Document:

<PAGE>   1
                                                                    EXHIBIT 10.7

                                            [SOBRATO DEVELOPMENT COMPANIES LOGO]

                                 LEASE BETWEEN
                      THE SOBRATO GROUP AND TELOCITY, INC.

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

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

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

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

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

3.   USE:

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

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

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

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

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

4.   TERM AND RENTAL:

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

12/06/99 - 12/31/99      [*]
01/01/00 - 11/30/00:     [*]
12/01/00 - 11/30/01:     [*]
12/01/01 - 11/30/02:     [*]
12/01/02 - 11/30/03:     [*]
12/01/03 - 11/30/04:     [*]

Base Monthly Rent shall be due in advance on or before the first day of each
calendar month during the Lease Term. All sums payable by Tenant under this
Lease shall be paid to Landlord in lawful money of the United States of
America, without offset or deduction and without prior notice or demand, at the
address specified in Section 1 of this Lease or at such place or places as may
be designated in writing by Landlord during the Lease Term. Base Monthly Rent
for any period less than a calendar month shall be a pro rata portion of the
monthly installment. Concurrently with Tenant's execution of this Lease, Tenant
shall pay to Landlord the sum of [*] as prepaid rent for the period from
December 6, 1999 through December 31, 1999.

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

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

[*] The Registrant has required confidential treatment for certain
    portions of this exhibit. The omitted portions have been separately filed
    with the Commission.

                                     Page 2

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

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

5.   This section intentionally left blank:

6.   ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:

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

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

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

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

7.  ALTERATIONS AND ADDITIONS:

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

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

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

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

8.    MAINTENANCE OF PREMISES:

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

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

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

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

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

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

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

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

                                     Page 6

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

9.   HAZARD INSURANCE:

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

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

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

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

[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.

                                     Page 7

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

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

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

12.  TOXIC WASTE AND ENVIRONMENTAL DAMAGE:

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

                                     Page 8

<PAGE>   12

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                    Page 11

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

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

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

14.  LANDLORD'S LIABILITY:

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

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

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

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

15.  DESTRUCTION OF PREMISES:

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

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

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

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

17.   ASSIGNMENT OR SUBLEASE:

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

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

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

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

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

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

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

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

                                    Page 15

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

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

18.  This Section intentionally left blank.:

19.  GENERAL PROVISIONS:

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

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

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

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

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

                                    Page 16

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                    Page 18

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

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

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

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

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

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

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

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

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

     V. TIME: Time is of the essence

                                    Page 19
<PAGE>   23
hereunder.

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

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

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

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

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

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

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

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

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

                                    Page 21
<PAGE>   25
                                  EXHIBIT "A"

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

December 7, 1999

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

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

Dear Mr. Olson:

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

Sincerely,

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

<PAGE>   27
                             [TELOCITY LETTERHEAD]

December 16, 1999

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

RE: Security Deposit

Dear Phil:

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

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

Sincerely,

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

cc: Sonia Colgan
Matt Stepovich
Jeff Houston

Acknowledged:

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

[*] The Registrant has requested confidential treatment for certain portions of
this exhibit. The omitted portions have been separately filed with the
Commission.<PAGE>   1
                                                                    EXHIBIT 10.8

                                 TELOCITY, INC.

                           SECOND AMENDED AND RESTATED

                           INVESTORS' RIGHTS AGREEMENT

                                DECEMBER 13, 1999

<PAGE>   2

                           SECOND AMENDED AND RESTATED

                           INVESTORS' RIGHTS AGREEMENT

         This SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is entered into as of December 13, 1999, by and among Telocity,
Inc., a California corporation (the "Company"), the undersigned purchasers of
Series C Preferred Stock of the Company (individually, an "Investor" and
collectively, the "Investors")), the existing holders of Investor Rights of the
Company by virtue of their purchase of Series A Preferred Stock and Series B
Preferred Stock of the Company and parties to that, certain Amended and Restated
Investors' Rights Agreement (the "Rights Agreement"), dated as of February 16,
1999 ("Existing Holders") and, with respect to Section 5 below, the undersigned
holders of Common Stock of the Company, Peter D. Olson, Thomas Obenhuber,
Michael Solomon, Matthew J. Stepovich and Kevin Grundy (collectively, the
"Founders"). This Agreement is being entered into pursuant to Section 5.1(h) of
that certain Series C Preferred Stock Purchase Agreement of even date herewith
between the Company and the Investors (the "Purchase Agreement"). By this
Agreement, the Company, the Existing Holders and the Founders desire to, and by
signing below do, amend and restate the Rights Agreement, and with the
Investors, desire to set forth certain registration and other rights of the
parties as set forth below.

         NOW THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties mutually agree as follows:

         1.       Registration; Restrictions on Transfers.

                  1.1      Definitions. As used in this Agreement the following
terms shall have the following respective meanings:

         "Holder" means any person owning or having the right to acquire
Registrable Securities, including Existing Holders and Investors , or any
assignee of record thereof in accordance with Section 1.11 hereof.

         "Initial Offering" shall mean the Company's initial public offering
registered under the Securities Act, which shall be a Qualifying Offering (as
such term is defined in the Company's Articles of Incorporation).

         "Initiating Holders" means any Holder or Holders holding 10% or greater
of the aggregate number of the Registrable Securities then outstanding.

         "Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

         "Registrable Securities" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (ii) any Common Stock of the
Company issued as (or

                                       1
<PAGE>   3
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, the Shares. Notwithstanding the foregoing,
Registrable Securities shall not include any securities sold by a person to the
public either pursuant to a registration statement or Rule 144 or sold in a
private transaction in which the transferor's rights under Section 2 of this
Agreement are not assigned or, as to any Holder, if the Registrable Securities
held by such Holder may be sold immediately pursuant to Rule 144 without
restriction.

         "Registrable Securities then outstanding" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities or may be received upon conversion of
other Registrable Securities and either (1) are then issued and outstanding or
(2) are issuable pursuant to then exercisable or convertible securities.

         "Registration Expenses" shall mean all expenses incurred by the Company
in complying with Sections 1.3 and 1.6 hereof, including, without limitation,
all registration, filing and qualification fees, printing expenses, fees and
disbursements of counsel of the Company and one special counsel to the
Investors, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.

         "Shares" shall mean the Company's Series C Preferred Stock, Series B
Preferred Stock and Series A Preferred Stock.

         "Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

         "SEC" or "Commission" means the Securities and Exchange Commission.

                  1.2      Restrictions on Transfer.

                           1.2.1    Each of the Holders agrees not to make any
disposition of all or any portion of the Shares (or the Common Stock of the
Company issuable upon the conversion thereof) unless and until the transferee
has agreed in writing for the benefit of the Company to be bound by the terms of
this Agreement and:

                                    (a) There is then in effect a registration
statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or

                                       2
<PAGE>   4

                                    (b) (i) Such Holder shall have notified the
Company of the proposed disposition and the name and address of the transferee,
and (ii) if reasonably requested by the Company, such Holder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Securities Act. It is agreed that the Company will not unreasonably
require opinions of counsel for transactions made pursuant to Rule 144.

                                    (c) Notwithstanding the provisions of
paragraphs (a) and (b) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by a Holder (i) which is a
partnership, to its partners, funds administered by any such partner, or retired
partners in accordance with partnership interests, (ii) to its members and any
affiliates of such members, (iii) which is a corporation, to its affiliates,
(iv) to any charitable donee or (v) to such Holder's family member or trust for
the benefit of an individual Holder, provided the transferee agrees in writing
to be subject to the terms of this Agreement to the same extent as if he were an
original Holder hereunder. For purposes of this Agreement, "affiliate," with
respect to any person, means any other person that controls, is controlled by,
is under common control or investment discretion with such person.

                           1.2.2    Each certificate representing Shares or
Registrable Securities shall (unless otherwise permitted by the provisions of
the Agreement) be stamped or otherwise imprinted with a legend as follows (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in the Agreement):

         THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
         OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
         REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON
         OTHER WRITTEN EVIDENCE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
         THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
         HYPOTHECATION IS IN COMPLIANCE THEREWITH.

                           1.2.3    The Company shall be obligated to reissue
promptly unlegended certificates at the request of any holder thereof if the
holder shall have obtained an opinion of counsel (which counsel may be counsel
to the Company) reasonably satisfactory to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.

                           1.2.4    Any legend endorsed on an instrument
pursuant to applicable state securities laws and the stop-transfer instructions
with respect to such securities shall be removed upon receipt by the Company of
an order of the appropriate blue sky authority authorizing such removal or an
opinion of counsel (which counsel may be counsel to the Company) reasonably
satisfactory to the Company to the effect that the securities may be distributed
lawfully without such legend.

                                       3
<PAGE>   5

                  1.3      Demand Registration.

                           1.3.1    Request for Registration. In case the
Company shall receive from Initiating Holders a written request that the Company
effect any registration, qualification or compliance with respect to at least
10% of the aggregate number of Registrable Securities then outstanding, provided
that the anticipated aggregate offering price of such registration,
qualification or compliance, net of standard underwriting discounts, would
exceed $5,000,000, the Company will:

                                          (i) promptly give written notice of
the proposed registration, qualification or compliance to all other Holders; and

                                          (ii) as soon as practicable, use its
best efforts to effect all such registrations, qualifications and compliances
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualifications under the applicable blue
sky or other state securities laws and appropriate compliance with exemptive
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Initiating
Holder's or Initiating Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a written request
given within 30 days after receipt of such written notice from the Company;
provided that the Company shall not be obligated to take any action to effect
such registration, qualification or compliance pursuant to this Section 1.3:

                                    (a) at any time prior to the earlier of
February 16, 2002 or six (6) months after the Company's Initial Offering;

                                    (b) in any particular jurisdiction in which
the Company would be required to execute a general qualification or compliance
unless the Company is already subject to service in such jurisdiction and except
as required by the Securities Act; or

                                    (c) after the Company has effected four (4)
such registrations pursuant to this Section 1.3.1 and such registrations have
been declared or ordered effective.

                           Subject to the foregoing clauses (a) through (c), the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practical, but in any event within 90
days, after receipt of the request or requests of the Initiating Holders;
provided, however, that if the Company shall furnish to such holders within ten
(10) days of its receipt of the request for registration a certificate signed by
the President of the Company stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Company and its
shareholders for such registration to be filed at the date filing would be
required and it is therefore essential to defer the filing of such registration
statement, the Company shall have the right to defer the offering for a period
of not more than ninety (90) days after receipt of the request for registration;
provided, however, that this right cannot be exercised more than once in any
twelve month period.

                                       4
<PAGE>   6

                  1.4      Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30) days prior to
the filing of any registration statement under the Securities Act for purposes
of a public offering of securities of the Company (including, but not limited
to, registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans and corporate reorganizations) and will afford each such Holder an
opportunity to include in such registration statement all or part of such
Registrable Securities held by such Holder, provided, that such notice shall not
obligate the Company to file such registration statement. Each Holder desiring
to include in any such registration statement all or any part of the Registrable
Securities held by it shall, within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing. Such
notice shall state the intended method of disposition of the Registrable
Securities by such Holder. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.

                  1.5      Underwriting. If the registration statement under
which the Company gives notice under Section 1.4 is for an underwritten offering
of the Common Stock of the Company, the Company shall so advise the Holders of
Registrable Securities. In such event, the right of any such Holder to be
included in a registration pursuant to this Section shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected by the Company for such
underwriting. Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, in the case of a registration
statement filed pursuant to a request under Section 1.4, first to the Company
and next to the Holders participating in such registration on a pro rata basis
based on the total number of Registrable Securities held by such Holders, or, in
the case of a registration statement filed pursuant to a request under Section
1.3, to all of the Holders participating in such registration on a pro rata
basis based on the total number of Registrable Securities held by such Holders;
provided, however, in no event shall any shares which are not Registrable
Securities be included in any registration in which the number of Registrable
Securities to be sold in such registration have been limited pursuant to this
Section 1.5, unless the inclusion of such shares has been approved by the
holders of three quarters (3/4) of the Registrable Securities and provided,
further that in no event shall the limitation on the number of shares included
in such registration by the Holders exercising rights under Section 1.4 be
reduced below fifty percent (50%) of the total number of securities included in
such registration, unless such registration is the Company's Initial Offering,
in which case the selling Holders may be excluded if the underwriter makes the
determination described above and no other shareholder's securities are included
in the registration. No such reduction shall reduce the securities being offered
by the Company for its own account to be included in the registration and
underwriting in the Initial Offering.

                                       5
<PAGE>   7

                  1.6      Form S-3. In case the Company shall receive a written
request or requests from Holders of 10% of Registrable Securities then
outstanding that the Company effect a registration on Form S-3 or any successor
form to S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder, the Company will,
provided that it is able to utilize a Form S-3:

                           1.6.1    promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities; and

                           1.6.2    at any time after 180 days following the
effective date of the Initial Offering and after 90 days following the effective
date of any subsequent registered underwritten offering of the Company's Common
Stock to the general public, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
twenty (20) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 1.6: (i) if
the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $1,000,000, (ii) if the Company shall furnish to the Holders
a certificate signed by the President or Chairman of the Board of Directors of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the registration
statement for a period of not more than sixty (60) days after receipt of the
request of the Holder or Holders under this Section 1.6.2, provided that such
right shall not be exercised more than once in any twelve month period, (iii) if
the Company has, within the six (6) month period preceding the date of such
request, already effected one (1) registration for the Holders pursuant to this
Section 1.6, or (iv) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance. In
addition, the Company shall not be required to effect a registration pursuant to
this Section if within thirty (30) days receipt of a written request from
Holders pursuant to this Section, the Company gives notice to the Holders of the
Company's good faith intention to make a public offering of the Company's Common
Stock within sixty (60) days of such request and the Holders shall be provided
with piggyback registration rights for such registration pursuant to Section 1.4
hereof (and may actually sell Shares thereunder) and provided that such Company
notice shall not be given more than once in a twelve month period.

                           1.6.3    Subject to the foregoing, the Company shall
file such registration statement as is then available to the Company covering
the Registrable Securities and other securities so requested to be registered as
soon as practicable, but in any event not later than thirty (30) days after
receipt of the request or requests of the Holders.

                                       6
<PAGE>   8

                  1.7      Expenses of Registration. All Registration Expenses
incurred in connection with any registration under this Section 1 shall be borne
by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares of such Holders so
registered. The Company shall not, however, be required to pay for the
Registration Expenses of any registration proceeding begun pursuant to Section
1.3 or Section 1.6, the request of which has been subsequently withdrawn by the
Initiating Holders unless (a) the withdrawal is based upon material adverse
information concerning the Company or a public offering of the Company of which
the Initiating Holders were not aware at the time of such request or that arose
or developed after the date of such request or (b) the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 1.3 or Section 1.6 in which event such right
shall be forfeited by all Holders). If the Holders are required to pay the
Registration Expenses, such expenses shall be borne solely by those holders of
securities (including Registrable Securities) who withdraw such request for
registration in proportion to the number of shares for which registration was
requested.

                  1.8      Obligations of the Company. Whenever required to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:

                           1.8.1    Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, unless otherwise
requested by the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days.

                           1.8.2    Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.

                           1.8.3    Furnish to the Holders such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

                           1.8.4    Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

                           1.8.5    In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.

                                       7
<PAGE>   9

                           1.8.6    Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.

                           1.8.7    Furnish, at the request of a majority of the
Holders participating in the registration, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.

                  1.9      Delay of Registration; Furnishing Information.

                           1.9.2    It shall be a condition precedent to the
obligations of the Company to register the Registrable Securities of any selling
Holder that such selling Holder shall have furnished to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of such securities as shall be reasonably
required to effect the registration of their Registrable Securities within a
reasonable period after having received a written request from the Company for
such information.

                  1.10     Indemnification. In the event any Registrable
Securities are included in a registration statement under Sections 1.3, 1.4 or
1.6:

                           1.10.1   To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the partners, affiliates,
officers, directors, representatives, agents and legal counsel of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Securities Exchange Act of 1934, as amended, (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the 1934 Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein

                                       8
<PAGE>   10

or any amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law in connection with the offering covered
by such registration statement; and the Company will reimburse each such Holder,
partner, affiliate, officer, director, representative, agent, legal counsel,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided
however, that the indemnity agreement contained in this Section 1.10.1 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability or action to
the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, affiliate,
officer, director, underwriter or controlling person of such Holder.

                           1.10.2   To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers, each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information expressly furnished by
such Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 1.10.2 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 1.10
exceed the net proceeds from the offering received by such Holder.

                           1.10.3   Promptly after receipt by an indemnified
party under this Section 1.10 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
1.10, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to

                                       9
<PAGE>   11

the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to material actual or potential differing interests between such indemnified
party and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.10 to the extent
materially prejudicial, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.

                           1.10.4   If the indemnification provided for in this
Section 1.10 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the Violation relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided that in no event shall any contribution by a
Holder under this Section 1.10.4 exceed the net proceeds received from the
offering by such Holder.

                           1.10.5   The foregoing indemnity agreements of the
Company and Holders are subject to the condition that, insofar as they relate to
any Violation made in a preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the registration statement
in question becomes effective or the amended prospectus filed with the SEC
pursuant to SEC Rule 424(b) (the "Final Prospectus"), such indemnity agreement
shall not inure to the benefit of any person if a copy of the Final Prospectus
was furnished in a timely manner to the indemnified party and was not furnished
to the person asserting the loss, liability, claim or damage at or prior to the
time such action is required by the Securities Act.

                           1.10.6   The obligations of the Company and Holders
under this Section 1.10 shall survive the completion of any offering of
Registrable Securities in a registration statement and the termination of this
Agreement.

                  1.11     Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to this Section 1
may be assigned by a Holder to a transferee or assignee of Registrable
Securities; provided, however, that no such transferee or assignee shall be
entitled to registration rights under Sections 1.3 or 1.6 hereof unless it
acquires

                                       10
<PAGE>   12

at least two hundred fifty thousand (250,000) shares of Registrable Securities
(as adjusted for stock splits and combinations) and the Company shall, within a
reasonable time, be furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned. Notwithstanding the foregoing, rights to
cause the Company to register securities may be assigned to any subsidiary,
parent, affiliate, partner or retired partner of a Holder, any family member or
trust for the benefit of any individual Holder or any entity affiliated with the
Holder by common ownership.

                  1.12     Amendment of Registration Rights. Any provision of
this Section 1 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
at least two-thirds (2/3) of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 1.12 shall be binding upon each Holder
and the Company. By acceptance of any benefits under this Section 1, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.

                  1.13     "Market Stand-Off" Agreement. If requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
a Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by such Holder (other than those included
in the registration) for a period specified by the underwriters not to exceed
one hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act relating to the Initial
Offering, provided that all officers and directors of the Company and
shareholders and optionholders of 1% or more of the Company's outstanding shares
enter into similar agreements, provided, further, that such market stand-off
shall be memorialized in a letter agreement containing customary terms and
conditions. The obligations described in this Section 1.13 shall apply solely to
a registration relating to the Initial Offering. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of said one hundred eighty (180) day
period; provided that the underwriter of the Initial Offering has not released
such Holder from such market stand-off.

                  1.14     Termination of Registration Rights. All registration
rights granted under this Section 1 shall terminate and be of no further force
and effect seven (7) years after the date following the closing of the Company's
Initial Offering or, as to any Holder, if the Registrable Securities held by
such Holder may be sold immediately pursuant to Rule 144 without restriction.

                  1.15     Reports Under the 1934 Act. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:

                           (i)      make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all times after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;

                                       11
<PAGE>   13

                           (ii) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the
1934 Act; and

                           (iii) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144, the Securities Act and the 1934 Act (at any time after it has become
subject to such reporting requirements), and (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company.

         2.       Covenants of the Company.

                  2.1      Financial Information and Reporting.

                           2.1.1    The Company will maintain true books and
records of account in which full and correct entries will be made of all its
business transactions pursuant to a system of accounting established and
administered in accordance with generally accepted accounting principles
consistently applied, and will set aside on its books all such proper accruals
and reserves as shall be required under generally accepted accounting principles
consistently applied.

                           2.1.2    The Company will furnish to each Holder as
soon as practicable after the end of each fiscal year of the Company, and in any
event within 90 days thereafter, a consolidated balance sheet of the Company, as
at the end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Company, for such year, all prepared
in accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be audited and accompanied by
a report and opinion thereon by independent public accountants of national
standing selected by the Company's Board of Directors.

                           2.1.3    The Company will furnish to each Holder
within thirty (30) days after the end of each month, an unaudited balance sheet
and statements of income and cash flows, prepared in accordance with generally
accepted accounting principles, with the exception that no notes need be
attached to such statements and year-end audit adjustments may not have been
made.

                           2.1.4    The Company will furnish to each Holder
forty-five (45) days prior to the beginning of each fiscal year, the Company's
annual operating plan for the succeeding fiscal year.

                           2.1.5    Notwithstanding anything to the contrary
stated in this Section 2.1, the Company shall not be obligated to provide
financial information to any Holder (i) if such Holder and its affiliates do not
continue to hold at least an aggregate of 500,000 Shares or at least 500,000
shares of Common Stock of the Company issued or issuable upon conversion of the
Shares, or (ii) upon the closing of the Initial Offering. For purposes of
calculating the number of shares held by a Holder for purposes of this Section
2.1.5, all shares held by Holders who are

                                       12
<PAGE>   14

affiliates (as such term is defined in Rule 405 promulgated under the Securities
Act) shall be aggregated.

                           2.1.6.   Upon the reasonable request of any Holder,
who owns together with its affiliates at least an aggregate of 500,000 Shares or
at least 500,000 shares of Common Stock of the Company issued or issuable upon
conversion of the Shares, the Company shall provide to such Holder (i)
reasonable access during regular business hours to the management of the Company
for the purpose of discussing matters related to the Company and (ii)
information regarding the Company and its operations.

                  2.2      Reservation of Common Stock. The Company will at all
times reserve and keep available, solely for issuance and delivery upon the
conversion of the Shares, all Common Stock of the Company issuable from time to
time upon such conversion.

                  2.3      Right to Observe. The Company will furnish to holders
of Series B Preferred Stock, who, with their affiliates, hold at least 750,000
Shares, notice of, and permit the attendance at, all meetings of the Board of
Directors of the Company, or any committee thereof. Such holders of Series B
Preferred Stock shall be entitled to attend such meetings as non-voting
observers. The Company will furnish to GE Capital Equity Investments, Inc. ("GE
Capital"), for so long as it or any of its affiliates continues to hold at least
250,000 Shares, notice of, and permit its attendance at, all meetings of the
Board of Directors of the Company, or any committee thereof. GE Capital shall be
entitled to attend such meetings as non-voting observers. Notwithstanding the
foregoing, GE Capital agrees not to disclose confidential matters discussed at
the Board meeting and the Company shall have the right to exclude such
representative if the Company and the Company's counsel reasonably believe it is
necessary to protect the attorney-client privilege or the Company's interests.
This Section 2.3, other than the first sentence hereof, may not be amended
without the written consent of GE Capital.

                  2.4      Termination of Covenants. All covenants of the
Company contained in Sections 2.1 and 2.2 of this Agreement shall expire and
terminate as to each Holder immediately after the Company's Initial Offering.

         3.       Rights of First Refusal.

                  3.1      Subsequent Offerings. Each Holder shall have a right
of first refusal to purchase up to its pro rata share of all Equity Securities,
as defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement. Each Holder's pro rata share, for
purposes of this right of first refusal, is equal to the ratio of (a) the number
of Shares (including all shares of Common Stock of the Company issued or
issuable upon conversion of the Shares or options or warrants for Shares) of
which such Holder is deemed to be a holder immediately prior to the issuance of
such Equity Securities to (b) the total number of shares of stock then
outstanding (including all shares of Common Stock of the Company issued or
issuable upon conversion of the Shares and other convertible securities and upon
the exercise of outstanding and options and warrants). The Company shall
promptly, in writing, inform each Holder that elects to purchase all the shares
available to it (a "Fully-Exercising Holder") of any other Holder's failure to
do likewise. During the ten (10) day period commencing after such

                                       13
<PAGE>   15

information is given, each Fully-Exercising Holder may elect to purchase that
portion of the Shares for which Holders were entitled to subscribe but which
were not subscribed for by the Holders that is equal to a fraction of the
unsubscribed shares. The numerator of such fraction shall be the number of
equity securities of the Company (assuming conversion of all such securities to
Common Stock of the Company) owned by a Fully-Exercising Holder and the
denominator of which shall be the total number of equity securities (assuming
the conversion of all such securities to Common Stock of the Company) owned by
all Fully-Exercising Holders who wish to purchase some of the unsubscribed
shares. The term "Equity Securities" shall mean any stock or similar security of
the Company or any security convertible, with or without consideration, into any
stock or similar security, except that the term "Equity Securities" shall not
refer to securities specified in Section 3.5 below. For purposes of determining
each Holder's pro rata share, all entities that are affiliates (as such term is
defined in Rule 405 promulgated under the Securities Act) shall be aggregated
and any such affiliated entities may purchase some or all of the shares
available to such affiliated entities pursuant to this Section 3.1.

                  3.2      Exercise of Rights. If the Company proposes to issue
any Equity Securities, it shall give each Holder written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Holder shall
have thirty (30) days from the giving of such notice to agree to purchase up to
its pro rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to such Holders if such issuance would cause the
Company to be in violation of applicable federal securities laws by virtue of
such offer or sale. In the event that the price, terms or conditions of such
proposed issuance becomes less favorable to the Company, the Company shall
re-offer such Equity Securities to each Holder in accordance with this Section
3.

                  3.3      Termination of Rights of First Refusal. The rights of
first refusal established by this Section 3 shall terminate (i) immediately
prior to the closing of the Initial Offering or (ii) upon conversion of all of
the Shares into Common Stock of the Company.

                  3.4      Transfer of Rights of First Refusal. The rights of
first refusal of the Holders under this Section 3 may be transferred to any
constituent partner or affiliate of the Holders, to any successor in interest to
all or substantially all the assets of such Holder, or to any transferee or
assignee who holds at least two hundred fifty thousand (250,000) shares (as
adjusted for stock splits, combinations and the like) of Registrable Securities,
provided that such transferee or assignee agrees in writing to be bound by the
provisions of this Agreement. Notwithstanding the foregoing, rights to cause the
Company to register securities may be assigned to any subsidiary, parent,
partner, member or retired partner of a Holder, any family member or trust for
the benefit of any individual Holder or any affiliate (as such term is defined
in Rule 405 promulgated under the Securities Act) of any such Holder.

                  3.5      Excluded Securities. The rights of first refusal
established by this Section shall have no application to any of the following:

                                       14
<PAGE>   16

                           3.5.1    Up to 13,950,000 shares of Common Stock of
the Company (and/or options, warrants or other Common Stock of the Company
purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary, pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board of Directors,
including the director elected by the holders of shares of Series C Preferred
Stock;

                           3.5.2    stock issued pursuant to any rights,
agreements, options or warrants outstanding as of the date of this Agreement and
stock issued pursuant to any such rights, agreements, options or warrants
granted after the date of this Agreement, provided that the rights of first
refusal established by this Section 3 applied with respect to the initial sale
or grant by the Company of such rights, agreements, options or warrants;

                           3.5.3    any Equity Securities issued pursuant to a
merger, consolidation, acquisition (including technology acquisitions) or
similar business combination;

                           3.5.4    any Equity Securities that are issued by the
Company as part of an underwritten public offering, except as set forth in
Section 4 below;

                           3.5.5    shares of Common Stock of the Company issued
in connection with any stock split, stock dividend or recapitalization by the
Company approved by the Company's Board of Directors, including the director
elected by the holders of shares of Series C Preferred Stock;

                           3.5.6    shares of Common Stock of the Company issued
upon conversion of the Preferred Stock of the Company;

                           3.5.7    any Equity Securities issued pursuant to any
equipment leases, commercial loans, or debt financings approved by the Company's
Board of Directors, including the director elected by the holders of shares of
Series C Preferred Stock; and

                           3.5.8    any Equity Securities issued in connection
with strategic transactions involving the Company and other entities, including
joint ventures, manufacturing, marketing or distribution arrangement or
technology transfer or development arrangement, approved by the Company's Board
of Directors, including the director elected by the holders of shares of Series
C Preferred Stock.

         4.       Company's Initial Offering. In the event of the Company's
Initial Offering and subject to all applicable rules, requirements and
restrictions of the SEC and the National Association of Securities Dealers, Inc.
(the "NASD"), the Company will use reasonable efforts to allow the Investors
(including any fund with the same or an affiliated general partner of an
Investor or any affiliate of an Investor or any designee of an Investor ) to
purchase in any directed share program associated with the Initial Offering;
provided, however the Company will have the right to allocate the remaining
shares offered in the Initial Offering as the Company determines, in its sole
discretion, is in the best interest of the Company and, provided further that,
if the underwriter advises the Company that allowing the Investors to
participate in the

                                       15
<PAGE>   17

Initial Offering may reduce the marketability of the offering or otherwise
adversely affect the Company then the Company shall not be required to take any
action in connection with this Section 4. In connection with any potential
purchase under this Section 4, the Investors agree to take all action that the
Company or its counsel reasonably deems necessary, appropriate or desirable in
connection with such potential purchase, including without limitation prompt
notice of whether each Investor desires to participate in the Initial Offering
if offered the opportunity by the Company. This Section 4 does not constitute an
offer to sell, or a solicitation of an offer to buy any securities of the
Company nor shall this Section 4 be construed as granting a right to purchase
such securities to the Investors or any other person.

         5.       Agreements Between Holders and Founders.

                  5.1      Right of First Refusal and Co-Sale.

                           5.1.1    The Right of First Refusal.  If at any time
one or more of the Founders propose to sell or otherwise transfer any Common
Shares (as defined in Section 5.1.5 below) to parties other than the Holders (on
a pro rata basis) in a transaction (a "Transaction") not registered under the
Securities Act, then such Founder (a "Selling Founder") shall first promptly
notify the Holders of its intention to do so pursuant to Section 5.1.3. Each
Holder shall have a right of first refusal to purchase its pro rata share of all
Common Shares proposed to be sold by any Selling Founder after such Selling
Founder first offers such Common Shares to the Company pursuant to existing
agreements containing such right. The Selling Founder shall promptly, in
writing, inform each Fully-Exercising Holder of any other Holder's failure to
exercise its right of first refusal. During the ten (10) day period commencing
after such information is given, each Fully-Exercising Holder may elect to
purchase that portion of the Common Shares for which the Holders were entitled
to subscribe but which were not subscribed for by the Holders that is equal to a
fraction of the unsubscribed shares. The numerator of such fraction shall be the
number of equity securities of the Company (assuming conversion of all such
securities to Common Stock) owned by a Fully-Exercising Holder and the
denominator of which shall be the total number of equity securities (assuming
the conversion of all such securities to Common Stock) owned by all
Fully-Exercising Holders who wish to purchase some of the unsubscribed shares.
For purposes of determining each Holder's pro rata share, all affiliates shall
be aggregated and any of such affiliates may sell some or all of the shares
available to such affiliates pursuant to this Section 5.1.1.

                           5.1.2    The Right of Co-Sale. If the Company and any
Holders have waived or failed to timely exercise their Rights of First Refusal
as to all or any part of the Common Shares proposed to be sold by a Selling
Founder, then each Holder that has not exercised its Right of First Refusal
shall have a Right of Co-Sale as set forth in this Section 5.1.2. Any Holder
which notifies such Founder in writing within thirty (30) days after receipt of
the notification from such Founder referred to in Section 5.1.3 shall have the
opportunity to sell up to a pro rata portion of the Common Shares which the
Founder proposes to sell to such third party in the Transaction. In such
instance, the Selling Founder shall assign so much of his interest in the
proposed agreement of sale as the Selling Founder shall be entitled to and shall
request hereunder, and the Holder shall assume such part of the obligations of
the Selling

                                       16
<PAGE>   18

Founder under such agreement as shall relate to the sale of the securities by
the Selling Founder. For the purposes of this Section 5.1.2, the "pro rata
portion" which the Holder shall be entitled to sell shall be an amount of Common
Shares equal to a fraction of the total amount of Common Shares proposed to be
sold to such third party. The numerator of such fraction shall be the number of
equity securities of the Company (assuming the conversion of all such securities
to Common Stock) owned by Holder and the denominator shall be the total number
of equity securities (assuming the conversion of all such securities to Common
Stock) owned by all participating Selling Founders and the other Holders
proposing to sell shares in the Transaction (individually a "Selling Holder" and
collectively the "Selling Holders"). Each Holder shall notify the Selling
Founder whether it elects to sell an amount equal to or less than its pro rata
share of the Common Shares so offered. The Selling Founder shall promptly, in
writing, inform each Selling Holder of any other Selling Holder's failure to
exercise its right of co-sale in full. During the ten (10) day period commencing
after such information is given, each Selling Holder may elect to sell that
portion of the Common Shares for which the Selling Holders were entitled to sell
but which were not sold by the Selling Holders that is equal to their pro rata
portion of the unsold shares. Each Holder shall be entitled to apportion Common
Shares to be sold among its partners, members, or affiliates, provided that such
Holder notifies the Selling Founder and the Company of such allocation, and
provided that such allocation does not preclude the Company's reliance on any
exemption from the registration provisions of the Securities Act or the
applicable qualifications provisions. For purposes of this Section 5.1., the
stock of the Company shall be arithmetically adjusted for stock dividends, stock
splits, recapitalizations and the like.

                           5.1.3    Notice. Prior to any sale by a Founder of
any Common Shares, the Founder shall notify each Holder, in writing, of his
intention to sell such securities (the "Offered Securities"), setting forth in
reasonable detail the general terms under which he proposed to make such sale
including the number of Common Shares to be sold or transferred, the nature of
the sale or transfer, the consideration to be paid and the identity of the
Holder. Within thirty (30) days after receipt of such notice, any Holder which
desires to exercise its rights under this Section 5.1 shall notify the Founder
of its desire to do so. Each Holder shall be entitled to apportion Offered
Securities to be sold or purchased among its partners and affiliates, provided
that such Holder notifies the Founder of such intention to do so.

                           5.1.4    Failure to Notify. If within thirty (30)
days after the Founder gives his aforesaid notice to the Holders, the Holders do
not notify the Founder that they desire to sell or purchase all of their pro
rata portions of the Common Shares described in such notice for the price and on
the terms and conditions set forth therein, then the Founder may sell during the
90-day period thereafter such Common Shares as to which the Holders do not elect
to sell or purchase. Any such sale or purchase shall be made only to persons
identified in the Founder's notice and at the same price and upon the same terms
and conditions as those set forth in the notice. In the event the Founder has
not sold the Common Shares or entered into an agreement to sell the Common
Shares within such 90-day period set forth in Section 5.1.3, the Founder shall
not thereafter sell any Common Shares without first notifying the Holders in the
manner provided above.

                                       17
<PAGE>   19

                           5.1.5    Definition. The term "Common Shares" shall
mean all shares of Common Stock of the Company owned or subsequently acquired by
a Founder and all shares of Common Stock of the Company issuable upon exercise
or conversion of any exercisable or convertible securities held or subsequently
acquired by Founder.

                           5.1.6    Limitations to Rights of Co-Sale and First
Refusal. Notwithstanding the provisions of this Section 5.1:

                                    (a)   a Founder may sell or otherwise
assign, without consideration, Common Shares to any or all of his ancestors,
descendants, spouse, or members of his immediate family, or to a custodian,
trustee (including a trustee of a voting trust), executor, or other fiduciary
for the account of his ancestors, descendants, spouse, or members of his
immediate family without compliance with this Section 5.1, provided that each
such transferee or assignee, prior to the completion of the sale, transfer, or
assignment, shall have executed documents assuming the obligations of such
Founder under this Agreement with respect to the transferred securities;

                                    (b)   the Company may exercise in full its
rights to repurchase unvested Common Stock of the Company issued pursuant to
stock purchase or option agreements entered into between the Company and the
Founders without compliance with this Section 5.1;

                                    (c)   a Founder may sell, transfer or pledge
up to ten percent (10%), in the aggregate, of the Common Stock of the Company
held by such Founder as of the date hereof without compliance with this Section
5.1, except that such Founder shall give the Company detailed notice of such
sale at least ten (10) days prior to the consummation of such sale and such
transferee shall agree to assume the obligations of transferor as provided
herein;

                                    (d)   a Founder may sell the Common Stock of
the Company held by such Founder in connection with the Initial Offering without
compliance with this Section 5.1, so long as the Holders are also permitted to
sell in the Initial Offering the same proportion of their Registrable Securities
as the maximum proportion of the Common Stock of any Founder that such Founder
is permitted to sell.

                  5.2      Board of Directors. So long as at least 1,000,000
Shares are issued and outstanding, the Founders and the Holders agree to vote
all shares held by them by written consent or a duly held meeting of
shareholders in favor of each of (i) any two (2) representatives of the holders
of Series A Preferred Stock (the "Series A Designees") to serve as nominees to
the Company's Board of Directors, who, as of the date hereof, are Andrew S.
Rappaport and David Cowan, and (ii) any two (2) representatives of the holders
of Series C Preferred Stock (the "Series C Designees") to serve as nominees to
the Company's Board of Directors, of which one (1) member shall be appointed by
NBCi, who initially shall be Edmond Sanctis, and one (1) member shall be
appointed by NBC upon the earlier of (A) the closing of the Initial Offering or
(B) one year after the date hereof; provided that at such time NBC owns,
directly or indirectly, all of the shares of Series C Preferred Stock (or Common
Stock into which such Series C Preferred Stock is converted) that it acquires
pursuant to this Agreement. Until such time that

                                       18
<PAGE>   20

NBC is allowed to appoint one member of the Board of Directors, there shall
remain one vacancy on the Board of Directors. NBC shall continue to have the
right to elect a director until such time as it no longer holds at least 66% of
the shares of Series C Preferred Stock that it acquires pursuant to the Purchase
Agreement. The Founders and Holders agree to vote all shares held by them by
written consent or a duly held meeting of shareholders in favor of each of any
two (2) representatives of the holders of the Company's Common Stock to serve as
nominees to the Company's Board of Directors, who, as of the date hereof, are
Peter Olson and Michael Solomon. The seventh member of the Board of Directors,
who, as of the date hereof, is Randy Strahan, shall be agreeable to two-thirds
of the members of the Board of Directors.

                  5.3      Legends.

                           5.3.1.   Founders.  All instruments evidencing Common
Shares held by the Founders shall bear the following legends:

         "THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
         REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
         OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT CONTAINED IN
         THE SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT DATED
         DECEMBER 13, 1999. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
         WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."

         "THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT
         CONTAINED IN THE SECOND AMENDED AND RESTATED INVESTORS' RIGHTS
         AGREEMENT DATED DECEMBER 13, 1999 (A COPY OF WHICH MAY BE OBTAINED FROM
         THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON
         ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME
         BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT."

                           5.3.1.   Holders. All instruments evidencing Shares
held by the Holders shall bear the following legend:

         "THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT
         CONTAINED IN THE SECOND AMENDED AND RESTATED INVESTORS' RIGHTS
         AGREEMENT DATED DECEMBER 13, 1999 (A COPY OF WHICH MAY BE OBTAINED FROM
         THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON
         ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME
         BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT."

                                       19
<PAGE>   21

                  5.4      Termination. The obligations of the Founders under
Sections 5.1 and 5.2 shall terminate and be of no further force and effect after
two (2) years following the effective date of the Company's Initial Offering.

                  5.5      Assignment. Upon written notice to the Founders, the
rights granted pursuant to this Section 5.1 may be assigned by a Holder or its
transferees upon a sale or transfer (other than a sale thereof to the public) of
Shares or the Common Stock of the Company issued or issuable upon conversion of
the Shares held by such Holder; so long as (i) such transferee holds at least
500,000 Shares or 500,000 shares of the Common Stock of the Company issued or
issuable upon conversion of the Shares or (ii) such transferee is a charitable
donee and holds 50,000 Shares or 50,000 shares of Common Stock of the Company
issued or issuable upon conversion of the Shares, and provided that any
transferee of a Holder shall agree to become subject to the obligations of the
Holders hereunder. Notwithstanding the foregoing, rights to cause the Company to
register securities may be assigned to any subsidiary, parent, partner or
retired partner of a Holder, any family member or trust for the benefit of any
individual Holder or any affiliate of any such Holder.

                  5.6      Amendment. The rights and obligations of the Founders
and the Holders under this Section 5 may only be amended (either generally or in
a particular instance) by a statement in writing signed by (i) a majority of the
shares held by the Founders whose rights and obligations are to be amended and
(ii) two-thirds (2/3) of the shares held by the Holders.

                  5.7      No Waiver. The exercise or non-exercise of the rights
of a Holder hereunder to participate in one or more sales of Common Shares made
by a Founder shall not adversely affect their rights to participate in
subsequent sales of Common Shares subject to Section 5.1.

         6.       Covenants.

                  6.1      Consent of NBC and NBCi for Certain Matters. The
prior written consent of NBC and NBCi will be required for any action which
results in: (a) the issuance of any equity or debt securities to any NBCi
Competitor or NBC Competitor (each as defined below), (b) any merger of the
Company with, or sale of assets of the Company with a fair market value of at
least $100,000 to, any NBCi Competitor or NBC Competitor, or (c) the issuance of
equity or equity-linked securities senior to the Series C Preferred Stock;
provided that after June 30, 2000, in the event that the Company receives a bona
fide offer from an NBC Competitor or NBCi Competitor to purchase any equity or
debt securities of the Company or all or substantially all of its assets, the
Company may accept such offer without the prior written consent of consent of
NBC or NBCi if neither NBC nor NBCi offers to purchase such securities or assets
on the same terms within ten (10) days of receipt of a notice, which notice
shall include the identity of the offeror and a complete description of the
terms and conditions of such offer; including the number and type of securities
or assets to be purchased, the purchase price and the terms upon which
securities are to be purchased and which shall be delivered to NBC and NBCi
within ten (10) days of receipt of such offer, it being understood that if the
terms and conditions of such offer become more favorable to the offeror, then
the Company shall provide NBC and NBCi with an

                                       20
<PAGE>   22

additional ten (10) business day period in which to match such revised offer.
NBC and/or NBCi may match any offer made by an NBC Competitor or NBCi Competitor
with cash or stock (or a combination thereof) of equal value to the purchase
price proposed by the offeror. "NBC Competitor" means Disney/ABC, CBS/Viacom,
News Corporation/Fox, Time Warner, Liberty Media, USA Network or their
affiliates. "NBCi Competitor" means Yahoo!, MSN, AOL/Netcenter, Excite AtHome,
Lycos, Go Network, Go2Net.com, AltaVista, CMGI (so long as CMGI continues to own
a controlling interest in an Internet e-commerce/content company which could
provide services/content which may compete with those provided by NBCi), Amazon
or their respective affiliates. As used above, "affiliates" shall include
entities that directly, or indirectly through one or more intermediaries,
control, or are controlled by, or are under common control with one or more of
the entities listed above. The rights and obligations under this Section 6.1
shall terminate immediately upon the closing of the Initial Offering.

                  6.2      Right of First Negotiation. So long as the Operating
Agreement is in effect and NBC and NBCi together own at least 2,500,000 shares
of Series C Preferred Stock (or any Common Stock issued upon conversion
thereof), NBC and NBCi shall have the rights as set forth in this Section 6.2.

                                       21
<PAGE>   23

                           6.2.1.   In the event that the Company receives a
bona fide offer from an NBC Competitor or NBCi Competitor to purchase a twenty
per cent (20%) or greater interest in the Company or all or substantially all of
the Company's assets, the Company will provide written notice to NBC and NBCi
that an offer has been received within ten (10) business days of receiving such
offer, including the identity of such bona fide offeror and a complete
description of the terms and conditions of such offer. In the event that the
Company intends to accept such offer, the Company first will negotiate
exclusively and in good faith with NBC and NBCi for thirty (30) days to allow
NBC and/or NBCi to make an offer to purchase such interest or such assets. If
the Company shall have negotiated exclusively and in good faith and shall have
failed to reach an agreement with NBC and/or NBCi, as a group or individually,
regarding such purchase within thirty (30) days after NBC and NBCi shall have
received such written notice from the Company, then the Company may sell such
interest or assets to such Competitor on terms which are no less favorable to
the Company than those last offered to NBC and NBCi.

                           6.2.2    In the event that the Company receives a
bona fide offer from any entity other than an NBC Competitor or NBCi Competitor
to purchase a twenty per cent (20%) or greater interest in the Company or all or
substantially all of the Company's assets, the Company will provide written
notice to NBC and NBCi that an offer has been received within ten (10) business
days of receiving such offer, including the identity of the bona fide offeror
and a complete description of the terms and conditions of such offer. If either
NBC or NBCi desire to make a competitive offer, then the Company shall negotiate
exclusively and in good faith with NBC or NBCi, as the case may be, the terms of
such competitive offer. If the Company shall have negotiated exclusively and in
good faith and shall have failed to reach an agreement with NBC and/or NBCi, as
a group or individually, regarding such competitive offer within thirty (30)
days after NBC and NBCi shall have received such written notice, then the
Company may sell such interest or assets to such entity on terms which are no
less favorable to the Company than those last offered to NBC and NBCi.

                  6.3      Amendment.  Sections 6.1 and 6.2 and this Section 6.3
may not be amended without the written consent of NBC and NBCi.

                  6.4      Remedies. Upon the breach of any covenant,
representation or warranty which would have a material adverse effect on the
business of the Company and which cannot be cured within a reasonable period of
time, or upon bankruptcy, liquidation or insolvency of the Company, or upon the
failure to make mandatory redemptions of Preferred Stock as set forth in the
Company's Articles of Incorporation within a reasonable period of time,
Purchasers shall have the right to elect up to one (1) additional member to the
Board of Directors of the Company and the Holders and Founders hereby agree to
vote their shares of capital stock in the Company to increase the size of the
Board of Directors in order to accommodate such additional member.

                  6.5      Amendment of Articles of Incorporation. The Company
and all parties to this Agreement hereby agree to amend and restate the
Company's Third Amended and Restated Articles of Incorporation as set forth in
Exhibit A attached hereto as soon as reasonably practicable after the date of
this Agreement and each of the Investors, the Existing Holders and

                                       22
<PAGE>   24
the Founders agrees to execute on the date hereof the shareholder consent to
such effect attached hereto as Exhibit B.

         7.       Miscellaneous.

                  7.1      Governing Law. This Agreement shall be governed by
and construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California. Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any state or federal court located in the County of
Santa Clara, California. Each party to this Agreement: (a) expressly and
irrevocably consents and submits to the jurisdiction of each state and federal
court located in the County of Santa Clara, California (and each appellate court
located in the State of California) in connection with any such legal
proceeding; (b) agrees that each state and federal court located in the County
of Santa Clara, California shall be deemed to be a convenient forum; and (c)
agrees not to assert (by way of motion, as a defense or otherwise), in any such
legal proceeding commenced in any state or federal court located in the County
of Santa Clara, any claim that such party is not subject personally to the
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or by
such court.

                  7.2      Waiver of Jury Trial. Each party hereto hereby
waives, to the fullest extent permitted by applicable state law, any right that
it may have to a trial by jury in respect of any claim, action, lawsuit or
proceeding (collectively, "Litigation") directly or indirectly arising out of,
under, or in connection with this Agreement, whether grounded in tort, contract
or otherwise. Each party hereto (i) certifies that no representative, agent,
attorney of the other party has represented, expressly or otherwise, that the
other party would not, in the event of Litigation, seek to enforce the foregoing
waiver and (ii) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement by, among other things, the mutual waivers
and certifications in this subsection.

                  7.3      Survival. The representations, warranties, covenants,
and agreements made herein shall survive any investigation made by any Holder
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.

                  7.4      Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement, and the rights and obligations hereunder, may
not be assigned by any party hereto to a third party (excluding any subsidiary,
parent, affiliate, general partner, limited partner or acquiror of such party
hereto) without the prior written consent of the Company and the holders of at
least a majority in interest of the Shares. The provisions hereof shall inure to
the benefit of, and be binding upon, the successors, permitted assigns, heirs,
executors, and administrators of the parties hereto; provided, however, that
prior to the receipt by the Company

                                       23
<PAGE>   25

of written notice of the transfer of any Registrable Securities specifying the
full name and address of the transferee, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.

                  7.5      Separability. In case any provision of the Agreement
shall be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

                  7.6      Amendment and Waiver.

                           7.6.1    Except as otherwise expressly provided, this

Agreement may be amended or modified only upon the written consent of the
Company and the holders of at least two-thirds (2/3) of the Shares (including
any Common Stock of the Company issued upon the conversion of the Shares).

                           7.6.2    Except as otherwise expressly provided, the
obligations of the Company and the rights of the Holders under this Agreement
may be waived only with the written consent of the Company and the holders of at
least two-thirds (2/3) of the Shares (including any Common Stock of the Company
issued upon the conversion of the Shares).

                  7.7      Delays or Omissions. It is agreed that no delay or
omission to exercise any right, power, or remedy accruing to any party hereto,
upon any breach, default or noncompliance of any other party hereto under this
Agreement shall impair any such right, power, or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of any similar breach, default or noncompliance
thereafter occurring. It is further agreed that any waiver, permit, consent, or
approval of any kind or character on any party's part of any breach, default or
noncompliance under the Agreement or any waiver on such party's part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to the
parties hereto, shall be cumulative and not alternative.

                  7.8      Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) upon confirmed receipt of telex or
facsimile by the intended recipient, (iii) five (5) days after having been sent
by registered or certified mail, return receipt requested, postage prepaid, or
(iv) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All
communications shall be sent to the party to be notified at the address as set
forth on the signature pages hereof or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.

                  7.9      Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

                                       24
<PAGE>   26

                  7.10     Pronouns. All pronouns contained herein and any
variations thereof shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity of the parties hereto may require.

                  7.11     Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.

                  7.12     Entire Agreement. This Agreement constitutes the full
and entire understanding and agreement between the parties regarding the matters
set forth herein, and supersedes and cancels any prior agreements.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       25
<PAGE>   27

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

COMPANY:

TELOCITY, INC.

By:________________________________
   Patti Hart, President and CEO

10355 North De Anza Boulevard
San Jose, CA 95014

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   28

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

EXISTING HOLDERS:                      AUGUST CAPITAL, L.P., FOR ITSELF AND AS
                                       NOMINEE FOR AUGUST CAPITAL STRATEGIC
                                       PARTNERS, L.P. AND AUGUST CAPITAL
______________________________         ASSOCIATES, L. P.
Peter Olson                            By: August Capital Management, L.L.C.,
                                           its general partner
c/o Telocity, Inc.
10355 North De Anza Boulevard
San Jose, CA 95014                     By:_______________________________
                                          Mark G. Wilson, Member

______________________________         2480 Sand Hill Road, Suite 101
Michael Solomon                        Menlo Park, CA 94025

c/o Telocity, Inc.                     BESSEMER VENTURE PARTNERS IV L.P.
10355 North De Anza Boulevard          By:  Deer IV & Co. L.P.
San Jose, CA 95014

                                       By:_______________________________
______________________________            Robert H. Buescher
Kevin Grundy

c/o Telocity, Inc.
10355 North De Anza Boulevard
San Jose, CA 95014

______________________________
John Seamons

0103 Stackyard Lane
Basalt, CO 81621

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   29

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

EXISTING HOLDERS (cont'd):

COMDISCO, INC.                         BESSEC VENTURES IV L.P.
                                       By:  Deer IV & Co. L.P.
By:___________________________
                                       By: _____________________________________
Name:_________________________             Robert H. Buescher, Manage

Its:__________________________         Address:   1400 Old County Rd., Ste. 407

                                                        Westbury, NY 11590
6111 N. River Road
Rosemont, IL 60018
Attn:  Jill Hanses                     MOHR, DAVIDOW VENTURES V, L.P.
                                       By:  Fifth MDV Partners, L.L.C.,
STANFORD UNIVERSITY                    Its:  General Partner

By:___________________________         By:  _______________________________
                                              Jonathan D. Feiber, Member
Name:_________________________
                                       Address:  2775 Sand Hill Road, Suite 240
Its:__________________________                         Menlo Park, CA 94025

2770 Sand Hill Road                    MOHR, DAVIDOW VENTURES V, L.P.
Menlo Park, CA 94025                   AS NOMINEE FOR MDV ENTREPRENEURS' NETWORK
Attn:  Carol Gilmer                    FUND II (A), L.P. AND MDV ENTREPRENEURS'
                                       NETWORK FUND II (B), L.P.
                                       By:   Fifth MDV Partners, L.L.C.,
Blumenfeld & Cohen                     Its:   General Partner

                                       By:______________________________________
By:___________________________                 Jonathan D. Feiber, Member
Its:__________________________
                                       Address:  2775 Sand Hill Road, Suite 240
Address:______________________                         Menlo Park, CA 94025
        ______________________

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   30

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

EXISTING HOLDERS (cont'd)

GRAY CARY WARE & FREIDENRICH LLP

By:____________________________
   Margaret H. Kavalaris, Partner

400 Hamilton Avenue
Palo Alto, CA 94301-1825

H. JOSEPH AND JOELE L. HOROWITZ          RRE INVESTORS, L.P.
AS TRUSTEES OF THE HOROWITZ FAMILY
TRUST DATED 11/6/89                      By:___________________________
By:_______________________________          Andrew L. Zalasin

Name:_____________________________       Its:  Member, General Partner

Its:  Trustee                            Address: RRE Investors
                                                  126 East 56th Street
Address:  52 Isabella Avenue                      New York, NY 10022
                Atherton, CA 94027

                                         RRE INVESTORS FUND, L.P.
By:______________________________
       Manuel A. Henriquez               By:___________________________
                                                Andrew L. Zalasin
Address:  170 Hanna Way
                Menlo Park, CA 94025     Its:  Member, General Partner

                                         Address: P.O. Box 31106 SMB
LABE REVOCABLE TRUST, DATED                       West Bay Road
OCTOBER 15, 1998                                  Grand Cayman, Cayman Islands
By:______________________________                   B.W.I.

Its:_____________________________

Address:_________________________

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   31

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

FOUNDERS:

________________________________
Thomas Obenhuber

________________________________
Matthew J. Stepovich

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   32

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

FOUNDER:

__________________________
Peter D. Olson

                                CONSENT OF SPOUSE

        I, ____________________, spouse of Peter D. Olson, acknowledge that I
have read the Agreement and that I know its contents. I am aware that by its
provisions there are certain restrictions imposed upon the sale or other
disposition during my spouse's lifetime of the Common Shares of the Company
which my spouse owns. I hereby agree that my interest, if any, in the Common
Shares subject to the Agreement shall be irrevocably bound by the Agreement and
further understand and agree that any community property interest I may have in
the Common Shares shall be similarly bound by the Agreement.

                                      _________________________________________
                                      [Signature]

                                      __________________________________________
                                      [Print Name]

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   33

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

FOUNDER:

___________________________
Michael Solomon

                                CONSENT OF SPOUSE

        I, ____________________, spouse of Michael Solomon, acknowledge that I
have read the Agreement and that I know its contents. I am aware that by its
provisions there are certain restrictions imposed upon the sale or other
disposition during my spouse's lifetime of the Common Shares of the Company
which my spouse owns. I hereby agree that my interest, if any, in the Common
Shares subject to the Agreement shall be irrevocably bound by the Agreement and
further understand and agree that any community property interest I may have in
the Common Shares shall be similarly bound by the Agreement.

                                     ___________________________________________
                                     [Signature]

                                     ___________________________________________
                                     [Print Name]

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   34

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

FOUNDER:

___________________________
Kevin Grundy

                                CONSENT OF SPOUSE

        I, ____________________, spouse of Kevin Grundy, acknowledge that I have
read the Agreement and that I know its contents. I am aware that by its
provisions there are certain restrictions imposed upon the sale or other
disposition during my spouse's lifetime of the Common Shares of the Company
which my spouse owns. I hereby agree that my interest, if any, in the Common
Shares subject to the Agreement shall be irrevocably bound by the Agreement and
further understand and agree that any community property interest I may have in
the Common Shares shall be similarly bound by the Agreement.

                                     ___________________________________________
                                     [Signature]

                                     ___________________________________________
                                     [Print Name]

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   35

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

INVESTORS:

NBC INTERNET, INC.                      VALUEVISION INTERNATIONAL, INC.

                                        By:________________________________
By:____________________________
                                        Name:______________________________
Name:__________________________
                                        Its:_______________________________
Its:___________________________
                                        Address:
Address: 300 Montgomery Street,
Suite 300
San Francisco, CA 94104
Attention: President

NATIONAL BROADCASTING COMPANY, INC.     GE CAPITAL EQUITY INVESTMENTS, INC.

By:____________________________         By:________________________________

Name:__________________________         Name:______________________________

Its:___________________________         Its:_______________________________

Address: 30 Rockefeller Plaza           Address:
New York, NY  10112
Attention:  President,
NBC Interactive Media

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   36

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

INVESTORS:

MOHR, DAVIDOW VENTURES V, L.P.             BESSEMER VENTURE PARTNERS IV LP
By: Fifth MDV Partners, L.L.C.,
Its: General Partner
                                           By:__________________________________
By:_______________________________
   Jonathan D. Feiber, Member              Name:________________________________

Address: 2775 Sand Hill Road, Suite 240    Its:_________________________________
         Menlo Park, CA 94025
                                           Address: 1400 Old County Rd.,
MOHR, DAVIDOW VENTURES V, L.P.                      Ste. 407
AS NOMINEE FOR MDV ENTREPRENEURS'                   Westbury, NY 11590
NETWORK FUND II (A), L.P. AND MDV
ENTREPRENEURS' NETWORK FUND II (B), L.P.   BESSEC VENTURES IV L.P.
By: Fifth MDV Partners, L.L.C.,
Its: General Partner                       By:__________________________________

By:_______________________________         Name:________________________________
   Jonathan D. Feiber, Member
                                           Its:_________________________________
Address: 2775 Sand Hill Road, Suite 240
         Menlo Park, CA 94025              Address: 1400 Old County Rd.,
                                                    Ste. 407
                                                    Westbury, NY 11590

AUGUST CAPITAL, L.P., FOR ITSELF AND       MOHR, DAVIDOW VENTURES V-L, L.P.
AS NOMINEE FOR AUGUST CAPITAL STRATEGIC    By:  Fifth MDV Partners, L.L.C.,
PARTNERS, L.P. AND AUGUST CAPITAL          Its:  General Partner
ASSOCIATES, L. P.
By: August Capital Management, L.L.C.,
     its general partner                   By: _______________________________
                                               Jonathan D. Feiber, Member

By:_______________________________         Address: 2775 Sand Hill Road,
   Mark G. Wilson, Member                           Suite 240
                                                    Menlo Park, CA 94025
2480 Sand Hill Road, Suite 101
Menlo Park, CA 94025

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   37

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

INVESTORS:

STANFORD UNIVERSITY                     COMDISCO, INC.

By:________________________________     By:_________________________________

Name:______________________________     Name:_______________________________

Its:_______________________________     Its:________________________________

2770 Sand Hill Road                     1116 N. River Road
Menlo Park, CA 94025                    Rosemont, IL 60018
                                        Attn:  Jill Hanses

By:________________________________     By: ________________________________
   Patti Hart                               John Seamons

c/o Telocity, Inc.                      0103 Stackyard Lane
10355 North De Anza Boulevard           Basalt, CO 81621
San Jose, CA 95014

By:________________________________
   Peter Olson

c/o Telocity, Inc.
10355 North De Anza Boulevard
San Jose, CA 95014

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   38

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

INVESTORS:

                                         RRE INVESTORS FUND, L.P.

                                         By:__________________________________
                                             Andrew L. Zalasin

                                         Its: Member, General Partner

                                         Address: P.O. Box 31106 SMB
                                                  West Bay Road
                                                  Grand Cayman, Cayman Islands
                                                  B.W.I.
RRE INVESTORS, L.P.                      LABE REVOCABLE TRUST, DATED
                                         OCTOBER 15, 1998
By:________________________________
   Andrew L. Zalasin                     By:__________________________________

Its: Member, General Partner             Name:________________________________

Address: RRE Investors                   Its:_________________________________
         126 East 56th Street
         New York, NY 10022              Address:

By:________________________________      By:__________________________________
   Manuel A. Henriquez                      Kevin Grundy

Address: 170 Hanna Way                   c/o Telocity, Inc.
         Menlo Park, CA 94025            10355 North De Anza Boulevard
                                         San Jose, CA 95014

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   39

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

INVESTORS:

GRAY CARY WARE & FREIDENRICH LLP          BESSTEL LLC

By:_________________________________      By:______________________________
   Margaret H. Kavalaris, Partner
                                          Name:____________________________
400 Hamilton Avenue
Palo Alto, CA 94301-1825                  Its:_____________________________

                                          c/o Bessemer Partners & Co.
                                          630 Fifth Avenue, 39th Floor
                                          New York, NY 10111
                                          Attn:  Robert Roriston
                                          Fax:  (212) 307-6314
                                          Phone:  (212) 708-9237

QUANTUM INDUSTRIAL PARTNERS LDC           SFM DOMESTIC INVESTMENTS LLC

By:_________________________________      By:______________________________

Name:_______________________________      Name:____________________________

Its:________________________________      Its:_____________________________

Curacao Corporation Company N.V.          c/o  Soros Fund Management LLC
Kaya Flambonyan 9                              888 Seventh Avenue, Suite 3300
Willemstad, Curacao                            New York, NY 10106
Netherlands Antilles                           Attn:  Michael C. Neus
Fax: (011) 599-97-322-420                      Phone:  (212) 397-5540
Phone: (011) 599-97-322-422                    Fax:  (212) 664-0544

Copy to: Soros Fund Management LLC
         888 Seventh Avenue,
         Suite 3300
         New York, NY 10106
         Attn:  Michael C. Neus
         Phone:  (212) 397-5540
         Fax:  (212) 664-0544

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   40

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

INVESTORS:

By:____________________________          By:_____________________________
   Donald B. Marron                         Frank Drazka

Address:                                 Address:

By:____________________________          By:_____________________________
   Joeseph J. Grano Jr.                     J. Scott Coburn

Address:                                 Address:

By:____________________________          By:_____________________________
   Steven P. Baum                           Thomas H. Mahoney, IV

Address:                                 Address:

By:____________________________          By:_____________________________
   Brian M. Barefoot                        Joseph L. Morea

Address:                                 Address:

By:____________________________          By:_____________________________
   Leonard Brooks, III                      Suzanne E. Maccagnan

Address:                                 Address:

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   41

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

INVESTORS:

By:______________________________        By:_______________________________
       Donald C. Cacciapaglia                      Stephen P. Bowen

Address:                                 Address:  Blumenfeld & Cohen
                                                   4 Embarcadero Center,
                                                   Suite 1170
                                                   San Francisco, CA 94111
                                                   (415) 394-7500

By:______________________________        By:________________________________
          Elise P.W. Kiely                         Dave M. Naseman

Address:  Blumenfeld & Cohen             Address:  Blumenfeld & Cohen
          1625 Massachusetts Avenue NW             56 Desert Highlands
          Suite 300                                10040 East Happy Valley Road
          Washington, DC 20036                     Scottsdale, AZ 85255
          (202) 955-6300                           (480) 473-7068

By:______________________________        By:________________________________
          Jeffrey Blumenfeld                       Gary M. Cohen

Address:  Blumenfeld & Cohen             Address:  Blumenfeld & Cohen
          1625 Massachusetts Avenue NW             1625 Massachusetts Avenue NW
          Suite 300                                Suite 300
          Washington, DC 20036                     Washington, DC 20036
         (202) 955-6300                            (202) 955-6300

By:______________________________        By:________________________________
          Christy C. Kunin                         Glenn B. Manishin

Address:  Blumenfeld & Cohen             Address:  Blumenfeld & Cohen
          1625 Massachusetts Avenue NW             1625 Massachusetts Avenue NW
          Suite 300                                Suite 300
          Washington, DC 20036                     Washington, DC 20036
          (202) 955-6300                           (202) 955-6300

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   42

        IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.

INVESTORS:

GCWF INVESTMENT PARTNERS
                                          By:____________________________
                                                  Margaret H. Kavalaris
By:______________________________
   Gregory Gallo, President and           c/o Gray Cary Ware & Freidenrich LLP
   Chief Financial Officer                400 Hamilton Avenue
                                          Palo Alto, CA 94301-1825
400 Hamilton Avenue
Palo Alto, CA 94301-1825

                    SIGNATURES TO INVESTORS' RIGHTS AGREEMENT

<PAGE>   43

                                    EXHIBIT A

        Fourth Amended and Restated Articles of Incorporation of the Company

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