CKS GROUP INC, 10-K, 1997-02-28

CKS GROUP INC
10-K, 1997-02-28
BUSINESS SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
__________.

COMMISSION FILE NUMBER: 0-27090

CKS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 77-0385435
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

10441 BANDLEY DRIVE, CUPERTINO, CA 95014
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
</TABLE>

Registrant's telephone number, including area code: (408) 366-5100

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
--------------------------------------- ---------------------------------------
<S> <C>
None None
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.001 par value
(TITLE OF CLASS)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the Common Stock on
February 25, 1997 as reported on the National Market of The Nasdaq Stock Market,
was approximately $209 million. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes. As of February 12, 1997, registrant had outstanding
14,133,131 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

THE REGISTRANT HAS INCORPORATED BY REFERENCE INTO PART III OF THIS FORM
10-K PORTIONS OF ITS PROXY STATEMENT FOR REGISTRANT'S ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD APRIL 23, 1997.

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The Business section and other parts of this Report contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operation -- Factors Affecting
Operating Results and Market Price of Stock" commencing on page 8.

PART I

ITEM 1. BUSINESS

THE COMPANY

CKS Group is an integrated marketing communications holding company
headquartered in Cupertino, California. The Company specializes in offering a
wide range of integrated marketing communication services that help companies
market their products, services and messages. The integrated marketing
communication services CKS Group provides include strategic corporate and
product positioning, corporate identity and product branding, new media, systems
integration, environmental design, packaging, collateral systems, advertising,
direct mail, consumer promotions, trade promotions and media placement. CKS
Group is a provider of integrated marketing communication programs that utilize
advanced technology solutions and new media -- which CKS Group defines as media
that delivers content to the end user in digital form, including the World Wide
Web, the Internet, proprietary online services, CD-ROMs, laptop PC presentations
and interactive kiosks. New media services represented approximately 8%, 25% and
36% of the Company's revenues for fiscal years 1994, 1995 and 1996,
respectively. The balance of the Company's revenue for such periods was derived
from the Company's other integrated marketing communication services, including
strategic corporate and product positioning, corporate identity and product
branding, environmental design, packaging, collateral systems, advertising,
direct mail, consumer promotions, trade promotions and media placement.

The Company was incorporated in California in 1994 and is the successor to
three predecessor corporations, CKS Partners, Inc., CKS Pictures, Inc. and CKS
Interactive, Inc., which are now wholly owned subsidiaries of the Company. CKS
Partners, Inc. originally began business in 1987 with two employees as Cleary
Communications. CKS Pictures, Inc. and CKS Interactive, Inc. were incorporated
in 1994. The Company was reincorporated in Delaware in December 1995. The
Company acquired Schell/Mullaney, Inc. ("Schell/Mullaney") in August 1996;
Donovan & Green, Inc. ("Donovan & Green") in January 1997; and McKinney & Silver
("M&S") in January 1997. The Company's executive offices are located at 10441
Bandley Drive, Cupertino, California 95014. Its telephone number at that address
is (408) 366-5100. The Company's Internet address is: http://www.cks.com.
Information contained on the Company's Internet site shall not be deemed a part
of this Report.

INDUSTRY BACKGROUND

Several recent trends within the U.S. and international business
communities are changing the marketing communications needs of businesses
throughout the world. These trends include the following:

- Shortening product life cycles and preparation times for marketing
campaigns, which increase the need for rapid development and
execution of marketing strategies.

- The emergence of new media, such as the World Wide Web, proprietary
online services, CD-ROMs, laptop PC presentations and interactive
kiosks, as well as the increasing availability of sophisticated
digital delivery, storage and multimedia enhancement tools and
technologies.

- The advent of narrowly focused media delivery vehicles, such as
proprietary online services, the World Wide Web, satellite
television and special interest magazines, which allow greater
market segmentation, but demand coordination of multiple variations
of marketing messages aimed at particular market subsegments.

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- Corporate downsizing, which has led many corporations to reduce the
size of their in-house marketing departments, which in turn has led
to an increased need to outsource the creation and coordination of
such corporations' marketing strategies.

CKS CORE STRENGTHS

The Company's overall objective is to consistently deliver integrated
marketing communication services and products to its clients through the
creative use of advanced technology, breakthrough design and superior account
management. The Company believes that certain core strengths have been, and will
continue to be, key to the Company's success. These core strengths include the
following:

New Media Communications. The Company develops and implements new media
marketing communication programs. The Company created its first interactive
marketing program for Apple Computer Co. ("Apple") in 1988 using Apple's
Hypercard technology. Since that time, the Company has continued to build on its
new media capabilities. The Company believes that its fundamental understanding
of the tools and technologies used to develop and distribute new forms of
interactive communication provides it with a substantial advantage over its
competitors in the emerging new media area.

Integrated Marketing. The Company currently offers a full range of
marketing communication services to its clients, including strategic corporate
and product positioning, corporate identity and product branding, new media,
systems integration, environmental design, packaging, collateral systems,
advertising, direct mail, consumer promotions, trade promotions and media
placement services. The Company provides both traditional and new media
solutions in these areas. While some of the Company's employees specialize in
only one or two of these disciplines, many are generalists skilled at providing
high quality marketing services in several of these areas.

Creative Excellence. The Company attempts to provide creative solutions in
all areas of marketing communications that meet or exceed the highest standards
of service within each individual discipline. In order to maintain high levels
of creativity and quality, the Company places great importance on recruiting and
retaining talented employees. The Company's investments in tools and
technologies have served as a competitive advantage in recruiting and retaining
many talented employees who are attracted to the Company's technology-driven
culture. In addition, the Company's integrated approach to marketing
communication services attracts and retains many highly qualified employees who
are interested in applying their skills to more than one marketing discipline.
Moreover, the Company's multiple office locations enable the Company to attract
creative, technical, production and management talent in a variety of geographic
markets. The Company has received numerous honors and awards, including Addy
Awards, Marget Larsen Awards for Design, Murphy Awards, Telly Awards and a
Communication Arts Design Annual award.

Technological Proficiency. One of the Company's primary objectives has
been to capitalize on the fundamental changes in the marketing communication
services marketplace by becoming the premier supplier of integrated marketing
communications through the use of advanced technology.

The Company employs the extensive information technology expertise and
experience of its staff to provide clients with end-to-end new media content
delivery solutions. Towards this end, the Company created an information
technology and consulting division, CKS Enterprise, in August 1996. CKS
Enterprise's engineering staff includes individuals with extensive experience in
computer systems, networking and relational database technology. CKS Enterprise
provides a broad range of information technology services, such as systems
database design, systems architectural design and performance tuning. These
services enable clients to extend new media marketing content to include live
audio and video event broadcasts over the Web, Internet commerce infrastructure
and access to corporate intranets and commercial databases.

The Company's programming staff is skilled in Java, PL/SQL, HTML, C/C++,
Perl, Visual Basic and other programming languages, and Oracle, Sybase and
Informix database environments, as well as multimedia tools such as Director,
JavaScript, QuickTime VR and various content distribution, or "push,"
technologies. In addition, the Company's reputation as a technological innovator
allows it to acquire licenses to certain

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third-party software products and tools prior to the time such products and
tools are generally available by acting as a beta site for pre-release versions
of these products and tools.

CKS STRATEGY

The Company intends to expand upon its core strengths in order to further
enhance its ability to provide high quality marketing solutions that must be
developed quickly and efficiently. * The Company's strategy also includes the
following key elements:

Use Integration as a Tool for Building Client Relationships. The Company
has been able to utilize its integrated approach to marketing communication
services as an effective tool in forming its present client relationships, and
the Company believes that such integration will continue to serve this function
in the future.* The Company's client relationships have typically begun with a
single assignment that might encompass corporate identity or packaging, a
brochure or a World Wide Web site. Such single project relationships have
allowed clients to "test" the Company's services with minimal long-term risk. In
many instances, with clients such as Fujitsu PC Corporation, MCI Communications
Corporation ("MCI"), Microsoft Corporation ("Microsoft"), The Dunn & Bradstreet
Corporation and Widmer Brothers Brewing Company, the Company has been successful
in expanding the relationship beyond the single-project assignment to include
additional projects in other marketing disciplines.

Grow Through Acquisitions of Complementary Businesses. The Company seeks
to acquire businesses that offer complementary marketing communication services,
products and technologies.* The Company evaluates potential acquisitions for
their ability to add to the Company's new media capabilities, technological
proficiency, creative excellence and integrated marketing services skills. In
addition, the Company seeks to leverage acquisitions to expand the breadth of
the Company's management.* Other factors that the Company evaluates in
considering potential acquisitions include a reputation for superb creative work
both in specialities where the Company is particularly strong and in specialties
that have not been the Company's historic strengths, accessible proprietary
technology and new media expertise, potential for geographic expansion,
relationships with certain companies and clients and the degree to which the
potential acquisition candidate shares the Company's vision of combining
integrated marketing communications services with an understanding of
technology. To date, the Company has completed or expects to complete* the
following acquisitions:

<TABLE>
<CAPTION>
ACQUIRED ENTITY ACQUISITION DATE
- ------------------------------------------------------------------ -----------------------
<S> <C>
Schell/Mullaney -- a New York advertising and marketing firm August 1996
specializing in marketing communication services for high
technology clients.
Donovan & Green -- a New York integrated marketing communications January 1997
firm with a strong emphasis in environmental design, brand
identity and imaging and the evolving discipline of information
architecture.
McKinney & Silver -- a Raleigh, North Carolina advertising and January 1997
marketing services firm.
Prisma Holding GmbH -- an integrated marketing communications firm March 1997 (expected)*
that provides direct marketing, advertising, event marketing,
public relations and channel marketing services in Germany,
Switzerland and Austria.
</TABLE>

See "Factors Affecting Operating Results and Market Price of Stock -- Risks
Associated with Acquisitions" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Expand Scope of Services and Geographic Locations. The Company seeks to
expand both the breadth and depth of its integrated marketing communication
services both by continuing to expand the scope of the marketing communications
services that it currently offers and adding new offices in cities where clients
have

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*This statement is a forward-looking statement reflecting current
expectations. Investors are strongly encouraged to review the section entitled
"Factors Affecting Operating Results and Market Price of Stock" commencing on
page 8, for a discussion of factors that could affect future performance.

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recognized the need for the Company's services.* In 1996, the Company opened an
office in Washington, D.C., and plans to open other offices in the future.* This
strategy entails the risk that business at a new office will not develop as well
as the Company anticipates. See "Factors Affecting Operating Results and Market
Price of Stock -- Management of Growth; Risk Associated with Expansion."

Capitalize on Leadership Position and Market Opportunities in New
Media. The Company has been and continues to be a leader in the development and
application of new media marketing communication services and products. The
Company believes that the proliferation of the Internet and other new media will
continue to provide substantial opportunities to the Company.* These trends have
enabled companies to focus their marketing messages and may ultimately result in
one-on-one marketing to specific individuals. Towards this end, the Company
seeks to provide clients with integrated new media design and development
services as well as support in implementing and maintaining key content delivery
technologies.

Leverage Relationship with The Interpublic Group of Companies, Inc.
("IPG"). In January 1995, the Company entered into a financial and strategic
relationship with IPG, one of the three largest advertising and communications
corporations in the world. The relationship was based on IPG's desire to
accelerate the integration of advanced technology into its own advertising
agency services, as well as the Company's interest in gaining access to IPG's
resources and substantial existing client base. Certain of IPG's clients have
periodically relied on the Company for new media marketing communication
services. In addition, as a result of IPG's active acquisition history (having
acquired over 250 marketing communication companies), IPG has aided the Company
in identifying, valuing and integrating potential acquisitions. Moreover, IPG
has provided the Company with access to additional research capabilities and a
worldwide network of agencies that the Company might otherwise not have.

CKS CLIENTS AND SERVICES

The Company provides a broad range of marketing communication services.
Depending on the scope of the assignment, the Company's services to its clients
range from execution of a discrete marketing project, such as designing product
packaging, to taking responsibility for the overall marketing message through
various methods. When the Company assumes responsibility for the overall
marketing message, the Company works with the client to analyze the client's
products or services and the market for those services and to evaluate the
appropriate media to reach the desired market efficiently. The Company then
creates and distributes various versions of the message through the chosen
media. The Company's services include the following:

- Strategic Corporate and Product Positioning -- Development of a unique
selling proposition for either a company or product that differentiates
it from the competition.

- Corporate Identity and Product Branding -- Development of a creative look
and feel that establishes a corporate or brand personality to
differentiate it from the competition.

- New Media -- Development of media to be delivered to end users in digital
form, including the World Wide Web, the Internet, proprietary online
services, CD-ROMs, laptop PC presentations and interactive kiosks.

- Systems Integration -- Development and execution of information
technology services such as systems database design, systems
architectural design and performance tuning, that enable clients to
extend new media marketing content to include live audio and video
broadcasts over the Web, Internet commerce infrastructure and access to
the corporate intranets and commercial databases.

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- Environmental Design -- Creative design, development and management of
virtual and physical images as well as information and entertainment
environments, including the development of public exhibition spaces and
new retail store formats.

- Packaging -- Creative development, design and production of an individual
retail package or integrated retail packaging systems.

- Collateral Systems -- Development and implementation of a literature
system including, for example, individual brochures, flyers and data
sheets.

- Advertising -- Broadcast and/or print advertising designed to generate
awareness of a company, product, or service over an extended period of
time.

- Direct Mail -- Development of mail programs designed to generate demand
among a specific target audience within a limited time frame.

- Consumer Promotions -- Marketing communications campaign and
merchandising materials designed to increase sales among consumers.

- Trade Promotions -- Marketing communications campaign designed to provide
information and incentives to specific industry trade during a limited
time.

- Media Placement Services -- Strategic planning, negotiation and purchase
of both traditional and new media.

The Company's five largest clients accounted for 42% and 29% of the
Company's revenues for the fiscal years ended November 30, 1995 and November 30,
1996, respectively, with fluctuations in the amount of revenue contribution from
each such client from quarter to quarter. MCI and Apple, the Company's two
largest clients during fiscal 1995, accounted for approximately 19% and 7% of
the Company's revenues, respectively, during that year. MCI and Microsoft, the
Company's two largest clients during fiscal 1996, accounted for approximately
14% and 4% of the Company's revenues, respectively, during that year. Since the
Company's clients generally retain the Company on a project by project basis, a
client from whom the Company generates substantial revenue in one period may not
be a substantial source of revenue in a subsequent period. For example, of the
five largest clients (in terms of revenues recognized by the Company) during the
fiscal year ended November 30, 1996, only two were in the top five for the
fiscal year ended November 30, 1995.

CKS generally performs services for its clients on a project by project
basis. In certain circumstances the Company enters into agreements with its
clients to establish the terms upon which the Company deals with such clients
when the Company is engaged to perform services. Such agreements are generally
terminable at will by either party and without penalty.

DEVELOPMENT OF NEW CLIENT RELATIONSHIPS

The Company attracts new clients through a number of different methods. To
date, the Company has relied heavily on referrals from existing clients to
attract new clients. The Company's executive officers have historically engaged
in numerous speaking tours and other presentations aimed at attracting new
clients. These speaking tours have led directly to the formation of new client
relationships by the Company as well as substantial press and other media
coverage of the Company, which has indirectly assisted the Company in forming
new client relationships. The Company also advertises its integrated marketing
communication services in certain business magazines. In March 1996, the Company
opened an office in Washington, D.C. in order to enhance the Company's ability
to rapidly meet the needs of MCI, the Company's largest client in

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terms of fiscal 1996 revenues. The Company may establish additional offices in
the future in order to further relationships with existing clients or in order
to facilitate acquiring new clients in diverse geographic markets.*

USE OF TECHNOLOGY

The Company's founders' and many of its employees' prior experience in
technology companies, along with the location of the Company's headquarters in
Silicon Valley, have helped the Company to utilize technology as a major
competitive advantage. The Company employs its extensive information technology
expertise and experience in providing clients with end-to-end new media content
creation and delivery solutions. The Company also acquires licenses to certain
third-party software products and tools prior to the time such products and
tools are generally available by acting as a beta site for pre-release versions
of these products and tools. In addition, the Company employs technology to
maximize its ability to provide high quality, integrated marketing communication
services to its clients in a timely and cost-effective manner.

CKS Enterprise

In August 1996, the Company established CKS Enterprise, a information
technology consulting and integration organization. CKS Enterprise's engineering
staff includes individuals with extensive experience in computer systems,
network and relational database technology. CKS Enterprise provides a broad
range of information technology services, such as systems database design,
systems architectural design and performance tuning. These services enable
clients to extend new media marketing content to include live audio and video
event broadcasts over the Web, Internet commerce infrastructure and access to
corporate intranets and commercial databases. CKS Enterprise has the skill set
and infrastructure to successfully implement and support a wide range of
information technology systems; from a simple Web site providing information to
the Internet, to large data warehouses performing complex ad hoc queries, to
mission critical online transaction processing environments.

Access to New Technologies

The Company's reputation as a technological innovator frequently allows it
access to advanced media and communications technologies before such
technologies are available to the general public or to the Company's
competitors. In addition, the Company is frequently involved in alpha and beta
test programs for pre-release versions of new information technologies. Early
access to emerging technologies allows the Company to provide innovative media
and marketing solutions to its customers before the Company's competitors, and
to more rapidly explore and exploit the benefits of such new technologies. As a
result of these relationships, the Company's engineers and creative staff
regularly interact with the persons who design and develop the new media tools
the Company uses. The Company believes it enjoys an advantage over rival
marketing communication providers in effectively utilizing advanced multimedia
and communications technologies to deliver its clients' marketing messages.

Digital Content

The Company has made a substantial investment in technology which allows
all of its employees to share and utilize digital content as well as other
Company and client information in an easy and efficient manner. All work
performed by most of the Company's offices for their clients is maintained in
digital form on CD-ROMs. The Company has created an electronic network among its
offices, which facilitates the sharing of information and allows each office to
benefit from the experience and know-how of the other offices. The Company
believes that its use of digital technology for the production and shipping of
audio and video content, frequent updating of content for whatever medium is
being used for its distribution, packaging and design

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assignment, virtual sets, internal communication, and cost control enable the
Company to provide superior solutions to its clients at lower costs than
traditional marketing communication services companies.

Electronic Job Jacket Software

The Electronic Job Jacket is a software system that the Company uses for
internal purposes only that tracks financial and other information relating to
completed and open projects being worked on by the Company. The Company uses the
Electronic Job Jacket in project bids to help estimate, based upon historical
information from prior projects, the various resources that will be needed to
complete the project. When a project commences, each person working on the
project records, on a daily or weekly basis, the time spent on the project. This
allows the account manager, each individual working on the account, the
Company's executive officers and finance personnel, and each employee of the
Company to compare, at any time, the Company's performance against the estimates
that formed the basis for the Company's project quote. This allows the Company
to determine early in the process if its costs of performing the services are
likely to exceed the revenue received, or result in lower margins than
anticipated. By closely monitoring the information contained in the Electronic
Job Jacket, the Company is better able to manage its projects. The Company can
also obtain data on the costs of performing certain services, thereby improving
its ability to prepare appropriate bids on future projects. The Electronic Job
Jacket is linked with the Company's accounting system, allowing the Company to
obtain accurate information as to the extent of project completion for the
purpose of recognizing revenues.

COMPETITION

The markets for the Company's services are highly competitive and are
characterized by pressures to reduce prices, incorporate new capabilities and
accelerate job completion schedules.

The Company faces competition from a number of sources. These sources
include national and regional advertising agencies as well as specialized and
integrated marketing communication firms. In addition, with respect to new
media, many advertising agencies have started to either internally develop or
acquire new media capabilities. New competitors that either provide integrated
or specialized services (e.g., corporate identity and packaging, advertising
services or World Wide Web site design) and are technologically proficient,
especially in the new media arena, have emerged and are competing with the
Company. Many of the Company's competitors or potential competitors have longer
operating histories, longer client relationships and significantly greater
financial, management, technology, development, sales, marketing and other
resources than the Company. In addition, the Company's ability to maintain its
existing client relationships and generate new clients depends to a significant
degree on the quality of its services and its reputation among its clients and
potential clients, as compared with the quality of services provided by and the
reputations of the Company's competitors. To the extent the Company loses
clients to the Company's competitors because of dissatisfaction with the
Company's services or the Company's reputation is adversely impacted for any
other reason, the Company's business, financial condition and operating results
could be materially adversely affected.

There are relatively low barriers to entry into the Company's business. The
Company has no significant proprietary technology that would preclude or inhibit
competitors from entering the integrated marketing communication solutions
market. The Company expects that it will face additional competition from new
entrants into the market in the future. There can be no assurance that existing
or future competitors will not develop or offer marketing communication services
and products that provide significant performance, price, creative or other
advantages over those offered by the Company, which could have a material
adverse effect on the Company's business, financial condition and operating
results.

The principal factors on which the Company competes are creative quality,
client service, technological and new media sophistication, price and intangible
factors such as the interpersonal skills of the individuals

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managing the client account. The Company believes that it competes favorably
with respect to each of these factors.*

EMPLOYEES

As of November 30, 1996, the Company had a total of 323 employees, 271 of
which were full-time regular employees.

The Company's success depends to a significant extent upon certain members
of senior management, including Mark D. Kvamme, Thomas K. Suiter, Carlton H.
Baab and other key employees. Although the Company maintains key man life
insurance policies on Messrs. Kvamme, Suiter and Baab and certain other key
personnel, there can be no assurance that such insurance policies will
adequately compensate for the loss of such individuals. The Company has no
employment agreements with any of these individuals. The loss of any senior
manager or other key employee could have a material adverse effect upon the
Company's business, financial condition and operating results. In addition, the
Company's ability to generate revenues relates directly to the Company's
personnel, both in terms of the number and expertise of the personnel the
Company has available to work on its projects as they are received and the mix
of such personnel (i.e., full time or temporary employees or contract service
providers). As a result, any failure by the Company to retain existing employees
or hire new employees when necessary could have a material adverse effect upon
the Company's business, financial condition and operating results. In addition,
if one or more of the Company's key employees resigns from the Company to join a
competitor or to form a competing company, the loss of such personnel and any
resulting loss of existing or potential clients to any such competitor could
have a material adverse effect upon the Company's business, financial condition
and operating results. Further, in the event of the loss of any such personnel
there can be no assurance that the Company would be able to prevent the
unauthorized disclosure or use of its technical knowledge, practices, procedures
or client lists. The Company believes that its future success will depend in
large part upon its ability to attract and retain additional highly skilled
creative, technical, financial and strategic marketing personnel. Competition
for such personnel, especially creative talent, is intense. There can be no
assurance the Company will be successful in attracting and retaining such
personnel, and the failure to do so could have a direct and immediate material
adverse effect on the Company's business, financial condition and operating
results. See "Directors and Officers of the Company".

FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK

CKS operates in a rapidly changing environment that involves a number of
uncertainties, some of which are beyond the Company's control. In addition to
the uncertainties described elsewhere in this report, these uncertainties
include:

Dependence on Key Accounts. The Company's five largest clients accounted
for 42% and 29% of the Company's revenues for the fiscal years ended November
30, 1995 and November 30, 1996, respectively, with fluctuations in the amount of
revenue contribution from each such client from quarter to quarter. MCI and
Microsoft, the Company's two largest clients during the fiscal year ended
November 30, 1996, accounted for approximately 14% and 4% of the Company's
revenues, respectively, during the period. Since the Company's clients generally
retain the Company on a project by project basis, a client from whom the Company
generates substantial revenue in one period may not be a substantial source of
revenue in a subsequent period. For example, of the five largest clients (in
terms of fees paid to the Company) during the fiscal year ended November 30,
1996, only two were in the top five for the fiscal year ended November 30, 1995.
To the extent that the Company's major clients do not remain a significant
source of revenues, and the Company is unable to replace these clients, there
could be a direct and immediate material adverse effect on the Company's
business, financial condition and operating results. The Company's typical
project lasts four to six weeks. Once a project is completed there can be no
assurance that a client will engage the Company for further services. In

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addition, the Company's clients may unilaterally reduce their use of the
Company's services or terminate existing projects without penalty. The
termination of the Company's business relationship with any of its significant
clients or a material reduction in the use of the Company's services by a
significant client would have a material adverse effect on the Company's
business, financial condition and operating results.

Fluctuations in Quarterly Operating Results and Margins; Seasonality of
Business. The Company's operating results have fluctuated in the past and may
fluctuate in the future as a result of a variety of factors, including timing of
the completion, material reduction or cancellation of major projects or the loss
of a major client, timing of the receipt of new business, timing of the hiring
or loss of personnel, timing of the opening or closing of an office, the
relative mix of high margin creative projects as compared to lower margin
production projects, changes in the pricing strategies and business model of the
Company or its competitors, capital expenditures and other costs relating to the
expansion of operations, and other factors that are outside of the Company's
control. Operating results could also be materially adversely affected by
increased competition in the Company's markets. The Company's operating margins
may fluctuate from quarter to quarter depending on the relative mix of lower
cost full time employees versus higher cost independent contractors. The Company
experiences some seasonality in its business which results from timing of
product introductions and business cycles of the Company's clients. The
Company's revenues tend to be somewhat higher during the third and fourth
quarters of the Company's fiscal year as the Company's clients prepare marketing
campaigns for products launched in anticipation of fall trade shows and the
holiday season. The Company's revenues for the first fiscal quarter tend to be
somewhat lower because many clients have expended most of their marketing
budgets prior to the end of the calendar year and do not release funds from the
next calendar year's marketing budget until mid to late January. The Company
expects this seasonality to continue in the future. As a result of the foregoing
and other factors, the Company anticipates that it may experience material and
adverse fluctuations in future operating results on a quarterly or annual basis.
Therefore, the Company believes that period to period comparisons of its
revenues and operating results are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of future performance.

Management of Growth; Risks Associated with Expansion. The Company's
business has grown rapidly in recent periods. The growth of the Company's
business and expansion of its customer base have placed a significant strain on
the Company's management and operations. In the last four years, the Company has
opened offices in Portland (Oregon), New York and Washington, D.C. The Company's
expansion has resulted, and is expected in the future to result, in substantial
growth in the number of its employees and in increased responsibility for both
existing and new management personnel and strain on the Company's existing
operational, financial and management information systems. The Company's success
depends to a significant extent on the ability of its executive officers and
other members of senior management to operate effectively, both independently
and as a group.

In addition, the Company plans to expand its offerings of integrated
marketing communication services and products. There can be no assurance that
the Company will be successful in identifying new services or products that will
be attractive to clients or that such services or products will ultimately
generate revenues in excess of costs to implement them. Difficulties in
recruiting and assimilating new personnel, enhancing the Company's financial and
operational controls and expanding the Company's marketing and customer support
capabilities may impede the Company's ability to pursue its growth strategy. In
general, there can be no assurance that the Company will be able to manage its
recent or any future expansions effectively, and any inability to do so would
have a material adverse effect on the Company's business, financial condition
and operating results. There also can be no assurance that the Company will be
able to sustain the rates of growth that it has experienced in the past. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Developing Market for New Media; New Entrants; Unproven Acceptance of the
Company's New Media Solutions. The Company's future growth is dependent to a
significant extent upon its ability to increase the amount of revenue it derives
from providing marketing and advertising solutions to its customers through new
media, which the Company defines as media that delivers content to end users in
digital form, including the World Wide Web, the Internet, proprietary online
services, CD-ROMs, laptop PC presentations and interactive kiosks. The market
for marketing and advertising through new media has only recently begun to

9
<PAGE> 11

develop, is rapidly evolving and is characterized by an increasing number of
market entrants who have introduced or developed products and services for
communication and commerce through new media. Demand and market acceptance for
recently introduced products and services are subject to a high level of
uncertainty. There can be no assurance that commerce and communication through
new media will continue to grow. The use of new media in marketing and
advertising, particularly by those individuals and enterprises that have
historically relied upon traditional means of marketing and advertising,
generally requires the acceptance of a new way of conducting business and
exchanging information. In particular, enterprises that have already invested
substantial resources in other means of conducting commerce and exchanging
information may be particularly reluctant or slow to adopt a new strategy that
may make their existing resources and infrastructure less useful.

In connection with the Company's new media services, the Company is
exploring new methods to derive revenue, so that a larger percentage of its
revenues is recurring. These methods include long-term service contracts,
ongoing content development contracts and technology consulting and maintenance
services. There is no assurance that the Company will be able to negotiate such
arrangements with clients.

Risks Associated with Acquisitions. As part of its business strategy, the
Company expects to make acquisitions of, or significant investments in,
businesses that offer complementary marketing communication services, products
and technologies. Any such future acquisitions or investments would be
accompanied by the risks commonly encountered in acquisitions of businesses.
Such risks include, among other things, the difficulty of assimilating the
operations and personnel of the acquired businesses, the potential disruption of
the Company's ongoing business, the inability of management to maximize the
financial and strategic position of the Company through the successful
incorporation of acquired personnel and clients, the maintenance of uniform
standards, controls, procedures and policies and the impairment of relationships
with employees and clients as a result of any integration of new management
personnel. In August 1996, the Company acquired Schell/Mullaney for
consideration consisting of an initial payment, in Common Stock of the Company,
of $5 million and additional future consideration of up to $9 million in Common
Stock of the Company if certain operating results are achieved in 1997 and 1998.
In January 1997, the Company acquired the assets of Donovan & Green for
consideration consisting of an initial cash payment of $5.15 million and the
right to receive $4.83 million in cash and Common Stock of the Company over the
next three fiscal years and up to an additional $6.67 million cash and Common
Stock of the Company over the next four fiscal years contingent on attainment of
certain financial goals. Also in January 1997, the Company acquired M&S for
consideration consisting of 841,291 shares of Common Stock which as of the
closing of the acquisition had an approximate value of $24.0 million. The
Company is also negotiating with other potential acquisition targets and has
signed an agreement to acquire Prisma Holding GmbH. The Company expects that
future acquisitions, if any, could provide for consideration to be paid in cash,
stock or a combination of cash and stock. There can be no assurance that the
acquisition of Prisma Holding GmbH or any other potential acquisition will be
consummated. There can be no assurance that the Company's prior acquisitions or
any other potential acquisitions will not have a material adverse effect on the
Company's business, financial condition and operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

Uncertain Adoption of Internet as a Medium of Commerce and Communications;
Dependence on the Internet. The Company's ability to derive revenues from new
media solutions will depend in part upon a robust industry and the
infrastructure for providing Internet access and carrying Internet traffic. The
Internet may not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure, such as a reliable
network backbone or timely development of complementary products, such as high
speed modems. Because global commerce and online exchange of information on the
Internet and other similar open wide area networks are new and evolving, it is
difficult to predict with any assurance whether the Internet will prove to be
and remain a viable commercial marketplace. Moreover, critical issues concerning
the commercial use of the Internet (including security, reliability, cost, ease
of use and access, and quality of service) remain unresolved and may impact the
growth of Internet use. There can be no assurance that the Internet will become
a viable commercial marketplace. If the necessary infrastructure or
complementary products are not developed, or if the Internet does not become a
viable commercial marketplace, the Company's business, operating results and
financial condition could be materially adversely affected.

10
<PAGE> 12

Project Profit Exposures. The Company generates the substantial majority
of its revenues through project fees on a fixed fee for service basis. The
Company assumes greater financial risk on fixed-price type contracts than on
either time-and-material or cost-reimbursable contracts. Failure to anticipate
technical problems, estimate costs accurately or control costs during
performance of a fixed-price contract may reduce the Company's profit or cause a
loss. Although the majority of the Company's projects typically last four to six
weeks and therefore each individual short-term project creates less exposure
than a long-term fixed-price contract, in the event the Company does not
accurately anticipate the progress of a number of significant revenue-generating
projects it could have a material adverse effect on the Company's business,
operating results and financial condition.

Conflicts of Interest. Conflicts of interest are inherent in certain
segments of the marketing communications industry, particularly in advertising.
The Company has in the past and will in the future be unable to pursue potential
advertising and other opportunities because such opportunities will require the
Company to provide services to direct competitors of existing Company clients.
In addition, the Company risks alienating or straining relationships with
existing clients each time the Company agrees to provide services to even
indirect competitors of existing Company clients. Conflicts of interest may
jeopardize the stability of revenues generated from existing clients and
preclude access to business prospects, either of which developments could have a
material adverse effect on the Company's business, financial condition and
operating results.

Market Acceptance of the Company's Approach; Service Development; Rapid
Technological Change. The Company provides an integrated approach to meet the
marketing communications needs of its clients. To compete successfully against
specialized service providers, the Company believes that its products and
services in each marketing communication discipline will need to be competitive
with the services offered by the firms that specialize in each discipline. There
can be no assurance that the Company will be successful in providing competitive
solutions to clients in each of its integrated marketing communication services
and products. Failure to do so could result in the loss of existing customers or
the inability to attract and retain new customers, either of which developments
could have a material adverse effect on the Company's business, financial
condition and operating results.

Susceptibility to General Economic Conditions. The Company's revenues and
results of operations will be subject to fluctuations based upon the general
economic conditions. If there were to be a general economic downturn or a
recession in the United States, then the Company expects that business
enterprises, including its clients and potential clients, will substantially and
immediately reduce their advertising and marketing budgets. In the event of such
an economic downturn, there can be no assurance that the Company's business,
operating results and financial condition would not be materially and adversely
affected.

ITEM 2. PROPERTIES

The Company's primary facility consists of approximately 93,000 square feet
in Cupertino, California including a 22,000 square foot digital video production
facility. The Company's other facilities include the following: Campbell,
California -- approximately 10,000 square feet; New York -- approximately 19,500
square feet of space; Portland (Oregon) -- approximately 8,500 square feet; San
Francisco -- approximately 7,400 square feet; and Washington,
D.C., -- approximately 10,900 square feet. The Company leases all of its
facilities.

ITEM 3. LEGAL PROCEEDINGS

None.

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

Not applicable.

11
<PAGE> 13

PART II

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

The Company's Common Stock, $0.01 par value, has been traded on the Nasdaq
National Market System under the symbol CKSG since December 15, 1995. Prior to
that, there was no public market for the Company's Common Stock. The high and
low per share closing prices for the Company's Common Stock for the period from
December 15, 1995 through November 30, 1996 are set forth below. Price data
reflect actual transactions, but do not reflect mark-ups, mark-downs or
commissions.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30, 1996 HIGH LOW
- ----------------------------------------------------------------------------- ------ ------
<S> <C> <C>
First Quarter (Beginning December 15, 1995).................................. $39.00 $20.00
Second Quarter............................................................... $43.75 $24.50
Third Quarter................................................................ $38.75 $23.63
Fourth Quarter............................................................... $28.50 $18.00
</TABLE>

The trading price of the Company's Common Stock has been and in the future
could be subject to wide fluctuations in response to quarterly variations in
operating results, announcements of new services or business acquisitions by the
Company or its competitors, the gain or loss of client accounts, changes in
estimates of revenues or earnings by securities analysts, changes in the mix of
revenues derived by the Company from new media projects as compared to other
projects and other events or factors. In addition, the stock market has from
time to time experienced extreme price and volume fluctuations that have
particularly affected the market price of many technology-oriented companies and
that often have been unrelated or disproportionate to the operating performance
of these companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock. The trading prices of many high
technology and Internet-related companies' stocks, including the Common Stock of
the Company, are at or near their historical highs and reflect price/earning
ratios substantially above historical norms. There can be no assurance that the
trading price of the Company's Common Stock will remain at or near its current
level.

As of February 12, 1997, there were 97 stockholders of record.

The Company currently intends to retain future earnings to fund the
development and growth of its business and therefore does not anticipate paying
cash dividends within the foreseeable future. Any future payment of dividends
will be determined by the Company's Board of Directors and will depend on the
Company's financial condition, results of operations and other factors deemed
relevant by its Board of Directors.

12
<PAGE> 14

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements, notes thereto and other financial information included elsewhere
herein.

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------
1992 1993 1994 1995 1996
------ ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $6,723 $12,038 $22,938 $34,792 $56,951
------ ------- ------- ------- -------
Operating expenses:
Direct salaries and related expenses............ 1,343 2,782 6,168 10,485 16,542
Other direct operating expenses................. 3,359 6,183 11,121 13,164 19,866
General and administrative expenses............. 1,773 2,584 5,131 8,688 13,355
------ ------- ------- ------- -------
Total operating expenses................ 6,475 11,549 22,420 32,337 49,763
------ ------- ------- ------- -------
Operating income.................................. 248 489 518 2,455 7,188
Other income (expense)............................ 12 (25) (38) (27) 1,757
------ ------- ------- ------- -------
Income before income taxes........................ 260 464 480 2,428 8,945
Income taxes...................................... 110 185 192 1,062 3,266
------ ------- ------- ------- -------
Net income........................................ $ 150 $ 279 $ 288 $ 1,366 $ 5,679
====== ======= ======= ======= =======
Net income per share.............................. $ 0.02 $ 0.03 $ 0.03 $ 0.13 $ 0.43
Shares used in per share computation.............. 8,039 8,482 9,944 10,726 13,362
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 28 $ 102 $ 43 $ 2,327 $ 7,528
Marketable securities............................... -- -- -- -- 37,895
Working capital..................................... 128 69 (336) 2,797 49,604
Total assets........................................ 1,571 3,953 8,107 13,686 72,908
Notes payable and capital lease obligations, less
current portion................................... -- 106 340 412 419
Total stockholders' equity.......................... 612 895 1,023 4,595 58,656
</TABLE>

13
<PAGE> 15

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This section and other parts of this Report contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in the subsection entitled "Business -- Factors
Affecting Operating Results and Market Price of Stock" commencing on page 8.

OVERVIEW

The Company was originally founded in 1987 as Cleary Communications and
initially concentrated on the development and implementation of marketing plans
and programs. Over the last several years, the Company developed its vision as
an integrated marketing communications company and hired personnel with the
appropriate skills to expand its service offerings to encompass a full range of
marketing communications, including strategic corporate and product positioning,
corporate identity and product branding, new media, systems integration,
environmental design, packaging, collateral systems, advertising, direct mail,
consumer promotions, trade promotions and media placement services. The Company
is a provider of integrated marketing programs that utilize advanced technology
solutions and new media -- which the Company defines as media that deliver
content to the end user in digital form, including the World Wide Web, the
Internet, proprietary online services, CD-ROMs, laptop PC presentations and
interactive kiosks. New media services represented approximately 8%, 25% and 36%
of the Company's revenues for fiscal years 1994, 1995 and 1996, respectively.
The balance of the Company's revenues for such periods were derived from the
Company's other integrated marketing communication services, including strategic
corporate and product positioning, corporate identity and product branding,
environmental design, packaging, collateral systems, advertising, direct mail,
consumer promotions, trade promotions and media placement services.

The Company generates substantially all of its revenues through project
fees on a fixed fee for service basis. When the Company prepares to bid on a new
project, the Company develops internal estimates for the number of hours
required to complete various segments of the project, based in large part on the
Company's database of similar projects archived in the Company's proprietary
project management software, the Electronic Job Jacket. The Company's policy is
to bill 50% of project fees at the commencement of the project, with the balance
billed upon completion.

The Company recognizes revenues related to fixed fee for service projects
using the percentage of completion method based on the ratio of costs incurred
to total estimated project costs. The Company updates its estimated costs on
each project monthly. Fees and expenditures in excess of billings represent the
costs incurred and anticipated profits earned on projects in progress in excess
of amounts billed, and are recorded as an asset. Billings in excess of fees and
expenditures represent amounts billed in excess of costs incurred and estimated
profit earned, and are recorded as a liability. To the extent costs incurred and
anticipated costs to complete projects in progress exceed anticipated billings,
a loss is accrued for the excess.

The Company is currently exploring new methods to derive revenue, so that a
larger percentage of its revenues is recurring.* These methods include the
following:

- Long-term service contracts, under which the Company provides ongoing
marketing communication services and technology consulting and
maintenance services;

- Content development contracts for new media, under which the Company
prepares and refreshes the content of online communications on a daily,
weekly or monthly basis for which the Company receives either an agreed
upon flat fee or a percentage of the revenue generated from the online
site.

- ---------------

* This statement is a forward-looking statement reflecting current
expectations. Investors are strongly encouraged to review the section entitled
"Factors Affecting Operating Results and Market Price of Stock" commencing on
page 8, for a discussion of factors that could affect future performance.

14
<PAGE> 16

There can be no assurance that the Company will be able to negotiate such
arrangements with clients.

The Company generates higher profit margins when a greater percentage of
its services are performed by full time employees rather than independent
consultants. Accordingly, the Company actively monitors and manages its level of
full time and temporary employees as compared to independent consultants to
ensure that future projects are adequately staffed. The Company has made a
strategic decision to incur the incremental costs of independent consultants to
staff growth in project levels rather than increase the number of full time
employees until the Company has determined that the increased revenue levels are
sustainable.

The Company has also made a strategic decision to grow through the
acquisition of businesses that offer complementary marketing communications
services, products and technologies. In August 1996, the Company completed its
acquisition of Schell/Mullaney for consideration consisting of an initial
payment in Common Stock of the Company of $5 million, and additional future
consideration of up to $9 million in Common Stock of the Company if certain
operating results are achieved in 1997 and 1998. In January 1997, the Company
completed its acquisition of the assets of Donovan & Green for consideration
consisting of an initial cash payment of $5.15 million and the right to receive
$4.83 million in cash and Common Stock of the Company over the next three fiscal
years and up to an additional $6.67 million in cash and additional shares of the
Company's Common Stock over the next four fiscal years upon attainment of
certain financial performance goals by Donovan & Green. In January 1997, the
Company also completed its acquisition of M&S for consideration consisting of
841,291 shares of Common Stock of the Company, which as of the closing of the
acquisition had an approximate value of $24.0 million. The latter acquisition
will be accounted for as a pooling of interests. Also in January 1997, the
Company entered into an agreement to acquire Prisma Holding GmbH. The Company is
also negotiating with other potential acquisition candidates. The Company
expects that future acquisitions, if any, could provide for consideration to be
paid in cash, stock or a combination of cash and stock. There can be no
assurance that any of these acquisitions will be consummated.

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenue of certain items
included in the Company's statements of operations for the periods indicated:

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-------------------------
YEAR ENDED NOVEMBER 30,
-------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Revenues............................................................ 100.0% 100.0% 100.0%
Operating expenses:
Direct salaries and related expenses.............................. 26.9 30.1 29.0
Other direct operating expenses................................... 48.5 37.8 34.9
General and administrative expenses............................... 22.3 25.0 23.5
----- ----- -----
Total operating expenses.................................. 97.7 92.9 87.4
----- ----- -----
Operating income.................................................... 2.3 7.1 12.6
Other income (expense).............................................. (0.2) (0.1) 3.1
----- ----- -----
Income before taxes................................................. 2.1 7.0 15.7
Income taxes........................................................ 0.8 3.1 5.7
----- ----- -----
Net income.......................................................... 1.3% 3.9% 10.0%
===== ===== =====
</TABLE>

FISCAL YEARS ENDED NOVEMBER 30, 1994, 1995 AND 1996

Revenues

The Company generates substantially all of its revenues through project
fees on a fixed fee for service basis. Revenues increased from $34.8 million in
fiscal 1995 to $57.0 million in fiscal 1996, representing an increase of 63.7%.
This increase in revenues was due to an increase in the value of creative and
design projects undertaken for existing clients of the Company, the
establishment of new client relationships, and the

15
<PAGE> 17

inclusion of Schell/Mullaney revenues in the Company's consolidated results.
Revenues from new media projects represented approximately 36% of revenues in
fiscal 1996. During fiscal 1996, the Company experienced an increase in revenues
associated with its new media business of approximately 132% over fiscal 1995,
as well as an increase in revenues from other services of approximately 41%.

Revenues increased from $22.9 million in fiscal 1994 to $34.8 million in
fiscal 1995, representing an increase of 51.7%. The increase in revenues was
primarily due to an increase in the value of creative and design projects
undertaken for existing clients of the Company, as well as to the establishment
of new client relationships. Revenues from new media projects represented
approximately 25% of revenues for fiscal 1995. During fiscal 1995, the Company
experienced an increase in revenues associated with its new media business of
approximately 358% over fiscal 1994, as well as an increase in revenues from
other services of approximately 23.7%.

Direct Salaries and Related Expenses

Direct salaries and related expenses consist primarily of wages for regular
and temporary employees, as well as incentive bonus payments and benefits for
regular employees. The Company's direct salaries and related expenses increased
57.8% from approximately $10.5 million in fiscal 1995 to approximately $16.5
million during fiscal 1996, representing 30.1% of revenues for fiscal 1995 and
29.0% of revenues in fiscal 1996. The decrease in these expenses as a percentage
of revenues reflects a more rapid increase in revenues than in direct salaries
and related expenses.

The Company's direct salaries and related expenses increased 70.0% from
$6.2 million in fiscal 1994 to $10.5 million during fiscal 1995, representing
26.9% of revenues for fiscal 1994 and 30.1% of revenues in fiscal 1995. The
increase in these expenses as a percentage of revenues from fiscal 1994 to
fiscal 1995, as well as the increases in absolute dollars from fiscal 1995 to
fiscal 1996 and from fiscal 1994 to fiscal 1995, resulted principally from the
Company's hiring of additional full time employees, many of whom initially
provided services to the Company as independent consultants on a periodic basis.
Fees paid to independent consultants are included in other direct operating
expenses.

Other Direct Operating Expenses

Other direct operating expenses include materials, contract freelance
talent (independent consultants), facilities and equipment expenses necessary to
provide services to the Company's clients. Other direct operating expenses
increased 50.9% from $13.2 million in fiscal 1995 to $19.9 million in fiscal
1996, representing 37.8% of revenues for fiscal 1995 and 34.9% of revenues in
fiscal 1996. In absolute dollars, this increase was primarily attributable to
increases in materials costs and freelance talent costs necessary to support the
higher level of revenues. The Company's other direct operating expenses
increased 18.4% from $11.1 million in fiscal 1994 to $13.2 million for fiscal
1995, representing 48.5% of revenues in fiscal 1994 and 37.8% of revenues in
fiscal 1995. Approximately 48% of the absolute dollar increase in other direct
operating expenses during this period was due to additional facilities required
to support the Company's growth. The decrease in other direct operating expenses
as a percentage of revenues from fiscal 1995 to fiscal 1996 and the decrease
from fiscal 1994 to fiscal 1995 resulted principally from an increased
proportion of higher margin creative and design projects.

General and Administrative Expenses

General and administrative expenses include headquarters expenses,
insurance, personnel costs for finance and administration, accounting and legal
fees, bad debt expense, management information systems expenses, employee
benefits and, from January through December 1995, a management fee paid to IPG.

General and administrative expenses increased 53.7% from approximately $8.7
million in fiscal 1995 to approximately $13.4 million in fiscal 1996 and
represented 25.0% and 23.5% of revenues in fiscal 1995 and fiscal 1996,
respectively. This period over period increase in absolute dollars was
attributable principally to higher general and administrative payroll costs and
increased general office costs to support the Company's growth, as well as
increases in business development expense, offset in part by reductions in bad
debt expense and

16
<PAGE> 18

management fees paid to IPG. The decrease in these expenses as a percentage of
revenues from fiscal 1995 to fiscal 1996 reflects a more rapid increase in
revenues than in general and administrative expenses. In the future, general and
administrative expenses will include expense associated with the amortization of
approximately $4.6 million in goodwill related to the acquisition of
Schell/Mullaney to be amortized over twenty years, as well as the amortization
of goodwill relating to certain of the Company's other acquisitions.

General and administrative expenses increased from approximately $5.1
million in fiscal 1994 to approximately $8.7 million in fiscal 1995,
representing an increase of 69.3%. This increase in absolute dollars was
primarily due to an increase of approximately $1.17 million in costs relating to
finance and administrative personnel to support the Company's expanded
operations and improve the Company's management information systems, and to a
lesser extent an increase of $784,000 in the Company's bad debt reserve during
fiscal 1995. The Company increased provisions for doubtful accounts to
accommodate the increased number of customers served by the Company.

Other Income (Expense), Net

Other income, net increased primarily due to an increase in interest income
of approximately $1.4 million during fiscal 1996 over fiscal 1995 due to higher
average cash, cash equivalent and marketable securities balances.

Income Taxes

Combined federal and state income tax rates were 40.0% in fiscal 1994,
43.7% in fiscal 1995, and 36.5% in fiscal 1996. The reduction in rate for fiscal
1996 is primarily due to the impact of income generated by the Company's
holdings in tax-advantaged investments.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations and investments in
property and equipment through cash generated from operations, bank borrowing,
equity financing and capital lease financing arrangements. At November 30, 1996,
the Company had no material capital commitments.

Cash, cash equivalents and marketable securities, consisting primarily of
high-quality municipal bonds and tax-advantaged money market instruments,
totaled $43,000, $2.3 million and $45.4 million at November 30, 1994, 1995 and
1996, respectively. The increase in cash, cash equivalents and marketable
securities during this period was primarily due to net proceeds of $37.8 million
and $3.8 million resulting from the sale of stock in connection with the
Company's initial public offering in December 1995 and a secondary offering in
June 1996, respectively, and from cash provided by operations of $1.0 million,
$2.1 million and $3.0 million during fiscal 1994, fiscal 1995 and fiscal 1996,
respectively.

The Company has a $3.0 million credit facility available under a revolving
line of credit. The Company also has a $1.0 million three year term loan
facility available for purchases of equipment. The credit facilities are secured
by all the assets of the Company and bear interest at prime for the line of
credit and prime plus 0.5% for the term loan facility. At November 30, 1996,
there was no indebtedness outstanding under these credit facilities. These
credit agreements, which are scheduled to expire on September 30, 1997, require
compliance with various financial covenants and restrictions, including
maintenance of minimum levels of net worth and profitability, and restrict the
Company's ability to pay dividends or to effect mergers or acquisitions without
the bank's consent.

The Company believes that its current cash, cash equivalents, and
marketable securities, together with existing credit facilities and cash flows
from operations, if any, will be sufficient to meet the Company's cash
requirements for at least the next twelve months, including the cost of business
acquisitions, if any.* The Company may need to raise additional funds through
public or private debt or equity financing in order to take

- ---------------

* This statement is a forward-looking statement reflecting current
expectations. Investors are strongly encouraged to review the section entitled
"Factors Affecting Operating Results and Market Price of Stock" commencing on
page 8, for a discussion of factors that could affect future performance.

17
<PAGE> 19

advantage of opportunities that may become available to the Company,
including more rapid expansion and acquisition of businesses, products or
technologies, or to otherwise respond to competitive pressures. There can be no
assurance that the Company will be able to raise capital on favorable terms or
at all.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is incorporated by reference herein from
Part IV Item 14(a)(1) and (2).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

Certain information required by Part III is omitted from this Report in
that the registrant will file a definitive Proxy Statement pursuant to
Regulation 14A (the "Proxy Statement") not later than 120 days after the end of
the fiscal year covered by this Report, and certain information included therein
is incorporated herein by reference.

ITEM 10. DIRECTORS AND OFFICERS OF THE COMPANY

Certain of information required by Item 10 is set forth under the captions,
"Proposal 1: Election of Directors", "Director Compensation and Director Option
Plan", and "Compliance with Section 16(a) of the Exchange Act" in the Company's
Proxy Statement, which information is incorporated herein by reference.

The current executive officers and directors of the Company, and their ages
as of January 1, 1997, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Mark D. Kvamme........................... 35 Chief Executive Officer and Chairman of the Board
Thomas K. Suiter......................... 42 President, CKS Partners and Director
Carlton H. Baab.......................... 39 Executive Vice President, Chief Financial Officer
and Secretary
Robert T. Clarkson....................... 43 Executive Vice President, Business Development
Alexandre Balkanski(1)................... 36 Director
Pierre R. Lamond(1)(2)................... 66 Director
Barry R. Linsky(1)(2).................... 55 Director
Michael B. Slade......................... 39 Director
</TABLE>

- ---------------
(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

Each director of the Company serves a three-year term. Mr. Balkanski's, Mr.
Linsky's and Mr. Slade's terms expire at the 1997 Annual Meeting of
Stockholders, Mr. Kvamme's and Mr. Lamond's terms expire at the 1998 Annual
Meeting of Stockholders, and Mr. Suiter's term expires at the 1999 Annual
Meeting of Stockholders.

Mark D. Kvamme joined the Company in 1989 as a Partner and since 1991 has
served as the Chairman of the Company's Board of Directors and Chief Executive
Officer. Prior to joining the Company, Mr. Kvamme served as Vice President of
Marketing of Pillar Corporation. From September 1986 to January 1989, Mr. Kvamme
was International Marketing Manager for Wyse Technology, Inc., a terminal and
personal computer manufacturer. Before joining Wyse, Mr. Kvamme founded and
served as President and Chief Executive Officer of International Solutions,
Inc., a global distributor of hardware and software products, from 1984 to 1986.
While at Apple between 1980 and 1984, Mr. Kvamme held various management
positions in international sales and marketing and in product development, as
well as being one of the initial managers of

18
<PAGE> 20

Apple France. Mr. Kvamme holds a B.A. in French Economics and Literature from
the University of California at Berkeley.

Thomas K. Suiter assumed the position of President, CKS Partners in May
1996. Mr. Suiter joined CKS in 1991 as Chief Creative Officer, and has served as
a member of the Company's Board of Directors since that time. Before joining the
Company, Mr. Suiter was World Wide Creative Director of Landor Associates from
1985 to 1991. Prior to joining Landor, Mr. Suiter was Director of Creative
Services at Apple from 1984 to 1985 and Creative Director from 1982-1984 where
he and his group were responsible for Apple's corporate identity and the
marketing communication materials for the MacIntosh and Apple II product lines.
Mr. Suiter attended San Diego State University and the Art Center College of
Design, Pasadena, California.

Carlton H. Baab has served as the Company's Chief Financial Officer and
Vice President of Finance and Administration since joining the Company in
February 1994. Mr. Baab was promoted to Executive Vice President, Chief
Operating Officer and Secretary in August 1995. Mr. Baab's duties were
consolidated under the titles of Chief Financial Officer, Executive Vice
President and Secretary in May 1996. Prior to joining the Company, Mr. Baab
co-founded and served as President and Chief Executive Officer of MobileSoft
Corporation, a software application developer for the Apple Newton. Mr. Baab was
the Vice President & General Manager of the Contract Division at the Levolor
Corporation from August 1989 to August 1993. At Levolor, Mr. Baab was also Vice
President of Information Technology and Re-Engineering and a member of the
executive turnaround team. Mr. Baab holds a B.S. in Electrical Engineering from
the University of Southern California and an M.B.A. from the Harvard Graduate
School of Business Administration.

Robert T. Clarkson assumed the position of Executive Vice President,
Business Development at the Company in February 1997. From February 1989 to
January 1997, Mr. Clarkson served as a member of Wilson Sonsini Goodrich &
Rosati, Professional Corporation, the Company's primary outside counsel. Mr.
Clarkson holds a B.A. in History from Stanford University and a J.D. from the
University of California at Los Angeles.

Alexandre Balkanski has been a member of the Company's Board of Directors
since March 1995. Dr. Balkanski is the President and CEO of C-Cube Microsystems,
Inc. ("C-Cube"), a publicly-held company specializing in digital video
compression solutions, which he co-founded in July 1988. Dr. Balkanski was named
Senior Vice President of C-Cube in August 1989, served as its Vice President of
Worldwide Sales and Marketing from February 1994 to June 1995, and served as its
Executive Vice President and Chief Operating Officer from February 1994 to June
1995. Dr. Balkanski currently serves on the board of directors of both C-Cube
and Sierra Semiconductor Corporation. Dr. Balkanski holds graduate degrees from
Harvard University in Physics, Economics and Business, as well as a B.A. in
Physics from Harvard College.

Pierre R. Lamond has been a member of the Company's Board of Directors
since 1990. Mr. Lamond has been a general partner of Sequoia Capital, a venture
capital firm, since 1981. Prior to joining Sequoia, Mr. Lamond was Vice
President and Technical Director of National Semiconductor, a company he
co-founded in 1967. Mr. Lamond currently serves as the Chairman of the Board of
Directors of Cypress Semiconductor Corporation and Vitesse Semiconductor
Corporation, and is a director of a number of privately held companies. He holds
a B.S. in Electrical Engineering and an M.S. in Physics from the University of
Toulouse, France, as well as an M.S. in Electrical Engineering from Northeastern
University.

Barry R. Linsky has been a member of the Company's Board of Directors since
January 1995. Mr. Linsky has served as Senior Vice President, Planning and
Business Development of IPG since December 1990. Prior to joining IPG at the
parent company level, Mr. Linsky was Executive Vice President, Account Service,
of Lowe & Partners (formerly The Marschalk Company, a subsidiary of IPG), from
1980 until 1990. From 1972 to 1980, Mr. Linsky held various positions at The
Marschalk Company, including Senior Vice President and Director of the agency's
New Products Group and positions in account management. Previously, Mr. Linsky
had worked in consumer marketing for Lever Brothers Co., Bristol-Myers Company
and Squibb Beech-Nut, Inc. He holds a B.A. in Liberal Arts from Dartmouth
College and an M.B.A. from Amos Tuck School of Business.

Michael B. Slade has been a member of the Company's Board of Directors
since June 1996. Mr. Slade has served as President and Chief Executive Officer
of Starwave Corp., a developer of multimedia information

19
<PAGE> 21

services for the Internet, since February 1993. Prior to joining Starwave, Mr.
Slade was Vice President of Special Projects at Asymetrix, a multimedia software
developer, from October 1992 to February 1993. From May 1991 to October 1992,
Mr. Slade served as Vice President of Marketing at NeXT Computer, Inc., a
developer of object-oriented software. Mr. Slade holds a B.A. in Economics from
Colorado College and an M.B.A. from Stanford University.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is set forth under the caption,
"Executive Compensation" in the Company's Proxy Statement, which information is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 is set forth under the caption
"Security Ownership" in the Company's Proxy Statement, which information is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 is set forth under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions" in the Company's Proxy Statement, which information is
incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Report:

1. CONSOLIDATED FINANCIAL STATEMENTS

The following consolidated financial statements of CKS Group, Inc. and
subsidiaries are filed as part of this Report:

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.................................................. F-2
Consolidated Balance Sheets as of November 30, 1995 and 1996.................. F-3
Consolidated Statements of Income for the years ended November 30, 1994, 1995,
and 1996.................................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended November
30, 1994, 1995, and 1996.................................................... F-5
Consolidated Statements of Cash Flows for the three years ended November 30,
1994, 1995, and 1996........................................................ F-6
Notes to Consolidated Financial Statements.................................... F-7
</TABLE>

2. CONSOLIDATED FINANCIAL STATEMENTS SCHEDULE

The following consolidated financial statement schedule of CKS Group, Inc.
is filed as part of this Report and should be read in conjunction with the
consolidated financial statements of CKS Group, Inc.:

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts.............................. S-1
</TABLE>

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.

20
<PAGE> 22

3. EXHIBITS

(a) The following exhibits are filed with this Report:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ---------- ---------------------------------------------------------------------------------
<S> <C>
3.1* Certificate of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
10.1* Form of Indemnification Agreement between Registrant and its officers and
directors.
10.2* The Registrant's 1995 Series B Common Stock Plan, as amended.
10.3* The Registrant's 1995 Stock Plan.
10.4* The Registrant's 1995 Employee Stock Purchase Plan.
10.5* The Registrant's 1995 Director Stock Option Plan.
10.6* Amended and Restated Purchase Agreement dated as of October 17, 1996 by and among
the Registrant, The Interpublic Group of Companies, Inc. and certain stockholders
of the Registrant.
10.7* Shareholder Rights Agreement dated as of January 13, 1995 by and among the
Registrant, The Interpublic Group of Companies, Inc. and certain stockholders of
the Registrant.
10.8* Lease Agreement dated as of March 8, 1995 between Registrant and Devcon
Associates XVI for Registrant's headquarters facility at 10441 Bandley,
Cupertino, CA.
10.9 Lease Agreement dated June 11, 1996 between Registrant and Devcon Associates XVI
for Registrant's facility at 10381 Bandley, Cupertino, CA.
10.10 Industrial Building Lease dated March 27, 1995 between CKS Partners, Inc. and
Lazaneo Investment, L.P. for Registrant's facility located at 10260 Bandley,
Cupertino, CA.
10.11 Industrial Lease Agreement dated November 16, 1995 between CKS Partners, Inc. and
The Leonard Company for Registrant's facility located at 20615 Lazaneo Drive,
Cupertino, CA.
10.12 Office Lease Agreement dated February 29, 1996, between Registrant and
Shorenstein Realty Investors, L.P. for Registrant's facility located at 345 Spear
Street, San Francisco, CA.
10.13* Exchange Agreement, dated as of December 1, 1994 among Registrant and certain
stockholders of CKS Partners, Inc., CKS Pictures, Inc. and CKS Interactive, Inc.
10.14* Stock Purchase Agreement among the Registrant, The Interpublic Group of
Companies, Inc. and certain stockholders of the Registrant dated October 16,
1995.
10.15* Letter agreement dated October 14, 1995 between the Registrant and The
Interpublic Group of Companies, Inc. ("IPG") regarding Shelf Registration
Statement to be filed to enable IPG to sell shares of Common Stock of Registrant.
10.16** Agreement and Plan of Reorganization, dated as of June 7, 1996, by and among
Registrant, Schell/Mullaney, Inc., a New York corporation, Michael Schell, Brian
Mullaney and First Interstate Bank of California.
10.17*** Asset Purchase Agreement, dated as of October 4, 1996, by and among Registrant,
Donovan & Green, Inc., a New York corporation ("Donovan & Green"), DG
Acquisition, Inc., a Delaware corporation ("Sub"), Nancye L. Green and Michael
Donovan.
10.18*** Amendment No. 1 to Asset Purchase Agreement, dated December 30, 1996, by and
among Registrant, Donovan & Green, Sub, Nancye L. Green and Michael Donovan.
10.19**** Acquisition Agreement dated January 31, 1996, by and among Registrant, Raleigh
Acquisition, Inc., a Delaware Corporation, the current and former partners of
McKinney & Silver, a North Carolina partnership, Robert C. Doherty, Donald D.
Maurer and Chemical Trust Company of California.
11.1 Statement regarding Computation of Per Share Earnings.
23.1 Consent of Independent Auditors.
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* Previously filed as exhibits to Registrant's Registration Statement on Form
S-1 (File No. 33-98312), filed with Securities Exchange Commission on
October 19, 1995.
** Previously filed as an exhibit to Registrant's report on Form 8-K dated
June 7, 1996.
*** Previously filed as exhibits to Registrant's report on Form 8-K dated
January 3, 1997.
**** Previously filed as exhibit to Registrant's report on Form 8-K dated
January 31, 1997.

(b) Reports on Form 8-K filed in the fourth quarter of fiscal 1996.

None.

21
<PAGE> 23

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: February 28, 1997 CKS GROUP, INC.

By: /s/ CARLTON H. BAAB
------------------------------------
Carlton H. Baab
Executive Vice President and
Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1934, this Report has
been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- ------------------

<C> <S> <C>
/s/ MARK D. KVAMME Chairman and Chief Executive February 28, 1997
- ---------------------------------------- Officer (Principal Executive
Mark D. Kvamme Officer)

/s/ CARLTON H. BAAB Executive Vice President and February 28, 1997
- ---------------------------------------- Chief Financial Officer
Carlton H. Baab (Principal Financial and
Accounting Officer)

/s/ THOMAS K. SUITER Director February 28, 1997
- ----------------------------------------
Thomas K. Suiter

/s/ ALEXANDRE BALKANSKI Director February 28, 1997
- ----------------------------------------
Alexandre Balkanski

/s/ PIERRE R. LAMOND Director February 28, 1997
- ----------------------------------------
Pierre R. Lamond

/s/ BARRY R. LINSKY Director February 28, 1997
- ----------------------------------------
Barry R. Linsky

/s/ MICHAEL B. SLADE Director February 28, 1997
- ----------------------------------------
Michael B. Slade
</TABLE>

22
<PAGE> 24

CKS GROUP, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Independent Auditors' Report......................................................... F-2
Consolidated Balance Sheets as of November 30, 1995 and 1996......................... F-3
Consolidated Statements of Income for the years ended November 30, 1994, 1995
and 1996.......................................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended November 30,
1994, 1995 and 1996............................................................... F-5
Consolidated Statements of Cash Flows for the years ended November 30, 1994, 1995
and 1996.......................................................................... F-6
Notes to Consolidated Financial Statements............................................. F-7

Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts..................................... S-1
</TABLE>

F-1
<PAGE> 25

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
CKS Group, Inc.:

We have audited the consolidated financial statements of CKS Group, Inc.
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we have also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CKS Group,
Inc. and subsidiaries as of November 30, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended November 30, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

/s/ KMPG PEAT MARWICK LLP
San Jose, California
December 16, 1996

F-2
<PAGE> 26

CKS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------
1995 1996
------- -------
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------
Current assets:
Cash and cash equivalents.............................................. $ 2,327 $ 7,528
Marketable securities.................................................. -- 37,895
Accounts receivable, net of allowances of $868 and $762 in 1995 and
1996, respectively.................................................. 7,203 14,542
Fees and expenditures in excess of billings............................ 471 2,043
Prepaid expenses and other current assets.............................. 1,095 1,429
------- -------
Total current assets........................................... 11,096 63,437
Property and equipment, net.............................................. 2,408 3,252
Goodwill and other assets................................................ 182 6,219
------- -------
Total assets................................................... $13,686 $72,908
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------
Current liabilities:
Accounts payable....................................................... 3,681 5,224
Accrued expenses....................................................... 2,371 6,284
Billings in excess of fees and expenditures............................ 959 1,720
Current portion of notes payable and capital lease obligations......... 316 417
Income taxes payable................................................... 972 188
------- -------
Total current liabilities...................................... 8,299 13,833
Notes payable and capital lease obligations, less current portion........ 412 419
Deferred income taxes.................................................... 380 --
------- -------
Total liabilities.............................................. $ 9,091 $14,252
======= =======
Commitments
Stockholders' equity:
Preferred stock; $.001 par value; 5,000,000 shares authorized; none
issued
and outstanding..................................................... -- --
Common stock; $.001 par value; 30,000,000 shares authorized:
Series A common stock; 3,114,437 shares issued and outstanding in
1995............................................................... 3 --
Common stock; 7,125,000 and 13,162,000 shares issued and outstanding
in 1995 and 1996, respectively..................................... 7 13
Additional paid-in capital............................................. 2,380 50,824
Unrealized loss on marketable securities............................... -- (65)
Notes receivable from stockholders..................................... (292) (292)
Retained earnings...................................................... 2,497 8,176
------- -------
Total stockholders' equity..................................... 4,595 58,656
------- -------
Total liabilities and stockholders' equity..................... $13,686 $72,908
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 27

CKS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Revenues...................................................... $22,938 $34,792 $56,951
------- ------- -------
Operating expenses:
Direct salaries and related expenses........................ 6,168 10,485 16,542
Other direct operating expenses............................. 11,121 13,164 19,866
General and administrative expenses......................... 5,131 8,688 13,355
------- ------- -------
Total operating expenses................................. 22,420 32,337 49,763
------- ------- -------
Operating income.............................................. 518 2,455 7,188
Other income (expense), net................................... (38) (27) 1,757
------- ------- -------
Income before income taxes.................................... 480 2,428 8,945
Income taxes.................................................. 192 1,062 3,266
------- ------- -------
Net income.................................................... $ 288 $ 1,366 $ 5,679
======= ======= =======
Net income per share.......................................... $ 0.03 $ 0.13 $ 0.43
======= ======= =======
Shares used in per share computation.......................... 9,944 10,726 13,362
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 28

CKS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
SERIES A UNREALIZED NOTES
COMMON STOCK COMMON STOCK ADDITIONAL LOSS ON RECEIVABLE TOTAL
--------------- --------------- PIAD-IN MARKETABLE FROM RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL SECURITIES STOCKHOLDERS EARNINGS EQUITY
------ ------ ------ ------ ---------- ---------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, November 30,
1993.................... -- $ -- 7,840 $ 8 $ 363 $ -- $ (319) $ 843 $ 895
Issuance of common
stock................... -- -- 2,273 2 204 -- (146) -- 60
Repurchase of common
stock................... -- -- (650) (1) (313) -- 94 -- (220)
Net income................ -- -- -- -- -- -- -- 288 288
------ --- ----- --- ------- ---- ----- ------ -------
Balances, November 30,
1994.................... -- -- 9,463 9 254 -- (371) 1,131 1,023
Issuance of Series A
common stock............ 739 1 -- -- 1,923 -- -- -- 1,924
Conversion of common stock
to Series A common
stock................... 2,375 2 (2,375) (2) -- -- -- -- --
Repurchase of common
stock................... -- -- (31) -- (23) -- 8 -- (15)
Issuance of common
stock................... -- -- 68 -- 70 -- -- -- 70
Compensation related to
stock options........... -- -- -- -- 156 -- -- -- 156
Collections on stockholder
notes receivable........ -- -- -- -- -- -- 71 -- 71
Net income................ -- -- -- -- -- -- -- 1,366 1,366
------ --- ----- --- ------- ---- ----- ------ -------
Balances, November 30,
1995.................... 3,114 3 7,125 7 2,380 -- (292) 2,497 4,595
Conversion of Series A
common stock to common
stock................... (3,114) (3) 3,114 3 -- -- -- -- --
Issuance of common
stock................... -- -- 2,923 3 47,416 -- -- -- 47,419
Compensation related to
stock options........... -- -- -- -- 102 -- -- -- 102
Tax benefit from
disqualifying
dispositions............ -- -- -- -- 926 -- -- -- 926
Unrealized loss on
marketable securities... -- -- -- -- -- (65) -- -- (65)
Net income................ -- -- -- -- -- -- -- 5,679 5,679
------ --- ----- --- ------- ---- ----- ------ -------
Balances, November 30,
1996.................... -- $ -- 13,162 $ 13 $ 50,824 $(65) $ (292) $8,176 $58,656
====== === ===== === ======= ==== ===== ====== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 29

CKS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 288 $ 1,366 $ 5,679
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income taxes.................................... (127) (10) (1,325)
Compensation related to stock options.................... -- 156 102
Tax benefit from disqualifying dispositions.............. -- -- 926
Depreciation and amortization............................ 514 738 850
Changes in operating assets and liabilities:
Accounts receivable.................................... (2,914) (1,550) (5,833)
Fees and expenditures in excess of billings............ (24) (292) (1,572)
Prepaid expenses and other current assets.............. (140) (952) 72
Accounts payable....................................... 2,154 335 1,169
Accrued expenses....................................... 384 1,565 3,492
Billings in excess of fees and expenditures............ 616 137 269
Income taxes payable................................... 293 654 (784)
------- ------- -------
Net cash provided by operating activities........... 1,044 2,147 3,045
------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment......................... (1,649) (1,239) (1,368)
Purchases of marketable securities.......................... -- -- (39,710)
Sale of marketable securities............................... -- -- 1,750
Cash acquired in business combination....................... -- -- 55
Other assets................................................ -- -- (574)
------- ------- -------
Net cash used in investing activities............... (1,649) (1,239) (39,847)
------- ------- -------
Cash flows from financing activities:
Net borrowings (repayments) on line of credit and notes
payable.................................................. 706 (674) (419)
Collections on stockholder notes receivable................. -- 71 --
Proceeds from sale of common stock.......................... 60 1,994 42,422
Repurchase of common stock.................................. (220) (15) --
------- ------- -------
Net cash provided by financing activities........... 546 1,376 42,003
------- ------- -------
Net change in cash and cash equivalents....................... (59) 2,284 5,201
Cash and cash equivalents, beginning of year.................. 102 43 2,327
------- ------- -------
Cash and cash equivalents, end of year........................ $ 43 $ 2,327 $ 7,528
======= ======= =======
Supplementary disclosure of cash flow information:
Cash paid:
Interest................................................. $ 60 $ 91 $ 63
======= ======= =======
Income taxes............................................. $ 30 $ 647 $ 4,488
======= ======= =======
Noncash investing and financing activities:
Sale of common stock in exchange for stockholder notes... $ 146 $ -- $ --
======= ======= =======
Issuance of common stock in business acquisition......... $ -- $ -- $ 4,997
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 30

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1994, 1995, AND 1996

(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Principles of Combination

CKS Group, Inc. (the Company) is an integrated marketing communications
company providing corporate identity, advertising, sales promotions, product
packaging, general merchandising, and multimedia services.

The Company was formed in January 1995 in a merger of three entities that
were under common control: CKS Partners, Inc., CKS Interactive, Inc., and CKS
Pictures, Inc. (collectively, the Former Affiliates). The accompanying
consolidated financial statements have been prepared on the basis that these
entities were combined at the beginning of their existence for financial
reporting purposes. The combined entities have been under common control since
inception and have been included in the consolidated financial statements at
historical cost, in a manner similar to a pooling of interests, since their
respective dates of inception. All transactions and accounts between the
combined entities have been eliminated in the accompanying consolidated
financial statements.

In accordance with the merger of the Former Affiliates, each entity's
capital stock was converted, using a predetermined conversion factor, to give
effect to the merger. All share and per share information has been retroactively
restated to give the effect to the merger.

Cash Equivalents and Marketable Securities

The Company considers all highly liquid investments purchased with an
original maturity of 90 days or less to be cash equivalents.

The Company classifies its investments in certain debt and equity
securities as "available-for-sale." Such investments are recorded at fair value,
with unrealized gains and losses reported as a separate component of
stockholders' equity. The cost of securities sold is based upon the specific
identification method.

Fair Value of Financial Instruments and Concentrations of Credit Risk

The carrying value of the Company's financial instruments, including
marketable securities and accounts receivable, approximates fair market value.

Financial instruments, which potentially subject the Company to a
concentration of credit risk, consist principally of accounts receivable. The
Company's services are provided to clients in a variety of industries. The
Company performs ongoing credit evaluation of its clients, generally does not
require collateral, and records allowances for potential credit losses.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Property and equipment are depreciated on a straight-line
basis over estimated useful lives of four to seven years.

Leasehold improvements are amortized over the lesser of their useful lives
or the remaining term of the related lease.

Goodwill

Goodwill is amortized on a straight-line basis over 20 years. The Company
assesses the recoverability of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation. The
amount of

F-7
<PAGE> 31

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

goodwill impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds.

Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

Revenue Recognition

Revenues are derived from fixed fee arrangements and are recognized on the
percentage-of-completion method based on the ratio of costs incurred to total
estimated costs. Fees and expenditures in excess of billings represent the costs
incurred and anticipated profits earned on projects in progress in excess of
amounts billed, and are recorded as an asset. Billings in excess of fees and
expenditures represent amounts billed in excess of costs incurred and estimated
profit earned, and are recorded as a liability. Such billings are generally at
the beginning of contract periods and are in accordance with contract
provisions. To the extent costs incurred and anticipated costs to complete
projects in progress exceed anticipated billings, a loss is accrued for the
excess.

Income Taxes

The Company records income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

Net Income Per Share

Net income per share is computed using the weighted average number of
shares outstanding of common stock and dilutive common equivalent shares from
stock options using the treasury stock method. In accordance with certain
Securities and Exchange Commission (SEC) Staff Accounting Bulletins, such
computations include all common and common equivalent shares issued within 12
months of the Company's initial public offering (IPO) date as if they were
outstanding for all prior periods presented using the treasury stock method and
the IPO price.

Recent Accounting Pronouncements

The Financial Accounting Standard Board (FASB) recently adopted SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. This statement requires long-lived assets to be
evaluated for impairment whenever events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable. The Company will adopt
SFAS No. 121 in fiscal 1997. The adoption of SFAS No. 121 is not expected to
have a material effect on the Company's consolidated results of operations.

Reclassifications

Certain amounts in the accompanying 1994 and 1995 consolidated financial
statements have been reclassified in order to conform them with the 1996
consolidated financial statement presentation.

F-8
<PAGE> 32

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2) ACQUISITIONS

Schell/Mullaney, Inc.

On August 1, 1996, the Company acquired Schell/Mullaney, Inc.
(Schell/Mullaney). Upon the closing of the merger the shares of common stock of
Schell/Mullaney (Schell/Mullaney common stock) that were issued and outstanding
immediately prior to the closing were converted into 183,066 shares of the
Company's common stock valued at $5,000,000, and the right to receive up to an
additional $9,000,000 in common stock of the Company in 1997 and 1998 upon
attainment of certain financial performance goals by Schell/Mullaney. The number
of additional shares to be issued to the former shareholders of Schell/Mullaney
will be determined based on the average closing price of the Company's common
stock during the 40-day period ending 2 days prior to the issuance dates of such
shares. In the event additional shares are issued to the former shareholders of
Schell/Mullaney, they will be accounted for as additional purchase price.

The acquisition was accounted for as a purchase with the results of
Schell/Mullaney included from the acquisition date. The excess of the purchase
price over the fair value of net assets acquired amounted to $4,577,000 and was
attributed to goodwill. Accumulated amortization amounted to $74,000 as of
November 30, 1996.

The following summary, prepared on a pro forma basis, combines the
Company's consolidated results of operations for the years ended November 30,
1995 and 1996, with Schell/Mullaney's results of operations for the years ended
December 31, 1995 and November 30, 1996, respectively, as if Schell/Mullaney had
been acquired as of the beginning of the periods presented (in thousands, except
per share data):

<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------
1995 1996
------- -------
<S> <C> <C>
Revenues................................................. $39,838 $61,239
Net income............................................... 2,325 6,994
Net income per share..................................... 0.21 0.52
Shares used in per share computation..................... 10,858 13,484
</TABLE>

The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the periods presented. In
addition, they are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from combined operations.

Donovan & Green, Inc.

On October 4, 1996 the Company entered into an agreement to acquire the
assets and assume substantially all the liabilities of Donovan & Green, Inc.
(Donovan & Green). The Purchase Agreement provides for initial payments to
Donovan & Green of $3,330,000 in cash and shares of the Company's common stock
with a fair market value of $1,820,000. In addition, Donovan & Green will be
entitled to receive an additional $3,220,000 in cash and a number of shares of
common stock of the Company with a value of up to $1,610,000 over the next three
fiscal years. Donovan & Green will also have the right to receive additional
payments if the subsidiary attains certain earnings goals during the fiscal
years ending November 30, 1997, 1998, 1999, and 2000. Donovan & Green may
receive $889,000 in cash and shares of the Company's common stock with a value
of $444,000 in each of 1998 and 1999 if the subsidiary meets its earnings goals
for the 1997 and 1998 fiscal years. To the extent that the subsidiary exceeds
its earnings goals for the 1997, 1998, 1999, and 2000 fiscal years by more than
10%, Donovan & Green will be entitled to receive cash and common stock of the
Company with a combined value of up to $1,000,000 per year for each of these
four years. The Company anticipates closing the acquisition in December 1996.

F-9
<PAGE> 33

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) MARKETABLE SECURITIES

Marketable securities include the following as of November 30, 1996 (in
thousands):

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Municipal obligations........................... $37,771 $ -- $ -- $37,771
Marketable equity security...................... 189 -- 65 124
------- --- --- -------
$37,960 $ -- $ 65 $37,895
======= === === =======
</TABLE>

The contractual maturities of available-for-sale debt securities,
regardless of their balance sheet classification as of November 30, 1996, are as
follows (in thousands):

<TABLE>
<CAPTION>
FAIR
COST VALUE
------- -------
<S> <C> <C>
Due within one year.............................................. $14,037 $14,037
Due after one year through five years............................ 1,034 1,034
Due after five years through ten years........................... 2,500 2,500
Due after ten years.............................................. 20,200 20,200
------- -------
$37,771 $37,771
======= =======
</TABLE>

(4) PROPERTY AND EQUIPMENT

Property and equipment include the following (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------
1995 1996
------ ------
<S> <C> <C>
Computer equipment and software.................................... $2,149 $3,033
Furniture and fixtures............................................. 718 891
Video production equipment......................................... 750 928
Leasehold improvements............................................. 558 877
------ ------
4,175 5,729
Less accumulated depreciation and amortization..................... 1,767 2,477
------ ------
$2,408 $3,252
====== ======
</TABLE>

(5) NOTES PAYABLE

In July 1995, the Company entered into a credit agreement with a bank for
$4,600,000, including a $3,000,000 line of credit, a $1,000,000 equipment line
of credit, and a $600,000 term loan to refinance existing debt. The lines of
credit have maturities of September 30, 1997. Advances under the $1,000,000
equipment loan facility are limited to 80% of the equipment purchase price.
Borrowings bear interest at the bank's prime rate for the $3,000,000 facility
and at prime rate plus .5% for the $1,000,000 facility. Borrowings are secured
by all assets of the Company. As of November 30, 1995 and 1996, the Company had
not drawn on the line of credit.

F-10
<PAGE> 34

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Notes payable consisted of the following (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30,
-------------
1995 1996
---- ----
<S> <C> <C>
Borrowings under term loan, prime rate plus 1.5%, due December
1, 2000..................................................... $ -- $163
Borrowings under term loan, prime rate plus .75%, due July 30,
1997........................................................ 408 89
Purchase contracts, with interest at 5.65% to 10.25%, expiring
at various dates through December 1, 2000................... 116 190
Other......................................................... 204 394
---- ----
728 836
Less current maturities....................................... 316 417
---- ----
$412 $419
==== ====
</TABLE>

Future maturities of the long-term portion of notes payable are as follows:
$417,000 in fiscal 1997; $142,000 in fiscal 1998; $133,000 in fiscal 1999;
$105,000 in fiscal 2000; and $39,000 in fiscal 2001.

(6) LEASES

The Company maintains an executive office and two operating offices in
Northern California as well as operating offices in Oregon, New York, Washington
D.C., and London. The Company is generally responsible for maintaining public
liability and property damage insurance on the leased property and is also
responsible for certain operating expenses and property taxes. The facilities'
leases begin to expire in 1996, but contain renewal options to extend lease
terms for up to six years. The Company also leases office equipment under
various operating leases, which begin to expire in 1996.

Total rent expense for facilities and office equipment was approximately
$1,128,000, $2,183,000, and $3,607,000 for the years ended November 30, 1994,
1995, and 1996, respectively.

Future minimum operating lease payments for facilities and equipment are as
follows (in thousands):

<TABLE>
<CAPTION>
FISCAL YEAR ENDING NOVEMBER 30,
--------------------------------------------------------------------
<S> <C>
1997................................................................ $2,485
1998................................................................ 1,918
1999................................................................ 1,635
2000................................................................ 1,552
2001................................................................ 1,160
Thereafter.......................................................... 673
------
$9,423
======
</TABLE>

(7) STOCKHOLDERS' EQUITY

Reincorporation

On December 7, 1995, the Company was reincorporated in Delaware. The
certificate of incorporation provides for 5,000,000 authorized shares of
preferred stock with a $.001 par value per share and for 30,000,000 authorized
shares of common stock with a $.001 par value per share. The accompanying
consolidated financial statements have been retroactively restated to give
effect to the reincorporation. In conjunction with the reincorporation, all
outstanding shares of Series A common stock were converted into an equal number
of shares of the Company's common stock, and all outstanding options to purchase
shares of the Company's

F-11
<PAGE> 35

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Series B common stock were converted into options to purchase an equal number of
shares of the Company's common stock.

Common Stock Repurchases

In 1994 and 1995, the Company repurchased approximately 650,000 and 31,000
shares of common stock, respectively. These shares were repurchased from
employees who had terminated employment with the Company. In accordance with the
terms of the respective employee's Stock Purchase Agreement, the Company
exercised its right of repurchase and repurchased the vested portion of shares
at the then fair market value of the common stock, with the unvested shares
being repurchased at the employee's original purchase price.

1995 Series B Common Stock Plan

On April 28, 1995, the Company's Board of Directors approved the 1995
Series B common stock plan (the Plan). Under the Plan, 750,000 shares of Series
B common stock have been reserved for issuance. Options granted under the Plan
may be either incentive stock options or nonstatutory stock options, as
designated by the Company's Board of Directors. The Plan expires 10 years after
adoption. Series B common stock possessed the same rights and privileges as
common stock except that each share is entitled to one-tenth the dividend, if
declared, on common stock and one-tenth the voting privilege and liquidation
preference as a share of common stock. Series B common stock converted
automatically on a one-for-one basis into common stock upon the closing of the
IPO.

The Plan provides (i) the exercise price of an incentive stock option will
be no less than the fair market value of the Company's common stock at the date
of grant; (ii) the option exercise price per share for a nonstatutory stock
option will not be less than 85% of the fair market value; and (iii) the
exercise price of an incentive stock option for an optionee who possesses more
than 10% of the total combined voting power of all classes of stock shall not be
less than 110% of the fair market value; all as determined by the Board of
Directors. Options generally vest 25% after one year and then ratably over 36
months thereafter.

Plan activity is summarized as follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
OPTIONS ----------------------------
AVAILABLE NUMBER OF PRICE
FOR GRANT SHARES PER SHARE
--------- --------- --------------
<S> <C> <C> <C>
Options available for grant under plan....... 750,000 -- $ --
Options granted.............................. (648,022) 648,022 0.50 - 9.00
Options canceled............................. 13,806 (13,806) 0.50 - 9.00
------- -------
Balances, November 30, 1995.................. 115,784 634,216 .50 - 9.00
------- -------
Options granted.............................. (87,800) 87,800 10.00
Options exercised............................ -- (82,685) 0.50 - 9.00
Options canceled............................. 44,175 (44,175) 0.50 - 9.00
Plan shares expired.......................... (72,159) -- 0.50 - 9.00
------- -------
Balances, November 30, 1996.................. -- 595,156 0.50 - 10.00
======= =======
</TABLE>

As of November 30, 1995 and 1996, options to purchase 155,492 and 211,749
shares, respectively, were vested.

F-12
<PAGE> 36

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1995 Stock Plan

In October 1995, the Company's Board of Directors approved the 1995 Stock
Plan (the Stock Plan). Under the Stock Plan, options to purchase common stock
and rights to purchase common stock may be granted to eligible employees,
officers, and consultants of the Company. The Company's Board of Directors or a
committee thereof, has the authority to select the persons to whom awards are
granted and determine the terms of each award. As of November 30, 1995, no
options or rights had been granted pursuant to the Stock Plan, and 1,000,000
shares were available for future grant under the Stock Plan.

In November 1996, the Company's Board of Directors authorized the repricing
of outstanding options to purchase the Company's common stock with exercise
prices in excess of $20.00 per share to reduce their exercise price to $20.00
per share. The repricing has been reflected in the plan activity for the year
ended November 30, 1996 as follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
OPTIONS -----------------------
AVAILABLE NUMBER OF PRICE
FOR GRANT SHARES PER SHARE
--------- --------- ---------
<S> <C> <C> <C>
Options available for grant under plan............ 1,000,000 -- $ --
Options granted................................... (934,700) 934,700 20.00
Options canceled.................................. 35,000 (35,000) 20.00
--------- -------
Balances, November 30, 1996....................... 100,300 899,700 20.00
========= =======
</TABLE>

As of November 30, 1996, no options under the Stock Plan were vested.

In December 1996, the total number of shares reserved for issuance under
the Stock Plan was increased to 2,600,000.

1995 Employee Stock Purchase Plan

The Company's 1995 Employee Stock Purchase Plan (the Purchase Plan) was
approved by the Company's Board of Directors in October 1995 and provides for
the purchase by eligible employees of shares of the Company's common stock. A
total of 300,000 shares of common stock have been reserved for issuance under
the Purchase Plan. Eligible employees may purchase common stock through payroll
deductions, which may not exceed 15% of an employee's compensation. Shares are
purchased on the last day of each purchase period. The price at which stock may
be purchased under the Purchase Plan is equal to 85% of the lower of the fair
market value of the Company's common stock on the first day of the offering
period or the last day of the purchase period.

1995 Directors' Option Plan

Under the 1995 Directors' Option Plan (the Directors' Option Plan), a total
of 100,000 shares are reserved for issuance. The Directors' Option Plan provides
that each nonemployee director will be granted an option to purchase 20,000
shares of common stock on the date on which the optionee first becomes a
director of the Company. Thereafter each nonemployee director will be granted an
option to purchase 5,000 shares of common stock on the first day of each year
after adoption of the Directors' Option Plan. Each option becomes exercisable as
to 25% of the shares subject to such option on each anniversary of its date of
grant. The exercise price of all options granted under the Directors' Option
Plan will be equal to the fair market value of the Company's common stock on the
date of grant. To date, 35,000 options have been granted under the Directors'
Option Plan.

F-13
<PAGE> 37

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Public Offerings

In December 1995, the Company completed the IPO and issued 2,475,000 shares
of its common stock at a per share price of $17.00. The Company received cash
proceeds of approximately $37,800,000, net of underwriting discounts,
commissions, and other costs. In June 1996, the Company completed a secondary
public offering of 1,800,000 shares of its common stock at a per share price to
the public of $34.00. Of these shares, 131,500 were sold by the Company, and
1,668,500 were sold by certain stockholders. The Company received cash proceeds
of approximately $3,800,000, net of underwriting discounts, commissions, and
other costs.

(8) INCOME TAXES

The provision for income taxes consisted of the following (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
---------------------------
1994 1995 1996
----- ------ ------
<S> <C> <C> <C>
Current:
Federal......................................... $ 260 $1,201 $2,327
State........................................... 70 340 942
Foreign......................................... 3 -- --
----- ------ ------
333 1,541 3,269
----- ------ ------
Deferred:
Federal......................................... (106) (377) (762)
State........................................... (35) (102) (167)
----- ------ ------
(141) (479) (929)
Charge in lieu of taxes attributable to employee
stock plans..................................... -- -- 926
----- ------ ------
$ 192 $1,062 $3,266
===== ====== ======
</TABLE>

The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of November 30, 1995 and
1996, are presented below:

<TABLE>
<CAPTION>
NOVEMBER 30,
----------------
1995 1996
----- ------
<S> <C> <C>
Deferred tax assets:
Accounts receivable allowances........................... $ 297 $ 327
Depreciation............................................. -- 314
Federal benefit of state taxes........................... 125 266
Billing in excess of fees and expenditures............... -- 106
Deferred compensation.................................... -- 657
Benefit and other accruals............................... 129 198
----- ------
Total deferred tax assets........................ 551 1,868
----- ------
Deferred tax liabilities:
Deferred rent............................................ -- (148)
Change from cash to accrual method of accounting for
income tax purposes................................... (322) (620)
Depreciation............................................. (58) --
----- ------
Total deferred tax liabilities................... (380) (768)
----- ------
Net deferred tax assets.......................... $ 171 $1,100
===== ======
</TABLE>

F-14
<PAGE> 38

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:

<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Federal tax statutory rate............................. 34.0% 34.0% 34.0%
State income taxes, net of federal benefit............. 6.0 6.0 7.4
Tax exempt income...................................... -- -- (5.5)
Other.................................................. -- 3.7 .6
---- ---- ----
40.0% 43.7% 36.5%
==== ==== ====
</TABLE>

(9) SIGNIFICANT CUSTOMERS

In the years ended November 30, 1995 and 1996, professional fees from a
major telecommunications company amounted to approximately $6,730,000 and
$8,003,000, respectively, representing approximately 19% and 14%, respectively,
of total professional fees. This customer owed the Company a total of
approximately $1,212,000 and $2,092,000 as of November 30, 1995 and 1996,
respectively. During 1994,
professional fees from a computer hardware company amounted to approximately
$3,194,000 representing approximately 14% of total professional fees for 1994.

(10) SUMMARY OF QUARTERLY RESULTS OF OPERATIONS -- UNAUDITED
(in thousands, except per share data)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------
FEBRUARY 29, MAY 31, AUGUST 31, NOVEMBER 30,
1995 1995 1995 1995
------------ ------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 6,200 $ 8,738 $ 9,532 $ 10,322
Operating expenses:
Direct salaries and related expenses........ 2,052 2,599 2,862 2,972
Other direct operating expenses............. 2,252 3,558 3,512 3,842
General and administrative expenses......... 1,706 2,008 2,470 2,504
------- ------- ------- -------
Total Operating Expenses................. 6,010 8,165 8,844 9,318
------- ------- ------- -------
Operating income.............................. 190 573 688 1,004
Other income (expense)........................ (36) 3 (10) 16
------- ------- ------- -------
Income before income taxes.................... 154 576 678 1,020
Income taxes.................................. 68 253 298 443
------- ------- ------- -------
Net Income.................................... $ 86 $ 323 $ 380 $ 577
======= ======= ======= =======
Net Income Per Share.......................... $ 0.01 $ 0.03 $ 0.04 $ 0.05
Shares Used in Per Share Computation.......... 10,674 10,765 10,739 10,750
</TABLE>

F-15
<PAGE> 39

CKS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------
FEBRUARY 29, MAY 31, AUGUST 31, NOVEMBER 30,
1996 1996 1996 1996
------------ ------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 9,150 $13,745 $ 15,523 $ 18,533
Operating expenses:
Direct salaries and related expenses........ 2,978 3,797 4,273 5,494
Other direct operating expenses............. 3,227 5,232 5,788 5,619
General and administrative expenses......... 2,089 3,195 3,512 4,559
------- ------- ------- -------
Total Operating Expenses................. 8,294 12,224 13,573 15,672
------- ------- ------- -------
Operating income.............................. 856 1,521 1,950 2,861
Other income (expense)........................ 259 515 355 628
------- ------- ------- -------
Income before income taxes.................... 1,115 2,036 2,305 3,489
Income taxes.................................. 372 734 832 1,328
------- ------- ------- -------
Net Income.................................... $ 743 $ 1,302 $ 1,473 $ 2,161
======= ======= ======= =======
Net Income Per Share.......................... $ 0.06 $ 0.10 $ 0.11 $ 0.16
Shares Used in Per Share Computation.......... 12,942 13,361 13,519 13,665
</TABLE>

F-16
<PAGE> 40

SCHEDULE II

CKS GROUP INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
(ALL AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
ACCOUNT DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
- ------------------------------------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended November 30, 1994
Allowance for doubtful accounts................ $ 20 $377 $ (313) $ 84
Year ended November 30, 1995
Allowance for doubtful accounts................ $ 84 $869 $ (85) $ 868
Year ended November 30, 1996
Allowance for doubtful accounts................ $868 $713 $ (819) $ 762
</TABLE>

S-1
<PAGE> 41

CKS GROUP, INC.

FORM 10-K REPORT FOR FISCAL YEAR ENDED NOVEMBER 30, 1996

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER EXHIBIT TITLE NUMBER
--------- ------------------------------------------------------------------ ----------
<C> <S> <C>
3.1* Certificate of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
10.1* Form of Indemnification Agreement entered into between Registrant
and its officers and directors.
10.2* The Registrant's 1995 Series B Common Stock Plan, as amended.
10.3* The Registrant's 1995 Stock Plan.
10.4* The Registrant's 1995 Employee Stock Purchase Plan.
10.5* The Registrant's 1995 Director Stock Option Plan.
10.6* Amended and Restated Purchase Agreement dated as of October 17,
1996 by and among the Registrant, The Interpublic Group of
Companies, Inc. and certain stockholders of the Registrant.
10.7* Shareholder Rights Agreement dated as of January 13, 1995 by and
among the Registrant, The Interpublic Group of Companies, Inc. and
certain stockholders of the Registrant.
10.8* Lease Agreement dated as of March 8, 1995 between Registrant and
Devcon Associates XVI for Registrant's headquarters facility at
10441 Bandley, Cupertino, CA.
10.9 Lease Agreement dated June 11, 1996 between Registrant and Devcon
Associates XVI for Registrant's facility at 10381 Bandley,
Cupertino, CA.
10.10 Industrial Building Lease dated March 27, 1995 between CKS
Partners, Inc. and Lazaneo Investment, L.P. for Registrant's
facility located at 10260 Bandley, Cupertino, CA.
10.11 Industrial Lease Agreement dated November 16, 1995 between CKS
Partners, Inc. and The Leonard Company for Registrant's facility
located at 20615 Lazaneo Drive, Cupertino, CA.
10.12 Office Lease Agreement dated February 29, 1996, between Registrant
and Shorenstein Realty Investors, L.P. for Registrant's facility
located at 345 Spear Street, San Francisco, CA.
10.13* Exchange Agreement, dated as of December 1, 1994 among Registrant
and certain stockholders of CKS Partners, Inc., CKS Pictures, Inc.
and CKS Interactive, Inc.
10.14* Stock Purchase Agreement among the Registrant, The Interpublic
Group of Companies, Inc. and certain stockholders of the
Registrant dated October 16, 1995.
10.15* Letter agreement dated October 14, 1995 between the Registrant and
The Interpublic Group of Companies, Inc. ("IPG") regarding Shelf
Registration Statement to be filed to enable IPG to sell shares of
Common Stock of Registrant.
10.16** Agreement and Plan of Reorganization, dated as of June 7, 1996, by
and among Registrant, Schell/Mullaney, Inc., a New York
corporation, Michael Schell, Brian Mullaney and First Interstate
Bank of California.
</TABLE>
<PAGE> 42

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER EXHIBIT TITLE NUMBER
--------- ------------------------------------------------------------------ ----------
<C> <S> <C>
10.17*** Asset Purchase Agreement, dated as of October 4, 1996, by and
among Registrant, Donovan & Green, Inc., a New York corporation
("Donovan & Green"), DG Acquisition, Inc., a Delaware corporation
("Sub"), Nancye L. Green and Michael Donovan.
10.18*** Amendment No. 1 to Asset Purchase Agreement, dated December 30,
1996, by and among Registrant, Donovan & Green, Sub, Nancye L.
Green and Michael Donovan.
10.19**** Acquisition Agreement dated January 31, 1996, by and among
Registrant, Raleigh Acquisition, Inc., a Delaware Corporation, the
current and former partners of McKinney & Silver, a North Carolina
partnership, Robert C. Doherty, Donald D. Maurer and Chemical
Trust Company of California.
11.1 Statement regarding Computation of Per Share Earnings.
23.1 Consent of Independent Auditors.
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* Previously filed as exhibits to Registrant's Registration Statement on Form
S-1 (File No. 33-98312), filed with Securities Exchange Commission on
October 19, 1995.

** Previously filed as an exhibit to Registrant's report on Form 8-K dated
June 7, 1996.

*** Previously filed as exhibits to Registrant's report on Form 8-K dated
January 3, 1997.

**** Previously filed as exhibit to Registrant's report on Form 8-K dated
January 31, 1997.

<PAGE> 1
Exhibit 10.9

LEASE AGREEMENT

1. Parties. This Lease is made by and between DEVCON ASSOCIATES XVI, a
California general partnership ("Landlord"), and CKS GROUP, INC., a Delaware
corporation ("Tenant").

2. Demise of Premises. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord, upon the terms and conditions hereinafter set
forth, those certain premises (the "Premises") situated in the City of
Cupertino, County of Santa Clara, State of California, described as follows:
approximately twenty-nine thousand seven hundred fifty-eight (29,758) square
feet of floor space as shown on the floor plan attached hereto as EXHIBIT "A"
and located in the building (the "Building") shown as Building A on the site
plan (the "Site Plan") attached hereto as EXHIBIT "B" and commonly known as
10381 Bandley Drive. The Building is located on a larger parcel (the "Parcel")
containing another building (the "Other Building") as shown on the Site Plan.
The Building and the Other Building are hereinafter collectively referred to as
the Buildings. Except as provided in Paragraph 42, Landlord shall not be
required to make any alterations, additions or improvements to the Premises and
the Premises shall be leased to Tenant in an "as-is" condition.

3. Term. The term of this Lease ("Lease Term") shall be for five (5)
years, commencing on September 1, 1996 (the "Commencement Date") and ending on
August 31, 2001 unless sooner terminated pursuant to any provision hereof.
Notwithstanding said scheduled Commencement Date, if for any reason Landlord
cannot deliver possession of the Premises to Tenant on said date, Landlord shall
not be subject to any liability therefor, nor shall such failure affect the
validity of this Lease or the obligations of Tenant hereunder, but in such case
Tenant shall not be obligated to pay rent until possession of the Premises is
tendered to Tenant and the commencement and termination dates of this Lease
shall be revised to conform to the date of Landlord's delivery of possession.
Landlord shall permit Tenant to have access (including for construction) to the
Premises commencing August 1, 1996. Such early access shall be subject to all
the provisions of this Lease, excluding only the obligation to pay the Monthly
Installment of rent, Additional Rent and Common Area Charges.

4. Rent. Initial ______ ______

A. Time of Payment. Tenant shall pay to Landlord as rent for the
Premises the sum specified in Subparagraph 4.B below (the "Monthly Installment")
each month in advance on the first day of each calendar month, without deduction
or offset, prior notice or demand, commencing on the Commencement Date and
continuing through the term of this Lease, together with such additional rents
as are payable by Tenant to Landlord under the terms of this Lease. The Monthly
Installment for any period during the Lease Term which period is less than one
(1) full month shall be a pro rata portion of the Monthly Installment based upon
a thirty (30) day month.

<PAGE> 2
B. Monthly Installment. The Monthly Installment of rent payable each
month shall be the following respective amounts during the following time
periods:

<TABLE>
<CAPTION>
TIME PERIOD AMOUNT
----------- ------
<S> <C>
Months 1 through 12 $44,637.00 per month
Months 13 through 48 $47,613.00 per month
Months 49 through 60 $50,589.00 per month
</TABLE>

C. Late Charge. Tenant acknowledges that late payment by Tenant to
Landlord of rent and other sums due hereunder will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Landlord by the
terms of any mortgage or deed of trust covering the Premises. Accordingly, if
any installment of rent or any other sum due from Tenant shall not be received
by Landlord within five (5) days after such amount shall be due, Tenant shall
pay to Landlord, as additional rent, a late charge equal to four percent (4%) of
such overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of its other rights and remedies granted
hereunder.

D. Additional Rent. All taxes, insurance premiums, Common Area
Charges, late charges, costs and expenses which Tenant is required to pay
hereunder, together with all interest and penalties that may accrue thereon in
the event of Tenant's failure to pay such amounts, and all reasonable damages,
costs, and attorneys' fees and expenses which Landlord may incur by reason of
any default of Tenant or failure on Tenant's part to comply with the terms of
this Lease, shall be deemed to be additional rent ("Additional Rent") and shall
be paid in addition to the Monthly Installment of rent, and, in the event of
nonpayment by Tenant, Landlord shall have all of the rights and remedies with
respect thereto as Landlord has for the nonpayment of the Monthly Installment of
rent.

E. Place of Payment. Rent shall be payable in lawful money of the
United States of America to Landlord at DEVCON ASSOCIATES XVI, c/o J. Lohr
Properties, 2021 The Alameda, #145, San Jose, California 95121 or to such other
person (s) or at such other place (s) as Landlord may designate in writing.

F. Advance Payment. Concurrently with the execution of this Lease,
Tenant shall pay to Landlord the sum of Forty-Four Thousand Six Hundred
Thirty-Seven Dollars ($44,637.00) to be applied to the Monthly Installment of
rent first accruing under this Lease.

5. Security Deposit. Concurrently with the execution of this Lease,
Tenant shall deposit the sum of Fifty Thousand Five Hundred Eighty-Nine Dollars
($50,589.00) (the "Security Deposit") to

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<PAGE> 3
secure the faithful performance by Tenant of each term, covenant and condition
of this Lease. If Tenant shall at any time fail to make any payment or fail to
keep or perform any term, covenant or condition on its part to be made or
performed or kept under this Lease, Landlord may, but shall not be obligated to
and without waiving or releasing Tenant from any obligation under this Lease,
use, apply or retain the whole or any part of the Security Deposit (A) to the
extent of any sum due to Landlord; (B) to make any required payment on Tenant's
behalf; or (C) to compensate Landlord for any loss, damages, attorneys' fees or
expense sustained by Landlord due to Tenant's default. In such event, Tenant
shall, within five (5) days of written demand by Landlord, remit to Landlord
sufficient funds to restore the Security Deposit to its original sum. No
interest shall accrue on the Security Deposit. Landlord shall not be required to
keep the Security Deposit separate from its general funds. Should Tenant comply
with all the terms, covenants, and conditions of this Lease and at the end of
the term of this Lease leave the Premises in the condition required by this
Lease, then said Security Deposit, less any sums owing to Landlord or which
Landlord is otherwise entitled to retain, shall be returned to Tenant within
thirty (30) days after the termination of this Lease and vacancy of the Premises
by Tenant.

6. Use of Premises. Tenant shall use the Premises only in conformance
with applicable governmental laws, regulations, rules and ordinances for
administrative, marketing, sales, demonstration, research and development and
other general office uses and for no other purpose. Tenant shall indemnify,
protect, defend, and hold Landlord harmless against any loss, expense, damage,
attorneys' fees or liability arising out of the failure of Tenant to comply with
any applicable law. Tenant shall not commit or suffer to be committed, any waste
upon the Premises, or any nuisance, or other acts or things which may disturb
the quiet enjoyment of any other tenant in the buildings adjacent to the
Premises, or allow any sale by auction upon the Premises, or allow the Premises
to be used for any unlawful purpose, or place any loads upon the floor, walls or
ceiling which endanger the structure, or place any harmful liquids in the
drainage system of the Building. No waste materials or refuse shall be dumped
upon or permitted to remain upon any part of the Premises outside of the
Building, except in trash containers placed by Tenant inside exterior enclosures
designated for that purpose by Landlord. No materials, supplies, equipment,
finished products or semifinished products, raw materials or articles of any
nature shall be stored upon or permitted to remain on any portion of the
Premises outside of the Building. Tenant shall strictly comply with the
provisions of Paragraph 39 below.

7. Taxes and Assessments.

A. Tenant's Property. Tenant shall pay before delinquency any and
all taxes and assessments, license fees and public charges levied, assessed or
imposed upon or against Tenant's mixtures, equipment, furnishings, furniture,
appliances and personal property installed or located on or within the Premises.
Tenant shall cause said fixtures, equipment, furnishings, furniture, appliances
and personal property to be assessed and billed separately from the real
property of Landlord. If any of Tenant's said personal property shall be
assessed with Landlord's real property, Tenant shall pay Landlord the taxes
attributable to Tenant within ten (10) days after receipt of a written statement
from Landlord setting forth the taxes applicable to Tenant's property.

B. Property Taxes. Tenant shall pay, as Additional Rent, Tenant's
Pro Rata Share (as defined below) of all Property Taxes levied or assessed with
respect to the land comprising the Parcel

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<PAGE> 4
and with respect to all buildings and improvements located on the Parcel which
become due or accrue during the term of this Lease. Tenant shall pay such
Property Taxes to Landlord on or before the later of the following dates: (1) at
least ten (10) days prior to the delinquency date; or (2) twenty (20) days after
receipt of billing. If Tenant fails to do so, Tenant shall reimburse Landlord,
on demand, for all interest, late fees and penalties that the taxing authority
charges Landlord. In the event Landlord's mortgagee requires an impound for
Property Taxes, then on the first day of each month during the Lease Term,
Tenant shall pay Landlord one twelfth (1/12) of its annual share of such
Property Taxes. Tenant's liability hereunder shall be prorated to reflect the
Commencement and termination dates of this Lease.

As used in this Lease, the term "Tenant's Pro Rata Share" shall mean a
fraction, expressed as a percentage, the numerator of which is the number of
square feet of floor space contained in the Premises and the denominator of
which is the number of square feet of floor space contained in all of the
Buildings located on the Parcel. As of the Commencement Date, Tenant's Pro Rata
Share is fifty-six and seven-tenths percent (56.7%).

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

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

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<PAGE> 5
with respect to the Premises; any tax upon this transaction or any document to
which Tenant is a party creating or transferring an interest or an estate in the
Premises.

8. Insurance.

A. Indemnity. Tenant agrees to indemnify, protect and defend
Landlord against and hold Landlord harmless from any and all claims, causes of
action, judgments, obligations or liabilities, and all reasonable expenses
incurred in investigating or resisting the same (including reasonable attorneys'
fees), on account of, or arising out of, the use or occupancy of the Premises
and the Parcel and all areas appurtenant thereto by Tenant, its agents,
employees, contractors and invitees; provided, however, Tenant shall not be
obligated to indemnify, defend and hold harmless Landlord from claims, causes of
action, judgments, obligations and liabilities arising from (i) Landlord's gross
negligence or willful misconduct or (ii) any breach of Landlord's obligations
under this Lease. The Lease is made on the express understanding that Landlord
shall not be liable for, nor suffer loss by reason of, injury to person or
property, from whatever cause (except for the gross negligence or willful
misconduct of Landlord), which in any way may be connected with the operation,
use or occupancy of the Premises specifically including, without limitation, any
liability for injury to the person or property of Tenant, its agents, officers,
employees, licenses and invitees.

B. Liability Insurance. Tenant shall, at Tenant's expense,
obtain and keep in force during the term of this Lease a policy of comprehensive
public liability insurance insuring Landlord and Tenant against claims and
liabilities arising out of the operation, use, or occupancy of the Premises and
all areas appurtenant thereto, including parking areas. Such insurance shall be
in an amount of not less than Two Million Dollars ($2,000,000.00) for bodily
injury or death as a result of any one occurrence and Five Hundred Thousand
Dollars ($500,000.00) for damage to property as a result of any one occurrence.
The insurance shall be with companies approved by Landlord, which approval
Landlord agrees not to withhold unreasonably, Tenant shall deliver to Landlord,
prior to possession, and at least thirty (30) days prior to the expiration
thereof, a certificate of insurance evidencing the existence of the policy
required hereunder and such certificate shall certify that the policy (1) names
Landlord as an additional insured, (2) shall not be canceled or altered without
thirty 930) days prior written notice to Landlord, (3) insures performance of
the indemnity set forth in Subparagraph 8.A above, (4) the coverage is primary
and any coverage by Landlord is in excess thereto and (5) contains a
cross-liability endorsement. Landlord may maintain a policy or policies of
comprehensive general liability insurance insuring Landlord (and such others as
are designated by Landlord), against liability for personal injury, bodily
injury, death and damage to property occurring or resulting from time to time
determine are reasonably necessary for its protection. The cost of any such
liability insurance maintained by Landlord shall be a Common Area Charge and
Tenant shall pay, as Additional Rent, its share of such cost to Landlord as
provided in Paragraph 12 below.

C. Property Insurance. Landlord shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Premises and the Buildings, in the amount of the full replacement
value thereof, providing protection against those perils included within the
classification of "all risk" insurance, plus a policy of rental income insurance
in the amount of one hundred percent (100%) of twelve (12) months rent
(including, without limitation, sums payable as

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<PAGE> 6
Additional Rent), plus, at Landlord's option, flood insurance and earthquake
insurance, and any other coverages which may be required from time to time by
Landlord's mortgages. Tenant shall have no interest in nor any right to the
proceeds of any insurance procured by Landlord on the Premises. Tenant shall,
within twenty (20) days after receipt of billing, pay to Landlord, as Additional
Rent, Tenant's Pro Rata Share of such insurance procured and maintained by
Landlord. Tenant acknowledges that such insurance procured by Landlord may
contain a deductible which reduces Tenant's cost for such insurance and, in the
event of loss or damage, Tenant shall be required to pay to Landlord the amount
of such deductible.

D. Tenant's Insurance; Release of Landlord. Tenant
acknowledges that the insurance to be maintained by Landlord on the Premises
pursuant to Subparagraph 8.C above will not insure any of Tenant's property.
Accordingly, Tenant, at Tenant's own expense, shall maintain in full force and
effect on all of its fixtures, equipment, leasehold improvements and personal
property in the Premises, a policy of "All Risk" coverage insurance to the
extent of at least ninety percent (90%) of their insurable value.

E. Mutual Waiver of Subrogation. Tenant and Landlord hereby
mutually waive their respective rights for recovery against each other for any
loss of or damage to the property of either party, to the extent such loss or
damage is insured by any insurance policy required to be maintained by this
Lease or otherwise in force at the time of such loss or damage. Each party shall
obtain any special endorsements, if required by the insurer, whereby the insurer
waives its right of subrogation against the other party hereto. The provisions
of this Subparagraph E shall not apply in those instances in which waiver of
subrogation would cause either party' s insurance coverage to be voided or
otherwise made uncollectible.

9. Utilities. Tenant shall pay for all water, gas, light, heat,
power, electricity, telephone, trash pick-up, sewer charges, and all other
services supplied to or consumed on the Premises, and all taxes and surcharges
thereon. In addition, the cost of any utility services supplied to the Common
Area or not separately metered to the Premises shall be a Common Area Charge and
Tenant shall pay Tenant's Pro Rata Share of such costs to Landlord as provided
in Paragraph 12 below.

10. Repairs and Maintenance.

A. Landlord's Repairs. Subject to the provisions of Paragraph
16, Landlord shall keep and maintain the exterior roof, structural elements and
exterior walls of the Building in good order and repair. Landlord shall not,
however, be required to maintain, repair or replace the interior surface of
exterior walls, nor shall Landlord be required to maintain, repair or replace
windows, doors, skylights or plate glass. Landlord shall have no obligation to
make repairs under this Subparagraph 10.A until a reasonable time after receipt
of written notice from Tenant of the need for such repairs. Tenant shall
reimburse Landlord, as additional rent, within thirty (30) days after receipt of
billing, for the cost of such repairs and maintenance which are the obligation
of Landlord hereunder, provided however, that Tenant shall not be required to
reimburse Landlord for the cost of maintenance and repairs of the structural
elements of the Building unless such maintenance or repair is required because
of the negligence or willful misconduct of Tenant or its employees, agents, or
invitees. As used herein, the term "structural elements

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<PAGE> 7
of the Building" shall mean and be limited to the foundation, footings, floor
slab (but not flooring), structural walls, and roof structure (but not roofing
or roof membrane).

Landlord shall, at Tenant's cost, maintain and repair the heating,
ventilating and air conditioning ("HVAC") systems and equipment serving the
Premises. Tenant shall, within thirty (30) days after receipt of billing,
reimburse Landlord as Additional Rent for the cost of such HVAC maintenance and
repair, including, without limitation, the cost of a service contract with a
HVAC contractor for periodic inspections and servicing.

B. Tenant's Repairs. Except as expressly provided in
Subparagraph 10.A above, Tenant shall, at its sole cost, keep and maintain the
entire Premises and every part thereof, including without limitation, the
windows, window frames, plate glass, glazing, skylights, truck doors, doors and
all door hardware, the walls and partitions, and the electrical, plumbing,
lighting, systems and equipment in good order, condition and repair. The term
"repair" shall include replacements, restorations and/or renewals when necessary
as well as painting. Tenant's obligation shall extend to all alterations,
additions and improvements to the Premises, and all fixtures and appurtenances
therein and thereto.

Should Tenant fail to make repairs required of Tenant hereunder
forthwith upon five (5) days notice from Landlord or should Tenant fail
thereafter to diligently complete the repairs, Landlord, in addition to all
other remedies available hereunder or by law and without waiving any alternative
remedies, may make the same, and in that event, Tenant shall reimburse Landlord
as additional rent for the cost of such maintenance or repairs within five (5)
days of written demand by Landlord.

Landlord shall have no maintenance or repair obligations whatsoever
with respect to the Premises except as expressly provided in Subparagraph 10.A
and Paragraphs 11 and 16. Tenant hereby expressly waives the provisions of
Subsection 1 of Section 1932 and Sections 1941 and 1942 of the Civil Code of
California and all rights to make repairs at the expense of Landlord as provided
in Section 1942 of said Civil Code. Landlord shall not be liable for any damages
arising from any act or neglect of any other tenant, if any, of the Building or
the Parcel.

C. Amortization of Certain Items. Notwithstanding anything to
the contrary contained in Subparagraphs 10.A or 10.B above, if the HVAC
equipment or the roof requires replacement during the Lease Term (or any
extension thereof), Landlord shall make the replacement and the cost thereof
shall be amortized over a ten (10) year period, and Tenant shall pay to Landlord
as Additional Rent one-tenth (1/10th) of the cost of such replacement each year
during the remaining term of the Lease (including any extension term). Said
payment shall be made monthly along with the Monthly Installment of rent for
each remaining month during the Lease Term (including any extension term)
following such replacement.

11. Common Area. Subject to the terms and conditions of this Lease
and such rules and regulations as Landlord may from time to time prescribe,
Tenant and Tenant's employees, invitees and customers shall, in common with
other occupants of the Parcel, and their respective employees, invitees and
customers, and others entitled to the use thereof, have the non-exclusive right
to use the access roads, parking areas and facilities provided and designated by
Landlord for the general use and

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convenience of the occupants of the Parcel, which areas and facilities are
referred to herein as "Common Area." This right shall terminate upon the
termination of this Lease. Landlord reserves the right from time to time to make
changes in the shape, size, location, amount and extent of the Common Area.
Landlord further reserves the right to promulgate such reasonable rules and
regulations relating to the use of the Common Area, and any part or parts
thereof, as Landlord may deem appropriate for the best interest of the occupants
of the Parcel. The rules and regulations shall be binding upon Tenant upon
delivery of a copy of them to Tenant, and Tenant shall abide by them and
cooperate in their observance. Such rules and regulations may be amended by
Landlord from time to time, with or without advance notice, and all amendments
shall be effective upon delivery of a copy of them to Tenant. Tenant shall have
the non-exclusive use of no more than fifty-six percent (56%) of the parking
spaces in the Common Area as designated from time to time by Landlord. Tenant
shall not at any time park or permit the parking of Tenant's trucks or other
vehicles, or the trucks or other vehicles of others, adjacent to loading areas
so as to interfere in any way with the use of such areas, nor shall Tenant at
any time park or permit the parking of Tenant's vehicles or trucks, or the
vehicles or trucks of Tenant's suppliers or others, in any portion of the Common
Area not designated by Landlord for such use by Tenant. Tenant shall not abandon
any inoperative vehicles or equipment on any portion of the Common Area. Tenant
shall make no alterations, improvements or additions to the Common Area.

Landlord shall operate, manage, insure, maintain and repair the Common
Area in good order, condition and repair. The manner in which the Common Area
shall be maintained and the expenditures for such maintenance shall be at the
discretion of Landlord. The cost of such repair, maintenance, operation,
insurance and management, including without limitation, maintenance and repair
of landscaping, irrigation systems, paving, sidewalks, fences, and lighting,
shall be a Common Area Charge and Tenant shall pay to Landlord its share of such
costs as provided in Paragraph 12 below. If any landscaping in the Common Area
requires replacement during the Lease Term (including any extensions thereof),
Landlord shall make the replacement, the cost thereof shall be amortized over a
ten (10) year period, and one-tenth (1/10th) of the cost thereof shall be
included each year as a Common Area Charge.

12. Common Area Charges. Tenant shall pay to Landlord, as
additional rent, upon demand but not more often than once each calendar month,
an amount equal to Tenant's Pro Rata Share of the Common Area Charges as defined
in Subparagraph 8.B and Paragraphs 9, 11 and 13 of this Lease. Tenant
acknowledges and agrees that the Common Area Charges shall include a management
fee in such reasonable amount as is customarily charged by third party property
management companies managing properties in Santa Clara County similar to the
Premises, Buildings, Common Area and Parcel.

13. Alterations. Tenant shall not make, or suffer to be made, any
alterations, improvements or additions in, on, about or to the Premises or any
part thereof, without the prior written consent of Landlord (which consent shall
not be unreasonably withheld) and without a valid building permit issued by the
appropriate governmental authority. As a condition to giving such consent,
Landlord may require that Tenant agree to remove any such alterations,
improvements or additions at the termination of this Lease, and to restore the
Premises to their prior condition. Unless Landlord requires that Tenant remove
any such alteration, improvement or addition, any alteration, addition or
improvement to the Premises, except movable furniture and trade fixtures not
affixed to the Premises, shall become the property of Landlord upon termination
of the Lease and shall remain upon and be surrendered with the Premises at

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the termination of this Lease. Without limiting the generality of the foregoing,
all heating, lighting, electrical (including all wiring, conduit, outlets,
drops, buss ducts, main and subpanels), air conditioning, partitioning, drapery,
and carpet installations made by Tenant regardless of how affixed to the
premises, together with all other additions, alterations and improvements that
have become an integral part of the Building, shall be and become the property
of the Landlord upon termination of the Lease, and shall not be deemed trade
fixtures, and shall remain upon and be surrendered with the Premises at the
termination of this Lease.

If, during the term hereof, any alteration, addition or change of any
sort to all or any portion of the Premises is required by law, regulation,
ordinance or order of any public agency, Tenant shall promptly make the same at
its sole cost and expense. If during the term hereof, any alteration, addition,
or change to the Common Area is required by law, regulation, ordinance or order
of any public agency, Landlord shall make the same and the cost of such
alteration, addition or change shall be a Common Area Charge and Tenant shall
pay Tenant's Pro Rata Share of said cost to Landlord as provided in Paragraph 12
above.

14. Acceptance of the Premises. By entry and taking possession of
the Premises pursuant to this Lease, Tenant accepts the Premises as being in
good and sanitary order, condition and repair and accepts the Premises in their
condition existing as of the date of such entry. Tenant acknowledges that
neither Landlord nor Landlord's agents has made any representation or warranty
as to the suitability of the Premises to the conduct of Tenant's business. Any
agreements, warranties or representations not expressly contained herein shall
in no way bind either Landlord or Tenant, and Landlord and Tenant expressly
waive all claims for damages by reason of any statement, representation,
warranty, promise or agreement, if any, not contained in this Lease. This Lease
constitutes the entire understanding between the parties hereto and no addition
to, or modification of, any term or provision of this Lease shall be effective
until set forth in a writing signed by both Landlord and Tenant.

15. Default.

A. Events of Default. A breach of this Lease shall exist if
any of the following events (hereinafter referred to as "Event of Default")
shall occur:

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

(2) Tenant's failure to perform or comply with any
provision of Paragraph 39.

(3) Tenant's failure to perform any other term, covenant or
condition contained in this Lease where such failure shall have continued for
twenty (20) days after written notice of such failure is given to Tenant;

(4) Tenant's vacating for more than sixty (60) days or
abandonment of the Premises;

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(5) Tenant's assignment of its assets for the benefit of its
creditors;

(6) The sequestration of, attachment of, or execution on, any
substantial part of the property of Tenant or on any property essential to the
conduct of Tenant's business, shall have occurred and Tenant shall have failed
to obtain a return or release of such property within thirty (30) days
thereafter, or prior to sale pursuant to such sequestration, attachment or levy,
whichever is earlier;

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

(8) Tenant or any such guarantor shall take any corporate
action to authorize any of the actions set forth in Clause 7 above; or

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

(10) An Event of Default by Tenant shall occur under that
certain lease between Landlord and Tenant covering the Other Building on the
Parcel commonly known as 10441-10443 Bandley Drive.

B. Remedies. Upon any event of Default, Landlord shall have the
following remedies, in addition to all other rights and remedies provided by
law, to which Landlord may resort cumulatively, or in the alternative:

(1) Recovery of Rent. Landlord shall be entitled to keep this
Lease in full force and effect (whether or not Tenant shall have abandoned the
Premises) and to enforce all of its rights and remedies under this Lease,
including the right to recover rent and other sums as they become due, plus
interest at the Permitted Rate (as defined in Paragraph 33 below) from the due
date of each installment of rent or other sum until paid.

(2) Termination. Landlord may terminate this Lease by giving
Tenant written notice of termination. On the giving of the notice all of
Tenant's rights in the Premises and the Building and Parcel shall terminate.
Upon the giving of the notice of termination, Tenant shall surrender and vacate
the Premises in the condition required by Paragraph 34, and Landlord may
re-enter and take possession of the Premises and all the remaining improvements
or property and eject Tenant or any of

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Tenant's subtenants, assignees or other person or persons claiming any right
under or through Tenant or eject some and not others or eject none. This Lease
may also be terminated by a judgment specifically providing for termination. Any
termination under this paragraph shall not release Tenant from the payment of
any sum then due Landlord or from any claim for damages or rent previously
accrued or then accruing against Tenant. In no event shall any one or more of
the following actions by Landlord constitute a termination of this Lease:

(a) maintenance and preservation of the Premises;

(b) efforts to relet the Premises;

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

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

(3) Damages. In the event this Lease is terminated pursuant to
Subparagraph 15.B.2 above, or otherwise, Landlord shall be entitled to damages
in the following sums:

(a) the worth at the time of award of the unpaid rent which
has been earned at the time of termination; plus

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

(c) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; and

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

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(vi) attorneys' fees and court costs; and (vii) any unamortized real estate
brokerage commission paid in connection with this Lease.

(e) The "worth at the time of award" of the amounts
referred to in Subparagraphs (a) and (b) of this Paragraph 15.B(3) is computed
by allowing interest at the Permitted Rate. The "worth at the time of award" of
the amounts referred to in Subparagraph (c) of this Paragraph 15.B(3) is
computed by discounting such amount at the discount rate of the Federal Reserve
Board of San Francisco at the time of award plus one percent (1%). The term
"rent" as used in this Paragraph 15 shall include all sums required to be paid
by Tenant to Landlord pursuant to the terms of this Lease.

16. Destruction. In the event the Premises are destroyed in whole
or in part from any cause Landlord may, at its option:

(a) Rebuild or restore the Premises to their condition prior
to the damage or destruction; or

(b) Terminate this Lease.

Notwithstanding the foregoing, Landlord may not elect to terminate this
Lease if the Premises are only partially destroyed to an extent not more than
seventy percent (70%) of their replacement cost, (ii) the damage is totally
covered by insurance (or Tenant agrees to pay and does in fact pay any uninsured
costs), and (iii) the repairs can be made within one hundred twenty (120) days
after the date of the destruction.

If Landlord does not give Tenant notice in writing within thirty (30)
days from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which Landlord agrees, at its expense,
promptly to rebuild or restore the Premises to their condition prior to the
damage or destruction. If Landlord does not complete the rebuilding or
restoration within one hundred eighty (180) days following the date of
destruction (such period of time to be extended for delays caused by the fault
or neglect of weather, inability to obtain materials, supplies or fuels, acts or
contractors or subcontractors, or delay of the contractors or subcontractors due
to such causes or other contingencies beyond the control of Landlord), then
Tenant shall have the right to terminate this Lease by giving fifteen (15) days
prior written notice to Landlord. Landlord's obligation to rebuild or restore
shall not include restoration of Tenant's trade fixtures, equipment,
merchandise, or any improvements, alterations made by Tenant to the Premises.

In the event of any damage or destruction to or of the Premises which
materially interferes with Tenant's use of the Premises for more than ninety
(90) days (unless such damage or destruction is caused by the negligence or
willful misconduct of Tenant, its agents, employees or invitees), Tenant shall
have the right to terminate this Lease by giving fifteen (15) days prior written
notice to Landlord.

Any policy or policies of fire, extended coverage or similar casualty
insurance, which either party obtains in connection with the Premises shall
include a clause or endorsement denying the insurer any

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<PAGE> 13
rights of subrogation against the other party to the extent permitted by such
policy and to the extent rights have been waived by the insured prior to the
occurrence of injury or loss. Landlord and Tenant hereby waive any rights of
recovery against the other for injury or loss due to hazards covered by
insurance.

Unless this Lease is terminated pursuant to the foregoing provisions,
this Lease shall remain in full force and effect; provided, however, that during
any period of repairs or restoration, rent and all other amounts to be paid by
Tenant on account of the Premises and this Lease shall be abated in proportion
to the area of the Premises rendered not reasonably suitable for the conduct of
Tenant's business thereon. Tenant hereby expressly waives the provisions of
Section 1932, Subdivision 2 and Section 1933, Subdivision 4 of the California
Civil Code.

17. Condemnation.

A. Definition of Terms. For the purposes of this Lease, the
term (1) "Taking" means a taking of the Premises or damage to the Premises
related to the exercise of the power of eminent domain and includes a voluntary
conveyance, in lieu of court proceedings, to any agency, authority, public
utility, person or corporate entity empowered to condemn property; (2) "Total
Taking" means the taking of the entire Premises or so much of the Premises as to
prevent or substantially impair the use thereof by Tenant for the uses herein
specified; provided, however, in no event shall a Taking of less than ten
percent (10%) of the Premises be deemed a Total Taking; (3) "Partial Taking"
means the taking of only a portion of the Premises which does not constitute a
Total Taking; (4) "Date of Taking" means the date upon which the title to the
Premises, or a portion thereof, passes to and vests in the condemnor or the
effective date of any order for possession if issued prior to the date title
vests in the condemnor; and (5) "Award" means the amount of any award made,
consideration paid, or damages ordered as a result of a Taking.

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

C. Total Taking. In the event of a Total Taking during the
term hereof (1) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the Premises shall cease and terminate as of the Date of
Taking; (2) Landlord shall refund to Tenant any prepaid rent; (3) Tenant shall
pay Landlord any rent or charges due Landlord under the Lease, each prorated as
of the Date of Taking; (4) Tenant shall receive from Landlord those portions of
the Award attributable to trade fixtures of Tenant and for moving expenses of
Tenant; and (5) the remainder of the Award shall be paid to and be the property
of Landlord.

D. Partial Taking. In the event of a Partial Taking during the
term hereof (1) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking; (2) from and after the Date of Taking the Monthly
Installment of rent shall be an amount equal to the product obtained by
multiplying the Monthly Installment of rent immediately prior to the Taking by a
fraction, the numerator of which is the number

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of square feet contained in the Premises after the Taking and the denominator of
which is the number of square feet contained in the Premises prior to the
Taking; (3) Tenant shall receive from the Award the portions of the Award
attributable to trade fixtures of Tenant; and (4) the remainder of the Award
shall be paid to and be the property of Landlord.

18. Mechanics' Lien. Tenant shall (A) pay for all labor and services
performed for, materials used by or furnished to, Tenant or any contractor
employed by Tenant with respect to the Premises; (B) indemnify, defend, protect
and hold Landlord and the Premises harmless and free from any liens, claims,
liabilities, demands, encumbrances, or judgments created or suffered by reason
of any labor or services performed for, materials used by or furnished to,
Tenant or any contractor employed by Tenant with respect to the Premises; (C)
give notice to Landlord in writing five (5) days prior to employing any laborer
or contractor to perform services related to, or receiving materials for use
upon the Premises; and (D) permit Landlord to post a notice of nonresponsibility
in accordance with the statutory requirements of California Civil Code Section
3094 or any amendment thereof. In the event Tenant is required to post an
improvement bond with a public agency in connection with the above, Tenant
agrees to include Landlord as an additional obligee.

19. Inspection of the Premises. Tenant shall permit Landlord and its
agents to enter the Premises at any reasonable time for the purpose of
inspecting the same, performing Landlord's maintenance and repair
responsibilities, posting a notice of non-responsibility for alterations,
additions or repairs and at any time within ninety (90) days prior to expiration
of this Lease, to place upon the Premises, ordinary "For Lease" or "For Sale"
signs.

20. Compliance with Laws. Tenant shall, at its own cost, comply with
all of the requirements of all municipal, county, state and federal authorities
now in force, or which may hereafter be in force, pertaining to the use and
occupancy of the Premises, and shall faithfully observe all municipal, county,
state and federal law, statutes or ordinances now in force or which may
hereafter be in force. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action or proceeding against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any such ordinance
or statute in the use and occupancy of the Premises shall be conclusive of the
fact that such violation by Tenant has occurred.

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

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

B. Subsequent Security Instruments. At Landlord's election,
this Lease shall become subject and subordinate to any Security Instrument
created after the Commencement Date. Notwithstanding such subordination,
Tenant's right to quiet possession of the Premises shall not be

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disturbed so long as Tenant is not in default and performs all of its
obligations under this Lease, unless this Lease is otherwise terminated pursuant
to its terms.

C. Documents. Tenant shall execute any document or instrument
required by Landlord or any Lender to make this Lease either prior or
subordinate to a Security Instrument, which may include such other matters as
the Lender customarily requires in connection with such agreements, including
provisions that the Lender not be liable for (1) the return of the Security
Deposit unless the Lender receives it from Landlord, and (2) any defaults on the
part of Landlord occurring prior to the time that the Lender takes possession of
the Project in connection with the enforcement of its Security Instrument.
Tenant's failure to execute any such document or instrument within ten (10) days
after written demand therefor shall constitute a default by Tenant or, at
Landlord' s option, Landlord may execute such documents on behalf of Tenant as
Tenant's attorney-in-fact. Tenant does hereby make, constitute and irrevocably
appoint Landlord as Tenant's attorney-in-fact to execute such documents in
accordance with this Paragraph.

D. Tenant's Attornment. Tenant shall attorn (1) to any
purchaser of the Premises at any foreclosure sale or private sale conducted
pursuant to any Security Instrument encumbering the Project; (2) to any grantee
or transferee designated in any deed given in lieu of foreclosure; or (3) to the
lessor under any underlying ground lease should such ground lease be terminated.

E. Lender. The term "Lender" shall mean (1) any beneficiary,
mortgagee, secured party, or other holder of any deed of trust, mortgage, or
other written security device or agreement affecting the Project; and (2) any
lessor under any underlying lease under which Landlord holds its interest in the
Project.

22. Holding Over. This Lease shall terminate without further
notice at the expiration of the Lease Term. Any holding over by Tenant after
expiration shall not constitute a renewal or extension or give Tenant any rights
in or to the Premises except as expressly provided in this lease. Any holding
over after the expiration with the consent of Landlord shall be construed to be
a tenancy from month to month, at one hundred fifty percent (150%) of the
monthly rent for the last month of the Lease Term, and shall otherwise be on the
terms and conditions herein specified insofar as applicable.

23. Notices. Any notice required or desired to be given under this
Lease shall be in writing with copies directed as indicated below and shall be
personally served or given by mail. Any notice given by mail shall be deemed to
have been given when forty-eight (48) hours have elapsed from the time such
notice was deposited in the United States mails, certified and postage prepaid,
addressed to the party to be served with a copy as indicated herein at the last
address given by that party to the other party under the provisions of this
Paragraph 23. At the date of execution of this Lease, the address of Landlord
is:

DEVCON ASSOCIATES XVI
c/o J. Lohr Properties
2021 The Alameda, Suite 145
San Jose, CA 95121

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and the address of Tenant is:

CKS GROUP, INC., Attn: COO
10441 Bandley Drive
Cupertino, CA 95014

24. Attorneys' Fees. In the event either party shall bring any
action or legal proceeding for damages for any alleged breach of any provision
of this Lease, to recover rent or possession of the Premises, to terminate this
Lease, or to enforce, protect or establish any term or covenant of this Lease or
right or remedy of either party, the prevailing party shall be entitled to
recover as a part of such action or proceeding, reasonable attorneys' fees and
court costs, including attorneys' fees and costs for appeal, as may be fixed by
the court or jury. The term "prevailing party" shall mean the party who received
substantially the relief requested, whether by settlement, dismissal, summary
judgment, judgment, or otherwise.

25. Nonassignment.

A. Landlord's Consent Required. Tenant's interest in this
Lease is not assignable, by operation of law or otherwise, nor shall Tenant have
the right to sublet the Premises, transfer any interest of Tenant therein or
permit any use of the Premises by another party, without the prior written
consent of Landlord to such assignment, subletting, transfer or use, which
consent Landlord agrees not to withhold unreasonably subject to the provisions
of Subparagraph 25.B below. A consent to one assignment, subletting, occupancy
or use by another party shall not be deemed to be a consent to any subsequent
assignment, subletting, occupancy or use by another party. Any assignment or
subletting without such consent shall be void and shall, at the option of
Landlord, terminate this Lease.

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

B. Transferee Information Required. If Tenant desires to
assign its interest in this Lease or sublet the Premises, or transfer any
interest of Tenant therein, or permit the use of the Premises by another party
(hereinafter collectively referred to as a "Transfer"), Tenant shall give
Landlord at least thirty (30) days prior written notice of the proposed Transfer
and of the terms of such proposed Transfer, including, but not limited to, the
name and legal composition of the proposed transferee, a financial statement of
the proposed transferee, the nature of the proposed transferee's business to be
carried on in the Premises, the payment to be made or other consideration to be
given to Tenant on account of the Transfer, and such other pertinent information
as may be requested by Landlord, all in sufficient detail to enable Landlord to
evaluate the proposed Transfer and the prospective transferee. It is the intent
of the parties hereto that this Lease shall confer upon Tenant only the right to
use and occupy the Premises, and to exercise such other rights as are conferred
upon Tenant by this Lease. The parties agree that this Lease is not intended to
have a bonus value nor to serve as a vehicle whereby Tenant may profit by a
future Transfer of this Lease or the right to use or occupy the Premises as a
result of any favorable terms contained herein, or future changes in the market
for leased space. It is the intent of the parties that any such bonus value that
may attach to this Lease shall be and remain the exclusive property of Landlord.

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Accordingly, in the event Tenant seeks to Transfer its interest in this Lease or
the Premises, Landlord shall have the following options, which may be exercised
at its sole choice without limiting Landlord in the exercise of any other right
or remedy which Landlord may have by reason of such proposed Transfer:

(1) Landlord may elect to terminate this Lease effective as of
the proposed effective date of the proposed Transfer and release Tenant from any
further liability hereunder accruing after such termination date by giving
Tenant written notice of such termination within twenty (20) days after receipt
by Landlord of Tenant's notice of intent to transfer as provided above. If
Landlord elects to terminate the Lease, Tenant shall have the right to rescind
the proposed transfer and keep the Lease in full force and effect by giving
Landlord written notice of such rescission within ten (10) days after receipt of
Landlord's election to terminate. If Landlord makes such election to terminate
this Lease and Tenant does not rescind the proposed transfer in accordance with
the foregoing, Tenant shall surrender the Premises, in accordance with Paragraph
34, on or before the effective termination date; or

(2) Landlord may consent to the proposed Transfer on the
condition that Tenant agrees to pay to Landlord, as additional rent, fifty
percent (50%) of any and all rents or other consideration (including key money)
received by Tenant from the transferee by reason of such Transfer in excess of
the rent payable by Tenant to Landlord under this Lease (less any brokerage
commissions or advertising expenses incurred by Tenant in connection with the
Transfer). Tenant expressly agrees that the foregoing is a reasonable condition
for obtaining Landlord's consent to any Transfer; or

(3) Landlord may reasonably withhold its consent to the
proposed Transfer.

26. Successors. The covenants and agreements contained in this Lease
shall be binding on the parties hereto and on their respective heirs, successors
and assigns (to the extent the Lease is assignable).

27. Mortgagee Protection. In the event of any default on the part of
Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage encumbering the
Premises, whose address shall have been furnished to Tenant, and shall offer
such beneficiary or mortgagee a reasonable opportunity to cure the default,
including time to obtain possession of the Premises by power of sale or judicial
foreclosure, if such should prove necessary to effect a cure.

28. Landlord Loan or Sale. Tenant agrees within ten (10) days following
request by Landlord to (A) execute and deliver to Landlord any documents,
including estoppel certificates presented to Tenant by Landlord, (1) certifying
that this Lease is unmodified and in full force and effect and the date to which
the rent and other charges are paid in advance, if any, and (2) acknowledging
that there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder, and (3) evidencing, the status of the Lease as may be
required either by a lender making a loan to Landlord to be secured by a deed of
trust or mortgage covering the Premises or a purchaser of the Premises from
Landlord and (B) to deliver to Landlord the financial statement of Tenant
certified by the chief financial officer of Tenant, including a balance sheet
and profit and loss statement, for the last completed fiscal year all prepared
in accordance with generally accepted accounting principles consistently
applied. Tenant's failure to deliver an estoppel certificate promptly following
such request shall be an Event of Default under this Lease.

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

30. Waiver. The waiver by Landlord or Tenant of any breach 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.

31. General.

A. Captions. The captions and paragraph headings used in this
Lease are for the purposes of convenience only. They shall not be construed to
limit or extend the meaning of any part of this Lease, or be used to interpret
specific sections. The word(s) enclosed in quotation marks shall be construed as
defined terms for purposes of this Lease. As used in this Lease, the masculine,
feminine and neuter and the singular or plural number shall each be deemed to
include the other whenever the context so requires.

B. Definition of Landlord. The term LANDLORD as used in this
Lease, so far as the covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner at the time in
question of the fee title of the Premises, and in the event of any transfer or
transfers of the title of such fee, the Landlord herein named (and in case of
any subsequent transfers or conveyances, the then grantor) shall after the date
of such transfer or conveyance be automatically freed and relieved of all
liability with respect to performance of any covenants or obligations on the
part of Landlord contained in this Lease, thereafter to be performed; provided
that any funds in the hands of Landlord or the then grantor at the time of such
transfer, in which Tenant has an interest, shall be turned over to the grantee.
It is intended that the covenants and obligations contained in this Lease on the
part of Landlord shall, subject as aforesaid, be binding upon each Landlord, its
heirs, personal representatives, successors and assigns only during its
respective period of ownership.

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

D. Severability. In case any one or more of the provisions
contained herein, except for the payment of rent, shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had not been contained herein. This Lease shall be
construed and enforced in accordance with the laws of the State of California.

E. Joint and Several Liability. If Tenant is more than one
person or entity, each such person or entity shall be jointly and severally
liable for the obligations of Tenant hereunder.

F. Law. The term "law" or "laws" shall mean any judicial
decision, statute, constitution, ordinance, resolution, regulation, rule,
administrative order, or other requirement of any

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government agency or authority having jurisdiction over the parties to this
Lease or the Premises or both, in effect at the Commencement Date of this Lease
or any time during the Lease Term, including, without limitation, any
regulation, order, or policy of any quasi-official entity or body (e.g., board
of fire examiners, public utility or special district).

G. WAIVER OF JURY TRIAL

LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHT TO
TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, COUNTERCLAIM OR
CROSS-COMPLAINT IN ANY ACTION, PROCEEDING AND/OR HEARING
BROUGHT BY EITHER LANDLORD AGAINST TENANT OR TENANT AGAINST
LANDLORD ON ANY MATTER WHATSOEVER ARISING OUT OF, OR IN ANY
WAY CONNECTED WITH, THIS LEASE, THE RELATIONSHIP OF LANDLORD
AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, OR ANY
CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY
UNDER ANY LAW, STATUTE, OR REGULATION, EMERGENCY OR OTHERWISE,
NOW OR HEREAFTER IN EFFECT.

INITIALS: (Landlord)
(Tenant)

32. Sign. Tenant shall be permitted to use the existing sign
placard for the Premises at Tenant's sole cost and expense. Tenant shall not
place or permit to be placed any other sign or decoration on the Parcel or the
exterior of the Building without the prior written consent of Landlord. Tenant,
upon written notice by Landlord, shall immediately remove any sign or decoration
that Tenant has placed or permitted to be placed on the Parcel or the exterior
of the Building without the prior written consent of Landlord, and if Tenant
fails to so remove such sign or decoration within five (5) days after Landlord's
written notice, Landlord may enter upon the Premises and remove said sign or
decoration and Tenant agrees to pay Landlord, as additional rent upon demand,
the cost of such removal. At the termination of this Lease, Tenant shall remove
any sign which it has placed on the Parcel or Building and shall repair any
damage caused by the installation or removal of such sign.

33. Interest on Past Due Obligations. Any Monthly Installment of
rent or any other sum due from Tenant under this Lease which is received by
Landlord after the date the same is due shall bear interest from said due date
until paid, at an annual rate equal to the greater of (the "Permitted Rate"):
(1) ten percent (10%); or (2) five percent (5%) plus the rate established by the
Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the
month immediately preceding the due date, on advances to member banks under
Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter
from time to time amended. Payment of such interest shall not excuse or cure any
default by Tenant. In addition, Tenant shall pay all costs and attorneys' fees
incurred by Landlord in collection of such amounts.

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34. Surrender of the Premises. On the last day of the Term hereof, or
on the sooner termination of this Lease, Tenant shall surrender the Premises to
Landlord in their condition existing as of the Commencement Date of this Lease,
ordinary wear and tear excepted, with all originally painted interior walls
washed, and other interior walls cleaned, and repaired or replaced, all carpets
shampooed and cleaned, the air conditioning and heating equipment serviced and
repaired by a reputable and licensed service firm, all floors cleaned and waxed,
all to the reasonable satisfaction of Landlord. Tenant shall remove all of
Tenant's personal property and trade fixtures from the Premises, and all
property not so removed shall be deemed abandoned by Tenant. Tenant, at its sole
cost, shall repair any damage to the Premises caused by the removal of Tenant's
personal property, machinery and equipment, which repair shall include, without
limitation, the patching and filling of holes and repair of structural damage.
If the Premises are not so surrendered at the termination of this Lease, Tenant
shall indemnify, defend, protect and hold Landlord harmless from and against
loss or liability resulting from delay by Tenant in so surrendering the Premises
including without limitation, any claims made by any succeeding tenant or losses
to Landlord due to lost opportunities to lease to succeeding tenants.

35. Authority. The undersigned parties hereby warrant that they have
proper authority and are empowered to execute this Lease on behalf of Landlord
and Tenant, respectively.

36. C.C.&R.'s. This Lease is made subject to all matters of public
record affecting title to the property of which the Premises are a part. Tenant
shall abide by and comply with all private conditions, covenants and
restrictions of public record now or hereafter affecting the Premises and any
amendment thereof.

37. Brokers. Landlord shall pay any brokerage commissions due to Bishop
Hawk as a result of this transaction in accordance with the separate agreement
between Landlord and Bishop Hawk. Tenant represents and warrants to Landlord
that it has not dealt with any broker respecting this transaction other than
Bishop Hawk and Cornish & Carey Commercial and hereby agrees to indemnify and
hold Landlord harmless from and against any brokerage commission or fee,
obligation, claim or damage (including attorneys' fees) paid or incurred
respecting any broker (excluding Bishop Hawk) claiming through Tenant or with
which/whom Tenant has dealt.

38. Limitation on Landlord's Liability. Tenant, for itself and its
successors and assigns (to the extent this Lease is assignable), hereby agrees
that in the event of any actual, or alleged, breach or default by Landlord under
this Lease that:

A. Tenant's sole and exclusive remedy against Landlord shall
be as against Landlord's interest in the Building;

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

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

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D. No partner of Landlord shall be required to answer or
otherwise plead to any service of process;

E. No judgment will be taken against any partner of Landlord;

F. Any judgment taken against any partner of Landlord may be
vacated and set aside at any time nunc pro tunc;

G. No writ of execution will ever be levied against the assets
of any partner of Landlord;

H. The covenants and agreements of Tenant set forth in this
Paragraph 38 shall be enforceable by Landlord and any partner of Landlord.

39. Hazardous Material.

A. Definitions. As used herein, the term "Hazardous Material"
shall mean any substance (a) the presence of which requires investigation or
remediation under any federal, state or local statute, regulation, ordinance,
order, action, policy or common law; (b) which is or becomes defined as a
"hazardous waste," "hazardous substance," pollutant or contaminant under any
federal, state or local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and/or the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ; (c)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof; (d) the presence of which on the Premises and/or the Parcel
causes or threatens to cause a nuisance upon the Premises and/or the Parcel or
to adjacent properties or poses or threatens to pose a hazard to the health or
safety of persons on or about the Premises and/or the Parcel; (e) the presence
of which on adjacent properties could constitute a tresspass; (f) without
limitation which contains gasoline, diesel fuel or other petroleum hydrocarbons;
(g) without limitation which contains polychlorinated biphenyls (PCBs), asbestos
or urea formaldehyde foam insulation; or (h) without limitation radon gas.

B. Use Restriction. Subject to the terms and conditions set
forth herein, Tenant shall be permitted to use and store in the Premises those
materials described in Subparagraph 39.G below, in the quantities set forth in
said Subparagraph. Except as specifically allowed in this Lease, Tenant shall
not cause or permit any Hazardous Material to be used, stored, generated,
discharged, transported to or from, or disposed of in or about the Premises, or
any other land or improvements in the vicinity of the Premises. The appearance
of any Hazardous Material that is not permitted by this Lease in or about the
Premises shall be deemed an Event of Default under Paragraph 15 above. Without
limiting the generality of the foregoing, Tenant, at its sole cost, shall comply
with all laws relating to the storage, use, generation, transport, discharge and
disposal of Hazardous Materials. If the presence of Hazardous Materials on the
Premises caused or permitted by Tenant results in contamination of the Premises
or any soil, air, ground or surface waters under, through, over, on, in or about
the Premises, Tenant, at its

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expense, shall promptly take all actions necessary to return the Premises and/or
the surrounding real and personal property to the condition existing prior to
the appearance of such Hazardous Material.

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

C. Compliance. Tenant shall immediately notify Landlord of any
inquiry, test, investigation, enforcement proceeding by or against Tenant or the
Premises concerning a Hazardous Material. Tenant acknowledges that Landlord, as
the owner of the Property, at its election, shall have the sole right, at
Tenant's expense, to negotiate, defend, approve and appeal any action taken or
order issued with regard to any Hazardous Material(s) by any applicable
governmental authority. Landlord shall have the right to appoint a consultant,
at Tenant's expense, to conduct an investigation to determine whether Hazardous
Materials are being used, generated, discharged, transported to or from, stored
or disposed of in, on, over, through, or about the Premises, in an appropriate
and lawful manner. Tenant, at its expense, shall comply with all recommendations
of the consultant.

D. Assignment and Subletting. It shall not be unreasonable for
Landlord to withhold its consent to any proposed assignment or subletting if (1)
the proposed assignee's or subtenant's anticipated use of the Premises involves
the storage, generation, discharge, transport, use or disposal of any Hazardous
Material; (2) if the proposed assignee or subtenant has been required by any
prior landlord, lender or governmental authority to "clean up" or remediate any
Hazardous Material; (3) if the proposed assignee or subtenant is subject to
investigation or enforcement order or proceeding by any governmental authority
in connection with the use, generation, discharge, transport, disposal or
storage of any Hazardous Material.

E. Surrender. Upon the expiration or earlier termination of
the Lease, Tenant, at its sole cost, shall remove all Hazardous Materials from
the Premises and the Parcel which were introduced to the Premises and/or Parcel
by Tenant or its agents, employees, contractors or invitees. If any Hazardous
Materials were introduced to the Premises and/or Parcel by Tenant or its agents,
employees, contractors or invitees, then Tenant shall provide a certificate to
Landlord from a registered soils engineer certifying that there is no
contamination of soil or ground or surface waters in, under, on, through, over
or about the Premises and that there is no other contamination of Hazardous
Materials in the Premises. If Tenant fails to so surrender the Premises, Tenant
shall indemnify, protect, defend and hold Landlord harmless from and against all
damages resulting from Tenant's failure to surrender the Premises as required by
this Paragraph 39, including, without limitation, any actions, claims, losses,
liabilities, fees (including but not limited to attorneys' and consultants',
fees), fines, costs, penalties, or damages in connection with the condition of
the Premises including, without limitation, damages occasioned by the

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<PAGE> 23
inability to relet the Premises or a reduction in the fair market and/or rental
value of the Premises by reason of the existence of any Hazardous Materials in,
on, over, under, through or around the Premises.

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

G. Materials. Limited quantities of office supplies and
janitorial products commonly used in an office.

H. Provision Survive Termination. The provisions of this
Paragraph 39 shall survive the expiration or termination of this Lease.

I. Controlling Provisions. The provisions of this Paragraph 39
are intended to govern the rights and liabilities of the Landlord and Tenant
hereunder respecting Hazardous Materials to the exclusion of any other
provisions in this Lease that might otherwise be deemed applicable. The
provisions of this Paragraph 39 shall be controlling with respect to any
provisions in this Lease that are inconsistent with this Paragraph 39.

40. Option to Extend.

A. Provided that Tenant is not in default under this Lease at
the time of exercise of the hereinafter described options or at the time of
termination of the then existing term of this Lease, as the case may be, Tenant
shall have two successive options to extend the term of this Lease, each for a
period of five (5) years (the "First Option Term" and the "Second Option Term",
respectively). Each of said options shall be exercised only by written notice
delivered to Landlord not later than one hundred eighty (180) days prior to the
expiration date of the then existing term of this Lease. In all respects, the
terms, covenants and conditions of this Lease shall remain unchanged during each
Option Term, except that the monthly Installment of rent payable during each
Option Term shall be adjusted in accordance with Subparagraph (b) below, and
except that there shall be no further option to extend the term of this Lease at
the end of the Second Option Term. The Option for the Second Option Term shall
not be exercisable unless the Option for the First Option Term is exercised. The
option to extend hereby granted is personal to the original Tenant under this
Lease and is granted so that such original Tenant can occupy the Premises for
its own use during the Option Term. Accordingly, if the original Tenant under
this Lease assigns this Lease or sublets more than twenty-five percent (25%) of
the Premises, the option hereby granted shall automatically terminate without
notice.

B. The Monthly Installment of rent payable during the First
Option Term shall be ninety-seven and a half percent (97.5%) of the Fair Market
Rental for the Premises as of the first day of the First Option Term for a five
(5) year lease term. The Monthly Installment of rent payable during the

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<PAGE> 24
Second Option Term shall be ninety-seven and a half percent (97.5%) of the Fair
Market Rental for the Premises as of the first day of the Second Option Term for
a five (5) year lease term.

Promptly following exercise of the first and second options to extend,
the parties shall meet and endeavor to agree upon the Fair Market Rental of the
Premises as of the first day of the Option Term in question. In determining the
Fair Market Rental for the Premises, the Premises shall be compared only to
buildings of a similar quality and size with open office improvements and with
similar amenities in the Cupertino area and all legal uses of the Premises shall
be considered. If within fifteen (15) days after exercise of the first or second
options, the parties cannot agree upon the Fair Market Rental for the Premises
as of the first day of the Option Term in question, the parties shall submit the
matter to binding appraisal in accordance with the following procedure: Within
thirty (30) days after the exercise of the option, the parties shall either (A)
jointly appoint an appraiser for this purpose or (B) failing this joint action,
separately designate a disinterested appraiser. No person shall be appointed or
designated an appraiser unless he or she has at least five (5) years experience
in appraising major commercial property in Santa Clara County and is a member of
a recognized society of real estate appraisers. If, within thirty (30) days
after the appointment, the two appraisers reach agreement on the Fair Market
Rental for the Premises as of the first day of the Option Term in question, that
value shall be binding and conclusive upon the parties. If the two appraisers
thus appointed cannot reach agreement on the question presented within thirty
(30) days after their appointment, then the appraisers thus appointed shall
appoint a third disinterested appraiser having like qualifications. If within
thirty (30) days after the appointment of the third appraiser, a majority of the
appraisers agree on the Fair Market Rental of the Premises as of the first day
of the Option Term in question, that value shall be binding and conclusive upon
the parties. If within thirty (30) days after the appointment of the third
appraiser, a majority of the appraisers cannot reach agreement on the question
presented, then the three appraisers shall each submit their independent
appraisal to the parties, and the appraisal farthest from the median of the
three appraisals shall be disregarded and the mean average of the remaining two
appraisals shall be deemed to be to the Fair Market Rental of the Premises as of
the first day of the Option Term in question and shall be binding and conclusive
upon the parties. Each party shall pay the fees and expenses of the appraiser
appointed by it and shall share equally the fees and expenses of the third
appraiser. If the two appraisers appointed by the parties cannot agree on the
appointment of the third appraiser, they or either of them shall give notice of
such failure to agree to the parties and if the parties fail to agree upon the
selection of such third appraiser within ten (10) days after the appraisers
appointed by the parties give such notice, then either of the parties, upon
notice to the other party may request such appointment by the American
Arbitration Association, or on its failure, refusal or inability to act, may
apply for such appointment to the presiding judge of the Superior Court of Santa
Clara County, California.

41. Initial Alterations.

A. Except as provided in Paragraph 42 below, Landlord shall
not be required to make any alterations, additions or improvements to the
Premises and the Premises shall be leased to Tenant in an "as-is" condition.

B. Tenant, at its expense, shall construct, furnish or install
all improvements, alterations, additions, equipment or fixtures within the
Premises that are necessary for Tenant's occupancy

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<PAGE> 25
and use of the Premises (hereinafter referred to as "Tenant's Work"). Tenant
shall not commence any of Tenant's Work until Tenant has submitted to Landlord,
and Landlord has approved, plans and specifications for Tenant's Work. All of
Tenant's Work shall be performed by Tenant in conformity with the plans and
specifications submitted to and approved by Landlord. Tenant shall, at its sole
cost, obtain all required building permits and other governmental approvals
necessary to commence Tenant's Work. Tenant's work shall be subject to the
provisions of Paragraph 13 above. However, if the Tenant's Work consists only of
a generic office R&D build-out and Landlord approves the plans and
specifications for same, then, notwithstanding the provisions of Paragraph 13,
Tenant shall not be required to return the Premises to their existing condition
prior to Tenant's Work at the expiration or termination of the Lease Term.

C. If Tenant is not in default under this Lease and the Lease
is in full force and effect, then Landlord, at Tenant's request, shall reimburse
Tenant up to the sum of Eighty-Nine Thousand Two Hundred Seventy Dollars
($89,270.00) ("Landlord's Allowance") for the cost of Tenant's Work, in
accordance with the following procedures:

(i) Prior to commencing Tenant's Work, Tenant shall
submit to Landlord a copy of Tenant's contract with Tenant's general contractor
showing the total cost of Tenant's Work.

(ii) During the course of construction of Tenant's Work,
Landlord shall disburse to Tenant on account of Landlord's Allowance a fraction
of each progress payment due to Landlord's general contractor, which fraction
shall have as its numerator Sixty-Nine Thousand Two Hundred Seventy Dollars
($69,270.00) and shall have as its denominator the total cost of construction of
Tenant's Work as shown in the contract previously submitted to Landlord;
provided, however, that Landlord shall not be required to disburse to Tenant
more than Sixty-Nine Thousand Two Hundred Seventy Dollars ($69,270.00) until all
of the conditions set forth in Clause (iii) below have been satisfied. Tenant
shall pay the balance of each progress payment due to Tenant's general
contractor.

(iii) When Tenant's Work has been completed and Tenant is
open for business, then Landlord shall reimburse Tenant up to the sum of
Landlord's Allowance less amounts previously disbursed by Landlord pursuant to
Clause (ii) above for the costs of Tenant's Work provided that Tenant shall
furnish to Landlord the following:

(a) A statement from Tenant's architect certifying
that Tenant's Work has been completed in compliance with the plans and
specifications approved by Landlord and in compliance with all applicable
governmental laws, codes, regulations and ordinances;

(b) An itemized statement of such costs, certified as
correct by Tenant;

(c) Copies of paid invoices evidencing that all work
for which reimbursement is requested has been paid for in full by Tenant;

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(d) Unconditional mechanic's lien releases from Tenant's
general contractors, suppliers, materialmen and all subcontractors who have done
work or supplied materials to the Premises; and

(e) An estoppel certificate executed by Tenant as described in
Paragraph 28 of the Lease.

D. All cost of Tenant's Work in excess of Landlord's Allowance
shall be paid solely by Tenant.

42. Landlord's Warranties. Landlord makes the following warranties
to Tenant:

A. The Premises shall comply with the provisions of the
Americans With Disabilities Act (ADA) in effect on the date this Lease is
executed.

B. The HVAC/mechanical equipment shall be in good working
order on the Commencement Date of the Lease.

C. The roof membrane shall be "water tight" as of the
Commencement Date of the Lease, to be verified at the first rainy season.

43. Condition Precedent. This Lease and the obligations of Landlord
and Tenant hereunder are expressly conditioned upon the satisfaction of the
following condition precedent to the effectiveness of this Lease:

(a) This Lease shall have been approved by Landlord's first
mortgage lender, the Prudential Insurance Company of America.

If the foregoing condition precedent is not satisfied on or before July
1, 1996, then this Lease shall automatically terminate without liability of
either party to the other.

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IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below.

TENANT:

CKS GROUP, INC.,
a Delaware corporation

Dated: By: /s/CARLTON H. BAAB
--------------- ----------------------------------------
Name: Carlton H. Baab
-------------------------------------
Title: EVP, CFO and Secretary
-------------------------------------

LANDLORD:

DEVCON ASSOCIATES XVI,
a California general partnership

Dated: By:
--------------- ----------------------------------------
Name:
-------------------------------------
Title: General Partner
-------------------------------------

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<PAGE> 1
EXHIBIT 10.10

INDUSTRIAL BUILDING LEASE

10260 BANDLEY DRIVE

TABLE OF CONTENTS

PARTIES ............................................................ 1
PREMISES ........................................................... 1
TERM ............................................................... 1
RENEWAL ............................................................ 1
HOLDOVER ........................................................... 3
RENT ............................................................... 3
LATE CHARGES ....................................................... 5
SECURITY DEPOSIT ................................................... 5
USE OF PREMISES .................................................... 5
COMPLIANCE WITH LAW ................................................ 6
ALTERATIONS AND ADDITIONS .......................................... 6
LIENS .............................................................. 7
REPAIRS AND MAINTENANCE ............................................ 7
ASSIGNMENT AND SUBLETTING .......................................... 9
HOLD HARMLESS ...................................................... 10
RELEASE FROM LIABILITY/WAIVER OF SUBROGATION ....................... 12
INSURANCE .......................................................... 12
SERVICES AND UTILITIES ............................................. 13
PERSONAL PROPERTY TAXES ............................................ 13
RULES AND REGULATIONS .............................................. 14
ENTRY BY LANDLORD .................................................. 14
DESTRUCTION/RECONSTRUCTION ......................................... 14
DEFAULT ............................................................ 15
REMEDIES ........................................................... 16
EMINENT DOMAIN ..................................................... 17
ESTOPPEL CERTIFICATE ............................................... 17
SUBORDINATION ...................................................... l8
PARKING ............................................................ 18
AUTHORITY .......................................................... l8
GENERAL PROVISIONS ................................................. 19
BROKERS ............................................................ 21
LIST OF EXHIBITS ................................................... 21

<PAGE> 2
INDUSTRIAL BUILDING LEASE

10260 BANDLEY DRIVE

PARTIES

1. THIS LEASE, dated for reference purposes only, March 27, 1995, is
made by and between Lazaneo Investment, a California general partnership (herein
"Landlord") and Cleary Kvamme Suiter, Inc. (herein "Tenant").

PREMISES

2. Landlord leases to Tenant and Tenant hires from Landlord for the
term, at the rental and upon the conditions in this Industrial Building Lease
(herein "Lease") the real property commonly known as 10260 Bandley Drive,
Cupertino, Santa Clara County, California consisting of a building containing
approximately Twenty Thousand Three Hundred Eighty (20,380) square feet together
with the parking lot adjacent to the building, and the land on which it is
located (all of which are herein referred to as the "Premises"). See Exhibit A.
It is further understood and agreed that the area set forth in this Paragraph 2
is approximate only and that neither party shall have a claim against the other
for any variance between the actual area and that set forth above.

TERM

3. (a) The term of the Lease shall be a period of eight (8) years,
commencing on May 1, 1995, and expiring (unless sooner terminated) at midnight
on the 30th day of April 2003, herein called the "lease term" or "term".

(b) Notwithstanding said commencement date, if for any reason
Landlord cannot deliver possession of the Premises to Tenant on said date,
Landlord shall not be subject to any liability therefor, nor shall such failure
affect the validity of this Lease or the obligations of Tenant hereunder or
extend the term hereof, but in such case Tenant shall not be obligated to pay
rent until possession is tendered to Tenant; provided however, that if Landlord
shall not have delivered possession of the Premises by July 1, 1995, Tenant may,
at Tenant's option, by written notice to Landlord within ten (10) days
thereafter, cancel this Lease, in which event the parties shall be discharged
from all obligations hereunder.

(c) Tenant shall be entitled to occupy the Premises at any time
after execution of this Lease, either before or after the commencement date of
the term so long as Tenant provides Landlord with the insurance certificates
required by Paragraph 17 at least 3 days prior to such occupancy. Such occupancy
shall be subject to all the provisions of this Lease and shall not advance the
commencement or termination dates set forth above. Notwithstanding the previous
two sentences, Tenant's early occupancy shall not interfere in any way (in the
reasonable discretion of Landlord) with the repairs and maintenance to be made
by Apple Computer during the month of April.

RENEWAL

4. (a) In the event Tenant shall not then be in default hereunder and
shall have made all previous rental payments in a timely manner (no more than
two payments in each calendar year being delinquent, as defined in Paragraph 7
hereof), Tenant shall have the right, not earlier than nine (9) months prior to
the date of the expiration of the term of this Lease and not later than six (6)
months prior to the date of the expiration of the term of this Lease, to renew
the term of this Lease for a further term of three (3) years from the date of
expiration of the term of this Lease.

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<PAGE> 3
(b) Such election shall be made by Tenant by serving upon Landlord
a notice in writing to the effect that Tenant elects to renew and extend the
term of this Lease for such extended term.

(c) In the event Tenant shall elect to renew this Lease and shall
serve notice of such election, upon the expiration of the term of this Lease, it
shall be automatically extended for an additional term of three (3) years from
the date of expiration of the original term of this Lease.

(d) Except for the redetermination of the base rental in
accordance with this Paragraph 4, all other terms and conditions of the original
lease agreement shall apply to the extended term.

(e) (i) During the extended term of this Lease, if any, Tenant
shall pay to Landlord as Minimum Base Rent for the Premises monthly rent in an
amount equal to 95 percent of the then current fair market value of the
Premises. Such Minimum Base Rent shall be increased at normal and customary
intervals during the extended term.

(ii) Landlord and Tenant shall have thirty (30) days after
the date of service of Tenant's notice to agree on such monthly fair market
rental value of the Premises and the adjustments thereto. If Landlord and Tenant
agree on such amounts during such thirty (30) day period, then they shall
immediately execute an amendment to this Lease setting forth the Minimum Base
Rent for the extended term of this Lease. If Landlord and Tenant are unable to
agree on such amounts within such thirty (30) day period, then they shall each,
within thirty (30) days of the expiration of such period, appoint a real estate
broker or appraiser knowledgeable of the monthly rentals charged for similar
commercial space in the Cupertino area and such brokers and/or appraisers shall
then endeavor to agree on the monthly fair market rental value of the Premises
and on the adjustments thereto. If the two brokers and/or appraisers agree on
the monthly fair market rental value of the Premises and on the adjustments
thereto, their decision shall be binding on the parties. If either party hereto
does not appoint a broker or appraiser within such second thirty (30) day
period, then the single broker or appraiser appointed shall be the sole broker
or appraiser and shall establish such amounts alone.

(iii) If the brokers and/or appraisers so appointed are
unable to agree on the monthly fair market rental value of the Premises and on
the adjustments thereto within thirty (30) days after the second broker or
appraiser has been appointed, then the brokers and/or appraisers shall attempt
to select a third broker or appraiser meeting the qualifications set forth above
within ten (10) days after the last day the two brokers and/or appraisers are
given to establish such amounts. If the two brokers and/or appraisers are unable
to agree on a third person, either party hereto, after giving ten (10) days I
notice to the other party, can apply to the then President of the Real Estate
Board of Santa Clara County, or to the presiding judge of the Superior Court of
Santa Clara County, for the selection of a third broker or appraiser. The three
brokers and/or appraisers shall then establish the monthly fair market rental
value of the Premises and adjustments thereto, by majority vote. Landlord and
Tenant shall each bear the cost of their own broker or appraiser and 1/2 of the
cost of appointing the third broker or appraiser and of the third broker's or
appraiser's fee.

(f) In the event that Tenant has exercised its option to renew
this Lease at the end of the initial term and If Tenant shall not then be In
default hereunder and shall have made all previous rental payments in a timely
manner (no more than one payment In each calendar year being delinquent), Tenant
shall have the right, not earlier than nine (9) months prior to the date of the
expiration of the first renewal period of this Lease and not later than six (6)
months prior to said date to further renew the term of this Lease for a second
renewal term of three (3) years from the date of expiration of the first renewal
term of this Lease. All of the

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<PAGE> 4
terms contained in Paragraphs 4(b) through 4(e) above shall be applicable to the
second renewal period. Tenant shall have no right to renew the term of this
Lease for more than two (2) renewal periods of three (3) years each.

HOLDOVER

5. (a) Holding over after the expiration of the term or extended
term, of this Lease, or any oral extension thereof, with the consent of
Landlord, which consent shall not unreasonably be withheld, shall be a tenancy
from month to month, and the rentals and additional rentals upon the covenants,
conditions, limitations, and agreements are subject to the exceptions and
reservations contained in this Lease. The rental rate is to be the same rate
last charged hereunder.

(b) If Tenant remains in possession without Landlord's consent
after termination of the Lease, by lapse of time or otherwise, Tenant shall pay
Landlord for each day of such retention one-fifteenth (1/15th) of the amount of
the monthly rental for the last month prior to such termination and Tenant shall
also pay all costs, expenses and damages sustained by Landlord by reason of such
retention, including, without limitation, claims made by a succeeding tenant
resulting from Tenant's failure to surrender the Premises.

RENT

6. (a) Tenant shall be entitled to use and occupy the Premises during
the first seven (7) months of the term free of Minimum Base Rent. During the
next seventeen (17) months of the term, Tenant shall pay to Landlord as Minimum
Base Rent for the Premises, the sum of Twenty Two Thousand Four Hundred Eighteen
Dollars ($22,418.00) per month. All rents shall be payable in advance and due on
the first day of each and every month of the term of this Lease. Tenant shall
pay the Minimum Base Rent for the eighth (8th) month of the term on execution
hereof together with the Security Deposit mentioned in Paragraph 8 below.

The Minimum Base Rent for the Premises for the next twenty four (24)
month period shall be an amount equal to the Minimum Base Rent of the first two
years, i.e., $22,418.00 adjusted upward as of the 1st day of May, 1997 (the
adjustment date) according to the following computation:

The base for computing this first adjustment is the index figure for
February, 1995 as shown in the Consumer Price Index (CPI), All Urban
Consumers, San Francisco-Oakland-San Jose, based on the period 1982-84
= 100 as published by the U.S. Dept. of Labor's Bureau of Labor
Statistics. The Minimum Base Rent shall be increased by the percentage
Increase in the CPI over the two (2) year period. For example, assuming
the base figure for February, 1995 is 149.4 and the index figure for
February, 1997 is 164.3, the increase In the CPI is:

164.3 - 149.4 = 0.10 = 10.0%
-------------
149.4

In this example, the Minimum Base Rent would be Increased on May 1,
1997 by 10%.

In no event shall the Minimum Base Rent be increased by less than 4%
per annum (8% per 2 year adjustment) nor more than 7% per annum (14%
per 2 year adjustment).

The Minimum Base Rental shall also be increased on May 1, 1999, May 1,
2001, and May 1, 2003 in a similar manner except that the base for each
such adjustment shall be index figure for February of the second year
prior to the year in which the adjustment is being made and the Index

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figure for February of the year of each adjustment shall be used to
determine the increase in the CPI and the rent for each twenty four
month period.

The index for each adjustment date shall be the one reported in the
U.S. Department of Labor's most comprehensive official index then in
use and most nearly answering the foregoing description of the index to
be used. If it is calculated from a base different from the base period
1982-84 = 100 used for the base figure above, the base figure used for
calculating the adjustment percentage shall first be converted under a
formula supplied by the Bureau.

The index figure for February of the year of each adjustment may not be
available by April 1st. Therefore, Tenant shall continue to pay the
Minimum Base Rental for the prior twenty four month period on April 1
of the current year. As soon as the index figure is available, Landlord
shall perform the above calculations and notify Tenant of the new rent
and Tenant shall pay to Landlord within 20 days of receipt of
Landlord's notification together with Landlord's calculations, the
increased rent.

Rent for any period which is for less than one (1) month shall be
a prorated portion of the monthly installment stated herein, based upon a thirty
(30) day month. Said rental shall be paid, without prior notice or demand and
without deduction or offset, in lawful money of the United States of America at
800 El Camino Real, Suite 175, Menlo Park, California 94025 or at such other
place as Landlord may from time to time designate in writing.

(b) As additional rent, Tenant shall pay to Landlord or directly
to the tax collector, at the direction of Landlord, all real property taxes and
assessments (general and special), in lieu real property taxes, rent taxes,
gross receipt taxes (whether assessed against Landlord or assessed against
Tenant and collected by Landlord, or both). Such taxes shall be prorated if the
commencement and termination dates of this Lease do not correspond to the tax
year. Notwithstanding the above, Tenant shall not be responsible for any
increase in any of the above caused by a reassessment due to a change in
ownership (as said term in defined in California Revenue and Taxation Code
Section 60 et seq. as the same may be amended) during the first five (5) years
of the initial term of this Lease.

As additional rent, Tenant shall pay to Landlord the cost of
the insurance policy or policies referred to in Paragraph 17(b) attributable to
the Premises, pro-rated if the commencement and termination dates of this Lease
do not correspond to the periods covered by such policy or policies.

The above additional rents shall be due and payable thirty
(30) calendar days after Landlord has furnished Tenant with a photocopy of the
tax bill or premium notice, as the case may be. Any sums not paid on or before
such due date shall bear interest as the highest rate allowed by law in addition
to any penalties that may be imposed by the taxing authorities for delinquent
payments.

As further additional rent Tenant shall either maintain the
entire Premises except as set forth in subparagraph 13 (b), including, but not
limited to, the parking lot, paving, striping, and any landscaping or shall pay
to Landlord the cost of any such maintenance expenses in the event Landlord
provides some or all of such maintenance. Landlord shall bill Tenant on a
monthly basis as such expenses are incurred by Landlord and Tenant shall pay
such additional rent to Landlord with its Minimum Base Rent. Should Tenant fail
to

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<PAGE> 6
pay for any such maintenance within thirty (30) days of the date of the bill,
Tenant shall post an additional deposit of Five Thousand Dollars ($5,000.00)
within fifteen (15) days after written demand from Landlord. Thereafter,
Landlord may apply such additional deposit to such additional rent in the same
manner as the security deposit mentioned below and Tenant shall replenish such
deposit on demand in the same manner set forth In Paragraph 8(a) below.

LATE CHARGES

7. Tenant agrees that all Minimum Base Rent not received by Landlord
within ten (10) calendar days of the due date shall be considered delinquent and
agrees to pay a late charge equal to eight percent (8%) of the delinquent
payment within five (5) business days after receipt of written notice of non
receipt of payment. Rent mailed and bearing a U. S. Postal Service postmark of
the third (3rd) of a month shall not be considered delinquent no matter when
received. Additionally, any delinquent payments not paid within thirty (30) days
of the original due date shall bear interest at the lower of the maximum rate
then allowed by law or two points over the reference rate (prime rate) charged
by the San Francisco Main Branch of the Bank of America.

SECURITY DEPOSIT

8. (a) Tenant shall deposit with Landlord the total sum of Twenty
Two Thousand Four Hundred Eighteen Dollars ($22,418.00) on execution hereof.
Said sum shall be held by Landlord as security for the faithful performance by
Tenant of all of the terms, covenants, and conditions of this Lease. If Tenant
defaults with respect to any provision of this Lease, including, but not limited
to, the provisions relating to the payment of rent, Landlord may (but shall not
be required to) use, apply or retain all or any part of this security deposit
for the payment of any rent or any other sum in default, or for the payment of
any amount which Landlord may spend or become obligated to spend by reason of
Tenant's default, or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of tenant's default. If any portion of said
deposit is so used or applied, Tenant shall, within five (5) days after written
demand therefor, deposit cash with Landlord in an amount sufficient to restore
the security deposit to its original amount and Tenant's failure to do so shall
be a material breach of this Lease. Landlord shall not be required to keep this
security deposit separate from its General funds, and tenant shall not be
entitled to any interest on said deposit.

(b) If Landlord's interest in this Lease is terminated, Landlord
shall transfer said deposit to Landlord's successor in interest and Landlord's
successor agrees to be bound by the terms of this Lease.

USE OF PREMISES

9. (a) Tenant shall use the Premises for general administration,
marketing, production, data center, and general office uses and other legally
related uses and shall not use or permit the Premises to be used for any other
purpose without the prior written consent of Landlord.

(b) Tenant shall not knowingly do or permit anything to be done
in or about the Premises nor bring or keep anything therein which will:

(i) increase the existing rate of or affect any fire or other
insurance upon the building or any of its contents unless Tenant agrees to pay
such increased rate, or

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(ii) cause cancellation of any insurance policy covering said
building or any part thereof or any of its contents.

Tenant shall not knowingly use or allow the Premises to be used
for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises. Tenant
shall not knowingly commit or suffer to be committed any waste in or upon the
Premises. Tenant shall not place any loads upon the floors, walls, or roof which
endanger the structure or place any harmful liquids or other toxic waste in the
drainage system of the Premises or in any other place in on or about the
Premises. No materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain on any portion of the Premises outside of the building,
except as approved by the City of Cupertino.

COMPLIANCE WITH LAW

10. Tenant shall not use the Premises 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 or regulation now in force or which may hereafter
be enacted or promulgated. Tenant shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances, and governmental rules, regulations
or requirements, pertaining to the specific use of the Premises by Tenant,
including, but not limited to, those relating to the protection of the
environment and storage and disposal of toxic materials, now in force or which
may hereafter be in force except that Tenant shall not be required to make
structural changes not related to or affected by Tenant's improvements or acts.

Landlord represents to Tenant that to its best knowledge the Premises
are not in violation of any laws, statutes, ordinances, codes, and governmental
rules, regulations or requirements. Tenant acknowledges that prior to the
execution of this Lease, Tenant was given the opportunity to have the Premises
inspected for potential violations of the Americans with Disabilities Act and be
relieved of any obligations to enter into this Lease If the cost of compliance
exceeded Five Thousand Dollars ($5,000.00). Tenant therefore agrees that its
execution of this Lease shall be deemed to be a waiver of said condition.

Tenant shall also comply with the requirements of any board of fire
insurance underwriters or other similar bodies now or hereafter constituted
relating to or affecting the condition, use or occupancy of the Premises,
excluding structural changes not required 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 the
Landlord and Tenant.

ALTERATIONS AND ADDITIONS

11. (a) Landlord shall provide Tenant with a tenant improvement
allowance of One Hundred One Thousand Nine Hundred Dollars ($101,900.00) for
Tenant to use in improving the Premises, including, but not limited to, the
painting of the exterior and interior of the building, construction of
conference rooms and offices, and other interior improvements. Tenant shall not
make or allow any alterations, additions or improvements of or to the Premises
without Landlord's prior written consent, which consent shall not unreasonably
be withheld. Landlord's consent shall not be required for any non

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<PAGE> 8
structural Tenant improvements costing less than Five Thousand Dollars
($5,000.00). Any such alterations, additions or improvements, including, but not
limited to, wall covering, paneling and built-in cabinet work, but excepting
movable furniture, and trade fixtures, shall become a part of the realty, shall
belong to Landlord and shall be surrendered with the Premises at expiration or
termination of the Lease. If Landlord consents to any such alterations,
additions or improvements by Tenant, they shall be made by Tenant at Tenant's
sole cost and expense, and any contractor or person selected by Tenant to
perform the work shall first be approved of, in writing, by Landlord, which
approval shall not be unreasonably withheld. Landlord further reserves the right
to require all plans for structural improvements and alterations to be approved
by its structural engineer. No such work shall be allowed to commence until
three (3) days have elapsed from the date of Landlord's consent. Upon
expiration, or sooner termination, of the term hereof, Tenant shall, upon
written demand by Landlord given at least one hundred twenty (120) days prior to
the end of the term, promptly remove any alterations, additions or improvements
made by Tenant and designated by Landlord to be removed. Such removal and repair
of any damage to the Premises caused by such removal shall be at Tenant's sole
cost and expense.

(b) Tenant shall not place or permit to be placed in, upon, or
about the Premises any signs not approved by the City of Cupertino or other
governing authority. Tenant shall not place, or permit to be placed, upon the
Premises, any signs, advertisements or notices without Landlord's prior written
consent which shall not be unreasonably withheld or delayed. Any sign so placed
on the Premises shall be placed upon the understanding and agreement that Tenant
shall remove same at the termination of the tenancy created herein and repair
any damage or injury to the Premises caused thereby, and if not so removed by
Tenant then Landlord may have the same so removed at Tenant's expense.

LIENS

12. Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Tenant. In the event a mechanic's
lien is recorded against the Premises and is not removed within ten (10)
business days after Landlord gives written notice to Tenant to cause the removal
of same, Landlord may require Tenant to provide Landlord, at Tenant's sole cost
and expense, a lien and completion bond in an amount equal to one and one-half
(1-1/2) times the estimated cost of any improvements, additions, or alterations
by Tenant, to insure Landlord against liability for mechanic's and materialmen's
liens and to insure completion of the work. Landlord shall also have the right
to post and maintain on the Premises such notices of nonresponsibility as may be
required by law to protect Landlord's rights herein.

REPAIRS AND MAINTENANCE

13. (a) Tenant accepts the Premises in an "AS-IS" condition with the
following exceptions: (1) Landlord warrants that all electrical, plumbing, and
HVAC systems servicing the Premises should be in good operating condition at the
time possession is delivered to Tenant; (2) Landlord shall warrant the roof,
parking lot, and electrical system to be free from defects for the first six (6)
months of the term; and (3) Landlord shall warrant the HVAC systems to be free
from defects for the first nine (9) months of the term. Landlord's liability for
the above shall be limited to the repair or replacement of any defect and
Landlord shall in no way be liable for lost profits or any consequential damages
of Tenant. Additionally, Landlord shall not be responsible for the repair or
replacement of any HVAC or electrical components installed

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<PAGE> 9
by Tenant or for any damage caused by any roof penetration made by Tenant.
Tenant shall at Tenant's sole cost and expense, keep the Premises and every part
thereof including, but not limited to, roof covering (unless it is not feasible
to repair the existing roof covering and a new roof covering is required and
Tenant has not penetrated the roof causing the damage requiring replacement) the
glazing, plumbing, and electrical systems, and the parking areas in good
condition and repair, unless caused by a casualty required to be insured
pursuant to Paragraph 17 hereof or by any inherent defects. Notwithstanding the
above, if during any lease year (May-April), the aggregate cost of repairs to
any specific HVAC unit (excluding the costs of preventive maintenance) exceeds
thirty percent (30%) of its replacement cost (as determined by two (2) HVAC
contractors, one selected by Tenant and one selected by Landlord), Landlord
reserves the right to pay the excess of such costs over said thirty percent
(30%) or replace such unit with Tenant contributing thirty percent (30%) of the
replacement cost less the aggregate repair costs paid by Tenant for such unit
during the lease year and in no event shall Tenant be responsible to expend more
than sixty percent (60%) of such replacement cost during the term hereof for
major repairs (repairs in excess of $500.00). Further notwithstanding the above,
until such time as Landlord replaces the entire existing roof, Tenant's
obligation to maintain the roof shall not exceed Two Thousand Five Hundred
Dollars ($2,500.00) per lease year and Landlord shall be responsible for any
excess roof maintenance costs. Tenant further agrees to maintain the Premises
and make minor repairs thereto in conformance with any reasonable requirements
of any institutional lender of Landlord. Should Tenant at any time during the
term of this Lease or any renewal or extension of the term fail to maintain the
Premises or make any repairs or replacements as required herein, Landlord may,
at its option, enter the Premises and perform such maintenance or make such
repairs or replacements for the account of Tenant after reasonable written
notice to Tenant. Any sums expended by Landlord in so doing, together with
interest thereon at the highest rate allowed by law from the date expended by
Landlord until the date repaid by Tenant, shall be due and payable by Tenant to
Landlord within fifteen (15) business days after demand of Landlord. Tenant
shall upon the expiration or sooner termination of this Lease surrender the
Premises to the Landlord in good condition, damage from causes beyond the
reasonable control of the Tenant and normal wear and tear excepted. Unless
specifically provided in an addendum to this Lease, Landlord shall have no
obligation to alter, remodel, improve, repair, decorate or paint the Premises or
any part thereof and the parties hereto affirm that Landlord has made no
representations to Tenant respecting the condition of the Premises or the
building in which the Premises are located except as specifically herein set
forth.

(b) Notwithstanding the above provisions of Paragraph 13(a),
Landlord shall maintain the structural integrity of the building, including,
but not limited to the foundation and exterior walls, of which the Premises are
a part, together with the parking lot foundation, unless such maintenance and
repairs are caused in part or in whole by the act, neglect, fault or omission
of any duty by the Tenant, its agents, servants, employees or invitees, in which
case Tenant shall pay to Landlord the reasonable cost of such maintenance and
repairs. Additionally, Landlord shall guarantee the roof from leakage for one
year and will replace the roof covering at any time during the term hereof, if
repairs to said covering are no longer economically feasible in the judgment of
roofing experts provided that Tenant has not penetrated the roof causing the
replacement or done any other acts causing such necessary replacement. Tenant
shall give Landlord written notice of any required repairs or maintenance.
Landlord shall not be liable for any failure to repair or to perform any
maintenance unless such failure shall persist for an

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unreasonable time after written notice. Except as provided in Paragraph 22
hereof, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements to any portion of the
building or the Premises or to fixtures, appurtenances and equipment therein.
Tenant waives the right to make repairs at Landlord's expense or terminate this
Lease under any law, statute or ordinance now or hereafter in effect for
Landholder's failure to maintain the Premises, provided Landlord commences or
arranges for commencement of the required repairs or maintenance within ten
(10) days of receipt of Tenant's written notice; provided, however, that Tenant
may make emergency repairs if necessary to prevent a disruption in Tenant's
business or imminent danger to its employees and property. In no event shall
Tenant's costs of such repairs or maintenance be deducted or offset from any
amounts due from Tenant to Landlord.

ASSIGNMENT AND SUBLETTING

14. (a) Tenant shall not, voluntarily or by operation of law,
assign, or transfer Tenant's interest under this Lease or in the Premises nor
sublease all or any part of the Premises or allow any other person or entity
(except Tenant's employees, agents and invitees) to occupy or use all or any
part of the Premises without the prior written consent of Landlord. Landlord's
consent shall not be unreasonably withheld or delayed. Without in any way
limiting Landlord's right to refuse to give consent under this Paragraph 14,
Landlord's refusal to give consent shall not be deemed unreasonably withheld if:

(i) The character, reputation and financial responsibility of
the proposed new Tenant or sub-tenant is not reasonably satisfactory or
in any event, not at least equal to those possessed by Tenant or
represented to be possessed by Tenant as of the date of the execution of
this Lease and/or the date of the requested consent. In connection with
any such assignment or subletting Tenant shall deliver to Landlord
certified financial statements of Tenant and the new proposed tenant or
sub-tenant showing their then financial condition as required hereunder.

(ii) The proposed new tenant or sub-tenant fails to agree in
writing to assume and be bound by all the terms and provisions of this
Lease.

(b) Additionally, as a condition to Landlord's consent to an
assignment or subletting it is hereby agreed that there shall be paid to
Landlord the following: To the extent any rental or other payments under such
sublease or assignment exceed the base rental payments payable under the terms
of this Lease plus the assignment or subleasing commissions, and other costs of
assigning or subleasing, and tenant improvement costs over Landlord's allowance
(such excess tenant improvement costs shall be reasonable), all amortized over
the initial term of the sublease or remainder of the lease term, 100% of such
excess (the total of such excess is referred to herein as "Excess Payments")
shall be paid to Landlord as such Excess Payments become due and payable under
the terms of the assignment or subletting.

(c) In the event Tenant proposes to transfer, assign, or sublet
any of Tenant's interests herein or enter into any license or concession
agreement Tenant shall thirty (30) days prior to the proposed transaction supply
to Landlord the following in writing:

(i) The name and address of the proposed

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assignee, transferee, or sub-lessee.

(ii) All details as to the proposed assignment or subletting
including without limitation all of the terms and conditions thereof
including all sums or considerations to be paid.

(iii) A certified financial statement dated within thirty (30)
days of the date of notification of the proposed transferee, assignee, or
sub-lessee certified by the chief financial officer of such transferee as
being true and correct.

(iv) Within ten (10) days of any assignment or sub-lease Tenant
shall deliver to Landlord true, correct and complete copies of such
agreement, assignment or sublease and material documents pertaining
thereto.

Landlord shall have ten (10) business days within which to
respond to Tenant's notice. Failure on the part of Landlord to respond
within such time shall be deemed to constitute Landlord's approval of the
proposed transfer. Anything contained in this Paragraph 13 to the contrary
notwithstanding, no transfer, assignment, sub-letting of any of Tenant's
interests herein shall be effective unless all of the above provisions are
complied with within the time limits provided.

(d) Any additional documentation reasonably required by Landlord
shall be prepared and executed by Tenant and its assignee or sub-lessee or
transferee as part of the assignment or sub-letting or transfer before it shall
be effected.

(e) Anything contained herein to the contrary notwithstanding,
regardless of whether or not Lessor's consent is required, no sub-letting or
assignment or transfer of any of Tenant's interests hereunder shall be deemed to
release Tenant from any liability under the terms of this Lease. A consent to
one assignment, subletting, occupation or use shall not be deemed a consent to
any subsequent assignment, subletting, occupation or use. Any such purported
assignment, subletting, or permission to occupy or use without such consent from
Landlord shall be void and shall, at the option of Landlord, constitute a
default under this Lease.

(f) Notwithstanding anything to the contrary in this Article 14,
Tenant shall have the right, without Landlord's prior consent, to assign its
interests under this Lease or to sublease all or any portion of the Premises for
all or any portion of the term of this Lease, to any affiliate of Tenant. For
purposes hereof, the term "affiliate" shall mean any entity which controls, is
controlled by, or is under common control with, Tenant, or a purchaser of all or
substantially all of Tenant's assets. In addition, the provisions of
subparagraph 14(b) shall not apply to any such affiliate transfer, nor shall the
provisions of said subparagraph 14(c) apply to any such affiliate transfer;
provided, however, that any such affiliate shall be obligated to use and occupy
the Premises for a purpose equivalent to the purposes for which Tenant has
occupied the Premises pursuant to this Lease. Any proposed change in use by any
such affiliate shall be subject to the reasonable prior approval of Landlord.

HOLD HARMLESS

15. (a) Tenant shall indemnify Landlord against and hold Landlord and
Landlord's property harmless from any and all liability, claims, loss, damages,
or expense, including reasonable counsel fees and costs, arising by reason of
the death or injury of any person, including Tenant or any person

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who is an employee, agent, or customer of Tenant, or by reason of damage to or
destruction of any property, including property owned by Tenant or any person
who is an employee, agent, or customer of Tenant, caused or allegedly caused
by:

(i) Any cause whatsoever while such person or property is
in or on said Premises;

(ii) Some condition of said Premises for which Tenant is
responsible or for which Landlord is responsible and Landlord has not
been given notice thereof and reasonable time to correct;

(iii) Some act or omission on said Premises of Tenant or any
person in or on said Premises with the permission of Tenant; or

(iv) Tenant's use, storage, or disposal of hazardous wastes,
toxic substances, or related materials ("hazardous materials").
Hazardous materials shall include, but not be limited to, substances
defined as "hazardous substances", "hazardous materials", or "toxic
substances" in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act; and
those substances defined as "hazardous wastes" in Section 25117 of the
California Health and Safety Code; in the regulations adopted and
publications promulgated pursuant to such laws; and in the Hazardous
Material Storage Ordinance of the City of Cupertino, if any, as
amended.

The indemnity of Tenant provided above shall not apply to any
damage: (1) covered by insurance; (2) caused by a defect in the Premises; (3)
caused by the willful misconduct, negligence or omission of Landlord, its agents
or employees; or (4) caused by a breach of this Lease by Landlord.

(b) Tenant hereby assumes all risk of damage to property or injury
to persons in or upon the Premises, from any cause other than the following: (1)
the willful misconduct, negligence or omission of Landlord, its agents or
employees; (2) defects in the Premises; and (3) a breach of this Lease by
Landlord and Tenant hereby waives all claims in respect thereof against
Landlord. Landlord and its agents shall not be liable for any damage to property
entrusted to employees of the building, nor for loss or damage to any property
by theft or otherwise, nor from any injury to or damage to persons or property
resulting from any cause whatsoever, unless caused by or due to the following:
(1) the willful misconduct, negligence or omission of Landlord, its agents or
employees; (2) defects in the Premises; and (3) a breach of this Lease by
Landlord.

(c) If any action or proceeding is brought against Landlord by
reason of any claim for which Tenant has an obligation to indemnify Landlord as
set forth above, Tenant shall defend Landlord therein at Tenant's expense by
counsel reasonably satisfactory to Landlord.

(d) Landlord and its agents and employees shall not be liable for
interference with the light or other incorporeal hereditaments, or loss of
business by Tenant unless the same is caused by the gross negligence or willful
misconduct of Landlord, its agents, or employees. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Premises or in the
buildings or of alleged defects in the building, fixtures or equipment, provided
that Tenant has actual knowledge of such matters.

(e) To the best of Landlord's knowledge, as of the

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date of this Lease, there were no hazardous materials on, in, under or about
the Premises or the property on which the Premises are located (the "Property")
except that a 1,000 gallon diesel fuel tank currently exists beneath the surface
of the parking lot at the rear of the building on the Premises. Said tank is
owned and operated by Apple Computer, Inc., the current tenant. Apple Computer,
Inc. will be removing said tank and restoring the parking lot surface prior to
the completion of Tenant's tenant improvements. Landlord hereby indemnities and
agrees to hold Tenant free and harmless from any environmental problems which
result from the existence of or removal of said tank. Furthermore, except with
respect to hazardous materials released on the Premises or Property by Tenant,
Landlord shall indemnify, defend, protect and hold Tenant and its employees,
agents, officers and directors, harmless from and against any claims, actions,
proceedings, judgments, losses, costs, damages, liabilities, fines, penalties,
punitive damages or expenses (including, without limitation, reasonable
attorneys', experts' and consultants' fees, investigation and laboratory fees,
court costs and litigation expenses) directly or indirectly resulting from,
arising out of, or based upon: (i) the presence of any hazardous materials on,
under, in or about the Premises or the Property, unless such hazardous materials
are released onto the Premises or Property by Tenant; or (ii) the violation or
alleged violation by Landlord of any laws, regulations, orders, or permits
relating to the use, generation, manufacture, installation, release, discharge,
storage or disposal of hazardous materials on, under, in or about the Premises
or the Property. This indemnity shall include, without limitation: (i) any
damage, liability, fine, penalty, punitive damages, cost or expenses arising
from or out of any claim, action, suit or proceeding for personal injury
(including, without limitation, sickness, disease or death), tangible property
damage, nuisance, pollution, contamination, leak, spill, release or other effect
on the environment; and (ii) the cost of any required or necessary
investigation, repair clean-up, or treatment of the Premises and/or the
Property, and the preparation and implementation of any closure, disposal,
remedial or other required action in connection with the Premises and/or the
Property, except for hazardous materials released on the Premises or the
Property by Tenant. Landlord's obligations hereunder shall survive the
expiration or earlier termination of this Lease.

RELEASE FROM LIABILITY/WAIVER OF SUBROGATION

16. Landlord and Tenant hereby mutually waive their respective rights
of recovery against each other for any loss of the type required by this Lease
to be insured against. Landlord and Tenant hereby agree to obtain any special
endorsements (including waivers of subrogation) required by their insurance
carriers in order to effectuate the foregoing mutual release.

INSURANCE

17. (a) Tenant shall, at Tenant's expense, obtain and keep in force
during the term of this Lease a policy of comprehensive public liability
insurance insuring Landlord and Tenant against claims occurring in, on or about
the Premises and all areas appurtenant thereto. The limit of said insurance
shall not, however, limit the liability of Tenant hereunder. Tenant may carry
said insurance under a blanket policy, providing however, said insurance by
Tenant shall name Landlord as an additional insured. If Tenant falls to procure
and maintain said insurance, Landlord may, but shall not be required to, procure
and maintain same, but at the expense of Tenant. Insurance required hereunder,
shall be in companies rated A+, Class X or better in "Best's Insurance Guide".

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Tenant shall deliver to Landlord prior to occupancy of the Premises copies of
policies of liability insurance required herein or certificates evidencing the
existence and amount of such insurance with loss payable clauses satisfactory to
Landlord. No policy shall be cancelable or subject to reduction of coverage
except after fifteen (15) days prior written notice to Landlord. The minimum
acceptable amount of comprehensive liability insurance is $2,000,000 per
accident, and property damage in an amount of not less than $1,000,000.00 per
occurrence. The above stated minimum levels of coverage are subject to amendment
by Landlord upon ninety (90) days written notice should the economic conditions,
In the discretion of Landlord, warrant adjustment thereof. Tenant may, at its
own expense, also insure or self insure its inventory, fixtures, equipment,
furniture, and its own Tenant improvements. Tenant acknowledges that Landlord
shall have no responsibility for insuring such items.

(b) Landlord shall carry and maintain, during the entire term,
including extensions hereof, fire and all risk insurance insuring the Premises
and the initial tenant improvements for their full replacement cost. Said
insurance policy or policies shall cover at least the following risks: fire,
smoke damage, windstorm, hail, explosion, riot, riot attending a strike, civil
commotion, malicious mischief, vandalism, aircraft, flood, earthquake and
sprinkler leakage. Additionally, such policy or policies shall have a loss of
rents (12 months) endorsement. Tenant shall pay to Landlord as additional rent,
the cost of such policy or policies (and with respect to earthquake insurance,
only if available at commercially reasonable rates) pursuant to Paragraph 6(b).
Any loss payable under such insurance shall be payable to Landlord and any
Lender holding an encumbrance on the Premises. The proceeds from any such policy
or policies for damages to the Premises shall be used for the repair of the
Premises except as set forth in Paragraph 22.

SERVICES AND UTILITIES

18. (a) Tenant shall provide and pay for its own utilities, janitorial
services, trash removal and all other material and services it desires in
connection with its occupation and use of the Premises. Tenant acknowledges that
it understands that Landlord is not obligated to provide services, materials or
supplies, including but not limited to, janitorial services or maintenance
services, to Tenant.

(b) Tenant shall not connect with electric current except through
approved electrical outlets in the Premises or such additional electrical
outlets as may be installed by a licensed electrical contractor in conformance
with the then applicable building codes, any apparatus or device, for the
purpose of using electric current.

PERSONAL PROPERTY TAXES

19. Tenant shall pay before delinquency, all taxes levied or assessed
and which become payable during the term hereof upon all Tenant's leasehold
improvements, equipment, furniture, fixtures and personal property located in
the Premises, except that which has been paid for by Landlord and is the
standard of the building. If any of the Tenant's leasehold improvements,
equipment, furniture, fixtures and personal property are assessed and taxed with
the building, Tenant shall pay to Landlord its share of such taxes within ten
(10) days after delivery to Tenant by Landlord of a statement in writing setting
forth the amount of such taxes applicable to Tenant's property.

<PAGE> 15
RULES AND REGULATIONS

20. Intentionally omitted.

ENTRY BY LANDLORD

21. (a) Landlord reserves the right to enter the Premises at any time
to inspect the Premises, to submit the Premises to prospective purchasers or
tenants, to post notice of non-responsibility, and to alter, improve, maintain
or repair the Premises that Landlord deems necessary or desirable, all without
abatement of rent. Except in the cases of emergencies and to post notices of
nonresponsibility, Landlord shall give telephone notice twenty four (24) hours
in advance, unless Tenant waives such notice, prior to entering the Premises.
Landlord may erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, but shall not block the
entrance to the Premises nor interfere with Tenant's business or parking, except
as reasonably required for the particular activity by Landlord. Landlord shall
not be liable in any manner for any inconvenience, disturbance, loss of
business, nuisance, interference with quiet enjoyment, or other damage arising
out of Landlord's entry on the Premises as provided in this paragraph, except
damage, if any, resulting from the willful misconduct or negligence of Landlord
or its authorized representatives.

(b) In an emergency, Landlord shall have the right to use any
means which Landlord deems reasonably necessary to obtain entry to the Premises
without liability to Tenant, except for any failure to exercise due care for
Tenant's property. Any such entry to the Premises by Landlord shall not be
construed or deemed to be forcible or unlawful entry into or a detainer of the
Premises or an eviction of Tenant from the Premises or any portion thereof.

DESTRUCTION/RECONSTRUCTION

22. (a) If ten percent (10%) or less of the Premises is damaged by an
uninsured peril, Landlord shall promptly and diligently proceed to repair and
restore the same to substantially the same condition as existed prior to such
damage or destruction; provided, however, that should such damage be caused by
the act, negligence or fault or omission of any duty with respect to the same by
Tenant, its agents, servants, employees or invitees, Tenant, and not Landlord,
shall be so obligated to repair and restore. If the Premises are damaged by an
uninsured peril rendering more than ten percent (10%) of the Premises unusable
for the conduct of Tenant's business, Landlord may, upon written notice, given
to Tenant within thirty (30) days after the occurrence of such damage, elect to
terminate this Lease (the effective date of such termination shall be as
mutually agreed upon and if the parties fail to agree on such a date, the
effective termination date shall be the date that is thirty (30) days after the
date Landlord gives written notice of its election to terminate this Lease);
provided, however, Tenant may, within thirty (30) days after receipt of such
notice, elect to make any required repairs and/or restoration, in which event
this Lease shall remain in full force and effect, and Tenant shall thereafter
diligently proceed with such repairs and/or restoration.

(b) If the Premises are damaged or destroyed by fire or other
insured peril, Landlord shall promptly and diligently proceed to repair and
restore the same to substantially the same condition as existed prior to such
damage or destruction; provided, however, that Landlord shall not be obligated
to repair and restore until either the insurer acknowledges that the loss is
covered by insurance and sufficient proceeds of

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such insurance are available to Landlord to pay the costs (including a
reasonable allowance for contractor's profit and overhead not to exceed ten
percent (10%) of the repairs and/or restoration) or the Tenant agrees to pay
such costs to Landlord. If the existing laws do not permit the restoration,
either party can terminate this Lease immediately by giving notice to the other
party.

If the cost of restoration exceeds the amount of insurance
proceeds, and Tenant has not agreed to pay the cost of repairs and/or
restoration to Landlord, either party can elect to terminate this Lease by
giving notice to the other within fifteen (15) days after determining that the
restoration cost will exceed the insurance proceeds. In the case of destruction
to the Premises, if Landlord elects to terminate this Lease, Tenant, within
fifteen (15) days after receiving Landlord's notice to terminate, can agree to
pay to Landlord the difference between the amount of insurance proceeds and the
cost of restoration in which case Landlord shall restore the Premises. Landlord
shall give Tenant satisfactory evidence that all sums contributed by Tenant as
provided in this paragraph 22 have been expended by Landlord in paying the cost
of restoration.

If Landlord elects to terminate this Lease and Tenant does
not elect to contribute toward the cost of restoration as provided herein, this
Lease shall terminate, and all of the proceeds of the insurance shall be paid to
Landlord; provided, however, that in the event such proceeds shall include any
amounts paid for damage to or destruction of property belonging to Tenant,
Landlord shall within ten (10) days of receipt, pay over such amounts to Tenant
in the following manner: Out of the gross proceeds paid by insurance to
Landlord, Landlord shall retain an amount equivalent to the current replacement
value of the building and improvements owned by Landlord; after Landlord has
been so paid from the insurance proceeds, if there remains a balance of such
insurance proceeds which represent payment for damages to or destruction of
improvements added by Tenant after the date of Tenant's occupancy of the
Premises, then, to the extent of any remaining balance of the insurance proceeds
and to the extent of Tenant's direct costs of making such added improvements,
Landlord shall be obligated to pay over to Tenant such remaining insurance
proceeds. During any such repairs or restoration described in this paragraph 22,
rent shall abate in proportion to the area of the Premises rendered unusable by
such damage or destruction; provided, however, that Landlord shall have no
liability by reason of injury to or interference with Tenant's business or
property arising from the making of any repairs, alterations, or improvements in
or to any portion of the Premises or in or to fixtures, appurtenances and
equipment therein; and further provided, that if the damage was caused by the
fault or neglect of Tenant, its agents or employees, there shall be no such
abatement of rent. If the Premises are destroyed or substantially damaged within
one year of the end of this Lease term or extensions thereof, Landlord or Tenant
shall each have the option to cancel the Lease, and all insurance proceeds on
the real property shall be paid to Landlord.

In the event Tenant shall have paid all or a portion of the
costs of any repairs or restorations for which Landlord subsequently receives
insurance proceeds, then to the extent that such insurance proceeds and Tenant's
payments exceed Landlord's cost of repair and/or restoration, Landlord shall
reimburse Tenant to the extent of Tenant's payments.

(c) Landlord shall not be required to repair any damage by fire
or other cause, or to make any repairs or replacements of any panels,
decoration, office fixtures, railings, floor coverings, partitions, or any other
property

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installed in the Premises by Tenant.

DEFAULT

23. Occurrence of any of the following events shall constitute a
default and breach of this Lease by Tenant.

(a) The vacating and abandonment of the Premises by Tenant.

(b) The failure by Tenant to make any payment of rent or any other
payment required of Tenant hereunder, as and when due, if such failure continues
for three (3) days after written notice thereof by Landlord to Tenant.

(c) The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease other than described in
Paragraph 23(b) above, where such failure continues for thirty (30) days after
written notice thereof by Landlord to Tenant; provided however, that if Tenant's
default is such that more than thirty (30) days are reasonably required for its
cure, then Tenant shall not be deemed to be in default if Tenant commences such
cure within said thirty (30) day period and thereafter diligently prosecutes
such cure to completion.

(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors or the filing by or against Tenant of a
petition to have Tenant adjudged bankrupt, or a petition, or reorganization or
arrangement under any law relating to bankruptcy (unless in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged in thirty (30) days.

REMEDIES

24. Landlord shall have the following remedies if Tenant commits a
default. These remedies are not exclusive; they are cumulative and in addition
to any remedies now or later allowed by law.

(a) Landlord may continue this Lease in full force and effect, as
long as Landlord does not terminate Tenant's right to possession, and Landlord
shall have the right to collect rent when due. During the period Tenant is in
default, Landlord may enter the Premises and relet them, or any part of them, to
third parties for Tenant's account. Tenant shall be liable to Landlord for all
costs Landlord incurs in reletting the Premises, including, without limitation,
reasonable broker's commissions and expenses of remodelling the Premises
required by the reletting. Reletting may be for a period shorter or longer than
the remaining term of the Lease. Tenant shall pay to Landlord the rent due under
this Lease as and when due, less the rent Landlord receives from any reletting.
No act by Landlord allowed by this Paragraph shall terminate this Lease unless
Landlord notifies Tenant in writing that Landlord elects to terminate Tenant's
right to possession of the Premises. If Tenant obtains Landlord's consent,
Tenant shall have the right to assign or sublet its interest in this Lease, but
Tenant shall not be released from liability. Landlord's consent to a proposed
assignment or subletting shall not be unreasonably withheld.

(b) Landlord may terminate Tenant's right to

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possession of the Premises at any time. No act by Landlord other than giving
written notice to Tenant shall terminate this Lease. Acts of maintenance,
efforts to relet the Premises, or the appointment of a receiver on Landlord's
initiative to protect Landlord's interest under this Lease shall not constitute
a termination of Tenant's right to possession. On termination, Landlord has the
right to recover from Tenant:

(i) The worth, at the time of the award of the unpaid rent
that had been earned at the time of termination of this Lease;

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

(iii) The worth, at the time of the award of the amount by
which the unpaid rent for the balance of the term after the time of
award exceeds the amount of the loss of rent that Tenant proves could
have been reasonably avoided; and

(iv) Any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom.

"The worth, at the time of the award", as used in (i) and (ii) of this
subparagraph, is to be computed by allowing interest at the maximum
rate allowed by law. "The worth, at the time of the award", as referred
to in (iii) of this subparagraph, is to be computed by discounting the
amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%).

EMINENT DOMAIN

25. If more than twenty-five percent (25%) of the Premises or ten
percent (10%) of the building in which the Premises are located is taken or
appropriated by any public or quasi-public authority under powers of eminent
domain, either party hereto shall have the right at its option, to terminate
this Lease effective as of the date of taking. If less than twenty-five percent
(25%) of the Premises or ten percent (10%) of the building in which the Premises
are located is taken (or neither party elects to terminate as above provided if
more than twenty-five percent (25%) of the Premises or ten percent (10%) of the
building in which the Premises are located is taken), the Lease shall continue,
and the rental thereafter to be paid shall continue, but the rental thereafter
to be paid shall be equitably reduced. Whether or not the Lease is terminated by
reason of any such taking or appropriation, Landlord shall be entitled to the
entire award and compensation for the taking which is paid or made by the public
or quasi-public agency, and Tenant shall have no claim against said award;
except for amounts paid directly to Tenant for its moving expenses, interruption
to its business or damage to personal property or trade fixtures. A voluntary
sale by Landlord to any public body or agency having the power of eminent
domain, either under threat of condemnation or while the condemnation
proceedings are pending shall be deemed to be a taking under the power of
eminent domain for the purposes of this Paragraph.

ESTOPPEL CERTIFICATE

26. Tenant shall at any time and from time to time, upon not less than
ten (10) business days prior written notice from

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Landlord, execute, acknowledge, and deliver to Landlord a statement in writing,
(a) certifying that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modifications and certifying that this
Lease as so modified, is in full force and effect), and the date to which the
rental and other charges are paid in advance, if any, and (b) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of the
Landlord hereunder, or specifying such defaults if any are claimed. Any such
statement may be relied upon by any prospective purchaser or encumbrancer of all
or any portion of the Premises.

SUBORDINATION

27. Tenant agrees upon request of Landlord and the holder of any deed
of trust affecting the Premises to subordinate this Lease and its rights
hereunder to the lien of any mortgage, deed of trust or other encumbrance,
together with any conditions, renewals, extensions, or replacements thereof, now
or hereafter placed, charged or enforced against the Landlord's interest in this
Lease and the leasehold estate thereby created, the Premises or the land,
building or improvements included therein, and deliver (but without cost to
Tenant) at any time and from time to time upon demand by Landlord such documents
as may be required to effectuate such subordination; provided, however, that
Tenant shall not be required to effectuate such subordination, nor shall
Landlord be authorized to effect such subordination on behalf of Tenant, unless
the mortgagee or trustee named in such mortgage, deed of trust or other
encumbrance shall first agree in writing, for the benefit of Tenant, that so
long as Tenant is not in default under any of the provisions, covenants or
conditions of this Lease on the part of Tenant to be kept and performed, that
neither this Lease nor any of the rights of Tenant hereunder shall be terminated
or modified or be subject to termination or modification, nor shall Tenant's
possession of the Premises be disturbed or interfered with, by any trustee's
sale or by an action or proceeding to foreclose said mortgage, deed of trust or
other encumbrance.

In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by the Landlord covering the Premises, the Tenant shall attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Landlord under this Lease.

In the event that the mortgagee or beneficiary of any such mortgage or
deed of trust elects to have this Lease prior to its mortgage or deed of trust,
then and in such event upon such mortgagee or beneficiary giving written notice
to Tenant to that effect, this Lease shall be deemed prior to such mortgage or
deed of trust whether this Lease is dated or recorded prior to or subsequent to
the date of recordation of such mortgage or deed of trust.

PARKING

28. Tenant shall have the exclusive right to use the parking facilities
provided by Landlord subject to any recorded easements. Landlord shall have no
obligation to police the use of the parking facilities, however.

AUTHORITY

29. Corporate Authority. If Tenant is a corporation, each individual
executing this Lease an behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of

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the Board of Directors of said corporation or in accordance with the bylaws of
said corporation, and that this Lease is binding upon said corporation in
accordance with its terms except as it may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws or by other laws
affecting creditors' or lessors' rights generally and except as to the
availability of equitable relief.

Partnership Authority. If Tenant is a partnership, each individual
executing this Lease on behalf of said partnership represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
partnership and that this Lease is binding upon said partnership and its
partners In accordance with its terms.

GENERAL PROVISIONS

30. General Provisions.

(a) Clauses, plats and riders, if any, signed by the Landlord and
the Tenant and endorsed on or affixed to this Lease are a part hereof.

(b) The waiver by Landlord of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition on any subsequent breach of the same or any other terms, 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 the
Tenant to pay the particular rental so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of the acceptance of such rent.

(c) 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 the Landlord to the Tenant shall be sufficient if delivered in person
or sent by United States Mail, postage prepaid, addressed to the Tenant at the
Premises or to such other place as Tenant may from time to time designate in a
written notice to the Landlord. All notices and demands by the Tenant to the
Landlord shall be sufficient if delivered in person, by receipted courier
service, or sent by United States Mail, postage prepaid, addressed to the
Landlord at 800 El Camino Real, Suite 175, Menlo Park, California 94025 or to
such other person or place as the Landlord may from time to time designate in a
notice to the Tenant. Any such notice is effective at the time of delivery or
if mailed, two (2) business days after mailing.

(d) If there be more than one Tenant, the obligations hereunder
imposed upon Tenants shall be joint and several.

(e) The paragraph titles to the paragraphs of this Lease are not a
part of this Lease and shall have no affect upon the construction or
interpretation of any part hereof.

(f) Time is of the essence of this Lease and each of its
provisions in which performance is a factor.

(g) The time in which any act provided by this Lease is to be done
is computed by excluding the first day and including the last, unless the last
day is a Saturday, Sunday, or holiday, and then it is also excluded. The term
"holiday" shall mean all holidays specified in Sections 6700 and 6701 of the
Government Code.

(h) The covenants and conditions herein contained,

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subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto.

(i) Neither Landlord nor Tenant shall record this Lease or a short
form memorandum hereof without the prior written consent of the other party.

(j) Upon Tenant paying the rent reserved hereunder and observing
and performing all of the covenants, conditions and provisions on Tenant's part
to be observed and performed hereunder, Tenant shall have quiet possession of
the Premises for the entire term hereof, subject to all the provisions of this
Lease.

(k) This Lease contains all of the agreements of the parties
hereto with respect to any matter covered or mentioned in this Lease. No prior
agreements or understandings pertaining to any such matters shall be effective
for any purpose. No provision of this Lease shall be amended or added except by
an agreement in writing signed by the parties hereto or their respective
successors in interest. This Lease shall not be effective or binding on any
party until fully executed by both parties hereto.

(l) If either party shall be delayed or prevented from the
performance of any act required by this Lease by reason of acts of God, strikes,
lockouts, labor troubles, inability to procure materials, restrictive
governmental laws, or regulations or other cause, without fault and beyond the
reasonable control of the party obligated (financial inability excepted),
performance of such act shall be excused for the period of the delay; and the
period for the performance of any such act shall be extended for a period
equivalent for the period of such delay, provided, however, nothing in this
section shall excuse Tenant from the prompt payment of any rental or other
charge required of Tenant except as may be expressly provided elsewhere in this
Lease.

(m) In the event of any action or proceeding brought by either
party against the other under this Lease, the prevailing party shall be entitled
to recover all costs and expenses including the fees of its attorneys in such
action or proceeding in such amount as the court may adjudge reasonable as
attorney's fees.

(n) In the event of any sale of the building, Landlord shall be
and is hereby entirely freed and relieved of all liability under any and all of
its covenants and obligations contained in or derived from this Lease arising
out of any act, occurrence or omission occurring after the consummation of such
sale and the purchaser, at such sale or any subsequent sale of the Premises
shall be deemed, without any further agreement between the parties or their
successors in interest or between the parties and any such purchaser, to have
assumed and agreed to carry out all of the covenants and obligations of the
Landlord under this Lease.

(o) Tenant shall not use the name of the building or of the
development in which the building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.

(p) Any provision of this Lease which shall prove to be invalid,
void or illegal shall in no way affect, impair or invalidate any other provision
hereof and such other provision shall remain in full force and effect.

(q) No remedy or election hereunder shall be deemed exclusive but
shall, wherever possible, be cumulative with all other remedies at law or in
equity.

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(r) This Lease shall be governed by the laws of the State of
California.

(s) Tenant shall not conduct any auction, on or at the Premises
or building without Landlord's prior written consent.

(t) Nothing contained in this Lease shall be deemed or construed
by the parties or by any third person to create the relationship of principal
and agent or of partnership or of joint venture or of any association between
Landlord and Tenant, and neither the method of computation of rent nor any other
provisions contained in this Lease nor any acts of the parties shall be deemed
to create any relationship between Landlord and Tenant other than the
relationship of Landlord and Tenant.

(u) (i) The language in all parts of this Lease shall in all
cases be simply construed according to its fair meaning and not strictly for or
against Landlord or Tenant. Unless otherwise provided in this Lease, or unless
the context otherwise requires, the following definitions and rules of
construction shall apply to this Lease.

(ii) In this Lease the neuter gender includes the feminine
and masculine, and the singular number includes the plural, and the
word "person" includes corporation, partnership, firm, or association
wherever the context so requires.

(iii) "Shall", "will", and "agrees" are mandatory, "may" is
permissive.

(iv) All references to the Term of this Lease or the Lease
Term shall include any extensions of such Term.

(v) Parties shall include the Landlord and Tenant named in
this Lease.

(vi) As used herein, the word "sublessee" shall mean and
include, in addition to a sublessee and subtenant, a licensee,
concessionaire, or other occupant or user of any portion of the leased
Premises or buildings or improvements thereon.

BROKERS

31. Each party warrants to the other that it has had no dealings with
any real estate broker or agent in connection with the negotiation of this Lease
other than Cornish & Carey Commercial and it knows of no other real estate
broker or agent who is entitled to a commission in connection with this Lease.
Each party agrees to indemnify and hold the other harmless from any cost,
expense, or liability for any compensation, commissions, or charges claimed by
any other broker or agent who alleges he is owed a compensation through it.

LIST OF EXHIBITS

32. The following is a complete list of the documents attached hereto
and made a part of this Lease:

EXHIBIT DESCRIPTION

A Site Plan
B Tenant Improvement Contribution

The parties hereto have executed this Lease and on the dates specified
immediately adjacent to their respective signatures.

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LANDLORD:

Lazaneo Investment, a California General Partnership

By /s/ James G. Walker Date 3/21/95
----------------------------------------- ----------------
James G. Walker, Managing General Partner

TENANT:
Cleary Kvamme Suiter, Inc.

By /s/ Carlton H. Baab CFO Date 3/24/95
----------------------------------------- ----------------
Title

By Date
----------------------------------------- ----------------
Title

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[GRAPHIC - MAP]

EXHIBIT A

<PAGE> 25
Exhibit B

Tenant Improvement Contribution

In the event that Tenant desires Landlord to contribute towards its tenant
improvements over the amount of the allowance set forth in Paragraph 11 (a),
Landlord will make available to Tenant up to an additional Forty Thousand Seven
Hundred Sixty Dollars ($40,760.00) for Tenant's use for tenant improvement costs
on the condition that the monthly Minimum Base Rent be increased by One percent
(1%) of the additional amount actually used by Tenant. For example, should
Tenant request and Landlord contribute an additional $40,000.00 towards the
tenant improvement costs, the initial Monthly Minimum Rent shall be increased by
$400.00 from $22,418.00 to $22,818.00. However, the original initial Monthly
Minimum Rent shall be used as a base for all rent adjustment purposes and the
adjusted rent shall have the same $400.00 added to it.

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<PAGE> 28

<PAGE> 29
THIS COUNTER-PROPOSAL DATED OCTOBER 11, 1995 IS TO THE PROPOSAL TO
LEASE 20815 LAZANEO, CUPERTINO, FROM CKS PARTNERS, INC. PER CORNISH AND
CAREY LETTER DATED OCTOBER 9, 1995. THE COUNTER PROPOSAL WAS REVISED
OCTOBER 12, 1995 (REVISIONS SHOWN IN BOLD PRINT).

1. PARTIES: Lessor is Burrel Leonard dbs The Leonard Company.

2. LOCATION: Accepted (20615 Lazaneo, Cupertino)

3. SIZE & TYPE: The lease shall be based on 20,366 "Rentable" square feet.
Includes two entry overhangs)

4. TERM: Accepted (7 Years, 2 Months)

5. RENT: Accepted except free rent shall be 5 weeks not 12 weeks and the
following twenty-two and one half months rent shall be $1.10/s.f./month.
(balance of offered rent schedule accepted)

6. COMMENCEMENT; Accepted. However, the lease shall commence on said March
1, 1996 date regardless of the status of the completion of the improvements
or issuance of any "use" or "occupancy" permits. (Rent to start 6 weeks
later - April 15, 1996).

7. OCCUPANCY: Accepted. However, said occupancy shall occur NO SOONER THAN
completion of the improvements and receipt of an "occupancy permit".
Additionally, so lessees can construct improvements, and in cooperation with
any work that lessor conducts, lessee shall have the right of early ACCESS
FOR THE SOLE PURPOSE OF CONSTRUCTING TENANT IMPROVEMENT WORK before the
lease commencement date under all the terms of the lease including liability
insurance and excluding rent AND PASS THROUGH OPERATING EXPENSES.

8. TENANT IMPROVEMENT ALLOWANCE: Lessor shall provide a $6.00 per rentable
square foot improvement allowance. Lessee's coordination and selection of
contractors is acceptable. However, all contractors shall be licenced and
insured and the plans for the work are subject to lessor's approval. Lessor
shall have the right to post "notice of non-responsibility". Contractors
shall be paid by lessee and lessor
<PAGE> 30
shall reimburse lessee on a "progress payment" basis. Contractors to
provide lien releases upon receipt of payment.
Generator to remain on-site. Lessee shall have the option to use the
generator but lessor shall be responsible for all maintenance and repair.
Plus, lessee, at lessee's cost, may legally install an above ground fuel
tank for the generator subject to lessor's approval of the plans for same.
Lessee may trench connections over to lessee's adjacent building. Lessor
shall retain ownership of the computer floors.

A) Replacement of roof acceptable. However, the work shall be conducted in
the Spring or early Summer of 1996. THE WORK WILL BE CONDUCTED IMMEDIATELY
IF THE WARRANTY FOR SUCH IS NOT AFFECTED DUE TO ANTICIPATED ADVERSE WEATHER.

B) Lessor, at lessor's expense, shall be responsible to replace the HVAC
units as they fail on an as needed basis such as when compressors fail.
Lessor, at lessor's sole expense, shall maintain the HVAC and enter a
service contract.

C) Accepted. (removal of Bandley side raised floor and sheet rock over
windows).

D) Accepted (removal of Halon systems and fire sale per City code)

E) Accepted (ADA)

F) Accepted (structural)

G) Cost of painting the building shall be drawn from the "Improvement
allowance". Lessor to select color with input from lessee.

POSTSCRIPT OF #8: Accepted. (consultant & retrofit)

LESSEE SHALL USE "BEST EFFORTS" IN SPACE PLANNING TO BE ABLE TO USE THE
FREESTANDING AIR-CONDITIONING LIEBERT UNITS (WITH NO HEAT) IN THE INTERIOR
COMPUTER ROOM AS NO ROOF UNITS WITH DUCTING TO SAID ROOM EXISTS. HOWEVER,
IF LESSEE CANNOT USE SAID UNITS,
<PAGE> 31
LESSOR, AT LESSOR'S SOLE COST, SHALL INSTALL AN HVAC UNIT, OR UTILIZE
EXISTING UNITS IF CAPACITY IS AVAILABLE, FOR SAID SPACE, INCLUDING DUCTING.
LESSOR WILL PROVIDE LESSEE COMPUTER ROOM FLOOR PIECES FROM THE BANDLEY SIDE
COMPUTER ROOM FOR LESSEE TO INSTALL IN THE FLOOR OF THE INTERIOR COMPUTER
ROOM AT LESSEES EXPENSE. THE FREESTANDING AIR-CONDITIONING LIEBERT UNITS
SHALL REMAIN THE PROPERTY OF LESSOR WHETHER REMOVED BY LESSOR OR LEFT AT THE
PROPERTY.

9. CODES: "To the best of lessor's knowledge" shall replace the word
"warranty" relative to code compliance.

10. USE: Accepted

11. FIRST MONTH RENT: Accepted (clarify "type" that first month rent equals
$22,314.60)

12. SECURITY DEPOSIT: $26,371.80 (equals last month rent).

13. TAXES: Lessee's property tax obligation shall not exceed $0.14/s.f./month
for the tax year 1996/1997. However, lessee shall pay any increases in
addition to said $0.14/s.f./month which occurs after the date lessor's
pending tax appeal is settled. That is, if the appeal results in an actual
tax more than $0.14/s.f./month lessee shall only pay said $0.14 plus any
increase which occurs after the actual tax is determined. If the tax is
less than said $0.14 lessee shall only pay the actual amount.

14. INSURANCE: The offer requires lessee to pay flood and earthquake
insurance. However, lessor does not require same. Public Liability
Insurance shall be at least $2,000,000.00 in coverage.

15. UTILITIES: Accepted.

16. MAINTENANCE: Accepted. Lessee responsible for parking lot seal, repair,
and stripe. Lessor responsible if pavement overlay is reasonably needed in
lessor's judgement. Lessor responsible for any security, fire sprinklers,
janitorial, plumbing, electrical systems, landscaping, signage, alarms, and
roof after the new roof is
<PAGE> 32
installed (subject to warranty AND EXCLUDING ROOF STRUCTURE).

17. BUILDING SALE TAX INCREASE: Accepted for initial lease term.
(Clarification - "new" owner, not initial lessor will then be
responsible for tax increase due to sale).

l8. SUBLEASING: If lessor provides no response within 14 days of lessor's
receipt of a written request to sublease the sublessee shall be
acceptable if it is a similar use only. Otherwise, in all cases, lessor's
approval shall be required. Lessee responsible for all costs associated
with said sublease including lessor's attorney fees relative to same.
After credit to lessee for lessees costs of subleasing, the lessor and
lessee shall share equally any rent which exceeds the base rent due
lessor from lessee. No substitution of liability from lessee to sublessee
shall take place under the sublease/assignment (both parties shall be
responsible).

19. OPTIONS: Accepted. However, the monthly rent for each option period
shall not be less than $26,371.80 or the amount of the last months
rent of the immediately preceding term, whichever is greater.

20. TOXIC MATERIALS: Accepted. However, lessor will not indemnify as
stated in the offer, but will state "to the best of lessor's knowledge
there are no environmental problems". Lessee shall warrant to Lessor
that Lessee will occupy in compliance with all environmental regulations
and hold lessor harmless for any environmental damage caused by lessee.
Lessee shall be responsible for toxic material used or stored at the
premises and indemnify Lessor against any loss, damage, liability on
account thereof.

21. ADA: Accepted. However, Lessor's representation is to the "best of
lessor's knowledge" relative to office use of the premises.

22. COMMISSIONS & REPRESENTATIONS: The parties acknowledge and consent to
Cornish & Carey representing Lessee and Thomas J. Costello, Broker,
representing Lessor. The total fee obligation to brokers by Lessor is as
follows of the annual NNN rent.

Year 1: 6%

Year 2: 5%

Year 3: 4%

Year 4: 3%

Year 5: 2%

Cornish and Carey shall receive 55% of the above fees plus one percent
of the sixth year rent and 1% of the seventh year and last two months.
Thomas J. Costello, Broker, shall receive 45% of said above fees. One
half of the total fees shall be paid on execution of the lease and one
half upon occupancy, issuance of occupancy permit, and lease commencement.
No other fees of any kind, including but not limited to fees for sales,
options to renew, lease renewals, expansions, or extensions, shall be
due to brokers.

23d) ACKNOWLEDGEMENTS: Delete - no accepted. 23 A,B,C, ACCEPTED.

24. PERSONAL GUARANTEE: The owners of CKB Partners, Inc. shall personally
guarantee the lease for the first 25.5 months of the lease term. THIS
PROVISION IS HEREBY DELETED. HOWEVER, THIS PROPOSAL IS STILL SUBJECT
TO PARAGRAPH 27 BELOW. ALSO, LESSEE AND THE THREE OWNERS OF LESSEE SHALL
GIVE LESSOR WRITTEN PERMISSION FOR LESSOR TO ORDER A CREDIT REPORT.

25. CONDITION OF PREMISES: Prior to lease commencement, the loading doors,
plumbing, electrical (include light bulbs) and mechanical systems will
be in good working order and condition. Lessor shall repair any
defective or malfunctioning component of the building including the
roof, heating, ventilation and air conditioning system (HVAC), the
plumbing system or electrical system (including lights) or loading
doors.

26. PARKING: Lessee shall have the exclusive use of the 60 parking spaces
on site. Lessor shall have no obligation to control use of the parking
area.

27. FINANCIAL STATUS: This proposal is subject to lessor's approval of
lessee's financial condition.

28. Lessee shall obtain Board of Director approval of this proposal on or
before October 18, 1995.

29. This proposal is intended merely as a preliminary expression of
general interest. The parties mutually intend that neither shall have
any binding contractual obligation to the other with respect to the
matters referenced to herein unless and until a formal written lease
has been prepared with adequate opportunity be reviewed by legal
counsel, and has been fully executed and delivered to the parties.

It is understood and agreed that the rights and obligations of the
parties are conditional upon the execution of a formal lease agree-
ment. Please indicate the acceptance of this proposal by having this
proposal signed below and returning it to our office. Lessor shall
be free to execute a binding lease agreement at any time before such
a lease agreement is executed with Lessee without notice or any
obligation to Lessee. This proposal expires OCTOBER 16, 1995. LESSOR
WILL PROVIDE LESSEE WITH COPIES OF ANY REPORTS NOW IN LESSOR'S
POSSESSION RELATIVE TO THE STRUCTURAL CONDITION OF THE PROPERTY,
STATUS OF COMPLIANCE WITH ADA REQUIREMENTS, AND ENVIRONMENTAL
CONDITION OF THE PROPERTY.

READ AND APPROVED:

Lessor: Date:
----------------------- ---------------

Lessee: /s/Carlton H. Baab Date: 10/13/95
----------------------- ---------------
Coo & CFO
Carlton H. Baab

<PAGE> 1
EXHIBIT 10.11

CKS PARTNERS, INC.
LEASE INDEX
<TABLE>
<CAPTION>
Page
----
<C> <C>
1. Parties ......................................................... 1

2. Premises ........................................................ 1

3. Term ............................................................ 1

3.1 Term ........................................................ 1

3.2 Early possession ............................................ 1

4. Rent ............................................................ 1,2

5. Security deposit ................................................ 2

6. Use ............................................................. 2

7. Compliance with law ............................................. 2

7.1 Lessor's representation ..................................... 2

7.2 Lessee's compliance ......................................... 2,3

8. Condition of Premises ........................................... 3

8.1 Delivery of Premises ........................................ 3

8.2 Lessee's acceptance ......................................... 3

9. Maintenance, repairs and alterations ............................ 3

9.1 Lessee's obligations ........................................ 3

9.2 Surrender .................................................. 3,4

9.3 Lessor's rights ............................................ 4

9.4 Lessor's obligations ....................................... 4

9.5 Lessee's alterations and additions ......................... 4

(a) Lessor's consent required ............................. 4

(b) Form of Lessee's request .............................. 5

(d) Status of fixtures .................................... 5

10. Insurance and indemnity ......................................... 5
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Page
----
<C> <C>
10.1 Liability insurance ....................................... 5

10.2 Property insurance ........................................ 6

(a) Premise insurance ..................................... 6

(b) Insurance of Lessee's fixtures ........................ 6

10.3 Insurance Policies ........................................ 6

10.4 Waiver of Subrogation ..................................... 6

10.5 Indemnity ................................................. 6,7

10.6 Exemption of Lessor from Liability ........................ 7

11. Damage or Destruction ........................................... 7

11.1 Definitions ............................................... 7

(a) Partial damage ........................................ 7

(b) Total destruction ..................................... 7

11.2 Partial Damage - Insured Loss ............................. 7,8

11.3 Partial Damage - Uninsured Loss ........................... 8

11.4 Total Destruction ......................................... 8

11.5 Damage Near End of Term ................................... 8

11.6 Abatement of Rent; Lessee's Remedies ...................... 8

(a) Abatement of rent ..................................... 8

(b) Lessee's right to terminate ........................... 8,9

11.7 Termination - Advance Payments ............................ 9

11.8 Waiver .................................................... 9

12. Real Property Taxes ............................................. 9

12.1 Payment of Taxes .......................................... 9

12.2 Definition of "Real Property Tax" ......................... 9,10

12.3 Personal Property Taxes ................................... 10

(a) Lessee's property ..................................... 10
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<C> <C>

(b) Mixed ownership ....................................... 10

13. Utilities ....................................................... 10

14. Operating Expenses .............................................. 10

15. Assignment and subletting ....................................... 10

15.1 Lessor's consent required ................................. 10

15.2 Lessee Affiliate .......................................... 11

15.3 No Release of Lessee ...................................... 11

15.4 Consent after assignment .................................. 11

15.5 Attorneys' Fees ........................................... 11

16. Defaults; remedies .............................................. 11

16.1 Defaults .................................................. 11

(a) Abandonment ........................................... 11

(b) Failure to pay ........................................11,12

(d) Insolvency ............................................ 12

(e) False financial statement ............................. 12

16.2 Remedies .................................................. 12

(a) Termination of lease .................................. 12

(b) Continue lease ........................................ 13

16.3 Default by Lessor ......................................... 13

16.4 Late Charges .............................................. 13

16.5 Impounds ..................................................13,14

17. Condemnation .................................................... 14

18. Brokers Fees ....................................................14,15

19. Estoppel Certificate ............................................ 15

(a) Lessee to provide ........................................... 15
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<C> <C>

(b) Lessee's failure to provide .................. 15

20. Lessor's Liability ............................................. 15

21. Severability ................................................... 16

22. Interest on Past-due Obligations ............................... 16

23. Time of Essence ................................................ 16

24. Additional Rent ................................................ 16

25. Incorporation of prior agreements; amendments .................. 16

26. Notices ........................................................ 16

27. Waivers ........................................................ 16

28. Recording ...................................................... 17

29. Holding Over ................................................... 17

30. Cumulative Remedies ............................................ 17

31. Covenants and Conditions ....................................... 17

32. Binding Effect; Choice of Law .................................. 17

33. Subordination .................................................. 17

33.1 Subordination; Lessee's right to
continued possession .................................. 17

33.2 Subordination documents ............................... 17

34. Attorney's Fees ................................................ 17,18

35. Lessor's Access ................................................ 18

36. Auctions ....................................................... 18

37. Merger ......................................................... 18

38. Consents ....................................................... 18

39. Quiet Possession ............................................... 18

40. Security Measures .............................................. 18

41. Easements ...................................................... 18,19

42. Performance Under Protest ...................................... 19
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<C> <C>

43. Authority ...................................................... 19

44. Captions. ...................................................... 19

45. Exhibits ....................................................... 19

46. Tenant Improvements ............................................ 19

46.1 Improvement Allowance ................................. 19

46.2 Coordination of Construction .......................... 19

46.3 Additional work by Lessor ............................. 19

a) Roof replacement ................................ 20

b) HVSV maintenance ................................ 20

c) computer room floor ............................. 20

d) Halon Systems. .................................. 20

e) ADA requirements ................................ 20

f) Structural retrofits ............................ 20

g) Exterior painting ............................... 20

h) Facility review ................................. 20

46.4 Generator. ............................................ 20

46.5 Computer floors ....................................... 21

46.6 Lessee shall use best efforts in space planning ....... 21

47. Signs .......................................................... 21

48. Hazardous Materials: ........................................... 21

48.1 Definition of Hazardous Materials: .................... 21,22

48.2 Definition of Applicable Laws: ........................ 22

48.3 Responsibility of Parties ............................. 22

a) Toxic materials .................................. 22

49. Lessee's Representations and Covenants: ...................... 22

49.1 Handling of hazardous materials ....................... 22

49.2 Use of hazardous materials. ........................... 22,23
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<C> <C>
49.3 compliance with environmental requirements ............ 23

49.4 Release of hazardous materials ........................ 23

49.5 Report of compliance .................................. 23

49.6 Asbestos. ............................................. 24

49.7 Default. .............................................. 24

49.8 Condition to assignment ............................... 24

50. Indemnification of Lessor: ................................... 24

5O.1 Removal of hazardous materials. ....................... 24

50.2 Waiver ................................................ 24

51. Limitation of Liability of Lessor, Lien Priority ............. 24,25

52. Option to extend term ........................................ 25

(a) Notice of Exercise ....................................... 25

(b) No Default ............................................... 25,26

(d) Option not separately assignable ......................... 26
</TABLE>
<PAGE> 7
INDUSTRIAL LEASE

1. Parties. This Lease, dated November 16, 1995 is made by and between BURREL
LEONARD, an individual doing business as THE LEONARD COMPANY (herein called
"Lessor") and CKS PARTNERS, INC., a California corporation (herein called
"Lessee').

2. Premises. Lessor hereby leases to Lessee and Lessee hires from Lessor for the
term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the City of Cupertino, County of Santa Clara,
State of California, commonly known as 20615 Lazaneo Drive, Cupertino,
California, consisting of approximately 20,286 square feet of rentable space,
and two entry overhangs together with yard, parking and landscaped areas. Said
real property, more particularly described on Exhibit "A", includes the land and
all improvements thereon, and is herein called "The Premises". Lessee shall have
the exclusive use of the 54 parking spaces on site as shown on Exhibit "B",
Lessor shall have no obligation to control use of the parking area.

3. Term.

3.1 Term. The term of this Lease shall be for Seven (7) years and Two
(2) months commencing on March 1, 1996 ("Commencement Date") and ending on April
30, 2003, unless sooner terminated pursuant to any provision hereof. The
Commencement Date shall not be affected by the status of the improvements or any
required permits including, but not limited to, use and occupancy permits.

3.2 Early possession. Occupancy shall begin on March 1, 1996; provided,
that Lessee can construct improvements, and in cooperation with any work that
Lessor conducts, Lessee shall have the right of early access, for the sole
purpose of constructing tenant improvement work before the lease Commencement
Date, under all the terms of the lease including liability insurance but
excluding rent and pass through operating expenses, provided, that Lessee shall
transfer all utility accounts into Lessee's name within sixty (60) days after
the date of this Lease or upon early possession pursuant to paragraph 3.2.

4. Rent. Lessee shall pay to Lessor during the term of this Lease, monthly
installments of rent, commencing on April 15, 1996 (prorated), as follows:
<TABLE>
<CAPTION>
Month: NNN Rent/per Square Foot
------ -----------------------
<S> <C>
01 - 1 1/2 No Charge
1 1/2 - 24 $ 22,314.60
25 - 48 $ 24,343.20
49 - 86 $ 26,371.80
</TABLE>

The monthly installments of rent shall be paid in advance, without offset, on
the First day of each month of the term hereof except that Lessee shall pay
Lessor upon the execution hereof

1
<PAGE> 8
$11,157.30 as rent for the second one-half of the second month of the lease
term. Rent for any period during the term hereof which is for less than one
month shall be a pro rata portion of the monthly installment. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other place as Lessor may designate
in writing.

5. Security deposit. Lessee shall deposit with Lessor upon execution hereof
$26,371.80 as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor upon
prior written notice to Lessee may use, apply or retain all or any portion of
said deposit for the payment of any rent or other charge in default or for the
payment of any other sum to which Lessor may become obligated by reason of
Lessee's default, or to compensate Lessor for any loss or damage which Lessor
may suffer thereby. If Lessor so uses or applies all or any portion of said
deposit, Lessee shall within ten (10) days after written demand therefor deposit
cash with Lessor, with or without protest, in an amount sufficient to restore
said deposit to the full amount hereinabove stated and Lessee's failure to do so
shall be a material breach of this Lease. Lessor shall not be required to keep
said deposit separate from its general accounts. If Lessee performs all of
Lessee's obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned, without payment of
interest or other increment for its use, to Lessee (or, at Lessor's option, to
the last assignee, if any, of Lessee's interests hereunder) at the expiration of
the term or within twenty (20) days after Lessee has vacated the Premises,
whichever last occurs. No trust relationship is created herein between Lessor
and Lessee with respect to said Security Deposit.

6. Use. The Premises shall be used and occupied only for marketing, sales,
administrative offices, computer facility and other related legal uses.

7. Compliance with law.

7.1 Lessor's representation. Lessor represents, to the best of its
knowledge and belief, that the Premises, in its state existing on the
Commencement Date, but without regard to the use for which Lessee will use the
Premises, does not violate any covenants or restrictions of record, or any
applicable building code, statute, regulation or ordinance, including, without
limitation, requirements of the Americans With Disabilities Act, in effect on
such Lease term Commencement Date. In the event it is determined that any of the
facts are not as represented, then it shall be the obligation of the Lessor,
after written notice from Lessee, to promptly, at Lessor's sole cost and
expense, rectify any such violation. In the event Lessee does not give to Lessor
written notice of the violation defect or defects within Six (6) months from the
Commencement Date, the correction of same shall be the obligation of the Lessee
at Lessee's sole cost.

7.2 Lessee's compliance. Except as provided in paragraph 7. 1, Lessee
shall at Lessee's expense, comply promptly with all applicable statutes,
ordinances, rules, regulations, orders, covenants and restrictions of record,
and requirements, including, without limitation, the

2
<PAGE> 9
Americans With Disabilities Act, in effect during the term or any part of the
term hereof, regulating the use by Lessee of the Premises. Lessee shall not use
nor permit the use of the Premises in any manner that will tend to create waste
or nuisance.

8. Condition of Premises.

8.1 Delivery of Premises. Lessor shall deliver the Premises to Lessee
clean and free of debris on Lease Commencement Date (unless Lessee is already in
possession) and the electrical (including light bulbs), plumbing, lighting,
heating ventilating, air conditioning and loading doors in the Premises shall be
in good operating condition on the Commencement Date. In the event that it is
determined that this covenant has been breached, then it shall be the obligation
of Lessor, after receipt of written notice from Lessee setting forth with
specificity the nature of the defect, to promptly, at Lessor's sole cost,
rectify such defect. Lessee's failure to give such written notice to Lessor
within Sixty (60) days after the Lease Commencement Date shall raise the
conclusive presumption that Lessor has complied with all of Lessor's obligations
hereunder.

8.2 Lessee's acceptance. Except as otherwise provided in this Lease,
and subject to the provisions of section 46 pertaining to Tenant Improvements,
Lessee hereby accepts the Premises in their condition existing as of the Lease
Commencement Date or the date that Lessee takes possession of the Premises,
whichever is earlier, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, and any covenants or restrictions of record, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has
made any representation or warranty as to the present or future suitability of
the Premises for the conduct of Lessee's business.

9. Maintenance, repairs and alterations.

9.1 Lessee's obligations. Lessee shall keep in good order, condition
and repair, the interior of the Premises and every part thereof, including,
without limiting the generality of the foregoing, all plumbing, electrical,
lighting facilities and equipment within the Premises, all fixtures, walls
(interior), ceilings (interior), floors, windows, doors, plate glass and
skylights located within the Premises. And, after installation of a new roof,
and with the benefit of the new roof warranty, Lessee shall maintain and repair
the roof as needed. Lessee shall also be responsible for parking lot seal,
repair and striping, but shall have no obligation to maintain the building
foundation, structure, or exterior walls. Lessor shall be responsible for
pavement overlay only if it is required in Lessor's reasonable judgment.

9.2 Surrender. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as when received, ordinary wear and tear excepted, clean and free of debris.
Lessee shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, furnishings and equipment. Notwithstanding
anything to the contrary otherwise stated in this Lease, Lessee shall

3
<PAGE> 10
leave the air lines, power panels, electrical distribution systems, lighting
fixtures, space heaters, air conditioning, plumbing and fencing within the
premises in good operating condition.

9.3 Lessor's rights. If Lessee fails to perform Lessee's obligations
under this section 9, or under any other paragraph of this Lease, Lessor may at
its option (but shall not be required to) enter upon the Premises after ten (10)
days prior written notice, to Lessee (except in the case of an emergency, in
which case no notice shall be required), perform such obligations on Lessee's
behalf and put the same in good order, condition and repair, and the cost
thereof, together with interest thereon at the maximum rate then allowable by
law, shall become due and payable as additional rental to Lessor together with
Lessee's next rental installment.

9.4 Lessor's obligations. Except for the obligations of Lessor under
paragraph 7.1 relating to Lessor's representations, section 9.1 relating to
condition of the Premises upon delivery, section 11, relating to destruction of
the Premises, and section 17 relating to condemnation of the Premises, it is
intended by the parties hereto that Lessor have no obligation, in any manner
whatsoever, to repair and maintain the Premises nor the building located thereon
nor the equipment therein, except, that Lessor shall install a new roof as soon
as reasonably possible and maintain in good condition the building foundations,
structure, roof until a new roof has been installed, exterior walls, and parking
lot foundation. Lessee expressly waives the benefit of any statute now or
hereinafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the premises in good order, condition and repair.

9.5 Lessee's alterations and additions.

(a) Lessor's consent required. Lessee shall not, without
Lessor's prior written consent, make any alterations, improvements, additions or
Utility Installations in, on, or about the Premises except for nonstructural
alterations not exceeding $25,000.00 in cumulative costs during the term of this
Lease. In any event, whether or not in excess of $25,000.00 in cumulative costs,
Lessee shall make no change or alteration to the structure or to the exterior of
the building, on or about the Premises without Lessor's prior written consent.
As used in this section 9, the term "Utility Installations" shall mean air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing. Lessor may require that Lessee
remove any or all of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the Premises to the
condition of the Premises as existed upon completion of the Tenant Improvements
described in section 46. Lessor may require Lessee to provide Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half times the estimated cost of such improvements, to insure Lessor
against any liability for mechanics' and materialmen's liens and to insure
completion of the work. Should Lessee make any alterations, improvements,
additions or Utility Installations without the prior approval of Lessor.
Lessor may require that Lessee remove any or all of the same. This paragraph
shall not apply to the Tenant Improvements described in section 46.

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(b) Form of Lessee's request. Any alterations, improvements,
additions or Utility Installations in, or about the Premises that Lessee shall
desire to make and which requires the consent of the Lessor shall be presented
to Lessor in written form, with proposed detailed plans. If Lessor shall give
its consent, the consent shall be deemed conditioned upon Lessee acquiring a
permit to do so from appropriate governmental agencies, the furnishing of a
copy thereof to Lessor prior to the commencement of the work and the compliance
by Lessee of all conditions of said permit in a prompt and expeditious manner.

(c) Payment of mechanics and materialmen. Lessee shall pay,
when due, all claims for labor or materials furnished or alleged to have been
furnished to or for Lessee or for use in the Premises, which claims are or may
be secured by any mechanics' or materialmen's lien against the Premises or any
interest therein. Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as provided by
law. If Lessee shall, in good faith, contest the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend itself and Lessor
against the same and shall pay and satisfy any such adverse judgment that may be
rendered thereon before the enforcement thereof against the Lessor or the
Premises, upon the condition that if Lessor shall require, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to one and
one-half times the amount of such contested lien claim or demand indemnifying
Lessor against liability for the same and holding the Premises free from the
effect of such lien or claim. In addition, Lessor may require Lessee to pay
Lessor's attorneys' fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.

(d) Status of fixtures. Unless Lessor requires their removal,
as set forth in paragraph 9.5(a), all alterations, improvements, additions and
Utility Installations (whether or not such Utility Installations constitute
trade fixtures of Lessee), which may be made on the Premises, shall become the
property of Lessor and remain upon and be surrendered with the Premises at the
expiration of the term. Notwithstanding the provisions of this paragraph 9.5(d),
Lessee's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises,
shall remain the property of Lessee and may be removed by Lessee subject to the
provisions of paragraph 9.2.

10. Insurance and indemnity.

10.1 Liability insurance. Lessee shall, at Lessee's expense obtain and
keep in force during the term of this Lease a policy of Combined Single Limit,
Bodily Injury and Property Damage insurance insuring Lessor and Lessee against
any liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be in an amount
not less than $2,000,000.00 per occurrence. The policy shall insure performance
by Lessee of the indemnity provisions of paragraph 10.5. The limits of said
insurance shall not, however, limit the liability of Lessee hereunder. Any
assignee or sub-lessee of Lessee shall also insure Lessor as provided in this
paragraph 10.1.

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10.2 Property insurance.

(a) Premise insurance. Lessee shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the building and Premises, in the amount of the full replacement value
thereof, as the same may exist and be reported by Lessor from time to time,
which replacement value is now $2,000,000, against all perils included within
the classification of fire, extended coverage, vandalism, malicious mischief,
and special extended perils ("all risk" as such term is used in the insurance
industry). Said insurance shall provide for payment of loss thereunder to Lessor
or to the holders of mortgages or deeds of trust on the Premises.

(b) Insurance of Lessee's fixtures. Lessee shall insure
Lessee's fixtures, equipment and tenant improvements which are a part of the
Premises under paragraph 9.5(a), hereof.

10.3 Insurance Policies. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or
similar rating, or such other rating as may be required by a lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide". Lessee shall deliver to Lessor copies of policies of such
insurance or certificates evidencing the existence and amounts of such insurance
with loss payable clauses as required by this paragraph 10.3. No such policy
shall be cancelable or subject to reduction of coverage or other modification
except after thirty (30) days' prior written notice to Lessor. Lessee shall, at
least thirty (30) days prior to the expiration of the insurance policies
required to be provided by Lessee, furnish Lessor with renewals or "binders"
thereof, or Lessor may order such insurance and charge the cost thereof to
Lessee, which amount shall be payable by Lessee upon demand. Lessee shall not do
or permit to be done anything which shall invalidate the insurance policies
referred to in paragraph 10.2.

10.4 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under this section 10, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining policies of
insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Lease.

10.5 Indemnity. Except for claims caused by the negligence or willful
misconduct of Lessor, Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's

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<PAGE> 13
fees, expenses and liabilities incurred in the defense of any such claim or any
action or proceeding brought thereon; and in case any action or proceeding be
brought against Lessor by reason of any such claim. Lessee upon notice from
Lessor shall defend the same at Lessee's expense by counsel satisfactory to
Lessor, except for Lessor's negligence, misconduct or default under this Lease.
Lessee, as a material part of the consideration to Lessor, hereby assumes a risk
of damage to property or injury to persons, in, upon or about the Premises
arising from any cause and Lessee hereby waives all claims in respect thereof
against Lessor.

10.6 Exemption of Lessor from Liability. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause whether the said damage or injury results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee.

11. Damage or Destruction.

11.1 Definitions.

(a) Partial damage. "Premises Partial Damage" shall herein
mean damage or destruction to the Premises to the extent that the cost of repair
is less than 50% of the then replacement cost of the Premises. "Premises
Building Partial Damage" shall herein mean damage or destruction to the building
of which the Premises are a part to the extent that the cost of repair is less
than 50% of the then replacement cost of such building as a whole.

(b) Total destruction. "Premises Total Destruction" shall
herein mean damage or destruction to the Premises to the extent that the cost of
repair is 50% or more of the then replacement cost of the Premises. "Premises
Building Total Destruction" shall herein mean damage or destruction to the
building of which the Premises are a part to the extent that the cost of repair
is 50% or more of the then replacement cost of such building at a whole.

(c) Insured Loss. "Insured Loss" shall herein mean damage or
destruction which was caused by an event required to be covered by the insurance
described in paragraph 11.2(a).

11.2 Partial Damage - Insured Loss. Subject to the provisions of
paragraphs 11.4, 11.5 and 10.6, if at any time during the term of this Lease
there is damage which is an Insured Loss and which falls into the classification
of Premises Partial Damage or Premises Building Partial Damage, then Lessor
shall, at Lessor's expense, repair such damage, but not Lessee's fixtures,

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<PAGE> 14
equipment or tenant improvements unless the same have become a part of the
Premises pursuant to paragraph 9.5 hereof as soon as reasonably possible and
this Lease shall continue in full force and effect.

11.3 Partial Damage - Uninsured Loss. Subject to the
provisions of paragraphs 11.4, 11.5 and 11.6, if any time during the term of
this Lease there is damage which is not an Insured Loss and which falls within
the classification of Premises Partial Damage or Premises Building Partial
Damage, unless caused by a negligent or willful act of Lessee (in which event
Lessee shall make the repairs at Lessee's expense), Lessor may at Lessor's
option either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) if the cost to repair such damage exceeds $25,000, give written notice to
Lessee within thirty (30) days after the date of the occurrence of such damage
of Lessor's intention to cancel and terminate this Lease, as of the date of the
occurrence of such damage. In the event Lessor elects to give such notice of
Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period, this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.

11.4 Total Destruction. If at any time during the term of this Lease
there is damage, whether or not an Insurance Loss, (including destruction
required by any authorized public authority), which falls into the
classification of Premises Total Destruction or Premises Building Total
Destruction, this Lease shall automatically terminate as of the date of such
total destruction.

11.5 Damage Near End of Term. If at anytime during the last six months
of the term of this Lease there is damage, whether or not an Insured Loss, which
falls within the classification of Premises Partial Damage, Lessor, or Lessee,
may cancel and terminate this Lease as of the date of occurrence of such damage
by giving written notice to Lessee of Lessor's election to do so within sixty
(60) days after the date of occurrence of such damage.

11.6 Abatement of Rent; Lessee's Remedies.

(a) Abatement of rent. In the event of damage described in
paragraphs 11.2 or 10.3, or 10.4, and Lessor or Lessee repairs or restores the
Premises pursuant to the provisions of this section 11, the rent payable
hereunder for the period during which such damage, repair or restoration
continues shall be abated in proportion to the degree to which Lessee's use of
the Premises is impaired. Except for abatement of rent, if any, Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.

(b) Lessee's right to terminate. If Lessor shall be obligated
or shall elect to

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repair or restore the Premises under the provisions of this section 11 and
shall not commence such repair or restoration within 60 days after such
obligations shall accrue, Lessee may at Lessee's option cancel and terminate
this Lease by giving Lessor written notice of Lessee's election to do so at any
time prior to the commencement of such repair or restoration. In such event this
Lease shall terminate as of the date of such notice.

11.7 Termination - Advance Payments. Upon termination of this Lease
pursuant to this section 11, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor, Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.

11.8 Waiver. Lessor and Lessee waive the provisions of any statutes
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.

12. Real Property Taxes.

12.1 Payment of Taxes. Lessee shall, promptly upon receipt of tax
bills, pay the real property taxes, as defined in paragraph 12.2 applicable to
the Premises during the term of this Lease. Lessee's property tax obligation,
however, shall not exceed $0.14/per square foot per month for the tax year
1996/1997. For subsequent years Lessee shall pay any increases in addition to
said $0.14/per square foot per month which accrue after the date Lessor's
pending tax appeal is settled. That is, if the appeal results in an actual tax
more than $0.14/per square foot per month Lessee shall only pay said $0.14 plus
any increase which occurs after the actual tax is determined. If the tax is less
than said $0.14 Lessee shall only pay the actual amount. Lessor shall pay any
tax increase which may result from a sale of the Premises by Lessor.

12.2 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Premises by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Lessor in the
Premises or in the real property of which the Premises are a part, as against
Lessor's right to rent or other income therefrom, and as against Lessor's
business of leasing the Premises. The term "real property tax" shall also
include any tax, fee, levy, assessment or charge (i) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax," or (ii) the nature of
which was hereinbefore included within the definition of "real property tax," or
(iii) which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv) which
is imposed as a result of a transfer, either partial or total, of Lessor's
interest in the Premises of which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer,
or (v) which is imposed by reason of this transaction, any

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modifications or changes hereto, or any transfers hereof.

12.3 Personal Property Taxes.

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

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

13. Utilities. Lessee shall obtain and pay for all water, gas, heat, light,
power, telephone, sewer, water, garbage, outside lights, fire alarms, building
security, landscaping, and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such utilities or services are
not separately metered or billed to Lessee, Lessee shall pay a reasonable
proportion of the cost to be determined by Lessor of all charges jointly metered
or charged with other premises.

14. Operating Expenses. Lessee shall be responsible for expenses for maintenance
and repair of the exterior of the building, parking lot, landscaping, signage,
fire sprinkler systems and/or alarm and security services, janitorial services,
plumbing maintenance and repair, electrical systems, roof maintenance and repair
after Lessor has installed a new roof (with the benefit of the warranty and
excluding roof structure), and for sweeping and sealing the parking lot, but not
for pavement overlay.

15. Assignment and subletting.

15.1 Lessor's consent required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withheld. Lessor's disapproval of any assignee or sublessee, due to that party's
financial capability or intended use of the premises as being incompatible with
the uses of other tenants in the building shall be considered to be reasonable
and therefore enforceable. Lessor shall respond to Lessee's request for consent
hereunder within fourteen (14) days after receipt of a written request to
sublease. If Lessor does not so respond the proposed sublease shall be deemed to
have Lessor's consent. Any attempted assignment, transfer, mortgage, encumbrance
or subletting without Lessor's consent shall be void, and shall constitute a
breach of this Lease. If the amount of rent per square foot payable by an
assignee or sublessee exceeds the rental rate per square foot provided under
paragraph 4, Lessor and Lessee shall share the excess equally after allowing
credit for Lessee's costs of subleasing.

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15.2 Lessee Affiliate. Notwithstanding the provisions of section 15
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, provided that said assignee assumes, in full, the
obligations of Lessee under this Lease. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease even
if after such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.

15.3 No Release of Lessee. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligation or alter
the primary liability of Ussee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Lessee or any successor of Lessee, in the performance of any of
the terms hereof, Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee.

15.4 Consent after assignment. Lessor may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Lessee, with the prior written consent of Lessee, which
consent shall not be unreasonably withheld or delayed. It shall be deemed
reasonable for Lessee to withhold its consent as to any such assignments,
subletting, amendments or modifications which alter Lessee's rights or
liabilities under this Lease to Lessee's substantial disadvantage.

15.5 Attorneys' Fees. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys' fees incurred in connection
therewith, such attorneys' fees not to exceed $500.00 for each such request.

16. Defaults; remedies.

16.1 Defaults. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by Lessee.

(a) Abandonment. The vacating or abandonment of the Premises
by Lessee.

(b) Failure to pay. The failure by Lessee to make any payment
of rent or any other payment required to be made by Lessee hereunder, as and
when due, where such failure shall continue for a period of ten (10) days after
written notice thereof from Lessor to Lessee.

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In the event that Lessor serves Lessee with a Notice to Pay Rent or Quit
pursuant to applicable Unlawful Detainer statutes such Notice to Pay Rent or
Quit shall also constitute the notice required by this subparagraph.

(c) Failure to perform. The failure by Lessee to observe or
perform any of the covenants, conditions or provisions of this Lease to be
observed or performed by Lessee, other than described in subparagraph (b) above,
where such failure shall continue for a period of 30 days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
default is such that more than 30 days are reasonably required for its cure,
then Lessee shall not be deemed to be in default if Lessee commenced such cure
within said 30-day period and thereafter diligently prosecutes such cure to
completion.

(d) Insolvency. (i) The making by Lessee of any general
arrangement or assignment for the benefit of creditors; (ii) Lessee becomes a
"debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto
(unless, in the case of a petition filed against Lessee, the same is dismissed
within 60 days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where possession is not restored to Lessee
within 30 days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.
Provided, however, in the event that any provision of this paragraph 16.l(d) is
contrary to any applicable law, such provision shall be of no force or effect.

(e) False financial statement. The discovery by Lessor that
any financial statement given to Lessor by Lessee, any assignee of Lessee, any
subtenant of Lessee, any successor in interest of Lessee or any guarantor of
Lessee's obligation hereunder, and any of them, was materially false.

16.2 Remedies. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach:

(a) Termination of lease. Terminate Lessee's right to
possession of the Premises by any lawful means, in which case this Lease shall
terminate and Lessee shall immediately surrender possession of the Premises to
Lessor, in such event Lessor shall be entitled to recover from Lessee all
damages incurred by Lessor by reason of Lessee's default including, but not
limited to, the cost of recovering possession of the Premises; expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorney's fees, and any real estate commission actually paid; the
worth at the time of award by the court having jurisdiction thereof of the
amount by which the unpaid rent for the balance of the term after the time of
such award exceeds the amount of such rental loss for the same period that
Lessee proves could be reasonably avoided; that portion of the leasing
commission paid by Lessor pursuant to section 18 applicable to the unexpired
term of this Lease.

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(b) Continue lease. Maintain Lessee's right to possession in
which case this Lease shall continue in effect whether or not Lessee shall have
abandoned the Premises. In such event Lessor shall be entitled to enforce all of
Lessor's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.

(c) Other remedies; interest. Pursue any other remedy now or
hereafter available to Lessor under the laws or judicial decisions of the state
wherein the Premises are located. Unpaid installments of rent and other unpaid
monetary obligations of Lessee under the terms of this Lease shall bear interest
from the date due at the maximum rate then allowable by law.

16.3 Default by Lessor. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently prosecutes the same to completion.

16.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder. In the event
that a late charge is payable hereunder, whether or not collected, for three (3)
consecutive installments of rent, then rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding section 4 or
any other provision of this Lease to the contrary.

16.5 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property

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taxes and insurance premiums. If the amounts paid to Lessor by Lessee under the
provisions of this paragraph are insufficient to discharge the obligations of
Lessee to pay such real property taxes and insurance premiums as the same become
due, Lessee shall pay to Lessor, upon Lessor's demand, such additional sums
necessary to pay such obligations. All moneys paid to Lessor under this
paragraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a default in the obligations of Lessee to perform
under this Lease, then any balance remaining from funds paid to Lessor under the
provisions of this paragraph may at the option of Lessor, be applied to the
payment of any monetary default of Lessee in lieu of being applied to the
payment of real property tax and insurance premiums.

17. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs, if more than 10% of the floor area of the
building on the Premises, or more than 25% of the land area of the Premises
which is not occupied by any building, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing only within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the rent shall be reduced in the
proportion that the floor area of the building taken bears to the total floor
area of the building situated on the Premises. No reduction of rent shall occur
if the only area taken is that which does not have a building located thereon.
Any award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any award for loss of or damage in Lessee's trade fixtures and removable
personal property. In the event that this Lease is not terminated by reason of
such condemnation, Lessor shall to the extent of severance damages received by
Lessor in connection with such condemnation, repair any damage to the Premises
caused by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in excess of
such severance damages required to complete such repair.

18. Brokers Fees. The parties acknowledge and consent to Cornish and Carey
representing Lessee and Thomas J. Costello, Broker representing Lessor. The
total brokers' fee obligation of Lessor is, by separate contract, as follows,
being percentages of the Annual Net Net Net Rent:
<TABLE>
<S> <C>
Year 1: 6%
Year 2: 5%
Year 3: 4%
Year 4: 3%
Year 5: 2%
</TABLE>

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<PAGE> 21
Cornish & Carey shall receive 55% of the above fees plus 1% of the
sixth year rent and 1% of the seventh year and last two months' rent. Thomas J.
Costello, Broker, shall receive 45% of said above fees. One-half of the total
fees shall be paid on execution of the lease and one-half upon occupancy,
issuance of occupancy permit, and Lease Commencement. No other fees of any kind,
including but not limited to fees for sales, options to renew, Lease renewals,
expansions, or extensions, shall be due to brokers.

19. Estoppel Certificate.

(a) Lessee to provide. Lessee shall at any time upon not less than ten
(10) days' prior written notice from Lessor execute, acknowledge and deliver to
Lessor a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of said
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder, or specifying
such defaults if any are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises.

(b) Lessee's failure to provide. At Lessor's option, Lessee's failure
to deliver such statement within such time shall be a material breach of this
Lease or shall be conclusive upon Lessee (i) that this Lease is in full force
and effect, without modification except as may be represented by Lessor, (ii)
that there are no uncured defaults in Lessor's performance, and (iii) that not
more than one month's rent has been paid in advance or such failure may be
considered by Lessor as a default by Lessee under this Lease.

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

20. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners at the time in question of the fee title to the Premises, and in
the event of any transfer of such title or interest, Lessor herein named (and in
case of any subsequent transfers then the grantor) shall be relieved from and
after the date of such transfer of all liability as respects Lessor's
obligations thereafter to be performed, provided, that any funds in the hands of
Lessor or the then grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations contained in this
Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.

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<PAGE> 22
21. Severability. The invalidity of any provision of this Lease as determined by
a court of competent of jurisdiction, shall in no way affect the validity of any
other provision hereof.

22. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease, provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.

23. Time of Essence. Time is of the essence.

24. Additional Rent. Any monetary obligations of Lessee to Lessor under the
terms of this Lease in addition to rent payable under section 4 shall be deemed
to be additional rent.

25. Incorporation of prior agreements; amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the real estate broker listed in section 18
hereof nor any cooperating broker on this transaction nor the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease relating to the use and
occupancy of the Premises and any alterations made thereto by Lessee except as
otherwise specifically stated in this Lease.

26. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified mail, postage
pre-paid, and if given personally or by mail, shall be deemed sufficiently given
if addressed to Lessee or to Lessor at the address noted below the signature of
the respective parties, as the case may be. Either party may by notice to the
other specify a different address for notice purposes except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for notice purposes.

27. Waivers. No waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.

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<PAGE> 23
28. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.

29. Holding Over. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rental rate shall
be 125% of the rate applicable to the last whole month of the term.

30. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

31. Covenants and Conditions. Each provision of this Lease performable by Lessee
shall be deemed both a covenant and a condition.

32. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of section 20,
this Lease shall bind the parties, their personal representatives, successors
and assigns. This Lease shall be governed by the laws of California.

33. Subordination.

33.1 Subordination; Lessee's right to continued possession. This Lease,
at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed upon the
real property of which the Premises are a part and to any and all advances made
on the security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the Premises shall not be disturbed if
Lessee is not in default and so long as Lessee shall pay the rent and observe
and perform all of the provisions of this lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgage, trustee or ground Lessor
shall elect to have this Lease prior to the lien of its mortgage, deed of trust
or ground lease, and shall give written notice thereof to Lessee, this lease
shall be deemed prior to such mortgage, deed of trust, or ground lease, whether
this Lease is dated prior or subsequent to the date of said mortgage, deed of
trust or ground lease or the date of recording thereof.

33.2 Subordination documents. Lessee agrees to execute any reasonable
documents required to effectuate an attornment, a subordination or to make this
Lease prior to the lien of any mortgage, deed of trust or ground lease, as the
case may be. Lessee's failure to execute such documents within 10 days after
written demand shall constitute a material default by Lessee hereunder.

34. Attorney's Fees. If either party or the broker named herein brings an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or

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<PAGE> 24
appeal, shall be entitled to his reasonable attorney's fees to be paid by the
losing party as fixed by the court.

35. Lessor's Access. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times upon 24 hour prior written notice (except in
cases of emergency) for the purpose of inspecting the same, showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part as Lessor may deem necessary or desirable. Lessor may at any
time place on or about the Premises any ordinary "For Sale" signs and Lessor may
at any time during the last 120 days of the term hereof place on or about the
Premises any ordinary "For Lease" signs, all without rebate of rent or liability
to Lessee.

36. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.

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

38. Consents. Except for section 36 hereof, wherever in this Lease the consent
of one party is required to an act of the other party such consent shall not be
unreasonably withheld.

39. Quiet Possession. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease. The individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership interest in the Premises.

40. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties in and about the premises.

41. Easements. Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of parcel Maps and restrictions, so long as such
easements, rights and dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do

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<PAGE> 25
so shall constitute a material breach of this Lease.

42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.

43. Authority. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.

44. Captions. Section and paragraph captions are included for convenience only
and shall not affect construction of such section or paragraph.

45. Exhibits. Attached hereto are Exhibits A through D, which constitute a part
of this Lease.

46. Tenant Improvements.

46.1 Improvement Allowance. Lessor shall provide Lessee a leasehold
"improvement allowance" of $5.00 per rentable square foot which will cover cost
for space planning, plans, permits, and a portion of the construction. Prior to
commencement of construction, Lessee shall submit all plans to Lessor and Lessor
and Lessee shall approve such plans, subject to reasonable changes and
adjustments. Upon approval by Lessor and Lessee, said plans shall be attached to
this Lease as Exhibit "C". Lessee shall, at Lessee's expense, pay all
construction costs in excess of the improvement allowance. Lessee shall pay all
other contractors and suppliers and Lessor shall reimburse Lessee out of the
improvement allowance on a "progress payment" basis upon presentation of actual
paid invoices and satisfactory lien releases. Lessor shall be obligated to make
such "progress payments" relative to the first and initial costs and expenses
related to the Tenant Improvements.

46.2 Coordination of Construction. Lessee shall manage the construction
and coordinate construction with Lessor and the contractors. Only licensed and
insured contractors shall be utilized. Lessor shall have the right to post a
Notice of Non-Responsibility.

46.3 Additional work by Lessor. In addition to the tenant improvement
allowance, the Lessor shall pay and be responsible for the following items prior
to Lessee taking possession of the Premises:

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<PAGE> 26

a) Lessor at Lessor's sole cost shall replace the entire roof
of the building. The work shall be conducted in the spring or early summer of
1996. The work will be conducted immediately after Lease execution, however, if
the warranty for such is not affected due to anticipated adverse weather.

b) Lessor at Lessor's sole cost shall maintain the HVAC units
and replace them on an as-needed basis such as when compressors fail. Lessor at
Lessor's sole cost shall maintain the HVAC system and enter into a service
contract.

c) Lessor shall remove the raised computer room floor and
remove the sheet rock from the windows adjacent to the Bandley as outlined and
agreed upon in Exhibit D.

d) Lessor shall remove all Halon systems on the Bandley Side
Computer Room and establish the fire safety systems as for a standard office in
use per city of Cupertino building codes. Lessor shall not be responsible for
safety systems related to new improvements obtained by Lessee.

e) Lessor shall be responsible for all ADA or access code
items which would be applicable prior to taking possession of the Premises, and
including any work related to new improvements completed or to be completed
(excluding the modification of or addition of entries and/or specialized
interior improvements) by Lessee, as indicated and agreed upon in Exhibit D.

f) Lessor shall not provide any structural retrofits to the
building. If Lessee changes or affects the structural integrity of the
building, Lessee shall be responsible for costs, to be reimbursed out of the
improvement allowance.

g) Lessor shall have the building painted, if requested by
Lessee, with, color input from Lessee, provided, that the cost of this
painting work shall be paid out of the improvement allowance. Color shall be
approved by Lessor.

h) Lessor and Lessee have further agreed to comply with
Exhibit D, incorporated herein, based on Shores Associates' Report dated October
31, 1995.

46.4 Generator. The electric generator and appurtenances shall remain on
the site. Lessee shall have the option to use the generator and, if so, Lessee
shall be responsible for all maintenance and repair. Lessee, at Lessee's cost,
may install, a legal above-ground fuel tank for the generator, and may trench
connections over to Lessee's adjacent building, subject to Lessor's approval of
the plans, provided, that Lessee hereby assumes all responsibility and liability
for the furnishing any and all electricity to the adjacent building, and agrees
to indemnify and hold harmless Lessor from any and all loss, costs, liabilities,
claims, attorneys' fees, and litigation expense, which Lessor may suffer or
incur, based upon or arising out of the connection of said generator to property
other than that demised in this Lease.

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<PAGE> 27
46.5 Computer floors. Lessor shall retain ownership of the computer
floors, however, Lessor shall provide Lessee with computer room floor pieces
from the Bandley side computer room for Lessee to install in the floor of the
main central computer room, at Lessee's expense. The freestanding air
conditioning Liebert units shall remain the property of Lessor and may be left
at the property.

46.6 Lessee shall use best efforts in space planning to be able to use
the freestanding air conditioning Liebert units (with no heat) in the interior
computer room as no roof units with ducting to said room exist. However, if
Lessee cannot use said units, Lessor, at Lessor's sole cost shall install an
HVAC unit, or utilize existing units if capacity is available, for said space,
including ducting.

47. Signs. Lessee may, at Lessee's expense, install one or more signs in the
area in front of the Premises, conditioned upon approval by the City of
Cupertino, and of Lessor, which shall, not unreasonably be withheld.

48. Hazardous Materials:

48.1 Definition of Hazardous Materials: The term "Hazardous Material"
shall, for purposes of this Agreement, mean any substance, material or waste
which is or becomes regulated by any local governmental authority having
jurisdiction, the State of California, or the United States government,
including but not limited to any material or substance which is (i) defined as a
"hazardous waste," "extremely hazardous waste" or "restricted hazardous waste"
under Sections 25115, 25117 or 25122.7, or listed, pursuant to Section 25140, of
the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste
Control Law); (ii) defined as a "hazardous substance" under Section 25316, of
the California Health and Safety Code, Division 20, Chapter 6.8
(Carpenter-Presley-Tanner Hazardous Substance Account Act); (iii) defined as a
"hazardous material," "hazardous substance" or "hazardous waste" under Section
25501 of the California Health and Safety Code, Division 20, Chapter 6.95
(Hazardous Materials Release Response Plans and Inventory); (iv) defined as a
"hazardous substance" under Section 25281 of the California Health and Safety
Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances);
(v) petroleum; (vi) asbestos; (vii) polychlorinated biphenyls; (viii) listed
under Article 9, or defined as "hazardous" or "extremely hazardous" pursuant to
Article 11, of Title 22 of the California Administrative Code, Division 4,
Chapter 30; (ix) designated as a "hazardous substance" pursuant to Section 311
of the Clean Water Act, 33 U.S.C. Section 1251, et seq. (33 U.S.C. Section 1321)
or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section
1317); (x) defined as a "hazardous waste" pursuant to Section 1004 of the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42
U.S.C. Section 6903); (xi) defined as a "hazardous substance" pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq. (42 U.S.C. Section 9601); (xii) defined as a hazardous
material in the Hazardous Materials Transportation Act (49 U.S.C. Section 1801,
et seq.); (xiii) listed in the United States Department of Transportation
Hazardous Materials Table (49 CFR 172.101), as amended from time to time; (xiv)
described in any applicable so-called "superfund" or

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<PAGE> 28
"Superlien" law; and/or (xv) described in any other applicable federal, state or
local statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability or standards of conduct
concerning any hazardous or toxic waste or substances, as now or at any time
hereafter in effect.

48.2 Definition of Applicable Laws: The term "Applicable Laws" shall,
for purposes of this Agreement, mean all applicable laws and governmental
regulations including, without limitation, all applicable federal, state, and
local laws pertaining to air and water quality, hazardous waste, waste disposal
and other environmental matters, including, but not limited to, the Clean Water,
Clean Air, Federal Water Pollution Control, Solid Waste Disposal, Resource
Conservation Recovery and Comprehensive Environmental Response Compensation and
Liability Acts, and the California Environmental Quality Act, and the rules,
regulations and ordinances of the city and county in which the Premises are
located, the California Department of Health Services, the California Regional
Water Quality Control Board, the California State Water Resources Control Board,
the Environmental Protection Agency and all applicable federal, state and local
agencies and bureaus and all rules, regulations, codes, ordinances referred to
in paragraph 48.1, above.

48.3 Responsibility of Parties.

a) Toxic materials. Lessor shall advise Lessee of any toxic
materials known to Lessor which are located in or about the Premises, parking
areas, storage area or other parts of the Project. It shall be the
responsibility of Lessor at its sole cost and expense to remove any building
toxic materials prior to the commencement of Lessee improvement construction.
Further, Lessor's costs for the removal of toxic material(s) in Lessee's
Premises or in any other location in the Project shall be the Lessor's sole
responsibility. Lessee shall warrant to Lessor that Lessee will occupy in
compliance with all environmental regulations and hold Lessor harmless from any
environmental damage caused by Lessee. Lessee shall be responsible for toxic
material used or stored at the Premises and indemnify Lessor against any loss,
damage, or liability on account thereof.

49. Lessee's Representations and Covenants:

49.1 Handling of hazardous materials. Lessee will, at all times,
exercise due care and conduct appropriate inquiry regarding all Hazardous
Materials and will take precautions against all foreseeable acts by third
parties and the consequences thereof, with regard to hazardous materials. This
paragraph is in no way intended to and shall not be deemed to constitute
knowledge, acquiescence or endorsement by Lessor of or to an Hazardous material
activity on or relating to the Premises.

49.2 Use of hazardous materials. Lessee agrees that it will not cause
or permit the use, presence, release, generation, storage, manufacturing,
discharge, production or disposal of any Hazardous Materials, above, in, on,
under and/or around the Premises or the transportation of any Hazardous
Materials to or from the Premises in contravention of any Applicable Law.

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<PAGE> 29
Lessee hereby agrees at all times to comply fully and in a timely manner with
and to cause all of its employees, agents, contractors and subcontractors and
any other persons occupying or present on the Premises to so comply with all
Applicable Laws now or any future time. It is understood that the obligation in
the preceding sentence does not extend to the employees or agents of Lessor.

49.3 Compliance with environmental requirements. If at any time it is
determined that three are any Hazardous Materials located or released at, from,
above, in, on, under or around the Premises during the term of this Lease or any
extensions thereof, which under any Applicable Law requires special handling in
use, collection, storage, treatment or disposal, Lessee shall commence with
diligence within thirty (30) days after receipt of notice thereof and continue
to diligently take all appropriate action, at Lessee's sole expense, to comply
with all such Applicable Laws; provided, however, that Lessee shall not be
responsible for environmental conditions existing on the date of possession of
the Premises by Lessee, those caused by Lessor, its agents, employees or
contractors, or those migrating onto the Premises as a result of the conduct of
persons other than Lessee, its agents, employees, contractors or other users or
occupants of the Premises.

49.4 Release of hazardous materials. Lessee shall immediately advise
Lessor in writing: (i) in the event that Lessee has knowledge, or has reasonable
cause to believe that any Hazardous Materials has come to be released or located
on or beneath the Premises, hereby acknowledging, in addition to the terms and
conditions of this Lease, Lessee's duties pursuant to California Health and
Safety Code Section 15359.7; (ii) of any and all enforcement, clean-up, removal
or other governmental or regulatory actions instituted, completed or threatened
pursuant to any Applicable Law; (iii) of all claims made or threatened by any
third party against Lessee with respect to the Premises or against the Premises
relating to damage, contribution, cost recovery compensation, loss or injury
resulting from any Hazardous Materials; and (iv) of Lessee's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of the
Premises that could cause the Premises or any part thereof to be otherwise
subject to any restrictions on the ownership, occupancy, transferability, zoning
or use of the Premises under any Applicable Law.

49.5 Report of compliance. From time to time during the term of this
Lease, Lessee shall, upon the request of Lessor, deliver to Lessor such evidence
as Lessor may reasonably request of Lessee's compliance with any Applicable Law.

49.6 Asbestos. Lessee shall not install or permit to be installed any
asbestos or asbestos-containing materials (collectively, "Asbestos") in or on
the Premises. In addition, Lessee acknowledges that in the event Lessee shall
remove or cause to be removed any Asbestos from the Premises which has been
installed or placed on the Premises by Lessee, any Environmental Protection
Agency number assigned to the Asbestos so removed shall be solely in the name of
the Lessee (as between Lessee and Lessor only), and Lessee shall assume (as
between Lessee and Lessor only) on a recourse basis all liability for such
removed Asbestos.

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49.7 Default. Lessee's failure to perform any of its obligations under
this section 49 shall constitute a default under the Lease.

49.8 Condition to assignment. Lessee's compliance with the terms and
conditions of this section 49 constitutes a condition precedent to Lessee's
right (if any) to assign this Lease or to sublet the Premises.

50. Indemnification of Lessor: Except as otherwise provided in paragraph 7.1,
Lessee shall (at Lessee's expense) defend, indemnify, save and hold Lessor
harmless against any and all claims, demands, losses, expenses, damages
(general, punitive or otherwise), causes of action (whether legal or equitable
in nature) asserted by any person, firm, corporation, entity or governmental
body arising out of the construction of any alterations to the Premises by the
Lessee or related to Lessee's responsibility for Hazardous Materials in relation
to the Premises, or asserted to be a violation of any Applicable Law by Lessee,
its agents, employees, contractors or any other user or occupant of the Premises
except Lessor. Lessee shall pay to Lessor, upon Lessor's demand, all claims,
judgments, damages, losses or expenses (including legal expenses) incurred by
Lessor as a result of any legal action arising out of the construction of any
alterations to the Premises by the Lessee, or caused by Lessee's breach of the
covenants set forth herein, or caused by violation of any Applicable Law.

50.1 Removal of hazardous materials. In addition to all other rights
and remedies of Lessor hereunder, if Hazardous Materials for which Lessee is
responsible are not removed from the Premises by Lessee within ninety (90) days
after Lessee becomes aware that such Hazardous Materials are present on the
Premises in violation of any Applicable Law, Lessor, at its sole discretion, may
pay to have same removed and Lessee shall reimburse Lessor for the action cost
thereof within five (5) days of Lessor's demand for payment. Lessee shall
indemnify and hold Lessor and Lessor's employees and officers harmless from and
against all loss, damage, liability (including all foreseeable and unforeseeable
consequential damages) and expense (including, without limitation, the cost of
any cleanup required by any Applicable Law of such Hazardous Materials and all
attorneys' fees and expenses incurred by Lessor or Lessor's employees or
officers in connection therewith) which Lessor or Lessor's employees or officers
may sustain as a result of the presence or cleanup of such Hazardous Materials
on the Premises.

50.2 Waiver: The covenants, warranties, representations, indemnities
and obligations of Lessee under this section 50, including without limitation,
the obligations of Lessee to indemnify, defend and hold harmless Lessor, shall
survive the termination or expiration of this Lease, and shall inure to the
benefits of any purchaser in a foreclosure or trustee's sale, or by deed in lieu
of foreclosure, of Lessor and of their respective successors and assigns. Lessee
hereby waives, to the maximum extent permitted by law, any limitation upon such
continuing liability.

51. Limitation of Liability of Lessor; Lien Priority. In the event Lessee shall
ever obtain any judgment against Lessor arising from any breach of this Lease by
Lessor or any liability of Lessor arising in connection with Lessee's occupancy
under this Lease, any liability of Lessor, shall be limited solely to Lessor's
interest in the real property of which the Premises are a part

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<PAGE> 31
and to any insurance maintained by Lessor pursuant to this Lease. Any lien
against the real property of which the Premises are a part, obtained to enforce
any judgment and levy of execution thereof in connection with this Lease, shall
be subject and subordinate to any and all ground and underlying leases,
mortgages and deeds of trust and easements and other restrictions which now
affect said real property or underlying leases.

52. Option to extend term. Lessee shall have three (3) successive options, each
to extend the lease term for a period of three (3) years commencing upon the
expiration of the preceding lease term, provided, however, that:

(a) Notice of Exercise. Lessee shall unconditionally have exercised its
right to extend the lease term by written notice given to Lessor not later than
one hundred twenty (120) days prior to the expiration of the preceding lease
term, and

(b) No Default. Lessee shall not, at the time Lessee exercises its
option, be in default of any of the material terms and conditions of this Lease
and this Lease shall be in full force and effect.

In the event Lessee exercises the option as aforesaid, the parties shall have a
period of thirty (30) days following the ninetieth (90th) day preceding the
expiration of the previous term of this Lease, to establish the fair market
rental of the Premises by mutual agreement. The geographic area for determining
"fair market rental" shall be limited to within two miles of subject property.
If, within such thirty (30) days the parties so agree, then they shall execute a
written memorandum establishing the fair market rental. 95 % of the fair market
rental, but not less than the amount of the last month's rent for the
immediately preceding lease term, whichever is greater, shall be the monthly
rental rate in effect for each three (3) year extension. If for any reason the
parties have failed to agree upon such fair market rental (which failure shall
be evidenced conclusively by their failure to execute a memorandum setting forth
the agreed fair market rental), then each party shall have a period of thirty
(30) days following the end of such thirty (30) day negotiation period in which
to produce a written opinion by an appraiser or real estate broker with at least
five (5) years' experience in appraising real property in the Cupertino area of
Santa Clara County, California. If a party fails to produce such an appraisal,
the appraisal produced by the other party shall be determinative of the fair
market rental. If both parties produce such an appraisal, and the two appraisals
establish the same fair market rental, or if the higher of the two appraisals is
not more than three percent (3%) higher than the lower of the two appraisals,
the fair market rental shall be deemed established by the average of the two
appraisals. If the two appraisals are not equivalent or within such three
percent (3%) range, then the two appraisers shall mutually meet and select a
third appraiser with the same qualifications aforesaid, who shall act as an
ombudsman and evaluate the two appraisals. If the two appraisers initially
selected are unable to agree on the third appraiser, either of the parties to
this Lease by giving ten (10) days written notice to the other party can apply
to the person who is presiding judge of the Santa Clara Superior Court for the
selection of a third appraiser who meets the qualifications stated in this
subparagraph. Each of the parties shall bear one-half (1/2) of the costs of
appointing the third appraiser and of paying the third appraiser's fee. (Each

25
<PAGE> 32
party shall bear the cost of fees charged by the appraiser selected by such
party.) The third appraiser, however selected, shall be a person who has not
previously acted in any capacity for either party. Within thirty (30) days after
the selection of the third appraiser, such appraiser shall, in writing,
communicate to Lessor and Lessee that, in his opinion, either one or the other
of the two appraisals previously submitted is nearest to his independent opinion
of the fair market rental value of the Premises. The appraisal so selected shall
conclusively establish the fair rental value of the Premises for the ensuing
three (3) year period.

(c) Rental Rate. Upon establishment of such fair rental value
(whether by agreement of the parties or by the appraisal procedure set forth
above), the parties shall immediately execute an amendment to this Lease
establishing rental at 95% of the fair market rental rate, but not less than the
rate in effect during the last year of the immediately preceding term. If the
parties have not agreed upon the new rental rate, or if the appraisal process
set forth above has not established a new rental rate, on or before the
commencement of the extension period, Lessee shall continue to pay rent at a
rate which is one hundred fifteen percent (115%) of the rent in effect at the
end of the immediately preceding term of this Lease, and when the new rental
rate has been established, then (i) if the new rental rate is greater than 115%
of the rent in effect at the end of the immediately preceding term of the Lease,
Lessee shall within ten (10) days pay to Lessor the amount of the deficiency, or
(ii) if the monthly rental established is less than one hundred fifteen percent
(115%) of the rental rate in effect at the end of the immediately preceding
term of this Lease, then within ten (10) days after the new rental rate is
established, Lessor shall refund to Lessee the excess rent paid by Lessee. In no
event shall the rent established by the agreement of the parties or the
appraisal process herein set forth be less than that in effect at the end of the
immediately preceding term of this Lease, anything hereinabove to the contrary
notwithstanding.

(d) Option not separately assignable. These options may not be
assigned apart from an assignment of this Lease with Lessor's consent as
provided by paragraph 15.1.

Approved and Accepted:

LESSOR: LESSEE:
Burrel Leonard, doing business CKS Partners, Inc., a California
as The Leonard Company corporation

/s/ Burrel Leonard By
- ------------------------------- ----------------------------------
Mark David Kvamme, President

/s/ Carlton H. Baab
----------------------------------
Carlton H. Baab, Chief Operating
Officer, Executive Vice President

Address: 10050 N. Wolfe Rd., SW2-260 Address: [ILLEGIBLE]
Cupertino, CA 95014

26
<PAGE> 33
FOR LEASE EXHIBIT A

20,286 SQ. FT. FREESTANDING
OFFICE/R&D BUILDING

[GRAPHIC: FLOORPLAN]

For More Information, Contact: IPA

THOMAS J. COSTELLO 595 Park Ave., #305
Exclusive Agent 20615 LAZANEO DRIVE San Jose, CA 95110
(408) 282-1622 Tel: (408) 282-1622
CUPERTINO Fax:(408) 282-1621
<PAGE> 34
EXHIBIT B

[MAP OF LAZANEO BUILDING]
<PAGE> 35
EXHIBIT C

Future Plans to
be Approved
<PAGE> 36
EXHIBIT D

DATE: November 8, 1995

RE: Shores Associates Report Dated October 31, 1995

Landscape

- Landscape irrigation will be turned over to Lessee "as is" in
operating condition with no leaks.

Site Parking Lot

- Parking lot is turned over to Lessee in "as is" condition and Lessor
will repair if failure occurs.

Accessibility - Title 24

- Title 24 Compliance is the total responsibility of Lessee on interior
improvements. Lessor to be responsible for exterior signage.

Accessibility - Parking

- Newspaper stands are not on Lessors' property and not the
responsibility of Lessor to remove or relocate.

- Lot will be striped if needed and handicap spaces added as required
by the City at Lessor's cost.

Accessibility Routes

- Lessor to provide proper accessibility on exterior of main entrance
and side entrance if required. Lessee to be responsible for all
interior accessibility - excluding items in Lease Agreement.

1
<PAGE> 37
Signage

- Lessor to be responsible for all exterior signage and restroom
signage only.

Restrooms

- Lessor to remount dispensers to meet ADA code.

- Lessor to re-insulate P-Traps.

- Lessor to repair any damaged tile below urinal

- Toilet fixtures will be replaced by Lessor if required by
City of Cupertino.

- Faucets to be replaced by Lessor (front restroom).

- If required by City of Cupertino or any governing agency for term
of Lease, Lessor will modify 60" diameter clearance in main men's
restroom.

Controls

- Lessee's responsibility. (Lessor only to replace drinking fountains
if requested by City.)

- Lessor to correct the one door to meet code.

Handrails

- Lessee responsible for handrail modification on interior of building.

Interiors

- Existing skylights will be replaced with new by Lessor

- One hour separations and exit pathways are Lessee's responsibility.

- Lessor to repair or replace any exit signage or emergency lighting.

- Energy management and lighting conservation is responsibility of
Lessee.

2
<PAGE> 38
Insulation

- Lessee responsible for Tile 24 Energy Compliance for walls, roof, and
lighting.

- Lessor to replace existing roof membrane with new.

Ceilings

- Lessee responsible for seismic bracing.

Window

- Lessor to remove covering and restore windows on north and west side
of building.

Flooring

- Lessee to accept floor covering "as is" and no replacement by Lessor

- Lessor to remove any asbestos tile as requested by Tenant improvement
plan if requested by Lessee.

Computer Rooms

- Computer rooms on west side of building will be abandoned at Lessor's
sole cost.

- Halon tank, if requested by Lessee, will be replaced by Lessor in
central computer room.

Loading Docks

- To remain "as is" unless Lessee wishes to change and pay for such
changes.

Generator Room

- There is an existing 40 gallon fuel tank in the room. Lessee is
responsible for installing anything beyond what is existing. Lessee may
exchange existing generator for a new system which is more efficient
and use any credit on old system for purchase of new equipment. This
new equipment

3
<PAGE> 39
becomes the property of Lessor upon Lease termination. It is also
Lessee's responsibility to maintain such equipment.

Roof

- New roof with proper drains will be installed at Lessor's cost.
Maintenance and inspections are Lessee's responsibility after warranty
period.

HVAC

- HVAC equipment will be replaced with new equipment upon compressor
failure by Lessor. Lessor to be responsible for HVAC maintenance on a
quarterly basis at Lessor's cost. Liebert units to be removed from west
computer room only. HVAC to be restored for office environment by
Lessor. All mechanical equipment will be in good operating condition
upon move in by Lessee

Electrical

- Electrical distribution is the responsibility of Lessee. Older HVAC
units to stay on 208/120 volts.

- Lessors responsibility on the west computer room is to demo floor and
electrical and cabling below floor, restore windows, HVAC, fire
protection, and concrete flooring to be prepped and ready for carpet
installation.

- GFI testing is responsibility of Lessee (if so applicable, all will
be in operating order). Lessor will conduct an electro-thermograph of
all distribution panels and pay for such and any repairs needed.

- Code does not require the installation of a ground fault interruption
device in existing buildings. Lessor will not be responsible if main is
not equipped with such.

4
<PAGE> 40
Fire and Life Safety

- Lessor will make certain that existing fire detection system is
operational, but will not install new system. Remounting to proper
height will be Lessee's responsibility.

- Lessor to test fire systems and have 5 year test on system and pay
for such tests.

Leasing Issues

- Tenant improvements to a building constructed in 1976 does not
require the building to be structurally upgraded. Therefore, Lessor
will not structurally upgrade to todays code.

- Lessor will comply with all exterior ADA and Title 24 required by
City.

- Lessor will not be responsible for complete interior accessibility,
only items specified in Lease.

- Lessor will not seismically upgrade ceilings

- HVAC to be replaced and maintained by Lessor as per Lease

Agreement.

- Lessor to replace entire roof membrane and skylights.

- Lessor to turn landscaping and irrigation over to Lessee in working
order.

<PAGE> 1
Exhibit 10.12

HILLS PLAZA PHASE I

OFFICE LEASE

SHORENSTEIN REALTY INVESTORS, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP,
Landlord

and

CKS GROUP, INC.
Tenant

DATED AS OF: February 29,1996

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<S> <C>
1. Premises ................................................................ 1
2. Definitions ............................................................. 1
3. Term; Delivery of Possession of Premises ................................ 2
4. Condition of Premises; Improvement Advance .............................. 3
5. Monthly Rent ............................................................ 4
6. Security Deposit ........................................................ 5
7. Additional Rent: Increases in Operating Expenses and Tax Expenses ....... 6
8. Use of Premises; Compliance with Law .................................... 9
9. Alterations and Restoration ............................................. 10
10. Repair .................................................................. 12
11. Abandonment ............................................................. 13
12. Liens ................................................................... 13
13. Assignment and Subletting ............................................... 14
14. Indemnification of Landlord ............................................. 16
15. Insurance ............................................................... 17
16. Mutual Waiver of Subrogation Rights ..................................... 18
17. Utilities ............................................................... 19
18. Personal Property and Other Taxes ....................................... 21
19. Rules and Regulations ................................................... 21
20. Surrender; Holding Over ................................................. 21
21. Subordination and Attornment ............................................ 22
22. Financing Condition ..................................................... 22
23. Entry by Landlord ....................................................... 22
24. Insolvency or Bankruptcy ................................................ 23
25. Default and Remedies .................................................... 23
26. Damage or Destruction ................................................... 25
27. Eminent Domain .......................................................... 26
28. Landlord's Liability; Sale of Building .................................. 27
29. Estoppel Certificates ................................................... 27
30. Right of Landlord to Perform ............................................ 27
31. Late Charge ............................................................. 28
32. Attorneys' Fees; Waiver of Jury Trial ................................... 28
33. Waiver .................................................................. 28
34. Notices ................................................................. 28
35. Notice of Surrender ..................................................... 29
36. Defined Terms and Marginal Headings ..................................... 29
37. Time and Applicable Law ................................................. 29
38. Successors .............................................................. 29
39. Entire Agreement; Modifications ......................................... 29
40. Light and Air ........................................................... 29
41. Name of Building ........................................................ 29
42. Severability ............................................................ 29
43. Authority ............................................................... 29
44. No Offer ................................................................ 29
45. Hazardous Substance Disclosure .......................................... 29
46. Real Estate Brokers ..................................................... 30
47. Parking ................................................................. 30
48. Option to Install Telecommunications Installation ....................... 30
49. Storage ................................................................. 32
50. Deleted ................................................................. 33
51. Right of First Offer .................................................... 33
52. Renewal Option .......................................................... 35
53. Temporary Premises ...................................................... 35
54. Cable Television Service ................................................ 37
55. Quiet Enjoyment ......................................................... 37
</TABLE>

EXHIBITS*
- ---------
A - Outline of Premises
B - Rules and Regulations
C - Appraisal Procedure
D - Temporary Premises
<PAGE> 2
LEASE

THIS LEASE is made as of the 29 day of February, 1996, between
SHORENSTEIN REALTY INVESTORS, L.P., a California limited partnership
("Landlord") and CKS GROUP, INC., a Delaware corporation ("Tenant").

1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, on the terms and conditions set forth herein, those three
increments of space, shown outlined and labeled, respectively, "Increment 1",
"Increment 2", and "Increment 3" on the attached Exhibit A (individually,
"Increment 1", "Increment 2", and "Increment 3", and collectively the
"Increments"). The term "Premises" as used herein shall refer collectively to
the Increments then delivered to Tenant. The Premises are located on the
floor(s) specified in Paragraph 2 below of the building (the "Building")
presently known as Hills Plaza Phase I, located at 345 Spear Street, San
Francisco, California. The Building is part of a combined office, retail and
residential condominium project (the "Project") located on the entire block of
Spear Street between Harrison Street and Folsom Street, in San Francisco,
California. The Building, the parcel(s) of land (the "Land") on which the
Building is located and any other improvements on the Land, the common areas of
the Project and the underground garage for the Project are referred to herein as
the "Real Property".

Tenant's lease of the Premises shall include the right to use, in
common with others, the lobbies, entrances, stairs, elevators and other common
areas of the Building and the common areas of the Project. References
hereinafter to the "common areas" shall refer to the common areas of the
Building and the common areas of the Project. Landlord reserves the right,
without notice to Tenant, to (i) close off any common areas or to change the
size, shape or nature thereof so long as such changes do not materially
adversely affect tenant's beneficial use of the Premises, and (ii) erect any
other structures or improvements on the common areas or convert any portion of
tile common areas to a portion of the Building or other buildings, or convert
any portion of the Building to common areas. All of the windows and outside
walls of the Premises and any space in the Premises used for shafts, stacks,
pipes, conduits, ducts, electrical equipment or other utilities or Building
facilities are reserved solely to Landlord and, subject to the provisions of
Paragraph 23 below, Landlord shall have rights of access through the Premises
for the purpose of operating, maintaining, repairing and improving the same.

2. Definitions. As used herein, the following terms shall have the
meaning specified below:

a. Floor on which the Premises are located: Fifth (5th). Landlord
and Tenant agree that for the purpose of this Lease, the Premises
shall be deemed to contain 12,865 rentable square feet of space.

b. Lease Term: Five (5) years, commencing on April 1, 1996 (the
"Commencement Date"), and ending on March 31, 2001 (the
"Expiration Date").

Notwithstanding the foregoing, Landlord and Tenant acknowledge
that the provisions of Paragraph 53 below (and the balance of
the Lease to the extent required to interpret or enforce the
parties' respective rights and duties under such Paragraph)
are effective as of the date hereof.

c. Monthly Rent: The respective sums set forth as follows:

<TABLE>
<CAPTION>
Period Monthly Rent
------ ------------
<S> <C>
Commencing on April 1, 1996, and
continuing through September 30, 1996. $20,034.00

Commencing on October 1, 1996 and
continuing through the Expiration Date. $25,730.00
</TABLE>

1
<PAGE> 3
The Monthly Rent amounts set forth above are subject to
possible partial abatement, in accordance with the provisions
of Paragraph 3.b. below, in connection with a delayed delivery
of Increment 2 and/or Increment 3 of the Premises.

d. Security Deposit: Twenty-Five Thousand Seven Hundred Thirty
Dollars ($25,730.00).

e. Tenant's Share: 2.84% during the period commencing on the
Commencement Date and continuing through and including
September 30, 1996 (which 2.84% includes only Tenant's Share
of 2.09% attributable to Increment 1 of the Premises and
Tenant's Share of 0.75% attributable to Increment 2 of the
Premises), and 3.65% thereafter (which 3.65% includes Tenant's
Share attributable to all Increments of the Premises).

f. Base Year: The calendar year 1996.
Base Tax Year: The fiscal tax year ending June 30, 1996.

g. Business of Tenant: Advertising and Marketing.

h. Real Estate Brokers: Whiney Cressman Limited and Shorenstein
Management. Inc.

3. Term: Delivery of Possession of Premises.

a. Term. The term of this Lease shall commence on the
Commencement Date (as defined in Paragraph 2.b.) and, unless sooner terminated
pursuant to the terms hereof, shall expire on the Expiration Date (defined in
Paragraph 2.b.).

b. Delayed Delivery. Landlord and Tenant mutually acknowledge
that Tenant is now, and will be at the commencement of the Term of this Lease,
in possession of Increment 1 of the Premises pursuant to the terms of a sublease
between Tenant's affiliate, Cleary, Kvamme & Suiter, Inc., as subtenant, and
Landels, Ripley & Diamond ("Landels"), as sublessor, the term of which sublease
is presently scheduled to expire on March 31, 1996. Landlord and Tenant further
acknowledge that Increment 1 and Increment 2 of the Premises are presently
leased by Landlord to Landels pursuant to a lease which is scheduled to expire
on March 31, 1996, and that Increment 3 of the Premises is presently leased to
another tenant of Landlord for a term which is scheduled to expire on September
14. 1996. Landlord shall use commercially reasonable, good-faith efforts to
deliver Increment 2 of the Premises to Tenant on Hay 1, 1996, or as soon
thereafter as possible, and to deliver Increment 3 of the Premises to Tenant on
October 1, 1996, or as soon thereafter as possible. Notwithstanding the
foregoing or the provisions of Paragraphs 2.c. and 2.e. above, if Landlord, for
any reason whatsoever, cannot deliver possession Increment 2 of the Premises to
Tenant on or before May 1, 1996, or cannot deliver possession of Increment 3 of
the Premises to Tenant on or before October 1, 1996, this Lease shall not be
void or voidable, except as specified below, nor shall Landlord be liable to
Tenant for any loss or damage resulting therefrom, but the Monthly Rent under
Paragraph 5 below and the Additional Rent payable under Paragraph 7 below shall
be abated as follows. If Landlord does not deliver Increment 2 of the Premises
to Tenant on or before April 1, 1996, Monthly Rent in the amount of $5,290.00
per month and the Additional Rent payable under Paragraph 7 below with respect
to such Increment shall be abated for the period from the scheduled Commencement
Date through and including the day preceding the date Landlord delivers
possession of Increment 2 to Tenant. If Landlord does not deliver Increment 3 of
the Premises to Tenant on or before October 1, 1996, Monthly Rent in the amount
of $5,696.00 per month and the Additional Rent payable under Paragraph 7 below
with respect to Increment 3 shall be abated for the period commencing on October
1, 1996, through and including the day preceding the date Landlord delivers
possession of Increment 3 of the Premises to Tenant. If Landlord cannot deliver
Increment 2 of the Premises to Tenant by October 1, 1996 (the "Delivery
Deadline"), or cannot deliver Increment 3 of the Premises to Tenant by April 1,
1997 (also a "Delivery Deadline"), then Tenant may terminate this Lease upon
written notice to Landlord given within five (5) calendar days after the
applicable Delivery Deadline. No delay in delivery of possession of any
Increment of the Premises shall operate

2
<PAGE> 4
to extend the term of this Lease or, except as otherwise provided in this
Paragraph 3, amend Tenant's obligations under this Lease.

c. Early Delivery and Early Occupancy. If Landlord delivers
legal possession of, and Tenant takes occupancy of, Increment 1 and/or Increment
2 of the Premises prior to the Commencement Date provided for in Paragraph 2.b.
above, as mutually agreed by Landlord and Tenant after the execution of this
Lease, then the Commencement Date of the Lease shall be the date of such early
occupancy by Tenant; provided, however, that the Expiration Date shall not be
affected by such early occupancy. If Landlord delivers and Tenant takes
occupancy of Increment 3 of the Premises prior to October 1, 1996, then the
increase in Monthly Rent and the increase in Tenant's Share scheduled for
October 1, 1996, as set forth in Paragraphs 2.c. and 2.e. above, shall be
effective on the date of such early delivery and occupancy.

4. Condition of Premises: Improvement Advance.

a. Premises "As-Is". Tenant shall accept the Premises in their
"as is" state and condition and, except as specifically provided in this
Paragraph 4, Landlord shall have no obligation to make or pay for any
improvements or renovations in or to the Premises to prepare the Premises for
Tenant's occupancy.

b. Increment 2 and Increment 3. Landlord, at Landlord's sole
cost, shall shampoo the carpeting throughout Increment 2 and Increment 3 of the
Premises prior to delivery of such Increments to Tenant and shall deliver such
Increments to Tenant broom clean.

c. Improvement Advance. At Tenant's written request,
accompanied by the proof described below that Tenant's financial standing for
the prior year meets the minimum standard set forth in the following paragraph
of this Paragraph 4. c. , Landlord shall from time to time provide Tenant with
advances of up to a total of $321,625.00 (the "Improvement Advances") to be
applied toward the cost of any Alterations (as defined in Paragraph 9.a. below)
constructed in the Premises in accordance with Paragraph 9 hereof during the
first two (2) years of the Lease Term and for which proper invoices and lien
waivers (as described below) are received during the first two (2) years of the
Lease Term, subject to the restrictions described below. Notwithstanding the
foregoing, no portion of an Improvement Advance may be applied to (1)
Alterations made to any portion of the Premises which is then the subject of a
sublease, or (2) Alterations made to prepare any portion of the Premises for a
proposed or anticipated subtenant or assignee. Alterations to which an
Improvement Advance may be applied are sometimes collectively referred to herein
as "Qualifying Alterations". Interest shall accrue on sums from time to time
disbursed hereunder at the rate of ten percent (10%) per annum.

Landlord shall have no obligation to make any Improvement Advance
unless Tenant provides Landlord with proof that Tenant's financial standing for
the immediately prior year meets, at a minimum, the following standards:

(A) $21,000,000 in total shareholders' equity, as shown on a year-end
consolidated balance sheet of the CKS Group, Inc., and subsidiaries, for the
immediately prior year, audited by independent certified public accountants with
an unqualified report, and

(B) $2,000,000 of "annual not income" for the immediately prior year,
which for the purposes of this Lease shall mean that amount, derived from a
year-end consolidated statement of the CKS Group, Inc., and its subsidiaries,
audited by independent certified public accountants with an unqualified report,
which is

(i) Net income, less
(ii) Interest and other investment income (less income taxes
thereon), and less
(iii) any extraordinary items of income (less income taxes
thereon).

If Tenant's Contractor constructs the Qualifying Alterations, as
provided in Paragraph 9 below, Landlord shall disburse the Improvement Advance
directly to Tenant's Contractor, and/or to the applicable subcontractors, and/or

3
<PAGE> 5
to Tenant, as Landlord shall determine, upon receipt of (x) invoices of Tenant's
Contractor to be furnished to Landlord by Tenant covering work actually
performed, construction in place and materials delivered to the site (as may be
applicable) describing in reasonable detail such work, construction and/or
materials, (y) conditional lien waivers executed by Tenant's Contractor,
subcontractors or suppliers, as applicable, for their portion of the work
covered by the requested disbursement, and (z) unconditional lien waivers
executed by Tenant's Contractor and the persons and entities performing the work
or supplying the materials covered by Landlord's previous disbursements for the
work or materials covered by such previous disbursements (all such waivers to be
In the forms prescribed by California Civil Code Section 3262). No payment will
be made for materials or supplies not located on the Premises. Landlord may
withhold the amount of any and all retentions provided for in original contracts
or subcontracts until expiration of the applicable lien periods or Landlord's
receipt of unconditional lien waivers and full releases upon final payment (in
the form prescribed by California Civil Code Section 3262) from Tenant's
Contractor and all subcontractors and suppliers involved in the Qualifying
Alterations. Further, if Tenant's Contractor constructs the Qualifying
Alterations, Landlord shall retain from the amount of the Improvement Advance,
In the manner described below, the Alteration Operations Fee (as defined in
Paragraph 9.b. below) with respect to such Qualifying Alterations. At the time
Landlord makes any disbursement of the Improvement Advance, Landlord shall
retain from the Improvement Advance, as a partial payment of the Alteration
Operations Fee, a proportionate amount of the Alteration Operations Fee base
upon Landlord's reasonable estimate of the amount required to be withheld from
such disbursement in order to ensure that the entire Alteration Operations Fee
with respect to such Qualifying Alterations is retained over the course of
construction on a prorata basis. At such time as the Improvement Advance has
been entirely disbursed, if the entire Alteration Operations Fee has not yet
been paid to Landlord, Tenant shall pay to Landlord a prorata portion of each
payment made by Tenant on account of the Qualifying Alterations in order to
ensure that the balance of the Alteration Operations Fee is paid to Landlord
over the course of construction on a prorata basis.

Portions of the Improvement Advance may, at Tenant's election, be
applied toward Tenant's reasonable architectural and engineering fees in
connection with the design and construction of the Qualifying Alterations,
provided, however, that the total amount of the Improvement Advances applied to
such architectural and engineering fees may not exceed Thirty-Two Thousand One
Hundred Sixty-Two Dollars ($32,162.00). Portions of the Improvement Advance may,
at Tenant's election, be applied toward Tenant's reasonable cost of Tenant's
consultants associated with the Qualifying Alterations or entering into this
Lease and Tenant's reasonable moving costs reasonably associated with Tenant's
relocation into the Premises, provided, however, that the total amount of the
Improvement Advances applied to such fees and costs may not exceed Thirty-Two
Thousand One Hundred Sixty-Two Dollars ($32,162.00). Landlord shall reimburse
Tenant for such portion of such fees and costs (or, if Tenant so notifies
Landlord in writing, will make payments directly to Tenant's architect, engineer
or vendor) upon Landlord's receipt of copies of receipted invoices covering the
same. In no event may any portions of an Improvement Advance be applied towards
the costs of Tenant's personal property, trade fixtures, equipment, furniture,
signage or rental obligations.

Upon the earlier of the completion of the Qualifying Alterations or the
commencement of the third year of the Lease Term, the actual amount of the
Improvement Advances that were disbursed by Landlord (the "Amortization Amount")
shall be determined and Landlord and Tenant will enter into an amendment to the
Lease which increases the monthly rent set forth in Paragraph 2.c. of the Lease
by a sum sufficient to fully amortize the Amortization Amount over the period
(the "Amortization Period") commencing on the first day of the first calendar
month following the final disbursement of the Improvement Advance and ending on
the Expiration Date, which amortization shall be on a straight line basis at an
interest rate of ten percent (10%) per annum. Landlord shall notify Tenant in
wring of the total interest which accrued prior to the commencement of the
Amortization Period, and Tenant shall pay Landlord such sum within thirty (30)
days of such notice. If this Lease is terminated early for any reason
whatsoever, the then unamortized portion of the Improvement Advances, together
with any accrued and unpaid interest thereon, shall be immediately due and
payable.

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d. Space Plan Allowance. Landlord shall contribute up to One
Thousand Two Hundred Eighty-Seven Dollars ($1,287.00) (the "Space Plan
Allowance") towards Tenant's out-of-pocket architectural costs paid to third
parties for the preparation of any space plans which are prepared in connection
with the Qualifying Alterations. The Space Plan Allowance shall be paid by
Landlord to Tenant within fifteen (15) business days after this Lease is
executed by Landlord and Tenant and an invoice therefor is presented to
Landlord.

5. Monthly Rent.

a. On or before the first day of each calendar month during
the term hereof, Tenant shall pay to Landlord, as monthly rent for the Premises,
the Monthly Rent specified in Paragraph 2 above. If the term of this Lease
commences on a day other than the first day of a calendar month, or terminates
on a day other than the last day of a calendar month, then the Monthly Rent
payable for such partial month shall be appropriately prorated on the basis of a
thirty (30) day month. Monthly Rent and the Additional Rent specified in
Paragraph 7 shall be paid by Tenant to Landlord, in advance, without deduction,
offset, prior notice or demand, in immediately available funds of lawful money
of the United States of America, or by good check as described below, at the
office of Shorenstein Management, Inc., at 555 California Street, 14th floor,
San Francisco, California 94104, or to such other person or at such other place
as Landlord may from time to time designate in writing. Payments made by check
must be drawn either on a California financial institution or on a financial
institution that is a member of the federal reserve system. Notwithstanding the
foregoing, Tenant shall pay to Landlord with execution of this Lease an amount
equal to one (1) month's initial Monthly Rent hereunder, which amount shall be
applied to the Monthly Rent first due and payable hereunder.

b. All amounts payable by Tenant to Landlord under this Lease
in addition to the Monthly Rent hereunder and Additional Rent under Paragraph 7
shall constitute rent owed by Tenant to Landlord hereunder.

c. Any rent not paid by Tenant to Landlord within five (5)
days of the date due, shall bear interest from the date due to the date of
payment by Tenant at an annual rate of interest (the "Interest Rate") equal to
the lesser of (i) the maximum annual interest rate allowed by law on such due
date for business loans (not primarily for personal, family or household
purposes) not exempt from the usury law, or (ii) a rate equal to the sum of five
(5) percentage points over the publicly announced reference rate (the "Reference
Rate") charged on such due date by the San Francisco Main Office of Bank of
America, NT&SA (or any successor bank thereto) (or if there is no such publicly
announced rate, the rate quoted by such bank in pricing ninety (90) day
commercial loans to substantial commercial borrowers). Failure by Tenant to pay,
including any interest accrued under this subparagraph, within five (5) days of
written notice that such sum was not paid when due, shall constitute an Event of
Default (as defined in Paragraph 25 hereof) by Tenant under the Lease giving
rise to all the remedies afforded Landlord under this Lease for nonpayment of
rent.

d. No security or guaranty which may now or hereafter be
furnished to Landlord for the payment of rent due hereunder or for the
performance by Tenant of the other terms of this Lease shall in any way be a bar
or defense to any of Landlord's remedies set forth in Paragraph 25 below.

6. Security Deposit. Upon execution of this Lease, Tenant shall
pay to Landlord the Security Deposit specified in Paragraph 2.d. hereof as
security for Tenant's performance of all of the provisions of this Lease.
Landlord shall not be required to segregate the Security Deposit from its other
funds and no interest shall accrue or be payable to Tenant with respect thereto.
Landlord may (but shall not be required to) use the Security Deposit or any
portion thereof to cure any Event of Default under this Lease or to compensate
Landlord for any damage Landlord incurs as a result of Tenant's failure to
perform any of its obligations hereunder. In such event and upon written notice
from Landlord to Tenant specifying the amount of the Security Deposit so
utilized by Landlord and the particular use for which such amount was used,
Tenant shall immediately deposit with Landlord an amount sufficient to return
the Security Deposit to an amount equal to one hundred ten percent (110%) of the
amount specified in Paragraph 2.d. as the same may have been increased by prior
applications of this Paragraph 6. Tenant's failure to make such payment to
Landlord within five (5) days of Landlord's notice shall constitute an Event of
Default hereunder. If

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Tenant is not in default at the expiration or termination of this Lease,
Landlord shall return to Tenant the Security Deposit or the balance thereof then
hold by Landlord; provided, however, that in no event shall any such return be
construed as an admission by Landlord that Tenant has performed all of its
obligations hereunder. No holder of a Superior Interest (as defined in Paragraph
21), nor any purchaser at any judicial or private foreclosure sale of the Real
Property or any portion thereof, shall be responsible to Tenant for such
Security Deposit unless such holder or purchaser shall have actually received
the same.

7. Additional Rent: Increases in Operating Expenses and Tax
Expenses.

a. Operating Expenses. Tenant shall pay to Landlord as
Additional Rent under this Lease at the times hereinafter set forth Tenant's
Share, as specified in Paragraph 2.e. hereof, of any increase in the Operating
Expenses (as defined below) incurred by Landlord for the office space in the
Building in each calendar year subsequent to the Base Year specified in
Paragraph 2.f. hereof, over the Operating Expenses incurred by Landlord for the
office space in the Building during the Base Year.

The term "Operating Expenses" shall mean the total costs and expenses
incurred by Landlord in connection with the management, operation, maintenance,
repair and ownership of the Real Property, as determined in accordance with
generally accepted accounting principles, consistently applied, excluding "Tax
Expenses" as defined in Paragraph 7.b. below, and including, without limitation,
the following costs: (1) salaries. wages, bonuses and other compensation
(including hospitalization, medical, surgical, retirement plan, pension plan,
union dues, life insurance, including group life insurance, welfare and other
fringe benefits, and vacation, holidays and other paid absence benefits)
relating to employees of Landlord or its agents engaged in the operation,
repair, or maintenance of the Real Property; (2) payroll, social security,
workers' compensation, unemployment and similar taxes with respect to such
employees of Landlord or its agents, and the cost of providing disability or
other benefits imposed by law or otherwise, with respect to such employees; (3)
uniforms (including the cleaning, replacement and pressing thereof) provided to
such employees; (4) premiums and other charges incurred by Landlord with respect
to fire, other casualty, rent and liability insurance, any other insurance as is
deemed necessary or advisable in the reasonable judgement of Landlord, or any
insurance required by the holder of any Superior Interest (as defined in
Paragraph 21), and, after the Base Year, costs of repairing an insured casualty
to the extent of the deductible amount under the applicable insurance policy;
(5) water charges and sewer rents or fees; (6) license, permit and inspection
fees; (7) sales, use and excise taxes on goods and services purchased by
Landlord in connection with the operation, maintenance or repair of the Real
Property and Building systems and equipment; (8) telephone, telegraph, postage,
stationary supplies and other expenses incurred in connection with the
operation, maintenance, or repair of the Real Property; (9) management fees and
expenses; (10) repairs to and physical maintenance of the Real Property,
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 to the extent provided In (16)
and (17) below); (11) janitorial, window cleaning, guard, extermination, water
treatment, rubbish removal, plumbing and other services and inspection or
service contracts for elevator, electrical, mechanical and other building
equipment and systems or as may otherwise be necessary or proper for the
operation or maintenance of the Real Property; (12) supplies, tools, materials,
and equipment used in connection with the operation, maintenance or repair of
the Real Property; (13) accounting, legal and other professional fees and
expenses directly related to the operation and management of the Real Property;
(14) painting the exterior or the public or common areas of the Building and the
cost of maintaining the sidewalks, landscaping and other common areas of the
Real Property; (15) all costs and expenses for electricity, chilled water, air
conditioning, water for heating, gas, fuel, steam, heat, lights, power and other
energy related utilities required in connection with the operation, maintenance
and repair of the Real Property; (16) the cost of any capital improvements made
by Landlord to the Real Property or capital assets acquired by Landlord after
the Base Year required under any governmental law, regulation or insurance
requirement with which the Real Property was not required to comply during the
Base Year, such cost or allocable portion to be amortized over the useful life
thereof, together with interest on the unamortized balance at a rate per annum
equal to the Reference Rate (as defined in Paragraph 5.d. hereof) charged at the
time such capital improvements

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<PAGE> 8
or capital assets are constructed or acquired or such higher rate an may have
been paid by Landlord on funds borrowed for the purpose of constructing or
acquiring such capital improvements or capital assets, but in either case not
more than the maximum rate permitted by law at the time such capital
improvements or capital assets are constructed or acquired; (17) the cost of any
capital improvements made by Landlord to the Building or capital assets acquired
by Landlord after the Base Year for the protection of the health and safety of
the occupants of the Real Property or that are designed to reduce other
Operating Expenses, such cost or allocable portion thereof to be amortized over
the useful life thereof, together with interest on the unamortized balance at a
rate per annum equal to the Reference Rate charged at the time such capital
improvements or capital assets are constructed or acquired or such higher rate
as may have been paid by Landlord on funds borrowed for the purpose of
constructing or acquiring such capital improvements or capital assets, but in
either case not more than the maximum rate permitted by law at the time such
capital improvements or capital assets are constructed or acquired; (18) the
cost of furniture, draperies, carpeting, landscaping and other customary and
ordinary items of personal property (excluding paintings, sculptures and other
works of art) provided by Landlord for use in common areas of the Building or in
the Building office (to the extent that such Building office is dedicated to
the operation and management of the Real Property), such costs to be amortized
over the useful life thereof; (19) any such expenses and costs resulting from
substitution of work, labor, material or services in lieu of any of the above
itemizations, or for any such additional work, labor, services or material
resulting from compliance with any governmental laws, rules, regulations or
orders applicable to the Real Property or any parts thereof; (20) Building
office rent or rental value; and (21) the Building's prorata share of the
Project costs under the Master Declaration (as described in Paragraph 21 below).
Notwithstanding anything to the contrary herein, as to the common areas of the
Project and the garage of the Project, Operating Expenses shall include only the
Building's prorata share (as reasonably determined by Landlord in its good faith
business judgment) of the above described costs and expenses for such common
areas and garage of the Project. Further, Landlord and Tenant acknowledge that
certain of the building systems serving the Building also serve the other office
building in the Project and that certain of the improvements, alterations or
repairs made by Landlord to the Building or the Land that are properly included
in Operating Expenses pursuant to the above may be a part of improvements,
alterations or repairs that also benefit the other office building in the
Project. In light of the foregoing, Landlord shall determine, in its reasonable
and good faith business judgment, the proper allocation of any such item of
Operating Expenses between the Building and any other building that benefits
from the Operating Expense so that Tenant shall be responsible only for
Operating Expenses to the extent they are attributable or allocable to the
Building and the Land. Landlord and Tenant also acknowledge that certain of the
items of Operating Expenses referenced above are applicable only to the office
space within the Building and certain of such items are applicable to both the
office space and the retail space in the Building. Landlord shall properly
allocate the cost of such items to the office space and to the retail space in
accordance with standard accounting principles.

Operating Expenses shall not include the following: (I) depreciation on
the Building or equipment or systems therein; (ii) debt service; (iii) rental
under any ground or underlying lease; (iv) interest (except as expressly
provided in this Paragraph 7.a.); (v) Tax Expenses; (vi) attorneys' fees and
expenses incurred in connection with lease negotiations with prospective
Building tenants; (vii) the cost of any repairs, improvements, alterations or
equipment which would be properly classified as capital expenditures according
to generally accepted accounting principles and practices (except for any
capital expenditures expressly included in Operating Expenses pursuant to this
Paragraph 7. a.); (viii) the cost of decorating, improving for tenant occupancy,
painting or redecorating portions of the Building to be demised to tenants; (ix)
executive salaries; (x) advertising; or (xi) real estate broker's or other
leasing commissions.

b. Tax Expenses. Tenant shall pay to Landlord as Additional
Rent under this Lease at the times hereinafter set forth Tenant's Share, as
specified in Paragraph 2.e. hereof, of any increase in Tax Expenses (as defined
below) incurred by Landlord for the office space in the Building in each
calendar year subsequent to the Base Tax Year specified in Paragraph 2.f.
hereof, over Tax Expenses incurred by Landlord for the office space in the
Building during the Base Tax Year.

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The term "Tax Expenses" shall mean all taxes, assessments (whether
general or special), excises, transit charges, housing fund assessments or other
housing charges, levies or fees, ordinary or extraordinary, unforeseen as well
as foreseen, of any kind, which are assessed, levied, charged, confirmed or
imposed on the Real Property, on the Landlord with respect to the Real Property,
on the act of entering into this Lease or any other lease of space in the Real
Property, on the use or occupancy of the Real Property or any part thereof, with
respect to services or utilities consumed in the use, occupancy or operation of
the Real Property, or on or measured by the rent payable under this Lease or in
connection with the business of renting space in the Real Property, including,
without limitation, any gross income tax or excise tax levied with respect to
the receipt of such rent, by the United States of America, the State of
California, the City and County of San Francisco, any political subdivision,
public corporation, district or other political or public entity or public
authority, and shall also include any other tax, fee or other excise, however
described, which may be levied or assessed in lieu of, as a substitute (in whole
or in part) for, or as an addition to, any other Tax Expense. Tax Expenses shall
include reasonable attorneys' fees, costs and disbursements incurred in
connection with proceedings to contest, determine or reduce Tax Expenses. If it
shall not be lawful for Tenant to reimburse Landlord for any increase in Tax
Expenses as defined herein, the Monthly Rent payable to Landlord prior to the
imposition of such increases in Tax Expenses shall be increased to net Landlord
the same net Monthly Rent after imposition of such increases in Tax Expenses
as would have been received by Landlord prior to the imposition of such
increases in Tax Expenses.

Tax Expenses shall not include income, franchise, transfer, inheritance
or capital stock taxes, unless, due to a change in the method of taxation, any
of such taxes is levied or assessed against Landlord in lieu of, as a substitute
(in whole or in part) for, or as an addition to, any other charge which would
otherwise constitute a Tax Expense. Landlord and Tenant acknowledge and agree
that certain other buildings exist or encroach upon the Land, that Tenant shall
have no liability as to any item of Tax Expense attributable or allocable to, or
assessed against, buildings other than the Building and that Landlord's good
faith determination of the proper allocation of any item of Tax Expense
allocable to buildings other than the Building shall be binding on Landlord and
Tenant.

c. Adjustment for Occupancy Factor. Notwithstanding any other
provision herein to the contrary, in the event the Building is not at least
ninety-five percent (95%) occupied on average during the Base Year or any year
of the term of this Lease, an adjustment shall be made by Landlord in computing
Operating Expenses for such year so that the Operating Expenses shall be
computed for such year as though the Building had been ninety-five percent (95%)
occupied on average during such year. The parties agree that statements in this
Lease to the effect that Landlord is to perform certain of its obligations
hereunder at its own or sole cost and expense shall not be interpreted as
excluding any cost from Operating Expenses or Tax Expenses if such cost is an
Operating Expense or Tax Expense pursuant to the terms of this Lease.

d. Intention Regarding Expense Pass-Through. It is the
intention of Landlord and Tenant that the Monthly Rent paid to Landlord
throughout the term of this Lease shall be absolutely net of all increases,
respectively, in Tax Expenses and Operating Expenses over, respectively, Tax
Expenses and Operating Expenses for the Base Year, and the foregoing provisions
of this Paragraph 7 are intended to so provide.

e. Notice and Payment. On or before the first day of each
calendar year during the term hereof subsequent to the Base Year, or as soon as
practicable thereafter, Landlord shall give to Tenant notice of Landlord's
estimate of the Additional Rent, if any, payable by Tenant pursuant to
Paragraphs 7.a. and 7.b. for such calendar year subsequent to the Base Year. On
or before the first day of each month during such subsequent calendar year,
Tenant shall pay to Landlord one twelfth (1/12th) of the estimated Additional
Rent; provided that if Landlord's notice is not given prior to the first day of
any calendar year Tenant shall continue to pay Additional Rent on the basis of
the prior year's estimate until the month after Landlord's notice is given. If
at any time it appears to Landlord that the Additional Rent payable under
Paragraphs 7.a. and/or 7.b. will vary from Landlord's estimate by more than five
percent (5%) Landlord may, by written notice to Tenant, revise its estimate for
such year, and

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subsequent payments by Tenant for such year shall be based upon the revised
estimate.

f. Annual Accounting. Landlord shall maintain adequate records
of the Operating Expenses and Tax Expenses in accordance with standard
accounting principles. Within ninety (90) days after the close of each calendar
year subsequent to the Base Year, or as soon after such ninety (90) day period
as practicable, Landlord shall deliver to Tenant a statement of the Additional
Rent payable under Paragraphs 7.a. and 7.b. for such year. The statement shall
be based on the results of an audit of the operations of the Building prepared
for the applicable year by a nationally recognized certified public accounting
firm selected by Landlord. Upon Tenant's request, Landlord shall promptly
deliver to Tenant a copy of the auditor's statement on which Landlord's annual
statement is based. Landlord's annual statement shall be final and binding upon
Landlord and Tenant unless either party, within thirty (30) days after Tenant's
receipt thereof, shall contest any item therein by giving written notice to the
other, specifying each item contested and the reason therefor. If the annual
statement shows that Tenant's payments of Additional Rent for such calendar year
pursuant to Paragraph 7.e. hereof exceeded Tenant's obligations for the calendar
year, Landlord shall at its option either (1) credit the excess to the next
succeeding installments of estimated Additional Rent or (2) pay the excess to
Tenant within thirty (30) days after delivery of such statement. If the annual
statement shows that Tenant's payments of Additional Rent for such calendar year
pursuant to Paragraph 7.e. hereof were less than Tenant's obligation for the
calendar year. Tenant shall pay the deficiency to Landlord within ten (10) days
after delivery of such statement.

g. Proration for Partial Lease Year. If this Lease terminates
on a day other than the last day of a calendar year, the Additional Rent payable
by Tenant pursuant to this Paragraph 7 applicable to the calendar year in which
the Lease terminates shall be prorated on the basis that the number of days from
the commencement of such calendar year to and including such termination date
bears to three hundred sixty-five (365).

8. Use of Premises: Compliance with Law.

a. Use of Premises. The Premises shall be used solely for
general office purposes for the business of Tenant as described in Paragraph
2.g. hereof, and for no other use or purpose without the prior written consent
of Landlord, which consent shall not be unreasonably withheld for any other
general office use consistent with the operation of the Building as a
first-class office building, provided in no event shall Landlord be obligated to
consent to a change in use of the Premises to a use which materially increases
(a) the operating costs for the Building, (b) the burden on the Building
services, or (c) the foot traffic, elevator usage or security concerns in the
Building, or which creates an increased probability of the comfort and/or safety
of the Landlord or other tenants of the Building being compromised or reduced
(for example, but not exclusively, Landlord may deny consent to a change in use
to a school or training facility, an entertainment, sports or recreation
facility, retail sales to the public, a personnel or employment agency, or an
embassy or consulate or similar office).

Tenant shall not do or suffer or permit anything to be done in or about
the Premises or the Real Property, nor bring or keep anything therein, which
would in any way subject Landlord, Landlord's agents or the holder of any
Superior Interest (as defined in Paragraph 21) to any liability, increase the
premium rate of or affect any fire, casualty, liability, rent or other insurance
relating to the Real Property or any of the contents of the Building, or cause a
cancellation of, or give rise to any defense by the insurer to any claim under,
or conflict with, any policies for such insurance. If any act or omission of
Tenant results in any such increase in premium rates, Tenant shall pay to
Landlord upon demand the amount of such increase. Tenant shall not do or suffer
or permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them, or use or suffer or permit the Premises to be
used for any immoral, unlawful or objectionable purpose, nor shall Tenant cause,
maintain, suffer or permit any nuisance in, on or about the Premises. Tenant
agrees not to handle, store or dispose of any substance on the Premises which is
prohibited by federal, state or local law or regulation. Without limiting the
foregoing, no loudspeakers or other similar device which can be heard outside
the

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Premises shall, without the prior written approval of Landlord, be used in or
about the Premises. Tenant shall not commit or suffer to be committed any waste
in, to or about the Premises.

Tenant agrees not to employ any person, entity or contractor for any
work in the Premises (including moving Tenant's equipment and furnishings in,
out or around the Premises) whose presence may give rise to a labor or other
disturbance in the Building and, if necessary to prevent such a disturbance in a
particular situation, Landlord may require Tenant to employ union labor for the
work.

b. Compliance with Law. Tenant shall not do or permit anything
to be done in or about the Premises which will in any way conflict with any law,
ordinance or governmental requirement now in force or which may hereafter be
enacted. Tenant, at its sole cost and expense, shall promptly comply with all
such laws, ordinances and governmental requirements and with the requirements of
any property or liability underwriters relating to the condition, use or
occupancy of the Premises (excluding structural changes to the Building not
related to or affected by Tenant's Alterations (as defined in Paragraph 9 below)
or Tenant's particular use of the Premises). The judgment of any court of
competent jurisdiction or the admission of Tenant in an action against Tenant,
whether or not Landlord is a party thereto, that Tenant has violated any law,
ordinance or governmental requirement shall be conclusive of that fact as
between Landlord and Tenant. Tenant shall immediately furnish Landlord with any
notices received from any insurance company or governmental agency or inspection
bureau regarding any unsafe or unlawful conditions within the Premises.

c. Applicability of Paragraph. The provisions of this
Paragraph 8 are for the benefit of Landlord only and are not nor shall they be
construed to be for the benefit of any tenant or occupant of the Building.

9. Alterations and Restoration.

a. Alterations. Tenant shall not make or suffer to be made any
alterations, additions or improvements to the Premises ("Alterations"), except
as expressly provided in this Paragraph 9. If Tenant desires any Alteration,
Tenant must obtain Landlord's prior written approval of such Alteration, which
approval shall not be unreasonably withheld or delayed. All Alterations shall be
made at Tenant's sole cost and expense (including the expense of complying with
laws regarding asbestos, if applicable).

b. Selection of Contractor. Tenant shall either (i) arrange
for Landlord's contractor to perform the work (in which case Landlord and Tenant
shall negotiate regarding Landlord's charge for the work) or (ii) bid the
project out to contractors approved by Landlord in writing in advance, as
provided below. Tenant shall furnish to Landlord for Landlord's approval, which
approval shall not be unreasonably withheld or delayed, a list of any number of
contractors selected by Tenant to bid on the Alterations that meet the
requirements set forth in items (ii) (1) through (3) of Paragraph 9.c. Following
Landlord's approval of Tenant's proposed contractors, Tenant shall provide
bidding materials relevant to the proposed Alteration simultaneously to Landlord
and to any number of contractors approved by Landlord. Tenant shall thereafter
notify Landlord of Tenant's preferred contractor ("Tenant's Contractor") for
construction of the Alteration, which notice shall contain a copy of Tenant's
Contractor's bid. Landlord, at Landlord's sole election, may cause Landlord's
contractor to meet such bid, in which event Landlord's contractor shall
construct the Alteration. Landlord shall have seven (7) days from its receipt
from Tenant of the bid Tenant would otherwise accept to advise Tenant of whether
Landlord will match such bid. If Landlord does not perform the work pursuant to
the above, Tenant shall pay Landlord on demand prior to or during the course of
such construction an amount equal to four percent (4%) of the total hard cost of
the Alteration (which hard cost shall not include permit fees) (the "Alteration
operations Fee") as compensation to Landlord for review of the plans and
specifications for the Alteration, and for electrical energy consumed in
connection with the work, freight elevator operation, additional cleaning
expenses, additional security services, and for other miscellaneous costs
incurred by Landlord as result of the work; provided that Tenant shall not be
required to pay an Alteration Operations Fee with respect to Alterations which
cost less than $1,000 and do not require a building permit or other governmental
permit.

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c. Construction of Alterations. All work in connection with
any Alteration shall be performed diligently and in a first-class workmanlike
manner and in accordance with plans and specifications approved by Landlord, and
shall comply with all applicable laws (including laws regarding asbestos, if
applicable) and Landlord's construction procedures for the Building. In no event
shall Tenant employ any person, entity or contractor to perform work in the
Premises whose presence may give rise to a labor or other disturbance in the
Building. If Tenant's Contractor constructs the Alterations pursuant to
Paragraph 9.b. above, the following provisions shall apply: (i) Tenant's
Contractor shall be subject to Landlord's prior approval, as provided above,
and (ii) Tenant's Contractor shall (1) have substantial recent experience in the
construction of tenant improvements in first class high-rise office buildings in
the San Francisco financial district, (2) be licensed by the State of California
(as evidenced by Tenant's submission to Landlord of Tenant's Contractor's state
license number), and (3) have the capacity to be bonded by a recognized surety
company to assure full performance of the construction contract for the work
shown on the plans approved by Landlord in writing (as evidenced by Tenant's
submission to Landlord of a commitment or other writing satisfactory to Landlord
issued by a recognized surety company confirming that Tenant's Contractor is
bondable for construction projects having a contract price not less than the
contract price under the construction contract for the Tenant Improvements).
Further, Tenant shall be responsible for Tenant's Contractor, subcontractors,
suppliers and materialmen (A) utilizing only union labor on the construction,
(B) obtaining Landlord's prior written approval (which Landlord shall not
unreasonably withhold or delay) of all subcontractors and labor to be utilized
in the performance of such construction work, (C) obtaining all necessary
governmental permits and approvals In connection with all construction work
(including demolition) shown on the plans (and Landlord shall have no
responsibility whatsoever in connection with obtaining the same), (D) furnishing
to Landlord, prior to the commencement of any construction in the Premises,
certificates evidencing comprehensive public liability insurance with limits per
occurrence of not less than $2,000,000 and property damage insurance with limits
per occurrence of not less than $1,000,000, covering Tenant's Contractor's and
subcontractors' operations in the Premises and the Building and builders' risk
insurance providing coverage in an amount equal to the full value of the
Alterations upon completion thereof, and with respect to all such insurance
naming Landlord as an additional insured, and upon Landlord's request also
naming any or all of the Indemnitees (as defined in Paragraph 14 below) as
additional insureds, and (E) performing the construction work in such manner as
to minimize, to the extent possible, disturbance of other tenants and occupants
of the Building and, with respect to any work the sound levels or other effects
of which would create a material disturbance of other tenants or occupants of
the Building, performing such work during other than business hours. Landlord
shall have no responsibility for furnishing any security services in or about
the Building or Premises to safeguard Tenant's construction of the Alterations
or materials in connection therewith.

d. Tenant's General Obligations. Default by Tenant in the
payment of any sums agreed to be paid by Tenant for or in connection with an
Alteration (regardless of whether such agreement is pursuant to this Paragraph 9
or separate instrument) shall entitle Landlord to all the same remedies as for
non-payment of rent hereunder. Any Alterations, including, without limitation,
moveable partitions that are affixed to the Premises (but excluding moveable,
free standing partitions) and all carpeting, shall at once become part of the
Building and the property of Landlord. Tenant shall give Landlord not less than
five (5) days prior written notice of the date the construction of the
Alteration is to commence. Landlord may post and record an appropriate notice of
nonresponsibility with respect to any Alteration and Tenant shall maintain any
such notices posted by Landlord in or on the Premises.

e. Removal and Restoration. Landlord shall advise Tenant at
the time of Landlord's approval of any Alteration requested by Tenant whether
Landlord will require the removal of the Alteration and restoration of the
Premises to its previous condition at the expiration or sooner termination of
this Lease. Those Alterations required by Landlord to be removed from the
Premises at the expiration or sooner termination of this Lease shall be so
removed by Tenant and the Premises shall be restored to their condition prior to
the making of the Alterations, ordinary wear and tear excepted. The removal of
the Alterations and the restoration of the Premises shall be performed by a
general contractor selected by Tenant and approved by Landlord, in which event

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Tenant shall pay the general contractor's fees and costs in connection with such
work. Any separate work letter or other agreement which is hereafter entered
into between Landlord and Tenant pertaining to Alterations shall be
automatically incorporated into this Lease without the necessity for further
reference thereto.

f. Special Provisions Regarding Qualifying Alterations. If
Tenant elects to have any Qualifying Alterations (as defined in Paragraph 4.c.
above) constructed by Landlord pursuant to item (i) of the first sentence of
Paragraph 9.b. above, the following provisions of this Paragraph 9.f. shall
apply. At Tenant's election, Tenant may suggest subcontractors to be included on
Landlord's contractor's bid invitation list and, subject to Landlord's prior
approval (which shall not be unreasonably withheld, conditioned or delayed),
such subcontractors shall be so included. As soon as reasonably possible
following approval of the plans for the Qualifying Alterations, Landlord shall
cause Landlord's contractor to receive bids from no fewer than three (3)
subcontractors (including the subcontractors suggested by Tenant and approved by
Landlord) for each major trade working on the Qualifying Alterations. When
Landlord's contractor has received responses to its bid request, Landlord's
contractor will analyze the same and provide Tenant with a copy of Landlord's
contractor's bid analysis, recommended winning bidders and estimated budget for
the Qualifying Alterations, based upon the selected subcontractors' bids and
including Landlord's contractor's charge and supervision fee (as previously
agreed by Landlord and Tenant) and a reasonable contingency. Tenant shall have
three (3) business days after the receipt of Landlord's contractor's bid
analysis to approve or reasonably disapprove Landlord's contractor's selection
of subcontractors and Landlord's contractor's estimated budget. If Tenant
disapproves of any subcontractor selected by Landlord's contractor, Tenant shall
notify Landlord in writing of Tenant's objection to such subcontractor. Further,
if Tenant disapproves of the budget, then within three (3) business days of
Tenant's receipt thereof, Tenant shall so notify Landlord and the plans shall
promptly be modified by Tenant's architect, in order to satisfactorily reduce
the cost of the work as shown on the budget. Any and all revisions to the
approved plans shall be subject to Landlord's reasonable approval. Upon Tenant's
disapproval of any subcontractor or the revision of the plans, Landlord shall
cause Landlord's contractor to promptly prepare and submit to Tenant a revised
estimated budget. Tenant shall respond to the revised estimated budget in the
manner described above. If Tenant fails to raise any objections to the analysis
and/or budget within the three (3) business day period(s) described above,
Tenant shall be deemed to have approved Landlord's contractor's recommended bid
acceptance and proposed budget. If Tenant thereafter shall desire any change in
or to the plans, Tenant shall submit to Landlord for Landlord's review and
written approval revised working drawings prepared by Tenant's architect
incorporating the requested change and clearly identifying the same as such on
the revised working drawings. Landlord shall not unreasonably withhold or delay
its approval of the revised working drawings, provided, however, that Landlord
shall have at least five (5) business days after receipt of the revised working
drawings to review any proposed change. If Landlord approves any proposed
change, then together with such approval, if practicable, and if not practicable
as soon thereafter as is practicable, Landlord shall give Tenant Landlord's
estimated increase or decrease in the cost of the relevant Qualifying
Alterations which would result from incorporating such change. Landlord will use
reasonable care in preparing the estimates, but they shall be good faith
estimates only and will not limit Tenant's obligation to pay for the actual
increase in the cost of the relevant Qualifying Alterations. Within two (2)
business days after receipt of such cost and delay estimates, Tenant shall
notify Landlord in writing whether Tenant approves the change. If Tenant fails
to approve the change within such two (2) business day period, construction of
the relevant Qualifying Alterations shall proceed as provided in accordance with
the approved plans as they existed prior to the requested change. If, following
Tenant's review of the estimated costs and delays, Tenant desires Landlord to
incorporate the change into the relevant Qualifying Alterations, then Tenant and
Landlord shall execute a change order for such change on Landlord's contractor's
standard form therefor. Upon Tenant's approval of the budget and Landlord's
contractor's subcontractors Landlord shall diligently pursue to completion
construction of the Qualifying Alterations.

10. Repair.

a. By taking possession of the Premises, Tenant agrees that
the Premises are in good condition and repair. Tenant, at Tenant's sole cost and

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expense, shall keep the Premises and every part thereof in good condition and
repair; provided that Tenant shall not be responsible for repairs to the extent
such repairs are (i) necessitated because of fire, earthquake, act of God or the
elements, (ii) necessitated by the negligence or willful misconduct of Landlord
or Landlord's agents, employees or contractors, (iii) Landlord's obligation
pursuant to Paragraph 10.b. below, or (iv) reasonable wear and tear not
resulting in a hazardous or unsafe condition. Tenant waives all rights to make
repairs at the expense of Landlord as provided by any law, statute or ordinance
now or hereinafter in effect. It is specifically understood and agreed that,
except as specifically set forth in this Lease, 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.
Tenant hereby waives the provisions of California Civil Code Sections 1932(l),
1941 and 1942 and of any similar law, statute or ordinance now or hereafter in
effect.

b. Repairs to the Premises due to item (i) described in
Paragraph 10.a. above shall be governed by Paragraph 26 below. Landlord shall
repair the Promises if they are damaged due to item (ii) described in Paragraph
10.a. above. Further, Landlord shall repair and maintain in good condition and
repair the structural portions of the Building and all Building systems,
including plumbing, air conditioning, heating, electrical, life safety and other
systems installed or furnished by Landlord, but excluding (1) non-Building
standard lighting and electrical wiring and (ii) extraordinary quantities of
electrical, plumbing, HVAC or other Building facilities or distribution thereof;
provided, however, that to the extent repairs which Landlord is required to make
pursuant to this sentence are necessitated by the negligence or deliberate
misconduct of Tenant or Tenant's agents, employees or contractors, then Tenant
shall reimburse Landlord for the cost of such repair to the extent Landlord is
not reimbursed therefor by insurance. Landlord shall in no event be obligated to
repair any wear and tear to the Premises.

11. Abandonment. Tenant shall not abandon the Premises or any part
thereof at any time during the term hereof. If Tenant abandons or surrenders all
or any part of the Promises or is dispossessed of the Premises by process of
law, or otherwise, any movable furniture, equipment, trade fixtures, or other
personal property belonging to Tenant and left on the Premises shall at the
option of Landlord be deemed to be abandoned and, whether or not the property is
deemed abandoned, Landlord shall have the right to remove such property from the
Premises and charge Tenant for the removal and any restoration of the Premises
as provided in Paragraph 9. Landlord may charge Tenant for the storage of
Tenant's property left on the Premises at such rates as Landlord may from time
to time reasonably determine, or, Landlord may, at its option, store Tenant's
property in a public warehouse at Tenant's expense. Notwithstanding the
foregoing, neither the provisions of this Paragraph 11 nor any other provision
of this Lease shall impose upon Landlord any obligation to care for or preserve
any of Tenant's property left upon the Premises, and Tenant hereby waives and
releases Landlord from any claim or liability in connection with the removal of
such property from the Premises and the storage thereof and specifically waives
the provisions of California Civil Code Section 1542 with respect to such
release. Landlord's action or inaction with regard to the provisions of this
Paragraph 11 shall not be construed as a waiver of Landlord's right to require
Tenant to remove its property, restore any damage to the Building caused by such
removal, and make any restoration required pursuant to Paragraph 9 hereof.
Tenant's vacancy of the Premises during the term hereof shall not constitute an
Event of Default (as provided in Paragraph 25.a.) so long as Tenant continues to
pay Monthly Rent, Additional Rent and all other sums due Landlord under this
Lease and maintains the insurance coverage required pursuant to Paragraph 15 of
this Lease.

12. Liens. Tenant shall not permit any mechanic's, materialman's or
other liens arising out of work performed at the Premises by or on behalf of
Tenant to be filed against the fee of the Real Property nor against Tenant's
interest in the Premises. Landlord shall have the right to post and keep posted
on the Premises any notices which it deems necessary for protection from such
liens. If any such liens are filed, Landlord may, upon thirty (30) days' written
notice to Tenant, without waiving its rights based on such breach by Tenant and
without releasing Tenant from any obligations hereunder, pay and satisfy the
same and in such event the sums so paid by Landlord shall be due and payable by
Tenant

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immediately without notice or demand, with interest from the date paid by
Landlord through the date Tenant pays Landlord, at the Interest Rate.

13. Assignment and Subletting.

a. Landlord's Consent. Landlord's and Tenant's agreement with
regard to Tenant's right to transfer all or part of its interest in the Premises
is as expressly set forth in this Paragraph 13. Tenant agrees that, except upon
Landlord's prior written consent, which consent shall not (subject to Landlord's
rights under Paragraph 13.d. below) be unreasonably withheld, neither this Lease
nor all or any part of the leasehold interest created hereby shall, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, be
assigned, mortgaged, pledged, encumbered or otherwise transferred by Tenant or
Tenant's legal representatives or successors in interest (collectively an
"assignment") and neither the Premises nor any part thereof shall be sublet or
be used or occupied for any purpose by anyone other than Tenant (collectively, a
"sublease"). Tenant agrees that any instrument by which Tenant assigns or
sublets all or any portion of the Premises shall expressly provide that the
subtenant or assignee may not further assign or sublet the assigned or sublet
space without Landlord's prior written consent (which consent shall not, subject
to Landlord's rights under Paragraph 13.d. below, be unreasonably withheld), and
that the assignee or subtenant will comply with all of the provisions of this
Lease and that Landlord may enforce the Lease provisions directly against such
assignee or subtenant. Any assignment or subletting without Landlord's prior
written consent shall, at Landlord's option, be void and shall constitute an
Event of Default entitling Landlord to terminate this Lease and to exercise all
other remedies provided in Paragraph 25 of this Lease.

In determining whether to approve a proposed assignment or sublease,
Landlord shall place primary emphasis on the proposed transferee's reputation
and creditworthiness, the character of the business to be conducted by the
proposed transferee at the subject premises and the effect of such assignment or
subletting on the tenant mix in the Building. In no event shall Landlord be
obligated to consent to an assignment or subletting which increases (a) the
operating costs for the Building, (b) the burden on the Building services, or
(c) the foot traffic, elevator usage or security concerns in the Building, or
creates an increased probability of the comfort and/or safety of the Landlord
and other tenants in the Building being unreasonably compromised or reduced (for
example, but not exclusively, Landlord may deny consent to an assignment or
subletting where the space will be used for a school or training facility, an
entertainment, sports or recreation facility, retail sales to the public (unless
Tenant's permitted use is retail sales), a personnel or employment agency, or an
embassy or consulate or similar office). Landlord shall not be obligated to
approve an assignment or subletting to a current tenant of the Building or a
prospective tenant of the Building with whom Landlord is then negotiating.
Landlord's foregoing rights and options shall continue throughout the entire
term of this Lease.

For purposes of this Paragraph 13, the following events shall be deemed
an assignment or sublease, as appropriate: (i) the issuance of equity interests
(whether stock, partnership interests or otherwise) in Tenant or any subtenant
or assignee, or any entity controlling any of them, to any person or group of
related persons, in a single transaction or a series of related or unrelated
transactions, such that, following such issuance, such person or group shall
have Control (as defined below) of Tenant; or (ii) a transfer of Control of
Tenant or any subtenant or assignee, or any entity controlling any of them, in a
single transaction or a series of related or unrelated transactions (including,
without limitation, by consolidation, merger, acquisition or reorganization),
except that the transfer of outstanding capital stock or other listed equity
interests by persons or parties other than "insiders" within the meaning of the
Securities Exchange Act of 1934, as amended, through the "over-the-counter"
market or any recognized national or international securities exchange, shall
not be included in determining whether Control has been transferred. "Control"
shall mean direct or indirect ownership of 50% or more of all of the voting
stock of such corporation or 50% or more of all the legal and equitable interest
in any other business entity.

If this Lease is assigned, whether or not in violation of the terms of
this Lease, Landlord may collect rent from the assignee. If the Promises or any
part thereof is sublet, Landlord may, upon an Event of Default by Tenant

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hereunder, collect rent from the subtenant. In either event, Landlord may apply
the amount collected from the assignee or subtenant to Tenant's monetary
obligations hereunder.

The consent by Landlord to an assignment or subletting hereunder shall
not relieve Tenant or any assignee or subtenant from obtaining Landlord's
express prior written consent to any other or further assignment or subletting,
which consent shall not, subject to Landlord's rights under Paragraph 13.d.
below, be unreasonably withheld. Neither an assignment or subletting nor the
collection of rent by Landlord from any person other than Tenant, nor the
application of any such rent as provided in this Paragraph 13.a. shall be deemed
a waiver of any of the provisions of this Paragraph 13.a. or release Tenant from
its obligation to comply with the provisions of this Lease and Tenant shall
remain fully and primarily liable for all of Tenant's obligations under the
Lease. If Landlord approves of an assignment or subletting hereunder and this
Lease contains any renewal options, expansion options, rights of first refusal,
rights of first negotiation or any other rights or options pertaining to
additional space in the Building, such rights and/or options shall not run to
the subtenant or assignee, it being agreed by the parties hereto that any such
rights and options are personal to Tenant named herein and may not be
transferred.

b. Processing Expenses. Tenant shall pay to Landlord the
amount of Landlord's cost of processing each proposed assignment or subletting
(including, without limitation, attorneys' and other professional fees, and the
(which shall include (i) a fee of not more than $750 to reimburse Landlord for
the cost of Landlord's administrative, accounting and clerical time, and (ii)
any attorneys' and other professional fees reasonably incurred by Landlord,
collectively "Processing Costs"), and the amount of all direct and indirect
expense incurred by Landlord arising from the assignee or sublessee taking
occupancy of the subject space (including, without limitation, costs of freight
elevator operation for moving of furnishings and trade fixtures, security
service, janitorial and cleaning service, and rubbish removal service).
Notwithstanding anything to the contrary herein, Landlord shall not be required
to process any request for Landlord's consent to an assignment or subletting
until Tenant has paid to Landlord the amount of Landlord's estimate of the
Processing Costs and all other direct and indirect costs and expenses of
Landlord and its agents arising from the assignee or subtenant taking occupancy.
If Landlord has in-house counsel available and it is then reasonable for
Landlord to employ Landlord's in-house counsel for such purposes, Landlord shall
use Landlord's in-house counsel for matters relating to processing the proposed
assignment or subletting and the attorneys' fees included in item (ii) of the
Processing Costs shall be the reasonable fees of Landlord's in-house counsel.

c. Consideration to Landlord. In the event of any assignment
or sublease, whether or not requiring Landlord's consent, Landlord shall be
entitled to receive, as additional rent hereunder, fifty percent (50%) of any
consideration (including, without limitation, payment for leasehold improvements
owned by Landlord) paid by the assignee or subtenant for the assignment or
sublease and, in the case of sublease, fifty percent (50%) of the excess of the
amount of rent paid for the sublet space by the subtenant over the total amount
of Monthly Rent under Paragraph 5 hereof and Additional Rent under Paragraph 7
hereof. Upon Landlord's request, Tenant shall assign to Landlord all amounts to
be paid to Tenant by any such subtenant and assignee and shall direct such
subtenant or assignee to pay the same directly to Landlord. If there is more
than one sublease under this Lease, the amounts (if any) to be paid by Tenant to
Landlord pursuant to the preceding sentence shall be separately calculated for
each sublease and amounts due Landlord with regard to any one sublease may not
be offset against rental and other consideration pertaining due under any other
sublease.

d. Procedures. If Tenant desires to assign this Lease or any
interest therein or sublet all or part of the Premises, Tenant shall give
Landlord written notice thereof designating the space proposed to be sublet and
the terms proposed. Landlord shall have the prior right and option (to be
exercised by written notice to Tenant given within twenty (20) days after
receipt of Tenant's notice) (i) to sublet from Tenant any portion of the
Premises proposed by Tenant to be sublet, for the term for which such portion is
proposed to be sublet, but at the same rent (including additional rent as
provided for in Paragraph 7 hereof) as Tenant is required to pay to Landlord
under this Lease for the same space, computed on a pro rata square footage
basis, and during the term

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of such sublease Tenant shall be released of its obligations under the Lease
with regard to the subject space, (ii) if the term of the sublease (including
any renewal terms) will expire during the final eighteen (18) months of the
initial Lease term (or if Tenant has exercised a renewal option, then during the
final eighteen (18) months of the subject renewal period), to terminate this
Lease as it pertains to the portion of the Premises so proposed by Tenant to be
sublet, or (iii) to approve Tenant's proposal to sublet conditional upon
Landlord's subsequent written approval of the specific sublease obtained by
Tenant and the specific subtenant named therein. If Landlord fails to make an
election within the twenty (20) day period set forth above, Tenant may give
Landlord written notice (which notice must reference this Paragraph 13.d.) that
if Landlord fails to make an election within five (5) business days of receipt
of Tenant's notice, Landlord will be deemed to have exercised its option
described in (iii) above, and if Landlord does not give Tenant written notice
exercising its option described in (i) or (ii) above within such period,
Landlord shall be deemed to have elected its option described in (iii) above. If
Landlord exercises its option in (i) above, then Landlord may, at Landlord's
sole cost, construct improvements in the subject space. If Landlord constructs
improvements in the Premises pursuant to the immediately preceding sentence,
Tenant shall have no obligation to remove such improvements and, so long as the
improvements are suitable for general office purposes, Landlord shall have no
obligation to restore the subject space to its original condition following the
termination of the sublease. If Landlord exercises its option described in (iii)
above, Tenant shall submit to Landlord for Landlord's written approval Tenant's
proposed sublease agreement (in which the proposed subtenant shall be named)
together with a current financial statement of such proposed subtenant. If
Landlord fails to exercise any aforesaid option to sublet or to terminate, this
shall not be construed as or constitute a waiver of any of the provisions of
Paragraphs 13.a., b., c. or d. herein. If Landlord exercises any such option to
sublet or to terminate, Landlord shall not have any liability for any real
estate brokerage commission(s) or with respect to any of the costs and expenses
that Tenant may have incurred in connection with its proposed subletting, and
Tenant agrees to indemnify, defend and hold harmless Landlord from and against
any and all claims (including, without limitation, claims for commissions)
arising from such proposed subletting. Landlord's foregoing rights and options
shall continue throughout the entire term of this Lease. For purposes of this
Paragraph 13.d., a proposed assignment of this Lease in whole or in part shall
be deemed a proposed subletting of such space.

e. Documentation. No permitted subletting by Tenant shall be
effective until there has been delivered to Landlord a counterpart of the
sublease in which the subtenant agrees to be and remain jointly and severally
liable with Tenant for the payment of rent pertaining to the sublet space and
for the performance of all of the terms and provisions of this Lease; provided,
however, that the subtenant shall be liable to Landlord for rent only in the
amount set forth in the sublease. No permitted assignment shall be effective
unless and until there has been delivered to Landlord a counterpart of the
assignment in which the assignee assumes all of Tenant's obligations under this
Lease arising on or after the date of the assignment. The failure or refusal of
a subtenant or assignee to execute any such instrument shall not release or
discharge the subtenant or assignee from its liability as set forth above.

f. No Merger. Without limiting any of the provisions of this
Paragraph 13, if Tenant has entered into any subleases of any portion of the
Premises, the voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation by Landlord and Tenant, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing subleases or subtenancies or,
at the option of Landlord, operate as an assignment to Landlord of any or all
such subleases or subtenancies.

14. Indemnification of Landlord.

a. Landlord and the holders of any Superior Interests (as
defined in Paragraph 21 hereof) shall not be liable to Tenant and Tenant hereby
waives all claims against such parties for any loss, injury or other damage to
person or property in or about the Premises or the Real Property from any cause
whatsoever, including without limitation, water leakage of any character from
the roof, walls, basement or other portion of the Premises or the Real Property,
or gas, fire, explosion or other electricity within the Premises or the Real
Property, construction activity performed by Landlord or Landlord's agents in or

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about the Building or the Real Property, or acts of other tenants of the
Building; provided, however, that the foregoing waiver shall be inapplicable to
any loss, injury or damage resulting directly from Landlord's gross negligence
or willful misconduct. Tenant acknowledges that from time to time throughout the
term of this Lease, Landlord or Landlord's agents will be performing
construction work in and about the Building and the Real Property and that such
construction may result in noise and disruption to Tenant's business. In
addition to and without limiting the foregoing waiver or any other provision of
this Lease, Tenant agrees that Landlord and the Indemnities (as defined below)
shall not be liable to Tenant, and Tenant expressly waives and releases any and
all claims Tenant may have against such parties for, any loss, injury or other
damage to person and property, including without limitation, lost profits or
business losses, and any and all consequential damages, arising or alleged to be
arising as a result of any such construction activity conducted by Landlord or
Landlord's agents.

b. Tenant shall hold Landlord and the holders of any Superior
Interest, and the constituent shareholders, partners or other owners thereof,
and all of their agents, contractors, servants, officers, directors, employees
and licensees (hereinafter collectively called the "Indemnitees") harmless from
and indemnify the Indemnitees against any claims, liability, damages, costs or
expenses, including reasonable attorneys' fees and costs incurred in defending
against the same ("Claims"), to the extent arising from (a) the acts or
omissions of Tenant, Tenant's employees, agents, contractors, licensees,
subtenants, customers, guests or invitees in or about the Real Property, or (b)
any construction or other work undertaken by Tenant on the Premises, whether
prior to or during the term of this Lease, or (c) any breach or Event of Default
under this Lease by Tenant, or (d) any accident, injury or damage, howsoever and
by whomsoever caused, to any person or property, occurring in or about the
Premises; except for such Claims to the extent they are caused directly by the
negligence or willful acts or omissions of Landlord or its authorized
representatives. In case any action or proceeding be brought against any of the
Indemnitees by reason of any such claim or liability, Tenant, upon notice from
Landlord, covenants to resist and defend at Tenant's sole expense such action or
proceeding by counsel reasonably satisfactory to Landlord. The provisions of
this Paragraph 14.b. shall survive the termination of this Lease with respect to
any injury, illness, death or damage occurring prior to such termination.

c. Landlord shall hold Tenant and Tenant's partners, agents,
contractors, servants, licensees, subtenants and employees ("Tenant's
Indemnitees") harmless from and against any and all Claims incurred in
connection with or arising from any injury, illness, or death to any person or
damage to any property or from any other cause whatsoever occurring in, on or
about any part of the Real Property when such injury, illness, death or damage
shall be caused by the negligent acts or omissions of Landlord, its agents,
contractors, partners, servants, officers, directors, licensees or employees,
except to the extent caused by the negligence or willful misconduct of Tenant's
Indemnitees. The provisions of this Paragraph 14.c. shall survive the
termination of this Lease with respect to any injury, illness, death or damage
occurring prior to such termination. In case any action or proceeding be brought
against Tenant or Tenant's agents and employees by reason of any such Claim,
Landlord, upon notice from Tenant, covenants to resist and, defend at Landlord's
sole expense such action or proceeding by counsel reasonably satisfactory to
Tenant. Notwithstanding anything to the contrary set forth in this Paragraph
14.c. or elsewhere in this Lease, in no event shall Landlord be liable for any
consequential or remote damages, or for loss of or damage to artwork, currency,
jewelry, bullion, securities or other property in the Premises, not in the
nature of ordinary fixtures, furnishings, equipment and other property used in
general business office activities and functions.

15. Insurance.

a. Tenant's Insurance. Tenant shall, at Tenant's expense,
maintain during the term of this Lease (and, if Tenant shall occupy or conduct
activities in or about the Premises prior to or after the term hereof, then also
during such pre-term or post-term period): (i) commercial general liability
insurance including contractual liability coverage, with a minimum coverage of
One Million Dollars ($1,000,000) per occurrence/Two Million Dollars ($2,000,000)
general aggregate, plus a Two Million Dollar ($2,000,000) umbrella, for injuries
to, or illness or death of, persons and damage to property occurring in or about

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the Premises or otherwise resulting from Tenant's operations in the Building,
(ii) property insurance protecting Tenant against loss or damage by fire and
such other risks as are insurable under then-available standard forms of "all
risk" insurance policies (excluding earthquake and flood but including water
damage), covering Tenant's property in or about the Premises or the Real
Property and also covering any fixtures that may belong to Tenant and any
Alterations not in the nature of ordinary office improvements, but excluding
the improvements existing in the Premises as of the date of Tenant's initial
occupancy of the Premises, for the full replacement value thereof without
deduction for depreciation; and (iii) workers' compensation insurance in
statutory limits. The above described commercial general liability insurance
shall protect Tenant, as named insured, and Landlord and all the Indemnitees
and any other parties designated by Landlord, as additional insureds; shall
insure Landlord's and such other parties' contingent liability with regard to
acts or omissions of Tenant; and shall specifically include all liability
assumed by Tenant under this Lease (provided, however, that such contractual
liability coverage shall not limit or be deemed to satisfy Tenant's indemnity
obligations under this Lease). Landlord reserves the right to increase the
foregoing amount of liability coverage from time to time as Landlord determines
is required to adequately protect Landlord and the other parties designated by
Landlord from the matters insured thereby; provided, however, such increased
amounts shall not materially exceed the greater of (a) those amounts normally
required for comparable buildings in the San Francisco financial district or
(b) those amounts required to provide Landlord with the same relative protection
as the amounts set forth above as of the date of this Lease.

b. Policy Form. Each insurance policy required pursuant to
this Paragraph 15 shall be issued by an insurance company licensed to do
business in the State of California and approved by Landlord. Each insurance
policy, other than Tenant's workers' compensation insurance, shall (i) provide
that it may not be materially changed, cancelled or allowed to lapse unless
thirty (30) days' prior written notice to Landlord and any other insureds
designated by Landlord is first given, and (ii) provide that no act or omission
of Tenant shall affect or limit the obligations of the insurer with respect to
any other insured. Each such insurance policy or a certificate thereof shall be
delivered to Landlord by Tenant on or before the effective date of such policy
and thereafter Tenant shall deliver to Landlord renewal policies or certificates
at least thirty (30) days prior to the expiration dates of expiring policies. If
Tenant fails to procure such insurance or to deliver such policies or
certificates, Landlord may, at its option, procure the same for Tenant's
account, and the cost thereof shall be paid to Landlord by Tenant upon demand.

c. Nothing in this Paragraph 15 shall be construed as creating
or implying the existence of (i) any ownership by Tenant of any fixtures,
additions, Alterations, or improvements in or to the Premises or (ii) any right
on Tenant's part to make any addition, Alteration or improvement in or to the
Premises.

d. Landlord' s Insurance. During the term hereof, Landlord shall
keep the Building and all Tenant Improvements to the Premises made pursuant to
Paragraph 4 hereof (but excluding any Alterations made pursuant to Paragraph 9
hereof, and any personal property, fixtures, office equipment, furniture,
artwork and other decoration not affixed to and a part of the Building) insured
through reputable insurance underwriters against perils covered by a standard
"all risk" insurance policy or policies as such policies are in use as of the
date of this Lease (excluding perils such as earthquake, flood and other
standard "all risk" policy form exclusions), if such a policy is reasonably
available, with a deductible provision, if any, that does not materially exceed
that which prudent, efficient operators of first-class high-rise office
buildings in the downtown San Francisco financial district would carry from
time-to-time in the exercise of reasonable business judgment, in an amount or
amounts equal to not less than eighty percent (80%) of the full replacement
value of the Building (excluding the land and the footings, foundations and
installations below the basement level) and the Tenant Improvements made
pursuant to Paragraph 4 hereof, without deduction for depreciation, including
the costs of demolition and debris removal, or such other fire and property
damage insurance as Landlord shall reasonably determine to give substantially
equal or greater protection. During the term hereof, Landlord shall keep in
force general liability insurance in the amount and coverage as Landlord deems
commercially reasonable.

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16. Mutual Waiver of Subrogation Rights. Each party hereto hereby
releases the other respective party and, in the case of Tenant as the releasing
party, the other Indemnitees identified in Paragraph 14 hereof, and the
respective partners, shareholders, agents, employees, officers, directors and
authorized representatives of such released party, from any claims such
releasing party may have for damage to the Building, the Premises or any of such
releasing party's fixtures, personal property, improvements and alterations in
or about the Premises, the Building or the Real Property that is caused by or
results from risks insured against under any fire and extended coverage
insurance policies actually carried by such releasing party or deemed to be
carried by such releasing party; provided, however, that such waiver shall be
limited to the extent of the net insurance proceeds payable by the relevant
insurance company with respect to such loss or damage. For purposes of this
Paragraph 16, Tenant shall be deemed to be carrying any of the insurance
policies required pursuant to Paragraph 15 but not actually carried by Tenant,
and Landlord shall be deemed to carry standard fire and extended coverage
policies on the Real Property. Each party hereto shall cause each such fire and
extended coverage insurance policy obtained by it to provide that the insurance
company waives all rights of recovery by way of subrogation against the other
respective party and the other aforesaid released parties in connection with any
matter covered by such policy.

17. Utilities.

a. Description of Utilities and Services. Landlord shall
furnish to the Promises during the period from 8 A.M. to 6 P.M. ("Business
Hours") Monday through Friday (except public holidays) ("Business Days"), and
subject to the Rules and Regulations of the Building and to applicable
governmental laws or agencies or the rules or actions of the public utility
company furnishing the service, the following: (i) electricity for lighting and
power suitable for the use of the Premises for ordinary general office purposes;
provided, however, that Tenant shall not at any time have a connected electrical
load for lighting purposes in excess of the wattage per square foot of rentable
area of the Premises required for building standard amounts of lighting, or a
connected load for all other power requirements in excess of two (2) watts per
square foot of rentable area of the Premises as determined by Landlord, and the
electricity so provided for lighting and power shall not exceed such limits;
(ii) heat and air conditioning required in Landlord's judgment for the
comfortable use and occupancy of the Premises for such purposes; (iii) water for
restroom and drinking purposes; (iv) elevator service by nonattended automatic
elevators for general office pedestrian usage; (v) janitorial services as
required to maintain the Premises and common areas in a clean and
orderly condition consistent with other first-class office buildings in the San
Francisco financial district; and (vi) window washing at least two (2) times a
year. Tenant agrees to keep closed, when necessary, draperies which, because of
the sun's position, must be closed to provide for the efficient operation of the
air conditioning system, and Tenant agrees to cooperate with Landlord and to
abide by the regulations and requirements which Landlord may prescribe for the
proper functioning and protection of the beating, ventilating and air
conditioning system. If Tenant requires heating, ventilating and air
conditioning to the Premises other than during Business Hours on Business Days,
Landlord shall, upon Tenant's request given not later than 3 P.M. of the
Business Day on which Tenant requires the after hour service, and not later than
3 P.M. on the Friday before any Saturday or Sunday on which Tenant requires such
service, and not later than 3 P.M. of the day before any holiday on which Tenant
requires such service, furnish such heating, ventilating and air conditioning.
If Tenant receives such services, then Tenant shall pay, upon demand, an amount
equal to Tenant's proportionate share of the actual direct cost to Landlord in
providing the heating, ventilating and air conditioning to Tenant and all other
tenants of the Building requesting such services outside of Business Hours on
Business Days.

b. Payment for Excess Utilities and Services. All services and
utilities for the Premises not required to be furnished by Landlord pursuant to
the first sentence of Paragraph 17.a. shall be paid for by Tenant. If Tenant
requires, on a regular basis, water, heat, air conditioning, electric current,
elevator or janitorial service in excess of that provided for in the first
sentence of Paragraph 17.a., Tenant shall first obtain the written consent of
Landlord which consent may be withheld in Landlord's sole discretion. If
Landlord consents to such excess use, Landlord may install an electric current
or water meter (including, without limitation, any additional wiring, conduit or
panel required therefor) to measure the excess electric current or water
consumed

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<PAGE> 21
by Tenant or may cause the excess usage to be measured by other reasonable
methods (e.g. by temporary "check" meters or by survey). Tenant shall pay to
Landlord upon demand (i) the cost of any and all water, heat, air conditioning,
electric current, janitorial, elevator or other services or utilities required
to be furnished to Tenant in excess of the services and utilities required to be
furnished by Landlord as provided in the first sentence of Paragraph 17.a.;
(ii) the cost of installation, maintenance and repair of any meter installed in
the Premises; (iii) the cost of all electricity and water consumed by Tenant in
connection with any dedicated heating, ventilating and/or air conditioning,
computer power and/or air conditioning, telecommunications or other special
systems of Tenant. Including any power usage other than through existing
standard 110-volt AC outlets; and (iv) any cost incurred by Landlord in keeping
account of or determining such excess utilities or services furnished to Tenant.
Landlord's failure to bill Tenant for any such excess utilities or services
shall not waive Landlord's right to bill Tenant for the excess at a later time.

c. Temperature Balance. Landlord makes no representation to
Tenant regarding the adequacy or fitness of the heating, air conditioning or
ventilation equipment in the Building to maintain temperatures that may be
required for, or because of, any of Tenant's equipment which uses other than the
fractional horsepower normally required for office equipment, and Landlord shall
have no liability for loss or damage suffered by Tenant or others in connection
therewith. If the temperature otherwise maintained in any portion of the
Premises by the heating, air conditioning or ventilation system is affected as a
result of (i) any lights, machines or equipment (including without limitation
electronic data processing machines) used by Tenant in the Premises, (ii) the
occupancy of the Premises by more than one person per two hundred (200) square
feet of rentable area therein, (iii) an electrical load for lighting or power in
excess of the limits per square foot of rentable area of the Premises specified
in Paragraph 17.a., or (iv) any rearrangement of partitioning or other
improvements, Landlord may install any equipment, or modify any existing
equipment (including the standard air conditioning equipment) Landlord deems
necessary to restore the temperature balance. The cost of any such equipment and
the cost of operating, maintaining or repairing the same, shall be paid by
Tenant to Landlord upon demand.

d. Special Electrical or Water Connections. Without the prior
written consent of Landlord, which Landlord in its sole discretion may refuse,
Tenant will not connect or use any apparatus or device in the Premises (i) using
current in excess of 110 volts or (ii) which will cause the amount of
electricity, water, heating, air conditioning or ventilation furnished to the
Premises to exceed the amount required for use of the Premises for ordinary
general office purposes, as determined by Landlord, during Business Hours or
(iii) which would cause Tenant's connected load to exceed any limits established
in Paragraph 17.a. Tenant shall not connect with electric current (except
through existing outlets in the Premises) or water pipes any apparatus or device
for the purpose of using electrical current or water.

Landlord will not permit additional coring of the floor of the Premises
in order to install new electric outlets in the Premises unless Tenant furnishes
Landlord with X-ray scans of the floor area where the Tenant wishes to place
additional electrical outlets and Landlord, in its absolute discretion, is
satisfied, on the basis of such X-ray scans and other information obtained by
Landlord, that coring of the floor in order to install such additional outlets
will not weaken the structure of the floor.

e. Interruption of Services. In the event of an interruption
in, or failure or inability to provide any of the above described services or
utilities, such interruption, failure or inability shall not constitute an
eviction of Tenant, constructive or otherwise, or impose upon Landlord any
liability whatsoever, including, but not limited to, liability for consequential
damages or loss of business by Tenant. Notwithstanding the foregoing, if any
interruption in, or failure or inability to provide any of the services or
utilities described in Paragraph 17.a. is (i) within Landlord's reasonable
control and continues for thirty (30) or more consecutive days, or (ii) outside
Landlord's reasonable control and continues for sixty (60) or more consecutive
days, and Tenant is unable to and does not use a material portion of the
Premises for Tenant's business purposes as a result thereof, then Tenant shall
be entitled to an abatement of Monthly Rent under Paragraph 5 hereof and
Additional Rent under Paragraph 7 hereof, which abatement shall be based on the
extent of

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Tenant's inability to use the Premises. Tenant hereby waives the provisions of
California Civil Code Section 1932(l) or any other applicable existing or future
law, ordinance or governmental regulation permitting the termination of this
Lease due to such interruption, failure or inability.

f. Governmental Controls. In the event any governmental
authority having jurisdiction over the Real Property or the Building promulgates
or revises any law, ordinance or regulation or building, fire or other code or
imposes mandatory or voluntary controls or guidelines on Landlord or the Real
Property or the Building relating to the use or conservation of energy or
utilities or the reduction of automobile or other emissions (collectively
"Controls") or in the event Landlord is required or elects to make alterations
to the Real Property or the Building in order to comply with such mandatory or
voluntary Controls, Landlord may, in its sole discretion, comply with such
Controls or make such alterations to the Real Property or the Building related
thereto. Such compliance and the making of such alterations shall not constitute
an eviction of Tenant, constructive or otherwise, or impose upon Landlord any
liability whatsoever, including, but not limited to, liability for consequential
damages or loss of business by Tenant.

18. Personal Property and Other Taxes. Tenant shall pay, at least ten
(10) days before delinquency, any and all taxes, fees, charges or other
governmental impositions levied or assessed against Landlord or Tenant (a) upon.
Tenant's equipment, furniture, fixtures, improvements and other personal
property (including carpeting installed by Tenant) located in the Premises, (b)
by virtue of any Alterations made by Tenant to the Premises, and (c) upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises. If any such fee, charge or other
governmental imposition is paid by Landlord, Tenant shall reimburse Landlord for
Landlord's payment upon demand.

19. Rules and Regulations. Tenant shall comply with the Rules and
Regulations set forth on Exhibit B attached hereto, as such Rules and
Regulations may be modified or amended by Landlord from time to time. Landlord
shall not be responsible to Tenant for the nonperformance by any other tenant or
occupant of the Building of any of the Rules and Regulations, but Landlord shall
use reasonable efforts to encourage such compliance.

20. Surrender: Holding Over.

a. Surrender. Upon the expiration or other termination of this
Lease, Tenant shall surrender the Premises and all improvements and Alterations
to Landlord broom-clean and in their original condition, except for reasonable
wear and tear, damage from casualty or condemnation and any changes resulting
from approved Alterations; provided, however, that prior to the expiration or
termination of this Lease Tenant shall remove from the Premises all of Tenant's
personal property and trade fixtures that Tenant is required by Landlord to
remove under the provisions of this Lease. If such removal is not completed at
the expiration or other termination of this Lease, Landlord may remove the same
at Tenant's expense. Any damage to the Premises or the Building caused by such
removal shall be repaired promptly by Tenant or, if Tenant fails to do so,
Landlord may do so at Tenant's expense. The removal of Alterations from the
Premises shall be governed by Paragraph 9 hereof. Tenant's obligations under
this Paragraph shall survive the expiration or other termination of this Lease.
Upon expiration or termination of this Lease or of Tenant's possession, Tenant
shall surrender all keys to the Promises or any other part of the Building and
shall make known to Landlord the combination of locks on all safes, cabinets and
vaults that may be located in the Premises.

b. Holding Over. If Tenant remains in possession of the
Promises after the expiration or earlier termination of this Lease with the
express written consent of Landlord, Tenant's occupancy shall be a
month-to-month tenancy at a rent agreed upon by Landlord and Tenant, but in no
event less than the Monthly Rent and Additional Rent payable under this Lease
during the last full month prior to the date of the expiration of the Lease.
Except as provided in the preceding sentence, the month-to-month tenancy shall
be on the terms and conditions of this Lease. Landlord's acceptance of rent
after such holding over with Landlord's written consent shall not result in any
other tenancy or in a renewal of the original term hereof. If Tenant remains in
possession of the Premises after the expiration or earlier termination of this
Lease without

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Landlord's consent, Tenant's continued possession shall be on the basis of a
tenancy at sufferance and Tenant shall pay as Monthly Rent during the holdover
period an amount equal to the greater of (i) one hundred fifty percent (150%) of
the fair market rental (as reasonably determined by Landlord) for the Premises
or (ii) two hundred percent (200%) of the Monthly Rent and Additional Rent
payable under this Lease for the last full month prior to the date of such
expiration.

c. Indemnification. Tenant shall indemnify and hold Landlord
harmless from and against all claims, liability, damages, costs or expenses,
including reasonable attorneys fees and costs of defending the same, incurred by
Landlord and arising directly or indirectly from Tenant's failure to timely
surrender the Premises, including (i) any rent payable by or any loss, cost, or
damages, including lost profits. claimed by any prospective tenant of the
Premises or any portion thereof, and (ii) Landlord's damages as a result of such
prospective tenant rescinding or refusing to enter into the prospective lease of
the Premises or any portion thereof by reason of such failure to timely
surrender the Promises.

21. Subordination and Attornment. This Lease is expressly made subject
and subordinate to any mortgage, deed of trust, ground lease, underlying lease
or like encumbrance affecting any part of the Real Property or any interest of
Landlord therein which is now existing or hereafter executed or recorded (any of
the foregoing being a "Superior Interest") without the necessity of any further
documentation evidencing such subordination. Notwithstanding the foregoing,
Tenant shall, within ten (10) business days of Landlord's written request,
execute and deliver to Landlord a document evidencing the subordination of this
Lease to a particular Superior Interest. If the interest of Landlord in the Real
Property or the Building is transferred to any person ("Purchaser") pursuant to
or in lieu of proceedings for enforcement of any encumbrance, Tenant shall
immediately and automatically attorn to the Purchaser, and this Lease shall
continue in full force and effect as a direct lease between the Purchaser and
Tenant on the terms and conditions set forth herein. This Lease is further
subject to that certain Master Declaration of Easements, Covenants, Conditions
and Restrictions For Hills Plaza Subdivision (the "Master Declaration"), dated
February 21, 1991, recorded on February 28, 1991, in Reel No. F322, Image No.
0357, in the Official Records of the City and County of San Francisco,
California.

22. Financing Condition. If at any time or times Landlord desires to
obtain financing for the Real Property, if any lender which intends to take, or
is holding, a mortgage or deed of trust encumbering the Real Property should
require, as a condition to such financing, either execution by Tenant of an
agreement requiring Tenant to send such lender written notice of any default by
Landlord under this Lease, giving such lender the right to cure such default
until such lender has completed foreclosure, and preventing Tenant from
terminating this Lease unless such default remains uncured after foreclosure has
been completed, or any modification of the agreements, covenants, conditions or
provisions of this Lease, or both of them, then Tenant agrees to execute and
deliver such agreement and to modify this Lease as required by such lender
within ten (10) days after receipt of a written request therefor; provided,
however, that no such modification shall affect the length of the term hereof or
increase the rent payable by Tenant under Paragraphs 5 and 7. Tenant
acknowledges and agrees that its failure to execute any such agreement or
modification required by such lender may cause Landlord serious financial damage
by causing the failure of a financing transaction and giving Landlord all of its
rights and remedies under Paragraph 25 hereof, including its right to damages
caused by the loss of said financing. If Tenant shall fail or refuse to execute
any such agreement or modification within ten (10) days after receipt thereof,
Landlord, at its option, may, upon written notice to Tenant, terminate this
Lease and, upon giving such termination notice, Landlord shall refund to Tenant
any unearned rent and/or security deposit hold by Landlord in excess of amounts
which Tenant then owes to Landlord, and this Lease shall terminate.

23. Entry by Landlord. Landlord may, at any and all reasonable times
and upon reasonable advance notice (provided that no advance notice need be
given if an emergency necessitates an immediate entry or prior to entry to
provide routine janitorial services), enter the Premises to (a) inspect the same
and to determine whether Tenant is in compliance with its obligations hereunder,
(b) supply janitorial and any other service Landlord is required to provide

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<PAGE> 24
hereunder, (c) show the Premises to prospective purchasers or tenants, (d) post
notices of nonresponsibility, and (e) alter, improve or repair the Premises or
any portion of the Real Property. In connection with any such alteration,
improvement or repair, Landlord may erect in the Premises or elsewhere in the
Real Property scaffolding and other structures reasonably required for the work
to be performed. In no event shall Tenant's rent abate as a result of any such
entry or work; provided, however, that all such work shall be done in such a
manner as to cause as little interference to Tenant as reasonably possible.
Except in the event of Landlord's gross negligence or willful misconduct,
Landlord shall not be liable in any manner for any inconvenience, loss of
business or other damage to Tenant or other persons arising out of Landlord's
entry on the Premises as provided in this paragraph. Landlord shall at all times
retain a key with which to unlock all of the doors in the Premises, except
Tenant's vaults and safes. If an emergency necessitates immediate access to the
Premises, Landlord may use whatever force is necessary to enter the Premises and
any such entry to the Premises shall not constitute a forcible or unlawful entry
into the Premises, a detainer of the Premises, or an eviction of Tenant from the
Premises, or any portion thereof.

24. Insolvency or Bankruptcy. The occurrence of any of the following
shall constitute an Event of Default under Paragraph 25 hereof:

a. Tenant ceases doing business as a going concern, makes an
assignment for the benefit of creditors, is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of such
petition) seeking for Tenant any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar arrangement under any state or
federal bankruptcy or other law, or Tenant consents to or acquiesces in the
appointment, pursuant to any state or federal bankruptcy or other law, of a
trustee, receiver or liquidator for the Premises, for Tenant or for all or any
substantial part of Tenant's assets;

b. Tenant fails within sixty (60) days after the commencement
of any proceedings against Tenant seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
state or federal bankruptcy or other law, to have such proceedings dismissed, or
Tenant fails, within sixty (60) days after an appointment pursuant to any state
or federal bankruptcy or other law without Tenant's consent or acquiescence, of
any trustee, receiver or liquidator for the Premises, for Tenant or for all or
any substantial part of Tenant's assets, to have such appointment vacated;

c. Tenant is unable, or admits in writing its inability, to
pay its debts as they mature;

d. Tenant gives notice to any governmental body of its
insolvency or pending insolvency, or of its suspension or pending suspension of
operations.

In no event shall this Lease be assigned or assignable by reason of any
voluntary or involuntary bankruptcy proceedings, nor shall any rights or
privileges hereunder be an asset of Tenant, the trustee, debtor-in-possession,
or the debtor's estate in any bankruptcy, insolvency or reorganization
proceedings.

25. Default and Remedies.

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

1. Tenant fails to pay rent or other sums due
hereunder within five (5) days of written notice from Landlord that such sum was
not paid when due.

2. Tenant fails to deliver, within the period
described in the applicable Paragraph, (i) any estoppel certificate requested by
Landlord under Paragraph 29 hereof, (ii) any document evidencing subordination
of this Lease required under Paragraph 21 hereof, or (iii) any agreement with a
lender described in Paragraph 22 hereof, and thereafter Tenant does not deliver
such executed document within ten (10) days of written notice from Landlord of
such failure.

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3. Tenant violates the bankruptcy and insolvency
provisions of Paragraph 24 hereof.

4. Tenant fails to comply with any other provision of
this Lease in the manner required within thirty (30) calendar days after written
notice of such failure (or if the noncompliance cannot by its nature be cured
within the 30-day period, if Tenant fails to commence to cure such noncompliance
within the 30-day period and thereafter diligently prosecute such cure to
completion).

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

1. Landlord may terminate Tenant's right to
possession of the Promises at any time by written notice to Tenant. Tenant
expressly acknowledges that in the absence of such written notice from Landlord,
no other act of Landlord, including, but not limited to, its re-entry into the
Premises, its efforts to relet the Premises, its reletting of the Premises for
Tenant's account, its storage of Tenant's personal property and trade fixtures,
its acceptance of keys to the Premises from Tenant or its exercise of any other
rights and remedies under this Paragraph 25, shall constitute an acceptance of
Tenant's surrender of the Premises or constitute a termination of this Lease or
of Tenant's right to possession of the Premises.

Upon such termination in writing of Tenant's right to possession of the
Premises, this Lease shall terminate and Landlord shall be entitled to recover
damages from Tenant as provided in California Civil Code Section 1951.2 or any
other applicable existing or future law, ordinance or regulation providing for
recovery of damages for such breach, including but not limited to the following:

(i) The reasonable cost of recovering the
Premises; plus

(ii) The reasonable cost of removing Tenant's
Alterations, trade fixtures and improvements; plus

(iii) All unpaid rent due or earned hereunder
prior to the date of termination, less the proceeds of any reletting or any
rental received from subtenants prior to the date of termination applied as
provided in Paragraph 25.b.2. below, together with interest at the
Interest Rate specified in Paragraph 5.c. of this Lease, on such sums from the
date such rent is due and payable until the date of the award of damages; plus

(iv) The amount by which the rent which would be
payable by Tenant hereunder, including Additional Rent under Paragraph 7 hereof,
as reasonably estimated by Landlord, from the date of termination until the date
of the award of damages, exceeds the amount of such rental loss as Tenant proves
could have been reasonably avoided together with interest at the Interest Rate
specified in Paragraph 5 hereof on such sums from the date such rent is due and
payable until the date of the award of damages; plus

(v) The amount by which the rent which would be
payable by Tenant hereunder, including Additional Rent under Paragraph 7 hereof,
as reasonably estimated by Landlord, for the remainder of the then term, after
the date of the award of damages exceeds the amount such rental loss as Tenant
proves could have been reasonably avoided, discounted at the discount rate
published by the Federal Reserve Bank of San Francisco for member banks at the
time of the award plus one percent (1%); plus

(vi) Such other amounts in addition to or in lieu
of the foregoing as may be permitted from time to time by applicable law.

2. Landlord may continue this Lease in full force and
effect and may enforce all of its rights and remedies under this Lease,
including, but not limited to, the right to recover rent as it becomes due.
During the continuance of an Event of Default, Landlord may enter the Premises
without terminating this Lease and sublet all or any part of the Premises for
Tenant's account to any person, for such term (which may be a period beyond the
remaining term of this Lease), at such rents and on such other terms and
conditions as

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<PAGE> 26
Landlord deems advisable. In the event of any such subletting, rents received
by Landlord from such subletting shall be applied (i) first, to the payment of
the costs of maintaining, preserving, altering and preparing the Premises for
subletting, the other costs of subletting, including but not limited to brokers'
commissions, attorneys' fees and expenses of removal of Tenant's personal
property, trade fixtures and Alterations; (ii) second, to the payment of rent
then due and payable hereunder; (iii) third, to the payment of future rent as
the same may become due and payable hereunder; (iv) fourth, the balance, if any,
shall be paid to Tenant upon (but not before) expiration of the term of this
Lease. If the rents received by Landlord from such subletting, after application
as provided above, are insufficient in any month to pay the rent due and payable
hereunder for such month, Tenant shall pay such deficiency to Landlord monthly
upon demand. Notwithstanding any such subletting for Tenant's account without
termination, Landlord may at any time thereafter, by written notice to Tenant,
elect to terminate this Lease by virtue of a previous Event of Default.

During the continuance of an Event of Default, for so long as Landlord
does not terminate Tenant's right to possession of the Premises and subject to
Paragraph 13, entitled Assignment and Subletting, and the options granted to
Landlord thereunder, Landlord shall not unreasonably withhold its consent to an
assignment or sublease of Tenant's interest in the Premises or in this Lease.

3. During the continuance of an Event of Default,
Landlord may enter the Premises without terminating this Lease and remove all
Tenant's personal property, Alterations and trade fixtures from the Premises and
store them at Tenant's risk and expense. If Landlord removes such property from
the Premises and stores it at Tenant's risk and expense, and if Tenant fails to
pay the cost of such removal and storage after written demand therefor and/or to
pay any rent then due, then after the property has been stored for a period of
thirty (30) days or more Landlord may sell such property at public or private
sale, in the manner and at such times and places as Landlord deems commercially
reasonable following reasonable notice to Tenant of the time and place of such
sale. The proceeds of any such sale shall be applied first to the payment of the
expenses for removal and storage of the property, the preparation for and the
conducting of such sale, and for attorneys' fees and other legal expenses
incurred by Landlord in connection therewith, and the balance shall be applied
as provided in Paragraph 25.b.2. above.

Tenant hereby waives all claims for damages that may be caused by
Landlord's reentering and taking possession of the Premises or removing and
storing Tenant's personal property pursuant to this Paragraph 25, and Tenant
shall hold Landlord harmless from and against any loss, cost or damage resulting
from any such act. No reentry by Landlord shall constitute or be construed as a
forcible entry by Landlord.

4. Landlord may require Tenant to remove any and all
Alterations from the Premises or, if Tenant fails to do so within ten (10) days
after Landlord's request, Landlord may do so at Tenant's expense.

5. Landlord may cure the Event of Default at Tenant's
expense. If Landlord pays any sum or incurs any expense in curing the Event of
Default, Tenant shall reimburse Landlord upon demand for the amount of such
payment or expense with interest at the Interest Rate specified in Paragraph 5
from the date the sum is paid or the expense is incurred until Landlord is
reimbursed by Tenant. Any amount due Landlord under this subsection shall
constitute additional rent hereunder.

26. Damage or Destruction. If all or a part of the Premises are damaged
by fire or other casualty, or if the Building is so damaged that access to or
use and occupancy of the Premises is materially impaired, Landlord shall
promptly give Tenant notice of Landlord's reasonable estimate of the time
required to make such repairs (the "Damage Estimate"). If the Damage Estimate is
seventy-five (75) days or less, then Landlord shall repair the damage and this
Lease shall remain in full force and effect. If the Damage Estimate is more than
seventy-five (75) days, Landlord, at its option exercised by written notice to
Tenant within sixty (60) days of the date of the damage, shall either (a) repair
the damage, in which event this Lease shall continue in full force and effect,
or (b) terminate this Lease as of the date specified by Landlord in the notice,
which date shall be not less than thirty (30) days nor more than sixty (60) days
after the date such notice is given, and this Lease shall terminate on the date

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specified in the notice. If the Damage Estimate is more than one hundred thirty-
five (135) days, and Landlord does not give notice terminating this Lease, then
Tenant may give notice to Landlord, within thirty (30) calendar days after
Tenant receives the Damage Estimate, terminating this Lease as of the date of
such fire or casualty.

If, during the course of repair, it becomes reasonably apparent to
Landlord that the time required to make the repairs is likely to exceed
Landlord's Damage Estimate by ninety (90) days or more, Landlord shall promptly
give Tenant written notice specifying Landlord's revised estimate of the number
of days (from the date of damage) required to make such repairs beyond the
original Damage Estimate (a "Revised Damage Estimate"). If the Revised Damage
Estimate exceeds one hundred eighty (180) days, Landlord, at its option
exercised by written notice accompanying the revised estimate, shall elect to
either (a) continue to repair the damage, or (b) terminate this Lease as of the
date specified by Landlord in the notice, which date shall be not less than
thirty (30) days nor more than sixty (60) days after the date such notice is
given, and this Lease shall terminate on the date specified in the notice. If
the Revised Damage Estimate exceeds one hundred eighty (180) days (which one
hundred eighty (180) day period shall be extended by the length of any delay in
the completion of the repairs caused by "Tenant Restoration Delay", which means
any delay in completion of the repairs caused by Tenant, including, without
limitation, any delay caused by Tenant's failure to respond to inquiries of
Landlord regarding the repairs within a reasonable period of time, or caused by
Tenant's failure to grant Tenant's approval of materials or finishes for the
repairs within a reasonable period of time, or caused by any interference by
Tenant, or Tenant's agents, employees or contractors with the performance of
the repairs), and Landlord does not give notice terminating this Lease, then
Tenant may give notice to Landlord, within thirty (30) calendar days after
Tenant receives notice of Landlord's revised estimate, terminating this Lease as
of the date thirty (30) days after Tenant's notice. If Tenant does not give
notice terminating the Lease within such period, Tenant shall be deemed to have
agreed to the redelivery of the repaired Premises on the revised estimated
redelivery date as set forth in the Revised Damage Estimate. After Landlord
becomes aware of any occurrence that will, or is likely to, result in Tenant
Restoration Delay, Landlord shall use reasonable good faith efforts to promptly
notify Tenant of such occurrence together with Landlord's then good faith
estimate of the probable duration of the Tenant Restoration Delay.

Notwithstanding anything to the contrary contained in this Paragraph
26, if the initial Damage Estimate is more than ninety (90) days, and the date
on which Landlord reasonably anticipates the repairs of such damage will be
completed is during the last twelve (12) months of the Lease term, Landlord and
Tenant shall each have the option to terminate this Lease as of the date of such
damage by giving written notice to the other, in the case of Landlord together
with the Damage Estimate, or, in the case of Tenant, within thirty (30) days of
Tenant's receipt of the Damage Estimate.

Notwithstanding anything to the contrary in this Paragraph 26, if
damage which would otherwise lead to a right to terminate this Lease results
from the willful misconduct of Landlord or Tenant, the party from whose
misconduct such damage results shall have no right to terminate this Lease.

If the fire or other casualty damages the Premises or the common areas
of the Real Property necessary for Tenant's use and occupancy of the Premises,
and the damage does not result from the negligence or willful misconduct of
Tenant or Tenant's agents, employees, contractors, licensees or invitees, then
during the period the Premises or any part thereof are rendered unusable by such
damage and repair, Tenant's Monthly Rent and Additional Rent under Paragraphs 5
and 7 hereof shall be proportionately reduced based upon the extent to which
the damage and repair prevents Tenant from conducting its business at the
Premises. Landlord shall not be obligated to repair or replace any of Tenant's
movable furniture, equipment, trade fixtures, and other personal property, nor
any Alterations installed in the Premises by Tenant, and Tenant shall, at
Tenant's sole cost and expense, repair and replace such items. All such repair
and replacement of Alterations shall be constructed in accordance with Paragraph
9 hereof regarding Alterations.

A total destruction of the Building shall automatically terminate this
Lease. Tenant hereby waives California Civil Code Sections 1932(2) and 1933(4),

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providing for termination of hiring upon destruction of the thing hired and
Sections 1941 and 1942, providing for repairs to and of premises.

27. Eminent Domain.

a. If all or any part of the Promises are taken by any public
or quasi-public authority under the power of eminent domain, or any agreement in
lieu thereof (a "taking"), this Lease shall terminate as to the portion of the
Premises taken effective as of the date of taking. If only a portion of the
Premises is taken, Landlord or Tenant may terminate this Lease as to the
remainder of the Premises upon written notice to the other party within ninety
(90) days after the taking; provided, however, that Tenant's right to terminate
the Lease is conditioned upon the remaining portion of the Premises being of
such size or configuration that such remaining portion of the Premises is
unusable or uneconomical for Tenant's business. Landlord shall be entitled to
all compensation, damages, income, rent awards and interest thereon whatsoever
which may be paid or made in connection with any taking and Tenant shall have no
claim against Landlord for the value of any unexpired term of this Lease or of
any of the improvements or Alterations in the Premises; provided, however, that
the foregoing shall not prohibit Tenant from prosecuting a separate claim
against the taking authority for an amount separately designated for Tenant's
relocation expenses or the interruption of or damage to Tenant's business or as
compensation for Tenant's personal property, trade fixtures, Alterations or
other improvements paid for by Tenant.

In the event of a partial taking of the Premises which does not result
in a termination of this Lease, the Monthly Rent and Additional Rent under
Paragraphs 5 and 7 hereunder shall be equitably reduced. If all or any part of
the Real Property other than the Premises is taken, Landlord may terminate this
Lease upon written notice to Tenant given within ninety (90) days after the date
of taking.

b. Notwithstanding the foregoing, if all or any portion of the
Premises is taken for a period of time ending prior to the end of the term of
this Lease, this Lease shall remain in full force and effect and Tenant shall
continue to pay all rent and to perform all of its obligations under this Lease;
provided, however, that Tenant shall be entitled to all compensation, damages,
income, rent awards and interest thereon that is paid or made in connection with
such temporary taking, except that any such compensation in excess of the rent
or other amounts payable to Landlord hereunder shall be promptly paid over to
Landlord as received. Landlord and Tenant each hereby waive the provisions of
California Code of Civil Procedure Section 1265.130 and any other applicable
existing or future law, ordinance or governmental regulation providing for, or
allowing either party to petition the courts of the state in which the Real
Property is located for, a termination of this Lease upon a partial taking of
the Premises and/or the Building.

28. Landlord's Liability: Sale of Building. The term "Landlord", as
used in this Lease, shall mean only the owner or owners of the Real Property at
the time in question. Notwithstanding any other provision of this Lease, the
liability of Landlord for its obligations under this Lease is limited solely to
Landlord's interest in the Real Property as the same may from time to time be
encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against Landlord's
stockholders, directors, officers or partners on account of any of Landlord's
obligations or actions under this Lease. In addition, in the event of any
conveyance of title to the Real Property, then from and after the date of such
conveyance, Landlord shall be relieved of all liability with respect to
Landlord's obligations to be performed under this Lease after the date of such
conveyance. Upon any conveyance of title to the Real Property, the grantee or
transferee, by accepting such conveyance, shall be deemed to have assumed
Landlord's obligations to be performed under this Lease from and after tile date
of transfer, subject to the limitations on liability set forth above in this
Paragraph 28. If Tenant provides Landlord with any security for Tenant's
performance of its obligations hereunder, and Landlord transfers such security
to the grantee or transferee of Landlord's interest in the Real Property,
Landlord shall be released from any further responsibility or liability for such
security. Notwithstanding any other provision of this Lease, Landlord shall not
be liable for any consequential damages, including, without limitation, lost
profits or loss of business, nor shall Landlord be liable for loss of or damage

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to artwork, currency, jewelry, bullion, unique or valuable documents,
securities or other valuables, or for other property not in the nature of
ordinary fixtures, furnishings and equipment used in general administrative and
executive office activities and functions. Wherever in this Lease Tenant (a)
releases Landlord from any claim or liability, (b) waives or limits any right of
Tenant to assert any claim against Landlord or to seek recourse against any
property of Landlord or (c) agrees to indemnify Landlord against any matters,
the relevant release, waiver, limitation or indemnity shall run in favor of and
apply to Landlord, the constituent shareholders, partners or other owners of
Landlord. and the directors, officers, employees and agents of Landlord and each
such constituent shareholder, partner or other owner.

29. Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) days' prior notice from Landlord, Tenant shall execute,
acknowledge and deliver to Landlord a statement certifying the commencement date
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 each such modification), that
Landlord is not in default under this Lease (or, if Landlord is in default,
specifying the nature of such default), that Tenant is not in default under this
Lease (or if Tenant is in default, specifying the nature of such default), the
current amounts of and the dates to which the Monthly Rent and Additional Rent
has been paid, and setting forth such other matters as may be reasonably
requested by Landlord. Any such statement may be conclusively relied upon by a
prospective purchaser of the Real Property or by a lender obtaining a lien on
the Real Property as security.

30. Right of Landlord to Perform. If Tenant fails to make any payment
required hereunder (other than Monthly Rent and Additional Rent) or fails to
perform any other of its obligations hereunder, Landlord may, but shall not be
obliged to, and without waiving any default of Tenant or releasing Tenant from
any obligations to Landlord hereunder, make any such payment or perform any
other such obligation on Tenant's behalf. All sums so paid by Landlord and all
necessary incidental costs in connection with the performance by Landlord of an
obligation of Tenant (together with interest thereon from the date of such
payment by Landlord until paid at the Interest Rate set forth in Paragraph 5
hereof) shall be payable by Tenant to Landlord upon demand, and Tenant's failure
to make such payment upon demand shall entitle Landlord to the same rights and
remedies provided Landlord in the event of non-payment of rent.

31. Late Charge. Tenant acknowledges that late payment of any
installment of Monthly Rent or Additional Rent will cause Landlord to incur
costs not contemplated by this Lease and that the exact amount of such costs
would be extremely difficult and impracticable to fix. Such costs include,
without limitation, processing and accounting charges, late charges that may be
imposed on Landlord by the terms of any encumbrance or note secured by the Real
Property and the loss of the use of the delinquent funds. Therefore, if any
installment of Monthly Rent or Additional Rent due from Tenant is not received
within five (5) days of the date of written notice that such is due, Tenant
shall pay to Landlord on demand an additional sum of five percent (5%) of the
overdue installment, which sum represents a fair and reasonable estimate of the
costs that Landlord will incur by reason of late payment by Tenant. Acceptance
of any late charge shall not constitute a waiver of Tenant's default with
respect to the overdue amount, nor prevent Landlord from exercising any of the
other rights and remedies available to Landlord.

32. Attorneys' Fees: Waiver of Jury Trial. In the event of any action
or proceeding between Landlord and Tenant (including an action or proceeding
between Landlord and the trustee or debtor in possession while Tenant is a
debtor in a proceeding under any bankruptcy law) to enforce any provision of
this Lease, the losing party shall pay to the prevailing party all costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred in such action and in any appeal in connection therewith by
such prevailing party. The "prevailing party" will be determined by the court
before whom the action was brought based upon an assessment of which party's
major arguments or positions taken in the suit or proceeding could fairly be
said to have prevailed over the other party's major arguments or positions on
major disputed issues in the court's decision.

If any action or proceeding between Landlord and Tenant to enforce the
provisions of this Lease (including an action or proceeding between Landlord and

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the trustee or debtor in possession while Tenant is a debtor in a proceeding
under any bankruptcy law) or arising out of Tenant's use or occupancy of the
Premises or any portion of the Real Property, proceeds to trial, Landlord and
Tenant hereby waive their respective rights to a jury in such trial.

33. Waiver. No provisions of this Lease shall be deemed waived by
Landlord unless such waiver is in a writing signed by Landlord. The waiver by
Landlord of any breach of any provision of this Lease shall not be deemed a
waiver of any subsequent breach of the same or any other provision of this
Lease. No delay or omission in the exercise of any right or remedy of Landlord
upon any default by Tenant shall impair such right or remedy or be construed as
a waiver. Landlord's acceptance of any payments of rent due under this Lease
shall not be deemed a waiver of any default by Tenant under this Lease
(including Tenant's recurrent failure to timely pay rent) other than Tenant's
nonpayment of the accepted sums, and no endorsement or statement on any check or
accompanying any check or payment shall be deemed an accord and satisfaction.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent act by Tenant.

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 mail, postage prepaid, addressed to Tenant at the Premises, or to
such other place as Tenant may from time to time designate by notice to Landlord
hereunder. All notices and demands by Tenant to Landlord shall be sent by United
States mail, postage prepaid, addressed to Landlord in care of Shorenstein
Management, Inc., 555 California Street, 49th floor, San Francisco, California
94104, or to such other place as Landlord may from time to time designate by
notice to Tenant hereunder.

35. Notice of Surrender. At least ninety (90) 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 neither this paragraph nor any
failure by Landlord to protest the lack of such notice by Tenant shall be
construed as an extension of the term hereof or as a consent by Landlord to any
holding over by Tenant.

36. Defined Terms and Marginal Headings. When required by the context
of this Lease, the singular includes the plural. If more than one person or
entity signs this Lease as Tenant, the obligations hereunder imposed upon Tenant
shall be joint and several. The headings and titles to the paragraphs of this
Lease are for convenience only and are not to be used to interpret or construe
this Lease. Wherever the term "including" or "includes" is used in this Lease it
shall be construed as if followed by the phrase "without limitation".

37. Time and Applicable Law. Time is of the essence of this Lease and
of each and all of its provisions. This Lease shall be governed by and
construed in accordance with the laws of the State of California.

38. Successors. Subject to the provisions of Paragraphs 13 and 28
hereof, the covenants and conditions hereof shall be binding upon and inure to
the benefit of the heirs, successors, executors, administrators and assigns of
the parties hereto.

39. Entire Agreement: Modifications. This Lease (including any exhibit,
rider or attachment hereto) constitutes the entire agreement between Landlord
and Tenant with respect to Tenant's lease of the Premises. Neither Landlord nor
Landlord's agents have made any representations or warranties with respect to
the Premises or the Real Property or this Lease except as expressly set forth
herein, and no rights, easements or licenses shall be acquired by Tenant by
implication or otherwise unless expressly set forth herein.

40. Light and Air. Tenant agrees that no diminution of light, air or
view by any structure which may hereafter be erected (whether or not by
Landlord) shall entitle Tenant to any reduction of rent hereunder, result in any
liability of Landlord to Tenant, or in any other way affect this Lease.

41. Name of Building. Tenant shall not use the name of the Building for
any purpose other than as the address of the business conducted by Tenant in

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the Premises without the written consent of Landlord. Landlord reserves the
right to change the name of the Building at any time by written notice to Tenant
and Landlord shall not be liable to Tenant for any loss, cost or expense on
account of any such change of name.

42. Severability. If any provision of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.

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

44. No Offer. Submission of this instrument for examination and
signature by Tenant does not constitute a reservation of or option for lease,
and is not effective as a lease or otherwise until execution and delivery by
both Landlord and Tenant.

45. Hazardous Substance Disclosure. California law requires landlords
to disclose to tenants the existence of certain hazardous substances.
Accordingly, the existence of gasoline and other automotive fluids, maintenance
fluids, copying fluids and other office supplies and equipment, certain
construction and finish materials, tobacco smoke, cosmetics and other personal
items must be disclosed. Gasoline and other automotive fluids are found in the
garage area of the Project. Cleaning, lubricating and hydraulic fluids used in
the operation and maintenance of the Building are found in the utility areas of
the Building not generally accessible to Building occupants or the public. Many
Building occupants use copy machines and printers with associated fluids and
toners, and pens, markers, inks, and office equipment that may contain hazardous
substances. Certain adhesives, paints and other construction materials and
finishes used in portions of the Building may contain hazardous substances.
Although smoking is prohibited in the public areas of the Building, these areas
may, from time to time, be exposed to tobacco smoke. Building occupants and
other persons entering the Building from time-to-time may use or carry
prescription and non-prescription drugs, perfumes, cosmetics and other
toiletries, and foods and beverages, some of which may contain hazardous
substances. Landlord has made no special investigation of the Premises with
respect to any hazardous substances. Landlord covenants to comply during the
Lease term with all local, state and federal laws and regulations requiring
disclosure to tenants regarding the existence of hazardous substances within the
Building.

46. Real Estate Brokers. Tenant represents and warrants that it has
negotiated this Lease directly with the Real Estate Broker(s) identified in
Paragraph 2 and has not authorized or employed, or acted by implication to
authorize or to employ, any other real estate broker or salesman to act for
Tenant in connection with this Lease. Tenant shall hold Landlord harmless from
and indemnify and defend Landlord against any and all claims by any real estate
broker or salesman other than the Real Estate Broker(s) identified in Paragraph
2 for a commission, finder's fee or other compensation as a result of Tenant's
entering into this Lease.

47. Parking. Landlord shall provide Tenant with parking for twelve (12)
automobiles in the garage of the Building, and Tenant shall pay for such parking
at Landlord's regular rate or charge from time to time in effect for parking in
the Building. Notwithstanding the fact that non-reserved parking for twelve (12)
automobiles shall be initially available to Tenant, Tenant shall not be required
to initially accept more than eight (8) parking spaces. If Tenant does not
accept all of the parking so available to Tenant, Tenant acknowledges that all
or a portion of the parking spaces not then accepted by Tenant may be
temporarily committed to other tenants of the Building. If Tenant thereafter

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needs any such space, for Tenant's own use, Tenant shall give Landlord at least
sixty (60) days prior written notice of the date on which Tenant requires such
space and Landlord shall make such space available to Tenant on such date,
provided that Tenant shall be deemed to have released to Landlord any parking
space which Tenant has not accepted by April 1, 1997. Tenant shall provide
Landlord with written notice of the names of each party to whom Tenant from time
to time distributes Tenant's parking rights hereunder, and shall cause each such
party to execute Landlord's standard waiver form for garage users. If the
parking charge is not paid within five (5) days of the date due then, in
addition to any other remedies afforded Landlord under this Lease for nonpayment
of rent, Landlord may suspend Tenant's rights under this Paragraph 47 until such
parking charge is paid in full. The parking rights set forth in this Paragraph
47 are non-transferrable, are personal to CKS Group, Inc., and shall not inure
to the benefit of any successor, assignee or subtenant of Tenant. Further, if at
any time during the term hereof, Tenant releases to Landlord any parking space
provided for in this paragraph, then Tenant's right under this paragraph to use
such released parking space is terminated for the remainder of the Lease term.

48. Option to Install Telecommunications Installation.

a. Antenna Request and Designation of Telecom Site. Provided
that Landlord has suitable space available for such equipment and Landlord
determines, in Landlord's sole judgment, that the operation of such equipment
will not interfere with the operation of the Building or with any other
equipment then installed in or on the Building or with any equipment for which
an installation right has then been granted, Tenant shall have the option to
install and maintain an antenna or telecommunications dish (the "Antenna") on
the roof of the Building, in accordance with the provisions of this Paragraph
48. If Tenant desires to install an Antenna on the roof of the Building, Tenant
shall so notify Landlord in writing, which notice shall be accompanied by the
specifications of the proposed Antenna and a detailed description of the
proposed method of installing the Antenna (an "Antenna Request"). Within sixty
(60) days of receipt of Tenant's Antenna Request, Landlord shall notify Tenant
in writing of whether there is a suitable site available on the roof of the
Building for the proposed Antenna. If Landlord determines that a suitable site
is available, Landlord's notice shall designate the site on which the Antenna
may be installed (the "Telecom Site"), the date on which the Telecom Site will
be available (the "Antenna Commencement Date"), and the monthly rental rate for
the Telecom Site (the "Telecom Rental"), which rate shall be Landlord's then
standard charge for rooftop equipment sites for antennae similar to the Antenna.
Landlord's designation of a Site shall represent only Landlord's consent to the
placement of the Antenna at the Telecom Site, and shall not constitute any
agreement or representation by Landlord that the Telecom Site will be adequate
for Tenant's needs, that the Antenna will not interfere with other equipment on
the roof of the Building, or that the Antenna or its proposed installation
complies with applicable laws, building codes, ordinances, rules or other
governmental regulations. If Landlord indicates that no suitable site is
available, or if Tenant does not elect to lease the Telecom Site on the terms
stated in Landlord's notice, Tenant may thereafter send another Antenna Request
(indicating the same or different specifications), and Landlord shall consider
such request, provided that Landlord shall have no obligation to consider an
Antenna Request more frequently than once every six (6) months. If Tenant
desires to lease the Telecom Site on the terms stated in Landlord's notice,
Tenant shall so notify Landlord in writing within ten (10) days of receipt of
Landlord's notice, and the following provisions of this Paragraph 48 shall
thereupon apply.

b. Equipment and Telecom Site. If Tenant elects to lease the
Telecom Site designated by Landlord in accordance with Paragraph 48.a, above,
then in addition to the Premises referred to in Paragraph 1 hereof and shown on
the attached Exhibit A, effective as of the Telecom Commencement Date Tenant
shall have the following:

(i) the right to use the Telecom Site, designated by Landlord
to Tenant as provided above, for the installation, operation,
maintenance and replacement by Tenant, at Tenant's sole expense, of the
Antenna (not to exceed the diameter and/or height designated in
Tenant's Antenna Request); and

(ii) the non-exclusive right to use, in common with one or
more other tenants of the Building and Landlord, the vertical shafts
and

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horizontal raceways of the Building for the installation of such
electrical wires and cables as reasonably needed, in Tenant's
reasonable judgment, to connect Tenant's equipment on the Telecom Site
with the Premises. The Antenna and all related wiring equipment and
cabling is referred to herein as the "Equipment".

The provisions of this Lease (excluding Paragraph 17, entitled
Utilities) shall apply to Tenant's lease of the Telecom Site. Without
limiting the generality of the foregoing, the provisions of Paragraph
14, entitled Indemnification of Landlord, and the provisions of
Paragraph 15, entitled Insurance, shall apply in full to Tenant's lease
of the Telecom Site and Tenant's installation, operation and
maintenance of the Equipment.

Landlord shall not be obligated to provide any water, gas or
other utilities to the Telecom Site except that Landlord will allow
Tenant to connect to Landlord's existing electrical panel serving the
Telecom Site and to draw therefrom, at no separate charge to Tenant,
electrical power for ordinary use of the Equipment.

c. Telecom Rental. Commencing on the Antenna Commencement
Date, and continuing throughout the term of this Lease, Tenant shall pay the
Telecom Rental to Landlord as rent for the Telecom Site, on the first day of
each month without deduction or offset. Such Telecom Rental shall be paid along
with Tenant's payment of Monthly Rent for the Premises under Paragraphs 2.c. and
5 of the Lease.

d. Installation Plans: Relocation. Tenant shall submit to
Landlord detailed plans and specifications for the Antenna and the cables and
wires that Tenant wishes to install, but shall not commence any construction,
installation or operation of any Equipment until the plans and specifications
have been approved in writing by Landlord. Landlord may require Tenant to
relocate the Equipment during the Lease term in order to accommodate any other
equipment Landlord may elect to locate (or permit others to locate) in the areas
occupied by the Equipment. Tenant shall label all Equipment in a manner approved
by Landlord.

e. Use: Compliance With Law. Tenant agrees that Tenant shall
not sell communication services or use the Equipment to provide services to any
other party. Tenant, at Tenant's sole expense, shall comply with all laws and
regulations regarding the installation, construction, operation and maintenance
of the Equipment.

f. Interference by Equipment. In no event may the Equipment
interfere with the reception of or signal from any other antenna or satellite
dish presently or hereinafter erected on the Building. If the operation of the
Equipment interferes with any such other antenna or satellite dish then,
immediately following written notice from Landlord to Tenant of such
interference, Tenant shall eliminate such interference. If Tenant is unable to
promptly eliminate such interference, then Landlord may, upon further written
notice to Tenant, terminate Tenant's lease of the Telecom Site and Tenant shall
immediately cease operation of the Equipment and remove the Equipment from the
Telecom Site pursuant to Paragraph 48.g. below.

g. Removal of Equipment. Upon the expiration or any sooner
termination of the Lease, Tenant shall remove all of the Equipment from the
Telecom Site, raceways and Building areas and restore the areas to their
condition prior to such installation.

h. Access to Telecom Site. Subject to the Rules and
Regulations of the Building Tenant shall have the right, at Tenant's sole cost
and expense, to enter upon the Telecom Site during normal business hours and
weekends and to construct, install, operate and maintain the Equipment on the
Telecom Site and in the raceways, until this Lease terminates. Tenant may enter
the Building and Telecom Site and perform construction work therein in
accordance with the plans and specifications approved by Landlord pursuant to
Paragraph 48.d. above. Tenant may have access to the roof of the Building for
normal repairs during normal business hours upon not less than three hours'
prior telephone notice to the engineer for the Building during normal business
hours. Tenant shall designate in writing to Landlord the appropriate authorized
person or persons whom Tenant will use to make emergency repairs to the
Equipment on the Telecom

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Site. Upon such proper designation and prior identification to Landlord's
Building security personnel, such authorized person(s) may enter upon the roof
to perform emergency repairs to the Equipment at any time. Tenant shall give
Landlord not less than fifteen (15) days' prior written notice of the
commencement of any construction or installation under this Paragraph 48.
Landlord agrees to allow access to the roof only to persons who show evidence
which, in the sole judgment and discretion of Landlord, reasonably appears to
constitute authorization by Tenant or by any other tenant granted rights by
Landlord to install, operate and/or maintain facilities or equipment of any kind
on the roof of the Building, or by any representative or agent of Landlord for
such access.

i. Landlord's Liability. Landlord shall have no obligation to
design, install, construct, use, operate, maintain, repair, replace or remove
Tenant's Equipment or to have any other responsibility or liability in
connection therewith or the operations thereof, except as expressly set forth In
this Lease.

49. Storage.

a. Lease of Storage Premises. In addition to the Premises
described in Paragraph 1 above, Tenant shall lease the "Storage Premises" (as
defined below) which consist of approximately 200 to 500 rentable square feet of
a storage space in the Building, the exact location of which shall be identified
by Landlord to Tenant on or prior to the commencement of the Term hereof.
Except to the extent inconsistent with this Paragraph 49, the provisions of the
Lease shall apply in full to Tenant's lease of the Storage Premises.

b. Storage Premises "As Is": Use. Tenant shall accept the
Storage Premises in their "as-is" condition and Landlord shall have no
obligation to make or pay for any improvements or perform any renovation in the
Storage Premises to prepare such space for Tenant's occupancy. Tenant shall use
the Storage Premises for storage purposes only. Landlord will provide lighting
suitable for the use of the Storage Premises for storage purposes, and no other
utility or services. Tenant will be responsible for providing, at Tenant's sole
cost and expense, janitorial services to the Storage Premises and Landlord will
have no obligation to furnish or pay for such service.

c. Rent. Tenant shall pay rent for the Storage Premises at the
rate of $1.25 per rentable square foot per month (the "Storage Rent"). Tenant
shall pay the Storage Rent monthly, in advance, on or before the first day of
each calendar month during the term of the Lease and the Storage Rent shall
constitute additional rent owing under the Lease. Storage Rent for any partial
month shall be proportionately adjusted based on a 30-day month.

d. Relocation. At any time during the term hereof Landlord
may, at Landlord's sole cost and expense, substitute other space of comparable
size in the Building or elsewhere in the Hills Plaza complex for the Storage
Premises.

50. Deleted.

51. Right of First Offer.

a. First Offer Right: Available Space. Tenant shall have a
continuing right of first offer to lease each increment of space on the fifth
(5th) floor of the Building which is contiguous to the Premises (each of which
is a "First Offer Increment") and is or becomes "available for lease" during the
term hereof, subject to the provisions of this Paragraph 51. An increment of
space shall not be deemed "available for lease" if the tenant under an expiring
lease of such space desires to renew or extend its lease or if any tenant of the
Building exercises an option or right of first offer to lease such space, which
option or right of first offer has been granted prior to the date of this Lease.

b. Tenant's Space Requirements Notice: Notice of Available
Space. Tenant shall deliver to Landlord, within the two (2) weeks immediately
preceding each six (6) month anniversary of the date this Lease is executed by
Landlord and Tenant, a written notice specifying Tenant's anticipated needs for
additional space on the fifth (5th) floor of the Building during the subsequent
six (6) month period (the "Space Requirements Notice"). Such Space Requirement
Notice shall be delivered to the building manager and a copy thereof delivered
to Landlord at the address for notices to Landlord set forth in Paragraph 34
hereof.

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<PAGE> 35
Within thirty (30) days after receipt of any Space Requirements Notice,
Landlord shall give Tenant written notice of any First Offer Increment which is
then available to Lease. Further, Landlord shall give Tenant written notice of
any First Offer Increment which becomes available to Lease during the six (6)
month period following delivery of Tenant's Space Requirements Notice, which
notice shall be given within thirty (30) days after any such First Offer
Increment becomes available to lease, or, if sooner, within thirty (30) days
after Landlord shall be in a position to project when a First Offer Increment
will be available to lease. Notices from Landlord to Tenant hereunder are
referred to as "Availability Notices". Each Availability Notice shall identify
the space and specify the availability date (or estimated availability date). If
Landlord has not received from Tenant a Space Requirements Notice for a
particular 6-month period, the provisions of this Paragraph 51 shall not apply
during such period and Landlord shall have no obligation to provide Tenant with
notice of any First Offer Increment that becomes available for lease during such
period or to lease any such First Offer Increment to Tenant during such period.
Tenant acknowledges that, as of the date this Lease is executed, Tenant does not
require additional space on the fifth (5th) floor of the Building other than the
Premises.

c. Exercise of First Offer Right. If Tenant elects to lease a
First Offer Increment, Tenant shall so notify Landlord in writing within ten
(10) business days after the date of the Availability Notice. If Tenant does not
exercise its right to lease a First Offer Increment within such ten (10) day
period, then Landlord shall be released of its obligation to lease such First
Offer Increment to Tenant for a period of six (6) months following the relevant
Availability Notice, and Landlord shall have the right during such six (6) month
period to lease the First Offer Increment to any third-party for a term and on
such other conditions as Landlord may determine in Landlord's sole discretion.
If Landlord has not leased the First Offer Increment to a third-party tenant
within the six (6) month period following the Availability Notice, then the
provisions of this Paragraph 51 shall again apply to the First Offer Increment,
provided, however, that if Landlord is actively and in good-faith negotiating
with a third-party with respect to the First Offer Increment at the end of such
six (6) month period (which negotiations have included, at a minimum, exchange
of a proposal and counter proposal), such six (6) month period shall be extended
through the date such negotiations conclude. Upon Landlord's leasing the First
Offer Increment to any third-party during the period permitted by this Paragraph
48, all rights of Tenant with respect thereto under this Paragraph 48 shall
cease until the First Offer Increment becomes "available for lease" again at a
future date.

d. Terms and Conditions. Upon Tenant's election to lease a
First Offer Increment, Landlord and Tenant shall promptly enter into an
amendment of this Lease, adding such First Offer Increment to the Premises on
all the terms and conditions set forth in this Lease as to the Premises
originally demised hereunder, except that (i) the term of the lease to Tenant of
such First Offer Increment shall commence upon the availability date (but in no
event sooner than thirty (30) days after the date of Landlord's Availability
Notice to Tenant) and shall continue coextensively with the remaining term
hereof and any extension thereof, (ii) the Monthly Rent payable by Tenant under
Paragraph 5 of the Lease for the First Offer Increment shall be the fair market
rent for such space, as provided for below, (M) Tenant's proportionate share
payable under Paragraph 7 hereof with respect to such First Offer Increment
shall be determined by dividing the rentable square footage of such First Offer
Increment by the rentable square footage of the Building, and (iv) Tenant shall
take the First Offer Increment in its then "as-is" condition, broom clean and
with the carpeting shampooed throughout.

The fair market rent for the First Offer Increment shall be mutually
agreed upon by Landlord and Tenant in writing within the thirty (30)-day period
commencing with Landlord's notice to Tenant stating the commencement date for
the First Offer Increment, but no sooner than six (6) months prior to the date
the First Offer Increment is to be added to the Lease. For purposes of this
Paragraph 51, the term "fair market rent" shall mean the rental rate for
comparable space under primary lease (and not sublease), taking into
consideration such amenities as existing improvements, view, floor on which the
Premises are situated and the like, situated in first-class, reputable,
established high-rise office buildings in comparable locations in the San
Francisco financial district, in sound physical and economic condition, engaged
in then-prevailing ordinary rental market practices with respect to tenant

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<PAGE> 36
concessions (if any) (e.g. not offering extraordinary rental, promotional deals
and other concessions to tenants in an effort to alleviate cash flow problems,
difficulties in meeting loan obligations or other financial distress, or in
response to a greater than average vacancy rate). If Landlord and Tenant are
unable to agree upon the fair market monthly rent within such thirty (30)-day
period, then the fair market monthly rent shall be established by appraisal in
accordance with the procedures set forth in Exhibit C attached hereto.

If Tenant shall exercise the right of first offer granted herein,
Landlord does not guarantee that the First Offer Increment will be available on
the stated availability date for the lease thereof, if the then existing
occupants of the First Offer Increment shall hold-over, or for any other reason
beyond Landlord's reasonable control. In such event. rent with respect to the
First Offer Increment shall be abated until Landlord legally delivers the same
to Tenant, as Tenant's sole recourse.

e. Minimum Monthly Rent. Notwithstanding anything in the
foregoing or Exhibit C attached hereto to the contrary, in no event shall the
Monthly Rent for any First Offer Increment be less than the amount produced by
multiplying the rentable square footage of such First Offer Increment by the
aggregate of the monthly rental rate per rentable square foot payable by Tenant
for all Premises then leased under this Lease under Paragraphs 2, 5 and 7 hereof
for the month immediately preceding the date the First Offer Increment is added
to the Lease.

f. Limitation on Tenant's Right of First Offer.
Notwithstanding the foregoing, if (i) on the date of exercise of the right of
first offer, or the date immediately preceding the date the Lease term for the
First Offer Increment is to commence, Tenant is in default hereunder, or (II) on
the date immediately preceding the date the Lease term for the First Offer
Increment is to commence Tenant named herein (a) Is not in occupancy of the
entire Premises then leased hereunder or (b) does not intend to occupy the
entire Premises then leased hereunder, together with the entire First Offer
Increment, then Tenant shall have no right to lease the First Offer Increment
and the exercise of the right of first offer shall be null and void.

52. Renewal Option.

a. Exercise of Renewal Option. Tenant shall have the option to
renew this Lease for one (1) additional term of five (5) years, commencing upon
the expiration of the initial term of the Lease. The renewal option must be
exercised, if at all, by written notice given by Tenant to Landlord not later
than twelve (12) months prior to the Expiration Date of this Lease.
Notwithstanding the foregoing, this renewal option shall be null and void and
Tenant shall have no right to renew this Lease if (i) as of the date immediately
preceding the commencement of the renewal period Tenant is not in occupancy of
the entire Premises then demised hereunder or Tenant does not intend to continue
to occupy the entire Premises (but intends to assign this Lease or sublet all or
a portion of the Premises), or (ii) on the date Tenant exercises the option or
on the date immediately preceding the commencement date of the renewal period
Tenant is in default of any of its obligations under this Lease.

b. Terms and Conditions. If Tenant exercises the renewal
option, then during the renewal period all of the terms and conditions set forth
in this Lease as applicable to the Promises during the initial term shall apply
during the renewal term, except that (i) Tenant shall have no further right to
renew this Lease, (ii) Tenant shall take the Premises in their then "as-is"
state and condition, (iii) the Base Year for the Premises shall be the calendar
year in which the renewal term commences and the Base Tax Year shall be the
fiscal tax year in which the renewal term commences, (iv) the Monthly Rent
payable by Tenant for the Premises shall be the then-fair market rent for the
Premises based upon the terms of this Lease, as renewed, and (v) Tenant shall
have no further rights under Paragraph 51 of this Lease. For purposes of this
Paragraph 52, the term "fair market rent" shall have the meaning set forth in
Paragraph 51 above. The fair market rent shall be mutually agreed upon by
Landlord and Tenant in writing within the thirty (30) calendar day period
commencing six (6) months prior to the Expiration Date of this Lease. If
Landlord and Tenant are unable to agree upon the fair market monthly rent within
such thirty (30)-day period, then the fair market rent shall be established by
appraisal in accordance with the procedures set forth in attached Exhibit C.

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<PAGE> 37
c. Minimum Monthly Rent. Notwithstanding anything in the
foregoing to the contrary, in no event shall the Monthly Rent during the renewal
period be less than the aggregate of the amounts of Monthly Rent and Additional
Rent payable by Tenant (for all of the Premises leased hereunder) under
Paragraphs 2.b., 5 and 7 hereof for the calendar month immediately preceding
the commencement of the renewal period. If the fair market rent is not
established prior to the commencement of the renewal period, then Tenant shall
continue to pay as Monthly Rent and Additional Rent the sums in effect as of the
last day of the initial term of the Lease and, as soon as the fair market rent
is determined, Tenant shall immediately pay to Landlord any deficiency in the
amount paid by Tenant during such period.

53. Temporary Promises.

a. Existing Temporary Premises. An affiliate of Tenant,
Cleary, Kvamme & Suitor, Inc., presently leases those premises shown outlined
on attached Exhibit D (the "Temporary Premises") on a month to month basis, with
a termination date effective on the date immediately preceding the date of this
Lease. Commencing on the date hereof and continuing through the earlier of (i)
the date Tenant vacates such space, (ii) the first date on which Landlord has
delivered both Increment 2 and Increment 3 of the Premises to Tenant, or (iii)
December 31, 1996, Landlord shall supply Tenant with the Temporary Premises.
Tenant shall accept the Temporary Premises in their "as is" state and condition
and Landlord shall have no obligation whatsoever to make or pay for any
improvements in the Temporary Premises to prepare the Temporary Premises for
Tenant's occupancy. Tenant shall pay rent for the Temporary Premises at the rate
of Five Thousand Six Hundred Twenty-Four Dollars ($5,624.00) per month,
commencing on the date hereof. The rent for any partial month shall be
proportionately adjusted. Landlord and Tenant acknowledge that, except to the
extent inconsistent with this Paragraph, all of the other terms of this Lease
shall apply in full to Tenant's occupancy of the Temporary Premises.

b. Substitute Temporary Premises. Landlord reserves the right
one time during the Term of this Lease, upon thirty (30) days advance written
notice to Tenant, to relocate Tenant from the Temporary Premises to another part
of the Building; provided that (i) the substitute temporary premises shall be no
smaller than the Temporary Premises, (ii) the substitute temporary premises
shall have improvements reasonably suitable for general office purposes, (iii)
Tenant shall have no obligation to pay more than the monthly rate set forth
above regardless of the size of the substitute temporary premises unless Tenant
actually occupies more than 2,812 rentable square feet of such space, in which
event Tenant shall pay rent for such additional space at the rate of $24.00 per
rentable square foot per annum, and (iv) such substitute space shall be on the
fifth (5th) floor of the Building, unless Landlord obtains Tenant's written
agreement to take proposed substitute space on another floor. From and after the
date of any relocation of the Temporary Premises pursuant to this Paragraph
53.b. or Paragraph 53.c., the term "Temporary Premises" as used herein shall
mean the substituted space in the Building. If such a relocation occurs, then
Landlord shall bear Tenant's reasonable out-of-pocket expenses in moving
Tenant's furnishings and equipment from the occupied Temporary Premises to the
substituted Temporary Premises (including the cost of installation in the
substitute Temporary Premises of Tenant's then-existing telephone system, but
expressly excluding the cost of any new, additional or replacement equipment).

c. Substitution of Shell Space for Temporary Premises. if
Landlord elects to replace the Temporary Premises with a portion of the space on
the fifth (5th) floor of the Building which is presently in shell condition (the
"Shell Substitute Premises"), the provisions of this Paragraph 53.c. shall
apply. Prior to delivering the Shell Substitute Premises to Tenant, Landlord
shall install in the Shell Substitute Premises basic levels of the following,
all designed and installed for open plan space: HVAC, carpeting, lighting, and
electrical wiring and outlets (collectively, the "Basic Improvements"). Landlord
and Tenant shall each bear one-half of the cost of the Basic Improvements,
including any architectural costs and the fee charged by Landlord's contractor
in connection therewith, provided that no Alterations Operations Fee (as defined
in Paragraph 9.a. above) shall be payable with respect to the Basic Improvements
and provided further that Tenant's share of the cost of the Basic Improvements
shall not exceed $5.00 per rentable square foot of the Shell Substitute
Premises. Tenant shall pay Landlord immediately upon written demand Tenants
one-half share of the cost of the construction of the Basic Improvements, which
demand may be

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[HILLS PLAZA PHASE I FLOOR 5]

[EXHIBIT A]
<PAGE> 39
for payment in advance or in course of construction installments. At Tenant's
written request, Landlord shall provide Tenant with an advance of up to
$14,060.00 (the "Temporary Promises Advance") to be applied toward Tenant's
share of the cost of the Basic Improvements. Interest shall accrue on sums from
time to time disbursed hereunder at the rate of ten percent (10%) per annum.
Upon the completion of the Basic Improvements and the determination of the
actual amount of the Temporary Premises Advance that was disbursed by Landlord
(the "Temporary Premises Amortization Amount"), Landlord and Tenant will enter
into an amendment to the Lease which increases the monthly rent set forth in
Paragraph 2.c. of the Lease by a sum sufficient to fully amortize the Temporary
Premises Amortization Amount over the period (the "Basic Improvements
Amortization Period") commencing on the first day of the first calendar month
following the final disbursement of the Temporary Premises Advance and ending on
the Expiration Date, which amortization shall be on a straight line basis at an
interest rate of ten percent (10%) per annum. Landlord shall notify Tenant in
writing of the total interest which accrued prior to the commencement of the
Basic Improvements Amortization Period, and Tenant shall pay Landlord such sum
shall be within thirty (30) days of such notice. If this Lease is terminated
early for any reason whatsoever, the then unamortized portion of the Temporary
Premises Improvement Advance, together with any accrued and unpaid interest
thereon, shall be immediately due and payable. Tenant shall accept the Shell
Substitute Premises in their as is condition following completion of the Basic
Improvements. Notwithstanding the provisions of Paragraph 53.a. above, Tenant
shall pay rent for the Shell Substitute Premises at the rate of Four Thousand
Six Hundred Eighty-Seven Dollars ($4,687.00) per month, commencing on the date
of substitution. The Shell Substitute Premises shall be no smaller than the
Temporary Premises, and Tenant shall have no obligation to pay more than the
monthly rate set forth above regardless of the size of the Shell Substitute
Premises unless Tenant actually occupies more than 2,812 rentable square feet of
such space, in which event Tenant shall pay for such additional space at the
rate of $20.00 per rentable square foot per annum.

54. Cable Television Service. Landlord shall use reasonable efforts to
assist Tenant in obtaining, at Tenant's cost, cable television service to the
Premises, provided that (i) In connection therewith, Landlord may, at Landlord's
sole discretion, refuse to permit any structural changes to the Building or any
changes to the Building systems, and (ii) the terms of any transmission access
agreement or rooftop equipment license entered into by Landlord with respect to
bringing such service into the Building and to the Premises must be acceptable
to Landlord, in Landlord's sole and absolute discretion.

55. Quiet Enjoyment. If, and so long as, Tenant pays the rent and
keeps, observes and performs each and every term, covenant and condition of this
Lease on the part or on behalf of Tenant to be kept, observed and performed,
Tenant shall peaceably and quietly enjoy the Premises throughout the term
without hindrance by Landlord or any person lawfully claiming through or under
Landlord, subject to the provisions of this Lease.

THIS LEASE IS EXECUTED by Landlord and Tenant as of the date set forth
at the top of page 1 hereof.

SHORENSTEIN REALTY INVESTORS, L.P., CKS GROUP, INC.,
a California limited partnership, a Delaware corporation

By The Shorenstein Company, a
California limited partnership,
its general partner

By Shorenstein Management, Inc.,
a California corporation,
its general partner

By /s/ Douglas W. Shorenstein By: /s/ Carlton H. Baab
---------------------------- --------------------------
Douglas W. Shorenstein
President Name: Carlton H. Baab
------------------------

Landlord Title: Chief Operating Officer
-----------------------
Tenant
37
<PAGE> 40
EXHIBIT B

RULES AND REGULATIONS

HILLS PLAZA

1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building without the prior written consent of Landlord, which
consent may be withheld in Landlord's sole discretion. Landlord shall have the
right to remove, at tenant's expense and without notice to tenant, any such
sign, placard, picture, advertisement, name or notice that has not been approved
by Landlord.

All approved signs or lettering on doors and walls shall be
printed, painted, affixed or inscribed at the expense of the tenant requiring
the sign or lettering by a person approved of by Landlord.

If Landlord notifies any tenant in writing that Landlord
objects to any curtains, blinds, shades or screens attached to or hung in or
used in connection with any window or door of the tenant's premises, such use of
such curtains, blinds, shades or screens shall be removed immediately by such
tenant. No awning shall be permitted on any part of any tenant's premises. The
sashes, sash doors, skylights, windows, heating, ventilating and air
conditioning vents and doors that reflect or admit light and air into the halls,
passageways or other public places in the Building shall not be covered or
obstructed by any tenant, nor shall any bottles, parcels, or other articles be
placed on any window sills.

2. No ice, drinking water, towel, barbering or bootblacking,
shoeshining, or repair services, or other similar services shall be provided to
any premises, except from persons authorized by the Landlord and at the hours
and under regulations fixed by the Landlord.

3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom.

4. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any tenant or used by any tenant for any
purpose other than for ingress to and egress from their premises. The halls,
passages, exits, entrances, elevators, stairways, balconies and roof are not for
the use of the general public and the Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence in the
judgment of the Landlord shall be prejudicial to the safety, character,
reputation and interests of the Building and its tenants. No tenant and no
employees or invitees of any tenant shall go upon the roof of the Building.

5. Tenants shall not alter any lock or install any new or additional
locks or any bolts on any interior or exterior door of their premises without
the prior written consent of the Landlord.

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

7. Tenants shall not overload the floor of their premises or mark,
drive nails, screw or drill into the partitions, woodwork or plaster or in any
way deface their premises or any part thereof.

8. No furniture, freight or equipment of any kind shall be brought into
the Building without the consent of Landlord and all moving of the same into or
out of the Building shall be done at such time and in such manner as Landlord
shall designate. Landlord shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the Building and

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<PAGE> 41
also the times and manner of moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Landlord, stand on a
platform of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss of or damage to any such safe or
property from any cause, and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
the tenant. The elevator designated for freight by Landlord shall be available
for use by all tenants in the Building during the hours and pursuant to such
procedures as Landlord may determine from time to time. The persons employed to
move any tenant's equipment, material, furniture or other property in or out of
the Building must be acceptable to Landlord. The moving company must be a
locally recognized professional mover, whose primary business is the performing
of relocation services, and must be bonded and fully insured. A certificate or
other verification of such insurance must be received and approved by Landlord
prior to the start of any moving operations. Insurance must be sufficient in
Landlord's sole opinion, to cover all personal liability, theft or damage to the
Project, including, but not limited to, floor coverings, doors, walls,
elevators, stairs, foliage and landscaping. Special care must be taken to
prevent damage to foliage and landscaping during adverse weather. All moving
operations shall be conducted at such times and in such a manner as Landlord
shall direct, and all moving shall take place during non-business hours unless
Landlord agrees in writing otherwise.

9. Tenants shall not employ any person or persons other than the
janitor of Landlord for the purpose of cleaning their premises, unless otherwise
agreed to by Landlord. Except with the written consent of Landlord, no person or
persons other than those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning the Building or any premises within the
Building. Tenants shall not cause any unnecessary labor by reason of their
carelessness or indifference in the preservation of good order and cleanliness.

10. Tenants shall not use, keep or permit to be used or kept any foul
or noxious gas or substance in their premises, or permit or suffer their
premises to be occupied or used in a manner offensive or objectionable to the
Landlord or other occupants of the Building by reason of noise, odors and/or
vibrations, or interfere in any way with other tenants or those having business
therein, nor shall any animals or birds be brought in or kept in or about any
tenant's premises or the Building. In no event shall tenants keep, use, or
permit to be used in their premises or the Building any guns, firearm, explosive
devices or ammunition.

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

12. Tenants shall not use or keep in their premises or the Building any
kerosene, gasoline, or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by the Landlord.

13. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced into tenants' premises and the Building. No
boring or cutting for wires will be allowed without the prior consent of
Landlord. The location of telephones, call boxes and other office equipment
affixed to any tenant's promises shall be subject to the prior approval of
Landlord.

14. Upon the expiration or earlier termination of tenant leases, each
tenant shall deliver to Landlord the keys of offices, rooms and toilet rooms
which have been furnished to them by Landlord and any copies of such keys which
the tenant has made. In the event the tenant has lost any keys furnished by
Landlord, the tenant shall pay Landlord for such keys.

15. Tenants shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of their premises,
except to the extent and in the manner approved in advance by Landlord. The
expense of repairing any damage resulting from a violation of this rule or

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<PAGE> 42
removal of any floor covering shall be borne by the tenant by whom, or by whose
contractors, employees or invitees, the damage shall have been caused.

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

17. On Sundays and legal holidays, and on other days between the hours
of 6:00 P.M. and 8:00 A.M., access to the Building, or to the halls, corridors,
elevators or stairways in the Building, or to individual tenant's premises may
be refused unless the person seeking access is known to the person or employee
of the Building in charge and has a pass or is properly identified. Landlord
shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In case of invasion,
mob, riot, public excitement, or other commotion, Landlord reserves the right to
prevent access to the Building during the continuance of the same by closing the
doors or otherwise, for the safety of the tenants and protection of property in
the Building.

18. Tenants shall be responsible for insuring that the doors of their
promises are closed and securely locked before leaving the Building and must
observe strict care and caution that all water faucets or water apparatus are
entirely shut off before the tenant or the tenant's employees leave the
Building, and that all electricity, gas or air shall likewise be carefully shut
off, so as to prevent waste or damage, and for any default or carelessness
tenant shall make good all injuries sustained by other tenants or occupants of
the Building or Landlord.

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

20. The requirements of any tenant will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties unless under
special instructions from Landlord, and no employee will admit any person
(tenant or otherwise) to any office without specific instructions from Landlord.

21. No vending machine or machines of any description shall be
installed, maintained or operated upon the Premises without the prior written
consent of Landlord.

22. Subject to the right of access by tenants to their premises in
accordance with Building security procedures, Landlord reserves the right to
close and keep locked all entrance and exit doors of the Building on Sundays and
legal holidays and on other days between the hours of 6:00 P.M. and 8:00 A.M.,
and during such further hours as Landlord may deem advisable for the adequate
protection of the Building and the property of its tenants.

23. Except as otherwise provided in a tenant's respective lease, each
tenant shall store all its trash and garbage within its premises. No material
shall be placed in the Building trash boxes or receptacles if such material is
of such nature that it may not be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage without being in violation
of any law or ordinance governing such disposal. All garbage and refuse disposal
shall be made only through entryways and elevators provided for such purposes
and at such times as Landlord designates. Removal of any furniture or
furnishing, large equipment, packing crates, packing materials and boxes shall
be the responsibility of each tenant and such items may not be disposed of in
the Building trash receptacles nor shall they be removed by the janitorial
service for the common areas, except at Landlord's sole option and at the
tenant's expense. No furniture, appliances, equipment or flammable products of
any type may be disposed of in the Building trash receptacles.

24. Landlord shall have the right, exercisable without notice and
without liability to any tenant, to change the name and the street address of
the Building of which the tenant's promises are a part.

B-3
<PAGE> 43
25. The word "Building" as used herein means the building of which the
tenant's premises are a part.

26. Landlord reserves the right to amend, supplement or delete any of
the foregoing rules and regulations and to make such other rules and regulations
as in its judgment may from time to time be needed for the safety, care and
cleanliness of the Building and for the preservation of good order therein.

27. Neither Landlord nor any operator of the parking areas within the
Project, as the same are designated and modified by Landlord, in its sole
discretion, from time to time (the "Parking Areas") shall be liable for loss of
or damage to any vehicle or any contents of such vehicle or accessories to any
such vehicle, or any property left in any of the Parking Areas, resulting from
fire, theft, vandalism, accident, conduct or other users of the Parking Areas
and other persons, or any other casualty or cause. Further, tenants understand
and agree that: (a) Landlord shall not be obligated to provide any traffic
control, security protection or operator for the Parking Areas; (b) tenants use
the Parking Areas at their own risk; and (c) Landlord shall not be liable for
personal injury or death, or theft, loss of or damage to property sustained in
the Parking Areas.

28. Tenants (including the employees, agents, invitees, and visitors of
tenants) shall use the Parking Areas solely for the purpose of parking passenger
model cars, small vans and small trucks and shall comply in all respects with
any rules and regulations that may be promulgated by Landlord from time to time
with respect to the Parking Areas. The Parking Areas may be used by tenants, or
their agents or employees, for occasional overnight parking of vehicles. Tenants
shall ensure that any vehicle parked in any of the parking spaces shall be kept
in proper repair and shall not leak excessive amounts of oil or grease or any
amount of gasoline.

29. Tenant's right to use the Parking Areas shall be in common with
other tenants of the Project and with other parties permitted by Landlord to use
the Parking Areas. Landlord reserves the right to assign and reassign, from time
to time, particular parking spaces within the Parking Areas for use by persons
selected by Landlord provided that each tenant's rights under its respective
lease are preserved. Landlord shall not be liable to any tenant for any
unavailability of such tenant's designated spaces, if any, nor shall any
unavailability entitle tenants to any refund, deduction, or allowance. Tenants
shall not park in any numbered space or any space designated as: RESERVED,
HANDICAPPED, VISITORS ONLY, or LIMITED TIME PARKING (or similarly designated).

30. If the Parking Areas are damaged or destroyed, or if the use of the
Parking Areas is limited or prohibited by any governmental authority, or the use
or operation of the Parking Areas is limited or prevented by strikes or other
labor difficulties or other causes beyond Landlord's control, the tenants'
inability to use their parking spaces shall not subject Landlord or any operator
of the Parking Areas to any liability to such tenants and shall not relieve the
tenants of any of their obligations under their respective leases.

B-4
<PAGE> 44
EXHIBIT C

APPRAISAL PROCEDURE

Within fifteen (15) days after the expiration of the thirty
(30)-day period set forth in Paragraph 51 or Paragraph 52 of the Lease, as
applicable, for the mutual agreement of Landlord and Tenant as to the fair
market monthly rental, each party hereto, at its cost, shall engage a real
estate appraiser to act on its behalf in determining the fair market monthly
rental. The appraisers each shall have at least ten (10) years' experience with
leases in first-class high-rise office buildings in the San Francisco Financial
District and shall submit to Landlord and Tenant in advance for Landlord's and
Tenant's reasonable approval the appraisal methods to be used. If a party does
not appoint an appraiser within such fifteen (15)-day period but an appraiser is
appointed by the other respective party, the single appraiser appointed shall be
the sole appraiser and shall set the fair market monthly rental. If the two
appraisers are appointed by the parties as stated in this paragraph, such
appraisers shall meet promptly and attempt to set the fair market monthly
rental. If such appraisers are unable to agree within thirty (30) days after
appointment of the second appraiser, the appraisers shall elect a third
appraiser meeting the qualifications stated in this paragraph within ten (10)
days after the last date the two appraisers are given to set the fair market
monthly rental. Each of the parties hereto shall bear one-half (1/2) the cost
of appointing the third appraiser and of the third appraiser's fee. The third
appraiser shall be a person who has not previously acted in any capacity for
either party.

The third appraiser shall conduct his own investigation of the
fair market monthly rent, and shall be instructed not to advise either party of
his determination of the fair market monthly rent except as follows: When the
third appraiser has made his determination, he shall so advise Landlord and
Tenant and shall establish a date, at least five (5) days after the giving of
notice by the third appraiser to Landlord and Tenant, on which he shall
disclose his determination of the fair market monthly rent. Such meeting shall
take place in the third appraiser's office unless otherwise agreed by the
parties. After having initialed a paper on which his determination of fair
market monthly rent is set forth, the third appraiser shall place his
determination of the fair market monthly rent in a sealed envelope. Landlord's
appraiser and Tenant's appraiser shall each set forth their determination of
fair market monthly rent on a paper, initial the same and place them in sealed
envelopes. Each of the three envelopes shall be marked with the name of the
party whose determination is inside the envelope.

In the presence of the third appraiser, the determination of
the fair market monthly rent by Landlord's appraiser and Tenant's appraiser
shall be opened and examined. If the higher of the two determinations is 105% or
less of the amount set forth in the lower determination, the average of the two
determinations shall be the fair market monthly rent, the envelope containing
the determination of the fair market monthly rent by the third appraiser shall
be destroyed and the third appraiser shall be instructed not to disclose his
determination. If either party's envelope is blank, or does not set forth a
determination of fair market monthly rent, the determination of the other party
shall prevail and be treated as the fair market monthly rent. If the higher of
the two determinations is more than 105% of the amount of the lower
determination, the envelope containing the third appraiser's determination shall
be opened. If the value determined by the third appraiser is the average of the
values proposed by Landlord's appraiser and Tenant's appraiser, the third
appraiser's determination of fair market monthly rent shall be the fair market
monthly rent. If such is not the case, fair market monthly rent shall be the
rent proposed by either Landlord's appraiser or Tenant's appraiser which is
closest to the determination of fair market monthly rent by the third appraiser.

C-1
<PAGE> 45
[HILLS PLAZA PHASE 1, FLOOR 5]

[EXHIBIT D]

<PAGE> 1

EXHIBIT 11.1

STATEMENT REGARDING COMPUTATION OF
EARNINGS PER SHARE

CKS GROUP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Net income..................................................... $ 288 $ 1,366 $ 5,679
------ ------- -------
Weighted average number of common shares outstanding........... 8,775 10,140 12,785
Number of common stock equivalents as a result of stock options
outstanding using the treasury stock method.................. -- 198 577
Number of common shares issued and stock options granted in
accordance with Staff Accounting Bulletin No. 83............. 1,169 388 --
------ ------- -------
Shares used in per share computation........................... 9,944 10,726 13,362
------ ------- -------
Net income per share........................................... $ 0.03 $ 0.13 $ 0.43
====== ======= =======
</TABLE>

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
CKS Group, Inc.

We consent to the incorporation by reference in the registration statements
(Nos. 333-3412 and 333-18085) on Forms S-8 and S-3 of CKS Group, Inc. of our
report dated December 16, 1996, relating to the consolidated financial
statements of CKS Group, Inc. as of November 30, 1995 and 1996, and related
statements of income, stockholders' equity, and cash flows for each of the years
in the three-year period ended November 30, 1996, and the related schedule,
which report appears in the November 30, 1996 annual report on Form 10-K of CKS
Group, Inc.

/s/ KPMG PEAT MARWICK LLP
San Jose, California
February 28, 1997

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> NOV-30-1995 NOV-30-1996
<PERIOD-START> DEC-01-1994 DEC-01-1995
<PERIOD-END> NOV-30-1995 NOV-30-1996
<CASH> 2,327 7,528
<SECURITIES> 0 37,895
<RECEIVABLES> 9,071 15,304
<ALLOWANCES> 868 762
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,096 63,437
<PP&E> 2,408 3,252
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 13,686 72,908
<CURRENT-LIABILITIES> 8,299 13,833
<BONDS> 0 0
0 0
0 0
<COMMON> 2,390 50,837
<OTHER-SE> 2,205 7,819
<TOTAL-LIABILITY-AND-EQUITY> 13,686 72,908
<SALES> 34,792 56,951
<TOTAL-REVENUES> 34,792 56,951
<CGS> 0 0
<TOTAL-COSTS> 32,337 49,763
<OTHER-EXPENSES> 27 (1,757)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 2,428 8,945
<INCOME-TAX> 1,062 3,266
<INCOME-CONTINUING> 1,366 5,679
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,366 5,676
<EPS-PRIMARY> .13 .43
<EPS-DILUTED> .13 .43

</TABLE>