<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
[X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange 
      Act of 1934.

                    FOR THE FISCAL YEAR ENDED MARCH 31, 1998
                                       or

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities 
     Exchange Act of 1934.

           For the transition period from ____________ to____________.

                       Commission File Number ( 0-21767 )

                                  VIASAT, INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                    33-0174996
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                     Identification No.)


                  2290 COSMOS COURT, CARLSBAD, CALIFORNIA 92009
                                 (760) 438-8099
               (Address, including zip code, and telephone number,
              including area code, of principal executive offices)

           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $.0001 PAR VALUE

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

        The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of June 16, 1998 was approximately $86,389,958 (based on the
closing price for shares of the registrant's Common Stock as reported by the
Nasdaq National Market for the last trading day prior to that date). Shares of
Common Stock held by each officer, director and holder of 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

The number of shares outstanding of the registrant's Common Stock, $.0001 par
value, as of June 16, 1998 was 7,925,526.



<PAGE>   2



                       DOCUMENTS INCORPORATED BY REFERENCE


     Portions of the registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A in connection
with the 1998 Annual Meeting are incorporated herein by reference into Part III
of this Report. Such Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days after the registrant's fiscal year
ended March 31, 1998.

     Certain exhibits filed with the registrant's Registration Statement on Form
S-1 (File No. 333-13183), as amended, and Annual Report on Form 10-K for the
fiscal year ended March 31, 1997, are incorporated by reference into Part IV of
this Report.



<PAGE>   3


<TABLE>
<CAPTION>



                                  VIASAT, INC.

                                    FORM 10-K

                    FOR THE FISCAL YEAR ENDED MARCH 31, 1998

                                      INDEX


PART I                                                                             Page
                                                                                   ----
<S>                                                                                <C>

   Item 1.     Business                                                             1

   Item 2.     Properties                                                           28

   Item 3.     Legal Proceedings                                                    28

   Item 4.     Submission of Matters to a Vote of Security Holders                  28


PART II

   Item 5.     Market for the Registrant's Common Stock and Related                 29
               Stockholder Matters

   Item 6.     Selected Financial Data                                              30

   Item 7.     Management's Discussion and Analysis of Financial Condition and
               Results of Operations                                                31

   Item 7A.    Quantitative and Qualitative Disclosures About Market Risk           35

   Item 8.     Financial Statements                                                 35

   Item 9.     Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosures                                                35

PART III

   Item 10.    Directors and Executive Officers of the Registrant                   36

   Item 11.    Executive Compensation                                               36

   Item 12.    Security Ownership of Certain Beneficial Owners and Management       36

   Item 13.    Certain Relationships and Related Transactions                       36


PART IV

   Item 14.    Exhibits, Financial Statements, Schedules and Reports on Form 8-K    37
   Glossary of Selected Terms                                                       41
   Signatures                                                                       43
</TABLE>




<PAGE>   4



                                     PART I


ITEM 1. BUSINESS

        Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. ViaSat, Inc. ("ViaSat" or the "Company") future results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not specifically limited to,
timely product development, variation of royalty, license and other revenues,
failure to satisfy performance obligations, uncertainty regarding the Company's
patents and property rights (including the risk that the Company may be forced
to engage in costly litigation to protect such patents and rights and the
material adverse consequences to the Company if there were an unfavorable
outcome of any such litigation), difficulties in obtaining components needed for
the production of wireless equipment and changes in economic conditions of
various markets the Company serves, as well as the other risks detailed in this
section, in particular under the heading Risk Factors. See "Glossary of Selected
Terms" for definitions of certain terms used in this Report.

INTRODUCTION

     ViaSat designs, produces and markets advanced digital satellite
telecommunications and wireless signal processing equipment. The Company has
achieved twelve consecutive years of internally generated revenue growth and
eleven consecutive years of profitability, primarily through defense-related
applications. More recently, the Company has been developing and marketing its
technology through strategic alliances for emerging commercial markets, such as
rural telephony, alternative carrier access and Internet/Intranet access by
satellite to multiple servers. ViaSat is a leading provider of Demand Assigned
Multiple Access ("DAMA") technology, which allows a large number of Very Small
Aperture Terminal ("VSAT") subscribers to economically share common satellite
transponders for high-performance voice, fax or data communications.

     The Company believes that DAMA satellite technology is superior to other
existing VSAT networking technologies for many important applications. The
existing Time Division Multiplex/Time Division Multiple Access ("TDM/TDMA")
networking technology features a "hub and spoke" architecture which requires all
transmissions to be routed through a central terrestrial hub. Unlike TDM/TDMA
systems, DAMA provides direct, on-demand switched networking capabilities which
do not require a terrestrial hub and allow faster and more efficient use of
expensive satellite transponder resources. In addition, the Company believes
that its DAMA products, commercially marketed under the tradename StarWire,
offer greater network flexibility and permit up to 50% greater satellite
capacity than competing DAMA systems. See "-- The ViaSat Advantage" and "--
Technology."

     ViaSat's DAMA products include satellite modems, networking processors and
network control systems for managing large numbers of network subscribers. The
Company's DAMA technology consists of proprietary real-time firmware and
software designed to run on industry-standard digital signal processors. The
Company also has developed DAMA network control software that operates on Intel
based personal computers running Windows NT(TM) operating systems. The Company's
DAMA technology operates on satellites in the military UHF and SHF frequency
bands, and commercial C and Ku bands. In addition to DAMA products, the Company
offers network information security products, communications simulation and test
equipment, and spread spectrum digital radios for satellite and terrestrial data
networks.

RECENT DEVELOPMENTS

     During the fiscal year ended March 31, 1998, the Company executed existing
critical government UHF satellite contracts, and also established significant
milestones in other important government markets including TCP/IP-based network
encryption, digital anti-jam radios, and communications simulation. In addition,
the Company made considerable investments in commercial satellite networking and
achieved significant revenue growth in that area, while capturing new
applications and geographic markets. Some specific highlights follow:


                                       1


<PAGE>   5

        o       Final installation, testing and commissioning of the worldwide 5
                kHz UHF DAMA satellite network control system for the Department
                of Defense ("DOD"). The completion of the network control system
                enables deployment of UHF DAMA satellite terminals by ground,
                air, and sea forces.

        o       First production deliveries of the QDC-100 UHF Satellite Antenna
                Processing units delivered to Lockheed Martin for installation
                on US Navy P3 Aircraft.

        o       Initial DOD order for 600 copies of ViaSat eMail Messaging
                Software, a new program for sending email-like communications
                over satellite and wireless channels using the Windows(R)
                operating system.

        o       First international orders for ViaSat UHF DAMA satellite modems
                from US allies -- Australia, Canada, New Zealand, and the UK.

        o       Selection by the U.S. Navy as a candidate supplier of production
                quantities of Multifunction Information Distribution System
                (MIDS) terminals, via a $5 million agreement for the MIDS
                Production Readiness Program.

        o       Continued growth in our Communication Simulation business area
                with a $15.4 million award from Lockheed Martin Aerospace
                Systems.

        o       First production order, valued at $2.5 million, for STAR
                portable satellite communication terminals.

        o       Initial over-the-air satellite testing of ViaSat's patented
                Paired Carrier Multiple Access (PCMA) -- the company's new
                bandwidth re-use technology. Depending on the application, this
                technique can as much as double the bandwidth efficiency of
                two-way satellite links. The Company does not project any
                significant near-term financial benefit from this technology,
                but believes it can provide a meaningful competitive advantage
                once it is incorporated into the Company's products.

        o       Introduction of new features for the Company's StarWire DAMA
                satellite networks, including integrated Demand Assigned
                Internet Protocol (IP) routing capabilities. The Company
                deployed a U.S. system for backup and congestion relief of a
                terrestrial frame-relay network.

        o       The National Security Agency certified that ViaSat's Embeddable
                INFOSEC Product (EIP) can be used to secure U.S. Government
                classified data up through Top Secret. EIP enables users to
                securely transmit information through non-secure, packet
                networks such as the Internet.

INDUSTRY BACKGROUND

        A broad array of new consumer, business and government markets, as well
as the development of new technologies, have driven the significant expansion of
the wireless communications industry. In addition to common consumer
applications such as paging, cellular telephony and new Personal Communications
Services ("PCS"), there is a wide range of other specialized terrestrial and
space-based wireless applications. Such wireless applications include government
fixed and mobile wireless networking and commercial fixed-site, switched
satellite services, ViaSat's principal lines of business. The growth in
software-intensive wireless equipment markets stems from, among other things,
increasing dependence on voice and data networks of all types, regulatory
reform, advances in technology, decreasing costs of equipment and services,
economic growth in developing nations, the increasing importance of
communications infrastructure as a catalyst of economic growth, and increasing
user acceptance of and confidence in wireless solutions. This growth in wireless
equipment markets corresponds to a transition away from mere point to point
radio links connecting remote or mobile users towards offering more
comprehensive wireless network services. Market demands for wireless services
are being addressed by both terrestrial- and satellite-based systems.


                                       2


<PAGE>   6

        GOVERNMENT APPLICATIONS. Historically, the military has driven
development of many new wireless technologies -- pioneering applications of
satellite communications, digital radios, spread spectrum and mobile wireless
networks to connect widely dispersed operations. In many cases these
technologies have been extended and increased in scale for broader non-defense
use. Defense applications of wireless technologies also have evolved over the
same time period. The break-up of the Soviet Union has caused a de-emphasis on
strategic missions and a shift towards more localized tactical roles such as
peace-keeping, counter-terrorism, counter-insurgency and drug enforcement. These
missions create new demands for rapidly deployable, mobile connectivity. Overall
reductions in the defense budget have led to a numerically smaller, more
technologically-advanced force structure. As a result, defense networks
increasingly build around real-time transmission of digital tactical data.
Defense systems also are adopting and extending low cost commercial technologies
to meet their needs.

        There has been a constantly shifting flow of technology between
government and commercial network applications. Both government and commercial
users developed fixed-site, long-haul applications. The government pioneered
mobile satellite terminals, as well as non-geosynchronous, high power and
extremely high frequency satellites. Commercial users adopted elements of these
technologies for Low Earth Orbit ("LEO") mobile telephony and high-powered
Direct Broadcast Satellite ("DBS") television systems. Now government agencies
are planning to integrate these technologies into still more advanced military
networks. Often, companies with both government and commercial expertise have
facilitated such technology transitions.

        COMMERCIAL APPLICATIONS. The recent worldwide trend toward privatization
of public telephone operators and deregulation of local telephone ("local loop")
services has resulted in increased competition in the delivery of telephone
services from alternative access providers. Many of these new access providers,
such as long-distance telephone carriers, must install or upgrade infrastructure
to support basic and enhanced services. In addition, worldwide demand for basic
telephone service has grown, especially in developing countries. As new
infrastructure is established to deliver local telephone service, the technology
exists to provide cost-effective, satellite-based wireless transmission systems,
instead of a traditional wired approach, to connect subscribers to the public
telephone network.

        A growing segment of the wireless communications industry involves
VSATs, which are communications systems utilizing fixed-site satellite
terminals. Historically, these systems were primarily designed for certain
specific data applications. But recent improvements in VSAT technology for
satellite-based wireless voice and data networks have led to their increasing
use in a variety of broader, higher system throughput commercial applications
such as mobile and rural telephony and more complicated data transmissions.
Satellite telephony systems are being utilized by developing countries that lack
a terrestrial-based telecommunication infrastructure, and which seek to provide
telephone service for large areas fairly rapidly and on a cost-effective basis.
Additionally, even where terrestrial systems exist, satellite systems are used
to fill in coverage for remote areas.

        EVOLUTION OF VSAT TECHNOLOGY. The commercial VSAT business began with
U.S. customers who operated large, sophisticated private terrestrial networks
using TDM/TDMA technology. Customers such as chain retailers, hotels and auto
dealers operated private data networks with hundreds or thousands of sites and a
high flow of transactions from remote terminals to host mainframe computers for
credit card validations, point-of-sale data collection, reservations or similar
applications. Customers who used VSATs for data networking still relied on
terrestrial providers for telephone service and possibly other telecommunication
needs for their sites. Sales of such VSAT systems are often quite sensitive to
prices from telephone carriers for equivalent packet transaction services. Users
with large networks generally are the only ones who can justify the significant
one-time cost of a VSAT network management hub.

        TDM/TDMA technology, while more established than DAMA technology,
features a "hub and spoke" architecture which requires all transmissions to be
routed through a central hub and is most useful for remote to mainframe network
connections. Remote-to-remote TDM/TDMA connections require two satellite hops.
DAMA is better suited for remote-to-remote connections than TDM/TDMA because the
voice quality is better and DAMA networks use expensive satellite transponders
more efficiently. DAMA 


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satellite technology allows individual subscribers to request links on demand
directly to any other subscriber with a single satellite hop. DAMA allows users
to make exactly the connections needed, lasting only for the duration of a voice
call, fax, electronic mail or digital file transfer. DAMA technology has been
under development for many years by the DOD to serve large networks of fixed and
mobile subscribers sharing a limited amount of satellite capacity, but is only
recently being deployed in significant quantities by the DOD.

        The Company believes the opportunities for government and commercial
ground station equipment sales are increasing. The government is planning over
$1.0 billion in total UHF space segment expenditures for tactical
communications. DAMA is applicable to several different satellite bands,
including government UHF and SHF and commercial C, Ku and Ka bands. DAMA is also
being used by commercial customers who believe that it is better suited for
their applications than the earlier VSAT technologies.

THE VIASAT ADVANTAGE

        In light of the limitations of the TDM/TDMA architecture, and the
magnitude of the potential market for primary telecommunications services
compared to the more limited market for data transaction services, ViaSat
believes that DAMA networks will better serve the emerging international market
for VSAT, voice and data services. Virtually all of the VSAT equipment makers
are now adding DAMA products to their line of products. This represents a
discontinuity in the VSAT market. VSAT vendors are now developing new
transmission waveforms, multiple access techniques, DAMA protocols, DAMA control
software, subscriber terminals and interface protocols to support the targeted
applications (voice, fax, dial-up data, video conferencing or others), which
creates an opportunity for new equipment suppliers such as the Company.

        The Company believes that its DAMA-based products have technological
advantages over competing DAMA products in offering practical solutions for
telecommunications applications through several means:

FLEXIBILITY

        Since communications networks are evolving so quickly, a system such as
the Company's that can be easily extended and configured has a competitive
advantage.

        o       REAL-TIME DIGITAL SIGNAL PROCESSING FIRMWARE. The Company's
                technology involves extensive use of real-time digital signal
                processing firmware to implement both signal processing and DAMA
                networking protocol functions. This approach was developed and
                proven under several government programs, especially UHF DAMA.
                The Company believes that digital signal processing firmware
                offers great flexibility in adding new features, because it
                allows modification without more expensive hardware changes, and
                that product costs should decrease if prices of Texas
                Instruments digital signal processing chips and associated
                peripherals continue to decline. The Company's digital signal
                processing design allows common hardware to be applied to both
                government and commercial markets.

                o       WINDOWS NT(TM)-BASED NETWORK CONTROL. ViaSat believes
                        that it is a leader in using an Intel PC/Windows NT(TM)
                        computer platform for its network control system. ViaSat
                        developed and proved Windows NT(TM) as a viable network
                        control platform under government funded UHF and SHF
                        DAMA programs.

CAPACITY

ViaSat's narrow-spacing technology, developed during the course of its
government DAMA contracts, results in less unused bandwidth between voice
channels than other DAMA systems.


                                       4

<PAGE>   8

STRATEGY

        ViaSat's objective is to become a leading developer and supplier of
DAMA-based products to commercial markets and to retain a leadership position in
developing and supplying DAMA-based products to the government market. The
Company's strategy incorporates the following key elements:

        MAINTAIN AND ENHANCE TECHNOLOGY LEADERSHIP POSITION. The Company's
strategy is to maintain and enhance its leadership position in DAMA-based
satellite technology by continuing its participation in selected DOD programs
involving networking technology and other related real-time signal processing
and networking software. The Company is also investing in proprietary research
for commercial applications. The Company's objective is to continue to offer
high-performance, software-oriented products which provide the most effective
use of satellite power and bandwidth as well as offering the most flexible
platform for continued growth.

        LEVERAGE TECHNOLOGICAL EXPERTISE INTO COMMERCIAL MARKETS. The Company's
strategy is to continue using its technological expertise developed in defense
applications to develop and market products to respond to the increasing demand
for DAMA-based VSAT solutions for commercial voice and data applications. The
Company is targeting commercial markets which it believes will offer high growth
potential and where it believes ViaSat's technology will have competitive
advantages, such as rural telephony, alternative carrier access and
Internet/Intranet access by satellite to multiple servers. The Company believes
its products are competitive largely because of their technological advantages
over competing products. The Company's strategy is to capitalize on these
technological advantages by utilizing a "cost of ownership" marketing approach
that emphasizes the overall lower cost to customers over the operating life of
the Company's products because of the products' adaptability and more efficient
use of limited satellite capacity.

        DEVELOP BROAD BASE OF INNOVATIVE PROPRIETARY PRODUCTS. The Company's
strategy is to continue to develop and market to both defense and commercial
customers a broad variety of signal processing and networking software products.
The Company has over 160 research engineers on staff and emphasizes offering
technologically-superior products. The Company generally retains certain
proprietary rights from the government-funded research and development of its
defense products and is also devoting a significant amount of its own resources
to independent product development.

        DEVELOP STRATEGIC ALLIANCES. The Company's strategy is to develop
strategic alliances with leading prime defense contractors and major
international telecommunications companies and equipment suppliers. The Company
targets those companies whose financial and technological resources and
established customer bases allow them to jointly introduce new technologies and
penetrate new markets sooner and at a lower cost than the Company could alone.
The Company has entered into strategic alliances with defense companies, such as
Raytheon Systems Company, formerly Hughes Defense Communications ("Raytheon
Systems Company"), Lockheed Martin Corporation ("Lockheed Martin"), and ITT
Industries, Inc., Aerospace/Communications Division, and commercial
telecommunications companies, such as Hutchison Corporate Access (HK) Limited
("Hutchison Telecommunications"), and HCL Comnet Systems and Services Limited
("HCL Comnet").

        ESTABLISH GLOBAL PRESENCE. The Company's strategy is to develop its
products so that they may be marketed and used throughout the world. The Company
is a market leader in DAMA-based defense products for the United States and its
allies. The Company believes that the commercial market opportunities for the
Company's products are greater internationally. The Company believes its focus
on meeting applicable international communication standards and establishing key
international strategic alliances will enable it to effectively penetrate
foreign markets.

        ADDRESS RURAL TELEPHONY MARKET. The Company believes there is a
substantial unmet demand for rural telephony services, especially in developing
countries. The Company's strategy is to capitalize on its networking software
expertise to develop technology for establishing regional rural telephony
network infrastructures of strategically located VSAT terminals capable of
handling multiple satellite telephone calls ("Point-of-Entry Terminals"). The
Company believes such an infrastructure would have a competitive 



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advantage over a single Point-of-Entry system by minimizing the ground
transmission cost of each satellite telephone call by permitting such calls to
enter the Public Switched Telephone Network (PSTN) through the Point-of-Entry
Terminal closest to the call's destination. The Company's strategy also includes
seeking partnerships with regional and local service providers to create
distribution channels for rural telephony infrastructures and to provide related
retail distribution services, including sales of Company-designed subscriber
terminals, installation and maintenance, as well as customer service, billing
and revenue collection.

TECHNOLOGY

        The Company's VSAT technology is focused on DAMA which allows individual
subscribers to request links on demand to any other subscriber through one
satellite hop. TDM/TDMA technology, while more established than DAMA technology,
features a "hub and spoke" architecture which requires all transmissions to be
routed through a central hub and is most useful for remote to mainframe network
connections. Remote-to-remote TDM/TDMA connections require two satellite hops.
DAMA is better suited for remote-to-remote connections than TDM/TDMA because the
voice quality is better and DAMA networks use expensive satellite transponders
more efficiently.

        DAMA technology has been under development for many years by the DOD,
but is only recently being deployed in significant quantities. DAMA is
applicable to several different satellite bands, including government UHF and
SHF and commercial C, Ku and Ka bands. A major objective for the DOD is to
improve capacity of extremely expensive government-owned satellite transponders.
The government expects DAMA to increase capacity for UHF tactical users by as
much as a factor of ten, depending on the application and traffic usage,
compared to dedicated non-DAMA links.

        A DAMA system consists of (i) a set of subscribers with DAMA-capable
terminals, (ii) a network management terminal which orchestrates access to a
shared satellite resource, and (iii) satellite transponder capacity managed by
the network controller and shared by subscribers. DAMA subscribers use
networking protocols to interact with the controller and each other. The essence
of DAMA is that the network controller allocates a shared satellite resource to
a particular combination of subscribers only when they request it, and then
terminates the connection when they are finished.

        DAMA protocols may be either "open" or "proprietary." Open standards are
published so that multiple manufacturers can develop equipment that works
together. The DOD has designated two different open DAMA standards defining
over-the-air interfaces for narrowband UHF satellite communications channels.
MIL-STD 188-182 defines an interoperable waveform for channels with 5 kHz
bandwidth, and MIL-STD 188-183 defines the 25 kHz channel waveform. The DOD is
currently defining open standards for SHF channels and for government DAMA use
of commercial C and Ku band transponders. There are no widely accepted
commercial open DAMA standards, and no open standards have evolved for TDM/TDMA
VSATs.

        DAMA VS. TDM/TDMA. DAMA is being sought by customers who see that it is
a better fit than TDM/TDMA VSATs for non-transaction applications such as voice
and fax. The principal limitations of TDM/TDMA for non-transaction applications
are:

        CAPACITY LIMITATIONS AND COSTS

        o       The TDM/TDMA hub and spoke architecture is primarily designed
                for rapid service for sporadic, short, burst transactions
                between a remote site and a mainframe computer. The hubs
                typically only support a maximum instantaneous aggregate data
                rate of 256 kbps to approximately 1 Mbps divided among the
                entire subscriber population (often several thousand terminals).
                This is a severe bottleneck for sustained circuit-type services
                like telephony, fax or peer-to-peer file transfers, which often
                dominate when the VSAT becomes the primary communication means
                for a site, as in telephony uses. In contrast, a comparable DAMA
                system has a much higher aggregate capacity. For small networks
                the TDM/TDMA hub performance is not a capacity bottleneck, but
                the typical hub price of approximately $1.0 million, amortized
                over a small number of 

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<PAGE>   10

                subscribers, is usually prohibitively expensive. The equipment
                cost for a comparable DAMA system for voice use, in contrast,
                would be significantly less.

        TRANSMISSION TIME

        o       The hub and spoke architecture requires all calls (voice or
                data) between two remote nodes to be routed through the hub.
                This causes each call to traverse two separate satellite hops in
                each direction (remote A-to-satellite-to-hub and then
                hub-to-satellite-to-remote B, with the return path from remote B
                to remote A also traversing two satellite hops). The additional
                time delay due to the extra satellite hops is striking for voice
                communications and is unacceptable to many users. Plus, the two
                satellite hops consume more expensive transponder resources per
                call than a single hop DAMA connection.

        DAMA VS. DEDICATED SCPC. In contrast to DAMA, which allows individual
subscribers to request links to other subscribers on demand, dedicated Single
Channel Per Carrier ("SCPC")-based systems maintain dedicated, unswitched links
between subscribers, such as for long distance trunk lines. Dedicated links
provide high quality transmissions, but only between particular subscriber sets.
In order to provide connections among many sites, a SCPC-based system would
require a dedicated link between each subscriber and each other subscriber,
which would be prohibitively expensive. As a result, DAMA is a much more
attractive solution for managing large numbers of network subscribers, as DAMA
provides transmissions of equally high quality, without restricting the
subscribers' ability to establish links on demand to any other subscriber.

        MOBILE SATELLITE VS. FIXED-SITE DAMA. The obvious advantage of
commercial mobile satellite systems, such as Iridium(TM) and GlobalStar(TM), is
that they allow subscribers to be mobile. A mobile satellite terminal can be
used by either a mobile or a fixed subscriber, while a fixed terminal cannot be
used by a mobile subscriber. However, in order to gain mobility, mobile
terminals employ an omni-directional antenna which operates at lower frequencies
and provides less bandwidth than is available in the fixed-site DAMA satellite
bands. Less bandwidth corresponds to less capacity and fewer voice circuits.
Also, mobile satellite systems typically require a greater investment in unique
space-based satellite resources than fixed-site DAMA systems which use existing
capacity on general purpose communication satellites. The combination of lower
capacity plus higher capital investments means that mobile service providers are
projecting per-minute service costs that are five to ten times higher than that
possible through fixed-site DAMA-based systems. Therefore, the Company believes
that customers who require satellite telephony services at fixed locations will
find fixed-site DAMA services to be much more economical than using mobile
satellite phones -- even if they already own mobile satellite phones for mobile
use.

        NON-DAMA TECHNOLOGY. The Company offers products outside of DAMA and
satellite communications that benefit from the Company's wireless networking
software and related technology. Important non-DAMA applications include:

        o       Spread spectrum digital radios for real-time tactical data
                networks among ground and airborne users. The MIDS radio system
                builds on the Company's software, firmware and hardware
                technology. The government is investing in "digitized
                battlefield" communications in an effort to obtain greater
                effectiveness from expensive tactical aircraft.

        o       Information security modules that encrypt classified information
                that can be broadcasted and routed across unclassified wired or
                wireless networks. This technology allows the government to make
                better use of commercial networks for securely transmitting
                classified information.

        o       Equipment that tests wireless receivers in the presence of
                complex, simulated radio wave environments. This technology
                allows the government to thoroughly test sophisticated airborne
                radio equipment without expensive flight exercises.

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GOVERNMENT MARKETS, PRODUCTS AND CUSTOMERS

        GOVERNMENT MARKETS. The Company believes it has an opportunity to build
on its government DAMA technology, software, hardware design and manufacturing
base to capture significant revenues in the government markets.

        UHF DAMA MARKETS.The Company is considered a leader in the UHF DAMA
market. The Company believes its DAMA manpack subcontract is the largest
outstanding DAMA contract in terms of quantity of units sold. The Company also
believes that it was the first to develop and market a stand-alone airborne DAMA
modem. The DOD requires all UHF satellite communications terminals to meet open
DAMA standards. This mandate has helped stimulate the UHF DAMA market. ViaSat is
active in the following business segments:

        o       UHF DAMA NETWORK CONTROL INFRASTRUCTURE. Viasat has completed
                several contracts with the U.S. Air Force for development,
                production, installation and support for four global network
                control system sites. Each site serves as a primary controller
                for seven channels and as an alternate for seven channels. Each
                satellite has 38 channels, offering a potential market for
                additional production, installation and support services.

        o       MANPACK TERMINALS. ViaSat has a contract with Raytheon Systems
                Company for over 7,000 DAMA modems for manpacks. As of March 31,
                1998, the funded contract value was $39.5 million, of which
                $23.1 million had been delivered.

        o       AIRBORNE DAMA TERMINALS. The 5 kHz channel DAMA protocols were
                designed to support U.S. Air Force aircraft. The U.S. Navy is
                also a major user of airborne UHF terminals. ViaSat equipment
                has been designed into a number of platforms, including P-3,
                S-3, Air Force One, ES-3, Tomahawk cruise missiles and others.

        o       INTERNATIONAL UHF DAMA MARKET. Cooperative efforts among
                multiple nations, such as in the Gulf War and Bosnia, require
                that allies have a standard communications platform. There are
                requirements for some units of NATO and other allies to have UHF
                DAMA capable satellite terminals.

        The Company's strategy includes actively working to expand the UHF DAMA
market as a whole, while sustaining its leading market share. Increasing the
market means extending UHF satellite communications capability to new users. UHF
satellite communications access and market size is limited in the following
ways:

        o       AVAILABILITY OF SATELLITE CAPACITY. Without DAMA, many users are
                denied access because higher priorities consume all channels.
                DAMA expands capacity. The Company anticipates increases in the
                UHF market, versus pre-DAMA levels, over the next seven years
                due to pent-up demand for service.

        o       EQUIPMENT SIZE AND WEIGHT. Most users are mobile and thus size
                and weight sensitive. They carry equipment in back-packs, or
                airframes where communication gear displaces weapons or mission
                critical payloads. Easier to carry, smaller, lighter equipment
                may expand the market beyond a core group who require DAMA to
                complete their mission.

        o       EQUIPMENT PRICE. The Company believes that the UHF DAMA market
                can expand by reducing the price of DAMA equipment. Embedded
                DAMA radios are less expensive than stand-alone models, and
                offer reduced size and weight.

        o       IMPROVED DAMA SUBSCRIBER SERVICES. The current DAMA system is a
                data "pipe." The Company anticipates that demand for DAMA can
                grow by increasing the value of the content

                                       8

<PAGE>   12

                sent over the pipes. Several areas are being explored, including
                improved secure voice quality, increased message routing
                capability, higher data rates and improved service set-up times.

        o       DAMA SIGNAL PROCESSING. Airborne DAMA is currently limited to
                large, slow aircraft for surveillance, airlift, command and
                control, or similar missions. High performance aircraft are
                excluded because current satellite communications antennas
                degrade mission performance or safety. A promising solution is
                to use low profile, conformal antennas with active antenna
                combiners. The Company has a contract for such active antenna
                combiners with Lockheed Martin which, if successful, opens the
                possibility of extending the UHF DAMA market to high performance
                aircraft, potentially resulting in an increase of up to 100% in
                the airborne DAMA market.

        ViaSat is also applying the market expansion strategy to its Advanced
Data Controller ("ADC") products. ADC conforms to MIL-STD 188-184 for packet
processing. It provides error-free data transmission over noisy channels. ADC
works for terrestrial and satellite communications wireless links. The Company
is working to reduce size, weight and price for ADC products, and potentially
licensing other manufacturers to embed ViaSat's ADC digital signal processing
firmware directly into their radios.

        TRI-BAND DAMA MARKETS. The U.S. government is a major consumer of leased
commercial satellite capacity in the C and Ku bands. Since satellite
availability is limited, the government has specified the purchase of "tri-band"
terminals (i.e., terminals which can operate on any of three bands, SHF (X
band), C or Ku band). This makes it easier for subscribers to use available
capacity in any band, as a function of time and location. The government
established the Commercial Satellite Communications Initiative program to
manage:

        o       Long term leases for commercial satellite transponders.

        o       Contracts to purchase tri-band satellite terminals.

        o       Bandwidth Management Centers to act as network controllers for
                the tri-band terminals.

        The DOD is planning to define an "open" standard for DAMA in SHF and
commercial satellite bands. The government owns and operates the Defense
Satellite Communication System constellation at SHF. Bandwidth at SHF is much
greater than at UHF -- over 200 MHz per satellite compared to less than 2 MHz at
UHF. Still, SHF capacity is limited and could be improved via DAMA. More
effective SHF use should reduce the government's monthly lease on commercial
satellites used for overflow. The potential market for SHF DAMA capable
terminals may be as large as that for UHF DAMA terminals.

        Extending DAMA to commercial satellites increases the bandwidth
available for government users. Increased bandwidth should support many more
terminals, increasing the potential DAMA user equipment market.

        In 1994, ViaSat was awarded a $2.0 million contract by the U.S. Air
Force for prototype demonstration of a draft SHF DAMA standard. In February
1996, the Company delivered and installed equipment which performs many, but not
all, of the protocols in the draft. The DOD has not yet designated a final
version of SHF DAMA, nor has the DOD yet issued a mandate for DAMA in SHF
terminals.

        The government tri-band DAMA market is very immature. This market will
likely not grow substantially until the DOD adopts a final standard and mandates
its use. However, there can be no assurance that the Company's products will be
procured by the government or prime contractors, even if a final standard
similar to the draft version is adopted. The Company is working to position its
SHF DAMA products through participation in government-industry standards working
groups. ViaSat also has been working with terminal manufacturers to help ensure
that its DAMA equipment integrates easily into their products. Finally, the
Company is working to maintain a prudent level of commonality between the
government and commercial DAMA modem platforms. The benefit of commonality is
that the larger 

                                       9



<PAGE>   13

commercial market offers economies of scale that reduce manufacturing costs for
the smaller government market. There is a potential disadvantage if unique
government product requirements increase the cost of commercial products. The
Company considers issues arising from this trade-off on a case-by-case basis.

        GOVERNMENT PRODUCTS

        ViaSat's DAMA products for the government market include:

        o       EMUT (ENHANCED MANPACK UHF TERMINAL) is a battery-operated UHF
                satellite radio which Raytheon Systems Company builds for the
                U.S. Army. ViaSat provides a DAMA modem to Raytheon under
                subcontract. EMUT is used to send encrypted voice, electronic
                mail, fax or other data via satellite. The DAMA modem allows the
                operator to automatically request a portion of a satellite
                channel to a selected destination whenever the operator asks to
                send a message or make a call. The EMUT radio, combined with a
                portable satellite antenna, can be used to make a secure voice
                or data call almost anywhere in the world.

        o       INCS (INITIAL NETWORK CONTROL SYSTEM) is the DAMA network
                management system for the U.S. Air Force. There are four sites
                worldwide (Guam, Hawaii, Naples and Virginia) that manage
                automatic DAMA access to 5 kHz bandwidth UHF satellite channels.
                The network control computer automatically allocates satellite
                resources to subscriber terminals (such as EMUT) whenever a
                subscriber requests a voice or data service. The INCS also keeps
                track of which satellite terminals are active, how much capacity
                is used and how much is available. ViaSat designs, installs and
                supports the whole system at each site.

        o       VM-200 (Also CALLED MD-1324) is ViaSat's stand-alone UHF DAMA
                modem product. The modem can be used with many UHF satellite
                radios having an industry standard 70 MHz interface. The VM-200
                enables a satellite radio to connect to a DAMA network. VM-200
                modems also are used in the INCS to communicate with
                subscribers. The modems connect to external voice coders,
                computers or encryption equipment and provide network access for
                those devices.

        ViaSat's other government wireless networking products include:

        o       MIDS (MULTIFUNCTION INFORMATION DISTRIBUTION SYSTEM) is an
                anti-jam radio system which implements the Link-16 waveform,
                message, and networking protocols for communicating real-time
                tactical data among ships, aircraft and ground units. MIDS
                terminals connect to sensors (like radar), computers, and
                targeting systems and provides information used for navigation,
                target identification, tracking and fire control. Link-16 is
                currently being implemented as a key element of the wireless
                communication system for "digital battlefields." For example, it
                allows individual fighter planes to obtain a broad view of the
                battlefield that is synthesized from many different views from
                many different participants.

        o       CES/JCS/CNIS (COMMUNICATION ENVIRONMENT SIMULATOR/JOINT
                COMMUNICATION SIMULATOR/ COMMUNICATIONS NAVIGATION AND
                IDENTIFICATION SIMULATOR) is used to simulate a realistic radio
                environment which can be used to test how well surveillance or
                other radio systems work in the presence of various and changing
                signals. It can simulate friendly military signals, neutral
                signals, commercial signals and enemy signals. The government
                uses the simulated total environment to verify that a system
                under test can correctly analyze specific target signals within
                a complicated and cluttered composite signal.

        o       EIP (EMBEDDABLE INFOSEC PRODUCT) is a plug-in module that
                encrypts classified information so that it can be broadcast over
                wireless systems (terrestrial or satellite) or sent over
                unclassified wirelines. EIP is unique because it can work for
                packet data systems instead of on circuits. For instance, EIP
                can encrypt information for the Internet (or government
                equivalents). EIP also can separate the addressing and routing
                information from a packet and 

                                       10

<PAGE>   14

                allow such information to remain unencrypted so that the network
                can correctly route the packet to its destination.

        o       QDC-100 (QUAD DIVERSITY COMBINER) is a unique product that
                combines four satellite antennas into one steerable high gain
                "virtual" antenna. Without the Combiner, an aircraft loses
                communications if its single fixed antenna is pointed away from
                the satellite by aircraft position changes. First production
                units were completed in March 1998, and are in use on US Navy P3
                reconnaissance aircraft in the Anti Surface Warfare Improvement
                Program (AIP). Markets for the Combiner could potentially expand
                to international customers and shipboard applications. In
                addition to an order from the Royal Norwegian Air Force, the US
                and Royal New Zealand navies are evaluating the product for
                shipboard use, where it can replace heavy, mechanically driven
                antennas.

        o       ADC (ADVANCED DATA CONTROLLER) is a packet processing system
                which provides error-free data transmission over noisy channels.
                ADC works for terrestrial and satellite communications wireless
                links. The ADC family of products include the VDC-200 which uses
                a serial PC interface, the VDC-300 which can be used in aircraft
                or vehicles, the VDC-400 which is packaged in a type II PCMCIA
                card for use with mobile PCs, and the VDC-500 which integrates
                Internet Protocol for communications from an Ethernet LAN to a
                wireless VDC network. The Company also offers two messaging
                applications which include DTS/WIN and ViaSat eMail(TM). Both
                applications give users a Windows(R) operating system interface
                to set up, control, manage, and log messages when communicating
                using VDCs.

GOVERNMENT CUSTOMERS

        The Company's major customers in the government DAMA market include:

        o       Raytheon Systems Company is the customer for the EMUT DAMA
                modem. Approximately 14% of the Company's fiscal 1998 revenues
                were derived from this contract

        o       The U.S. Air Force Electronics System Center ("ESC") is the
                customer for the 5 kHz UHF DAMA Global Initial Network Control
                System. ESC also procures stand-alone DAMA modems and
                Control/Indicators for various user agencies.

        o       Lockheed Martin is the customer for the airborne DAMA-capable
                UHF satellite communications antenna combiner.

        o       The Company also has entered into a number of smaller contracts
                with the DOD for UHF DAMA and ADC satellite equipment.

        The Company's major government customers for other wireless networking
products include:

        o       The U.S. Air Force, U.S. Navy, International Program Office and
                Logicon Tactical Systems Division are the customers for MIDS.

        o       Lockheed Martin is the customer for CNIS which will become part
                of Lockheed's Integrated Hardware-in-the-loop Avionics Test Lab.

        o       The U.S. Navy and U.S. Air Force are the customers for CES/JCS.

        o       The U.S. Navy is the customer for EIP.

                                       11

<PAGE>   15



COMMERCIAL MARKETS, PRODUCTS AND CUSTOMERS

        COMMERCIAL MARKETS

        DAMA technology is increasingly being used in emerging commercial
telecommunications markets. In contrast to "pre-assigned" or "hub and spoke"
satellite networks, DAMA is well suited to primary "circuit-oriented"
telecommunication because it routes connections in real-time on a call-by-call
basis from any subscriber to any other subscriber with only one satellite hop.
See "-- Industry Background" and "-- Technology." DAMA commercial markets can be
segmented as follows:

        o       TURN-KEY PRIVATE NETWORK EQUIPMENT SALES for corporations and
                government agencies in developing nations. These customers
                require voice and/or data services. Users manage their own
                networks and/or contract for management services. They lease
                satellite capacity in bulk. DAMA equipment is selected based
                primarily on purchase and operating costs for specific needs.
                Customers typically need to operate ten or more sites for a
                turn-key private network to be economical.

        o       "SHARED HUB" PRIVATE NETWORK SERVICE PROVIDERS. Customers with
                small networks may use a satellite service provider. The
                provider purchases a DAMA network and obtains transponder
                capacity at wholesale rates. The provider manages small
                "virtual" nets for its customers. Customers buy capacity from
                the provider at retail daily, hourly or minute rates. Service
                providers have different priorities than turn-key operators.
                Breadth and depth of service offerings are more important to
                providers since they must attract a broad base of customers.
                DAMA terminals must support a range of telephone and data
                equipment. Providers generally prefer flexible user terminal
                configurations to meet varying customer needs. They profit from
                the spread between wholesale transponder lease costs and retail
                prices, so DAMA performance is important. Efficiency advantages
                (measured, for example, by voice circuits per unit bandwidth)
                can offset a higher initial terminal purchase price over the
                term of a service contract.

        o       PUBLIC NETWORK CARRIER SERVICE PROVIDERS. Many
                telecommunications carriers use satellite links as part of their
                long distance networks. However, the satellite segment usually
                consists of a pre-planned link establishing a particular
                geographic connection at a fixed capacity. A satellite DAMA
                network can reduce costs for independent carriers by bypassing
                transit switching charges through a telecommunications hub city.
                Satellite DAMA can serve as either a primary link or as a
                back-up when terrestrial links are congested. DAMA satellite
                technology provides an economical secondary connection because
                the satellite pool of trunk lines can be quickly applied to any
                of the primary terrestrial routes. The DAMA network's ability to
                reach many different destinations offers a competitive advantage
                to a DAMA operator whose business is selling wholesale minutes
                of long distance service to national or regional carriers.

        o       PUBLIC NETWORK "LOCAL LOOP" SUBSCRIBER SERVICE PROVIDERS.
                Subscriber services differ from the carrier services in that
                there is a local loop interface between the DAMA satellite
                switch and a subscriber telephone. This allows a subscriber with
                a small VSAT terminal to connect directly into the public
                switched telephone network by using a single dial-tone to call
                to other satellite subscribers or to terrestrial phones through
                national (and/or international) switches. While the Company
                believes the local loop subscriber service has, by far, the
                greatest potential market volume for equipment manufacturers and
                also represents the greatest opportunity for service providers,
                there are numerous technical, regulatory and business management
                hurdles to implementing this service.

                                       12

<PAGE>   16



        COMMERCIAL PRODUCTS

        STARWIRE is a satellite networking system consisting of two major
elements, a network control system and a subscriber terminal. The network
control system sends and receives messages over the satellite, while the
subscriber terminal switches all user interface ports (voice and data)
individually and connects them call-by-call to an available satellite modem.
StarWire provides toll-quality voice circuits on a demand basis, efficiently
sharing satellite resources and thereby reducing costs to the end-user and the
network service provider.

        StarWire products include:

        o       AURORA TERMINAL is a ten slot rack mountable chassis configured
                with one VMM-101 and one TIM-201 (described below). The terminal
                is expandable to six user traffic channels by inserting
                additional VMM modems and TIM modules. Expansion beyond six
                channels is possible by using additional Aurora chassis with VMM
                modems and TIM modules installed.

        o       VMM-101 is a DAMA modem module designed for the Aurora. The
                VMM-101 is a single modem used for both user-data transmission
                and order-wire control channels.

        o       TIM-201 is a dual channel voice encoder/decoder module designed
                for the Aurora. The TIM-201 has a fax modem on board, along with
                an integrated echo canceller.

        o       TMC-101 is a terminal monitor and control card designed for the
                Aurora. The "EIP" version has an integrated LAN Ethernet port
                and supports multiple daughter-cards for data communications and
                additional external equipment control support.

        o       STARWIRE NETWORK CONTROL TERMINAL (NCT) is a ten slot rack
                mountable Aurora chassis with one Network Control Computer (NCC)
                interface card and two VMM-101 modems (operating as DAMA system
                control channel modems).

        o       STARWIRE DAMA NETWORK CONTROL SOFTWARE (NCS) provides the
                real-time network control and monitoring functions of the
                StarWire DAMA networking system. The NCS software acts as a
                switch to route calls through the network. In addition, the
                StarWire NCS monitors all aspects of system operation as well as
                collecting historical information about calls and maintaining
                detailed call records for billing purposes.

        o       STARWIRE NETWORK CONTROL COMPUTER (NCC) is computing and
                networking equipment designed to support the operation of the
                NCS software. The non-redundant configuration (NCC-100) provides
                for one operator workstation/server, Ethernet interface, Windows
                NT(TM) operating system and back-up media. The redundant
                configuration (NCC-200) provides two operator
                workstations/servers, Ethernet adapter cards, Windows NT(TM)
                operating system and back-up media.

        o       EXTERNAL DEVICE INTERFACE DRIVER (EDID) supports third party
                modem and RF terminal equipment.

        COMMERCIAL CUSTOMERS

        The Company is in the early stages of establishing sales for its
StarWire commercial DAMA product. Activities to date have primarily focused on
establishing distribution agreements with "in-country" service providers,
distributors and original equipment manufacturers ("OEMs"). The Company also has
delivered several test versions of the StarWire product for customer evaluation
and demonstration purposes. The Company's major customers in the commercial DAMA
market include:

                                       13

<PAGE>   17


        o       HUTCHISON TELECOMMUNICATIONS -- ViaSat and Hutchison
                Telecommunications have entered into a contract for
                intranational and international carrier satellite telephony
                equipment. The contract also provides for advanced digital data
                capabilities for public and private networks. The contract was
                awarded after competition from many other DAMA vendors.

        o       HCL COMNET -- HCL Comnet, ViaSat's exclusive distributor in
                India, operates the largest single VSAT network for India's
                national stock exchange. HCL Comnet selected ViaSat's StarWire
                system for HCL Comnet's DAMA private network products and
                services.

        o       SATELLITE COMMUNICATIONS SYSTEMS INCORPORATED ("SCSI") -- SCSI
                has inaugurated a network serving the International Civil
                Aviation Organization, an agency of the United Nations that is
                responsible for worldwide air traffic control. This network uses
                StarWire terminals to establish voice, data, and radar
                communications among air traffic control sites in the Caribbean
                and Central America.

        o       ViaSat also has executed distribution agreements and purchase
                contracts with companies operating VSAT networks in Mexico,
                Africa, South America, and other regions.


RESEARCH AND DEVELOPMENT

        The Company believes that its future success depends on its ability to
adapt to the rapidly changing satellite communications and related real-time
signal processing and networking software environment, and to continue to meet
its customers' needs. Therefore, the continued timely development and
introduction of new products is essential in maintaining its competitive
position. The Company develops most of its products in-house and currently has a
research and development staff which includes over 160 engineers. A significant
portion of the Company's research and development efforts in the defense
industry have generally been conducted in direct response to the specific
requirements of a customer's order and, accordingly, such amounts are included
in the cost of sales when incurred and the related funding (which includes a
profit component) is included in revenues at such time. Revenues for funded
research and development during the fiscal years ended March 31, 1998, 1997 and
1996 were approximately $25.6 million, $21.3 million, and $19.5 million,
respectively. In addition, the Company invested $7.6 million, $5.1 million and
$2.8 million, respectively, during the fiscal years ended March 31, 1998, 1997
and 1996 on independent research and development, which is not directly funded
by a third party. Funded research and development contains a profit component
and is therefore not directly comparable to independent research and
development. As a government contractor, the Company also is able to recover a
portion of its independent research and development expenses, consisting
primarily of salaries and other personnel-related expenses, supplies and
prototype materials related to research and development programs, pursuant to
its government contracts.

        The Company has benefited and continues to benefit from the Small
Business Innovation Research ("SBIR") program, through which the government
provides research and development funding for companies with fewer than 500
employees. While the Company has already harvested significant benefits from the
SBIR program throughout the initial developmental stages of its core technology
base, the Company believes that its business, financial condition and results of
operations would not be materially adversely affected if the Company were to
lose its SBIR funding status. The Company plans to leverage from this technology
base to further develop products for commercial applications.

MANUFACTURING

        The Company's manufacturing objective is to produce products that
conform to its specifications at the lowest possible manufacturing cost. The
Company is engaged in an effort to increase the standardization of its
manufacturing process in order to permit it to more fully utilize contract
manufacturers. As part of its program to reduce the cost of its manufacturing
and to support an increase in the volume of orders, the Company primarily
utilizes contract manufacturers in its manufacturing process. The Company
conducts extensive testing and quality control procedures for all products
before they are delivered to customers.


                                       14


<PAGE>   18

        The Company also relies on outside vendors to manufacture certain
components and subassemblies used in the production of the Company's products.
Certain components, subassemblies and services necessary for the manufacture of
the Company's products are obtained from a sole supplier or a limited group of
suppliers. In particular, Texas Instruments is a sole source supplier of digital
signal processing chips, which are critical components used by the Company in
substantially all of its products. The Company intends to reserve its limited
internal manufacturing capacity for new products and products manufactured in
accordance with a customer's custom specifications or expected delivery
schedule. Therefore, the Company's internal manufacturing capability for
standard products has been, and is expected to continue to be, very limited, and
the Company intends to rely on contract manufacturers for large scale
manufacturing. There can be no assurance that the Company's internal
manufacturing capacity and that of its contract manufacturers and suppliers will
be sufficient to fulfill the Company's orders in a timely manner. Failure to
manufacture, assemble and deliver products and meet customer demands on a timely
and cost effective basis could damage relationships with customers and have a
material adverse effect on the Company's business, financial condition and
operating results.

SALES AND MARKETING

        The Company markets its products to the DOD and to commercial customers
worldwide primarily through the Company's internal sales and marketing staff.
After the Company has identified key potential customers in its market segments,
the Company makes sales calls with its sales, management and engineering
personnel. In order to promote widespread acceptance of its products and provide
customers with support for their wireless transmission needs, the Company's
sales and engineering teams work closely with its customers to develop tailored
solutions to their wireless transmission needs. The Company believes that its
customer engineering support provides it with a key competitive advantage.

        During the fiscal year ended March 31, 1998, ViaSat sold products to
approximately 60 customers, of which DOD related contracts accounted for
approximately 91% of total revenues.

BACKLOG

        At March 31, 1998, the Company had firm backlog of $72.7 million, of
which $48.0 million was funded, not including options of $24.3 million. Of the
$72.7 million in firm backlog, approximately $46.6 million is expected to be
delivered in the fiscal year ending March 31, 1999, $15.2 million is expected to
be delivered in the fiscal year ending March 31, 2000 and the balance is
expected to be delivered in the fiscal year ending March 31, 2001 and
thereafter. The Company had firm backlog of $78.4 million, not including options
of $24.9 million, at March 31, 1997, compared to firm backlog of $28.7 million,
not including options of $28.0 million, at March 31, 1996. The Company includes
in its backlog only those orders for which it has accepted purchase orders.
However, backlog is not necessarily indicative of future sales. A majority of
the Company's backlog scheduled for delivery can be terminated at the
convenience of the government since orders are often made substantially in
advance of delivery, and the Company's contracts typically provide that orders
may be terminated with limited or no penalties. In addition, purchase orders may
set forth product specifications that would require the Company to complete
additional product development. A failure to develop products meeting such
specifications could lead to a termination of the related purchase order.

        The backlog amounts as presented are comprised of funded and unfunded
components. Funded backlog represents the sum of contract amounts for which
funds have been specifically obligated by customers to contracts. Unfunded
backlog represents future contract or option amounts that customers may obligate
over the specified contract performance periods. The Company's customers
allocate funds for expenditures on long-term contracts on a periodic basis. The
Company is committed to produce products under its contracts to the extent funds
are provided. The funded component of the Company's backlog at March 31, 1998
was approximately $48.0 million, and the funded components of the Company's
backlog at March 31, 1997 and 1996 were $67.6 million and $26.3 million,
respectively. The ability of the Company to realize revenues from government
contracts in backlog is dependent upon adequate funding for such contracts.
Although funding of its government contracts is not within the Company's
control, the Company's 

                                       15



<PAGE>   19

experience indicates that actual contract fundings have ultimately been
approximately equal to the aggregate amounts of the contracts.

GOVERNMENT CONTRACTS

        A substantial portion of the Company's revenues are derived from
contracts and subcontracts with the DOD and other federal government agencies.
Many of the Company's contracts are competitively bid and awarded on the basis
of technical merit, personnel qualifications, experience and price. The Company
also receives some contract awards involving special technical capabilities on a
negotiated, noncompetitive basis due to the Company's unique technical
capabilities in special areas. Future revenues and income of the Company could
be materially affected by changes in procurement policies, a reduction in
expenditures for the products and services provided by the Company, and other
risks generally associated with federal government contracts. See "Risk Factors
- -- Dependence on Defense Market" and "-- Government Regulations."

        The Company provides products under federal government contracts that
usually require performance over a period of one to five years. Long-term
contracts may be conditioned upon continued availability of Congressional
appropriations. Variances between anticipated budget and Congressional
appropriations may result in a delay, reduction or termination of such
contracts. Contractors often experience revenue uncertainties with respect to
available contract funding during the first quarter of the government's fiscal
year beginning October 1, until differences between budget requests and
appropriations are resolved.

        The Company's federal government contracts are performed under
cost-reimbursement contracts, time-and-materials contracts and fixed-price
contracts. Cost-reimbursement contracts provide for reimbursement of costs (to
the extent allowable, allocable and reasonable under Federal Acquisition
Regulations) and for payment of a fee. The fee may be either fixed by the
contract (cost-plus-fixed fee) or variable, based upon cost control, quality,
delivery and the customer's subjective evaluation of the work (cost-plus-award
fee). Under time-and-materials contracts, the Company receives a fixed amount by
labor category for services performed and is reimbursed (without fee) for the
cost of materials purchased to perform the contract. Under a fixed-price
contract, the Company agrees to perform certain work for a fixed price and,
accordingly, realizes the benefit or detriment to the extent that the actual
cost of performing the work differs from the contract price. Revenues generated
from contracts with the federal government or its prime contractors for the
fiscal year ended March 31, 1998 were approximately 22.6% from
cost-reimbursement contracts, approximately 4.0% from time-and-materials
contracts and approximately 64.1% from fixed-price contracts of total revenues.
See "Risk Factors -- Contract Profit Exposure."

        The Company's allowable federal government contract costs and fees are
subject to audit by the Defense Contract Audit Agency. Audits may result in
non-reimbursement of some contract costs and fees. While the government reserves
the right to conduct further audits, audits conducted for periods through fiscal
1995 have resulted in no material cost recovery disallowances for the Company.

        The Company's federal government contracts may be terminated, in whole
or in part, at the convenience of the government. If a termination for
convenience occurs, the government generally is obligated to pay the cost
incurred by the Company under the contract plus a pro rata fee based upon the
work completed. When the Company participates as a subcontractor, the Company is
at risk if the prime contractor does not perform its contract. Similarly, when
the Company as a prime contractor employs subcontractors, the Company is at risk
if a subcontractor does not perform its subcontract.

        Some of the Company's federal government contracts contain options which
are exercisable at the discretion of the customer. An option may extend the
period of performance for one or more years for additional consideration on
terms and conditions similar to those contained in the original contract. An
option may also increase the level of effort and assign new tasks to the
Company. In the Company's experience, options are usually exercised.


                                       16


<PAGE>   20

        The Company's eligibility to perform under its federal government
contracts requires the Company to maintain adequate security measures. The
Company has implemented security procedures which it believes are adequate to
satisfy the requirements of its federal government contracts.

GOVERNMENT REGULATIONS

        Certain of the Company's products are incorporated into wireless
telecommunications systems that are subject to regulation domestically by the
Federal Communications Commission and internationally by other government
agencies. Although the equipment operators and not the Company are responsible
for compliance with such regulations, regulatory changes, including changes in
the allocation of available frequency spectrum and in the military standards
which define the current networking environment, could materially adversely
affect the Company's operations by restricting development efforts by the
Company's customers, making current products obsolete or increasing the
opportunity for additional competition. Changes in, or the failure by the
Company to manufacture products in compliance with, applicable domestic and
international regulations could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
increasing demand for wireless telecommunications has exerted pressure on
regulatory bodies worldwide to adopt new standards for such products, generally
following extensive investigation and deliberation over competing technologies.
The delays inherent in this governmental approval process have in the past
caused and may in the future cause the cancellation, postponement or
rescheduling of the installation of communication systems by the Company's
customers, which in turn may have a material adverse effect on the sale of
products by the Company to such customers.

        The Company is also subject to a variety of local, state and federal
governmental regulations relating to the storage, discharge, handling, emission,
generation, manufacture and disposal of toxic or other hazardous substances used
to manufacture the Company's products. The failure to comply with current or
future regulations could result in the imposition of substantial fines on the
Company, suspension of production, alteration of its manufacturing processes or
cessation of operations. To date, these regulations have not had a material
effect on the Company, as the Company has neither incurred significant costs to
maintain compliance nor to remedy past noncompliance.

        The Company believes that it operates its business in material
compliance with applicable government regulations. The Company is not aware of
any pending legislation which if enacted could have a material adverse effect on
the Company's business, financial condition and results of operations.

COMPETITION

        The markets for the Company's products and services are extremely
competitive, and the Company expects that competition will increase in such
markets. See "Risk Factors --Competition." The Company faces intense competition
in both government and commercial wireless networking markets.

        Government DAMA Competition. Competition in the government DAMA market
consists primarily of other companies offering DAMA capable modem, radio or
network control equipment that is compatible with the open MIL-STD protocols.
The government DAMA competitors are significantly larger companies than ViaSat
and include Titan Corporation, Rockwell International, Raytheon Corporation and
GEC (UK). The Company believes that it is well-positioned among these
competitors because of its significant backlog of DAMA modem orders, its market
lead time with respect to DAMA product certification and its participation in
both the network control and subscriber terminal markets.

        Government Non-DAMA Competition. There is also intense competition in
other wireless networking markets. The MIDS market, in particular, is dominated
by two very large competitors (Rockwell and GEC- Marconi).

        The Company's simulation and test equipment and information security
products represent relatively new technologies in markets that are still small.
Most of the Company's competition in these markets stems from alternative
technologies that may or may not be applicable to any particular customer.

                                       17

<PAGE>   21


        Commercial DAMA Competition. There is intense competition in the
commercial DAMA market from companies that have strong positions in the TDM/TDMA
VSAT business, as well as from other companies using DAMA technology. Most of
the leading TDM/TDMA VSAT companies are offering DAMA products, including Hughes
Network Systems, (see "Risk Factors -- Dependence on Defense Market"),
Scientific Atlanta Inc., Gilat Satellite Networks Ltd., STM Wireless Inc. and
NEC. In addition, there are also other types of competing DAMA technologies
being developed.

        In different situations, DAMA products may be evaluated in comparison
with either TDM/TDMA technology, DAMA technology from other companies, dedicated
SCPC technology, mobile satellite technology or possibly terrestrial wireless
solutions. The Company believes that it has a good understanding of those
situations where DAMA systems in general, and its technology in particular,
offer the best overall value to its customers, and tends to focus its marketing
and selling efforts on those applications. DAMA technology is most attractive
for customers with telephone, fax or other circuit-oriented applications. DAMA
technology also allows networks to achieve much higher total capacity, with
better voice quality than TDM/TDMA networks.

        The Company seeks to establish strategic alliances with satellite
service providers which would most benefit from its particular technological
advantages. The Company has established such relationships with a few key
companies, including HCL Comnet in India. The Company believes that its products
offer the lowest total cost of ownership for service providers considering the
flexibility of its equipment, its transponder capacity advantages and the
breadth of its service offerings.

INTELLECTUAL PROPERTY

        The Company relies on a combination of trade secrets, copyrights,
trademarks, service marks and contractual rights to protect its intellectual
property. The Company attempts to protect its trade secrets and other
proprietary information through agreements with its customers, suppliers,
employees and consultants, and through other security measures. Although the
Company intends to protect its rights vigorously, there can be no assurance that
these measures will be successful. In addition, the laws of certain countries in
which the Company's products are or may be developed, manufactured or sold may
not protect the Company's products and intellectual property rights to the same
extent as the laws of the United States.

        While the Company's ability to compete may be affected by its ability to
protect its intellectual property, the Company believes that, because of the
rapid pace of technological change in the wireless personal communications
industry, its technical expertise and ability to introduce new products on a
timely basis will be more important in maintaining its competitive position than
protection of its intellectual property and that patent, trade secret and
copyright protections are important but must be supported by other factors such
as the expanding knowledge, ability and experience of the Company's personnel,
new product introductions and frequent product enhancements. Although the
Company continues to implement protective measures and intends to defend
vigorously its intellectual property rights, there can be no assurance that
these measures will be successful. See "Risk Factors -- Limited Protection of
the Company's Intellectual Property."

        There can be no assurance that third parties will not assert claims
against the Company with respect to existing and future products. In the event
of litigation to determine the validity of any third party's claims, such
litigation could result in significant expense to the Company and divert the
efforts of the Company's technical and management personnel, whether or not such
litigation is determined in favor of the Company. The wireless communications
industry has been subject to frequent litigation regarding patent and other
intellectual property rights. Leading companies and organizations in the
industry have numerous patents that protect their intellectual property rights
in these areas. In the event of an adverse result of any such litigation, the
Company could be required to expend significant resources to develop
non-infringing technology or to obtain licenses to the technology which is the
subject of the litigation. There can be no assurance that the Company would be
successful in such development or that any such license would be available on
commercially reasonable terms.

                                       18

<PAGE>   22



EMPLOYEES

        As of March 31, 1998, the Company had 345 employees (24 of which were
temporary employees), including over 180 in research and development, 11 in
marketing and sales, 81 in production, and 64 in corporate, administration and
production coordination. The Company believes that its future prospects will
depend, in part, on its ability to continue to attract and retain skilled
engineering, marketing and management personnel, who are in great demand. In
particular, there is a limited supply of highly qualified engineers with
appropriate experience. See "Risk Factors -- Dependence on Key Personnel." Each
of the Company's employees is required to sign an Invention and Confidential
Disclosure Agreement upon joining the Company. Under such agreement, each
employee agrees that any inventions developed by such employee during the term
of employment are the exclusive property of the Company and that such employee
will not disclose or use in any way information related to the Company's
business or products, either during the term of such employee's employment or at
any time thereafter. The Company currently employs over 160 engineers, including
72 engineers who have masters degrees and six engineers who have doctorate
degrees. None of the Company's employees are covered by a collective bargaining
agreement and the Company has never experienced any strike or work stoppage. The
Company believes that its relations with its employees are good.

RISK FACTORS

DEPENDENCE ON DEFENSE MARKET

        Approximately 91% of the Company's revenues for the fiscal year ended
March 31, 1998 were derived from U.S. government defense applications. Although
the Company has invested heavily in developing commercial satellite products,
there can be no assurance that the percentage of the Company's commercial
business will increase. In addition, there can be no assurance that the
Company's revenues from its government business will continue to increase at
historical rates or at all. U.S. government business is subject to various risks
including (i) unpredictable contract or project terminations, reductions in
funds available for the Company's projects due to government policy changes,
budget cuts and contract adjustments and penalties arising from post-award
contract audits, and incurred cost audits in which the value of the contract may
be reduced, (ii) risks of underestimating ultimate costs, particularly with
respect to software and hardware development, for work performed pursuant to
fixed-price contracts where the Company commits to achieve specified deliveries
for a predetermined fixed price, (iii) limited profitability from
cost-reimbursement contracts under which the amount of profit attainable is
limited to a specified negotiated amount and (iv) unpredictable timing of cash
collections of certain unbilled receivables as they may be subject to acceptance
of contract deliverables by the customer and contract close-out procedures,
including government approval of final indirect rates. See "Business --
Government Contracts." In addition, substantially all of the Company's backlog
scheduled for delivery can be terminated at the convenience of the government
since orders are often made well in advance of delivery, and the Company's
contracts typically provide that orders may be terminated with limited or no
penalties. See "Business -- Backlog."

        Certain of the Company's contracts individually contribute a significant
percentage of the Company's revenues. For the fiscal year ended March 31, 1998,
the Company's largest contracts (by revenues) were contracts related to the
Company's UHF DAMA technology, which generated approximately 61% of the
Company's total revenues, including a contract with Raytheon Systems Company
which generated approximately 14% of the Company's total revenues. Scheduled
deliveries pursuant to firm purchase orders under this contract are scheduled to
be completed during the fiscal year ending March 31, 2000. Raytheon Systems
Company is an affiliate of Raytheon Corporation, which is the Company's
principal competitor in the government DAMA market. See "Business --
Competition."

        The Company's five largest contracts (by revenues) generated
approximately 65% of the Company's total revenues for the fiscal year ended
March 31, 1998. The Company expects revenues to continue to be concentrated in a
relatively small number of large U.S. government contracts. Termination or
disruption of such contracts, especially the Company's largest contract, or the
Company's inability to renew or replace such contracts when they expire, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

                                       19


<PAGE>   23

PENETRATION OF COMMERCIAL MARKETS; NEW PRODUCT INTRODUCTIONS

        The Company's ability to grow will depend substantially on its and its
customers' ability to apply its expertise and technologies to existing and
emerging commercial wireless communications markets. The Company's efforts to
penetrate commercial markets has resulted, and the Company anticipates that it
will continue to result, in increased sales and marketing and research and
development expenses. If the Company's net revenues do not correspondingly
increase, the Company's business, financial condition and results of operations
could be materially adversely affected. The Company's success in penetrating
commercial markets also depends upon the success of new product introductions by
the Company, which will be dependent upon several factors, including timely
completion and introduction of new product designs, achievement of acceptable
product costs, establishment of close working relationships with major customers
for the design of their new wireless communications systems incorporating the
Company's products and market acceptance. Sales of the Company's commercial
StarWire products (see "Business -- Commercial Markets, Products and Customers
- -- Commercial Products") have not yet achieved profitability. The Company
believes that as the market expands for the StarWire products, average
production costs for such products should decrease and sales of such products
should become profitable. However, there can be no assurance that the market for
such products will expand or that average production costs will decrease. If the
Company is unable to design, manufacture and market profitable new products for
existing or emerging commercial markets, its business, financial condition and
results of operations will be adversely affected. No assurance can be given that
the Company's product development efforts for commercial products will be
successful or that any new commercial products it develops will achieve market
acceptance. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Commercial Markets, Products and
Customers."

DEVELOPMENT CONTRACTS

        The telecommunications industry is characterized by rapid technological
change. As a result, many companies involved in the telecommunications industry,
including the Company, are often parties to governmental and commercial
contracts which involve development of various products. Pursuant to such
contracts, the company performing the development services typically must agree
to meet strict performance covenants and project milestones which there is a
risk it may not be able to satisfy. Under the terms of such contracts, the
failure by a company to meet such performance covenants and milestones permit
the other party to terminate the contract and, under certain circumstances,
recover liquidated damages or other penalties from the breaching party. The
Company is not currently or in the past has not been in compliance with every
outstanding performance covenant and project milestone. While the Company's past
experience has been that in situations where the Company has not met all
performance covenants and project milestones generally the other party has not
elected to terminate such contracts or seek liquidated damages from the Company,
there can be no assurance that this will not occur in the future with respect to
current or future contracts and that such termination or damages would not have
a material adverse effect on the Company.

FLUCTUATIONS IN RESULTS OF OPERATIONS

        The Company has experienced and expects to continue to experience
significant fluctuations in quarterly and annual revenues, gross margins and
operating results. The procurement process for most of the Company's current and
potential customers is complex and lengthy, and the timing and amount of
revenues is difficult to predict reliably. The Company recognizes a majority of
its revenues under the percentage of completion method which requires estimates
regarding costs that will be incurred over the life of a specific contract.
Actual results may differ from those estimates. In such event, the Company has
been and may in the future be required to adjust revenues in subsequent periods
relating to revisions of prior period estimates, resulting in fluctuations in
the Company's results of operations from period to period. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
addition, a single customer's order scheduled for delivery in a quarter can
represent a significant portion of the Company's potential revenues for such
quarter. The Company has at times failed to receive expected orders, and
delivery schedules have been deferred as a result of, among other factors,
changes in customer 


                                       20



<PAGE>   24

requirements or parts shortages. In fiscal 1998, approximately 14% of the
Company's revenues were derived from one contract. Any disruption with respect
to this contract could have a material adverse effect on the Company in any
period where such a disruption occurs. See "Business -- Government Markets,
Products and Customers -- Government Customers." As a result of the foregoing
and other factors, the Company's operating results for particular periods have
in the past been and may in the future be materially adversely affected by a
delay, rescheduling or cancellation of even one purchase order. Moreover,
purchase orders are often received and accepted substantially in advance of
delivery, and the failure to reduce actual costs to the extent anticipated or an
increase in anticipated costs before delivery could materially adversely affect
the gross margins for such orders, and as a result, the Company's results of
operations. There can be no assurance that the Company will continue to realize
positive gross margins or operating results in the future, and even if so
realized, there can be no assurance as to the level of such gross margins and
operating results.

        A large portion of the Company's expenses are fixed and difficult to
reduce should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new products and technologies could cause
customers to defer or cancel purchases of the Company's products and services,
which could materially adversely affect the Company's business, financial
condition and results of operations or result in fluctuations in the Company's
results of operations from period to period. Additional factors that may cause
the Company's revenues, gross margins and results of operations to vary
significantly from period to period include mix of products and services sold;
manufacturing efficiencies, costs and capacity; price discounts; market
acceptance and the timing of availability of new products by the Company or its
customers; usage of different distribution and sales channels; warranty and
customer support expenses; customization of products and services; and general
economic and political conditions. In addition, the Company's results of
operations are influenced by competitive factors, including the pricing and
availability of, and demand for, competitive products. All of the above factors
are difficult for the Company to forecast, and these and other factors could
materially adversely affect the Company's business, financial condition and
results of operations or result in fluctuations in the Company's results of
operations from period to period. As a result, the Company believes that
period-to-period comparisons are not necessarily meaningful and should not be
relied upon as indications of future performance. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

CONTRACT PROFIT EXPOSURE

        The Company's products and services are provided primarily through three
types of contracts: fixed-price, time-and-materials and cost-reimbursement
contracts. Approximately 72.8% of the Company's total revenues for the fiscal
year ended March 31, 1998, were derived from fixed-price contracts which require
the Company to provide products and services under a contract at a stipulated
price. The Company derived approximately 4.6% of its revenues during the year
from time-and-materials contracts which reimburse the Company for the number of
labor hours expended at an established hourly rate negotiated in the contract,
plus the cost of materials utilized in providing such products or services.
Approximately 22.6% of the Company's revenues for the fiscal year ended March
31, 1998 were derived from cost-reimbursement contracts under which the Company
is reimbursed for actual costs incurred in performing the contract to the extent
that such costs are within the contract ceiling and allowable, allocable and
reasonable under the terms of the contract, plus a fee or profit. See "Business
- -- Government Contracts."

        The Company assumes greater financial risk on fixed-price contracts than
on either time-and-materials or cost-reimbursement contracts. As the Company
increases its manufacturing business, it believes that an increasing percentage
of its contracts will be fixed-priced. Failure to anticipate technical problems,
estimate costs accurately or control costs during performance of a fixed-price
contract may reduce the Company's profit or cause a loss. In addition, greater
risks are involved under time-and-materials contracts than under
cost-reimbursement contracts because the Company assumes the responsibility for
the delivery of specified products or services at a fixed hourly rate. Although
management believes that it adequately estimates costs for fixed-price and
time-and-materials contracts, no assurance can be given that such estimates are
adequate or that losses on fixed-price and time-and-materials contracts will not
occur in the future.

                                       21



<PAGE>   25

        To compete successfully for business, the Company must satisfy client
requirements at competitive rates. Although the Company continually attempts to
lower its costs, there are other companies that may provide the same or similar
products or services at comparable or lower prices than the Company. There can
be no assurance that the Company will be able to compete effectively on pricing
or other requirements, and as a result, the Company could lose clients or be
unable to maintain historic gross margin levels or to operate profitably. See
"Business -- Competition."

DECLINING AVERAGE SELLING PRICES; FLUCTUATIONS IN GROSS MARGINS

        Average selling prices for the Company's products may fluctuate from
period to period due to a number of factors, including product mix, competition
and unit volumes. In particular, the average selling prices of a specific
product tend to decrease over that product's life. To offset such decreases, the
Company intends to rely primarily on obtaining yield improvements and
corresponding cost reductions in the manufacture of existing products and on
introducing new products that incorporate advanced features and therefore can be
sold at higher average selling prices. However, there can be no assurance that
the Company will be able to obtain any such yield improvements or cost
reductions or introduce any such new products in the future. To the extent that
such cost reductions and new product introductions do not occur in a timely
manner or the Company's or its customers' products do not achieve market
acceptance, the Company's business, financial condition and results of
operations could be materially adversely affected. See "Business --
Manufacturing."

        The Company's gross margins in any period are affected by a number of
different factors. Because of the different gross margins on various products,
changes in product mix can impact gross margins in any particular period. In
addition, in the event that the Company is not able to adequately respond to
pricing pressures, the Company's current customers may decrease, postpone or
cancel current or planned orders, and the Company may not be able to secure new
customers or orders. As a result, the Company may not be able to achieve desired
production volumes or gross margins.

GOVERNMENT REGULATIONS

        The Company's products are incorporated into wireless communications
systems that are subject to various government regulations. Regulatory changes,
including changes in the allocation of available frequency spectrum and in the
military standards and specifications which define the current satellite
networking environment, could significantly impact the Company's operations by
restricting development efforts by the Company's customers, making current
products obsolete or increasing the opportunity for additional competition.
There can be no assurance that regulatory bodies will not promulgate new
regulations that could have a material adverse effect on the Company's business,
financial condition and results of operations. Changes in, or the failure by the
Company to comply with, applicable domestic and international regulations could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the increasing demand for wireless
communications has exerted pressure on regulatory bodies worldwide to adopt new
standards for such products and services, generally following extensive
investigation of and deliberation over competing technologies. The delays
inherent in this governmental approval process have caused and may continue to
cause the cancellation, postponement or rescheduling of the installation of
communications systems by the Company's customers, which in turn may have a
material adverse effect on the sale of products by the Company to such
customers. See "Business -- Government Regulations."

        The Company has benefitted and continues to benefit from the SBIR
program, through which the government provides research and development funding
for companies with fewer than 500 employees. While the Company has already
harvested significant benefits from the SBIR program throughout the initial
developmental stages of its core technology base, the Company believes that its
business, financial condition and results of operations would not be materially
adversely affected if the Company were to lose its SBIR funding status. See
"Business -- Research and Development."

                                       22

<PAGE>   26



EMERGING MARKETS IN WIRELESS COMMUNICATIONS

        A number of the commercial markets for the Company's products in the
wireless communications area, including its DAMA products, have only recently
begun to develop. Because these markets are relatively new, it is difficult to
predict the rate at which these markets will grow, if at all. If the markets for
the Company's products in the commercial wireless communications area fail to
grow, or grow more slowly than anticipated, the Company's business, financial
condition and results of operations could be materially adversely affected.
Conversely, to the extent that growth in these markets results in capacity
limitations in the wireless communications area, the Company's business,
financial condition and results of operations could also be materially adversely
affected. See "Business -- Commercial Markets, Products and Customers."

FIXED SITE SATELLITE TELEPHONY MARKET

        The Company's strategy includes establishing satellite telephony
networking infrastructure for developing countries through strategic alliances
with regional and local service providers (see "Business -- Strategy -- Address
Rural Telephony Market"). There can be no assurance that a substantial market
for fixed site telephony equipment in developing countries will ever develop, or
if such a market does develop that fixed-site DAMA VSAT-based equipment will
capture a significant portion of that market. The Company's ability to penetrate
such markets will be dependent upon its ability to develop equipment and
software which can be utilized by the regional and local service providers to
develop and implement such infrastructure and for such service providers to
market and sell the use of such systems. Furthermore, there can be no assurance
that the regional and local service providers will be able to successfully
market subscriber terminals to subscribers. The development and implementation
of such satellite telephony systems will be dependent upon, among other things,
the continued development of the necessary hardware and software technologies
(including the necessary expenditures of a large amount of funds and resources),
the implementation of cost-effective systems, market acceptance for such systems
and approval by the appropriate regulatory agencies. There can be no assurance
that the Company will be able to develop equipment and software which can be
utilized in such telephony systems and accepted by regional and local service
providers or that any regional or local service providers will be able to
develop, implement and market satellite telephony systems. Furthermore, if the
Company successfully introduces such products and the regional and local service
providers successfully develop and implement such systems, there is no assurance
that the Company will generate enough revenues to cover the Company expenditures
in the development and marketing of such products. Even if the Company is able
to realize sales of such products, the Company believes it is not likely that
the Company will realize any significant revenues from rural telephony
applications any time in the foreseeable future, including at least the next two
years.

DEPENDENCE ON CONTRACT MANUFACTURERS; RELIANCE ON SOLE OR LIMITED SOURCES OF
SUPPLY

        The Company's internal manufacturing capacity is limited. The Company
has recently begun to utilize contract manufacturers to produce its products and
expects to rely increasingly on such manufacturers in the future. The Company
also relies on outside vendors to manufacture certain components and
subassemblies, including printed wiring boards. Certain components,
subassemblies and services necessary for the manufacture of the Company's
products are obtained from a sole supplier or a limited group of suppliers. In
particular, Texas Instruments is a sole source supplier of digital signal
processing chips, which are critical components used by the Company in
substantially all of its products. There can be no assurance that the Company's
internal manufacturing capacity and that of its contract manufacturers and
suppliers will be sufficient to timely fulfill the Company's orders. See
"Business -- Manufacturing."

        The Company's reliance on contract manufacturers and on sole suppliers
or a limited group of suppliers involves several risks, including a potential
inability to obtain an adequate supply of required components, and reduced
control over the price, timely delivery, reliability and quality of finished
products. From time to time, the Company enters into long-term supply agreements
with its manufacturers and suppliers. Manufacture of the Company's products and
certain of its components and subassemblies is an extremely complex process, and
the Company has from time to time experienced and may in the future experience
delays in the delivery of and quality problems with products and certain
components and subassemblies from vendors. Certain of the Company's suppliers
have relatively limited financial and other resources. Any inability to obtain
timely deliveries of components and 

                                       23



<PAGE>   27

subassemblies of acceptable quality or any other circumstance that would require
the Company to seek alternative sources of supply, or to manufacture its
finished products or such components and subassemblies internally, could delay
or prevent the Company from timely delivery of its systems or raise issues
regarding quality, which could damage relationships with current or prospective
customers and have a material adverse effect on the Company's business,
financial condition and results of operations.

COMPETITION

        The markets for the Company's products and services are extremely
competitive, and the Company expects that competition will increase in such
markets. Many of the Company's competitors have entrenched market positions,
established patents, copyrights, tradenames, trademarks, service marks and
intellectual property rights and substantial technological capabilities. The
Company's existing and potential competitors include large and emerging domestic
and international companies, many of which have significantly greater financial,
technical, manufacturing, marketing, sales and distribution resources and
management expertise than the Company. The Company believes that its ability to
compete successfully in the markets for its products and services depends upon a
number of factors within and outside its control, including price, quality,
availability, product performance and features, timing of new product
introductions by the Company, its customers and competitors, and customer
service and technical support. The Company's customers continuously evaluate
whether to develop and manufacture their own products and could elect to compete
with the Company at any time. Price competition in the markets in which the
Company currently competes is likely to increase, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Competition."

LIMITED PROTECTION OF THE COMPANY'S INTELLECTUAL PROPERTY

        The Company's ability to compete may depend, in part, on its ability to
obtain and enforce intellectual property protection for its technology in the
United States and internationally. The Company relies on a combination of
patents, trade secrets, copyrights, trademarks, service marks and contractual
rights to protect its intellectual property. There can be no assurance that the
steps taken by the Company will be adequate to deter misappropriation or impede
third party development of the Company's technology. In addition, the laws of
certain foreign countries in which the Company's products are or may be sold do
not protect the Company's intellectual property rights to the same extent as do
the laws of the United States. The failure of the Company to protect its
proprietary information could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Intellectual Property."

        Litigation may be necessary to protect the Company's intellectual
property rights and trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
infringement, invalidity, right to use or ownership claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted against the Company in the future. If any claims or actions are
asserted against the Company, the Company may seek to obtain a license under a
third party's intellectual property rights. There can be no assurance, however,
that a license will be available under reasonable terms or at all. In addition,
should the Company decide to litigate such claims, such litigation could be
extremely expensive and time consuming and could materially adversely affect the
Company's business, financial condition and results of operations, regardless of
the outcome of the litigation. If the Company's products are found to infringe
upon the rights of third parties, the Company may be forced to incur substantial
costs to develop alternative products. There can be no assurance that the
Company would be able to develop such alternative products or that if such
alternative products were developed, they would perform as required or be
accepted in the applicable markets.

                                       24



<PAGE>   28

REQUIREMENT FOR RESPONSE TO RAPID TECHNOLOGICAL CHANGE AND REQUIREMENT FOR
FREQUENT NEW PRODUCT INTRODUCTIONS

        The wireless communications market is subject to rapid technological
change, frequent new product introductions and enhancements, product
obsolescence and changes in end-user requirements. The Company's ability to be
competitive in this market will depend in significant part upon its ability to
successfully develop, introduce and sell new products and enhancements on a
timely and cost-effective basis that respond to changing customer requirements.
Any success of the Company in developing new and enhanced products will depend
upon a variety of factors, including new product selection, integration of the
various elements of its complex technology, timely and efficient completion of
product design, timely and efficient implementation of manufacturing and
assembly processes and its cost reduction efforts, development and completion of
related software tools, product performance, quality and reliability and
development of competitive products by competitors. The Company may experience
delays from time to time in completing development and introduction of new
products. Moreover, there can be no assurance that the Company will be
successful in selecting, developing, manufacturing and marketing new products or
enhancements. There can be no assurance that errors will not be found in the
Company's products after commencement of deliveries, which could result in the
loss of or delay in market acceptance. The inability of the Company to introduce
in a timely manner new products that achieve market acceptance and thereby
contribute to revenues could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Research and Development."

INTERNATIONAL OPERATIONS; RISKS OF DOING BUSINESS IN DEVELOPING COUNTRIES

        The Company anticipates that international sales will account for an
increasing percentage of its revenues for the foreseeable future. The Company's
international sales may be denominated in foreign or U.S. currencies. The
Company does not currently engage in foreign currency hedging transactions. As a
result, a decrease in the value of foreign currencies relative to the U.S.
dollar could result in losses from transactions denominated in foreign
currencies. With respect to the Company's international sales that are U.S.
dollar-denominated, such a decrease could make the Company's products less
price-competitive. Additional risks inherent in the Company's international
business activities include various and changing regulatory requirements, cost
and risks of localizing systems in foreign countries, increased sales and
marketing and research and development expenses, availability of suitable export
financing, timing and availability of export licenses, tariffs and other trade
barriers, political and economic instability, difficulties in staffing and
managing foreign operations, difficulties in managing distributors, potentially
adverse taxes, complex foreign laws and treaties and the possibility of
difficulty in accounts receivable collections. Certain of the Company's customer
purchase agreements are governed by foreign laws, which may differ significantly
from U.S. laws. Therefore, the Company may be limited in its ability to enforce
its rights under such agreements and to collect damages, if awarded. There can
be no assurance that any of these factors will not have a material adverse
effect on the Company's business, financial condition and results of operations.

VOLATILITY OF STOCK PRICE

        Historically, the Company's stock price has been volatile. The sales
price for the Company's Common Stock has ranged from $8.88 to $24.38 per share
during the 52-week period ended March 31, 1998. The Company believes that
factors such as announcements of developments related to the Company's business,
announcements of technological innovations or new products or enhancements by
the Company or its competitors, developments in the Company's relationships with
its customers, partners, distributors and suppliers, changes in analysts'
estimates, regulatory developments, fluctuations in results of operations and
general conditions in the Company's market or the markets served by the
Company's customers or the economy could cause the price of the Common Stock to
fluctuate, perhaps substantially. In addition, in recent years the stock market
in general, and technology companies in particular have been subject to
significant price fluctuations, which have often been unrelated to the operating
performance of affected companies. Such fluctuations could adversely affect the
market price of the Common Stock. There can be no assurance that the market
price of the Common Stock will not experience significant fluctuations in the
future, including fluctuations that are unrelated to the Company's performance.

                                       25

<PAGE>   29

CONTROL BY EXISTING STOCKHOLDERS

        As of March 31, 1998, members of the Board of Directors and the
executive officers of the Company, together with members of their families and
entities that may be deemed affiliates of or related to such persons or
entities, beneficially owned approximately 36% of the outstanding shares of the
Company's Common Stock. Accordingly, these stockholders may be able to elect all
members of the Company's Board of Directors and determine the outcome of
corporate actions requiring stockholder approval, such as mergers and
acquisitions. This level of ownership may have a significant effect in delaying,
deferring or preventing a change in control of the Company and may adversely
affect the voting and other rights of other holders of the Common Stock.

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS

        Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and Bylaws could discourage potential acquisition proposals, could
delay or prevent a change in control of the Company and could make removal of
management more difficult. Such provisions could diminish the opportunities for
a stockholder to participate in tender offers, including tender offers that are
priced above the then current market value of the Company's Common Stock. The
provisions also may inhibit increases in the market price of the Common Stock
that could result from takeover attempts. Additionally, the Board of Directors
of the Company, without further stockholder approval, may issue up to 5,000,000
shares of Preferred Stock, in one or more series, with such terms as the Board
of Directors may determine, including rights such as voting, dividend and
conversion rights which could adversely affect the voting power and other rights
of the holders of Common Stock. Preferred Stock may be issued quickly with terms
which delay or prevent a change in control of the Company or make removal of
management more difficult. Also, the issuance of Preferred Stock may have the
effect of decreasing the market price of the Common Stock.

DEPENDENCE ON KEY PERSONNEL

        The Company's future success depends in large part on the continued
service of its key technical, marketing and management personnel and on its
ability to continue to attract and retain qualified employees, particularly its
Chief Executive Officer, Mark D. Dankberg, and those highly skilled design,
process and test engineers involved in the manufacture of existing products and
the development of new products and processes. The competition for such
personnel is intense, and the loss of key employees could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company does not have employment agreements with any of its
officers or employees. The Company has obtained, however, a key man insurance
policy on the life of Mr. Dankberg in the amount of $500,000, for which the
Company is the sole beneficiary. See "Business -- Employees."


                                       26


<PAGE>   30




I
TEM 2. PROPERTIES

        The Company's headquarters are located in an approximately 37,000 square
foot leased facility in Carlsbad, California. This facility houses the Company's
management, marketing and sales personnel. The lease for this facility
terminates in November 1998. The Company leases two other facilities in
Carlsbad, California containing approximately 56,000 and 26,000 square feet for
research and development, application engineering and manufacturing coordination
activities. The first facility lease terminates in July 1999 with options to
renew for two additional periods of two years each. The second facility lease
terminates in November 1998 with options to renew for two additional periods of
one year each. In addition, the Company leases three smaller sales facilities
aggregating approximately 3,000 square feet located in Acton, Massachusetts,
Marietta, Georgia, and Durango, Colorado. The Massachusetts lease terminates in
April 1999 with an option to renew for a period of one year. The Georgia lease
terminates in June 1998. The Colorado lease terminates in January 1999. Annual
leasing costs of the Company totaled $1.1 million, $793,000 and $608,000 for the
fiscal years ended March 31, 1998, 1997 and 1996, respectively.

        In April 1998, the Company entered into a long-term agreement to lease a
facility in Carlsbad, California which will house the Company's entire
California based operations. The facility will contain approximately 180,000
square feet and is expected to be completed in September 1999. The term of the
lease is 10 years with two three-year option periods. The initial minimum lease
payments are $2.3 million per year and will be payable commencing upon
completion of the facility.



ITEM 3. LEGAL PROCEEDINGS

        The Company is not a party to any legal proceedings other than various
claims and lawsuits arising in the ordinary course of its business which, in the
opinion of the Company's management, are not individually or in the aggregate
material to its business.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of security holders during the
quarter ended March 31, 1998.

                                       27


<PAGE>   31




                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

        The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "VSAT." The Common Stock was initially offered to the public on
December 3, 1996 at $9.00 per share. The following table sets forth the range of
high and low sales prices on the Nasdaq National Market of the Company's Common
Stock for the periods indicated, as reported by Nasdaq. Such quotations
represent inter-dealer prices without retail markup, markdown or commission and
may not necessarily represent actual transactions.

<TABLE>
<CAPTION>

FISCAL 1997                    HIGH             LOW
                            ---------       ---------
<S>                         <C>             <C>      
  Third Quarter(a)          $    9.63       $    8.38
  Fourth Quarter                12.25            8.75


FISCAL 1998                    HIGH            LOW
                            ---------       ---------
  First Quarter             $   16.13       $    8.88
  Second Quarter                23.50           11.00
  Third Quarter                 24.38           10.00
  Fourth Quarter                19.13           12.81
</TABLE>




        To date, the Company has neither declared nor paid any dividends on the
Common Stock. The Company currently intends to retain all future earnings, if
any, for use in the operation and development of its business and, therefore,
does not expect to declare or pay any cash dividends on the Common Stock in the
foreseeable future. In addition, an equipment financing agreement of the Company
prohibits the payment of any cash dividends on the Company's capital stock. As
of June 16, 1998, there were 294 holders of record of the Common Stock.

- ----------

(a) Subsequent to December 3, 1996.

                                       28

<PAGE>   32




ITEM 6. SELECTED FINANCIAL DATA

        The following data has been derived from the Company's audited financial
statements. The balance sheet at March 31, 1998 and 1997 and the related
statements of income, of cash flows and of stockholders' equity of the Company
for the three years ended March 31, 1998 and notes thereto appear elsewhere
herein. The data should be read in conjunction with such financial statements
and other financial information appearing elsewhere herein. All amounts shown
are in thousands, except per share data.



<TABLE>
<CAPTION>

                                                                             YEARS ENDED MARCH 31,
                                           ----------------------------------------------------------------------------------
                                             1998              1997              1996               1995               1994
                                           --------          --------          --------           --------           --------
<S>                                        <C>               <C>               <C>                <C>                <C>     
STATEMENT OF INCOME DATA:
  Revenues                                 $ 64,197          $ 47,715          $ 29,017           $ 22,341           $ 11,579
  Cost of revenues                           40,899            33,102            20,983             16,855              9,033
                                           --------          --------          --------           --------           --------
    Gross profit                             23,298            14,613             8,034              5,486              2,546
  Operating expenses:
    Selling, general and administrative       7,862             4,752             3,400              2,416              1,554
    Independent research and
      development                             7,631             5,087             2,820                788                134
                                           --------          --------          --------           --------           --------
  Income from operations                      7,805             4,774             1,814              2,282                858
  Net interest income (expense)                 586               100              (231)               (87)               (45)
                                           --------          --------          --------           --------           --------
  Income before income taxes                  8,391             4,874             1,583              2,195                813
  Provision (benefit) for
    income taxes                              3,104             1,702               (50)               888                328
                                           --------          --------          --------           --------           --------

  Net income                               $  5,287          $  3,172          $  1,633           $  1,307           $    485
                                           ========          ========          ========           ========           ========

  Basic net income per share(1)            $   0.68          $   0.66          $   0.50           $   0.42           $   0.16
                                           ========          ========          ========           ========           ========
  Diluted net income per share(1)          $   0.65          $   0.48          $   0.28           $   0.24           $   0.09
                                           ========          ========          ========           ========           ========
  Shares used in Basic per share
    calculations (1)                          7,801             4,810             3,267              3,080              2,957
                                           ========          ========          ========           ========           ========
  Shares used in Diluted per
    share calculations (1)                    8,175             6,642             5,735              5,479              5,323
                                           ========          ========          ========           ========           ========
</TABLE>




<TABLE>
<CAPTION>

                                                                                MARCH 31,
                                               ----------------------------------------------------------------------------
                                                  1998             1997           1996               1995             1994
                                               --------          -------         -------           -------           ------

<S>                                             <C>              <C>              <C>              <C>              <C>    
BALANCE SHEET DATA:
  Cash and short-term investments               $ 9,208          $12,673          $ 2,297          $ 2,731          $     9
  Working capital                                24,276           20,406            4,651            2,808            1,486
  Total assets                                   42,793           35,674           13,262            9,377            4,986
  Long-term debt, less current portion            1,544            1,428            1,747            1,220              297
  Total stockholders' equity                     29,610           23,619            5,217            3,413            1,956
</TABLE>


- ----------

(1)  Earnings per share calculations have been restated to comply with Statement
     of Financial Accounting Standards (SFAS) No. 128. For an explanation of the
     determination of the number of shares used in computing net income per
     share, see Note 1 and Note 7 of the Notes to Financial Statements.


                                       29

<PAGE>   33




ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

        Historically, the Company's revenues have been principally derived from
contracts with the DOD. The Company's DOD revenues have continued to grow
despite government budgetary constraints. Since 1992, the Company's total
revenues have grown at a compounded annual growth rate of approximately 58%. DOD
revenues amounted to $58.2 million and $46.3 million for the fiscal years ended
March 31, 1998 and 1997, respectively. The Company has achieved this growth rate
entirely through internal growth, and not through acquisitions. See "Risk
Factors -- Fluctuations in Results of Operations."

        The Company's products and services are provided primarily through three
types of contracts: fixed-price, time-and-materials and cost-reimbursement
contracts. Approximately 72.8% and 63.3% of the Company's total revenues for the
fiscal years ended March 31, 1998 and 1997, respectively, were derived from
fixed-price contracts which require the Company to provide products and services
under a contract at a stipulated price. The Company derived approximately 4.6%
and 6.0% of its revenues during such periods from time-and-materials contracts
which reimburse the Company for the number of labor hours expended at an
established hourly rate negotiated in the contract, plus the cost of materials
utilized in providing such products or services. The remaining 22.6% and 30.7%
of the Company's revenues for the fiscal years ended March 31, 1998 and 1997,
respectively, were derived from cost-reimbursement contracts under which the
Company is reimbursed for all actual costs incurred in performing the contract
to the extent that such costs are within the contract ceiling and allowable
under the terms of the contract, plus a fee or profit. See "Risk Factors --
Contract Profit Exposure."

        As of March 31, 1998, the Company had firm backlog of $72.7 million, of
which $48.0 million was funded. Of the $72.7 million in firm backlog,
approximately $46.6 million is expected to be delivered in the fiscal year
ending March 31, 1999, approximately $15.2 million is expected to be delivered
in the fiscal year ending March 31, 2000 and the balance is expected to be
delivered in the fiscal years ending March 31, 2001 and thereafter. The Company
received $58.0 million in awards during the year ended March 31, 1998,
consisting of $19.6 million in UHF DAMA satellite communications awards, $15.8
million in awards for the defense simulator business, $18.4 million in other
defense awards and $4.2 million in commercial satellite communications awards.
The Company's $72.7 million in firm backlog at March 31, 1998 excludes an
additional $24.3 million of customer options. See "Business --Backlog."

        Historically, a significant portion of the Company's revenue has been
derived from research and development contracts with the DOD. The research and
development efforts are conducted in direct response to the specific
requirements of a customer's order and, accordingly, expenditures related to
such efforts are included in cost of sales when incurred and the related funding
(which includes a profit component) is included in net revenues at such time.
Revenues are recognized using the percentage of completion method on these
long-term development contracts. Revenues for funded research and development
during the fiscal years ended March 31, 1998 and 1997 were approximately $25.6
million and $21.3 million, respectively. See "Business -- Research and
Development."

        Beginning in fiscal 1995, production contracts for delivery of
previously developed equipment became a more significant percentage of total
revenues. Production contracts amounted to approximately 52.6% and 35.3% of
fiscal 1998 and 1997 total revenues, respectively.

        The Company invests in independent research and development ("IR&D"),
which is not directly funded by a third party. The Company expenses IR&D costs
as they are incurred. IR&D expenses consist primarily of salaries and other
personnel-related expenses, supplies and prototype materials related to research
and development programs. IR&D expenses for governmental and commercial
applications were minimal prior to fiscal 1995. In the fourth quarter of fiscal
1995, the Company began investing a significant amount of IR&D funds primarily
in the development of satellite telephony and other satellite DAMA products. The
Company expended 11.9% and 10.6% of revenues in IR&D during the fiscal years
ended 

                                       30



<PAGE>   34

March 31, 1998 and 1997, respectively. As a government contractor, the Company
is able to recover a portion of its IR&D expenses pursuant to its government
contracts.


RESULTS OF OPERATIONS

   The following table sets forth, as a percentage of total revenues, certain
income data for the periods indicated.


<TABLE>
<CAPTION>

                                               FISCAL YEARS ENDED
                                                    MARCH 31,
                                    ---------------------------------------
                                      1998            1997            1996
                                    -------         -------         -------
<S>                                 <C>             <C>             <C>   
Revenues                              100.0%          100.0%          100.0%
Cost of revenues                       63.7            69.4            72.3
                                    -------         -------         -------
Gross profit                           36.3            30.6            27.7
Operating expenses:
Selling, general and                   12.2            10.0            11.7
administrative
Independent research and
development                            11.9            10.6             9.7
                                    -------         -------         -------
Income from operations                 12.2            10.0             6.3
Income before income taxes             13.1            10.2             5.5
Net income                              8.2             6.6             5.6
</TABLE>



        FISCAL YEAR ENDED MARCH 31, 1998 VS. FISCAL YEAR ENDED MARCH 31, 1997

        Revenues. The Company's revenues increased 34.5% from $47.7 million in
fiscal 1997 to $64.2 million in fiscal 1998. This increase was primarily due to
increases in revenues generated by MD-1324s (UHF DAMA stand-alone modems),
StarWire satellite networking systems and Joint Communication Simulator ("JCS")
products. These increases were partially offset by a decrease in revenues
derived from UHF DAMA network control stations and modems and Enhanced Manpack
UHF Terminal ("EMUT") production.

        Revenue from commercial customers grew from $1.5 million in fiscal 1997
to $5.9 million in fiscal 1998. Simulator product revenues grew from $4.8
million in fiscal 1997 to $11.5 million in fiscal 1998. UHF DAMA business area
revenues grew from $32.8 million (68.8% of revenues) in fiscal 1997 to $35.0
million (54.5% of revenues) in fiscal 1998.

        Gross Profit. Gross profit increased 59.4% from $14.6 million (30.6% of
revenues) in fiscal 1997 to $23.3 million (36.3% of revenues) in fiscal 1998.
The increase in gross profit was primarily the result of a larger content of
higher margin products in the Company's sales for the year ended March 31, 1998
relative to the same period of the prior year. In addition, certain long-term
contracts realized higher profits than initial estimates.

        Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased 65.5% from $4.8 million (10.0% of
revenues) in fiscal 1997 to $7.9 million (12.2% of revenues) in fiscal 1998. The
Company increased its business development and administrative staffing in
support of both defense and commercial programs. Bid and proposal efforts
increased from $1.2 million in fiscal 1997 to $1.5 million in fiscal 1998.

        Independent Research and Development. IR&D expenses increased 50.0% from
$5.1 million (10.6% of revenues) in fiscal 1997 to $7.6 million (11.9% of
revenues) in fiscal 1998. This increase resulted primarily from higher IR&D
expenses related to the Company's StarWire DAMA product, which represented
approximately 88% of total IR&D for fiscal 1998.

                                       31


<PAGE>   35

        Interest Expense. Interest expense decreased 16.9% from $254,000 in
fiscal 1997 to $211,000 in fiscal 1998. Interest expense relates to loans for
the purchase of capital equipment and to short-term borrowings under the
Company's line of credit to cover working capital requirements. Total
outstanding equipment loans were $2.6 million at March 31, 1997 and 1998. There
were no outstanding borrowings under the Company's line of credit at the end of
each fiscal year.

        Interest Income. Interest income increased 125.1% from $354,000 in
fiscal 1997 to $797,000 in fiscal 1998. Interest income relates to interest
earned on cash and short-term investments.

        Provision (Benefit) for Income Taxes. The Company's effective income tax
rate increased from 35% in fiscal 1997 to 37% in fiscal 1998. The Company's
effective income tax rate increased due to a limitation on qualified research
and development expenditures used to calculate the Company's research and
development tax credit.

        FISCAL YEAR ENDED MARCH 31, 1997 VS. FISCAL YEAR ENDED MARCH 31, 1996

        Revenues. The Company's revenues increased 64.4% from $29.0 million in
fiscal 1996 to $47.7 million in fiscal 1997. This increase was primarily due to
a $13.0 million increase in revenues generated by contracts with the U.S. Air
Force for UHF DAMA network control stations, and a revenue increase of $8.7
million generated by EMUT modem production, offset in part by reduced activity
in other product lines and the completion of certain contracts. UHF DAMA
business area revenues grew from $12.4 million (42.8% of revenues) in fiscal
1996 to $32.8 million (68.8% of revenues) in fiscal 1997.

        Gross Profit. Gross profit increased 81.9% from $8.0 million (27.7% of
revenues) in fiscal 1996 to $14.6 million (30.6% of revenues) in fiscal 1997.
This increase primarily reflects improved contract profitability and higher
prices related to the recovery of allowable IR&D costs under certain government
contracts.

        Selling, General and Administrative Expenses. SG&A expenses increased
39.8% from $3.4 million (11.7% of revenues) in fiscal 1996 to $4.8 million
(10.0% of revenues) in fiscal 1997. The Company continued to increase
administrative staff to support IR&D related to its StarWire DAMA product,
increased its business development staff for defense programs, and added to
finance and administrative staffing. Bid and proposal efforts increased from
$1.0 million in fiscal 1996 to $1.2 million in fiscal 1997.

        Independent Research and Development. IR&D expenses increased 80.4% from
$2.8 million (9.7% of revenues) in fiscal 1996 to $5.1 million (10.6% of
revenues) in fiscal 1997. Expenditures on the development of the Company's
StarWire DAMA product began in the last quarter of fiscal 1995 and have steadily
increased.

        Interest Expense. Interest expense decreased 2.3% from $260,000 in
fiscal 1996 to $254,000 in fiscal 1997. Total outstanding equipment loans were
$2.5 million at the end of fiscal 1996 and $2.6 million at the end of fiscal
1997. There were no outstanding borrowings under the Company's line of credit at
the end of each fiscal year.

        Interest Income. Interest income increased from $29,000 in fiscal 1996
to $354,000 in fiscal 1997. Interest income relates to interest earned on
short-term deposits of cash.

        Provision (Benefit) for Income Taxes. The income tax benefit in fiscal
1996 was primarily attributable to the utilization of research and development
credits generated during the current period and the impact of a United States
Federal judicial decision which clarified the tax law related to the utilization
of research and development credits generated from funded research and
development. The income tax provision in fiscal 1997 was less than the combined
federal and state statutory rate due to the utilization of research and
development credits.

                                       32


<PAGE>   36



LIQUIDITY AND CAPITAL RESOURCES

        The Company has financed its operations to date primarily from cash
flows from operations, bank line of credit financing, equity financing and loans
for the purchase of capital equipment. Cash used in operating activities for the
fiscal years ended March 31, 1998 and 1997 was $127,000 and $1.2 million,
respectively. The relative decrease in cash used for operating activities for
the year ended March 31, 1998 compared to the prior year was primarily due to an
increase in net income of $2.1 million, relatively flat inventory growth and a
reduction in other assets, which was offset by an increase in accounts
receivable and a decrease in accounts payable. Other assets decreased primarily
due to the collection of a non-trade receivable. The increase in accounts
receivable resulted from an increase in the Company's revenues and the timing of
customer payments.

        Cash used in investing activities for the fiscal years ended March 31,
1998 and 1997 was $10.0 million and $3.7 million, respectively. This increase
was the result of purchasing $5.9 million in short-term, investment grade, debt
securities and purchases of property and equipment, primarily consisting of test
equipment and computers.

        Cash provided by financing activities for the fiscal years ended March
31, 1998 and 1997 was $745,000 and $15.3 million, respectively. This decrease
was primarily the result of $14.8 million of capital raised in the Company's
initial public offering which closed in December 1996.

        At March 31, 1998, the Company had $3.3 million in cash and cash
equivalents, $5.9 million in short-term investments, $24.3 million in working
capital and $2.6 million in long-term debt which consists of equipment
financing. The Company had a zero balance under its line of credit at March 31,
1998 and 1997.

        The Company's credit facility with Union Bank includes a $6.0 million
line of credit and $4.5 million in commitments for equipment financing. The line
of credit allows the Company to borrow, for general working capital purposes,
the greater of $2.0 million or 80% of eligible accounts receivable plus 50% of
the Company's eligible inventory. At the Company's option, interest accrues
either at the bank's prime rate (8.5% at March 31, 1998) or at the bank's LIBOR
rate plus 1.75% (7.44% at March 31, 1998). The credit facility expires on
September 15, 1998. The Company is required to pay a fee equal to 0.09% of the
unused portion of the line of credit on a quarterly basis.

        The equipment line consists of three loans, each of which limits
borrowings to an 80.0% advance against the purchase price, net of sales tax,
delivery and insurance. The first and second loans have been converted into
fully amortizing loans which mature on September 15, 1999 and 2000,
respectively. All borrowings under the third loan, which may not exceed $2.5
million, must be made before September 15, 1998, at which time all unpaid
principal under such loan will be converted into a fully amortizing loan for a
period of 36 months with a maturity date of September 15, 2001.

        The Company has commenced the evaluation of computer systems and
products to insure its operations will not be adversely effected by the year
2000 software problems. Presently, the Company does not believe that year 2000
compliance will result in additional material investments by the Company, nor
does the Company anticipate that the year 2000 problem will have a material
adverse effect on the business operations or financial performance of the
Company. There can be no assurances, however, that the year 2000 problem will
not adversely effect the Company and its business.

        The Company's future capital requirements, which management anticipates
will not exceed $10.0 million over the next 12 months, will depend upon many
factors, including the progress of the Company's research and development
efforts, expansion of the Company's marketing efforts, and the nature and timing
of commercial orders. The Company believes that its current cash and short-term
investment balances, amounts available under its credit facilities and net cash
expected to be provided by operating activities, will be sufficient to meet its
working capital and capital expenditure requirements for at least the next 12
months. Management intends to invest the Company's cash in excess of current
operating requirements in short-term, interest-bearing, investment-grade
securities.

                                       33

<PAGE>   37



SUMMARIZED QUARTERLY DATA (UNAUDITED)

        The following financial information reflects all normal recurring
adjustments which are, in the opinion of management, necessary for the fair
statement of the results for the interim periods. Summarized quarterly data for
fiscal 1998 and 1997 is as follows (in thousands, except per share data):


<TABLE>
<CAPTION>

                                   1st Quarter   2nd Quarter  3rd Quarter   4th Quarter
                                   -----------   -----------  -----------   -----------
<S>                                <C>           <C>          <C>           <C>    
1998
Revenues                             $14,476       $15,931      $15,991       $17,799
Gross profit                           5,117         5,418        5,757         7,006
Income from operations                 1,706         1,760        2,006         2,333
Net income                             1,175         1,203        1,351         1,558
Basic net income per share (1)          0.15          0.15         0.17          0.20
Diluted net income per share (1)        0.15          0.15         0.16          0.19


1997
Revenues                             $ 9,732       $11,850      $12,079       $14,054
Gross  profit                          2,870         3,379        3,832         4,532
Income from operations                   772           947        1,288         1,767
Net income                               478           604          853         1,237
Basic net income per share (1)          0.14          0.18         0.18          0.16
Diluted net income per share (1)        0.08          0.10         0.13          0.15
</TABLE>


- -------------

(1) Earnings per share calculations have been restated to comply with Statement
    of Financial Accounting Standards (SFAS) No. 128. Basic and diluted net
    income per share computations for each quarter are independent and may not
    add up to the net income per share computation for the respective year. See
    Note 1 and Note 7 of Notes to the Financial Statements for an explanation of
    the determination of basic and diluted net income per share.


I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        Not applicable.


ITEM 8 FINANCIAL STATEMENTS

        The Company's financial statements at March 31, 1998 and 1997, and for
each of the three years in the period ended March 31, 1998, and the Report of
Price Waterhouse LLP, Independent Accountants, are included in this Report on
pages F-1 through F-14.


ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
       DISCLOSURE

        None.

                                       34

<PAGE>   38




                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information required by this item will be set forth under the
captions "Election of Directors" and "Executive Officers" in the Company's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the 1998 Annual Meeting of Stockholders (the
"Proxy Statement"), which is incorporated by reference herein.


ITEM 11. EXECUTIVE COMPENSATION

        The information required by this item is incorporated by reference to
the Proxy Statement under the heading "Executive Compensation."


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information required by this item is incorporated by reference to
the Proxy Statement under the heading "Security Ownership of Certain Beneficial
Owners and Management ."



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by this item is incorporated by reference to
the Proxy Statement under the heading "Certain Transactions."


                                       35

<PAGE>   39




                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

                                                                        PAGE
                                                                       NUMBER
                                                                       ------
<S>                                                                    <C>
      (a)  Documents filed as part of the report:

           (1)  Report of Independent Accountants                        F-1 

                Balance Sheets at March 31, 1998 and 1997                F-2

                Statements of Income for Fiscal 1998, 1997 and 1996      F-3
                
                Statements of Cash Flow for Fiscal 1998, 1997 and 1996   F-4 
                
                Statements of Stockholders' Equity for Fiscal 
                1998, 1997 and 1996                                      F-5

                Notes to Financial Statements                            F-6
</TABLE>



     Financial statement schedules have been omitted because they are either not
required, not applicable or the information is otherwise included.

           (2)  Exhibits

<TABLE>
<CAPTION>

         EXHIBIT
         NUMBERS                     DESCRIPTION OF EXHIBIT
         -------                     ----------------------

<S>                 <C>
           3.1      Amended and Restated Certificate of Incorporation.(1)

           3.2      Bylaws.(1)

           4.1      Form of Common Stock Certificate.(1)

          10.1      Preferred Stock Purchase Agreement, dated as of June 11,
                    1986, by and among the Company, Southern California
                    Ventures, Robert W. Johnson and Thomas A. Tisch.(1)

          10.2      Shareholders' Agreement, dated June 11, 1986, by and among
                    Southern California Ventures, Robert W. Johnson, Thomas A.
                    Tisch, the Company, Mark D. Dankberg, Steven R. Hart and
                    Mark J. Miller.(1)

          10.3      Form of Stock Restriction Agreement by and between the
                    Company and each stockholder of the Company.(1)

          10.4      Form of Invention and Confidential Disclosure Agreement by
                    and between the Company and each employee of the Company.(1)

          10.5      ViaSat, Inc. 1993 Stock Option Plan (the "1993 Stock Option
                    Plan").(1)

          10.6      First Amendment to the 1993 Stock Option Plan.(2)

          10.7      Form of Incentive Stock Option Agreement under the 1993
                    Stock Option Plan.(1)

          10.8      Form of Nonqualified Stock Option Agreement under the 1993
                    Stock Option Plan.(1)

          10.9      The 1996 Equity Participation Plan of ViaSat, Inc. (the
                    "1996 Equity Participation Plan").(1)

          10.10     Form of Incentive Stock Option Agreement under the 1996
                    Equity Participation Plan.(1)

          10.11     Form of Nonqualified Stock Option Agreement under the 1996
                    Equity Participation Plan.(1)

          10.12     The ViaSat, Inc. Employee Stock Purchase Plan.(1)

          10.13     ViaSat, Inc. 401(k) Profit Sharing Plan.(1)

          10.14     Loan Agreement, dated as of September 15, 1995, by and
                    between the Company and Union Bank.(1)

          10.15     Waiver and First Amendment to Loan Agreement, dated as of
                    March 31, 1997, by and between the Company and Union
                    Bank.(2)

          10.16     Business Loan Agreement, dated as of April 5, 1994, as
                    amended, by and between the Company and Scripps Bank.(1)

          10.17     Equipment Financing Agreement, dated April 28, 1994, by and
                    between the Company and Heritage Leasing Capital.(1)

          10.18     Equipment Financing Agreement, dated May 13, 1994, by and
                    between the Company and Heritage Leasing Capital.(1)
</TABLE>



                                       36


<PAGE>   40

<TABLE>
<CAPTION>

         EXHIBIT
         NUMBERS                     DESCRIPTION OF EXHIBIT
         -------                     ----------------------

<S>                 <C>
          10.19     Equipment Financing Agreement, dated September 19, 1994, by
                    and between the Company and Heritage Leasing Capital.(1)

          10.20     Equipment Financing Agreement, dated December 6, 1994, by
                    and between the Company and Heritage Leasing Capital.(1)

          10.21     Sublease, dated as of August 20, 1993, by and between
                    Whittaker Corporation and the Company (2290 Cosmos Court,
                    Carlsbad, California).(1)

          10.22     Lease Agreement, dated December 8, 1994, by and between The
                    Campus, LLC and the Company (The Campus, Carlsbad,
                    California).(1)

          10.23     Lease, dated March 21, 1995, by and between Nagog
                    Development Co. and the Company (125 Nagog Park, Acton,
                    Massachusetts).(1)

          10.24     Lease, dated March 8, 1996, by and between Harry and Wendy
                    Brandon and the Company(1900 S. Harbor City Blvd.,
                    Melbourne, Florida).(1)

          10.25     Lease, dated December 9, 1997, by and between Newport
                    National Corporation and the Company(5962 La Place Court,
                    Carlsbad, California).(3)

          10.26     Lease, dated April 22, 1997, by and between Onimac
                    Corporation and the Company (2320 Camino Vida Roble,
                    Carlsbad, California).(3)

          10.27     Lease, dated March 24, 1998, by and between W9/LNP Real
                    Estate Limited Partnership and the Company (6155 El Camino
                    Real, Carlsbad, California).(3)

          10.28     Basic Ordering Agreement, dated November 8, 1994, as
                    amended, by and between the Company and AT&T acting through
                    its Tridom division.(1)

          10.29     Supply & Services Contract, dated June 2, 1996, by and
                    between HCL Comnet Systems and Services Limited and the
                    Company.(1)

          10.30     Basic Ordering Agreement Subcontract, dated March 4, 1994,
                    by and between Magnavox Electronic Systems Company and the
                    Company.(1)

          10.31     Purchase Order Change to Basic Ordering Agreement
                    Subcontract, dated February 25, 1997, by and between Hughes
                    Defense Communications (formerly Magnavox Electronic Systems
                    Company) and the Company.(2)

          10.32     Award/Contract, effective March 29, 1996, as amended, issued
                    by Electronic Systems Center/MCK Air Force Materiel Command,
                    USAF to the Company.(1)

          10.33     Amendment of Award/Contract, effective February 24, 1997,
                    issued by Electronic Systems Center/MCK Air Force Materiel
                    Command, USAF to the Company.(2)

          10.34     Award/Contract, effective October 2, 1995, issued by
                    Electronic Systems Center/MCK Air Force Materiel Command,
                    USAF to the Company.(1)

          10.35     Award/Contract, effective September 29, 1993, as amended,
                    issued by Information Technology Acquisition Center to the
                    Company.(1)

          10.36     Turnkey Agreement, dated August 9, 1996, by and between
                    Hutchison Corporate Access (HK) Limited and the Company.(1)

          10.37     Award/Contract, effective July 30, 1991, issued by
                    Electronic Systems Division Air Force Systems Command, USAF
                    to the Company.(1)

          10.38     Award/Contract, effective September 27, 1993, as amended,
                    issued by Contracting Officer Naval Research Laboratory to
                    the Company.(1)

          10.39     Award Contract, effective September 21, 1994, as amended,
                    issued by Technical Contract Management Office to the
                    Company.(1)

          10.40     Fixed Price Contract, dated as of October 18, 1995, by and
                    between the Company and Spectragraphics.(1)

          21.1      Subsidiaries.(1)

          23.1      Consent of Independent Accountants.(3)

          27.1      Financial Data Schedule.(3)

          27.2      Restated Financial Data Schedule for the six months ended
                    September 30, 1997.(3)

          27.3      Restated Financial Data Schedule for the nine months ended
                    December 31, 1996.(3)

          27.4      Restated Financial Data Schedule for the year ended 
                    March 31, 1997.(3) 
</TABLE>

- ----------

(1)  Incorporated by reference to the Registrant's Registration Statement on
     Form S-1 filed with the Securities and Exchange Commission (the
     "Commission") on October 1, 1996 (File No. 333-13183), as amended by
     Amendment No 1 filed with the Commission on November 5, 1996, Amendment No.
     2 filed with the Commission on November 20, 1996, and Amendment No.
     3 filed with the Commission on November 22, 1996.

                                       37

<PAGE>   41

(2)  Incorporated by reference to the Company's Annual Report on Form 10-K for
     the fiscal year ended March 31, 1997.

(3)  Filed herewith.


        (b) REPORTS ON FORM 8-K

        There were no reports on Form 8-K filed by the registrant during the
fourth quarter of the fiscal year ended March 31, 1998.

        (c) EXHIBITS

        The exhibits required by this Item are listed under Item 14(a)(2).

                                       38

<PAGE>   42



<TABLE>

                           GLOSSARY OF SELECTED TERMS

<S>                             <C>    
DAMA ...........................Demand Assigned Multiple Access. A protocol for
                                assigning a communication channel to a user only
                                upon request.

DOD.............................Department of Defense.

Downlink .......................A radio transmission from a satellite back down
                                toward the earth.

EMUT ...........................Enhanced Manpack UHF Terminal. A small, portable
                                satellite terminal for DOD that operates in the
                                UHF frequency band.

FDMA............................Frequency Division Multiple Access. A protocol
                                that assigns each communication channel to a
                                different transmission frequency.

GHz.............................Giga Hertz. One billion cycles per second. A
                                measure of frequency or bandwidth.

LEO.............................Low Earth Orbit.

Local Loop Services.............Local telephony service.

MHz.............................Mega Hertz. One million cycles per second. A
                                measure of frequency or bandwidth.

MIL-STD.........................Military standard.

NCS.............................Network Control System. The satellite terminal
                                and computer that manages channel assignments in
                                a DAMA network.

Network.........................A collection of user terminals linked together
                                by a satellite.

PSTN............................Public Switched Telephone Network.

RF..............................Radio Frequency.

SCPC............................Single Channel Per Carrier. A signalling
                                technique that transmits one voice or data
                                circuit per radio channel.

SHF.............................Super High Frequency radio transmissions.

TDM.............................Time Division Multiplexing. A protocol for
                                combining several different circuits into a
                                single, continuous transmission.

TDMA............................Time Division Multiple Access. A protocol for
                                time sharing a single communication channel
                                among a number of different users.

Transponder.....................A receiving and transmitting device on board a
                                satellite that relays an uplink transmission
                                from a satellite terminal back down to earth.

UHF.............................Ultra High Frequency radio transmissions.
</TABLE>



                                       39


<PAGE>   43


<TABLE>
<S>                             <C>
Uplink..........................A radio transmission from a satellite terminal
                                that is sent up to a satellite.

VSAT............................Very Small Aperture Terminal. A satellite
                                terminal with a very small antenna. A VSAT
                                antenna is typically considered to be less than
                                3.7 meters in diameter.

Wireless Local Loop ............Wireless switched local telephony service.
</TABLE>


                                       40

<PAGE>   44




                                    SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date: June 26, 1998.


                                      ViaSat, Inc.

                                      By: /s/  MARK D. DANKBERG
                                          --------------------------------------
                                          Mark D. Dankberg
                                          Chairman, President and Chief
                                          Executive Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

                 SIGNATURE                      TITLE                           DATE
                 ---------                      -----                           ----

<S>                                       <C>                                  <C> 
/s/  MARK D. DANKBERG                     Chairman of the Board,               June 26, 1998
- ------------------------------------      President and Chief
Mark D. Dankberg                          Executive Officer (Principal
                                          Executive Officer)


/s/  GREGORY D. MONAHAN                   Vice President, Chief                June 26, 1998
- ------------------------------------      Financial Officer and
Gregory D. Monahan                        General Counsel (Principal
                                          Financial Officer and
                                          Principal Accounting
                                          Officer)


/s/  ROBERT W. JOHNSON                    Director                             June 26, 1998
- ------------------------------------
Robert W. Johnson


/s/  JEFFREY M. NASH                      Director                             June 26, 1998
- ------------------------------------
Jeffrey M. Nash


/s/  B. ALLEN LAY                         Director                             June 26, 1998
- ------------------------------------
B. Allen Lay


/s/  JAMES F. BUNKER                      Director                             June 26, 1998
- ------------------------------------
James F. Bunker
</TABLE>



                                       41

<PAGE>   45






                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of ViaSat, Inc.

In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) on page 36 present fairly, in all material respects, the financial
position of ViaSat, Inc. at March 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.


PRICE WATERHOUSE LLP

San Diego, California
May 13, 1998



                                      F-1

<PAGE>   46




                                  VIASAT, INC.

                                  BALANCE SHEET



<TABLE>
<CAPTION>

                                                           MARCH 31,      MARCH 31,
                                                             1998           1997
                                                         ------------      ------------
<S>                                                      <C>               <C>         
ASSETS

Current assets:
  Cash and cash equivalents                              $  3,290,000      $ 12,673,000
  Short-term investments                                    5,918,000                --
  Accounts receivable                                      19,056,000        10,315,000
  Inventory                                                 4,687,000         4,478,000
  Deferred income taxes                                     1,548,000           863,000
  Other current assets                                        479,000         1,825,000
                                                         ------------      ------------
     Total current assets                                  34,978,000        30,154,000
Property and equipment, net                                 6,986,000         5,085,000
Other assets                                                  829,000           435,000
                                                         ------------      ------------

          Total assets                                   $ 42,793,000      $ 35,674,000
                                                         ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                       $  4,555,000      $  4,844,000
  Accrued liabilities                                       5,087,000         3,769,000
  Current portion of notes payable                          1,060,000         1,135,000
                                                         ------------      ------------
     Total current liabilities                             10,702,000         9,748,000
                                                         ------------      ------------
Notes payable                                               1,544,000         1,428,000

Other liabilities                                             937,000           879,000
                                                         ------------      ------------
     Total long-term liabilities                            2,481,000         2,307,000
                                                         ------------      ------------
Commitments and contingencies (Notes 11 & 12)

Stockholders' equity:
  Series A, convertible preferred stock, $.0001 par
   value; 5,000,000 shares authorized; no shares
   issued and outstanding at March 31, 1998 and
   1997, respectively

Common stock, $.0001 par value, 25,000,000
   shares authorized; 7,920,639 and 7,742,274
   shares issued and outstanding at March 31,
   1998 and 1997, respectively                                 81,000            81,000

  Paid in capital                                          16,668,000        16,044,000
  Stockholders' notes receivable                                   --           (80,000)
  Retained earnings                                        12,861,000         7,574,000
                                                         ------------      ------------
     Total stockholders' equity                            29,610,000        23,619,000
                                                         ------------      ------------
     Total liabilities and stockholders'
        equity                                           $ 42,793,000      $ 35,674,000
                                                         ============      ============
</TABLE>





                 See accompanying notes to financial statements.


                                      F-2

<PAGE>   47



                                  VIASAT, INC.

                               STATEMENT OF INCOME


<TABLE>
<CAPTION>

                                                    YEAR ENDED MARCH 31,
                                      --------------------------------------------------
                                          1998                1997              1996
                                      ------------       ------------       ------------
<S>                                   <C>                <C>                <C>         
Revenues                              $ 64,197,000       $ 47,715,000       $ 29,017,000
Cost of revenues                        40,899,000         33,102,000         20,983,000
                                      ------------       ------------       ------------
  Gross profit                          23,298,000         14,613,000          8,034,000
Operating expenses:
  Selling, general and
     administrative                      7,862,000          4,752,000          3,400,000
  Independent research and
     development                         7,631,000          5,087,000          2,820,000
                                      ------------       ------------       ------------
Income from operations                   7,805,000          4,774,000          1,814,000
Other income (expense):
  Interest income                          797,000            354,000             29,000
  Interest expense                        (211,000)          (254,000)          (260,000)
                                      ------------       ------------       ------------
Income before income taxes               8,391,000          4,874,000          1,583,000
Provision (benefit) for income
  taxes                                  3,104,000          1,702,000            (50,000)
                                      ------------       ------------       ------------
Net income                            $  5,287,000       $  3,172,000       $  1,633,000
                                      ============       ============       ============

Basic net income per share
                                      $       0.68       $       0.66       $       0.50
                                      ============       ============       ============

Diluted net income per share
                                      $       0.65       $       0.48       $       0.28
                                      ============       ============       ============

Shares used in computing basic
   net income per share                  7,801,212          4,810,472          3,267,141
                                      ============       ============       ============

Shares used in computing diluted
   net income per share                  8,174,994          6,641,805          5,734,637
                                      ============       ============       ============

</TABLE>


                 See accompanying notes to financial statements.

                                      F-3

<PAGE>   48



                                  VIASAT, INC.

                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                                               YEAR ENDED MARCH 31,
                                                 --------------------------------------------------
                                                     1998                1997                1996
                                                 ------------       ------------       ------------

<S>                                              <C>                <C>                <C>         
Cash flows from operating activities:
  Net income                                     $  5,287,000       $  3,172,000       $  1,633,000

  Adjustments to reconcile net income to
   net cash (used in) provided by operating
   activities:
      Depreciation                                  2,182,000          1,389,000            982,000
      Deferred income taxes                          (811,000)          (721,000)          (350,000)
  Increase (decrease) in cash resulting
   from changes in:
      Accounts receivable                          (8,741,000)        (4,144,000)        (1,871,000)
      Inventory                                      (209,000)        (3,255,000)        (1,019,000)
      Other assets                                  1,078,000         (1,620,000)          (186,000)
      Accounts payable                               (289,000)         2,070,000          1,294,000
      Accrued liabilities                           1,318,000          1,612,000           (512,000)
      Other liabilities                                58,000            275,000            485,000
                                                 ------------       ------------       ------------
        Net cash (used in) provided by
            operating activities                     (127,000)        (1,222,000)           456,000
                                                 ------------       ------------       ------------

Cash flows from investing activities:
  Purchases of short-term investments              (5,918,000)                --                 --
  Purchases of property and equipment              (4,083,000)        (3,685,000)        (1,875,000)
                                                 ------------       ------------       ------------

        Net cash used in investing
          activities                              (10,001,000)        (3,685,000)        (1,875,000)
                                                 ------------       ------------       ------------


Cash flows from financing activities:
  Proceeds from short-term bank borrowings                 --          2,600,000          1,400,000
  Repayment of short-term bank borrowings                  --         (2,600,000)        (1,400,000)
  Proceeds from issuance of notes payable           1,448,000            889,000          2,778,000
  Repayment of notes payable                       (1,407,000)          (836,000)        (1,964,000)
  Proceeds from issuance of common stock              704,000         15,230,000            171,000
                                                 ------------       ------------       ------------

        Net cash provided by financing 
          activities                                  745,000         15,283,000            985,000
                                                 ------------       ------------       ------------


Net (decrease) increase in cash and cash
   equivalents                                     (9,383,000)        10,376,000           (434,000)
Cash and cash equivalents at
   beginning of year                               12,673,000          2,297,000          2,731,000
                                                 ------------       ------------       ------------


Cash and cash equivalents at end of year         $  3,290,000       $ 12,673,000       $  2,297,000
                                                 ============       ============       ============

Supplemental information:
  Cash paid for interest                         $    211,000       $    254,000       $    260,000
                                                 ============       ============       ============
  Cash paid for income taxes                     $  3,857,000       $  2,293,000       $    468,000
                                                 ============       ============       ============
</TABLE>



                 See accompanying notes to financial statements.

                                      F-4

<PAGE>   49



                                  VIASAT, INC.

                        STATEMENT OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>


                                         PREFERRED STOCK              COMMON  STOCK                       STOCKHOLDERS'
                                    NUMBER OF                   NUMBER OF                     PAID IN          NOTES       RETAINED
                                     SHARES          AMOUNT      SHARES         AMOUNT        CAPITAL       RECEIVABLE     EARNINGS
                                  -----------    ------------  ----------   ------------   ------------   ------------  ------------
<S>                               <C>            <C>            <C>         <C>            <C>            <C>           <C>
Balance at March 31, 1995           3,225,000    $     32,000   3,207,339   $     44,000   $   568,000                  $ 2,769,000

  Issuance of common stock                                        134,762          2,000       169,000
  Net income                                                                                                              1,633,000
                                  -----------    ------------  ----------   ------------   -----------   ------------   -----------
Balance at March 31, 1996           3,225,000          32,000   3,342,101         46,000       737,000                    4,402,000

  Issuance of common stock                                      2,034,635          3,000    15,307,000
  Conversion of preferred
     stock to common stock         (3,225,000)   $    (32,000)  2,365,538         32,000
  Shares subscribed                                                                                       $    (80,000)
  Net income                                                                                                              3,172,000
                                  -----------    ------------  ----------   ------------   ------------   ------------  ------------
Balance at March 31, 1997                                       7,742,274         81,000     16,044,000        (80,000)   7,574,000

  Exercise of stock options                                       126,273                       149,000
  Issuance for Employee Stock 
    Purchase Plan                                                  52,092                       475,000
  Payment for shares subscribed                                                                            $    80,000
  Net income                                                                                                              5,287,000
                                  -----------    ------------  ----------   ------------   ------------   ------------  -----------

Balance at March 31, 1998                                       7,920,639   $     81,000   $ 16,668,000                 $12,861,000
                                  ===========    ============  ==========   ============   ============   ============  ============
</TABLE>




                 See accompanying notes to financial statements.

                                      F-5

<PAGE>   50



                                  VIASAT, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES

  The Company

        ViaSat, Inc. (the "Company") designs, produces and markets advanced
digital satellite telecommunications and wireless signal processing equipment.

  Management Estimates and Assumptions

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Estimates have been prepared on the basis of the most current and best
available information and actual results could differ from those estimates.

  Cash Equivalents

        Cash equivalents consist of highly liquid investments with original
maturities of 90 days or less.

  Investments

        At March 31, 1998, the Company held investments in investment grade debt
securities with various maturities. Management determines the appropriate
classification of its investments in debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. The Company's total
investments in these securities as of March 31, 1998 and 1997 totaled $9,176,000
and $8,979,000, respectively. The Company has included $3,258,000 and $8,979,000
of these securities in cash and cash equivalents, as of March 31, 1998 and 1997,
respectively, as they have maturities of less than 90 days. The remaining
$5,918,000 as of March 31, 1998 has been classified as short-term investments.
The Company has designated all of its investments as held to maturity.

  Revenue Recognition

        The majority of the Company's revenues are derived from services
performed for the United States Government and its prime contractors under a
variety of contracts including cost-plus-fixed fee, fixed-price, and time and
materials contracts. Such sales amounted to $58,249,000, $46,292,000, and
$28,305,000 for the years ended March 31, 1998, 1997 and 1996, respectively.
Included in these revenues are sales to a significant customer under various
subcontracts totaling $8,964,000, $12,830,000 and $5,269,000 during the years
ended March 31, 1998, 1997 and 1996, respectively. The Company's five largest
contracts (by revenues) generated approximately 65%, 58% and 37% of the
Company's total revenues for the fiscal year ended March 31, 1998, 1997 and
1996, respectively.

        Generally, revenues are recognized as services are performed using the
percentage of completion method, measured primarily by costs incurred to date
compared with total estimated costs at completion or based on the number of
units delivered. The Company provides for anticipated losses on contracts by a
charge to income during the period in which they are first identified.

        Contract costs, including indirect costs, are subject to audit and
negotiations with Government representatives. These audits have been completed
and agreed upon through fiscal year 1995. Contract revenues and accounts
receivable are stated at amounts which are expected to be realized upon final
settlement.

                                      F-6

<PAGE>   51




  Unbilled Accounts Receivable

        Unbilled receivables consist of costs and fees earned and billable on
contract completion or other specified events. The majority of unbilled
receivables is expected to be collected within one year.

   Concentration of Credit Risk

        Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of cash equivalents,
short-term investments, and trade accounts receivable which are generally not
collateralized. The Company limits its exposure to credit loss by placing its
cash equivalents and short-term investments with high credit quality financial
institutions which invest in high quality short-term debt instruments.
Concentrations of credit risk with respect to receivables are generally limited
because the Company's principal customers are various agencies of the United
States Government and its prime contractors.

  Inventory

        Inventories are valued at the lower of cost or market, cost being
determined by the first-in, first-out method.

  Software Costs

        Software product development costs incurred from the time technological
feasibility is reached until the product is available for general release to
customers are capitalized and reported at the lower of cost or net realizable
value. Through March 31, 1998, no significant amounts were expended subsequent
to reaching technological feasibility.

  Property and Equipment

        Equipment, computers, and furniture and fixtures are recorded at cost,
and depreciated over estimated useful lives of 3 to 7 years under the
straight-line method. Additions to property and equipment together with major
renewals and betterments are capitalized. Maintenance, repairs and minor
renewals and betterments are charged to expense. When assets are sold or
otherwise disposed of, the cost and related accumulated depreciation or
amortization are removed from the accounts and any resulting gain or loss is
recognized.

  Long-lived Assets

        The Company assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances have made recovery of
the asset's carrying value unlikely. An impairment loss would be recognized when
the sum of the expected future undiscounted net cash flows is less than the
carrying amount of the asset. No such impairment losses have been identified by
the Company.

  Warranty Reserves

        The Company provides limited warranties on certain of its products for
periods of up to three years. The Company recognizes warranty reserves when
products are shipped based upon an estimate of total warranty costs, with
amounts expected to be incurred within twelve months classified as a current
liability.

  Income Taxes

        Current income tax expense is the amount of income taxes expected to be
payable for the current year. A deferred income tax asset or liability is
established for the expected future tax consequences resulting from differences
in the financial reporting and tax bases of assets and liabilities. Deferred
income tax expense (benefit) is the net change during the year in the deferred
income tax asset or liability. 

                                      F-7

<PAGE>   52


  Stock Based Compensation

        The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net income and earnings per share as if the fair value method had
been applied in measuring compensation expense (Note 8).

  Earnings Per Share

        In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", which establishes new standards for computing earnings per share. Under
the new requirements, historically reported "primary" and "fully diluted"
earnings per share have been replaced with "basic" and "diluted" earnings per
share. Basic earnings per share is computed based upon the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is based upon the weighted average number of common shares outstanding and
dilutive common stock equivalents during the period. Common stock equivalents
include options granted under the Company's stock option plans which are
included in the earnings per share calculations using the treasury stock method
and common shares expected to be issued under the Company's employee stock
purchase plan. All earnings per share data reported in prior years has been
restated in accordance with SFAS No. 128.

  Fair Value of Financial Instruments

        At March 31, 1998, the carrying amounts of the Company's financial
instruments, including cash equivalents, short-term investments, trade
receivables and accounts payable, approximated their fair values due to their
short-term maturities. At March 31, 1998, the estimated fair value of the
Company's long-term debt approximated its carrying value, as a majority of the
related borrowing rates are variable.

  Recapitalization

        In November 1996, the Company filed an Amended and Restated Certificate
of Incorporation to effect a .7335 for 1 reverse stock split of all outstanding
shares of common stock and stock options. All shares and per share data in the
accompanying financial statements have been adjusted retroactively to give
effect to the reverse stock split. The Amended and Restated Certificate of
Incorporation increases the authorized stock of the Company such that the
Company is authorized to issue 5,000,000 shares of $0.0001 par value preferred
stock, and 25,000,000 shares of $0.0001 par value common stock. Concurrently,
the conversion ratio of the Company's preferred stock was changed to .7335 for
1.

NOTE 2 - COMPLETION OF INITIAL PUBLIC OFFERING

     On December 3, 1996, the Company completed its initial public offering for
the sale of 2,400,000 shares of common stock (of which 1,850,000 shares were
sold by the Company and 550,000 shares were sold by certain stockholders) at a
price to the public of $9 per share, which resulted in net proceeds to the
Company of $15,485,000 after payment of the underwriters' commissions but before
deduction of offering expenses.


                                      F-8

<PAGE>   53



NOTE 3 - COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS

<TABLE>
<CAPTION>

                                                         MARCH 31,
                                              -------------------------------
                                                   1998              1997
                                              ------------       ------------
<S>                                           <C>                <C>         
Cash and cash equivalents:
  Investments in debt securities              $  3,258,000       $  8,979,000
  Certificates of deposit                               --          1,500,000
  Cash                                              32,000          2,194,000
                                              ------------       ------------
                                              $  3,290,000       $ 12,673,000
                                              ============       ============

Accounts receivable:
  Billed                                      $ 12,077,000       $  6,860,000
  Unbilled, less progress payments of
   $3,092,000 and  $7,399,000 at
   March 31, 1998 and 1997, respectively         6,979,000          3,455,000
                                              ------------       ------------
                                              $ 19,056,000       $ 10,315,000
                                              ============       ============
Inventory:
  Raw materials                               $  1,564,000       $  1,418,000
  Work in process                                2,372,000          2,662,000
  Finished goods                                   751,000            398,000
                                              ------------       ------------
                                              $  4,687,000       $  4,478,000
                                              ============       ============

Property and equipment:
  Machinery and equipment                     $  8,224,000       $  5,320,000
  Computer equipment                             4,108,000          3,012,000
  Furniture and fixtures                           339,000            256,000
                                              ------------       ------------
                                                12,671,000          8,588,000
  Less accumulated depreciation                 (5,685,000)        (3,503,000)
                                              ------------       ------------
                                              $  6,986,000       $  5,085,000
                                              ============       ============

Accrued liabilities:
  Current portion of warranty reserve         $  1,279,000       $    806,000
  Accrued vacation                                 974,000            821,000
  Collections in excess of revenues                930,000            355,000
  Accrued 401(k) matching contribution             671,000            553,000
  Accrued bonus                                    500,000            762,000
  Income taxes payable                             309,000            252,000
  Other                                            424,000            220,000
                                              ------------       ------------
                                              $  5,087,000       $  3,769,000
                                              ============       ============
</TABLE>



NOTE 4 - SHORT-TERM BANK BORROWINGS

        The Company has a $6,000,000 line of credit with a bank which allows it
to borrow the greater of $2,000,000 or 80% of eligible accounts receivable plus
50% of the Company's eligible inventory. At the Company's option, interest
accrues either at the bank's prime rate (8.5% at March 31, 1998) or at the
bank's LIBOR rate plus 1.75% (7.44% at March 31, 1998). There were no borrowings
outstanding as of March 31, 1998 and 1997. The Company is required to pay a fee
equal to 0.09% of the unused portion of the line of credit on a quarterly basis.
The credit agreement includes covenants which, among other things, require the
Company to maintain stated net worth amounts plus specific liquidity and
long-term solvency ratios as well as a minimum net income level. The line of
credit expires on September 15, 1998. Amounts borrowed are secured by
substantially all of the Company's assets.


                                      F-9

<PAGE>   54



NOTE 5 - NOTES PAYABLE

<TABLE>
<CAPTION>

                                                         MARCH 31,
                                             -----------------------------
                                                 1998             1997
                                             -----------       -----------
<S>                                          <C>               <C>        
Bank installment loans, with various
  maturity dates through September
  2001, total monthly  payments of
  $89,000 with interest rates ranging
  between 8% and 12%, collateralized
  by equipment                               $ 2,485,000       $ 2,232,000

Finance company installment loans, with
  various maturity dates through
  April 1999, total  monthly payments
  of $20,000 with interest rates
  ranging between 10.23% and 11.81%,
  collateralized by equipment                    119,000           331,000
                                             -----------       -----------
                                               2,604,000         2,563,000
Less current portion                          (1,060,000)       (1,135,000)
                                             -----------       -----------
                                             $ 1,544,000       $ 1,428,000
                                             ===========       ===========
</TABLE>


        Principal maturities of notes payable as of March 31, 1998 are
summarized as follows:

<TABLE>
<CAPTION>

        YEAR ENDING MARCH 31,
        ---------------------
<S>                                                          <C>      
               1999                                             1,060,000
               2000                                               873,000
               2001                                               517,000
               2002                                               154,000
                                                              -----------
                                                              $ 2,604,000
                                                              ===========
</TABLE>


NOTE 6 - COMMON STOCK AND OPTIONS

        In July 1993, the Company adopted the 1993 Stock Option Plan (the
"Plan") which authorizes 733,500 shares to be granted no later than July 2003.
The Plan provides for the grant of both incentive stock options and
non-qualified stock options which are subject to a three year vesting period.
The exercise prices of the options represent the estimated fair value of the
Company's common stock as determined by the Company's Board of Directors. In
November 1996, the Plan was terminated and replaced by the 1996 Equity
Participation Plan. No options have been issued under the Plan since July 1996.

        In November 1996, the Company adopted the ViaSat, Inc. 1996 Equity
Participation Plan (the "1996 Equity Participation Plan") designed to update and
replace the 1993 Stock Option Plan. The 1996 Equity Participation Plan provides
for the grant to executive officers, other key employees, consultants and
non-employee directors of the Company a broad variety of stock-based
compensation alternatives such as nonqualified stock options, incentive stock
options, restricted stock and performance awards. A maximum of 750,000 shares
are reserved for issuance under the 1996 Equity Participation Plan. As of March
31, 1998, the Company has granted 438,000 options to purchase shares of common
stock under this plan with vesting terms of 3 to 5 years.

        In November 1996, the Company adopted the ViaSat, Inc. Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan") to assist employees in
acquiring a stock ownership interest in the Company and to encourage them to
remain in the employment of the Company. The Employee Stock Purchase Plan is
intended to qualify under Section 423 of the Internal Revenue Code. A maximum of
250,000 shares of common stock are reserved for issuance under the Employee
Stock Purchase Plan. The Employee Stock Purchase Plan permits eligible employees
to purchase common stock at a discount through payroll deductions during
specified six-month offering periods. No employee may purchase more than $25,000
worth of stock in any calendar year. The price of shares purchased under the
Employee Stock Purchase Plan is equal to 85% of the fair market value of the
common stock on the first or last day of the offering period, whichever is
lower. As of March 31, 1998, the Company has issued 52,092 shares of common
stock under this plan.

                                      F-10

<PAGE>   55

        Transactions under the Company's stock option plans are summarized as
follows:

<TABLE>
<CAPTION>

                                                    NUMBER           EXERCISE PRICE
                                                  OF SHARES            PER SHARE
                                                  ---------            ---------
<S>                                              <C>                <C>
    Outstanding at March 31, 1995                    190,416           $.34- .82
    Options granted                                  128,033                1.36
    Options canceled                                    (147)                .82
    Options exercised                                 (8,215)            .34-.82
                                                 -----------
    Outstanding at March 31, 1996                    310,087            .34-1.36
    Options granted                                  295,673          4.09-10.75
    Options canceled                                  (5,284)           .82-4.09
    Options exercised                                (73,458)           .34-1.36
                                                 -----------
    Outstanding at March 31, 1997                    527,018           .34-10.75
    Options granted                                  269,450        12.25- 19.81
    Options canceled                                 (13,511)         .48- 12.75
    Options exercised                               (126,273)           .34-4.09
                                                 -----------
    Outstanding at March 31, 1998                    656,684          $.34-19.81
                                                 ===========
</TABLE>


        The Company also granted certain officers and employees the opportunity
to purchase at fair value 118,607 and 124,805 shares of the Company's common
stock in fiscal 1997 and 1996, respectively.

        The following table summarizes all options outstanding and exercisable
by price range as of March 31, 1998:

<TABLE>
<CAPTION>

                                               WEIGHTED
                                                AVERAGE         WEIGHTED                          WEIGHTED
                                               REMAINING         AVERAGE                           AVERAGE
         RANGE OF             NUMBER          CONTRACTUAL       EXERCISE       NUMBER             EXERCISE
      EXERCISE PRICES       OUTSTANDING       LIFE-YEARS          PRICE      EXERCISABLE            PRICE
     ----------------      ------------      -----------     -----------     -----------         -----------
<S>                        <C>               <C>            <C>              <C>                  <C>      
     $    0.34-1.50           119,812          1.99         $    1.13             74,242          $    1.07
          4.09-4.50            98,031          3.25              4.17             25,936               4.19
         9.00-12.75           355,341          9.01             11.31             40,002               9.77
        14.03-15.31            54,500          9.37             14.42                 --                 --
        17.13-19.81            29,000          9.50             17.89                 --                 --
                           ----------                                        -----------
     $   0.34-19.81           656,684          6.92         $    8.93            140,180           $   4.13
                           ==========                                        ===========
</TABLE>



NOTE 7 - SHARES USED IN EARNINGS PER SHARE CALCULATIONS

<TABLE>
<CAPTION>


                                                                                   YEAR ENDED MARCH 31,
                                                                     --------------------------------------------------
                                                                          1998             1997              1996
                                                                     ---------------  ----------------  ---------------
<S>                                                                  <C>              <C>               <C>   
 Weighted average common shares outstanding used in
    calculating basic net income per share                                7,801,212         4,810,472        3,267,141

 Weighted average options to purchase common stock as
    determined by application of the treasury stock method                  360,118           226,840          101,958

  Incremental shares for assumed conversion of
    convertible preferred stock                                                  --         1,600,788        2,365,538

  Employee Stock Purchase Plan equivalents                                   13,664             3,705               --

                                                                    ---------------  ----------------  ---------------
  Shares used in computing diluted net income per share                   8,174,994         6,641,805        5,734,637
                                                                    ===============  ================  ===============
</TABLE>


                                      F-11

<PAGE>   56


        All outstanding shares of the Company's preferred stock automatically
converted into shares of common stock upon the closing of the Company's initial
public offering on December 3, 1996. Shares used in computing diluted net income
per share for 1997 and 1996 assume the conversion of all outstanding shares of
the convertible preferred stock at the beginning of those years.

NOTE 8 - PRO FORMA EARNINGS PER SHARE

        The Company has elected to follow APB Opinion No. 25, "Accounting for
Stock Issued to Employees," to account for its employee stock options because,
as discussed below, the alternative fair value based accounting provided for
under SFAS No. 123 "Accounting for Stock-Based Compensation," requires the use
of option valuation models that were not developed for use in valuing employee
stock options. These valuation models were developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Under APB
No. 25, when the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized in the Company's financial statements.

        As the Company continues to follow APB Opinion No. 25 it presents pro
forma information regarding net income and earnings per share as if the Company
had accounted for its employee stock options and shares issued under the
Employee Stock Purchase Plan (hereafter referred to as "options") granted
subsequent to March 31, 1995 using the fair value methodology.

        The fair values of options granted during the years ended as reported
below were estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions:

<TABLE>
<CAPTION>

                                                        EMPLOYEE                                EMPLOYEE STOCK
                                                     STOCK OPTIONS                              PURCHASE PLAN
                                 ------------------------------------------------         ------------------------
                                       1998              1997              1996             1998             1997
                                 -------------      -------------        --------         --------         -------
<S>                              <C>                <C>                  <C>              <C>               <C> 
     Expected life (in years)      3.50 - 5.50       3.50 - 5.00            3.50             0.50            0.50
     Risk-free interest rate       5.65 - 5.68%             6.45%           5.93%            5.54%           5.97%
     Expected volatility                 50.00%            50.00%          50.00%           50.00%          50.00%
     Expected dividend yield              0.00%             0.00%           0.00%            0.00%           0.00%
</TABLE>




        The weighted average estimated fair value of employee stock options
granted during 1998, 1997 and 1996 was $6.30, $3.55 and $.57 per share,
respectively. The weighted average estimated fair value of shares granted under
the Employee Stock Purchase Plan during 1998 and 1997 was $4.00 and $2.78 per
share, respectively.

        For purposes of pro forma disclosures, the estimated fair value of
options is amortized to expense over the vesting period. Because SFAS No. 123 is
applicable only to options granted subsequent to March 31, 1995, the pro forma
effect will not be fully reflected until the options granted in fiscal 1996 are
fully vested in fiscal 2000. The Company's pro forma information for the years
ended March 31, 1998, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>

                                       1998            1997             1996
                                   -------------    ------------    -------------
<S>                                 <C>              <C>             <C>        
Net income as reported              $ 5,287,000      $3,172,000      $ 1,633,000
Pro forma net income                  4,489,000       3,016,000        1,615,000
Pro forma basic earnings per share         0.58            0.63             0.49
Pro forma diluted earnings per share       0.56            0.46             0.28
</TABLE>



                                      F-12


<PAGE>   57



NOTE 9 - INCOME TAXES

        The provision (benefit) for income taxes includes the following:

<TABLE>
<CAPTION>

                                                             YEAR ENDED MARCH 31,
                                            -------------------------------------------------------
                                               1998                   1997                  1996
                                            -----------           -----------           -----------
<S>                                         <C>                   <C>                   <C>        
Current tax provision
  Federal                                   $ 3,200,000           $ 1,954,000           $   344,000
  State                                         715,000               469,000                 9,000
                                            -----------           -----------           -----------
                                              3,915,000             2,423,000               353,000
                                            -----------           -----------           -----------
Deferred tax provision:
  Federal                                      (683,000)             (563,000)             (310,000)
  State                                        (128,000)             (158,000)              (93,000)
                                            -----------           -----------           -----------
                                               (811,000)             (721,000)             (403,000)
                                            -----------           -----------           -----------
     Total provision (benefit) for
       income taxes                         $ 3,104,000           $ 1,702,000           $   (50,000)
                                            ===========           ===========           ===========
</TABLE>



        Significant components of the Company's deferred tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>

                                                 MARCH 31,
                                        --------------------------
                                            1998           1997
                                        -----------     ----------
<S>                                      <C>            <C>       
            Deferred tax assets:
              Warranty reserve           $  738,000     $  528,000
              Inventory reserve             383,000        280,000
              Accrued vacation              328,000        247,000
              State income taxes            243,000         58,000
              Other                         377,000        145,000
                                         ----------     ----------
                 Total deferred tax 
                   assets                $2,069,000     $1,258,000
                                         ==========     ==========
</TABLE>



        A reconciliation of the provision for income taxes to the amount
computed by applying the statutory federal income tax rate to income before
income taxes is as follows:


<TABLE>
<CAPTION>

                                                             YEAR ENDED MARCH 31,
                                            -------------------------------------------------------
                                                1998                  1997                 1996
                                            -----------           -----------           -----------
<S>                                         <C>                   <C>                   <C>        
Tax expense at statutory rate               $ 2,853,000           $ 1,657,000           $   538,000

    State tax provision (benefit),
      net of federal benefit                    388,000               205,000               (60,000)

    Research tax credit                        (179,000)             (181,000)             (480,000)
    Other                                        42,000                21,000               (48,000)
                                            -----------           -----------           -----------
                                            $ 3,104,000           $ 1,702,000           $   (50,000)
                                            ===========           ===========           ===========
</TABLE>


        The Company's income tax benefit for the fiscal year ended March 31,
1996 was primarily attributable to the utilization of research and development
credits generated in the period and the impact of a favorable United States
Federal judicial decision which clarified the tax law related to the utilization
of research and development credits generated from the Company's funded research
and development.

NOTE 10 - EMPLOYEE BENEFITS

        The Company has a voluntary deferred compensation plan under Section
401(k) of the Internal Revenue Code. The Company may make discretionary
contributions to the plan which vest equally over six years. Employees who have
completed 90 days of service and are at least 21 years of age are eligible to
participate in the plan. Participants are entitled, upon termination or
retirement, to their vested portion of the plan assets which are held by an
independent trustee. Discretionary contributions accrued by the Company 


                                      F-13

<PAGE>   58

during fiscal years 1998, 1997 and 1996 amounted to $671,000, $553,000 and
$444,000, respectively. The cost of administering the plan is not significant.

NOTE 11 - COMMITMENTS

        The Company leases office facilities under noncancelable operating
leases with initial terms ranging from one to five years which expire between
December 1998 and July 1999. Certain of the Company's facilities leases contain
option provisions which allow for extension of the lease terms. Rent expense was
$1,079,000, $793,000 and $608,000 in fiscal years 1998, 1997 and 1996,
respectively.

Future minimum lease payments are as follows:

<TABLE>
<CAPTION>

         YEAR ENDING MARCH 31,
<S>                                                   <C>         
                1999                                   $  1,041,000
                2000                                        177,000
                                                       ------------
                                                       $  1,218,000
                                                       ============
</TABLE>



NOTE 12 - CONTINGENCIES

The Company is currently a party to various government and commercial contracts
which require the Company to meet performance covenants and project milestones.
Under the terms of these contracts, failure by the Company to meet such
performance covenants and milestones permit the other party to terminate the
contract and, under certain circumstances, recover liquidated damages or other
penalties. The Company is currently not in compliance (or in the past was not in
compliance) with the performance or milestone requirements of certain of these
contracts. Historically, the Company's customers have not elected to terminate
such contracts or seek liquidated damages from the Company and management does
not believe that its existing customers will do so; therefore, the Company has
not accrued for any potential liquidated damages or penalties.

NOTE 13 - SUBSEQUENT EVENT

In April 1998, the Company entered into a long-term agreement to lease a
facility in Carlsbad, California which will house the Company's entire
California based operations. The facility is expected to be completed in
September 1999. The term of the lease is 10 years with two three-year option
periods. The initial minimum lease payments are $2,300,000 per year.


                                      F-14





<PAGE>   1
                                                                  EXHIBIT 10.25

                              OFFICE BUILDING LEASE

This Office Building Lease ("Lease") is made November 11, 1997 between The
Campus, LLC, a California Limited Liability Company, ("Landlord") and Viasat,
Inc., a California corporation, ("Tenant").

1.         DEFINITIONS.

                     As used in this Lease, the following items shall have the
following meanings:

           1.1.      Annual Base Rent. One Hundred Twenty Thousand Two Hundred
                     Sixty Four and 40/100 Dollars ($120,264.40), computed at
                     the rate of $19.80 per rentable square foot per year
                     (Subject to adjustment in Addendum, Paragraph 41).

           1.2.      Base Year. The Base Year for this Lease is the 1997
                     calendar year.

           1.3.      Building. The two (2) story office building within which
                     the Premises is located known as The Campus Office
                     Building, located at 5962 La Place Court, Carlsbad,
                     California and consisting of approximately 45,173 rentable
                     square feet.

           1.4.      Commencement Date.


<TABLE>
<S>                     <C>        <C>                              <C>     
                        Suite 225  ("Original Premises"):           December 1, 1997.

                        Suite 260  ("First Expansion Premises"):    The date that the existing tenant vacates Suite 
                                                                    260, which will not be later than January 12, 1998.

                        Suite 230  ("Second Expansion Premises"):   March 1, 1998.
</TABLE>


           1.5.      Common Areas. All areas within the Project which now or at
                     any time hereafter are available for the common use of
                     tenants and
 which are not leased or held for the exclusive
                     use of any such tenants, including, but not limited to,
                     building lobbies, building conference rooms, common
                     corridors and hallways, restrooms and shower rooms (other
                     than those for full floor tenants), parking and landscaped
                     areas, swimming pools, picnic areas, sidewalks, stairways,
                     elevators,and other generally understood public or common
                     areas. Landlord may, from time to time, change the size,
                     location, nature and use of the common areas, so long as
                     such changes do not materially affect Tenant's use of the
                     Premises.

           1.6.      Comparison Year. Comparison Year is defined as each
                     calendar year during the Lease Term subsequent to the Base
                     Year.

           1.7.      Expiration Date. May 31, 1999.

           1.8.      Consumer Price Index. United States Department of Labor,
                     Bureau of Labor Statistics Consumer Price Index for All
                     Urban Consumers, Los Angeles/Anaheim/Riverside Metropolitan
                     Area, Subgroup "All Items" (1982-84=100).

           1.9.      Landlord's Mailing Address for Notice. The.Campus, LLC, c/o
                     Newport National Corporation; Attn.: Jeffry A. Brusseau,
                     5050 Avenida Encinas, Suite 356, Carlsbad, California
                     92008.

           1.10.     Lease Term. The term of this Lease shall be for One (1)
                     year and Six (6) months.

           1.11.     Tenant's Mailing Address for Notice. 2290 Cosmos Court,
                     Carlsbad, CA 92009-1585, Attention: Greg Monahan.

           1.12.     Monthly Installments of Annual Base Rent. Three Thousand
                     Seven Hundred Forty Eight and 00/100 Dollars ($3,748.00).
                     (Subject to adjustment in Addendum Paragraph 41).

           1.13.     Premises. The cross-hatched area shown on the attached
                     floor plans (Exhibits "B" through "B-3") consisting of the
                     approximate 2,272 rentable square feet comprising Suite 225
                     ("Original Premises'), the approximate 2,724 rentable
                     square feet comprising Suite 260 ("First Expansion
                     Premises"), and the approximate 1,740 rentable square feet
                     comprising Suite 230 ("Second Expansion Premises"), for a
                     total of approximately 6,736 rentable square feet
                     ("Premises'), located on the second floor of the Building.

           1.14.     Project. The real property upon which the Building is
                     located as more particularly described in Exhibit "A"
                     attached hereto, together with all easements and
                     appurtenances pertaining thereto, improvements, fixtures,
                     and equipment used in the general operation of such
                     improvements. The Project contains a total Rentable Area of
                     approximately 157,886 rentable square feet.

           1.15.     Security Deposit. Ten Thousand Six Hundred Seventy Nine and
                     40/100 Dollars ($10,679.40).

           1.16.     Tenant's Building Proportionate Share. 14.91%. Such share
                     is a fraction, the numerator of which is the rentable
                     square footage of the Premises, and the denominator of
                     which is the rentable square footage of the Building.

           1.17.     Tenant's Project Proportionate Share. 4.27%. Such share is
                     a fraction, the numerator of which is the rentable square
                     footage of the Premises, and the denominator of which is
                     the rentable square footage of the Project.


                                    1 of 17                  INITIALS ____ ____

<PAGE>   2
2.         LEASE OF PREMISES.

           2.1.      Lease of Premises. Landlord leases to Tenant and Tenant
                     leases from Landlord the Premises described in Section 1.13
                     above. Tenant shall have the non-exclusive right (unless
                     otherwise provided herein) in common with Landlord, other
                     tenants, subtenants and invitees, to use of the Common
                     Areas (as defined in Section 1.5), subject to such rules
                     and regulations as Landlord may establish from time to
                     time.

           2.2.      Delivery of Possession. If Landlord, for any reason, cannot
                     deliver possession of the Premises to Tenant on or before
                     the Commencement Date (as defined in Section 1.4), all
                     other terms and conditions of this Lease shall remain in
                     full force and effect, this Lease shall not be void or
                     voidable, nor shall Landlord be liable to Tenant for any
                     loss or damage resulting from such delay.

3.         EXHIBITS AND ADDENDA.

           The exhibits and addenda listed below (unless lined out) are
           attached hereto and incorporated by reference in this Lease:

           Exhibit A:  Site Plan of the Project

           Exhibit B:  Premises

           Exhibit C:  Tenant Improvements

           Exhibit D:  Rules and Regulations

           Exhibit E:  Parking Rules and Regulations

           Exhibit E-1:  Pool and Spa Rules and Regulations

           Exhibit F:  Sign Criteria

           Exhibit F-1:  Sign Dimensions

           Exhibit G:  [Deleted]

           Exhibit H: Standard Hazardous Materials Addendum to Office Building
                     Lease

           Addenda

4.         TERM.

           4.1.      Term. The term of this lease shall begin as of the
                     Commencement Date as defined in Sections 1.4 and 2.2 shall
                     continue thereafter during the Lease Term as specified in
                     Section 1. 1 0 unless sooner terminated as hereinafter
                     provided in this Lease.

5.         PARKING.

           During the Lease Term and in connection with its use and occupancy of
           the Premises, Tenant shall have the right to lease on a non-reserved
           or allocated basis Twenty Four (24) parking spaces in the designated
           parking areas in the Project. All such spaces shall be available at
           the same rates as established from time to time by Landlord for other
           spaces in the same location. The use by Tenant, its employees and
           invitees, of the parking facilities of the Project shall be on the
           terms and conditions set forth in Exhibit "E" attached hereto and as
           may be established by Landlord from time to time during the Lease
           Term. (See also Addendum Paragraph 50.)

           The parking authorized by this Section shall be for the personal
           transportation of Tenant and its employees only, to and from the
           Building, and is not for Tenant's invitees and guests. Tenant's
           invitees and guests may use parking spaces in the Building garage or
           parking lot which are not allocated or reserved for Tenant or other
           occupants of the Building on a first-come first-served basis, at the
           then current parking rates charged by Landlord. The parking spaces
           allocated to Tenant are not for long-term (i.e., more than 24 hours)
           storage of automobiles or for short-term or long-term storage of
           boats, trailers, recreational vehicles, motorcycles or other vehicles
           or equipment. Landlord shall have the right to designate where
           parking spaces allocated to Tenant shall be located and may reserve
           certain spaces from Tenant's use as, in Landlord's sole discretion,
           Landlord may determine.

6.         RENT.

           6.1.      Payment of Annual Base Rent. Tenant agrees to pay the
                     Annual Base Rent for the Premises (as specified in Section
                     1.1) in twelve (12) equal monthly installments (as
                     specified in Section 1.12) payable in advance, on the first
                     day of each calendar month of the Lease Term, without prior
                     notice, offset, demand or deduction, commencing on the
                     Commencement Date. If the Lease Term begins or ends on
                     other than the first or last day of a calendar month, the
                     Base Rent for the partial month shall be prorated on a per
                     diem basis.

           6.2.      Annual Base Rent Adjustment. (See also Addendum Paragraph
                     41.)

                     The amount of Annual Base Rent (and the corresponding
                     Monthly installments of Base Rent) payable hereunder shall
                     be adjusted according to the schedule in Addendum Paragraph
                     41.


                                    2 of 17                  INITIALS ____ ____

<PAGE>   3
           6.3.      Project Operating Costs. Tenant shall pay to Landlord as
                     additional Rent during the Lease Term hereof, in addition
                     to the Annual Base Rent (i) Tenant's Project Proportionate
                     Share of the amount by which all Project Operating Costs
                     (as hereinafter defined) for each Comparison Year (as
                     defined in Section 1.6) exceed the amount of all Project
                     Operating Costs for the Base Year (as defined in Section
                     1.2), such excess being hereinafter referred to as the
                     "Project Operating Costs Increase," and (ii) Tenant's
                     Building Proportionate Share of the amount by which Project
                     Operating Costs specifically allocated to the Building for
                     each Comparison Year exceed the amount of Project Operating
                     Costs specifically allocated to the Building for the Base
                     Year, such excess being hereinafter referred to as the
                     "Building Operating Costs Increase." The Project Operating
                     Costs Increase and Building Operating Costs Increase are
                     sometimes referred to collectively as the "Operating Costs
                     Increase."

                     a.        The term "Project Operating Costs" shall include,
                               but not be limited to, the sum of all those
                               operating costs and expenses incurred by Landlord
                               in maintaining, repairing, managing and operating
                               the Project, including without limitation the
                               following: (1) electricity, gas, and other
                               utilities (except those separately metered to
                               tenants); (2) supplies and tools; (3) water and
                               sewer charges and other similar governmental or
                               quasi-governmental charges attributable to the
                               Project or its operations; (4) services of
                               independent contractors including trash removal,
                               janitorial and all other cleaning services,
                               refurbishing and repainting, air conditioning,
                               heating and elevator service, pest control,
                               resurfacing, lighting systems, fire detection and
                               security services, landscape maintenance, road,
                               sidewalk and driveway maintenance; (5)
                               compensation (including employment, employer tax
                               liabilities; and fringe benefits) of all persons
                               who perform on-site duties connected with the
                               operation, maintenance, repair or overhaul of the
                               Project and equipment, improvements and
                               facilities located within. the Project, including
                               without limitation engineers, janitors, painters,
                               floor waxers, window washers, security and
                               parking personnel and gardeners (but excluding
                               persons performing `services not uniformly
                               available to or performed for substantially all
                               Project tenants); (6) operation and maintenance
                               of a room for delivery and distribution of mail
                               to tenants of the Project, if required by the
                               U.S. Postal Service (including, without
                               limitation, an amount equal to the fair market
                               rental value of the mail room premises); (7) any
                               charges under any declarations of covenants,
                               conditions and restrictions applicable to the
                               Project for repair and maintenance of, property
                               taxes with respect to, special assessments, or
                               other charges on property controlled by the
                               declarations; (8) management of the Project,
                               whether managed by Landlord or an independent
                               contractor (including, without limitation, an
                               amount equal to the fair market value of any
                               on-site manager's office); (9) rental expenses
                               for (or a reasonable depreciation allowance on)
                               personal property used in the maintenance,
                               operation or repair of the Project; (10) costs,
                               expenditures -or charges relating to the
                               maintenance and repair of the Common Areas, (11)
                               amortization over its useful life of any capital
                               improvements (including financing costs) provided
                               such improvements are (i) required by a
                               governmental or quasigovernmental entity or any
                               change in laws, rules, or regulations of any
                               governmental authority, or (ii) made by Landlord
                               to reduce Project Operating Costs; and which
                               actually do reduce Project Operating Costs; and
                               (12) any other operating costs or expenses
                               incurred by Landlord under this Lease and not
                               otherwise reimbursed by tenants of the Project.

                     b.        As soon as possible after the beginning' of each
                               calendar year, Landlord shall give to Tenant a
                               statement of the amount of the Operating Costs
                               Increase and any other additional rent payable by
                               Tenant hereunder for the previous year, all of
                               which shall be due and payable upon receipt of
                               the statement. In addition, for each year after
                               the Base Year, or portion thereof, Tenant shall
                               pay Tenant's Project Proportionate Share and
                               Tenant's Building Proportionate Share of
                               Landlord's good faith estimate of the Operating
                               Costs Increase for the following year. This
                               estimated amount shall be divided into twelve
                               equal monthly installments. Tenant shall pay to
                               Landlord, concurrently with the regular monthly
                               rent payment next due following the receipt of
                               such statement, an amount equal to one monthly
                               installment multiplied by the number of months
                               from January in the calendar year in which said
                               statement is submitted to the month of such
                               payment, both months inclusive. Subsequent
                               installments shall be payable concurrently with
                               the regular monthly rent payments for the balance
                               of that calendar year and shall continue until
                               the next calendar year's statement is rendered..
                               If; in any calendar year, the actual amount of
                               the Operating Costs Increase Tenant owes is less
                               than the estimate for that year, then upon
                               receipt of Landlord's statement, any overpayment
                               made by Tenant shall be credited towards all
                               payments thereafter due under this Article 6.3,
                               and the estimated monthly installments of
                               Tenant's share of Operating Costs Increase shall
                               be adjusted to reflect such lower Project
                               Operating Costs for the most recent year. If the
                               actual amount of the Operating Costs Increase
                               Tenant owes is more than the estimate for that
                               year, Tenant shall immediately pay any such
                               increase to Landlord.

                     c.        Even though the Lease Term has expired and Tenant
                               has vacated the Premises, when the final
                               determination is made of the amount Tenant owes
                               under this Section for the year in which this
                               Lease terminates, Tenant shall immediately pay
                               any increase due over the estimated expenses paid
                               and, conversely, provided Tenant is not in
                               default under this Lease, any overpayment made in
                               the event said expenses decrease shall be rebated
                               by Landlord to Tenant.

                     d.        All increases in Project Operating Costs shall be
                               determined separately and without regard to
                               changes or adjustments in Property Taxes or
                               Insurance Charges for the Project.

                     e.        Project Operating Costs shall not include (i)
                               costs incurred because the Landlord or another
                               tenant violated the terms of any lease; (ii)
                               interest on debt or amortization payments on
                               mortgages or deeds of trust or any. other debt
                               for borrowed money; (iii) advertising,
                               promotional and public relations expenditures;
                               (iv) repairs or other work needed because of
                               fire, windstorm, or other 


                                    3 of 17                  INITIALS ____ ____

<PAGE>   4
                               casualty or cause insured against by Landlord
                               or to the extent Landlord's insurance required
                               under Section 38 would have provided insurance,
                               whichever is greater coverage, except that the
                               cost of the deductible for said insurance shall
                               be included in the project operating costs; (v)
                               any costs, fines, or penalties incurred because
                               Landlord violated any law, governmental rule or
                               authority; (vi) costs incurred to test, survey,
                               cleanup, contain, abate, remove, or otherwise
                               remove hazardous waste or asbestos containing
                               materials from the Property unless the waste or
                               asbestos containing materials were in or on the
                               Property because of tenant's negligence or
                               intentional acts; and (vii) other expenses that
                               under generally accepted accounting principles
                               consistently applied would not be considered
                               normal maintenance, repair, management, or
                               operation expenses.

                  6.4.  Property Taxes. Tenant agrees to pay to Landlord, as
                        additional rent, Tenant's Project Proportionate Share of
                        the amount by which all taxes, assessments and other
                        similar governmental charges levied on or attributable
                        to the Project or its operation for each Comparison Year
                        exceed the amount of all Property Taxes for the Base
                        Year, including without limitation, (1) real property
                        taxes or assessments levied or assessed against the
                        Project, (2) assessments or charges levied or assessed
                        against the Project by any redevelopment agency, and (3)
                        any tax measured by gross rental received from the
                        leasing of the Project, excluding any net income,
                        franchise, capital stock estate or inheritance taxes
                        imposed by the State or federal government or their
                        agencies, branches or departments, such taxes,
                        assessments and charges being hereinafter referred to as
                        "Property Taxes".If at any time during the Lease Term
                        any governmental entity levies, assesses or imposes on
                        Landlord any (1) general or special, ad valorem or
                        specific, excise, capital levy or other tax, assessment,
                        levy or charge directly on the Rent received under this
                        Lease or on the rent received under any other leases of
                        space in the Building or Project, or (2) any license
                        fee, excise or franchise tax, assessment, levy or charge
                        measured by or based, in whole or part, upon such rent,
                        or (3) any transfer, transaction, or similar tax,
                        assessment, levy or charge based directly or indirectly
                        upon the transaction represented by this Lease or such
                        other leases, or (4) any occupancy, use, per capita or
                        other tax, assessment, levy or charge based directly or
                        indirectly upon the use or occupancy of the Premises or
                        other premises within the Building or Project, then any
                        such taxes, assessments, levies and charges shall be
                        deemed to be included in the term Property Taxes. Tenant
                        shall pay the amount of Property Taxes owed by Tenant in
                        accordance with the requirements of Section 6.3 of this
                        Lease. All increases in Property Taxes for each year of
                        this Lease shall be determined separately and without
                        regard to changes or adjustments in Project Operating
                        Costs or Insurance Charges for the Project.

           6.5.      Insurance Charges. Tenant agrees to pay to Landlord, as
                     additional rent, Tenant's Project Proportionate Share of
                     the amount by which all premiums for insurance for each
                     Comparison Year exceed the amount of Premiums for the Base
                     Year including, without limitation, public liability,
                     property damage, loss of rents, earthquake and fire and
                     extended coverage insurance for the full replacement value
                     of the Project as required by Landlord or its lenders for
                     the Project. Tenant shall pay the amount of Premiums owed
                     by Tenant in accordance with the requirements of Section
                     6.3 of this Lease. All increases in Premiums for each year
                     of this Lease shall be determined separately and without
                     regard to changes or adjustments in Project Operating Costs
                     or Property Taxes for the Project.

           6.6.      Definition of Rent. All costs and expenses which tenant
                     assumes or agrees to pay to Landlord under this Lease shall
                     be deemed additional rent (which, together with the Annual
                     Base Rent is sometimes referred to as the "Rent"). The Rent
                     shall be paid to the Landlord (or other person that
                     Landlord may designate), and at such place as Landlord may
                     from time to time designate in writing, without any prior
                     notice or demand therefor and without deduction or offset,
                     in lawful money of the United States of America.

           6.7.      Taxes Payable by Tenant. In addition to the Rent and any
                     other charges to be paid by Tenant hereunder, Tenant shall
                     reimburse Landlord upon demand for any and all taxes
                     payable by Landlord (other than net income taxes) which are
                     not otherwise reimbursable under this Lease pursuant to
                     Section 6.4 hereof, whether or not now customary or within
                     the contemplation of the parties, where such taxes are
                     upon, measured by or reasonably attributable to (i) the
                     costs or value of Tenant's equipment, furniture, fixtures
                     and other personal property located in the Premises, or the
                     cost or value of any leasehold improvements made in or to
                     the Premises by or for Tenant, other than Tenant
                     Improvements made by Landlord, regardless of whether title
                     to such improvements is held by Tenant or Landlord; (ii)
                     the gross or net Rent payable under this Lease, including,
                     without limitation, any rental or gross receipts, tax
                     levied by any taxing authority with respect to the receipt
                     of the Rent hereunder; (iii) the possession, leasing,
                     operation, management, maintenance or alteration, repair,
                     use or occupancy by Tenant of the Premises or any portion
                     thereof, or (iv) this transaction or any document to which
                     Tenant is a party creating or transferring an interest or
                     an estate in the Premises. If it becomes unlawful for
                     Tenant to reimburse Landlord for any costs as required
                     under this Lease, the Base Rent shall be revised to net
                     Landlord the same net Rent after imposition of any tax or
                     other charge upon Landlord as would have been payable to
                     Landlord but for the reimbursement being unlawful.

           6.8.      Audit. Landlord shall retain its records regarding Common
                     Area Maintenance Charges for a period of at least one (1)
                     year following the final billing for the calendar year in
                     question. At any time during such one (1) year period, upon
                     reasonable advance written notice to Landlord, but not more
                     frequently than once in any calendar year, Tenant shall
                     have the right to audit all of Landlord's or Landlord's
                     agent's records pertaining to Common Area Maintenance
                     Charges by a representative of Tenant's choice. If such
                     audit reveals that Landlord's annual statement was
                     incorrect, any over-billing discovered in the course of
                     such audit shall be refunded to Tenant within thirty (30)
                     days of Landlord's receipt of a copy of the audit, unless
                     Landlord disputes the audit, and any underbilling shall be
                     paid by Tenant to Landlord within thirty (30) days of the
                     audit. In the event that any overbilling exceeds the amount
                     actually due from Tenant for the year by 


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<PAGE>   5
                      three percent (3%) or more, then Landlord shall reimburse
                      Tenant for the reasonable costs of the audit. If Landlord
                      disputes the results of Tenant's audit, Landlord and
                      Tenant shall attempt to resolve such dispute in good
                      faith. If Landlord and Tenant are unable to do so within
                      thirty (30) days, then Landlord shall commission a second
                      audit by an accounting firm selected by Landlord. The
                      results of such second audit shall be deemed conclusive as
                      to any such dispute. Landlord shall pay the cost of such
                      second audit unless such second audit confirms amounts
                      actually due from Tenant for the year are within the three
                      percent (3%) noted above, in which event Tenant shall pay
                      for the second audit. In any event, Tenant shall continue
                      to pay all Rent and Excess Operating Costs, Additional
                      Rent, as otherwise provided by this Lease until the
                      dispute is resolved or the results of the second audit are
                      available.

7.         INTEREST AND LATE CHARGES.

           If Tenant fails to pay, when due, any Rent or other amounts or
           charges which Tenant is obligated to pay under the terms of this
           Lease, the unpaid amounts shall bear interest from the due date until
           the date paid at the prime rate then established by Bank Of America
           plus two percent per annum, but not to exceed the maximum rate then
           allowed by law. Tenant acknowledges that the late payment of any
           installment of Rent or other charges will cause Landlord to lose the
           use of that money and incur costs and expenses not contemplated under
           this Lease, including without limitation, administrative and
           collection costs and processing and accounting expenses, the exact
           amount of which is extremely difficult to ascertain. Therefore, in
           addition to interest, if any such installment is not received by
           Landlord within five (5) days from the date it is due, Tenant shall
           pay Landlord a late charge equal to ten percent (10%) of such
           installment. By affixing their initials where indicated below,
           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 loss suffered from such late payment
           by Tenant. Acceptance of any interest or late charge shall not
           constitute a waiver of Tenant's defaults with respect to such late
           payment by Tenant nor prevent Landlord from exercising any other
           rights or remedies available to Landlord under this Lease.

8.         SECURITY DEPOSIT.

           Tenant agrees to deposit with Landlord a Security Deposit equal to
           one Monthly Installment of Annual Base Rent upon execution of this
           Lease as security for Tenant's faithful performance of its
           obligations under this Lease. Tenant may not credit the Security
           Deposit to any rent, or additional rent, due under the lease,
           including rent due during the last month of the Term of this Lease.
           Landlord and Tenant agree that the Security Deposit may be commingled
           with funds of Landlord, and Landlord shall have no obligation or
           liability for payment of interest on such deposit. Tenant shall not
           mortgage, assign, transfer or encumber the Security Deposit without
           the prior written consent of Landlord, and any attempt by Tenant to
           do so shall be void, without full force or effect and shall not be
           binding upon Landlord.

           If Tenant fails to pay any Rent or other amount when due and payable
           under this Lease, or fails to perform any of the terms hereof,
           Landlord may appropriate and apply or use all, or any portion, of the
           Security Deposit for Rent payments or any other amount then due and
           unpaid, for payment of any amount for which Landlord has become
           obligated as a result of Tenant's default or breach, or for any loss
           or damage sustained by Landlord as a result of Tenant's default under
           or breach of any term of this Lease. Landlord may so apply or use
           this deposit without prejudice to any other remedy Landlord may have
           by reason of Tenant's default or breach. If any portion of the
           Security Deposit is so used or applied, Tenant shall, within ten days
           after written demand therefor, restore the Security Deposit to the
           full amount originally deposited; Tenant's failure to do so shall
           constitute an event of default hereunder and Landlord shall have the
           right to exercise any remedy provided for at Section 28 hereof.
           Within thirty (30) days after the Term has expired or Tenant has
           vacated the Premises, whichever shall last occur, and provided Tenant
           is not then in default of any of its obligations hereunder, Landlord
           shall return the Security Deposit or any balance thereof to Tenant,
           or if Tenant has assigned its interest under this Lease, to the last
           assignee of Tenant. Such Security Deposit shall be returned to Tenant
           within thirty (30) days of Tenant's vacation of the Premises provided
           that the Premises is in satisfactory condition as per Paragraph 12.8
           of the Lease Agreement. If any portion of the Security Deposit is
           retained by Landlord, Landlord shall provide Tenant with a statement
           setting for the amounts and reasons for retention. IF Landlord sells
           its interest in the Premises, Landlord may deliver this deposit to
           the purchaser of Landlord's interest and thereupon be relieved of any
           further liability or obligation to Tenant with respect to the
           Security Deposit.

9.         TENANT'S USE OF THE PREMISES.

           Tenant shall use the Premises solely for general office and assembly
           of components for telecommunications equipment. Tenant shall not use
           or occupy the Premises in violation of law or any covenant, condition
           or restriction affecting the Project or the certificate of occupancy
           issued for the Project, and shall, upon notice from Landlord,
           immediately discontinue any use of the Premises which is declared by
           any governmental authority having jurisdiction to be a violation of
           law or the certificate of occupancy. Tenant, at Tenant's own cost and
           expenses, shall comply with all laws, ordinances, regulations, rules
           and/or any directives of any governmental agencies or authorities
           having jurisdiction which shall, by reason of the nature of Tenant's
           use or occupancy of the Premises, impose any duty upon Tenant or
           Landlord with respect to the Premises or its use or occupation. A
           judgment of any court of competent jurisdiction or the admission by
           Tenant of any action or proceeding against Tenant or that Tenant has
           violated any such law, ordinances, regulations, rules and/or
           directives in the use of the Premises shall be deemed to be a
           conclusive determination of that fact as between Landlord and Tenant.
           Tenant shall not do or permit to be done anything which will
           invalidate or increase the cost of any fire, extended coverage or
           other insurance policy covering the Building or Project and/or
           property located therein, and shall comply with all rules, orders,
           regulations, requirements and recommendations of the Insurance
           Services Office or any other organization performing a similar
           function. Tenant shall promptly upon demand reimburse Landlord for
           any additional premium charged for such policy by reason of Tenant's
           failure to comply with the provisions of this Section. Tenant shall
           not 


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<PAGE>   6
           do or permit anything to be done in or about the Premises or Project
           which will in any way obstruct or interfere with the rights of other
           tenants or occupants of the Building or Project, or injure or annoy
           them, or use or allow the Premises or Project to be used for any
           improper, immoral, or unlawful purpose, nor shall Tenant cause,
           maintain or permit any nuisance in, on or about the Premises or
           Project. Tenant shall not permit animals in, on or about the
           Premises. Tenant shall not commit or suffer to be committed any waste
           in or upon the Premises or Project.

10.        SERVICES AND UTILITIES.

           Provided that Tenant is not in default hereunder, Landlord agrees to
           furnish to the Premises, during normal business hours of generally
           recognized business days, the utilities and services described
           herein, including water, electricity for operating common areas
           during hours determined by Landlord in its sole discretion and
           subject to the Rules and Regulations of the Building or Project. If
           Tenant desires any of these services at any other time, Landlord
           shall use reasonable efforts to furnish such service upon reasonable
           notice from Tenant and Tenant shall pay Landlord's charges therefore
           on demand. Landlord shall also keep lighted the common stairs, common
           entries and restroom(s) in the Project. Landlord shall not be in
           default hereunder or be liable for any damages directly or indirectly
           resulting from, nor shall the Rent be abated by reason of (i) the
           installation, use or interruption of use of any equipment in
           connection with the furnishing of any of the foregoing services, (ii)
           failure to furnish or delay in furnishing any such services where
           such failure or delay is caused by accident or by any condition or
           event beyond the reasonable control of Landlord, or by the making of
           necessary repairs or improvements to the Premises, the Building or
           the Project, or (iii) the limitation, curtailment or rationing of, or
           restrictions on, use of water, electricity, gas or any other form of
           energy serving the Premises, the Building, or the Project. Landlord
           shall not be liable under any circumstances for a loss of or injury
           to property or business, however occurring, through or in connection
           with or incidental to failure to furnish any such services. If Tenant
           uses heat generating machines or equipment in the Premises which
           affect the temperature otherwise maintained, Landlord reserves the
           right to install supplementary air conditioning units in the Premises
           and the cost thereof, including the cost of installation, operation
           and maintenance thereof, shall be paid by Tenant to Landlord upon
           demand by Landlord.

           Tenant shall not consume water in excess of that usually furnished or
           supplied for the use of premises as general office space (as
           determined by the Landlord) without first procuring the written
           consent of Landlord, which Landlord may refuse, and, in the event of
           consent, Landlord may have installed a water meter in the Premises to
           measure the amount of water consumed. The cost of any such meter and
           of its installation, maintenance and repair shall be paid for by the
           Tenant, and Tenant agrees to pay promptly as and when bills are
           rendered for all such water consumed as shown by said meters, at the
           rates charged for such services by the local public utility plus any
           additional expense incurred by Landlord in keeping account of the
           water so consumed. If a separate meter is not installed, the excess
           cost for such water shall. be established by an estimate made by a
           utility company or electrical engineer hired by Landlord at Tenant's
           expense.

           If Landlord has installed separate metering of electricity furnished
           to the Premises, the cost of maintenance and repair of such metering
           shall be paid by Tenant. Tenant agrees to cause all bills for its use
           of electricity to be sent and charged directly to Tenant and Tenant
           agrees to promptly pay such electrical bill as and when rendered for
           all such electricity consumed as shown by said metering at utility
           rates charged by said public utility. Tenant agrees not to connect
           any apparatus with electric current except through existing
           electrical outlets in the Premises.

           Landlord shall furnish heating, ventilation, and air conditioning
           ("HVAC"), elevator service, lighting replacement for building
           standard lights, restroom supplies, window washing and janitor
           services in the manner that such services are customarily furnished
           to comparable office building in.the area. Tenant at his sole cost
           and expense shall provide for itself all other services including
           telephone services chargeable to the Premises not herein supplied by
           Landlord.

11.        CONDITION OF THE PREMISES.

           Except as specified in the "Tenant Improvement Punch List" and/or
           "Move-In Walk Through Form," taking of possession of the Premises by
           Tenant shall be deemed conclusive evidence that, as of that date, the
           Premises were in good order and satisfactory condition. Tenant
           acknowledges that no promises to alter, remodel, repair or improve
           the Premises, the Building, or the Project and no representation,
           express or implied, respecting any matter relating to the Premises,
           the Building, or the Project or this Lease including, without
           limitation, the suitability of or condition of the Premises, the
           Building, or the Project have been made to Tenant by Landlord or its
           Broker or any agent, other than as may be contained herein or in a
           separate exhibit or addendum signed and made a part of this agreement
           by Landlord and Tenant.

12.        CONSTRUCTION, REPAIRS AND MAINTENANCE.

           12.1.     Landlord's Obligations: Landlord shall maintain in good
                     order, condition and repair the structural portions of the
                     Project, the Building, the Common Areas, and all other
                     portions of the Premises and the Project not the obligation
                     of Tenant or of any other tenant in the Project, unless
                     such maintenance and repairs are caused in part or in whole
                     by the act, neglect,, or omission of any duty by Tenant,
                     its agents, servants, employees or invitees, in which case
                     Tenant shall pay to Landlord, as additional rent, the
                     reasonable cost of such maintenance and repairs as
                     determined by Landlord plus a reasonable percentage of
                     mark-up to cover general conditions and fees.

           12.2.     Tenant's Obligations.

                     a.        Tenant, at Tenant's sole expense shall, except
                               for services and utilities furnished by Landlord
                               pursuant to Section 10 hereof, maintain the
                               Premises in good order, condition and repair,
                               including the interior surfaces of the ceilings,
                               walls and floors, all doors, all interior
                               windows, all plumbing, 


                                    6 of 17                  INITIALS ____ ____

<PAGE>   7
                               pipes and fixtures, electrical wiring, switches
                               and fixtures, furnishings and special items and
                               equipment installed by or at the expense of
                               Tenant; provided, however, that Tenant may not
                               make repairs of a capital nature without
                               Landlord's prior written consent (at Landlord's
                               sole discretion) nor shall Tenant be responsible
                               for the costs of capital repairs unless such
                               repairs are due to Tenant's use in excess of
                               normal wear and tear or due to Tenant's
                               negligence or intentional misconduct.

                     b.        Tenant shall be responsible for all repairs and
                               alterations in and to the Premises, the Building,
                               and the Project and the facilities and systems
                               thereof, the need for which arises out of (I)
                               Tenant's use or occupancy of the Premises, (ii)
                               the installation, removal, use or operation of
                               Tenant's Property (as defined in Section 14) in
                               the Premises, (iii) the moving of Tenant's
                               Property into or out of the Premises, or (iv) the
                               act, omission, misuse or negligence of Tenant,
                               its agents, contractors, employees or invitees.

                     c.        If Tenant fails to maintain the Premises in good
                               order, condition and repair, Landlord shall give
                               Tenant notice to do such acts as are reasonably
                               required to so maintain the Premises. If, within
                               ten (10) days thereafter, Tenant fails to.
                               promptly commence such work and diligently
                               prosecute it to completion, then Landlord shall
                               have the right to do such work and expend such
                               funds at the expense of Tenant as are reasonably
                               required to perform such work. Any amount so
                               expended by Landlord plus a reasonable percentage
                               of mark-up to cover general conditions and fees
                               shall be paid by Tenant promptly upon demand and
                               interest shall accrue on any unpaid portion of
                               such amount at the prime rate then established by
                               Bank Of America plus two percent per annum, from
                               the date payment was due, but not to exceed the
                               maximum rate then allowed by law. Landlord shall
                               have no liability to Tenant for any damage,
                               inconvenience, or interference with the use of
                               the Premises by Tenant as a result of performing
                               any such work.

           12.3.     Compliance with Law: Landlord and Tenant shall each do all
                     acts required to comply with all applicable laws,
                     ordinances, and rules of any public authority relating to
                     their respective maintenance and repair obligations as set
                     forth herein.

           12.4.     Waiver by Tenant: Tenant expressly. waives the benefits of
                     any statute now or hereafter in effect which would
                     otherwise afford the Tenant the right to make repairs at
                     Landlord's expense or to terminate this Lease because of
                     Landlord's failure to keep the Premises in good order,
                     condition or repair. The foregoing sentence shall not be a
                     waiver of Tenant's rights to claim Landlord has breached
                     its obligations specified in this Lease.

           12.5.     Load and Equipment Limits: Tenant shall not place a load
                     upon any floor of the Premises which exceeds the load per
                     square foot which such floor was designed to carry, as
                     determined by Landlord or Landlord's structural engineer.
                     The cost of any such determination made by Landlord's
                     structural engineer shall be paid by Tenant upon demand.
                     Tenant shall not install business machines or mechanical
                     equipment which cause noise or vibration to such a degree
                     as to be objectionable to Landlord or other Project
                     tenants.

           12.6.     Except as otherwise expressly provided in this Lease,
                     Landlord shall have no liability to Tenant nor shall
                     Tenant's obligations under this Lease be reduced or abated
                     in any manner whatsoever by reason of any inconvenience,
                     annoyance, interruption or injury to business arising from
                     Landlord's making any repairs, alterations or improvements
                     in or to any portion of the Project, the Building, or the
                     Premises which Landlord is required or permitted to make
                     under this Lease or under any other tenant's lease or
                     required to make by law. Landlord shall nevertheless use
                     reasonable efforts to minimize any interference with
                     Tenant's business in the Premises.

           12.7.     Tenant shall give Landlord prompt notice of any damage to
                     or defective condition in any part or appurtenance of the
                     Project's mechanical, electrical, plumbing, heating,
                     ventilating, air conditioning or other systems serving,
                     located in, or passing through the Premises.

           12.8.     Upon the expiration or earlier termination of this Lease,
                     Tenant shall return the Premises to Landlord clean and in
                     the same condition as on the date Tenant took possession,
                     except for normal wear and tear. Any damage to the
                     Premises, including any structural damage, resulting from
                     Tenant's use or from the removal of Tenant's fixtures,
                     furnishings and equipment pursuant to Section 14 shall be
                     repaired by Tenant at Tenant's expense.

13.        ALTERATIONS AND ADDITIONS.

           13.1.     Tenant shall not make any additions, alterations or
                     improvements to the Premises without first obtaining the
                     prior written consent of Landlord. Landlord's consent may
                     be conditioned upon Tenant's removing any such additions,
                     alterations or improvements upon the expiration of the
                     Lease Term and restoring the Premises to the same condition
                     as on the date Tenant took possession. All work with
                     respect to any addition, alteration or improvements shall
                     be done in a good and workmanlike manner by properly
                     qualified and licensed contractors, mechanics and other
                     personnel approved in advance by Landlord, and such work
                     shall be permitted by the City in which the work is
                     performed and diligently pursued to completion in
                     conformance with applicable building codes. Tenant shall
                     supply Landlord with copies of as-built drawings and
                     permits. Landlord may, at Landlord's option, require that
                     any such work be performed by Landlord's contractor, in
                     which case the cost of such work shall be paid for before
                     commencement of the work.

           13.2.     Tenant shall pay the costs of any work done on the Premises
                     pursuant to Section 13.1 and shall keep the Premises and
                     Project free and clear of mechanic's, materialman's or any
                     other liens. Tenant shall 


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<PAGE>   8
                     indemnify, defend against and hold Landlord free and
                     harmless from all liability, loss, damage, costs,
                     attorneys' fees and any other expense incurred on account
                     of claims by any person performing work or furnishing
                     materials or supplies for Tenant or any person claiming
                     under Tenant.

                     Tenant shall keep Tenant's leasehold interest, and any
                     additions or improvements which are or become the property
                     of Landlord under this Lease, free and clear of all
                     attachment or judgment liens before the actual commencement
                     of any work for which a claim or lien may be filed. Tenant
                     shall give Landlord ten days written notice of the intended
                     commencement date to enable Landlord to post notices of
                     nonresponsibility or any other notices which Landlord deems
                     necessary for the proper protection of Landlord's interest
                     in the Premises or the Project, and Landlord shall have the
                     right to enter the Premises and post such notices at any
                     reasonable time.

           13.3.     Landlord may require, at Landlord's sole option, that
                     Tenant provide to Landlord, at Tenant's expense, a lien and
                     completion bond in an amount equal to at least one and
                     one-half times the total estimated cost to any additions,
                     alterations or improvements to be made in or to the
                     Premises to protect Landlord against any liability for
                     mechanic's and materialman's liens and to insure timely
                     completion of the work. Nothing contained in this Section
                     13.3 shall relieve Tenant of its obligation under Section
                     13.2 to keep the Premises and the Project free of all
                     liens.

           13.4.     Unless their removal is required by Landlord as provided in
                     Section 13.1, all additions, alterations and improvements
                     made to the Premises shall become the property of Landlord
                     and shall remain upon and be surrendered with the Premises
                     as a part thereof upon the expiration of the Lease Term;
                     provided, however, Tenant's equipment, machinery and trade
                     fixtures which can be removed without damage to the
                     Premises shall remain the property of Tenant and may be
                     removed, subject to the provisions of Section 14.2.

           13.5.     Tenant shall be required to remove only those Alterations
                     and Additions which Landlord identifies in writing, at the
                     time Landlord consents to construction, as an Alteration or
                     Addition which Landlord desires to be removed upon
                     termination or expiration of this Lease.

14.        LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY.

           14.1.     All fixtures, improvements and appurtenances attached to or
                     built into the Premises at the commencement of or during
                     the Term, whether or not by or at the expense of Tenant
                     ("Leasehold Improvements"), shall be and remain a part of
                     the Premises, shall be the property of Landlord and shall
                     not be removed by Tenant, except as expressly provided in
                     Section 14.2.

           14.2.     All movable partitions, business and trade fixtures,
                     machinery and equipment, communications equipment and
                     office equipment located in the Premises and acquired by or
                     for the account of Tenant, without expense to Landlord,
                     which can be removed without structural damage to the
                     Project, and all furniture, furnishings and other articles
                     of movable personal property owned by Tenant and located in
                     the Premises (collectively "Tenant's Property") shall be
                     and shall remain the property of Tenant and may be removed
                     by Tenant at any time during the Lease Term; provided that
                     if any of Tenant's Property is removed, Tenant shall,
                     within ten (10) days thereafter or the Expiration Date,
                     whichever occurs first, repair any damage to the Premises
                     or to the Building resulting from such removal,

15.        RULES AND REGULATIONS.

           Tenant agrees to comply with (and cause its agents, contractors
           employees and invitees to comply with) the rules and regulations
           attached hereto as Exhibits "D", "E" and "E-1" and with such
           reasonable modifications and additions thereto as Landlord may from
           time to time make which shall apply uniformly to all tenants of the
           Project. Landlord shall not be responsible for any violation of said
           rules and regulations by other tenants or occupants of Page 8 of the
           Project or their agents, contractors or invitees.

16.        CERTAIN RIGHTS RESERVED BY LANDLORD.

           Landlord reserves the following rights, exercisable without liability
           to Tenant for (i) damage or injury to property, person or business,
           (ii) causing an actual or constructive eviction, from the Premises,
           or (iii) disturbing Tenant's use or possession of the premises:

                     a.        To name the Project and to change the name or
                               street address of the Project;

                     b.        To change the size, location, nature and use of
                               the common areas, so long as such changes do not
                               materially affect Tenant's use of the Premises;

                     c.        To install and maintain all signs on the exterior
                               and interior of the Project;

                     d.        To have pass keys to the Premises and all doors
                               within the Premises, excluding Tenant's vaults
                               and safes;

                     e.        At any time during the Lease Term, and on
                               reasonable prior notice to Tenant, to inspect the
                               Premises, and to show the Premises to any
                               prospective purchaser or mortgagee of the
                               Project, or to any assignee of any mortgage on
                               the Project, or to others having an Interest in
                               the Project or Landlord, and during the last six
                               months of the Lease Term, to show the Premises to
                               prospective tenants thereof and post signs; and


                                    8 of 17                  INITIALS ____ ____

<PAGE>   9
                     f.        To enter the Premises for the purpose. of making
                               inspections, repairs, alterations, additions or
                               improvements to the Premises or the Project
                               (including, without limitation, checking,
                               calibrating, adjusting or balancing controls and
                               other systems), and to take all steps as may be
                               necessary or desirable for the safety,
                               protection, maintenance or preservation of the
                               Premises or the Project or Landlord's interest
                               herein, or as may be necessary or desirable for
                               the operation or improvement of the Project or in
                               order to comply with laws, orders or requirements
                               of any governmental authority. Landlord agrees to
                               use its best efforts (except in an emergency) to
                               minimize interference with Tenant's business in
                               the Premises in the course of any such entry.

17.        ASSIGNMENT AND SUBLETTING.

           No assignment or hypothecation of this Lease or sublease of all or
           any part of the Premises shall be permitted, except as provided in
           this Section 17.

                     a.        Tenant shall not, without the prior written
                               consent of Landlord, assign or hypothecate this
                               Lease or any interest herein or sublet the
                               Premises or any part thereof, or permit use of
                               the Premises by any party other than Tenant. Any
                               of the foregoing acts without such consent shall
                               be void and shall, at the option of Landlord,
                               terminate this Lease. This Lease shall not, nor
                               shall any interest of Tenant herein, be
                               assignable by operation of law without the prior
                               written consent of Landlord.

                     b.        If, at any time or from time to time during the
                               Lease Term, Tenant desires to assign or otherwise
                               transfer this Lease or sublet all or any part of
                               the Premises, Tenant shall give thirty (30) days
                               prior written notice to Landlord setting forth
                               the provisions of the proposed assignment or
                               sublease, the name, address and business of the
                               proposed assignee or subtenant, information
                               concerning the character, ownership and financial
                               condition of the proposed assignee or subtenant,
                               the proposed date of the assignment or sublease,
                               any ownership or commercial relationship between
                               Tenant and the proposed assignee or subtenant,
                               the consideration and all other material terms
                               and conditions of the proposed transfer, all in
                               such detail as Landlord shall reasonably require.
                               In addition, Tenant shall promptly supply
                               Landlord with such additional information
                               concerning the proposed transfer as Landlord may
                               reasonably request. Landlord shall have the
                               option, exercisable by written notice given to
                               Tenant within twenty (20) days after Tenant's
                               notice is given, either to permit a proposed
                               sublease of such space at the rental and on the
                               other terms set forth in this Lease for the term
                               set forth in Tenant's notice, or, in the case of
                               an assignment, to terminate this Lease. If
                               Landlord does not exercise such option, Tenant
                               may assign the Lease or sublet such space to such
                               proposed assignee or subtenant on the following
                               further conditions:

                               (i)        Landlord shall have the right to
                                          approve such proposed assignee or
                                          subtenant, which approval shall not be
                                          unreasonably withheld;

                               (ii)       The assignment or sublease shall be on
                                          the same terms set forth in the notice
                                          given to Landlord,

                               (iii)      No assignment or sublease shall be
                                          valid and no assignee or sublessee
                                          shall take possession of the Premises
                                          until an executed counterpart of such
                                          assignment or sublease has been
                                          delivered to Landlord;

                               (iv)       No assignee or sublessee shall have a
                                          further right to assign the lease or
                                          sublet the Premises except on the
                                          terms herein contained; and

                               (v)        Fifty percent (50%) of any sums or
                                          other economic consideration received
                                          by Tenant as a result of such
                                          assignment or subletting, however
                                          denominated under the assignment or
                                          sublease, which exceed, in the
                                          aggregate, (i) the total sums which
                                          Tenant is obligated to pay Landlord
                                          under this Lease (prorated to reflect
                                          obligations allocable to any portion
                                          of the Premises subleased), plus (ii)
                                          any real estate brokerage commissions
                                          or fees payable in connection with
                                          such assignment or subletting, shall
                                          be paid to Landlord as additional rent
                                          under this Lease without affecting or
                                          reducing any other obligations of
                                          Tenant hereunder.

                     c.        If Tenant is a corporation, partnership or other
                               entity, the transfer of controlling interest of
                               Tenant during the terms shall constitute an
                               assignment for purposes of this Section 17.

                     d.        Notwithstanding the provisions of Paragraphs
                               17(a) and 17(b) above, Tenant may assign this
                               Lease or sublet the Premises or any portion
                               thereof, without Landlord's consent and without
                               extending any recapture or termination option to
                               Landlord, to any corporation or entity which
                               controls, is controlled by or is under common
                               control with Tenant, or to any corporation
                               resulting from a merger or consolidation with
                               Tenant, or to any person or entity which acquires
                               all the assets of Tenant's business as a going
                               concern, provided that (i) the assignee or
                               sublessee assumes, in full, the obligations of
                               Tenant under this Lease, (ii) Tenant remains
                               fully liable under this Lease, and (iii) the use
                               of the Premises under Section 9 remains
                               unchanged.

                     e.        No subletting or assignment shall release Tenant
                               of Tenant's obligations under this Lease or alter
                               the primary liability of Tenant to pay the Rent
                               and to perform all other obligations to be
                               performed by Tenant hereunder. The acceptance of
                               Rent by Landlord from any other person shall not
                               be deemed to be a waiver by Landlord of any
                               provision hereof. Consent to one assignment or
                               subletting shall not be deemed consent to any
                               subsequent assignment or subletting. In the event
                               of default by an assignee or subtenant of Tenant
                               or any successor of Tenant in the performance of
                               any of the terms hereof, Landlord may proceed
                               directly against Tenant without the necessity of


                                    9 of 17                  INITIALS ____ ____

<PAGE>   10
                               exhausting remedies against such assignee,
                               subtenant or successor. Landlord may, if Tenant
                               does not provide Landlord with a current mailing
                               address to notify Tenant, consent to subsequent
                               assignment of the Lease or subletting or
                               amendments or modifications to the Lease with
                               assignees of Tenant, without notifying Tenant,
                               and without obtaining its or their consent
                               thereto and any such actions shall not relieve
                               Tenant of liability under this Lease.

                     f.        If Tenant assigns the Lease or sublets the
                               Premises or requests the consent of Landlord to
                               any assignment or subletting or if Tenant
                               requests the consent of Landlord for any act that
                               Tenant proposes to do, then Tenant shall, upon
                               demand, pay Landlord an administrative fee of
                               five hundred and 00/100 Dollars ($500.00) plus
                               any attorneys' fees reasonably incurred by
                               Landlord in connection with such act or request.
                               Such administrative fee shall be increased
                               annually by the same percentage as Annual Base
                               Rent is increased pursuant to Section 6.2 hereof.

18.        HOLDING OVER.

           If after the expiration or earlier termination of the Term, as it may
           be extended, Tenant remains in possession of the Premises with or
           without Landlord's consent (express or implied), Tenant shall become
           a tenant from month to month only, upon all the provisions of this
           Lease (except as to Lease Term and Annual Base Rent), but the
           "Monthly Installments of Annual Base Rent" payable by Tenant shall be
           increased to one hundred fifty percent (150%) of the Monthly
           Installments of Annual Base Rent payable by Tenant at the expiration
           of the Lease Term. Such monthly rent shall be payable in advance on
           or before the first day of each month. If either party desires to
           terminate such month to month tenancy, it shall give the other party
           not less than thirty (30) days advance written notice of the date of
           termination.

           19.       SURRENDER OF PREMISES.

                     a.        Tenant shall peaceably surrender the Premises to
                               Landlord on the Expiration Date, in broom-clean
                               condition and in as good condition as when Tenant
                               took possession, except for (i) reasonable wear
                               and tear, (ii) loss by fire or other casualty,
                               and (iii) loss by condemnation. On or before the
                               Expiration Date, Tenant shall, on Landlord's
                               request, remove Tenant's Property and repair all
                               damage to the Premises or Building caused by such
                               removal.

                     b.        If Tenant abandons or surrenders the Premises, or
                               is dispossessed of the Premises by process of law
                               or otherwise, any of Tenant's Property left on
                               the Premises shall be deemed to be abandoned,
                               and, at Landlord's option, title shall pass to
                               Landlord under this Lease as by a bill of sale.
                               If Landlord elects to remove all or any part of
                               such Tenant's Property, the cost of removal,
                               including repairing any damage to the Premises or
                               Building caused by such removal, including court
                               costs and attorneys' fees and storage charges on
                               such effects, for any length of time that the
                               same shall be in Landlord's possession, shall be
                               paid by Tenant. Landlord may, at its option,
                               without notice, sell said effects, or any of the
                               same at private sale and without legal process,
                               for such price as Landlord may obtain and apply
                               the proceeds of such sale upon any amounts due
                               under this Lease from Tenant to Landlord and upon
                               the expense incident to the removal and sale of
                               said effects. On the Expiration Date, Tenant
                               shall surrender all keys to the Premises.

20.        DESTRUCTION OR DAMAGE.

                     a.        If the Premises or the portion of the Project
                               reasonably necessary for Tenant's occupancy is
                               damaged by fire, earthquake, act of God, the
                               elements or other casualty, Landlord shall,
                               subject to the provisions of this Section,
                               promptly repair the damage, if such repairs can,
                               in Landlord's opinion, be completed within ninety
                               (90) days. If Landlord determines that repairs
                               can be completed within ninety (90) days, this
                               Lease shall remain in full force and effect.

                     b.        If in Landlord's opinion, such repairs to the
                               Premises or any portion of the Project reasonably
                               necessary for Tenant's occupancy cannot be
                               completed within ninety (90) days, Landlord may
                               elect, upon written notice to Tenant given within
                               thirty (30) days after the date of such fire or
                               other casualty, to repair such damage, in which
                               event this Lease shall continue In full force and
                               effect, or if Landlord does not so elect to make
                               such repairs, this Lease shall terminate as of
                               the date of such fire or other casualty. If,
                               however, the damage is limited to the interior of
                               the Premises, then if Landlord does not elect to
                               repair the Premises, Tenant shall have the
                               option, at its expense, by written notice to
                               Landlord within fifteen (15) days after receipt
                               of Landlord's notice that it will not repair, to
                               repair the Premises and then keep this Lease in
                               effect. If Tenant shall repair the premises, then
                               any insurance proceeds attributable to the damage
                               may be used by Tenant to pay the cost of such
                               repair.

                     c.        If the Premises are to be repaired under this
                               Section, Landlord shall repair at its cost any
                               injury or damage to the Project outside of the
                               Premises and shall pay the cost of restoring the
                               Premises to their condition prior to the damage,
                               except that Tenant shall be responsible for
                               payment of the cost of the repair, restoration
                               and replacement of any Leasehold Improvements and
                               Tenant's Property in excess of the Tenant's
                               Improvements established in the Addendum,
                               Paragraphs 47 and 48 and the attached Exhibit
                               "C". Landlord shall not be liable for any loss of
                               business, inconvenience or annoyance arising from
                               any repair or restoration of any portion of the
                               Premises or the Project as a result of any damage
                               from fire or other casualty.

                     d.        This Lease shall be considered an express
                               agreement governing any case of damage to or
                               destruction of the Premises or the Project by
                               fire or other casualty, and any present or future
                               law


                                    10 of 17                  INITIALS ____ ____

<PAGE>   11
                               which purports to govern the rights of
                               Landlord and Tenant in such circumstances in the
                               absence of express agreement, shall have no
                               application.

21.        EMINENT DOMAIN.

                     a.        If the whole of the Project or Premises is
                               lawfully taken by condemnation or in any other
                               manner for any public or quasi-public purpose,
                               this Lease shall terminate as of the date of such
                               taking, and Rent shall be prorated to such date.
                               If less than the whole of the Project or Premises
                               is so taken, this Lease shall be unaffected by
                               such taking, provided that (i) Tenant shall have
                               the right to terminate this Lease by written
                               notice to Landlord given within ninety (90) days
                               after the date of such taking if twenty percent
                               (20%) or more of the Premises is taken and the
                               remaining area of the Premises is not reasonably
                               sufficient for Tenant to continue operation of
                               its business, or if such portion of the Project
                               other than the Premises is taken which makes it
                               reasonably impossible for Tenant to carry on its
                               operations, and (ii) Landlord shall have the
                               right to terminate this Lease by written notice
                               to Tenant given within ninety (90) days after the
                               date of such taking if the taking shall include
                               the Building of which the Premises are a part. If
                               either Landlord or Tenant so elects to terminate
                               this Lease, the Lease shall terminate on the
                               thirtieth (30th) day after either such notice.
                               The Rent shall be prorated to the date of
                               Termination. If this Lease continues in force
                               upon such partial taking, the Annual Base Rent
                               and Tenant's Proportionate Share of Project
                               Operating Expenses shall be equitably adjusted
                               according to the remaining Area of the Premises
                               and Project.

                     b.        In the event of any taking, partial or whole, all
                               of the proceeds of any award, judgment or
                               settlement payable by the condemning authority
                               shall be the exclusive property of Landlord, and
                               Tenant hereby assigns to Landlord all of its
                               right, title and interest in any award, judgment
                               or settlement from the condemning authority.
                               Tenant, however, shall have the right, to the
                               extent that Landlord's award is not reduced or
                               prejudiced, to claim from the condemning
                               authority (but not from Landlord) such
                               compensation as may be recoverable by Tenant in
                               its own right for relocation expenses and damage
                               to Tenant's personal property and after damage
                               recoverable by Tenant under applicable laws.

                     c.        In the event of a partial taking of the Premises
                               which does not result in a termination of this
                               Lease, Landlord shall restore the remaining
                               portion of the Premises as nearly as practicable
                               to its condition prior to the condemnation or
                               taking, but only to the extent of the Tenant
                               Improvement allowance established pursuant to
                               Addendum, Paragraphs 47 and 48 and the attached
                               Exhibit "C". Tenant shall be responsible at its
                               sole cost and expense for the repair, restoration
                               and replacement of any other leasehold
                               improvements and Tenant's Property.

22.        INDEMNIFICATION.

                     a.        Tenant shall indemnify and hold Landlord harmless
                               against and from liability and claims of any kind
                               for loss or damage to property of Tenant,
                               Landlord, or any other person, or for any injury
                               to or death of any person, arising out of: (i)
                               Tenant's use and occupancy of the Premises, or
                               any work, activity or other things allowed or
                               suffered by Tenant to be done in or on the
                               Premises; (ii) any breach or default by Tenant of
                               any of Tenant's obligations under this Lease;
                               (iii) any negligent or otherwise tortuous act or
                               omission of Tenant, its agents, employees,
                               invitees or contractors. Tenant shall, at
                               Tenant's expense, and by counsel satisfactory to
                               Landlord, defend Landlord in any action or
                               proceeding arising from any such claim and shall
                               indemnify Landlord against all costs, attorneys'
                               fees, and any other expenses incurred in such
                               action or proceeding. As a material part of the
                               consideration for Landlord's execution of this
                               Lease, Tenant hereby assumes all risk of damage
                               or injury to any person or property in, on or
                               about the Premises or Project from any cause,
                               except to the extent due to Landlord's gross
                               negligence or intentional misconduct.

                     b.        Landlord shall not be liable for injury or damage
                               which may be sustained by the person or property
                               of Tenant, its employees, invitees or customers,
                               or any other person in or about the Premises or
                               Project, caused by or resulting from fire,
                               explosion, falling plaster, steam, electricity,
                               gas, water or rain which may leak or flow or into
                               any part of the Premises, or from the breakage,
                               leakage, obstruction or other defects of pipes,
                               sprinklers, wires, appliances, plumbing, air
                               conditioning or lighting fixtures, or from any
                               other cause whatsoever, whether such damage or
                               injury results from conditions arising upon the
                               Premises or upon other portions of the Project
                               except to the extent resulting from the willful
                               misconduct or gross negligence of Landlord.
                               Landlord shall not be liable for any damage
                               arising from any act or omission of any other
                               tenant of the Project.

                     c.        Notwithstanding the provisions of Section 22(a)
                               and (b) to the contrary, Landlord or its agents
                               shall not be liable for (i) any damage to any
                               property entrusted to employees of the Building,
                               (ii) loss or damage to any property by theft or
                               otherwise. Landlord, its agents, employees and
                               invitees shall not be liable for interference
                               with light or other incorporeal hereditaments,
                               nor shall Landlord be liable for any latent
                               defect on the Premises or in the Building. Tenant
                               shall give prompt notice to Landlord in case of
                               fire or accidents on the Premises or in the
                               Building or of defects therein or in the fixtures
                               or equipment.

23. TENANT'S INSURANCE.

                     a.        The minimum limits of policies of insurance
                               required of Tenant under this Lease shall in no
                               event limit the liability of Tenant under this
                               Lease. All insurance required to be carried by
                               Tenant hereunder shall (i) be issued by an
                               insurance company having a General Policyholders
                               Rating of 


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<PAGE>   12
                               B+ or better and a financial size of "VI" or
                               better, as set forth in the most current issue of
                               Best's Rating Guide and licensed to do business
                               in the State of California; (ii) name Landlord,
                               Landlord's agent if any, and at Landlord's
                               request any mortgagee of Landlord, as an
                               additional insured, as their respective interests
                               may appear; (iii) be an occurrence policy (or
                               policies); (iv) contain a cross-liability
                               endorsement and contractual liability
                               endorsement; (v) contain a provision that such
                               policy and the coverage evidenced thereby shall
                               be primary and non-contributing with respect to
                               any policies carried by Landlord and that any
                               coverage carried by Landlord shall be excess
                               insurance; and (vi) include a waiver by the
                               insurer of any right of subrogation against
                               Landlord, its agent, employees and
                               representatives, which arises or might arise by
                               reason of any payment under such policy or by
                               reason of any act or omission of Landlord, its
                               agents, employees or representatives. A
                               certificate of the insurer evidencing the
                               existence and amount of each insurance policy
                               required hereunder shall be delivered to Landlord
                               before the date Tenant is first given the right
                               of possession of the Premises, and thereafter
                               within thirty (30) days after any demand by
                               Landlord therefor. Landlord may, at any time and
                               from time to time, inspect and/or copy any
                               insurance policies required to be maintained by
                               Tenant hereunder. Tenant shall furnish Landlord
                               with renewals to "binders" of any such policy at
                               least ten days prior to the expiration thereof.
                               Tenant agrees that if Tenant does not take out
                               and maintain such insurance, Landlord may (but
                               shall not be required to) procure said insurance
                               on Tenant's behalf and charge the Tenant the
                               premiums together with a twenty-five percent
                               (25%) handling charge, payable upon demand.
                               Tenant shall have the right to provide such
                               insurance coverage pursuant to blanket policies
                               obtained by the Tenant, provided such blanket
                               policies expressly afford coverage to the
                               Premises, Landlord, Landlord's agent and
                               mortgagee and Tenant as required by this Lease.
                               Renewal certificates shall be regularly provided
                               to Landlord at such times as renewal certificates
                               are regularly provided to all other landlords of
                               Tenant. Such certificates shall provide that
                               Tenant's insurer shall endeavor to provide
                               Landlord with thirty (30) days/prior written
                               notice of any cancellation or modification of
                               Tenant's insurance coverage.

                     b.        Beginning on the date Tenant is given access to
                               the Premises for any purpose and continuing until
                               expiration of the Lease Term, Tenant shall
                               procure, pay for and maintain in effect policies
                               of casualty insurance covering (i) all Leasehold
                               Improvements (including any alterations,
                               additions, or improvements as may be made by
                               Tenant pursuant to the provisions of Section 13
                               hereof), and (ii) trade fixtures, merchandise and
                               other personal property from time to time in, on
                               or about the Premises, in an amount not less than
                               one hundred percent (100%) of their actual
                               replacement cost from time to time, providing
                               protection against any peril included with the
                               classification `Fire and Extended Coverage"
                               together with insurance against sprinkler damage,
                               vandalism and malicious mischief. The proceeds of
                               such insurance shall be used for the repair or
                               replacement of the property so insured. Upon
                               termination of this Lease following a casualty as
                               set forth herein, the proceeds under (i) above
                               shall be paid to Landlord, and the proceeds under
                               (ii) above shall be paid to Tenant.

                     c.        Beginning on the date Tenant is given access to
                               the Premises for any purpose and continuing until
                               expiration of the Lease Term, Tenant shall
                               procure, pay for and maintain in effect workers'
                               compensation insurance as required by law and
                               comprehensive public liability and property
                               damage insurance with respect to the construction
                               of improvements on the Premises, the use,
                               operation or condition of the Premises and the
                               operations of Tenant in, on or about the
                               Premises, providing personal injury and broad
                               form property damage coverage for not less than
                               $1,000,000.00 combined single limit for bodily
                               injury, death and property damage liability.

                     d.        Not less than every two years during the Lease
                               Term, Landlord and Tenant shall mutually agree to
                               increases in all of Tenant's Insurance policy
                               limits for all insurance to be carried by Tenant
                               as set forth in this Section. In the event
                               Landlord and Tenant cannot mutually agree upon
                               the amounts of said increases, then Tenant agrees
                               that all insurance policy limits as set forth in
                               this Section shall be adjusted for increases in
                               the cost of living in the same manner as is set
                               forth in Section 6.2 hereof for the adjustment of
                               the Annual Base Rent.

24.        WAIVER OF SUBROGATION.

           Landlord and Tenant each hereby waive all rights of recovery against
           the other and against the officers, employees, agents and
           representatives of the other, on account of loss by or damage to the
           waiving party or its property or the property of others under its
           control, to the extent that such loss or damage is insured against
           under any fire and extended coverage insurance policy which either
           may have in force at the time of the loss or damage. Tenant shall,
           upon obtaining the policies of insurance required under this Lease,
           give notice to its insurance carrier or carriers that the foregoing
           mutual wavier of subrogation is contained in this Lease.

25.        SUBORDINATION AND ATTORNMENT.

           Upon written request of Landlord, or any mortgage or deed of trust
           beneficiary of Landlord, or ground lessor of Landlord, Tenant shall,
           in writing, subordinate its rights under this Lease to the lien of
           any mortgage or deed of trust, or to the interest of any lease in
           which Landlord is lessee, and to all advances made or hereafter to be
           made thereunder. However, before signing any subordination agreement,
           Tenant shall have the right to obtain from any lender or lessor of
           Landlord requesting such subordination, an agreement in writing
           providing that, as long as Tenant is not in default hereunder, this
           Lease shall remain in effect for the full Lease Term. The holder of
           any security interest may, upon written notice to Tenant, elect to
           have this Lease prior to its security interest regardless of the time
           of the granting or recording of such security interest.


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           In the event of any foreclosure sale or transfer in lieu of
           foreclosure, Tenant shall attorn to the purchaser or transferee as
           the case may be, and recognize that party, as Landlord, under this
           Lease, provided such party acquires and accepts the Premises subject
           to this Lease,

26.        TENANT ESTOPPEL CERTIFICATES.

           Within ten (10) days after written request from Landlord, Tenant
           shall execute and deliver to Landlord or Landlord's designee, in
           recordable form, a written statement in the form as required by
           Landlord certifying (a) that this Lease is unmodified and in full
           force and effect, or is in full force and effect as modified and
           stating the modifications; (b) the amount of Annual Base Rent and the
           date to which Annual Base Rent and additional rent have been paid in
           advance; (c) the amount of any security deposited with Landlord; and
           (d) that Landlord is not in default hereunder or, if Landlord is
           claimed to be in default, stating the nature of any claimed default.
           Any such statement may be relied upon by a purchaser, assignee or
           lender. Tenant's failure to execute and deliver such statement within
           the time required shall, at Landlord's election, be a default under
           this Lease without further notice other than that required pursuant
           to Section 28.1 hereof and shall also be conclusive upon Tenant that:
           (1) this Lease is in full force and effect and has not been modified
           except as represented by Landlord; (2) there are no uncured defaults
           in Landlord's performance and that Tenant has no right of offset,
           counterclaim or deduction against Rent; and (3) not more than one
           month's Rent has been paid in advance.

27.        TRANSFER OF LANDLORD'S INTEREST.

           In the event of any sale or transfer by Landlord of the Premises or
           the Project, and assignment of this Lease by Landlord, Landlord shall
           be and is hereby entirely freed and relieved of any and all liability
           and obligations contained in or derived from this Lease arising out
           of any act, occurrence or omission relating to the Premises, Project
           or Lease occurring after the completion of such sale or transfer, and
           Landlord's successor shall be solely responsible for all obligations
           of Landlord under this Lease. If any security deposit or prepaid Rent
           has been paid by Tenant, Landlord may transfer the security deposit
           or prepaid Rent to Landlord's successor and upon such transfer,
           Landlord shall be relieved of any and all further liability with
           respect thereto. Tenant shall fully and properly cooperate in the
           completion of such transfer

28.        DEFAULT.

            28.1. Tenant's Default. The occurrence of any one or more of the
                  following events shall constitute a default and breach of this
                  Lease by Tenant:

                     a.        If Tenant abandons or vacates the Premises; or

                     b.        If Tenant fails to pay any Rent or any additional
                               rent or any other charges required to be paid by
                               Tenant under this Lease and such failure
                               continues for three (3) days after written notice
                               thereof from Landlord (so long as the form of any
                               such notice complies with statutory requirements,
                               any such notice and the opportunity to cure shall
                               be in lieu of and not in addition to the notice
                               required in order to commence unlawful detainer
                               proceedings); or

                     c.        If Tenant fails promptly and fully to perform any
                               non-monetary covenant, condition or agreement
                               contained in this Lease and such failure
                               continues for thirty (30) days after written
                               notice thereof from Landlord to Tenant (so long
                               as the form of any such notice complies with
                               statutory requirements, any such notice and the
                               opportunity to cure shall be in lieu of and not
                               in addition to the notice required in order to
                               commence unlawful detainer proceedings); or

                     d.        If a writ of attachment or execution is levied on
                               this Lease or on any of Tenant's Property; or

                     e.        If Tenant makes a general assignment for the
                               benefit of creditors, or provides for an
                               arrangement, composition, extension or adjustment
                               with its creditors; or

                     f.        If Tenant files a voluntary petition for relief
                               or if a petition against Tenant in a proceeding
                               under the federal bankruptcy laws or other
                               insolvency laws is filed and not withdrawn or
                               dismissed within forty-five (45) days thereafter,
                               or if under the provisions of any law providing
                               for reorganization or winding up of corporations,
                               any court of competent jurisdiction assumes
                               jurisdiction, custody or control of Tenant or any
                               substantial part of its property and such
                               jurisdiction, custody or control remains in force
                               unrelinquished, unstayed or unterminated for a
                               period of forty-five (45) days; or

                     g.        If in any proceeding or action in which Tenant is
                               a party, a trustee, receiver, agent or custodian
                               is appointed to take charge of the Premises or
                               Tenant's Property (or has the authority to do so)
                               for the purpose of enforcing a lien against the
                               Premises or Tenant's Property; or

                     h.        If Tenant is a partnership or consists of more
                               than one person or entry, if any partner of the
                               partnership or other person or entity is involved
                               in any of the acts or events described in
                               subparagraphs (d) through (g) above.

           28.2.     Remedies. In the event of Tenant's default hereunder, then
                     in addition to any other rights or remedies Landlord may
                     have under any law, Landlord shall have the right, at
                     Landlord's option, without further notice or demand of any
                     kind to do the following:

                     a.        Terminate this Lease and Tenant's right to
                               possession of the Premises and reenter the
                               Premises and take possession thereof, and Tenant
                               shall have no further claim to the Premises or no
                               further claim under this Lease; or


                                    13 of 17                  INITIALS ____ ____

<PAGE>   14
                     b.        Maintain Tenant's right to possession, in which
                               case this Lease shall continue in effect whether
                               or not Tenant shall have abandoned the premises.
                               This remedy is intended to be the remedy
                               described in California Civil Code Section
                               1951.4. In such event, Landlord shall be entitled
                               to enforce all of Landlord's rights and remedies
                               under this Lease, including the right to recover
                               the rent as it becomes due hereunder; and/or

                     c.        Reenter the Premises under the provisions of
                               subparagraph (b), and thereafter elect to
                               terminate this Lease and Tenant's right to
                               possession of the Premises.

                     If Landlord reenters the Premises under the provisions of
                     subparagraphs (b) or (c) above, Landlord shall not be
                     deemed to have terminated this Lease or the obligation of
                     Tenant to pay any Rent or other charges thereafter
                     accruing, unless Landlord notifies Tenant in writing of
                     Landlord's election to terminate this Lease. In the event
                     of re-entry or retaking of possession by Landlord, Landlord
                     shall have the right, but not the obligation, to remove all
                     or any part of Tenant's Property in the Premises and to
                     place such property in storage at a public warehouse at the
                     expense and risk of Tenant. If Landlord elects to relet the
                     Premises for the account of Tenant, the rent received by
                     Landlord from such reletting shall be applied as follows:
                     first, to the payment of any indebtedness other than Rent
                     due hereunder from Tenant to Landlord; second, to the
                     payment of any costs of such reletting; third, to the
                     payment of the cost of any alterations or repairs to the
                     Premises; fourth, to the payment of Rent due and unpaid
                     hereunder; and the balance, if any, shall be held by
                     Landlord and applied in payment of future Rent as it
                     becomes due. If that portion of rent received from the
                     reletting which is applied against the Rent due hereunder
                     is less than the amount of the Rent due, Tenant shall pay
                     the deficiency to Landlord within five (5) days after
                     demand by Landlord. Such deficiency shall be calculated and
                     paid monthly. Tenant shall also pay to Landlord, within
                     five (5) days of the demand, any costs and expenses
                     incurred by Landlord in connection with such reletting or
                     in making alterations and repairs to the Premises which are
                     not covered by the rent received from the reletting.

           28.3.     Damages. Should Landlord elect to terminate this Lease
                     under the provisions of subparagraph 28.2(a) or (c) above,
                     Landlord may recover as damages from Tenant the following:

                     a.        Past Rent. The worth at the time of the award of
                               any unpaid Rent which had been earned at the time
                               of termination; plus

                     b.        Rent Prior to Award. The worth at the time of the
                               award of the amount by which the unpaid Rent
                               which would have been earned after termination
                               until the time of award exceeds the amount of
                               such rental loss that Tenant proves could have
                               been reasonably avoided; plus

                     c.        Rent After Award. The worth at the time of the
                               award of the amount by which the unpaid Rent for
                               the balance of the Term after the time of award
                               exceeds the amount of the rental loss that Tenant
                               proves could be reasonably avoided; plus

                     d.        Proximately Caused Damages. Any, other amount
                               necessary to compensate Landlord for all
                               detriment proximately caused by Tenant's failure
                               to perform its obligations under this Lease or
                               which in the ordinary course of things would by
                               likely to result therefrom, including, but not
                               limited to, any costs or expenses (including
                               attorneys' fees), incurred by Landlord in (i)
                               retaking possession of the Premises, (ii)
                               maintaining the Premises after Tenant's default,
                               (iii) preparing the Premises for reletting to a
                               new tenant, including any repairs or alterations,
                               and (iv) reletting the Premises, including
                               brokers' commissions.

                               "The worth at the time of the award" as used in
                               subparagraphs (a) and (b) above, is to be
                               computed by allowing interest on the unpaid rent
                               at the rate of twelve percent (12%) per annum or
                               by allowing interest at the maximum rate an
                               individual is permitted to charge by law,
                               whichever is greater. "The worth at the time of
                               the award" as used in subparagraph (c) above, is
                               to be computed by discounting the amount at the
                               discount rate of the Federal Reserve Bank of San
                               Francisco at the time, of the award plus one
                               percent.

           28.4.     Waiver: Cumulative. The waiver by Landlord of any breach of
                     any term, covenant or condition of this Lease shall not be
                     deemed a waiver of such term, covenant or condition or of
                     any subsequent breach of the same or any other term;
                     covenant or condition. Acceptance of Rent by Landlord
                     subsequent to any breach hereof shall not be deemed to be a
                     waiver of any preceding breach other than the failure to
                     pay the particular Rent so accepted, regardless of
                     Landlord's knowledge of any breach at the time of such
                     acceptance of Rent. Landlord shall not be deemed to have
                     waived any term, covenant or condition unless Landlord
                     gives Tenant written notice of such waiver. Landlord's
                     exercise of any right of remedy shall not prevent it from
                     exercising any other right or remedy which may be provided
                     by law or this Lease, whether or not stated in this Lease.
                     The termination of this Lease under this Article 16 shall
                     not release Tenant from obligations arising as a result of
                     any acts or omissions occurring prior to such expiration or
                     termination, including, without limitation, any indemnity
                     obligations of Tenant and any obligations of Tenant under
                     Article 7 of this Lease and all such obligations shall
                     survive such termination.

29.        BROKERAGE FEES.

           Tenant warrants and represents that it has not dealt with any real
           estate broker or agent in connection with this Lease or its
           negotiation other than Newport National Corporation, who represents
           the Landlord, and Business Real Estate, Rick Reeder, who represents
           the Tenant. Tenant shall indemnify and hold Landlord harmless from
           any cost, expense or liability (including costs of suit and
           reasonable attorneys' fees) for any compensation, commission or


                                    14 of 17                  INITIALS ____ ____

<PAGE>   15
           fees claimed by any other real estate broker or agent in connection
           with this Lease or its negotiation by reason of any act of Tenant.

30.        NOTICES.

           All notices, approvals and demands permitted or required to be given
           under this Lease shall be in writing and deemed duty served or given
           when actually delivered if personally delivered or within three (3)
           business days after deposit in the mail if sent by certified or
           registered U.S. mail, postage prepaid, or return receipt requested.
           Such notices shall be addressed as follows: (a) if to Landlord, to
           Landlord's Mailing Address and to the Building Manager, and (b) If to
           Tenant, to Tenant's Mailing Address; provided however, notices to
           Tenant or Landlord shall be deemed duly served or given if personally
           delivered or mailed to Landlord at its offices. Landlord and Tenant
           may from time to time by notice to the other designate another place
           for receipt of future notices.

31.        GOVERNMENT ENERGY OR UTILITY CONTROLS.

           In the event of imposition of federal, state or local government
           controls, rules, regulations, or restrictions on the use or
           consumption of energy or other utilities during the Term, both
           Landlord and Tenant shall be bound thereby. In the event of a
           difference in interpretation by Landlord and Tenant or any such
           controls, the interpretation of Landlord shall prevail, and Landlord
           shall have the right to enforce compliance therewith, including the
           right of entry Into the Premises to effect compliance.

32.        QUIET ENJOYMENT.

           Tenant, upon paying the Rent and performing all of its obligations
           under this Lease, shall peaceably and quietly enjoy the Premises,
           subject to the terms of this Lease and to any mortgage, lease, or
           other agreement to which this Lease may be subordinate.

33.        FORCE MAJEURE.

           Any prevention, delay or stoppage of work to be performed by Landlord
           or Tenant which is due to strikes, labor disputes, inability to
           obtain labor, materials, equipment or reasonable substitutes
           therefor, acts of God, governmental restrictions or regulations or
           controls, judicial orders, enemy or hostile government actions, civil
           commotion, fire or other casualty, or other causes beyond the
           reasonable control of the party obligated to perform hereunder, shall
           excuse performance of the work by that party for a period equal to
           the duration of that prevention, delay or stoppage. Nothing in this
           Article 33 shall excuse or delay Tenant's obligation to pay Rent or
           other charges under this Lease in a timely manner.

34.        CURING TENANT'S DEFAULTS.

           If Tenant defaults in the performance of any of its obligations under
           this Lease, Landlord may (but shall not be obligated to) without
           waiving such default, perform the same for the account and at the
           expense of Tenant. Tenant shall pay Landlord all costs plus a
           reasonable percentage mark-up to cover general conditions and fees of
           such performance within ten (10) days upon receipt of a bill
           therefor.

35.        LIMITATION OF LIABILITY.

           In consideration of the benefits accruing hereunder, Tenant agrees
           that, if Landlord is a partnership, in the event of any actual or
           alleged failure, breach or default of this Lease by Landlord,

                     a.        The sole and exclusive remedy shall be against
                               the assets of such partnership;

                     b.        No partner of Landlord shall be sued or named as
                               a party in any suit or action (except as may be
                               necessary to secure jurisdiction of the
                               partnership);

                     c.        No service of process shall be made against any
                               partner of Landlord (except as may be necessary
                               to secure jurisdiction of the partnership);

                     d.        No partner of Landlord shall be required to
                               answer or otherwise plead to any service of
                               process;

                     e.        No judgment may be taken against any partner of
                               Landlord;

                     f.        Any judgment taken against any partner of
                               Landlord may be vacated and set-aside at any time
                               without hearing;

                     g.        No writ of execution will ever be levied against
                               the assets of any partner of Landlord; and

                     h.        These covenants and agreements are for the
                               benefit of and shall be enforceable both by
                               Landlord and by any partner of Landlord.

           Tenant agrees that each of the foregoing provisions shall be
           applicable to any covenant or agreement either expressly contained in
           this Lease or imposed by statute or at common law.

36.        BUILDING PLANNING.

           In the event Landlord requires the Premises for use in conjunction
           with another suite or for other reasons connected with the Building
           planning program, upon notifying Tenant in writing, Landlord shall
           have the right to move Tenant to other space in the Building of which
           the Premises forms a part, at Landlord's sole cost and expense, and
           the terms and conditions of the original Lease shall remain in full
           force and effect, save and excepting that a revised Exhibit 48


                                    15 of 17                  INITIALS ____ ____

<PAGE>   16
           shall become part of this Lease and shall reflect the location of the
           new space. However, if the new space does not meet with Tenant's
           reasonable approval, Tenant shall have the right to cancel this Lease
           upon giving Landlord thirty (30) days notice within ten (10) days of
           receipt of Landlord's notification. In no event shall Landlord
           relocate Tenant during the first (1st) year of the Original Lease
           Term. Any relocation shall be to space which is substantially similar
           In size, dimensions and configuration to the Premises. Landlord shall
           reimburse Tenant for all reasonable expenses incurred by Tenant In
           relocating including, but not limited to, moving expenses, phone
           transfer charges, and the cost of changing the address on business
           stationery and business cards.

37.        MISCELLANEOUS.

                     a.        Accord and Satisfaction; Allocation of Payments.
                               No payment by Tenant or receipt by Landlord of a
                               lesser amount than the Rent provided for in this
                               Lease shall be deemed to be other than on account
                               of the earliest due Rent, nor shall any
                               endorsement or statement on any check or letter
                               accompanying any check or payment as Rent, be
                               deemed an accord and satisfaction, and Landlord
                               may accept such check or payment without
                               prejudice to Landlord's right to recover the
                               balance of the Rent or pursue any other remedy
                               provided for in this Lease. In connection with
                               the foregoing, Landlord shall have the absolute
                               right in its sole discretion to apply any payment
                               received from Tenant to any account or other
                               payment of Tenant then not current and due or
                               delinquent.

                     b.        Addenda. If any provision contained in an
                               addendum to this Lease is inconsistent with any
                               other provision herein, the provision contained
                               in the addendum shall control, unless otherwise
                               provided in the addendum.

                     c.        Attorneys' Fees. If any action or proceeding is
                               brought by either party against the other
                               pertaining to or arising out of this Lease, the
                               prevailing party shall be entitled to recover all
                               costs and expenses, including reasonable
                               attorneys' fees, incurred on account of such
                               action or proceeding. In addition, if Landlord
                               incurs attorneys fees and/or costs in enforcing
                               or seeking to enforce any right of indemnity set
                               forth in the Lease, all such attorneys' fees and
                               costs shall be recoverable and deemed within the
                               scope of such indemnity and/or this attorneys'
                               fees provisions.

                     d.        Captions and Section Numbers. The captions
                               appearing within the body of this lease have been
                               inserted as a matter of convenience and for
                               reference only and in no way define, limit or
                               enlarge the scope or meaning of this Lease. All
                               references to Section numbers refer to Sections
                               in this Lease unless expressly stated otherwise.

                     e.        Changes Requested. Neither Landlord or Tenant
                               shall unreasonably withhold its consent to
                               changes or amendments to this Lease requested by
                               a lender that holds Landlord's interest as
                               security, or by any prospective purchaser of the
                               Project, so long as these changes do not alter
                               the basic business terms of this Lease or
                               otherwise materially diminish any rights or
                               materially increase any obligations of the party
                               from whom consent to such change of amendment is
                               requested.

                     f.        Choice of Law. This Lease shall be construed and
                               enforced in accordance with the laws of the State
                               of California.

                     g.        Consent. Notwithstanding anything contained in
                               this Lease to the contrary, Tenant shall have no
                               claim, and hereby waives the right to any claim
                               against Landlord for money damages by reason of
                               any refusal, withholding or delaying by Landlord
                               of any consent, approval or statement of
                               satisfaction, and in such event, Tenant's only
                               remedies therefor shall be an action for specific
                               performance, injunction or declaratory judgment
                               to enforce any right to such consent, approval or
                               statement of satisfaction.

                     h.        Corporate Authority. If Tenant is a corporation,
                               each individual signing this Lease on behalf of
                               Tenant represents and warrants that he is duly
                               authorized to execute and deliver this Lease on
                               behalf of the corporation and that this Lease is
                               binding on Tenant in accordance with its terms.
                               Tenant shall, at Landlord's request, deliver a
                               certified copy of a resolution of its Board of
                               Directors authorizing such execution.

                     i.        Counterparts. This Lease may be executed in
                               multiple counterparts, all of which shall
                               constitute one and the same Lease.

                     j.        Execution of Lease, No Option. The submission of
                               this Lease to Tenant shall be for examination
                               purposes only and does not and shall not
                               constitute a reservation of or option for Tenant
                               to lease, or otherwise create any interest of
                               Tenant in the Premises or any other premises
                               within the Building or Project. Execution of this
                               Lease by Tenant and its return to Landlord shall
                               not be binding on Landlord notwithstanding any
                               time interval, until Landlord has in fact signed
                               and delivered this Lease or a counterpart to
                               Tenant.

                     k.        Furnishing of Financial Statements: Tenant's
                               Representations. In order to induce Landlord to
                               enter into this Lease, Tenant agrees that it
                               shall within thirty (30) days furnish Landlord,
                               from time to time, upon Landlord's written
                               request, with published annual and/or quarterly
                               reports reflecting Tenant's current financial
                               condition. Tenant represents and warrants that
                               all financial statements, records and information
                               furnished by Tenant to Landlord in connection
                               with this Lease are true, correct and complete in
                               all respects.

                     l.        Further Assurances. The parties agree to promptly
                               sign all documents reasonably requested to give
                               effect to the provisions of this Lease.


                                    16 of 17                  INITIALS ____ ____

<PAGE>   17
                     m.        Prior Agreements: Amendments. This Lease contains
                               all of the agreements of the parties with respect
                               to any matter covered or mentioned in this Lease,
                               and no prior agreement of understanding
                               pertaining to any such matter shall be effective
                               for any purpose. No provisions of this Lease may
                               be amended or added to except by an agreement in
                               writing signed by the parties or their respective
                               successors in interest.

                     n.        Recording. Tenant shall not record this Lease
                               without the prior written consent of Landlord.
                               Tenant, upon the request of Landlord, shall
                               execute and, acknowledge a "short form"
                               memorandum of this Lease for recording purposes
                               in form and content satisfactory to both parties.
                               The party requesting that a short form lease be
                               recorded shall be responsible for paying any
                               costs incurred in connection therewith.

                     o.        Severability. A final determination by a court of
                               competent jurisdiction that any provision of this
                               Lease is invalid shall not affect the validity of
                               any other provision, and any provision so
                               determined to be invalid shall to the extent
                               possible, be construed to accomplish its intended
                               effect.

                     p.        Successors and Assigns. This Lease shall apply to
                               and bind the permitted successors and assigns of
                               the parties.

                     q.        Time of the Essence. Time is of the essence in
                               this Lease.

                     r.        Waiver. No delay or omission in the exercise of
                               any right or remedy of Landlord upon any default
                               by Tenant shall impair such right or remedy or be
                               construed as a waiver of such default.

                               The receipt and acceptance by Landlord of
                               delinquent Rent shall not constitute a waiver of
                               any other default: it shall constitute only a
                               waiver of timely payment for the particular Rent
                               payment involved.

                               No act or conduct of Landlord including, without
                               limitation, the acceptance of keys to the
                               Premises, shall constitute an acceptance of the
                               surrender of the Premises by Tenant before the
                               expiration of the Term. Only a written notice
                               from Landlord to Tenant shall constitute
                               acceptance of the surrender of the Premises and
                               accomplish a termination of the Lease.

                               Landlord's consent to or approval of any act by
                               Tenant requiring Landlord's consent or approval
                               shall not be deemed to waive or render
                               unnecessary Landlord's consent to or approval of
                               any subsequent act by Tenant.

                               Any waiver by Landlord of any default must be in
                               writing and shall not be a waiver of any other
                               default concerning the same or any other
                               provision of the Lease.

                     s.        Mortgagee Protection. In the event of any default
                               on the part of Landlord, Tenant will give notice
                               by registered or certified mail to any
                               beneficiary of a deed of trust or mortgage
                               covering the Premises whose address shall have
                               been furnished to Tenant, and shall offer such
                               beneficiary of mortgagee a reasonable opportunity
                               to cure the default, including time to obtain
                               possession of the Premises by power of sale or a
                               judicial foreclosure, if such should prove
                               necessary to effect a cure.

                     t.        Identification of Tenant. If more than one person
                               executes this Lease as Tenant:

                               (i)        Each of them is jointly and severally
                                          liable for the keeping, observing and
                                          performing of all of the terms,
                                          covenants, conditions, provisions and
                                          agreements of this Lease to be kept,
                                          observed and performed by Tenant, and

                               (ii)       The term "Tenant" as used in this
                                          Lease shall mean and include each of
                                          them jointly and severally. The act of
                                          or notice from or notice or refund to,
                                          or the signature of any one or more of
                                          them, with respect to the tenancy of
                                          this Lease, including, but not limited
                                          to any renewal, extension, expiration,
                                          termination or modification of this
                                          Lease, shall be binding upon each and
                                          all of the persons executing this
                                          Lease as Tenant with the same force
                                          and effect as if each and all of them
                                          had so acted or so given or received
                                          such notice or refund or so signed.

                     u.        Exhibits and Addenda. All exhibits and addenda
                               attached to this Lease are incorporated herein by
                               this reference and shall be deemed a part of this
                               Lease.

                     Notwithstanding anything to the contrary contained herein,
                     the obligations of Tenant hereunder shall not extend beyond
                     what is commercially reasonable given the particularities
                     of the project and such premises.

38.        WAIVER OF LANDLORD'S LIEN.

           The terms of any statutory lien provisions notwithstanding, in no
           event shall Landlord have a lien on, interest in or any other right
           to any computer hardware, computer peripherals or computer software,
           in whatever form, which may be or may have been on the Premises at
           any time during the term of this Lease.


                                    17 of 17                  INITIALS ____ ____

<PAGE>   18
The parties hereto have executed this Lease as of the date first above written.

AGREED AND ACCEPTED:                        AGREED AND ACCEPTED:

LANDLORD:                                   TENANT:

The Campus, LLC,                            Viasat, Inc.,
a California Limited Liability Company      a California corporation,

By:    Newport National Corporation,
       a California corporation
Its:   Manager                              By: _______________________________
                                                     Greg Monahan
       By:  _________________________       Its:     Vice President
            Jeffry A. Brusseau
       Its: Senior Vice President/CCO       Date: _____________________________

Date:  _______________________



                                    18 of 17                  INITIALS ____ ____



<PAGE>   1
                                                                  EXHIBIT 10.26

                       SOUTHERN CALIFORNIA CHAPTER OF THE
               SOCIETY OF INDUSTRIAL AND OFFICE REALTORS,(R) INC.

                          INDUSTRIAL REAL ESTATE LEASE
                             (MULTI-TENANT FACILITY)

ARTICLE ONE:  BASIC TERMS

      This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.

      Section  1.01. DATE OF LEASE: April 22, 1997

      Section  1.02. LANDLORD (INCLUDE LEGAL ENTITY): Onimac Corporation, a
California corporation

Address of Landlord: 12520 High Bluff Drive, Suite 100
                               San Diego, CA 92130

      Section  1.03. TENANT (INCLUDE LEGAL ENTITY): Viasat, Inc., a Delaware
corporation

      Section  1.04. PROPERTY: The Property is A 25,000+/- square foot portion
subject to verification and adjustment, of Landlord's multi-tenant real property
development known as Suite A of 2320 Camino Vida Roble, Carlsbad, California
92008, and described or depicted in Exhibit "A" (the "Project"). The Project
includes the land, the buildings and all other improvements located on the land,
and the common areas described in Paragraph 4.05(a). The Property is (include
street address, approximate square
 footage and description) approximately 44,000
square feet, and is a single-story building which is a part of a two-building
complex, the other building having the street address 2310 Camino Vida Roble,
Carlsbad, California.

Address of Tenant:   2290 Cosmos Court
                     Carlsbad, California

      Section  1.05. LEASE TERM: One (1) years five (5) months BEGINNING ON July
1, 1997 or such other date as specified in this Lease, and ENDING ON November
30, 1998.

      Section  1.06. PERMITTED USES: (See Article Five) General office use.

      Section  1.07. TENANT'S GUARANTOR: (if none, so state) Not applicable.

      Section  1.08. BROKERS: (See Article Fourteen) (if none, so state)

Landlord's Broker:   Not applicable.

Tenant's Broker:     Rick Reeder, Business Real Estate, 5050 Avenida Encinas,
                     Suite 150, Carlsbad, CA 92008, Phone: 431-4200, ext. 208.

      Section  1.09. COMMISSION PAYABLE TO LANDLORD'S BROKER: (See Article
Fourteen) $ N/A

      Section  1.10. INITIAL SECURITY DEPOSIT: (See Section 3.03) $22,500.00.

      Section  1.11. VEHICLE PARKING SPACES ALLOCATED TO TENANT: (See Section
4.05) 3.6/1000 sq. ft. at no expense to Tenant.

      Section  1.12. RENT AND OTHER CHARGES PAYABLE BY TENANT:

      (a) BASE RENT: Twenty Two Thousand Five Hundred Dollars ($22,500.00) per
month for the first seventeen (17) months, as provided in Section 3.01, and
shall be increased on the first day of the eighteenth (18th) month after the
Commencement Date, at the start of the first Option Period.

      (b) OTHER PERIODIC PAYMENTS: (i) Utilities (See Section 4.03); (ii)
Insurance Premiums (See Section 4.04); (iii) Maintenance, Repairs and
Alterations (See Article Six) and (iv) janitorial services for the Premises.

      Section  1.13. LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE: (See
Section 9.05) fifty percent (50%) of the Profit (the "Landlord's Share").



<PAGE>   2
      Section  1.14. RIDERS: The following Riders are attached to and made a
part of this Lease: (If none, so state)

      First Addendum to Lease (Additional Lease Terms)
      Exhibit "A" - The Project
      Exhibit "B" - The Property

ARTICLE TWO:   LEASE TERM

      Section  2.01. LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.

      Section  2.02. DELAY IN COMMENCEMENT. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not deliver possession of the Property to Tenant within
thirty (30) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60) -day period ends. If Tenant gives such notice, the Lease shall be canceled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and expiration date of the
Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.

      Section  2.03. EARLY OCCUPANCY. If Tenant occupies the Property prior to
the Commencement Date, Tenant's occupancy of the Property shall be subject to
all of the provisions of this Lease. Early occupancy of the Property shall not
advance the expiration date of this Lease. Tenant shall pay Base Rent and all
other charges specified in this Lease for the early occupancy period. Tenant
shall have access thirty (30) days early for cabling, furniture and phones.

      Section  2.04. HOLDING OVER. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a
"month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by ten percent (10%).

ARTICLE THREE:  BASE RENT

      Section  3.01. TIME AND MANNER OF PAYMENT. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall be payable at Landlord's address or at such other place as
Landlord may designate in writing.

      Section  3.02. [deleted]

      Section  3.03. SECURITY DEPOSIT; INCREASES.

      (a)      Upon the execution of this Lease, Tenant shall deposit with
Landlord a cash Security Deposit in the amount set forth in Section 1.10 above.
Landlord may apply all or part of the Security Deposit to any unpaid rent or
other charges due from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the Security Deposit, Tenant shall restore the
Security Deposit to its full amount within ten (10) days after Landlord's
written request. Tenant's failure to do so shall be a material default under
this Lease. No interest shall be paid on the Security Deposit. Landlord shall
not be 

                                       2

<PAGE>   3
required to keep the Security Deposit separate from its other accounts
and no trust relationship is created with respect to the Security Deposit.

      (b)      [deleted]

      Section  3.04. TERMINATION; ADVANCE PAYMENTS. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant within ten (10) days, (or Tenant's successor) the
unused portion of the Security Deposit, any advance rent or other advance
payments made by Tenant to Landlord, and any amounts paid for real property
taxes and other reserves which apply to any time periods after termination of
the Lease.

ARTICLE FOUR:  OTHER CHARGES PAYABLE BY TENANT

      Section  4.01. ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.

      Section  4.02. [deleted]

      (a)      [deleted]

      (b)      [deleted]

      (c)      [deleted]

      (d)      PERSONAL PROPERTY TAXES.

               (i) Tenant shall pay all taxes charged against trade fixtures,
      furnishings, equipment or any other personal property belonging to Tenant.
      Tenant shall try to have personal property taxed separately from the
      Property.

               (ii) If any of Tenant's personal property is taxed with the
      Property, Tenant shall pay Landlord the taxes for the personal property
      within fifteen (15) days after Tenant receives a written statement from
      Landlord for such personal property taxes.

      Section  4.03. UTILITIES. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement. If utilities are prorated, Tenant shall have the right to
audit the historical utility cost to determine if additional leasing at the
Project has increased its proportionate share of utilities. If so, Landlord
shall adjust the utility cost to reflect Tenant's actual use.

      Section  4.04. INSURANCE POLICIES.

      (a)      LIABILITY INSURANCE. During the Lease Term, Tenant shall maintain
a policy of commercial general liability insurance (sometimes known as broad
form comprehensive general liability insurance) insuring Tenant against
liability for bodily injury, property damage (including loss of use of property)
and personal injury arising out of the operation, use or occupancy of the
Property. Tenant shall name Landlord as an additional insured under such policy.
The initial amount of such insurance shall be One Million Dollars ($1,000,000)
per occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance shall not limit Tenant's liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord
insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The policy obtained by Landlord shall not be
contributory and shall not provide primary insurance.


                                       3

<PAGE>   4
      (b)      PROPERTY AND RENTAL INCOME INSURANCE. During the Lease Term,
Landlord shall maintain policies of insurance covering loss of or damage to the
Property in the full amount of its replacement value. Such policy shall contain
an Inflation Guard Endorsement and shall provide protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (all risk), sprinkler leakage and
any other perils which Landlord deems reasonably necessary. Landlord shall have
the right to obtain flood and earthquake insurance if required by any lender
holding a security interest in the Property. Landlord shall not obtain insurance
for Tenant's fixtures or equipment or building improvements installed by Tenant
on the Property. During the Lease Term, Landlord shall also maintain a rental
income insurance policy, with loss payable to Landlord, in an amount equal to
one year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall not do or permit anything to be done which invalidates any such
insurance policies.

           (c) PAYMENT OF PREMIUMS. Subject to Section 4.08, Tenant shall pay
all premiums for the insurance policies described in Paragraphs 4.04(a) (whether
obtained by Landlord or Tenant) within fifteen (15) days after Tenant's receipt
of a copy of the premium statement or other evidence of the amount due, except
Landlord shall pay all premiums for non-primary comprehensive public liability
insurance which Landlord elects to obtain as provided in Paragraph 4.04(a).
Before the Commencement Date, Tenant shall deliver to Landlord a copy of any
policy of insurance which Tenant is required to maintain under this Section
4.04. At least thirty (30) days prior to the expiration of any such policy,
Tenant shall deliver to Landlord a renewal of such policy. As an alternative to
providing a policy of insurance, Tenant shall have the right to provide Landlord
a certificate of insurance, executed by an authorized officer of the insurance
company, showing that the insurance which Tenant is required to maintain under
this Section 4.04 is in full force and effect and containing such other
information which Landlord reasonably requires, naming Landlord and Manager as
additional insureds thereto.

           (d)       GENERAL INSURANCE PROVISIONS.

                     (i) Any insurance which Tenant is required to maintain
            under this Lease shall include a provision which requires the
            insurance carrier to give Landlord not less than thirty (30) days'
            written notice prior to any cancellation or modification of such
            coverage.

                     (ii) If Tenant fails to deliver any policy, certificate or
            renewal to Landlord required under this Lease within the prescribed
            time period or if any such policy is canceled or modified during the
            Lease Term without Landlord's consent, Landlord may obtain such
            insurance, in which case Tenant shall reimburse Landlord for the
            cost of such insurance within fifteen (15) days after receipt of a
            statement that indicates the cost of such insurance.

                     (iii) Tenant shall maintain all insurance required under
            this Lease with companies holding a "General Policy Rating" of A-12
            or better, as set forth in the most current issue of "Best Key
            Rating Guide." Landlord and Tenant acknowledge the insurance markets
            are rapidly changing and that insurance in the form and amounts
            described in this Section 4.04 may not be available in the future.
            Tenant acknowledges that the insurance described in this Section
            4.04 is for the primary benefit of Landlord. If at any time during
            the Lease Term, Tenant is unable to maintain the insurance required
            under the Lease, Tenant shall nevertheless maintain insurance
            coverage which is customary and commercially reasonable in the
            insurance industry for Tenant's type of business, as that coverage
            may change from time to time. Landlord makes no representation as to
            the adequacy of such insurance to protect Landlord's or Tenant's
            interests. Therefore, Tenant shall obtain any such additional
            property or liability insurance which Tenant deems necessary to
            protect Landlord and Tenant.

                     (iv) Unless prohibited under any applicable insurance
            policies maintained, Landlord and Tenant each hereby waive any and
            all rights of recovery against the other, or against the officers,
            employees, agents or representatives of the other, for loss of or
            damage to its property or the property of others under its control,
            if such loss or damage is covered by any insurance policy in force
            (whether or not described in this Lease) at the time of such loss or
            damage. Upon obtaining the required policies of insurance, Landlord
            and Tenant shall give notice to the insurance carriers of this
            mutual waiver of subrogation.

      Section  4.05. COMMON AREAS; USE, MAINTENANCE AND COSTS.

      (a)      COMMON AREAS. As used in this Lease, "Common Areas" shall mean
all areas within the Project which are available for the common use of tenants
of the Project and which are not leased or held for the exclusive use of Tenant
or other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and planted
areas. Landlord, from time to time, may change the size, location, nature and
use of any of the Common Areas, convert 

                                       4

<PAGE>   5
Common Areas into leaseable areas, construct additional parking facilities
(including parking structures) in the Common Areas, and increase or decrease
Common Area land and/or facilities. Tenant acknowledges that such activities may
result in inconvenience to Tenant. Such activities and changes are permitted if
they do not materially affect Tenant's use of the Property.

      (b)      USE OF COMMON AREAS. Tenant shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended, subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
effort to cause others who use the Common Areas with Tenant's express or implied
permission to abide by Landlord's rules and regulations. At any time, Landlord
may close any Common Areas to perform any acts in the Common Areas as, in
Landlord's judgment, are desirable to improve the Project. Tenant shall not
interfere with the rights of Landlord, other tenants or any other person
entitled to use the Common Areas.

      (c)      SPECIFIC PROVISION RE: VEHICLE PARKING. Tenant shall be entitled
to use the number of vehicle parking spaces in the Project allocated to Tenant
in Section 1.11 of the Lease without paying any additional rent. Tenant's
parking shall not be reserved and shall be limited to vehicles no larger than
standard size automobiles or pickup utility vehicles. Tenant shall not cause
large trucks or other large vehicles to be parked within the Project or on the
adjacent public streets. Temporary parking of large delivery vehicles in the
Project may be permitted by the rules and regulations established by Landlord.
Vehicles shall be parked only in striped parking spaces and not in driveways,
loading areas or other locations not specifically designated for parking.
Handicapped spaces shall only be used by those legally permitted to use them. If
Tenant parks more vehicles in the parking area than the number set forth in
Section 1.11 of this Lease, such conduct shall be a material breach of this
Lease. In addition to Landlord's other remedies under the Lease, Tenant shall
pay a daily charge determined by Landlord for each such additional vehicle.

      (d)      MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common
Areas in good order, condition and repair and shall operate the Project, in
Landlord's sole discretion, as a first-class industrial/commercial real property
development. Common Area costs include, but are not limited to, costs and
expenses for the following: gardening and landscaping; utilities, water and
sewage charges; maintenance of signs (other than tenants' signs); premiums for
liability, property damage, fire and other types of casualty insurance on the
Common Areas and worker's compensation insurance; all property taxes and
assessments levied on or attributable to the Common Areas and all Common Area
improvements; all personal property taxes levied on or attributable to personal
property used in connection with the Common Areas; straight-line depreciation on
personal property owned by Landlord which is consumed in the operation or
maintenance of the Common Areas; rental or lease payments paid by Landlord for
rented or leased personal property used in the operation or maintenance of the
Common Areas; fees for required licenses and permits; repairing, resurfacing,
repaving, maintaining, painting, lighting, cleaning, refuse removal, security
and similar items; reserves for roof replacement and exterior painting and other
appropriate reserves; and a reasonable allowance to Landlord for Landlord's
supervision of the Common Areas (not to exceed five percent (5%) of the gross
rents of the Project for the calendar year). Landlord may cause any or all of
such services to be provided by third parties and the cost of such services
shall be included in Common Area costs. Common Area costs shall not include
depreciation of real property which forms part of the Common Areas.

      (e)      [deleted]

      Section  4.06. LATE CHARGES. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.

      Section  4.07. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of ten
percent (10%) per annum from the due date of such amount. However, interest
shall not be payable on late charges to be paid by Tenant under this Lease. The
payment of interest on such amounts shall not excuse or cure any default by
Tenant under this Lease. If the interest rate specified in this Lease is higher
than the rate permitted by law, the interest rate is hereby decreased to the
maximum legal interest rate permitted by law.


                                       5

<PAGE>   6
ARTICLE FIVE:  USE OF PROPERTY

      Section  5.01. PERMITTED USES. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.

      Section  5.02. MANNER OF USE. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes with
the rights of tenants of the Project, or which constitutes a nuisance or waste.
Landlord shall obtain and pay for all permits, including a Certificate of
Occupancy, required for Tenant's occupancy of the Property and shall promptly
take all actions necessary to comply with all applicable statutes, ordinances,
rules, regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.

      Section  5.03. HAZARDOUS MATERIALS. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances," hazardous wastes," "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including without limitation petroleum-based products
paints, solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia
compounds and other chemical products, asbestos, PCBs and similar compounds, and
including any different products and materials which are subsequently found to
have adverse effects on the environment or the health and safety of persons.
Tenant shall not cause or permit any Hazardous Material to be generated,
produced, brought upon, used, stored, treated or disposed of in or about the
Property by Tenant, its agents, employees, contractors, sublessees or invitees
without the prior written consent of Landlord. Landlord shall be entitled to
take into account such other factors or facts as Landlord may reasonably
determine to be relevant in determining whether to grant or withhold consent to
Tenant's proposed activity with respect to Hazardous Material. In no event,
however, shall Landlord be required to consent to the installation or use of any
storage tanks on the Property.

      Section  5.04. SIGNS AND AUCTIONS. Tenant shall not place any signs on the
Property without Landlord's prior written consent. Tenant shall not conduct or
permit any auctions or sheriff's sales at the Property.

      Section  5.05. INDEMNITY. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct. As used in this Section, the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable. This section shall not apply to events due to the negligence,
breach, fault or willful misconduct of Landlord or its employees, agents,
contractors or invitees.

      Section  5.06. LANDLORD'S ACCESS. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect (upon
reasonable notice -- See Paragraph 25 in First Addendum) and conduct tests in
order to monitor Tenant's compliance with all applicable environmental laws and
all laws governing the presence and use of Hazardous Material; or for any other
purpose Landlord deems necessary. Landlord shall give Tenant prior notice of
such entry, except in the case of an emergency. Landlord may place customary
"For Sale" or "For Lease" signs on the Property within ninety (90) days of
expiration.

      Section  5.07. QUIET POSSESSION. If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease. Landlord acknowledges
and agrees that Landlord's obligation to comply with applicable laws with
respect to the Project and Landlord's obligations under this Lease is an
integral part of Tenant's right of quiet enjoyment of the Premises.


                                       6

<PAGE>   7
ARTICLE SIX:   CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS

      Section  6.01. EXISTING CONDITIONS. Tenant accepts the Property in its
condition as of the execution of the Lease (latent defects excluded), subject to
all recorded matters, laws, ordinances, and governmental regulations and orders.
Except as provided herein, Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation as to the condition of the
Property or the suitability of the Property for Tenant's intended use. Tenant
represents and warrants that Tenant has made its own inspection of and inquiry
regarding the condition of the Property and is not relying on any
representations of Landlord or any Broker with respect thereto. If Landlord or
Landlord's Broker has provided a Property Information Sheet or other Disclosure
Statement regarding the Property, a copy is attached as an exhibit to the Lease.
Landlord warrants that all mechanical are in good working order and shall repair
same at no additional cost to Tenant for a period of ninety (90) days.

      Section  6.02. EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of the Project, or from other sources or places;
or (d) any act or omission of any other tenant of the Project. Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant. The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord's gross negligence or willful misconduct, fault or breach
or that of its employees, agents, contractors and invitees.

      Section  6.03. LANDLORD'S OBLIGATIONS.

      (a)      Except as provided in Article Seven (Damage or Destruction) and
Article Eight (Condemnation), Landlord shall keep the following in good order,
condition and repair: the foundations, exterior walls and roof of the Property
(including painting the exterior surface of the exterior walls of the Property
not more often than once every five (5) years, if necessary) and all components
of electrical, mechanical, plumbing, heating and air conditioning systems and
facilities located in the Property which are concealed or used in common by
tenants of the Project. However, Landlord shall not be obligated to maintain or
repair windows, doors, plate glass or the interior surfaces of exterior walls.
Landlord shall make repairs under this Section 6.03 within a reasonable time
after receipt of written notice from Tenant of the need for such repairs.
Landlord shall use its best efforts to keep the Project and the Property in
compliance with all applicable laws, ordinances, codes and governmental
regulations and orders.

      (b)      Tenant waives the benefit of any statute in effect now or in the
future which might give Tenant the right to make repairs at Landlord's expense
or to terminate this Lease due to Landlord's failure to keep the Property in
good order, condition and repair.

      Section  6.04. TENANT'S OBLIGATIONS.

      (a)      Except as provided in Section 6.03, Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including nonstructural, interior, systems and equipment) in good
order, condition and repair (including interior repainting and refinishing, as
needed). If any portion of the Property or any system or equipment in the
Property which Tenant is obligated to repair cannot be fully repaired or
restored, Tenant shall promptly replace such portion of the Property or system
or equipment in the Property, regardless of whether the benefit of such
replacement extends beyond the Lease Term; but if the benefit or useful life of
such replacement extends beyond the Lease Term (as such term may be extended by
exercise of any options), the useful life of such replacement shall be prorated
over the remaining portion of the Lease Term (as extended), and Tenant shall be
liable only for that portion of the cost which is applicable to the Lease Term
(as extended). Tenant shall maintain a preventive maintenance contract providing
for the regular inspection and maintenance of the heating and air conditioning
system by a licensed heating and air conditioning contractor, unless Landlord
maintains such equipment under Section 6.03 above. If any part of the Property
or the Project is damaged by any act or omission of Tenant, Tenant shall pay
Landlord the cost of repairing or replacing such damaged property, whether or
not Landlord would otherwise be obligated to pay the cost of maintaining or
repairing such property. It is the intention of Landlord and Tenant that at all
times Tenant shall maintain the portions of the Property which Tenant is
obligated to maintain in an attractive, first-class and fully operative
condition.


                                       7

<PAGE>   8
      (b)      Tenant shall fulfill all of Tenant's obligations under this
Section 6.04 at Tenant's sole expense. If Tenant fails to maintain, repair or
replace the Property as required by this Section 6.04, Landlord may, upon ten
(10) days' prior notice to Tenant (except that no notice shall be required in
the case of an emergency), enter the Property and perform such maintenance or
repair (including replacement, as needed) on behalf of Tenant. In such case,
Tenant shall reimburse Landlord for all costs reasonably incurred in performing
such maintenance or repair immediately upon demand.

      Section  6.05. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. (a) Tenant shall
not make any alterations, additions, or improvements to the Property without
Landlord's prior written consent, except for non-structural alterations which do
not exceed Ten Thousand Dollars ($10,000) in cost cumulatively over the Lease
Term and which are not visible from the outside of any building of which the
Property is part. Landlord may require Tenant to provide demolition and/or lien
and completion bonds in form and amount satisfactory to Landlord. Tenant shall
promptly remove any alterations, additions, or improvements constructed in
violation of this Paragraph 6.05(a) upon Landlord's written request. All
alterations, additions, and improvements shall be done in a good and workmanlike
manner, in conformity with all applicable laws and regulations, and by a
contractor approved by Landlord. Upon completion of any such work, Tenant shall
provide Landlord with "as built" plans, copies of all construction contracts,
and proof of payment for all labor and materials.

      (b)      Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least twenty (20) days'
prior written notice of the commencement of any work on the Property, regardless
of whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of non-responsibility on the Property.

      Section  6.06. CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction), or for which Tenant is not
responsible under this Lease. In addition, Landlord may require Tenant to remove
any alterations, additions or improvements (whether or not made with Landlord's
consent) prior to the expiration of the Lease and to restore the Property to its
prior condition, all at Tenant's expense. All alterations, additions and
improvements shall become Landlord's property and shall be surrendered to
Landlord upon the expiration or earlier termination of the Lease, except that
Tenant may remove any of Tenant's machinery or equipment which can be removed
without material damage to the Property. Tenant shall repair, at Tenant's
expense, any damage to the Property caused by the removal of any such machinery
or equipment. In no event, however, shall Tenant remove any of the following
materials or equipment (which shall be deemed Landlord's property) without
Landlord's prior written consent: any power wiring or power panels; lighting or
lighting fixtures; wall coverings; drapes, blinds or other window coverings;
carpets or other floor coverings; heaters, air conditioners or any other heating
or air conditioning equipment; fencing or security gates; or other similar
building operating equipment and decorations.

ARTICLE SEVEN: DAMAGE OR DESTRUCTION

      Section  7.01. PARTIAL DAMAGE TO PROPERTY.

      (a)      Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Property. If the Property is only partially
damaged (i.e., less than twenty-five percent (25% of the Property is
untenantable as a result of such damage or less than twenty-five percent (25%)
of Tenant's operations are materially impaired) and if the proceeds to be
received by Landlord from the insurance policies described in Paragraph 4.04(b)
are sufficient to pay for the necessary repairs, this Lease shall remain in
effect and Landlord shall repair the damage as soon as reasonably possible.
Landlord may elect (but is not required) to repair any damage to Tenant's
fixtures, equipment, or improvements.

      (b)      If the insurance proceeds to be received by Landlord are not
sufficient to pay the entire cost of repair, or if the cause of the damage is
not covered by the insurance policies which Landlord maintains under Paragraph
4.04(b), Landlord may elect either to (i) repair the damage as soon as
reasonably possible, in which case this Lease shall remain in full force and
effect, or (ii) terminate this Lease as of the date the damage occurred.
Landlord shall notify Tenant within thirty (30) days after receipt of notice of
the occurrence of the damage whether Landlord elects to repair the damage or
terminate the Lease. If Landlord elects to repair the damage, Tenant shall pay
Landlord, if the damage was due to an act or omission of Tenant, or Tenant's
employees, agents, contractors or invitees, the difference between the actual
cost of repair and any insurance proceeds received by Landlord. If Landlord
elects to terminate this Lease, Tenant may elect to continue this Lease in full
force and effect, 


                                       8

<PAGE>   9
in which case Tenant shall repair any damage to the Property and any building in
which the Property is located. Tenant shall pay the cost of such repairs, except
that upon satisfactory completion of such repairs, Landlord shall deliver to
Tenant any insurance proceeds received by Landlord for the damage repaired by
Tenant. Tenant shall give Landlord written notice of such election within ten
(10) days after receiving Landlord's termination notice.

      (c)      If the damage to the Property occurs during the last six (6)
months of the Lease Term and such damage will require more than thirty (30) days
to repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord, of the occurrence of the damage.

      Section  7.02. SUBSTANTIAL OR TOTAL DESTRUCTION. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the preceding
sentence, if the Property can be rebuilt within six (6) months after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's own
expense, in which case this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after
Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord. Tenant must consent
in writing to Landlord's election to rebuild or this Lease shall terminate as
aforesaid.

      Section  7.03. TEMPORARY REDUCTION OF RENT. If the Property is destroyed
or damaged and Landlord or Tenant repairs or restores the Property pursuant to
the provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes if Tenant is doing the Repair. Except for such possible
reduction in Base Rent, insurance premiums and real property taxes, Tenant shall
not be entitled to any compensation, reduction, or reimbursement from Landlord
as a result of any damage, destruction, repair, or restoration of or to the
Property for which Landlord is not otherwise responsible.

      Section  7.04. WAIVER. Tenant waives the protection of any statute, code
or judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.

ARTICLE EIGHT: CONDEMNATION

      If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to either terminate this Lease or make
such repair at Landlord's expense.

ARTICLE NINE:  ASSIGNMENT AND SUBLETTING


                                       9

<PAGE>   10
      Section  9.01. LANDLORD'S CONSENT REQUIRED. No portion of the Property or
of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grant or withhold its
consent as provided in Section 9.05 below. Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this Lease.
If Tenant is a partnership, any cumulative transfer of more than twenty percent
(20%) of the partnership interests shall require Landlord's consent. If Tenant
is a corporation, any change in the ownership of a controlling interest of the
voting stock of the corporation shall require that Landlord be informed of such
change.

      Section  9.02. TENANT AFFILIATE. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.

      Section  9.03. NO RELEASE OF TENANT. No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability under
this Lease.

      Section  9.04. OFFER TO TERMINATE. If Tenant desires to assign the Lease
or sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.

      Section  9.05. LANDLORD'S CONSENT.

      (a)      Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security deposit payable under any proposed assignment or sublease), and any
other information Landlord deems relevant. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on the following
factors: (i) the business of the proposed assignee or subtenant and the proposed
use of the Property; (ii) the net worth and financial reputation of the proposed
assignee or subtenant; (iii) Tenant's compliance with all of its obligations
under the Lease; and (iv) such other factors as Landlord may reasonably deem
relevant. If Landlord objects to a proposed assignment solely because of the net
worth and/or financial reputation of the proposed assignee, Tenant may
nonetheless sublease (but not assign), all or a portion of the Property to the
proposed transferee, but only on the other terms of the proposed transfer.

      (b)      If Tenant assigns or subleases, the following shall apply:

               (i) Tenant shall pay to Landlord as Additional Rent under the
      Lease the Landlord's Share (stated in Section 1.13) of the Profit (defined
      below) on such transaction as and when received by Tenant, unless Landlord
      gives written notice to Tenant and the assignee or subtenant that
      Landlord's Share shall be paid by the assignee or subtenant to Landlord
      directly. The "Profit" means (A) all amounts paid to Tenant for such
      assignment or sublease, including "key" money, monthly rent in excess of
      the monthly rent payable under the Lease, and all fees and other
      consideration paid for the assignment or sublease, including fees under
      any collateral agreements, less (B) costs and expenses directly incurred
      by Tenant in connection with the execution and performance of such
      assignment or sublease for real estate broker's commissions and costs of
      renovation or construction of tenant improvements required under such
      assignment or sublease. Tenant is entitled to recover such costs and
      expenses before Tenant is obligated to pay the Landlord's Share to
      Landlord. The Profit in the case of a sublease of less than all the
      Property is the rent allocable to the subleased space as a percentage on a
      square footage basis.

               (ii) Tenant shall provide Landlord a written statement certifying
      all amounts to be paid from any assignment or sublease of the Property
      within thirty (30) days after the transaction 


                                       10

<PAGE>   11
      documentation is signed, and Landlord may inspect Tenant's books and
      records to verify the accuracy of such statement. On written request,
      Tenant shall promptly furnish to Landlord copies of all the transaction
      documentation, all of which shall be certified by Tenant to be complete,
      true and correct. Landlord's receipt of Landlord's Share shall not be a
      consent to any further assignment or subletting. The breach of Tenant's
      obligation under this Paragraph 9.05(b) shall be a material default of the
      Lease.

      Section  9.06. NO MERGER. No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.

ARTICLE TEN:   DEFAULTS; REMEDIES

      Section  10.01. COVENANTS AND CONDITIONS. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.

      Section  10.02. DEFAULTS. Tenant shall be in material default under this
Lease:

      (a)      If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section 4.04;

      (b)      If Tenant fails to pay rent or any other non-disputed charge
when due;

      (c)      If Tenant fails to perform any of Tenant's non-monetary
obligations under this Lease for a period of thirty (30) days after written
notice from Landlord; provided that if more than thirty (30) days are required
to complete such performance, Tenant shall not be in default if Tenant commences
such performance within the thirty (30) -day period and thereafter diligently
pursues its completion. However, Landlord shall not be required to give such
notice if Tenant's failure to perform constitutes a non-curable breach of this
Lease. The notice required by this Paragraph is intended to satisfy any and all
notice requirements imposed by law on Landlord and is not in addition to any
such requirement. SEE PARAGRAPH 24., FIRST ADDENDUM.

      (d)      (i) If Tenant makes a general assignment or general arrangement
for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy
or for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.

      (e)      If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.

      Section  10.03. REMEDIES. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:

      (a)      Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all legally allowable damages
incurred by Landlord by reason of Tenant's default, including (i) the worth at
the time of the award of the unpaid Base Rent, Additional Rent and other charges
which Landlord had earned at the time of the termination; (ii) the worth at the
time of the award of the amount by which the unpaid Base Rent, Additional Rent
and other charges which Landlord would have earned after termination until the
time of the award exceeds the amount of such rental loss that Tenant proves
Landlord could have reasonably avoided; (iii) the worth at the time of the award
of the amount by which the unpaid Base Rent, Additional Rent and other charges
which Tenant would have paid for the balance of the Lease term after 


                                       11

<PAGE>   12
the time of award exceeds the amount of such rental loss that Tenant proves
Landlord could have reasonably avoided; and (iv) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's failure
to perform its obligations under the Lease or which in the ordinary course of
things would be likely to result therefrom, including, but not limited to, any
costs or expenses Landlord incurs in maintaining or preserving the Property
after such default, the cost of recovering possession of the Property, expenses
of reletting, including necessary renovation or alteration of the Property,
Landlord's reasonable attorneys' fees incurred in connection therewith, and any
real estate commission paid or payable. As used in subparts (i) and (ii) above,
the "worth at the time of the award" is computed by allowing interest on unpaid
amounts at the rate of fifteen percent (15%) per annum, or such lesser amount as
may then be the maximum lawful rate. As used in subpart (iii) above, the "worth
at the time of the award" is computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of the award, plus
one percent (1%). If Tenant has abandoned the Property, Landlord shall have the
option of (i) retaking possession of the Property and recovering from Tenant the
amount specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);

      (b)      Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant has abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;

      (c)      Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Property is
located.

      Section  10.04. REPAYMENT OF "FREE" RENT. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent."
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case Abated Rent shall
be calculated based on the full initial rent payable under this Lease,

      Section  10.05. AUTOMATIC TERMINATION. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.

      Section  10.06. CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.

ARTICLE ELEVEN: PROTECTION OF LENDERS

      Section  11.01. SUBORDINATION. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any lender
which is acquiring a security interest in the Property or the Lease. Tenant
shall execute such further documents and assurances as such lender may require,
provided that Tenant's obligations under this Lease shall not be increased in
any material way (the performance of ministerial acts shall not be deemed
material), and Tenant shall not be deprived of its rights under this Lease.
Tenant's right to quiet possession of the Property during the Lease Term shall
not be disturbed if Tenant pays the rent and performs all of Tenant's
obligations under this Lease and is not otherwise in default. If any ground
lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground lease, deed of trust or mortgage and gives written notice thereof to
Tenant, this Lease shall be deemed prior to such ground lease, deed of trust or
mortgage whether this 


                                       12

<PAGE>   13
Lease is dated prior or subsequent to the date of said ground lease, deed of
trust or mortgage or the date of recording thereof.

      Section  11.02. ATTORNMENT. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.

      Section  11.03. SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant falls to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.

      Section  11.04. ESTOPPEL CERTIFICATES.

      (a)      Upon Landlord's written request, Tenant shall execute,
acknowledge and deliver to Landlord a written statement certifying: (i) that
none of the terms or provisions of this Lease have been changed (or if they have
been changed, stating how they have been changed); (ii) that this Lease has not
been cancelled or terminated; (iii) the last date of payment of the Base Rent
and other charges and the time period covered by such payment; (iv) that
Landlord is not in default under this Lease (or, if Landlord is claimed to be in
default, stating why); and (v) such other representations or information with
respect to Tenant or the Lease as Landlord may reasonably request or which any
prospective purchaser or encumbrancer of the Property may require. Tenant shall
deliver such statement to Landlord within ten (10) days after Landlord's
request. Landlord may give any such statement by Tenant to any prospective
purchaser or encumbrancer of the Property. Such purchaser or encumbrancer may
rely conclusively upon such statement as true and correct.

      (b)      If Tenant does not deliver such statement to Landlord within
such ten (10) -day period, Landlord, and any prospective purchaser or
encumbrancer, may conclusively presume and rely upon the following facts: (i)
that the terms and provisions of this Lease have not been changed except as
otherwise represented by Landlord; (ii) that this Lease has not been cancelled
or terminated except as otherwise represented by Landlord; (iii) that not more
than one month's Base Rent or other charges have been paid in advance; and (iv)
that Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.

      Section  11.05. [deleted]

ARTICLE TWELVE: LEGAL COSTS

      Section  12.01. LEGAL PROCEEDINGS. If Tenant or Landlord shall be in
breach or default under this Lease, such party (the "Defaulting Party") shall
reimburse the other party (the "Nondefaulting Party") upon demand for any costs
or expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and
costs. The losing party in such action shall pay such attorneys' fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord's interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.

      Section  12.02. LANDLORD'S CONSENT. Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.

                                       13

<PAGE>   14
ARTICLE THIRTEEN:  MISCELLANEOUS PROVISIONS

      Section  13.01. NON-DISCRIMINATION. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.

      Section  13.02. LANDLORD'S LIABILITY; CERTAIN DUTIES.

      (a)      As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or Project or the leasehold
estate under a ground lease of the Property or Project at the time in question.
Each Landlord is obligated to perform the obligations of Landlord under this
Lease only during the time such Landlord owns such interest or title. Any
Landlord who transfers its title or interest is relieved of all liability with
respect to the obligations of Landlord under this Lease to be performed on or
after the date of transfer. However, each Landlord shall deliver to its
transferee all funds that Tenant previously paid if such funds have not yet been
applied under the terms of this Lease.

      (b)      Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgagee or beneficiary under any deed of trust encumbering the
Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice. However, if such
non-performance reasonably requires more than thirty (30) days to cure, Landlord
shall not be in default if such cure is commenced within such thirty (30) -day
period and thereafter diligently pursued to completion.

      (c)      Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property and the Project,
and neither the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.

      Section  13.03. SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.

      Section  13.04. INTERPRETATION. The captions of the Articles or Sections
of this Lease are to assist the parties in reading this Lease and are not a part
of the terms or provisions of this Lease. Whenever required by the context of
this Lease, the singular shall include the plural and the plural shall include
the singular. The masculine, feminine and neuter genders shall each include the
other.

      Section 13.05. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.

      Section 13.06. NOTICES. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Section 1.03 above, Attn: Greg Monahan, Vice Pres. -
General Council, with a copy to Gerard Turksley. Notices to Landlord shall be
delivered to the address specified in Section 1.02 above. All notices shall be
effective upon delivery. Either party may change its notice address upon written
notice to the other party.

      Section 13.07. WAIVERS. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.

      Section 13.08. NO RECORDATION. Tenant shall not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.

      Section 13.09. BINDING EFFECT; CHOICE OF LAW. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no 


                                       14

<PAGE>   15
obligation to Tenant's successor unless the rights or interests of Tenant's
successor are acquired in accordance with the terms of this Lease. The laws of
the state in which the Property is located shall govern this Lease.

      Section 13.10. CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partner's withdrawal or addition. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.

      Section 13.11. JOINT AND SEVERAL LIABILITY. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.

      Section 13.12. FORCE MAJEURE. If a party cannot perform any of its
obligations due to events beyond its control, the time provided for performing
such obligations shall be extended by a period of time equal to the duration of
such events. Events beyond control include, but are not limited to, acts of God,
war, civil commotion, labor disputes, strikes, fire, flood or other casualty,
shortages of labor or material, government regulation or restriction and weather
conditions.

      Section 13.13. EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.

      Section 13.14. SURVIVAL. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.

ARTICLE FOURTEEN:  BROKERS

      Section 14.01. BROKER'S FEE. When this Lease is signed by and delivered to
both Landlord and Tenant, Landlord shall pay a real estate commission to
Tenant's Broker named in Section 1.08 above, the sum stated in Section 1.09
above for services rendered to Landlord by Tenant's Broker in this transaction.
Landlord shall pay Tenant's Broker a commission if Tenant exercises any option
to extend the Lease Term or to buy the Property, or any similar option or right
which Landlord may grant to Tenant, or if Tenant's Broker is the procuring cause
of any other lease or sale entered into between Landlord and Tenant covering the
Property. Nothing contained in this Lease shall impose any obligation on
Landlord to pay a commission or fee to any party other than Tenant's Broker.

      Section 14.02. PROTECTION OF BROKERS. If Landlord sells the Property, or
assigns Landlord's interest in this Lease, the buyer or assignee shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker
thereafter required of Landlord under this Article Fourteen. Landlord's Broker
shall have the right to bring a legal action to enforce or declare rights under
this provision. The prevailing party in such action shall be entitled to
reasonable attorneys' fees to be paid by the losing party. Such attorneys' fees
shall be fixed by the court in such action. This Paragraph is included in this
Lease for the benefit of Landlord's Broker.

      Section 14.03. BROKER'S DISCLOSURE OF AGENCY. Tenant's Broker hereby
discloses to Landlord and Tenant and Landlord and Tenant hereby consent to
Tenant's Broker acting in this transaction as the agent of (check one):

      [ ]      Landlord exclusively; or

      [ ]      both Landlord and Tenant.

      Section 14.04. NO OTHER BROKERS. Tenant represents and warrants to
Landlord that the brokers named in Section 1.08 above are the only agents,
brokers, finders or other parties with whom Tenant has dealt who are or may be
entitled to any commission or fee with respect to this Lease or the Property.


                                       15

<PAGE>   16
      ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED
HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED,
PLEASE DRAW A LINE THROUGH THE SPACE BELOW.

      Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all Riders which
are attached to or incorporated by reference in this Lease.

                                                   "LANDLORD"

Signed on ________________, 1997    Onimac Corporation, a California corporation

at San Diego, California,           ____________________________________________

                                    By:        John I. Kocmur

                                    Its:       President

                                                    "TENANT"

Signed on ________________, 1997    Viasat, Inc., a Delaware corporation

at Carlsbad, California,            ____________________________________________

                                    By:        Greg Monahan

                                    Its:       CFO/Corporate Counsel

      IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A
PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.

      THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION
OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE
REALTORS,(R) INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN
CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS,(R) INC.,
ITS LEGAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR
AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS
LEASE OR OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO
ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL
COUNSEL.


                                       16

<PAGE>   17
                                 FIRST ADDENDUM

                            (ADDITIONAL LEASE TERMS)

THIS ADDENDUM is attached to and made a part of that certain Southern California
Chapter of the Society of Industrial and Office Realtors, Inc. Industrial Real
Estate Lease (Multi-Tenant Facility) dated April 22, 1997 (the "Lease") by and
between ONIMAC CORPORATION, a California corporation (the "Landlord") and
VIASAT, INC., a Delaware corporation (the "Tenant'), with respect to Premises
(the "Premises") located in the Project (as defined in the Lease) located in the
City of Carlsbad, San Diego County, California. The following new terms or
modifications to existing terms are hereby made a part of the Lease as though
fully set forth therein.

15.   TENANT'S RIGHT OF FIRST OFFERING. Provided that Tenant is not in
      default with any of the terms and conditions of the Lease, Tenant shall
      have the first right of offering on any contiguous space that may become
      available, and any space located at 2310 Camino Vida Roble, Carlsbad,
      California that may become available, during the Lease Term or any
      extension of thereof.

16.   TENANT IMPROVEMENTS. Landlord shall, at Landlord's sole cost and expense:

      a. paint the interior of the Property;

      b. repair damaged ceiling tiles; and

      If and when the remaining 19,000 (plus or minus) square foot balance of
      space in the 2320 Camino Vida Roble Building is leased to another tenant,
      Landlord shall, at Landlord's sole cost and expenses, construct a demising
      wall separating the Property from the 19,000 (plus or minus) square foot
      balance of space in the Building.

17.   ARBITRATION. In the event that Landlord and Tenant are unable to resolve a
      dispute pertaining to the terms and conditions of this Lease, such dispute
      shall be resolved by binding arbitration under the rules of the American
      Arbitration Association, or any other procedures mutually agreeable to
      Landlord and Tenant.

18.   NON-DISTURBANCE. With respect to any Security Device entered into by
      Landlord after the execution of this Lease, Tenant's subordination of this
      Lease shall be subject to receiving assurance (a "non-disturbance
      agreement") from the holder thereof that Tenant's possession and this
      Lease, including any options to extend the term hereof, will not be
      disturbed so long as Tenant is not in default hereunder and attorns to the
      record owner of the Premises.

19.   BUILDING SIGNAGE. Tenant, at Tenant's sole cost and expense, shall have
      the right to install building signage based upon mutually-agreed-on plans
      and specifications, and subject to City of Carlsbad rules and regulations,
      and any CC&R's pertaining to the Property.

20.   SATELLITE DISH. Tenant shall be allowed to install, at Tenant's sole cost
      and expense, a satellite dish (the "Dish") on the roof of the Building.
      Such installation shall be subject to review and approval by Landlord, the
      City of Carlsbad, and the appropriate association that governs the
      business park, if any, including the location and method of such
      installation, and comply with CC&R's pertaining to the Property. On
      termination of the Lease, Tenant shall be responsible for, at Tenant's
      sole cost and expense, the removal of the Dish and the repair of any and
      all damage to the Building caused by such Dish installation and subsequent
      removal thereof. Tenant shall reimburse Landlord for Landlord's costs of
      reviewing, approving and supervising the installation and removal of the
      Dish, subject to a maximum of $250.00 for installation, and $125.00 for
      removal.



LANDLORD'S INITIALS:                                         TENANT'S INITIALS:

___________________                                          __________________


                                       17

<PAGE>   18
21.   PROPERTY TAX INCREASE DUE TO SALE OR REFINANCE. Tenant shall not be
      responsible for any increases in real property taxes pertaining to the
      Property as a result of the sale of the Property or refinance thereof.

22.   OPTIONS TO EXTEND LEASE TERM. Provided that Tenant is not in default with
      any of the terms and conditions of the Lease, Tenant shall have two (2)
      options to extend the Lease Term for a period of one (1) year each (the
      "First Option Period" and "Second Option Period", respectively) by
      providing Landlord with one hundred twenty (120) days' written notice
      prior to the expiration of the Lease Term of Tenant's intention to
      exercise the Option. The rent during the First Option Period shall be
      $0.95 per square foot per month. The rent during the Second Option Period,
      if applicable, shall be $1.00 per square foot per month. All other terms
      and conditions of the Lease shall remain in full force and effect during
      each Option Period.

23.   AMERICANS WITH DISABILITIES ACT-1990, TITLE III ("ADA"). Landlord shall be
      solely responsible for any and all costs and expenses pertaining to and
      delivering compliance with ADA. Such costs and expenses shall not be a
      part of the project operating expenses.

24.   LANDLORD'S INABILITY TO PERFORM. Landlord shall not be in default under
      this Lease as a result of its inability to fulfill any of its obligations
      hereunder or its delay in doing so, if such inability or delay is caused
      by reason of any act of God, war, revolt, civil arrest, strike, lockout,
      labor trouble, inability to secure materials, restrictive governmental
      laws, regulations or approvals, or any other similar cause including, but
      not limited to, impossibility due to excessive or unreasonable costs
      beyond the reasonable control of Landlord. Further, Landlord shall not be
      deemed to be in default in the performance of any obligation required to
      be performed by it hereunder unless and until it has failed to perform
      such obligation within thirty (30) days after notice by Tenant to Landlord
      specifying how Landlord has failed to perform such obligation; provided,
      however that if the nature of Landlord's obligation is such that more than
      thirty (30) days are required for its performance, then Landlord shall not
      be deemed to be in default if it shall commence such performance within
      the thirty (30) day period and thereafter diligently prosecutes same to
      completion.

25.   LANDLORD'S ACCESS. Tenant holds a security clearance from the United
      States Government. Landlord and its agents, independent contractors and
      designated representatives, may enter the Premises at all reasonable times
      to post notices of non-responsibility, to make repairs and/or show the
      Premises to holders of any encumbrances, potential buyers, mortgagees,
      investors or tenants or other parties, or for any other purpose Landlord
      deems reasonably necessary. Landlord shall give Tenant written notice of
      such entry at least twenty-four (24) hours before such entry, except in
      the case of an emergency, in which case no prior notice need be given.
      Tenant shall have the right to escort any such entrant and to limit
      Landlord's access to the Premises as Tenant in good faith determines is
      beneficial or necessary for national defense purposes. Any entry to the
      Premises by Landlord in the event of an emergency shall not, under any
      circumstances, be construed or deemed to be forcible or unlawful entry
      onto the Premises or to be an eviction of Tenant from the Premises or any
      part thereof. Landlord may place customary "For Lease" signs on the
      exterior of the Premises during the last one hundred eighty (180) days of
      the Lease Term.



LANDLORD'S INITIALS:                                         TENANT'S INITIALS:

___________________                                          __________________

                                       18



<PAGE>   1
                                                                   EXHIBIT 10.27


                                 LEASE AGREEMENT
                             BASIC LEASE INFORMATION




<TABLE>
<S>                                    <C>
LEASE DATE:                            March 24, 1998

LANDLORD:                              W9/LNP Real Estate Limited Partnership,
                                       a Delaware limited partnership

LANDLORD'S ADDRESS:                    c/o LPC MS, Inc.
                                       6480 Weathers Place, Suite 245
                                       San Diego, California  92121

TENANT:                                ViaSat, Inc.,
                                       a Delaware corporation

TENANT'S ADDRESS:                      2290 Cosmos Court
                                       Carlsbad, California  92009-1585

PREMISES:                              The Premises consists of (i) certain real property located on El Camino Real, Carlsbad,
                                       California containing approximately thirteen (13) acres of land ("Land"), which Land shall be
                                       a separate, independent tax parcel and, when approved by the City, a separate legal parcel
                                       and (ii) certain Improvements (defined herein) to be constructed by Landlord thereon
                                       consisting, in part, of three (3) buildings ("Buildings") containing a total of approximately
                                       180,000 square feet.  The term "Premises" shall not mean the Premises into which Tenant may
                                       expand, as more particularly set forth in Addendum 2 to this Lease.  The Premises are part of
                                       approximately 49 acre parcel being developed by Landlord for commercial/industrial uses
                                       (the "Park").

PREMISES ADDRESS:                      To be assigned after Substantial Completion of the Improvements (on El Camino Real, Carlsbad,
                                       California)


TERM:                                  Ten (10) years, as more particularly set forth in Section 2 and Exhibit B of this Lease plus
                                       any extension options as set forth in Addendum 1 of this Lease

BASE RENT (Paragraph 3):               Base Rent is more particularly set forth in Section 3 of this Lease

ADJUSTMENTS TO BASE RENT:              Base Rent shall be adjusted as more particularly set forth in Addendum 3 to this Lease
                                       
SECURITY DEPOSIT (Paragraph 4):        An initial Security Deposit of One Hundred Thousand Dollars ($100,000.00), which Security
                                       Deposit shall be increased and may be decreased as more particularly set forth in Section 4
                                       of this Lease

PERMITTED USES (Paragraph 9):          Office headquarters, manufacturing, warehouse, and research and development and, incidental
                                       to the aforementioned uses, a day care facility, cafeteria and recreational and sports
                                       facilities for Tenant's employees and for satellite antennas and dishes (as more particularly
                                       set forth in and subject to the terms of Section 42 of this Lease) but only to the extent
                                       permitted by the City of Carlsbad and all agencies and governmental authorities having
                                       jurisdiction thereof and for no other purposes whatsoever.

EXCLUSIVE PARKING SPACES:              Seven Hundred Twenty (720) exclusive spaces

BROKER (Paragraph 38):                 Business Real Estate Brokerage Company for Tenant and
                                       Colliers Iliff Thorn for Landlord

EXHIBITS:                              Exhibit A -     Premises
                                       Exhibit B -     Work Letter
                                       Exhibit C -     Rules and Regulations
                                       Exhibit D -     Covenants, Conditions and Restrictions
                                       Exhibit E -     Hazardous Materials Disclosure Certificate - Example
                                       Exhibit F -     Change of Commencement Date - Example
                                       Exhibit G -     Tenant's Initial Hazardous Materials Disclosure Certificate

ADDENDA:                               Addendum 1:     Options to Extend
                                       Addendum 2:     Expansion Options
                                       Addendum 3:     Base Rent Adjustment
                                       Addendum 4:     Right of First Offer to Purchase
</TABLE>





                                       1

<PAGE>   2

                                TABLE OF CONTENTS



<TABLE>
<CAPTION>

SECTION                                                                       PAGE
- -------                                                                       ----

<S>                                                                           <C>
 1.     PREMISES...............................................................3
 2.     ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES;
        TERMINATION RIGHT OF TENANT............................................3
 3.     RENT...................................................................4
 4.     SECURITY DEPOSIT.......................................................5
 5.     TENANT IMPROVEMENTS....................................................5
 6.     ADDITIONAL RENT........................................................7
 7.     UTILITIES.............................................................10
 8.     LATE CHARGES..........................................................10
 9.     USE OF PREMISES.......................................................10
10.     ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES..................11
11.     REPAIRS AND MAINTENANCE...............................................12
12.     INSURANCE.............................................................13
13.     WAIVER OF SUBROGATION.................................................15
14.     LIMITATION OF LIABILITY AND INDEMNITY.................................15
15.     ASSIGNMENT AND SUBLEASING.............................................16
16.     AD VALOREM TAXES......................................................18
17.     SUBORDINATION.........................................................18
18.     RIGHT OF ENTRY........................................................19
19.     ESTOPPEL CERTIFICATE..................................................19
20.     TENANT'S DEFAULT......................................................19
21.     REMEDIES FOR TENANT'S DEFAULT.........................................20
22.     HOLDING OVER..........................................................21
23.     LANDLORD'S DEFAULT....................................................21
24.     PARKING...............................................................21
25.     SALE OF PREMISES......................................................21
26.     WAIVER................................................................21
27.     CASUALTY DAMAGE.......................................................22
28.     CONDEMNATION..........................................................23
29.     ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS.............................24
30.     FINANCIAL STATEMENTS..................................................27
31.     GENERAL PROVISIONS....................................................27
32.     SIGNS.................................................................28
33.     MORTGAGEE PROTECTION..................................................28
34.     QUITCLAIM.............................................................29
35.     INTENTIONALLY OMITTED.................................................29
36.     WARRANTIES OF TENANT..................................................29
37.     COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT.......................29
38.     BROKERAGE COMMISSION..................................................29
39.     QUIET ENJOYMENT.......................................................30
40.     LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS........30
41.     TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS........30
42.     SATELLITE DISH........................................................30
</TABLE>




                                       2

<PAGE>   3

                                 LEASE AGREEMENT



DATE:   This Lease is made and entered into as of the Lease Date set forth on
        Page 1. The Basic Lease Information set forth on Page 1 and this Lease
        are and shall be construed as a single instrument.


1. PREMISES: Landlord hereby leases the Premises on an exclusive basis to 
Tenant upon the terms and conditions contained herein, subject to the terms
of this Lease. The term "Premises" as used herein shall mean and refer to the
Buildings and the Land upon which the Buildings are situated. Landlord and
Tenant hereby agree that for purposes of this Lease, as of the Lease Date, the
rentable square footage area of the Buildings shall be deemed to be the number
of rentable square feet set forth in the Basic Lease Information on Page 1;
provided, however, within thirty (30) days after the date on which Landlord
causes the Improvements of each of the Buildings to be Substantially Completed
(as such term is defined in Exhibit B hereto), Landlord shall deliver to Tenant
the actual square footage of the Land and the rentable square feet contained
within the Buildings. Tenant may have its architect verify the actual square
footage of the Land and the rentable square feet contained within the Buildings,
provided that the basis of such measurement of the Buildings shall be measured
from drip line to drip line. Landlord and Tenant hereby acknowledge and agree
that as of the Lease Date the Buildings have not been constructed on the Land.
After Landlord has Substantially Completed the Improvements, Landlord and Tenant
shall execute a written amendment to this Lease, substantially in the form of
Exhibit F hereto, wherein the parties shall specify the following: (i) the
actual square footage of the Land; (ii) the rentable square feet contained
within the Buildings; (iii) the actual amount of Base Rent to be paid by Tenant,
which shall be based upon the amount of Base Rent per rentable square foot as
set forth in this Lease; and (iv) the Premises Addresses. Such measurement at
Substantial Completion shall be final.

2. COMMENCEMENT DATE; CONDITION OF THE PREMISES; TERMINATION RIGHT OF TENANT:

        2.1 The Term of the Lease shall be a period of ten (10) years commencing
upon the earlier to occur of the following ("Commencement Date") and, except as
set forth in Addendum 2 to this Lease, expiring ten (10) years thereafter
("Expiration Date"): (i) the date Tenant commences business operations at the
Premises, or (ii) Substantial Completion of the Improvements (as defined in
Exhibit B) for all of the Buildings. In no event shall the Commencement Date be
prior to January 10, 1999, unless Tenant has commenced conducting its business
operations at the Premises prior to that date.

        2.2 Landlord shall construct the Improvements (as defined in Exhibit B)
as more particularly set forth in Exhibit B. If the Improvements (as defined in
Exhibit B) for all of the Buildings are not Substantially Complete (as defined
in Exhibit B) on or before July 10, 1999, (i) Landlord agrees to use reasonable
efforts to Substantially Complete the Improvements for all of the Buildings as
soon as practicable thereafter, (ii) the Lease shall remain in full force and
effect, (iii) Landlord shall not be deemed to be in breach or default of the
Lease as a result thereof and Landlord shall, except as set forth below, have no
liability to Tenant as a result of any delay in occupancy (whether for damages,
abatement of all or any portion of the rent, or otherwise). Subject to Force
Majeure Delays (as defined is Exhibit B) or Tenant Caused Delays (as defined in
Exhibit B), Landlord shall cause Substantial Completion of all of the Buildings
to occur no later than September 10, 1999 or for each day of delay thereafter,
Landlord shall pay to Tenant liquidated damages in the amount of Two Thousand
Dollars ($2,000.00); provided, however, Landlord shall have the right to extend
such date by one (1) day for each day after July 10, 1999 that Landlord shall
not have received all permits and approvals necessary for construction of all of
the Buildings and such liquidated damages amount shall not be applicable to such
days of delay. Tenant shall also have the right to extend the Term for two (2)
consecutive periods of three (3) years each as more particularly set forth in
Addendum 1 to this Lease. The Lease Term and the obligation to pay Rent shall
commence on the Commencement Date. Landlord and Tenant shall execute a written
amendment to this Lease, substantially in the form of Exhibit F hereto, wherein
the parties shall specify the actual commencement date, expiration date and the
date on which Tenant is to commence paying Rent. The word "Term" whenever used
herein refers to the initial term of this Lease and any extension thereof.
Except as otherwise expressly set forth in this Lease, Tenant hereby
acknowledges and agrees that neither Landlord nor Landlord's agents or
representatives has made any representations or warranties as to the
suitability, safety or fitness of the Premises for the conduct of Tenant's
business, Tenant's intended use of the Premises or for any other purpose.
Notwithstanding the foregoing, within three (3) business days after the
Substantial Completion (as such term is defined in Exhibit B hereto) of the
Tenant Improvements for each of the Buildings representatives of Landlord and
Tenant shall make a joint inspection of Improvements and the results of each
such inspection shall be set forth in a written list specifying the incomplete
items as well as those items for which corrections need to be made to the
Improvements (the "Punchlist Items"). Landlord and Tenant shall promptly (by no
later than three (3) business days thereafter) and in good faith approve or
disapprove the written list of Punchlist Items. Landlord, at its sole cost and
expense, shall use commercially reasonable efforts to cause the Punchlist Items
to be promptly completed and/or corrected, 



                                       3

<PAGE>   4

as applicable. The performance of the work associated with the Punchlist Items
shall be performed in such a manner so as not to preclude or substantially
prevent Tenant's conduct of its operations in the Premises. Upon the completion
of the Punchlist Items to Tenant's reasonable satisfaction Tenant shall
immediately notify Landlord in writing that such items have been completed to
Tenant's reasonable satisfaction. In addition to the Punchlist Items, Landlord
shall also use commercially reasonable efforts to cause the Project Contractor
to correct any other deficiencies or defects in the Improvements during the
ninety (90) day period following Substantial Completion of all of the
Improvements in the Buildings. If Tenant fails to timely deliver to Landlord any
such written notice of the aforementioned patent defects or deficiencies within
said 90-day period, Landlord shall have no obligation to perform any such work
thereafter, except as otherwise specifically provided in this Lease; provided,
however, subject to the terms of Landlord's agreement with the Project
Contractor (as defined in Exhibit B), Tenant shall have the right, concurrently
with Landlord (if Landlord so desires, otherwise separately) to make a claim
against Landlord's Project Contractor for patent or latent defects in the design
or construction of the Improvements for any general applicable warranty period.
Tenant shall also have the right to enforce, concurrently with Landlord, any
warranties made or given to Landlord from the Project Contractor and major
subcontractors. Upon final completion of Punchlist Items and acceptance by
Tenant, all further obligations for repair, maintenance and replacement of the
Improvements shall be controlled under Section 11 of this Lease.

        2.3 TERMINATION RIGHTS. Tenant shall have the right to terminate this
Lease in the event Landlord shall not commence demolishing the existing
improvements on the Land on or before May 1, 1998, which date shall be extended
one (1) day for each day of Force Majeure Delays (as defined in Exhibit B).
Tenant must exercise such right, if at all, on or before May 10, 1998 or such
right shall be null and void and of no further force or effect. In the event of
the proper termination of this Lease by Tenant, Landlord shall promptly return
the portion of the Security Deposit then deposited with Landlord and neither
party shall have any further obligation or liability to the other.

3. RENT:

        3.1 DEFINITION OF BASE RENT: The initial monthly Base Rent is $1.062 per
square foot. This includes a Tenant Improvement Allowance (as defined in Exhibit
B) of $26.00 per square foot, as more particularly described in Section 4.1 of
Exhibit B to this Lease. The initial monthly Base Rent may decrease if the
actual TI Costs (as defined in Exhibit B) are less than $26.00 per square foot;
provided, however, the maximum amount that the initial monthly Base Rent may
decrease is by $.037 per square foot per month, which is the difference, on a
monthly basis, between $26.00 per square foot and $22.00 per square foot for TI
Costs; and, provided further, the initial monthly Base Rent shall not decrease
due to certain Tenant Changes (as defined in Exhibit B) the cost of which may be
deducted from the Tenant Improvement Allowance as more particularly described in
Sections 3.6.3 and 4.1 of Exhibit B. In other words, as more particularly
described in Section 4.1 of Exhibit B to this Lease, in no event shall the TI
Costs be less than $22.00 per square foot. In the event actual TI Costs are less
than $26.00 per square foot, the reduction in initial monthly Base Rent is
calculated by (i) taking the amount that such actual TI Costs are less than
$26.00 per square foot (but not less than $22.00 per square foot) ("Savings"),
(ii) multiplying the Savings by an amount equal to eleven percent (11%) of such
Savings and (iii) dividing the quotient in (ii) above by twelve (12) (the number
of months in a year). For example, if the actual TI Costs equal $24.00 per
square foot, the Savings is $2.00 and the reduction in initial monthly Base Rent
is calculated as follows: $2.00 x .11 = .22 (DIVIDED BY) 12 = $0.018. The
initial monthly Base Rent is reduced by $0.018 per square foot per month or, to
$1.044 per square foot per month.

If the actual TI Costs are more than $26.00 per square foot, Tenant may elect to
amortize the actual TI Costs in excess of $26.00 per square foot up to the
maximum amount of $35.00 per square foot (the "Amortized TI Costs"). The
Amortized TI Costs shall be repaid to Landlord in the form of increases to the
initial monthly Base Rent in the following manner: the actual TI Costs over
$26.00 per square foot, but less than $32.51 (an amount equal to $6.50 per
square foot) shall increase the Base Rent at the interest rate of eleven percent
(11%) per annum; and the actual TI Costs over $32.50, but less than $35.01 (an
amount equal to $2.50 per square foot ) shall be fully amortized at the interest
rate of eleven percent (11%) per annum. For example, if (a) if the actual TI
Costs are $28.00 per square foot, the initial monthly Base Rent shall increase
to the amount of $1.08 per square foot per month as follows: $2.00 x 11%
(DIVIDED BY) 12 = $0.018 + $1.062 = $1.08; or (b) if the actual TI Costs are
$34.00 per square foot, the initial monthly Base Rent shall increase to the
amount of $1.142 per square foot per month as follows: ($6.50 x 11% = .715
(DIVIDED BY) 12 = $.06) PLUS ($1.50 fully amortized over the initial Term of one
hundred twenty (120) months at 11% equals $0.02 per square foot per month) =
$1.142 ($1.062 + $0.06 + $0.02) per square foot per month.

        3.2 PAYMENT OF RENT: On the date that Tenant executes this Lease, Tenant
shall deliver to Landlord the original executed Lease and One Hundred Thousand
Dollars ($100,000.00) of the Security Deposit. Insurance certificates evidencing
the liability insurance required to be obtained by Tenant under Section 12 of
this Lease shall be delivered to Landlord prior to Tenant entering onto the
Premises. Tenant agrees to pay Landlord, without prior notice or demand, or
abatement, offset, deduction or claim (except as otherwise provided in this
Lease), the Base Rent specified herein, payable in advance at Landlord's 



                                       4

<PAGE>   5

address specified in the Basic Lease Information on the Commencement Date and
thereafter on the first (1st) day of each month throughout the balance of the
Term of the Lease. In addition to the Base Rent set forth herein, Tenant shall
pay Landlord in advance on the Commencement Date and thereafter on the first
(1st) day of each month throughout the balance of the Term of this Lease the
Operating Expenses, Utility Expenses, (if any) and any Common Area Expenses as
set forth in Section 6.3 of this Lease, as Additional Rent. In the event of a
default by Tenant, Tenant shall also pay to Landlord as Additional Rent
hereunder, within thirty (30) days of Landlord's written demand therefor, any
and all reasonable costs and expenses incurred by Landlord to enforce the
provisions of this Lease, including, but not limited to, costs associated with
the delivery of notices, delivery and recordation of notice(s) of default,
attorneys' fees, expert fees, court costs and filing fees (collectively, the
"Enforcement Expenses"). In addition, Tenant shall pay directly to the
appropriate vendor all operating costs which are separately metered or
separately contracted for by Tenant. The term "Rent" whenever used herein refers
to the aggregate of all these amounts. If Landlord permits Tenant to occupy the
Premises without requiring Tenant to pay rental payments for a period of time,
the waiver of the requirement to pay rental payments shall only apply to waiver
of the Base Rent and Tenant shall otherwise perform all other obligations of
Tenant required hereunder. The Rent for any fractional part of a calendar month
at the commencement or termination of the Lease term shall be a prorated amount
of the Rent for a full calendar month based upon a thirty (30) day month. The
prorated Rent shall be paid on the Commencement Date and the first day of the
calendar month in which the date of termination occurs, as the case may be.

4. SECURITY DEPOSIT: Upon Tenant's execution of this Lease, Tenant shall deliver
to Landlord, as a Security Deposit for the performance by Tenant of its
obligations under this Lease, One Hundred Thousand Dollars ($100,000.00). On or
within five (5) days after Landlord notifies Tenant that all permits are ready
to be issued for commencement of construction of the Shell Improvements for the
Premises, Tenant shall deliver to Landlord an additional security deposit of One
Hundred Thousand Dollars ($100,000.00). Provided there shall have occurred no
default during the initial Term, Tenant's net income shall not have decreased
more than Two Million Dollars ($2,000,000.00) on an annual basis and Tenant's
net worth shall not have decreased, One Hundred Thousand Dollars ($100,000.00)
of the Security Deposit shall be returned to Tenant upon the commencement of the
twenty-fifth (25th) month of the initial Term and Fifty Thousand Dollars
($50,000.00) of the Security Deposit shall be returned to Tenant every two (2)
years thereafter until the Security Deposit is exhausted. However, Tenant shall
be obligated to increase the Security Deposit to Two Hundred Thousand Dollars
($200,000.00) in the event Tenant's net worth declines or net income declines
more than Two Million Dollars ($2,000,000.00) on an annual basis. In the event
the TI Costs exceed $26.00 per square foot for the Premises, the Security
Deposit shall be increased (in excess of Two Hundred Thousand Dollars
($200,000.00)) by an amount equal to five percent (5%) of the amount by which
such TI Costs exceed $26.00 per square foot for such Premises. If Tenant is in
default, Landlord may, but without obligation to do so, use the Security
Deposit, or any portion thereof, to cure the default or to compensate Landlord
for all damages sustained by Landlord resulting from Tenant's default,
including, but not limited to the Enforcement Expenses. Tenant shall, within ten
(10) days of Landlord's written demand, pay to Landlord a sum equal to the
portion of the Security Deposit so applied or used so as to replenish the amount
of the Security Deposit held to increase such deposit to the amount initially
deposited with Landlord. Within thirty (30) days after the termination of this
Lease, Landlord shall return the Security Deposit to Tenant, less such amounts
as are reasonably necessary to remedy Tenant's default(s) hereunder or to
otherwise restore the Premises to a clean and safe condition, reasonable wear
and tear excepted. If the cost to restore the Premises exceeds the amount of the
Security Deposit, Tenant shall promptly deliver to Landlord any and all of such
excess sums as reasonably determined by Landlord. Landlord shall not be required
to keep the Security Deposit separate from other funds, and, unless otherwise
required by law, Tenant shall not be entitled to interest on the Security
Deposit. In no event or circumstance shall Tenant have the right to any use of
the Security Deposit and, specifically, Tenant may not use the Security Deposit
as a credit or to otherwise offset any payments required hereunder, including,
but not limited to, Rent or any portion thereof.

5. TENANT IMPROVEMENTS, ACCESS AND TENANT'S PRE-OCCUPANCY WORK:

          5.1 Landlord shall install and construct the Tenant Improvements (as
such term is defined in Exhibit B hereto) in accordance with the terms,
conditions, criteria and provisions set forth in Exhibit B. Except for
completion of the Punch-List Items, the defects and deficiencies to be corrected
during the ninety (90) day time period set forth in Section 2.2 above, and
Tenant's right to enforce any warranties and make a claim against the Project
Contractor set forth in Section 2.2 above, Tenant shall accept the Premises as
suitable for Tenant's use and as being in good operating order, condition and
repair, "AS-IS." Landlord and Tenant hereby agree to and shall be bound by the
terms, conditions and provisions of Exhibit B. Any exception to the foregoing
provisions must be made by express written agreement by both parties.

          5.2 ACCESS TO THE PREMISES: Tenant and Tenant's Representatives (as
defined in Section 9 below) shall have access to the Premises during
construction of the Improvements to assure themselves that construction is in
conformance with final plans and specifications for the Improvements; provided,
(i) such access shall be subject to the terms of Section 5.3 below and (ii) in
the event any such persons interfere and/or delay construction in any manner,
form or means, such interference and/or delay shall be a Tenant 



                                       5

<PAGE>   6

Delay, which shall extend the Commencement Date by one (1) day for each day of
such interference and/or delay and no payment of liquidated damages shall be
paid to Tenant due to such delay of the Commencement Date.

          5.3 TENANT'S PRE-OCCUPANCY WORK: Tenant shall have access to the
Premises commencing thirty (30) days prior to the Commencement Date to allow
Tenant to do other work required by Tenant to make the Premises ready for
Tenant's use and occupancy (the "Tenant's Pre-Occupancy Work") upon the
following conditions:

                     5.3.1 Tenant shall give to Landlord a written request to
have such access not less than three (3) business days prior to the date on
which such proposed access will first commence (the "Access Notice"). The Access
Notice shall contain or be accompanied by each of the following items, all in
form and substance reasonably acceptable to Landlord: (i) a detailed description
of and schedule for Tenant's Pre-Occupancy Work; (ii) the names and addresses of
all contractors, subcontractors and material suppliers and all other
representatives of Tenant who or which will be entering the Premises on behalf
of Tenant to perform Tenant's Pre-Occupancy Work or will be supplying materials
for such work, and the approximate number of individuals, itemized by trade, who
will be present in the Premises; (iii) copies of all contracts, subcontracts,
material purchase orders, plans and specifications pertaining to Tenant's
Pre-Occupancy Work; (iv) copies of all licenses and permits required in
connection with the performance of Tenant's Pre-Occupancy Work; and (v)
certificates of insurance (in amounts reasonably satisfactory to Landlord and
with the parties identified in, or required by, the Lease named as additional
insureds).

                     5.3.2 Such pre-term access by Tenant and Tenant's
employees, agents, contractors, consultants, workmen, mechanics, suppliers and
invitees shall be subject to reasonable scheduling by Landlord.

                     5.3.3 Tenant's employees, agents, contractors, consultants,
workmen, mechanics, suppliers and invitees shall fully cooperate, work in
harmony and not, in any manner, materially interfere with Landlord or Landlord's
agents or representatives in performing the work required to install and/or
construct the Tenant Improvements and any additional work, Landlord's work in
other areas of the Buildings or the Park, or the general operation of the
Buildings, such interference to be deemed a "Tenant-Caused Delay" under Exhibit
B to this Lease. If at any time any such person representing Tenant shall not be
cooperative or shall otherwise cause or threaten to cause any such disharmony or
interference, including, without limitation, labor disharmony, and Tenant fails
to promptly institute and maintain corrective actions as directed by Landlord,
then Landlord may revoke such license upon twenty-four (24) hours' prior written
notice to Tenant.

                     5.3.4 Any such entry into and occupancy of the Premises or
any portion thereof by Tenant or any person or entity working for or on behalf
of Tenant shall be deemed to be subject to all of the terms, covenants,
conditions and provisions of the Lease as set forth above in Section 2 of this
Lease. Landlord shall not be liable for any injury, loss or damage which may
occur to any of Tenant's Pre-Occupancy Work made in or about the Premises or to
any property placed therein prior to the commencement of the term of the Lease,
the same being at Tenant's sole risk and liability. Tenant shall be liable to
Landlord for any damage to any portion of the Premises, the Improvements or the
additional work related to any Tenant Changes caused by Tenant or any of
Tenant's employees, agents, contractors, consultants, workmen, mechanics,
suppliers and invitees. In the event that the performance of Tenant's
Pre-Occupancy Work causes extra costs to be incurred by Landlord or requires the
use of other Building services, such extra costs shall be treated in the same
manner as a Tenant Change.

                     5.3.5 Tenant shall be solely responsible for the security
of its property or equipment stored in the Premises, except for Landlord's gross
negligence or willful misconduct.

                     5.3.6 In consideration for Landlord permitting Tenant to
access the Premises prior to the Commencement Date, Tenant shall indemnify and
hold Landlord harmless from and against any and all claims, losses or damages
arising from (i) the use of the Premises or any portion thereof, by Tenant or
Tenant's Representatives or from any activity permitted or suffered by Tenant or
Tenant's Representatives in or about the Premises, and (ii) any breach or
default in the performance of any obligation on Tenant's part to be performed
under the Lease, or arising from any act or negligence of Tenant or Tenant's
Representatives, and from and against any and all costs, attorney's fees,
expenses and liabilities incurred in connection with such claim or any such
action or proceeding; provided, however, Tenant shall not be liable for damage
or injury occasioned by the gross negligence or willful misconduct of Landlord
and its designated agents or employees, unless covered by insurance Tenant is
required by the Lease to maintain. In no event shall Landlord be liable for any
claims, damages, or losses of any nature incurred or suffered by Tenant or
Tenant's Representatives, or any other person in or about the Premises, arising
during the period covered by this Section 5.3.6, except to the extent such
claims, damages or losses arise from the gross negligence or willful misconduct
of Landlord (provided, however, in no event shall Landlord be liable for
consequential damages).



                                       6

<PAGE>   7

6. ADDITIONAL RENT : Except as otherwise expressly set forth in this Lease it is
intended by Landlord and Tenant that this Lease be a "Triple Net Lease," Tenant
shall pay directly any and all costs and expenses associated with the use,
operation, management, repair and occupancy of the Premises. All other costs and
expenses described in this Section 6 and all other sums, charges, costs and
expenses specified in this Lease other than Base Rent are to be paid by Tenant
to Landlord as additional rent (collectively, "Additional Rent").

          6.1 LANDLORD'S OPERATING EXPENSES: In addition to the Base Rent set
forth in Section 3, Tenant shall pay to Landlord all Landlord's Operating
Expenses as Additional Rent. The term "Operating Expenses" as used herein shall
mean the total amounts paid or payable by Landlord in connection with the
following:

                     6.1.1 Landlord's annual cost of insurance (which shall be
at commercially competitive rates) insuring against fire and extended coverage
(including, if Landlord elects, "all risk" or "special purpose" coverage) and
all other insurance, including, but not limited to, earthquake, flood and/or
surface water endorsements reasonably apportioned by Landlord to the Premises,
rental value insurance against loss of Rent in an amount equal to the amount of
Rent for a period of at least six (6) months commencing on the date of loss, and
subject to the provisions of Section 27 below, any deductible;

                     6.1.2 Landlord's cost of: (i) modifications and/or new
improvements to the Buildings and/or Common Area occasioned by any laws or
regulations effective subsequent to the date on which the Buildings were
originally constructed; (ii) reasonably necessary replacement improvements to
the Buildings and/or Common Area after the Lease Date; and (iii) new
improvements to the Buildings and/or Common Area that reduce operating costs or
improve life/safety conditions, all as reasonably determined by Landlord;
provided, however, if any of the foregoing are in the nature of capital
improvements, then the cost of such capital improvements shall be amortized on a
straight-line basis over a reasonable period, which shall not be less than the
lesser of fifteen (15) years or the reasonably estimated useful life of such
modifications, new improvements or replacement improvements in question (with
interest at a rate reasonably determined by Landlord), and Tenant shall pay the
monthly amortized portion of such costs (including interest charges) as part of
the Operating Expenses herein;

                     6.1.3 Landlord's cost for the management and administration
of the Premises and Common Area, including without limitation, a property
management fee, accounting, auditing, billing, salaries for clerical and
supervisory employees and all fees, licenses and permits related to the
ownership, operation and management of the Premises and Common Area in an amount
not to exceed one and one-half percent (1-1/2%) of the Base Rent, plus
Landlord's Operating Expenses reimbursed to Landlord by Tenant under Sections
6.1.1, 6.1.2, 6.1.4, 6.2, 6.3, and 7 (but excluding for purposes of calculating
this sum, the costs described in this Section 6.1.3).

                     6.1.4 Any other replacements, not within the scope of
Sections 6.1.2 or 11.2.3, which under customary practices in the industry would
be considered to be "capital expenditures," shall be paid ninety percent (90%)
by Landlord and ten percent (10%) by Tenant (Tenant shall pay such amounts
within thirty (30) days of receipt of written demand therefor); provided,
however the ninety percent (90%) paid by Landlord for the costs of such capital
expense shall be reimbursed by Tenant to Landlord in accordance with the
reimbursement formula set forth in Section 6.1.2 of this Lease.

          Notwithstanding anything to the contrary contained herein, for
purposes of this Lease, the term "Operating Expenses" shall not include the
following:

                                (a) Legal and auditing fees (other than those
fees reasonably incurred in connection with the maintenance and operation of the
Buildings and/or Common Area), leasing commissions, advertising expenses, and
other costs incurred in connection with the original development or original
leasing of the Buildings and/or Common Area or future re-leasing of the
Buildings and/or Common Area;

                                (b) Depreciation of the Buildings or any other
improvements situated within the Park;

                                (c) Any items for which Landlord is actually
reimbursed by insurance;

                                (d) Costs of repairs or other work necessitated
by fire, windstorm or other casualty and/or costs of repair or other work
necessitated by the exercise of the right of eminent domain to the extent
insurance proceeds or a condemnation award, as applicable, is actually received
by Landlord for such purposes; provided (i) such costs of repairs or other work
shall be paid by the parties in accordance with the provisions of Sections 27
and 28 below and (ii) a commercially reasonable deductible under any such
insurance policies shall be included as an Operating Expense if paid by
Landlord;

                                (e) Other than any interest charges for capital
improvements referred to in 



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<PAGE>   8

Section 6.1.3 hereinabove, any interest or payments on any financing for the
Buildings or the Common Area, interest and penalties incurred as a result of
Landlord's late payment of any invoice (provided that Tenant pays Operating
Expenses, Tax Expenses and Tenant's Share of Common Area Expenses to Landlord
when due as set forth herein), and any bad debt loss, rent loss or reserves for
same;

                                (f) Costs associated with the investigation
and/or remediation of Hazardous Materials (hereafter defined) present in, on or
about the Premises and/or Common Area, unless such costs and expenses are the
responsibility of Tenant as provided in Section 29 of this Lease, in which event
such costs and expenses shall be paid solely by Tenant in accordance with the
provisions of Section 29 of this Lease;

                                (g) Landlord's cost for the replacement items
set forth in Section 11.2.3 below; and

                                (h) Costs for services performed or materials
provided by Landlord or affiliates of Landlord to the extent such costs exceed
those amounts which would otherwise be paid to independent third parties in an
arms-length transaction;

                                (i) rental payments and any related costs
pursuant to any ground lease of land underlying all or any portion of the
Premises and/or Common Area;

                                (j) any costs, fees, dues, contributions or
similar expenses for political, charitable, industry association or similar
organizations;

                                (k) amortization on any mortgage or mortgages or
any other debt instrument made by Landlord encumbering the Premises and/or
Common Area;

                                (l) marketing costs, including leasing
commissions, attorneys' fees in connection with the negotiation and preparation
of letters, deal memos, letters of intent, leases, subleases and/or assignments,
space planning costs, and other costs and expenses incurred in connection with
lease, sublease and/or assignment negotiations and transactions with present or
prospective tenants or other occupants of the Buildings, including bad debt
expenses, attorneys' fees and other costs and expenditures incurred in
connection with disputes with present or prospective tenants or other occupants
of the Buildings;

                                (m) real estate brokers' leasing commissions;

                                (n) costs incurred by Landlord due to the
violation solely by Landlord or any tenant, including Tenant, of the terms and
conditions of any lease of space in the Buildings;

                                (o) Landlord's general corporate overhead and
general administrative expenses, including, but not limited to, salaries of
officers and executives of Landlord;

                                (p) advertising and promotional expenditures,
and costs of signs identifying the owner of the Buildings or other tenants'
signs;

                                (q) legal and accounting fees for preparation of
Landlord's business documents, including the preparation of any and all tax
returns;

                                (r) costs incurred by Landlord in the original
development and/or original construction of the Park, Premises and/or Common
Area for "tap fees" or sewer or water connection fees of the Park, Premises
and/or Common Area; and

                                (s) any fines, costs, penalties or interest
resulting from the gross negligence or willful misconduct of the Landlord or its
agents, contractors or employees.

          6.2 TAX EXPENSES: In addition to the Base Rent set forth in Section 3,
Tenant shall pay to Landlord (and Landlord shall pay the Tax Collector prior to
delinquency) one hundred percent (100%) of all real property taxes applicable to
the Premises (except as otherwise set forth below), all personal property taxes
now or hereafter assessed or levied against the Premises or Tenant's personal
property and subject to this Section 6.2, any increases in real property taxes
and assessments attributable to any and all alterations, tenant improvements
(including, but not limited to, the Tenant Improvements) or other improvements
of any kind whatsoever placed in, on or about the Premises for the benefit of,
at the request of, or by Tenant; provided, however, (a) during the first (1st)
year of the initial Term, Tenant shall not pay any increase in real property
taxes and assessments attributable to a "Change in Ownership" which may occur
during such first (1st) year of the initial Term, (b) during the second (2nd)
year of the initial Term, in the event of a "Change in Ownership" during the
first (1st) or second (2nd) years of the initial Term, Tenant shall pay fifty
percent (50%) of any real property taxes and assessments attributable to such



                                       8

<PAGE>   9

"Change in Ownership" plus the annual two percent (2%) adjustment as and when
such adjustment becomes effective, and (c) thereafter, Tenant shall pay all real
property taxes and assessments attributable to a "Change in Ownership." The term
"Tax Expenses" shall mean and include, without limitation, any form of tax and
assessment (general, special, supplemental, ordinary or extraordinary),
including the existing City of Carlsbad Community Facilities Districts
commercial rental tax, payments under any improvement bond or bonds, license
fees, license tax, business license fee, rental tax, transaction tax or levy
imposed by authority having the direct or indirect power of tax (including any
city, county, state or federal government, or any school, agricultural,
lighting, drainage or other improvement district thereof) as against any legal
or equitable interest of Landlord in the Premises, as against Landlord's right
to rent, or as against Landlord's business of leasing the Premises or the
occupancy of Tenant or any other tax, fee, or excise, however described,
including, but not limited to, any value added tax, or any tax imposed in
substitution (partially or totally) of any tax previously included within the
definition of real property taxes, or any additional tax the nature of which was
previously included within the definition of real property taxes. The term "Tax
Expenses" shall not include any franchise, estate, inheritance, net income, or
excess profits tax imposed upon Landlord. Tenant shall not be responsible for
the payment of any assessments or special taxes on the Park in conjunction with
the development or future development of the Park.

          6.3 COMMON AREA EXPENSES: In addition to the Base Rent set forth in
Section 3, Tenant shall pay to Landlord Tenant's Share of Common Area Expenses
as Additional Rent in the same manner as provided in Section 3.2 and reconciled
in the same manner as set forth in Section 6.5. The term "Tenant's Share" shall
mean a percentage derived by dividing the actual gross square footage of the
Premises by the actual gross square footage of the entire Park, including the
Premises. The term "Common Area" shall mean the land, landscaping and
improvements between El Camino Real and the Premises and the main entrance and
driveway to the Premises from El Camino Real and the slopes fronting on El
Camino Real. The term "Common Area Expenses" shall mean Landlord's cost of
maintaining, repairing and replacing the improvements within the Common Area,
including, but not limited to Landlord's cost of utilities, insurance, fees,
charges and expenses, supplies, equipment, rental equipment, security and fire
protection services if provided by Landlord and other similar items used in the
operation and/or maintenance of the Common Area, and all real property taxes
applicable or reasonably apportioned by the Landlord to the Common Area. The
Landlord may be maintaining other portions of the Park under service contracts
which include the Common Area, and in such event, the expense charged to the
Common Area shall be reasonably apportioned by Landlord.

          6.4 PAYMENT OF EXPENSES: Landlord shall estimate Operating Expenses,
Tax Expenses and Tenant's Share of Common Area Expenses for the calendar year in
which the Lease commences. Commencing on the Commencement Date, one-twelfth
(1/12th) of this estimated amount shall be paid by Tenant to Landlord, as
Additional Rent, and thereafter on the first (1st) day of each month throughout
the remaining months of such calendar year. Thereafter, Landlord may estimate
such expenses as of the beginning of each calendar year during the Term of this
Lease and Tenant shall pay one-twelfth (1/12th) of such estimated amount as
Additional Rent hereunder on the first (1st) day of each month during such
calendar year and for each ensuing calendar year throughout the Term of this
Lease. Tenant's obligation to pay Operating Expenses, Tax Expenses and Tenant's
Share of Common Area Expenses arising during the Term of the Lease shall survive
for a period of two (2) years following the expiration or earlier termination of
this Lease.

          6.5 ANNUAL RECONCILIATION: By May 31st of each calendar year, or as
soon thereafter as reasonably possible, Landlord shall furnish Tenant with an
accounting of actual Operating Expenses, Tax Expenses and Common Area Expenses.
Within thirty (30) days of Landlord's delivery of such accounting, Tenant shall
pay to Landlord the amount of any underpayment. Notwithstanding the foregoing,
failure by Landlord to give such accounting by such date shall not constitute a
waiver by Landlord of its right to collect any of Tenant's underpayment at any
time. Landlord shall credit the amount of any overpayment by Tenant toward the
next estimated monthly installment(s) falling due, or where the Term of the
Lease has expired, refund the amount of overpayment to Tenant. If the Term of
the Lease expires prior to the annual reconciliation of expenses Landlord shall
have the right to reasonably estimate Operating Expenses, Tax Expenses and
Common Area Expenses, and if Landlord determines that an underpayment is due,
Tenant hereby agrees that Landlord shall be entitled to deduct such underpayment
from Tenant's Security Deposit. If Landlord reasonably determines that an
overpayment has been made by Tenant, Landlord shall refund said overpayment to
Tenant as soon as practicable thereafter. Notwithstanding the foregoing, failure
of Landlord to accurately estimate Operating Expenses, Tax Expenses and Common
Area Expenses or to otherwise perform such reconciliation of Operating Expenses,
Tax Expenses and Common Area Expenses, including without limitation, Landlord's
failure to deduct any portion of any underpayment from Tenant's Security
Deposit, shall not constitute a waiver of Landlord's right to collect any of
Tenant's underpayment so long as any action is brought by Landlord within two
(2) years after the after the expiration or earlier termination of this Lease.

          6.6 AUDIT: After delivery to Landlord of at least thirty (30) days
prior written notice, Tenant, at its sole cost and expense through any
accountant designated by it, shall have the right to examine and/or audit the
books and records evidencing such costs and expenses for the previous one (1)
calendar year, 



                                       9

<PAGE>   10

during Landlord's reasonable business hours but not more frequently than once
during any calendar year. Any such accounting firm designated by Tenant may not
be compensated on a contingency fee basis. The results of any such audit (and
any negotiations between the parties related thereto) shall be maintained
strictly confidential by Tenant and its accounting firm and shall not be
disclosed, published or otherwise disseminated to any other party other than to
Landlord and its authorized agents. Landlord and Tenant shall use their
reasonable efforts to cooperate in such negotiations and to promptly resolve any
discrepancies between Landlord and Tenant in the accounting of such costs and
expenses. If the audit objectively demonstrates a mistake in Tenant's favor in
excess of five percent (5%) of the total amounts paid by Tenant for Operating
Expenses, Tax Expenses, and Tenant's Share of Common Area Expenses, Landlord
shall within thirty (30) days thereafter reimburse Tenant for the actual and
reasonable cost of the audit, and any monies shown to be owing to Tenant.

7. UTILITIES: Tenant shall pay directly the cost of all utilities, including but
not limited to, all water, sewer use, sewer discharge fees, water and sewer
connection fees (but only to the extent, if any, required in Exhibit B), gas,
heat, electricity, refuse pickup, janitorial service, telephone and other
utilities billed or separately metered to the Premises and/or Tenant. Tenant
shall cause all such utilities to be placed in Tenant's name and Tenant shall
timely pay the costs of all such utilities. Tenant shall also pay prior to
delinquency directly to the appropriate authority any assessments or charges for
utility or similar purposes included within any tax bill for the Premises,
including, without limitation, entitlement fees, allocation unit fees, and/or
any similar fees or charges, and any penalties related thereto. Tenant
acknowledges that the Premises may become subject to the rationing of utility
services or restrictions on utility use as required by a public utility company,
governmental agency or other similar entity having jurisdiction thereof.
Notwithstanding any such rationing or restrictions on use of any such utility
services, Tenant acknowledges and agrees that its tenancy and occupancy
hereunder shall be subject to such rationing restrictions as may be imposed upon
Landlord, Tenant, the Premises or Common Area, and Tenant shall in no event be
excused or relieved from any covenant or obligation to be kept or performed by
Tenant by reason of any such rationing or restrictions. Tenant further agrees to
timely and faithfully pay, prior to delinquency, any amount, tax, charge,
surcharge, assessment or imposition levied, assessed or imposed upon the
Premises, or Tenant's use and occupancy thereof.

8. LATE CHARGES: Any and all sums or charges set forth in this Section 8 are
considered part of Additional Rent. Tenant acknowledges that late payment (the
sixth (6th) day of each month or any time thereafter) by Tenant to Landlord of
Base Rent, Operating Expenses, Tax Expenses, Common Area Expenses, and Utility
Expenses (if any) (the 31st day after Tenant's receipt of Landlord's written
demand therefor or any time thereafter) or other sums due hereunder, will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult and impracticable to fix. Such costs include,
without limitation, processing and accounting charges, and late charges that may
be imposed on Landlord by the terms of any note secured by any encumbrance
against the Premises, and late charges and penalties imposed on Landlord as a
result of Tenant's late payment of Operating Expenses. Therefore, if any
installment of Rent or any other sum due from Tenant is not received by Landlord
within five (5) days of the date when due, Tenant shall promptly pay to Landlord
all of the following, as applicable: (a) an additional sum equal to five percent
(5%) of such delinquent amount plus interest on such delinquent amount at the
rate equal to the prime rate plus three percent (3%) for the time period such
payments are delinquent as a late charge for every month or portion thereof that
such sums remain unpaid, (b) the amount of seventy-five dollars ($75) for each
three-day notice prepared for, or served on, Tenant, (c) the amount of fifty
dollars ($50) relating to checks for which there are not sufficient funds. If
Tenant delivers to Landlord a check for which there are not sufficient funds,
Landlord may, at its sole option, require Tenant to replace such check with a
cashier's check for the amount of such check and all other charges payable
hereunder. The parties agree that this late charge and the other charges
referenced above represent a fair and reasonable estimate of the costs that
Landlord will incur by reason of late payment by Tenant. Acceptance of any late
charge or other charges shall not constitute a waiver by Landlord of Tenant's
default with respect to the delinquent amount, nor prevent Landlord from
exercising any of the other rights and remedies available to Landlord for any
other breach of Tenant under this Lease. If a late charge or other charge
becomes payable for any three (3) installments of Rent within any twelve (12)
month period, then Landlord, at Landlord's sole option, can either require the
Rent be paid quarterly in advance, or be paid monthly in advance by cashier's
check or by electronic funds transfer.

9. USE OF PREMISES:

          9.1 COMPLIANCE WITH LAWS, RECORDED MATTERS, AND RULES AND REGULATIONS:
The Premises are to be used solely for the purposes and uses specified in the
Basic Lease Information and for no other uses or purposes without Landlord's
prior written consent, which consent shall not be unreasonably withheld or
delayed so long as the proposed use (i) does not involve the use of Hazardous
Materials other than as expressly permitted under the provisions of Section 29
below and (ii) is compatible and consistent with the other uses then being made
in the vicinity of the Premises, as reasonably determined by Landlord. The use
of the Premises by Tenant and its employees, representatives, agents, invitees,
licensees, subtenants, customers or contractors (collectively, "Tenant's
Representatives") shall be subject to, and at all times in compliance with, (a)
any and all applicable laws, ordinances, statutes, orders and regulations 



                                       10

<PAGE>   11

as same exist from time to time (collectively, the "Laws"), (b) any and all
documents, matters or instruments, including without limitation, any
declarations of covenants, conditions and restrictions, and any supplements
thereto, each of which has been or hereafter is recorded in any official or
public records with respect to the Premises and/or Common Area, or any portion
thereof (collectively, the "Recorded Matters"), and (c) any and all rules and
regulations set forth in Exhibit C, attached to and made a part of this Lease,
and any other reasonable rules and regulations promulgated by Landlord now or
hereafter enacted relating to parking and the operation of the Premises and/or
Common Area (collectively, the "Rules and Regulations"); provided, however, any
Recorded Matters which are recorded subsequent to the Lease Date shall not
materially and adversely affect Tenant's use and enjoyment of the Premises or
Common Area or be inconsistent with the terms of this Lease (provided, Tenant
acknowledges that Landlord intends to parcelize the Land such that each of the
Buildings shall be located on a separate legal parcel and Tenant shall have no
right to approve and/or consent to such parcelization). Subject to any other
express terms set forth in this Lease, Tenant agrees to, and does hereby, assume
full and complete responsibility to ensure that the design of the Tenant
Improvements is adequate to fully meet the needs and requirements of Tenant's
intended operations of its business within the Premises, and Tenant's use of the
Premises and that same are in compliance with all applicable Laws throughout the
Term of this Lease. Additionally, Tenant shall be solely responsible for the
payment of all costs, fees and expenses associated with any modifications,
improvements or alterations to the Premises and/or Common Area occasioned by the
enactment of, or changes to, any Laws arising from Tenant's particular use of
the Premises or alterations, improvements or additions made to the Premises
regardless of when such Laws became effective.

          9.2 PROHIBITION ON USE: Tenant shall not use the Premises or permit
anything to be done in or about the Premises nor keep or bring anything therein
which will in any way conflict with any of the requirements of the Board of Fire
Underwriters or similar body now or hereafter constituted or in any way increase
the existing rate of or affect any policy of fire or other insurance upon any of
the Buildings or any of its contents, or cause a cancellation of any insurance
policy. No auctions may be held or otherwise conducted in, on or about the
Premises and/or Common Area without Landlord's written consent thereto, which
consent may be given or withheld in Landlord's sole discretion. Tenant shall not
do or permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of Landlord or other persons or businesses
in the area, or injure or annoy other tenants or use or allow the Premises to be
used for any unlawful or objectionable purpose; nor shall Tenant cause, maintain
or permit any private or public nuisance in, on or about the Premises and/or
Common Area, including, but not limited to, any offensive odors, noises, fumes
or vibrations. Tenant shall not damage or deface or otherwise commit or suffer
to be committed any waste in, upon or about the Premises. Tenant shall not place
or store, nor permit any other person or entity to place or store, any property,
equipment, materials, supplies, personal property or any other items or goods
outside of the Premises for any period of time. Tenant shall not permit any
animals, including, but not limited to, any household pets, to be brought or
kept in or about the Premises. Tenant shall place no loads upon the floors,
walls, or ceilings in excess of the maximum designed load permitted by the
applicable Uniform Building Code or which may damage any of the Buildings or
outside areas; nor place any harmful liquids in the drainage systems; nor dump
or store waste materials, refuse or other such materials, or allow such to
remain outside the Building area, except for any non-hazardous or non-harmful
materials which may be stored in refuse dumpsters or in any enclosed trash areas
provided. Tenant shall honor the terms of all Recorded Matters relating to the
Premises and/or Common Area. Tenant shall honor the Rules and Regulations. If
Tenant fails to comply with such Laws, Recorded Matters, Rules and Regulations
or the provisions of this Lease, Landlord shall have the right to pursue any and
all rights and remedies of Landlord hereunder including, but not limited to, the
payment by Tenant to Landlord of all Enforcement Expenses and Landlord's costs
and expenses, if any, to cure any of such failures of Tenant, if Landlord, at
its sole option, elects to undertake such cure. If any portion of the Common
Area is located on the Premises, Landlord shall have the right to reasonably
enter upon the Premises for the purposes of keeping and maintaining the Common
Area as required herein and that portion of the Common Area consisting of the
right of way shall be open and available to other tenants within the Park and
their invitees. The provisions of this Section 9.2 shall be applied to Tenant by
Landlord in a reasonable and non-discriminatory manner on the same basis that
Landlord applies similar provisions to other tenants within the Park.

10. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES:

          10.1 ALTERATIONS AND ADDITIONS: Tenant shall be permitted to make, at
Tenant's sole cost and expense, non-structural alterations and additions to the
Premises which do not require a permit without obtaining Landlord's prior
written consent provided the cost of same does not exceed One Hundred Thousand
Dollars ($100,000.00) cumulatively in any six (6) month period ("Permitted
Improvements"); provided, however, no such Permitted Improvement shall be
allowed which penetrate the roof or alter the plumbing, mechanical, electrical
or fire sprinkler/monitoring systems of the Building. Except for the Permitted
Improvements, Tenant shall not install any signs, fixtures (other than trade
fixtures), improvements, nor make or permit any other alterations or additions
to the Premises without the prior written consent of Landlord, which shall not
be unreasonably withheld or delayed. If any such alteration or addition is
expressly permitted by Landlord, including the Permitted Improvements, Tenant
shall deliver 



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<PAGE>   12

at least twenty (20) days prior notice to Landlord, from the date Tenant intends
to commence construction, sufficient to enable Landlord to post a Notice of
Non-Responsibility. Within twenty (20) business days of Landlord's receipt of
Tenant's written notice of any item comprising the Permitted Improvements,
Landlord shall notify Tenant whether or not Landlord will require Tenant to
remove such items from the Premises upon the expiration or earlier termination
of this Lease. In all events, Tenant shall obtain all permits or other
governmental approvals prior to commencing any of such work and deliver a copy
of same to Landlord. All alterations and additions shall be installed by a
licensed contractor approved by Landlord, at Tenant's sole expense in compliance
with all applicable Laws (including, but not limited to, the ADA as defined
herein), Recorded Matters, and Rules and Regulations. Tenant shall keep the
Premises and the property on which the Premises are situated free from any liens
arising out of any work performed, materials furnished or obligations incurred
by or on behalf of Tenant. As a condition to Landlord's consent to the
installation of any fixtures, additions or other improvements the cost of which
exceeds Five Hundred Thousand Dollars ($500,000.00), Landlord may require Tenant
to post and obtain a completion and indemnity bond for up to one hundred fifty
percent (150%) of the cost of the work.

          10.2 SURRENDER OF PREMISES: Upon the termination of this Lease,
whether by forfeiture, lapse of time or otherwise, or upon the termination of
Tenant's right to possession of the Premises, Tenant will at once surrender and
deliver up the Premises, together with the Tenant Improvements (except as set
forth below), fixtures (other than trade fixtures), additions and improvements
which Landlord has notified Tenant, in writing, that Landlord will require
Tenant not to remove, to Landlord in good condition and repair (including, but
not limited to, replacing all light bulbs and ballasts not in good working
condition) and in the condition in which the Premises existed as of the
Commencement Date, except for reasonable wear and tear and casualty; provided,
however, (i) Landlord may require Tenant to remove some or all of the Tenant
Improvements so long as Landlord gives Tenant written notice of such demand at
the time of Landlord's approval of the Tenant Improvements, (ii) in the event TI
Costs exceed $35.00 per square foot ("Excess TIs"), Landlord and Tenant shall
identify and agree upon at or prior to the finalization of the TI Construction
Drawings (as defined in Exhibit B) those Excess TIs which (a) which may be
removed by Tenant at Tenant's election at the expiration or earlier termination
of the Term provided Tenant repairs any damage caused by such removal and (b)
which shall be removed by Tenant at the expiration or earlier termination of the
Term in the event Landlord requires Tenant to so remove such Excess TIs, (iii)
Tenant shall remove those Permitted Improvements of which Landlord, at least
sixty (60) days prior to the expiration or earlier termination of this Lease,
notifies Tenant must be removed at the expiration or earlier termination of this
Lease, and (iv) such removal by Tenant shall not cause the Premises to be in
non-compliance with any and all applicable codes, laws and regulations;
provided, further, in the event Landlord fails to notify Tenant that Landlord
shall require the removal of any Permitted Improvements, Tenant Improvements,
Excess TIs (except those agreed upon by Landlord and Tenant as set forth above)
or any other addition, fixture or other improvement, Tenant shall not remove any
such Permitted Improvements, Tenant Improvements, Excess TIs (except those
agreed upon by Landlord and Tenant as set forth above) or any other addition,
fixture or other improvement. Reasonable wear and tear shall not include any
damage or deterioration to the floors of the Premises arising from the use of
forklifts in, on or about the Premises (including, without limitation, any marks
or stains of any portion of the floors), and any damage or deterioration that
would have been prevented by proper maintenance by Tenant or Tenant otherwise
performing all of its obligations under this Lease. Tenant shall repair any
damage caused by the installation or removal of any Tenant Improvements, any
Excess TIs, signs, trade fixtures, furniture, furnishings, fixtures, additions
and improvements which are to be removed from the Premises by Tenant hereunder.
Tenant shall ensure that the removal of such items and the repair of the
Premises will be completed within thirty (30) days after termination of this
Lease and such tenancy shall be subject to Section 22.

11. REPAIRS AND MAINTENANCE:

          11.1 TENANT'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for those
portions of the Buildings to be replaced by Landlord, as expressly provided in
Section 11.2 below, (i) Tenant shall, at Tenant's sole cost and expense, keep
and maintain the entirety of the Premises in good, clean and safe condition and
repair to the reasonable satisfaction of Landlord including, but not limited to,
repairing any damage caused by Tenant or Tenant's Representatives and replacing
any property so damaged by Tenant or Tenant's Representatives; any replacements,
including those replacements described in Section 11.2.1 of this Lease, shall be
of equal or better quality than the components or items replaced and be
reasonably approved by Landlord in advance of such replacements and Landlord
shall have the right, but not the obligation to, inspect and monitor the
installation and operation of such replacement; and (ii) Tenant shall, at
Tenant's sole cost, provide for security and fire protection services for the
Premises as may reasonably be required. Tenant shall procure and maintain
preventative maintenance contract(s) for (a) the heating, ventilation and air
conditioning systems; (b) the fire and sprinkler protection services (including,
without limitation, monitoring services; and (c) the roof systems (other than
the structural portions of the roof which are the responsibility of the Landlord
unless damage to those portions of the roof is due to Tenant's failure to
maintain its portion of the roof systems). All preventative maintenance
contract(s) shall be obtained from licensed contractors or vendors, on a
monthly, bi-monthly or quarterly basis, as reasonably determined by Landlord.
Landlord shall have the right to reasonably approve all such maintenance



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<PAGE>   13

contracts prior to their execution by Tenant, and, in the event Landlord shall
reasonably conclude that Tenant is not properly maintaining the above-mentioned
systems, Landlord reserves the right, but without the obligation to do so, to
procure and maintain (i) the heating, ventilation and air conditioning systems
preventative maintenance contract(s), (ii) the fire and sprinkler protection
services and preventative maintenance contract(s) (including, without
limitation, monitoring services) and/or (iii) the roof systems preventative
maintenance contract(s). If Landlord so elects to procure and maintain any such
contract(s), Tenant will be named as a third party beneficiary in each such
contract(s) and Tenant shall reimburse Landlord for the cost thereof in
accordance with the provisions of Section 6 above. If Tenant procures and
maintains any of such contract(s), Tenant will promptly deliver to Landlord a
true and complete copy of each such contract and any and all renewals or
extensions thereof, and each service report or other summary received by Tenant
pursuant to or in connection with such contract(s). If Landlord actually
procures any of such contract(s) and the contractors or vendors thereunder fail
to promptly and adequately respond or otherwise perform the work required, then
Tenant shall notify Landlord of such in writing (including a reasonably detailed
explanation of the problems being experienced by Tenant) and Landlord shall
promptly commence and undertake such corrective action as may be reasonably
necessary to resolve such problems to Tenant's reasonable satisfaction. In
addition to the above, if required Tenant shall also obtain repair contracts
with appropriate contractors or vendors.

          11.2 REPLACEMENT OBLIGATIONS: With respect to replacements of
Improvements on the Premises, other than those caused by fire or other casualty
covered under Section 27 of this Lease, Landlord and Tenant agree that they
shall have the following obligations:

                     11.2.1 Replacements rendered necessary by (i) the
intentional or negligent acts or omissions of Tenant or any of Tenant's
Representatives and (ii) replacements not covered by Sections 6.1.2, 6.1.4 or
11.2.3, shall be the sole responsibility of Tenant subject to waiver of
subrogation under Section 13.

                     11.2.2 Replacements made pursuant to Section 6.1.2 of this
Lease (if any) shall be subject to Tenant's obligation to reimburse Landlord in
accordance with Section 6.1.2 and shall be deemed to be Additional Rent
hereunder.

                     11.2.3 Landlord shall be solely responsible for the
replacement of the structural portions of the following portions of the
Buildings: the floors, foundations, exterior perimeter walls and roofs of the
Buildings (exclusive of the roof membrane and glass and exterior doors), as, and
when, Landlord determines such replacement to be necessary in Landlord's
reasonable discretion.

                     11.2.4 Replacements made pursuant to Section 6.1.4 of this
Lease, if any, shall be subject to Tenant's obligation to reimburse Landlord in
accordance with Section 6.1.4 and shall be deemed to be Additional Rent
hereunder.

          11.3 TENANT'S FAILURE TO PERFORM REPAIRS AND MAINTENANCE OBLIGATIONS:
Except for normal maintenance and repair of the items described above and except
as set forth in Section 42 of this Lease, Tenant shall have no right of access
to or right to install any device on the roofs of the Buildings nor make any
penetrations of the roofs of the Buildings without the express prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed. If Tenant refuses or neglects to commence repair and maintenance of
Premises (including the Land) as required herein and to the reasonable
satisfaction of Landlord within three (3) business days after written notice
from Landlord (unless in the case of an emergency in which case no notice shall
be required), Landlord may, but without obligation to do so, at any time make
such repairs and/or maintenance without Landlord having any liability to Tenant
for any loss or damage that may accrue to Tenant's merchandise, fixtures or
other property, or to Tenant's business by reason thereof, except to the extent
any damage is caused by the willful misconduct or gross negligence of Landlord
or its authorized agents and representatives. In the event Landlord makes such
repairs and/or maintenance, upon completion thereof Tenant shall pay to
Landlord, as additional rent, the Landlord's costs for making such repairs
and/or maintenance, plus ten percent (10%) for overhead, upon presentation of a
bill therefor, plus any Enforcement Expenses. The obligations of Tenant
hereunder shall survive two (2) years following the expiration of the Term of
this Lease or the earlier termination thereof. Subject to Section 41 of this
Lease, Tenant hereby waives any right to repair at the expense of Landlord under
any applicable Laws now or hereafter in effect respecting the Premises.

          11.4 LANDLORD'S AUDIT RIGHTS. Landlord shall have the right to audit
Tenant's replacement, maintenance and repair of the Buildings' systems,
including without limitation, those systems identified in Section 11.1 of this
Lease and, in the event such audit shall reveal deficiencies and/or defects in
the replacement, repair and maintenance of such systems by Tenant, Landlord
shall have those rights granted to Landlord under Sections 11.1 and 11.3 of this
Lease.

12. INSURANCE:

          12.1 TYPES OF INSURANCE: Tenant shall maintain in full force and
effect at all times during the 



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<PAGE>   14

Term of this Lease, at Tenant's sole cost and expense, for the protection of
Tenant and Landlord, as their interests may appear, policies of insurance issued
by a carrier or carriers reasonably acceptable to Landlord and its lender(s)
which afford the following coverages: (i) worker's compensation: statutory
limits; (ii) employer's liability, as required by law, with a minimum limit of
$100,000 per employee and $500,000 per occurrence; (iii) commercial general
liability insurance (occurrence form) providing coverage against any and all
claims for bodily injury and property damage occurring in, on or about the
Premises arising out of Tenant's and Tenant's Representatives' use and/or
occupancy of the Premises. Such insurance shall include coverage for blanket
contractual liability, fire damage, premises, personal injury, completed
operations, products liability, personal and advertising, and a plate-glass
rider to provide coverage for all glass in, on or about the Premises including,
without limitation, skylights. Such insurance shall have a combined single limit
of not less than Two Million Dollars ($2,000,000) per occurrence with a Four
Million Dollar ($4,000,000) aggregate limit and excess/umbrella insurance in the
amount of Four Million Dollars ($4,000,000). If Tenant has other locations which
it owns or leases, the policy shall include an aggregate limit per location
endorsement. If necessary, as reasonably determined by Landlord, Tenant shall
provide for restoration of the aggregate limit; (iv) comprehensive automobile
liability insurance: a combined single limit of not less than $2,000,000 per
occurrence and insuring Tenant against liability for claims arising out of the
ownership, maintenance, or use of any owned, hired or non-owned automobiles; (v)
"all risk" or "special purpose" property insurance, including without
limitation, sprinkler leakage, boiler and machinery comprehensive form, if
applicable, covering damage to or loss of any personal property, trade fixtures,
inventory, fixtures and equipment located in, on or about the Premises, and in
addition, coverage for flood, earthquake, and business interruption of Tenant,
together with, if the property of Tenant's invitees is to be kept in the
Premises, warehouser's legal liability or bailee customers insurance for the
full replacement cost of the property belonging to invitees and located in the
Premises. Such insurance shall be written on a replacement cost basis (without
deduction for depreciation) in an amount equal to eighty percent (80%) of the
full replacement value of the aggregate of the items referred to in this
subparagraph (v); and (vi) such other insurance as Landlord deems reasonably
necessary and prudent or as may otherwise be reasonably required by any of
Landlord's lenders or joint venture partners.

          12.2 INSURANCE POLICIES: Insurance required to be maintained by Tenant
shall be written by companies (i) licensed to do business in the State of
California, (ii) domiciled in the United States of America, and (iii) having a
"General Policyholders Rating" of at least A:X (or such higher rating as may be
required by a lender having a lien on the Premises) as set forth in the most
current issue of "A.M. Best's Rating Guides." Any deductible amounts under any
of the insurance policies required hereunder shall not exceed Ten Thousand
Dollars ($10,000.00). Tenant shall deliver to Landlord certificates of insurance
and true and complete copies of any and all endorsements required herein for all
insurance required to be maintained by Tenant hereunder at the time of execution
of this Lease by Tenant. Tenant shall, at least thirty (30) days prior to
expiration of each policy, furnish Landlord with certificates of renewal or
"binders" thereof. Each certificate shall expressly provide that such policies
shall not be cancelable or otherwise subject to modification except after thirty
(30) days prior written notice to the parties named as additional insureds as
required in this Lease (except for cancellation for nonpayment of premium, in
which event cancellation shall not take effect until at least ten (10) days'
notice has been given to Landlord). Tenant shall have the right to provide
insurance coverage which it is obligated to carry pursuant to the terms of this
Lease under a blanket insurance policy, provided such blanket policy expressly
affords coverage for the Premises and for Landlord as required by this Lease.

          12.3 ADDITIONAL INSUREDS AND COVERAGE: Landlord, any property
management company and/or agent of Landlord for the Premises and Common Area and
any lender(s) of Landlord having a lien against the Premises and Common Area
shall be named as additional insureds under all of the policies required in
Section 12.1(iii) above. Additionally, such policies shall provide for
severability of interest. All insurance to be maintained by Tenant shall, except
for workers' compensation and employer's liability insurance, be primary,
without right of contribution from insurance maintained by Landlord. Any
umbrella/excess liability policy (which shall be in "following form") shall
provide that if the underlying aggregate is exhausted, the excess coverage will
drop down as primary insurance. The limits of insurance maintained by Tenant
shall not limit Tenant's liability under this Lease. It is the parties'
intention that the insurance to be procured and maintained by Tenant as required
herein shall provide coverage for any and all damage or injury arising from or
related to Tenant's operations of its business and/or Tenant's or Tenant's
Representatives' use of the Premises. It is not contemplated or anticipated by
the parties that the aforementioned risks of loss be borne by Landlord's
insurance carriers, rather it is contemplated and anticipated by Landlord and
Tenant that such risks of loss be borne by Tenant's insurance carriers pursuant
to the insurance policies procured and maintained by Tenant as required herein.

          12.4 FAILURE OF TENANT TO PURCHASE AND MAINTAIN INSURANCE: In the
event Tenant does not purchase the insurance required in this Lease or keep the
same in full force and effect throughout the Term of this Lease (including any
renewals or extensions), Landlord may, but without obligation to do so, purchase
the necessary insurance and pay the premiums therefor. If Landlord so elects to
purchase such insurance, Tenant shall promptly pay to Landlord as Additional
Rent, the amount so paid by Landlord, upon Landlord's demand therefor. In
addition, Landlord may recover from Tenant and Tenant agrees to pay, as
Additional Rent, any and all Enforcement Expenses and damages which Landlord may
sustain by 



                                       14

<PAGE>   15

reason of Tenant's failure to obtain and maintain such insurance. If
Tenant fails to maintain any insurance required in this Lease, Tenant shall be
liable for all losses, damages and costs resulting from such failure.

          12.5 LANDLORD'S INSURANCE: Landlord shall maintain in full force and
effect during the Term of this Lease, subject to reimbursement as provided in
Section 6, policies of insurance which afford such coverages as are commercially
reasonable and as is consistent with other properties in Landlord's portfolio.
Notwithstanding the foregoing, Landlord shall obtain and keep in force during
the Term of this Lease, as an item of Operating Expenses, a policy or policies
in the name of Landlord, with loss payable to Landlord and to the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lender(s)"),
insuring loss or damage to the Buildings, including all improvements, fixtures
(other than trade fixtures) and permanent additions. However, all alterations,
additions and improvements made to the Premises by Tenant (other than the Tenant
Improvements) shall be insured by Tenant rather than by Landlord. The amount of
such insurance procured by Landlord shall be equal to at least eighty percent
(80%) of the full replacement cost of the Buildings, including all improvements
and permanent additions as the same shall exist from time to time, or the amount
required by Lenders. At Landlord's option, such policy or policies shall insure
against all risks of direct physical loss or damage (including, without
limitation, the perils of flood and earthquake), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Buildings
required to be demolished or removed by reason of the enforcement of any
building, zoning, safety or land use laws as the result of a covered cause of
loss. If any such insurance coverage procured by Landlord has a deductible
clause, the deductible shall not exceed commercially reasonable amounts, and in
the event of any casualty, the amount of such deductible shall be an item of
Operating Expenses. Notwithstanding anything to the contrary contained herein,
to the extent the cost of maintaining insurance with respect to the Buildings is
increased as a result of Tenant's acts, omissions, use or occupancy of the
Premises, Tenant shall pay for such increase(s).

13. WAIVER OF SUBROGATION: Landlord and Tenant hereby mutually waive their
respective rights of recovery against each other for any loss of, or damage to,
either parties' property to the extent that such loss or damage is insured by an
insurance policy required to be in effect at the time of such loss or damage.
Each party shall obtain any special endorsements, if required by its insurer
whereby the insurer waives its rights of subrogation against the other party.
This provision is intended to waive fully, and for the benefit of the parties
hereto, any rights and/or claims which might give rise to a right of subrogation
in favor of any insurance carrier. The coverage obtained by Tenant pursuant to
Section 12 of this Lease shall include, without limitation, a waiver of
subrogation endorsement attached to the certificate of insurance. The provisions
of this Section 13 shall not apply in those instances in which such waiver of
subrogation would invalidate such insurance coverage or would cause either
party's insurance coverage to be voided or otherwise uncollectible. In addition
to the above, neither party shall be personally obligated under any indemnities
given to the other party to the extent that insurance carried by the party
suffering a loss actually covers such loss.

14. LIMITATION OF LIABILITY AND INDEMNITY: Except to the extent of losses,
damages, liabilities, claims, charges and costs resulting from the gross
negligence or willful misconduct of Landlord or its authorized representatives,
Tenant agrees to protect, defend (with counsel acceptable to Landlord) and hold
Landlord and Landlord's lenders, partners, members, property management company
(if other than Landlord), agents, directors, officers, employees,
representatives, contractors, shareholders, successors and assigns and each of
their respective partners, members, directors, employees, representatives,
agents, contractors, shareholders, successors and assigns (collectively, the
"Indemnitees") harmless and indemnify the Indemnitees from and against all
liabilities, damages, claims, losses, judgments, charges and expenses (including
reasonable attorneys' fees, costs of court and expenses necessary in the
prosecution or defense of any litigation including the enforcement of this
provision) arising from or in any way related to, directly or indirectly, (i)
Tenant's or Tenant's Representatives' use of the Premises, (ii) the conduct of
Tenant's business, (iii) from any activity, work or thing done, permitted or
suffered by Tenant in or about the Premises, (iv) in any way connected with the
Premises or with the improvements or personal property therein, including, but
not limited to, any liability for injury to person or property of Tenant,
Tenant's Representatives, or third party persons, and/or (v) Tenant's failure to
perform any covenant or obligation of Tenant under this Lease. Tenant agrees
that the obligations of Tenant herein shall survive the expiration or earlier
termination of this Lease.

          Except to the extent of damage resulting from the gross negligence or
willful misconduct of Landlord or its authorized representatives, to the fullest
extent permitted by law, Tenant agrees that neither Landlord nor any of
Landlord's lender(s), partners, members, employees, representatives, legal
representatives, successors or assigns shall at any time or to any extent
whatsoever be liable, responsible or in any way accountable for any loss,
liability, injury, death or damage to persons or property which at any time may
be suffered or sustained by Tenant or by any person(s) whomsoever who may at any
time be using, occupying or visiting the Premises, including, but not limited
to, any acts, errors or omissions by or on behalf of any other tenants or
occupants of the Buildings. Tenant shall not, in any event or circumstance, be
permitted to offset or otherwise credit against any payments of Rent required
herein for matters for which Landlord may be liable hereunder. Landlord and its
authorized representatives shall not 



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<PAGE>   16

be liable for latent defects or any interference with light or air from other
structures off the Premises and not leased by Tenant.

15. ASSIGNMENT AND SUBLEASING:

          15.1 PROHIBITION: Except as expressly set forth herein with respect to
a Related Entity, Tenant shall not assign, mortgage, hypothecate, encumber,
grant any license or concession, pledge or otherwise transfer this Lease
(collectively, "assignment"), in whole or in part, whether voluntarily or
involuntarily or by operation of law, nor sublet or permit occupancy by any
person other than Tenant of all or any portion of the Premises without first
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant hereby agrees that Landlord may withhold its
consent to any proposed sublease or assignment if the proposed sublessee or
assignee or its business is subject to compliance with additional requirements
of the ADA (defined below) and/or Environmental Laws (defined below) beyond
those requirements which are applicable to Tenant, unless the proposed sublessee
or assignee shall (a) first deliver plans and specifications for complying with
such additional reasonable requirements and obtain Landlord's written reasonable
consent thereto, and (b) comply with all Landlord's reasonable conditions for or
contained in such consent, including without limitation, requirements for
security to assure the lien-free completion of such improvements. If Tenant
seeks to sublet or assign all or any portion of the Premises, Tenant shall
deliver to Landlord at least thirty (30) days prior to the proposed commencement
of the sublease or assignment (the "Proposed Effective Date") the following: (i)
the name of the proposed assignee or sublessee; (ii) such information as to such
assignee's or sublessee's financial responsibility and standing as Landlord may
reasonably require; and (iii) the aforementioned plans and specifications, if
any. Within ten (10) days after Landlord's receipt of a written request from
Tenant that Tenant seeks to sublet or assign all or any portion of the Premises,
Landlord shall deliver to Tenant a copy of Landlord's standard form of sublease
or assignment agreement (as applicable), which instrument shall be utilized for
each proposed sublease or assignment (as applicable), and such instrument shall
include a provision whereby the assignee assumes all of Tenant's obligations
hereunder and agrees to be bound by the terms hereof. As Additional Rent
hereunder, Tenant shall pay to Landlord a fee in the amount of five hundred
dollars ($500) plus Tenant shall reimburse Landlord for actual legal and other
expenses incurred by Landlord in connection with any actual or proposed
assignment or subletting. In the event the sublease or assignment (other than to
a Related Entity) (1) by itself or taken together with prior sublease(s) or
partial assignment(s) covers or totals, as the case may be, (a) more than
thirty-five percent (35%) of the rentable square feet of the Premises, or (b)
all of any one or more of the Buildings; or (2) is for a term which by itself or
taken together with prior or other subleases or partial assignments is greater
than fifty percent (50%) of the period remaining in the Term of this Lease as of
the time of the Proposed Effective Date; or (3) is an assignment or subletting
for any portion of the Premises for a period extending into any option or
renewal Term of this Lease, then Landlord shall have the right, to be exercised
by giving written notice to Tenant within ten (10) business days after
Landlord's receipt of Tenant's written request seeking to assign or sublet all
or a portion of the Premises, to recapture the space described in the sublease
or assignment. If such recapture notice is given, it shall serve to terminate
this Lease with respect to the proposed sublease or assignment space, or, if the
proposed sublease or assignment space covers all the Premises, it shall serve to
terminate the entire term of this Lease in either case, as of the Proposed
Effective Date. However, no termination of this Lease with respect to part or
all of the Premises shall become effective without the prior written consent,
where necessary, of the holder of each deed of trust encumbering the Premises or
any part thereof. If this Lease is terminated pursuant to the foregoing with
respect to less than the entire Premises, the Rent shall be adjusted on the
basis of the proportion of square feet retained by Tenant to the square feet
originally demised and this Lease as so amended shall continue thereafter in
full force and effect. Each permitted assignee or sublessee, including without
limitation, a Related Entity, shall assume and be deemed to assume this Lease
and shall be and remain liable jointly and severally with Tenant for payment of
Rent and for the due performance of, and compliance with all the terms,
covenants, conditions and agreements herein contained on Tenant's part to be
performed or complied with, for the term of this Lease. No assignment or
subletting shall affect the continuing primary liability of Tenant (which,
following assignment, shall be joint and several with the assignee), and Tenant
shall not be released from performing any of the terms, covenants and conditions
of this Lease. Tenant hereby acknowledges and agrees that it understands that
Landlord's accounting department may process and accept Rent payments without
verifying that such payments are being made by Tenant, a permitted sublessee or
a permitted assignee in accordance with the provisions of this Lease. Although
such payments may be processed and accepted by such accounting department
personnel, any and all actions or omissions by the personnel of Landlord's
accounting department shall not be considered as acceptance by Landlord of any
proposed assignee or sublessee nor shall such actions or omissions be deemed to
be a substitute for the requirement that Tenant obtain Landlord's prior written
consent to any such subletting or assignment, and any such actions or omissions
by the personnel of Landlord's accounting department shall not be considered as
a voluntary relinquishment by Landlord of any of its rights hereunder nor shall
any voluntary relinquishment of such rights be inferred therefrom. For purposes
hereof, and except with respect to a Related Entity, in the event Tenant is a
corporation, partnership, joint venture, trust or other entity other than a
natural person, any change in the direct or indirect ownership of Tenant
(whether pursuant to one or more transfers) which results in a change of more
than fifty percent (50%) (except for sales of shares through a regulated public
exchange) in the direct or indirect ownership of Tenant shall be deemed to be 



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<PAGE>   17

an assignment within the meaning of this Section 15 and shall be subject to all
the provisions hereof. Except for a permissible assignment to a Related Entity,
any and all options, first rights of refusal, tenant improvement allowances and
other similar rights granted to Tenant in this Lease, if any, shall not be
assignable by Tenant unless expressly authorized in writing by Landlord.

          15.2 EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION: In the event
of any sublease or assignment of all or any portion of the Premises where the
rent or other consideration provided for in the sublease or assignment either
initially or over the term of the sublease or assignment exceeds the Rent or pro
rata portion of the Rent, as the case may be, for such space reserved in the
Lease, Tenant shall pay the Landlord monthly, as Additional Rent, at the same
time as the monthly installments of Rent are payable hereunder, the following:
until Tenant shall have been reimbursed the actual costs expended by Tenant for
Tenant Improvements and brokerage commissions in connection with any assignment
or subletting (and no other costs shall be reimbursable to Tenant from such
profits), Tenant shall receive seventy-five percent (75%) of such profits and
Landlord shall receive twenty-five percent (25%) of such profits; provided, such
deduction of actual costs shall in no event exceed Fifteen Dollars ($15.00) per
square foot assigned or sublet. After such reimbursement of costs to Tenant, all
profits shall be shared fifty/fifty (50/50).

          15.3 WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any assignee
or sublessee, or failure by Landlord to take action against any assignee or
sublessee, Landlord may, at its option, proceed against Tenant without having
taken action against or joined such assignee or sublessee, except that Tenant
shall have the benefit of any indulgences, waivers and extensions of time
granted to any such assignee or sublessee.

          15.4 RELATED ENTITY: Notwithstanding anything to the contrary
contained herein, so long as Tenant delivers to Landlord (1) at least fifteen
(15) business days prior written notice of its intention to assign or sublease
the Premises to any Related Entity, which notice shall set forth the name of the
Related Entity, (2) a copy of the proposed agreement pursuant to which such
assignment or sublease shall be effectuated, and (3) such other information
concerning the Related Entity as Landlord may reasonably require, including
without limitation, information regarding any change in the proposed use of any
portion of the Premises and any financial information with respect to such
Related Entity, and so long as Landlord approves, in writing, of any change in
the proposed use of the subject portion of the Premises and such financial
information, then Tenant may assign this Lease or sublease any portion of the
Premises (X) to any Related Entity, or (Y) in connection with any merger,
consolidation or sale of substantially all of the assets of Tenant, without
having to obtain the prior written consent of Landlord thereto. For purposes of
this Lease the term "Related Entity" shall mean and refer to any corporation or
entity which controls, is controlled by or is under common control with Tenant
and/or which arises from the merger, consolidation or sale of substantially all
of the assets of Tenant, as all of such terms are customarily used in the
industry, and in the case of a complete assignment of the Lease, with an equal
or greater net worth as Tenant has as of the proposed transfer date.

          15.5 Notwithstanding anything else in the Lease, those entities
("Business Entities") (i) in which Tenant holds at least a ten percent (10%)
interest, (ii) which are performing services with or for the Tenant to fulfill
contractual obligations of the Tenant, and/or (iii) for which the Tenant is
providing services, if any of (i), (ii) and/or (iii) are not otherwise a Related
Entity, will be governed by the following terms with respect to assignments
and/or subleases under the Lease:

                     (1) Tenant may partially assign or sublet up to (singularly
or in the aggregate) forty percent (40%) of the rentable square feet of the
Premises to Business Entities without the prior consent of the Landlord;
provided Tenant notifies Landlord of such assignment or sublease within thirty
(30) days after it becomes effective. Any such assignment or sublease shall be
subject to Landlord's right to share in any excess Base Rent as provided in
Section 15.2. of the Lease.

                     (2) Any assignment or sublease to Business Entities which
singularly or in the aggregate with other such assignments or subleases exceeds
forty percent (40%) of the rentable square footage of the Premises ("Excess
Space") shall require the prior written consent of the Landlord, which consent
shall not be unreasonably withheld. It shall be reasonable for Landlord to
withhold Landlord's consent to any such assignment or subletting in the event,
at the time of such assignment or subletting Tenant shall not have a net worth
equal to at least Tenant's net worth as of the Lease Date. In the event of a
partial assignment or sublease to a Business Entity of Excess Space, Landlord
shall not have the right to recapture the Excess Space under Section 15.1 of the
Lease, but shall have the right to share in excess Base Rent pursuant to the
following terms and conditions which shall supersede Section 15.2 of the Lease
in such event:

                                (a) The Base Rent under the assignment or
sublease for the Excess Space shall be the greater of (i) the actual Base Rent
charged by Tenant; or (ii) the Fair Rental Value of the Excess Space as
determined pursuant to the formula set forth in Addendum 1 to the Lease.

                                (b) To the extent the Base Rent per rentable
square foot of the Excess Space 



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<PAGE>   18

as calculated under subparagraph (a) above is greater than the Base Rent per
rentable square foot paid by Tenant under the Lease, Landlord and Tenant shall
share the difference fifty/fifty (50/50) without any offset or reimbursement to
Tenant for costs and expenses incurred with respect to the assignment or
sublease of the Excess Space.

The provisions of this Section 15.5 (2) shall only be applicable during the
period(s) of time in which more than forty percent (40%) of the Premises is
assigned or sublet to one or more Business Entities.

                     (3) The term "Premises," as used in and for purposes only
of this Section 15.5, shall include the (i) Phase 2 Building if Landlord owns
such Phase, Tenant has exercised the Phase 2 Option, and the Commencement Date
for the Lease on the Phase 2 Building has occurred, and (ii) the Phase 3
Building if Landlord owns such Phase, Tenant has exercised the Phase 3 Option,
and the Commencement Date for the Lease on the Phase 3 Building has occurred.


16. AD VALOREM TAXES: Prior to delinquency, Tenant shall pay all taxes and
assessments levied upon trade fixtures, alterations, additions, improvements,
inventories and personal property located and/or installed on or in the Premises
by, or on behalf of, Tenant; and if requested by Landlord, Tenant shall promptly
deliver to Landlord copies of receipts for payment of all such taxes and
assessments. To the extent any such taxes are not separately assessed or billed
to Tenant, Tenant shall pay the amount thereof as invoiced by Landlord.

17. SUBORDINATION: Except as set forth below, without the necessity of any
additional document being executed by Tenant for the purpose of effecting a
subordination, and at the election of Landlord or any bona fide mortgagee or
deed of trust beneficiary with a lien on all or any portion of the Premises or
any ground lessor with respect to the land of which the Premises are a part, the
rights of Tenant under this Lease (including, without limitation, the rights set
forth in Addendum 4 hereto) and this Lease shall be subject and subordinate at
all times to: (i) all ground leases or underlying leases which may now exist or
hereafter be executed affecting the Buildings or the land upon which the
Buildings are situated or both, and (ii) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed in any amount for which any
of the Buildings, the Premises, ground leases or underlying leases, or
Landlord's interest or estate in any of said items is specified as security.
Notwithstanding the foregoing, Landlord or any such ground lessor, mortgagee, or
any beneficiary shall have the right to subordinate or cause to be subordinated
any such ground leases or underlying leases or any such liens to this Lease. If
any ground lease or underlying lease terminates for any reason or any mortgage
or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made
for any reason, Tenant shall, notwithstanding any subordination and upon the
request of such successor to Landlord, attorn to and become the Tenant of the
successor in interest to Landlord, provided such successor in interest will not
disturb Tenant's use, occupancy or quiet enjoyment of the Premises so long as
Tenant is not in default of the terms and provisions of this Lease. The
successor in interest to Landlord following foreclosure, sale or deed in lieu
thereof shall not be (a) liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (b) subject
to any offsets or defenses which Tenant might have against any prior lessor; (c)
bound by prepayment of more than one (1) month's Rent, except in those instances
when Tenant pays Rent quarterly in advance pursuant to Section 8 hereof, then
not more than three months' Rent; or (d) liable to Tenant for any Security
Deposit not actually received by such successor in interest to the extent any
portion or all of such Security Deposit has not already been forfeited by, or
refunded to, Tenant. Landlord shall be liable to Tenant for all or any portion
of the Security Deposit not forfeited by, or refunded to Tenant, until and
unless Landlord transfers such Security Deposit to the successor in interest.
Tenant covenants and agrees to execute (and acknowledge if required by Landlord,
any lender or ground lessor) and deliver, within ten (10) days of written demand
or request by Landlord and, subject to this Section 17, in the form requested by
Landlord, ground lessor, mortgagee or beneficiary, any additional documents
evidencing the priority or subordination of this Lease (including, without
limitation, the rights set forth in Addendum 4 hereto) with respect to any such
ground leases or underlying leases or the lien of any such mortgage or deed of
trust. Tenant's failure to timely execute and deliver such additional documents
shall, at Landlord's option, constitute a material default hereunder. Tenant's
agreement to subordinate this Lease and any automatic subordination to any
future ground or underlying lease or any future deed of trust or mortgage
pursuant to the foregoing provisions of this Section 17 is conditioned upon
Landlord delivering to Tenant from the lessor under such future ground or
underlying lease or the holder of any such mortgage or deed of trust, a
non-disturbance agreement agreeing, among other things, that Tenant's right to
possession of the Premises pursuant to the terms and conditions of this Lease
shall not be disturbed provided that Tenant is not in default under this Lease
beyond the applicable notice and cure periods hereunder. If Landlord at any time
during the Term causes the Premises to be encumbered by a deed of trust or
mortgage and the beneficiary thereof requires this Lease to be subordinated to
such encumbrance or lien, Landlord or the successor of Landlord will use
commercially reasonable efforts to obtain a subordination, non-disturbance and
attornment agreement in a form reasonably acceptable to Landlord, Tenant and the
subject beneficiary. If said subordination, non-disturbance and attornment
agreement is required and agreed upon by the aforesaid parties, Landlord or the
successor of Landlord, the subject beneficiary and Tenant shall cause any such
subordination, non-disturbance and attornment agreement to be executed,
acknowledged and 



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<PAGE>   19

recorded concurrently with, or as soon as practicable after, the execution and
recordation of any such lien, deed of trust or mortgage. In addition to the
foregoing, if Landlord enters into a ground lease with regard to the Buildings
and/or the Land and such ground lessee requires this Lease to be subordinated to
such ground lease, the ground lessee and ground lessor will use commercially
reasonable efforts to provide to Tenant a subordination, non-disturbance and
attornment agreement in form reasonably acceptable to such ground lessee, ground
lessor, any beneficiary of ground lessee, and to Tenant. Tenant will in good
faith accept commercially reasonable non-disturbance agreements.

18. RIGHT OF ENTRY: Tenant grants Landlord or its agents the right to enter the
Premises with an escort designated by Tenant for purposes of inspection,
exhibition, posting of notices, repair or alteration during normal business
hours upon twenty-four (24) hours prior written notice (except in the event of
an emergency in which case no notice shall be required). It is further agreed
that Landlord shall have the right to use any and all reasonable means Landlord
deems necessary to enter the Premises in an emergency. Landlord shall have the
right to place "for rent" or "for lease" signs in the Common Area during the
final twelve (12) months of the Term, and on the outside of the Premises and/or
the outside of the Buildings during the final six (6) months of the Term.
Landlord shall also have the right to place "for sale" signs on the outside of
the Buildings. Tenant hereby waives any claim from damages or for any injury or
inconvenience to or interference with Tenant's business, or any other loss
occasioned thereby except for any claim for any of the foregoing arising out of
the sole active gross negligence or willful misconduct of Landlord or its
authorized representatives.

19. ESTOPPEL CERTIFICATE: Each party shall execute (and acknowledge if required
by any lender or ground lessor) and deliver to the other, within ten (10) days
after written request therefor, a statement in writing certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification), the date to which the Rent and other charges are
paid in advance, if any, acknowledging that there are not, to such party's
knowledge, any uncured defaults on the part of the other party hereunder or
specifying such defaults as are claimed, and such other matters as the other
party may reasonably require. Any such statement may be conclusively relied upon
by the other party and any prospective purchaser or encumbrancer of the
Premises. A party's failure to deliver such statement within such time shall be
conclusive upon the other party that (a) this Lease is in full force and effect,
without modification except as may be represented by the requesting party; (b)
there are no uncured defaults in such party's performance; and (c) not more than
one month's Rent has been paid in advance, except in those instances when Tenant
pays Rent quarterly in advance pursuant to Section 8 hereof, then not more than
three (3) month's Rent has been paid in advance. Failure by Tenant to so deliver
such certified estoppel certificate shall be a material default of the
provisions of this Lease.

20. TENANT'S DEFAULT: The occurrence of any one or more of the following events
shall, at Landlord's option, constitute a material default by Tenant of the
provisions of this Lease:

          20.1 The abandonment of the Premises by Tenant or the vacation of the
Premises by Tenant which would cause any insurance policy to be invalidated or
otherwise lapse; provided, however, notwithstanding the foregoing Tenant may
leave the Premises vacant so long as (i) Tenant fully insures or otherwise pays
for any loss or damage thereto and (ii) all insurance policies carried by
Landlord with respect to the Buildings are not invalidated, in whole or in part,
nor would such insurance policies be caused to otherwise lapse. Tenant agrees to
notice and service of notice as provided for in this Lease and waives any right
to any other or further notice or service of notice which Tenant may have under
any statute or law now or hereafter in effect;

          20.2 The failure by Tenant to make any payment of Rent, Additional
Rent or any other payment required hereunder within three (3) calendar days
after the delivery by Landlord of written notice that said payment is due.
Tenant agrees that such written notice by Landlord shall serve as the
statutorily required notice under the Law (including without limitation, any
unlawful detainer statutes), and Tenant further agrees to notice and service of
notice as provided for in this Lease and waives any right to any other or
further notice or service of notice which Tenant may have under any statute or
law now or hereafter in effect on the date said payment is due.

          20.3 The failure by Tenant to observe, perform or comply with any of
the conditions, covenants or provisions of this Lease (except failure to make
any payment of Rent and/or Additional Rent) and such failure is not cured within
(i) thirty (30) days of the date on which Landlord delivers written notice of
such failure to Tenant, complying with the notice requirements of Section 31.10
hereof, for all failures other than with respect to Hazardous Materials, and
(ii) ten (10) days of the date on which Landlord delivers written notice of such
failure to Tenant for all failures in any way related to Hazardous Materials.
However, Tenant shall not be in default of its obligations hereunder if such
failure cannot reasonably be cured within such thirty (30) or ten (10) day
period, as applicable, and Tenant promptly commences, and thereafter diligently
proceeds with same to completion, all actions necessary to cure such failure as
soon as is reasonably possible, but in no event shall the completion of such
cure be later than sixty (60) days after the date on which Landlord delivers to
Tenant written notice of such failure, unless Landlord, acting reasonably and in
good faith, otherwise expressly agrees in writing to a longer period of time
based upon 



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<PAGE>   20

the circumstances relating to such failure as well as the nature of the failure
and the nature of the actions necessary to cure such failure;

          20.4 The making of a general assignment by Tenant for the benefit of
creditors, the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation, or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within ninety (90) days of such
filing, the appointment of a receiver or other custodian to take possession of
substantially all of Tenant's assets or this leasehold, Tenant's insolvency or
inability to pay Tenant's debts or failure generally to pay Tenant's debts when
due, any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant's assets, Tenant taking
any action toward the dissolution or winding up of Tenant's affairs, the
cessation or suspension of Tenant's use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets or
this leasehold;

          20.5 Tenant's use or storage of Hazardous Materials in, on or about
the Premises other than as expressly permitted by the provisions of Section 29
below, unless cured as provided in Section 20.3; or

          20.6 The intentional making of any material misrepresentation or
omission by Tenant in any materials delivered by or on behalf of Tenant to
Landlord pursuant to this Lease.

21. REMEDIES FOR TENANT'S DEFAULT:

          21.1 LANDLORD'S RIGHTS: In the event of Tenant's material default
under this Lease, Landlord may terminate Tenant's right to possession of the
Premises by any lawful means in which case upon delivery of written notice by
Landlord this Lease shall terminate on the date specified by Landlord in such
notice and Tenant shall immediately surrender possession of the Premises to
Landlord. In addition, the Landlord shall have the immediate right of re-entry
whether or not this Lease is terminated, and if this right of re-entry is
exercised following abandonment of the Premises by Tenant, Landlord may consider
any personal property belonging to Tenant and left on the Premises to also have
been abandoned. No re-entry or taking possession of the Premises by Landlord
pursuant to this Section 21 shall be construed as an election to terminate this
Lease unless a written notice of such intention is given to Tenant. If Landlord
relets the Premises or any portion thereof, (i) Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises
or any part thereof, including, without limitation, broker's commissions,
expenses of cleaning, redecorating, and other similar costs (collectively, the
"Reletting Costs"), and (ii) the rent received by Landlord from such reletting
shall be applied to the payment of, first, any indebtedness from Tenant to
Landlord other than Base Rent, Operating Expenses, Tax Expenses, Common Area
Expenses, and Utility Expenses; second, all costs including maintenance,
incurred by Landlord in reletting; and, third, Base Rent, Operating Expenses,
Tax Expenses, Common Area Expenses, Utility Expenses, and all other sums due
under this Lease. Any and all of the Reletting Costs shall be fully chargeable
to Tenant and shall not be prorated or otherwise amortized in relation to any
new lease for the Premises or any portion thereof. After deducting the payments
referred to above, any sum remaining from the rental Landlord receives from
reletting shall be held by Landlord and applied in payment of future Rent as
Rent becomes due under this Lease. In no event shall Tenant be entitled to any
excess rent received by Landlord. Reletting may be for a period shorter or
longer than the remaining term of this Lease. No act by Landlord other than
giving written notice to Tenant shall terminate this Lease. Acts of maintenance,
efforts to relet the Premises or the appointment of a receiver on Landlord's
initiative to protect Landlord's interest under this Lease shall not constitute
a termination of Tenant's right to possession. So long as this Lease is not
terminated, Landlord shall have the right to remedy any default of Tenant, to
maintain or improve the Premises, to cause a receiver to be appointed to
administer the Premises and new or existing subleases and to add to the Rent
payable hereunder all of Landlord's reasonable costs in so doing, with interest
at the maximum rate permitted by law from the date of such expenditure.

          21.2 DAMAGES RECOVERABLE: If Tenant defaults under this Lease and
abandons the Premises before the end of the Term, or if Tenant's right to
possession is terminated by Landlord because of a breach or default under this
Lease, then in either such case, Landlord may recover from Tenant all damages
suffered by Landlord as a result of Tenant's failure to perform its obligations
hereunder, allowed by law and the worth at the time of the award (computed in
accordance with paragraph (3) of Subdivision (a) of Section 1951.2 of the
California Civil Code) of the amount by which the Rent then unpaid hereunder for
the balance of the Lease Term exceeds the amount of such loss of Rent for the
same period which Tenant proves could be reasonably avoided by Landlord and in
such case, Landlord prior to the award, may relet the Premises for the purpose
of mitigating damages suffered by Landlord because of Tenant's failure to
perform its obligations hereunder; provided, however, that even though Tenant
has abandoned the Premises following such default, this Lease shall nevertheless
continue in full force and effect for as long as Landlord does not terminate
Tenant's right of possession, and until such termination, Landlord shall have
the remedy described in Section 1951.4 of the California Civil Code (Landlord
may continue this Lease in effect after Tenant's breach and abandonment and
recover Rent as it becomes due, if Tenant has the right to sublet or assign,
subject only to reasonable limitations) and may enforce all its 



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<PAGE>   21

rights and remedies under this Lease, including the right to recover the Rent
from Tenant as it becomes due hereunder. The "worth at the time of the award"
within the meaning of Subparagraphs (a)(1) and (a)(2) of Section 1951.2 of the
California Civil Code shall be computed by allowing interest at the rate of ten
percent (10%) per annum. Tenant waives redemption or relief from forfeiture
under California Code of Civil Procedure Sections 1174 and 1179, or under any
other present or future law, in the event Tenant is evicted or Landlord takes
possession of the Premises by reason of any default of Tenant hereunder.

          21.3 RIGHTS AND REMEDIES CUMULATIVE: The foregoing rights and remedies
of Landlord are not exclusive; they are cumulative in addition to any rights and
remedies now or hereafter existing at law, in equity by statute or otherwise, or
to any equitable remedies Landlord may have, and to any remedies Landlord may
have under bankruptcy laws or laws affecting creditor's rights generally. In
addition to all remedies set forth above, if Tenant materially defaults under
this Lease, any and all Base Rent waived by Landlord under Section 3 above shall
be immediately due and payable to Landlord and all options granted to Tenant
hereunder shall automatically terminate, unless otherwise expressly agreed to in
writing by Landlord.

          21.4 WAIVER OF A DEFAULT: The waiver by Landlord of any default of any
provision of this Lease shall not be deemed or construed a waiver of any other
default by Tenant hereunder or of any subsequent default of this Lease, except
for the default specified in the waiver.

22. HOLDING OVER: If Tenant holds possession of the Premises after the
expiration of the Term of this Lease with Landlord's consent, Tenant shall
become a tenant from month-to-month upon the terms and provisions of this Lease,
provided the monthly Base Rent during the first two (2) months of such hold over
period shall be 125% of the Base Rent due on the last month of the Lease Term
and thereafter, monthly Base Rent shall be 150% of the Base Rent due on the last
month of the Lease Term, payable in advance on or before the first day of each
month. Acceptance by Landlord of the monthly Base Rent without the additional
applicable increase of Base Rent shall not be deemed or construed as a waiver by
Landlord of any of its rights to collect the increased amount of the Base Rent
as provided herein at any time. Such month-to-month tenancy shall not constitute
a renewal or extension for any further term. All options, if any, granted under
the terms of this Lease shall be deemed automatically terminated and be of no
force or effect during said month-to-month tenancy. Tenant shall continue in
possession until such tenancy shall be terminated by either Landlord or Tenant
giving written notice of termination to the other party at least thirty (30)
days prior to the effective date of termination. This paragraph shall not be
construed as Landlord's permission for Tenant to hold over. Acceptance of Base
Rent by Landlord following expiration or termination of this Lease shall not
constitute a renewal of this Lease.

23. LANDLORD'S DEFAULT: Landlord shall not be deemed in breach or default of
this Lease unless Landlord fails within a reasonable time to perform an
obligation required to be performed by Landlord hereunder. For purposes of this
provision, a reasonable time shall not be less than thirty (30) days after
receipt by Landlord of written notice specifying the nature of the obligation
Landlord has not performed; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days, after receipt of written
notice, is reasonably necessary for its performance, then Landlord shall not be
in breach or default of this Lease if performance of such obligation is
commenced within such thirty (30) day period and thereafter diligently pursued
to completion.

24. PARKING: Tenant shall have the exclusive right to use the number of parking
spaces specified in the Basic Lease Information, provided, in the event of a
sublease or assignment of the whole or any part of the Premises, the number of
parking spaces for Tenant's exclusive use shall be reduced by an amount equal to
four (4) parking spaces for each one thousand (1,000) square feet of Premises
assigned or sublet.

25. SALE OF PREMISES: In the event of any sale of the Premises by Landlord or
the cessation otherwise of Landlord's interest therein, Landlord shall be and is
hereby entirely released from any and all of its obligations to perform or
further perform under this Lease from or after the date of sale and from all
liability hereunder accruing from or after the date of such sale; and the
purchaser, at such sale or any subsequent sale of the Premises shall be deemed,
without any further agreement between the parties or their successors in
interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of the Landlord
under this Lease. For purposes of this Section 25, the term "Landlord" means
only the owner and/or agent of the owner as such parties exist as of the date on
which Tenant executes this Lease. A ground lease or similar long term lease by
Landlord of the entire Buildings, of which the Premises are a part, shall be
deemed a sale within the meaning of this Section 25. Tenant agrees to attorn to
such new owner provided such new owner does not disturb Tenant's use, occupancy
or quiet enjoyment of the Premises so long as Tenant is not in default of any of
the provisions of this Lease. Landlord agrees that Landlord shall not sell the
separate legal parcels into which Landlord intends to divide the Premises (which
term, for the purposes of this sentence, shall specifically not include Phase 2
and/or Phase 3 (as defined in Addendum 2 to this Lease) to more than one (1)
owner.

26. WAIVER: No delay or omission in the exercise of any right or remedy of
Landlord on any default by Tenant shall impair such a right or remedy or be
construed as a waiver. The subsequent acceptance 



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of Rent by Landlord after default by Tenant of any covenant or term of this
Lease shall not be deemed a waiver of such default, other than a waiver of
timely payment for the particular Rent payment involved, and shall not prevent
Landlord from maintaining an unlawful detainer or other action based on such
breach. No payment by Tenant or receipt by Landlord of a lesser amount than the
monthly Rent and other sums due hereunder shall be deemed to be other than on
account of the earliest Rent or other sums due, nor shall any endorsement or
statement on any check or accompanying any check or payment be deemed an accord
and satisfaction; and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or other sum
or pursue any other remedy provided in this Lease. No failure, partial exercise
or delay on the part of the Landlord in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.

27. CASUALTY DAMAGE:

          27.1 CASUALTY. If the Premises or any part thereof shall be damaged or
destroyed by fire or other casualty, Tenant shall give immediate written notice
thereof to Landlord. Within ninety (90) days after receipt by Landlord of such
notice, Landlord shall notify Tenant, in writing, whether the necessary repairs
can reasonably be made, as reasonably determined by Landlord: (a) within one
hundred twenty (120) days; (b) in more than one hundred twenty (120) days but in
less than one hundred eighty (180) days; or (c) in more than one hundred eighty
(180) days, from the date of such notice. Notwithstanding anything to the
contrary contained in this Section 27, if any portion of the Premises is damaged
or destroyed due to the fault, negligence (active or passive) or material
default of this Lease by Tenant or any of Tenant's Representatives, this Lease
shall not terminate (and Tenant's termination rights in this Section 27 shall be
of no force or effect), Rent shall not be diminished during the repair of such
damage to the extent Landlord does not receive rental abatement insurance
proceeds, and Tenant shall be liable to Landlord for the cost of the repair
caused thereby to the extent such cost is not covered by insurance proceeds.

                     27.1.1 MINOR INSURED DAMAGE. If either (i) only one (1)
Building is damaged and/or (ii) less than one-third (1/3) of the total rentable
square footage for all Buildings then subject to the Lease are damaged, this
Lease shall not terminate and, provided that insurance proceeds are available to
fully repair the damage and/or Tenant otherwise contributes any shortfall
thereof to Landlord, Landlord shall, with reasonable diligence, repair the
damage, including Tenant Improvements, to substantially the same condition that
existed prior to the occurrence of such casualty, except Landlord shall not be
required to rebuild, repair, or replace any alterations or improvements
installed by or for the benefit of Tenant or any part of Tenant's property,
including without limitation, the Excess Tenant Improvements, Tenant's
furniture, furnishings or trade fixtures and equipment removable by Tenant. The
Rent payable hereunder shall be abated proportionately from the date of the
occurrence of such insured damage until any and all repairs are substantially
completed to the extent of the portion of the Premises which is rendered
unusable and unfit for occupancy.

                     27.1.2 MAJOR INSURED DAMAGE. If (i) more than one (1)
Building is damaged and (ii) more than one-third (1/3) of the total rentable
square footage of all Buildings then subject to the Lease are damaged, and such
damage is to such extent that repairs, rebuilding and/or restoration cannot be
reasonably completed within two hundred seventy (270) days, then Landlord shall
within ninety (90) days after such damage notify Tenant in writing that the
repairs cannot be completed within two hundred seventy (270) days. For a period
of thirty (30) days following the receipt of the above-mentioned notice from
Landlord, either Landlord or Tenant may terminate this Lease by giving written
notice thereof within such thirty (30) day period; and, in the event of such
termination, this Lease shall terminate and the Rent payable hereunder shall be
abated proportionately from the date of the occurrence of such damage; provided,
however, in the event Landlord terminates this Lease as provided herein, Tenant
may nonetheless elect to keep this Lease in full force and effect (even though
Landlord has elected not to repair any damage), with respect to any Building
which has no damage whatsoever and this Lease shall terminate as to any wholly
or partially damaged Building. In the event of such election by Tenant, the
Premises shall be reduced accordingly and the Rent payable hereunder shall be
abated proportionately from the date of the occurrence of such damage. If
Landlord elects to repair and Tenant does not elect to terminate the Lease,
Landlord shall promptly commence and diligently prosecute to completion the
repairs to the Premises, including the Tenant Improvements provided insurance
proceeds are available to fully repair the damage and/or Tenant contributes any
shortfall thereof to Landlord (except that Landlord shall not be required to
rebuild, repair, or replace any alterations or improvements installed by Tenant
or any part of Tenant's property, including without limitation, the Excess
Tenant Improvements, Tenant's furniture, furnishings or trade fixtures and
equipment removable by Tenant). During the time when Landlord is prosecuting
such repairs to completion, the Rent payable hereunder shall be abated
proportionately from the date of the occurrence of such insured damage until any
and all repairs are substantially completed, to the extent of the portion of the
Premises which are rendered unusable and are unfit for occupancy.

                     27.1.3 DAMAGE NEAR END OF TERM. If the Premises are damaged
or destroyed to an extent affecting more than twenty-five percent (25%) of the
rentable square footage of the Buildings during the last year of the then
applicable term of this Lease and Tenant has not or does not within thirty (30)
days of such damage exercise any option to extend the Lease (which exercise by
Tenant shall serve to extend 



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the Term of this Lease and thereafter Tenant shall not have the right to
terminate this Lease as a result of such casualty), either Landlord or Tenant
may, at its option, cancel and terminate this Lease by giving written notice to
the other party of its election to do so within thirty (30) days after receipt
by Landlord of notice from Tenant of the occurrence of such casualty. If either
party so elects to terminate this Lease, Tenant shall promptly vacate the
damaged Building or Buildings and have six (6) months to vacate the remainder of
the Buildings which are undamaged provided that the Rent shall continue to be
paid proportionately to the amount of rentable square footage that Tenant
continues to occupy during this period.

          27.2 UNINSURED CASUALTY; LENDER'S APPLICATION OF PROCEEDS. Tenant
shall be responsible for and shall pay to Landlord, as Additional Rent, any
commercially reasonable deductible amounts under the insurance policies for the
Premises and/or the Building. So long as Landlord actually maintains the
insurance policies required to be maintained by Landlord under this Lease, if
any portion of the Premises is damaged and (i) such damage is not fully covered
by insurance proceeds received by Landlord due to the casualty being uninsured,
(ii) a holder of indebtedness secured by the Premises applies the insurance
proceeds to the debt, or (iii) the deductible amounts under the policies make
rebuilding unfeasible in Landlord's reasonable judgment, then Landlord shall
have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to Tenant
of any such event, whereupon all rights and obligations shall cease and
terminate hereunder (except for those obligations expressly provided for in this
Lease to survive such termination of the Lease); provided, however, in any of
such events described above in (i), (ii) or (iii) of this Section 27.2, Tenant
may elect to keep the Lease in full force and effect by (x) delivering a notice
of such election to Landlord during the thirty (30) day period referenced in
this Section 27.2 and (y) making a loan (upon the terms and conditions set forth
below) to Landlord in the amount of any shortfall between the amount of the
available insurance proceeds and the cost of repairing and restoring the
Premises due to the occurrence of any of the events described in (i), (ii) or
(iii) above (the "Shortfall Amount"). Prior to the commencement of any repairs,
Tenant shall cause the Shortfall Amount to be placed in a mutually agreeable
fund control which provides adequate assurance to Landlord that the Shortfall
Amount will be available for the repairs. In the event Landlord shall not repay
the loan for the Shortfall Amount as and when due, Tenant shall receive a credit
against each monthly payment of Rent under the Lease from and after the date of
Landlord's failure to repay the loan in an amount equal to the monthly payment
of the loan for the Shortfall Amount not made to Tenant by Landlord. Any loan
made by Tenant hereunder shall bear interest at a variable rate equal to the
prime rate as published in the Wall Street Journal plus one hundred (100) basis
points (1%), but not to exceed eleven percent (11%) per annum, amortized from
the date the loan for such Shortfall Amount is first drawn upon by Landlord over
the balance of the Lease Term (including any option terms exercised by Tenant).
Interest on the Shortfall Amount shall be imputed whether or not Tenant actually
obtains a loan for the Shortfall Amount.

          27.3 TENANT'S WAIVER. Landlord shall not be liable for any
inconvenience or annoyance to Tenant, injury to the business of Tenant, loss of
use of any part of the Premises by Tenant or loss of Tenant's personal property,
resulting in any way from such damage, destruction or the repair thereof, except
that, Landlord shall allow Tenant a fair diminution of Rent during the time and
to the extent the Premises are unusable and unfit for occupancy as specifically
provided above in this Section 27. With respect to any damage or destruction
which Landlord is obligated to repair or may elect to repair, except as
expressly set forth herein, Tenant hereby waives all rights to terminate this
Lease or offset any amounts against Rent pursuant to rights accorded Tenant by
any law currently existing or hereafter enacted, including but not limited to,
all rights pursuant to the provisions of Sections 1932(2.), 1933(4.), 1941 and
1942 of the California Civil Code, as the same may be amended or supplemented
from time to time.

28. CONDEMNATION: If twenty-five percent (25%) or more of the Premises is
condemned by eminent domain, inversely condemned or sold in lieu of condemnation
for any public or quasi-public use or purpose ("Condemned"), then Tenant or
Landlord may terminate this Lease as of the date when physical possession of the
Premises is taken and title vests in such condemning authority, and Rent shall
be adjusted to the date of termination. Tenant shall not because of such
condemnation assert any claim against Landlord or the condemning authority for
any compensation because of such condemnation, and, except as set forth below,
Landlord shall be entitled to receive the entire amount of any award without
deduction for any estate of interest or other interest of Tenant; provided,
however, the foregoing provisions shall not preclude Tenant, at Tenant's sole
cost and expense, from obtaining any separate award to Tenant for loss of or
damage to Tenant's trade fixtures, Excess TIs, removable personal property and
goodwill or for damages for cessation or interruption of Tenant's business
provided such award is separate from Landlord's award and provided further such
separate award does not diminish or impair the award otherwise payable to
Landlord. In addition to the foregoing, Tenant shall be entitled to seek
compensation for the relocation costs recoverable by Tenant pursuant to the
provisions of California Government Code Section 7262. If neither party elects
to terminate this Lease, Landlord shall, if necessary, promptly proceed to
restore the Premises or the Building(s) to substantially its same condition
prior to such partial condemnation, allowing for the reasonable effects of such
partial condemnation, and a proportionate allowance shall be made to Tenant, as
reasonably determined by Landlord, for the Rent corresponding to the time during
which, and to the part of the Premises of which, Tenant is deprived on account
of such partial condemnation and restoration. Landlord shall not be required to
spend funds for restoration in excess of the amount received by Landlord 



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<PAGE>   24

as compensation awarded. The Base Rent shall be reduced on a pro rata basis to
the extent that the square footage of the Premises is reduced as a result of any
condemnation.

29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS:

          29.1 HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE: Prior to executing
this Lease, Tenant has completed, executed and delivered to Landlord Tenant's
initial Hazardous Materials Disclosure Certificate (the "Initial HazMat
Certificate"), a copy of which is attached hereto as Exhibit G and incorporated
herein by this reference. Tenant covenants, represents and warrants to Landlord
that the information on the Initial HazMat Certificate is true and correct and
accurately describes the use(s) of Hazardous Materials which will be made and/or
used on the Premises by Tenant. Tenant shall commencing with the date which is
one year from the Commencement Date and continuing every year thereafter,
complete, execute, and deliver to Landlord, a Hazardous Materials Disclosure
Certificate ("the "HazMat Certificate") describing Tenant's present use of
Hazardous Materials on the Premises, and any other reasonably necessary
documents as requested by Landlord. The HazMat Certificate required hereunder
shall be in substantially the form as that which is attached hereto as Exhibit
E.

          29.2 DEFINITION OF HAZARDOUS MATERIALS: As used in this Lease, the
term Hazardous Materials shall mean and include (a) any hazardous or toxic
wastes, materials or substances, and other pollutants or contaminants, which are
or become regulated by any Environmental Laws; (b) petroleum, petroleum by
products, gasoline, diesel fuel, crude oil or any fraction thereof; (c) asbestos
and asbestos containing material, in any form, whether friable or non-friable;
(d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance displaying
toxic, reactive, ignitable or corrosive characteristics, as all such terms are
used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (h) any materials which cause or threatens
to cause a nuisance upon or waste to any portion of the Premises or any
surrounding property; or poses or threatens to pose a hazard to the health and
safety of persons on the Premises or any surrounding property.

          29.3 PROHIBITION; ENVIRONMENTAL LAWS: Except for items disclosed in
the Initial HazMat Disclosure Certificate and other than office supplies and
janitorial supplies normally used in premises similar to the Premises and stored
in their original packaging, Tenant shall not be entitled to use nor store any
Hazardous Materials on, in, or about the Premises or any portion of the
foregoing, without, in each instance, obtaining Landlord's prior written consent
thereto. If Landlord consents to any such usage or storage, then Tenant shall be
permitted to use and/or store only those Hazardous Materials that are necessary
for Tenant's business and to the extent disclosed in the HazMat Certificate and
as expressly approved by Landlord in writing, provided that such usage and
storage is only to the extent of the quantities of Hazardous Materials as
specified in the then applicable HazMat Certificate as expressly approved by
Landlord and provided further that such usage and storage is in full compliance
with any and all local, state and federal environmental, health and/or
safety-related laws, statutes, orders, standards, courts' decisions, ordinances,
rules and regulations (as interpreted by judicial and administrative decisions),
decrees, directives, guidelines, permits or permit conditions, currently
existing and as amended, enacted, issued or adopted in the future which are or
become applicable to Tenant or all or any portion of the Premises (collectively,
the "Environmental Laws"). Tenant agrees that any changes to the type and/or
quantities of Hazardous Materials specified in the most recent HazMat
Certificate may be implemented only with the prior written consent of Landlord,
which consent may be given or withheld in Landlord's sole discretion. Tenant
shall not be entitled nor permitted to install any tanks under, on or about the
Premises for the storage of Hazardous Materials without the express written
consent of Landlord, which may be given or withheld in Landlord's sole
discretion. Landlord shall have the right at all times during the Term of this
Lease to (i) inspect the Premises, (ii) conduct tests and investigations to
determine whether Tenant is in compliance with the provisions of this Section
29, and (iii) request lists of all Hazardous Materials used, stored or otherwise
located on, under or about any portion of the Premises and/or the Common Area.
The cost of all such inspections, tests and investigations shall be borne solely
by Tenant, if Landlord reasonably determines that Tenant or any of Tenant's
Representatives are directly or indirectly responsible in any manner for any
contamination revealed by such inspections, tests and investigations. The
aforementioned rights granted herein to Landlord and its representatives shall
not create (a) a duty on Landlord's part to inspect, test, investigate, monitor
or otherwise observe the Premises or the activities of Tenant and Tenant's
Representatives with respect to Hazardous Materials, including without
limitation, Tenant's operation, use and any remediation related thereto, or (b)
liability on the part of Landlord and its representatives for Tenant's use,
storage, disposal or remediation of Hazardous Materials, it being understood
that Tenant shall be solely responsible for all liability in connection
therewith.

          29.4 TENANT'S ENVIRONMENTAL OBLIGATIONS: Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials on, under or about any portion of the Premises or in any
Common Area. Tenant, at its sole cost and expense, covenants and warrants to
promptly investigate, clean up, remove, restore and otherwise remediate
(including, without limitation, preparation of any feasibility studies or
reports and the performance of any and all closures) any spill, release,
discharge, disposal, 



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<PAGE>   25

emission, migration or transportation of Hazardous Materials arising from or
related to the intentional or negligent acts or omissions of Tenant or Tenant's
Representatives such that the affected portions of the Premises and any adjacent
property are returned to the condition existing prior to the appearance of such
Hazardous Materials. Any such investigation, clean up, removal, restoration and
other remediation shall only be performed after Tenant has obtained Landlord's
prior written consent, which consent shall not be unreasonably withheld so long
as such actions would not potentially have a material adverse long-term or
short-term effect on any portion of the Premises or the Common Area.
Notwithstanding the foregoing, Tenant shall be entitled to respond immediately
to an emergency without first obtaining Landlord's prior written consent.
Tenant, at its sole cost and expense, shall conduct and perform, or cause to be
conducted and performed, all closures as required by any Environmental Laws or
any agencies or other governmental authorities having jurisdiction thereof. If
Tenant fails to so promptly investigate, clean up, remove, restore, provide
closure or otherwise so remediate, Landlord may, but without obligation to do
so, take any and all steps necessary to rectify the same and Tenant shall
promptly reimburse Landlord, upon demand, for all costs and expenses to Landlord
of performing investigation, clean up, removal, restoration, closure and
remediation work. All such work undertaken by Tenant, as required herein, shall
be performed in such a manner so as to enable Landlord to make full economic use
of the Premises and Common Area after the satisfactory completion of such work.

          29.5 ENVIRONMENTAL INDEMNITY: In addition to Tenant's obligations as
set forth hereinabove, Tenant agrees to, and shall, protect, indemnify, defend
(with counsel acceptable to Landlord) and hold Landlord and the other
Indemnitees harmless from and against any and all claims, judgments, damages,
penalties, fines, liabilities, losses (including, without limitation, diminution
in value of any portion of the Premises or the Common Area, damages for the loss
of or restriction on the use of rentable or usable space, and from any adverse
impact of Landlord's marketing of any space within the Buildings), suits,
administrative proceedings and costs (including, but not limited to, attorneys'
and consultant fees and court costs) arising at any time during or after the
Term of this Lease in connection with or related to, directly or indirectly, the
use, presence, transportation, storage, disposal, migration, removal, spill,
release or discharge of Hazardous Materials on, in or about any portion of the
Premises or the Common Area, as a result (directly or indirectly) of the
intentional or negligent acts or omissions of Tenant or any of Tenant's
Representatives. Neither the written consent of Landlord to the presence, use or
storage of Hazardous Materials in, on, under or about any portion of the
Premises nor the strict compliance by Tenant with all Environmental Laws shall
excuse Tenant from its obligations of indemnification pursuant hereto. Tenant
shall not be relieved of its indemnification obligations under the provisions of
this Section 29.5 due to Landlord's status as either an "owner" or "operator"
under any Environmental Laws.

          29.6 SURVIVAL: Tenant's obligations and liabilities pursuant to the
provisions of this Section 29 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the condition of
all or any portion of the Premises or Common Area is not in compliance with the
provisions of this Lease with respect to Hazardous Materials, including without
limitation all Environmental Laws at the expiration or earlier termination of
this Lease, then in Landlord's sole discretion, Landlord may require Tenant to
hold over possession of the Premises until Tenant can surrender the Premises to
Landlord in the condition in which the Premises existed as of the Commencement
Date and prior to the appearance of such Hazardous Materials except for
reasonable wear and tear, including without limitation, the conduct or
performance of any closures as required by any Environmental Laws. The burden of
proof hereunder shall be upon Tenant. For purposes hereof, the term "reasonable
wear and tear" shall not include any deterioration in the condition or
diminution of the value of any portion of the Premises or Common Area in any
manner whatsoever related to directly, or indirectly, Hazardous Materials. Any
such holdover by Tenant will be with Landlord's consent, will not be terminable
by Tenant in any event or circumstance and will otherwise be subject to the
provisions of Section 22 of this Lease.

          29.7 EXCULPATION OF TENANT: Tenant shall not be liable to Landlord for
nor otherwise obligated to Landlord under any provision of the Lease with
respect to the following: (i) any claim, remediation, obligation, investigation,
obligation, liability, cause of action, attorney's fees, consultants' cost,
expense or damage resulting from any Hazardous Materials present in, on or about
the Premises or the Buildings to the extent not caused or otherwise permitted,
directly or indirectly, by Tenant or Tenant's Representatives; or (ii) the
removal, investigation, monitoring or remediation of any Hazardous Material
present in, on or about the Premises or the Buildings caused by any source,
including third parties, other than Tenant or Tenant's Representatives;
provided, however, Tenant shall be fully liable for and otherwise obligated to
Landlord under the provisions of this Lease for all liabilities, costs, damages,
penalties, claims, judgments, expenses (including without limitation, attorneys'
and experts' fees and costs) and losses to the extent (a) Tenant or any of
Tenant's Representatives contributes to the presence of such Hazardous
Materials, or Tenant and/or any of Tenant's Representatives exacerbates the
conditions caused by such Hazardous Materials, or (b) Tenant and/or Tenant's
Representatives allows or permits persons over which Tenant or any of Tenant's
Representatives has control, and/or for which Tenant or any of Tenant's
Representatives are legally responsible for, to cause such Hazardous Materials
to be present in, on, under, through or about any portion of the Premises or
Common Area, or (c) Tenant and/or any of Tenant's Representatives does not take
all reasonably appropriate actions to prevent such persons over which Tenant or
any of Tenant's Representatives has control and/or for which Tenant or any of
Tenant's Representatives 



                                       25

<PAGE>   26

are legally responsible from causing the presence of Hazardous Materials in, on,
under, through or about any portion of the Premises.

          29.8 ACKNOWLEDGMENT OF ENVIRONMENTAL REPORT: Tenant hereby
acknowledges that Landlord has delivered and Tenant has received and reviewed
that certain Phase I Environmental Site Assessment Report prepared by Dudek &
Associates, dated November 1995 and that certain draft Phase I Environmental
Site Assessment Report prepared by Camp Dresser & McKee, Inc., dated March 17,
1997 and that certain Supplemental Geotechnical Investigation Report prepared by
Robert Prater Associates, dated December 1997, and that certain Phase II
Environment Site Characterization Report prepared by Genesis Environmental
Corporation, dated July 28, 1997 (collectively, "Report"). Landlord represents
to Tenant that, to Landlord's actual (not constructive or imputed and without
additional investigation or inquiry) knowledge, there are no other Hazardous
Materials present in, on or under the Premises or the Common Area except as set
forth in the Report. Landlord shall, within one hundred eighty (180) days of the
Lease Date, cause the preparation of an additional environmental report the
scope and subject matter of which shall be reasonably determined by Landlord
("Additional Report"); provided, prior to the commencement of any investigation
or inquiry which is the subject matter of the Additional Report, Tenant may
inquire in writing as to the scope and/or methods to be employed in such
Additional Report and Tenant request in writing that Landlord cause the scope
and/or methods to be employed in such Additional Report to be altered or
expanded. Such request by Tenant shall be approved or disapproved by Landlord in
Landlord's reasonable judgment. Landlord shall be responsible for the payment of
the Additional Report to the extent and only to the extent the investigation
and/or inquiry in such Additional Report is expressly and specifically required
by any applicable governmental agency or by Landlord's lender; otherwise, Tenant
shall be responsible for payment of the Additional Report. At no time during the
Term shall Tenant have the right or ability to independently perform or cause
the performance of an environmental assessment of the Land and/or Buildings.
Landlord shall provide the Additional Report to Tenant; however, in no event
shall Tenant be entitled to rely on such Additional Report and such Additional
Report shall be provided to Tenant without representation or warranty of any
kind or nature. Landlord and Tenant agree to keep strictly confidential the
Additional Report and any and all matters discussed therein; provided, however,
that notwithstanding the foregoing, the existence of the Report and Additional
Report and the matters discussed therein may be disclosed (i) to the extent as
may be required by law, regulation, court order, subpoena, or otherwise
necessary to defend or prosecute a claim, (ii) by Landlord, to any of Landlord's
officers, directors, partners, members, employees, paralegals, advisors, agents,
attorneys, accountants, inspectors, consultants, potential or actual investors,
partners, members, assignees, potential or actual lenders and potential or
actual purchasers of the Premises, and (iii) by Tenant, to Tenant's actual or
potential assignees or sublessees, officers, directors, employees, advisors,
agents, attorneys and accountants. Any Hazardous Material disclosed by such
Additional Report shall not be deemed a breach of the above representation made
by Landlord.

          29.9 EXIT REPORT: Tenant shall notify Landlord in writing no more than
two hundred forty (240) days and no less than one hundred twenty (120) days
prior to the expiration or earlier termination of this Lease that Tenant desires
Landlord to cause the preparation of, at Tenant's sole cost and expense, an
environmental site assessment of the Premises ("Exit Report"). Within sixty (60)
days of receipt of such written notification, Landlord shall cause such Exit
Report to be prepared and delivered to Tenant. The scope and subject matter of
such Exit Report shall be reasonably determined by Landlord; provided, the Exit
Report shall be prepared in a manner consistent with the scope of and methods
used in the Report and Additional Report unless Landlord determines that
Tenant's use of the Premises requires additional testing or a change in the
scope or methods of the Report and Additional Report. In the event of such
determination by Landlord, Landlord shall have the right to cause such
additional testing and/or change in the scope and/or methods of the Report and
Additional Report as Landlord deems prudent. In no event shall Tenant be
entitled to rely on such Exit Report and such Exit Report shall be provided to
Tenant without representation or warranty of any kind or nature. Landlord and
Tenant agree to keep strictly confidential the Exit Report and any and all
matters discussed therein; provided, however, that notwithstanding the
foregoing, the existence of the Exit Report and the matters discussed therein
may be disclosed (i) to the extent as may be required by law, regulation, court
order, subpoena, or otherwise necessary to defend or prosecute a claim, (ii) by
Landlord, to any of Landlord's officers, directors, partners, members,
employees, paralegals, advisors, agents, attorneys, accountants, inspectors,
consultants, potential or actual investors, partners, members, assignees,
potential or actual lenders and potential or actual purchasers of the Premises,
and (iii) by Tenant, to Tenant's actual or potential assignees or sublessees,
officers, directors, employees, advisors, agents, attorneys and accountants. No
later than the expiration or earlier termination of this Lease, Tenant shall
correct any deficiencies identified in such Exit Report as being caused by or
being the probable result of Tenant's operation in accordance with its
obligations under this Section 29. The preparation of such Exit Report shall not
constitute a consent or waiver by Landlord of any kind or nature as to any
matter disclosed or not disclosed in such Exit Report. This Section 29 is the
exclusive provision in this Lease regarding cleanup, repairs or maintenance
arising from the receiving, handling, use, storage, accumulation,
transportation, generation, spillage, migration, discharge, release or disposal
of Hazardous Material in, upon or about the Premises and Common Area, by Tenant
or Tenant's Representatives and the provisions of Section 11 (Repairs and
Maintenance) shall not apply thereto.



                                       26

<PAGE>   27

30. FINANCIAL STATEMENTS: The following provisions of this Section 30 shall only
apply if Tenant is no longer a publicly traded company. Tenant, for the reliance
of Landlord, any lender holding or anticipated to acquire a lien upon the
Premises or any portion thereof, or any prospective purchaser of the Premises or
any portion thereof, within ten (10) days after Landlord's request therefor, but
not more often than once annually so long as Tenant is not in default of this
Lease, shall deliver to Landlord the then current audited financial statements
of Tenant (including interim periods following the end of the last fiscal year
for which annual statements are available) which statements shall be prepared or
compiled by a certified public accountant and shall present fairly the financial
condition of Tenant at such dates and the result of its operations and changes
in its financial positions for the periods ended on such dates. If an audited
financial statement has not been prepared, Tenant shall provide Landlord with an
unaudited financial statement and/or such other information, the type and form
of which are acceptable to Landlord in Landlord's reasonable discretion, which
reflects the financial condition of Tenant. If Landlord so requests, Tenant
shall deliver to Landlord an opinion of a certified public accountant, including
a balance sheet and profit and loss statement for the most recent prior year,
all prepared in accordance with generally accepted accounting principles
consistently applied. Any and all options granted to Tenant hereunder shall be
subject to and conditioned upon Landlord's reasonable approval of Tenant's
financial condition at the time of Tenant's exercise of any such option.

31. GENERAL PROVISIONS:

          31.1 TIME. Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a factor.

          31.2 SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.

          31.3 RECORDATION. Landlord and Tenant shall execute and record a short
form memorandum of this Lease as set forth in Exhibit B to this Lease.

          31.4 LANDLORD'S PERSONAL LIABILITY. The liability of Landlord (which,
for purposes of this Lease, shall include Landlord and the owner of the
Buildings if other than Landlord) to Tenant for any default by Landlord under
the terms of this Lease shall be limited to the actual interest of Landlord and
its present or future partners or members in the Premises or the Buildings, and
Tenant agrees to look solely to the Premises for satisfaction of any liability
and shall not look to other assets of Landlord nor seek any recourse against the
assets of the individual partners, members, directors, officers, shareholders,
agents or employees of Landlord (including without limitation, any property
management company of Landlord); it being intended that Landlord and the
individual partners, members, directors, officers, shareholders, agents and
employees of Landlord (including without limitation, any property management
company of Landlord) shall not be personally liable in any manner whatsoever for
any judgment or deficiency. The liability of Landlord under this Lease is
limited to its actual period of ownership of title to the Premises or the
Buildings, and Landlord shall be automatically released from further performance
under this Lease and from all further liabilities and expenses hereunder
accruing after the date of such transfer of Landlord's interest in the Premises
or the Buildings.

          31.5 SEPARABILITY. Any provisions of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provisions hereof and such other provision shall remain in full force and
effect.

          31.6 CHOICE OF LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of California.

          31.7 ATTORNEYS' FEES. In the event any dispute between the parties
results in litigation or other proceeding, the prevailing party shall be
reimbursed by the party not prevailing for all reasonable costs and expenses,
including, without limitation, reasonable attorneys' and experts' fees and costs
incurred by the prevailing party in connection with such litigation or other
proceeding, and any appeal thereof. Such costs, expenses and fees shall be
included in and made a part of the judgment recovered by the prevailing party,
if any. In the event that Tenant is named in any litigation or other proceeding
due to the acts or omissions of Landlord with respect to the Common Area only
and Tenant is a prevailing party in such litigation or proceeding involving the
Common Area only, Tenant shall be reimbursed by Landlord for all reasonable
attorneys' fees, expert fees and court costs incurred by the Tenant in
connection with such litigation or other proceeding, and any appeal thereof.

          31.8 ENTIRE AGREEMENT. This Lease supersedes any prior agreements,
representations, negotiations or correspondence between the parties, and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party, that is not in writing and
signed by all parties to this Lease, shall be binding.



                                       27

<PAGE>   28

          31.9 WARRANTY OF AUTHORITY. On the date that Tenant executes this
Lease, Tenant shall deliver to Landlord an original certificate of status for
Tenant issued by the California Secretary of State or statement of partnership
for Tenant recorded in the county in which the Premises are located, as
applicable, and such other documents as Landlord may reasonably request with
regard to the lawful existence of Tenant. Each person executing this Lease on
behalf of a party represents and warrants that (1) such person is duly and
validly authorized to do so on behalf of the entity it purports to so bind, and
(2) if such party is a partnership, corporation or trustee, that such
partnership, corporation or trustee has full right and authority to enter into
this Lease and perform all of its obligations hereunder. Tenant hereby warrants
that this Lease is valid and binding upon Tenant and enforceable against Tenant
in accordance with its terms.

          31.10 NOTICES. Any and all notices and demands required or permitted
to be given hereunder to Landlord shall be in writing and shall be sent: (a) by
United States mail, certified and postage prepaid; or (b) by personal delivery;
or (c) by overnight courier, addressed to Landlord at 30 Executive Park, Suite
100, Irvine, California 92614-6741. Any and all notices and demands required or
permitted to be given hereunder to Tenant shall be in writing and shall be sent:
(i) by United States mail, certified and postage prepaid; or (ii) by personal
delivery to any employee or agent of Tenant over the age of eighteen (18) years
of age; or (iii) by overnight courier, all of which shall be addressed to Tenant
at the Premises. Notice and/or demand shall be deemed given upon the earlier of
actual receipt or the third day following deposit in the United States mail. Any
notice required by any statute or law now or hereafter in effect, including, but
not limited to, California Code of Civil Procedure Sections 1161, 1161.1, and
1162 (including any amendments, supplements or substitutions thereof), is hereby
waived by Tenant.

          31.11 JOINT AND SEVERAL. If Tenant consists of more than one person or
entity, the obligations of all such persons or entities shall be joint and
several.

          31.12 COVENANTS AND CONDITIONS. Each provision to be performed by
Tenant hereunder shall be deemed to be both a covenant and a condition.

          31.13 WAIVER OF JURY TRIAL. The parties hereto shall and they hereby
do waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other on any matters whatsoever arising
out of or in any way related to this Lease, the relationship of Landlord and
Tenant, Tenant's use or occupancy of the Premises and/or any claim of injury,
loss or damage.

          31.14 [INTENTIONALLY OMITTED.]

          31.15 UNDERLINING. The use of underlining within the Lease is for
Landlord's reference purposes only and no other meaning or emphasis is intended
by this use, nor should any be inferred.

          31.16 MERGER. The voluntary or other surrender of this Lease by
Tenant, the mutual termination or cancellation hereof by Landlord and Tenant, or
a termination of this Lease by Landlord for a material default by Tenant
hereunder, shall not work a merger, and, at the sole option of Landlord, (i)
shall terminate all or any existing subleases or subtenancies, or (ii) may
operate as an assignment to Landlord of any or all of such subleases or
subtenancies. Landlord's election of either or both of the foregoing options
shall be exercised by delivery by Landlord of written notice thereof to Tenant
and all known subtenants under any sublease.

32. SIGNS: Tenant shall have the right to install a sign or signs on each of the
Buildings depicting Tenant's name and logo, provided, all signs and graphics of
every kind visible in or from public view or corridors or the exterior of the
Premises shall be subject to Landlord's prior written reasonable approval, the
terms, covenants and conditions of any Recorded Matters and shall be subject to
any applicable governmental laws, ordinances, and regulations. Tenant shall
remove all such signs and graphics prior to the termination of this Lease. Such
installations and removals shall be made in a manner as to avoid damage or
defacement of the Premises; and Tenant shall repair any damage or defacement,
including without limitation, discoloration caused by such installation or
removal. Landlord shall have the right, at its option, to deduct from the
Security Deposit such sums as are reasonably necessary to remove such signs,
including, but not limited to, the costs and expenses associated with any
repairs necessitated by such removal. Tenant further agrees to maintain any such
sign, awning, canopy, advertising matter, lettering, decoration or other thing
as may be approved in good condition and repair at all times.

33. MORTGAGEE PROTECTION: Upon any default on the part of Landlord, Tenant will
give written notice by registered or certified mail to any beneficiary of a deed
of trust or mortgagee of a mortgage covering the Premises who has provided
Tenant with notice of their interest together with an address for receiving
notice, and shall offer such beneficiary or mortgagee a reasonable opportunity
to cure the default (which, in no event shall be not more than one hundred
twenty (120) days), including time to obtain possession of the Premises by power
of sale or a judicial foreclosure, if such should prove necessary to effect a
cure. If such default cannot be cured within such time period, then such
additional time as may be necessary will be given to such beneficiary or
mortgagee to effect such cure so long as such beneficiary or mortgagee has
commenced the cure within the original time period and thereafter diligently
pursues such cure to



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<PAGE>   29

completion, in which event this Lease shall not be terminated while such cure
is being diligently pursued. Tenant agrees that each lender to whom this Lease
has been assigned by Landlord is an express third party beneficiary hereof.
Tenant shall not make any prepayment of Rent more than one (1) month in advance
without the prior written consent of each such lender, except if Tenant is
required to make quarterly payments of Rent in advance pursuant to the
provisions of Section 8 above. Tenant waives the collection of any deposit from
such lender(s) or any purchaser at a foreclosure sale of such lender(s)' deed of
trust unless the lender(s) or such purchaser shall have actually received and
not refunded the deposit. Tenant agrees to make all payments under this Lease to
the lender with the most senior encumbrance upon receiving a direction, in
writing, to pay said amounts to such lender. Tenant shall comply with such
written direction to pay without determining whether an event of default exists
under such lender's loan to Landlord. Nothing herein shall diminish any rights
of Tenant under Civil Code Section 1950.7.

34. QUITCLAIM: Upon any termination of this Lease, Tenant shall, at Landlord's
request, execute, have acknowledged and deliver to Landlord a quitclaim deed of
Tenant's interest in and to the Premises. If Tenant fails to so deliver to
Landlord such a quitclaim deed, Tenant hereby agrees that Landlord shall have
the full authority and right to record such a quitclaim deed signed only by
Landlord and such quitclaim deed shall be deemed conclusive and binding upon
Tenant.

35. [INTENTIONALLY OMITTED.]

36. WARRANTIES OF TENANT: Tenant hereby warrants and represents to Landlord, for
the express benefit of Landlord, that Tenant has undertaken a complete and
independent evaluation of the risks inherent in the execution of this Lease and
the operation of the Premises for the use permitted hereby, and that, based upon
said independent evaluation, Tenant has elected to enter into this Lease and,
except as otherwise expressly set forth in this Lease, hereby assumes all risks
with respect thereto. Tenant hereby further warrants and represents to Landlord,
for the express benefit of Landlord, that in entering into this Lease, Tenant
has not relied upon any statement, fact, promise or representation (whether
express or implied, written or oral) not specifically set forth herein in
writing and that any statement, fact, promise or representation (whether express
or implied, written or oral) made at any time to Tenant, which is not expressly
incorporated herein in writing, is hereby waived by Tenant.

37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT: Landlord and Tenant hereby
agree and acknowledge that the Premises may be subject to the requirements of
the Americans with Disabilities Act, a federal law codified at 42 U.S.C. 12101
et seq, including, but not limited to Title III thereof, all regulations and
guidelines related thereto, together with any and all laws, rules, regulations,
ordinances, codes and statutes now or hereafter enacted by local or state
agencies having jurisdiction thereof, including all requirements of Title 24 of
the State of California, as the same may be in effect on the date of this Lease
and may be hereafter modified, amended or supplemented (collectively, the
"ADA"). Any Tenant Improvements to be constructed hereunder shall be in
compliance with the requirements of the ADA, and all costs incurred for purposes
of compliance therewith shall be a part of and included in the costs of the
Tenant Improvements. Tenant shall be solely responsible for conducting its own
independent investigation of this matter and for ensuring that the design of all
Tenant Improvements strictly comply with all requirements of the ADA. Subject to
reimbursement pursuant to Section 6 of the Lease, if any barrier removal work or
other work is required to the Premises under the ADA, then such work shall be
the responsibility of Landlord; provided, if such work is required under the ADA
as a result of Tenant's use of the Premises or any work or alteration made to
the Premises by or on behalf of Tenant, then such work shall be performed by
Landlord at the sole cost and expense of Tenant. Except as otherwise expressly
provided in this provision, Tenant shall be responsible at its sole cost and
expense for fully and faithfully complying with all applicable requirements of
the ADA, including without limitation, not discriminating against any disabled
persons in the operation of Tenant's business in or about the Premises, and
offering or otherwise providing auxiliary aids and services as, and when,
required by the ADA. Within ten (10) days after receipt, Landlord and Tenant
shall advise the other party in writing, and provide the other with copies of
(as applicable), any notices alleging violation of the ADA relating to any
portion of the Premises or the Buildings; any claims made or threatened in
writing regarding noncompliance with the ADA and relating to any portion of the
Premises or the Buildings; or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with the ADA and
relating to any portion of the Premises or the Buildings. Tenant shall and
hereby agrees to protect, defend (with counsel acceptable to Landlord) and hold
Landlord and the other Indemnitees harmless and indemnify the Indemnitees from
and against all liabilities, damages, claims, losses, penalties, judgments,
charges and expenses (including reasonable attorneys' fees, costs of court and
expenses necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly, Tenant's or Tenant's Representatives' violation or alleged
violation of the ADA. Tenant agrees that the obligations of Tenant herein shall
survive the expiration or earlier termination of this Lease. 

38. BROKERAGE COMMISSION: Landlord and Tenant each represents and warrants for
the benefit of the other that it has had no dealings with any real estate
broker, agent or finder in connection with the Premises and/or the negotiation
of this Lease, except for the Broker(s) (as set forth on Page 1), and that
neither party 



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<PAGE>   30

knows of no other real estate broker, agent or finder who is or might be
entitled to a real estate brokerage commission or finder's fee in connection
with this Lease or otherwise based upon contacts between the claimant and such
party. Landlord shall be responsible for the payment of a brokerage commission
to Broker pursuant to separate agreement between Broker and Landlord. Each party
shall indemnify and hold harmless the other from and against any and all
liabilities or expenses arising out of claims made for a fee or commission by
any real estate broker, agent or finder in connection with the Premises and this
Lease other than Broker(s), if any, resulting from the actions of the
indemnifying party. Any real estate brokerage commission or finder's fee payable
to the Broker(s) in connection with this Lease shall only be payable and
applicable to the extent of the initial Term of the Lease and to the extent of
the Premises as same exist as of the date on which Tenant executes this Lease.
Unless expressly agreed to in writing by Landlord and Broker(s), no real estate
brokerage commission or finder's fee shall be owed to, or otherwise payable to,
the Broker(s) for any renewals or other extensions of the initial Term of this
Lease or for any additional space leased by Tenant other than the Premises as
same exists as of the date on which Tenant executes this Lease. Tenant further
represents and warrants to Landlord that Tenant will not receive (i) any portion
of any brokerage commission or finder's fee payable to the Broker(s) in
connection with this Lease or (ii) any other form of compensation or incentive
from the Broker(s) with respect to this Lease.

39. QUIET ENJOYMENT: Landlord covenants with Tenant, upon the paying of Rent and
observing and keeping the covenants, agreements and conditions of this Lease on
its part to be kept, and during the periods that Tenant is not otherwise in
default of any of the terms or provisions of this Lease, and subject to the
rights of any of Landlord's lenders, (i) that Tenant shall and may peaceably and
quietly hold, occupy and enjoy the Premises during the Term of this Lease, and
(ii) neither Landlord, nor any successor or assign of Landlord, shall disturb
Tenant's occupancy or enjoyment of the Premises.

40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Tenant
shall fail to perform any of the terms, provisions, covenants or conditions to
be performed or complied with by Tenant pursuant to this Lease, and/or if the
failure of Tenant relates to a matter which in Landlord's judgment reasonably
exercised is of an emergency nature and such failure shall remain uncured for a
period of time commensurate with such emergency, then Landlord may, at
Landlord's option without any obligation to do so, and in its sole discretion as
to the necessity therefor, perform any such term, provision, covenant, or
condition, or make any such payment and Landlord by reason of so doing shall not
be liable or responsible for any loss or damage thereby sustained by Tenant or
anyone holding under or through Tenant. If Landlord so performs any of Tenant's
obligations hereunder, the full amount of the cost and expense entailed or the
payment so made or the amount of the loss so sustained shall immediately be
owing by Tenant to Landlord, and Tenant shall promptly pay to Landlord upon
demand, as Additional Rent, the full amount thereof with interest thereon from
the date of payment at the greater of (i) ten percent (10%) per annum, or (ii)
the highest rate permitted by applicable law and Enforcement Expenses. The
obligation of Tenant to pay any amounts to Landlord in accordance with the terms
of this Section 40 shall survive the expiration or earlier termination of this
Lease.

41. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Landlord
shall fail to perform any of the terms, provisions, covenants or conditions to
be performed or complied with by Landlord pursuant to this Lease after
expiration of all applicable notice and cure periods for Landlord's and any
mortgagee's benefit as set forth in Sections 23 and 33, respectively and/or if
the failure of Landlord relates to a matter which in Tenant's judgment
reasonably exercised is of an emergency nature and such failure shall remain
uncured for a period of time commensurate with such emergency, then Tenant may,
at Tenant's option, without any obligation to do so, after delivery of prior
written notice to Landlord, perform any such term, provision, covenant, or
condition. If Tenant so performs any of Landlord's obligations hereunder, the
full amount of the reasonable costs and expenses incurred shall immediately be
owing by Landlord to Tenant, and Landlord shall pay to Tenant the full amount
thereof within sixty (60) days of Landlord's receipt of Tenant's written demand
therefor. If Landlord fails to pay such sums within said 60-day period, and
provided there does not then exist a good faith dispute thereof on the part of
Landlord, Tenant may deduct such sums so demanded from the next installment of
Base Rent then due from Tenant hereunder. The obligation of Landlord to pay any
amounts to Tenant in accordance with the terms of this Section 41 shall survive
the expiration or earlier termination of this Lease.

42. SATELLITE DISH: Tenant shall have the right (but only to the extent
permitted by the City of Carlsbad and all agencies and governmental authorities
having jurisdiction thereof), at Tenant's sole cost and expense, to install and
operate a satellite or microwave dish or dishes ("Satellite Dish") along with
any necessary cables ("Cables") on a portion of the roof of each Building ("Roof
Space") and upon the Land (but such Equipment (defined below) shall only be
allowed to be placed on the Premises pursuant to the City of Carlsbad or other
applicable governmental authority approval) for the Term of the Lease (the
Satellite Dish and Cables are hereinafter collectively referred to as the
"Equipment"). The location and size of the Equipment shall be subject to
Landlord's approval in accordance with the approvals under the Work Letter,
which approval shall be based upon that which best promotes the safety,
aesthetics and efficiency of the Equipment; provided, all of the Equipment and
any modifications thereto or placement 



                                       30

<PAGE>   31

thereof shall be (i) at Tenant's sole cost and expense, (ii) contained visually
within the roof screen, (iii) installed and operated to Landlord's reasonable
specifications, and (iv) installed, maintained, operated and removed in
accordance with all Recorded Matters and applicable Laws. Landlord shall
cooperate reasonably with Tenant to modify the roof screen placement (subject to
all applicable Laws and Recorded Matters) if required for signal quality,
reconfiguration due to the installation of any HVAC systems and other reasonable
considerations; provided, the cost of all such modifications shall be the
responsibility of Tenant. All modifications to the Buildings, including the
roofs and Roof Space, if any, shall be reasonably approved by Landlord prior to
commencement of any work with respect to the Equipment. No additional rent shall
be paid by Tenant for use of the Roof Space and operation of the Equipment. The
Equipment shall remain the property of Tenant and Tenant shall remove the
Equipment upon the expiration or earlier termination of the Lease. Tenant shall
restore the Roof Space and any other portion of the Buildings affected by the
Equipment to its original condition, excepting ordinary wear and tear and/or
damage or destruction due to fire or other casualty not caused directly or
indirectly by Tenant, its agents, employees, contractors or the Equipment or any
part thereof. Tenant may not assign, lease, rent, sublet or otherwise transfer
any of its interest in the Roof Space or the Equipment except together with the
remainder of the Premises as more particularly set forth in Section 15. Each of
the other provisions of this Lease shall be applicable to the Equipment and the
use of the Roof Space by Tenant, including without limitation, Sections 12 and
14 of this Lease. The Equipment shall comply with all-non-interference rules of
the Federal Communications Commission. If applicable, Tenant shall provide to
Landlord a copy of (i) the Federal Communications Commission (or other agency)
grant which has awarded frequencies to Tenant and (ii) a list of Tenant's
frequencies. Tenant acknowledges and agrees that Tenant shall not have the right
to change Tenant's frequencies without Landlord's prior written consent.
Landlord may, at any time and at Landlord's sole cost and expense, relocate the
Equipment, including, without limitation, the antenna and any wiring, to a
mutually agreeable alternative site within the Premises upon sixty (60) days'
notice to Tenant. Upon relocation, Tenant's means of access and utility lines
will be relocated by Landlord or, at Landlord's option, by Tenant as required to
operate and maintain Equipment. Except as expressly provided in this Paragraph,
in no event shall the relocation of the Equipment, or any part thereof, affect,
alter, modify, or otherwise change any of the terms and conditions of the Lease.
Anything to the contrary contained herein notwithstanding, if, during the Lease
Term, as such Term may be extended, Landlord, in its reasonable judgment,
believes that the Equipment poses a human health or environmental hazard that
cannot be remediated or has not been remediated within ten (10) days after
Tenant has been notified thereof, then Tenant shall immediately cease all
operations of the Equipment and Tenant shall remove all of the Equipment within
thirty (30) days thereafter. Tenant represents to Landlord that the Equipment
shall not emit or project any electro-magnetic fields which pose a human health
or environmental hazard. In addition, Tenant shall be responsible for insuring
the Equipment and Landlord shall have no responsibility therefor. Tenant shall
indemnify, defend (by counsel reasonably acceptable to Landlord) and hold
harmless Landlord from any



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and all claims, demands, liabilities, damages, judgments, costs and expenses
(including reasonable attorneys' fees) Landlord may suffer or incur arising out
of or related to the installation, use, operation, maintenance, replacement
and/or removal of the Equipment or any portion thereof.

          IN WITNESS WHEREOF, this Lease is executed by the parties as of the
Lease Date referenced on Page 1 of this Lease.


LANDLORD:

W9/LNP REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership

By:   LPC MS, Inc.,
      as manager and agent for W9/LNP
      Real Estate Limited Partnership,
      a Delaware Limited Partnership


      By:_____________________________
         Senior Vice President

      Date:___________________________


TENANT:

VIASAT, INC.,
a Delaware corporation


By:_____________________

      Gregory Monahan

Its:___________________________

Date:__________________________


By:_____________________

Its:___________________________

Date:__________________________



                                       32

<PAGE>   33

                                   ADDENDUM 1
                                OPTIONS TO EXTEND



This Addendum 1 ("Addendum") is incorporated as part of that certain Lease
Agreement, dated for reference purposes as of March 24, 1998 (the "Lease"), by
and between W9/LNP Real Estate Limited Partnership, a Delaware limited
partnership ("Landlord"), and ViaSat, Inc., a Delaware corporation ("Tenant"),
for the leasing by Tenant of (i) a portion of that certain site on El Camino
Real, Carlsbad, California currently known as the "Hughes facility" and to be
known as Lincoln Northpointe as more particularly described in Exhibit A to the
Lease (the "Premises"). Any capitalized terms used herein and not otherwise
defined herein shall have the meaning ascribed to such terms as set forth in the
Lease.

1. GRANT OF EXTENSION OPTIONS. Subject to the provisions and conditions of this
Addendum, Tenant shall have the right, at its option (individually, an "Option"
and collectively, the "Options"), to extend the term of the Lease for two (2)
additional three (3) year periods (individually, the "First Extended Term" and
the "Second Extended Term," respectively and collectively, the "Extended
Terms").

2. TENANT'S OPTION NOTICES. Landlord must receive written notice from Tenant of
Tenant's exercise of an Option on a date which is not more than four hundred
fifty (450) days nor less than two hundred seventy (270) days prior to the end
of, with respect to the First Extended Term, the initial term of the Lease or,
with respect to the Second Extended Term, the First Extended Term ("Option
Notice"). In the event Tenant fails to timely and properly exercise such Option
for the (i) First Extended Term, all rights to both Options shall automatically
lapse and terminate and shall be of no further force or effect or (ii) the
Second Extended Term, all rights to the Option for the Second Extended Term
shall automatically terminate and be of no further force or effect.

3. ESTABLISHING THE MONTHLY BASE RENT FOR EXTENDED TERMS. The initial monthly
Base Rent for each of the Extended Terms shall be the greater of (i) four
percent (4%) in excess of the monthly Base Rent for the last month of the
initial term or First Extended Term, as applicable (excluding for purposes of
this calculation the portion of the monthly Base Rent included in such Base Rent
to amortize TI Costs between $32.50 and $35.00 per square foot), or (ii) ninety
five percent (95%) of the then current market rent for similar space within the
"competitive market area" of the Premises (the "Fair Rental Value") agreed upon
by and between Landlord and Tenant and their agents appointed for this purpose.
For purposes of this Section 3, "competitive market area" shall be conclusively
deemed to be the Carlsbad office market. The "Fair Rental Value" of the Premises
shall be defined to mean the current market rental value of the Premises as of
the commencement of each of the Extended Terms, as applicable, taking into
consideration all relevant factors, including length of term, the uses permitted
under the Lease, the quality, size, design and location of the Premises,
including but not limited to the condition and value of existing tenant
improvements, and the monthly base rent paid by tenants for premises comparable
to the Premises, located within the competitive market area of the Premises.

If Landlord and Tenant are unable to agree on the Fair Rental Value for either
of the Extended Terms, as applicable, within ten (10) days of receipt by
Landlord of the applicable Option Notice, Landlord and Tenant each, at its cost
and by giving notice to the other party, shall appoint a competent and
disinterested real estate appraiser with an "MAI" designation (hereinafter
"Appraiser") with at least five (5) years' full-time commercial real estate
brokerage experience in the geographical area of the Premises to set the Fair
Rental Value for the applicable Extended Term. If either Landlord or Tenant does
not appoint an Appraiser within ten (10) days after the other party has given
notice of the name of its Appraiser, the single Appraiser appointed shall be the
sole Appraiser and shall set the Fair Rental Value for the applicable Extended
Term. If two (2) Appraisers are appointed by Landlord and Tenant as stated in
this paragraph, they shall meet promptly and attempt to set the Fair Rental
Value. If the two (2) Appraisers are unable to agree within ten (10) days after
the second Appraiser has been appointed, they shall attempt to select a third
Appraiser, meeting the qualifications stated in this paragraph within ten (10)
days after the last day the two (2) Appraisers are given to set the Fair Rental
Value. If they are unable to agree on the third Appraiser, either Landlord or
Tenant by giving ten (10) days' notice to the other party, can apply to the
Presiding Judge of the Superior Court of the county in which the Premises is
located for the selection of a third Appraiser who meets the qualifications
stated in this paragraph. Landlord and Tenant each shall bear one-half (1/2) of
the cost of appointing the third Appraiser and of paying the third Appraiser's
fee. The third Appraiser, however selected, shall be a person who has not
previously acted in any capacity for either Landlord or Tenant. Within fifteen
(15) days after the selection of the third Appraiser, the third Appraiser shall
select and specify a Fair Rental Value for the applicable Extended Term, which
Fair Rental Value shall neither be higher than the highest Fair Rental Value nor
lower than the lowest Fair Rental Value submitted by the first two Appraisers as
the Fair Rental Value for the applicable Extended Term. If either of the first
two Appraisers fails to submit their opinion of the Fair Rental Value, then the
single Fair Rental Value submitted shall automatically be the monthly Base Rent
for the applicable Extended Term.



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<PAGE>   34

Upon determination of the initial monthly Base Rent for the applicable Extended
Term, pursuant to the terms outlined above, Tenant shall have a period of
fifteen (15) days in which to rescind its Option Notice by delivering written
notice of such rescission to the Landlord, whereupon the Option shall be deemed
not to have been exercised by Tenant. In the event of such a rescission, Tenant
shall pay for the entire cost of all appraisals and reimburse Landlord for any
portions of such costs previously paid by Landlord. If Tenant fails to rescind
its Option Notice in the manner set forth, Landlord and Tenant shall immediately
execute an amendment to the Lease. Such amendment, shall set forth among other
things, the initial monthly Base Rent for the applicable Extended Term, and the
actual commencement date and expiration date of the applicable Extended Term,
and shall otherwise be on the same terms and provisions of the Lease to the
extent then applicable (by way of example only, the provisions of Exhibit B to
the Lease may not be applicable during the Second Extended Term). Tenant shall
have no other right to further extend the term of the Lease under this Addendum
unless Landlord and Tenant otherwise expressly agree in writing.

4. INCREASES IN MONTHLY BASE RENT DURING EXTENDED TERMS. The initial monthly
Base Rent in effect for the First Extended Term and Second Extended Term shall
be increased effective as of the thirtieth (30th) month anniversary date
following the commencement of the applicable Extended Term by the change in the
Index (defined in Addendum 3) in effect one (1) month prior to the commencement
of the applicable Extended Term as compared to the Index in effect one (1) month
prior to such adjustment; provided, however, in no event shall such increase, on
an annual basis, be less than three percent (3%) or more than five percent (5%)
from the commencement of the applicable Extended Term to the adjustment date.

5. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE EXTENDED TERMS. If
Tenant timely and properly exercises either or both of the Options, in
accordance with the terms contained herein: (1) Tenant shall accept the Premises
in its then "As-Is" condition and, accordingly, Landlord shall not be required
to perform any additional improvements to the Premises; and (2) each party will
solely be responsible for any and all brokerage commissions and finder's fees
payable to any broker now or hereafter procured or hired by the party or who
otherwise claims a commission based on any act or statement of the party in
connection with the Options; and the other party shall in no event or
circumstance be responsible for the payment of any such commissions and fees.

6. LIMITATIONS ON, AND CONDITIONS TO, EXTENSION OPTIONS. Each Option is personal
to Tenant and may not be assigned separate from or as a part of the Lease other
than to a Related Entity. At Landlord's option, all rights of Tenant under both
Options shall terminate and be of no force or effect if any of the following
individual events occur or any combination thereof occur: (i) Tenant has been in
default at any time beyond the expiration of any applicable notice and cure
periods during more than three (3) times during any twelve (12) month period in
the initial term of the Lease or First Extended Term, as the case may be, or is
in default in the performance of any of its obligations under this Lease beyond
any applicable notice and cure periods at the time of Tenant's exercise of the
then applicable Option; and/or (ii) there has occurred a substantial and adverse
change in Tenant's financial condition during the initial term or First Extended
Term, as then applicable; and/or (iii) Tenant has failed to exercise properly
the then applicable Option described in this Addendum in a timely manner in
strict accordance with the provisions of this Addendum; and/or (iv) Tenant no
longer has lawful possession of the Premises under the Lease, or if the Lease
has been terminated earlier, pursuant to the terms of the Lease; and/or (v)
Tenant has assigned its rights and obligations under all or part of the Lease or
Tenant has subleased twenty-five percent (25%) or more of the Premises other
than to a Related Entity and/or a Business Entity.

7. TIME IS OF THE ESSENCE. Time is of the essence with respect to each and every
time period set forth in this Addendum.



                                       2

<PAGE>   35

                                   ADDENDUM 2
                                EXPANSION OPTIONS



This Addendum 2 is incorporated as part of that certain Lease Agreement dated
for reference purposes March 24, 1998, by and between ViaSat, Inc., a Delaware
corporation ("Tenant") and W9/LNP Real Estate Limited Partnership, a Delaware
limited partnership ("Landlord"), for the leasing by Tenant of the Premises. Any
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms as set forth in the Lease.

1. TENANT'S OPTION TO LEASE "PHASE 2". For a period of eighteen (18) months
following the Commencement Date (the "Phase 2 Option Period"), Tenant shall have
the option (the "Phase 2 Option") to lease and hire from Landlord an additional
approximately 60,000 square foot building with similar landscaping, recreation
facilities and other amenities to be constructed (the "Phase 2 Building") on
approximately 4.25 acres of land contiguous to the initial Premises described in
the Lease (the "Phase 2 Land"), upon the same terms and conditions contained in
the Lease and in the Work Letter, except as set forth herein (the Phase 2
Building and the Phase 2 Land are sometimes collectively referred to as "Phase
2"). Tenant shall notify Landlord of its desire to lease Phase 2, in writing, at
any time within the Phase 2 Option Period (the "Phase 2 Notice"). Within ten
(10) days after Landlord's receipt of the Phase 2 Notice, Landlord and Tenant
shall, acting reasonably and exercising good business judgment, agree upon the
actual configuration of the Phase 2 Building (the location of which is
designated as Building 5 on the "Phase II Site Plan" attached hereto and
incorporated herein as Schedule 1). Within ten (10) days after Substantial
Completion of the Phase 2 Building, the parties shall execute a new lease
substantially similar to this Lease, including without limitation, a lease which
includes a provision substantially similar to Section 31.4 of this Lease and
with a Project Schedule with substantially the same time periods as set forth in
Exhibit 5 to the Work Letter (but, for example, such new lease shall not contain
any expansion options beyond those in this original Lease). Such new lease
shall, among other things, set forth the following: (i) Base Rent for Phase 2,
as agreed upon by the parties pursuant to Section 3 below, (ii) the term of the
Lease for Phase 2, which term shall be ten (10) years from the date of
Substantial Completion of the Shell Improvements and Tenant Improvements for the
Phase 2 Building except as set forth in Section 5 below, (iii) the actual square
footage of the Phase 2 Building, (iv) the security deposit for such lease shall
be seventy five thousand dollars ($75,000.00), and (v) a default under any one
or more of this Lease, the lease for Phase 2 or the lease for Phase 3
(collectively, "Phase Leases") shall constitute a default under each of the
other Phase Leases, so long as the identity of the landlord under each Phase
Lease is the same; and, in the event the identity of the landlord under any two
(2) of the Phase Leases is the same, a default under one of such Phase Leases
shall constitute a default under the other Phase Lease; and, in the event the
identity of the landlord is different under each Phase Lease, a default under
any Phase Lease shall not be a default under any other Phase Lease. Landlord
shall provide Tenant with a Tenant Improvement Allowance for TI Costs of up to
$26.00 per square foot. Landlord shall provide Tenant up to an additional $5.00
per square foot for TI Costs provided (a) such additional $5.00 per square foot
shall be amortized over the term of the Lease for Phase 2 at an interest rate
equal to twelve percent (12%) per annum, and (b) that, at the date of Landlord's
receipt of the Phase 2 Notice, Tenant's net worth and net operating income shall
not have decreased from such net worth and net operating income as of the Lease
Date.

           If Tenant does not exercise the Phase 2 Option within twelve (12)
months following the Commencement Date, from and after the commencement of the
thirteenth (13th) month following the Commencement Date, Tenant shall pay
Landlord, on a monthly basis as additional rent and option consideration, an
amount equal to interest of eleven percent (11%) per annum (compounded) on the
land value of the Phase 2 Land. Such value shall be determined by multiplying
the square footage of the Phase 2 Land by Seven Dollars and Eighty-two Cents
($7.82). In the event Tenant timely exercises the Phase 2 Option, such
additional rent and option payments shall continue until commencement of
construction of the Shell Improvements for the Phase 2 Building. In the event
Tenant fails to timely exercise the Phase 2 Option or informs Landlord prior to
the expiration of the Phase 2 Option Period that Tenant shall not elect the
Phase 2 Option, such additional rent and option payments shall continue until
the expiration of the Phase 2 Option Period unless Tenant terminates the Phase 2
Option by written notice to Landlord prior to the Commencement Date, in which
case no such payments shall be required to be made by Tenant.

2. TENANT'S OPTION TO LEASE "PHASE 3". Provided Tenant has timely and properly
exercised the Phase 2 Option, Tenant shall have, for a period of twenty-four
(24) months following the Commencement Date (the "Phase 3 Option Period"), the
option (the "Phase 3 Option") to lease and hire from Landlord an additional
approximately 60,000 square foot building and the Work Letter to be constructed
(the "Phase 3 Building") on approximately 4.25 acres of land contiguous to the
initial Premises and/or the Phase 2 Land (the "Phase 3 Land"), upon the same
terms and conditions contained in the Lease with similar landscaping, recreation
facilities and other amenities, except as set forth herein (the Phase 3 Building
and the Phase 3 Land are sometimes collectively referred to as "Phase 3").
Tenant shall notify Landlord of its desire to 



                                       1

<PAGE>   36

lease Phase 3, in writing, at any time within the Phase 3 Option Period (the
"Phase 3 Notice"). Within ten (10) days after Landlord's receipt of the Phase 3
Notice, Landlord and Tenant shall, acting reasonably and exercising good
business judgment, agree upon the actual configuration of the Phase 3 Building
(the location of which is designated as Building 4 on the "Phase III Site Plan"
attached hereto and incorporated herein as Schedule 2). Within ten (10) days
after Substantial Completion of the Phase 3 Building, the parties shall execute
a new lease substantially similar to this Lease, including without limitation, a
lease which includes a provision substantially similar to Section 31.4 of this
Lease (but, for example, such new lease shall not contain any expansion options
beyond those in this original Lease) setting forth the following: (i) Base Rent
for Phase 3, as agreed upon by the parties pursuant to Section 3 below, (ii) the
term of the Lease for Phase 3, which term shall be ten (10) years from the date
of Substantial Completion of the Shell Improvements and Tenant Improvements for
the Phase 3 Building except as set forth in Section 5 below, (iii) the actual
square footage of the Phase 3 Building, (iv) the security deposit for such lease
shall be seventy five thousand dollars ($75,000.00), and (v) a default under any
one or more of the Phase Leases shall constitute a default under each of the
other Phase Leases, so long as the identity of the landlord under each Phase
Lease is the same; and, in the event the identity of the landlord under any two
(2) of the Phase Leases is the same, a default under one of such Phase Leases
shall constitute a default under the other Phase Lease; and, in the event the
identity of the landlord is different under each Phase Lease, a default under
any Phase Lease shall not be a default under any other Phase Lease. Landlord
shall provide Tenant with a Tenant Improvement Allowance for TI Costs of up to
$26.00 per square foot. Landlord shall provide Tenant up to an additional $5.00
per square foot for TI Costs provided (a) such additional $5.00 per square foot
shall be amortized over the term of the Lease for Phase 3 at an interest rate
equal to twelve percent (12%) per annum, and (b) that, at the date of Landlord's
receipt of the Phase 3 Notice, Tenant's net worth and net operating income shall
not have decreased from such net worth and net operating income as of the Lease
Date.

          If Tenant does not exercise the Phase 3 Option within twelve (12)
months following the Commencement Date, from and after the commencement of the
thirteenth (13th) month following the Commencement Date, Tenant shall pay
Landlord, on a monthly basis as additional rent and option consideration, an
amount equal to interest of eleven percent (11%) per annum on the land value of
the Phase 3 Land. Such value shall be determined by multiplying the square
footage of the Phase 3 Land by Seven Dollars and Eighty-two Cents ($7.82). In
the event Tenant timely exercises the Phase 3 Option, such additional rent and
option payments shall continue until commencement of construction of the Shell
Improvements for the Phase 3 Building. In the event Tenant fails to timely
exercise the Phase 3 Option or informs Landlord prior to the expiration of the
Phase 3 Option Period that Tenant shall not elect the Phase 3 Option, such
additional rent and option payments shall continue until the expiration of the
Phase 3 Option Period unless Tenant terminates the Phase 3 Option by written
notice to Landlord prior to the Commencement Date, in which case no such
payments shall be required to be made by Tenant.

3. BASE RENT FOR PHASE 2 AND/OR PHASE 3. Initial monthly Base Rent for Phase 2
shall be One Dollar and Nineteen Cents ($1.19) per square foot per month.
Initial monthly Base Rent for Phase 3, if exercised within the Phase 2 Option
Period, shall be One Dollar and Nineteen Cents ($1.19) per square foot per
month; if Tenant exercises the Phase 3 Option after the expiration of the Phase
2 Option Period, the initial monthly Base Rent for Phase 3 shall be One Dollar
and Twenty-three Cents ($1.23) per square foot per month. These initial monthly
Base Rent amounts shall not be altered except as follows: (i) in the event that
the Ten (10) Year Treasury Note Rate increases by more than 200 basis points
from five and 59 one hundreds percent (5.59%) (which is the Ten (10) Year
Treasury Note Rate as of the Lease Date) to the date of either the Phase 2
Notice or the Phase 3 Notice, as applicable, monthly Base Rent shall be
increased as follows: because the Base Rent has been calculated on an eleven
percent (11%) per annum return to Landlord, the Base Rent shall be adjusted
upward to calculate the return to Landlord at a rate equal to eleven percent
(11%) per annum plus the number of basis points in excess of 200 basis points by
which the ten (10) year Treasury Note Rate increases from the Lease Date to the
date of the Phase 2 Notice and/or Phase 3 Notice, as applicable, and/or (ii) in
the event that Tenant requests any changes to Landlord's Plans (as defined in
Exhibit B to the Lease) for such Phase (and the parties anticipate that
Landlord's Plans for Phase 2 and Phase 3 shall be identical to Landlord's Plans
for the two (2) "engineering buildings" constituting a portion of the Premises)
and such changes increase the construction costs in either Phase, the Base Rent
shall be increased such that Landlord shall receive a return on such increased
costs of an amount equal to eleven percent (11%) per annum or if such changes
decrease the construction costs, the Base Rent shall decrease by an amount
calculated in the same manner.

4. INCREASES IN BASE RENT. Base Rent shall increase on the 30th, 60th and 90th
month anniversary dates following the applicable commencement date of the Phase
by the annual change in the Index, as more specifically set forth in Addendum 3
to the Lease. Notwithstanding the foregoing, in no event shall each percentage
increase, on an annual basis, be less than three percent (3%) or more than five
percent (5%).

5. TENANT'S OPTION TO MAKE LEASE TERM CO-TERMINUS WITH THE PHASE 2 BUILDING
AND/OR PHASE 3 BUILDING LEASES. Tenant shall have the option, exercisable with
Tenant's delivery of the (i) Phase 2 Notice, to elect that the term of the lease
for the Premises be co-terminus with the term of the lease for Phase 2 and (ii)
Phase 3 Notice, to elect that the term of the Lease for the Premises and Phase 2
be co-terminus with the term of the lease for Phase 3. If Tenant makes either of
such elections,



                                       2

<PAGE>   37

Base Rent shall be increased on the 120th month anniversary date of the
Commencement Date in the same manner as such Base Rent was increased on the
thirtieth (30th), sixtieth (60th) and ninetieth (90th) month anniversary dates
of the Commencement Date of the Lease and as otherwise set forth in Addendum 3
to this Lease. Tenant's Options to Extend the Term of this Lease shall be
applicable to the leases for Phase 2 and Phase 3, provided in no event shall the
expiration date of any lease for any Phase (including this Lease) be later than
the date which is sixteen (16) years from the Commencement Date (as defined in
this Lease).

6. FAILURE TO CONSTRUCT.

          A. The parties acknowledge that the Tenant's ability to expand into
the Phase 2 Building and the Phase 3 Building is of material consideration to
Tenant under this Lease; provided, however, the parties further acknowledge that
Landlord may determine (in Landlord's reasonable business judgment) that it
would not be commercially reasonable for the Landlord to construct the
applicable Phase at the time Tenant exercises its option for the applicable
Phase. Landlord shall notify Tenant of such determination within sixty (60) days
following Tenant's notice. In the event Landlord fails to commence to construct
either Phase 2 or Phase 3, by ten (10) months after receipt of either the Phase
2 Notice or the Phase 3 Notice and upon the terms and conditions contained in
this Addendum 2, then Tenant shall have the option to purchase the Phase 2 Land
or the Phase 3 Land, as then applicable, at the Fair Market Value (defined
below); and, in the event Tenant actually consummates the purchase of the Phase
2 Land or Phase 3 Land, as applicable, Tenant shall receive a credit against the
purchase price for the applicable Phase in the amount of the consideration
previously paid to Landlord (and described in Sections 1 and 2 of this Addendum
2) for such Phase. Tenant shall have a period of thirty (30) days from receipt
of Landlord's written notice that Landlord is unable to construct the applicable
Phase in order to determine whether Tenant will purchase the applicable Phase
and the parties shall have thirty (30) days thereafter to agree upon the
purchase price for the Phase 2 Land or Phase 3 Land, as then applicable, and to
enter into a definitive agreement. If the parties are unable to agree upon the
purchase price for the Phase 2 Land or Phase 3 Land, as then applicable, it
shall be determined in the same manner and under the same time frames set forth
in the second paragraph of Section 3 of Addendum 1 (and no other Section or
paragraph of Addendum 1 shall be applicable hereto) of this Lease for
determination of Fair Rental Value (as defined in Addendum 1); provided,
however, Landlord and Tenant agree that, with respect to (i) Phase 2, in no
event shall the purchase price for the Phase 2 Land be less than thirteen
dollars ($13.00) or more than eighteen dollars ($18.00) per square foot of the
Phase 2 Land and (ii) Phase 3, in no event shall the purchase price for the
Phase 3 Land be less than fourteen dollars ($14.00) or more than nineteen
dollars ($19.00) per square foot of the Phase 3 Land. The purchase price
determined by the MAI appraisers, subject to the immediately preceding sentence,
shall be deemed to be the "Fair Market Value" of the Phase 2 Land or Phase 3
Land, as applicable. In the event Tenant shall not desire to purchase the Phase
2 Land or Phase 3 Land, as applicable, after the purchase price for the Phase 2
Land or Phase 3 Land, as applicable, is determined pursuant to the arbitration
procedure described above, Tenant shall have the right, by written notice
delivered to Landlord within fifteen (15) days of such determination (or such
right shall be null and void and of no further force or effect), to rescind
Tenant's exercise of the applicable option to purchase; provided, however, in
the event Tenant rescinds the exercise of Tenant's option to purchase the Phase
2 Land, Tenant shall have no further right whatsoever to exercise Tenant's
option to purchase the Phase 3 Land and such option to purchase with respect to
the Phase 3 Land shall be null and void and of no further force or effect.

          B. IN CONSIDERATION OF LANDLORD GRANTING TENANT THE OPTION TO PURCHASE
THE PHASE 2 LAND AND PHASE 3 LAND AS SET FORTH IN THIS SECTION 6, TENANT
ACKNOWLEDGES AND EXPRESSLY AGREES THAT, IF LANDLORD DETERMINES (IN LANDLORD'S
REASONABLE BUSINESS JUDGMENT) THAT IT WOULD NOT BE COMMERCIALLY REASONABLE FOR
LANDLORD TO CONSTRUCT THE PHASE 2 BUILDING AND/OR PHASE 3 BUILDING, AS
APPLICABLE, AND LANDLORD FAILS TO SO CONSTRUCT THE PHASE 2 BUILDING AND/OR PHASE
3 BUILDING, AS APPLICABLE, THEN AND ONLY THEN (I) IN NO EVENT OR CIRCUMSTANCE
SHALL TENANT, ANY OF TENANT'S REPRESENTATIVES OR ANY SUCCESSOR, ASSIGN AND/OR
AFFILIATE THEREOF HAVE THE RIGHT OR ABILITY TO BRING ANY LEGAL OR EQUITABLE
ACTION, PROCEEDING OR SUIT (INCLUDING ANY ARBITRATION) OF ANY KIND OR NATURE
AGAINST LANDLORD, THE INDEMNITEES (AS DEFINED IN SECTION 14 OF THE LEASE) OR ANY
SUCCESSOR, ASSIGN OR AFFILIATE THEREOF FOR LANDLORD'S FAILURE TO CONSTRUCT THE
BUILDINGS AND (II) TENANT'S SOLE AND EXCLUSIVE REMEDY FOR SUCH FAILURE OF
LANDLORD SHALL BE THE EXERCISE BY TENANT OF THE OPTION(S) TO PURCHASE DESCRIBED
IN THIS SECTION 6. SUCH REMEDY SHALL CONSTITUTE AND BE DEEMED TO BE THE AGREED
AND LIQUIDATED DAMAGES OF TENANT, INTENDED NOT AS A PENALTY OR FORFEITURE WITHIN
THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT AS FULL
LIQUIDATED DAMAGES PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND
1677 AND THE SOLE AND EXCLUSIVE REMEDY OF TENANT AT LAW OR IN EQUITY FOR
LANDLORD'S FAILURE TO CONSTRUCT THE PHASE 2 BUILDING AND/OR PHASE 3 BUILDING AND
(III) 



                                       3

<PAGE>   38

TENANT WAIVES AND RELEASES ANY RIGHTS THAT TENANT MAY HAVE UNDER
CALIFORNIA CIVIL CODE SECTIONS 1680 AND 3389 EXCEPT TO THE EXTENT NECESSARY TO
ENFORCE THE LIQUIDATED DAMAGES. IN PLACING THEIR INITIALS BELOW, EACH PARTY
SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT
THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF
THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS AGREEMENT WAS MADE.

        LANDLORD'S INITIALS ____                 TENANT'S INITIALS ____


7. APPLICABLE PROVISIONS OF ADDENDUM 1. Section 5(2), Section 6 and Section 7 of
Addendum 1 of this Lease shall be applicable to the Phase 2 Option and Phase 3
Option, and such provisions shall be deemed to be fully incorporated into this
Addendum 2, except the references to "initial term" and "First Extended Term,"
respectively, shall be replaced with "Phase 2 Option Period" and "Phase 3 Option
Period," respectively.



                                       4

<PAGE>   39



                                   ADDENDUM 3
                            ADJUSTMENTS TO BASE RENT


This Addendum 3 ("Addendum") is incorporated as part of that certain Lease
Agreement, dated for reference purposes as of March 24, 1998 (the "Lease"), by
and between W9/LNP Real Estate Limited Partnership, a Delaware limited
partnership ("Landlord"), and ViaSat, Inc., a Delaware corporation ("Tenant"),
for the leasing by Tenant of the Premises. Any capitalized terms used herein and
not otherwise defined herein shall have the meaning ascribed to such terms as
set forth in the Lease.

The following provision shall be added to and incorporated in the
above-referenced Lease. Any capitalized terms used herein, and not otherwise
defined herein, shall have the meaning ascribed to such terms as set forth in
the Lease. In the event of any inconsistencies between the terms and provisions
of this Addendum 3 and the Lease, the terms and provisions of this Addendum 3
shall control.

The monthly rent payable by Tenant to Landlord, as set forth in this Lease,
shall be adjusted effective on the first (1st) day of the (i) thirtieth (30th),
sixtieth (60th) and ninetieth (90th) month anniversary dates of the Commencement
Date of this Lease (and one hundred twentieth (120th) month in the event Tenant
makes either of the elections described in Addendum 2, Paragraph 5 of this
Lease) and (ii) thirtieth (30th) month anniversary date following the
commencement of the applicable Extended Term, if any, of this Lease (each an
"Adjustment Date"), in accordance with the percentage increase, if any, in the
"Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for
Los Angeles-Riverside-Orange County, California" (Base: 1982-1984=100), as
published by the United States Department of Labor, Bureau of Labor Statistics
("Index").

The monthly rent payable on each Adjustment Date shall be the product of the
monthly rent in effect on the last day preceding each Adjustment Date and the
fraction described below. The denominator of such fraction shall be the Index in
effect one (1) month prior to the first day of the initial term of the Lease or
the last adjustment date, as the case may be ("Base Index"). The numerator of
such fraction shall be the Index in effect one (1) month prior to the last day
preceding each Adjustment Date ("Adjustment Index"). The monthly rent shall be
increased and paid thereafter in accordance with the percentage increase, if
any, between such Indices; provided, however, in no event shall such increase,
on an annual basis, be less than three percent (3%) or more than five percent
(5%).

Should said Bureau discontinue the publication of the above Index, or the
compilation of the Index be materially altered, or publish the same less
frequently, or vary the method of calculation of same, or alter the same in some
other manner, then Landlord shall adopt a substitute index which is most nearly
the same or substitute procedure which reasonably reflects and monitors consumer
prices, and shall be used to make such calculation. If the Index is changed so
that the base year differs from that in effect when the term commences, the
Index shall be converted in accordance with the conversion factor published by
the United States Department of Labor, Bureau of Labor Statistics, or, if said
Bureau shall not publish the same, then with the use of such conversion factor,
formula or table as may be published by Prentice Hall, Inc. or by any other
nationally recognized publisher of similar statistical information. In the event
the compilation and/or publication of the Index shall be discontinued or
materially altered, then the index most nearly the same as the Index shall be
used to make such calculation. In the event the Landlord and Tenant cannot agree
on such alternative Index, then the matter shall be submitted for decision to
the American Arbitration Association in accordance with the then rules of the
said Association and a decision of the arbitrators as to the applicable Index
shall be binding upon the parties. The cost of said arbitrator shall be paid
equally by the Landlord and Tenant.

References herein to the term "monthly rent" shall, for purposes of all
applicable provisions of this Lease, mean Base Rent and be synonymous therewith.

         Example:


<TABLE>
<CAPTION>

<S>                                                <C>
                    Hypothetical Facts:
                    -------------------
                    Lease Commencement Date or
                          Last Adjustment Date:    9/1/92
                    Adjustment Date:               9/1/93
                    Monthly rent in effect:        8/31/93 - $2,000.00
                    Base Index:                    July, 1992 - 410.0
                    Adjustment Index:              July, 1993 - 430.0

                    Adjusted Rent Calculation:
                    -------------------------
                    Ratio of Indices:              430.0 = 1.0488 or 4.88%
                                                   410.0
                    Adjusted monthly rent:         $2,000.00 x 4.88% = $2,097.60
</TABLE>




                                       1

<PAGE>   40



                                   ADDENDUM 4
                        RIGHT OF FIRST OFFER TO PURCHASE



This Addendum 4 is incorporated as a part of that certain Lease Agreement dated
March 24, 1998 by and between ViaSat, Inc., a Delaware corporation ("Tenant"),
and W9/LNP Real Estate Limited Partnership, a Delaware limited partnership
("Landlord"), for the leasing of the Premises. Any capitalized terms used herein
and not otherwise defined herein shall have the meaning ascribed to such terms
as set forth in the Lease.

Tenant shall have a one time right of first offer ("Right of First Offer") to
purchase any portion of the Premises which constitutes a separate legal lot
including Phase 2 and Phase 3 which Landlord has elected to sell. Tenant's Right
of First Offer, as granted herein, shall be void if (i) Tenant has been in
default in the performance of any of Tenant's obligations under the Lease more
than three (3) times in any twelve (12) month period, or (ii) on the date of
Landlord's Availability Notice (defined below) Tenant is then in default in the
performance of any of its obligations under the Lease or (iii) the Premises or
any portion thereof has been assigned or subleased at the time this Right of
First Offer is offered other than to a Related Entity and/or a Business Entity.

Provided the above conditions are satisfied, and Landlord desires to sell any
portion of the Premises which constitutes a separate legal lot, Landlord shall
give Tenant written notice of such desire and the amount Landlord is willing to
offer the Premises for sale ("Landlord's Availability Notice") and Tenant shall
have the right to exercise Tenant's Right of First Offer. Tenant shall have a
period of seven (7) days following receipt of Landlord's Availability Notice to
advise Landlord of Tenant's interest in the portion of the Premises which were
the subject of Landlord's Availability Notice ("Tenant's Offer"), which Tenant's
Offer shall contain all of the terms and conditions on which Tenant is willing
and able to purchase the Building(s). If Tenant fails to deliver to Landlord
such advisement within the time specified herein, it shall be deemed that (i)
Tenant has elected not to offer to purchase the Building(s); (ii) Landlord may
thereafter enter into negotiations with any person or entity and/or negotiate
and consummate an agreement to sell the Building(s) with any person or entity on
any terms and conditions Landlord, in its sole and absolute discretion, shall
deem desirable; and (iii) all rights under this Right of First Offer shall
terminate and be of no further force or effect. Time is of the essence herein.

In the event Tenant's Offer is acceptable to Landlord, Tenant and Landlord shall
have twenty-one (21) days after Tenant's receipt of Landlord's written
acceptance of such terms and conditions in which to exclusively negotiate and
enter into a purchase and sale agreement for the Building(s). In the event
Tenant's Offer is not acceptable to Landlord, Landlord shall have the right,
within the above-referenced fourteen (14) day period, to either (i) reject
Tenant's Offer (in which case Landlord may thereafter enter into negotiations
with any person or entity and/or negotiate and consummate an agreement to sell
the Building(s) with any person or entity on any terms and conditions Landlord,
in its sole and absolute discretion, shall deem desirable, and all rights under
this Right of First Offer shall terminate and be of no further force or effect)
or (ii) counter Tenant's Offer ("Counteroffer") and Tenant shall have a period
of ten (10) days after receipt of the Counteroffer in which to accept or reject
such Counteroffer. In the event Tenant accepts such Counteroffer within the
above-referenced ten (10) day period with no changes, modifications or
amendments, Landlord and Tenant shall have a period of twenty-one (21) days
after Landlord's receipt of Tenant's written acceptance of such Counteroffer in
which to exclusively negotiate and enter into a purchase and sale agreement for
the Building(s). In the event (a) Landlord accepts Tenant's Offer, as described
in the first and second sentences of this paragraph, but Landlord and Tenant are
unable to reach agreement within the above-referenced twenty-one (21) day
period, (b) Tenant rejects the Counteroffer or does not respond to the
Counteroffer, (c) Tenant makes any changes, modifications or amendments to the
Counteroffer or, (d) following Tenant's acceptance of Landlord's Counteroffer,
Landlord and Tenant are unable to enter into a purchase and sale agreement
within the above-referenced twenty-one (21) day period, it shall be deemed that
(i) Tenant has elected not to purchase the Building(s); (ii) Landlord may
thereafter enter into negotiations with any person or entity and/or negotiate
and consummate an agreement to sell the Building(s) with any person or entity on
any terms and conditions Landlord, in its sole and absolute discretion, shall
deem desirable; and (iii) all rights under this Right of First Offer shall
terminate and be of no further force or effect.

This Right of First Offer is personal to Tenant and may not be assigned,
voluntarily or involuntarily, separate from or as a part of the Lease.
Notwithstanding the foregoing, Tenant may acquire the Buildings with a partner
or other joint venture entity in which Tenant is a member, and/or cause a third
party to acquire the Buildings as long as Tenant remains in compliance with the
above conditions to this Right of First Offer.

Upon consummation of the purchase and sale of the Building(s) to Tenant, this
Lease shall terminate and be of no further force or effect. In the event the
Building(s) are sold to any person or entity other than Tenant during the
initial term or extended term of this Lease, Tenant shall remain in possession
of the Premises subject to the terms, covenants, conditions and provisions of
this Lease.

Landlord and Tenant represent and warrant to the other that no person or entity
shall be entitled to a brokerage or real estate commission of any kind in
connection with the subject matter of this Addendum 4.


                                       1



<PAGE>   1




                                                                    EXHIBIT 23.1


                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-21113) of ViaSat, Inc. of our report dated May
13, 1998 appearing on page F-1 of this Form 10-K.


PRICE WATERHOUSE LLP

San Diego, California
June 24, 1998





<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE VIASAT
INC. FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          MAR-31-1998
<PERIOD-START>                             APR-01-1997
<PERIOD-END>                               MAR-31-1998
<CASH>                                           3,290
<SECURITIES>                                     5,918
<RECEIVABLES>                                   19,056
<ALLOWANCES>                                         0
<INVENTORY>                                      4,687
<CURRENT-ASSETS>                                34,978
<PP&E>                                          12,671
<DEPRECIATION>                                   5,685
<TOTAL-ASSETS>                                  42,793
<CURRENT-LIABILITIES>                           10,702
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            81
<OTHER-SE>                                      29,529
<TOTAL-LIABILITY-AND-EQUITY>                    42,793
<SALES>                                         64,197
<TOTAL-REVENUES>                                64,197
<CGS>                                           40,899
<TOTAL-COSTS>                                   40,899
<OTHER-EXPENSES>                                15,493
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               (586)
<INCOME-PRETAX>                                  8,391
<INCOME-TAX>                                     3,104
<INCOME-CONTINUING>                              5,287
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     5,287
<EPS-PRIMARY>                                     0.68
<EPS-DILUTED>                                     0.65
        

</TABLE>






<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE VIASAT
INC. FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
FORM 10-K.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          MAR-31-1998
<PERIOD-START>                             JUL-01-1997
<PERIOD-END>                               SEP-30-1997
<CASH>                                          13,299
<SECURITIES>                                         0
<RECEIVABLES>                                   13,394
<ALLOWANCES>                                         0
<INVENTORY>                                      5,736
<CURRENT-ASSETS>                                34,120
<PP&E>                                          10,208
<DEPRECIATION>                                   4,472
<TOTAL-ASSETS>                                  40,355
<CURRENT-LIABILITIES>                           11,811
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            81
<OTHER-SE>                                      26,276
<TOTAL-LIABILITY-AND-EQUITY>                    40,355
<SALES>                                         30,407
<TOTAL-REVENUES>                                30,407
<CGS>                                           19,872
<TOTAL-COSTS>                                   19,872
<OTHER-EXPENSES>                                 7,069
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 102
<INCOME-PRETAX>                                  3,779
<INCOME-TAX>                                     1,401
<INCOME-CONTINUING>                              2,378
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     2,378
<EPS-PRIMARY>                                     0.31
<EPS-DILUTED>                                     0.29
        

</TABLE>






<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE VIASAT
INC. FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
FORM 10-K.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          MAR-31-1997
<PERIOD-START>                             APR-01-1996
<PERIOD-END>                               DEC-31-1996
<CASH>                                          13,823
<SECURITIES>                                         0
<RECEIVABLES>                                    7,699
<ALLOWANCES>                                         0
<INVENTORY>                                      4,961
<CURRENT-ASSETS>                                27,574
<PP&E>                                           6,914
<DEPRECIATION>                                   3,083
<TOTAL-ASSETS>                                  31,870
<CURRENT-LIABILITIES>                            7,240
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            80
<OTHER-SE>                                      22,209
<TOTAL-LIABILITY-AND-EQUITY>                    31,870
<SALES>                                         33,661
<TOTAL-REVENUES>                                33,661
<CGS>                                           23,580
<TOTAL-COSTS>                                   30,654
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 187
<INCOME-PRETAX>                                  2,969
<INCOME-TAX>                                     1,034
<INCOME-CONTINUING>                              1,935
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     1,935
<EPS-PRIMARY>                                     0.50
<EPS-DILUTED>                                     0.31
        

</TABLE>






<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE VIASAT
INC. FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1997 AND IS QUALIFIED IN 
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN FORM 10-K.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          MAR-31-1997
<PERIOD-START>                             APR-01-1996
<PERIOD-END>                               MAR-31-1997
<CASH>                                          12,673
<SECURITIES>                                         0
<RECEIVABLES>                                   10,315
<ALLOWANCES>                                         0
<INVENTORY>                                      4,478
<CURRENT-ASSETS>                                30,154
<PP&E>                                           8,588
<DEPRECIATION>                                   3,503
<TOTAL-ASSETS>                                  35,674
<CURRENT-LIABILITIES>                            9,748
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            81
<OTHER-SE>                                      23,538
<TOTAL-LIABILITY-AND-EQUITY>                    35,674
<SALES>                                         47,715
<TOTAL-REVENUES>                                47,715
<CGS>                                           33,102
<TOTAL-COSTS>                                   33,102
<OTHER-EXPENSES>                                 9,839
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               (100)
<INCOME-PRETAX>                                  4,874
<INCOME-TAX>                                     1,702
<INCOME-CONTINUING>                              3,172
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     3,172
<EPS-PRIMARY>                                     0.66
<EPS-DILUTED>                                     0.48
        

</TABLE>