<PAGE>   1
                                                                    EXHIBIT 10.7

                                            [SOBRATO DEVELOPMENT COMPANIES LOGO]

                                 LEASE BETWEEN
                      THE SOBRATO GROUP AND TELOCITY, INC.

<TABLE>
<S>                                                                       <C>
SECTION ...............................................................   PAGE #
Parties ...............................................................        1
Premises ..............................................................        1
Use ...................................................................        1
   Permitted Uses .....................................................        1
   Uses Prohibited ....................................................        1
   Advertisements and Signs ...........................................        1
   Covenants, Conditions and Restrictions .............................        2
Term and Rental .......................................................        2
   Base Monthly Rent ..................................................        2
   Late Charges .......................................................        2
   Security Deposit ...................................................        2
This section intentionally left blank .................................        3
Acceptance of Possession and Covenants to Surrender ...................        3
   Delivery and Acceptance ............................................        3
   Condition Upon Surrender ...........................................        3
   Failure to Surrender ...............................................        4
Alterations and Additions .............................................        4
   Tenant's Alterations ...............................................        4
   Free From Liens ....................................................        5
   Compliance With Governmental Regulations ...........................        5
Maintenance of Premises ...............................................        5
   Landlord's Obligations .............................................        5
   Tenant's Obligations ...............................................        5
   Landlord and Tenant's Obligations Regarding Reimbursable
     Operating Costs ..................................................        5
   Reimbursable Operating Costs .......................................        6
   Tenant's Allocable Share ...........................................        6
   Waiver of Liability ................................................        6
Hazard Insurance ......................................................        7
   Tenant's Use .......................................................        7
   Landlord's Insurance ...............................................        7
   Tenant's Insurance .................................................        7
   Waiver .............................................................        7
Taxes .................................................................        8
Utilities .............................................................        8
Toxic Waste and Environmental Damage ..................................        8
   Tenant's Responsibility ............................................        8
   Tenant's Indemnity Regarding Hazardous Materials ...................        9
</TABLE>

                                     page i

<PAGE>   2

<TABLE>
<S>                                                                           <C>
   Actual Release by Tenant ...........................................        9
   Environmental Monitoring ...........................................       10
Tenant's Default ......................................................       10
   Remedies ...........................................................       10
   Right to Re-enter ..................................................       11
   Abandonment ........................................................       11
   No Termination .....................................................       11
   Non-Waiver .........................................................       11
   Performance by Landlord ............................................       12
   Habitual Default ...................................................       12
Landlord's Liability ..................................................       12
   Limitation on Landlord's Liability .................................       12
   Limitation on Tenant's Recourse ....................................       12
   Indemnification of Landlord ........................................       12
Destruction of Premises ...............................................       13
   Landlord's Obligation to Restore ...................................       13
   Limitations on Landlord's Restoration Obligation ...................       13
Condemnation ..........................................................       13
Assignment or Sublease ................................................       14
   Consent by Landlord ................................................       14
   Assignment or Subletting Consideration .............................       14
   No Release .........................................................       14
   Reorganization of Tenant ...........................................       15
   Permitted Transfers ................................................       15
   Effect of Default ..................................................       15
   Effects of Conveyance ..............................................       15
   Successors and Assigns .............................................       16
This Section intentionally left blank .................................       16
General Provisions ....................................................       16
   Attorney's Fees ....................................................       16
   Authority of Parties ...............................................       16
   Brokers ............................................................       16
   Choice of Law ......................................................       16
   Dispute Resolution .................................................       16
   Entire Agreement ...................................................       17
   Entry by Landlord ..................................................       17
   Estoppel Certificates ..............................................       18
   Exhibits ...........................................................       18
   Interest ...........................................................       18
   Modifications Required by Lender ...................................       18
   No Presumption Against Drafter .....................................       18
   Notices ............................................................       18
   Property Management ................................................       19
   Rent ...............................................................       19
   Representations ....................................................       19
   Rights and Remedies ................................................       19
   Severability .......................................................       19
   Submission of Lease ................................................       19
   Subordination ......................................................       19
</TABLE>


                                    Page ii

<PAGE>   3

<TABLE>
<S>                                                                           <C>
   Survival of Indemnities ............................................       19
   Time ...............................................................       19
   Transportation Demand Management Programs ..........................       20
   Waiver of Right to Jury Trial ......................................       20
EXHIBIT A -- Building & Project .......................................       22
</TABLE>




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<PAGE>   4
1.   PARTIES: THIS LEASE, is entered into on this 17th day of December, 1999
("Effective Date") between The Sobrato Group, a California Limited Partnership,
whose address is 10600 North De Anza Boulevard, Suite 200, Cupertino,
California, 95014, and Telocity, Inc., a California Corporation, whose address
is 10355 North De Anza Boulevard, Cupertino, California, 95014, hereinafter
called respectively Landlord and Tenant.

2.   PREMISES: Landlord hereby leases to Tenant, and Tenant hires from Landlord
those certain Premises with the appurtenances, situated in the City of San
Jose, County of Santa Clara, State of California, commonly known and designated
as 490 Race Street consisting of 66,250 rentable square feet ("Building") as
outlined in red on Exhibit "A" and all improvements located therein including
but not limited to buildings, parking areas and structures, landscaping,
loading docks, sidewalks, service areas and other facilities. The Building is
situated within a project site shared with five (5) additional buildings owned
by Landlord as outlined in Exhibit "A" attached hereto ("Project"). Tenant
shall have the exclusive use of 225 parking spaces on the parcel on which the
Building is located. Unless expressly provided otherwise, the term Premises as
used herein shall include the Tenant Improvements (defined in Section 5.B)
constructed by Tenant pursuant to Section 5.B.

3.   USE:

     A.   PERMITTED USES:  Tenant shall use the Premises only for the following
purposes and shall not change the use of the Premises without the prior written
consent of Landlord: Office, research and development, marketing, light
manufacturing, ancillary storage and other incidental uses. Tenant shall use
only the number of parking spaces allocated to Tenant under this Lease. All
commercial trucks and delivery vehicles shall (i) be parked at the rear of the
Building, (ii) loaded and unloaded in a manner which does not interfere with
the businesses of other occupants of the Project, and (iii) permitted to remain
within the Project only so long as is reasonably necessary to complete the
loading and unloading. Landlord makes no representation or warranty that any
specific use of the Premises desired by Tenant is permitted pursuant to any
Laws.

     B.  USES PROHIBITED: Tenant shall not commit or suffer to be committed on
the Premises any waste, nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant in or around the Premises, nor allow any
sale by auction or any other use of the Premises for an unlawful purpose.
Tenant shall not (i) damage or overload the electrical, mechanical or plumbing
systems of the Premises, (ii) attach, hang or suspend anything from the
ceiling, walls or columns of the building or set any load on the floor in
excess of the load limits for which such items are designed, or (iii) generate
dust, fumes or waste products which create a fire or health hazard or damage
the Premises or any portion of the Project, including without limitation the
soils or ground water in or around the Project. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature, or any waste materials, refuse, scrap or debris, shall
be stored upon or permitted to remain on any portion of the Premises outside of
the Building without Landlord's prior approval, which approval may be withheld
in its sole discretion.

     C.  ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be
placed, in, upon or about the Premises any signs not approved by the city and
other governing authority having jurisdiction. Tenant will not place or permit
to be placed upon the Premises any signs, advertisements or notices without the
written consent of Landlord as to type, size, design, lettering, coloring and
location, which consent will not be unreasonably withheld. Any sign placed on
the Premises shall be removed by Tenant, at its sole cost, prior to the
Expiration Date or promptly following the earlier


                                     Page 1
<PAGE>   5
termination of the Lease, and Tenant shall repair, at its sole cost, any damage
or injury to the Premises caused thereby, and if not so removed, then Landlord
may have same so removed at Tenant's expense.

     D.   Covenants, Conditions and Restrictions: This Lease is subject to the
effect of (i) any covenants, conditions, restrictions, easements, mortgages or
deeds of trust, ground leases, rights of way of record and any other matters or
documents of record; and (ii) any zoning laws of the city, county and state
where the Building is situated (collectively referred to herein as
"Restrictions") and Tenant will conform to and will not violate the terms of
any such Restrictions.

4.   TERM AND RENTAL:

     A. Base Monthly Rent: The term ("Lease Term") shall be for approximately
sixty (60) months, commencing on December 6, 1999 (the "Commencement Date") and
ending on November 30, 2004 ("Expiration Date"). Notwithstanding the Parties
agreement that the Lease Term begins on the Commencement Date, this Lease and
all of the obligations of Landlord and Tenant shall be binding and in full
force and effect from and after the Effective Date. In addition to all other
sums payable by Tenant under this Lease, Tenant shall pay base monthly rent
("Base Monthly Rent") for the Premises in accordance with the following
schedule:

12/06/99 - 12/31/99      $99,375.00
01/01/00 - 11/30/00:     $119,250.00 per month
12/01/00 - 11/30/01:     $122,563.00 per month
12/01/01 - 11/30/02:     $125,875.00 per month
12/01/02 - 11/30/03:     $129,188.00 per month
12/01/03 - 11/30/04:     $132,500.00 per month

Base Monthly Rent shall be due in advance on or before the first day of each
calendar month during the Lease Term. All sums payable by Tenant under this
Lease shall be paid to Landlord in lawful money of the United States of
America, without offset or deduction and without prior notice or demand, at the
address specified in Section 1 of this Lease or at such place or places as may
be designated in writing by Landlord during the Lease Term. Base Monthly Rent
for any period less than a calendar month shall be a pro rata portion of the
monthly installment. Concurrently with Tenant's execution of this Lease, Tenant
shall pay to Landlord the sum of Ninety Nine Thousand Three Hundred Seventy
Five and No/100 Dollars ($99,375.00) as prepaid rent for the period from
December 6, 1999 through December 31, 1999.

     B. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant to
Landlord of Base Monthly Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which is
extremely difficult to ascertain. Such costs include but are not limited to:
administrative, processing, accounting, and late charges which may be imposed
on Landlord by the terms of any contract, revolving credit, mortgage, or trust
deed covering the Premises. Accordingly, if any installment of Base Monthly
Rent or other sum due from Tenant shall not be received by Landlord or its
designee within five (5) days after the rent is due, Tenant shall pay to
Landlord a late charge equal to five (5%) percent of such overdue amount, which
late charge shall be due and payable on the same date that the overdue amount
was due. The parties agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of late payment
by Tenant, excluding interest and attorneys fees and costs. If any rent or
other sum due from Tenant remains delinquent for a period in excess of thirty
(30) days then, in addition to such late charge, Tenant shall pay to Landlord
interest on any rent that is not paid when due at the Agreed Interest Rate
specified in Section 19.J following the date such amount became due until paid.
Acceptance by Landlord of such late charge shall not constitute a waiver of
Tenant's default with respect to such overdue amount nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder. In the event
that a late charge is payable hereunder, whether or not collected, for three
(3) consecutive installments of Base Monthly Rent, then the Base Monthly Rent
shall automatically become due and payable quarterly in advance, rather than
monthly, notwithstanding any provision of this Lease to the contrary.

     D. SECURITY DEPOSIT: Concurrently with Tenant's execution of this Lease,
Tenant has deposited with Landlord the sum of Seven Hundred Thousand Dollars
($700,000.00) ("Security "Deposit"). Landlord shall not be deemed a trustee of
the Security Deposit, may use the Security Deposit in business, and shall not
be required to segregate it from its general accounts. Tenant shall not be
entitled to interest



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<PAGE>   6
on the Security Deposit. If Tenant defaults with respect to any provisions of
the Lease, including but not limited to the provisions relating to payment of
Base Monthly Rent or other charges, Landlord may, to the extent reasonably
necessary to remedy Tenant's default, use any or all of the Security Deposit
towards payment of the following: (i) Base Monthly Rent or other charges in
default; (ii) any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's default including, but not limited to Tenant's
failure to restore or clean the Premises following vacation thereof. If any
portion of the Security Deposit is so used or applied, Tenant shall, within ten
(10) days after written demand from Landlord, deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its full original amount,
and shall pay to Landlord such other sums as necessary to reimburse Landlord for
any sums paid by Landlord. Tenant waives the provisions of California Civil Code
Section  1950.7, and all other provisions of Law now in force or that become in
force after the date of execution of this Lease, that provide that Landlord may
claim from a security deposit only those sums reasonably necessary to remedy
defaults in the payment of Rent, to repair damage caused by Tenant, or to clean
the Premises. Tenant may not assign or encumber the Security Deposit without the
consent of Landlord. Any attempt to do so shall be void and shall not be binding
on Landlord. The Security Deposit shall be returned to Tenant within thirty (30)
days after the Expiration Date and surrender of the Premises to Landlord, less
any amount deducted in accordance with this Section, together with Landlord's
written notice itemizing the amounts and purposes for such deduction. In the
event of termination of Landlord's interest in this Lease, Landlord may deliver
or credit the Security Deposit to Landlord's successor in interest in the
Premises and thereupon be relieved of further responsibility with respect to the
Security Deposit. Notwithstanding the foregoing, the Security Deposit shall be
reduced by: (i) $100,000.00 at the commencement of the 13th, 25th, 37th, and
48th month of the Lease Term, provided Tenant has not been in default under the
Lease beyond any applicable cure periods during the previous year; and (ii)
$100,000.00 after Tenant completes a successful public offering, provided Tenant
has not been in default under the Lease beyond any applicable cure periods prior
to such public offering.

Landlord agrees that in lieu of a cash Security Deposit, Tenant may deposit a
letter of credit ("LC") in a form acceptable to Landlord. Landlord shall be
entitled to draw against the LC at any time provided only that Landlord
certifies to the issuer of the LC that Tenant is in default under the Lease.
Tenant shall keep the LC in effect during the entire Lease Term, as the same
may be extended, plus a period of four (4) weeks after expiration of the Lease
Term. At least thirty (30) days prior to expiration of any LC, the term thereof
shall be renewed or extended for a period of at least one (1) year. Tenant's
failure to so renew or extend the LC shall be a material default of this Lease
by Tenant. In the event Landlord draws against the LC, Tenant shall replenish
the existing LC or cause a new LC to be issued such that the aggregate amount
of LCs available to Landlord at all times during the Lease Term is the amount
of the Security Deposit then required.

5.   This section intentionally left blank:

6.   ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:

     A.  DELIVERY AND ACCEPTANCE: On the Commencement Date, Landlord shall
deliver and Tenant shall accept possession of the Premises and enter into
occupancy of the Premises on the Commencement Date. Tenant acknowledges that it
has had an opportunity to conduct, and has conducted, such inspections of the
Premises as it deems necessary to evaluate its conduction. Tenant agrees to
accept possession of the Premises in its then existing condition, subject to
all Restrictions and without representation or warranty by Landlord.

     B.  CONDITION UPON SURRENDER: Tenant further agrees on the Expiration Date
or on the sooner termination of this Lease, to surrender the Premises to
Landlord in good condition and repair, normal wear and tear excepted. In this
regard, "normal wear and tear" shall be construed to mean wear and tear caused
to the Premises by the natural aging process which occurs in spite of prudent
application of the best commercially reasonable standards for



                                     Page 3
<PAGE>   7
maintenance, repair replacement, and janitorial practices, and does not include
items of neglected or deferred maintenance. In any event, Tenant shall cause
the following to be done prior to the Expiration Date or sooner termination of
this Lease: (i) all interior walls shall be cleaned, patched, and otherwise
made paint-ready, (ii) all tiled floors shall be cleaned and waxed, (iii) all
carpets shall be cleaned and shampooed, (iv) all broker, marred, stained or
nonconforming acoustical ceiling tiles shall be replaced, (v) all cabling
placed above the ceiling by Tenant or Tenant's contractors shall be removed,
(vi) all windows shall be washed; (vii) the HVAC system shall be serviced by a
reputable and licensed service firm and left in "good operating condition and
repair" as so certified by such firm, (viii) the plumbing and electrical
systems and lighting shall be placed in good order and repair (including
replacement of any burned out, discolored or broken light bulbs, ballasts, or
lenses. On or before the Expiration Date or sooner termination of this Lease,
Tenant shall remove all its personal property and trade fixtures from the
Premises. All property and fixtures not so removed shall be deemed as abandoned
by Tenant. Tenant shall ascertain from Landlord within ninety (90) days before
the Expiration Date whether Landlord desires to have the Premises or any parts
thereof restored to their condition as of the Commencement Date, or to cause
Tenant to surrender all Alterations (as defined in Section 7) in place to
Landlord. If Landlord shall so desire, Tenant shall, at Tenant's sole cost and
expense, remove such Alterations as Landlord requires and shall repair and
restore said Premises or such parts thereof before the Expiration Date. Such
repair and restoration shall include causing the Premises to be brought into
compliance with all applicable building codes and laws in effect at the time of
the removal to the extent such compliance is necessitated by the repair and
restoration work.

     C.  FAILURE TO SURRENDER: If the Premises are not surrendered at the
Expiration Date (or sooner, upon rightful termination of the Lease) in the
condition required by this Section 6, Tenant shall be deemed in a holdover
tenancy pursuant to this Section 6.C and Tenant shall indemnify, defend, and
hold Landlord harmless against loss or liability resulting from delay by Tenant
in so surrendering the Premises including, without limitation, any claims made
by any succeeding tenant founded on such delay and costs incurred by Landlord
in returning the Premises to the required condition, plus interest at the
Agreed Interest Rate. Any holding over after the termination or Expiration Date
with Landlord's express written consent, shall be construed as month-to-month
tenancy, terminable on thirty (30) days written notice from either party, and
Tenant shall pay as Base Monthly Rent to Landlord a rate equal to one hundred
twenty five percent (125%) of the Base Monthly Rent due in the month preceding
the termination or Expiration Date, plus all other amounts payable by Tenant
under this Lease. Any holding over shall otherwise be on the terms and
conditions herein specified, except those provisions relating to the Lease Term
and any options to extend or renew, which provisions shall be of no further
force and effect following the expiration of the applicable exercise period. If
Tenant remains in possession of the Premises after the Expiration Date or
sooner termination of this Lease without Landlord's consent, Tenant's continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall
pay as rent during the holdover period an amount equal to one hundred fifty
percent (150%) of the Base Monthly Rent due in the month preceding the
termination or Expiration Date, plus all other amounts payable by Tenant under
this Lease. This provision shall survive the termination or expiration of the
Lease.

7.  ALTERATIONS AND ADDITIONS:

     A.  TENANT'S ALTERATIONS: Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises ("Alterations"), or any part thereof,
without obtaining Landlord's prior written consent and delivering to Landlord
the proposed architectural and structural plans for all such Alterations at
least fifteen (15) days prior to the start of construction. If such Alterations
affect the structure of the Building, Tenant additionally agrees to reimburse
Landlord its reasonable out-of-pocket costs incurred in reviewing Tenant's
plans. After obtaining Landlord's consent, Tenant shall not proceed to make such
Alterations until Tenant has obtained all required governmental approvals and
permits, and provides Landlord reasonable security, in form reasonably approved
by Landlord, to protect Landlord against mechanics' lien claims. Tenant agrees
to provide Landlord (i) written notice of the anticipated and actual start-date
of the work, (ii) a complete set of half-size (15" X 21") vellum as-built
drawings, and (iii) a certificate of



                                     Page 4
<PAGE>   8
occupancy for the work upon completion of the Alterations. All Alterations
shall be constructed in compliance with all applicable building codes and laws
including, without limitation, the Americans and Disabilities Act of 1990
("ADA") as amended from time to time. The parties acknowledge that all ADA work
required to the Premises for Tenant's occupancy shall be performed by Tenant as
part of its Alterations. Upon the Expiration Date, all Alterations, except
movable furniture and trade fixtures, shall become a part of the realty and
belong to Landlord but shall nevertheless be subject to removal by Tenant as
provided in Section 6 above. Alterations which are not deemed as trade fixtures
include heating, lighting, electrical systems, air conditioning, walls,
carpeting, or any other installation which has become an integral part of the
Premises. All Alterations shall be maintained, replaced or repaired by Tenant
at its sole cost and expense.

      B. FREE FROM LIENS: Tenant shall keep the Premises free from all liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant or claimed to have been performed for Tenant. In the event Tenant fails
to discharge any such lien within ten (10) days after receiving notice of the
filing, Landlord shall be entitled to discharge the lien at Tenant's expense
and all resulting costs incurred by Landlord, including attorney's fees shall
be due from Tenant as additional rent.

      C. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: The term Laws or Governmental
Regulations shall include all federal, state, county, city or governmental
agency laws, statutes, ordinances, standards, rules, requirements, or orders
now in force or hereafter enacted, promulgated, or issued. The term also
includes government measures regulating or enforcing public access, traffic
mitigation, occupational, health, or safety standards for employers, employees,
landlords, or tenants. Tenant, at Tenant's sole expense shall make all repairs,
replacements, alterations, or improvements needed to comply with all
Governmental Regulations. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action or proceeding against Tenant (whether
Landlord be a party thereto or not) that Tenant has violated any such law,
regulation or other requirement in its use of the Premises shall be conclusive
of that fact as between Landlord and Tenant.

8.    MAINTENANCE OF PREMISES:

      A. LANDLORD'S OBLIGATIONS: Landlord at its sole cost and expense, shall
maintain in good condition, order, and repair, and replace as and when
necessary, the foundation, exterior load bearing walls and roof structure of
the Building Shell.

      B. TENANT'S OBLIGATIONS: Tenant shall clean, maintain, repair and replace
when necessary the Premises and every part thereof through regular inspections
and servicing, including but not limited to: (i) all plumbing and sewage
facilities, (ii) all heating ventilating and air conditioning facilities and
equipment, (iii) all fixtures, interior walls floors, carpets and ceilings,
(iv) all windows, door entrances, plate glass and glazing systems including
caulking, and skylights, (v) all electrical facilities and equipment, (vi) all
automatic fire extinguisher equipment, (vii) the parking lot and all
underground utility facilities servicing the Premises, (viii) all elevator
equipment, (ix) the roof membrane system, and (x) all waterscape, landscaping
and shrubbery. All wall surfaces and floor tile are to be maintained in an as
good a condition as when Tenant took possession free of holes, gouges, or
defacements. With respect to items (ii), (viii) and (ix) above, Tenant shall
provide Landlord a copy of a service contract between Tenant and a licensed
service contractor providing for periodic maintenance of all such systems or
equipment in conformance with the manufacturer's recommendations. Tenant shall
provide Landlord a copy of such preventive maintenance contracts and paid
invoices for the recommended work if requested by Landlord.

If as a part of Tenant's fulfilment of its maintenance obligations under this
Section 8.B., a roof replacement to the Premises is paid for by Tenant during
the last three (3) years of the Lease Term, Landlord shall reimburse Tenant for
the cost of the replacement less the sum of (i) Twenty Thousand Dollars
($20,000.00) plus (ii) that portion of the cost over $20,000.00 equal to the
product of such cost multiplied by a fraction, the numerator of which is the
number of years remaining in the Lease Term, the denominator of which is the
useful life (in years) of the roof replacement.

      C. LANDLORD AND TENANT'S OBLIGATIONS REGARDING REIMBURSABLE OPERATING
COSTS: In addition to the direct payment by Tenant of



                                     Page 5
<PAGE>   9
expenses as provided in Sections 8.B, 9, 10 and 11 of this Lease, Tenant agrees
to reimburse Landlord for Tenant's Allocable Share (as defined in Section 8.E
below) of Reimbursable Operating Costs (as defined in Section 8.D below)
resulting from Landlord payment of reasonable expenses related to the Building
or Project which are not otherwise paid by Tenant directly. Tenant agrees to
pay its Allocable Share of the Reimbursable Operating Costs as additional
rental within ten (10) days of written invoice from Landlord.

     D.  REIMBURSABLE OPERATING COSTS: For purposes of calculating Tenant's
Allocable Share of Building and Project Costs, the term "Reimbursable Operating
Costs" is defined as all costs and expenses of the nature hereinafter
described which are incurred by Landlord in connection with ownership and
operation of the Building or the Project in which the Premises are located,
together with such additional facilities as may be determined by Landlord to be
reasonably desirable or necessary to the ownership and operation of the
Building and/or Project. All costs and expenses shall be determined in
accordance with generally accepted accounting principles which shall be
consistently applied (with accruals appropriate to Landlord's business),
including but not limited to the following: (i) common area utilities,
including water, power, telephone, heating, lighting, air conditioning,
ventilating, and Building utilities to the extent not separately metered; (ii)
common area maintenance and service agreements for the Building and/or Project
and the equipment therein, including without limitation, common area janitorial
services, alarm and security services, exterior window cleaning, and maintenance
of the sidewalks, landscaping, waterscape, roof membrane, parking areas,
driveways, service areas, mechanical rooms, elevators, and the building
exterior; (iii) insurance premiums and costs, including without limitation, the
premiums and cost of fire, casualty and liability coverage and rental abatement
and earthquake (if commercially available) insurance applicable to the Building
or Project; (iv) repairs, replacements and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance or by Tenant or
other third parties, and repairs or alterations attributable solely to tenants
of the Building or Project other than Tenant); and (v) all real estate taxes
and assessment installments or other impositions or charges which may be levied
on the Building or Project, upon the occupancy of the Building or Project and
including any substitute or additional charges which may be imposed during, or
applicable to the Lease Term including real estate tax increases due to a sale,
transfer or other change of ownership of the Building or Project, as such taxes
are levied or appear on the City and County tax bills and assessment rolls.
Landlord shall have no obligation to provide guard services or other security
measures for the benefit of the Project. Tenant assumes all responsibility for
the protection of Tenant and Tenant's Agents from acts of third parties;
provided, however, that nothing contained herein shall prevent Landlord, at its
sole option, from providing security measures for the Project. This is a "Net"
Lease, meaning that Base Monthly Rent is paid to Landlord absolutely net of all
costs and expenses. The provision for payment of Reimbursable Operating Costs
by means of periodic payment of Tenant's Allocable Share of Building and/or
Project Costs is intended to pass on to Tenant and reimburse Landlord for all
costs of operating and managing the Building and/or Project.

     E.  TENANT'S ALLOCABLE SHARE: For purposes of prorating Reimbursable
Operating Costs which Tenant shall pay, Tenant's Allocable Share of
Reimbursable Operating Costs shall be computed by multiplying the Reimbursable
Operating Costs by a fraction, the numerator of which is the rentable square
footage of the Premises and the denominator of which is either the total
rentable square footage of the Building if the service or cost is allocable
only to the Building, or the total square footage of the Project if the service
or cost is allocable to the entire Project. Tenant's obligation to share in
Reimbursable Operating Costs shall be adjusted to reflect the Lease
Commencement and Expiration dates and is subject to recalculation in the event
of expansion of the Building or Project.

     F.  WAIVER OF LIABILITY: Failure by Landlord to perform any defined
services, or any cessation thereof, when such failure is caused by accident,
breakage, repairs, strikes, lockout or other labor disturbances or labor
disputes of any character or by any other cause, similar or dissimilar, unless
due to the gross negligence or willful misconduct of Landlord, shall not render
Landlord liable to Tenant in any respect, including damages to either person or
property, nor be construed as an eviction of


                                     Page 6


<PAGE>   10
Tenant, nor cause an abatement of rent, nor relieve Tenant from fulfillment of
any covenant or agreement hereof. Should any equipment or machinery utilized in
supplying the services listed herein break down or for any cause cease to
function properly, upon receipt of written notice from Tenant of any
deficiency or failure of any services, Landlord shall use reasonable diligence
to repair the same promptly, but Tenant shall have no right to terminate this
Lease and shall have no claim for rebate of rent or damages on account of any
interruptions in service occasioned thereby or resulting therefrom. Tenant
waives the provisions of California Civil Code Sections 1941 and 1942
concerning the Landlord's obligation of tenantability and Tenant's right to
make repairs and deduct the cost of such repairs from the rent. Landlord shall
not be liable for a loss of or injury to person or property, however occurring,
through or in connection with or incidental to furnishing, or its failure to
furnish, any of the foregoing, unless due to the gross negligence or willful
misconduct of Landlord.

9.   HAZARD INSURANCE:

     A. TENANT'S USE: Tenant shall not use or permit the Premises, or any
part thereof, to be used for any purpose other than that for which the Premises
are hereby leased; and no use of the Premises shall be made or permitted, nor
acts done, which will cause an increase in premiums or a cancellation of any
insurance policy covering the Premises or any part thereof, nor shall Tenant
sell or permit to be sold, kept, or used in or about the Premises, any article
prohibited by the standard form of fire insurance policies. Tenant shall, at
its sole cost, comply with all requirements of any insurance company or
organization necessary for the maintenance of reasonable fire and public
liability insurance covering the Premises and appurtenances.

     B. LANDLORD'S INSURANCE: Landlord agrees to purchase and keep in force
fire, extended coverage insurance in an amount equal to the replacement cost of
the Building (not including any Tenant Improvements or Alterations paid for by
Tenant from sources other than the Work Allowance) as determined by Landlord's
insurance company's appraisers. If available at commercially reasonable rates
and carried by other owners of commercial properties in the area, such fire and
property damage insurance may be endorsed to cover loss caused by such
additional perils against which Landlord may elect to insure, including
earthquake and/or flood, and shall contain reasonable deductibles which, in the
case of earthquake and flood insurance may be up to fifteen percent (15%) of
the replacement value of the property. Additionally Landlord may maintain a
policy of (i) commercial general liability insurance insuring Landlord (and
such others designated by Landlord) against liability for personal injury,
bodily injury, death and damage to property occurring or resulting from an
occurrence in, on or about the Premises or Project in an amount as Landlord
determines is reasonably necessary for its protection, and (ii) rental lost
insurance covering a twelve (12) month period. Tenant agrees to pay Landlord as
additional rent, on demand, the full cost of said insurance as evidenced by
insurance billings to Landlord, and in the event of damage covered by said
insurance, the amount of any deductible under such policy. Payment shall be due
to Landlord within ten (10) days after written invoice to Tenant. It is
understood and agreed that Tenant's obligation under this Section will be
prorated to reflect the Lease Commencement and Expiration Dates.

     C. TENANT'S INSURANCE: Tenant agrees, at its sole cost, to insure its
personal property, Tenant Improvements (for which it has paid from sources
other than the Work Allowance), and Alterations for their full replacement
value (without depreciation) and to obtain worker's compensation and public
liability and property damage insurance for occurrences within the Premises
with a combined single limit of not less than Five Million Dollars
($5,000,000.00). Tenant's liability insurance shall be primary insurance
containing a cross-liability endorsement, and shall provide coverage on an
"occurrence" rather than a "claims made" basis. Tenant shall name Landlord and
Landlord's lender as an additional insured and shall deliver a copy of the
policies and renewal certificates to Landlord. All such policies shall provide
for thirty (30) days' prior written notice to Landlord of any cancellation,
termination, or reduction in coverage. Notwithstanding the above, Landlord
retains the right to have Tenant provide other forms of insurance which may be
reasonably required to cover future risks.

     D. WAIVER: Landlord and Tenant hereby waive all rights each may have
against the other on account of any loss or damage sustained by Landlord or
Tenant, as the case may be, or to the

                                     Page 7


<PAGE>   11
Premises or its contents, which may arise from any risk covered by their
respective insurance policies (or which would have been covered had such
insurance policies been maintained in accordance with this Lease) as set forth
above. The Parties shall use their reasonable efforts to obtain from their
respective insurance companies a waiver of any right of subrogation which said
insurance company may have against Landlord or Tenant, as the case may be.

10.  TAXES: Tenant shall be liable for and shall pay as additional rental, prior
to delinquency, the following: (i) all taxes and assessments levied against
Tenant's personal property and trade or business fixtures; (ii) all real estate
taxes and assessment installments or other impositions or charges which may be
levied on the Premises or upon the occupancy of the Premises, including any
substitute or additional charges which may be imposed applicable to the Lease
Term; and (iii) real estate tax increase due to an increase in assessed value
resulting from a sale, transfer or other change of ownership of the Premises as
it appears on the City and County tax bills during the Lease Term. Tenant's
obligation under this Section shall be prorated to reflect the Lease
Commencement and Expiration Dates. If, at any time during the Lease Term a tax,
excise on rents, business license tax or any other tax, however described, is
levied or assessed against Landlord as a substitute or addition, in whole or in
part, for taxes assessed or imposed on land or Buildings, Tenant shall pay and
discharges its pro rata share of such tax or excise on rents or other tax before
it becomes delinquent; except that this provision is not intended to cover net
income taxes, inheritance, gift or estate tax imposed upon Landlord. In the
event that a tax is placed, levied, or assessed against Landlord and the taxing
authority takes the position that Tenant cannot pay and discharge its pro rata
share of such tax on behalf of Landlord, then at Landlord's sole election,
Landlord may increase the Base Monthly Rent by the exact amount of such tax and
Tenant shall pay such increase. If by virtue of any application or proceeding
brought by Landlord, there results a reduction in the assessed value of the
Premises during the Lease Term, Tenant agrees to pay Landlord a fee consistent
with the fees charged by a third party appeal firm for such services.

11.  UTILITIES: Tenant shall pay directly to the providing utility all water,
gas, electric, telephone, and other utilities supplied to the Premises.
Landlord shall not be liable for loss of or injury to person or property,
however occurring, through or in connection with or incidental to furnishing
or the utility company's failure to furnish utilities to the Premises, and in
such event Tenant shall not be entitled to abatement or reduction of any
portion of Base Monthly Rent or any other amount payable under this Lease.

12.  TOXIC WASTE AND ENVIRONMENTAL DAMAGE:

     A.   TENANT'S RESPONSIBILITY: Without the prior written consent of
Landlord, Tenant or Tenant's agents, employees, contractors and invitees
("Tenant's Agents") shall not bring, use, or permit upon the Premises, or
generate, create, release, emit, or dispose (nor permit any of the same) from
the Premises any chemicals, toxic or hazardous gaseous, liquid or solid
materials or waste, including without limitation, material or substance having
characteristics of ignitability, corrosivity, reactivity, or toxicity or
substances or materials which are listed on any of the Environmental Protection
Agency's lists of hazardous wastes or which are identified in Division 22 Title
26 of the California Code of Regulations as the same may be amended from time
to time or any wastes, materials or substances which are or may become
regulated by or under the authority of any applicable local, state or federal
laws, judgments, ordinances, orders, rules, regulations, codes or other
governmental restrictions, guidelines or requirements. ("Hazardous Materials")
except for those substances customary in typical office uses for which no
consent shall be required. In order to obtain consent, Tenant shall deliver to
Landlord its written proposal describing the toxic material to be brought onto
the Premises, measures to be taken for storage and disposal thereof, safety
measures to be employed to prevent pollution of the air, ground, surface and
ground water. Landlord's approval may be withheld in its reasonable judgment.
In the event Landlord consents to Tenant's use of Hazardous Materials on the
Premises or such consent is not required, Tenant represents and warrants that
it shall comply with all Governmental Regulations applicable to Hazardous
Materials including doing the following: (i) adhere to all reporting and
inspection requirements imposed by Federal, State, County or Municipal laws,
ordinances or regulations and will provide Landlord a copy of any such reports
or agency inspections; (ii)



                                     Page 8

<PAGE>   12

obtain and provide Landlord copies of all necessary permits required for the
use and handling of Hazardous Materials on the Premises; (iii) enforce
Hazardous Materials handling and disposal practices consistent with industry
standards; (iv) surrender the Premises free from any Hazardous Materials
arising from Tenant's bringing, using, permitting, generating, creating,
releasing, emitting or disposing of Hazardous Materials; and (v) properly close
the facility with regard to Hazardous Materials including the removal or
decontamination of any process piping, mechanical ducting, storage tanks
containers, or trenches which have come into contact with Hazardous Materials
and obtain a closure certificate from the local administering agency prior to
the Expiration Date.

      B.    TENANT'S INDEMNITY REGARDING HAZARDOUS MATERIALS: Tenant shall, at
its sole cost and expense, comply with all laws pertaining to, and shall with
counsel reasonably acceptable to Landlord, indemnify, defend and hold harmless
Landlord and Landlord's trustees, shareholders, directors, officers, employees,
partners, affiliates, and agents from, any claims, liabilities, costs or
expenses incurred or suffered arising from the following conduct during the
Lease Term: the bringing, using, permitting, generating, emitting or disposing
of Hazardous Materials by Tenant, Tenant's Agents or a third party through the
surface soils of the Premises during the Lease Term or the violation of any
Governmental Regulation or environmental law, by Tenant or Tenant's Agents.
Tenant's indemnification, defense, and hold harmless obligations include,
without limitation, the following: (i) claims, liability, costs or expenses
resulting from or based upon administrative, judicial (civil or criminal) or
other action, legal or equitable, brought by any private or public person under
common law or under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Resource Conservation and
Recovery Act of 1980 ("RCRA") or any other Federal, State, County or Municipal
law, ordinance or regulation now or hereafter in effect; (ii) claims,
liabilities, costs or expenses pertaining to the identification, monitoring,
cleanup, containment, or removal of Hazardous Materials from soils, riverbeds or
aquifers including the provision of an alternative public drinking water source;
(iii) all costs of defending such claims; (iv) losses attributable to diminution
in the value of the Premises or the Building; (v) loss or restriction of use of
rentable space in the Building; (vi) Adverse effect on the marketing of any
space in the Building; and (vi) all other liabilities, obligations, penalties,
fines, claims, actions (including remedial or enforcement actions of any kind
and administrative or judicial proceedings, orders or judgments), damages
(including consequential and punitive damages), and costs (including attorney,
consultant, and expert fees and expenses) resulting from the release or
violation. This Section 12.B shall survive the expiration or termination of this
Lease.

      C. ACTUAL RELEASE BY TENANT: Tenant agrees to notify Landlord of any
lawsuits or orders which relate to the remedying of or actual release of
Hazardous Materials on or into the soils or ground water at or under the
Premises. Tenant shall also provide Landlord all notices required by Section
25359.7(b) of the Health and Safety Code and all other notices required by law
to be given to Landlord in connection with Hazardous Materials. Without
limiting the foregoing, Tenant shall also deliver to Landlord, within twenty
(20) days after receipt thereof, any written notices from any governmental
agency alleging a material violation of, or material failure to comply with,
any federal, state or local laws, regulations, ordinances or orders, the
violation of which or failure to comply with poses a foreseeable and material
risk of contamination of the ground water or injury to humans (other than
injury solely to Tenant or Tenant's Agents.

      In the event of any release on or into the Premises or into the soil or
ground water under the Premises, the Building or the Project of any Hazardous
Materials used, treated, stored or disposed of by Tenant or Tenant's Agents,
Tenant agrees to comply, at its sole cost, with all laws, regulations,
ordinances and orders of any federal, state or local agency relating to the
monitoring or remediation of such Hazardous Materials. In the event of any such
release of Hazardous Materials Tenant shall immediately give verbal and
follow-up written notice of the release to Landlord and its Lender to attempt
to eliminate and mitigate any financial exposure to such Lender and resultant
exposure to Landlord under California Code of Civil Procedure Section 736(b) as
a result of such release, and promptly to take reasonable monitoring, cleanup
and remedial steps given,


                                     Page 9
<PAGE>   13
inter alia, the historical uses to which the Property has and continues to be
used, the risks to public health posed by the release, the then available
technology and the costs of remediation, cleanup and monitoring, consistent with
acceptable customary practices for the type and severity of such contamination
and all applicable laws. Nothing in the preceding sentences shall eliminate,
modify or reduce the obligation of Tenant under 12.B of this Lease to indemnify,
defend and hold Landlord harmless from any claims liabilities, costs or expenses
incurred or suffered by Landlord. Tenant shall provide Landlord prompt written
notice of Tenant's monitoring, cleanup and remedial steps.

     In the absence of an order of any federal, state or local governmental or
quasi-governmental agency relating to the cleanup, remediation or other response
action required by applicable law, any dispute arising between Landlord and
Tenant concerning Tenant's obligation to Landlord under this Section 12.C
concerning the level, method, and manner of cleanup, remediation or response
action required in connection with such a release of Hazardous Materials shall
be resolved by remediation and/or arbitration pursuant to this Lease.

     D. ENVIRONMENTAL MONITORING: Landlord and its agents shall have the right
to reasonably inspect, investigate, sample and monitor the Premises including
any air, soil, water, ground water or other sampling or any other testing,
digging, drilling or analysis to determine whether Tenant is complying with the
terms of this Section 12. If Landlord discovers that Tenant is not in compliance
with the terms of this Section 12, any costs incurred by Landlord related to
such non-compliance, including attorneys' and consultants' fees, and costs
incurred by Landlord pursuant to this Section 12.D., shall be due and payable by
Tenant to Landlord within five (5) days following Landlord's written demand
therefore.

13.  TENANT'S DEFAULT: The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant: (i) Tenant's failure to pay
the Base Monthly Rent including additional rent or any other payment due under
this Lease by the date such amount is due, where such failure continues for five
(5) days after written notice from Landlord, (ii) the abandonment of the
Premises by Tenant; (iii) Tenant's failure to observe and perform any other
required provision of this Lease, where such failure continues for thirty (30)
days after written notice from Landlord; provided, however that if the nature of
the default is such that it cannot reasonably be cured within the 30-day period,
Tenant shall not be deemed in default if it commences within such period to
cure, and thereafter diligently prosecutes the same to completion; (iv) Tenant's
making of any general assignment for the benefit of creditors; (v) the filing by
or against Tenant of a petition to have Tenant adjudged bankrupt or of a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
after the filing); (vi) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant
within thirty (30) days; or (vii) the attachment, execution or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where such seizure is not discharged within
thirty (30) days.

     A.   REMEDIES: In the event of any such default by Tenant, then in addition
to other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder
by giving written notice of such intention to terminate. In the event Landlord
elects to so terminate this Lease, Landlord may recover from Tenant all the
following: (i) the worth at time of award of any unpaid rent which had been
earned at the time of such termination; (ii) the worth at time of award of the
amount by which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss for the same
period that Tenant proves could have been reasonably avoided; (iii) the worth at
time of award of the amount by which the unpaid rent for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided; (iv) any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure to
perform its obligations under this Lease, or which in the ordinary course of
things would be likely to result therefrom; including the following: (x)
expenses for repairing, altering or remodeling the



                                    Page 10
<PAGE>   14
Premises for purposes of reletting, (y) broker's fees, advertising costs or
other expenses of reletting the Premises, and (z) costs of carrying the
Premises such as taxes, insurance premiums, utilities and security precautions;
and (v) at Landlord's election, such other amounts in addition to or in lieu of
the foregoing as may be permitted by applicable California law. The term
"rent", as used herein, is defined as the minimum monthly installments of Base
Monthly Rent and all other sums required to be paid by Tenant pursuant to this
Lease, all such other sums being deemed as additional rent due hereunder. As
used in (i) and (ii) above, "worth at the time of award" shall be computed by
allowing interest at a rate equal to the discount rate of the Federal Reserve
Bank of San Francisco plus five (5%) percent per annum. As used in (iii) above,
"worth at the time of award" 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 (1%) percent.

     B. RIGHT TO RE-ENTER: In the event of any such default by Tenant, Landlord
shall have the right, after terminating this Lease, to re-enter the Premises
and remove all persons and property. Such property may be removed and stored in
a public warehouse or elsewhere at the cost of and for the account of Tenant,
and disposed of by Landlord in any manner permitted by law.

     C. ABANDONMENT: If Landlord does not elect to terminate this Lease as
provided in Section 13.A or 13.B above, then the provisions of California Civil
Code Section 1951.4, (Landlord may continue the lease in effect after Tenant's
breach and abandonment and recover rent as it becomes due if Tenant has a right
to sublet and assign, subject only to reasonable limitations) as amended from
time to time, shall apply and Landlord may from time to time, without
terminating this Lease, either recover all rental as it becomes due or relet
the Premises or any part thereof for such term or terms and at such rental or
rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs
to the Premises. In the event that Landlord elects to so relet, rentals
received by Landlord from such reletting shall be applied in the following
order to: (i) the payment of any indebtedness other than Base Monthly Rent due
hereunder from Tenant to Landlord; (ii) the payment of any cost of such
reletting; (iii) the payment of the cost of any alterations and repairs to the
Premises; and (iv) the payment of Base Monthly Rent due and unpaid hereunder.
The residual rentals, if any, shall be held by Landlord and applied in payment
of future Base Monthly Rent as the same may become due and payable hereunder.
Landlord shall have the obligation to market the space but shall have no
obligation to relet the Premises following a default if Landlord has other
comparable available space within the Project. In the event the portion of
rentals received from such reletting which is applied to the payment of rent
hereunder during any month be less than the rent payable during that month by
Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately
upon demand. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any reasonable costs and expenses
incurred by Landlord in such reletting or in making such alterations and
repairs not covered by the rentals received from such reletting.

     D. NO TERMINATION: Landlord's re-entry or taking possession of the Premises
pursuant to 13.B or 13.C shall not be construed as an election to terminate
this Lease unless written notice of such intention is given to Tenant or unless
the termination is decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such default.

     3. NON-WAIVER: Landlord may accept Tenant's payments without waiving any
rights under this Lease, including rights under a previously served notice of
default. No payment by Tenant or receipt by Landlord of a lesser amount than
any installment of rent due shall be deemed as other than payment on account of
the amount due. If Landlord accepts payments after serving a notice of default,
Landlord may nevertheless commence and pursue an action to enforce rights and
remedies under the previously served notice of default without giving Tenant
any further notice or demand. Furthermore, the Landlord's acceptance of rent
from the Tenant when the Tenant is holding over without express written consent
does not convert Tenant's Tenancy from a tenancy at sufferance to a month to
month tenancy. No waiver of any provision of this Lease shall be implied by any
failure of the waiving party to enforce any remedy for the violation of that


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<PAGE>   15
provision, even if that violation continues or is repeated. Any waiver by either
party of any provision of this Lease must be in writing. Such waiver shall
affect only the provision specified and only for the time and in the manner
stated in the writing. No delay or omission in the exercise of any right or
remedy by either party shall impair such right or remedy or be construed as a
waiver thereof by the waiving party. No act or conduct of Landlord, including,
without limitation, the acceptance of keys to the Premises, shall constitute
acceptance of the surrender of the Premises by Tenant before the Expiration
Date. Only written notice from Landlord to Tenant of acceptance shall constitute
such acceptance of surrender of the Premises. Landlord's consent to or approval
of any act by Tenant which requires Landlord's consent or approvals shall not be
deemed to waive or render unnecessary Landlord's consent to or approval of any
subsequent act by Tenant.

     F.   PERFORMANCE BY LANDLORD: If Tenant fails to perform any obligation
required under this Lease or by law or governmental regulation, Landlord in its
sole discretion may, without notice, without waiving any rights or remedies and
without releasing Tenant from its obligations hereunder, perform such
obligation, in which event Tenant shall pay Landlord as additional rent all
sums paid by Landlord in connection with such substitute performance, including
interest at the Agreed Interest Rate (as defined in Section 19.J) within ten
(10) days of Landlord's written notice for such payment.

     G.   HABITUAL DEFAULT: The provisions of Section 13 notwithstanding, the
Parties agree that if Tenant shall have defaulted in the performance of any
(but not necessarily the same) term or condition of this Lease for four or more
times during any twelve (12) month period during the Lease Term, then such
conduct shall, at the election of the Landlord, represent a separate event of
default which cannot be cured by Tenant. Tenant acknowledges that the purpose
of this provision is to prevent repetitive defaults by Tenant, which work a
hardship upon Landlord and deprive Landlord of Tenant's timely performance
under this Lease.

14.  LANDLORD'S LIABILITY:

     A.   LIMITATION ON LANDLORD'S LIABILITY: In the event of Landlord's
failure to perform any of its covenants or agreements under this Lease, Tenant
shall give Landlord written notice of such failure and shall give Landlord
thirty (30) days to cure or commence to cure such failure prior to any claim
for breach  or resultant damages, provided, however, that if the nature of the
default is such that it cannot reasonably be cured within the 30-day period,
Landlord shall not be deemed in default if it commences within such period to
cure, and thereafter diligently prosecutes the same to completion. In addition,
upon any such failure by Landlord, Tenant shall give notice by registered or
certified mail to any person or entity with a security interest in the Premises
("Mortgagee") that has provided Tenant with notice of its interest in the
Premises, and shall provide Mortgagee a reasonable opportunity to cure such
failure, including such time to obtain possession of the Premises by power of
sale or judicial foreclosure, if such should prove necessary to effectuate a
cure. Tenant agrees that each of the Mortgagees to whom this Lease has been
assigned is an expressed third-party beneficiary hereof. Tenant waives any
right under California Civil Code Section 1950.7 or any other present or future
law to the collection of any payment or deposit from Mortgagee or any purchaser
at a foreclosure sale of Mortgagee's interest unless Mortgagee or such
purchaser shall have actually received and not refunded the applicable payment
or deposit. Tenant further waives any right to terminate this Lease and to
vacate the Premises on Landlord's default under this Lease. Tenant's sole
remedy on Landlord's default is an action for damages or injunctive or
declaratory relief.

     B.   LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity, then (i) the obligations of Landlord shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals or representatives except to
the extent of their interest in the Premises. Tenant shall have recourse only to
the interest of Landlord in the Premises or for the satisfaction of the
obligations of Landlord and shall not have recourse to any other assets of
Landlord for the satisfaction of such obligations.

     C.   INDEMNIFICATION OF LANDLORD: As a material part of the consideration
rendered to Landlord, Tenant hereby waives all claims against Landlord (unless
due to Landlord's



                                    Page 12
<PAGE>   16
gross negligence or willful misconduct) for damages to goods, wares and
merchandise, and all other personal property in, upon or about said Premises and
for injuries to persons in or about said Premises, from any cause arising at any
time to the fullest extent permitted by law, and Tenant shall indemnify, defend
with counsel reasonably acceptable to Landlord and hold Landlord, and their
shareholders, directors, officers, trustees, employees, partners, affiliates and
agents from any claims, liabilities, costs or expenses incurred or suffered
arising from the use of occupancy of the Premises or any part of the Project by
Tenant or Tenant's Agents, the acts or omissions of Tenant or Tenant's Agents,
Tenant's breach of this Lease, or any damage or injury to person or property
from any cause, except to the extent caused by the willful misconduct or active
negligence of Landlord or from the failure of Tenant to keep the Premises in
good condition and repair as herein provided, except to the extent due to the
gross negligence or willful misconduct of Landlord. Further, in the event
Landlord is made party to any litigation due to the acts or omission of Tenant
and Tenant's Agents, Tenant will indemnify, defend (with counsel reasonably
acceptable to Landlord) and hold Landlord harmless from any such claim or
liability including Landlord's costs and expenses and reasonable attorney's fees
incurred in defending such claims.

15.  DESTRUCTION OF PREMISES:

     A.  LANDLORD'S OBLIGATION TO RESTORE: In the event of a destruction of the
Premises during the Lease Term Landlord shall repair the same to a similar
condition to that which existed prior to such destruction. Such destruction
shall not annul or void this Lease; however, Tenant shall be entitled to a
proportionate reduction of Base Monthly Rent while repairs are being made, such
proportionate reduction to be based upon the extent to which the repairs
interfere with Tenant's business in the Premises, as reasonably determined by
Landlord. In no event shall Landlord be required to replace or restore
Alterations, Tenant Improvements paid for by Tenant from sources other than the
Work Allowance or Tenant's fixtures or personal property. With respect to a
destruction which Landlord is obligated to repair or may elect to repair under
the terms of this Section, Tenant waives the provisions of Section 1932, and
Section 1933, Subdivision 4, of the Civil Code of the State of California, and
any other similarly enacted statute, and the provisions of this Section 15
shall govern in the case of such destruction.

     B.  LIMITATIONS ON LANDLORD'S RESTORATION OBLIGATION:  Notwithstanding
the provisions of Section 15.A, Landlord shall have no obligation to repair, or
restore the Premises if any of the following occur: (i) if the repairs cannot
be made in one hundred eighty (180) days from the date of receipt of all
governmental approvals necessary under the laws and regulations of State,
Federal, County or Municipal authorities, as reasonably determined by Landlord,
(ii) if the holder of the first deed of trust or mortgage encumbering the
Building elects not to permit the insurance proceeds payable upon damage or
destruction to be used for such repair or restoration, (iii) the damage or
destruction is not fully covered by the insurance maintained by Landlord,
(iv) the damage or destruction occurs in the last twenty-four (24) months of
the Lease Term, (v) Tenant is in default pursuant to the provisions of Section
13, or (vi) Tenant has vacated the Premises for more than ninety (90) days. In
any such event Landlord may elect either to (i) complete the repair or
restoration, or (ii) terminate this Lease by providing Tenant written notice of
its election within sixty (60) days following the damage or destruction.

16.  CONDEMNATION:  If any part of the Premises shall be taken for any public
or quasi-public use, under any statute or by right of eminent domain or
private purchase in lieu thereof, and only a part thereof remains which is
susceptible of occupation hereunder, this Lease shall, as to the part so taken,
terminate as of the day before title vests in the condemnor or purchaser
("Vesting Date") and Base Monthly Rent payable hereunder shall be adjusted so
that Tenant is required to pay for the remainder of the Lease Term only such
portion of Base Monthly Rent as the value of the part remaining after such
taking bears to the value of the entire Premises prior to such taking. Further,
in the event of such partial taking, Landlord shall have the option to
terminate this Lease as of the Vesting Date. If all of the Premises or such
part thereof be taken so that there does not remain a portion susceptible for
occupation hereunder, this Lease shall terminate on the Vesting Date. If part
or all of the Premises be taken, all compensation awarded upon such taking
shall go to Landlord, and Tenant shall have no claim thereto; except Landlord
shall cooperate with Tenant, without cost to Landlord, to recover compensation
for damage to or taking of any


                                    Page 13
<PAGE>   17
Alterations, Tenant Improvements paid for by Tenant from sources other than the
Work Allowance, or for Tenant's moving costs. Tenant hereby waives the
provisions of California Code of Civil Procedures Section 1265.130 and any
other similarly enacted statute, and the provisions of this Section 16 shall
govern in the case of a taking.

17.   ASSIGNMENT OR SUBLEASE:

      A. CONSENT BY LANDLORD: Except as specifically provided in this Section
17.E, Tenant may not assign, sublet, hypothecate, or allow a third party to use
the Premises without the express written consent of Landlord. In the event
Tenant desires to assign this Lease or any interest herein or sublet the
Premises or any part thereof, Tenant shall deliver to Landlord (i) executed
counterparts of any agreement and of all ancillary agreements with the proposed
assignee/subtenant, (ii) current financial statements of the transferee
covering the preceding three years, (iii) the nature of the proposed
transferee's business to be carried on in the Premises, (iv) a statement
outlining all consideration to be given on account of the Transfer, and (v) a
current financial statement of Tenant. Landlord may condition its approval of
any Transfer on receipt of a certification from both Tenant and the proposed
transferee of all consideration to be paid to Tenant in connection with such
Transfer. At Landlord's request, Tenant shall also provide additional
information reasonably required by Landlord to determine whether it will
consent to the proposed assignment or sublease. Landlord shall have a ten (10)
day period following receipt of all the foregoing within which to notify Tenant
in writing that Landlord elects to: (i) terminate this Lease in the event the
proposed sublease or assignment is for substantially all of space in the
Premises; (ii) permit Tenant to assign or sublet such space to the named
assignee/subtenant on the terms and conditions set forth in the notice; or
(iii) reasonably refuse consent. If Landlord should fail to notify Tenant in
writing of such election within the 10-day period, Landlord shall be deemed to
have elected option (iii) above. In the event Landlord elects option (i) above,
this Lease shall expire with respect to such part of the Premises on the date
upon which the proposed sublease or transfer was to commence, and from such
date forward, Base Monthly Rent and Tenant's Allocable Share of all other costs
and charges shall be adjusted based upon the proportion that the rentable area
of the Premises remaining bears to the total rentable area of the Building. In
the event Landlord elects option (ii) above, Landlord's written consent to the
proposed assignment or sublease shall not be unreasonably withheld, provided
and upon the condition that: (i) the proposed assignee or subtenant is engaged
in a business that is limited to the use expressly permitted under this Lease;
(ii) the proposed assignee or subtenant is a company with sufficient financial
worth and management ability to undertake the financial obligation of this
Lease and Landlord has been furnished with reasonable proof thereof; (iii) the
proposed assignment or sublease is in form reasonably satisfactory to Landlord;
(iv) Tenant reimburses Landlord on demand for any costs that may be incurred by
Landlord in connection with said assignment or sublease, including the
reasonable costs of making investigations as to the acceptability of the
proposed assignee or subtenant and legal costs incurred in connection with the
granting of any requested consent; and (v) Tenant shall not have advertised or
publicized in any way the availability of the Premises without prior notice to
Landlord. In the event all or any one of the foregoing conditions are not
satisfied, Landlord shall be considered to have acted reasonably if it
withholds its consent.

      B. ASSIGNMENT OR SUBLETTING CONSIDERATION: Any rent or other economic
consideration realized by Tenant under any sublease and assignment, in excess
of the Base Monthly Rent payable hereunder and reasonable subletting and
assignment costs, shall be divided and paid fifty percent (50%) to Landlord and
fifty percent (50%) to Tenant. Tenant's obligation to pay over Landlord's
portion of the consideration constitutes an obligation for additional rent
hereunder. The above provisions relating to Landlord's right to terminate the
Lease and relating to the allocation of excess rent are independently
negotiated terms of the Lease which constitute a material inducement for the
Landlord to enter into the Lease, and are agreed by the Parties to be
commercially reasonable. No assignment or subletting by Tenant shall relieve it
of any obligation under this Lease. Any assignment or subletting which
conflicts with the provisions hereof shall be void.

      C.    NO RELEASE: Any assignment or sublease shall be made only if and
shall not be effective until the assignee or subtenant shall



                                    Page 14
<PAGE>   18
execute, acknowledge, and deliver to Landlord an agreement, in form and
substance satisfactory to Landlord, whereby the assignee or subtenant shall
assume all the obligations of this Lease on the part of Tenant to be performed
or observed and shall be subject to all the covenants, agreements, terms,
provisions and conditions in this Lease. Notwithstanding any such sublease or
assignment and the acceptance of rent by Landlord from any subtenant or
assignee, Tenant and any guarantor shall remain fully liable for the payment of
Base Monthly Rent and additional rent due, and to become due hereunder, for the
performance of all the covenants, agreements, terms, provisions and conditions
contained in this Lease on the part of Tenant to be performed and for all acts
and omissions of any licensee, subtenant, assignee or any other person claiming
under or through any subtenant or assignee that shall be in violation of any of
the terms and conditions of this Lease, and any such violation shall be deemed
a violation by Tenant. Tenant shall indemnify, defend and hold Landlord
harmless from and against all losses, liabilities, damages, costs and expenses
(including reasonable attorney fees) resulting from any claims that may be made
against Landlord by the proposed assignee or subtenant or by any real estate
brokers or other persons claiming compensation in connection with the proposed
assignment or sublease.

     D.   REORGANIZATION OF TENANT: The provisions of this Section 17.D shall
apply if Tenant is a corporation and: (i) there is a dissolution, merger,
consolidation, or other reorganization of or affecting Tenant, where Tenant is
not the surviving corporation, or (ii) there is a sale or transfer to one
person or entity (or to any group of related persons or entities) of stock
possessing more than 50% of the total combined voting power of all classes of
Tenant's capital stock issued, outstanding and entitled to vote for the
election of directors, and after such sale or transfer of stock Tenant's stock
is no longer publicly traded. In a transaction under clause (i) the surviving
corporation shall promptly execute and deliver to Landlord an agreement in form
reasonably satisfactory to Landlord under which such surviving corporation
assumes the obligations of Tenant hereunder, and in a transaction under clause
(ii) the transferee or buyer shall promptly execute and deliver to Landlord an
agreement in form reasonably satisfactory to Landlord under which such
transferee or buyer assumes the obligations of Tenant under the Lease.

     E.   PERMITTED TRANSFERS: Notwithstanding anything contained in this
Section 17, so long as Tenant otherwise complies with the provisions of this
Article, Tenant may enter into any of the following transfers (a "Permitted
Transfer") without Landlord's prior consent, and Landlord shall not be
entitled to terminate the Lease or to receive any part of any subrent resulting
therefrom that would otherwise be due pursuant to Sections 17.A and 17.B. Tenant
may sublease all or part of the Premises or assign its interest in this Lease
to (i) any corporation which controls, is controlled by, or is under common
control with the original Tenant to this Lease by means of an ownership
interest of more than 50% of the total combined voting power of all classes of
Tenant's capital stock issued, outstanding and entitled to vote; (ii) a
corporation which results from a merger, consolidation or other reorganization
in which Tenant is not the surviving corporation, so long as the surviving
corporation has a net worth at the time of such assignment that is equal to or
greater than the net worth of Tenant immediately prior to such transaction; and
(iii) a corporation which purchases or otherwise acquires all or substantially
all of the assets of Tenant so long as such acquiring corporation has a net
worth at the time of such assignment that is equal to or greater than the net
worth of Tenant immediately prior to such transaction.

     F.   EFFECT OF DEFAULT: In the event of Tenant's default, Tenant hereby
assigns all rents due from any assignment or subletting to Landlord as security
for performance of its obligations under this Lease, and Landlord may collect
such rents as Tenant's Attorney-in-Fact, except that Tenant may collect such
rents unless a default occurs as described in Section 13 above. A termination
if the Lease due to Tenant's default shall not automatically terminate an
assignment or sublease then in existence; rather at Landlord's election, such
assignment or sublease shall survive the Lease termination, the assignee or
subtenant shall attorn to Landlord, and Landlord shall undertake the
obligations of Tenant under the sublease or assignment; except that Landlord
shall not be liable for prepaid rent, security deposits or other defaults of
Tenant to the subtenant or assignee, or for any acts or omissions of Tenant and
Tenant's Agents.

     G.   CONVEYANCE BY LANDLORD: As used in this Lease, the term "Landlord" is
defined only



                                    Page 15


<PAGE>   19
as the owner for the time being of the Premises, so that in the event of any
sale or other conveyance of the Premises or in the event of a master lease of
the Premises, Landlord shall be entirely free and relieved of all its covenants
and obligations hereunder, and it shall be deemed and construed, without
further agreement between the Parties and the purchaser at any such sale or the
master tenant of the Premises, that the purchaser or master tenant of the
Premises has assumed and agreed to carry out any and all covenants and
obligations of Landlord hereunder. Such transferor shall transfer and deliver
Tenant's security deposit to the purchaser at any such sale or the master
tenant of the Premises, and thereupon the transferor shall be discharged from
any further liability in reference thereto.

     F. SUCCESSORS AND ASSIGNS: Subject to the provisions of this Section 17,
the covenants and conditions of this Lease shall apply to and bind the heirs,
successors, executors, administrators and assigns of all Parties hereto; and all
Parties hereto comprising Tenant shall be jointly and severally liable
hereunder.

18.  This Section intentionally left blank.:

19.  GENERAL PROVISIONS:

     A. ATTORNEY'S FEES: In the event a suit or alternative form of dispute
resolution is brought for the possession of the Premises, for the recovery of
any sum due hereunder, to interpret the Lease, or because of the breach of any
other covenant hereon; then the losing party shall pay to the prevailing party
reasonable attorney's fees including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be deemed to
have accrued on the commencement of such action. The prevailing party shall
also be entitled to recover all costs and expenses including reasonable
attorney's fees incurred in enforcing any judgment or award against the other
party. The foregoing provision relating to post-judgment costs is severable
from all other provisions of this Lease.

     B. AUTHORITY OF PARTIES: Tenant represents and warrants that it is duly
formed and in good standing, and is duly authorized to execute and deliver this
Lease on behalf of said corporation, in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with
the by-laws of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms. At Landlord's request, Tenant shall
provide Landlord with corporate resolutions or other proof in a form acceptable
to Landlord, authorizing the execution of the Lease.

     C. BROKERS: Tenant acknowledges that no real estate commission is due from,
or payable by Landlord with respect to this transaction, and Tenant agrees to
indemnify, defend and hold Landlord harmless against any claim, cost, liability
or cause of action asserted by any broker or finder claiming through Tenant.

     D. CHOICE OF LAW: This Lease shall be governed by and construed in
accordance with California law. Except as provided in Section 19.E, venue shall
be Santa Clara County.

     E. DISPUTE RESOLUTION: Landlord and Tenant and any other party that may
become a part to this Lease or be deemed a party to this Lease including any
subtenants agree that, except for any claim by Landlord for unlawful detainer
or any claim within the jurisdiction of the small claims court (which small
claims court shall be the sole court of competent jurisdiction), any
controversy, dispute, or claim of whatever nature arising out of, in connection
with or in relation to the interpretation, performance or breach of this Lease,
including any claim based on contract, tort, or statute, shall be resolved at
the request of any party to this agreement through a two-step dispute
resolution process administered by J.A.M.S. or another judicial mediation
service mutually acceptable to the parties located in Santa Clara County,
California. The dispute resolution process shall involve first, mediation,
followed, if necessary, by final and binding arbitration administered by and in
accordance with the then existing rules and practices of J.A.M.S. or other
judicial mediation service selected. In the event of any dispute subject to
this provision, either party may initiate a request for mediation and the
parties shall use reasonable efforts to promptly select a J.A.M.S. mediator and
commence the mediation. In the event the parties are not able to agree on a
mediator within thirty (30) days, J.A.M.S. or another judicial mediation
service mutually acceptable to the parties shall appoint a mediator. The
mediation shall be confidential and in accordance with California Evidence Code
Section 1119 et. seq. The mediation shall be held in Santa Clara County,
California and in accordance with the existing rules and practice

                                    Page 16





<PAGE>   20
of J. A. M. S. (or other judicial and mediation service selected). The parties
shall use reasonable efforts to conclude the mediation within sixty (60) days
of the date of either party's request for mediation. The mediation shall be
held prior to any arbitration or court action (other than a claim by Landlord
for unlawful detainer or any claim within the jurisdiction of the small claims
court which are not subject to this mediation/arbitration provision and may be
filed directly with a court of competent jurisdiction). Should the prevailing
party in any dispute subject to this Section 19.E attempt an arbitration or a
court action before attempting to mediate, the prevailing party shall not be
entitled to attorney's fees that might otherwise be available to them in a court
action or arbitration and in addition thereto, the party who is determined by
the arbitrator to have resisted mediation, shall be sanctioned by the
arbitrator or judge.

IF A MEDIATION IS CONDUCTED BUT IS UNSUCCESSFUL, IT SHALL BE FOLLOWED BY FINAL
AND BINDING ARBITRATION ADMINISTERED BY AND IN ACCORDANCE WITH THE THEN
EXISTING RULES AND PRACTICES OF J.A.M.S. OR THE OTHER JUDICIAL AND MEDIATION
SERVICE SELECTED, AND JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATOR(S) MAY
BE ENTERED BY ANY STATE OR FEDERAL COURT HAVING JURISDICTION THEREOF AS PROVIDED
BY CALIFORNIA CODE OF CIVIL PROCEDURES SECTION 1280 ET. SEQ, AS SAID STATUTES
THEN APPEAR, INCLUDING ANY AMENDMENTS TO SAID STATUTES OR SUCCESSORS TO SAID
STATUTES OR AMENDED STATUTES, EXCEPT THAT IN NO EVENT SHALL THE PARTIES BE
ENTITLED TO PROPOUND INTERROGATORIES OR REQUEST FOR ADMISSIONS DURING THE
ARBITRATION PROCESS. THE ARBITRATOR SHALL BE A RETIRED JUDGE OR A LICENSED
CALIFORNIA ATTORNEY. THE VENUE FOR ANY SUCH ARBITRATION OR MEDIATION SHALL BE
IN SANTA CLARA COUNTY, CALIFORNIA.

NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA
LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES" PROVISION.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU
MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.

LANDLORD:  /s/ [Signature Illegible]          TENANT:
          --------------------------                 ------------------

     F.  ENTIRE AGREEMENT: This Lease and the exhibits attached hereto contains
all of the agreements and conditions made between the Parties hereto and may
not be modified orally or in any other manner other than by written agreement
signed by all parties hereto or their respective successors in interest. This
Lease supersedes and revokes all previous negotiations, letters of intent,
lease proposals, brochures, warranties, and understandings, whether oral or in
writing, between the parties or their respective representatives or any other
person purporting to represent Landlord or Tenant.

     G.  ENTRY BY LANDLORD: Upon prior notice to Tenant and subject to Tenant's
reasonable security regulations, Tenant shall permit Landlord and his agents to
enter into and upon the Premises at all reasonable times, and without any rent
abatement or reduction or any liability to Tenant for any loss of occupation or
quiet enjoyment of the Premises thereby occasioned, for the following purposes:
(i) inspecting and maintaining the Premises; (ii) making repairs, alterations
or additions to the Premises; (iii) erecting additional building(s) and
improvements on the land where the Premises are situated or on adjacent land
owned by Landlord; (iv) performing any obligations of



                                    Page 17
<PAGE>   21
Landlord under the Lease including remediation of Hazardous Materials if
determined to be the responsibility of Landlord, (v) posting and keeping posted
thereon notices of non-responsibility for any construction, alteration or repair
thereof, as required or permitted by any law, and (vi) showing the Premises to
Landlord's or the Master Landlord's existing or potential successors, purchaser,
tenants and lenders. Tenant shall permit Landlord and his agents, at any time
within one hundred eighty (180) days prior to the Expiration Date (or at any
time during the Lease if Tenant is in default hereunder), to place upon the
Premises "For Lease" signs and exhibit the Premises to real estate brokers and
prospective tenants at reasonable hours, with reasonable notice.

     H. ESTOPPEL CERTIFICATES: At any time during the Lease Term, Tenant shall,
within ten (10) business days following written notice from Landlord, execute
and deliver to Landlord a written statement certifying, if true, the following:
(i) that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification); (ii) the date to which rent and other
charges are paid in advance, if any; (iii) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on Landlord's part hereunder (or
specifying such defaults if they are claimed); and (iv) such other information
as Landlord may reasonably request. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of Landlord's interest
in the Premises. Tenant's failure to deliver such statement within such time
shall be conclusive upon the Tenant that this Lease is in full force and effect
without modification, except as may be represented by Landlord, and that there
are no uncured defaults in Landlord's performance. Tenant agrees to provide,
within five (5) days of Landlord's request, Tenant's most recent three (3) years
of unaudited financial statements for Landlord's use in financing or sale of the
Premises or Landlord's interest therein.

     I.   EXHIBITS: All exhibits referred to are attached to this Lease and
incorporated by reference.

     J.   INTEREST: All rent due hereunder, if not paid when due, shall bear
interest at the rate of the Reference Rate published by Bank of America, San
Francisco Branch, plus two percent (2%) per annum from that date until paid in
full ("Agreed Interest Rate"). This provision shall survive the expiration or
sooner termination of the Lease. Despite any other provision of this Lease, the
total liability for interest payments shall not exceed the limits, if any,
imposed by the usury laws of the State of California. Any interest paid in
excess of those limits shall be refunded to Tenant by application of the amount
of excess interest paid against any sums outstanding in any order that Landlord
requires. If the amount of excess interest paid exceeds the sums outstanding,
the portion exceeding those sums shall be refunded in cash to Tenant by
Landlord. To ascertain whether any interest payable exceeds the limits imposed,
any non-principal payment (including late charges) shall be considered to the
extent permitted by law to be an expense or a fee, premium, or penalty rather
than interest.

     K.   MODIFICATIONS REQUIRED BY LENDER: If any lender of Landlord or ground
lessor of the Premises requires a modification of this Lease that will not
increase Tenant's cost or expense or materially or adversely change Tenant's
rights and obligations, this Lease shall be so modified and Tenant shall execute
whatever documents are required and deliver them to Landlord within ten (10)
days after the request.

     L.   NO PRESUMPTION AGAINST DRAFTER: Landlord and Tenant understand, agree
and acknowledge that this Lease has been freely negotiated by both Parties; and
that in any controversy, dispute, or contest over the meaning, interpretation,
validity, or enforceability of this Lease or any of its terms or conditions,
there shall be no inference, presumption, or conclusion drawn whatsoever against
either party by virtue of that party having drafted this Lease or any portion
thereof.

     M.   NOTICES: All notices, demands, requests, or consents required to be
given under this Lease shall be sent in writing by U.S. certified mail, return
receipt requested, or by personal delivery addressed to the party to be notified
at the address for such party specified in Section 1 of this Lease, or to such
other place as the party to be notified may from time to time designate by at
least fifteen (15) days prior notice to the notifying party. When this Lease
requires service of a notice, that notice shall replace rather than supplement
any equivalent or similar statutory notice, including any notices required by
Code of Civil Procedure Section



                                    Page 18

<PAGE>   22
1161 or any similar or successor statute. When a statute requires service of a
notice in a particular manner, service of that notice (or a similar notice
required by this Lease) shall replace and satisfy the statutory
service-of-notice procedures, including those required by Code of Civil
Procedure Section 1162 or any similar or successor statute.

     N. PROPERTY MANAGEMENT: In addition, Tenant agrees to pay Landlord along
with the expenses to be reimbursed by Tenant a monthly fee for management
services rendered by either Landlord or a third party manager engaged by
Landlord (which may be a party affiliated with Landlord), in the amount of three
percent (3%) of the Base Monthly Rent.

     O. RENT: All monetary sums due from Tenant to Landlord under this Lease,
including, without limitation those referred to as "additional rent", shall be
deemed as rent.

     P. REPRESENTATIONS: Tenant acknowledges that neither Landlord nor any of
its employees or agents have made any agreements, representations, warranties
or promises with respect to the Premises or with respect to present or future
rents, expenses, operations, tenancies or any other matter. Except as herein
expressly set forth herein, Tenant relied on no statement of Landlord or its
employees or agents for that purpose.

     Q. RIGHTS AND REMEDIES: Subject to Section 14 above, all rights and
remedies hereunder are cumulative and not alternative to the extent permitted
by law, and are in addition to all other rights and remedies in law and in
equity.

     R. SEVERABILITY: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder of
the Lease shall not be invalidated thereby but shall be enforceable in
accordance with its terms, omitting the invalid or unenforceable term.

     S. SUBMISSION OF LEASE: Submission of this document for examination or
signature by the parties does not constitute an option or offer to lease the
Premises on the terms in this document or a reservation of the Premises in
favor of Tenant. This document is not effective as a lease or otherwise until
executed and delivered by both Landlord and Tenant.

     T. SUBORDINATION: This Lease is subject and subordinate to ground and
underlying leases, mortgages and deeds of trust (collectively "encumbrances")
which may now affect the Premises, to any covenants, conditions or restrictions
of record, and to all renewals, modifications, consolidations, replacements and
extensions thereof; provided, however, if the holder or holders of any such
Encumbrance ("Holder") require that this Lease be prior and superior thereto,
within seven (7) days after written request of Landlord to Tenant, Tenant shall
execute, have acknowledged and deliver all documents or instruments, in the
form presented to Tenant, which Landlord or Holder deems necessary or
desirable for such purposes. Landlord shall have the right to cause this Lease
to be and become and remain subject and subordinate to any and all Encumbrances
which are now or may hereafter be executed covering the Premises or any
renewals, modifications, consolidations, replacements or extensions thereof,
for the full amount of all advances made or to be made thereunder and without
regard to the time or character of such advances, together with interest
thereon and subject to all the terms and provisions thereof; provided only,
that in the event of termination of any such lease or upon the foreclosure of
any such mortgage or deed of trust, Holder agrees to recognize Tenant's rights
under this Lease as long as Tenant is not then in default and continues to pay
Base Monthly Rent and additional rent and observes and performs all required
provisions of this Lease. Within ten (10) days after Landlord's written
request, Tenant shall execute any documents required by Landlord or the Holder
to make this Lease subordinate to any lien of the Encumbrance. If Tenant fails
to do so, then in addition to such failure constituting a default by Tenant, it
shall be deemed that this Lease is so subordinated to such Encumbrance.
Notwithstanding anything to the contrary in this Section, Tenant hereby attorns
and agrees to attorn to any entity purchasing or otherwise acquiring the
Premises at any sale or other proceeding or pursuant to the exercise of any
other rights, powers or remedies under such encumbrance.

     U. SURVIVAL OF INDEMNITIES: All indemnification, defense, and hold
harmless obligations of Landlord and Tenant under this Lease shall survive the
expiration or sooner termination of the Lease.

     V. TIME: Time is of the essence


                                    Page 19
<PAGE>   23
hereunder.

      W. TRANSPORTATION DEMAND MANAGEMENT PROGRAMS: Should a government
agency or municipality require Landlord to institute TDM (Transportation Demand
Management) facilities and/or programs, Tenant agrees that the cost of TDM
imposed facilities and programs required on the Premises, including but not
limited to employee showers, lockers, cafeteria, or lunchroom facilities, shall
be paid by Tenant. Further, any ongoing costs or expenses associated with a TDM
program which are required for the Premises and not provided by Tenant, such as
an on-site TDM coordinator, shall be provided by Landlord with such costs being
included as additional rent and reimbursed to Landlord by Tenant within thirty
(30) days after demand. If TDM facilities and programs are instituted on a
Project wide basis, Tenant shall pay its proportionate share of such costs in
accordance with Section 8 above.

      X. WAIVER OF RIGHT TO JURY TRIAL: Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim, counterclaim,
cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in
any way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant's use or occupancy of the Premises, including any claim or injury or
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.



                                    Page 20
<PAGE>   24
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and
year first above written.

LANDLORD: The Sobrato Group,              TENANT: Telocity, Inc.
a California Limited Partnership          a California Corporation


By: [ILLEGIBLE]                           *By: [ILLEGIBLE]
   -----------------------------              -----------------------------

Its: 12/17/99                             Its: Executive Vice President
    ----------------------------              -----------------------------

                                          *By: Matt Stepovich
                                              -----------------------------

                                          Its: Secretary, VP Legal Affairs
                                              -----------------------------

*NOTE: This lease must be signed by two (2) officers of such corporation: one
being the chairman of the board, the president, or a vice president, and the
other being the secretary, an assistant secretary, the chief financial officer
or an assistant treasurer. If one (1) individual is signing in two (2) of the
foregoing capacities, that individual must sign twice; once as one officer and
again as the other officer and in such event, Tenant must deliver to Landlord a
certified copy of a corporate resolution authorizing the signatory to execute
this Lease.



                                    Page 21
<PAGE>   25
                                  EXHIBIT "A"



                                     [MAP]
<PAGE>   26
                           [CISCO SYSTEMS LETTERHEAD]



December 7, 1999


Mr. Peter Olson
CTO
Telocity, Inc.
10355 N. De Anza Blvd.
Cupertino, CA 95014

RE:  Repair of Heating, Ventilation and Air
     Conditioning System ("HVAC System")
     Servicing 490 Race Street, San Jose, California

Dear Mr. Olson:

In connection with Telocity Inc.'s agreement to lease the premises from
Sobrato Group, Cisco Systems, Inc. shall, at its sole cost and expense and
within sixty (60) days of the Effective Date of the Lease Termination Agreement
dated December __, 1999 between Cisco Systems, Inc. and Sobrato Group, make all
repairs required to put the HVAC System in good working order and repair, as
reasonably determined by Cisco.

Sincerely,

/s/  ELLEN JAMASON
---------------------------------
Ellen Jamason
Director of Real Estate Worldwide
Cisco Systems, Inc.

<PAGE>   27
                             [TELOCITY LETTERHEAD]


December 16, 1999


Mr. Phil Taylor
Sobrato Development
10600 N. De Anza Blvd.
Suite 200
Cupertino, CA 95014


RE: Security Deposit

Dear Phil:

To expedite the execution of the lease, we are going to provide a cash Security
Deposit of $700,000.00. Please be advised that we will trade out the cash
deposit for a letter of credit ("LC") in the next 60 days, as provided in the
Lease.

Please sign below, acknowledging that this arrangement is acceptable and that
upon presentation of the LC you will return the above deposit immediately,
without interest. Once this letter is signed, we will provide you with the cash
deposit.

Sincerely,

/s/ MICHAEL BUERGER
------------------------
Michael Buerger
Controller
Telocity, Inc

cc: Sonia Colgan
Matt Stepovich
Jeff Houston


Acknowledged:

/s/ PHIL TAYLOR
-----------------------
Phil Taylor
Sobrato Development