<PAGE>

                                                                   EXHIBIT 10.15



                              OFFICE BUILDING LEASE


                                 by and between


                           HMS GATEWAY OFFICE, L.P.,

                        a Delaware Limited Partnership


                                      and


                             ACTUATE CORPORATION,

                            a Delaware corporation
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                            Page
                                                                                                            ----
<S>                                                                                                         <C>
ARTICLE 1. Definitions......................................................................................   1
   1.01   "Additional Rent".................................................................................   1
   1.02   "Base Building Improvements"......................................................................   1
   1.03   "Base Rent".......................................................................................   1
   1.04   "Basic Operating Cost"............................................................................   1
   1.05   "Basic Operating Cost Adjustment".................................................................   1
   1.06   "Basic Services"..................................................................................   1
   1.07   "Building"........................................................................................   1
   1.08   "Building Standard Improvements"..................................................................   1
   1.09   "business day"....................................................................................   2
   1.10   "business hours"..................................................................................   2
   1.11   "Common Areas"....................................................................................   2
   1.12   "Estimated Basic Operating Cost"..................................................................   2
   1.13   "Fair Market Rent"................................................................................   2
   1.14   "Gross Rent"......................................................................................   2
   1.15   "Hazardous Material"..............................................................................   2
   1.16   "Hazardous Materials Claims"......................................................................   3
   1.17   "Hazardous Materials Laws"........................................................................   3
   1.18   "Landlord Parties"................................................................................   3
   1.19   "Leased Premises".................................................................................   3
   1.20   "Major Vertical Penetrations".....................................................................   3
   1.21   "Net Rentable Area"...............................................................................   4
   1.22   "Permitted Hazardous Materials"...................................................................   4
   1.23   "Permitted Use"...................................................................................   4
   1.24   "Project".........................................................................................   5
   1.25   "Rent"............................................................................................   5
   1.26   "Security Deposit"................................................................................   5
   1.27   "Substantial Completion"..........................................................................   5
   1.28   "Tenant Extra Improvements".......................................................................   5
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                                          <C>
   1.29   "Tenant Improvements"............................................................................    5
   1.30   "Tenant Parties".................................................................................    5
   1.31   "Tenant's Plan Delivery Date"....................................................................    5
   1.32   "Tenant's Proportionate Share"...................................................................    6
   1.33   "Term"...........................................................................................    6
   1.34   "Term Commencement Date".........................................................................    6
   1.35   "Term Expiration Date"...........................................................................    6

ARTICLE 2. Leased Premises.................................................................................    6

   2.01   Lease............................................................................................    6
   2.02   Landlord's Reserved Rights.......................................................................    6

ARTICLE 3. Rent, Term, Use And Basic Operating Costs.......................................................    7

   3.01   Term.............................................................................................    7
   3.02   Use..............................................................................................    7
   3.03   Payment of Base Rent And Tenant's Proportionate Share Of Estimated Basic Operating Cost..........    8
   3.04   Net Lease........................................................................................    8
   3.05   Basic Operating Cost.............................................................................    8
   3.06   Adjustment For Variation Between Estimated And Actual............................................   12
   3.07   Computation Of Basic Operating Cost Adjustment...................................................   12

ARTICLE 4. Landlord Covenants..............................................................................   12

   4.01   Basic Services...................................................................................   12
   4.02   Extra Services...................................................................................   14
   4.03   Graphics And Signage.............................................................................   15
   4.04   Tenant Extra Improvements........................................................................   15
   4.05   Repair Obligation................................................................................   15
   4.06   Peaceful Enjoyment...............................................................................   16

ARTICLE 5. Tenant's Covenants..............................................................................   16

   5.01   Payments By Tenant...............................................................................   16
   5.02   Obligations Of Tenant To Furnish Floor Plans And Approve Plans And Specifications................   16
   5.03   Construction Of Tenant Improvements..............................................................   16
</TABLE>

                                     -ii-
<PAGE>

<TABLE>
<S>                                                                                                         <C>
   5.04   Taxes On Personal Property And Tenant Extra Improvements.........................................   17
   5.05   Repairs By Tenant................................................................................   17
   5.06   Waste............................................................................................   18
   5.07   Assignment Or Sublease...........................................................................   18
   5.08   Alterations, Additions or Improvements...........................................................   20
   5.09   Liens............................................................................................   21
   5.10   Compliance With Laws, Insurance Standards and Non-Discrimination.................................   21
   5.11   Entry For Repairs, Inspection, Posting Notices, Etc..............................................   22
   5.12   No Nuisance......................................................................................   23
   5.13   Subordination; Mortgagee Protection; Reciprocal Easement Agreements..............................   23
   5.14   Estoppel Certificate.............................................................................   24
   5.15   Security Deposit.................................................................................   24
   5.16   Tenant's Remedies................................................................................   26
   5.17   Rules And Regulations............................................................................   27
   5.18   Prohibition And Indemnity With Respect To Hazardous Material.....................................   27
   5.19   Surrender Of Premises On Termination.............................................................   27
   5.20   Window Coverings.................................................................................   28

ARTICLE 6. Condition And Operation Of The Building.........................................................   28

   6.01   Exhibit B Controls...............................................................................   28
   6.02   Alteration.......................................................................................   29

ARTICLE 7. Casualty, Eminent Domain And Miscellaneous Matters..............................................   29

   7.01   Landlord's Casualty Insurance....................................................................   29
   7.02   Liability Insurance..............................................................................   29
   7.03   Tenant's Casualty Insurance And Additional Tenant Insurance Requirements.........................   30
   7.04   Indemnity And Exoneration........................................................................   31
   7.05   Waiver Of Subrogation Rights.....................................................................   31
   7.06   Condemnation And Loss Or Damage..................................................................   32
   7.07   Damage And Destruction...........................................................................   32
   7.08   Default By Tenant................................................................................   34
   7.09   Arbitration Of Fair Market Rent..................................................................   37
</TABLE>

                                     -iii-
<PAGE>

<TABLE>
<S>                                                                                                         <C>
   7.10   No Waiver........................................................................................   39
   7.11   Statutory Waivers................................................................................   40
   7.12   Holding Over.....................................................................................   40
   7.13   Attorneys' Fees..................................................................................   40
   7.14   Amendments.......................................................................................   41
   7.15   Transfers By Landlord............................................................................   41
   7.16   Severability.....................................................................................   41
   7.17   Notices..........................................................................................   41
   7.18   Building Planning................................................................................   41
   7.19   No Option........................................................................................   42
   7.20   Integration and Interpretation...................................................................   42
   7.21   Quitclaim........................................................................................   42
   7.22   No Easement For Light, Air And View..............................................................   42
   7.23   No Merger........................................................................................   42
   7.24   Memorandum Of Lease..............................................................................   42
   7.25   Survival.........................................................................................   43
   7.26   Financial Statements.............................................................................   43
   7.27   No Joint Venture.................................................................................   43
   7.28   Successors And Assigns...........................................................................   43
   7.29   Applicable Law...................................................................................   43
   7.30   Time Of The Essence..............................................................................   43
   7.31   Interpretation...................................................................................   43
   7.32   Parking..........................................................................................   44
   7.33   Brokers..........................................................................................   44
   7.34   Non-Disturbance, Attornment and Subordination Agreement..........................................   44
   7.35   Signage..........................................................................................   44
</TABLE>

                                     -iv-
<PAGE>

                                  Basic Lease Information

                            Date: December ___, 2000

                          Tenant: Actuate Corporation

                         Address: 701 Gateway Boulevard, Suite 500
                                  South San Francisco, California 94080

                        Landlord: HMS Gateway Office, L.P.

                         Address: c/o Hines Interests Limited Partnership
                                  651 Gateway Boulevard, Suite 1140
                                  South San Francisco, California 94080

                 Leased Premises: Ground and 2nd Floors of 801 Gateway Boulevard

               Net Rentable Area: 50,438 rentable square feet

Scheduled Term Commencement Date: May 1, 2001

                            Term: Ten (10) years

<TABLE>
<CAPTION>
                       Base Rent:       Year                          Amount/Month
<S>                    <C>              <C>                           <C>
                                         1   $226,971.00 (based on $4.50 per rentable square foot)

                                         2   $234,032.32 (based on $4.64 per rentable square foot)

                                         3   $240,589.26 (based on $4.77 per rentable square foot)

                                         4   $248,154.96 (based on $4.92 per rentable square foot)

                                         5   $255,216.28 (based on $5.06 per rentable square foot)

                                         6   $263,286.36 (based on $5.22 per rentable square foot)

                                         7   $270,852.06 (based on $5.37 per rentable square foot)

                                         8   $278,922.14 (based on $5.53 per rentable square foot)

                                         9   $287,496.60 (based on $5.70 per rentable square foot)

                                        10   $296,071.06 (based on $5.87 per rentable square foot)
</TABLE>

     Tenant's Plan Delivery Date: February 1, 2001

                Security Deposit: Letter of Credit in the amount of $1,600,000,
                                  as adjusted pursuant to Section 5.15 below.

                         Parking: 152 parking spaces

                          Broker: West Bay Commercial Real Estate
<PAGE>

                               801 GATEWAY LEASE

          This Lease is made and entered into as of the date specified in the
Basic Lease Information Sheet attached hereto and incorporated herein by this
reference, by and between HMS Gateway Office, L.P., a Delaware limited
partnership ("Landlord"), and the Tenant identified in the Basic Lease
Information Sheet.

          IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS CONTAINED IN
THIS LEASE, THE PARTIES AGREE AS FOLLOWS:


                                  ARTICLE 1.
                                  ----------
                                  Definitions
                                  -----------

          Certain terms used in this Lease and the Exhibits hereto shall have
the meaning set forth below for each such term. Certain other terms shall have
the meaning set forth elsewhere in this Lease and the Exhibits hereto.

          1.01 "Additional Rent" shall mean all monetary obligations of Tenant
                ---------------
hereunder ot her than the obligation for payment of Gross Rent.

          1.02 "Base Building Improvements" shall mean those improvements of the
                --------------------------
Leased Premises that are so defined in Exhibit B.

          1.03 "Base Rent" shall mean the basic rent payable by Tenant to
                ---------
Landlord in the amounts shown on the Basic Lease Information sheet and in the
manner provided in Section 3.03.

          1.04 "Basic Operating Cost" shall have the meaning given in Section
                --------------------
3.05.

          1.05 "Basic Operating Cost Adjustment" for any calendar year shall
                -------------------------------
mean the difference, if any, between Estimated Basic Operating Cost and Basic
Operating Cost for that calendar year.

          1.06 "Basic Services" shall mean the services provided pursuant to
                --------------
Section 4.01.

          1.07 "Building" shall mean the improvements known as 801 Gateway
                --------
Boulevard located in South San Francisco, California.

          1.08 "Building Standard Improvements" shall mean those improvements of
                ------------------------------
the Leased Premises that are so defined in Exhibit B-1.

                                      -1-
<PAGE>

          1.09 "business day" shall mean Monday through Friday, except holidays;
                ------------
"holiday" means those holidays specified by the laws of the United States or the
State of California and all holidays to which maintenance employees of the
Building are entitled from time to time under their union contract or other
agreement.

          1.10 "business hours" shall mean the Building hours of operation set
                --------------
forth in the Building rules and regulations attached hereto as Exhibit C.

          1.11 "Common Areas" shall mean (i) with respect to the Building, the
                ------------
total square footage of areas of the Building devoted to non-exclusive uses such
as lobbies, fire vestibules, rest rooms, mechanical areas, loading areas, trash
areas, tenant and ground floor corridors, elevator foyers, electrical and
janitorial closets, ground floor lobbies, telephone and equipment rooms, and
other similar facilities maintained for the benefit of Building tenants and
invitees, but shall not mean Major Vertical Penetrations and (ii) with respect
to the Project (excluding the Building), all walkways, roadways, sidewalks,
parkways, driveways, landscaped areas or other similar facilities maintained for
the benefit of Project Tenants and invitees.

          1.12 "Estimated Basic Operating Cost" for any calendar month shall
                ------------------------------
mean Landlord's estimate of Basic Operating Cost for the calendar year within
which such month falls divided by twelve (12) equal monthly installments.

          1.13 "Fair Market Rent" shall mean the rate being charged by Landlord
                ----------------
in the Building for comparable space, taking into consideration: location in the
Building, tenant improvements or allowances existing or to be provided, rental
abatements, lease takeovers/assumptions, moving expenses and other forms of
rental concessions, proposed term of lease, extent of service provided or to be
provided, the ownership of the comparable space, whether or not the transaction
is a sublease, the time the particular rate under consideration became or is to
become effective and any other relevant terms or conditions.

          1.14 "Gross Rent" shall mean the total of Base Rent and Tenant's
                ----------
Proportionate Share of Estimated Basic Operating Cost.

          1.15 "Hazardous Material" shall mean any (a) oil, flammable
                ------------------
substances, explosives, radioactive materials, hazardous wastes or substances,
toxic wastes or substances or any other wastes, materials or pollutants which
(i) pose a hazard to the Project or to persons on or about the Project or (ii)
cause the Project to be in violation of any Hazardous Materials Laws; (b)
asbestos in any form, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, or radon gas; (c) chemical, material or substance defined as or
included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous waste", "restricted hazardous
waste", or "toxic substances" or words of similar import under any applicable
local, state or federal law or under the regulations adopted or publications

                                      -2-
<PAGE>

promulgated pursuant thereto, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. (S)9601, et seq.; the Hazardous Materials Transportation Act, as amended,
49 U.S.C. (S)1801, et seq.; the Federal Water Pollution Control Act, as amended,
33 U.S.C. (S)1251, et seq.; Sections 25115, 25117, 25122.7, 25140, 25249.8,
25281, 25316, and 25501 of the California Health and Safety Code; (d) other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority or may or could pose a hazard to the
health and safety of the occupants of the Project or the owners and/or occupants
of property adjacent to or surrounding the Project, or any other Person coming
upon the Project or adjacent property; and (e) other chemicals, materials or
substances which may or could pose a hazard to the environment.

          1.16 "Hazardous Materials Claims" shall mean any enforcement, cleanup,
                --------------------------
removal, remedial or other governmental or regulatory actions, agreements or
orders instituted pursuant to any Hazardous Materials Laws; and any claims made
by any third party against Landlord, Tenant or the Project relating to damage,
contribution, cost recovery, compensation, loss or injury resulting from the
presence, release or discharge of any Hazardous Materials.

          1.17 "Hazardous Materials Laws" shall mean any federal, state or local
                ------------------------
laws, ordinances, orders, rules, regulations or policies, now or hereafter in
force, as amended from time to time, in any way relating to the environment,
health and safety, and Hazardous Materials (including, without limitation, the
use, handling, transportation, production, disposal, discharge or storage
thereof) or to industrial hygiene or the environmental conditions on, under or
about the Project, including, without limitation, soil, groundwater and indoor
and ambient air conditions. Landlord hereby notifies Tenant in accordance with
California Health & Safety Code Section 25359.7 that in 1981-82, the Project was
the subject of a state-supervised cleanup of hazardous waste disposed of on the
site by prior occupants. As part of the cleanup approved by the applicable
agencies, some soils containing heavy metals were left in place, covered by
clean fill. These soils are managed in accordance with the requirements of the
applicable agencies and a Declaration of Covenants, Conditions and Restrictions
imposed by Homart Development Co.

          1.18 "Landlord Parties" means the employees, agents, contractors,
                ----------------
officers, directors, partners, licensees, invitees and guests of Landlord,
Landlord's affiliates, Landlord's general partners and limited partners.

          1.19 "Leased Premises" shall mean the floor area more particularly
                ---------------
shown on the Exhibit A-1 floor plan attached hereto, containing the Net Rentable
Area specified on the Basic Lease Information sheet.

          1.20 "Major Vertical Penetrations" shall mean the area or areas within
                ---------------------------
Building stairs (excluding the landing at each floor), elevator shafts, flues,
vents, stacks, pipe shafts and vertical ducts and the like, that service more
than one floor of the Building. The area with Major Vertical Penetrations shall
be bounded and defined by the interior surface of the perimeter walls

                                      -3-
<PAGE>

thereof (or the extended plane of such walls over areas that are not enclosed).
Major Vertical Penetrations shall exclude, however, areas for the specific use
of Tenant or installed at the request of Tenant, such as special stairs or
elevators.

          1.21 "Net Rentable Area" shall mean the area or areas of space within
                -----------------
the Project determined pursuant to the Standard Method for Measuring Floor Area
in Office Buildings, ANSI Z65.1-1996. The Net Rentable Area in the Leased
Premises has been calculated on the basis of the foregoing definition and is
hereby stipulated for all purposes hereof to be the amount stated on the Basic
Lease Information sheet, subject to confirmation by actual measurement by
Landlord's architect, at the request of either party, prior to Tenant's Plan
Delivery Date. Any such changes to the Net Rentable Area in the Leased Premises
shall be reflected in the Lease Commencement Certificate, a sample form of which
is attached hereto as Exhibit D to be executed by Tenant promptly after the Term
Commencement Date.

          1.22 "Permitted Hazardous Materials" shall mean Hazardous Materials
                -----------------------------
which are contained in ordinary office supplies of a type and in quantities
typically used in the ordinary course of business within executive offices of
similar size and location, but only if and to the extent that such supplies are
transported, stored and used in full compliance with all Hazardous Materials
Laws and otherwise in a safe and prudent manner. Hazardous Materials which are
contained in ordinary office supplies but which are transported, stored and used
in a manner which is not in full compliance with all Hazardous Materials Laws or
which is not in any respect safe and prudent shall not be deemed to be
"Permitted Hazardous Materials" for the purposes of this Lease.

          1.23 "Permitted Use" shall mean executive, professional office and
                -------------
corporate administrative office uses in the Leased Premises of a kind
appropriate in a building of the type and quality of the Building; provided,
however, that for the purpose of limiting the type of use permitted by Tenant,
or an assignee of Tenant, but without limiting Landlord's right to lease any
portion of the Building to a tenant of Landlord's choice, "Permitted Use," shall
not include (i) offices of any agency or bureau of the United States or any
state or political subdivision thereof; (ii) offices or agencies of any foreign
government or political subdivision thereof; (iii) offices of any health care
professionals or service organization, except for administrative offices where
no diagnostic, treatment or laboratory services are performed; (iv) schools or
other training facilities that are not ancillary to executive, professional or
corporate administrative office use; (v) retail or restaurant uses; (vi)
broadcast studios or other broadcast production facilities, such as radio and/or
television stations; (vii) product display or demonstration facilities; (viii)
offices at which deposits or bills are regularly paid in person by customers;
and (ix) personnel agencies, except offices of executive search firms. Landlord
acknowledges that Tenant will be using the Leased Premises as a training
facility for its employees, agents, customers, prospective customers and
partners and will display and demonstrate (but in no event visible from outside
the Premises)Tenant's products within the Leased Premises.

                                      -4-
<PAGE>

          1.24 "Project" shall mean the real property (including without
                -------
limitation, the Building, the Common Areas and any other present or hereafter
existing improvements), as such real property may be expanded from time to time
by Landlord, situated in the City of South San Francisco, County of San Mateo
and more particularly described on Exhibit A-2.

          1.25 "Rent" shall mean Gross Rent, Additional Rent and any and all
                ----
other charges of any nature payable by Tenant to Landlord under this Lease.

          1.26 "Security Deposit" shall mean the amount specified on the Basic
                ----------------
Lease Information sheet paid by Tenant to Landlord to be held pursuant to
Section 5.15.

          1.27 "Substantial Completion" shall mean (and the Leased Premises
                ----------------------
shall be deemed "Substantially Complete") when (i) installation of Building
Standard Improvements (and Tenant Extra Improvements installed by Landlord's
contractor or Tenant Extra Improvements installed by Tenant's contractor within
the time schedule for performance of such work by Landlord's contractor) has
occurred, (ii) Tenant has direct access to the elevator lobby on the floor (or
floors) where the Leased Premises are located, (iii) Basic Services are
available to the Leased Premises, and (iv) appropriate governmental authorities
have issued a certificate of occupancy for the Leased Premises. Substantial
Completion shall be deemed to have occurred notwithstanding a requirement to
complete "punchlist" or similar corrective work.

          1.28 "Tenant Extra Improvements" shall mean the extent to which the
                -------------------------
Tenant Improvements in the Leased Premises would exceed in quality or quantity
the Building Standard Improvements. In instances where this Lease refers to
Tenant Extra Improvements as a standard for the provision of services,
maintenance, repair or replacement by Tenant or Landlord, such reference shall
be to the difference in required services, maintenance, repairs or replacements
between the Tenant Improvements as constructed in the Leased Premises and the
Building Standard Improvements, had the Building Standard Improvements been
constructed in the Leased Premises.

          1.29 "Tenant Improvements" shall mean the Building Standard
                -------------------
Improvements and Tenant Extra Improvements (if any) installed or to be installed
for Tenant as approved by Landlord pursuant to Exhibit B.

          1.30 "Tenant Parties" shall mean the employees, agents, contractors,
                --------------
officers, directors, partners, licensees, invitees and guests of Tenant.

          1.31 "Tenant's Plan Delivery Date" shall mean the date stated on the
                ---------------------------
Basic Lease Information sheet for delivery of complete plans and specifications
pursuant to Section 5.02 and Exhibit B.

                                      -5-
<PAGE>

          1.32 "Tenant's Proportionate Share" shall mean the percentage that the
                ----------------------------
Net Rentable Area of the Leased Premises bears to ninety-five percent (95%) of
the total Net Rentable Area of the Building or to the total Net Rentable Area
leased in the Building (if such total is greater than ninety-five percent (95%)
of the total Net Rentable Area) as calculated for each calendar year of the
Term. Notwithstanding the foregoing, Tenant's Proportionate Share shall in no
event exceed [39%] of the total Net Rentable Area of the Building.

          1.33 "Term" shall mean the period from the Term Commencement Date and
                ----
ending on the Term Expiration Date. The Scheduled Term Commencement Date stated
on the Basic Lease Information sheet represents merely the parties' estimate of
the Term Commencement Date.

          1.34 "Term Commencement Date" shall mean the date when the Term
                ----------------------
commences as determined pursuant to Section 3.01 hereof.

          1.35 "Term Expiration Date" shall mean the date that is the number of
                --------------------
years and/or months set forth on the Basic Lease Information after the Term
Commencement Date or such earlier date upon which this Lease is terminated
pursuant to the terms hereof.


                                  ARTICLE 2.
                                  ----------
                                Leased Premises
                                ---------------

          2.01 Lease. Landlord leases to Tenant and Tenant leases from Landlord
               -----
the Leased Premises upon all of the terms, covenants and conditions set forth
herein.

          2.02 Landlord's Reserved Rights. Landlord reserves from the leasehold
               --------------------------
estate hereunder, in addition to all other rights reserved by Landlord under
this Lease: (i) all exterior walls and windows bounding the Leased Premises, and
all space located within the Leased Premises for Major Vertical Penetrations,
conduits, electric and all other utilities, air-conditioning, sinks or other
Building facilities that do not constitute Tenant Extra Improvements, the use
thereof and access thereto through the Leased Premises for operation,
maintenance, repair or replacement thereof, and (ii) the right from time to
time, without unreasonable interference with Tenant's use, to install, remove or
relocate any of the foregoing for service to any part of the Building to
locations that will not materially interfere with Tenant's use of the Leased
Premises, to make alterations to the Building, to alter or relocate any portion
of the Common Areas or any other common facility, and to make changes or
alterations or additions to the Project or any portion thereof. Subject to the
rights of Tenant specified in this Lease as to the non-exclusive use of certain
portions of the Common Areas, Landlord shall have the sole and exclusive right
to possession and control of the Common Areas and all other areas of the Project
outside the Leased Premises. Notwithstanding anything in this Section 2.02 to
the contrary, Landlord shall not permit satellite dishes or other
telecommunications equipment located on the

                                      -6-
<PAGE>

roof of the Building to unreasonably interfere with Tenant's use of the Premises
for typical general office uses.


                                  ARTICLE 3.
                                  ----------
                   Rent, Term, Use And Basic Operating Costs
                   -----------------------------------------

          3.01 Term. Except as otherwise provided herein, the Term shall
               ----
commence upon the later of Substantial Completion of the Leased Premises (as
such date may be adjusted pursuant to the provisions of paragraph 8 of Exhibit B
to this Lease) or the Scheduled Term Commencement Date and shall continue in
full force for the Term. If the Leased Premises are Substantially Complete prior
to the Scheduled Term Commencement Date, Tenant shall have the option to take
occupancy and the Term Commencement Date shall be the date of such occupancy. If
the Leased Premises are not Substantially Complete by the Scheduled Term
Commencement Date for any reason, Landlord shall not be liable for any claims,
damages or liabilities by reason thereof, but the Term Commencement Date shall
be the day when the Leased Premises are Substantially Complete. Landlord shall
provide Tenant as much notice as circumstances reasonably allow of the date when
Landlord expects to achieve Substantial Completion, based upon the progress of
the work. Should the Term Commencement Date be a date other than the Scheduled
Term Commencement Date, either Landlord or Tenant, at the request of the other,
shall promptly execute a declaration specifying the Term Commencement Date.
Tenant's obligation to pay Rent and its other obligations under this Lease shall
commence upon the Term Commencement Date (except as expressly otherwise provided
herein with respect to obligations arising earlier). Notwithstanding anything in
this Lease to the contrary, if the Term Commencement Date does not occur on or
before October 1, 2001 solely as a result of Landlord's action (as opposed to
Tenant's Delay or a force majeure event), Tenant shall receive an abatement of
Base Rent following the Term Commencement Date for each day of delay in the Term
Commencement Date resulting from such Landlord's action; provided however, if
the Term Commencement Date does not occur on or before December 31, 2001, solely
as a result of Landlord's action, Tenant shall have the right to terminate this
Lease by providing Landlord with written notice of its election to terminate by
January 10, 2002. If Tenant fails to terminate this Lease as provided above,
time being of the essence, this Lease shall remain in full force and effect in
accordance with the terms set forth herein. As used herein, "force majeure
event" shall mean any event or circumstance outside the control of the parties,
including without limitation, strikes, embargoes, governmental regulations,
inability to obtain permits, acts of God, war or other strife.

          3.02 Use. Tenant shall use the Leased Premises solely for the
               ---
Permitted Use and for no other use or purpose.

                                      -7-
<PAGE>

           3.03 Payment of Base Rent And Tenant's Proportionate Share Of
                --------------------------------------------------------
Estimated Basic Operating Cost. Tenant shall pay the Base Rent with adjustments
------------------------------
and in the manner hereinafter set forth.

           Base Rent shall be payable in advance on or before the first day of
each calendar month during the Term and any extensions or renewals thereof,
provided however, Base Rent for the first full calendar month following the Term
Commencement Date shall be paid in advance immediately upon execution of this
Lease. Tenant's Proportionate Share of Estimated Basic Operating Cost shall be
payable in advance on or before the first day of each calendar month during the
Term and any extensions or renewals thereof. If the Term commences on other than
the first day of a calendar month, then Gross Rent (consisting of Base Rent plus
Tenant's Proportionate Share of Estimated Basic Operating Cost) provided for
such partial calendar month shall be prorated and the prorated amount shall be
paid on the first day of the calendar month following the Term Commencement Date
together with any other amounts payable on that day. If the Term terminates on
other than the last day of a calendar month, then Gross Rent provided for such
partial calendar month shall be prorated and the prorated installment shall be
paid on the first day of the calendar month preceding the Term Expiration Date.
All payments due under this paragraph shall be payable in advance, without
demand and without reduction, abatement, counterclaim or setoff, at the address
specified on the Basic Lease Information or at such other address as may be
designated by Landlord in the manner provided for giving notice under Section
7.17 hereof.

           3.04 Net Lease. This is a Net Lease. Base Rent shall be paid to
                ---------
Landlord absolutely net of all costs and expenses. The provisions for payment of
Basic Operating Cost by means of periodic payment of Tenant's Proportionate
Share of Estimated Basic Operating Cost and the Basic Operating Cost Adjustment
are intended to pass on to Tenant and reimburse Landlord for Tenant's
Proportionate Share of all costs and expenses of the nature described in Section
3.05.

           3.05 Basic Operating Cost.
                --------------------

   (a)  Basic Operating Cost shall mean all expenses and costs (but not specific
        costs that are separately billed to and paid by specific tenants) of
        every kind and nature that Landlord shall pay or incur or become
        obligated to pay or incur (including, without limitation, costs incurred
        by managers and agents that are reimbursed by Landlord) because of or in
        connection with the management, maintenance, preservation, ownership and
        operation of the Project and its supporting facilities directly
        servicing the Project (as allocated to the Project in accordance with
        generally accepted accounting principles, consistently applied)
        including, but not limited to the following:

        (1)  Wages, salaries and reimbursable expenses and benefits of all on-
             site and off-site personnel engaged in the operation, maintenance
             and security of the Project and the direct costs of training such
             employees limiting such charges only to amounts

                                      -8-
<PAGE>

            directly allocable to services rendered by the employees and
            personnel for the benefit of the Project.

       (2)  Costs of the property management office and office operation, but in
            no event shall such costs exceed those customarily charged by other
            landlords of comparable buildings located in the Northern San Mateo
            County area.

       (3)  All supplies, materials and rental equipment used in the operation
            and maintenance of the Project, including, without limitation,
            temporary lobby displays and events, the cost of erecting,
            maintaining and dismantling art work and similar decorative displays
            commensurate with operation of a first-class office building, but
            excluding the cost of any and all art work purchased and owned by
            Landlord solely for aesthetic purposes.

       (4)  Utilities, including, without limitation, water, power, gas, sewer,
            waste di sposal, communication and cable TV facilities, heating,
            cooling, lighting and ventilation of the Project.

       (5)  Assessments, fees or other charges levied by the Gateway Owners'
            Association or other similar body with respect to the maintenance,
            repair and operation of the Gateway development.

       (6)  All maintenance, janitorial and service agreements for the Project
            and the equipment therein, including, but not limited to, alarm
            service, window cleaning, elevator maintenance, and maintenance and
            repair of sidewalks, landscaping, Building exterior and service
            areas.

       (7)  A management cost recovery equal to three percent (3%) of all
            revenue (excluding such management cost recovery) derived from the
            Project, without limitation, all Rent hereunder, all rent and other
            payments derived from other tenants in the Building, parking
            revenues and other revenues derived from licensees of any other part
            of or right in the Building.

       (8)  Legal and accounting services for the Project, including, but not
            limited to, the costs of audits by certified public accountants of
            Basic Operating Cost records; provided, however, that legal expense
            shall not include the cost of (i) negotiating lease terms for
            prospective tenants, (ii) negotiating termination or extension of
            leases with existing tenants, (iii) proceedings against or with any
            other specific tenant, or (iv) legal costs incurred in connection
            with development and/or construction of the Project.

       (9)  All insurance premiums and costs, including but not limited to, the
            premiums and cost of fire, casualty, liability, rental abatement and
            earthquake insurance applicable to the Project and Landlord's
            personal property used in connection therewith (and

                                      -9-
<PAGE>

            all amounts paid as a result of loss sustained that would be covered
            by such policies but for "deductible" or self-insurance provisions);
            provided, however, that Landlord may, but shall not be obligated to,
            carry earthquake insurance.

       (10) Repairs, replacements and general maintenance (except for repairs
            and replacements (i) paid for from the proceeds of insurance, (ii)
            paid for directly by Tenant, other tenants or any third party, or
            (iii) for the benefit solely of tenants of the Project other than
            Tenant to the extent that Tenant could not obtain similar services
            from Landlord without an obligation to reimburse Landlord for the
            entire cost thereof under the provisions of this Lease).

       (11) All real estate or personal property taxes, possessory interest
            taxes, business or license taxes or fees, service payments in lieu
            of such taxes or fees, annual or periodic license or use fees,
            including, but not limited to, all of the following: (i) all real
            estate taxes and assessments, and all other taxes relating to, or
            levied, assessed or imposed on, the Project, or any portion thereof,
            or interest therein; (ii) all taxes, assessments, charges, levies,
            fees, excises or penalties, general and special, ordinary and
            extraordinary, unforeseen as well as foreseen, of any kind and
            nature imposed, levied upon, measured by or attributable to
            Landlord's equipment, furniture, fixtures and other property located
            in, or used in connection with, the Project, or levied upon,
            measured by or reasonably attributable to the cost or value of any
            of the foregoing; (iii) all other taxes (including, without
            limitation, value added taxes), assessments, charges, levies, fees,
            or penalties, general and special, ordinary and extraordinary,
            unforeseen as well as foreseen, of any kind and nature imposed,
            levied, assessed, charged or collected by any governmental authority
            or other entity either directly or indirectly (A) for or in
            connection with public improvements, user, maintenance or
            development fees, transit, parking, housing, employment, police,
            fire, open space, streets, sidewalks, utilities, job training, child
            care or other governmental services or benefits, (B) upon or with
            respect to the development, possession, leasing, operation,
            management, maintenance, alteration, repair, use or occupancy of, or
            business operations in, the Project (C) upon, against or measured by
            the area of the Project, or uses made thereof, or leases made to
            tenants thereof, or all or any part of the rents collected or
            collectible from tenants thereof, and (D) for environmental matters
            or as a result of the imposition of mitigation measures, including
            parking taxes, employer parking regulations, or fees, charges or
            assessments as a result of the treatment of the Project, or any
            portion thereof or interest therein, as a source of pollution or
            storm water runoff; (iv) any tax or excise, however described,
            imposed in addition to, or in substitution partially or totally of,
            any or all of the foregoing taxes, assessments, charges or fees; and
            (v) any and all costs, expenses and attorneys' fees paid or incurred
            by Landlord in connection with any proceeding or action to contest
            in whole or in part, formally or informally, the imposition,
            collection or validity of any of the foregoing taxes, assessments,
            charges or fees. If by law any Real Property Taxes may be paid in
            installments at the option

                                      -10-
<PAGE>

            of the taxpayer, then Landlord shall include within Real Property
            Taxes only those installments (including interest, if any) which
            would become due by exercise of such option. Real estate taxes shall
            not include (i) inheritance or estate taxes imposed upon or assessed
            against the Project, or any part thereof or interest therein, (ii)
            taxes computed upon the basis of the net income derived from the
            Project by Landlord or the owner of any interest therein, or (iii)
            tax penalties incurred as a result of Landlord's failure to make
            payment and/or to file any tax or informational returns when due,
            except to the extent caused by Tenant's failure to pay Gross Rent as
            required hereunder.

       (12) Amortization (together with reasonable financing charges) of capital
            improvements made to the Project (i) to comply with the requirements
            of law, ordinance rule or regulation, (ii) to replace items which
            Landlord would be obligated to maintain under this Lease; or (iii)
            to improve the operating efficiency of the Project; provided,
            however, that in the case of improvements made solely for efficiency
            purposes, the amount chargeable as a Basic Operating Cost in any
            year shall not exceed Landlord's reasonable determination of the
            efficiency achieved either in direct cost savings, avoidance of cost
            increases or a combination of both. As used in this Section
            3.05.(a)(12), "amortization" shall mean allocation of the cost
            equally to each year of useful life of the items being amortized or
            a shorter period equal to the number of years required to recover
            the cost of said item of capital improvement out of the savings in
            operating efficiency derived therefrom. Notwithstanding the
            foregoing, however, Landlord may treat as expenses (chargeable in
            the year incurred) and not as capital costs items that are less than
            two percent (2%) of Estimated Basic Operating Cost for the year in
            question.

   (b) Notwithstanding anything to the contrary contained in the Lease, Basic
       Operating Cost shall not include costs incurred during the Term in
       connection with the removal, transportation or storage of Hazardous
       Materials found in the ground water or soil of the Project, unless such
       Hazardous Materials resulted from the acts of an unidentifiable party or
       from an identifiable party that is unwilling or unable to cover such cost
       after reasonable efforts have been made by Landlord to pursue
       reimbursement from such party, even if such efforts are undertaken
       following the expiration or earlier termination of this Lease. Any costs
       incurred during a calendar year during the Term in connection with the
       removal, transportation or storage of Hazardous Materials that are deemed
       Basic Operating Costs under this Section in excess of $100,000 for such
       calendar year shall be amortized (together with reasonable financing
       charges) over the Term of the Lease.

   (c) Notwithstanding any other provision herein to the contrary, if the
       Project is not fully occupied during any year of the Term, an adjustment
       shall be made in computing Basic Operating Cost for such year so that
       Basic Operating Cost shall be computed as though the Project had been
       fully occupied during such year; provided, however, that in no event
       shall Landlord collect in total, from Tenant and all other tenants of the
       Project, an amount

                                      -11-
<PAGE>

       greater than one hundred percent (100%) of the actual Basic Operating
       Cost during any year of the Term. Tenant acknowledges that the Basic
       Operating Costs shall include expenses and costs associated with the
       management, preservation, ownership and operation of the Common Areas
       that are, from time to time, allocated by Landlord, in its sole but
       reasonable discretion, between the Building and other buildings,
       presently or hereafter existing at the Project, and Tenant agrees to pay
       as Additional Rent, Tenant's share, as reasonably determined by Landlord,
       of such Basic Operating Cost as so allocated by Landlord.

          3.06 Adjustment For Variation Between Estimated And Actual. If the
               -----------------------------------------------------
Basic Operating Cost Adjustment for any calendar year is a positive number
(i.e., actual cost exceeds estimated cost) Tenant shall pay to Landlord,
pursuant to Landlord's billing therefor (submitted pursuant to Section 3.07),
Tenant's Proportionate Share of the Basic Operating Cost Adjustment within
thirty (30) days after presentation of Landlord's statement. If the Basic
Operating Cost Adjustment for any calendar year is a negative number (i.e.,
estimated cost exceeds actual cost), then Landlord at Landlord's option shall
pay Tenant's Proportionate Share of the Basic Operating Cost Adjustment to
Tenant in cash, within ten (10) days after the Basic Operating Cost Adjustment
is finally determined, or credit said amount against future installments of
Estimated Basic Operating Cost payable by Tenant hereunder. Should the Term
commence or terminate at any time other than the first day of a calendar year,
Tenant's Proportionate Share of the Basic Operating Cost Adjustment shall be
prorated for the exact number of calendar days during such calendar year that
fall within the Term.

          3.07 Computation Of Basic Operating Cost Adjustment. Landlord shall,
               ----------------------------------------------
within a reasonable period of time after the end of any calendar year for which
Estimated Basic Operating Cost differs from Basic Operating Cost, give written
notice thereof to Tenant. The notice shall contain or be accompanied by a
statement of the Basic Operating Cost during such calendar year (prepared by a
certified public accountant), and a computation of Basic Operating Cost
Adjustment. Landlord's failure to give such notice and statement within a
reasonable period of time after the end of any calendar year for which a Basic
Operating Cost Adjustment is due shall not release either party from the
obligation to make the adjustment provided for in Section 3.06.


                                  ARTICLE 4.
                                  ----------
                              Landlord Covenants
                              ------------------

          4.01 Basic Services. Landlord shall:
               --------------

   (a) Administer the initial improvement of the Leased Premises in accordance
       with Exhibit B.

                                      -12-
<PAGE>

   (b) Furnish Tenant during Tenant's occupancy of the Leased Premises:

       (i)   Hot and cold water at those points of supply provided for general
             use of other tenants in the Project; central heat and air
             conditioning in season, at such times as Landlord normally
             furnishes these services to other tenants in the Project and at
             such temperatures and in such amounts as are consistent with the
             temperatures and amounts provided by other landlords of comparable
             buildings in the Northern San Mateo County area or as may be
             permitted or controlled by applicable laws, ordinances, rules and
             regulations.

       (ii)  Routine maintenance, repairs, structural and exterior maintenance
             (including exterior glass and glazing), painting and electric
             lighting service for all public areas and special service areas of
             the Project in the manner and to the extent deemed by Landlord to
             be standard for comparable buildings in the Northern San Mateo
             County Area, subject to the limitation contained in Section 4.06.

       (iii) Janitorial service on a five (5) days-a-week basis, excluding
             holidays, such days being Monday through Friday.

       (iv)  An electrical system to convey power delivered by public utility or
             other providers selected by Landlord, in its sole and absolute
             discretion (and Tenant hereby acknowledges and agrees not to obtain
             any electrical or other utility services from vendors other than
             those so selected by Landlord) in amounts sufficient for normal
             office operations as provided in similar office buildings, but not
             to exceed a total allowance of five (5) watts per square foot of
             Net Rentable Area during normal office hours (which includes an
             allowance for lighting of the Leased Premises at the maximum
             wattage per square foot of Net Rentable Area permitted under
             applicable laws, ordinances, orders, rules and regulations),
             provided that no single item of electrical equipment consumes more
             than 0.5 kilowatts at rated capacity or requires a voltage other
             than 120 volts, single phase. If Tenant's electrical requirements,
             as estimated by Landlord based upon rated capacity (or based upon
             metered consumption, at Landlord's option and at Tenant's expense),
             exceed such amounts, Tenant shall pay the full amount of such
             excess together with any additional cost necessary to provide such
             excess capacity; and provided that if the installation and
             operation of said electrical equipment requires additional air
             conditioning capacity above that provided by the Building Standard
             Improvements, then the additional air conditioning installation and
             operating costs shall be paid by Tenant.

       (v)   Building Standard lamps, bulbs and ballasts used in the Leased
             Premises.

       (vi)  Security service for the Project; provided, however, that the
             security service shall be provided by a card reader access system
             to the Building and by unarmed personnel and shall not include
             alarm systems for a special surveillance of the Leased Premises;
             and provided further that Landlord shall not be liable to Tenant or
             any

                                      -13-
<PAGE>

             third party for any breach of security or any losses due to theft,
             burglary, battery or for damage done or injury inflicted by persons
             (other than the employees of Landlord) in or on the Project.

       (vii) Public elevator service on a twenty-four hours, seven days-a-week
             basis and a freight elevator serving the floors on which the Leased
             Premises are situated during hours designated by Landlord.

   (c) Landlord shall not be liable for damages to either person or property,
       nor shall Landlord be deemed to have evicted Tenant, nor shall there be
       any abatement of Rent (except as specified below), nor shall Tenant be
       relieved from performance of any covenant on its part to be performed
       hereunder by reason of (i) deficiency in the provision of Basic Services,
       (ii) breakdown or malfunction of lines, cables, wires, pipes, equipment
       or machinery utilized in supplying or permitting Basic Services or
       telecommunications, or (iii) curtailment or cessation of Basic Services
       due to causes or circumstances beyond the reasonable control of Landlord.
       Landlord shall use reasonable diligence to make such repairs as may be
       required to lines, cables, wires, pipes, equipment or machinery within
       the Project to provide restoration of Basic Services and, where the
       cessation or interruption of Basic Service has occurred due to
       circumstances or conditions beyond Project boundaries, to cause the same
       to be restored, by diligent application or request to the provider
       thereof. In no event shall any mortgagee or the beneficiary under any
       deed of trust referred to in Section 5.13 be or become liable for any
       default of Landlord under this Section 4.01.(c). Notwithstanding the
       foregoing, if the Basic Services are interrupted as a result of
       Landlord's gross negligence or willful misconduct and such interruption
       materially adversely affects Tenant's use of the Premises for the conduct
       of its business and such interruption continues for a period of three (3)
       consecutive business days, Tenant shall receive an abatement of Base Rent
       from the time of the interruption of Basic Services until Basic Services
       are restored so as to not materially adversely affect Tenant's use of the
       Premises for the conduct of its business.

          4.02 Extra Services. Landlord shall provide to Tenant at Tenant's sole
               --------------
cost and expense (and subject to the limitations hereinafter set forth) the
following:

   (a) Such extra cleaning and janitorial services required by reason of any
       Tenant Improvements in excess of that which would be required for
       Building Standard Improvements;

   (b) Additional air conditioning and ventilating capacity required by reason
       of any electrical, data processing or other equipment or facilities or
       services required to support the same, in excess of that which would be
       required for Building Standard Improvements;

   (c) Maintaining and replacing above Building Standard lamps, bulbs, and
       ballasts after initial installation;

                                      -14-
<PAGE>

   (d) Heating, ventilation, air conditioning or extra electrical service
       provided by Landlord to Tenant (i) during hours other than normal
       business hours, (ii) on Saturdays, Sundays, or holidays, said heating,
       ventilation and air conditioning or extra service to be furnished solely
       upon the prior request of Tenant;

   (e) Repair and maintenance service which is the obligation of Tenant
       hereunder;

   (f) Any Basic Service in amounts reasonably determined by Landlord to exceed
       the amounts required to be provided under Section 4.01.(b), but only if
       Landlord elects to provide such additional or excess service. Tenant
       shall pay Landlord the cost of providing such additional services,
       together with an administration fee equal to ten percent (10%) of such
       cost (which administration fee shall be used by Landlord to reduce
       Operating Expenses for all tenants of the Building), within ten (10) days
       following presentation of an invoice therefor by Landlord to Tenant. The
       cost chargeable to Tenant for all extra services shall constitute
       Additional Rent.

          4.03 Graphics And Signage. Landlord shall provide, at no cost to
               --------------------
Tenant, the initial identification of Tenant on a proportionate share (based on
Net Rentable Area) of space on the directory located in the main lobby of
Building and at the entrance to the Premises. All signs, notices and graphics of
every kind or character, visible in or from public corridors, the Common Area or
the exterior of the Leased Premises shall be subject to Landlord's prior written
approval which Landlord shall have the right to withhold in its absolute and
sole discretion.

          4.04 Tenant Extra Improvements. All Tenant Extra Improvements shall be
               -------------------------
installed at Tenant's cost, such installation to be made and paid for pursuant
to the provisions of Exhibit B. For purposes hereof, "costs" shall include, but
without limitation, all building permit fees for Tenant Extra Improvements (not
included in the permit fees paid with respect to the Building), payments to
design consultants for services and disbursements, and such inspection fees as
Landlord may incur and reimbursement to Landlord for permit and other fees
Landlord has prepaid on behalf of Tenant that are fairly attributable to the
Tenant Extra Improvement Work. Landlord shall not seek the benefits of
depreciation deductions or income tax credit allowances for federal or state
income tax reporting purposes with respect to any Tenant Extra Improvements for
which Tenant has fully reimbursed Landlord under this Section 4.05.

          4.05 Repair Obligation. Landlord's obligation with respect to repair
               -----------------
as part of Basic Services shall be limited to (i) the structural portions of the
Building, (ii) the exterior wall of the Building, including glass and glazing,
(iii) the roof, (iv) mechanical, electrical, plumbing and life safety systems
that are considered Base Building Improvements, and (v) Common Areas. Landlord
shall have the right but not the obligation upon reasonable prior written notice
to Tenant to undertake work of repair that Tenant is required to perform under
this Lease and that Tenant fails or refuses to perform in a timely and efficient
manner. All costs incurred by Landlord in performing any such repair for the
account of Tenant shall be repaid by Tenant to Landlord upon demand, together
with an administration fee equal to ten percent (10%) of such

                                      -15-
<PAGE>

costs; provided, however, that administration fees shall not be included in
"income" for purposes of calculating Landlord's management cost recovery under
Section 3.05.(a)(7).

          4.06 Peaceful Enjoyment. Tenant shall peacefully have, hold and enjoy
               ------------------
the Leased Premises, subject to the other terms hereof, provided that Tenant
pays the Rent and performs all of Tenant's covenants and agreements herein
contained. This covenant and the other covenants of Landlord contained in this
Lease shall be binding upon Landlord and its successors only with respect to
breaches occurring during its and their respective ownership of Landlord's
interest hereunder.


                                  ARTICLE 5.
                                  ----------
                              Tenant's Covenants
                              ------------------

          5.01 Payments By Tenant. Tenant shall pay Rent at the times and in
               ------------------
the manner herein provided. All obligations of Tenant hereunder to make payments
to Landlord shall constitute Rent and failure to pay the same when due shall
give rise to the rights and remedies provided for in Section 7.08.

          5.02 Obligations Of Tenant To Furnish Floor Plans And Approve Plans
               --------------------------------------------------------------
And Specifications. Tenant shall deliver to Landlord a detailed floor plan
------------------
layout, together with written instructions sufficiently detailed to prepare
plans and specifications, obtain approval by Tenant's Plan Delivery Date and
enable Landlord to let firm contracts for installation of the Tenant
Improvements desired by Tenant in the Leased Premises pursuant to Exhibit B.
Upon completion of the Tenant Improvements, Tenant shall provide Landlord, at
Tenant's expense, with a complete set of plans on mylar and specifications
reflecting the actual conditions of the Tenant Improvements as constructed in
the Leased Premises, together with a copy of such plans on diskette in the
AutoCAD format or such other format as may then be in common use for computer
assisted design purposes.

          5.03 Construction Of Tenant Improvements. Landlord shall cause its
               -----------------------------------
contractor to install Tenant Improvements pursuant to Exhibit B. All building
permit and municipal inspection fees payable with respect to such work shall be
paid to Landlord by Tenant in the same manner as that provided for payment of
the cost of Tenant Extra Improvements pursuant to Section 4.04 hereof. All
additions to or improvements of the Leased Premises, whether of Building
Standard Improvements or Tenant Extra Improvements installed pursuant to Section
4.04, shall be and become the property of Landlord upon installation and shall
be surrendered to Landlord upon termination of this Lease by lapse of time or
otherwise, subject to Tenant's rights of removal with respect thereto in the
same manner as provided in Section 5.08 hereof. Although Tenant Extra
Improvements become the property of Landlord upon installation, they are
intended to be for the convenience of Tenant and are not intended to be a

                                      -16-
<PAGE>

substitute for Rent or any part thereof and Tenant may, to the extent permitted
by law, avail itself of any tax benefits (depreciation or otherwise) from the
Tenant Extra Improvements.

          5.04 Taxes On Personal Property And Tenant Extra Improvements. In
               --------------------------------------------------------
addition to, and wholly apart from its obligation to pay Tenant's Proportionate
Share of Basic Operating Costs, Tenant shall be responsible for and shall pay
prior to delinquency taxes or governmental service fees, possessory interest
taxes, fees or charges in lieu of any such taxes, capital levies, or other
charges imposed upon, levied with respect to or assessed against its personal
property, on the value of its Tenant Extra Improvements, on its interest
pursuant to this Lease or on any use made of the Leased Premises or the Common
Areas by Tenant in accordance with this Lease. To the extent that any such taxes
are not separately assessed or billed to Tenant, Tenant shall pay the amount
thereof as invoiced to Tenant by Landlord. Landlord may require by written
notice to Tenant that Tenant shall install and maintain all required
intrabuilding network cable and other communications wires and cables necessary
to serve the Leased Premises from the point of presence in the Building of a
telecommunications provider selected by Landlord in its reasonable discretion
(and Tenant hereby acknowledges and agrees not to obtain any telecommunications
services within the Building from vendors other than those so selected by
Landlord in its reasonable discretion).

          5.05 Repairs By Tenant. Tenant shall maintain and repair the Leased
               -----------------
Premises and keep the same in good condition. Tenant shall not be obligated to
repair any damage (i) caused by Landlord or Landlord's Parties, (ii) covered by
insurance maintained by Landlord and not otherwise covered by insurance
maintained or required to be maintained by Tenant hereunder, (iii) covered and
paid for by Landlord's contractor's and (iv) covered by Operating Expenses.
Tenant's obligation shall include, without limitation, the obligation to
maintain and repair all walls, floors, ceilings and fixtures and to repair all
damage caused by Tenant or Tenant Parties to the utility outlets and other
installations in the Leased Premises or anywhere in the Project, whatever the
scope of the work of maintenance or repair required. Tenant shall repair all
damage caused by removal of Tenant's movable equipment or furniture or the
removal of any Tenant Extra Improvements or Alterations (hereinafter defined)
permitted or required by Landlord, all as provided in Section 5.19. At the
request of Tenant, Landlord shall perform the work of maintenance and repair
constituting Tenant's obligation pursuant to this Section 5.05 and as an "extra
service" to be rendered pursuant to Section 4.02.(e) at Tenant's sole cost and
expense including the administration fee referred to therein. Any work of repair
and maintenance performed by or for the account of Tenant by persons other than
Landlord shall be performed by contractors approved by Landlord prior to
commencement of the work and in accordance with procedures Landlord shall from
time to time establish. All such work shall be performed in compliance with all
applicable laws, ordinances, rules and regulations and Tenant shall provide to
Landlord copies of all permits and records of inspection issued or obtained by
Tenant in connection therewith to establish such compliance. Nothing herein
contained, however, shall be deemed to impose upon Tenant the obligation to
perform work of maintenance or repair required by reason of Landlord's
negligence or wrongful acts or those of Landlord

                                      -17-
<PAGE>

Parties. In performing the obligations under this Section, Tenant shall notify
Landlord of any repairs that could affect the mechanical, electrical, HVAC, life
safety or other systems of the Building.

          5.06 Waste. Tenant shall not commit or allow any waste or damage to be
               -----
committed in any portion of the Leased Premises.

          5.07 Assignment Or Sublease.
               ----------------------

   (a) If Tenant intends to assign this Lease or sublet the Leased Premises or
       any part thereof, Tenant shall give Landlord written notice of such
       intent. Tenant's notice shall set forth the date any such assignment or
       sublease shall commence and be accompanied by an exact copy of the
       proposed agreements between Tenant and the proposed assignee or
       subtenant. Tenant shall provide Landlord with (i) any additional
       information or documents reasonably requested by Landlord, within ten
       (10) days after receiving Tenant's notice (Landlord hereby acknowledging
       that Landlord may only request such additional information one time after
       receiving Tenant's notice), and (ii) an opportunity to meet and interview
       the proposed assignee or subtenant, if requested by Landlord.

   (b) Landlord shall then have a period of twenty (20) days following such
       interview and receipt of such additional information (or thirty (30) days
       from the date of Tenant's original notice if Landlord does not request
       additional information or an interview) within which to notify Tenant in
       writing that, subject to subparagraph (c) below, Landlord elects either
       (A) to terminate this Lease as to the space so affected as of the date so
       specified by Tenant in its notice under Section 5.07(a) above, in which
       event Tenant will be relieved of all further obligations hereunder as to
       such space, or (B) to permit Tenant to assign this Lease or sublet such
       space, subject, however, to prior written approval of the proposed
       assignee or sublessee by Landlord. The approval by Landlord of the
       proposed assignee or sublessee shall not to be unreasonably withheld or
       delayed so long as: (i) the use of the Leased Premises by such proposed
       assignee or sublessee would be a Permitted Use; (ii) the proposed
       assignee or sublessee is of sound financial condition as reasonably
       determined by Landlord; (iii) the proposed assignee's or sublessee's use
       will not involve the storage, use, treatment or disposal of any Hazardous
       Material (except for Permitted Hazardous Materials transported, stored
       and used in accordance with the provisions of this Lease); (iv) the
       proposed use or the proposed assignee or sublessee would not cause the
       violation of any covenant or agreement of Landlord to any third party or
       would permit any other tenant to terminate its lease; and (v) the
       proposed subtenant or assignee does not then lease or occupy any other
       space in the Building or if the proposed subtenant or assignee does then
       lease or occupy space in the Building, Landlord cannot itself accommodate
       such existing occupant's expansion needs within the Building. If Landlord
       fails to notify Tenant in writing of such election within said period,
       Landlord shall be deemed to have waived option (A) above, but written
       approval by Landlord of the proposed assignee or sublessee shall be
       required. Failure by Landlord to approve a

                                      -18-
<PAGE>

       proposed subtenant or assignee shall not cause a termination of this
       Lease, and the sole remedy of Tenant shall be an action for injunctive or
       declaratory relief. Notwithstanding anything herein to the contrary,
       Landlord's written approval shall not be required for any assignment of
       the Lease or sublet of the Leased Premises by Tenant to any person,
       corporation or entity which controls, is controlled by or is under common
       control with Tenant, or to any corporation or entity resulting from a
       merger or consolidation with Tenant, or to any person, corporation or
       entity which acquires all the assets of Tenant as a going concern in the
       business that is being conducted on the Premises, provided that, before
       such assignment shall be effective, such assignee shall assume, in full,
       the obligations of Tenant under this Lease. For purposes hereof,
       "control" shall mean the possession, direct or indirect, of the power to
       direct or cause the direction of the management and policies of a person,
       firm or corporation, whether through the ownership of voting securities,
       by contract or otherwise. In the event of an assignment or subletting
       pursuant to this Section, Tenant shall promptly thereafter notify
       Landlord of such assignment or subletting (including the name of such
       assignee or sublessee) and Tenant agrees to execute such documentation as
       reasonably requested by Landlord to memorialize such assignment or
       subletting.

   (c) Notwithstanding the terms of subparagraph (b) above, in the event that
       Tenant desires to enter into a Limited Sublease (as hereinafter defined),
       then Tenant shall be required to obtain Landlord's consent thereto in
       accordance with this Section 5.07 (including, without limitation,
       Landlord's approval of the proposed sublessee), but Landlord shall not
       have the option to terminate this Lease as to the space affected by such
       Limited Sublease as otherwise provided in clause (A) of said subparagraph
       (b). Except as expressly provided in this subparagraph (c), nothing
       contained herein shall be deemed to limit Landlord's rights under this
       Section 5.07. As used herein, "Limited Sublease" means a sublease
       affecting not more than fifty percent (50%) of the Leased Premises for a
       period not extending beyond the initial twenty-four (24) months of the
       Term.

   (d) Any rent or other consideration realized by Tenant under any such
       sublease and assignment in excess of the Rent payable hereunder, after
       amortization of the reasonable cost of Tenant Extra Improvements for
       which Tenant has paid and reasonable subletting and assignment costs,
       shall be divided and paid as follows: (i) so long as after such
       assignment or subletting, the original Tenant named herein shall occupy
       not less than fifty percent (50%) of the Net Rentable Area of the Leased
       Premises, fifty percent (50%) to Tenant and fifty percent (50%) to
       Landlord; and (ii) in all other cases, twenty five-percent (25%) to
       Tenant and seventy-five percent (75%) to Landlord.

   (e) In any subletting undertaken by Tenant, Tenant shall use commercially
       reasonable efforts to obtain not less than Fair Market Rent for the space
       so sublet. In any assignment of this Lease in whole or in part, Tenant
       shall seek to obtain from the assignee consideration reflecting a value
       of not less than Fair Market Rent for the space subject to such
       assignment. Tenant shall provide to Landlord, upon Landlord's demand,
       true and correct

                                      -19-
<PAGE>

       executed copies of the documents constituting such sublease or assignment
       and any amendments thereof during the Term.

   (f) No assignment or subletting by Tenant shall relieve Tenant of any
       obligation under this Lease. Any assignment or subletting that conflicts
       with the provisions hereof shall be void. No consent by Landlord to any
       subletting or assignment shall constitute a consent to any other
       assignment or subletting nor shall it constitute a waiver of any of the
       provisions of this Section 5.07 as they apply to any such future
       sublettings or assignments.

   (g) Any assignee shall assume in writing, for the express benefit of
       Landlord, all of the obligations of Tenant under this Lease, provided
       that no such assumption shall be deemed a novation or other release of
       the prior Tenant. Following any assignment, the obligations for which the
       prior Tenant remains liable under this Lease shall include, without
       limitation, any obligations arising in connection with any amendments to
       this Lease executed by Landlord and the assignee, whether or not such
       amendments are made with knowledge or consent of the prior Tenant.

   (h) Any improvements, additions, or alterations to the Building or the
       Project that are required by any law, ordinance, rule or regulation, or
       are deemed necessary or appropriate by Landlord as a result of any
       subletting or assignment hereunder, shall be installed and provided
       without cost or expense to Landlord. Landlord may condition its consent
       to any proposed sublessee or assignee on the construction of improvements
       reasonably d eemed necessary or appropriate by Landlord by reason of the
       subletting or assignment.

   (i) Landlord may hire outside consultants to review all assignment and
       subletting documents and information. Tenant shall reimburse Landlord for
       the reasonable cost thereof, including reasonable attorneys' fees, on
       demand.

   (j) Without liability to Tenant, Landlord shall have the right to offer and
       to lease space in the Building, or in any other property, to any party,
       including without limitation parties with whom Tenant is negotiating, or
       with whom Tenant desires to negotiate, concerning assignment or
       subletting the Leased Premises, or any portion thereof.

          5.08 Alterations, Additions or Improvements. Tenant shall not make or
               --------------------------------------
allow to be made any alterations, additions or improvements in or to the Leased
Premises (collectively, "Alterations") without obtaining the prior written
consent of Landlord. Landlord's consent shall not be unreasonably withheld with
respect to proposed Alterations that (i) comply with all applicable laws,
ordinances, rules and regulations, (ii) are compatible with the Building and its
mechanical, electrical, HVAC and life safety systems; (iii) will not interfere
with the use and occupancy of any other portion of the Building by any other
tenant or their invitees; (iv) do not affect the structural portions of the
Building; and (v) do not and will not, whether alone or taken together with
other improvements, require the construction of any other improvements or

                                      -20-
<PAGE>

alterations within the Building. In determining whether or not to consent to
proposed Alterations, Landlord shall have the right (without limitation) to
review plans and specifications for proposed Alterations, construction means and
methods, the identity of any contractor or subcontractor to be employed on the
work of Alterations, and the time for performance of such work. Tenant shall
supply to Landlord any documents and information reasonably requested by
Landlord in connection with the exercise of its rights hereunder. Landlord may
hire outside consultants to review such documents and information and Tenant
shall reimburse Landlord for the reasonable cost thereof, including reasonable
attorneys' fees, upon demand. All Alterations permitted hereunder shall be made
and performed by Tenant or, at Landlord's election, may be performed by
Landlord, without cost or expense to Landlord; provided however, the cost for
Landlord to perform such work in excess of the cost and expense that Tenant
would have incurred, using its own qualified contractors, to perform such
Alteration work shall not be Tenant's responsibility. Tenant shall pay Landlord,
upon completion of any Alteration, a reasonable fee for Landlord's supervision
and administration of the installation thereof; provided, however, that such fee
(not to exceed 5% of the cost of the Alteration) shall not be deemed to be
"income" for purposes of calculating management cost recovery under Section
3.05.(a)(7). The obligations of the parties with respect to removal of
Alterations shall be controlled by Section 5.19; provided, however, that
Landlord shall notify Tenant at the time Landlord consents to any Alteration, if
Landlord will require the removal of such Alterations upon termination of this
Lease.

          5.09 Liens. Tenant shall keep the Leased Premises and the Project free
               -----
from any liens arising out of any (i) work performed or material furnished to or
for the Leased Premises, and (ii) obligations incurred by or for Tenant or any
person claiming through or under Tenant. Tenant shall, within ten (10) days
following the imposition of any such lien, cause such lien to be released of
record by payment or posting of a bond fully satisfactory to Landlord in form
and substance. Landlord shall have the right at all times to post and keep
posted on the Leased Premises any notices permitted or required by law, or that
Landlord shall deem proper for the protection of Landlord, the Leased Premises,
the Project and any other party having an interest therein, from mechanics',
materialmen's and other liens. Landlord may cause such liens to be released by
any means it deems proper, including, without limitation, payment of any such
lien, at Tenant's sole cost and expense. All costs and expenses incurred by
Landlord in causing such liens to be released shall be repaid by Tenant to
Landlord immediately upon demand, together with an administration fee equal to
ten percent (10%) of such costs and expenses. In addition to all other
requirements contained in this Lease, Tenant shall give to Landlord at least ten
(10) business days prior written notice before commencement of any construction
on the Leased Premises.

          5.10 Compliance With Laws, Insurance Standards and Non-Discrimination.
               ----------------------------------------------------------------

   (a) Tenant shall comply with all federal, state and local laws, ordinances,
       orders, rules, regulations and policies (collectively, "Laws"), now or
       hereafter in force, as amended from time to time, in any way related to
       the use, condition or occupancy of the Leased

                                      -21-
<PAGE>

       Premises, regardless of when they become effective, including, without
       limitation, all applicable Hazardous Materials Laws and the Americans
       with Disabilities Act of 1990, as amended. Tenant shall immediately
       deliver to Landlord a copy of any notices received from any governmental
       agency in connection with the Leased Premises. It is the intention of
       Tenant and Landlord that the obligations of Tenant under this Section
       5.10 shall apply irrespective of the scope of work required to achieve
       such compliance. Tenant shall promptly cure and satisfy all Hazardous
       Materials Claims arising out of or by reason of the activities or
       businesses of Tenant, its sub-tenants, or Tenant Parties or any
       employees, agents, contractors, officers, directors, partners, licensees,
       invitees and guests of Tenant's sub-tenant. Nothing done by Tenant in its
       use or occupancy of the Leased Premises shall create, require or cause
       imposition of any requirement by any governmental authority for
       structural or other upgrading of or improvement to the Project.

   (b) Tenant shall not occupy or use, or permit any portion of the Leased
       Premises to be occupied or used, for any business or purpose that is
       disreputable or productive of fire hazard, or permit anything to be done
       that would increase the rate of fire or other insurance coverage on the
       Project and/or its contents. If Tenant does or permits anything to be
       done that shall increase the cost of any insurance policy required to be
       carried hereunder, then Tenant, at Landlord's option, shall not be in
       default under this Lease, but shall reimburse Landlord, upon demand, for
       any such additional premiums. Landlord shall deliver to Tenant a written
       statement setting forth the amount of any such insurance cost increase
       and showing in reasonable detail the manner in which it has been
       computed.

   (c) Tenant herein covenants by and for himself or herself, his or her heirs,
       executors, administrators and assigns, and all persons claiming under or
       through him or her, and this Lease is made and accepted upon and subject
       to the following conditions: That there shall be no discrimination
       against, or segregation of, any person or group of persons on account of
       race, color creed, religion, sex, marital status, national origin or
       ancestry in the leasing, subleasing, transferring, use' occupancy, tenure
       or enjoyment of the Leased Premises herein leased, nor shall Tenant, or
       any person claiming under or through him or her, establish or permit any
       such practice or practices of discrimination or segregation with
       reference to the selection, location, number, use or occupancy of
       tenants, lessees, subtenants, sublessees or vendees in the Leased
       Premises herein leased.

          5.11 Entry For Repairs, Inspection, Posting Notices, Etc. After
               ---------------------------------------------------
reasonable notice (except in emergencies where no such notice shall be
required), Landlord or Landlord Parties shall have the right to enter the Leased
Premises to inspect the same, to clean, to perform such work as may be permitted
or required hereunder, to make repairs to or alterations of the Project or other
tenant spaces therein, to deal with emergencies, to post such notices as may be
permitted or required by law to prevent the perfection of liens against
Landlord's interest in the Project or to exhibit the Leased Premises to
prospective tenants, purchasers, encumbrancers or others, or for any other
purpose as Landlord may deem necessary or desirable; provided,

                                      -22-
<PAGE>

however, that Landlord shall not unreasonably interfere with Tenant's business
operations. Tenant shall not be entitled to any abatement of Rent by reason of
the exercise of any such right of entry.

          5.12 No Nuisance. Tenant shall conduct its business and control Tenant
               -----------
Parties without creating any nuisance, or interfering with, annoying,
endangering or disturbing any other tenant or Landlord in its operation of the
Project. Tenant shall not place any loads upon the floor, walls or ceiling of
the Leased Premises that endanger the structure nor place any harmful liquids or
Hazardous Material in the drainage system of the Building. Tenant shall not
permit any vibration, noise or odor to escape from the Leased Premises and shall
not do or permit anything to be done within the Leased Premises which would
adversely affect the quality of the air in the Building.

          5.13 Subordination; Mortgagee Protection; Reciprocal Easement
               --------------------------------------------------------
Agreements.
----------

   (a) Tenant agrees that this Lease and the rights of Tenant hereunder are
       subject and subordinate to the holder of or beneficiary under any
       mortgage or deed of trust whether now or in the future encumbering the
       Project (the "Mortgage Lender") and to any and all advances made
       thereunder, and interest thereon, and all modifications, renewals,
       supplements, consolidations and replacements thereof. Tenant's obligation
       to subordinate hereunder is contingent upon Mortgage Lender's agreement
       to not-disturb Tenant's occupancy of the Premises in accordance with this
       Lease. Tenant agrees, however, that the Mortgage Lender may at its
       option, unilaterally elect to subordinate, in whole or in part, by an
       instrument in form and substance satisfactory to such Lender, the lien of
       such mortgage or deed of trust to this Lease. In such case, Tenant agrees
       to execute promptly and to deliver to Landlord or such Mortgage Lender
       any such subordination instrument or instruments requested by such Lender
       and agrees that if it fails or refuses to do so within 15 days after
       written request therefor by Landlord or such Mortgage Lender, such
       failure or refusal shall constitute a default by Tenant under this Lease,
       but such failure or refusal shall in no way affect the validity or
       enforceability of any such subordination made by such Mortgage Lender.

   (b) Any successor in interest to any Mortgage Lender shall not be bound by
       (i) any payment of Gross Rent for more than one (1) month in advance, or
       (ii) any amendment or modification of this Lease made without the written
       consent of the Mortgage Lender. Nothing herein contained shall be deemed
       to impose upon the person or party succeeding to the interest of Landlord
       as a result of the enforcement of such mortgage or first deed of trust by
       any Mortgage Lender, any obligation for defaults on the part of Landlord,
       and any person or party succeeding to possession of the Project as a
       successor to Landlord shall be subject to Landlord's obligations
       hereunder only during the period of such persons' or party's ownership.

                                      -23-
<PAGE>

   (c) Tenant shall not sue, seek any remedy or enforce any right against
       Landlord until (a) Tenant gives written notice to any Mortgage Lender and
       (b) a reasonable time (not to exceed 90 days) for such Mortgage Lender,
       at its option, to remedy the act or omission has elapsed following the
       giving of notice by Tenant to Mortgage Lender required hereunder,
       including, without limitation, time to obtain possession from Landlord by
       power of sale or judicial foreclosure, it being agreed that the Mortgage
       Lender shall have no obligation to Tenant to cure or remedy any act or
       omission of Landlord.

   (d) Tenant agrees that this Lease and the rights of Tenant hereunder are
       subject and subordinate to any reciprocal easement agreements whether now
       or in the future affecting the Project (the "REA's"); provided, however,
       any future REA's shall not materially adversely affect any specific
       rights granted to Tenant hereunder with respect to parking or access.
       Tenant agrees to execute promptly and to deliver to Landlord any
       subordination instrument or instruments requested by Landlord and agrees
       that if it fails or refuses to do so within 15 days after written request
       therefor by Landlord, such failure or refusal shall constitute a default
       by Tenant under this Lease, but such failure or refusal shall in no way
       affect the validity or enforceability of any such subordination.

          5.14 Estoppel Certificate. Within ten (10) business days of a written
               --------------------
request from Landlord, Tenant shall execute estoppel certificates addressed to
(i) any mortgagee or prospective mortgagee of Landlord or, (ii) any
purchaser or prospective purchaser of all or any portion of, or interest in, the
Project, on a form specified by Landlord, certifying as to such facts (if true)
and agreeing to such notice provisions and other matters as such mortgagee(s) or
purchaser(s) may reasonably require; provided, however, that in no event shall
any such estoppel certificate require an amendment of the provisions hereof,
although Tenant shall be bound by the statements made in such certificate. In
the event that Tenant fails or refuses to deliver such an estoppel certificate
to Landlord within ten (10) days of a written request from Landlord, then
Landlord may give to Tenant a second notice, reiterating the request that Tenant
execute an estoppel certificate in the form specified by Landlord and stating
that, if Tenant fails to do so within five (5) days of the receipt by Tenant of
such second notice from Landlord, Tenant shall be deemed to be bound by the
statements set forth in the form of certificate which Landlord requested that
Tenant deliver. In the event that Tenant fails to deliver an estoppel
certificate in the form specified by Landlord within five (5) days of the
receipt by Tenant of such second notice from Landlord, Tenant shall conclusively
be deemed, without exception, to have acknowledged the correctness of the
statements set forth in the form of certificate which Landlord requested that
Tenant deliver, and Tenant shall be estopped from denying the correctness of
each such statement, such that a mortgage or purchaser may rely on the
correctness of the statements in such form of certificate, as if made and
certified by Tenant. A failure by Tenant to deliver an estoppel certificate in
the form specified by Landlord within fifteen (15) business days of the receipt
by Tenant of an initial request from Landlord for such certificate shall also
constitute a material breach of this Lease by Tenant.

          5.15 Security Deposit.
               ----------------

                                      -24-
<PAGE>

   (a) Upon execution of this Lease, Tenant shall deliver to Landlord the Letter
       of Credit described below as security for Tenant's performance of all of
       Tenant's covenants and obligations under this Lease; provided, however,
       that neither the Letter of Credit nor any Letter of Credit Proceeds (as
       defined below) shall be deemed an advance rent deposit or an advance
       payment of any other kind, or a measure of Landlord's damages upon
       Tenant's default. Provided that the Letter of Credit has not previously
       been reduced to zero pursuant to subparagraph (b) below, then the Letter
       of Credit shall be maintained in effect from the date hereof through the
       date that is sixty (60) days after the tenth (10th) anniversary of the
       Term Commencement Date; provided however, at any time during the Term,
       Tenant may deliver to Landlord a substitute Letter of Credit satisfying
       the conditions hereof, in which event, Landlord shall promptly return the
       previously delivered Letter of Credit to Tenant. Landlord shall not be
       required to segregate the Letter of Credit Proceeds from its other funds,
       and in no event shall Letter of Credit Proceeds or any portion thereof be
       deemed to be held in trust for Tenant. No interest shall accrue or be
       payable to Tenant with respect to the Letter of Credit Proceeds. Landlord
       may (but shall not be required to) draw upon the Letter of Credit and use
       the proceeds therefrom (the "Letter of Credit Proceeds") or any portion
       thereof to cure any Event of Default under this Lease or to compensate
       Landlord for any damage Landlord incurs as a result of Tenant's failure
       to perform any of its obligations hereunder, it being understood that any
       use of the Letter of Credit Proceeds shall not constitute a bar or
       defense to any of Landlord's remedies set forth in herein. In such event
       and upon written notice from Landlord to Tenant specifying the amount of
       the Letter of Credit Proceeds so utilized by Landlord and the particular
       purpose for which such amount was applied, Tenant shall immediately
       deliver to Landlord an amended Letter of Credit or a replacement Letter
       of Credit in an amount equal to one hundred percent (100%) of the amount
       specified below. Tenant's failure to deliver such replacement Letter of
       Credit to Landlord within five (5) business days of Landlord's notice
       shall constitute an Event of Default hereunder. If Tenant is not in
       default at the expiration of the tenth (10th) anniversary of the Term
       Commencement Date, and provided that the Letter of Credit has not
       previously been reduced to zero pursuant to subparagraph (b) below, then
       Landlord shall promptly return to Tenant the Letter of Credit or the
       balance of the Letter of Credit Proceeds then held by Landlord; provided,
       however, that in no event shall any such return be construed as an
       admission by Landlord that Tenant has performed all of its obligations
       hereunder. No mortgagee of Landlord, nor any purchaser at any judicial or
       private foreclosure sale of the Premises or any portion thereof, shall be
       responsible to Tenant for such Letter of Credit or any Letter of Credit
       Proceeds unless such holder or purchaser shall have actually received the
       same.

   (b) As used herein, Letter of Credit shall mean an unconditional, irrevocable
       letter of credit (hereinafter referred to as the "Letter of Credit")
       issued by a major national bank satisfactory to Landlord in its sole and
       absolute discretion (the "Bank"), drawings under which may be made at an
       office of the Bank located in San Francisco, California, naming Landlord
       as beneficiary, in the amounts set forth below, and otherwise in form and

                                      -25-
<PAGE>

       substance satisfactory to Landlord. The amount of the Letter of Credit
       shall initially be One Million Six Hundred Thousand Dollars ($1,600,000)
       and shall decline on each anniversary of the Term Commencement Date
       through and including the seventh (7th) anniversary of the Term
       Commencement Date by the sum of Two Hundred Twenty-Eight Thousand Five
       Hundred Seventy-One and 43/100 Dollars ($228,571.43). Notwithstanding the
       foregoing, if an Event of Default (or an event or condition which, with
       the giving of notice or the passage of time, or both, would constitute an
       Event of Default hereunder (a "Potential Default")) shall be occurring on
       any such anniversary date, then Tenant's right to reduce the Letter of
       Credit on such anniversary date shall lapse, but Tenant shall retain the
       right to reduce the Letter of Credit on the next succeeding anniversary
       date, provided that no Event of Default or Potential Default is occurring
       on such succeeding anniversary date. The Letter of Credit shall be
       maintained in said amounts for so long as the Letter of Credit is
       required to be maintained pursuant to subparagraph (a), above. The Letter
       of Credit shall be for an initial term of not less than one year, shall
       be automatically renewed as provided below, and shall provide: (i) that
       Landlord may make partial and multiple draws thereunder, up to the face
       amount thereof, (ii) that Landlord may draw upon the Letter of Credit up
       to the full amount thereof, as determined by Landlord, and the Bank will
       pay to Landlord the amount of such draw upon receipt by the Bank of a
       sight draft signed by Landlord and accompanied by a written certification
       from Landlord to the Bank stating either: (A) that a breach of this Lease
       has occurred and is continuing under this Lease or (B) that Landlord has
       received notice from the Bank that the Letter of Credit will not be
       renewed by the Bank for at least one year beyond the then applicable
       expiration date; and (iii) that, in the event of Landlord's assignment or
       other transfer of its interest in this Lease, the Letter of Credit shall
       be freely transferable by Landlord, without charge and without recourse,
       to the assignee or transferee of such interest and the Bank shall confirm
       the same to Landlord and such assignee or transferee. The Letter of
       Credit shall further provide that it will be deemed automatically renewed
       without an amendment for a period of not less than one year unless at
       least thirty (30) days prior to the expiration date the Bank notifies
       Landlord in writing that the Bank elects not to renew the Letter of
       Credit, whereupon Landlord shall be authorized in accordance with clause
       (ii)(B) above to draw upon the Letter of Credit. In the event that the
       Bank shall have notified Landlord that the Letter of Credit will not be
       renewed for at least one year beyond the then applicable expiration date,
       then Landlord shall be entitled to draw on the Letter of Credit as
       provided above, and shall hold the proceeds of such draw as Letter of
       Credit Proceeds pursuant to subparagraph (a) above, provided that such
       drawing shall not constitute a waiver of Landlord's right to declare a
       default under this Lease.

          5.16 Tenant's Remedies. Tenant shall look solely to Landlord's
               -----------------
interest in the Building and the insurance proceeds received therefrom (subject,
however, to the right of any Mortgage Lender hereunder) for recovery of any
judgment from Landlord. Landlord and Landlord Parties shall not be personally
liable for any such judgment. Any lien obtained to

                                      -26-
<PAGE>

enforce any such judgment and any levy of execution thereon shall be subject and
subordinate to any lien, mortgage or deed of trust to which Section 5.13 applies
or may apply.

          5.17 Rules And Regulations. Tenant shall comply with the Rules and
               ---------------------
Regulations for the Project attached as Exhibit C and such amendments thereto as
Landlord may adopt from time to time with prior notice to Tenant. Landlord shall
not be liable to Tenant for or in connection with the failure of any other
tenant of the Building to comply with any rules and regulations applicable to
such other tenant under its lease.

          5.18 Prohibition And Indemnity With Respect To Hazardous Material.
               ------------------------------------------------------------
Tenant shall not cause or permit any Hazardous Material to be brought upon, kept
or used in or about the Leased Premises by Tenant or Tenant Parties without the
prior written consent of Landlord, save and except only for Permitted Hazardous
Materials, which Tenant may bring, store and use in reasonable quantities for
their intended use in the Leased Premises, but only in full compliance with all
Hazardous Materials Laws and otherwise in a safe and prudent manner. If Tenant
breaches the obligations stated in the preceding sentence, or if contamination
of the Leased Premises by Hazardous Material occurs for which Tenant is or
Tenant Parties are responsible, or if Tenant's activities or those of Tenant
Parties (or those of its subtenants) result in or cause a Hazardous Materials
Claim, then Tenant shall indemnify, defend, protect and hold Landlord and
Landlord Parties harmless from and against any and all claims, judgments,
damages, penalties, fines, costs, expenses, liabilities or losses (including,
without limitation, diminution in value of the Leased Premises, damages for the
loss or restriction on use of rentable or useable space or of any amenity of the
Leased Premises, damages arising from any adverse impact on marketing of space,
and sums paid in settlement of claims, reasonable attorneys' fees, consultants'
fees and experts' fees) (collectively, "Claims") which arise during or after the
Term as a result of such contamination. This indemnification of Landlord by
Tenant includes, without limitation, costs incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Leased Premises due to the activities of Tenant and
Tenant's Parties. The foregoing indemnity shall survive the expiration or
earlier termination of this Lease.

          5.19 Surrender Of Premises On Termination. On or before the ninetieth
               ------------------------------------
(90th) day preceding the Term Expiration Date, Tenant shall notify Landlord in
writing of the precise date upon which Tenant plans to surrender the Leased
Premises to Landlord. On expiration of the Term, Tenant shall quit and surrender
the Leased Premises to Landlord, broom clean, in good order, condition and
repair as required by Section 5.05, with all of Tenant's movable equipment,
furniture, trade fixtures and other personal property removed therefrom. Unless
Tenant has obtained Landlord's agreement in writing that it can remove an
Alteration or item of Tenant Improvements, all Alterations and Tenant
Improvements shall be surrendered with the Leased Premises in good condition and
repair, reasonable wear and tear (but only to an extent consistent with the
Leased Premises remaining in good condition and repair) and casualty damage

                                      -27-
<PAGE>

excepted. Any property of Tenant not removed hereunder shall be deemed, at
Landlord's option, to be abandoned by Tenant and Landlord may store such
property in Tenant's name at Tenant's expense, and/or dispose of the same in any
manner permitted by law. If Landlord desires to have the Leased Premises, or any
part or parts thereof, restored to a condition that existed prior to
installation of any Tenant Extra Improvements or to their condition prior to
making any Alteration thereto, Landlord shall so notify Tenant in writing not
later than sixty (60) days prior to the regularly scheduled Term Expiration Date
(or if this Lease is sooner terminated, upon the date of such termination); and
upon receipt of such notice, Tenant shall, at Tenant's sole cost and expense, so
restore the Leased Premises, or such part or parts thereof, before the regularly
scheduled Term Expiration Date (or if this Lease is sooner terminated, within
ten (10) days thereafter), so long as Landlord has previously notified Tenant,
in accordance with Section 5.08 above, that Landlord requires such Alterations
or Tenant Improvements to be removed upon termination of this Lease. Tenant
shall repair at its sole cost and expense, all damage caused to the Leased
Premises or the Project by removal of Tenant's movable equipment or furniture
and such Tenant Improvements and Alterations as Tenant shall be allowed or
required to remove from the Leased Premises by Landlord. If the Leased Premises
are not surrendered as of the end of the Term in the manner and condition herein
specified, Tenant shall indemnify, defend, protect and hold Landlord and
Landlord Parties harmless from and against any and all Claims resulting from or
caused by Tenant's delay or failure in so surrendering the Leased Premises,
including, without limitation, any Claims made by any succeeding tenant due to
such delay or failure. Tenant acknowledges that Landlord will be attempting to
lease the Leased Premises with any such lease to be effective upon expiration of
the Term, and failure to surrender the Leased Premises could cause Landlord to
incur liability to such successor tenant for which Tenant shall be responsible
hereunder to the full extent thereof.

          5.20 Window Coverings. All window coverings shall be provided by
               ----------------
Tenant, at its sole cost and expense, and shall comply with Landlord's standard
Building window covering. Tenant shall not place or maintain any window
coverings, blinds or drapes on any exterior window, other than those in
compliance with Landlord's standards, without Landlord's prior written approval
which Landlord shall have the right to grant or withhold in its absolute and
sole discretion. Tenant acknowledges that breach of this covenant will directly
and adversely affect the exterior appearance of the Project or the operation of
the heating, ventilation or air conditioning systems.


                                  ARTICLE 6.
                                  ----------
                    Condition And Operation Of The Building
                    ---------------------------------------

          6.01 Exhibit B Controls. Landlord's entire obligation with respect to
               ------------------
the condition of the Leased Premises, its suitability for Tenant's uses and the
improvement requirements with respect thereto shall be as stated in Exhibit B.
Landlord shall have no other obligation of any kind or character, express or
implied, with respect to the condition of the Leased Premises, Building or
Project or the suitability thereof for Tenant's purposes, and Tenant

                                      -28-
<PAGE>

acknowledges that it has neither received nor relied upon any representation or
warranty made by or on behalf of Landlord with respect to such matters.

          6.02 Alteration. Landlord may, at any time and from time to time: (i)
               ----------
make alterations, structural modifications, seismic modifications or additions
to the Building; (ii) change, add to, eliminate or reduce the extent, size,
shape or configuration of any aspect of or improvement (including the Building)
within the Project or its operations; (iii) change the arrangement, character,
use or location of corridors, stairs, toilets, mechanical, plumbing, electrical
or other operating systems or any other parts of the Building; and (iv) change
the name, number or designation by which the Building or the Project is commonly
known. None of the foregoing acts shall be deemed an actual or constructive
eviction of Tenant, shall entitle Tenant to any reduction of Rent or shall
result in any liability of Landlord to Tenant. Landlord shall have the exclusive
rights to the airspace above and around, and the subsurface below, the Leased
Premises and other portions of the Building, including, without limitation, the
exclusive right to use all exterior walls, roofs and other portions of the
Building for signs, notices and other promotional purposes.


                                  ARTICLE 7.
                                  ----------
              Casualty, Eminent Domain And Miscellaneous Matters
              --------------------------------------------------

          7.01 Landlord's Casualty Insurance. Landlord shall maintain, or
               -----------------------------
cause to be maintained, a policy or policies of insurance with the premiums
thereon fully paid in advance, issued by and binding upon an insurance company
of good financial standing, insuring the Project against loss or damage by fire
or other insurable hazards (that may include earthquake loss if Landlord elects
to maintain such coverage) and contingencies for the full insurable value
thereof, or, in the alternative, insuring for eighty percent (80%) of the
replacement cost thereof (or such minimum amount as shall be required to
eliminate operation of coinsurance provisions), exclusive of excavations and
foundations; provided, however, that Landlord shall not be obligated to insure
any of Tenant's furniture, equipment, machinery, trade-fixtures, goods or
supplies ("Tenant's Personal Property"), or any Tenant Extra Improvements or
Alterations that Tenant may make upon the Leased Premises. If the annual
premiums charged Landlord for such casualty insurance exceed the standard
premium rates because the nature of Tenant's operations result in
extra-hazardous or higher than normal risk exposure, then Tenant shall, upon
receipt of appropriate premium invoices, reimburse Landlord for such increases
in premium. All insurance proceeds payable under Landlord's insurance carried
hereunder shall be payable solely to Landlord, and Tenant shall have no interest
therein.

          7.02 Liability Insurance. Landlord (with respect to the Project) and
               -------------------
Tenant (with respect to the Leased Premises and Project) shall each maintain or
cause to be maintained a policy or policies of commercial general liability
insurance with the premiums thereon fully paid in advance, issued by and binding
upon an insurance company of good financial standing, such insurance to afford
minimum protection of not less than Five Million Dollars ($5,000,000.00) for

                                      -29-
<PAGE>

bodily injury, or death in any one occurrence and of not less than One Million
Dollars ($1,000,000.00) for property damage in any one occurrence. The coverages
required to be carried shall be extended to include, but not to be limited to,
blanket contractual liability, personal injury liability (libel, slander, false
arrest and wrongful eviction), and broad form property damage liability.
Tenant's contractual liability insurance shall apply, without limitation, to all
of Tenant's indemnity obligations under this Lease. The certificate evidencing
Tenant's insurance coverage required hereunder shall state that the insurance
includes the liability assumed by Tenant under this Lease and that Tenant's
insurance is primary with any other insurance available to Landlord or any other
named insured being excess. Upon request of Tenant, Landlord shall provide
Tenant reasonable evidence that the insurance required to be maintained
hereunder by Landlord is in full force and effect.

          7.03 Tenant's Casualty Insurance And Additional Tenant Insurance
               -----------------------------------------------------------
Requirements.
------------

   (a) Tenant shall provide insurance coverage during the Term against loss or
       damage by fire and such other risks as are from time to time included in
       an "all risk" policy (including without limitation sprinkler leakage and
       water damage), insuring the full insurable value of any Tenant Extra
       Improvements, any Alterations, Tenant's trade fixtures, furnishings,
       equipment, and all other items of personal property of Tenant, insuring
       the full replacement cost thereof.

   (b) All policies required to be carried by Tenant under this Article 7 shall
       be written with financially responsible companies with a Best & Company
       rating of "B+" or better, and all evidence of insurance provided to
       Landlord shall contain an endorsement showing that Landlord and Mortgage
       Lender are included as an additional insured and an endorsement whereby
       the insurer agrees not to cancel or alter the policy without at least
       thirty (30) days' prior written notice to Landlord and all named and
       additional insureds. Any deductible or self-insurance provisions under
       any insurance policies maintained by Tenant shall be subject to
       Landlord's prior written approval which shall not be unreasonably
       withheld.

   (c) Prior to the Term Commencement Date and thereafter, from time to time,
       promptly upon request by Landlord, Tenant shall furnish Landlord and any
       additional insureds with copies of policies or certificates of insurance,
       evidencing Tenant's maintenance and renewal of the required coverages. If
       Tenant fails to provide such evidence of insurance required hereunder,
       Landlord shall be authorized (but not required) to procure such coverage
       in the amounts stated with all costs thereof to be charged to Tenant and
       paid upon written invoice therefor as Additional Rent together with an
       administrative fee equal to ten percent (10%) of such costs.

                                      -30-
<PAGE>

          7.04  Indemnity And Exoneration.
                -------------------------

   (a) Landlord shall not be liable to Tenant (i) for any loss, damage or injury
       to person or property caused by theft, fire, vandalism, assault, battery,
       act of God, acts of the public enemy, acts of terrorists or criminals,
       riot, strike, insurrection, war, court order, requisition or order of
       governmental body or authority, whether or not the negligence of Landlord
       was a partial cause of such loss, damage or injury, or (ii) that occur by
       reason of the active negligence or willful misconduct of Tenant or Tenant
       Parties, or (iii) for any damage or inconvenience which may arise through
       repair or alteration of any part of the Project or failure to make any
       such repair except as expressly otherwise provided in Sections 7.04.(c),
       7.06 and 7.07.

   (b) Tenant shall indemnify, defend, protect and hold Landlord and Landlord
       Parties harmless from and against any and all Claims arising out of or
       related to claims of injury to or death of persons, damage to property
       occurring or resulting directly or indirectly from the use or occupancy
       of the Leased Premises or activities of Tenant or its employees in or
       about the Leased Premises or Project; provided, however, that the
       foregoing indemnity shall not be applicable to claims arising by reason
       of the active negligence or willful misconduct of Landlord or Landlord
       Parties, unless covered by insurance required to be carried by Tenant
       under the terms of this Lease.

   (c) Landlord shall indemnify, defend, protect and hold Tenant and Tenant
       Parties harmless from and against any and all claims, judgments, damages,
       penalties, fines, costs, expenses, liabilities or losses arising out of
       or related to claims of injury to or death of persons, damage to property
       occurring or resulting directly or indirectly from the use or occupancy
       of those portions of the Project other than the Leased Premises or
       activities of Landlord or Landlord Parties in or about the Leased
       Premises or Project, such indemnity to include, without limitation, the
       obligation to provide all costs of defense against any such claim;
       provided, however, that the foregoing indemnity shall not include claims
       arising by reason of the active negligence or willful misconduct of
       Tenant or Tenant Parties.

   (d) Tenant shall indemnify, defend and protect Landlord and hold and save
       Landlord harmless of and from any and all loss, claims, proceedings,
       cost, damage, injury, causes of action, liabilities or expense arising
       out of or in any way related to work or labor performed, materials or
       supplies furnished to or at the request of Tenant or in connection with
       performance of any work done for the account of Tenant in the Leased
       Premises or the Project.

          7.05  Waiver Of Subrogation Rights. Anything in this Lease to the
                ----------------------------
contrary notwithstanding, Landlord and Tenant each waive all rights of recovery,
claim, action or cause of action, against the other, Tenant Parties or Landlord
Parties, as applicable, for any loss or damage that may occur to the Leased
Premises, or any improvements thereto, or the Project or any personal property
of such party therein, by reason of fire, the elements, or any other cause

                                      -31-
<PAGE>

that could be insured against under the terms of an "all risk" insurance policy
or other casualty insurance coverages which are required to be obtained pursuant
to this Lease, regardless of cause or origin, including negligence of the other
party, Landlord Parties or Tenant Parties, as applicable; and each party
covenants that no insurer shall hold any right of subrogation against such other
party. Tenant shall advise its insurers of the foregoing and such waiver shall
be a part of each policy maintained by Tenant that applies to the Leased
Premises, any part of the Project or Tenant's use and occupancy of any part
thereof.

          7.06  Condemnation And Loss Or Damage.
                -------------------------------

   (a) If the Leased Premises or any portion of the Project shall be taken or
       condemned for any public purpose to such an extent as to render the
       Leased Premises untenantable as reasonably determined by Landlord, this
       Lease shall, at the option of either party, forthwith cease and terminate
       as of the date of taking. All proceeds from any taking or condemnation of
       the Leased Premises shall belong to and be paid to Landlord subject to
       the rights of any Mortgage Lender; provided, however, that Landlord shall
       cooperate with Tenant if Tenant seeks to recover at its cost and expense,
       proceeds, damages or awards paid to compensate for damage to or taking of
       Tenant's Personal Property.

   (b) If a temporary taking of all or a portion of the Leased Premises occurs,
       there shall be no abatement of Rent and Tenant shall remain fully
       obligated for performance of all of the covenants and obligations on its
       part to be performed pursuant to the terms of this Lease. All proceeds
       awarded or paid with respect thereto shall belong to Tenant.

          7.07  Damage And Destruction. If a fire or other casualty in the
                ----------------------
Leased Premises occurs, Tenant shall immediately give notice thereof to
Landlord. The following provision shall then apply:

   (a) If the damage is limited solely to the Leased Premises and the Leased
       Premises can, in the reasonable opinion of Landlord, be made tenantable
       with all damage repaired within six (6) months from the date of damage or
       destruction, then Landlord shall diligently rebuild the same. If Landlord
       rebuilds the Leased Premises, Tenant shall repair and restore Tenant
       Extra Improvements or any Alterations, or, at Tenant's election, Landlord
       may repair and rebuild the Tenant Extra Improvements or Alterations, at
       Tenant's expense.

   (b) If portions of the Project outside the boundaries of the Leased Premises
       are damaged or destroyed (whether or not the Leased Premises are also
       damaged or destroyed) and the Leased Premises and the Project can, in the
       reasonable opinion of Landlord, both be made tenantable with all damage
       repaired within six (6) months from the date of damage or destruction,
       and provided that Landlord determines that such reconstruction is
       economically feasible, then Landlord shall be obligated to do so;
       provided, however, that Landlord shall have no obligation to repair or
       restore Tenant Extra Improvements or

                                      -32-
<PAGE>

       Alterations unless Tenant elects to have Landlord do so at Tenant's
       expense as provided in Section 7.07.(a).

   (c) If neither Section 7.07.(a) nor 7.07.(b) above applies, Landlord shall
       notify Tenant within sixty (60) days after the date of such damage and
       destruction and either Tenant or Landlord may terminate this Lease within
       thirty (30) days after the date of such notice; provided, however, that
       Landlord shall have the right to elect to reconstruct the Project and the
       Leased Premises, in which event Landlord shall notify Tenant within said
       sixty (60) day period and Tenant shall thereupon have no right to
       terminate this Lease. Notwithstanding the foregoing, if the Project and
       the Leased Premises have not be reconstructed within twelve (12) months
       following the date of such damage and destruction, Tenant shall have the
       right to terminate this Lease by providing written notice to Landlord
       within ten (10) days following the expiration of such twelve (12) month
       period. If Tenant fails to terminate this Lease as provided above, time
       being of the essence, this Lease shall remain in full force and effect in
       accordance with the terms set forth herein.

   (d) During any period when Tenant's use of the Leased Premises is
       significantly affected by damage or destruction, Gross Rent shall abate
       proportionately until such time as the Leased Premises are made
       tenantable as reasonably determined by Landlord, and no portion of the
       Rent so abated shall be subject to subsequent recapture; provided,
       however, that there shall be no such abatement except to the extent that
       the amount thereof is compensated for and recoverable from the proceeds
       of rental abatement or business interruption insurance maintained by
       Landlord with respect to this Lease, the Leased Premises or the Project
       which Landlord agrees to maintain with respect to this Lease, the Leased
       Premises or the Project, so long as such insurance is available on
       commercially reasonable terms, and, if such insurance is not available on
       commercially reasonable terms, Landlord agrees to notify Tenant of its
       decision to cancel such insurance so that Tenant, at its sole discretion,
       may obtain business interruption insurance, if it so desires.

   (e) The proceeds from any insurance paid by reason of damage to or
       destruction of the Building or any part thereof, the Building Standard
       Improvements or any other element, component or property insured by
       Landlord shall belong to and be paid to Landlord subject to the rights of
       any mortgagee of Landlord's interest in the Project or the beneficiary of
       any deed of trust that constitutes an encumbrance thereon. If this Lease
       is terminated by either party as a consequence of a casualty in
       accordance with any of the provisions of this Section 7.07.(e), all
       proceeds of insurance required to be maintained either by Landlord or
       Tenant shall be paid to Landlord subject to the rights of any mortgagee
       of Landlord's interest in the Project or the beneficiary of any deed of
       trust that constitutes an encumbrance thereon; provided, however, that
       Tenant shall be paid all proceeds of insurance payable in connection with
       Tenant's trade fixtures, furnishings, equipment and all other items of
       personal property of Tenant and any Tenant Extra

                                      -33-
<PAGE>

       Improvements and Alterations required to be removed from the Leased
       Premises upon termination of this Lease.

   (f) If the Leased Premises, or any part thereof, or any portion of the
       Building necessary for Tenant's use of the Leased Premises, are damaged
       or destroyed during the last twelve (12) months of the Term, or any
       extension thereof, Landlord or Tenant may terminate this Lease by giving
       written notice thereof to the other party within thirty (30) days after
       the date of the casualty, in which case this Lease shall terminate as of
       the date of the casualty.

   (g) Except to the extent expressly provided in this Lease, nothing contained
       in this Lease shall relieve Tenant of any liability to Landlord or to
       Landlord's insurance carriers that Tenant may have under law or under the
       provisions of this Lease in connection with any damage to the Leased
       Premises or the Building by fire or other casualty.

          7.08  Default By Tenant.
                -----------------

   (a) Events Of Default. The occurrence of any of the following shall
       -----------------
       constitute an event of default ("Event of Default") on the part of
       Tenant:

       (1)  Abandonment. Abandonment of the Leased Premises for a continuous
            -----------
            period in excess of five (5) business days. Tenant waives any right
            to notice Tenant may have under Section 1951.3 of the Civil Code of
            the State of California, the terms of this Section 7.08.(a)(1) being
            deemed such notice to Tenant as required by said Section 1951.3;

       (2)  Nonpayment Of Rent. Failure to pay any installment of Gross Rent or
            ------------------
            items of Additional Rent, upon the date when payment is due, such
            failure continuing for a period of five (5) business days after
            receipt of written notice of such failure; provided, however, that
            Landlord shall not be required to provide such notice more than
            twice during any calendar year with respect to non-payment of Gross
            Rent, the third such non-payment constituting default without
            requirement of notice;

       (3)  Other Obligations. Failure to perform any obligation, agreement or
            -----------------
            covenant under this Lease other than those matters specified in
            Sections 7.08.(a)(1) and 7.08.(a)(2), such failure continuing for
            fifteen (15) business days after written notice of such failure (or
            with respect to non-monetary obligations only, such longer period as
            is reasonably necessary to remedy such default, provided that Tenant
            shall continuously and diligently pursue such remedy at all times
            until such default is cured);

       (4)  General Assignment. A general assignment by Tenant or Guarantor for
            ------------------
            the benefit of creditors;

                                      -34-
<PAGE>

       (5)  Bankruptcy. The filing of any voluntary petition in bankruptcy by
            ----------
            Tenant or Guarantor, or the filing of an involuntary petition by
            Tenant's or Guarantor's creditors, which involuntary petition
            remains undischarged for a period of thirty (30) days. If under
            applicable law the trustee in bankruptcy or Tenant has the right to
            affirm this Lease and continue to perform the obligations of Tenant
            hereunder, such trustee or Tenant shall, in such time period as may
            be permitted by the bankruptcy court having jurisdiction, cure all
            defaults of Tenant hereunder outstanding as of the date of the
            affirmance of this Lease and provide to Landlord such adequate
            assurances as may be necessary to ensure Landlord of the continued
            performance of Tenant's obligations under this Lease;

       (6)  Receivership. The employment of a receiver to take possession of
            ------------
            substantially all of Tenant's assets or the Leased Premises, if such
            receivership remains undissolved for a period of ten (10) business
            days after creation thereof;

       (7)  Attachment. The attachment, execution or other judicial seizure of
            ----------
            all or substantially all of Tenant's assets or the Leased Premises,
            if such attachment or other seizure remains undismissed or
            undischarged for a period of ten (10) business days after the levy
            thereof;

       (8)  Insolvency. The admission by Tenant or Guarantor in writing of its
            ----------
            inability to pay its debts as they become due, the filing by Tenant
            or Guarantor of a petition seeking any reorganization, arrangement,
            composition, readjustment, liquidation, dissolution or similar
            relief under any present or future statute, law or regulation, the
            filing by Tenant or Guarantor of an answer admitting or failing
            timely to contest a material allegation of a petition filed against
            Tenant or Guarantor in any such proceeding or, if within thirty (30)
            days after the commencement of any proceeding against Tenant or
            Guarantor seeking any reorganization, or arrangement, composition,
            readjustment, liquidation, dissolution or similar relief under any
            present or future statute, law or regulation, such proceeding shall
            not have been dismissed.

   (b) Remedies Upon Default.
       ---------------------

       (1)  Termination. If an Event of Default occurs, Landlord shall have the
            -----------
            right, with or without notice or demand, immediately (after
            expiration of the applicable grace periods specified herein) to
            terminate this Lease, and at any time thereafter recover possession
            of the Leased Premises or any part thereof and expel and remove
            therefrom Tenant and any other person occupying the same, by any
            lawful means, and again repossess and enjoy the Leased Premises
            without prejudice to any of the remedies that Landlord may have
            under this Lease, or at law or equity by reason of Tenant's default
            or of such termination.

       (2)  Continuation After Default. Even though Tenant has breached this
            --------------------------
            Lease and/or abandoned the Leased Premises, this Lease shall
            continue in effect for so long as

                                      -35-
<PAGE>

            Landlord does not terminate Tenant's right to possession under
            Section 7.08.(b)(1) hereof, and Landlord may enforce all of its
            rights and remedies under this Lease, including (but without
            limitation) the right to recover Rent as it becomes due. Landlord
            has the remedy described in Section 1951.4 of the Civil Code of the
            State of California or any successor code section (Landlord may
            continue the 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). Acts of
            maintenance, preservation or efforts to lease the Leased Premises or
            the appointment of receiver upon application of Landlord to protect
            Landlord's interest under this Lease shall not constitute an
            election to terminate Tenant's right to possession.

   (c) Damages Upon Termination. Should Landlord terminate this Lease pursuant
       ------------------------
       to the provisions of Section 7.08.(b)(1) hereof, Landlord shall have all
       the rights and remedies of a landlord provided by Section 1951.2 of the
       Civil Code of the State of California, or successor code section. Upon
       such termination, in addition to any other rights and remedies to which
       Landlord may be entitled under applicable law, Landlord shall be entitled
       to recover from Tenant: (i) the worth at the time of award of the unpaid
       Rent and other amounts which had been earned at the time of termination;
       (ii) the worth at the time of award of the amount by which the unpaid
       Rent which would have been earned after termination until the time of
       award exceeds the amount of such Rent loss that the Tenant proves could
       have been reasonably avoided; (iii) the worth at the time of award of the
       amount by which the unpaid Rent for the balance of the Term after the
       time of award exceeds the amount of such Rent loss that the Tenant proves
       could be 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 this Lease or which, in the
       ordinary course of things, would be likely to result therefrom. The
       "worth at the time of award" of the amounts referred to in (i) and (ii)
       shall be computed with interest at ten percent (10%) per annum or the
       highest lawful rate, whichever is the lower. The "worth at the time of
       award" of the amount referred to in (iii) shall be computed by
       discounting such amount at the "discount rate" of the Federal Reserve
       Bank of San Francisco in effect as of time of award plus one percent (1%)
       and, where rental value is a material issue, shall be based upon
       competent appraisal evidence.

   (d) Computation Of Rent For Purposes Of Default. For purposes of computing
       -------------------------------------------
       unpaid Rent that would have accrued and become payable under this Lease
       pursuant to the provisions of Section 7.08.(c), unpaid Rent shall consist
       of the sum of:

       (1)  the total Base Rent for the balance of the Term, plus

       (2)  a computation of the Basic Operating Cost for the balance of the
            Term, the assumed Basic Operating Cost for the calendar year of the
            default and each future calendar year in the Term to be equal to the
            Basic Operating Cost for the calendar year prior to the year in
            which default occurs compounded at a per annum rate equal to the

                                      -36-
<PAGE>

            mean average rate of inflation for the preceding five (5) calendar
            years as determined by reference to the Consumer Price Index -- all
            items for the San Francisco-Oakland-San Jose Area, All Urban
            Consumers, published by the Bureau of Labor Statistics of the United
            States Department of Labor (Base Year 1982-84=100), or such
            successor index as may be established to provide a measure of the
            current purchasing power of the dollar.

   (e) Late Charge. In addition to its other remedies, after written notice of
       -----------
       its intention to invoke this paragraph because of previous late payments
       by Tenant, Landlord shall have the right to add to the amount of any
       payment required to be made by Tenant hereunder that is not paid on or
       before the date the same is due, an amount equal to Two Hundred Fifty
       Dollars ($250.00) plus five percent (5%) of the delinquency for each
       month or portion thereof that the delinquency remains outstanding, the
       parties agreeing that Landlord's damage by virtue of such delinquencies
       would be difficult to compute and the amount stated herein represents a
       reasonable estimate thereof. The provision for a late charge set forth in
       this Section 7.08.(e), and any collection of a late charge by Landlord,
       shall not be deemed a waiver of any breach or Event of Default by Tenant
       under this Lease. The late charge shall be due upon demand by Landlord at
       any time after failure to pay any installment of Rent, and in the case of
       Gross Rent, without waiting for expiration of the period specified in
       Section 7.08.(a)(2).

   (f) Remedies Cumulative. All of the remedies permitted or available to
       -------------------
       Landlord under this Lease, or at law or in equity, shall be cumulative
       and not alternative and invocation of any such right or remedy shall not
       constitute a waiver or election of remedies with respect to any other
       permitted or available right or remedy.

          7.09  Arbitration Of Fair Market Rent. If Tenant disputes the amount
                -------------------------------
claimed by Landlord as Fair Market Rent, and such dispute cannot be resolved by
mutual agreement, the dispute shall be submitted to arbitration. The award
rendered in any such arbitration may be entered in any court having jurisdiction
and shall be final and binding between the parties. The arbitration shall be
conducted and determined in the City of South San Francisco in accordance with
the then-prevailing commercial arbitration rules of the American Arbitration
Association or its successor for arbitration of commercial disputes except to
the extent that the procedures mandated by said rules shall be modified as
follows:

   (a) Tenant shall make demand for arbitration in writing within thirty (30)
       days after service of Landlord's determination of Fair Market Rent given
       under Section 3.03.(b), specifying therein the name and address of the
       person to act as the arbitrator on its behalf. The arbitrator shall be
       qualified as a real estate appraiser familiar with the Fair Market Rent
       of first-class commercial office space in the downtown San Francisco
       Financial District who would qualify as an expert witness over objection
       to give testimony addressed to the issue in a court of competent
       jurisdiction. Failure on the part of Tenant to make a timely and proper
       demand for such arbitration shall constitute a waiver of the right
       thereto. Within

                                      -37-
<PAGE>

       ten (10) business days after the service of Tenant's demand for
       arbitration, Landlord shall have the right to give notice in writing to
       Tenant of Landlord's adjusted determination of Fair Market Rent. Within
       ten (10) business days following Tenant's receipt of such notice, if
       Tenant and Landlord have not agreed upon Fair Market Rent, Tenant shall
       notify Landlord in writing that Tenant desires to renew its demand for
       arbitration. Failure on the part of Tenant to give such notice shall
       constitute a waiver of the right to such arbitration, and Tenant shall be
       deemed to have accepted Landlord's adjusted determination of Fair Market
       Rent. Within ten (10) business days after the receipt of such notice,
       Landlord shall give notice to Tenant, specifying the name and address of
       the person designated by Landlord to act as arbitrator on its behalf who
       shall be similarly qualified. If Landlord fails to notify Tenant of the
       appointment of its arbitrator, within or by the time above specified,
       then the arbitrator appointed by Tenant shall be the arbitrator to
       determine the issue.

   (b) If two (2) arbitrators are chosen pursuant to Section 7.09.(a) above, the
       arbitrators so chosen shall meet within ten (10) business days after the
       second arbitrator is appointed and, if within ten (10) business days
       after such first meeting the two arbitrators shall be unable to agree
       promptly upon a determination of Fair Market Rent, they shall appoint a
       third arbitrator, who shall be a competent and impartial person with
       qualifications similar to those required of the first two arbitrators
       pursuant to Section 7.09.(a). If they are unable to agree upon such
       appointment within five (5) business days after expiration of said ten
       (10) day period, the third arbitrator shall be selected by the parties
       themselves, if they can agree thereon, within a further period of ten
       (10) business days. If the parties do not so agree, then either party, on
       behalf of both, may request appointment of such a qualified person by the
       then Chief Judge of the United States District Court having jurisdiction
       over the City and County of San Francisco, acting in his private
       non-judicial capacity. Request for appointment shall be made in writing
       with a copy given to the other party. Each party agrees that said Judge
       shall have the power to make the appointment, provided, however, if the
       Chief Judge does not make a determination within ten (10) days of request
       by either party for the appointment of a third arbitrator, appointment of
       such third arbitrator shall be made in accordance with the selection
       procedure of the commercial arbitration rules of the American Arbitration
       Association or its successor for arbitration of commercial disputes. The
       three (3) arbitrators shall decide the dispute, if it has not previously
       been resolved, by following the procedure set forth in Section 7.09.(c)
       below.

   (c) Where the issue cannot be resolved by agreement between the two
       arbitrators selected by Landlord and Tenant or settlement between the
       parties during the course of arbitration, the issue shall be resolved by
       the three arbitrators in accordance with the following procedure. The
       arbitrators selected by each of the parties shall state in writing his
       determination of the Fair Market Rent, supported by the reasons therefor
       with counterpart copies to each party. The arbitrators shall arrange for
       a simultaneous exchange of such proposed resolutions. The role of the
       third arbitrator shall be to select which of the two

                                      -38-
<PAGE>

       proposed resolutions most closely approximates his determination of Fair
       Market Rent. The third arbitrator shall have no right to propose a middle
       ground or any modification of either of the two proposed resolutions. The
       resolution he chooses as most closely approximating his determination
       shall constitute the decision of the arbitrators and be final and binding
       upon the parties.

   (d) If any arbitrator fails, refuses or is unable to act, his successor shall
       be appointed by him, but in the case of the third arbitrator, his
       successor shall be appointed in the same manner as provided for
       appointment of the third arbitrator. The arbitrators shall attempt to
       decide the issue within ten (10) business days after the appointment of
       the third arbitrator. Any decision in which the arbitrator appointed by
       Landlord and the arbitrator appointed by Tenant concur shall be binding
       and conclusive upon the parties. Each party shall pay the fees and costs
       of its own counsel. The losing party shall pay the fees and costs of the
       arbitrators and of the expert witnesses (if any) of the prevailing party
       as well as those of its expert witnesses. For purposes hereof, the losing
       party shall be that party whose selected arbitrator's statement of Fair
       Market Rent was not selected by the third arbitrator.

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

          7.10  No Waiver. Failure of Landlord or Tenant to declare any default
                ---------
immediately upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord or Tenant, as the case may
be, shall have the right to declare any such default at any time thereafter. No
waiver by Landlord of an Event of Default, or any agreement, term, covenant or
condition contained in this Lease, shall be effective or binding on Landlord
unless made in writing and no such waiver shall be implied from any omission by
Landlord to take action with respect to such Event of Default or other such
matter. No express written waiver by Landlord of any Event of Default, or other
such matter, shall affect or cover any other Event of Default, matter or period
of time, other than the Event of Default, matter and/or period of time specified
in such express waiver. One or more written waivers by Landlord of any Event of
Default, or other matter, shall not be deemed to be a waiver of any subsequent
Event of Default, or other matter, in the performance of the same provision of
this Lease. Acceptance of Rent by Landlord hereunder, or endorsement of any
check, shall not, in and of itself, constitute a waiver of any breach or Event
of Default or of any agreement, term, covenant or condition of this Lease,
except as to the payment of Rent so accepted, regardless of Landlord's knowledge
of any concurrent Event of Default or matter. Landlord may, at its election,
apply any Rent received from Tenant to the oldest obligation outstanding from
Tenant to Landlord, any endorsement or other statement of Tenant to the contrary
notwithstanding. No course of conduct

                                      -39-
<PAGE>

between Landlord and Tenant, and no acceptance of the keys to or possession of
the Leased Premises before the termination of the Term by Landlord or any
employee of Landlord shall constitute a waiver of any such breach or of any
term, covenant or condition of this Lease or operate as a surrender of this
Lease. All of the remedies permitted or available to Landlord under this Lease,
or at law or in equity, shall be cumulative and not alternative and invocation
of any such right or remedy shall not constitute a waiver or election of
remedies with respect to any other permitted or available right or remedy.

          7.11  Statutory Waivers. Tenant hereby waives the benefits of: (i)
                -----------------
Sections 1932 and 1933(4) of the California Civil Code (pertaining to the
termination of a hiring); (ii) 1941 and 1942 of the California Civil Code
(pertaining to the obligations of a landlord to maintain premises and the rights
of a tenant to make certain repairs or terminate a lease); (iii) Section
1263.260 of the California Code of Civil Procedure (pertaining to the removal of
improvements upon condemnation); and (iv) Section 1265.130 of the California
Code of Civil Procedure (pertaining to the termination of a lease upon
condemnation).

          7.12  Holding Over. If Tenant holds over after expiration or
                ------------
termination of this Lease without the written consent of Landlord, Tenant shall
pay for each month of hold-over tenancy one and one-half the Gross Rent that
Tenant was obligated to pay for the month immediately preceding the end of the
Term for each month or any part thereof of any such hold-over period together
with such other amounts as may become due hereunder. No holding over by Tenant
after the Term shall operate to extend the Term. If Tenant holds over without
consent, Tenant shall indemnify, defend, protect and hold Landlord and Landlord
Parties harmless from and against any and all claims, judgments, damages,
penalties, fines, costs, expenses, liabilities or losses for damages by any
other tenant or third person to whom Landlord may have leased or offered to
lease all or any part of the Leased Premises covered hereby effective on or
after the termination of this Lease, together with all loss, cost, expense,
damages and liabilities in connection with any such reletting, including,
without limitation, reasonable attorneys' fees and Landlord's lost revenues. Any
holding over with the consent of Landlord in writing shall thereafter constitute
this Lease a lease from month to month.

          7.13  Attorneys' Fees. If either party places the enforcement of this
                ---------------
Lease, or any part thereof, or the collection of any Rent due, or to become due
hereunder, or recovery of the possession of the Leased Premises in the hands of
an attorney or collection agency, or files suit upon the same, or seeks a
judicial declaration of rights hereunder, the prevailing party shall recover its
reasonable attorneys' fees, court costs and collection agency charges. As used
herein, "prevailing party" shall mean the party who substantially prevails in
the matter at issue, including without limitation, a party who dismisses an
action for recovery hereunder in exchange for payment of the sums allegedly due,
performance of covenants allegedly breached or consideration substantially equal
to the relief sought in the action.

                                      -40-
<PAGE>

          7.14  Amendments. This Lease may not be altered, changed or amended,
                ----------
except by an instrument in writing signed by both parties.

          7.15  Transfers By Landlord. Landlord shall have the right to transfer
                ---------------------
and assign, in whole or in part, all of its rights and obligations hereunder and
in the Project. Upon transfer by Landlord of its interest in the Project, and
upon the transferee's assumption of Landlord's obligations hereunder, no further
liability or obligations shall thereafter accrue against the transferring or
assigning person as Landlord hereunder.

          7.16  Severability. If any term or provision of this Lease, or the
                ------------
application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and shall be enforceable to the extent permitted by
law.

          7.17  Notices. All notices, demands, consents and approvals that may
                -------
or are required to be given by either party to the other hereunder shall be in
writing and shall be deemed to have been fully given by personal delivery or
when deposited in the United States mail, certified or registered, postage
prepaid, or by national overnight courier service and addressed to the party to
be notified at the address for such party specified on the Basic Lease
Information sheet, or to such other place as the party to be notified may from
time to time designate by at least fifteen (15) days notice to the notifying
party. Personal delivery of notices to Tenant may in all events be made by
leaving a copy of the notice, addressed to Tenant, at the Leased Premises.
Tenant appoints as its agent to receive the service of all default notices and
notice of commencement of unlawful detainer proceedings the person in charge of
or apparently in charge of or occupying the Leased Premises at the time, and, if
there is no such person, then such service may be made by attaching the same on
the main entrance of the Leased Premises.

          7.18  Building Planning. Landlord shall have the right to relocate the
                -----------------
entire Leased Premises prior to the commencement of construction of Tenant
Improvements upon all of the following terms, covenants and conditions:

   (a) The relocated Leased Premises must be of substantially comparable size to
       the initial Leased Premises and must be on two (2) contiguous floors in
       the Building.

   (b) Landlord shall reimburse Tenant for: (i) the necessary and reasonable
       costs incurred by Tenant in planning for the space in the initial Leased
       Premises which have been previously approved by Landlord and have no
       benefit to Tenant on the relocated floor; and (ii) for such other costs
       as Tenant may incur as a direct result of the relocation which have been
       previously approved by Landlord.

   (c) All of the other terms, covenants and conditions to the Lease shall
       remain unchanged and in full force and effect, except that the Basic
       Lease Information sheet shall be revised:

                                      -41-
<PAGE>

       (i) to identify the floors of the Leased Premises after such relocation;
       and (ii) to state the new Net Rentable Area and the new Base Rent
       relative to the relocated Leased Premises. The new Base Rent charged from
       time to time shall be calculated by multiplying the per-square-foot rates
       specified in the Basic Lease Information by the new New Rentable Area.

          7.19  No Option. Submission of this instrument for examination or
                ---------
signature by Tenant does not constitute a reservation of or an option for lease,
and it is not effective as a lease or otherwise until execution and delivery by
both Landlord and Tenant.

          7.20  Integration and Interpretation. The terms of this Lease are
                ------------------------------
intended by the parties as a final expression of their agreement with respect to
such terms as are included in this Lease and may not be contradicted by evidence
of any prior or contemporaneous agreement, arrangement, understanding or
negotiation (whether oral or written). The parties further intend that this
Lease constitutes the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial proceeding
involving this Lease. The language in all parts of this Lease shall in all cases
be construed as a whole and in accordance with its fair meaning and not
restricted for or against any party, regardless of which party may have drafted
the provision in question, it being agreed that this is a negotiated agreement.

          7.21  Quitclaim. Upon expiration or earlier termination of this Lease,
                ---------
Tenant shall, immediately upon request of Landlord, execute, acknowledge and
deliver to Landlord a recordable deed quit-claiming to Landlord all interest of
Tenant in the Leased Premises, the Project and this Lease.

          7.22  No Easement For Light, Air And View. This Lease conveys to
                -----------------------------------
Tenant no rights for any light, air or view. No diminution of light, air or
view, or any impairment of the visibility of the Leased Premises from inside or
outside the Building, by any structure or other object that may hereafter be
erected (whether or not by Landlord) shall entitle Tenant to any reduction of
Rent under this Lease, constitute an actual or constructive eviction of Tenant,
result in any liability of Landlord to Tenant, or in any other way affect this
Lease or Tenant's obligations hereunder.

          7.23  No Merger. The voluntary or other surrender or termination of
                ---------
this Lease by Tenant, or a mutual cancellation thereof shall not work a merger,
but, at Landlord's sole option, shall either terminate all existing subleases or
subtenancies or shall operate as an assignment to Landlord of all such subleases
or subtenancies.

          7.24  Memorandum Of Lease. Tenant shall, upon request of Landlord,
                -------------------
execute, acknowledge and deliver a short form memorandum of this Lease (and any
amendment hereto or consolidation hereof), in form suitable for recording. In no
event shall this Lease or any

                                      -42-
<PAGE>

memorandum thereof be recorded without the prior written consent of Landlord,
and any attempt to do so shall constitute a default by Tenant.

          7.25  Survival. All of Tenant's covenants and obligations contained in
                --------
this Lease shall survive the expiration or earlier termination of this Lease. No
provision of this Lease providing for termination in certain events shall be
construed as a limitation or restriction of Landlord's rights and remedies at
law or in equity available upon a breach by Tenant of this Lease.

          7.26  Financial Statements. If Landlord intends to sell all or any
                --------------------
portion of the Building or Project (or any interest therein), or obtain a loan
secured by the Building or Project (or any interest therein), then Tenant shall,
within fifteen (15) days of Landlord's written request, furnish Landlord with
financial statements, dated no earlier than one (1) year before such request,
certified as accurate by Tenant, or, if available, audited financial statements
prepared by an independent certified public accountant with copies of the
auditor's statement, reflecting Tenant's then current financial condition, or
the financial condition of the individuals comprising Tenant, in such form and
detail as Landlord may reasonably request. Notwithstanding the foregoing,
provided that Tenant is a publicly traded company, the obligation to provide
financial statements set forth in this Section 7.26 shall be satisfied by
Tenant's delivery to Landlord of the then most recent publicly filed financial
statements.

          7.27  No Joint Venture. This Lease shall not be construed to create a
                ----------------
partnership, joint venture or similar relationship or arrangement between
Landlord and Tenant hereunder.

          7.28  Successors And Assigns. This Lease shall be binding upon and
                ----------------------
inure to the benefit of Landlord, its successors and assigns (subject to the
provisions hereof, including, but without limitation, Section 5.16); and shall
be binding upon and inure to the benefit of Tenant, its successors, and to the
extent assignment may be approved by Landlord hereunder, Tenant's assigns.

          7.29  Applicable Law. All rights and remedies of Landlord and Tenant
                --------------
under this Lease shall be construed and enforced according to the laws of the
State of California. Any actions or proceedings brought under this Lease, or
with respect to any matter arising under or out of this Lease, shall be brought
and tried only in courts located in the County of San Mateo, California
(excepting appellate courts).

          7.30  Time Of The Essence. Time is of the essence of each and every
                -------------------
covenant herein contained.

          7.31  Interpretation. Except as specifically provided otherwise in
                --------------
this Lease, Landlord may act in its sole and absolute discretion when required
to act hereunder. The term,

                                      -43-
<PAGE>

"including" shall mean "including, without limitation." All indemnities
contained herein shall survive termination of this Lease with respect to any
act, condition or event that is the subject matter of such indemnity and that
occurs prior to the Term Expiration Date. Notwithstanding anything herein to the
contrary, all provisions of this Lease which require the payment of money or the
delivery of property after the Term Expiration Date shall survive termination of
the Lease.

          7.32  Parking. Tenant shall be entitled to the non-preferential and
                -------
non-exclusive use of the number of parking spaces in the Common Areas set forth
in the Basic Lease Information for which right Tenant shall pay the monthly fee
per space established by Landlord from time to time for the applicable type of
space, plus any tax or assessment imposed by any governmental authority in
connection with the parking privileges provided to Tenant pursuant to this
Lease. Said monthly fees shall be paid whether or not Tenant uses said spaces;
provided, however, that Landlord hereby waives its right to collect such parking
fees from Tenant for the spaces during the Term of this Lease, except to the
extent that Landlord is required to impose a parking fee by any governmental
regulation now or hereafter applicable to any part of all of the Project, or to
Landlord or Tenant. Landlord may assign any unreserved and unassigned parking
spaces and/or make all or a portion of such spaces reserved, if it determines
that it is necessary for orderly and efficient parking.

          7.33  Brokers. Tenant and Landlord each represent and warrant to the
                -------
other that it has had no dealing with any broker or agent other than the Broker
set forth on the Basic Lease Information. Tenant and Landlord each indemnify,
defend and hold the other party harmless from and against any and all
liabilities for commissions or other compensation or charges claimed by any
other broker or agent based on dealings with the indemnifying party with respect
to this Lease. The foregoing indemnity shall survive termination or earlier
expiration of this Lease.

          7.34  Non-Disturbance, Attornment and Subordination Agreement. Within
                -------------------------------------------------------
thirty days after full execution of this Lease by Landlord and Tenant, Landlord
shall deliver to Tenant a commercially reasonable non-disturbance, attornment
and subordination agreement (the "Non-Disturbance Agreement") executed by
Landlord's Lender, Wells Fargo Bank, N.A. Tenant shall not record the Non-
Disturbance Agreement or a copy or memorandum thereof. If Landlord fails to
deliver such Non-Disturbance Agreement by the expiration of such thirty day
period, Tenant shall have the right, as Tenant's sole and exclusive remedy,
within five (5) business days after the expiration of such thirty day to
terminate this Lease by providing written notice of such termination to Landlord
and to receive a return of the Letter of Credit. If Tenant fails to terminate
this Lease as provided above, time being of the essence, this Lease shall remain
in full force and effect in accordance with the terms set forth herein.

          7.35  Signage. Provided that Tenant is the largest tenant in the
                -------
Building (determined by comparing the Net Rentable Area of the Leased Premises
to the Net Rentable Area leased by other tenants in the Building), Tenant shall
have the right to install one (1) tenant

                                      -44-
<PAGE>

identification sign at the top of the western facade of the Building (the
"Sign"), at Tenant's sole cost and expense, subject to Landlord's approval of
the plans and specifications thereof (including, without limitation, the design,
location, and size) and in accordance with all applicable laws, ordinances,
rules and regulations and any private restrictions imposed against the Property
(the "Applicable Requirements"). Tenant shall not install the Sign on the
Building until Landlord has entered into binding lease agreements covering a
sufficient portion of the Net Rentable Area of the Building to allow Landlord to
determine whether or not Tenant is and shall be the largest Tenant in the
Building; provided, however, that if Landlord has not entered into a sufficient
number of such lease agreements by the second anniversary of the Term
Commencement Date, and if on the second anniversary Tenant is the largest tenant
in the Building, then Tenant shall have the right to proceed with the
installation of the Sign on the terms and conditions contained in this Section
7.35. Subject to the foregoing, Tenant shall erect the Sign in accordance with
the approved plans and specifications, in a good and workmanlike manner, and at
all times thereafter, Tenant shall maintain, at its sole cost and expense, the
Sign in a good, clean and safe condition and in accordance with the Applicable
Requirements, including all repairs and replacements thereto. Upon the
occurrence of any Event of Default and/or upon termination of this Lease, or if
Tenant desires to assign its interest under this Lease or to sublease fifty
percent (50%) or more of the Leased Premises and if in connection therewith
Landlord elects to terminate this Lease as to the affected portion of the Leased
Premises in accordance with clause (A) of Section 5.07(b) aboove, Tenant shall
promptly remove the Sign, in which event Tenant shall be responsible for and
shall repair any damage to the Building resulting therefrom. Tenant's exterior
signage rights hereunder are personal to Actuate Corporation (or to a successor
by merger or consolidation) and may not be assigned or transferred except with
the prior written consent of Landlord, which consent may be given or withheld in
Landlord's sole and absolute discretion. Tenant shall be responsible for
obtaining all permits and approvals (governmental and private) necessary for the
installation and maintenance of the Sign; provided however, Landlord shall, at
Tenant's cost and expense, reasonably cooperate with Tenant in obtaining any
such permits or approvals.

          Upon completion of any removal of the Sign, Tenant's right under this
Section 7.35 shall terminate and be of no further force or effect. If Tenant
fails to remove the Sign as required under this Section 7.35, Landlord shall
have the right, at Tenant's expense, to remove the Sign. Tenant shall indemnify,
defend and protect Landlord and hold Landlord harmless of and from any and all,
proceedings, loss, cost, damage, causes of action, liabilities, injury or
expense arising out of or related to claims of injury to or death of persons or
damage to property occurring or resulting directly or indirectly from the
installation or maintenance of the Sign on the Building.

                                      -45-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.

               Landlord     HMS GATEWAY OFFICE, L.P.

                            By:  Hines Gateway Office, L.P.,
                                 General Partner

                                 By:  Hines Interests Limited Partnership,
                                      General Partner

                                      By:   Hines Holdings, Inc.,
                                            General Partner

                                            By: _______________________________

                                            Name:______________________________

                                            Title:_____________________________

               Tenant       Actuate Corporation

                            a Delaware corporation

                            By: ___________________________________

                            Name:__________________________________

                            Title:_________________________________

                                      -46-
<PAGE>

                                  EXHIBIT A-1

                          "Leased Premises Depiction"

                                   (to come)

                                      -1-
<PAGE>

                                  EXHIBIT A-2

                                   "Project"

ALL THAT CERTAIN PROPERTY SITUATED IN THE CITY OF SOUTH SAN FRANCISCO, COUNTY OF
SAN MATEO, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:

BEING ALL OF PARCEL C AS SAID PARCEL IS SHOWN ON PARCEL MAP 99-095 FILED JUNE
26, 2000 IN BOOK 72 OF PARCEL MAPS AT PAGES 90 AND 91, SAN MATEO COUNTY RECORDS,
AND ALL OF THAT CERTAIN PARCEL OF LAND DESCRIBED IN THE GRANT DEED TO HMS
GATEWAY OFFICE, L.P. RECORDED APRIL 21, 2000 AS INSTRUMENT NUMBER 2000-045898,
SAN MATEO COUNTY RECORDS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE WESTERLY CORNER OF SAID PARCEL C;

THENCE ALONG THE NORTHWESTERLY LINE OF SAID PARCEL C, NORTH 38(degrees)42'41"
EAST, 95.97 FEET TO AN ANGLE POINT THEREIN;

THENCE CONTINUING ALONG SAID NORTHWESTERLY LINE, ALONG THE NORTHWESTERLY LINE OF
SAID PARCEL DESCRIBED IN SAID DEED TO HMS GATEWAY OFFICE, L.P., AND AGAIN ALONG
SAID NORTHWESTERLY LINE OF SAID PARCEL C, NORTH 38(degrees)42'27" EAST, 177.53
FEET TO AN ANGLE POINT IN SAID NORTHWESTERLY LINE OF PARCEL C;

THENCE ALONG THE EXTERIOR BOUNDARY OF SAID PARCEL C, THE FOLLOWING TWELVE
COURSES:

1.   NORTH 38(degrees)42'41" EAST, 51.85 FEET;

2.   SOUTH 51(degrees)17'19" EAST, 170.54 FEET;

3.   NORTH 38(degrees)42'41" EAST, 1.53 FEET;

4.   NORTHEASTERLY ALONG THE ARC OF A 138.00 RADIUS, TANGENT CURVE TO THE RIGHT,
     THROUGH A CENTRAL ANGLE OF 49(degrees)50'53", AN ARC DISTANCE OF 120.06
     FEET TO A POINT OF COMPOUND CURVATURE;

5.   EASTERLY ALONG THE ARC OF A 850.00 FOOT RADIUS, TANGENT CURVE TO THE RIGHT,
     THROUGH A CENTRAL ANGLE OF 21(degrees)31'54", AN ARC DISTANCE OF 319.43
     FEET TO THE GENERAL SOUTHEASTERLY LINE OF SAID PARCEL C;

6.   SOUTHWESTERLY ALONG THE ARC OF A 270.00 FOOT RADIUS, NON-TANGENT CURVE TO
     THE LEFT, THE CENTER OF WHICH CURVE BEARS SOUTH 52(degrees)44'55" EAST,
     THROUGH A CENTRAL ANGLE OF 6(degrees)33'41", AN ARC DISTANCE OF 30.92 FEET
     TO A POINT OF COMPOUND CURVATURE;

                                      -1-
<PAGE>

7.   SOUTHERLY ALONG THE ARC OF A 130.00 FOOT RADIUS, TANGENT CURVE TO THE LEFT,
     THROUGH A CENTRAL ANGLE OF 51(degrees)02'48", AN ARC DISTANCE OF 115.82
     FEET;

8.   SOUTH 88(degrees)16'54" WEST, 121.98 FEET;

9.   SOUTH 38(degrees)42'41" WEST, 223.44 FEET;

10.  NORTH 51(degrees)17'19" WEST, 211.85 FEET;

11.  SOUTH 38(degrees)42'41" WEST, 161.47 FEET; AND

12.  NORTH 51(degrees)17'19" WEST, 255.99 FEET TO THE POINT OF BEGINNING

CONTAINING 4.0851 ACRES MORE OR LESS

                                      -2-
<PAGE>

                                   EXHIBIT B
                                   ---------

                  INITIAL IMPROVEMENT OF THE LEASED PREMISES
                  ------------------------------------------

          1.   Improvements. The Base Building Improvements described in
               ------------
paragraph 2 shall be furnished and installed within the Leased Premises
substantially in accordance with the plans and specifications for the Building
without cost or expense to Tenant. Any work in addition to Base Building
Improvements is referred to herein as Tenant Improvements and shall be furnished
and installed within the Leased Premises substantially in accordance with plans
and specifications to be prepared by Tenant and approved by Landlord in
accordance with this Exhibit B and shall be furnished and installed at the
expense of Tenant, except for the amount of the Landlord's Contribution
described in Paragraph 12 and in Administration of Work described in Paragraph 8
of this Exhibit B. For purposes hereof, the cost of the Tenant Improvements
shall include all costs associated with the design and construction of the
Tenant Improvements, including, without limitation, all building permit fees,
payments to design consultants for services and disbursements, all demolition
and other preparatory work, premiums for insurance and bonds, general
conditions, such inspection fees as Landlord may incur, reimbursement to
Landlord for permit and other fees Landlord may incur that are fairly
attributable to the Tenant Improvement work and the cost of installing any
additional electrical capacity or telecommunications capacity required by
Tenant.

          2.   Description of Base Building Improvements. The Base Building
               -----------------------------------------
Improvements shall consist of those items listed on the attached Schedule 1.

          3.   Tenant's Architect, Engineers and Contractors. Tenant shall
               ---------------------------------------------
select architects, engineers and contractors from a list of approved architects,
engineers and contractors to be provided to Tenant by Landlord. In the event
that Tenant desires to use an architect, engineer or contractor not on the list
provided by Landlord, Tenant may request the consent of Landlord to the use of
such architect, engineer or contractor, which consent may be given or withheld
in Landlord's sole and absolute discretion. The cost of preparing all plans and
specifications for the Tenant Improvements (including without limitation the
Conceptual Plans referred to in Paragraph 4 of this Exhibit B and the Working
Drawings referred to in Paragraph 5 of this Exhibit B), and the cost of
preparing any change thereto shall be paid by Tenant, although Tenant may apply
the Landlord's Contribution to the payment of such costs in accordance with the
provisions of Paragraph 12 of this Exhibit B.

          4.   Submittal of Conceptual Plans. Tenant shall submit to Landlord
               -----------------------------
conceptual plans for the Tenant Improvements (the "Conceptual Plans"), including
architectural, electrical and reflected ceiling drawings, within twenty-one (21)
days after the full execution of the Lease. Such Conceptual Plans shall be for
the general information of Landlord, and to assist in the coordination of the
design and construction of the Tenant Improvements, but receipt of such
Conceptual Plans by Landlord shall not constitute an approval by Landlord of the
design or

                                      -1-
<PAGE>

specifications shown thereon. Landlord shall, within five (5) business days
following receipt by Landlord of such plans from Tenant, review, comment on and
return the Conceptual Plans to Tenant, marked "Approved," "Approved as Noted" or
"Disapproved as Noted, Revise and Resubmit." If the Conceptual Plans are
returned to Tenant marked "Approved," the Conceptual Plans shall be deemed
approved by Landlord and the procedure set forth in Paragraph 5 below shall be
followed. If the Conceptual Plans are returned to Tenant marked "Approved as
Noted," the Conceptual Plans so submitted shall be deemed approved by Landlord
and the procedure set forth in Paragraph 5 below shall be followed; provided
however, in preparing the Working Drawings, Tenant shall cause Tenant's
Architect to incorporate Landlord's noted items into the Working Drawings. If
the Conceptual Plans are returned to Tenant marked "Disapproved as Noted, Revise
and Resubmit," Tenant shall cause such plans to be revised, taking into account
the reasons for Landlord's disapproval, and shall resubmit revised plans to
Landlord for review within five (5) days after return of the Conceptual Plans to
Tenant by Landlord. The same procedure shall be repeated until Landlord fully
approves the Conceptual Plans.

          5.   Submittal of Working Drawings. Following the approval by Landlord
               -----------------------------
of the Conceptual Plans, Tenant shall deliver to Landlord one (1) set of
reproducible sepia and three (3) sets of blue-lined prints of working drawings
and specifications (hereinafter referred to collectively as the "Working
Drawings") for the Tenant Improvements prepared at Tenant's sole cost and
expense (although Tenant may apply the Landlord's Contribution to the payment of
such cost in accordance with the provisions of Paragraph 12 of this Exhibit B)
by an architect ("Tenant's Architect") licensed in the State of California and
selected by Tenant from the list provided by Landlord in accordance with
Paragraph 3 of this Exhibit B or specifically approved in writing by Landlord.
If the draft of the Working Drawings was prepared on a computer-assisted design
("CAD") system, Tenant shall also deliver to Landlord a diskette containing the
Working Drawings in the AutoCAD format. Within five (5) business days of the
receipt by Landlord of a draft of Working Drawings from Tenant, Landlord shall
return to Tenant one (1) sepia set of the Working Drawings marked "Approved,"
"Approved as Noted" or "Disapproved as Noted, Revise and Resubmit." If the
Working Drawings are returned to Tenant marked "Approved," the Working Drawings,
as so submitted, shall be deemed approved by Landlord. If the Working Drawings
are returned to Tenant marked "Approved as Noted," the draft of the Working
Drawings shall be deemed approved by Landlord; provided however, in preparing
the final approved Working Drawings, Tenant shall cause Tenant's Architect to
incorporate Landlord's noted items into the Working Drawings. If the Working
Drawings are returned to Tenant marked "Disapproved as Noted, Revise and
Resubmit," Tenant shall cause such Working Drawings to be revised, taking into
account the reasons for Landlord's disapproval and shall resubmit revised plans
to Landlord for review. The same procedure shall be repeated until Landlord
fully approves the Working Drawings. The Working Drawings shall be consistent
with, and a logical extension of, the Conceptual Plans approved by Landlord in
accordance with Paragraph 4 of this Exhibit B. Tenant shall be solely
responsible for: (i) the completeness of the Working Drawings; (ii) the
conformity of the Working Drawings with the existing conditions in the Building
and the Leased Premises; (iii) the compatibility of the Working Drawings with
the shell or the core or the mechanical, plumbing, life safety or electrical
systems of the Building

                                      -2-
<PAGE>

(including obtaining, at Tenant's sole cost and expense, mechanical and
electrical drawings from Flack & Kurtz Consulting Engineers, LLP); and (iv) the
compliance of the Working Drawings with all applicable regulations, laws,
ordinances, codes and rules, including, without limitation, the Americans With
Disabilities Act. When the Working Drawings are approved by Landlord and Tenant,
they shall be acknowledged as such by Landlord and Tenant signing each sheet of
the Working Drawings. If the Working Drawings were prepared on a computer-
assisted design ("CAD") system, Tenant shall also deliver to Landlord a diskette
containing the approved Working Drawings in the AutoCAD format. Tenant shall
cause the Conceptual Plans and Working Drawings to be prepared, submitted to
Landlord and, where required, revised so as to obtain the approval of the
Working Drawings by Landlord on or before Tenant's Plan Delivery Date.

          6.   Landlord's Review Responsibilities. Tenant acknowledges and
               ----------------------------------
agrees that Landlord's review and approval, if granted, of all Conceptual Plans
and Working Drawings by Landlord is solely for the benefit of Landlord and to
protect the interests of Landlord in the Building and the Leased Premises, and
Landlord shall not be the guarantor of, nor in any way or to any extent
responsible for, the correctness or accuracy of any Conceptual Plans or Working
Drawings or of the compliance of the Conceptual Plans or Working Drawings with
applicable regulations, laws, ordinances, codes and rules or of the conformance
or compatibility of the Conceptual Plans or Working Drawings with existing
conditions in the Building or Leased Premises or with the shell or the core or
the mechanical, plumbing, life safety or electrical systems of the Building.
Tenant shall require and be solely responsible for insuring that its architects,
engineers and contractors verify all existing conditions in the Building,
insofar as they are relevant to, or may affect, the design and construction of
the Tenant Improvements, and Landlord shall have no liability to Tenant for any
inaccuracy or incorrectness in any of the information supplied by Landlord with
regard to existing conditions. Tenant shall be solely responsible for, and
Landlord specifically reserves the right to require Tenant to make at any time
and from time to time during the construction of the Tenant Improvements, any
changes to the Conceptual Plans and the Working Drawings necessary to obtain any
permit or to comply with all applicable regulations, laws, ordinances, codes and
rules or to achieve the compatibility, as reasonably determined by Landlord, of
the Conceptual Plans and Working Drawings with the shell and the core and the
mechanical, plumbing, life safety and electrical systems of the Building and any
third-party warranties.

          7.   Pricing The Work.
               ----------------

               (a)  Upon completion of the Working Drawings for the Tenant
Improvements, Tenant shall cause its architect to deliver to Landlord the number
of copies of the Working Drawings which Landlord may reasonably request for use
in obtaining bids for the work and in the course of construction. Upon receipt
of such copies, Landlord shall elect, by written notice to Tenant and in
accordance with Paragraph 7(b) or (c) below, as applicable, either to solicit
bids from two (2) general contractors for the work shown on the Working Drawings
or to solicit bids from subcontractors for the work.

                                      -3-
<PAGE>

               (b)  Landlord shall obtain bids from general contractors, and
(i) Tenant may, within five (5) business days of the receipt by Tenant of the
notice of election from Landlord to use a general contractor, notify Landlord in
writing of the names of not more than two (2) general contractors from the list
described in Paragraph 3 above or from such other contractors as otherwise
approved by Landlord in its sole and absolute discretion from which Tenant would
like bids solicited; (ii) Landlord shall solicit bids from any such general
contractors named in the notice from Tenant and from any other contractors from
which Landlord desires to solicit bids; and (iii) Landlord shall be entitled to
receive a fee for the supervision of the general contractor in an amount equal
to the sum of (A) five percent (5%) of the cost of constructing the Tenant
Improvements in the Leased Premises up to the amount of the Landlord's
Contribution, plus (B) two and one-half percent (2.5%) of the cost of
constructing the Tenant Improvements in the Leased Premises that exceed the
amount of the Landlord's Contribution. Upon receipt of bids from the contractors
from which bids were solicited, excluding any Contractor that does not submit a
bid within the time period specified by Landlord in the request for bids,
Landlord shall notify Tenant of the amount of each of the bids, and shall select
the general contractor whose bid for the work (taking into account, in
Landlord's good faith judgment, all factors associated with the bids, including
without limitation, quality of materials to be used, estimated completion time
and reputation of subcontractors to be used) is the lowest. Tenant shall have
five (5) business days after receipt of notice from Landlord regarding the
selection of the contractor in which to give written notice to Landlord of
Tenant's objection to the selected bid. If Tenant accepts or fails to object
within the time set forth above, the bid shall be deemed approved. If Tenant
timely objects to the bid, Tenant shall meet with Landlord, the Tenant's
architect and the selected general contractor within five (5) business days to
discuss mutually acceptable revisions. All costs of changes required by any such
revisions shall be the sole responsibility of Tenant. Following such revisions,
Landlord shall submit to Tenant, as soon as reasonably practicable, a revised
bid from the selected contractor, and the same procedure will be followed as set
forth above until Tenant has approved the bid. In revising the bid Landlord may,
if it deems appropriate, resolicit bids from the other originally solicited
contractors.

               (c)  Tenant shall be responsible for paying in accordance with
the provisions of Section 11 below all amounts in excess of the Landlord's
Contribution necessary to complete construction of the Tenant Improvements (the
"Construction Payment").

          8.   Administration Of Work.
               ----------------------

               (a)  After acceptance of bids, Landlord shall administer the
construction of Tenant Improvements in accordance with the Working Drawings;
provided, however, that Landlord shall not be required to install any Tenant
Improvements that do not conform to the approved Working Drawings, or conflict
with elements of the approved Working Drawings, or do not comply with applicable
regulations, laws, ordinances, codes and rules; such conformity being the
obligation of Tenant.

                                      -4-
<PAGE>

          (b)  All Tenant Improvements shall be constructed by the general
contractor or subcontractors selected for the work with the exception of floor
coverings, wall finishes, mill work security systems (which shall not be
connected to the life safety systems of the Building) and work stations which
may be constructed, installed or provided by Tenant subject to the limitation
hereinafter set forth. Furthermore, Tenant shall furnish and install all
telephone equipment and wiring and office equipment and wiring, all of which
shall be constructed, installed or provided by Tenant subject to the limitations
hereinafter set forth.

          (c)  All materials or equipment furnished and installed by Tenant
shall be installed in a manner that conforms with the construction schedule
established by Landlord and Tenant, and the work of installation shall be
handled in such a manner as to maintain harmonious labor relations and as not to
interfere with or delay the work of Landlord's contractors. No portion of the
work to be performed by Landlord's contractor shall be dependent upon completion
of any work of construction or installation to be performed by Tenant, and the
work to be performed by Landlord's contractor shall have priority over any work
to be performed by Tenant. Tenant's contractors, subcontractors and materialmen
shall be subject to prior approval by Landlord and shall be subject to the
administrative supervision of Landlord or Landlord's general contractor and
rules of the site. Contractors, subcontractors and materialmen engaged by Tenant
shall take the necessary steps to insure, so far as may be possible, the
progress of the work without interruption on account of strikes, work stoppage
or similar causes for delay. In the event that Tenant's contractors or
subcontractors do not promptly cause any pickets to be withdrawn and all other
disruptions to the operations of the Building promptly to cease, or in the event
that Landlord notifies Tenant that Landlord has in good faith concluded that
picketing or other disruptive activities are an imminent threat, Tenant shall
immediately cause the withdrawal from the job of all its contractors,
subcontractors or materialmen involved in the dispute. Any delay caused to
Landlord's contractor attributable to performance on the part of Tenant of any
work of installing or furnishing floor coverings, wall finishes, mill work
office equipment work stations, telephone equipment and wiring or office
equipment and wiring shall constitute Tenant's Delay, and in addition to the
obligations set forth in Paragraph 8 below, Tenant shall be obligated to pay all
cost and expense incurred by Landlord in connection therewith. No portion of any
work to be performed by Tenant shall be taken into account in determining
whether or not the Leased Premises are Substantially Complete.

          (d)  Tenant shall require that each of its contractors, subcontractors
and materialmen maintain commercial general liability insurance in an amount of
not less than Three Million Dollars ($3,000,000.00) on a combined single limit
basis and all worker's compensation insurance required by law.

          (e)  Landlord shall provide access and entry to the Leased Premises to
Tenant at times consistent with the construction schedule established by
Landlord and Tenant for the work and subject to all the terms and conditions of
the Lease and this Exhibit B (except that Tenant shall not be responsible for
payment of Gross Rent solely as a result of such access and entry). Upon and
following any entry into the Leased Premises by Tenant prior to the

                                      -5-
<PAGE>

commencement of its Term, Tenant shall perform all of the obligations of Tenant
applicable under the Lease during the Term (except the obligation to pay Base
Rent and Tenant's Proportionate Share of Basic Operating Cost), including,
without limitation, obligations pertaining to insurance, indemnity, compliance
with laws and hazardous materials. In addition to the indemnity obligations of
Tenant under the Lease, Tenant shall indemnify, defend and protect Landlord and
hold Landlord harmless of and from any and all claims, proceedings, loss, cost,
damage, causes of action, liabilities, injury or expense arising out of or
related to claims of injury to or death of persons or damage to property
occurring or resulting directly or indirectly from the presence in the Leased
Premises or the Project of Tenant's contractors or representatives or the
activities of Tenant or its contractors or representatives in or about the
Leased Premises or Project during the construction period, such indemnity to
include, but without limitation, the obligation to provide all costs of defense
against any such claims. This indemnity shall survive the expiration or sooner
termination of the Lease.

          9.   Obligation of Tenant To Provide As-Built Plans. Within thirty
               ----------------------------------------------
(30) day of Substantial Completion, Tenant shall cause Tenant's Architect to
provide Landlord with a complete set of plans on mylar and specifications
reflecting the actual conditions of the Tenant Improvements as constructed in
the Leased Premises, together with a copy of such plans on diskette in the
AutoCAD format or such other format as may then be in common use for computer
assisted design purposes.

          10.  Reimbursement and Compensation. Tenant shall reimburse Landlord
               ------------------------------
for all actual costs incurred by Landlord in connection with the design and
review of Conceptual Plans and Working Drawings for the Tenant Improvements, and
Landlord shall be entitled to receive the fee provided in Paragraph 7 of this
Exhibit B. Landlord may obtain any reimbursement or compensation required
hereunder by deducting the amount of such reimbursement or compensation from
Landlord's Contribution.

          11.  Tenant Payments. Landlord and Tenant shall make progress payments
               ---------------
on a pro rata basis (in the proportion that the Landlord's Contribution and the
Construction Payment bear to the total cost for constructing the Tenant
Improvements) from time to time as the Tenant Improvements are constructed or as
other cost related to the Tenant Improvements are incurred. Tenant shall pay to
Landlord its pro rata share within 10 days after billing by Landlord of any
progress payment, and Landlord shall pay its pro rata share and Tenant's share
of any progress payments directly to the general contractor or subcontractors,
as appropriate. Landlord shall be entitled to suspend or terminate construction
of the Tenant Improvements and to declare Tenant in default in accordance with
the terms of the Lease, if payment by Tenant of its pro rata share of any
progress payment has not been received by Landlord within the timeframe
specified above.

          12.  Landlord's Contribution. Landlord shall provide a total of up to
               -----------------------
Seven Hundred Fifty-Six Thousand Five Hundred Seventy Dollars ($756,570.00);
"Landlord's Contribution") (which is based on a maximum Landlord Contribution of
$15.00 per rentable square foot), as provided in this Paragraph 12 toward the
payment for the design and construction of the Tenant Improvements in the Leased
Premises. Landlord shall in accordance

                                      -6-
<PAGE>

with this Exhibit B apply Landlord's Contribution to the cost of designing and
constructing the Tenant Improvements and for the other purposes specifically
provided in this Exhibit B. The obligation of Landlord to make any one or more
payments pursuant to the provisions of this Paragraph 12 or to proceed with the
construction of the Tenant Improvements shall be suspended without further act
of the parties during any such time as there exists an event of default under
the Lease or any event or condition which, with the passage of time or the
giving of notice or both would constitute such an event of default. Nothing in
this Paragraph 12 shall affect the obligations of Tenant under the Lease with
respect to any alterations, additions and improvements within the Leased
Premises, including, without limitation, any obligation to obtain the prior
written consent of Landlord hereto.

          13.  Designation of Tenant's Representative. Tenant hereby designates
               --------------------------------------
Bruce Tews as its representative in connection with the design and construction
of the Tenant Improvements, and Landlord shall be entitled to rely upon the
decisions and agreements made by such representative as binding upon Tenant.

          14.  Tenant's Delay. If Landlord shall be delayed in Substantial
               --------------
Completion as a result of:

               (a)  Tenant's failure to obtain approval of the Working Drawings
by Landlord on or before Tenant's Plan Delivery Date; or,

               (b)  Tenant's change(s) in Working Drawings after approval of the
Working Drawings by Landlord, provided that Tenant shall not change the Working
Drawings without the prior written consent of Landlord, which consent shall not
be unreasonably withheld unless such change could reasonably be expected to
delay Substantial Completion; or,

               (c)  Any changes initiated by reason of the disapproval of any
Conceptual Plans, Working Drawings or bids; or

               (d)  Tenant's request for materials, finishes or installations
other than Building Standard Improvements which require a longer time than
Building Standard Improvements to obtain, install or complete; or,

               (e)  Tenant's failure to comply with Landlord's contractor's or
subcontractor's schedule; or,

               (f)  An event of default by Tenant under the Lease or the
existence of any event or condition which, with the passage of time or the
giving of notice or both would constitute such an event of default; or,

               (g)  Delays caused by Tenant in construction, (all of the
foregoing being referred to herein collectively as "Tenant's Delay"), then
Tenant shall pay to Landlord, as Additional Rent, one day's Gross Rent for each
day of Tenant's Delay. In addition, and notwithstanding any provision to the
contrary contained in the Lease, if Substantial Completion

                                      -7-
<PAGE>

is delayed due to Tenant's Delay, the Term Commencement Date shall be the
earlier of the date of Substantial Completion or the date when Substantial
Completion would have occurred if there had been no Tenant's Delay. Tenant
acknowledges that the length of any Tenant's Delay is to be measured by the
duration of the delay in Substantial Completion caused by the event or conduct
constituting Tenant's Delay, which may exceed the duration of such event or
conduct due to the necessity of rescheduling work or other causes. Landlord
agrees to give Tenant notice promptly following any event or conduct
constituting Tenant's Delay.

                                      -8-
<PAGE>

                             SCHEDULE 1 TO EXHIBIT B

            Preliminary Specifications For Base Building Improvements

         The base building shall be constructed per all governmental codes by
Landlord for Tenant, including, but not limited to, the following:

Structure/Envelope

 .    Concrete foundation to be reinforced grade beams with spread footings or
     other system as specified by geotechnical and engineering consultants.

 .    Ground floor to be concrete slab on grade, minimum thickness 5", or as
     required by geotechnical and engineering consultants.

 .    Elevated floors to be constructed of vented metal deck with reinforced
     concrete that meets fire code requirements.

 .    Building structural framing to consist of steel "braced frame" with beams
     and columns constructed structural rolled shapes.

 .    Non-bearing exterior facade consisting of EIFS or GFRC with decorative
     metal panels. An exterior containing a minimum average of 40% glass of
     ribbon or punched opening windows with high performance glass.

 .    Floor system designed with minimum live load capacity of 50 psf and dead
     load capacity of 20 psf. Select central core areas to have increased floor
     loading capacity of 100 psf.

 .    Roof live load to be 20 psf except where mechanical loads are imposed.

 .    Floor to floor heights to be approximately 15'-0".

 .    Base building roof drains and drain lines with connection to site storm
     drain system.

 .    Surface and/or structured parking adjacent to premises as required to
     provide tenant with 3.0 spaces per 1,000 rentable square feet.

 .    Roof screens up to 11'-0" in height above the roof as required by City of
     South San Francisco.

 .    Roofing membrane to be a built-up roof over rigid insulation on top of
     metal roof deck construction.

 .    Two internal fire rated stairways serving all floors. One stairway to
     continue to roof via a ship ladder. Security system for access between
     floors to be provided by Tenant.

                                      -1-
<PAGE>

 .    One complete and finished base building male and female restroom at each
     floor. Finishes to include stone countertops, ceramic tile walls and
     floors. Accessible showers located on first floor.

 .    Fire proofing of building structure, as required, per building code.

 .    Fire safing between floors to maintain code required separations.

 .    Perimeter walls and roof insulation per Title 24 requirements.

Electrical

 .    4,000 amp 277/480 volt, 3-phase electric service and transformer with
     underground electrical to main base building switch and meter section.

 .    Switchgear as required to service base building systems, parking structure,
     site lighting and irrigation.

 .    Emergency generator for base building life safety systems. Conduit provided
     for Tenant exterior generator adjacent to base building generator.

 .    Vertical electrical service distribution to each floor to be provided via
     busways. Horizontal switchgear and distribution by Tenant.

Mechanical

 .    Rooftop mounted heating, ventilation and air conditioning systems with
     vertical distribution provided to each floor but exclusive of horizontal
     distribution and control equipment.

 .    Domestic water, sanitary sewer, plumbing vent and exhaust systems provided
     at each floors restroom core.

 .    Base building domestic water service with meters, backflow preventers and
     check assembly located per California Water Service requirements.

 .    Base building sanitary sewer line under ground floor slab.

 .    Complete base building light hazard automatic fire sprinkler system to meet
     NFPA standards (excluding tenant branch lines and drops to suspended
     ceilings).

Miscellaneous

 .    Two elevators. One passenger car and one "swing" car for passenger and
     freight service.

 .    Base building fire and life safety systems shall meet all applicable codes
     and capable of being extended beyond the core to accommodate tenant
     improvements.

 .    Base building security systems to provide for after hours access and
     controls at ground floor exterior lobby doors.

                                      -2-
<PAGE>

 .    Two (2), 4" underground telephone/data conduits from Gateway Blvd to base
     building main telecommunications room. Two 4" sleeves to be provided in
     each telephone room at each elevated floor.

 .    Loading area to be at grade.

 .    Landscaping, hardscapes and automatic irrigation systems, including control
     systems.

 .    One (1) monument sign at each main entrance along Gateway Boulevard
     identifying The Gateway North Campus and the building address.

 .    Controlled site lighting to provide a minimum of one (1) foot candle per
     square foot.

                                      -3-
<PAGE>

                                   EXHIBIT B-1

                 Definition Of Building Standard Improvements

     For the purposes of the definition set forth in Section 1.08 of the Lease,
                Building Standard Improvements would consist of:

A.       Partitions.
         ----------

         One (1) linear foot of ceiling-height partition per twelve (12) square
feet of Net Rentable Area less Common Areas. Partitions to be constructed of 2
1/2" metal studs at 24" on center, 5/8" gypsum wallboard both sides, with two
coats of latex paint.

B.       Doors and Hardware.
         ------------------

         One (1) ten (10) foot high, solid core, plain sliced maple door with a
clear anodized aluminum frame and polished chrome lever handle latch set
hardware per three hundred (300) square feet of Net Rentable Area less Common
Areas.

C.       Ceiling.
         -------

         Suspended metal "T-Bar" ceiling system with 24" x 24" x 5/8" thick
tegular-style mineral fiber acoustical ceiling throughout the Leased Premises.

D.       Lighting.
         --------

         One (1) 2' x 4' recessed fluorescent lighting fixture with anodized
aluminum parabolic shaped louvers, including initial lamping, per seventy-five
(75) square feet of Net Rentable Area less Common Areas. Common Areas on all
office floors shall have lighting selected by Landlord.

E.       Electrical Outlets.
         ------------------

         One (1) duplex wall-mounted convenience outlet mounted at standard
locations with white plastic cover plate for each one hundred twenty (120)
square feet of Net Rentable Area less Common Areas.

F.       Telephone Outlets.
         -----------------

         One (1) telephone wall outlet mounted at standard locations for each
two hundred ten (210) square feet of Net Rentable Area less Common Areas with
pull wire through the partition.

G.       Floor Covering.
         --------------

         Direct glue down carpet or a credit of $15.00 per square yard of
carpeted area.

                                      -1-
<PAGE>

H.       Switch.
         ------

         One (1) dual light switch, rocker type, mounted at standard locations
with white plastic cover plate for each three hundred (300) square feet of Net
Rentable Area less Common Areas.

I.       Window Covering.
         ---------------

         Horizontal aluminum one-inch-slat blinds for exterior windows.

J.       Life Safety Systems.
         -------------------

         Rapid Response fire sprinkler heads to conform with typical Tenant
partition layout, utilizing the Building Standard partition and lighting, for
light hazard occupancy design criteria. Manual fire alarm pull stations, exit
lights, and audible fire alarm speakers shall be provided at the Building stair
doors and elevator lobbies.

K.       HVAC.
         ----

         The HVAC system for the Leased Premises to suit normal general office
space utilizing the Building Standard lighting fixtures.

                                      -2-
<PAGE>

                                    EXHIBIT C
                                    ---------

                         BUILDING RULES AND REGULATIONS

         1.    Sidewalks, doorways, halls, stairways, vestibules and other
similar areas shall not be obstructed by any Tenant or used by them for purpose
other than ingress to and egress from their respective Leased Premises, and for
going from one part of the Building to another part.

         2.    Plumbing fixtures shall be used only for their designated
purpose, and no foreign substances of any kind shall be deposited therein.
Damage to any such fixture resulting from misuse by Tenant or any employee or
invitee of Tenant shall be repaired at the expense of Tenant.

         3.    Nails, screws and other attachments to the Building require prior
written consent from Landlord.

         4.    All contractors and technicians rendering any installation
service to Tenant shall be subject to Landlord's approval and supervision prior
to performing services. This applies to all work performed in the Building,
including, but not limited to, installation of telephone, telegraph equipment,
and electrical devices, as well as all installation affecting floors, walls,
woodwork, windows, ceilings, and any other physical portion of the Building.

         5.    Movement in or out of the Building of furniture, office
equipment, or other bulky material which requires the use of elevators,
stairways, or Building entrance and lobby shall be restricted to hours
established by Landlord. All such movement shall be under Landlord's
supervision, and the use of an elevator for such movements shall be made
restricted to the Building's freight elevators. Rearrangements with Landlord
shall be made regarding the time, method, and routing of such movement, and
Tenant shall assume all risks of damage and pay the cost of repairing or
providing compensation for damage to the Building, to articles moved and injury
to persons or public resulting from such moves. Landlord shall not be liable for
any acts or damages resulting from any such activity.

         6.    Corridor doors, when not in use, shall be kept closed.

         7.    Tenant shall cooperate with Landlord in maintaining the Leased
Premises. Tenant shall not employ any person for the purpose of cleaning the
Leased Premises other than the Building's cleaning and maintenance personnel.

         8.    Deliveries of water, soft drinks, newspapers, or other such items
to any Leased Premises shall be restricted to hours established by Landlord and
made by use of the freight elevators if Landlord so directs.

                                      -1-
<PAGE>

         9.    Nothing shall be swept or thrown into the corridors, halls,
elevator shafts, or stairways. No birds, fish, or animals of any kind shall be
brought into or kept in, on or about the Leased Premises.

         10.   No cooking shall be done in the Leased Premises except in
connection with convenience lunch room or beverage service for employees and
guests (on a non-commercial basis) in a manner which complies with all of the
provisions of the Lease and which does not produce fumes or odors.

         11.   Food, soft drink or other vending machines shall not be placed
within the Leased Premises without Landlord's prior written consent.

         12.   Tenant shall not use or keep on its Leased Premises any kerosene,
gasoline, or inflammable or combustible fluid or material other than limited
quantities reasonably necessary for the operation and maintenance of office
equipment.

         13.   Tenant shall not tamper with or attempt to adjust temperature
control thermostats in the Leased Premises. Landlord shall make adjustments in
thermostats on call from Tenant.

         14.   Tenant shall comply with all requirements necessary for the
security of the Leased Premises, including the use of service passes issued by
Landlord for after hours movement of office equipment/packages, and signing
security register in Building lobby after hours.

         15.   Landlord will furnish Tenant with a reasonable number of initial
keys for entrance doors into the Leased Premises and may charge Tenant for
additional keys, thereafter. All such keys shall remain the property of
Landlord. No additional locks are allowed on any door of the Leased Premises
without Landlord's prior written consent and Tenant shall not make any duplicate
keys, except those provided by Landlord. Upon termination of this Lease, Tenant
shall surrender to Landlord all keys to the Leased Premises, and give to
Landlord the combination of all locks for safes and vault doors, if any, in the
Leased Premises.

         16.   Landlord retains the right, without notice or liability to any
tenant, to change the name and street address of the Building.

         17.   Canvassing, peddling, soliciting, and distribution of handbills
in the Building are prohibited and each tenant will cooperate to prevent these
activities.

         18.   The Building hours of operation are (excluding holidays):

                 7:00 A.M. to 6:00 P.M. Monday through Friday

         19.   Landlord reserves the right to rescind any of these rules and
regulations and to make future rules and regulations required for the safety,
protection, and maintenance of the

                                      -2-
<PAGE>

Building, the operation and preservation of good order thereof, and the
protection and comfort of the tenants and their employees and visitors. Such
rules and regulations, when made and written notice given the Tenant, shall be
binding as if originally included herein.

                                      -3-
<PAGE>

                                    Exhibit D

                                 Sample Form Of

                         Lease Commencement Certificate

                                 Office Building

Re:      The Gateway

         _____ Gateway Boulevard, Suite ______
         So. San Francisco, California 94080

              This is to certify that    [Tenant's Name and Suite Number] has
                                     ------------------------------------
opened/closed on [Date]


     BILLING ADDRESS                         Rentable Area ___________________

                                             Lease Commencement
     NAME _____________________________      Date_____________________________

     ADDRESS __________________________      Lease Expiration Date____________

     CITY, STATE, ZIP__________________      Rental Payment Commencement

     __________________________________      Date ____________________________

     ATTN:_____________________________      Final Tenant Construction
                                             Overage _________________________

     ATTN: ____________________________
                                             Payment due from Tenant

                                             Insurance Certificate
                                             submitted (Y/N)__________________


                                             Security Deposit received________


     By: ______________________________      By:______________________________
         [TENANT or TENANT'S Agent]             Agent for HMS GATEWAY
                                                OFFICE, L.P.

                                      -1-