Document:

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                                                                   EXHIBIT 10.50

                              LIQUID AUDIO, INC.

                      2000 NONSTATUTORY STOCK OPTION PLAN

1.  Purposes of the Plan.  The purposes of this Nonstatutory Stock Option Plan
    --------------------
are:
    .  to attract and retain the best available personnel for positions of
       substantial responsibility,

    .  to provide additional incentive to Employees and Consultants, and

    .  to promote the success of the Company's business.

    Options granted under the Plan will be Nonstatutory Stock Options.

2.  Definitions.  As used herein, the following definitions shall apply:
    -----------

    (a)  "Administrator" means the Board or any of its Committees as shall be
          -------------
administering the Plan, in accordance with Section 4 of the Plan.

    (b)  "Applicable Laws" means the requirements relating to the administration
          ---------------
of stock option plans under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Options are, or will be, granted under the Plan.

    (c)  "Board" means the Board of Directors of the Company.
          -----

    (d)  "Code" means the Internal Revenue Code of 1986, as amended.
          ----

    (e)  "Committee"  means a committee of Directors appointed by the Board in
          ---------
accordance with Section 4 of the Plan.

    (f)  "Common Stock" means the Common Stock of the Company.
          ------------

    (g)  "Company" means Liquid Audio, Inc., a Delaware corporation.
          -------

    (h)  "Consultant" means any person, including an advisor, engaged by the
          ----------
Company or a Parent or Subsidiary to render services to such entity.

    (i)  "Director" means a member of the Board.
          --------

    (j)  "Disability" means total and permanent disability as defined in Section
          ----------
22(e)(3) of the Code.

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    (k)  "Employee" means any person, including Officers, employed by the
          --------
Company or any Parent or Subsidiary of the Company. A Service Provider shall not
cease to be an Employee in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

    (l)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.
          ------------

    (m)  "Fair Market Value" means, as of any date, the value of Common Stock
          -----------------
determined as follows:

          (i)  If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;

          (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

          (iii)  In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.

    (n)  "Notice of Grant" means a written or electronic notice evidencing
          ---------------
certain terms and conditions of an individual Option grant. The Notice of
Grant is part of the Option Agreement.

    (o)  "Officer" means a person who is an officer of the Company within the
          -------
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

    (p)  "Option" means a nonstatutory stock option granted pursuant to the
          ------
Plan, that is not intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code and the regulations promulgated thereunder.

    (q)  "Option Agreement" means an agreement between the Company and an
          ----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.

    (r)  "Option Exchange Program" means a program whereby outstanding options
          -----------------------
are surrendered in exchange for options with a lower exercise price.

                                      -2-
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    (s)  "Optioned Stock" means the Common Stock subject to an Option.
          --------------

    (t)  "Optionee" means the holder of an outstanding Option granted under the
          --------
Plan.

    (u)  "Parent" means a "parent corporation," whether now or hereafter
          ------
existing, as defined in Section 424(e) of the Code.

    (v)  "Plan" means this 2000 Nonstatutory Stock Option Plan.
          ----

    (w)  "Service Provider" means an Employee including an Officer or
          ----------------
Consultant.

    (x)  "Share" means a share of the Common Stock, as adjusted in accordance
          -----
with Section 12 of the Plan.

    (y)  "Subsidiary" means a "subsidiary corporation," whether now or hereafter
          ----------
existing, as defined in Section 424(f) of the Code.

3.  Stock Subject to the Plan.  Subject to the provisions of Section 12 of the
    -------------------------
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Five Hundred Thousand (500,000) Shares.  The Shares may be
authorized, but unissued, or reacquired Common Stock.

          If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated).

4.  Administration of the Plan.
    --------------------------
    (a)  Administration.  The Plan shall be administered by (i) the Board or
         --------------
(ii) a Committee, which committee shall be constituted to satisfy
Applicable Laws.

    (b)  Powers of the Administrator.  Subject to the provisions of the Plan,
         ---------------------------
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:

         (i)  to determine the Fair Market Value of the Common Stock;

         (ii) to select the Service Providers to whom Options may be granted
hereunder;

         (iii)  to determine whether and to what extent Options are granted
hereunder;

         (iv) to determine the number of shares of Common Stock to be covered by
each Option granted hereunder;

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         (v)  to approve forms of agreement for use under the Plan;

         (vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options may be exercised (which may be based on performance criteria), any
vesting acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any Option or the shares of Common Stock relating
thereto, based in each case on such factors as the Administrator, in its sole
discretion, shall determine;

         (vii)  to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such
Option shall have declined since the date the Option was granted;

         (viii)  to institute an Option Exchange Program;

         (ix) to construe and interpret the terms of the Plan and awards granted
pursuant to the Plan;

         (x)  to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans established for
the purpose of qualifying for preferred tax treatment under foreign tax laws;

         (xi) to modify or amend each Option (subject to Section 14(b) of the
Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;

         (xii)  to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option previously granted by the
Administrator;

         (xiii)  to determine the terms and restrictions applicable to Options;

         (xiv)  to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and

         (xv) to make all other determinations deemed necessary or advisable for
administering the Plan.

    (c)  Effect of Administrator's Decision.  The Administrator's decisions,
         ----------------------------------
determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

                                      -4-
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    5.  Eligibility.  Options may be granted to Service Providers; provided,
        -----------
however, that notwithstanding anything to the contrary contained in the Plan,
Options may not be granted to Officers and Directors.

    6.  Limitation.  Neither the Plan nor any Option shall confer upon an
        ----------
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

    7.  Term of Plan.  The Plan shall become effective upon its adoption by the
        ------------
Board.  It shall continue in effect for ten (10) years, unless sooner terminated
under Section 14 of the Plan.

    8.  Term of Option.  The term of each Option shall be stated in the Option
        --------------
Agreement.

    9.  Option Exercise Price and Consideration.
        ---------------------------------------

        (a)  Exercise Price.  The per share exercise price for the Shares to be
             --------------
issued pursuant to exercise of an Option shall be determined by the
Administrator.

        (b)  Waiting Period and Exercise Dates.  At the time an Option is
             ---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.

        (c)  Form of Consideration.  The Administrator shall determine the
             ---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of:

             (i)  cash;

             (ii)  check;

             (iii)  promissory note;

             (iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

             (v)  a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

             (vi) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws; or

             (vii)  any combination of the foregoing methods of payment.

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     10.  Exercise of Option.
          ------------------

          (a)  Procedure for Exercise; Rights as a Shareholder. Any Option
               -----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. An Option may not be exercised for a fraction of
a Share.

          An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised.  Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan.  Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised.  No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.

          Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

     (b)  Termination of Relationship as a Service Provider.  If an Optionee
          -------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option Agreement, and only to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

     (c)  Disability of Optionee.  If an Optionee ceases to be a Service
          ----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option
Agreement, to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the

                                      -6-
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unvested portion of the Option shall revert to the Plan.  If, after
termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered
by such Option shall revert to the Plan.

         (d)  Death of Optionee.  If an Optionee dies while a Service Provider,
              -----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

         (e)  Buyout Provisions.  The Administrator may at any time offer to buy
              -----------------
out for a payment in cash or Shares, an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

    11.  Non-Transferability of Options.  Unless determined otherwise by the
         ------------------------------
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.  If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

    12.  Adjustments Upon Changes in Capitalization, Dissolution, Merger or
         ------------------------------------------------------------------
Asset Sale.
----------

         (a)  Changes in Capitalization.  Subject to any required action by the
              -------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities

                                      -7-
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convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.

         (b)  Dissolution or Liquidation.  In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.

         (c)  Merger or Asset Sale.  In the event of a merger of the Company
              --------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
or right substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation refuses
to assume or substitute for the Option, the Optionee shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock, immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.

    13.  Date of Grant.  The date of grant of an Option shall be, for all
         -------------
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

    14.  Amendment and Termination of the Plan.
         -------------------------------------

                                      -8-
<PAGE>

         (a)  Amendment and Termination.  The Board may at any time amend,
              -------------------------
alter, suspend or terminate the Plan.

         (b)  Effect of Amendment or Termination. No amendment, alteration,
              ----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to options granted under the
Plan prior to the date of such termination.

    15.  Conditions Upon Issuance of Shares.
         ----------------------------------

         (a)  Legal Compliance.  Shares shall not be issued pursuant to the
              ----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

         (b)  Investment Representations.  As a condition to the exercise of an
              --------------------------
Option the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.

    16.  Inability to Obtain Authority.  The inability of the Company to obtain
         -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

    17.  Reservation of Shares.  The Company, during the term of this Plan, will
         ---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

                                      -9-<PAGE>

                                                                   Exhibit 10.15

                           TRIPLE NET BUILDING LEASE

                                    Between

                       PACIFIC SHORES DEVELOPMENT, LLC,
                                      as
                                    LESSOR

                                      and

                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                                       1
<PAGE>

                                   ARTICLE I
                                    PARTIES

     Section 1.01 Parties. This Lease, dated for reference purposes, and
     --------------------
effective as of May 5, 2000, is made by and between PACIFIC SHORES DEVELOPMENT,
LLC, or assignee, ("Lessor") and NUANCE COMMUNICATIONS, INC., a Delaware
corporation ("Lessee").

                                  ARTICLE II
                                   PREMISES

     Section 2.01 Demise of Premises. Lessor hereby leases to Lessee and Lessee
     -------------------------------
leases from Lessor for the term, at the rental, and upon all of the terms and
conditions set forth herein, Premises consisting of one building ("Building")
which together with nine (9) other free standing, office and research and
development buildings ("Buildings") and various other improvements are to be
constructed by Lessor on real property situated in Redwood City, County of San
Mateo, State of California and commonly known as Pacific Shores Center, all of
which real property improvements and their respective appurtenances (the
"Project"). The Building will be four (4) stories tall and will consist of
approximately one hundred forty thousand nine hundred forty-one (140,941)
rentable square feet, as more particularly described and depicted herein in
Exhibit "A." The actual rentable square footage of the Building (the "Rentable
Area") will be determined and certified by Lessor's architect by a method
described as "dripline," whereby the measurement encompasses the outermost
perimeter of the constructed building, including every projection thereof and
all area beneath each such projection, whether or not enclosed, with no
deduction for any inward deviation of structure and with the measurement being
made floor by floor, but beginning from the top of the Building provided that,
Lessee shall have the right, to be exercised prior to Commencement Date, to
measure the "as-built" Building to confirm that the aforesaid dripline
methodology was accurately utilized by Lessor's architect.. The Building and
appurtenances described herein, together with the legal parcel on which it is
constructed as well as all other improvements to be built on said legal parcel
are together designated as the "Property." The Building leased hereunder,
commonly known as Building 3 - Pacific Shores Center, Redwood City, California,
and its appurtenances described herein are herein designated as the "Premises."

     Section 2.02 Common Area. During the Lease Term, Lessee shall have the non-
     ------------------------
exclusive right to use the Common Area described herein, provided that

                                       2
<PAGE>

Lessor reserves the right to modify the Common Area, including reducing the size
or changing the use, configuration and elements thereof in its sole discretion
(including without limitation, for the purpose of construction of parking
facilities or additional buildings, of any nature or size whatsoever, and in any
part of the Project including, without limitation, any of the Common Area
including Common Area on the Property so long as Lessee's number of parking
spaces in not reduced) and to close or restrict access from time to time for
repair, maintenance or to prevent a dedication thereof, provided, further, that
Lessee nonetheless shall have access to parking and the Premises during such
activities and, provided further, that Lessor will continue to maintain the
baseball and soccer fields and the amenities/athletic facility or replacement
items of like kind for so long as Lessor is legally able to do so during the
Lease Term. Lessor further reserves the right to establish, repeal and amend
from time to time rules and regulations for the use of the Common Area and to
grant reciprocal easements or other rights to use the Common Area to owners of
other property, provided that, to the extent any conflict between this Lease and
such amended Common Area rules and regulations would unreasonably interfere with
any new rules and Regulations and this Lease (including the Rules and
Regulations attached hereto as Exhibit "L") would materially and adversely
affect Lessee's use of the Premises, this Lease shall govern, and to grant
reciprocal easements or other rights to use the Common Area to owners of other
property. "Common Area" includes, without limitation, all portions of the
Property other than the Building, including landscaping, sidewalks, walkways,
driveways, curbs, parking lots (including striping), roadways within the
Project, sprinkler systems, lighting, surface water drainage systems, sewer
systems, an amenities/athletic facility to be available for use by Lessee's
employees (the "Amenities/Athletic Facility"), as well as baseball and soccer
fields, a water front park, and a perimeter walking/biking trial, and, to the
extent required by government authorities having jurisdiction over Lessor's
development of the Project, amphitheater, marine life resource center, retreat
and conference center, child care center and such different or further portions
of the Project or additional or different facilities as Lessor may from time to
time designate or install or make available for the use by Lessee in common with
others. Lessee's employees may use, in common with others and without charge,
the baseball and soccer fields and the Amenities/Athletic Facility, subject to
such rules and regulations as Lessor may impose from time to time, but nothing
herein shall be deemed to waive payment for optional services which may be
available from time to time at those fields and/or Facility.

     Section 2.03 Parking. Lessor shall provide Lessee with parking spaces
     --------------------
within the Common Area in the ratio to space within the Building as required by

                                       3
<PAGE>

law, which is three (3) spaces per one thousand (1,000) square feet of interior
space within the Building. In the event Lessor elects or is required by any law
to limit or control parking at the Premises, whether by validation of parking
tickets or any other method of assessment, Lessee agrees to participate in such
validation or assessment program under such reasonable rules and regulations as
are from time to time established by Lessor. Lessor agrees that Lessee's access
to parking shall not be unreasonably limited beyond any requirement of law by
any such rules and regulations and the burden of any such limitation or control
imposed by law on the Project as a whole shall not be allocated to Lessee to an
extent greater than required by such law. Said parking shall be provided at no
additional cost except as expressly provided herein in Article VI for
reimbursement of repair, replacement and maintenance costs and expenses, and in
Article IX for payment or reimbursement of any real property taxes including
governmental or public authority charges, fees or impositions of any nature
hereafter imposed and in Article IV for payment of Additional Rent, without
limitation, including Operating Expenses. Lessor shall act in good faith to
facilitate the availability of the parking spaces allocated to Lessee, but
Lessor does not guarantee the availability of those spaces at all times against
the actions of other tenants of the Project and guests, visitors, invitees and
users of the Project amenities; provided, however, if after the Commencement
Date Lessee demonstrates to Lessor's satisfaction there is significant
interference with Lessee's ability to park in the vicinity of the Building, then
at Lessee's written request to Lessor, Lessor shall designate certain parking
spaces in the vicinity of the Building as reserved for Lessee and/or Lessee's
visitors, subject to Lessee paying the cost of same. Access to parking may, at
Lessor's option, be regulated by card, pass, bumper sticker, decal or other
appropriate identification issued by Lessor. Lessor retains the right to revoke
the parking privileges of any user of the parking areas who violates the rules
and regulations governing use of the parking areas (and Lessee shall be
responsible for causing any employee of Lessee or other person using parking
spaces allocated to Lessee to comply with all parking rules and regulations.

     Section 2.04  Construction.
     --------------------------

     (a)  Government Approvals. Lessor shall diligently pursue obtaining
          --------------------
governmental approval of a Site Plan and Building design and elevations with
respect to the development of the Premises, copies of which are attached hereto
as Exhibit "A." The parties acknowledge and agree that the final footprint and
elevations of the Building may vary from those attached as Exhibit "A" because
the plans and specifications will undergo a plancheck process with the City of
Redwood City and Lessor will make such revisions as are required or are

                                       4
<PAGE>

otherwise deemed necessary or appropriate by Lessor, provided however, that
nothing herein shall be deemed to relieve Lessor from the duty to develop the
Building substantially in accordance with Exhibit "A."

     (b)  Construction of Building Shell. Lessor, utilizing Rudolph & Sletten
          ------------------------------
(or such alternate as Lessor in its sole discretion may select) as general
contractor ("General Contractor") and DES as the Building Shell Architect
("Architect"), shall construct the "Building Shell" (as defined in the attached
Exhibit "D") substantially in accordance with (i) plans and specifications to be
attached as Exhibit "B" and (ii) all existing applicable municipal, local, state
and federal laws, statutes, rules, regulations and ordinances. Lessor shall pay
all costs of constructing the Building Shell.

     (c)  Construction of Tenant Improvements. All improvements not included
          -----------------------------------
within the scope of the Building Shell shall be deemed "Tenant Improvements."
Lessor, using the General Contractor, shall construct the Tenant Improvements
and Lessee shall pay all costs associated with same. The total compensation to
the General Contractor under such contract shall be equal to a contractor's fee
not to exceed an amount equal to two and one-half percent (2.5%) of the contract
(provided that a contractor's fee shall not be payable for change orders
required due to coordination errors caused by the General Contractor or any of
its subcontractors) and an amount not to exceed an amount equal to two and one-
half percent (2.5%) of the contract for general conditions plus an amount equal
to three quarters of a percent (.75%) of the contract for insurance.

     (d)  Tenant Improvement Plans and Cost Estimate. Lessee shall utilize
          ------------------------------------------
Gensler Associates or another architect acceptable to both Lessee and Lessor
("Tenant Improvement Architect") and shall cause the Tenant Improvement
Architect to develop interior schematic drawings, and schematic drawings for the
Generator described in Subsection 2.04(j) below, and Lessee shall approve and
obtain Lessor's approval of (which shall not be unreasonably withheld or
delayed) final schematic drawings for the Tenant Improvements and Generator no
later than September 1, 2000, provided that Lessor delivers working drawings for
the Building Shell on or before July 5, 2000 (and the date for delivery of the
schematic drawings by Lessee shall be extended by one day for each day of delay
by Lessor in delivering the Building Shell working drawings to Lessee). Lessee
shall cause the Tenant Improvement Architect to develop working drawings
outlining, among other things, Lessee's wall layout, detailed electrical and air
conditioning requirements and finishes sufficient to allow the General
Contractor to construct and install all of the Tenant Improvements ("Working
Drawings") and Lessee shall approve (and obtain Lessor's approval, which shall
not be

                                       5
<PAGE>

unreasonably withheld or delayed) final Working Drawings on or before December
1, 2000. The cost of the interior schematic drawings and Working Drawings shall
be a Tenant Improvement cost paid by Lessee. Based on this information, Lessor
shall cause the General Contractor to prepare and deliver to Lessee a budget for
the Tenant Improvements ("Budget"). Lessee shall approve the Budget (or modify
the same with Lessor's consent), in writing, within fourteen (14) days
thereafter. The Working Drawings and Budget must be approved by Lessor and
Lessee (neither of whom shall unreasonably withhold or delay such consent) in
writing and must provide for Tenant Improvements of quality (but not necessarily
cost) equal to or greater than the Interior Specifications Standards set forth
in Exhibit "C" and must encompass the build-out of the entire Premises provided
that Lessee may request and Lessor may consent, in its sole discretion, that
certain improvements of lesser quality or of a type not generally used for Class
A office space (for purposes of this subsection 2.04(d), showers and computer
labs are deemed to be improvements of a type generally used for Class A office
space) be installed to comply with Lessee's artistic scheme provided, further,
that Lessor may condition its consent on Lessee depositing with Lessor the cost
of removal of such improvements and for the cost of replacing such improvements
with higher quality or of a type more generally used in Class A office space
buildings at the expiration or termination of the Lease Term, provided further,
that the specifications set forth in Schedule One to Exhibit "C" for finish
items are meant only as a guideline and as an example of Class A standard
improvements, and such specifications for finish items are not to be interpreted
as binding on Lessee or as the actual finish specifications for the construction
of the Tenant Improvements, but only as an example of Class A standard finish
improvements. Lessee shall not be required to construct the finish items of
Tenant Improvements to the above-referenced specifications, but shall be
required to construct all the Tenant Improvements, including finish items, to a
Class A standard. Once the Budget is approved, Lessor shall enter into a
guaranteed maximum price ("GMP") contract with the General Contractor for the
construction of the Tenant Improvements, and any additional costs for Tenant
Improvements in excess of the GMP contract shall be Lessor's responsibility
except for Lessee initiated change orders which shall be Lessee's
responsibility.

     (e)  Cost Responsibilities. Attached as Exhibit "C" to this Lease is a Work
          ---------------------
Letter Agreement for Tenant Improvements, and Exhibit "D," Cost Responsibilities
of Lessor and Lessee, which together with this Section 2.04, describe the
planning and payment responsibilities of Lessor and Lessee with respect to the
construction of the Shell Building and Tenant Improvements at the Premises. All
approved Tenant Improvements shall be constructed in accordance

                                       6
<PAGE>

with a construction schedule approved by Lessor and no portion of the Building
interior shall remain unimproved.

     (f)  Tenant Improvements. Lessor shall provide to Lessee semi-improved
          -------------------
"cold" shell facilities as described in Exhibit "D" attached. Lessor shall cause
the General Contractor to construct the Tenant Improvements outlined in Exhibit
"D," as further outlined in the Tenant Improvement Work Letter attached as
Exhibit "C" and Lessee shall pay all costs and expenses of same. Subcontracts
for all Tenant Improvement Work shall be obtained by a sealed competitive bid
process (involving at least two qualified bidders) wherever practical and as to
work done without such process, Lessor or the General Contractor shall provide
reasonable assurance to Lessee that the cost and expense of same is competitive
in the industry for first-class workmanship and materials. Lessee may have a
representative attend weekly construction meetings but failure of Lessee or its
representative to attend any meeting for any reason shall not invalidate
anything which occurs thereat or give rise to any right or remedy in favor of
Lessee.

     (g)  Payment for Tenant Improvements. Within ten (10) business days after
          -------------------------------
the Budget is approved by Lessor and Lessee, Lessee shall deposit the entire
amount (together with the cost of any Tenant Improvements already made) with
Lessor's construction lender to be held in an interest-bearing escrow account
with interest being credited to Lessee. Said construction lender shall issue
payments from said account pursuant to the construction contract for the Tenant
Improvements, remaining payments shall be made 100% by Lessee. Lessor shall
manage the construction of the Tenant Improvements for a supervision fee equal
to four percent (4%) of the Budget (as the same may change by agreement of the
parties) due and payable in nine equal monthly installments beginning on the
first day of the calendar month following the calendar month in which the Budget
is first approved.

     (h)  Lessee's Fixturing Period. By advance written notice, Lessor shall
          -------------------------
provide Lessee access to the Premises during the thirty (30) day period (and
such earlier date for items of fixturing requiring earlier access, to the extent
Lessee requests same and Lessor determines same can be granted without
interference with the construction of the Building Shell) prior to the
Commencement Date ("Lessee's Fixturing Period") for the purpose of installing
furnishings and equipment, e.g. security system, furniture system and phone and
data system, provided, that Lessee and Lessee's employees and contractors shall
at all times avoid interfering with Lessor's ongoing work to bring the Premises
to a substantially completed condition. Except for payment of Base Rent, all
terms and provisions of this Lease shall apply during Lessee's Fixturing Period,

                                       7
<PAGE>

including, without limitation, Lessee's indemnity and other obligations set
forth in Sections 7.07., 7.08. and 17.22. hereof and payment of Additional Rent
pursuant to Section 4.05 hereof.

     (i)  Construction of Offsite and Onsite Improvements. In addition to the
          -----------------------------------------------
Building Shell and Tenant Improvements, and concurrently with its construction
schedule for same, Lessor shall construct both offsite and onsite improvements
required as a condition to the Certificate of Occupancy for the Building which
are (i) (onsite) waterfront park, baseball field and soccer field, and (ii)
(offsite) Seaport Boulevard improvements and deep water slough restoration.

     (j)  Generator. Lessee, at Lessee's sole cost and expense, and in
          ---------
compliance with all applicable legal requirements including required permits,
may install, in a location and configuration to be designated by Lessee and
subject to Lessor's prior written consent, which shall not be unreasonably
withheld, a generator and fuel storage tank and appropriate screening  and route
all electrical distribution from the Generator to the Premises (such generator,
tank and screening, routing of distribution and any related improvements being
collectively referred to herein as "Generator").  Lessee shall indemnify and
hold Lessor and any lender whose loan is secured by the Project or Property or
any part thereof, free and harmless from any and all liability, claims, loss,
damages, causes of action (whether in tort or contract, law or equity, or
otherwise), expenses, charges, assessments, fines and penalties of any kind,
including without limitation, reasonable attorneys' fees, expert witness fees
and costs, arising by reason of the existence, installation, problems with or
use of Generator.  Installation shall be done at such time and manner as to
which Lessor shall consent, which consent shall not be unreasonably withheld.

                                  ARTICLE III
                                     TERM

     Section 3.01 Lease Term.
     -----------------------

     (a)  Commencement Date. The term of this Lease ("Lease Term") shall be for
          -----------------
eleven (11) years beginning on the earlier of (i) the date a Certificate of
Occupancy (which means for purposes of this Lease, either a Certificate of
Occupancy or its equivalent which allows legal occupancy and including, without
limitation, a Notice of Substantial Completion) first is issued affecting the
Building, or (ii) the date on which Lessee first occupies or conducts business
at the Premises and the Seaport Boulevard improvements, the baseball and soccer

                                       8
<PAGE>

fields have been substantially completed (the "Commencement Date") provided
that, (i) for each day of delay by Lessee in failing to approve the interior
schematic drawings or the Working Drawings when required under Section 2.04(d),
or (ii) for each day of delay by Lessee in failing to approve the Budget, in
writing, within fourteen (14) days after delivery by the General Contractor as
provided in Section 2.04(d), or (iii) for each day of delay caused by any
changes to the approved Working Drawings requested by Lessee, or (iv) for each
day that any other act or omission by Lessee causes the construction schedule
for Tenant Improvements to be delayed provided that Lessor gives Lessee written
notice of such Lessee Delay within five (5) business days after its occurrence
(collectively "Lessee Delay"), the Commencement Date shall occur one (1) day in
advance of the date of the Certificate of Occupancy for each such day of delay.
For example, if seven (7) days of Lessee Delay causes the date of issuance of
the Certificate of Occupancy to occur on August 8, 2001 rather than August 1,
2001, the Commencement Date shall be August 1, 2001 for all purposes, including
payment of Base Rent and Additional Rent. The Lease Term shall expire, unless
sooner terminated or extended as provided herein, on the date which completes
eleven (11) years after the Commencement Date occurs or is deemed to have
occurred, e.g. if the date on which the Certificate of Occupancy is issued or
deemed to be issued for the Building is August 1, 2001, the Lease Term shall
expire on July 31, 2012 and if that date is August 3, 2001, the Lease Term shall
expire on August 2, 2012 ("Expiration Date"). The parties shall execute a
"Memorandum of Commencement of Lease Term" when the Commencement Date becomes
known, which shall include a certification by Lessor's architect of the actual
Rentable Area of the Building determined by the methodology described in Section
2.01. and the actual monthly installments of Base Rent to be paid pursuant to
Section 4.01., and shall be substantially in the form attached hereto as Exhibit
"E."

     (b)  Scheduled Commencement Date. Lessor shall use commercially reasonable
          ---------------------------
efforts to cause the Certificate of Occupancy for the Building to be issued no
later than August 1, 2001 ("Scheduled Commencement Date"). If a Certificate of
Occupancy is not issued for the Building on or before the Scheduled Commencement
Date, this failure shall not constitute a breach of any obligation hereunder on
Lessor's part to observe or perform nor affect the validity of this Lease or the
obligations of Lessee under it. If the Commencement Date is adjusted for delay
from any cause, the Expiration Date shall be likewise adjusted for a like
period.

     (c)  Termination in Event of Delay. If for any reason Lessor is unable to
          -----------------------------
cause the issuance of a Certificate of Occupancy for the Building, on or before
the

                                       9
<PAGE>

date which is one hundred eighty (180) days after the Scheduled Commencement
Date (for a reason other than Lessee Delay or Force Majeure Delay excused under
Section 17.21.), Lessee, at its sole election, may terminate this Lease upon
giving notice within ten (10) business days thereafter. Failure to give such
notice within said time period constitutes an irrevocable waiver of the
foregoing right to terminate under this Section 3.01(c).

     Section 3.02  Option to Extend.
     ------------------------------

     (a)  Exercise. Lessee is given one (1) option to extend the Lease Term
          --------
("Option to Extend") for a five (5) year period ("Extended Term") following the
date on which the initial Lease Term would otherwise expire, which option may be
exercised only by written notice ("Option Notice") from Lessee to Lessor given
not less than eighteen (18) months prior to the end of the initial Lease Term
("Option Exercise Date"); provided, however, if Lessee is in material default
under this Lease (beyond the expiration of any applicable notice and cure
period) on the Option Exercise Date or on any day thereafter on or before the
last day of the initial Lease Term, the Option Notice shall be totally
ineffective, and this Lease shall expire on the last day of the initial Lease
Term, if not sooner terminated. The right of Lessee to exercise an Option to
Extend shall not be affected by any sublease or assignment of this Lease
previously entered into by Lessee pursuant to the provisions of this Lease.

     (b)  Extended Term Rent. In the event Lessee exercises its Option to Extend
          ------------------
set forth herein, all the terms and conditions of this Lease shall continue to
apply except that the Base Rent payable by Lessee during each Option Term shall
be equal to one hundred percent (100%) of Fair Market Rent (defined below), as
determined under subparagraph (c) below. "Fair Market Rent" shall mean the
effective rate being charged (including periodic adjustments thereto as
applicable during the period of the Extended Term), for comparable space in
similar buildings in the vicinity, i.e. of a similar age and quality considering
any recent renovations or modernization, and floor plate size or, if such
comparable space is not available, adjustments shall be made in the
determination of Fair Market Rent to reflect the age and quality of the Building
and Premises as contrasted to other buildings used for comparison purposes, with
similar amenities, taking into consideration: size, location, floor level,
leasehold improvements or allowances provided or to be provided, term of the
lease, extent of services to be provided, the time that the particular rate
under consideration became or is to become effective, and any other relevant
terms or conditions applicable to both new and renewing tenants, but in no event
less than the monthly Base Rent prevailing during the last year of the initial
Lease Term or Extended Term, as applicable.

                                       10
<PAGE>

     (c)  Determination of Fair Market Rent.
          ---------------------------------

          (i)  Negotiation. If Lessee so exercises its Option to Extend in a
               -----------
timely manner, the parties shall then meet in good faith to negotiate the Base
Rent for the Premises for the Extended Term, during the first thirty (30) days
after the date of the delivery by Lessee of the Option Notice (the "Negotiation
Period"). If, during the Negotiation Period, the parties agree on the Base Rent
applicable to the Premises for the Extended Term, then such agreed amount shall
be the Base Rent payable by Lessee during the Extended Term.

          (ii) Arbitration. In the event that the parties are unable to agree on
               -----------
the Base Rent for the Premises within the Negotiation Period, then within ten
(10) days after the expiration of the Negotiation Period, each party shall
separately designate to the other in writing an appraiser to make this
determination. Each appraiser designated shall be a member of MAI and shall have
at least ten (10) years experience in appraising commercial real property, of
similar quality and use as the Premises, in San Mateo County. The failure of
either party to appoint an appraiser within the time allowed shall be deemed
equivalent to appointing the appraiser appointed by the other party, who shall
then determine the Fair Market Rent for the Premises for the Extended Term.
Within five (5) business days of their appointment, the two designated
appraisers shall jointly designate a third similarly qualified appraiser. Within
thirty (30) days after their appointment, each of the two appointed appraisers
shall submit to the third appraiser a sealed envelope containing such appointed
appraiser's good faith determination of the Fair Market Rent for the Premises
for the Extended Term; concurrently with such delivery, each such appraiser
shall deliver a copy of his or her determination to the other appraiser. The
third appraiser shall within ten (10) days following receipt of such
submissions, then determine which of the two appraisers' determinations most
closely reflects Fair Market Rent as defined above. The determination most
closely reflecting the third appraiser's determination shall be deemed to be the
Fair Market Rent for the Premises during the Extended Term; the third appraiser
shall have no rights to adjust, amend or otherwise alter the determinations made
by the appraiser selected by the parties, but must select one or the other of
such appraisers' submissions. The determination by such third appraiser shall be
final and binding upon the parties. Said third appraiser shall, upon selecting
the determination which most closely resembles Fair Market Rent, concurrently
notify both parties hereto. The Base Rent for the Extended Term shall be the
determination so selected. The parties shall share the appraisal expenses
equally. If the Extended Term begins prior to the determination of Fair Market
Rent, Lessee shall pay monthly installments of Base Rent equal to one hundred
ten

                                       11
<PAGE>

percent (110%) of the monthly installment of Base Rent in effect for the last
year of the initial Lease Term (in lieu of "holdover rent" payable under Section
17.09(b)). Once a determination is made, any over payment or under payment shall
be reimbursed as a credit against, or paid by adding to, the monthly installment
of Base Rent next falling due.

                                  ARTICLE IV
                            RENT: TRIPLE NET LEASE

     Section 4.01 Base Rent. Lessee shall pay to Lessor as Base Rent an initial
     ----------------------
monthly installment of Four Dollars and Twenty-Five Cents ($4.25) per square
foot of Rentable Area as determined under Section 2.01., in advance, on the
first day of each calendar month of the Lease Term, commencing on the
Commencement Date, subject to being credited with the advance payment of
estimated first installment of Base Rent pursuant to Section 4.03. Base Rent for
any period during the Lease Term which is for less than one month shall be a pro
rata portion of the monthly installment (based on the actual days in that
month).

     Section 4.02 Rent Adjustment. The Base Rent set forth in Section 4.01.
     ----------------------------
above shall be adjusted upward by an annual compounded increase of three and
one-half percent (3.5%), as of the first day of the thirteenth (13th) full
calendar month following the Commencement Date and as of each anniversary of
that date thereafter during the Lease Term, as shown on Exhibit "E" attached
hereto.

     Section 4.03 First Payment of Base Rent. Lessee shall pay in advance the
     ---------------------------------------
first payment of Base Rent in the estimated amount of Five Hundred Ninety-Eight
Thousand, Eight Hundred Ninety-Nine Dollars and Twenty-Five Cents ($598,999.25)
within five (5) days after Lessee's execution of this Lease. Base Rent payments
shall resume on the first day of the calendar month immediately succeeding the
Commencement Date. If the Commencement Date is other than the first day of a
calendar month, the first payment of Base Rent subsequent to the Commencement
Date, but only that payment of Base Rent, shall be reduced by any excess of the
first Base Rent installment paid in advance over the prorated amount actually
due for such partial first month of the Lease Term.

     Section 4.04 Absolute Triple Net Lease. This Lease is what is commonly
     --------------------------------------
called a "Absolute Triple Net Lease," it being understood that Lessor shall
receive the Base Rent set forth in Section 4.01. free and clear of any and all
expenses, costs, impositions, taxes, assessments, liens or charges of any nature
whatsoever. Lessee shall pay all rent in lawful money of the United States of
America to Lessor at the notice address stated herein or to such other persons
or at such other

                                       12
<PAGE>

places as Lessor may designate in writing on or before the due date specified
for same without prior demand, set-off or deduction of any nature whatsoever. It
is the intention of the parties hereto that this Lease shall not be terminable
for any reason by Lessee, and that except as herein expressly provided in
Articles III, VIII and XIII, concerning delay, destruction and condemnation,
Lessee shall in no event be entitled to any abatement of or reduction in rent
payable under this Lease. Any present or future law to the contrary shall not
alter this agreement of the parties.

     Section 4.05  Additional Rent.
     -----------------------------

     (a)  Defined. In addition to the Base Rent reserved by Section 4.01.,
          -------
Lessee shall pay, as Additional Rent (i) 100% as to amounts applicable solely to
the Premises or Property and Lessee's Share (as defined in Section 4.07(c)
below) as to amounts applicable to the Project or Common Area of all taxes,
assessments, fees and other impositions payable by Lessee in accordance with the
provisions of Article IX, and insurance premiums in accordance with the
provisions of Article VII, (ii) Lessee's Share of Operating Expenses defined
below provided that notwithstanding the foregoing, prior to January 1, 2002,
during the construction phase of the Project, Lessee shall pay 100% of Operating
Expenses applicable to the Property or Premises in lieu of paying Lessee's Share
of the specific items being billed, and (iii) any other charges, costs and
expenses (including appropriate reserves therefor) which are contemplated or
which may arise under any provision of this Lease during the Lease Term, plus a
Management Fee to Lessor equal to 3% of the Base Rent. The Management Fee is due
and payable, in advance, with each installment of Base Rent. All of such
charges, costs, expenses, Management Fee and all other amounts payable by Lessee
hereunder, shall constitute Additional Rent, and upon the failure of Lessee to
pay any of such charges, costs or expenses, Lessor shall have the same rights
and remedies as otherwise provided in this Lease for the failure of Lessee to
pay Base Rent. To the extent any of the aforesaid amounts are fairly allocable
to the Common Area or to other portions of the Project, Lessee's obligation is
to pay only its proportionate share as determined by Lessor based upon the ratio
of the Rentable Area of the Premises to the Rentable Area of all office and
research and development buildings at the Project which share is presently
determined to be eight point five three percent (8.53 %).

     (b)  Payment. To the extent not paid pursuant to other provisions of this
          -------
Lease, and at Lessor's sole election, Lessor may submit invoices and Lessee
shall pay Additional Rent in monthly installments on the first day of each month
in advance in an amount to be estimated by Lessor, based on Lessor's experience
in

                                       13
<PAGE>

managing office/research and development projects. Within ninety (90) days
following the end of the period used by Lessor in estimating Additional Rent,
Lessor shall furnish to Lessee a statement (hereinafter referred to as "Lessor's
Statement") of the actual amount of Lessee's proportionate share of such
Additional Rent for such period. Within fifteen (15) days thereafter, Lessee
shall pay to Lessor, as Additional Rent, or Lessor shall remit or credit to
Lessee, as the case may be, the difference between the estimated amounts paid by
Lessee and the actual amount of Lessee's Additional Rent for such period as
shown by such statement. Monthly installments for the ensuing year shall be
adjusted upward or downward as set forth in Lessor's Statement.

     Section 4.06  Security Deposit.
     ------------------------------

     (a)  Initial Security Deposit. Within five (5) business days after the date
          ------------------------
this Lease is executed by Lessee, Lessee shall deposit with Lessor a Security
Deposit equal to eighteen (18) month's estimated Base Rent in the amount of Ten
Million, Nine Hundred Seven Thousand, Seven Hundred Seventy-Six Dollars
($10,907,776.00) in the form of cash or an unconditional, irrevocable standby
letter of credit without documents, i.e., no obligation on Lessor's part to
present anything but a sight draft, with Lessor as beneficiary (or, at Lessor's
option, as co-beneficiary with Lessor's Lender), drawable in whole or in part,
providing for payment in San Francisco on presentation of Lessor's drafts on
sight, providing for multiple draws and multiple successors and otherwise both
from a bank and in a form acceptable to Lessor, including, without limitation,
in a form identical to or similar to that attached to this Lease as Exhibit __
(the "Security Deposit"). The Security Deposit shall be held by Lessor as
security for the faithful performance by Lessee of all of the terms, covenants,
and conditions of this Lease applicable to Lessee. If Lessee defaults with
respect to any provision of this Lease, including but not limited to the
provisions relating to the condition of the Premises upon Lease Termination,
Lessor may (but shall not be required to) use, apply or retain all or any part
of the Security Deposit for the payment of any amount which Lessor may spend by
reason of Lessee's default or to compensate Lessor for any loss or damage which
Lessor may suffer by reason of Lessee's default and if all or any part of the
Security Deposit is in the form a of a letter of credit, Lessor may draw on all
or any part of same and thereafter retain any unapplied portion as a cash
Security Deposit. If any portion of the Security Deposit is so used or applied,
Lessee shall, within ten days after written demand therefor, deposit cash (or a
replacement letter of credit in form and substance subject to the same
requirements as the original letter of credit) with Lessor in an amount
sufficient to restore the Security Deposit to its original amount. Lessee's
failure to do so shall

                                       14
<PAGE>

be a material default and breach of this Lease by Lessee. The rights of Lessor
pursuant to this Section 4.06. are in addition to any rights which Lessor may
have pursuant to Article 12 below. If Lessee fully and faithfully performs every
provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned (without interest) to Lessee (or, at Lessor's
option, to the last assignee of Lessee's interests hereunder) at Lease
expiration or termination and after Lessee has vacated the Premises. Lessor
shall not be required to keep the Security Deposit separate from Lessor's
general funds or be deemed a trustee of same. If the Security Deposit is in
whole or in part in the form of a letter of credit, failure of Lessee to deliver
a replacement letter of credit to Lessor at least forty-five (45) business days
prior to the expiration date of any current letter of credit shall constitute a
separate default entitling Lessor to draw down immediately and entirely on the
current letter of credit and the proceeds shall constitute a cash Security
Deposit.

     (b)  Adjustment of Security Deposit. The letter of credit shall be reduced
          ------------------------------
to an amount equal to the total of three (3) months of Base Rent at the then
current rate, if Lessee establishes through financial statements prepared in
accordance with generally accepted accounting principles and in a form
acceptable to Lessor that Lessee has achieved annual revenue for a period of at
least one (1) fiscal year of at least Seven Hundred Fifty Million Dollars
($750,000,000) and has further achieved quarterly operating profit of at least
Seventy-Five Million Dollars ($75,000,000) for not less than four (4)
consecutive quarters.

     Section 4.07  Operating Expenses.
     --------------------------------

     (a)  Definition. "Operating Expenses" shall mean and include, to the extent
          ----------
not billed as a cost or expense of the Premises, Property or otherwise pursuant
to Articles VI, VII or IX, all costs and expenses of every kind and nature paid
or incurred by Lessor (whether obligated to do so or undertaken at Lessor's
discretion) in the operation, maintenance, repair and replacement of the Common
Areas, including Common Area buildings and improvements located within the
Project and including Common Areas located on the Property. Such cost and
expenses shall include, but not be limited to, costs of management; cleaning;
lighting; the costs of maintaining, repairing and replacing all Common Area
improvements (including but not be limited to signage, light poles and fixtures,
storm and sanitary sewers, parking lots, driveways, walkways, curbs and roads),
repairs to and maintenance of the structural and non-structural portions of the
Amenity/Athletic Facility; supplies, tools, equipment and materials used in the
operation and maintenance of the Project; snow removal; parking lot striping;
removal of trash, rubbish, garbage and other refuse; painting; removal of
graffiti;

                                       15
<PAGE>

painting of exterior walls; landscaping; providing security to the extent Lessor
determines in its sole discretion to do so (including security systems and/or
systems designed to safeguard life or property against acts of God and/or
criminal and/or negligent acts, and the costs of maintaining of same); public
liability, property damage, fire insurance, earthquake and flood coverage, all
risk or special form insurance coverage, rent interruption insurance coverage,
the costs of excess award above insurance aggregate, total compensation and
benefits (including premiums for workers' compensation and other insurance) paid
to or on behalf of employees, including but not limited to full or part time on-
site management or maintenance personnel; personal property taxes; fire
protection and fire hydrant charges (including fire protection system signaling
devices, now or hereafter required, and the costs of maintaining of same); water
and sewer charges; utility charges; license and permit fees necessary to operate
and maintain the initial cost of or the reasonable depreciation of equipment
used in operating and maintaining the Common Areas and rent paid for leasing any
such equipment; reasonable cost of on or off site storage space of any and all
items used in conjunction with the operation, maintenance and management of the
Project, including but not limited to tools, machinery, records, decorations,
tables, benches, supplies and meters; the cost of and installation cost of any
and all items which are installed for the purpose of reducing Operating
Expenses, increasing building or public safety or which may be then required by
governmental authority, laws, statutes, ordinances and/or regulations, a use
privilege charge consisting of Base Rent and Operating Expenses allocated to the
Amenities/Athletic Facility and all costs and expenses arising from the
operation of same. Lessor shall apply the following amounts received by Lessor
to reduce Operating Expenses of the amenities/Athletic Facility or other portion
of the Common Area which generates same; (1) fees paid by any user other than
tenants of the Project (including, without limitation, the public and Lessee's
employees) for use of the Amenities/Athletic Facility and any of the other
Common Areas; (2) base rent and additional rent paid by the operators of the
Amenities/Athletic Facility and any of the other Common Areas.

     (b)  Payment. Lessee shall pay Lessee's Share of Additional Rent in monthly
          -------
installments on the first day of each month in an amount set forth in a written
estimate by Lessor. Lessor agrees that it will make its estimate in good faith
and based on Lessor's experience in managing office/research and development
projects. Within ninety (90) days following the end of the period used by Lessor
in estimating Lessee's share of Additional Rent, Lessor shall furnish to Lessee
a statement (hereinafter referred to as "Lessor's Statement") of the actual
amount of Lessee's Share of such Additional Rent for such period. Within ten
(10) days thereafter, Lessee shall pay to Lessor, as Additional Rent, or

                                       16
<PAGE>

Lessor shall remit to Lessee, as the case may be, the difference between the
estimated amounts paid by Lessee and the actual amount of Lessee's Share of
Additional Rent for such period as shown by such Statement. Lessee's Share of
Additional Rent for the ensuing estimation period shall be adjusted upward or
downward based upon Lessor's Statement.

     (c)  Lessee's Share. For purposes hereof, "Lessee's Share" shall mean the
          --------------
rentable square footage of the Building subject to this Lease (at the time in
question) divided by a number equal to the number of rentable square feet of
office/research and development buildings which are then constructed at the
Project, in each case measured on a dripline basis.

     (d)  Exclusions. For purposes of this Lease, the term Operating Expenses
          ----------
shall not include (and Lessee shall have no liability for) any of the following:
initial construction of any Common Area improvements; legal fees, permit fees,
architectural and engineering fees related to the initial development and
construction of the Project; costs (including permit, license and inspection
costs) incurred in renovating or otherwise improving, decorating or redecorating
rentable space for prospective tenants or vacant rentable space; legal fees,
space planner's fees and brokerage fees incurred in connection with the original
or future leasing of the Project; any bad debt loss, rent loss, or reserves for
bad debts or rent loss; interest, charges and fees incurred on debt, payments on
mortgages and amounts paid as ground rental for the real property underlying the
Project by Lessor; any costs covered by any warranty, rebate, guarantee or
service contract which are actually collected by Lessor (which shall not
prohibit Lessor from passing through the costs of any such service contract if
otherwise includable in Operating Expenses); interest, late charges and tax
penalties incurred as a result of Lessor's gross negligence or unwillingness to
make payments or file tax returns when due; any costs representing an amount
paid to a person, firm, corporation or other entity related to Lessor which is
in excess of the amount which would have been paid in the absence of such
relationship. Nothing contained in this Section shall prohibit or limit Lessor
from passing through, in Article IX, any one or more specified items as part of
the Community Facility District Bond.

     Section 4.08  Lessee's Right to Review Supporting Data.
     ------------------------------------------------------

     (a)  Exercise of Right by Lessee. Provided that Lessee is not in default
          ---------------------------
under this Lease and provided further that Lessee strictly complies with the
provisions of this Paragraph, Lessee shall have the right to reasonably review
supporting data for any portion of a Lessor's statement that Lessee claims is
incorrect. In order for Lessee to exercise its right under this Paragraph,
Lessee

                                       17
<PAGE>

shall, within thirty (30) days after any such Lessor's statement is sent,
deliver a written notice to Lessor specifying the portions of the Lessor's
statement that are claimed to be incorrect, and Lessee shall simultaneously pay
to Lessor all amounts due from Lessee to Lessor as specified in the Lessor's
statement. Except as expressly set forth in subparagraph 3 below, in no event
shall Lessee be entitled to withhold, deduct, or offset any monetary obligation
of Lessee to Lessor under the Lease.

     (b)  Procedures for Review.  Lessee acknowledges that Lessor maintains its
          ---------------------
records for the Building and Project at its offices in San Francisco, and Lessee
therefore agrees that any review of supporting data under this Paragraph shall
occur at such location. Any review to be conducted under this Paragraph shall be
at the sole expense of Lessee and shall be conducted by an independent firm of
certified public accountants of national standing. Lessee acknowledges and
agrees that any supporting data reviewed under this Paragraph constitute
confidential information of Lessor, which shall not be disclosed to anyone other
than the accountants performing the review and the principals of Lessee who
receive the results of the review. The disclosure of such information to any
other person, whether or not caused by the conduct of Lessee, shall constitute a
material breach of this Lease.

     (c)  Finding of Error.  Any errors disclosed by the review of supporting
          ----------------
data under this Paragraph shall be promptly corrected, provided that Lessor
shall have the right to cause another review of the supporting data to be made
by an independent firm of certified public accountants of national standing. In
the event of a disagreement between the two accounting firms, the review that
discloses the least amount of deviation from the Lessor's statement shall be
deemed to be correct and its review shall be final and binding on both Lessor
and Lessee. If the results of the review of supporting data taking into account,
if applicable, the results of any additional review caused by Lessor reveal that
Lessee has overpaid obligations for a preceding period, the amount of such
overpayment shall be credit against Lessee's subsequent installment obligations
to pay its share of Additional Rent. In the event that such results show that
Lessee has underpaid its obligations for a preceding period, the amount of such
underpayment shall be paid by Lessee to Lessor with the next succeeding
installment obligation of Additional Rent or, if the Lease has terminated, in
cash within thirty (30) days after the determination of underpayment is
delivered to Lessee. Each party shall pay the cost and expense of its chosen
accounting firm.

     (d)  Effect of Lessee's Default.  In the event that Lessee becomes in
          --------------------------
default of its obligations under this Lease at any time during the pendency of a

                                       18
<PAGE>

review of records under this Paragraph, said right to review shall immediately
cease and the matters originally set forth in the Lessor's statement shall be
deemed to be correct.

                                   ARTICLE V
                                      USE

     Section 5.01  Permitted Use and Limitations on Use.  The Premises shall be
     --------------------------------------------------
used and occupied only for office, research and development, together with such
ancillary uses which do not cause excessive wear of the Premises or increase the
potential liability of Lessor, and for no other use, without Lessor's prior
written consent which shall not be unreasonably withheld, conditioned or delayed
so long as such use is lawful and does not conflict with any other provision of
this Lease, including, without limitation, the restrictions set forth in the
following provisions of this Section. Lessee shall not use, suffer or permit the
use of the Premises in any manner that will tend to create or constitute waste,
nuisance or unlawful acts. In no event shall it be unreasonable for Lessor to
withhold its consent as to uses which it determines would tend to increase
materially the wear of the Premises or any part thereof or increase the
potential liability of Lessor or decrease the marketability, financability,
leasability or value of the Premises or Project. Lessee shall not do anything in
or about the Premises which will (i) cause structural injury to or threaten the
structural integrity of the Premises, or (ii) cause damage to any part of the
Building or Project except to the extent reasonably necessary for the
installation of Lessee's trade fixtures and Lessee's Alterations, and then only
in a manner which has been first approved by Lessor in writing. Lessee shall not
operate any equipment within the Premises which will (i) materially damage the
Building or the Common Area, (ii) overload existing electrical plumbing or HVAC
systems or other equipment or system servicing the Building, (iii) impair the
efficient operation of the sprinkler system or the heating, ventilating or air
conditioning ("HVAC") equipment within or servicing the Building, (iv) damage,
overload or corrode the sanitary sewer system, or (v) damage or interferes with
the use by others of the Common Area or any other part of the Project. Lessee
shall not attach, hang or suspend anything from the ceiling, roof, walls or
columns of the Building or set any load on the floor in excess of the load
limits for which such items are designed nor operate hard wheel forklifts within
the Premises. Any dust, fumes, or waste products generated by Lessee's use of
the Premises shall be contained and disposed so that they do not (i) create an
unreasonable fire or health hazard, (ii) damage the Premises, or (iii) result in
the violation of any law. Except as approved by Lessor in its discretion, Lessee
shall not change the exterior of the Building, or install any equipment or
antennas on or make any penetrations of the

                                       19
<PAGE>

exterior or roof of the Building, provided that Lessee may install rooftop
antennae or other communication devices on the roof of the Building with
Lessor's prior written consent which shall not be unreasonably withheld or
delayed. Lessee shall not conduct on any portion of the Premises any sale of any
kind, including any public or private auction, fire sale, going-out-of-business
sale, distress sale or other liquidation sale. No materials, supplies, tanks or
containers, equipment, finished products or semifinished products, raw
materials, inoperable vehicles or articles of any nature shall be stored upon or
permitted to remain within the outside areas of the Project except in any fully
fenced and screened areas outside the Building which have been designed for such
purpose and have been approved in writing by Lessor for such use by Lessee.

     Section 5.02  Compliance with Law.
     ---------------------------------

     (a)  Lessor shall deliver the Premises to Lessee on the Commencement Date,
for office use, free of violations of any covenants or restrictions of record,
or any applicable law, building code, regulation or ordinance in effect on such
Commencement Date, including without limitation, the Americans with Disability
Act, and free of Year Two Thousand computer programming defects.

     (b)  Except as provided in paragraph 5.02.(a), Lessee shall, at Lessee's
cost and expense, comply promptly with all statutes, ordinances, codes, rules,
regulations, orders, covenants and restrictions of record, and requirements
applicable to the Premises and Lessee's use and occupancy of same in effect
during any part of the Lease Term, whether the same are presently foreseeable or
not, and without regard to the cost, expense or inconvenience of compliance.

     (c)  By executing this Lease, Lessee acknowledges that it has reviewed and
satisfied itself as to its compliance, or intended compliance with the
applicable zoning and permit laws, hazardous materials and waste requirements,
and all other statutes, laws, or ordinances relevant to the uses stated in
Section 5.01., above, provided that Lessor represents that the Premises, on the
date certified for occupancy, may legally be used for general office purposes.

     Section 5.03  Condition of Premises at Commencement Date.  Subject to all
     --------------------------------------------------------
of the terms of this Lease for the construction of Tenant Improvements, Lessor
shall deliver the Building to Lessee on the Commencement Date with the Building
plumbing, lighting, heating, ventilating, air conditioning, gas, electrical, and
sprinkler systems and loading doors as set forth in Exhibit "D" in proper
operating condition and built substantially in accordance with the approved
plans therefor, and in a workmanlike manner. Except as otherwise provided in
this Lease, Lessee

                                       20
<PAGE>

hereby accepts the Premises in their condition existing as of the Commencement
Date, subject to all applicable zoning, municipal, county and state laws,
ordinances and regulations governing and regulating the use and condition of the
Premises, and any covenants or restrictions, liens, encumbrances and title
exceptions of record, and accepts this Lease subject thereto and to all matters
disclosed thereby and by any exhibits attached hereto. Lessee acknowledges that
neither Lessor nor any agent of Lessor has made any representation or warranty
as to the present or future suitability of the Premises for the conduct of
Lessee's business.

     Section 5.04  Defective Condition at Commencement Date.  In the event that
     ------------------------------------------------------
it is determined, and Lessee notifies Lessor in writing within one year after
the Commencement Date, that any of the obligations of Lessor set forth in
Section 2.04.(b), Section 5.02.(a) or Section 5.03. were not performed, then it
shall be the obligation of Lessor, and the sole right and remedy of Lessee,
after receipt of written notice from Lessee setting forth with specificity the
nature of the failed performance, to promptly, within a reasonable time and at
Lessor's sole cost, correct same. Except as to certain defects which remain
Lessor's responsibility under Section 6.01(b) Lessee's failure to give such
written notice to Lessor within one year after the Commencement Date shall
constitute a conclusive presumption that Lessor has complied with all of
Lessor's obligations under the foregoing sections 2.04.(b), 5.02.(a) and 5.03.,
and any required correction after that date shall be performed by Lessee, at its
sole cost and expense. At the end of the first year of the Lease Term, Lessor
shall promptly assign to Lessee all of Lessor's contractor's, and/or
manufacturer's guarantees, warranties, and causes of action which do not relate
to Lessor's obligations under Section 6.01(b).

     Section 5.05  Building Security.  Lessee acknowledges and agrees that it
     -------------------------------
assumes sole responsibility for security at the Premises for its agents,
employees, invitees, licensees, contractors, guests and visitors and will
provide such systems and personnel for same including, without limitation, that
portion of the Common Area located on the legal parcel which the Building is
located as it deems necessary or appropriate and at its sole cost and expense.
Lessee acknowledges and agrees that Lessor does not intend to provide any
security system or security personnel at the Premises or Project, including,
without limitation, at the Common Areas, provided, however, that nothing herein
shall be deemed to prevent Lessor from providing such system or personnel in the
future, the cost of which will be included in those items for which Lessee pays
Additional Rent.

     Section 5.06  Rules and Regulations.  Lessor may from time to time
     -----------------------------------
promulgate reasonable and nondiscriminatory rules and regulations applicable for

                                       21
<PAGE>

the care and orderly management of the Premises, the Project and/or its Common
Area. Such rules and regulations shall be binding upon Lessor upon delivery of a
copy thereof to Lessor, and Lessor agrees to abide by such rules and
regulations. A copy of the initial Rules and Regulations is attached hereto as
Exhibit "L." If there is a conflict between the rules and regulations and any of
the provisions of this Lease, the provisions of this Lease shall prevail. Lessor
shall not be responsible for the violation of any such rules and regulations by
any person, including, without limitation, Lessee or its employees, agents,
invitees, licensees, guests, visitors or contractors.

                                  ARTICLE VI
                     MAINTENANCE, REPAIRS AND ALTERATIONS

     Section 6.01  Maintenance of Premises.
     -------------------------------------

     (a)  Throughout the Lease Term, Lessee, at its sole cost and expense, shall
keep, maintain, repair and replace the Premises (except as provided in 6.01.(b)
and except for uninsured repairs or replacement costs caused solely by an act of
gross negligence or intentional misconduct by Lessor during the Lease Term) and
all improvements and appurtenances in or serving the Premises, including,
without limitation, all interior and exterior walls, all doors and windows, the
roof membrane, all elevators and stairways, all wall surfaces and floor
coverings, all Tenant Improvements and alterations, additions and improvements
installed during the Lease Term, all sewer, plumbing, electrical, lighting,
heating, ventilation and cooling systems, fire sprinklers, fire safety and
security systems, fixture and appliances and all wiring and glazing, in the same
good order, condition and repair as they are in on the Commencement Date, or may
be put in during the Lease Term, reasonable wear excepted, provided that wear
which could be prevented by first class maintenance shall not be deemed
reasonable.

     (b)  Lessor, at its sole cost and expense, (and in addition to its
obligations set forth in Section 5.04) shall repair defects Building Shell,
including exterior walls (including all exterior glass which is damaged by
structural defects in such exterior walls), floors installed as part of the
Building Shell, supporting pillars, structural walls, roof structure and
foundations of the Building and sewer and plumbing systems outside the Building
as well as any defects in the offsite and onsite improvements listed in Section
2.04(i) of which Lessor receives notice during the final twenty-four (24) months
of the Lease Term, provided that the need for repair is not caused by Lessee, in
which event Lessor shall repair same, at Lessee's sole cost and expense (to the
extent not insured) and Lessee shall reimburse Lessor for same upon demand.
Lessor shall replace the roof membrane

                                       22
<PAGE>

of the Building, the parking lot surface, landscaping, drainage, irrigation,
sprinkler and sewer and plumbing systems outside the Building systems when the
useful life of each has expired, and Lessee shall pay that portion of the cost
of each replacement, together with annual interest at the Agreed Rat which shall
be amortized over the useful life of each such replacement applicable to the
balance of the Lease Term, in equal monthly installments due and payable with
installments of Base Rent provided that as to repairs and replacements within
the Common Area, Lessee shall pay Lessee's Share as described in Section 4.05.
Lessee shall give Lessor written notice of any need of repairs which are the
obligation of Lessor hereunder and Lessor shall have a reasonable time to
perform same. Should Lessor default as provided in Section 12.03 with respect to
its obligation to make any of the repairs assumed by it hereunder with respect
to the Building, Lessee shall have the right to perform such repairs and Lessor
agrees that within thirty (30) days after written demand accompanied by detailed
invoice(s), it shall pay to Lessee the cost of any such repairs together with
accrued interest from the date of Lessee's payment at the Agreed Rate. Lessor
shall not be liable to Lessee, its employees, invitees, or licensees for any
damage to person or property, and Lessee's sole right and remedy shall be the
performance of said repairs by Lessee with right of reimbursement from Lessor of
the reasonable fair market cost of said repairs, not exceeding the sum actually
expended by Lessee, together with accrued interest from the date of Lessee's
payment at the Agreed Rate, provided that nothing herein shall be deemed to
create a right of setoff or withholding by Lessee of Base Rent or Additional
Rent or any other amounts due herein. Lessee hereby expressly waives all rights
under and benefits of Sections 1941 and 1942 of the California Civil Code or
under any similar law, statute or ordinance now or hereafter in effect to make
repairs and offset the cost of same against rent or to withhold or delay any
payment of rent or any other of its obligations hereunder as a result of any
default by Lessor under this Section 6.01.(b).

     (c)  Lessee agrees to keep the Premises, both inside and out, clean and in
sanitary condition as required by the health, sanitary and police ordinances and
regulations of any political subdivision having jurisdiction and to remove all
trash and debris which may be found in or around the Premises. Lessee further
agrees to keep the interior surfaces of the Premises, including, without
limitation, windows, floors, walls, doors, showcases and fixtures clean and neat
in appearance.

     (d)  If Lessee refuses or neglects to commence such repairs and/or
maintenance for which Lessee is responsible under this Article VI within a
thirty

                                       23
<PAGE>

(30) day period (or as soon as practical and in no event later than five (5)
days, if the failure to initiate the repair threatens to cause further damage to
the Premises) after written notice from Lessor and thereafter diligently
prosecute the same to completion, then Lessor may (i) enter the Premises (except
in an emergency, upon at least 24 hours advanced written notice) during Lessor's
business hours and cause such repairs and/or maintenance to be made and shall
not be responsible to Lessee for any loss or damage occasioned thereby and
Lessee agrees that upon demand, it shall pay to Lessor the reasonable cost of
any such repairs, not exceeding the sum actually expended by Lessor, together
with accrued interest from the date of Lessor's payment at the Agreed Rate and
(ii) elect to enter into a maintenance contract at a market rate for first-rate
maintenance with a third party for the performance of all or a part of Lessee's
maintenance obligations, whereupon, Lessee shall be relieved from its
obligations to perform only those maintenance obligations covered by such
maintenance contract, and Lessee shall bear the entire cost of such maintenance
contract which shall be paid in advance, as Additional Rent, on a monthly basis
with Lessee's Base Rent payments.

     Section 6.02  Maintenance of Common Areas.  Subject to 6.01.(c) and subject
     -----------------------------------------
to Lessee paying Lessee's Share of the cost and expense for same pursuant to
Section 4.05 Lessor shall maintain, repair and replace all landscape, hardscape
and other improvements within the Common Areas and shall operate and manage the
Amenities/Athletic Facility and other Common Area features and facilities
described in Section 2.02, including, without limitation, all landscape,
hardscape and other improvements within the areas outside of the Premises
located on the Property, including without limitation, landscaping, curbs,
walkways, driveways, parking areas and lighting and sprinkler systems.

     Section 6.03  Alterations, Additions and Improvements.  No alterations,
     -----------------------------------------------------
additions, or improvements ("Alterations") shall be made to the Premises by
Lessee without the prior written consent of Lessor which Lessor will not
unreasonably withhold, provided, however, that Lessee may make Alterations which
do not affect the Building systems, exterior appearance, structural components
or structural integrity and which do not exceed collectively One Hundred
Thousand Dollars ($100,000) in cost within any twelve (12) month period, without
Lessor's prior written consent. As a condition to Lessor's obligation to
consider any request for consent hereunder, Lessee shall pay Lessor upon demand
for the reasonable costs and expenses of third-party consultants, engineers,
architects and others for reviewing plans and specifications and for monitoring
the construction of any proposed Alterations. Lessor may require Lessee to
remove any such Alterations at the expiration or termination of the

                                       24
<PAGE>

Lease Term and to restore the Premises to their prior condition by written
notice given on or before the earlier of (i) the expiration of the Lease Term or
(ii) thirty (30) days after termination of the Lease or (iii) thirty (30) days
after a written request from Lessee for such notice from Lessor provided, that,
if Lessee requests same from Lessor, Lessor will notify Lessee within five (5)
business days after receipt of Lessee's request and a copy of all plans and
specifications for the proposed Alteration whether it will require removal. All
Alterations to be made to the Premises shall be made under the supervision of a
competent, California licensed architect and/or competent California licensed
structural engineer (each of whom has been approved by Lessor) and shall be made
in accordance with plans and specifications which have been furnished to and
approved by Lessor in writing prior to commencement of work. All Alterations
shall be designed, constructed and installed at the sole cost and expense of
Lessee by California licensed architects, engineers, and contractors approved by
Lessor, in compliance with all applicable law, and in good and workmanlike
manner. Any Alteration except furniture and trade fixtures, shall become the
property of Lessor at the expiration, or sooner termination of the Lease, unless
Lessor directs otherwise, provided that Lessee shall retain title to all
furniture and trade fixtures placed on the Premises. All heating, lighting,
electrical, air conditioning, full height partitioning (but not moveable, free
standing cubicle-type partitions which do not extend to the ceiling or connect
to Building walls), drapery and carpeting installations made by Lessee together
with all property that has become an integral part of the Premises, shall be and
become the property of Lessor upon the expiration, or sooner termination of the
Lease, and shall not be deemed trade fixtures. Within thirty (30) days after
completion of any Alteration, Lessee, Lessee shall provide Lessor with a
complete set of "as built" plans for same.

     Section 6.04  Covenant Against Liens.  Lessee shall not allow any liens
     ------------------------------------
arising from any act or omission of Lessee to exist, attach to, be placed on, or
encumber Lessor's or Lessee's interest in the Premises or Project, or any
portion of either, by operation of law or otherwise. Lessee shall not suffer or
permit any lien of mechanics, material suppliers, or others to be placed against
the Premises or Project, or any portion of either, with respect to work or
services performed or claimed to have been performed for Lessee or materials
furnished or claimed to have been furnished to Lessee or the Premises. Lessor
has the right at all times to post and keep posted on the Premises any notice
that it considers necessary for protection from such liens. At least seven (7)
days before beginning construction of any Alteration, Lessee shall give Lessor
written notice of the expected commencement date of that construction to permit
Lessor to post and record a notice of nonresponsibility. If any such lien
attaches or Lessee received notice of

                                       25
<PAGE>

any such lien, Lessee shall cause the lien to be immediately released and
removed of record. Despite any other provision of this Lease, if the lien is not
released and removed within twenty (20) days after Lessor delivers notice of the
lien to Lessee, Lessor may immediately take all action necessary to release and
remove the lien, without any duty to investigate the validity of it. All
expenses (including reasonable attorney fees and the cost of any bond) incurred
by Lessor in connection with a lien incurred by Lessee or its removal shall be
considered Additional Rent under this Lease and be immediately due and payable
by Lessee.

     Section 6.05  Reimbursable Capital Expenditures.  Except for items of
     -----------------------------------------------
capital expenditures which are to be made at Lessor's sole cost and expense
pursuant to the first sentence of Section 6.01(b) above, capital expenditures,
together with interest thereon at the Agreed Rate, for any replacement item at
the Project made by Lessor in excess of One Hundred Thousand Dollars
($100,000.00) during the Lease Term shall be amortized over the remaining Lease
Term for the useful life of such replacement item within the numerator being the
number of months remaining in the Lease Term and the denominator being the
number of months of the "useful life" of the improvements. Lessee shall be
obligated for such amortized portion of any such expenditure in equal monthly
installments due and payable with each installment of Base Rent.

                                  ARTICLE VII
                                   INSURANCE

     Section 7.01  Property/Rental Insurance for Premises.  At all times during
     ----------------------------------------------------
the Lease Term, Lessor shall keep the Premises and Project insured against loss
or damage by fire and those risks normally included in the term "all risk,"
including, without limitation, coverage for (i) earthquake and earthquake
sprinkler leakage, (ii) flood, (iii) loss of rents and extra expense for
eighteen (18) months, including scheduled rent increases, (iv) boiler and
machinery, (v) Tenant Improvements and (vi) fire damage legal liability form,
including waiver of subrogation. Any deductibles shall be paid by Lessee. The
amount of such insurance shall not be less than 100% of replacement cost.
Insurance shall include a Building Ordinance and Increased Cost of Construction
Endorsement insuring the increased cost of reconstructing the Premises incurred
due to the need to comply with applicable statutes, ordinances and requirements
of all municipal, state and federal authorities now in force, which or may be in
force hereafter. Any recovery received from said insurance policy shall be paid
to Lessor and thereafter applied by Lessor to the reconstruction of the Premises
in accordance with the provisions of Article VIII below. Lessee, in addition to
the rent and other charges provided herein, shall reimburse Lessor for the cost
of the premiums for all such insurance covering

                                       26
<PAGE>

the Premises in accordance with Article IV. Such reimbursement and shall be made
within (15) days of Lessee's receipt of a copy of Lessor's statement therefor.
Lessee shall pay to Lessor any deductible (subject to the above conditions)
owing within fifteen (15) days after receipt of notice from Lessor of the amount
owing. To the extent commercially available, Lessor's insurance shall have a
deductible not greater than fifteen percent (15%) for earthquake and ten percent
(10%) for the basic "all risk" coverage.

     Section 7.02  Property Insurance for Fixtures and Inventory.  At all times
     -----------------------------------------------------------
during the Lease Term, Lessee shall, at its sole expense, maintain insurance
with "all risk" coverage on any fixtures, furnishings, merchandise equipment or
personal property in or on the Premises, whether in place as of the date hereof
or installed hereafter.  The amount of such insurance shall not be less than one
hundred percent (100%) of the replacement cost thereof, and Lessor shall not
have any responsibility nor pay any cost for maintaining any types of such
insurance.  Lessee shall pay all deductibles.

     Section 7.03  Lessor's Liability Insurance.  During the Lease Term, Lessor
     ------------------------------------------
shall maintain a policy or policies of comprehensive general liability insurance
naming Lessor (and such others as designated by Lessor) against claims and
liability for bodily injury, property damage on our about the Project, with
combined single limit coverage in an amount determined by Lessor in its sole
discretion (which amount is currently Fifty Million Dollars ($50,000,000.00));
provided that if such policy is a blanket policy that covers properties (other
than the Project) owned by Lessor, only that portion allocable to the Project
shall be payable hereunder. Lessee, in addition to the rent and other charges
provided herein, agrees to pay Lessee's Share of the premiums for all such
insurance in accordance with Article IV.

     Section 7.04  Liability Insurance Carried by Lessee.  At all times during
     ---------------------------------------------------
the Lease Term (and any holdover period) Lessee shall obtain and keep in force a
commercial general liability policy of insurance protecting Lessee, Lessor and
any Lender(s) whose names are provided to Lessee as Additional Insureds against
claims and liability for bodily injury, personal injury and property damage
based upon involving or arising out of ownership, use, occupancy or maintenance
of the Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing a single limit coverage in amount of not less than
Ten Million Dollars ($10,000,000) per occurrence with an Additional Lessors or
Premises Endorsements and containing an "Amendment of the Pollution Exclusion
Endorsement" for damage caused by heat, smoke, fumes from a hostile fire. The
limits of said insurance required by this Lease as carried by Lessee shall

                                       27
<PAGE>

not, however limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by the Lessee shall be primary to and not
contributory with, any similar insurance carried by Lessor whose insurance shall
be considered excess insurance only.

     Section 7.05  Lessee to Furnish Proof of Insurance.  Lessee shall furnish
     --------------------------------------------------
to Lessor prior to the Commencement Date, and at least thirty (30) days prior to
the expiration date of any policy, certificates indicating that the property
insurance and liability insurance required to be maintained by Lessee is in full
force and effect for the twelve (12) month period following such expiration
date; that Lessor has been named as an additional insured to the extent of
contractual liability assumed in Section 7.07. "Indemnification" and Section
7.08. "Lessor as Party Defendant"; and that all such policies will not be
canceled unless thirty (30) days' prior written notice of the proposed
cancellation has been given to Lessor. The insurance shall be with insurers
approved by Lessor, provided, however, that such approval shall not be
unreasonably withheld so long as Lessee's insurance carrier has a Best's
Insurance Guide rating not less than A+ VIII. Within ten (10) business days
after Lessee's written request for same, Lessor shall furnish once during any
calendar year, certificates indicating that the property insurance and liability
insurance required to be kept by Lessor is in full force and effect.

     Section 7.06  Mutual Waiver of Claims and Subrogation Rights.  Lessor and
     ------------------------------------------------------------
Lessee hereby release and relieve the other, and waive their entire claim of
recovery for loss or damage to property arising out of or incident to fire,
lightning, and the other perils included in a standard "all risk" insurance
policy of a type described in Sections 7.01 and 7.02 above, when such property
constitutes the Premises, or is in, on or about the Premises, whether or not
such loss or damage is due to the negligence of Lessor or Lessee, or their
respective agents, employees, guests, licensees, invitees, or contractors.
Lessee and Lessor waive all rights of subrogation against each other on behalf
of, and shall obtain a waiver of all subrogation rights from, all property and
casualty insurers referenced above.

     Section 7.07  Indemnification and Exculpation.
     ---------------------------------------------

     (a)  Except as otherwise provided in Section 7.07.(b), Lessee shall
indemnify and hold Lessor free and harmless from any and all liability, claims,
loss, damages, causes of action (whether in tort or contract, law or equity, or
otherwise), expenses, charges, assessments, fines, and penalties of any kind,
including without limitation, reasonable attorney fees, expert witness fees and
costs, arising by reason of the death or injury of any person, including any
person who is an employee, agent, invitee, sublessee, licensee, permittee,
visitor, guest or

                                       28
<PAGE>

contractor of Lessee, or by reason of damage to or destruction of any property,
including property owned by Lessee or any person who is an employee, agent,
sublessee, invitee, permitee, visitor, or contractor of Lessee, caused or
allegedly caused (1) while that person or property is in or about the Premises;
(2) by some condition of the Premises; (3) by some act or omission by Lessee or
its agent, employee, licensee, invitee, guest, visitor or contractor or any
person in, adjacent, on, or about the Premises with the permission, consent or
sufferance of Lessee; (4) by any matter connected to or arising out of Lessee's
occupation and use of the Premises, or any breach or default in timely
observance or performance of any obligation on Lessee's part to be observed or
performed under this Lease.

     (b)  Notwithstanding the provisions of Section 7.07.(a) of this Lease,
Lessee's duty to indemnify and hold Lessor harmless shall not apply to any
liability, claims, loss or damages arising because of the active negligence or
willful acts of misconduct of Lessor or its agents, employees or contractors or
which is or could be covered by the insurance Lessor is required to carry under
this Lease. Lessor hereby waives all claims against Lessee for any damage which
is or could be covered by the insurance Lessee is required to carry under this
Lease.

     (c)  Lessee hereby waives all claims against Lessor for damages to goods,
wares and merchandise and all other personal property in, on or about the
Premises and for injury or death to persons in, on or about the Premises from
any cause arising at any time to the fullest extent permitted by law. In no
event shall Lessor be liable (i) for lost profits or other consequential damages
arising from any cause or (ii) for any damage which is or could be covered by
the insurance Lessee is required to carry under this Lease.

     Section 7.08  Lessor as Party Defendant.  If by reason of an act or
     ---------------------------------------
omission of Lessee or any of its employees, agents, invitees, licensee,
visitors, guests or contractors, Lessor is made a party defendant or a cross-
defendant to any action involving the Premises or this Lease, Lessee shall hold
harmless and indemnify Lessor from all liability or claims of liability,
including all damages, attorney fees and costs of suit.

                                 ARTICLE VIII
                             DAMAGE OR DESTRUCTION

     Section 8.01  Destruction of the Premises.
     -----------------------------------------

     (a)  In the event of a partial destruction of the Premises (i.e., affecting
less than fifty percent (50%) of its Rentable Area) during the Lease Term from
any

                                       29
<PAGE>

cause, Lessor, upon receipt of, and to the extent of, insurance proceeds paid in
connection with such casualty and deductibles paid by Lessee, shall forthwith
repair the same, provided the repairs can be made within a reasonable time under
state, federal, county and municipal applicable law, but such partial
destruction shall in no way annul or void this Lease, (except as provided in
Section 8.01.(b) below) provided that Lessee shall be entitled to a
proportionate credit for rent equal to rental income insurance proceeds received
by Lessor, provided further, that if Lessor failed to carry such insurance as
required by Article VII hereof, Lessee shall nonetheless be entitled to an
abatement of rent to the same extent as if Lessor had carried such insurance
from such insurance as is required under Section 7.01. Lessor shall use
diligence in making such repairs within a reasonable time period, subject to the
Force Majeure provisions of Section 17.21, in which instance the time period
shall be extended accordingly, and this Lease shall remain in full force and
effect, with the rent to be proportionately reduced as provided in this Section.
If the Premises are damaged by any peril within twelve (12) months prior to the
last day of the Lease Term and, in the reasonable opinion of the Lessor's
architect or construction consultant, the restoration of the Premises cannot be
substantially completed within ninety (90) days after the date of such damage
Lessor may terminate this Lease on sixty (60) days written notice to Lessee.

     (b)  If the Building is damaged or destroyed by any cause to the extent of
more than fifty percent (50%) of its total Rentable Area during the Lease Term,
Lessor shall notify Lessee within sixty (60) days after such damage or
destruction whether it will repair the same within twelve months (12) (subject
to the Force Majeure provisions of Section 17.21) from the date of such notice
and if Lessor states that it will not repair within said twelve months (12)
(subject to Force Majeure) this Lease shall terminate ten (10) business days
after Lessor gives its notice. In the event of termination, Lessee shall pay to
Lessor all insurance proceeds, if any, received by Lessee as a result of the
damage or destruction, except to the extent allocable to unamortized (sixty (60)
equally monthly amounts over the five (5) year period following installation of
same) Tenant Improvements or other Alterations installed therein at Lessee's
sole cost and expense.

     Section 8.02  Waiver of Civil Code Remedies.  Lessee hereby expressly
     -------------------------------------------
waives any right to terminate this Lease upon damage or destruction to the
Premises, including without limitation any right pursuant to the provisions of
Section 1932, Subdivisions 1 and 2 and Section 1933, Subdivision 4, of the
California Civil Code, as amended from time-to-time, and the provisions of any
similar law hereinafter enacted.

                                       30
<PAGE>

     Section 8.03 No Abatement of Rentals. The Base Rent, Additional Rent and
     ------------------------------------
any other amounts due under this Lease shall not be reduced or abated by reason
of any damage or destruction to the Premises (except as provided in Section
8.01.(a) above with respect to rental loss insurance), and Lessor shall be
entitled to all proceeds of the insurance maintained pursuant to Section 7.01.
above during the period of rebuilding pursuant to Section 8.01. above, or if the
Lease is terminated pursuant to Section 8.01. above. Lessee shall have no claim
against Lessor, including, without limitation, for compensation for
inconvenience or loss of business, profits or goodwill during any period of
repair or reconstruction.

     Section 8.04 Liability for Personal Property. In no event shall Lessor have
     --------------------------------------------
any liability for, nor shall it be required to repair or restore, any injury or
damage to Lessee's personal property or to any other personal property or to
Alterations (except to the extent Lessor receives insurance proceeds to repair
damage to same) in or upon the Premises by Lessee.

                                  ARTICLE IX
                              REAL PROPERTY TAXES

     Section 9.01 Payment of Taxes. Subject to Lessee timely paying Lessor the
     -----------------------------
same in advance as provided below, Lessor shall pay all real property taxes,
including any escaped or supplemental tax and any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license, fee,
charge, excise or imposition ("real property tax"), imposed, assessed or levied
on or with respect to the Project by any Federal, State, County, City or other
political subdivision or public authority having the direct or indirect power to
tax, including, without limitation, any improvement district or any community
facilities district (including the district established for purposes of
constructing the Seaport Boulevard improvements and other improvements as
required in the Development Agreement or by the City of Redwood City ("Community
Facility District"), as against any legal or equitable interest of Lessor in the
Project or against the Project or any part thereof applicable to the Project for
all periods of time included within the Lease Term (as the same may be extended
and during any holdover period), as well as any government or private cost
sharing agreement assessments made for the purpose of augmenting or improving
the quality of services and amenities normally provided by government agencies.
All such payments shall be made by Lessee directly pursuant to Section 4.05
hereof no later than ten (10) days after Lessor's delivery to Lessee of a
statement of the real property tax due, together with a copy of the applicable
tax bill. Notwithstanding the foregoing, Lessee shall not be required to pay any
net income taxes, franchise

                                       31
<PAGE>

taxes, or any succession or inheritance taxes of Lessor. If at anytime during
the Lease Term, the State of California or any political subdivision of the
state, including any county, city, city and county, public corporation,
district, or any other political entity or public corporation of this state,
levies or assesses against Lessor a tax, fee, charge, imposition or excise on
rents under the Lease, the square footage of the Premises or Project, the act of
entering into this Lease, or the occupancy of Lessee, or levies or assesses
against Lessor any other tax, fee, or excise, however described, including,
without limitation, a so-called value added, business license, transit,
commuter, environmental or energy tax fee, charge or excise or imposition
related to the Project as a direct substitution in whole or in part for, or in
addition to, any real property taxes on the Project the same shall be included n
real property taxes and Lessee shall pay ten (10) days before delinquency or ten
(10) days after receipt of the tax bill, whichever is later, that tax, fee,
charge, excise or imposition except to the extent estimated real property taxes
are billed and paid monthly. Real property taxes payable by Lessee hereunder
shall not include real property taxes applicable to other office/research and
development buildings within the Project or the legal parcels on which such
buildings are located, but Lessee shall pay one hundred percent (100%) of real
property taxes applicable to the Premises and the Property.

     Section 9.02 Pro Ration for Partial Years. If any such real property taxes
     -----------------------------------------
paid by Lessee shall cover any period prior to the Commencement Date or after
the Expiration Date of the Lease Term, Lessee's share of such real property
taxes shall be equitably prorated to cover only the period of time within the
tax fiscal year during which this Lease shall be in effect, and Lessor shall
reimburse Lessee to any extent required. If Lessee shall fail to pay any such
real property taxes, Lessor shall have the right to pay the same in which case
Lessee shall repay such amount to Lessor within ten (10) days after written
demand, together with interest at the Agreed Rate.

     Section 9.03  Personal Property Taxes.
     -------------------------------------
     (a)  Lessee shall pay prior to delinquency all taxes imposed, assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Lessor.

     (b)  If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee

                                       32
<PAGE>

within ten (10) days after receipt of a written statement setting forth the
taxes applicable to Lessee's property.

     (c)  If Lessee shall fail to pay any such taxes, Lessor shall have the
right to pay the same, in which case Lessee shall repay such amount to Lessor
with Lessee's next rent installment together with interest at the Agreed Rate.

     Section 9.04.   Lessee's Right to Contest Real Property Taxes. Lessee at
     -------------------------------------------------------------
its sole cost and expense shall have the right, at any time, to seek a reduction
in the assessed valuation of the Premises or to contest any real property taxes
that are to be paid by Lessee with respect to solely the Premises but Lessee
must still pay such taxes timely as required hereunder. If Lessee seeks a
reduction or contests any such real property taxes, the failure on Lessee's part
to pay such real property taxes shall not constitute a default as long as Lessee
complies with the provisions of this Section. Lessor shall not be required to
join in any proceeding or contest brought by Lessee unless the provisions of any
law require that the proceeding or contest be brought by or in the name of
Lessor or any owner of the Premises. In that case Lessor shall join in the
proceeding or contest or permit it to be brought in Lessor's name as long as
Lessor is not required to bear any cost or expense. Lessor, on final
determination of the proceeding or contest, shall immediately pay or discharge
any decision or judgment rendered, together with all costs, fees, charges,
interest, penalties and all other amounts incidental to the decision or
judgment.

                                   ARTICLE X
                                   UTILITIES

     Section 10.01  Lessee to Pay. Lessee shall pay prior to delinquency and
     ----------------------------
throughout the Lease Term, all charges for water, gas, heating, cooling, sewer,
telephone, electricity, garbage, air conditioning and ventilation, janitorial
service, and all other materials, services and utilities supplied to the
Premises. The disruption, failure, lack or shortage of any service or utility
due to any cause whatsoever shall not affect any obligation of Lessee hereunder,
and Lessee shall faithfully keep and observe all the terms, conditions and
covenants of this Lease and pay all rent due hereunder, all without diminution,
credit or deduction, provided that, Lessor shall credit Lessee to the extent of
any rental interruption proceeds Lessor receives as a result of such disruption,
failure, lack or shortage of services or utility.

                                       33
<PAGE>

                                  ARTICLE XI

                           ASSIGNMENT AND SUBLETTING

     Section 11.01 Lessor's Consent Required. Except as provided in Section
     ---------------------------------------
11.02, Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage, sublet, license or otherwise transfer or encumber all or any part of
Lessee's interest in this Lease or in the Premises or any part thereof, without
Lessor's prior written consent which Lessor shall not unreasonably withhold or
delay. Lessor shall respond in writing to Lessee's request for consent hereunder
in a timely manner and any attempted assignment, transfer, mortgage,
encumbrance, subletting or licensing without such consent shall be void, and
shall constitute a breach of this Lease. By way of example, but not limitation,
reasonable grounds for denying consent include: (i) poor credit history or
insufficient financial strength of transferee (but, with respect to a sublease
of less than fifty percent (50%) of the Buildings, not necessarily financial
strength as great as that of Lessee), (ii) transferee's intended use of the
Premises is inconsistent with the permitted use or will materially and adversely
affect Lessor's interest. Lessee shall reimburse Lessor upon demand for Lessor's
reasonable costs and expenses (including attorneys' fees, architect fees and
engineering fees) involved in renewing any request for consent whether or not
consent is granted.

     Section 11.02 Lessee Affiliates. Lessee may assign or sublet the Premises,
     -------------------------------
or any portion thereof, to any corporation which controls, is controlled by, or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all of Lessee's stock or all, or substantially all of the assets of Lessee as a
going concern of the business that is being conducted on the Premises
("Affiliate"), provided that said assignee or sublessee assumes, in full, the
obligations of Lessee under this Lease and provided further that the use to
which the Premises will be put does not materially change. Any such assignment
shall not, in any way, affect or limit the liability of Lessee under the terms
of this Lease.

     Section 11.03  No Release of Lessee. Regardless of Lessor's consent, no
     -----------------------------------
subletting or assignment shall release Lessee of Lessee's obligation or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms hereof, Lessor
may proceed directly against Lessee without the necessity of exhausting remedies
against said assignee.

                                       34
<PAGE>

     Section 11.04 Excess Rent. In the event Lessor shall consent to a sublease
     -------------------------
or an assignment, Lessee shall pay to Lessor with its regularly scheduled Base
Rent payments, fifty percent (50%) of all sums and the fair market value of all
consideration collected or received by Lessee from a sublessee or assignee which
are in excess of the Base Rent and Additional Rent due and payable with respect
to the subject space pursuant to Article IV for the time period encompassed by
the sublease or assignment term, after first deducting (i) reasonable leasing
commissions paid by Lessee with respect to such sublease or assignment, and (ii)
that portion of the cost of Tenant Improvements paid by Lessee which remains
unamortized (using an amortization schedule of the first sixty (60) months of
the Lease Term) during any portion of the sublease or assignment term.

     Section 11.05 No Impairment of Security. Lessee's written request to Lessor
     ---------------------------------------
for consent to an assignment or subletting or other form of transfer shall be
accompanied by (a) the name and legal composition of the proposed transferee;
(b) the nature of the proposed transferee's business to be carried on in the
Premises; (c) the terms and provisions of the proposed transfer agreement; and
(d) such financial and other reasonable information as Lessor may request
concerning the proposed transferee.

     Section 11.06  Lessor's Recapture Rights.
     ----------------------------------------

     (a)  Lessor's Recapture Rights. Notwithstanding any other provision of this
          -------------------------
Article 11, in the event that Lessee proposes to sublease or assign or otherwise
transfer any interest in this Lease or the Premises or any part thereof
affecting, in the aggregate with all other such subleases, assignments, or
transfers then in effect, more than seventy five thousand (75,000) rentable
square feet within the Building ("Recapture Space") for more than the lesser of
(i) three (3) years, or (ii) fifty percent (50%) of the then remaining Lease
Term, then Lessor shall have the option to recapture the Recapture Space by
written notice to Lessee (Recapture Notice) given within ten (10) business days
after Lessor receives any notice of such proposed assignment or sublease or
other transfer ("Transfer Notice"). A timely Recapture Notice terminates this
Lease for the Recapture Space, effective as of the date specified in the
Transfer Notice. If Lessor declines or fails timely to deliver a Recapture
Notice, Lessor shall have no further right under this Section 11.06 to the
Recapture Space unless it becomes available again after transfer by Lessee.

     (b)  Consequences of Recapture. To determine the new Base Rent under this
Lease if Lessor recaptures the Recapture Space, the then current Base Rent
(immediately before Lessor's recapture) under the Lease shall be multiplied by a

                                       35
<PAGE>

fraction, numerator of which is the square feet of the Rentable Area retained by
Lessee after Lessor's recapture and the denominator of which is the total square
feet of the Rentable Area before Lessor's recapture. The Additional Rent, to the
extent that it is calculated on the basis of the square feet within the
Building, shall be reduced to reflect Lessee's proportionate share based on the
square feet of the Building retained by Lessee after Lessor's recapture. This
Lease as so amended shall continue thereafter in full force and effect. Either
party may require written confirmation of the amendments to this Lease
necessitated by Lessor's recapture of the Recapture Space. If Lessor recaptures
the Recapture Space, Lessor shall, at Lessor's sole expense, construct, paint,
and furnish any partitions required to segregate the Recapture Space from the
remaining Premises retained by Lessee as well as arrange separate metering of
utilities.

                                  ARTICLE XII
                              DEFAULTS; REMEDIES

     Section 12.01  Defaults. The occurrence of any one or more of the following
     -----------------------
events shall constitute a material default and breach of this Lease by
Lessee:

     (a)  The vacation of the Premises by Lessee for a period of time which
would thereafter terminate Lessor's insurance coverage at the Premises or cause
an increase of Lessor's insurance coverage at the Project or which for a period
of more than six consecutive calendar months (other than vacation caused by
damage or destruction and during the repair of same) or the commission of waste
at the Premises or the making of an assignment or subletting in violation of
Article XI, provided however, abandonment shall be considered to not occur if
the Premises are maintained and occupied to the extent necessary to maintain the
insurance on each and every portion of the Premises;

     (b)  The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, if such failure
continues for a period of five (5) business days after written notice thereof
from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to
Pay Rent or Quit in the form required by applicable Unlawful Detainer statutes
such Notice shall constitute the notice required by this paragraph, provided
that the cure period stated in the Notice shall be five (5) business days rather
than the statutory three (3) days;

     (c)  Lessee's failure to provide (i) any instrument or assurance as
required by Section 7.05 or (ii) estoppel certificate as required by Section
15.01 or (iii) any document subordinating this Lease to a Lender's deed of trust
if such failure

                                       36
<PAGE>

continues for five (5) business days after written notice of the failure. In the
event Lessor serves Lessee with a Notice to Perform Covenant or Quit in the form
required by applicable Unlawful Detainer Statutes, such Notice shall constitute
the notice required by this paragraph, provided that the cure period stated in
the Notice shall be five (5) business days rather than the statutory three (3)
days;

     (d)  Lessee's failure to deposit cash with Lessor in an amount sufficient
to restore the Security Deposit to its original amount within the ten (10) day
period provided in Section 4.06.

     (e)  The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in paragraph (a), (b), (c) or (d) above, if such failure
continues for a period of ten (10) days after written notice thereof from Lessor
to Lessee; provided, however, that if the nature of Lessee's default is such
that more than ten (10) days are reasonably required for its cure, then Lessee
shall not be deemed to be in default if Lessee commences such cure within said
ten (10) day period and thereafter diligently prosecutes such cure to
completion;

     (f)  (i) The making by Lessee of any general arrangement or assignment for
the benefit of creditors; (ii) the filing by Lessee of a voluntary petition in
bankruptcy under Title 11 U.S.C. or the filing of an involuntary petition
against Lessee which remains uncontested for a period of sixty days; (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease;
or (iv) the attachment, execution or other judicial seizure of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, provided, however, in the event that any provisions of this Section
12.01(e) is contrary to any applicable law, such provision shall be of no force
or effect;

     (g)  The discovery by Lessor that any financial statement given to Lessor
by Lessee, or any guarantor of Lessee's obligations hereunder, was materially
false.

     (h)  The occurrence of a material default and breach by Lessee under any
other Lease between Lessee and Lessor (or any affiliate of Lessor) for Premises
in Pacific Shores Center.

     Section 12.02  Remedies. In the event of any such material default and
     -----------------------
breach by Lessee, Lessor may at any time thereafter, and without limiting Lessor
in the exercise of any right or remedy which Lessor may have by reason of such
default and breach:

                                       37
<PAGE>

     (a)  Terminate Lessee's right to possession of the Premises by any lawful
means including by way of unlawful detainer (and without any further notice if a
notice in compliance with the unlawful detainer statutes and in compliance with
paragraphs (b), (c) and (d) of Section 12.01 above has already been given), in
which case this Lease shall terminate and Lessee shall immediately surrender
possession of the Premises to Lessor. In such event Lessor shall be entitled to
recover from Lessee all damages incurred by Lessor by reason of Lessee's default
including, but not limited to, (i) the cost of recovering possession of the
Premises including reasonable attorney's fees related thereto; (ii) the worth at
the time of the award of any unpaid rent that had been earned at the time of the
termination, to be computed by allowing interest at the Agreed Rate but in no
case greater than the maximum amount of interest permitted by law, (iii) the
worth at the time at the time of the award of the amount by which the unpaid
rent that would have been earned between the time of the termination and the
time of the award exceeds the amount of unpaid rent that Lessee proves could
reasonably have been avoided, to be computed by allowing interest at the Agreed
Rate but in no case greater than the maximum amount of interest permitted by
law, (iv) the worth at the time of the award of the amount by which the unpaid
rent for the balance of the Lease Term after the time of the award exceeds the
amount of unpaid rent that Lessee proves could reasonably have been avoided, to
be computed by discounting that amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award plus one per cent (1%),
(v) any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform obligations under this Lease,
including brokerage commissions and advertising expenses, expenses of remodeling
the Premises for a new tenant (whether for the same or a different use), and any
special concessions made to obtain a new tenant, and (vi) any other amounts, in
addition to or in lieu of those listed above, that may be permitted by
applicable law.

     (b)  Maintain Lessee's right to possession as provided in Civil Code
Section 1951.4 in which case this Lease shall continue in effect whether or not
Lessee shall have abandoned the Premises. In such event Lessor shall be entitled
to enforce all of Lessor's rights and remedies under this Lease, including the
right to recover the rent as it becomes due hereunder.

     (c)  Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the state of California. Unpaid amounts of rent
and other unpaid monetary obligations of Lessee under the terms of this Lease
shall bear interest from the date due at the Agreed Rate.

                                       38
<PAGE>

     Section 12.03  Default by Lessor. Lessor shall not be in default under this
     --------------------------------
Lease unless Lessor fails to perform obligations required of Lessor within a
reasonable time, but in no event later than thirty (30) days after written
notice by Lessee to Lessor and to the holder of any first mortgage or deed of
trust covering the Premises whose name and address shall have theretofore been
furnished to Lessee in writing, specifying that Lessor has failed to perform
such obligation; provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days are reasonably required for performance
then Lessor shall not be in default if Lessor commences performance within such
thirty day period and thereafter diligently prosecutes the same to completion.
In the event Lessor does not commence performance within the thirty (30) day
period provided herein, Lessee may perform such obligation and will be
reimbursed for its expenses by Lessor together with interest thereon at the
Agreed Rate. Lessee waives any right to terminate this Lease or to vacate the
Premises on Lessor's default under this Lease. Lessee's sole remedy on Lessor's
default is an action for damages or injunctive or declaratory relief.
Notwithstanding the foregoing,- nothing herein shall be deemed applicable in the
event of Lessor's delay in delivery of the Premises. In that situation, all
rights and remedies shall be determined under Section 3.01 above.

     Section 12.04  Late Charges. Lessee hereby acknowledges that late payment
     ---------------------------
by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designated agent within five (5) days
after such amount is due and owing, Lessee shall pay to Lessor a late charge
equal to five percent (5%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Lessor
will incur by reason of late payment by Lessee. Acceptance of such late charge
by Lessor shall in no event constitute a waiver of Lessee's default with respect
to such overdue amount, nor prevent Lessor from exercising any of the other
rights and remedies granted hereunder. In the event that a late charge is
payable hereunder, whether or not collected, for three (3) consecutive
installments of rent, then rent shall automatically become due and payable
quarterly in advance, rather than monthly, notwithstanding Section 4.01 or any
other provision of this Lease to the contrary.

                                       39
<PAGE>

                                 ARTICLE XIII

                           CONDEMNATION OF PREMISES.

     Section 13.01 Total Condemnation. If the entire Premises, whether by
     --------------------------------
exercise of governmental power or the sale or transfer by Lessor to any
condemnor under threat of condemnation or while proceedings for condemnation are
pending, at any time during the Lease Term, shall be taken by condemnation such
that there does not remain a portion suitable for occupation, this Lease shall
then terminate as of the date transfer of possession is required. Upon such
condemnation, all rent shall be paid up to the date transfer of possession is
required, and Lessee shall have no claim against Lessor or the award for the
value of the unexpired portion of this Lease Term.

     Section 13.02  Partial Condemnation. If any portion of the Premises is
     -----------------------------------
taken by condemnation during the Lease Term, whether by exercise of governmental
power or the sale for transfer by Lessor to an condemnor under threat of
condemnation or while proceedings for condemnation are pending, this Lease shall
remain in full force and effect except that in the event a partial taking leaves
the Premises unfit for the conduct of the business of Lessee, then Lessee shall
have the right to terminate this Lease effective upon the date transfer of
possession is required. Moreover, Lessor shall have the right to terminate this
Lease effective on the date transfer of possession is required if more than
thirty-three percent (33%) of the total square footage of the Premises is taken
by condemnation. Lessee and Lessor may elect to exercise their respective rights
to terminate this Lease pursuant to this Section by serving written notice to
the other within thirty (30) days after receipt of notice of condemnation. All
rent shall be paid up to the date of termination, and Lessee shall have no claim
against Lessor for the value of any unexpired portion of the Lease Term. If this
Lease shall not be canceled, the rent after such partial taking shall be that
percentage of the adjusted base rent specified herein, equal to the percentage
which the square footage of the untaken part of the Premises, immediately after
the taking, bears to the square footage of the entire Premises immediately
before the taking. If Lessee's continued use of the Premises requires
alterations and repair by reason of a partial taking, all such alterations and
repair shall be made by Lessee at Lessee's expense. Lessee waives all rights it
may have under California Code of Civil Procedure Section 1265.130 or otherwise,
to terminate this Lease based on partial condemnation.

     Section 13.03  Award to Lessee. In the event of any condemnation, whether
     ------------------------------
total or partial, Lessee shall have the right to claim and recover from the
condemning authority such compensation as may be separately awarded or
recoverable by Lessee for loss of its business fixtures, or equipment belonging
to

                                       40
<PAGE>

Lessee immediately prior to the condemnation. The balance of any condemnation
award shall belong to Lessor (including, without limitation, any amount
attributable to any excess of the market value of the Premises for the remainder
of the Lease Term over the then present value of the rent payable for the
remainder of the Lease Term) and Lessee shall have no further right to recover
from Lessor or the condemning authority for any claims arising out of such
taking, provided that Lessee shall have the right to make a separate claim in
the condemnation proceeding, as long as the award payable to Lessor is not
reduced thereby, for (i) the taking of the unamortized or undepreciated value of
any leasehold improvements owned by Lessee that Lessee has the right to remove
at the end of the Lease Term and that Lessee elects not to remove, (ii)
reasonable removal and relocation costs for any leasehold improvements that
Lessee has the right to remove and elects to remove (if condemnor approves of
the removal), and (iii) relocation costs under Government Code section 7262, the
claim for which Lessee may pursue by separate action independent of this Lease.

                                  ARTICLE XIV
                                ENTRY BY LESSOR

     Section 14.01 Entry by Lessor Permitted. Lessee shall permit Lessor and its
     ---------------------------------------
employees, agents and contractors to enter the Premises and all parts thereof
(i) upon twenty-four (24) hours notice (or without notice in an emergency),
including without limitation, the Building and all parts thereof at all
reasonable times for any of the following purposes: to inspect the Premises; to
maintain the Premises; to make such repairs to the Premises as Lessor is
obligated or may elect to make; to make repairs, alterations or additions to any
other portion of the Project and (ii) upon twenty-four (24) hours notice to show
the Premises and post "To Lease" signs for the purposes of reletting during the
last twelve (12) months of the Lease Term (provided that Lessee has failed to
exercise its option to extend) or extended Lease Term to show the Premises as
part of a prospective sale by Lessor or to post notices of nonresponsibility.
Lessor shall have such right of entry without any rebate of rent to Lessee for
any loss of occupancy or quiet enjoyment of the Premises hereby occasioned.
Lessee shall have the right to accompany Lessor on any entry, provided that
Lessor shall not be required to give Lessee any notice of an emergency entry and
shall not be required to delay any noticed entry to accommodate Lessee's
exercise of its right to so accompany.

                                       41
<PAGE>

                                  ARTICLE XV
                              ESTOPPEL CERTIFICATE

     Section 15.01 Estoppel Certificate.
     ----------------------------------

     (a)  Either party shall at any time upon not less than fifteen (15) days'
prior written request from the other party execute, acknowledge and deliver to
the other party a statement in writing (i) certifying, if true, that this Lease
is unmodified and in full force and effect (or, if modified, stating the nature
of such modification and certifying, if true, that this Lease, as so modified,
is in full force and effect) and the date to which the rent and other charges
are paid in advance, if any, and (ii) acknowledging, if true, that there are
not, to such party's knowledge, any uncured defaults on the part of the other
party hereunder, or specifying such defaults if any are claimed and (iii)
certifying or acknowledging such other matters as are requested by any
prospective lender or buyer which are reasonably related to the loan or sale
transaction. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises.

     (b)  Either party's failure to deliver such statement within such time
shall be conclusive upon the other party (i) that this Lease is in full force
and effect, without modification except as may be represented by the requesting
party in the statement, (ii) that there are no uncured defaults in requesting
party's performance, and (iii) that not more than one month's rent has been paid
in advance.

                                  ARTICLE XVI
                               LESSOR'S LIABILITY

     Section 16.01 Limitations on Lessor's Liability.  The term "Lessor" as used
     -----------------------------------------------
herein shall mean only the owner or owners at the time in question of the fee
title of the Premises. In the event of any transfer of such title or interest,
Lessor herein named (and in case of any subsequent transfers then the grantor)
shall be relieved from and after the date of such transfer of all liability as
respects Lessor's obligations thereafter to be performed, except as to any claim
Lessee may have as to any funds in the hands of Lessor or the then grantor at
the time of such transfer, including without limitation, the Security Deposit,
in which Lessee has an interest, which are not delivered to the grantee. The
obligations contained in this Lease to be performed by Lessor shall, subject as
aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership. For any breach of this Lease by Lessor, the
liability of Lessor (including all persons and entities that comprise Lessor,
and any successor Lessor) and any recourse by Lessee against Lessor shall be
limited to the interest of Lessor, and Lessor's

                                       42
<PAGE>

successors in interest, in and to the Premises including any sales proceeds or
condemnation awards received by Lessor from the sale or condemnation of the
Premises after said breach and (ii) any insurance coverage pertaining to such
breach provided by policies carried pursuant to this Lease. On behalf of itself
and all persons claiming by, through, or under Lessee, Lessee expressly waives
and releases Lessor and each member, agent and employee of Lessor from any
personal liability for breach of this Lease.

                                 ARTICLE XVII
                               GENERAL PROVISIONS

     Section 17.01 Severability.  The invalidity of any provision of this Lease
     --------------------------
as determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

     Section 17.02 Agreed Rate Interest on Past-Due Obligations.  Except as
     ----------------------------------------------------------
expressly herein provided, any amount due to either party not paid when due
shall bear interest at the Bank of America prime rate (as the same may vary from
day to day) plus one percent (1%) ("Agreed Rate").  Payment of such interest
shall not excuse or cure any default by Lessee under this Lease. Despite any
other provision of this Lease, the total liability for interest payments shall
not exceed the limits, if any, imposed by the usury laws of the State of
California.  Any interest paid in excess of those limits shall be refunded to
the payor by application of the amount of excess interest paid against any sums
outstanding in any order that payee requires.  If the amount of excess interest
paid exceeds the sums outstanding, the portion exceeding those sums shall be
refunded in cash to the payor by the payee.  To ascertain whether any interest
payable exceeds the limits imposed, any nonprincipal payment (including late
charges) shall be considered to the extent permitted by law to be an expense or
a fee, premium, or penalty rather than interest.

     Section 17.03 Time of Essence.  Time is of the essence in the performance
     -----------------------------
of all obligations under this Lease.

     Section 17.04 Additional Rent.  Any monetary obligation of Lessee to
     -----------------------------
Lessor under the terms of this Lease shall be deemed to be Additional Rent and
Lessor shall have all the rights and remedies for the nonpayment of same as it
would have for nonpayment of Base Rent, except that the one year requirement of
Code of Civil Procedure Section 1161(2) shall apply only to scheduled
installments of Base Rent and not to any Additional Rent. All references to
"rent"

                                       43
<PAGE>

(except specific references to either Base Rent or Additional Rent) shall
mean Base Rent and Additional Rent.

     Section 17.05 Incorporation of Prior Agreements, Amendments and Exhibits.
     ------------------------------------------------------------------------
This Lease (including Exhibits A, B, C, D, E, F, G, H, I, J, K and L) contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the parties in
interest at the time of the modification. Except as otherwise stated in this
Lease, Lessee hereby acknowledges that neither the Lessor nor any employees or
agents of the Lessor has made any oral or written warranties or representations
to Lessee relative to the condition or use by Lessee of said Premises and Lessee
acknowledges that Lessee assumes all responsibility regarding the Occupational
Safety Health Act, the legal use and adaptability of the Premises and the
compliance thereof with all applicable laws and regulations in effect during the
Lease Term except as otherwise specifically stated in this Lease. Neither party
has been induced to enter into this Lease by, and neither party is relying on,
any representation or warranty outside those expressly set forth in this Lease.

     Section 17.06  Notices.
     -------------

     (a)  Written Notice.  Any notice required or permitted to be given
          --------------
hereunder shall be in writing and shall be given by a method described in
paragraph (b) below and shall be addressed to Lessee or to Lessor at the
addresses noted below, next to the signature of the respective parties, as the
case may be. Either party may by notice to the other specify a different address
for notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee, but delay or failure of delivery to such person shall not affect the
validity of the delivery to Lessor or Lessee.

     (b)  Methods of Delivery.
          -------------------

          (i)   When personally delivered to the recipient, notice is effective
on delivery. Delivery to the person apparently designated to receive deliveries
at the subject address is personally delivered if made during business hours
(e.g. receptionist).

          (ii)  When mailed by certified mail with return receipt requested,
notice is effective on receipt if delivery is confirmed by a return receipt.

                                       44
<PAGE>

          (iii) When delivery by overnight delivery Federal
Express/Airborne/United Parcel Service/DHL WorldWide Express with charges
prepaid or charged to the sender's account, notice is effective on delivery if
delivery is confirmed by the delivery service.

     (c)  Refused, Unclaimed or Undeliverable Notices.  Any correctly addressed
          -------------------------------------------
notice that is refused, unclaimed, or undeliverable because of an act or
omission of the party to be notified shall be considered to be effective as of
the first date that the notice was refused, unclaimed, or considered
undeliverable by the postal authorities, messenger, or overnight delivery
service.

     Section 17.07 Waivers.  No waiver of any provision hereof shall be deemed
     ---------------------
a waiver of any other provision hereof or of any subsequent breach of the same
or any other provisions. Any consent to, or approval of, any act shall not be
deemed to render unnecessary the obtaining of consent to or approval of any
subsequent act. The acceptance of rent hereunder by Lessor shall not be a waiver
of any preceding breach by Lessee of any provision hereof, other than the
failure of Lessee to pay the particular rent so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of acceptance of such rent.

     Section 17.08 Recording.  Either Lessor or Lessee shall, upon request of
     -----------------------
the other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes, provided that Lessee shall also
simultaneously execute in recordable form and delivering to Lessor a Quit Claim
Deed as to its leasehold and any other interest in the Premises and hereby
authorizes Lessor to date and record the same only upon the expiration or sooner
termination of this Lease.

     Section 17.09 Surrender of Possession; Holding Over.
     -------------

     (a)  At the expiration of the Lease, Lessee agrees to deliver up and
surrender to Lessor possession of the Premises and all improvements thereon
broom clean and, in as good order and condition as when possession was taken by
Lessee, excepting only ordinary wear and tear (wear and tear which could have
been avoided by first class maintenance practices and in accordance with
industry standards shall not be deemed "ordinary"). Upon expiration or sooner
termination of this Lease, Lessor may reenter the Premises and remove all
persons and property therefrom. If Lessee shall fail to remove any personal
property which it is entitled or obligated to remove from the Premises upon the
expiration or sooner termination of this Lease, for any cause whatsoever,
Lessor, at its option, may remove the same and store or dispose of them, and
Lessee agrees to pay to Lessor

                                       45
<PAGE>

on demand any and all expenses incurred in such removal and in making the
Premises free from all dirt, litter, debris and obstruction, including all
storage and insurance charges. If the Premises are not surrendered at the end of
the Lease Term, Lessee shall indemnify Lessor against loss or liability
resulting from delay by Lessee in so surrendering the Premises, including,
without limitation, actual damages for lost rent and with respect to any claims
of a successor occupant.

     (b)  If Lessee, with Lessor's prior written consent, remains in possession
of the Premises after expiration of the Lease Term and if Lessor and Lessee have
not executed an express written agreement as to such holding over, then such
occupancy shall be a tenancy from month to month at a monthly Base Rent
equivalent to one hundred fifty percent (150%) of the monthly rental in effect
immediately prior to such expiration, such payments to be made as herein
provided for Base Rent. In the event of such holding over, all of the terms of
this Lease, including the payment of Additional Rent all charges owing hereunder
other than rent shall remain in force and effect on said month to month basis.

     Section 17.10 Cumulative Remedies.  No remedy or election hereunder by
     ---------------------------------
Lessor shall be deemed exclusive but shall, wherever possible, be cumulative
with all other remedies at law or in equity, provided that notice and cure
periods set forth in Article XII are intended to extend and modify statutory
notice provisions to the extent expressly stated in Section 12.01.

     Section 17.11 Covenants and Conditions.  Each provision of this Lease to
     --------------------------------------
be observed or performed by Lessee shall be deemed both a covenant and a
condition.

     Section 17.12  Binding Effect; Choice of Law.  Subject to any provisions
     --------------------------------------------
hereof restricting assignment or subletting by Lessee and subject to the
provisions of Article XVI, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of California and any legal or equitable action or proceeding
brought with respect to the Lease or the Premises shall be brought in Santa
Clara County, California.

     Section 17.13 Lease to be Subordinate.  Lessee agrees that this Lease is
     -------------------------------------
and shall be, at all times, subject and subordinate to the lien of any mortgage
or other encumbrances which Lessor may create against the Premises including all
renewals, replacements and extensions thereof provided, however, that regardless
of any default under any such mortgage or encumbrance or any sale of the
Premises under such mortgage, so long as Lessee timely performs all covenants
and conditions of this Lease and continues to make all timely payments
hereunder,

                                       46
<PAGE>

this Lease and Lessee's possession and rights hereunder shall not be disturbed
by the mortgagee or anyone claiming under or through such mortgagee. Lessee
shall execute any documents subordinating this Lease within ten (10) days after
delivery of same by Lessor so long as the Lender agrees therein that this Lease
will not be terminated if Lessee is not in default following a foreclosure,
including, without limitation, any Subordination Non-Distribution and Attornment
Agreement ("SNDA") which is substantially in the form attached hereto as Exhibit
"F."

     Section 17.14 Attorneys' Fees.  If either party herein brings an action to
     -----------------------------
enforce the terms hereof or to declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to recover its reasonable
attorney's fees, expert witness fees and costs as fixed by the Court.

     Section 17.15 Signs.  Lessee shall not place any sign upon the exterior of
     -------------------
the Building without Lessor's prior written consent, which consent shall not be
unreasonably withheld provided that any such signage shall be subject to
approval by the City of Redwood City and shall comply with the signage described
in Exhibit "G" hereto. Lessee, at its sole cost and expense, after obtaining
Lessor's prior written consent, shall install, maintain and remove prior to
expiration of this Lease (or within ten (10) days after any earlier termination
of this Lease) all signage in full compliance with (i) all applicable law,
statutes, ordinances and regulations and (ii) all provisions of this Lease
concerning Alterations. Lessee shall have access to any monument sign or Project
entrance sign which Lessor installs for use by Project occupants.

     Section 17.16 Merger.  The voluntary or other surrender of this Lease by
     --------------------
Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not
work a merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.

     Section 17.17 Guarantor.  [Intentionally Omitted]
     -----------------------

     Section 17.18 Quiet Possession.  Upon Lessee timely paying the rent for the
     ------------------------------
Premises and timely observing and performing all of the covenants, conditions
and provisions on Lessee's part to be observed and performed hereunder, Lessee
shall have quiet possession of the Premises for the entire Lease Term, subject
to all of the provisions of this Lease.

     Section 17.19 Easements.  Lessor reserves to itself the right, from time to
     -----------------------
time, to grant such easements, rights and dedications that Lessor deems
necessary

                                       47
<PAGE>

or desirable, and to cause the recordation of Parcel Maps and conditions,
covenants and restrictions, so long as such easements, rights, dedications, Maps
and conditions, covenants and restrictions do not unreasonably interfere with
the use of the Premises by Lessee. Lessee shall sign any of the aforementioned
or other documents, and take such other actions, which are reasonably necessary
or appropriate to accomplish such granting recordation and subordination of the
Lease to same, upon request of Lessor, and failure to do so within ten (10)
business days of a written request to do so shall constitute a material breach
of this Lease.

     Section 17.20 Authority.  Each individual executing this Lease on behalf of
     -----------------------
a corporation, limited liability company or partnership represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf of
such entity in accordance with a duly adopted resolution of the governing group
of the entity empowered to grant such authority, and that this Lease is binding
upon said entity in accordance with its terms. Each party shall provide the
other with a certified copy of its resolution within ten (10) days after
execution hereof, but failure to do so shall in no manner (i) be evidence of the
absence of authority or (ii) affect the representation or warranty.

     Section 17.21 Force Majeure Delays.  In any case where either party hereto
     ----------------------------------
is required to do any act (other than the payment of money), delays caused by or
resulting from Acts of God or Nature, war, civil commotion, fire, flood or other
casualty, labor difficulties, shortages of labor or materials or equipment,
government regulations, delay by government or regulatory agencies with respect
to approval or permit process, unusually severe weather, or other causes beyond
such party's reasonable control ("Force Majeure Delay") the time during which
act shall be completed, shall be deemed to be extended by the period of such
delay, whether such time be designated by a fixed date, a fixed time or "a
reasonable time."

     Section 17.22 Hazardous Materials.
     ---------------------------------

     (a)  Definition of Hazardous Materials and Environmental Laws.  "Hazardous
          --------------------------------------------------------
Materials" means any (a) substance, product, waste or other material of any
nature whatsoever which is or becomes listed regulated or addressed pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. sections 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation
Act ("HMTA") 49 U.S.C. section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. section 6901, et seq. ("RCRA"); the Toxic Substances
Control Act, 15 U.S.C. sections 2601, et seq.

                                       48
<PAGE>

("TSCA"); the Clean Water Act, 33 U.S.C. sections 1251, et seq.; the California
Hazardous Waste Control Act, Health and Safety Code sections 25100, et seq.; the
California Hazardous Substances Account Act, Health and Safety Code sections
26300, et seq.; the California Safe Drinking Water and Toxic Enforcement Act,
Health and Safety Code sections 25249.5, et seq.; California Health and Safety
Code sections 25280, et seq.; (Underground Storage of Hazardous Substances); the
California Hazardous Waste Management Act, Health and Safety Code sections
25170.1, et seq.; California Health and Safety Code sections 25501. et seq.
(Hazardous Materials Response Plans and Inventory); or the Porter-Cologne Water
Quality Control Act, California Water Code sections 13000, et seq., all as
amended, or any other federal, state or local statute, law, ordinance,
resolution, code, rule, regulation, order or decree regulating, relating to or
imposing liability (including, but not limited to, response, removal and
remediation costs) or standards of conduct or performance concerning any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter may be in effect (collectively, "Environmental Laws"); (b) any
substance, product, waste or other material of any nature whatsoever whose
presence in and of itself may give rise to liability under any of the above
statutes or under any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance, strict or absolute liability or under any
reported decisions of a state or federal court, (c) petroleum or crude oil,
including but not limited to petroleum and petroleum products contained within
regularly operated motor vehicles and (d) asbestos.

     (b)  Lessor's Representations and Disclosures.  Lessor represents that it
          ----------------------------------------
has provided Lessee with a description of the Hazardous Materials on or beneath
the Property as of the date hereof, attached hereto as Exhibit I and
incorporated herein by reference and that except as described in the documents
identified in Exhibit "I," Lessor has no actual knowledge of any Hazardous
Materials at the Property. Lessee acknowledges that in providing the attached
Exhibit I, Lessor has satisfied its obligations of disclosure pursuant to
California Health & Safety Code Section 25359.7 which requires:

          "Any owner of nonresidential real property who knows, or has
          reasonable cause to believe, that any release of hazardous substances
          has come to be located on or  beneath that real property shall, prior
          to the sale, lease or rental of the real property by that owner, give
          written notice of that condition to the buyer, lessee or renter of the
          real property."

                                       49
<PAGE>

     (c)  Use of Hazardous Materials.  Lessee shall not cause or permit any
Hazardous Materials to be brought upon, kept or used in, on or about the Project
by Lessee, its agents, employees, contractors, licensee, guests, visitors or
invitees without the prior written consent of Lessor. Lessor shall not
unreasonably withhold such consent so long as Lessee demonstrates to Lessor's
reasonable satisfaction that such Hazardous Materials are necessary or useful to
Lessee's business and will be used, kept and stored in a manner that complies
with all applicable Environmental Laws. Lessee shall, at all times, use, keep,
store, handle, transport, treat or dispose all such Hazardous Materials in or
about the Property in compliance with all applicable Environmental Laws. Prior
to the expiration or earlier termination of the Lease, Lessee shall remove from
the Project all Hazardous Materials used or brought onto the Premises during the
Lease Term by anyone other than Lessor, its agents, employees or contractors.

     (d)  Lessee's Environmental Indemnity.  Lessee agrees to indemnify and hold
          --------------------------------
Lessor harmless from any liabilities, losses, claims, damages, penalties, fines,
attorney fees, expert fees, court costs, remediation costs, investigation costs,
or other expenses resulting from or arising out of the use, storage, treatment,
transportation, release, presence, generation, or disposal of Hazardous
Materials on, from or about the Project, and/or subsurface or ground water,
after the Commencement Date from an act or omission of Lessee (or Lessee's
successor), its agents, employees, invitees, vendors, contractors, guests or
visitors.

     (e)  Lessee's Obligation to Promptly Remediate.  If the presence of
          -----------------------------------------
Hazardous Materials on the Premises after the Commencement Date results from an
act or omission of Lessee (or Lessee's successors), its agents, employees,
invitees, vendors, contractors, guests, or visitors results in contamination or
deterioration of the Property or any water or soil beneath the Property, Lessee
shall promptly take all action necessary or appropriate to investigate and
remedy that contamination, at its sole cost and expense, provided that Lessor's
consent to such action shall first be obtained, which consent shall not be
unreasonably withheld.

     (f)  Notification.  Lessor and Lessee each agree to promptly notify the
          ------------
other of any communication received from any governmental entity concerning
Hazardous Materials or the violation of Environmental Laws that relate to the
Property.

     (g)  Lessor's Environmental Indemnity.  In no event shall Lessee be
          --------------------------------
responsible for, and Lessor shall indemnify and hold Lessee, its agents and
employees harmless with respect to, remediation of Hazardous Materials

                                       50
<PAGE>

identified in Exhibit "I" which are at the Premises prior to the Commencement
Date.

     Section 17.23  Modifications Required by Lessor's Lender.  If any lender of
     -------------  -----------------------------------------
Lessor requires a modification of this Lease that will not increase Lessee's
cost or expense or materially and adversely change Lessee's rights and
obligations, this Lease shall be so modified and Lessee shall execute whatever
documents are required by such lender and deliver them to Lessor within ten (10)
days after the request.

     Section 17.24 Brokers.  Lessor and Lessee each represents to the other that
     ---------------------
it has had no dealings with any real estate broker or agent in connection with
the negotiation of this Lease, except for the real estate brokers or agents
identified on the signature page hereof ("Brokers") and that they know of no
other real estate broker or agent who is entitled to a commission or finder's
fee in connection with this Lease. Each party shall indemnify, protect, defend,
and hold harmless the other party against all claims, demands, losses,
liabilities, lawsuits, judgments, and costs and expenses (including reasonable
attorney fees) for any leasing commission, finder's fee, or equivalent
compensation alleged to be owning on account of the indemnifying party's
dealings with any real estate broker or agent other than the Brokers. The terms
of this Section 17.24 shall survive the expiration or earlier termination of the
Lease Term.

     Section 17.25  Not an Offer by Lessor; Effectiveness of Lease.  The
     -------------  ----------------------------------------------
submission of this Lease to Lessee shall be for examination purposes only and
shall not constitute an offer to or option for Lessee to lease the Premises.
Execution of this Lease by Lessee and its return to Lessor shall constitute an
offer by Lessee to lease the Premises but not be binding upon Lessor,
notwithstanding any time interval, unless and until Lessor has, in fact,
executed and delivered this Lease to Lessee, it being intended that this Lease
shall only become effective upon execution by Lessor and delivery of a fully
executed counterpart to Lessee.

     Section 17.26  Acknowledgment of Notices.  Lessor has provided and Lessee
     -------------  -------------------------
hereby acknowledges receipt of the Notices attached as Exhibits J and K hereto,
concerning the presence of certain uses and operations of neighboring parcels of
land.

                                       51
<PAGE>

     Section 17.27 List of Exhibits.
     ------------------------------

                                                            REF. PAGE

EXHIBIT A:        Real Property Legal Description, Site Plan, and
                  Building Elevations

EXHIBIT B:        Plans and Specifications for Shell Building

EXHIBIT C:        Work Letter Agreement for Tenant Improvements and
                  Interior Specification Standards

EXHIBIT D:        Cost Responsibilities of Lessor and Lessee

EXHIBIT E:        Memorandum of Commencement of Lease Term and Schedule
                  of Base Rent

EXHIBIT F:        SNDA

EXHIBIT G:        Signage Exhibit

EXHIBIT H:        Guaranty of Lease [Intentionally Omitted]

EXHIBIT I:        Hazardous Materials Disclosure

EXHIBIT J:        Notice to Tenants

EXHIBIT K:        Notice to Tenants

EXHIBIT L:        Rules and Regulations

EXHIBIT M:        Letter of Credit

                                       52
<PAGE>

LESSOR AND LESSEE EACH HAS CAREFULLY READ AND HAS REVIEWED THIS LEASE AND BEEN
ADVISED BY LEGAL COUNSEL OF ITS OWN CHOOSING AS TO EACH TERM AND PROVISION
CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOWS ITS INFORMED AND
VOLUNTARY CONSENT THERETO.  EACH PARTY HEREBY AGREES THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS AND CONDITIONS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.

Executed at San Jose, California, as of the reference date.

LESSOR:                                      ADDRESS:

PACIFIC SHORES
DEVELOPMENT , LLC,
a Delaware limited liability company

By: TECHNOLOGY LAND, LLC,                    c/o Jay Paul Company
    a Delaware limited liability company     353 Sacramento Street, Suite 1740
                                             San Francisco, California 94111
By:_______________________
   Jay Paul, President

                                             With a copy to:

                                             Thomas G. Perkins, Esq.
                                             99 Almaden Boulevard., 8/th/ Floor
                                             San Jose, California 95113
                                             Telephone:  (408) 993-9911
                                             Facsimile:  (408) 286-3312

LESSEE:                                      ADDRESS:

NUANCE COMMUNICATIONS, INC.,                 ____________________________
a _______________ corporation                ____________________________
                                             (Before Commencement Date)

By:______________________________            Pacific Shores Center

                                       53
<PAGE>

    ______________________                   Building 4
    (type or print name)                     Redwood City, California
Its:______________________                   (After Commencement Date)

                                       54
<PAGE>

                                BROKER EXECUTION

     By signing below, the indicated real estate broker or agent is not being
made a party hereto, but is signifying its agreement with the provisions hereof
concerning brokerage.

LESSOR'S BROKER:                             ADDRESS:

CORNISH & CAREY COMMERCIAL                   2804 Mission College Boulevard
                                             Suite 120
                                             Santa Clara, California 95054
By: _______________________
    _______________________
    (type or print name)
Its:_______________________

LESSEE'S BROKER:                             ADDRESS:

CRESA PARTNERS                               ________________________
                                             ________________________
                                             ________________________
By: ________________________
    ________________________
    (type or print name)
Its:________________________

                                       55
<PAGE>

                                   EXHIBIT A
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO

                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                       REAL PROPERTY LEGAL DESCRIPTION,
                       SITE PLAN AND BUILDING ELEVATIONS
                       ---------------------------------

                                (See Attached)

                                       56
<PAGE>

                                   EXHIBIT B
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                    SHELL BUILDING PLANS AND SPECIFICATIONS
                    --------------------------------------

                               (To be provided)

  NOTE:  Shell Building Plans and Specifications shall be consistent with DES
Development Progress Plans dated February 7, 2000 for (a) exterior skin and (b)
                               structural steel.

                                       57
<PAGE>

                                   EXHIBIT C
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

     WORK LETTER AGREEMENT FOR TENANT IMPROVEMENTS

     AND INTERIOR SPECIFICATION STANDARDS

This agreement supplements the above referenced Lease executed concurrently
herewith and is as follows:

     1.  Lessee shall devote such time as may be necessary to complete and
obtain, by the respective dates specified in Section 2.04(d) of the Lease,
Lessor's written approval, and approval by appropriate government authorities,
of the final Working Drawings.  The Working Drawings, as they may be modified or
provided herein, shall be prepared by Lessee in accordance with the design
specified by Lessee and approved by Lessor.  Lessee shall be responsible for the
suitability, for Lessee's needs and business, of the design and function of all
Tenant Improvements.  All improvements to be constructed by Lessor as shown on
the Working Drawings, standard or special, shall be defined as "Tenant
Improvements."  All Tenant Improvements materials shall be of a quality equal to
or greater than the quality of materials described on the Interior Specification
Standards attached hereto as Schedule One.

     2.  Lessor shall cause General Contractor to complete the construction of
the Tenant Improvements in a good and workmanlike manner and in substantial
accordance with the Working Drawings. Lessor shall not, however, be responsible
for procuring or installing in the Premises any trade fixtures, equipment,
furniture, furnishings, telephone equipment or other personal property
("Personal Property") to be used in the Premises by Lessee, and the cost

                                       58
<PAGE>

of such Personal Property shall be paid by Lessee. Lessee shall conform to all
Project standards in installing any Personal Property and shall be subject to
any and all rules of the site during construction.

          3.  Payment for the Tenant Improvements shall be pursuant to Section
     2.04(g) of the Lease.

     4.  Lessee shall, by signing the Working Drawings within the time set forth
in Section 2.04 (d) of the Lease, give Lessor authorization to complete the
Tenant Improvements in accordance with such Working Drawings.  If Lessee shall
request any change, addition or alteration in the approved Working Drawings,
Lessor shall promptly give Lessee a written estimate of the cost of engineering
and design services to prepare a change order (the "Change Order") in accordance
with such request and the time delay expected because of such request.  If
Lessee, in writing, approves such written estimate, Lessor shall have the Change
Order prepared and Lessee shall concurrently reimburse Lessor for the cost
thereof.  Promptly upon the completion of such Change Order, Lessor shall notify
Lessee in writing of the cost and delay  which will be chargeable to Lessee by
reason of such change, addition or deletion.  Lessee shall within three (3)
business days notify Lessor in writing whether it desires to proceed with such
change, addition or deletion, and in the absence of such written authorization,
the Change Order will be deemed canceled and Lessee shall be chargeable with any
delay in the completion of the Premises resulting from the processing of such
Change Order, including the three (3) business day approval period.

     5.  If the completion of the Tenant Improvements in the Premises is delayed
(i) at the request of Lessee, (ii) by Lessee's failure to comply with the time
frames set forth in Section 2.04(d), or (iii) by changes in the work ordered by
Lessee or by extra work ordered by Lessee, or (iv) because Lessee chooses to
have additional work performed by Lessor, then Lessee shall be responsible for
all costs and any expenses occasioned by such delay including, without
limitation, any costs and expenses attributable to increases in labor or
materials; and there shall be no delay in the commencement of Lessee's
obligation to pay Rent because of Lessor's failure to complete the Tenant
Improvements on time and any such delay in completion shall constitute Lessee
Delay for purposes of Section 3.01(a) of the Lease.

          Each person executing this Work Letter Agreement certifies that he or
     she is authorized to do so on behalf of and as the act of the entity
     indicated.  Executed as of the reference date of the Lease, at San Jose
     (Santa Clara County), California.

PACIFIC SHORES DEVELOPMENT, LLC     NUANCE COMMUNICATIONS, INC.
                                    a ___________ corporation

                                       59
<PAGE>

By: _________________________       By: __________________________
     Jay Paul                           __________________________
Its: Manager                             (Type or print name)
                                    Its:__________________________

                                    By: __________________________
                                        __________________________
                                    (Type or print name)
                                    Its: _________________________

                                       60
<PAGE>

                                 SCHEDULE ONE
                                      TO
                                   EXHIBIT C
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                                      FOR

                             Pacific Shores Center

                                  Building 3

                           Redwood City, California

                       INTERIOR SPECIFICATION STANDARDS
                       --------------------------------

                        ABBREVIATED BUILDING STANDARDS
                        ------------------------------

                              For Pacific Shores
                              ------------------

Note:  The Tenant Improvements shall be Class "A" and, subject to subsection
2.04(d), their quality must be at a minimum, per the following standards:

GENERAL OFFICE
--------------

CUSTOM CABINETRY

     SCOPE:  All materials and labor for the construction and installation of
     Cabinetry and all related accessories per WIC Standards.

A.   Trade Standards: Woodworking Institute of California (WIC) latest edition
     Section 15 and 16 for plastic laminated casework and plastic laminated
     countertops. Color of plastic laminate to be selected by Architect

B.   All cabinetry to be constructed to "Custom-Grade" Specifications. Cabinetry
     to be flush overlay construction.

C.   Plastic Laminate:  High Pressure thermoset laminated plastic surfacing
     material to equal or surpass NEMA LD3, Nevamar, WilsonArt or approved
     equal.
     1.   Countertops, shelf-tops, splashes, and edges:  Grade GP 50, 0.050
          inches thick.
     2.   All other exposed vertical surfaces:  Grade GP 28, 0.028 inches thick
     3.   Semi-exposed backing sheet:  Grade CL 20, 0.020 inches thick

                                       61
<PAGE>

     4.   Concealed backing sheet:  Grade BK 20, 0.020 inches thick
D.   Adhesives:  Bond surfaces to Type 11 as recommend by Plastic Laminate
     Manufacturer.
E.   Hinges: Heavy-duty concealed self-closing hinges.  Amount of hinges per
     Door per WIC.  Stanley or approved equal
F.   Door and Drawer Pulls: Wire-pull with 4-inch centers; Dull Chrome finish;
     Stanley 4483 or approved equal.
G.   Drawer slides: Heavy-duty grade with ball-bearings. Stanley, Klein, or
     approved equal
H.   Door Catches: Heavy-duty commercial friction type.
     1.   Recessed Adjustable Shelf Standards: Aluminum or zinc-plated recessed
          type; Knape & Vogt with clips or approved equal.
J.   Base and Wall Cabinets including doors: 3/4-inch thick medium density
     particleboard:
     1 .  Conceal all fastenings.
     2.   Provide clear spaces as required for mechanical and electrical
          fittings
     3.   Plastic laminate and self-edge all shelves.
     4.   Provide 3/4-inch thick doors and drawer faces.
     5.   Unless indicated otherwise, all shelving to be adjustable.
     6.   Provide back and ends on all cabinets.
     7.   All exposed cabinet faces to be plastic-laminated.
K.   Countertops and Shelving: 3/4-inch thick medium density particleboard.
     Backsplash to be 3/4 inches thick, glued and screwed into top with scribed
     edges. Joints in countertop to be not closer than 24 inches from sinks.
     Joints shall be shop fitted, splined, glued and mechanically fastened.
L.   Installation of Cabinetry shall be per WIC instructions, Custom Grade.

WOOD DOORS

SCOPE: All materials and labor necessary for the installation of Wood Doors,
       required accessories and preparations for hardware.

A.   Non-rated Wood Doors: 1-3/4 inch thick, flush, solid core, plain sliced
     Birch veneer with Birch edge. Cores may be either of the following: Glued
     block Hardwood Core per NWMA or Particleboard Core per NWMA. Manufacturer:
     Algoma, Weyerhaeuser, or approved equal.
B.   Fire-rated Wood Doors: 1-3/4 inch thick, flush, solid core, plain sliced
     Birch face veneer with Birch Edge with mineral core per rating.
     Manufacturer: Algoma, Weyerhaeuser, or approved equal. Doors shall have a
     permanent UL label.
C.   Vision Panels (where applies): Fire rated vision panel where required. Set
     in square metal stop to match metal doorstops as provided by doorframe
     manufacturer.
D.   Doors shall be 8'- 0" x 3'-0" leafs typical.

ALUMINUM DOOR AND WINDOW FRAMES

SCOPE: All materials and labor necessary for the installation of Aluminum Door
       Frames.

A.   Frame Manufacturers:  Raco, or Ragland Manufacturing Company, Inc.
B.   Door Frames:  Non-rated and 20-minute label, Raco "Trimstyle" frame with
     Trim 700 (3/8 inch by 1- 1/2 inch) with no exposed fasteners.
C.   Finish, Door and Window Frame Extrusions, Wall Trim:
     1.   Painted and oven-cured with "Duralaq" finish.
     2.   Color:  Clear.
     3.   Finish shall meet or exceed requirements of AAMA Specifications 603.
     4.   Coat inside of frame profile with bituminous coating to a thickness of
          1/16 inch where in contact with dissimilar materials.

DOOR HARDWARE

                                       62
<PAGE>

SCOPE: All materials and labor for the installation of all Door Hardware,
locksets, closers, hinges, miscellaneous door hardware.

A.   Swinging Door Lockset and Cylinder:  Schlage "L" series with lever handle
     with 6 pin  cylinder.
B.   Keyway:  Furnish blank keyways to match existing master-key system. Match
     existing keyways.
C.   Finishes:  Satin Chrome, 626 finish. Paint closers to match.
D.   Kickplates:  16 gauge stainless steel; 10 inches high: width to equal door
     width less 2 inches.

                               HARDWARE SCHEDULE

     Hardware Group A  (Typical, rated, single door)

      1             Lockset            Schlage       L9050PD
      1-1/2 pair    Butt Hinges        Hager         BB1279
      1             Closer             Norton        700 Series
      1             Stop               Quality      (332 @ carpet)
      1             Smoke Seal         Pemko

Hardware Group B  (Typical, rated, closet/service door)

      1             Lockset            Schlage       L9080PD
      1-1/2 pair    Butt Hinges        Hager         BB1279
      1             Closer             Norton        700 Series w/ hold-open
      1             Stop               Quality      (332 @ carpet)
      1             Smoke Seal         Pemko

Hardware Group C  (Typical, non-rated door)

      1             Lockset            Schlage       L9050PD
      1-1/2 pair    Butt Hinges        Hager         BB1279
      1             Stop               Quality      (332 @ carpet)

Hardware Group D  (Typical, non-rated, closet/service door)

      1             Lockset            Schlage       L9080PD
      1-1/2 pair    Butt Hinges        Hager         BB1279
      1             Stop               Quality      (332 @ carpet)

Hardware Group E  (Card-access door)

      1             Electric Lockset   Schlage       L9080PDGU
      1-1/2 pair    Butt Hinges        Hager         BB1279 - NRP
      (2 pr @ 8' door)
      1             Electric Butt      Hager         ETW
      1             Closer             Norton        700 Series w/ hold-open
      1             Stop               Quality       331-ES (332 @ carpet)

Hardware Group F  (Typical, double door)

      1             Electric Lockset   Schlage       L9050PD
      3 pair        Butt Hinges        Hager         BB1270
      1             Auto Flush Bolt    Glyn Johnson  FB-8
      1             Dustproof Strike   Glyn Johnson  DP2
      2             Closer             Norton        7700 Series
      2             Stop               Quality       331-ES (332 @ carpet)
      1             Astragal           Pemko         355CS
      1             Coordinator        Glyn Johnson  COR-2
      1             Smoke Seal         Pemko         S88W

                                       63
<PAGE>

GLAZING

SCOPE:  All materials and labor for the installation of Glass.

A.   Manufacturers: PPG Industries, or Viracon, Inc. See glazing schedule below.
B.   Shop prepares all glazing. Edges to have no chips or fissures.
C.   Glazing Materials:
     1.  Safety Glass:  ASTM C1048, fully tempered with horizontal tempering,
         Condition A uncoated, Type 1 transparent flat, Class 1 clear, Quality
         q3 glazing select, conforming to ANSI Z97.1
     2.  Mirror Glass:  Clear float type with copper and silver coating, organic
         overcoating, square polished edges, 1/4-inch thick,
     3.  Wire Glass: Clear, polished both sides, square wire mesh of woven
         stainless steel wire 1/2 inch x 1/2 inch grid; 1/4 inch thick.
     4.  Tempered Glass:  1/4 inch thick, no tong marks. UL rated for 1 -hour
         rating.
     5.  Spacers:  Neoprene.
     6.  Tape to be poly-iso-butylene.

D.   Schedule:
     1 . Type A:  1/4-inch thick mirror, annealed, heat strengthened, or full
         tempered as required.
     2.  Type B:  1/4 inch thick clear float glass, annealed, heat
         strengthened, or full tempered as required.
     3.  Type C:  1/4-inch thick wire glass plate, square pattern "Baroque"

LIGHT GAUGE METAL FRAMING

SCOPE:  All materials and labor necessary for the installation of metal framing
and related accessories.

A.   Structural Studs:  14 gauge punched channel studs with knurled screw-type
     flanges, prime-coated steel.  Manufacturer: United States Gypsum SJ or
     approved equal. Submit cut-sheet of material.
B.   Partition Studs:  20 gauge studs with key-hole shaped punch-outs at 24
     inches on center. Manufacturer:  United States Gypsum ST or approved equal.
C.   Fasteners for Structural Studs:  Metal screws as recommended by metal
     system manufacturer.  Weld at all structural connection points.
D.   Reinforce framed door and window openings with double studs at each jamb
     (flange-to-flange and weld) and fasten to runners with screws and weld.
     Reinforce head with 14 gauge double stud same width as wall.  Screw and
     weld.
E.   Provide all accessories as required to fasten metal-framing per
     manufacturers recommendations.
F.   Provide and install flat-strapping at all structural walls (walls with
     concrete footings beneath the walls). Minimum bracing shall be 25 % of
     structural walls shall be braced with flat-strapping per Manufacturers
     recommendations.  Weld at all strap ends and at all intermediate studs.
G.   Provide foundation clips at 4'-0" on center at structural walls.  Anchor
     with 1/2 inch diameter by 10 inch long anchor bolts.
H.   Non-structural interior partitions shall be anchored with power-driven
     fasteners at 4'-0" on center at the concrete slab.

ACOUSTIC CEILING SYSTEM

SCOPE:  All materials and labor for the installation of the Acoustic Ceiling
        System including T-Bar system, Acoustic Ceiling Panels, Suspension
        wiring and fastening devices and Glued-down Ceiling Panels.

                                       64
<PAGE>

A.   Manufacturer:  Armstrong, or approved equal.  Exposed T-bar system; factory
     painted; steel construction; rated for intermediate duty.
D.   Acoustical Tile: "Second Look", conforming to the following:
     1 .  Size:  24 x 48 inches.
     2.   Thickness:  3/4 inches.
     3.   Composition:  Mineral.
     4.   NRC Range:  .55 to .60.
     5.   STC Range:  35 to 39.
     6.   Flame Spread:  ASTME84,0-25. UL Label, 25 or under.
     7.   Edge:  Tegular, Lay-in.
     8.   Surface Color:  White.
     9.   Surface Finish:  Factory-applied washable vinyl latex paint.

G.   Installation to be per ASTM C636 structural testing. Lateral support for
     each 96 square feet of ceiling flared at 45 degrees in 4 directions.
H.   Provide clips for panel uplift restraints at all panels, 2 per panel.

GYPSUM WALLBOARD

SCOPE: Provide all materials and labor for the installation of Gypsum Wallboard
     including all accessories and finishes.

A.   Standard Gypsum Wallboard:  ASTM C36;.  Ends square cut, tapered edges.
B.   Fire Resistant Gypsum Wallboard:  ASTM C36, 5/8 inches thick Type X.  Ends
     square cut, tapered edges.  See Drawings for locations.
C.   Moisture-resistant gypsum wallboard:  ASTM C630-90.
D.   Joint-reinforcing Tape and Joint Compound:  ASTM C475, as manufactured by
     or recommended by wallboard manufacturer. Minimum 3 coat application for a
     smooth finish.
E.   Corner Bead:  Provide at all exposed outside corners;
F.   L-shaped edge trim:  Provide at all exposed intersections with different
     materials.
G.   All work shall be done in accordance with the USG recommended method of
     installation.
     1.   Finish:  smooth.

PAINTING

A.   Paint Manufacturers:  ICI,  Dunn-Edwards Corporation, Kelly Moore.
B.   Paint colors shall be selected by the Architect.
C.   Painting Schedule: Provide for 4 different color applications
     1 .  P-1:  "Field".  Color to be selected.
     2.   P-2:  "Accent".  Color to be selected.
     3.   P-3:  "Accent".  Color to be selected.
     4.   P-4:  "Accent".  Color to be selected.
D.   Interior Gypsum Wallboard:
     1.   Primer: Vinyl Wall Primer/Sealer.
     2.   1 stand 2nd Coat:  Eggshell Acrylic Latex.
E.   Metal Framing:
     1.   Primer:  Red Oxide, shop-primed (for non-galvanized) if exposed.
F.   Wood Work, Wood Doors:
     1.   Two coats of transparent finish. Sand lightly between coats with steel
          wool.

INSULATION

A.   R-15 in exterior walls.
B.   R-25 on Roof.

                                       65
<PAGE>

C.   Sound batts in conference, restroom and lobby walls.

ROOF EQUIPMENT

A.   Stainless steel mechanical platform and associated access stairs and guard
     rail system
B.   EIFS roof screen to match detail of exterior GFRC Panel.

FULL HEIGHT GLAZED PARTITION

A.   1/4" glazed partition, in building standard aluminum frame

FINISHES

A.   Vinyl Composite Tile:  Armstrong stonetex, 12" x 12"
B.   Resilient Base:  Burke rubber wall base, 4" top set or cove, as appropriate
     for VCT or carpet.
C.   Window Coverings:  Miniblinds, Levelor, color: TBD
D.   Carpet:
               Option 1:               Designweave, Windswept Classic 30 oz.
                                       (Direct glue installation) or equal

               Option 2: (cut pile)    Designweave, Tempest Classic 32 oz.
               Upgrade                 (Direct glue Upgrade installation) or
                                       equal.

               Option 3: (cut pile)    Designweave, Sabre Classic, 38 oz.
               Upgrade                 (Direct glue Upgrade installation) or
                                       equal.

KITCHEN FIXTURES

A.   Sink:  Ekkay stainless steel, GECR-2521-L&R, 20 gauge, 25"w x 21  1/4" D x
     5 3/8" D, ADA compliant.
B.   Kitchen Faucet:  American Standard, Silhouette Single control, #4205
     series, spout 9  3/4".

KITCHEN APPLIANCES

A.   Dishwasher:
          Option 1:  GE GSD463DZWW, 24'W x 24  3/4" D x 34-35" H, 9 gallons/wash
          Option 2:  Bosch, SHU5300 series, 5.4 gallons/wash-with water heater

B.   Refrigerator:
          Full Size:  GE, "S" series top-mount, TBX16SYZ, 16.4 cubic feet,
                      recessed, recessed handles, 28" W x 29 1/8" D x 66 3/4" H,
                      white, optional factory installed ice-maker.

          Under-counter:
                Option 1:      U-Line, #29R, 3.5 cubic feet, white
                Option 2:      U-Line, Combo 29FF, Frost Free with factory
                               installed icemaker, 2.1 cubic feet, white

C.   Microwave: GE, Spacemaker II JEM25WY, Midsize, 9 cubic feet, 800 watts, 23
                13/16" W x 11 13/16"D x 12 5/16" H

                                       66
<PAGE>

               Option 1:    Under counter Mounting Kit, #4AD19-4
               Option 2:    Accessory Trim Kit # JXB37WN, 26 1/8" W X 18 1/4" H
                            (built-in application)

D.   Garbage Disposal: ISE #77, 3/4" horsepower

E.   Water Heater: To be selected by DES.

PUBLIC SPACES
-------------

FRONT BUILDING LOBBY

  Walk Off Matts:      Design Materials, Sisel, Calcetta #68. Natural, 100% coir

  Floor Tile:          3/8" x 18" x 18" Stone or Marble set in mortar bed in
                       recessed slab as approved by Owner

  Transition Strips:   5/16" x 1  1/2" x random length strips, cherry wood
     flooring

  Corridor Carpeting:  Carpet over pad, Atlas, New Vista or as approved by Owner

  Lobby Ceiling:       Suspended gypsum board ceiling, Painted

  Building Lobby:      Akarl shades hanging #J1-9  3/4" x 5'-2" or equal as
  Pendant Fixture      approved by owner.

  Stairs &             P & P Railing, Modesto with custom cherry guard rail
  Mezzanine Railing:   Rep: Oliver Capp (805) 241-8810.  Hand and guard railing
                       P & P Railings, Modesto stainless steel railing with
                       horizontal spirals and custom cherry guard rail cap by
                       others, fittings dark gray metallic or equal as approved
                       by Owner.

BACK BUILDING LOBBY & EMERGENCY STAIRS

  Walk Off Matts:      Design Materials, Sisal, Calcutta #68, Natural, 100%
                       coir.

  Treads & Landings:   Carpet covered concrete, as approved by Owner

  Stringers, Risers    Painted steel stringer, eggshell finish
  & Handrails          enamel.

  Ceiling:             Suspended gypsum board ceiling.

ELEVATORS

  Cars:                (1) 3800 lb, (1) 3500 lb 150 ft/min by Otis

  Elevator Doors:      Stainless Steel

  Elevator
  Interior Paneling:   Cherry veneer with stainless steel reveals and railing

  Elevator Floor:      Slate 3/8" x 18" x 18" tile as approved by Owner.

RESTROOMS

                                       67
<PAGE>

  Counter tops:        Stone/marble or equal as approved by Owner

  Walls at Lavatories: Eggshell finish, latex paint, Benjamin Moore

  Floor at Toilets:    2" x 2" matte porcelain ceramic floor tiles, thin set,
                       Dal-tile.

  Walls at Toilets:    2" x 2" matte porcelain ceramic floor tiles, thin set,
                       Dal-tile.

  Ceiling:             Suspended gypsum board ceiling.

  Toilet compartments:

     A.   Manufactured floor-anchored metal toilet compartments and wall-hung
          urinal screens.
     B.   Approved Manufacturer, Global Steel Products Corp, or approved equal.
     C.   Toilet Partitions: Stainless Steel finish.
     D.   Hardware: Hinges: Manufacturer's standard self-closing type that can
          be adjusted to hold door open at any angle up to 90 degrees. Latch and
          Keeper: Surface-mounted latch unit, designed for emergency access,
          with combination rubber-faced door strike and keeper. Coat Hook:
          Combination hook and rubber-tipped bumper. Door Pull: Manufacturer's
          standard.

     Ceramic Tile

     A.   Manufacturer:  Dal-Tile or approved equal.
     B.   Size: 4-1/4" x 4-1/4" for walls, 8 x 8 for floors, 3/4" liner strip as
          accent.
     C.   Glaze:  Satin glaze for walls, unglazed tile for floors.
     D.   Color:  As selected by Architect.
     E.   Accessories:  Base, corners, coved cap and glazed to match
     F.   Wall and floor installation:  per applicable TCA
     G.   Waterproof Membrane: Chloraloy or approved equal.
     H.   Tile Backer Board:  1/2 inch thick wonderboard
     I.   Grout:  Commercial Portland Cement Grout; Custom Building Products or
          approved equal
     J.   Mortar: Latex-Portland cement mortar; Custom Building Products or
          approved equal.

RESTROOM:

  Toilet:           Kohler/American Standard, commercial quality.

  Urinal:           Kohler/American Standard, commercial quality.

  Lavatory:         Kohler/American Standard, undercounter.

  Lavatory Faucet:  Kroin handicap lavatory faucet #HV1LH, polished chrome.

  Soap Dispenser    Bobrick, 8226, Lavatory mounted for soaps, 34 fl oz.
  Counter:

  Toilet accessories:

     A.   Manufacturer: Bobrick Washroom Equipment, or approved equal.
     B.   Schedule: Model numbers used in this schedule are Bobrick (134) unless
          otherwise noted.

                                       68
<PAGE>

     C.   Combination Paper Towel Dispenser/Waste Receptacle: Recessed, Model B-
          3944, one per restroom #7151 and 7152, and two per restroom #7050 and
          7061.
     D.   Feminine Napkin Vendor: Recessed, combination napkin/tampon vendor,
          Model B-3500, with 25 cent operation, one per each women's toilet
          room.
     E.   Soap Dispenser: Lavatory mounted dispenser, Model B-822, one per each
          lavatory.
     F.   Toilet Paper Dispenser: Surface-mounted, Model JRT, JR Escort, "In-
          Sight" by Scott Paper Company, one per stall.
     G.   Toilet Seat Cover Dispenser: Recessed, wall-mounted, Model B-301, one
          per stall.
     H.   Sanitary Napkin Disposal: Recessed, wall-mounted, Model B-353, one per
          each women's handicapped and odd stall.
     I.   Sanitary Napkin Disposal: Partition-mounted, Model B-354 (serves two
          stalls).
     J.   Grab Bars: Horizontal 36", B6206-36: 42", B62-6-42: one per each
          handicapped stall.
     K.   Mop/Broom Holders: B223-24 (one per janitor closet).
     L.   Paper Towel Dispensers: Recessed mounted, Model B-359, one at side
          wall adjacent to sink.

TENANT CORRIDORS

  Walls:            Eggshell finish, latex paint, Benjamin Moore.

  Floors:           Level loop carpet over pad with 4" resilient base as
                    approved by Owner.

  Ceiling:          24" x 24" x 3/4" thick fine fissured type mineral fiber,
                    Armstrong Cirus acoustical tile (beveled regular edge) in a
                    24" x 24" Donn Fineline suspended grid, white finish.

  Water Fountain:   Haws Model #1114 Stainless Steel #4.

  Cross Corridor    3'-6" x full height, 20 minute rated, pocket assembly,
  Smoke Detector:   on magnetic hold opens.

  Corridor          Carpyen "Berta" 35cm x 33 cm, engraved curved opaque glass,
  Wall Sconce       2 x 7-9W, #G-23.or equal as approved by owner

ELECTRICAL

A.   50 foot candles at working surface.
B.   3 Bulb 2x4 parbolic fixtures
C.   1/2 20 Amp circuit for each hard wall office
D.   Electrical Devices:   Recessed wall mounted devices with plastic cover
     plate. Color: white, multi-gang plate 80400 Series duplex wall outlets.
E.   Telephone/Data Outlets:  Recessed wall mounted, Standard 2x4 wall box with
     3/4" EMT conduit from box to sub out above ceiling walls pull string,
     cabling, terminations and cover-plates, color:  white, provided by tenant's
     vendor.  Tenant shall furnish telephone backboard.
F.   Light Switches:  Dual level rocker type, mounted at standard locations,
     with plastic cover plate, 5325-W cover plate single switch B0401-W, double
     switch B0409-W. Decors by Leviton, colors: white, and will comply with
     Title 24 Energy Codes.  Decors by Leviton.

MECHANICAL

                                       69
<PAGE>

A.   VAV Reheat system - design/build. Each floor to have a minimum of thirty
     zones. Provide reheat boxes on all zones on top floor and at all exterior
     zones on lower floor. System shall meet T-24 for ventilation.. Design shall
     be for 73 deg. Ambient interior temperature and 2 1/2 watts per sq. ft.
     min.

FIRE SPRINKLER SYSTEM

As required by NFPA & factory mutual standard hazard, seismically braced.

                                      END

                                       70
<PAGE>

                                   EXHIBIT D
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                  COST RESPONSIBILITIES OF LESSOR AND LESSEE
                         FOR SHELL TENANT IMPROVEMENTS
                         -----------------------------

     A.  Lessor is responsible for the construction of the building shell
improvements which shall include the following items:

          Soils Engineer
          Civil Engineer
          Architectural and Structural Engineer
          Landscaping

               Empty Electrical Conduits will be provided from the street to the
               future electrical room for a 2500 Amp. Service 277/480 volt
               service capability for each building . The electrical conduits
               will be stubbed up above the  floor level.

          Lessor to provide two vertical risers for fire sprinklers.
          Testing and Inspection for the shell.
          Building Permits for the Shell and exterior Premises.

                                       71
<PAGE>

          Utility Connection Fee (Fire Protection).
          Area Fees
          Construction Insurance
          Construction Interest
          Construction Taxes
          Land Interest (if any)
          Temporary Facilities
          All site work to include:
                 Site clearing and grading
                 Excavating/Fill
                 Soil compaction
                 Site drainage
                 Site utilities
                 Paving
                 Curbs and gutters
                 Sidewalks
                 Parking lot lights
                 Curb painting and parking lot striping and markings as
                 required by the City.
          Fences, to include special enclosures for trash
          Irrigation System
          Lawns and planting
          Building Shells to include:
                 Concrete Formwork
                 Concrete Reinforcement (if used)
                 Cast in pace concrete (if used)
                 Metal decking (if used)
          Metal framing (if used)
          Rough carpentry as related to shell
          Millworks as related to Shell
          Glue-Lam structure (if used)
          Building roof installation
          Roofing tiles
          Flashing
          Drainage Systems for Roof
          Roof Pitch Pans
          Caulking/Sealants
          Exterior Metal Door/Frames related to the Shell
          Wood or Glass Doors as designated as related to the
          Exterior Shell
          Overhead Doors
          Anodized Aluminum Windows
          Finish Hardware as related to the Shell Doors
          Glass Glazing as specific on plans
          Storefront if desired
          Gutters over front and rear entrances

                                       72
<PAGE>

          Exterior Loading Docks as specific on plans
          Water Supply stubbed to the ground floor (first floor of each Building
          only)
          Roof drainage
          Gas piping to face of building at First Floor
          Telephone and computer conduits between Buildings
          All Government fees applying to the exterior premises and shell.

     B.  The following shall be considered interior improvements costs and shall
be the responsibility of the Lessee subject to the tenant improvement allowance
as provided in the Lease:

          Interior Building Permits
          Gypsum drywall
          Ceramic Tile or elate Tile in Lobbies
          Quarry Tile as specified
          Flag Pole
          Meal door framing
          All interior Wood doors and Hardware
          Custom Woodwork
          Specialized Security construction
          Interior Glass doors 2/nd/ windows
          Acoustical Treatment (suspended ceiling)
          Resilient flooring
          Any special flooring
          Carpeting
          Sprayed fire proofing if required by the code on structural
          Steel and metal deck surfaces
          Lift and Lift Operator
          Interior Painting
          Wall Coverings including Ceramic Tiles
          Grease Interceptor if required
          Drapery, Blinds or Shades
          Pedestal floors
          Toilet Compartments
          Demountable partitions
          Firefighting devices (Extinguishers)
          Toilet and bath accessories
          Lift (Dock levelers)
          Plumbing fixtures, trims and vertical piping
          Interior electrical distribution
          Lighting
          Electrical controls
          Electrical Power Equipment
          Built in Audio-Visual facilities
          Built-in Projection screens
          Water Treatment Discharge

                                       73
<PAGE>

          Sinks in Coffee Rooms
          Lunch Room plumbing for vending machines
          Specialized security systems
          Specialized Halon Fire Extinguishing systems
          Fire sprinkler head drops and horizontal distribution
          Piping off owner-installed vertical risers
          Specialized caging
          Special piping for Tank Farm (If installed)
          Hot water heating system
          Cool water system
          HVAC units
          Ducting controls
          Air Tempering Systems
          Elevators and elevator pits (Otis Elevator Lessor Specs)
          Mechanical platforms, screens and associated roof accessories
          Stairs
          Electrical service (Lessor to provide exterior conduit)

                                       74
<PAGE>

                                   EXHIBIT E
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                                  MEMORANDUM
                                      OF
                          COMMENCEMENT OF LEASE TERM
                          --------------------------

     Pursuant to Article III, Section 3.01, paragraph (a) of the above-
referenced Lease, the parties to said Lease agree to the following:

     1.   The Commencement Date of the Lease is ___________, 2001 and the Lease
          Term commenced on said date. The Expiration Date for the initial Lease
          Term is __________, 2013.
     2.   The date for commencement of rent for the Building is _________, 2001.
     3.   Attached hereto as a part hereof is a true and correct schedule of
          Base Rent.
     4.   The total Rentable Area of the Building is ____________ (   ) rentable
          square feet.

     Each person executing this Memorandum certifies that he or she is
authorized to do so on behalf of and as the act of the entity indicated.
Executed as of ______________, 2000,
at Redwood City (San Mateo County), California.

PACIFIC SHORES DEVELOPMENT, LLC          NUANCE COMMUNICATIONS, INC.
                                         a Delaware corporation

By: _________________________            By:  __________________________
     Jay Paul                                 __________________________
                                              Its:    Manager

                                       75
<PAGE>

                                                (Type or print name)

                                         Its: __________________________

                                         By: ___________________________

                                         _______________________________
                                         (Type or print name)

                                         Its: __________________________

                                       76
<PAGE>

                                   EXHIBIT F
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                                     SNDA
                                     ----

            (See Construction and Permanent SNDA Samples Attached)

                                       77
<PAGE>

                                 ARTICLE XVIII
RECORDING REQUESTED AND
WHEN RECORDED RETURN TO:

KEYBANK NATIONAL ASSOCIATION
Real Estate Division
Mailcode WA-31-10-5285
700 Fifth Avenue, 52/nd/ Floor
Seattle, WA  98104-5099
Attn:  _______________
Loan No.: ___________

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

              SUBORDINATION, ACKNOWLEDGMENT OF LEASE ASSIGNMENT,
                    NONDISTRUBANCE AND ATTORNMENT AGREEMENT

                           AND ESTOPPEL CERTIFICATE

                           (Lease to Deed of Trust)

     NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR LEASE BECOMING SUBJECT
TO AND OF LOWER PRIORITY THAN THE LIEN OF THE DEED OF TRUST (DEFINED BELOW).

     THIS AGREEMENT AND CERTIFICATE is made this _____ day of _________, 2000,
between KEYBANK NATIONAL ASSOCIATION, a national banking association ("Lender")
and _______________________, a _________________ ("Tenant").

                                   RECITALS

     A.  ________________ ("Landlord"), is the owner of real property
("Property") located in _____________ County, California, and legally described
on Exhibit A.

     B.  Tenant is a tenant of a portion of the Property ("Premises") under a
lease ("Lease") with Landlord dated ________________.

     C.  Lender has agreed to make a loan ("Loan") to Landlord.  In connection
therewith, Landlord has executed or proposes to execute, a Construction Deed of
Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing
("Deed of Trust") encumbering the Property and securing, among other things, a
promissory note ("Note") in the principal sum of __________________ DOLLARS
($___________), of even date herewith, in favor of Lender, which Note is payable
with interest and upon the terms described therein.  The Deed of Trust is to be
recorded concurrently herewith.

                                       78
<PAGE>

     D.   The Deed of Trust constitutes a present assignment to Lender of all
right, title, and interest of Landlord under the Lease.

     E.   Lender's agreement to make the Loan is conditioned on Tenant's
specific and unconditional subordination of the Lease to the lien of the Deed of
Trust such that the Deed of Trust at all times remains a lien on the Property,
prior and superior to all the rights of Lessee under the Lease, and Tenant's
agreement to attorn to Lender if Lender obtains possession of the Property by
foreclosure or deed in lieu of foreclosure. Tenant is willing to do so in
consideration of the benefits to Tenant from the Loan and the Lease and Lender's
agreement not to disturb Tenant's possession of the Premises under the Lease.

     NOW, THEREFORE, Lender and Tenant agree as provided below.

     1.   Subordination.  Tenant hereby intentionally and unconditionally
subordinates the Lease and all of Lessee's right, title and interest thereunder
and in and to the Property to the lien of the Deed of Trust and all of Lender's
rights thereunder, including any and all renewals, modifications and extensions
thereof and agrees that the Deed of Trust and any and all renewals,
modifications and extensions thereof shall unconditionally be and at all times
remain in lien on the Property prior and superior to the Lease.  Without
limiting the generality of the foregoing, such subordination shall include all
rights of Tenant in connection with any insurance or condemnation proceeds with
respect to the Premises or Property.

     2.   Acknowledgment. Tenant understands that Lender would not make the Loan
without this Agreement and the subordination of the Lease to the lien of the
Deed of Trust as set forth herein and that in reliance upon, and in
consideration of, this subordination, specific loans and advances are being and
will be made by Lender and, as part and parcel thereof, specific monetary and
other obligations are being and will be entered into which would not be made or
entered into but for reliance upon this subordination. This Agreement is and
shall be the sole and only agreement with regard to the subordination of the
Lease to the lien of the Deed of Trust and shall supersede and cancel, but only
insofar as would affect the priority between the Deed of Trust and the Lease,
any prior agreement as to such subordination, including, without limitation,
those provisions, if any, contained in the lease which provide for the
subordination of the Lease to a deed or deeds of trust or to a mortgage or
mortgages.

     3.   Use of Proceeds. Lender, in making disbursements pursuant to the Note,
the Deed of Trust or any loan agreement with respect to the property, is under
no obligation or duty to, nor has Lender represented that it will, see to the
application of such proceeds by the person or persons to whom Lender disburses
such proceeds, and any application or use of such proceeds for purposes other
than those provided for in such agreement or agreements shall not defeat this
agreement to subordinate in whole or in party.

     4.   Nondisturbance. Lender agrees that Tenant's possession of the Premises
shall not be disturbed by Lender during the tem of the Lease, and Lender shall
not join Tenant in any action or proceeding for the purpose of terminating the
Lease, except upon the occurrence of a default by Tenant under the Lease and the
continuance of such default beyond any cure period given to Tenant under the
Lease.

                                       79
<PAGE>

     5.  Attornment.  If Lender obtains possession of the Property by
foreclosure or deed in lieu of foreclosure, Tenant shall attorn to Lender, be
bound to Lender in accordance with all of the provisions of the Lease for the
balance of the term thereof, and recognize Lender as the landlord under the
Lease for the unexpired term of the Lease.  Such attornement shall be effective
without Lender being (i) subject to any offsets or defenses, or otherwise
liable, for any prior act or omission of Landlord, (ii) bound by any amendment,
modification, or waiver of any of the provisions of the Lease, or by any
separate agreement between Landlord and Tenant relating to the Premises or
Property, unless any such action was taken with the prior written consent of
Lender, (iii) liable for the return of any security or other deposit unless the
deposit has been paid to Lender, (iv) bound by any payment of rent or other
monthly payment under the Lease made by Tenant more than one (1) month in
advance of the due date, or (v) bound by any option, right of first refusal, or
similar right of Tenant to lease any portion of the Property (other than the
Premises) or to purchase all or any portion of the Property.  Lender's
obligations as landlord under the Lease after obtaining possession of the
Property by foreclosure or deed in lieu of foreclosure shall terminate upon
Lender's subsequent transfer of its interest in the Property.

     6.  Termination of Lease.  Notwithstanding any other provision of this
Agreement, in the event Lender obtains ownership of the Property by foreclosure
or deed in lieu of foreclosure and the Lease requires the landlord to construct
any improvements on the Premises or Property, the Lease shall terminate unless
(i) Lender delivers written notice to Tenant expressly assuming such obligation
within ten (10) days after the foreclosure sale or acceptance of the deed in
lieu of foreclosure, or (ii) Tenant waives such obligation by delivery of
written notice to Lender within ten (10) days after receiving notice of the
foreclosure or deed in lieu of foreclosure.

     7.  Covenants of Tenant.  Tenant covenants and agrees with Lender as
follows:

         (a) Tenant shall pay to Lender all rent and other payments otherwise
payable to Landlord under the Lease upon written demand from Lender.  The
consent and approval of Landlord to this Agreement shall constitute an express
authorization for Tenant to make such payments to Lender and a release and
discharge of all liability of Tenant to Landlord for any such payments made to
Lender.

         (b) Tenant shall enter into no material amendment or modification of
any of the provisions of the Lease without Lender's prior written consent.

         (c) Tenant shall not subordinate its rights under the Lease to any
other mortgage, deed of trust, or other security instrument without the prior
written consent of Lender.

         (d) In the event the Lease is rejected or deemed rejected in any
bankruptcy proceeding with respect to Landlord, Tenant shall not exercise its
option to treat the Lease as terminated under 11 U.S.C. (S) 365(h), as amended.

                                       80
<PAGE>

          (e)   Tenant shall not accept any waiver or release of Tenant's
obligations under the Lease by Landlord, or any termination of the Lease by
Landlord, without Lender's prior written consent.

          (f)   Tenant shall promptly deliver written notice to Lender of any
default by Landlord under the Lease. Lender shall have the right to cure such
default within thirty (30) days after the receipt of such notice. Tenant further
agrees not to invoke any of its remedies under the Lease until the thirty (30)
days have elapsed, or during any period that Lender is proceeding to cure the
default with due diligence, or is attempting to obtain the right to enter the
Premises and cure the default.

     8.    Effect of Assignment. Notwithstanding that Landlord has made a
present assignment of all of its rights under the Lease to Lender, Lender shall
not be liable for any of the obligations of Landlord to Tenant under the Lease
until Landlord has obtained possession of the Property by foreclosure or deed in
lieu of foreclosure, and then only to the extent provided in paragraph 3 above.

     9.    Estoppel Certifications. Tenant hereby certifies and represents to
Lender as provided below.

          (a)   The Lease constitutes the entire agreement between Landlord and
Tenant relating to the premises and the Property.

          (b)   The Lease is in full force and effect, and has not been amended,
modified, or assigned by Tenant, either orally or in writing.

          (c)   No payments to become due under the Lease have been paid more
than one (1) month in advance of the due date.

          (d)   Tenant has no present claim, offset or defense under the Lease,
and Tenant has no knowledge of any uncured breach or default by Landlord or
Tenant under the Lease or of any event or condition which, with the giving of
notice or the passage of time or both, would constitute a breach or default
under the lease.

          (e)   Tenant has no knowledge of any prior sale, transfer, assignment,
hypothecation or pledge of Landlord's interest under the Lease or of the rents
due under the Lease.

          (f)   Except as otherwise provided in the Lease, Tenant has made no
agreements with Landlord concerning free rent, partial rent, rebate of rental
payments, setoff, or any other type of rental concession.

     10.   Costs and Attorneys' Fees.  In the event of any claim or dispute
arising out of this Agreement, the party that substantially prevails shall be
awarded, in addition to all other relief, all attorneys' fees and other costs
and expenses incurred in connection with such claim or dispute;  including
without limitation those fees, costs, and expenses incurred before or after
suit,

                                       81
<PAGE>

and in any arbitration, and any appeal, any proceedings under any present
or future bankruptcy act or state receivership, and any post-judgment
proceedings.

     11.   Notices.  All notices to be given under this Agreement shall be in
writing and personally delivered or mailed, postage prepaid, certified or
registered mail, return receipt requested, to Lender at the address indicated on
the first page of this Agreement, and to Tenant at its address indicated below.
All notices which are mailed shall be deemed given three (3) days after the
postmark thereof. Either party may change their address by delivery of written
notice to the other party.

     12.   Miscellaneous.  This agreement may not be modified except in writing
and executed by the parties hereto or their successors in interest.  This
agreement shall inure to the benefit of and by binding upon the parties hereto
and their successors and assigns.  As used herein "Landlord" shall include
Landlord's predecessors and successors in interest under the Lease, and "Lender"
shall include any purchaser of the Property at any foreclosure sale.  All rights
of Lender herein to collect rents on behalf of Landlord under the Lease are
cumulative and shall be in addition to any and all other rights and remedies
provided by law and by other agreements between Lender and Landlord or others.
If any provision of this Agreement is determined to be invalid, illegal or
unenforceable, such provision shall be considered severed from the rest of this
Agreement and the remaining provisions shall continue in full force and effect
as if such provision had not been included.  This Agreement shall be governed by
the laws of the State of California.  This Agreement may be executed in one or
more counterparts, all of which together shall constitute one and the same
original.

     DATED this ______day of ______________, 2000.

     NOTICE:    THIS SUBORDINATION AGREEMENT RESULTS IN YOUR LEASE BECOMING
SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF THE DEED OF TRUST (DEFINED
ABOVE).
          IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE
          PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO.

                                                   "LENDER"

                                             KEYBANK NATIONAL ASSOCIATION,
                                             a National banking association

                                             By:  _________________________
                                             Its: _________________________

                                   "TENANT"

                                       82
<PAGE>

                                             _________________________________'
                                             a ___________________________

                                             By:  ____________________________
                                             Its:   __________________________
                                                       Address:
                                                       _______________________
                                                       _______________________
                                                       _______________________

CONSENTED AND AGREED TO:

"LANDLORD"

____________________________,
a ________________________

By:  ______________________________
Its: ______________________________

ALL SIGNATURES MUST BE ACKNOWLEDGED

                                       83
<PAGE>

STATE OF CALIFORNIA  )
COUNTY OF ___________)

     On ____________, 2000, before me, __________________ the undersigned, a
notary public in and for said state, personally appeared ___________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he/she executed the same in his/her authorized capacity, and that by
his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                       84
<PAGE>

                                   EXHIBIT A

                                      TO

                       SUBORDINATION, NONDISTRUBANCE AND

                ATTORNEMENT AGREEMENT AND ESTOPPEL CERTIFICATE

     (a)   Legal Description

     The Property is located in __________ County, California and is legally
described as follows:

                                       85
<PAGE>

                                 SCHEDULE TWO
                                      TO
                                   EXHIBIT F
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                                     SNDA
                                     ----

            (See Construction and Permanent SNDA Samples Attached)

                                       86
<PAGE>

                        SUBORDINATION, NON-DISTURBANCE

                    ARTICLE XIX  AND ATTORNEMENT AGREEMENT

     THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
"Agreement") made as of the ______ day of ________, 2000, by and among Nomura
Asset Capital Corporation ("Lender"), ______________ ("Tenant") and
_______________ ("Landlord").

                                  WITNESSETH:
                                  ----------

     WHEREAS, Lender has agreed to make a loan (the "Loan") of up to __________
to Landlord;

     WHEREAS, the Loan will be evidenced by a deed of trust note (the "Note") of
even date herewith made by Landlord to order of Lender and will be secured by,
among other things, a deed of trust, assignment of leases and rents and security
agreement (the "Deed of Trust") of even date herewith made by Landlord to Lender
covering the land (the "Land") described on Exhibit A attached hereto and all
improvements (the "Improvements") now or hereafter located on the land (the Land
and the Improvements hereinafter collectively referred to as the "Property");
and

     WHEREAS, by a lease dated as of ___________ (which lease, as the same may
have been amended and supplemented, is hereinafter called the "Lease"), Landlord
leased to Tenant approximately _____ square feet of space located in the
Improvements (the "Premises"); and

     WHEREAS, the parties hereto desire to make the Lease subject and
subordinate to the Deed of Trust.

     NOW, THEREFORE, the parties hereto, in consideration of the covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby agree as follows:

     1.    The Lease, as the same may hereafter be modified, amended or
extended, and all of Tenant's right, title and interest in and to the Premises
and all rights, remedies and options of Tenant under the Lease, are and shall be
unconditionally subject and subordinate to the Deed of Trust and the lien
thereof, to all the terms, conditions and provisions of the Deed of Trust, to
each and every advance made or hereafter made under the Deed of Trust, and to
all renewals, modifications, consolidations, replacements, substitutions and
extensions of the Deed of Trust, so that at all times the Deed of Trust shall be
and remain a lien on the Property prior and superior to the Lease for all
purposes; provided, however, and Lender agrees, that so long as (A) no event has
occurred and no condition exists, which would entitle Landlord to terminate the
Lease or would cause, without further action of Landlord, the termination of the
Lease or would entitle Landlord to dispossess Tenant from the Premises, (B) the
term of the Lease has commenced and Tenant is in possession of the Premises, (C)
the Lease shall be in full force and effect and shall not have been otherwise
modified or supplemented in any way without Lender's prior written

                                       87
<PAGE>

consent, (D) Tenant shall duly confirm its attornment to Lender or its successor
or assign by written instrument as set forth in Paragraph 3 hereof, (E) neither
Lender nor its successors or assigns shall be liable under any warranty of
construction contained in the Lease or any implied warranty of construction, and
(F) all representations and warranties made herein by Tenant shall be true and
correct as of the date of such attornement; then, and in such event Tenant's
leasehold estate under the Lease shall not be terminated, Tenant's possession of
the Premises shall not be disturbed by Lender and Lender will accept the
attornement of Tenant.

     2.    Notwithstanding anything to the contrary contained in the Lease,
Tenant hereby agrees that in the event of any act, omission or default by
Landlord or Landlord's agents, employees, contractors, licensees or invitees
which would give Tenant the right, either immediately or after the lapse of a
period of time, to terminate the Lease, or to claim a partial or total eviction,
or to reduce the rent payable thereunder or credit or offset any amounts against
future rents payable thereunder, Tenant will not exercise any such right (i)
until it has given written notice of such act, omission or default to Lender by
delivering notice of such act, omission or default, in accordance with Paragraph
8 hereof, and (ii) until a period of not less than sixty (60) days for remedying
such act, omission or default shall have elapsed following the giving of such
notice. Notwithstanding the foregoing, in the case of any default of Landlord
which cannot be cured within such sixty (60) day period, if Lender shall within
such period proceed promptly to cure the same (including such time as may be
necessary to acquire possession of the Premises if possession is necessary to
effect such cure) and thereafter shall prosecute the curing of such default with
diligence, then the time within which such default may be cured by Lender shall
be extended for such period as may be necessary to complete the curing of the
same with diligence. Lender's cure of Landlord's default shall not be considered
an assumption by Lender of Landlord's other obligations under the Lease. Unless
Lender otherwise agrees in writing, Landlord shall remain solely liable to
perform Landlord's obligations under the Lease (but only to the extent required
by and subject to the limitation included with the Lease), both before and after
Lender's exercise of any right or remedy under this Agreement. If Lender or any
successor or assign becomes obligated to perform as Landlord under the Lease,
such person or entity will be released from those obligations when such person
or entity assigns, sells or otherwise transfers its interest in the Premises or
the Property.

     3.    Without limitation of any of the provisions of the Lease, in the
event that Lender succeeds to the interest of Landlord or any successor to
Landlord, then subject to the provisions of this Agreement including, without
limitation, Paragraph 1 above, the Lease shall nevertheless continue in full
force and effect and Tenant shall and does hereby agree to attorn to and accept
Lender and to recognize Lender as its Landlord under the Lease for the then
remaining balance of the term thereof, and upon request of Lender, Tenant shall
execute and deliver to Lender an agreement of attornment reasonably satisfactory
to Lender.

     4.    If Lender succeeds to the interest of Landlord or any successor to
Landlord, in no event shall Lender have any liability for any act or omission of
any prior landlord under the Lease which occurs prior to the date Lender
succeeds to the rights of Landlord under the Lease, nor any liability for
claims, offsets or defenses which Tenant might have had against Landlord. In no
event shall Lender have any personal liability as successor to Landlord and
Tenant shall look only to the estate and property of Lender in the Land and the
Improvements for the

                                       88
<PAGE>

satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money in the event of any default by
Lender as Landlord under the Lease, and no other property or assets of Lender
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to the Lease.

     5.    Tenant agrees that no prepayment of rent or additional rent due under
the Lease of more than one month in advance, and no amendment, modification,
surrender or cancellation of the Lease, and no waiver or consent by Landlord
under the terms of the Lease, shall be binding upon or as against Lender, as
holder of the Deed of Trust, and as Landlord under the Lease if it succeeds to
that position, unless consented to in writing by Lender. In addition, and
notwithstanding anything to the contrary set forth in this Agreement, Tenant
agrees that Lender, as holder of the Deed of Trust, and as Landlord under the
Lease if it succeeds to that position, shall in no event have any liability for
the performance or completion of any initial work or installations or for any
loan or contribution or rent concession towards initial work, which are required
to be made by Landlord (A) under the Lease or under any related Lease documents
or (B) for any space which may hereafter become part of said Premises, and any
such requirement shall be inoperative in the event Lender succeeds to the
position of Landlord prior to the completion or performance thereof. Tenant
further agrees with Lender that Tenant will not voluntarily subordinate the
Lease to any lien or encumbrance without Lender's prior written consent.

     6.    This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute and
be construed as one and the same instrument.

     7.    All remedies which Lender may have against Landlord provided herein,
if any, are cumulative and shall be in addition to any and all other rights and
remedies provided by law and by other agreements between Lender and Landlord or
others. If any party consists of multiple individuals or entities, each of same
shall be jointly and severally liable for the obligations of such party
hereunder.

     8.    All notices to be given under this Agreement shall be in writing and
shall be deemed served upon receipt by the addressee if served personally or, if
mailed, upon the first to occur of receipt of the refusal of delivery as shown
on a return receipt, after deposit in the United States Postal Service certified
mail, postage prepaid, addressed to the address of Landlord, Tenant or Lender
appearing below, or, if sent by telegram, when delivered by or refused upon
attempted delivery by the telegraph office. Such addresses may be changed by
notice given in the same manner. If any party consists of multiple individuals
or entities, then notice to any one of same shall be deemed notice to pay such
party.

Lender's Address:

Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York  10281-1198

                                       89
<PAGE>

Attn:  Ms. Sheryl McAfee

Tenant's Address:

____________________________
____________________________
____________________________
____________________________

Attn:  ___________________

Landlord's Address:

 ____________________________
____________________________
____________________________
____________________________

Attn:  ___________________

     9.    This Agreement shall be interpreted and construed in accordance with
and governed by the laws of the State of California.

     10.   This Agreement shall apply to, bind and inure to the benefit of the
parties hereto and their respective successors and assigns. As used herein
"Lender" shall include any subsequent holder of the Deed of Trust.

     11.   Tenant acknowledges that Landlord has assigned to Lender its right,
title and interest in the Lease and to the rents, issues and profits of the
Property and the Property pursuant to the Deed of Trust, and that Landlord has
been granted the license to collect such rents provided no Event of Default has
occurred under, and as defined in, the Deed of Trust. Tenant agrees to pay all
rents and other amounts due under the Lease directly to Lender upon receipt of
written demand by Lender, and Landlord hereby consents thereto. The assignment
of the Lease to Lender, or the collection of rents by Lender pursuant to such
assignment, shall not obligate Lender to perform Landlord's obligations under
the Lease.

[NO FURTHER TEXT ON THIS PAGE]

                                       90
<PAGE>

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

                                        NOMURA ASSET CAPITAL CORPORATION,
                                        a Delaware corporation

                                        By:_________________________________
                                           Name:
                                           Title:

                                        [LANDLORD]

                                        By:____________________________________

                                        [TENANT]

                                        By:___________________________________

                                       91
<PAGE>

STATE OF CALIFORNIA  )
COUNTY OF ___________)

     On ____________, 2000, before me, __________________ the undersigned, a
notary public in and for said state, personally appeared ___________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he/she executed the same in his/her authorized capacity, and that by
his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                       92
<PAGE>

                                   EXHIBIT G
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                                SIGNAGE EXHIBIT
                                ---------------

                               (To be provided)

                                       93
<PAGE>

                                   EXHIBIT H
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                               Guaranty of Lease
                               -----------------

                            [Intentionally Omitted]

                                       94
<PAGE>

                                   EXHIBIT I
                                      TO

                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

                        HAZARDOUS MATERIALS DISCLOSURE
                        ------------------------------

     Lessor has provided Lessee, and Lessee acknowledges that it has received
and pursuant to Section 17.22(b) of the Lease, reviewed same, a copy of each of
those certain documents entitled: (i) PHASE I, ENVIRONMENTAL SITE ASSESSMENT,
PACIFIC SHORES CENTER, REDWOOD CITY, CALIFORNIA, Prepared for: The Jay Paul
Company, San Francisco, California, Prepared by: IRIS ENVIRONMENTAL, Oakland,
California, December 20, 1999, Job No. 99-122A; and (ii) PHASE II, ENVIRONMENTAL
SITE ASSESSMENT, PACIFIC SHORES CENTER, 1000 SEAPORT BOULEVARD, REDWOOD CITY,
CALIFORNIA, Prepared for: The Jay Paul Company, San Francisco, California,
Prepared by: IRIS ENVIRONMENTAL, Oakland, California, January 14, 1999, Job No.
99-122-B

                                    LESSEE

                                    NUANCE COMMUNICATIONS, INC.
                                    a Delaware corporation

                                    By: ______________________
                                        ______________________
                                         (Type or print name)

                                    Its: ______________________

                                    By: ______________________
                                        ______________________
                                         (Type or print name)

                                       95
<PAGE>

                                   EXHIBIT J
                                      TO
                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

     (a)  NOTICE TO TENANTS AND TRANSFEREES OF

     (b)  CURRENT OR FUTURE USES OF ADJACENT PORT PROPERTY

     Notice is hereby given to all lessees, tenants and transferees of land or
interests in land located within Pacific Shores Center of the presence or
potential future presence of Port related industrial activities on Port property
adjacent to and west of Pacific Shores Center. All recipients of this notice
should be aware of the following facts:

               1.   The parcel of Port property adjacent to Pacific Shores
          Center to the northwest shown on the Exhibit ____ attached hereto (the
          "Port Parcel") is now or may be developed for Port related maritime
          and industrial uses similar to those occupying other properties along
          the west side of Seaport Boulevard and to the west of
                                       96
<PAGE>

          Pacific Shores Center.

               2.   Such Port related maritime and industrial activities are
          those which are permitted by the general industrial zoning of the City
          of Redwood City and may include heavy industrial land uses, including
          uses which involve the receipt, transport, storage or management of
          hazardous wastes, aggregates, cement, gravel and similar materials,
          including the outdoor storage and handling of such materials.

               3.   Pacific Shores Center Limited Partnership, on behalf of
          itself, its successors and assigns, has recognized, accepted and
          approved such uses of the Port Parcel subject to the utilization of
          Best Available Management Practices in the development and use of the
          Port Parcel. Best Available Management Practices are defined on
          Exhibit ____ attached hereto.

      4.  Despite the use of Best Available Management Practices on the Port
Parcel by the Port and its lessees and licensees and despite Pacific Shores
Center Limited Partnership's efforts to ensure compatibility between such uses
and those in Pacific Shores Center, it is possible that such uses will cause
emissions into the air of dust or other particulate matter, or noise or odorous
substances which may be offensive to or be perceived as a nuisance by occupants
of Pacific Shores Center.

               5.   Pursuant to covenants made by Pacific Shores Center Limited
          Partnership on behalf of its successors and assigns, tenants and
          lessees, the tenants, lessees and transferees of Pacific Shores Center
          Limited Partnership have approved and accepted such neighboring uses
          subject to their utilization of Best Available Management Practices.

     6.   Any actions to enjoin the continuation of such uses or to recover any
damages to persons or property related to their operations are subject to a
requirement for prior notice found in recorded covenants by Pacific Shores
Center Limited Partnership. The following language is excerpted from such
covenants:

     "In the event that either party hereto believes that the other has failed
     to perform any covenant made herein in favor of the other, at least ten
     (10) days prior to the commencement of any action to enforce the covenants
     hereunder or to recover damages for the

                                       97
<PAGE>

     breach thereof, that party who believes that a failure to perform has
     occurred (the "Complaining Party") shall give written notice (the "Notice")
     to the party alleged not to have performed the covenant (the "Non-
     Complaining Party") of the specific nature of the alleged failure and of
     the intent of the Complaining Party to take action to remedy the breach by
     the Non-Complaining Party. In the event that the nature of the alleged
     failure to perform is such that the same cannot reasonably be cured within
     ten (10) days after receipt of the Notice (the "Notice Period"), the Non-
     Complaining Party shall not be deemed to be in violation of its covenants
     and no action shall be commenced by the Complaining Party if, within the
     Notice Period, the Non-Complaining Party commences such cure and thereafter
     diligently and continuously prosecutes the same to completion within a
     reasonable time. Provided, however, that the Complaining Party shall not be
     precluded from recovering any actual damages suffered by reason of the
     alleged failure to perform prior to or after delivery of the Notice,
     whether or not such failure is thereafter cured."

                                       98
<PAGE>

                                   EXHIBIT K
                                      TO

                        PACIFIC SHORES DEVELOPMENT, LLC
                                     LEASE
                                      TO
                          NUANCE COMMUNICATIONS, INC.
                            a Delaware corporation
                                      as
                                    LESSEE

                                      for

                                   PREMISES
                                      at
                             Pacific Shores Center
                                  Building 3
                           Redwood City, California

     (c)  NOTICE TO PACIFIC SHORES TENANTS, LESSEES, SUCCESSORS, ASSIGNS AND
     TRANSFEREES REGARDING CURRENT OR FUTURE USES OF ADJACENT RMC LONESTAR AND
     PORT PROPERTY

          Notice is hereby given to all tenants, lessees, successors, assigns
     and transferees of land or interest in land located within the Pacific
     Shores Center the of presence or potential future presence of maritime and
     industrial activities on RMC Lonestar and Port of Redwood City property
     west and adjacent to Pacific Shores Center. Recipients of this notice
     should be aware of the following:

          1.  The RMC Lonestar property and parcels of port property adjacent to
     and west of Pacific Shores Center are shown on the map attached to this
     notice. The RMC Lonestar and Port properties are now devoted to, or will be
     developed for, maritime and industrial uses.

                                       99
<PAGE>

          2.   These maritime and industrial uses are those which are permitted
     by the "Heavy Industry" General Plan designation and general industrial
     zoning of the City of Redwood City. These uses include, by way of example
     and not limitation, uses involving the receipt, transport, storage,
     handling, processing or management of aggregates, cement, concrete,
     asphalt, soil or other landscaping materials, recyclable metals and
     plastics, recyclable concrete and asphalt, chemicals, petroleum products,
     hazardous wastes, and similar materials, including indoor storage, mixing
     and handling of these materials.

          3.   These uses may cause, on either a regular or intermittent basis,
     air emissions, including without limitation, dust and other particulates,
     odors, vibrations, loud noises, and heavy truck, rail or marine vessel
     traffic. These uses may have visual, aesthetic or other aspects that may be
     offensive or perceived as a nuisance by occupants of Pacific Shores Center.

                                      100

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