GAMETECH INTERNATIONAL INC, S-1, 1997-09-04

GAMETECH INTERNATIONAL INC
S-1, 1997-09-04

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<PAGE>

As filed with the Securities and Exchange Commission on September 4, 1997
Registration No. 333-

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GAMETECH INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7999 33-0612983
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification No.)
organization) Classification
Code Number)
2209 W. 1ST STREET
SUITE 113-114
TEMPE, ARIZONA 85281
(602) 804-1101
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ANDREJS K. BUNKSE, ESQ.
GENERAL COUNSEL-CORPORATE SECRETARY
GAMETECH INTERNATIONAL, INC.
2209 W. 1ST STREET
SUITE 113-114
TEMPE, ARIZONA 85281
(602) 804-1101
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
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JONATHAN H. GRUNZWEIG, ESQ.
PETER P. WALLACE, ESQ. SKADDEN, ARPS, SLATE, MEAGHER &
MORGAN, LEWIS & BOCKIUS LLP FLOM LLP
801 S. GRAND AVENUE, 22ND FLOOR 300 S. GRAND AVENUE
LOS ANGELES, CALIFORNIA 90017 LOS ANGELES, CALIFORNIA 90071
(213) 612-2500 (213) 687-5000
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
Common stock, par value $.001 per share 4,266,500 $13.00 $55,464,500 $16,808
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(1) Includes 556,500 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457 of the Securities Act of 1933, as amended.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

<PAGE>

Information contained herein is subject to completion or amendment. A
registration statment relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to by nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.

<PAGE>

SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 1997
PROSPECTUS
, 1997

3,710,000 Shares
GAMETECH INTERNATIONAL, INC.

COMMON STOCK

Of the 3,710,000 shares of Common Stock, par value $.001 per share (the
"Common Stock"), offered hereby, 3,100,000 shares are being offered by GameTech
International, Inc., ("GameTech" or the "Company"), and 610,000 shares are being
sold by certain stockholders of the Company (the "Selling Stockholders"). The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders. See "Principal and Selling Stockholders." Prior to this
offering, there has been no public market for the Common Stock. It is currently
estimated that the initial public offering price will be between $ and $
per share. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Company has filed an
application for quotation and trading of the Common Stock on The Nasdaq National
Market under the symbol "GMTC."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 HEREOF FOR INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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Price Underwriting Proceeds Proceeds to
to the Discounts and to the the Selling
Public Commissions(1) Company(2) Stockholders
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<S> <C> <C> <C> <C>
Per Share . . . . . . . $ $ $ $
Total (3) . . . . . . . $ $ $ $
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</TABLE>

(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ ,
THE COMPANY HAS AGREED TO PAY THE EXPENSES OF THE SELLING STOCKHOLDERS,
OTHER THAN UNDERWRITING DISCOUNTS AND COMMISSIONS.
(3) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE GRANTED TO THE UNDERWRITERS A
30-DAY OPTION TO PURCHASE UP TO 556,500 ADDITIONAL SHARES OF COMMON STOCK
SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN
FULL, THE TOTAL PRICE TO THE PUBLIC, UNDERWRITING DISCOUNTS AND
COMMISSIONS, PROCEEDS TO THE COMPANY AND PROCEEDS TO THE SELLING
STOCKHOLDERS WILL BE $ , $ , $ AND $ ,
RESPECTIVELY. SEE "UNDERWRITING."

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if accepted by the Underwriters, and subject
to various prior conditions, including their right to reject any order in whole
or in part. It is expected that delivery of the shares will be made in New
York, New York on or about , 1997.

DONALDSON, LUFKIN & JENRETTE PRUDENTIAL SECURITIES INCORPORATED
SECURITIES CORPORATION

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[GRAPHICS]

to be provided by amendment

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND NOTES
THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED,
INFORMATION IN THIS PROSPECTUS (i) DOES NOT GIVE EFFECT TO THE EXERCISE BY THE
UNDERWRITERS OF THEIR OPTION TO PURCHASE UP TO 556,500 ADDITIONAL SHARES OF
COMMON STOCK TO COVER OVER-ALLOTMENTS, IF ANY, AND (ii) ASSUMES AN INITIAL
PUBLIC OFFERING PRICE OF $ PER SHARE OF COMMON STOCK, THE MIDPOINT OF THE
OFFERING PRICE RANGE SET FORTH ON THE COVER OF THIS PROSPECTUS.

THE COMPANY

GameTech is a leading designer, developer and marketer of interactive
electronic bingo systems. The Company currently markets a fixed-base system
with light-pen-activated monitors and a portable, hand-held system which can
be played anywhere within a bingo hall. Both bingo systems display the
electronic bingo card images purchased by a player for each bingo game. The
Company's electronic bingo units enable players to play substantially more
bingo than they can play on paper cards, leading to a greater spend per
player and higher profit per bingo session for the bingo hall operator.

GameTech installs the electronic bingo systems at no cost to the
operator in exchange for a percentage of the sales generated by each unit.
The Company typically enters into one to three year contracts pursuant to
which the Company receives up to 30% of the revenues generated by GameTech
units or to a lesser extent, charges fixed rates per bingo session.
Management believes that because a significant majority of players who use
GameTech's electronic bingo units also purchase paper cards the use of
GameTech's electronic bingo units generates incremental revenues and profits
for the bingo hall operator.

The Company was founded in 1994 by executives previously involved in the
bingo, slot machine, lottery and high technology software and hardware
industries to pursue their belief that an advanced, interactive, electronic
bingo system would be well received by both bingo hall operators and players.
The Company has grown rapidly, and management believes that the Company has a
competitive advantage resulting from the experience of its management, its
quality electronic bingo systems and its reputation for superior customer
service and support. The Company's growth has been accelerated by a
successful expansion into Texas which began in August 1996; for the six
months ended April 30, 1997, the Texas market accounted for approximately 40%
of the Company's revenues. For the fiscal year ended October 31, 1996, the
Company's revenues increased approximately 60% to $5.4 million from $3.3
million in the prior year. For the six months ended April 30, 1997, the
Company's revenues increased more than 160% to $5.5 million from $2.1 million
for the same period in the prior year. During the same period, net income
increased more than 600% to $1.4 million from $192,000.

GameTech had approximately 3,900 fixed-base units and 2,000 hand-held units
operating in more than 120 Indian and charity bingo halls at July 31, 1997.
Following its development of a new generation of hand-held units introduced in
April 1997, GameTech has been increasing its penetration of existing markets,
and management expects to add 3,000 hand-held units to the Company's installed
base by the end of the fiscal year ending October 31, 1997. Management
estimates that less than 5% of the current player spend on bingo in the United
States is attributable to electronic bingo, which management believes presents
the Company with significant additional growth opportunities.

2
<PAGE>

profits increase nearly dollar-for-dollar from sales of additional paper
bingo cards and electronic bingo card images. Electronic bingo systems like
GameTech's allow players to play more bingo per game than they can by hand,
which provides bingo hall operators with the potential to increase profits
commensurately. Nonprofit organizations sponsor bingo games for fund raising
purposes, while Indian tribes, casinos and government-sponsored entities
operate bingo games for profit. Bingo is a legal enterprise in 46 states
(the exceptions are Arkansas, Hawaii, Tennessee and Utah) and the District of
Columbia. Electronic bingo systems are currently permitted for charitable
organizations in 24 states, and the Company has units in operation in
charitable bingo halls in five of those states. Under the Indian Gaming
Regulatory Act ("IGRA"), in the 46 states where bingo is legal, electronic
bingo may be played on tribal Indian lands as well. Electronic bingo is
currently played on tribal Indian lands in 28 states, and the Company has
units in operation in Indian bingo halls in eight of those states.

STRATEGY

The Company's strategic objective is to increase revenues and earnings by
capitalizing on the increasing acceptance of electronic bingo and to become the
leading provider of electronic bingo units. To reach this objective, the
Company intends to:

MAINTAIN SUPERIOR CUSTOMER SERVICE. GameTech believes that its dedication
to providing superior customer service and support fosters customer loyalty and
cultivates long-term customer relationships. Approximately half of GameTech's
employees are field technicians on call 24 hours a day to support customers and
respond immediately to servicing calls. Management believes that its dedication
to superior customer service has contributed to the rapid acceptance of
GameTech's products and the Company's ability to attract and retain customers
for the long-term.

INCREASE PENETRATION WITH EXISTING CUSTOMERS. The Company closely tracks
the utilization of its units to maximize revenues. As bingo player acceptance
of electronic bingo units increases and utilization rates grow, management
installs additional electronic bingo units at its customers' bingo halls. At
more than 80% of the bingo halls where GameTech units have been in operation for
more than six months, the number of units has been increased since the initial
installation.

EXPAND CUSTOMER BASE IN EXISTING MARKETS. Management estimates that
less than 5% of the more than $5 billion domestic bingo spend is currently
played on electronic bingo units. In the states in which the Company has
units installed in charitable bingo halls and for which data is available,
GameTech units are used by an average of approximately 7% of the charitable
halls located in those states. This low penetration level illustrates
GameTech's opportunity to increase its base of customers in its existing
markets.

EXPAND INTO NEW MARKETS DOMESTICALLY. GameTech has charitable bingo
hall customers in only five of the 24 states which currently allow charitable
organizations to conduct electronic bingo, and is actively pursuing entry
into seven additional states. In addition, GameTech has Indian bingo hall
customers in only eight of the 28 states where bingo is currently played on
Indian lands and is actively pursuing Indian bingo hall customers in six
additional states. As part of its strategy to help expand the charity
electronic bingo market, the Company is pursuing changes to legislation in
several states to permit electronic bingo. In addition, the Company intends
to initiate route operations to serve bingo halls which otherwise would be
uneconomical to serve. The route operations would move the Company's
hand-held units between various charity bingo halls on days that the
respective halls hold bingo sessions.

EXPAND INTERNATIONALLY. GameTech is in the process of adding salespeople
and distributors to expand into Canada, which management estimates has an annual
bingo spend of approximately $2 billion. GameTech is also actively evaluating
opportunities to expand into other countries.

<PAGE>

participating players from different Indian bingo halls into one large bingo
game, which will allow TSBN to offer bigger prizes than those generally offered
by a single bingo hall. Initially, TSBN intends to include 15 Indian bingo
halls, with a goal of including more than 25 Indian bingo halls after the first
12 months of operation.

DEVELOP NEW APPLICATIONS. GameTech maintains an ongoing product
development program focused on enhancing its existing products and developing
new products and applications for its technology. In January 1996, GameTech
introduced its first hand-held unit, followed by an improved version in April
1997. In July 1996, the Company introduced its GameTech Gold fixed-base system,
which incorporates picture-in-picture technology that allows bingo players to
watch television while playing bingo. Other opportunities under development
include progressive bingo games and parimutuel bingo games (during non-session
hours), which are anticipated to generate additional revenue for the operator by
linking fixed-base units nationwide into a single high-stakes bingo game.

DEVELOP STRATEGIC ALLIANCES/ACQUIRE COMPLEMENTARY COMPANIES. The Company
selectively reviews opportunities to grow through the establishment of strategic
alliances and acquisitions which could extend its presence into new geographic
markets, expand its client base, add new products and/or provide operating
synergies. The Company also intends to pursue joint operating agreements or
joint ventures for additional bingo opportunities, including, in particular,
all-electronic bingo halls.

The Company is a Delaware corporation with its executive offices at 2209 W.
1st Street, Suite 113-114, Tempe, Arizona 85281, and its telephone number is
(602) 804-1101.

THE OFFERING

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Common Stock Offered:
By the Company . . . . . . . . . . . 3,100,000 shares
By the Selling Stockholders . . . . 610,000 shares
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Total. . . . . . . . . . . . . . 3,710,000 shares
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Common Stock outstanding after this
offering(a)(b) 9,365,720 shares
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Use of Proceeds. . . . . . . . . . . The estimated net proceeds to the
Company of $ million from this
offering will be used to fund
efforts to expand the Company's
operations, to repay substantially
all of its outstanding indebtedness
(approximately $3.9 million at
April 30, 1997, excluding debt to be
converted into Common Stock upon
completion of this offering) and for
other general corporate purposes. A
portion of the proceeds may also be
used in connection with any
opportunities to acquire or invest
in complementary businesses,
products or technologies. See "Use
of Proceeds."
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Proposed Nasdaq National Market symbol "GMTC"
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(a) Excludes options to purchase 1,630,300 shares of Common Stock outstanding
as of April 30, 1997, of which 1,018,250 options are currently exercisable.
(b) Assumes (i) the conversion by certain officers of convertible subordinated
debt (including accrued interest) of $1,451,645 at April 30, 1997 into
1,451,645 shares of Common Stock, and (ii) the conversion into 400,000
shares of Common Stock of 400,000 shares of the Company's Series A
Preferred Stock (the "Series A Preferred") sold in a private placement on
September 2, 1997 (the "Private Placement"), all of which will occur prior
to completion of this offering. See "Certain Relationships and Related
Party Transactions," "Description of Capital Stock," "Underwriting," and
Note 8 of Notes to Financial Statements.

4
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SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
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SIX MONTHS ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
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1994(a) 1995 1996 1996 1997
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STATEMENT OF OPERATIONS DATA: (dollars in thousands, except per share amounts)
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<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 599 $3,350 $ 5,364 $ 2,105 $ 5,485
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Gross profit . . . . . . . . . . . . . . . . . . . . . 346 2,638 3,749 1,409 4,174
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Income (loss) from operations. . . . . . . . . . . . . (117) 1,064 1,639 456 2,505
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Income (loss) before provision for income taxes. . . . (175) 870 1,364 326 2,304
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Net income (loss). . . . . . . . . . . . . . . . . . . (175) 592 805 192 1,390
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Pro forma net income per share . . . . . . . . . . . . $ 0.11 $ 0.19
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Shares used in computing pro forma net income per
share(b) (000s) . . . . . . . . . . . . . . . . . . . 8,289 7,520
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SELECTED OTHER DATA:
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Fixed-base units in operation (end of period) . . . . 545 1,250 2,644 1,549 3,924
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Hand-held units in operation (end of period). . . . . -- -- 710 852 1,524
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Number of customer locations (end of period). . . . . 14 30 70 36 123
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Capital expenditures. . . . . . . . . . . . . . . . . $ 462 $1,251 $2,966 $1,701 $2,451
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Depreciation and amortization . . . . . . . . . . . . 63 282 599 227 594
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</TABLE>

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April 30, 1997
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Actual Pro Forma
As Adjusted(c)
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BALANCE SHEET DATA: (in thousands)
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Cash and cash equivalents . . . . . . . . . . $ 441
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Working capital (deficit) . . . . . . . . . . (292)
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Total assets. . . . . . . . . . . . . . . . . 8,536
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Total debt. . . . . . . . . . . . . . . . . . 5,370
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Total stockholders' equity. . . . . . . . . . 2,478
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(a) Represents the period from inception (April 18, 1994) through October 31,
1994. Operations commenced June 1, 1994.
(b) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net income per share.
(c) Adjusted to reflect the sale by the Company of 3,100,000 shares of Common
Stock in this offering and the application of the estimated net proceeds
therefrom, including the application of $3.9 million of the proceeds for
repayment of indebtedness of the Company. See "Use of Proceeds" and
"Capitalization." Assumes (i) the conversion by certain officers of
convertible subordinated debt (including accrued interest) of $1,451,645 at
April 30, 1997 into 1,451,645 shares of Common Stock, and (ii) the
conversion into 400,000 shares of Common Stock of the Series A Preferred,
all of which will occur prior to completion of this offering. See "Certain
Relationships and Related Party Transactions," "Description of Capital
Stock," "Underwriting," and Note 8 of Notes to Financial Statements.

<PAGE>

RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING SHARES OF COMMON STOCK.

LIMITED OPERATING HISTORY AND DEPENDENCE ON BINGO AND ELECTRONIC BINGO INDUSTRY

The Company commenced operations in June 1994. Although the Company was
profitable during the fiscal years ended October 31, 1995 and 1996 and the six
months ended April 30, 1997, future revenues and profits will depend upon
continued market acceptance of the Company's products and services, the
continued penetration of electronic bingo into bingo halls nationwide and
various other factors, many of which are beyond the control of the Company.
Other factors beyond the Company's control include the continued popularity of
bingo as a leisure activity and as a means of charitable fundraising. The bingo
industry is a mature industry and there can be no assurance that it will not
decline in the future due to an increase in competing forms of entertainment
including those resulting from developments in on-line gaming and the continued
expansion of the legalization of casino gaming (for example, riverboat gaming).
The Company faces risks, expenses and difficulties frequently encountered in
connection with the operation and development of a new and rapidly expanding
business, including, but not limited to, fluctuating cash flow and the addition,
training and integration of qualified personnel.

COMPETITION

The electronic bingo industry is characterized by intense competition based
on, among other things, an electronic bingo unit's ability to generate
incremental sales for bingo hall operators through product appeal to players,
ease of use, ease of serviceability, support and training, distribution, name
recognition and price. Certain of the Company's competitors may have
significantly greater financial and technical resources than the Company, as
well as more established customer bases and distribution channels, which may
allow them to move rapidly into the Company's market and acquire significant
market share. Increased competition may result in price reductions, reduced
operating margins, conversion from lease to sale of the Company's units and loss
of market share, any of which could materially and adversely affect the
Company's business, operating results or financial condition. Furthermore, the
Company's success may benefit existing competitors and induce new competitors to
enter the market. The Company has attempted to counter competitive factors by
providing superior service and new, innovative, quality products, but there can
be no assurance that the Company will continue to be a successful competitor in
the electronic bingo industry. In addition, the Company competes with other
similar forms of entertainment including casino gaming and lotteries.

LIMITED PROTECTION OF INTELLECTUAL PROPERTY RIGHTS; RISK OF LITIGATION

The Company regards its products as proprietary and relies primarily on a
combination of trade secret laws and employee and third-party non-disclosure
agreements to protect its proprietary rights. Defense of intellectual property
rights can be difficult and costly and there can be no assurance that the
Company will be able to protect its technology from misappropriation by
competitors. In addition, the protections offered by trademark, copyright and
trade secret laws would not prevent a competitor from designing electronic bingo
systems having appearance and functionality that closely resemble those of the
Company.

As the number of electronic bingo units in the industry increases and the
functionality of these products further overlaps, the Company may become subject
to infringement claims, with or without merit, that are brought by competitors.
For example, patent infringement suits have been filed against the Company by
Bingo Technology Corporation, Inc. (formerly Bingo Card Minder Corp.) and
FortuNet, Inc. The Company believes that its products do not infringe the
plaintiffs' patents and intends to continue to defend against both actions
vigorously. However, both actions are in the early stages of litigation, and
there can be no assurance that favorable outcomes will be obtained or that if
either or both actions are resolved in favor of the plaintiffs, such results
would not have a material adverse effect on the Company. See "Business --
Legal Proceedings." Any such claims or litigation could be

<PAGE>

costly and could result in a significant diversion of management's attention.
Any settlement of such claims or adverse determinations in such litigation could
also have a material adverse impact on the Company's business and financial
condition.

RISKS ASSOCIATED WITH THE COMPANY'S CONTRACTS

The Company seeks written agreements with its customers. Current
written agreements with its customers generally (i) permit termination by the
customers upon relatively short notice; (ii) do not designate the Company as
the customer's exclusive electronic bingo system provider and (iii) do not
penalize customer for early termination. In addition, approximately 5% of the
Company's contracts are oral. To date, none of the foregoing has had a
material adverse effect on the Company's business, results of operations or
financial condition.

RELIANCE ON TEXAS MARKET

A substantial portion of the Company's revenues come from the Texas
market. The Company began operations in Texas in August 1996, and, as
required by state law, operates through a distributor. For the six months
ended April 30, 1997, approximately 40% of the Company's revenues were
generated in Texas, and of the approximately 120 bingo halls served by the
Company at April 30, 1997, 71 were located in Texas. The Company's contract
with its exclusive distributor is subject to renewal in December 1998 and may
be renewed for an additional year at the Company's option. Management
believes that this contract will be renewed in due course on substantially
similar terms or that, alternatively, the Company could find another
qualified distributor without undue delay or additional expense. Any change
in the regulatory environment that would prevent or impede the Company from
doing business in Texas, or any significant deterioration of the Texas
economy, could have a material adverse effect on the Company's business.

DEPENDENCE ON KEY PERSONNEL

The operations of the Company depend to a great extent on its ability to
retain and attract existing and new key personnel. Competition is intense for
skilled marketing and product development employees in particular and there can
be no assurance that the Company will be successful in attracting and retaining
such personnel, or that it can avoid increased costs in order to do so. The
Company's failure to attract additional qualified employees or to retain the
services of key personnel could have a material adverse effect on the Company's
operating results and financial condition. The loss of key personnel or the
failure to attract additional qualified personnel for whatever reason could
delay implementation of the Company's business plans. See "Management."

MANAGEMENT OF GROWTH

The Company's growth plans will require full use of the Company's
current financial, managerial and other resources as well as substantial
expansion of those resources. The Company's ability to manage its growth
effectively will require it to continue to improve its operational, financial
and management information systems and to attract, motivate and train key
employees. The Company plans to expand within its existing domestic markets
and into foreign and domestic bingo markets in which it has no previous
operating experience. There can be no assurance that the Company will be
able to maintain profitability or successfully manage the aggressive
expansion of its existing and planned business. If the Company's management
is unable to manage growth effectively, the Company's business, operating
results and financial condition would be materially and adversely affected.

<PAGE>

REGULATORY RISKS

The Company must maintain its existing licenses and approvals necessary
to operate in its existing markets and obtain the necessary licenses,
approvals, findings of suitability and product approvals in all additional
jurisdictions in which it intends to distribute its products. The licensing
and approval processes can involve extensive investigation into the Company
and its officers, directors, principal stockholders and products, and can
require significant expenditures of time and resources by the Company. The
Company must comply with applicable regulations for its activities in any
international jurisdictions into which it expands. There can be no assurance
that the Company will receive licensing approval in the jurisdictions in
which it is currently seeking such approval. The regulations relating to
company and product licensing are subject to change and other jurisdictions,
including the federal government, may elect to regulate or tax bingo. The
Company cannot predict the nature of any such changes or their impact on the
Company. The loss of a license in a particular state will prohibit the
Company from realizing revenues in that state and may prohibit the Company
from installing its units in other states. The loss of one or more licenses
held by the Company could have an adverse effect on the Company's business.

DEPENDENCE ON SINGLE-SOURCE SUPPLIER FOR HAND-HELD UNITS

The Company currently obtains its hand-held units from Tidalpower
Technologies Inc., a contract manufacturer in Taiwan. The Company does not have
long-term supply contracts with this supplier, but rather obtains hand-held
units on a purchase order basis. Although the design of hand-held units is not
unique or proprietary, if such supplier ceased doing business with the Company,
there can be no assurance that the Company would be able to procure, substitute
or produce such units without a significant interruption or a price increase.
Any failure or delay in receiving hand-held units could have a material adverse
effect on the Company's business, financial condition and results of operation.

PROTECTION OF LAW

The Company's units are operated in many bingo halls located on Indian
reservations in the United States. State and federal laws governing the
business or other conduct of private citizens generally do not apply to bingo
halls that operate on Indian reservations. The Company would therefore have
little or no legal recourse if an Indian tribe operating a particular bingo hall
seized the units or barred entry onto the reservation in the event of a contract
or other dispute. The Company has the capability to render any units inoperable
in the event of such action. However, any seizure of the Company's units is
likely to result in a capital loss and loss of revenue to the Company and could,
were it to occur on a large scale, have a materially adverse effect on the
Company's capital resources.

CHANGING TECHNOLOGY

The Company's products utilize hardware components that have been developed
primarily for the personal computer industry, which is characterized by rapid
technological change and product enhancements. Should any current or potential
competitor of the Company succeed in developing a better electronic bingo
system, such competitor could be in a position to outperform the Company in its
ability to exploit developments in microprocessor, video technology or other
multimedia technology. The emergence of an electronic bingo system that is
superior to the Company's in any respect could substantially diminish the
Company's revenues and limit the Company's ability to grow and thereby have a
material adverse effect on the Company's operating results.

SUBSTANTIAL PORTION OF NET PROCEEDS ALLOCATED FOR GENERAL PURPOSES

Substantially all of the net proceeds to the Company from this offering
have been allocated to working capital to fund future development and expansion
activities and other general corporate purposes. Subject to the foregoing, the
net proceeds may be spent at the discretion of the Company's board of directors
(the "Board of Directors"). As a result, investors may not know in advance how
such net proceeds will be used by the Company. See "Use of Proceeds."

<PAGE>

CONTROL BY PRINCIPAL STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS

Upon closing of this offering (assumed to be October 31, 1997), management
will beneficially own 52.4% of the outstanding Common Stock (48.8% if the
Underwriters' over-allotment option is exercised in full). As a result,
management will continue to have the ability to control the Company and direct
its affairs and business. Such concentration of ownership, as well as certain
provisions of the Company's Amended Certificate of Incorporation and the
Delaware General Corporation Law (the "DGCL"), could have the effect of delaying
or preventing a change in control of the Company. These provisions include the
classified structure of the Company's Board of Directors and the Company's
ability to issue "blank check" preferred stock. In addition, such concentration
of ownership and such provisions may adversely affect the ability of
stockholders to realize a premium on the sale of their shares of Common Stock in
a takeover of the Company. See "Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Upon closing of this offering, the Company will have 9,365,720 shares of
Common Stock outstanding, excluding shares of Common Stock issuable upon
exercise of options under the Company's Incentive Stock Plan (the "Stock Option
Plan") or otherwise. All of the shares of Common Stock to be sold in this
offering will be eligible for immediate sale in the public market without
restriction unless acquired by affiliates of the Company. Of the remaining
5,655,720 shares of Common Stock outstanding, 1,919,125 shares will be available
for resale beginning 180 days after the date of this Prospectus upon expiration
of the applicable lock-up agreements described below and subject to compliance
with Rule 144 under the Securities Act ("Rule 144"), 1,988,950 shares not
subject to lock-up will be eligible for sale under Rule 144, unless registered,
upon completion of this offering and the rest of the shares will become eligible
for sale under Rule 144, unless registered, at various dates as the holding
period provisions of Rule 144 are satisfied. See "Shares Eligible for Future
Sale."

Sales of substantial amounts of Common Stock, or the perception that
such sales could occur, could adversely affect prevailing market prices of
the Common Stock. The Company, the Selling Stockholders and the directors
and executive officers of the Company have agreed not to offer, pledge, sell
an option or contract to purchase, purchase an option or contract to sell,
sell, contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or enter into any swap or other arrangement that in any manner
transfers all or a portion of the economic consequences associated with the
ownership of such Common Stock, or to cause a registration statement covering
any shares of Common Stock to be filed, for 180 days after the date of this
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), provided that the Company may grant options
pursuant to the Stock Option Plan, and issue shares of Common Stock upon the
exercise of outstanding options. See "Underwriting."

NO PRIOR PUBLIC MARKET

Prior to this offering, there has been no public market for the Company's
Common Stock. There can be no assurance that an active public market for the
Common Stock will develop or be sustained after this offering. The initial
public offering price of the Common Stock will be determined by negotiation
between the Company and the representatives of the Underwriters based on the
factors described under "Underwriting." The price at which the Common Stock will
trade in the public market after this offering may be less than the initial
public offering price. See "Underwriting."

ABSENCE OF DIVIDENDS

The Company has not paid or declared any cash dividends to date and does
not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. Covenants under the Company's $3 million term loan (the
"Term Loan"), which will be repaid with proceeds from this offering, and $3
million revolving line of credit (the "Revolving Credit Facility"), both with
Wells Fargo Bank, N.A. ("Wells Fargo") restrict payment of dividends without
the prior consent of Wells Fargo. See "Dividend Policy."

<PAGE>

DILUTION TO NEW INVESTORS

Purchasers of Common Stock in this offering will experience immediate
and substantial dilution in the amount of $ per share in pro forma net
tangible book value per share (based upon the assumed initial public offering
price of $ per share). See "Dilution."

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements that can be identified
by the use of forward-looking terminology such as "may," "will," "should,"
"expect," "anticipate," "estimate" or "continue" or the negative thereof or
other variations thereon or comparable terminology. The matters set forth under
"Risk Factors" constitute cautionary statements identifying important factors
with respect to such forward-looking statements, including certain risks and
uncertainties that could cause actual results to differ materially from those in
such forward-looking statements.

USE OF PROCEEDS

The net proceeds to the Company from the sale of 3,100,000 shares of Common
Stock offered hereby by the Company, after deducting the underwriting discounts
and commissions and estimated offering expenses payable by the Company, are
estimated to be $ million ($ million if the Underwriters' over-
allotment option is exercised in full). The Company will not receive any
proceeds from the sale of shares of Common Stock by the Selling Stockholders.
See "Principal and Selling Stockholders."

Approximately $3.9 million of the net proceeds of this offering are
allocated to repay substantially all of the Company's outstanding indebtedness
(which had varying interest rates not exceeding 9% per annum and maturing not
later than April 11, 2000) and to fund the Company's growth plans, which include
the purchase of additional fixed-base and hand-held bingo units to be installed
at existing and new customers' bingo halls, expanding the Company's operations
into new markets, increasing research and development, launching TSBN and for
other general corporate purposes. See "Risk Factors -- Substantial Portion of
Net Proceeds Allocated for General Purposes." The Company will be able to
borrow up to $3 million under the Revolving Credit Facility upon completion of
this offering. A portion of the proceeds may also be used to acquire or invest
in complementary businesses, products, joint ventures, or the right to obtain
the use of complementary technologies. To date, the Company has not entered
into any definitive agreements, commitments or understandings with respect to
any acquisitions. Pending such uses, the Company plans to invest the net
proceeds in short-term investment grade, interest bearing securities.

DIVIDEND POLICY

The Company has paid no cash dividends to date and does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future. The
Company intends to retain its earnings, if any, to finance the expansion of
its business and for other general corporate purposes. Any payment of future
dividends will be at the discretion of the Board of Directors and will depend
upon, among other factors, the Company's earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions with
respect to the payment of dividends and other considerations that the Board
of Directors deems relevant. The Revolving Credit Facility restricts payment
of cash dividends without the prior consent of Wells Fargo. See "Risk
Factors--Absence of Dividends."

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company at April
30, 1997, on (i) a historical basis, (ii) a pro forma basis to give effect to
the sale and conversion of 400,000 shares of Series A Preferred issued on
September 2, 1997 into 400,000 shares of Common Stock and the conversion by
certain stockholders of convertible subordinated debt (including accrued
interest) of $1,451,645 at April 30, 1997 into 1,451,645 shares of Common Stock
and (iii) a pro forma as adjusted basis to give effect to the sale by the
Company of 3,100,000 shares of Common Stock offered hereby and the application
of the estimated net proceeds therefrom. The capitalization of the Company
should be read in conjunction with "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
Financial Statements and Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
APRIL 30, 1997
ACTUAL PRO FORMA PRO FORMA
AS ADJUSTED
- ----------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

CASH AND CASH EQUIVALENTS $ 441 $ 3,291 $
--------- ---------- -------
--------- ---------- -------
- ----------------------------------------------------------------------------------------------------------
DEBT:
Convertible notes payable to officers
(including accrued interest) . . . . . . . . . . $ 1,452 $ - $
- ----------------------------------------------------------------------------------------------------------
Other debt. . . . . . . . . . . . . . . . . . . . . 3,918 3,918
- ----------------------------------------------------------------------------------------------------------
TOTAL DEBT(a) . . . . . . . . . . . . . . . . . 5,370 3,918
- ----------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:(b)
Preferred stock, undesignated, par value $.001
per share; 5,000,000 shares authorized, no
shares issued and outstanding . . . . . . . . . . - -
- ----------------------------------------------------------------------------------------------------------
Common stock, par value $.001 Per share;
40,000,000 shares authorized; 4,414,075
shares issued and outstanding, actual;
6,265,720 pro forma; and 9,365,720 pro
forma as adjusted . . . . . . . . . . . . . . . . 4 6
- ----------------------------------------------------------------------------------------------------------
Capital in excess of par value. . . . . . . . . . . 10 4,309
- ----------------------------------------------------------------------------------------------------------
Retained earnings . . . . . . . . . . . . . . . . . 2,464 2,464
--------- ---------- -------
- ----------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . 2,478 6,779
--------- ---------- -------
- ----------------------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION. . . . . . . . . . . . $ 7,848 $ 10,697 $
--------- ---------- -------
--------- ---------- -------
- ----------------------------------------------------------------------------------------------------------
</TABLE>

(a) The Company's $3 million Revolving Credit Facility will remain available
for reborrowing after completion of this offering. See "Use of
Proceeds."
(b) An amendment to the Company's Certificate of Incorporation was filed on
August 25, 1997. Prior to such amendment, the Company had 15,000,000
shares of Common Stock authorized and 4,414,075 shares issued and
outstanding, and no shares of preferred stock were authorized or issued
and outstanding.

<PAGE>
- ------------------------------------------------------------------------------
APRIL 30, 1997
- ------------------------------------------------------------------------------

DILUTION

At April 30, 1997, the Company had a pro forma net tangible book value of
$6.4 million, or $1.01 per share of Common Stock based upon 6,265,720 shares of
Common Stock outstanding. Pro forma net tangible book value per share is
determined by dividing the pro forma net tangible book value of the Company
(total tangible assets less total liabilities) by the number of shares of Common
Stock outstanding(a) at such date. After giving effect to the sale by the
Company of 3,100,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $ per share and application of the
net proceeds therefrom, the pro forma net tangible book value of the Company, as
adjusted, at April 30, 1997 would have been $ million or $ per share
of Common Stock. This represents an immediate dilution to new investors of
$ per share and an immediate increase in pro forma as adjusted net
tangible book value per share to existing stockholders of $ per share.
The following table illustrates the per share dilution to the new investors:

- --------------------------------------------------------------------------------
Assumed initial public offering price per share.... $
- --------------------------------------------------------------------------------
Pro forma net tangible book value per share
at April 30, 1997................................ $ 1.01
- --------------------------------------------------------------------------------
Increase in net tangible book value per share
attributable to new investors....................
- --------------------------------------------------------------------------------
Pro forma as adjusted net tangible book value
per share after giving effect to this offering...

- --------------------------------------------------------------------------------
Dilution per share to new investors................ $
- --------------------------------------------------------------------------------

The following table sets forth at April 30, 1997, the relevant investments
of the existing stockholders and of the new investors, giving effect to the sale
by the Company of 3,100,000 shares and the sale by the Selling Stockholders of
610,000 shares of Common Stock being offered hereby, at an assumed public
offering price of $ per share and, prior to completion of this offering, the
conversion by certain officers of convertible subordinated debt (including
accrued interest) of $1,451,645 at April 30, 1997 into 1,451,645 shares of
Common Stock, and the conversion into 400,000 shares of Common Stock of the
Series A Preferred.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing stockholders. . . . . . . . 5,655,720 60.4% $ % $ .
- ----------------------------------------------------------------------------------------------------------------
New investors. . . . . . . . . . . . 3,710,000 39.6%
--------- ------ --------
- ----------------------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . 9,365,720 100.0% $ % $
--------- ------ ------ -----
--------- ------ ------ ----- --------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

The foregoing table assumes no exercise of options and excludes options to
purchase 1,630,300 shares of Common Stock, outstanding as of April 30, 1997, of
which 1,018,250 options are currently exercisable. See "Management -- Stock
Option Plan" and Note 6 of Notes to Financial Statements.

- ---------------------------
(a) Assumes (i) the conversion by certain officers of convertible subordinated
debt (including accrued interest) of $1,451,645 at April 30, 1997 into
1,451,645 shares of Common Stock, and (ii) the conversion into 400,000
shares of Common Stock of the Series A Preferred, all of which will occur
prior to completion of this offering.

<PAGE>

SELECTED FINANCIAL DATA

The selected statement of operations data for the period from inception
(April 18, 1994) through October 31, 1994 and for the years ended October 31,
1995 and 1996 and the selected balance sheet data set forth below at October 31,
1995 and 1996 have been derived from the Company's financial statements, which
have been audited by Ernst & Young LLP, independent auditors, and are included
elsewhere herein. The selected balance sheet data set forth below at October
31, 1994 has been derived from the Company's audited financial statements not
included herein. The selected statement of operations data set forth below for
the six months ended April 30, 1996 and 1997 and balance sheet data at April 30,
1997 have been derived from the Company's unaudited financial statements which
are included elsewhere herein. The unaudited financial statements have been
prepared by the Company on a basis consistent with the Company's audited
financial statements and, in the opinion of management, include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the Company's results of operations and financial condition for
such periods. Operating results for the six months ended April 30, 1997 are not
necessarily indicative of results that may be expected for the entire year
ending October 31, 1997. The selected financial data set forth below should be
read in conjunction with the Financial Statements and Notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

SIX MONTHS ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
---------------------------------- -------------------
1994(a) 1995 1996 1996 1997

(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues. . . . . . . . . . . . . . . . . . . . . . . $ 599 $3,350 $5,364 $2,105 $5,485
Cost of revenues. . . . . . . . . . . . . . . . . . . 253 712 1,615 696 1,311
------ ------ ----- ----- -----
Gross profit. . . . . . . . . . . . . . . . . . . . . 346 2,638 3,749 1,409 4,174
Operating expenses:
General and administrative . . . . . . . . . . . . 220 693 1,020 453 805
Sales and marketing. . . . . . . . . . . . . . . . 149 552 613 281 628
Research and development. . . . . . . . . . . . . . 94 329 477 219 236
------ ------ ----- ----- -----
Total operating expenses. . . . . . . . . . . . . 463 1,574 2,110 953 1,669
------ ------ ----- ----- -----
Income (loss) from operations . . . . . . . . . . . . (117) 1,064 1,639 456 2,505
Interest expense and other. . . . . . . . . . . . . . (58) (194) (275) (130) (201)
------ ------ ----- ----- -----
Income (loss) before provision for income
taxes. . . . . . . . . . . . . . . . . . . . . . . . (175) 870 1,364 326 2,304
Provision for income taxes. . . . . . . . . . . . . . -- 278 559 134 914
------ ------ ----- ----- -----
Net income (loss) . . . . . . . . . . . . . . . . . . $(175) $592 $805 $ 192 $1,390
------ ------ ----- ----- -----
------ ------ ----- ----- -----

Pro forma net income per share(b) . . . . . . . . . . $0.11 $0.19
Shares used in computing pro forma net
income per share(a) (000s) . . . . . . . . . . . . . 8,289 7,520

SELECTED OTHER DATA:
Fixed-based units in operation (end of
period). . . . . . . . . . . . . . . . . . . . . . . 545 1,250 2,644 1,549 3,924
Hand-held units in operation (end of
period). . . . . . . . . . . . . . . . . . . . . . . -- -- 710 852 1,524
Number of customer locations (end of
period). . . . . . . . . . . . . . . . . . . . . . . 14 30 70 36 123
Capital expenditures. . . . . . . . . . . . . . . . . $ 462 $ 1,251 $ 2,966 $1,701 $2,451

Depreciation and amortization . . . . . . . . . . . . 63 282 599 227 594

</TABLE>

- ------------------------------
(a) Represents the period from inception (April 18, 1994) through October 31,
1994. Operations commenced June 1, 1994.

(b) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net income per share.

<PAGE>
<TABLE>
OCTOBER 31,
--------------------------------

1994 1995 1996 APRIL 30, 1997

(dollars in thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . . . . . . $ 25 $ 37 $ 166 $ 441
Working capital (deficit) . . . . . . . . . . . . . 76 (37) (1,385) (292)
Total assets. . . . . . . . . . . . . . . . . . . . 1,330 2,783 5,710 8,536
Total debt(c) . . . . . . . . . . . . . . . . . . . 1,464 1,306 3,398 5,370
Total stockholders' equity (deficit). . . . . . . . (175) 980 1,785 2,478
</TABLE>

- -------------------------
(c) Includes convertible subordinated debt to stockholders (including accrued
interest) of $1,331,383, $1,291,460 and $1,362,662 at October 31, 1994,
1995 and 1996, respectively, and $1,451,645 at April 30, 1997, which will
be converted into 1,451,645 shares of Common Stock prior to completion of
this offering.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Financial
Statements and Notes thereto included elsewhere in this Prospectus.

OVERVIEW

GameTech has grown rapidly, and management believes that the Company has
had a competitive advantage resulting from the experience of its management and
the value it has provided its customers through a combination of its quality
electronic bingo units and its reputation for superior customer service and
support. The Company's recent growth has been driven by the increase in its
installed base of bingo units primarily resulting from the Company's entry into
the Texas market in August 1996 and introduction of an improved hand-held unit
in April 1997. The Company expects to add 3,000 hand-held units by the end of
October 1997 to its installed base of approximately 3,900 fixed-base units and
2,000 hand-held units at July 31, 1997.

GameTech generates revenues by installing electronic bingo systems in bingo
halls under revenue sharing agreements, or to a lesser extent, at fixed rates
per bingo session. The Company recognizes revenue as its bingo units are
utilized by players. Revenue growth is affected by player acceptance of
electronic bingo as an alternative to paper bingo and the Company's ability to
expand operations into new markets. Fixed-base bingo units generate greater
revenue per unit than hand-held bingo units, but also require greater initial
capital investment.

The Company installs its electronic bingo systems at no charge to its
customers and capitalizes the costs. During fiscal 1995, fiscal 1996 and the
six months ended April 30, 1997, the Company's capital expenditures were
approximately $1.3 million, $3.0 million and $2.5 million, respectively, almost
all of which represented investments in bingo equipment. The Company's cost of
revenues consists primarily of the expense of providing customer service,
including labor, service-related overhead and depreciation of the bingo systems
installed at customer locations. The Company records depreciation over a
five-year estimated useful life using the straight line method of depreciation.

TSBN, the Company's 50%-owned joint venture, is anticipated to be
launched in early 1998. TSBN is accounted for under the equity method on the
Company's financial statements. If the Company pursues and executes
strategic opportunities such as the all-electronic bingo halls discussed
under "Business--Products" and "--Sales, Marketing and Distribution," its
operating results and margins will, to varying degrees, begin to be affected
by the Company's status as an owner and operator of such ventures. To the
extent any such ventures become material to the Company, its financial
results will accordingly reflect the different accounting methods to
recognize revenue from, and fund the expenses of, these operations.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
statement of operations data for the Company expressed as a percentage of
revenues.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
1994(a) 1995 1996 | 1996 1997
<S> <C> <C> <C> | <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues. . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues. . . . . . . . . . . . . . . . 42.3 21.2 30.1 33.0 23.9
---- ---- ---- ---- ----
Gross profit. . . . . . . . . . . . . . . . . . 57.7 78.8 69.9 67.0 76.1
---- ---- ---- ---- ----
Operating expenses:
General and administrative. . . . . . . . . 36.8 20.7 19.0 21.5 14.6
Sales and marketing . . . . . . . . . . . . 24.8 16.5 11.5 13.4 11.4
Research and development. . . . . . . . . . 15.7 9.8 8.9 10.4 4.3
---- ---- ---- ---- ----

<PAGE>

Total operating expenses. . . . . . . . . . . . 77.3 47.0 39.4 45.3 30.3
---- ---- ---- ---- ----
Income (loss) from operations . . . . . . . . . (19.6) 31.8 30.5 21.7 45.8
Interest expense and other. . . . . . . . . . . (9.7) (5.8) (5.1) (6.2) (3.7)
---- ---- ---- ---- ----
Income (loss) before income taxes . . . . . . . (29.3) 26.0 25.4 15.5 42.1
Provision for income taxes. . . . . . . . . . . 0.0 8.3 10.4 6.4 16.7
---- ---- ---- ---- ----
Net income (loss) . . . . . . . . . . . . . . . (29.3)% 17.7% 15.0% 9.1% 25.4%
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>

(a) Represents the period from inception (April 18, 1994) through October 31,
1994. Actual operations began June 1, 1994.

SIX MONTHS ENDED APRIL 30, 1997 COMPARED TO SIX MONTHS ENDED APRIL 30, 1996

REVENUES. Revenues increased $3.4 million, or 161%, to $5.5 million for
the six months ended April 30, 1997 from $2.1 million for the six months ended
April 30, 1996. The increase in revenues was primarily due to a 176% increase
in the average number of units installed to 4,070 during the six months ended
April 30, 1997 from 1,473 during the six months ended April 30, 1996, partially
offset by a slight decrease in average revenues per unit. Expansion into Texas
accounted for $2.3 million of the revenue increase during the six months ended
April 30, 1997.

COST OF REVENUES. Cost of revenues increased $616,000, or 88.6%, to
$1.3 million for the six months ended April 30, 1997, from $695,000 for the
six months ended April 30, 1996. The increase in cost of revenues was
primarily due to the greater average number of units installed. As a
percentage of revenues, cost of revenues decreased to 23.9% from 33.0% in the
prior period. The higher percentage for the six months ended April 30, 1996
reflected start-up costs for the expansion into Texas which were not
immediately offset by increased revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$352,000, or 77.7%, to $805,000 for the six months ended April 30, 1997 from
$453,000 for the six months ended April 30, 1996. The increase reflects hiring
three additional personnel to help manage the Company's growth and larger
provisions for bonuses, professional services and profit sharing. As a
percentage of revenues, general and administrative expenses decreased to 14.6%
from 21.5% in the prior period primarily due to the increase in revenues and
operating leverage in the Company's operations.

SALES AND MARKETING. Sales and marketing expenses increased $347,000, or
124%, to $628,000 for the six months ended April 30, 1997 from $281,000 for the
six months ended April 30, 1996. The increase was primarily due to hiring an
additional salesperson and larger distributor commissions attributable to the
higher level of revenues in Texas. As a percentage of revenues, sales and
marketing expenses decreased to 11.4% from 13.4% in the prior period primarily
due to the increase in revenues and operating leverage in the Company's
operations.

RESEARCH AND DEVELOPMENT. Research and development expenses remained
relatively constant at approximately $200,000 in each period. As a percentage
of revenues, research and development expenses decreased to 4.3% from 10.4% in
the prior period.

INTEREST EXPENSE AND OTHER. Interest expense and other increased $71,000,
or 54.6%, to $201,000 for the six months ended April 30, 1997 from $130,000 for
the six months ended April 30, 1996. The increase was primarily due to
increased average debt outstanding of $4.5 million for the six months ended
April 30, 1997 compared to $2.2 million for the six months ended April 30, 1996,
partially offset by lower interest rates. The increased debt was used to
finance operations.

PROVISION FOR INCOME TAXES. Provision for income taxes increased $780,000,
or 582%, to $914,000 for the

<PAGE>

six months ended April 30, 1997 from $134,000 for the six months ended April 30,
1996 primarily due to an increase in pre-tax income. The Company's effective
income tax rate remained constant at approximately 40% in each period.

NET INCOME. As a result of the factors discussed above, net income
increased $1.2 million, or 623%, to $1.4 million for the six months ended April
30, 1997 from $192,000 for the six months ended April 30, 1996.

YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995

REVENUES. Revenues increased $2.0 million, or 60.1%, to $5.4 million for
the year ended October 31, 1996 from $3.4 million for the year ended October 31,
1995. The increase in revenues was primarily due to a 126% increase in the
average number of units in service to 1,865 during 1996 from 821 in 1995,
partially offset by a decrease in average revenues per unit resulting from the
increased percentage of hand-held units installed which generate lower average
revenue per unit.

COST OF REVENUES. Cost of revenues increased $903,000, or 127%, to $1.6
million for the year ended October 31, 1996 from $712,000 for the year ended
October 31, 1995. The increase in cost of revenues was primarily due to the
increased number of units installed and start-up costs in Texas. As a
percentage of revenues, cost of revenues increased to 30.1% from 21.2% in the
prior period, primarily due to start-up costs for the expansion into Texas which
were not immediately offset by increased revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$327,000, or 47.2%, to $1.0 million for the year ended October 31, 1996 from
$693,000 for the year ended October 31, 1995. The increase was primarily due to
larger provisions for bonuses, professional services, bad debts and profit
sharing. As a percentage of revenues, general and administrative expenses
decreased to 19.0% from 20.7% in the prior period primarily due to the increase
in revenues and operating leverage in the Company's operations.

SALES AND MARKETING. Sales and marketing expenses increased $62,000, or
11.2%, to $614,000 for the year ended October 31, 1996 from $552,000 for the
year ended October 31, 1995. The increase was primarily due to hiring an
additional salesperson and a larger amount of distributor commissions
attributable to the higher level of revenues. As a percentage of revenues,
sales and marketing expenses decreased to 11.5% from 16.5% in the prior period
primarily due to the increase in revenues and operating leverage in the
Company's operations.

RESEARCH AND DEVELOPMENT. Research and development expenses increased
$148,000, or 45.1%, to $477,000 for the year ended October 31, 1996 from
$329,000 for the year ended October 31, 1995. The increase was primarily due to
additional products under development in 1996 as compared to 1995. As a
percentage of revenues, research and development expenses decreased to 8.9% from
9.8% in the prior period as a result of the increase in revenues.

INTEREST EXPENSE AND OTHER. Interest expense and other increased $81,000,
or 41.9%, to $275,000 for the year ended October 31, 1996 from $194,000 for the
year ended October 31, 1995. The increase was primarily due to the increased
average debt outstanding, of $2.4 million in 1996 compared to $1.4 million in
1995, partially offset by lower interest rates. The increased debt was used to
finance operations.

PROVISION FOR INCOME TAXES. Provision for income taxes increased $281,000,
or 101%, to $559,000 for the year ended October 31, 1996 from $278,000 for the
year ended October 31, 1995 primarily due to an increase in pre-tax income
partially offset by the use of net operating loss carryforwards of approximately
$170,000 utilized in computing the provision for income taxes for 1995.

NET INCOME. As a result of the factors discussed above, net income
increased $213,000, or 35.9%, to $805,000 for the year ended October 31, 1996
from $592,000 in 1995.

<PAGE>

YEAR ENDED OCTOBER 31, 1995 COMPARED TO THE PERIOD FROM INCEPTION (APRIL 18,
1994) THROUGH OCTOBER 31, 1994

REVENUES. Revenues increased $2.8 million to $3.4 million for the year
ended October 31, 1995 from $599,000 for the period ended October 31, 1994. The
increase in revenues was primarily due to a full year of operations in 1995
compared to five months of operations in the 1994 period, as well as an increase
in the average number of units installed to 821 during 1995 from 540 during the
1994 period.

COST OF REVENUES. Cost of revenues increased $459,000, to $712,000 for the
year ended October 31, 1995, from $253,000 for the period ended October 31,
1994. The increase in cost of revenues reflects a full year of operations in
1995 compared to five months of operations in the 1994 period, as well as the
greater average number of units installed. As a percentage of revenues, cost of
revenues decreased to 21.2% from 42.3% in the prior period primarily due to the
higher utilization of field service personnel and the increase in revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$473,000 to $693,000 for the year ended October 31, 1995 from $220,000 for the
period ended October 31, 1994. The increase reflects a full year of operations
in 1995 compared to five months of operations in the 1994 period, an addition to
the staff and larger provisions for bonuses and professional services. As a
percentage of revenues, general and administrative expenses decreased to 20.7%
from 36.8% in the prior period primarily due to the increase in revenues and
operating leverage in the Company's operations.

SALES AND MARKETING. Sales and marketing expenses increased $403,000
to $552,000 for the year ended October 31, 1995 from $149,000 for the period
ended October 31, 1994. The increase reflects a full year of operations in
1995 compared to five months of operations in the 1994 period and higher
amounts of commissions paid to distributors. As a percentage of revenues,
sales and marketing expenses decreased to 16.5% from 24.8% in the prior
period primarily due to the increase in revenues and operating leverage in
the Company's operations.

RESEARCH AND DEVELOPMENT. Research and development expenses increased
$235,000 to $329,000 for the year ended October 31, 1995 from $94,000 for the
period ended October 31, 1994. As a percentage of revenues, research and
development expenses decreased to 9.8% from 15.7% in the prior period
reflecting a full year of operations in 1995 compared to five months in the
1994 period and hiring of consultants for new product development.

INTEREST EXPENSE AND OTHER. Interest expense and other increased $136,000
to $194,000 for the year ended October 31, 1995 from $58,000 for the period
ended October 31, 1994. The increase was primarily due to interest expense on
debt outstanding for the full year as compared to partial year, higher average
debt outstanding and higher interest rates.

PROVISION FOR INCOME TAXES. Provision for income taxes was $278,000 for
the year ended October 31, 1995 compared to $0 for the period ended October
31, 1994. In the prior period, the Company had no income tax liability. In
1995, the Company utilized $170,000 of net operating loss carryforwards.

NET INCOME. As a result of the factors discussed above, net income
increased $767,000 to $592,000 for the year ended October 31, 1995 from a loss
of $175,000 for the period ended October 31, 1994.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company has primarily used its cash flow to purchase additional bingo
units to install in customers' bingo halls and to meet its ordinary operating
expenses. The principal sources of the Company's liquidity have been cash flow
from operations, borrowings under the Company's Term Loan and Revolving Credit
Facility, the issuance to officers of notes convertible into Common Stock and
sales of Common Stock. In addition, on September 2, 1997, the Company issued
and sold 400,000 shares of Series A Preferred for $3.0 million. GameTech
currently has the $3 million Term Loan, which has an interest rate of 8.9% per
annum and the $3 million Revolving Credit Facility, which has an interest rate
based on the prime rate plus 0.5% or LIBOR plus 2.5%, at the Company's option;
the Revolving Credit Facility expires on April 11, 1998 and the Term Loan
expires on April 11, 2000. The Company intends to repay borrowings under both
the Term Loan and Revolving Credit Facility with a portion of the net proceeds
from this offering. See "Use of Proceeds." The Company expects to maintain
availability under the Revolving Credit Facility and does not anticipate that it
will have difficulty refinancing or replacing the Revolving Credit Facility
should it so desire. Covenants under these credit facilities restrict payment
of cash dividends, and interest to holders of the convertible notes without
prior consent of Wells Fargo.

Operating activities provided $1.6 million of cash in the six months ended
April 30, 1997 compared to $406,000 in the six months ended April 30, 1996. The
increase was primarily due to higher net income and increased depreciation,
partially offset by increased accounts receivable. In 1996, operating
activities provided net cash of $1.3 million as compared to $1.1 million in
1995. The increase was primarily due to higher net income and depreciation,
partially offset by increased accounts receivable and lower accounts payable.

Investing activities used $2.5 million of cash in the six months ended
April 30, 1997 compared to a use of $1.7 million of cash in the six months ended
April 30, 1996. The increase was primarily due to a $750,000 increase in
capital expenditures for bingo systems and other fixed assets. In 1996,
investing activities used cash of $3.1 million as compared to $1.3 million in
1995. The increase was primarily due to a $1.7 million increase in
capital expenditures for bingo systems and other fixed assets.

Financing activities provided cash of $1.2 million in the six months ended
April 30, 1997 compared to $1.4 million in the six months ended April 30, 1996.
The decrease resulted primarily from repayments of short term notes and the
repurchase of Common Stock, partially offset by proceeds from the Term Loan,
increases in short term bank borrowings, and a note issued to a former
stockholder. In 1996, financing activities provided cash of $1.9 million as
compared to $209,000 in 1995. The increase was primarily due to a net $1.9
million increase in short-term borrowings, partially offset by a reduction in
the amount of convertible notes issued to stockholders.

The Company believes that cash flow from operations and the net proceeds to
the Company from this offering, together with funds available under the
Revolving Credit Facility, will be sufficient to support its operations and
provide for budgeted capital expenditures of approximately $8.0 million and
liquidity requirements through fiscal 1998. However, the Company's long term
liquidity requirements will depend on many factors, including, but not limited
to the rate at which the Company expands its business, whether internally or
through acquisitions and strategic alliances. In addition, strategic
opportunities the Company may pursue, including without limitation TSBN, will
require it to fund its portion of operating expenses of such ventures, and may
further require it to advance additional amounts should any partners in such
ventures be unable to meet unanticipated capital calls or similar funding
events. To the extent that the funds generated from the sources described above
are insufficient to fund the Company's activities in the long term, the Company
will be required to raise additional funds through public or private financings.
No assurance can be given that additional financing will be available or that,
if it is available, it will be on terms acceptable to the Company.

<PAGE>

QUARTERLY RESULTS

The following table sets forth certain quarterly unaudited statement of
operations data for the quarters in the year ended October 31, 1996 and in the
six months ended April 30, 1997. The quarterly information has been prepared on
the same basis as the annual information and, in management's opinion, includes
all adjustments necessary to present fairly the information for the quarters
presented.

1996 QUARTERS ENDED 1997 QUARTERS ENDED
------------------------------------------ ----------------------------
(DOLLARS IN THOUSANDS)
JANUARY 31 APRIL 30 JULY 31 OCTOBER 31 JANUARY 31 APRIL 30
<S> <C> <C> <C> <C> <C> <C>
Revenues $963 $ 1,142 $ 1,440 $ 1,819 $ 2,487 $ 2,998

Gross profit 629 780 989 1,351 1,879 2,295

Income from operations 196 260 461 722 1,148 1,357

Net income 75 117 230 383 632 758

The following table sets forth certain unaudited statement of operations data for the quarters in the year
ended October 31, 1996 and in the six months ended April 30, 1997, expressed as a percentage of revenues.

1996 QUARTERS ENDED 1997 QUARTERS ENDED
------------------- -----------------------------------------
JANUARY 31 APRIL 30 JULY 31 OCTOBER 31 JANUARY 31 APRIL 30

Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Gross profit 65.3 68.4 68.6 74.3 75.6 76.5

Income from operations 20.3 22.8 32.0 39.7 46.1 45.3

Net income 7.8 10.3 16.0 21.0 25.4 25.3

</TABLE>

The Company's revenues have grown in each quarter presented, principally
as a result of the increase in its installed base of bingo units in each
quarter. The Company anticipates variations in the rate of growth of revenues
as a result of a number of factors, many of which are outside the Company's
control, including competition, regulatory changes permitting electronic
bingo in new markets, licensing approval in new markets and the introduction
of new products. Net income has grown more rapidly than revenues as a result
of the relatively fixed nature of many of the Company's operating costs.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standard No. 123 (SFAS 123), ACCOUNTING FOR
STOCK BASED COMPENSATION. SFAS 123 provides an alternative to Accounting
Principles Board's Opinion No. 25 (APB 25) and is effective for fiscal years
beginning after December 15, 1995. The Company expects to continue to
account for its stock options in accordance with APB 25. SFAS 123 is not
expected to have a material impact on the Company's financial position or
results of operations.

In February 1997, the FASB issued Statement No.128, EARNINGS PER SHARE,
which is required for both interim and annual periods ending after December
15, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact of
Statement 128 on the calculation of primary and fully diluted earnings per
share is not expected to be

<PAGE>

material.

INFLATION AND GENERAL ECONOMIC CONDITIONS

Although the Company cannot accurately anticipate the effect of inflation
on its operations, the Company does not believe that inflation has had, or is
likely in the foreseeable future to have, a material effect on its results of
operations or financial condition.

<PAGE>

BUSINESS

GENERAL

GameTech is a leading designer, developer and marketer of interactive
electronic bingo systems. The Company currently markets a fixed-base system
with light-pen-activated monitors and a portable, hand-held system which can be
played anywhere within a bingo hall. Both bingo systems display electronic
bingo card images which have been purchased and played by a player for each
bingo game. The Company's electronic bingo units enable players to play
substantially more bingo simultaneously than they can play on paper cards,
leading to a greater spend per player and higher profit per bingo session for
the bingo hall operator.

GameTech installs the electronic bingo systems at no cost to the operator
in exchange for a percentage of the sales generated by each unit. The
Company typically enters into one to three year contracts pursuant to which
the Company receives up to 30% of the revenues generated by GameTech units or
to a lesser extent, charges fixed rates per bingo session. Management
believes that because a significant majority of playes who use GameTech's
electronic bingo units also purchase paper cards the use of GameTech's
electronic bingo units generates incremental revenues and profits for the
bingo hall operator.

Bingo is one of the oldest and most popular forms of wagering and
entertainment, with an estimated domestic annual player spend of more than $5
billion, based upon INTERNATIONAL GAMING & WAGERING BUSINESS MAGAZINE'S
annual report dated August 1, 1997. Bingo is easy to understand, a pleasant
social activity and a reasonably priced source of entertainment. As compared
to lotteries, where prizes increase with the number of tickets sold, a bingo
game is more like a raffle, with prizes predetermined before players buy
their bingo cards. Because prize amounts are fixed regardless of the number
of paper bingo cards and electronic bingo card images played, bingo
operators' profits increase nearly dollar-for-dollar from sales of additional
paper bingo cards and electronic bingo card images. Electronic bingo systems
like GameTech's allow players to play more bingo per game than they can by
hand, which provides bingo hall operators with the potential to increase
profits commensurately. Nonprofit organizations sponsor bingo games for fund
raising purposes, while Indian tribes, casinos and government-sponsored
entities operate bingo games for profit. Bingo is a legal enterprise in 46
states (the exceptions are Arkansas, Hawaii, Tennessee and Utah) and the
District of Columbia. Electronic bingo systems are currently permitted for
charitable organizations in 24 states, and the Company has units in operation
in

22
<PAGE>

charitable bingo halls in five of those states. Under the Indian Gaming
Regulatory Act ("IGRA"), in the 46 states where bingo is legal, electronic bingo
may be played on tribal Indian lands as well. Electronic bingo is currently
played on tribal Indian lands in 28 states, and the Company has units in
operation in Indian bingo halls in eight of those states.

STRATEGY

EXPAND INTO NEW MARKETS DOMESTICALLY. GameTech has charitable bingo hall
customers in only five of the 24 states which currently allow charitable
organizations to conduct electronic bingo, and is actively pursuing entry into
seven additional states. In addition, GameTech has Indian bingo hall customers
in only eight of the 28 states where bingo is currently played on Indian lands
and is actively pursuing Indian bingo hall customers in six additional states.
As part of its strategy to help expand the charity electronic bingo market, the
Company is pursuing changes to legislation in several states to permit
electronic bingo. In addition, the Company intends to initiate route
operations to serve bingo halls which otherwise would be uneconomical to
serve. The route operations would move the Company's hand-held units between
various charity bingo halls on days that the respective halls hold bingo
sessions.

LAUNCH THE SATELLITE BINGO NETWORK. GameTech is a 50% owner of The
Satellite Bingo Network, LLC ("TSBN"), which is anticipated to be launched in
early 1998. TSBN is developing a network to link via satellite participating
players from different Indian bingo halls into one large bingo game, which will
allow TSBN to offer bigger prizes than those generally offered by a single bingo
hall. Initially, TSBN intends to include 15 Indian bingo halls, with a goal of
including more than 25 Indian bingo halls after the first 12 months of
operation.

23
<PAGE>

Company introduced its GameTech Gold fixed-base system, which incorporates
picture-in-picture technology that allows bingo players to watch television
while playing bingo. Other opportunities under development include progressive
bingo games and parimutuel bingo games (during non-session hours), which are
anticipated to generate additional revenue for the operator by linking
fixed-base units nationwide into a single high-stakes bingo game.

SALES, MARKETING AND DISTRIBUTION

The Company's marketing strategy is to target larger bingo hall operators
and demonstrate the benefits of GameTech's bingo systems to both the bingo
hall operator and the bingo players. Management estimates that players spend
an average of more than $50 per session on each GameTech electronic bingo
unit utilized, which is significantly more than players spend on average on
paper bingo cards. In addition, management believes that because a
significant majority of players who use GameTech's electronic bingo units
also purchase paper cards, the use of GameTech's electronic bingo units
generates higher profit per bingo session for the bingo hall operator.
Benefits of GameTech's electronic units for the players include the ease of
marking numbers called, the decreased likelihood of missing a winning pattern
and the ability to play substantially more bingo than can be played using
only paper bingo cards.

The Company allocates its electronic bingo units based on utilization,
generally offering additional units to those halls that have in excess of 85%
utilization. This strategy is designed to maximize revenues from newly placed
units. The Company's superior customer service orientation and quality products
are designed to promote player loyalty and long-term relationships with bingo
hall operators.

The Company's installation package typically includes the following:

- Installation by the Company at no cost to the bingo hall
- Training sessions for bingo hall staff
- Promotional sessions to introduce players to the system
- Advertising package and point of sale materials
- Ongoing maintenance program

The Company operated with an in-house sales force of three people at July
31, 1997 and expects to add another two by the end of fiscal 1997. Sales
personnel earn base salaries plus incentive commissions based on the revenues
generated by the units they place. Management estimates that approximately 40%
of GameTech's units installed at July 31, 1997 were placed by GameTech's
in-house sales force. In addition to the sales force, the Company also has
exclusive distributors in Mississippi, Oklahoma and Texas, whose compensation is
based on a percentage of the sales generated for the Company from their
respective territories. Distributors are typically selected based upon their
financial stability and experience and are required to make an exclusive
commitment to the Company.

TARGET MARKETS. There are approximately 275 Indian bingo halls and
approximately 37,000 charity-owned bingo locations in the United States. At
July 31, 1997, the Company had approximately 5,900 installed units at more than
120 locations serving 350 customers, including many charitable bingo halls where
the Company has multiple customers. For the six months ended April 30, 1997
approximately 37% of the Company's revenues were derived from units installed in
Indian bingo halls and the remaining 63% were from units installed in charity
bingo halls. The Company also intends to market its electronic bingo systems to
the military, casino and cruise ship markets.

24
<PAGE>

GameTech currently operates in 10 states: charitable bingo halls in five
(California, Mississippi, Oregon, Texas and Washington) of the 24 states where
electronic bingo is currently permitted in charitable bingo halls, and Indian
bingo halls in eight (Arizona, California, Kansas, Michigan, New Mexico,
Oklahoma, Oregon and Washington) of the 28 states where electronic bingo is
currently played in Indian bingo halls. In addition, GameTech is licensed to
serve charitable bingo halls in Kentucky, and is actively marketing to Indian
bingo halls in Minnesota and Wisconsin. Additional bingo halls in the Northeast
and Canada are being actively pursued. Outside of North America, the Company
intends to pursue bingo opportunities in the Phillippines and selected countries
throughout Europe, South America and Asia.

ADVERTISING AND PROMOTION. The Company places advertisements in selected
gaming magazines and bingo magazines and newsletters and makes presentations at
key trade shows, especially those devoted solely to bingo. The Company also
plans to develop additional advertising and promotional programs to create
awareness and interest in its electronic bingo products among hall operators and
relevant segments of the consumer marketplace. GameTech is also exploring other
cost-effective promotional strategies, including public relations and media
programs.

PRICING ARRANGEMENTS. The Company installs its units at no cost to the
bingo hall operator. The Company generates revenues by "participating" with
bingo hall operators, receiving up to 30% (with an average of approximately 24%)
of the gross revenues derived from GameTech's electronic bingo systems, or, to a
lesser extent, by charging a fixed fee per unit per session. The Company
maintains ownership of all hardware and software.

NEW MARKETING STRATEGIES. The Company intends to initiate route
operations to market its hand-held units to bingo halls which only operate a
limited number of sessions per week and would otherwise be uneconomical to
serve. By moving its hand-held units between bingo halls, the Company
intends to introduce electronic bingo to a new segment of the bingo market.
The Company has also assisted in the development of, and placed its units in,
an all-electronic bingo hall in Victorville, California. Under this concept,
the Company would develop, on its own or with others, a bingo hall equipped
entirely with the Company's units. The hall would be rented to one or more
organizations eligible to conduct bingo.

CUSTOMER SERVICE

Management believes that its customer service is one of GameTech's most
important competitive advantages. As a demonstration of the Company's
commitment to customer service, approximately half of the Company's employees
are based in the field and dedicated to customer service and support. The
Company offers 24-hour technical support seven days a week, and responds
immediately to servicing calls via cellular phones and pagers. Service
personnel generally have primary service responsibility for no more than eight
bingo halls, which ensures sufficient time to support each customer's needs.
Service personnel install and repair the equipment and visit the halls
regularly. Although service technicians maintain a small inventory of spare
parts, most repairs are presently handled by returning units to the Arizona or
Texas facilities, with replacement by overnight delivery.

PRODUCTS

The Company designs its bingo systems to generate maximum appeal to bingo
players. The primary benefits to players of electronic bingo units are the
ability to play up to 600 electronic bingo card images during one bingo game,
significantly more than can be played on paper; to have the system
simultaneously mark the numbers called, thereby reducing player error in missing
or mismarking a number, and to have the system alert the player upon attaining a
BINGO, thereby reducing the chance a player misses winning a prize. In
addition, GameTech's units are designed to enhance the entertainment value of
playing bingo. The Company's units allow the player to customize certain
aspects of the user interface, and recently developed fixed-base units
incorporate picture-in-picture and audio technology. The Company's hand-held
units will allow the player to play bingo electronically

25
<PAGE>

while sitting in the player's preferred seat or moving around the bingo hall.
The ease of using GameTech's electronic bingo units makes playing bingo possible
for players with physical disabilities that may prevent them from playing on
paper, which normally involves marking multiple bingo cards by hand with an ink
dauber. Management believes that these aspects of GameTech's electronic bingo
systems make them more appealing to players than paper cards or electronic bingo
units offered by the competition.

The Company currently markets two types of electronic bingo systems: (i) a
fixed-base bingo system and (ii) a portable, hand-held electronic bingo system.
Many bingo hall operators use both fixed-base and hand-held units to satisfy
varying customer preferences. In addition, the Company is a 50% owner of TSBN,
which is developing a satellite-linked bingo network.

FIXED-BASE BINGO SYSTEM

The fixed-base bingo system consists of a local area network (the "LAN") of
microcomputers consisting of the master unit, the communications unit, the sales
unit and the player's unit. All units in the fixed-base bingo system use
microcomputer hardware and can be operated with light pens, touch screens or
keyboards. Fixed-base units can be played in automatic mode or in manual mode,
which requires the players to enter the numbers called. Players can switch
between the two modes and, in either case, up to 600 electronic bingo card
images can be marked simultaneously. A complete fixed-base bingo system
consists of the following:

MASTER UNIT. The master unit is a file server that is located on the
caller's stand and runs the LAN. All bingo game data is processed and stored
through this unit.

COMMUNICATIONS UNIT. The communications unit is also located on the
caller's stand and allows the caller to communicate with each player's unit
by use of a state-of-the-art touch-screen. By simply touching the screen, the
caller enters ball numbers drawn, game numbers, game patterns and wild
numbers. The communications unit is connected to each player's unit for
verification of the nearly 60,000 unique, non-duplicating electronic bingo
card images and enables the winning electronic bingo card images and paper
cards to be displayed on monitors within the bingo hall. The communications
unit stores all data from the bingo system and contains a modem which allows
the Company to access remotely such data. All files are protected against
unauthorized access. Accordingly, the Company monitors utilization of its
units and bills bingo hall operators without the bingo hall operators'
assistance. Data from the system is also available to bingo hall operators
to assist them in managing their halls.

SALES UNIT. The sales unit is a point-of-sale terminal where all
customer purchases are made, typically located near the entrance of a bingo
hall. Player buy-in choices for the session are activated by the cashier
using a light pen and pricing and totals are calculated automatically. The
player is given a printed receipt with a nine-digit pack number which is
itemized by date, session and number of electronic bingo card images
purchased.

PLAYER'S UNIT. Each player's unit consists of a separate computer, monitor
and light pen. Each player's unit is built into customized wooden tables with
five units per table. Players enter the nine-digit pack numbers printed on
their receipts to receive their electronic bingo card images. Players can cycle
through all of their electronic bingo card images while play is proceeding. The
player's unit marks the numbers called on each electronic bingo card image being
played either automatically or after the player enters the number called. The
unit always displays the player's three electronic bingo card images that are
closest to a BINGO, and the free space at the center of any electronic bingo
card image that is one number away from BINGO flashes to notify the player. The
unit sounds an alert alarm and the screen flashes when BINGO is achieved.

HAND-HELD BINGO SYSTEMS

Hand-held bingo systems operate similarly to fixed-base systems except
players must manually enter the numbers as they are called and each electronic
bingo card image being played is then simultaneously marked. Each

26
<PAGE>

unit can mark up to 600 electronic bingo card images per game and players can
play several hand-held units during a bingo session. In a hand-held system, the
master, communication and sales units are similar to, and can be shared with,
those of fixed-base systems. The hand-held unit is completely portable,
resembling a palm-top computer, and can be played anywhere within a bingo hall.
The hand-held unit is capable of recognizing any bingo game format the bingo
hall operator wishes to play and alerts the player both audibly and visually
when BINGO has been achieved. Hand-held units are battery powered and battery
packs are designed to last for 11 hours (most bingo sessions are four hours or
less). Hand-held units are recharged between bingo sessions on charging carts,
each of which handles 27 hand-held units.

THE SATELLITE BINGO NETWORK

TSBN, the Company's 50%-owned joint venture, is anticipated to be launched
in early 1998, and is to be broadcast from a master control studio at the Gila
River Indian Casino in Chandler, Arizona. TSBN plans initially to include 15
Indian bingo halls throughout the country to create progressive, high-stakes
bingo, with a goal of including more than 25 Indian bingo halls after the first
year of operation. The game is planned to be offered at least once per day,
seven days a week, to the participating halls. The game will be played as
follows: depending on the date of the month (odd or even number), either all of
the odd or even numbers on each paper bingo card are blacked out by the player
prior to the start of the game. The game then will be played until all of the
remaining numbers on a player's paper bingo card are blacked out.

For each game, four types of prizes will be offered: a main prize for the
game, a consolation prize at each participating bingo hall and a chance for a
bonus prize and super prize. The bonus prize will grow each time the game is
played through the allocation of a percentage of the total prizes and is
capped at $250,000. In order to win the bonus prize, BINGO must be achieved
within the first 10 numbers called. The super prize will be $1 million and
will be won only if BINGO is reached within the first eight numbers called.
Half of the revenues from bingo card sales will be allocated to the prize
fund. The super prize, when won, will be paid through an insurance policy
carried by the TSBN owners.

Through April 30, 1997, the Company had invested $50,000 and advanced
approximately $10,000 to TSBN to fund planning and development costs. Under
the terms of TSBN's operating agreement, the Company is solely responsible
for funding TSBN. As a new venture, TSBN's operation may be subject to
unforeseen delays or unanticipated problems. However, the Company's joint
venture partner in TSBN is an affiliate of a Canadian entity, The Satellite
Bingo Network, which has operated a similar system in Canada for a group of
Canadian charities since February 1996. The joint venture partner has advised
the Company that the Canadian system has been profitable since inception and
has never failed to provide scheduled bingo sessions on its network. In the
United States, for the past eight years, Multimedia Games, Inc. has operated
a similar bingo game, "Mega Bingo," and TSBN will compete with Mega Bingo for
some of the same bingo halls.

PRODUCT DEVELOPMENT

GameTech has implemented an ongoing research and development program to
enhance the features and capabilities of its bingo systems and to maintain a
competitive advantage in the marketplace, as well as to extend its product line
to new games and applications. Product development efforts produced the
hand-held system, which was introduced in January 1996 and improved in April
1997. In addition, an advanced fixed-base system called GameTech Gold,
incorporating picture-in-picture technology, was introduced in August 1996.

The Company's product development efforts currently focus on the following:

- Continue development of hand-held units to address all targeted
segments of the market;

- Integrate other communications technologies into the Company's
existing fixed-base bingo system to broaden the reach of the game for
remote game operation, including the integration

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of satellite or other communication technologies; and

- Complete the development of Ultra Fast Action Bingo and progressive
bingo for the Company's fixed-base bingo systems currently in
operation. With Ultra Fast Action Bingo, bingo players from across
the country could be linked to the same game, which could offer large
prizes as a result of its parimutuel nature.

- Develop a point-of-sale system to allow the recording of bingo
hall sales attributable to both fixed-base and hand-held electronic
bingo systems, as well as record sales of other items sold in the
bingo hall including paper bingo cards, bingo accessories and
refreshments.

INDUSTRY

Bingo is easy to understand, a pleasant social activity and a reasonably
priced source of entertainment, with a guaranteed winner for each game. In
contrast to lotteries, where prizes grow with the number of tickets sold, a
bingo game is like a raffle, with prizes predetermined before players
purchase their paper bingo cards or electronic bingo card images. Hence, the
marginal profit on each additional paper bingo card or electronic bingo card
image sold is almost 100%. In a conventional paper bingo format, even the
most experienced players are limited in the number of cards that they can
play by the time required to mark the cards and recognize a winning pattern
within the number calling cycle. As such, there is a natural barrier to
sales growth that affects bingo operations, which has led to the development
of electronic bingo units.

In the United States, bingo is a legal enterprise in 46 states (the
exceptions are Arkansas, Hawaii, Tennessee, and Utah) and the District of
Columbia. In 43 of those states and the District of Columbia, bingo must be
operated either by, or in association with, a not-for-profit organization. The
three states where it may be played under private ownership for profit are
Nevada, New Jersey and certain parts of Maryland. Electronic bingo systems are
regulated differently than traditional paper bingo, with electronic bingo
systems currently permitted in 24 states. In any of the 46 states where bingo
and other forms of gaming are legal, bingo may be played on tribal Indian lands
without supervision or regulation by the state in which they are located. In
Canada, government-sponsored entities and commercial operators run games on
behalf of various charitable halls, often playing several sessions per day.
Bingo is both legal and popular in various other international markets, and in
the military and cruise ship market segments.

The 1997 CASINO AND GAMING BUSINESS MARKET RESEARCH HANDBOOK estimates that
approximately 37,000 charitable halls have licenses to operate bingo games in
the United States. In some parts of the United States, bingo operators have
designed halls specifically to accommodate bingo play and then rent the halls
for fundraising events to charities that do not have their own facilities. From
a player's perspective, this offers a consistent, familiar location for bingo on
a regular basis.

More than $5 billion annually is spent on bingo in the United States.
The majority of bingo games in the United States are operated by nonprofit
organizations for fundraising purposes. The two primary segments of the
bingo gaming market are (i) the charity bingo market and (ii) the Indian
bingo market.

CHARITY BINGO MARKET

Charity bingo sessions are conducted regularly by parochial and private
schools, religious organizations, fraternal orders, fraternities, sororities,
little leagues, symphony orchestras, cultural and civic organizations, clubs,
day care centers, retirement associations, and a host of other nonprofit
entities across the United States. While larger halls are candidates for both
fixed-base and hand-held units, some of the charity halls, because of their
small size or infrequent operation, are better candidates for hand-held units,
which can be provided on a predetermined date and removed after the completion
of the bingo session. In many states it is permissible for a number of
charities to associate themselves with each other for the purpose of operating
bingo. Under this concept, the association rents or leases a suitable hall and
plays bingo seven days per week with a specific charity accepting

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responsibility for operations each day of the week. The result is a bingo
operation that is much more efficient than an isolated charity game and is
therefore an appropriate candidate for either fixed-base or hand-held bingo
systems.

INDIAN BINGO MARKET

The largest bingo games in terms of player spend are generally run on
tribal Indian lands, and there are approximately 275 Indian bingo operations
located on tribal lands in 28 states. The bingo halls located on these
reservations are constructed to seat between 300 and 3,000 players. These
operations are conducted three to seven days per week, playing up to 28 bingo
sessions per week. While many Indian halls also offer video poker and other
gaming machines, off-track thoroughbred betting and on-premise card rooms for
poker and other card games, management believes that bingo is one of the most
popular games played.

OTHER MARKET SEGMENTS

Other noteworthy segments of the bingo market include cruise ships,
military bases and casinos. Most cruise ships organize bingo sessions at least
once per cruise. Large scale bingo sessions are also conducted regularly on
most large military bases. While not as large a market as slot machines or table
games, approximately 25 Nevada casinos regularly operate bingo sessions. Bingo
is also a popular form of entertainment in many countries throughout the world,
including Canada which has an estimated $2 billion annual bingo market.

COMPETITION

The electronic bingo industry is characterized by intense competition based
on, among other things, an electronic bingo system's ability to generate
incremental sales for bingo hall operators through product appeal to players,
ease of use and serviceability, support and training, distribution, name
recognition and price. Management believes that the Company competes primarily
with other companies providing electronic bingo units, including Advanced Gaming
Technology, Inc., Bingo Concepts, Bingo Technology Corporation, Inc., FortuNet,
Inc. and Stuart Entertainment, Inc., and also competes with companies offering
traditional paper bingo cards. The Company, through TSBN, will also compete
with Multimedia Games, Inc.'s "Mega Bingo," which has operated a satellite bingo
game in the United States for the past eight years. Certain of the Company's
competitors may have significantly greater financial and technical resources
than the Company, as well as more established customer bases and distribution
channels, which may allow them to move rapidly into the Company's markets and
acquire significant market share. Increased competition may result in price
reductions, reduced operating margins, conversion from lease to sale of the
Company's units, and loss of market share, any of which could materially and
adversely affect the Company's business, operating results or financial
condition. Furthermore, the Company's success may benefit existing competitors
and induce new competitors to enter the market. The Company has attempted to
counter competitive factors by providing superior service and new, innovative
and quality products, but there can be no assurance that the Company will
continue to be a successful competitor in the electronic bingo industry. In
addition, the Company competes with other similar forms of entertainment
including casino gaming and lotteries. Management believes, however, that the
quality of its fixed-base and hand-held bingo systems, combined with superior
service and customer support, differentiate it from its competitors.

Management estimates that at July 31, 1997, GameTech had domestic market
shares of more than 65% of fixed-base units installed and less than 10% of
hand-held units installed.

EMPLOYEES

At July 31, 1997, the Company had approximately 50 full-time equivalent
employees. The Company and its employees are not subject to any collective
bargaining agreements, and the Company believes that its relations with its
employees are good.

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SUPPLIERS

The Company uses a contract manufacturer in Taiwan to supply its hand-held
units. All hardware components for the fixed-base bingo systems are sourced by
the Company from numerous suppliers domestically and assembled at its facilities
in Arizona and Texas. The Company has not had any significant quality problems
or delays in securing its hand-held units or the supply of fixed-base system
components. See "Risk Factors -- Dependence on Single-Source Suppliers for
Hand-Held Units."

FACILITIES

The Company operates from two leased locations: a 6,500 square-foot
headquarters site in Tempe, Arizona under a lease which expires June 14, 2007
and a 6,500 square-foot regional center in Austin, Texas under a sublease which
expires February 28, 1998. Assembly of fixed-base systems and testing and
repair of all the Company's products occurs at both locations, with each serving
as a regional hub. In addition, TSBN has a 5,600 square foot facility for its
operations adjacent to the Company's headquarters in Tempe under a lease which
expires May 31, 2002. The Company rents a small research and development
facility in Denver, Colorado under a lease which expires May 31, 1999.
Additional research and development activities are carried out by three Company
employees at residences in San Diego, California and Las Vegas, Nevada.

INTELLECTUAL PROPERTY/PATENTS

The Company currently holds no registered trademarks, service marks or
patents and does not believe that the lack of such intellectual property
protection is material to its business. The Company has confidentiality
agreements with certain of its customers, suppliers and distributors pursuant to
which the parties agree not to disclose or use any confidential information (as
defined in the agreements) obtained from the other party to that party's
detriment. The employment agreements between the Company and certain of its
executive officers also provide that the executive officer may not disclose or
use the Company's confidential information during or after the term of his
employment. Substantially all of the Company's employees have signed
confidentiality and non-disclosure agreements.

LEGAL PROCEEDINGS

In November 1996, a patent infringement action and demand for jury trial
was commenced against the Company and five other defendants by FortuNet, Inc.
in the U.S. District Court, Southern District of California. The other
defendants were Advanced Gaming Technology, Inc., American Video Systems,
FortuNet Canada, Inc., Network Gaming, Inc. (f/k/a Artificial Intelligence)
and Multimedia Games, Inc. The complaint alleges that the Company, among
others, has infringed, actively induced or contributed to the infringement of
Patent No. 4,624,462 (the "'462 Patent") by making, using and selling, among
other acts, electronic bingo devices that allegedly infringe upon at least
one claim of the '462 Patent. The '462 Patent was issued in 1986 and will
expire in 2001 and is allegedly infringed by the Company's fixed- base units.
The Company, in July 1997, won its motion for transfer and severance in this
action. All prior court dates have been vacated in light of the transfer to
the U.S. District Court of Arizona. A scheduling conference in the U.S.
District Court of Arizona has been set for January 5, 1998.

In March 1996, a patent infringement action and demand for jury trial was
commenced against the Company by Bingo Technology Corporation, Inc. (formerly
Bingo Card Minder Corporation), in the U.S. District Court, Northern District of
California. The complaint alleges that the Company has infringed, actively
induced or contributed to the infringement of Patent No. 4,378,940 (the "'940
Patent") by making, using and selling, among other acts, electronic bingo
devices that allegedly infringe upon at least one claim of the '940 Patent. The
'940 Patent was issued in 1983 and will expire in 2000 and is allegedly
infringed by the Company's hand-held units. A trial date has been set for
December 7, 1998.

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<PAGE>

and there can be no assurance that favorable outcomes will be obtained or that
if either or both actions are resolved in favor of the plaintiffs, such results
would not have a material adverse effect on the Company.

In the normal course of business, the Company may be named as defendant or
co-defendant in lawsuits involving primarily claims for damages. Management
believes that any such unasserted claims will not have a material adverse effect
on the Company.

GOVERNMENT REGULATION

The Company is subject to regulation by authorities in most jurisdictions
in which its electronic bingo units are installed. On tribal Indian lands,
regulation is pursuant to the provisions of IGRA. Otherwise, the regulatory
requirements vary from jurisdiction to jurisdiction, and licensing, other
approval or finding of suitability processes with respect to the Company, its
personnel and its products can be lengthy and expensive. Many jurisdictions
have comprehensive licensing, reporting and operating requirements with respect
to the sale and manufacture of bingo and bingo-related products, including
electronic bingo equipment. These licensing requirements have a direct impact
on the conduct of the day-to-day operations of the Company. Generally,
regulatory authorities may deny applications for licenses, other approvals or
findings of suitability for any cause they may deem reasonable. There can be no
assurance that the Company, its products or its personnel will receive or be
able to maintain any necessary gaming licenses, other approvals or findings of
suitability. The loss of a license in a particular state will prohibit the
Company from realizing revenues in that state and may prohibit the Company from
installing its units in other states. The loss of one or more licenses held by
the Company could have an adverse effect on the Company's business. See "Risk
Factors -- Regulatory Risks."

INDIAN GAMING

Gaming on Indian lands, including the terms and conditions under which
gaming equipment can be sold or leased to Indian tribes, is or may be subject
to regulation under the laws of the tribes, the laws of the host state and
IGRA. Under IGRA, gaming activities are classified as Class I, II or III.
Class I gaming includes social games played solely for prizes of minimal
value or traditional forms of Indian gaming engaged in as part of, or in
connection with, tribal ceremonies or celebrations. Class II gaming includes
bingo and other card games authorized or not explicitly prohibited and played
within the host state (but not including banking card games such as baccarat
or blackjack). Class III gaming includes all forms of gaming that are not
Class I or Class II, including slot machines, video lottery terminals and
casino style games. Indian tribes may conduct Class II gaming under IGRA
without having entered into a written compact with their host state if the
host state permits Class II gaming, but must enter into a separate written
compact with the state in which they are located in order to conduct Class
III gaming activities. Tribal-state compacts vary from state to state. Many
require that equipment suppliers meet ongoing registration and licensing
requirements of the state or the tribe, some establish equipment standards
that may limit or prohibit the placement of electronic gaming systems on
Indian lands and some impose background check requirements on the officers,
directors and stockholders of gaming equipment suppliers. Under IGRA, tribes
are required to regulate all gaming under ordinances approved by the Chairman
of the National Indian Gaming Commission. Such ordinances may impose
standards and technical requirements on gaming hardware and software, and may
impose registration, licensing and background check requirements on gaming
equipment suppliers and their officers, directors and stockholders.

REGULATION OF ELECTRONIC BINGO SYSTEMS

The Company's electronic bingo products, including its fixed-base and
hand-held units, are more heavily regulated than traditional paper bingo, and
federal, state, tribal and local regulations vary significantly by jurisdiction.

IGRA defines Class II gaming to include "the game of chance commonly known
as bingo, whether or not electronic, computer or other technologic aids are used
in connection therewith," and defines Class III gaming to

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<PAGE>

include "electronics or electromechanical facsimiles of any game of chance or
slot machines of any kind." The Company believes that both its fixed-base and
hand-held units are Class II games. In the event that either is classified as a
Class III device, such a designation would reduce the potential market for the
devices (because only Indian gaming halls that had entered into a tribal-state
compact that permits Class III electronic gaming systems would be permitted to
use the device), unless the Company could modify the systems to have them
reclassified as a Class II game. It is difficult to speculate as to what
modifications may be required in the event of such a classification.

Electronic bingo in charitable halls is less widely permitted than paper
bingo, largely because many states' laws and regulations were written before
electronic bingo was introduced. Electronic bingo in charitable halls is
currently permitted in at least 24 states, including Alabama, Alaska, Arizona,
California, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Mississippi,
Montana, Nebraska, Nevada, New Hampshire, New York, North Dakota, Ohio, Oregon,
Pennsylvania, South Dakota, Texas, Virginia, Washington and Wyoming. Because
many state laws and regulations are silent with respect to electronic bingo,
changes in regulatory and enforcement personnel could impact the continued
operation of electronic bingo in these states. In addition, some states require
the inspection, approval or modification of electronic bingo systems before sale
in those states.

APPLICATION OF FUTURE OR ADDITIONAL REGULATORY REQUIREMENTS

The Company intends to seek the necessary licenses, approvals and
findings of suitability for the Company, its products and its personnel in
other jurisdictions where significant bingo activities are anticipated.
However, there can be no assurance that such licenses, approvals or findings
of suitability will be obtained and will not be revoked, suspended or
conditioned or that the Company will be able to obtain the necessary
approvals for its future products as they are developed in a timely manner,
or at all. If a license, approval or finding of suitability is required by a
regulatory authority and the Company fails to seek or does not receive the
necessary license or finding of suitability, the Company may be prohibited
from distributing its products for use in the respective jurisdiction or may
be required to distribute its products through other licensed entities at a
reduced profit to the Company.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executives officers are as follows:

NAME AGE POSITION
-------------------- -------- -----------------------------------

Richard T. Fedor . . 51 Chairman of the Board and Chief
Executive Officer

Clarence H. Thiesen. 66 Chief Financial Officer and Director

Gary R. Held . . . . 43 Vice President - Sales & Marketing and
Director

Conrad J. Granito, Jr. 39 President and Chief Operating Officer

John J. Paulson. . . 43 Treasurer

Paul M. Wehrs. . . . 48 Vice President - Operations

Andrejs K. Bunkse. . 28 General Counsel - Corporate Secretary

RICHARD T. FEDOR is a co-founder of GameTech and has held the positions of
Chairman of the Board and CEO since 1994. Mr. Fedor was also the Company's
President from 1994 until August 1, 1997. From 1991 to 1994, Mr. Fedor's
occupation was that of a private investor. Previously, Mr. Fedor was President
of ZYGO Corporation, a manufacturer of high performance, laser-based electro
optical measuring instruments, from 1987 to 1991. From 1985 to 1987, Mr. Fedor
held the position of Operations Vice President at International Game Technology
("IGT"). Mr. Fedor has also held various senior management positions at Hewlett
Packard and GTE.

CLARENCE H. THIESEN is a co-founder of GameTech and has held the position
of Chief Financial Officer since 1994. Prior to his employment with GameTech,
Mr. Thiesen was a financial consultant from 1992 to 1994. From 1988 to 1992,
Mr. Thiesen was Vice President of ZYGO Corporation, where he focused on sourcing
in the Far East and assisted in restructuring the company. From 1986 to 1988,
Mr. Thiesen was the President of Keno Computer Systems, Reno, Nevada. From 1981
to 1986, Mr. Thiesen was the Vice President of Finance at IGT, where he
specialized in acquisitions, the installation of new accounting, budgeting and
forecasting systems and financial public relations.

GARY R. HELD is a co-founder of GameTech and has held the position of
Vice President - Sales & Marketing since 1994. Mr. Held has over nine years
of experience in the bingo industry. Prior to his employment with GameTech,
Mr. Held was Vice President - Sales and Marketing at Advanced Gaming
Technology, Inc. from November 1993 until 1994. Mr. Held was the General
Manager of Bingo Operations and Promotions & Marketing Director at the Barona
Casino in San Diego, California from 1992 to November 1993. During 1991, Mr.
Held was involved in management at the Treasure Island Casino in Red Wing,
Minnesota. Mr. Held was previously Vice President of Sales at FortuNet, Inc.,
one of the first companies to develop electronic bingo units. Mr. Held also
has experience at Bingo West, the largest bingo distributor in the western
United States, where he was responsible for sales to charity and Indian bingo
halls.

CONRAD J. GRANITO, JR. has been a consultant for GameTech since March
1997 and joined the Company in August 1997 as President and Chief Operating
Officer. From 1993 to July 1997, Mr. Granito was the General Manager of the
Isleta Gaming Palace in Albuquerque, New Mexico, a Class III gaming operation
which is owned and operated by the Pueblo of Isleta Tribe. From 1990 to
1993, Mr. Granito was the Director of Gaming Operations for the Sycuan Band
of Mission Indians where he supervised all gaming operations of the Sycuan
Gaming Center in San Diego, California. Mr. Granito also acted as a
consultant for over 20 Indian tribes across the United States regarding their
gaming operations.

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<PAGE>

JOHN J. PAULSON, a certified public accountant, joined GameTech in 1996
as the controller and was promoted to Treasurer in July 1997. Prior to his
employment with GameTech, Mr. Paulson was Chief Financial Officer at the
Sycuan Gaming Center from 1991 to 1996. Mr. Paulson has also served as a
senior manager for the national CPA and consulting firm of McGladrey &
Pullen, LLP, certified public accountants, where he consulted for Indian
bingo halls and casinos and provided audit and consulting services to several
publicly traded corporations.

PAUL M. WEHRS joined GameTech in April 1997 as Vice President - Operations.
From 1989 to April 1997, Mr. Wehrs was Installation Manager at BancTec
International, Inc. which developed, sold and installed check imaging systems.
Mr. Wehrs previously was Vice President of Operations at Park Plaza Bank in
St. Cloud, Minnesota.

ANDREJS K. BUNKSE joined GameTech in April 1997 as General Counsel -
Corporate Secretary. From 1995 to 1997, Mr. Bunkse was an associate at the law
firm of Mitchell, Brisso, Delaney & Vrieze in Eureka, California. Mr. Bunkse is
a graduate of Syracuse University and the Santa Clara University School of Law,
is a member of the State Bar of California and the American Bar Association, and
is admitted to practice before the United States District Court for the Southern
District of California.

Pursuant to the Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), the Board of Directors is divided into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected each year.
Currently, the Board of Directors consists of three members. The Company
intends to add two qualified, independent directors following completion of this
offering subject to any regulatory approvals, and will establish a compensation
committee and audit committee. See "Risk Factors - Control by Principal
Stockholders; Anti-Takeover Provisions."

COMPENSATION OF DIRECTORS

When directors who are not receiving compensation as officers, employees or
consultants of the Company are appointed to the Board of Directors, they will be
entitled to receive an annual retainer fee of $5,000, plus $500 and
reimbursement of expenses for each meeting of the Board of Directors and each
committee meeting of the Board of Directors that they attend in person. In
addition, such directors will receive grants of non-qualified stock options for
3,000 shares upon joining the Board of Directors and 1,000 shares following each
Annual Meeting of Stockholders while such director continues to serve on the
Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended October 31, 1996, the Company did not have a
compensation committee of its Board of Directors, or other board committee
performing equivalent functions. Decisions concerning the compensation of
executive officers were made by the entire Board of Directors.

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE. The following table sets forth certain
information concerning the compensation paid by the Company to the Chief
Executive Officer and to the two other most highly compensated executive
officers who were employed during the fiscal year ended October 31, 1996.

SUMMARY COMPENSATION TABLE

1996 ANNUAL COMPENSATION
- --------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION SALARY BONUS

Richard T. Fedor $154,000 $ 20,000
Chairman of the Board and CEO. . . . .
- --------------------------------------------------------------------------------

Clarence H. Thiesen 111,033 15,000
Chief Financial Officer. . . . . . . .
- --------------------------------------------------------------------------------

Gary R. Held 133,798 13,000
Vice President - Sales & Marketing . .
- --------------------------------------------------------------------------------

STOCK OPTION PLAN

The Company has adopted the Stock Option Plan, which authorizes the grant
of up to 2,000,000 options to purchase shares of Common Stock, of which 813,000
remain available for grant, as (i) incentive stock options ("ISOs") within the
meaning of Section 422 of the Code or (ii) stock options that are not intended
to qualify under Section 422 of the Code ("Non-qualified Stock Options" and
together with ISOs, "Options"). Directors, officers, employees and consultants
of the Company, as selected from time to time by the Board of Directors or the
committee administering the Stock Option Plan, will be eligible to participate
in the Stock Option Plan.

The Stock Option Plan provides that it is to be administered by the
Company's Board of Directors or a committee thereof (such Board of Directors or
committee as is administering the Stock Option Plan, the "Administrator").
Subject to certain limitations, the Administrator has complete discretion to
determine which eligible individuals are to receive awards under the Stock
Option Plan, the form and vesting schedule of awards, the number of shares
subject to each award and the exercise price, the manner of payment and
expiration date applicable to each award.

Under the terms of the Stock Option Plan, all options will expire on the
date that is the earliest of 30 days after the holder's termination of
employment with the Company, one year after the holder's death or 10 years
after the date of grant. The exercise price per share of an ISO will be
determined by the Administrator at the time of grant, but in no event may be
less than the fair market value of the Common Stock on the date of grant.
Notwithstanding the foregoing, if an ISO is granted to a participant who owns
more than 10% of the voting power of all classes of stock of the Company, the
exercise price will be at least 110% of the fair market value of the Common
Stock on the date of grant and the exercise period will not exceed five years
from the date of grant. The exercise price per share of Non-qualified Stock
Options will be determined by the Administrator in its sole discretion.

EMPLOYMENT AGREEMENTS

Richard T. Fedor entered into an employment agreement on August 14, 1997 to
serve as Chairman of the Board and Chief Executive Officer of the Company. His
annual salary is -200,500 and may be increased, but not decreased, at the
discretion of the Board of Directors. Mr. Fedor may be awarded bonuses at the
discretion of the Board of Directors based on his performance and the Company's
overall performance. Mr. Fedor's employment agreement is for a term of two
years, which term is renewed on a monthly basis unless his employment is

35
<PAGE>

terminated pursuant to the employment contract. The contract is terminable by
the Company for cause on 30 days' written notice to Mr. Fedor. Mr. Fedor's
employment agreement provides that he may not compete with the Company during
the term of his employment and for a period of two years after his retirement or
other termination of his employment. The agreement also provides that Mr. Fedor
is entitled to receive stock options pursuant to the Stock Option Plan. See "--
Stock Option Plan."

Clarence H. Thiesen entered into an employment agreement on August 14, 1997
to serve as Chief Financial Officer of the Company. His annual salary is
$130,600 and may be increased, but not decreased, at the discretion of the Board
of Directors. Mr. Thiesen may be awarded bonuses at the discretion of the Board
of Directors based on his performance and the Company's overall performance.
Mr. Thiesen's employment contract is for a term of one year, which term is
renewed on a monthly basis unless his employment is terminated pursuant to the
employment contract. The contract is terminable by the Company for cause on 30
days' written notice to Mr. Thiesen. Mr. Thiesen's employment agreement
provides that he may not compete with the Company during the term of his
employment and for a period of two years after his retirement or other
termination of his employment. The agreement also provides that Mr. Thiesen is
entitled to receive stock options pursuant to the Stock Option Plan. See "--
Stock Option Plan."

Gary R. Held entered into an employment agreement on August 14, 1997 to
serve as Vice President - Sales & Marketing of the Company. His annual salary
is $136,000 and may be increased, but not decreased, at the discretion of the
Board of Directors. Mr. Held may be awarded bonuses at the discretion of the
Board of Directors based on his performance and the Company's overall
performance. Mr. Held's employment contract is for a term of two years, which
term is renewed on a monthly basis unless his employment is terminated pursuant
to the employment contract. The contract is terminable by the Company for cause
on 30 days' written notice to Mr. Held. Mr. Held's employment agreement
provides that he may not compete with the Company during the term of his
employment and for a period of two years after his retirement or other
termination of his employment. The agreement also provides that Mr. Held is
entitled to receive stock options pursuant to the Stock Option Plan. See "--
Stock Option Plan."

Conrad J. Granito, Jr. entered into an employment agreement on August 14,
1997 to serve as President and Chief Operating Officer of the Company. His
annual salary is $130,000 and may be increased, but not decreased, at the
discretion of the Board of Directors. Mr. Granito may be awarded bonuses at the
discretion of the Board of Directors based on his performance and the Company's
overall performance. Mr. Granito's employment contract is for a term of two
years, which term is renewed on a monthly basis unless his employment is
terminated pursuant to the employment contract. The contract is terminable by
the Company for cause on 30 days' written notice to Mr. Granito. Mr. Granito's
employment agreement provides that he may not compete with the Company during
the term of his employment and for a period of two years after his retirement or
other termination of his employment. The agreement also provides that Mr.
Granito is entitled to receive stock options pursuant to the Stock Option Plan.
See "-- Stock Option Plan."

36
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

NOTES PAYABLE TO STOCKHOLDERS

On March 1, 1997, the Company issued a convertible promissory note in favor
of Richard T. Fedor and Bonnie G. Fedor in the original principal amount of
$1,341,200 (the "Fedor Note"), and a convertible promissory note in favor of the
CJB Family Trust in the principal amount of $80,954 (the "Trust Note" and
collectively with the Fedor Note, the "Notes"). The initial interest rate of
the Notes is 13.0%, plus or minus incremental changes in the prime rate,
compounded daily, and they are due in full on February 28, 1999. The principal
and accrued interest on the Notes outstanding at April 30, 1997 was $1,451,645.
The Notes represent the consolidation of previously outstanding notes and
interest payable to the holders, and are convertible at the holders' option into
Common Stock of the Company at a conversion price that is the lower of (i) the
lowest price offered to any individual or investor group or (ii) $1.00 per
share. The holders will convert their respective Notes plus accrued interest
into Common Stock of the Company at the $1.00 per share price specified in the
Notes prior to the completion of this offering.

LOANS TO COMPANY

In October 1996, GameTech and Richard T. Fedor, the Chairman of the Board
and Chief Executive Officer of the Company, as Borrowers, entered into a
non-revolving loan commitment with Wells Fargo in the principal amount of $3
million. As part of the loan transaction, Mr. Fedor and Bonnie G. Fedor agreed
to subordinate certain indebtedness owed to them by the Company (see "-- Notes
Payable to Stockholders") to the indebtedness owed by the Company and Mr. Fedor
to Wells Fargo, pursuant to a subordination agreement with Wells Fargo. On
April 11, 1997, Wells Fargo agreed to amend the loan documents, naming the
Company as the sole borrower. Under the terms of the amendment, Mr. Fedor must
retain at least 25% of the outstanding Common Stock prior to any initial public
offering.

STOCK REPURCHASE AGREEMENT

On November 22, 1996, the Company entered into an agreement with a former
officer of the Company to repurchase 1,000,000 shares of Common Stock for
$875,000 and forgiveness of a note and accrued interest of approximately
$168,000. The Company issued a note in the principal amount of $625,000 as
part payment for the repurchase of the shares of Common Stock and paid the
balance of $250,000 in cash. The note bears interest at 5.65% and is payable
in four semi-annual installments of $156,250 plus interest. See Note 6 of
Notes to Financial Statements.

37
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the pro forma
beneficial ownership of the Company's Common Stock at the date of this
Prospectus, assuming, where relevant, the conversion into Common Stock of the
Series A Preferred and Notes, and as adjusted to reflect the sale of the shares
of Common Stock being offered hereby, by: (i) each stockholder who is known by
the Company to beneficially own more than 5% of the currently outstanding shares
of Common Stock; (ii) each of the Company's Directors and executive officers;
(iii) all Company's Directors and executive officers of the Company as a group;
and (iv) the Selling Stockholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY
NAME AND ADDRESS OF PRIOR TO THE OFFERING SHARES BEING OWNED AFTER THE OFFERING(a)
- ------------------------------------------------------------------------------------------------------------------------
BENEFICIAL OWNER NUMBER PERCENT . OFFERED NUMBER PERCENT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard T. Fedor (b)(c) . . 2,995,659 44.2% 150,000 2,845,659 28.8%
- ------------------------------------------------------------------------------------------------------------------------
Gary R. Held (d) . . . . . . 1,035,000 20.8 150,000 885,000 10.9%
- ------------------------------------------------------------------------------------------------------------------------
Clarence H. Thiesen (e). . . 535,000 10.7 150,000 385,000 4.8%
- ------------------------------------------------------------------------------------------------------------------------
Andrejs K. Bunkse (f). . . . 40,000 * 10,000 30,000 *
Conrad J. Granito. . . . . . - * - - *
- ------------------------------------------------------------------------------------------------------------------------
Bonnie G. Fedor (g). . . . . 2,995,659 44.2% - 2,845,659 28.8%
- ------------------------------------------------------------------------------------------------------------------------
CJB Family Trust (h) . . . . 1,288,467 28.1 150,000 1,138,467 14.2%
- ------------------------------------------------------------------------------------------------------------------------
Vern Blanchard (i) . . . . . 1,423,467 28.1 - 1,273,467 15.6%
- ------------------------------------------------------------------------------------------------------------------------
Susan E. Held (j). . . . . . 1,035,000 20.8 - 885,000 10.9%
- ------------------------------------------------------------------------------------------------------------------------
Mara Thiesen(k). . . . . . . 535,000 10.7 - 385,000 4.8%
Kenneth Fedor (l). . . . . . 275,000 5.7 -
Emilie Fedor (m) . . . . . . 275,000 5.7 -
- ------------------------------------------------------------------------------------------------------------------------
All directors and executive
officers as a group
(7 persons). . . . . . . . . 4,628,326 65.5% 460,000 4,168,326 41.4%

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

</TABLE>

* Less than one percent.

The address of each person, trust or trustee is c/o the Company, 2209 W. 1st
Street, Suite 113-114, Tempe, Arizona 85281.

(a) Assumes no exercise of the Underwriters' over-allotment option. If
such option is exercised, four of the Selling Stockholders will sell
up to an additional 50,000 shares of Common Stock and the Company will
sell up to an additional 356,000 shares of Common Stock, PRO RATA.
(b) Includes (i) 492,000 shares of Common Stock issuable upon the exercise
of stock options granted November 1, 1996 and currently exercisable
and (ii) certain shares owned of record by Mr. Fedor's wife and minor
children. Mr. Fedor is the husband of Bonnie G. Fedor. Mr. Fedor
disclaims beneficial ownership of shares owned by Mrs. Fedor.
(c) Includes 1,437,534 shares at October 31, 1997, to be issuable upon
conversion of the Fedor Note, at a price of -1.00 per share, prior to
completion of this offering. See "Certain Relationships and Related
Party Transactions."
(d) Includes (i) 135,000 shares of Common Stock issuable upon the exercise
of stock options granted November 1, 1996 and currently exercisable
and (ii) certain shares owned of record by Mr. Held's wife and

38
<PAGE>

minor child. Mr. Held is the husband of Susan E. Held. Mr. Held
disclaims beneficial ownership of shares owned by Mrs. Held.
(e) Includes (i) 135,000 shares of Common Stock issuable upon the exercise
of stock options granted November 1, 1996 and currently exercisable
and (ii) certain shares owned of record by Mr. Thiesen's wife. Mr.
Thiesen is the husband of Mara Thiesen. Mr. Thiesen disclaims
beneficial ownership of shares owned by Mrs. Thiesen.
(f) Mr. Bunkse is the son of Mara Thiesen.
(g) Mrs. Fedor is the wife of Richard T. Fedor. Mrs. Fedor disclaims
beneficial ownership of shares owned by Mr. Fedor.
(h) Includes 88,467 shares at October 31, 1997 issuable upon conversion,
at a price of $1.00 per share, prior to completion of this offering,
of the Trust Note. See "Certain Relationships and Related Party
Transactions."
(i) Represents shares owned by the CJB Family Trust. Vern Blanchard is
the sole trustee of the trust and has sole voting power and investment
power with respect to the Common Stock held by the trust. In
addition, includes 135,000 shares of Common Stock issuable upon the
exercise of stock options granted to Mr. Blanchard November 1, 1996
and currently exercisable.
(j) Mrs. Held is the wife of Gary R. Held. Mrs. Held disclaims beneficial
ownership of shares owned by Mr. Held.
(k) Mrs. Thiesen is the wife of Clarence H. Thiesen and the mother of
Andrejs Bunkse. Mrs. Thiesen disclaims beneficial ownership of shares
owned by Mr. Thiesen.
(l) Mr. Fedor is the brother of Richard T. Fedor.
(m) Mrs. Fedor is the wife of Kenneth Fedor.

39
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 9,365,720 shares of
Common Stock outstanding. All of the shares offered hereby will be freely
tradeable without restriction or registration under the Securities Act, unless
acquired by an "affiliate" of the Company as that term is defined in Rule 144,
which shares will unless registered be subject to resale limitations of Rule 144
described below.

In connection with the Private Placement, the Company granted certain
"demand" and "piggyback" registration rights to the holders of any Common Stock
issuable upon conversion of the Series A Preferred (which will occur upon
completion of this offering). The demand registration right may not be
exercised prior to one year after completion of this offering. See
"Underwriting."

In general, under Rule 144 as currently in effect, a stockholder who has
beneficially owned for at least one year shares privately acquired directly or
indirectly from the Company or from an affiliate of the Company, and persons who
are affiliates of the Company who have acquired the shares in registered
transactions, will be entitled to sell within any three-month period a number of
shares that does not exceed the greater of: (i) one percent of the outstanding
shares of Common Stock (approximately 93,366 shares upon completion of this
offering); or (ii) the average weekly trading volume in the Common Stock during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain requirements relating to the manner and notice of sale and
the availability of current public information about the Company. See "Risk
Factors -- Shares Eligible for Future Sales."

The Company, the Selling Stockholders and the directors and executive
officers of the Company have agreed not to offer, pledge, sell, sell an option
or contract to purchase, purchase an option or contract to sell, contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or enter into
any swap or other arrangement that in any manner transfers all or a portion of
the economic consequences associated with the ownership of such Common Stock, or
to cause a registration statement covering any shares of Common Stock to be
filed, for 180 days after the date of this Prospectus without the prior written
consent of DLJ, provided that the Company may grant options pursuant to the
Stock Option Plan, and issue shares of Common Stock upon the exercise of
outstanding options. See "Underwriting."

Prior to this offering, there has been no established trading market for
the Common Stock. No predictions can be made with respect to the effect, if
any, that public sales of shares of the Common Stock or the availability of
shares for sale will have on the market price of the Common Stock after the
completion of this offering. Sales of substantial amounts of Common Stock in
the public market following this offering, or the perception that such sales may
occur, could adversely affect the market price of the Common Stock or the
ability of the Company to raise capital through sales of its equity securities.
See "Risk Factors--No Prior Public Market."

40
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 40,000,000 shares
of Common Stock and 5,000,000 shares of preferred stock, par value -.001 per
share (the "Preferred Stock"). The following summary description of the capital
stock of the Company does not purport to be complete and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the
Certificate of Incorporation and Amended and Restated Bylaws (the "Bylaws"),
copies of which have been filed as exhibits to the registration statement of
which this Prospectus forms a part, and to the applicable provisions of the
DGCL. See "Underwriting."

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to the
rights of any holders of Preferred Stock, holders of Common Stock are entitled
to receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available. The Company does not anticipate paying any cash
dividends in the foreseeable future. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in the distribution of all assets remaining
after payment of liabilities, subject to the rights of any holders of Preferred
Stock. The holders of Common Stock have no preemptive rights to subscribe for
additional shares of the Company and no right to convert their Common Stock into
any other securities. In addition, there are no redemption or sinking fund
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are, and the Common Stock offered hereby will be, validly issued,
fully-paid and nonassessable.

PREFERRED STOCK

The Board of Directors is authorized to issue from time to time, without
stockholder approval, in one or more designated series, any or all shares of
authorized Preferred Stock and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series. The issuance of Preferred Stock could adversely affect
the voting power of holders of Common Stock and could have the effect of
delaying, deferring or impeding a change in control of the Company. At the date
of this Prospectus, the Company has issued and outstanding 400,000 shares of
Series A Preferred Stock, which by its terms, will convert into an equal number
of shares of Common Stock upon the completion of this offering.

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" (as defined) with a Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination, (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced (excluding shares owned by persons who are
both officers and directors of the corporation and shares held by certain
employee stock ownership plans) or (iii) following the transaction in which such
person became an interested stockholder, the business combination is approved by
the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Bylaws provide that the Company shall indemnify, to the
fullest extent permitted by the

41
<PAGE>

DGCL, its directors and officers, against losses incurred by any such person by
reason of the fact that such person was acting in such capacity. Under the
DGCL, liability of a director or officer may not be limited for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is ChaseMellon Shareholder
Services, LLC.

42
<PAGE>

UNDERWRITING

Subject to certain terms and conditions contained in an underwriting
agreement (the "Underwriting Agreement"), the Underwriters named below, for whom
DLJ and Prudential Securities Incorporated are serving as representatives (the
"Representatives"), have severally agreed to purchase from the Company and the
Selling Stockholders the respective number of shares of Common Stock set forth
opposite their names below:

NUMBER OF
UNDERWRITERS SHARES

Donaldson, Lufkin & Jenrette Securities Corporation . . .

Prudential Securities Incorporated. . . . . . . . . . . .

----------------
Total. . . . . . . . . . . . . . . . . . . . . . . .
----------------
----------------

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of the
shares of Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all of the shares of Common Stock (other than the shares
of Common Stock covered by the Underwriters' over-allotment option described
below) must be so purchased.

Prior to this offering, there has been no established trading market for
the Common Stock. The initial price to the public for the Common Stock offered
hereby has been determined by negotiation between the Company and the
Representatives. The factors considered in determining the initial price to the
public included the history of and the prospects for the industry in which the
Company competes, the performance and ability of the Company's management, the
past and present operations of the Company, the historical results of operations
of the Company, the prospects for future earnings of the Company, the general
condition of the securities markets at the time of this offering and the recent
market prices of securities of generally comparable companies.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the price
to the public set forth on the cover page of this Prospectus and to certain
dealers (who may include the Underwriters) at such price less a concession not
to exceed $ share. The Underwriters may allow, and such dealers may
reallow, discounts not in excess of $ per share to any other Underwriter
and certain other dealers. After this offering, the offering price and other
selling terms may be changed by the Underwriters.

The Company and the Selling Stockholders have granted to the Underwriters
an option to purchase up to an aggregate of 556,500 additional shares of Common
Stock, at the initial public offering price less underwriting discounts and
commissions, solely to cover over-allotments. If such option is exercised, four
of the Selling Stockholders will sell up to an additional 50,000 shares of
Common Stock and the Company will sell up to an

43
<PAGE>

additional 356,500 shares of Common Stock, PRO RATA. See APrincipal and Selling
Stockholders." Such option may be exercised in whole or in part from time to
time during the 30-day period after the date of this Prospectus. To the extent
that the Underwriters exercise such option, each of the Underwriters will be
committed, subject to certain conditions, to purchase from certain of the
Selling Stockholders and the Company a number of option shares proportionate to
such Underwriter's initial commitment as indicated in the preceding table.

The Underwriters have reserved up to 5% of the shares of Common Stock
offered hereby for sale at the initial public offering price to certain
employees, consultants and other persons associated with the Company. The
number of shares of Common Stock available for sale to the general public will
be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased may be offered by the Underwriters to the
general public on the same basis as the other shares offered hereby. This
program will be administered by DLJ.

The Company, Selling Stockholders, and the directors and executive officers
of the Company have agreed not to offer, pledge, sell, contract to sell, sell an
option or contract to purchase, purchase an option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or enter into
any swap or other arrangement that in any manner transfers all or a portion of
the economic consequences associated with the ownership of such Common Stock, or
to cause a registration statement covering any shares of Common Stock to be
filed, for 180 days after the date of this Prospectus without the prior written
consent of DLJ, provided that the Company may grant options pursuant to the
Stock Option Plan, and issue shares of Common Stock upon the exercise of
outstanding options. See "Shares Eligible for Future Sale."

In connection with this offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot the offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase shares of Common Stock in the open market to cover syndicate short
positions or to stabilize the price of the Common Stock. Finally, the
underwriting syndicate may reclaim selling concessions from syndicate members in
this offering, if the syndicate repurchases previously distributed Common Stock
in syndicate covering transactions, in stabilization transactions or
otherwise. Any of these activities may stabilize or maintain the market price
of the Common Stock above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.

The Representatives have informed the Company that they do not expect to
make sales to accounts over which they exercise discretionary authority in
excess of 5% of the number of shares of Common Stock offered hereby.

Certain affiliates of DLJ purchased 133,333 shares of the 400,000 shares
of Series A Preferred issued and sold on September 2, 1997. In connection
therewith and for financial advisory and other services, DLJ received a fee.

The Company has filed an application for quotation and trading of the
Common Stock on The Nasdaq National Market under the symbol "GMTC."

LEGAL MATTERS

The validity of the shares of the Common Stock offered hereby will be
passed upon for the Company by Morgan, Lewis & Bockius LLP, Los Angeles,
California. Certain legal matters will be passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles, California.

44
<PAGE>

EXPERTS

The financial statements of the Company at October 31, 1995 and 1996, for
the period from inception (April 18, 1994) through October 31, 1994, and for the
years ended October 31, 1995 and 1996, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, covering the Common Stock offered hereby. This Prospectus (which
constitutes a part of the Registration Statement) omits certain information
contained in the Registration Statement as permitted by the rules and
regulations of the Commission, and reference is made to the Registration
Statement, and the exhibits and schedules thereto for further information with
respect to the Company and the Common Stock offered hereby. Statements
contained in this Prospectus as to the contents of any contract, agreement or
other document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance, reference is made to the exhibit for
a more complete description of the matter involved, each such statement being
qualified in its entirety by such reference. The Registration Statement may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 and
at the regional offices of the Commission maintained at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of such materials may be obtained from the
Public Reference Section of the Commission, Room 1024, Judiciary Plaza, 450
Fifth Street, NW, Washington, D.C. 20549, at prescribed rates. In addition,
registration statements and certain other filings made with the Commission
through its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system
are publicly available through the Commission's site on the Internet's World
Wide Web, located at http://www.sec.gov. The Registration Statement, including
all exhibits thereto and amendments thereof, has been filed with the Commission
through EDGAR.

The Company intends to furnish its stockholders with annual reports, which
will include audited financial statements prepared in accordance with accounting
principles generally accepted in the United States and a report of its
independent public accountants with respect to the examination of such financial
statements. In addition, the Company will make available to or furnish its
stockholders with such other interim reports as the Company deems appropriate or
as may be required by law.

45
<PAGE>

GAMETECH INTERNATIONAL, INC.

INDEX TO FINANCIAL STATEMENTS

PAGE

Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . .F-2
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-3
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . .F-4
Statements of Stockholders' Equity (Deficit) . . . . . . . . . . . . . . .F-5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . .F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . .F-7

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
GameTech International, Inc.

We have audited the accompanying balance sheets of GameTech International, Inc.
as of October 31, 1995 and 1996 and the related statements of operations,
stockholders' equity (deficit), and cash flows for the period from inception
(April 18, 1994) through October 31, 1994 and for the years ended October 31,
1995 and 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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 financial statements referred to above present fairly, in
all material respects, the financial position of GameTech International, Inc. at
October 31, 1995 and 1996, and the results of its operations and its cash flows
for the period from inception (April 18, 1994) through October 31, 1994 and for
the years ended October 31, 1995 and 1996, in conformity with generally accepted
accounting principles.

ERNST & YOUNG LLP
/s/ Ernst & Young LLP

Sacramento, California
January 10, 1997

F-2

<PAGE>

GAMETECH INTERNATIONAL, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
CONVERTIBLE NOTES
PAYABLE AND
STOCKHOLDERS'
OCTOBER 31, EQUITY
---------------------------------- APRIL 30, AT APRIL 30, 1997
1995 1996 1997 [NOTE 8]
--------------- -------------- ------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash $ 37,027 $ 166,119 $ 441,062
Accounts receivable, less allowance for doubtful
accounts of $24,000 in 1995, $102,000 in 1996 and
$115,000 in 1997 244,714 546,356 1,012,041
Deposits 258,200 276,622 365,497
Prepaids and other current assets 42,425 32,572 97,074
--------- ---------- -----------
Total current assets 582,366 1,021,669 1,915,674

Bingo units, furniture and equipment, net 1,869,839 4,294,337 6,191,021

Intangibles, less accumulated amortization of
$78,000 in 1995, $136,000 in 1996 and $176,000 in
1997 330,473 394,364 429,373

Total assets $2,782,678 $5,710,370 $8,536,068
---------- ---------- ------------
---------- ---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term borrowings from bank $ 14,200 $1,866,793 $ 450,000
Accounts payable 284,540 52,532 100,659
Accrued payroll and related obligations 35,950 150,273 221,412
Other accrued liabilities 38,525 35,166 57,211
Income taxes payable 28,907 134,216 153,030
Current portion of convertible notes payable to
officers, including accrued interest 217,141 168,183 -
Current portion of long-term debt - - 1,225,060
------------
Total current liabilities 619,263 2,407,163 2,207,372

Convertible notes payable to officers, including
accrued interest 1,074,319 1,362,662 1,451,645 $ -
------------
------------
Long-term debt - - 2,243,690

Deferred income taxes 109,207 155,207 155,207

Commitments and contingencies

Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares
authorized; none issued - - -
Common stock, $.001 par value; 40,000,000 shares
authorized; 5,109,875 shares issued and outstanding
in 1995, 5,181,575 in 1996, 4,414,075 in 1997 and
6,265,720 pro forma 5,110 5,182 4,414 $ 6,266
Capital in excess of par value 557,865 558,510 9,515 4,309,308
Retained earnings 416,914 1,221,646 2,464,225 2,464,225
--------- --------- --------- -----------
Total stockholders' equity 979,889 1,785,338 2,478,154 $ 6,779,799
--------- ---------- ---------- -----------
--------- ---------- ---------- -----------

Total liabilities and stockholders' equity $2,782,678 $5,710,370 $8,536,068
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-3

<PAGE>

GAMETECH INTERNATIONAL, INC.

STATEMENTS OF OPERATIONS

<S> <C> <C> <C> <C> <C>
Revenues $ 598,779 $3,349,611 $5,364,017 $2,105,213 $5,485,538

Operating expenses:
Cost of revenues 253,165 711,603 1,614,562 695,451 1,311,332
General and administrative 220,473 693,049 1,019,919 453,367 803,452
Sales and marketing 148,693 551,844 613,503 280,989 628,364
Research and development 93,689 329,104 477,482 219,256 235,670
------------ ------------ ------------ ------------ ----------
716,020 2,285,600 3,725,466 1,649,063 2,980,818
------------ ------------ ------------ ------------ ----------
Income (loss) from operations (117,241) 1,064,011 1,638,551 456,150 2,504,720

Interest expense (59,881) (195,890) (279,032) (127,662) (213,678)
Other income (expense), net 1,714 2,315 4,430 (2,656) 12,844
------------ ------------ ------------ ------------ ----------

Income (loss) before provision
for income taxes (175,408) 870,436 1,363,949 325,832 2,303,886

Provision for income taxes - 278,114 559,217 133,592 914,000
------------ ------------ ------------ ------------ ----------

Net income (loss) $ (175,408) $ 592,322 $ 804,732 $ 192,240 $1,389,886
------------ ------------ ------------ ------------ ----------
------------ ------------ ------------ ------------ ----------

Pro forma net income per share $ .11 $ .19
------------- -----------
------------- -----------

Shares used in the calculation
of pro forma net income per share 8,289.283 7,520,006
------------- -----------
------------- -----------
</TABLE>

SEE ACCOMPANYING NOTES.

F-4

<PAGE>

GAMETECH INTERNATIONAL, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------ CAPITAL IN RETAINED STOCKHOLDERS'
EXCESS OF EARNINGS EQUITY
SHARES AMOUNT PAR VALUE (DEFICIT) (DEFICIT)
<S> <C> <C> <C> <C> <C>
Balances at inception (April 18, 1994) $ - $ - $ - $ - $ -
Net loss - - - (175,408) (175,408)
------------ ------------ ------------- ------------- ------------
Balances at October 31, 1994 - - - (175,408) (175,408)

Issuance of founders' shares 4,570,000 4,570 18,530 - 23,100
Conversion of convertible notes
payable into common stock 439,875 440 439,435 - 439,875
Issuance of common stock for cash 100,000 100 99,900 - 100,000
Net income - - - 592,322 592,322
------------ ------------ ------------- ------------- ------------
Balances at October 31, 1995 5,109,875 5,110 557,865 416,914 979,889

Issuance of common stock for cash
upon exercise of stock options 71,700 72 645 - 717
Net income - - - 804,732 804,732
------------ ------------ ------------- ------------- ------------
Balances at October 31, 1996 5,181,575 5,182 558,510 1,221,646 1,785,338

Repurchase and cancellation of
common stock (unaudited) (1,000,000) (1,000) (558,510) (147,307) (706,817)
Common shares issued in exchange
for services (unaudited) 5,500 5 5,495 - 5,500
Issuance of common stock upon
exercise of stock options
(unaudited) 225,000 225 2,022 - 2,247

Conversion of convertible notes
payable into common stock
(unaudited) 2,000 2 1,998 - 2,000
Net income (unaudited) - - - 1,389,886 1,389,886

Balances at April 30, 1997 (unaudited) $4,414,075 $ 4,414 $ 9,515 $2,464,225 $2,478,154
------------ ------------ ------------- ------------- ------------
------------ ------------ ------------- ------------- ------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-5

<PAGE>

GAMETECH INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 18,
1994) THROUGH YEARS ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
OCTOBER 31, ------------------------------- ---------------------------
1994 1995 1996 1996 1997
--------------- ------------ ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (175,408) $592,322 $804,732 $192,240 $1,389,886
Adjustments to reconcile net income
(loss) to net cash (used in) provided
by operating activities:
Depreciation and amortization 62,583 282,433 599,458 227,417 93,852
Accrued interest payable to officers 59,258 195,890 164,363 84,935 90,983
Deferred income taxes - 109,207 46,000 - -
Changes in operating assets and
liabilities: 79,880 (177,469) (301,642) (98,921) 465,685)
Accounts receivable, net - (258,200) (18,422) 182,649 (88,875)
Deposits (5,384) (37,041) 9,853 40,073 (64,502)
Prepaids and other current assets 23,107 261,433 (232,008) (236,300) 48,127
Accounts payable
Accrued payroll and related obligations (89,712) 35,950 114,323 54,500 1,139
Other accrued liabilities (17,187) 20,329 (3,359) (73,572) 22,045
Income taxes payable - 28,907 105,309 33,032 18,814
-------------- --------------
Net cash (used in) provided by
operating activities (62,863.00) 1,053,761 1,288,607 406,053 1,615,784

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for bingo units,
furniture and equipment (461,543) (1,251,001) (2,965,612) (1,700,814) 2,450,964)
Capitalized software development costs - - (122,235) (31,200) (74,581)
-------------- --------------
Net cash used in investing activities (461,543.00) (1,251,001) (3,087,847) (1,732,014) (2,525,545)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings from
bank - 14,200 2,360,493 1,385,634 1,480,000
Payments on short-term notes payable and
borrowings from bank (288,342) (132,222) (507,900) - (300,000)
Proceeds from borrowings on convertible
notes payable to officers 846,000 339,967 100,000 - -
Payments on convertible notes payable to
officers (8,125) (114,405) (24,978) (10,000) -
Proceeds from issuance of issuance of
long-term debt - - - - 403,207

Payments on long-term debt - - (156,250)
Payment for repurchase of common stock and
cancellation of a note payable to an
officer - - - - (250,000)
Proceeds from sales of common stock - 101,600 717 - 7,747
-------------- --------------
Net cash provided by financing activities 549,533.00 209,140 1,928,332 1,375,634 1,184,704
Net increase in cash 25,127.00 11,900 129,092 49,673
274,943
Cash at beginning of period - 25,127 37,027 37,027 166,119
-------------- -------------- -------------- -------------- --------------
Cash at end of period $ 25,127.00 $ 37,027 $166,119 $ 86,700 $ 441,062
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Supplemental disclosure of cash flow
information: $ - $ - $ 109,000 $ 3,000 $ 110,000
Cash paid for interest $ - $ 140,000 $ 410,000 $ 101,000 $ 895,000
Cash paid for income taxes

Supplemental schedule of non-cash
transactions:
Conversion of convertible notes payable
to common stock $ - $ 461,375 $ - $ - $ 2,000
</TABLE>

SEE ACCOMPANYING NOTES.

F-6

<PAGE>

1. SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

GameTech International, Inc. (the "Company") was incorporated in Delaware
on April 18, 1994. The Company manufactures and leases electronic bingo units
(the "Bingo Units") under long-term or month-to-month arrangements. The
Company's fiscal year ends on October 31.

INTERIM FINANCIAL INFORMATION

The interim financial information is unaudited. In the opinion of
management, all adjustments considered necessary for a fair presentation of its
financial position at April 30, 1997, and the results of its operations and its
cash flows for the six months ended April 30, 1996 and 1997, have been included.
All adjustments to the interim financial information were of a normal recurring
nature and in the opinion of management are consistent with the adjustments made
in the financial statements for the period from inception (April 18, 1994)
through October 31, 1994 and for the fiscal years ended October 31, 1995 and
1996. The Company's operating results for the six months ended April 30, 1997,
should not be considered indicative of the results that may be expected for the
fiscal year ending October 31, 1997.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

BINGO UNITS, FURNITURE AND EQUIPMENT

Bingo Units, furniture and equipment is stated at cost and depreciated
using the straight-line method over estimated useful lives of the assets.

The estimated useful lives are as follows:
Bingo Units - 5 years
Office furniture and equipment - 5-7 years
Leasehold improvements - 5 years

SEE ACCOMPANYING NOTES.

F-7
<PAGE>

INTANGIBLES

The excess of cost over fair value of net assets of businesses acquired is
amortized on a straight-line basis over seven years. Also included in
intangibles is capitalized software development costs of approximately $122,000
at October 31, 1996 and $197,000 at April 30, 1997 which is amortized on a
straight-line basis over three years once the developed products are made
available for general release.

LONG-LIVED ASSETS

The carrying value of long-lived assets are periodically evaluated by
management and if indicators of impairment are present and the undiscounted cash
flows estimated to be generated are less than the assets carrying amount, then
the amount will be reduced and an impairment loss will be recorded.

REVENUE RECOGNITION, SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

Bingo Unit revenues are based on either a percentage of gaming revenues
earned per Bingo Unit at customer locations or a fixed rate per bingo
session. The Company's revenue arrangements, which are based on negotiations
with the customer, consist of written and unwritten agreements.

The Company's customer base currently consists of bingo halls on tribal
Indian lands and charity bingo operations located throughout the United States.
The Company generally does not require collateral. Management believes that
adequate allowances for credit losses have been provided.

During the period from inception (April 18, 1994) through October 31, 1994,
four customers comprised 28%, 23%, 10% and 10% of total revenues. During the
year ended October 31, 1995, two customers comprised 21% and 17% of total
revenues. During the year ended October 31, 1996 and during the six months
ended April 30, 1996 and 1997 no single customer comprised more than 10% of
total revenues.

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising costs during the
period from inception (April 18, 1994) through October 31, 1994, the years ended
October 31, 1995 and 1996 and the six months ended April 30, 1996 and 1997 were
not material.

INVESTMENT IN JOINT VENTURE

The Company has a 50% interest in The Satellite Bingo Network, LLC ("TSBN")
which is accounted for using the equity method. TSBN was formed on April 8,
1997 and the Company's equity share of TSBN's operations through April 30, 1997
were immaterial. The Company will record 100% of TSBN's operating losses, if
any, since under the joint venture agreement, the Company is solely responsible
for funding such losses.

F-8
<PAGE>

ACCOUNTING FOR STOCK BASED COMPENSATION

The Company accounts for its stock options (Note 6) in accordance with the
provisions of the Accounting Principles Board's Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees." In 1995, the Financial Accounting
Standards Board released Statement of Financial Accounting Standard No. 123
(SFAS 123), "Accounting for Stock Based Compensation." SFAS 123 provides an
alternative to APB 25 and is effective for fiscal years beginning after December
15, 1995. The Company expects to continue to account for its stock options in
accordance with APB 25. SFAS 123 is not expected to have a material impact on
the Company's financial position or results of operations.

NET INCOME (LOSS) PER SHARE OF COMMON STOCK

The Company's historical net income (loss) per share is based upon the
weighted average number of shares of common stock outstanding including dilutive
common equivalent shares from stock options using the treasury stock method. In
addition, the number of shares used in the calculation of fully diluted net
income (loss) per share also include the weighted average common equivalent
shares outstanding as if the convertible notes payable to officers were
converted to common stock on their original dates of issue after giving effect
to the elimination of interest expense. Except as noted below, common stock
issuable upon the exercise of stock options have been excluded from the
computation if their inclusion was antidilutive. Pursuant to SAB No. 83, shares
of common stock issued, and shares issuable from stock options granted by the
Company, during the twelve months immediately preceding the assumed offering
date at prices below the assumed initial public offering price (using the
treasury stock method and the assumed initial public offering price of $12.00
per share), have been included in the number of shares used in the calculation
of historical net income (loss) per share as if they were outstanding for all
periods presented.

Historical net income (loss) per share information is as follows:

PERIOD FROM
INCEPTION
(APRIL 18,
1994) THROUGH

OCTOBER 31, YEARS ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
----------------------- ---------------------------

1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------

(unaudited)

<S> <C> <C> <C> <C> <C>
Primary net income (loss) $(.13) $.10 $.13 $.03 $.25
per share ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Fully diluted net income
(loss) per share $(.13) .10 .11 .03 .20
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

</TABLE>

F-9
<PAGE>

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required for both interim and annual
periods ending after December 15, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact of Statement No. 128 on the calculation of primary and
fully diluted earnings per share is not expected to be material.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1994, 1995 and 1996
financial statements to conform to the 1997 presentation.

2. BINGO UNITS, FURNITURE AND EQUIPMENT

Bingo units, furniture and equipment consist of the following:

<TABLE>
<CAPTION>
OCTOBER 31, APRIL 30,
----------------------------

1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Installed Bingo Units $1,515,041 $4,128,640 $6,227,281
Bingo Units on-hand 170,021 490,860 655,804
Raw materials and bingo units in-progress
Office furniture and equipment 399,875 164,141 272,236
Leasehold improvements 51,944 278,835 336,824
- 40,017 61,311
----------- ----------- -----------

2,136,881 5,102,493 7,553,456

Less accumulated depreciation and 267,042 808,156 1,362,435
amortization ----------- ----------- -----------

$1,869,839 $4,294,337 $6,191,021
----------- ----------- -----------
----------- ----------- -----------

</TABLE>

"Bingo Units on-hand" are transferred to "installed Bingo Units" when
installed at a customer location, at which time a provision for
depreciation is applied.

3. CREDIT AGREEMENT

The Company may borrow up to $3,000,000 under the terms of a
non-revolving line-of-credit agreement with a bank dated October 8, 1996 (the
"Credit Agreement"). Borrowings under the Credit Agreement bear interest at
the bank's prime rate plus .75% (aggregating 9% at October 31, 1996), are
secured by substantially all of the

F-10
<PAGE>

Company's assets and are guaranteed by a stockholder/officer of the Company.
Interest is payable monthly and the principal balance is payable in monthly
installments of $100,000 during the period February 1997 through April 1997,
$200,000 during the period May 1997 through May 1998 and all unpaid principal
and interest are due in June 1998. The Credit Agreement contains certain
restrictive covenants, which among other things require that specified financial
ratios be maintained. At October 31, 1996, borrowings under the Credit
Agreement amounted to approximately $1,867,000.

On April 11, 1997, the Company obtained a revolving line-of-credit (the
"Line") and a $3,000,000 term loan (the "Term Loan") from a bank. The maximum
amount available under the terms of the Line is $3,000,000 and borrowings bear
interest based on the prime rate plus .5% or LIBOR plus 2.5% at the Company's
option, interest is payable monthly and the Line expires on April 11, 1998. The
Term Loan bears interest at a fixed rate of 8.9%, due in equal monthly
installments of principal and interest through the maturity date of April 11,
2000 and it includes provisions for pre-payment penalties. The Term Loan was
used to pay off amounts outstanding under the Credit Agreement totaling
approximately $2.6 million. Both the Line and the Term Loan are secured by
substantially all of the Company's assets. The Line and the Term Loan contain
certain restrictive covenants, which among other things require that specified
financial balances and ratios be maintained, restricts the payment of dividends
and prohibit the incurrence of additional indebtedness. At April 30, 1997,
$450,000 was outstanding under the Line at an interest rate of 9.0% and
$3,000,000 was outstanding under the Term Loan. (Unaudited.)

4. CONVERTIBLE NOTES PAYABLE TO OFFICERS

Convertible notes payable to officers are unsecured borrowings at an
interest rate adjustable by changes in the prime rate (14.25% at October 31,
1996). Principal and interest of $168,183 are due in fiscal 1997 and principal
and interest of $1,362,662 are due in fiscal 2000. Unpaid principal and interest
are convertible into the Company's common stock at the lesser of $1.00 per share
or the lowest price offered to any individual or investor group. Interest
expense recorded on notes payable to officers amounted to approximately $60,000,
$198,000, $164,000, $85,000 and $91,000 during the period from inception (April
18, 1994) through October 31, 1994, during the years ended October 31, 1995 and
1996, and during the six months ended April 30, 1996 and 1997, respectively.
Included along with the principal amount of convertible notes payable to
officers on the accompanying balance sheets is accrued interest of approximately
$110,000 (current portion of $38,000), $276,000 (current portion of $45,000) and
$367,000 at October 31, 1995 and 1996 and April 30, 1997, respectively.

As required under the terms of the Credit Agreement (Note 3) no principal
payments may be made on certain of the convertible notes payable to officers
(approximately $932,000 principal amount outstanding at October 31, 1996) until
all amounts payable under the Credit Agreement have been paid in full.

5. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases administrative and manufacturing facilities under
non-cancelable operating leases. Rent expense for the period from inception
(April 18, 1994) through October 31, 1994, during the years ended October 31,
1995 and 1996 and during the six months ended April 30, 1996 and 1997 amounted
to approximately $10,000, $32,000, $89,000, $36,000 and $52,000, respectively.

F-11
<PAGE>

Future minimum lease payments under these leases, by fiscal year, at
October 31, 1996 are as follows:

1997 $ 81,000
1998 66,000
1999 56,000
2000 49,000
2001 49,000

$ 301,000
---------------
---------------

LITIGATION

In November, 1996, a patent infringement action and demand for jury trial
was commenced against the Company and five other defendants by FortuNet, Inc. in
the U.S. District Court, Southern District of California. The other included
defendants were Advanced Gaming Technology, Inc., American Video Systems,
FortuNet Canada, Inc., Artificial Intelligence, and Multimedia Games, Inc. The
complaint alleges that the Company, among others, has infringed, actively
induced or contributed to the infringement of Patent No. 4,624,462 (the "'462
Patent") by making, using, selling, among other acts, electronic bingo devices
that allegedly embody the invention of the '462 Patent. The '462 Patent was
issued in 1986 and will expire in 2001 and is allegedly infringed by the
Company's fixed-base units. The Company, in July 1997, won its motion for
transfer and severance in this action. All relevant court dates have been
vacated in light of the transfer to the U.S. District Court of Arizona. A
scheduling conference in the U.S. District Court of Arizona has been set for
January 5, 1998.

In March, 1996, a patent infringement action and demand for jury trial was
commenced against the Company by Bingo Technologies, Inc. (formerly Bingo Card
Minder Corp.), in the U.S. District Court, Northern District of California. The
complaint alleges that the Company has infringed, actively induced or
contributed to the infringement of Patent No. 4,378,940 (the "'940 Patent") by
making, using, selling, among other acts, electronic bingo devices that
allegedly embody the invention of the '940 Patent. The '940 Patent was issued
in 1983 and will expire in 2000 and is allegedly infringed by the Company's
hand-held units. A trial date has been set for December 7, 1998.

The Company believes that its products do not infringe either the '462
Patent or the '940 Patent and intends to continue to defend against both actions
vigorously. However, both actions are in the early stages of litigation, and
there can be no assurance that favorable outcomes will be obtained or that if
either or both actions are resolved in favor of the plaintiffs, such results
would not have a material adverse effect on the Company.

In addition, in the normal course of business, the Company may be named as
defendant or co-defendant in lawsuits involving primarily claims for damages.
The Company's management believes that any such pending lawsuits will not have a
material adverse effect on the Company.

F-12

<PAGE>

6. STOCKHOLDERS' EQUITY

COMMON STOCK

During fiscal 1995, the Company issued 2,260,000 shares of common stock
which included provisions that the shares would be subject to repurchase by the
Company at the original purchase price over specified periods in the event that
the stockholder no longer participated in the management of the Company. At
October 31, 1996, 250,000 shares were subject to repurchase by the Company (none
at April 30, 1997).

STOCK OPTION PLAN

In August 1997, the Company's Board of Directors adopted a stock option
plan under which all officers, employees, directors and consultants may
participate (the "1997 Plan"). Options granted under the 1997 Plan may either
be incentive stock options ("ISO's") or non-qualified stock options ("NSO's")
and will generally have a term of 10 years from the date of grant and will vest
over periods determined at the date of grant. The exercise prices of the ISO's
will be at 100% of the fair market value of the Company's common stock on the
date of grant. The exercise prices of the NSO's are determined by the board of
directors. In connection with the adoption of the 1997 Plan the board of
directors approved the reservation of 2,000,000 shares of common stock for
issuance under the 1997 Plan and included options granted during the twelve
months immediately preceding the adoption of the 1997 Plan as grants under the
1997 Plan.

A summary of the Company's stock option activity under the 1997 Plan is as
follows:

NUMBER OF SHARES WEIGHTED AVERAGE
(OPTIONS) EXERCISE PRICE

Balance at October 31, 1996 -- $ --
Granted 1,187,000 $ 1.02
Exercised -- $ --
Canceled -- $ --
---------
Balance at April 30, 1997 1,187,000 $ 1.02
---------
---------

At April 30, 1997, options to purchase 897,000 shares of common stock were
exercisable at an exercise price of $1.00 per share. In addition, at April 30,
1997, 813,000 shares of common stock were available for future grants under the
1997 Plan.

The Company also has options outstanding at April 30, 1997, to purchase 443,300
shares of common stock at exercise prices ranging from $.01 to $.16 per share
that were granted prior to the adoption of the 1997 Plan. Of these options
121,250 were exercisable as of April 30, 1997, at an exercise price of $.01 per
share.

STOCK REPURCHASE AGREEMENT

On November 22, 1996, the Company entered into an agreement with one of its
stockholders to repurchase 1,000,000 shares of the Company's common stock (the
"Agreement"). Of the 1,000,000 shares repurchased, 250,000 were subject to
repurchase under the terms of the original purchase agreement. The shares
repurchased by the

F-13
<PAGE>

Company have been canceled. The Agreement provides for the Company to pay a
total of $875,000 for the stock and forgiveness of a note and accrued interest
payable to the stockholder totaling approximately $168,000 (the "Payment"). The
Payment is comprised of a cash payment of $250,000 and issuance of a new note
payable in the principal amount of $625,000 (the "Note"). The Note bears
interest at 5.65% and is payable in four semi-annual installments of $156,250
plus accrued interest beginning March 1, 1997. The Agreement limits the amount
of any prepayments on certain convertible notes payable to officers (Note 4)
while there are any amounts owing under the Agreement.

7. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax reporting purposes. At October 31, 1995 and
1996, the Company had deferred tax liabilities (attributable to accelerated
depreciation for tax purposes) of approximately $130,000 and $270,000,
respectively, offset by deferred tax assets (primarily attributable to goodwill
amortization and accrued liabilities) of approximately $20,000 and $115,000,
respectively.

The income tax provision for the years ended October 31, 1995 and 1996
(none for the period from inception (April 18, 1994) through October 31, 1994)
consist of the following components:

1995 1996
------------- -------------
Current:
Federal $ 137,143 $ 431,092
State 31,764 82,125

Deferred:
Federal 90,562 34,472
State 18,645 11,528
------------- -------------

$ 278,114 $ 559,217
------------- -------------
------------- -------------

The 1995 income tax provision is net of an operating loss carryforward
utilization of approximately $170,000.

F-14
<PAGE>

The difference between the Company's (benefit) provision for income taxes
as presented in the accompanying statements of operations and the (benefit)
provision for income taxes computed at the federal statutory rate is comprised
of the items shown in the following table as a percentage of pre-tax earnings:

Period from inception,
(April 18, 1994) through Years ended October 31
October 31, 1994
-------------------------
1995 1996
------------------------ --------- ---------
Income tax (benefit)
provision at the statutory
rate (34.0)% 34.0% 34.0%
State income taxes, net of
federal benefit - 6.0% 7.0%
Net operating loss benefit - (8.0)% -
Net operating loss with no
current benefit 34.0% - -
------------------------ --------- ----------
- % 32.0% 41.0%
------------------------ --------- ----------
------------------------ ---------- ----------

8. SUBSEQUENT EVENTS (UNAUDITED)

INITIAL PUBLIC OFFERING

On September 2, 1997, the Company's board of directors authorized the
filing of a registration statement with the Securities and Exchange
Commission permitting the Company to sell 3,100,000 shares of common stock to
the public. Under the terms of the offering currently contemplated, the
outstanding notes payable to officers (principal and accrued interest) and
the Preferred Stock will be converted into common stock, prior to or
concurrently with the completion of the offering. In addition, the
stockholders approved the increase in the number of authorized shares of
common stock to 40,000,000 and also authorized 5,000,000 shares of preferred
stock on July 28, 1997.

SALE OF PREFERRED STOCK

On September 2, 1997, the Company received proceeds of approximately
$2,850,000 (net of issuance costs of $150,000) from the sale of 400,000 shares
of convertible preferred stock (the "Preferred Stock"). Each share of Preferred
Stock is convertible, at the holder's option, into common stock on a one-for-one
basis subject to certain antidilution adjustments. Each share shall
automatically be converted into common stock immediately upon the closing of a
registered public offering of the Company's common stock with aggregate proceeds
to the Company of at least $20,000,000. The preferred stockholders are entitled
to one vote for each share of common stock into which such shares can be
converted.

The preferred stockholders are also entitled to liquidation preferences
equal to the initial purchase price per share plus any declared and unpaid
dividends. In addition, at any time after December 31, 2001, the Company shall,
upon the request of the holders of a majority of the Preferred Stock then
outstanding, redeem the Preferred Stock at the liquidation preference for cash.

F-15
<PAGE>

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

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFERING OR SOLICITATION

__________________________

TABLE OF CONTENTS

PAGE

Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Certain Relationships and Related Party
Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Principal and Selling Stockholders . . . . . . . . . . . . . . . . . . . . 38
Shares Eligible for Future Sale. . . . . . . . . . . . . . . . . . . . . . 40
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 41
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Index to Consolidated Financial Statements . . . . . . . . . . . . . . . .F-1
_______________________

UNTIL , 1997 (25 DAYS AFTER COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

3,710,000 SHARES

GAMETECH
INTERNATIONAL, INC.

COMMON STOCK

PROSPECTUS

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

PRUDENTIAL SECURITIES INCORPORATED

, 1997

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Estimated expenses (other than the underwriting discounts and commissions)
payable in connection with the issuance and distribution of the securities to be
registered hereunder are as follows:

- --------------------------------------------------------------------------------
SEC registration fee . . . . . . . . . . . . . . . . . . . . . $ 16,808
- --------------------------------------------------------------------------------
NASD filing fee. . . . . . . . . . . . . . . . . . . . . . . . 6,047
- --------------------------------------------------------------------------------
Nasdaq National Market listing fee . . . . . . . . . . . . . . 40,914.30
- --------------------------------------------------------------------------------
Printing and engraving expenses. . . . . . . . . . . . . . . . *
- --------------------------------------------------------------------------------
Accounting fees and expenses . . . . . . . . . . . . . . . . . *
- --------------------------------------------------------------------------------
Legal fees and expenses. . . . . . . . . . . . . . . . . . . . *
- --------------------------------------------------------------------------------
Blue Sky fees and expenses (including legal fees). . . . . . . *
- --------------------------------------------------------------------------------
Transfer agent and registrar fees and expenses . . . . . . . . *
- --------------------------------------------------------------------------------
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . *
- ----------------------------------------------------------------- ---------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . .
- ----------------------------------------------------------------- ---------
---------

- ------------------------------------
*To be completed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Bylaws of the Company provide for indemnification of the officers and
directors of the Company to the fullest extent permitted by applicable law.
Applicable law permits indemnification for all matters (including those asserted
in derivative actions) except for those determined by a court to have
constituted willful misconduct or recklessness.

The Registrant has obtained directors' and officers' liability insurance.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Described below is information regarding all unregistered securities that
have been issued by the Company during the past three years.

On September 2, 1997 the Company issued and sold 400,000 shares of the
Company's Series A Preferred Stock in a private placement for total
consideration of $3 million to institutional and individual investors
unaffiliated with the Company in reliance upon Section 4(2) of the Securities
Act as a transaction not involving a public offering.

On various dates between October 1, 1996 and July 15, 1997 Company
employees exercised options granted in partial compensation for their
services to purchase an aggregate of 200,950 shares of Common Stock for an
aggregate consideration of $2009.50 in private sales in reliance upon Section
4(2) of the Securities Act as a transaction not involving a public offering.

II-1

<PAGE>

On March 1, 1995 the Company issued and sold 100,000 shares of Common
Stock to an officer of the Company for the aggregate price of $1,000,000.00
in reliance upon Section 4(2) of the Securities Act as a transaction not
involving any public offering.

On June 6, 1996 and on April 27, 1997, an exclusive distributor of the
Company exercised options granted pursuant to a distributorship agreement to
purchase 5,000 shares of Common Stock on each date for a total of 10,000
shares issued by the Company and purchased in private sales for a total
aggregate price of $100.00 in reliance upon Section 4(2) of the Securities
Act as a transaction not involving any public offering. On January 2, 1997,
the same individual was issued 2,500 shares of Common Stock in partial
compensation in the aggregate amount of $2,500.00 for the purchase of a
distributorship by the Company in reliance upon Section 4(2) of the
Securities Act as a transaction not involving any public offering.

On November 1, 1996 the Company issued 5,000 shares of Common Stock each
to three individuals for a price of $5,000.00 each as partial compensation
for services in establishing a distributorship in reliance upon Section 4(2)
of the Securities Act as a transaction not involving any public offering.

II-2
<PAGE>

On November 18, 1996 the Company issued 3,000 shares of Common Stock to
an officer of the Company as a sign-on bonus in the aggregate amount of
$3,000.00 in reliance upon Section 4(2) of the Securities Act as a
transaction not involving any public offering.

On various dates between March 1, 1995 and June 1, 1997 the Company
issued an aggregate of 516,375 shares of Common Stock to a stockholder for
the conversion of stockholder debt in the aggregate amount of $516,375.00 in
reliance upon Section 4(2) of the Securities Act as a transaction not
involving any public offering.

Additionally, on March 1, 1997, the Company issued a convertible
promissory note in favor of a stockholder in the original principal amount of
$1,341,200, convertible into Common Stock at the option of the holder at a
$1.00 per share price and due in full on February 28, 1999. The convertible
note was issued in exchange for previously outstanding notes and interest
payable to the holder and was issued in reliance upon Section 4(2) of the
Securities Act as a transaction not involving any public offering.

Also on March 1, 1997, the Company issued a convertible promissory note
in favor of a stockholder in the original principal amount of $80,954
convertible into Common Stock at the option of the holder at a $1.00 per
share price and due in full on February 28, 1999. The convertible note was
issued in exchange for previously outstanding notes and interest payable to
the holder and was issued in reliance upon Section 4(2) of the Securities Act
as a transaction not involving any public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS

Exhibit
Number
------
* 1.1 Form of Underwriting Agreement

2.1 Certificate of Incorporation of the Company, as amended

2.2 Amended and Restated Bylaws of the Company

* 4.1 GameTech International, Inc. Registration Rights Agreement

* 4.2 Specimen Common Stock certificate

5.1 Opinion and Consent of Morgan, Lewis & Bockius LLP

10.1 GameTech International, Inc. Incentive Stock Plan

10.2 Lease Agreement between Russ Jeter and GameTech International,
Inc.

10.3 Lease Agreement between Russ Jeter and TSBN, LLC

10.4 Lease Agreement between North Point Associates Limited Partnership
and GameTech International, Inc.

10.5 Joint Venture and Limited Liability Company Agreement by and
between GameTech International, Inc. and The Satellite Bingo
Network (US) Inc.

* 10.6 Distribution Agreement between GameTech International, Inc. and
Trend Gaming Systems

* 10.7 Distribution Agreement between M&M Operators and GameTech
International, Inc.

* 10.8 Revolving Line of Credit Note of GameTech International, Inc.
dated April 11, 1997 in the principal amount of $3,000,000 payable
to Wells Fargo Bank, N.A.

11.1 Statement re Computation of Earnings Per Share

23.1 Consent of Ernst & Young LLP, independent auditors

23.2 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1)

II-3
<PAGE>

24.1 Power of Attorney (included in Part II of this Registration
Statement)

* 27.1 Financial Data Schedule

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

* To be filed by amendment.

(b) FINANCIAL STATEMENT SCHEDULES

Schedule II - Valuation and qualifying accounts

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement at the time it was declared effective.

(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF TEMPE, STATE OF ARIZONA,
ON , 1997.

GAMETECH INTERNATIONAL, INC.

By:/s/ Richard T. Fedor
-------------------------------
Richard T. Fedor
Chairman of the Board,
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard T. Fedor, Clarence H. Thiesen,
and Andrejs K. Bunkse, and each of them, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to this registration statement
and to any registration statement for additional securities filed pursuant to
Rule 462(b) under the Securities Act of 1933 and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
either of them or their or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

- --------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- --------------------------------------------------------------------------------

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

Chairman of the Board,
Chief Executive Officer September 4, 1997
/s/ Richard T. Fedor and Director
- ----------------------
Richard T. Fedor
- --------------------------------------------------------------------------------
Chief Financial Officer
/s/ Clarence H. Thiesen and Director September 4, 1997
- ----------------------
Clarence H. Thiesen
- --------------------------------------------------------------------------------
Vice President -Sales & September 4, 1997
/s/ Gary R. Held Marketing and Director
- ----------------------
Gary R. Held
- --------------------------------------------------------------------------------
Treasurer September 4, 1997
/s/ John J. Paulson
- ----------------------
John J. Paulson

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

II-5
<PAGE>

SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS

PERIOD FROM INCEPTION (APRIL 18, 1994) THROUGH OCTOBER 31, 1994 AND
YEARS ENDED OCTOBER 31, 1995 AND 1996

ADDITIONS DEDUCTIONS

BALANCE AT BALANCE AT
BEGINNING END OF
DESCRIPTION OF PERIOD PERIOD
--------- ---------
CHARGED TO CHARGED TO (WRITE-OFFS,
COSTS AND OTHER NET OF
EXPENSES ACCOUNTS COLLECTIONS)
---------- ---------- -------------
<S> <C> <C> <C> <C> <C>

Period from inception (April 18,
1994) through October 31, 1994:
Deducted from asset accounts:
Allowance for doubtful $ - $ - $ - $ - $ -
accounts

Year ended October 31, 1995:
Deducted from asset accounts:
Allowance for doubtful
accounts $ - $ 24,426 $ - $ - $ 24,426

Year ended October 31, 1996:
Deducted from asset accounts:
Allowance for doubtful
accounts $ 24,426 $ 78,196 $ - $ (1,080) $ 101,542

</TABLE>

S-1

<PAGE>

CERTIFICATE OF INCORPORATION

GAMETECH INTERNATIONAL, INC.

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

FIRST. The name of this corporation shall be:

GAMETECH INTERNATIONAL, INC.

SECOND. Its registered office in the State of Delaware is to be located
at 1013 Centre Road, in the City of Wilmington, County of New Castle, 19805,
and its registered agent at such address is CORPORATE AGENTS, INC.

THIRD. The purpose or purposes of the corporation shall be:

To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.

FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:

Fifteen Million (15,000,000) shares with a par value of ($.001) per share,
amounting to Fifteen Thousand Dollars ($15,000.00).

FIFTH. The name and mailing address of the incorporator is as follows:

Lamont W. Jones
Corporate Agents, Inc.
1013 Centre Road
Wilmington, DE 19805

SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.

IN WITNESS WHEREOF, The undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this eighteenth day of April, A.D. 1994.

/s/ LAMONT W. JONES
-----------------------------
Lamont W. Jones
Incorporator

<PAGE>

Exhibit A

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GAMETECH INTERNATIONAL, INC.

GAMETECH INTERNATIONAL, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That pursuant to the unanimous written consent of the Board
of Directors of the corporation, given in accordance with Section 141(f) of
the General Corporation Law of the State of Delaware, resolutions were duly
adopted setting forth a proposed amendment of the Certificate of
Incorporation of said corporation, declaring said amendment to be advisable
and submitting said amendment to the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:

"RESOLVED, that the Fourth Article of the Certificate of
Incorporation of the Company be, and it hereby is, amended
to read as follows:

a. AUTHORIZED SHARES. The total number of shares of stock which the
corporation shall have the authority to issue is 45,000,000, of which
40,000,000 shares are Common Stock, $.001 par value, and 5,000,000 shares are
Preferred Stock, $.001 par value.

b. AUTHORITY OF BOARD TO FIX TERMS OF PREFERRED STOCK The Board of
Directors of the corporation is hereby expressly authorized at any time and
from time to time to provide for the issuance of all or any shares of the
Preferred Stock in one or more classes or series, and to fix for each such
class or series such voting powers, full or limited, or no voting powers, and
such distinctive designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions adopted by the Board of Directors providing for the issuance of
such class or series and to the fullest extent as may now or hereafter be
permitted by the Delaware General Corporation Law, including, without
limiting the generality of the foregoing, the authority to provide that any
such class or series may be (i) subject to redemption at such time or times
and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at
such times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or any other series; (iii)
entitled to such rights upon the dissolution of, or upon any distribution of
the assets of, the corporation; or (iv) convertible into, or exchangeable
for, shares of any other class or classes of

<PAGE>

stock, or of any other series of the same or any other class or classes of
stock, or other securities or property, of the corporation at such price or
prices or at such rates of exchange and with such adjustments; all as may be
stated in such resolution or resolutions. Unless otherwise provided in such
resolution or resolutions, shares of Preferred Stock of such class or series
which shall be issued and thereafter acquired by the corporation through
purchase, redemption, exchange, conversion or otherwise shall return to the
status of authorized but unissued Preferred Stock."

SECOND: That thereafter, pursuant to resolution of the Board of
Directors and in lieu of a special meeting of the stockholders of said
corporation, the resolution authorizing the amendment was adopted and
approved by written consent of a Majority of the Stockholders of said
corporation, given in accordance with Section 228 of the General Corporation
Law of the State of Delaware.

THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, said corporation has caused this certificate to
be signed by Richard T. Fedor as of this 13th day of AUG. , 1997.
------- --------

/s/ RICHARD T. FEDOR
Richard T. Fedor, Authorized Officer

-2-

<PAGE>

BY-LAWS

GAMETECH INTERNATIONAL, INC.

<PAGE>

BY-LAWS
OF
GAMETECH INTERNATIONAL, INC.

TABLE OF CONTENTS

PAGE
----
ARTICLE I MEETINGS OF STOCKHOLDERS.............................. 1

Section 1.1 Place of Meetings................................... 1
Section 1.2 Annual Meetings..................................... 1
Section 1.3 Special Meetings.................................... 1
Section 1.4 Notice of Meetings.................................. 1
Section 1.5 Record Date......................................... 1
Section 1.6 Action without a Meeting............................ 2

ARTICLE II DIRECTORS ........................................... 2

Section 2.1 Powers of Directors................................. 2
Section 2.2 Number, Election, and Term of Office................ 2
Section 2.3 Vacancies........................................... 2
Section 2.4 Meetings of Directors............................... 2
Section 2.5 Action without a Meeting............................ 3
Section 2.6 Telephone Participation in Meetings................. 3
Section 2.7 Removal............................................. 3

ARTICLE III OFFICERS ........................................... 3

Section 3.1 Enumeration......................................... 3
Section 3.2 Chief Executive Officer or President................ 3
Section 3.3 Vice President...................................... 4
Section 3.4 Secretary........................................... 4
Section 3.5 Treasurer........................................... 4
Section 3.6 Other Officers and Assistant Officers............... 4
Section 3.7 Term and Compensation............................... 4

ARTICLE IV INDEMNIFICATION ...................................... 5

Section 4.1 Directors and Officers.............................. 5
Section 4.2 Payment of Expenses................................. 5

<PAGE>

TABLE OF CONTENTS (CONTINUED)

PAGE
----
Section 4.3 Permissive Indemnification and Advancement
of Expenses.......................................... 5
Section 4.4 Basis of Rights; Other Rights......................... 5
Section 4.5 Determination of Indemnification...................... 6
Section 4.6 Insurance............................................. 6
Section 4.7 Definition - Corporation.............................. 6
Section 4.8 Definition - Authorized Representative................ 6

ARTICLE V SHARES OF CAPITAL STOCK ................................ 7

Section 5.1 Issuance of Stock..................................... 7
Section 5.2 Stock Certificates.................................... 7
Section 5.3 Transfer of Stock..................................... 7
Section 5.4 Lost, Stolen, Destroyed, or Mutilated Certificates.... 7
Section 5.5 Regulations........................................... 7
Section 5.6 Holders of Record..................................... 7
Section 5.7 Restriction on Transfer............................... 8

ARTICLE VI GENERAL PROVISIONS .................................... 8

Section 6.1 Corporate Seal........................................ 8
Section 6.2 Fiscal Year........................................... 8
Section 6.3 Authorization......................................... 8
Section 6.4 Financial Reports..................................... 8
Section 6.5 Effect of By-Laws..................................... 8

ARTICLE VII AMENDMENTS ........................................... 8

<PAGE>

AMENDED AND RESTATED BY-LAWS

GAMETECH INTERNATIONAL, INC.

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

ARTICLE I

MEETINGS OF STOCKHOLDERS

Section 1.1. PLACE OF MEETINGS. Meetings of the stockholders shall
be held at such place within or without the State of Delaware as shall be
designated by the Board of Directors or the person or person calling the
meeting.

Section 1.2. ANNUAL MEETINGS. The annual meeting of the
stockholders for the election of directors and the transaction of such other
business as may properly come before the meeting shall be held after the
close of the Corporation's fiscal year on such date and at such time as shall
be designated by the Board of Directors.

Section 1.3. SPECIAL MEETINGS. Special meetings may be called at
any time by the Chairman of the Board, the President or the Board of
Directors.

Section 1.4. NOTICE OF MEETINGS. A written notice stating the
place, date and hour of each meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called shall be given by,
or at the direction of, the Secretary or the person or persons authorized to
call the meeting to each stockholder of record entitled to vote at such
meeting, not less than ten (10) days nor more than sixty (60) days before the
date of the meeting, unless a greater period of time is required by law in a
particular case.

Section 1.5. RECORD DATE. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date, which shall
not precede the date on which the Board of Directors so act and which shall
not be more than sixty (60) nor less than (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. If no
record date is fixed: (i) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding
the day on which the meeting is held; and (ii) the record date for determining
stockholders entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first

<PAGE>

written consent is expressed. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourning meeting.

Section 1.6. ACTION WITHOUT A MEETING. Any action required to be
taken at any annual or special meeting of stockholders of the Company, or any
action which may be taken at any annual or special meeting of the
stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents thereto in writing, setting forth
the action so taken, shall be signed by all of the holders of outstanding
stock and shall be delivered to the Company by delivery to its registered
office in the State of Delaware, its principal place of business, or an
officer or agent of the Company having custody of the book in which
proceedings of meetings of stockholders are recorded.

Section 1.7. NOTICE FOR NOMINATIONS AND PROPOSALS. Nominations of
candidates for election as directors at any annual meeting of stockholders
may be made (a) by, or at the direction of, a majority of the Board of
Directors or a committee thereof, or (b) by any stockholder entitled to vote
at such annual meeting. Only persons nominated in accordance with the
procedures set forth in this Section 1.7 shall be eligible for election as
directors at an annual meeting. Ballots bearing the names of all persons who
have been nominated for election as directors at an annual meeting in
accordance with the procedures set forth in this Section 1.7 shall be
provided for use at the annual meeting.

Nominations shall be made pursuant to timely notice in writing to the
Secretary of the Company as set forth in this Section 1.7. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal offices of the Company not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders
of the Company. Such stockholder's notice shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election or re-election
as a director (i) the name, age, business address and residence address of
such person, and (ii) the principal occupation or employment of such person;
and (b) as to the stockholder giving the notice (i) the name and address, as
they appear on the Company's books, of such stockholder and any other
stockholders known by such stockholder to be supporting such nominees and
(ii) the number of shares of Company stock which are beneficially owned by
such stockholder on the date of such stockholder notice and, to the extent
known, by any other stockholders known by such stockholder to be supporting
such nominees on the date of such stockholder notice. At the request of the
Board of Directors, any person nominated by, or at the direction of, the
Board for election as a director at an annual meeting shall furnish to the
Secretary of the Company that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.

Proposals, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Company as set forth in this Section 1.7. Such stockholder's
notice shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the proposal desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and

<PAGE>

address, as they appear on the Company's books, of the stockholder proposing
such business and, to the extent known, any other stockholders known by such
stockholder to be supporting such proposal, (c) the number of shares of the
Company stock which are beneficially owned by the stockholder on the date of
such stockholder notice and, to the extent known, by any other stockholders
known by such stockholder to be supporting such proposal on the date of such
stockholder notice, and (d) any financial interest of the stockholder in such
proposal (other than interests which all stockholders would have).

The Board of Directors may reject any nomination by a stockholder or
stockholder proposal not timely made in accordance with the requirements of
this Section 1.7. If the Board of Directors, or a designated committee
thereof, determined that the information provided in a stockholder's notice
does not satisfy the informational requirements of this Section 1.7 in any
respect, the Secretary of the Company shall notify such stockholder of the
deficiency in the notice. The stockholder shall have an opportunity to cure
the defiency by providing additional information to the Secretary within
such period of time, not to exceed five days from the date such deficiency
notice is given to the stockholder, as the or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the
Board of Directors or such committee reasonably determined that the
additional information provided by the stockholder, together with information
previously provided, does not satisfy the requirements of this Section 1.7 in
any respect, then the Board of Directors may reject such stockholder's
nomination or proposal. The Secretary of the Company shall notify a
stockholder in writing whether such stockholder's nomination or proposal has
been made in accordance with the time and informational requirements of this
Section 1.7. Notwithstanding the procedures set forth in this paragraph, if
neither the Board of Directors nor such committee makes a determination as to
the validity of any nominations or proposals by a stockholder, the presiding
officer of the annual meeting shall determine and declare at the annual
meeting whether the nomination or proposal was made in accordance with the
terms of this Section 1.7. If the presiding officer determines that a
nomination or proposal was made in accordance with the terms of this
Section 1.7, the presiding office shall so declare at the annual meeting and
ballots shall be provided for use at the meeting with respect to such nominee
or proposal. If the presiding officer determines that a nomination or
proposal was not made in accordance with the terms of this Section 1.7, the
presiding shall so declare at the annual meeting and the defective nomination
or proposal shall be disregarded.

ARTICLE II

DIRECTORS

Section 2.1. POWERS OF DIRECTORS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, which shall exercise all powers that may be exercised or performed
by the Corporation and that are not by statute, the Certificate of
Incorporation or these By-Laws directed to be exercised or performed by the
stockholders.

<PAGE>

Section 2.2. NUMBER, ELECTION AND TERM OF OFFICE. The Board of
Directors shall consist of not less than three (3) nor more than nine (9)
members, as fixed from time to time by the Board of Directors. The directors
shall be divided into three (3) classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as may be possible, of
one-third (1/3) of the total number of directors constituting the entire
Board of Directors. Class I directors shall shall serve for a term ending
upon the annual meeting of stockholders held in 1998, Class II directors
shall serve for a term ending upon the annual meeting of stockholders held in
1999 and Class III directors shall serve for a term ending upon the annual
meeting of stockholders held in 2000. At each succeeding annual meeting of
stockholders beginning with the annual meeting of stockholders held in 1998,
successors to the class of directors whose term expires at such annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that
shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year
in which his or her term expires and until his or her successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
incapacitation or removal from office, and except as otherwise required by
law. In the event such election is not held at an annual meeting of
stockholders, it shall be held at any adjournment thereof or a special
meeting.

Section 2.3. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be
filled by a majority vote of the directors then in office, although less than
a quorum, or by a sole remaining director.

Section 2.4. MEETINGS OF DIRECTORS. Regular meetings of the Board
of Directors shall be held at such time and place as the Board of Directors
shall from time to time by resolution appoint; and no notice shall be
required to be given of any such regular meeting. A special meeting of the
Board of Directors may be called by one-half of the directors then in office
(rounded up to the nearest whole number) by giving seven (7) days' notice to
each director by letter, telegram, telephone or other oral message unless all
directors consent in writing to lesser notice, in accordance with applicable
law. Except as otherwise provided by these By-Laws, a majority of the total
number of the directors shall constitute a quorum for the transaction of
business, and the vote of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors.

Section 2.5. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or
committee.

Section 2.6. TELEPHONE PARTICIPATION IN MEETINGS. Members of the
Board of Directors, or any committee designated by the Board, may participate
in a meeting of the Board of

<PAGE>

Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.

Section 2.7. REMOVAL. Any director or the entire Board of Directors
may be removed for cause by the holders of a majority of the shares then
entitled to vote at an election of directors.

ARTICLE III

OFFICERS

Section 3.1. ENUMERATION. The officers of the Corporations shall be
elected by the Board of Directors and shall consist of a Chief Executive
Officer and/or President, such number of Vice Presidents (if any) as the
Board of Directors shall from time to time elect, a Secretary, a Treasurer,
and such other officers (if any) as the Board of Directors shall from time to
time elect. The Board of Directors may at any time elect one of its members
as Chairman of the Board of the Corporation, who shall preside at meetings of
the Board of Directors and of the stockholders and shall have such powers and
perform such duties as shall from time to time be prescribed by the Board of
Directors. Any two or more offices may be held by the same person.

Section 3.2. CHIEF EXECUTIVE OFFICER OR PRESIDENT. The Chief
Executive Officer or President shall be the chief executive officer of the
Corporation, and shall have general and active charge and control over the
business and affairs of the Corporation, subject to the Board of Directors.
If there shall be no Chairman of the Board, or in his or her absence or
inability to act, the Chief Executive Officer or President shall preside at
meetings of the Board of Directors and of the stockholders.

Section 3.3. VICE-PRESIDENT. The Vice-President or, if there shall
be more than one, the Vice Presidents, in the order of their seniority unless
otherwise specified by the Board of Directors, shall have all of the powers
and perform all of the duties of the Chief Executive Officer or President
during the absence or inability to act of the Chief Executive Officer or
President. Each Vice President shall also have such other powers and perform
such other duties as shall from time to time be prescribed by the Board of
Directors or the Chief Executive Officer or President.

Section 3.4. SECRETARY. The Secretary shall record the proceedings
of the meetings of the stockholders and the Board of Directors in a book to
be kept for that purpose, and shall give notice as required by statute or
these By-Laws of all such meetings. The Secretary shall have custody of the
seal of the Corporation and of all books, records and papers of the
Corporation, except such as shall be in the charge of the Treasurer or of
some other person authorized to have custody and possession thereof by
resolution of the Board of Directors. The Secretary shall
also have such other powers and perform such other duties as are incident to
the office of the secretary of a corporation

<PAGE>

or as shall from time to time be prescribed by, or pursuant to authority
delegated by, the Board of Directors.

Section 3.5. TREASURER. The Treasurer shall keep full and accurate
accounts of the receipts and disbursements of the Corporation in books
belonging to the Corporation, shall deposit all moneys and other valuable
effects of the Corporation in the name and to the credit of the Corporation
in such depositories as may be designated by the Board of Directors, and
shall also have such other powers and perform such other duties as are
incident to the office of the treasurer of a corporation or as shall from
time to time be prescribed by, or pursuant to authority delegated by, the
Board of Directors.

Section 3.6. OTHER OFFICERS AND ASSISTANT OFFICERS. The powers and
duties of each other officer or assistant officer who may from time to time
be chosen by the Board of Directors shall be as specified by, or pursuant to
authority delegated by, the Board of Directors at the time of the appointment
of such other officer or assistant officer or from time to time thereafter.
In addition, each officer designated as an assistant officer shall assist in
the performance of the duties of the officer to which he or she is assistant,
and shall have the powers and perform the duties of such officer during the
absence or inability to act of such officer.

Section 3.7. TERM AND COMPENSATION. Officers shall be elected by
the Board of Directors from time to time, to serve at the pleasure of the
Board. Each officer shall hold office until his or her successor is elected
and qualified, or until his or her earlier resignation or removal. The
compensation of all officers shall be fixed by, or pursuant to authority
delegated by, the Board of Directors from time to time.

ARTICLE IV

INDEMNIFICATION

Section 4.1. DIRECTORS AND OFFICERS. The Corporation shall
indemnify, to the fullest extent permitted by Delaware law, as the same
exists or may hereafter be amended, each director or officer of the
Corporation who was or is made a party to or witness in or is threatened to
be made a party to or a witness in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was an authorized
representative of the Corporation, against all expenses (including attorneys'
fees and disbursements), judgments, fines (including excise taxes and
penalties) and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding.

Section 4.2. PAYMENT OF EXPENSES. The Corporation shall pay
expenses (including attorneys' fees and disbursements) incurred by a director
or officer of the Corporation referred to in Section 4.1 hereof in defending
or appearing as a witness in any civil or criminal action, suit or proceeding
described in Section 4.1 hereof in advance of the final disposition of such
action, suit or

6
<PAGE>

proceeding. The expenses incurred by such director or officer in his capacity
as a director or officer of the Corporation shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding only
upon receipt of an undertaking by or on behalf of such director or officer to
repay all amounts in advance if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation because he has not met the
standard or conduct set forth in the first sentence of Section 4.5 hereof.

Section 4.3. PERMISSIVE INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The Corporation may, as determined by the Board of Directors from
time to time, indemnify to the fullest extent now or hereafter permitted by
law, any person who was or is a party to or a witness in or is threatened to
be made a party to or a witness in, or is otherwise involved in, any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is
or was an authorized representative of the Corporation, against all expenses
(including attorneys' fees and disbursements), judgments, fines (including
excise taxes and penalties), and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding. Subject to the limitations as are set forth in Section 4.2
hereof, the Corporation may, as determined by the Board of Directors from
time to time, pay expenses incurred by any such person by reason of his
participation in an action, suit or proceeding referred to in this Section
4.3 in advance of the final disposition of such action, suit or proceeding.

Section 4.4. BASIS OF RIGHTS; OTHER RIGHTS. Each director and
officer of the Corporation shall be deemed to act in such capacity in
reliance upon such rights of indemnification and advancement of expenses as
are provided in this Article. The rights of indemnification and advancement
of expenses provided by this Article shall not be deemed exclusive of any
other rights to which any person seeking indemnification or advancement of
expenses may be entitled under any agreement, vote of stockholders or
disinterested directors, statute or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office or position, and shall continue as to a person who has ceased to
be an authorized representative of the Corporation and shall inure to the
benefit of the heirs, executors and administrators of such person.

Section 4.5. DETERMINATION OF INDEMNIFICATION. Any indemnification
under this Article shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the authorized
representative is proper in the circumstances because such person has acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, did not believe his conduct was unlawful. Such
determination shall be made (1) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (3) by the
stockholders. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with

7
<PAGE>

respect to any criminal action or proceeding, had reason to believe that such
person's conduct was unlawful.

Section 4.6. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of each director and officer against any liability
asserted against or incurred by such director or officer in any capacity, or
arising out of such director's or officer's status as such, whether or not
the Corporation would have the power to indemnify such director or officer
against such liability under the provisions of this Article. The Corporation
shall not be required to maintain such insurance if it is not available on
terms satisfactory to the Board of Directors or if, in the business judgment
of the Board of Directors, either (i) the premium cost for such insurance is
substantially disproportionate to the amount of coverage, or (ii) the
coverage provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance. The Corporation may purchase and
maintain insurance on behalf of any person referred to in Section 4.3 hereof
against any liability asserted against or incurred by such person in any
capacity, whether or not the Corporation would have the power to indemnify
such person against such liability under the provision of this Article.

Section 4.7. DEFINITION - CORPORATION. For purposes of this Article,
references to "the Corporation" shall include, in addition to the resulting
corporation, and constituent corporation (including any constituent of a
constituent) absorbed in consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
authorized representatives so that any person who is or was an authorized
representative of such constituent corporation shall stand in the same
position under this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.

Section 4.8. DEFINITION - AUTHORIZED REPRESENTATIVE. For the
purposes of this Article, the term "authorized representative" shall mean a
director, officer, employee or agent of the Corporation or of any subsidiary
of the Corporation, or a trustee, custodian, administrator, committee member
or fiduciary of any employee benefit plan established and maintained by the
Corporation or by any subsidiary of the Corporation, or a person serving
another corporation, partnership, joint venture, trust or other enterprise in
any of the foregoing capacities at the request of the Corporation.

ARTICLE V

SHARES OF CAPITAL STOCK

Section 5.1. ISSUANCE OF STOCK. Shares of capital stock of any
class now or hereafter authorized, securities convertible into or
exchangeable for such stock, or options or other rights to purchase such
stock or securities may be issued or granted in accordance with authority
granted by resolution of the Board of Directors.

8
<PAGE>

Section 5.2. STOCK CERTIFICATES. Certificates for shares of the
capital stock of the Corporation shall be in the form adopted by the Board of
Directors, shall be signed by the Chief Executive Officer or President and by
the Secretary or Treasurer, and may be sealed with the seal of the
Corporation. All such certificates shall be numbered consecutively, and the
name of the person owning the shares represented thereby, with the number of
such shares and the date of issue, shall be entered on the books of the
Corporation.

Section 5.3. TRANSFER OF STOCK. Shares of capital stock of the
Corporation shall be transferred only on the books of the Corporation, by the
holder of record in person or by the holder's duly authorized representative,
upon surrender to the Corporation of the certificate for such shares duly
endorsed for transfer, together with such other documents (if any) as may be
required to effect such transfer.

Section 5.4. LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES.
New stock certificates may be issued to replace certificates alleged to have
been lost, stolen, destroyed, or mutilated, upon such terms and conditions,
including proof of loss or destruction, and the giving of a satisfactory bond
of indemnity, as the Board of Directors from time to time may determine.

Section 5.5. REGULATIONS. The Board of Directors shall have power
and authority to make all such rules and regulations not inconsistent with
these By-Laws as it may deem expedient concerning the issue, transfer, and
registration of shares of capital stock of the Corporation.

Section 5.6. HOLDERS OF RECORD. The Corporation shall be entitled
to treat the holder of record of any share or shares of capital stock of the
Corporation as the holder and owner in fact thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or right,
title, or interest in, such share or shares on the part of any other person,
whether or not the Corporation shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Delaware.

Section 5.7. RESTRICTION ON TRANSFER. A restriction on the
hypothecation, transfer or registration of transfer of shares of the
Corporation may be imposed either by these By-Laws or by agreement among
stockholders of the Corporation. No restriction so imposed shall be binding
with respect to those securities issued prior to the adoption of the
restriction unless the holders of such securities are parties to an agreement
or voted in favor of the restriction.

9
<PAGE>

ARTICLE VI

GENERAL PROVISIONS

Section 6.1. CORPORATE SEAL. The Corporation may adopt a seal in
such form as the Board of Directors shall from time to time determine.

Section 6.2. FISCAL YEAR. The fiscal year of the Corporation shall
be as designated by the Board of Directors from time to time.

Section 6.3. AUTHORIZATION. All checks, notes, vouchers, warrants,
drafts, acceptances, and other orders for the payment of moneys of the
Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.

Section 6.4. FINANCIAL REPORTS. Financial statements or reports
shall not be required to be sent to the stockholders of the Corporation, but
may be so sent in the discretion of the Board of Directors, in which event
the scope of such statements or reports shall be within the discretion of the
Board of Directors, and such statements or reports shall not be required to
have been examined by or to be accompanied by an opinion of an accountant or
firm of accountants.

Section 6.5. EFFECT OF BY-LAWS. No provision in these By-Laws shall
vest any property right in any stockholder.

ARTICLE VII

AMENDMENTS

The authority to adopt, amend or repeal By-Laws of the Corporation
is expressly conferred upon the Board of Directors, which may take such
action by the affirmative vote of a majority of the whole Board of Directors
at any regular or special meeting duly convened after notice of that purpose,
subject always to the power of the stockholders to adopt, amend or repeal the
By-Laws.

<PAGE>

September 4, 1997

GameTech International, Inc.
2209 W. 1st Street
Suite 113-114
Tempe, Arizona 85281

Re: Registration Statement on Form S-1
----------------------------------

Gentlemen:

We have examined the Registration Statement on Form S-1 filed by you with the
Securities and Exchange Commission on September 4, 1997 (Registration No.
333-_____) (the "Registration Statement"), in connection with the public
offering of 3,456,000 shares (including the Underwriters' over-allotment
option) (the "Shares") of the Common Stock, $.001 par value, of GameTech
International, Inc. (the "Company"). The Shares are to be sold to the
Underwriters for resale to the public as described in the Registration
Statement and pursuant to an Underwriting Agreement in the form filed as
Exhibit 1.1 thereto. As your special counsel, we have examined the
proceedings proposed to be taken in connection with said sale and issuance of
the Shares.

Based on these examinations, it is our opinion that upon completion of the
proceedings being taken or which we, as your special counsel, contemplate
will be taken prior to the issuance of the Shares, the Shares, when issued
and sold in the manner referred to in the Registration Statement, will be
legally and validly issued, fully paid, and non-assessable.

We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the use of our firm name,
whenever appearing in the Registration Statement under the heading "Legal
Matters," including the Prospectus constituting a part thereof and any
amendments thereto. This opinion is furnished to you in connection with the
registration of the Shares, is solely for your benefit and may not be relied
upon by, nor copies delivered to, any other person or entity without our
prior written consent.

Very truly yours,

/s/ MORGAN, LEWIS & BOCKIUS LLP

<PAGE>

GAMETECH INTERNATIONAL, INC.
1997 INCENTIVE STOCK PLAN

1. PURPOSE OF THE PLAN. The purposes of the Incentive Stock Plan are
to attract and retain the best available personnel for the positions of
substantial responsibility, to provide additional incentive to the Employees
and Consultants of the Company and to promote the success of the Company's
business.

Options granted hereunder may be either Incentive Stock Options or
Non-qualified Stock Options, at the discretion of the Administrator and as
reflected in the terms of the written option agreement.

2. DEFINITIONS. As used herein, the following definitions shall apply:

(a) "ADMINISTRATOR" means the Board of any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the plan.

(b) "BOARD" shall mean the Board of Directors of the Company.

(d) "COMMITTEE" shall mean a Committee appointed by the Board
of Directors in accordance with paragraph (a) of Section 4 of the Plan.

(e) "COMMON STOCK" shall mean the Common Stock of the Company.

(f) "COMPANY" shall mean GameTech International, Inc., a
Delaware corporation.

(g) "CONSULTANT" shall mean any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not; provided that for purposes of
eligibility for new Options, the term Consultant shall not include directors
who are not compensated for their services or are paid only a director's fee
by the Company.

(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall
mean the absence of any interruption or termination of service as an Employee
or Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board; provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statue.

(i) "DIRECTOR" shall mean a member of the Board of Directors
of the Company.

(j) "EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or a Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company

(k) "EXCHANGE ACT" means the United States Securities Exchange
Act of 1934, as amended.

(l) "INCENTIVE STOCK OPTION" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
<PAGE>

(m) "NON-QUALIFIED STOCK OPTION" shall mean an Option granted
not intended to qualify as an Incentive Stock Option.

(n) "OPTION" shall mean a stock option granted pursuant of the
Plan.

(o) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.

(p) "OPTIONEE" shall mean an Employee, Director or Consultant
who receives an Option.

(q) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.

(r) "PLAN" shall mean this 1997 Incentive Stock Plan.

(s) "PURCHASER" shall mean any person who has purchased Shares
pursuant to an Option.

(t) "SHARE" shall mean a share of the Common stock, as
adjusted in accordance with Section 12 of the Plan.

(u) "SUBSIDIARY" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 425(f) of the Code.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of shares which may be optioned
and sold under the plan is 2,000,000 shares of Common Stock. The Shares may
be authorized, but unissued, or reacquired Common Stock.

If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. To the extent allowable under
applicable law and regulations, Shares issued under the Plan and later
repurchased by the Company shall become available for future grant or sale
under the Plan.

4. ADMINISTRATION OF THE PLAN

(a) COMPOSITION OF ADMINISTRATOR

(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3 promulgated under the Exchange Act or any successor rule thereto, as in
effect at the time that discretion is being exercised with respect to the
Plan ("Rule 16b-3") and by the legal requirements relating to the
administration of incentive stock option plans, if any, of Delaware corporate
and securities laws and the Internal Revenue Code of 1986, as amended,
(collectively, the "Applicable Laws"), the Plan may (but need not) be
administered by different bodies with respect to Directors, Officers who are
not Directors, and Employees who are neither Directors nor Officers.

(ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS
SUBJECT TO SECTION 16(b). With respect to Option grants made to Employees
who are also Officers or Directors subject to Section 16(b) of the Exchange
Act, the plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan intended to
qualify as a discretionary plan under Rule 16b-3, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted to comply with the rules governing a plan intended to qualify as
a discretionary plan under Rule 16b-3. Once appointed, such Committee shall
continue to serve in its

<PAGE>

designated capacity until otherwise directed by the Board. From time to time
the board may increase the size of the Committee and appoint additional
members, remove members (with or without cause and substitute new members,
fill vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
rules governing a plan intended to qualify as a discretionary plan under Rule
16b-3.

(iii) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With
respect to Option grants made to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall
be constituted to satisfy Applicable Laws. Once appointed, such Committee
shall serve in its designated capacity until otherwise directed by the Board.
The Board may increase the size of the Committee and appoint additional.
members, remove members (with or without cause) and subsitute new members,
fill vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.

(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan, the Administrator shall have the authority, in its discretion: (i)
to grant Incentive Stock Options and Non-qualified Stock Options; (ii) to
determine, upon a review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (iii) to
determine the exercise price per Share of Options to be granted, which
exercise price shall be determined in accordance with Section 8(a) of the
Plan; (iv) to determine the Employees, Directors or Consultants to whom, and
time or times at which, Options shall be granted and the number of shares to
be represented by each Option; (v) to interpret the Plan; (vi) to prescribe
amend and rescind rules and regulations relating to the Plan; (vii) to
determine the terms and provisions of each Option granted (which need not be
identical) and with the consent of the holder thereof, modify or amend each
Option; (viii) to accelerate and defer (with the consent of the Optionee) the
exercise date of any Option consistent with the provisions of Section 5 of
the Plan; (ix) to authorize any person to execute on behalf of the Company
and instrument required to effectuate the grant of an Option previously
granted by the Administrator; and (x) to make all other determinations deemed
necessary or advisable for the administration of the Plan.

(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees, Purchasers and any other holders of any Options
granted under the Plan.

5. ELIGIBILITY.

(a) Non-qualified Stock Options may be granted only to Employees,
Directors or Consultants. Incentive Stock Options may be granted only to
Employees. An Employee, Director or Consultant who has been granted an
Option(s) may, if he is otherwise eligible, be granted an additional
Option(s).

(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Non-qualified Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
fair market value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company) exceeds $100,000,
such Options shall be treated as Non-qualified Stock Options.

(c) For purposes of Section 5(b), Options shall be taken into
account in the order in which they were granted, and the fair market value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.

<PAGE>

(d) The plan shall not confer upon any Optionee or Purchaser any
right with respect to continuation of employment or consulting relationship
with the Company, nor shall it interfere in any way with the his right or the
Company's right to terminate his employment or consulting relationship at any
time, with or without cause.

(e) The following limitations shall apply to grants of Options to
Employees:

(i) No employees shall be granted, in any fiscal year of the
Company, Options to purchase more than the number of Shares reserved for
issuance under the Plan pursuant to Section 3.

(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.

(iii) If an Option is canceled (other than in connection with a
transaction described in Section 12), the canceled Option will be counted
against the limit set forth in Section 5(e)(i). For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.

6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated
under Section 14 of the Plan.

7. TERM OF OPTION. The term of each Incentive Stock Option shall be
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement or Non-qualified Stock
Option Agreement. However, in the case of an Option granted to an Optionee
who, at the time of the Option is granted, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company
or any parent or Subsidiary, the term of the Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Incentive Stock Option Agreement or Non-qualified Stock Option Agreement.

8. EXERCISE PRICE AND CONSIDERATION.

(a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the Share exercise price shall be no less than 110%
of the fair market value per Share on the date of grant.

(B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the fair market value per Share
on the date of grant.

(ii) In the case of a Non-qualified Stock Option granted
to any person, the per Share exercise price shall be such price as is
determined by the Administrator.

For purposes of the Section 8(a), in the event that an Option is amended to
reduce the exercise price, the date of grant of such Option shall thereafter
be considered to be the date of such amendment.

<PAGE>

(b) The fair market value shall be determined by the
Administrator in its discretion; provided, however, that where there is a
public market for the Common Stock, the fair market value per Share shall be
the mean of the bid and asked prices (or the closing price per share if the
Common Stock is listed on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System) of the Common Stock
for the date of grant, as reported in THE WALL STREET JOURNAL (or, if not so
reported, as otherwise reported by the NASDAQ System) or, in the event the
Common Stock is listed on a stock exchange, the fair market value per Share
shall be the closing price on such exchange on the date of grant of the
Option, as reported in THE WALL STREET JOURNAL.

(c) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment shall be
determined by the Administrator and may consist entirely of cash, check,
promissory note, other Shares of Common Stock which (i) either have been
owned by the Optionee or Purchaser for more than six (6) months on the date
of surrender or were not acquired, directly or indirectly, from the Company,
and (ii) have a fair market value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price, or any
combination of such methods of payment, or such other consideration and
method of payment for the issuance of Shares to extent permitted under
applicable laws.

9. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE: RIGHTS AS A STOCKHOLDER. Any
option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable
under Section 8 (c) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Option. In the event
that the exercise of an Option is treated in part as the exercise of an
Incentive Stock Option and in part as the exercise of a Non-qualified Stock
Option pursuant to Section 5(b), the Company shall issue a separate stock
Certificate evidencing the Shares treated as acquired upon exercise of an
Incentive Stock Option and a separate stock certificate evidencing the Shares
treated as acquired upon exercise of a Non-qualified Stock Option, and shall
identify each such certificate accordingly in its stock transfer records. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided
in Section 12 of the Plan.

Except as provided in Section 3 of the Plan, exercise of
an Option in any manner shall result in a decrease in the number of Shares
which thereafter may be available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.

<PAGE>

(b) TERMINATION OF STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event of termination of an Optionee's Continuous Status
as an Employee, Director or Consultant (as the case may be), such Optionee
may, but only within 30 days (or such other period of time, not exceeding
three (3) months in the case of an Incentive Stock Option or twelve (12)
months in the case of a Non-qualified Stock Option, as is determined by the
Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) after the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent that he was entitled to exercise it at the date of such termination.
To the extent that he was not entitled to exercise the Option at the date of
such termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.

(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee, Director or Consultant as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), he may,
but only within 12 months (or such other period of time not exceeding
twelve (12) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time
of grant of the Option) from the date of such termination (but in not event
later than the date of expiration of the term of such Option as set forth in
the Option Agreement), exercise his Option to the extent that he was entitled
to exercise it at the date of such termination. To the extent that he was not
entitled to exercise the Option at the date of such termination, or if he
does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.

(d) DEATH OF OPTIONEE. Notwithstanding the provisions of
Section 9(b) above, in the event of the death of the Optionee:

(i) during the term of the Option who is at the time of
his death and Employee, Director or Consultant of the Company and who shall
have been on Continuous Status as an Employee or Consultant since the date of
grant of the option, the Option may be exercised, at any time within twelve
(12) months following the date of death (but in no event later than the date
of expiration of the term of such option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living
and remained in Continuous Status as an Employee, Director or Consultant
twelve (12) months after the date of death: or

(ii) within 90 days (or such other period of time
not exceeding three (3) months as is determined by the Administrator, with
such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) after the termination of Continuous Status as an
Employee, Director or Consultant, the Option may be exercised, at any time
within twelve (12) months following the date of death (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of termination.

10. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the stockholders of the Company, the number of shares
of Common Stock covered by each outstanding Option, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but
as to which no Options have yet been granted or which have been returned to
the Plan

<PAGE>

pursuant to Section 3, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an Option.

In the event of the proposed dissolution of liquidation of the
Company, the Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may,
in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Board, and give each
Optionee the right to exercise his Option as to all or any part of the
Optioned Stock, including Shares as to which the Option would not otherwise
be exercisable. In the event of a proposed sale of all or substantially all
of the assets of the Company, or the merger of the Company with or into
another corporation, the Option may be assumed or an equivalent option may be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, or if such successor corporation does not assume the
Option or substitute an equivalent option, the Board may, in lieu of such
assumption or substitute, provide for the Optionee to have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Board shall notify the Optionee that the
Option shall be fully exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of
such period.

12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the
determination granting such Option. Notice of the determination shall be
given to each Employee, Director or Consultant to whom an Option so granted
within a reasonable time after the date of such grant.

13. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable.

(b) STOCKHOLDER APPROVAL. The Company shall obtain
stockholder approval of any Plan amendment to the extent necessary and
desirable to comply with Rule 16b-3 of the Exchange Act or with Section 422
of the Code (or any successor statute or rule or other applicable law, rule
or regulation, including the requirements of any exchange or quotation system
on which the Common Stock is listed or quoted). Such stockholder approval, if
required, shall be obtained in such a manner and to such a degree as is
required by the applicable law, rule or regulation.

(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
or Purchase and the Board, which agreement must be in writing and signed by
the Optionee or Purchaser and the Company.

14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of

<PAGE>

1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares
may then be listed, and shall be further subject to the approval of counsel
for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such representation is
required by any of the aforementioned relevant provisions of law.

15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such numbers of Shares as shall
be sufficient to satisfy the requirements of the Plan.

16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Administrator shall approve.

17. STOCKHOLDER APPROVAL

(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted.

(b) If and in the event that the Company registers any class
of equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the stockholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.

(c) If any required approval by the stockholders of the Plan
itself or of any amendment thereto is solicited at any time otherwise than in
the manner described in Section 18 (b) thereof, then the Company shall, at or
prior to the first annual meeting of stockholders held subsequent to the
later of (1) the first registration of any class of equity securities of the
Company under Section 12 of the Exchange Act or (2) the granting of an Option
hereunder to an officer or director after such registration, do the following.

(i) furnish in writing to the holders entitled to vote
for the Plan substantially the same information which would be required (if
proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and

(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is
first sent or given to stockholders.

18. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding copies of all annual reports and other information which are
provided to all stockholders of the Company. The Company shall not be
required to provide such information if the issuance of Options under the
Plan is limited to key employees whose duties in connection with the Company
assure their access to equivalent information.
<PAGE>

GAMETECH INTERNATIONAL, INC.
1997 STOCK OPTIONS GRANT AGREEMENT
Part 1
AGREEMENT AND NOTICE OF STOCK OPTION GRANT

[Optionee's Name and Address]

We have pleasure in informing you that you have been granted an Option
to purchase Common Stock of the Company, subject to the terms and condition
of the 1997 GameTech International, Inc. Stock Option Plan (the Plan) and
this Option Agreement, as follows. Unless otherwise defined herein, the terms
defined in the Plan have the same defined meanings in the Option Agreement.

Grant Number: ____________________________
Date of Grant: ____________________________
Vesting Commencement Date: ____________________________
Exercise Price per Share: $___________________________
Total Number of Options Granted: ____________________________
Total Exercise Price: $___________________________
Type of Options: [Incentive Stock Options]
[Non-qualified Stock Option]
Term/Expiration Date: ____________________________

Vesting Schedule:

This Option may be exercised, in whole or in part, in accordance with
the following schedule:

[Specific vesting schedule to be inserted]

TERMINATION PERIOD:

This Option may be exercised for thirty (30) days after termination of
the Optionee's employment with the Company or the Affiliated Company as the
case may be. Upon the death or Disability of the Optionee, this Option may be
exercised for such longer period as provided in the Plan. Save as provided in
the Plan, in no event shall this Option be exercised later than the
Term/Expiration Date as provided above.

<PAGE>

By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and
governed by the terms and conditions of the Plan and this Option Agreement.
The Optionee has reviewed the Plan and this Option Agreement in their
entirety, has had the opportunity to obtain the advice of counsel prior to
executing this Option Agreement and fully understands all provisions of the
Plan and Option Agreement. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator
upon any questions relating to the plan and Option Agreement. The Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.

Done in two original counterparts

On
------------------------

OPTIONEE:

- -------------------------- GameTech International, Inc.
Signature
By:
-------------------------

- -------------------------- Title:
Print Name -------------------------

- --------------------------
Residence Address

<PAGE>

GAMETECH INTERNATIONAL, INC.
1997 STOCK OPTION GRANT AGREEMENT

PART II

TERMS AND CONDITIONS

1. GRANT OF OPTIONS. The Plan Administrator hereby Grants to the Optionee
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee"), an Option (the "Option") to purchase the number of Shares, as
set forth in the Notice of Grant, at the exercise price per Share set forth
in the Notice of Grant ("the "Exercise Price"), subject to the terms and
conditions of the GameTech International, Inc., 1997 Stock Option Plan, which
is incorporated herein by reference. Subject to Section 14(c) of the Plan, in
the event of a conflict between the terms and conditions of the Plan and the
terms and conditions of this Option Agreement, the terms and conditions of
the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option, this
Option is intended to qualify as an Incentive Stock Option under Section 422
of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,00 rule of Code Section 422(d)
it shall be treated as a Non-qualified Stock Option.

2. EXERCISE OF OPTION

(a) RIGHT TO EXERCISE. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, disability or other termination of Optionee's employment,
the exercisability of the Option is governed by the applicable provisions of
the Plan and this Option Agreement.

(b) METHOD OF EXERCISE. This Option is exercisable by delivery of an
exercise notice, in the form attached hereto (the "Exercise Notice"),
comprising a share subscription form which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised (the "Exercised Share"), and such other representations and
agreements as may be required by the Company pursuant to the provisions of the
Plan. The Exercise Notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Company or its designated
representative of by facsimile message to be immediately confirmed by
certified mail to the Company. The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all Exercised Shares. This
Option shall be deemed to be exercised upon receipt by the Company of such
fully executed Exercise Notice accompanied by such aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant provisions of law and
the requirements of any Stock Exchange or quotation service upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes
the Exercised Shares shall be considered transferred to the Optionee on the
date the Option is exercised with respect to such Exercised Shares.

Upon the issuance of the Shares, the Optionee shall be entitled to
receive such Shares by completing and signing the appropriate box of the
Exercise Notice attached hereto.

<PAGE>

3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the
Optionee:

(1) wire transfer;
(2) check;
(3) promissory note;
(4) Shares of Common Stock which (i) either have been owned by the Optionee
or Purchaser for more than six (6) months on the date of surrender or
were not acquired, directly or indirectly, for the Company, and (ii) have
a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised;
(5) delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall
require to effect exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(6) any combination of the foregoing methods of payment.

4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the Optionee only by the Optionee.
The terms of the Plan and this Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.

5. TERMS OF OPTION. Except as provided in the Plan, this Option may be
exercised only within the terms set out in the Notice of Grant, and may be
exercised during such term only in accordance with the Plan and the terms of
this Option Agreement.

6. ENTIRE AGREEMENT: GOVERNING LAW. The Plan, incorporated herein by
references to the Plan, and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not
be modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee.

Any claim or dispute arising under the Plan or this Agreement shall be
subject to the exclusive jurisdiction of __________________________.

<PAGE>

CONSENT OF SPOUSE

(TO BE SIGNED BY RESIDENTS OF
CALIFORNIA AND OTHER COMMUNITY PROPERTY STATES)

The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration
of the Company's granting his or her spouse the right to subscribe Shares as
set forth in the Plan and this Option Agreement, the undersigned hereby
agrees to be irrevocably bound by the terms and conditions of the Plan and
this Option Agreement and further agrees that any community property interest
shall be similarly bound. The undersigned hereby appoints the undersigned's
spouse as attorney in fact for the undersigned with respect to any amendment
or exercise of rights under the Plan or this Option Agreement.

---------------------------
Spouse of Optionee

<PAGE>

ADDENDUM I

to that Lease Agreement between Russ Jeter (Lessor)
and Game Tech International (Lessee) dated March 13, 1996

Paragraph 1. BASE RENT. Base Rent shall be payable according to the
schedule following:

Years 1-3 $3,880.42 plus applicable rental tax
Years 4-5 $4,104.10 plus applicable rental tax

Paragraph 2. Lessor shall provide no more than $74,620 for Lessor's share
of Tenant Improvements to the Premises. Lessee shall provide
$37,500 toward the Tenant Improvements. Tenant Improvements
shall be completed in accordance with a mutually agreed upon
space plan to be prepared by at3 Architects. In the event
total cost of the Tenant Improvements exceeds the above total
estimate of $112,120, Lessor agrees to amortize an additional
amount not to exceed $7,500 over the 60 month term of the Lease
at an annual interest rate of ten percent (10%). Lessee shall
pay any amount greater than the above resulting total of
$119,620 in cash prior to lease Commencement. If contractor's
final bid exceeds $119,620 Lessee shall have the right to
terminate this agreement.

Paragraph 3. Disbursement of Lessee's $37,500 referenced in paragraph 2
above, shall be paid to Arcadia Management Company upon
issuance of the building permit.

Paragraph 4. There are no oral agreements between Lessor and Lessee
affecting this Lease, and this Lease supersedes and cancels
any and all previous negotiations, arrangements, brochures,
letters of intent, agreements and understandings, written or
oral, if any between Lessor and lessee or displayed by lessor
to Lessee with respect to the Premises and the Industrial
Center, and none of them shall be used to interpret or
construe this Lease. This will and shall be considered to be
the only agreement between Lessor and Lessee and their
representatives and agents. All negotiations and oral
agreements acceptable to lessor and Lessee have been merged
into and are included in this Lease. There are no other
representations or warranties between Lessor and Lessee and
all reliance with respect to representations is solely upon
the representations and agreement contained in this Lease.

Paragraph 5. Neither the preparation nor the delivery of this Lease to
Lessee for examination shall be deemed to be an offer by
Lessor to lease the premises to Lessee, but shall be merely a
part of the negotiations between Lessor and Lessee to lease
the premises from Lessor upon the terms and conditions
contained in this Lease which offer may be accepted by Lessor
only by the execution of the Lease by Lessor.

Paragraph 6. Lessor and Lessee have entered into a Letter Agreement dated
May 17, 1996, the conditions of which shall be incorporated
herein.

Paragraph 7. The date for Lease Commencement shall be August 1, 1996 or
as soon as the Premises are approved for occupancy by the City
of Tempe.

<PAGE>

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

[LOGO]

1. Basic Provisions ("BASIC PROVISIONS").

1.1 PARTIES: this Lease ("LEASE"), dated for reference purposes
only, March 13, 1996, is made by and between Russ Jeter ("LESSOR") and Game
Tech International ("LESSEE"), (collectively the "PARTIES," or individually a
"PARTY").

1.2(a) PREMISES: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this
Lease, commonly known by the street address of 2209 W. 1st St.-Suites
109/113/114, located in the City of Tempe, County of Maricopa, State of
Arizona, with zip code 85281, as outlined on Exhibit A attached hereto
("PREMISES"). The "BUILDING" is that certain building containing the Premises
and generally described as (describe briefly the nature of the Building): a
multi-tenant office/warehouse building containing approx. 39,611 sq.ft. and
situated on an approx. 2.88 acre land parcel and referred to as Harbor View
Business Park. In addition to Lessee's rights to use and occupy the Premises
as hereinafter specified, Lessee shall have non-exclusive rights to the
Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified,
but shall not have any rights to the roof, exterior walls or utility raceways
of the Building or to any other buildings in the Industrial Center. The
Premises, the Building, the Common Areas, the land upon which they are
located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "INDUSTRIAL CENTER." (Also see Paragraph 2.)

1.2(b) PARKING: twenty-nine (29) unreserved vehicle parking spaces
("UNRESERVED PARKING SPACES"); and zero (0) reserved vehicle parking spaces
("RESERVED PARKING SPACES"). (Also see Paragraph 2.6)

1.3 TERM: five (5) years and zero months ("ORIGINAL
TERM") commencing June 15, 1996 or as soon as Premises given approval by City
of Tempe ("COMMENCEMENT DATE") and ending 60 months after commencement
("EXPIRATION DATE"). (Also see Paragraph 3.)

1.4 EARLY POSSESSION: ______________________________________________
("EARLY POSSESSION DATE"). (Also see Paragraphs 3.2 and 3.3)

1.5 BASE RENT: $3,880.24* per month ("BASE RENT"), payable on the
first day of each month commencing (see Para. 1.3 above) (Also see Paragraph
4.) *plus applicable rental tax.
/X/ If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum I, attached hereto.

1.6(a) BASE RENT PAID UPON EXECUTION: $3,880.24 as Base Rent for the
period first month's rent (18.84%).

1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: eighteen and
84/100 percent ( %)("LESSEE'S SHARE") as determined by [ ] prorata square
footage of the Premises as compared to the total square footage of the
Building or [ ] other criteria as described in Addendum ____.

1.7 SECURITY DEPOSIT: $3,880.24 ("SECURITY DEPOSIT"). (Also see
Paragraph 5.)

1.8 PERMITTED USE: Office, administrative, warehousing
and assembly related to electronic equipment ("PERMITTED USE")(Also see
paragraph 6.)

1.9 INSURING PARTY. Lessor is the "INSURING PARTY." (Also see
Paragraph 8.)

1.10(a) REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):

[X] Johnson Commercial Real Estate, Inc. represents Lessor exclusively
("LESSOR'S BROKER");

[X] Classic Real Estate Corporation represents Lessee exclusively ("LESSEE'S
BROKER"); or

[ ] _______________________________ represents both Lessor and Lessee
("DUAL AGENCY"). (Also see Paragraph 15.)

1.10(b) PAYMENT TO BROKERS. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate
shares as they may mutually designate in writing, a fee as set forth in a
separate written agreement between Lessor and said Broker(s) (or in the event
there is no separate written agreement between Lessor and said Broker(s), the
sum of $_______) for brokerage services rendered by said Broker(s) in connection
with this transaction.

1.11 GUARANTOR. The obligations of the Lessee under this Lease are
to be guaranteed by None ("GUARANTOR"). (Also see paragraph 37.)

1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum I
consisting of Paragraphs 1 through 7, and Exhibits A through - , all of which
constitute a part of this Lease.

2. PREMISES, PARKING AND COMMON AREAS.

2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating rental and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee agree is
reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b))
based thereon is not subject to revision whether or not the actual square
footage is more or less.

2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition
on the Commencement Date. If a non-compliance with said warranty exists as of
the Commencement Date, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within thirty (30) days after the
Commencement Date, correction of that non-compliance shall be the obligation
of Lessee at Lessee's sole cost and expense.

2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE.
Lessor warrants that any improvements (other than those constructed by
Lessee or at Lessee's direction) on or in the Premises which have been
constructed or installed by Lessor or with Lessor's consent or at Lessor's
direction shall comply with all applicable covenants or restrictions of
record and applicable building codes, regulations and ordinances in effect on
the Commencement Date. Lessor further warrants to Lessee that Lessor has no
knowledge of any claim having been made by any governmental agency that a
violation or violations of applicable building codes, regulations, or
ordinances exist with regard to the Premises as of the Commencement Date. Said
warranties shall not apply to any Alterations or Utility installations
(defined in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises
do not comply with said warranties, Lessor shall, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
given within six (6) months following the Commencement Date and setting forth
with specificity the nature and extent of such non-compliance, take such
action, at Lessor's expense, as may be reasonable or appropriate to rectify
the non-compliance. Lessor makes no warranty that the Permitted Use in
Paragraph 1.8 is permitted for the Premises under Applicable Laws (as
defined in Paragraph 2.4).

2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that
it has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and
fire sprinkler systems, security, environmental aspects, seismic and
earthquake requirements, and compliance with the Americans with Disabilities
Act and applicable zoning, municipal, county, state and federal laws,
ordinances and regulations and any covenants or restrictions of record
(collectively, "APPLICABLE LAWS") and the present and future suitability of
the Premises for Lessee's intended use; (b) that Lessee has made such
investigation as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefore as
the same relate to Lessee's occupancy of the Premises and/or the terms of
this Lease; and (c) that neither Lessor, nor any of Lessor's agents, has made
any oral or written representations or warranties with respect to said
matters other than as set forth in this Lease.

2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor
in this Paragraph 2 shall be of no force or effect if immediately prior to
the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the Premises with said warranties.

<PAGE>

2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no larger
than full-size passenger automobiles or pick-up trucks, herein called
"PERMITTED SIZE VEHICLES." Vehicles other than Permitted Size Vehicles shall
be parked and loaded or unloaded as directed by Lessor in the Rules and
Regulations (as defined in Paragraph 40) issued by Lessor. (Also see
Paragraph 2.9.)

(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.

(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.

2.7 COMMON AREAS--DEFINITION. The term "COMMON AREAS" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general non-
exclusive use of Lessor, Lessee and other lessees of the Industrial Center and
their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.

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

2.9 COMMON AREAS--RULES AND REGULATIONS. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations with respect thereto in
accordance with Paragraph 40. Lessee agrees to abide by and conform to all such
Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors and invitees to so abide and conform. Lessor shall not
be responsible to Lessee for the non-compliance with said rules and regulations
by other lessees of the Industrial Center.

2.10 COMMON AREAS--CHANGES. Lessor shall have the right, in Lessor's sole
discretion, from time to time:

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

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

(d) To add additional buildings and improvements to the Common Areas;

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

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

3. TERM.

3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.

3.2 EARLY POSSESSION. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.

3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.

4. RENT.

4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.

4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:

Increases over base year of lease commencement only.

(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:

Increases shall not exceed 5% annually.

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

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

(bb) Exterior signs and any tenant directories.

(cc) Fire detection and sprinkler systems.

(ii) The cost of water, gas, electricity and telephone to
service the Common Areas.

(iii) Trash disposal, property management and security services
and the costs of any environmental inspections.

(iv) Reserves set aside for maintenance and repair of Common
Areas.

(v) Any increase above the Base Real Property Taxes (as
defined in Paragraph 10.2(b)) for the Building and the Common Areas.

(vi) Any "Insurance Cost Increase" (as defined in Paragraph
8.1).

(vii) The cost of insurance carried by Lessor with respect to
the Common Areas.

(viii) Any deductible portion of an insured loss concerning the
Building or the Common Areas.

(ix) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense.

(b) Any Common Area Operating Expenses and Real Property Taxes that
are specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.

(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in the Lease to provide
the same or some of them.

(d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver
to Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessor shall be credited the amount of such over-

-2-
<PAGE>

payment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement,
Lessee shall pay to Lessor the amount of the deficiency within ten (10) days
after delivery by Lessor to Lessee of said statement.

5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.7 as security
for Lessee's faithful performance of Lessee's obligations under this Lease. If
Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor to reimburse or compensate Lessor for any
liability, cost, expense, loss or damage (including attorneys' fees) which
Lessor may suffer or incur by reason thereof. Lessor uses or applies all or
any portion of said Security Deposit, Lessee shall within ten (10) days after
written request therefore deposit monies with Lessor sufficient to restore
said Security Deposit to the full amount required by this Lease. Any time the
Base Rent increases during the term of this Lease, Lessee shall, upon written
request from Lessor, deposit additional monies with Lessor as an addition to
the Security Deposit so that the total amount of the Security Deposit shall
at all times bear the same proportion to the then current Base Rent as the
initial Security Deposit bears to the initial Base Rent set forth in
Paragraph 1.5. Lessor shall not be required to keep all or any part of the
Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.

6. USE.

6.1 PERMITTED USE.

(a) Lessee shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use
or permit the use of the Premises in a manner that is unlawful, creates waste
or a nuisance, or that disturbs owners and/or occupants of, or causes damage
to the Premises or neighboring premises or properties.

(b) Lessor hereby agrees to not unreasonably withhold or delay
its consent to any written request by Lessee, Lessee's assignees or subtenants,
and by prospective assignees and subtenants of Lessee, its assignees and
subtenants, for a modification of said Permitted Use, so long as the same
will not impair the structural integrity of the improvements on the Premises
or in the Building or the mechanical or electrical systems therein, does not
conflict with uses by other lessees, is not significantly more burdensome to
the Premises or the Building and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days after such request give a
written notification of same, which notice shall include an explanation of
Lessor's reasonable objections to the change in use.

6.2 HAZARDOUS SUBSTANCES.

(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials expected to
be on the Premises, is either: (i) potentially injurious to the public
health, safety or welfare, the environment, or the Premises; (ii) regulated
or monitored by any governmental authority; or (iii) a basis for potential
liability of Lessor to any governmental agency or third party under any
applicable statute or common law theory. Hazardous Substance shall include,
but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any
products or by-products thereof. Lessee shall not engage in any activity in or
about the Premises which constitutes a Reportable Use (as hereinafter
defined) of Hazardous Substances without the express prior written consent of
Lessor and compliance in a timely manner (at Lessee's sole cost and expense)
with all Applicable Requirements (as defined in Paragraph 6.3) "REPORTABLE
USE" shall mean (i) the installation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use, transportation,
or disposal of a Hazardous Substance that requires a permit from, or with
respect to which a report, notice, registration or business plan is required
to be filed with, any governmental authority, and (iii) the presence in, on
or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or
occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may, without Lessor's prior consent, but upon notice to
Lessor and in compliance with all Applicable Requirements, use any ordinary
and customary materials reasonably required to be used by Lessee in the
normal course of the Permitted Use, so long as such use is not a Reportable
Use and does not expose the Premises or neighboring properties to any
meaningful risk of contamination or damage or expose Lessor to any liability
therefor. In addition, Lessor may (but without any obligation to do so)
condition its consent to any Reportably Use of any Hazardous Substance by
Lessee upon Lessee's giving Lessor such additional assurances as Lessor, in
its reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefor, including but not limited to the installation (and, at
Lessor's opinion, removal on or before Lease expiration or earlier
termination) of reasonable necessary protective modifications to the Premises
(such as concrete encasements) and/or the deposit of an additional Security
Deposit under Paragraph 5 hereof.

(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises or the Building, other than as previously
consented to by Lessor, Lessee shall immediately give Lessor written notice
thereof, together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding
given to, or received from, any governmental authority or private party
concerning the presence, spill, release, discharge of, or exposure to, such
Hazardous Substance including but not limited to all such documents as may
be involved in any Reportable Use involving the Premises. Lessee shall not
cause or permit any Hazardous Substance to be spilled or released in, on,
under or about the Premises (including, without limitation, through the
plumbing or sanitary sewer system).

(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground lessor, if any,
and the Premises, harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, loss of permits and
attorneys' and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Premises by or for Lessee or by anyone under
Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the
cost of investigation (including consultants' and attorneys' fees and
testing), removal, remediation, restoration and/or abatement thereof, or of
any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.

6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at
Lessee's sole cost and expense, fully, diligently and in a timely manner,
comply with all "APPLICABLE REQUIREMENTS," which term is used in this Lease
to mean all laws, rules, regulations, ordinances, directives, covenants,
easements and restrictions of record, permits, the requirements of any
applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any
manner to the Premises (including but not limited to matters pertaining to
(i) industrial hygiene, (ii) environmental conditions on, in, under or about
the Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance, now in
effect or which may hereafter come into effect. Lessee shall, within five (5)
days after receipt of Lessor's written request, provide Lessor with copies of
all documents and information, including but not limited to permits,
registrations, manifests, applications, reports and certificates, evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or
the Premises to comply with the Applicable Requirements.

6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("LENDERS") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this
Lease and all Applicable Requirements (as defined in Paragraph 6.3), and
Lessor shall be entitled to employ experts and/or consultants in connection
therewith to advise Lessor with respect to Lessee's activities, including
but not limited to Lessee's installation, operation, use, monitoring,
maintenance, or removal of any Hazardous Substance on or from the Premises.
The costs and expenses of any such inspections shall be paid by the party
requesting same, unless a Default or Breach of this Lease by Lessee or a
violation of Applicable Requirements or a contamination, caused or materially
contributed to by Lessee, is found to exist or be imminent, or unless the
inspection is requested or ordered by a government authority as the result of
any such existing or imminent violation or contamination. In such case,
Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case
may be, for the costs and expenses of such inspections.

7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS.

7.1 LESSEE'S OBLIGATIONS.

(a) Subject to the provisions of Paragraphs 2.2 (Condition),
2.3 (Compliance with Covenants, Restrictions and Building Code), 7.2
(Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation),
Lessee shall, at Lessee's sole cost and expense and at all times, keep the
Premises and every part thereof in good order, condition and repair (whether
or not such portion of the Premises requiring repair, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use,
any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all equipment
or facilities specifically serving the Premises, such as plumbing, heating,
air conditioning, ventilating, electrical, lighting facilities, boilers,
fired or unfired pressure vessels, fire hose connections if within the
Premises, fixtures, interior walls, interior surfaces of exterior walls,
ceilings, floors, windows, doors, plate glass, and skylights, but excluding
any items which are the responsibility of Lessor pursuant to Paragraph 7.2
below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep
the Premises and all improvements thereon or a part thereof in good order,
condition and state of repair.

(b) Lessee shall, at Lessee's sole cost and expense, procure
and maintain a contract, with copies to Lessor, in customary form and
substance for and with a contractor specializing and experienced in the
inspection, maintenance and service of the heating, air conditioning and
ventilation system for the Premises. However, Lessor reserves the right,
upon notice to Lessee, to procure and maintain the contract for the heating,
air conditioning and ventilating systems, and if Lessor so elects, Lessee
shall reimburse Lessor, upon demand, for the cost thereof.

(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may 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 Premises in good order, condition and repair, in accordance with
Paragraph 13.2 below.

7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor,
subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order,
condition and repair the foundations, exterior walls, structural condition of
interior bearing walls, exterior roof, fire sprinkler and/or standpipe and
hose (if located in the Common Areas) or other automatic fire extinguishing
system including fire alarm and/or smoke detection

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systems and equipment, fire hydrants, parking lots, walkways, parkways,
driveways, landscaping, fences, signs and utility systems serving the Common
Areas and all parts thereof, as well as providing the services for which there
is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not
be obligated to paint the exterior or interior surfaces of exterior walls nor
shall Lessor be obligated to maintain, repair or replace windows, doors or plate
glass of the Premises. Lessee expressly waives the benefit of any statute now
or hereafter 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 Building, Industrial Center or Common Areas in good order,
condition and repair.

7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.

(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "TRADE FIXTURES"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "ALTERATIONS" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "LESSEE-OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined
as Alterations and/or Utility Installations made by Lessee that are not yet
owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause
to be made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make non-
structural Utility Installations to the interior of the Premises (excluding the
roof) without Lessor's consent but upon notice to Lessor, so long as they are
not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.

(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations of Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.

(c) LIEN PROTECTION. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's 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, on, or about 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 and protect itself,
Lessor and the Premises 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. 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, as required by law for the
holding of 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.

7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.

(a) OWNERSHIP. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owner Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.

(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.

(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date,
clean and free of debris and in good operating order, condition and state of
repair, ordinary wear and tear excepted. Ordinary wear and tear shall not
include any damage or deterioration that would have been prevented by good
maintenance practice or by Lessee performing all of its obligations under
this Lease. Except as otherwise agreed or specified herein, the Premises, as
surrendered, shall include the Alterations and Utility Installations. The
obligation of Lessee shall include the repair of any damage occasioned by the
installation, maintenance or removal of Lessee's Trade Fixtures, furnishings,
equipment, and Lessee-Owned Alterations and Utility Installations, as well as
the removal of any storage tank installed by or for Lessee, and the removal,
replacement, or remediation of any soil, material or ground water
contaminated by Lessee, all as may then be required by Applicable
Requirements and/or good practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation
to repair and restore the Premises per this Lease.

8. INSURANCE; INDEMNITY.

8.1 PAYMENT OF PREMIUM INCREASES.

(a) As used herein, the term "INSURANCE COST INCREASE" is defined as
any increase in the actual cost of the insurance applicable to the Building and
required to be carried by Lessor pursuant to Paragraphs 8.2(b), 8.3(a) and
8.3(b), ("REQUIRED INSURANCE"), over and above the Base Premium, as hereinafter
defined, calculated on an annual basis "Insurance Cost Increase" shall include,
but not be limited to, requirements of the holder of a mortgage or deed of trust
covering the Premises, increased valuation of the Premises, and/or a general
premium rate increase. The term "Insurance Cost Increase" shall not, however,
include any premium increases resulting from the nature of the occupancy of any
other lessee of the Building. If the parties insert a dollar amount in
Paragraph 1.9, such amount shall be considered the "BASE PREMIUM." If a dollar
amount has not been inserted in Paragraph 1.9 and if the Building has been
previously occupied during the twelve (12) month period immediately preceding
the Commencement Date, the "Base Premium" shall be the annual premium applicable
to such twelve (12) month period. If the Building was not fully occupied during
such twelve (12) month period, the "Base Premium" shall be the lowest annual
premium reasonably obtainable for the Required insurance as of the Commencement
Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000 procured
under Paragraph 8.2(b).

(b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant
to Paragraph 4.2. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the
corresponding Commencement Date or Expiration Date.

8.2 LIABILITY INSURANCE.

(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of
insurance protecting Lessee, Lessor and any Lender(s) whose names have been
provided to Lessee in writing (as additional insureds) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $1,000,000
per occurrence with an "Additional Insured-Managers or Lessors of Premises"
endorsement and contain the "Amendment of the Pollution Exclusion"
endorsement for damage caused by heat, smoke or fumes from a hostile fire.
The policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease as an "INSURED CONTRACT" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance
required by this Lease or as carried by Lessee shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not contributory
with any similar insurance carried by Lessor, whose insurance shall be
considered excess insurance only.

(b) CARRIED BY LESSOR. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be
named as an additional insured therein.

8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.

(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available
and commercially appropriate, Lessor's policy or policies shall insure against
all risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender or included in the Base Premium),
including coverage for any additional costs resulting from debris removal and
reasonable amounts of coverage for the enforcement of any ordinance or law
regulating the reconstruction or replacement of any undamaged sections of the
Building required to be demolished or removed by reason of the enforcement of
any building, zoning, safety or land use laws as the result of a covered loss,
but not including plate glass insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.

(b) RENTAL VALUE. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that
in the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.

(c) ADJACENT PREMISES. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.

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<PAGE>

(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee-Owned Alterations and
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.

8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's [illegible] by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property, Trade Fixtures and
Lessee-Owned Alterations [illegible] Utility Installations in, on, or about
the Premises similar in coverage to that carried by Lessor as the Insuring
Party under Paragraph 8.3(a). Such insurance shall [illegible] full
replacement cost coverage with a deductible not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for
replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force.

8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or such other rating as may be required by a
Lender, as set forth [illegible] the most current issue of "Best's Insurance
Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. Lessee
shall cause to be delivered to Lessor, within seven (7) days after the
earlier of the Early Possession Date or the Commencement Date, certified
copies of, or certificates evidencing the existence and amounts of, the
insurance required under Paragraph 8.2(a) and 8.4. No such policy shall be
cancelable or subject to modification except after thirty (30) days' prior
written notice to Lessor. Lessee shall at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.

8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and
waive the entire right to recover damages (whether in contract or in tort)
against the other, for loss or damage to their property arising out of or
incident to the perils required to be insured against under Paragraph 8. The
effect of such releases and waivers of the right to recover damages shall not
be limited by the amount of insurance carried or required, or by any
deductibles applicable thereto. Lessor and Lessee agree to have their
respective insurance companies issuing property damage [illegible] insurance
waive any right to subrogation that such companies may have against Lessor or
Lessee, as the case may be, so long as the insurance is not invalidated
thereby.

8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and
consultants' fees, expenses and/or liabilities arising out of, involving, or
in connection with, the occupancy of the Premises by Lessee, the conduct of
Lessee's business, any act, omission or neglect of Lessee, its agents,
contractors, employees or invitees and out of any Default or Breach by Lessee
in the performance in a timely manner of any obligation on Lessee's part to
be performed under this Lease. The foregoing shall include, but not be
limited to, the defense or pursuit of any claim or any action or proceeding
involved therein, and whether or not (in the case of claims made against
Lessor) litigated and/or reduced to judgment. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing
matters Lessee upon notice from Lessor shall defend the same at Lessee's
expense by counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.

8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property
of Lessee. Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, 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, fire sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures, or from
any other cause, whether said injury or damage results from conditions
arising upon the Premises or upon other portions of the Building of which the
Premises are a part, from other sources or places, and regardless of whether
the cause of such damage or injury or the means of repairing the same is
accessible or not. Lessor shall not be liable for any damages arising from
any act or neglect of any other lessee of Lessor nor from the failure by
Lessor to enforce the provisions of any other lease in the Industrial Center.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall
under no circumstances be liable for injury to Lessee's business or for any
loss of income or profit therefrom.

9. DAMAGE OR DESTRUCTION.

9.1 DEFINITIONS.

(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations,
the repair cost of which damage or destruction is less than fifty percent
(50%) of the then Replacement Cost (as defined in Paragraph 9.1(d)) of the
Premises (excluding Lessee-Owned Alterations and Utility Installations and
Trade Fixtures) immediately prior to such damage or destruction.

(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to the Premises, other than Lessee-Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost of the Premises (excluding
Lessee-Owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction. In addition, damage or
destruction to the Building, other than Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building, the cost of
which damage or destruction is fifty percent (50%) or more of the then
Replacement Cost (excluding Lessee-Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building) of the
Building shall, at the option of Lessor, be deemed to be Premises Total
Destruction.

(c) "INSURED LOSS" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible
amounts or coverage limits involved.

(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the Improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.

(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.

9.2 PREMISES PARTIAL DAMAGE--INSURED LOSS. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense,
repair such damage (but not Lessee's Trade Fixtures or Lessee-Owned
Alterations and Utility Installations) as soon as reasonably possible and
this Lease shall continue in full force and effect. In the event, however,
that there is a shortage of insurance proceeds and such shortage is due to
the fact that, by reason of the unique nature of the improvements in the
Premises, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have not obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or
adequate assurance thereof, within ten (10) days following receipt of written
notice of such shortage and request therefor. If Lessor receives said funds
or adequate assurance thereof within said ten (10) day period, Lessor shall
complete them as soon as reasonably possible and this Lease shall remain in
full force and effect. If Lessor does not receive such funds or assurance
within said period, Lessor may nevertheless elect by written notice to Lessee
within ten (10) days thereafter to make such restoration and repair as is
commercially reasonable with Lessor paying any shortage in proceeds, in which
case this Lease shall remain in full force and effect. If Lessor does not
receive such funds or assurance within such ten (10) day period, and if
Lessor does not so elect to restore and repair, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or
destruction. Unless otherwise agreed, Lessee shall in no event have any right
to reimbursement from Lessor for any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net
proceeds of any such insurance shall be made available for the repairs if made
by either Party.

9.3 PARTIAL DAMAGE--UNINSURED LOSS. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), 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
efect, or (ii) give written notice to Lessee within thirty (30) days after
receipt by Lessor of knowledge of the occurrence of such damage of Lessor's
desire to terminate this Lease as of the date sixty (60) days following the
date of such notice. In the event Lessor elects to give such notice of
Lessor's intention to 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 commitment to pay for the repair of such damage totally
at Lessee's expense and without reimbursement from Lessor. Lessee shall
provide Lessor with the required funds or satisfactory assurance thereof
within thirty (30) days following such commitment from Lessee. In such event
this Lease shall continue in full force and effect, and Lessor shall proceed
to make such repairs as soon as reasonably possible after the required funds
are available. If Lessee does not give such notice and provide the funds or
assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.

9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the
damage or destruction is an Insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction
was caused by Lessee, Lessor shall have the right to recover Lessor's damages
from Lessee except as released and waived in Paragraph 9.7.

9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within thirty (30) days after the date occurrence
of such damage. Provided, however, if Lessee at that time has an exercisable
option to extend this Lease or to purchase the Premises, then Lessee may
preserve this Lease by (a) exercising such option, and (b) providing Lessor
with any shortage in insurance proceeds (or adequate assurance thereof)
needed to make the repairs on or before the earlier of (i) the date which is
ten (10) days after Lessee's receipt of Lessor's written notice purporting to
terminate this Lease, or (ii) the day prior to the date upon which such
option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any
shortage in insurance proceeds, Lessor shall, at Lessor's expense repair such
damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option and provide such
funds or assurance during such period, then this Lease shall terminate as of
the date set forth in the first sentence of this Paragraph 9.5.

9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.

(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base
Rent, Common Area Operating Expenses and other charges, if any, payable by
Lessee hereunder for the period during which such damage or condition, its
repair, remediation or restoration continues, shall be abated in proportion
to the degree to which Lessee's use of the Premises is impaired, but not in
excess of proceeds from insurance required to be carried under Paragraph
8.3(b). Except for abatement of Base Rent, Common Area Operating Expenses and
other charges, if any, as aforesaid, all other obligations of Lessee
hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such damage,
destruction, repair, remediation or restoration.

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<PAGE>

(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual notice
of Lessee's election to terminate this Lease on a date not less than sixty
(60) days following the giving of such notice. If Lessee gives such notice to
Lessor and such Lenders and such repair or restoration is not commenced
within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after the receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph 9.6 shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever occurs first.

9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but
subject to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor
may at Lessor's option either (i) investigate and remediate such Hazardous
Substance Condition, if required, 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 estimated cost to investigate and remediate such condition
exceeds twelve (12) times the then monthly Base Rent or $100,000 whichever is
greater, give written notice to Lessee within thirty (30) days after receipt
by Lessor of knowledge of the occurrence of such Hazardous Substance
Condition of Lessor's desire to terminate this Lease, Lease as of the date
sixty (60) days following the date of such notice. In the event Lessor
elects to give such notice of Lessor's intention to 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 commitment to pay for the excess
costs of (a) investigation and remediation of such Hazardous Substance
Condition to the extent required by Applicable Requirements, over (b) an
amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
said commitment by Lessee. In such event this Lease shall continue in full
force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds
or assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.

9.8 TERMINATION--ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance
payment made by Lessee to Lessor and so much of Lessee's Security Deposit as
has not been, or is not then required to be, used by Lessor under the terms
of this Lease.

9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby
waive the provisions of any present or future statute to the extent it is
inconsistent herewith.

10. REAL PROPERTY TAXES.

10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2(a), applicable to the Industrial Center, and except
as otherwise provided in Paragraph 10.3, any increases in such amounts over
the Base Real Property Taxes shall be included in the calculation of Common
Area Operating Expenses in accordance with the provisions of Paragraph 4.2.

10.2 REAL PROPERTY TAX DEFINITIONS.

(a) As used herein, the term "REAL PROPERTY TAXES" 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 upon the Industrial Center 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, levied against any legal or equitable interest
of Lessor in the Industrial Center or any portion thereof, Lessor's right to
rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "REAL PROPERTY TAXES" shall also include any tax, fee,
levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the term
of this Lease, including but not limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this
Lease, or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties.

(b) As used herein, the term "BASE REAL PROPERTY TAXES" shall be
the amount of Real Property Taxes, which are assessed against the Premises,
Building or Common Areas in the calendar year during which the Lease is
executed. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the
calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.

10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such
other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however,
pay to Lessor at the time Common Area Operating Expenses are payable under
Paragraph 4.2, the entirety of any increase in Real Property Taxes if
assessed solely by reason of Alterations, Trade Fixtures or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.

10.4 JOINT ASSESSMENT. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of
the Real Property Taxes for all of the land and improvements included within
the tax parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable determination
thereof, in good faith, shall be conclusive.

10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, euiqpment and all personal
property of Lessee contained in the Premises or stored within the Industrial
Center. When possible, Lessee shall cause its Lessee-Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property
of Lessor. If any of Lessee's said property shall be assessed with Lessor's
real property. Lessee shall pay Lessor the taxes attributable to Lessee's
property within ten (10) days after receipt of a written statement setting
forth the taxes applicable to Lessee's property.

11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity,
telephone, security, gas and cleaning of the Premises, together with any
taxes thereon, if any such utilities or services are not separately metered
to the Premises or separately billed to the Premises. Lessee shall pay to
Lessor a reasonable proportion to be determined by Lessor of all such charges
jointly metered or billed with other premises in the Building, in the manner
and within the time periods set forth in Paragraph 4.2(d).

12. ASSIGNMENT AND SUBLETTING.

12.1 LESSOR'S CONSENT REQUIRED.

(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign")
or sublet all or any part of Lessee's interest in this Lease or in the
Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.

(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.

(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Lessee's assets occurs,
which results or will result in a reduction of the Net Worth of Lessee, as
hereinafter defined, by an amount equal to or greater than twenty-five
percent (25%) of such Net Worth of Lessee as it was represented to Lessor at
the time of full execution and delivery of this Lease or at the time of the
most recent assignment to which Lessor has consented, or as it exists
immediately prior to said transaction or transactions constituting such
reduction, at whichever time said Net Worth of Lessee was or is greater,
shall be considered an assignment of this Lease by Lessee to which Lessor may
reasonably withhold its consent. "NET WORTH OF LESSEE" for purposes of this
Lease shall be the net worth of Lessee (excluding any Guarantors) established
under generally accepted accounting principles consistently applied.

(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be
a Default curable after notice per Paragraph 13.1, or a non-curable Breach
without the necessity of any notice and grace period. If Lessor elects to
treat such unconsented to assignment or subletting as a non-curable Breach,
Lessor shall have the right to either: (i) terminate this Lease, or (ii) upon
thirty (30) days' written notice ("LESSOR'S NOTICE"), increase the monthly
Base Rent for the Premises to the greater of the then fair market rental
value of the Premises, as reasonably determined by Lessor, or one hundred ten
percent (110%) of the Base Rent then in effect. Pending determination of the
new fair market rental value, if disputed by Lessee, Lessee shall pay the
amount set forth in Lessor's Notice, with any overpayment credited against
the next installment(s) of Base Rent coming due, and any underpayment for the
period retroactively to the effective date of the adjustment being due and
payable immediately upon the determination thereof. Further, in the event of
such Breach and rental adjustment, (i) the purchase price of any option to
purchase the Premises held by Lessee shall be subject to similar adjustment
to the then fair market value as reasonably determined by Lessor (without the
Lease being considered an encumbrance or any deduction for depreciation or
obsolescence, and considering the Premises at its highest and best use and in
good condition) or one hundred ten percent (110%) of the price previously in
effect, (ii) any index-oriented rental or price adjustment formulas contained
in this Lease shall be adjusted to require that the base index be determined
with reference to the index applicable to the time of such adjustment, and
(iii) any fixed rental adjustments scheduled during the remainder of the
Lease term shall be increased in the same ratio as the new rental bears to
the Base Rent in effect immediately prior to the adjustment specified in
Lessor's Notice.

(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.

12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.

(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval
of an assignment. Neither a delay in the approval or disapproval of such
assignment nor the acceptance of any rent for performance shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the Default
or Breach by Lessee of any of the terms, covenants or conditions of this
Lease.

(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else under this Lease or the sublease and
without obtaining their consent, and such action shall not relieve such
persons from liability under this Lease or the sublease.

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(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors
or anyone else responsible for the performance of the Lessee's obligations
under this Lease, including any sublessee, without first exhausting Lessor's
remedies against any other person or entity responsible therefor to Lessor,
or any security held by Lessor.

(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a
non-refundable deposit of $1,000 or ten percent (10%) of the monthly Base
Rent applicable to the portion of the Premises which is the subject of the
proposed assignment or sublease, whichever is greater, as reasonable
consideration for Lessor's considering and processing the request for
consent. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested by Lessor.

(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for
the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed
or performed by Lessee during the term of said assignment or sublease, other
than such obligations as are contrary to or inconsistent with provisions of
an assignment or sublease to which Lessor has specifically consented in
writing.

(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.

(h) Lessor, as a condition to giving its consent to any assignment
or subletting, may require that the amount and adjustment schedule of the
rent payable under this Lease be adjusted to what is then the market value
and/or adjustment schedule for property similar to the Premises as then
constituted, as determined by Lessor.

12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein:

(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a
portion of the Premises heretofore or hereafter made by Lessee, and Lessor
may collect such rent and income and apply same toward Lessee's obligations
under this Lease; provided, however, that until a Breach (as defined in
Paragraph 13.1) shall occur in the performance of Lessee's obligations under
this Lease, Lessee may, except as otherwise provided in this Lease, receive,
collect and enjoy the rents accruing under such sublease. Lessor shall not,
by reason of the foregoing provision or any other assignment of such sublease
to Lessor, nor by reason of the collection of the rents from a sublessee, be
deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee under such
Sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
Sublessee shall rely upon any such statement and request from Lessor and
shall pay such rents and other charges to Lessor without any obligation or
right to inquire as to whether such Breach exists and notwithstanding any
notice from or claim from Lessee to the contrary. Lessee shall have no right
or claim against such sublessee, or, until the Breach has been cured, against
Lessor, for any such rents and other charges so paid by said sublessee to
Lessor.

(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to such sublessor or for any
other prior defaults or breaches of such sublessor under such sublease.

(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.

(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior
written consent.

(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right to reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.

13. DEFAULT; BREACH; REMEDIES.

13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in
said notice as rent due and payable to cure said default. A "DEFAULT" by
Lessee is defined as a failure by Lessee to observe, comply with or perform
any of the terms, covenants, conditions or rules applicable to Lessee under
this Lease. A "BREACH" by Lessee is defined as the occurrence of any one or
more of the following Defaults, and, where a grace period for cure after
notice is specified herein, the failure by Lessee to cure such Default prior
to the expiration of the applicable grace period, and shall entitle Lessor
to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:

(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.

(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder as and when due, the failure by Lessee to provide Lessor
with reasonable evidence of insurance or surety bond required under this
Lease, or the failure of Lessee to fulfill any obligation under this Lease
which endangers or threatens life or property, where such failure continues
for a period of three (3) days following written notice thereof by or on
behalf of Lessor to Lessee.

(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination
of this Lease per Paragraph 30, (vi) the guaranty of the performance of
Lessee's obligations under this Lease if required under Paragraphs 1.11 and
37, (vii) the execution of any document requested under Paragraph 42
(easements), or (viii) any other documentation or information which Lessor
may reasonably require of Lessee under the terms of this lease, where any
such failure continues for a period of ten (10) days following written notice
by or on behalf of Lessor to Lessee.

(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof
that are to be observed, complied with or performed by Lessee, other than
those described in Subparagraphs 13.1(a), (b) or (c), above, where such
Default continues for a period of thirty (30) days after written notice
thereof by or on behalf of Lessor to Lessee; provided, however, that if the
nature of Lessee's Default is such that more than thirty (30) days are
reasonably required for its cure, then it shall not be deemed to be a Breach
of this Lease by Lessee if Lessee commences such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion.

(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (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 thirty (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 thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.

(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.

(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.

13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:

(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the worth at the
time of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, 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 attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the
provisional remedy of unlawful detainer, Lessor shall have the right to recover
in such pro-

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ceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit for
such rent and/or damages. If a notice and grace period required under
Subparagraph 13.1(b), (c) or (d) was not previously given, a notice to pay
rent or quit, or to perform or quit, as the case may be, given to Lessee
under any statute authorizing the forfeiture of leases for unlawful detainer
shall also constitute the applicable notice for grace period purposes
required by Subparagraph 13.1(b), (c) or (d), in such case, the applicable
grace period under the unlawful detainer statue shall run concurrently after
the one such statutory notice, and the failure of Lessee to cure the Default
within the greater of the two (2) such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.

(b) Continue the Lease and Lessee's right to possession in effect (in
California Civil Code Section 1951.4) after Lessee's Breach and recover the rent
as it becomes due, provided Lessee has the right to sublet or assign, subject
only to reasonable limitations. Lessor and Lessee agree that the limitations on
assignment and subletting in this Lease are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under this Lease, shall not constitute a
termination of the Lessee's right to possession.

(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.

(d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee form liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessor's occupancy of the Premises.

13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any net, other charge, bonus, inducement or
consideration therefore abated, given or paid by Lessor under such an Inducement
Provision shall be immediately due and payable by Lessee to Lessor, and
recoverable by Lessor, as additional rent due under this Lease, notwithstanding
any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent
or the cure of the Breach which initiated the operation of this Paragraph 13.3
shall not be deemed a waiver by Lessor of the provisions of this Paragraph 13.3
unless specifically so stated in writing by Lessor at the time of such
acceptance.

13.4 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
upon Lessor by the terms of any ground lease, mortgage or deed of trust
covering the Premises. Accordingly, if any installment of rent or other sum
due from Lessee shall not be received by Lessor or Lessor's designed within
ten (10) days after such amount shall be due, then, without any requirement
for notice to Lessee. Lessee shall pay the Lessor a late charge equal to six
percent (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 or Breach
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 Base Rent, then notwithstanding Paragraph 4.1 or
any other provision of this Lease to the contrary, Base Rent shall, at
Lessor's option, become due and payable quarterly in advance.

13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this Lease
unless Lessor falls within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.

14. 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 ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing 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 Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. 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 of value of the leasehold or by the taking of the
fee or as severance damages; provided, however, that Lessee shall be entitled to
any compensation, separately awarded to Lessee for Lessee's relocation expenses
and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to the extent of its net
severance damages received, over and above Lessee's Share of the legal and other
expenses incurred by Lessor in the condemnation matter repair any damage to the
Premises caused by such condemnation authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.

15. BROKERS' FEES

15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease

15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise agreed
in writing, Lessor agrees that: (a) if Lessee exercises any Option (as
defined in Paragraph 39.1) granted under this Lease or any Option
subsequently granted, or (b) if Lessee acquires any rights to the Premises or
other premises in which Lessor has an interest, or (c) if Lessee remains in
possession of the Premises with the consent of Lessor after the expiration of
the term of this Lease after having failed to exercise an Option, or (d) if
said Brokers are the procuring cause of any other lease or sale entered into
between the Parties pertaining to the Premises and/or any adjacent property
in which Lessor has an interest, or (e) of Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then as to any of said
transactions. Lessor shall pay said Broker(s) a fee in accordance with the
schedule of said Broker(s) in effect at the time of the execution of this
Lease.

15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.

15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.

16. TENANCY AND FINANCIAL STATEMENTS.

16.1 TENANCY STATEMENT. Each Party (as "RESPONDING PARTY") shall within
ten (10) days after written notice from the other Party (the "REQUESTING PARTY")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "TENANCY STATEMENT" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.

16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance, or sell
the Premises or the Building, or any part thereof, Lessee and all Guarantors
shall deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably required
by such lender or purchaser, including but not limited to Lessee's financial
statements for the past three (3) years. 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.

17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In
the event of a transfer of Lessor's title or interest in the Premises or in
this Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in Paragraph 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the
Lessor as hereinabove defined.

18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.

20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.

22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party
beneficiary of the provisions of this Paragraph 22.

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23. NOTICES.

23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written 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 the purpose of making or delivering notices to Lessee. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.

23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail, the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.

24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.

25. 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. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.

26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.

27. 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.

28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.

29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.

30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.

30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.

30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.

30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.

30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.

31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "PREVAILING PARTY" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.

32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of
Lessor shall be without abatement of rent or liability to LESSEE.

33. 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.

34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign
on the Premises by or for Lessee shall be subject to the provisions of Paragraph
7 (Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.

35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.

36. CONSENTS.

(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.

(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.

37. GUARANTOR.

37.1 FORM OF GUARANTY. If there are to be any Guarantors of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.

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37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.

38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.

39. OPTIONS.

39.1 DEFINITION. As used in this Lease, the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.

39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.

39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.

39.4 EFFECT OF DEFAULT ON OPTIONS.

(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.

(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a)

(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.

40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.

41. 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 the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

43. 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.

44. AUTHORITY. If either Party hereto 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 its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.

45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.

46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.

47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.

48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.

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LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED
TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR
CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH
IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE
SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM
THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.

The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

Executed at: S.B. CA Executed at: Tempe, AZ
-------------------------- ---------------------------

on: May 31, 1996 on: April 16, 1996
----------------------------------- -------------------------------------

By LESSOR: By LESSEE:

Russ Jeter Game Tech International
- -------------------------------------- -------------------------------------

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

By: /s/ Russ Jeter By: /s/ Clarence H. Thiesen
----------------------------------- -------------------------------------

Name Printed: Russ Jeter Name Printed: Clarence H. Thiesen
------------------------- ---------------------------

Title: Owner Title: Chief Financial Officer
-------------------------------- ----------------------------------

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

Name Printed: Name Printed:
------------------------- ---------------------------

Title: Title:
-------------------------------- ----------------------------------

Address: 1030 Vista De La Mesa Address:
------------------------------ --------------------------------

Santa Barbara, CA 93110 --------------------------------
------------------------------

Telephone: (805) 964-2199 Telephone:( )
---------------------- -------------------------

Facsimile: (805) 964-4723 Facsimile: ( )
---------------------- ------------------------

BROKER: Johnson Commercial Real Estate BROKER: Classic Real Estate Corporation

Executed at: Tempe, AZ Executed at: Scottsdale, AZ
-------------------------- ----------------------------

on: April 16, 1996 on: April 16, 1996
----------------------------------- -------------------------------------

By: /s/ Robert E. Soules By: /s/ Barry A. Harvey
----------------------------------- -------------------------------------

Name Printed: Robert E. Soules Name Printed: Barry A. Harvey
------------------------- ---------------------------

Title: Associate Title: Marketing Associate
-------------------------------- ----------------------------------

Address: 2741 W. Southern, Suite 1, Address: 7845 East Redfield Road,
------------------------------ --------------------------------
Tempe, AZ 85282 Suite 100
------------------------------ --------------------------------
Tempe, AZ 85282 Scottsdale, AZ 85260
------------------------------ --------------------------------

Telephone: (602) 431-1777 Telephone: (602) 596-9000
---------------------------- ------------------------------

Facsimile: (602) 431-1213 Facsimile: (602) 948-0502
---------------------------- ------------------------------

NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are
utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION, 345 So. Figueroa St., M-1, Los Angeles, CA 90071.
(213) 687-8777.

-11-

<PAGE>

EXHIBIT "A"

to that Lease Agreement between Russ Jeter ("Lessor") and
Game Tech International ("Lessee"), dated

April 16, 1996

[SITE MAP]

<PAGE>

[COPY OF CHECK FROM GAMETECH INTERNATIONAL, INC. TO
RUSS JETER IN THE AMOUNT OF $3,880.24]

<PAGE>

ADDENDUM ONE

This document shall serve as ADDENDUM ONE to that certain lease by and
between Russell Jeter, "Lessor", and TSBN, LLC, "Lessee" dated April 14, 1997.

2. Lessor and Lessee mutually agree that at the assignment, Game Tech
International will remain liable for performing all of the terms and
conditions, including financial responsibility, for the lease during its
entire term.

3. Lessor shall contribute $10.00 per square foot towards the cost of
improving the suite(s). All additional costs shall be the sole
responsibility of the Lessee. Lessor shall coordinate all construction and
Lessee shall deposit with Lessor the sum equal to the Lessee portion of
costs in two equal instalments. The first half is due upon receipt of the
building permit and the balance is due upon receipt of the certificate of
occupancy as issued by the City of Tempe.

4. Lessor and Lessee mutually agree that the final square footage shall be
verified by architectural measurement. Rent and other financial
arrangements shall be recalculated on the basis of the final square
footage calculation. Rent has been calculated at fifty-two cents per
square foot per month for months one through thirty-six and fifty-five
cents per square foot per month for the remaining term.

5. Lessor shall grant to Lessee the first right of refusal on all space in
the complex as it becomes available. Lessor shall provide notice to Lessee
of the suite available, the square footage of the suite, and the price per
square foot. Lessee will then have 48 hours to respond to Lessor with
interest. If a lease is not mutually executed within 10 days of the original
notice date by Lessor, no further obligation will exist on the part of the
Lessor or Lessee as pertains to this first right of refusal.

6. No other agreements, written or oral, exist between the parties.

<PAGE>

All other terms and conditions of the original lease agreement remain in full
force and effect.

LESSOR LESSEE

Arcadia Mgt Group, Inc
as Agent for Owner /s/ Clarence H. Thiesen
----------------------------------- -----------------------------------
Russell Jeter TSBN, LLC
By PC Kef, Pres By Clarence H. Thiesen (Print name)
--------------------

Its CFO (Title)
-------------------

<PAGE>

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE -- GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

[LOGO]

1. BASIC PROVISIONS ("BASIC PROVISIONS").

1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes
only, April 14, 1997, is made by and between Russell Jeter ("LESSOR") and
TSBN, LLC ("LESSEE"), (collectively the "PARTIES," or individually a
"PARTY").

1.2(a) PREMISES: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this
Lease, commonly known by the street address of 2209 West First Street, #109,
located in the City of Tempe, County of Maricopa, State of AZ, with zip code
85281, as outlined on Exhibit A attached hereto ("PREMISES"). The "BUILDING"
is that certain building containing the Premises and generally described as
(describe briefly the nature of the Building): multi-tenant office/warehouse
building containing approximately 39,611 square feet and referred to as
Harbor View. In addition to Lessee's rights to use and occupy the Premises
as hereinafter specified, Lessee shall have non-exclusive rights to the
Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified,
but shall not have any rights to the roof, exterior walls or utility raceways
of the Building or to any other buildings in the Industrial Center. The
Premises, the Building, the Common Areas, the land upon which they are
located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "INDUSTRIAL CENTER." (Also see Paragraph 2.)

1.2(b) PARKING: twenty-five (25) unreserved vehicle parking spaces
("UNRESERVED PARKING SPACES"); and zero (0) reserved vehicle parking spaces
("RESERVED PARKING SPACES"). (Also see Paragraph 2.6.)

1.3 TERM: five (5) years and zero months ("ORIGINAL TERM")
commencing June 1st or upon completion of construction. ("COMMENCEMENT DATE")
and ending 60 months after commence. ("EXPIRATION DATE"). (Also see
Paragraph 3.)

1.4 EARLY POSSESSION:
-----------------------------------
("EARLY POSSESSION DATE"). (Also see Paragraphs 3.2 and 3.3.)

1.5 BASE RENT: $ see addendum per month ("BASE RENT"), payable on the
1st day of each month commencing (see Para. 1.3 above) (Also see
Paragraph 4.)

[X] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum One, attached hereto.

1.6(a) BASE RENT PAID UPON EXECUTION: $2926.54 as Base Rent for the
period first month *14.47%.

1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: see *
percent (* %)("LESSEE'S SHARE") as determined by [X] prorata square
footage of the Premises as compared to the total square footage of the
Building or [ ] other criteria as described in Addendum .

1.7 SECURITY DEPOSIT: $2926.54 ("SECURITY DEPOSIT"). Also see
Paragraph 5.)

1.8 PERMITTED USE: office, administrative, and warehousing
related to gaming business. ("PERMITTED USE")(Also see Paragraph 6.)

1.9 INSURING PARTY. Lessor is the "INSURING PARTY." (Also see
Paragraph 8.)

[ ] represents Lessor exclusively ("LESSOR'S BROKER");

[ ] represents Lessee exclusively ("LESSEE'S BROKER"); or

[X] Arcadia Management Group, Inc represents both Lessor and Lessee
("DUAL AGENCY"). (Also see Paragraph 15.)

1.10(b) PAYMENT TO BROKERS. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate
shares as they may mutually designate in writing, a fee as set forth in a
separate written agreement between Lessor and said Broker(s) (or in the event
there is no separate written agreement between Lessor and said Broker(s), the
sum of $ ) for brokerage services rendered by said Broker(s) in connection
with this transaction.

1.11 GUARANTOR. The obligations of the Lessee under this Lease are
to be guaranteed by
-----------------------------------------------------------

- ------------------------------------------------------------------------------
("GUARANTOR"). (Also see Paragraph 37.)

1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 1 through 5, and Exhibits A through B, all of which
constitute a part of this Lease.

2. PREMISES, PARKING AND COMMON AREAS.

2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE.
Lessor warrants that any improvements (other than those constructed by
Lessee or at Lessee's direction) on or in the Premises which have been
constructed or installed by Lessor or with Lessor's consent or at Lessor's
direction shall comply with all applicable covenants or restrictions of
record and applicable building codes, regulations and ordinances in effect on
the Commencement Date. Lessor further warrants to Lessee that Lessor has no
knowledge of any claim having been made by any governmental agency that a
violation or violations of applicable building codes, regulations, or
ordinances exist with regard to the Premises as of the Commencement Date.
Said warranties shall not apply to any Alterations or Utility installations
(defined in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises
do not comply with said warranties, Lessor shall, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
given within six (6) months following the Commencement Date and setting forth
with specificity the nature and extent of such non-compliance, take such
action, at Lessor's expense, as may be reasonable or appropriate to rectify
the non-compliance. Lessor makes no warranty that the Permitted Use in
Paragraph 1.8 is permitted for the Premises under Applicable Laws (as defined
in Paragraph 2.4).