<PAGE>   1
                                                                 EXHIBIT 10.42

                         SINGLE TENANT INDUSTRIAL LEASE



                                Effective Date:  January 7, 1997
                                (The date set forth below Landlord's signature.)

                                BASIC LEASE INFORMATION

Landlord:                       CATELLUS DEVELOPMENT CORPORATION, a Delaware
                                corporation

Landlord's Address
        For Notice:             1065 N. PacifiCenter Drive, Suite 200
                                Anaheim, CA 92806
                                Attn: Asset Management
                                Telephone: (714) 630-8100
                                Fax: (714) 237-7425
Landlord's Address
          For Payment of Rent:  File #53694
                                Los Angeles, CA 90074-3694

Tenant:                         PAIRGAIN TECHNOLOGIES, INC., a Delaware 
                                corporation

Tenant's Address
          For Notice:           14402 Franklin Ave.
                                Tustin, CA 92680-7013
                                Attn: Rob Price, Controller
                                Telephone: 714-730-2916
                                Fax:  714-832-9924

Project:                        Franklin Building

Building:                       Approximately 65,910 rentable square feet as 
                                shown in Exhibit A.

Building Address:
          Street:               14352 Franklin Ave.
          City and State:       Tustin, CA
          Lot:                  The tax parcel on which the Building is located.

Term:                           Ninety-six (96) months

Commencement Date:              January 1, 1997

<TABLE>
<S>                            <C>                                   <C>
Base Rent Per Month:            January 1, 1997 - December 31, 1998    Thirty Thousand Three
                                                                       Hundred Eighteen Dollars
                                                                       ($30,318.00), provided
                                                                       however that the rent for
                                                                       months one (1) and two (2)
                                                                       shall be conditionally abated
                                                                       as set forth in the
                                                                       Addendum

                                January 1, 1999 - December 31, 2000    Thirty Two Thousand Seven
                                                                       Hundred Fifty Seven Dollars
                                                                       ($32,757.00)

                                January 1, 2001 - December 31, 2002    Thirty Five Thousand Four
                                                                       Hundred Fifty Nine Dollars
                                                                       ($35,459.00)
</TABLE>

                                       (i)

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<TABLE>

                              <S>                                     <C>               
                            January 1, 2003 - December 31, 2004    Thirty Eight Thousand Three
                                                                   Hundred Fifty Nine Dollars
                                                                   ($38,359.00)
</TABLE>

Security Deposit:           Seventy Five Thousand Three Hundred Eighteen Dollars
                            ($75,318.00) of which Thirty Thousand Three Hundred
                            Eighteen Dollars ($30,318.00) shall be in cash, and
                            of which Forty Five Thousand Dollars shall be in the
                            form of an irrevocable standby letter of credit
                            issued from a financially sound financial
                            institution reasonably satisfactory to Landlord.
                            (See Addendum for additional provisions concerning
                            the Letter of Credit.)

Broker:                     Landlord shall pay a brokerage commission in 
                            connection with this Lease to The Grubb & Ellis
                            Company (Byron Ward and Kevin Turner for Landlord,
                            and Gary Allen for Tenant) pursuant to the listing
                            agreement executed between Grubb & Ellis and
                            Landlord.

Lease Year:                 Shall refer to each three hundred sixty-five (365) 
                            day period during the Term commencing on the
                            Commencement Date and on each anniversary thereof.

Permitted Uses:             General office, engineering, assembly and storage
                            for communication equipment and related uses, and no
                            other uses shall be permitted without the prior
                            written consent of Landlord.

EXHIBITS

  A   -   Building/Lot - Premises 
  B   -   Work Letter 
  B-1 -   Space Plan
  C   -   Commencement Date Memorandum 
  D   -   Insurance Certificate 
  E   -   Prohibited Uses

  G   -   Estoppel Certificate
  H   -   Sample Form of Acceptable Subordination, Non-Disturbance, and
          Attornment Agreement
  I   -   Drawing of Acceptable Industrial / Office Configuration at Lease
          Termination
  J   -   Landlord Requirements for Improvements or Alterations by Tenant

       The Basic Lease Information set forth above and the Exhibits attached
hereto are incorporated into and made a part of the following Lease. Each
reference in this Lease to any of the Basic Lease Information shall mean the
respective information above and shall be construed to incorporate all of the
terms provided under the particular Lease paragraph pertaining to such
information. In the event of any conflict between the Basic Lease Information
and the provisions of the Lease, the latter shall control.

  LANDLORD (________)     AND TENANT (_______) AGREE.
             initial                  initial



                                      (ii)

<PAGE>   3



                                    Table of Contents
<TABLE>
<CAPTION>
                                                                        Page
                                                                        ----
<S>     <C>                                                               <C>
  1.    PREMISES...........................................................1
        1.1   Premises.....................................................1
        1.2   Reserved Rights..............................................1

  2.    TERM...............................................................1
        2.1   Commencement Date............................................1
        2.2   Possession...................................................1

  3.    RENT...............................................................1
        3.1   Rent.........................................................1
        3.2   Late Charge and Interest.....................................1
        3.3   Security Deposit.............................................2

  4.    UTILITIES..........................................................2

  5.    TAXES..............................................................2
        5.1   Real Property Taxes..........................................2
        5.2   Personal Property Taxes......................................3

  6.    TRIPLE NET LEASE...................................................3

  7.    INSURANCE..........................................................3
        7.1   Landlord.....................................................3
        7.2   Tenant.......................................................3
        7.3   General......................................................4
        7.4   Indemnity....................................................4
        7.5   Exemption of Landlord from Liability.........................4

  8.    REPAIRS AND MAINTENANCE............................................5
        8.1   Landlord.....................................................5
        8.2   Tenant.......................................................5

  9.    ALTERATIONS........................................................5
        9.1 Trade Fixtures; Alterations....................................5
        9.2 Damage; Removal................................................5
        9.3 Liens..........................................................6

10.     USE................................................................6

11.     ENVIRONMENTAL MATTERS..............................................6
        11.1 Hazardous Materials...........................................6
        11.2 Indemnification...............................................7

12.     DAMAGE AND DESTRUCTION.............................................7
        12.1 Casualty......................................................7
        12.2 Tenant's Fault................................................8
        12.3 Uninsured Casualty............................................8
        12.4 Waiver                                                        8

13.     EMINENT DOMAIN.....................................................8
        13.1 Total Condemnation............................................8
        13.2 Partial Condemnation..........................................8
        13.3 Award.........................................................8
        13.4 Temporary Condemnation........................................9

14.     DEFAULT............................................................9
        14.1 Events of Defaults............................................9
        14.2 Remedies......................................................9
        14.3 Cumulative...................................................10
</TABLE>



                                      (iii)

<PAGE>   4


<TABLE>
<C>                                                                      <C>
15.     ASSIGNMENT AND SUBLETTING.........................................10
        15.1 No Assignment or Subletting Without Landlord's Consent.......10
        15.2 Exception for Related Entity Assignment......................11

16.     ESTOPPEL, ATTORNMENT AND SUBORDINATION............................11
        16.1 Estoppel.....................................................11
        16.2 Subordination................................................11
        16.3 Attornment...................................................11

17.     MISCELLANEOUS.....................................................11
        17.1   General....................................................11
        17.2   Signs......................................................12
        17.3   Waiver.....................................................12
        17.4   Financial Statements.......................................12
        17.5   Limitation of Liability....................................12
        17.6   Notices....................................................13
        17.7   Brokerage Commission.......................................13
        17.8   Authorization..............................................13
        17.9   Holding Over; Surrender....................................13
        17.10  Joint and Several..........................................13
        17.11  Covenants and Conditions...................................13
        17.12  Addenda....................................................13
</TABLE>


                                      (iv)

<PAGE>   5



1.   PREMISES.
        
     1.1  Premises. Landlord hereby leases to Tenant the Building and that
portion of the Lot (or all thereof if the Building constitutes the material
improvement thereon) upon which the same is situated (hereinafter collectively
referred to as the "Premises")as shown on Exhibit A attached hereto.

     1.2  Reserved Rights. Landlord reserves the right to enter the Premises
upon reasonable notice to Tenant (except in case of an emergency) and/or to
undertake the following: inspect the Premises and/or the performance by Tenant
of the terms and conditions hereof; grant easements on the Project, dedicate for
public use portions thereof and record covenants, conditions and restrictions
("CC&R's") affecting the Project and/or amendments to existing CC&R's which do
not unreasonably interfere with Tenant's use of the Premises; change the name of
the Project; and, during the last FIVE (5) months of the INITIAL
Term, show the Premises to prospective tenants. IN THE EVENT TENANT EXERCISES
ITS OPTION TO EXTEND AS PROVIDED IN THE ADDENDUM, LANDLORD RESERVES THE RIGHT
DURING THE LAST NINE (9) MONTHS OF THE EXTENSION TERM TO ENTER THE PREMISES UPON
REASONABLE NOTICE TO

2.   TERM.                              ON THE COMMENCEMENT DATE SET FORTH
                                        IN THE BASIC LEASE INFORMATION

     2.1  Commencement Date. The Term of the Lease shall commence ("Commencement
Date") and the Lease shall continue in full force and effect for the period of
time specified as the Term or until this Lease is terminated as otherwise
provided herein. Tenant shall, upon demand after delivery of the Premises to
Tenant, execute and deliver to Landlord a Commencement Date Memorandum in the
form attached hereto as Exhibit C acknowledging (i) the Commencement Date, and
(ii) Tenant's acceptance of the Premises.

3.   RENT.

     3.1  Rent. Tenant shall pay to Landlord, at Landlord's Address for Payment
of Rent designated in the Basic Lease Information, or at such other address as
Landlord may from time to time designate in writing to Tenant for the payment of
Rent, the Base Rent, without notice, demand, offset or deduction, in advance, on
the first day of each calendar month. Upon the execution of this Lease, Tenant
shall pay to Landlord the first month's Base Rent. If the Term commences (or
ends) on a date other than the first (or last) day of a month, Base Rent shall
be prorated on a per diem basis with respect to the portion of the first month
and/or last month within the Term. All sums other than Base Rent which Tenant is
obligated to pay under this Lease shall be deemed to be additional rent due
hereunder, whether or not such sums are designated "additional rent." The term
"Rent" means the Base Rent and all additional rent payable hereunder.

    3.2  Late Charge and Interest. The late payment of any Rent will cause
Landlord to incur additional costs, including administration and collection
costs and processing and accounting expenses and increased debt service
("Delinquency Costs"). If Landlord has not received any installment of Rent
within five (5) days after such amount is due, Tenant shall pay a late charge of
SIX PERCENT (6%) of the delinquent amount, which is agreed to represent a
reasonable estimate of the Delinquency Costs incurred by Landlord. In addition,
IF AND ONLY IF LANDLORD COMMENCES A LEGAL PROCEEDING TO ENFORCE THIS LEASE, all
such delinquent amounts shall bear interest from the date such amount was due
until paid in full at a rate per annum ("Applicable Interest Rate") equal to the
lesser of (a) the maximum interest rate permitted by law or (b) five percent
(5%) above the rate publicly announced by Bank of America, N.A. (or if Bank of
America, N.A. ceases to exist, the largest bank then headquartered in the State
of California ("Bank") as its "Reference Rate." If the use of the announced
Reference Rate is discontinued by the Bank, then the term Reference Rate shall
mean the announced rate charged by the Bank which is, from time


                                       1.

<PAGE>   6



to time, substituted for the Reference Rate. Landlord and Tenant recognize that
the damage which Landlord shall suffer as a result of Tenant's failure to pay
such amounts is difficult to ascertain and said late charge and interest are the
best estimate of the damage which Landlord shall suffer in the event of late
payment. If a late charge becomes payable for any three (3) installments of Rent
within any twelve (12) month period, then the Rent shall automatically become
due and payable quarterly in advance.

     3.3  Security Deposit. Upon the execution of this Lease, Tenant shall pay
to Landlord the Security Deposit. The Security Deposit shall secure the full and
faithful performance of each provision of this Lease to be performed by Tenant.
Landlord shall not be required to pay interest on the Security Deposit or to
keep the Security Deposit separate from Landlord's own funds. If Tenant fails to
perform fully and timely all or any of Tenant's covenants and obligations
hereunder, Landlord may, but without obligation, apply all or any portion of the
Security Deposit toward fulfillment of Tenant's unperformed covenants and/or
obligations. If Landlord does so apply any portion of the Security Deposit,
Tenant shall immediately pay Landlord sufficient cash to restore the Security
Deposit to the SUM OF (i) THE amount of the then current Base Rent per month,
PLUS (ii) THE FORTY FIVE THOUSAND DOLLARS ($45,000) LETTER OF CREDIT REFERRED TO
IN THE BASIC LEASE INFORMATION AND AS FURTHER SPECIFIED IN THE ADDENDUM ATTACHED
HERETO. Upon any increase in Base Rent, Landlord may require the Security
Deposit to be increased by the amount of the increase in Base Rent per month.
After Tenant vacates the Premises, upon the expiration or sooner termination of
this Lease, if Tenant is not then in default, Landlord shall return to Tenant
any unapplied balance of the Security Deposit.

4.   UTILITIES. Tenant shall make all arrangements for and shall pay all charges
for heat, water, gas, electricity, telephone and any other utilities used on or
provided to the Premises including, without limitation, paying any deposits and
"hook up charges." Landlord shall not be liable to Tenant for interruption in or
curtailment of any utility service, nor shall any such interruption or
curtailment constitute constructive eviction or grounds for rental abatement.

5.   TAXES.

     5.1  Real Property Taxes. Landlord shall pay to the proper taxing
authorities as the same become due all Real Property Taxes applicable to the
Premises, subject to reimbursement by Tenant as provided below. The term "Real
Property Taxes" shall be the sum of the following: all real property taxes,
possessory-interest taxes, business or license taxes or fees, service payments
in lieu of such taxes or fees, annual or periodic license or use fees, excises,
transit and traffic charges, housing fund assessments, open space charges, child
care fees, school, sewer and parking fees or any other assessments, levies,
fees, exactions or charges, general and special, ordinary and extraordinary,
unforeseen as well as foreseen (including fees "in-lieu" of any such tax or
assessment) which are assessed, levied, charged, conferred or imposed by any
public authority upon the Premises (or any real property comprising any portion
thereof) or its operations, together with all taxes, assessments or other fees
imposed by any public authority upon or measured by any Rent or other charges
payable hereunder, including any gross receipts tax or excise tax levied by any
governmental authority with respect to receipt of rental income, or upon, with
respect to or by reason of the development, possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises or any portion thereof, or documentary transfer taxes upon this
transaction or any document to which Tenant is a party creating or transferring
an interest in the Premises, together with any tax imposed in substitution,
partially or totally, of any tax previously included within the aforesaid
definition or any additional tax the nature of which was previously included
within the aforesaid definition, together with the costs and expenses (including
attorneys and expert witness fees and costs) of challenging any of the foregoing
or seeking the reduction in or abatement, redemption or return of any of the
foregoing, but only to the extent of any such reduction, abatement, redemption
or return. Nothing contained in this Lease shall require Tenant to pay any
franchise, corporate, estate or inheritance tax of Landlord, or any income,
profits or revenue tax or charge upon the net income of Landlord.

          5.1.1 Reimbursement By Tenant. Tenant shall pay to Landlord an amount
equal to the Real Property Taxes then due within fifteen (15) days after
delivery to Tenant by Landlord of an invoice for the same. Landlord may, at
Landlord's option, deliver statements from different taxing authorities at
different times or deliver all such statements at one time. In addition,
Landlord may elect to collect such Real Property Taxes from Tenant in advance,
on a monthly or quarterly basis, based upon Landlord's reasonable estimate of
such Real Property Taxes. If the amount of monthly or quarterly payments for
estimated Real Property Taxes received by Landlord from Tenant is more or less
than the actual Real Property Taxes due, an appropriate adjustment shall be made
by Landlord and Tenant. NOTWITHSTANDING THE FOREGOING, PROVIDED (i) TENANT IS
NOT IN DEFAULT UNDER THE TERMS OF THIS LEASE, (ii) TENANT IS OCCUPYING AT LEAST
NINETY PERCENT (90%) OF THE PREMISES, AND (iii) LANDLORD HAS NOT GIVEN MORE THAN
ONE (1) NOTICE OF DEFAULT IN ANY TWELVE (12) MONTH PERIOD FOR NONPAYMENT OF
MONETARY OBLIGATIONS, PAYMENT OF REAL PROPERTY TAXES SHALL NOT BE REQUIRED OF
TENANT SOONER THAN 30 DAYS PRIOR TO THE DATE THE APPLICABLE REAL PROPERTY TAX IS
DUE. IN NO EVENT SHALL REAL PROPERTY TAXES REIMBURSABLE BY TENANT INCLUDE
PENALTIES OR LATE CHARGES IMPOSED BY THE TAXING AUTHORITY BY REASON OF THE
FAILURE OF LANDLORD TO PAY TAXES ON TIME UNLESS SUCH DELINQUENCY OR FAILURE TO
PAY WAS DIRECTLY OR INDIRECTLY CONTRIBUTED TO BY TENANT, INCLUDING BUT NOT
LIMITED TO THE FAILURE OF TENANT TO PROMPTLY REIMBURSE LANDLORD AS REQUIRED
HEREUNDER.

          5.1.2 Partial Years. Real Property Taxes for partial tax fiscal years,
if any, failing within the Term, shall be prorated. Tenant's obligations for
Real Property Taxes for the last full or partial year of the Term shall survive
the expiration or earlier termination of this lease.


                                       2.

<PAGE>   7



          5.1.3 RIGHT TO CONTEST TAX ASSESSMENTS. TENANT SHALL HAVE THE RIGHT TO
EXAMINE TAX STATEMENTS RECEIVED FROM ANY TAXING AUTHORITY AND OTHER RELEVANT
INFORMATION UPON REASONABLE REQUEST TO LANDLORD, TO REQUEST A PROPOSITION 8
REASSESSMENT, OR TO OTHERWISE CONTEST THE AMOUNT OF REAL PROPERTY TAXES WITH THE
APPROPRIATE TAXING AUTHORITY, PROVIDED HOWEVER, THAT IN THE EVENT OF ANY SUCH
REQUEST FOR REASSESSMENT OR IN THE EVENT TENANT CONTESTS THE AMOUNT OR LEGALITY
OF SUCH TAXES (i) TENANT SHALL BEAR THE ENTIRE COST OF SUCH REQUEST OR CONTEST,
(ii) TENANT AGREES TO INDEMNIFY AND HOLD LANDLORD FREE AND HARMLESS FROM ALL
COSTS, LIABILITY, OR EXPENSE, INCLUDING WITHOUT LIMITATION ATTORNEYS' FEES, IN
CONNECTION THEREWITH, (iii) TENANT SHALL PROVIDE LANDLORD WITH NOT LESS THAN
THIRTY (30) DAYS ADVANCE WRITTEN NOTICE OF SUCH INTENT TO SEEK A REASSESSMENT OR
TO CONTEST THE AMOUNT, (iv) LANDLORD SHALL HAVE THE RIGHT, IN LANDLORD'S SOLE
DISCRETION, TO JOIN IN SUCH OR RELATED PROCEEDINGS, MOTIONS, AND PETITIONS, AND
(v) LANDLORD MAY REQUIRE THAT TENANT PAY SUCH TAXES AS THEY BECOME DUE
REGARDLESS OF THE STATUS OF SUCH CONTEST OR REQUEST.

     5.2  Personal Property Taxes. Prior to delinquency, Tenant shall pay all
taxes and assessments levied upon trade fixtures, alterations. additions,
improvements, inventories and other personal property located and/or installed
an the Premises by Tenant; and Tenant shall provide Landlord copies of receipts
for payment of all such taxes and assessments. To the extent any such taxes are
not separately assessed or billed to Tenant, Tenant shall pay the amount thereof
as invoiced by Landlord.

6.   TRIPLE NET LEASE. It is intended that this Lease be a "triple net lease,"
and that the Rent to be paid hereunder by Tenant will be received by Landlord
without any deduction or offset whatsoever by Tenant, foreseeable or
unforeseeable. Except as expressly provided to the contrary in this Lease,
Landlord shall not be required to make any expenditure, incur any obligation, or
incur any liability of any kind whatsoever in connection with this Lease or the
ownership, construction, maintenance, operation or repair of the Premises,
EXCEPT AS SPECIFICALLY SET FORTH IN THE ADDENDUM. 

7.   INSURANCE.

     7.1  Landlord. Landlord shall maintain insurance insuring the Building
against fire and extended coverage (including, if Landlord elects, "all risk"
coverage, earthquake/volcanic action, flood and/or surface water insurance) for
the full replacement cost of the Building, with deductibles and the form and
endorsements of such coverage as selected by Landlord, together with rental
abatement insurance against loss of Rent in an amount equal to the amount of
Rent for a period of at least twelve (12) months commencing on the date of loss.
Landlord may also carry such other insurance as Landlord may deem prudent or
advisable, including, without limitation, liability insurance in such amounts
and on such terms as Landlord shall determine. Tenant shall pay to Landlord an
amount equal to the premiums then due within fifteen (15) days after delivery to
Tenant by Landlord of an invoice for any such premiums. Landlord may, at
Landlord's option, elect to collect such premiums from Tenant in advance, on a
monthly or quarterly basis, based upon Landlord's reasonable estimate of such
premiums. If the amount of monthly or quarterly payments for estimated premiums
received by Landlord from Tenant are more or less than the actual premiums due,
an appropriate adjustment shall be made by Landlord and Tenant.

     7.2  Tenant. Tenant shall, at Tenant's expense, obtain and keep in force at
all times the following insurance:

          7.2.1 Commercial General Liability Insurance (Occurrence Form). A
policy of commercial general liability insurance (occurrence form) having a
combined single limit of not less than Two Million Dollars ($2,000,000) per
occurrence and Two Million Dollars ($2,000,000) aggregate per location if Tenant
has multiple locations, providing coverage for, among other things, blanket
contractual liability, premises, products/completed operations and personal and
advertising injury coverage, with deletion of (a) the exclusion for operations
within fifty (50) feet of a railroad track (railroad protective liability), if
applicable, and (b) the exclusion for explosion, collapse or underground hazard,
if applicable, and, if necessary, Tenant shall provide for restoration of the
aggregate limit;

          7.2.2 Automobile Liability Insurance. Comprehensive automobile
liability insurance having a combined single limit of not less than Two Million
Dollars ($2,000,000) per occurrence and insuring Tenant against liability for
claims arising out of ownership, maintenance, or use of any owned, hired or
non-owned automobiles;

          7.2.3 Workers' Compensation and Employer's Liability Insurance.
Workers' compensation insurance having limits not less than those required by
state statute and federal statute, if applicable, and covering all persons
employed by Tenant in the conduct of its operations on the Premises (including
the all states endorsement and, if applicable, the volunteers endorsement),
together with employer's liability insurance coverage in the amount of at least
One Million Dollars ($1,000,000); and

          7.2.4 Property Insurance. "All risk" property insurance including
boiler and machinery comprehensive form, if applicable, covering damage to or
loss of any of Tenant's personal property, fixtures, equipment and alterations,
including electronic data processing equipment (collectively "Tenant's
Property") (and coverage for the full replacement cost thereof including
business interruption of Tenant), together with, if the property of Tenant's
invitee's is to be kept in the Premises,


                                       3.

<PAGE>   8



warehouser's legal liability or bailee customers insurance for the full
replacement cost of the property belonging to invitee's and located in the
Premises.

     7.3  General.

          7.3.1 Insurance Companies. Insurance required to be maintained by
Tenant shall be written by companies licensed to do business in the state in
which the Premises are located and having a "General Policyholders Rating" of at
least A 8 (or such higher rating as may be required by a lender having a lien on
the Premises) as set forth in the most current issue of "Best's Insurance
Guide."

          7.3.2 Certificates of Insurance. Tenant shall deliver to Landlord
certificates of insurance for all insurance required to be maintained by Tenant
in the form of Exhibit D, attached hereto, no later than seven (7) days prior to
the date of possession of the Premises. Tenant shall, at least ten (10) days
prior to expiration of the policy, furnish Landlord with certificates of renewal
or "binders" thereof. Each certificate shall expressly provide that such
policies shall not be cancelable or otherwise subject to modification except
after sixty (60) days prior written notice to the parties named as additional
insured in this Lease (except in the case of cancellation for nonpayment of
premium in which case cancellation shall not take effect until at least (10)
days' notice has been given to Landlord). If Tenant fails to maintain any
insurance required in this Lease, Tenant shall be liable for all losses and cost
resulting from said failure.

          7.3.3 Additional Insured. Landlord and any property management company
of Landlord for the Premises shall be named as additional insured under all of
the policies required by Section 7.2.1. The policies required under Section
7.2.1 shall provide for severability of interest.

          7.3.4 Primary Coverage. All insurance to be maintained by Tenant
shall, except for workers' compensation and employer's liability insurance, be
primary, without right of contribution from insurance of Landlord. Any umbrella
liability policy or excess liability policy (which shall be in "following form")
shall provide that if the underlying aggregate is exhausted, the excess coverage
will drop down as primary insurance. The limits of insurance maintained by
Tenant shall not limit Tenant's liability under this Lease.

          7.3.5 Mutual Waiver of Subrogation. Tenant waives any right to recover
against Landlord for claims for damages to Tenant's Property whether or not
covered by insurance. LANDLORD WAIVES ANY RIGHT TO RECOVER AGAINST TENANT FOR
DAMAGES TO LANDLORD'S PROPERTY TO THE EXTENT COVERED BY INSURANCE. This
provision is intended to waive fully, and for the benefit of Landlord AND
TENANT, any rights and/or claims which might give rise to a right of subrogation
in favor of any insurance carrier. The coverage obtained by LANDLORD AND Tenant
pursuant to this Lease shall include, without limitation, a waiver of
subrogation endorsement attached to the certificate of insurance.

          7.3.6 Notification of Incidents. Tenant shall notify Landlord within
twenty-four (24) hours after the occurrence of any accidents or incidents in the
Premises which could give rise to a claim under any of the insurance policies
required under this Section 7.

     7.4  Indemnity. Tenant shall indemnify, protect, defend (by counsel
acceptable to Landlord) and hold harmless Landlord and its partners, directors,
officers, employees, shareholders, lenders, agents, contractors and each of
their successors and assigns from and against any and all claims, judgments,
causes of action, damages, penalties, costs, liabilities, and expenses,
including all costs, attorneys' fees, expenses and liabilities incurred in the
defense of any such claim or any action or proceeding brought thereon, arising
at any time during or after the Term as a result (directly or indirectly) of or
in connection with (i) any default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or (ii) Tenant's
use of the Premises, the conduct of Tenant's business or any activity, work or
things done, permitted or suffered by Tenant in or about the Premises or other
portions of the Project, except to the extent caused by Landlord's [gross]
negligence or wilful misconduct. TENANT SHALL IN ANY EVENT UNDERTAKE AND PAY FOR
THE COST OF DEFENSE FOR LANDLORD (WITH COUNSEL REASONABLY ACCEPTABLE TO
LANDLORD), AND IN THE EVENT THAT IT IS DETERMINED BY A COURT OF COMPETENT
JURISDICTION THAT THE PLAINTIFF(S) IN SUCH ACTION(S) IS ENTITLED TO AN AWARD
BASED UPON THE COMPARATIVE NEGLIGENCE OF LANDLORD, ANY AWARD AND THE COST OF
DEFENDING SUCH SUIT SHALL BE ALLOCATED BETWEEN TENANT AND LANDLORD IN THE
PROPORTION OF THE COMPARATIVE NEGLIGENCE SO DETERMINED. The obligations of
Tenant under this Section 7.4 shall survive the termination of this Lease with
respect to any claims or liability arising prior to such termination.

     7.5  Exemption of Landlord from Liability. Tenant, as a material part of
the consideration to Landlord, hereby assumes all risk of damage to property
including, but not limited to, Tenant's fixtures, equipment, furniture and
alterations or injury to persons in, upon or about the Premises or other
portions of the Project arising from any cause, and Tenant hereby waives all
claims in respect thereof against Landlord, except to the extent such claims are
caused by Landlord's gross negligence or wilful misconduct. Tenant hereby agrees
that Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the property of Tenant, or injury to or death
of Tenant, Tenant's employees, invitee's, customers, agents or contractors or
any other person in or about the Premises or the Project, whether such damage or
injury is caused by fire, steam, electricity, gas, water or rain, or from the
breakage, leakage or other defects of sprinklers, wires, appliances, plumbing,
air
                                       4.

<PAGE>   9



conditioning or lighting fixtures, or from any other cause, whether said damage
lighting or injury results from conditions arising upon the Premises, or from
other sources or places, and regardless of whether the cause of such damage or
injury or the means of repairing the same is inaccessible to Tenant, except to
the extent caused by Landlord's gross negligence or wilful misconduct.

8.   REPAIRS AND MAINTENANCE.

     8.1  Landlord. Landlord shall, AT ITS COST AND subject to the following
sentence, maintain the structural portions of the roof, foundation, and
load-bearing portions of walls (excluding wall coverings, painting, glass and
doors) of the Premises. Landlord shall not be required to make any repair
resulting from (i) any alteration or modification to the Premises or to
mechanical equipment within the Premises performed by, for or because of Tenant
or to special equipment or systems installed by, for or because of Tenant, (ii)
the installation, use or operation of Tenant's property, fixtures and equipment,
(iii) the moving of Tenant's property in or out of the Premises, (iv) Tenant's
use or occupancy of the Premises in violation of Section 10 of this Lease or in
the manner not contemplated by the parties at the time of the execution of this
Lease, (v) the acts or omissions of Tenant and Tenant's employees, agents,
invitees, subtenants, licensees or contractors, (vi) fire and other casualty,
except as provided by Section 12 of this Lease or (vii) condensation, except as
provided in Section 13 of this Lease. Landlord shall have no obligation to make
repairs under this Section 8.1 until a reasonable time after receipt of written
notice from Tenant of the need for such repairs. Tenant waives any right to
repair the Premises at the expense of Landlord under any applicable governmental
laws, ordinances, statutes, orders or regulations now or hereafter in effect
which might otherwise apply. IN THE CASE OF AN EMERGENCY WHERE LANDLORD'S
RESPONSE IS NOT (OR CANNOT REASONABLY BE EXPECTED TO OCCUR) WITH SUFFICIENT
PROMPTNESS TO PREVENT FURTHER MATERIAL DAMAGE TO THE PREMISES OR TENANT'S
EQUIPMENT AND PROPERTY, TENANT SHALL HAVE A LIMITED RIGHT TO RIGHT TO REPAIR AT
THE EXPENSE OF LANDLORD TO PREVENT FURTHER DAMAGE TO THE PREMISES AND TENANT'S
EQUIPMENT AND PROPERTY; PROVIDED HOWEVER, THAT TENANT DOES HEREBY WAIVE, AND IN
NO EVENT SHALL TENANT HAVE, A RIGHT TO OFFSET SUCH EXPENSE AGAINST ANY RENT DUE
HEREUNDER AND TENANT HEREBY WAIVES ANY RIGHTS IT MAY OTHERWISE HAVE TO ANY AND
ALL RIGHTS OF OFFSET PURSUANT TO ANY APPLICABLE GOVERNMENTAL LAWS, ORDINANCES,
STATUTES, ORDERS, OR REGULATIONS NOW OR HEREAFTER IN EFFECT. IN SUCH EVENT,
LANDLORD SHALL REIMBURSE TENANT FOR SUCH REASONABLE COSTS WITHIN THIRTY (30)
DAYS FROM THE DATE TENANT DELIVERS AN INVOICE TO LANDLORD.

     8.2  Tenant. Except for the portions of the Premises expressly required to
be maintained by Landlord under Section 8.1, Tenant, at Tenant's expense, shall
maintain the Premises in good order, condition and repair, including, without
limitation, THE ROOF MEMBRANE, subfloors and floor coverings, walls and wall
coverings, mechanical, electrical, and plumbing systems, doors, windows, parking
lots and truck aprons, gutters and downspouts, landscaping and any signage.
Tenant shall enter into regularly scheduled preventive maintenance/service
contracts with maintenance contractors reasonably acceptable to Landlord for
servicing all hot water and heating and air conditioning systems and equipment
in the Premises. In the event Tenant fails, in the reasonable judgment of
Landlord, to maintain the Premises in good order, condition and repair, Landlord
shall have the right to perform such maintenance, repairs or refurbishing at
Tenant's expense.

9.   ALTERATIONS.

     9.1  Trade Fixtures; Alterations. Tenant may install necessary trade
fixtures, equipment and furniture in the Premises, provided that such items are
installed and are removable without structural or material damage to the
Premises or the Project. Tenant shall not construct, nor allow to be
constructed, any alterations or physical additions in, about or to the Premises
without obtaining the prior written consent of Landlord, which consent shall be
conditioned upon Tenant's compliance with Landlord's reasonable requirements
regarding construction of improvements and alterations but such consent
otherwise shall not be unreasonably withheld. Tenant shall submit plans and
specifications to Landlord with Tenant's request for approval and shall
reimburse Landlord for all costs which Landlord may incur in connection with
granting approval to Tenant for any such alterations and additions, including
any costs or expenses which Landlord may incur in electing to have outside
architects and engineers review said matters. Tenant shall file a notice of
completion after completion of such work and provide Landlord with a copy
thereof. Tenant shall provide Landlord with a set of "as-built" drawings for any
such work; PROVIDED HOWEVER THAT "AS-BUILT" DRAWINGS SHALL NOT BE REQUIRED FOR
NON-STRUCTURAL ALTERATIONS. FURTHER, NOTWITHSTANDING THE FOREGOING, THE CONSENT
OF LANDLORD SHALL NOT BE REQUIRED FOR NON-STRUCTURAL IMPROVEMENTS, THE COST OF
WHICH DO NOT EXCEED FIFTY THOUSAND DOLLARS ($50,000) PER PROJECT. IN ALL EVENTS,
REGARDLESS OF THE COST AND THE REQUIREMENT (OR LACK THEREOF) OF LANDLORD'S
CONSENT, TENANT SHALL GIVE LANDLORD REASONABLE ADVANCE NOTICE OF ALL
ALTERATIONS, IMPROVEMENTS, OR WORK TO BE PERFORMED.

     9.2  Damage, Removal. Tenant shall repair all damage to the Premises caused
by the installation or removal of Tenant's fixtures, equipment, furniture and
alterations. Upon the termination of this Lease, Tenant shall remove any or all
alterations, additions, improvements and partitions made or installed by Tenant
and restore the Premises to its condition existing prior to the construction of
any such items; provided, however, Landlord may permit, upon written notice to
Tenant, any such items designated by Landlord to remain on the Premises, in
which event they shall be and become the property of Landlord upon the
termination of this Lease. All such removals and restoration shall be
accomplished in a good and workmanlike manner and so as not to cause any damage
to the Premises or the Project whatsoever. SEE ADDENDUM.

     9.3  Liens. Tenant shall promptly pay and discharge all claims for labor
performed, supplies furnished and services rendered at the request of Tenant and
shall keep the Premises free of all mechanics' and materialmen's liens in
connection therewith. Tenant shall provide at least ten (10) days prior written
notice to Landlord before any labor is performed, supplies


                                       5.

<PAGE>   10



furnished or services rendered on or at the Premises and Landlord shall have the
right to post on the Premises notices of non-responsibility. If any lien is
filed, Tenant shall cause such lien to be released and removed within [ten (10)]
THIRTY (30) days after the date of filing, and if Tenant fails to do so,
Landlord may take such action as may be necessary to remove such lien and Tenant
shall pay Landlord such amounts expended by Landlord together with interest
thereon at the Applicable Interest Rate from the date of expenditure. AS AN
ALTERNATIVE TO PROMPT RELEASE AND REMOVAL OF A LIEN, IF LANDLORD AND TENANT
MUTUALLY AGREE, TENANT MAY BOND AROUND SUCH LIEN UPON SUCH TERMS AND CONDITIONS,
INCLUDING THE AMOUNT OF THE BOND, AS LANDLORD AND TENANT MAY MUTUALLY AGREE AND
DETERMINE ON A CASE BY CASE BASIS.

10.  USE. The Premises shall be used only for the Permitted Uses set forth in
the Basic Lease Information and for no other uses. Tenant's use of the Premises
shall be in compliance with and subject to all applicable governmental laws,
ordinances, statutes, orders and regulations and any CC&R's or any supplement
thereto recorded in any official or public records with respect to the Project
or any portion thereof. In no event shall the Premises be used for any of the
Prohibited Uses set forth on Exhibit E attached hereto. Tenant shall comply with
the rules and regulations attached hereto as Exhibit F, together with such
additional rules and regulations as Landlord may from time to time prescribe.
Tenant shall not commit waste, overload the floors or structure of the Premises,
subject the Premises or the Project to any use which would damage the same or
increase the risk of loss or violate any insurance coverage, permit any
unreasonable odors, smoke, dust, gas, substances, noise or vibrations to emanate
from the Premises, take any action which would constitute a nuisance or would
disturb, obstruct or endanger any other tenants of the Project, take any action
which would abrogate any warranties, or use or allow the Premises to be used for
any unlawful purpose. Tenant shall have the right to use for its employees and
invitees, the parking areas on the Premises. Landlord shall not be responsible
for noncompliance by any other tenant or occupant of the Project with, or
Landlord's failure to enforce, any of the rules or regulations or any other
terms or provisions of such tenant's or occupant's lease. Tenant shall promptly
comply with the reasonable requirements of any board of fire insurance
underwriters or other similar body now or hereafter constituted. Tenant shall
not do any act which shall in any way encumber the title of Landlord in and to
the Premises or the Project.

11.  ENVIRONMENTAL MATTERS.

     11.1 Hazardous Materials. Tenant shall not cause nor permit, nor allow any
of Tenant's employees, agents, customers, visitors, invitee's, licensees,
contractors, assignees or subtenants (collectively, "Tenant's Parties") to cause
or permit, any Hazardous Materials to be brought upon, stored, manufactured,
generated, blended, handled, recycled, treated, disposed or used on, under or
about the Premises or the Project, except for routine office and janitorial
supplies in usual and customary quantities stored, used and disposed of in
accordance with all applicable Environmental Laws. As used herein, "Hazardous
Materials" means any chemical, substance, material, controlled substance,
object, condition, waste, living organism or combination thereof which is or may
be hazardous to human health or safety or to the environment due to its
radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity,
carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful or
potentially harmful properties or effects, including, without limitation,
petroleum and petroleum products, asbestos, radon, polychlorinated biphenyls
(PCBs) and a of those chemicals, substances, materials, controlled substances,
objects, conditions, wastes, living organisms or combinations thereof which are
now or become in the future listed, defined or regulated in any manner by any
Environmental Law based upon, directly or indirectly, such properties or
effects. As used herein, "Environmental Laws" means any and all federal, state
or local environmental, health and/or safety-related laws, regulations,
standards, decisions of courts, ordinances, rules, codes, orders, decrees,
directives, guidelines, permits or permit conditions, currently existing and as
amended, enacted, issued or adopted in the future which are or become applicable
to Tenant, the Premises, the Building or the Project. Tenant and Tenant's
Parties shall comply with all Environmental Laws and promptly notify Landlord of
the violation of any Environmental Law or presence of any Hazardous Materials,
other than office and janitorial supplies as permitted above, on the Premises.
Landlord shall have the right to enter upon and inspect the Premises and to
conduct tests, monitoring and investigations. If such tests indicate the
presence of any environmental condition which occurred during the Term of this
Lease, Tenant shall reimburse Landlord for the cost of conducting such tests
UNLESS IT IS ULTIMATELY DETERMINED THAT THE CAUSE OR SOURCE OF SUCH
ENVIRONMENTAL CONDITIONS WAS NOT RELATED EITHER DIRECTLY OR INDIRECTLY, WHETHER
THROUGH USE OR OCCUPANCY OR OTHERWISE, TO TENANT OR TENANT'S PARTIES. The phrase
"environmental condition" shall mean any adverse condition relating to any
Hazardous Materials or the environment, including surface water, groundwater,
drinking water supply, land, surface or subsurface strata or the ambient air and
includes air, land and water pollutants, noise, vibration, light and odors. In
the event of any such environmental condition CAUSED BY TENANT OR TENANT'S
PARTIES, Tenant shall promptly take any and all steps necessary to rectify the
same to Landlord's reasonable satisfaction or shall, at Landlord's election,
reimburse Landlord, upon demand, for the cost to Landlord of performing
rectifying work. The reimbursement shall be paid to Landlord in advance of
Landlord's performing such work, based upon Landlord's reasonable estimate of
the cost thereof; and upon completion of such work by Landlord, Tenant shall pay
to Landlord any shortfall within thirty (30) days after Landlord bills Tenant
therefore or Landlord shall within thirty (30) days refund to Tenant any excess
deposit, as the case may be.

     11.2 Indemnification. Tenant shall indemnify, protect, defend (by counsel
acceptable to Landlord) and hold harmless Landlord and its partners, directors,
officers, employees, shareholders, lenders, agents, contractors and each of
their respective successors and assigns (individually and collectively,
"Indemnitees") from and against any and all claims, judgments, causes of action,
damages, penalties, fines, taxes, costs, liabilities, losses and expenses
arising at any time during or after the Term as a result (directly or
indirectly) of or in connection with (a) Tenant and/or Tenant's Parties' breach
of any prohibition or provision


                                       6.

<PAGE>   11
of the preceding section, or (b) the presence of Hazardous Materials on, under
or about the Premises or other property as a result (directly or indirectly) of
Tenant's and/or Tenant's Parties' activities, or failure to act, in connection
with the Premises. This indemnity shall include the cost of any required or
necessary repair, cleanup or detoxification, and the preparation and
implementation of any closure, monitoring or other required plans, whether such
action is required or necessary prior to or following the termination of this
Lease. Neither the written consent by Landlord to the presence of Hazardous
Materials on, under or about the Premises, nor the strict compliance by Tenant
with all Environmental Laws, shall excuse Tenant from Tenant's obligation of
indemnification pursuant hereto. Tenant's obligations pursuant to the foregoing
indemnity shall survive the termination of this Lease.

11.3 PRE-EXISTING CONDITIONS.

     11.3.1 LANDLORD HEREBY REPRESENTS TO TENANT THAT, TO THE BEST OF ITS
CURRENT ACTUAL KNOWLEDGE (BUT WITHOUT ANY INVESTIGATION OR INQUIRY), NO
ENVIRONMENTAL CONDITION (AS DEFINED IN SECTION 11.1) PRESENTLY EXISTS AS OF THE
EFFECTIVE DATE ON, UNDER, OR WITHIN THE PREMISES (A "PRE-EXISTING CONDITION")
EXCEPT AS DISCLOSED IN THE PHASE I ENVIRONMENTAL SITE ASSESSMENT AS PREPARED BY
ANNE M. BROWN, R.E.A., ENVIRONMENTAL MANAGEMENT CONSULTING, DATED OCTOBER 25,
1996, WHICH WAS PREPARED FOR TENANT AND WHICH TENANT ACKNOWLEDGES IT HAS
RECEIVED, REVIEWED, AND APPROVED. SEE ADDENDUM.

12.  DAMAGE AND DESTRUCTION.

     12.1 Casualty. If the Premises should be damaged or destroyed by fire or
other casualty, Tenant shall give immediate written notice to Landlord. Within
thirty (30) days after receipt thereof, Landlord shall notify Tenant whether the
necessary repairs can reasonably be made: (a) within TWO HUNDRED SEVENTY (270)
DAYS; or (b) in more than TWO HUNDRED SEVENTY (270) DAYS from the date of such
notice. 

          12.1.1 Less Than 270 Days. If the Premises should be damaged only to
such extent that rebuilding or repairs can reasonably be completed within TWO
HUNDRED SEVENTY (270) DAYS, this Lease shall not terminate and, provided that
insurance proceeds are available to fully repair the damage, Landlord shall
repair the Premises, except that Landlord shall not be required to rebuild,
repair or replace any alterations, partitions, fixtures, additions and other
improvements (collectively, "Improvements") which may have been placed in, on or
about the Premises by or for the benefit of Tenant. If Tenant is required to
vacate all or a portion of the Premises during Landlord's repair thereof, the
Base Rent payable hereunder shall be abated proportionately from the date Tenant
vacates all or a portion of the Premises only to the extent rental abatement
insurance proceeds are received by Landlord and only during the period the
Premises are unfit for occupancy.

          12.1.3 Greater Than 270 Days. If the Premises should be so damaged
that rebuilding or repairs cannot be completed within TWO HUNDRED SEVENTY (270)
DAYS, either Landlord or Tenant may terminate this Lease by giving written
notice within ten (10) days after notice from Landlord specifying such time
period of repair; and this Lease shall terminate and the Rent shall be abated
from the date Tenant vacates the Premises. In the event that neither party
elects to terminate this Lease, Landlord shall promptly commence and diligently
prosecute to completion the repairs to the Premises, provided insurance proceeds
are available to repair the damage (except that Landlord shall not be required
to rebuild, repair or replace any Improvements which may have been placed in, on
or about the Premises by or for the benefit of Tenant). If Tenant is required to
vacate all or a portion of the Premises during Landlord's repair thereof, the
Base Rent payable hereunder shall be abated proportionately from the date Tenant
vacates all or a portion of the Premises only to the extent rental abatement
insurance proceeds are received by Landlord and only during the period that the
Premises are unfit for occupancy. THE TWO HUNDRED SEVENTY (270) DAYS (AND THE
CORRESPONDING RIGHT TO TERMINATE) SHALL BE EXTENDED BY ANY FORCE MAJEURE DELAYS
ENCOUNTERED BY LANDLORD, INCLUDING WITHOUT LIMITATION, ANY DELAYS BEYOND THE
REASONABLE CONTROL OF LANDLORD IN OBTAINING THE NECESSARY PERMITS FROM
APPROPRIATE GOVERNMENTAL BODIES AND AGENCIES.


                                       7.

<PAGE>   12
          12.1.4 DAMAGE DURING LAST TWELVE MONTHS OF TERM. NOTWITHSTANDING THE
FOREGOING, IN THE EVENT SUCH DAMAGE OCCURS WITHIN THE LAST TWELVE MONTHS OF THE
LEASE TERM, AND NOTWITHSTANDING ANY OPTION TO EXTEND WHICH TENANT MAY HAVE,
EITHER LANDLORD OR TENANT SHALL HAVE THE OPTION TO TERMINATE THIS LEASE
REGARDLESS OF THE AMOUNT OF TIME ESTIMATED TO REBUILD OR REPAIR THE DAMAGE OR
DESTRUCTION.

     12.2 Tenant's Fault. If the Premises or any portion of the Premises is
damaged resulting from the negligence or breach of this Lease by Tenant or any
of Tenant's Parties, Rent shall not be reduced (EXCEPT TO THE EXTENT LANDLORD IS
ENTITLED TO AND RECEIVES RENTAL ABATEMENT INSURANCE PROCEEDS) during the repair
of such damage and Tenant shall be liable to Landlord for the cost of the repair
caused thereby to the extent such cost AND SUCH RENT is not covered by insurance
proceeds FROM POLICIES LANDLORD IS OBLIGATED TO CARRY HEREUNDER.

     12.3 Uninsured Casualty. In the event that the Premises or any portion of
the Premises is damaged to the extent Tenant is unable to use the Premises and
such damage is not covered by insurance proceeds received by Landlord (UNLESS
THE FAILURE TO HAVE INSURANCE COVERAGE WAS A RESULT OF A BREACH BY LANDLORD OF
ITS OBLIGATIONS TO PURCHASE A SPECIFIC TYPE AND AMOUNT OF INSURANCE AS SET FORTH
IN THIS LEASE) or in the event that the holder of any indebtedness secured by
the Premises requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right at Landlord's option either (i)
to repair such damage as soon as reasonably possible at Landlord's expense, or
(ii) to give written notice to Tenant within thirty (30) days after the date of
the occurrence of such damage of Landlord's intention to terminate this Lease as
of the date of the occurrence of such damage. In the event Landlord elects to
terminate this Lease. Tenant shall have the right within ten (10) days after
receipt of such notice to give written notice to Landlord of Tenant's intention
to pay the cost of repair of such damage, in which event this Lease shall
continue in full force and effect, Landlord shall make such repairs as soon as
reasonably possible and Tenant shall reimburse Landlord for such repairs within
fifteen (15) days after receipt of an invoice from Landlord. If Tenant does not
give such notice within the ten (10) day period, this Lease shall terminate
automatically as of the date of the occurrence of the damage.

     12.4 Waiver. With respect to any damage or destruction which Landlord is
obligated to repair or may elect to repair, Tenant waives all rights to
terminate this Lease pursuant to rights otherwise presently or hereafter
accorded by law.

13.  EMINENT DOMAIN

     13.1 Total Condemnation. If all of the Premises is condemned by eminent
domain, inversely condemned or sold under threat of condemnation for any public
or quasi-public use or purpose ("Condemned"), this Lease shall terminate as of
the earlier of the date the condemning authority takes title to or possession of
the Premises, and Rent shall be adjusted to the date of termination.

     13.2 Partial Condemnation. If any portion of the Premises is Condemned and
such partial condemnation materially impairs Tenant's ability to use the
Premises for Tenant's business EITHER LANDLORD OR TENANT shall have the option
of terminating this Lease as of the earlier of the date title vests in the
condemning authority or as of the date an order of immediate possession is
issued and Rent shall be adjusted to the date of termination. If such partial
condemnation does not materially impair Tenant's ability to use the Premises for
the business of Tenant, Landlord shall promptly restore the Premises to the
extent of any condemnation proceeds recovered by Landlord, excluding the portion
thereof lost in such condemnation, and this Lease shall continue in full force
and effect except that after the date of such title vesting Rent shall be
adjusted as reasonably determined by Landlord.

     13.3 Award. If the Premises are wholly or partially Condemned, Landlord
shall be entitled to the entire award paid for such condemnation, and Tenant
waives any claim to any part of the award from Landlord or the condemning
authority; provided, however, Tenant shall have the right to recover from the
condemning authority such compensation as may be separately awarded to Tenant in
connection with costs in removing Tenant's merchandise, furniture, fixtures,
leasehold improvements and equipment to a new location. No condemnation of any
kind shall be construed to constitute an actual or constructive eviction of
Tenant or a breach of any express or implied covenant of quiet enjoyment.


     13.4 Temporary Condemnation. In the event of a temporary condemnation not
extending beyond the Term, this Lease shall remain in effect, Tenant shall
continue to pay Rent and Tenant shall receive any award made for such
condemnation except damages to any of Landlord's property. If a temporary
condemnation is for a period which extends beyond the Term, this Lease shall
terminate as of the date of initial occupancy by the condemning authority and
any such award shall be distributed in accordance with the preceding section.
If a temporary condemnation remains in effect at the expiration or earlier
termination of this Lease, Tenant shall pay Landlord the reasonable cost of
performing any obligations required of Tenant with respect to the surrender of
the Premises. 

14.  DEFAULT

     14.1 Events of Defaults. The occurrence of any of the following events
shall, at Landlord's option, constitute an "Event of Default":


                                       8.
<PAGE>   13




         14.1.2 Failure to pay Rent on the date when due and the failure
continuing for a period of three (3) days after written notice from Landlord
that such payment is due and has not been received;

          14.1.3 Failure to perform Tenant's covenants and obligations hereunder
(except default in the payment of Rent) where such failure continues for a
period of thirty (30) days after written notice from Landlord; provided,
however, if the nature of the default is such that more than thirty (30) days
are reasonably required for its cure, Tenant shall not be deemed to be in
default if Tenant commences the cure within the thirty (30) day period and
diligently prosecutes such cure to completion;

      14.1.4 The making of a general assignment by Tenant for the benefit of
creditors; the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within sixty (60) days of such
filing; the appointment of a receiver or other custodian to take possession of
substantially all of Tenant's assets or this leasehold; Tenant's insolvency or
inability to pay Tenant's debts or failure generally to pay Tenant's debts when
due; any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant's assets; Tenant taking
any action toward the dissolution or winding up of Tenant's affairs; the
cessation or suspension of Tenant's use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets or
this leasehold;

          14.1.5 The making of any material misrepresentation or omission by
Tenant or any successor in interest of Tenant coupled with the failure to
promptly cure, if possible, the misrepresentation or omission in a timely way
and manner such that the misrepresentation or omission by Tenant has no
financial, legal or other appreciable impact on Landlord or Landlord's lender,
in any materials delivered by or on behalf of Tenant to Landlord or Landlord's
lender pursuant to this Lease; or)

     14.2 Remedies.

          14.2.1 Termination. In the event of the occurrence of any Event of
Default, Landlord shall have the right to give a written termination notice to
Tenant and, on the date specified in such notice, this Lease shall terminate
unless on or before such date all arrears of Rent and all other sums payable by
Tenant under this Lease and all costs and expenses incurred by or on behalf of
Landlord hereunder shall have been paid by Tenant and all other Events of
Default at the time existing shall have been fully remedied to the satisfaction
of Landlord.

               14.2.1.1 Repossession. Following termination, without prejudice
to other remedies Landlord may have, Landlord may (i) peaceably re-enter the
Premises upon voluntary surrender by Tenant or remove Tenant therefrom and any
other persons occupying the Premises, using such legal proceedings as may be
available: (ii) repossess the Premises or relet the Premises or any part thereof
for such term (which may be for a term extending beyond the Term), at such
rental and upon such other terms and conditions as Landlord in Landlord's sole
discretion shall determine, with the right to make reasonable alterations and
repairs to the Premises; and (iii) remove all personal property therefrom.

               14.2.1.2 Unpaid Rent. Landlord shall have all the rights and
remedies of a landlord provided by applicable law, including the right to
recover from Tenant: (a) the worth, at the time of award, of the unpaid Rent
that had been earned at the time of termination, (b) the worth, at the time of
award, of the amount by which the unpaid Rent that would have been earned after
the date of termination until the time of award exceeds the amount of loss of
rent that Tenant proves could have been reasonably avoided, (c) the worth, at
the time of award, of the amount by which the unpaid Rent for the balance of the
Term after the time of award exceeds the amount of the loss of rent that Tenant
proves could have been reasonably avoided, and (d) any other amount, and court
costs, necessary to compensate Landlord for all detriment proximately caused by
Tenant's default. The phrase ???? worth, at the time of award," as used in (a)
and (b) above. shall be computed at the Applicable Interest Rate, and as used in
(c) above, shall be 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%).

               14.2.2 Continuation. Even though an Event of Default may have
occurred, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession; and Landlord may enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
Rent as it becomes due. Landlord, without terminating this Lease, may, during
the period Tenant is in default, enter the Premises and relet the same, or any
portion thereof, to third parties for Tenant's account and Tenant shall be
liable to Landlord for all costs Landlord incurs in reletting the Premises,
including, without limitation, brokers' commissions, expenses of remodeling the
Premises and Like costs. Reletting may be for a period shorter or longer than
the remaining Term. Tenant shall continue to pay the Rent on the date the same
is due. No act by Landlord hereunder, including acts of maintenance,
preservation or efforts to lease the Premises or the appointment of a receiver
upon application of Landlord
                                       9.

<PAGE>   14


to protect Landlord's interest under this Lease, shall terminate this Lease
unless Landlord notifies Tenant that Landlord elects to terminate this Lease. In
the event that Landlord elects to relet the Premises, the rent that Landlord
receives from reletting shall be applied to the payment of, first, any
indebtedness from Tenant to Landlord other than Base Rent and Real Property
Taxes; second, all costs, including maintenance, incurred by Landlord in
reletting; and, third, Base Rent and Real Property Taxes under this Lease. After
deducting the payments referred to above, any sum remaining from the rental
Landlord receives from reletting shall be held by Landlord and applied in
payment of future Rent as Rent becomes due under this Lease. In no event, and
notwithstanding anything in Section 15 to the contrary, shall Tenant be entitled
to any excess rent received by Landlord. If, on the date Rent is due under this
Lease, the rent received from the reletting is less than the Rent due on that
date, Tenant shall pay to Landlord, in addition to the remaining Rent due, all
costs, including maintenance, which Landlord incurred in reletting the Premises
that remain after applying the rent received from reletting as provided
hereinabove. So long as this Lease is not terminated, Landlord shall have the
right to remedy any default of Tenant, to maintain or improve the Premises, to
cause a receiver to be appointed to administer the Premises and new or existing
subleases and to add to the Rent payable hereunder all of Landlord's reasonable
costs in so doing, with interest at the Applicable Interest Rate from the date
of such expenditure.

     14.3 Cumulative. Each right and remedy of Landlord provided for herein or
now or hereafter existing at law, in equity, by statute or otherwise shall be
cumulative and shall not preclude Landlord from exercising any other rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity, by statute or otherwise. No payment by Tenant of a lesser amount than
the Rent nor any endorsement on any check or letter accompanying any check or
payment as Rent shall be deemed an accord and satisfaction of full payment of
Rent; and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies.

15.  ASSIGNMENT AND SUBLETTING.

     15.1 NO ASSIGNMENT OR SUBLETTING WITHOUT LANDLORD'S CONSENT. Tenant shall
not assign, sublet or otherwise transfer, whether voluntarily or involuntarily
or by operation of law, the Premises or any part thereof without Landlord's
prior written approval, which shall not be unreasonably withheld. The merger of
Tenant with any other entity or the transfer of any controlling or managing
ownership or beneficial interest in Tenant, or the assignment of a substantial
portion of the assets of Tenant, whether or not located at the Premises, shall
constitute an assignment hereunder. If Tenant desires to assign this Lease or
sublet any or all of the Premises, Tenant shall give Landlord written notice
thereof with copies of all related documents and agreements associated with the
assignment or sublease, including without limitation, the financial statements
of any proposed assignee or subtenant, forty-five (45) days prior to the
anticipated effective date of the assignment or sublease. Tenant shall pay
Landlord's reasonable attorneys' fees incurred in the review of such
documentation plus an administrative fee of Three Hundred Fifty Dollars
($350.00) for each proposed transfer. Landlord shall have a period of thirty
(30) days following receipt of such notice and all related documents and
agreements to notify Tenant in writing of Landlord's approval or disapproval of
the proposed assignment or sublease. If Landlord fails to notify Tenant in
writing of such election, Landlord shall be deemed to have disapproved such
assignment or subletting. This Lease may not be assigned by operation of law.
Any purported assignment or subletting contrary to the provisions hereof shall
be void and shall constitute an Event of Default hereunder. Landlord may, wthout
waiving any rights or remedies, collect rent from the assignee, subtenant or
occupant and apply the net amount collected to the Rent herein reserved. Tenant
shall continue to be liable as a principal and not as a guarantor or surety to
the same extent as though no assignment or subletting had been made. Landlord
may consent to subsequent assignments or subletting of this Lease or amendments
or modifications to the Lease by assignees of Tenant without notifying Tenant or
any successor of Tenant and without obtaining their consent. No permitted
transfer shall be effective until there has been delivered to Landlord a
counterpart of the transfer instrument in which the transferee agrees to be and
remain jointly and severally liable with Tenant for the payment of Rent
pertaining to the Premises and for the performance of all the terms and
provisions of this Lease relating thereto arising on or after the date of the
transfer.

     15.2 EXCEPTION FOR RELATED ENTITY ASSIGNMENT. NOTWITHSTANDING THE
FOREGOING, TENANT MAY ASSIGN THIS LEASE OR SUBLET THE PREMISES OR ANY PORTION
THEREOF, WITHOUT LANDLORD'S CONSENT, TO ANY PARTNERSHIP, CORPORATION OR OTHER
ENTITY (COLLECTIVELY "RELATED ENTITY") WHICH CONTROLS, IS CONTROLLED BY, OR IS
UNDER COMMON CONTROL WITH TENANT (CONTROL BEING DEEMED FOR SUCH PURPOSES AS THE
POWER TO DIRECT THE MANAGEMENT OF THE RELATED ENTITY); PROVIDED, THAT (A)
LANDLORD RECEIVES THIRTY (30) DAYS PRIOR WRITTEN NOTICE OF SUCH ASSIGNMENT OR
SUBLETTING, (B) THE CREDITWORTHINESS OF TENANT IS NOT IMPAIRED, AND (C)
LANDLORD RECEIVES A FULLY EXECUTED COPY OF SUCH LEASE ASSIGNMENT. IN NO EVENT
SHALL SUCH ASSIGNMENT RELEASE TENANT FROM ITS OBLIGATIONS AND DUTIES HEREUNDER.
FURTHER, TENANT MAY ASSIGN THIS LEASE IN THE EVENT OF A MERGER OF TENANT WITH
ANY OTHER ENTITY, OR MAY TRANSFER ANY CONTROLLING OR MANAGING OWNERSHIP INTEREST
IN TENANT, PROVIDED THAT (I) LANDLORD RECEIVES THIRTY (30) DAYS ADVANCE NOTICE
OF SUCH ASSIGNMENT (OR TRANSFER) TOGETHER WITH REASONABLE FINANCIAL INFORMATION
CONCERNING THE CREDITWORTHINESS OF THE NEW ENTITY WITH WHICH TENANT MERGED (OR
IN THE CASE OF A CHANGE IN THE CONTROLLING OR IN OWNERSHIP OF TENANT, THE
CONTROLLING OR MANAGING PARTIES), (II) THE CREDITWORTHINESS OF TENANT IS NOT
IMPAIRED, (III) THE NET WORTH OF THE MERGED ENTITY IS SUFFICIENT TO UNDERTAKE
AND FULFILL TENANT'S OBLIGATIONS UNDER THIS LEASE, ALL AS REASONABLY DETERMINED
BY LANDLORD, AND, IF A MERGER (IV) THE NEW ENTITY WITH WHICH TENANT MERGED
ASSUMES IN WRITING ALL OF TENANT'S


                                       10.

<PAGE>   15



OBLIGATIONS UNDER THIS LEASE. NOTWITHSTANDING ANYTHING TO THE CONTRARY, LANDLORD
RECOGNIZES THAT TENANT IS A PUBLICLY TRADED COMPANY AND THAT IT HAS NO CONTROL
OVER THE SALES OF PUBLICLY TRADED SHARES. ACCORDINGLY NO SALE OR TRANSFER OF
PUBLICLY TRADED SHARES SHALL BE DEEMED AN ASSIGNMENT FOR PURPOSES OF THIS
SECTION 15.

16.  ESTOPPEL, ATTORNMENT AND SUBORDINATION.

     16.1 Estoppel. Within ten (10) days after request by Landlord, Tenant shall
deliver an estoppel certificate duly executed (and acknowledged if required by
any lender), in the form attached hereto as Exhibit G, or in such other form as
may be acceptable to the lender, which form may include some or all of the
provisions contained in Exhibit G, to any proposed mortgagee, purchaser or
Landlord. Tenant's failure to deliver said statement in such time period shall
be an Event of Default hereunder and shall be conclusive upon Tenant that (a)
this Lease is in full force and effect, without modification except as may be
represented by Landlord, (b) there are no uncured defaults in Landlord's
performance and Tenant has no right of offset, counterclaim or deduction against
Rent hereunder; and (c) no more than one month's Base Rent has been paid in
advance. If any financier should require that this Lease be amended (other than
in the description of the Premises, the Term, the Permitted Use, the Rent or as
will substantially, materially and adversely affect the rights of Tenant),
Landlord shall give written notice thereof to Tenant, which notice shall be
accompanied by a Lease supplement embodying such amendments. Tenant shall,
within ten (10) days after the receipt of Landlord's notice, execute and deliver
to Landlord the tendered Lease supplement.

     16.2 Subordination. This Lease shall be subject and subordinate to all
ground leases and the lien of all mortgages and deeds of trust which now or
hereafter affect the Premises or the Project or Landlord's interest therein, and
all amendments thereto, all without the necessity of Tenant's executing further
instruments to effect such subordination. If requested, Tenant shall execute and
deliver to Landlord within ten (10) days after Landlord's request whatever
documentation that may reasonably be required to further effect the provisions
of this paragraph, PROVIDED HOWEVER THAT AS A CONDITION TO EXECUTING SUCH
SUBORDINATION DOCUMENTATION, TENANT MAY REQUIRE AN AGREEMENT FROM SUCH LENDER OR
HOLDER OF THE GROUND LEASE THAT IN CONNECTION WITH SUCH SUBORDINATION TENANT'S
RIGHT TO QUIET POSSESSION OF THE PREMISES SHALL NOT BE DISTURBED IF TENANT IS
NOT IN DEFAULT UNDER THE LEASE AND SO LONG AS TENANT SHALL PAY ALL RENT DUE
HEREUNDER AND OTHERWISE OBSERVE AND PERFORM ALL OF THE PROVISIONS OF THIS LEASE
UNLESS THIS LEASE IS OTHERWISE TERMINATED PURSUANT TO ITS TERMS. A SAMPLE FORM
OF A SUBORDINATION AGREEMENT WITH NON-DISTURBANCE LANGUAGE, ALL OF WHICH HAS
BEEN APPROVED AND IS ACCEPTABLE TO TENANT, IS ATTACHED HERETO AS EXHIBIT H.

     16.3 Attornment. In the event of a foreclosure proceeding, the exercise of
the power of sale under any mortgage or deed of trust or the termination of a
ground lease, Tenant shall, if requested, attorn to the purchaser thereupon and
recognize such purchaser as Landlord under this Lease; provided, however,
Tenant's obligation to attorn to such purchaser shall be conditioned upon
Tenant's receipt of a non-disturbance agreement.

17.  MISCELLANEOUS.

     17.1 General.

          17.1.1 Entire Agreement. This Lease sets forth all the agreements
between Landlord and Tenant concerning the Premises; and there are no agreements
either oral or written other than as set forth herein.

          17.1.2 Time of Essence. Time is of the essence of this Lease.

          17.1.3 Attorneys' Fees. In any action or proceeding which either party
brings against the other to enforce its rights hereunder, the unsuccessful party
shall pay all costs incurred by the prevailing party, including reasonable
attorneys' fees, which amounts shall be a part of the judgment in said action or
proceeding.

          17.1.4 Severability. If any provision of this Lease or the application
of any such provision shall be held by a court of competent jurisdiction to be
invalid, void or unenforceable to any extent, the remaining provisions of this
Lease and the application thereof shall remain in full force and effect and
shall not be affected, impaired or invalidated.

          17.1.5 Law. This Lease shall be construed and enforced in accordance
with the laws of the state in which the Premises are located.

          17.1.6 No Option. Submission of this Lease to Tenant for examination
or negotiation does not constitute an option to lease, offer to lease or a
reservation of, or option for the Premises, and this document shall become
effective and binding only upon the execution and delivery hereof by Landlord
and Tenant.

          17.1.7 Successors and Assigns. This Lease shall be binding upon and
inure to the benefit of the successors and assigns of Landlord and, subject to
compliance with the terms of Section 15, Tenant.

          17.1.8 Third Party Beneficiaries. Nothing herein is intended to create
any third party benefit.



                                       11.

<PAGE>   16



          17.1.9 Memorandum of Lease. Tenant shall not record this Lease or a
short form memorandum hereof without Landlord's prior written consent.

          17.1.10 Agency, Partnership or Joint Venture. Nothing contained herein
nor any acts of the parties hereto shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture by the parties hereto or any
relationship other than the relationship of landlord and tenant.

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

          17.1.12 Headings. Section headings have been inserted solely as a
matter of convenience and are not intended to define or limit the scope of any
of the provisions contained therein.

     17.2 Signs. All signs and graphics of every kind visible in or from public
view or the exterior of the Premises shall be subject to Landlord's prior
written approval and shall be subject to any applicable governmental laws,
ordinances, and regulations and in compliance with Landlord's signage program.
Tenant shall remove all such signs and graphics prior to the termination of this
Lease. Such installations and removals shall be made in such manner as to avoid
injury or defacement of the Premises; and Tenant shall repair any injury or
defacement, including without limitation, discoloration caused by such
installation or removal.

     17.3 Waiver. No waiver of any default or breach hereunder shall be implied
from any omission to take action on account thereof, notwithstanding any custom
and practice or course of dealing. No waiver by either party of any provision
under this Lease shall be effective unless in writing and signed by such party.
No waiver shall affect any default other than the default specified in the
waiver and then such waiver shall be operative only for the time and to the
extent therein stated. Waivers of any covenant shall not be construed as a
waiver of any subsequent breach of the same.

     17.4 Financial Statements. Tenant shall provide to any lender, purchaser or
Landlord, within ten (10) days after request, a current, accurate, certified
financial statement for Tenant and Tenant's business prepared under generally
accepted accounting principles consistently applied and such other certified
financial information or tax returns as may be reasonably required by Landlord,
purchaser or any lender of either. NOTWITHSTANDING THE FOREGOING, THE PARTIES
RECOGNIZE THAT TENANT IS A PUBLICLY TRADED COMPANY AND ACCORDINGLY, TENANT MAY
SATISFY THE REQUIREMENTS OF THIS SECTION BY PROVIDING UPON REQUEST THE QUARTERLY
10-Q REPORTS AND/OR THE ANNUAL FINANCIAL REPORTS OF THE COMPANY.

     17.5 Limitation of Liability. The obligations of Landlord under this Lease
are not personal obligations of the individual partners, directors, officers,
shareholders, agents or employees of Landlord; and Tenant shall look solely to
the Premises for satisfaction of any liability of Landlord and shall not look to
other assets of Landlord nor seek recourse against the assets of the individual
partners, directors, officers, shareholders, agents or employees of Landlord.
Whenever Landlord transfers its interest, Landlord shall be automatically
released from further performance under this Lease and from all further
liabilities and expenses hereunder and the transferee of Landlord's interest
shall assume all liabilities and obligations of Landlord hereunder from the date
of such transfer.

     17.6 Notices. All notices to be given hereunder shall be in writing and
mailed postage prepaid by certified or registered mail, return receipt
requested, or delivered by personal or courier delivery, or sent by facsimile
(immediately followed by one of the preceding methods), to Landlord's Address
and Tenant's Address, or to such other place as Landlord or Tenant may designate
in a written notice given to the other party. Notices shall be deemed served
upon the earlier of receipt or three (3) days after the date of mailing.

     17.7 Brokerage Commission. Landlord shall pay a brokerage commission to
Broker in accordance with a separate agreement between Landlord and Broker.
Tenant warrants to Landlord that Tenant's sole contact with Landlord or with the
Premises in connection with this transaction has been directly with Landlord and
Broker, and that no other broker or finder can properly claim a right to a
commission or a finder's fee based upon contacts between the claimant and
Tenant. Tenant agrees to indemnify and hold Landlord harmless from any claim or
liability, including reasonable attorneys' fees, in connection with a claim by
any person for a real estate broker's commission, finder's fee or other
compensation based upon any statement, representation or agreement of Tenant,
and Landlord agrees to indemnify and hold Tenant harmless from any such claims
or liability, including reasonable attorneys' fees, based upon any statement,
representation or agreement of Landlord.

     17.8 Authorization. Each individual executing this Lease on behalf of
Tenant represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of Tenant and that such execution is binding upon
Tenant.

     17.9 Holding Over; Surrender.

          17.9.1 Holding Over. If Tenant holds over the Premises or any part
thereof after expiration of the Term, such holding over shall constitute a
month-to-month tenancy, at a rent equal to one hundred twenty five


                                       12.

<PAGE>   17



percent (125%) of the Base Rent in effect immediately prior to such holding over
and shall otherwise be on all the other terms and conditions of this Lease. This
paragraph shall not be construed as Landlord's permission for Tenant to hold
over. Acceptance of Rent by Landlord following expiration or termination shall
not constitute a renewal of this Lease or extension of the Term except as
specifically set forth above. If Tenant fails to surrender the Premises upon
expiration or earlier termination of this Lease, Tenant shall indemnify and hold
Landlord harmless from and against all loss or liability resulting from or
arising out of Tenant's failure to surrender the Premises, including, but not
limited to, any amounts required to be paid to any tenant or prospective tenant
who was to have occupied the Premises after the expiration or earlier
termination of this Lease and any related attorneys' fees and brokerage
commissions,

          17.9.2 Surrender. Upon the termination of this Lease or Tenant's right
to possession of the Premises, Tenant will surrender the Premises, together with
all keys, in good condition and repair, reasonable wear and tear excepted.
Conditions existing because of Tenant's failure to perform maintenance, repairs
or replacements shall not be deemed "reasonable wear and tear."

     17.10 Joint and Several. If Tenant consists of more than one person, the
obligation of all such persons shall be joint and several.

     17.11 Covenants and Conditions. Each provision to be performed by Tenant
hereunder shall be deemed to be both a covenant and a condition.

     17.12 Addenda. The Addenda attached hereto, if any, and identified with
this Lease are incorporated herein by this reference as if fully set forth
herein.

     IN WITNESS WHEREOF, the parties have executed this Lease as of the date set
forth above.


"Landlord"                              "Tenant"

CATELLUS DEVELOPMENT CORPORATION,               PAIRGAIN TECHNOLOGIES, INC.
a Delaware corporation                          a Delaware corporation


By: /s/ Ana Maria Perez                         By: /s/ Charles W. McBrayer
   -----------------------------                   -----------------------------
Its: Vice President                                Chief Financial Officer
    ---------------------------                    -----------------------------
Date:      1/7/97                                            1/2/97
     ---------------------------                   -----------------------------



                                       13.

<PAGE>   18



                               ADDENDUM TO LEASE

     THIS ADDENDUM TO LEASE ("Addendum") is attached to and constitutes an
integral part of the Lease between CATELLUS DEVELOPMENT CORPORATION, as
Landlord, and PAIRGAIN TECHNOLOGIES, INC. as Tenant. The terms of this Addendum
shall be incorporated in the Lease for all purposes. In the event of a conflict
between the provisions of the Lease and the provisions of this Addendum, this
Addendum shall control.

THE FOLLOWING NEW SECTIONS ARE HEREBY ADDED TO THE LEASE WHICH STATE IN THEIR
ENTIRETY AS FOLLOWS:

18.  Force Majeure Event. For purposes of this Lease, the term "Force Majeure
Event" shall mean and include the following: any delay caused by any action,
inaction, order, ruling, moratorium, regulation, statute, condition or other
decision of any governmental agency having jurisdiction over any portion of the
Project, over the construction anticipated to occur thereon or over any uses
thereof, or by fire, flood, inclement weather, strikes, lockouts or other labor
or industrial disturbance (whether or not on the part of agents or employees of
either party hereto engaged in the construction of the Premises), civil
disturbance, order of any government, court or regulatory body claiming
jurisdiction or otherwise, act of public enemy, war, riot, sabotage, blockade,
embargo, failure or inability to secure materials, supplies or labor through
ordinary sources by reason of shortages or priority, discovery of hazardous or
toxic materials, earthquake, or other natural disaster, or any cause whatsoever
beyond the reasonable control (excluding financial inability) of the party whose
performance is required, or any of its contractors or other representatives,
whether or not similar to any of the causes hereinabove stated.

19.  Option to Extend.

     19.1 Terms of Option. Provided (i) Tenant is not in default under the terms
of this Lease at the time the renewal option is exercised nor at the
commencement of the Extension Term (as hereinafter defined), (ii) Tenant is
occupying at least ninety percent (90%) of the Premises, and (iii) Landlord has
not given more than two (2) notices of default in any twelve (12) month period
for nonpayment of monetary obligations, Tenant shall have one (1) option to
renew this Lease for an additional period of sixty (60) months (the "Extension
Term"). The Extension Term shall be on all the terms and conditions of this
Lease, and Landlord shall have no additional obligation for free rent, leasehold
improvements or for any other tenant inducements for the Extension Term. Base
Rent shall be increased (but not decreased) as set forth below and the Security
Deposit will be increased to reflect any increase in Base Rent payable under the
Lease. There shall be no additional extension terms beyond the Extension Term
set forth herein. Tenant must exercise its option to extend this Lease by giving
Landlord written notice of its election to do so not less than one hundred fifty
(150) days prior to the end of the initial Term. Any notice not given in a
timely manner shall be void, and Tenant shall be deemed to have waived its
extension rights. The extension option set forth herein is personal to Tenant
and shall not be included in any assignment of this Lease.

     19.2 Base Rent During the Extension Term. The monthly Base Rent for the
Extension Term shall be the then fair Market Rent for comparable industrial
facilities, determined as follows:

          19.2.1 Agreement on Base Rent. Landlord and Tenant shall have thirty
(30) days after Landlord receives the exercise notice in which to agree on the
Base Rent during the Extension Term. Notwithstanding anything in this Section
19.2 to the contrary, in no event shall the Base Rent for the Extension Term be
less than the Base Rent in effect immediately prior to the Extension Term.

          19.2.2 Appraisal by Brokers. If Landlord and Tenant are unable to
agree upon the Base Rent for the Extension Term within such thirty (30) day
period, then within fifteen (15) days after the expiration of the thirty (30)
day period, each party, by giving notice to the other party, shall appoint a
real estate BROKER WHO IS LICENSED IN THE STATE OF CALIFORNIA AND WHO IS ACTIVE
IN THE ORANGE COUNTY AREA HAVING at least five (5) years of experience
appraising OR ACTIVELY ENGAGED IN THE LEASING (WHETHER REPRESENTING LANDLORDS OR
TENANTS) OF building space comparable to the Premises in the city and county
where the Premises is located to determine the Market Rent. Market Rent shall
mean the monthly amount per rentable square foot in the Premises that a willing,
non-equity new tenant would pay and a willing landlord would accept at arm's
length for space in a comparable building or buildings, with comparable tenant
improvements, in a comparable location, giving appropriate consideration to
monthly rental rates per rentable square foot, the presence or absence of rent
escalation clauses such as operating expense and tax pass-throughs, length of
lease term, size and location of premises being leased and other generally
applicable terms and conditions of tenancy for a similar building or buildings.
If the two (2) brokers are unable to agree on the Market Rent for the Extension
Term within twenty (20) days, they shall select a third broker meeting the
qualifications stated in this Section within five (5) days after the last day
the two (2) brokers are given to set the Market Rent for the Extension Term. The
third broker, however selected, shall be a person who has not previously acted
in any capacity for either party. Within twenty (20) days after the selection of
the third broker, a majority of the brokers shall set the Market Rent for the
Extension Term. If a majority of the brokers is unable to set the Market Rent
within the twenty (20) day period, the two (2) closest appraisals shall be added
together and their total divided by two (2). The resulting quotient shall be the
Market Rent for the Extension Term. Each party shall be responsible for the
costs, charges and fees of the broker appointed by that party plus one-half of
the cost of the third broker. IN NO EVENT SHALL LANDLORD BE RESPONSIBLE FOR, OR
SHALL THE USE OF BROKERS IN THE APPRAISAL PROCESS, IN ANY WAY ENTITLE ANY BROKER
TO A COMMISSION FOR TENANT'S



                                       14.

<PAGE>   19

OCCUPANCY DURING THE EXTENSION TERM. AS OF THE DATE OF THE EXECUTION OF THIS
LEASE, THE PARTIES REPRESENT TO EACH OTHER THAN NO BROKER, REAL ESTATE AGENT, OR
OTHER PARTY IS ENTITLED TO ANY COMMISSION OR COMPENSATION RELATING TO THE
EXERCISE OF TENANT'S OPTION TO EXTEND. HOWEVER, SHOULD ANY BROKER BECOME
ENTITLED TO A COMMISSION OR OTHER COMPENSATION RELATING TO TENANT'S OCCUPANCY
DURING THE EXTENSION TERM, SAID BROKER (AND ANY RELATED, AFFILIATED, ASSOCIATED,
OR OTHER BROKER WORKING FOR THAT COMPANY) SHALL BE DISQUALIFIED FROM ACTING AS
AN APPRAISING BROKER HEREUNDER.

          19.2.3 Consideration of Improvements Made By Tenant. In no event shall
the Market Rent determined in accordance with this Section 19.2 reflect or
include an increase in the rental value, if any, of the Premises due to
improvements made to the Premises by Tenant at Tenant's expense. Rather, in
determining the Market Rent, the parties, whether Landlord and Tenant or the
BROKERS AS PROVIDED FOR ABOVE, shall determine Market Rent based on the original
configuration of the Premises as of the date of execution of this Lease.

          19.2.3 Amendment of Lease. Immediately after the Base Rent is
determined pursuant to this Section 19.2, Landlord and Tenant shall execute
an amendment to this Lease stating the new Base Rent in effect.

20.  Improvements to Be Made By Tenant.

     20.1 Tenant's Work. Landlord shall grant Tenant, subject to the limitations
set forth hereinafter, the right to make certain Tenant improvements as more
fully described in Exhibit "B" attached to this Lease ("Tenant's Work"). Tenant
will use qualified licensed contractors to perform Tenant's Work. The
Commencement Date of this Lease shall not be delayed by Tenant's failure to
complete Tenant's Work. Tenant shall guarantee to Landlord's reasonable
satisfaction that no mechanics liens are filed in connection with Tenant's work
and, if reasonably requested or required to do so by Landlord or Landlord's
lender, shall indemnify Landlord's lender and/or title insurance company against
mechanic's liens relating to Tenants contractors and subcontractors. In no event
shall Tenant commence Tenant's Work prior to coming to a resolution, which is
satisfactory to Landlord with the City of Tustin for termination of the CUP in
accordance with the provisions of Section 22.2 hereof.

     20.2 Tenant Responsible for Tenant Improvements. Tenant shall be
responsible to construct the Tenant Improvements comprising the Tenant's Work at
Tenant's sole cost and expense and according to current building codes and in
compliance with the American Disabilities Act ("ADA"). Additionally, Tenant
shall, at Tenant's sole cost and expense, comply with all conditions outlined in
the Conditional Use Permit ("CUP") obtained from the City of Tustin. Tenant
shall also be responsible for obtaining any other approvals required or
necessary relating to Tenant's Work.

     20.3 Removal. Tenant shall remove, at Tenant's sole cost and expense, all
improvements made by Tenant, including the mezzanine and office areas, and shall
restore the Premises to an industrial office configuration in accordance with
the configuration attached to this Lease as Exhibit "I". All such removals and
restoration shall be accomplished in a good and workmanlike manner and so as not
to cause any damage to the Premises or to the Project whatsoever.

     20.4 Free Rent Period. Tenant's obligation to pay Base Rent shall be
conditionally abated during months one (1) and two (2) of the Term ("Free Rent
Period"). Such abatement shall apply to Base Rent only and shall not apply to
any other sums payable under this Lease. The abatement of Base Rent described
above is expressly conditioned on Tenant's performance of its obligations under
the Lease throughout the Term; and the amount of the abated Base Rent is based
in part on the amount of Base Rent due under the Lease for the full Term. If
Tenant defaults under the Lease and such default results in a termination of the
Lease prior to the expiration of the Term, then Tenant shall pay to Landlord on
the date of such termination, in addition to all other amounts and damages to
which Landlord is entitled, the amount of Base Rent which would otherwise have
been due and payable during the Free Rent Period.

21.  Limited Agreement of Landlord Regarding Certain Improvements.

     21.1 Improvements Existing as of Date of Delivery. Landlord shall deliver
the Premises to Tenant in good operating condition including the roof structure
and roof membrane in a leak free condition, plumbing, electrical, fire sprinkler
system, lighting, air conditioning and heating systems, and loading doors.

     21.2 Deferred Maintenance / Current Repairs to be Completed by Landlord.
Landlord shall, at Landlord's expense, repair slab fractures existing as of the
date of execution of this Lease where cracks are greater than 1/8 inch wide.

     21.3 Code Compliance. Tenant has had and has availed itself of the
opportunity to have an inspection of the Premises to discover any code
violations and items of repair or maintenance it deemed necessary for Landlord
to complete. No code violations of existing improvements were noted by said
inspections. However, in the event that existing code violations as of Effective
Date are discovered in the future which relate to improvements existing prior to
the work to be done by Tenant, Landlord shall be responsible for correction, at
Landlord's cost, of such code related matters up to a maximum of Ten Thousand
Dollars ($10,000.00). The parties further understand that because of the extent
and the nature of the modifications to be made by Tenant, that in the process of
obtaining the necessary permits a condition to said permits may be that other
modifications be made to bring the Premises or portions thereof up to current
building codes. In no event shall Landlord be responsible for any code upgrading



                                       15.
<PAGE>   20



required by reason of Tenant's modifications and applications. Accordingly, in
the event repairs (other than those set forth in section 21.2 above), upgrades,
code compliance corrections (in excess of the $10,000.00 limited contribution of
Landlord for existing violations, if any), or code improvements and/or upgrades
are necessary, Tenant shall bear the cost at its sole expense without limitation
on the amount of such costs and without right of termination of this Lease or
offset.

     21.5 Environmental Clean-up By Dinamation. As a matter of reference only,
without any binding effect on this Lease or on Landlord, the parties acknowledge
that both Landlord and Tenant are aware of that certain Phase I Environmental
Site Assessment prepared by Anne M. Brown, R.E.A., Environmental Management
Consulting, dated October 25, 1996 (the "Phase I Report"), and the contents
thereof. Dinamation has represented that clean-up and remediation of the
Environmental Conditions, as said term is defined in section 11.1 of the Lease,
specified as existing in the Phase I Report, has been completed as of the date
of this Lease. As a part of the Termination Agreement, Dinamation is to provide
Landlord as soon as reasonably practical with a copy of final lab results
verifying completion of the clean-up and remediation, and Landlord will
thereafter provide Tenant with a copy of said final lab results. In no event
shall the foregoing be construed as a waiver or release by Landlord of claims
which Landlord may have against Dinamation relating to Dinamation's obligations
under its lease, including but not limited to environmental matters.

22.  Special Provisions Relating to Conditional Use Permit.

     22.1 Landlord Cooperation. Landlord agrees to reasonably cooperate with
Tenant regarding the CUP from the City of Tustin, including executing a required
parking agreement, which the parties anticipate will be a Grant of Easement for
Use and Maintenance (the "Parking Agreement") and an Agreement to Conditions
document as required by the CUP, provided that the Parking Agreement and the CUP
agreements are in a form reasonably satisfactory to Landlord. The Parking
Agreement shall contain an express provision that The Cheek Family Trust and any
successors and assigns agree to look solely to Tenant, and not to Landlord, for
satisfaction of all obligations and duties, including but not limited to
financial obligations, imposed either on Landlord or Tenant thereunder.
Landlord's consent to and execution and participation in the CUP and the Parking
Agreements are expressly conditioned upon the indemnity and hold harmless from
Tenant as set forth in Section 22.3 below.

     22.2 Amendment of CUP / Termination Clause. Tenant shall, on or before
January 17, 1997 negotiate with the City of Tustin and The Cheek Family Trust
language mutually acceptable to Tenant, Landlord, the City of Tustin, and to the
extent applicable, The Cheek Family Trust, to be included in the Parking
Agreement and the CUP (or a letter or other document amending or clarifying the
CUP) allowing (a) the Parking Agreement to be terminated at such time as this
Lease is terminated for any reason and the improvements installed as the
Tenant's Work are removed as specified in the Lease and this Addendum, and (b)
the CUP to be correspondingly terminated such that it shall be of no further
force or effect and that Landlord may use the Property without the necessity for
the additional parking or other restrictions and requirements imposed by the
CUP. The parties understand that the CUP will run with the Property and that for
an "out" or termination clause to be effective, the conditions of the CUP may
need to be amended to allow for the inclusion of the "out" or termination clause
in the Parking Agreement together with the inclusion in the CUP of a
corresponding provision for revocation or termination of the CUP concurrent with
such termination of the Lease and removal of Tenant's improvements. Tenant shall
be responsible for all costs and expenses, including attorney fees, incurred in
(i) negotiating, drafting, and amendment of the CUP, or negotiation, drafting
and execution of other documentation satisfactory to the City of Tustin and
Landlord, to assure that there is an "out" or termination provision for the CUP,
(ii) negotiating and drafting of the Parking Agreement, and (iii) clearing title
to the Property at the termination of the Lease such that, at Landlord's option,
title is free of any encumbrance relating to the CUP and the Parking Agreement
and any other encumbrance. It is expressly understood and agreed that obtaining
satisfactory documentation relating to such issues on or before said date is a
contingency a condition precedent to Landlord's obligations to lease the
Premises to Tenant. Said contingency is solely for the benefit of Landlord, and
may be exerted only by Landlord and by no other party.

     22.3 Indemnity. Tenant shall indemnify, protect, defend (by counsel
acceptable to Landlord) and hold harmless Landlord and its partners, directors,
officers, employees, shareholders, lenders, agents, contractors and each of
their successors and assigns from and against any and all claims, judgments,
causes of action, damages, penalties, costs, liabilities, obligations, and
expenses, including all costs, attorneys' fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding



                                       16.

<PAGE>   21
brought thereon, arising at any time during or after the Term as a result
(directly or indirectly) of or in connection with Tenant's and Landlord's
obligations under the terms of the CUP and the Parking Agreement. The
obligations of Tenant under this Section 22.3 shall survive the termination of
this Lease with respect to any claims or liability arising prior to such
termination.

23.  Contingencies.

     This Lease is contingent upon the following:

     23.1 Concurrent Termination of Dinamation Lease. The parties understand
that the Premises are currently leased by Dinamation International Corp., a
California corporation. Dinamation has indicated that it desires to terminate
its lease, and this Lease is expressly contingent on the successful termination
of the Dinamation lease to be effective as of midnight, December 31, 1996 and
the surrender of the Premises by Dinamation as of that date. This Lease, and the
Lease Termination with Dinamation, are hereby expressly conditioned and
contingent upon each other, and this Lease and the Lease Termination shall be
effective concurrent with each other and in no event shall either agreement be
effective until all contingencies and conditions precedent in both agreements
have been fully satisfied or waived. Notwithstanding the December 31, 1996 date
for termination and surrender by Dinamation, in the event that Dinamation does
not timely terminate and vacate, or that a contingency or condition precedent in
either this Lease or the Termination Agreement has not yet been satisfied, the
date shall automatically be extended by such additional time as is required to
satisfy said contingencies and/or conditions precedent and for Dinamation to
actually vacate and terminate its lease, up to a maximum of six additional
months. In that event, the Commencement Date and Early Access Date shall be
similarly be adjusted and moved forward by an equal number of days such that (i)
the Commencement Date shall be the day after the revised Dinamation termination
and surrender date, and (ii) (iii) this Lease shall become effective as of and
concurrent with the vacation of the Premises by Dinamation in accordance with
its Termination Agreement. This contingency shall be solely in favor and for the
benefit of Landlord, and may be raised and/or exerted only by Landlord and by no
other party.

     23.2 Conditional Use Permit and Other Contingencies. This lease is
contingent upon (i) the successful execution of the CUP and the related Parking
Agreement (including amendment of the CUP conditions to provide for an "out" or
termination provision as a way to terminate the Parking Agreement and to revoke
the CUP), and (ii) the approval of the Board of Directors of Tenant. The
contingency set forth as (i) must be satisfied on or before January 17, 1997,
and the contingency set forth as (ii) must be satisfied or waived by Landlord
and Tenant on or before January 17, 1997. In the event of a failure of Tenant to
give Landlord written notice of the failure of the contingency listed as (ii) in
this Section 23.2 on or before the date specified, said contingency shall be
deemed satisfied and/or waived by Tenant.

24.  Assignment of Existing Sublease. Silicon Systems currently occupies the
rear 19,900 square feet of the Premises for office and dead storage under a
sublease agreement with Dinamation. Tenant shall enter into appropriate
documentation (whether by way of a new sublease or otherwise, with terms
materially identical to the terms of the existing Silicon Systems sublease) in a
form reasonably satisfactory to Tenant. Alternatively, Tenant may negotiate an
acceptable "buy-out" of the Silicon Systems sublease which expires February 28,
1998. In any event, Tenant will accept the full and complete obligation and
hereby agrees to be responsible for restoring and surrendering the Premises upon
the termination of this Lease with Landlord to the condition called for in
Exhibit 1, regardless of any obligation of Silicon Systems for restoration under
the terms of its sublease. Tenant shall be solely responsible for, and hereby
releases Landlord from any and all liability or involvement with, enforcement of
the restoration provisions of the current sublease against Silicon Systems. The
new sublease or buy-out shall be accomplished on or before January 17, 1997.

25.  Non-Disturbance Agreement from Current Lender. Landlord will request that
Landlord's Lender provide a non-disturbance agreement stating that Tenant's
right to quiet possession of the Premises shall not be disturbed if Tenant is
not in default under the Lease and so long as Tenant shall pay all Rent due
hereunder and otherwise observe and perform all of the provisions of this Lease
unless this Lease is otherwise terminated pursuant to its terms; provided
however, that the parties recognize that Landlord's lender is under no
obligation to execute such agreement and that accordingly the obtaining of such
non-disturbance agreement is not and shall not be a condition to the validity of
this Lease. Landlord has provided to Tenant a copy of the standard subordination
for the current Lender normally executes, and has represented to Tenant that its
Lender has in the past commonly executed such subordination agreements upon
request and payment of Lender's processing fee of One Thousand Dollars
($1,000.00). Tenant agrees to pay all processing or other fees charged by
Landlord's Lender in connection with obtaining and providing such subordination.

26.  Condition of Premises.

     26.1 Tenant has determined that the Premises are acceptable for Tenant's
use and Tenant acknowledges that neither Landlord nor any broker or agent has
made any representations or warranties in connection with the physical condition
of the Premises or their fitness for Tenant's use upon which Tenant has relied
directly or indirectly for any purpose.

     26.2. Tenant acknowledges that Tenant has inspected the Premises and that
Tenant accepts the Premises in an "AS-IS" condition, except for the work
Landlord has specifically agreed to do as set forth in this Addendum. Any tenant
improvements which Tenant requires in and to the Premises shall be provided by
Tenant, at Tenant's sole expense; provided, however, all tenant


                                       17.

<PAGE>   22



improvements shall be subject to Landlord's prior written approval and shall
comply with the provisions of Section 9, the Work Letter attached as Exhibit B,
and this Addendum.

27.  Additional Security Deposit - Letter of Credit.

     27.1 Delivery of Letter of Credit. In addition to the required cash
Security Deposit and as called for in the Basic Lease Information, Tenant shall
deliver to Landlord a clean, irrevocable standby letter of credit (the "LC")
substantially in compliance with the terms, provisions and requirements of this
Section 27, in the amount of Forty Five Thousand Dollars ($45,000.00) and issued
by a financial institution acceptable to Landlord. The LC shall be negotiable as
set forth in this Section 27.

     27.2 Term and Renewal of Letter of Credit. The LC shall be for a term of
Twelve (12) months, automatically renewable annually. Tenant shall keep the LC
in effect for the entire Term of this Lease, including any extensions and/or
options exercised by Tenant, plus Ninety (90) days thereafter. Tenant and
Tenant's bank shall be required to give Landlord 60 days notice prior to the LC
expiration if Tenant's bank does not agree to automatically renew such LC. If
for any reason LC is not renewed, Landlord shall be entitled to immediately draw
the entire amount of the LC, and hold such sum as an additional security deposit
for Tenant's faithful performance of the obligations the LC secures in
accordance with the provisions of the Lease and Section 27.3 below.

     27.3 Amount of Draw on Letter of Credit. Upon (i) Tenant's failure to
remove (in accordance with the provisions of Section 20.3 hereof) the
improvements made by Tenant as allowed in Section 20.1 and/or elsewhere in the
Lease, (ii) Tenant's failure to promptly and timely follow-through with
completing the termination of the Parking Agreement and the termination of any
restrictions, obligations, and conditions called for by the CUP, all as set
forth herein and in other documents related to such matters, or (iii) promptly
and timely indemnify Landlord for all costs, expense, liability, or damage
relating to the CUP, Parking Agreement, and new Improvements matters as called
for herein and in other related documents, Landlord shall be entitled to obtain
payment under the LC, in such amount as may be required to satisfy Tenant's
outstanding obligations under the Lease and such other related documents and
shall apply such amount to said obligations. Specifically, Landlord shall be
entitled to obtain partial draws pursuant to the LC in the amounts required to
satisfy Tenant's unfulfilled obligations with respect to such matters.

     27.4 Manner of Presentment. Landlord is authorized to draw, for the account
of Tenant, the amounts allowable pursuant to this provision by a draft, which
shall be payable at sight, accompanied by a statement of Landlord that (a)
Landlord is entitled to draw on the amount set forth in said draft pursuant to
Section 27.3 of this Lease, or (b) Landlord is entitled to draw on the full
amount of the LC as a result of a failure by Tenant to renew, extend or replace
the LC pursuant to the terms of the Lease. Payment of the draft shall be made by
bank check payable to Landlord, or in such other manner or to such other
accounts as Landlord may designate in the draft.





LANDLORD'S INITIALS                      TENANT'S INITIALS
                   -------                                -------


                                       18.

<PAGE>   23



                                    EXHIBIT A
                                    PREMISES











                                  [FLOORPLAN]
<PAGE>   24



                                    EXHIBIT B

                                   WORK LETTER

Tenant Improvements.

(a) Tenant's Work. Following the execution of this Lease by both parties,
Landlord shall deliver possession of the Premises to Tenant as called for in the
Addendum, and Tenant shall construct or cause to be constructed in and to the
Premises, at Tenant's cost, certain tenant improvements, defined as the
demolition of existing offices and construction of a 15,000 square foot
mezzanine including 30,000 square feet of two-story open plan office space
(15,000 square feet upstairs and 15,000 square feet downstairs which includes
the existing office space) (the "Tenant's Work"), in accordance with Landlord's
building standards and the provisions of Section 9 of the Lease and Section 20
of the Addendum. Tenant's Work, as well as Tenant's installation of furniture,
fixtures and equipment in the Premises shall be performed in a good and
workmanlike manner, and shall comply with all applicable governmental permits,
laws, ordinances and regulations. In addition, Tenant shall comply with
Landlord's requirements for improvements or alterations by Tenant as specified
in Exhibit J attached to this Lease.

(b) Approval of Working Drawings. Preparation of the working drawings shall be
the responsibility of Tenant and Tenant shall submit same to Landlord within
forty-five (45) days after execution of this Lease, for Landlord's approval (to
be evidenced by Landlord's representative's signature thereon). Landlord and
Tenant shall confer regarding any changes reasonably required by Landlord,
Tenant shall cause to be made such changes as are mutually agreed to, and
deliver revised working drawings to Landlord within fifteen (15) business days.
Landlord's approval shall be given within five (5) business days following
receipt thereof. Any significant or material changes to the plans and working
drawings which Tenant desires to make during the course of construction shall
require Landlord's consent, which consent shall not be unreasonably withheld. In
all events, Tenant shall provide Landlord with notice of all changes to the
plans and working drawings. TENANT HAS SUBMITTED TO LANDLORD THE DRAWINGS /
PLANS ATTACHED HERETO AS EXHIBIT B-1, WHICH DRAWINGS / PLANS HAVE BEEN APPROVED
BY LANDLORD.

(c) Cost of Tenant's Work. The cost of Tenant's Work, including without
limitation, the architect's and/or space planner's fees, the construction costs,
and any additional costs due to changes required by the City, or other local,
state or federal governmental agency having jurisdiction, or due to events or
conditions beyond Tenant's control, shall be borne by Tenant and Landlord shall
have no liability therefor.

(d) Indemnity. Tenant shall indemnify, defend and hold Landlord harmless from
and against any and all claims, liabilities, losses, costs, demands, actions, or
causes of action arising out of or relating to Tenant's Work or any part
thereof, unless caused solely by the negligence or willful misconduct of
Landlord or Landlord's agents or employees. The foregoing indemnity shall
include, without limitation, reasonable attorneys' fees incurred by Landlord to
defend itself against any action or proceeding, together with reasonable
attorneys' fees incurred to enforce this indemnity.

(E) CUT TO JOIN DRIVEWAYS AND UTILITY CONDUIT TRENCHING. LANDLORD ACKNOWLEDGES
THAT TENANT HAS DISCLOSED THAT IT PLANS TO (I) CUT A DRIVEWAY TO JOIN THE
PARKING OF THE PREMISES WITH THE ADJACENT BUILDING ALREADY OCCUPIED BY TENANT,
(TOGETHER WITH SUCH OTHER ACCESS MODIFICATIONS AS MAY BE APPROPRIATE WITH
RESPECT TO THE ADDITIONAL PARKING EASEMENT BEING OBTAINED BY TENANT IN
COMPLIANCE WITH THE CUP), AND (II) TRENCH FOR AND INSTALL A CONDUIT FOR
UTILITIES BETWEEN THE PREMISES AND THE ADJACENT BUILDING OCCUPIED BY TENANT.
LANDLORD HAS GIVEN ITS CONSENT IN CONCEPT TO SUCH ITEMS, PROVIDED HOWEVER, THAT
THE FINAL APPROVAL OF LANDLORD IS EXPRESSLY CONDITIONED UPON ACCEPTABLE PLANS
AND SPECIFICATIONS TO BE PROVIDED BY TENANT (WHICH HAVE NOT YET BEEN PREPARED)
AND APPROVED BY LANDLORD, AND THAT SUCH FINAL CONSENT AND APPROVAL IS FURTHER
EXPRESSLY SUBJECT TO AND CONDITIONED UPON THE OBLIGATION OF TENANT TO RESTORE
THE PROPERTY LINE OF THE PREMISES TO ITS ORIGINAL CONDITION UPON TERMINATION OF
THE LEASE.

LANDLORD'S INITIALS                                 TENANT'S INITIALS
                   -------                                           -------



<PAGE>   25



                                   EXHIBIT B-1

                                   SPACE PLAN


<PAGE>   26



                                    EXHIBIT C
                          COMMENCEMENT DATE MEMORANDUM

     With  respect to that certain lease ("Lease") dated           , 19  ,
between                 a ("Tenant"), and Catellus Development Corporation, a
Delaware corporation ("Landlord"), whereby Landlord leased to Tenant and Tenant
leased from Landlord approximately         rentable square feet of the building
located at                                              ("Premises"), Tenant
hereby acknowledges and certifies to Landlord as follows:

      (1)   Landlord delivered possession of the Premises to Tenant in a
Substantially completed condition on                  ("Possession Date");

      (2)   The Commencement Date is                                       ; and

      (3)   Tenant has accepted and is currently in possession of the Premises
and the Premises are acceptable for Tenant's use.

     IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this 
day of             199 .
                                          "Tenant"

                                          ____________________________, a

                                          ____________________________

                                          By: ________________________

                                                Its: _________________

                                          By: ________________________

                                                Its: _________________


<PAGE>   27
<TABLE>
<S>     <C>                     <C>             <C>                     <C>                     <C>             <C>

ACORD CERTIFICATE OF INSURANCE                                                                  ISSUE DATE (MM/DD/YY)
------------------------------------------------------------------------------------------------------------------------------
PRODUCER                                     THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO 
                                             RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND 
                                             OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
------------------------------------------------------------------------------------------------------------------------------
                                                                     COMPANIES AFFORDING COVERAGE
                                                          (Must have "Best" Rating of "A8" or better)
------------------------------------------------------------------------------------------------------------------------------
                                             COMPANY
                                             LETTER      A
------------------------------------------------------------------------------------------------------------------------------
INSURED                                      COMPANY
                                             LETTER      B
------------------------------------------------------------------------------------------------------------------------------
                                             COMPANY
                                             LETTER      C
------------------------------------------------------------------------------------------------------------------------------
                                             COMPANY
                                             LETTER      D
------------------------------------------------------------------------------------------------------------------------------
                                             COMPANY
                                             LETTER      E
------------------------------------------------------------------------------------------------------------------------------
COVERAGES
------------------------------------------------------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS
CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS, AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
------------------------------------------------------------------------------------------------------------------------------
CO                                              POLICY EFFECTIVE     POLICY EXPIRATION
LTR     TYPE OF INSURANCE       POLICY NUMBER   DATE (MM/DD/YY)      DATE (MM/DD/YY)         ALL LIMITS IN THOUSANDS
------------------------------------------------------------------------------------------------------------------------------
     GENERAL LIABILITY                                                                     GENERAL AGGREGATE            $2,000
     [X] COMMERCIAL GENERAL                                                                 PRODUCTS COMP/OPS           $2,000
           LIABILITY                                                                            AGGREGATE
     [ ] CLAIMS MADE                                                                        PERSONAL & ADVERTISING      $2,000
     [X] OCCURRENCE                                                                         INJURY
     [X] OWNER'S & CONTRACTORS                                                              EACH OCCURRENCE             $2,000
           PROTECTIVE                                                                       FIRE DAMAGE (ANY ONE FIRE)  $   50
     [X] RAILROAD PROT. LIAB.                                                               MEDICAL EXPENSE (ANY        $    5
     [X] X C U INCLUDED                                                                         ONE PERIOD)
------------------------------------------------------------------------------------------------------------------------------
     AUTOMOBILE LIABILITY                                                                   CSL                 $2,000
     [X] ANY AUTO                                                                           --------------------------
     [ ] ALL OWNED AUTOS                                                                    BODILY INJURY
     [ ] SCHEDULED AUTOS                                                                    (PER PERSON)        $
     [X] HIRED AUTOS                                                                        --------------------------
     [X] NON-OWNED AUTOS                                                                    BODILY INJURY       $
     [ ] GARAGE LIABILITY                                                                   (PER ACCIDENT)
     [ ] ________________                                                                   --------------------------
                                                                                            PROPERTY DAMAGE     $
------------------------------------------------------------------------------------------------------------------------------
     EXCESS LIABILITY                                                                               EACH          AGGREGATE
     [X] FOLLOWING FORM                                                                          OCCURRENCE
         OTHER THAN UMBRELLA FORM                                                               $               $
------------------------------------------------------------------------------------------------------------------------------
                                                                                            STATUTORY
     WORKERS' COMPENSATION                                                                  ----------------------------------
                                                                                              $ 1,000  (EACH ACCOUNT)
             AND                                                                            ----------------------------------
                                                                                              $ 1,000  (DISEASE POLICY LIMIT)
     EMPLOYERS' LIABILITY                                                                   ----------------------------------
                                                                                              $ 1,000  (DISEASE EACH EMPLOYEE)
------------------------------------------------------------------------------------------------------------------------------
     OTHER



------------------------------------------------------------------------------------------------------------------------------
     DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/RESTRICTIONS/SPECIAL ITEMS
        Certificate holder is named as additional insured as respects:

        ____________________________________________________________________________________ (Location)
        Refer to Additional Insured endorsement attached. Aggregate limits apply per location.

------------------------------------------------------------------------------------------------------------------------------
     CERTIFICATE HOLDER                                     CANCELLATION
                                                             
        CATELLUS DEVELOPMENT CORPORATION                    SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED OR LIMITS
        1065 N. PACIFICENTER DRIVE, SUITE 200               REDUCED, BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY
        ANAHEIM, CA 92806                                   WILL ENDEAVOR TO MAIL 60 DAYS WRITTEN NOTICE; TO THE CERTIFICATE
        ATTN: ASSET MANAGEMENT                              HOLDER NAMED TO THE LEFT.
        FAX (714) 237-7416                                  ------------------------------------------------------------------
                                                            AUTHORIZED REPRESENTATIVE

                                                            EXHIBIT D
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>   28
ACORD.                   EVIDENCE OF PROPERTY INSURANCE         DATE(MM/DD/YY)

THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN
FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES AFFORDED UNDER THE POLICY.
(Must have "Best" Rating of "A 8" or better.)

<TABLE>
<S>                             <C>                     <C>                     <C>                             <C>
PRODUCER                        COMPANY

CODE            SUB-CODE

INSURED                         LOAN NUMBER                                     POLICY NUMBER

                                EFFECTIVE DATE (MM/DD/YY)                       EXPIRATION DATE (MM/DD/YY)      CONT. UNTIL
                                                                                                                TERMINATED
                                                                                                                IF CHECKED
                                THIS REPLACES PRIOR EVIDENCE DATED:

-----------------------------------------------------------------------------------------------------------------------------------
PROPERTY INFORMATION

LOCATION/DESCRIPTION

        (provide address of leased premises)

-----------------------------------------------------------------------------------------------------------------------------------
COVERAGE INFORMATION

                        COVERAGE/PERILS/FORMS                                           AMOUNT OF INSURANCE     DEDUCTIBLE

        Business Personal Property (including Tenants Improvements                      $ _________________     $ _________
                and Betterments, if applicable)

        Business Income (100% contribution)                                             $ _________________     $ _________

        Boiler & Machinery (if applicable)                                              $ _________________     $ _________
        Warehousers legal liability (if applicable)                                     $ _________________     $ _________

        Replacement Cost Coverage, special form

-----------------------------------------------------------------------------------------------------------------------------------
REMARKS (Including Special Conditions)

        Waiver of Subrogation provision included (per lease)

-----------------------------------------------------------------------------------------------------------------------------------
CANCELLATION

        THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULES IN EFFECT FOR EACH POLICY PERIOD.  SHOULD
        THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE ADDITIONAL INTEREST IDENTIFIED BELOW 60 DAYS
        WRITTEN NOTICE, AND WILL SEND NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT
        INTEREST.  IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW.
-----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INTEREST

NAME AND ADDRESS                                NATURE OF INTEREST

        CATELLUS DEVELOPMENT CORPORATION                MORTGAGEE                       ADDITIONAL INSURED
        1065 N. PACIFICENTER DRIVE, SUITE 200
        ANAHEIM, CA 92806                               LOSS PAYEE                 X    (OTHER)     Landlord
            ATTN:   ASSET MANAGEMENT            ----------------------------------------------------------------------------------
        FAX     (714)   237-7416                SIGNATURE OF AUTHORIZED AGENT OF COMPANY

ACORD 27 (2/88)                                                                                         (C) ACORD CORPORATION 1981
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>   29



                                    EXHIBIT E
                                 PROHIBITED USES

The following types of operations and activities are expressly prohibited on the
Premises:

     1.   automobile/truck maintenance, repair or fueling (EXCEPTING NORMAL AND
          ROUTINE ACTIVITIES ASSOCIATED WITH TENANT'S PERMITTED USES);

     2.   battery manufacturing or reclamation;

     3.   ceramics and jewelry manufacturing or finishing;

     4.   chemical (organic or inorganic) storage, use or manufacturing
          (EXCEPTING NORMAL AND ROUTINE STORAGE, USE OR MANUFACTURING IN NORMAL
          QUANTITIES AS REASONABLY ASSOCIATED WITH TENANT'S PERMITTED USES);

     5.   drum recycling;

     6.   dry cleaning;

     7.   electronic components manufacturing (EXCEPTING NORMAL AND ROUTINE
          ACTIVITIES ASSOCIATED WITH TENANT'S PERMITTED USES);

     8.   electroplating and metal finishing;

     9.   explosives manufacturing, use or storage,

     10.  hazardous waste treatment, storage, or disposal;

     11.  leather production, tanning or finishing;

     12.  machinery and tool manufacturing (EXCEPTING NORMAL AND ROUTINE
          ACTIVITIES ASSOCIATED WITH TENANT'S PERMITTED USES);

     13.  medical equipment manufacturing and hospitals;

     14.  metal shredding, recycling or reclamation;

     15.  metal smelting and refining;

     16.  mining;

     17.  paint, pigment and coating operations;

     18.  petroleum refining;

     19.  plastic and synthetic materials manufacturing;

     20.  solvent reclamation;

     21.  tire and rubber manufacturing;

     22.  above- and/or underground storage tanks; and

     23.  residential use or occupancy.




<PAGE>   30



                                   EXHIBIT F
                             RULES AND REGULATIONS




                            "INTENTIONALLY OMITTED"
<PAGE>   31



                                          EXHIBIT G

                                 TENANT ESTOPPEL CERTIFICATE

To:   Bank of America National Trust
      and Savings Association ("Bank")
      Real Estate Industries Division No.

      Attn:

Re:   Lease Dated:
      Current Landlord:
      Current Tenant:
      Square Feet:                                     Approximately
      Floor(s):
      Located at:

      ("Tenant") hereby certifies that as of                       199  :

      1. Tenant is the present owner and holder of the tenant's interest under
the lease described above, as it may be amended to date (the "Lease") with
                   as Landlord (who is called "Borrower" for the purposes of
this Certificate). (USE THE NEXT SENTENCE IF THE LANDLORD OR TENANT NAMED IN
THE LEASE IS A PREDECESSOR TO THE CURRENT LANDLORD OR TENANT.) [The original
landlord under the Lease was                        , and the original tenant
under the Lease was         .] The Lease covers the premises commonly known as
                 (the "Premises") in the building (the "Building") at the
address set forth above.

                (CHOOSE ONE OF THE FOLLOWING SECTION 2(a)s BELOW)

     [2.  (a) A true, correct and complete copy of the Lease (including all
modifications, amendments, supplements, side letters, addenda and riders of and
to it) is attached to this Certificate as Exhibit A.]

     [2   (a)  The attached Exhibit A accurately identifies the Lease and all
modifications, amendments, supplements, side letters, addenda and riders of and
to it.]

          (b)  (IF APPLICABLE) [The Lease provides that in addition to the
Premises, Tenant has the right to use or rent   [assigned/unassigned] parking
spaces near the Building or in the garage portion of the building during the
term of the Lease.]

          (c)  The term of the Lease commenced on       199 , and will expire on
any presently exercised option or renewal term. (CHOOSE ONE OF THE FOLLOWING TWO
SENTENCES.) [Tenant has no option or right to renew, extend or cancel the Lease,
or to lease additional space in the Premises or Building, or to use any parking
(IF APPLICABLE) [other than that specified in Section 2(b) above].] [Except as
specified in Paragraph(s)    of the Lease (copy attached), Tenant has no option
or right to renew, extend or cancel the Lease, or to lease additional space in
the Premises or Building, or to use any parking (IF APPLICABLE) [other than that
specified in Section 2(b) above].]

                   (CHOOSE ONE OF THE FOLLOWING SECTION 2(d)s)

          [(d) Tenant has no option or preferential right to purchase all or any
part of the Premises (or the land of which the Premises are a part). Tenant has
no right or interest with respect to the Premises or the Building other than as
Tenant under the Lease.]




<PAGE>   32



          [(d) Except as specified in Paragraph(s) ______ of the Lease (copy
attached), Tenant has no option or preferential right to purchase all or any
part of the Premises (or the land of which the Premises are a part). Except for
the foregoing, Tenant has no right or interest with respect to the Premises or
the Building other than as Tenant under the Lease.]

          (e)  The annual minimum rent currently payable under the Lease is
$_________ and such rent has been paid through ______ 199__. (IF APPLICABLE)
[The annual percentage rent currently payable under the Lease is at the rate of
____ and such rent has been paid through _______ 199__.]

          (f)  (IF APPLICABLE) [Additional rent is payable under the Lease for
(i) operating, maintenance or repair expenses, (ii) property taxes, (iii)
consumer price index cost of living adjustments, or (iv) percentage of gross
sales adjustments (i.e., adjustments made based on underpayments of percentage
rent). Such additional rent has been paid in accordance with Borrower's rendered
bills through ______ 199_. The base year amounts for additional rental items are
as follows: (1) operating, maintenance or repair expenses $_____ (2) property
taxes $_____________, and (3) consumer price index (please indicate base year
CPI level).]

          (g)  Tenant has made no agreement with Borrower or any agent,
representative or employee of Borrower concerning free rent, partial rent,
rebate of rental payments or any other similar rent concession (IF APPLICABLE)
[except as expressly set forth in Paragraph(s) _____ of the Lease (copy 
attached)].

          (h)  Borrower currently holds a security deposit in the amount of
$_______ which is to be applied by Borrower or returned to Tenant in accordance
with Paragraph(s) _ of the Lease. Tenant acknowledges and agrees that Bank shall
have no responsibility or liability for any security deposit, except to the
extent that any security deposit shall have been actually received by Bank.

     3.   (a)  The Lease constitutes the entire agreement between Tenant and
Borrower with respect to the Premises, has not been modified changed, altered or
amended and is in full force and effect in the form (CHOOSE ONE) [attached
as/described in] Exhibit A. There are no other agreements, written or oral,
which affect Tenant's occupancy of the Premises.

          (b)  All insurance required of Tenant under the Lease has been
provided by Tenant and all premiums have been paid.

          (c)  To the best knowledge of Tenant, no party is in default under the
Lease. To the best knowledge of Tenant, no event has occurred which, with the
giving of notice or passage of time, or both, would constitute such a default.

          (d)  The interest of Tenant in the Lease has not been assigned or
encumbered. Tenant is not entitled to any credit against any rent or other
charge or rent concession under the Lease except as set forth in the Lease. No
rental payments have been made more than one month in advance.

     4.   All contributions required to be paid by Borrower to date for
improvements to the Premises have been paid in full and all of Borrower's
obligations with respect to tenant improvements have been fully performed.
Tenant has accepted the Premises, subject to no conditions other than those set
forth in the Lease.

     5.   Neither Tenant nor any guarantor of Tenant's obligations under the
Lease is the subject of any bankruptcy or other voluntary or involuntary
proceeding, in or out of court, for the adjustment of debtor-creditor
relationships.

     6.   (a) As used here, "Hazardous Substance" means any substance, material
or waste (including petroleum and petroleum products) which is designated,
classified or regulated as being "toxic" or "hazardous" or a "pollutant" or
which is similarly designated, classified or regulated, under any federal, state
or local law, regulation or ordinance.

          (b)  Tenant represents and warrants that it has not used, generated,
released, discharged, stored or disposed of any Hazardous Substances on, under,
in or about the Building or the land on which the Building is located (IF
APPLICABLE) [, other than Hazardous Substances used in the ordinary and
commercially reasonable course of Tenant's business in compliance with all
applicable laws]. (IF APPLICABLE) [Except for such commercially reasonable use
by Tenant,) Tenant has no actual knowledge that any Hazardous Substance is
present, or has been used, generated, released, discharged, stored or disposed
of by any party, on, under, in or about such Building or land.

     7.   Tenant hereby acknowledges that Borrower (CHOOSE ONE) [intends to
encumber/has encumbered] the property containing the Premises with a Deed of
Trust in favor of Bank. Tenant acknowledges the right of Borrower, Bank and any
and




                                       2
<PAGE>   33



all of Borrower's present and future lenders to rely upon the statements and
representations of Tenant contained in this Certificate and further acknowledges
that any loan secured by any such Deed of Trust or further deeds of trust will
be made and entered into in material reliance on this Certificate.

     8.   Tenant hereby agrees to furnish Bank with such other and further
estoppel as Bank may reasonably request.




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

                              By:
                                 -------------------------------
                              Name:
                                   -----------------------------
                              Title:
                                    ----------------------------



                                       3
<PAGE>   34



                                    EXHIBIT H

            SAMPLE FORM OF ACCEPTABLE SUBORDINATION, NONDISTURBANCE
                            AND ATTORNMENT AGREEMENT

RECORDING REQUESTED BY, AND
WHEN RECORDED RETURN TO:

SHEPPARD, MULLIN, RICHTER & HAMPTON
333 South Hope Street, 48th Floor
Los Angeles, CA 90071
Attention:  Mark L. Nelson, Esq.

                                 SUBORDINATION,
                     NONDISTURBANCE AND ATTORNMENT AGREEMENT

     This agreement ("Agreement"), dated as of                       , 19 ,
executed by       , a                 corporation ("Tenant"), and CATELLUS
DEVELOPMENT CORPORATION, a Delaware corporation ("Landlord"), in favor of BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, as Agent ("Lender"), is entered into with reference to the
following facts:

          A.   Tenant is presently leasing certain premises (the "Premises")
comprising a portion of the real property (the "Property") described in Exhibit
"A", attached hereto and incorporated herein by this reference, pursuant to a
lease (as modified from time to time, the "Lease") dated            19 , between
Tenant and Landlord.

         B.   Lender has made or agreed to make a loan or loans to Landlord
(the "Loan") and, in connection therewith, Landlord has executed a deed of trust
(as modified from time to time, the "Deed of Trust") and an assignment of leases
(the "Assignment of Leases"), assigning to Lender Landlord's interest in the
Property, including Landlord's interest as landlord under the Lease.

         In consideration of the foregoing, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Tenant and Landlord hereby agree as follows.

     1.   Certifications by Tenant. Tenant hereby certifies to Lender as
follows:

          1.1  Upon full execution, the Lease will be in full force and effect,
Tenant will occupy the Premises pursuant thereto, and Tenant has not transferred
its interests in the Lease or agreed to do so.

          1.2  A true and complete copy of the Lease, together with all
amendments, supplements and other modifications thereto (oral or written), has
been delivered to Lender by Landlord prior to the execution of this Agreement.

          1.3  No rent or other amount has been prepaid under the Lease, except
as follows (if none, state "None"):

          1.4  No deposit of any nature has been made in connection with the
Lease (other than deposits the nature and amount of which are expressly
described in the Lease), except as follows (if none, state "None"):

          1.5  Upon the commencement of the Lease term, Tenant will be obligated
to pay [BASE] rent under the Lease in the amount of $       per month [AND
PERCENTAGE RENT IN AN AMOUNT EQUAL TO    % OF ITS [GROSS] [NET] INCOME (AS
DEFINED IN THE LEASE) FOR EACH 12-MONTH PERIOD ENDING               , 19 ].
[TENANT'S SHARE OF COMMON AREA CHARGES, INSURANCE, REAL ESTATE TAXES AND
ADMINISTRATIVE AND OVERHEAD CHARGES IS ESTIMATED TO BE CHARGED AT THE RATE OF 
$        PER MONTH.]

          1.6  The Lease is the only agreement between Landlord and Tenant with
respect to the Premises, and Tenant claims no rights with respect to the
Premises or the Property other than those set forth in the Lease, except as
follows (if none, state "None"):

          1.7  To the best of Tenant's knowledge, there are no existing defenses
or offsets against amounts due or to become due to Landlord under the Lease, and
there are no existing uncured defaults by Landlord under the Lease, nor has any
event occurred which, with the passage of time or the giving of notice or both,
would constitute such a default, except as follows (if none, state "None"):



                                        1

<PAGE>   35



          1.8 Landlord has offered no free rent period, building allowance or
similar concession(s) to induce Tenant to enter into the Lease except as set
forth in the Lease; and Landlord has no other obligations to Tenant in
connection with the Lease, matured or not yet matured, except as set forth in
the Lease.

          1.9  To the best of Tenant's knowledge, no circumstance presently
exists, and no event has occurred, that would prevent the Lease from becoming
effective or would entitle Tenant to terminate the Lease.

     2.   Consent to Assignment. Tenant understands that Landlord has assigned
or will assign the Lease to Lender in connection with the Loan, and Tenant
hereby consents to such assignment. Tenant is not aware of any prior assignment
of the Lease by Landlord, except as follows (if none, state "None"):

     3.   No Modification of Lease; Lender Consents. Tenant shall not, without
Lender's prior written consent, (a) amend, supplement, terminate (except to the
extent permitted under Section 4, below) or otherwise modify the Lease; or (b)
accept (and/or act in reliance on) the release, relinquishment or waiver by
Landlord of any right with respect to the Lease. Any such termination,
modification, acceptance or other action taken without such prior consent shall,
at Lender's option, be void. Without limiting the generality of the foregoing,
(i) any assignment or subletting by Tenant (or by any assignee or subtenant)
which requires Landlord's consent shall also require Lender's consent, which
consent shall not be unreasonably withheld and shall, at Lender's option, be
void if such consent is not obtained, and (ii) any alteration to the Premises
which requires Landlord's consent shall also require Lender's consent, which
consent shall not be unreasonably withheld. Tenant shall not pay any rent or
other amount due to Landlord under the Lease more than 10 days in advance of the
due date.

     4.   Lender Cure Rights. Tenant shall not exercise any termination remedy
upon a default by Landlord with respect to the Lease unless Tenant has first
given Lender written notice of such default (at the address shown below or any
other address hereafter supplied to Tenant by Lender) and such default is not
cured within 30 days thereafter; provided that, if such default is nonmonetary,
is curable by Lender, and (a) is of such a nature that it cannot reasonably be
cured within 30 days or (b) the cure thereof by Lender requires Lender to have
possession of the Property, then in either such event Tenant shall not exercise
any termination remedy so long as Lender is diligently taking all steps required
for Lender to cure the default (including pursuit of possession of the Property,
to the extent required).

ADDRESS FOR NOTICES TO LENDER:

      BANK OF AMERICA NT & SA
      50 California St., 11th Floor (#9105)
      San Francisco, CA 94111
      Attention:    Janice Sears, Vice President

     5.   Payments to Lender. Tenant shall make all payments under the Lease to
Lender upon receiving a direction to pay from Lender, and shall comply with any
such direction to pay without determining whether any default exists with
respect to the Loan.

     6.   Agreements by Landlord. Landlord hereby agrees as follows:

          6.1  Tenant shall have no liability to Landlord for any amount
otherwise owing to Landlord under the Lease in the event that (a) Tenant
receives a written demand from Lender to pay such amount to Lender and (b)
Tenant thereafter pays such amount to Lender.

          6.2  Tenant shall be entitled to assume that any such demand by Lender
is valid and shall be under no obligation, and shall have no right, to inquire
as to its validity, nor shall any claim by Landlord that such demand is invalid
affect Tenant's right and obligation to pay all amounts demanded to Lender and
thereupon be discharged of Tenant's obligation to pay such amounts to Landlord.

     7.   Subordination. All of Tenant's rights and interests with respect to
the Premises and the Property under the Lease and all related documents
(including without limitation any options to purchase and rights of first offer
and first refusal) are and shall remain subject and subordinate to Lender's
rights and interests in the Property under the Deed of Trust, the Assignment of
Leases and all related loan and security documents, and to all amendments,
supplements and other modifications now or hereafter executed with respect
thereto, including without limitation modifications that substantially increase
the obligations to Lender to which Tenant's interests are subordinated. Without
limiting the generality of the foregoing, the provisions of the above-described
loan and security documents shall prevail over any inconsistent provisions of
the Lease relating to the disposition of insurance and condemnation awards.

     8.   Nondisturbance and Attornment. In the event of any judicial or
nonjudicial foreclosure of the Deed of Trust or transfer by deed in lieu
thereof, the Lease shall not terminate, nor shall Tenant's rights thereunder be
disturbed, except



                                        2

<PAGE>   36



in accordance with the terms of the Lease or any amendment or other applicable
agreement executed by Tenant with respect thereto; provided, however, that the
transferee of Landlord's interests pursuant to such foreclosure or other
transfer shall not be (i) liable for any act or omission of any prior landlord
under the Lease (including without limitation the breach of any representation
or warranty made by any prior landlord unless such breach is caused by such
transferee), (ii) obligated to cure any default of any prior landlord under the
Lease (other than nonmonetary defaults that remain uncured at the time of
foreclosure), (iii) subject to any offsets or defenses which Tenant is entitled
to assert against any prior landlord under the lease, (iv) bound by any payment
of any amount owing under the Lease to any prior landlord which was made more
than 10 days prior to the date due, (v) bound by any amendment or other
modification to the Lease which was made subsequent to the date of this
Agreement without the prior written consent of Lender (which shall not be
unreasonably withheld) and which could adversely affect the landlord's
interests, or (vi) liable for the return to Tenant of any security or other
deposit paid by Tenant to any prior landlord under the Lease except to the
extent that such transferee actually receives such deposit. Tenant shall attorn
to and accept any such transferee as the landlord under the Lease for the
unexpired balance of the Lease term, and shall execute any document reasonably
requested by such transferee to evidence such attornment.

     9.   Further Assurances. Each party hereto shall execute, acknowledge and
deliver to each other party all documents, and shall take all actions,
reasonably required by such other party from time to time to confirm or effect
the matters set forth herein, or otherwise to carry out the purposes of this
Agreement.

     10.  Attorneys' Fees. In the event that any litigation shall be commenced
concerning this Agreement, the party prevailing in such litigation shall be
entitled to recover, in addition to such other relief as may be granted, its
reasonable costs and expenses, including without limitation reasonable
attorneys' fees and court costs, whether or not taxable, as awarded by a court
of competent jurisdiction.

     11.  Reliance by Lender. Tenant understands that Lender will rely upon this
Agreement in making the Loan and/or in entering into certain agreements and/or
granting certain consents in connection therewith. Notice of acceptance of this
Agreement by Lender is waived.

     12.  Miscellaneous. This Agreement shall bind, and shall inure to the
benefit of, the successors and assigns of the parties. This document may be
executed in counterparts with the same force and effect as if the parties had
executed one instrument, and each such counterpart shall constitute an original
hereof. This Agreement shall be governed by the laws of the State of California.



                                        3

<PAGE>   37



      IN WITNESS WHEREOF, Tenant and Landlord have caused this Agreement to be
duly executed as of the date first written above.

                                    "Tenant":

                                    a              corporation

                                    By

                                       Its

                                    By

                                       Its

                                    "Landlord":

                                    CATELLUS DEVELOPMENT CORPORATION,
                                    a Delaware corporation

                                    By

                                       Its



                                        4

<PAGE>   38



STATE OF
                     ss.
COUNTY OF

      On                  , 19__, before me,                                   
personally appeared               personally known to me or proved to me on the
basis of satisfactory evidence to be the person(s) whose names(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

      WITNESS my hand and official seal.

STATE OF CALIFORNIA
                     ss.
COUNTY OF ORANGE

      On                  , 19__, before me,                                   
personally appeared                            personally known to me or proved
to me on the basis of satisfactory evidence to be the person(s) whose names(s)
is/are subscribed to the within instrument and acknowledged to me that he/she/
they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

      WITNESS my hand and official seal.



                                        5

<PAGE>   39


                                                                          CA
                                                                             ---
                                   EXHIBIT "A"

                        Legal Description of the Property

The real property in the County of             , State of California, more
particularly described as follows:



<PAGE>   40



                                   EXHIBIT I

                             DRAWING OF ACCEPTABLE
                               INDUSTRIAL/OFFICE

                             CONFIGURATION AT LEASE
                                  TERMINATION




<PAGE>   41



                                    EXHIBIT J

                        CATELLUS DEVELOPMENT CORPORATION
             REQUIREMENTS FOR IMPROVEMENTS OR ALTERATIONS BY TENANT

     If Landlord shall permit Tenant to construct any initial tenant
improvements in the Premises or to have any work performed in the Premises at
any time prior to or during the Lease term by a contractor retained by Tenant
("Tenant's Work"), then Tenant shall comply with the requirements set forth
herein. When the work has been properly authorized, Tenant will receive written
approval and consent for alterations to the Premises. All alterations to the
Premises, excepting movable furniture and trade fixtures, shall, at Landlord's
option, become a part of the realty and belong to Landlord UNLESS OTHERWISE
SPECIFICALLY SET FORTH IN THE LEASE.

1.   SUBMITTAL OF PLANS. Prior to commencing any work in the Premises, Tenant
     shall submit to Landlord for approval its proposed plans for the work.
     Without limiting the foregoing, Tenant shall provide:

     (a)  A separate scale drawing denoting all proposed construction and/or
          demolition.

     (b)  NOT APPLICABLE.

     (c)  Specify all dimensions and complete references to all work to be
          performed in the affected areas.

     (d)  If adding extra electrical or mechanical equipment, provide complete
          operating and maintenance specifications for each item.

2.   CHECKLIST. With respect to each project, Landlord will provide Tenant with
     a checklist listing the items required to be furnished to Landlord in
     connection with the proposed work. Tenant shall furnish to Landlord prior
     to, during, or upon completion of Tenant's Work, as applicable, each of the
     items specified in the checklist attached hereto as Attachment 1.

3.   CONTRACTORS PROVIDING TENANT IMPROVEMENT SERVICES.

     (a)  The contractor employed by Tenant and any subcontractors shall be (i)
          duly licensed in the state in which the Premises are located, and (ii)
          subject to Landlord's prior written approval, which approval shall not
          be unreasonably withheld. If more than one trade is employed on a
          single job, state law requires the services of a general contractor in
          addition to contractors for specialty work being performed.

     (b)  Each contractor shall provide proof of licensing as a general or
          specialty contractor in accordance with State Law. Additionally, each
          contractor shall furnish proof of licensing in the city or 
          municipality wherein the construction related activity is to take 
          place, if required by law or local ordinance.

     (c)  N/A (intentionally deleted).

     (d)  Tenant and Tenant's contractors shall comply with all applicable
          local, state and federal codes and regulations pertaining to the
          performance of Tenant's Work and the completed improvements and all
          applicable safety regulations established by Landlord or the general
          contractor.

     (e)  Prior to commencement of any work in the Premises, Tenant and Tenant's
          contractors shall obtain and provide Landlord with certificates
          evidencing Workers' Compensation, public liability and property damage
          insurance in amounts and forms and with companies satisfactory to
          Landlord. Each general contractor employed on the Premises shall
          provide Landlord with a current certificate of insurance in effect for
          that contractor with a thirty day notice of cancellation or revocation
          clause. Insurance requirements are as follows:

          (i)  Comprehensive General Liability with a $2,000,000 Combined Single
               Limit covering the liability of Landlord and contractor for
               bodily injury and property damage arising as a result of the
               construction of the improvements and the services performed
               thereunder. Landlord shall be named as an additional insured.


                                   Page 1 of 5

<PAGE>   42



          (ii) Comprehensive Automobile Liability with a $2,000,000 Combined
               Single Limit covering Landlord and vehicles used by contractor
               (and any subcontractor) in connection with the construction of
               the improvements.

          (iii) Workers' Compensation and Employer's Liability as required by
               law, for employees of the contractor (and any subcontractors)
               performing work on the Premises.

     (f)  The following requirements shall be incorporated as "Special
          Conditions" into the contract between Tenant and its contractors and a
          copy of the contract shall be furnished to Landlord prior to the
          commencement of Tenant's Work:

          (i)  Prior to start of Tenant's Work, Tenant's contractor shall
               provide Landlord with a construction schedule in "bar graph" form
               indicating the completion dates of all phases of Tenant's Work.

          (ii) Tenant's contractor shall be responsible for the repair,
               replacement or clean-up of any damage done by him to other
               contractors' work which specifically includes accessways to the
               Premises which may be concurrently used by others.

          (iii)Tenant's contractor shall accept the Premises prior to starting
               any trenching operations. Any rework of sub-base or compaction
               required after the contractor's initial acceptance of the
               Premises shall be done by Tenant's contractor, which shall
               include the removal from the Project of any excess dirt or
               debris.

          (iv) Tenant's contractor shall contain his storage of materials and
               his operations within the Premises and such other space as he may
               be assigned by Landlord or Landlord's contractor. Should he be
               assigned space outside the Premises, he shall move to such other
               space as Landlord or Landlord's contractor shall direct from time
               to time to avoid interference or delays with other work.

          (v)  Tenant's contractor shall clean up the construction area and
               surrounding exterior daily. All trash, demolition materials and
               surplus construction materials shall be stored within the
               Premises and promptly removed from the Premises and the Project
               and disposed of in an approved sanitation site.

          (vi) Tenant's contractor shall provide temporary utilities, portable
               toilet facilities, and potable drinking water as required for his
               work within the Premises.

          (vii)Tenant's contractor shall notify Landlord or Landlord's project
               manager of any planned work to be done on weekends or other than
               normal job hours.

         (viii)Tenant's contractor or subcontractors shall not post signs on
               any part of the Project or on the Premises.

4.   COSTS.

     (a)  Tenant shall promptly pay any and all costs and expenses in connection
          with or arising out of the performance of Tenant's Work (including the
          costs of permits therefor) and shall furnish to Landlord evidence of
          such payment upon request.

     (b)  NOT APPLICABLE.

5.   CONTRACTOR'S BONDS. Prior to the commencement of construction, Tenant shall
     obtain or cause its contractor to obtain and deliver evidence thereof to
     Landlord payment and performance bonds covering the faithful performance of
     the contract for the construction of the Tenant's Work and the payment of
     all obligations arising


                                   Page 2 of 5

<PAGE>   43



     thereunder. In the alternative, and at Landlord's option. Tenant may
     appoint Landlord as its contractor, and in so doing, Tenant shall deposit
     with the Landlord a sum of money equal to the entire amount of the
     estimated construction cost, as is required for the installation of the
     Tenant improvements on the Premises. If Tenant deposits with Landlord
     monies for construction costs, it is agreed that Landlord will not be
     placed in a fiduciary capacity as a trustee, or any other fiduciary title,
     for the sums of monies in Landlord's possession. Tenant agrees to hold
     Landlord harmless from any and all claims, for workmanship and installation
     of improvements, and for merchantability and quality of goods used for the
     installation of Tenant's improvements, as are requested by Tenant. Any
     bonds obtained pursuant hereto shall be for the mutual benefit of both
     Landlord and Tenant as obligees and beneficiaries. AS A FURTHER ALTERNATIVE
     TO DELIVERING PAYMENT OR PERFORMANCE BONDS, TENANT MAY SEEK LANDLORD'S
     PRIOR APPROVAL OF THE FINANCIAL STRENGTH OF TENANT'S CONTRACTOR AND A
     WAIVER FROM LANDLORD OF BONDING REQUIREMENTS. ANY WAIVER OF BONDING
     REQUIREMENTS BY LANDLORD SHALL BE IN LANDLORD'S SOLE BUT REASONABLE
     DISCRETION, AND LANDLORD MAY CONSIDER SUCH FACTORS IN MAKING ITS DECISION
     AS WHETHER OR NOT ANY MATERIAL RISKS OF EXPOSURE TO LANDLORD OR THE
     PROPERTY WILL EXIST IN LIGHT OF ALL OF THE FACTS AND CIRCUMSTANCES,
     INCLUDING BUT NOT LIMITED TO THE CONTRACTORS FINANCIAL STRENGTH, IF SUCH
     BONDING REQUIREMENTS ARE WAIVED.

6.   MECHANIC'S LIENS.

     (a)  Tenant shall not suffer or permit to be enforced against the Premises
          or any part of the Project any mechanic's, materialman's, contractor's
          or subcontractor's lien arising out of any work of improvement,
          however it may arise.

     (b)  Tenant shall notify Landlord at least ten (10) days prior to the
          commencement of construction of any Tenant's Work and Landlord shall
          have the right to post and record a notice of nonresponsibility in
          conformity with applicable law. Within ten (10) days following
          completion of Tenant's Work, Tenant shall file a Notice of Completion
          and deliver to Landlord an unconditional release and waiver of lien
          executed by each contractor, subcontractor and materialman involved in
          Tenant's Work.

     (c)  In the event any lien is filed against the Project or any portion
          thereof or against Tenant's leasehold interest therein, Tenant shall
          obtain the release and/or discharge of said lien, within seven (7)
          days after the filing thereof. In the event Tenant fails to do so,
          Landlord may obtain the release and/or discharge of said lien and
          Tenant shall indemnify Landlord for the costs thereof, including
          reasonable attorney's fees, together with interest at the Applicable
          Interest Rate from the date of demand. Nothing herein shall prohibit
          Tenant from contesting the validity of any such asserted claim,
          provided Tenant has furnished to Landlord a lien release bond freeing
          the Premises from the effect of the lien claim.

     (d)  NOTWITHSTANDING ANYTHING TO THE CONTRARY, IN THE EVENT ANY OF THE
          REQUIREMENTS AND PROVISIONS OF THIS SECTION 6 CONFLICT WITH OTHER
          TERMS OF THE LEASE, THE TERMS OF THE LEASE SHALL CONTROL OVER THE
          TERMS OF THIS EXHIBIT.

7.   INDEMNITY. Tenant shall indemnify, defend (with counsel satisfactory to
     Landlord) and hold Landlord harmless from and against any and all suits,
     claims, actions, loss, cost or expense (including claims for workers'
     compensation, attorney's fees and costs) based on personal injury or
     property damage, or otherwise (including, without limitation, contract and
     breach of warranty claims) arising from the performance of Tenant's Work.
     Tenant shall repair or replace (or, at Landlord's election, reimburse
     Landlord for the cost of repairing or replacing) any portion of the
     Building or item of Landlord's equipment or any of Landlord's real or
     personal property damaged, lost or destroyed in the performance of Tenant's
     Work.

8.   NOT APPLICABLE.

9.   ROOF PENETRATIONS. If improvements penetrate the roof membrane, the
     penetrations will be sealed per Landlord/IRC roofing specifications and
     inspected by IRC to maintain roof warranty. The cost of inspection and all
     corrective work shall be borne by Tenant. Tenant shall use Landlord's
     original roofing contractor.

10.  NOT APPLICABLE.


                                   Page 3 of 5

<PAGE>   44



11.  NOT APPLICABLE.

12.  SCHEDULE OF WORK. Tenant may be required to provide a schedule of all work
     to be performed, subject to Landlord approval. All costs to produce such
     schedule shall be borne solely by the Tenant.

13.  CLEAN UP AND DISPOSAL OF CONSTRUCTION DEBRIS. Building trash containers are
     provided for office generated trash only and are not to be used for
     disposal of construction-related materials and debris. Unapproved usage
     will result in a penalty assessment to the Tenant equal to the cost of an
     extra pick-up service as provided under the current rate schedule of
     regular trash removal service.

14.  INSPECTION BY LANDLORD. Landlord reserves the following rights: (i) the
     right of inspection prior to, during and at completion of all construction
     and/or demolition, (ii) the right to post and record a notice of
     nonresponsibility in conformity with California law, and (iii) the right to
     order a total stop to all improvements underway for non-compliance with any
     of the above criteria.

15.  RIGHT OF ENTRY. Landlord will permit entry of Tenant and/or Tenant's
     contractors into the Premises for the purpose of performing work prior to
     the commencement of the Term, and while Landlord's contractor is working at
     the Premises, only at such time or times as Landlord shall deem feasible
     under the circumstances. Such license to enter before commencement of the
     Term is expressly conditioned upon the contractor retained by Tenant
     working in harmony and not interfering with the workers, mechanics,
     suppliers, contractors and subcontractors of Landlord; and if at any time
     such entry or work by Tenant's contractors or subcontractors shall cause
     any disharmony or interference, such permission to enter may be withdrawn
     by Landlord immediately upon written notice to Tenant. Such entry shall be
     deemed to be under all the terms, covenants, provisions and conditions of
     the Lease, except the covenant to pay Base Rent. Tenant's contractor shall
     perform the work in a manner and at times which do not impede or delay
     Landlord's contractor in the performance of its work. Any delays in the
     completion of the Premises or the commencement of the rental and any damage
     to any work caused by Tenant's contractor shall be at the sole cost and
     expense of Tenant.

16.  GENERAL PROVISIONS.

     (a)  If Landlord has agreed to provide an allowance toward the cost of
          tenant improvements, Landlord shall retain from such funds an amount
          determined by Landlord until Tenant has fully complied with the
          requirements hereof.

     (b)  All materials, work, installations and decorations of any nature
          whatsoever brought on or installed in the Premises before the
          commencement of the Term or throughout the Term shall be at Tenant's
          risk, and neither Landlord nor any party acting on Landlord's behalf
          shall be responsible for any damage thereto or loss or destruction
          thereof due to any reason or cause whatsoever.

     (c)  Nothing contained herein shall make or constitute Tenant as the agent
          of Landlord.


                                   Page 4 of 5

<PAGE>   45


               ITEMS TO BE FURNISHED TO LANDLORD FOR EACH WORK OF
                                  IMPROVEMENTS

1.   Plan of Alterations for Landlord Approval.

2.   Contractor(s), Address, Telephone Number, Contact Person.

3.   Copy of Contractor's State and City Business License.

4.   Copy of Building Permit.

5.   Copy of Final Inspection and Signed Building Permit Cards.

6.   Copy of Certificate of Insurance Naming Catellus Development Corporation as
     Additional Insured. Insurance to include Comprehensive General Liability,
     Comprehensive Auto, Workers' Compensation and Employer's Liability.

7.   Signed Unconditional lien waiver in favor of Catellus Development
     Corporation.

8.   Schedule of Work.

9.   Copy of Completion and Payment Bond.

10.  Architect's License and Expiration.

11.  Tenant and Architect Agreement.

12.  Tenant and Contractor Agreement.

13.  Copy of Permit Plans.

14.  Copy of As-Builts.

15.  Copy of Recorded Notice of Completion.

16.  Certificate of Occupancy.

17.  Evidence of Insurance for All-Risk/Builder's Risk Insurance to the Amount
     of Improvements.

                                  Attachment I


                                   Page 5 of 5

<PAGE>   46
                             [CATELLUS LETTERHEAD]


January 3, 1997


Mr. Herb Espleland
Pairgain Technologies, Inc.
14402 Franklin Avenue
Tustin, CA 92680-7013


        Re:  Condition of Premises - 14352 Franklin Avenue, Tustin, California


Dear Mr. Espleland,

After discussions with Dinamation, the payment for deferred maintenance items
currently addressed in Paragraph 21.4 of the lease by and between Catellus
Development Corporation and Pairgain Technologies, Inc. shall be paid by
Catellus.  The allowance for the deferred maintenance items will be $3,000.00.
This is calculated as $2,000.00 for parking lot repair and $1,000.00 for
building paint.  Kevin Turner of Grubb & Ellis has copies of repair bids to
support this allowance.  Please strike Paragraph 21.4 of the lease, initial the
change, and execute the leases previously provided.

Catellus Development Corporation, prior to and in conjunction with the
improvements to be made by Pairgain Technologies, Inc., will complete the
following items at its expense:

a)      Maintenance to roof.  This will include closing the penetration made by
        Dinamation for their paint booth.

b)      Repair of slab fractures, 1/8" or greater, in concrete flooring.

c)      Re-tacking of foil insulation.

From walk through of facility on December 30, 1996 with Dinamation.

d)      Remove abandoned conduit drops, manufacturing lighting and suspended
        shields. 

e)      Repair roof drywall penetration in one hour fire wall.

f)      Repair roll up door openings.

<PAGE>   47
Pairgain Technologies, Inc.
January 3, 1997
Condition of Premises
Page 2


This letter, once signed by Pairgain Technologies, Inc., will become a binding
commitment from Catellus Development Corporation as to the delivery state of
the facility located at 14352 Franklin Avenue, Tustin, California.

If you have any questions, please call me at (714) 237-7301.


Sincerely,


/s/ CHERYL TODD
Cheryl Todd
Asset Manager



Signed and Accepted.

PAIRGAIN TECHNOLOGIES, INC.



By: /s/ Charles W. McBrayer
   ----------------------------------

Its: CFO
    ---------------------------------


cc:     Gary Allen
        Kevin Turner
        Bryan Ward
<PAGE>   48
                                                        December 03, 1996

                               PAINTING PROPOSALS

--------------------------------------------------------------------------------
COMPANY NAME                            PHONE NUMBER          BID
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Zion Painting Co. (Tony Lee)            (714) 736-8993        $2,850.00
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Lee's Painting Co. (Kenneth Lee)        (714) 638-0300        $990.00
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Private Contractor (John Hinds)         (714) 953-8614        $950.00
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
United Maintenance & Painting Co.       (714) 530-0441        $1,450.00
                        (John Pang)
--------------------------------------------------------------------------------
<PAGE>   49

                                                        Page No. __ of __ Pages

-------------------------------------PROPOSAL----------------------------------

                        [LEE'S PAINTING CO. LETTERHEAD]

-------------------------------------------------------------------------------
PROPOSAL SUBMITTED TO           PHONE                   DATE
     Mis. Ruth Dinamation Inc.        665-2915                11/26/96
-------------------------------------------------------------------------------
STREET                                  JOB NAME
        14352 Franklin Av               
-------------------------------------------------------------------------------
CITY, STATE AND ZIP CODE                JOB LOCATION
        Tustin                                  Same as last
-------------------------------------------------------------------------------
                        DATE OF PLANS                   JOB PHONE

-------------------------------------------------------------------------------
                EXTERIOR                                    INTERIOR
-------------------------------------------------------------------------------
<TABLE>
<S>                             <C>              <C>                  <C>
[ ] WHOLE OUTSIDE               [ ] SHUTTERS     [ ] WHOLE INSIDE     [ ] CLOSET INSIDE
[x] STUCCO CONCRETE WALL        [ ] FENCE        [ ] CEILING          [ ] DOORS
[ ] EAVES                       [ ] IRON RAILING [ ] BEDROOM          [ ] WINDOWS
[ ] WOOD SIDING FRONTSIDE ONLY  [ ] STAIRWAY     [ ] BATHROOM         [ ] SHUTTERS
[ ] FACIA BOARD                 [ ] GATE         [ ] KITCHEN          [ ] RAILING
[ ] TRIM                        [ ] DORMER       [ ] LIVING ROOM      [ ] WALLPAPER REMOVE
[ ] DOORS                       [ ] LATTICE      [ ] FAMILY ROOM      [ ] VARNISH WORK
[ ] WINDOWS                     [ ] DECK FLOOR   [ ] HALLWAY          [ ] TEXTURE COAT
[ ] GARAGE DOORS                [ ] STORAGE      [ ] DINING ROOM      [ ] OTHERS
[ ] PATIO                       [ ] OTHERS       [ ] STAIRWAY
[ ] BALCONY                                      [ ] KITCHEN CABINET  
</TABLE>

-------------------------------------------------------------------------------
                           (Concrete Wall Repainting)
                                Front Side Only

A. Water power cleaning

B. Any crack & hole to patching on caulking

C. 100% acrylic flat finish coat Evershield (W201)
   Dunn-Edwards Paint Co., materials using (Top Quality Material)

D. Color: same existing color
   Light Grey -- Main Wall
   L. Dark Blue -- Trim

E. No paint: entry wood area.
-------------------------------------------------------------------------------
WE PROPOSE hereby to furnish material and labor--complete in accordance with
above specifications, for the sum of:

____________________________________________________________ dollars ($ 990.00)
Payment to be made as follows:

_______________________________________________________________________________

_______________________________________________________________________________
All material is guaranteed to be as specified. All work to be completed in a
workmanlike manner according to standard practices. Any alteration or deviation
from above specifications involving extra costs will be included only upon
written orders, and will become an extra charge over and above the ????, All
agreements upon ???? accidents or delays beyond our control. Owner to carry
fire, tornado and other necessary insurance. Our workers are fully covered by
Workmen's Compensation Insurance.

Authorized
Signature       Lee
           -----------------------------
Note: This proposal may be withdrawn by us if not accepted within _______ days.
-------------------------------------------------------------------------------
ACCEPTANCE OF PROPOSAL--The above prices, specifications and conditions are
satisfactory and are hereby accepted. You are authorized to do the work as
specified. Payment will be made as outlined above.

                                          Signature ___________________________

Date of Acceptance: ___________________   Signature ___________________________
-------------------------------------------------------------------------------


<PAGE>   50
                                                        December 03, 1996

                                PAVING PROPOSALS

--------------------------------------------------------------------------------
COMPANY NAME                            PHONE NUMBER          BID
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Zion Painting Co. (Tony Lee)            (714) 736-8993        $2,150.00
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Allstar Paving (Robert Haije)           (714) 835-9177        $1,985.00
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
El Camino Paving Co. (Mike)             (714) 997-9357        $2,108.00
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Allied Paving Co. (Chris Barnes)        (714) 632-7484        $2,580.00
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Preferred Paving (Terry Baker)          (714) 632-1414        Bid in by 12/06/96
--------------------------------------------------------------------------------
<PAGE>   51

                      [ALLSTAR PAVING COMPANY LETTERHEAD]

-------------------------------------------------------------------------------
                              PROPOSAL & CONTRACT
-------------------------------------------------------------------------------

        DINAMATION
TO:     14352 Franklin                          Telephone       (714) 665-2910
        Tustin, CA 92780
                                                Date    November 27, 1996
        ATTENTION: Ms. Ruth Johnson
================================================================================
                     JOB LOCATION:   14352 Franklin, Tustin
================================================================================

SCOPE OF WORK:  Furnish all labor, equipment and materials required to complete
                the following:

        1)      Resurface approx. 2,985 sq.ft. of deteriorated pavement with up
                to 1" of hot asphalt.  Roll and compact.

        2)      Restripe parking stalls covered by new asphalt patches.


ALL FOR THE SUM OF:                                             $1,985.00

        - Not responsible for weed growth.
        - Crack filling does not imply crack repair.
        - Not responsible for pre-existing engineering with respect to drainage.
        - Not responsible for back-fill and compaction or back-fill installed
          by others.
        - Engineering, testing, inspection and permit fees not included.
        - Not responsible for reflective cracking when overlaying or skin
          surfacing.
        - Scuffing is a natural occurence with new asphalt and seal, normally
          correcting itself as it is curing.

                                                ALLSTAR PAVING COMPANY, INC.
TERMS:
This proposal may be withdrawn if not accepted
within N/A days.                                By:  /s/  ROBERT HAIJE
       ---                                          ------------------------
100% due upon completion and presentation of        ROBERT HAIJE
invoice.
                                   ACCEPTANCE

I/We accept the within proposal and agree to pay the said amount in accordance
with the terms set forth.  All of the terms and definitions on the reverse side
are incorporated herein and made a part hereof.

Company____________________________By ___________________ Date ________________


<PAGE>   52
               LIMITED SECONDARY AGREEMENT TO REMOVE IMPROVEMENTS

        THIS AGREEMENT is made as of the 31st day of December 1996 ("Effective
Date") by and between CATELLUS DEVELOPMENT CORPORATION, a Delaware corporation
("Catellus") and RICHARD CHEEK, ROBERT D. CHEEK, AND DANIEL S. CHEEK, all
Trustees of THE CHEEK FAMILY TRUST "D" UDT March 1, 1995 (the "Cheek Trust").

                                    RECITALS

        A.      Catellus is the owner of that certain real property commonly
known 14352 Franklin Ave., Tustin, California, as more particularly described
on Exhibit A attached hereto and made a part hereof by this reference (the
"Catellus Property").

        B.      The Cheek Trust is the owner of that certain real property
located in the City of Tustin, California, as more particularly described on
attached hereto and made a part hereof by this reference (the "Cheek
Property"), which property is located near the Catellus Property.

        C.      Catellus has or intends to enter into a lease (the "Building
Lease") with PairGain Technologies, Inc., a Delaware corporation ("PairGain")
whereby PairGain intends to construct certain improvements (the "Tenant
Improvements") to the existing Building on the Catellus Property for use by
PairGain during the term of the Building Lease.  As a condition to allowing
such Tenant Improvements to be constructed, the City of Tustin has required
that PairGain obtain additional parking and has required that the parking
rights be evidenced by a Grant of Easement to be recorded on the Cheek
Property.  Accordingly, PairGain has entered into a lease (the "Ground Lease")
with the Cheek Trust for use of the Cheek Property as a parking lot.

        D.      Catellus has required as a part of the Building Lease and
related documentation, that, among other things, PairGain (a) remove the Tenant
Improvements in accordance with the provisions of the Building Lease at the
termination or expiration of the Building Lease, and (b) indemnify and hold
Catellus free and harmless from any and all costs, damages, liabilities, or
consequences, whether monetary or otherwise, resulting from the building of the
Tenant Improvements, the Conditional Use Permit from the City of 
Tustin, and the Ground Lease.

        E.      It is the intent of the parties that the Ground Lease be
terminated upon termination or expiration of the Building Lease.

        F.      The Cheek Trust desires the assurance of Catellus that in the
event PairGain defaults in its obligation to remove the improvements such that
the Ground Lease can be terminated and any encumbrance relating thereto may be
removed from the title to the Cheeks Property, and Catellus is willing to give
such assurance on the limited terms of this Agreement.

        NOW THEREFORE, the parties agree as follows:

1.      AGREEMENT TO REMOVE IMPROVEMENTS

        Catellus hereby agrees that in the event PairGain fails to remove the
Tenant Improvements and restore the Premises to the termination condition
called for in the Building Lease on or before ninety (90) days from the
expiration or termination of the Building Lease, including any extensions or
options thereof, Catellus will promptly undertake and pursue to completion the
removal of such improvements and restoration to the condition called for in the
Building Lease at its cost and expense; provided however, that such
undertaking on the part of Catellus shall in no way be deemed a waiver of its
rights to indemnity from PairGain nor of the primary responsibility of PairGain
with respect to such removal.  Further, notwithstanding the foregoing, Catellus
shall not have any obligation or responsibility with respect to removal of any
portion of the Tenant Improvements nor restoration which is not required as a
condition by the City of Tustin to consenting to and permitting the termination
of the Ground Lease and the removal of the encumbrance related to the grant of
an easement for parking in connection therewith.

2.      AGREEMENT FOR SOLE BENEFIT OF THE CHEEK TRUST.

 
<PAGE>   53
        This Agreement is intended for and strictly limited to the Cheek Trust
and its successors-in-interest to the Cheek Property.  Nothing in this
agreement shall be construed as granting any other party, including but not
limited to PairGain and the City of Tustin, any right to enforce or benefit
from this agreement.

3.      SECONDARY, NOT PRIMARY OBLIGATION.

        The agreement of Catellus shall be deemed secondary to the obligation
of PairGain directly to The Cheek Trust, and Catellus shall not be deemed the
primary obligor for the removal of the Tenant Improvements.  The Cheek Trust
shall look first to PairGain for removal and restoration sufficient to result
in the Ground Lease termination and reconveyance of the easement encumbering
the Cheeks Property related thereto.

4.      NO REPRESENTATION OR WARRANTY.

        No representation or warranty, of any nature or kind, is made by
Catellus except for the limited agreement to remove the Tenant Improvements as
specifically set forth herein.

5.      GENERAL PROVISIONS.

        This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original Agreement, and all of which shall constitute one
Agreement to be effective as of the Effective Date.  In the event any action is
brought to enforce or interpret any of the terms and provisions of this
Agreement, the "prevailing party" in such action shall be entitled to recover,
as an element of costs of suit and not as damages, reasonable costs and
expenses, including but not limited to taxable costs and reasonable attorneys'
fees.  Each of the undersigned shall have joint and several liability for each
and every obligation set forth herein.  This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.  The
parties and their successors and assigns agree to execute any and all documents
reasonably advisable and/or necessary to effectuate the terms and intent of
this Agreement.  If any provision of this Agreement as applied to any party or
circumstance shall be adjudged by a court to be void and unenforceable, the
same shall in no way affect any other provision of this Agreement or the
validity and enforceability of the Agreement as a whole.  This Agreement shall
be governed by the laws of the State of California.

        "Catellus"              CATELLUS DEVELOPMENT CORPORATION
                                a Delaware corporation

                                By /s/ Ana Maria Perez
                                  ------------------------------------------
                                  Its   Vice President
                                     ---------------------------------------

        "The Cheeks Trust"      THE CHEEK FAMILY TRUST "D" UDT MARCH 1, 1995

                                By      /s/ RICHARD D. CHEEK, TRUSTEE
                                  ------------------------------------------
                                        Richard D. Cheek, Trustee

                                By      /s/ ROBERT D. CHEEK, TRUSTEE
                                  ------------------------------------------
                                        Robert D. Cheek, Trustee

                                By      /s/ DANIEL S. CHEEK, TRUSTEE
                                  ------------------------------------------
                                        Daniel S. Cheek, Trustee

READ, APPROVED, and AGREED TO:

PAIRGAIN TECHNOLOGIES, INC.,
a Delaware corporation

By /s/ Charles W. McBrayer
  -----------------------------
  Its   CFO
      -------------------------



                                       2