Document:

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                                                                    EXHIBIT 10.8

                           EXPANSION OPTION AGREEMENT

        THIS EXPANSION OPTION AGREEMENT (this "Agreement") is made and entered
into as of the 27 day of October, 1999 by and between CORPORATE TECHNOLOGY
CENTRE ASSOCIATES LLC, a California limited liability company ("Landlord"), and
REDBACK NETWORKS, INC., a Delaware corporation ("Tenant").

                                    RECITALS

        A. Landlord and Tenant are parties to that certain Lease dated of even
date herewith for Building 4 (the "Building 4 Lease") in Corporate Technology
Centre, San Jose, California (the "Project"), which Project is shown on the Site
Plan attached hereto as Exhibit "A", and that certain Lease dated of even date
herewith for Building 3 in the Project (the "Building 3 Lease").

        B. Landlord has agreed to grant certain rights to Tenant regarding
Parcel 2 of the Project (the "Property"), to be located at 250 Holger Way, San
Jose, California, which Landlord currently plans to improve with one (1)
building containing approximately 76,410 square feet ("Building 2"), which
Property is shown on the Site Plan attached hereto as Exhibit "B"; provided
however that, if such Property is adjusted prior to final legal parcelization,
the Property shall consist of the final legal parcel resulting from such
parcelization.

        C. Capitalized terms used in this Agreement and not otherwise defined
shall have the meanings assigned to them in the Building 3 Lease and the
Building 4 Lease.

AGREEMENT

        NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:

1. NOTICE OF AVAILABILITY. Landlord shall use commercially reasonable efforts to
inform Tenant of the availability of additional space in the Project when such
space is available for lease by third parties.

2. EXPANSION OPTION. Subject to the conditions precedent set forth in Section 4
below, Landlord hereby grants to Tenant the option to lease (the "Expansion
Option") the entirety of Building 2, subject to the following conditions:

(A) Tenant shall provide written notice given to Landlord no later than 5:00
p.m. (California time) on July 31, 2000, of Tenant's election to lease Building
2 pursuant to the terms set forth herein;

(B) In the event the Expansion Option is exercised in a timely fashion, Landlord
and Tenant shall enter into a new lease for Building 2, which lease shall be
upon all of the terms and conditions of the Building 3 Lease, including, without
limitation, lease commencement date, the base monthly rent per square foot, and
annual increases thereto, and the provisions in the Work Letter for the Building
3 Lease (including completion and delivery dates); provided, however, that the
square footage of the Leased Premises shall be 76,410 rentable square feet. In
addition, the building shell for Building 2 shall be built in accordance with
the building plans and specifications prepared Robinson Mills + Williams on
behalf of Landlord, described as Corporate Technology Centre, Phase II "Issued
for Permit" plans dated June 21, 1999 ("Base Building Plans") which have been
approved by Tenant prior to the date hereof.

(C) In the event Tenant fails to provide Landlord with notice of its exercise of
the Expansion Option granted by this Section 2 prior to 5:00 p.m. (California
time) on July 31, 2000, all of Tenant's rights under this Section 2 shall
terminate and be of no further force or effect.

3. RIGHT OF FIRST OFFER. In the event the Expansion Option terminates as set
forth in Section 2(c) above, then subject to the conditions precedent set forth
in Section 4 below, Tenant shall have the following rights regarding Building 2:

(A) Commencing on August 1, 2000, prior to entering into a lease proposal with a
third party for Building 2, Landlord shall deliver a written notice (the
"Building 2 Notice") to Tenant setting forth the terms upon which Landlord is
willing to lease Building 2 to Tenant. Tenant shall notify Landlord in writing
with five (5) business days after receipt of the Building 2 Notice of Tenant's
election to lease Building 2 on the terms set forth in the Building 2 Notice
("Tenant's Election Notice"). Failure of Tenant to deliver such notice within
the required time period shall be deemed an election by Tenant to not lease
Building 2 and Tenant shall have no further rights to lease Building 2
thereafter. Tenant's right under this Section 3 is a one-time right. Failure of
Tenant to deliver Tenant's Election Notice within the required time period shall
cause this Agreement to terminate and be of no further force or effect.

(B) In the event Tenant delivers Tenant's Election Notice within the time period
required herein, Landlord and Tenant shall enter into a lease for Building 2
within ten (10) business days after Landlord's receipt of Tenant's Election
Notice, which lease shall be substantially identical to the Building 3 Lease,
provided, however, that (1) the square footage of the Leased Premises shall be
the net rentable footage determined by Landlord after construction of Building
2, (2) the economic terms (including, without limitation, the amount of rent and
the tenant improvement allowance, if any) shall be the terms set forth in the
Building 2 Notice, and (3) the lease term shall be coterminous with the Building
3 Lease and Building 4 Lease. In addition, the building shell for Building 2
shall be built in accordance with the Base Building Plans.

4. CONDITION PRECEDENT. Anything herein to the contrary notwithstanding, (a) if
Tenant is in default under any of the
<PAGE>   2

terms, covenants or conditions of any lease or other agreement between Landlord
and Tenant at the time (i) Tenant exercises the Expansion Option, (ii) Landlord
delivers the Building 2 Notice to Tenant or (iii) at the commencement of the
term of the lease for Building 2, or (b) Tenant has subleased fifty percent
(50%) or more of total square footage in Building 3 and Building 4, at the time
(i) Tenant exercises the Expansion Option, (ii) Landlord delivers the Building 2
Notice to Tenant or (iii) at the commencement of the term of the lease for
Building 2, or (c) Tenant has assigned its interest in any lease between
Landlord and Tenant for fifty percent (50%) or more of total square footage in
Building 3 and Building 4 at the time (i) Tenant exercises the Expansion Option,
(ii) Landlord delivers the Building 2 Notice to Tenant or (iii) at the
commencement of the term of the lease for Building 2, then Landlord shall have
the right to terminate the Tenant's rights under this Agreement and any lease
for Building 2 upon notice to Tenant.

5. GENERAL PROVISIONS.

(A) NOTICES. Any notice required or permitted to be given under this Agreement
shall be in writing and (i) personally delivered, (ii) sent by United States
mail, registered or certified mail, postage prepaid, return receipt requested,
(iii) sent by Federal Express or similar nationally recognized overnight courier
service, or (iv) transmitted by facsimile with a hard copy sent within one (1)
business day by any of the foregoing means, and in all cases addressed as
follows, and such notice shall be deemed to have been given upon the date of
actual receipt or delivery (or refusal to accept delivery) at the address
specified below (or such other addresses as may be specified by notice in the
foregoing manner) as indicated on the return receipt or air bill:

        TO LANDLORD:        Corporate Technology Centre Associates LLC
                            c/o Menlo Equities LLC
                            525 University Avenue, Suite 100
                            Palo Alto, California  94301
                            Attention:  Henry D. Bullock/Richard J. Holmstrom
                            Facsimile (650) 326-9300

        TO TENANT:          Redback Networks, Inc.
                            1389 Moffett Park Drive
                            Sunnyvale, California  94089
                            Attention: Pat Ryan
                            Facsimile (408) 548-3599

(B) ENTIRE AGREEMENT; NO MODIFICATIONS. This Agreement, together with the
schedules and exhibits attached hereto, incorporates all agreements, warranties,
representations and understandings between the parties to the Agreement with
respect to the subject matter hereof and constitutes the entire agreement of
Landlord and Tenant with respect to the lease of the Premises. Any prior or
contemporaneous correspondence, memoranda, understandings, offers, negotiations
and agreements, oral or written, are merged herein and replaced in total by this
Agreement and the exhibits hereto and shall be of no further force or effect.
This Agreement may not be modified or amended except in a writing signed by
Landlord and Tenant.

(C) TIME. Time is of the essence in the performance of the parties' respective
obligations set forth in this Agreement.

(D) SUCCESSORS AND ASSIGNS. Subject to the foregoing provisions, this Agreement
shall inure to the benefit of and be binding upon the parties to this Agreement
and their respective successors and assigns. Tenant shall have the right to
assign its rights under this Agreement to a "Permitted Assignee" as defined in
the Building 3 and Building 4 Leases.

(E) COUNTERPARTS. This Agreement may be executed in one or more counterparts and
each such counterpart shall be deemed to be an original; all counterparts so
executed shall constitute one instrument and shall be binding on all of the
parties to this Agreement notwithstanding that all of the parties are not
signatory to the same counterpart.

(F) CONSTRUCTION. This Agreement shall be governed by and construed under the
laws of the State of California. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that no rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall be employed in the interpretation of this Agreement or any
schedules or exhibits to it or any document executed and delivered by either
party in connection with this Agreement. All captions in this Agreement are for
reference only and shall not be used in the interpretation of this Agreement or
any related document. If any provision of this Agreement shall be determined to
be illegal or unenforceable, such determination shall not affect any other
provision of this Agreement and all such other provisions shall remain in full
force and effect.

        IN WITNESS WHEREOF, Tenant and Landlord have executed this Agreement as
of the date and year first written above:

                                 LANDLORD:

                                 CORPORATE TECHNOLOGY CENTRE ASSOCIATES llc,
                                 a California limited liability company

                                 By:   Corporate Technology Centre Partners LLC,
                                       a California limited liability company,
                                       Its Manager

<PAGE>   3

                                        By:    Menlo Equities LLC,
                                               a California limited liability
                                               company,
                                               Its Managing Member

                                               By:   Menlo Equities, Inc.,
                                                     Its Managing Member

Dated: October 27, 1999                              By:  /s/ HENRY D. BULLOCK
       ------------------------                           ----------------------
                                                          Henry D. Bullock
                                                          President

<PAGE>   4

                                     TENANT:

                                     REDBACK NETWORKS, INC.,
                                     a Delaware corporation

Dated: October 27, 1999              By: /s/ CRAIG M. GENTNER
      ----------------------------       -----------------------------
                                     Title:
                                           ----------------------------

Dated:                               By:
      ----------------------------       -----------------------------
                                     Title:
                                           ----------------------------<PAGE>   1
                                                                    EXHIBIT 10.9

                                                                      BUILDING 3

                                      LEASE

                                 BY AND BETWEEN

                   CORPORATE TECHNOLOGY CENTRE ASSOCIATES LLC,
                     A CALIFORNIA LIMITED LIABILITY COMPANY

                                   AS LANDLORD

                                       AND

                             REDBACK NETWORKS INC.,
                             A DELAWARE CORPORATION

                                    AS TENANT

                                OCTOBER 27, 1999

<PAGE>   2

                                      LEASE

        THIS LEASE, dated October 27, 1999 for reference purposes only, is made
by and between CORPORATE TECHNOLOGY CENTRE ASSOCIATES LLC, a California limited
liability company ("Landlord") and REDBACK NETWORKS INC., a Delaware corporation
("Tenant"), to be effective and binding upon the parties as of the date the last
of the designated signatories to this Lease shall have executed this Lease (the
"Effective Date of this Lease").

                                    ARTICLE 1

                                    REFERENCE

1.1 REFERENCES. All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:

        Tenant's Address for Notice:        Redback Networks Inc.
                                            1389 Moffett Park Drive
                                            Sunnyvale, California 94089

        Tenant's Representative:            Pat Ryan

        Landlord's Address for Notices:     c/o Menlo Equities LLC
                                            525 University Avenue
                                            Suite 100
                                            Palo Alto, California  94301

        Landlord's Representative:          Henry Bullock/Richard Holmstrom
        Phone Number:                       (650) 326-9300

        Intended Commencement Date:         January 1, 2001

        Intended                            Term: Eight (8) years, 2 months (or
                                            such shorter or longer period to
                                            make the term of this Lease
                                            co-terminus with the Lease between
                                            Landlord and Tenant for Building 4
                                            at 350 Holger Way).

        Options to Renew:                   Two (2) options to renew, each for a
                                            term of five (5) years.

        First Month's Prepaid Rent:         $197,243.25

        Tenant's Security Deposit:          $1,183,459.50

        Late Charge Amount:                 Five Percent (5%) of the Delinquent
                                            Amount

        Tenant's Required Liability
        Coverage:                           $10,000,000 Combined Single Limit

        Brokers:                            Craig Leiker and Jere Hench of Wayne
                                            Mascia Associates (Tenant's Broker)

                                            Dennis Chambers, Steve Horton and
                                            Kalil Jenab of Commercial Property
                                            Services Company (Landlord's Broker)

        Project:                            That certain real property situated
                                            in the City of San Jose, County of
                                            Santa Clara, State of California, to
                                            be improved with a total of eight
                                            (8) building(s), which real property
                                            is shown on the Site Plan attached
                                            hereto as Exhibit "A" and is
                                            commonly known as or otherwise
                                            described as follows: Corporate
                                            Technology Centre, San Jose,
                                            California.

        Property:                           That certain real property situated
                                            in the City of San Jose, County of
                                            Santa Clara, State of California, as
                                            presently improved with one (1)
                                            building, which real property is
                                            shown as Parcel 3 on the Site Plan
                                            attached hereto as Exhibit "B";
                                            provided however that, if such
                                            Parcel 3 is adjusted prior to final
                                            legal parcelization, the Property
                                            shall consist of the final legal
                                            parcel resulting from such
                                            parcelization.

        Building:                           That certain building on the
                                            Property in which the Leased
                                            Premises are located commonly known
                                            as or otherwise described as
                                            follows: 300 Holger Way, San Jose,
                                            California (the "Building") which
                                            Building is shown outlined on
                                            Exhibit "B" hereto.

                                       1.
<PAGE>   3

        Outside Areas:                      The "Outside Areas" shall mean all
                                            areas within the Property which are
                                            located outside the Building, such
                                            as pedestrian walkways, parking
                                            areas, landscaped areas, open areas
                                            and enclosed trash disposal areas.

        Leased Premises:                    All the interior space within the
                                            Building, including stairwells,
                                            connecting walkways, and atriums,
                                            consisting of approximately 99,870
                                            square feet and, for purposes of
                                            this Lease, agreed to contain said
                                            number of square feet.

        Tenant's Expense Share:             The term "Tenant's Expense Share"
                                            shall mean the percentage obtained
                                            by dividing the rentable square
                                            footage of the Leased Premises at
                                            the time of calculation by the
                                            rentable square footage of the
                                            Building. Such percentage is
                                            currently 100%. In the event that
                                            any portion of the Building is sold
                                            by Landlord, or the rentable square
                                            footage of the Leased Premises or
                                            the Building is otherwise changed,
                                            Tenant's Expense Share shall be
                                            recalculated to equal the percentage
                                            described in the first sentence of
                                            this paragraph, so that the
                                            aggregate Tenant's Expense Share of
                                            all tenants of the Building shall
                                            equal 100%.

        Base Monthly Rent:                  The term "Base Monthly Rent" shall
                                            mean the following:

                                            Months            *Rent/SF/Month/NNN
                                            ------             -----------------
                                            01-12                  $1.975

                                            *Commencing with Month 13 of the
                                            Lease Term and at the end of each 12
                                            month period thereafter, Base
                                            Monthly Rent shall be increased at a
                                            rate of 3.0% per annum compounded.

        Permitted Use:                      General office, research and
                                            development, marketing, sales,
                                            manufacturing, distribution,
                                            warehouse and other related lawful
                                            uses.

        Exhibits:                           The term "Exhibits" shall mean the
                                            Exhibits of this Lease which are
                                            described as follows:

                                            Exhibit "A" - Site Plan showing the
                                                          Project

                                            Exhibit "B" - Site Plan showing the
                                                          Property and
                                                          delineating the
                                                          Building in which the
                                                          Leased Premises are
                                                          located.

                                            Exhibit "C" - Work Letter

                                            Exhibit "D" - Form of Lease
                                                          Commencement Date
                                                          Certificate

                                            Exhibit "E" - Form of Tenant
                                                          Estoppel Certificate

                                    ARTICLE 2

                      LEASED PREMISES, TERM AND POSSESSION

2.1 DEMISE OF LEASED PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for Tenant's own use in the conduct of Tenant's
business and not for purposes of speculating in real estate, for the Lease Term
and upon the terms and subject to the conditions of this Lease, that certain
interior space described in Article 1 as the Leased Premises, reserving and
excepting to Landlord the right to fifty percent (50%) of all assignment
consideration and excess rentals as provided in Article 7 below. Tenant's lease
of the Leased Premises, together with the appurtenant right to use the Outside
Areas as described in Paragraph 2.2 below, shall be conditioned upon and be
subject to the continuing compliance by Tenant with (i) all the terms and
conditions of this Lease, (ii) all Laws governing the use of the Leased Premises
and the Property, (iii) all Private Restrictions, easements and other matters
now of public record respecting the use of the Leased Premises and Property, and
(iv) all reasonable rules and regulations from time to time established by
Landlord. Notwithstanding any provision of this Lease to the contrary, Landlord
hereby reserves to itself and its designees all rights of access, use and
occupancy of the Building roof, and Tenant shall have no right of access, use or
occupancy of the Building roof except (if at all) to the extent required in
order to enable Tenant to perform Tenant's maintenance and repair obligations
pursuant to this Lease.

2.2 RIGHT TO USE OUTSIDE AREAS. As an appurtenant right to Tenant's right to the
use and occupancy of the Leased Premises, Tenant shall have the right to use the
Outside Areas in conjunction with its use of the Leased Premises solely for the
purposes for which they were designated and intended and for no other purposes
whatsoever. Tenant's right to so use the Outside Areas shall be subject to the
limitations on such use as set forth in Article 1 and shall terminate
concurrently with any termination of this Lease.

                                       2.
<PAGE>   4

2.3 LEASE COMMENCEMENT DATE AND LEASE TERM. Subject to Paragraph 2.4 below, the
term of this Lease shall begin, and the Lease Commencement Date shall be deemed
to have occurred, on the Intended Commencement Date, as set forth in Article 1
(the "Lease Commencement Date"). The term of this Lease shall in all events end
on the Lease Expiration Date (as set forth in Article 1). The Lease Term shall
be that period of time commencing on the Lease Commencement Date and ending on
the Lease Expiration Date (the "Lease Term").

2.4 DELIVERY OF POSSESSION. Landlord shall deliver to Tenant possession of the
Leased Premises at such time as the Improvement Work (as defined in Paragraph
2.5 below) is deemed "Substantially Complete" as defined in the Work Letter. If
Landlord is unable to so deliver possession of the Leased Premises to Tenant in
the agreed condition on or before the Intended Commencement Date, Landlord shall
not be in default under this Lease, nor shall this Lease be void, voidable or
cancelable by Tenant until the lapse of ninety (90) days after the Intended
Commencement Date (the "delivery grace period"). Additionally, the delivery
grace period above set forth shall be extended for such number of days as
Landlord may be delayed in delivering possession of the Leased Premises to
Tenant by reason of Force Majeure or the action or inaction of Tenant. If
Landlord is unable to deliver possession of the Leased Premises in the agreed
condition to Tenant within the described delivery grace period (including any
extension thereof by reason of Force Majeure or the actions or inactions of
Tenant), then Tenant's sole remedy shall be to terminate this Lease, and in no
event shall Landlord be liable in damages to Tenant for such delay. Tenant may
not terminate this Lease at any time after the date Landlord notifies Tenant
that the Leased Premises have been put into the agreed condition and are
available for delivery to Tenant, unless Landlord's notice is not given in good
faith.

2.5 PERFORMANCE OF IMPROVEMENT WORK; ACCEPTANCE OF POSSESSION. Landlord shall,
pursuant to the work letter attached as Exhibit C hereto and made a part of this
Lease (the "Work Letter"), perform the work and make the installations in the
Leased Premises substantially as set forth in the Work Letter (such work and
installations hereinafter referred to as the "Improvement Work"). Without
limiting the foregoing, Landlord agrees to deliver in good working order the
roof surface and all existing plumbing, lighting, heating, ventilating and air
conditioning systems within the Leased Premises. It is agreed that by occupying
the Leased Premises, Tenant formally accepts same and acknowledges that the
Leased Premises are in the condition called for hereunder, subject to normal
punchlist items specified by Tenant to Landlord in writing within ten (10) days
of such occupancy. Notwithstanding the foregoing, Tenant may elect to construct
the Improvement Work (and use Tenant's own contractor) by written notice to
Landlord no later than March 15, 2000. In the event Tenant elects to construct
the Improvement Work using Tenant's own contractor, Landlord and Tenant agree to
amend this Lease and Work Letter to so provide, and to provide that the Lease
Commencement Date will be the fixed date of January 1, 2001 (regardless of
whether the Improvement Work is complete), provided Landlord makes the Leased
Premises available no later than September 1, 2000 for commencement of the
Improvement Work (in cooperation with Landlord's Contractor) and completes the
Base Building no later than October 1, 2000.

2.6 SURRENDER OF POSSESSION. Immediately prior to the expiration or upon the
sooner termination of this Lease, Tenant shall remove all of Tenant's signs from
the exterior of the Building and shall remove all of Tenant's equipment, trade
fixtures, furniture, supplies, wall decorations and other personal property from
within the Leased Premises, the Building and the Outside Areas, and shall vacate
and surrender the Leased Premises, the Building, the Outside Areas and the
Property to Landlord in the same condition, broom clean, as existed at the Lease
Commencement Date, reasonable wear and tear excepted. Tenant shall repair all
damage to the Leased Premises, the exterior of the Building and the Outside
Areas caused by Tenant's removal of Tenant's property. Tenant shall patch and
refinish, to Landlord's reasonable satisfaction, all penetrations made by Tenant
or its employees to the floor, walls or ceiling of the Leased Premises, whether
such penetrations were made with Landlord's approval or not. Tenant shall repair
all damage caused by Tenant to the exterior surface of the Building and the
paved surfaces of the Outside Areas and, where necessary, replace or resurface
same. Additionally, to the extent that Landlord shall have notified or is deemed
to have notified Tenant in writing at the time the improvements were completed
that it desired to have certain improvements made by Tenant or at the request of
Tenant removed at the expiration or sooner termination of the Lease, Tenant
shall, upon the expiration or sooner termination of the Lease, remove any such
improvements constructed or installed by Landlord or Tenant and repair all
damage caused by such removal. If the Leased Premises, the Building, the Outside
Areas and the Property are not surrendered to Landlord in the condition required
by this paragraph at the expiration or sooner termination of this Lease,
Landlord may, at Tenant's expense, so remove Tenant's signs, property and/or
improvements not so removed and make such repairs and replacements not so made
or hire, at Tenant's expense, independent contractors to perform such work.
Tenant shall be liable to Landlord for all costs incurred by Landlord in
returning the Leased Premises, the Building and the Outside Areas to the
required condition, together with interest on all costs so incurred from the
date paid by Landlord at the then maximum rate of interest not prohibited or
made usurious by law until paid. Tenant shall pay to Landlord the amount of all
costs so incurred plus such interest thereon, within ten (10) days of Landlord's
billing Tenant for same. Tenant shall indemnify Landlord against loss or
liability resulting from delay by Tenant in surrendering the Leased Premises,
including, without limitation, any claims made by any succeeding Tenant or any
losses to Landlord with respect to lost opportunities to lease to succeeding
tenants.

                                    ARTICLE 3

                    RENT, LATE CHARGES AND SECURITY DEPOSITS

3.1 BASE MONTHLY RENT. Commencing on the Lease Commencement Date (as determined
pursuant to Paragraph 2.3 above) and continuing throughout the Lease Term,
Tenant shall pay to Landlord, without prior demand therefor, in advance on the
first day of each calendar month, the amount set forth as "Base Monthly Rent" in
Article 1 (the "Base Monthly Rent").

3.2 ADDITIONAL RENT. Commencing on the Lease Commencement Date (as determined
pursuant to Paragraph 2.3 above) and continuing throughout the Lease Term, in
addition to the Base Monthly Rent and to the extent not

                                       3.
<PAGE>   5

required by Landlord to be contracted for and paid directly by Tenant, Tenant
shall pay to Landlord as additional rent (the "Additional Rent") the following
amounts:

        (a) An amount equal to all Property Operating Expenses (as defined in
Article 13) incurred by Landlord. Payment shall be made by whichever of the
following methods (or combination of methods) is (are) from time to time
designated by Landlord:

               (i) Landlord may forward invoices or bills for such expenses to
Tenant, and Tenant shall, no later than ten (10) days prior to the due date, pay
such invoices or bills and deliver satisfactory evidence of such payment to
Landlord, and/or

               (ii) Landlord may bill to Tenant, on a periodic basis not more
frequently than monthly, the amount of such expenses (or group of expenses) as
paid or incurred by Landlord, and Tenant shall pay to Landlord the amount of
such expenses within ten days after receipt of a written bill therefor from
Landlord, and/or

               (iii) Landlord may deliver to Tenant Landlord's reasonable
estimate of any given expense (such as Landlord's Insurance Costs or Real
Property Taxes), or group of expenses, which it anticipates will be paid or
incurred for the ensuing calendar or fiscal year, as Landlord may determine, and
Tenant shall pay to Landlord an amount equal to the estimated amount of such
expenses for such year in equal monthly installments during such year with the
installments of Base Monthly Rent.

Landlord reserves the right to change from time to time the methods of billing
Tenant for any given expense or group of expenses or the periodic basis on which
such expenses are billed.

        (b) Landlord's share of the consideration received by Tenant upon
certain assignments and sublettings as required by Article 7.

        (c) Any legal fees and costs that Tenant is obligated to pay or
reimburse to Landlord pursuant to Article 13; and

        (d) Any other charges or reimbursements due Landlord from Tenant
pursuant to the terms of this Lease.

Notwithstanding the foregoing, Landlord may elect by written notice to Tenant to
have Tenant pay Real Property Taxes or any portion thereof directly to the
applicable taxing authority, in which case Tenant shall make such payments and
deliver satisfactory evidence of payment to Landlord no later than ten (10) days
before such Real Property Taxes become delinquent.

3.3 YEAR-END ADJUSTMENTS. If Landlord shall have elected to bill Tenant for the
Property Operating Expenses (or any group of such expenses) on an estimated
basis in accordance with the provisions of Paragraph 3.2(a)(iii) above, Landlord
shall furnish to Tenant within three months following the end of the applicable
calendar or fiscal year, as the case may be, a statement setting forth (i) the
amount of such expenses paid or incurred during the just ended calendar or
fiscal year, as appropriate, and (ii) the amount that Tenant has paid to
Landlord for credit against such expenses for such period. If Tenant shall have
paid more than its obligation for such expenses for the stated period, Landlord
shall, at its election, either (i) credit the amount of such overpayment toward
the next ensuing payment or payments of Additional Rent that would otherwise be
due or (ii) refund in cash to Tenant the amount of such overpayment. If such
year-end statement shall show that Tenant did not pay its obligation for such
expenses in full, then Tenant shall pay to Landlord the amount of such
underpayment within ten days from Landlord's billing of same to Tenant. The
provisions of this Paragraph shall survive the expiration or sooner termination
of this Lease.

3.4 LATE CHARGE, AND INTEREST ON RENT IN DEFAULT. Tenant acknowledges that the
late payment by Tenant of any monthly installment of Base Monthly Rent or any
Additional Rent will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include without
limitation, administration and collection costs and processing and accounting
expenses. Therefor, if any installment of Base Monthly Rent is not received by
Landlord from Tenant within five (5) calendar days after the same becomes due,
Tenant shall immediately pay to Landlord a late charge in an amount equal to the
amount set forth in Article 1 as the "Late Charge Amount," and if any Additional
Rent is not received by Landlord when the same becomes due, Tenant shall
immediately pay to Landlord a late charge in an amount equal to 5% of the
Additional Rent not so paid. Landlord and Tenant agree that this late charge
represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the anticipated loss Landlord would suffer by
reason of Tenant's failure to make timely payment. In no event shall this
provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rental installment or prevent Landlord
from exercising any right or remedy available to Landlord upon Tenant's failure
to pay each rental installment due under this Lease when due, including the
right to terminate this Lease. If any rent remains delinquent for a period in
excess of five (5) calendar days, then, in addition to such late charge, Tenant
shall pay to Landlord interest on any rent that is not so paid from said tenth
day at the then maximum rate of interest not prohibited or made usurious by Law
until paid.

3.5 PAYMENT OF RENT. Except as specifically provided otherwise in this Lease,
all rent shall be paid in lawful money of the United States, without any
abatement, reduction or offset for any reason whatsoever, to Landlord at such
address as Landlord may designate from time to time. Tenant's obligation to pay
Base Monthly Rent and all Additional Rent shall be appropriately prorated at the
commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the
same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord
shall have the same rights and remedies against Tenant as Landlord would have
had Tenant failed to pay the Base Monthly Rent when due.

                                       4.
<PAGE>   6

3.6 PREPAID RENT. Tenant shall, upon execution of this Lease, pay to Landlord
the amount set forth in Article 1 as "First Month's Prepaid Rent" as prepayment
of rent for credit against the first payment of Base Monthly Rent due hereunder.

3.7 SECURITY DEPOSIT.

        (a) Tenant shall deposit with Landlord, no later than the Lease
Commencement Date, the amount set forth in Article 1 as the "Security Deposit"
as security for the performance by Tenant of the terms of this Lease to be
performed by Tenant, and not as prepayment of rent. In the event (1) Tenant does
not elect to use the Additional Allowance as set forth in Section 4 of the Work
Letter and (2) Tenant elects to fund any amount of the cost for the Tenant
Improvements above the amount of the Tenant Improvement Allowance (such amount
the "Tenant Contribution") and provided that Tenant is not then in default (and
has never been in default) under this Lease, then following completion of the
Improvement Work and payment in full by Tenant of the Tenant Contribution, the
Security Deposit shall be reduced by an amount equal to the Tenant Contribution,
up to a maximum of $573,006.75. In addition, in the event (i) Tenant reports net
profits for eight (8) consecutive quarters (as shown on its quarterly financial
statements prepared in accordance with generally accepted accounting
principles), and (ii) Tenant has achieved a market capitalization of
$8,000,000,000 for four (4) consecutive quarters (as shown on its quarterly
financial statements prepared in accordance with generally accepted accounting
principles) and provided that Tenant is not then in default (and has never been
in default) under this Lease, upon Tenant's written request to Landlord (which
request shall include supporting documentation), the Security Deposit shall be
reduced to an amount equal to one month of the Base Monthly Rent then in effect.

        (b) Landlord may apply such portion or portions of the Security Deposit
as are reasonably necessary for the following purposes: (i) to remedy any
default by Tenant in the payment of Base Monthly Rent or Additional Rent or a
late charge or interest on defaulted rent, or any other monetary payment
obligation of Tenant under this Lease; (ii) to repair damage to the Leased
Premises, the Building or the Outside Areas caused or permitted to occur by
Tenant; (iii) to clean and restore and repair the Leased Premises, the Building
or the Outside Areas following their surrender to Landlord if not surrendered in
the condition required pursuant to the provisions of Article 2, and (iv) to
remedy any other default of Tenant to the extent permitted by Law including,
without limitation, failure of Tenant to comply with the terms of Paragraph 6.4
hereof. In this regard, Tenant hereby waives any restriction on the uses to
which the Security Deposit may be applied as contained in Section 1950.7(c) of
the California Civil Code and/or any successor statute. In the event the
Security Deposit or any portion thereof is so used, Tenant shall pay to
Landlord, promptly upon demand, an amount in cash sufficient to restore the
Security Deposit to the full original sum. If Tenant fails to promptly restore
the Security Deposit and if Tenant shall have paid to Landlord any sums as "Last
Month's Prepaid Rent," Landlord may, in addition to any other remedy Landlord
may have under this Lease, reduce the amount of Tenant's Last Month's Prepaid
Rent by transferring all or portions of such Last Month's Prepaid Rent to
Tenant's Security Deposit until such Security Deposit is restored to the amount
set forth in Article 1. Landlord shall not be deemed a trustee of the Security
Deposit. Landlord may use the Security Deposit in Landlord's ordinary business
and shall not be required to segregate it from Landlord's general accounts.
Tenant shall not be entitled to any interest on the Security Deposit. If
Landlord transfers the Building or the Property during the Lease Term, Landlord
shall pay the Security Deposit to any subsequent owner in conformity with the
provisions of Section 1950.7 of the California Civil Code and/or any successor
statute, in which event the transferring landlord shall be released from all
liability for the return of the Security Deposit. Tenant specifically grants to
Landlord (and Tenant hereby waives the provisions of California Civil Code
Section 1950.7 to the contrary) a period of sixty (60) days following a
surrender of the Leased Premises by Tenant to Landlord within which to inspect
the Leased Premises, make required restorations and repairs, receive and verify
workmen's billings therefor, and prepare a final accounting with respect to the
Security Deposit. In no event shall the Security Deposit or any portion thereof,
be considered prepaid rent.

                                    ARTICLE 4

                     USE OF LEASED PREMISES AND OUTSIDE AREA

4.1 PERMITTED USE. Tenant shall be entitled to use the Leased Premises solely
for the "Permitted Use" as set forth in Article 1 and for no other purpose
whatsoever. Tenant shall continuously and without interruption use the Leased
Premises for such purpose for the entire Lease Term. Any discontinuance of such
use for a period of sixty consecutive calendar days shall be, at Landlord's
election, a default by Tenant under the terms of this Lease. Tenant shall have
the right to use the Outside Areas in conjunction with its Permitted Use of the
Leased Premises solely for the purposes for which they were designed and
intended and for no other purposes whatsoever. Tenant shall have no right of
access, use or occupancy of the Building roof except as expressly permitted
herein.

4.2 GENERAL LIMITATIONS ON USE. Tenant shall not do or permit anything to be
done in or about the Leased Premises, the Building, the Outside Areas or the
Property which does or could (i) jeopardize the structural integrity of the
Building or (ii) cause damage to any part of the Leased Premises, the Building,
the Outside Areas or the Property. Tenant shall not operate any equipment within
the Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage, overload or impair the efficient
operation of any electrical, plumbing, heating, ventilating or air conditioning
systems within or servicing the Leased Premises or the Building, or (iii) damage
or impair the efficient operation of the sprinkler system (if any) within or
servicing the Leased Premises or the Building. Tenant shall not install any
equipment or antennas on or make any penetrations of the exterior walls or roof
of the Building except as expressly permitted herein. Tenant shall not affix any
equipment to or make any penetrations or cuts in the floor, ceiling, walls or
roof of the Leased Premises. Tenant shall not place any loads upon the floors,
walls, ceiling or roof systems which could endanger the structural integrity of
the Building or damage its floors, foundations or supporting structural
components. Tenant shall not place any explosive, flammable or harmful fluids or
other waste materials in the drainage systems of the Leased Premises, the
Building, the Outside Areas or the Property. Tenant shall not drain or discharge
any fluids in the landscaped areas

                                       5.
<PAGE>   7

or across the paved areas of the Property. Tenant shall not use any of the
Outside Areas for the storage of its materials, supplies, inventory or equipment
and all such materials, supplies, inventory or equipment shall at all times be
stored within the Leased Premises. Tenant shall not commit nor permit to be
committed any waste in or about the Leased Premises, the Building, the Outside
Areas or the Property.

4.3 NOISE AND EMISSIONS. All noise generated by Tenant in its use of the Leased
Premises shall be confined or muffled so that it does not interfere with the
businesses of or annoy the occupants and/or users of adjacent properties. All
dust, fumes, odors and other emissions generated by Tenant's use of the Leased
Premises shall be sufficiently dissipated in accordance with sound environmental
practice and exhausted from the Leased Premises in such a manner so as not to
interfere with the businesses of or annoy the occupants and/or users of adjacent
properties, or cause any damage to the Leased Premises, the Building, the
Outside Areas or the Property or any component part thereof or the property of
adjacent property owners.

4.4 TRASH DISPOSAL. Tenant shall provide trash bins or other adequate garbage
disposal facilities within the trash enclosure areas provided or permitted by
Landlord outside the Leased Premises sufficient for the interim disposal of all
of its trash, garbage and waste. All such trash, garbage and waste temporarily
stored in such areas shall be stored in such a manner so that it is not visible
from outside of such areas, and Tenant shall cause such trash, garbage and waste
to be regularly removed from the Property. Tenant shall keep the Leased Premises
and the Outside Areas in a clean, safe and neat condition free and clear of all
of Tenant's trash, garbage, waste and/or boxes, pallets and containers
containing same at all times.

4.5 PARKING. Tenant shall have the use of all parking within the boundaries of
the Property. Tenant shall not, at any time, park or permit to be parked any
recreational vehicles, inoperative vehicles or equipment in the Outside Areas or
on any portion of the Property. Tenant agrees to assume responsibility for
compliance by its employees and invitees with the parking provisions contained
herein. If Tenant or its employees park any vehicle within the Property in
violation of these provisions, then Landlord may, upon prior written notice to
Tenant giving Tenant one (1) day (or any applicable statutory notice period, if
longer than one (1) day) to remove such vehicle(s), in addition to any other
remedies Landlord may have under this Lease, charge Tenant, as Additional Rent,
and Tenant agrees to pay, as Additional Rent, One Hundred Dollars ($100) per day
for each day or partial day that each such vehicle is so parked within the
Property. Landlord reserves the right to grant easements and access rights to
others for use of the parking areas on the Property, provided that such grants
do not materially interfere with Tenant's use of the parking areas.

4.6 SIGNS. Except for business identification signs permitted by this Section
4.6, Tenant shall not place or install on or within any portion of the Leased
Premises, the exterior of the Building, the Outside Areas or the Property any
sign, advertisement, banner, placard, or picture which is visible from the
exterior of the Leased Premises. Tenant shall have the right to install a
building mounted business identification sign, subject to Landlord's prior
written approval (which shall not be unreasonably withheld). Landlord agrees to
use its best efforts to assist Tenant in obtaining approval for such signage
from the City of San Jose. Except for the foregoing, Tenant shall not place or
install on or within any portion of the Leased Premises, the exterior of the
Building, the Outside Areas or the Property any business identification sign
which is visible from the exterior of the Leased Premises until Landlord shall
have approved in writing and in its sole discretion the location, size, content,
design, method of attachment and material to be used in the making of such sign;
provided, however, that so long as such signs are normal and customary business
directional or identification signs within the Building, Tenant shall not be
required to obtain Landlord's approval. Any sign, once approved by Landlord,
shall be installed at Tenant's sole cost and expense and only in strict
compliance with Landlord's approval and all Laws and requirements of the City of
San Jose, using a person approved by Landlord to install same. Landlord may
remove any signs (which have not been approved in writing by Landlord),
advertisements, banners, placards or pictures so placed by Tenant on or within
the Leased Premises, the exterior of the Building, the Outside Areas or the
Property and charge to Tenant the cost of such removal, together with any costs
incurred by Landlord to repair any damage caused thereby, including any cost
incurred to restore the surface (upon which such sign was so affixed) to its
original condition. Tenant shall remove all of Tenant's signs, repair any damage
caused thereby, and restore the surface upon which the sign was affixed to its
original condition, all to Landlord's reasonable satisfaction, upon the
termination of this Lease.

4.7 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS. Tenant shall abide by and
shall promptly observe and comply with, at its sole cost and expense, all Laws
and Private Restrictions respecting the use and occupancy of the Leased
Premises, the Building, the Outside Areas or the Property including, without
limitation, all Laws governing the use and/or disposal of hazardous materials,
and shall defend with competent counsel, indemnify and hold Landlord harmless
from any claims, damages or liability resulting from Tenant's failure to so
abide, observe, or comply. Tenant's obligations hereunder shall survive the
expiration or sooner termination of this Lease.

4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS. With respect to any insurance
policies required or permitted to be carried by Landlord in accordance with the
provisions of this Lease, Tenant shall not conduct nor permit any other person
to conduct any activities nor keep, store or use (or allow any other person to
keep, store or use) any item or thing within the Leased Premises, the Building,
the Outside Areas or the Property which (i) is prohibited under the terms of any
such policies, (ii) could result in the termination of the coverage afforded
under any of such policies, (iii) could give to the insurance carrier the right
to cancel any of such policies, or (iv) could cause an increase in the rates
(over standard rates) charged for the coverage afforded under any of such
policies. Tenant shall comply with all requirements of any insurance company,
insurance underwriter, or Board of Fire Underwriters which are necessary to
maintain, at standard rates, the insurance coverages carried by either Landlord
or Tenant pursuant to this Lease.

4.9 LANDLORD'S RIGHT TO ENTER. Landlord and its agents shall have the right to
enter the Leased Premises during normal business hours after giving Tenant
reasonable notice and subject to Tenant's reasonable security measures for the
purpose of (i) inspecting the same; (ii) showing the Leased Premises to
prospective purchasers, mortgagees

                                       6.
<PAGE>   8

or tenants; (iii) making necessary alterations, additions or repairs; and (iv)
performing any of Tenant's obligations when Tenant has failed to do so. Landlord
shall have the right to enter the Leased premises during normal business hours
(or as otherwise agreed), subject to Tenant's reasonable security measures, for
purposes of supplying any maintenance or services agreed to be supplied by
Landlord. Landlord shall have the right to enter the Outside Areas during normal
business hours for purposes of (i) inspecting the exterior of the Building and
the Outside Areas; (ii) posting notices of nonresponsibility (and for such
purposes Tenant shall provide Landlord at least thirty days' prior written
notice of any work to be performed on the Leased Premises); and (iii) supplying
any services to be provided by Landlord. Any entry into the Leased Premises or
the Outside Areas obtained by Landlord in accordance with this paragraph shall
not under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Leased Premises, or an eviction, actual or
constructive of Tenant from the Leased Premises or any portion thereof.

4.10 USE OF OUTSIDE AREAS. Tenant, in its use of the Outside Areas, shall at all
times keep the Outside Areas in a safe condition free and clear of all
materials, equipment, debris, trash (except within existing enclosed trash
areas), inoperable vehicles, and other items which are not specifically
permitted by Landlord to be stored or located thereon by Tenant. If, in the
opinion of Landlord, unauthorized persons are using any of the Outside Areas by
reason of, or under claim of, the express or implied authority or consent of
Tenant, then Tenant, upon demand of Landlord, shall restrain, to the fullest
extent then allowed by Law, such unauthorized use, and shall initiate such
appropriate proceedings as may be required to so restrain such use. Landlord
reserves the right to grant easements and access rights to others for use of the
Outside Areas and shall not be liable to Tenant for any diminution in Tenant's
right to use the Outside Areas as a result.

4.11 ENVIRONMENTAL PROTECTION. Tenant's obligations under this Section 4.11
shall survive the expiration or termination of this Lease.

        (a) As used herein, the term "Hazardous Materials" shall mean any toxic
or hazardous substance, material or waste or any pollutant or infectious or
radioactive material, including but not limited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations and any and all of those substances included within the definitions
of "hazardous substances," "hazardous materials," "hazardous waste," "hazardous
chemical substance or mixture," "imminently hazardous chemical substance or
mixture," "toxic substances," "hazardous air pollutant," "toxic pollutant," or
"solid waste" in the (a) Comprehensive Environmental Response, Compensation and
Liability Act of 1990 ("CERCLA" or "Superfund"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 et
seq., (b) Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
Section 6901 et seq., (c) Federal Water Pollution Control Act ("FSPCA"), 33
U.S.C. Section 1251 et seq., (d) Clean Air Act ("CAA"), 42 U.S.C. Section 7401
et seq., (e) Toxic Substances Control Act ("TSCA"), 14 U.S.C. Section 2601 et
seq., (f) Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., (g) Carpenter-Presley-Tanner Hazardous Substance Account Act ("California
Superfund"), Cal. Health & Safety Code Section 25300 et seq., (h) California
Hazardous Waste Control Act, Cal. Health & Safety code Section 25100 et seq.,
(i) Porter-Cologne Water Quality Control Act ("Porter-Cologne Act"), Cal. Water
Code Section 13000 et seq., (j) Hazardous Waste Disposal Land Use Law, Cal.
Health & Safety codes Section 25220 et seq., (k) Safe Drinking Water and Toxic
Enforcement Act of 1986 ("Proposition 65"), Cal. Health & Safety code Section
25249.5 et seq., (l) Hazardous Substances Underground Storage Tank Law, Cal.
Health & Safety code Section 25280 et seq., (m) Air Resources Law, Cal. Health &
Safety Code Section 39000 et seq., and (n) regulations promulgated pursuant to
said laws or any replacement thereof, or as similar terms are defined in the
federal, state and local laws, statutes, regulations, orders or rules. Hazardous
Materials shall also mean any and all other biohazardous wastes and substances,
materials and wastes which are, or in the future become, regulated under
applicable Laws for the protection of health or the environment, or which are
classified as hazardous or toxic substances, materials or wastes, pollutants or
contaminants, as defined, listed or regulated by any federal, state or local
law, regulation or order or by common law decision, including, without
limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and
other chlorinated solvents, (ii) any petroleum products or fractions thereof,
(iii) asbestos, (iv) polychlorinted biphenyls, (v) flammable explosives, (vi)
urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials
and wastes that are harmful to or may threaten human health, ecology or the
environment.

        (b) Notwithstanding anything to the contrary in this Lease, Tenant, at
its sole cost, shall comply with all Laws relating to the storage, use and
disposal of Hazardous Materials; provided, however, that Tenant shall not be
responsible for contamination of the Leased Premises by Hazardous Materials
existing as of the date the Leased Premises are delivered to Tenant (whether
before or after the Scheduled Delivery Date) unless caused by Tenant. Tenant
shall not store, use or dispose of any Hazardous Materials except for those
Hazardous Materials listed in a Hazardous Materials management plan ("HMMP")
which Tenant shall deliver to Landlord upon execution of this Lease and update
at least annually with Landlord ("Permitted Materials") which may be used,
stored and disposed of provided (i) such Permitted Materials are used, stored,
transported, and disposed of in strict compliance with applicable laws, (ii)
such Permitted Materials shall be limited to the materials listed on and may be
used only in the quantities specified in the HMMP, and (iii) Tenant shall
provide Landlord with copies of all material safety data sheets and other
documentation required under applicable Laws in connection with Tenant's use of
Permitted Materials as and when such documentation is provided to any regulatory
authority having jurisdiction, in no event shall Tenant cause or permit to be
discharged into the plumbing or sewage system of the Building or onto the land
underlying or adjacent to the Building any Hazardous Materials. Tenant shall be
solely responsible for and shall defend, indemnify, and hold Landlord and its
agents harmless from and against all claims, costs and liabilities, including
attorneys' fees and costs, arising out of or in connection with Tenant's
storage, use and/or disposal of Hazardous Materials. If the presence of
Hazardous Materials on the Leased Premises caused or permitted by Tenant results
in contamination or deterioration of water or soil, then Tenant shall promptly
take any and all action necessary to clean up such contamination, but the
foregoing shall in no event be deemed to constitute permission by Landlord to
allow the presence of such Hazardous Materials. At any time prior to the
expiration of the Lease Term if Tenant has a reasonable basis to suspect that
there has been any release or the presence of Hazardous Materials in the ground
or ground water on the Leased Premises which did not exist upon commencement of
the Lease Term,

                                       7.
<PAGE>   9

Tenant shall have the right to conduct appropriate tests of water and soil and
to deliver to Landlord the results of such tests to demonstrate that no
contamination in excess of permitted levels has occurred as a result of Tenant's
use of the Leased Premises. Tenant shall further be solely responsible for, and
shall defend, indemnify, and hold Landlord and its agents harmless from and
against all claims, costs and liabilities, including attorneys' fees and costs,
arising out of or in connection with any removal, cleanup and restoration work
and materials required hereunder to return the Leased Premises and any other
property of whatever nature to their condition at the time the Leased Premises
were delivered to Tenant.

        (c) Upon termination or expiration of the Lease, Tenant at its sole
expense shall cause all Hazardous Materials placed in or about the Leased
Premises, the Building and/or the Property by Tenant, its agents, contractors,
or invitees, and all installations (whether interior or exterior) made by or on
behalf of Tenant relating to the storage, use, disposal or transportation of
Hazardous Materials to be removed from the property and transported for use,
storage or disposal in accordance and compliance with all Laws and other
requirements respecting Hazardous Materials used or permitted to be used by
Tenant. Tenant shall apply for and shall obtain from all appropriate regulatory
authorities (including any applicable fire department or regional water quality
control board) all permits, approvals and clearances necessary for the closure
of the Property and shall take all other actions as may be required to complete
the closure of the Building and the Property. In addition, prior to vacating the
Leased Premises, Tenant shall undertake and submit to Landlord an environmental
site assessment from an environmental consulting company reasonably acceptable
to Landlord which site assessment shall evidence Tenant's compliance with this
Paragraph 4.11.

        (d) At any time prior to expiration of the Lease term, subject to
reasonable prior notice (not less than forty-eight (48) hours) and Tenant's
reasonable security requirements and provided such activities do not
unreasonably interfere with the conduct of Tenant's business at the Leased
Premises, Landlord shall have the right to enter in and upon the Property,
Building and Leased Premises in order to conduct appropriate tests of water and
soil to determine whether levels of any Hazardous Materials in excess of legally
permissible levels has occurred as a result of Tenant's use thereof. Landlord
shall furnish copies of all such test results and reports to Tenant and, at
Tenant's option and cost, shall permit split sampling for testing and analysis
by Tenant. Such testing shall be at Tenant's expense if Landlord has a
reasonable basis for suspecting and confirms the presence of Hazardous Materials
in the soil or surface or ground water in, on, under, or about the Property, the
Building or the Leased Premises, which has been caused by or resulted from the
activities of Tenant, its agents, contractors, or invitees.

        (e) Landlord may voluntarily cooperate in a reasonable manner with the
efforts of all governmental agencies in reducing actual or potential
environmental damage. Tenant shall not be entitled to terminate this Lease or to
any reduction in or abatement of rent by reason of such compliance or
cooperation. Tenant agrees at all times to cooperate fully with the requirements
and recommendations of governmental agencies regulating, or otherwise involved
in, the protection of the environment.

4.12 RULES AND REGULATIONS. In the event Redback Networks Inc. is no longer the
sole tenant of the Leased Premises, Landlord shall have the right from time to
time to establish reasonable rules and regulations and/or amendments or
additions thereto respecting the use of the Leased Premises and the Outside
Areas for the care and orderly management of the Property. Upon delivery to
Tenant of a copy of such rules and regulations or any amendments or additions
thereto, Tenant shall comply with such rules and regulations. A violation by
Tenant of any of such rules and regulations shall constitute a default by Tenant
under this Lease. If there is a conflict between the rules and regulations and
any of the provisions of this Lease, the provisions of this Lease shall prevail.
Landlord shall not be responsible or liable to Tenant for the violation of such
rules and regulations by any other tenant of the Property.

4.13 RESERVATIONS. Landlord reserves the right from time to time to grant,
without the consent or joinder of Tenant, such easements, rights of way and
dedications that Landlord deems necessary, and to cause the recordation of
parcel maps and restrictions, so long as such easements, rights of way and
dedications not unreasonably interfere with the use of the Leased Premises by
Tenant. Tenant agrees to execute any documents reasonably requested by Landlord
to effectuate any such easement rights, dedications, maps or restrictions.

4.14 ROOF. Notwithstanding any provision of this Lease to the contrary, Landlord
hereby reserves to itself and its designees rights of access, use and occupancy
of the Building roof, and Tenant shall have no right of access, use or occupancy
of the Building roof except as permitted herein and except to the extent
required in order to enable Tenant to perform Tenant's maintenance and repair
obligations pursuant to this Lease. Subject to Tenant's restoration and repair
obligations under Paragraph 2.6, Tenant shall have the right to install antennae
and equipment on the Building roof in an area designated by Landlord no larger
than 20 feet by 20 feet.

                                    ARTICLE 5

                  REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

5.1 REPAIR AND MAINTENANCE. Except in the case of damage to or destruction of
the Leased Premises, the Building, the Outside Areas or the Property caused by
an act of God or other peril, in which case the provisions of Article 10 shall
control, the parties shall have the following obligations and responsibilities
with respect to the repair and maintenance of the Leased Premises, the Building,
the Outside Areas, and the Property.

        (a) TENANT'S OBLIGATIONS. Tenant shall, at all times during the Lease
Term and at its sole cost and expense, regularly clean and continuously keep and
maintain in good order, condition and repair the Leased Premises and every part
thereof including, without limiting the generality of the foregoing, (i) all
interior walls, floors and ceilings, (ii) all windows, doors and skylights,
(iii) all electrical wiring, conduits, connectors and fixtures, (iv) all
plumbing, pipes, sinks, toilets, faucets and drains, (v) all lighting fixtures,
bulbs and lamps and all heating,

                                       8.
<PAGE>   10

ventilating and air conditioning equipment, and (vi) all entranceways to the
Leased Premises. Tenant, if requested to do so by Landlord, shall hire, at
Tenant's sole cost and expense, a licensed heating, ventilating and air
conditioning contractor to regularly and periodically (not less frequently than
every three months) inspect and perform required maintenance on the heating,
ventilating and air conditioning equipment and systems serving the Leased
Premises, or alternatively, Landlord may, at its election, contract in its own
name for such regular and periodic inspections of and maintenance on such
heating, ventilating and air conditioning equipment and systems and charge to
Tenant, as Additional Rent, the cost thereof. Tenant, if requested to do so by
Landlord, shall hire, at Tenant's sole cost and expense, a licensed roofing
contractor to regularly and periodically (not less frequently than every three
months) inspect and perform required maintenance on the roof of the Leased
Premises, or alternatively, Landlord may, at its election, contract in its own
name for such regular and periodic inspections of and maintenance on the roof
and charge to Tenant, as Additional Rent, the cost thereof. Tenant shall, at all
times during the Lease Term, keep in a clean and safe condition the Outside
Areas. Tenant shall regularly and periodically sweep and clean the driveways and
parking areas. Tenant shall, at its sole cost and expense, repair all damage to
the Leased Premises, the Building, the Outside Areas or the Property caused by
the activities of Tenant, its employees, invitees or contractors promptly
following written notice from Landlord to so repair such damages. If Tenant
shall fail to perform the required maintenance or fail to make repairs required
of it pursuant to this paragraph within a reasonable period of time following
notice from Landlord to do so, then Landlord may, at its election and without
waiving any other remedy it may otherwise have under this Lease or at law,
perform such maintenance or make such repairs and charge to Tenant, as
Additional Rent, the costs so incurred by Landlord for same. All glass within or
a part of the Leased Premises, both interior and exterior, is at the sole risk
of Tenant and any broken glass shall promptly be replaced by Tenant at Tenant's
expense with glass of the same kind, size and quality.

        (b) LANDLORD'S OBLIGATION. Landlord shall, at its sole cost and expense,
at all times during the Lease Term, maintain and repair the foundation, the roof
structure and the load-bearing and exterior walls of the Building. Landlord
shall repair and maintain the roof membrane of the Building as needed and charge
to Tenant, as part of Property Maintenance Costs, the costs incurred by Landlord
in performing such maintenance and/or making such repairs.

5.2 UTILITIES. Tenant shall arrange at its sole cost and expense and in its own
name, for the supply of gas and electricity to the Leased Premises. In the event
that such services are not separately metered, Tenant shall, at its sole
expense, cause such meters to be installed. Landlord shall maintain the water
meter(s) in its own name; provided, however, that if at any time during the
Lease Term Landlord shall require Tenant to put the water service in Tenant's
name, Tenant shall do so at Tenant's sole cost. Tenant shall be responsible for
determining if the local supplier of water, gas and electricity can supply the
needs of Tenant and whether or not the existing water, gas and electrical
distribution systems within the Building and the Leased Premises are adequate
for Tenant's needs. Tenant shall be responsible for determining if the existing
sanitary and storm sewer systems now servicing the Leased Premises and the
Property are adequate for Tenant's needs. Tenant shall pay all charges for
water, gas, electricity and storm and sanitary sewer services as so supplied to
the Leased Premises, irrespective of whether or not the services are maintained
in Landlord's or Tenant's name.

5.3 SECURITY. Tenant acknowledges that Landlord has not undertaken any duty
whatsoever to provide security for the Leased Premises, the Building, the
Outside Areas or the Property and, accordingly, Landlord is not responsible for
the security of same or the protection of Tenant's property or Tenant's
employees, invitees or contractors. To the extent Tenant determines that such
security or protection services are advisable or necessary, Tenant shall arrange
for and pay the costs of providing same.

5.4 ENERGY AND RESOURCE CONSUMPTION. Landlord may voluntarily cooperate in a
reasonable manner with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the Property,
provided that such cooperation does not materially and adversely impact Tenant's
use of the Leased Premises. Tenant shall not be entitled to terminate this Lease
or to any reduction in or abatement of rent by reason of such compliance or
cooperation. Tenant agrees at all times to cooperate fully with Landlord and to
abide by all reasonable rules established by Landlord in order to comply with
the requirements of utility suppliers and governmental agencies regulating the
consumption of energy and/or other resources.

5.5 LIMITATION OF LANDLORD'S LIABILITY. Landlord shall not be liable to Tenant
for injury to Tenant, its employees, agents, invitees or contractors, damage to
Tenant's property or loss of Tenant's business or profits, nor shall Tenant be
entitled to terminate this Lease or to any reduction in or abatement of rent by
reason of (i) Landlord's failure to provide security services or systems within
the Property for the protection of the Leased Premises, the Building or the
Outside Areas, or the protection of Tenant's property or Tenant's employees,
invitees, agents or contractors, or (ii) Landlord's failure to perform any
maintenance or repairs to the Leased Premises, the Building, the Outside Areas
or the Property until Tenant shall have first notified Landlord, in writing, of
the need for such maintenance or repairs, and then only after Landlord shall
have had a reasonable period of time following its receipt of such notice within
which to perform such maintenance or repairs, or (iii) any failure,
interruption, rationing or other curtailment in the supply of water, electric
current, gas or other utility service to the Leased Premises, the Building, the
Outside Areas or the Property from whatever cause (other than Landlord's gross
negligence or willful misconduct), or (iv) the unauthorized intrusion or entry
into the Leased Premises by third parties (other than Landlord).

                                    ARTICLE 6

                          ALTERATIONS AND IMPROVEMENTS

6.1 BY TENANT. Tenant shall not make any alterations to or modifications of the
Leased Premises or construct any improvements within the Leased Premises until
Landlord shall have first approved, in writing, the plans and specifications
therefor, which approval may be withheld in Landlord's reasonable discretion.
Landlord's approval shall be deemed given if not denied by Landlord in a written
notice to Tenant delivered within fifteen (15) days

                                       9.
<PAGE>   11

following receipt of Tenant's written request. Tenant's written request shall
also contain a request for Landlord to elect whether or not it will require
Tenant to remove the subject alterations, modifications or improvements at the
expiration or earlier termination of this Lease. If such additional request is
not included, Landlord may make such election at the expiration or earlier
termination of this Lease (and for purposes of Tenant's removal obligations set
forth in Section 2.6 above, Landlord shall be deemed to have made the election
at the time the alterations, modifications or improvements were completed). All
such modifications, alterations or improvements, once so approved, shall be
made, constructed or installed by Tenant at Tenant's expense (including all
permit fees and governmental charges related thereto), using a licensed
contractor first approved by Landlord, in substantial compliance with the
Landlord-approved plans and specifications therefor. All work undertaken by
Tenant shall be done in accordance with all Laws and in a good and workmanlike
manner using new materials of good quality. Tenant shall not commence the making
of any such modifications or alterations or the construction of any such
improvements until (i) all required governmental approvals and permits shall
have been obtained, (ii) all requirements regarding insurance imposed by this
Lease have been satisfied, (iii) Tenant shall have given Landlord at least five
(5) business days prior written notice of its intention to commence such work so
that Landlord may post and file notices of non-responsibility, and (iv) if
requested by Landlord, Tenant shall have obtained contingent liability and broad
form builder's risk insurance in an amount satisfactory to Landlord in its
reasonable discretion to cover any perils relating to the proposed work not
covered by insurance carried by Tenant pursuant to Article 9. In no event shall
Tenant make any modification, alterations or improvements whatsoever to the
Outside Areas or the exterior or structural components of the Building
including, without limitation, any cuts or penetrations in the floor, roof or
exterior walls of the Leased Premises. As used in this Article, the term
"modifications, alterations and/or improvements" shall include, without
limitation, the installation of additional electrical outlets, overhead lighting
fixtures, drains, sinks, partitions, doorways, or the like. Notwithstanding the
foregoing, Tenant, without Landlord's prior written consent, shall be permitted
to make non-structural alterations to the Building, provided that: (a) such
alterations do not exceed $50,000 individually or $200,000 in the aggregate, (b)
Tenant shall timely provide Landlord the notice no less than ten (10) days prior
to commencing such alterations , (c) Tenant shall notify Landlord in writing
within thirty (30) days of completion of the alteration and deliver to Landlord
a set of the plans and specifications therefor, either "as built" or marked to
show construction changes made, and (d) Tenant shall, upon Landlord's request,
remove the alteration at the termination of the Lease and restore the Leased
Premises to their condition prior to such alteration.

6.2 OWNERSHIP OF IMPROVEMENTS. All modifications, alterations and improvements
made or added to the Leased Premises by Tenant (other than Tenant's inventory,
equipment, movable furniture, wall decorations and trade fixtures) shall be
deemed real property and a part of the Leased Premises, but shall remain the
property of Tenant during the Lease, and Tenant hereby covenants and agrees not
to grant a security interest in any such items to any party other than Landlord.
Any such modifications, alterations or improvements, once completed, shall not
be altered or removed from the Leased Premises during the Lease Term without
Landlord's written approval first obtained in accordance with the provisions of
Paragraph 6.1 above. At the expiration or sooner termination of this Lease, all
such modifications, alterations and improvements other than Tenant's inventory,
equipment, movable furniture, wall decorations and trade fixtures, shall
automatically become the property of Landlord and shall be surrendered to
Landlord as part of the Leased Premises as required pursuant to Article 2,
unless Landlord shall require Tenant to remove any of such modifications,
alterations or improvements in accordance with the provisions of Article 2, in
which case Tenant shall so remove same. Landlord shall have no obligations to
reimburse Tenant for all or any portion of the cost or value of any such
modifications, alterations or improvements so surrendered to Landlord. All
modifications, alterations or improvements which are installed or constructed on
or attached to the Leased Premises by Landlord and/or at Landlord's expense
shall be deemed real property and a part of the Leased Premises and shall be
property of Landlord. All lighting, plumbing, electrical, heating, ventilating
and air conditioning fixtures, partitioning, window coverings, wall coverings
and floor coverings installed by Tenant shall be deemed improvements to the
Leased Premises and not trade fixtures of Tenant.

6.3 ALTERATIONS REQUIRED BY LAW. Tenant shall make all modifications,
alterations and improvements to the Leased Premises, at its sole cost, that are
required by any Law because of (i) Tenant's use or occupancy of the Leased
Premises, the Building, the Outside Areas or the Property, (ii) Tenant's
application for any permit or governmental approval, or (iii) Tenant's making of
any modifications, alterations or improvements to or within the Leased Premises.
If Landlord shall, at any time during the Lease Term, be required by any
governmental authority to make any modifications, alterations or improvements to
the Building or the Property, or if due to any change in those Laws applicable
to commercial buildings generally, capital improvements are required to the
Leased Premises (except for modifications, alterations or improvements covered
by (i), (ii) or (iii) above) Landlord shall perform such modifications,
alterations or improvements and the cost incurred by Landlord in making such
modifications, alterations or improvements, including interest at a rate equal
to the greater of (a) 12%, or (b) the sum of that rate quoted by Wells Fargo
Bank, N.T. & S.A. from time to time as its prime rate, plus two percent (2%)
("Wells Prime Plus Two") (but in no event more than the maximum rate of interest
not prohibited or made usurious), shall be amortized by Landlord over the useful
life of such modifications, alterations or improvements, as determined in
accordance with generally accepted accounting principles, and the monthly
amortized cost of such modifications, alterations and improvements as so
amortized shall be considered a Property Maintenance Cost.

6.4 LIENS. Tenant shall keep the Property and every part thereof free from any
lien, and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Property. If any such claim of lien is recorded
against Tenant's interest in this Lease, the Property or any part thereof,
Tenant shall bond against, discharge or otherwise cause such lien to be entirely
released within ten days after the same has been recorded. Tenant's failure to
do so shall be conclusively deemed a material default under the terms of this
Lease.

                                      10.
<PAGE>   12

                                    ARTICLE 7

                       ASSIGNMENT AND SUBLETTING BY TENANT

7.1 BY TENANT. Tenant shall not sublet the Leased Premises or any portion
thereof or assign its interest in this Lease, whether voluntarily or by
operation of Law, without Landlord's prior written consent which shall not be
unreasonably withheld. Any attempted subletting or assignment without Landlord's
prior written consent, at Landlord's election, shall constitute a default by
Tenant under the terms of this Lease. The acceptance of rent by Landlord from
any person or entity other than Tenant, or the acceptance of rent by Landlord
from Tenant with knowledge of a violation of the provisions of this paragraph,
shall not be deemed to be a waiver by Landlord of any provision of this Article
or this Lease or to be a consent to any subletting by Tenant or any assignment
of Tenant's interest in this Lease. Without limiting the circumstances in which
it may be reasonable for Landlord to withhold its consent to an assignment or
subletting, Landlord and Tenant acknowledge that it shall be reasonable for
Landlord to withhold its consent in the following instances:

        (a) the proposed assignee or sublessee is a governmental agency;

        (b) in Landlord's reasonable judgment, the use of the Leased Premises by
the proposed assignee or sublessee would involve occupancy by other than for a
Permitted Use, would entail any alterations which would lessen the value of the
leasehold improvements in the Leased Premises, or would require increased
services by Landlord;

        (c) in Landlord's reasonable judgment, the financial worth of the
proposed assignee is less than that of Tenant or does not meet the credit
standards applied by Landlord;

        (d) the proposed assignee or sublessee (or any of its affiliates) has
been in material default under a lease, has been in litigation with a previous
landlord, or in the ten years prior to the assignment or sublease has filed for
bankruptcy protection, has been the subject of an involuntary bankruptcy, or has
been adjudged insolvent;

        (e) Landlord has experienced a previous default by or is in litigation
with the proposed assignee or sublessee;

        (f) in Landlord's reasonable judgment, the Leased Premises, or the
relevant part thereof, will be used in a manner that will violate any negative
covenant as to use contained in this Lease;

        (g) the use of the Leased Premises by the proposed assignee or sublessee
will violate any applicable law, ordinance or regulation;

        (h) the proposed assignee or sublessee is, as of the date of this Lease,
a tenant in the Building;

        (i) the proposed assignment or sublease fails to include all of the
terms and provisions required to be included therein pursuant to this Article 7;

        (j) Tenant is in default of any obligation of Tenant under this Lease,
or Tenant has defaulted under this Lease on three or more occasions during the
12 months preceding the date that Tenant shall request consent; or

        (k) in the case of a subletting of less than the entire Leased Premises,
if the subletting would result in the division of the Leased Premises into more
than two subparcels or would require improvements to be made outside of the
Leased Premises.

7.2 MERGER, REORGANIZATION, OR SALE OF ASSETS. Any dissolution, merger,
consolidation or other reorganization of Tenant, or the sale or other transfer
in the aggregate over the Lease Term of a controlling percentage of the capital
stock of Tenant, or the sale or transfer of all or a substantial portion of the
assets of Tenant, shall be deemed a voluntary assignment of Tenant's interest in
this Lease. The phrase "controlling percentage" means the ownership of and the
right to vote stock possessing more than fifty percent of the total combined
voting power of all classes of Tenant's capital stock issued, outstanding and
entitled to vote for the election of directors. If Tenant is a partnership, a
withdrawal or change, voluntary, involuntary or by operation of Law, of any
general partner, or the dissolution of the partnership, shall be deemed a
voluntary assignment of Tenant's interest in this Lease. Upon Landlord's request
from time to time, Tenant shall promptly provide Landlord with a statement
certified by the Tenant's chief operating officer, which shall provide the
following information: (a) the names of all of Tenant's shareholders and their
ownership interests at the time thereof, provided Tenant's shares are not
publicly traded; (b) the state in which Tenant is incorporated; (c) the location
of Tenant's principal place of business; (d) information regarding a material
change in the corporate structure of Tenant, including, without limitation, a
merger or consolidation; and (e) any other information regarding Tenant's
ownership that Landlord reasonably requests. Notwithstanding the foregoing,
Tenant may, without Landlord's prior written consent and without being subject
to any of the provisions of this Article 7, including without limitation,
Landlord's right to recapture any portion of the Leased Premises, sublet the
Leased Premises or assign this Lease to (individually, a "Permitted Assignee,"
collectively, "Permitted Assignees"): (i) a subsidiary, affiliate, division,
corporation or joint venture controlling, controlled by or under common control
with Tenant; (ii) a successor corporation related to Tenant by merger,
consolidation, nonbankruptcy reorganization, or government action; or (iii)
Tenant, after the sale or transfer of a controlling percentage of the capital
stock of Tenant; provided that any Permitted Assignee under (i), (ii) or (iii)
above has a market capitalization on the effective date of the assignment or
sublease which is equal to or greater than Tenant.

7.3 LANDLORD'S ELECTION. If Tenant shall desire to assign its interest under the
Lease or to sublet the Leased Premises, Tenant must first notify Landlord, in
writing, of its intent to so assign or sublet, at least thirty (30) days in

                                      11.
<PAGE>   13

advance of the date it intends to so assign its interest in this Lease or sublet
the Leased Premises but not sooner than one hundred eighty days in advance of
such date, specifying in detail the terms of such proposed assignment or
subletting, including the name of the proposed assignee or sublessee, the
property assignee's or sublessee's intended use of the Leased Premises, current
financial statements (including a balance sheet, income statement and statement
of cash flow, all prepared in accordance with generally accepted accounting
principles) of such proposed assignee or sublessee, the form of documents to be
used in effectuating such assignment or subletting and such other information as
Landlord may reasonably request. Landlord shall have a period of ten (10)
business days following receipt of such notice and the required information
within which to do one of the following: (i) consent to such requested
assignment or subletting subject to Tenant's compliance with the conditions set
forth in Paragraph 7.4 below, or (ii) refuse to so consent to such requested
assignment or subletting, provided that such consent shall not be unreasonably
refused, or (iii) terminate this Lease as to the portion (including all) of the
Leased Premises that is the subject of the proposed assignment or subletting if
Tenant proposes to assign or sublet fifty percent (50%) or more of the total
space leased by Tenant from Landlord in the Project (pursuant to this Lease and
all other leases between Landlord and Tenant). During such ten (10) business day
period, Tenant covenants and agrees to supply to Landlord, upon request, all
necessary or relevant information which Landlord may reasonably request
respecting such proposed assignment or subletting and/or the proposed assignee
or sublessee.

7.4 CONDITIONS TO LANDLORD'S CONSENT. If Landlord elects to consent, or shall
have been ordered to so consent by a court of competent jurisdiction, to such
requested assignment or subletting, such consent shall be expressly conditioned
upon the occurrence of each of the conditions below set forth, and any purported
assignment or subletting made or ordered prior to the full and complete
satisfaction of each of the following conditions shall be void and, at the
election of Landlord, which election may be exercised at any time following such
a purported assignment or subletting but prior to the satisfaction of each of
the stated conditions, shall constitute a material default by Tenant under this
Lease until cured by satisfying in full each such condition by the assignee or
sublessee. The conditions are as follows:

        (a) Landlord having approved in form and substance the assignment or
sublease agreement and any ancillary documents, which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.

        (b) Each such sublessee or assignee having agreed, in writing
satisfactory to Landlord and its counsel and for the benefit of Landlord, to
assume, to be bound by, and to perform the obligations of this Lease to be
performed by Tenant which relate to space being subleased.

        (c) Tenant having fully and completely performed all of its obligations
under the terms of this Lease through and including the date of such assignment
or subletting.

        (d) Tenant having reimbursed to Landlord all reasonable costs and
reasonable attorneys' fees incurred by Landlord in conjunction with the
processing and documentation of any such requested subletting or assignment.

        (e) Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement or assignment agreement (as
applicable) and all related agreements.

        (f) Tenant having paid, or having agreed in writing to pay as to future
payments, to Landlord the assignment consideration or excess rentals to be paid
to Tenant or to any other on Tenant's behalf or for Tenant's benefit for such
assignment or subletting as follows:

               (i) If Tenant assigns its interest under this Lease and if all or
a portion of the consideration for such assignment is to be paid by the assignee
at the time of the assignment, that Tenant shall have paid to Landlord and
Landlord shall have received an amount equal to fifty percent (50%) of the
assignment consideration so paid or to be paid (whichever is the greater) at the
time of the assignment by the assignee; or

               (ii) If Tenant assigns its interest under this Lease and if
Tenant is to receive all or a portion of the consideration for such assignment
in future installments, that Tenant and Tenant's assignee shall have entered
into a written agreement with and for the benefit of Landlord satisfactory to
Landlord and its counsel whereby Tenant and Tenant's assignee jointly agree to
pay to Landlord an amount equal to fifty percent (50%) of all such future
assignment consideration installments to be paid by such assignee as and when
such assignment consideration is so paid.

               (iii) If Tenant subleases the Leased Premises, that Tenant and
Tenant's sublessee shall have entered into a written agreement with and for the
benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and
Tenant's sublessee jointly agree to pay to Landlord fifty percent (50%) of all
excess rentals to be paid by such sublessee as and when such excess rentals are
so paid.

Notwithstanding the foregoing, in the event either (1) Tenant has assigned or
proposes to assign its interest in this Lease and any other lease between
Landlord and Tenant for space in the Project equal to or exceeding 99,870 square
feet; or (2) Tenant has sublet or proposes to sublet 99,870 or more square feet
of the total space in the Project leased by Tenant (pursuant to this Lease and
all other leases between Landlord and Tenant), then Landlord shall be entitled
to one hundred percent (100%) of the assignment consideration or excess rentals,
as applicable, in connection with any assignment or sublease, payable as set
forth in (i) through (iii) above.

7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED. For purposes of this
Article, including any amendment to this Article by way of addendum or other
writing, the term "assignment consideration" shall mean all consideration to be
paid by the assignee to Tenant or to any other party on Tenant's behalf or for
Tenant's benefit as

                                      12.
<PAGE>   14

consideration for such assignment, after deduction for reasonable leasing
commissions and reasonable legal fees paid by Tenant in connection with such
assignment but without deductions for any other costs or expenses (including,
without limitation, tenant improvements, capital improvements, building
upgrades, permit fees, and other consultants' fees) incurred by Tenant in
connection with such assignment, and the term "excess rentals" shall mean all
consideration to be paid by the sublessee to Tenant or to any other party on
Tenant's behalf or for Tenant's benefit for the sublease of all or any portion
of the Leased Premises in excess of the rent due to Landlord under the terms of
this Lease for the portion so subleased for the same period, after deduction for
reasonable leasing commissions and reasonable legal fees paid by Tenant in
connection with such assignment but without deductions for any other costs or
expenses (including, without limitation, tenant improvements, capital
improvements, building upgrades, permit fees, and other consultants' fees)
incurred by Tenant in connection with such sublease. Tenant agrees that the
portion of any assignment consideration and/or excess rentals arising from any
assignment or subletting by Tenant which is to be paid to Landlord pursuant to
this Article now is and shall then be the property of Landlord and not the
property of Tenant.

7.6 PAYMENTS. All payments required by this Article to be made to Landlord shall
be made in cash in full as and when they become due. At the time Tenant,
Tenant's assignee or sublessee makes each such payment to Landlord, Tenant or
Tenant's assignee or sublessee, as the case may be, shall deliver to Landlord an
itemized statement in reasonable detail showing the method by which the amount
due Landlord was calculated and certified by the party making such payment as
true and correct.

7.7 GOOD FAITH. The rights granted to Tenant by this Article are granted in
consideration of Tenant's express covenant that all pertinent allocations which
are made by Tenant between the rental value of the Leased Premises and the value
of any of Tenant's personal property which may be conveyed or leased generally
concurrently with and which may reasonably be considered a part of the same
transaction as the permitted assignment or subletting shall be made fairly,
honestly and in good faith. If Tenant shall breach this covenant, Landlord may
immediately declare Tenant to be in default under the terms of this Lease and
terminate this Lease and/or exercise any other rights and remedies Landlord
would have under the terms of this Lease in the case of a material default by
Tenant under this Lease.

7.8 EFFECT OF LANDLORD'S CONSENT. No subletting or assignment, even with the
consent of Landlord, shall relieve Tenant of its personal and primary obligation
to pay rent and to perform all of the other obligations to be performed by
Tenant hereunder. Consent by Landlord to one or more assignments of Tenant's
interest in this Lease or to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment or subletting.
If Landlord shall have been ordered by a court of competent jurisdiction to
consent to a requested assignment or subletting, or such an assignment or
subletting shall have been ordered by a court of competent jurisdiction over the
objection of Landlord, such assignment or subletting shall not be binding
between the assignee (or sublessee) and Landlord until such time as all
conditions set forth in Paragraph 7.4 above have been fully satisfied (to the
extent not then satisfied) by the assignee or sublessee, including, without
limitation, the payment to Landlord of all agreed assignment considerations
and/or excess rentals then due Landlord.

                                    ARTICLE 8

                LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY

8.1 LIMITATION ON LANDLORD'S LIABILITY AND RELEASE. Landlord shall not be liable
to Tenant for, and Tenant hereby releases Landlord and its partners, principals,
members, officers, agents, employees, lenders, attorneys, and consultants from,
any and all liability, whether in contract, tort or on any other basis, for any
injury to or any damage sustained by Tenant, Tenant's agents, employees,
contractors or invitees, any damage to Tenant's property, or any loss to
Tenant's business, loss of Tenant's profits or other financial loss of Tenant
resulting from or attributable to the condition of, the management of, the
repair or maintenance of, the protection of, the supply of services or utilities
to, the damage in or destruction of the Leased Premises, the Building, the
Property or the Outside Areas, including without limitation (i) the failure,
interruption, rationing or other curtailment or cessation in the supply of
electricity, water, gas or other utility service to the Property, the Building
or the Leased Premises; (ii) the vandalism or forcible entry into the Building
or the Leased Premises; (iii) the penetration of water into or onto any portion
of the Leased Premises; (iv) the failure to provide security and/or adequate
lighting in or about the Property, the Building or the Leased Premises, (v) the
existence of any design or construction defects within the Property, the
Building or the Leased Premises; (vi) the failure of any mechanical systems to
function properly (such as the HVAC systems); (vii) the blockage of access to
any portion of the Property, the Building or the Leased Premises, except that
Tenant does not so release Landlord from such liability to the extent such
damage was proximately caused by Landlord's active negligence, willful
misconduct, or Landlord's failure to perform an obligation expressly undertaken
pursuant to this Lease after a reasonable period of time shall have lapsed
following receipt of written notice from Tenant to so perform such obligation.
In this regard, Tenant acknowledges that it is fully apprised of the provisions
of Law relating to releases, and particularly to those provisions contained in
Section 1542 of the California Civil Code which reads as follows:

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

Notwithstanding such statutory provision, and for the purpose of implementing a
full and complete release and discharge, Tenant hereby (i) waives the benefit of
such statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
paragraph is a full and complete settlement and release and discharge of all
claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its
favor.

                                      13.
<PAGE>   15

8.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall defend with competent
counsel satisfactory to Landlord any claims made or legal actions filed or
threatened against Landlord with respect to the violation of any Law, or the
death, bodily injury, personal injury, property damage, or interference with
contractual or property rights suffered by any third party occurring within the
Leased Premises or resulting from Tenant's use or occupancy of the Leased
Premises, the Building or the Outside Areas, or resulting from Tenant's
activities in or about the Leased Premises, the Building, the Outside Areas or
the Property, and Tenant shall indemnify and hold Landlord, Landlord's partners,
principals, members, employees, agents and contractors harmless from any loss
liability, penalties, or expense whatsoever (including any loss attributable to
vacant space which otherwise would have been leased, but for such activities)
resulting therefrom, except to the extent proximately caused by the active
negligence or willful misconduct of Landlord or Landlord's default under this
Lease (after notice and opportunity to cure as specified in Paragraph 12.3).
This indemnity agreement shall survive the expiration or sooner termination of
this Lease.

                                    ARTICLE 9

                                    INSURANCE

9.1 TENANT'S INSURANCE. Tenant shall maintain insurance complying with all of
the following:

        (a) Tenant shall procure, pay for and keep in full force and effect, at
all times during the Lease Term, the following:

               (i) Commercial general liability insurance insuring Tenant
against liability for personal injury, bodily injury, death and damage to
property occurring within the Leased Premises, or resulting from Tenant's use or
occupancy of the Leased Premises, the Building, the Outside Areas or the
Property, or resulting from Tenant's activities in or about the Leased Premises
or the Property, with coverage in an amount equal to Tenant's Required Liability
Coverage (as set forth in Article 1), which insurance shall contain "blanket
contractual liability" and "broad form property damage" endorsements insuring
Tenant's performance of Tenant's obligations to indemnify Landlord as contained
in this Lease.

               (ii) Fire and property damage insurance in special form coverage
insuring Tenant against loss from physical damage to Tenant's personal property,
inventory, trade fixtures and improvements within the Leased Premises with
coverage for the full actual replacement cost thereof;

               (iii) Business income/extra expense insurance sufficient to pay
Base Monthly Rent and Additional Rent for a period of not less than twelve (12)
months;

               (iv) Plate glass insurance, at actual replacement cost;

               (v) Boiler and machinery insurance, to limits sufficient to
restore the Building;

               (vi) Product liability insurance (including, without limitation,
if food and/or beverages are distributed, sold and/or consumed within the Leased
Premises, to the extent obtainable, coverage for liability arising out of the
distribution, sale, use or consumption of food and/or beverages (including
alcoholic beverages, if applicable) at the Leased Premises for not less than
Tenant's Required Liability Coverage (as set forth in Article 1);

               (vii) Workers' compensation insurance (statutory coverage) with
employer's liability in amounts not less than $1,000,000 insurance sufficient to
comply with all laws; and

               (viii) With respect to making of any alterations or modifications
or the construction of improvements or the like undertaken by Tenant, course of
construction, commercial general liability, automobile liability and workers'
compensation (to be carried by Tenant's contractor), in an amount and with
coverage reasonably satisfactory to Landlord.

        (b) Each policy of liability insurance required to be carried by Tenant
pursuant to this paragraph or actually carried by Tenant with respect to the
Leased Premises or the Property: (i) shall, except with respect to insurance
required by subparagraph (a)(vii) above, name Landlord, and such others as are
designated by Landlord, as additional insureds; (ii) shall be primary insurance
providing that the insurer shall be liable for the full amount of the loss, up
to and including the total amount of liability set forth in the declaration of
coverage, without the right of contribution from or prior payment by any other
insurance coverage of Landlord; (iii) shall be in a form satisfactory to
Landlord; (iv) shall be carried with companies reasonably acceptable to Landlord
with Best's ratings of at least A and XI; (v) shall provide that such policy
shall not be subject to cancellation, lapse or change except after at least
thirty (30) days prior written notice to Landlord, and (vi) shall contain a
so-called "severability" or "cross liability" endorsement. Each policy of
property insurance maintained by Tenant with respect to the Leased Premises or
the Property or any property therein (i) shall provide that such policy shall
not be subject to cancellation, lapse or change except after at least thirty
(30) days prior written notice to Landlord and (ii) shall contain a waiver
and/or a permission to waive by the insurer of any right of subrogation against
Landlord, its partners, principals, members, officers, employees, agents and
contractors, which might arise by reason of any payment under such policy or by
reason of any act or omission of Landlord, its partners, principals, members,
officers, employees, agents and contractors.

        (c) Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to Landlord, with respect to each policy of
insurance required to be carried by Tenant pursuant to this Article, a copy of
such policy (appropriately authenticated by the insurer as having been issued,
premium paid) or a certificate of the insurer certifying in form satisfactory to
Landlord that a policy has been issued, premium paid, providing the coverage
required by this Paragraph and containing the provisions specified herein. With
respect to each renewal or

                                      14.
<PAGE>   16

replacement of any such insurance, the requirements of this Paragraph must be
complied with not less than thirty days prior to the expiration or cancellation
of the policies being renewed or replaced. Landlord may, at any time and from
time to time, inspect and/or copy any and all insurance policies required to be
carried by Tenant pursuant to this Article. If Landlord's Lender, insurance
broker, advisor or counsel reasonably determines at any time that the amount of
coverage set forth in Paragraph 9.1(a) for any policy of insurance Tenant is
required to carry pursuant to this Article is not adequate, then Tenant shall
increase the amount of coverage for such insurance to such greater amount as
Landlord's Lender, insurance broker, advisor or counsel reasonably deems
adequate.

9.2 LANDLORD'S INSURANCE.  With respect to insurance maintained by Landlord:

        (a) Landlord shall maintain, as the minimum coverage required of it by
this Lease, fire and property damage insurance in special form coverage insuring
Landlord (and such others as Landlord may designate) against loss from physical
damage to the Building with coverage of not less than one hundred percent (100%)
of the full actual replacement cost thereof and against loss of rents for a
period of not less than six months. Such fire and property damage insurance, at
Landlord's election but without any requirements on Landlord's behalf to do so,
(i) may be written in so-called "all risk" form, excluding only those perils
commonly excluded from such coverage by Landlord's then property damage insurer;
(ii) may provide coverage for physical damage to the improvements so insured for
up to the entire full actual replacement cost thereof; (iii) may be endorsed to
cover loss or damage caused by any additional perils against which Landlord may
elect to insure, including earthquake and/or flood; and/or (iv) may provide
coverage for loss of rents for a period of up to twelve months. Landlord shall
not be required to cause such insurance to cover any of Tenant's personal
property, inventory, and trade fixtures, or any modifications, alterations or
improvements made or constructed by Tenant to or within the Leased Premises.
Landlord shall use commercially reasonable efforts to obtain such insurance at
competitive rates.

        (b) Landlord shall maintain commercial general liability insurance
insuring Landlord (and such others as are designated by Landlord) against
liability for personal injury, bodily injury, death, and damage to property
occurring in, on or about, or resulting from the use or occupancy of the
Property, or any portion thereof, with combined single limit coverage of at
least Ten Million Dollars ($10,000,000). Landlord may carry such greater
coverage as Landlord or Landlord's Lender, insurance broker, advisor or counsel
may from time to time determine is reasonably necessary for the adequate
protection of Landlord and the Property.

        (c) Landlord may maintain any other insurance which in the opinion of
its insurance broker, advisor or legal counsel is prudent in carry under the
given circumstances, provided such insurance is commonly carried by owners of
property similarly situated and operating under similar circumstances.

9.3 MUTUAL WAIVER OF SUBROGATION. Landlord hereby releases Tenant, its
respective partners, principals, members, officers, agents, employees and
servants, and Tenant hereby releases Landlord and its respective partners,
principals, members, officers, agents, employees and servants, from any and all
liability for loss, damage or injury to the property of the other in or about
the Leased Premises or the Property which is caused by or results from a peril
or event or happening which is covered by insurance required to be carried by
this Lease and in force at the time of the loss by the party sustaining such
loss; provided, however, that such waiver shall be effective only to the extent
permitted by the insurance covering such loss and to the extent such insurance
is not prejudiced thereby.

                                   ARTICLE 10

                            DAMAGE TO LEASED PREMISES

10.1 LANDLORD'S DUTY TO RESTORE. If the Leased Premises, the Building or the
Outside Area are damaged by any peril after the Effective Date of this Lease,
Landlord shall restore the same, as and when required by this paragraph, unless
this Lease is terminated by Landlord pursuant to Paragraph 10.3 or by Tenant
pursuant to Paragraph 10.4. If this Lease is not so terminated, then upon the
issuance of all necessary governmental permits, Landlord shall commence and
diligently prosecute to completion the restoration of the Leased Premises, the
Building or the Outside Area, as the case may be, to the extent then allowed by
law, to substantially the same condition in which it existed as of the Lease
Commencement Date. Landlord's obligation to restore shall be limited to the
improvements constructed by Landlord. Landlord shall have no obligation to
restore any alterations, modifications or improvements made by Tenant to the
Leased Premises or any of Tenant's personal property, inventory or trade
fixtures. Upon completion of the restoration by Landlord, Tenant shall forthwith
replace or fully repair all of Tenant's personal property, inventory, trade
fixtures and other improvements constructed by Tenant to like or similar
conditions as existed at the time immediately prior to such damage or
destruction.

10.2 INSURANCE PROCEEDS. All insurance proceeds available from the fire and
property damage insurance carried by Landlord shall be paid to and become the
property of Landlord. If this Lease is terminated pursuant to either Paragraph
10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant
which cover loss of property that is Landlord's property or was paid for with
the Tenant Improvement Allowance (as set forth in the Work Letter) or was
installed or constructed by Landlord shall be paid to and become the property of
Landlord, and the remainder of such proceeds shall be paid to and become the
property of Tenant. If this Lease is not terminated pursuant to either Paragraph
10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant
which cover loss to property that is Landlord's property shall be paid to and
become the property of Landlord, and all proceeds available from such insurance
which cover loss to property which would only become the property of Landlord
upon the termination of this Lease shall be paid to and remain the property of
Tenant. The determination of Landlord's property and Tenant's property shall be
made pursuant to Paragraph 6.2.

10.3 LANDLORD'S RIGHT TO TERMINATE. Landlord shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:

                                      15.
<PAGE>   17

        (a) The Building is damaged by any peril covered by valid and
collectible insurance actually carried by Landlord and in force at the time of
such damage or destruction (an "insured peril") to such an extent that the
estimated cost to restore the Building exceeds the lesser of (i) the insurance
proceeds (less any deductible amount) available from insurance actually carried
by Landlord, or (ii) fifty percent of the then actual replacement cost thereof;

        (b) The Building is damaged by an uninsured peril whose repair cost
exceeds ten percent (10%) of the replacement cost of the Building, which peril
Landlord was not required to insure against pursuant to the provisions of
Article 9 of this Lease.

        (c) The Building is damaged by any peril and, because of the laws then
in force, the Building (i) cannot be restored at reasonable cost or (ii) if
restored, cannot be used for the same use being made thereof before such damage.

10.4 TENANT'S RIGHT TO TERMINATE. If the Leased Premises, the Building or the
Outside Area are damaged by any peril and Landlord does not elect to terminate
this Lease or is not entitled to terminate this Lease pursuant to this Article,
then as soon as reasonably practicable, Landlord shall furnish Tenant with the
written opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be complete. Tenant shall have the
option to terminate this Lease in the event any of the following occurs, which
option may be exercised only by delivery to Landlord of a written notice of
election to terminate within twenty (20) days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:

        (a) If the time estimated to substantially complete the restoration
exceeds twelve months from and after the date the architect's or construction
consultant's written opinion is delivered; or

        (b) If the damage occurred within twelve months of the last day of the
Lease Term and the time estimated to substantially complete the restoration
exceeds one hundred eighty days from and after the date such restoration is
commenced.

10.5 TENANT'S WAIVER. Landlord and Tenant agree that the provisions of Paragraph
10.4 above, captioned "Tenant's Right To Terminate", are intended to supersede
and replace the provisions contained in California Civil Code, Section 1932,
Subdivision 2, and California Civil Code, Section 1934, and accordingly, Tenant
hereby waives the provisions of such Civil Code Sections and the provisions of
any successor Civil Code Sections or similar laws hereinafter enacted.

10.6 ABATEMENT OF RENT. In the event of damage to the Leased Premises which does
not result in the termination of this Lease, the Base Monthly Rent (and any
Additional Rent) shall be temporarily abated during the period of restoration in
proportion in the degree to which Tenant's use of the Leased Premises is
impaired by such damage.

                                   ARTICLE 11

                                  CONDEMNATION

11.1 TENANT'S RIGHT TO TERMINATE. Except as otherwise provided in Paragraph 11.4
below regarding temporary takings, Tenant shall have the option to terminate
this Lease if, as a result of any taking, (i) all of the Leased Premises is
taken, or (ii) twenty-five percent (25%) or more of the Leased Premises is taken
and the part of the Leased Premises that remains cannot, within a reasonable
period of time, be made reasonably suitable for the continued operation of
Tenant's business. Tenant must exercise such option within a reasonable period
of time, to be effective on the later to occur of (i) the date that possession
of that portion of the Leased Premises that is condemned is taken by the
condemnor or (ii) the date Tenant vacated the Leased Premises.

11.2 LANDLORD'S RIGHT TO TERMINATE. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Landlord shall have the option to
terminate this Lease if, as a result of any taking, (i) all of the Leased
Premises is taken, (ii) twenty-five percent (25%) or more of the Leased Premises
is taken and the part of the Leased Premises that remains cannot, within a
reasonable period of time, be made reasonably suitable for the continued
operation of Tenant's business, or (iii) because of the laws then in force, the
Leased Premises may not be used for the same use being made before such taking,
whether or not restored as required by Paragraph 11.3 below. Any such option to
terminate by Landlord must be exercised within a reasonable period of time, to
be effective as of the date possession is taken by the condemnor.

11.3 RESTORATION. If any part of the Leased Premises or the Building is taken
and this Lease is not terminated, then Landlord shall, to the extent not
prohibited by laws then in force, repair any damage occasioned thereby to the
remainder thereof to a condition reasonably suitable for Tenant's continued
operations and otherwise, to the extent practicable, in the manner and to the
extent provided in Paragraph 10.1.

11.4 TEMPORARY TAKING. If a portion of the Leased Premises is temporarily taken
for a period of one year or less and such period does not extend beyond the
Lease Expiration Date, this Lease shall remain in effect. If any portion of the
Leased Premises is temporarily taken for a period which exceeds one year or
which extends beyond the Lease Expiration Date, then the rights of Landlord and
Tenant shall be determined in accordance with Paragraphs 11.1 and 11.2 above.

11.5 DIVISION OF CONDEMNATION AWARD. Any award made for any taking of the
Property, the Building, or the Leased Premises, or any portion thereof, shall
belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of
its right, title and interest in any such award; provided, however, that Tenant
shall be entitled to receive any portion of the award that is made specifically
(i) for the taking of personal property, inventory or trade

                                      16.
<PAGE>   18

fixtures belonging to Tenant, (ii) for the interruption of Tenant's business or
its moving costs, or (iii) for the value of any leasehold improvements installed
and paid for by Tenant. The rights of Landlord and Tenant regarding any
condemnation shall be determined as provided in this Article, and each party
hereby waives the provisions of Section 1265.130 of the California Code of Civil
Procedure, and the provisions of any similar law hereinafter enacted, allowing
either party to petition the Supreme Court to terminate this Lease and/or
otherwise allocate condemnation awards between Landlord and Tenant in the event
of a taking of the Leased Premises.

11.6 ABATEMENT OF RENT. In the event of a taking of the Leased Premises which
does not result in a termination of this Lease (other than a temporary taking),
then, as of the date possession is taken by the condemning authority, the Base
Monthly Rent shall be reduced in the same proportion that the area of that part
of the Leased Premises so taken (less any addition to the area of the Leased
Premises by reason of any reconstruction) bears to the area of the Leased
Premises immediately prior to such taking.

11.7 TAKING DEFINED. The term "taking" or "taken" as used in this Article 11
shall mean any transfer or conveyance of all or any portion of the Property to a
public or quasi-public agency or other entity having the power of eminent domain
pursuant to or as a result of the exercise of such power by such an agency,
including any inverse condemnation and/or any sale or transfer by Landlord of
all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power. Landlord and Tenant shall each give
the other prompt notice after receiving notice of a proposed taking.

                                   ARTICLE 12

                              DEFAULT AND REMEDIES

12.1 EVENTS OF TENANT'S DEFAULT. Tenant shall be in default of its obligations
under this Lease if any of the following events occur:

        (a) Tenant shall have failed to pay Base Monthly Rent or any Additional
Rent when due; or

        (b) Tenant shall have done or permitted to be done any act, use or thing
in its use, occupancy or possession of the Leased Premises or the Building or
the Outside Areas which is prohibited by the terms of this Lease; or

        (c) Tenant shall have failed to perform any term, covenant or condition
of this Lease (except those requiring the payment of Base Monthly Rent or
Additional Rent, which failures shall be governed by subparagraph (a) above)
within thirty (30) days after written notice from Landlord to Tenant specifying
the nature of such failure and requesting Tenant to perform same; or

        (d) Tenant shall have sublet the Leased Premises or assigned or
encumbered its interest in this Lease in violation of the provisions contained
in Article 7, whether voluntarily or by operation of law; or

        (e) Tenant shall have abandoned the Leased Premises; or

        (f) Tenant or any Guarantor of this Lease shall have permitted or
suffered the sequestration or attachment of, or execution on, or the appointment
of a custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such Guarantor) or any property or asset
essential to the conduct of Tenant's (or such Guarantor's) business, and Tenant
(or such Guarantor) shall have failed to obtain a return or release of the same
within thirty days thereafter, or prior to sale pursuant to such sequestration,
attachment or levy, whichever is earlier; or

        (g) Tenant or any Guarantor of this Lease shall have made a general
assignment of all or a substantial part of its assets for the benefit of its
creditors; or

        (h) Tenant or any Guarantor of this Lease shall have allowed (or sought)
to have entered against it a decree or order which: (i) grants or constitutes an
order for relief, appointment of a trustee, or condemnation or a reorganization
plan under the bankruptcy laws of the United States; (ii) approves as properly
filed a petition seeking liquidation or reorganization under said bankruptcy
laws or any other debtor's relief law or similar statute of the United States or
any state thereof; or (iii) otherwise directs the winding up or liquidation of
Tenant; provided, however, if any decree or order was entered without Tenant's
consent or over Tenant's objection, Landlord may not terminate this Lease
pursuant to this Subparagraph if such decree or order is rescinded or reversed
within thirty days after its original entry; or

        (i) Tenant or any Guarantor of this Lease shall have availed itself of
the protection of any debtor's relief law, moratorium law or other similar law
which does not require the prior entry of a decree or order.

12.2 LANDLORD'S REMEDIES. In the event of any default by Tenant, and without
limiting Landlord's right to indemnification as provided in Article 8.2,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by law or otherwise provided in this Lease, to which Landlord
may resort cumulatively, or in the alternative:

        (a) Landlord may, at Landlord's election, keep this Lease in effect and
enforce, by an action at law or in equity, all of its rights and remedies under
this Lease including, without limitation, (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required by Tenant, or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate
of interest not prohibited by law from the date the sum is paid by Landlord
until Landlord is reimbursed by

                                      17.
<PAGE>   19

Tenant, and (iii) the remedies of injunctive relief and specific performance to
prevent Tenant from violating the terms of this Lease and/or to compel Tenant to
perform its obligations under this Lease, as the case may be.

        (b) Landlord may, at Landlord's election, terminate this Lease by giving
Tenant written notice of termination, in which event this Lease shall terminate
on the date set forth for termination in such notice, in which event Tenant
shall immediately surrender the Leased Premises to Landlord, and if Tenant fails
to do so, Landlord may, without prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon and take possession of the
Leased Premises and expel or remove Tenant and any other person who may be
occupying the Leased Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor. Any termination under this
subparagraph shall not relieve Tenant from its obligation to pay to Landlord all
Base Monthly Rent and Additional Rent then or thereafter due, or any other sums
due or thereafter accruing to Landlord, or from any claim against Tenant for
damages previously accrued or then or thereafter accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate this Lease constitute a termination of this
Lease:

               (i) Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;

               (ii) Consent to any subletting of the Leased Premises or
assignment of this Lease by Tenant, whether pursuant to the provisions hereof or
otherwise; or

               (iii) Any action taken by Landlord or its partners, principals,
members, officers, agents, employees, or servants, which is intended to mitigate
the adverse effects of any breach of this Lease by Tenant, including, without
limitation, any action taken to maintain and preserve the Leased Premises on any
action taken to relet the Leased Premises or any portion thereof for the account
at Tenant and in the name of Tenant.

        (c) In the event Tenant breaches this Lease and abandons the Leased
Premises, Landlord may terminate this Lease, but this Lease shall not terminate
unless Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right and
remedies provided by California Civil Code Section 1951.4 ("lessor may continue
lease in effect 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"), as in effect on the Effective Date of this Lease.

        (d) In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to the rights and remedies provided in
California Civil Code Section 1951.2, as in effect on the Effective Date of this
Lease. For purposes of computing damages pursuant to Section 1951.2, an interest
rate equal to the maximum rate of interest then not prohibited by law shall be
used where permitted. Such damages shall include, without limitation:

               (i) The worth at the time of the award of the unpaid rent which
had been earned at the time of termination;

               (ii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided,
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; and

               (iii) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely to
result therefrom, including without limitation, the following: (i) expenses for
cleaning, repairing or restoring the Leased Premises, (ii) expenses for
altering, remodeling or otherwise improving the Leased Premises for the purpose
of reletting, including removal of existing leasehold improvements and/or
installation of additional leasehold improvements (regardless of how the same is
funded, including reduction of rent, a direct payment or allowance to a new
tenant, or otherwise), (iii) broker's fees allocable to the remainder of the
term of this Lease, advertising costs and other expenses of reletting the Leased
Premises; (iv) costs of carrying and maintaining the Leased Premises, such as
taxes, insurance premiums, utility charges and security precautions, (v)
expenses incurred in removing, disposing of and/or storing any of Tenant's
personal property, inventory or trade fixtures remaining therein; (vi)
reasonable attorney's fees, expert witness fees, court costs and other
reasonable expenses incurred by Landlord (but not limited to taxable costs) in
retaking possession of the Leased Premises, establishing damages hereunder, and
releasing the Leased Premises; and (vii) any other expenses, costs or damages
otherwise incurred or suffered as a result of Tenant's default.

12.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES. In the event Landlord fails to
perform its obligations under this Lease, Landlord shall nevertheless not be in
default under the terms of this Lease until such time as Tenant shall have first
given Landlord written notice specifying the nature of such failure to perform
its obligations, and then only after Landlord shall have had thirty (30) days
following its receipt of such notice within which to perform such obligations;
provided that, if longer than thirty (30) days is reasonably required in order
to perform such obligations, Landlord shall have such longer period. In the
event of Landlord's default as above set forth, then, and only then, Tenant may
then proceed in equity or at law to compel Landlord to perform its obligations
and/or to recover damages proximately caused by such failure to perform (except
as and to the extent Tenant has waived its right to damages as provided in this
Lease).

12.4 LIMITATION OF TENANT'S RECOURSE. If Landlord is a corporation, trust,
partnership, joint venture, limited liability company, unincorporated
association, or other form of business entity, Tenant agrees that (i) the
obligations of Landlord under this Lease shall not constitute personal
obligations of the officers, directors, trustees, partners,

                                      18.
<PAGE>   20

joint venturers, members, owners, stockholders, or other principals of such
business entity, and (ii) Tenant shall have recourse only to the property of
such corporation, trust, partnership, joint venture, limited liability company,
unincorporated association, or other form of business entity for the
satisfaction of such obligations and not against the assets of such officers,
directors, trustees, partners, joint venturers, members, owners, stockholders or
principals. Additionally, if Landlord is a partnership or limited liability
company, then Tenant covenants and agrees:

        (a) No partner or member of Landlord shall be sued or named as a party
in any suit or action brought by Tenant with respect to any alleged breach of
this Lease (except to the extent necessary to secure jurisdiction over the
partnership and then only for that sole purpose);

        (b) No service of process shall be made against any partner or member of
Landlord except for the sole purpose of securing jurisdiction over the
partnership; and

        (c) No writ of execution will ever be levied against the assets of any
partner or member of Landlord other than to the extent of his or her interest in
the assets of the partnership or limited liability company constituting
Landlord.

Tenant further agrees that each of the foregoing covenants and agreements shall
be enforceable by Landlord and by any partner or member of Landlord and shall be
applicable to any actual or alleged misrepresentation or nondisclosure made
regarding this Lease or the Leased Premises or any actual or alleged failure,
default or breach of any covenant or agreement either expressly or implicitly
contained in this Lease or imposed by statute or at common law.

12.5 TENANT'S WAIVER. Landlord and Tenant agree that the provisions of Paragraph
12.3 above are intended to supersede and replace the provisions of California
Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant hereby
waives the provisions of California Civil Code Sections 1932(1), 1941 and 1942
and/or any similar or successor law regarding Tenant's right to terminate this
Lease or to make repairs and deduct the expenses of such repairs from the rent
due under this Lease.

                                   ARTICLE 13

                               GENERAL PROVISIONS

13.1 TAXES ON TENANT'S PROPERTY. Tenant shall pay before delinquency any and all
taxes, assessments, license fees, use fees, permit fees and public charges of
whatever nature or description levied, assessed or imposed against Tenant or
Landlord by a governmental agency arising out of, caused by reason of or based
upon Tenant's estate in this Lease, Tenant's ownership of property, improvements
made by Tenant to the Leased Premises or the Outside Areas, improvements made by
Landlord for Tenant's use within the Leased Premises or the Outside Areas,
Tenant's use (or estimated use) of public facilities or services or Tenant's
consumption (or estimated consumption) of public utilities, energy, water or
other resources (collectively, "Tenant's Interest"). Upon demand by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of these payments.
Tenant may elect to protest such taxes provided that Tenant first notifies
Landlord in writing and posts a bond equal to 100% of the maximum amount of such
taxes plus penalties and interest. If any such taxes, assessments, fees or
public charges are levied against Landlord, Landlord's property, the Building or
the Property, or if the assessed value of the Building or the Property is
increased by the inclusion therein of a value placed upon Tenant's Interest,
regardless of the validity thereof, Landlord shall have the right to require
Tenant to pay such taxes, and if not paid and satisfactory evidence of payment
delivered to Landlord at least ten days prior to delinquency, then Landlord
shall have the right to pay such taxes on Tenant's behalf and to invoice Tenant
for the same. Tenant shall, within the earlier to occur of (a) thirty (30) days
of the date it receives an invoice from Landlord setting forth the amount of
such taxes, assessments, fees, or public charge so levied, or (b) the due date
of such invoice, pay to Landlord, as Additional Rent, the amount set forth in
such invoice. Failure by Tenant to pay the amount so invoiced within such time
period shall be conclusively deemed a default by Tenant under this Lease. Tenant
shall have the right to bring suit in any court of competent jurisdiction to
recover from the taxing authority the amount of any such taxes, assessments,
fees or public charges so paid.

13.2 HOLDING OVER. This Lease shall terminate without further notice on the
Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant
after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Paragraph. Any such holding over to which
Landlord has consented shall be construed to be a tenancy from month to month,
on the same terms and conditions herein specified insofar as applicable, except
that the Base Monthly Rent shall be increased to an amount equal to one hundred
fifty percent (150%) of the Base Monthly Rent payable during the last full month
immediately preceding such holding over. Tenant acknowledges that if Tenant
holds over without Landlord's consent, such holding over may compromise or
otherwise affect Landlord's ability to enter into new leases with prospective
tenants regarding the Leased Premises. Therefore, if Tenant fails to surrender
the Leased Premises upon the expiration or termination of this Lease, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
protect, defend, indemnify and hold Landlord harmless from and against all
claims resulting from such failure, including, without limiting the foregoing,
any claims made by any succeeding tenant founded upon such failure to surrender,
and any losses suffered by Landlord, including lost profits, resulting from such
failure to surrender.

13.3 SUBORDINATION TO MORTGAGES. This Lease is subject to and subordinate to all
ground leases, mortgages and deeds of trust which affect the Building or the
Property and which are of public record as of the Effective Date of this Lease,
and to all renewals, modifications, consolidations, replacements and extensions
thereof. However, if the lessor under any such ground lease or any lender
holding any such mortgage or deed of trust shall advise Landlord that it desires
or requires this Lease to be made prior and superior thereto, then, upon written
request of Landlord to

                                      19.
<PAGE>   21

Tenant, Tenant shall promptly execute, acknowledge and deliver any and all
customary or reasonable documents or instruments which Landlord and such lessor
or lender deems necessary or desirable to make this Lease prior thereto. Tenant
hereby consents to Landlord's ground leasing the land underlying the Building or
the Property and/or encumbering the Building or the Property as security for
future loans on such terms as Landlord shall desire, all of which future ground
leases, mortgages or deeds of trust shall be subject to and subordinate to this
Lease. However, if any lessor under any such future ground lease or any lender
holding such future mortgage or deed of trust shall desire or require that this
Lease be made subject to and subordinate to such future ground lease, mortgage
or deed of trust, then Tenant agrees, within ten days after Landlord's written
request therefor, to execute, acknowledge and deliver to Landlord any and all
documents or instruments requested by Landlord or by such lessor or lender as
may be necessary or proper to assure the subordination of this Lease to such
future ground lease, mortgage or deed of trust, but only if such lessor or
lender agrees to recognize Tenant's rights under this Lease and agrees not to
disturb Tenant's quiet possession of the Leased Premises so long as Tenant is
not in default under this Lease. If Landlord assigns the Lease as security for a
loan, Tenant agrees to execute such documents as are reasonably requested by the
lender and to provide reasonable provisions in the Lease protecting such
lender's security interest which are customarily required by institutional
lenders making loans secured by a deed of trust. Landlord agrees to use
commercially reasonable efforts to obtain a subordination, non-disturbance
agreement and attornment agreement from the existing lender holding a deed of
trust on the Property.

13.4 TENANT'S ATTORNMENT UPON FORECLOSURE. Tenant shall, upon request, attorn
(i) to any purchaser of the Building or the Property at any foreclosure sale or
private sale conducted pursuant to any security instruments encumbering the
Building or the Property, (ii) to any grantee or transferee designated in any
deed given in lieu of foreclosure of any security interest encumbering the
Building or the Property, or (iii) to the lessor under an underlying ground
lease of the land underlying the Building or the Property, should such ground
lease be terminated; provided that such purchaser, grantee or lessor recognizes
Tenant's rights under this Lease.

13.5 MORTGAGEE PROTECTION. In the event of any default on the part of Landlord,
Tenant will give notice by registered mail to any Lender or lessor under any
underlying ground lease who shall have requested, in writing, to Tenant that it
be provided with such notice, and Tenant shall offer such Lender or lessor a
reasonable opportunity to cure the default, including time to obtain possession
of the Leased Premises by power of sale or judicial foreclosure or other
appropriate legal proceedings if reasonably necessary to effect a cure.

13.6 ESTOPPEL CERTIFICATE. Tenant will, following any request by Landlord,
promptly execute and deliver to Landlord an estoppel certificate substantially
in form attached as Exhibit E, and certifying such other information about this
Lease, if true, as may be reasonably requested by Landlord, its Lender or
prospective lenders, investors or purchasers of the Building or the Property.
Tenant's failure to execute and deliver such estoppel certificate within ten
(10) days after Landlord's request therefor shall be a material default by
Tenant under this Lease, and Landlord shall have all of the rights and remedies
available to Landlord as Landlord would otherwise have in the case of any other
material default by Tenant, including the right to terminate this Lease and sue
for damages proximately caused thereby, it being agreed and understood by Tenant
that Tenant's failure to so deliver such estoppel certificate in a timely manner
could result in Landlord being unable to perform committed obligations to other
third parties which were made by Landlord in reliance upon this covenant of
Tenant. Landlord and Tenant intend that any statement delivered pursuant to this
paragraph may be relied upon by any Lender or purchaser or prospective Lender or
purchaser of the Building, the Property, or any interest in them.

13.7 TENANT'S FINANCIAL INFORMATION. Tenant shall, within ten business days
after Landlord's request therefor, deliver to Landlord a copy of Tenant's (and
any guarantor's) current financial statements (including a balance sheet, income
statement and statement of cash flow, all prepared in accordance with generally
accepted accounting principles) and any such other information reasonably
requested by Landlord regarding Tenant's financial condition. Landlord shall be
entitled to disclose such financial statements or other information to its
Lender, to any present or prospective principal of or investor in Landlord, or
to any prospective Lender or purchaser of the Building, the Property, or any
portion thereof or interest therein. Any such financial statement or other
information which is marked "confidential" or "company secrets" (or is otherwise
similarly marked by Tenant) shall be confidential and shall not be disclosed by
Landlord to any third party except as specifically provided in this paragraph,
unless the same becomes a part of the public domain without the fault of
Landlord.

13.8 TRANSFER BY LANDLORD. Landlord and its successors in interest shall have
the right to transfer their interest in the Building, the Property, or any
portion thereof at any time and to any person or entity. In the event of any
such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the date of such transfer, (i) shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer and (ii) shall be relieved of
all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to
assume and perform all such prior obligations of the Landlord hereunder. Tenant
shall attorn to any such transferee. After the date of any such transfer, the
term "Landlord" as used herein shall mean the transferee of such interest in the
Building or the Property.

13.9 FORCE MAJEURE. The obligations of each of the parties under this Lease
(other than the obligations to pay money) shall be temporarily excused if such
party is prevented or delayed in performing such obligations by reason of any
strikes, lockouts or labor disputes; government restrictions, regulations,
controls, action or inaction; civil commotion; or extraordinary weather, fire or
other acts of God.

13.10 NOTICES. Any notice required or permitted to be given under this Lease
shall be in writing and (i) personally delivered, (ii) sent by United States
mail, registered or certified mail, postage prepaid, return receipt requested,
(iii) sent by Federal Express or similar nationally recognized overnight courier
service, or (iv) transmitted by facsimile with a hard copy sent within one (1)
business day by any of the foregoing means, and in all cases

                                      20.
<PAGE>   22

addressed as follows, and such notice shall be deemed to have been given upon
the date of actual receipt or delivery (or refusal to accept delivery) at the
address specified below (or such other addresses as may be specified by notice
in the foregoing manner) as indicated on the return receipt or air bill:

        IF TO LANDLORD:      Corporate Technology Centre Associates
                             c/o Menlo Equities LLC
                             525 University Avenue
                             Suite 100
                             Palo Alto, California  94301
                             Attention:  Henry Bullock/Richard Holmstrom
                             Facsimile:  (650) 326-9300

        with a copy to:      Cooley Godward LLP
                             One Maritime Plaza
                             20th Floor
                             San Francisco, California  94111
                             Attention:  Paul Churchill
                             Facsimile:  (415) 951-3699

        IF TO TENANT:        Redback Networks Inc.
                             1389 Moffett Park Drive
                             Sunnyvale, California 94089
                             Attention:  Pat Ryan

        with a copy to:      Hallgrimson McNichols LLP
                             40 S. Market Street, Suite 700
                             San Jose, California  95113
                             Attention:  Eric Wong

Any notice given in accordance with the foregoing shall be deemed received upon
actual receipt or refusal to accept delivery.

13.11 ATTORNEYS' FEES. In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys' fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party.

13.12 DEFINITIONS. Any term that is given a special meaning by any provision in
this Lease shall, unless otherwise specifically stated, have such meaning
wherever used in this Lease or in any Addenda or amendment hereto. In addition
to the terms defined in Article 1, the following terms shall have the following
meanings:

        (a) REAL PROPERTY TAXES. The term "Real Property Tax" or "Real Property
Taxes" shall each mean Tenant's Expense Share of (i) all taxes, assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all instruments of principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessments caused by any change in ownership or
new construction), now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed for whatever
reason against the Property or any portion thereof, or Landlord's interest
herein, or the fixtures, equipment and other property of Landlord that is an
integral part of the Property and located thereon, or Landlord's business of
owning, leasing or managing the Property or the gross receipts, income or
rentals from the Property, (ii) all charges, levies or fees imposed by any
governmental authority against Landlord by reason of or based upon the use of or
number of parking spaces within the Property, the amount of public services or
public utilities used or consumed (e.g. water, gas, electricity, sewage or waste
water disposal) at the Property, the number of person employed by tenants of the
Property, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Property, or the type of use or uses conducted
within the Property, and all costs and fees (including attorneys' fees)
reasonably incurred by Landlord in contesting any Real Property Tax and in
negotiating with public authorities as to any Real Property Tax. If, at any time
during the Lease Term, the taxation or assessment of the Property prevailing as
of the Effective Date of this Lease shall be altered so that in lieu of or in
addition to any the Real Property Tax described above there shall be levied,
awarded or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate,
substitute, or additional use or charge (i) on the value, size, use or occupancy
of the Property or Landlord's interest therein or (ii) on or measured by the
gross receipts, income or rentals from the Property, or on Landlord's business
of owning, leasing or managing the Property or (iii) computed in any manner with
respect to the operation of the Property, then any such tax or charge, however
designated, shall be included within the meaning of the terms "Real Property
Tax" or "Real Property Taxes" for purposes of this Lease. If any Real Property
Tax is partly based upon property or rents unrelated to the Property, then only
that part of such Real Property Tax that is fairly allocable to the Property
shall be included within the meaning of the terms "Real Property Tax" or "Real
Property Taxes." Notwithstanding the foregoing, the terms "Real Property Tax" or
"Real Property Taxes" shall not include estate, inheritance, transfer, gift or
franchise taxes of Landlord or the federal or state income tax imposed on
Landlord's income from all sources.

                                      21.
<PAGE>   23

        (b) LANDLORD'S INSURANCE COSTS. The term "Landlord's Insurance Costs"
shall mean Tenant's Expense Share of the costs to Landlord to carry and maintain
the policies of fire and property damage insurance for the Building and the
Property and general liability and any other insurance required or permitted to
be carried by Landlord pursuant to Article 9, together with any deductible
amounts paid by Landlord upon the occurrence of any insured casualty or loss. If
any of Landlord's Insurance Costs are partly based upon property unrelated to
the Property (e.g., another portion of the Project), then only that part of
Landlord's Insurance Costs that is fairly allocable to the Property shall be
included in Landlord's Insurance Costs hereunder.

        (c) PROPERTY MAINTENANCE COSTS. The term "Property Maintenance Costs"
shall mean Tenant's Expense Share of all costs and expenses (except Landlord's
Insurance Costs and Real Property Taxes) paid or incurred by Landlord in
protecting, operating, maintaining, repairing and preserving the Property and
all parts thereof, including without limitation, (i) market rate professional
management fees of two percent (2%) of all base rent collected from tenants of
the Property, (ii) the amortizing portion of any costs incurred by Landlord in
the making of any modifications, alterations or improvements required by any
governmental authority as set forth in Article 6, which are so amortized during
the Lease Term, and (iii) such other costs as may be paid or incurred with
respect to operating, maintaining, and preserving the Property, including, but
limited to, repairing or replacing, when necessary, electrical, plumbing,
heating, ventilating and air conditioning systems serving the Building, and
repairing and resurfacing paved areas. "Property Maintenance Costs" shall not
include the costs of repairing and/or replacing the foundation, the roof
structure and the load-bearing and exterior walls of the Building. If any of the
Property Maintenance Costs are partly based upon property unrelated to the
Property (e.g., another portion of the Project), then only that part of Property
Maintenance Costs that is fairly allocable to the Property shall be included in
the definition of Property Maintenance Costs hereunder.

        (d) PROPERTY OPERATING EXPENSES. The term "Property Operating Expenses"
shall mean and include all Real Property Taxes, plus all Landlord's Insurance
Costs, plus all Property Maintenance Costs.

        (e) LAW. The term "Law" shall mean any judicial decisions and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirements of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them, in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).

        (f) LENDER. The term "Lender" shall mean the holder of any promissory
note or other evidence of indebtedness secured by the Property or any portion
thereof.

        (g) PRIVATE RESTRICTIONS. The term "Private Restrictions" shall mean (as
they may exist from time to time) any and all covenants, conditions and
restrictions, private agreements, easements, and any other recorded documents or
instruments affecting the use of the Property, the Building, the Leased
Premises, or the Outside Areas.

        (h) RENT. The term "Rent" shall mean collectively Base Monthly Rent and
all Additional Rent.

13.13 GENERAL WAIVERS. One party's consent to or approval of any act by the
other party requiring the first party's consent or approval shall not be deemed
to waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. No waiver of any provision hereof, or
any waiver of any breach of any provision hereof, shall be effective unless in
writing and signed by the waiving party. The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach. No waiver of any provision of
this Lease shall be deemed a continuing waiver unless such waiver specifically
states so in writing and is signed by both Landlord and Tenant. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by either party of any breach of any provision of this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other provisions herein contained.

13.14 MISCELLANEOUS. Should any provisions of this Lease prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provisions hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term "party"
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State in which the Leased Premises are located.
The captions in this Lease are for convenience only and shall not be construed
in the construction or interpretation of any provision hereof. When the context
of this Lease requires, the neuter gender includes the masculine, the feminine,
a partnership, corporation, limited liability company, joint venture, or other
form of business entity, and the singular includes the plural. The terms "must,"
"shall," "will," and "agree" are mandatory. The term "may" is permissive. When a
party is required to do something by this Lease, it shall do so at its sole cost
and expense without right of reimbursement from the other party unless specific
provision is made therefor. Where Landlord's consent is required hereunder, the
consent of any Lender shall also be required. Landlord and Tenant shall both be
deemed to have drafted this Lease, and the rule of construction that a document
is to be construed against the drafting party shall not be employed in the
construction or interpretation of this Lease. Where Tenant is obligated not to
perform any act or is not permitted to perform any act, Tenant is also obligated
to restrain any others reasonably within its control, including agents,
invitees, contractors, subcontractors and employees, from performing such act.
Landlord

                                      22.
<PAGE>   24

shall not become or be deemed a partner or a joint venturer with Tenant by
reason of any of the provisions of this Lease.

                                   ARTICLE 14

                               CORPORATE AUTHORITY
                          BROKERS AND ENTIRE AGREEMENT

14.1 CORPORATE AUTHORITY. If Tenant is a corporation, each individual executing
this Lease on behalf of such corporation represents and warrants that Tenant is
validly formed and duly authorized and existing, that Tenant is qualified to do
business in the State in which the Leased Premises are located, that Tenant has
the full right and legal authority to enter into this Lease, and that he or she
is duly authorized to execute and deliver this Lease on behalf of Tenant in
accordance with its terms. Tenant shall, within thirty days after execution of
this Lease, deliver to Landlord a certified copy of the resolution of its board
of directors authorizing or ratifying the execution of this Lease or other
evidence of due authorization and if Tenant fails to do so, Landlord at its sole
election may elect to terminate this Lease.

14.2 BROKERAGE COMMISSIONS. Tenant and Landlord each represent, warrant and
agree that they have not had any dealings with any real estate broker(s),
leasing agent(s), finder(s) or salesmen, other than the Brokers (as named in
Article 1) with respect to the lease by it of the Leased Premises pursuant to
this Lease, and that Landlord will assume all obligations with respect to
Landlord's Broker and Tenant's Broker and any other broker retained by Landlord.
Tenant will assume all obligations and responsibility with respect to the
payment of any broker other than Tenant's Broker that Tenant retained. Each of
Landlord and Tenant will indemnify, defend with competent counsel, and hold the
other harmless from any liability for the payment of any real estate brokerage
commissions, leasing commissions or finder's fees claimed by any other real
estate broker(s), leasing agent(s), finder(s), or salesmen due to the other
party's breach of the representations, warranties and covenants made by such
party in this Section 14.2.

14.3 ENTIRE AGREEMENT. This Lease and the Exhibits (as described in Article 1),
which Exhibits are by this reference incorporated herein, constitute the entire
agreement between the parties, and there are no other agreements, understandings
or representations between the parties relating to the lease by Landlord of the
Leased Premises to Tenant, except as expressed herein. No subsequent changes,
modifications or additions to this Lease shall be binding upon the parties
unless in writing and signed by both Landlord and Tenant.

14.4 LANDLORD'S REPRESENTATIONS. Tenant acknowledges that neither Landlord nor
any of its agents made any representations or warranties respecting the
Property, the Building or the Leased Premises, upon which Tenant relied in
entering into the Lease, which are not expressly set forth in this Lease. Tenant
further acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for Tenant's
intended use under existing Law, or (ii) the suitability of the Leased Premises
for the conduct of Tenant's business, or (iii) the exact square footage of the
Leased Premises, and that Tenant relies solely upon its own investigations with
respect to such matters. Tenant expressly waives any and all claims for damage
by reason of any statement, representation, warranty, promise or other agreement
of Landlord or Landlord's agent(s), if any, not contained in this Lease or in
any Exhibit attached hereto.

                                   ARTICLE 15

                                OPTIONS TO EXTEND

15.1 So long as Redback Networks, Inc. is the Tenant hereunder and occupies the
entirety of the Leased Premises, and subject to the condition set forth in
clause (b) below, Tenant shall have two options to extend the term of this Lease
with respect to the entirety of the Leased Premises, the first for a period of
five (5) years from the expiration of the ninth year of the Lease Term (the
"First Extension Period"), and the second (the "Second Extension Period") for a
period of five (5) years from the expiration of the First Extension Period,
subject to the following conditions:

        (a) Each option to extend shall be exercised, if at all, by notice of
exercise given to Landlord by Tenant not more than twelve (12) months nor less
than nine (9) months prior to the expiration of the ninth year of the Lease Term
or the expiration of the First Extension Period, as applicable;

        (b) Anything herein to the contrary notwithstanding, if Tenant is in
default under any of the terms, covenants or conditions of this Lease, either at
the time Tenant exercises either extension option or on the commencement date of
the First Extension Period or the Second Extension Period, as applicable,
Landlord shall have, in addition to all of Landlord's other rights and remedies
provided in this Lease, the right to terminate such option(s) to extend upon
notice to Tenant.

15.2 In the event the applicable option is exercised in a timely fashion, the
Lease shall be extended for the term of the applicable extension period upon all
of the terms and conditions of this Lease, provided that the Base Monthly Rent
for each extension period shall be ninety-five percent (95%) of the "Fair Market
Rent" for the Leased Premises, increased as set forth below. For purposes
hereof, "Fair Market Rent" shall mean the Base Monthly Rent determined pursuant
to the process described below. In no event, however, shall any adjustment of
Base Monthly Rent pursuant to this paragraph result in a decrease of the Base
Monthly Rent for the Leased Premises below the amount due from Tenant for the
preceding portion of the initial Lease Term (or the First Extension Period, if
such Base Monthly Rent is being determined for the Second Extension Period) for
which Base Monthly Rent had been fixed.

                                      23.
<PAGE>   25

15.3 Within thirty (30) days after receipt of Tenant's notice of exercise,
Landlord shall notify Tenant in writing of Landlord's estimate of the Base
Monthly Rent for the first year of the applicable extension period, and
Landlord's estimate of annual increases. For purposes hereof, "Fair Market Rent"
shall mean collectively, (1) Base Monthly Rent for the first year of the
applicable extension period and (2) annual increases, if any, determined at the
time and in the same manner Base Monthly Rent for the first year is determined.
Within 30 days after receipt of such notice from Landlord, Tenant shall have the
right either to (i) accept Landlord's estimate of Fair Market Rent or (ii) elect
to arbitrate Landlord's estimate of Fair Market Rent, such arbitration to be
conducted pursuant to the provisions hereof. Failure on the part of Tenant to
require arbitration of Fair Market Rent within such 30-day period shall
constitute acceptance of the Fair Market Rent for the applicable extension
period as calculated by Landlord. If Tenant elects arbitration, the arbitration
shall be concluded within 90 days after the date of Tenant's election, subject
to extension for an additional 30-day period if a third arbitrator is required
and does not act in a timely manner. To the extent that arbitration has not been
completed prior to the expiration of any preceding period for which Base Monthly
Rent has been determined, Tenant shall pay Base Monthly Rent at the rate
calculated by Landlord, with the potential for an adjustment to be made once
Fair Market Rent is ultimately determined by arbitration.

15.4 In the event of arbitration, the judgment or the award rendered in any such
arbitration may be entered in any court having jurisdiction and shall be final
and binding between the parties. The arbitration shall be conducted and
determined in the City and County of San Francisco in accordance with the then
prevailing rules of the American Arbitration Association or its successor for
arbitration of commercial disputes except to the extent that the procedures
mandated by such rules shall be modified as follows:

        (a) Tenant shall make demand for arbitration in writing within thirty
(30) days after service of Landlord's determination of Fair Market Rent given
under Paragraph 15.3 above, specifying therein the name and address of the
person to act as the arbitrator on its behalf. The arbitrator shall be qualified
as a real estate appraiser familiar with the Fair Market Rent of similar
industrial, research and development, or office space in the Silicon Valley area
who would qualify as an expert witness over objection to give opinion testimony
addressed to the issue in a court of competent jurisdiction. Failure on the part
of Tenant to make a proper demand in a timely manner for such arbitration shall
constitute a waiver of the right thereto. Within fifteen (15) days after the
service of the demand for arbitration, Landlord shall give notice to Tenant,
specifying the name and address of the person designated by Landlord to act as
arbitrator on its behalf who shall be similarly qualified. If Landlord fails to
notify Tenant of the appointment of its arbitrator, within or by the time above
specified, then the arbitrator appointed by Tenant shall be the arbitrator to
determine the issue.

        (b) In the event that two arbitrators are chosen pursuant to Paragraph
15.4(a) above, the arbitrators so chosen shall, within fifteen (15) days after
the second arbitrator is appointed determine the Fair Market Rent. If the two
arbitrators shall be unable to agree upon a determination of Fair Market Rent
within such 15-day period, they, themselves, shall appoint a third arbitrator,
who shall be a competent and impartial person with qualifications similar to
those required of the first two arbitrators pursuant to Paragraph 15.4(a). In
the event they are unable to agree upon such appointment within seven days after
expiration of such 15-day period, the third arbitrator shall be selected by the
parties themselves, if they can agree thereon, within a further period of
fifteen (15) days. If the parties do not so agree, then either party, on behalf
of both, may request appointment of such a qualified person by the then Chief
Judge of the United States District Court having jurisdiction over the County of
Santa Clara, acting in his private and not in his official capacity, and the
other party shall not raise any question as to such Judge's full power and
jurisdiction to entertain the application for and make the appointment. The
three arbitrators shall decide the dispute if it has not previously been
resolved by following the procedure set forth below.

        (c) Where an issue cannot be resolved by agreement between the two
arbitrators selected by Landlord and Tenant or settlement between the parties
during the course of arbitration, the issue shall be resolved by the three
arbitrators within 15 days of the appointment of the third arbitrator in
accordance with the following procedure. The arbitrator selected by each of the
parties shall state in writing his determination of the Fair Market Rent
supported by the reasons therefor with counterpart copies to each party. The
arbitrators shall arrange for a simultaneous exchange of such proposed
resolutions. The role of the third arbitrator shall be to select which of the
two proposed resolutions most closely approximates his determination of Fair
Market Rent. The third arbitrator shall have no right to propose a middle ground
or any modification of either of the two proposed resolutions. The resolution he
chooses as most closely approximating his determination shall constitute the
decision of the arbitrators and be final and binding upon the parties.

        (d) In the event of a failure, refusal or inability of any arbitrator to
act, his successor shall be appointed by him, but in the case of the third
arbitrator, his successor shall be appointed in the same manner as provided for
appointment of the third arbitrator. The arbitrators shall decide the issue
within fifteen (15) days after the appointment of the third arbitrator. Any
decision in which the arbitrator appointed by Landlord and the arbitrator
appointed by Tenant concur shall be binding and conclusive upon the parties.
Each party shall pay the fee and expenses of its respective arbitrator and both
shall share the fee and expenses of the third arbitrator, if any, and the
attorneys' fees and expenses of counsel for the respective parties and of
witnesses shall be paid by the respective party engaging such counsel or calling
such witnesses.

        (e) The arbitrators shall have the right to consult experts and
competent authorities to obtain factual information or evidence pertaining to a
determination of Fair Market Rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine. The
arbitrators shall render their decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease.

                                      24.
<PAGE>   26

                                   ARTICLE 16

                                TELEPHONE SERVICE

        Notwithstanding any other provision of this Lease to the contrary:

        (a) So long as the entirety of the Leased Premises is leased to Tenant:

               (i) Landlord shall have no responsibility for providing to Tenant
any telephone equipment, including wiring, within the Leased Premises or for
providing telephone service or connections from the utility to the Leased
Premises; and

               (ii) Landlord makes no warranty as to the quality, continuity or
availability of the telecommunications services in the Building, and Tenant
hereby waives any claim against Landlord for any actual or consequential damages
(including damages for loss of business) in the event Tenant's
telecommunications services in any way are interrupted, damaged or rendered less
effective, except to the extent caused by the grossly negligent or willful act
or omission by Landlord, its agents or employees. Landlord shall not be liable
to Tenant and Tenant waives all claims against Landlord whatsoever, whether for
personal injury, property damage, loss of use of the Leased Premises, or
otherwise, due to the interruption or failure of telephone services to the
Leased Premises. Tenant hereby holds Landlord harmless and agrees to indemnify,
protect and defend Landlord from and against any liability for any damage, loss
or expense due to any failure or interruption of telephone service to the Leased
Premises for any reason.

        (b) At such time as the entirety of the Building is no longer leased to
Tenant, Landlord shall in its sole discretion have the right, by written notice
to Tenant, to elect to assume limited responsibility for INC, as provided below,
and upon such assumption of responsibility by Landlord, this subparagraph (b)
shall apply prospectively.

               (i) Landlord shall provide Tenant access to such quantity of
pairs in the Building intra-building network cable ("INC") as is determined to
be available by Landlord in its reasonable discretion. Tenant's access to the
INC shall be solely by arrangements made by Tenant, as Tenant may elect,
directly with Pacific Bell or Landlord (or such vendor as Landlord may
designate), and Tenant shall pay all reasonable charges as may be imposed in
connection therewith. Pacific Bell's charges shall be deemed to be reasonable.
Subject to the foregoing, Landlord shall have no responsibility for providing to
Tenant any telephone equipment, including wiring, within the Leased Premises or
for providing telephone service or connections from the utility to the Leased
Premises, except as required by law.

               (ii) Tenant shall not alter, modify, add to or disturb any
telephone wiring in the Leased Premises or elsewhere in the Building without the
Landlord's prior written consent. Tenant shall be liable to Landlord for any
damage to the telephone wiring in the Building due to the act, negligent or
otherwise, of Tenant or any employee, contractor or other agent of Tenant.
Tenant shall have no access to the telephone closets within the Building, except
in the manner and under procedures established by Landlord. Tenant shall
promptly notify Landlord of any actual or suspected failure of telephone service
to the Leased Premises.

               (iii) All costs incurred by Landlord for the installation,
maintenance, repair and replacement of telephone wiring in the Building shall be
a Property Maintenance Cost.

               (iv) Landlord makes no warranty as to the quality, continuity or
availability of the telecommunications services in the Building, and Tenant
hereby waives any claim against Landlord for any actual or consequential damages
(including damages for loss of business) in the event Tenant's
telecommunications services in any way are interrupted, damaged or rendered less
effective, except to the extent caused by the grossly negligent or willful act
or omission by Landlord, its agents or employees. Tenant acknowledges that
Landlord meets its duty of care to Tenant with respect to the Building INC by
contracting with a reliable third party vendor to assume responsibility for the
maintenance and repair thereof (which contract shall contain provisions
requiring such vendor to inspect the INC periodically (the frequency of such
inspections to be determined by such vendor based on its experience and
professional judgment), and requiring such vendor to meet local and federal
requirements for telecommunications material and workmanship). Subject to the
foregoing, Landlord shall not be liable to Tenant and Tenant waives all claims
against Landlord whatsoever, whether for personal injury, property damage, loss
of use of the Leased Premises, or otherwise, due to the interruption or failure
of telephone services to the Leased Premises. Tenant hereby holds Landlord
harmless and agrees to indemnify, protect and defend Landlord from and against
any liability for any damage, loss or expense due to any failure or interruption
of telephone service to the Leased Premises for any reason.

                                      25.
<PAGE>   27

        IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the respective dates below set forth with the intent to be legally bound thereby
as of the Effective Date of this Lease first above set forth.

                                    LANDLORD:

                                    CORPORATE TECHNOLOGY CENTRE ASSOCIATES LLC,
                                    a California limited liability company

                                    By: Corporate Technology Centre Partners LLC
                                        a California limited liability company
                                        Its Manager

                                        By: Menlo Equities LLC
                                            a California limited liability
                                            company
                                            Its Managing Member

                                            By:  Menlo Equities, Inc.
                                                 Its Managing Member

Dated: October 27, 1999                         By: /s/ Henry D. Bullock
      ---------------------                         ----------------------------
                                                    Henry D. Bullock
                                                    President

                                    TENANT:

                                    REDBACK NETWORKS, INC.,
                                    a Delaware corporation

Dated: October 27, 1999             By: /s/ Craig M. Gentner
      ---------------------            -----------------------------------------
                                    Title:
                                          --------------------------------------

Dated:                              By:
      ---------------------            -----------------------------------------
                                    Title:
                                          --------------------------------------

                                      26.
<PAGE>   28

<TABLE>
<S>            <C>                                                         <C>
ARTICLE 1         REFERENCE...................................................1

        1.1    References.....................................................1

ARTICLE 2         LEASED PREMISES, TERM AND POSSESSION........................2

        2.1    Demise Of Leased Premises......................................2

        2.2    Right To Use Outside Areas.....................................2

        2.3    Lease Commencement Date And Lease Term.........................3

        2.4    Delivery Of Possession.........................................3

        2.5    Performance Of Improvement Work; Acceptance Of Possession......3

        2.6    Surrender Of Possession........................................3

ARTICLE 3         RENT, LATE CHARGES AND SECURITY DEPOSITS....................3

        3.1    Base Monthly Rent..............................................3

        3.2    Additional Rent................................................3

        3.3    Year-End Adjustments...........................................4

        3.4    Late Charge, And Interest On Rent In Default...................4

        3.5    Payment Of Rent................................................4

        3.6    Prepaid Rent...................................................4

        3.7    Security Deposit...............................................5

ARTICLE 4         USE OF LEASED PREMISES AND OUTSIDE AREA.....................5

        4.1    Permitted Use..................................................5

        4.2    General Limitations On Use.....................................5

        4.3    Noise And Emissions............................................6

        4.4    Trash Disposal.................................................6

        4.5    Parking........................................................6

        4.6    Signs..........................................................6

        4.7    Compliance With Laws And Private Restrictions..................6

        4.8    Compliance With Insurance Requirements.........................6

        4.9    Landlord's Right To Enter......................................6

        4.10   Use Of Outside Areas...........................................7

        4.11   Environmental Protection.......................................7

        4.12   Rules And Regulations..........................................8

        4.13   Reservations...................................................8

        4.14   Roof...........................................................8

ARTICLE 5         REPAIRS, MAINTENANCE, SERVICES AND UTILITIES................8

        5.1    Repair And Maintenance.........................................8

               (a)    Tenant's Obligations....................................8

               (b)    Landlord's Obligation...................................9

        5.2    Utilities......................................................9

        5.3    Security.......................................................9

        5.4    Energy And Resource Consumption................................9

        5.5    Limitation Of Landlord's Liability.............................9

ARTICLE 6         ALTERATIONS AND IMPROVEMENTS................................9
</TABLE>

                                       i.
<PAGE>   29

<TABLE>
<S>            <C>                                                         <C>
        6.1    By Tenant......................................................9

        6.2    Ownership Of Improvements.....................................10

        6.3    Alterations Required By Law...................................10

        6.4    Liens.........................................................10

ARTICLE 7         ASSIGNMENT AND SUBLETTING BY TENANT........................10

        7.1    By Tenant.....................................................10

        7.2    Merger, Reorganization, or Sale of Assets.....................11

        7.3    Landlord's Election...........................................11

        7.4    Conditions To Landlord's Consent..............................12

        7.5    Assignment Consideration And Excess Rentals Defined...........12

        7.6    Payments......................................................13

        7.7    Good Faith....................................................13

        7.8    Effect Of Landlord's Consent..................................13

ARTICLE 8         LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY...........13

        8.1    Limitation On Landlord's Liability And Release................13

        8.2    Tenant's Indemnification Of Landlord..........................13

ARTICLE 9         INSURANCE..................................................14

        9.1    Tenant's Insurance............................................14

        9.2    Landlord's Insurance..........................................15

        9.3    Mutual Waiver Of Subrogation..................................15

ARTICLE 10        DAMAGE TO LEASED PREMISES..................................15

        10.1   Landlord's Duty To Restore....................................15

        10.2   Insurance Proceeds............................................15

        10.3   Landlord's Right To Terminate.................................15

        10.4   Tenant's Right To Terminate...................................16

        10.5   Tenant's Waiver...............................................16

        10.6   Abatement Of Rent.............................................16

ARTICLE 11        CONDEMNATION...............................................16

        11.1   Tenant's Right To Terminate...................................16

        11.2   Landlord's Right To Terminate.................................16

        11.3   Restoration...................................................16

        11.4   Temporary Taking..............................................16

        11.5   Division Of Condemnation Award................................16

        11.6   Abatement Of Rent.............................................17

        11.7   Taking Defined................................................17

ARTICLE 12        DEFAULT AND REMEDIES.......................................17

        12.1   Events Of Tenant's Default....................................17

        12.2   Landlord's Remedies...........................................17

        12.3   Landlord's Default And Tenant's Remedies......................18

        12.4   Limitation Of Tenant's Recourse...............................18

        12.5   Tenant's Waiver...............................................19
</TABLE>

                                      ii.
<PAGE>   30

<TABLE>
<S>            <C>                                                         <C>
ARTICLE 13        GENERAL PROVISIONS.........................................19

        13.1   Taxes On Tenant's Property....................................19

        13.2   Holding Over..................................................19

        13.3   Subordination To Mortgages....................................19

        13.4   Tenant's Attornment Upon Foreclosure..........................20

        13.5   Mortgagee Protection..........................................20

        13.6   Estoppel Certificate..........................................20

        13.7   Tenant's Financial Information................................20

        13.8   Transfer By Landlord..........................................20

        13.9   Force Majeure.................................................20

        13.10  Notices.......................................................20

        13.11  Attorneys' Fees...............................................21

        13.12  Definitions...................................................21

               (a)    Real Property Taxes....................................21

               (b)    Landlord's Insurance Costs.............................21

               (c)    Property Maintenance Costs.............................22

               (d)    Property Operating Expenses............................22

               (e)    Law....................................................22

               (f)    Lender.................................................22

               (g)    Private Restrictions...................................22

               (h)    Rent...................................................22

        13.13  General Waivers...............................................22

        13.14  Miscellaneous.................................................22

ARTICLE 14        CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT...........23

        14.1   Corporate Authority...........................................23

        14.2   Brokerage Commissions.........................................23

        14.3   Entire Agreement..............................................23

        14.4   Landlord's Representations....................................23

ARTICLE 15        OPTIONS TO EXTEND..........................................23

ARTICLE 16        TELEPHONE SERVICE..........................................25
</TABLE>

                                      iii.

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