<PAGE>   1
                                                                   Exhibit 10.29





                                  GROUND LEASE



                                    Between

                            CALIFORNIA JOCKEY CLUB,
                        A REAL ESTATE INVESTMENT TRUST,
                                  as Landlord

                                      and

                                 BORDERS, INC.,
                                   as Tenant


                                   Property:

                          2900 Block of El Camino Real
                             San Mateo, California





<PAGE>   2
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION
                                                                                                              PAGE
                                                                                                              ----
<S>      <C>                                                                                                  <C>
1.       DEMISED PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
2.       TERM AND OPTIONS TO EXTEND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
3.       ANNUAL RENT - ADDITIONAL RENT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
4.       REAL ESTATE TAXES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
5.       LANDLORD'S WORK  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
6.       TENANT'S WORK  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
7.       INSURANCE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   5
8.       RENT COMMENCEMENT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
9.       LANDLORD'S REPRESENTATIONS AND WARRANTIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
10.      MAINTENANCE OF PROPERTY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
11.      ALTERATIONS AND ADDITIONAL CONSTRUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
12.      UTILITIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
13.      GOVERNMENTAL REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
14.      EXCULPATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
15.      DAMAGE AND DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
16.      EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
17.      USE, ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
18.      INTENTIONALLY DELETED  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
19.      LANDLORD'S REMEDIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
20.      BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
21.      COVENANT OF TITLE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
22.      LEASEHOLD MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
23.      FEE MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
24.      INDEMNIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
25.      TENANT'S RIGHT TO CURE LANDLORD'S DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
25A.     LANDLORD'S RIGHT TO CURE TENANT'S DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
26.      HAZARDOUS MATERIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
27.      CONDITION OF PREMISES AT TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
28.      HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
29.      RIGHT OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
30.      SIGNAGE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
31.      NOTICES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
32.      PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
33.      ENTIRE AGREEMENT - APPLICABLE LAW  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
34.      SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
35.      MEMORANDUM OF LEASE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
36.      BROKER'S REPRESENTATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
37.      ESTOPPEL CERTIFICATES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
38.      CAPTIONS AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
39.      SURVIVAL.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
</TABLE>





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<TABLE>
<S>      <C>                                                                                                <C>
40.      DUE DILIGENCE CONTINGENCY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
41.      SITE PLAN APPROVAL/PERMIT CONTINGENCY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
42.      ADJACENT PROPERTY ACQUISITION CONTINGENCY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
43.      FINANCING CONTINGENCY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
44.      QUIET TITLE CONTINGENCY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
45.      TIME OF ESSENCE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>



                                    EXHIBITS

Exhibit A-1      Legal Description of Jockey Club Parcel

Exhibit A-2      Legal Description of Williams Parcel

Exhibit B        Site Plan Showing Proposed Location of Tenant's Building and
                 Improvements

Exhibit C        Annual Rent

Exhibit D        Criteria for Tenant Improvements

Exhibit E        Form of Assignment to Developer

Exhibit F        Permitted Title Exceptions





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<PAGE>   4
                                  GROUND LEASE

         THIS GROUND LEASE ("Lease") is made and entered into as of this 22nd
day of November, 1996 by and between CALIFORNIA JOCKEY CLUB, A REAL ESTATE
INVESTMENT TRUST, having its principal office at 2600 Delaware Street, San
Mateo, California 94403 (herein referred to as "Landlord") and BORDERS, INC., a
Delaware corporation, having its principal office at 311 Maynard Street, Ann
Arbor, Michigan 48104 (herein referred to as "Tenant").

                             W I T N E S S E T H :

         That in consideration of the rents, covenants and conditions herein
set forth, Landlord and Tenant do hereby covenant, promise and agree as
follows:

         1.      DEMISED PREMISES.  Effective upon satisfaction or waiver of
the contingencies set forth in Articles 40 through 43 inclusive hereof,
Landlord hereby demises unto Tenant and Tenant rents from Landlord a certain
parcel of land containing approximately two and one-half (2 1/2) acres (the
"demised premises") which premises are located in the 2900 Block of El Camino
Real in San Mateo, California.  The demised premises consist of certain real
property presently owned by Landlord and described in Exhibit A-1 attached
hereto (the "Jockey Club Parcel") and certain real property presently owned by
another party and described on Exhibit A-2 attached hereto (the "Williams
Parcel").  Landlord will exercise its reasonable best efforts to acquire the
Williams Parcel prior to this Lease becoming effective, in accordance with the
provisions of Article 42 hereof.

         Tenant shall demolish any existing structures located on the demised
premises, and construct thereon a building containing approximately twenty-five
thousand (25,000) square feet of floor area ("Tenant's Building") together with
a loading dock, trash compactor, dumpster pad, parking lot and other site
improvements as generally depicted on the site plan attached hereto as Exhibit
B (Tenant's Building and all other improvements on the demised premises being
collectively referred to herein as  the "Improvements").  Tenant shall have the
right to change the configuration and/or location of Tenant's Building so long
as Tenant's Building substantially conforms to the depiction on Exhibit B.
Upon expiration or sooner termination of this Lease, title to the Improvements
shall automatically vest in Landlord.  The demised premises and the
Improvements are collectively referred to herein as the "Property".

         2.      TERM AND OPTIONS TO EXTEND.

                 (a)      Initial Term.  The term of this Lease shall commence
         upon the "Rent Commencement Date," as that term is defined in Article
         8 hereof, and shall terminate on the 31st day of January following the
         twentieth (20th) anniversary of the Rent Commencement Date (the
         "Initial Term").





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<PAGE>   5
                 (b)      Option Periods.  Tenant shall have eight (8)
         successive options to extend the term of this Lease for an additional
         period of five (5) years (hereinafter called "Option Period") on each
         such option, such extended term to begin respectively upon the
         expiration of the term of this Lease or of this Lease as extended and
         the same terms and conditions as herein set forth shall apply to each
         such extended term, except for the Annual Rent which shall be adjusted
         as set forth on Exhibit C.  Upon the expiration of the eighth (8th)
         Option Period, Tenant shall have no further option to extend the term
         of this Lease.

                 (c)      Exercise of Option Periods.  Tenant shall not have
         the right to exercise an Option Period at any time while Tenant is in
         default of this Lease.  If Tenant shall elect to exercise an Option
         Period, it shall do so by giving written notice to Landlord not less
         than six (6) months prior to the expiration of the term of this Lease
         or of this Lease as extended; notwithstanding the foregoing, if Tenant
         does not exercise any Option Period in the time period or in the
         manner provided in this Article, such Option Period shall nevertheless
         continue in full force and effect and shall not lapse until fifteen
         (15) days after Tenant (and Tenant's Leasehold Mortgagee (as defined
         in Article 22), if any) has received written notice from Landlord that
         such deadline has passed and that Landlord has not received such
         notice.

                 (d)      Definition of "Lease term".  The phrase "Lease term,"
         as used in this Lease, shall mean the Initial Term of this Lease and
         any extension thereof pursuant to this Article 2.

                 (e)      Restrictions on Exercise of Options.  Landlord
         acknowledges that following the mutual execution and delivery of this
         Lease, Tenant intends to assign this Lease to a limited liability
         company (the "Developer") which will construct Tenant's Building and
         thereafter lease Tenant's Building and the demised premises to Tenant.
         In connection with such assignment Tenant, Developer and Tenant will
         execute and deliver an Assignment of Ground Lease (the "Assignment")
         substantially in the form attached hereto as Exhibit E, which
         Assignment contains restrictions on the Developer's and any subsequent
         assignee's exercise of Option Periods.  Landlord agrees to execute and
         deliver the Acknowledgement and Consent to the Assignment to Tenant
         and Developer within ten (10) days following full execution of the
         Assignment and written request and to be bound by the terms thereof,
         including but not limited to the restrictions on exercise of the
         Option Periods set forth therein.

         3.      ANNUAL RENT - ADDITIONAL RENT.

                 (a)      Annual Rent.  Tenant shall, during the Lease term,
         pay to Landlord, at such place as Landlord shall designate in writing,
         from time to time, without demand therefor, and without deduction or
         offset except as specifically permitted in this Lease, the amounts set
         forth on Exhibit C ("Annual Rent"), unless abated or diminished as
         hereinafter





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<PAGE>   6
         provided.  Annual Rent shall be paid in equal monthly installments on
         the first day of each month, in advance, commencing upon the first day
         of the Lease term; provided, however, in the event the first day of the
         Lease term shall not be the first day of a calendar month, then the
         Annual Rent for such month shall be prorated on a daily basis.

                 (b)      Additional Rent.  All amounts which Tenant is
         required to pay pursuant to this Lease (other than Annual Rent),
         together with any fine, penalty, interest and costs which may be added
         for nonpayment or late payment thereof, shall constitute additional
         rent (referred to herein as "Additional Rent").  If Tenant fails to
         pay any Additional Rent due under this Lease, then Landlord shall have
         the right to pay the same and shall have all of the rights, powers and
         remedies with respect thereto as are provided herein or by law in the
         case of nonpayment of Annual Rent.

                 (c)      Net Lease.  Except as otherwise set forth in this
         Lease, Landlord shall not be required to make any payment of any kind
         with respect to the Property nor shall Landlord be required to incur
         any obligation or liability with respect to this Lease or the
         ownership, construction, operation, maintenance or repair of the
         Property.

         4.      REAL ESTATE TAXES.

                 (a)      Payment.  Commencing on the Rent Commencement Date,
         Tenant shall pay all Taxes (as defined below) not later than ten (10)
         days prior to the date upon which such Taxes become delinquent.
         Landlord shall cooperate with Tenant to cause all tax bills to be sent
         directly to Tenant from the assessing agency; provided, that until
         such change has been effected, Landlord shall forward all tax bills
         for the Property to Tenant promptly following receipt thereof.  Upon
         Landlord's written request, Tenant shall provide Landlord with proof
         of payment of Taxes.  For purposes of this paragraph, if any
         assessment is payable in installments, Tenant shall have the right to
         pay any installment as and when such installment becomes due and
         payable.  Tenant's liability for Taxes shall be prorated for the years
         in which this Lease commences and terminates.

                 (b)      "Taxes" Defined.  "Taxes" shall mean all real and
         personal property taxes, general and special assessments, and other
         charges of every description levied on or against the Property, the
         leasehold estate created hereunder, any subleasehold estate in the
         Property, any portion thereof, and any rent and other charges payable
         hereunder or under any sublease of the Property.  Notwithstanding the
         foregoing, "Taxes" shall not include any franchise, excise, gift,
         estate, inheritance, succession, or transfer tax of Landlord in
         connection with this Lease or Landlord's rights in the Property.

                 (c)      Challenge.  Should either Landlord or Tenant initiate
         proceedings to contest the validity or amount of any Taxes levied
         against the Property, the other party will cooperate in such
         proceedings and should such proceedings be successful, Tenant shall





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<PAGE>   7
         be entitled to any tax refund or future abatement, after deducting
         therefrom payment of all reasonable out-of-pocket expenses incurred by
         Landlord in any such proceeding.  Neither party shall initiate
         proceedings to contest the validity or amount of any Taxes without
         first paying the disputed Taxes or otherwise taking all actions
         reasonably required to protect the other party's interest in the
         Property.

         5.      LANDLORD'S WORK.  The parties acknowledge the demised premises
will be delivered in an "as is" condition, except for the following items which
shall be Landlord's obligation to perform at its sole cost and expense
("Landlord's Work"):  Following the satisfaction or waiver of the contingencies
set forth in Articles 40 through 44 inclusive below, Landlord shall remove all
then-existing Hazardous Materials (as defined in Article 26 below) as shown in
the Phase II Environmental Report to be prepared by Landlord from the demised
premises and restore the surface of the demised premises to its condition
existing prior to such removal, and shall provide Tenant with a certification
from the party performing the remediation of Hazardous Materials showing that
all Hazardous Materials required to be removed or abated pursuant to this
Section 5 have been removed or abated in accordance with applicable law.
Landlord shall deliver the demised premises to Tenant, with all of Landlord's
Work completed, on or before March 1, 1997.  Notwithstanding anything to the
contrary set forth herein, Landlord shall not be obligated to remove any such
Hazardous Materials which are in compliance with applicable law and whose
presence would not in any manner interfere with Tenant's ability to secure all
permits and authorizations required to develop and use the Property for
Tenant's intended use or materially interfere with Tenant's use and enjoyment
of the Property; provided, Landlord shall remain liable for removal of any such
Hazardous Materials should the presence of any such Hazardous Materials
materially interfere with Tenant's use and enjoyment of the Property.  Further,
if the estimated cost of Landlord's Work shall exceed Two Hundred Thousand
Dollars ($200,000), Landlord shall have the right to terminate this Lease in
lieu of performing Landlord's Work unless Tenant shall agree to pay all costs
of Landlord's Work in excess of Two Hundred Thousand Dollars ($200,000).
Further notwithstanding anything to the contrary set forth herein, Landlord
shall not be obligated to remove or abate any asbestos or asbestos containing
materials contained within the buildings located on the Williams Parcel.

         6.      TENANT'S WORK.

                 (a)      Definition.  Tenant shall at its sole cost and
         expense construct the Improvements, install such trade fixtures, and
         perform such other work as may be necessary for Tenant to open for
         business at the demised premises or to provide improvements for
         sublease to subtenants ("Tenant's Work").

                 (b)      Plans and Specifications.  Prior to commencement of
         Tenant's Work, Tenant shall submit plans and specifications for the
         Improvements to Landlord for its approval, which shall not be withheld
         or delayed so long as such plans and specifications generally conform
         to the Criteria for Tenant Improvements attached hereto as Exhibit D.
         Landlord shall have a period of fifteen (15) business days within
         which to either approve





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         such plans and specifications or to make comments and changes thereon.
         If Landlord does not respond to Tenant's submission of plans and
         specifications within such fifteen (15) day period, then Landlord shall
         be deemed to have approved the same.  If Landlord responds by making
         reasonable comments to the proposed plans and specifications for the
         Improvements, then Tenant shall revise the plans and specifications in
         accordance with Landlord's comments and resubmit them to Landlord for
         approval within fifteen (15) business days from the date of receipt of
         written comments from Landlord.  Landlord shall then have ten (10)
         business days to approve such revised plans and specifications.

                 (c)      Liens.  Tenant agrees to keep the Property free and
         clear of all liens arising out of, or claimed by reason of, any work
         performed, material furnished or obligations incurred by or at the
         insistence of Tenant, and to indemnify and save Landlord harmless from
         all such liens or claims of lien and all attorneys' fees or other
         costs and expenses incurred by reason thereof.  Should Tenant fail to
         fully discharge any lien or claim of lien within thirty (30) days
         after written notice from Landlord, Landlord may, at its option, pay
         the same or any part thereof, and the amount of such payment shall be
         due and owing to Landlord from Tenant as of the date of such payment.
         No liens of any character whatsoever created or suffered by Tenant
         shall in any way extend, attach to or affect the rights of Landlord in
         the demised premises, or the Property.

         7.      INSURANCE.

                 (a)      Liability Insurance.  Tenant shall maintain, or shall
         cause to be maintained by its subtenant, during the entire term of
         this Lease and any extension thereof, a policy of public liability and
         property damage insurance insuring the Property against any and all
         claims for personal injury, including property damage in, on or about
         the demised premises in which aggregate limits of public liability and
         property damage coverage shall not be less than Two Million
         ($2,000,000.00) Dollars.  Such policy shall name Landlord and
         Landlord's mortgagee (and any Leasehold Mortgagee at its request) as
         additional insured, and shall contain a clause that the insurer will
         not cancel or change the insurance without first giving Landlord, or
         any Leasehold Mortgagee, thirty (30) days prior written notice.

                 (b)      All-Risk Insurance.  Tenant shall maintain, or shall
         cause to be maintained by its subtenant, during the entire term of
         this Lease and any extension thereof, a policy of all-risk property
         damage insurance upon Tenant's Building in an amount equal to the
         replacement value of Tenant's Building above the foundation walls.
         The policy of insurance pursuant to this Article 7(b) shall insure and
         be payable to Tenant and shall provide for release of insurance
         proceeds to Tenant for restoration of loss.  Such policy shall name
         Landlord as additional insured and may also name any Leasehold
         Mortgagee, upon its request, as an additional insured as its interest
         may appear, by standard mortgagee clause if obtainable.  Such policy
         or policies shall provide that the policy will





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<PAGE>   9
         not be cancelled except after thirty (30) days written notice to the
         Landlord and any Leasehold Mortgagee.  To the extent that Tenant is
         obligated to rebuild Tenant's Building following damage or destruction
         thereof, and subject to any superior rights of the Leasehold Mortgagee,
         any proceeds of the insurance described herein shall be deposited into
         a construction disbursement escrow mutually acceptable to the parties
         and shall be disbursed on a progress payment basis during the course of
         construction in accordance with standard industry practice.

                 (c)      Worker's Compensation Insurance.  Tenant shall
         maintain, or cause to be maintained by its subtenant, during the
         entire term of this Lease and any extension thereof, a policy of
         worker's compensation insurance as required by law.

                 (d)      Builder's Risk Insurance.  Before commencement of any
         demolition or construction, Tenant shall procure, and shall maintain
         in force until completion and acceptance of the work, "all risks"
         builder's risk insurance including vandalism and malicious mischief,
         in form and with a company reasonably acceptable to Landlord, covering
         improvements in place and all materials and equipment at the job site
         furnished under contract, but excluding contractor's, subcontractor's,
         and construction manager's tools and equipment and property owned by
         contractor's or subcontractor's employees.

                 (e)      General.

                          (1)     The insurance coverages required hereunder
                 shall be primary insurance as to all claims thereunder and
                 shall be carried with an insurance company or companies
                 licensed to do business in the state in which the demised
                 premises are located and having a Best's Insurance Reports
                 rating of A-X or better.  Such insurance may be carried under
                 a blanket policy or policies covering other liabilities and
                 locations of the Tenant.  From time to time, but not less
                 frequently than annually, Tenant shall furnish Landlord such
                 evidence as Landlord may require to indicate that the
                 foregoing insurance is in full force and effect and that the
                 premiums therefor have been paid and all renewal policies
                 shall be delivered to Landlord no less than thirty (30) days
                 prior to the date of expiration of the then existing policy.
                 Notwithstanding the above, Tenant (or its subtenant, if
                 applicable) may self-insure any of the insurance obligations
                 hereunder during any period of time in which the net worth of
                 the insuring party (or a guarantor thereof) exceeds One
                 Hundred Million Dollars ($100,000,000.00).

                          (2)     Landlord and Tenant hereby release and
                 discharge each other and any officer, agent, employee or
                 representative of such party, of and from any liability
                 whatsoever arising from loss, damage or injury for which
                 insurance (providing waiver of liability and containing waiver
                 of subrogation) is carried, or for which a program of
                 self-insurance is maintained as allowed in this Lease, by





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                 the party at the time of such loss, damage, or injury to the
                 extent of any recovery by the injured party under such
                 insurance or to the extent of the insurance that would
                 otherwise have been required hereunder if Tenant self-insures.

         8.      RENT COMMENCEMENT.  The Rent Commencement Date shall be the
earlier of (a) the date Tenant (or its subtenant) opens for business at the
demised premises, or (b) the date which is two hundred ten (210) days after
Landlord has delivered possession of the demised premises to Tenant with all of
Landlord's Work (except any ongoing monitoring of Hazardous Materials
conditions) completed.

         9.      LANDLORD'S REPRESENTATIONS AND WARRANTIES.  Landlord
represents, warrants and covenants that:

                 (a)      Prior to the Rent Commencement Date, Landlord shall
         not make any further additions or modifications to the demised
         premises or to the buildings located thereon other than normal
         maintenance and repair.

                 (b)      Intentionally deleted.

                 (c)      Landlord is a duly constituted and validly existing
         real estate investment trust under the laws of the State of Delaware,
         duly qualified to do business in the state in which the demised
         premises are located, and has the full power to carry out the
         transactions contemplated by this Lease.

                 (d)      All partnership or corporate and other proceedings
         required to be taken on the part of Landlord to authorize Landlord to
         execute and deliver this Lease and to consummate the transaction
         contemplated have been duly and validly taken.

                 (e)      Intentionally deleted.

                 (f)      The execution, delivery and performance of the Lease
         will not conflict in any way with Landlord's partnership or corporate
         documents, and will not conflict or result in a breach or default
         under any note, lease, mortgage, indenture, contract or commitment to
         which Landlord is a party or by which Landlord may be bound.

                 (g)      The demised premises are not located in a flood
         hazard zone or wetland area.

                 (h)      There are no pending or threatened lawsuits of any
         nature which in any way affect title to the demised premises, affect
         the organization or solvency of Landlord, affect the validity and
         enforceability of this Lease, or affect the rights of the Tenant under
         the terms of this Lease.





                                       7
<PAGE>   11
                 (i)      Intentionally deleted.

                 (j)      There is no other lease applicable to any portion of
         the demised premises, nor are the demised premises subject to any
         reciprocal operating agreement, cross easement agreement, restrictive
         covenants, or any other similar document except as set forth on
         Exhibit F attached hereto.

         10.     MAINTENANCE OF PROPERTY.  Tenant shall make and pay for (or
cause its subtenant to make and pay for) all maintenance, replacement and
repair necessary to keep the Property in a good state of repair and in
tenantable condition.  Upon advance written notice to Tenant and any subtenant
of Tenant,  and during normal business hours, Landlord shall have the right to
inspect the structural, mechanical and roofing components of Tenant's Building.
Tenant shall not commit or permit waste on the Property.  Tenant waives the
provisions of Sections 1932(1), 1941 and 1942 of the California Civil Code or
any amendments thereto or any similar law, statute or ordinance now or
hereafter in effect.

         11.     ALTERATIONS AND ADDITIONAL CONSTRUCTION.  Tenant, or any
subtenant, may at any time and from time to time, at its expense, make
alterations to Tenant's Building provided that (i) the fair market value of
Tenant's Building shall not be lessened thereby, (ii) the structural integrity
of Tenant's Building shall not be adversely affected thereby, (iii) the
character of Tenant's Building shall remain primarily retail and/or office in
nature unless Landlord otherwise approves (such approval not to be unreasonably
withheld or delayed) and (iv) such work shall be expeditiously performed and
completed in a good and workmanlike manner and in compliance with all
applicable legal requirements.  Tenant agrees to keep the Property free and
clear of all liens arising out of, or claimed by reason of, any work performed,
material furnished or obligations incurred by or at the insistence of Tenant,
and to indemnify and save Landlord harmless from all such liens or claims of
lien and all attorneys' fees or other costs and expenses incurred by reason
thereof.  Should Tenant fail to fully discharge any lien or claim of lien
within thirty (30) days after written notice from Landlord, Landlord may, at
its option, pay the same or any part thereof, and the amount of such payment
shall be due and owing to Landlord from Tenant as of the date of such payment.
No liens of any character whatsoever created or suffered by Tenant shall in any
way extend, attach to or affect the rights of Landlord in the demised premises,
or the Property.

         12.     UTILITIES.  Landlord covenants and agrees that, as of date
hereof, gas, electric, telephone, water, sewer and other utilities are
available at the property line of the demised premises.

         13.     GOVERNMENTAL REGULATIONS.  Tenant shall observe and comply
with all requirements, rules, orders and regulations of the federal, state and
municipal governments or other duly constituted public authority affecting the
Property or Tenant's use thereof, including but not limited to compliance with
the Americans with Disabilities Act.  Tenant shall have the right, however, to
contest, without cost to Landlord, the validity or application of any such
rule,





                                       8
<PAGE>   12
order or regulation required to be complied with by Tenant in accordance with
the foregoing, and may postpone compliance therewith so long as such contest
does not subject Landlord to criminal prosecution or civil penalty or
liability, or adversely affect Landlord's revisionary interest in the Property
for non-compliance therewith and further provided Tenant pays all fines,
penalties and other costs imposed on Landlord as a result of such
non-compliance by Tenant.

         14.     EXCULPATION.  The liability of Landlord for Landlord's
obligations under this Lease shall be limited to Landlord's interest in the
Property, and Tenant shall look solely to the interest of Landlord, its
successors and assigns, in the Property, for the satisfaction of each and every
remedy of Tenant against Landlord.  Tenant shall not look to any of Landlord's
other assets seeking either to enforce Landlord's obligations under this Lease,
or to satisfy any money or deficiency judgment for Landlord's failure to
perform such obligations.

         From and after the date of this Lease, if Landlord shall fail to
perform any covenant, term or condition of this Lease upon Landlord's part to
be performed, and as a consequence of such default, Tenant shall recover a
money judgment against Landlord, such judgment shall be satisfied solely out of
(i) the proceeds of sale received upon execution of such judgment and levy
thereon against the right, title and interest of Landlord and the buildings and
improvements from time to time on the Property, (ii) the rents or other income
from the Property receivable by Landlord, and/or (iii) any condemnation awards
or insurance proceeds received by Landlord in connection with all or any
portion of the Property.  The provisions contained in the preceding sentence
are not intended to, and shall not, (a) limit any right that Tenant might
otherwise have to obtain injunctive relief against Landlord or Landlord's
successors-in-interest, or with respect to any other action or remedy which may
be accorded Tenant under the terms of this Lease, subject to the limitations
contained in the preceding sentence, (b) excuse any default or other breach on
Landlord's part under this Lease, or (c) render Tenant liable for the
obligations or other liabilities of Landlord to others.

         15.     DAMAGE AND DESTRUCTION.

                 (a)      Obligation to Rebuild.  In the event that, at any
         time during the Lease term, Tenant's Building shall be damaged or
         destroyed (partially or totally) Tenant shall, at its expense,
         promptly and with due diligence, either (i) repair, rebuild and
         restore the same, as nearly as practicable, to the condition existing
         just prior to such damage or destruction, or (ii) at Tenant's option,
         repair, rebuild and restore the same for the same use and purposes or
         any other use permitted under this Lease, but in accordance with such
         plans and specifications as are then generally in use by any existing
         or proposed tenant or tenants in Tenant's Building; provided, however
         (i) the Improvements as repaired, rebuilt or replaced will have a
         value not less than their value just prior to said loss, and (ii) the
         character of the repaired, rebuilt or replaced premises shall be
         primarily retail and/or office in nature unless Landlord otherwise
         approves (such approval not to be unreasonably withheld or delayed).

                                       9
<PAGE>   13

                 (b)      Option to Terminate.  It is understood and agreed
         that if Tenant's Building is damaged or destroyed within two (2) years
         of the then scheduled expiration date of the Lease term (including any
         extension thereof), and if the extent of such damage or destruction is
         such that the cost of restoration would exceed fifty percent (50%) of
         the amount it would have cost to replace Tenant's Building on the
         Property in its entirety at the time such damage or destruction took
         place, then, and in either of such event, Tenant may terminate this
         Lease as of the date of such damage or destruction by giving written
         notice to Landlord within ninety (90) days after the date of the
         casualty, specifying a date of termination within ninety (90) days
         after the date of such notice.  If Tenant so elects to terminate, then
         Tenant shall utilize insurance proceeds to pay off and discharge any
         Leasehold Mortgage and any remaining insurance proceeds shall be paid
         to Landlord.  Upon such termination, and at the request of Landlord,
         Tenant will clear the Improvements from the demised premises at
         Tenant's expense.

         16.     EMINENT DOMAIN.

                 (a)      Tenant's Building/Ingress and Egress.  In the event
         that the points of ingress and egress to the public roadways,
         substantially as depicted on Exhibit B, shall be materially impaired
         by a public or quasi-public authority, so as to render, in Tenant's
         sole and reasonable opinion, the demised premises unsuitable for its
         intended purpose, Tenant shall have the option to terminate this Lease
         as of the date Tenant shall be deprived or denied thereof.  In the
         event that more than ten percent (10%) of Tenant's Building or the
         parking areas on the demised premises shall be expropriated by public
         or quasi-public authority, Tenant shall have the option to terminate
         this Lease as of the date Tenant shall be dispossessed from the part
         so expropriated by giving written notice to Landlord of such election
         so to terminate within ninety (90) days from the date of such
         dispossession.

                 (b)      Restoration.  In the event of an expropriation of any
         portion of Tenant's Building or the parking areas on the demised
         premises, and if this Lease shall not be terminated as provided above,
         this Lease shall continue as to that portion of the demised premises
         which shall not have been expropriated or taken, and Tenant shall,
         subject to available condemnation proceeds, promptly and with due
         diligence, restore Tenant's Building, as nearly as practicable, to a
         complete unit of like quality and character as existed just prior to
         such expropriation.  To the extent Tenant is required to restore
         Tenant's Building hereunder, and subject to any superior rights of the
         Leasehold Mortgagee as to proceeds allocable to the Improvements, any
         proceeds of the condemnation shall be deposited into a construction
         disbursement escrow mutually acceptable to the parties and shall be
         disbursed on a progress payment basis during the course of
         construction in accordance with standard industry practice.  Annual
         Rent shall be reduced in the proportion that the value of the portion
         of the demised premises so expropriated shall bear to the value of the
         demised premises prior to such expropriation, such reduction to be
         effective as of the date of expropriation.  For a period of thirty
         (30)





                                       10
<PAGE>   14
         days following any such expropriation, Landlord and Tenant shall
         negotiate in good faith to determine the amount of any reduction in
         Annual Rent.  If Landlord and Tenant are unable to agree upon the
         amount of any reduction in Annual Rent, such reduction shall be
         determined as follows: Within ten (10) business days after written
         demand by one party on the other, Landlord and Tenant shall each
         appoint, and notify the other in writing of the appointment of, an MAI
         appraiser having not less than five (5) years experience appraising
         commercial properties in the San Francisco Bay Area.  The two
         appraisers shall promptly meet and attempt to agree upon a rent
         reduction, and the determination of such appraisers shall be binding
         upon Landlord and Tenant. If either party shall fail to appoint an
         appraiser, the decision of the single appraiser appointed by the other
         party shall be binding upon Landlord and Tenant.  If the appraisers are
         unable to agree upon a rent reduction within thirty (30) days after the
         end of the ten (10) business day period set forth above, they shall
         jointly select a third appraiser meeting the qualifications set forth
         above and they shall each submit to such appraiser their final
         determinations ("Final Determinations") of an appropriate rent
         reduction.  If the two appraisers shall fail to appoint a third
         appraiser, the third appraiser shall be appointed by the presiding
         judge of the Superior Court in which the demised premises are located
         upon application of either Landlord or Tenant. The third appraiser
         shall then independently determine the appropriate rent reduction,
         which shall in no event be less than the smallest reduction set forth
         in the Final Determinations or greater than the largest reduction set
         forth in the Final Determinations, and such determination shall be
         binding upon Landlord and Tenant.  Each party shall pay the cost of its
         own appraiser, and the parties shall share equally the cost of the
         third appraiser.

                 (c)      Termination.  In the event this Lease shall be
         terminated pursuant to this Article 16, any Annual Rent, Additional
         Rent and any other charges paid in advance shall be refunded to Tenant
         and Tenant shall have an additional thirty (30) days, rent free,
         within which to remove its personal property, inventory and trade
         fixtures from the demised premises.  Tenant shall repair any damage to
         the demised premises caused by removal of its trade fixtures.  Nothing
         herein contained shall be construed as preventing Tenant from being
         entitled to any separate award made to Tenant for the taking of any
         personal property, inventory or trade fixtures of Tenant, or from
         claiming its award directly against the condemnor.

                 (d)      Condemnation Award - Lease Not Terminated.  In the
         event of a condemnation of any portion of the Tenant's Building or the
         Improvements and if this Lease is not terminated, the award paid by
         the condemning authority (after payment of expenses incurred in
         connection with collecting the same) shall be allocated as follows:

                          (1)     First, Tenant shall receive so much of the
                 award allocable to the Improvements as is necessary to restore
                 the Improvements and, (i) during the first twenty (20) years
                 of the term of this Lease, for the value of the Improvements
                 taken not to exceed the outstanding principal balance of any
                 note secured by the

                                       11
<PAGE>   15
                 Leasehold Mortgage, and (ii) during any Option Period, for the
                 unamortized cost of any improvements or alterations to the
                 Property constructed after the completion of the initial
                 Improvements contemplated by Article 1 of this Lease;

                          (2)     Second, Tenant shall receive one-half (1/2)
                 of any portion of the award allocable to the value of the
                 leasehold estate created hereunder; and

                          (3)     Third, Landlord shall receive the balance of
                                  the award.

                 (e)      Condemnation Award - Lease Terminated.  In the event
         of a condemnation and this Lease is terminated as herein provided, the
         award paid by the condemning authority (after payment of expenses
         incurred in connection with collecting the same) shall be allocated as
         follows:

                          (1)     First, to the extent the award is allocable
                 to the Improvements, an  amount shall be paid to the Leasehold
                 Mortgagee, such amount not to exceed the balance due on any
                 note secured by the Leasehold Mortgage; and

                          (2)     Second, to the extent that the award is
                 rendered during the Initial Term of this Lease and is
                 allocable to the Improvements, the Tenant shall receive that
                 proportion of the amount of the award remaining after the
                 payment under subparagraph (1) that the number of months
                 remaining in the Initial Term bears to two hundred forty
                 (240);

                          (3)     Third, to the extent that the award is
                 rendered during any Option Period and is allocable to the
                 Improvements, the Tenant shall receive the amount of the award
                 equal to the unamortized cost of any improvements or
                 alterations to the Property constructed after completion of
                 the initial Improvements contemplated by Article 1 of this
                 Lease, to the extent such amount remains after payment under
                 subparagraph (1);

                          (4)     Fourth, Tenant shall receive one-half (1/2)
                 of any portion of the award allocable to the value of the
                 leasehold estate created hereunder; and

                          (5)     Fifth, the Landlord shall receive the
                 balance of the award.

                 (f)      In the event of any dispute between Landlord and
         Tenant concerning any matters set forth in this Article 16, Landlord
         and Tenant agree to negotiate in good faith for a period of thirty
         (30) days from the date either party notifies the other in writing of
         the existence of such dispute, in order to attempt to resolve such
         dispute.  If the parties are unable to resolve the dispute through
         negotiation, the matter shall be submitted to arbitration upon the
         written request of one party and the service of that request on the
         other party within ten (10) days following the end of such thirty (30)
         day period.  The





                                       12
<PAGE>   16
         parties may agree on one arbitrator.  If they cannot agree on one
         arbitrator, there shall be three:  one named in writing by each of the
         parties within five (5) days after demand for arbitration is given, and
         a third chosen by the two appointed.  Should either party refuse or
         neglect to join in the appointment of the arbitrator(s) or to furnish
         the arbitrator(s) with any papers or information demanded, the
         arbitrator(s) may proceed ex parte.  A hearing on the matter to be
         arbitrated shall take place before the arbitrator(s) in the County of
         San Mateo, State of California, at the time and place selected by the
         arbitrator(s).  The arbitrator(s) shall select the time and place
         promptly and shall give each party written notice of the time and place
         at least thirty (30) days before the date selected.  At the hearing,
         any relevant evidence may be presented by either party, and the formal
         rules of evidence applicable to judicial proceedings shall not govern.
         Evidence may be admitted or excluded in the sole discretion of the
         arbitrator(s).  The arbitrator(s) shall hear and determine the matter
         and shall execute and acknowledge the award in writing and cause a copy
         of the writing to be delivered to each of the parties.  If there is
         only one arbitrator, his or her decision shall be binding and
         conclusive on the parties, and if there are three arbitrators, the
         decision of any two shall be binding and conclusive.  The submission of
         a dispute to the arbitrator(s) and the rendering of a decision by the
         arbitrator(s) shall be a condition precedent to any right of legal
         action on the dispute.  A judgment confirming the award may be given by
         any Superior Court having jurisdiction, or that Court may vacate,
         modify, or correct the award in accordance with the prevailing
         provisions of the California Arbitration Act.  The costs of the
         arbitration shall be borne equally by the parties.

         17.     USE, ASSIGNMENT AND SUBLETTING.

                 (a)      Use.  The demised premises may be used for any lawful
         purpose; provided, however, that for the first twelve (12) months of
         the Initial Term the demised premises shall be used for a Borders
         Books & Music store and for the balance of the Initial Term the
         demised premises shall be used only for retail use and any office or
         other use incidental to such retail use.

                 (b)      Assignment and Subleasing.  Tenant may assign this
         Lease, or sublet the whole or any part of the demised premises, for
         any use which is not prohibited or limited by the terms hereof, but if
         it does so, Tenant shall remain liable and responsible under this
         Lease.  Further, no assignment shall be effective until and unless the
         assignee has assumed the obligations of Tenant under this Lease which
         accrue from and after the effective date of assignment.  Tenant shall
         notify Landlord of the identity of any assignee or sublessee, but
         Tenant's failure to so notify the Landlord shall not be deemed a
         default under this Lease.  Any assignment of this Lease or subletting
         of the demised premises without notification to Landlord shall not be
         effective as to Landlord and Landlord shall not be bound thereby until
         receipt of such notification and, in the case of an assignment, a copy
         of the assignment and assumption has been furnished to Landlord.
         Nothing in this Lease shall require Tenant to open or operate in the
         demised premises.


                                       13
<PAGE>   17
                 (c)      Non-Disturbance of Sublessee.  Upon request of
         Tenant, Landlord shall execute and deliver to a sublessee under an
         Approved Sublease (as defined below) an agreement to the effect that
         notwithstanding any termination of this Lease, such sublease and the
         rights of the sublessee thereunder shall not be disturbed by Landlord
         but shall continue in full force and effect so long as such sublessee
         shall continue to observe and perform all of its obligations under
         such sublease and shall attorn to Landlord in writing.  A sublease
         shall be considered an "Approved Sublease" if it (1) obligates the
         sublessee to pay basic or minimum rent in an amount not less than the
         Annual Rent payable under this Lease, (2) obligates such sublessee to
         pay the Additional Rent payable hereunder, and (3) demises and
         subleases the entirety of the demised premises.

                 (d)      Performance by Sublessee.  Landlord acknowledges and
         agrees to accept performance of Tenant's obligations under this Lease
         by a sublessee of Tenant.

         18.     TENANT'S DEFAULT.  The occurrence of any of the following
shall be a default on the part of Tenant hereunder:

                 (a)      Failure to pay Annual Rent or Additional Rent at the
         times or in the manner herein provided, when such failure shall
         continue for a period of ten (10) days after written notice thereof
         from Landlord to Tenant; any such notice shall be deemed to be the
         notice required under California Code of Civil Procedure Section 1161.
         No such notice shall be deemed a forfeiture or a termination of this
         Lease unless Landlord expressly so elects in such notice;

                 (b)      Failure to perform any non-monetary provision of this
         Lease when such failure shall continue for a period of thirty (30)
         days, or such other period as is expressly set forth herein, after
         written notice thereof from Landlord to Tenant; any such notice shall
         be deemed to be the notice required under California Code of Civil
         Procedure Section 1161; provided that if the nature of the default is
         such that it will reasonably take more than thirty (30) days to cure,
         Tenant shall not be in default so long as it promptly commences and
         diligently prosecutes such cure to completion.  No notice of default
         shall be deemed a forfeiture or a termination of this Lease unless
         Landlord expressly so elects in such notice; or

                 (c)      The abandonment of the demised premises.

         19.     LANDLORD'S REMEDIES.  If Tenant is in default under any
provision of this Lease, Landlord shall have the following rights and remedies:

                 (a)      terminate this Lease, and all of the rights of Tenant
         under this Lease, and Tenant shall surrender the demised premises to
         Landlord in accordance with Article 27 hereof;

                                       14
<PAGE>   18
                 (b)      cure the default for the account of and at the
         expense of Tenant, and Tenant shall reimburse Landlord upon demand for
         the reasonable cost of curing Tenant's default, plus interest at the
         Default Rate (as such term is defined in Article 25 hereof);

                 (c)      re-enter the demised premises by summary proceedings
         or otherwise, expel Tenant and remove all property therefrom, use
         commercially reasonable efforts to relet said premises and receive the
         rent therefrom; provided, however, Tenant shall remain liable for
         Annual Rent and Additional Rent less any avails of reletting, after
         deducting from such avails the reasonable cost of obtaining possession
         of the demised premises and the reasonable cost of any repairs and
         alterations necessary to prepare it for reletting, and other costs
         incurred by landlord in connection therewith.  Any and all monthly
         deficiencies so payable by Tenant shall be paid monthly on the date
         herein provided for the payment of rent;

                 (d)      pursue the remedy described in California Civil Code
         Section 1951.4 (Lessor may continue lease in effect after Lessee's
         breach and abandonment and recover rent as it becomes due, and acts of
         maintenance or preservation and efforts to relet shall not constitute
         a termination of Tenant's right of possession).  Accordingly, if
         Landlord does not elect to terminate this Lease on account of any
         default by Tenant, Landlord may, from time to time, without
         terminating this Lease, enforce all of its rights and remedies under
         this Lease, including the right to recover all rent as it becomes due;

                 (e)      even though Landlord may have re-entered the demised
         premises, Landlord may thereafter elect to terminate this Lease and
         all of the rights of Tenant in or to this Lease and the demised
         premises; or

                 (f)      pursue any and all other rights or remedies available
         at law or equity.

         Any notices of default by Landlord to Tenant shall constitute the
notice required by Section 1161 of the California Code of Civil Procedure.

         Should Landlord elect to terminate this Lease under any of the
provisions above, Landlord shall be entitled to recover from Tenant as damages
any and all of the following:  (w) the worth at the time of award of any unpaid
Annual Rent, Additional Rent and other sums due hereunder (collectively,
"Rent") that had been earned at the time of such termination; plus (x) the
worth at the time of award of the amount by which the unpaid Rent that would
have been earned after termination until the time of award exceeds the amount
of rental loss Tenant proves could have been reasonably avoided; plus (y) 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 Tenant proves could be reasonably avoided; plus (z) such other reasonable
amounts in addition to or in lieu of the foregoing as may be permitted from
time to time by the laws of the State of California.


                                       15
<PAGE>   19
         As used in Subparagraphs (w) and (x) above, the "worth at the time of
award" is computed by allowing interest at the Default Rate.  As used in
Subparagraph (y) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).

         20.     BANKRUPTCY.  If a petition of bankruptcy shall be filed by or
against Tenant, Tenant shall become bankrupt, Tenant shall make a general
assignment for the benefit of creditors, or in any proceeding based upon the
insolvency of Tenant, a receiver or trustee of all or a substantial portion of
the property of Tenant shall be appointed and shall not be discharged within
ninety (90) days after such appointment, then Landlord may terminate this Lease
by giving written notice to Tenant of its intention to do so; provided, however,
neither bankruptcy, insolvency, an assignment for the benefit of creditors nor
the appointment of a receiver or trustee shall affect this Lease or permit its
termination so long as the covenants on the part of Tenant to be performed shall
be timely performed by Tenant, or someone claiming under it.

         21.     COVENANT OF TITLE.

                 (a)      Quiet Enjoyment.  Landlord covenants, represents and
         warrants that it has full right and power to execute and perform this
         Lease and to grant the estate demised herein and that subject to the
         terms hereof Tenant, on payment of the Annual and Additional Rent and
         performance of the covenants and agreements hereof, shall peaceably
         and quietly have, hold and enjoy the demised premises and all rights,
         easements, appurtenances and privileges belonging or in any way
         appertaining thereto during the Lease term without molestation or
         hindrance of any person whomsoever, and if, at any time during the
         term hereby demised the title of Landlord shall fail or it be
         discovered that its title shall not enable Landlord to grant the term
         hereby demised, Tenant shall have the option, at Landlord's expense,
         to correct such defect or to annul and void this Lease with full
         reservation of its right to damages, if any.

                 (b)      Evidence of Title.  Landlord further covenants,
         represents and warrants that, with respect to the Jockey Club Parcel,
         it is presently seized, and with respect to the Williams Parcel, will
         following its acquisition thereof be seized, of an indefeasible estate
         in fee simple to the demised premises free and clear of any liens,
         encumbrances, restrictions and violations (or claims or notices
         thereof), except public utility easements and covenants and
         restrictions of record not impairing Tenant's use of the demised
         premises, real estate taxes and special assessments not yet due and
         payable, and the items set forth on Exhibit F attached hereto.
         Landlord further covenants, represents and warrants that the demised
         premises are not presently encumbered by, and prior to the recordation
         of the Leasehold Mortgage (as defined in Article 22 hereof) will not
         be encumbered by, the lien of any mortgage, deed of trust or other
         security interest.  Landlord shall, without expense to Tenant and
         within fifteen (15) days after Landlord's acquisition of the Williams
         Parcel, furnish to Tenant a copy of a title policy evidencing that
         Landlord's title to the Williams Parcel is as herein represented.

                                       16





<PAGE>   20
         22.     LEASEHOLD MORTGAGE.

                 (a)      Tenant shall have the unrestricted right at any time
         and from time to time to mortgage the demised premises, including the
         Improvements, and its leasehold interest under this Lease (but not
         Landlord's fee interest) for the purposes of financing or refinancing
         the Improvements which have been built or are to be built pursuant to
         the terms hereof, subject however to the limitations hereinafter set
         forth.  Any such mortgage shall be subject and subordinate to the
         rights of Landlord hereunder.  A mortgage of the Property and/or
         Tenant's leasehold interest under this Lease is herein referred to as
         a "Leasehold Mortgage," and the party holding the Leasehold Mortgage
         the "Leasehold Mortgagee."

                 (b)      No Leasehold Mortgagee shall be entitled to enjoy the
         rights or benefits mentioned herein, nor shall the provisions of this
         Lease pertaining to Leasehold Mortgages be binding upon Landlord,
         unless Landlord shall have been given written notice of the name and
         address of the Leasehold Mortgagee together with a true and correct
         copy of the Leasehold Mortgage and the note secured thereby.

                 (c)      So long as such Leasehold Mortgage shall remain in
         effect, the following provisions shall apply:

                          (1)     Landlord shall serve a copy of any notice,
                 including a notice of default, required to be served on Tenant
                 under this Lease upon such Leasehold Mortgagee at the address
                 provided in the notice referred to in subsection (b) hereof,
                 and no notice by Landlord to Tenant hereunder shall be deemed
                 to have been duly given unless and until a copy thereof has
                 been served on the Leasehold Mortgagee.

                          (2)     In the event of a default by Tenant
                 hereunder, any Leasehold Mortgagee (or its agents) shall,
                 within the period allowed Tenant to cure such default and
                 otherwise as herein provided, have the right to cure such
                 default, or cause the same to be cured, and Landlord shall
                 accept such performance by or on behalf of such Leasehold
                 Mortgagee as if the same had been made by Tenant.

                          (3)     For the purposes of this subsection, no event
                 of default shall be deemed to exist for a default which cannot
                 be cured within the permitted cure period as long as (i) such
                 default is curable, (ii) action to cure the default shall in
                 good faith have been commenced within the time permitted
                 therefor to cure the same and shall be prosecuted to
                 completion with diligence and continuity, and (iii) during
                 such extended cure period there shall occur no monetary
                 default hereunder on the part of Tenant which is not cured
                 within twenty (20) days after written notice of such default
                 is given to the Leasehold Mortgagee.


                                       17
<PAGE>   21
                          (4)     Notwithstanding the foregoing, upon the
                 occurrence of an event of default, Landlord shall take no
                 action to terminate this Lease without first giving to the
                 Leasehold Mortgagee written notice thereof and, in the event
                 of a monetary default, a period of fifteen (15) business days
                 after written notice to cure such default, or in the case of a
                 non-monetary default, a reasonable time thereafter (not to
                 exceed sixty (60) days) within which either (i) to obtain
                 possession of the demised premises (including possession by a
                 receiver) or (ii) to institute and thereafter diligently
                 prosecute foreclosure proceedings or otherwise acquire
                 Tenant's interest under this Lease, or (iii) to cure such
                 default.  Such Leasehold Mortgagee, within sixty (60) days
                 after obtaining possession or acquiring Tenant's interest
                 under this Lease, (the "Leasehold Mortgage Cure Period"),
                 shall be required to cure all non-monetary defaults reasonably
                 susceptible of being cured by such Leasehold Mortgagee;
                 provided, however, that:  (A) such Leasehold Mortgagee shall
                 not be obligated to continue such possession or to continue
                 such foreclosure proceedings after such defaults shall have
                 been cured; (B) nothing herein contained shall preclude
                 Landlord, subject to the provisions of this Article, from
                 exercising any rights or remedies under this Lease with
                 respect to any other default by Tenant; (C) such Leasehold
                 Mortgagee shall agree with Landlord in writing to comply
                 during the period of such forbearance with such of the terms,
                 conditions and covenants of this Lease as are reasonably
                 susceptible of being complied with by such Leasehold
                 Mortgagee; and (D) if a non-monetary default which the
                 Leasehold Mortgagee is otherwise required to cure pursuant to
                 the provisions of this subparagraph (c)(4) is not reasonably
                 susceptible to cure within the Leasehold Mortgagee Cure
                 Period, the Leasehold Mortgagee shall be deemed to be in
                 compliance with the requirements hereof as long as (i) such
                 default is curable, (ii) it has commenced action to cure such
                 default within the Leasehold Mortgagee Cure Period, and
                 diligently pursues such cure to completion, and (iii) during
                 such extended cure period there shall occur no monetary
                 default hereunder on the part of Tenant which is not cured
                 within twenty (20) days after written notice of such default
                 is given to the Leasehold Mortgagee.  Any non-monetary default
                 by Tenant not reasonably susceptible of being cured by such
                 Leasehold Mortgagee shall be deemed to have been waived by
                 Landlord upon completion of such foreclosure proceedings or
                 upon such acquisition of Tenant's interest under this Lease,
                 except that any of such events of default which are reasonably
                 susceptible of being cured after such completion and
                 acquisition shall then be cured with reasonable diligence.
                 Such Leasehold Mortgagee or other purchaser in foreclosure
                 proceedings may become the legal owner and holder of Tenant's
                 interest under this Lease by foreclosure or assignment in lieu
                 of foreclosure.

                 (d)      In the event of termination of this Lease prior to
         the expiration of the term, except by reason of condemnation or
         casualty as provided in Articles 15 and 16 herein or the default of
         Tenant and the failure to cure such default by the Leasehold

                                       18
<PAGE>   22
         Mortgagee after having notice thereof as provided in subparagraph
         (c)(4) above, Landlord shall serve upon the Leasehold Mortgagee written
         notice that the Lease has been terminated together with a statement of
         any and all sums which would at that time be due under this Lease but
         for such termination, and of all other defaults, if any, under this
         Lease then known to Landlord.  Such Leasehold Mortgagee shall thereupon
         have the option to obtain a new lease in accordance with and upon the
         following terms and conditions:

                          (1)     Upon written request of the Leasehold
                 Mortgagee within thirty (30) days after service of such notice
                 that the Lease has been terminated, Landlord shall enter into
                 a new lease of the demised premises with such Leasehold
                 Mortgagee, or his designee, as set forth in clause (2) below.

                          (2)     Such new lease shall be effective on the date
                 of termination of this Lease and shall be for the remainder of
                 the term of this Lease, at the rent and upon all the
                 agreements, terms, covenants and conditions hereof, including
                 any applicable rights of renewal.  Such new lease shall
                 require the tenant thereunder to perform all unfulfilled
                 obligations of Tenant under this Lease except those
                 obligations which are reasonably susceptible of being
                 performed only by the original Tenant under this Lease.  Upon
                 the execution of such new lease, the tenant named therein
                 shall pay all sums which would at the time of the execution
                 thereof be due under this Lease but for such termination and
                 shall pay the reasonable expenses and damages incurred by
                 Landlord in connection with such defaults and termination, the
                 recovery of possession of said demised premises and the
                 preparation, execution and delivery of such new lease.  Upon
                 execution and delivery of such new lease, such tenant shall be
                 entitled to an adjustment in the amount otherwise owed pursuant
                 to the terms of this paragraph, such adjustment to be equal to
                 the net income, if any, derived by Landlord from the demised
                 premises during the period from the date of termination of this
                 Lease to the date of execution of the new lease.

                 (e)      Effective upon the commencement of the term of any
         new lease executed pursuant to subsection (d) above, all subleases
         shall be assigned and transferred without recourse by Landlord to the
         tenant under such new lease and all monies on deposit with Landlord
         which Tenant would have been entitled to use but for the termination
         or expiration of this Lease may be used by the tenant under such new
         lease for the purposes of and in accordance with the provisions of
         such new lease.

                 (f)      This Lease may not be modified, amended, or cancelled
         by the mutual agreement of Landlord and Tenant or surrendered without
         the express written consent of the Leasehold Mortgagee.  Nothing
         contained in this subsection (f) shall prevent Landlord's termination
         of this Lease as a result of a default by Tenant, subject to the
         rights and protections afforded the Leasehold Mortgagee under this
         Lease.

                                       19
<PAGE>   23
                 (g)      If Landlord and Tenant shall acquire the interest of
         the other hereunder, this Lease shall remain outstanding and no merger
         of the leasehold into the fee interest shall be deemed to have
         occurred.

                 (h)      If any Leasehold Mortgagee shall acquire title to
         Tenant's interest under this Lease by foreclosure, assignment in lieu
         of foreclosure or otherwise, or under a new lease pursuant to
         subsection (d) above, such Leasehold Mortgagee may assign such
         interest under this Lease or in such new lease and shall thereupon be
         released from all liability for the performance or observance of the
         covenants and conditions in this Lease or in such new lease contained
         on Tenant's or Tenant's part to be performed and observed from and
         after the date of such assignment; provided,  however, that the
         assignee of such Leasehold Mortgagee shall have expressly assumed this
         Lease or such new lease and written evidence thereof shall have been
         submitted to Landlord; and provided further that the Landlord has
         approved the assignee of the Leasehold Mortgagee, such approval not to
         be unreasonably withheld or delayed.

                 (i)      Landlord agrees to make reasonable modifications to
         the terms and conditions of this Lease that do not affect or alter the
         economic obligations of the parties hereto and that do not have any
         material adverse effect on the rights of Landlord hereunder, to the
         extent that a Leasehold Mortgagee shall require that such
         modifications be made in order to make the Lease acceptable to the
         Leasehold Mortgagee for the making of its loan.

         23.     FEE MORTGAGE.  Landlord may mortgage its interest in the
demised premises provided such mortgage expressly provides that the rights and
interest of the mortgagee thereunder are subject and subordinate to the rights
and interest of Tenant hereunder and any Leasehold Mortgagee under any
Leasehold Mortgage then or thereafter existing.  Notwithstanding the foregoing,
upon written request by Landlord, Tenant shall execute and deliver an agreement
in form satisfactory to Tenant subordinating this Lease to any first mortgage
encumbering the fee interest in the demised premises; provided, however, such
subordination shall be upon the express condition that the validity of this
Lease shall be recognized by such mortgagee and that, notwithstanding any
default by Landlord with respect to the mortgage, or any foreclosure or
termination thereof, Tenant's possession of the demised premises and its rights
under this Lease shall not be disturbed by such mortgagee unless and until the
occurrence of an event of default and the expiration of the cure period, if
any, with respect thereto, and this Lease and Tenant's right to possession
hereunder shall have been terminated in accordance with the provisions of this
Lease.

         Provided the holder of a properly recorded first mortgage shall have
notified Tenant, in writing, that it is the holder of such lien on the demised
premises and shall so request, Tenant shall provide such holder with a
duplicate copy of any notice sent to Landlord covering a default of Landlord
hereunder and such holder shall be granted sixty (60) days after receipt
thereof to correct or remedy such default (provided however, that such holder
shall provide written notice

                                       20
<PAGE>   24
to Tenant on or before the thirty-first (31st) day after receipt of Tenant's
notice of default as to whether such holder intends to cure said default,
except that if such default is not reasonably susceptible of being cured within
such sixty (60) day period, then Landlord shall not be deemed to be in default
under this Lease so long as (i) such default is curable, (ii) such holder
commences action to cure such default within such sixty (60) day period and
thereafter diligently pursues such cure to completion, and (iii) during such
extended cure period there shall occur no monetary default hereunder on the
part of Landlord which is not cured within twenty (20) days after written
notice of such default is given to such holder.

         24.     INDEMNIFICATIONS.

                 (a)      Tenant's Obligation.  During the Lease term, Tenant
         shall indemnify and save Landlord, and its agents, employees,
         successors and assigns, harmless against all penalties, loss, damage,
         cost, expense (including attorneys' fees), claims or demands of
         whatsoever nature arising from use or occupancy of the Property by
         Tenant, its agents, contractors, employees, tenants or
         concessionaires, except to the extent the same shall result, in whole
         or in part, directly or indirectly, from the default or negligence of
         Landlord, its agents, employees, successors and assigns, or from
         Landlord's default under this Lease.  Tenant waives all claims against
         Landlord for damage or injury to person or property except to the
         extent arising from Landlord's negligence.

                 (b)      Landlord's Obligation.  During the Lease term,
         Landlord shall indemnify and save Tenant, and its  agents, employees,
         assignees and sublessees, harmless against all penalties,loss, damage,
         cost, expense (including attorneys' fees), claims or demands of
         whatsoever nature arising from all areas of the Property except to the
         extent the same shall result, in whole or in part, directly or
         indirectly from the default or negligence of Landlord, its agents,
         employees, assignees or successors.

                 (c)      Survival.  The indemnifications set forth in this
         Article 24 shall survive the expiration, cancellation or termination
         of this Lease.

         25.     TENANT'S RIGHT TO CURE LANDLORD'S DEFAULTS.  In the event
Landlord shall neglect to pay when due any obligations on any mortgage or
encumbrance affecting title to the demised premises and to which this Lease
shall be subordinate and with respect to which Tenant does not have an existing
non-disturbance agreement, or in the event Landlord shall fail to perform any
obligation specified in this Lease, or if Landlord shall be in default of any
representation, warranty, or covenant of Landlord, then Tenant may, after the
continuance of any such default for fifteen (15) days (in the case of a
monetary default) or thirty (30) days (in the case of a non-monetary default)
after written notice thereof by Tenant to Landlord, pay said principal,
interest or other charges or cure such default, all on behalf of and at the
expense of Landlord and do all necessary work and make all necessary payments
in connection therewith and Landlord shall, on demand, pay Tenant, forthwith,
the amount so paid by Tenant together with interest thereon at the rate of two
percent (2%)  in excess of the prime rate of Citibank N.A.

                                       21
<PAGE>   25
(the "Default Rate") or the highest rate permitted by law, whichever is the
lower, from the date of payment until re-payment.  Tenant may, to the extent
necessary, after an additional ten (10) days notice to Landlord, withhold any
and all payments of Annual and Additional Rent payments thereafter due to
Landlord and apply the same to the payment of such indebtedness.

         25A.    LANDLORD'S RIGHT TO CURE TENANT'S DEFAULTS.  If Tenant shall
fail to perform any act herein required by it to be performed and such failure
shall not be cured within any applicable grace period provided in Article 18 of
this Lease, then Landlord shall have the right, but not the obligation, to
perform or cause to be performed such act (entering upon the Property for such
purpose, if Landlord shall so elect), and Tenant shall repay to Landlord the
entire reasonable cost and expense thereof, together with interest at the
Default Rate (as defined in Article 25 of this Lease) or the highest rate
permitted by law, whichever is the lower, from the date of payment until
repayment.

         26.     HAZARDOUS MATERIAL.

                 (a)      Landlord's Representations.  Tenant has provided to
         Landlord a copy of a Phase One Environmental Audit dated May 6, 1996,
         and prepared by Hygienetics Environmental Services, Inc. (the
         "Environmental Report").  Except as disclosed in the Environmental
         Report, Landlord represents that, to the best of its knowledge, there
         are not now nor have there been any Hazardous Materials (as defined
         below) used, generated, stored, treated or disposed of on the
         Property.  Landlord further represents that there are no underground
         storage tanks located upon the Property.  Landlord's representations
         to Tenant under this Article shall survive the cancellation or
         termination of this Lease.  Landlord further represents and warrants
         that except as noted in the Environmental Report, to the best of its
         knowledge it is, and shall remain during the term of this Lease, in
         compliance with all local, state and federal environmental laws
         imposing obligations on the Landlord as owner of the Property except
         to the extent non-compliance is the result of actions or omissions of
         Tenant, its subtenants, agents, employees, contractors, assignees or
         successors; provided that nothing herein shall relieve Tenant of its
         obligations under subparagraph (c) below.

                 (b)      Indemnification by Landlord.  Notwithstanding any
         investigation made by Landlord or Tenant, Landlord hereby indemnifies
         Tenant, and Tenant's subtenants, from and against any loss, liability,
         claim or expense, including, without limitation, cleanup, engineering
         and attorneys fees and expenses that Tenant may incur by reason of the
         above representation being false, by reason of the presence of any
         Hazardous Materials in and upon the Property or by reason of any
         investigation or claim of any governmental agency or third party,
         except for (i) any Hazardous Materials used, generated, stored,
         treated or disposed of on the Property by the Tenant, its agents,
         licensees, concessionaires, contractors or employees, or (ii) any
         Hazardous Materials placed upon the surface of the Property by any
         party other than Landlord or its agents, licensees, concessionaires,
         contractors or employees during the term of this Lease.  Landlord's
         representations and indemnity to Tenant under this paragraph shall
         survive the cancellation or termination of this Lease.


                                       22
<PAGE>   26
                 (c)      Tenant's Representations.  Tenant warrants and agrees
         that it will not use, maintain, generate, store, treat or dispose of
         any Hazardous Materials in or on the Property in violation of
         applicable governmental regulations.  Tenant hereby indemnifies
         Landlord from and against any loss, liability, claim or expense,
         including, without limitation, cleanup, engineering and attorneys fees
         and expenses that Landlord may incur by reason of any investigation or
         claim of any governmental agency or third party for any actions taken
         by or omissions of Tenant, its agents, licensees, concessionaires,
         contractors or employees at the Property during the term of this Lease
         in violation of the above covenant.  Tenant's indemnity to Landlord
         under this paragraph shall survive the cancellation or termination of
         this Lease.

                 (d)      Affirmative Obligations.  At any time prior to the
         Rent Commencement Date, Tenant (or Tenant's contractor) may inspect
         the Property for the presence of Hazardous Materials.  If Hazardous
         Materials are discovered on the Property beyond the levels which
         require investigation and/or remediation under applicable
         environmental laws, Landlord shall be required, subject to the
         provisions of Article 5 above, at its sole cost and expense, to remedy
         and cleanup such problem in accordance with all applicable
         governmental regulations.  If Landlord is unable to, or does not
         remediate, such Hazardous Materials prior to the Rent Commencement
         Date, Tenant may, within thirty (30) days thereafter, and without
         waiving any other rights it may have at law or in equity arising out
         of Landlord's breach of this Lease, cancel this Lease by giving notice
         to Landlord and returning possession of the demised premises to
         Landlord and, in such event, Tenant will thereafter be relieved of all
         further liability under this Lease.  If, after the Rent Commencement
         Date, Hazardous Materials are discovered on the Property beyond the
         amounts which require investigation, remediation or other action under
         applicable environmental laws, and which were not caused as a result
         of the acts or omissions of Tenant or its agents, licensees,
         concessionaires, contractors or employees or by the placement of
         Hazardous Materials onto the surface of the Property by any party
         other than Landlord or its agents, licensees, concessionaires,
         contractors or employees, Landlord shall be required, at its sole cost
         and expense, to remedy and cleanup such conditions in accordance with
         all applicable governmental regulations, and in the event such remedy
         and/or cleanup requires the vacation of ten percent (10%) or more of
         the Property for a period exceeding ninety (90) days, Tenant may, and
         without waiving any other rights it may have at law or in equity
         arising out of Landlord's breach of this Lease, with thirty (30) days
         notice, cancel this Lease by giving notice to Landlord and returning
         the demised premises to the Landlord and, in such event, Tenant and
         Landlord will thereafter be relieved of all further liability under
         this Lease (except that Landlord shall remain liable with respect to
         the representations contained in Article 26(a) above.  In the event
         that Tenant does not elect to cancel this Lease in accordance with the
         foregoing, (i) the Annual Rent, and any Additional Rent payable
         hereunder, shall be equitably abated in accordance with the proportion
         of the demised premises which are rendered unusable as a result of
         such environmental conditions, (ii) Landlord shall promptly commence
         to remedy and cleanup the Hazardous Materials conditions and


                                       23
<PAGE>   27
         thereafter diligently and continuously prosecute the same to
         completion, and (iii) if Landlord does not so commence and diligently
         and continuously prosecute such remedy and cleanup, Tenant shall have
         the right, upon ten (10) days prior written notice to Landlord, to
         undertake the same on Landlord's behalf and at Landlord's expense, and
         all costs and expenses incurred by Tenant in connection with such
         remedy and cleanup shall be payable by Landlord to Tenant and/or may
         be recovered by Tenant withholding payments of Annual Rent and
         Additional Rent, all in accordance with Article 25 of this Lease.

                 (e)      Definition.  For purposes of this Article, the term
         "Hazardous Materials" shall mean any toxic or hazardous waste or
         substances (including asbestos and petroleum products) which are
         regulated by applicable local, state or federal environmental laws or
         regulations.

         27.     CONDITION OF PREMISES AT TERMINATION.  At the expiration or
earlier termination of the Lease term Tenant shall surrender the demised
premises, together with alterations, additions and improvements then a part
thereof, in good order and condition, except for the following:  (a) ordinary
wear and tear, (b) repairs required to be made by Landlord, (c) subject to
Tenant's obligation to clear Tenant's Building from the demised premises in
accordance with the last sentence of Article 15(b) hereof, loss or damage by
fire, the elements and other casualty, (d) subject to Tenant's obligations
under Article 16(c) hereof, loss or damage by condemnation, and (e) any
Hazardous Materials conditions not caused by the actions of Tenant or its
agents, licensees, concessionaires, subtenants, contractors or employees.  All
furniture and trade fixtures installed in Tenant's Building at the expense of
Tenant, or other occupant, shall remain the property of Tenant, or such other
occupant; provided, however, Tenant shall, at any time and from time to time,
during the Lease term, have the option to relinquish its property rights with
respect to such trade fixtures, which option shall be exercised by written
notice of such relinquishment to Landlord and, from and after the exercise of
said option, the property specified in said notice shall be the property of
Landlord.

         28.     HOLDING OVER.  In the absence of any written agreement to the
contrary, if Tenant should remain in occupancy of the demised premises after
the expiration of the Lease term, it shall so remain as a tenant from
month-to-month and all provisions of this Lease applicable to such tenancy
shall remain in full force and effect, except that Annual Rent payable during
such holdover tenancy shall be one hundred twenty-five percent (125%) of the
Annual Rent payable at the end of the Lease term.

         29.     RIGHT OF FIRST OFFER.  In the event Landlord desires to sell
the Property at any time during the Lease term, Landlord shall first offer to
sell the Property to Tenant upon and subject to all of the following terms,
covenants, and conditions:

                 (a)      Initial Offer.  Landlord shall deliver to Tenant a
         written offer to sell which shall set forth all of the terms and
         conditions upon which Landlord is willing to sell the


                                       24
<PAGE>   28
         Property to Tenant.  Such offer shall specifically state the purchase
         price for the Property and the proposed closing date.  The purchase
         price shall be payable in cash and the sale shall be without
         representation or warranty, unless stated otherwise in the offer.

                 (b)      Acceptance by Tenant.  Tenant shall have thirty (30)
         days following delivery of Landlord's offer within which to accept
         such offer.  During such thirty (30) day period, Landlord shall not
         offer the Property to any other person or entity, subject,
         nevertheless, to the provisions of Article 29(p).  During such thirty
         (30) day period Landlord and Tenant may negotiate Landlord's offer
         (but nothing herein requires Landlord to change Landlord's offer) and
         Landlord may, in Landlord's sole discretion, agree to make additional
         offers to Tenant which may differ from the terms and conditions of
         Landlord's original offer including the purchase price.  Such
         additional offers shall be set forth in writing.  However, the thirty
         (30) day period shall not be extended as a result of any additional
         offers made by Landlord.  Tenant may accept any of the offers made by
         Landlord during said thirty (30) day period.

                 (c)      Tenant's Rejection of Offer.  If Tenant does not
         accept any of Landlord's offers, in a writing signed by Tenant, within
         said thirty (30) day period, such failure shall constitute a rejection
         of all of Landlord's offers, and all such offers shall be deemed
         terminated.

                 (d)      Landlord's Right to Sell to Third Party.  If Tenant
         rejects all of Landlord's offers within said thirty (30) day period,
         Landlord shall have the right to offer the Property for sale to third
         parties upon any terms, covenants, and conditions desired by Landlord.
         Landlord shall have the right to contract to sell and convey the
         Property free and clear of any rights of Tenant to purchase the
         Property provided that:

                          (1)     the contract for the sale of the Property is
                 entered into within six (6) months following (X) the
                 expiration of the thirty (30) day period set forth in Article
                 29(b) above; or (Y) the expiration of the period or periods
                 referred to in Article 29(g) below, whichever shall later
                 occur; and

                          (2)     the purchase price for the Property (the
                 "Outside Purchase Price") is "Substantially Similar" to the
                 best purchase price offered to Tenant, as such term is
                 hereinafter defined.

                 (e)      Substantially Similar Purchase Price.  The Outside
         Purchase Price shall be deemed to be "Substantially Similar" to the
         best purchase price offered to Tenant if the total Outside Purchase
         Price is not less than ninety-five percent (95%) of the lowest total
         purchase price offered to Tenant (whether pursuant to Article 29(a) or
         Article 29(g).  An Outside Purchase Price which is equal to or greater
         than ninety-five percent (95%) of the best purchase price offered to
         Tenant shall be deemed "Substantially Similar" under this Subsection
         (e).



                                       25
<PAGE>   29
                 (f)      Obligations of Tenant.  Within three (3) business
         days after request by Landlord, which request shall set forth the
         terms of a proposed Outside Purchase Price, Tenant shall certify, in
         writing, addressed to Landlord and to any third parties designated by
         Landlord, that the proposed Outside Purchase Price is Substantially
         Similar to the best purchase price offered to Tenant.

                 (g)      Re-Offer to Tenant at Lower Price.  If Landlord
         desires to sell the Property for a more favorable purchase price which
         is not Substantially Similar to the best purchase price previously
         offered to Tenant, Landlord shall offer to sell the Property, in
         writing, to Tenant at such more favorable purchase price.  Tenant
         shall have five (5) business days within which to accept, in a writing
         signed by Tenant, the more favorable purchase price.  If Tenant fails
         to accept such purchase price within said five (5) business day
         period, such offer shall be deemed rejected and shall terminate.  From
         and after such rejection, such more favorable purchase price offered
         to Tenant shall be used as the best purchase price offered to Tenant,
         under Articles 29(d) and 29(e), to determine whether the Outside
         Purchase Price offered to third parties is Substantially Similar to
         the best purchase price offered to Tenant.

                 (h)      Acceptance of Offer by Tenant.  If Tenant accepts any
         of the offers made by Landlord during the initial thirty (30) day
         period referred to in Article 29(b), the Property shall be sold and
         conveyed to Tenant in accordance with the terms and conditions of the
         offer so accepted by Tenant.  If Tenant accepts the more favorable
         purchase price offered by Landlord pursuant to Article 29(g), the
         Property shall be sold and conveyed to Tenant in accordance with the
         terms and conditions of the offer accepted by Tenant.  As a condition
         to the effectiveness of the acceptance by Tenant of any offer made by
         Landlord, Tenant shall deliver to Landlord, concurrently with Tenant's
         written acceptance, cash in a sum equal to ten percent (10%) of the
         purchase price, which shall constitute a deposit under the agreement
         between Landlord and Tenant for the sale of the Property and such
         deposit shall constitute liquidated damages to Landlord in the event
         of a default by Tenant and Tenant shall, as a further condition to the
         effectiveness of Tenant's acceptance of Landlord's offer, sign and
         initial a provision complying with all California statutory requisites
         for the enforcement of liquidated damages provision.  Such provision
         for liquidated damages shall be Landlord's sole remedy and Landlord
         shall not seek specific performance.

                 (i)      Re-Offer to Tenant if Property Not Sold.  If Landlord
         has not executed a contract to sell the Property within the time
         period set forth in Article 29(d), Landlord shall be required to
         comply with all of the provisions of this Article 29 before again
         offering the Property for sale to third parties subsequent to such
         period.

                 (j)      Re-Offer to Tenant if Outside Purchase Price Not
         Substantially Similar.  If Landlord enters into a contract to sell the
         Property for an Outside Purchase Price which is not Substantially
         Similar to the best purchase price offered to Tenant, such


                                       26
<PAGE>   30
         contract shall be and remain subject to Tenant's rights hereunder.
         Landlord shall have the obligation to offer such Outside Purchase Price
         to Tenant pursuant to Article 29(a) and if Tenant accepts same,
         Tenant's rights under Article 29(h) shall be superior to the rights of
         the purchaser under such contract; provided that if Tenant rejects such
         offer pursuant to Article 29(a), Tenant's rights to purchase the
         Property shall automatically terminate and such purchaser shall take
         title to the Property free and clear of Tenant's rights to purchase the
         Property.

                 (k)      Sale of Property to Third Party.  If Landlord sells
         and conveys the Property to a third party pursuant to Article 29(d) or
         pursuant to Article 29(j) (after Tenant has rejected Landlord's offer
         to Tenant as therein specified), such third party purchaser shall take
         title to the Property free and clear of Tenant's rights to purchase
         the Property.  Such third party purchaser and all parties thereafter
         claiming under such third party purchaser shall have the right to
         thereafter sell and convey the Property unencumbered by the provisions
         of this Article 29 and without offering the Property for sale to
         Tenant.  Upon such sale by Landlord pursuant to Article 29(d) or
         Article 29(j), Tenant shall execute and deliver to Landlord and/or
         such purchaser any and all documents and instruments reasonably
         requested by Landlord and/or such purchaser terminating Tenant's
         rights under this Article 29.

                 (l)      Right of First Offer Not Applicable.  The provisions
         of this Article 29 are not applicable, and Tenant shall have no right
         to purchase the Property under this Article 29 and Landlord shall have
         no obligation to offer to sell the Property to Tenant (i) upon or with
         respect to one or more mortgages or deeds of trust given by Landlord
         covering or affecting the Property or any other transfer,
         hypothecation, assignment or other conveyance in the nature of
         security for the repayment of indebtedness, or (ii) upon or with
         respect to a contribution of the Property to the capital of an entity
         in which Landlord will immediately following such contribution own at
         least a twenty percent (20%) equity interest, or (iii) to a sale or
         transfer of the Property as part of a transaction involving the sale
         or transfer of all or a substantial portion of Landlord's assets
         except where the Property and Landlord's leasehold interest hereunder
         are the only assets of substantial value being sold in such
         transaction.

                 (m)      Rights Not Separately Assignable. Tenant's rights
         under this Article 29 may not be assigned, transferred or conveyed
         separately from the Lease.

                 (n)      Tenant's Obligation to Make Claims.  In the event
         Tenant has notice of an intended sale by Landlord to a third party,
         Tenant shall have the obligation, upon inquiry by either Landlord or
         any proposed purchaser, to deliver, in a writing signed by Tenant, a
         certificate stating that: (i) Landlord has complied with the
         provisions of this Article 29 and such sale may be consummated free
         and clear of Tenant's rights under this Article 29; or (ii) this
         Article 29 is not applicable to such sale; or (iii) Landlord has not
         complied with this Article 29, this Article 29 is applicable to such
         sale and that Tenant


                                       27
<PAGE>   31
         intends to make a claim to enforce its rights under this Article 29,
         as the case may be.  Such certificate shall be delivered promptly
         after request therefor but in any event within five (5) days after
         request therefor.

                 (o)      Termination.  The rights granted under this Article
         29 shall terminate and shall have no further force or effect (i) on
         the date of the expiration or earlier termination of the Lease, (ii)
         upon assignment of this Lease to any entity other than the Developer
         (as defined in Article 2(e) of this Lease), Tenant or any parent or
         subsidiary of Tenant (by way of reassignment from Developer), or any
         holder of a Leasehold Mortgage where the assignment to such holder is
         solely for security purposes,  or (iii) as otherwise expressly
         provided in this Article 29, whichever first occurs.

                 (p)      Miscellaneous.

                          (1)     Notwithstanding the provisions of Article
                 29(b), Landlord may offer the Property for sale and negotiate
                 with other third parties concerning the sale of the Property
                 during the thirty (30) day period referred to therein provided
                 that any contract of sale entered into by Landlord during such
                 thirty (30) day period shall be subject and subordinate to
                 Tenant's rights to accept Landlord's offer during such thirty
                 (30) day period, and purchase the Property pursuant thereto.

                          (2)     As used in this Article 29, a contract for
                 the sale of the Property is "entered into" when Landlord and
                 the contract vendee have executed and delivered an agreement
                 for the sale of the Property.

         30.     SIGNAGE.  Tenant shall have the right to place the maximum
amount of exterior signage on Tenant's Building and on the Property as may be
permitted by applicable governmental laws or ordinances, including but not
limited to the right to construct freestanding signs.

         31.     NOTICES.  All notices, demands and other communications
required or permitted to be given under this Lease shall be in writing and
shall be deemed to be given when delivered (or, if delivery is refused, on the
date delivery was attempted) if sent by recognized overnight courier, or upon
three (3) business days after deposit in the U.S. Mail if sent by certified or
registered mail, postage prepaid.  All notices shall be addressed to Landlord
or to Tenant at the following addresses:

<TABLE>
         <S>                      <C>
         Tenant:                  Borders, Inc.
                                  311 Maynard Street
                                  Ann Arbor, Michigan 48104
                                  Attention:  Vice President - Development
</TABLE>


                                       28
<PAGE>   32
<TABLE>
         <S>                <C>
         with a copy to:    Rosenfeld & Wolff
                                         2049 Century Park East
                                         Suite 600
                                         Los Angeles, California 90067
                                         Attention:  Alan D. Aronson, Esq.

         Landlord:                       California Jockey Club
                                         2600 Delaware Street
                                         San Mateo, California 94403

         with a copy to:    Carr, McClellan, Ingersoll, Thompson
                                             & Horn
                                         216 Park Road
                                         P.O. Box 513
                                         Burlingame, California 94011
                                         Attention:  Norman I. Book, Jr., Esq.
</TABLE>

or to any subsequent address which Landlord or Tenant shall designate for such
purpose.

         32.     PARTIAL INVALIDITY.  If any term, covenant or condition of
this Lease or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Lease or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable shall not be
affected thereby and each term, covenant or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.

         33.     ENTIRE AGREEMENT - APPLICABLE LAW.  This Lease, the exhibits
and amendments or addenda, if any, attached hereto and forming a part hereof,
set forth all the covenants, promises, agreements, conditions, provisions and
understandings between Landlord and Tenant concerning the demised premises and
there are no covenants, promises, agreements, conditions, provisions or
understandings, either oral or written, between them other than are herein set
forth.  No alteration, amendment, change or addition to this Lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed by each
party.  This Lease shall be governed by and construed in accordance with the
laws of the State in which the demised premises are located.

         34.     SUCCESSORS AND ASSIGNS.  Subject to the provisions on
assignment set forth in this Lease, the conditions, covenants and agreements
contained in this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors and assigns.  The covenants contained herein shall be deemed to be
covenants running with the demised premises and shall be binding upon all
owners, users and occupants of such land for so long as this Lease remains in
effect.  The restrictions, benefits and obligations under this Lease shall be
deemed to create mutual and reciprocal benefits and servitudes


                                       29
<PAGE>   33
upon the demised premises, which shall run with and against said property and
be a benefit and burden thereon, except that said restrictions, benefits and
obligations shall cease and be of no further force or effect after the
termination of this Lease.

         35.     MEMORANDUM OF LEASE.  The parties shall, concurrently with the
execution and delivery of this Lease, execute and deliver a memorandum of lease
which Landlord shall, at its sole expense, cause to be recorded as an
encumbrance against the demised premises within ten (10) days following the
date upon which the last of all contingencies to the effectiveness of this
Lease has been satisfied or waived.  Upon the expiration or sooner termination
of this Lease, Tenant will execute a document for recordation confirming that
this Lease has terminated.

         36.     BROKER'S REPRESENTATION.  Landlord represents that it dealt
with no broker or brokers and Tenant represents that it dealt with no broker or
brokers in connection with the negotiation, execution and delivery of this
Lease.  Landlord and Tenant shall, and do hereby, indemnify and save the other
harmless from and against any losses, damages, penalties, claims or demands of
whatsoever nature arising from a breach of its foregoing representation
including, without limitation, reasonable attorneys' fees and expenses.  The
representations and indemnifications set forth in this Article shall survive
the cancellation or termination of this Lease.

         37.     ESTOPPEL CERTIFICATES.  Within twenty (20) days after request
by either party, the other party shall execute and deliver to the requesting
party a written certificate as to the status of this Lease, any existing
defaults, the status of the payments and performance of the parties required
hereunder and such other information that may be reasonably requested.

         38.     CAPTIONS AND DEFINITIONS.  Marginal captions of this Lease are
solely for convenience of reference and shall not in any way limit or amplify
the terms and provisions thereof.  The necessary grammatical changes which
shall be required to make the provision of this Lease apply (a) in the plural
sense if there shall be more than one Landlord or Tenant and (b) to any
landlord or tenant, which shall be either a corporation, an association, a
partnership or an individual, male or female, shall in all instances be assumed
as though in each case fully expressed.

         39.     SURVIVAL.  Unless otherwise provided, upon the termination of
this Lease under any of the Articles hereof, the parties hereto shall be
relieved of any further liability hereunder except as to acts, omissions or
defaults occurring prior to such termination.

         40.     DUE DILIGENCE CONTINGENCY.  Tenant's obligations under this
Lease are contingent upon Tenant's approval of the suitability of the demised
premises for Tenant's intended development and use thereof.  Tenant, and its
agents, employees and contractors, at Tenant's expense and at reasonable times,
shall have a period of sixty (60) days from the date of this Lease (the "Due
Diligence Period") to enter upon the demised premises for the purpose of making
a diligent, prudent and confidential inspection to explore the potential
development of the demised premises, by examining, testing and surveying the
demised premises.  The


                                       30
<PAGE>   34
inspections relating to the demised premises may include, but shall not be
limited to, examination of title, site survey, availability of a building
permit for construction of Tenant's Work, zoning or use restrictions, present
and future access, geological or environmental testing, drainage conditions on
the demised premises, excessive levels of radon, toxic waste, hazardous
substances including, but not limited to asbestos or other undesirable
substances, and any other condition or circumstance which may adversely affect
the demised premises or Tenant's operations thereon.  Landlord agrees to
cooperate with Tenant during the Due Diligence Period in providing and allowing
Tenant to photocopy all related documents which Landlord may possess relating
to the demised premises and in executing any applications required to be
submitted to the City or County, any planning commission, or government agency
or authority presiding over the demised premises affecting the Tenant's
intended use of the demised premises and which are consistent with the intent
and purpose of this Lease.  In the event Tenant's due diligence with respect to
the demised premises produces results that are unsatisfactory to Tenant for any
reason, Tenant may, at its sole option, and without specifying the matters
which are unsatisfactory to Tenant, within ten (10) days after the end of the
Due Diligence Period, terminate this Lease, upon which termination neither
party shall have any further rights, duties or obligations hereunder.  Upon
satisfaction or waiver of the contingency set forth herein, and subject to
Landlord's obligations, covenants, representations and warranties under this
Lease, Tenant shall accept the demised premises in their "as-is" condition.
Tenant shall conduct no drilling on the demised premises except solely for the
purpose of determining the adequacy of the soils condition to support
construction of the Improvements.

         41.     SITE PLAN APPROVAL/PERMIT CONTINGENCY.  Tenant's obligations
under this Lease are contingent upon the receipt by Tenant of (or assurance
satisfactory to Tenant in its sole and absolute discretion that Tenant shall
receive) (i) site plan approval and all required permits and licenses for the
construction of the Improvements as generally shown on the attached Exhibit B,
(ii) written assurance from the City of San Mateo and any other governmental
authorities exercising jurisdiction that the demised premises are properly
zoned for use as a retail store selling books, periodicals, newspapers, music
and video products, CD-ROM's and other computer software, and the operation of
a coffee bar selling food and beverage items (the "Intended Use"), and (iii)
all required permits and licenses for the Intended Use (other than permits and
licenses which are conditioned upon completion of Tenant's Work or store
opening) within one hundred eighty (180) days from the date hereof.  Landlord
agrees that upon the request of Tenant and at Tenant's sole cost and expense,
Landlord shall execute and deliver such instruments and perform such other acts
as shall be required for Tenant to secure any such approvals, permits, licenses
or assurances, including but not limited to instruments creating a single legal
parcel out of the multiple parcels comprising the demised premises or covenants
to hold such parcels as a single parcel.  In the event that the foregoing
contingency is not satisfied or waived in writing by Tenant within the time
period specified, then this Lease shall terminate and neither party shall have
any further rights, duties or obligations hereunder.

         42.     ADJACENT PROPERTY ACQUISITION CONTINGENCY.  This Lease is
contingent upon the acquisition by Landlord of fee title to the Williams Parcel
within one hundred eighty


                                       31
<PAGE>   35
(180) days from the date of this Lease.  Promptly following mutual execution
and delivery of this Lease, Tenant shall assign to Landlord all of Tenant's
rights and obligations under its agreement (the "Purchase Agreement") to
purchase the Williams Parcel.  Landlord agrees to use its reasonable best
efforts to complete the purchase of the Williams Parcel in accordance with the
terms of such Purchase Agreement.  In the event that the foregoing contingency
is not removed within the time period specified, then this Lease shall
terminate and neither party shall have any further rights, duties or
obligations hereunder; provided, if such contingency fails due to Landlord's
failure to use its best reasonable efforts to complete the purchase of the
Williams Parcel or Landlord's default under the Purchase Agreement, Landlord
shall be liable to Tenant and Developer for all out of pocket costs incurred by
Tenant and Developer in connection with this Lease.  In no event shall Landlord
have any obligation to complete such purchase prior to satisfaction or waiver
by Tenant of the contingencies described in Articles 40, 41 and 43 hereof and
satisfaction of the contingency set forth in Article 44 hereof.  Landlord
acknowledges that Tenant will attempt to obtain a credit against the purchase
price for the Williams Parcel in order to compensate Tenant for the costs
Tenant will occur in abating asbestos containing materials from the buildings
located on the Williams Parcel.  Landlord agrees that if Tenant succeeds in
obtaining such a credit, Landlord shall pay an amount equal to such credit to
Tenant within ten (10) days following Landlord's acquisition of the Williams
Parcel; provided, that if Landlord shall fail to pay such amount to Tenant, then
Tenant, in addition to its other remedies hereunder, shall have the right to
offset such amount against its Annual Rent hereunder.

         43.     FINANCING CONTINGENCY.  Tenant's obligations under this Lease
are contingent upon Tenant securing financing for construction of the
Improvements upon terms and conditions acceptable to Tenant in its sole and
absolute discretion within sixty (60) days following satisfaction or waiver of
the contingencies set forth in Articles 41 and 42 hereof.  In the event that
the foregoing contingency is not satisfied or waived in writing by Tenant
within the time period specified, then this Lease shall terminate and neither
party shall have any further rights, duties or obligations hereunder.

         44.     QUIET TITLE CONTINGENCY.  This Lease is contingent upon
Landlord successfully quieting title to the demised premises as against any
rights in third parties to cross over the demised premises between El Camino
Real and areas to the west of the demised premises, within sixty (60) days from
the date of this Lease.  Landlord agrees to diligently pursue such quiet title
action during such sixty (60) day period.  In the event the foregoing
contingency is not satisfied or waived in writing by Tenant within the time
period specified, then this Lease shall terminate and neither party shall have
any further rights, duties or obligations hereunder.


                                       32
<PAGE>   36
         45.     TIME OF ESSENCE.  Time is of the essence of this Lease and the
                 provisions hereof.

         IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.

<TABLE>
<S>                               <C>
WITNESSES:                                 BORDERS, INC.


-------------------------          By: /s/ Richard Flanagan
                                      ------------------------
-------------------------          Its: President and COO

                                         CALIFORNIA JOCKEY CLUB, A REAL
                                         ESTATE INVESTMENT TRUST


-------------------------          By: /s/ James M. Harris
                                      ------------------------
-------------------------          Its: President
</TABLE>

                                       33