Document:

<PAGE>

                                                                   Exhibit 10.17

================================================================================

                                $6,603,470.30*

                                LEASE AGREEMENT
                                    (Land)

                                    BETWEEN

                            BNP LEASING CORPORATION

                                   ("BNPLC")

                                      AND

                           ZHONE TECHNOLOGIES, INC.

                                   ("Zhone")

                                August 1, 2000

                             (Oakland, California)

     * Equals the Prior Funding Advances ($3,603,275.30) plus the amount
    ($3,000,195) that remains to be paid to the City fo Oakland under the
    Purchase Money Note.

==============================================================================

[Land]
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
<S>                                                                                                        <C>
1.   Term.............................................................................................        2
     (a)  Scheduled Term..............................................................................        2
          --------------
     (b)  Intentionally Deleted.......................................................................        3
          ---------------------
     (c)  Intentionally Deleted.......................................................................        3
          ---------------------
     (d)  Election by Zhone to Terminate After Accelerating the Designated Sale Date..................        3
          --------------------------------------------------------------------------
     (e)  Extension of the Term.......................................................................        3
          ---------------------

2.   Use and Condition of the Property................................................................        4
     (a)  Use.........................................................................................        4
          ---
     (b)  Condition of the Property...................................................................        4
          -------------------------
     (c)  Consideration for and Scope of Waiver.......................................................        4
          -------------------------------------

3.   Rent.............................................................................................        4
     (a)  Base Rent Generally.........................................................................        4
          -------------------
     (b)  Impact of Collateral Upon Formulas..........................................................        5
          ----------------------------------
     (c)  Calculation of and Due Dates for Base Rent..................................................        5
          ------------------------------------------
          (i)      Determination of Payment Due Dates, Generally......................................        5
                   ---------------------------------------------
          (ii)     Special Adjustments to Base Rent Payment Dates, Periods and Amounts................        5
                   -------------------------------------------------------------------
          (iii)    Base Rent Formula for Periods During Which The Collateral Percentage is 100%.......        6
                   ----------------------------------------------------------------------------
          (iv)     Base Rent Formula for Periods During Which The Collateral Percentage is Less
                   ----------------------------------------------------------------------------
                   Than 100%..........................................................................        7
                   ---------
     (d)  Additional Rent.............................................................................        8
          ---------------
     (e)  Intentionally Deleted.......................................................................        8
          ---------------------
     (f)  Commitment Fees.............................................................................        8
          ---------------
     (g)  Intentionally Deleted.......................................................................        8
          ---------------------
     (h)  Intentionally Deleted.......................................................................        8
          ---------------------
     (i)  No Demand or Setoff.........................................................................        8
          -------------------
     (j)  Default Interest and Order of Application...................................................        8
          -----------------------------------------

4.   Nature of this Agreement.........................................................................        9
     (a)  "Net" Lease Generally.......................................................................        9
          ---------------------
     (b)  No Termination..............................................................................        9
          --------------
     (c)  Tax Reporting...............................................................................       10
          -------------
     (d)  Characterization of this Land Lease.........................................................       10
          -----------------------------------

5.   Payment of Executory Costs and Losses Related to the Property....................................       10
     (a)  Impositions.................................................................................       10
          -----------
     (b)  Increased Costs; Capital Adequacy Charges...................................................       11
          -----------------------------------------
     (c)  Zhone's Payment of Other Losses; General Indemnification....................................       12
          --------------------------------------------------------
     (d)  Exceptions and Qualifications to Indemnities................................................       13
          --------------------------------------------

6.   Post Closing Advance to Cover Deferred Purchase Price of the Land................................       15
     (a)  Purchase Money Documents....................................................................       15
          ------------------------
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                           <C>
     (b)    Post-Closing Advance..........................................................................    15
            --------------------
7.   Intentionally Deleted................................................................................    16

8.   Environmental........................................................................................    16
     (a)    Environmental Covenants by Zhone..............................................................    16
            --------------------------------
     (b)    Right of BNPLC to do Remedial Work Not Performed by Zhone.....................................    17
            ---------------------------------------------------------
     (c)    Environmental Inspections and Reviews.........................................................    17
            -------------------------------------
     (d)    Communications Regarding Environmental Matters................................................    17
            ----------------------------------------------

9.   Insurance Required and Condemnation..................................................................    18
     (a)    Liability Insurance...........................................................................    18
            -------------------
     (b)    Intentionally Deleted.........................................................................    18
            ---------------------
     (c)    Failure to Obtain Insurance...................................................................    18
            ---------------------------
     (d)    Condemnation..................................................................................    19
            ------------

10.  Application of Insurance and Condemnation Proceeds...................................................    19
     (a)    Collection and Application of Insurance and Condemnation Proceeds Generally...................    19
            ---------------------------------------------------------------------------
     (b)    Advances of Land Escrowed Proceeds to Zhone...................................................    20
            -------------------------------------------
     (c)    Application of Land Escrowed Proceeds as a Qualified Prepayment...............................    20
            ---------------------------------------------------------------
     (d)    Special Provisions Applicable After Completion by Zhone of the Construction Projects..........    20
            ------------------------------------------------------------------------------------
     (e)    Special Provisions Applicable After a CMA Termination Event or an Event of Default............    20
            ----------------------------------------------------------------------------------
     (f)    Zhone's Obligation to Restore.................................................................    20
            -----------------------------
     (g)    Takings of All or Substantially All of the Property on or after the Last Building Base Rent
            -------------------------------------------------------------------------------------------
            Commencement Date.............................................................................    21
            -----------------

11.  Additional Representations, Warranties and Covenants of Zhone Concerning the Property................    21
     (a)    Compliance with Covenants and Laws............................................................    21
            ----------------------------------
     (b)    Operation of the Property.....................................................................    21
            -------------------------
     (c)    Debts for Construction, Maintenance, Operation or Development.................................    22
            -------------------------------------------------------------
     (d)    Repair, Maintenance, Alterations and Additions................................................    23
            ----------------------------------------------
     (e)    Permitted Encumbrances and Development Documents..............................................    23
            ------------------------------------------------
     (f)    Books and Records Concerning the Property.....................................................    23
            -----------------------------------------

12.  Financial Covenants and Other Covenants Incorporated by Reference to Schedule 1......................    23

13.  Financial Statements and Other Reports...............................................................    24
     (a)    Financial Statements; Required Notices; Certificates..........................................    24
            ----------------------------------------------------

14.  Assignment and Subletting by Zhone...................................................................    25
     (a)    BNPLC's Consent Required......................................................................    25
            ------------------------
     (b)    Standard for BNPLC's Consent to Assignments and Certain Other Matters.........................    25
            --------------------------------------------------------------------
     (c)    Consent Not a Waiver..........................................................................    26
            -------------------

15.  Assignment by BNPLC..................................................................................    26
     (a)    Restrictions on Transfers.....................................................................    26
            -------------------------
     (b)    Effect of Permitted Transfer or other Assignment by BNPLC.....................................    26
            ---------------------------------------------------------

16.  BNPLC's Right of Access..............................................................................    26
</TABLE>

[Land]

<PAGE>

<TABLE>
<S>                                                                                                           <C>
17.  Events of Default.....................................................................................   27

18.  Remedies..............................................................................................   29
     (a)    Basic Remedies.................................................................................   29
            --------------
     (b)    Notice Required So Long As the Purchase Option and the Land Supplemental Payment Obligation
            -------------------------------------------------------------------------------------------
            Continue Under the Land Purchase Agreement.....................................................   30
            ------------------------------------------
     (c)    Enforceability.................................................................................   31
            --------------
     (d)    Remedies Cumulative............................................................................   31
            -------------------

19.  Default by BNPLC......................................................................................   31

20.  Quiet Enjoyment.......................................................................................   31

21.  Surrender Upon Termination............................................................................   32

22.  Holding Over by Zhone.................................................................................   32

23.  Independent Obligations Evidenced by the other Operative Documents....................................   32

24.  Amendment and Restatement.............................................................................   33
</TABLE>

[Land]

<PAGE>

                                     (iv)

[Land]

<PAGE>

                            Exhibits and Schedules

Exhibit A...........................                           Legal Description
---------

Exhibit B...........................                      Insurance Requirements
---------

Exhibit C...........................                  LIBOR Period Election Form
---------

Schedule 1..........................  Financial Covenants and Other Requirements
----------

[Land]
                                      (v)
<PAGE>

                                LEASE AGREEMENT
                                    (LAND)

     This LEASE AGREEMENT (LAND) (this "Land Lease"), is made and dated as of
August 1, 2000 (the "Effective Date") by and between BNP LEASING CORPORATION, a
Delaware corporation ("BNPLC"), and ZHONE TECHNOLOGIES, INC., a Delaware
corporation ("Zhone").

                                    RECITALS

     Contemporaneously with the execution of this Land Lease, BNPLC and Zhone
are executing an Common Definitions and Provisions Agreement (Land) dated as of
the Effective Date (the "Land CDPA"), which by this reference is incorporated
into and made a part of this Land Lease for all purposes. As used in this Land
Lease, capitalized terms defined in the Land CDPA  and not otherwise defined in
this Land Lease are intended to have the respective meanings assigned to them in
the Land CDPA.

     Zhone and BNPLC have previously executed that Lease Agreement (Phase I -
Land) dated as of January 20, 2000 (the "Prior Lease Agreement").  Zhone and
BNPLC have agreed to amend, restate and replace the Prior Lease Agreement with
this Land Lease as provided in Paragraph 24 below.

     Pursuant to the Acquisition Contract, which covers the Land described in
Exhibit A, BNPLC has acquired the Land from Seller.
---------

     BNPLC and Zhone have reached agreement as to the terms and conditions upon
which BNPLC is willing to lease the Land to Zhone, and by this Land Lease BNPLC
and Zhone desire to evidence such agreement.

                                    GRANTING CLAUSES

     BNPLC does hereby LEASE, DEMISE and LET unto Zhone for the term hereinafter
set forth all right, title and interest of BNPLC, now owned or hereafter
acquired, in and to:

          (1)  the Land;

          (2)  all easements and other rights appurtenant to the Land, whether
     now owned or hereafter acquired by BNPLC; and

          (3)  (A) any land lying within the right-of-way of any street, open or
     proposed, adjoining the Land, (B) any sidewalks and alleys adjacent to the
     Land and (C) any strips and gores between the Land and any abutting land
     not owned or leased by BNPLC.

BNPLC's interest in all property described in clauses (1) through (3) above are
hereinafter referred to collectively as the "Real Property". The Real Property
does not include any Improvements (now existing or those to be constructed as
provided in the Other Lease Agreements and the Construction Management
Agreements) or BNPLC's rights appurtenant to the Improvements, it being
understood that the Other Lease Agreements constitute separate leases of the
Improvements and the appurtenances thereto, and only the Improvements and the
appurtenances thereto, from BNPLC to Zhone.

[Land]
<PAGE>

     To the extent, but only to the extent, that assignable rights or interests
in, to or under the following have been or will be acquired by BNPLC under the
Acquisition Contract or acquired by BNPLC pursuant to Paragraph 7 below, BNPLC
also hereby grants and assigns to Zhone for the term of this Land Lease the
right to use and enjoy (and, in the case of contract rights, to enforce) such
rights or interests of BNPLC:

          (a)  the benefits, if any, conferred upon the owner of the Real
     Property by the Permitted Encumbrances and Development Documents; and

          (b)  any permits, licenses, franchises, certificates, and other rights
     and privileges against third parties related to the Real Property.

Such rights and interests of BNPLC, whether now existing or hereafter arising,
are hereinafter collectively called the "Personal Property". The Real Property
and the Personal Property are hereinafter sometimes collectively called the
"Property."

     However, the leasehold estate conveyed hereby and Zhone's rights hereunder
are expressly made subject and subordinate to the terms and conditions of this
Land Lease, the Permitted Encumbrances and any other claims or encumbrances not
constituting Liens Removable by BNPLC.

     Further, the leasehold estate conveyed hereby and Zhone's rights hereunder
shall be subject to an easement reserved by BNPLC to allow BNPLC and its
representatives, contractors, subcontractors and other invitees to enter upon
the Land and do whatever BNPLC deems necessary or appropriate  to construct or
continue the construction of Improvements on the Land following any "Landlord's
Election to Continue Construction" under and as defined in either or both of the
Other Lease Agreements.   Such easement, however, shall be subject to all the
terms and conditions set forth in the Other Lease Agreements regarding a
Landlord's Election to Continue Construction, and except in the event of a
Landlord's Election to Continue Construction, so long as the Other Lease
Agreements and Zhone's possessory rights thereunder remain in force, Zhone will
have the sole right to control and the sole responsibility for the design and
construction of the Construction Projects (including the means, methods,
sequences and procedures implemented to accomplish such design and construction)
as provided in (and subject to the terms and conditions of) the Other Lease
Agreements and the Construction Management Agreements.

                         GENERAL TERMS AND CONDITIONS

     The Property is leased by BNPLC to Zhone and is accepted and is to be used
and possessed by Zhone upon and subject to the following terms and conditions:

     1    Term.

          (a)  Scheduled Term. The term of this Land Lease (the "Term") shall
               --------------
commence on and include the Effective Date, and end on the first Business Day of
August, 2005, unless sooner terminated as expressly herein provided or extended
as provided in subparagraph 1.(e).

          (b)  Intentionally Deleted.
               ---------------------

          (c)  Intentionally Deleted.
               ---------------------

[Land]

                                      -2-
<PAGE>

          (d)  Election by Zhone to Terminate After Accelerating the Designated
               ----------------------------------------------------------------
Sale Date. Zhone shall be entitled to accelerate the Designated Sale Date (and
---------
thus accelerate the purchase of BNPLC's interest in the Property by Zhone or by
an Applicable Purchaser pursuant to the Land Purchase Agreement) by sending a
notice to BNPLC as provided in clause (2) of the definition of "Designated Sale
Date" in the Land CDPA. In the event, because of Zhone's election to so
accelerate the Designated Sale Date or for any other reason, the Designated Sale
Date occurs before the end of the scheduled Term, Zhone may terminate this Land
Lease on or after the Designated Sale Date; provided, however, as a condition to
any such termination by Zhone, Zhone must have done the following prior to the
termination:

          (i)    purchased or caused an Applicable Purchaser to purchase the
     Property pursuant to the Land Purchase Agreement and satisfied all of
     Zhone's other obligations under the Land Purchase Agreement;

          (ii)   paid to BNPLC all Base Rent and all other Rent due on or before
     or accrued through the Designated Sale Date; and

          (iii)  paid any Breakage Costs caused by BNPLC's sale of the Property
     pursuant to the Land Purchase Agreement.

          (e)    Extension of the Term. The Term may be extended at the option
                 ---------------------
of Zhone for two successive periods of one year each; provided, however, that
prior to any such extension the following conditions must have been satisfied:
(A) at least one hundred eighty days prior to the commencement of any such
extension, BNPLC and Zhone must have agreed in writing upon, and received the
consent and approval of BNPLC's Parent and all other Participants to (1) a
corresponding extension not only to the date for the expiration of the Term
specified above in this Section, but also to the date specified in clause (1) of
the definition of Designated Sale Date in the Land CDPA, and (2) an adjustment
to the Rent that Zhone will be required to pay for the extension, it being
expected that the Rent for the extension may be different than the Rent required
for the original Term, and it being understood that the Rent for any extension
must in all events be satisfactory to both BNPLC and Zhone, each in its sole and
absolute discretion; (B) no Event of Default shall have occurred and be
continuing at the time of Zhone's exercise of its option to extend; and (C)
immediately prior to any such extension, this Land Lease must remain in effect.
With respect to the condition that BNPLC and Zhone must have agreed upon the
Rent required for any extension of the Term, neither Zhone nor BNPLC is willing
to submit itself to a risk of liability or loss of rights hereunder for being
judged unreasonable.  Accordingly, both Zhone and BNPLC hereby disclaim any
obligation express or implied to be reasonable in negotiating the Rent for any
such extension.  Subject to the changes to the Rent payable during any extension
of the Term as provided in this Paragraph, if Zhone exercises its option to
extend the Term as provided in this Paragraph, this Land Lease shall continue in
full force and effect, and the leasehold estate hereby granted to Zhone shall
continue without interruption and without any loss of priority over other
interests in or claims against the Property that may be created or arise after
the date hereof and before the extension.

     2    Use and Condition of the Property.

          (a)    Use. Subject to the Permitted Encumbrances, the Development
                 ---
Documents and the terms hereof, Zhone may use and occupy the Property during the
Term, but only for the following purposes.

          (i)  constructing, maintaining and using Improvements on the Land for
     purposes expressly permitted by and described in the Other Lease
     Agreements; and

[Land]

                                      -3-
<PAGE>

          (ii) other lawful purposes approved in advance and in writing by
     BNPLC, which approval will not be unreasonably withheld after completion of
     the Construction Project (but Zhone acknowledges that BNPLC's withholding
     of such approval shall be reasonable if BNPLC determines in good faith that
     (1) giving the approval may materially increase BNPLC's risk of liability
     for any existing or future environmental problem, or (2) giving the
     approval is likely to substantially increase BNPLC's administrative burden
     of complying with or monitoring Zhone's compliance with the requirements of
     the Land Operative Documents or the Other Operative Documents).

          (b)  Condition of the Property. Zhone acknowledges that it has
               -------------------------
carefully and fully inspected the Property and accepts the Property in its
present state, AS IS, and without any representation or warranty, express or
               -----
implied, as to the condition of such property or as to the use which may be made
thereof. Zhone also accepts the Property without any covenant, representation or
warranty, express or implied, by BNPLC or its Affiliates regarding the title
thereto or the rights of any parties in possession of any part thereof, except
as expressly set forth in Paragraph 20. BNPLC shall not be responsible for any
latent or other defect or change of condition in  the Property or for any
violations with respect thereto of Applicable Laws. Further, BNPLC shall not be
required to furnish to Zhone any facilities or services of any kind, including
water, steam, heat, gas, air conditioning, electricity, light or power.

          (c)  Consideration for and Scope of Waiver. The provisions of
               -------------------------------------
subparagraph 2.(b) above have been negotiated by BNPLC and Zhone after due
consideration for the Rent payable hereunder and are intended to be a complete
exclusion and negation of any representations or warranties of BNPLC or its
Affiliates, express or implied, with respect to the Property that may arise
pursuant to any law now or hereafter in effect or otherwise, except as expressly
set forth herein.

     However, such exclusion of representations and warranties by BNPLC is not
intended to impair any representations or warranties made by other parties, the
benefit of which may pass to Zhone during the Term because of the definition of
Personal Property and Property above.

     3    Rent.

          (a)  Base Rent Generally. On each Base Rent Date through the end of
               -------------------
the Term, Zhone shall pay BNPLC rent ("Base Rent"). Each payment of Base Rent
must be received by BNPLC no later than 10:00 a.m. (Pacific time) on the date it
becomes due; if received after 10:00 a.m. (Pacific time) it will be considered
for purposes of this Land Lease as received on the next following Business Day.
At least five days prior to any Base Rent Date upon which an installment of Base
Rent shall become due, BNPLC shall notify Zhone in writing of the amount of each
installment, calculated as provided below. Any failure by BNPLC to so notify
Zhone, however, shall not constitute a waiver of BNPLC's right to payment, but
absent such notice Zhone shall not be in default hereunder for any underpayment
resulting therefrom if Zhone, in good faith, reasonably estimates the payment
required, makes a timely payment of the amount so estimated and corrects any
underpayment within three Business Days after being notified by BNPLC of the
underpayment.

          (b)  Impact of Collateral Upon Formulas.  To ease the administrative
               ----------------------------------
burden of this Land Lease and the Land Pledge Agreement, the formulas for
calculating Base Rent set out below in subparagraph 3.(c) reflect a reduction in
the Base Rent equal to the interest that would accrue on any Collateral provided
in accordance with the requirements of the Land Pledge Agreement from time to
time if the Accounts (as defined in the Land Pledge Agreement) bore interest at
the Deposit Rate.  BNPLC has agreed to such

[Land]

                                      -4-
<PAGE>

reduction to provide Zhone with the economic equivalent of interest on such
Collateral, and in return Zhone has agreed to the provisions of the Land Pledge
Agreement that excuse the actual payment of interest on the Accounts. By
incorporating such reduction of Base Rent into the formulas below, and by
providing for noninterest bearing Accounts in the Land Pledge Agreement, an
unnecessary and cumbersome periodic exchange of equal payments will be avoided.
It is not, however, the intent of BNPLC or Zhone to understate Base Rent or
interest for financial reporting purposes. Accordingly, for purposes of any
financial reports that this Land Lease requires of Zhone from time to time,
Zhone may report Base Rent as if there had been no such reduction and as if the
Collateral from time to time provided in accordance with the requirements of the
Land Pledge Agreement had been maintained in Accounts bearing interest at the
Deposit Rate.

          (c)    Calculation of and Due Dates for Base Rent.  Payments of Base
                 ------------------------------------------
Rent shall be calculated and become due as follows:

          (i)    Determination of Payment Due Dates, Generally.  For all Base
                 ---------------------------------------------
     Rent Periods subject to a LIBOR Period Election of one month or three
     months, Base Rent shall be due in one installment on the Base Rent Date
     upon which the Base Rent Period ends.  For Base Rent Periods subject to a
     LIBOR Period Election of six months, Base Rent shall be payable in two
     installments, with the first installment becoming due on the Base Rent Date
     that occurs on the first Business Day of the third calendar month following
     the commencement of such Base Rent Period, and with the second installment
     becoming due on the Base Rent Date upon which the Base Rent Period ends.

          (ii)   Special Adjustments to Base Rent Payment Dates, Periods and
                 -----------------------------------------------------------
     Amounts. Notwithstanding the foregoing:
     -------

                (a) Any Base Rent Period that begins before, and does not
          otherwise end before, the first Business Day of the first calendar
          month following a Failed Collateral Test Date shall end upon but not
          include such first Business Day, and such first Business Day shall
          constitute a Base Rent Date, upon which Zhone must pay all accrued,
          unpaid Base Rent for the Base Rent Period just ended.

                (b) In addition to Base Rent due on a the first Business Day of
          the first calendar month following a Failed Collateral Test Date,
          Zhone must pay the Breakage Costs, if any, resulting from any early
          ending of a Base Rent Period pursuant to the preceding clause
          3.(c)(ii)a).

                (c) If Zhone or any Applicable Purchaser purchases BNPLC's
          interest in the Property pursuant to the Land Purchase Agreement, any
          accrued unpaid Base Rent and all outstanding Additional Rent shall be
          due on the date of purchase in addition to the purchase price and
          other sums due BNPLC under the Land Purchase Agreement.

                (d) No Base Rent will be required hereunder for any Base Rent
          Period that ends on or before the earlier of the "Buildings 1&2 Base
          Rent Commencement Date" or the "Building 3 Base Rent Commencement
          Date" (as such terms are defined in the Other Common Definitions and
          Provisions Agreements), so long as the Other Lease Agreements remain
          in force and Carrying Costs continue to accrue as provided therein.

                (e) For any Base Rent Period that begins on or after the
          Buildings 1&2 Base Rent Commencement Date and ends on or before the
          Building 3 Base Rent Commencement Date, the Base Rent (initially
          calculated in accordance with the formulas set forth below) shall be
          reduced

[Land]

                                      -5-
<PAGE>

          by the Building 3 Land Percentage, provided that Carrying
          Costs for such period continue to accrue as provided in the Lease
          Agreement (Improvements - Building 3) between Zhone and BNPLC.

                (f) Although not expected, if any Base Rent Period begins on or
          after the Building 3 Base Rent Commencement Date and ends on or before
          the Buildings 1&2 Base Rent Commencement Date, the Base Rent
          (initially calculated in accordance with the formulas set forth below)
          for that period shall be reduced by the Buildings 1&2 Land Percentage,
          provided that Carrying Costs for such period continue to accrue as
          provided in the Lease Agreement (Improvements - Building 1&2) between
          Zhone and BNPLC.

          (iii)  Base Rent Formula for Periods During Which The Collateral
                 ---------------------------------------------------------
     Percentage is 100%.  Each installment of Base Rent payable for any Base
     ------------------
     Rent Period during which the Collateral Percentage is one hundred percent
     (100%) shall equal:

          .      Stipulated Loss Value on the first day of such Base Rent
                 Period, times

          .      the sum of (a) the Secured Spread and (b) the Effective
                 Rate/Deposit Rate Difference for the period from and including
                 the preceding Base Rent Date to but not including the Base Rent
                 Date upon which the installment is due, times

          .      the number of days in the period from and including the
                 preceding Base Rent Date to but not including the Base Rent
                 Date upon which the installment is due, divided by

          .      three hundred sixty.

          Assume, only for the purpose of illustration: that the Collateral
Percentage for a hypothetical Base Rent Period is one hundred percent (100%);
that prior to the first day of such Base Rent Period Qualified Prepayments have
been received by BNPLC, leaving a Stipulated Loss Value of $5,000,000; that the
sum of the Secured Spread and the Effective Rate/Deposit Rate Difference is
fifty-seven and one-half basis points (57.5/100 of 1%); and that such Base Rent
Period contains exactly thirty days. Under such assumptions, the Base Rent for
the hypothetical Base Rent Period will equal:

                    $5,000,000 x .575% x 30/360 = $2,395.83

          (iv)   Base Rent Formula for Periods During Which The Collateral
                 ---------------------------------------------------------
Percentage is Less Than 100%. Each installment of Base Rent payable for any Base
----------------------------
Rent Period during which the Collateral Percentage is less than one hundred
percent (100%) shall equal:

          .      Stipulated Loss Value on the first day of such Base Rent
                 Period, times

          .      the sum of:

                    (A) the product of:

                         (1)   the Collateral Percentage for such Base Rent
                               Period, times

[Land]

                                      -6-
<PAGE>

                         (2)   the sum of (a) the Secured Spread and (b) the
                               Effective Rate/Deposit Rate Difference for the
                               period from and including the preceding Base Rent
                               Date to but not including the Base Rent Date upon
                               which the installment is due, plus

                    (B) the product of:

                         (1)   one minus the Collateral Percentage for such Base
                               Rent Period, times

                         (2)   the sum of (a) the Effective Rate with respect to
                               such Base Rent Period, plus (b) the Unsecured
                               Spread for the period from and including the
                               preceding Base Rent Date to but not including the
                               Base Rent Date upon which the installment is due,
                               times

          .      the number of days in the period from and including the
                 preceding Base Rent Date to but not including the Base Rent
                 Date upon which the installment is due, divided by

          .      three hundred sixty.

          Assume, only for the purpose of illustration: that the Collateral
     Percentage for a hypothetical Base Rent Period is fifty percent (50%); that
     prior to the first day of such Base Rent Period Qualified Prepayments have
     been received by BNPLC, leaving a Stipulated Loss Value of $5,000,000; that
     the Effective Rate for the Base Rent Period is 6%; that the sum of the
     Secured Spread and the Effective Rate/Deposit Rate Difference is fifty-
     seven and one-half basis points (57.5/100 of 1%); that upon the
     commencement of such Base Rent Period the Unsecured Spread is two hundred
     twenty-five basis points (225/100 of 1%); and that such Base Rent Period
     contains exactly thirty days.  Under such assumptions, the Base Rent for
     the hypothetical Base Rent Period will equal:

          $5,000,000 x {(50% x .575%) + ([1 - 50%] x [6% + 2.25%])} x
                              30/360 = $18,385.42

          (d)    Additional Rent. All amounts which Zhone is required to pay to
                 ---------------
or on behalf of BNPLC pursuant to this Land Lease, together with every charge,
premium, interest and cost set forth herein which may be added for nonpayment or
late payment thereof, shall constitute rent (all such amounts, other than Base
Rent, are herein called "Additional Rent", and together Base Rent and Additional
Rent are herein sometimes called "Rent").

          (e)    Intentionally Deleted.
                 ---------------------

          (f)    Commitment Fees.  For each day beginning on and including the
                 ---------------
date of this Agreement and ending on but not including the earlier to occur of
the date that BNPLC makes the Post Closing Advance as provided in Paragraph 6,
Zhone will pay BNPLC's Parent commitment fees (the "Commitment Fees") equal to:

          .      the amount by which dollar amount on the cover page to this
                 Land Lease (the "Total Commitment") exceeds the Prior Funding
                 Advances; times

[Land]

                                      -7-
<PAGE>

          .      twenty basis points (20/100 of 1%); divided by

          .      three hundred sixty.

Zhone shall pay Commitment Fees in arrears on the first Business Day of January,
April, July and October of each calendar year, beginning with the first Business
Day of the first Business Day of October, 2000 and continuing regularly
thereafter until such time as BNPLC shall make the Post Closing Advance, after
which Commitment Fees shall no longer accrue; provided, that all accrued, unpaid
Commitment Fees shall become due on the Designated Sale Date.

On the first Business Day of October, 2000, Zhone shall pay (in addition to
Commitment Fees payable as provided above for the Construction Periods
commencing on or after the Effective Date and ending on or before the first
Business Day of October, 2000) the Commitment Fees that had accrued and remained
unpaid under the Prior Lease Agreement as of the Effective Date.

          (g)    Intentionally Deleted.
                 ---------------------

          (h)    Intentionally Deleted.
                 ---------------------

          (i)    No Demand or Setoff. Except as expressly provided herein, Zhone
                 -------------------
shall pay all Rent without notice or demand and without counterclaim, deduction,
setoff or defense.

          (j)    Default Interest and Order of Application. All Rent shall bear
                 -----------------------------------------
interest, if not paid when first due, at the Default Rate in effect from time to
time from the date due until paid; provided, that nothing herein contained will
be construed as permitting the charging or collection of interest at a rate
exceeding the maximum rate permitted under Applicable Laws. BNPLC shall be
entitled to apply any amounts paid by or on behalf of Zhone against any Rent
then past due in the order the same became due or in such other order as BNPLC
may elect.

     4    Nature of this Agreement.

          (a)    "Net" Lease Generally. Subject only to the exceptions listed in
                  --------------------
subparagraph 5.(d) below, it is the intention of BNPLC and Zhone that Base Rent,
Commitment Fees and other payments herein specified shall be absolutely net to
BNPLC and that Zhone shall pay all costs, expenses and obligations of every kind
relating to the Property or this Land Lease which may arise or become due,
including: (i) any taxes payable by virtue of BNPLC's receipt of amounts paid to
or on behalf of BNPLC in accordance with Paragraph 5; (ii) any amount for which
BNPLC is or becomes liable with respect to the Permitted Encumbrances or the
Development Documents; and (iii) any costs incurred by BNPLC (including
Attorneys' Fees) because of BNPLC's acquisition or ownership of any interest in
the Property or because of this Land Lease or the transactions contemplated
herein.

          (b)     No Termination. Except as expressly provided in this Land
                  --------------
Lease itself, this Land Lease shall not terminate, nor shall Zhone have any
right to terminate this Land Lease, nor shall Zhone be entitled to any abatement
of the Rent, nor shall the obligations of Zhone under this Land Lease be
excused, for any reason whatsoever, including any of the following: (i) any
damage to or the destruction of all or any part of the Property from whatever
cause, (ii) the taking of the Property or any portion thereof by eminent domain
or otherwise for any reason, (iii) the prohibition, limitation or restriction of
Zhone's use or development of all or any portion of

[Land]

                                      -8-
<PAGE>

the Property or any interference with such use by governmental action or
otherwise, (iv) any eviction of Zhone or of anyone claiming through or under
Zhone, (v) any default on the part of BNPLC under this Land Lease or under any
other agreement to which BNPLC and Zhone are parties, (vi) the inadequacy in any
way whatsoever of the Property (it being understood that BNPLC has not made,
does not make and will not make any representation express or implied as to the
adequacy thereof), (vii) any latent or other defect in the Property or any
change in the condition thereof or the existence with respect to the Property of
any violations of Applicable Laws, (viii) any breach by Seller of the
Acquisition Contract or other agreements or promises or representations made in
connection with the Acquisition Contract, or (ix) any other cause whether
similar or dissimilar to the foregoing. It is the intention of the parties
hereto that the obligations of Zhone hereunder shall be separate and independent
of the covenants and agreements of BNPLC, that Base Rent and all other sums
payable by Zhone hereunder shall continue to be payable in all events and that
the obligations of Zhone hereunder shall continue unaffected, unless the
requirement to pay or perform the same shall have been terminated or limited
pursuant to an express provision of this Land Lease. Without limiting the
foregoing, Zhone waives to the extent permitted by Applicable Laws, except as
otherwise expressly provided herein, all rights to which Zhone may now or
hereafter be entitled by law (including any such rights arising because of any
implied "warranty of suitability" or other warranty under Applicable Laws) (i)
to quit, terminate or surrender this Land Lease or the Property or any part
thereof or (ii) to any abatement, suspension, deferment or reduction of the
Rent.

     However, nothing in this subparagraph 4.(b) shall be construed as a waiver
by Zhone of any right Zhone may have at law or in equity to the following
remedies, whether because of BNPLC's failure to remove a Lien Removable by BNPLC
or because of any other default by BNPLC under this Land Lease that continues
beyond the period for cure provided in Paragraph 19: (i) the recovery of
monetary damages, (ii) injunctive relief in case of the violation, or attempted
or threatened violation, by BNPLC of any of the express covenants, agreements,
conditions or provisions of this Land Lease which are binding upon BNPLC
(including the confidentiality provisions set forth in subparagraph 16.(c)
below), or (iii) a decree compelling performance by BNPLC of any of the express
covenants, agreements, conditions or provisions of this Land Lease which are
binding upon BNPLC.

          (c)  Tax Reporting. BNPLC and Zhone shall report this Land Lease and
               -------------
the Land Purchase Agreement for federal income tax purposes as a conditional
sale unless prohibited from doing so by the Internal Revenue Service. If the
Internal Revenue Service shall challenge BNPLC's characterization of this Land
Lease and the Land Purchase Agreement as a conditional sale for federal income
tax reporting purposes, BNPLC shall notify Zhone in writing of such challenge
and consider in good faith any reasonable suggestions by Zhone about an
appropriate response. In any event, Zhone shall (subject only to the limitations
set forth in this subparagraph) indemnify and hold harmless BNPLC from and
against all liabilities, costs, additional taxes (other than Excluded Taxes) and
other expenses that may arise or become due because of such challenge or because
of any resulting recharacterization required by the Internal Revenue Service,
including any additional taxes that may become due upon any sale under the Land
Purchase Agreement to the extent (if any) that such additional taxes are not
offset by tax savings resulting from additional depreciation deductions or other
tax benefits to BNPLC of the recharacterization.  If BNPLC receives a written
notice of any challenge by the Internal Revenue Service that BNPLC believes will
be covered by this Paragraph, then BNPLC shall promptly furnish a copy of such
notice to Zhone.  The failure to so provide a copy of the notice to Zhone shall
not excuse Zhone from its obligations under this Paragraph; provided, that if
none of the officers of Zhone and none of the employees of Zhone responsible for
tax matters are aware of the challenge described in the notice and such failure
by BNPLC renders unavailable defenses that Zhone might otherwise assert, or
precludes actions that Zhone might otherwise take, to minimize its obligations
hereunder, then Zhone shall be excused from its obligation to indemnify BNPLC
against liabilities, costs, additional taxes and other expenses, if any, which
would not have been incurred but for such failure.  For example, if BNPLC fails
to provide Zhone with a copy of a notice of a challenge by the Internal Revenue
Service covered by the indemnities set out in this Land Lease and Zhone is not
otherwise already aware of such challenge, and if as a result of such failure
BNPLC becomes liable for penalties and interest covered by

[Land]

                                      -9-
<PAGE>

the indemnities in excess of the penalties and interest that would have accrued
if Zhone had been promptly provided with a copy of the notice, then Zhone will
be excused from any obligation to BNPLC to pay the excess.

          (d)    Characterization of this Land Lease. For purposes of
                 -----------------------------------
determining the appropriate financial accounting for this Land Lease and for
purposes of determining their respective rights and remedies under state law,
BNPLC and Zhone believe and intend that (i) this Land Lease constitutes a true
lease, not a mere financing arrangement, enforceable in accordance with its
express terms, and the preceding subparagraph is not intended to affect the
enforcement of any other provisions of this Land Lease or the Land Purchase
Agreement, and (ii) the Land Purchase Agreement shall constitute a separate and
independent contract, enforceable in accordance with the express terms and
conditions set forth therein. In this regard, Zhone acknowledges that Zhone
asked BNPLC to participate in the transactions evidenced by this Land Lease and
the Land Purchase Agreement as a landlord and owner of the Property, not as a
lender. Although other transactions might have been used to accomplish similar
results, Zhone expects to receive certain material accounting and other
advantages through the use of a lease transaction. Accordingly, and
notwithstanding the reporting for income tax purposes described in the preceding
subparagraph, Zhone cannot equitably deny that this Land Lease and the Land
Purchase Agreement should be construed and enforced in accordance with their
respective terms, rather than as a mortgage or other security device, in any
action brought by BNPLC to enforce this Land Lease or the Land Purchase
Agreement.

     5    Payment of Executory Costs and Losses Related to the Property.

          (a)     Impositions. Subject only to the exceptions listed in
                  -----------
subparagraph 5.(d) below, Zhone shall pay or cause to be paid prior to
delinquency all ad valorem taxes assessed against the Property and other
Impositions. If requested by BNPLC from time to time, Zhone shall furnish BNPLC
with receipts showing payment of all Impositions prior to the applicable
delinquency date therefor.

     Notwithstanding the foregoing, Zhone may in good faith, by appropriate
proceedings, contest the validity, applicability or amount of any asserted
Imposition, and pending such contest Zhone shall not be deemed in default under
any of the provisions of this Land Lease because of the Imposition if (1) Zhone
diligently prosecutes such contest to completion in a manner reasonably
satisfactory to BNPLC, and (2) Zhone promptly causes to be paid any amount
adjudged by a court of competent jurisdiction to be due, with all costs,
penalties and interest thereon, promptly after such judgment becomes final;
provided, however, in any event each such contest shall be concluded and the
contested Impositions must be paid by Zhone prior to the earlier of (i) the date
that any criminal prosecution is instituted or overtly threatened against BNPLC
or its directors, officers or employees because of the nonpayment thereof or
(ii) the date any writ or order is issued under which any property owned or
leased by BNPLC (including the Property) may be seized or sold or any other
action is taken against BNPLC or against any property owned or leased by BNPLC
because of the nonpayment thereof, or (iii) any Designated Sale Date upon which,
for any reason, Zhone or an Affiliate of Zhone or any Applicable Purchaser shall
not purchase BNPLC's interest in the Property pursuant to the Land Purchase
Agreement for a price to BNPLC (when taken together with any additional payments
made by Zhone pursuant to Paragraph 1(A)(3) of the Land Purchase Agreement, in
                          -----------------
the case of a purchase by an Applicable Purchaser) equal to the Land Break Even
Amount.

          (b)    Increased Costs; Capital Adequacy Charges.  Subject only to the
                 -----------------------------------------
exceptions listed in subparagraph 5.(d) below:

          (i)    If after the Effective Date there shall be any increase in the
     cost to BNPLC's Parent or any other Participant agreeing to make or making,
     funding or maintaining advances to BNPLC in

[Land]

                                      -10-
<PAGE>

     connection with the Property because of any Banking Rules Change, then
     Zhone shall from time to time, pay to BNPLC for the account of BNPLC's
     Parent or such other Participant, as the case may be, additional amounts
     sufficient to compensate BNPLC's Parent or the Participant for such
     increased cost. An increase in costs resulting from any imposition or
     increase of reserve requirements applicable to Collateral held from time to
     time by BNPLC's Parent or other Participants pursuant to the Land Pledge
     Agreement would be an increase covered by the preceding sentence. A
     certificate as to the amount of such increased cost, submitted to BNPLC and
     Zhone by BNPLC's Parent or the other Participant, shall be conclusive and
     binding upon Zhone, absent clear and demonstrable error.

          (ii)   BNPLC's Parent or any other Participant may demand additional
     payments ("Capital Adequacy Charges") if BNPLC's Parent or the other
     Participant determines that any Banking Rules Change affects the amount of
     capital to be maintained by it and that the amount of such capital is
     increased by or based upon the existence of advances made or to be made to
     BNPLC to permit BNPLC to maintain BNPLC's investment in the Property. To
     the extent that BNPLC's Parent or another Participant demands Capital
     Adequacy Charges as compensation for the additional capital requirements
     reasonably allocable to such investment or advances, Zhone shall pay to
     BNPLC for the account of BNPLC's Parent or the other Participant, as the
     case may be, the amount so demanded. Without limiting the foregoing, BNPLC
     and Zhone hereby acknowledge and agree that the provisions for calculating
     Base Rent set forth herein reflect the assumption that the Land Pledge
     Agreement will cause a zero percent (0%) risk weight to be assigned to a
     percentage (equal to the Collateral Percentage) of the collective
     investment of BNPLC and the Participants in the Property pursuant to 12
     Code of Federal Regulations, part 225, as from time to time supplemented or
     amended, or pursuant to any other similar or successor statute or
     regulation applicable to BNPLC and the Participants. If and so long as such
     risk weight is increased the assumed amount of zero percent (0%) because of
     a Banking Rules Change, Capital Adequacy Charges may be collected to yield
     the same rate of return to BNPLC, BNPLC's Parent and any other Participants
     (net of their costs of maintaining required capital) that they would have
     enjoyed from this Land Lease absent such increase.

          (iii)  Notwithstanding the foregoing provisions of this subparagraph
     5.(b), Zhone shall not be obligated to pay any claim for compensation
     pursuant to this subparagraph 5.(b) arising or accruing more than six
     months prior to the date Zhone is notified that BNPLC or a Participant
     intends to make the claim; provided, however, that Zhone shall not be
     excused by this subparagraph from providing such compensation for any
     period during which notice on behalf of BNPLC or the Participant, as the
     case may be, could not be provided because of the retroactive application
     of the statute, regulation or other basis for the claim.

          (iv)   Any amount required to be paid by Zhone under this subparagraph
     5.(b) shall be due fifteen days after a notice requesting such payment is
     received by Zhone.

          (c)    Zhone's Payment of Other Losses; General Indemnification.
                 --------------------------------------------------------
Subject only to the exceptions listed in subparagraph 5.(d) below:

          (i)    All Losses (including Environmental Losses) asserted against or
     incurred or suffered by BNPLC or other Interested Parties at any time and
     from time to time by reason of, in connection with or arising out of (A)
     their ownership or alleged ownership of any interest in the Property or the
     Rents, (B) the use and operation of the Property, (C) the negotiation,
     administration or enforcement of the Land Operative Documents, (D) the
     making of the Funding Advances, (E) the breach by Zhone of this Land Lease
     or any other document executed by Zhone in connection herewith, (F) any
     failure of the Property

[Land]

                                      -11-
<PAGE>

     or Zhone itself to comply with Applicable Laws, (G) Permitted Encumbrances,
     (H) Hazardous Substance Activities, including those occurring prior to
     Effective Date, (I) any obligations under the Acquisition Contract (or
     under any other agreement made with the City of Oakland in connection with
     or pursuant to the Acquisition Contract) that survive the closing under the
     Acquisition Contract, or (J) any bodily or personal injury or death or
     property damage occurring in or upon or in the vicinity of the Property
     through any cause whatsoever, shall be paid by Zhone, and Zhone shall
     indemnify and defend BNPLC and other Interested Parties from and against
     all such Losses.

          (ii)   THE INDEMNITIES AND RELEASES PROVIDED HEREIN FOR THE BENEFIT OF
     BNPLC AND OTHER INTERESTED PARTIES, INCLUDING THE INDEMNITY SET FORTH IN
     -----           -          -
     THE PRECEDING SUBPARAGRAPH 5.(c)(i), SHALL APPLY EVEN IF AND WHEN THE
     SUBJECT MATTERS OF THE INDEMNITIES AND RELEASES ARE CAUSED BY OR ARISE OUT
     OF THE NEGLIGENCE OR STRICT LIABILITY OF BNPLC OR ANOTHER INTERESTED PARTY.
                                              -----            -          -
     FURTHER, SUCH INDEMNITIES AND RELEASES WILL APPLY EVEN IF INSURANCE
     OBTAINED BY ZHONE OR REQUIRED OF ZHONE BY THIS LAND LEASE OR OTHER LAND
                 -                    -             -    -              -
     OPERATIVE DOCUMENTS IS NOT ADEQUATE TO COVER LOSSES AGAINST OR FOR WHICH
     -         -                                  -
     THE INDEMNITIES AND RELEASES ARE PROVIDED. ZHONE'S LIABILITY, HOWEVER, FOR
                                                -
     ANY FAILURE TO OBTAIN INSURANCE REQUIRED BY THIS LAND LEASE OR OTHER LAND
                                                      -    -              -
     OPERATIVE DOCUMENTS WILL NOT BE LIMITED TO LOSSES AGAINST WHICH INDEMNITIES
     -         -                                -
     ARE PROVIDED HEREIN, IT BEING UNDERSTOOD THAT SUCH INSURANCE IS INTENDED TO
     DO MORE THAN PROVIDE A SOURCE OF PAYMENT FOR LOSSES AGAINST WHICH BNPLC AND
                                                  -                    -----
     OTHER INTERESTED PARTIES ARE ENTITLED TO INDEMNIFICATION BY THIS LAND
           -          -                                               -
     LEASE.
     -

          (iii)  Costs and expenses for which Zhone shall be responsible
     pursuant to this subparagraph 5.(c) will include appraisal fees, filing and
     recording fees, inspection fees, survey fees, taxes, brokerage fees and
     commissions, abstract fees, title policy fees, Uniform Commercial Code
     search fees, escrow fees and Attorneys' Fees incurred by BNPLC with respect
     to the Property, whether such costs and expenses are incurred at the time
     of execution of this Land Lease or at any time during the Term.

          (iv)   Zhone's obligations under this subparagraph 5.(c) shall survive
     the termination or expiration of this Land Lease. Any amount to be paid by
     Zhone under this subparagraph 5.(c) shall be due fifteen days after a
     notice requesting such payment is received by Zhone.

          (v)    If an Interested Party notifies Zhone of any claim or
     proceeding included in, or any investigation or allegation concerning,
     Losses for which Zhone is responsible pursuant to this subparagraph 5.(c),
     Zhone shall assume on behalf of the Interested Party and conduct with due
     diligence and in good faith the investigation and defense thereof and the
     response thereto with counsel selected by Zhone, but reasonably
     satisfactory to the Interested Party; provided, that the Interested Party
     shall have the right to be represented by advisory counsel of its own
     selection and at its own expense; and provided further, that if any such
     claim, proceeding, investigation or allegation involves both Zhone and the
     Interested Party and the Interested Party shall have reasonably concluded
     that there are legal defenses available to it which are inconsistent with
     or in addition to those available to Zhone, then the Interested Party shall
     have the right to select separate counsel to participate in the
     investigation and defense of and response to such claim, proceeding,
     investigation or allegation on its own behalf, and Zhone shall pay or
     reimburse the Interested Party for all Attorney's Fees incurred by the
     Interested Party because of the

[Land]

                                      -12-
<PAGE>

     selection of such separate counsel. If Zhone fails to assume promptly (and
     in any event within fifteen days after being notified of the applicable
     claim, proceeding, investigation or allegation) the defense of the
     Interested Party, then the Interested Party may contest (or settle, with
     the prior consent of Zhone, which consent will not be unreasonably
     withheld) the claim, proceeding, investigation or allegation at Zhone's
     expense using counsel selected by the Interested Party. Moreover, if any
     such failure by Zhone continues for forty-five days or more after Zhone is
     notified of any such claim, proceeding, investigation or allegation, the
     Interested Party may elect not to contest or continue contesting the same
     and instead, in accordance with the written advice of counsel, settle (or
     pay in full) all claims related thereto without Zhone's consent and without
     releasing Zhone from any obligations to the Interested Party under this
     subparagraph 5.(c).

          (d)    Exceptions and Qualifications to Indemnities.
                 --------------------------------------------

          (i)    BNPLC acknowledges and agrees that nothing in subparagraph
     4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed
     to require Zhone to pay or reimburse (w) any costs or expenses incurred by
     any Interested Party (including BNPLC or any transferee of BNPLC) to
     accomplish any Permitted Transfers described in clauses (1), (2), (3), (4)
     or (6) of the definition thereof in the Land CDPA, (x) Excluded Taxes, (y)
     Losses incurred or suffered by any Interested Party that are proximately
     caused by (and attributed by any applicable principles of comparative fault
     to) the Established Misconduct of that Interested Party, or (z) Losses
     incurred or suffered in connection with the execution of the Participation
     Agreement or Land Pledge Agreement by Participants (or supplements making
     them parties thereto) or in connection with any negotiation or due
     diligence Participants may undertake before entering into the Participation
     Agreement or Land Pledge Agreement. Further, without limiting BNPLC's
     rights (as provided in other provisions of this Land Lease and other Land
     Operative Documents) to include the following in the calculation of
     Stipulated Loss Value or the Land Break Even Amount or to collect Base
     Rent, a Land Supplemental Payment and other amounts, the calculation of
     which depends upon the Stipulated Loss Value or the Land Break Even Amount,
     BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the
     preceding subparagraphs of this Paragraph 5 shall be construed to require
     Zhone to pay or reimburse an Interested Party for:

                 (a)   costs previously paid by BNPLC with the proceeds of the
          Prior Funding Advances; or

                 (b)   Construction Advances made under (and as defined in) any
          of the Construction Management Agreements or the Other Lease
          Agreements, including costs and expenditures incurred or paid by or on
          behalf of BNPLC after any Landlord's Election to Continue Construction
          under (and as defined in) the Other Lease Agreements, to the extent
          that such costs and expenditures are considered to be Construction
          Advances pursuant to subparagraph 6(e) of either of the Other Lease
                               -----------------
          Agreements; or

                 (c)   any Post Closing Advance made by BNPLC as hereinafter
          provided.

     Further, if an Interested Party receives a written notice of Losses that
     such Interested Party believes are covered by the indemnity in subparagraph
     5.(c)(i), then such Interested Party will be expected to promptly furnish a
     copy of such notice to Zhone.  The failure to so provide a copy of the
     notice to Zhone shall not excuse Zhone from its obligations under
     subparagraph 5.(c)(i); provided, that if Zhone is unaware of the matters
     described in the notice and such failure renders unavailable defenses that
     Zhone

[Land]

                                      -13-
<PAGE>

     might otherwise assert, or precludes actions that Zhone might otherwise
     take, to minimize its obligations, then Zhone shall be excused from its
     obligation to indemnify such Interested Party (and any Affiliate of such
     Interested Party) against the Losses, if any, which would not have been
     incurred or suffered but for such failure. For example, if BNPLC fails to
     provide Zhone with a copy of a notice of an obligation covered by the
     indemnity set out in subparagraph 5.(c)(i) and Zhone is not otherwise
     already aware of such obligation, and if as a result of such failure BNPLC
     becomes liable for penalties and interest covered by the indemnity in
     excess of the penalties and interest that would have accrued if Zhone had
     been promptly provided with a copy of the notice, then Zhone will be
     excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the
     excess.

          (ii    [Intentionally Deleted.].

     6.   Post Closing Advance to Cover Deferred Purchase Price of the Land.

          (a     Purchase Money Documents.  Zhone acknowledges that BNPLC has,
                 ------------------------
with the knowledge and consent of Zhone, executed and delivered to Seller a
Promissory Note in the original principal amount of $3,000,195 pursuant to
Paragraph 1.2.2 of the Acquisition Contract (the "Purchase Money Note") and
other documents which establish a lien against a portion of the Land to secure
the Purchase Money Note (the "Purchase Money Lien").  Zhone also acknowledges
that the Purchase Money Lien is a Permitted Encumbrance.

          (b     Post-Closing Advance.   BNPLC shall have the right and, subject
                 --------------------
to the conditions set forth in this Paragraph 6, an obligation to Zhone to make
an advance of funds as necessary to satisfy the Purchase Money Note and to
obtain a release of the Purchase Money Lien (the "Post Closing Advance").  If
BNPLC does make the Post Closing Advance, it shall be added to Stipulated Loss
Value as contemplated in the definition thereof in the Land CDPA, regardless of
whether BNPLC makes the Post Closing Advance to satisfy its obligations to Zhone
under this Paragraph 6, or merely because BNPLC exercises its right (even over
the objection of Zhone) to make the Post Closing Advance as provided in this
Paragraph 6.  If all goes as expected, the Post Closing Advance will be made by
BNPLC to or for the benefit of Seller on or before the "Post Closing Advance
Deadline", which as used herein means the first day of the last Base Rent Period
to commence within 364 days after the Effective Date.  However, BNPLC's right
and obligation to make the Post Closing Advance shall be subject to the all of
the following terms and conditions:

          (1)    BNPLC shall not be obligated to Zhone to make the Post Closing
     Advance when any Event of Default shall have occurred and be continuing or
     after any CMA Termination Event shall have occurred.  When, however, any
     Event of Default shall have occurred and be continuing or after any CMA
     Termination Event shall have occurred, and regardless of whether the
     Purchase Money Note is then due and payable, BNPLC shall be entitled to
     make the Post Closing Advance if in BNPLC's sole judgment paying the
     Purchase Money Note and obtaining a release of the Purchase Money Lien is
     advisable.  If for any reason BNPLC does not pay the Purchase Money Note in
     full on or prior to the Post Closing Advance Deadline, BNPLC shall
     thereafter be entitled (but not required) to make the Post Closing Advance
     if in BNPLC's sole judgment it is advisable to do so.

          (2)    BNPLC's obligation to Zhone (but not BNPLC's right) to make the
     Post Closing Advance shall be subject to the condition that Zhone first
     delivers additional Collateral under and pursuant to the Land Pledge
     Agreement as necessary to prevent the Minimum Collateral Value (as defined
     in the Land Pledge Agreement) from exceeding the actual Value (as defined
     in the Land Pledge Agreement) of all Collateral subject to a Qualified
     Pledge under (and as defined in) the Land Pledge

[Land]

                                      -14-
<PAGE>

     Agreement following the Post Closing Advance. Any decision by BNPLC to make
     the Post Closing Advance before Zhone delivers any such additional
     Collateral shall not in any event excuse Zhone from its obligations to
     deliver additional Collateral under the Land Pledge Agreement.

          (4)    Although BNPLC shall be entitled to make the Post Closing
     Advance in a greater amount if needed to pay the Purchase Money Note and to
     obtain a release of the Purchase Money Lien, in no event shall Zhone be
     entitled to require BNPLC to make the Post Closing Advance in an amount
     that exceeds the Total Commitment, less the Prior Funding Advances.

          (5)    BNPLC's obligation to Zhone (but not BNPLC's right) to make the
     Post Closing Advance shall also be subject to the condition that Zhone
     shall have requested BNPLC to make the Post Closing Advance by an
     unequivocal and unconditional notice delivered to BNPLC no earlier than
     thirty days prior to, and no later than ten days prior to, the date upon
     which BNPLC is expected to make the Post Closing Advance.

          (6)    BNPLC's obligation to Zhone (but not BNPLC's right) to make the
     Post Closing Advance shall also be subject to the condition that no
     Participant (other than an Affiliate of BNPLC) shall have failed to advance
     its pro rata share of the funds needed to make the Post Closing Advance as
     contemplated by the Participation Agreement.  In this regard, it is
     understood that BNPLC will not be responsible for a breach by any
     Participant (other than an Affiliate of BNPLC) of its obligation to make
     advances required by the Participation Agreement, and that Zhone will have
     the right as a third party beneficiary of the provisions of the
     Participation Agreement requiring such advances (as more particularly
     provided therein) such that Zhone may itself pursue a claim directly
     against any such Participant in the event of such a breach.

     7.   Intentionally Deleted.

     8.   Environmental.

          (a     Environmental Covenants by Zhone. Zhone covenants that:
                 --------------------------------

                 (i   Zhone shall not conduct or permit others to conduct
     Hazardous Substance Activities, except Permitted Hazardous Substance Use
     and Remedial Work.

                 (ii  Zhone shall not discharge or permit the discharge of
     anything on or from the Property that would require any permit under
     applicable Environmental Laws, other than (1) storm water runoff, (2) waste
     water discharges through a publicly owned treatment works, (3) discharges
     that are a necessary part of any Remedial Work, and (4) other similar
     discharges consistent with the definition herein of Permitted Hazardous
     Substance Use, in each case in strict compliance with Environmental Laws.

                 (iii Following any discovery that Remedial Work is required by
     Environmental Laws or otherwise believed by BNPLC to be reasonably
     required, and to the extent not inconsistent with the other provisions of
     this Land Lease, Zhone shall promptly perform and diligently and
     continuously pursue such Remedial Work, in each case in strict compliance
     with Environmental Laws.

                 (iv  If requested by BNPLC in connection with any Remedial Work
     required by this subparagraph, Zhone shall retain independent environmental
     consultants acceptable to BNPLC to

[Land]

                                      -15-
<PAGE>

     evaluate any significant new information generated during Zhone's
     implementation of the Remedial Work and to discuss with Zhone whether such
     new information indicates the need for any additional measures that Zhone
     should take to protect the health and safety of persons (including
     employees, contractors and subcontractors and their employees) or to
     protect the environment. Zhone shall implement any such additional measures
     to the extent required with respect to the Property by Environmental Laws
     or otherwise believed by BNPLC to be reasonably required and to the extent
     not inconsistent with the other provisions of this Land Lease.

          (b     Right of BNPLC to do Remedial Work Not Performed by Zhone. If
                 ---------------------------------------------------------
Zhone's failure to cure any breach of the covenants set forth in subparagraph
8.(a) continues beyond the Environmental Cure Period (as defined below), BNPLC
may, in addition to any other remedies available to it, conduct all or any part
of the Remedial Work. To the extent that Remedial Work is done by BNPLC pursuant
to the preceding sentence (including any removal of Hazardous Substances), the
cost thereof shall be a demand obligation owing by Zhone to BNPLC. As used in
this subparagraph, "Environmental Cure Period" means the period ending on the
earlier of: (1) one hundred eighty days after Zhone is notified of the breach
which must be cured within such period, (2) the date that any writ or order is
issued for the levy or sale of any property owned by BNPLC (including the
Property) because of such breach, (3) the date that any criminal action is
instituted or overtly threatened against BNPLC or any of its directors, officers
or employees because of such breach, or (4) any Designated Sale Date upon which,
for any reason, Zhone or an Affiliate of Zhone or any Applicable Purchaser shall
not purchase BNPLC's interest in the Property pursuant to the Land Purchase
Agreement for a net price to BNPLC (when taken together with any Land
Supplemental Payment made by Zhone pursuant to Paragraph 1(A)(3) of the Land
                                               -----------------
Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal
to Stipulated Loss Value.

          (c     Environmental Inspections and Reviews. BNPLC reserves the right
                 -------------------------------------
to retain environmental consultants to review any report required by Applicable
Law to be prepared by Zhone or to conduct BNPLC's own investigation to confirm
whether Zhone is complying with the requirements of this Paragraph 8. Zhone
grants to BNPLC and to BNPLC's agents, employees, consultants and contractors
the right to enter upon the Property during reasonable hours and after
reasonable notice to inspect the Property and to perform such tests as BNPLC
deems necessary or appropriate to review or investigate Hazardous Substances in,
on, under or about the Property or any discharge or suspected discharge of
Hazardous Substances into groundwater or surface water from the Property. Zhone
shall promptly reimburse BNPLC for the fees of its environmental consultants and
the costs of any such inspections and tests; provided, however, BNPLC's right to
such reimbursement shall be limited to the following circumstances: (1) a breach
of this Paragraph 8 by Zhone shall, in fact, have occurred or an Event of
Default shall have occurred and be continuing at the time BNPLC engages the
consultants or first initiates the inspections and tests; (2) BNPLC shall have
engaged the consultants or undertaken the tests and inspections to establish the
condition of the Property just prior to any conveyance of the Property pursuant
to the Option Agreement or to the expiration of this Land Lease; (3) BNPLC shall
have engaged the consultants or undertaken the inspections and tests to satisfy
any regulatory requirements applicable to BNPLC or its Affiliates; or (4) BNPLC
shall have engaged the consultants or undertaken the tests because BNPLC was
notified of a violation of Environmental Laws concerning the Property by any
governmental authority or owner of other land in the vicinity of the Land.

          (d     Communications Regarding Environmental Matters.
                 ----------------------------------------------

                 (i      Zhone shall immediately advise BNPLC of (1) any
     discovery of any event or circumstance which would render any of the
     representations of Zhone herein or in the Closing Certificate concerning
     environmental matters materially inaccurate or misleading if made at the
     time of such discovery and assuming that Zhone was aware of all relevant
     facts, (2) any Remedial Work (or change in Remedial Work) required or
     undertaken by Zhone or its Affiliates in response to any (A)

[Land]

                                      -16-
<PAGE>

     discovery of any Hazardous Substances on, under or about the Property other
     than Permitted Hazardous Substances or (B) any claim for damages resulting
     from Hazardous Substance Activities, (3) Zhone's discovery of any
     occurrence or condition on any real property adjoining or in the vicinity
     of the Property which could cause the Property or any part thereof to be
     subject to any ownership, occupancy, transferability or use restrictions
     under Environmental Laws, or (4) any investigation or inquiry of any
     failure or alleged failure by Zhone to comply with Environmental Laws
     affecting the Property by any governmental authority responsible for
     enforcing Environmental Laws. In such event, Zhone shall deliver to BNPLC
     within thirty days after BNPLC's request, a preliminary written
     environmental plan setting forth a general description of the action that
     Zhone proposes to take with respect thereto, if any, to bring the Property
     into compliance with Environmental Laws or to correct any breach by Zhone
     of this Paragraph 8, including any proposed Remedial Work, the estimated
     cost and time of completion, the name of the contractor and a copy of the
     construction contract, if any, and such additional data, instruments,
     documents, agreements or other materials or information as BNPLC may
     request.

               (ii    Zhone shall provide BNPLC with copies of all material
     written communications with federal, state and local governments, or
     agencies relating to the matters listed in the preceding clause (i). Zhone
     shall also provide BNPLC with copies of any correspondence from third
     Persons which threaten litigation over any significant failure or alleged
     significant failure of Zhone to maintain or operate the Property in
     accordance with Environmental Laws.

               (iii   Prior to Zhone's submission of a Material Environmental
     Communication to any governmental or regulatory agency or third party,
     Zhone shall, to the extent practicable, deliver to BNPLC a draft of the
     proposed submission (together with the proposed date of submission), and in
     good faith assess and consider any comments of BNPLC regarding the same.
     Promptly after BNPLC's request, Zhone shall meet with BNPLC to discuss the
     submission, shall provide any additional information requested by BNPLC and
     shall provide a written explanation to BNPLC addressing the issues raised
     by comments (if any) of BNPLC regarding the submission, including a
     reasoned analysis supporting any decision by Zhone not to modify the
     submission in accordance with comments of BNPLC.

     9.   Insurance Required and Condemnation.

          (a   Liability Insurance. Throughout the Term Zhone shall maintain
               -------------------
commercial general liability insurance against claims for bodily and personal
injury, death and property damage occurring in or upon or resulting from any
occurrence in or upon the Property under one or more insurance policies that
satisfy the requirements set forth in Exhibit B. Zhone shall deliver and
                                      ---------
maintain with BNPLC for each liability insurance policy required by this Land
Lease written confirmation of the policy and the scope of the coverage provided
thereby issued by the applicable insurer or its authorized agent, which
confirmation must also satisfy the requirements set forth in Exhibit B.
                                                             ---------

          (b   Intentionally Deleted.
               ---------------------

          (c   Failure to Obtain Insurance. If Zhone fails to obtain any
               ---------------------------
insurance or to provide confirmation of any such insurance as required by this
Land Lease, BNPLC shall be entitled (but not required) to obtain the insurance
that Zhone has failed to obtain or for which Zhone has not provided the required
confirmation and, without limiting BNPLC's other remedies under the
circumstances, BNPLC may require Zhone to reimburse BNPLC for the cost of such
insurance and to pay interest thereon computed at the Default Rate from the date
such cost was paid by BNPLC until the date of reimbursement by Zhone (provided,
however, that any such insurance cost paid by BNPLC relative to particular
Improvements covered by one of the Other

[Land]

                                      -17-
<PAGE>

Lease Agreements prior to the end of the last Construction Period thereunder
will be charged against the Construction Allowance under, and as defined in, the
Construction Management Agreement that contemplates the construction of such
Improvements, as if such insurance cost had been paid by Zhone).

          (d   Condemnation. Immediately upon obtaining knowledge of the
               ------------
institution of any proceedings for the condemnation of the Property or any
portion thereof, or any other similar governmental or quasi-governmental
proceedings arising out of injury or damage to the Property or any portion
thereof, each party shall notify the other (provided, however, BNPLC shall have
no liability for its failure to provide such notice) of the pendency of such
proceedings. Zhone shall, at its expense, diligently prosecute any such
proceedings and shall consult with BNPLC, its attorneys and experts and
cooperate with them as requested in the carrying on or defense of any such
proceedings. All proceeds of condemnation awards or proceeds of sale in lieu of
condemnation with respect to the Property and all judgments, decrees and awards
for injury or damage to the Property shall be paid to BNPLC as Land Escrowed
Proceeds, and all such proceeds will be applied as provided in Paragraph 10.
BNPLC is hereby authorized, in the name of Zhone, at any time when an Event of
Default shall have occurred and be continuing, or otherwise with Zhone's prior
consent, to execute and deliver valid acquittances for, and to appeal from, any
such judgment, decree or award concerning condemnation of any of the Property.
BNPLC shall not be in any event or circumstances liable or responsible for
failure to collect, or to exercise diligence in the collection of, any such
proceeds, judgments, decrees or awards.

     10.  Application of Insurance and Condemnation Proceeds.

          (a   Collection and Application of Insurance and Condemnation Proceeds
               -----------------------------------------------------------------
Generally.  This Paragraph 10 shall govern the application of proceeeds received
---------
by BNPLC or Zhone during the Term from any third party (1) as compensation for
any restriction placed upon the use or development of the Property or for the
condemnation of the Property or any portion thereof, or (2) because of any
judgment, decree or award for injury or damage to the Property (e.g.,damage
resulting from a third party's release of Hazardous Materials onto the
Property); excluding, however, any funds paid to BNPLC by BNPLC's Parent, by an
Affiliate of BNPLC or by any Participant that is made to compensate BNPLC for
any Losses BNPLC may suffer or incur in connection with this Land Lease or the
Property. Except as provided in subparagraph 10.(d), Zhone will promptly pay
over to BNPLC any condemnation or other proceeds covered by this Paragraph 10
which Zhone may receive from any condemning authority or other third party. All
proceeds covered by this Paragraph 10, including those received by BNPLC from
Zhone or third parties, shall be applied as follows:

               (i   First, proceeds covered by this Paragraph 10 will be used to
     reimburse BNPLC for any costs and expenses, including Attorneys' Fees, that
     BNPLC incurred to collect the proceeds.

               (ii  Second, the proceeds remaining after such reimbursement to
     BNPLC (hereinafter, the "Remaining Proceeds") will be applied, as
     hereinafter more particularly provided, either as a Qualified Prepayment or
     to reimburse Zhone or BNPLC for the actual out-of-pocket costs of repairing
     or restoring the Property. Until, however, any Remaining Proceeds received
     by BNPLC are applied by BNPLC as a Qualified Prepayment or applied by BNPLC
     to reimburse costs of repairs to or restoration of the Property pursuant to
     this Paragraph 10, BNPLC shall hold and maintain such Remaining Proceeds as
     Land Escrowed Proceeds in an interest bearing account, and all interest
     earned on such account shall be added to and made a part of such Land
     Escrowed Proceeds.

          (b   Advances of Land Escrowed Proceeds to Zhone. Except as otherwise
               -------------------------------------------
provided below in this Paragraph 10, BNPLC shall advance all Remaining Proceeds
held by it as Land Escrowed Proceeds to reimburse Zhone for the actual out-of-
pocket cost to Zhone of repairing or restoring the Property in accordance

[Land]

                                      -18-
<PAGE>

with the requirements of this Land Lease and the other Land Operative Documents
as the applicable repair or restoration progresses and upon compliance by Zhone
with such terms, conditions and requirements as may be reasonably imposed by
BNPLC.  In no event, however, shall BNPLC be required to pay Land Escrowed
Proceeds to Zhone in excess of the actual out-of-pocket cost to Zhone of the
applicable repair or restoration, as evidenced by invoices or other
documentation satisfactory to BNPLC, it being understood that BNPLC may retain
and apply any such excess as a Qualified Prepayment.

          (c   Application of Land Escrowed Proceeds as a Qualified Prepayment.
               ---------------------------------------------------------------
Provided no Event of Default shall have occurred and be continuing, BNPLC shall
apply any Remaining Proceeds paid to it (or other amounts available for
application as a Qualified Prepayment) as a Qualified Prepayment on any date
that BNPLC is directed to do so by a notice from Zhone; however, if such a
notice from Zhone specifies an effective date for a Qualified Prepayment that is
less than five Business Days after BNPLC's actual receipt of the notice, BNPLC
may postpone the date of the Qualified Prepayment to any date not later than
five Business Days after BNPLC's receipt of the notice. In any event, except
when BNPLC is required by the preceding sentence to apply Remaining Proceeds or
other amounts as a Qualified Prepayment on an Advance Date or Base Rent Date,
BNPLC may deduct Breakage Costs incurred in connection with any Qualified
Prepayment from the Remaining Proceeds or other amounts available for
application as the Qualified Prepayment, and Zhone will reimburse BNPLC upon
request for any such Breakage Costs that BNPLC incurs but does not deduct.

          (d   Special Provisions Applicable After Completion by Zhone of the
               --------------------------------------------------------------
Construction Projects. If, after the Last Building Base Rent Commencement Date
---------------------
and Zhone's completion of the Construction Projects pursuant to the Construction
Management Agreements, any taking by condemnation of any portion of the Property
or any diminution, destruction, demolition or damage to any portion of the
Property shall (in the good faith judgment of BNPLC) reduce the then current "AS
IS" market value by less than $500,000 and (in the good faith estimation of
BNPLC) be unlikely to result in Remaining Proceeds of more than $500,000, and if
no Event of Default shall have occurred and be continuing, then BNPLC will, upon
Zhone's request, instruct the condemning authority or insurer, as applicable, to
pay the Remaining Proceeds resulting therefrom directly to Zhone.  Zhone shall
apply any such Remaining Proceeds to the repair or restoration of the Property
to a safe and secure condition and to a value of no less than the value before
taking or casualty.

          (e   Special Provisions Applicable After a CMA Termination Event or an
               -----------------------------------------------------------------
Event of Default. Notwithstanding the foregoing, after any CMA Termination
----------------
Event, and when any Event of Default shall have occurred and be continuing,
BNPLC shall be entitled to receive and collect all condemnation or other
proceeds governed by this Paragraph 10 and to apply all Remaining Proceeds, when
and to the extent deemed appropriate by BNPLC in its sole discretion, either (A)
to the reimbursement of Zhone or BNPLC for the out-of-pocket cost of repairing
or restoring the Property, or (B) as Qualified Prepayments.

          (f   Zhone's Obligation to Restore. Regardless of the adequacy of
               -----------------------------
any Remaining Proceeds available to Zhone hereunder, and notwithstanding other
provisions of this Land Lease to the contrary, if the Property is damaged or
less than all or substantially all of the Property is taken by condemnation,
Zhone must:

               A)   increase the value of the Property or the remainder thereof
          by restoring the same (in a manner consistent with the requirements
          and limitations imposed by this Land Lease and the other Land
          Operative Documents or otherwise acceptable to BNPLC), or decrease
          Stipulated Loss Value by tendering a payment to BNPLC for application
          as a Qualified Prepayment, as necessary to cause the then current AS
          IS market value of the Property to be not less than Stipulated Loss
          Value; and

[Land]

                                      -19-
<PAGE>

               B)   restore the Property or the remainder thereof to a
          reasonably safe and sightly condition.

          (g   Takings of All or Substantially All of the Property on or after
               ---------------------------------------------------------------
the Last Building Base Rent Commencement Date. In the event of any taking of
---------------------------------------------
all or substantially all of the Property on or after the Last Building Base Rent
Commencement Date, BNPLC shall be entitled to apply all Remaining Proceeds as a
Qualified Prepayment.  In addition, if Stipulated Loss Value immediately prior
to any such taking exceeds the sum of the Remaining Proceeds resulting from such
condemnation, then BNPLC shall be entitled to recover the excess from Zhone upon
demand as an additional Qualified Prepayment, whereupon this Land Lease shall
terminate.  Any taking of so much of the Real Property as, in BNPLC's reasonable
good faith judgment, makes it impracticable to restore or improve the remainder
thereof as required by part (2) of the preceding subparagraph shall be
considered a taking of substantially all the Property for purposes of this
Paragraph 10.

     11.  Additional Representations, Warranties and Covenants of Zhone
Concerning the Property. Zhone represents, warrants and covenants as follows:

          (a   Compliance with Covenants and Laws. The use of the Property
               ----------------------------------
permitted by this Land Lease complies, or will comply after Zhone obtains
available permits as the tenant under this Land Lease, in all material respects
with all Applicable Laws. Zhone has obtained or will promptly obtain all
utility, building, health and operating permits as may be required by any
governmental authority or municipality having jurisdiction over the Property for
any construction upon or use of the Property permitted by this Land Lease.

          (b   Operation of the Property. During the Term, Zhone shall operate
               -------------------------
the Property in a good and workmanlike manner and substantially in compliance
with all Applicable Laws and will pay or cause to be paid all fees or charges of
any kind in connection therewith.  (If Zhone does not promptly correct any
failure of the Property to comply with Applicable Laws that is the subject of a
written notice given to Zhone or BNPLC by any governmental authority, then for
purposes of the preceding sentence, Zhone shall be considered not to have
maintained the Property "substantially in accordance with Applicable Laws"
whether or not the noncompliance would be substantial in the absence of the
notice.)  During the Term, Zhone shall not use or occupy, or allow the use or
occupancy of, the Property in any manner which violates any Applicable Law or
which constitutes a public or private nuisance or which makes void, voidable or
cancelable any insurance then in force with respect thereto.  During the Term,
to the extent that any of the following would, individually or in the aggregate,
increase the likelihood of a CMA Termination Event under (and as defined in)
either of the Construction Management Agreements or materially and adversely
affect the value of the Property or the use of the Property for purposes
permitted by this Land Lease, Zhone shall not, without BNPLC's prior consent:
(i) initiate or permit any zoning reclassification of the Property; (ii) seek
any variance under existing zoning ordinances applicable to the Property; (iii)
use or permit the use of the Property in a manner that would result in such use
becoming a nonconforming use under applicable zoning ordinances or similar laws,
rules or regulations; (iv) execute or file any subdivision plat affecting the
Property; or (v) consent to the annexation of the Property to any municipality.
If during the Term (A) a change in the zoning or other Applicable Laws affecting
the permitted use or development of the Property shall occur after the Last
Building Base Rent Commencement Date that (in BNPLC's good faith judgment)
reduces the value of the Property, or (B) conditions or circumstances on or
about the Property are discovered after the Last Building Base Rent Commencement
Date (such as the presence of an endangered species) which substantially impede
development and thereby (in BNPLC's good faith judgment) reduce the value of the
Property, then Zhone shall upon demand pay BNPLC an amount equal to such
reduction (as determined by BNPLC in good faith) for application as a Qualified
Prepayment. Zhone shall not permit any drilling or exploration for, or
extraction, removal or production of, minerals from the surface or subsurface of
the Property, and Zhone shall not do anything that could reasonably

[Land]

                                      -20-
<PAGE>

be expected to significantly reduce the market value of the Property. If Zhone
receives a notice or claim from any federal, state or other governmental
authority that the Property is not in compliance with any Applicable Law, or
that any action may be taken against BNPLC because the Property does not comply
with any Applicable Law, Zhone shall promptly furnish a copy of such notice or
claim to BNPLC.

     Notwithstanding the foregoing, Zhone may in good faith, by appropriate
proceedings, contest the validity and applicability of any Applicable Law with
respect to the Property, and pending such contest Zhone shall not be deemed in
default hereunder because of the violation of such Applicable Law, if Zhone
diligently prosecutes such contest to completion in a manner reasonably
satisfactory to BNPLC, and if Zhone promptly causes the Property to comply with
any such Applicable Law upon a final determination by a court of competent
jurisdiction that the same is valid and applicable to the Property; provided,
however, in any event such contest shall be concluded and the violation of such
Applicable Law must be corrected by Zhone and any claims asserted against BNPLC
or the Property because of such violation must be paid by Zhone, all prior to
the earlier of (i) the date that any criminal prosecution is instituted or
overtly threatened against BNPLC or any of its directors, officers or employees
because of such violation, (ii) the date that any action is taken by any
governmental authority against BNPLC or any property owned by BNPLC (including
the Property) because of such violation, or (iii) a Designated Sale Date upon
which, for any reason, Zhone or an Affiliate of Zhone or any Applicable
Purchaser shall not purchase BNPLC's interest in the Property pursuant to the
Land Purchase Agreement for a price to BNPLC (when taken together with any
additional payments made by Zhone pursuant to Paragraph 1(A)(3) of the Land
                                              -----------------
Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal
to the Land Break Even Amount.

          (c   Debts for Construction, Maintenance, Operation or Development.
               -------------------------------------------------------------
Zhone shall cause all debts and liabilities incurred in the construction,
maintenance, operation or development of the Property, including all debts and
liabilities for labor, material and equipment and all debts and charges for
utilities servicing the Property, to be promptly paid; provided, that nothing in
this subparagraph will be construed to require Zhone to remove Liens Removable
by BNPLC.

     Notwithstanding the foregoing, Zhone may in good faith, by appropriate
proceedings, contest the validity, applicability or amount of any asserted
mechanic's or materialmen's lien and pending such contest Zhone shall not be
deemed in default under this subparagraph because of the contested lien if (1)
within sixty days after being asked to do so by BNPLC, Zhone bonds over to
BNPLC's reasonable satisfaction all such contested liens against the Property
alleged to secure an amount in excess of $500,000 (individually or in the
aggregate), (2) Zhone diligently prosecutes such contest to completion in a
manner reasonably satisfactory to BNPLC, and (3) Zhone promptly causes to be
paid any amount adjudged by a court of competent jurisdiction to be due, with
all costs and interest thereon, promptly after such judgment becomes final;
provided, however, that in any event each such contest shall be concluded and
the lien, interest and costs must be paid by Zhone prior to the earlier of (i)
the date that any criminal prosecution is instituted or overtly threatened
against BNPLC or its directors, officers or employees because of the nonpayment
thereof, (ii) the date that any writ or order is issued under which the Property
or any other property in which BNPLC has an interest may be seized or sold or
any other action is taken against BNPLC or any property in which BNPLC has an
interest because of the nonpayment thereof, or (iii) a Designated Sale Date upon
which, for any reason, Zhone or an Affiliate of Zhone or any Applicable
Purchaser shall not purchase BNPLC's interest in the Property pursuant to the
Land Purchase Agreement for a price to BNPLC (when taken together with any
additional payments made by Zhone pursuant to Paragraph 1(A)(3) of the Land
                                              -----------------
Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal
to the Land Break Even Amount.

[Land]

                                      -21-
<PAGE>

          (d   Repair, Maintenance, Alterations and Additions. Zhone shall
               ----------------------------------------------
keep the Property in good order, operating condition and appearance and shall
cause all necessary repairs, renewals and replacements to be promptly made.
Zhone will not allow any of the Property to be materially misused, abused or
wasted.  Zhone shall not, without the prior consent of BNPLC, make material new
Improvements or alter Improvements in any material respect, except as part of
the work performed in accordance with the Construction Management Agreements.
Without limiting the foregoing, Zhone will notify BNPLC before making any
significant alterations to the Improvements after the completion of the
Construction Projects. Nothing in this subparagraph, however, is intended to
limit Zhone's rights and obligations under the express provisions of the Other
Lease Agreements and the Construction Management Agreements with respect to the
Construction Projects.

          (e   Permitted Encumbrances and Development Documents. Zhone shall
               ------------------------------------------------
during the Term comply with and will cause to be performed all of the covenants,
agreements and obligations imposed upon the owner of any interest in the
Property by the Permitted Encumbrances or the Development Documents. Without
limiting the foregoing, Zhone shall cause all amounts to be paid when due, the
payment of which is secured by any Lien against the Property created by the
Permitted Encumbrances.  Without the prior consent of BNPLC, Zhone shall not
enter into, initiate, approve or consent to any modification of any Permitted
Encumbrance or Development Document that would create or expand or purport to
create or expand obligations or restrictions which would encumber BNPLC's
interest in the Property.  (Whether BNPLC must give any such consent requested
by Zhone during the Term of this Land Lease shall be governed by subparagraph
                                                                 ------------
3(A) of the Closing Certificate and Agreement.)
----

          (f   Books and Records Concerning the Property. Zhone shall keep
               -----------------------------------------
books and records that are accurate and complete in all material respects for
the Property and, subject to Paragraph 16.(c), will permit all such books and
records to be inspected and copied by BNPLC.  This subparagraph shall not be
construed as requiring Zhone to regularly maintain separate books and records
relating exclusively to the Property; provided, however, that upon request,
Zhone shall construct or abstract from its regularly maintained books and
records information required by this subparagraph relating to the Property.

     12.  Financial Covenants and Other Covenants Incorporated by Reference to

Schedule 1.  Throughout the Term of this Land Lease, Zhone shall comply with
----------
the requirements of Schedule 1 attached hereto.
                    ----------

     13.  Financial Statements and Other Reports.

          (a   Financial Statements; Required Notices; Certificates.
               ----------------------------------------------------
Throughout the Term of this Land Lease, Zhone shall deliver to BNPLC and to each
Participant:

          (i   as soon as available and in any event within one hundred twenty
     days after the end of each fiscal year of Zhone, a consolidated balance
     sheet of Zhone and its Consolidated Subsidiaries as of the end of such
     fiscal year and a consolidated income statement and statement of cash flows
     of Zhone and its Consolidated Subsidiaries for such fiscal year, all in
     reasonable detail and all prepared in accordance with GAAP and accompanied
     by a report and opinion of accountants of national standing selected by
     Zhone, which report and opinion shall be prepared in accordance with
     generally accepted auditing standards and shall not be subject to any
     qualifications or exceptions as to the scope of the audit nor to any
     qualification or exception which BNPLC determines, in BNPLC's reasonable
     discretion, is unacceptable;

[Land]

                                      -22-
<PAGE>

          (ii   as soon as available and in any event within sixty days after
     the end of each of the first three quarters of each fiscal year of Zhone,
     the consolidated balance sheet of Zhone and its Consolidated Subsidiaries
     as of the end of such quarter and the consolidated income statement and the
     consolidated statement of cash flows of Zhone and its Consolidated
     Subsidiaries for the period commencing at the end of the previous fiscal
     year and ending with the end of such quarter, all in reasonable detail and
     all prepared in accordance with GAAP and certified by the chief financial
     officer or controller of Zhone (subject to year-end adjustments);

          (iii  together with the financial statements furnished in accordance
     with subparagraph 13.(a)(i) and13.(a)(ii), a certificate of the chief
     financial officer or controller of Zhone: (i) certifying that to the
     knowledge of Zhone no Default or Event of Default under this Land Lease has
     occurred and is continuing or, if a Default or Event of Default has
     occurred and is continuing, a brief statement as to the nature thereof and
     the action which is proposed to be taken with respect thereto, (ii)
     certifying that the representations of Zhone set forth in the Land
     Operative Documents are true and correct in all material respects as of the
     date thereof as though made on and as of the date thereof or, if not then
     true and correct, a brief statement as to why such representations are no
     longer true and correct, and (iii) with computations demonstrating
     compliance with the financial covenants contained in Schedule 1;
                                                          ----------

          (iv   within fifteen days after the end of each fiscal quarter of
     Zhone, a certificate of the chief financial officer or controller of Zhone
     certifying that at the end of the preceding fiscal quarter, Zhone had
     sufficient cash and other assets described in Paragraph 1 of Part II of

     Schedule 1 to comply with the requirements of that paragraph;
     ----------

          (v    promptly after the sending or filing thereof, copies of all
     proxy statements, financial statements and reports which Zhone sends to
     Zhone's stockholders, and copies of all regular, periodic and special
     reports, and all registration statements (other than registration
     statements on Form S-8 or any form substituted therefor) which Zhone files
     with the Securities and Exchange Commission or any governmental authority
     which may be substituted therefor, or with any national securities
     exchange;

          (vi   upon request by BNPLC, a statement in writing certifying that
     the Land Operative Documents are unmodified and in full effect (or, if
     there have been modifications, that the Land Operative Documents are in
     full effect as modified, and setting forth such modifications) and the
     dates to which the Base Rent has been paid and either stating that to the
     knowledge of Zhone no Default or Event of Default under this Land Lease has
     occurred and is continuing or, if a Default or Event of Default under this
     Land Lease has occurred and is continuing, a brief statement as to the
     nature thereof; it being intended that any such statement by Zhone may be
     relied upon by any prospective purchaser or mortgagee of the Property and
     by the Participants;

          (vii  as soon as possible after, and in any event within ten days
     after Zhone becomes aware that, any of the following has occurred, with
     respect to which the potential aggregate liability to Zhone relating
     thereto is $500,000 or more, a notice signed by a senior financial officer
     of Zhone setting forth details of the following and the response, if any,
     which Zhone or its ERISA Affiliate proposes to take with respect thereto
     (and a copy of any report or notice required to be filed with or given to
     PBGC by Zhone or an ERISA Affiliate with respect to any of the following or
     the events or conditions leading up to the following):  (A) the assertion,
     to secure any Unfunded Benefit Liabilities, of any Lien against the assets
     of Zhone, against the assets of any Plan or Multiemployer Plan or against
     any interest of BNPLC or Zhone in the Property, or (B) the taking of any
     action by the PBGC or any other governmental

[Land]

                                      -23-
<PAGE>

     authority against Zhone to terminate any Plan of Zhone or any ERISA
     Affiliate of Zhone or to cause the appointment of a trustee or receiver to
     administer any such Plan ; and

          (viii   such other information respecting the condition or operations,
     financial or otherwise, of Zhone, of any of its Subsidiaries or of the
     Property as BNPLC or any Participant through BNPLC may from time to time
     reasonably request.

BNPLC is hereby authorized to deliver a copy of any information or certificate
delivered to it pursuant to this subparagraph 13.(a) to BNPLC's Parent, to the
Participants and to any regulatory body having jurisdiction over BNPLC or
BNPLC's Parent or any Participant that requires or requests it.

     14.  Assignment and Subletting by Zhone.

          (a   BNPLC's Consent Required. Without the prior consent of BNPLC,
               ------------------------
Zhone shall not assign, transfer, mortgage, pledge or hypothecate this Land
Lease or any interest of Zhone hereunder and shall not sublet all or any part of
the Property, by operation of law or otherwise; provided, that this provision
will not be construed to prohibit any sublease of space within Improvements
expressly permitted by the Other Lease Agreements.

          (b   Standard for BNPLC's Consent to Assignments and Certain Other
               -------------------------------------------------------------
Matters. Consents and approvals of BNPLC which are required by this Paragraph
-------
14 will not be unreasonably withheld or delayed, but Zhone acknowledges that
BNPLC's withholding of such consent or approval shall be reasonable if BNPLC
determines in good faith that (1) giving the approval may materially increase
BNPLC's risk of liability for any existing or future environmental problem, or
(2) giving the approval is likely to increase BNPLC's administrative burden of
complying with or monitoring Zhone's compliance with the requirements of this
Land Lease.

          (c   Consent Not a Waiver. No consent by BNPLC to a sale,
               --------------------
assignment, transfer, mortgage, pledge or hypothecation of this Land Lease or
Zhone's interest hereunder, and no assignment or subletting of the Property or
any part thereof in accordance with this Land Lease or otherwise with BNPLC's
consent, shall release Zhone from liability hereunder; and any such consent
shall apply only to the specific transaction thereby authorized and shall not
relieve Zhone from any requirement of obtaining the prior consent of BNPLC to
any further sale, assignment, transfer, mortgage, pledge or hypothecation of
this Land Lease or any interest of Zhone hereunder.

     15.  Assignment by BNPLC.

          (a   Restrictions on Transfers.  Except by a Permitted Transfer,
               -------------------------
BNPLC shall not assign, transfer, mortgage, pledge, encumber or hypothecate this
Land Lease or the other Land Operative Documents or any interest of BNPLC in and
to the Property during the Term without the prior consent of Zhone, which
consent Zhone may withhold in its sole discretion.  Further, notwithstanding
anything to the contrary herein contained, if withholding taxes are imposed on
the rents and other amounts payable to BNPLC hereunder because of BNPLC's
assignment of this Land Lease to any citizen of, or any corporation or other
entity formed under the laws of, a country other than the United States, Zhone
shall not be required to compensate BNPLC or any such assignee for the
withholding tax. If, in breach of this subparagraph, BNPLC transfers the
Property or any part thereof by a conveyance or that does not constitute a
Permitted Transfer, with the result that additional transfer taxes or other
Impositions are assessed against the Property or the owner thereof, BNPLC shall
be required to pay such additional transfer taxes or other Impositions.

[Land]

                                      -24-
<PAGE>

          (b   Effect of Permitted Transfer or other Assignment by BNPLC.  If,
               ---------------------------------------------------------
without breaching subparagraph 15.(a), BNPLC sells or otherwise transfers the
Property and assigns to the transferee all of BNPLC's rights under this Land
Lease and under the other Operative Documents, and if the transferee expressly
assumes all of BNPLC's obligations under this Land Lease and under the other
Operative Documents, then BNPLC shall thereby be released from any obligations
arising after such assumption under this Land Lease or under the other Operative
Documents (other than any liability for a breach of any continuing obligation to
provide Construction Advances under the Construction Management Agreements), and
Zhone shall look solely to each successor in interest of BNPLC for performance
of such obligations.  (As used in this subparagraph, "Operative Documents" is
intended to mean not only the Land Operative Documents, but also the Other
Operative Documents.)

     16.  BNPLC's Right of Access.

          (a   During the Term, BNPLC and BNPLC's representatives may (subject
to subparagraphs 16.(c) and 16.(d)) enter the Property at any reasonable time
after five Business Days advance written notice to Zhone for the purpose of
making inspections or performing any work BNPLC is authorized to undertake by
the next subparagraph or for the purpose confirming whether Zhone has complied
with the requirements of the Land Operative Documents and the Other Operative
Documents.

          (b   If Zhone fails to perform any act or to take any action required
of it by this Land Lease or the Closing Certificate, or to pay any money which
Zhone is required by this Land Lease or the Closing Certificate to pay, and if
such failure or action constitutes an Event of Default or renders BNPLC or any
director, officer, employee or Affiliate of BNPLC at risk of criminal
prosecution or renders BNPLC's interest in the Property or any part thereof at
risk of forfeiture by forced sale or otherwise, then in addition to any other
remedies specified herein or otherwise available, BNPLC may, perform or cause to
be performed such act or take such action or pay such money. Any expenses so
incurred by BNPLC, and any money so paid by BNPLC, shall be a demand obligation
owing by Zhone to BNPLC. Further, BNPLC, upon making such payment, shall be
subrogated to all of the rights of the person, corporation or body politic
receiving such payment. But nothing herein shall imply any duty upon the part of
BNPLC to do any work which under any provision of this Land Lease Zhone may be
required to perform, and the performance thereof by BNPLC shall not constitute a
waiver of Zhone's default. BNPLC may during the progress of any such work
permitted by BNPLC hereunder on or in the Property keep and store upon the
Property all necessary materials, tools, and equipment. BNPLC shall not in any
event be liable for inconvenience, annoyance, disturbance, loss of business, or
other damage to Zhone or the subtenants or invitees of Zhone by reason of making
such repairs or the performance of any such work on or in the Property, or on
account of bringing materials, supplies and equipment into or through the
Property during the course of such work (except for any liability in excess of
the liability insurance limits established in Exhibit B resulting from death or
                                              ---------
injury or damage to the property of third parties caused by the Established
Misconduct of BNPLC or its officers, employees, or agents in connection
therewith), and the obligations of Zhone under this Land Lease shall not thereby
be excused in any manner.

          (c   Zhone shall have no obligation to provide proprietary
information (as defined in the next sentence) to BNPLC, except and to the extent
that (1) BNPLC reasonably determines that BNPLC cannot,  without evaluating such
information, accomplish the purposes of BNPLC's inspection of the Property or
exercise of other rights granted pursuant to the various express provisions of
the Land Operative Documents and the Other Operative Documents.  For purposes of
this Land Lease "proprietary information" includes Zhone's intellectual
property, trade secrets and other confidential information of value to Zhone
about, among other things, Zhone's manufacturing processes, products, marketing
and corporate strategies, but in no event will

[Land]

                                      -25-
<PAGE>

"proprietary information" include any disclosure of substances and materials
(and their chemical composition) which are or previously have been present in,
on or under the Property at the time of any inspections by BNPLC, nor will
"proprietary information" include any additional disclosures reasonably required
to permit BNPLC to determine whether the presence of such substances and
materials has constituted a violation of Environmental Laws. In addition, under
no circumstances shall Zhone have any obligation to disclose to BNPLC or any
other party any proprietary information of Zhone (including, without limitation,
any pending applications for patents or trademarks, any research and design and
any trade secrets) except if and to the limited extent reasonably necessary to
comply with the express provisions of the Land Operative Documents and the Other
Operative Documents.

          (d   So long as Zhone remains in possession of the Property, BNPLC or
BNPLC's representative will, before making any inspection or performing any work
on the Property authorized by this Land Lease, if then requested to do so by
Zhone to maintain Zhone's security: (i) sign in at Zhone's security or
information desk if Zhone has such a desk on the premises, (ii) wear a visitor's
badge or other reasonable identification, (iii) permit an employee of Zhone to
observe such inspection or work, and (iv) comply with other similar reasonable
nondiscriminatory security requirements of Zhone that do not, individually or in
the aggregate, significantly interfere with inspections or work of BNPLC
authorized by this Land Lease.

     17.  Events of Default. Each of the following events shall be an "Event
of Default" by Zhone under this Land Lease:

     (a   Zhone shall fail to pay when due any installment of Rent due hereunder
and such failure shall continue for three (3) Business Days after Zhone is
notified in writing thereof.

     (b   Zhone shall fail to cause any representation or warranty of Zhone
contained herein or in the Closing Certificate that was false or misleading in
any material respect when made to be made true and not misleading (other than as
described in the other clauses of this Paragraph 17), or Zhone shall fail to
comply with any term, provision or covenant of this Land Lease or the Closing
Certificate (other than as described in the other clauses of this Paragraph 17),
and in either case shall not cure such failure prior to the earlier of (A)
thirty days after written notice thereof is sent to Zhone or (B) the date any
writ or order is issued for the levy or sale of any property owned by BNPLC
(including the Property) or any criminal prosecution is instituted or overtly
threatened against BNPLC or any of its directors, officers or employees because
of such failure; provided, however, that so long as no such writ or order is
issued and no such criminal prosecution is instituted or overtly threatened, the
period within which such failure may be cured by Zhone shall be extended for a
further period (not to exceed an additional sixty days) as shall be necessary
for the curing thereof with diligence, if (but only if) (x) such failure is
susceptible of cure but cannot with reasonable diligence be cured within such
thirty day period, (y) Zhone shall promptly have commenced to cure such failure
and shall thereafter continuously prosecute the curing thereof with reasonable
diligence and (z) the extension of the period for cure will not, in any event,
cause the period for cure to extend beyond five days prior to the expiration of
this Land Lease.

     (c   Zhone shall abandon the Property.

     (d   Zhone or any Subsidiary shall fail to make any payment or payments of
principal, premium or interest, of Debt of Zhone described in the next sentence
when due (taking into consideration the time Zhone may have to cure such
failure, if any, under the documents governing such Debt).  As used in this
clause 14(a)(v), "Debt" shall include only Debt (as defined in the Land CDPA) of
Zhone or any of its Subsidiaries now existing or arising in the future (1)
payable to any Interested Party, or (2) payable to any other Person and with
respect to which $5,000,000 or more is actually due and payable because of
acceleration or otherwise.

[Land]

                                      -26-
<PAGE>

     (e)  Zhone: (a) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (b) shall
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (c) shall file any petition or application to
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (d) shall have had any such
petition or application filed against it; or (e) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; or (f)
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of sixty days or more.

     (f)  One or more final judgments, decrees or orders for the payment of
money in excess of $5,000,000 in the aggregate shall be rendered against Zhone
and such judgments, decrees or orders shall continue unsatisfied and in effect
for a period of thirty consecutive days without Zhone's having obtained an
agreement (or after the expiration or termination of an agreement) of the
Persons entitled to enforce such judgment, decrees or orders not to enforce the
same pending negotiations with Zhone concerning the satisfaction or other
discharge of the same. (For purposes of this provision, no judgment, decree or
order will be considered "final" until Zhone's right to appeal, if any, shall
have expired or been exhausted.)

     (g)  Zhone shall breach the requirements of Paragraph 12, which by
reference to Schedule 1 establishes certain financial covenants and other
             ----------
requirements.

     (h)  as of the effective date of this Land Lease, any of the
representations or warranties of Zhone contained in subparagraphs 2(A) - (J) of
the Closing Certificate shall be false or misleading in any material respect.

     (i)  Zhone shall fail to pay the full amount of any Land Supplemental
Payment required by the Land Purchase Agreement on the Designated Sale Date.

     (j)  Zhone shall fail to comply with any term, provision or condition of
the Land Pledge Agreement after the expiration of any applicable notice and cure
period set forth in the Land Pledge Agreement.

     18.  Remedies.

          (a)  Basic Remedies. At any time after an Event of Default and after
               --------------
BNPLC has given any notice required by subparagraph 18.(b), BNPLC shall be
entitled at BNPLC's option (and without limiting BNPLC in the exercise of any
other right or remedy BNPLC may have, and without any further demand or notice
except as expressly described in this subparagraph 18.(a)), to exercise any one
or more of the following remedies:

               (i)  By notice to Zhone, BNPLC may terminate Zhone's right to
     possession of the Property. A notice given in connection with unlawful
     detainer proceedings specifying a time within which to cure a default shall
     terminate Zhone's right to possession if Zhone fails to cure the default
     within the time specified in the notice.

               (ii) Upon termination of Zhone's right to possession and without
     further demand or notice, BNPLC may re-enter the Property in any manner not
     prohibited by Applicable Law and take possession of all improvements,
     additions, alterations, equipment and fixtures thereon and remove any

[Land]

                                      -27-
<PAGE>

     persons in possession thereof. Any property on the Land may be removed and
     stored in a warehouse or elsewhere at the expense and risk of and for the
     account of Zhone.

               (iii) Upon termination of Zhone's right to possession, this Land
     Lease shall terminate and BNPLC may recover from Zhone:

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

                    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 rental loss that Zhone
          proves could have been reasonably avoided;

                    c)   The worth at the time of award of the amount by which
          the unpaid Rent for the balance of the scheduled Term after the time
          of award exceeds the amount of such rental loss that Zhone proves
          could be reasonably avoided; and

                    d)   Any other amount necessary to compensate BNPLC for all
          the detriment proximately caused by Zhone's failure to perform Zhone's
          obligations under this Land Lease or which in the ordinary course of
          things would be likely to result therefrom, including the costs and
          expenses (including Attorneys' Fees, advertising costs and brokers'
          commissions) of recovering possession of the Property, removing
          persons or property therefrom, placing the Property in good order,
          condition, and repair, preparing and altering the Property for
          reletting, all other costs and expenses of reletting, and any loss
          incurred by BNPLC as a result of Zhone's failure to perform Zhone's
          obligations under the other Land Operative Documents.

          The "worth at the time of award" of the amounts referred to in
          subparagraph 18.(a)(iii)a) and subparagraph 18.(a)(iii)b) shall be
          computed by allowing interest at the Default Rate. The "worth at the
          time of award" of the amount referred to in subparagraph 18.(a)(iii)c)
          shall be computed by discounting such amount at the discount rate of
          the Federal Reserve Bank of San Francisco at the time of award plus
          one percent (1%).

                    e)   Such other amounts in addition to or in lieu of the
          foregoing as may be permitted from time to time by applicable
          California law.

               (iv) BNPLC shall have the remedy described in California Civil
     Code Section 1951.4 (lessor may continue lease in force even after lessee's
     breach and abandonment and recover rent as it becomes due, if lessee has
     right to sublet or assign, subject only to reasonable limitations).
     Accordingly, even if Zhone has breached this Land Lease and abandoned the
     Property, this Land Lease shall continue in effect for so long as BNPLC
     does not terminate Zhone's right to possession, and BNPLC may enforce all
     of BNPLC's rights and remedies under this Land Lease, including the right
     to recover the Rent as it becomes due under this Land Lease. Zhone's right
     to possession shall not be deemed to have been terminated by BNPLC except
     pursuant to subparagraph 18.(a)(i) hereof. The following shall not
     constitute a termination of Zhone's right to possession:

                    a)   Acts of maintenance or preservation or efforts to relet
          the Property;

[Land]

                                      -28-
<PAGE>

                    b)   The appointment of a receiver upon the initiative of
          BNPLC to protect BNPLC's interest under this Land Lease; or

                    c)   Reasonable withholding of consent to an assignment or
          subletting, or terminating a subletting or assignment by Zhone.

          (b)  Notice Required So Long As the Purchase Option and the Land
               -----------------------------------------------------------
Supplemental Payment Obligation Continue Under the Land Purchase Agreement. So
--------------------------------------------------------------------------
long as Zhone remains in possession of the Property and there has been no
termination of the Purchase Option and the Land Supplemental Payment Obligation
as provided Paragraph 4 of the Land Purchase Agreement, BNPLC's right to
            -----------
exercise remedies provided in subparagraph 18.(a) will be subject to the
condition precedent that BNPLC shall have notified Zhone, at a time when an
Event of Default shall have occurred and be continuing, of BNPLC's intent to
exercise remedies provided in subparagraph 18.(a) at least sixty days prior to
exercising the remedies. The condition precedent is intended to provide Zhone
with an opportunity to exercise the Purchase Option or Zhone's Initial
Remarketing Rights before losing possession of the Property pursuant to
subparagraph 18.(a). The condition precedent is not, however, intended to extend
any period for curing an Event of Default. Accordingly, if an Event of Default
has occurred, and regardless of whether any Event of Default is then continuing,
BNPLC may proceed immediately to exercise remedies provided in subparagraph
18.(a) at any time after the earlier of (i) sixty days after BNPLC has given
such a notice to Zhone, (ii) any date upon which Zhone relinquishes possession
of the Property, or (iii) any termination of the Purchase Option and the Land
Supplemental Payment Obligation.

          (c)  Enforceability. This Paragraph 18 shall be enforceable to the
               --------------
maximum extent not prohibited by Applicable Law, and the unenforceability of any
provision in this Paragraph shall not render any other provision unenforceable.

          (d)  Remedies Cumulative. No right or remedy herein conferred upon
               -------------------
or reserved to BNPLC is intended to be exclusive of any other right or remedy,
and each and every such right and remedy shall be cumulative and in addition to
any other right or remedy given to BNPLC hereunder or now or hereafter existing
in favor of BNPLC under Applicable Law or in equity. In addition to other
remedies provided in this Land Lease, BNPLC shall be entitled, to the extent
permitted by Applicable Law or in equity, to injunctive relief in case of the
violation, or attempted or threatened violation, of any of the covenants,
agreements, conditions or provisions of this Land Lease, or to a decree
compelling performance of any of the other covenants, agreements, conditions or
provisions of this Land Lease to be performed by Zhone, or to any other remedy
allowed to BNPLC at law or in equity. Nothing contained in this Land Lease shall
limit or prejudice the right of BNPLC to prove for and obtain in proceedings for
bankruptcy or insolvency of Zhone by reason of the termination of this Land
Lease, an amount equal to the maximum allowed by any statute or rule of law in
effect at the time when, and governing the proceedings in which, the damages are
to be proved, whether or not the amount be greater, equal to, or less than the
amount of the loss or damages referred to above. Without limiting the generality
of the foregoing, nothing contained herein shall modify, limit or impair any of
the rights and remedies of BNPLC under the Land Purchase Documents, and BNPLC
shall not be required to give the sixty day notice described in subparagraph
18.(b) as a condition precedent to any acceleration of the Designated Sale Date
or to taking any action to enforce the Land Purchase Documents.

     19.  Default by BNPLC. If BNPLC should default in the performance of any
of its obligations under this Land Lease, BNPLC shall have the time reasonably
required, but in no event less than thirty days, to cure such default after
receipt of notice from Zhone specifying such default and specifying what action
Zhone believes is necessary to cure the default. If Zhone prevails in any
litigation brought against BNPLC because of

[Land]

                                      -29-
<PAGE>

BNPLC's failure to cure a default within the time required by the preceding
sentence, then Zhone shall be entitled to an award against BNPLC for the
monetary damages proximately caused to Zhone by such default.

     Notwithstanding the foregoing, BNPLC's right to cure as provided in this
Paragraph 19 will not in any event extend the time within which BNPLC must
remove Liens Removable by BNPLC as required by Paragraph 20 beyond the
Designated Sale Date.

     20.  Quiet Enjoyment. Provided Zhone pays the Base Rent and all
Additional Rent payable hereunder as and when due and payable and keeps and
fulfills all of the terms, covenants, agreements and conditions to be performed
by Zhone hereunder, BNPLC shall not during the Term disturb Zhone's peaceable
and quiet enjoyment of the Property; however, such enjoyment shall be subject to
the terms, provisions, covenants, agreements and conditions of this Land Lease,
to Permitted Encumbrances, to Development Documents and to any other claims not
constituting Liens Removable by BNPLC.  If any Lien Removable by BNPLC is
claimed against the Property, BNPLC will remove the Lien Removable by BNPLC
promptly. Any breach by BNPLC of this Paragraph shall render BNPLC liable to
Zhone for any monetary damages proximately caused thereby, but as more
specifically provided in subparagraph 4.(b) above, no such breach shall entitle
Zhone to terminate this Land Lease or excuse Zhone from its obligation to pay
Rent.

     21.  Surrender Upon Termination. Unless Zhone or an Applicable Purchaser
purchases or has purchased BNPLC's entire interest in the Land and Improvements
pursuant to the Land Purchase Agreement and the Other Purchase Agreements, Zhone
shall, upon the termination of Zhone's right to occupancy, surrender to BNPLC
the Property, including Improvements constructed by Zhone and fixtures and
furnishings included in the Property, free of all Hazardous Substances
(including Permitted Hazardous Substances) and tenancies and with all
Improvements in substantially the same condition as of the date the same were
initially completed, excepting only (i) ordinary wear and tear that occurs
between the maintenance, repairs and replacements required by other provisions
of this Land Lease or the Other Lease Agreements, and (ii) demolition,
alterations and additions which are expressly permitted by the terms of this
Land Lease or the Other Lease Agreements and which have been completed by Zhone
in a good and workmanlike manner in accordance with all Applicable Laws. Any
movable furniture or movable personal property belonging to Zhone or any party
claiming under Zhone, if not removed at the time of such termination and if
BNPLC shall so elect, shall be deemed abandoned and become the property of BNPLC
without any payment or offset therefor. If BNPLC shall not so elect, BNPLC may
remove such property from the Property and store it at Zhone's risk and expense.

     Nothing in this Paragraph 21 will be construed to require Zhone to
surrender the Property to BNPLC during the continuation of any breach by BNPLC
of any obligation it has under the Land Purchase Agreement to convey the
Property to Zhone or an Applicable Purchaser.

     22.  Holding Over by Zhone. Should Zhone not purchase BNPLC's right,
title and interest in the Property as provided in the Land Purchase Agreement,
but nonetheless continue to hold the Property after the termination of this Land
Lease without BNPLC's consent, whether such termination occurs by lapse of time
or otherwise, such holding over shall constitute and be construed as a tenancy
from day to day only, at a daily Base Rent equal to: (i) Stipulated Loss Value
on the day in question, times (ii) the Default Rate for such day; divided by
(iii) three hundred and sixty; subject, however, to all of the terms,
provisions, covenants and agreements on the part of Zhone hereunder. No payments
of money by Zhone to BNPLC after the termination of this Land Lease shall
reinstate, continue or extend the Term of this Land Lease and no extension of
this Land Lease after the termination thereof shall be valid unless and until
the same shall be reduced to writing and signed by both BNPLC and Zhone.

[Land]

                                      -30-
<PAGE>

     23.  Independent Obligations Evidenced by the other Operative Documents.
Zhone acknowledges and agrees that nothing contained in this Land Lease shall
limit, modify or otherwise affect any of Zhone's obligations under the other
Land Operative Documents or the Other Operative Documents, which obligations are
intended to be separate, independent and in addition to, and not in lieu of, the
obligations set forth herein. In the event of any inconsistency between the
express terms and provisions of the Land Purchase Documents and the express
terms and provisions of this Land Lease, the express terms and provisions of the
Land Purchase Documents shall control. In the event of any inconsistency between
the express terms and provisions of the Closing Certificate and the express
terms and provisions of this Land Lease, the express terms and provisions of
this Land Lease shall control; provided, nothing herein will limit or impair
Zhone's obligations under the Closing Certificate following any expiration of
termination of this Land Lease.

     24.  Amendment and Restatement. This Land Lease amends, restates and
replaces the Prior Lease Agreement referenced in the recitals at the beginning
of this agreement.

                         [The signature pages follow.]

[Land]

                                      -31-
<PAGE>

     IN WITNESS WHEREOF, Zhone and BNPLC have caused this Lease Agreement (Land)
to be executed as of August 1, 2000.

                                   "Zhone"

                                   ZHONE TECHNOLOGIES, INC.

                                   By:  /s/  Bruce Ruberg
                                        ---------------------------
                                        Name: Bruce Ruberg
                                              ---------------------
                                        Title: Corporate Controller
                                               --------------------
<PAGE>

[Continuation of signature pages to Lease Agreement (Land) dated to be effective
as of August 1, 2000]

                                   "BNPLC"

                                   BNP LEASING CORPORATION

                                   By:  /s/ Lloyd G. Cox
                                        ----------------------------
                                        Lloyd G. Cox, Vice President
<PAGE>

                                   Exhibit A
                                   ---------

                               Legal Description

All that certain real property situate in the City of Oakland, State of
California, described as follows:

Being a portion of Lot 12, as shown on Parcel Map No. 6003, filed in Book 205 of
Parcel Maps, at Pages 94 through 98, Alameda County Records, more particularly
described as follows:

Commencing at the most southerly corner of said Lot 12; Thence along the
southwesterly line of said Lot 12, North 33(degrees) 50' 24" West, 628.68 feet
to the point of beginning; Thence continuing along the southwesterly line of
said Lot 12, North 33(degrees) 50' 24" West, 1029.21 feet; Thence along the
southeasterly line of said Lot 12, South 56(degrees) 09' 36" West 14.00 feet;
Thence along the southwesterly line of said Lot 12, South 33(degrees) 50' 24"
East, 253.55 feet to the beginning of a curve, concave southwesterly, having a
radius of 392.21 feet; Thence northerly along the arc of said curve, through a
central angle of 3(degrees) 51' 45", an arc distance of 26.44 feet to the
intersection of a line drawn parallel with and 85.00 feet southeasterly of the
northwesterly line of said Lot 12, a radial line through said point bears North
52(degrees) 17' 51" East; Thence parallel with the northwesterly line of said
Lot 12, North 56(degrees) 09' 36" East, 476.93 feet to a point that is 5 feet
southwesterly of the northeasterly line of said Lot 12; Thence along a line that
is parallel with and 5 feet southwesterly of the said northeasterly line of Lot
12, South 40(degrees) 00' 30" East, 69.44 feet to the beginning of a curve,
concave southwesterly, having a radius of 1949.00 feet; Thence southeasterly
along the arc of said curve, through a central angle of 6(degrees) 10' 18", an
arc distance of 209.94 feet; Thence continuing along a line that is parallel
with and 5 feet southwesterly of the said northeasterly line of Lot 12, South
33(degrees)50' 12" East, 1030.61 feet to the intersection with a line drawn
perpendicular with the southwesterly line of said Lot 12, distant thereon 628.68
feet from the most southerly corner of said Lot 12; Thence southwesterly along
said perpendicular line, South 56(degrees) 09' 36" West, 480.72 feet to the
Point of Beginning.

The basis of bearings for Parcel Map No. 6003 is the North American Datum of
1983, Zone 3, 1984 Adjustment Published in 1986, as shown on Record of Survey
990, filed in Book 18 of Records of Survey, at Pages 50 through 60, Alameda
County Records.  All distances in this description are grid distances.  To
convert to ground distances, multiply grid distances by 1.0000708.

Assessor's Parcel No. 041-3902-015 (Portion)

[Land]
<PAGE>

[SUBSTITUTE A PAGE COPIED FROM A SURVEY OF THE LAND, MARKED TO SHOW THE
"BUILDING 3 SITE" HERE.]

[Land]

                              Exhibit A - Page 2
<PAGE>

                                    Exhibit B
                                    ---------

                            Insurance Requirements

I.   LIABILITY INSURANCE:

     A.   Zhone must maintain commercial general liability ("CGL") insurance on
an occurrence basis, affording immediate protection to the limit of not less
than $20,000,000 combined single limit for bodily and personal injury, death and
property damage in respect of any one occurrence. The CGL insurance must be
primary to, and shall receive no contribution from, any insurance policies or
self-insurance programs otherwise afforded to or available to the Interested
Parties, collectively or individually. Further, the CGL insurance must include
blanket contractual liability coverage which insures contractual liability under
the indemnifications set forth in this Land Lease (though such coverage or the
amount thereof shall in no way limit such indemnifications).

     B.   Any deductible or self-insured retention applicable to the CGL
insurance shall not exceed $1,000 at any time when Zhone shall continue to have
the right to exercise any Issue 97-10 Election under (and as defined in) any of
the Other Operative Documents, or shall have previously exercised any such Issue
97-10 Election. After the expiration of Zhone's right to exercise any such Issue
97-10 Election, and provided no such Issue 97-10 Election has been exercised by
Zhone, Zhone may increase any deductible or self-insured retention applicable to
such insurance, but not to an amount in excess of $500,000.

     C.   The forms of insurance policies (including endorsements) used to
provide the CGL insurance required by this Land Lease, and the insurance company
or companies providing the CGL insurance, must be acceptable to BNPLC. BNPLC
shall have the right from time to time and at any time to review and approve
such policy forms (including endorsements) and the insurance company or
companies providing the insurance. Without limiting the generality of the
foregoing, BNPLC may reasonably require (and unless and until Zhone is otherwise
notified by BNPLC, BNPLC does require) that such insurance be provided under
forms and by companies consistent with the following:

          (1)  Forms: CGL Insurance must be provided on Insurance Services
               -----
               Office ("ISO") forms CG 0001 1093 or CG 0001 0196 or equivalent
               substitute forms providing the same or greater coverage.

          (2)  Rating Requirements: Insurance must be provided through insurance
               -------------------
               or reinsurance companies rated by the A.M. Best Company of
               Oldwick, New Jersey as having a policyholder's rating of A or
               better and a reported financial information rating of X or
               better.

          (3)  Required Endorsements: CGL Insurance must be endorsed to provide
               ---------------------
               or include:

               (a)  in any policy containing a general aggregate limit, ISO form
               amendment "Aggregate Limits of Insurance Per Location" CG 2504
               1185 or equivalent substitute form;

               (c)  a waiver of subrogation, using ISO form CG 2404 1093 or
               equivalent substitute form (and under the commercial umbrella, if
               any), in favor of "BNP Leasing Corporation and other Interested
               Parties (as defined in the Common Definitions and Provisions
               Agreement

[Land]
<PAGE>

               (Land) between Zhone Technologies, Inc. and BNP Leasing
               Corporation dated August 1, 2000)";

               (c)  ISO additional insured form CG 2026 1185 or equivalent
               substitute form, without modification (and under the commercial
               umbrella, if any), designating as additional insureds "BNPLC and
               other Interested Parties, as defined in the Common Definitions
               and Provisions Agreement (Land) between Zhone Technologies, Inc.
               and BNP Leasing Corporation dated August 1, 2000)"; and

               (d)  provisions entitling BNPLC to 30 days' notice from the
               insurer prior to any cancellation, nonrenewal or material
               modification to the CGL coverage.

          (4)  Other Insurance: Each policy to contain standard CGL "other
               ---------------
               insurance" wording, unmodified in any way that would make it
               excess over or contributory with the additional insured's own
               commercial general liability coverage.

II.   INTENTIONALLY DELETED.

III.  OTHER INSURANCE RELATED REQUIREMENTS:

      A.  BNPLC must be notified in writing immediately by Zhone of claims
against Zhone that might cause a reduction below seventy-five percent (75%) of
any aggregate limit of any policy.

      B.  Intentionally Deleted.

      C.  Zhone's CGL insurance must be evidenced by ACORD form 25 "Certificate
of Insurance" completed and interlineated in a manner satisfactory to BNPLC to
show compliance with the requirements of this Exhibit. Copies of endorsements to
the CGL insurance must be attached to such form.

      D.  Such evidence of required insurance must be delivered upon execution
of this Land Lease and new certificate or evidence of insurance must be
delivered no later than 10 days prior to expiration of existing policy.

      E.  Zhone shall not cancel, fail to renew, or make or permit any material
reduction in any of the policies or certificates described in this Exhibit
without the prior written consent of BNPLC. The certificates (ACORD forms 25)
described in this Exhibit must contain the following express provision:

      "This is to certify that the policies of insurance described herein have
      been issued to the insured Zhone Technologies, Inc. for whom this
      certificate is executed and are in force at this time. In the event of
      cancellation, non-renewal, or material reduction in coverage affecting the
      certificate holder, at least sixty days prior notice shall be given to the
      certificate holder."

      F.  The limits of liability under the liability insurance required by this
Land Lease may be provided by a single policy of insurance or by a combination
of primary and umbrella policies, but in no event shall the total limits of
liability available for any one occurrence or accident be less than those
required by this Exhibit.

[Land]

                              Exhibit B - Page 2
<PAGE>

      G.  Zhone shall provide copies, certified as complete and correct by an
authorized agent of the applicable insurer, of all insurance policies required
by this Exhibit within ten days after receipt of a request for such copies from
BNPLC.

[Land]

                           Exhibit B - Page 3
<PAGE>

                                   Exhibit C
                                   ---------

                        Notice of LIBOR Period Election

BNP Leasing Corporation
12201 Merit Drive
Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox

     Re: Lease Agreement (Improvements - Buildings 1&2), Lease Agreement
(Improvements - Building 3) and Lease Agreement (Land), all dated as of August
1, 2000, and all between Zhone Technologies, Inc., as tenant, and BNP Leasing
Corporation, as landlord

Gentlemen:

     Capitalized terms used in this letter are intended to have the meanings
assigned to them in the two Lease Agreements referenced above.  This letter
constitutes notice to you that the LIBOR Period Election under both of the Lease
Agreements shall be:

                       ________________ month(s),

beginning with the first Base Rent Period that commences on or after:

                       ______________, ____.

NOTE:  YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE NUMBER OF MONTHS
-----
SPECIFIED ABOVE IS NOT A PERMITTED NUMBER UNDER THE DEFINITION OF "LIBOR PERIOD
ELECTION" IN THE COMMON DEFINITIONS AND PROVISIONS AGREEMENTS REFERENCED IN THE
LEASE AGREEMENTS, OR IF THE DATE SPECIFIED ABOVE CONCERNING THE COMMENCEMENT OF
THE LIBOR PERIOD ELECTION IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OF
THIS NOTICE.  HOWEVER, WE ASK THAT YOU NOTIFY US IMMEDIATELY IF FOR ANY REASON
YOU BELIEVE THIS NOTICE IS DEFECTIVE.

  Executed this _____ day of ______________, 20__.

                                 Zhone Technologies, Inc.

                                 Name:__________________________________________
                                 Title:_________________________________________
[cc all Participants]

[Land]
<PAGE>

                                  Schedule 1
                                  ----------

                              FINANCIAL COVENANTS

[DRAFTING NOTE: TK WILL MANUALLY SUBSTITUTE THE FINAL SCHEDULE 1 (A SEPARATE
 --------------
WORD PROCESSING FILE) FOR THIS PAGE IN THE EXECUTION COPIES OF THIS DOCUMENT.]

[Land]
<PAGE>

                              COMMON DEFINITIONS
                           AND PROVISIONS AGREEMENT
                                    (LAND)

                                    between

                            BNP LEASING CORPORATION

                                      and

                           ZHONE TECHNOLOGIES, INC.

                          Dated as of August 1, 2000
<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                 Page
                                                                 ----
ARTICLE I - LIST OF DEFINED TERMS:
<S>                                                              <C>
  Acquisition Contract............................................  1
  Active Negligence...............................................  1
  Additional Rent.................................................  2
  Advance Date....................................................  2
  Affiliate.......................................................  2
  Agent...........................................................  2
  Applicable Laws.................................................  2
  Applicable Purchaser............................................  2
  Attorneys' Fees.................................................  2
  Banking Rules Change............................................  2
  Base Rate.......................................................  3
  Base Rent.......................................................  3
  Base Rent Date..................................................  3
  Base Rent Period................................................  3
  BNPLC...........................................................  4
  BNPLC's Parent..................................................  4
  Breakage Costs..................................................  4
  Buildings 1&2 Land Percentage...................................  4
  Building 3 Land Percentage......................................  4
  Business Day....................................................  4
  Capital Adequacy Charges........................................  5
  Capital Lease...................................................  5
  Closing Certificate.............................................  5
  CMA Termination Event...........................................  5
  Code............................................................  5
  Collateral......................................................  5
  Collateral Percentage...........................................  5
  Collateral Test Date............................................  5
  Commitment Fees.................................................  5
  Construction Management Agreements..............................  5
  Construction Projects...........................................  5
  Debt............................................................  5
  Default.........................................................  6
  Default Rate....................................................  6
  Defaulting Participant..........................................  6
  Deposit Rate....................................................  6
  Deposit Taker...................................................  6
  Deposit Taker Losses............................................  6
  Designated Sale Date............................................  6
  Development Documents...........................................  7
  Direct Payments to Participants.................................  7
  Effective Date..................................................  7
  Effective Rate..................................................  7
</TABLE>

[Land]                                (i)
<PAGE>

<TABLE>
<CAPTION>
                                                                 Page
                                                                 ----
<S>                                                              <C>
  Effective Rate/Deposit Rate Difference..........................   8
  Environmental Laws..............................................   8
  Environmental Cutoff Date.......................................   8
  Environmental Losses............................................   8
  Environmental Reports...........................................   8
  ERISA...........................................................   9
  ERISA Affiliate.................................................   9
  Established Misconduct..........................................   9
  Eurocurrency Liabilities........................................   9
  Eurodollar Rate Reserve Percentage..............................   9
  Event of Default................................................  10
  Excluded Taxes..................................................  10
  Failed Collateral Test Date.....................................  10
  Fed Funds Rate..................................................  10
  Funding Advances................................................  10
  GAAP............................................................  10
  Hazardous Substance.............................................  11
  Hazardous Substance Activity....................................  11
  Impositions.....................................................  11
  Improvements....................................................  11
  Interested Party................................................  11
  Issue 97-1 Non-performance-related Subjective Event of Default..  12
  Land............................................................  12
  Land Break Even Amount..........................................  12
  Land CDPA.......................................................  12
  Land Escrowed Proceeds..........................................  12
  Land Lease......................................................  13
  Land Operative Documents........................................  13
  Land Pledge Agreement...........................................  13
  Land Purchase Agreement.........................................  13
  Land Purchase Documents.........................................  13
  Land Sale Closing Documents.....................................  13
  Land Supplemental Payment.......................................  13
  Land Supplemental Payment Obligation............................  14
  Land Third Party Price..........................................  14
  Last Building Base Rent Commencement Date.......................  14
  LIBOR...........................................................  14
  LIBOR Period Election...........................................  14
  Lien............................................................  15
  Liens Removable by BNPLC........................................  15
  Losses..........................................................  15
  Material Environmental Communication............................  15
  Maximum Remarketing Obligation..................................  16
  Minimum Collateral Percentage...................................  16
  Minimum Extended Remarketing Price..............................  16
  Multiemployer Plan..............................................  16
</TABLE>

[Land]                               (ii)
<PAGE>

<TABLE>
<CAPTION>
                                                                  Page
                                                                  ----
  <S>                                                             <C>
  Other Common Definitions and Provisions Agreements..............  16
  Other Lease Agreements..........................................  16
  Other Operative Documents.......................................  16
  Other Purchase Agreements.......................................  16
  Participant.....................................................  16
  Participation Agreement.........................................  17
  PBGC............................................................  17
  Permitted Encumbrances..........................................  17
  Permitted Hazardous Substance Use...............................  17
  Permitted Hazardous Substances..................................  18
  Permitted Transfer..............................................  18
  Person..........................................................  18
  Personal Property...............................................  18
  Plan............................................................  18
  Prime Rate......................................................  19
  Prior Funding Advances..........................................  19
  Property........................................................  19
  Purchase Money Lien.............................................  19
  Purchase Money Note.............................................  19
  Purchase Option.................................................  19
  Qualified Affiliate.............................................  19
  Qualified Prepayments...........................................  19
  Real Property...................................................  20
  Remedial Work...................................................  20
  Rent............................................................  20
  Residual Risk Percentage........................................  20
  Responsible Financial Officer...................................  20
  Secured Spread..................................................  20
  Seller..........................................................  20
  Stipulated Loss Value...........................................  20
  Subsidiary......................................................  20
  Term............................................................  21
  Third Party Sale Notice.........................................  21
  Third Party Sale Proposal.......................................  21
  Third Party Target Price........................................  21
  Unfunded Benefit Liabilities....................................  21
  Unsecured Spread................................................  21
  Voluntary Retention of the Property.............................  21
  Zhone...........................................................  21
  Zhone's Extended Remarketing Period.............................  21
  Zhone's Extended Remarketing Right..............................  21
  Zhone's Initial Remarketing Rights..............................  21

ARTICLE II - PROVISIONS USED IN COMMON:

  1.   Notices....................................................  22
</TABLE>

 [Land]                              (iii)
<PAGE>

<TABLE>
<CAPTION>
                                                                    Page
                                                                    ----
  <S>                                                               <C>
  2.   Severability.................................................  23
  3.   No Merger....................................................  23
  4.   No Implied Waiver............................................  24
  5.   Entire and Only Agreements...................................  24
  6.   Binding Effect...............................................  24
  7.   Time is of the Essence.......................................  24
  8.   Governing Law................................................  24
  9.   Paragraph Headings...........................................  24
  10.  Negotiated Documents.........................................  25
  11.  Terms Not Expressly Defined in a Land Operative Document.....  25
  12.  Other Terms and References...................................  25
  13.  Execution in Counterparts....................................  25
  14.  Not a Partnership, Etc.......................................  26
  15.  Amendment and Restatement....................................  26
</TABLE>

[Land]                                (iv)

<PAGE>

                              COMMON DEFINITIONS
                           AND PROVISIONS AGREEMENT
                                    (LAND)

     This Common Definitions and Provisions Agreement (Land) (this "Land CDPA"),
by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and
ZHONE TECHNOLOGIES, INC., a Delaware corporation ("Zhone"), is dated as of
August 1, 2000, the Effective Date.

                                   RECITALS

     Contemporaneously with the execution of this Land CDPA, BNPLC and Zhone are
executing the Closing Certificate (as defined below), the Land Lease (as defined
below) and the Land Purchase Agreement (as defined below), all of which concern
the Property (as defined below). Each of the Closing Certificate, the Land Lease
and the Land Purchase Agreement (together with this Land CDPA and the Land
Pledge Agreement [as defined below], the "Land Operative Documents") are
intended to create separate and independent obligations upon the parties
thereto. However, Zhone and BNPLC intend that all of the Land Operative
Documents share certain consistent definitions and other miscellaneous
provisions. To that end, the parties are executing this Land CDPA and
incorporating it by reference into each of the other Land Operative Documents.

     Zhone and BNPLC previously executed that Common Definitions and Provisions
Agreement (Phase I - Land) dated January 20, 2000 (the "Prior Common Definitions
and Provisions Agreement"). Zhone and BNPLC have agreed to amend, restate and
replace the Prior Common Definitions and Provisions Agreement with this Land
CDPA as provided in Section 15 of Article II below.

                                  AGREEMENTS

                       ARTICLE I - LIST OF DEFINED TERMS

     Unless a clear contrary intention appears, the following terms shall have
the respective indicated meanings as used herein and in the other Land Operative
Documents:

     "Acquisition Contract" means the Purchase and Sale Agreement executed on or
about the Effective Date, between Seller and Zhone covering the Land described
in Exhibit A attached to the Land Lease, the interests of Zhone therein having
   ---------
being assigned to BNPLC pursuant to the assignment dated as of the Effective
Date between Zhone and BNPLC, with the consent and approval of Seller.

     "Active Negligence" of any Person (including BNPLC) means, and is limited
to, the negligent conduct on the Property (and not mere omissions) by such
Person or by others acting and authorized to act on such Person's behalf in a
manner that proximately causes actual bodily injury or property damage for which
Zhone does not carry (and is not obligated by the Land Lease to carry)
insurance. "Active Negligence" shall not include (1) any negligent failure of
BNPLC to act when the duty to act would not have been imposed but for BNPLC's
status as owner of the Land, the Improvements or any interest in any other
Property or as a party to the transactions described in any of the Land
Operative Documents or the Other Operative Documents, (2) any negligent failure
of any other Interested Party to act when the duty to act would not have been
imposed but for such party's contractual or other relationship to BNPLC or
participation or facilitation in any manner, directly or indirectly, of the
transactions described in any of the Land Operative Documents or the Other
Operative Documents, or (3) the exercise in a lawful manner by BNPLC (or any
party lawfully claiming through or under
<PAGE>

BNPLC) of any right or remedy provided in or under any of the Land Operative
Documents or the Other Operative Documents.

     "Additional Rent" shall have the meaning assigned to it in subparagraph
                                                                ------------
3.(d) of the Land Lease.
-----

     "Advance Date" means the first Business Day of every calendar month,
beginning with the first Business Day in September, 2000 and continuing
regularly thereafter to and including the Last Building Base Rent Commencement
Date.

     "Affiliate" of any Person means any other Person controlling, controlled by
or under common control with such Person. For purposes of this definition, the
term "control" when used with respect to any Person means the power to direct
the management of policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.

     "Agent" means the Person acting as "Agent" for BNPLC and Participants under
(and as defined in) the Land Pledge Agreement from time to time.

     "Applicable Laws" means any or all of the following, to the extent
applicable to Zhone or the Property or the Land Lease or the other Land
Operative Documents: restrictive covenants; zoning ordinances and building
codes; flood disaster laws; health, safety and environmental laws and
regulations; the Americans with Disabilities Act and other laws pertaining to
disabled persons; and other laws, statutes, ordinances, rules, permits,
regulations, orders, determinations and court decisions.

     "Applicable Purchaser" means any third party designated by Zhone to
purchase BNPLC's interest in the Property and in any Land Escrowed Proceeds as
provided in the Land Purchase Agreement.

     "Attorneys' Fees" means the expenses and reasonable fees of counsel to the
parties incurring the same, excluding costs or expenses of in-house counsel
(whether or not accounted for as general overhead or administrative expenses),
but otherwise including printing, photostating, duplicating and other expenses,
air freight charges, and fees billed for law clerks, paralegals, librarians and
others not admitted to the bar but performing services under the supervision of
an attorney. Such terms shall also include all such fees and expenses incurred
with respect to appeals, arbitrations and bankruptcy proceedings, and whether or
not any manner of proceeding is brought with respect to the matter for which
such fees and expenses were incurred.

     "Banking Rules Change" means either: (1) the introduction of or any change
in any law or regulation applicable to BNPLC, BNPLC's Parent or any other
Participant, or in the generally accepted interpretation by the institutional
lending community of any such law or regulation, or in the interpretation of any
such law or regulation asserted by any regulator, court or other governmental
authority (other than any change by way of imposition or increase of reserve
requirements included in the Eurodollar Rate Reserve Percentage) or (2) the
compliance by BNPLC, BNPLC's Parent or any other Participant with any new
guideline or new request from any central bank or other governmental authority
(whether or not having the force of law).

     "Base Rate" for any Base Rent Period means a rate equal to the higher of
(1) the Prime Rate in effect on the first day of such period, or (2) the rate
which is fifty basis points (50/100 of 1%) above the Fed Funds Rate for that
period.

     "Base Rent" means the rent payable by Zhone pursuant to subparagraph 3.(a)
                                                             ------------------
of the Land Lease.

        Common Definitions and Provisions Agreement (Land) - Page 2
<PAGE>

     "Base Rent Date" means a date upon which Base Rent must be paid under the
Land Lease, all of which dates shall be the first Business Day of a calendar
month. The first Base Rent Date shall be the first Business Day of the first
calendar month after the Effective Date. Each successive Base Rent Date after
the first Base Rent Date shall be the first Business Day of the first or third
calendar month following the calendar month which includes the preceding Base
Rent Date, determined as follows:

               (1)    If a LIBOR Period Election of one month is in effect on a
          Base Rent Date, then the first Business Day of the first calendar
                                                             -----
          month following such Base Rent Date shall be the next following Base
          Rent Date.

               (2)    If a LIBOR Period Election of three months or six months
          is in effect on a Base Rent Date, then the first Business Day of the
          third calendar month following such Base Rent Date shall be the next
          -----
          following Base Rent Date.

Thus, for example, if the Last Building Base Rent Commencement Date falls on the
first Business Day of September, 2001 and a LIBOR Period Election of two months
commences on the Last Building Base Rent Commencement Date, then the first Base
Rent Date shall be the first Business Day of November, 2001.

     "Base Rent Period" means a period for which Base Rent must be paid under
the Land Lease, each of which periods shall correspond to the LIBOR Period
Election for such period. The first Base Rent Period shall begin on and include
the Effective Date, and each successive Base Rent Period shall begin on and
include the Base Rent Date upon which the preceding Base Rent Period ends. Each
Base Rent Period shall end on but not include the first or second Base Rent Date
after the Base Rent Date upon which such period began, determined as follows:

               (1)    If the LIBOR Period Election for a Base Rent Period is one
          month or three months, then such Base Rent Period shall end on the
          first Base Rent Date after the Base Rent Date upon which such period
          -----
          began.

               (2)    If the LIBOR Period Election for a Base Rent Period is six
          months, then such Base Rent Period shall end on the second Base Rent
                                                              ------
          Date after the Base Rent Date upon which such period began.

The determination of Base Rent Periods can be illustrated by two examples:

               1)  If Zhone makes a LIBOR Period Election of three months for a
          hypothetical Base Rent Period beginning on the first Business Day in
          January, 2002, then such Base Rent Period will end on but not include
          the first Base Rent Date after it begins; that is, such Base Rent
          Period will end on the first Business Day in April, 2002, the third
          calendar month after January, 2002.
               2)  If, however, Zhone makes a LIBOR Period Election of six
          months for the hypothetical Base Rent Period beginning the first
          Business Day in January, 2002, then such Base Rent Period will end on
          but not include the second Base Rent Date after it begins; that is,
          the first Business Day in July, 2002.

     "BNPLC" means BNP Leasing Corporation, a Delaware corporation.

        Common Definitions and Provisions Agreement (Land) - Page 3
<PAGE>

     "BNPLC's Parent" means BNPLC's Affiliate, BNP Paribas, a bank organized and
existing under the laws of France and any successors of such bank.

     "Breakage Costs" means any and all costs, losses or expenses incurred or
sustained by BNPLC's Parent (as a Participant or otherwise) or any other
Participant, for which BNPLC's Parent or the Participant shall request
reimbursement from BNPLC, because of the resulting liquidation or redeployment
of deposits or other funds:

          (1) used to make or maintain Funding Advances upon application of a
     Qualified Prepayment or upon any sale of the Property pursuant to the Land
     Purchase Agreement, if such application or sale occurs on any day other
     than an Advance Date or the last day of a Base Rent Period; or

          (2) used to make or maintain Funding Advances upon the acceleration of
     the end of any Base Rent Period pursuant subparagraph 3.(c)(ii) of the Land
                                              ----------------------
     Lease.

Breakage Costs will include, for example, losses attributable to any decline in
LIBOR as of the effective date of any application described in the clause (1)
preceding, as compared to LIBOR used to determine the Effective Rate then in
effect. Each determination by BNPLC's Parent or the applicable Participant of
Breakage Costs shall, in the absence of clear and demonstrable error, be
conclusive and binding upon Zhone.

     "Buildings 1&2 Land Percentage" means 50%, which is the approximate
percentage of the total acreage of the Land that, according to Zhone, is
properly allocated to the Improvements covered by the Lease Agreement
(Improvements - Buildings 1&2) between Zhone and BNPLC (in contrast to the
portion of the Land properly allocated to the Improvements covered by the Lease
Agreement (Improvements - Building 3) between Zhone and BNPLC.

     "Building 3 Land Percentage" means 50%, which is the approximate percentage
of the total acreage of the Land that, according to Zhone, is properly allocated
to the Improvements covered by the Lease Agreement (Improvements -Building 3)
between Zhone and BNPLC (in contrast to the portion of the Land properly
allocated to the Improvements covered by the Lease Agreement (Improvements -
Buildings 1&2) between Zhone and BNPLC.

     "Business Day" means any day that is (1) not a Saturday, Sunday or day on
which commercial banks are generally closed or required to be closed in New York
City, New York or San Francisco, California, and (2) a day on which dealings in
deposits of dollars are transacted in the London interbank market; provided that
if such dealings are suspended indefinitely for any reason, "Business Day" shall
mean any day described in clause (1).

     "Capital Adequacy Charges" means any additional amounts BNPLC's Parent or
any other Participant requests BNPLC to pay as compensation for an increase in
required capital as provided in subparagraph 5.(b)(ii) of the Land Lease.
                                ----------------------

     "Capital Lease" means any lease which has been or should be capitalized on
the books of the lessee in accordance with GAAP or for federal income tax
purposes.

     "Closing Certificate" means the Closing Certificate and Agreement dated as
of the Effective Date, between Zhone and BNPLC, as such agreement may be
extended, supplemented, amended, restated or otherwise modified from time to
time in accordance with its terms.

        Common Definitions and Provisions Agreement (Land) - Page 4
<PAGE>

     "CMA Termination Event" means any event that would constitute a CMA
Termination Event under (and as defined in) either of the Construction
Management Agreements.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Collateral" shall have the meaning assigned to it in the Land Pledge
Agreement.

     "Collateral Percentage" for each Base Rent Period means the Collateral
Percentage for such period determined under (and as defined in) the Land Pledge
Agreement; provided, however, for purposes of the Land Lease, the Collateral
Percentage for any Base Rent Period shall not exceed a fraction; the numerator
of which fraction shall equal the value (determined as provided in the Land
Pledge Agreement) of all Collateral (a) that is, on the first day of such
period, held by the Deposit Takers under (and as defined in) the Land Pledge
Agreement subject to a Qualifying Security Interest (as defined below), (b) that
is free from claims or security interests held or asserted by any third party,
and (c) that is not in excess of Stipulated Loss Value; and the denominator of
which fraction shall equal the Stipulated Loss Value on the first day of such
period. "Qualifying Security Interest" means a first priority perfected security
interest under the Land Pledge Agreement.

     "Collateral Test Date" shall have the meaning assigned to it in Part I of
Schedule 1 attached to the Land Lease and to the Land Pledge Agreement.
----------

     "Commitment Fees" shall have the meaning assigned to it in subparagraph
                                                                ------------
3.(f) of the Land Lease.
-----

     "Construction Management Agreements" means the Construction Management
Agreement (Buildings 1&2) and the Construction Management Agreement (Building
3), both dated as of the Effective Date and both between BNPLC and Zhone, as
such agreements may be extended, supplemented, amended, restated or otherwise
modified from time to time in accordance with their terms.

     "Construction Projects" means the new buildings or other substantial
Improvements to be constructed, or the alteration of existing Improvements, as
described generally in exhibits designated as Exhibit B attached to the
                                              ---------
Construction Management Agreements.

     "Debt" of any Person means (without duplication of any item): (a)
indebtedness of such Person for borrowed money; (b) indebtedness of such Person
for the deferred purchase price of property or services (except trade payables
and accrued expenses constituting current liabilities in the ordinary course of
business); (c) the face amount of any outstanding letters of credit issued for
the account of such Person; (d) obligations of such Person arising under
acceptance facilities; (e) guaranties, endorsements (other than for collection
in the ordinary course of business) and other contingent obligations of such
Person to purchase, to provide funds for payment, to provide funds to invest in
any Person, or otherwise to assure a creditor against loss; (f) obligations of
others secured by any Lien on property of such Person; (g) obligations of such
Person as lessee under Capital Leases; and (h) the obligations of such Person,
contingent or otherwise, under any "synthetic" or other lease of property or
related documents (including a separate purchase agreement) which obligate such
Person or any of its Affiliates (whether by purchasing or causing another Person
to purchase any interest in the leased property or otherwise) to guarantee a
minimum residual value of the leased property to the lessor. For purposes of
this definition, the amount of the obligations described in clause (h) of the
preceding sentence with respect to any lease classified according to GAAP as an
"operating lease," shall equal the sum of (1) the present value of rentals and
other minimum lease payments required in connection with such lease [calculated
in accordance with SFAS 13 and other GAAP relevant to the determination of the
whether such lease must be accounted for as an operating lease or capital
lease], plus (2) the fair value of the property covered by the lease; provided,
however,

        Common Definitions and Provisions Agreement (Land) - Page 5
<PAGE>

that such amount shall not exceed the price, as of the date a determination of
Debt is required hereunder, for which the lessee can purchase the leased
property pursuant to any valid ongoing purchase option if, upon such a purchase,
the lessee shall be excused from paying rentals or other minimum lease payments
that would otherwise accrue after the purchase.

     "Default" means any event which, with the passage of time or the giving of
notice or both, would (if not cured within any applicable cure period)
constitute an Event of Default.

     "Default Rate" means, for any period prior to the Designated Sale Date, a
floating per annum rate equal to two percent (2%) above the Prime Rate, and for
any period commencing on or after the Designated Sale Date, Default Rate shall
mean a floating per annum rate equal to five percent (5%) above the Prime Rate.
However, in no event will the "Default Rate" at any time exceed the maximum
interest rate permitted by law.

     "Defaulting Participant" shall have the meaning assigned to it in Section 1
                                                                       ---------
of the Participation Agreement.

     "Deposit Rate" means, for any Base Rent Period, the rate computed by
subtracting (1) twelve and one-half basis points (12.5/100 of 1%), from (2)
LIBOR for such Base Rent Period.

     "Deposit Taker" shall have the meaning assigned to it in the Land Pledge
Agreement.

     "Deposit Taker Losses" shall have the meaning assigned to it in the Land
Pledge Agreement.

     "Designated Sale Date" means the earlier of:

          (1)  the first Business Day of August, 2005; or

          (2)  any Business Day designated as the "Designated Sale Date" under
     (and as defined in) this Land CDPA and the Other Common Definitions and
     Provisions Agreements in an irrevocable, unconditional notice given by
     Zhone to BNPLC; provided, that any such notice will be effective for
     purposes of this definition only if its satisfies all of the following
     conditions:

               (A) the notice must designate a Business Day as the Designated
          Sale Date that is at least thirty days after the date of BNPLC's
          receipt of such notice;

               (B) the notice must be given before Zhone has made any Issue 97-
          10 Election under (and as defined in) any of the Other Operative
          Documents;

               (C) the notice must include an express, unconditional,
          unequivocal and irrevocable (i) waiver by Zhone of any remaining right
          Zhone may have to make any such Issue 97-10 Elections, and (ii)
          acknowledgment and agreement by Zhone that, because of Zhone's
          election to accelerate the Designated Sale Date, the Maximum
          Remarketing Obligation will equal the Land Break Even Amount under
          each of the Land Purchase Agreement and the Other Purchase Agreements;
          or

          (3)  any Business Day designated as such in a notice given by BNPLC to
     Zhone when any Event of Default has occurred and is continuing; provided,
     that if the Business Day so designated by

        Common Definitions and Provisions Agreement (Land) - Page 6
<PAGE>

     BNPLC is not at least thirty days after the date of such notice, the notice
     will be of no effect for purposes of this definition;

          (4)  any Business Day designated as such in a notice given by BNPLC to
     Zhone after the effective date of any termination of either of the
     Construction Management Agreements by BNPLC as provided in subparagraph
                                                                ------------
     4(E) thereof; or
     ----

          (5)  any Business Day designated as such in a notice given by BNPLC to
     Zhone after Zhone has given a notice exercising or attempting to exercise
     any Issue 97-10 Election under (and as defined in) any of the Other
     Operative Documents.

     "Development Documents" means the contracts, ordinances and other documents
described in Exhibit C attached to the Closing Certificate, as the same may be
             ---------
modified from time to time in accordance with the Land Operative Documents and
the Other Operative Documents, and any applications, permits or certificates
concerning or affecting the use or development of the Property that may be
submitted, issued or executed from time to time as contemplated in such
contracts, ordinances and other documents or that BNPLC may hereafter execute,
approve or consent to at the request of Zhone.

     "Direct Payments to Participants" means the amounts paid or required to be
paid directly to Participants on the Designated Sale Date as provided in Section
                                                                         -------
6.2 of the Land Pledge Agreement at the direction of and for Zhone by the
---
collateral agent appointed pursuant to the Land Pledge Agreement from all or any
part of the Collateral described therein.

     "Effective Date" means August 1, 2000.

     "Effective Rate" means for each Base Rent Period, the per annum rate
determined by dividing (A) LIBOR for such Base Rent Period, as the case may be,
by (B) one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage
for such Base Rent Period. If LIBOR or the Eurodollar Rate Reserve Percentage
changes from Base Rent Period to Base Rent Period, then the Effective Rate shall
be automatically increased or decreased as of the date of such change, as the
case may be, without prior notice to Zhone. If for any reason BNPLC determines
that it is impossible or unreasonably difficult to determine the Effective Rate
with respect to a given Base Rent Period in accordance with the foregoing, then
the "Effective Rate" for that Base Rent Period shall equal any published index
or per annum interest rate determined in good faith by BNPLC's Parent to be
comparable to LIBOR at the beginning of the first day of that period. A
comparable interest rate might be, for example, the then existing yield on short
term United States Treasury obligations (as compiled by and published in the
then most recently published United States Federal Reserve Statistical Release
H.15(519) or its successor publication), plus or minus a fixed adjustment based
on BNPLC's Parent's comparison of past eurodollar market rates to past yields on
such Treasury obligations. Any determination by BNPLC of the Effective Rate
under this definition shall, in the absence of clear and demonstrable error, be
conclusive and binding upon Zhone.

     "Effective Rate/Deposit Rate Difference" means, for any Base Rent Period,
the difference (not less than zero) computed by subtracting (1) the Deposit Rate
for such Base Rent Period, from (2) the Effective Rate for such Base Rent
Period.

     "Environmental Laws" means any and all existing and future Applicable Laws
pertaining to safety, health or the environment, or to Hazardous Substances or
Hazardous Substance Activities, including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (as amended, "CERCLA"), and the
Resource

        Common Definitions and Provisions Agreement (Land) - Page 7
<PAGE>

Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act
of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and
Solid Waste Amendments of 1984 (as amended, "RCRA").

     "Environmental Cutoff Date" means the later of the dates upon which (i) the
Land Lease terminates, or (ii) Zhone surrenders possession and control of the
Property and ceases to have interest in the Land or Improvements or rights with
respect thereto under any of the Land Operative Documents or the Other Operative
Documents.

     "Environmental Losses" means Losses suffered or incurred by BNPLC or any
other Interested Party, directly or indirectly, relating to or arising out of,
based on or as a result of any of the following: (i) any Hazardous Substance
Activity on or prior to the Environmental Cutoff Date; (ii) any violation on or
prior to the Environmental Cutoff Date of any applicable Environmental Laws
relating to the Property or to the ownership, use, occupancy or operation
thereof; (iii) any investigation, inquiry, order, hearing, action, or other
proceeding by or before any governmental or quasi-governmental agency or
authority in connection with any Hazardous Substance Activity that occurs or is
alleged to have occurred on or prior to the Environmental Cutoff Date; or (iv)
any claim, demand, cause of action or investigation, or any action or other
proceeding, whether meritorious or not, brought or asserted against any
Interested Party which directly or indirectly relates to, arises from, is based
on, or results from any of the matters described in clauses (i), (ii), or (iii)
of this definition or any allegation of any such matters. For purposes of
determining whether Losses constitute "Environmental Losses," as the term is
used in the Land Lease, any actual or alleged Hazardous Substance Activity or
violation of Environmental Laws relating to the Property will be presumed to
have occurred prior to the Environmental Cutoff Date unless Zhone establishes by
clear and convincing evidence to the contrary that the relevant Hazardous
Substance Activity or violation of Environmental Laws did not occur or commence
prior to the Environmental Cutoff Date.

     "Environmental Reports" means collectively the following reports (whether
one or more), which were provided by Zhone to BNPLC prior to the Effective Date:
(a) Phase II Site Investigation + Oakport Parcel, dated January 1991, prepared
by Baseline Environmental Consulting, Emeryville, CA; (b) Phase II Environmental
Assessment at the Edgewater Drive Property and Oakport Development Site, dated
April 16, 1993, prepared by Uribe & Associates, Oakland, CA; (c) Phase II
Environmental Assessment at the Edgewater Drive Property and Oakport Development
Site, Appendix E/Part 1, dated April 16, 1993, prepared by Uribe & Associates,
Oakland, CA; (d) Phase II Environmental Assessment at the Edgewater Drive
Property and Oakport Development Site, Appendix E/Part 2, dated April 16, 1993,
Uribe & Associates, Oakland, CA; (e) Geotehnical Investigation Report,
Price/Costco Wholesale Store, Oakland, CA, dated June 28, 1994, prepared by
Klienfelder; (f) Letter from the Port of Oakland to Frank Fanelli of the City of
Oakland, dated December 14, 1999; (g) Letter from Baseline Environmental
Consulting to Frank Fanelli of the City of Oakland, dated December 6, 1999; and
(h) Phase I Environmental Site Assessment for Oakport Road site, Oakland, CA.,
dated December 13, 1999.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.

     "ERISA Affiliate" means any Person who for purposes of Title IV of ERISA is
a member of Zhone's controlled group, or under common control with Zhone, within
the meaning of Section 414 of the Internal Revenue Code, and the regulations
promulgated and rulings issued thereunder.

     "Established Misconduct" of a Person means, and is limited to: (1) if the
Person is bound by the Land Operative Documents or the Participation Agreement,
a breach by such Person of the express provisions of the

        Common Definitions and Provisions Agreement (Land) - Page 8
<PAGE>

Land Operative Documents or the Participation Agreement, as applicable, that
continues beyond any period for cure provided therein, and (2) conduct of such
Person or its Affiliates that has been determined to constitute wilful
misconduct or Active Negligence in or as a necessary element of a final judgment
rendered against such Person by a court with jurisdiction to make such
determination. Established Misconduct of one Interested Party shall not be
attributed to a second Interested Party unless the second Interested Party is an
Affiliate of the first. Negligence which does not constitute Active Negligence
shall not in any event constitute Established Misconduct. For purposes of this
definition, "conduct of a Person" will include (1) the conduct of an employee of
that Person, but only to the extent that the employee is acting within the scope
of his employment by that Person, as determined in or as a necessary element of
a final judgment rendered against such Person by a court with jurisdiction to
make such determination, and (2) the conduct of an agent of that Person (such as
an independent environmental consultant engaged by that Person), but only to the
extent that the agent is, as determined in or as a necessary element of a final
judgment rendered against such Person by a court with jurisdiction to make such
determination, (x) acting within the scope of the authority granted to him by
such Person, (y) not acting with the consent or approval of or under the
direction of Zhone or Zhone's Affiliates, employees or agents, and (z) not
acting in good faith to mitigate Losses that such Person may suffer because of a
breach or repudiation by Zhone of the Land Lease or the Land Purchase Documents.

     "Eurocurrency Liabilities" shall have the meaning assigned to it in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.

     "Eurodollar Rate Reserve Percentage" means, for purposes of determining the
Effective Rate for any Base Rent Period, the reserve percentage applicable two
Business Days before the first day of such period under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) for BNPLC's
Parent with respect to liabilities or deposits consisting of or including
Eurocurrency Liabilities (or with respect to any other category or liabilities
by reference to which LIBOR is determined) having a term comparable to such
period.

     "Event of Default" shall have the meaning assigned to it in subparagraph 17
                                                                 ---------------
of the Land Lease.

     "Excluded Taxes" means (1) all federal, state and local income taxes upon
Base Rent, any interest paid to BNPLC or any Participant pursuant to
subparagraph 3.(j) of the Land Lease, and any additional compensation claimed by
------------------
BNPLC pursuant to subparagraph 5.(b)(ii) of the Land Lease; (2)  any transfer or
                  ----------------------
change of ownership taxes assessed because of BNPLC's transfer or conveyance to
any third party of any rights or interest in the Land Lease, the Land Purchase
Agreement or the Property (other than any such taxes assessed because of any
Permitted Transfer under clauses (1), (3), (5) or (6) of the definition of
Permitted Transfer in this Agreement), (3) all federal, state and local income
taxes upon any amounts paid as reimbursement for or to satisfy Losses incurred
by BNPLC or any Participant to the extent such taxes are offset by a
corresponding reduction of BNPLC's or the applicable Participant's income taxes
because of BNPLC's or such Participant's deduction of the reimbursed Losses from
its taxable income or because of any tax credits attributable thereto. If,
however, a change in Applicable Laws after the Effective Date results in an
increase in such taxes for any reason other than an increase in the applicable
tax rates (e.g., a disallowance of deductions that would otherwise be available
against payments described in clause (A) of this definition), then for purposes
of the Land Operative Documents, the term "Excluded Taxes" will not include the
increase in such taxes attributable to the change.

     "Failed Collateral Test Date" means any Collateral Test Date upon which the
Minimum Collateral Percentage is increased as described in Part III of Schedule
                                                                       --------
1 attached to the Land Pledge Agreement with the
-

        Common Definitions and Provisions Agreement (Land) - Page 9
<PAGE>

result that the Minimum Collateral Percentage then exceeds the Collateral
Percentage that would, but for Section 3.3 of the Land Pledge Agreement,
otherwise be in effect thereunder.

     "Fed Funds Rate" means, for any period, a fluctuating interest rate
(expressed as a per annum rate and rounded upwards, if necessary, to the next
1/16 of 1%) equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rates are not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by BNPLC's Parent from three Federal funds brokers of
recognized standing selected by BNPLC's Parent. All determinations of the Fed
Funds Rate by BNPLC's Parent shall, in the absence of clear and demonstrable
error, be binding and conclusive upon Zhone.

     "Funding Advances" means (1) the Prior Funding Advances, (2) any Post
Closing Advance, and (3) all future advances made by BNPLC's Parent or any other
Participant to or on behalf of BNPLC to allow BNPLC to maintain its investment
in the Property.

     "GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, applied on a basis consistent with
those used in the preparation of the financial statements referred to in
subparagraph 13.(a) of the Land Lease (except for changes with which Zhone's
-------------------
independent public accountants concur).

     "Hazardous Substance" means (i) any chemical, compound, material, mixture
or substance that is now or hereafter defined or listed in, regulated under, or
otherwise classified pursuant to, any Environmental Laws as a "hazardous
substance," "hazardous material," "hazardous waste," "extremely hazardous waste
or substance," "infectious waste," "toxic substance," "toxic pollutant," or any
other formulation intended to define, list or classify substances by reason of
deleterious properties, including ignitability, corrosiveness, reactivity,
carcinogenicity, toxicity or reproductive toxicity; (ii) petroleum, any fraction
of petroleum, natural gas, natural gas liquids, liquified natural gas, synthetic
gas usable for fuel (or mixtures of natural gas and such synthetic gas), and ash
produced by a resource recovery facility utilizing a municipal solid waste
stream, and drilling fluids, produced waters and other wastes associated with
the exploration, development or production of crude oil, natural gas or
geothermal resources; (iii) asbestos and any asbestos containing material; and
(v) any other material that, because of its quantity, concentration or physical
or chemical characteristics, poses a significant present or potential hazard to
human health or safety or to the environment if released into the workplace or
the environment.

     "Hazardous Substance Activity" means any actual, proposed or threatened
use, storage, holding, release (including any spilling, leaking, leaching,
pumping, pouring, emitting, emptying, dumping, disposing into the environment,
and the continuing migration into or through soil, surface water, groundwater or
any body of water), discharge, deposit, placement, generation, processing,
construction, treatment, abatement, removal, disposal, disposition, handling or
transportation of any Hazardous Substance from, under, in, into or on the
Property, including the movement or migration of any Hazardous Substance from
surrounding property, surface water, groundwater or any body of water under, in,
into or onto the Property and any resulting residual Hazardous Substance
contamination in, on or under the Property. "Hazardous Substance Activity" also
means any existence of Hazardous Substances on the Property that would cause the
Property or the owner or operator thereof to be in violation of, or that would
subject the Property to any remedial obligations under, any Environmental Laws,
including CERCLA and RCRA, assuming disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances pertaining to
the Property.

       Common Definitions and Provisions Agreement (Land) - Page 10
<PAGE>

     "Impositions" means all sales, excise, ad valorem, gross receipts,
business, transfer, stamp, occupancy, rental and other taxes, levies, fees,
charges, surcharges, assessments or penalties which arise out of or are
attributable to the Land Lease or which are imposed upon BNPLC or the Property
because of the ownership, leasing, occupancy, sale or operation of the Property,
or any part thereof or interest therein, or relating to or required to be paid
by any of the Permitted Encumbrances or the Development Documents, excluding
only Excluded Taxes. "Impositions" shall include real estate taxes imposed
because of a change of use or ownership of the Property on or prior to the date
of any sale by BNPLC pursuant to the Land Purchase Agreement.

     "Improvements" means any and all (1) buildings and other real property
improvements now or hereafter erected on the Land, and (2) equipment (e.g., HVAC
systems, elevators and plumbing fixtures) attached to the buildings or other
real property improvements, the removal of which would cause structural or other
material damage to the buildings or other real property improvements or would
materially and adversely affect the value or use of the buildings or other real
property improvements.

     "Interested Party" means each of (1) BNPLC, its Affiliates and its
successors and assigns as to the Property or any part thereof or any interest
therein, (2) BNPLC's Parent, and (3) any other Participants and their permitted
successors and assigns under the Participation Agreement; provided, however,
none of the following shall constitute an Interested Party: (a) any Person to
whom BNPLC may transfer an interest in the Property by a conveyance that is not
a Permitted Transfer and others that cannot lawfully claim an interest in the
Property except through or under such a transfer by BNPLC, (b) Zhone or any
Person that cannot lawfully claim an interest in the Property except through or
under a conveyance from Zhone, or (c) any Applicable Purchaser under the Land
Purchase Agreement and any Person that cannot lawfully claim an interest in the
Property except through or under a conveyance from such Applicable Purchaser.

     "Issue 97-1 Non-performance-related Subjective Event of Default" means an
Event of Default that is unrelated to the Property or the use or maintenance
thereof and that results solely from (A) a breach by Zhone of a provision in any
Land Operative Document or Other Operative Document, the occurrence of which
breach cannot be objectively determined, or (B) any other event described in
subparagraph 17.(e) of the Land Lease, the occurrence of which event cannot be
-------------------
objectively determined. For example, an Event of Default under subparagraph
                                                               ------------
17.(e) of the Land Lease resulting solely from a failure of Zhone to "generally"
------
pay its debts as such debts become due (in contrast to a failure of Zhone to pay
Rent to BNPLC as it becomes due under the Land Lease) would constitute an Issue
97-1 Non-performance-related Subjective Event of Default.  Likewise, an Event of
Default resulting solely from a breach by Zhone of Paragraph L of Part IV of
Schedule 1 attached to the Land Lease would constitute an Issue 97-1 Non-
performance-related Subjective Event of Default. In no event, however, will the
term "Issue 97-1 Non-performance-related Subjective Event of Default" include an
Event of Default resulting from (1) a failure of Zhone to make any payment
required to BNPLC under the Land Operative Documents or the Other Operative
Documents, (2) a breach by Zhone of the provisions set forth in Part II of
Schedule 1 attached to the Land Lease (which set forth financial covenants), (3)
----------
any failure of Zhone to use, maintain and insure the Property in accordance with
the requirements of the Land Lease, or (4) any failure of Zhone to pay the full
amount of any Land Supplemental Payment on the Designated Sale Date as required
by the Land Purchase Agreement. Except as provided in subparagraph 1(A)(3) of
                                                      --------------------
the Land Purchase Agreement, the characterization of any Event of Default as an
Issue 97-1 Non-performance-related Subjective Event of Default will not affect
the rights or remedies available to BNPLC because of the Event of Default.

     "Land" means the land described in Exhibit A attached to the Closing
                                        ---------
Certificate, the Land Lease and the Land Purchase Agreement.

         Common Definitions and Provisions Agreement (Land) - Page 11
<PAGE>

     "Land Break Even Amount" shall have the meaning assigned to it in
subparagraph 1(B)(1) of the Land Purchase Agreement.
--------------------

     "Land CDPA" means this Agreement, which is incorporated by reference into
each of the other Land Operative Documents.

     "Land Escrowed Proceeds" means, subject to the exclusions specified in the
next sentence, any money that is received by BNPLC from time to time during the
Term (and any interest earned thereon) from any party (1) under any property
insurance policy as a result of damage to the Property, (2) as compensation for
any restriction imposed by any governmental authority upon the use or
development of the Property or for the condemnation of the Property or any
portion thereof, (3) because of any judgment, decree or award for physical
damage to the Property or (4) as compensation under any title insurance policy
or otherwise as a result of any title defect or claimed title defect with
respect to the Property; provided, however, in determining the amount of "Land
Escrowed Proceeds" there shall be deducted all expenses and costs of every type,
kind and nature (including Attorneys' Fees) incurred by BNPLC to collect such
proceeds. Notwithstanding the foregoing, "Land Escrowed Proceeds" will not
include (A) any payment to BNPLC by a Participant or an Affiliate of BNPLC that
is made to compensate BNPLC for the Participant's or Affiliate's share of any
Losses BNPLC may incur as a result of any of the events described in the
preceding clauses (1) through (4), (B) any money or proceeds that have been
applied as a Qualified Prepayment or to pay any Breakage Costs or other costs
incurred in connection with a Qualified Prepayment, (C) any money or proceeds
that, after no less than ten days notice to Zhone, BNPLC returns or pays to a
third party because of BNPLC's good faith belief that such return or payment is
required by law, (D) any money or proceeds paid by BNPLC to Zhone or offset
against any amount owed by Zhone, or (E) any money or proceeds used by BNPLC in
accordance with the Land Lease for repairs or the restoration of the Property or
to obtain development rights or the release of restrictions that will inure to
the benefit of future owners or occupants of the Property. Until Land Escrowed
Proceeds are paid to Zhone pursuant to Paragraph 10 of the Land Lease,
                                       ------------
transferred to a purchaser under the Land Purchase Agreement as therein provided
or applied as a Qualified Prepayment or as otherwise described in the preceding
sentence, BNPLC shall keep the same deposited in one or more interest bearing
accounts, and all interest earned on such account shall be added to and made a
part of Land Escrowed Proceeds.

     "Land Lease" means the Lease Agreement (Land) dated as of Effective Date
between BNPLC, as landlord, and Zhone, as tenant, pursuant to which Zhone has
agreed to lease BNPLC's interest in the Land, as such agreement may be extended,
supplemented, amended, restated or otherwise modified from time to time in
accordance with its terms.

     "Land Operative Documents" means the Closing Certificate, the Land Lease,
the Land Purchase Agreement, the Land Pledge Agreement and this Land CDPA.

     "Land Pledge Agreement" means the Pledge Agreement (Land) dated as of the
Effective Date among BNPLC, Zhone, BNP Paribas and Wells Fargo Bank, N.A.
(pursuant to which Zhone may pledge certificates of deposit as security for
Zhone's obligations under the Land Purchase Agreement and for the corresponding
obligations of BNPLC to the Participants under the Participation Agreement), as
such agreement may be extended, supplemented, amended, restated or otherwise
modified from time to time in accordance with its terms.

     "Land Purchase Agreement" means the Purchase Agreement (Land) dated as of
Effective Date between BNPLC and Zhone, as such agreement may be extended,
supplemented, amended, restated or otherwise modified from time to time in
accordance with its terms.

         Common Definitions and Provisions Agreement (Land) - Page 12
<PAGE>

     "Land Purchase Documents" means collectively (1) the Land Purchase
Agreement, (2) the Memorandum of Purchase Agreement (Land) executed by BNPLC and
Zhone as of the Effective Date and recorded to provide notice of the Land
Purchase Agreement; and (3) the Land Pledge Agreement and all financing
statements, notices, acknowledgments and certificates of deposit executed or
delivered from time to time by Zhone, BNPLC or the other parties to the Land
Pledge Agreement pursuant to and as expressly provided therein.

     "Land Sale Closing Documents" shall have the meaning assigned to it in
subparagraph 1(C) of the Land Purchase Agreement.
-----------------

     "Land Supplemental Payment" shall have the meaning assigned to it in
subparagraph 1(A)(3) of the Land Purchase Agreement.
--------------------

     "Land Supplemental Payment Obligation" shall have the meaning assigned to
it in subparagraph 1(A)(3) of the Land Purchase Agreement.
      --------------------

     "Land Third Party Price" shall have the meaning assigned to it in
subparagraph 1(B)(2) of the Land Purchase Agreement.
--------------------

     "Last Building Base Rent Commencement Date" means the later of the
"Buildings 1&2 Base Rent Commencement Date" or the "Building 3 Base Rent
Commencement Date" (as such terms are defined in the Other Common Definitions
and Provisions Agreements).

     "LIBOR" means, for purposes of determining the Effective Rate for each Base
Rent Period, the rate determined by BNPLC's Parent to be the average rate of
interest per annum (rounded upwards, if necessary, to the next 1/16 of 1%) of
the rates at which deposits of dollars are offered or available to BNPLC's
Parent in the London interbank market at approximately 11:00 a.m. (London time)
on the second Business Day preceding the first day of such period. BNPLC shall
instruct BNPLC's Parent to consider deposits, for purposes of making the
determination described in the preceding sentence, that are offered: (i) for
delivery on the first day of such Base Rent Period, as the case may be, (ii) in
an amount equal or comparable to the total (projected on the applicable date of
determination by BNPLC's Parent) Stipulated Loss Value on the first day of such
period, and (iii) for a time equal or comparable to the length of such period.
If BNPLC's Parent so chooses, it may determine LIBOR for any period by reference
to the rate reported by the British Banker's Association on Page 3750 of the
Telerate Service at approximately 11:00 a.m. (London time) on the second
Business Day preceding the first day of such period. If for any reason BNPLC's
Parent determines that it is impossible or unreasonably difficult to determine
LIBOR with respect to a given Base Rent Period in accordance with the foregoing,
or if BNPLC's Parent shall determine that it is unlawful (or any central bank or
governmental authority shall assert that it is unlawful) for BNPLC, BNPLC's
Parent or any Participant to provide or maintain Funding Advances during any
Base Rent Period for which Base Rent is computed by reference to LIBOR, then
"LIBOR" for that period shall equal the Base Rate for that period.  All
determinations of LIBOR by BNPLC's Parent shall, in the absence of clear and
demonstrable error, be binding and conclusive upon Zhone.

     "LIBOR Period Election" for any Base Rent Period means a period of one
month, three months or six months as designated by Zhone at least five Business
Days prior to the commencement of such Base Rent Period by a notice given to
BNPLC in the form of Exhibit C attached to the Land Lease.  (For purposes of the
                     ---------
Land Lease a LIBOR Period Election for any Base Rent Period shall also be
considered the LIBOR Period Election in effect on the Last Building Base Rent
Commencement Date or Base Rent Date upon which such Base Rent Period begins.)
Any LIBOR Period Election so designated by Zhone shall remain in effect for the
entire Base

         Common Definitions and Provisions Agreement (Land) - Page 13
<PAGE>

Rent Period specified in Zhone's notice to BNPLC (provided such Base Rent Period
commences at least ten Business Days after BNPLC's receipt of the notice) and
for all subsequent Base Rent Periods until a new designation becomes effective
in accordance with the provisions set forth in this definition. Notwithstanding
the foregoing, however: (1) Zhone shall not be entitled to designate a LIBOR
Period Election that would cause a Base Rent Period to extend beyond the end of
the scheduled Term; (2) changes in the LIBOR Period Election shall become
effective only upon the commencement of a new Base Rent Period; (3) no LIBOR
Period Election designated by Zhone hereunder shall be different than the LIBOR
Period Election specified under (and as defined in) the Other Common Definitions
and Provisions Agreements, and for any Base Rent Period that ends on or prior to
the Last Building Base Rent Commencement Date, the LIBOR Period Election shall
be one month; and (4) if Zhone fails to make a LIBOR Period Election consistent
with the foregoing requirements for any Base Rent Period, or if an Event of
Default shall have occurred and be continuing on the third Business Day
preceding the commencement of any Base Rent Period, the LIBOR Period Election
for such Base Rent Period shall be deemed to be one month.

     "Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any agreement to sell receivables with recourse, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction).  In addition, for purposes of subparagraph A.(8) of Part IV
                                                 ------------------    -------
of Schedule 1 attached to the Land Lease, "Lien" includes any Liens under ERISA
   ----------
relating to Unfunded Benefit Liabilities of which Zhone is required to notify
BNPLC under subparagraph 13.(a)(vii) of the Land Lease (irrespective of whether
            ------------------------
Zhone actually notifies BNPLC as required thereunder).

     "Liens Removable by BNPLC" means, and is limited to, Liens encumbering the
Property that are asserted (1) other than as contemplated in the Land Operative
Documents or the Other Operative Documents, by BNPLC itself, (2) by third
parties lawfully claiming through or under BNPLC (which for purposes of the Land
Lease shall include any judgment liens established against the Property because
of a judgment rendered against BNPLC and shall also include any liens
established against the Property to secure past due Excluded Taxes), or (3) by
third parties lawfully claiming under a deed or other instrument duly executed
by BNPLC; provided, however, Liens Removable by BNPLC shall not include (A) any
Permitted Encumbrances or Development Documents (regardless of whether claimed
through or under BNPLC), (B) the Land Operative Documents, the Other Operative
Documents or any other document executed by BNPLC with the knowledge of (and
without objection by) Zhone's counsel contemporaneously with the execution and
delivery of the Land Operative Documents, (C) Liens which are neither lawfully
claimed through or under BNPLC (as described above) nor claimed under a deed or
other instrument duly executed by BNPLC, (D) Liens claimed by Zhone or claimed
through or under a conveyance made by Zhone, (E) Liens arising because of
BNPLC's compliance with Applicable Law, the Land Operative Documents, the Other
Operative Documents, Permitted Encumbrances, the Development Documents or any
written request made by Zhone, (F) Liens securing the payment of property taxes
or other amounts assessed against the Property by any governmental authority,
other than to secure the payment of past due Excluded Taxes or to secure damages
caused by (and attributed by any applicable principles of comparative fault to)
BNPLC's own Established Misconduct, (G) Liens resulting from or arising in
connection with any breach by Zhone of the Land Operative Documents or the Other
Operative Documents; or (H) Liens resulting from or arising in connection with
any Permitted Transfer that occurs more than thirty days after any Designated
Sale Date upon which, for any reason, Zhone or an Affiliate of Zhone or any
Applicable Purchaser shall not purchase BNPLC's interest in the Land and all
Improvements pursuant to the Land Purchase Agreement and the Other Purchase
Agreements.

         Common Definitions and Provisions Agreement (Land) - Page 14
<PAGE>

     "Losses" means the following: any and all losses, liabilities, damages
(whether actual, consequential, punitive or otherwise denominated), demands,
claims, administrative or legal proceedings, actions, judgments, causes of
action, assessments, fines, penalties, costs and expenses (including Attorneys'
Fees and the fees of outside accountants and environmental consultants), of any
and every kind or character, foreseeable and unforeseeable, liquidated and
contingent, proximate and remote.

     "Material Environmental Communication" means a communication between Zhone
or its agents and a regulatory agency or third party, which causes, or
potentially could cause (whether by implementation of or response to said
communication), a material change in the scope, duration, or nature of any
Remedial Work.

     "Maximum Remarketing Obligation" shall have the meaning indicated in
subparagraph 1(A)(3) of the Land Purchase Agreement.
--------------------

     "Minimum Collateral Percentage" means the percentage established as such
from time to time as described in Part III of Schedule 1 attached to the Land
                                              ----------
Lease and the Land Pledge Agreement.

     "Minimum Extended Remarketing Price" shall have the meaning assigned to it
in subparagraph 2(B) of the Land Purchase Agreement.
   -----------------

     "Multiemployer Plan" means a multiemployer plan as defined in Section 3(37)
of ERISA to which contributions have been made by Zhone or any ERISA Affiliate
during the preceding six years and which is covered by Title IV of ERISA.

     "Other Common Definitions and Provisions Agreements" means the Common
Definitions and Provisions Agreement (Improvements - Buildings 1&2) and the
Common Definitions and Provisions Agreements (Improvements - Building 3), both
dated as of the Effective Date and both between BNPLC and Zhone, as such
agreements may be extended, supplemented, amended, restated or otherwise
modified from time to time in accordance with their terms.

     "Other Lease Agreements" means the Lease Agreement (Improvements -
Buildings 1&2) and the Lease Agreement (Improvements - Building 3), both dated
as of the Effective Date and both between BNPLC and Zhone, as such agreements
may be extended, supplemented, amended, restated or otherwise modified from time
to time in accordance with their terms.

     "Other Operative Documents" means, collectively, all documents (other than
the Closing Certificate) comprising "Buildings 1&2 Operative Documents" or
"Building 3 Operative Documents" as described in recitals at the beginning of
the Other Common Definitions and Provisions Agreements.

     "Other Purchase Agreements" means the Purchase Agreement (Improvements -
Buildings 1&2) and the Purchase Agreement (Improvements - Building 3), both
dated as of the Effective Date and both between BNPLC and Zhone, as such
agreements may be extended, supplemented, amended, restated or otherwise
modified from time to time in accordance with their terms.

     "Participant" means BNPLC's Parent and any other Person that, upon becoming
a party to the Participation Agreement and the Land Pledge Agreement by
executing supplements as contemplated therein, agrees from time to time to
participate in all or some of the risks and rewards to BNPLC of the Land Lease
and the Land Purchase Documents.  As of the Effective Date, the only Participant
is BNPLC's Parent and Wells Fargo Bank, N.A., but BNPLC may agree after the
Effective Date to share in risks and rewards of the Land

         Common Definitions and Provisions Agreement (Land) - Page 15
<PAGE>

Lease and the Land Purchase Documents with other Participants. However, no
                                                               -------
Person other than Parent and its Affiliates shall qualify as a Participant for
purposes of the Land Operative Documents or other agreements concerning the
Property to which Zhone is a party unless such Person, during the continuance of
an Event of Default or otherwise with Zhone's prior written approval (which
approval will not be unreasonably withheld), became a party to the Land Pledge
Agreement and to the Participation Agreement by executing supplements to those
agreements as contemplated therein.

     "Participation Agreement" means the Participation Agreement dated as of the
Effective Date between BNPLC, BNPLC's Parent and Wells Fargo Bank, N.A.
(pursuant to which BNPLC's Parent and Wells Fargo Bank, N.A. have agreed to
participate in the risks and rewards to BNPLC of the Land Operative Documents
and the Other Operative Documents), as such Participation Agreement may be
extended, supplemented, amended, restated or otherwise modified from time to
time in accordance with its terms.  It is understood, however, that the
Participation Agreement expressly makes Zhone a third party beneficiary of the
Participant's obligations thereunder to make advances to BNPLC in connection
with the Construction Advances contemplated in the Construction Management
Agreements and with any Post-Closing Advance under the Land Lease.  Thus,
Zhone's consent will be required to any amendment of the Participation Agreement
that limits or excuses such obligations.  It is also understood that the
Participation Agreement (as more particularly described therein) amends,
restates and replaces a prior Participation Agreement, certain provisions of
which Zhone was a third party beneficiary, and Zhone has given its consent to
such amendment, restatement and replacement of the prior Participation
Agreement.

     "PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.

     "Permitted Encumbrances" means (i) the encumbrances and other matters
affecting the Property that are set forth in Exhibit B attached to the Closing
                                             ---------
Certificate, (ii) any easement agreement or other document affecting title to
the Property executed by BNPLC at the request of or with the consent of Zhone
(including the Other Lease Agreements, the Other Purchase Agreements and all
documents executed by BNPLC pursuant to the Other Purchase Agreements), (iii)
any ground lease executed pursuant to the Other Purchase Agreements, (iv) any
Liens securing the payment of Impositions which are not delinquent or claimed to
be delinquent or which are being contested in accordance with subparagraph 5.(a)
                                                              ------------------
of the Land Lease, (v) mechanics' and materialmen's liens for amounts not past
due or claimed to be past due or which are being contested in accordance with
subparagraph 11.(c) of the Land Lease; and (vi) all terms and conditions of the
-------------------
Acquisition Contract or any other agreement made with the City of Oakland in
connection with or pursuant to the Acquisition Contract, to the extent such
terms and conditions survive the closing under the Acquisition Contract and
affect title to the Property.

     "Permitted Hazardous Substance Use" means the use, generation, storage and
offsite disposal of Permitted Hazardous Substances in strict accordance with
applicable Environmental Laws and with due care given the nature of the
Hazardous Substances involved; provided, the scope and nature of such use,
generation, storage and disposal shall not:

          (1)  exceed that reasonably required for the construction of the
     Construction Projects in accordance with the Other Lease Agreements and the
     Construction Management Agreements or for the operation of the Property for
     the purposes expressly permitted under subparagraph 2.(a) of the Land
                                            ------------------
     Lease; or

         Common Definitions and Provisions Agreement (Land) - Page 16
<PAGE>

          (2)  include any disposal, discharge or other release of Hazardous
     Substances from the Property in any manner that might allow such substances
     to reach surface water or groundwater, except (i) through a lawful and
     properly authorized discharge (A) to a publicly owned treatment works or
     (B) with rainwater or storm water runoff in accordance with Applicable Laws
     and any permits obtained by Zhone that govern such runoff; or (ii) any such
     disposal, discharge or other release of Hazardous Substances for which no
     permits are required and which are not otherwise regulated under applicable
     Environmental Laws.

Further, notwithstanding anything to the contrary herein contained, Permitted
Hazardous Substance Use shall not include any use of the Property in a manner
that requires a RCRA treatment, storage or disposal permit, including a
landfill, incinerator or other waste disposal facility.

     "Permitted Hazardous Substances" means Hazardous Substances used and
reasonably required for the construction of the Construction Project or for the
use of the Property by Zhone and its permitted subtenants and assigns for the
purposes expressly permitted by subparagraph 2.(a) of the Land Lease, in either
                                ------------------
case in strict compliance with all Environmental Laws and with due care given
the nature of the Hazardous Substances involved. Without limiting the generality
of the foregoing, Permitted Hazardous Substances shall include usual and
customary office, laboratory and janitorial products.

     "Permitted Transfer" means any one or more of the following:  (1) the
creation or conveyance by BNPLC of rights and interests in favor of any
Participant pursuant to the Participation Agreement; (2) the creation or
conveyance of rights and interests in favor of or to BNP Paribas (through its
San Francisco Branch or otherwise), as BNPLC's Parent, or any other Qualified
Affiliate of BNPLC, provided that Zhone must be notified before any such
conveyance to BNP Paribas or another Qualified Affiliate of (A) any interest in
the Property or any portion thereof by an assignment or other document which
will be recorded in the real property records of Alameda County, California or
(B) BNPLC's entire interest in the Land and the Property; (3) any assignment or
conveyance by BNPLC or its permitted successors or assigns to any present or
future Participant of any lien or security interest against the Property (in
contrast to a conveyance of BNPLC's fee estate in the Land and Improvements) or
of any interest in Rent, payments required by or under the Land Purchase
Documents or payments to be generated from the Property after the Term, provided
that such assignment or conveyance is made expressly subject to the rights of
Zhone under the Land Operative Documents and the Other Operative Documents; (4)
any agreement to exercise or refrain from exercising rights or remedies under
the Land Operative Documents or under the Other Operative Documents made by
BNPLC with any present or future Participant; (5) any assignment or conveyance
by BNPLC requested by Zhone or required by any Permitted Encumbrance, by the
Land Purchase Agreement or Other Purchase Agreements, by the Acquisition
Contract or any other agreement made with the City of Oakland in connection with
or pursuant to the Acquisition Contract, by any other Development Contract or by
Applicable Laws; or (6) any assignment or conveyance after a Designated Sale
Date on which Zhone shall not have purchased or caused an Applicable Purchaser
to purchase BNPLC's interest in the Property and, if applicable, after the
expiration of the thirty day cure period specified in Paragraph 4(B) of the Land
                                                      --------------
Purchase Agreement.

     "Person" means an individual, a corporation, a partnership, an
unincorporated organization, an association, a joint stock company, a joint
venture, a trust, an estate, a government or agency or political subdivision
thereof or other entity, whether acting in an individual, fiduciary or other
capacity.

     "Personal Property" shall have the meaning assigned to it on page 2 of the
Land Lease.

         Common Definitions and Provisions Agreement (Land) - Page 17
<PAGE>

     "Plan" means any employee benefit or other plan established or maintained,
or to which contributions have been made, by Zhone or any ERISA Affiliate of
Zhone during the preceding six years and which is covered by Title IV of ERISA,
other than a Multiemployer Plan.

     "Post Closing Advance" shall have the meaning assigned to it in Paragraph 6
                                                                     -----------
of the Land Lease.

     "Post Closing Advance" shall have the meaning assigned to it in Paragraph 6
                                                                     -----------
of the Land Lease.

     "Prime Rate" means the prime interest rate or equivalent charged by BNPLC's
Parent in the United States of America as announced or published by BNPLC's
Parent from time to time, which need not be the lowest interest rate charged by
BNPLC's Parent. If for any reason BNPLC's Parent does not announce or publish a
prime rate or equivalent, the prime rate or equivalent announced or published by
either CitiBank, N.A. or any New York branch or office of Credit Commercial de
France as selected by BNPLC shall be used to compute the rate describe in the
preceding sentence. The prime rate or equivalent announced or published by such
bank need not be the lowest rate charged by it. The Prime Rate may change from
time to time after the Effective Date without notice to Zhone as of the
effective time of each change in rates described in this definition.

     "Prior Funding Advances" means the advances made prior to the Effective
Date by BNPLC's Parent (directly or through one or more of its Affiliates) or by
Participants to or on behalf of BNPLC to cover the cost of BNPLC's acquisition
of the Property (including $300,000 advanced and ultimately paid to Zhone as
consideration for stock warrants that Zhone granted to Seller contemporaneously
with BNPLC's acquisition of the Land) and other costs related to the documents
being amended, restated and replaced by the Land Operative Documents. The amount
of the Prior Funding Advances will be confirmed by a separate closing
certificate executed by Zhone as of the Effective Date.  (Such amount equals the
outstanding balance on the Effective Date of "Stipulated Loss Value" under and
as defined in the lease that is being amended, restated and replaced by the
Buildings 1&2 Lease and the Building 3 Lease.)

     "Property" means the Personal Property and the Real Property, collectively.
All rights, titles and interests acquired by BNPLC under the Acquisition
Contract are, to the extent not covered by the Land Lease and thus not
encompassed within this definition of Property, intended to be covered by the
Other Lease Agreements and encompassed within the term "Property" as defined in
the Other Common Definitions and Provisions Agreements.

     "Purchase Money Lien" shall have the meaning assigned to it in Paragraph 6
                                                                    -----------
of the Land Lease.

     "Purchase Money Note" shall have the meaning assigned to it in Paragraph 6
                                                                    -----------
of the Land Lease.

     "Purchase Option" shall have the meaning assigned to it in subparagraph
                                                                ------------
1(A)(1) of the Land Purchase Agreement.
-------

     "Qualified Affiliate" means any Person that is one hundred percent (100%)
owned, directly or indirectly, by BNP Paribas or any successor of such bank;
provided, that such Person can make (and has in writing made) the same
representations to Zhone that BNPLC has made in Paragraphs 3(E) and 3(F) of the
                                                ------------------------
Closing Certificate; and, provided, further, that such Person is not insolvent.

     "Qualified Prepayments" means any payments received by BNPLC from time to
time during the Term (1) under any property insurance policy as a result of
damage to the Property, (2) as compensation for any restriction placed upon the
use or development of the Property or for the condemnation of the Property or
any

         Common Definitions and Provisions Agreement (Land) - Page 18
<PAGE>

portion thereof, (3) because of any judgment, decree or award for injury or
damage to the Property, or (4) under any title insurance policy or otherwise as
a result of any title defect or claimed title defect with respect to the
Property; provided, however, that (x) in determining the amount of "Qualified
Prepayments", there shall be deducted all expenses and costs of every kind, type
and nature (including taxes, Breakage Costs and Attorneys' Fees) incurred by
BNPLC with respect to the collection or application of such payments, (y)
"Qualified Prepayments" shall not include any payment to BNPLC by a Participant
or an Affiliate of BNPLC that is made to compensate BNPLC for the Participant's
or Affiliate's share of any Losses BNPLC may incur as a result of any of the
events described in the preceding clauses (1) through (4) and (z) "Qualified
Prepayments" shall not include any payments received by BNPLC that BNPLC has
paid or is obligated to pay to Zhone for the restoration or repair of the
Property or that BNPLC is holding as Land Escrowed Proceeds pursuant to
Paragraph 10 of the Land Lease or any other provision of the Land Lease. For
------------
purposes of computing the total Qualified Prepayments (and other amounts
dependent upon Qualified Prepayments, such as Stipulated Loss Value) paid to or
received by BNPLC as of any date, payments described in the preceding clauses
(1) through (4) will be considered as Land Escrowed Proceeds, not Qualified
Prepayments, until they are actually applied as Qualified Prepayments by BNPLC
as provided in the Paragraph 10 of the Land Lease.
                   ------------

     "Real Property" shall have the meaning assigned to it on page 1 of the Land
Lease.

     "Remedial Work" means any investigation, monitoring, clean-up, containment,
remediation, removal, payment of response costs, or restoration work and the
preparation and implementation of any closure or other required remedial plans
that any governmental agency or political subdivision requires or approves (or
could reasonably be expected to require if it was aware of all relevant
circumstances concerning the Property), whether by judicial order or otherwise,
because of the presence of or suspected presence of Hazardous Substances in, on,
under or about the Property or because of any prior Hazardous Substance
Activity. Without limiting the generality of the foregoing, Remedial Work also
means any obligations imposed upon or undertaken by Zhone pursuant to
Development Documents or any recommendations or proposals made therein.

     "Rent" means the Base Rent and all Additional Rent.

     "Residual Risk Percentage" means fifteen percent (15%).

     "Responsible Financial Officer" means the chief financial officer, the
controller, the treasurer or the assistant treasurer of Zhone.

     "Secured Spread" means forty-five basis points (45/100 of 1%) per annum.

     "Seller" means the REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND, a community
redevelopment agency organized and existing under the California Community
Redevelopment Law.

     "Stipulated Loss Value" as of any date means the amount equal to the sum of
the Prior Funding Advances, plus the Post Closing Advance if it is made on or
prior to such date, minus all funds actually received by BNPLC and applied as
Qualified Prepayments on or prior to such date. Under no circumstances will any
payment of Base Rent or Commitment Fees reduce Stipulated Loss Value.

     "Subsidiary" means, with respect to any Person, any Affiliate of which at
least a majority of the securities or other ownership interests having ordinary
voting power then exercisable for the election of directors or other persons
performing similar functions are at the time owned directly or indirectly by
such Person.

         Common Definitions and Provisions Agreement (Land) - Page 19
<PAGE>

     "Term" shall have the meaning assigned to it in subparagraph 1.(a) of the
                                                     ------------------
Land Lease.

     "Third Party Sale Notice" shall have the meaning assigned to it in
subparagraph 2(C) of the Land Purchase Agreement.
-----------------

     "Third Party Sale Proposal" shall have the meaning assigned to it in
subparagraph 2(C) of the Land Purchase Agreement.
-----------------

     "Third Party Target Price" shall have the meaning assigned to it in
subparagraph 2(C) of the Land Purchase Agreement.
-----------------

     "Unfunded Benefit Liabilities" means, with respect to any Plan or
Multiemployer Plan, the amount (if any) by which the present value of all
benefit liabilities (within the meaning of Section 4001(a)(16) of ERISA) under
the Plan or Multiemployer Plan exceeds the market value of all Plan or
Multiemployer assets allocable to such benefit liabilities, as determined on the
most recent valuation date of the Plan or Multiemployer Plan and in accordance
with the provisions of ERISA for calculating the potential liability of Zhone or
any ERISA Affiliate of Zhone under Title IV of ERISA.

     "Unsecured Spread" means two hundred twenty-five basis points (225/100 of
1%) per annum.

     "Voluntary Retention of the Property" means an affirmative election made by
BNPLC to keep the Property pursuant to, and under the circumstances described
in, the second sentence of subparagraph 1(A)(2)(a) of the Land Purchase
                           -----------------------
Agreement.

     "Zhone" means Zhone Technologies, Inc., a Delaware corporation.

     "Zhone's Extended Remarketing Period" shall have the meaning assigned to it
in subparagraph 2(A) of the Land Purchase Agreement.
   -----------------

     "Zhone's Extended Remarketing Right" shall have the meaning assigned to it
in subparagraph 2(A) of the Land Purchase Agreement.
   -----------------

     "Zhone's Initial Remarketing Rights" shall have the meaning assigned to it
in subparagraph 1(A)(2) of the Land Purchase Agreement.
   --------------------

         Common Definitions and Provisions Agreement (Land) - Page 20
<PAGE>

                     ARTICLE II - RULES OF INTERPRETATION

     The following provisions will apply to and govern the interpretation of
each of the Land Operative Documents:

     1.  Notices. The provision of any Land Operative Document, or of any
Applicable Laws with reference to the sending, mailing or delivery of any notice
or demand under any Land Operative Document or with reference to the making of
any payment required under any Land Operative Document, shall be deemed to be
complied with when and if the following steps are taken:

         (i)   All Rent and other amounts required to be paid by Zhone to BNPLC
     shall be paid to BNPLC in immediately available funds by wire transfer to:

                       Federal Reserve Bank of New York
                       ABA  026007689 BNP Paribas
                       /BNP/ BNP San Francisco
                       /AC/ 14334000176
                       /Ref/ Zhone Oakland Synthetic Land Lease

     or at such other place and in such other manner as BNPLC may designate in a
     notice to Zhone.

         (ii)  All Collateral required to be paid by Zhone to the Agent shall be
     paid in immediately available funds by wire transfer to:

                       Federal Reserve Bank of New York
                       ABA  026007689 BNP Paribas
                       /BNP/ BNP San Francisco
                       /AC/ 14334000176
                       /Ref/ Zhone Collateral Payment

     or at such other place and in such other manner as Agent may designate in a
     notice to Zhone.

         Common Definitions and Provisions Agreement (Land) - Page 21
<PAGE>

         (iii) All notices, demands, approvals, consents and other
     communications to be made under any Land Operative Document to or by the
     parties thereto must, to be effective for purpose of such Land Operative
     Document, be in writing. Notices, demands and other communications required
     or permitted under any Land Operative Document are to be sent to the
     addresses set forth below (or in the case of communications to
     Participants, at the addresses set forth in Schedule 1 to the Participation
                                                 ----------
     Agreement) and shall be given by any of the following means: (A) personal
     service, with proof of delivery or attempted delivery retained; (B)
     electronic communication, whether by telex, telegram or telecopying (if
     confirmed in writing sent by United States first class mail, return receipt
     requested); or (C) registered or certified first class mail, return receipt
     requested. Such addresses may be changed by notice to the other parties
     given in the same manner as provided above.  Any notice or other
     communication sent pursuant to clause (A) or (B) hereof shall be deemed
     received upon such personal service or upon dispatch by electronic means,
     and, if sent pursuant to clause (C) shall be deemed received five days
     following deposit in the mail.

                       Address of BNPLC:
                       ----------------

                       BNP Leasing Corporation
                       12201 Merit Drive
                       Suite 860
                       Dallas, Texas 75251
                       Attention: Lloyd G. Cox
                       Telecopy: (972) 788-9191

                       With a copy to:
                       --------------

                       BNP Paribas, San Francisco
                       180 Montgomery Street
                       San Francisco, California 94104
                       Attention: Gavin Holles or Stuart Darby
                       Telecopy: (415) 296-8954

                       And for draw requests and funding notices, with a copy
                       ------------------------------------------------------
                       to:
                       --

                       BNP Paribas, San Francisco
                       180 Montgomery Street
                       San Francisco, California 94104
                       Attention: Paggie Wong/Thomas Kuntz
                       Telecopy: (415) 956-4230

                       Address of Zhone:
                       ----------------

                       Zhone Technologies, Inc.
                       Attn: Bruce Ruberg
                       7001 Oakport Street
                       Oakland, CA 94621
                       Telecopy: (510) 777-7010

         Common Definitions and Provisions Agreement (Land) - Page 22
<PAGE>

          2.   Severability. If any term or provision of any Land Operative
Document or the application thereof shall to any extent be held by a court of
competent jurisdiction to be invalid and unenforceable, the remainder of such
document, or the application of such term or provision other than to the extent
to which it is invalid or unenforceable, shall not be affected thereby.

          3.   No Merger. There shall be no merger of the Land Lease or of the
leasehold estate created by the Land Lease with any other interest in the
Property by reason of the fact that the same person may acquire or hold,
directly or indirectly, the Land Lease or the leasehold estate created hereby
and any other interest in the Property, unless all Persons with an interest in
the Property that would be adversely affected by any such merger specifically
agree in writing that such a merger shall occur. There shall be no merger of the
Land Purchase Agreement or of the purchase options or obligations created by the
Land Purchase Agreement with any other interest in the Property by reason of the
fact that the same person may acquire or hold, directly or indirectly, the Land
Lease or the leasehold estate created hereby and any other interest in the
Property, unless all Persons with an interest in the Property that would be
adversely affected by any such merger specifically agree in writing that such a
merger shall occur.

          4.   No Implied Waiver. The failure of BNPLC or Zhone to insist at any
time upon the strict performance of any covenant or agreement or to exercise any
option, right, power or remedy contained in any Land Operative Document shall
not be construed as a waiver or a relinquishment thereof for the future. The
failure of Agent to insist at any time upon the strict performance of any
covenant or agreement or to exercise any option, right, power or remedy
contained in the Land Pledge Agreement shall not be construed as a waiver or a
relinquishment thereof for the future. The waiver of or redress for any breach
of any Land Operative Document by any party thereto shall not prevent a similar
subsequent act from constituting a violation. Any express waiver of any
provision of any Land Operative Document shall affect only the term or condition
specified in such waiver and only for the time and in the manner specifically
stated therein. No waiver by any party to any Land Operative Document of any
provision therein shall be deemed to have been made unless expressed in writing
and signed by the party to be bound by the waiver. A receipt by BNPLC of any
Rent with knowledge of the breach by Zhone of any covenant or agreement
contained in the Land Lease or any other Land Operative Document shall not be
deemed a waiver of such breach. A receipt by Agent of any Collateral or other
payment under the Land Pledge Agreement with knowledge of the breach by Zhone of
any covenant or agreement contained in the Land Pledge Agreement shall not be
deemed a waiver of such breach.

          5.   Entire and Only Agreements. The Land Operative Documents
supersede any prior negotiations and agreements between BNPLC, Agent and Zhone
concerning the Property or the Collateral, and no amendment or modification of
any Land Operative Document shall be binding or valid unless expressed in a
writing executed by all parties to such Land Operative Document.

          6.   Binding Effect. Except to the extent, if any, expressly provided
to the contrary in any Land Operative Document with respect to assignments
thereof, all of the covenants, agreements, terms and conditions to be observed
and performed by the parties to the Land Operative Documents shall be applicable
to and binding upon their respective successors and, to the extent assignment is
permitted thereunder, their respective assigns.

          7.   Time is of the Essence. Time is of the essence as to all
obligations of Zhone and BNPLC and all notices required of Zhone and BNPLC under
the Land Operative Documents.

          8.   Governing Law. Each Land Operative Document shall be governed by
and construed in accordance with the laws of the State of California without
regard to conflict or choice of laws (subject,

         Common Definitions and Provisions Agreement (Land) - Page 23
<PAGE>

however, in the case of the Land Pledge Agreement to any contrary provisions of
the "UCC," as defined in the Land Pledge Agreement).

          9.   Paragraph Headings. The paragraph and section headings contained
in the Land Operative Documents are for convenience only and shall in no way
enlarge or limit the scope or meaning of the various and several provisions
thereof.

          10.  Negotiated Documents. All the parties to each Land Operative
Document and their counsel have reviewed and revised or requested revisions to
such Land Operative Document, and the usual rule of construction that any
ambiguities are to be resolved against the drafting party shall not apply to the
construction or interpretation of any Land Operative Documents or any amendments
thereof.

          11.  Terms Not Expressly Defined in a Land Operative Document. As used
in any Land Operative Document, a capitalized term that is not defined therein
or in this Land CDPA, but that is defined in another Land Operative Document,
shall have the meaning ascribed to it in the other Land Operative Document.
Further, as used in any Land Operative Document, a capitalized term that is not
defined therein or in this Land CDPA or in another Land Operative Document, but
that is defined in any of the Other Operative Documents, shall have the meaning
ascribed to it in the Other Operative Documents.  But if the meaning given any
such capitalized term in one of the Other Operative Documents is different than
the meaning assigned to it another of the Other Operative Documents, the term
will be construed broadly for purposes of the Land Operative Documents to
include anything that would fall within one or more of the definitions of the
term in the Other Operative Documents.

          12.  Other Terms and References. Words of any gender used in each Land
Operative Document shall be held and construed to include any other gender, and
words in the singular number shall be held to include the plural and vice versa,
unless the context otherwise requires. References in any Land Operative Document
to Paragraphs, subparagraphs, Sections, subsections or other subdivisions shall
refer to the corresponding Paragraphs, subparagraphs, Sections, subsections or
subdivisions of that Land Operative Document, unless specific reference is made
to another document or instrument. References in any Land Operative Document to
any Schedule or Exhibit shall refer to the corresponding Schedule or Exhibit
attached to that Land Operative Document, which shall be made a part thereof by
such reference. All capitalized terms used in each Land Operative Document which
refer to other documents shall be deemed to refer to such other documents as
they may be renewed, extended, supplemented, amended or otherwise modified from
time to time, provided such documents are not renewed, extended or modified in
breach of any provision contained in the Land Operative Documents or, in the
case of any other document to which BNPLC is a party or of which BNPLC is an
intended beneficiary, without the consent of BNPLC. All accounting terms used
but not specifically defined in any Land Operative Document shall be construed
in accordance with GAAP. The words "this [Agreement]", "herein", "hereof",
"hereby", "hereunder" and words of similar import when used in each Land
Operative Document refer to that Land Operative Document as a whole and not to
any particular subdivision unless expressly so limited. The phrases "this
Paragraph", "this subparagraph", "this Section", "this subsection" and similar
phrases used in any Land Operative Document refer only to the Paragraph,
subparagraph, Section, subsection or other subdivision described in which the
phrase occurs. As used in the Land Operative Documents the word "or" is not
exclusive. As used in the Land Operative Documents, the words "include",
"including" and similar terms shall be construed as if followed by "without
limitation to".

          13.  Execution in Counterparts. To facilitate execution, each Land
Operative Document may be executed in as many identical counterparts as may be
required. It shall not be necessary that the signature of, or on behalf of, each
party, or that the signature of all persons required to bind any party,

         Common Definitions and Provisions Agreement (Land) - Page 24
<PAGE>

appear on each counterpart. All counterparts, taken together, shall collectively
constitute a single instrument. It shall not be necessary in making proof of any
Land Operative Document to produce or account for more than a single counterpart
containing the respective signatures of, or on behalf of, each of the parties
hereto. Any signature page to any counterpart may be detached from such
counterpart without impairing the legal effect of the signatures thereon and
thereafter attached to another counterpart identical thereto except having
attached to it additional signature pages.

          14.  Not a Partnership, Etc. NOTHING IN ANY LAND OPERATIVE DOCUMENT IS
INTENDED TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE
BETWEEN BNPLC AND ZHONE. NEITHER THE EXECUTION OF ANY LAND OPERATIVE DOCUMENT
NOR THE ADMINISTRATION THEREOF OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC,
NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO ANY LAND
OPERATIVE DOCUMENT IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF
BNPLC TO ZHONE.

          15.  Amendment and Restatement.  This Land CDPA amends, restates and
replaces the Prior Common Definitions and Provisions Agreement referenced in the
recitals at the beginning of this agreement.

                        [The signature pages follows.]

         Common Definitions and Provisions Agreement (Land) - Page 25
<PAGE>

     IN WITNESS WHEREOF, Zhone and BNPLC have caused this Common Definitions and
Provisions Agreement (Land) to be executed as of August 1, 2000.

                                   "Zhone"

                                   ZHONE TECHNOLOGIES, INC.

                                   By: ________________________________________
                                       Name:___________________________________
                                       Title:__________________________________
<PAGE>

[Continuation of signature pages to Common Definitions and Provisions Agreement
(Land) dated to be effective as of August 1, 2000]

                                   "BNPLC"

                                   BNP LEASING CORPORATION

                                   By: ________________________________________
                                       Lloyd G. Cox, Vice President<PAGE>

                                                                   Exhibit 10.18

================================================================================

                              PURCHASE AGREEMENT
                        (IMPROVEMENTS - BUILDINGS 1&2)

                                    BETWEEN

                            BNP LEASING CORPORATION

                                   ("BNPLC")

                                      AND

                           ZHONE TECHNOLOGIES, INC.

                                   ("Zhone")

                                August 1, 2000

                             (Oakland, California)

============================================================================
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
1    Zhone's Options and Obligations on the Designated Sale Date...............................................    2
     (A)    Right to Purchase; Initial Remarketing Rights; Supplemental Payment Obligation.....................    2
            ------------------------------------------------------------------------------
     (B)    Determinations Concerning Price and the Supplemental Payment.......................................    3
            ------------------------------------------------------------
     (C)    Designation of the Purchaser.......................................................................    7
            ----------------------------
     (D)    Effect of the Purchase Option and Zhone's Initial Remarketing Rights on Subsequent Title
            ----------------------------------------------------------------------------------------
            Encumbrances.......................................................................................    8
            ------------
     (E)    Security for the Purchase Option and Zhone's Initial Remarketing Rights............................    8
            -----------------------------------------------------------------------
     (F)    Delivery of Books and Records If BNPLC Retains the Buildings 1&2 Property..........................    8
            -------------------------------------------------------------------------

2    Zhone's Rights and Options After the Designated Sale Date.................................................    9
     (A)    Zhone's Extended Right to Remarket.................................................................    9
            ----------------------------------
     (B)    Definition of Minimum Extended Remarketing Price...................................................    9
            ------------------------------------------------
     (C)    BNPLC's Right to Sell..............................................................................   10
            ---------------------
     (D)    Zhone's Right to Excess Sales Proceeds.............................................................   11
            --------------------------------------
     (E)    Permitted Transfers During Zhone's Extended Remarketing Period.....................................   12
            --------------------------------------------------------------

3    Terms of Conveyance Upon Purchase.........................................................................   12

4    Survival and Termination of the Rights and Obligations of Zhone and Bnplc.................................   12
     (A)    Status of this Agreement Generally.................................................................   12
            ----------------------------------
     (B)    Election by Zhone to Terminate the Buildings 1&2 Supplemental Payment Obligation Prior to the
            ---------------------------------------------------------------------------------------------
            Designated Sale Date and the Buildings 1&2 Base Rent Commencement Date.............................   13
            ----------------------------------------------------------------------
     (C)    Automatic Termination of Zhone's Rights............................................................   14
            ---------------------------------------
     (D)    Conditions to Zhone's Rights Relative to State and Local Subdivision Requirements..................   15
            ---------------------------------------------------------------------------------
     (E)    Termination of Zhone's Extended Remarketing Rights to Permit a Sale by BNPLC.......................   15
            ----------------------------------------------------------------------------
     (F)    Payment Only to BNPLC..............................................................................   15
            ---------------------
     (G)    Remedies Under the other Operative Documents.......................................................   15
            --------------------------------------------
     (H)    Occupancy by Zhone Prior to Closing of a Sale......................................................   16
            ---------------------------------------------
     (I)    Preferential Payments to BNPLC.....................................................................   16
            ------------------------------

5.   Security for Zhone's Obligations; Return of Funds.........................................................   16

6    Certain Remedies Cumulative...............................................................................   17

7    Attorneys' Fees and Legal Expenses........................................................................   17

8    Estoppel Certificate......................................................................................   17

9    Successors and Assigns....................................................................................   17

10   Amendment and Restatement.................................................................................   17
</TABLE>

[Improvements - Buildings 1&2]

<PAGE>

                            Exhibits and Schedules
                            ----------------------

<TABLE>
<CAPTION>
<S>                                                <C>
Exhibit A.................................................................Legal Description
---------

Exhibit B......................................................Grant Deed Form Requirements
---------

Exhibit C...................................................    Bill of Sale and Assignment
---------

Exhibit D.................................................    Acknowledgment and Disclaimer
---------

Exhibit E.......................................................    Secretary's Certificate
---------

Exhibit F........................................    Certificate Concerning Tax Withholding
---------

Exhibit G......................................    Notice by Zhone of Election to Terminate
---------
</TABLE>

  [Improvements - Buildings 1&2]
<PAGE>

                              PURCHASE AGREEMENT
                        (IMPROVEMENTS - BUILDINGS 1&2)

     This PURCHASE AGREEMENT (IMPROVEMENTS - BUILDINGS 1&2) (this "Agreement")
is made and dated as of August 1, 2000 (the "Effective Date") by and between BNP
LEASING CORPORATION, a Delaware corporation ("BNPLC"), and ZHONE TECHNOLOGIES,
INC., a Delaware corporation ("Zhone").

                                   RECITALS

     Contemporaneously with the execution of this Agreement, BNPLC and Zhone are
executing a Common Definitions and Provisions Agreement (Improvements -
Buildings 1&2) dated as of the Effective Date (the "Buildings 1&2 CDPA"), which
by this reference is incorporated into and made a part of this Agreement for all
purposes. As used in this Agreement, capitalized terms defined in the Buildings
1&2 CDPA and not otherwise defined in this Agreement are intended to have the
respective meanings assigned to them in the Buildings 1&2 CDPA.

     Zhone and BNPLC previously executed that Purchase Agreement (Phase I -
Improvements) dated as of January 20, 2000 (the "Prior Purchase Agreement").
Zhone and BNPLC have agreed to amend, restate and replace the Prior Purchase
Agreement with this Agreement and the Building 3 Purchase Agreement as provided
in Paragraph 10 below.

     Pursuant to the Acquisition Contract, which covers the Land described in
Exhibit A, BNPLC has acquired the Land and any appurtenances thereto from
---------
Seller.  Contemporaneously with this Agreement, BNPLC and Zhone are executing a
Lease Agreement (Improvements - Buildings 1&2) (the "Buildings 1&2 Lease"),
under which BNPLC is leasing to Zhone the Improvements on the portion of the
Land designated as the Buildings 1&2 Site in Exhibit A (the "Buildings 1&2
                                             ---------
Site"), and BNPLC is agreeing to provide funding for the construction and
completion of such Improvements, all of which will be owned by BNPLC. Also
contemporaneously with this Agreement, BNPLC and Zhone are executing a Lease
Agreement (Improvements - Building 3) (the "Building 3 Lease"), under which
BNPLC is leasing to Zhone the Improvements on all the Land other than the
Buildings 1&2 Site, and BNPLC is agreeing to provide funding for the
construction and completion of such Improvements, all of which will be owned by
BNPLC.

     All of BNPLC's interests in the Improvements covered by the Buildings 1&2
Lease and in all other real and personal property from time to time covered by
the Buildings 1&2 Lease and included within the "Property" as defined therein
are hereinafter collectively referred to as the "Buildings 1&2 Property".  All
of BNPLC's interests in the Improvements covered by the Building 3 Lease and in
all other real and personal property from time to time covered by the Building 3
Lease and included within the "Property" as defined therein are hereinafter
collectively referred to as the "Building 3 Property". Together, the Buildings
1&2 Property and the Building 3 Property are hereinafter called the "Combined
Properties".  The Combined Properties do not include the Land itself, it being
understood that the Land Purchase Agreement constitutes a separate agreement
providing for the possible sale of the Land and the appurtenances thereto, and
only the Land and the appurtenances thereto, from BNPLC to Zhone or a third
party designated by Zhone.

                                  AGREEMENTS

     1    Zhone's Options and Obligations on the Designated Sale Date.

          (A) Right to Purchase; Initial Remarketing Rights; Supplemental
              -----------------------------------------------------------
Payment Obligation.
------------------
<PAGE>

Whether or not an Event of Default shall have occurred and be continuing or the
Buildings 1&2 Lease shall have been terminated, but subject to Paragraph 4
below:

               (1)  Zhone shall have the right (the "Purchase Option") to
     purchase or cause an Affiliate of Zhone to purchase the Buildings 1&2
     Property and BNPLC's interest in Buildings 1&2 Escrowed Proceeds, if any,
     on the Designated Sale Date for a cash price equal to the Buildings 1&2
     Break Even Amount (as defined below).

               (2)  If neither Zhone nor an Affiliate of Zhone purchases the
     Buildings 1&2 Property and BNPLC's interest in any Buildings 1&2 Escrowed
     Proceeds on the Designated Sale Date as provided in the preceding
     subparagraph 1(A)(1), then Zhone shall have the following rights
     (collectively, "Zhone's Initial Remarketing Rights"):

                    (a)  First, Zhone shall have the right (but not the
          obligation) to cause an Applicable Purchaser who is not an Affiliate
          of Zhone to purchase the Buildings 1&2 Property and BNPLC's interest
          in any Buildings 1&2 Escrowed Proceeds on the Designated Sale Date for
          a cash purchase price equal to the Buildings 1&2 Third Party Price (as
          defined below). If, however, (i) the Buildings 1&2 Break Even Amount
          exceeds the sum of any Buildings 1&2 Third Party Price tendered or to
          be tendered to BNPLC and any Buildings 1&2 Supplemental Payment paid
          to BNPLC on the Designated Sale Date itself, and (ii) the Building 3
          Break Even Amount (under and as defined in the Building 3 Purchase
          Agreement) exceeds the sum of any Building 3 Third Party Price (under
          and as defined in the Building 3 Purchase Agreement) tendered or to be
          tendered to BNPLC and any Building 3 Supplemental Payment (under and
          as defined in the Building 3 Purchase Agreement) paid to BNPLC on the
          Designated Sale Date itself, then BNPLC may affirmatively elect to
          decline such tender from the Applicable Purchaser and to keep the
          Buildings 1&2 Property (together with any Buildings 1&2 Escrowed
          Proceeds) rather than sell to the Applicable Purchaser (a "Voluntary
          Retention of the Property").  But if BNPLC elects a Voluntary
          Retention of the Property hereunder, BNPLC must also elect a Voluntary
          Retention of the Property under and as defined in the Building 3
          Purchase Agreement.

                    (b) Second, if the Buildings 1&2 Third Party Price actually
          paid by an Applicable Purchaser to BNPLC on the Designated Sale Date
          exceeds the Buildings 1&2 Break Even Amount, Zhone shall be entitled
          to such excess, subject, however, to BNPLC's right to offset against
          such excess any and all sums that are then due from Zhone to BNPLC
          under the other Buildings 1&2 Operative Documents.  (In no event shall
          BNPLC be entitled to retain any such excess to recover any part of
          BNPLC's investment in the Building 3 Property that the Building 3
          Operative Documents do not entitle BNPLC to recover from Zhone.)

               (3)  If for any reason whatsoever neither Zhone nor an Applicable
     Purchaser pays to BNPLC a net cash price for the Buildings 1&2 Property (or
     allocated thereto as described in subparagraph 1(B)(2)) on the Designated
     Sale Date equal to or in excess of the Buildings 1&2 Break Even Amount
     pursuant to this Agreement, then Zhone shall have the obligation (the
     "Buildings 1&2 Supplemental Payment Obligation") to pay to BNPLC on the
     Designated Sale Date a supplemental payment (the "Buildings 1&2
     Supplemental Payment") equal to the lesser of (1) the amount by which the
     Buildings 1&2 Break Even Amount on the Designated Sale Date exceeds such
     net cash price (if any) for the Buildings 1&2 Property (or allocated
     thereto) actually received by BNPLC on the Designated Sale Date (such
     excess being hereinafter called a "Deficiency") or (2) the Maximum
     Remarketing Obligation. As used herein, the "Maximum Remarketing
     Obligation" means a dollar amount equal to the product of (i) Stipulated
     Loss Value on the Designated Sale Date, times (ii) 100% minus the Residual
     Risk Percentage; provided, however, that the "Maximum Remarketing
     Obligation" will equal the

  [Improvements - Buildings 1&2]

                                       2
<PAGE>

     Buildings 1&2 Break Even Amount, if (but only if):

                         (x) Zhone shall have elected to accelerate the
               Designated Sale Date as provided in clause (2) of the definition
               of Designated Sale Date in the Buildings 1&2 CDPA when no "Event
               of Default" under and as defined in the Building 3 Lease
               Agreement has occurred and is continuing; or

                         (y) an "Event of Default" under and as defined in the
               Buildings 1&2 Lease has occurred and is continuing on the
               Designated Sale Date, other than an Issue 97-1 Non-performance-
               related Subjective Event of Default or a Building 3 Cross-
               Default.

     BNPLC acknowledges that the proviso at the end of the preceding sentence
     shall not cause the Maximum Remarketing Obligation to exceed the product of
     (i) Stipulated Loss Value on the Designated Sale Date, times (ii) 100%
     minus the Residual Risk Percentage, solely by reason of an Issue 97-1 Non-
     performance-related Subjective Event of Default or a Building 3 Cross-
     Default.

     Without limiting the generality of the foregoing, the Buildings 1&2
     Supplemental Payment shall be required even if BNPLC does not sell the
     Buildings 1&2 Property to Zhone or an Applicable Purchaser on the
     Designated Sale Date because of (A) a Voluntary Retention of the Property,
     or (B) a failure of Zhone to exercise, or decision by Zhone not to
     exercise, the Purchase Option or Zhone's Initial Remarketing Rights in
     accordance with the terms and conditions set forth in  subparagraph 4(D)
     and other provisions of this Agreement.   If any Buildings 1&2 Supplemental
     Payment or portion thereof is not actually paid to BNPLC on the Designated
     Sale Date, Zhone shall pay interest on the past due amount computed at the
     Default Rate from the Designated Sale Date.  Zhone acknowledges that it is
     undertaking the Buildings 1&2 Supplemental Payment Obligation in
     consideration of the rights afforded to it by this Agreement, but that such
     obligation is not contingent upon any exercise by Zhone of such rights or
     upon any purchase of the Buildings 1&2 Property by Zhone or an Applicable
     Purchaser.

          (B) Determinations Concerning Price and the Supplemental Payment.
              ------------------------------------------------------------

               (1) Determination of the Buildings 1&2 Break Even Amount. As used
                   ----------------------------------------------------
     herein, "Buildings 1&2 Break Even Amount" means an amount equal to
     Stipulated Loss Value, plus any out-of-pocket costs and expenses (including
                            ----
     appraisal costs, withholding taxes (if any) not constituting Excluded
     Taxes, and Attorneys' Fees) incurred by BNPLC in connection with any sale
     of BNPLC's interests in the Buildings 1&2 Property under this Agreement or
     in connection with collecting payments due hereunder, and plus an amount
                                                           --------
     equal to the Balance of Unpaid Construction-Period Indemnity Payments, but
                                                                            ---
     less the aggregate amounts (if any) of Direct Payments to Participants and
     ----
     Deposit Taker Losses.  As used herein, the "Balance Of Unpaid Construction-
     Period Indemnity Payments" means an amount equal to the sum of
     Construction-Period Indemnity Payments, if any, that Zhone declined to pay
     pursuant to subparagraph 5(d)(ii) of the Buildings 1&2 Lease, plus interest
                 ---------------------                             ----
     accruing at the Default Rate, compounded annually, on each such payment
     from the date such payment would have become due but for Zhone's right to
     decline to pay it as described in subparagraph 5(d)(ii) of the Buildings
                                       ---------------------
     1&2 Lease.  If, however, Losses for which Zhone has so declined to pay any
     Construction-Period Indemnity Payment consist of claims against BNPLC or
     another Interested Party that have not been liquidated prior to the
     Designated Sale Date (and, thus, such Losses have yet to be fixed in amount
     as of the Designated Sale Date), then Zhone may elect to exclude any
     Construction-Period Indemnity Payment attributable to such Losses by
     providing to BNPLC, for the benefit of BNPLC and other Interested Parties,
     a written agreement to indemnify and defend BNPLC and other Interested
     Parties against such Losses.  To be effective  hereunder for purposes of
     reducing the Balance of Unpaid Construction-Period Indemnity Payments (and,
     thus, the Buildings 1&2 Break Even Amount), any such written indemnity

  [Improvements - Buildings 1&2]

                                       3
<PAGE>

     must be fully executed and delivered by Zhone on or prior to the Designated
     Sale Date, must include provisions comparable to subparagraphs 5(c)(ii),
                                                      ----------------------
     (iii), (iv) and (v) of the Buildings 1&2 Lease and otherwise must be in
     -------------------
     form and substance satisfactory to BNPLC.

               (2) Determination of Buildings 1&2 Third Party Price.  As used in
                   ------------------------------------------------
     subparagraph 1(A)(2)(a) and other provisions of this Agreement, "Buildings
     1&2 Third Party Price" means the amount determined as follows:

               (a) For purposes of both the Building 3 Purchase Agreement and
          this Agreement, Zhone may give a notice (a "Remarketing Notice") to
          BNPLC and to each of the Participants no earlier than one hundred
          eighty days before the Designated Sale Date and no later than twenty
          days before the Designated Sale Date, specifying (i) an amount as the
          Building 3 Third Party Price that Zhone believes in good faith to
          constitute reasonably equivalent value for the Building 3 Property and
          any Building 3 Escrowed Proceeds, and (ii) an amount as the Buildings
          1&2 Third Party Price that Zhone believes in good faith to constitute
          reasonably equivalent value for the Buildings 1&2 Property and any
          Buildings 1&2 Escrowed Proceeds. Once given, a Remarketing Notice
          shall not be rescinded, replaced or modified without BNPLC's written
          consent.  If (1) the Building 3 Third Party Price specified by Zhone
          in a Remarketing Notice, when added to any Building 3 Supplemental
          Payment that Zhone must pay to BNPLC on the Designated Sale Date, is
          equal to or greater than the Building 3 Break Even Amount calculated
          on the Designated Sale Date, and (2) the Buildings 1&2 Third Party
          Price specified by Zhone in the same Remarketing Notice, when added to
          any Buildings 1&2 Supplemental Payment that Zhone must pay to BNPLC on
          the Designated Sale Date, is equal to or greater than the Buildings
          1&2 Break Even Amount calculated on the Designated Sale Date, then the
          Remarketing Notice will control for purposes of establishing the
          Building 3 Third Party Price under the Building 3 Purchase Agreement
          and for purposes of establishing the Buildings 1&2 Third Party Price
          under this Agreement.  Otherwise, however:

          .    the Building 3 Third Party Price will be established for purposes
               of the Building 3 Purchase Agreement as the greater of (A) any
               amount specified as the Building 3 Third Party Price by Zhone in
               a Remarketing Notice, or (B) the lesser of (i) the Building 3
               Break Even Amount, or (ii) the Assumed Conditions Market Value
               (as defined below) allocated to the Building 3 Property; and

          .    the Buildings 1&2 Third Party Price will be established for
               purposes of this Agreement as the greater of (A) any amount
               specified as the Buildings 1&2 Third Party Price by Zhone in a
               Remarketing Notice, or (B) the lesser of (i) the Buildings 1&2
               Break Even Amount, or (ii) the Assumed Conditions Market Value
               allocated to the Buildings 1&2 Property.

          As used in this Agreement (and in the Building 3 Purchase Agreement)
          "Assumed Conditions Market Value" means (and all appraisers and other
          persons involved in the determination of the Assumed Conditions Market
          Value will be so advised) the price that would be agreed upon between
          a willing buyer, under no compulsion to buy, and a willing seller,
          under no compulsion to sell, for the Combined Properties, calculated
          under the assumptions (whether or not then accurate) that Zhone's
          representations in the Building 3 Operative Documents and the
          Buildings 1&2 Operative Documents are true and correct; that Zhone has
          complied with all of the requirements of the Building 3 Operative
          Documents and Buildings 1&2 Operative Documents, including
          requirements to maintain the Combined Properties in compliance with
          Applicable Laws [including Environmental Laws], and has completed the
          repairs or restoration which according to the Building 3 Lease or the
          Buildings 1&2 Lease Zhone will provide after

  [Improvements - Buildings 1&2]

                                       4
<PAGE>

          any damage or destruction of the Combined Properties by fire or other
          casualty or after any partial taking of the Combined Properties or any
          conveyance in lieu of such a partial taking; that no lien or other
          encumbrance against the Combined Properties exists other than
          Permitted Encumbrances; that Zhone, as the owner or lessee of any
          other property in the vicinity of the Combined Properties, will
          cooperate to permit the future development or use thereof in
          accordance with the requirements of the Closing Certificate and
          Agreement; that the construction, use and maintenance of Improvements
          on the Land that are contemplated in the Operative Documents will not
          be hindered or delayed because of any failure of Zhone to plan and
          provide for adequate utilities, water and parking; and that any
          purchaser of the Combined Properties will receive copies of Zhone's
          books and records which are necessary or useful to a future owner's or
          occupant's use of the Combined Properties. After it is calculated for
          the Combined Properties, taken together, the Assumed Conditions Market
          Value will be allocated, for purposes of this Agreement and the
          Building 3 Purchase Agreement (and all appraisers and other persons
          involved in the determination of the Assumed Conditions Market Value
          will be so advised), between the Building 3 Property and the Buildings
          1&2 Property as if each was a stand-alone facility benefitted by
          easements and restrictive covenants that provide for ingress, egress,
          parking, utilities and lateral support and that provide for common
          area maintenance and security, the maintenance of appropriate
          insurance, the application of insurance proceeds, the application of
          condemnation proceeds and the fair and appropriate allocation of
          shared costs, all as may be necessary or appropriate for the normal
          operation, maintenance, repair, improvement and ownership of the
          Building 3 Property and the Buildings 1&2 Property in order that such
          properties could, if separately owned, share the common facilities
          that they actually do share or are designed to share. In no event will
          the Assumed Conditions Market Value so allocated to the Building 3
          Property plus the Assumed Conditions Market Value so allocated to the
          Buildings 1&2 Property be less than the Assumed Conditions Market
          Value of the Combined Properties.

               (b) If concerned that a Remarking Notice alone will not be
          determinative of the Building 3 Third Party Price and the Buildings
          1&2 Third Party Price as provided in subparagraph (a), Zhone may, for
          purposes of both the Building 3 Purchase Agreement and this Agreement,
          give a notice (an "Appraisal Notice") to BNPLC and to each of the
          Participants no earlier than one hundred eighty days before the
          Designated Sale Date and no later than twenty days before the
          Designated Sale Date, stating that Zhone elects to have made a
          determination of Assumed Conditions Market Value and an allocation
          thereof between the Building 3 Property and the Buildings 1&2
          Property, in accordance with the following procedures (the "Appraisal
          Procedures"):

                    1)  Zhone and BNPLC shall each appoint a real estate
               appraiser who is familiar with properties in the vicinity of the
               Combined Properties.  Each party will make the appointment no
               later than ten days after receipt of notice from the other party
               that the appraisal process described in these provisions has been
               invoked.  The agreement of the two appraisers as to the amount of
               Assumed Conditions Market Value and the allocation thereof
               between the Building 3 Property and the Buildings 1&2 Property
               will be binding upon Zhone and BNPLC.  If the two appraisers do
               not, however, agree upon Assumed Conditions Market Value or the
               allocation thereof within thirty days following their
               appointment, they shall within another ten days agree upon a
               third real estate appraiser.  Immediately thereafter, each of the
               first two appraisers will submit his best estimate of the
               appropriate Assumed Conditions Market Value and the allocation
               thereof between the Building 3 Property and the Buildings 1&2
               Property (together with a written report supporting such
               estimate) to the third appraiser and the third appraiser will
               choose between the two estimates.  The estimate chosen by the
               third

  [Improvements - Buildings 1&2]

                                       5
<PAGE>

               appraiser will be binding upon Zhone and BNPLC. Notification in
               writing of the Assumed Conditions Market Value and the allocation
               thereof shall be made to Zhone and BNPLC within thirty days
               following the selection of the third appraiser.

                    2)  If appraisers must be selected under the procedure set
               out above and either BNPLC or Zhone fails to appoint an appraiser
               or fails to notify the other party of such appointment within
               fifteen days after receipt of notice that the prescribed time for
               appointing the appraisers has passed, then the other party's
               appraiser will determine the Assumed Conditions Market Value and
               the proper allocation thereof.  All appraisers selected for these
               Appraisal Procedures will be disinterested, reputable, qualified
               real estate appraisers with the designation of MAI or equivalent
               and with at least 10 years experience in appraising properties
               comparable to the Land in the San Francisco Bay area.

                    3)  If a third appraiser must be chosen under the Appraisal
               Procedures set out above, he will be chosen on the basis of
               objectivity and competence, not on the basis of his relationship
               with the other appraisers or with BNPLC or Zhone, and the first
               two appraisers will be so advised.  Although the first two
               appraisers will be instructed to attempt in good faith to agree
               upon the third appraiser, if for any reason they cannot agree
               within the prescribed time, either Zhone or BNPLC may require the
               first two appraisers to immediately submit his or her choice for
               the third appraiser to the then highest ranking officer of the
               California Bar Association who will agree to help and who has no
               attorney/client or other significant relationship to either Zhone
               or BNPLC.  Such officer will have complete discretion to select
               the most objective and competent third appraiser from between the
               choices of each of the first two appraisers, and will be
               instructed to do so within ten days after such choices are
               submitted to him.

                    4)  Either Zhone or BNPLC may notify the appraiser selected
               by the other party to demand the submission of an estimate of
               Assumed Conditions Market Value and the allocation thereof or a
               choice of a third appraiser as required under the procedure
               described above; and if the submission of such an estimate or
               choice is required but the other party's appraiser fails to
               comply with the demand within fifteen days after receipt of such
               notice, then the Assumed Conditions Market Value and allocation
               thereof, or choice of the third appraiser, as the case may be,
               selected by the other appraiser (i.e., the notifying party's
               appraiser) will be binding upon Zhone and BNPLC.

          All appraisal and other costs of the Appraisal Procedures shall be
          paid by Zhone.

               (c) If for any reason whatsoever, including any acceleration of
          the Designated Sale Date, the Buildings 1&2 Third Party Price is not
          established before the Designated Sale Date by a Remarketing Notice
          alone pursuant to subparagraph (a) and is not otherwise established
          before the Designated Sale Date by the Appraisal Procedures outlined
          in subparagraph (b), then the Buildings 1&2 Third Party Price will,
          for purposes of subparagraph 1(A)(2)(a), be the amount equal to the
          lesser of (1) the Buildings 1&2 Break Even Amount on the Designated
          Sale Date, or (2) the Assumed Conditions Market Value allocable to the
          Buildings 1&2 Property as determined by BNPLC in its sole good faith
          discretion. Without limiting the foregoing, for the purposes of
          determining the Buildings 1&2 Third Party Price pursuant to the
          preceding sentence, BNPLC shall be entitled to determine in its sole
          good faith discretion the amount of the Assumed Conditions Market
          Value and the allocation thereof between the Building 3 Property and
          the Buildings 1&2 Property.  Further, any determinations of BNPLC
          pursuant to this subparagraph (c) will also control for purposes of
          establishing the Assumed Conditions

  [Improvements - Buildings 1&2]

                                       6
<PAGE>

          Market Value and allocation thereof as elements of the Minimum
          Extended Remarketing Price (as defined below); provided, however, that
          if Zhone did deliver an Appraisal Notice at least twenty days prior to
          the Designated Sale Date, then Zhone may require the continuation of
          the Appraisal Procedures outlined in subparagraph (b) after the
          Designated Sale Date only for the purpose of establishing the Minimum
          Extended Remarketing Price hereunder and the Minimum Extended
          Remarketing Price under and as defined in the Building 3 Purchase
          Agreement. Effective upon, but only upon, any conclusion of the
          Appraisal Procedures after the Designated Sale Date, BNPLC's
          determination of the Assumed Conditions Market Value and of the
          allocation thereof between the Building 3 Property and the Buildings
          1&2 Property will be superseded by the determinations thereof made in
          accordance with the Appraisal Procedures for purposes of calculating
          the Minimum Extended Remarketing Price.

          (C) Designation of the Purchaser. To give BNPLC the opportunity before
              ----------------------------
the Designated Sale Date to prepare the deed and other documents that BNPLC must
tender pursuant to Paragraph 3 (collectively, the "Sale Closing Documents"),
Zhone must, by a notice to BNPLC given at least seven days prior to the
Designated Sale Date, specify irrevocably, unequivocally and with particularity
the party who will purchase the Buildings 1&2 Property pursuant to this
Agreement. If for any reason Zhone fails to so specify a party who will in
accordance with the terms and conditions set forth herein purchase the Buildings
1&2 Property (be it Zhone itself, an Affiliate of Zhone or another Applicable
Purchaser), BNPLC shall be entitled to postpone the tender of the Sale Closing
Documents until a date after the Designated Sale Date and not more than twenty
days after Zhone finally does so specify a party, but such postponement will not
relieve or postpone or affect the obligation of Zhone to make a Buildings 1&2
Supplemental Payment as provided in Paragraph 1(A)(3).

          (D) Effect of the Purchase Option and Zhone's Initial Remarketing
              -------------------------------------------------------------
Rights on Subsequent Title Encumbrances.  Any conveyance of the Buildings 1&2
---------------------------------------
Property to Zhone or any Applicable Purchaser pursuant to this Paragraph 1(A)
shall cut off and terminate any interest in the Buildings 1&2 Property claimed
by, through or under BNPLC, including any interest claimed by the Participants
and including any Liens Removable by BNPLC (such as, but not limited to, any
judgment liens established against the Buildings 1&2 Property because of a
judgment rendered against BNPLC and any leasehold or other interests conveyed by
BNPLC in the ordinary course of BNPLC's business), but not including personal
obligations of Zhone to BNPLC under the Buildings 1&2 Operative Documents or the
Other Operative Documents  (including obligations arising under the indemnities
in the Buildings 1&2 Lease).  Anyone accepting or taking any interest in the
Buildings 1&2 Property by or through BNPLC after the date of this Agreement
shall acquire such interest subject to the Purchase Option and Zhone's Initial
Remarketing Rights.  Further, Zhone and any Applicable Purchaser shall be
entitled to pay any payment required by this Agreement for the purchase of the
Buildings 1&2 Property directly to BNPLC notwithstanding any prior conveyance or
assignment by BNPLC, voluntary or otherwise, of any right or interest in this
Agreement or the Buildings 1&2 Property, and neither Zhone nor any Applicable
Purchaser shall be responsible for the proper distribution or application of any
such payments by BNPLC; and any such payment to BNPLC shall discharge the
obligation of Zhone to cause such payment to all Persons claiming an interest in
such payment.  Contemporaneously with the execution of this Agreement, the
parties shall record a memorandum of this Agreement for purposes of effecting
constructive notice to all Persons of Zhone's rights under this Agreement,
including its rights under this subparagraph.

          (E) Security for the Purchase Option and Zhone's Initial Remarketing
              ----------------------------------------------------------------
Rights.  To secure BNPLC's obligation to sell the Buildings 1&2 Property
------
pursuant to Paragraph 1(A) and to pay any damages to Zhone caused by a breach of
such obligations, including any such breach caused by a rejection or termination
of this Agreement in any bankruptcy or insolvency proceeding instituted by or
against BNPLC, as debtor, BNPLC does hereby grant to Zhone a lien and security
interest against all rights, title and interests of BNPLC from time to time in
and to the Buildings 1&2 Property.  Zhone may enforce such lien and security
interest judicially after any such breach by BNPLC, but not otherwise.
Contemporaneously with the execution of this Agreement, Zhone and BNPLC will
execute a memorandum of this Agreement which is in recordable form and which

  [Improvements - Buildings 1&2]

                                       7
<PAGE>

specifically references the lien granted in this subparagraph, and Zhone shall
be entitled to record such memorandum at any time prior to the Designated Sale
Date.   However, nothing in this subparagraph shall be construed as a waiver by
Zhone of any right Zhone may have at law or in equity to the following remedies,
whether because of BNPLC's failure to remove a Lien Removable by BNPLC or
because of any other default by BNPLC under this Agreement: (i) the recovery of
monetary damages, (ii) injunctive relief in case of the violation, or attempted
or threatened violation, by BNPLC of any of the express covenants, agreements,
conditions or provisions of this Agreement which are binding upon BNPLC, or
(iii) a decree compelling performance by BNPLC of any of the express covenants,
agreements, conditions or provisions of this Agreement which are binding upon
BNPLC.

          (F) Delivery of Books and Records If BNPLC Retains the Buildings 1&2
              ----------------------------------------------------------------
Property. Unless Zhone or its Affiliate or another Applicable Purchaser
--------
purchases the Buildings 1&2 Property pursuant to Paragraph 1(A), promptly after
the Designated Sale Date Zhone shall deliver to BNPLC copies of all plans and
specifications for the Buildings 1&2 Property prepared in connection with the
construction contemplated by the Construction Management Agreement and the
Buildings 1&2 Lease, together with all other books and records of Zhone which
will be necessary or useful to any future owner's or occupant's use of the
Buildings 1&2 Property.

     2    Zhone's Rights and Options After the Designated Sale Date.

          (A)  Zhone's Extended Right to Remarket.  During the two years
               ----------------------------------
following the Designated Sale Date ("Zhone's Extended Remarketing Period"),
Zhone shall have the right ("Zhone's Extended Remarketing Right") to cause an
Applicable Purchaser who is not an Affiliate of Zhone to purchase the Buildings
1&2 Property for a cash purchase price not below the Minimum Extended
Remarketing Price (as defined below).  Zhone's Extended Remarketing Right shall,
however, be subject to all of the following conditions:

               (1) The Buildings 1&2 Property and BNPLC's interest in Buildings
     1&2 Escrowed Proceeds, if any, shall not have been sold on the Designated
     Sale Date as provided in Paragraph 1 or within the thirty days thereafter
     as provided in subparagraph 4(C).

               (2) No Voluntary Retention of the Property shall have occurred as
     described in subparagraph 1(A)(2)(a).

               (3) Zhone's Extended Remarketing Right shall not have been
     terminated pursuant to subparagraph 4(C) below because of Zhone's failure
     to make any Buildings 1&2 Supplemental Payment required on the Designated
     Sale Date.

               (4) Zhone's Extended Remarketing Right shall not have been
     terminated by BNPLC pursuant to subparagraph 4(E) below to facilitate
     BNPLC's sale of the Buildings 1&2 Property to a third party in accordance
     with subparagraph 2(C).

               (5) At least thirty days prior to the date upon which BNPLC is to
     convey the Buildings 1&2 Property to an Applicable Purchaser because of
     Zhone's exercise of Zhone's Extended Remarketing Right (the "Final Sale
     Date"), Zhone shall have notified BNPLC of (x) the date proposed by Zhone
     as the Final Sale Date (which must be a Business Day), (y) the full legal
     name of the Applicable Purchaser and such other information as will be
     required to prepare the Sale Closing Documents, and (z) the amount of the
     purchase price that the Applicable Purchaser will pay (consistent with the
     minimum required pursuant to the other provisions of this subparagraph
     2(A)) for the Buildings 1&2 Property.

               (6) Zhone shall have satisfied the obligations imposed upon it by
     subparagraph 4(D).

  [Improvements - Buildings 1&2]

                                       8
<PAGE>

               (7) The sale of the Buildings 1&2 Property to the Applicable
     Purchaser hereunder, or the simultaneous sale of the Building 3 Property to
     the Applicable Purchaser under the Building 3 Purchase Agreement as
     required by subparagraph 4(D), shall generate excess sale proceeds to which
     Zhone is entitled under subparagraph 2(D) of this Agreement or under
     subparagraph 2(D) of the Building 3 Purchase Agreement or under both
     subparagraphs.

          (B)  Definition of Minimum Extended Remarketing Price. As used herein,
               ------------------------------------------------
"Minimum Extended Remarketing Price" means, subject to reduction as provided in
subparagraph 2(C) below (if applicable), an amount equal to the sum of the
following:

               (1) the lesser of (a) the amount by which the Buildings 1&2 Break
     Even Amount on the Designated Sale Date exceeds any Buildings 1&2
     Supplemental Payment actually paid to BNPLC on the Designated Sale Date
     itself, or (b) the Assumed Conditions Market Value allocated to the
     Buildings 1&2 Property as of the Designated Sale Date, determined as
     described in subparagraph 1(B)(2), plus
                                        ----

               (2) interest on the lesser of the amounts described in the
     preceding clause (1) computed at the Default Rate for the period commencing
     on the Designated Sale Date and ending on the Final Sale Date, plus
                                                                    ----

               (3) all out-of-pocket costs and expenses (including withholding
     taxes [if any], other than Excluded Taxes, and Attorneys' Fees) incurred by
     BNPLC in connection with the sale to the Applicable Purchaser, to the
     extent not already included in the computation of the Minimum Extended
     Remarketing Price, and plus
                        --------

               (4) the sum of all Impositions, insurance premiums and other
     Losses of every kind suffered or incurred by BNPLC or any other Interested
     Party with respect to the ownership, operation, construction or maintenance
     of the Buildings 1&2 Property on or after the Designated Sale Date (except
     to the extent already reimbursed by any lessee of the Buildings 1&2
     Property after the Designated Sale Date), together with interest on such
     Impositions, insurance premiums and other Losses computed at the Default
     Rate from the date paid or incurred to the Final Sale Date.

If, however, Losses described in the preceding clause (4) consist of claims
against BNPLC or another Interested Party that have not been liquidated prior to
the Final Sale Date (and, thus, such Losses have yet to be fixed in amount as of
the Final Sale Date), then Zhone may elect to exclude any such Losses from the
computation of the Minimum Extended Remarketing Price by providing to BNPLC, for
the benefit of BNPLC and other Interested Parties, a written agreement to
indemnify and defend BNPLC and other Interested Parties against such Losses.  To
be effective  hereunder for purposes of reducing the Minimum Extended
Remarketing Price (and, thus, the Buildings 1&2 Break Even Amount), any such
written indemnity must be fully executed and delivered by Zhone on or prior to
the Final Sale Date, must include provisions comparable to subparagraphs
                                                           -------------
5(c)(ii), (iii), (iv) and (v) of the Buildings 1&2 Lease and otherwise must be
-----------------------------
in form and substance satisfactory to BNPLC.

          (C) BNPLC's Right to Sell. After the Designated Sale Date, if the
              ---------------------
Buildings 1&2 Property has not already been sold by BNPLC pursuant to Paragraph
1 or this Paragraph 2, BNPLC shall have the right to sell the Combined
Properties or offer the Combined Properties for sale to any third party on any
terms believed to be appropriate by BNPLC in its sole good faith business
judgment; provided, however, that so long as the conditions to Zhone's Extended
Remarketing Rights specified in subparagraph 2(A) continue to be satisfied:

               (1) BNPLC shall not sell the Combined Properties to an Affiliate
     of BNPLC on

  [Improvements - Buildings 1&2]

                                       9
<PAGE>

     terms less favorable than those which BNPLC would require from a
     prospective purchaser not an Affiliate of BNPLC;

              (2)   If BNPLC receives or desires to make a written proposal
     (whether in the form of a "letter of intent" or other nonbinding expression
     of interest or in the form of a more definitive purchase and sale
     agreement) for a sale of the Combined Properties to a prospective purchaser
     (a "Third Party Sale Proposal"), and if on the basis of such Third Party
     Sale Proposal BNPLC expects to enter into or to pursue negotiations for a
     definitive purchase and sale agreement with the prospective purchaser, then
     prior to executing any such definitive agreement, BNPLC shall submit the
     Third Party Sale Proposal to Zhone with a notice (the "Third Party Sale
     Notice") explaining that:

                    (A)  if BNPLC and the prospective purchaser reach agreement
          on other terms and conditions to be incorporated into a definitive
          purchase and sale agreement, BNPLC is then prepared to accept (i) a
          price for the Building 3 Property (or allocated thereto) not below an
          amount specified in such Third Party Sale Notice (the "Building 3
          Third Party Target Price"), and (ii) a price for the Buildings 1&2
          Property (or allocated thereto) not below an amount specified in such
          Third Party Sale Notice (the "Buildings 1&2 Third Party Target
          Price"); and

                    (B)  Zhone's Extended Remarketing Right may be terminated
          pursuant to subparagraph 4(E) of this Agreement, and Zhone's Extended
          Remarketing Right under and as defined in the Building 3 Purchase
          Agreement may be terminated pursuant to subparagraph 4(E) thereof,
          unless within ninety days after the date of such Third Party Sale
          Notice Zhone causes an Applicable Purchaser to consummate a purchase
          of the Combined Properties under Paragraph 2 of this Agreement and
          Paragraph 2 of the Building 3 Purchase Agreement; and

              (3)   If BNPLC does sell the Combined Properties to a third party
     pursuant to this subparagraph during Zhone's Extended Remarketing Period,
     then for purposes of subparagraphs 2(D) and 4(E) of this Agreement and of
     subparagraphs 2(D) and 4(E) of the Building 3 Purchase Agreement, BNPLC may
     allocate the total price paid by the third party for the Combined
     Properties between the Building 3 Property and the Buildings 1&2 Property
     in accordance with any agreement for the allocation reached by BNPLC and
     the third party.  Absent such an agreement, however, the total price paid
     by the third party for the Combined Properties will be allocated between
     the Building 3 Property and the Buildings 1&2 Property in the same
     proportion that the Assumed Conditions Market Value of the Combined
     Properties is allocated pursuant to this Agreement and the Building 3
     Purchase Agreement.

For a period of ninety days (but only ninety days) after the date of any Third
Party Sale Notice, the Minimum Extended Remarketing Price shall be limited in
amount so that it does not exceed the Buildings 1&2 Third Party Target Price
specified by BNPLC therein.  Accordingly, if BNPLC has delivered a Third Party
Sale Notice specifying a Buildings 1&2 Third Party Target Price below the
Minimum Extended Remarketing Price calculated as provided in subparagraph 2(B)
within the ninety days prior to the Final Sale Date for any sale to an
Applicable Purchaser by BNPLC pursuant to this Paragraph 2, then the Minimum
Extended Remarketing Price applicable to such sale shall be reduced to the
amount of the Buildings 1&2 Third Party Target Price so specified.  Such a
reduction, however, will apply only to a sale to an Applicable Purchaser
actually consummated within the ninety days after the date of the applicable
Third Party Sale Notice.

          (D) Zhone's Right to Excess Sales Proceeds. If the cash price actually
              --------------------------------------
paid to BNPLC by any third party for the Buildings 1&2 Property (or allocated
thereto) during Zhone's Extended Remarketing Period, including any price paid by
an Applicable Purchaser purchasing from BNPLC pursuant to this Paragraph 2,
exceeds the Minimum Extended Remarketing Price (calculated as provided in
subparagraph 2(B), without reduction pursuant to subparagraph 2(C)), then Zhone
shall be entitled to the excess; provided, that BNPLC may

  [Improvements - Buildings 1&2]

                                      10
<PAGE>

offset and retain from the excess any and all sums that are then due and unpaid
from Zhone to BNPLC under any of the Buildings 1&2 Operative Documents or the
Other Operative Documents. (But in no event shall BNPLC be entitled to retain
any such excess to recover any part of BNPLC's investment in the Building 3
Property that the Building 3 Operative Documents do not entitle BNPLC to recover
from Zhone.)

          (E) Permitted Transfers During Zhone's Extended Remarketing Period.
              --------------------------------------------------------------
Any "Permitted Transfer" described in clause (6) of the definition thereof in
                                      ----------
the Buildings 1&2 CDPA to an Affiliate of BNPLC or that covers BNPLC's entire
fee estate in the Improvements included in the Buildings 1&2 Property will be
subject to Zhone's Extended Remarketing Right if, at the time of the Permitted
Transfer, Zhone's Extended Remarketing Right has not expired or been terminated
as provided herein. Any other Permitted Transfer described in clause (6) of the
definition thereof, however, will not be subject to Zhone's Extended Remarketing
Right. Thus, for example, BNPLC's conveyance of a utility easement or space
lease more than thirty days after the Designated Sale Date to a Person not an
Affiliate of BNPLC shall not be subject to Zhone's Extended Remarketing Right,
though following the conveyance of the lesser estate, Zhone's Extended
Remarketing Right may continue to apply to BNPLC's remaining interest in the
Buildings 1&2 Property.

     3    Terms of Conveyance Upon Purchase. As necessary to consummate any sale
of the Buildings 1&2 Property to Zhone or an Applicable Purchaser pursuant to
this Agreement, BNPLC must, subject to any postponement permitted by
subparagraph 1(C) and to Zhone's satisfaction of its obligations set forth in
subparagraph 4(D), immediately after the tender of the purchase price and any
other payments to BNPLC required pursuant to Paragraph 1 or Paragraph 2, as
applicable, convey all of BNPLC's right, title and interest in the Buildings 1&2
Property to Zhone or the Applicable Purchaser, as the case may be, by BNPLC's
execution, acknowledgment (where appropriate) and delivery of the Sale Closing
Documents. Such conveyance by BNPLC will be subject only to the Permitted
Encumbrances and any other encumbrances that do not constitute Liens Removable
by BNPLC. However, such conveyance shall not include the rights of BNPLC or
other Interested Parties under the indemnities provided in the Buildings 1&2
Operative Documents and the Other Operative Documents, including rights to any
payments then due from Zhone under the indemnities or that may become due
thereafter because of any expense or liability incurred by BNPLC or another
Interested Party resulting in whole or in part from events or circumstances
occurring or alleged to have occurred before such conveyance. All costs, both
foreseen and unforeseen, of any purchase by Zhone or an Applicable Purchaser
hereunder shall be the responsibility of the purchaser. The Sale Closing
Documents used to accomplish such conveyance shall consist of the following: (1)
a Corporation Grant Deed (conveying both the Building 3 Property and the
Buildings 1&2 Property simultaneously to the same grantee as required to satisfy
the condition set forth in subparagraph 4(D)) in the form attached as Exhibit B-
                                                                      ---------
1 or Exhibit B-2 or Exhibit B-4, as required by Exhibit B, (2) if required by
-    -----------    -----------                 ---------
Exhibit B, an extension of the Land Lease in the form attached as Exhibit B-3,
---------                                                         -----------
(3) a Bill of Sale and Assignment in the form attached as Exhibit C, (4) an
                                                          ---------
Acknowledgment of Disclaimer of Representations and Warranties, in the form
attached as Exhibit D, which Zhone or the Applicable Purchaser must execute and
            ---------
return to BNPLC, (5) a Secretary's Certificate in the form attached as Exhibit
                                                                       -------
E, and (6) a certificate concerning tax withholding in the form attached as
-
Exhibit F. If for any reason BNPLC fails to tender the Sale Closing Documents as
---------
required by this Paragraph 3, BNPLC may cure such refusal at any time before
thirty days after receipt of a demand for such cure from Zhone.

     4    Survival and Termination of the Rights and Obligations of Zhone and
BNPLC.

          (A) Status of this Agreement Generally. Except as expressly provided
              ----------------------------------
herein, this Agreement shall not terminate; nor shall Zhone have any right to
terminate this Agreement; nor shall Zhone be entitled to any reduction of the
Buildings 1&2 Break Even Amount, any Deficiency, the Maximum Remarketing
Obligation, any Buildings 1&2 Supplemental Payment or the Minimum Extended
Remarketing Price hereunder; nor shall the obligations of Zhone to BNPLC under
Paragraph 1 be affected, by reason of (i) any damage to or the destruction of
all or any part of the Buildings 1&2 Property from whatever cause (though it is
understood that Zhone will receive any remaining Buildings 1&2 Escrowed Proceeds
yet to be applied as provided in the

  [Improvements - Buildings 1&2]

                                      11
<PAGE>

Buildings 1&2 Lease that may result from such damage if Zhone purchases the
Buildings 1&2 Property and the Buildings 1&2 Escrowed Proceeds as herein
provided), (ii) the taking of or damage to the Buildings 1&2 Property or any
portion thereof by eminent domain or otherwise for any reason (though it is
understood that Zhone will receive any remaining Buildings 1&2 Escrowed Proceeds
yet to be applied as provided in the Buildings 1&2 Lease that may result from
such taking or damage if Zhone purchases the Buildings 1&2 Property and the
Buildings 1&2 Escrowed Proceeds as herein provided), (iii) the prohibition,
limitation or restriction of Zhone's use of all or any portion of the Buildings
1&2 Property or any interference with such use by governmental action or
otherwise, (iv) any eviction of Zhone or any party claiming under Zhone by
paramount title or otherwise, (v) Zhone's prior acquisition or ownership of any
interest in the Buildings 1&2 Property, (vi) any default on the part of BNPLC
under this Agreement, the Buildings 1&2 Lease or any other agreement to which
BNPLC is a party, or (vii) any other cause, whether similar or dissimilar to the
foregoing, any existing or future law to the contrary notwithstanding. It is the
intention of the parties hereto that the obligation of Zhone to make any
Buildings 1&2 Supplemental Payment as provided in Paragraph 1 shall be a
separate and independent covenant and agreement from BNPLC's obligations under
this Agreement or any other agreement between BNPLC and Zhone; provided,
however, that nothing in this subparagraph shall excuse BNPLC from its
obligation to tender the Sale Closing Documents in substantially the form
attached hereto as exhibits when required by Paragraph 3. Nothing in this
subparagraph shall be construed as a waiver by Zhone of any right Zhone may have
at law or in equity to the following remedies, whether because of BNPLC's
failure to remove a Lien Removable by BNPLC or because of any other default by
BNPLC under this Agreement: (i) the recovery of monetary damages, (ii)
injunctive relief in case of the violation, or attempted or threatened
violation, by BNPLC of any of the express covenants, agreements, conditions or
provisions of this Agreement which are binding upon BNPLC, or (iii) a decree
compelling performance by BNPLC of any of the express covenants, agreements,
conditions or provisions of this Agreement which are binding upon BNPLC.

          (B) Election by Zhone to Terminate the Buildings 1&2 Supplemental
              -------------------------------------------------------------
Payment Obligation Prior to the Designated Sale Date and the Buildings 1&2 Base
-------------------------------------------------------------------------------
Rent Commencement Date. At any time prior to the Buildings 1&2 Base Rent
----------------------
Commencement Date, Zhone may elect to terminate its Buildings 1&2 Supplemental
Payment Obligation, subject to the following conditions:

          (1) To be effective, any such election to terminate must be made by
     giving notice thereof to BNPLC and the Participants in the form attached as

     Exhibit G (a) prior to the Buildings 1&2 Base Rent Commencement Date and
     ---------
     (b) only after (x) Zhone shall have given Notice of Zhone's Election to
     Terminate pursuant to Paragraph 4(D) of the Construction Management
                           --------------
     Agreement, (y) BNPLC shall have given any FOCB Notice as provided in

     Paragraph 4(E) of the Construction Management Agreement, or (z) BNPLC shall
     --------------
     have given notice of its election to accelerate the Designated Sale Date
     when an Event of Default has occurred and is continuing as provided in
     clause (3) of the definition of Designated Sale Date in the Buildings 1&2
     CDPA.

          (2) No termination pursuant to this subparagraph 4(B) shall be
     effective, notwithstanding any notice Zhone may have given as described in
     the preceding clause (1), unless contemporaneously with the giving of the
     notice (and in any event prior to both the Designated Sale Date and the
     Buildings 1&2 Base Rent Commencement Date) Zhone shall deliver to BNPLC an
     Issue 97-10 Prepayment.

          (3) If for any reason whatsoever, including any bona fide dispute over
     the amount of any required Issue 97-10 Prepayment, BNPLC does not receive
     both the notice described in the preceding clause (1) and a full Issue 97-
     10 Prepayment as described in the preceding clause (2) prior to both the
     Buildings 1&2 Supplemental Payment Date and the Buildings 1&2 Base Rent
     Commencement Date, then without any notice or other action by the parties
     to this Agreement Zhone shall cease to have any option to terminate the
     Buildings 1&2 Supplemental Payment Obligation pursuant to this subparagraph
     4(B).  Zhone may, however, pay any amount claimed by BNPLC to constitute a
     required Issue 97-10

  [Improvements - Buildings 1&2]

                                      12
<PAGE>

     Prepayment in order to preserve Zhone's option to terminate the Buildings
     1&2 Supplemental Payment Obligation without waiving its right to continue
     any bona fide dispute over such amount and without waiving its right to
     recover any excess paid to BNPLC if Zhone subsequently establishes that the
     amount claimed by BNPLC was excessive.

          (C) Automatic Termination of Zhone's Rights.
              ---------------------------------------

          (1) Without limiting BNPLC's right to enforce Zhone's obligation to
     pay any Buildings 1&2 Supplemental Payment or other amounts required by
     this Agreement, the Purchase Option, Zhone's Initial Remarketing Rights and
     Zhone's Extended Remarketing Rights shall all terminate automatically if
     BNPLC shall elect a Voluntary Retention of the Property as provided in
     subparagraph 1(A)(2)(a).

          (2) Without limiting BNPLC's right to enforce Zhone's obligation to
     pay any Buildings 1&2 Supplemental Payment or other amounts required by
     this Agreement, the Purchase Option, Zhone's Initial Remarketing Rights and
     Zhone's Extended Remarketing Rights shall all terminate automatically if
     Zhone shall fail to pay the full amount of any Buildings 1&2 Supplemental
     Payment required by subparagraph 1(A)(3) on the Designated Sale Date. If,
     however, the Buildings 1&2 Supplemental Payment Obligation is effectively
     terminated pursuant to subparagraph 4(B) prior to the Designated Sale Date,
     thereby excusing Zhone from the obligation to make any Buildings 1&2
     Supplemental Payment that would otherwise be required by subparagraph
     1(A)(3), then neither the Purchase Option, nor Zhone's Initial Remarketing
     Rights nor Zhone's Extended Remarketing Rights will automatically terminate
     pursuant to this subparagraph 4(C)(2). Further, notwithstanding anything in
     this subparagraph 4(C) to the contrary, even after a failure to pay any
     required Buildings 1&2 Supplemental Payment on the Designated Sale Date, on
     any Business Day within thirty days after the Designated Sale Date Zhone or
     its designee may tender to BNPLC the full Buildings 1&2 Break Even Amount
     (calculated as of the Designated Sale Date) and the full Building 3 Break
     Even Amount (calculated as of the Designated Sale Date), together with
     interest on the total Buildings 1&2 Break Even Amount and Building 3 Break
     Even Amount computed at the Default Rate from the Designated Sale Date to
     the date of tender, and together with all other amounts then due under any
     of the Buildings 1&2 Operative Documents and the Other Operative Documents,
     and if presented with such a tender within thirty days after the Designated
     Sale Date, BNPLC must accept the tender and promptly thereafter deliver to
     Zhone or its designee all Building 3 Escrowed Proceeds (if any), Buildings
     1&2 Escrowed Proceeds (if any), the Building 3 Sale Closing Documents
     listed in Paragraph 3 of the Building 3 Purchase Agreement and the
     Buildings 1&2 Sale Closing Documents required by Paragraph 3 of this
     Agreement.

          (D) Conditions to Zhone's Rights Relative to State and Local
              --------------------------------------------------------
Subdivision Requirements.  Simultaneously with any sale hereunder of the
------------------------
Buildings 1&2 Property by BNPLC to Zhone because of Zhone's exercise of the
Purchase Option, Zhone must also acquire, on and subject to the terms and
conditions set forth in the Building 3 Purchase Agreement, the Building 3
Property.  Simultaneously with any sale hereunder of the Buildings 1&2 Property
by BNPLC to an Applicable Purchaser because of Zhone's exercise of the Purchase
Option, Zhone's Initial Remarketing Right or Zhone's Extended Remarketing Right,
Zhone must cause the same Applicable Purchaser to acquire, on and subject to the
terms and conditions set forth in the Building 3 Purchase Agreement, the
Building 3 Property.  If, in addition to the simultaneous acquisition of both
the Combined Properties by the same purchaser, other requirements of state or
local subdivision laws and ordinances must be satisfied to permit a lawful
conveyance by BNPLC of the Buildings 1&2 Property in connection with Zhone's
exercise of the Purchase Option, Zhone's Initial Remarketing Right or Zhone's
Extended Remarketing Right, then Zhone must also comply or cause an Applicable
Purchaser to comply with such other requirements.  Zhone's right to require any
tender by BNPLC of the Sale Closing Documents in connection with Zhone's
exercise of the Purchase Option, Zhone's Initial Remarketing Right or Zhone's
Extended Remarketing Right shall be conditioned upon Zhone's satisfaction of the
requirements of this subparagraph 4(D).  Nothing contained in this subparagraph
4(D) shall be construed to obligate Zhone to exercise its Purchase Option,
Zhone's Initial Remarketing Rights or Zhone's Extended Remarketing Rights or
shall create any claim on the part of BNPLC

[Improvements - Buildings 1&2]

                                       13
<PAGE>

against Zhone in the event Zhone does not exercise its Purchase Option, Zhone's
Initial Remarketing Rights or Zhone's Extended Remarketing Rights, for payment
of any sum other than the Buildings 1&2 Supplemental Payment as provided in
subparagraph 1(A)(3).

          (E) Termination of Zhone's Extended Remarketing Rights to Permit a
              --------------------------------------------------------------
Sale by BNPLC. At any time after the Designated Sale Date and more than ninety
-------------
days after BNPLC has delivered a Third Party Sale Notice to Zhone as described
in subparagraph 2(C)(2), BNPLC may terminate Zhone's Extended Remarketing Rights
(both under and as defined in this Agreement and under and as defined in the
Building 3 Purchase Agreement) contemporaneously with the consummation of a sale
of the Combined Properties by BNPLC to any third party (be it the prospective
purchaser named in the Third Party Sale Notice or another third party).
However, as a condition to such termination, (1) the price paid by the third
party to BNPLC for the Building 3 Property (or allocated thereto) must equal or
exceed the Building 3 Third Party Target Price specified in the Third Party Sale
Notice, and (2) the price paid by the third party to BNPLC for the Buildings 1&2
Property (or allocated thereto) must equal or exceed the Buildings 1&2 Third
Party Target Price specified in the Third Party Sale Notice.  This subparagraph
is intended to establish the requirements for a sale by BNPLC of the Combined
Properties, unencumbered by Zhone's Extended Remarketing Rights, pursuant to
subparagraph 2(C).

          (F) Payment Only to BNPLC. Except for Direct Payments to Participants,
              ---------------------
all amounts payable under this Agreement by Zhone and, if applicable, by an
Applicable Purchaser must be paid directly to BNPLC, and no payment to any other
party shall be effective for the purposes of this Agreement. (This provision
shall not, however, limit Zhone's right to deduct Deposit Taker Losses when
calculating the Buildings 1&2 Break Even Amount, as provided in subparagraph
1(B)(1).)  In addition to any payments required under subparagraph 1(A), on the
Designated Sale Date Zhone must pay all amounts then due to BNPLC under the
Buildings 1&2 Operative Documents or under the Other Operative Documents.

          (G) Remedies Under the other Operative Documents. No repossession of
              --------------------------------------------
or re-entering upon the Buildings 1&2 Property or exercise of any other remedies
available to BNPLC under the other Buildings 1&2 Operative Documents or the
Other Operative Documents shall terminate Zhone's rights or obligations
hereunder, all of which shall survive BNPLC's exercise of remedies under those
other documents. Zhone acknowledges that the consideration for this Agreement is
separate and independent of the consideration for the Buildings 1&2 Lease, the
Construction Management Agreement and the Closing Certificate, and Zhone's
obligations hereunder shall not be affected or impaired by any event or
circumstance that would excuse Zhone from performance of its obligations under
such other Buildings 1&2 Operative Documents or any of the Other Operative
Documents.

          (H) Occupancy by Zhone Prior to Closing of a Sale. Prior to the
              ---------------------------------------------
closing of any sale of the Buildings 1&2 Property to Zhone or an Applicable
Purchaser hereunder, Zhone's occupancy of the Buildings 1&2 Land and Buildings
1&2 Improvements and its use of the Buildings 1&2 Property shall continue to be
subject to the terms and conditions of the Buildings 1&2 Lease, including the
terms setting forth Zhone's obligation to pay rent, prior to any termination or
expiration of the Buildings 1&2 Lease pursuant to its express terms and
conditions.

          (I) Preferential Payments to BNPLC.  If any payment to BNPLC by an
              ------------------------------
Applicable Purchaser hereunder is held to constitute a preference or a voidable
transfer under Applicable Law, or must for any other reason be refunded by BNPLC
to the Applicable Purchaser or to another Person, and if such payment to BNPLC
reduced or had the effect of reducing a Buildings 1&2 Supplemental Payment or
increased or had the effect of increasing any excess sale proceeds paid to Zhone
pursuant to subparagraph 1(A)(2)(b) or pursuant to subparagraph 2(D), then Zhone
shall pay to BNPLC upon demand an amount equal to the reduction of the Buildings
1&2 Supplemental Payment or to the increase of the excess sale proceeds paid to
Zhone, as applicable, and this Agreement shall continue to be effective or shall
be reinstated as necessary to permit BNPLC to enforce

[Improvements - Buildings 1&2]

                                       14
<PAGE>

its right to collect such amount from Zhone.

     5    Security for Zhone's Obligations; Return of Funds. Zhone's obligations
under this Agreement are secured by the Buildings 1&2 Pledge Agreement,
reference to which is hereby made for a description of the Collateral covered
thereby and the rights and remedies provided to BNPLC thereby. Although the
collateral agent appointed for BNPLC as provided in the Buildings 1&2 Pledge
Agreement shall be entitled to hold all Collateral as security for the full and
faithful performance by Zhone of Zhone's covenants and obligations under this
Agreement, the Collateral shall not be considered an advance payment of the
Buildings 1&2 Break Even Amount or any Buildings 1&2 Supplemental Payment or a
measure of BNPLC's damages should Zhone breach this Agreement. If Zhone does
breach this Agreement and fails to cure the same within any time specified
herein for the cure, BNPLC may, from time to time, without prejudice to any
other remedy and without notice to Zhone, require the collateral agent to
immediately apply the proceeds of any disposition of the Collateral (and any
cash included in the Collateral) to amounts then due hereunder from Zhone. If by
a Permitted Transfer BNPLC conveys its interest in the Buildings 1&2 Property
before the Designated Sale Date, BNPLC may also assign BNPLC's interest in the
Collateral to the transferee. BNPLC shall be entitled to return any Collateral
not sold or used to satisfy the obligations secured by the Buildings 1&2 Pledge
Agreement directly to Zhone notwithstanding any prior actual or attempted
conveyance or assignment by Zhone, voluntary or otherwise, of any right to
receive the same; neither BNPLC nor the collateral agent named in the Buildings
1&2 Pledge Agreement shall be responsible for the proper distribution or
application by Zhone of any such Collateral returned to Zhone; and any such
return of Collateral to Zhone shall discharge any obligation of BNPLC to deliver
such Collateral to all Persons claiming an interest in the Collateral. Further,
BNPLC shall be entitled to deliver any Buildings 1&2 Escrowed Proceeds it holds
on the Designated Sale Date directly to Zhone or to any Applicable Purchaser
purchasing BNPLC's interest in the Buildings 1&2 Property and the Buildings 1&2
Escrowed Proceeds pursuant to this Agreement notwithstanding any prior actual or
attempted conveyance or assignment by Zhone, voluntary or otherwise, of any
right to receive the same; BNPLC shall not be responsible for the proper
distribution or application by Zhone or any Applicable Purchaser of any such
Buildings 1&2 Escrowed Proceeds paid over to Zhone or the Applicable Purchaser;
and any such payment of Buildings 1&2 Escrowed Proceeds to Zhone or an
Applicable Purchaser shall discharge any obligation of BNPLC to deliver the same
to all Persons claiming an interest therein.

     6    Certain Remedies Cumulative. No right or remedy herein conferred upon
or reserved to BNPLC is intended to be exclusive of any other right or remedy
BNPLC has with respect to the Buildings 1&2 Property, and each and every right
and remedy shall be cumulative and in addition to any other right or remedy
given hereunder or now or hereafter existing at law or in equity or by statute.
In addition to other remedies available under this Agreement, either party shall
be entitled, to the extent permitted by applicable law, to a decree compelling
performance of any of the other party's agreements hereunder.

     7    Attorneys' Fees and Legal Expenses. If either party to this Agreement
commences any legal action or other proceeding to enforce any of the terms of
this Agreement, or because of any breach by the other party or dispute
hereunder, the party prevailing in such action or proceeding shall be entitled
to recover from the other party all Attorneys' Fees incurred in connection
therewith, whether or not such controversy, claim or dispute is prosecuted to a
final judgment.  Any such Attorneys' Fees incurred by either party in enforcing
a judgment in its favor under this Agreement shall be recoverable separately
from such judgment, and the obligation for such Attorneys' Fees is intended to
be severable from other provisions of this Agreement and not to be merged into
any such judgment.

     8    Estoppel Certificate. Upon request by BNPLC, Zhone shall execute,
acknowledge and deliver a written statement certifying that this Agreement is
unmodified and in full effect (or, if there have been modifications, that this
Agreement is in full effect as modified, and setting forth such modification)
and either stating that no default exists hereunder or specifying each such
default of which Zhone has knowledge. Any such statement may be relied upon by
any Participant or prospective purchaser or assignee of BNPLC with respect to

[Improvements - Buildings 1&2]

                                       15
<PAGE>

the Buildings 1&2 Property.

     9    Successors and Assigns. The terms, provisions, covenants and
conditions hereof shall be binding upon Zhone and BNPLC and their respective
permitted successors and assigns and shall inure to the benefit of Zhone and
BNPLC and all permitted transferees, mortgagees, successors and assignees of
Zhone and BNPLC with respect to the Buildings 1&2 Property; provided, that (A)
the rights of BNPLC hereunder shall not pass to Zhone or any Applicable
Purchaser or any subsequent owner claiming through Zhone or an Applicable
Purchaser, (B) BNPLC shall not assign this Agreement or any rights hereunder
except pursuant to a Permitted Transfer, and (C) Zhone shall not assign this
Agreement or any rights hereunder without the prior written consent of BNPLC.

     10   Amendment and Restatement. Together, this Agreement and the Building 3
Purchase Agreement amend, restate and replace the Prior Purchase Agreement
referenced in the recitals at the beginning of this agreement.

                           [Signature pages follow.]

[Improvements - Buildings 1&2]

                                       16
<PAGE>

     IN WITNESS WHEREOF, Zhone and BNPLC have caused this Purchase Agreement
(Improvements - Buildings 1&2) to be executed as of August 1, 2000.

                                   "Zhone"

                                   ZHONE TECHNOLOGIES, INC.

                                   By: /s/  Bruce Ruberg
                                       ---------------------------------------
                                       Name:   Bruce Ruberg
                                              --------------------------------
                                       Title:  Controller
                                              --------------------------------

<PAGE>

[Continuation of signature pages to Purchase Agreement (Improvements - Buildings
1&2) dated to be effective as of August 1, 2000]

                                   "BNPLC"

                                   BNP LEASING CORPORATION

                                   By: /s/  Lloyd G. Cox
                                       ------------------------------------
                                       Lloyd G. Cox, Vice President

<PAGE>

                                   Exhibit A
                                   ---------

                               LEGAL DESCRIPTION

The real property located in the City of Oakland, County of Alameda, State of
California, described as follows:

Being a portion of Lot 12, as shown on Parcel Map No. 6003, filed in Book 205 of
Parcel Maps, at Pages 94 through 98, Alameda County Records, more particularly
described as follows:

Commencing at the most southerly corner of said Lot 12; Thence along the
southwesterly line of said Lot 12, North 33(degrees) 50' 24" West, 628.68 feet
to the point of beginning; Thence continuing along the southwesterly line of
said Lot 12, North 33(degrees) 50' 24" West, 1029.21 feet; Thence along the
southeasterly line of said Lot 12, South 56(degrees) 09' 36" West 14.00 feet;
Thence along the southwesterly line of said Lot 12, North 33(degrees) 50' 24"
West, 253.55 feet to the beginning of a curve, concave southwesterly, having a
radius of 392.21 feet; Thence northerly along the arc of said curve, through a
central angle of 3(degrees) 51' 45", an arc distance of 26.44 feet to the
intersection of a line drawn parallel with and 85.00 feet southeasterly of the
northwesterly line of said Lot 12, a radial line through said point bears North
52(degrees) 17' 51" East; Thence parallel with the northwesterly line of said
Lot 12, North 56(degrees) 09' 36" East, 476.93 feet to a point that is 5 feet
southwesterly of the northeasterly line of said Lot 12; Thence along a line that
is parallel with and 5 feet southwesterly of the said northeasterly line of Lot
12, South 40(degrees) 00' 30" East, 69.44 feet to the beginning of a curve,
concave southwesterly, having a radius of 1949.00 feet; Thence southeasterly
along the arc of said curve, through a central angle of 6(degrees) 10' 18", an
arc distance of 209.94 feet; Thence continuing along a line that is parallel
with and 5 feet southwesterly of the said northeasterly line of Lot 12, South
33(degrees) 50' 12" East, 1030.61 feet to the intersection with a line drawn
perpendicular with the southwesterly line of said Lot 12, distant thereon 628.68
feet from the most southerly corner of said Lot 12; Thence southwesterly along
said perpendicular line, South 56(degrees) 09' 36" West, 480.72 feet to the
Point of Beginning.

The basis of bearings for Parcel Map No. 6003 is the North American Datum of
1983, Zone 3, 1984 Adjustment Published in 1986, as shown on Record of Survey
990, filed in Book 18 of Records of Survey, at Pages 50 through 60, Alameda
County Records.  All distances in this description are grid distances.  To
convert to ground distances, multiply grid distances by 1.0000708.

Assessor's Parcel No. 041-3902-015 (Portion)

[Improvements - Buildings 1&2]

                                       19
<PAGE>

[SUBSTITUTE A PAGE COPIED FROM A SURVEY OF THE LAND, MARKED TO SHOW THE
"BUILDINGS 1&2 SITE" HERE.]

[Improvements - Buildings 1&2]

<PAGE>

                                   Exhibit B
                                   ---------

        Requirements Re: Form of Grant Deed and Extension of Land Lease

The form of deed to be used to convey BNPLC's interest in the Improvements to
Zhone or an Applicable Purchaser will depend upon whether BNPLC's interest in
the Land has been or is being conveyed at the same time to the same party.

If BNPLC's interests in both the Land and the Improvements are to be conveyed to
Zhone or an Applicable Purchaser at the same time, because sales under this
Buildings 1&2 Purchase Agreement, the Building 3 Purchase Agreement and the Land
Purchase Agreement (covering the Land) are all being consummated at the same
time and to the same party, then the one deed in form attached as Exhibit B-1
                                                                  -----------
will be used to convey both.

If, however, a sale of BNPLC's interest in the Land pursuant to the Land
Purchase Agreement has not been consummated before, and is not being consummated
contemporaneously with sales of BNPLC's interest in the Improvements under this
Buildings 1&2 Purchase Agreement and under the Building 3 Purchase Agreement,
then BNPLC's interest in the Improvements will be conveyed by a deed in the form
attached as Exhibit B-2.  In such a case, if Zhone has requested it in writing
            -----------
at least thirty days prior to the delivery of such a deed, BNPLC shall also
tender an amendment to the Land Lease in the form attached as Exhibit B-3, which
                                                              -----------
will extend the term of the Land Lease at a base rent equal to fair market
rental value of the Land, determined as provided in such amendment.   In such a
case, it is understood that if Zhone designates an Applicable Purchaser to
purchase BNPLC's interest in the Improvements, Zhone may sublease the Land to
the Applicable Purchaser under (and subject to the terms and conditions of) the
Land Lease.  (Presumably, the Applicable Purchaser will require a sublease of
the Land from Zhone as a condition to purchasing the Improvements.)  But in no
event will BNPLC be required to do more than tender an extension of the Land
Lease (as provided in this paragraph) to facilitate the use and enjoyment of the
Improvements by Zhone or any Applicable Purchaser claiming through Zhone.
Without limiting the generality of the foregoing, it is understood that BNPLC
will not otherwise be required to grant any lease or other interest in the Land
to any such Applicable Purchaser.

Finally, BNPLC's interest in the Improvements will be conveyed by a deed in the
form attached as Exhibit B-3 if BNPLC's interest in the Land has been sold
                 -----------
pursuant to the Land Purchase Agreement before a sale of BNPLC's interest in the
Improvements under this Agreement and the Building 3 Purchase Agreement, or if
BNPLC's interest in the Improvements is being sold contemporaneously with a sale
of BNPLC's interest in the Land, but the purchaser of the Improvements is not
the same as the purchaser of the Land.

[Improvements - Buildings 1&2]
<PAGE>

                                  Exhibit B-1
                                  -----------

                            CORPORATION GRANT DEED

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
-------------------------

NAME:  [Zhone or the Applicable Purchaser]
ADDRESS:  ___________________
ATTN:     ___________________
CITY:     ___________________
STATE:  ___________________
Zip:      ___________________

MAIL TAX STATEMENTS TO:
----------------------

NAME:  [Zhone or the Applicable Purchaser]
ADDRESS:  ___________________
ATTN:     ___________________
CITY:     ___________________
STATE:  ___________________
Zip:      ___________________

                            CORPORATION GRANT DEED
                        (Covering Land and Improvements)

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to [Zhone
or the Applicable Purchaser] ("Grantee") all of Grantor's interest in the land
situated in Oakland, California, described on Annex A attached hereto and hereby
made a part hereof and all improvements on such land, together with the any
other right, title and interest of Grantor in and to any easements, rights-of-
way, privileges and other rights appurtenant to such land or the improvements
thereon; provided, however, that this grant is subject to the encumbrances
described on Annex B (the "Permitted Encumbrances"). Grantee hereby assumes the
obligations (including any personal obligations) of Grantor, if any, created by
or under, and agrees to be bound by the terms and conditions of, the Permitted
Encumbrances to the extent that the same concern or apply to the land or
improvements conveyed by this deed.

[Improvements - Buildings 1&2]

<PAGE>

                                    BNP LEASING CORPORATION

Date: As of ____________            By:     ____________________________________
                                            Its:

                                    Attest: ____________________________________
                                            Its:

                                    [Zhone or Applicable Purchaser]

Date: As of ____________            By:     ____________________________________
                                            Its:

                                    Attest: ____________________________________
                                            Its:

STATE OF ____________  )
                       )    SS
COUNTY OF ___________  )

     On ___________________ before me,______________, personally appeared
___________ and ________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
person, or the entity upon behalf of which the persons acted, executed the
instrument.

     WITNESS my hand and official seal.

     Signature____________________________

[Improvements - Buildings 1&2]

                             Exhibits B-1 - Page 2

<PAGE>

STATE OF ____________  )
                       )    SS
COUNTY OF ___________  )

     On ___________________ before me,______________, personally appeared
___________ and ________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
person, or the entity upon behalf of which the persons acted, executed the
instrument.

     WITNESS my hand and official seal.

     Signature____________________________

[Improvements - Buildings 1&2]

                             Exhibit B-1 - Page 3

<PAGE>

                                    Annex A

                               LEGAL DESCRIPTION

[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES
 --------------
FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH ZHONE REQUESTS BNPLC'S
CONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY
SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING
NOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED IS
ACTUALLY EXECUTED AND DELIVERED.]

The real property located in the City of Oakland, County of Alameda, State of
California, described as follows:

Being a portion of Lot 12, as shown on Parcel Map No. 6003, filed in Book 205 of
Parcel Maps, at Pages 94 through 98, Alameda County Records, more particularly
described as follows:

Commencing at the most southerly corner of said Lot 12; Thence along the
southwesterly line of said Lot 12, North 33(degrees) 50' 24" West, 628.68 feet
to the point of beginning; Thence continuing along the southwesterly line of
said Lot 12, North 33(degrees) 50' 24" West, 1029.21 feet; Thence along the
southeasterly line of said Lot 12, South 56(degrees) 09' 36" West 14.00 feet;
Thence along the southwesterly line of said Lot 12, North 33(degrees) 50' 24"
West, 253.55 feet to the beginning of a curve, concave southwesterly, having a
radius of 392.21 feet; Thence northerly along the arc of said curve, through a
central angle of 3(degrees) 51' 45", an arc distance of 26.44 feet to the
intersection of a line drawn parallel with and 85.00 feet southeasterly of the
northwesterly line of said Lot 12, a radial line through said point bears North
52(degrees) 17' 51" East; Thence parallel with the northwesterly line of said
Lot 12, North 56(degrees) 09' 36" East, 476.93 feet to a point that is 5 feet
southwesterly of the northeasterly line of said Lot 12; Thence along a line that
is parallel with and 5 feet southwesterly of the said northeasterly line of Lot
12, South 40(degrees) 00' 30" East, 69.44 feet to the beginning of a curve,
concave southwesterly, having a radius of 1949.00 feet; Thence southeasterly
along the arc of said curve, through a central angle of 6(degrees) 10' 18", an
arc distance of 209.94 feet; Thence continuing along a line that is parallel
with and 5(degrees) feet southwesterly of the said northeasterly line of Lot 12,
South 33(degrees) 50' 12" East, 1030.61 feet to the intersection with a line
drawn perpendicular with the southwesterly line of said Lot 12, distant thereon
628.68 feet from the most southerly corner of said Lot 12; Thence southwesterly
along said perpendicular line, South 56(degrees) 09' 36" West, 480.72 feet to
the Point of Beginning.

The basis of bearings for Parcel Map No. 6003 is the North American Datum of
1983, Zone 3, 1984 Adjustment Published in 1986, as shown on Record of Survey
990, filed in Book 18 of Records of Survey, at Pages 50 through 60, Alameda
County Records.  All distances in this description are grid distances.  To
convert to ground distances, multiply grid distances by 1.0000708.

Assessor's Parcel No. 041-3902-015 (Portion)

[Improvements - Buildings 1&2]

                             Exhibit B-1 - Page 4

<PAGE>

                                    Annex B

                            Permitted Encumbrances

[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY
 --------------
BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL
ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BE
DELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCH
ADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS
"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE, THE BUILDING 3 LEASE OR THE
BUILDINGS 1&2 LEASE FROM TIME TO TIME OR BECAUSE OF ZHONE'S REQUEST FOR BNPLC'S
CONSENT OR APPROVAL TO AN ADJUSTMENT.]

     This conveyance is subject to all encumbrances not constituting a "Lien
Removable by BNPLC" (as defined in the Common Definitions and Provisions
Agreement (Improvements - Buildings 1&2) incorporated by reference into the
Lease Agreement (Improvements - Buildings 1&2) referenced in the last item of
the list below), including the following matters to the extent the same are
still valid and in force:

1.   County and city taxes for the Fiscal Year 2000 - 2001, a lien not yet due
     or payable.

2.   The Lien of Supplemental Taxes, if any, assessed pursuant to the provisions
     of Chapter 3.5, Revenue and Taxation Code, Sections 75 et seq., resulting
     from changes of ownership or completion of construction on or after the
     date hereof.

3.   Easement, upon the terms, covenants and conditions thereof, for the
     purposes stated therein and incidental purposes created in that certain
     instrument

     Recorded      :  FEBRUARY 11, 1974, REEL 3608, IMAGE 3, SERIES NO.
                      74-16523, OFFICIAL RECORDS
     Granted to    :  THE PACIFIC TELEPHONE AND TELEGRAPH COMPANY, A CORPORATION
     Purpose       :  COMMUNICATION FACILITIES
     Affects       :  A SOUTHWESTERLY PORTION OF SAID LAND

4.   Terms, covenants, conditions and reservations as contained in the Port
     Ordinance No. 2832.  An Ordinance establishing standards and restrictions
     regulating the use of land and the design and construction of structures
     and other improvements in the Oakland Airport Business Park, and repealing
     Port Ordinance No. 1343, as amended, recorded MAY 10, 1990, SERIES NO.
     90130204, OFFICIAL RECORDS.

     Amendment Port Ordinance No. 3146, recorded SEPTEMBER 30, 1993, SERIES NO.
     93348032, OFFICIAL RECORDS.

5.   Terms and conditions of the City of Oakland Redevelopment Project adopted
     by Ordinance No. 11824, C.M.S., as disclosed in the "Notice of Adoption of
     the Coliseum Area Redevelopment Plan, Termination of the 77/th/ Avenue
     Industrial Redevelopment Project and Amendment of the Elmhurst
     Redevelopment Plan," recorded JULY 31, 1995, SERIES NO. 95167161, OFFICIAL
     RECORDS.

     Amendment recorded SEPTEMBER 9, 1997, SERIES NO. 97-231187, OFFICIAL
     RECORDS.

6.   The Lease Agreement (Land), the Lease Agreement (Improvements - Building 3)
     and the Lease

[Improvements - Buildings 1&2]

                             Exhibit B-1 - Page 5

<PAGE>

     Agreement (Improvements - Buildings 1&2), all dated as of August 1, 2000
     and all between BNP Leasing Corporation, as lessor, and Zhone Technologies,
     Inc., as lessee.

[Improvements - Buildings 1&2]

                             Exhibit B-1 - Page 6

<PAGE>

                                  Exhibit B-2
                                  -----------

                            CORPORATION GRANT DEED

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
-------------------------

NAME:  [Zhone or the Applicable Purchaser]
ADDRESS:  ___________________
ATTN:     ___________________
CITY:     ___________________
STATE:  ___________________
Zip:      ___________________

MAIL TAX STATEMENTS TO:
----------------------

NAME:  [Zhone or the Applicable Purchaser]
ADDRESS:  ___________________
ATTN:     ___________________
CITY:     ___________________
STATE:  ___________________
Zip:      ___________________

                            CORPORATION GRANT DEED
        (Covering Improvements but not the Land under the Improvements)

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to [Zhone
or the Applicable Purchaser] ("Grantee") all of Grantor's interest in the
buildings and other improvements (the "Improvements") on the land situated in
Oakland, California, described on Annex A attached hereto and hereby made a part
hereof (the "Land"), together with the any other right, title and interest of
Grantor in and to any easements, rights-of-way, privileges and other rights
appurtenant to the Improvements; provided, however, that this grant is subject
to the encumbrances described on Annex B (the "Permitted Encumbrances") and any
reservations or qualifications set forth below. Grantee hereby assumes the
obligations (including any personal obligations) of Grantor, if any, created by
or under, and agrees to be bound by the terms and conditions of, the Permitted
Encumbrances to the extent that the same concern or apply to the Improvements.

Although this deed conveys Grantor's interest in the Improvements, this deed
does not convey any interest in the Land under the Improvements or any rights or
easements appurtenant to Improvements. Grantor retains and reserves all right,
title and interest of  Grantor in and to the Land and any rights and easements
appurtenant to Land.  Further, this deed does not convey any right of access
over or right to use the Land, it being understood that the right of Grantee or
its successors and assigns to maintain or use the improvements conveyed hereby
on the Land shall be on and subject to the terms and conditions of any separate
ground lease or deed that Grantee may from time to time obtain, authorizing use
of the Land by Grantee. [DRAFTING NOTE: IF ZHONE DESIGNATES AN APPLICABLE
                         -------------
PURCHASER AS GRANTEE (RATHER THAN DESIGNATING ITSELF TO BE THE GRANTEE), THE
FOLLOWING WILL BE ADDED TO THIS DEED:

     Unless Grantee has obtained or is (contemporaneously with the delivery of
this deed) obtaining a sublease under a separate existing ground lease that is
sufficient to authorize Grantee to maintain the Improvements on the Land,
Grantee shall remove or abandon the Improvements promptly upon request of the
owner of the Land. Nothing herein or in the agreements pursuant to which this
deed is being delivered shall be construed as an obligation on the part of
Grantor to deliver or cooperate reasonably in obtaining for Grantee any deed or
ground lease covering the Land described in Annex A.]

[Improvements - Buildings 1&2]
<PAGE>

                                    BNP LEASING CORPORATION

Date: As of ____________            By:     ___________________________
                                            Its:

                                    Attest: ___________________________
                                            Its:

                                    [Zhone or Applicable Purchaser]

Date: As of ____________            By:     ___________________________
                                            Its:

                                    Attest: ___________________________
                                            Its:

STATE OF ____________  )
                       )    SS
COUNTY OF ___________  )

     On ___________________ before me,______________, personally appeared
___________ and ________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
person, or the entity upon behalf of which the persons acted, executed the
instrument.

     WITNESS my hand and official seal.

     Signature_____________________________

[Improvements - Buildings 1&2]

                              Exhibit B-2 - Page 2
<PAGE>

STATE OF ____________  )
                       )    SS
COUNTY OF ___________  )

     On ___________________ before me,______________, personally appeared
___________ and ________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
person, or the entity upon behalf of which the persons acted, executed the
instrument.

     WITNESS my hand and official seal.

     Signature____________________________

[Improvements - Buildings 1&2]

                             Exhibit B-2 - Page 3
<PAGE>

                                    Annex A

                               LEGAL DESCRIPTION

[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES
 --------------
FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH ZHONE REQUESTS BNPLC'S
CONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY
SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING
NOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED IS
ACTUALLY EXECUTED AND DELIVERED.]

The real property located in the City of Oakland, County of Alameda, State of
California, described as follows:

Being a portion of Lot 12, as shown on Parcel Map No. 6003, filed in Book 205 of
Parcel Maps, at Pages 94 through 98, Alameda County Records, more particularly
described as follows:

Commencing at the most southerly corner of said Lot 12; Thence along the
southwesterly line of said Lot 12, North 33 degrees 50' 24" West, 628.68 feet to
the point of beginning; Thence continuing along the southwesterly line of said
Lot 12, North 33 degrees 50' 24" West, 1029.21 feet; Thence along the
southeasterly line of said Lot 12, South 56 degrees 09' 36" West 14.00 feet;
Thence along the southwesterly line of said Lot 12, North 33 degrees 50' 24"
West, 253.55 feet to the beginning of a curve, concave southwesterly, having a
radius of 392.21 feet; Thence northerly along the arc of said curve, through a
central angle of 3 degrees 51' 45", an arc distance of 26.44 feet to the
intersection of a line drawn parallel with and 85.00 feet southeasterly of the
northwesterly line of said Lot 12, a radial line through said point bears North
52 degrees 17' 51" East; Thence parallel with the northwesterly line of said Lot
12, North 56 degrees 09' 36" East, 476.93 feet to a point that is 5 feet
southwesterly of the northeasterly line of said Lot 12; Thence along a line that
is parallel with and 5 feet southwesterly of the said northeasterly line of Lot
12, South 40 degrees 00' 30" East, 69.44 feet to the beginning of a curve,
concave southwesterly, having a radius of 1949.00 feet; Thence southeasterly
along the arc of said curve, through a central angle of 6 degrees 10' 18", an
arc distance of 209.94 feet; Thence continuing along a line that is parallel
with and 5 feet southwesterly of the said northeasterly line of Lot 12, South 33
degrees 50' 12" East, 1030.61 feet to the intersection with a line drawn
perpendicular with the southwesterly line of said Lot 12, distant thereon 628.68
feet from the most southerly corner of said Lot 12; Thence southwesterly along
said perpendicular line, South 56 degrees 09' 36" West, 480.72 feet to the Point
of Beginning.

The basis of bearings for Parcel Map No. 6003 is the North American Datum of
1983, Zone 3, 1984 Adjustment Published in 1986, as shown on Record of Survey
990, filed in Book 18 of Records of Survey, at Pages 50 through 60, Alameda
County Records.  All distances in this description are grid distances.  To
convert to ground distances, multiply grid distances by 1.0000708.

Assessor's Parcel No. 041-3902-015 (Portion)

[Improvements - Buildings 1&2]

                             Exhibit B-2 - Page 4
<PAGE>

                                    Annex B

                            Permitted Encumbrances

[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY
 --------------
BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL
ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BE
DELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCH
ADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS
"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE, THE BUILDING 3 LEASE OR THE
BUILDINGS 1&2 LEASE FROM TIME TO TIME OR BECAUSE OF ZHONE'S REQUEST FOR BNPLC'S
CONSENT OR APPROVAL TO AN ADJUSTMENT.]

     This conveyance is subject to all encumbrances not constituting a "Lien
Removable by BNPLC" (as defined in the Common Definitions and Provisions
Agreement (Improvements - Buildings 1&2) incorporated by reference into the
Lease Agreement (Improvements - Buildings 1&2) referenced in the last item of
the list below), including the following matters to the extent the same are
still valid and in force:

1.   County and city taxes for the Fiscal Year 2000 - 2001, a lien not yet due
     or payable.

2.   The Lien of Supplemental Taxes, if any, assessed pursuant to the provisions
     of Chapter 3.5, Revenue and Taxation Code, Sections 75 et seq., resulting
     from changes of ownership or completion of construction on or after the
     date hereof.

3.   Easement, upon the terms, covenants and conditions thereof, for the
     purposes stated therein and incidental purposes created in that certain
     instrument

     Recorded      :  FEBRUARY 11, 1974, REEL 3608, IMAGE 3, SERIES NO.
                      74-16523, OFFICIAL RECORDS
     Granted to    :  THE PACIFIC TELEPHONE AND TELEGRAPH COMPANY, A CORPORATION
     Purpose       :  COMMUNICATION FACILITIES
     Affects       :  A SOUTHWESTERLY PORTION OF SAID LAND

4.   Terms, covenants, conditions and reservations as contained in the Port
     Ordinance No. 2832.  An Ordinance establishing standards and restrictions
     regulating the use of land and the design and construction of structures
     and other improvements in the Oakland Airport Business Park, and repealing
     Port Ordinance No. 1343, as amended, recorded MAY 10, 1990, SERIES NO.
     90130204, OFFICIAL RECORDS.

     Amendment Port Ordinance No. 3146, recorded SEPTEMBER 30, 1993, SERIES NO.
     93348032, OFFICIAL RECORDS.

5.   Terms and conditions of the City of Oakland Redevelopment Project adopted
     by Ordinance No. 11824, C.M.S., as disclosed in the "Notice of Adoption of
     the Coliseum Area Redevelopment Plan, Termination of the 77/th/ Avenue
     Industrial Redevelopment Project and Amendment of the Elmhurst
     Redevelopment Plan," recorded JULY 31, 1995, SERIES NO. 95167161, OFFICIAL
     RECORDS.
     Amendment recorded SEPTEMBER 9, 1997, SERIES NO. 97-231187, OFFICIAL
     RECORDS.

[Improvements - Buildings 1&2]

                               Exhibit B-2 Page 5
<PAGE>

6.   The Lease Agreement (Land), the Lease Agreement (Improvements - Building 3)
     and the Lease Agreement (Improvements - Buildings 1&2), all dated as of
     August 1, 2000 and all between BNP Leasing Corporation, as lessor, and
     Zhone Technologies, Inc., as lessee.

[Improvements - Buildings 1&2]

                             Exhibit B-2 - Page 6
<PAGE>

                                  Exhibit B-3
                                  -----------

                      AMENDMENT TO LEASE AGREEMENT (LAND)

     This AMENDMENT TO LEASE AGREEMENT LAND (this "Amendment"), by and between
BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), whose address is
12201 Merit Drive, Suite 860, Dallas, Texas 75251, and [Zhone or any permitted
assignee of Zhone which has become the tenant under the Land Lease], a
___________ ("Lessee"), whose address is ____________________. as of
____________, ____ (the "Effective Date").

                                   RECITALS

     This Amendment is being executed pursuant to a Purchase Agreement (Land)
dated as of August 1, 2000 (the "Land Purchase Agreement"), between BNP Leasing
Corporation and Zhone Technologies, Inc., covering the land described in Annex 1
                                                                         -------
attached hereto (the "Land").  Incorporated by reference into the Land Purchase
Agreement is a Common Definitions and Provisions Agreement (Land) dated as of
the effective date of the Land Purchase Agreement (the "Land CDPA"), between BNP
Leasing Corporation and Zhone Technologies, Inc.  The Land CDPA is hereby
incorporated into and made a part of this Amendment for all purposes.
Capitalized terms defined in the Land CDPA and used but not otherwise defined
herein are intended in this Amendment to have the respective meanings ascribed
to them in the Land CDPA.  The provisions in Article II of the Land CDPA are
intended to apply to this Amendment as if set forth herein and as if this Ground
Lease were one of the "Land Operative Documents" as defined therein.

     Lessee is currently the tenant under the Land Lease, which covers the Land
described in Annex 1.  Lessee and BNPLC have reached agreement as to the terms
             -------
and conditions upon which they will extend the Land Lease Land for a term of
just less that 35 years, and by this Amendment Lessee and BNPLC desire to
evidence such agreement.

                                  AGREEMENTS

     NOW, THEREFORE, Lessee and BNPLC agree as follows:

     1.   The term of the Land Lease is extended so that (unless the Land Lease
is terminated earlier in accordance with its terms) the term of the Land Lease
will end on the first day of the last calendar month prior to the thirty-fifth
anniversary of the date of this Amendment.

     2.   From and after the Designated Sale Date, Base Rent required by the
Land Lease must be paid by Lessee in monthly installments, with each installment
due on the first day of every calendar month, in arrears, without offset, demand
or deduction, in an amount equal to the Fair Rental Value as defined in Annex 2
                                                                        -------
attached hereto.

     3.   Lessee waives (A) any right to terminate the Land Lease as provided in
Paragraph 1(d) thereof, and (B) any right to further extend the Land Lease,
pursuant to Paragraph 1(c) thereof or otherwise.

     4.   Except as provided herein, the Land Lease will continue on all of the
same terms and conditions as are set forth therein.

[Improvements - Buildings 1&2]
<PAGE>

                         [The signature pages follow.]

[Improvements - Buildings 1&2]

                             Exhibit B-3 - Page 2
<PAGE>

     IN WITNESS WHEREOF, this Land Lease Amendment is hereby executed in
multiple originals as of the date first written above.

                          "Lessor"

                          [Zhone or its permitted assignee under the Land Lease]

                          By:___________________________________________________
                             Name:______________________________________________
                             Title:_____________________________________________

[Improvements - Buildings 1&2]

                             Exhibit B-3 - Page 3
<PAGE>

[Continuation of signature pages to Land Lease Amendment dated as of
___________, ____]

                                 "BNPLC"

                                 BNP LEASING CORPORATION

                                 By:____________________________________________
                                    Name:_______________________________________
                                    Title:______________________________________

[Improvements - Buildings 1&2]

                             Exhibit B-3 - Page 4
<PAGE>

STATE OF ___________     )
                         )
COUNTY OF __________     )

     On _____________, _____, before me, ________________________, personally
appeared ____________________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

                         WITNESS my hand and official seal.

                         Signature______________________________________________

[Improvements - Buildings 1&2]

                             Exhibit B-3 - Page 5
<PAGE>

STATE OF ________   )
                    )
COUNTY OF _______   )

     On ___________, _____, before me, ________________________, personally
appeared ____________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.

                         WITNESS my hand and official seal.

                         Signature______________________________________________

[Improvements - Buildings 1&2]

                             Exhibits B-3 - Page 6
<PAGE>

                                    Annex 1
                                    -------

                               Legal Description

[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES
 --------------
FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH ZHONE REQUESTS BNPLC'S
CONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY
SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING
NOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED IS
ACTUALLY EXECUTED AND DELIVERED.]

The real property located in the City of Oakland, County of Alameda, State of
California, described as follows:

Being a portion of Lot 12, as shown on Parcel Map No. 6003, filed in Book 205 of
Parcel Maps, at Pages 94 through 98, Alameda County Records, more particularly
described as follows:

Commencing at the most southerly corner of said Lot 12; Thence along the
southwesterly line of said Lot 12, North 33(degrees) 50' 24" West, 628.68 feet
to the point of beginning; Thence continuing along the southwesterly line of
said Lot 12, North 33(degrees) 50' 24" West, 1029.21 feet; Thence along the
southeasterly line of said Lot 12, South 56(degrees) 09' 36" West 14.00 feet;
Thence along the southwesterly line of said Lot 12, North 33(degrees) 50' 24"
West, 253.55 feet to the beginning of a curve, concave southwesterly, having a
radius of 392.21 feet; Thence northerly along the arc of said curve, through a
central angle of 3(degrees) 51' 45", an arc distance of 26.44 feet to the
intersection of a line drawn parallel with and 85.00 feet southeasterly of the
northwesterly line of said Lot 12, a radial line through said point bears North
52(degrees) 17' 51" East; Thence parallel with the northwesterly line of said
Lot 12, North 56(degrees) 09' 36" East, 476.93 feet to a point that is 5 feet
southwesterly of the northeasterly line of said Lot 12; Thence along a line that
is parallel with and 5 feet southwesterly of the said northeasterly line of Lot
12, South 40(degrees) 00' 30" East, 69.44 feet to the beginning of a curve,
concave southwesterly, having a radius of 1949.00 feet; Thence southeasterly
along the arc of said curve, through a central angle of 6(degrees) 10' 18", an
arc distance of 209.94 feet; Thence continuing along a line that is parallel
with and 5 feet southwesterly of the said northeasterly line of Lot 12, South
33(degrees) 50' 12" East, 1030.61 feet to the intersection with a line drawn
perpendicular with the southwesterly line of said Lot 12, distant thereon 628.68
feet from the most southerly corner of said Lot 12; Thence southwesterly along
said perpendicular line, South 56(degrees) 09' 36" West, 480.72 feet to the
Point of Beginning.

The basis of bearings for Parcel Map No. 6003 is the North American Datum of
1983, Zone 3, 1984 Adjustment Published in 1986, as shown on Record of Survey
990, filed in Book 18 of Records of Survey, at Pages 50 through 60, Alameda
County Records.  All distances in this description are grid distances.  To
convert to ground distances, multiply grid distances by 1.0000708.

Assessor's Parcel No. 041-3902-015 (Portion)

[Improvements-Buildings 1&2]

                             Exhibits B-3 - Page 7
<PAGE>

                                    ANNEX 2
                                    -------

                       DETERMINATION OF FAIR RENTAL VALUE

     Each monthly payment of Base Rent will equal the Fair Rental Value,
computed as of the most recent Rental Determination Date (defined below) when
such payment becomes due.  As used in this Annex:

          "Fair Rental Value" means (and all appraisers and other persons
     involved in the determination of the Fair Rental Value will be so advised)
     the monthly rent, as determined in accordance with this Annex, that would
     be agreed upon between a willing tenant, under no compulsion to lease, and
     a willing landlord, under no compulsion to lease, for unimproved land
                                                           ----------
     comparable in size and location to the Land, exclusive of any improvements,
     at the time a determination is required hereunder and taking into
     consideration the condition of the Land, the encumbrances affecting the
     title to the Land and all applicable zoning, land use approvals and other
     governmental permits relating to the Land at the time of such
     determination; and

          "Rental Determination Date" means the Designated Sale Date and each
     fifth anniversary of the Designated Sale Date.

     If Lessee and BNPLC have not agreed upon Fair Rental Value as of any Rental
Determination Date within one hundred eighty days after the such date, then Fair
Rental Value will be determined as follows:

          (a)  Lessee and BNPLC shall each appoint a real estate appraiser who
     is familiar with rental values for properties in the vicinity of the Land
     and who has not previously acted for either party.  Each party will make
     the appointment no later than ten days after receipt of notice from the
     other party that the appraisal process described in this Annex has been
     invoked.  The agreement of the two appraisers as to Fair Rental Value will
     be binding upon Lessee and BNPLC.  If the two appraisers cannot agree upon
     the Fair Rental Value within ten days following their appointment, they
     shall within another ten days agree upon a third real estate appraiser.
     Immediately thereafter, each of the first two appraisers will submit his
     best estimate of the appropriate Fair Rental Value (together with a written
     report supporting such estimate) to the third appraiser and the third
     appraiser will choose between the two estimates.  The estimate of Fair
     Rental Value chosen by the third appraiser as the closest to the prevailing
     annual fair rental value will be binding upon Lessee and BNPLC.
     Notification in writing of this estimate shall be made to Lessee and BNPLC
     within fifteen days following the selection of the third appraiser.

          (b)  If appraisers must be selected under the procedure set out above
     and either BNPLC or Lessee fails to appoint an appraiser or fails to notify
     the other party of such appointment within fifteen days after receipt of
     notice that the prescribed time for appointing the appraisers has passed,
     then the other party's appraiser will determine the Fair Rental Value.  All
     appraisers selected for the appraisal process set out in this Annex will be
     disinterested, reputable, qualified real estate appraisers with the
     designation of MAI or equivalent and with at least 5 years experience in
     appraising properties comparable to the Land.

          (c)  If a third appraiser must be chosen under the procedure set out
     above, he or she will be chosen on the basis of objectivity and competence,
     not on the basis of his relationship with the other appraisers or the
     parties to the Land Lease, and the first two appraisers will be so advised.
     Although the first two appraisers will be instructed to attempt in good
     faith to agree upon the third appraiser, if for any reason they cannot
     agree within the prescribed time, either Lessee and BNPLC may require the
     first

[Improvements - Buildings 1&2]

                             Exhibit B-3 - Page 8
<PAGE>

     two appraisers to immediately submit its top choice for the third appraiser
     to the then highest ranking officer of the California Bar Association who
     will agree to help and who has no attorney/client or other significant
     relationship to either Lessee or BNPLC. Such officer will have complete
     discretion to select the most objective and competent third appraiser from
     between the choices of each of the first two appraisers, and will do so
     within twenty days after such choices are submitted to him.

          (d)  Either Lessee or BNPLC may notify the appraiser selected by the
     other party to demand the submission of an estimate of Fair Rental Value or
     a choice of a third appraiser as required under the procedure described
     above; and if the submission of such an estimate or choice is required but
     the other party's appraiser fails to comply with the demand within fifteen
     days after receipt of such notice, then the Fair Rental Value or choice of
     the third appraiser, as the case may be, selected by the other appraiser
     (i.e., the notifying party's appraiser) will be binding upon Lessee and
     BNPLC.

          (e)  Lessee and BNPLC shall each bear the expense of the appraiser
     appointed by it, and the expense of the third appraiser and of any officer
     of the California Bar Association who participates in the appraisal process
     described above will be shared equally by Lessee and BNPLC.

     If the Fair Rental Value as of any Rental Determination Date has not been
established by agreement of the parties or in accordance with the foregoing
procedures prior to the due date for any monthly installment of Base Rent that
is dependent upon such Fair Rental Value, then no later than such due date
Lessee shall make an estimated payment of Base Rent equal to 150% of the monthly
Base Rent required for latest full calendar month prior to such Rental
Determination Date.  Thereafter, if the Fair Rental Value is established to be
greater than the estimated payments made by Lessee, Lessee will pay over any
resulting underpayment to BNPLC upon demand.  If, on the other hand, the Fair
Rental Value is later established to be less than the estimated payments made by
Lessee, Lessee may offset any resulting overpayment of Base Rent against future
installments of Base Rent as they become due.

[Improvements - Buildings 1&2]

                             Exhibit B-3 - Page 9
<PAGE>

                                  Exhibit B-4
                                  -----------

                            CORPORATION GRANT DEED

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
-------------------------

NAME:  [Zhone or the Applicable Purchaser]
ADDRESS:  ___________________
ATTN:     ___________________
CITY:     ___________________
STATE:  ___________________
Zip:      ___________________

MAIL TAX STATEMENTS TO:
----------------------

NAME:  [Zhone or the Applicable Purchaser]
ADDRESS:  ___________________
ATTN:     ___________________
CITY:     ___________________
STATE:  ___________________
Zip:      ___________________

                            CORPORATION GRANT DEED
          (Covering Improvements but not Land under the Improvements)

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation ("Grantor"), hereby grants to [Zhone
or the Applicable Purchaser] ("Grantee") all of Grantor's interest in the
buildings and other improvements (the "Improvements") on the land situated in
Oakland, California, described on Annex A attached hereto and hereby made a part
hereof (the "Land"), together with the any other right, title and interest of
Grantor in and to any easements, rights-of-way, privileges and other rights
appurtenant to the Improvements; provided, however, that this grant is subject
to the encumbrances described on Annex B (the "Permitted Encumbrances") and any
reservations or qualifications set forth below. Grantee hereby assumes the
obligations (including any personal obligations) of Grantor, if any, created by
or under, and agrees to be bound by the terms and conditions of, the Permitted
Encumbrances to the extent that the same concern or apply to the Improvements.

Although this deed conveys Grantor's interest in the Improvements on the Land,
this deed does not convey any interest in the Land itself or any rights or
easements appurtenant to Land. Prior to or contemporaneously with the delivery
of this deed, Grantor has conveyed or is conveying the Land and appurtenant
rights and easements to another party, subject to the terms and conditions of a
Ground Lease dated ________, filed or to be filed for record in the Santa Clara
County records. Grantor is assigning it's rights as lessee under the Ground
Lease to Grantee by a separate instrument dated of even date herewith.

[Improvements - Buildings 1&2]
<PAGE>

                                    BNP LEASING CORPORATION

Date: As of ____________            By:     __________________________
                                            Its:

                                    Attest: __________________________
                                            Its:

                                    [Zhone or Applicable Purchaser]

Date: As of ____________            By:     __________________________
                                            Its:

                                    Attest: __________________________
                                            Its:

STATE OF ____________  )
                       )    SS
COUNTY OF ___________  )

     On ___________________ before me,______________, personally appeared
___________ and________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
person, or the entity upon behalf of which the persons acted, executed the
instrument.

     WITNESS my hand and official seal.

     Signature ___________________________

[Improvements - Buildings 1&2]

                             Exhibit B-4 - Page 2
<PAGE>

STATE OF ____________  )
                       )    SS
COUNTY OF ___________  )

     On ___________________ before me,______________, personally appeared
___________ and________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
person, or the entity upon behalf of which the persons acted, executed the
instrument.

     WITNESS my hand and official seal.

     Signature

[Improvements - Buildings 1&2]

                             Exhibit B-4 - Page 3
<PAGE>

                                    Annex A

                               LEGAL DESCRIPTION

[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES
 --------------
FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH ZHONE REQUESTS BNPLC'S
CONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY
SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING
NOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED IS
ACTUALLY EXECUTED AND DELIVERED.]

The real property located in the City of Oakland, County of Alameda, State of
California, described as follows:

Being a portion of Lot 12, as shown on Parcel Map No. 6003, filed in Book 205 of
Parcel Maps, at Pages 94 through 98, Alameda County Records, more particularly
described as follows:

Commencing at the most southerly corner of said Lot 12; Thence along the
southwesterly line of said Lot 12, North 33(degrees) 50' 24" West, 628.68 feet
to the point of beginning; Thence continuing along the southwesterly line of
said Lot 12, North(degrees) 33 50' 24" West, 1029.21 feet; Thence along the
southeasterly line of said Lot 12, South 56(degrees) 09' 36" West 14.00 feet;
Thence along the southwesterly line of said Lot 12, North 33(degrees) 50' 24"
West, 253.55 feet to the beginning of a curve, concave southwesterly, having a
radius of 392.21 feet; Thence northerly along the arc of said curve, through a
central angle of 3(degrees) 51' 45", an arc distance of 26.44 feet to the
intersection of a line drawn parallel with and 85.00 feet southeasterly of the
northwesterly line of said Lot 12, a radial line through said point bears North
52(degrees) 17' 51" East; Thence parallel with the northwesterly line of said
Lot 12, North 56(degrees) 09' 36" East, 476.93 feet to a point that is 5 feet
southwesterly of the northeasterly line of said Lot 12; Thence along a line that
is parallel with and 5 feet southwesterly of the said northeasterly line of Lot
12, South 40(degrees) 00' 30" East, 69.44 feet to the beginning of a curve,
concave southwesterly, having a radius of 1949.00 feet; Thence southeasterly
along the arc of said curve, through a central angle of 6(degrees) 10' 18", an
arc distance of 209.94 feet; Thence continuing along a line that is parallel
with and 5 feet southwesterly of the said northeasterly line of Lot 12, South 33
(degrees) 50' 12" East, 1030.61 feet to the intersection with a line drawn
perpendicular with the southwesterly line of said Lot 12, distant thereon 628.68
feet from the most southerly corner of said Lot 12; Thence southwesterly along
said perpendicular line, South 56(degrees) 09' 36" West, 480.72 feet to the
Point of Beginning.

The basis of bearings for Parcel Map No. 6003 is the North American Datum of
1983, Zone 3, 1984 Adjustment Published in 1986, as shown on Record of Survey
990, filed in Book 18 of Records of Survey, at Pages 50 through 60, Alameda
County Records.  All distances in this description are grid distances.  To
convert to ground distances, multiply grid distances by 1.0000708.

Assessor's Parcel No. 041-3902-015 (Portion)

[Improvements - Buildings 1&2]

                             Exhibit B-4 - Page 4
<PAGE>

                                    Annex B

                            Permitted Encumbrances

[DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY
 --------------
BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL
ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING NOTE" WILL BE
DELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCH
ADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS
"PERMITTED ENCUMBRANCES" UNDER THE LAND LEASE, THE BUILDING 3 LEASE OR THE
BUILDINGS 1&2 LEASE FROM TIME TO TIME OR BECAUSE OF ZHONE'S REQUEST FOR BNPLC'S
CONSENT OR APPROVAL TO AN ADJUSTMENT.]

     This conveyance is subject to all encumbrances not constituting a "Lien
Removable by BNPLC" (as defined in the Common Definitions and Provisions
Agreement (Land) incorporated by reference into the Lease Agreement (Land)
referenced in the last item of the list below), including the following matters
to the extent the same are still valid and in force:

1.   County and city taxes for the Fiscal Year 2000 - 2001, a lien not yet due
     or payable.

2.   The Lien of Supplemental Taxes, if any, assessed pursuant to the provisions
     of Chapter 3.5, Revenue and Taxation Code, Sections 75 et seq., resulting
     from changes of ownership or completion of construction on or after the
     date hereof.

3.   Easement, upon the terms, covenants and conditions thereof, for the
     purposes stated therein and incidental purposes created in that certain
     instrument

     Recorded      :  FEBRUARY 11, 1974, REEL 3608, IMAGE 3, SERIES NO. 74-
                      16523, OFFICIAL RECORDS
     Granted to    :  THE PACIFIC TELEPHONE AND TELEGRAPH COMPANY, A CORPORATION
     Purpose       :  COMMUNICATION FACILITIES
     Affects       :  A SOUTHWESTERLY PORTION OF SAID LAND

4.   Terms, covenants, conditions and reservations as contained in the Port
     Ordinance No. 2832. An Ordinance establishing standards and restrictions
     regulating the use of land and the design and construction of structures
     and other improvements in the Oakland Airport Business Park, and repealing
     Port Ordinance No. 1343, as amended, recorded MAY 10, 1990, SERIES NO.
     90130204, OFFICIAL RECORDS.

     Amendment Port Ordinance No. 3146, recorded SEPTEMBER 30, 1993, SERIES NO.
     93348032, OFFICIAL RECORDS.

5.   Terms and conditions of the City of Oakland Redevelopment Project adopted
     by Ordinance No. 11824, C.M.S., as disclosed in the "Notice of Adoption of
     the Coliseum Area Redevelopment Plan, Termination of the 77/th/ Avenue
     Industrial Redevelopment Project and Amendment of the Elmhurst
     Redevelopment Plan," recorded JULY 31, 1995, SERIES NO. 95167161, OFFICIAL
     RECORDS.

     Amendment recorded SEPTEMBER 9, 1997, SERIES NO. 97-231187, OFFICIAL
     RECORDS.

6.   The Lease Agreement (Land), the Lease Agreement (Improvements - Building 3)
     and the Lease

[Improvements - Buildings 1&2]

                              Exhibit B-4 - Page 5
<PAGE>

     Agreement (Improvements - Buildings 1&2), all dated as of August 1, 2000
     and all between BNP Leasing Corporation, as lessor, and Zhone Technologies,
     Inc., as lessee.

[Improvements - Buildings 1&2]

                             Exhibit B-4 - Page 6
<PAGE>

                                   Exhibit C
                                   ---------

                          BILL OF SALE AND ASSIGNMENT

     Reference is made to: (1) that certain Purchase Agreement (Improvements -
Buildings 1&2) between BNP Leasing Corporation ("Assignor") and Zhone
Technologies, Inc., dated as of August 1, 2000, (the "Buildings 1&2 Purchase
Agreement") and (2) that certain Lease Agreement (Improvements - Buildings 1&2)
between Assignor, as landlord, and Zhone Technologies, Inc., as tenant, dated as
of August 1, 2000 (the "Buildings 1&2 Lease"). (Capitalized terms used and not
otherwise defined in this document are intended to have the meanings assigned to
them in the Common Definitions and Provisions Agreement (Improvements -Buildings
1&2) incorporated by reference into both the Buildings 1&2 Purchase Agreement
and Buildings 1&2 Lease.)

     As contemplated by the Buildings 1&2 Purchase Agreement, Assignor hereby
sells, transfers and assigns unto [Zhone OR THE APPLICABLE PURCHASER, AS THE
CASE MAY BE], a _____________ ("Assignee"), all of Assignor's right, title and
interest in and to the following property, if any, to the extent such property
is assignable:

     (a) the Buildings 1&2 Lease [DRAFTING NOTE: THE FOLLOWING WILL BE ADDED
ONLY IF APPLICABLE BECAUSE OF THE SIMULTANEOUS DELIVERY OF A GRANT DEED IN THE
FORM OF EXHIBIT B-3:  and the Ground Lease dated _________, between _________,
        ------------
as lessor, and Assignor, as lessee,  filed for record on in ___________ of
Alameda County records (the "Ground Lease")];

     (b) any pending or future award made because of any condemnation affecting
the Buildings 1&2 Property or because of any conveyance to be made in lieu
thereof, and any unpaid award for damage to the Buildings 1&2 Property and any
unpaid proceeds of insurance or claim or cause of action for damage, loss or
injury to the Buildings 1&2 Property; and

     (c) all other property included within the definition of "Property" as set
forth in the Buildings 1&2 Purchase Agreement, including but not limited to any
of the following transferred to Assignor by the tenant pursuant to Paragraph 7
                                                                   -----------
of the Buildings 1&2 Lease or otherwise acquired by Assignor, at the time of the
execution and delivery of the Buildings 1&2 Lease and Purchase Agreement or
thereafter, by reason of Assignor's status as the owner of any interest in the
Buildings 1&2 Property: (1) any goods, equipment, furnishings, furniture,
chattels and tangible personal property of whatever nature that are located on
the Buildings 1&2 Property and all renewals or replacements of or substitutions
for any of the foregoing; (ii) the rights of Assignor, existing at the time of
the execution of the Buildings 1&2 Lease and Purchase Agreement or thereafter
arising, under Permitted Encumbrances or Development Documents (both as defined
in the Buildings 1&2 Lease); and (iii) any other permits, licenses, franchises,
certificates, and other rights and privileges related to the Buildings 1&2
Property that Assignee would have acquired if Assignee had itself acquired the
Improvements covered by the Buildings 1&2 Lease and constructed the Improvements
included in the Buildings 1&2 Property.

Provided, however, excluded from this conveyance and reserved to Assignor are
any rights or privileges of Assignor under the following ("Excluded Rights"):
(1) the indemnities set forth in the Buildings 1&2 Lease or Other Lease
Agreements, whether such rights are presently known or unknown, including rights
of the Assignor to be indemnified against environmental claims of third parties
which may not presently be known, (2) provisions in the Buildings 1&2 Lease or
Other Lease Agreements that establish the right of Assignor to recover any
accrued unpaid rent which may be outstanding as of the date hereof, (3)
agreements between Assignor and "BNPLC's Parent" or any "Participant," both as
defined in the Buildings 1&2 Lease, or any modification or extension thereof, or
(4) any other instrument being delivered to Assignor contemporaneously herewith
pursuant to the Buildings 1&2 Purchase Agreement or the Other Purchase
Agreements. To the extent that this

[Improvements - Buildings 1&2]
<PAGE>

conveyance does include any rights to receive future payments under the
Buildings 1&2 Lease, such rights shall be subordinate to Assignor's Excluded
Rights.

     Assignor does for itself and its successors covenant and agree to warrant
and defend the title to the property assigned herein against the just and lawful
claims and demands of any person claiming under or through a Lien Removable by
BNPLC, but not otherwise.

     Assignee hereby assumes and agrees to keep, perform and fulfill Assignor's
obligations, if any, relating to any permits or contracts, under which Assignor
has rights being assigned herein.

     IN WITNESS WHEREOF, the parties have executed this instrument as of
_______________, _____.

                                 ASSIGNOR:
                                 --------

                                 BNP LEASING CORPORATION a Delaware corporation

                                 By:____________________________________________
                                 Its:___________________________________________

                                 ASSIGNEE:
                                 --------

                                 [Zhone or the Applicable Purchaser], a
                                 ____________________

                                 By:____________________________________________
                                 Its:___________________________________________

[Improvements - Buildings 1&2]

                              Exhibit C - Page 2
<PAGE>

STATE OF ____________   )
                        )  SS
COUNTY OF ___________   )

     On ___________________ before me,______________, personally appeared
___________ and________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
person, or the entity upon behalf of which the persons acted, executed the
instrument.

     WITNESS my hand and official seal.

     Signature________________________

STATE OF ____________   )
                        )  SS
COUNTY OF ___________   )

     On ___________________ before me,______________, personally appeared
___________ and________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the persons whose names are subscribed to
the within instrument and acknowledged to me that they executed the same in
their authorized capacities, and that by their signatures on the instrument the
person, or the entity upon behalf of which the persons acted, executed the
instrument.

     WITNESS my hand and official seal.

     Signature________________________

[Improvements - Buildings 1&2]

                              Exhibit C - Page 3
<PAGE>

                                    Annex A

                               LEGAL DESCRIPTION

[DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LAND LEASE CHANGES
 --------------
FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH ZHONE REQUESTS BNPLC'S
CONSENT OR APPROVAL, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY
SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING
NOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHED
IS ACTUALLY EXECUTED AND DELIVERED.]

The real property located in the City of Oakland, County of Alameda, State of
California, described as follows:

Being a portion of Lot 12, as shown on Parcel Map No. 6003, filed in Book 205 of
Parcel Maps, at Pages 94 through 98, Alameda County Records, more particularly
described as follows:

Commencing at the most southerly corner of said Lot 12; Thence along the
southwesterly line of said Lot 12, North 33(degrees) 50' 24" West, 628.68 feet
to the point of beginning; Thence continuing along the southwesterly line of
said Lot 12, North 33(degrees) 50' 24" West, 1029.21 feet; Thence along the
southeasterly line of said Lot 12, South 56(degrees) 09' 36" West 14.00 feet;
Thence along the southwesterly line of said Lot 12, North 33(degrees) 50' 24"
West, 253.55 feet to the beginning of a curve, concave southwesterly, having a
radius of 392.21 feet; Thence northerly along the arc of said curve, through a
central angle of 3(degrees) 51' 45", an arc distance of 26.44 feet to the
intersection of a line drawn parallel with and 85.00 feet southeasterly of the
northwesterly line of said Lot 12, a radial line through said point bears North
52(degrees) 17' 51" East; Thence parallel with the northwesterly line of said
Lot 12, North 56(degrees) 09' 36" East, 476.93 feet to a point that is 5 feet
southwesterly of the northeasterly line of said Lot 12; Thence along a line that
is parallel with and 5 feet southwesterly of the said northeasterly line of Lot
12, South 40(degrees) 00' 30" East, 69.44 feet to the beginning of a curve,
concave southwesterly, having a radius of 1949.00 feet; Thence southeasterly
along the arc of said curve, through a central angle of 6 10' 18", an arc
distance of 209.94 feet; Thence continuing along a line that is parallel with
and 5 feet southwesterly of the said northeasterly line of Lot 12, South
33(degrees) 50' 12" East, 1030.61 feet to the intersection with a line drawn
perpendicular with the southwesterly line of said Lot 12, distant thereon 628.68
feet from the most southerly corner of said Lot 12; Thence southwesterly along
said perpendicular line, South 56(degrees) 09' 36" West, 480.72 feet to the
Point of Beginning.

The basis of bearings for Parcel Map No. 6003 is the North American Datum of
1983, Zone 3, 1984 Adjustment Published in 1986, as shown on Record of Survey
990, filed in Book 18 of Records of Survey, at Pages 50 through 60, Alameda
County Records.  All distances in this description are grid distances.  To
convert to ground distances, multiply grid distances by 1.0000708.

Assessor's Parcel No. 041-3902-015 (Portion)

[Improvements - Buildings 1&2]

                              Exhibit C - Page 4
<PAGE>

                                   Exhibit D
                                   ---------

        ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES

     THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this
"Certificate") is made as of ___________________, ____, by [Zhone or the
Applicable Purchaser, as the case may be], a ___________________ ("Grantee").

     Contemporaneously with the execution of this Certificate, BNP Leasing
Corporation, a Delaware corporation ("BNPLC"), is executing and delivering to
Grantee (1) a corporate grant deed and (2) a Bill of Sale and Assignment (the
foregoing documents and any other documents to be executed in connection
therewith are herein called the "Conveyancing Documents" and any of the
properties, rights or other matters assigned, transferred or conveyed pursuant
thereto are herein collectively called the "Subject Property").

     Notwithstanding any provision contained in the Conveyancing Documents to
the contrary, Grantee acknowledges that BNPLC makes no representations or
warranties of any nature or kind, whether statutory, express or implied, with
respect to environmental matters or the physical condition of the subject
Property, and Grantee, by acceptance of the Conveyancing Documents, accepts the
Subject Property "AS IS," "WHERE IS," "WITH ALL FAULTS" and without any such
                  -- --    ----- --    ---- --- ------
representation or warranty by grantor as to environmental matters, the physical
condition of the subject property, compliance with subdivision or platting
requirements or construction of any improvements. Without limiting the
generality of the foregoing, Grantee hereby further acknowledges and agrees that
warranties of merchantability and fitness for a particular purpose are excluded
from the transaction contemplated by the Conveyancing Documents, as are any
warranties arising from a course of dealing or usage of trade. Grantee hereby
assumes all risk and liability (and agrees that BNPLC shall not be liable for
any special, direct, indirect, consequential, or other damages) resulting or
arising from or relating to the ownership, use, condition, location,
maintenance, repair, or operation of the Subject Property, except for damages
proximately caused by (and attributed by any applicable principles of
comparative fault to) the Established Misconduct of BNPLC. As used in the
preceding sentence, "Established Misconduct" is intended to have, and be limited
to, the meaning given to it in the Common Definitions and Provisions Agreement
(Improvements - Buildings 1&2) incorporated by reference into the Buildings 1&2
Purchase Agreement between BNPLC and Zhone Technologies, Inc. dated as of August
1, 2000, pursuant to which Purchase Agreement BNPLC is delivering the
Conveyancing Documents.

     The provisions of this Certificate shall be binding on Grantee, its
successors and assigns and any other party claiming through Grantee. Grantee
hereby acknowledges that BNPLC is entitled to rely and is relying on this
Certificate.

     EXECUTED as of ________________, ____.

                                         [Zhone or the Applicable Purchaser]
                                         By:________________________________
                                            Name:___________________________
                                            Title:__________________________

[Improvements - Buildings 1&2]
<PAGE>

                                   Exhibit E
                                   ---------

                            SECRETARY'S CERTIFICATE

     The undersigned, [Secretary or Assistant Secretary] of BNP Leasing
Corporation, a Delaware corporation (the "Corporation"), hereby certifies as
follows:

     1.  That he is the duly, elected, qualified and acting Secretary [or
Assistant Secretary] of the Corporation and has custody of the corporate
records, minutes and corporate seal.

     2.  That the following named persons have been properly designated, elected
and assigned to the office in the Corporation as indicated below; that such
persons hold such office at this time and that the specimen signature appearing
beside the name of such officer is his or her true and correct signature.

[The following blanks must be completed with the names and signatures of the
officers who will be signing the deed and other Sale Closing Documents on behalf
of the Corporation.]

Name                     Title                      Signature
----                     -----                      ---------

_____________            _______________            ___________________

_____________            _______________            ___________________

     3. That the resolutions attached hereto and made a part hereof were duly
adopted by the Board of Directors of the Corporation in accordance with the
Corporation's Articles of Incorporation and Bylaws. Such resolutions have not
been amended, modified or rescinded and remain in full force and effect.

     IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of
the Corporation on this__, day of____,__.

                         ____________________________
                             [signature and title]

[Improvements - Buildings 1&2]
<PAGE>

                           CORPORATE RESOLUTIONS OF
                            BNP LEASING CORPORATION

     WHEREAS, pursuant to that certain Purchase Agreement (Improvements -
Buildings 1&2) (herein called the "Purchase Agreement") dated as of August 1,
2000, by and between BNP Leasing Corporation (the "Corporation") and [Zhone or
the Applicable Purchaser as the case may be] ("Purchaser"), the Corporation
agreed to sell and Purchaser agreed to purchase or cause the Applicable
Purchaser (as defined in the Buildings 1&2 Purchase Agreement) to purchase the
Corporation's interest in the property (the "Property") located in Oakland,
California more particularly described therein.

     NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of the
Corporation, in its best business judgment, deems it in the best interest of the
Corporation and its shareholders that the Corporation convey the Property to
Purchaser or the Applicable Purchaser pursuant to and in accordance with the
terms of the Buildings 1&2 Purchase Agreement.

     RESOLVED FURTHER, that the proper officers of the Corporation, and each of
them, are hereby authorized and directed in the name and on behalf of the
Corporation to cause the Corporation to fulfill its obligations under the
Buildings 1&2 Purchase Agreement.

     RESOLVED FURTHER, that the proper officers of the Corporation, and each of
them, are hereby authorized and directed to take or cause to be taken any and
all actions and to prepare or cause to be prepared and to execute and deliver
any and all deeds and other documents, instruments and agreements that shall be
necessary, advisable or appropriate, in such officer's sole and absolute
discretion, to carry out the intent and to accomplish the purposes of the
foregoing resolutions.

[Improvements - Buildings 1&2]

                              Exhibit E - Page 2
<PAGE>

                                   Exhibit F
                                   ---------

                               FIRPTA STATEMENT

     Section 1445 of the Internal Revenue Code of 1986, as amended, provides
that a transferee of a U.S. real property interest must withhold tax if the
transferor is a foreign person. Sections 18805, 18815 and 26131 of the
California Revenue and Taxation Code, as amended, provide that a transferee of a
California real property interest must withhold income tax if the transferor is
a nonresident seller.

     To inform [Zhone or the Applicable Purchaser] (the "Transferee") that
withholding of tax is not required upon the disposition of a California real
property interest by transferor, BNP Leasing Corporation (the "Seller"), the
undersigned hereby certifies the following on behalf of the Seller:

     1. The Seller is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations);

     2. The United States employer identification number for the Seller is
_____________________;

     3. The office address of the Seller is ______________ _____________________
_________________.

     4. The Seller is qualified to do business in California.

     The Seller understands that this certification may be disclosed to the
Internal Revenue Service and/or to the California Franchise Tax Board by the
Transferee and that any false statement contained herein could be punished by
fine, imprisonment, or both.

     The Seller understands that the Transferee is relying on this affidavit in
determining whether withholding is required upon said transfer.

     Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of the Seller.

     Dated: ___________, ____.

                              By:_________________________
                               Name:______________________
                               Title:_____________________

[Improvements - Buildings 1&2]
<PAGE>

                                   Exhibit G
                                   ---------

            Notice of Election to Terminate the Purchase Option and
              the Buildings 1&2 Supplemental Payment Obligations

BNP Leasing Corporation
12201 Merit Drive
Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox

     Re: Purchase Agreement (Improvements - Buildings 1&2) dated as of August 1,
2000 (the "Buildings 1&2 Purchase Agreement"), between Zhone Technologies, Inc.
("Zhone") and BNP Leasing Corporation ("BNPLC")

Gentlemen:

     Capitalized terms used in this letter are intended to have the meanings
assigned to them in the Buildings 1&2 Purchase Agreement referenced above. This
letter shall constitute a notice, given before the Buildings 1&2 Base Rent
Commencement Date pursuant to subparagraph 4(B) of the Buildings 1&2 Purchase
Agreement, of Zhone's election to terminate the Purchase Option and the
Buildings 1&2 Supplemental Payment Obligation. Zhone irrevocably elects to
terminate the Purchase Option and the Buildings 1&2 Supplemental Payment
Obligation effective immediately, subject only to the conditions described
below.

     Zhone acknowledges that the election made by Zhone described above
constitutes an Issue 97-10 Election under and as defined in the Buildings 1&2
Operative Documents.

     Zhone also acknowledges that its right to terminate the Purchase Option and
the Buildings 1&2 Supplemental Payment Obligation is subject to the condition
precedent that (x) Zhone shall have given Notice of Zhone's Election to
Terminate pursuant to Paragraph 4(D) of the Construction Management Agreement,
                      --------------
or (y) BNPLC shall have given any FOCB Notice as provided in Paragraph 4(E) of
                                                             --------------
the Construction Management Agreement, or (z) BNPLC shall have given notice of
its election to accelerate the Designated Sale Date when an Event of Default has
occurred and is continuing as provided in clause (5) of the definition
Designated Sale Date in the Common Definitions and Provisions Agreement (Phase I
- Improvements). Accordingly, if none of the notices described in the preceding
sentence have been given, the Purchase Option and the Buildings 1&2 Supplemental
Payment Obligation shall not terminate by reason of this notice.

     Zhone further acknowledges that no termination of the Purchase Option and
the Buildings 1&2 Supplemental Payment Obligation by Zhone pursuant to this
notice shall be effective, unless contemporaneously with the giving of this
notice Zhone shall deliver to BNPLC a full Issue 97-10 Prepayment. Zhone hereby
covenants to pay, if Zhone has not already done so, a full Issue 97-10
Prepayment to BNPLC.

     Finally, Zhone acknowledges that a termination of the Purchase Option and
the Buildings 1&2 Supplemental Payment Obligation pursuant to this notice shall
cause the Buildings 1&2 Lease to terminate as of the Buildings 1&2 Base Rent
Commencement Date pursuant to subparagraph 1(b) of the Buildings 1&2 Lease.
                              -----------------

[Improvements - Buildings 1&2]
<PAGE>

     Executed this _____ day of ______________, 20___.

                         ZHONE TECHNOLOGIES, INC.

                         Name:__________________________________________________
                         Title:_________________________________________________

[cc all Participants]

[Improvements - Buildings 1&2]

                              Exhibit G - Page 2

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