<PAGE>   1
                                                                    EXHIBIT 10.3

                       ASSIGNMENT AND ASSUMPTION OF LEASE



         THIS ASSIGNMENT AND ASSUMPTION OF LEASE ("Agreement") is made this 17th
day of December, 1998 by and between LUCENT TECHNOLOGIES INC., a Delaware
corporation, having an address at 475 South Street, Morristown, New Jersey,
07962 ("Assignor") and BROOKTROUT TECHNOLOGY, INC., a Massachusetts corporation,
having an address at 410 First Avenue, Needham, Massachusetts, 02192
("Assignee")

                                   WITNESSETH:

         WHEREAS, Los Gatos Business Park, a general partnership, as Landlord,
and Rhetorex, Incorporated ("Rhetorex"), as Tenant, entered into a lease dated
November 16, 1995 (the "Lease"), a complete copy of which is attached hereto as
Exhibit A, in which Landlord leased to Rhetorex and Rhetorex hired from Landlord
approximately 33,290 rentable square feet (the "Premises") located at 151
Albright Way, Los Gatos, California (the "Building");

         WHEREAS, Octel Communications Corporation ("Octel") became successor by
merger to Rhetorex;

         WHEREAS, Octel assigned its right, title and interest in and to the
Lease to Assignor, parent corporation of Octel, pursuant to an Assignment and
Assumption of Lease dated March 1, 1998;

         WHEREAS, in accordance with Section 21 of the Lease, Assignor desires
to assign all its right, title and interest in the Lease to Assignee, pursuant
to the acquisition by Assignee of substantially all of the former assets of
Rhetorex by Assignee, and Assignee desires to accept such assignment, on the
terms set forth herein.

         NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is acknowledged by the parties, Assignor and Assignee agree as follows:

         1.   Assignor hereby assigns and transfers all of its right, title and
interest in and to the Lease to Assignee to have and to hold the same from the
18th day of December, 1998 (the "Effective Date"), for all the rest of the term
of the Lease, and subject to all the terms, covenants, conditions and provisions
therein contained.

         2.   Assignee accepts the Assignment and assumes and agrees to perform,
from and after the Effective Date in a direct obligation to Landlord, all of the
terms, covenants, conditions and provisions of the Lease, as though the Assignee
were the original signatory to the Lease. Assignee shall make all payments of
rent, additional rent and all other sums due under the Lease accruing from and
after the Effective Date in accordance with the terms of the


<PAGE>   2
Lease and shall send the same directly to Landlord as provided in the Lease.
Assignee agrees to look solely to Landlord for provision of services under the
Lease.

         3.   Assignor shall be responsible for all of the terms, covenants,
conditions, payments and provisions of the Lease prior to the Effective Date.
Assignor shall continue to be secondarily liable for all of the terms,
covenants, conditions, payments and provisions of the Lease for the remaining
term of the Lease.

         4.   This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their personal representatives, successors and assigns.

         IN WITNESS WHEREOF, Assignor and Assignee have executed the instrument
the date first above written.

                                           LUCENT TECHNOLOGIES INC.
                                           (ASSIGNOR)

                                           By:    /s/ Deborah J. Quok
                                              ---------------------------------
                                           Name:  Deborah J. Quok
                                                -------------------------------
                                           Title: Transaction Manager
                                                 ------------------------------




                                           BROOKTROUT TECHNOLOGY, INC.
                                           (ASSIGNEE)

                                           By:    /s/ ROBERT C. LEAHY
                                              ---------------------------------
                                           Name:  Robert C. LeahY
                                                -------------------------------
                                           Title: Vice President
                                                 ------------------------------

The undersigned hereby acknowledges, agrees and consents to the above assignment
pursuant to Section 21 of the Lease. The undersigned further agrees to look to
Assignee as Lessee under the Lease and acknowledges that the attached Lease has
not been amended and that to the best of the undersigned's knowledge, Assignor
is not in default under the Lease, nor will assignment cause the Lease to be in
default.

LOS GATOS BUSINESS PARK

By:   /s/ Howard White
      ---------------------------------
Name:  Howard White
      -------------------------------
Title: General Manager
      ------------------------------





                                        2

<PAGE>   3
                                      LEASE

         THIS LEASE is made on the 16th day of November, 1995 by and between Los
Gatos Business Park (hereinafter called "Lessor") and Rhetorex, Incorporated, a
California Corporation (hereinafter called "Lessee").

         IN CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED,
THE PARTIES AGREE AS FOLLOWS:

1.       PREMISES. Lessor leases to Lessee, and Lessee leases from Lessor, upon
         the terms and conditions herein set forth, those certain Premises
         ("Premises") situated in the Town of Los Gatos, County of Santa Clara,
         California, as outlined in Exhibit "A" attached hereto and described as
         follows: +/- 33,290 square foot building commonly known as 151 Albright
         Way, Los Gatos, California. Lessee's pro-rata share of the building is
         100%.

2.       TERM. The term of this Lease shall be for five (5) years, commencing
         the later of (a) February 1, 1996 and (b) the date by which all of the
         following have occurred: (1) Lessor has substantially completed the
         improvements set forth on Exhibit B in accordance with the terms of
         this Lease (the "Improvements"); (ii) there remains no incomplete or
         defective item of Improvements that would adversely affect Lessee's
         intended use of the Premises: (iii) Lessor has delivered legal
         possession of the Premises to Lessee; and (iv) Lessor has obtained all
         approvals and permit from the appropriate governmental authorities
         required to be obtained by Lessor for the legal occupancy of the
         Premises (the "Commencement Date").

3.       RENT. Lessee shall pay to Lessor rent for the Premises of Thirty-Four
         Thousand Nine Hundred Fifty-Five and 00/100 Dollars ($34,955.00) per
         month in lawful money of the United States of America, subject to
         adjustment as provided in Section A of this Paragraph. Rent shall be
         paid without deduction or offset, prior notice, or demand, at such
         place as may be designated from time to time by Lessor as follows:
         $34,955.00 shall be paid upon execution of the Lease, which sum
         represents the amount of the first month's rent. A deposit of
         $34,955.00 as a Security Deposit shall be made by Lessee and held by
         Lessor pursuant to Paragraph 5 of this Lease, and shall be paid upon
         execution of the Lease. If Lessee is not in default of this Lease, this
         sum, without interest thereon, shall be applied toward the rent due for
         the last month of the term of this Lease or the extended term, pursuant
         to any extension of the initial term in accordance with the provisions
         of this Lease. Rent shall be paid in advance on the first (1st) day of
         each calendar month as follows:

                      Months                Monthly Rent/nnn
                      ------                ----------------
                      01-12                    $34,955.00
                      13-24                    $36,953.00
                      25-36                    $36,952.00
                      37-48                    $37,951.00




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<PAGE>   4
                      49-60                    $38,949.00

Rent for any period during the term hereof which is for less than one (1) full
month shall be a pro-rata portion of the monthly rent payment. Lessee
acknowledges that late payment by Lessee to Lessor of rent or any other payment
due Lessor will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of such costs being extremely difficult and impracticable to fix.
Such costs include, without limitation, processing and accounting charges, and
late charges that may be imposed on Lessor by the terms of any encumbrance and
note secured by any encumbrance covering the Premises. Therefore, if any
installment of rent or other payment due from Lessee is not received by Lessor
within five (5) days following the date it is due and payable, Lessee shall pay
to Lessor an additional sum of five percent (5%) of the overdue amount as a late
charge. The parties agree that this late charge represents a fair and reasonable
estimate of the costs that Lessor will incur by reason of late payment by
Lessee. Acceptance of any late charge shall not constitute a waiver of Lessee's
default with respect to the overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies available to Lessor.

         If, for any reason whatsoever, Lessor cannot deliver possession of the
Premises on February 1, 1995, this Lease shall not be void or voidable, nor
shall Lessor be liable to Lessee for any loss or damage resulting therefrom.
Notwithstanding anything to the contrary in this Lease, if the Commencement Date
has not occurred on or before May 1, 1996, then, in addition to Lessee's other
rights and remedies, Lessee may terminate this Lease by written notice to
Lessor, whereupon any monies previously paid by Lessee to Lessor shall be
reimbursed to Lessee or, at Lessee's election, the date Lessee is otherwise
obligated to commence payment of rent shall be delayed by one day for each day
that the Commencement Date is delayed beyond such date. In the event that Lessor
shall permit Lessee to occupy the Premises prior to the commencement date of the
term, such occupancy shall be subject to all of the provisions of this Lease,
excluding the obligation to pay rent at the same monthly rate as that prescribed
for the first month of the Lease term.

         A.    COST-OF-LIVING INCREASE. Not applicable.

         B.    All taxes, insurance premiums, Outside Area Charges, late
               charges, costs and expenses which Lessee is required to pay
               hereunder, together with all interest and penalties that may
               accrue thereon in the event of Lessee's failure to pay such
               amounts, and all reasonable damages, costs, and attorney's fees
               and expenses which Lessor may incur by reason of any default of
               Lessee or failure on Lessee's part to comply with the terms of
               this Lease, shall be deemed to be additional rent (hereinafter,
               "Additional Rent"), and, in the event of non-payment by Lessee,
               Lessor shall have all of the rights and remedies with respect
               thereto as Lessor has for the non-payment of monthly installment
               of rent.




                                        4

<PAGE>   5
4.       OPTION TO EXTEND TERM.

         A.    Lessee shall have the option to extend the term on all the
               provisions contained in this Lease for one (1) five (5) year
               period ("extended term(s)") at an adjusted rental calculated as
               provided in Subparagraph B below on the condition that:

               (1)   Lessee has given to Lessor written notice of exercise of
                     that option ("option notice") at least six (6) months
                     before expiration of the initial term or extended term(s),
                     as the case may be.

               (2)   Lessee is not in default of the Lease on the date of giving
                     the option notice, and Lessee is not in default on the date
                     that the extended term is to commence.

         B.    RENT FOR OPTION PERIOD: The rent during the extended term shall
               be the then current fair market monthly rent ("Fair Market Rent")
               for the Premises as of the commencement date of the applicable
               extended term, as determined by the agreement of the parties or,
               if the parties cannot agree within sixty (60) days prior to the
               commencement of such extended term, then by an appraisal. All
               other terms and conditions contained in the Lease as the same may
               be amended from time to time by the parties in accordance with
               the provisions of the Lease, shall remain in full force and
               effect and shall apply during the Option term.

               If it becomes necessary to determine the fair market rental value
               for the Premises by appraisal, real estate appraiser(s), all of
               whom shall be members of the American Institute of Real Estate
               Appraisers and have at least five (5) years experience appraising
               office space located in the vicinity of the Premises and none of
               whom shall have worked for either Lessor or Lessee in the five
               (5) year period preceding the commencement date of the applicable
               extended term, shall be appointed and shall act in accordance
               with the following procedures:

               1.    If the parties are unable to agree on the Fair Market
                     within the allowed time, either party may demand an
                     appraisal by giving written notice to the other party,
                     which demand to be effective must state the name, address
                     and qualifications of an appraiser selected by the party
                     demanding an appraisal (the "Notifying Party"). Within ten
                     (10) days following the Notifying Party's appraisal demand,
                     the other party (the "Non-Notifying Party) shall either
                     approve the appraiser selected by the notifying party or
                     select a second property qualified appraiser by giving
                     written notice of the name, address and qualification of
                     said appraiser to the Notifying Party. If the Non-Notifying
                     Party fails to select an appraiser within the ten (10) day
                     period, the appraiser selected by the Notifying Party shall
                     be deemed selected by both parties and no other appraiser
                     shall be selected. If two appraisers are selected, they
                     shall select a third appropriately qualified appraiser. If
                     the two appraisers fail to select a third qualified
                     appraiser, the third appraiser shall be appointed




                                        5

<PAGE>   6
                     by the then presiding judge of the county where the
                     Premises are located upon application by either party.

               2.    If only one appraiser is selected, that appraiser shall
                     notify the parties in simple letter form of its
                     determination of the Fair Market Rent for the Premises
                     within fifteen (15) days following his selection, which
                     appraisal shall be conclusively determinative and binding
                     on the parties as the appraised Fair Market Rent.

               3.    If multiple appraisers are selected, the appraisers shall
                     meet no later than ten (10) days following the selection of
                     the last appraiser. At such meeting the appraisers shall
                     attempt to determine the Fair Market Rent for the Premises
                     as of the commencement date of the extended term by the
                     agreement of at least two (2) of the appraisers.

               4.    If two (2) or more of the appraisers agree on the Fair
                     Market Rent for the Premises at the initial meeting, such
                     agreement shall be determinative and binding upon the
                     parties hereto and the agreeing appraisers shall, in simple
                     letter form executed by the agreeing appraisers, forthwith
                     notifying both Lessor and Lessee of the amount set by such
                     agreement. If multiple appraisers are selected and two (2)
                     appraisers are unable to agree on the Fair Market Rent for
                     the Premises, all appraisers shall submit to Lessor and
                     Lessee an independent appraisal of the Fair Market Rent for
                     the Premises in simple letter form within twenty (20) days
                     following appointment of the final appraiser. The parties
                     shall then determine the Fair Market Rent for the Premises
                     by averaging the appraisals; provided that any high or low
                     appraisal, differing from the middle appraisal by more than
                     ten percent (10%) of the middle appraisal, shall be
                     disregarded in calculating the average.

               5.    The appraisers' determination of Fair Market Rent shall be
                     based on rental of space of the same age, construction,
                     size and location as the Premises with the improvements
                     installed therein at Lessor's expense and shall take into
                     account Lessee's obligations to pay additional rent under
                     this Lease. In determining Fair Market Rent, the appraisers
                     shall not consider any alterations installed in the
                     Premises at Lessee's expense.

               6.    If only one appraiser is selected, then each party shall
                     pay one-half of the fees and expenses of that appraiser. If
                     three appraisers are selected, each party shall bear the
                     fees and expenses of the appraiser it selects and one-half
                     of the fees and expenses of the third appraiser.

5.       SECURITY DEPOSIT. Lessor acknowledges that Lessee has deposited with
         Lessor a Security Deposit in the sum of $34,955.00 to secure the full
         and faithful performance by Lessee of each term, covenant, and
         condition of this Lease. If Lessee shall at any




                                        6

<PAGE>   7
         time fail to make any payment or fail to keep or perform any term,
         covenant, or condition on its part to be made or performed or kept
         under this Lease, Lessor may, but shall not be obligated to and without
         waiving or releasing Lessee from any obligation under this Lease, use,
         apply, or retain the whole or any part of said Security Deposit (a) to
         the extent of any sum due to Lessor; or (b) to compensate Lessor for
         any loss, damage, attorneys' fees or expense sustained by Lessor due to
         Lessee's default. In such event, Lessee shall, within five (5) days of
         written demand by Lessor, remit to Lessor sufficient funds to restore
         the Security Deposit to its original sum. No interest shall accrue on
         the Security Deposit. Should Lessee comply with all the terms,
         covenants, and conditions of this Lease and, at the end of the term of
         this Lease, leave the Premises in the condition required by this Lease,
         then said Security Deposit or any balance thereof, less any sums owing
         to Lessor, shall be returned to Lessee within fifteen (15) days after
         the termination of this Lease and vacancy of the Premises by Lessee.
         Notwithstanding the foregoing, within thirty (30) days after the
         termination of this Lease, Lessor shall return to Lessee the entire
         Security Deposit except for amounts that Lessor has deducted therefrom
         that are needed by Lessor to cure defaults of Lessee under this Lease
         or compensate Lessor for damages for which Lessee is liable pursuant to
         this Lease. Lessor can maintain the Security Deposit separate and apart
         from Lessors general funds, or can co-mingle the Security Deposit with
         the Lessor's general and other funds.

6.       USE OF THE PREMISES. The Premises shall be used exclusively for the
         purpose of general office, sales, marketing, engineering and research
         and development, board repair and assembly for voice processing
         software and hardware products and related materials.
                  Lessee shall not use or permit the Premises, or any part
         thereof, to be used for any purpose or purposes other than the purpose
         for which the Premises are hereby leased without Lessor's prior written
         consent; and no use shall be made or permitted to be made of the
         Premises, acts done, which will increase the existing fate of insurance
         upon the building in which the Premises are located unless Lessee pays
         the cost of any such increase or cause a cancellation of any insurance
         policy covering said building, or any part thereof, nor shall Lessee
         sell or permit to be kept, used, or sold, in or about the Premises, any
         article which may be prohibited by the standard form of fire insurance
         policies. Lessee shall not commit or suffer to be committed any waste
         upon the Premises or any public or private nuisance or other act or
         thing which may disturb the quiet enjoyment of any other tenant in the
         building in which the premises are located; nor, without limiting the
         generality of the foregoing, shall Lessee allow the Premises to be used
         for any improper, immoral, unlawful, or objectionable purpose.
               Lessee shall not place any harmful liquids in the drainage system
         of the Premises or of the building of which the Premises form a part.
         No waste materials or refuse shall be dumped upon or permitted to
         remain upon any part of the Premises outside of the building proper
         except in trash containers placed inside exterior enclosures designated
         for that purpose by Lessor, or inside the building proper where
         designated by Lessor. No materials, supplies, equipment, finished or
         semi-finished products, raw materials, or articles of any nature shall
         be stored upon or permitted to remain on any portion of the Premises
         outside of the building proper. Lessee shall




                                        7

<PAGE>   8
         comply with all the covenants, conditions, and/or restrictions ("C.C. &
         R.'s") affecting the Premises.
               Lessor represents and warrants to Lessee that to the best of its
         knowledge (i) there are no Toxic or Hazardous materials present on, at
         or under the Premises, which shall be deemed to include underlying land
         and groundwater, at the time of Lessee's occupancy, (ii) no underground
         storage tanks or asbestos containing materials are present on the
         Premises, and (iii) no action, proceeding, or claim is pending or
         threatened concerning the Premises concerning any Toxic or Hazardous
         material or pursuant to any environmental Law. Lessor shall indemnify,
         defend and hold harmless Lessee, its partners, directors, officers,
         employees, lenders, and successors against all claims, obligations,
         liabilities, demands, damages, judgements, and costs, including
         reasonable attorneys' fees arising from or in connection with any prior
         Toxic or Hazardous materials that existed prior to Lessee's occupancy
         of the Premises or arising out of or based upon the Presence of any
         Toxic or Hazardous materials on, under, in or about the Premises,
         unless Lessee or Lessee's agents, employees, contractors or invitees
         caused the presence of such Toxic or Hazardous materials in, on, about
         or under the Premises. Lessee in turn represents to Lessor that it does
         not now and will not in the future permit the use or storage on the
         Premises of Toxic or Hazardous materials, excluding, however basic
         janitorial, maintenance and office supplies, and materials commonly
         used in connection with Lessee's business as described in paragraph 6
         hereof and the substances listed on Exhibit D hereto. For purposes of
         this paragraph 6 "Toxic or Hazardous Materials" shall mean any product,
         substance, chemical, material or waste whose presence, nature, quality
         and/or intensity or existence, use, manufacture, disposal,
         transportation, spill, release or effect, either by itself or in
         combination with other materials expected to be on the leased premises,
         is either (i) potentially injurious to the public health, safety or
         welfare, the environment, or the leased premises; (ii) regulated or
         monitored by any governmental authority and pertaining to health,
         safety or the environment or (iii) a basis for potential liability of
         Lessee and Lessor to any governmental agency or third party under any
         applicable statute or common law theory and pertaining to health,
         safety or the environment. "Toxic or Hazardous Materials" shall
         include, but not be limited to, hydrocarbons, petroleum, gasoline,
         crude oil or any products or by-products thereof.
               Lessee hereunder shall be responsible for and indemnify, and hold
         Lessor and its partners, directors, officers, employees, lenders,
         successors and assigns harmless from all claims, obligations,
         liabilities, demands, damages, judgments and costs, including
         reasonable attorneys' fees arising at any time during or in connection
         with Lessee or Lessee's agents, employees, contractors or invitees
         causing any materials referred to under any governmental provisions or
         regulatory scheme as "hazardous" or "toxic" or which contain petroleum,
         gasoline, or other petroleum product, to be brought upon, stored,
         manufactured, generated, handled, disposed, or used, on, under or about
         the Premises.
               Lessee's and Lessor's obligations hereunder shall survive the
         termination of this Lease. If, at any time during the term of this
         Lease, Lessor suspects that toxic waste, spillage, or other
         contaminants may be present on the Premises, Lessor may order a soils
         report, or its equivalent, at Lessee's expense and Lessee shall pay
         such costs within fifteen (15) days from the date of the invoice by
         Lessor if it is determined that



                                        8

<PAGE>   9
         Lessee or Lessee's agents, employees contractors or invitees released
         or caused Toxic or Hazardous materials on or about the Premises. If any
         such toxic waste, spillage, or other contaminants are found upon the
         Premises which were released by Lessee or Lessee's agents, employees or
         invitees Lessee shall deposit with Lessor, within fifteen (15) days of
         notice from Lessor to Lessee to do so, the amount necessary to remove
         the substances and remedy the problem.
               Lessee shall abide by all laws, ordinances, and statutes, as they
         now exist or may hereafter be enacted by legislative bodies having
         jurisdiction thereof, relating to its use and occupancy of the
         Premises.
               Notwithstanding anything to the contrary in this Lease, (i) at
         the Commencement Date, the Premises shall conform to all requirements
         of covenants, conditions, restrictions and encumbrances ("CC&R's"), all
         underwriter's requirements, and all rules, regulations, statutes,
         ordinances, laws and building codes (including the Americans with
         Disabilities Act of 1990) (collectively, "Laws") applicable thereto,
         including without limitation, all Laws governing Toxic or Hazardous
         materials.
               In addition, and notwithstanding anything to the contrary in this
         Lease, if the Premises should become not reasonably suitable for
         Lessee's use as a consequence of cessation of utilities or other
         services required to be provided to the Premises by Lessor,
         interference with access to the Premises, legal restrictions or the
         presence of any Toxic or Hazardous material which is not released or
         caused by Lessee, Lessee's agents, employees, contractors or invitees,
         and in any of the foregoing cases the interference with Lessee's use of
         the Premises persists for seven (7) consecutive calendar days, then
         Lessee shall be entitled to an equitable abatement of rent to the
         extent of the interference with Lessee's use of the Premises occasioned
         thereby.

7.       IMPROVEMENTS: Lessor will provide an allowance of $14.00 per square
         foot for improvements to the Premises as specified in Exhibit "B"
         attached hereto and by this reference made a part hereof. Further,
         Lessor agrees to provide an additional $2.50 per square foot for
         improvements, to be amortized as Additional Rent, over the term of the
         Lease at a rate of Bank of America's Prime plus 2%. Said payments shall
         be due and payable by Lessee on the first of each month with the
         monthly rent payment. However, should Lessee exercise its Option to
         Expand as referred to in Section 35 of this Lease, Lessor shall waive
         the monthly amortized payment effective upon Lessee's taking occupancy
         of the Expansion Space. Lessor will make reasonable efforts to complete
         such improvements prior to February 15, 1996. Possession of the
         promises, pursuant to Paragraph 13 of this lease, shall be deemed
         tendered on the Commencement Date. Lessor shall construct the
         improvements described in the plans and specifications attached to this
         Lease as Exhibit B at Lessor's sole cost and expense. The improvements
         shall be constructed in accordance with such attached plans and
         specifications and all applicable Laws, in a good and workmanlike
         manner, free of defects and using new materials and equipment of good
         quality. Within thirty (30) days after the Commencement Date, Lessee
         shall have the right to submit a written "punch list" to Lessor,
         setting forth any defective item of construction, and Lessor shall
         promptly cause such items to be corrected. The improvements shall be
         constructed in accordance with the Work Letter attached hereto as
         Exhibit E, except that the "Expansion Space" shall mean the "Premises".




                                        9

<PAGE>   10
8.       TAXES AND ASSESSMENTS.

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

         B.    All property taxes or assessments levied or assessed by or
               hereafter levied or assessed by any governmental authority
               against the Premises or any portion of such taxes or assessments
               which accrued during the term of this Lease shall be paid by
               Lessor. Lessee shall pay to Lessor Lessee's proportionate share
               of such taxes or assessments by the later of (i) ten (10) days
               prior to the date such taxes are due and (ii) ten (10) days of
               receipt of Lessor's invoice demanding such payment. Lessee's
               liability hereunder shall be prorated to reflect the commencement
               and termination dates of this Lease.
                     Notwithstanding anything to the contrary in this Lease,
               Lessee shall not be required to pay any portion of any tax or
               assessment expense (i) in excess of the amount which would be
               payable if such tax or assessment expense were paid in
               installments over the longest possible term; or (ii) occasioned
               by Lessor's failure to pay timely or perform any obligation of
               Lessor, provided that Lessee has timely paid its share of said
               taxes or assessments. Lessee may in good faith contest any tax or
               assessment, provided that Lessee indemnifies Lessor from any loss
               or liability in connection therewith.

9.       INSURANCE.

         A.    INDEMNITY. Lessee agrees to indemnify and defend Lessor against
               and hold Lessor harmless from any and all demands, claims, causes
               of action, judgments, obligations, or liabilities, and all
               reasonable expenses incurred in investigating or resisting the
               same (including reasonable attorneys' fees) on account of or
               arising from Lessee's use of said Premises.
                     Lessor also agrees that it shall not be released or
               indemnified from and shall indemnify and defend Lessee against
               and hold Lessee harmless from any and all demands, claims, causes
               of action, judgements, obligations, or liabilities and all
               reasonable expenses incurred in investigating or resisting the
               same (including reasonable attorneys fees) on account or arising
               from Lessor's use and/or ownership of said Premises, Lessor's
               violation of any Law or a breach of Lessor's obligations under
               this Lease.




                                       10

<PAGE>   11
         B.    LIABILITY INSURANCE. Lessee shall, at its expense, obtain and
               keep in force during the term of this Lease a policy of
               comprehensive public liability insurance insuring Lessor against
               any liability arising out of the condition, use, or occupancy of
               the Premises. Such insurance shall be in an amount not less than
               one million dollars ($1,000,000) for bodily injury or death as a
               result of one occurrence, and five hundred thousand dollars
               ($500,000) for damage to property as a result of any one
               occurrence. The insurance shall be with companies rated A or
               better by Best's Rating. Lessee shall deliver to Lessor a
               certificate of insurance evidencing the existence of the policy
               upon the request of Lessor which (1) names Lessor as an
               additional insured, (2) shall not be canceled or reduced without
               thirty (30) days' prior written notice to Lessor, (3) insures
               performance of the indemnity set forth in Section A of Paragraph
               9, and (4) coverage is primary and any coverage by Lessor is in
               excess thereto to the extent it is available from Lessee's
               insurance carrier.
                     Lessor also agrees to maintain during the term of this
               Lease a policy of comprehensive public liability insurance
               protecting Lessor for interest in such Property. Such insurance
               shall be in an amount not less than one million dollars
               ($1,000,000) for bodily injury or death as a result of one
               occurrence, and five hundred thousand dollars ($500,000) for
               damage to Property as a result of any one occurrence.

         C.    PROPERTY INSURANCE. Lessor shall obtain and keep in force during
               the term of this Lease a policy or policies of "all-risk,
               extended coverage" property insurance covering loss or damage to
               the Premises, in the amount of the full replacement value
               thereof. Lessee shall pay to Lessor its pro-rata share of the
               cost of said insurance within twenty (20) days of Lessee's
               receipt of Lessor's invoice demanding such payment. Lessee
               acknowledges that such insurance procured by Lessor shall contain
               a deductible which reduces Lessee's cost for such insurance, and,
               in the event of loss or damage, Lessee shall be required to pay
               to Lessor the amount of such deductible. Lessor, agrees that in
               no event shall said deductible exceed $1,000 per occurrence.
                     Lessee agrees to maintain an All Risk Property policy
               covering Lessee's owned contents and improvements.

         D.    EARTHQUAKE INSURANCE. Lessor does not currently carry earthquake
               insurance. However, Lessor reserves the right to do so should it
               become available at a commercially reasonable rate. If available,
               earthquake premium rates shall not exceed 2 times the rate paid
               for All Risk Property insurance.

         E.    Notwithstanding anything to the contrary in this Lease, the
               parties hereto release each other and their respective agents,
               employees, successors, assigns; and subleases from all liability
               for injury to any person or damage to any property that is caused
               by or results from a risk which is actually insured against or
               which is required to be insured against under this Lease, without
               regard to the negligence or willful misconduct of the entity so
               released. Each party shall use its best efforts to cause such
               insurance policy it obtains to

                                                        11


<PAGE>   12
               provide that the insurer thereunder waives all right of recovery
               by way of subrogation as required herein in connection with any
               injury or damage covered by the policy. If the insurance policy
               cannot be obtained with the waiver of subrogation, or if the
               waiver of subrogation is available only at additional cost and
               the party for whose benefit the waiver is not obtained does not
               pay additional cost, then the party obtaining the insurance
               immediately shall notify the other party of that fact.

10.      REIMBURSABLE EXPENSES AND UTILITIES. Lessor represents that heating,
         ventilation, air conditioning, water, gas, electricity, sewer and waste
         pick-up utilities and services to the Premises as are reasonable and
         customary for tenants engaged in Lessee's business at facilities of
         comparable size and location to the Premises are available to the
         Premises, and Lessor shall provide Lessee with access to the Premises
         twenty-four (24) hours a day, seven (7) days a week. Lessee shall pay
         for all water, gas, light, heat, power, electricity, telephone, trash
         removal, landscaping, sewer charges, and all other services, including
         normal, reasonable and customary property management fees, supplied to
         or consumed on the Premises. In the event that any such services are
         billed directly to Lessor, then Lessee shall pay Lessor for such
         expenses within ten (10) days of Lessee's receipt of Lessors invoice
         demanding payment.

11.      REPAIRS AND MAINTENANCE.

         A.    Subject to provisions of paragraph 15, Lessor shall keep and
               maintain in good order, condition and repair the structural
               elements of the Premises including the roof, roof membrane,
               paving, floor slab, foundation, exterior walls, landscaping,
               irrigation and elevators. Lessor shall make such repairs,
               replacements, alterations or improvements as Lessor deems
               reasonably necessary with respect to such structural elements and
               Lessee shall pay to Lessor, within ten days of Lessor's invoice
               to Lessee therefor, Lessee's pro-rata share of such repairs,
               replacements, alterations or improvements: provided however, that
               replacement and improvement costs shall be amortized over the
               useful-life of such replacements or improvements, and Lessee
               shall be obligated to Pay on a monthly basis, as additional rent,
               only the monthly-amortized amounts which coincide with the term
               of the Lease, including any extensions. Notwithstanding the
               foregoing, if the reason for any repair, replacement, alteration
               or improvement is caused by Lessee or arises because of a breach
               of Lessee's obligations under this Lease, then Lessee shall pay
               100% of the costs or expense to remedy the same.

         B.    Except as expressly provided in Subparagraph A above, Lessee
               shall, at its sole cost, keep and maintain the entire Premises
               and every part thereof, including, without limitation, the
               windows, window frames, plate glass, glazing, truck doors, doors,
               all door hardware, interior of the Premises, interior walls and
               partitions, and electrical, plumbing, fighting, heating, and air
               conditioning systems in good and sanitary order, condition, and
               repair. Lessee shall, at all times during the Lease term and at
               his expense, have in effect a service contract



                                       12
<PAGE>   13
               for the maintenance of the heating, ventilating, and
               air-conditioning (HVAC) equipment with an HVAC repair and
               maintenance contractor approved by Lessor which provides for
               periodic inspection and servicing at least once every three (3)
               months during the term hereof. Lessee shall further provide
               Lessor with a copy of such contract and all periodic service
               reports.
                     Notwithstanding anything to the contrary in this Lease,
               Lessor shall perform and construct, and Lessee shall have no
               responsibility to perform, construct, pay directly, or to
               reimburse Lessor for, any repair. maintenance or improvement (i)
               necessitated by acts or omissions of Lessor or its agents,
               employees or contractors, (ii) occasioned by fire, acts of God or
               other casualty, subject to the provisions of Section 9, or by the
               exercise of the power of eminent domain, (iii) for which Lessor
               has a right of reimbursement from others, or (iv) which would be
               treated as a "capital expenditures under generally accepted
               accounting principles. Notwithstanding the foregoing, Lessee
               shall pay for the costs set forth in (iv) as provided in Section
               11.A hereof.
                     Should Lessee fail to maintain the Premises or make repairs
               required of Lessee hereunder forthwith upon notice from Lessor,
               Lessor, in addition to all other remedies available hereunder or
               by law, and without waiving any alternative remedies, may make
               the same, and in that event, Lessee shall reimburse Lessor as
               additional rent for the cost of such maintenance or repairs on
               the next date upon which rent becomes due.
                     Lessee hereby expressly waives the provision of Subsection
               1 of Section 1932, and Sections 1941 and 1942 of the Civil Code
               of California and all rights to make repairs at the expense of
               Lessor, as provided in Section 942 of said Civil Code.

12.      ALTERATIONS AND ADDITIONS. Lessee shall not make, any alterations,
         improvements, or additions in, on, or about, or to the Premises any
         part thereof, without prior written consent of Lessor and without a
         valid building permit issued by the appropriate governmental authority.
         Lessor retains, at his sole option, the right to retain a General
         Contractor of his own choosing to perform all repairs, alterations,
         improvements, or additions in, on, about, or to said Premises or any
         part thereof. As a condition to giving such consent, Lessor may require
         that Lessee agree to remove any such alterations, improvements, or
         additions at the termination of this Lease, and to restore the Premises
         to their prior condition. Any alteration, addition, or improvement to
         the Premises, shall become the property of Lessor upon installation,
         and shall remain upon and be surrendered with the Premises at the
         termination of this Lease. Lessor can elect, however, within thirty
         (30) days before expiration of the term or within five (5) days after
         termination of the term, to require Lessee to remove any alterations,
         additions, or improvements that Lessee has made to the Premises. If
         Lessor so elects, Lessee shall restore the Premises to the condition
         designated by Lessor in its election, before the last day of the term,
         or within thirty (30) days after notice of election is given, whichever
         is later. Alterations and additions which are not to be deemed as trade
         fixtures include heating, lighting, electrical systems, air
         conditioning, partitioning, electrical signs, carpeting, or any other
         installation which has become an integral part of the Premises. In the
         event that Lessor consents to Lessee's making any




                                       13


<PAGE>   14
         alterations, improvements, or additions, Lessee shall be responsible
         for preparing and providing Lessor with a notice of non-responsibility,
         which Lessor shall sign and return to Lessee for posting, which shall
         remain posted until completion of the alterations, additions, or
         improvements. Lessee's failure to post notices of non-responsibility as
         required hereunder shall be a breach of this Lease.
               Notwithstanding anything to the contrary in this Lease: (i)
         Lessee may construct non-structural alterations, additions and
         improvements that do not affect the HVAC or electrical systems, do not
         penetrate the roof membrane or any structural element ("Alterations")
         in the Premises without Lessor's Prior approval, if the cost of such
         work does riot exceed Twenty-Five Thousand Dollars ($25,000): (ii)
         Alterations constructed in the Premises by Lessee and Lessee's trade
         fixtures, furniture, equipment and other personal property installed in
         the Premises ("Lessee's Property") shall at all items be and remain
         Lessee's property, and Lessee shall be entitled to all depreciation,
         amortization and other tax benefits with respect thereto; (iii) Lessor
         shall have no lien or other interest whatsoever in any item of Lessee's
         property, and shall execute any document reasonably necessary to waive
         any lien or interest in Lessee's property; and (iv) upon request,
         Lessor shall advise Lessee in writing whether it reserves the right to
         require Lessee to remove any alterations from the Premises upon
         termination of this Lease.
               Notwithstanding anything to the contrary herein, during the term
         hereof, any alteration, addition, or change of any sort through all or
         any portion of the Premises or of the building of which the Premises
         form a part, is required by law, regulation, ordinance, or order of any
         public agency, then if such legal requirement is not imposed because of
         Lessee's specific use of the Premises and is not "triggered" by
         Lessee's alterations or Lessee's application for a building permit or
         any other governmental approval (in which instance Lessee shall be
         responsible for 100% of the cost of such improvement), Lessor shall be
         responsible for constructing such improvement and Lessee shall be
         responsible for its proportional share of the cost for said improvement
         amortized over the useful life of such improvement that coincides with
         the remaining Lease term including any extensions.

13.      ACCEPTANCE OF THE PREMISES AND COVENANT TO SURRENDER. By entry and
         taking possession of the Premises pursuant to this Lease, Lessee
         accepts the Premises as being in good and sanitary order, condition,
         and repair, and accepts the Premises in their condition existing as of
         date of such entry, and Lessee further accepts any tenant improvements
         to be constructed by Lessor, if any, as being completed in accordance
         with the plans and specifications for such improvements. Lessor shall
         pass on to Lessee any warranties or guaranties it receives regarding
         the construction of the improvements outlined on Exhibit B. On the
         Commencement Date, the Premises shall be in good condition and repair
         and the roof shall be watertight.
                Lessee agrees on the last day of the term hereof, or on sooner
         termination of this Lease, to surrender the Premises, together with all
         alterations, additions, and improvements which may have been made in,
         to, or on the Premises by Lessor or Losses, unto Lessor in good and
         sanitary order, condition, and repair, excepting for such wear and tear
         as would be normal for the period of the Lessee's occupancy casualties,
         condemnation, Toxic or Hazardous materials (other than those released
         or




                                       14

<PAGE>   15
         caused to be present by Lessee, Lessee's agents, employees, contractors
         or invitees in or about the Premises) and Alterations with respect to
         which Lessor has not reserved the right to require removal. Lessee, on
         or before the end of the term or sooner termination of this Lease,
         shall remove all its personal property and trade fixtures from the
         Premises, and all property not so removed shall be deemed abandoned by
         Lessee. Lessee further agrees that at the end of the term or sooner
         termination of this Lease, Lessee, at its sole expense, shall have the
         carpets steam cleaned, the walls and columns painted, the flooring
         waxed, any damaged ceiling be replaced, the windows cleaned, the drapes
         cleaned, and any damaged doors replaced if necessary to restore the
         Premises to its original condition, normal wear and tear excepted.
               If the Premises are not surrendered at the end of the term or
         sooner termination of this Lease, Lessee shall indemnify Lessor against
         loss or liability resulting from delay by Lessee in so surrendering the
         Premises, including, without limitation, any claims made by any
         succeeding tenant founded on such delay.

14.      DEFAULT. Notwithstanding anything to the contrary in this Lease, Lessee
         shall not be deemed to be in breach of or in default under this Lease
         and Lessor shall not be entitled to cure any breach by Lessee or
         exercise any remedy under this Lease, nor shall any late charge or
         interest be imposed on account of (i) Lessee's failure to pay any sum
         due to Lessor under this Lease, unless Lessee's failure to pay
         continues for five (5) days after Lessee's receipt of written notice of
         delinquency from Lessor, or (ii) Lessee's failure to perform any other
         covenant of this Lease, unless failure to perform such covenant
         continues for thirty (30) days after Lessee's actual receipt of written
         notice, or such longer time as may reasonably required to cure the
         default. In the event of any breach of this Lease by the Lessee, or an
         abandonment of the Premises by the Lessee, the Lessor has the option of
         (1.) removing all persons and property from the Premises and
         repossessing the Premises, in which case any of the Lessee's property
         which the Lessor removes from the Premises may be stored in a public
         warehouse or elsewhere at the cost of, and for the account of, Lessee;
         or (2.) allowing the Lessee to remain in full possession and control of
         the Premises. If the Lessor chooses to repossess the Premises, the
         Lease will automatically terminate in accordance with the provisions of
         the California Civil Code, Section 19512. In the event of such
         termination of the Lease, the Lessor may recover from the Lessee: (1.)
         the worth at the time of award of the unpaid rent which had been earned
         at the time of termination, including interest at Bank of America's
         Prime rate plus 3%; (2.) 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, including interest at
         Bank of America's Prime rate plus 3%; (3.) 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 (4.) any other
         amount necessary to compensate the Lessor for all the detriment
         proximately caused by the Lessee's failure to perform his obligations
         under the Lease or which, in the ordinary course of things, would be
         likely to result therefrom. "The worth at the time of award," as used
         in (1.) and (2.) of this Paragraph, is to be computed by allowing
         interest at Bank of America's Prime rate plus 3%. "The worth




                                       15


<PAGE>   16
         at the time of award," as used in (3.) of this Paragraph, is to be
         computed by discounting the amount at the discount rate of the Federal
         Reserve Bank of San Francisco at the time of award, plus one percent
         (1%).
               If the Lessor chooses not to repossess the Premises, but allows
         the Lessee to remain in full possession and control of the Premises,
         then, in accordance with provisions of the California Civil Code,
         Section 1951.4, the Lessor may treat the Lease as being in full force
         and effect, and may collect from the Lessee all rents as they become
         due through the termination date of the Lease, as specified in the
         Lease. For the purpose of this paragraph, the following do not
         constitute a termination of Lessee's right to possession: (1.) acts of
         maintenance or preservation, or efforts to relet the property; (2.) the
         appointment of a receiver on the initiative of the Lessor to protect
         his interest under this Lease.
               Lessee shall be liable immediately to Lessor for all costs Lessor
         incurs in reletting the Premises, including, without limitation,
         brokers' commissions, expenses of remodeling the Premises required by
         the reletting, and like costs. Reletting can be for a period shorter or
         longer than the remaining term of this Lease. Lessee shall pay to
         Lessor the rent due under this Lease on the dates the rent is due, less
         the rent Lessor receives from any reletting. No act by Lessor allowed
         by this Section shall terminate this Lease unless Lessor notifies
         Lessee that Lessor elects to terminate this Lease. After Lessee's
         default and for as long as Lessor does not terminate Lessee's right to
         possession of the Premises, if Lessee obtains Lessor's consent, Lessee
         shall have the right to assign of sublet its interest in this Lease,
         but Lessee shall not be released from liability. Lessor's consent to a
         proposed assignment or subletting shall not be unreasonably withheld.
               If Lessor elects to relet the Premises as provided in this
         Paragraph, rent that Lessor receives from reletting shall be applied to
         the payment of: (1.) any indebtedness from Lessee to Lessor other than
         rent due from Lessee; (2.) all costs, including for maintenance,
         incurred by Lessor in reletting; (3.) rent due and unpaid under this
         Lease. After deducting the payments referred to in this Paragraph, any
         sum remaining from the rent Lessor receives from reletting shall be
         held by Lessor and applied in payment of future rent as rent becomes
         due under this Lease. In no event shall Lessee be entitled to any
         excess rent received by Lessor. If, on the date rent is due under this
         Lease, the rent received from reletting is less than the rent due on
         that date, Lessee shall pay to Lessor, in addition to the remaining
         rent due, all costs, including for maintenance, Lessor incurred in
         reletting that remain after applying the rent received from the
         reletting, as provided in this Paragraph.
               Lessor, at any time after the notice and cure periods set forth
         herein, can cure the default at Lessee's cost. If Lessor at any time,
         by reason of Lessee's default, pays any sum or does any act that
         requires the payment of any sum, the sum paid by Lessor shall be due
         immediately from Lessee to Lessor at the time the sum is paid, and if
         paid at a later date shall bear interest at Bank of America's Prime
         rate plus 3% from the date the sum is paid by Lessor until Lessor is
         reimbursed by Lessee. The sum, together with interest on it, shall be
         additional rent.
               Rent not paid when due shall bear interest at Bank of America's
         Prime rate plus 3%.




                                       16


<PAGE>   17
               In addition to Lessee's other rights and remedies under this
         Lease, if Lessor is in default of the Lease and has not cured such
         default within thirty (30) days after Lessor's actual receipt of
         written notice, or such longer time as may reasonably be required to
         cure the default, then Lessee shall have the right to cure the default
         and to demand reimbursement by Lessor of the cost of such cure.

15.      DESTRUCTION. In the event the Premises are destroyed in whole or in
         part from any cause, Lessor may, at its option, (1.) rebuild or restore
         the Premises to their condition prior to the damage or destruction or
         (2.) terminate the Lease.
               If Lessor does not give Lessee notice in writing within thirty
         (30) days from the destruction of the Premises of its election either
         to rebuild and restore the Premises, or to terminate this Lease, Lessor
         shall be deemed to have elected to rebuild or restore them, in which
         event Lessor agrees, at its expense, promptly to rebuild or restore the
         Premises to its condition prior to the damage or destruction. If Lessor
         estimates that it cannot or does not complete the rebuilding or
         restoration within one hundred fifty (150) days following the date of
         destruction (such period of time to be extended for delays caused by
         the fault or neglect of Lessee of because of acts of God, acts of
         public agencies, labor disputes, strikes, fires, freight embargoes,
         rainy or stormy weather, inability to obtain materials, supplies or
         fuels, acts of contractors or subcontractors, or delay of the
         contractors or subcontractors due to such causes or other contingencies
         beyond control of Lessor), then Lessee shall have the right to
         terminate this Lease by giving fifteen (16) days prior written notice
         to Lessor. Lessor's obligation to rebuild or restore shall not include
         restoration of Lessee's trade fixtures, equipment, merchandise, or any
         improvements, alterations, or additions made by Lessee to the Premises.
         Notwithstanding anything to the contrary in this Lease, Lessor shall
         not have the right to terminate this Lease if damage to or destruction
         of the Premises results from a casualty ordinarily covered by insurance
         required to be carried by Lessor under this Lease. If the Premises are
         damaged by any peril and Lessor does not elect to terminate this Lease
         or is not entitled to terminate this Lease pursuant to its terms, then
         within thirty (30) days thereof, Lessor shall furnish Lessee with a
         written opinion of Lessor's architect or construction consultant as to
         when the restoration work required of Lessor may be completed.
               Lessee shall be entitled to a reduction in rent while such repair
         is being made in proportion that the area of the Premises rendered
         untenantable by such damage bears to the total area of the Premises.
               Unless this Lease is terminated pursuant to the foregoing
         provisions, this Lease shall remain in full force and effect. Lessee
         hereby expressly waives the provisions of Section 1932, Subdivision 2,
         and Section 1933, Subdivision 4, of the California Civil Code.
               In the event that the building in which the Premises are situated
         is damaged or destroyed to the extent of not less than thirty-three and
         one-third percent (331/3%) of the replacement cost thereof, Lessor may
         elect to terminate this Lease, whether the Premises be injured or not.

16.      CONDEMNATION. If any part of the Premises shall be taken for any public
         or quasi-public use, under any statute or by right of eminent domain,
         or private purchase



                                       17

<PAGE>   18
         in lieu thereof, and a part thereof remains, which is susceptible of
         occupation hereunder, this Lease shall, as to the part so taken,
         terminate as of the date title shall vest in the condemnor or
         purchaser, and the rent payable hereunder shall be adjusted so that the
         Lessee shall be required to pay for the remainder of the term only such
         portion of such rent as the value of the part remaining after taking
         such bears to the value of the entire Premises prior to such taking.
         Lessor and Lessee shall have the option to terminate this Lease in the
         event that such taking causes a reduction in rent payable hereunder by
         fifty percent (50%) or more. If all of the Premises or such part
         thereof be taken so that there does not remain a portion susceptible
         for occupation hereunder, as reasonably necessary for Lessee's conduct
         of its business as contemplated in this Lease, this Lease shall
         thereupon terminate. If a part of all of the Premises be taken, all
         compensation awarded upon such taking shall go to the Lessor, and the
         Lessee shall have no claim thereto, and the Lessee hereby irrevocably
         assigns and transfers to the Lessor any right to compensation or
         damages to which the Lessee may become entitled during the term hereof
         by reason of the purchase or condemnation of all or a part of the
         Premises, except that Lessee shall have the right to file its own claim
         to recover its share of any award or consideration for (1.) moving
         expenses; (2.) loss or damage to Lessee's trade fixtures, furnishings,
         equipment, and other personal property; and (3.) business goodwill;
         (4.) the Lease bonus value (the difference between the rent and fair
         market value rent); (5.) the value of the condemned improvements Lessee
         has the right to remove from the Premises; (6.) the unamortized value,
         allocable to the remainder of the term of this Lease, of any
         improvements installed at Lessee's expenses, which are not removable.
         Each party waives the provisions of the Code of Civil Procedure,
         Section 1266.130, allowing either party to petition the Superior Court
         to terminate this Lease in the event of a partial taking of the
         Premises.

17.      FREE FROM LIENS. Lessee shall (1.) pay for all labor and services
         performed for materials used by or furnished to Lessee, or any
         contractor employed by Lessee with respect to the Premises, and (2.)
         indemnify, defend, and hold Lessor and the Premises harmless and free
         from any liens, claims, demands, encumbrances, or judgments created or
         suffered by reason of any labor or services performed for materials
         used by or furnished to Lessee or any contractor employed by Lessee
         with respect to the Premises, and (3.) give notice to Lessor in writing
         five (5) days prior to employing any laborer or contractor to perform
         services related, or receiving materials for use upon the Premises, and
         (4.) shall prepare and provide Lessor with a notice of
         non-responsibility, which Lessor shall sign and return to Lessee for
         posting, on behalf of Lessor, a notice of non-responsibility in
         accordance with the statutory requirements of the California Civil
         Code, Section 3904, or any amendment thereof. In the event an
         improvement bond with a public agency in connection with the above is
         required to be posted, Lessee agrees to include Lessor as an additional
         obligee.

18.      COMPLIANCE WITH LAWS. Subject to Section 12, Lessee shall, at its own
         cost, comply with and observe all requirements of all municipal,
         county, state, and federal authority now in force, or which may
         hereafter be in force, pertaining to the use and occupancy of the
         Premises.




                                       18


<PAGE>   19
19.      SUBORDINATION. Lessee agrees that this Lease shall, at the option of
         Lessor, be subjected and subordinated to any mortgage, deed of trust,
         or other instrument of security, which has been or shall be placed on
         the land and building, or land or building of which the Premises form a
         part, and this subordination is hereby made effective without any
         further act of Lessee or Lessor. The Lessee shall, at any time
         hereinafter, on demand, execute any instruments, releases, or other
         documents that may be required by any mortgagee, mortgagor, trustor, or
         beneficiary under any deed of trust, for the purpose of subjecting or
         subordinating this Lease to the lien of any such mortgage, deed of
         trust, or other instrument of security. Failure of Lessee to execute
         and deliver any such documents or instruments shall be a breach of
         Lessee's obligations under this Lease.
               Notwithstanding anything to the contrary in this Lease, prior to
         the Commencement Date, Lessor shall obtain from The Union Labor Life
         Insurance Company a written agreement in substantially the form 
         attached hereto as Exhibit F. Further, as a condition to the
         subordination of Lessee's leasehold interest to a future around lease
         or instrument of security. Lessor shall obtain from any such ground
         lessors or lenders a written recognition agreement in form
         substantially similar to such form.

20.      ABANDONMENT. Lessee shall not vacate or abandon the Premises at any
         time during the term; and if Lessee shall abandon, vacate, or surrender
         said Premises, or be dispossessed by process of law, or otherwise, any
         personal property belonging to Lessee and left on the Premises shall be
         deemed to be abandoned, at the option of Lessor, except such property
         as may be mortgaged to Lessor, provided, however, that Lessee shall not
         be deemed to have abandoned or vacated the Premises so long as Lessee
         continues to pay all rents as and when due, and otherwise performs
         pursuant to the terms and conditions of this Lease. Notwithstanding
         anything to the contrary in this Lease, any property of Lessee
         remaining in the Premises after the expiration or earlier termination
         of this Lease shall be treated in accordance with California Civil Code
         Section 1980, et seq.

21.      ASSIGNMENT AND SUBLETTING. Lessee's interest in this Lease is not
         assignable, by operation of law or otherwise, nor shall Lessee have the
         right to sublet the Premises, transfer any interest of Lessee's
         therein, or permit any use of the Premises by another party, without
         the prior written consent of Lessor to such assignment, subletting, or
         transfer of use.
               If Lessee is a partnership, a withdrawal or change, voluntary,
         involuntary, or by operation of law, of any partner(s) owning fifty
         percent (50%) or more of the partnership, of the dissolution of the
         partnership, shall be deemed as a voluntary assignment.
               If Lessee consists of more than one person, a purported
         assignment, voluntary, involuntary, or by operation of law, from one
         person to the other or from a majority of persons to the others, shall
         be deemed a voluntary assignment.
               Notwithstanding anything to the contrary in this Lease, Lessee,
         without Lessor's prior written consent and without being subject to any
         of the provisions of this section, may sublet the Premises or assign
         this Lease to: (i) a subsidiary, affiliate,




                                       19


<PAGE>   20
         franchise, division or corporation controlled by or under common
         control with Lessee; (ii) a successor corporation related to Lessee by
         merger, consolidation, non-bankruptcy reorganization or government
         action or (iii) a purchaser of substantially all of Lessee's assets. A
         sale of Lessee's capital stock shall not be deemed an assignment,
         subletting or other transfer of this Lease or the Premises requiring
         Lessor's consent.
               In the event of any subletting or transfer which is consented to,
         or not consented to, by Lessor, a subtenant or transferee agrees to pay
         monies or other consideration, whether by increased rent or otherwise,
         in excess of or in addition to those provided for herein, then all of
         such excess or additional monies or other consideration (after first
         deducting therefrom from the costs to Lessee to effectuate the
         assignment or sublease, including, the unamortized costs of any
         alterations installed in the Premises at Lessee's expense, leasing
         commissions and remodeling costs) shall be paid solely to Lessor, and
         this shall be one of the conditions to obtaining Lessor's consent.
               Lessee immediately and irrevocably assigns to Lessor, as security
         for Lessee's obligations under this Lease, all rent from any subletting
         of all or a part of the Premises as permitted by this Lease, and
         Lessor, as assignee, may collect such rent and apply it toward Lessee's
         obligations under this Lease; except that, until the occurrence of an
         act of default by the Lessee, Lessee shall have the right to collect
         such rent.
               A consent to one assignment, subletting, occupation, or use by
         another party shall not be deemed to be a consent to any subsequent
         assignment, subletting, occupation, or use by another party. Any
         assignment or subletting without such consent shall be void and shall,
         at the option of the Lessor, terminate this Lease. Lessor's waiver or
         consent to any assignment or subletting hereunder shall not relieve
         Lessee from any obligation under this Lease unless the consent shall so
         provide. If Losses requests Lessor to consent to a proposed assignment
         or subletting, Lessee shall pay to Lessor, whether or not consent is
         ultimately given, Lessor's reasonable attorneys' fees incurred in
         conjunction with each such request.

22.      PARKING CHARGES. Lessee agrees to pay upon demand, based on its percent
         of occupancy of the entire Premises, its pro-rata share of any parking
         charges, surcharges, or any other cost hereafter levied or assessed by
         local, state, or federal governmental agencies in connection with the
         use of the parking facilities serving the Premises, including, without
         limitation, parking surcharge imposed by or under the authority of the
         Federal Environmental Protection Agency.

23.      INSOLVENCY OR BANKRUPTCY. Either (1.) the appointment of a receiver to
         take possession of all or substantially all of the assets of Lessee, or
         (2.) a general assignment by Lessee for the benefit of creditors, or
         (3.) any action taken or suffered by Lessee under any insolvency or
         bankruptcy act, if any such receiver, assignment or action is not
         released or discharges within sixty (60) days, shall constitute a
         breach of this Lease by Lessee. Upon the happening of any such event,
         this Lease shall terminate ten (10) days after written notice of
         termination from Lessor to Lessee. This section is to be applied
         consistent with the applicable state and federal law in effect at the
         time such event occurs.





                                       20


<PAGE>   21
24.      LESSOR LOAN OR SALE. Lessee agrees promptly following request by Lessor
         to (1.) execute and deliver to Lessor any documents, including estoppel
         certificates presented to Lessee by Lessor, (a.) certifying that this
         Lease is unmodified and in full force and effect, or, if modified,
         stating the nature of such modification and certifying that this Lease,
         as so modified, is in full force and effect and the date to which the
         rent and other charges are paid in advance, if any, and (b.)
         acknowledging that there are not, to Lessee's knowledge, any uncured
         defaults on the part of Lessor hereunder, or stating the nature of any
         defaults, and (c.) evidencing the status of the Lease as may be
         required either by a lender making a loan to Lessor, to be secured by
         deed of trust or mortgage covering the Premises, or a purchaser of the
         Premises from Lessor, and (2.) to deliver to Lessor the current
         publicly available financial statements of Lessee with an opinion of a
         certified public accountant, including a balance sheet and profit and
         loss statement, for the current fiscal year and the two immediately
         prior fiscal years, all prepared in accordance with Generally Accepted
         Accounting Principles consistently applied. Lessee's failure to deliver
         an estoppel certificate within five (5) business days following such
         request shall constitute a default under this Lease and shall be
         conclusive upon Lessee that this Lease is in full force and effect and
         has not been modified except as may be represented by Lessor. Failure
         of Lessee to execute and deliver any such estoppel certificates within
         the five (5) business days shall be a breach of Lessee's obligations
         under this Lease.
               The Provisions of this section shall be reciprocal and, within
         ten (10) days after request by Lessee, Lessor shall execute a similar
         estoppel in favor of Lessee.

25.      SURRENDER OF LEASE. The voluntary or other surrender of this Lease by
         Lessee, or a mutual cancellation thereof, shall not work a merger nor
         relieve Lessee of any of Lessee's obligations under this Lease, and
         shall, at the option of Lessor, terminate all or any existing Subleases
         or Subtenancies, or may, at the option of Lessor, operate as an
         assignment to him of any or all such Subleases or Subtenancies.

26.      ATTORNEYS' FEES. If, for any reason, any suit be initiated to enforce
         any provision of this Lease, the prevailing party shall be entitled to
         legal costs, expert witness expenses, and reasonable attorneys' fees,
         as fixed by the court.

27.      NOTICES. All notices to be given to Lessee may be given in writing,
         personally, or by depositing the same in the United States mail,
         certified or registered, postage prepaid, and addressed to Lessee at
         the said Premises, whether or not Lessee has departed from, abandoned,
         or vacated the Premises and the address set forth below, or at such
         other address as Lessee may have theretofore specified by notice
         delivered in accordance herewith. Any notice or document required or
         permitted by this Lease to be given Lessor shall be addressed to Lessor
         at the address set forth below, or at such other address as it may have
         theretofore specified by notice delivered in accordance herewith:

               LESSOR:      Los Gatos Business Park
                            900 Welch Road, Suite 10
                            Palo Alto, California 94304



                                       21


<PAGE>   22
               LESSEE:      Rhetorex, Inc.
                            151 Albright Way
                            Los Gatos, CA 95030

               AND TO:      Octel Communications Corporation
                            1001 Murphy Ranch Road
                            Milpitas, CA 95035-7912
                            Attn: Director of Real Estate and Facilities

               Notices given hereunder shall be deemed to have been given (i) on
         the third business day after mailing if such notice or report was
         deposited in the United States mail, certified or registered, postage
         Prepaid and (ii) when delivered if given by personal delivery.

28.      TRANSFER OF SECURITY. If any security be given by Lessee to secure the
         faithful performance of all or any of the covenants of this Lease on
         the part of Lessee, Lessor may transfer and/or deliver the security, as
         such, to the purchaser of the reversion, in the event that the
         reversion be sold, and thereupon Lessor shall be discharged from any
         further liability in reference thereto, upon the written assumption by
         such transferee of lessors obligations under this Lease.

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

30.      HOLDING OVER. Any holding over after the expiration of the term or any
         extension thereof, with the consent of lessor, shall be construed to be
         a tenancy from month-to-month, at a rental of one and one-quarter (1
         1/4) times the previous month's rental rate per month, and shall
         otherwise be on the terms and conditions herein specified, so far as
         applicable.

31.      COVENANTS, CONDITIONS, AND RESTRICTIONS. Attached hereto, marked
         Exhibit "C" and by this reference incorporated as if set out in full,
         are Covenants, Conditions, and Restrictions pertaining to Los Gatos
         Business Park. As a condition to this Lease, Lessee agrees to abide by
         all of said Covenants, Conditions, and Restrictions. Moreover, such
         reasonable rules and regulations as may be hereafter adopted by Lessor
         for the safety, care, and cleanliness of the Premises and the
         preservation of good order thereon, are hereby expressly made a part
         hereof, and Lessee agrees to obey all such rules and regulations, so
         long as any new rules and regulations do not increase Lessee's
         obligations or decrease Lessee's rights under this Lease or
         unreasonably interfere with Lessee's use of the Premises.



                                       22


<PAGE>   23
32.      LIMITATION ON LESSORS LIABILITY. If Lessor is in default of this Lease,
         and, as a consequence, Lessee recovers a money judgment against Lessor,
         the judgment shall be satisfied only out of the proceeds of sale
         received on execution of the judgment and levy against the right,
         title, and interest of Lessor in the Premises, or in the building,
         other improvements, and land of which the Premises are part, and out of
         rent or other income from such real property receivable by Lessor or
         out of the consideration, received by Lessor from the sale or other
         disposition of all or any part of Lessors right, title, and interest in
         the Premises or in the building, other improvements, and land of which
         the Premises are part. Neither Lessor nor any of the partners
         comprising the partnership designated as Lessor shall be personally
         liable for any deficiency. The foregoing limitation shall not apply,
         however, to any losses, costs, claim or damages arising from or
         relating to the failure of a successor or assignee of Lessor to assume
         liability for the defaults or obligations of Lessor as it pertains to
         the security deposit and any prepaid rent which accrued prior to the
         date of an assignment or other transfer of Lessor's interest in the
         Premises.

33.      QUIET POSSESSION. Lessor covenants that Lessee, on paying the rent and
         performing the covenants aforesaid, shall and may peacefully and
         quietly have, hold and enjoy the demised Premises for the term
         aforesaid.

34.      MISCELLANEOUS.

         A.    Time is of the essence of this Lease and of each and all of its
               provisions.

         B.    The term "building" shall mean the building in which the Premises
               are situated.

         C.    Lessee shall have the exclusive right to make reasonable use of
               any driveways, sidewalks, and parking areas located on the parcel
               of land on which the building is situated.

         D.    Lessee shall have the exclusive right to use all of the parking
               spaces on the land on which the Premises are located, which shall
               in no event be less than 108 parking spaces. Lessee's such
               reasonable use of parking areas shall not exceed that percent of
               the total parking areas which is equal to the ratio which floor
               space of the Premises bears to floor space of the building.

         E.    The term "assign" shall include the term "transfer."

         F.    The invalidity or unenforceability of any provision of this Lease
               shall not affect the validity or enforceability of the remainder
               of this Lease.

         G.    All parties hereto have equally participated in the preparation
               of this Lease.

         H.    The headings and titles to the Paragraphs of this Lease are not a
               part of this Lease and shall have no effect upon the construction
               or interpretation of any part thereof




                                       23

<PAGE>   24
         I.    Lessor has made no representation(s) whatsoever to Lessee
               (express or implied) except as may be expressly stated in writing
               in this Lease instrument.

         J.    This instrument contains all of the agreements and conditions
               made between the parties hereto, and may not be modified orally
               or in any other manner than by agreement in writing, signed by
               all of the parties hereto or their respective successors in
               interest.

         K.    It is understood and agreed that the remedies herein given to
               Lessor shall be cumulative, and the exercise of any one remedy by
               Lessor shall not be to the exclusion of any other remedy.

         L.    The covenants and conditions herein contained shall, subject to
               the provisions as to assignment, apply to and bind the heirs,
               successors, executors, and administrators, and assigns of all the
               parties hereto; and all of the parties hereto shall jointly and
               severally be liable hereunder.

         M.    This Lease has been negotiated by the parties hereto and the
               language hereof shall not be construed for or against either
               party.

         N.    All exhibits to which reference is made are deemed incorporated
               into this Lease, whether covenants or conditions, on the part of
               Lessee shall be deemed to be both covenants and conditions.

         O.    Whenever this Lease requires an approval, consent, designation,
               determination or judgment by either Lessor or Lessee, such
               approval, consent, designation, determination or judgment shall
               not be unreasonably withheld or delayed, and in exercising any
               right or remedy hereunder, each party shall at all times act
               reasonably and in good faith.

         P.    Any expenditure by a party permitted or required under this
               Lease, for which such party is entitled to demand and does demand
               reimbursement from the other party, shall be limited to the fair
               market value of the goods and services involved, shall be
               reasonably incurred and shall be substantiated by documentary
               evidence available for inspection and review by the other party
               or its representative during normal business hours.

         Q.    If either Lessor or Lessee shall bring any action or legal
               proceeding to enforce, protect or establish any term or covenant
               of this Lease, the prevailing party shall be entitled to recover
               its reasonable attorneys' fees, court costs and experts' fees as
               may be fixed by the court. "Prevailing party" as used herein
               includes a party who dismisses an action for recovery hereunder
               in exchange for sums allegedly due, performance of covenants
               allegedly breached or consideration substantially equal to the
               relief sought in the action.




                                       24


<PAGE>   25
         R.    Lessee shall be entitled to install, at Lessee's sole cost and
               expense, a monument sign in front of the Premises so long as said
               signage complies with the Town of Los Gatos requirements and Los
               Gatos Business Park standards.

         S.    Notwithstanding anything to the contrary in this Lease, Lessor
               and Lessor's agents, except in the case of emergency, shall
               provide Lessee with twelve (12) hours notice prior to entry of
               the Premises. Any entry by Lessor and Lessor's agents shall not
               impair Lessee's operations more than reasonably necessary, and
               Lessee shall have the right to have an employee accompany Lessor
               at all times that Lessor is Present on the Premises.

35.      OPTION TO EXPAND. Lessor hereby represents and warrants that (i) it is
         the landlord under the lease for the premises consisting of
         approximately 14,700 square feet of space ("Expansion Space"), located
         in a building known as 100 Albright Way, Los Gatos, California, and
         more particularly described on Exhibit A hereto, (ii) the expiration
         date of the lease of Expansion Space is August 31, 1997, and (iii) the
         Expansion Space Lease does not contain any extension or renewal right
         and Lessor agrees not to extend or renew said lease provided Lessee has
         given notice of its intent to exercise its Option to Expand.
               Lessor hereby grants to Lessee the option to expand the Premises
         under this Lease to include Expansion Space, which option may be
         exercised in Lessee's sole discretion. Lessee may exercise said option
         to expand the Premises as follows:

               (a)   Provided Lessee does not receive a notice as set forth in
         Section 36(b) below, Lessee may exercise its option to expand the
         Premises by giving Lessor written notice of its' intention to exercise
         the option no later than December 31, 1996. If Lessee delivers such a
         notice, Lessee agrees to provide Lessor with a final space plan for the
         Expansion Space (to be attached as Exhibit D) no later than February 1,
         1997.
               If Lessee has exercised its option to lease Expansion Space under
         this Section 35(a) the Premises under this Lease shall expand to
         include Expansion Space on the date (the "Expansion Space Effective
         Date") which is the later of October 15, 1997, and the date by which
         all of the following have occurred: (1) Lessor has substantially
         completed the improvements set forth on Exhibit E in accordance with
         the terms of this Lease (the "Improvements"); (ii) there remains no
         incomplete or defective item of improvements that would adversely
         affect Lessee's intended use of the Expansion Space (iii) Lessor has
         delivered legal possession of the Expansion Space to Lessee; and (iv)
         Lessor has obtained all approvals and permit from the appropriate
         governmental authorities required to be obtained by Lessor for the
         legal occupancy of the Expansion Space; and (v) all representations and
         warranties of Lessor under Section 6 of this Lease Shall be true,
         complete and correct with respect to Expansion Space; and (vi) the
         Expansion Space has been vacated by the previous tenant.
         Notwithstanding the foregoing, provided Lessee has given notice of its
         intent to exercise its option under this Section 35(a), if all of the
         foregoing have not occurred for any reason whatsoever on or before May
         1, 1998, then, in addition to Lessee's other rights and remedies,
         Lessee may terminate the Expansion Option with respect to the Expansion
         Space by written notice to Lessor, or, at Lessee's election, the date
         Lessee




                                       25

<PAGE>   26
         is otherwise obligated to commence payment of rent for the Expansion
         Space shall be delayed by one day for each day that the Expansion Space
         Effective Date is delayed beyond such date.

               (b)   If the current tenant in Expansion Space is unable to
         fulfill its obligations of its Lease through the expiration date
         (August 31, 1997) and is in default (after applicable notice and cure
         periods) under its Lease, Lessor shall notify Lessee in writing of its
         intent to evict the tenant. Lessee shall have five (5) business days to
         notify Lessor of its intent to exercise its option to lease Expansion
         Space. No response shall be deemed a rejection of the offer of
         Expansion Space. If Lessee has exercised its option to lease Expansion
         Space as set forth in this subsection (b), Lessee shall provide Lessor
         with a final space plan (to be attached as Exhibit E) within twenty
         (20) business days following Lessors notice. If Lessee has exercised
         its option to lease Expansion Space as set forth in this subsection (b)
         the Premises under this Lease shall expand to include Expansion Space
         on the date (the "Expansion Space Effective Date") which is the later
         of ninety (90) days after Lessor's notice to Lessee of its intent to
         evict tenant, and the date by which all of the following have occurred:
         (i) Lessor has substantially completed the improvements set forth on
         Exhibit B in accordance with the terms of this Lease (the
         "improvements"); (ii) there remains no incomplete or defective item of
         improvements that would adversely affect Lessee's intended use of the
         Expansion Space; (iii) Lessor has delivered legal possession of the
         Expansion Space to Lessee; and (iv) Lessor has obtained all approvals
         and permit from the appropriate governmental authorities required to be
         obtained by Lessor for the legal occupancy of the Expansion Space; and
         (v) all representations and warranties of Lessor under Section 6 of
         this Lease shall be true, complete and correct with respect to
         Expansion Space, and (vi) the Expansions Space has been vacated by the
         previous tenant. Notwithstanding the foregoing, provided Lessee has
         given notice of its intent to exercise its option under this Section
         35(b), if all of the foregoing have not occurred for any reason
         whatsoever within nine (9) months of the date in which Lessee delivered
         its notice of intent, to exercise its option under this Section 35(b),
         then, in addition to Lessee's other rights and remedies, Lessee may
         terminate the Expansion Option with respect to the Expansion Space by
         written notice to Lessor, or, at Lessee's election, the date Lessee is
         otherwise obligated to commence payment of rent for the Expansion Space
         shall be delayed by one day for each day that the Expansion Space
         Effective Date is delayed beyond such date. Provided Lessee has given
         Lessor notice of its intent to exercise its option under this Section
         35(b), Lessor shall use commercially reasonable efforts to evict and
         cause the current tenant to vacate the Expansion Space as quickly as
         reasonably possible.

               (c)   If Lessee exercises its option to lease Expansion Space,
         Lessor shall provide Lessee with an allowance of $220,500 for mutually
         agreeable tenant improvements to be installed by Lessors contractor in
         accordance with the work letter attached hereto as Exhibit E.

               (d)   Effective as of the Expansion Space Effective Date, this
         Lease shall be modified as follows:




                                       26

<PAGE>   27
                     (i)   The monthly rent payable under this Lease shall be
         increased to include Expansion Space at the same amount per rentable
         square foot as the amount per rentable square foot of the existing
         Premises. Lessor and Lessee acknowledge that the rentable square
         footage of the existing Premises is as follows:

<TABLE>
<S>                                                                     <C>
         Months 01-12 following the Commencement Date of this Lease:   $1.05 p.s.f.
         Months 13-24 following the Commencement Date of this Lease:    $1.08 p.s.f.
         Months 25-36 following the Commencement Date of this Lease:    $1.11 p.s.f.
         Months 37-48 following the Commencement Date of this Lease:    $1.14 p.s.f.
         Months 49-60 following the Commencement Date of this Lease:    $1.17 p.s.f.
</TABLE>

                     (ii)  The term of this Lease shall be extended so that the
         expiration date of this Lease is the seventh (7th) anniversary of the
         Expansion Space Effective Date. Monthly rent during any extended term
         of this Lease shall be payable in accordance with the following
         schedule:

<TABLE>
<S>                                                                     <C>
         Months 61-72 following the Commencement Date of this Lease:    $1.20 p.s.f.
         Months 73-84 following the Commencement Date of this Lease:    $1.23 p.s.f.
         Months 85-96 following the Commencement Date of this Lease:    $1.26 p.s.f.
         Months 97-108 following the Commencement Date of this Lease:   $1.29 p.s.f.
         Months 109-120 following the Commencement Date of this Lease:  $1.32 p.s.f.
</TABLE>

               The foregoing table shall on no event be deemed to extend the
         term of this Lease beyond the date which is the seventh (7th)
         anniversary of the Expansion Space Effective Date.

                     (iii) Lessee shall have the right-to use its pro-rata share
         of the building's 76 parking spaces.

                     (iv)  Except as expressly provided in Sections 35 and 36
         hereof, all of the terms a conditions of this Lease shall remain in
         full force and effect with respect to the addition of the Expansion
         Space, and this Lease shall not be modified as a result of the addition
         of the Expansion Space.

36.      OPTION TO EXTEND TERM AFTER LESSEE'S EXERCISE OF THE OPTION FOR THE
         EXPANSION SPACE.

         A.    Notwithstanding anything to the contrary in this Lease, provided
               that the Premises have expanded to include the Expansion Space as
               set forth in Section 35 hereof, at the end of the term of the
               Lease (as extended as provided in Section 35(d)(ii) hereof),
               Lessee shall have the option to extend the term on all the
               provisions contained in this Lease for one (1) five (5) year
               period ("extended term(s)") at an adjusted rental calculated as
               provided in Subparagraph B below on the condition that:

               1.    Lessee has given to Lessor written notice of exercise of
                     that option ("option notice") at least six (6) months
                     before expiration of the initial term or extended term(s),
                     as the case may be.




                                       27


<PAGE>   28
               2.    Lessee is not in default of the Lease on the date of giving
                     the option notice, and Lessee is not in default on the date
                     that the extended term is to commence.

         B.    RENT FOR OPTION PERIOD: The rent during the extended term shall
               be the then current fair market monthly rent ("Fair Market Rent")
               for the Premises as of the commencement date of the applicable
               extended term, as determined by the agreement of the parties or,
               if the parties cannot agree within sixty (60) days prior to the
               commencement of such extended term, then by an appraisal. All
               other terms and conditions contained in the Lease and this
               Addendum, as the same may be amended from time to time by the
               parties in accordance with the provisions of the Lease, shall
               remain in full force and effect and shall apply during the Option
               term.
                     If it becomes necessary to determine the fair market rental
               value for the Premises by appraisal, real estate appraiser(s),
               all of whom shall be members of the American institute of Real
               Estate Appraisers and have at least five (5) years experience
               appraising office space located in the vicinity of the Premises
               and none of whom shall have worked for either Lessor or Lessee in
               the five (5) year period preceding the commencement date of the
               applicable extended term, shall be appointed and shall act in
               accordance with the following procedures:

                     1.   If the parties are unable to agree on the Fair Market
                     within the allowed time, either party may demand an
                     appraisal by giving written notice to the other party,
                     which demand to be effective must state the name, address
                     and qualifications of an appraiser selected by the party
                     demanding an appraisal (the "Notifying Party"). Within ten
                     (10) days following the Notifying Party's appraisal demand,
                     the other party (the (the "Non-Notifying Party") shall
                     either approve the appraiser selected by the notifying
                     party or select a second property qualified appraiser by
                     giving written notice of the name, address and
                     qualification of said appraiser to the Notifying Party. If
                     the Non-Notifying Party falls to select an appraiser within
                     the ten (10) day period, the appraiser selected by the
                     Notifying Party shall be deemed selected by both parties
                     and no other appraiser shall be selected. If two appraisers
                     are selected, they shall select a third appropriately
                     qualified appraiser. If the two appraisers fall to select a
                     third qualified appraiser, the third appraiser shall be
                     appointed by the then presiding judge of the county where
                     the Premises are located upon application by either party.

                     2.   It only one appraiser is selected, that appraiser
                     shall notify the parties in simple letter form of its
                     determination of the Fair Market Rent for the Premises
                     within fifteen (15) days following his selection, which
                     appraisal shall be conclusively determinative and binding
                     on the parties as the appraised Fair Market Rent.




                                       28

<PAGE>   29
                     3.   If multiple appraisers are selected, the appraisers
                     shall meet no later than ten (10) days following the
                     selection of the last appraiser. At such meeting the
                     appraisers shall attempt to determine the Fair Market Rent
                     for the Premises as of the commencement date of the
                     extended term by the agreement of at least two (2) of the
                     appraisers.

                     4.   If two (2) or more of the appraisers agree on the Fair
                     Market Rent for the Premises at the initial meeting, such
                     agreement shall be determinative and binding upon the
                     parties hereto and the agreeing appraisers shall, in simple
                     letter form executed by the agreeing appraisers, forthwith
                     notifying both Lessor and Lessee of the amount set by such
                     agreement. If multiple appraisers are selected and two (2)
                     appraisers are unable to agree on the Fair Market Rent for
                     the Premises, all appraisers shall submit to Lessor and
                     Lessee an independent appraisal of the Fair Market Rent for
                     the Premises in simple letter form within twenty (20) days
                     following appointment of the final appraiser. The parties
                     shall then determine the Fair Market Rent for the Premises
                     by averaging the appraisals; provided that any high or low
                     appraisal, differing from the middle appraisal by more than
                     ten percent (10%) of the middle appraisal, shall be
                     disregarded in calculating the average.

                     5.   The appraisers' determination of Fair Market Rent
                     shall be based on rental of space of the same age,
                     construction, size and location as the Premises with the
                     improvements installed therein at Lessor's expense and
                     shall take into account Lessee's obligations to pay
                     additional rent under this Lease. In determining Fair
                     Market Rent, the appraisers shall not consider any
                     alterations installed in the Premises at Lessee's expense.

                     6.   If only one appraiser is selected, then each party
                     shall pay one-half of the fees and expenses of that
                     appraiser. If three appraisers are selected, each party
                     shall bear the fees and expenses of the appraiser it
                     selects and one-half of the fees and expenses of the third
                     appraiser.

37.      RIGHT OF FIRST REFUSAL.

         A.   Lessor hereby represents and warrants to Lessee that (i) it is the
         landlord under the lease for the premises consisting of approximately
         10,584 square feet of space (the "Refusal Space"), located in a
         building known as 100-A Albright Way, Los Gatos, California, and more
         particularly described on Exhibit A hereto, (ii) the expiration date of
         the lease of the Refusal Space (the "Refusal Space Lease") is January
         24, 1998, and (iii) the Refusal Space Lease does not contain any
         extension or renewal rights.

         B.   If, at any time during the term, as extended, the Refusal Space
         shall become vacant or Lessor shall solicit or receive a bona fide
         offer in writing ("Offer") from an unrelated third party to lease all
         or any portion of the Refusal Space, Lessee shall have




                                       29


<PAGE>   30
         a right of first refusal ("Right of First Refusal") to lease the
         Refusal Space upon the same terms and conditions as set forth in the
         Offer, except that the term shall be deemed to be coterminous with the
         term of the Lease, provided Lessee has exercised its option to lease
         the Expansion Space. Lessor, promptly following Lessor's receipt of the
         Offer, shall deliver written notice to Lessee specifying the terms and
         conditions contained in the Offer. Lessee shall exercise its Right of
         First Refusal by providing Lessor with written notice of its exercise
         within five (5) business days after the date of the receipt of Lessor's
         notice regarding the Offer. If Lessee exercises its Right of First
         Refusal within the five (5) business day period, Lessor and Lessee
         promptly shall execute an amendment to the Lease relating to the
         Refusal Space, which includes the terms and conditions set forth in the
         Offer, except as set forth above. If Lessee fails to provide Lessor
         with its written notice of exercise within the five (5) business day
         period, then Lessee shall be deemed to have elected not to exercise its
         Right of First Refusal with respect to the particular Offer at issue.

38.      RIGHT OF FIRST OFFER. If Lessor determines to lease any space in the
         project owned by Lessor and known as Los Gatos Business Park (the
         "Offer Space"), then Lessor shall notify Lessee of the terms on which
         Lessor is willing to lease the Offer Space. If Lessee, within five (5)
         business days after receipt of Lessor's written notice indicates in
         writing its agreement to lease the Offer Space on the terms stated in
         Lessor's notice, Lessor and Lessee promptly shall execute an amendment
         to the Lease relating to the Offer Space, which includes the terms and
         conditions set forth in Lessor's notice, except that the term shall be
         deemed to be coterminous with the term of the Lease. If Lessee does not
         indicate in writing its agreement to lease the Offer Space on the terms
         contained in Lessor's notice within said five (5) business day period,
         then Lessor thereafter shall have the right to lease the Offer Space to
         a third party on the same terms stated in Lessor's notice. Lessee's
         Right of First Offer as set forth herein shall be subject to existing
         expansion and renewal rights, rights of first refusal and rights of
         first offer of other tenants in the project, existing as of this date.

         IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the
date first above-written.

LESSOR:                                   LESSEE:

Los Gatos Business Park                   Rhetorex, Inc.




By:________________________________       By:___________________________________

Date:______________________________       Date:_________________________________





                                       30

<PAGE>   31
                                    EXHIBIT A

                              [Map of Albright Way]




























                                       31


<PAGE>   32
                                   EXHIBIT B

         The Final Plans, approved by Lessee and Lessor, shall be attached to
the Lease as Exhibit B upon completion of the drawings.







































                                       32


<PAGE>   33
                                    EXHIBIT E

                           EXPANSION SPACE WORK LETTER



         1.   Lessor shall construct the Improvements to the Expansion Space
(the "Improvements") in accordance with the preliminary plans prepared by Lessee
and approved by Lessor (the "Preliminary Plans") in accordance with the terms of
this work letter. The parties shall confer and negotiate in good faith to reach
agreement on the Preliminary Plans.

         2.   Lessor shall cause three (3) subcontractors for each trade to bid
for construction of the Improvements. If Lessee so desires, Lessee may also
select a qualified subcontractor to bid the work. All bids will be opened
together with Lessor selecting the subcontractors to construct the Improvements
(the "General Contractor"), subject to reasonable approval of Lessee.

         3.   Lessor shall cause to be prepared, as quickly as possible, final
plans, specifications and working drawings of the Improvements ("Final Plans"),
as well as an estimate of the total cost for the Improvements ("Cost Estimate")
all of which conform to or represent logical evolutions of or developments from
the Preliminary Plans. The Final Plans and Cost Estimate shall be delivered to
Lessee Immediately upon completion. Within five (5) business days after receipt
thereof, Lessee shall (a) approve the Final Plans and Cost Estimate, or (b)
deliver to Lessor the specific written changes to such plans that are necessary,
in Lessee's opinion, to conform such plans to the Preliminary Plans or to reduce
costs. If Lessee desires changes, Lessor shall not unreasonably withhold its
approval of such changes and the parties shall confer and negotiate in good
faith to reach agreement on modifications to the Final Plans, and the Cost
Estimate as a consequence of such change. As soon as approved by Lessor and
Lessee, Lessor shall submit the Final Plans to all appropriate governmental
agencies and thereafter Lessor shall use its best efforts to obtain required
governmental approvals as soon as practical.

         4.   After the Final Plans have been approved by Lessor and Lessee as
provided above, neither party shall have the right to require extra work or
change orders with respect to the construction of the Improvements without the
prior written consent of the other, which consent shall not be unreasonably
withhold or delayed. All change orders shall specify any change in the Cost
Estimate as a consequence of the change order.

         5.   Lessor shall thereafter commence construction of the Improvements
and shall diligently prosecute such construction to completion.

         6.   When the Improvements are complete, Lessor shall deliver
possession of the Expansion Space to Lessee.

         7.   Notwithstanding anything to the contrary in the Lease, effective
upon delivery of the Expansion Space to Lessee, Lessor does hereby warrant that
(a) the construction of the





                                       33

<PAGE>   34
Improvements was performed In accordance with all rules, regulations, codes,
statutes, ordinances and laws of all governmental and quasi-governmental
authorities, in accordance with the Final Plans, and in a good and workmanlike
manner, (b) all material and equipment installed therein conformed to the Final
Plans and was of good quality, (c) the electrical, plumbing, and mechanical
systems servicing are in working order and in good condition, and (d) the roof
is in good condition and water tight.

         8.   The cost of the Improvements shall not include (and Lessee shall
have no responsibility for and the Allowance shall not be used for) the
following: a) costs Incurred to remove Hazardous Materials from the Expansion
space prior to Lessee taking occupancy of the Expansion Space or the surrounding
area; (b) costs Incurred as a consequence of delay (unless the delay is caused
by Lessee), construction defects or default by a contractor, (c) costs
recoverable by Lessor upon account of warranties and Insurance; (d) costs
Incurred as a result of alterations to the Expansion Space by the existing
tenant therein after the date of execution of the Lease; restoration costs in
excess of Insurance proceeds as a consequence of casualties.

         9.   In such event that the cost of the Improvements exceeds the
Allowance, Lessee shall pay to Lessor the amount of any such overage prior to
Lessors delivery of the Expansion Space to Lessee.

         10.  So long as such occupancy does not Interfere with Lessors
construction of the Improvements, Lessee shall have the right to occupy the
Expansion Space prior to the completion of the Improvements for the purpose of
installing its equipment, data, telecommunications system and trade fixtures.
Such occupancy shall be subject to all of the terms of the Lease except the
obligation to pay rent.

         11.  Within thirty (30) days after the delivery of the Expansion Space,
Lessee shall have the right to submit a written "punch list" to Lessor, setting
forth any defective term of construction, and Lessor shall promptly cause such
items to be corrected at Lessor's sole cost and expense.




                                       34

<PAGE>   35
                                    EXHIBIT F

             SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT



         SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT made as of the
____ day of November, 1994, by and between THE UNION LABOR LIFE INSURANCE
COMPANY, having an address at 111 Massachusetts Avenue, Washington D.C. 20001
("Lender") and ______________________ having an address at _______________
("Lessee")

                                   WITNESSETH:

         WHEREAS, Los Gatos Business Park, a California limited partnership
("Lessor") is the owner of the fee estate in that certain property located in
Los Gatos, California more particularly know as 100-160 Albright Way (the
"Property"); and

         WHEREAS, Lessor and Lessee have entered into a lease dated
_____________ (the "Lease"), covering a portion of the Property (the "Leased
Premises"); and

         WHEREAS, Lessor proposes to borrow certain sums from Lender, such loan
to be evidenced by a promissory note and secured by, INTER ALIA, a deed of trust
encumbering the Leased Premises (the "Deed of Trust"); and

         WHEREAS, to induce Lender to make the loan to Lessor, Lessee has agreed
to subordinate the Lease to the Deed of Trust, and Lender has agreed that the
Lease shall remain in force and effect on the terms, and conditions hereinafter
set forth, notwithstanding any foreclosure or other proceedings for enforcement
of the Deed of Trust.

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:

         1.   The Lease and any extension, renewal, replacement or modification
thereof and all of the right, title and interest of Lessee in and to the Leased
Premises and the rights of Lessee under the Lease now are, and shall at all
times continue to be subject and subordinate to the lien and security interest
of the Deed of Trust and to each renewal, extension, modification or replacement
thereof, with the same force and effect as if the Deed of Trust had been
executed, delivered and recorded prior to the execution and delivery of the
Lease.

         2.   So long as Lessee is not in default in the payment of rents or in
this performance of any of the other terms, covenants or conditions of the Lease
requiring performance on the part of Lessee, (a) Lender will not join Lessee as
a party defendant in any action or proceeding for the purpose of terminating any
ownership, possession, interest or estate of Lessor because of any default under
the Deed of Trust. Unless Lessee is deemed a necessary party by the court, in
which event Lessee may be so named but such naming shall not otherwise be in




                                       35

<PAGE>   36
derogation of the rights of Lessee set forth in this Agreement, and (b) the
Lease and the rights of Lessee thereunder shall not be divested by a sale on the
Deed of Trust or on the obligation secured by the Deed of Trust or the exercise
of any other right or remedy available to Lender against Lessor.

         3.   If the Property or any portion thereof which includes the Leased
Premises shall be transferred to and owned by Lender or any assignee of Lender,
or any purchaser at judicial sale or any transferee under an action in lieu
thereof, by reason of foreclosure or other remedial proceedings brought by
Lender or any assignee of Lender, or by any transferee or purchaser, or by any
other similar manner, or if the interest of Lessor is terminated or assigned by
any action of the Lender and Lessee is not in default in the Payment of rent or
in the performance of any of the other terms, covenants or conditions of the
Lease requiring performance on the part of Lessee, Lessee's rights shall not be
terminated thereby; rather, Lessee shall be bound by Lender or any such
assignee, purchaser or transferee (hereinafter referred to collectively as
"Successor Landlord") under all or the terms, covenants and conditions of the
Lease for the balance of the term thereof remaining, with the same force and
effect as if the Successor Landlord were the lessor under the Lease with the
Lease remaining in full force and effect, provided, however, that the Successor
Landlord shall not be:

              (a)   liable for any act or omission of any prior landlord, or for
the return of any security deposit unless actually received by the Successor
Landlord; or

              (b)   subject to any offsets or defenses which Lessee may have
against any prior landlord; or

              (c)   bound by any payment of rent which Lessee may have paid for
more than the then current month to any prior landlord, or bound by any
amendment, modification, extension or supplement of the Lease, made without the
written consent of Lender; or

              (d)   obligated to repair, replace, rebuild or restore the Leased
Premises, or any part thereof, in the event, of total or substantially total
damage or destruction beyond such repair, replacement, rebuilding or restoration
of the Leased Premises as can reasonable be accomplished from the net proceeds
of insurance actually received by, or made available to, Successor Landlord for
such purposes; or

              (e)   obligated to repair, replace, rebuild or restore the Leased
Premises, or any part thereof, in this event of partial condemnation beyond such
repair, replacement, rebuilding or restoration of the Leased Premises as can
reasonably be accomplished from the net proceeds of any award actually received
by, or made available to, Successor Landlord, as consequential damages allocable
to the part of the Leased Premises not taken; or

              (f)   obligated to make any capital improvements to the Leased
Premises, or to construct, erect or complete any construction or renovation of
all or any portion of the




                                       36

<PAGE>   37
improvements at the Leased Premises, which Lessor may have agreed to make but
has not commenced or completed; or

              (g)   personally liable under the Lease, and the liability of the
Successor Landlord under the Lease shall be limited to the extent of the
interest of the Successor Landlord in the Property.

         4.   In the event of any occurrence referred to in Paragraph 3 hereof,
Tenant agrees to attorn to the Successor Landlord on the terms set forth in
Paragraph 3 hereof, said attornment to be effective and self operative upon
notice from the Successor Landlord without the execution of any further
instruments on the part of either of the parties hereto.

         5.   This Agreement shall remain in effect throughout the term of the
Lease, including all option periods, if any.

         6.   Lessee agrees to notify Lender of any default of the landlord
under the Lease which would entitle Lessee to cancel the Lease or abate the rent
payable under the Lease, and agrees that, notwithstanding any provision of the
Lease, no notice of cancellation of the Lease shall be effective unless Lender
has received said notice and has failed within thirty (30) days of the date
thereof to cure any default, or if such default cannot be cured by Lender within
thirty (30) days, has failed to commence and to diligently prosecute the curing
of any default which gave rise to such right of cancellation or abatement.

         7.   The provisions of this Agreement shall be self-operative and no
further instrument shall be necessary to effect the aforementioned continuation,
attornment, recognition and subordination. Nevertheless, in confirmation
thereof, Lessee shall execute and deliver, upon request of Lender or any other
party to whom Lessee has agreed to attorn, an appropriate certificate to confirm
such continuation, attornment, recognition and subordination.

         8.   All notices, demands, consents, approvals and other communications
(collectively, "Notices") hereunder shall be in writing and shall be sent by
hand, or by telecopy (with a duplicate copy sent by ordinary mail, postage
prepaid), or by postage prepaid, certified or registered mail, return receipt
requested, or by reputable overnight courier service, postage prepaid, addressed
to the party to be notified as set forth below:

              If to Lender,         The Union Labor Life insurance Company
                                    Mortgage and Real Estate Department
                                    111 Massachusetts Avenue, N.W.
                                    Washington, D.C. 20001
                                    Attn: Thomas C. Perkins
                                    Telecopy No: 202-682-6784





                                       37


<PAGE>   38
              with a copy to,       Manatt, Phelps & Phillips
                                    11355 West Olympic Boulevard
                                    Los Angeles, California 90064
                                    Attn: Chris A. Carlson, Esq.
                                    Telecopy No: 310-312-4224

              if to Lessee,         _____________________________
                                    _____________________________
                                    _____________________________
                                    Attn:________________________
                                    Telecopy No.:________________

              with a copy to,       _____________________________
                                    _____________________________
                                    _____________________________
                                    Attn:________________________
                                    Telecopy No.:________________

Notices shall be deemed given when delivered by hand or when a legible copy is
received by telecopier (with receipt being verified by telephone confirmation),
or if mailed, five (5) business days after mailing (or one business day for
overnight courier service), with failure to accept delivery constituting
delivery for this purpose. Any party hereto may change the addresses for Notices
set forth above by giving at least ten (10) days, prior Notice of such change in
writing to the other party as aforesaid and otherwise in accordance with these
provisions.

         9.   This Agreement shall begin upon and shall inure to the benefit of
Lender and Lessee, and their respective transferees, successors and assigns.

         10.  This Agreement may not be changed, waived, modified or discharged
orally, but only by an instrument in writing executed by the party against whom
enforcement of any change, waiver, modification or discharge is sought.




                                       38

<PAGE>   39
         IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed as of the date first set fort above.

                                         THE UNION LABOR LIFE INSURANCE COMPANY

                                         By:___________________________________
                                         Title:________________________________



                                         By:___________________________________
                                         Title:________________________________






                                       39

<PAGE>   40
                                    EXHIBIT C

                             LOS GATOS BUSINESS PARK
                     COVENANTS, CONDITIONS AND RESTRICTIONS






























                                            RHETOREX, INC.
                                            151 Albright Way


                                            AGREED & ACCEPTED:

                                            _________________      __________
                                            Lessee                 Date

                                            _________________      __________
                                            Lessor                 Date





                                       40

<PAGE>   41
                             LOS GATOS BUSINESS PARK


         THIS DECLARATION is made on this 2nd day of February, 1976, by LOS
GATOS BUSINESS PARK, A LIMITED PARTNERSHIP organized under the laws of the State
of California.

         The property described in Exhibit "A" is subject to this Declaration
and will be known as LOS GATOS BUSINESS PARK.

         LOS GATOS BUSINESS PARK is being developed as a planned industrial
complex which will provide employment t opportunities for the residents of the
County of Santa Clara and the surrounding area. This Declaration is designed to
complement local government and municipal regulations. Except where the LOS
GATOS BUSINESS PARK RESTRICTIONS conflict with such local government and
municipal regulations, said Restrictions shall be binding upon all owners,
lessees, licensees, occupants, users of the property subject to these
Restrictions, and their successors in interest as set forth in this Declaration.
It is assumed that the users of industrial sites in the LOS GATOS BUSINESS PARK
will be motivated to preserve these qualities through mutual cooperation and by
enforcing not only the letter but the spirit of this Declaration.

ARTICLE I - DEFINITIONS

         Unless the context otherwise specifies or requires, the terms defined
in this Article I shall, for all purposes of this Declaration, have the meanings
herein specified.

         Section 1 - "ARCHITECT": The term "Architect" shall mean a person
holding a certificate to practice architecture in the State of California under
authority of Division 3, Chapter 3 of the Business and Professions Code of the
State of California.




                                       41


<PAGE>   42
         Section 2 - "BENEFICIARY": The term "Beneficiary" shall mean a
mortgagee under a mortgage, as well as a beneficiary under a deed of trust.

         Section 3 - "DECLARATION": The term "Declaration" shall man the
COVENANTS, CONDITIONS AND RESTRICTIONS FOR LOS GATOS BUSINESS PARK.

         Section 4 - "DEED OF TRUST": The term "Deed of Trust" or "Trust Deed"
shall mean a mortgage as well as a deed of trust.

         Section 5 - "FILE": The term "File" shall mean, with reference to any
subdivision map, record of survey or parcel map, the filing of said map in the
Office of the Recorder of the County of Santa Clara, State of California.

         Section 6 - "GRANTOR": The term "Grantor" shall mean LOS GATOS BUSINESS
PARK, a LIMITED PARTNERSHIP; and to the extent provided in Article VII - Section
I below, its successors and assigns.

         Section 7 - "IMPROVEMENTS": The term "Improvements" shall include
buildings out-buildings, roads, driveways, parking areas, fences, screening
walls and barriers, retaining walls, stairs, decks, hedges, windbreaks,
plantings, planted trees and shrubs, poles, signs, loading areas and all other
structures or landscaping improvements of every type and kind.

         Section 8 - "MORTGAGEE": The term "Mortgagee" shall mean a beneficiary
under, or a holder of a deed of trust as well as a mortgagee under a mortgage.

         Section 9 - "LOS GATOS BUSINESS PARK": The term "LOS GATOS BUSINESS
PARK" shall mean all of the real property now or hereafter made subject to this
Declaration.




                                       42


<PAGE>   43
         Section 10 "LOS GATOS BUSINESS PARK RESTRICTIONS": The term "Los Gatos
Business Park Restrictions" shall mean the covenants, conditions and
restrictions set forth in this Declaration, as it may from time to time be
amended or supplemented.

         Section 11 - "OWNER": The term "Owner" shall mean and refer to any
person having any estate in any site, excluding any person who holds such
interest as security for the payment of an obligation, but including any
mortgagee or other security holder in actual possession of any lot, by
foreclosure or otherwise, and any person taking title from any such security
holder.

         Section 12 - "RECORD" - "RECORDED": The term "Record" or "Recorded"
shall mean, with respect to any document, the recordation of said document in
the Office of the County Recorder of the County of Santa Clara, State of
California.

         Section 13 - "SIGN": The term "Sign" shall mean any structure, device
or contrivance, electric or non-electric, and all parts thereof which are
erected or used for advertising purposes upon or within which any poster, bill,
bulletin, printing, lettering, painting, device or other advertising of any kind
whatsoever is used, placed, posted, tacked, nailed, pasted, or otherwise
fastened or affixed to ground or improvements.

         Section 14 - "SITE": The term "Site" shall mean all contiguous land
under one ownership.

         Section 15 - "STREETS": The term "Streets" shall mean any street,
highway or other thoroughfare within or adjacent to the property and shown on
any recorded subdivision or parcel map, or record of survey, whether designated
thereon as street, boulevard, place, drive, road, terrace, way, land, circle or
otherwise.



                                       43


<PAGE>   44
         Section 16 - "VISIBLE FROM NEIGHBORING PROPERTY": The term "Visible
From Neighboring Property" shall mean, with respect to any given object, that
such object is or would be visible to a person six (6) feet tall, standing on
any part of such neighboring property at an elevation no greater than the
elevation of the base of the object being viewed.

         Section 17 - "LOT": The term "lot" shall mean the fractional part of
blocks as divided and sub-divided on subdivision or parcel maps of the Official
Records of the Recorder of Santa Clara County, California, as they from time to
time become current.

ARTICLE II - PROPERTY SUBJECT TO THE LOS GATOS BUSINESS PARK RESTRICTIONS

         Section 1 - GENERAL DECLARATION CREATING LOS GATOS BUSINESS PARK:
Grantor hereby declares that all of the real property located in the Town of Los
Gatos County of Santa Clara, State of California, described in Exhibit "A".
which is attached hereto and incorporated herein by this reference is and shall
be, conveyed, hypothecated, encumbered, leased, occupied, built upon or
otherwise used, improved or transferred in whole or in part subject to the LOS
GATOS BUSINESS PARK RESTRICTIONS, meaning the covenants, conditions and
restrictions set forth in this Declaration. All of said restrictions are
declared and agreed to be in furtherance of a general plan for the subdivision,
improvement and sale of said real property and are established for the purpose
of enhancing and perfecting the value, desirability and attractiveness of said
real property and every part thereof. All of the LOS GATOS BUSINESS PARK
RESTRICTIONS shall run with all of said real property for all purposes and shall
be binding upon and inure to the benefit of Grantor and all owners, lessees,
licensees, occupants and their successor in interest as set forth in this
Declaration.




                                       44


<PAGE>   45
         Section 2 - ADDITION OF OTHER REAL PROPERTY BY GRANTOR:

         A.   GRANTOR'S POWER: Grantor may at any time during the pendency of
this Declaration add all or a portion of any land now or hereafter owned by
Grantor to the property which is covered by this Declaration, and upon recording
of a notice of addition of real property containing at least the provisions set
forth in Section 2B of this Article 11, the provisions of this Declaration
specified in said notice shall apply to such added land in the same manner as if
it were originally covered by this Declaration. Thereafter, to the extent this
Declaration is made applicable thereto, the rights, powers and responsibilities
of Grantor and the owners, lessees, licensees and occupants of parcels within
such added land shall be the same as in the case of the land described in
Exhibit "A".

         B.   NOTICE OF ADDITION OF LAND: The notice of addition of real
property referred to in Section 2A above shall contain at least the following
provisions:

              (1)   A reference to this Declaration stating the date of
recording hereof and the book or books of the records of Santa Clara County,
California, and the page numbers where this Declaration is recorded;

              (2)   A statement that the provisions of this Declaration, or some
specified part thereof, shall apply to such added real property;

              (3)   A legal description of such added real property; and

              (4)   Such other or different covenants, conditions and
restrictions as Grantor shall, in its discretion, specify to regulate and
control the use, occupant and improvement of such added real property.




                                       45

<PAGE>   46
ARTICLE  III - REGULATION OF MOMENTS

         Section 1 - APPROVAL OF PLANS:

         A.   APPROVAL REQUIRED: No improvement shall be erected, placed,
altered, maintained or permitted to remain on any land subject to this
Declaration until final plans and specifications shall have been submitted to
and approved in writing by Grantor. Such final plans and specifications shall be
submitted in writing in duplicate over the authorized signature of the owner,
lessee, licensee or other occupant of the site or his authorized agent. Such
plans and specifications shall be in such form and shall contain such
information as may be required by the Grantor, but in any event shall include:

              (1)   A site development plan of the lot showing the nature,
grading scheme, kind, shape, materials and location with respect to the
particular lot (including proposed front, rear and side setback lines) of all
structures, the location thereof with reference to structures on adjoining
portions of the property, and the number and location of all parking spaces and
driveways on the lot;

              (2)   A landscaping plan for the particular lot; 

              (3)   A signing and lighting plan; and

              (4)   A building elevation plan showing dimensions, materials and
exterior color scheme and be in no less detail than required by the appropriate
governmental authority for the issuance of a building permit. Changes in
approved plans which materially affect building size, placement or external
appearance must be similarly submitted to and approved by Grantor.




                                       46


<PAGE>   47
         B.   BASIS FOR APPROVAL: Approval shall be based, among other things,
on adequacy of site dimensions, adequacy of structural design, conformity and
harmony, of external design with neighboring structures, effect of location and
use of proposed improvements on neighboring sites, proper facing of main
elevation with respect to nearby streets, adequacy of screening of mechanical
air conditioning or other roof top installations, and conformity of the plans
and specifications to the purpose and general plan and intent of this
Declaration. No plans will be approved which do not provide for the underground
installation of power, electrical, telephone and other utility lines from the
property line to buildings. No plans will be approved which provide for
buildings covering more than fifty percent (50%) of the lot areas. Grantor shall
not arbitrarily or unreasonably withhold its approval of such plans and
specifications. Grantor shall have the right to disapprove any plans and
specifications submitted hereunder, including but not limited to any of the
following:

              (1)   Failure to comply with any of the Restrictions;

              (2)   Failure to include information in such plans and
specifications as may have been reasonably requested by Grantor;

              (3)   Objection to the exterior design, appearance of materials of
any proposed structure;

              (4)   Objection on the ground of incompatibility of any proposed
structure or use with existing structures or uses upon other lots or other
properties in the vicinity;

              (5)   Objection to the location of any proposed structure upon any
lot with reference to other lots in the vicinity;




                                       47

<PAGE>   48
              (6)   Objection to the grading plan for any lot;

              (7)   Objection to the color scheme, finish, proportions, style or
architecture, height, bulk or appropriateness of any structure;

              (8)   Objection to the number or size of parking spaces, or to the
design of the parking area;

              (9)   Any other matter, which in the judgment of the Grantor,
would render the proposed structure or structures or use inharmonious with the
general plan for improvement of the property or with structures located upon
other lots or other properties in the vicinity.

         C.   APPROVAL: Upon approval by the Grantor of any plans and
specifications submitted hereunder, a copy of such plans and specifications as
approved, shall be deposited for permanent record with the Grantor, and a copy
of such plans and specifications bearing such approval, in writing, shall be
returned to the applicant submitting the same.

         D.   RESULT OF AN ACTION: If Grantor fails either to approve or
disapprove such plans and specifications within sixty (60) days after the same
have been submitted to it, it shall be conclusively presumed that Grantor has
disapproved said plans and specifications; provided, however, that if within
said sixty (60) day period Grantor gives written notice of the fact that more
time is required for the approval of such plans and specifications, there shall
be no presumption that the same are disapproved until the expiration of a
reasonable period of time as set forth in said notice.




                                       48


<PAGE>   49
         E.   PROCEEDING WITH WORK: Upon receipt of approval from Grantor
pursuant to this Section the Owner or lessee to whom the same is given shall as
soon as practicable, satisfy all conditions thereof and diligently proceed with
the commencement and completion of all approved construction, refinishing,
altered and excavations. In all cases work shall be commenced within one (1)
year from the date of such approval. If there is a failure to comply with this
paragraph then the approval given pursuant to this Section shall be deemed
revoked unless Grantor upon request made prior to the expiration of said one (1)
year period extends the time for commencing work.

         F.   COMPLETION OF WORK: In any event, reconstruction, refinishing or
alteration of any such improvement shall be completed within two (2) years after
the commencement thereof except for so long as such completion is rendered
impossible or would result in great hardship due to strikes, fire, national
emergencies, natural calamities or other supervening forces beyond the control
of the Owner, lessee, licensee or occupant or his agents. Failure to comply with
this paragraph shall constitute a breach of the LOS GATOS BUSINESS PARK
RESTRICTIONS and subject the defaulting party or parties to all enforcement
procedures set forth in this Declaration and any other remedies provided by law
or in equity.

         G.   LIABILITY: Grantor shall not be liable for any damage, loss or
prejudice suffered or claimed on account of:

              (1)   The approval or disapproval of any plans, drawings and
specification whether or not defective;

              (2)   The construction or performance of any work, whether or not
pursuant to approved plans, drawings and specifications; or




                                       49


<PAGE>   50
              (3)   The development of any property within the LOS GATOS
BUSINESS PARK.

         H.   REVIEW FEE: An architectural review fee shall be paid to Grantor
at such time as plans and specifications are submitted for approval based on the
following schedule;

              (1)   When the plans submitted are prepared by an architect, the
architectural review fee shall be Two Hundred Fifty Dollars ($250.00);

              (2)   In all other cases the architectural review fee shall be
Five Hundred Dollars ($500.00).

         I.   CONSTRUCTION WITHOUT APPROVAL: If any improvement shall be
altered, erected, placed or maintained upon any lot, or any new use commenced on
any lot, otherwise than in accordance with the approval by the Grantor pursuant
to the provisions of this Section, such alteration, erection, maintenance or use
shall be deemed to have been undertaken in violation of this Section and without
the approval required herein, and upon written notice from the Grantor, any such
structure so altered, erected, placed or maintained upon any lot in violation
hereof shall be removed or re-altered, and any such use shall be terminated so
as to extinguish such violation. If within fifteen (15) days after the notice of
such violation the Owner of the lot upon which such violation exists shall not
have taken reasonable steps toward the removal or termination of the same,
Grantor shall have the right, through its agents and employees, to enter upon
such lot, subject to any security controls imposed by the Government of the
United States (or any agency thereof) with respect to any operation being
conducted thereon, and to take such steps as may be necessary to extinguish




                                       50


<PAGE>   51
such violation. Grantor or any such agent shall not thereby be deemed to have
trespassed upon such lot and shall be subject to no liability to the Owner or
occupant of such lot for such entry and any action taken in connection with the
removal of any violation. The cost of any abatement or removal hereunder shall
be a binding personal obligation of such mortgagee upon the lot in question. The
lien provided in this Section shall not be valid as against a bona-fide
purchaser (or bona-fide mortgagee) of a lot in question unless a suit to enforce
said lien shall have been filed in a court of record in Santa Clara County,
California, prior to the recordation among the land records of Santa Clara
County, California, of the deed (or mortgage) conveying the lot in question to
such purchaser (or subjecting the same to such mortgage).

         Section 2 - LIMITATIONS ON IMPROVEMENTS:

         A.   MINIMUM SETBACK LINES: No improvements of any kind, and no part
thereof, shall be placed closer than permitted by Grantor to an interior
property line. No improvements of any kind, and no part thereof, shall be placed
closer than twenty-five (25) feet from a property line fronting streets.

         B.   EXCEPTIONS TO SETBACK REQUIREMENTS: The following structures and
improvements are specifically excluded from the foregoing setback requirements:

              (1)   Roof overhang subject to the specific approval of Grantor in
writing, provided it does not extend more than six (6) feet into the setback
area;

              (2)   Steps and walks;

              (3)   Paving and associated curbing except that vehicle parking
area shall not be permitted to extend within street setback area.





                                       51


<PAGE>   52
              (4)   Fences, except that no fence shall be placed within the
street setback area unless specific approval is given by Grantor in writing;

              (5)   Landscaping;

              (6)   Planters, not to exceed three (3) feet in height, unless
specific written approval is given by Grantor;

              (6)   Signs identifying the owner, lessee or occupant subject to
the specific approval of Grantor in writing;

              (7)   Lighting facilities, subject to the specific approval of
Grantor in writing.

         C.   LANDSCAPING: Every site on which a building shall have been placed
shall be landscaped in accordance with plans and specifications submitted to and
approve by Grantor pursuant to Section 1 above. Landscaping as approved by
Grantor shall be installed within thirty (30) days of occupancy or completion of
the building, whichever occurs first, unless Grantor approves in writing another
completion date. After completion such landscaping shall be maintained in a
sightly and well-kept condition. The area of each site between any street and
any minimum setback line as defined by paragraphs A and B of this Section shall
be landscaped with an effective combination of street trees, trees, ground cover
and shrubbery. All other areas fronting on a street that are not utilized for
parking or driveways shall be landscaped in a similar manner. All areas of each
site not fronting on a street and not used for parking or storage shall be
landscaped utilizing ground cover and/or shrub and tree materials. Undeveloped
areas proposed for future expansion shall be maintained in a weed-free condition
and shall be landscaped if required by Grantor. Unpaved




                                       52

<PAGE>   53
areas between the street curb line and the property line adjoining any street
shall be landscaped and maintained by Owner. An underground automatic landscape
irrigation system shall be provided by the owner over all landscaped areas.
Areas used for parking shall be landscaped, be or fenced in such a manner as to
screen said areas from view from adjacent streets Such screening shall extend at
least forty two (42) inches above the high point of the finished pavement in
said parking area. Plant materials used for this purpose shall consist of lineal
or grouped masses of shrubs and/or trees.

         If, in the opinion and sole discretion of the Grantor, the required
landscape is not maintained in a sightly and well-kept condition, the Grantor
shall have the right, through its agents and employees, to enter onto any site
and to take such steps as may be necessary to maintain the landscaping in a
sightly and well-kept condition. Grantor, or any such agent or employee, shall
not thereby be deemed to have trespassed upon such site and shall be subject to
no liability to the owner or occupant of such site for such entry and any action
taken in connection with such necessary maintenance. The cost of any such
maintenance hereunder shall be a binding personal obligation of such Owner, as
well as a lien (enforceable in the same manner as a mortgage) upon the site in
question. The lien provided in this Section shall not be valid as against a
bona-fide purchaser (or bona-fide mortgagee) of a site in question unless a suit
to enforce said lien shall have been filed in a court of record in Santa Clara
County, California, prior to the recordation among the land records of Santa
Clara County, California, of a deed (or mortgage) conveying the site in question
to such purchaser (or subjecting the same to such mortgage).




                                       53


<PAGE>   54
         D.   SIGNS:

              (1)   No sign shall be permitted on any site unless approved by
Grantor in writing. No sign shall be approved other than those identifying the
name, business and products of the person or firm occupying the premises and
those offering the premises for sale or for lease;

              (2)   The location of signs shall be governed by the setback
requirements set forth in Article III-Section 2 unless Grantor gives permission
for a non-conforming location;

         E.   PARKING AREAS:

              (1)   Adequate off-street parking shall be provided to accommodate
all parking needs for employee, visitor and company vehicles on the site. The
intent of this provision is to eliminate the need for any on-street parking;
provided that this provision does not prohibit on-street parking of public
transportation vehicles.

              (2)   On-Site: Required off-street parking shall be provided on
the site of the use served, or on a contiguous site, or within six hundred (600)
feet of this subject site. Where parking is provided on other than the site
concerned, a recorded document shall be filed with the Grantor and signed by the
Owners of the alternate site stipulating to the permanent reservation of the use
of the site for said parking.

              (3)   Paved Areas: Parking areas shall be paved so as to provide
dust-free, all-weather surfaces. Each parking space provided shall be designated
by lines painted on the paved surfaces and shall be adequate in area, and all
parking areas shall




                                       54

<PAGE>   55
provide, in addition to parking spaces, adequate driveways and space for the
movement of vehicles.

              (4)   Parking Plan: The number of parking spaces required for each
site, and the specific location of the same, shall be designated in plans for
each site which have been submitted and approved in the manner set forth herein.
In determining the number of parking spaces and the location thereof of each
site, Grantor shall consider the exact nature of the use proposed for the site;
the anticipated number and manner of employment of persons on the site; the
nature and location of proposed structures on the site; and such other matters
as Grantor shall deem relevant.

              (5)   Limitation: No parking spaces shall be located on, and no
parking shall be permitted by the Grantor within designated street setback
areas.

         F.   STORAGE AND LOADING AREAS:

              (1)   Unless specifically approved by Grantor in writing, no
materials, supplies or equipment, including company-owned or operated trucks and
motor vehicles shall be stored in any area on a site except inside a closed
building, or behind a visual barrier screening such areas so that they are not
visible from the neighboring properties or public streets. Any storage areas
screened by visual barriers shall be located on the rear portions of the site,
unless approved by Grantor in writing. No storage areas shall extend into
setback lines as established herein unless approved by Grantor in writing.

              (2)   All provisions for vehicle loading shall be provided on the
site with on-street vehicle loading not permitted.




                                       55


<PAGE>   56
              (3)   No loading dock, trucking or railroad activity shall be
permitted between the structure and any street, and no loading areas shall
encroach into setback areas unless specifically approved by Grantor.

              (4)   Loading dock areas shall be set back and screened so as not
to be visible from neighboring properties and streets, but in any event, the
docks shall not be closer than forty-five (45) feet from a property line
fronting any street unless specifically approved by Grantor in writing. ARTICLE
IV - REGULATION OF OPERATIONS AND USES

         Section 1 - PERMITTED USES: Unless otherwise specifically prohibited
herein, any industrial operation and use will be permitted, provided Grantor
specifically consents to such use in writing, if it is performed or carried out
entirely within a building that is so designed and constructed that the enclosed
operations and uses do not cause or produce a nuisance to adjacent sites such
as, but not limited to vibration, sound, electro-mechanical disturbances and
radiation, electro-magnet disturbances, radiation, air or water pollution, dust,
emission of odorous, toxic and non-toxic matter. Certain activities which cannot
be carried on within a building may be permitted, provided Grantor specifically
consents to such activity in writing and further provided such activity is
screened so as not to be visible from neighboring properties and streets. All
lighting is to be shielded from adjacent sites.

         Section 2 - RESTRICTIONS AND PROHIBITED USES:

         A.   PROHIBITED USES: The following operations and uses shall not be
permitted on any property subject to these restrictions:

              (1)   Residential of any type;




                                       56

<PAGE>   57
              (2)   Trailer courts or recreation vehicle campgrounds;

              (3)   Hotels or motels;

              (4)   Junk yards or recycling facilities;

              (5)   Drilling for and/or the removal of oils gas or other
hydrocarbon substances (except that this provision shall not be deemed to
prohibit the entry of subject property below a depth of five hundred (500) feet
for such purposes);

              (6)   Commercial excavation of building or construction materials,
except in the course of approved construction as provided by Article III-Section
1 above;

              (7)   Distillation of bones;

              (8)   Dumping, disposal, incineration or reduction of garbage,
sewage, offal, dead animals or refuse;

              (9)   Fat rendering;

              (10)  Stockyard or slaughter of animals;

              (11)  Refining of petroleum or of its products;

              (12)  Smelting of iron, tin, zinc, or other ores;

              (13)  Cemeteries;

              (14)  Jail or honor farms;

              (15)  Labor or migrant worker camps;

              (16)  Truck terminals;

              (17)  Petroleum storage yards.




                                       57


<PAGE>   58
         B.   NUISANCES: No nuisance shall be permitted to exist or operate upon
any site so as to be offensive or detrimental to any property in the vicinity
thereof or to its occupants. A "nuisance" shall include but not be limited to
any of the following conditions:

              (1)   Dirt, Dust and Waste Discharge: No use of the property will
be permitted which emits dust, sweepings, dirt or cinders into the atmosphere,
or discharges liquid, solid wastes or other harmful matter into any stream,
river or other body of water which, in the opinion of the Grantor may adversely
affect the health, safety, comfort of, or intended property use by persons
within the area. Nor shall waste or any substance or materials of any kind be
discharged into any public sewer serving the property, or any part thereof, in
violation of any regulations of any public body having jurisdiction.

              (2)   Fumes, Gases, Odors, Etc.: No fumes, odors, gases, vapors,
acids or other substances shall be permitted to escape or be discharged into the
atmosphere which, in the opinion of Grantor, may be detrimental to the health,
safety or welfare of persons, or may interfere with the comfort of, persons
within the area, or which may be harmful to property or vegetation.

              (3)   Glare or Heat: Any operation producing intense glare or heat
shall be performed only within an enclosed or screened area and then only in
such manner that the glare or heat emitted will not be discernible from any
exterior lot line.

              (4)   Noise: At no point outside of any property plane shall the
sound pressure level of any machine, device, or any combination of same, from
any individual plant or operation exceed the decibel levels in the designated
preferred octave bands shown below:




                                       58

<PAGE>   59
                 OCTAVE BAND            MAXIMUM SOUND PRESSURE
              CENTER FREQUENCY          LEVELS (DB) AT BOUNDARY
                    (HZ)                     PLANE OF LOT

                     31.5                           78
                     63                             72
                    125                             65
                    250                             59
                    500                             55
                   1000                             52
                   2000                             50
                   4000                             48
                   8000                             47

A-scale levels for monitoring purposes are equivalent to 60 dB(A). The maximum
permissible noise levels for the octave bands shown above are equal to an NC-50
Noise Criterion curve when plotted on the preferred frequency scale. Noise from
motor vehicles and other transportation facilities are exempted. The operation
of signalling devices and other equipment having impulsive or non-continuous
sound characteristics shall have the following corrections applied:

CORRECTIONS

Pure tone content                           -5dB
Impulsive character                         -5dB
Duration for non-continuous
sounds in daytime only,
         1 min/hr                           -5dB
         10 sec/10 min                      -10dB
         2 sec/10 min                       -15dB

The reference level for the dB values listed above is the pressure of 0.0002
microbar or 0.0002 dyne/em.

              (5)   Smoke and Particulate Matter: Visible emissions of smoke
will not be permitted (outside any building) which exceed Ringlemann No. 1 on
the Ringlemann



                                       59

<PAGE>   60
Chart of the United States Bureau of Mines, other than the exhausts emitted by
motor vehicles or other transportation facilities. This requirement shall also
be applicable to the disposal of trash and waste materials. Wind-borne dust,
sprays and mists originating in plants will not be permitted.

              (6)   Vibration: Buildings and other structures shall be
constructed and machinery and equipment installed and insulated on each site so
that the ground vibration inherently and recurrently generated is not
perceptible without instruments at any point along any of the exterior lot
lines.

         C.   CONDITION OF PROPERTY: The Owner of any site or lot shall at all
times keep the premises, buildings, improvements and appurtenances in a safe,
clean and wholesome condition and comply in all respects with all government,
health, fire and police requirements and regulations, and the Owner will remove
at his or its own expense any rubbish of any character whatsoever which may
accumulate on such site or lot. In the event such Owner fails to comply with any
or all of such specifications or requirements, the Grantor shall have the right,
privilege and license to enter upon such premises and make any and all
corrections or improvements that may be necessary to meet such standards and to
charge such Owner the expenses incurred in doing so. Grantor or any of its
agents shall not thereby be deemed to have trespassed upon such lot and shall be
subject to no liability to the Owner or occupant of such lot for such entry and
any action taken in connection with the removal of any violation. The cost of
any abatement or removal hereunder shall be a binding personal obligation on
such Owner as well as a lien (enforceable in the same manner as a mortgage) upon
the lot in question. The lien provided in this Section shall not be valid as
against a




                                       60

<PAGE>   61
bona-fide purchaser (or a bona-fide mortgagee) of a lot in question unless a
suit to enforce said lien shall have been filed in a court of record in Santa
Clara County, California, prior to the recordation among the land records Santa
Clara County, of the deed (or mortgage) conveying the lot in question to such
purchaser, or subjecting the same to such mortgage.

         D.   REPAIR OF BUILDINGS: No building or structure upon any site shall
be permitted to fall into disrepair, and each such building and structure shall
at all times be kept in good condition and repair and adequately painted or
otherwise finished.

         E.   RIGHT OF ENTRY: During reasonable hours and subject to reasonable
security requirements, Grantor, or its authorized representative, shall have the
right to enter upon and inspect any building, site or parcel and the
improvements thereon embraced for the purpose of ascertaining whether or not the
provisions of LOS GATOS BUSINESS PARK RESTRICTIONS have been or are being
complied with and neither Grantor nor its authorized representative, shall be
deemed to have committed a trespass or other wrongful act by reason of such
entry or inspection.

         F.   REFUSE COLLECTION AREAS: All outdoor refuse collection areas shall
be visually screened so as not to be visible from streets, freeways and
neighboring property. No refuse collection areas shall be permitted between a
street and the front of a building.

         G.   IMPROVEMENTS: The Grantor reserves the sole right to grant 
consents for the construction and operation of street railways, interurban,
rapid transit or other public utility facilities, freight railways, electric
light, telephone and telegraph pole lines, aboveground or underground conduits,
and gas pipes in and upon any and all streets now




                                       61


<PAGE>   62
existing or hereafter established upon which any portion of the premises may now
or hereafter front or abut. The Grantor reserves and is hereby granted the
exclusive right to grant consents and to petition the proper authorities for any
and all street improvements such as grading, seeding, tree planting, sidewalks,
paving, sewer and water installation, whether it be on the surface or
sub-surface which in the opinion of the Grantor are necessary in or to the
property subject to these restrictions. The Grantor reserves the right to
approve aboveground utility lines across any property subject to these
restrictions, when such utility lines, in the opinion of the Grantor, are
necessary to the property subject to these restrictions.

         Section 3 - OTHER OPERATIONS AND USES: Operations and uses which are
neither specifically prohibited nor specifically authorized by these
restrictions may be permitted in a specific case if operational plans and
specifications are submitted to and approved in writing by Grantor. Approval or
disapproval of such operational plans and specifications shall be based upon the
effect of such operations or uses on other property subject to these
restrictions or upon the occupants thereof, but shall be in the sole discretion
of Grantor.

ARTICLE V - DURATION, MODIFICATION AND REPEAL

         Section 1 - DURATION OF RESTRICTIONS: The LOS GATOS BUSINESS PARK
RESTRICTIONS shall continue and remain in full force and effect at all times
with respect to all property, and each part thereof, now or hereafter made
subject thereto (subject, however, to the right to amend and repeal as provided
for herein) until January 1, 2009. However, unless within one (1) year prior to
January 1, 2009, there shall be recorded an instrument directing the terminate
of the LOS GATOS BUSINESS PARK RESTRICTIONS signed by owners of not less than
two-thirds (2/3) of the property then subject to these restrictions, based on
the




                                       62


<PAGE>   63
number of square feet subject to these restrictions (excluding dedicated
streets), the LOS GATOS BUSINESS PARK RESTRICTIONS, as in effect immediately
prior to the expiration date shall be continued automatically without any
further notice for an additional period of ten (10) years and thereafter for
such periods of ten (10) years unless within one (1) year prior to the expansion
of a such period the LOS GATOS BUSINESS PARK RESTRICTIONS are terminated as set
forth above in this Section.

         Section 2 - TERMINATION AND MODIFICATION: This Declaration or any
provision thereof, or any covenant, condition or restriction contained herein,
may be terminated, extended, modified or amended, as to the whole of said
property or portion thereof, with the written consent of the owners of sixty six
and two-thirds (66-2/3%) of the property subject to these restrictions, based on
the number of square feet owned as compared to the total number of square feet
subject to these restrictions (excluding dedicated streets), provided, however,
that so long as Grantor owns at least twenty five percent (25%) of the property
subject to these restrictions, or for a period of fifteen (15) years from the
effective date hereof, whichever period is longer, no such termination,
extension modification or amendment shall be effective without the written
approval of Grantor thereto. Provided further, that the provisions of Article
III and Article IV hereof shall inure to the benefit of and be enforceable
solely by Grantor, shall be capable of being amended by Grantor without the
consent of any other owner, person or entity, and shall not give any third party
any right or cause of action on account of the terms of this Declaration. No
such termination, extension, modification or amendment shall be effective until
a proper instrument in writing has been




                                       63


<PAGE>   64
executed and acknowledged and recorded in the County where the land affected
thereby is situated.

ARTICLE VI - ENFORCEMENT

         Section 1 - ABATEMENT AND SUIT: Violation or breach of any restriction
herein contained shall give to Grantor the right to enter upon the property or
as to which said violation or breach exists and to summarily abate and remove at
the expense of the Owner, lessee or occupant thereof, any structure, thing or
condition that may be or exist thereon contrary to the intent and meaning of the
provisions hereof, or to prosecute a proceeding at law or in equity against the
person or persons who have violated or are attempting to violate any of these
restrictions to enjoin or prevent them from doing so, to cause said violation to
be remedied or to recover damages for said violation.

         Section 2 - DEEMED TO CONSTITUTE A NUISANCE: The result of every action
or omission whereby any restriction herein contained is violated in whole or in
part is hereby declared to be and to constitute a nuisance, and every remedy
allowed by law or equity against an Owner, either public or private, shall be
applicable against every such result and may be exercised by Grantor.

         Section 3 - ATTORNEY FEES: In any legal or equitable proceeding for the
enforcement of this Declaration or any provision hereof, whether it be an action
for damages, declaratory relief or injunctive relief, the losing party or
parties shall pay the attorney fees of the prevailing party or parties, in such
reasonable amount as may be fixed by the court in such proceedings, or in a
separate action brought for that purpose. The prevailing party shall be




                                       64

<PAGE>   65
entitled to said attorney fees, even though said proceeding is settled prior to
judgment. All remedies provided herein or at law or in equity shall be
cumulative and not exclusive.

         Section 4 - FAILURE TO ENFORCE NOT A WAIVER OF RIGHTS: The Grantor
shall have the right to waive or grant a variance from any requirement,
restriction or standard contained in these Restrictions. The failure of Grantor
to enforce any requirement, restriction or standard herein contained, shall in
no event be deemed to be a waiver of the right to do so thereafter, nor of the
right to enforce any other restriction.

ARTICLE VII - MISCELLANEOUS PROVISIONS

         Section 1 - ASSIGNMENT OF RIGHTS AND DUTIES: Any and all of the rights,
powers and reservations of Grantor herein contained may be assigned to any
person, corporation or association which will assume the duties of Grantor
pertaining to the particular rights, powers and reservations assigned, and upon
any such person, corporation or association evidencing its consent in writing to
accept such assignment and assume such duties, he or it shall, to the extent of
such assignment, have the same rights and powers and be subject to the same
obligations and duties as are given to and assumed by Grantor herein. The term
"Grantor" as used herein includes all such assignees and their successors and
assigns. I f at any time Grantor ceases to exist and has not made such an
assignment, a successor Grantor may be appointed in the same manner as these
Restrictions may be terminated, extended, modified or amended under Article V -
Section 2. Any assignment or appointment made under this Section shall be in
recordable form and shall be recorded in the County where the land is situated.




                                       65

<PAGE>   66
         Section 2 - CONSTRUCTION NOISE AND ACCEPTANCE: Every person or other
entity who now or hereafter owns, occupies or acquires any right, title or
interest in or to any portion of the property made subject to these Restrictions
is and shall be conclusively deemed to have consented and agreed to every
covenant, condition and restriction contained herein, whether or not any
reference to this Declaration are contained in the instrument by which such
person or entity acquired an interest in said property.

         Section 3 - WAIVER: Neither Grantor nor its successors or assigns shall
be liable to any Owner, lessee, licensee, or occupant of land subject to this
Declaration by reason of any mistake in judgment, negligence, nonfeasance,
action or inaction or for the enforcement or failure to enforce any provision of
this Declaration. Every Owner, lessee, licensee or occupant of any of said
property by acquiring his interest therein agrees that he will not bring any
action or suit against Grantor to recover any such damages or to seek equitable
relief.

         Section 4 - MUTUALITY, RECIPROCITY - RUNS WITH LAND: All covenants,
conditions, restrictions and agreements contained herein are made for the
direct, mutual and reciprocal benefit of each and every part and parcel of the
property now or hereafter made subject to this Declaration, shall create mutual,
equitable servitudes upon each parcel in favor of every other parcel; shall
create reciprocal rights and obligations between the respective Owners of all
parcels and privity of contract and estate between all grantees of said parcels,
their heirs, successors and assigns; and shall, as to the owner of each parcel,
his heirs, successors and assigns, operate as covenants running with the land,
for the benefit of all other parcels, except as provided herein.




                                       66


<PAGE>   67
         Section 5 - RIGHTS OF MORTGAGEES: No breach of the restrictions and
other provisions contained herein, or any enforcement thereof, shall defeat or
render invalid the lien of any mortgage or deed of trust now or hereafter
executed upon land subject to these Restrictions; provided, however, that if any
portion of said property is sold under a foreclosure of any mortgage or under
the provisions of any deed of trust, any purchaser of such sale and his
successors and assigns shall hold any and all property so purchased subject to
all of the restrictions and other provisions of this Declaration.

         Section 6 - PARAGRAPH HEADINGS: Paragraph headings, where used herein,
are inserted for convenience only and are not intended to be a part of this
Declaration or in any way to define, limit or describe the scope and intent of
the particular paragraphs to which they refer.

         Section 7 - EFFECT OF INVALIDATION: If any provisions of this
Declaration is held to be invalid by any court, the invalidity of such provision
shall not effect the validity of. the remaining provisions hereof.

         IN WITNESS WHEREOF, Grantor has executed this Declaration the day and
year first above written.

                                       LOS GATOS BUSINESS PARK
                                       A Limited Partnership

                                       By: /s/ Howard J. White
                                           ------------------------------------
                                           Howard J. White, III General Manager


         Article VI, Section 4 entitled "Failure to Enforce Not a Waiver of
Rights" has been amended to read:





                                       67

<PAGE>   68
         The Grantor is hereby authorized and empowered to grant reasonable
variances from the provisions of this Declaration in order to overcome practical
difficulties and in order to prevent unnecessary hardship in the application of
the provisions contained herein, provided, however, that said variances shall
not materially alter or be inconsistent with the general plan and intent of this
Declaration. The failure of Grantor to enforce any requirement, restriction or
standard herein contained, shall in no event be deemed to be a waiver of the
right to do so thereafter, nor of the right to enforce any other restriction.




















                                       68


<PAGE>   69
                                 LEASE GUARANTY

         THIS LEASE GUARANTY is made as of the 17th day of November, 1995, by
Octel Communications Corporation, a Delaware corporation ("Guarantor"), in favor
of Los Gatos Business Park, a California limited partnership ("Lessor").
Guarantor recites as follows:

         A.   Lessor and Rhetorex, Incorporated, a California corporation
("Lessee"), have entered into that certain Lease (the "Lease") dated the date
hereof pursuant to which Lessor is leasing to Lessee certain premises located at
151 Albright Way, Los Gatos, California.

         B.   As a condition precedent to Lessor's execution and delivery of the
Lease, and as an inducement for Lessor to enter the Lease, Guarantor desires to
guaranty the payment of all rent under the Lease on the terms and conditions
described herein.

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby guaranties and agrees as follows:

         1.   Guarantor absolutely and irrevocably guaranties the payment of all
monthly rent, real estate taxes, operating expenses and other amounts referenced
under Section 3.B of the Lease which may from time to time be due and owing by
Lessee to Lessor under the Lease (the "Guaranteed Obligations"). If Lessee at
any time fails to pay any Guaranteed Obligation prior to the expiration of any
applicable cure period under the Lease, Guarantor will, upon demand from Lessor,
pay the same. This Guaranty shall be continuing and shall terminate only upon
the full and complete payment of all Guaranteed Obligations.

         2.   This Guaranty is a guaranty of payment and not of collection, the
obligations of Guarantor under this Guaranty are independent of the obligations
of Lessee, and Lessor may enforce this Guaranty against Guarantor without first
(a) making any effort at collection or enforcement of any Guaranteed Obligations
from or against Lessee or any other party that may be liable therefor, other
than providing any notices and cure periods required under the Lease, (b)
exercising or asserting any other right or remedy which may be available in
connection with the Guaranteed Obligations or resorting to or exhausting any
other security, guaranty or collateral held with respect to the Guaranteed
Obligations, or (c) asserting or filing any claim against the assets of Lessee,
Guarantor, or any other guarantor or any other party whatsoever. Neither failure
by Lessor to enforce any or all of its rights under the Lease or to insist upon
strict payment by Lessee of the Guaranteed Obligations, nor any grant by Lessor
of any indulgences or extensions of time to Lessee for the payment of any
Guaranteed Obligations, shall release Guarantor or in any way affect or diminish
Guarantor's obligations under this Guaranty. Guarantor expressly waives any
notice of acceptance of this Guaranty, diligence, presentment, demand, protest,
extension of time for payment of the Guaranteed Obligations, and notice of any
kind whatsoever, other than any notices and cure periods required under the
Lease.




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         3.   This Guaranty shall remain and continue in full force and effect
notwithstanding (a) the commencement or continuation of any action or proceeding
by, against or concerning Lessee under any federal or state bankruptcy,
insolvency or other debtor-relief law, (b) the voluntary or involuntary
appointment of a receiver, trustee, keeper or other person who takes possession
of any of Lessees assets, regardless of whether such appointment occurs as a
result of insolvency or any other cause, or (c) any assignment by Lessee for the
benefit of its creditors.

         4.   This Guaranty may not be amended, modified, waived, discharged or
terminated orally or by course of conduct, but only by an instrument in writing
duly executed by both Lessor and Guarantor. No waiver by Lessor of any default
of Lessee or Guarantor or any other event shall be effective unless in writing,
nor shall it operate as a waiver of any other default or of the same default on
a future occasion.

         5.   This Guaranty shall inure to the benefit of any person or persons,
entity or entities who now or hereafter may be entitled to the benefits or
obligated to perform the duties of Lessor under the Lease and shall be binding
upon the heirs, legal representatives, successors and assigns of Guarantor. All
rights and remedies of Lessor under this Guaranty and the Lease are cumulative
and not restrictive of any other rights or remedies available at law or in
equity.

         6.   Any notice required or permitted to be given hereunder shall be in
writing and shall be deemed duly given (a) when personally delivered, (b) one
day after being sent by Federal Express or similar overnight delivery service,
charges prepaid, or (c) three (3) business days after being deposited in the
U.S. Postal Service, postage prepaid, registered or certified mail, return
receipt requested (or when actually received, if earlier), and addressed as
follows: if to Lessor, at 900 Welch Road, Suite 10, Palo Alto, California 94304;
if to Guarantor, at 1001 Murphy Ranch Road, Milpitas, California 95035,
Attention: Vice President of Real Estate and Facilities.

         7.   If either Lessor or Guarantor shall bring any action or legal
proceeding to enforce, protect or establish any term or covenant of this
Guaranty, the prevailing party shall be entitled to recover its reasonable
attorneys' fees, court costs and experts' fees as may be fixed by the court.
"Prevailing party" as used herein includes a party who dismisses an action for
recovery hereunder in exchange for sums allegedly due, performance of covenants
allegedly breached or consideration substantially equal to the relief sought in
the action.

         8.   The validity, effect, construction, performance and enforcement of
this Guaranty shall be governed in all respects by the laws of the State of
California (without regard to conflicts of laws). Whenever possible, each
provision of this Guaranty shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.




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         IN WITNESS WHEREOF, the undersigned has executed this Guaranty, by its
duly-authorized representative, as of the day and year first above written.

                                       OCTEL COMMUNICATIONS CORPORATION,

                                       a Delaware corporation

                                       By: /s/ James Engle
                                           -----------------------------
                                       Its: Treasurer








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