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                                                                   EXHIBIT 10.21


                     ENVIRONMENTAL AGREEMENT AND INDEMNITY
                     -------------------------------------

          THIS ENVIRONMENTAL AGREEMENT AND INDEMNITY (this "Agreement") is made
and entered into as of March 24, 1997 by IPAC Properties, a California
corporation ("Indemnitor"), to and for the benefit of SUN LIFE ASSURANCE COMPANY
OF CANADA (U.S.), a Delaware corporation ("Lender").

                                R E C I T A L S
                                ---------------

     A.  Lender has made a loan (the "Loan") to Indemnitor in the principal
amount of $6,700,000.00, which Loan is evidenced by a Promissory Note ("Note")
of even date herewith executed by Indemnitor in favor of Lender and is secured
by, among other things, that certain Deed of Trust, Financing Statement,
Security Agreement and Fixture Filing (With Assignment of Rents and Leases) (the
"Deed of Trust") of even date herewith executed by Indemnitor, as trustor, in
favor of Lender, as beneficiary, encumbering certain property located in the
City of San Jose, County of Santa Clara, State of California, as described in
Exhibit A attached hereto and made a part hereof (the "Property").
---------

     B.  As a result of Lender's making the Loan to Indemnitor, Lender could
incur or suffer certain liabilities, costs and/or expenses in connection with
the Property relating to Hazardous Substances (as hereinafter defined)
including, but not limited to, as the owner of the Property subsequent to a
foreclosure sale or deed taken in lieu thereof.  Lender has therefore required
the execution and delivery of this Agreement as a condition precedent to
Lender's making of the Loan to Indemnitor in order to protect Lender from any
such liabilities, costs and/or expenses, and Lender would not be willing to make
the Loan to Indemnitor in the absence of the execution and delivery by
Indemnitor of this Agreement.

     NOW, THEREFORE, Indemnitor, in consideration of the foregoing and as an
inducement to Lender to make the Loan, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby covenants and agrees to and for the benefit of Lender as follows:

                                A G R E E M E N T
                                -----------------

     1.  Recitals. The recitals set forth above are true and correct and are by
         --------
this reference incorporated herein.

     2.  Definitions. As used in this Agreement, the following terms shall have
         -----------
the following meanings:

           (a) Hazardous Substance. The term "Hazardous Substance" means (i) any
               -------------------
     chemical, compound, material, mixture or substance that is now or hereafter
     defined or listed in, or otherwise classified pursuant to, any
     Environmental Laws (as hereinafter defined) as a "hazardous substance",
     "hazardous material", "hazardous waste", "extremely hazardous waste",
     "infectious waste", "toxic substance", "toxic pollutant" or any other
     formulation intended to define, list, or classify substances by reason of
     deleterious properties such as ignitability, corrosivity, reactivity,
     carcinogenicity, toxicity, reproductive toxicity, or "EP toxicity", (ii)
     any petroleum, natural gas, natural gas liquid, liquified natural gas,
     synthetic gas usable for fuel (or mixtures of natural gas and such
     synthetic gas), ash produced by a resource recovery facility utilizing a
     municipal solid
<PAGE>

     waste stream, and drilling fluids, produced waters, and other wastes
     associated with the exploration, development or production of crude oil,
     natural gas, or geothermal resources, and (iii) any underground storage
     tanks.

          (b) Hazardous Substance Activity. The term "Hazardous Substance
              ----------------------------
     Activity" means any actual, proposed or threatened storage, holding,
     existence or suspected existence, release or suspected release, emission,
     discharge, generation, processing, abatement, removal, disposition,
     handling or transportation of any Hazardous Substance from, under, into, on
     or across the Property or surrounding property or any other use of or
     operation on the Property or the surrounding property that creates a risk
     of Hazardous Substance contamination of the Property. "Hazardous Substance
     Activity" includes, without limitation, any use of the Property involving
     any of the following activities: leather tanning; metal plating; salvage
     operations of any type (including, but not limited to, automobiles,
     electrical equipment or transformers, surplus military equipment or lead
     batteries); fertilizer or pesticide manufacture, packaging or bulk storage;
     wood or pole treatment facilities; paint manufacturing; drum or tank
     recycling or salvage; oil reclamation; petroleum blending, packaging or
     bulk storage; chemical manufacturing, processing, blending, bulk storage,
     packaging or distribution; manufacturing of electronic components or
     analytical laboratory equipment; ceramics manufacturing or painting; dry
     cleaning; printing; biological or chemical research; precious metal
     recovery; gas station operations; automobile painting; or automotive
     service center.

          (c) Environmental Laws. The term "Environmental Laws" means any and
              ------------------
     all present and future federal, state and local laws (whether under common
     law, statute, ordinance, rule, regulation or otherwise), court or
     administrative orders or decrees, requirements of permits issued with
     respect thereto, and other requirements of governmental authorities
     relating to the environment or to any Hazardous Substance or Hazardous
     Substance Activity (including, without limitation, the Comprehensive
     Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
     (S)(S)9601, et seq.), as heretofore or hereafter amended from time to time
                 ------
     ("CERCLA"), and the applicable provisions of the California Health and
     Safety Code and the California Water Code).

          (d) Hazardous Substance Claims. The term "Hazardous Substance Claims"
              --------------------------
     means any and all enforcement, clean-up, removal, remedial or other
     governmental or regulatory actions, agreements or orders threatened,
     instituted or completed pursuant to any Environmental Laws and any and all
     other actions, proceedings, claims, demands or causes of action, whether
     meritorious or not (including, without limitation, third party claims for
     contribution, indemnity, personal injury or real or personal property
     damage), which directly or indirectly relate to, arise from or are based in
     whole or in part on: (i) the occurrence or alleged occurrence of any
     Hazardous Substance Activity; (ii) any violation or alleged violation of
     any applicable Environmental Laws relating to the Property or to the
     ownership, use, occupation or operation thereof; or (iii) any
     investigation, inquiry, order, hearing, action or other proceeding by or
     before any governmental agency in connection with any Hazardous Substance
     Activity.

          (e) Remedial Work. The term "Remedial Work" shall mean all
              -------------
     investigation, monitoring, restoration, abatement, detoxification,
     containment, handling, treatment, removal, storage, decontamination, clean-
     up, transport, disposal or other ameliorative work or response action
     required by (i) any Environmental Law, (ii) any order or request

                                       2
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     of any federal, state or local governmental agency, or (iii) any judgment,
     consent decree, settlement or compromise with respect to any Hazardous
     Substance Claims.

          (f) Losses. The term "Losses" means any and all losses (including
              ------
     diminution in value of the Property), liabilities, damages, punitive
     damages, demands, claims, actions, judgments, causes of action,
     assessments, penalties, costs and expenses (including sums paid in
     settlement of claims), liens, interest, fines or penalties, including,
     without limitation, the reasonable fees and disbursements of outside legal
     counsel, paralegals and accountants and the reasonable charges of in-house
     legal counsel, paralegals and accountants, consultant fees, expert fees,
     all foreseeable and unforeseeable consequential damages, and all other
     costs and expenses of any kind or nature. "Losses" include, but are not
     limited to, (a) capital, operating and maintenance costs incurred in
     connection with any Remedial Work required or performed by or on behalf of
     any federal, state or local governmental agency or political subdivision or
     performed by or on behalf of any nongovernmental entity or person because
     of the presence, suspected presence, release or suspected release of any
     Hazardous Substance in or into the air, soil, groundwater or surface water
     at, on, about, under or within the Property (or any portion thereof), and
     any claims of third parties for loss or damage due to such Hazardous
     Substance; and (b) all Losses sustained by Lender due to any Hazardous
     Substance (i) that is present or suspected to be present in the air, soil,
     groundwater or surface water at, on, about, under or within the Property
     (or any portion thereof) on or before the date of this Agreement, or (ii)
     that migrates, flows, percolates, diffuses or in any way moves onto, into
     or under the air, soil, groundwater or surface water at, on, about, under
     or within the Property (or any portion thereof) after the date of this
     Agreement, irrespective of whether such Hazardous Substance shall be
     present or suspected to be present in the air, soil, groundwater or surface
     water at, on, about, under or within the Property (or any portion thereof)
     as a result of any release, discharge, disposal, dumping, spilling, or
     leaking (accidental or otherwise) onto the Property (or any portion
     thereof) occurring before, on or after the date of this Agreement or caused
     by any person or entity.

          (g) Environmental Losses. The term "Environmental Losses" means Losses
              --------------------
     suffered or incurred by Lender with respect to the Property arising out of
     or as a result of: (i) the occurrence of any Hazardous Substance Activity;
     (ii) any violation of any applicable Environmental Laws relating to the
     Property or to the ownership, use, occupancy or operation thereof; (iii)
     any investigation, inquiry, order, hearing, action, or other proceeding by
     or before any governmental agency in connection with any Hazardous
     Substance Activity; (iv) any Hazardous Substance Claims brought, asserted,
     or alleged against Lender or any of its directors, officers, shareholders,
     employees or agents; (v) any actions taken by Lender to enter and inspect
     the Property pursuant to California Civil Code Section 2929.5; (vi) any
     actions taken by Lender to appoint a receiver pursuant to California Code
     of Civil Procedure Section 564; and (vii) any actions taken by Lender
     pursuant to California Code of Civil Procedure Section 726.5.

     3. Representations and Warranties. Indemnitor hereby represents and
        ------------------------------
warrants that, except as disclosed by the Level I Site Assessment dated December
18, 1996 and prepared by AllWest Environmental, Inc. and provided to Lender: (a)
to the best of Indemnitor's knowledge, no Hazardous Substances currently are or
have been present, used, generated, manufactured, stored, released, discharged
on or transported to, from or across the Property and no other Hazardous
Substance Activity currently is or has been conducted on the Property, except
strictly in accordance with all applicable Environmental Laws, and, as to
tenants or others in possession as of the date hereof, with prudent business
practices as determined by Indemnitor in its capacity

                                       3
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as a prudent landlord and owner; (b) Indemnitor has not received any written
notice that the Property is in violation of any Environmental Laws; and (c)
Indemnitor has not received any written notice of any Hazardous Substance
Claims.

     4. Covenants. Indemnitor shall: (a) comply and cause all tenants and other
        ---------
persons on or occupying the Property, to comply with all Environmental Laws; (b)
without limiting the generality of clause (a) above, not engage in, permit nor
acquiesce to any Hazardous Substance Activity on, under or about the Property,
except in strict accordance with all Environmental Laws, and with then prudent
business practices as determined by Indemnitor in its capacity as a prudent
landlord and owner; (c) immediately advise Lender in writing of (i) the receipt
by Indemnitor of written notice of any and all Hazardous Substance Claims, and,
as soon thereafter as possible, advise Lender of the correctness of such
Hazardous Substance Claims, (ii) any knowledge by Indemnitor that the Property
does not comply with any Environmental Laws, (iii) any remedial action taken by
Indemnitor in response to any Hazardous Substances or Hazardous Substance
Activity on, under or about the Property, or to any Hazardous Substance Claims,
and (iv) Indemnitor's discovery of the presence of any Hazardous Substances or
Hazardous Substances Activity on, under or about the Property or any real
property immediately adjacent to the Property whether or not the same requires
notice to be given to any governmental entity or agency under Environmental
Laws; (d) submit to Lender, promptly upon receipt or preparation, copies of any
and all reports, studies, analyses, correspondence, governmental comments or
approvals, proposed removal or other Remedial Work contracts and similar
information prepared or received by Indemnitor in connection with any Remedial
Work or Hazardous Substances relating to the Property; (e) maintain property
management services at the Property which shall provide for periodic inspections
of the Property (subject to access restrictions under leases and at law) and for
periodic meetings with representatives of Indemnitor and, upon request, Lender
to review the results of such inspections; and (f) use reasonable efforts to
negotiate leases which provide (i) that periodic entry and inspection by
Indemnitor, Indemnitor's representatives, property manager and/or upon request,
Lender, is authorized and (ii) that Indemnitor is authorized under the lease to
perform Remedial Work after a failure by a tenant to respond to Indemnitor's
request for Remedial Work by such tenant.

     5. Remedial Work. As soon as possible, but no later than sixty (60) days
        -------------
after receipt by Indemnitor of any Hazardous Substance Claim, Indemnitor shall
perform or cause others qualified to do so to perform any and all necessary
Remedial Work in response to any Hazardous Substance Claim. Subject to the terms
of any leases and applicable laws, in response to Indemnitor's knowledge of the
presence of any Hazardous Substance on or under the Property or real property
immediately adjacent to the Property, Indemnitor shall immediately perform or
cause tenants to immediately perform all Remedial Work. All costs and expenses
of any Remedial Work shall be paid by Indemnitor, it being understood that
Lender shall be at no cost or expense in connection with any Remedial Work.
Lender shall have the right, but no obligation, to join and participate in, as a
party if it so elects at Lender's cost, any legal proceedings or actions
initiated in connection with any Hazardous Substance Claims, provided, however,
Indemnitor shall reimburse to Lender its attorneys' fees and costs incurred if
such participation is deemed reasonably necessary by Lender to protect its
security interest in the Property.

     6. Remedies. In addition to any other rights or remedies Lender may have
        --------
under this Agreement, at law or in equity, in the event that Indemnitor shall
fail to timely comply with the provisions hereof or in the event that any
representation or warranty made herein proves to be intentionally or materially
false or misleading, then, in such event and after (a) delivering written notice
to Indemnitor, which notice specifically states that Indemnitor has failed to
comply with

                                       4
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the provisions of this Agreement; and (b) the expiration of the cure
period, if any, permitted under the applicable laws, rules, regulations or
orders with which Indemnitor shall have failed to comply; Lender may (i) declare
that an Event of Default (as defined in the Deed of Trust) has occurred under
the Deed of Trust and exercise any and all remedies provided for therein, (ii)
institute an action against Indemnitor for specific performance of the action
which Indemnitor has failed to perform, (iii) do or cause to be done whatever is
necessary to cause the Property to comply with all Environmental Laws and other
applicable laws, rules, regulations or orders and the costs thereof shall become
immediately due and payable from Indemnitor to Lender as Environmental Losses,
(iv) enter into and inspect the Property pursuant to California Civil Code
Section 2929.5, and/or (v) appoint a receiver pursuant to California Code of
Civil Procedure Section 564.

     7. Indemnification. Indemnitor agrees to indemnify, protect, defend (with
        ---------------
counsel reasonably approved by Lender) and hold Lender, and the directors,
officers, shareholders, policyholders, employees and agents of Lender, and each
of them, harmless from and against any and all Environmental Losses, to the
fullest extent permitted by applicable law. The indemnification provided for in
this paragraph shall specifically apply to and include any Environmental Losses
incurred by Lender in connection with the exercise of Lender's rights (i) to
enter and inspect the Property pursuant to California Civil Code Section 2929.5,
including, without limitation, the cost of repair of any physical damage to the
Property caused by the entry and inspection; (ii) to appoint a receiver pursuant
to California Code of Civil Procedure Section 564; and (iii) pursuant to
California Code of Civil Procedure Section 726.5, including, without limitation,
costs incurred to determine the value of the Property and to establish the
degree to which the Property is environmentally impaired, as required by
California Code of Civil Procedure Section 726.5(b). The indemnification
provided for in this paragraph shall also specifically apply to and include
claims or actions brought by or on behalf of employees of the Indemnitor, and
Indemnitor hereby expressly waives any immunity to which Indemnitor may
otherwise be entitled under any industrial or workers' compensation laws. In the
event Lender shall suffer or incur any such Environmental Losses, Indemnitor
shall pay to Lender the total of all such Environmental Losses suffered or
incurred by Lender upon demand therefor by Lender. Notwithstanding anything to
the contrary in this Agreement or in any other Loan Document (as defined in the
Note), Indemnitor shall have no obligation to indemnify any person, pay any sum,
perform any act or bear any other responsibility whatsoever for, any Hazardous
Substance Claim, Loss Environmental Loss, or Remedial Work, to the extent that a
court of competent jurisdiction conclusively determines that the foregoing
arises out of (a) any Hazardous Substance Activity which occurs on or after the
Foreclosure Date or (b) any Hazardous Substance which first comes to be present
on the Property, or the soil, groundwater, ambient air, or building materials
thereof on or after the Foreclosure Date. As used in this Section, the term
"Foreclosure Date" means the date of a final foreclosure sale, or the date of
reconveyance of the Deed of Trust by deed in lieu of foreclosure or
otherwise.

     8. Subrogation of Indemnity Rights. If Indemnitor fails to perform its
        -------------------------------
obligations under this Agreement, Lender shall be subrogated to any rights
Indemnitor may have under any indemnifications from any present, future or
former owners, tenants or other occupants or users of the Property (or any
portion thereof), relating to the matters covered by this Agreement.

     9. Joint and Several Liability; Contribution. If this Agreement is executed
        -----------------------------------------
and entered into by more than one person or entity as "Indemnitor", then:

          (a) Each of such persons or entities shall be jointly and severally
     liable for each and all of the obligations of Indemnitor hereunder;

                                       5
<PAGE>

          (b) Each Indemnitor agrees that it shall have no right of contribution
     (including, without limitation, any rights of contribution under CERCLA) or
     subrogation against any other Indemnitor hereunder unless and until all
     obligations of such Indemnitor have been satisfied; and

          (c) Each Indemnitor further agrees that, to the extent that the waiver
     of its rights of subrogation and contribution as set forth herein is found
     by a court of competent jurisdiction to be void or voidable for any reason,
     any rights of subrogation or contribution such Indemnitor may have shall be
     junior and subordinate to the rights of Lender against any Indemnitor
     hereunder.

     10. Inspection. Indemnitor shall permit Lender to enter the Indemnitor's
         ----------
office and the Property during all reasonable business hours (after giving
reasonable notice to Indemnitor) to conduct environmental testing and, in the
event of Indemnitor's failure to undertake Remedial Work, to perform Remedial
Work, and Indemnitor hereby grants to Lender (and its employees and agents) an
irrevocable and non-exclusive license for the purpose of conducting such testing
and/or Remedial Work. Lender's right to enter and inspect the Indemnitor's
office and the Property shall include all rights conferred upon Lender by
California Civil Code Section 2929.5.

     11. Assignment by Lender. No assignment or reassignment of the rights of
         --------------------
Lender hereunder to one or more purchasers of the Loan or the Property shall be
permitted without the consent of the Indemnitor.

     12. Interest. Any costs and other payments required to be paid by
         --------
Indemnitor to Lender under this Agreement which are not paid on demand therefor
shall thereupon be considered "Delinquent". In addition to all other rights and
remedies of Lender against Indemnitor as provided herein, or under applicable
law, Indemnitor shall pay to Lender, immediately upon demand therefor, Interest
(as defined below) on any such payments which are or have become Delinquent.
Interest shall be paid by Indemnitor from the date such payment becomes
Delinquent through and including the date of payment of such Delinquent sums. As
used herein, "Interest" shall be equal to interest at the Default Rate (as the
term "Default Rate" is defined in the Note) on the Delinquent sums, but not in
any event greater than the maximum rate of interest, if any, permitted by law to
be contracted for between Indemnitor and Lender.

     13. Recourse Obligations. The obligations of Indemnitor under this
         --------------------
Agreement shall be exceptions to any limitations on Lender's recourse against
Indemnitor or any so called "non-recourse" or "exculpatory" provisions set forth
in the Deed of Trust, in the Note or in any other document referred to therein
and evidencing or securing the repayment of the Loan, such that Indemnitor shall
be fully and personally liable on a full recourse basis for all of Indemnitor's
obligations hereunder, and such liability shall not be limited to the original
principal amount of the Loan.

     14. Secured Obligations; Survival. Indemnitor's obligations hereunder shall
         -----------------------------
be secured by the Deed of Trust for so long as the Deed of Trust shall remain a
lien upon the Property, provided, however, that any termination of the lien of
the Deed of Trust shall not terminate or otherwise affect Indemnitor's
obligations hereunder and Indemnitor's obligations hereunder shall survive (i)
any foreclosure, deed in lieu of foreclosure or reconveyance of the Deed of
Trust and (ii) any sale or other transfer of the Property by either Indemnitor
or Lender. The rights of Lender under this Agreement shall be in addition to any
other rights and remedies of Lender against Indemnitor under any other document
or instrument now or hereafter executed by Indemnitor, or at law or in equity
(including, without limitation, any right of reimbursement

                                       6
<PAGE>

or contribution pursuant to CERCLA), and shall not in any way be deemed a waiver
of any of such rights. The obligations of Indemnitor under this Agreement shall
be personal to each Indemnitor and their respective representatives,
administrators, executors, successors and assigns, and shall not run, and shall
not be deemed to run, with the land.

     15. Miscellaneous. If any term or condition of this Agreement or any
         -------------
application thereof shall be invalid, illegal or unenforceable, the remainder of
this Agreement and any other application of such term or condition shall not be
affected thereby. No delay or omission in exercising any right hereunder shall
operate as a waiver of such right or any other right. This Agreement shall be
binding upon, inure to the benefit of and be enforceable by Indemnitor and
Lender, and their respective representatives, administrators, executors,
successors and assigns, including, without limitation, any assignee or purchaser
of all or any portion of the Lender's interest in the Loan or the Property. No
failure or delay on the part of Lender to exercise any power, right or privilege
under this Agreement shall impair any such power, right or privilege, or be
construed to be a waiver of any default or an acquiescence therein, nor shall
any single or partial exercise of such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. No
provision of this Agreement may be changed, waived, discharged or terminated
except by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought. This Agreement shall
be governed and construed in accordance with the laws of the State of
California.

     16. Attorneys' Fees. Indemnitor hereby agrees to pay all attorneys' and
         ---------------
paralegals' fees and other costs and expenses which may be incurred by the
Lender in the enforcement of this Agreement including, without limitation, those
incurred in any case, action, proceeding, claim or otherwise under Chapters 7,
11 or 13 of the Federal Bankruptcy Code or any successor statute or statutes
thereto.

                        [Signatures begin on next page.]

                                       7
<PAGE>

     IN WITNESS WHEREOF, Indemnitor has caused this Agreement to be duly and
properly executed as of the day and year first above written.


Dated:  March 24, 1997
              --

                    Indemnitor:


                    IPAC PROPERTIES, a California corporation

                    By: /s/ Tony Lin
                        ________________________________
                        Its: Chief Financial Officer
                             ___________________________

                                       8
<PAGE>

                                  EXHIBIT "A"

                               LEGAL DESCRIPTION

                                [to be attached]