Document:

<PAGE>

 Terms and Conditions of the relocation of Edward J. Brown III to San Francisco

1.  I will retain my existing residence in Charlotte and pay all expenses
    related to this home.

2.  Regarding the purchase of my new home in San Francisco located at 3070
    Pacific, the bank agrees to provide $6.2 million of the $6.6 million
    required funds to purchase, renovate and decorate the home. All expenses
    related to this home including interest, real estate taxes, insurance and
    utilities will be reimbursed to me by the bank on an after tax basis.

3.  Upon my relocation to Charlotte, the bank agrees to reimburse me for all
    expenses related to the sale of the San Francisco home. Additionally, the
    bank agrees to reimburse me for any loss taken on the sale of the home.

4.  In the event that I retire or am terminated while working for Bank of
    America in San Francisco, the bank agrees to pay for all expenses incurred
    in the relocation of my family back to Charlotte and reimburse me for all
    expenses related to the sale of the San Francisco home. Lastly, the bank
    agrees to reimburse me for any loss taken on the sale of the home.

     /s/ Edward J. Brown III
     -----------------------
     Edward J. Brown III
     October 5, 1998

     CONCUR:

     By:  _________________________________   Date:  _____________________<PAGE>

                                                                     EXHIBIT 4.1
NUMBER VR-

SHARES

ORDINARY SHARES

ORDINARY SHARES

INCORPORATED UNDER THE LAWS
OF THE STATE OF ISRAEL

Verisity
VERISITY LTD.

SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP M97385 11 2

This Certifies that

is the record holder of

FULLY PAID AND NONASSESSABLE ORDINARY SHARES, NIS 0.01 PAR VALUE, SUBJECT TO THE
MEMORANDUM AND ARTICLES OF ASSOCIATION OF
VERISITY LTD.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney on surrender of this certificate properly endorsed.
This certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
WITNESS the facsimile signatures of its duly authorized officers.
Dated:

SECRETARY

CHIEF EXECUTIVE OFFICER

COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NY)
TRANSFER AGENT AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<PAGE>

VERISITY LTD.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS,
A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF EACH CLASS OF SHARES OR SERIES THEREOF AUTHORIZED TO BE ISSUED
AND THE AUTHORITY OF THE BOARD OF DIRECTORS OF THE CORPORATION TO DESIGNATE AND
FIX THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF CLASSES OF PREFERRED
SHARES IN SERIES.

The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM -as tenants in common
TEN ENT -as tenants by the entireties
JT WROS -as joint tenants with right
         of survivorship and not as
         tenants in common

UNIF GIFT MIN ACT-.....................Custodian...........................
                         (Cust)                         (Minor)
                under Uniform Gifts to Minors
                Act........................................................
                                      (State)

Additional abbreviations may also be used though not in the above list.

For value received,                                                 hereby
sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

(Please print or typewrite name and address including postal zip code of
assignee)

Shares

of the Ordinary Shares represented by the within Certificate, and do hereby
irrevocably constitute and appoint

Attorney

to transfer the said Shares on the Books of the within-named Corporation with
full power of substitution in the premises.

Dated

NOTICE:

THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.

SIGNATURE(S) GUARANTEED
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE
17Ad-15.<PAGE>

                                                                   EXHIBIT 10.42

                                FIRST AMENDMENT
                                      TO
                                 VERISITY LTD.
                       2000 EMPLOYEE SHARE PURCHASE PLAN

     Pursuant to an action taken on March 11, 2001 by the Board of Directors of
Verisity Ltd., Section 2(d) of the Verisity Ltd. 2000 Employee Share Purchase
Plan (the "Plan") is hereby amended as follows:

          (d) "Compensation" shall mean all gross earnings including
          commissions, bonuses, payments for overtime, shift premium, incentive
          compensation, incentive payments and other compensation.

Except as expressly amended above, the Plan shall remain in full force and
effect.<PAGE>

                                                                   Exhibit 10.24
                                                                   -------------

                            BUSINESS PARK NET LEASE

                             3777 SPINNAKER COURT
                              FREMONT, CALIFORNIA

                                BY AND BETWEEN

                       BEDFORD PROPERTY INVESTORS INC.,
                       --------------------------------
                            A Maryland corporation
                            ----------------------
                                  (Landlord)
                                  ----------

                                      AND

                        CENTILLIUM COMMUNICATION, INC.,
                        -------------------------------
                            a Delaware corporation
                            ----------------------
                                   (Tenant)
                                   --------

<PAGE>

                           BUSINESS PARK NET LEASE

      This Business Park Net Lease ("Lease") is entered into by and between
"Landlord" and "Tenant" (defined below and collectively the "Parties") and dated
for reference purposes only as of August 28, 2000.
                                  ---------

                        ARTICLE 1. SALIENT LEASE TERMS
                        ------------------------------

      In addition to the terms defined throughout this Lease, the terms set
forth below shall have the following meanings when referred to in this Lease:

1.1   Rent Payment Address:      BEDFORD PROPERTY INVESTORS, INC.
                                 Lockbox No. 73048-"Spinnaker Court"
                                                    ---------------
                                 P.O. Box 60000, San Francisco, CA 94160-3048.

1.2   Landlord & Notice Address: BEDFORD PROPERTY INVESTORS, INC.,
                                 a Maryland corporation
                                 270 Lafayette Circle
                                 Lafayette, CA 94549
                                 Attn: Property Management
                                 Facsimile Number: (925)283-0896.

1.3   Tenant & Notice Address:   CENTILLIUM COMMUNICATIONS, INC.
                                 a Delaware corporation
                                 3777 Spinnaker Court
                                 Fremont, California  94538
                                 Facsimile Number: (___)_________

1.4   Premises:                  3777 Spinnaker Court, Fremont, California
                                 ------------------------------------------
                                 containing approximately 20,770 square feet
                                                          ------
                                 (the "Rentable Area"), as outlined in Exhibit
                                                                       -------
                                 B-1
                                 ---

1.5   Building:                  Building 1: 3777 Spinnaker Court, Fremont,
                                 -----------------------------------------
                                 California in which the Premises are located.
                                 ----------

1.6   Complex:                   Spinnaker Court, located at 3777-3797 Spinnaker
                                 ---------------             -------------------
                                 Court, Fremont, California, in the State of
                                 --------------------------
                                 California ("State"), consisting of: (i) that
                                 parcel of real property on which the Premises
                                 are located, (ii) the Common Area, and (iii)
                                 any contiguous parcels owned by Landlord, as
                                 more particularly described in Exhibit A.
                                                                ---------

1.7   Term:                      (A) November 1, 2000 (the "Estimated
                                     ----------
                                     Commencement Date").

                                 (B) Sixty (60) months
                                     ----------

1.8   Minimum Monthly Rent:      (A) Minimum Monthly
                                     Months 01-12: $46,732.50
                                     ------------------------
                                     Months 13-24: $49,069.13
                                     ------------------------
                                     Months 25-36: $51,522.58
                                     ------------------------
                                     Months 37-48: $54,098.71
                                     ------------------------
                                     Months 49-60: $56,803.65
                                     ------------------------

                                 (B) Advance Rent: $46,732.50
                                                   ----------

1.9   Security Deposit:          Letter of Credit: $467,325.00 (see Exhibit F)
                                 -----------------------------

1.10  Permitted Use:             General office and administration, R&D and
                                 ------------------------------------------
                                 other ancillary uses related to the broadband
                                 ---------------------------------------------
                                 communications industry.
                                 -----------------------

1.11  Initial Pro Rata %:        21.09% percent (20,770 sq. ft. / 98,500 sq. ft)
                                 ------

1.12  Landlord's Allowance:      N/A.
                                 ---

1.13  CC&Rs:                     Date of Recordation  July 9, 1986
                                                     -------------
                                 Book  161   Pages  67
                                      -----        ----
                                 Document Number

1.14  Management Fee:            5% percent of gross rental revenue
                                 ---

       JRM                                                          WFM
-------------------                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                       1
<PAGE>

1.15   Broker:       Landlord:  Cornish & Carey Commercial
                                --------------------------
                     Tenant:  CB Richard Ellis
                            ------------------

1.16   Contents:     This Lease consists of Pages 1 through 29; Articles 1
                     through 34; and Addendum #1 - Option to Renew; as well as
                                                   ---------------
                     the following Exhibits:
                     Exhibit A  -  Legal Description of Complex
                     Exhibit B  -  Plan of the Complex
                     Exhibit B1 - Floor Plan of the Premises
                     Exhibit C  -  Work  Letter for Construction Obligations
                     Exhibit C1 - Contractor's Bid for Tenant Improvements
                     Exhibit D -  Acknowledgment of Commencement of Term
                     Exhibit E -  Rules and Regulations
                     Exhibit F -  Letter of Credit
                     Exhibit F1 - Form of Letter of Credit

                             ARTICLE 2.  PREMISES
                             --------------------

     2.1  Demising Clause.  Landlord leases to Tenant and Tenant leases from
          ---------------
Landlord the Premises upon the terms and conditions set forth in this Lease.
Landlord reserves the area beneath and above the Building and the exterior
thereof together with the right to install, maintain, use, repair and replace
pipes, ducts, conduits, wires, and structural elements leading through the
Premises serving other parts of the Complex, so long as such items are concealed
by walls, flooring or ceilings.  Such reservation in no way affects the
maintenance obligations imposed herein.  Landlord may change the shape, size,
location, number and extent of the improvements to any portion of the Complex,
including the Building, without the consent of Tenant and without affecting
Tenant's obligations hereunder if such changes do not have a material adverse
impact on Tenant's use of the Premises.  In this Lease "Landlord Parties" means
Landlord's directors, officers, employees, shareholders, contractors, property
managers, agents, Lenders, and other lien holders, but excluding other tenants
in the Complex, and "Tenant Parties" means Tenant's directors, officers,
employees, partners, shareholders, invitees, agents, contractors, assigns,
subtenants or occupants.

     2.2  Covenants, Conditions and Restrictions.  The Parties agree that this
          --------------------------------------
Lease is subject and subordinate to the effect of:  (a) any covenants,
conditions, restrictions, easements, Security Instruments, and any other matters
or documents of record, including the CC&Rs, and all amendments or modification
thereto (collectively, the "Restrictions"); (b) zoning and other laws of the
city, county and state where the Complex is situated; and (c) general and
special taxes not delinquent.  Tenant agrees that as to its leasehold estate,
Tenant and all persons in possession or holding under Tenant will conform to and
will not violate the terms of any Restrictions.

                        ARTICLE 3.  TERM AND POSSESSION
                        -------------------------------

     3.1  Commencement Date.  The Estimated Commencement Date specified in
          -----------------
Section 1.7 (A) is the date the Parties anticipate that the Tenant Improvements
will be Substantially Completed.  On Landlord's delivery of the Substantially
Completed Premises to Tenant, Tenant shall execute a written acknowledgment of
that date as the actual commencement date (the "Commencement Date") in the form
of Exhibit D.
   ---------

     3.2  Term.  The Term of this Lease shall start on the Commencement Date and
          ----
shall be for the term specified in Section 1.7 (B) hereof, plus any partial
month at the commencement of the Term.

     3.3  Pre-Term Possession.  If Landlord is to construct or remodel the
          -------------------
Premises, Landlord may notify Tenant when the Premises are ready for Tenant's
fixture installation or Tenant's work. Tenant may then enter the Premises at its
own risk to make such improvements, to install fixtures, supplies, inventory and
other property. Tenant will not interfere with the progress of Landlord's work
by such entry. Should Landlord determine such entry interferes with its work,
Landlord may demand that Tenant vacate the Premises until Landlord's work is
complete. Tenant shall promptly comply with this demand. During any pre-term
possession all terms and conditions of the Lease shall apply, including Tenant
indemnities under the Lease and Tenant's payment of utilities, but excluding the
payment of other Rent.

     3.4  Landlord Delay.  If Landlord cannot deliver possession of the Premises
          --------------
on the Estimated Commencement Date, as extended for Force Majeure Delay (defined
in Exhibit C, Section 3), the Lease shall not be void or voidable, nor shall
   ---------
Landlord be liable for any loss or damage resulting therefrom.  If Substantial
Completion of the Tenant Improvements does not occur within six months after the
Estimated Commencement Date (as extended for Force Majeure Delay) due to a cause
other than a Tenant Delay (defined in Exhibit C, Section 3), Tenant shall have
                                      ---------
the right to cancel this Lease upon Notice to Landlord given within ten days
after the expiration of the six-month period.

     3.5  Tenant Delay.  If Landlord cannot deliver possession of the Premises
          ------------
on the Estimated Commencement Date because of a Tenant Delay, the Commencement
Date will be the Estimated Commencement Date. In no event shall a Tenant Delay
excuse Tenant's performance hereunder. Tenant shall be responsible for, and
shall immediately pay upon demand to Landlord, all costs and expenses incurred
by Landlord in connection with any Tenant Delay.

                               ARTICLE 4.  RENT
                               ----------------

     4.1  Payment.  Tenant shall pay to Landlord the Minimum Monthly Rent
          -------
specified in Section 1.8 (A) and the Additional Rent as set forth in Articles 5
through 8 and elsewhere in this Lease (the Minimum Monthly Rent and the

       JRM                                                            WFM
-------------------                                           -----------------
Landlord's Initials                                           Tenant's Initials

                                       2
<PAGE>

Additional Rent are collectively referred to as "Rent").  Minimum Monthly Rent
is payable in advance on the first day of each month of the Term at the Rent
Payment Address or such other address specified by Landlord.  If the Term
commences on other than the first day of the month, the Rent for the first
partial month shall be prorated accordingly.  All Rent is payable in lawful
money of the United States.

     4.2  No Set Off.  Rent shall be paid without prior notice, demand,
          ----------
deduction, setoff, offset, counterclaim, recoupment, suspension or abatement
except as expressly provided in Articles 12 and 20.

     4.3  Advance Rent.  The amount specified in Section 1.8 (B) is paid to
          ------------
Landlord upon execution of this Lease as advance Rent; provided, however, that
such amount shall be held by Landlord as a Security Deposit pursuant to the
Lease until it is applied by Landlord to the Minimum Monthly Rent.

     4.4  Late Charges; Interest.  Tenant acknowledges that late payment of Rent
          ----------------------
or other sums due under the Lease will cause Landlord to incur costs not
contemplated by this Lease, the exact amount being extremely difficult and
impractical to fix.  Such costs include processing and accounting charges, late
charges that may be imposed on Landlord by the terms of any encumbrance covering
the Premises, and interest costs.  If Landlord does not receive any Rent or
other sums due from Tenant within five (5)  days after the due date, Tenant
shall pay to Landlord an additional sum of ten percent (10%) of such Rent or
other sum as a late charge. This provision shall not relieve Tenant of Tenant's
obligation to pay Rent at the time and in the manner herein specified. The
Parties agree that this late charge represents a fair and reasonable estimate of
the cost Landlord will incur by reason of Tenant's late payment.  Accepting any
late charge does not waive Tenant's default with respect to the overdue amount
or prevent Landlord from exercising any other rights or remedies available to
Landlord.  In addition to the late charge, Tenant shall pay interest at the rate
of 10 percent per annum on any Rent or other sum not paid within 30 days of the
date due.

                               ARTICLE 5.  TAXES
                               -----------------

     5.1  Definition.  The terms "Real Property Taxes" or "Taxes" as used in
          ----------
this Lease include all of the following, but do not include any tax levied upon
the net income or profits of Landlord:

          (a)  Present and future Real Property Taxes on the Building, the
Complex, the land on which the Building is situated and the various estates in
the Building and the land, including this Lease, as well as all personal
property taxes levied on the property used in the operation of the Building or
land;

          (b)  The cost to Landlord of contesting the amount, validity, or
applicability of any Taxes;

          (c)  General or special assessments, improvement or other bonds,
commercial and gross rental tax, levy, or tax imposed by any authority having
the direct or indirect power to tax, as against any legal or equitable interest
of Landlord in the Premises or in the real property of which the Premises are a
part, as against Landlord's right to Rent or other income therefrom, or as
against Landlord's business of leasing the Premises;

          (d)  Any tax, fee, or charge with respect to the possession, leasing,
transfer of interest, operation, management, maintenance, alteration, repair,
use, or occupancy by Tenant, of any part of the Premises, Building, or Complex;
and

          (e)  Any tax imposed in substitution, partially or totally, for any
tax previously included within the definition of Taxes herein, or any additional
tax, the nature of which may or may not have been previously included within the
definition of Taxes.

     5.2  Assessments.  Only the current amount of any general or special
          -----------
assessments and statutory interest (prorated for any partial year) that comprise
a part of the Taxes and are paid in annual or semi-annual installments shall be
included within the computation of Taxes for which Tenant is responsible.

     5.3  Separate Assessment.  If the Premises are assessed separately by the
          -------------------
taxing agency, Tenant shall pay to such agency all Taxes applicable to the
Premises.  Such payment is due ten days prior to such Taxes becoming delinquent.
If the Premises share parking or Common Area with other premises, Section 5.4
below shall apply to Taxes thereon.

     5.4  Proration.  If the Premises are not separately assessed, Tenant shall
          ---------
pay as Additional Rent to Landlord, within ten days after Notice, Tenant's share
of all Real Property Taxes stated in the tax bill in which the Premises are
included, including the parking and Common Area, as well as the improvements on
all of said land, or otherwise arising under the provisions of this Article.  As
used in this Section.  "Tenant's share" is a fraction in which the numerator is
the Rentable Area of the Premises and the denominator is the sum of all rentable
areas included within the tax bill.  The term "tax bill" means the tax bill that
includes the Premises, or a group of tax bills aggregated at the option of
Landlord, as long as all tax bills relate to the Complex.

     5.5  Estimated Payments.  Landlord, at its option, may estimate the Taxes
          ------------------
next due and collect from Tenant on a monthly basis, along with Tenant's payment
of Minimum Monthly Rent, the amount of Tenant's estimated Tax obligation.  About
May 1 of each year during the Term (or as soon thereafter as is reasonably
practicable), Landlord will provide Tenant with a reconciliation of Tenant's
account with respect to such estimated Tax payments.  If it is established upon
such reconciliation that Tenant has not paid enough estimated Taxes to cover
Tenant's share for the year in question, Tenant shall pay to Landlord the full
amount of such shortage within ten days of billing.  If it is established that
Tenant has overpaid its Tax obligation, Tenant will receive a credit applicable
to the next ensuing estimated Tax payments or, within thirty (30) days after
Landlord's determination of such overpayment,  a refund of the amount if the
Term has expired.

     5.6  Personal Property Taxes.  Tenant shall pay prior to delinquency all
          -----------------------
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of Tenant contained in the Premises or
elsewhere.  When possible, Tenant shall cause such trade fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Landlord.  If any of Tenant's personal property shall
be assessed with

        JRM                                                          WFM
-------------------                                           -----------------
Landlord's Initials                                           Tenant's Initials

                                       3
<PAGE>

Landlord's real property, or if any other Taxes or taxes which are payable by
Tenant pursuant to this Lease or otherwise are assessed against Landlord or
Landlord's real property, Tenant shall pay Landlord the Taxes and other taxes
attributable to Tenant within ten days after receipt of a written statement
setting forth the amount owed.

     5.7  Net Rent.  It is the intention of the Parties that the Rent received
          --------
by Landlord be net of any Taxes of any sort to be paid by Landlord.  If it is
not lawful for Tenant to reimburse Landlord for any of the Taxes, the Minimum
Monthly Rent shall be increased by the amount equal to the Taxes allocable to
Tenant so as to net to Landlord the amount which it would have received if such
Tax had not been imposed.

                ARTICLE 6.  COMMON AREAS AND COMMON AREA COSTS
                ----------------------------------------------

     6.1  Definitions
          -----------

          (a) "Common Area" include all areas and facilities outside the
Premises, within the exterior boundaries of the Complex, that are provided by
Landlord for the general use and convenience of Tenant and of other Complex
tenants and their authorized representatives and invitees.  Common Area includes
driveways, parking areas, sidewalks, and landscaped areas, all as generally
described or shown on Exhibit B attached hereto.  Exhibit B is tentative, and
                      ---------                   ---------
Landlord reserves the right to make alterations to it from time to time.  Common
Area also includes systems within the Premises that also serve other tenants
such as plumbing, fire sprinkler or non-exclusive HVAC.

          (b) "Common Area Costs" are all costs incurred by Landlord for:  (i)
maintenance, repair, replacement, improvement, or operation of the Complex,
except for Landlord's maintenance obligation under Section 19.1; (ii) refuse
disposal; (iii) property owner's association dues or assessments imposed upon
Landlord by any Restrictions; (iv) liability and other insurance for the Complex
not covered in Section 8.4; (v) security services for the Complex; (vi)
upgrading the utility, efficiency or capacity of any utility or
telecommunication system serving tenants of the Complex; (vii) the Management
Fee set forth in Section 1.14; (viii) any other costs or fees reasonably related
to the use, operation or enjoyment of any part of the Complex; (ix) any
insurance deductibles for repairs under Article 12 or elsewhere in the Lease;
and (x) amortized Capital Costs.

          (c) "Pro Rata %" is a fraction where the numerator is the Rentable
Area of the Premises and the denominator is the sum of the rentable areas of the
buildings in the Complex using the Common Area or for whose benefit the Common
Area Cost in incurred.  Tenant's Initial Pro Rata % is stated in Section 1.11.
The Pro Rata % may change from time to time.

          (d) "Capital Costs" are any (i) expenditures that do not recur more
frequently than at five year intervals in the normal course of operation and
maintenance of the Complex; (ii) costs of capital improvements made by Landlord
to the Complex for the purpose of reducing recurring expenses or utility costs;
and/or (iii) costs of capital improvements made by Landlord that are required by
governmental law, ordinance, regulation or mandate now or hereafter in effect,
that was not applicable to the Complex at the time of the original construction.
The portion of Capital Costs to be included each year in Common Area Costs is
that fraction allocable to the calendar year in question calculated by
amortizing the cost over the useful life of such improvement, as reasonably
determined by Landlord, with interest on the unamortized balance at ten per cent
per annum.  Tenant's Operating Costs for the Complex shall not include the
unamortized Capital Costs for capital improvements made prior to the Estimated
Commencement Date.

     6.2  Rights and Duties of Landlord.  Landlord shall maintain the Common
          -----------------------------
Area, establish and enforce reasonable rules and regulations therefor, close any
of the Common Area to whatever extent required in Landlord's opinion to prevent
a dedication of or the accrual of any rights of any person or of the public to
the Common Area, close temporarily any of the Common Area for maintenance
purposes, and make changes to the Common Area including changes in the location
of driveways, entrances, exits, vehicular parking spaces, parking area, the
designation of areas for the exclusive use of others, the direction of the flow
of traffic or construction of additional buildings thereupon, in a manner
Landlord deems proper in its opinion,.  Tenant hereby acknowledges that Landlord
is under no obligation to provide security for the Common Area but may do so at
its option as a Common Area Cost.

     6.3  Payments by Tenant.  As Additional Rent, Tenant shall pay Landlord its
          ------------------
"Pro Rata Share", being the product of the Pro Rata % times Common Area Costs,
within ten days of receiving a bill from Landlord, but no more frequently than
monthly.  Landlord shall have the right to estimate Tenant's future Pro Rata
Share and to collect it from Tenant on a monthly basis along with Tenant's
payment of Minimum Monthly Rent.  Landlord will provide a reconciliation of
Tenant's account at least annually.  If the reconciliation shows Tenant's
account does not cover Tenant's Pro Rata Share for the period estimated, Tenant
shall within ten (10) days after Landlord's demand,  pay Landlord any
deficiency.  Any excess indicated by the reconciliation shall be credited to
Tenant's account to reduce the estimated payments for the next ensuing period,
or if excess is determined at the end of the Term, it shall be refunded to
Tenant within thirty (30) days after Landlord's determination of such excess.

     6.4  Adjustments.  Notwithstanding the foregoing provisions, Tenant's Pro
          -----------
Rata % as to certain expenses included in Common Area Costs may be calculated
differently to yield a higher percentage share for Tenant as to those expenses
if Landlord permits other tenants or occupants in the Complex to incur such
expenses directly rather than have Landlord incur the expense in common for the
Complex.  In such case, Tenant's Pro Rata % of the applicable expense shall be
calculated as having as its denominator the sum of the rentable areas of all
premises in the Complex less the rentable areas of tenants who have incurred
such expense directly.  In any case where Tenant, with Landlord's consent,
incurs such expenses directly, Tenant's Pro Rata Share of such costs will be
calculated specially so that expenses of the same character which are incurred
by Landlord solely for the benefit of other tenants in the Complex will not be
prorated to Tenant.  Nothing herein shall imply that Landlord will permit Tenant
or any other tenant of the Complex to incur Common Area Costs.  Any such
permission shall be in the sole discretion of Landlord.

        JRM                                                          WFM
-------------------                                           -----------------
Landlord's Initials                                           Tenant's Initials

                                       4
<PAGE>

     6.5  Refuse Disposal.  Tenant shall pay Landlord, within ten days of being
          ---------------
billed therefor, for the removal from the Common Area, the Complex, or the
Building of any amounts of refuse or rubbish that Tenant has generated in excess
of amounts typically generated by other tenants of the Complex.

                     ARTICLE 7.  ASSIGNMENT AND SUBLETTING
                     -------------------------------------

     7.1  Restriction on Transfer.  Except as expressly provided in Article 7,
          -----------------------
Tenant will not, either voluntarily or by operation of law, assign, mortgage,
hypothecate, encumber or otherwise transfer this Lease or any interest herein or
sublet or license the Premises or any part thereof, or permit the use or
occupancy of the Premises by any party other than Tenant (any of which are
referred to as a "Transfer"), without the prior written consent of Landlord.
For purposes of this Article, if Tenant is a corporation, limited liability
company, partnership or other entity any transfer, assignment, encumbrance or
hypothecation of fifty percent or more (individually or in the aggregate) of any
stock or other ownership or beneficial interest in such entity, and/or any
transfer, assignment, hypothecation or encumbrance of any controlling ownership,
beneficial or voting interest in such entity, will be deemed a Transfer and will
be subject to all of the restrictions and provisions contained in this Article.
The immediately preceding sentence will not apply to public corporations, the
stock of which is traded through a public exchange or over the counter system.

     7.2  Transfer Notice.  If Tenant desires to effect a Transfer, at least 30
          ---------------
days prior to the date when Tenant desires the Transfer to be effective (the
"Transfer Date"), Tenant will give Notice (the "Transfer Notice"), stating the
name, address and business of the proposed assignee, subtenant or other
transferee (the "Transferee").  The Notice must contain information in such
detail as Landlord may reasonably require concerning the character, ownership,
and financial condition of Transferee (including references), the Transfer Date,
any relationship between Tenant and Transferee, and a draft of the "Transfer
Agreement" showing the consideration and other terms of the proposed Transfer.

     7.3  Landlord's Options.  Within fifteen days of receipt of a Transfer
          ------------------
Notice, and any additional information reasonably requested by Landlord
concerning the Transferee's financial responsibility, Landlord will notify
Tenant of its election to do one of the following:  (i) consent to the proposed
Transfer subject to such reasonable conditions as Landlord may impose in
providing such consent; (ii) refuse such consent, which refusal shall be on
reasonable grounds; or (iii) terminate this Lease as to the portion of the
Premises which is proposed to be sublet or assigned and recapture that portion
of the Premises for reletting by Landlord.  Tenant agrees that it is reasonable
for Landlord to deny consent to a proposed Transfer on any of the following
grounds, which list is not exclusive:

          (a)  The financial strength of the proposed Transferee is not
comparable to that of Tenant at the time of execution of this Lease;

          (b)  A proposed Transferee whose occupation of the Premises would
cause a diminution in the reputation of the Complex or the other businesses
located therein;

          (c)  A proposed Transferee whose impact on the common facilities or
the efficiency or effectiveness of any utility or telecommunication system
serving the Building or the Complex or other tenants of the Complex would be
adverse, disadvantageous or require improvements or changes in any utility or
telecommunication capacity currently serving the Building or the Complex;

          (d)  A proposed Transferee whose use presents any risk of violation of
Article 16;

          (e)  A proposed Transferee whose occupancy will require a variation in
the terms of this Lease (e.g., a variation in the use clause) or which otherwise
adversely affects any interest of Landlord;

          (f)  The existence of any default by Tenant under any provision of
this Lease;

          (g)  A proposed Transferee who is or is likely to be, or whose
business is or is likely to be, subject to compliance with additional laws or
other governmental requirements beyond those to which Tenant or Tenant's
business is subject; or

          (h)  The proposed Transfer, or Landlord's consent thereto, would
result in Landlord's breach of an existing agreement with a third party.

     7.4  Additional Conditions.  A condition precedent to any Transfer will be
          ---------------------
the delivery to Landlord of a true copy of the fully executed Transfer Agreement
that does not differ materially from that provided pursuant to Section 7.2.
Tenant undertaking the transfer ("Transferor") agrees to pay Landlord, as
Additional Rent, 80 percent of all sums and other consideration payable to and
for the benefit of Tenant by the Transferee in excess of the Rent payable under
the Lease for the same period and portion of the Premises.  In calculating
excess Rent or other consideration which may be payable to Landlord under this
paragraph, Tenant will be entitled to deduct a monthly amortization of
commercially reasonable third party brokerage commissions and attorney's fees
and other amounts reasonably and actually expended by Tenant in connection with
the Transfer if acceptable written evidence of such expenditures is provided to
Landlord.  No Transfer will release Transferor (or any prior Transferor) of
Tenant's obligations under this Lease or alter the primary liability of
Transferor (or any prior Transferor) to perform all obligations to be performed
by Tenant hereunder.  Landlord may require that Transferee remit directly to
Landlord on a monthly basis, all monies due Landlord under the terms of this
Section. Consent by Landlord to one Transfer will not be deemed consent to any
subsequent Transfer.  In the event of default by Transferee, Tenant or any
successor of Tenant in the performance of any other terms hereof, Landlord may
proceed directly against Transferor (or any prior Transferor) without the
necessity of exhausting remedies against Transferee or successor.  If Tenant
requests the consent of Landlord to a Transfer, Tenant will pay Landlord an
administrative fee of Two Hundred Fifty Dollars ($250.00) concurrent with the
request, plus Landlord's reasonable attorney's fees.

       JRM                                                           WFM
-------------------                                           -----------------
Landlord's Initials                                           Tenant's Initials

                                       5
<PAGE>

                        ARTICLE 8.  PROPERTY INSURANCE
                        ------------------------------

     8.1  Landlord's Insurance.  In addition to any other insurance Landlord
          --------------------
elects to maintain, Landlord agrees to maintain commercial property insurance
covering the Building against broad form causes of loss.  Such insurance shall
be issued in the names of Landlord and its lender, as their interests appear,
and shall be for the sole benefit of such parties and under their sole control.

     8.2  Use of Premises.  No use shall be made or permitted to be made on the
          ---------------
Premises, nor acts done, by Tenant or any of its invitees, contractors or agents
which will increase the existing rate of insurance upon the Building in which
the Premises are located or upon any other building or improvement in the
Complex or cause the cancellation of any insurance policy covering the Building,
or any other building or improvement in the Complex, or any part thereof.
Tenant or Tenant Parties shall not sell, or permit to be kept, used or sold, in
or about the Premises, any article that may be prohibited by commercial property
insurance, special form policies.  At its sole cost and expense, Tenant shall
comply with all requirements of any insurance company necessary to maintain
reasonable property damage and commercial general liability insurance covering
the Premises, Building, or Complex.

     8.3  Increase in Premiums.  Tenant agrees to pay to Landlord, as Additional
          --------------------
Rent, any increase in premiums on policies which may be carried by Landlord on
the Premises, the Building or the Complex, or any blanket policies which include
the Building or Complex, covering damage thereto and loss of Rent caused by fire
and other perils resulting from the nature of Tenant's occupancy or any act or
omission of Tenant.  All payments of Additional Rent by Tenant to Landlord
pursuant to this Section shall be made within ten days after receipt by Tenant
of Landlord's billing therefor.

     8.4  Pro Rata Share of Premiums.  Tenant shall pay to Landlord, as
          --------------------------
Additional Rent, its pro rata share of all increases in the insurance premiums
for any property insurance carried by Landlord covering the Complex (the
"Complex Insurance Premium") irrespective of the nature or cause of such
increase, unless Landlord, in Landlord's good faith judgment, can properly
allocate such increase solely to others in the Complex.  Tenant will pay such
costs as set forth in Section 8.5.  Such pro rata share is defined as a fraction
of the insurance premiums in which the numerator is the Rentable Area of the
Premises and the denominator is the total rentable areas in all premises to
which the Complex Insurance Premium is applicable.  If the property insurance
carried by Landlord for the Complex is a blanket policy covering other
properties not related to the Complex, the Complex Insurance Premium shall be
calculated as that portion of such blanket policy insurance premium which, in
Landlord's good faith judgment, is properly allocable to the Complex.  These
sums due shall be in addition to sums due under the previous Section of this
Lease.

     8.5  Estimated Payments.  Landlord may, at its option, estimate the amount
          ------------------
of insurance premiums for property insurance to be due in the future from Tenant
and collect from Tenant on a monthly basis, along with payment of Tenant's
Minimum Monthly Rent, the amount of Tenant's estimated insurance premium
obligation.  Prior to May 1 of each year (or as soon thereafter as reasonably
practicable), Landlord shall provide Tenant with a reconciliation of Tenant's
account along with a billing for any shortage in the event of a deficiency or
statement for credit applicable to the next ensuing insurance premium payments,
if an overpayment has been made by Tenant.

                        ARTICLE 9.  TENANT'S INSURANCE
                        ------------------------------

At its expense, Tenant shall obtain and keep in force during the Term, and
provide coverage after expiration of the Term for events occurring during the
Term, the following insurance, on an occurrence basis, against claims for
injuries to persons or damages to property that may arise from or in connection
with the Tenant's operation and use of the Premises:

          (a)  Commercial Property policy with Special Form causes of loss
covering:  (i) business personal property, leasehold improvements on a
replacement cost basis, subject to a deductible no greater than $1,000; (ii)
business income and extra expense equal to at least one year's gross revenue
from Tenant's operations on the Premises; which policy shall include waiver of
subrogation rights of insurer against Landlord consistent with Section 11.2.

          (b)  Commercial General Liability policy for bodily injury, personal
injury an property damage with limits of not less than $1,000,000 per occurrence
and $2,000,000 annual aggregates on a per location basis.  Endorsements
satisfying the following requirements shall be affixed:  (i) Landlord, Lender
and any other party designated by Landlord (including Landlord's property
manager) shall be named as additional insureds; (ii) Tenant's policy shall be
primary, not contributing with, and not in excess of any other applicable
insurance carried by Landlord; (iii) Tenant's policy shall extend to and include
injuries to persons and damage to property arising in connection with any
alterations or improvements to or about the Premises performed by or on behalf
of Tenant; and (iv) Tenant's policy shall include contractual liability
coverage.

          (c)  Business Auto Liability covering all owned, non-owned and hired
vehicles with a limit of $1,000,000 per accident.

          (d)  Workers' Compensation on a statutory basis and Employers'
Liability with $1,000,000 per accident for bodily injury and diseases.

          (e)  Umbrella Liability with a $3,000,000 per occurrence/annual
aggregate limit.

                  ARTICLE 10.  INSURANCE POLICY REQUIREMENTS
                  ------------------------------------------

All insurance policies to be carried by Tenant hereunder shall conform to the
following requirements:

          (a)  The insurer in each case shall carry a designation in "Best's
Insurance Reports" as issued from time to time throughout the Term as follows:
Policyholders' rating of A; financial rating of not less than VII;

          (b)  The insurer shall be qualified to do business in the State;

        JRM                                                          WFM
-------------------                                           -----------------
Landlord's Initials                                           Tenant's Initials

                                       6
<PAGE>

          (c)  The policy shall be in a form and include such endorsements as
are acceptable to Landlord;

          (d)  Certificates of insurance shall be delivered to Landlord at
commencement of the term and certificates of renewal at least 30 days prior to
the expiration of each policy; and

          (e)  Each policy shall require that Landlord be notified in writing by
the insurer at least 30 days prior to any cancellation or expiration of such
policy, or any reduction in the amounts of insurance carried.

        ARTICLE 11.  INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION
        --------------------------------------------------------------

     11.1 Intent and Purpose.  The Parties intend to completely assign the risk
          ------------------
of loss, whether resulting from negligence of the Parties or otherwise, to the
party who the Lease obligates to cover the risk of such loss with insurance.
The object of the indemnity and waiver of claims provisions of this Lease is to
assign the risk for a particular casualty to the party obligated to carry the
insurance for such risk (which is not a limitation of the assignment of the
risk), without respect to the causation thereof.

     11.2 Waiver of Subrogation.  The Parties release each other from any claims
          ---------------------
for damage to the Premises, Building and Complex, and to the furniture,
fixtures, and other business personal property, Tenant's improvements and
alterations of either Landlord or Tenant, in or on the Premises, Building and
Complex, and for loss of income, to the extent such damages or loss are actually
covered by insurance policies maintained by the Parties or that would have been
covered by insurance policies required of the Parties under this Lease.

     11.3 Tenant's Indemnity.  Tenant shall indemnify, defend, protect and hold
          ------------------
harmless Landlord from and against all actions, claims, demands, damages,
liabilities, losses, penalties, or expenses of any kind ("Claims") which may be
brought or imposed upon Landlord or which Landlord may pay or incur by reason of
injury to person or property, from whatever cause including the negligence of
the Parties hereto, in any way connected with the condition or use of the
Premises, or Alterations, improvements or personal property therein or thereon,
including any liability or injury to the person or property of Tenant or Tenant
Parties, except to the extent caused by Landlord's gross negligence or willful
acts.

     11.4 Waiver of Claims.  Except as arising from the gross negligence or
          ----------------
willful misconduct of Landlord, Tenant releases and waives all claims against
Landlord for damages or injury from any cause arising at any time, including the
negligence of the Parties, for damages to goods, wares, merchandise and loss of
business in, upon or about the Premises or Complex and injury to Tenant, its
agents, employees, invitees or third persons, in, upon, or about the Premises or
Complex.  It is understood and agreed that the release set forth herein extends
to all claims of every nature and kind whatsoever, known or unknown, suspected
or unsuspected, and Tenant expressly waives all rights under Section 1542 of the
Code which reads as follows:

     "A general release does not extend to claims which the creditor does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by him must have materially affected his settlement with the
     debtor."

     11.5 References.  Wherever the term Landlord, Tenant or the Parties is
          ----------
used in this Article, and such party is to receive the benefit of a provision of
this Article, such term shall also refer also to the Party's officers,
directors, shareholders, employees, partners, agents, mortgagees and other
lienholders.

                           ARTICLE 12.  DESTRUCTION
                           ------------------------

     12.1 Rights of Termination.  If the Premises suffers an Uninsured Property
          ---------------------
Loss or a property loss which cannot be repaired within 195 days from the date
of destruction, as determined by Landlord, Landlord may terminate this Lease as
of the date of the damage (the "Loss Date") upon Notice to Tenant.  If the
Premises cannot be repaired within 195 days of the Loss Date, as determined by
Landlord and stated in Landlord's Notice to Tenant, Tenant may elect to
terminate this Lease by Notice to Landlord given within 20 days of Landlord's
Notice that the restoration time will exceed 195 days.  Landlord's Notice shall
be given within 45 days of the Loss Date or as soon thereafter as the
restoration time can be determined.  "Uninsured Property Loss" is any damage or
destruction for which the insurance proceeds available to Landlord are
insufficient to pay for the repair or reconstruction of the Premises.

     12.2 Repairs.  In the event of a casualty that may be repaired within 195
          -------
days from the Loss Date, or if the Parties do not elect to terminate this Lease
under Section 12.1, this Lease shall continue in full force and effect and
Landlord shall promptly undertake to make repairs to reconstitute the Premises
to as near as practicable to the condition as existed prior to the Loss Date.
The partial destruction shall in no way void this Lease except, to the extent of
Landlord's recovery under its rent abatement insurance for the Premises, Tenant
shall be entitled to a proportionate reduction of Minimum Monthly Rent and any
Additional Rent following the property loss until the time the Premises are
restored.  The reduction amount will reflect the degree of interference with
Tenant's business.  As long as Tenant conducts business in the Premises, there
shall be no abatement until the Parties agree on the amount thereof.  If the
Parties cannot agree within 45 days of the Loss Date, the matter shall be
submitted to arbitration under the rules of the American Arbitration
Association.  Upon the resolution of the dispute, the settlement shall be
retroactive and Landlord shall within ten days thereafter refund to Tenant any
sums due in respect of the reduced Rent from the date of the property loss.
Landlord's obligations to restore shall in no way include any construction
originally performed by Tenant or subsequently undertaken by Tenant, but shall
include solely that property constructed by Landlord prior to commencement of
the Term.

     12.3 Repair Costs.  The cost of any repairs to be made by Landlord pursuant
          ------------
to Section 12.2 shall be paid by Landlord using available insurance proceeds.

     12.4 Waiver.  Tenant hereby waives all statutory or common law rights of
          ------
termination in respect to any partial destruction or property loss which
Landlord is obligated to repair or may elect to repair under the terms of this
Article.  Further, in event of a property loss occurring during the last two
years of the original term hereof or of any extension, Landlord need not
undertake any repairs and may cancel this Lease unless Tenant has the right
under the terms of this Lease to extend the term for an additional period of at
least five years and does so within 30 days of the date of the property loss.

       JRM                                                           WFM
-------------------                                           -----------------
Landlord's Initials                                           Tenant's Initials

                                       7
<PAGE>

     12.5 Landlord's Election.  If the Complex or Building is destroyed by more
          -------------------
than 35 percent of the replacement cost, Landlord may elect to terminate this
Lease, whether the Premises are damaged or not, as set forth in Section 12.1.  A
total destruction of the Complex or the Premises terminates this Lease.

                     ARTICLE 13.  ACCORD AND SATISFACTION
                     ------------------------------------

No payment by Tenant or receipt by Landlord of less than the full Rent due
hereunder shall be deemed to be other than on account of the earliest due Rent.
No endorsement or statement on any check or any letter accompanying any such
check or payment will be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such Rent or pursue any other remedy available in this Lease, at
law or in equity.  Landlord may accept partial payment from Tenant without
invalidation of any contractual notice required to be given herein (to the
extent such contractual notice is required) and without invalidation of any
notice required to be given pursuant to California Code of Civil Procedure
("CCP") Section 1161, et seq., or any successor statute.

                         ARTICLE 14.  SECURITY DEPOSIT
                         -----------------------------

     14.1 Payment on Lease Execution.  On execution of the Lease Tenant shall
          --------------------------
pay Landlord the Security Deposit. This sum is a deposit securing Tenant's
performance of the Lease and shall remain the sole and separate property of
Landlord until actually repaid to Tenant (or at Landlord's option the last
assignee, if any, of Tenant's interest hereunder). Tenant does not earn said sum
until all conditions precedent for its payment to Tenant have been fulfilled. As
this sum both in equity and at law is Landlord's separate property, Landlord is
not required to keep it separate from its general accounts or pay interest for
its use. If Tenant fails to pay Rent or other charges when due hereunder, or
otherwise defaults with respect to any provision of this Lease, including and
not limited to Tenant's obligation to restore or clean the Premises following
vacation thereof, at Landlord's election, Tenant shall be deemed not to have
earned the right to repayment of the Security Deposit, except those portions not
used by Landlord for the payment of any Rent or other charges in default, or for
the payment of any other sum to which Landlord may become obligated by reason of
Tenant's default, or to compensate Landlord for any loss or damage which
Landlord may suffer thereby. Landlord may retain such portion of the Security
Deposit as it reasonably deems necessary to restore or clean the Premises
following vacation by Tenant. The Security Deposit is not to be characterized as
Rent until and unless so applied to a default by Tenant.

     14.2 Restoration of Deposit.  If Landlord elects to use or apply all or any
          ----------------------
portion of the Security Deposit as provided in Section 14.1, Tenant shall within
ten days after written demand therefor pay to Landlord in cash, an amount equal
to that portion of the Security Deposit used or applied by Landlord, and
Tenant's failure to so do shall be a material breach of this Lease.  The ten day
notice specified in the preceding sentence shall insofar as not prohibited by
law, constitute full satisfaction of notice of default provisions required by
law or ordinance.

                               ARTICLE 15.  USE
                               ----------------

The Premises may be used and occupied only for the purposes specified in Section
1.10 and for no other purpose.  Tenant shall not use or permit the use of the
Premises in any manner that will disturb any other tenant in the Building or
Complex, or obstruct or interfere with the rights of other tenant or occupants
of the Building or Complex, or injure or annoy them or create any unreasonable
smells, noise or vibrations (taking into account the nature and tenant-mix of
the Building).  Tenant shall not allow the Premises to be used for any unlawful
or objectionable purpose, nor shall Tenant cause, maintain, or permit any
nuisance or waste in, on or about the Premises, Building or Complex.

               ARTICLE 16.  COMPLIANCE WITH LAWS AND REGULATIONS
               -------------------------------------------------

     16.1 Tenant's Obligations.  At its sole cost and expense, Tenant shall
          --------------------
comply with all of the requirements of all municipal, state, federal, and quasi-
governmental authorities and utility providers now in force, or which may
hereafter be in force, affecting the Premises and/or Tenant's use thereof
including those pertaining to Tenant Parties, and faithfully observe in the use
or occupancy of the Premises all municipal ordinances and state and federal
statutes, laws and regulations now or hereafter in force, including the
Environmental Laws and the Americans with Disabilities Act, 42 U.S.C. (S)(S)
12101-12213 (collectively the "Laws and Regulations").  Tenant's obligation to
comply with and observe the Laws and Regulations shall apply regardless of
whether such Laws and Regulations regulate or relate to Tenant's particular use
of the Premises or relate to the use of premises in general, and regardless of
the cost thereof.  A 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 any Laws and Regulations pertaining to the
Premises have been violated, is conclusive of that fact as between Landlord and
Tenant.

     16.2 Condition of Premises.  Subject to performance of Landlord's work, if
          ---------------------
any, as stated in Exhibit C, Tenant hereby accepts the Premises in "AS IS"
                  ---------
condition as of the date of occupancy, subject to all applicable Laws and
Regulations, Restrictions, and requirements in effect during any part of the
Term regulating the Premises, and without representation, warranty or covenant
by Landlord, express or implied, as to the condition, habitability or safety of
the Premises, the suitability or fitness thereof for their intended purposes.
Tenant acknowledges that the Premises in such condition are in good and sanitary
order, condition and repair.

     16.3 Hazardous Materials.
          -------------------

          (a)  Definitions.
               -----------

               (i)  "Environmental Laws" means any federal, State, local or
administrative agency ordinance, law, rule or regulation, order or requirement
relating to Hazardous Materials, radioactive materials, medical wastes, or which
deal with air or water quality, air emissions, soil or ground conditions or
other environmental matters of any kind.

       JRM                                                           WFM
-------------------                                           -----------------
Landlord's Initials                                           Tenant's Initials

                                       8
<PAGE>

                (ii)  "Hazardous Materials" mean any substance, chemical, waste
or material which is listed, defined or otherwise identified as "hazardous" or
"toxic" under any of the Environmental Laws, including formaldehyde, urea,
polychlorinated biphenyls, petroleum, petroleum products, crude oil, natural
gas, radioactive materials, radon, asbestos or any by-product of same.

                (iii) "Losses" mean claims, liability, damages (whether
consequential, direct or indirect, known or unknown, foreseen or unforeseen),
penalties, fines, liabilities, losses (including property damage, diminution in
value of Landlord's interest in the Premises, Building or Complex, damages for
the loss of use of any space or amenity within the Premises, Building, or
Complex, damages arising from any adverse impact on marketing space in the
Complex, sums paid in settlement of claims and any costs and expenses associated
with injury, illness or death to or of any person), suits, administrative
proceedings, costs and fees, including Professional Fees and expenses.

                (iv)  "Release" means generation, discharge, disposal, release,
deposit, transport, or storage of Hazardous Materials.

           (b)  Use of Hazardous Materials.  Tenant shall use and store in the
                --------------------------
Premises and Complex only ordinary and general office and cleaning supplies in
normal and customary amounts, and such other Hazardous Materials as have been
previously approved by Landlord in writing (which approval may be withheld in
Landlord's sole and absolute discretion) and which are reasonably necessary for
Tenant's business. All such Hazardous Materials shall be limited to quantities
consistent with the approved use of the Premises and shall be used, stored and
disposed of in full compliance with all Environmental Laws. Tenant shall not
install any tanks under or on the Premises for the storage of Hazardous
Materials without the written consent of Landlord, which may be given or
withheld in Landlord's sole discretion. Upon the expiration or earlier
termination of this Lease, Tenant shall promptly remove from the Premises,
Building and Complex all Hazardous Materials brought on, stored, used, generated
or Released on the Premises, Building or Complex by Tenant or any Tenant
Parties.

           (c)  Release of Hazardous Materials.  Tenant shall promptly give
                ------------------------------
Landlord Notice of any Release of Hazardous Materials in the Premises, Building
or Complex of which Tenant becomes aware during the Term whether caused by
Tenant or others. At its sole cost and expense, Tenant shall investigate, clean
up and remediate any Release of Hazardous Materials that were caused or created
by Tenant or any of Tenant Parties. Investigation, clean up and remediation may
be performed only after Tenant has Landlord's written approval of the
remediation plan.  Tenant may respond immediately to an emergency without first
obtaining Landlord's written consent.  All clean up and remediation shall be
done in compliance with Environmental Laws and to the reasonable satisfaction of
Landlord.

           (d)  Inspection and Testing by Landlord.  At reasonable times during
                ----------------------------------
the term of this Lease, Landlord may inspect the Premises and conduct tests to
determine whether Tenant is in compliance with the provisions of this Article
16. Except in case of emergency, Landlord shall give reasonable notice to Tenant
before conducting any inspections or tests. Tenant shall pay the cost of any
inspections or tests that discloses any violation by Tenant or Tenant Parties of
the terms and provisions of Article 16.

           (e)  Liability.  It is the express intention of the Parties that
                ---------
Tenant shall be liable under Section 16.3 for any and all conditions which were
caused or created by Tenant or any Tenant Parties, whenever created or caused.
Tenant shall not enter into any settlement agreement, consent decree or other
compromise with respect to any claims relating to any Hazardous Materials in any
way connected to the Premises without first (i) notifying Landlord of Tenant's
intention to do so and affording Landlord the opportunity to participate in any
such proceedings, and (ii) obtaining Landlord's written consent.

     16.4  Indemnity.  Tenant shall indemnify and hold harmless Landlord and
           ---------
Landlord Parties, from and against all Losses arising from or related to (a) any
violation or alleged violation by Tenant or any Tenant Parties of any Laws and
Regulations or the Environmental Laws; (b) any liability under any Laws and
Regulations or the Environmental Laws arising out of Hazardous Materials that
were "Released" or otherwise brought onto the Complex by Tenant or any Tenant
Parties; (c) any breach of the provisions of Article 16 by Tenant or any Tenant
Parties; or (d) any Release of Hazardous Materials on the Premises, Building or
Complex by Tenant or Tenant Parties. Tenant shall also reimburse Landlord costs
of cleanup, remediation, removal and restoration that are in any way related to
any matter covered by the foregoing indemnity. Tenant's obligations under this
Section survive the expiration or termination of the Lease.

                            ARTICLE 17. UTILITIES
                            ---------------------

     17.1  Payment by Tenant.  Tenant, from the earlier of the time it first
           -----------------
enters the Premises for the purpose of setting fixtures, or from the
commencement of this Lease, and throughout the Term, shall pay all charges
including connection fees for water, gas, heat, sewer, power, cable, telephone
cabling and services and any other utility supplied to or consumed in or on the
Premises. Tenant shall not allow refuse, garbage or trash to accumulate outside
of the Premises except on the day of scheduled scavenger pick-up services, and
then only in areas designated for that purpose by Landlord. Landlord shall not
be responsible or liable for any interruption or failure in utility, refuse or
telecommunication services, nor shall such interruption or failure affect the
continuation or validity of this Lease.

     17.2  Separate Meters.  Landlord reserves the right to install separate
           ---------------
meters for any utility servicing the Premises for which a meter is not presently
installed, in which event Tenant shall make payments, when due, directly to the
utility involved.

     17.3  Joint Meters.  For any utility services not separately metered to
           ------------
Tenant, Tenant shall pay a proportion to be reasonably determined by Landlord of
all charges jointly metered with other leased premises or occupants in the
Complex. All payments to Landlord in respect thereof shall be due within ten
days after receipt of the billing by Tenant as Additional Rent.

       JRM                                                            WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                       9
<PAGE>

                            ARTICLE 18. ALTERATIONS
                            -----------------------

     18.1  Consent of Landlord; Ownership.  Tenant shall not make or allow
           ------------------------------
alterations, additions or improvements, including any that result in increased
telecommunication demands or require the addition of new conduit, communication
or computer wires, cables or related devises or expand the number of telephone
or communication lines dedicated to the Premises by the Building's
telecommunication design, ("Alterations") to the Premises without the prior
written consent of Landlord. Tenant may not make any Alterations that affect
structural elements of the Building. Upon expiration or termination of this
Lease, any Alterations except trade fixtures shall become a part of the realty
and belong to Landlord. Except as otherwise provided in this Lease, Tenant shall
have the right to remove its trade fixtures placed upon the Premises provided
that Tenant restores the Premises as indicated below.

     18.2  Requirements.  Landlord may condition its consent for any Alterations
           ------------
upon Tenant complying at its sole cost and expense with reasonable conditions
and requirements, including the preparation of all construction plans, drawings
and specifications for approval by Landlord; the use of contractors and
subcontractors approved by Landlord; the delivery of performance and payment
bonds showing Landlord as a beneficiary; and the delivery to Landlord of
duplicate originals of all as-built drawings. Tenant shall obtain all necessary
permits as its sole obligation and expense, and strictly comply with the
following requirements:

           (a)  Following approval by Landlord of Alterations, Tenant shall give
Landlord at least ten days' prior Notice of commencement of work in the Premises
so that Landlord may post notices of non-responsibility in or upon the Premises
as provided by law;

           (b)  The Alterations must use materials of at least equal quality to
Tenant Improvements at the Commencement Date, and must be performed in
compliance with all laws, ordinances, rules and regulation now or hereafter in
effect and in a manner such that they will not interfere with the quiet
enjoyment of the other tenants in the Complex; and

           (c)  All costs and expenses incurred by Landlord in altering,
repairing or replacing any portion of the Premises, Building or Complex in
connection with approving any Alterations shall be paid solely by Tenant to
Landlord prior to commencing any Alterations.

     18.3  Liens.  Tenant will keep the Premises and the Complex free from any
           -----
liens arising out of any Alterations done by Tenant. If a mechanic's or other
lien is filed against the Premises, Building or Complex through Tenant, Landlord
may demand that Tenant furnish a satisfactory lien release bond of one hundred
fifty percent of the amount of the contested lien claim. Such bond must be
posted ten days after Notice from Landlord. In addition, Landlord may require
Tenant to pay Landlord's attorneys' fees and costs in participating in any
action contesting such lien, or the foreclosure thereof, if Landlord elects to
do so. Landlord may pay the claim prior to the enforcement thereof, in which
event Tenant shall reimburse Landlord in full, including attorneys' fees, for
any such expense, as Additional Rent, with the next due Rent payment.

                     ARTICLE 19.  MAINTENANCE AND REPAIRS
                     ------------------------------------

     19.1  Obligations of Landlord and Tenant.  At its cost and expense, Tenant
           ----------------------------------
shall maintain the Premises in good condition and repair including all necessary
replacements. Tenant shall maintain the appearance of the Premises in a manner
consistent with the character, use and appearance of the Complex. Subject to the
obligations of Tenant under this Article and Article 16, Landlord will make all
necessary repairs, maintenance and replacement of the foundation, roof and
structural parts of the Building. Landlord shall pay the costs thereof and
Tenant shall reimburse Landlord for Tenant's Pro Rata Share of such costs,
including amortization of Capital Costs, within ten days of receipt of billing.
At its expense, Tenant shall maintain all utilities, fixtures and mechanical
equipment within, or otherwise serving, the Premises in good order, condition
and repair. In the case of equipment installed by Landlord for Tenant, or
installed by Tenant to be the property of Landlord, such as heating, ventilating
and air conditioning equipment, or other mechanical equipment, at its expense,
Tenant shall maintain a service contract for its regular maintenance with a
service company acceptable to Landlord. Tenant shall not place anything on the
roof or penetrate the roof without the consent of Landlord, which consent may be
withheld in Landlord's sole discretion.

     19.2  HVAC System. Notwithstanding the provisions of Section 19.1, Landlord
           -----------
may elect at any time upon Notice to Tenant to perform the maintenance of the
heating, ventilating and air conditioning system (hereinafter "HVAC") for the
account of Tenant. In such event, Tenant shall pay as Additional Rent the full
cost of the maintenance contract for the Premises HVAC within ten days of
receipt of billing from Landlord, as well as for costs of necessary repair or
replacement of parts, in the reasonable judgment of Landlord. Landlord may, at
its option, elect to have the HVAC in the Premises maintained in common with
other equipment in the Complex. If so, Tenant shall pay its Pro Rata Share of
the maintenance costs.

     The maintenance contract on the HVAC, extended warranties and any repairs
and replacements not covered by the maintenance contract or warranty shall be
included in the charges allocated to Tenant. Landlord may elect to replace the
HVAC system, if necessary, and in such event the cost thereof shall be treated
as provided in Article 6. Tenant shall pay as Additional Rent to Landlord,
within ten days after receipt of billing, its pro rata share of such
amortization, established on an equitable basis as set forth in the prior
paragraph.

     19.3  Waiver.  Tenant waives all rights it may have under law or at equity
           ------
to make repairs or to perform any obligation of Landlord arising under this
Lease at Landlord's expense.

       JRM                                                            WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      10
<PAGE>

                           ARTICLE 20.  CONDEMNATION
                           -------------------------

     20.1  Definitions.
           -----------

           (a)  "Condemnation" means (i) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a Condemnor and/or (ii) a
voluntary sale by Landlord to a Condemnor, under threat of Condemnation or while
legal proceedings for Condemnation are pending.

           (b)  "Date of Taking" means the date the condemnor has the right to
possession of the property being condemned.

           (c)  "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial condemnation.

           (d)  "Condemnor" means any person or entity having the power of
condemnation.

     20.2  Total Taking.  If the Premises are totally taken by condemnation,
           ------------
this Lease shall terminate on the Date of Taking.

     20.3  Partial Taking; Common Area.
           ---------------------------

           (a)  If a portion of the Premises is taken by condemnation, this
Lease shall remain in effect, except that Tenant can elect to terminate this
Lease if 20 percent or more of the total number of square feet in the Premises
is taken.

           (b)  If any part of the Common Area of the Complex is taken by
condemnation, this Lease shall remain in full force and effect so long as there
is no material interference with the access to the Premises, except that if 35
percent or more of the Common Area is taken by condemnation, either party shall
have the election to terminate this Lease pursuant to this Section.

           (c)  If 30 percent or more of the Building in which the Premises are
located is taken, Landlord shall have the election to terminate this Lease in
the manner prescribed herein.

     20.4  Termination or Abatement.  If either party elects to terminate this
           ------------------------
Lease under the provisions of Section 20.3 (such party is hereinafter referred
to as the "Terminating Party"), it must terminate by giving Notice to the other
party (the "Nonterminating Party") within 30 days after the nature and extent of
the taking have been determined (the "Decision Period"). The Terminating Party
shall notify the Nonterminating Party of the date of termination, which date
shall not be earlier than sixty days after the Terminating Party given Notice of
its election to terminate nor later than the date of taking. If Notice of
Termination is not given within the Decision Period, the Lease shall continue in
full force and effect. The Minimum Monthly Rent shall be computed as the Minimum
Monthly Rent in effect prior to the taking times a fraction of which the
numerator is the number of square feet taken remaining in the Premises and the
denominator is the number of square feet in the Premises prior to the taking.

     20.5  Restoration.  If there is a partial taking of the Premises and this
           -----------
Lease remains in full force and effect, Landlord shall make all necessary
restoration so that the Premises is returned as near as practical to its
condition immediately prior to the taking, but in no event shall Landlord be
obligated to expend more for such restoration than the extent of funds actually
paid to Landlord by the condemnor.

     20.6  Award.  Any award arising from the condemnation or the settlement
           -----
thereof shall belong and be paid to Landlord, including any award for the
leasehold value. Tenant may seek a separate award for Tenant's trade fixtures,
tangible personal property and relocation expenses, if specified in the award by
the condemning authority and so long as it does not reduce Landlord's award.

                             ARTICLE 21.  PARKING
                             --------------------

Landlord shall have the right by Notice to Tenant, to specify areas of the
Complex for employee parking. If Landlord so designates an employee parking
area, then automobiles of Tenant, its employees and agents must park within the
parking areas specified by Landlord as employee parking. Tenant shall be
entitled to park in common with other tenants of Landlord. Tenant agrees not to
overburden the parking facilities and agrees to cooperate with Landlord and
other tenants in the use of parking facilities. Landlord reserves the right in
its sole discretion to determine if parking facilities are becoming crowded and
to allocate and assign parking spaces among Tenant and other tenants. Upon
request, Tenant shall provide Landlord with the license plate numbers of its
employees. Tenant shall not at any time park its trucks or other delivery
vehicles in the Common Area, except in such areas designated by Landlord.

                        ARTICLE 22.  ENTRY BY LANDLORD
                        ------------------------------

Tenant shall permit Landlord and any mortgagee under a mortgage or beneficiary
under a deed of trust encumbering the Building and their agents (each a
"Lender") to enter the Premises at all reasonable times for the purpose of (a)
inspecting them, (b) maintaining the Building, (c) making repairs, replacements,
alterations or additions to any portion of the Building, including the erection
and maintenance of such scaffolding, canopies, fences and props as may be
required, (d) posting notices of non-responsibility for alterations, additions
or repairs, (e) placing upon the Building any usual or ordinary "for sale" signs
and showing the space to prospective purchasers, investors and lenders, or (f)
placing on the Premises "to lease" signs or marketing and showing the Premises
to prospective tenants at any time Tenant is in uncured default hereunder or
otherwise within 180 days prior to the expiration of this Lease, without any
rebate of Rent and without any liability to Tenant for any loss of occupation or
quiet enjoyment of the Premises thereby occasioned.

      JRM                                                             WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      11
<PAGE>

                               ARTICLE 23. SIGNS
                               -----------------

Tenant shall not place on the Premises or Complex any exterior signs or
advertisements nor any interior signs or advertisements that are visible from
the exterior of the Premises, without Landlord's prior written consent, which
Landlord may withhold in its sole discretion. The cost of installation and
maintenance of any approved signs shall be at the sole expense of Tenant. At the
end of the Term, Tenant shall remove all its signs and damage caused by the
removal shall be repaired at Tenant's expense.

                              ARTICLE 24. DEFAULT
                              -------------------

     24.1  Tenant Default.  The occurrence of any of the following shall
           --------------
constitute a default and breach of this Lease by Tenant:

           (a)  Any failure by Tenant to pay when due the Rent or any other
required payment;

           (b)  Tenant's failure to observe or perform any Lease provision where
such failure continues for ten days after Notice thereof to Tenant; provided, if
the nature of the default is such that it cannot reasonably be cured within the
ten-day period, Tenant shall not be deemed in default if, in the ten-day period,
Tenant commences to cure and thereafter diligently prosecute the cure to
completion;

           (c)  If at any time during the Term there shall be filed by or
against Tenant a petition in bankruptcy or insolvency or for reorganization or
for the appointment of a receiver or trustee of all or a portion of Tenant's
property, or if a receiver or trustee takes possession of any of the assets of
Tenant, or if the leasehold interest herein passes to a receiver, or if Tenant
makes an assignment for the benefit of creditors or petitions for or enters into
an arrangement;

           (d)  Any attempted Transfer in violation of Article 7; or

           (e)  Tenant fails to take possession of the Premises on the
Commencement Date or Tenant vacates or abandons the Premises.

     24.2  Landlord Default. Landlord shall be in default if it fails to observe
           ----------------
or perform any of the covenants, conditions or provisions of this Lease for a
period longer than 30 days after Notice from Tenant; provided, however, that if
more than 30 days is required for performance, Landlord shall not be in default
if it commences performance within 30 days of Tenant's Notice and thereafter
completes such performance diligently and within a reasonable time.

                       ARTICLE 25. REMEDIES UPON DEFAULT
                       ---------------------------------

     25.1  Termination and Damages.  In the event of any Tenant default, in
           -----------------------
addition to any other remedies available to Landlord herein or at law or in
equity, Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder by giving Notice of such intention to terminate. If
Landlord shall elect to so terminate this Lease, then Landlord may recover from
Tenant:

           (a)  The worth at the time of award of any unpaid Rent which had been
earned at the time of such termination; plus

           (b)  The worth at the 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 Rent loss Tenant proves could have been reasonably
avoided. As used in subsections 25.1(a) and (b) the "worth at the time of award"
is computed by including interest at ten percent per annum; plus

           (c)  The worth at the time of award (computed by discounting such
amount at the discount rate at the time of award of the Federal Reserve Bank for
the State plus one percent) of the amount by which the unpaid Rent for the
balance of the term after the time of award exceeds the amount of such Rent loss
that Tenant proves could be reasonably avoided; plus

           (d)  Any other amount necessary to compensate Landlord for the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease; and

           (e)  At Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted by applicable State law.

     25.2  Personal Property.  In the event of default by Tenant, Landlord shall
           -----------------
have the right, with or without terminating this Lease, to reenter the Premises
and remove all persons and property from the Premises. Such property may be
stored in a public warehouse at the cost of and for the account of Tenant.

     25.3  Recovery of Rent; Reletting.
           ---------------------------

           (a)  In the event of the abandonment of the Premises by Tenant or if
Landlord elects to either reenter as provided in Section 25.2 or take possession
of the Premises pursuant to legal proceeding or pursuant to any notice provided
by law, then if Landlord does not elect to terminate this Lease as provided in
Section 25.1, this Lease shall continue in effect, and Landlord may enforce all
its rights and remedies under this Lease, including Landlord's right from time
to time, without terminating this Lease, to either recover all Rent as it
becomes due or relet the Premises or any part thereof for such term or terms and
at such Rent 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. Acts of maintenance or preservation or efforts to relet the
Premises or the appointment of a receiver upon initiation of Landlord or other
legal proceeding granting Landlord or its agent possession to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession.

           (b)  If Landlord elects to relet, the Rent received by Landlord from
reletting shall be applied in the following order: (1) to the payment of any
indebtedness other than Rent due hereunder from Tenant; (2) to the payment of

        JRM                                                           WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      12
<PAGE>

any cost of reletting, including brokerage fees; (3) to the payment of the cost
of any alterations and repairs to the Premises; (4) to the payment of Rent due
and unpaid hereunder; and (5) any residue shall be held by Landlord and applied
in payment of future Rent as the same may become due and payable hereunder. If
the portion of Rent received under clause (b) (4) is less than the Rent payable
during that month by Tenant hereunder, Tenant shall pay such deficiency to
Landlord immediately upon demand. Tenant shall also pay to Landlord when
ascertained, any costs and expenses incurred by Landlord in such reletting or in
making such alterations and repairs not covered by the Rents received from such
reletting.

           (c)  No reentry or taking possession of the Premises or any other
action under this Section shall be construed as an election to terminate this
Lease unless a Notice of such intention be given to Tenant or unless the
termination thereof be 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.

           (d)  Landlord has the remedy described in California Civil Code
("Code") Section 1951.4 (Landlord may continue Lease in effect after Tenant's
breach and abandonment and recover Rent as it becomes due, if Tenant has right
to sublet or assign, subject only to reasonable limitations).

     25.4  No Waiver.  Efforts by Landlord to mitigate the damages caused by
           ---------
Tenant's default in this Lease shall not constitute a waiver of Landlord's right
to recover damages hereunder.

     25.5  Curing Defaults.  If Tenant fails to repair, maintain, keep clean, or
           ---------------
service any of the Premises or fails to perform any other Lease obligation, then
after having given Tenant reasonable Notice of any failure and a reasonable
opportunity to remedy the failure, which in no case shall exceed ten days,
Landlord may enter upon the Premises and perform or contract for the performance
of the repair, maintenance, or other Tenant obligation, and Tenant shall pay
Landlord as Additional Rent all direct and indirect costs incurred in connection
therewith within ten days of receiving a bill therefor from Landlord.

     25.6  Cumulative Remedies.  The various rights, options, election powers,
           -------------------
and remedies of Landlord contained in this Article and elsewhere in this Lease
are cumulative.  None of them is exclusive of any others or of any legal or
equitable remedy that Landlord might otherwise have in the event of breach or
default, and the exercise of one right or remedy by Landlord will not in any way
impair its right to any other right or remedy.

                       ARTICLE 26  FORFEITURE OF PROPERTY
                       ----------------------------------

Tenant agrees that as of the date of termination of this Lease or repossession
of the Premises by Landlord, by way of default or otherwise, Tenant shall remove
all personal property in accordance with applicable law.  The Parties agree that
any property of Tenant not removed by such date shall, at the option of
Landlord, be deemed abandoned by Tenant.

                        ARTICLE 27. SURRENDER OF LEASE
                        ------------------------------

The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work as a merger. At the election of Landlord,
it shall either terminate all or any existing subleases or subtenancies or
operate as an assignment to Landlord of any or all such subleases or
subtenancies. Tenant shall return the Premises to Landlord at the expiration or
earlier termination of this Lease in good and sanitary order, condition and
repair, free of rubble and debris, broom clean, reasonable wear and tear
excepted. Tenant shall ascertain from Landlord at least 30 days prior to the
termination of this Lease, whether Landlord desires the Premises, or any part
thereof, restored to its condition prior to the making of Alterations,
installations and improvements, and if Landlord shall so desire, then Tenant
shall forthwith restore said Premises or the designated portions thereof, as the
case may be, to its original condition, entirely at its own expense, excepting
normal wear and tear. All damage to the Premises caused by the removal of trade
fixtures and personal property that Tenant is permitted to remove under the
terms of this Lease shall be promptly repaired by Tenant at its sole cost and
expense.

                      ARTICLE 28. LANDLORD'S EXCULPATION
                      ----------------------------------

In the event of default, breach, or violation by Landlord or Landlord Parties of
any of Landlord's obligations under this Lease, Landlord's liability to Tenant
shall be limited to its ownership interest in the Building or the proceeds of a
public sale of such interest pursuant to foreclosure of a judgment against
Landlord.  Landlord shall not be personally liable for any deficiency beyond its
interest in the Building.

                             ARTICLE 29.  NOTICES
                             --------------------

All notices required or permitted to be given under this Lease ("Notice"), shall
be in writing and shall be given or made to the respective party at the address
or number set forth in Sections 1.2 and 1.3 of this Lease by (i) personal
service; (ii) mailing by registered or certified mail, return receipt requested,
postage prepaid; (iii) reputable courier which provides written evidence of
delivery; or (iv) facsimile with the date and time imprinted during
transmission. Either Party may change its address for Notice by a Notice sent to
the other. Each Notice shall be deemed given or made upon the earlier of (a)
receipt or refusal to receive, (b) if by a reputable courier that provides next
business day delivery (the "Express Courier") which provides written evidence of
delivery, such as United States Express Mail, Federal Express, United Parcel
Service or Airborne Express, on the next business day after the deposit of the
same with such Express Courier, (c) if by facsimile transmission, upon the
transmission thereof, provided a copy is also given by personal service or
deposited with an Express Courier, by no later that the next business day after
such facsimile transmission or (d) if by mailing by registered or certified
mail, return receipt requested, postage prepaid, three (3) business days after
the deposit of the same with the U.S. Postal Service.

        JRM                                                           WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      13
<PAGE>

                          ARTICLE 30.  SUBORDINATION
                          --------------------------

     30.1  Priority of Encumbrances.  This Lease shall be subordinate to any
           ------------------------
ground lease, first mortgage, or first deed of trust upon the real property of
which the Premises are a part (each a "Security Instrument") and to any and all
advances made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof. Notwithstanding such
subordination, Tenant's right to quiet possession of the Premises shall not be
disturbed if Tenant is not in default and so long as Tenant shall pay the Rent
and observe and perform all the provisions of this Lease, unless this Lease is
otherwise terminated pursuant to its terms. If a Lender or ground lessor gives
Tenant Notice of its election to have this Lease prior to the lien of its
Security Instrument, this Lease shall be deemed prior to such Security
Instrument, whether this Lease is dated prior or subsequent to the date of said
Security Instrument or the date of recording thereof.

     30.2  Execution of Documents.  Tenant agrees that no documentation other
           ----------------------
than this Lease is required to evidence such subordination, however, Tenant
agrees to execute any documents required to effectuate such subordination and
any attornment or to make this Lease prior to the lien of any Security
Instrument, as the case may be. Tenant agrees that its failure to execute these
documents may cause Landlord serious financial damage by causing the failure of
a financing or sale transaction.

     30.3  Attornment.  If a Lender or ground lessor enforces its remedies
           ----------
provided by law or under the pertinent Security Instrument and succeeds to
Landlord's interest in the Premises (a "Successor-in-Interest"), Tenant shall,
upon request of any Successor-in-Interest, automatically become the tenant of
said Successor-in-Interest without change in the terms or other provisions of
this Lease. The Successor-in-Interest shall not be (i) bound by any payment of
Rent for more than 30 days in advance; (ii) bound by any modification or
amendment of this Lease to shorten the term or decrease the Minimum Monthly Rent
without the consent of the Lender or ground lessor; (iii) liable for any act or
omission of Landlord or any previous landlord; (iv) bound by any obligation of
Landlord under the Lease that is not reasonably susceptible to performance by
the Successor-in-Interest; (v) subject to any offset, defense, recoupment or
counterclaim that Tenant may have given to Landlord or any previous landlord; or
(vi) liable for any deposit that Tenant may have with respect to Landlord or
previous landlord that has not been transferred to the Successor-in-Interest.
Within ten days after Notice of a request by Successor-in-Interest, Tenant shall
deliver an executed attornment agreement in a form required by such
Successor-in-Interest.

                      ARTICLE 31.  ESTOPPEL CERTIFICATES
                      ----------------------------------

     31.1  Execution by Tenant.  Within ten days after receipt of Notice by
           -------------------
Landlord, Tenant shall execute and deliver to Landlord an estoppel certificate
acknowledging such facts regarding this Lease as Landlord may reasonably
require, including that (i) this Lease is in full force and effect, binding and
enforceable in accordance with its terms and unmodified (or if modified,
specifying the written modification documents); (ii) no default exists on the
part of Landlord or Tenant under this Lease; (iii) there are no events which
with the passage of time, or the giving of notice, or both, would create a
default under this Lease; (iv) no Rent in excess of one month's Rent has been
paid in advance; (v) Tenant has not sold, assigned, transferred, mortgaged or
pledged this Lease or the Rent nor has it received notice of same; (vi) Tenant
has no defense, setoff, recoupment or counterclaim against Landlord, and (vi)
such other matters as Landlord may reasonably request. Landlord, any Lender, or
any prospective purchaser of the Building or Complex may rely upon such estoppel
certificate. Failure to comply with this Article shall be a breach of this Lease
by Tenant giving Landlord all rights and remedies under Article 25 hereof, as
well as a right to damages caused by the loss of a loan or sale which may result
from such failure by Tenant.

     31.2  Financing, Sale or Transfer.  If Landlord desires to finance,
           ---------------------------
refinance, sell, ground lease or otherwise transfer the Premises, Building or
Complex, or any part thereof, Tenant agrees, within ten days of request therefor
by Landlord, to deliver to Landlord and to any lender or to any prospective
buyer, ground lessor or other transferee designated by Landlord financial
statements of Tenant and any parent company as may be reasonably required by
such party. Such statements shall include the past three years' financial
statements of Tenant. All such financial statements shall be received by
Landlord in confidence and shall be used only for the purposes herein set forth.

                        ARTICLE 32.  LENDER PROTECTION
                        ------------------------------

Tenant agrees to give any Lender, by registered mail, a copy of any notice of
default served upon Landlord, provided that prior to such notice Tenant has been
given Notice of the address of such Lender. Tenant agrees that if Landlord fails
to cure the default within the time provided for in this Lease, Lender shall
have an additional 30 days within which to cure the default or, if the default
cannot be cured within that time, then such additional time as may be necessary
if, within the 30 days, Lender has commenced and is diligently pursuing the
remedies necessary to cure the default (including commencement of foreclosure
proceedings, if necessary). This Lease shall not be terminated while such
remedies are being pursued.

                            ARTICLE 33.  BANKRUPTCY
                            -----------------------

If at any time during the Term (1) there shall be filed by or against Tenant, in
any court, pleadings to initiate a bankruptcy petition of any kind, or the
appointment of a receiver or trustee of all or a portion of Tenant's assets, or
(2) if a receiver or trustee takes possession of any of the assets of Tenant, or
if the leasehold interest herein passes to a receiver or trustee, or (3) if
Tenant makes an assignment for the benefit of creditors or petitions for or
enters into an arrangement with creditors (any of which are referred to herein
as a "Bankruptcy Event"), then the following provisions shall apply:

           (a)  Any receiver, assignee for the benefit of creditors
("assignee"), trustee of any kind, or Tenant as debtor-in-possession ("debtor")
shall either expressly assume or reject this Lease within sixty days following
the assignment to the Assignee or the filing of the pleading initiating the
receivership or bankruptcy case. All such parties agree that they will not seek
Court permission to extend such time for assumption or rejection. Failure to
assume or reject in the time set forth herein shall mean that the Lease may be
terminated at Landlord's option.

       JRM                                                            WFM
___________________                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      14
<PAGE>

           (b)  If the Lease is assumed by a debtor, receiver, assignee or
trustee, such party shall immediately after such assumption (1) cure any default
or provide adequate assurances that defaults will be promptly cured; (2) pay
Landlord for actual pecuniary loss or provide adequate assurances that
compensation will be made for such loss; and (3) provide adequate assurance of
future performance.

           (c)  Where a default exists under the Lease, the party assuming the
Lease may not require Landlord to provide services or supplies incidental to the
Lease before its assumption by such trustee or debtor, unless Landlord is
compensated under the terms of the Lease for such services and supplies provided
before the assumption of such Lease.

           (d)  Landlord reserves all remedies available to Landlord in Article
26 or at law or in equity in respect of a Bankruptcy Event by Tenant, to the
extent such remedies are permitted by law.

                     ARTICLE 34.  MISCELLANEOUS PROVISIONS
                     -------------------------------------

     34.1  Captions.  The captions of this Lease are for convenience only and
           --------
are not a part of this Lease and do not in any way limit or amplify the terms
and provisions of this Lease.

     34.2  Construction.  Whenever the singular number is used in this Lease and
           ------------
when required by the context, the same shall include the plural, the plural
shall include the singular. Items following the terms "include" or "including"
are descriptive only and not by way of limitation. All approvals to be given by
any party to the Lease are not to be unreasonably withheld, conditioned or
delayed unless specifically indicated to the contrary in the Lease.

     34.3  Modifications.  This instrument contains all the agreements,
          -------------
conditions and representations made between the Parties and may only be modified
by a written agreement signed by all of the Parties.

     34.4  Severability.  The invalidity of any provision of this Lease, as
           ------------
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

     34.5  No Offer.  The preparation and submission of a draft of this Lease by
           --------
either party to the other shall not constitute an offer, nor shall either party
be bound to any terms of this Lease or the entirety of the Lease itself until
the Parties have fully executed a final document and an original signature
document has been received by the Parties. Until such time as described in the
previous sentence, either party is free to terminate negotiations with no
obligation to the other.

     34.6  Light, Air and View.  No diminution of light, air, or view by any
           -------------------
structure, whether or not erected by Landlord, shall entitle Tenant to any
reduction of Rent, result in any liability of Landlord to Tenant, or in any
other way affect this Lease or Tenant's obligations hereunder.

     34.7  Public Transportation Information.  If required by law, Tenant shall
           ---------------------------------
establish and maintain a program to encourage maximum use of public
transportation by Tenant personnel employed on the Premises. Tenant shall comply
with all requirements of any local transportation management ordinance.

     34.8  Rules and Regulations.  Tenant will comply with all reasonable Rules
           ---------------------
and Regulations adopted and promulgated by Landlord and applicable to all
tenants in the Building or Complex. The "Rules and Regulations" concerning the
Complex are attached hereto as Exhibit E. Landlord reserves the right to change
                               ---------
the Rules and Regulations affecting the Complex. Landlord shall have no
liability for violation of any Rules or Regulations by any other tenant in the
Complex nor shall such violation or waiver thereof excuse Tenant's compliance.
All delivery and dispatch of supplies, fixtures, equipment and furniture shall
be by means and during hours established by Landlord.

     34.9  Joint and Several Liability.  Should Tenant consist of more than one
           ---------------------------
person or entity, they shall be jointly and severally liable on this Lease.

     34.10 Survival.  All obligations of Tenant which may accrue or arise during
           --------
the Term of this Lease or as a result of any act or omission of Tenant during
the Term shall, to the extent they have not been fully performed, satisfied or
discharged, survive the expiration or termination of this Lease.

     34.11 Brokers.  Landlord and Tenant each represent and warrant to the other
           -------
party that it has not authorized or employed, or acted by implication to
authorize or employ, any real estate broker or salesman to act for it in
connection with this Lease, except for the Broker identified in Article 1.
Landlord and Tenant shall each indemnify, defend and hold the other party
harmless from and against any and all claims by any real estate broker or
salesman whom the indemnifying party authorized or employed, or acted by
implication to authorize or employ, to act for the indemnifying party in
connection with this Lease.

     34.12 Non-liability of Landlord.  Except as otherwise expressly stated in
           -------------------------
this Lease, and only to the extent so stated, the consent or approval, whether
express or implied, or the act, failure to act or failure to object, by Landlord
in connection with any plan, specification, drawing, proposal, request, act,
omission, notice or communication (collectively "act") by or for, or prepared by
or for, Tenant, shall not create any responsibility or liability on the part of
Landlord, and shall not constitute a representation by Landlord, with respect to
the completeness, sufficiency, efficacy, propriety, quality or legality of such
act. Notwithstanding anything to the contrary contained in this Lease, if any
provision of this Lease expressly or impliedly obligates Landlord not to
unreasonably withhold its consent or approval, an action for declaratory
judgment or specific performance will be Tenant's sole right and remedy in any
dispute as to whether Landlord has breached such obligation.

     34.13 Attorneys' Fees.  In the event of litigation or arbitration between
           ---------------
the Parties with respect to this Lease, then all costs and expenses, including
all reasonable fees of appraisers, accountants, experts, consultants and
attorneys (collectively "Professional Fees") incurred by the prevailing party
shall be paid by the other party. If Landlord is named as a defendant, or
requested or required to appear as a witness or produce any documents in any
suit brought by Tenant against a third party

       JRM                                                            WFM
___________________                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      15
<PAGE>

or a third party suit against Tenant arising out of Tenant's occupancy
hereunder, Tenant shall pay Landlord its costs and expenses incurred in such
suit, including its actual Professional Fees.

     34.14  Effect of Waiver.  A party's waiver of any breach of a Lease
            ----------------
provision is not a waiver of such Lease provision or any subsequent breach of
the same or any other term, covenant or condition of the Lease.  Subsequent
acceptance of Rent by Landlord is not a waiver of any preceding breach by Tenant
of any provision of this Lease, other than the failure of Tenant to pay the
particular Rent so accepted, regardless of Landlord's knowledge the preceding
breach at the time of acceptance of Rent.

     34.15  Holding-Over.  If Tenant remains in possession of the Premises after
            ------------
the expiration of the Term or the Extended Term as provided in Addendum No. 1
attached hereto, with Landlord's written consent, then such holding over shall
be construed as a month-to-month tenancy, subject to all the conditions,
provisions and obligations of this Lease (as applicable to a month-to-month
tenancy) as existed during the last month of the Term, except the Minimum
Monthly Rent shall be equal to twice the Minimum Monthly Rent then payable.
Such tenancy may be terminated by either party upon ten days' Notice prior to
the end of any monthly period. Any option or right to extend, renew or expand
shall not be applicable. Landlord's acceptance of Rent after such expiration or
termination shall not constitute a holdover hereunder or result in a renewal of
this Lease.

     34.16  Binding Effect.  The covenants and conditions of this Lease, subject
            --------------
to the provisions as to assignment, apply to and bind the heirs, successors,
executors, administrators and assigns the Parties.

     34.17  Time of the Essence.  Time is of the essence of this Lease.
            -------------------

     34.18  Release of Landlord.  If Landlord sells its interest in the Building
            -------------------
or Complex, then from and after the effective date of the sale or conveyance,
Landlord shall be released and discharged from any and all obligations and
responsibilities under this Lease except those already accrued.

     34.19  Transfer to Purchaser.  If Tenant provides security for the faithful
            ---------------------
performance of any of its covenants of the Lease, Landlord may transfer the
security to a purchaser of the reversion, if the reversion be sold, and
thereupon Landlord shall be discharged from any further liability in reference
thereto.

     34.20  Waiver by Tenant.  The Parties have negotiated numerous provisions
            ----------------
of this Lease, some of which are covered by statute. Whenever a provision of
this Lease and a provision of any statute or other law cover the same matter,
the provisions of this Lease shall control. Therefore, Tenant waives (for itself
and all persons claiming under Tenant) the provisions of Code Sections 1932(2)
and 1933(4) with respect to the destruction of the Premises; Code Sections 1941
and 1942 with respect to Landlord's repair duties and Tenant's right to repair;
Code Section 1995.310 with respect to remedies for breach of contract; Code
Section 3275 and CCP Section 1179 relating to rights of redemption; and CCP
Section 1265.130, allowing either party a Court petition to terminate this Lease
in the event of a partial taking of the Premises by condemnation. This waiver
applies to future statutes enacted in addition to or in substitution for the
statutes specified.

     34.21  Waiver of Jury Trial.  Landlord and Tenant hereby waive trial by
            --------------------
jury in any action, proceeding or counterclaim brought by either of the Parties
against the other on any matters whatsoever arising out of this Lease, or any
other claims.

     34.22  Authorization.  If Tenant is a corporation, partnership or limited
            -------------
liability company, each person executing this Lease on behalf of such entity
represents and warrants (i) that he or she is duly authorized to execute this
Lease on behalf of such entity, (a) if a corporation, in accordance with either
a duly adopted resolution of its Board of Directors or its Bylaws; (b) if a
partnership, in accordance with its partnership agreement; or (c) if a limited
liability company, in accordance with its limited liability company agreement
and (ii) that this Lease is binding upon Tenant in accordance with its terms.

     34.23  Conversion to a Limited Liability Entity.  If Tenant is a
            ----------------------------------------
            partnership (either general or limited), joint venture, cotenancy,
            joint tenancy or an individual, Tenant may not convert (the
            "Conversion") the Tenant entity or person into any type of entity
            which possesses the characteristic of limited liability such as, by
            way of example only, a corporation, a limited liability company,
            limited liability partnership or limited liability limited
            partnership (a "Limited Entity") without the consent of Landlord,
            subject to fulfillment of the conditions below. The following are
            conditions precedent to Landlord's obligation to act reasonably with
            respect to a Conversion to a Limited Entity: (i) the Limited Entity
            assumes all of Tenant's liabilities and is assigned all of Tenant's
            assets as of the effective date of the Conversion; (ii) as of the
            effective date of the Conversion, the Limited Entity shall have a
            net worth ("Net Worth"), which is not less than either (a) Tenant's
            Net Worth on the date of execution of the Lease or (b) Tenant's Net
            Worth as of the date Tenant requests consent to the Conversion;
            (iii) Tenant is not in default under the Lease; (iv) Tenant delivers
            to Landlord a satisfactory agreement, executed by each equity
            interest holder of Tenant, wherein each agrees to remain personally
            liable for all of the terms, covenants and conditions of the Lease;
            and (v) Tenant reimburses Landlord within ten days of Landlord's
            written demand for any and all reasonable costs and expenses that
            may be incurred by Landlord in connection with the Conversion
            including, without limitation, reasonable attorneys' fees.

       JRM                                                            WFM
___________________                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      16
<PAGE>

In Witness Whereof, the Parties have executed this Lease as of the date first
written above.

"Landlord"                                  "Tenant"

Bedford Property Investors, Inc.,           Centillium Communications, Inc.,
a Maryland corporation                      a Delaware corporation

By:___________________________              By:____________________________
Name:_________________________              Name:__________________________
Title:________________________              Title:_________________________
Date:_________________________              Date:__________________________

FOR OFFICE USE ONLY:

PREPARED BY: ________
REVIEWED BY: ________
APPROVED BY: ________

       JRM                                                            WFM
------------------                                             -----------------
Landlord's Initials                                            Tenant's Initials

                                      17
<PAGE>

                                   APPENDIX

                            Index to Defined Terms
                            ----------------------

Term                                                         Section No.
-------------------------------------------------------------------------------

Advance Rent                                                   Section 1.8 (B)
Alterations                                                       Section 18.1
Award                                                         Section 20.1 (c)
Bankruptcy Event                                                    Article 33
Broker                                                            Section 1.15
Building                                                           Section 1.5
Capital Costs                                                  Section 6.1 (d)
CCP                                                                 Article 13
CC&Rs                                                             Section 1.13
Claims                                                            Section 11.3
Commencement Date                                                  Section 3.1
Common Area                                                    Section 6.1 (a)
Common Area Costs                                              Section 6.1 (b)
Complex                                                            Section 1.6
Complex Insurance Premium                                          Section 8.4
Condemnation                                                  Section 20.1 (a)
Condemnor                                                     Section 20.1 (d)
Construction Budget                                     Section 3 of Exhibit C
Construction Costs                                      Section 3 of Exhibit C
Construction Plans                                      Section 3 of Exhibit C
Conversion                                                       Section 34.23
Code                                                          Section 25.4 (d)
Date of Taking                                                Section 20.1 (b)
Decision Period                                                   Section 20.4
Environmental Laws                                        Section 16.3 (a) (i)
Estimated Commencement Date                                    Section 1.7 (A)
Force Majeure Delay                                     Section 3 of Exhibit C
Hazardous Materials                                      Section 16.3 (a) (ii)
HVAC                                                              Section 19.2
Initial Pro Rata %                                                Section 1.11
Landlord                                                           Section 1.2
Landlord's Allowance                                              Section 1.12
Landlord Parties                                                   Section 2.1
Laws and Regulations                                              Section 16.1
Lease                                                             Introduction
Lender                                                              Article 22
Limited Entity                                                   Section 34.23
Loss Date                                                         Section 12.1
Losses                                                  Section 16.3 (a) (iii)
Management Fee                                                    Section 1.14
Minimum Monthly Rent                                           Section 1.8 (A)
Net Worth                                                        Section 34.23
Nonterminating Party                                              Section 20.4
Notice                                                              Article 29
Parties                                                           Introduction
Permitted Use                                                     Section 1.11
Premises                                                           Section 1.4
Pro Rata %                                                     Section 6.1 (c)
Pro Rata Share                                                     Section 6.3
Professional Fees                                                Section 34.13
Real Property Taxes                                                Section 5.1
Release                                                  Section 16.3 (a) (iv)
Rent                                                               Section 4.1
Rent Payment Address                                               Section 1.1
Rentable Area                                                      Section 1.4
Restrictions                                                       Section 2.2
Rules and Regulations                                             Section 34.8
Security Deposit                                                   Section 1.9
Security Instrument                                               Section 30.1
Space Plan                                              Section 3 of Exhibit C
State                                                              Section 1.6
Substantial Completion                                  Section 3 of Exhibit C
Substantially Completed                                 Section 3 of Exhibit C
Successor-in-Interest                                             Section 30.3
Taxes                                                              Section 5.1
Tenant                                                             Section 1.3
Tenant Delay                                            Section 3 of Exhibit C
Tenant Improvements                                     Section 3 of Exhibit C
Tenant Parties                                                     Section 2.1
Tenant's Participation                                  Section 3 of Exhibit C
Term                                                               Section 1.7
Terminating Party                                                 Section 20.4
Transfer                                                           Section 7.1
Transfer Agreement                                                 Section 7.2
Transfer Date                                                      Section 7.2
Transfer Notice                                                    Section 7.2
Transferee                                                         Section 7.2
Transferor                                                         Section 7.4
Uninsured Property Loss                                           Section 12.1

       JRM                                                               WFM
------------------                                             -----------------
Landlord's Initials                                            Tenant's Initials

                                      18

<PAGE>

                                ADDENDUM No. 1
                 OPTION TO EXTEND THE TERM-NEGOTIATED RENTAL-
                 --------------------------------------------
                               THREE ARBITRATORS
                               -----------------

          1.   Notice of Exercise.  Tenant shall have the right to extend the
               ------------------
initial Term hereof for one (1) additional period of five (5) years upon the
                        -------                      --------
same terms and conditions as stated herein, except for Minimum Rent. Such
extension is herein referred to as the "Extended Term." Tenant must exercise its
right, if at all, by written Notice (the "Notice of Exercise") to Landlord not
less than one hundred twenty (120) nor more than one hundred eighty (180) days
          ------------------------               ------------------------
prior to the expiration of the initial Term hereof, provided that Tenant has not
been in default of any of the provisions of this Lease during the then current
Term.

          2.   Option is Personal to Tenant. The option to extend granted herein
               ----------------------------
is personal to the original Tenant executing this Lease, and notwithstanding
anything to the contrary contained in the Lease, the rights contained in this
Addendum are not assignable or transferable by such original Tenant.  Landlord
grants the rights contained herein to Tenant in consideration of Tenant's strict
compliance with the provisions hereof, including, without limitation, the manner
of exercise of this option.

          3.   Fair Market Rent.  If Tenant exercises the right to extend the
               ----------------
term then the Minimum Rent shall be adjusted to equal the Fair Market Rent for
the Premises as of the date of the commencement of the Extended Term, pursuant
to the procedures hereinafter set forth.  The term "Fair Market Rent" means the
Minimum Rent chargeable for the Premises based upon the following factors
applicable to the Premises or any comparable premises:

          (a)  Rental rates being charged for comparable premises in the same
geographical location;

          (b)  The relative locations of comparable premises;

          (c)  Improvements, or allowances provided for improvements, or to be
provided;

          (d)  Rental adjustments, if any, or rental concessions;

          (e)  Services and utilities provided or to be provided;

          (f)  Use limitations or restrictions; and

          (g)  Any other relevant Lease terms or conditions.

In no event, however, shall the Fair Market Rent be less than the Minimum Rent
in effect immediately prior to the commencement date of the Extended Term.  The
Fair Market Rent evaluation may include provision for further rent adjustment
during the Extended Term, if such adjustments are commonly required in the
market place for similar types of leases.

          4.   Determination of Fair Market Rent.  Upon exercise of the right to
               ---------------------------------
extend the term, and included within the Notice of Exercise, Tenant shall notify
Landlord of its opinion of Fair Market Rent as above defined for the Extended
Term.  If the parties are unable to agree upon a Minimum Rent for the Extended
Term within thirty days following Landlord's receipt of the Notice of Exercise,
within ten days thereafter either party may, at its sole cost and expense and by
giving notice to the other party in writing, appoint a real estate appraiser who
is a member of the Appraisal Institute, or the Society of Real Estate
Appraisers, or an equivalent professional organization, with at least five
years' experience appraising properties devoted to the same general type of use
(e.g. retail, office) as the Premises in the county in which the Premises are
located ("Qualified Appraiser") to set the Fair Market Rent for the Extended
Term.  If a party does not appoint a Qualified Appraiser within ten days after
the first party has given notice of the name of its Qualified Appraiser, the
single Qualified Appraiser appointed shall be the sole appraiser and shall set
the Fair Market Rent for the Extended Term.  If two Qualified Appraisers are
appointed by the parties, they shall meet promptly, on five days' notice to the
parties, to take such evidence and other information as the parties may deem
reasonable to submit to the Qualified Appraisers.  Within thirty days after the
selection of the last of the two Qualified Appraisers to be appointed by the
parties, the Qualified Appraisers shall render their opinions of the Fair Market
Rent of the Premises as above qualified. If the two valuations are within ten
percent of each other, they shall be averaged and the average of the two shall
be the Minimum Rent for the Extended Term.  If only one appraisal is timely
submitted, that appraisal shall constitute the Minimum Rent for the Extended
Term.   If the two valuations are separated by more than ten percent, then the
two Qualified Appraisers shall, within ten days following the last date for
submission of the two appraisals of Fair Market Rent, appoint a third Qualified
Appraiser, who shall decide the Fair Market Rent for the Extended Term as
specified in Section 7 of this Addendum.  If the two Qualified Appraisers are
unable to agree upon a third Qualified Appraiser within such ten-day period,
they shall notify the parties hereto in writing of their inability to appoint a
third Qualified Appraiser, and within ten days following receipt of such notice
either of the parties to this Lease, by giving five days' notice to the other
party, may demand Arbitration as specified in Section 6 of this Addendum.  If
neither party applies for Arbitration within the ten-day period herein
specified, the two appraisals of Fair Market Rent shall be averaged as stated
above, and such average shall be the Minimum Rent for the Extended Term.

          5.   Arbitration.  In the event the parties are unable to mutually
               -----------
agree upon a Minimum Rent for the Extended Term, and in such event proceed to
Appraisal or Arbitration proceedings as specified below, both parties shall be
bound to submit the matter for such determination.  The procedure specified in
this Addendum for appointment of Qualified Appraisers, delivery of appraisals,
appointment of an Arbitrator, and determination of Fair Market Rent thereby, is
herein collectively referred to as "Arbitration."  The Arbitration shall be
conducted and determined in the County where the Premises are situated.  If the
Arbitration is not concluded before the commencement of the Extended Term,
Tenant shall pay Minimum Rent to Landlord in an amount equal to the Fair Market
Rent set forth in the appraisal by Landlord's Qualified Appraiser until the Fair
Market Rent is determined in accordance with the arbitration provisions hereof.
If the Fair Market

       JRM                                                            WFM
------------------                                             -----------------
Landlord's Initials                                            Tenant's Initials

                                      19
<PAGE>

Rent as determined by Arbitration differs from that stated by Landlord's
Qualified Appraiser, then any adjustment shall be made by payment by the
appropriate party within thirty days after the determination of Fair Market Rent
by Arbitration has been concluded, as provided herein. Tenant shall be obligated
to make payment during the entire Extended Term of the Minimum Rent determined
in accordance with the Arbitration procedure hereunder.

          6.   Demand for Arbitration.  A party demanding Arbitration hereunder
               ----------------------
shall make its demand in writing ("Demand Notice") within ten days after receipt
of notice from the Qualified Appraisers that they have failed to appoint a third
Qualified Appraiser as specified in Section 4 above.  A copy of the Demand
Notice shall be sent to the President of the Real Estate Board for the county in
which the Premises are located.  If there is no Real Estate Board, or Board
President, in said county then a copy of the Demand Notice shall be sent to the
Presiding Judge of the highest trial court in such county for the state in which
the Premises are located.  The Board President or Presiding Judge, whichever is
applicable, is hereinafter referred to as the "Appointer."  The Appointer,
acting in his personal, private capacity, shall appoint within ten days
thereafter a third Qualified Appraiser to be the "Arbitrator."  The Arbitrator
shall be qualified to serve as an expert witness, over objection, to give
opinion testimony addressed to the issue in a court of competent jurisdiction.

          7.   Decision of the Arbitrator. As used herein, the term "Arbitrator"
               --------------------------
refers to a third Qualified Appraiser, selected by any of the methods heretofore
set forth.  The Arbitrator shall, within sixty days after his appointment, state
in writing his determination as to whether the Fair Market Rent stated by
Landlord's Qualified Appraiser or the Fair Market Rent stated by Tenant's
Qualified Appraiser most closely approximates his own.  The Arbitrator shall
have the right to consult experts and competent authorities with factual
information or evidence pertaining to the determination of Fair Market Rent, but
any such consultation shall be made in the presence of both parties with full
right to cross examine.  The Arbitrator shall not state his own opinion of Fair
Market Rent, but shall be strictly limited to the selection of one of the two
appraisals submitted by the other two Qualified Appraisers.  The Arbitrator
shall have no right to propose a middle ground or any modification of either of
the proposed valuations, and shall have no power to modify this Lease. The
valuation so chosen as most closely approximating that of the Arbitrator shall
constitute his decision, shall be deemed the Minimum Rent for the Extended Term
and shall be final and binding upon the parties' absent fraud or gross error.
The Arbitrator shall render a decision and award in writing, with counterpart
copies to each party.  Judgement may be entered thereon in any court of
competent jurisdiction.

          8.   Successor Arbitrator; Fees and Expenses. In the event of failure,
               ---------------------------------------
refusal, or inability of the Arbitrator to act in a timely manner, a successor
shall be appointed in the same manner as such Arbitrator was first chosen
hereunder.  The fees and expenses of the Arbitrator and for the administrative
hearing fee, if any, shall be divided equally between the parties.  Each party
shall bear its own attorneys' fees and other expenses, including fees of
witnesses in presenting evidence, and the fees and cost of its own Qualified
Appraiser.

       JRM                                                            WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      20
<PAGE>

                                   EXHIBIT A
                               LEGAL DESCRIPTION

REAL PROPERTY in the City of Fremont, County of Alameda, State of California,
described as follows:

Parcel 3, Parcel Map No. 4675, filed July 9, 1986, Map Book 161, Page 67,
Alameda County Records.

Excepting therefrom:

All oil, gas, mineral, geothermal, and hydrocarbon substances in and under or
that may be produced below a depth of 500 feet below the surface of said
property without any right of entry upon the surface of said land for the
purposes of mining, drilling, exploring or extracting such oil, gas, mineral,
geothermal, or hydrocarbon substances and without any right to the use of or
rights in or to any portion of the said land to a depth of 500 feet below the
surface thereof, as reserved by King & Lyons, a California general partnership,
in the Deed recorded December 31, 1987. Series No. 87-348396, Official Records.

A.P. No. 519-1693-031

       JRM                                                            WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      21
<PAGE>

                                   EXHIBIT B
                              PLAN OF THE COMPLEX

                                    [PLAN]

       JRM                                                            WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      22
<PAGE>

                                  EXHIBIT B-1
                          FLOOR PLAN OF THE PREMISES

                                 [FLOOR PLAN]

       JRM                                                            WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      23
<PAGE>

                                   EXHIBIT C
                           CONSTRUCTION OBLIGATIONS

     1.   Defined Terms.  All capitalized terms referred to in this Exhibit C
          -------------
(this "Agreement") not defined below shall have the same meaning as defined in
the Lease of which this Agreement  forms a part.

     2.   Construction of Tenant Improvements.  Landlord shall construct the
          -----------------------------------
Tenant Improvements in accordance with this Agreement and in substantial
conformance with the approved Construction Plans prepared by The Charles Doerr
                                                 -----------------------------
Group, dated May 12, 2000, Sheet#: CS-1, A-1, A-2, A-3 & A-4 (including design
------------------------------------------------------------------------------
build electrical, mechanical, & plumbing plans), which are hereby approved by
-----------------------------------------------
Tenant.

     3.   Definitions.  Each of the following terms shall have the following
          -----------
meaning:

          "Building" shall mean the Building Shell and the Tenant Improvements.

          "Building Shell" shall mean the basic minimum enclosure of the
Building consisting of the foundation and floors, structural framework, roof
coverings, exterior walls and exterior doors and windows, basic fire sprinkler
systems, underground electrical power stubs, plumbing system stubs, the parking
lots and landscaping appurtenant to the Complex, but excluding all Tenant
Improvements.

          "Construction Plans"  shall mean the complete plans and specifications
prepared by The Charles Doerr Group, dated May 12, 2000, Sheet#: CS-1, A-1, A-2,
--------------------------------------------------------------------------------
A-3 & A-4 an including all design build electrical, mechanical, & plumbing plans
--------------------------------------------------------------------------------
for the construction of the Tenant Improvements, which are required to obtain
all building permits, licenses and certificates from the applicable governmental
authority(ies) for the construction of the Tenant Improvements.

          "Contractor" shall mean P.D. Larson Company the California licensed
                                  -------------------
general contractor selected by Landlord.  Contractor shall be responsible for
construction of the Tenant Improvements.

          "Force Majeure Delay" means any delay, other than a Tenant Delay, by
Landlord in completing the Tenant Improvements by the Commencement Date by
reason of strike, other labor trouble, governmental preemption of priorities or
other controls in connection with a national or other public emergency, or
shortages of fuel, supplies or labor resulting therefrom, or any other cause,
whether similar or dissimilar to the above, beyond Landlord's reasonable
control.  The time for performance of any obligation of Landlord to construct
the Tenant Improvements under this Agreement or the Lease shall be extended at
Landlord's election by the period of any delay caused by any of the foregoing
events.

          "Tenant Delay" shall mean any delay in the construction of the Tenant
Improvements, or any delays in approvals or submissions required hereunder
beyond the time period provided for in this Agreement caused by (i) any changes
in the nature or scope of the Tenant Improvements requested by Tenant (including
Change Requests, and any changes in the Approved Preliminary Plans and/or
Approved Construction Plans for the Tenant Improvements), (ii) Tenant's failure
to timely provide Landlord with any needed information on the Tenant
Improvements, (iii) Tenant's failure to timely provide any open selections for
the Tenant Improvements, or (iv) Tenant's failure to timely provide the
"Warehouse Plan" (as defined in Section 5, below) in the time and manner
specified in Section 5, below.  In the event of any Tenant Delay, this Lease
shall be deemed to have commenced and the obligations of Tenant under the Lease,
including without limitation the obligation to pay all rent due thereunder,
shall have been deemed commence on the date the Lease would otherwise have
commenced had it not been for Tenant Delay.  Any and all costs and expenses
incurred by Landlord as a result of any Tenant Delay, including without
limitation, architectural, engineering and space planning fees, permit
resubmittal fees, increased Tenant Improvement Costs, and the like shall be the
sole responsibility and obligation of Tenant and shall be reimbursed by Tenant
to Landlord upon demand therefore.

          "Tenant's Personal Property" shall mean all personal property
constructed or installed in the Leased Premises by Tenant at Tenant's expense,
including furniture, fixtures and equipment, but excluding Tenant Improvements.

          "Space Planner" shall mean The Charles Doerr Group.  Space Planner
                                     -----------------------
shall be employed by Landlord.

          "Substantial Completion" or "Substantially Complete" shall be the date
that the construction of the Tenant Improvements is sufficiently complete so
that Tenant can legally occupy and utilize the Leased Premises (other than with
respect to the Warehouse Plan, for which Tenant is solely responsible), subject
only to minor "punchlist" items, the completion of which will not materially
affect Tenant's use and occupancy of the Leased Premises.  Landlord shall cause
all punchlist items to be completed within a reasonable time following
Substantial Completion.

          "Tenant Improvements" shall mean all interior portions of the Building
to be constructed by Landlord for Tenant pursuant to this Agreement and the
Construction Plans, including but not limited to, electrical systems, heating,
ventilating and air conditioning systems  ("HVAC"), plumbing and fire sprinkler
systems (to the extent the electrical, HVAC, plumbing and fire sprinkler systems
are not included in the Building Shell), Building Standard carpet throughout
office area, interior partitions, millwork, acoustical ceilings, interior
Building Standard  paint, and similar items.

          "Tenant Improvement Cost" shall mean the costs for construction and
installation of the Tenant Improvements as specified in a bid provided by the
Contractor and approved by Landlord (the "Bid"), as attached hereto as Exhibit
C-1, and shall include the fees charged by Space Planner in preparing the
Preliminary Plans and Construction Plans, and any alterations or modifications
thereto.  Tenant Improvement Costs shall not include the cost of any of Tenant's
Personal Property or the installation thereof, or any additional costs and
expenses (including the costs and expenses of the Space Planner) incurred as a
result of changes from the Construction Plans, or any Change Requests, all of
which shall be performed and/or paid for by Tenant, at its sole cost and
expense.

       JRM                                                            WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      24
<PAGE>

     4.   Building Permit.  Landlord shall be responsible for obtaining a
          ---------------
building permit ("Building Permit") for the Tenant Improvements. Landlord or its
Contractor shall submit the Construction Plans to the appropriate governmental
body for plan checking and a Building Permit.  Landlord, shall cause to be made
any change in the Construction Plans necessary to obtain the Building Permit.

     5.   Warehouse Plan. Tenant shall, as soon as practicable, submit to the
          --------------
appropriate governmental authorities having jurisdiction thereover (the
"Approval Authorities") a plan showing the design, layout, installations and
other details required by the Approval Authorities with respect to Tenant's
proposed methods for using the warehouse portion of the Leased Premises
(hereinafter, the "Warehouse Plan.")  It is agreed by both Landlord and Tenant
that obtaining approval from the Approval Authorities of the Warehouse Plan is
necessary for Tenant's legal occupancy of the Leased Premises.  In the event
that Tenant has failed to obtain approval of the Warehouse Plan by the date that
Landlord has otherwise Substantially Completed the Tenant Improvements, Landlord
and Tenant agree that this Lease shall commence on the date that Landlord has
otherwise Substantially Completed the Tenant Improvements, notwithstanding that
approval by the Approval Authorities of the Warehouse Plan may be necessary for
Tenant's legal occupancy of the Leased Premises, and that Tenant may begin to
pay rent and other charges due under the Lease prior to taking occupancy of the
Leased Premises.

     6.   Commencement and Completion of Tenant Improvements.  As soon as,
Landlord has obtained the Building Permit and other necessary authorizations for
the construction of the Tenant Improvements from the City of Fremont,
                                                             -------
California and any other governmental, quasi-governmental or regulatory agency
and Landlord has entered into a contract with the Contractor for the
construction of the Tenant Improvements, Landlord shall cause the construction
of the Tenant Improvements to commence and shall diligently pursue same until
completion.

     7.   Change Requests.
          ---------------

          7.1  Approval.  No changes to the Construction Plans requested by
Tenant (each, a "Change Request") shall be made without Landlord's prior written
approval, which approval shall not be unreasonably withheld or delayed, subject
to the following:

               (i)   No Change Request shall affect the structure or operating
systems of the Building;

               (ii)  Landlord may require Tenant to pay to Landlord within
thirty (30) days of written notice from Landlord, the amount by which the Tenant
Improvement Cost, after implementation of the Change Request, is reasonably
estimated by Landlord to exceed the Bid, including without limitation, increases
in construction costs and other charges payable hereunder caused by any delay in
construction of the Tenant Improvements as a result of a Change Request;

               (iii) A Change Request shall constitute an agreement by Tenant to
any delay in completion of the Tenant Improvements caused by Landlord's
reviewing, processing and implementing the Change Request, all of which delays
shall be deemed a Tenant Delay;

               (iv)  Landlord shall only accept Change Requests signed by
Tenant's representative, _____________________________. Tenant may from time to
time designate a different representative to authorize Change Requests.

               (v)   Any delays in completion of the Tenant Improvements caused
as a result of a Change Request shall not delay the commencement of the term of
the Lease from the date the term of the Lease would otherwise have commenced had
it not been for the Change Request. Tenant agrees that the Lease and all
obligations of Tenant thereunder (including without limitation the obligation to
pay rent) shall commence on the date that the term of the Lease would otherwise
have commenced had it not been for the Change Request.

          7.2  Procedure.  Except with respect to the mechanical and electrical
systems of the Building, within three (3) business days after receipt of a
written Change Request from Tenant, Landlord shall notify Tenant of Landlord's
approval or disapproval of the Change Request.  All costs paid by Landlord to
unaffiliated parties in connection with review of proposed Change Requests shall
be part of the Tenant Improvement Cost.  With respect to Change Request related
to the Building's mechanical and electrical systems, Landlord shall have five
(5) business days to respond.  If Landlord fails to notify Tenant of Landlord's
disapproval of the Change Request within the required period, the Change Request
shall be deemed disapproved.

          7.3  Period of Review.  The period of Landlord's review of a proposed
Change Request shall be deemed a Tenant Delay.

          7.4  Minor Changes in Work.  Landlord shall have the authority,
without the consent of Tenant, to order any changes to the Tenant Improvements
required by applicable laws or regulations, and to order minor changes in the
Tenant Improvements not involving an increase in cost to Tenant or a delay in
the completion of the Tenant Improvements.  Delays caused by Landlord's
compliance with laws or regulations shall not be deemed delays within Landlord's
control, and Landlord shall have no responsibility or liability with respect
thereto.

     8.   Payment of Contractor.  Landlord shall be responsible for making
          ---------------------
monthly progress payments to Contractor in accordance with the construction
contract between Landlord and the Contractor.

     9.   Payment of Additional Costs.  Following Substantial Completion of the
          ---------------------------
Tenant Improvements and determination of the total Tenant Improvement Cost, to
the extent the total Tenant Improvement Cost exceeds the Bid as a result of (i)
changes to the Construction Plans requested by Tenant, or (ii) Change Requests
made by Tenant (the "Additional Costs"), Tenant shall be solely responsible for
payment of such Additional Costs.  Tenant shall pay to Landlord, within ten (10)
days after written notice from Landlord (accompanied by statement evidencing
such Additional Costs incurred), the amount of the Additional Costs.

       JRM                                                          WFM
-------------------                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                      25
<PAGE>

     10.  Importance of Time Periods.  The time periods set forth in this
          --------------------------
Agreement are to be strictly adhered to and extensions of time shall be granted
only when the circumstances are such that it is clear that the party requesting
the additional time is without fault as to the delay.

      JRM                                                           WFM
-------------------                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                      26
<PAGE>

                                  EXHIBIT C-1
                   CONTRACTOR'S BID FOR TENANT IMPROVEMENTS

    1)   Demo walls and flooring.                                $  13,615.00
    2)   Framing and Drywall (Includes fir out exterior walls
          and draft stop).                                       $  39,212.00
    3)   Insulation (Demising wall and ceiling) Title-24.        $  11,894.00
    4)   Paint all walls in conditioned area.                    $   4,914.00
    5)   Doors and Frames (re-use existing).                     $   3,000.00
    6)   Glazing (Interior side-lights & (4) exterior 12'x9'
          w/saw cut, structural, etc.)                           $   9,160.00
    7)   Cabinets per plan.                                      $   7,225.00
    8)   Electrical (New Light (184); Re-locate Lights (40);
          Outlets (35), HVAC disconnects (4), Exit Lights (4);
          Night Lights(4).                                       $  32,400.00
    9)   HVAC (4) New Units (3=(10) Ton; 1=(3) Ton unit
          w/balance & distribution).                             $  59,000.00
    10)  Roofing Patch.                                          $   2,000.00
    11)  Plumbing to include gas lines.                          $  10,500.00
    12)  Fire Extinguisher.                                      $     400.00
    13)  Fire Sprinkler to include plan and permit.              $  16,800.00
    14)  Flooring (Building Standard Carpet, VCT and Base).      $  30,376.00
    15)  Acoustical Ceiling (New and patch existing).            $  29,920.00
    16)  Clean up.                                               $   1,250.00
    17)  Equipment Rental.                                       $   2,200.00
    18)  Supervision.                                            $   8,800.00
    19)  Permit Fee Budget.                                      $   3,500.00
    20)  Profit and Overhead.                                    $  20,031.00
                                                                -------------

                                          Subtotal Costs:        $ 306,179.00
                                     Add: Design-Build Drawings: $   3,808.00
                                                                 ------------

                                          Total Costs:           $ 309,979.00
                                                                 ============

  Exclusion: City required upgrades (i.e ADA ramp)

       JRM                                                            WFM
-------------------                                            -----------------
Landlord's Initials                                            Tenant's Initials

                                      27
<PAGE>

                                   EXHIBIT D
                        ACKNOWLEDGEMENT OF COMMENCEMENT

This Acknowledgement is made as of ________________________________ with
reference to that certain Lease Agreement (hereinafter referred to as the
"Lease") dated, August 28, 2000 by and between  Bedford Property Investors,
                ---------------
Inc., a Maryland corporation "Landlord" therein, and Centillium Communications,
Inc., a Delaware corporation "Tenant", for the Leased Premises situated at 3777
                                                                           ----
Spinnaker Court, Fremont, California 94538.
------------------------------------------

The undersigned hereby confirms the following:

1.   That the Tenant accepted possession of the Leased Premises (as described in
said Lease) on ________________, and acknowledges that the Leased Premises are
as represented by the Landlord and in good order, condition and repair, and that
the improvements, if any, required to be constructed for Tenant by Landlord
under this Lease have been so constructed and are satisfactorily completed in
all respects.

2.   That all conditions of said Lease to be performed by Landlord prerequisite
to the full effectiveness of said Lease have been satisfied and that Landlord
has fulfilled all of its duties of an inducement nature.

3.   That in accordance with the provisions of said Lease the commencement date
of the term is _________________, and that, unless sooner terminated, the
original term thereof expires on _______________.

4.   That said Lease is in full force and effect and that the same represents
the entire agreement between Landlord and Tenant concerning said Lease.

5.   That there are no existing defenses which Tenant has against the
enforcement of said Lease by Landlord, and no offsets or credits against
rentals.

6.   That the minimum rental obligations of said Lease is presently in effect
and that all rentals, charges and other obligations on the part of Tenant under
said Lease commenced to accrue on ___________________.

7.   That the undersigned has not made any prior assignment, hypothecation or
pledge of said Lease or of the rents hereunder.

Tenant:

Centillium Communications, Inc.,
a Delaware corporation

By: /s/ W F Mackenzie
   ---------------------------
(Print): WILLIAM F MACKENZIE
        ----------------------
Its: V.P. Operations
    --------------------------
Date:    9/19/00
     -------------------------

       JRM                                                          WFM
-------------------                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                      28
<PAGE>

                                   EXHIBIT E
                  RULES AND REGULATIONS ATTACHED TO AND MADE
                             A PART OF THIS LEASE

1.   No sign, placard, picture, advertisement, name of notice shall be
     inscribed, displayed or printed or affixed on the Building or to any part
     thereof, or which is visible from the outside of the Building, without the
     written consent of Landlord, first had and obtained and Landlord shall have
     the right to remove any such sign, placard, picture, advertisement, name or
     notice without notice and at the expense of Tenant.

     All approved signs or lettering on doors shall be printed, affixed or
     inscribed at the expense of Tenant by a person approved by Landlord.

     Tenant shall not place anything or allow anything to be placed near the
     glass of any window, door, partition or wall which may appear unsightly
     from outside the Premises.

2.   If a directory is located at the Building, it is provided exclusively for
     the display of the name and location of Tenant only and Landlord reserves
     the right to exclude any other names therefrom.

3.   The sidewalks, passages, exits, entrances, and stairways in and around the
     Building shall not be obstructed by Tenant or used by it for any purpose
     other than for ingress to and egress from the Premises.  The passages,
     exits, entrances, stairways, and roof are not for the use of the general
     public and Landlord shall in all cases retain the right to control and
     prevent access thereto by all persons whose presence in the judgment of
     Landlord shall be prejudicial to the safety, character, reputation and
     interests of the Building and its Tenants, provided that nothing herein
     contained shall be construed to prevent such access to person with whom
     Tenant normally deals in the ordinary course of Tenant's business unless
     such persons are engaged in illegal activities.  Neither Tenant nor any
     employees or invitees of Tenant shall go upon the roof of the Building.

4.   Tenant shall not be permitted to install any additional lock or locks on
     any door in the Building unless written consent of Landlord shall have
     first been obtained.  Two keys will be furnished by Landlord for every
     room.

5.   The toilets and urinals shall not be used for any purpose other than those
     for which they were constructed, and no rubbish, newspapers or other
     substances of any kind shall be thrown into them.  Wastes and excessive or
     unusual use of water shall not be allowed.   Tenant shall be responsible
     for any breakage, stoppage or damage resulting from the violation of this
     rule by Tenant or its employees or invitees.

6.   Tenant shall not overload the floor of the Premises or mark, drive nails,
     screw or drill into the partitions, woodwork or plaster or in any way
     deface the Premises or any part thereof.

7.   Tenant shall not use, keep or permit to be used or kept any foul or noxious
     gas or substance in the Premises, or permit or suffer the Premises to be
     occupied or used in a manner offensive or objectionable to Landlord or
     other occupants of the Building by reason of noise, odors and/or
     vibrations, or interfere in any way with other Tenants or those having
     business therein.

8.   The Premises shall not be used for the storage of merchandise, for washing
     clothes, for lodging, or for any improper objectionable or immoral
     purposes.

9.   Tenant shall not use or keep in the Premises or the Building any kerosene,
     gasoline, or inflammable or combustible fluid or material, or use any
     method of heating or air conditioning other than that supplied by Landlord.

10.  Landlord will direct electricians as to the manner and location in which
     telephone and telegraph wires are to be introduced.  No boring or cutting
     for wires will be allowed without the consent of Landlord.  The location of
     telephones, call boxes and other office equipment affixed to the Premises
     shall be subject to the approval of Landlord.

11.  Tenant shall not lay linoleum, tile, carpet or other similar floor covering
     so that the same shall be affixed to the floor of the Premises in any
     manner except as approved by Landlord.  The expense of repairing any damage
     resulting from a violation of this rule or removal of any floor covering
     shall be borne by Tenant.

12.  Exterior blinds are furnished for each window by Landlord.  Any additional
     window covering desired by Tenant shall be approved by Landlord.

13.  Landlord reserves the right to exclude or expel from the Building any
     person who, in the judgment of Landlord, is intoxicated or under the
     influence of liquor or drugs, or who shall in any manner do any act in
     violation of any of the rules and regulations of the Building.

14.  Tenant shall not disturb, solicit, or canvass any occupant of the Building.

15.  Without the written consent of Landlord, Tenant shall not use the name of
     the Building in connection with or in promoting or advertising the business
     of Tenant except as Tenant's address.

16.  Tenant shall not permit any contractor or other person making any
     alterations, additions or installations within the Premises to use the
     hallways, lobby or corridors as storage or work areas without the prior
     consent of Landlord.  Tenant shall be liable

       JRM                                                          WFM
___________________                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                      29
<PAGE>

     for and shall pay the expense of any additional cleaning or other
     maintenance required to be performed by Landlord as a result of the
     transportation or storage of materials or work performed within the
     Building by or for Tenant.

17.  Tenant shall be entitled to use parking spaces as mutually agreed upon
     between Tenant and Landlord subject to such reasonable conditions and
     regulations as may be imposed from time to time by Landlord.  Tenant agrees
     that vehicles of Tenant or its employees or agents shall not park in
     driveways nor occupy parking spaces or other areas reserved for any use
     such as Visitors, Delivery, Loading, or other tenants.  Landlord or its
     agents shall have the right to cause or be removed any car or Tenant, its
     employees or agents, that may be parked in unauthorized areas, and Tenant
     agrees to save and hold harmless Landlord, its agents and employees from
     any and all claims, losses, damages and demands asserted or arising in
     respect to or in connection with the removal of any such vehicle.  Tenant,
     its employees, or agents shall not park campers, trucks or cars on the
     Building parking areas overnight or over weekends.  Tenant will from time
     to time, upon request of Landlord, supply Landlord with a list of license
     plate numbers of vehicles owned or operated by its employees and agents.

18.  Landlord reserves the right to make modifications hereto and such other and
     further rules and regulations as in its sole judgment may be required for
     the safety, care and cleanliness of the Premises and the Building and for
     the preservation of good order therein.  Tenant agrees to abide by all such
     rules and regulations.

19.  Canvassing, soliciting and peddling is prohibited in the Building and each
     Tenant shall cooperate to prevent the same.

20.  Landlord is not responsible for the violation of any rule contained herein
     by any other Tenant.

21.  Landlord may waive any one or more of these rules for the benefit of any
     particular Tenant, but no such waiver shall be construed as a waiver of
     Landlord's right to enforce these rules against any or all Tenants
     occupying the Building.

22.  Tenant is responsible for purchasing and installing a security system if
     required by the City of Fremont.  The cost of purchasing and installation
                             -------
     of any such system is the sole costs and expense of the Tenant.

       JRM                                                          WFM
___________________                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                      30
<PAGE>

                                   EXHIBIT F
                               LETTER OF CREDIT

     This Exhibit F (this "Exhibit F") is made in connection with and is a part
of that certain Lease, dated as of August 28, 2000, by and between Bedford
                                   ---------------
Property Investors, Inc., a Maryland corporation, as Landlord, and Centillium
Communications, Inc., a Delaware corporation as Tenant, (the "Lease").

     1.   Definitions and Conflict.  All capitalized terms referred to in this
          ------------------------
Exhibit F shall have the same meaning as provided in the Lease, except as
expressly provided to the contrary in this Exhibit F.  In case of any conflict
between any term or provision of the Lease and this Exhibit F, this Exhibit F
shall control.

     2.   Letter of Credit Security Deposit.  Pursuant to the terms of the
          ---------------------------------
Lease, a Security Deposit of $467,325.00 is required from Tenant.  In lieu of
                             -----------
depositing cash for the full amount of the Security Deposit, Tenant shall, upon
the execution of the Lease, deposit a letter of credit for $467,325.00 (the
                                                           -----------
"Maximum Letter of Credit Amount"), with the balance of the Security Deposit in
the form of cash.  Said letter of credit shall be in the form of an irrevocable,
unconditional and clean standby letter of credit and otherwise in the form set
forth below (the "Letter of Credit").  The term Security Deposit shall mean the
cash portion of the Security Deposit and the Letter of Credit.

          2.1  Form of Letter of Credit.  The Letter of Credit shall be issued
               ------------------------
by a national bank acceptable to Landlord in its reasonable discretion, with
offices in the San Francisco Bay Area that will accept and pay on any draw on
the Letter of Credit.  The Letter of Credit shall be issued for a term of at
least twelve months (with a term during the last year of the Lease Term of at
least one full month following the expiration of the Lease Term) and shall be in
a form attached hereto as Exhibit F-1 or such other form with such content
acceptable to Landlord in its sole and absolute discretion.  Any Letter of
Credit that Tenant delivers to Landlord in replacement of an existing Letter of
Credit shall be in an amount equal to the replaced Letter of Credit (prior to
any draws) so that the cash and Letter of Credit together equal the amount of
the Security Deposit specified in the Lease.  Any such replacement Letter of
Credit shall be delivered to and received by Landlord no later than thirty days
prior to the expiration of the term of the Letter of Credit then in effect.  If
Tenant fails to deposit a replacement Letter of Credit or renew the expiring
Letter of Credit, Landlord shall have the right to draw upon the expiring Letter
of Credit for the full amount thereof and hold the same as Security Deposit;
provided, however, that if Tenant provides a replacement Letter of Credit that
meets the requirements of this section, Landlord shall promptly return to Tenant
in cash that amount of the Letter of Credit that had been drawn upon by
Landlord.  The Letter of Credit shall expressly permit full and partial draws.
If for any reason the Letter of Credit does not permit partial draws, then
Landlord shall have the right to make a full draw on the Letter of Credit,
notwithstanding that the full amount may not be required to cure any default by
Tenant.  The Letter of Credit shall designate Landlord as beneficiary and shall
be transferable by beneficiary to any transferee, successor, and assign
(including any lender of Landlord) at no cost or expense to beneficiary.  The
Letter of Credit shall provide that it may be drawn by Landlord (or its
assignee) upon presentation by Landlord to the issuing bank (at its offices in
the San Francisco Bay Area) of a sight draft(s), together with a written
statement executed by Landlord stating that the amount requested is due Landlord
under the Lease. The amount of the draw requested by Landlord shall be payable
by the bank, upon notice to Tenant as described in Section 29 of this Lease. The
amount of the draw requested by Landlord shall then be payable without further
inquiry or any other documentation or further action required of the bank,
Landlord, or Tenant. All costs and expenses to obtain the Letter of Credit and
all renewals shall be borne by Tenant.

          2.2  Landlord's Draw.  If the Letter of Credit is drawn upon by
               ---------------
Landlord, Tenant shall, within ten days after written demand therefore, deposit
cash with Landlord in an amount sufficient to restore the Security Deposit to
amount required under the Lease and this Exhibit F.  At all times the Security
Deposit, whether in the form of cash and/or Letter of Credit, shall be in the
amount specified in the Lease.  The use, application or retention of the Letter
of Credit, or any portion thereof, by Landlord shall not prevent Landlord from
exercising any other right or remedy provided by this Lease or by law, it being
intended that Landlord shall not first be required to use all or any part of the
Letter of Credit or cash portion of the Security Deposit, and such use shall not
operate as a limitation on any recovery to which Landlord may otherwise be
entitled.  Tenant shall not be entitled to any interest on the cash portion of
the Security Deposit.  The exercise of any rights of Landlord to the Security
Deposit shall not constitute a waiver of nor relieve Tenant from any liability
or obligation for any default by Tenant.  If Landlord draws upon the entire
amount of the Letter of Credit, Tenant may deliver a replacement Letter of
Credit to Landlord, instead of depositing cash with Landlord, equal to the
original amount of the Letter of Credit.

          2.3  Return or Transfer of Letter of Credit.  Within thirty days after
               --------------------------------------
the expiration or earlier termination of the Lease and provided Tenant has
complied with all of its obligations under the Lease, Landlord shall promptly
return the refundable portion of the Security Deposit, including the Letter of
Credit, to Tenant.  In the event of a transfer of the Premises, Building or
Project by Landlord, Landlord or any subsequent transferor shall deliver the
refundable portion of the Security Deposit, including both the cash portion and
the Letter of Credit, to the successor landlord or transferee.

       JRM                                                          WFM
___________________                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                      31
<PAGE>

                                  EXHIBIT F-1
                             FORM LETTER OF CREDIT

BENEFICIARY:

BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation,
its successors and assigns
270 Lafayette Circle
Lafayette, CA 94549
Attn: Property Management

APPLICANT:

CENTILLIUM COMMUNICATIONS, INC., a Delaware corporation
3777 Spinnaker Court
Fremont, California 94538

IRREVOCABLE STANDBY                                 AMOUNT: $467,325.00
LETTER OF CREDIT NO.

GENTLEMEN:

WE HEREBY AUTHORIZE YOU TO DRAW ON [bank's name, address and city/state/zip]

BY ORDER OF AND
FOR ACCOUNT OF

CENTILLIUM COMMUNICATIONS, INC., a Delaware corporation
3777 Spinnaker Court
Fremont, California 94538

UP TO AN AGGREGATE AMOUNT OF FOUR HUNDRED SIXTY-SEVEN THOUSAND THREE HUNDRED
TWENTY FIVE UNITED STATES DOLLARS ($467,325.00 U.S.).

AVAILABLE BY YOUR DRAFTS AT SIGHT ACCOMPANIED BY:

A WRITTEN NOTARIZED STATEMENT, PURPORTEDLY SIGNED BY AN AUTHORIZED OFFICER OR
AUTHORIZED AGENT OF BEDFORD PROPERTY INVESTORS, INC., A MARYLAND CORPORATION OR
ITS SUCCESSORS AND ASSIGNS ("LANDLORD) STATING THAT:

     "CENTILLIUM COMMUNICATIONS, INC., A DELAWARE CORPORATION ("TENANT"), HAS
     FAILED TO PAY BEDFORD PROPERTY INVESTORS, INC., A MARYLAND CORPORATION OR
     ITS SUCCESSORS AND ASSIGNS ("LANDLORD") $ [Landlord to insert the amount
                                              -------------------------------
     of the draw not to exceed the maximum amount of this letter of credit, in
     -------------------------------------------------------------------------
     the aggregate] THAT TENANT OWES LANDLORD ACCORDING TO THE TERMS AND
     --------------
     CONDITIONS OF THE BUSINESS PARK NET LEASE, DATED________________________,
     2000, FOR THE PREMISES KNOWN AS 3777 SPINNAKER COURT, FREMONT, CALIFORNIA,
     AND AT LEAST TEN (10) DAYS HAVE ELAPSED SINCE LANDLORD HAS GIVEN WRITTEN
     NOTICE OF SUCH REQUEST FOR PAYMENT TO TENANT."

OR

A WRITTEN NOTARIZED STATEMENT PURPORTEDLY SIGNED BY AN AUTHORIZED OFFICER OR
AUTHORIZED AGENT OF LANDLORD STATING:

     "CENTILLIUM COMMUNICATIONS, INC., A DELAWARE CORPORATION ("TENANT"), HAS
     FAILED TO PAY BEDFORD PROPERTY INVESTORS, INC., A MARYLAND CORPORATION OR
     ITS SUCCESSORS AND ASSIGNS ("LANDLORD") $467,325.00 THAT TENANT OWES
     LANDLORD ACCORDING TO THE TERMS AND CONDITIONS OF THE BUSINESS PARK NET
     LEASE, DATED________________________, 2000, FOR THE PREMISES KNOWN AS 3777
     SPINNAKER COURT, FREMONT, CALIFORNIA (THE "LEASE"), BECAUSE THE LETTER. OF
     CREDIT IS DUE TO EXPIRE WITHIN NOT MORE THAN TWENTY (20) DAYS AND TENANT
     HAS NEITHER REPLACED THE LETTER OF CREDIT WITH CASH IN THE AMOUNT OF
     $467,325.00 NOR CAUSED THE EXPIRATION DATE OF THE LETTER OF CREDIT TO BE
     EXTENDED FOR AN ADDITIONAL ONE-YEAR PERIOD IN ACCORDANCE WITH THE
     REQUIREMENTS OF THE LEASE."

ONE OR MORE PARTIAL DRAWS ON THIS LETTER OF CREDIT WILL BE HONORED AND PAID, UP
TO AN AGGREGATE EQUAL TO THE MAXIMUM AMOUNT OF $467,325.00.

THIS LETTER OF CREDIT SHALL BE DEEMED AUTOMATICALLY EXTENDED WITHOUT AN
AMENDMENT, FOR ADDITIONAL PERIODS OF ONE YEAR, FROM THE PRESENT OR ANY FUTURE
EXPIRATION DATE

       JRM                                                          WFM
___________________                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                      32
<PAGE>

HEREOF, UNLESS AT LEAST THIRTY (30) DAYS PRIOR TO SUCH EXPIRATION DATE WE NOTIFY
YOU IN WRITING NOT TO CONSIDER THIS LETTER OF CREDIT RENEWED FOR ANY SUCH
ADDITIONAL PERIODS. THIS LETTER OF CREDIT WILL NOT BE AUTOMATICALLY EXTENDED
BEYOND ________________________, 20________[a date that is at least two year's
from the effective date].

THIS LETTER OF CREDIT IS EFFECTIVE __________________________________, 2000.

DRAFTS MUST BE DRAWN AND PRESENTED AT THE OFFICE OF  [bank's name, address and
city/state/zip] NOT LATER THAN ___________________________________, 20________
[the current expiration date] OR ANY AUTOMATICALLY EXTENDED EXPIRATION DATE.

DRAFTS DRAWN HEREUNDER MUST BE MARKED: "DRAWN UNDER THE [bank's name] LETTER OF
CREDIT NUMBER __________________________________."

WE HEREBY ENGAGE WITH THE BENEFICIARY THAT ALL DRAFTS DRAWN UNDER AND IN
COMPLIANCE WITH THE TERMS OF THIS CREDIT WILL BE DULY HONORED.

THIS LETTER OF CREDIT IS IRREVOCABLE AND WILL NOT BE AFFECTED BY THE BANKRUPTCY
OR INSOLVENCY OF THE APPLICANT.

THIS LETTER OF CREDIT MAY BE TRANSFERRED AND THE PROCEEDS HEREUNDER MAY BE
ASSIGNED BY THE BENEFICIARY, TO ITS SUCCESSORS AND ASSIGNS WHO ARE OR BECOME A
LANDLORD UNDER THE LEASE OR WHO HAVE OR WILL HAVE A SECURITY INTEREST IN THE
REAL PROPERTY SUBJECT TO THE LEASE.

THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS (1993 REVISION) INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO. 500, AND WILL BE INTERPRETED AND ENFORCED UNDER THE LAWS OF THE
STATE OF CALIFORNIA.

VERY TRULY YOURS,

__________________________________________
[signature of bank's authorized officer]

       JRM                                                          WFM
___________________                                          -----------------
Landlord's Initials                                          Tenant's Initials

                                      33
<PAGE>

                  FIRST AMENDMENT TO BUSINESS PARK NET LEASE

     The First Amendment Business Park Net Lease ("First Amendment") is entered
into by and between "Landlord" and "Tenant" (defined below collectively the
"Parties") and dated for reference purposes only as of November 8, 2000 (the
                                                       ----------
"First Amendment Date").

                                   RECITALS

     On or about August 28, 2000, Bedford Property Investors, Inc., a Maryland
corporation ("Landlord") and Centillium Communications, Inc., a Delaware
corporation ("Tenant") entered into a Business Park Net Lease (the "Lease") for
the property located at 3777 Spinnaker Court Fremont, California 94538 (the
"Premises").

     Accordingly to the Lease, Landlord had agreed to install certain Tenant
Improvements. Tenant has requested that certain changes to the Tenant
Improvement be made by Landlord (the "First Change Request"). Landlord is
willing to make such changes if Tenant will agree that the commencement date of
the term of the Lease and the payment of rent will be December 1, 2000, and that
Tenant agrees to immediately pay the additional costs that Landlord will incur
in the design, construction and other costs associated with the changes
according to the First Change Request.

     The Parties now wish to amend the Lease as provided above, and to make
other changes, as stated in this First Amendment.

Now, therefore, the lease is amended as follows:

I.   SECTION 1.7 IS AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS:

     1.7     Term     (A)  December 1, 2000 (the "Estimated Commencement Date").
                      (B)  Sixty (60) months
                           ----------
                      (C)  December 18, 2000 (the "Estimated Possession Date")
                           -----------

II.  A NEW SECTION 1.17 IS INSERTED TO READ AS FOLLOWS:

     1.17    Additional Tenant Improvement Costs:    $277,185.00
                                                     -----------

III. SECTION 3.1 IS AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS:

     3.1     Commencement Date. The Estimated Commencement Date specified in
             -----------------
     Section 1.7 (A) is the date the Parties had originally anticipated that the
     Tenant Improvements will be Substantially Completed, but for changes
     requested by Tenant. Upon the execution of the First Amendment, Tenant
     shall execute a written acknowledgement of that date as the actual
     commencement date is December 1, 2000, (the "Commencement Date") in the
     form of Exhibit D-1 attached to the First Amendment, notwithstanding that
             -----------
     the Tenant has not yet accepted possession of the Leased Premises and that
     all the Tenant Improvements have not been completed in accordance with the
     provisions of said Lease and Tenant's First Change Request.

IV.  SECTION 3.4 IS AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS:

     3.4     Landlord Delay. If Landlord cannot deliver possession of the
             --------------
     Premises on the Estimated Possession Date, as extended for Force Majeure
     Delay (defined in Exhibit C, Section 3), the Lease shall not be void or
                       ---------
     voidable, nor shall Landlord be liable for any loss or damage resulting
     therefrom. If Substantial Completion of Tenant Improvements does not occur
     within six months after the Estimated Possession Date (as extended for
     Force Majeure Delay) due to a cause other than a Tenant Delay (defined in
     Exhibit C, Section 3), Tenant shall have the right to cancel this Lease
     ---------
     upon Notice to Landlord given within ten days after the expiration of the
     six-month period.

<PAGE>

V.     SECTION 3.5 IS AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS:

       3.5   Tenant Delay.  In no event shall a Tenant Delay excuse Tenant's
             ------------
       performance hereunder. Tenant shall be responsible for, and shall
       immediately pay upon demand to Landlord, all costs and expenses incurred
       by Landlord in connection with any Tenant Delay.

VI.    A NEW SECTION 4.5 IS INSERTED TO READ AS FOLLOWS:

       4.5   Additional Tenant Improvement Costs. Tenant will pay to Landlord
             -----------------------------------
             concurrently with the execution of the First Amendment, $277,185.00
                                                                     -----------
             (the "Additional Tenant Improvement Costs"), which is the amount by
             which the Tenant Improvement Cost, after implementation of the
             First Change Request, is reasonably estimated by Landlord to exceed
             the Bid, including without limitation, increases in design and
             construction costs and other charges payable hereunder as a result
             of the First Change Request.

VII.   SECTION 2 OF EXHIBIT C (CONSTRUCTION OBLIGATIONS) IS AMENDED IN ITS
       ENTIRETY TO READ AS FOLLOWS:

       2.    Construction of Tenant Improvements. Landlord shall construct the
             -----------------------------------
       Tenant Improvements in accordance with this Agreement and in substantial
       conformance with the approved "revised" Construction Plans prepared by
                                                                  -----------
       The Charles Doerr Group, Sheets; CS-1, CS-2, A-1, A-2, A-3, A-4, E-1 and
       ------------------------------------------------------------------------
       E-2 dated October 30, 2000; S1.0 dated October 20, 2000; and M-1 dated
       ----------------------------------------------------------------------
       August 12, 2000, which are hereby approved by Tenant.
       ---------------

VIII.  PARAGRAPH 3 UNDER SECTION 3 OF EXHIBIT C (CONSTRUCTION OBLIGATIONS) IS
       DELETED AND AMENDED IN ENTIRETY TO READ AS FOLLOWS:

       3     "Construction Plans" shall mean the complete plans and
       specifications prepared by The Charles Doerr Group, Sheets; CS-1, CS-2,
       -----------------------------------------------------------------------
       A-1, A-2, A-3, A-4, E-1 and E-2 dated October 30, 2000; $1.0 dated
       ------------------------------------------------------------------
       October 20, 2000; and M-1 dated August 12, 2000, for the construction of
       -----------------------------------------------
       the Tenant Improvements, which are required to obtain all building
       permits, licenses and certificates from the applicable governmental
       authority(ies) for the construction of the Tenant Improvements.

IX.    UNLESS SO SPECIFICALLY STATED IN THIS FIRST AMENDMENT, THE DEFINED TERMS
       CONTAINED IN THIS FIRST AMENDMENT SHALL HAVE THE SAME DEFINED MEANING AS
       STATED IN THE LEASE, AND ANY REFERENCE TO A SECTION OR A PARAGRAPH WILL
       BE A SECTION OR PARAGRAPH OF THE LEASE. THE LEASE SHALL REMAIN IN FULL
       FORCE AND EFFECT EXCEPT AS AMENDED OR SUPPLEMENTED BY THIS FIRST
       AMENDMENT.

In Witness Whereof, the Parties have executed this First Amendment as of the
date first written above.

"Landlord"                              "Tenant"

Bedford Property Investors, Inc.,       Centillium Communications, Inc.,
a Maryland corporation                  a Delaware corporation

By:    /s/ J R Moore                    By:    /s/ William F MacKenzie
   -------------------------------         -----------------------------------
Name:     Jim Moore                     Name:     William F. MacKenzie
     -----------------------------           ---------------------------------
Title:    COO                           Title:    VP Operations
      ----------------------------            --------------------------------
Date:  12/30/00                         Date:     12/20/00
     -----------------------------           ---------------------------------

<PAGE>

                                  EXHIBIT D-1
                        ACKNOWLEDGEMENT OF COMMENCEMENT

This Acknowledgement is made as of December 18, 2000, with reference to that
                                   -----------------
certain Lease Agreement (hereinafter referred to as the "Lease" dated, August
                                                                       ------
28, 2000 by and between Bedford Property Investors, Inc., a Maryland corporation
--------
"Landlord" therein, and Centillium Communications, Inc., a Delaware corporation
"Tenant", for the Leased Premises situated at 3777 Spinnaker Court, Fremont,
                                              -----------------------------
California 94538, as amended by the First Amendment to Business Park Lease dated
----------------
November 8, 2000.

The undersigned hereby confirms the following:

1.   That notwithstanding that the Tenant has not yet accepted possession of the
Leased Premises (as described in said Lease) and that all the tenant
improvements have not been completed in accordance with the provisions of said
Lease, the commencement date of the term is December 1, 2000 and that, unless
                                            ----------------
sooner terminated, the original term thereof expires on November 30, 2005.
                                                        -----------------

2.   That said Lease is in full force and effect and that the same represents
the entire agreement between Landlord and Tenant concerning said Lease.

3.   That there are no existing defenses which Tenant has against the
enforcement of said Lease by Landlord, and no offsets or credits against
rentals.

4.   That the minimum rental obligations of said Lease is presently in effect
and that all rentals, charges and other obligations on the part of Tenant under
said Lease commenced to accrue on December 1, 2000.
                                  ----------------

5.   That the undersigned has not made any prior assignment, hypothecation or
pledge of said Lease or the rents hereunder.

Tenant:

Centillium Communications, Inc.,
a Delaware corporation

By: /s/ W F Mackenzie
    --------------------------
(Print):  WILLIAM F MACKENZIE
        ----------------------
Its:  VP Operations
    --------------------------
Date: 12/20/00
     -------------------------

<PAGE>

                  [LETTERHEAD OF BEDFORD PROPERTY INVESTORS]

January 3, 2001                                                  Hand Delivered
                                                                 --------------

Mr. Dave Hickman
Centillium Communications
47211 Lakeview Blvd.
Fremont, CA 94538

Re:    3777 Spinnaker Court

Dear Dave:

Enclosed please find a fully executed First Amendment to Lease for the location
referenced above.

I look forward to continuing our business relationship. Please do not hesitate
to call me should you have any additional questions. I can be reached at
(925)299-4219. Thank you.

Sincerely,

/s/ Michelle McDuffy
Michelle McDuffy
Property Manager

Enclosure

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