<PAGE>   1


                                                                    EXHIBIT 10.6

Recording requested by and when recorded return to:

Thomas Y. Coleman, Esq.
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California  94111
===============================================================================


                           FACILITY 2 LEASE AGREEMENT

              CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF RENTS,

                      SECURITY AGREEMENT AND FIXTURE FILING


                                     BETWEEN


                             NOVELLUS SYSTEMS, INC.


                                       AND


                             LEASE PLAN U.S.A., INC.






                                OCTOBER 15, 1997


===============================================================================
<PAGE>   2
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>           <C>                                                                         <C>
SECTION 1.        INTERPRETATION............................................................2

        1.01.  Definitions..................................................................2
        1.02.  Rules of Construction........................................................2

SECTION 2.        BASIC PROVISIONS..........................................................2

        2.01.  Lease of the Facility 1 Property.............................................2
        2.02.  Term.........................................................................2
        2.03.  Rent.........................................................................3
        2.04.  Use..........................................................................5
        2.05.  As Is Lease..................................................................5
        2.06.  Nature of Transaction........................................................5
        2.07.  Security, Etc................................................................6

SECTION 3.        OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS............................8

        3.01.  Maintenance, Repair, Etc.....................................................8
        3.02.  Risk of Loss.................................................................8
        3.03.  Insurance....................................................................8
        3.04.  Casualty and Condemnation...................................................11
        3.05.  Taxes.......................................................................14
        3.06.  Environmental Matters.......................................................14
        3.07.  Liens, Easements, Etc.......................................................16
        3.08.  Subletting..................................................................17
        3.09.  Utility Charges.............................................................17
        3.10.  Removal of Facility 1 Property..............................................17
        3.11.  Compliance with Governmental Rules and Insurance Requirements...............17
        3.12.  Permitted Contests..........................................................18
        3.13.  Lessor Obligations; Right to Perform Lessee Obligations.....................18
        3.14.  Inspection Rights...........................................................18

SECTION 4.        EXPIRATION DATE..........................................................19

        4.01.  Termination by Lessee Prior to Scheduled Expiration Date....................19
        4.02.  Surrender of Facility 1 Property............................................19
        4.03.  Holding Over................................................................19

SECTION 5.        DEFAULT..................................................................19

        5.01.  Events of Default...........................................................19
        5.02.  General Remedies............................................................22
        5.03.  Lease Remedies..............................................................22
        5.04.  Loan Remedies...............................................................23
        5.05.  Remedies Cumulative.........................................................26
        5.06.  No Cure or Waiver...........................................................26
        5.07.  Exercise of Rights and Remedies.............................................27

                                        i
</TABLE>
<PAGE>   3
<TABLE>
<S>           <C>                                                                         <C>
SECTION 6.        MISCELLANEOUS............................................................27

        6.01.  Notices.....................................................................27
        6.02.  Waivers; Amendments.........................................................27
        6.03.  Successors and Assigns......................................................27
        6.04.  No Third Party Rights.......................................................27
        6.05.  Partial Invalidity..........................................................27
        6.06.  Governing Law...............................................................27
        6.07.  Counterparts................................................................28
        6.08.  Nature of Lessee's Obligations..............................................28
</TABLE>

                                       ii
<PAGE>   4

                                  FACILITY 2 LEASE AGREEMENT
                     CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF RENTS,
                            SECURITY AGREEMENT AND FIXTURE FILING


        THIS LEASE AGREEMENT, CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this "Agreement" herein), dated as
of October 15, 1997 is entered into by and between:

                (1) NOVELLUS SYSTEMS, INC., a California corporation ("Lessee");
        and

                (2) LEASE PLAN U.S.A., INC., a Georgia corporation ("Lessor").


                                           RECITALS

        A. Lessee has requested Lessor and the Persons which are "Participants"
under the Participation Agreement referred to in Recital B below (such Persons
to be referred to collectively as the "Participants") to provide to Lessee a
certain lease facility pursuant to which:

                (1) Lessor would (a) purchase the improvements to certain land
        and certain personal property designated by Lessee, (b) lease such
        property to Lessee as and when acquired by Lessor, (c) appoint Lessee as
        Lessor's agent to make certain improvements to such property, (d) make
        advances to finance such improvements and to pay certain related
        expenses and (e) grant to Lessee the right to purchase such parcels of
        property; and

                (2) The Participants would participate in such lease facility by
        (a) funding the purchase prices and other advances to be made by Lessor
        and (b) acquiring participation interests in the rental and certain
        other payments to be made by Lessee.

        B. Pursuant to a Participation Agreement dated of even date herewith
(the "Participation Agreement") among Lessee, Lessor, the Participants and ABN
AMRO Bank N.V., as agent for the Participants (in such capacity, "Agent"),
Lessor and the Participants have agreed to provide such lease facility upon the
terms and subject to the conditions set forth therein, including without
limitation the execution and delivery of this Agreement.


                                    AGREEMENT

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

<PAGE>   5


SECTION 1.            INTERPRETATION.

        1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in this Agreement or any other Operative
Document, shall have the respective meaning given to that term in such Schedule
1.01 or in the provision of this Agreement or other document, instrument or
agreement referenced in such Schedule 1.01.

        1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 to the Participation Agreement shall apply to this Agreement
and the other Operative Documents.


SECTION 2.            BASIC PROVISIONS.

        2.01. Lease of the Facility 2 Property. Subject to the acquisition
thereof by Lessor pursuant to the Participation Agreement and applicable
Acquisition Agreements, Lessor agrees to lease to Lessee and Lessee agrees to
lease from Lessor the following property (the "Facility 2 Property") to the
extent of Lessor's estate, right, title and interest therein, thereto or
thereunder:

                (a) All Improvements to the lots, pieces, tracts and parcels of
        land described in Exhibit A (the "Facility 2 Improvements"), but
        excluding such land;

                (b) All Appurtenant Rights;

                (c) All Related Goods (including those described in Exhibit B
        and in each Exhibit B Supplement), Related Permits and Related
        Agreements; and

                (d) All accessions and accretions to and replacements and
        substitutions for the foregoing.

        2.02.         Term.

                (a) Original Term. The original term of this Agreement shall
        commence on the Closing Date (the "Commencement Date") and shall end on
        the first Business Day of October, 2002 (such date as it may be extended
        pursuant to Subparagraph 2.02(b) to be referred to as the "Scheduled
        Expiration Date").

                (b) Extensions. Lessee may request Lessor to extend the
        Scheduled Expiration Date in effect at any time for an additional period
        of three (3) years, as provided in Subparagraph 2.09(b) of the
        Participation Agreement. If Lessor and each Participant consents to such
        a request in accordance with such provision, the definition of
        "Scheduled Expiration Date" set forth in Subparagraph 2.02(a) shall be
        deemed extended to the date which is the first business day of October,
        2005. Lessee acknowledges that neither Lessor nor any Participant has
        any obligation or commitment (either express or implied) to extend, or
        consent to the extension of, the Scheduled Expiration Date at any time.

                                       2
<PAGE>   6
        2.03. Rent.

                (a) Base Rent.

                        (i) Lessee shall pay as base rent hereunder ("Base
                Rent") for each Rental Period (or portion thereof) an amount
                equal to the sum of the Interest Component and Principal
                Component for such Rental Period determined as follows:

                                (A) "Interest Component" shall mean, with
                        respect to any Rental Period, the sum of the following:

                                        (1) The product of (x) the Rental Rate
                                for such Rental Period, times (y) the
                                Outstanding Lease Amount under Facility 2 on the
                                first day of such Rental Period (which shall
                                include any Advance under Facility 1 made on the
                                first day of such Rental Period), times (z) a
                                fraction, the numerator of which is the number
                                of days in such Rental Period and the
                                denominator of which is 360; and

                                        (2) If Lessor makes an Advance under
                                Facility 2 (other than any Advance on the
                                Closing Date) during such Rental Period on any
                                day other than the first day of such Rental
                                Period, the product of (x) the LIBOR Rental Rate
                                for the Stub Period if the Stub Period is
                                greater than seven (7) days or the Alternate
                                Rental Period for the Stub Period if the Stub
                                Period is Seven (7) days or less, times (y) the
                                amount of such Advance, times (z) a fraction,
                                the numerator of which is the number of days in
                                such Stub Period and the denominator of which is
                                360.

                        If the Rental Rate shall change during any Rental
                        Period, the Rental Rate for such Rental Period shall be
                        the weighted average of the Rental Rates in effect from
                        time to time during such Rental Period.

                                (B) "Principal Component" shall mean:

                                        (1) With respect to each Rental Period
                                ending on or prior to the Commitment Termination
                                Date, zero Dollars ($0.00); and

                                        (2) With respect to each Rental Period
                                beginning on or after the Commitment Termination
                                Date, an amount equal to the product of (y)
                                $90,208.33 times (z) the number of months (or
                                fraction thereof) in such Rental Period

                                       3
<PAGE>   7
                                (ii) The Term shall consist of the following
                        rental periods (individually, a "Rental Period"):

                                        (A) The period which begins on the
                                Commencement Date and ends on the first Business
                                Day in the first calendar month immediately
                                following the month in which the Commencement
                                Date occurs;

                                        (B) Each successive period thereafter
                                which begins on the last day of the immediately
                                preceding Rental Period and ends one (1) month
                                thereafter on the first Business Day of a
                                calendar month through and including the
                                Commitment Termination Date; and

                                        (C) Each successive period thereafter
                                which begins on the last day of the immediately
                                preceding Rental Period and ends one (1), two
                                (2), three (3) or six (6) months thereafter, as
                                determined in accordance with this clause (ii),
                                on the first Business Day of a calendar month
                                through and including the Scheduled Expiration
                                Date. 

                        Lessee may select a Rental Period of one (1), two (2),
                        three (3) or six (6) months for the Rental Period which
                        begins on the Commitment Termination Date or for any
                        Rental Period thereafter by delivering to Lessor, at
                        least three (3) Business Days prior to the first day of
                        such Rental Period, a written notice of such selection
                        (a "Notice of Rental Period Selection"); provided,
                        however, that (1) each Rental Period shall begin and end
                        on the first Business Day of a calendar month, (2) no
                        Rental Period shall end after the Scheduled Expiration
                        Date, (3) no Rental Period shall be longer than one (1)
                        month if a Default has occurred and is continuing on the
                        date three (3) Business Days prior to the first day of
                        such Rental Period and (4) each Rental Period for which
                        Lessee fails to make a selection in accordance with this
                        clause (ii) shall be one (1) month. Each Notice of
                        Rental Period Selection shall be delivered by
                        first-class mail or facsimile as required by
                        Subparagraph 2.02(a) and Paragraph 7.01 of the
                        Participation Agreement; provided, however, that Lessee
                        shall promptly deliver the original of any Notice of
                        Rental Period Selection initially delivered by
                        facsimile.

                                (iii) The rental rate for each Rental Period
                        ("Rental Rate") shall be the LIBOR Rental Rate for such
                        Rental Period, except as follows:

                                        (A) If the Commencement Date is not the
                                first Business Day of a month, the Rental Rate
                                for the first Rental Period (which begins on the
                                Commencement Date) shall be the LIBOR Rental
                                Rate for the Stub Period for the Acquisition
                                Advance made on the Commencement Date if such
                                Stub Period is greater than seven (7) days or
                                the Alternate Rental Rate for such Stub Period
                                if such Stub Period is seven (7) days or less;

                                        (B) The Rental Rate applicable during
                                any Stub Period to that portion of the
                                Outstanding Lease Amount under Facility 2 equal
                                to the


                                       4
<PAGE>   8
                                Acquisition Advance made on the first day of
                                such Stub Period shall be the LIBOR Rental Rate
                                for such Stub Period if such Stub Period is
                                greater than seven (7) days or the Alternate
                                Rental Rate for such Stub Period if such Stub
                                Period is seven (7) days or less: and

                                        (C) The Rental Rate for any Rental
                                Period (or portion thereof) during which the
                                LIBOR Rental Rate is unavailable pursuant to
                                Subparagraph 2.12(a) or Subparagraph 2.12(b) of
                                the Participation Agreement shall be the
                                Alternate Rental Rate. 

                                (iv) Lessee shall pay Base Rent in arrears on
                        (A) the last day of each Rental Period and, in the case
                        of any Rental Period which exceeds three (3) months,
                        each day occurring every three (3) months after the
                        first day of such Rental Period (individually, a
                        "Scheduled Rent Payment Date") and (B) the Expiration
                        Date.

                        (b) Supplemental Rent. Lessee shall pay as supplemental
                rent hereunder ("Supplemental Rent") all amounts (other than
                Base Rent, the purchase price payable by Lessee for any purchase
                of the Facility 2 Property by Lessee pursuant to the Facility 2
                Purchase Agreement and the Residual Value Guaranty Amount and
                Indemnity Amount payable under the Facility 2 Purchase
                Agreement) payable by Lessee under this Agreement and the other
                Operative Documents. Lessee shall pay all Supplemental Rent
                amounts on the dates specified in this Agreement and the other
                Operative Documents for the payment of such amounts or, if no
                date is specified for the payment of any such amount, upon the
                demand of Lessor or any other Person to whom such amount is
                payable.

        2.04. Use. Lessee may use the Facility 2 Property for office, research
and development, warehouse and manufacturing purposes, and for any other purpose
which is in compliance with applicable zoning laws and ordinances for the
Facility 2 Property.

        2.05. As Is Lease. Lessee has conducted, or will conduct from time to
time with regard to Facility 2 Property that may be added hereto after the date
hereof, all due diligence which it deems appropriate regarding the Facility 2
Property and agrees that no Lessor Party has any obligation to conduct any such
due diligence. Lessee is leasing the Facility 2 Property "as is, with all
faults" without any representation, warranty, indemnity or undertaking by any
Lessor Party regarding any aspect of the Facility 2 Property, including (a) the
condition of the Facility 2 Property (including any Improvements to the Facility
2 Property made prior to the Commencement Date or during the Term); (b) title to
the Facility 2 Property (including possession of the Facility 2 Property by any
Person or the existence of any Lien or any other right, title or interest in or
to any of the Facility 2 Property in favor of any Person); (c) the value,
habitability, usability, design, operation or fitness for use of the Facility 2
Property; (d) the availability or adequacy of utilities and other services to
the Facility 2 Property; (e) any latent, hidden or patent defect in the Facility
2 Property; (f) the zoning or status of the Facility 2 Property or any other
restrictions on the use of the Facility 2 Property; (g) the economics of the
Facility 2 Property; (h) any Casualty or Condemnation; or (i) the compliance of
the Facility 2 Property with any applicable Governmental Rule or Insurance
Requirement; provided, however,

                                       5
<PAGE>   9

that Lessor shall be obligated to remove Lessor Liens to the extent required in
Subparagraph 5.04(b) of the Participation Agreement. Without limiting the
generality of the foregoing, Lessee specifically waives any covenant of quiet
enjoyment except as otherwise provided in Subparagraph 5.04(b) of the
Participation Agreement.

        2.06. Nature of Transaction. As more fully provided in Paragraph 2.10 of
the Participation Agreement, Lessee and the Lessor Parties intend that the
transaction evidenced by this Agreement and the other Operative Documents
constitute an operating lease for accounting purposes and a loan secured by the
Facility 2 Property for all other purposes, including federal, state and local
income tax purposes and commercial, real estate and bankruptcy law purposes.

        2.07. Security, Etc. In order to secure the Lessee Obligations and
otherwise to assure the Lessor Parties the benefits hereof in the event that the
transaction evidenced by this Agreement and the other Operative Documents is,
pursuant to the intent of Lessee and the Lessor Parties, treated as a loan for
certain purposes, Lessee hereby makes the following grants and agrees as
follows:

                (a) Real Property Security. As security for the Lessee
        Obligations, Lessee hereby irrevocably and unconditionally grants,
        conveys, transfers and assigns to Lessor, in trust for the benefit of
        the Lessor Parties, with power of sale and right of entry and
        possession, all estate, right, title and interest of Lessee in the
        following Facility 2 Property, whether now owned or hereafter acquired,
        (collectively, the "Real Property Collateral"):

                        (i) The Facility 2 Improvements;

                        (ii) All Subleases and Issues and Profits to the extent
                that such Subleases and Issues and Profits constitute real
                property;

                        (iii) All Related Goods, Related Agreements and Related
                Permits to the extent that such Related Goods, Related
                Agreements and Related Permits constitute real property;

                        (iv) All other Facility 2 Property to the extent such
                property constitutes real Property; and

                        (v) All proceeds of the foregoing, including Casualty
                and Condemnation Proceeds.

                (b) Personal Property Security. As security for the Lessee
        Obligations, Lessee hereby irrevocably and unconditionally assigns and
        grants to Lessor, for the benefit of the Lessor Parties, a security
        interest in all estate, right, title and interest of Lessee in the
        following Property, whether now owned or hereafter acquired,
        (collectively, the "Personal Property Collateral"):

                        (i) All Subleases and Issues and Profits to the extent
                such Subleases and Issues and Profits constitute personal
                property;

                                       6
<PAGE>   10
                        (ii) All Related Goods, Related Agreements and Related
                Permits to the extent such Related Goods, Related Agreements and
                Related Permits constitutes personal property;

                        (iii) All deposit accounts, instruments, investment
                Facility 2 Property and monies held by any Lessor Party in
                connection with this Agreement or any other Operative Document
                (including any Repair and Restoration Account but excluding Cash
                Collateral held by any Lessor Party pursuant to the Cash
                Collateral Agreement);

                        (iv) All other Facility 2 Property to the extent such
                Facility 2 Property constitutes personal property;

                        (v) All proceeds of the foregoing, including Casualty
                and Condemnation Proceeds.

(Cash Collateral held by Lessor Parties pursuant to the Cash Collateral
Agreement secures only the Lessee Obligations under the Purchase Agreement.)
This Agreement constitutes a fixture filing for purposes of the California
Commercial Code with respect to the Related Goods which are or are to become
fixtures on the Facility 1 Land or Facility 2 Improvements.

        (c) Absolute Assignment of Subleases, Issues and Profits. Lessee hereby
irrevocably assigns to Lessor, for the benefit of the Lessor Parties, all of
Lessee's estate, right, title and interest in, to and under the Subleases and
the Issues and Profits, whether now owned or hereafter acquired. This is a
present and absolute assignment, not an assignment for security purposes only,
and Lessor's right to the Subleases and Issues and Profits is not contingent
upon, and may be exercised without possession of, the Facility 2 Property.

                (i) Until the occurrence of an Event of Default, Lessee shall
        have a revocable license to collect and retain the Issues and Profits as
        they become due. Upon the occurrence of an Event of Default, such
        license shall automatically terminate, and Lessor may collect and apply
        the Issues and Profits pursuant to Subparagraph 5.02(d) without further
        notice to Lessee or any other party and without taking possession of the
        Facility 2 Property. All Issues and Profits thereafter collected by
        Lessee shall be held by Lessee as trustee in a constructive trust for
        the benefit of Lessor. Lessee hereby irrevocably authorizes and directs
        the sublessees under the Subleases, without any need on their part to
        inquire as to whether an Event of Default has actually occurred or is
        then existing, to rely upon and comply with any notice or demand by
        Lessor for the payment to Lessor of any rental or other sums which may
        become due under the Subleases or for the performance of any of the
        sublessees' undertakings under the Subleases. Collection of any Issues
        and Profits by Lessor shall not cure or waive any default or notice of
        default hereunder or invalidate any acts done pursuant to such notice.

                                       7
<PAGE>   11
                (ii) The foregoing irrevocable assignment shall not cause any
        Lessor Party to be (A) a mortgagee in possession; (B) responsible or
        liable for (1) the control, care, management or repair of the Facility 2
        Property or for performing any of Lessee's obligations or duties under
        the Subleases, (2) any waste committed on the Facility 2 Property by the
        sublessees under any of the Subleases or by any other Persons, (3) any
        dangerous or defective condition of the Facility 2 Property, or (4) any
        negligence in the management, upkeep, repair or control of the Facility
        2 Property resulting in loss or injury or death to any sublessee,
        licensee, employee, invitee or other Person; or (C) responsible for or
        impose upon any Lessor Party any duty to produce rents or profits. No
        Lessor Party, in the absence of gross negligence or willful disregard on
        its part, shall be liable to Lessee as a consequence of (y) the exercise
        or failure to exercise any of the rights, remedies or powers granted to
        Lessor hereunder or (z) the failure or refusal of Lessor to perform or
        discharge any obligation, duty or liability of Lessee arising under the
        Subleases.


SECTION 3.            OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS.

        3.01.         Maintenance, Repair, Etc.

               (a) General. Lessee shall not permit any waste of the Facility 2
        Property, except for ordinary wear and tear, and shall, at its sole cost
        and expense, maintain the Facility 2 Property in good working order,
        mechanical condition and repair and make all necessary repairs thereto,
        of every kind and nature whatsoever, whether interior or exterior,
        ordinary or extraordinary, structural or nonstructural or foreseen or
        unforeseen, in each case as required by all applicable Governmental
        Rules and Insurance Requirements and on a basis consistent with the
        operation and maintenance of commercial properties comparable in type
        and location to the Facility 2 Property and in compliance with prudent
        industry practice.

                (b) New Improvements. Lessee shall make or cause to be made all
        of the New Improvements authorized and required by the Construction
        Agency Agreement in accordance with the Construction Agency Agreement.

                (c) Other Modifications. Lessee, at its sole cost and expense,
        may from time to time make alterations, renovations, improvements and
        additions to the Facility 2 Property and substitutions and replacements
        therefor (collectively, "Modifications") in addition to the New
        Improvements; provided that:

                        (i) No Modification impairs the value, utility or useful
                life of the Facility 2 Property or any part thereof from that
                which existed immediately prior to such Modification;

                        (ii) All Modifications are made expeditiously and, in
                all cases, completed not later than six (6) months prior to the
                Scheduled Expiration Date;


                                       8
<PAGE>   12
                provided, however, in the event that Lessee shall have exercised
                either the Term Purchase Option or the Expiration Purchase
                Option the foregoing six (6) month limitation shall not be
                applicable;

                        (iii) All Modifications are made in a good and
                workmanlike manner and in compliance with all applicable
                Governmental Rules and Insurance Requirements;

                      (iv) Subject to Paragraph 3.12 relating to permitted
               contests, Lessee pays all costs and expenses and discharges (or
               cause to be insured or bonded over) any Liens arising in
               connection with any Modification not later than the earlier of
               (A) sixty (60) days after the same shall be filed (or otherwise
               becomes effective) and (B) six (6) months prior to the Scheduled
               Expiration Date; provided, however, in the event that Lessee
               shall have exercised either the Term Purchase Option or the
               Expiration Purchase Option the foregoing six (6) month limitation
               shall not be applicable;

                        (v) At least one (1) month prior to the commencement of
                (y) any Modifications which are anticipated to cost $1,000,000
                or more in the aggregate, or (z) any Modifications which cause
                the total of all Modifications undertaken during the previous
                twelve month period to exceed an aggregate cost of $2,500,000,
                Lessee shall deliver to Lessor, with sufficient copies for Agent
                and each Participant, a brief written description of such
                Modifications; and

                        (vi) All Modifications otherwise comply with this
                Agreement and the other Operative Documents.

                (d) Abandonment. Lessee shall not abandon the Facility 2
        Property or any material portion thereof for any period in excess of
        thirty (30) consecutive days during the term hereof, except as a part of
        any New Improvements or Modifications as permitted herein.

                (e) Maintenance. Lessee shall maintain the Facility 2 Property
        and each material portion thereof in a manner consistent with other
        similar properties in the San Jose area, except as a part of any New
        Improvements or Modifications as permitted herein

        3.02. Risk of Loss. Lessee assumes all risks of loss arising from any
Casualty or Condemnation which arises or occurs prior to the Expiration Date or
while Lessee is in possession of the Facility 2 Property and all liability for
all personal injuries and deaths and damages to Facility 2 Property suffered by
any Person on or in connection with the Facility 2 Property which arises or
occurs prior to the Expiration Date or while Lessee is in possession of the
Facility 2 Property, except in each case to the extent any such loss or
liability is primarily caused by the gross negligence or willful misconduct of a
Lessor Party. Lessee hereby waives the provisions of California Civil Code
Sections 1932(1), 1932(2) and 1933(4), and any and all other applicable existing
or future Governmental Rules permitting the termination of this 

                                       9
<PAGE>   13
Agreement as a result of any Casualty or Condemnation, and Lessor shall in no
event be answerable or accountable for any risk of loss of or decrease in the
enjoyment and beneficial use of the Facility 2 Property as a result of any such
event.

        3.03.         Insurance.

                (a) Coverage. Lessee, at its sole cost and expense, shall carry
        and maintain the following insurance coverage:

                        (i) At all times during the Term, commercial liability
                insurance covering claims for injuries or death sustained by
                persons or damage to Facility 2 Property while on the Facility 2
                Property, and workers' compensation insurance;

                      (ii) At all times during the Term, property insurance
               covering loss or damage by fire, flood, earthquake and other
               risks in an amount not less than the then current replacement
               cost of the Improvements on the Facility 2 Property, provided
               that any property insurance for fire, flood and other risks shall
               not be required to cover the cost of foundations and underground
               improvements but any earthquake policy or coverage shall cover
               foundations and underground improvements. Earthquake insurance
               shall be required only if it is commercially reasonably
               available, as reasonably determined by Lessor and Required
               Participants. The amount of earthquake insurance coverage shall
               be 37.5% of the value of the Improvements. Lessee shall obtain
               and provide to Lessor and the Agent evidence of such earthquake
               insurance within thirty (30) days after the Closing Date.

                        (iii) During the construction of any Improvements,
                builders' risk insurance covering fire, flood, earthquake and
                other normal insured risks; and

                        (iv) At all times during the Term as appropriate, such
                other insurance of the types customarily carried by a reasonably
                prudent Person owning or operating properties similar to the
                Facility 2 Property in the same geographic area as the Facility
                2 Property.

        Except as otherwise specifically required above, such insurance shall be
in amounts, in a form and with deductibles approved by Lessor, which approval
shall not be unreasonably withheld.

        (b) Carriers. Any insurance carried and maintained by Lessee pursuant to
this Paragraph 3.03 shall be underwritten by an insurance company which (i) has,
at the time such insurance is placed and at the time of each renewal thereof, a
general policyholder rating of "A" and a financial rating of at least 8 from
A.M. Best and Company or any successor thereto (or if there is none, an
organization having a similar national reputation) or (ii) is otherwise approved
by Lessor and Required Participants.

        (c) Terms. Each insurance policy maintained by Lessee pursuant to this
Paragraph 3.03 shall provide as follows, whether through endorsements or
otherwise:

                                       10
<PAGE>   14

                (i) Lessor and the Agent shall be named as additional insured,
        in the case of each policy of liability insurance, or additional loss
        payee, in the case of each policy of Facility 2 Property insurance.

                (ii) In respect of the interests of Lessor in the policy, the
        insurance shall not be invalidated by any action or by inaction of
        Lessee or by any Person having temporary possession of the Facility 2
        Property while under contract with Lessee to perform maintenance,
        repair, alteration or similar work on the Facility 2 Property, and shall
        insure the interests of Lessor regardless of any breach or violation of
        any warranty, declaration or condition contained in the insurance policy
        by Lessee, Lessor or any other additional insured (other than by such
        additional insured, as to such additional insured); provided, however,
        that the foregoing shall not be deemed to (A) cause such insurance
        policies to cover matters otherwise excluded from coverage by the terms
        of such policies or (B) require any insurance to remain in force
        notwithstanding non-payment of premiums except as provided in clause
        (iii) below.

                (iii) If the insurance policy is canceled for any reason
        whatsoever, or substantial change is made in the coverage that affects
        the interests of Lessor, or if the insurance coverage is allowed to
        lapse for non-payment of premium, such cancellation, change or lapse
        shall not be effective as to Lessor for thirty (30) days after receipt
        by Lessor of written notice from the insurers of such cancellation,
        change or lapse.

                (iv) No Lessor Party shall have any obligation or liability for
        premiums, commissions, assessments, or calls in connection with the
        insurance.

                (v) The insurer shall waive any rights of set-off or
        counterclaim or any other deduction, whether by attachment or otherwise,
        that it may have against any Lessor Party.

                (vi) The insurance shall be primary without right of
        contribution from any other insurance that may be carried by any Lessor
        Party with respect to its interest in the Facility 2 Property.

                (vii) The insurer shall waive any right of subrogation against
        any Lessor Party.

                (viii) All provisions of the insurance, except the limits of
        liability, shall operate in the same manner as if there were a separate
        policy covering each insured party.

                (ix) The insurance shall not be invalidated should Lessee or any
        Lessor Party waive, in writing, prior to a loss, any or all rights of
        recovery against any Person for losses covered by such policy, nor shall
        the insurance in favor of any 


                                       11
<PAGE>   15

        Lessor Party or Lessee, as the case may be, or their respective rights
        under and interests in said policies be invalidated or reduced by any
        act or omission or negligence of any Lessee Party or Lessor, as the case
        may be, or any other Person having any interest in the Facility 2
        Property.

                (x) All insurance proceeds in respect of any loss or occurrence
        with a value of less than two million five hundred thousand dollars
        ($2,500,000) shall be paid to and adjusted solely by Lessee. All other
        losses shall be adjusted jointly by Lessor and Lessee with all proceeds
        for losses in excess of two million five hundred thousand dollars
        ($2,500,000) paid to Lessor, subject to the applicable provisions of the
        Operative Documents, except from and after the date on which the insurer
        receives written notice from Lessor that an Event of Default exists (and
        unless and until such insurer receives written notice from Lessor that
        all Events of Default have been cured), all losses shall be adjusted
        solely by, and all insurance proceeds shall be paid solely to, Lessor.

                (xi) Each policy shall contain a standard form mortgage
        endorsement in favor of Lessor.

        (d) Evidence of Insurance. Lessee, at its sole cost and expense, shall
furnish to Lessor from time to time upon the request of Lessor such certificates
or other documents as Lessor may reasonably request to evidence Lessee's
compliance with the insurance requirements set forth in this Paragraph 3.03.

        (e) Release of Lessor Parties. Lessee hereby waives, releases and
discharges each Lessor Party and its directors, officers, employees, agents and
advisors from all claims whatsoever arising out of any loss, claim, expense or
damage to or destruction covered or coverable by insurance required under this
Paragraph 3.03 notwithstanding that such loss, claim, expense or damage may have
been caused by any such Person, and, as among Lessee and such Persons, Lessee
agrees to look to the insurance coverage only in the event of such loss.

3.04. Casualty and Condemnation.

        (a) Notice. Lessee shall give Lessor prompt written notice of the
occurrence of any Casualty affecting, or the institution of any proceedings for
the Condemnation of, the Facility 2 Property or any portion thereof.

        (b) Repair or Purchase Option. After the occurrence of any Casualty or
Condemnation affecting the Facility 2 Property or any portion thereof, Lessee
shall either (i) repair and restore the Facility 2 Property as required by
Subparagraph 3.04(c) or (ii) exercise the Term Purchase Option and purchase the
Facility 2 Property pursuant to the Purchase Agreement; provided, however, that
Lessee may not elect to repair and restore the Facility 2 Property if an Event
of Default has occurred and is continuing unless Lessor and the Required
Participants shall consent in writing. Not later than one (1) month after the
occurrence of any Casualty or Condemnation, Lessee shall deliver to

                                       12
<PAGE>   16
Lessor a written notice indicating whether it elects to repair and restore or
purchase the Facility 2 Property

        (c) Repair and Restoration. If Lessee elects to repair and restore the
Facility 2 Property following any Casualty or Condemnation, Lessee shall
diligently proceed to repair and restore the Facility 2 Property to the
condition in which it existed immediately prior to such Casualty or Condemnation
and shall complete all such repairs and restoration not later than the earlier
of (y) one (1) year after the occurrence of the Casualty or Condemnation, and
(z) six (6) months prior to the Scheduled Expiration Date. Lessee shall use its
own funds to make such repairs and restoration, except to the extent any
Casualty and Condemnation Proceeds are available and are released to Lessee for
such purpose pursuant to Subparagraph 3.04(f). Lessee's exercise of the repair
and restoration option shall, if Lessor or Required Participants direct, be
subject to the following conditions:

                (i) Deposit in a deposit account acceptable to and controlled by
        Lessor (a "Repair and Restoration Account") of funds (including any
        Casualty and Condemnation Proceeds which are available and are released
        to Lessee pursuant to Subparagraph 3.04(f)) in the amount which Lessor
        determines is needed to complete and fully pay all costs of the repair
        or restoration (including taxes, financing charges, insurance and rent
        during the repair period); 

                (ii) The establishment of an arrangement for lien releases and
        disbursement of funds acceptable to Lessor and in a manner and upon such
        terms and conditions as would be required by a prudent interim
        construction lender; and

                (iii) The delivery to Lessor of the following within ninety (90)
        days after the occurrence of such Casualty or Condemnation, each in form
        and substance acceptable to Lessor:

                        (A) Evidence that the Facility 2 Property can, in
                Lessor's reasonable judgment, with diligent restoration or
                repair, be returned to a condition at least equal to the
                condition thereof that existed prior to the Casualty or partial
                Condemnation causing the loss or damage within the earlier to
                occur of (A) one (1) year after the Casualty and Condemnation,
                and (B) six (6) months prior to the Scheduled Expiration Date;

                        (B) Evidence that all necessary governmental approvals
                can be timely obtained to allow the rebuilding and reoccupancy
                of the Facility 2 Property;

                        (C) Copies of all plans and specifications for the work;

                        (D) Copies of all contracts for the work, signed by a
                contractor reasonably acceptable to Lessor;

                                       13
<PAGE>   17
                        (E) A cost breakdown for the work;

                        (F) A payment and performance bond for the work or other
                security satisfactory to Lender;

                        (G) Evidence that, upon completion of the work, the
                size, capacity and total value of the Facility 2 Property will
                be at least as great as it was before the Casualty or
                Condemnation occurred; and

                        (H) Evidence of satisfaction of any additional
                conditions that Lessor or Required Participants may reasonably
                establish to protect their rights under this Agreement and the
                other Operative Documents.

                All plans and specifications for the work must be reasonably
                acceptable to Lessor, except that Lessor's approval shall not be
                required if the restoration work is based on the same plans and
                specifications as were originally used to construct the Facility
                2 Property. To the extent that the funds in a Repair and
                Restoration Account include both Casualty and Condemnation
                Proceeds and other funds deposited by Lessee, the other funds
                deposited by Lessee shall be used first. Lessee acknowledges
                that the specific conditions described above are reasonable.

               (d) Prosecution of Claims for Casualty and Condemnation Proceeds.
        Lessee shall proceed promptly and diligently to prosecute in good faith
        the settlement or compromise of any and all claims for Casualty and
        Condemnation Proceeds; provided, however, that any settlement or
        compromise of any such claim shall, except as otherwise provided in
        Section 3.03(c)(x), be subject to the written consent of Lessor and
        Required Participants, which consents shall not be unreasonably
        withheld. Lessor may participate in any proceedings relating to such
        claims, and, after the occurrence and during the continuance of any
        Event of Default, Lessor is hereby authorized, in its own name or in
        Lessee's name, to adjust any loss covered by insurance or any Casualty
        or Condemnation claim or cause of action, and to settle or compromise
        any claim or cause of action in connection therewith, and Lessee shall
        from time to time deliver to Lessor any and all further assignments and
        other instruments required to permit such participation.

               (e) Assignment of Casualty and Condemnation Proceeds. Lessee
        hereby absolutely and irrevocably assigns to Lessor all Casualty and
        Condemnation Proceeds and all claims relating thereto and agrees that
        all Casualty and Condemnation Proceeds are to be paid to Lessor, except
        as otherwise provided in Section 3.03(c)(x). Except as otherwise
        provided in Section 3.03(c)(x), Lessee hereby authorizes and directs any
        insurer, Governmental Authority or other Person responsible for paying
        any Casualty and Condemnation Proceeds to make payment thereof directly
        to Lessor alone, and not to Lessor and Lessee jointly. If Lessee
        receives any Casualty and Condemnation Proceeds, Lessee shall promptly
        pay over such Casualty and Condemnation Proceeds to Lessor. Lessee
        hereby covenants that until such Casualty and Condemnation Proceeds are
        so paid over to Lessor, Lessee shall hold such Casualty and Condemnation
        Proceeds in trust for the benefit of Lessor and shall not commingle such
        Casualty and Condemnation Proceeds


                                       14
<PAGE>   18
        with any other funds or assets of Lessee or any other Person. Lessor may
        commence, appear in, defend or prosecute any assigned right, claim or
        action, and may adjust, compromise, settle and collect all rights,
        claims and actions assigned to Lessor, but shall not be responsible for
        any failure to collect any such right, claim or action, regardless of
        the cause of the failure.

               (f)    Use of Casualty and Condemnation Proceeds.

                      (i) If (A) no Event of Default has occurred and is
               continuing, (B) Lessee exercises the repair and restoration
               option pursuant to Subparagraphs 3.04(b) and 3.04(c) and (C)
               Lessee complies with any conditions imposed pursuant to
               Subparagraph 3.04(c); then Lessor shall release any Casualty and
               Condemnation Proceeds to Lessee for repair or restoration of the
               Facility 2 Property, but may condition such release and use of
               the Casualty and Condemnation Proceeds upon deposit of the
               Casualty and Condemnation Proceeds in a Repair and Restoration
               Account. Lessor shall have the option, upon the completion of
               such restoration of the Facility 2 Property, to apply any surplus
               Casualty and Condemnation Proceeds remaining after the completion
               of such restoration to the payment of Rent and/or the reduction
               of the Outstanding Lease Amount, notwithstanding that such
               amounts are not then due and payable or that such amounts are
               otherwise adequately secured.

                      (ii) If (A) an Event of Default has occurred and is
               continuing, (B) Lessee fails to or is unable to comply with any
               conditions imposed pursuant to Subparagraph 3.04(c) or (C) Lessee
               elects to exercise the Term Purchase Option and purchase the
               Facility 2 Property pursuant to the Purchase Agreement; then, at
               the absolute discretion of Lessor and the Required Participants,
               regardless of any impairment of security or lack of impairment of
               security, but subject to applicable Governmental Rules governing
               use of Casualty and Condemnation Proceeds, if any, Lessor may (1)
               apply all or any of the Casualty and Condemnation Proceeds it
               receives to the expenses of Lessor Parties in obtaining such
               proceeds; (2) apply the balance to the payment of Rent and/or the
               reduction of the Outstanding Lease Amount, notwithstanding that
               such amounts are not then due and payable or that such amounts
               are otherwise adequately secured and/or (3) release all or any
               part of such proceeds to Lessee upon any conditions Lessor and
               the Required Participants may elect.

                        (iii) Lessor shall apply any Casualty and Condemnation
                Proceeds which are to be used to reduce the Outstanding Lease
                Amount only on the last day of a Rental Period unless a Default
                has occurred and is continuing.

                        (iv) Application of all or any portion of the Casualty
                and Condemnation Proceeds, or the release thereof to Lessee,
                shall not cure or waive any Default or notice of default or
                invalidate any acts done pursuant to such notice.

                                       15
<PAGE>   19
        3.05. Taxes. Subject to Paragraph 3.12 relating to permitted contests,
Lessee shall promptly pay when due all Indemnified Taxes imposed on or payable
by Lessee or any Lessor Party in connection with the Facility 2 Property, this
Agreement or any of the other Operative Documents, or any of the transactions
contemplated hereby or thereby. Whenever any such taxes or other Governmental
Charges are payable by Lessee pursuant to the immediately preceding sentence, as
promptly as possible thereafter, Lessee shall send to Lessor for the account of
the applicable Lessor Party a certified copy of an original official receipt
received by Lessee showing payment thereof. If Lessee fails to pay any such
Indemnified Taxes when due to the appropriate taxing authority or fails to remit
to Lessor the required receipts or other required documentary evidence, Lessee
shall indemnify the Lessor Parties for any incremental taxes, interest or
penalties that may become payable by the Lessor Parties as a result of any such
failure. The obligations of Lessee under this Paragraph 3.05 shall survive the
payment and performance of the Lessee Obligations and the termination of this
Agreement.

        3.06.         Environmental Matters.

               (a) Lessee's Covenants. Lessee shall not cause or permit the
        Facility 2 Property to be used as a site for the use, generation,
        manufacture, storage, treatment, release, discharge, disposal,
        transportation or presence of any Hazardous Materials; provided that
        Lessee has disclosed to Lessor that Lessee shall use on the Facility 2
        Property from time to time the Hazardous Materials described in Schedule
        1 attached hereto. Notwithstanding the disclosure provided in Schedule
        1, Lessee shall comply and cause the Facility 2 Property to comply with
        all Environmental Laws. Lessee shall immediately notify Lessor in
        writing of (i) the discovery of any Hazardous Materials on, under or
        about the Facility 2 Property (except for those described in Schedule 1,
        which are used, stored, maintained and disposed of in accordance with
        all Environmental Laws); (ii) any knowledge by Lessee that the Facility
        2 Property does not comply with any Environmental Laws; (iii) any claims
        against Lessee or the Facility 2 Property relating to Hazardous
        Materials or pursuant to Environmental Laws; and (iv) the discovery of
        any occurrence or condition on any real property adjoining or in the
        vicinity of the Facility 2 Property that could cause the Facility 2
        Property or any part thereof to be designated as "border zone Facility 2
        Property" under the provisions of California Health and Safety Code
        Sections 25220 et seq. or any regulation adopted in accordance
        therewith. In response to the presence of any Hazardous Materials on,
        under or about the Facility 2 Property, Lessee shall immediately take,
        at Lessee's sole expense, all remedial action required by any
        Environmental Laws or any judgment, consent decree, settlement or
        compromise in respect to any claim based thereon.

                (b) Inspection By Lessor. Upon reasonable prior notice to
        Lessee, Lessor, its employees and agents, may from time to time (whether
        before or after the commencement of a nonjudicial or judicial
        foreclosure proceeding), enter and inspect the Facility 2 Property for
        the purpose of determining the existence, location, nature and magnitude
        of any past or present release or threatened release of any Hazardous
        Materials into, onto, beneath or from the Facility 2 Property.

               (c) Indemnity. Without in any way limiting any other indemnity
        contained in this Agreement or any other Operative Document, Lessee
        agrees to defend, indemnify


                                       16
<PAGE>   20

        and hold harmless the Lessor Parties and the other Indemnitees from and
        against any claim, loss, damage, cost, expense or liability directly or
        indirectly arising out of (i) the use, generation, manufacture, storage,
        treatment, release, threatened release, discharge, disposal,
        transportation or presence of any Hazardous Materials which are found
        in, on, under or about the Facility 2 Property or (ii) the breach of any
        covenant, representation or warranty of Lessee relating to Hazardous
        Materials or Environmental Laws contained in this Agreement or any
        Operative Document. This indemnity shall include (A) the costs, whether
        foreseeable or unforeseeable, of any investigation, repair, cleanup or
        detoxification of the Facility 2 Property which is required by any
        Governmental Authority or is otherwise necessary to render the Facility
        2 Property in compliance with all Environmental Laws; (B) all other
        direct or indirect consequential damages (including any third party
        claims, claims by any Governmental Authority, or any fines or penalties
        against the Indemnitees; and (C) all court costs and attorneys' fees
        (including expert witness fees and the cost of any consultants) paid or
        incurred by the Indemnitees. Lessee shall pay immediately upon Lessor's
        demand any amounts owing under this indemnity. Lessee shall use legal
        counsel reasonably acceptable to Lessor in any action or proceeding
        arising under this indemnity. The obligations of Lessee under this
        Subparagraph 3.06(c) shall survive the payment and performance of the
        Lessee Obligations and the termination of this Agreement.

               (d) Legal Effect of Section. Lessee and Lessor agree that (i)
        this Paragraph 3.06 and clause (i) of Subparagraph 4.01(t) of the
        Participation Agreement is intended as Lessor's written request for
        information (and Lessee's response) concerning the environmental
        condition of the real Facility 2 Property security as required by
        California Code of Civil Procedure Section 726.5 and (ii) each
        representation and warranty and covenant herein and therein (together
        with any indemnity applicable to a breach of any such representation and
        warranty) with respect to the environmental condition of the Facility 2
        Property is intended by Lessor and Lessee to be an "environmental
        provision" for purposes of California Code of Civil Procedure Section
        736.

        3.07.         Liens, Easements, Etc.

                (a) Lessee's Covenants. Subject to Paragraph 3.12 relating to
        permitted contests, Lessee shall not create, incur, assume or permit to
        exist any Lien or easement on or with respect to any of the Facility 2
        Property of any character, whether now owned or hereafter acquired,
        except for the following ("Permitted Property Liens"):

                        (i) Liens in favor of a Lessor Party securing the Lessee
                Obligations;

                        (ii) Liens and easements in existence on the
                Commencement Date to the extent reflected in the title insurance
                policy delivered to Agent pursuant to Paragraph 3.02 of and
                Schedule 3.02 to the Participation Agreement and approved by
                Lessor;

                        (iii) Liens and easements approved by Lessor and
                reflected in the title insurance policy or policies or binders
                to be delivered in connection with any Facility 2 Property added
                hereto after the date hereof;

                                       17
<PAGE>   21
                        (iv) Liens for taxes or other Governmental Charges not
                at the time delinquent or thereafter payable without penalty;

                        (v) Liens of carriers, warehousemen, mechanics,
                materialmen and vendors and other similar Liens imposed by law
                incurred in the ordinary course of business for sums not
                overdue; and

                        (vi) Lessor Liens or any other Liens approved by Lessor.

        Subject to Paragraph 3.12 relating to permitted contests, Lessee shall
        promptly (A) pay all Indebtedness and other obligations prior to the
        time the non-payment thereof would give rise to a Lien on the Facility 2
        Property and (B) discharge, at its sole cost and expense, any Lien on
        the Facility 2 Property which is not a Permitted Property Lien.

                (b) No Consents. Nothing contained in this Agreement shall be
        construed as constituting the consent or request of any Lessor Party,
        express or implied, to or for the performance by any contractor,
        mechanic, laborer, materialman, supplier or vendor of any labor or
        services or for the furnishing of any materials for any construction,
        alteration, addition, repair or demolition of or to the Facility 2
        Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NO LESSOR
        PARTY IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
        FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE
        FACILITY 2 PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND
        THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
        MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF ANY LESSOR PARTY IN
        AND TO THE FACILITY 2 PROPERTY.

        3.08. Subletting. Lessee may, in the ordinary course of business,
sublease the Facility 2 Property or any portion thereof to any Person, provided,
that (a) Lessee remains directly and primarily liable for performing its
obligations under this Agreement and all other Lessee Obligations; (b) each
sublease is subject to and subordinated to this Agreement; (c) each sublease
expressly provides for the surrender of the Facility 2 Property (or portion
thereof) by the sublessee on the Expiration Date; (d) each sublease has a term
which expires on or prior to the Scheduled Expiration Date (or, if longer,
includes a provision that the sublease terminates on the Expiration Date if such
Expiration Date occurs prior to the Scheduled Expiration Date unless Lessee
purchases the Facility 2 Property on the Expiration Date pursuant to the
Purchase Agreement); (e) each sublease prohibits the sublessee from engaging in
any activities on the Facility 2 Property other than those permitted by
Paragraph 2.04; and (f) no sublease has a Material Adverse Effect. Any sublease
which does not satisfy each of the requirements of the immediately preceding
sentence shall be null and void as to the Lessor Parties and their successor and
assigns. Except for such permitted subleases, Lessee shall not assign any of its
rights or interests under this Agreement to any other Person.

        3.09. Utility Charges. Lessee shall pay all charges for electricity,
power, gas, oil, water, telephone, sanitary sewer service and all other
utilities and services to, on or in connection with the Facility 2 Property
during the Term.

                                       18
<PAGE>   22
        3.10. Removal of Facility 2 Property. Lessee shall not remove any
Improvements from the Facility 1 Land or any other Facility 2 Property from the
Facility 1 Land or Improvements, except that, during the Term, Lessee may remove
any Modification or any trade fixture, machinery, equipment, inventory or other
personal Facility 2 Property if such Modification or Facility 2 Property (a) was
not financed by an Advance, (b) is not required by any applicable Governmental
Rule or Insurance Requirement and (c) is readily removable without impairing the
value, utility or remaining useful life of the Facility 2 Property.

        3.11. Compliance with Governmental Rules and Insurance Requirements.
Lessee, at its sole cost and expense, shall, unless its failure is not
reasonably likely to have a Material Adverse Effect, (a) comply, and cause its
agents, sublessees, assignees, employees, invitees, licensees, contractors and
tenants, and the Facility 2 Property to comply, with all Governmental Rules and
Insurance Requirements relating to the Facility 2 Property (including the
construction, use, operation, maintenance, repair and restoration thereof,
whether or not compliance therewith shall require structural or extraordinary
changes in the Improvements or interfere with the use and enjoyment of the
Facility 2 Property), and (b) procure, maintain and comply with all licenses,
permits, orders, approvals, consents and other authorizations required for the
construction, use, maintenance and operation of the Facility 2 Property and for
the use, operation, maintenance, repair and restoration of the Improvements

        3.12. Permitted Contests. Lessee, at its sole cost and expense, may
contest any alleged Lien or easement on any of the Facility 2 Property or any
alleged Governmental Charge, Indebtedness or other obligation which is payable
by Lessee hereunder to Persons other than the Lessor Parties or which, if
unpaid, would give rise to a Lien on any of the Facility 2 Property, provided
that (a) each such contest is diligently pursued in good faith by appropriate
proceedings; (b) the commencement and continuation of such proceedings suspends
the enforcement of such Lien or easement or the collection of such Governmental
Charge, Indebtedness or obligation; (c) Lessee has established adequate reserves
for the discharge of such Lien or easement or the payment of such Governmental
Charge, Indebtedness or obligation in accordance with GAAP and, if the failure
to discharge such Lien or easement or the failure to pay such Governmental
Charge, Indebtedness or obligation might result in any civil liability for any
Lessor Party, Lessee has provided to such Lessor Party a bond or other security
satisfactory to such Lessor Party; (d) the failure to discharge such Lien or
easement or the failure to pay such Governmental Charge, Indebtedness or
obligation could not result in any criminal liability for any Lessor Party; (e)
the failure to discharge such Lien or easement or the failure to pay such
Governmental Charge, Indebtedness or obligation is not otherwise reasonably
likely to have a Material Adverse Effect; and (f) any such contest is completed
and such Lien or easement is discharged (either pursuant to such proceedings or
otherwise) or such Governmental Charge, Indebtedness or obligation is declared
invalid, paid or otherwise satisfied not later than six (6) months prior to the
Scheduled Expiration Date; provided, however, in the event that Lessee shall
have exercised either the Term Purchase Option or the Expiration Purchase Option
the foregoing six (6) month limitation shall not be applicable.

        3.13. Lessor Obligations; Right to Perform Lessee Obligations. No Lessor
Party shall have any obligation to (a) maintain, repair or make any improvements
to the Facility 2 Property, (b) maintain any insurance on the Facility 2
Property, (c) perform any other obligation of Lessee under this Agreement or any
other Lessee Obligation, (d) make any expenditure on account of 


                                       19
<PAGE>   23
the Facility 2 Property (except to make Advances as required by the
Participation Agreement) or (e) take any other action in connection with the
Facility 2 Property, this Agreement or any other Operative Document, except as
expressly provided herein or in another Operative Document; provided however,
that Lessor may, in its sole discretion and without any obligation to do so,
after written notice to Lessee, perform any Lessee Obligation not performed by
Lessee when required. Lessor may enter the Facility 2 Property or exercise any
other right of Lessee under this Agreement or any other Operative Document to
the extent Lessor determines in good faith that such entry or exercise is
reasonably necessary for Lessor to perform any such Lessee Obligation not
performed by Lessee when required. Lessee shall reimburse Lessor and the other
Lessor Parties, within five (5) business days after demand, for all fees, costs
and expenses incurred by them in performing any such obligation or curing any
Default.

        3.14. Inspection Rights. During the Term, Lessee shall permit any Person
designated by Lessor, upon reasonable notice and during normal business hours,
to visit and inspect any of the Facility 2 Property.


SECTION 4.            EXPIRATION DATE.

        4.01. Termination by Lessee Prior to Scheduled Expiration Date. Subject
to the terms and conditions of the Purchase Agreement, Lessee may, at any time
prior to the Scheduled Expiration Date, terminate this Agreement and purchase
the Facility 2 Property pursuant to Section II of the Purchase Agreement. Lessee
shall notify Lessor of Lessee's election so to terminate this Agreement and
purchase the Facility 2 Property by delivering to Agent a Notice of Term
Purchase Option Exercise pursuant to and in accordance with the provisions of
Paragraph 2.02 of the Purchase Agreement.

        4.02. Surrender of Facility 2 Property. Unless Lessee purchases the
Facility 2 Property on the Expiration Date pursuant to the Purchase Agreement,
Lessee shall vacate and surrender the Facility 2 Property to Lessor on the
Expiration Date in its then-current condition, subject to compliance by Lessee
on or prior to such date of its obligations under this Agreement and the other
Operative Documents (including the completion of the New Improvements and all
Modifications, the completion of all permitted contests and the removal of all
Liens which are not Permitted Facility 2 Property Liens).

        4.03. Holding Over. If Lessee does not purchase the Facility 2 Property
on the Expiration Date pursuant to the Purchase Agreement but continues in
possession of any portion of the Facility 2 Property after the Expiration Date,
Lessee shall pay rent for each day it so continues in possession, payable upon
demand of Lessor, at a per annum rate equal to the Alternate Rental Rate plus
two percent (2%) and shall pay and perform all of its other Lessee Obligations
under this Agreement and the other Operative Documents in the same manner as
though the Term had not ended; provided, however, that this Paragraph 4.03 shall
not be interpreted to permit such holding over or to limit any right or remedy
of Lessor for such holding over.

SECTION 5.            DEFAULT.
                                       20
<PAGE>   24
        5.01. Events of Default. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:

               (a) Non-Payment. Lessee shall (i) fail to pay on the Expiration
        Date any amount payable by Lessee under this Agreement or any other
        Operative Document on such date, (ii) fail to pay within five (5)
        business days after any Scheduled Rent Payment Date any Base Rent
        payable on such Scheduled Rent Payment Date (other than the Base Rent
        payable on the Expiration Date) or (iii) fail to pay within five (5)
        business days after the same becomes due, any Supplemental Rent or other
        amount required under the terms of this Agreement or any other Operative
        Document (other than any such amount payable on the Expiration Date or
        Base Rent); or

                (b) Specific Defaults. Lessee or any of its Subsidiaries shall
        fail to observe or perform any covenant, obligation, condition or
        agreement set forth in Subparagraph 3.01(d), Paragraph 3.03 or
        Subparagraph 3.07(a) hereof or in Paragraph 5.02 or Paragraph 5.03 of
        the Participation Agreement ; or

               (c) Other Defaults. Lessee or any of its Subsidiaries shall fail
        to observe or perform any other covenant, obligation, condition or
        agreement contained in this Agreement or any other Operative Document
        (except for those covenants described in Paragraph 5.01(d) below) and
        such failure shall continue for a period of thirty (30) days after
        written notice thereof from Lessor, provided, however, that in the event
        that such failure cannot reasonably be cured within such thirty (30) day
        period, such failure shall not constitute an Event of Default hereunder
        so long as Lessee shall have commenced to cure such failure within such
        thirty (30) day period and shall thereafter diligently pursue such cure
        to completion, provided further that such failure shall in all events be
        cured by the earlier of (i) the Expiration Date, if Lessee is exercising
        the Marketing Option, (provided that if the Purchase Option is
        consummated in accordance with the terms of the Purchase Agreement all
        outstanding Defaults shall be deemed waived), or (ii) one hundred and
        eighty days (180) days after Lessor's notice thereof; or

               (d) Representations and Warranties. Any representation, warranty,
        certificate, information or other statement (financial or otherwise)
        made or furnished by or on behalf of Lessee or any of its Subsidiaries
        to any Lessor Party in or in connection with this Agreement or any other
        Operative Document, or as an inducement to any Lessor Party to enter
        into this Agreement or any other Operative Document, shall be false,
        incorrect, incomplete or misleading in any material respect when made or
        furnished and Lessee shall not have cured the facts or circumstances
        causing such representation, warranty, certificate or other statement to
        be false, incorrect, incomplete or misleading within thirty (30) days of
        notice thereof from Lessor; or

               (e) Cross-Default. (i) Lessee or any of its Subsidiaries shall
        fail to make any payment when due on account of any Indebtedness of such
        Person (other than the Lessee Obligations) and such failure shall
        continue beyond any period of grace provided with respect thereto, if
        the amount of such Indebtedness exceeds $2,500,000 or the effect of such
        failure is to cause, or permit the holder or holders thereof to cause,
        Indebtedness of Lessee and its Subsidiaries (other than the Lessee
        Obligations) in an aggregate amount

                                       21
<PAGE>   25
        exceeding $2,500,000 to become due or (ii) Lessee or any of its
        Subsidiaries shall otherwise fail to observe or perform any agreement,
        term or condition contained in any agreement or instrument relating to
        any Indebtedness of such Person (other than the Lessee Obligations), or
        any other event shall occur or condition shall exist, if the effect of
        such failure, event or condition is to cause, or permit the holder or
        holders thereof to cause, Indebtedness of Lessee and its Subsidiaries
        (other than the Lessee Obligations) in an aggregate amount exceeding
        $2,500,000 to become due (and/or to be secured by cash collateral); or

               (f) Insolvency, Voluntary Proceedings. Lessee or any of its
        Material Subsidiaries shall (i) apply for or consent to the appointment
        of a receiver, trustee, liquidator or custodian of itself or of all or a
        substantial part of its Facility 2 Property, (ii) be unable, or admit in
        writing its inability, to pay its debts generally as they mature, (iii)
        make a general assignment for the benefit of its or any of its
        creditors, (iv) be dissolved or liquidated in full or in part, (v)
        become insolvent (as such term may be defined or interpreted under any
        applicable statute), (vi) commence a voluntary case or other proceeding
        seeking liquidation, reorganization or other relief with respect to
        itself or its debts under any bankruptcy, insolvency or other similar
        law now or hereafter in effect or consent to any such relief or to the
        appointment of or taking possession of its Facility 2 Property by any
        official in an involuntary case or other proceeding commenced against
        it, or (vi) take any action for the purpose of effecting any of the
        foregoing; or

               (g) Involuntary Proceedings. Proceedings for the appointment of a
        receiver, trustee, liquidator or custodian of Lessee or any of its
        Material Subsidiaries or of all or a substantial part of the Facility 2
        Property thereof, or an involuntary case or other proceedings seeking
        liquidation, reorganization or other relief with respect to Lessee or
        any of its Material Subsidiaries or the debts thereof under any
        bankruptcy, insolvency or other similar law now or hereafter in effect
        shall be commenced and an order for relief entered or such proceeding
        shall not be dismissed or discharged within thirty (30) days of
        commencement; or

               (h) Judgments. (i) One or more judgments, orders, decrees or
        arbitration awards requiring Lessee and/or its Subsidiaries to pay an
        aggregate amount of $2,500,000 or more (exclusive of amounts covered by
        insurance issued by an insurer not an Affiliate of Lessee and otherwise
        satisfying the requirements set forth in Subparagraph 3.03(b)) shall be
        rendered against Lessee and/or any of its Subsidiaries in connection
        with any single or related series of transactions, incidents or
        circumstances and the same shall not be satisfied, vacated or stayed for
        a period of thirty (30) consecutive days after the issue or levy; (ii)
        any judgment, writ, assessment, warrant of attachment, tax lien or
        execution or similar process shall be issued or levied against a
        substantial part of the Facility 2 Property of Lessee or any of its
        Subsidiaries and the same shall not be released, stayed, vacated or
        otherwise dismissed within thirty (30) days after issue or levy; or
        (iii) any other judgments, orders, decrees, arbitration awards, writs,
        assessments, warrants of attachment, tax liens or executions or similar
        processes which, alone or in the aggregate, are reasonably likely to
        have a Material Adverse Effect are rendered, issued or levied; or

                                       22
<PAGE>   26

                (i) Operative Documents. Any Operative Document or any material
        term thereof shall cease to be, or be asserted by Lessee or any of its
        Subsidiaries not to be, a legal, valid and binding obligation of Lessee
        or any of its Subsidiaries enforceable in accordance with its terms; or

                (j) ERISA. Any Reportable Event which constitutes grounds for
        the termination of any Employee Benefit Plan by the PBGC or for the
        appointment of a trustee by the PBGC to administer any Employee Benefit
        Plan shall occur, or any Employee Benefit Plan shall be terminated
        within the meaning of Title IV of ERISA or a trustee shall be appointed
        by the PBGC to administer any Employee Benefit Plan; or

                (k) Change of Control. Any Change of Control shall occur; or

                (l) Material Adverse Effect. Any event(s) or condition(s) which
        is(are) reasonably likely to have a Material Adverse Effect shall occur
        and be continuing or exist.

        5.02. General Remedies. In all cases, upon the occurrence or existence
of any Event of Default and at any time thereafter unless such Event of Default
is waived, Lessor may, with the consent of the Required Participants, or shall,
upon instructions from the Required Participants, exercise any one or more of
the following rights and remedies (except that the remedy set forth in the first
sentence of Subparagraph 5.02(a) shall be automatic):

               (a) Termination of Commitments. If such Event of Default is an
        Event of Default of the type described in Subparagraph 5.01(f) or
        Subparagraph 5.01(g) affecting Lessee, immediately and without notice
        the obligation of Lessor to make Advances and the obligations of the
        Participants to fund Advances shall automatically terminate. If such
        Event of Default is any other Event of Default, Lessor may by written
        notice to Lessee, terminate the obligation of Lessor to make Advances
        and the obligations of the Participants to fund Advances.

                (b) Appointment of a Receiver. Lessor may apply to any court of
        competent jurisdiction for, and obtain appointment of, a receiver for
        the Facility 2 Property.

                (c) Specific Performance. Lessor may bring an action in any
        court of competent jurisdiction to obtain specific enforcement of any of
        the covenants or agreements of Lessee in this Agreement or any of the
        other Operative Documents.

                (d) Collection of Issues and Profits. Lessor may collect Issues
        and Profits as provided in Subparagraph 2.07(c) and apply the proceeds
        to pay Lessee Obligations.

               (e) Protection of Facility 2 Property. Lessor may enter, take
        possession of, manage and operate all or any part of the Facility 2
        Property or take any other actions which it reasonably determines are
        necessary to protect the Facility 2 Property and the rights and remedies
        of the Lessor Parties under this Agreement and the other Operative
        Documents, including (i) taking and possessing all of Lessee's books and
        records relating to the Facility 2 Property; (ii) entering into,
        enforcing, modifying, or canceling subleases 


                                       23
<PAGE>   27
        on such terms and conditions as Lessor may consider proper; (iii)
        obtaining and evicting tenants; (iv) fixing or modifying sublease rents;
        (v) collecting and receiving any payment of money owing to Lessee; (vi)
        completing any unfinished Improvements; and/or (vii) contracting for and
        making repairs and alterations.

                (f) Other Rights and Remedies. In addition to the specific
        rights and remedies set forth above in this Paragraph 5.02 and in
        Paragraph 5.03 and Paragraph 5.04, Lessor may exercise any other right,
        power or remedy permitted to it by any applicable Governmental Rule,
        either by suit in equity or by action at law, or both.

        5.03. Lease Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a lease, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor may, with the consent of the Required Participants,
or shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies in addition to those rights and
remedies set forth in Paragraph 5.02, provided that prior to exercising any
remedies provided by this Section 5.03, Lessor shall give Lessee not less than
three (3) business days notice during which time Lessee may exercise the
Purchase Option and provided the Purchase Option is consummated in accordance
with the terms of the Purchase Agreement, Lessor shall not exercise any of the
remedies under this Section 5.03:

               (a) Termination of Lease. Lessor may, by written notice to
        Lessee, terminate this Agreement on a Termination Date which is prior to
        the Scheduled Expiration Date, subject to Subparagraph 3.02(1) of the
        Purchase Agreement. Such Termination Date shall be the last day of a
        Rental Period unless Required Participants shall otherwise direct. On
        such Termination Date (which shall then be the Expiration Date), Lessee
        shall pay all unpaid Base Rent accrued through such date, all
        Supplemental Rent due and payable on or prior to such date and all other
        amounts payable by Lessee on the Expiration Date pursuant to this
        Agreement and the other Operative Documents. Lessee also shall pay to
        Lessor, in addition to all accrued Base Rent, the worth at the time of
        such payment of the amount by which the unpaid Base Rent through the
        Scheduled Expiration Date exceeds the amount of such rental loss for the
        same period that Lessee proves could reasonably be avoided.


                (b) Continuation of Lease. Lessor may exercise the rights and
        remedies provided by California Civil Code Section 1951.4, including the
        right to continue this Agreement in effect after Lessee's breach and
        abandonment and recover Rent as it becomes due. Acts of maintenance or
        preservation, efforts to relet the Facility 2 Property, the appointment
        of a receiver upon Lessor's initiative to protect its interest under
        this Agreement or withholding consent to or terminating a sublease shall
        not of themselves constitute a termination of Lessee's right to
        possession.

                (c) Removal and Storage of Facility 2 Property. Lessor may enter
        the Facility 2 Property and remove therefrom all Persons and Facility 2
        Property, store such Facility 2 Property in a public warehouse or
        elsewhere at the cost of and for the account of Lessee and sell such
        Facility 2 Property and apply the proceeds therefrom pursuant to
        applicable California law.

                                       24
<PAGE>   28
        5.04. Loan Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a loan, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor may, with the consent of the Required Participants,
or shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies in addition to those rights and
remedies set forth in Paragraph 5.02:

                (a) Acceleration of Lessee Obligations. Lessor may, by written
        notice to Lessee, terminate this Agreement on a Termination Date which
        is prior to the Scheduled Expiration Date, subject to Subparagraph
        3.02(1) of the Purchase Agreement, and declare all unpaid Lessee
        Obligations due and payable on such Termination Date. Such Termination
        Date shall be the last day of a Rental Period unless Required
        Participants shall otherwise direct. On such Termination Date (which
        shall then be the Expiration Date), Lessee shall pay all unpaid Base
        Rent accrued through such date, all Supplemental Rent due and payable on
        or prior to such date and all other amounts payable by Lessee on the
        Expiration Date pursuant to this Agreement and the other Operative
        Documents.

                (b) Uniform Commercial Code Remedies. Lessor may exercise any or
        all of the remedies granted to a secured party under the California
        Uniform Commercial Code.

                (c) Judicial Foreclosure. Lessor may bring an action in any
        court of competent jurisdiction to foreclose the security interest in
        the Facility 2 Property granted to Lessor by this Agreement or any of
        the other Operative Documents.

                (d) Power of Sale. Lessor may cause some or all of the Facility
        2 Property, including any Personal Property Collateral, to be sold or
        otherwise disposed of in any combination and in any manner permitted by
        applicable Governmental Rules.

                      (i) Sales of Personal Property. Lessor may dispose of any
               Personal Property Collateral separately from the sale of Real
               Property Collateral, in any manner permitted by Division 9 of the
               California Uniform Commercial Code, including any public or
               private sale, or in any manner permitted by any other applicable
               Governmental Rule. Any proceeds of any such disposition shall not
               cure any Event of Default or reinstate any Lessee Obligation for
               purposes of Section 2924c of the California Civil Code. In
               connection with any such sale or other disposition, Lessee agrees
               that the following procedures constitute a commercially
               reasonable sale:

                                (A) Lessor shall mail written notice of the sale
                        to Lessee not later than thirty (30) days prior to such
                        sale.

                                (B) Once per week during the three weeks
                        immediately preceding such sale, Lessor will publish
                        notice of the sale in a local daily newspaper of general
                        circulation.

                                       25
<PAGE>   29
                                (C) Upon receipt of any written request, Lessor
                        will make the Facility 2 Property available to any bona
                        fide prospective purchaser for inspection during
                        reasonable business hours.

                                (D) Notwithstanding, Lessor shall be under no
                        obligation to consummate a sale if, in its judgment,
                        none of the offers received by it equals the fair value
                        of the Facility 2 Property offered for sale.

                                (E) If Lessor so requests, Lessee shall assemble
                        all of the Personal Property Collateral and make it
                        available to Lessor at the site of the Facility 1 Land.
                        Regardless of any provision of this Agreement or any
                        other Operative Document, Lessor shall not be considered
                        to have accepted any Facility 2 Property other than cash
                        or immediately available funds in satisfaction of any
                        Lessee Obligation, unless Lessor has given express
                        written notice of its election of that remedy in
                        accordance with California Uniform Commercial Code
                        Section 9505.

               The foregoing procedures do not constitute the only procedures
               that may be commercially reasonable.

                      (ii) Lessor's Sales of Real Property or Mixed Collateral.
               Lessor may choose to dispose of some or all of the Facility 2
               Property which consists solely of Real Property Collateral in any
               manner then permitted by applicable Governmental Rules, including
               without limitation a nonjudicial trustee's sale pursuant to
               California Civil Code ss.ss. 2924 et seq. In its discretion,
               Lessor may also or alternatively choose to dispose of some or all
               of the Facility 2 Property, in any combination consisting of both
               Real Property Collateral and Personal Property Collateral,
               together in one sale to be held in accordance with the law and
               procedures applicable to real Facility 2 Property, as permitted
               by Section 9501(4) of the California Uniform Commercial Code.
               Lessee agrees that such a sale of Personal Property Collateral
               together with Real Property Collateral constitutes a commercially
               reasonable sale of the Personal Property Collateral. (For
               purposes of this power of sale, either a sale of Real Property
               Collateral alone, or a sale of both Real Property Collateral and
               Personal Property Collateral together in accordance with
               California Uniform Commercial Code Section 9501(4), will
               sometimes be referred to as a "Lessor's Sale.")

                                (A) Before any Lessor's Sale, Lessor shall give
                        such notice of default and election to sell as may then
                        be required by applicable Governmental Rules.

                                (B) When all time periods then legally mandated
                        have expired, and after such notice of sale as may then
                        be legally required has been given, Lessor shall sell
                        the Facility 2 Property being sold at a public auction
                        to be held at the time and place specified in the notice
                        of sale.

                                       26
<PAGE>   30
                                (C) Neither Lessor nor Agent shall have any
                        obligation to make demand on Lessee before any Lessor's
                        Sale.

                                (D) From time to time in accordance with then
                        applicable law, Lessor may postpone any Lessor's Sale by
                        public announcement at the time and place noticed for
                        that sale.

                                (E) At any Lessor's Sale, Lessor shall sell to
                        the highest bidder at public auction for cash in lawful
                        money of the United States.

                                (F) Lessor shall execute and deliver to the
                        purchaser(s) a deed or deeds conveying the Facility 2
                        Property being sold without any covenant or warranty
                        whatsoever, express or implied. The recitals in any such
                        deed of any matters or facts, including any facts
                        bearing upon the regularity or validity of any Lessor's
                        Sale, shall be conclusive proof of their truthfulness.
                        Any such deed shall be conclusive against all Persons as
                        to the facts recited in it.

               (e)    Foreclosure Sales.

                        (i) Single or Multiple. If the Facility 2 Property
                consists of more than one lot, parcel or item of Facility 2
                Property, Lessor may:

                                (A) Designate the order in which the lots,
                        parcels and/or items shall be sold or disposed of or
                        offered for sale or disposition; and

                                (B) Elect to dispose of the lots, parcels and/or
                        items through a single consolidated sale or disposition
                        to be held or made under the power of sale granted in
                        Subparagraph 5.04(d), or in connection with judicial
                        proceedings, or by virtue of a judgment and decree of
                        foreclosure and sale; or through two or more such sales
                        or dispositions; or in any other manner Lessor may deem
                        to be in its best interests (any such sale or
                        disposition, a "Foreclosure Sale;" any two or more, "
                        Foreclosure Sales").

               If Lessor chooses to have more than one Foreclosure Sale, Lessor
               at its option may cause the Foreclosure Sales to be held
               simultaneously or successively, on the same day, or on such
               different days and at such different times and in such order as
               it may deem to be in its best interests. No Foreclosure Sale
               shall terminate or affect the security interests granted to
               Lessor in the Facility 2 Property by this Agreement on any part
               of the Facility 2 Property which has not been sold, until all of
               the Lessee Obligations have been paid in full.

                                (ii) Credit Bids. At any Foreclosure Sale, any
                        Person or any Lessor Party, may bid for and acquire the
                        Facility 2 Property or any part of it to the extent
                        permitted by then applicable Governmental Rules. Instead
                        of paying cash for that Facility 2 Property, Lessor may
                        settle for the purchase price by crediting 


                                       27
<PAGE>   31

                        the sales price of the Facility 2 Property against the
                        Lessee Obligations in any order and proportions as
                        Lessor in its sole discretion may choose.

        5.05. Remedies Cumulative. The rights and remedies of Lessor under this
Agreement and the other Operative Documents are cumulative and may be exercised
singularly, successively, or together.

        5.06. No Cure or Waiver. Neither the performance by Lessor of any of
Lessee's obligations pursuant to Paragraph 3.13 nor the exercise by Lessor of
any of its other rights and remedies under this Agreement or any other Operative
Document (including the collection of Issues and Profits and the application
thereof to the Lessee Obligations) shall constitute a cure or waiver of any
Default or nullify the effect of any notice of default or sale, unless and until
all Lessee Obligations are paid in full.

        5.07. Exercise of Rights and Remedies. The rights and remedies provided
to Lessor under this Agreement may be exercised by Lessor itself, by Agent
pursuant to Subparagraph 2.02(c) of the Participation Agreement, by a
court-appointed receiver or by any other Person appointed by any of the
foregoing to act on its behalf. All of the benefits afforded to Lessor under
this Agreement and the other Operative Documents shall accrue to the benefit of
Agent to the extent provided in Subparagraph 2.02(c) of the Participation
Agreement.


SECTION 6.            MISCELLANEOUS.

        6.01. Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessee or Lessor under this Agreement shall be given as provided in Subparagraph
2.02(c) and Paragraph 7.01 of the Participation Agreement.

        6.02. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement may be amended or waived only as provided in the Participation
Agreement. No failure or delay by any Lessor Party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.

        6.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Lessor Parties and Lessee and their permitted
successors and assigns; provided, however, that the Lessor Parties and Lessee
shall not sell, assign or delegate their respective rights and obligations
hereunder except as provided in the Participation Agreement.

        6.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the Lessor Parties and Lessee and their permitted successors and
assigns, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.

                                       28
<PAGE>   32
        6.05. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby. 

        6.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.

        6.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.

        6.08. Nature of Lessee's Obligations.

                (a) Independent Obligation. The obligation of Lessee to pay the
        amounts payable by Lessee under this Agreement and the other Operative
        Documents and to perform the other Lessee Obligation are absolute,
        unconditional and irrevocable obligations which are separate and
        independent of the obligations of the Lessor Parties under this
        Agreement and the other Operative Documents and all other events and
        circumstances, including the events and circumstances set forth in
        Subparagraph 6.08(c).

                (b) No Termination or Abatement. This Agreement and the other
        Operative Documents and Lessee's obligation to pay Rent and to pay and
        perform all other Lessee Obligations shall continue in full force and
        effect without abatement notwithstanding the occurrence or existence of
        any event or circumstance, including any event or circumstance set forth
        in Subparagraph 6.08(c).

               (c) Full Payment and Performance. Lessee shall make all payments
        under this Agreement and the other Operative Documents in the full
        amounts and at the times required by the terms of this Agreement and the
        other Operative Documents without setoff, deduction or reduction of any
        kind and shall perform all other Lessee Obligations as and when
        required, without regard to any event or circumstances whatsoever,
        including (i) the condition of the Facility 2 Property (including any
        Improvements to the Facility 2 Property made prior to the Commencement
        Date or during the Term); (ii) title to the Facility 2 Property
        (including possession of the Facility 2 Property by any Person or the
        existence of any Lien or any other right, title or interest in or to any
        of the Facility 2 Property in favor of any Person); (iii) the value,
        habitability, usability, design, operation or fitness for use of the
        Facility 2 Property; (iv) the availability or adequacy of utilities and
        other services to the Facility 2 Property; (v) any latent, hidden or
        patent defect in the Facility 2 Property; (vi) the zoning or status of
        the Facility 2 Property or any other restrictions on the use of the
        Facility 2 Property; (g) the economics of the Facility 2 Property; (vii)
        any Casualty or Condemnation; (viii) the compliance of the Facility 2
        Property with any applicable Governmental Rule or Insurance Requirement;
        (ix) any failure by any Lessor Party to perform any of its obligations
        under this Agreement or any other Operative Document; or (x) the
        exercise by any Lessor Party of any of its remedies under this Agreement
        or any other Operative Document; provided, however, that this 


                                       29
<PAGE>   33

        Paragraph 7.08 shall not abrogate any right which Lessee may have to
        recover damages from any Lessor Party for any material breach by such
        Lessor Party of its obligations under this Agreement or any other
        Operative Document to the extent permitted hereunder or thereunder.


                          [The signature page follows.]



                                       30
<PAGE>   34

        IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed as of the day and year first above written.

LESSEE:                         NOVELLUS SYSTEMS, INC.

                                By: ___________________________________
                                       Name: __________________________
                                       Title: _________________________


LESSOR:                         LEASE PLAN U.S.A., INC.

                                By: ___________________________________
                                       Name:___________________________
                                       Title:__________________________


                                       31