Document:

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                                                                    EXHIBIT 10.2

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                           AMENDED AND RESTATED LEASE

                            Dated as of May 31, 2001

                                     between

                                   PALM, INC.,
                                 as the Lessee,

                                       and

                     SOCIETE GENERALE FINANCIAL CORPORATION,
                                 as the Lessor.

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

<TABLE>
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                                                                         Page
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ARTICLE I DEFINITIONS; INTERPRETATION.................................      1

     1.1      Definitions; Interpretation.............................      1

ARTICLE II LEASE......................................................      2

     2.1      Acceptance and Lease of Property........................      2

     2.2      Lease Term..............................................      2

     2.3      Title...................................................      2

ARTICLE III PAYMENT OF RENT...........................................      2

     3.1      Rent....................................................      2

     3.2      Payment of Rent.........................................      2

     3.3      Supplemental Rent.......................................      2

     3.4      Method of Payment.......................................      3

ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT..........................      3

     4.1      Quiet Enjoyment.........................................      3

     4.2      Right to Inspect........................................      3

ARTICLE V NET LEASE, ETC..............................................      4

     5.1      Net Lease...............................................      4

     5.2      No Termination or Abatement.............................      4

ARTICLE VI SUBLEASES AND ASSIGNMENTS..................................      5

     6.1      Subletting..............................................      5

     6.2      Assignment..............................................      5

ARTICLE VII LESSEE ACKNOWLEDGMENTS....................................      5

     7.1      Condition of the Property...............................      5

     7.2      Risk of Loss............................................      6
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<S>                                                                                                    <C>
ARTICLE VIII POSSESSION AND USE OF THE PROPERTY, ETC..............................................      6

     8.1      Utility Charges.....................................................................      6

     8.2      Possession and Use of the Property..................................................      6

     8.3      Compliance with Requirements of Laws and Insurance Requirements.....................      6

ARTICLE IX MAINTENANCE AND REPAIR; RETURN.........................................................      7

     9.1      Maintenance and Repair; Return......................................................      7

ARTICLE X MODIFICATIONS, ETC......................................................................      7

     10.1     Modifications, Substitutions and Replacements.......................................      7

ARTICLE XI WARRANT OF TITLE; EASEMENTS; deed of trust.............................................      8

     11.1     Warrant of Title....................................................................      8

     11.2     Grants and Releases of Easements; Lessor's Waivers..................................      8

     11.3     Deed of Trust.......................................................................      9

ARTICLE XII PERMITTED CONTESTS....................................................................     10

     12.1     Permitted Contests in Respect of Applicable Law Other Than Impositions..............     10

ARTICLE XIII INSURANCE............................................................................     10

     13.1     Insurance by the Lessee During the Lease Term.......................................     10

     13.2     Evidence of Insurance...............................................................     13

     13.3     Self-Insurance......................................................................     14

ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS......................................     14

     14.1     Casualty and Condemnation...........................................................     14

     14.2     Environmental Matters...............................................................     15

     14.3     Notice of Environmental Matters.....................................................     15

ARTICLE XV TERMINATION OF LEASE...................................................................     15

     15.1     Termination upon Certain Events.....................................................     15

     15.2     Termination by Lessee...............................................................     15
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     15.3     Expiration of Lease Term; Lease Default.................................     15

     15.4     Termination Procedures..................................................     16

ARTICLE XVI EVENTS OF DEFAULT.........................................................     16

     16.1     Lease Events of Default.................................................     16

     16.2     Remedies................................................................     18

     16.3     Waiver of Certain Rights................................................     19

ARTICLE XVII LESSOR'S RIGHT TO CURE...................................................     19

     17.1     The Lessor's Right to Cure the Lessee's Lease Defaults..................     19

ARTICLE XVIII PURCHASE PROVISIONS.....................................................     20

     18.1     Purchase Option.........................................................     20

ARTICLE XIX iNTENTIONALLY OMITTED.....................................................     20

ARTICLE XX intentionally omitted......................................................     20

ARTICLE XXI...........................................................................     20

ARTICLE XXII ESTOPPEL CERTIFICATES....................................................     20

     22.1     Estoppel Certificates...................................................     20

ARTICLE XXIII ACCEPTANCE OF SURRENDER.................................................     21

     23.1     Acceptance of Surrender.................................................     21

ARTICLE XXIV NO MERGER OF TITLE.......................................................     21

     24.1     No Merger of Title......................................................     21

ARTICLE XXV INTENT OF THE PARTIES.....................................................     21

     25.1     Nature of Transaction...................................................     21

ARTICLE XXVI MISCELLANEOUS............................................................     22

     26.1     Survival; Severability; Etc.............................................     22

     26.2     Amendments and Modifications............................................     22

     26.3     No Waiver...............................................................     22
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     26.4     Notices.................................................................     22

     26.5     Successors and Assigns..................................................     23

     26.6     Headings and Table of Contents..........................................     23

     26.7     Counterparts............................................................     23

     26.8     GOVERNING LAW...........................................................     24

     26.9     Liability Limited.......................................................     24

ARTICLE XXVII.........................................................................     24

     27.1     General Indemnification.................................................     24

     27.2     Environmental Indemnity.................................................     25

     27.3     Tax Indemnity...........................................................     26

     27.4     Indemnity Payments in Addition to Lease Obligations.....................     31

     27.5     Proceedings in Respect of Claims........................................     31

     27.6     Survival................................................................     31
</TABLE>

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<PAGE>

                           AMENDED AND RESTATED LEASE

          THIS AMENDED AND RESTATED LEASE (this "Lease"), dated as of May 31,
                                                 -----
2001, between SOCIETE GENERALE FINANCIAL CORPORATION, a Delaware corporation, as
Lessor (in such capacity, the "Lessor"), and PALM, INC., a Delaware corporation,
                               ------
as Lessee (in such capacity, the "Lessee").
                                  ------

                              W I T N E S S E T H:

          WHEREAS, Lessor is the owner of the land more particularly described
on Exhibit A attached hereto (the "Land"; the Land, together with any
   ---------                       ----
improvements located thereon, the "Property"); and
                                   --------

          WHEREAS, Lessor has previously leased the Property to Lessee pursuant
to the terms of that certain Master Lease dated as of November 16, 2000 (the
"Master Lease"); and
-------------

          WHEREAS, by letter to Lessor dated as of the date hereof, Lessee has
exercised the purchase option contained in Section 18.1 of the Master Lease and
has paid the Purchase Price (as defined in such Section 18.1); and

          WHEREAS, notwithstanding Lessee's payment of the Purchase Price in
accordance with Section 18.1 of the Master Lease, Lessee has asked Lessor to
continue to hold title to the Property and continue to lease the Property to
Lessee pursuant to the terms of the Master Lease, as amended and restated
hereby; and

          WHEREAS, Lessor has agreed to continue to hold title to the Property
and lease the Property to Lessee in accordance the terms of the Master Lease, as
amended and restated hereby;

          NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend and restate the Master Lease in
its entirety as follows:

                                   ARTICLE I

                          DEFINITIONS; INTERPRETATION

          1.1  Definitions; Interpretation.  Capitalized terms used but not
               ---------------------------
otherwise defined in this Lease have the respective meanings specified in
Appendix A to this Lease (as the same may be amended, supplemented, amended and
restated or otherwise modified from time to time, "Appendix A"); and the rules
                                                   ----------
of interpretation set forth in Appendix A shall apply to this Lease.
<PAGE>

                                                                               2

                                  ARTICLE II

                                     LEASE

          2.1  Lease of Property.  The Lessor hereby leases the Property to the
               -----------------
Lessee for the Lease Term (as defined below), and the Lessee hereby leases the
Property from the Lessor for the Lease Term.

          2.2  Lease Term.  The term of the Lease (the "Lease Term") shall
               ----------                               ----------
commence on the date hereof and end on May 31, 2002 (the "Expiration Date").
                                                           ---------------

          2.3  Title.  The Property is leased to the Lessee without any
               -----
representation or warranty, express or implied, by the Lessor and subject to the
rights of parties in possession, the existing state of title (including, without
limitation, all Liens) and all applicable Requirements of Law. The Lessee shall
in no event have any recourse against the Lessor for any defect in or exception
to title to the Property.

                                  ARTICLE III

                                PAYMENT OF RENT

          3.1  Rent.  During the Lease Term for the Property, the Lessee shall
               ----
pay rent in an amount equal to $50,000 per year or any portion thereof ("Basic
                                                                         -----
Rent"), payable in advance on the first day of the Lease Term. Lessor shall have
----
no obligation to refund any portion of Basic Rent even if this Lease terminates
prior to the Expiration Date.

          3.2  Payment of Rent.  Rent shall be paid absolutely net to Lessor, so
               ---------------
that this Lease shall yield to Lessor the full amount thereof, without setoff,
deduction or reduction.

          3.3  Supplemental Rent.  The Lessee shall pay to the Lessor or any
               -----------------
other Person entitled thereto any and all Supplemental Rent promptly as the same
shall become due and payable, and if the Lessee fails to pay any Supplemental
Rent, the Lessor and such other Persons entitled to the receipt of such payment
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise. The Lessee shall pay to the Lessor, as Supplemental Rent,
among other things, on demand, to the extent permitted by applicable
Requirements of Law, interest at the applicable Overdue Rate on any installment
of Basic Rent not paid when due for the period for which the same shall be
overdue and on any payment of Supplemental Rent not paid when due or demanded by
the Lessor for the period from the due date or the date of any such demand, as
the case may be, until the same shall be paid. The expiration or other
termination of the Lessee's obligations to pay Basic Rent hereunder shall not
limit or modify the obligations of the Lessee with respect to Supplemental Rent.
Unless expressly provided otherwise in this Lease, in the event of any failure
on the part of the Lessee to pay and discharge any Supplemental Rent as and when
due, the Lessee shall also promptly pay and discharge any fine, penalty,
interest or cost which may be assessed or added under any
<PAGE>

                                                                               3

agreement to which Lessee is a party or which is authorized in writing by the
Lessee with a third party for nonpayment or late payment of such Supplemental
Rent, all of which shall also constitute Supplemental Rent.

          3.4  Method of Payment.  Each payment of Rent payable by the Lessee to
               -----------------
the Lessor under this Lease shall be made by the Lessee to the Lessor or any
other Person or Persons entitled thereto prior to 2:00 P.M., New York City time,
to the Lessor in immediately available funds consisting of Dollars on the date
when such payment shall be due.

                                  ARTICLE IV

                       QUIET ENJOYMENT; RIGHT TO INSPECT

          4.1  Quiet Enjoyment.  Subject to Section 4.2, and subject to the
               ---------------
rights of the Lessor contained in Article XV and Article XVI, the Lessee shall
                                  ----------     -----------
peaceably and quietly have, hold and enjoy the Property for the Lease Term, free
of any claim or other action by the Lessor or anyone claiming by, through or
under the Lessor. Such right of quiet enjoyment is independent of, and shall not
affect the Lessor's rights otherwise to initiate legal action to enforce the
obligations of the Lessee under this Lease.

          4.2  Right to Inspect.  During the Lease Term, the Lessee shall upon
               ----------------
reasonable notice from the Lessor (except if there exists a Lease Default or an
emergency in which event notice will not be required), permit the Lessor and its
respective authorized representatives to have access to and to inspect the
Property.

                                   ARTICLE V

                                NET LEASE, ETC.

          5.1  Net Lease.  This Lease shall constitute a net lease. Any present
               ---------
or future law to the contrary notwithstanding, this Lease shall not terminate,
nor shall the Lessee be entitled to any abatement, suspension, deferment,
reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall
the obligations of the Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) by
reason of: (i) any defect in the condition, merchantability, design,
construction, quality or fitness for use of the Property or any part thereof, or
the failure of the Property to comply with all Requirements of Law, including
any inability to occupy or use, as the case may be, the Property by reason of
such non-compliance; (ii) any damage to, removal, abandonment, salvage, loss,
contamination of or Release from, scrapping or destruction of or any requisition
or taking of the Property or any part thereof; (iii) any restriction, prevention
or curtailment of or interference with the construction on or any use of the
Property or any part thereof including eviction; (iv) any defect in title to or
rights to the Property or any Lien on such title or rights or on the
<PAGE>

                                                                               4

Property; (v) any change, waiver, extension, indulgence or other action or
omission or breach in respect of any obligation or liability of or by the
Lessor; (vi) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceedings relating to the
Lessee, the Lessor or any other Person, or any action taken with respect to this
Lease by any trustee or receiver of the Lessee, the Lessor or any other Person,
or by any court, in any such proceeding; (vii) any claim that the Lessee has or
might have against any Person, including without limitation the Lessor, or any
vendor, manufacturer, contractor of or for the Property; (viii) any failure on
the part of the Lessor to perform or comply with any of the terms of this Lease
or of any other agreement; (ix) any invalidity or unenforceability or illegality
or disaffirmance of this Lease against or by the Lessee or any provision hereof;
(x) the impossibility or illegality of performance by the Lessee, the Lessor or
both; (xi) any action by any court, administrative agency or other Governmental
Authority; or (xii) any other cause or circumstances whether similar or
dissimilar to the foregoing and whether or not the Lessee shall have notice or
knowledge of any of the foregoing. The Lessee's agreement in the preceding
sentence shall not affect any claim, action or right the Lessee may have against
the Lessor or any other Person. The parties intend that the obligations of the
Lessee hereunder shall be covenants and agreements that are separate and
independent from any obligations of the Lessor hereunder or under any other
agreement and the obligations of the Lessee shall continue unaffected unless
such obligations shall have been modified or terminated in accordance with an
express provision of this Lease.

          5.2  No Termination or Abatement.  The Lessee shall remain obligated
               ---------------------------
under this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease (except as provided herein),
notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting the Lessor, or any
action with respect to this Lease which may be taken by any trustee, receiver or
liquidator of the Lessor or by any court with respect to the Lessor. The Lessee
hereby waives all right to terminate or surrender this Lease (except as provided
herein) or to avail itself of any abatement, suspension, deferment, reduction,
setoff, counterclaim or defense with respect to any amount payable hereunder.
The Lessee shall remain obligated under this Lease in accordance with its terms
and the Lessee hereby waives any and all rights now or hereafter conferred by
statute or otherwise to modify or to avoid strict compliance with its
obligations under this Lease. Notwithstanding any such statute or otherwise, the
Lessee shall be bound by all of the terms and conditions contained in this
Lease.

                                  ARTICLE VI

                           SUBLEASES AND ASSIGNMENTS

          6.1  Subletting.  The Lessee may not sublease the Property or any
               ----------
portion thereof to any Person, nor extend, modify or renew any sublease.

          6.2  Assignment.  The Lessee may not assign this Lease or any of its
               ----------
rights or obligations hereunder in whole or in part to any Person.
<PAGE>

                                                                               5

                                  ARTICLE VII

                             LESSEE ACKNOWLEDGMENTS

     7.1  Condition of the Property.  THE LESSEE ACKNOWLEDGES AND AGREES THAT IT
          -------------------------
IS LEASING THE LAND AND THE IMPROVEMENTS CONSTRUCTED THEREON "AS IS" WITHOUT
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR AND
SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN
POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL
INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST
ON THE DATE HEREOF. THE LESSOR HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE MADE
ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) AND SHALL NOT BE
DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY,
USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE PROPERTY (OR ANY
PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT (EXCEPT SECTION
                                                                         -------
4.1 HEREOF) WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY (OR ANY
---
PART THEREOF) AND THE LESSOR SHALL NOT BE LIABLE FOR ANY LATENT, HIDDEN, OR
PATENT DEFECT THEREIN OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO
COMPLY WITH ANY REQUIREMENT OF LAW.

          7.2  Risk of Loss.  During the Lease Term, the risk of loss of or
               ------------
decrease in the enjoyment and beneficial use of the Property as a result of the
damage or destruction thereof by fire, earthquake, the elements, flood, gas
explosion, sabotage, casualties, thefts, riots, wars or otherwise is assumed by
the Lessee, and except for loss or damages arising from the gross negligence or
willful misconduct of Lessor or its respective agents, employees or contractors,
the Lessor shall not in any event be answerable or accountable to Lessee
therefor.

                                 ARTICLE VIII

                    POSSESSION AND USE OF THE PROPERTY, ETC.

          8.1  Utility Charges.  The Lessee shall pay or cause to be paid all
               ---------------
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Property during the
Lease Term. The Lessee shall be entitled to receive any credit or refund with
respect to any utility charge paid by the Lessee and the amount of any credit or
refund received by the Lessor on account of any utility charges paid by the
Lessee, net of the costs and expenses reasonably incurred by the Lessor in
obtaining such credit or refund, shall be promptly paid over to the Lessee.

          8.2  Possession and Use of the Property. The Property shall be used in
               ----------------------------------
a manner consistent with this Lease for any lawful purpose in accordance with
Applicable Law
<PAGE>

                                                                               6

now or hereafter in effect. The Lessee shall pay, or cause to be paid, all
charges and costs required in connection with the use of the Property as
contemplated by this Lease. The Lessee shall not commit or permit any waste of
the Property or any part thereof. Notwithstanding the foregoing or any other
provision of this Lease to the contrary, the Lessee shall not construct, or
permit the construction of any improvements on the Property whatsoever, or
otherwise perform, or permit the performance of, any excavation, construction,
or other work on or at the Property. In addition, Lessee shall not use the
Property, nor permit any other Person to use the Property, in any way except as
necessary to (i) take such actions necessary to comply with Applicable Law, (ii)
market the Property for sale and (iii) to arrange for a subdivision of the
Property and any entitlements necessary to facilitate a sale of the Property.

          8.3  Compliance with Requirements of Laws and Insurance Requirements.
               ---------------------------------------------------------------
Subject to the terms of Article XII relating to permitted contests, the Lessee
                        -----------
at its sole cost and expense, shall (a) comply in all material respects with all
Requirements of Law (including all Hazardous Materials Laws) and Insurance
Requirements relating to the Property, including the use, construction,
operation, maintenance, repair and restoration thereof, whether or not
compliance therewith shall require structural or extraordinary changes in the
Improvements or interfere with the use and enjoyment of the Property, and (b)
procure, maintain and comply with all licenses, permits, orders, approvals,
consents and other authorizations required for the construction, use,
maintenance and operation of the Property and for the use, operation,
maintenance, repair and restoration of the Improvements.

                                  ARTICLE IX

                        MAINTENANCE AND REPAIR; RETURN

          9.1  Maintenance and Repair; Return.
               ------------------------------

          (a)  The Lessee, at its sole cost and expense, shall maintain the
Property (including any fencing on the Property) in good condition (ordinary
wear and tear excepted) and make all necessary repairs thereto, of every kind
and nature whatsoever, whether interior or exterior, ordinary or extraordinary,
structural or nonstructural or foreseen or unforeseen, in each case as required
by all Requirements of Law and Insurance Requirements and in no event less than
the standards applied by the Lessee in the operation and maintenance of other
comparable properties owned or leased by the Lessee or its Affiliates.

          (b)  The Lessor shall under no circumstances be required to build any
improvements on the Property, make any repairs, replacements, alterations or
renewals of any nature or description to the Property, make any expenditure
whatsoever in connection with this Lease or the Property or maintain the
Property in any way. The Lessee waives any right to (i) require the Lessor to
maintain, repair, or rebuild all or any part of the Property or (ii) make
repairs at the expense of the Lessor pursuant to any Requirement of Law,
Insurance Requirement, contract, agreement, or covenant, condition or
restriction in effect at any time during the Lease Term.
<PAGE>

                                                                               7

                                   ARTICLE X

                              MODIFICATIONS, ETC.

          10.1 Modifications, Substitutions and Replacements.  During the Lease
               ---------------------------------------------
Term, the Lessee may not make any alterations, renovations, improvements and
additions to the Property or any part thereof.

                                  ARTICLE XI

                   WARRANT OF TITLE; EASEMENTS; DEED OF TRUST

          11.1 Warrant of Title.
               ----------------

          (a)  The Lessee agrees that except as otherwise provided herein
(including without limitation Section 11.3) and subject to the terms of Article
                                                                        -------
XII relating to permitted contests, the Lessee shall not directly or indirectly
---
create or allow to remain, and shall promptly discharge at its sole cost and
expense, any Lien (other than Permitted Property Liens), defect, attachment,
levy, title retention agreement or claim upon the Property or any Lien,
attachment, levy or claim with respect to the Rent or with respect to any
amounts held by the Lessor..

          (b)  Nothing contained in this Lease shall be construed as
constituting the consent or request of the Lessor, expressed or implied, to or
for the performance by any contractor, mechanic, laborer, materialman, supplier
or vendor of any labor or services or for the furnishing of any materials for
any construction, alteration, addition, repair or demolition of or to the
Property or any part thereof. NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT NOR
SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING THE PROPERTY OR ANY PART THEREOF
THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH
LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE
LESSOR IN AND TO THE PROPERTY.

          11.2 Grants and Releases of Easements; Lessor's Waivers.  Provided
               --------------------------------------------------
that no Lease Default or Lease Event of Default shall have occurred and be
continuing, and subject to the provisions of Articles VII, IX and X and Section
8.3, the Lessor hereby consents in each instance to the following actions by the
Lessee as the Lessor's agent, and the Lessor hereby appoints the Lessee the
Lessor's attorney-in-fact, with full authority in the place and stead of the
Lessor to take such action or actions from time to time during the Lease Term,
but at the Lessee's sole cost and expense: (i) the granting of easements,
licenses, rights-of-way and other rights and privileges in the nature of
easements reasonably necessary or desirable for the use, repair, or maintenance
of the Property as herein provided; (ii) the release of existing easements or
other rights in the nature of easements which are for the benefit of the
Property; (iii) if required by applicable Governmental Authority in connection
with any construction, the
<PAGE>

                                                                               8

dedication or transfer of unimproved portions of the Property for road, highway
or other public purposes; (iv) the imposition of and the execution of amendments
to any covenants and restrictions; (v) the filing and processing of site
development permit amendments, parcel maps, tentative maps, development
agreements and any and all other permit applications, authorizations,
entitlement, agreements with any governmental authority or regulatory agency or
amendments thereof, or other documents reasonably required or beneficial for
construction or Modification of the Improvements, or amendments to Permitted
Property Liens or governmental permits or approvals affecting the Property; and
(vi) the execution and filing of tract or parcel maps subdividing the Land into
lots or parcels or reconfiguring existing lots or parcels; provided, however,
                                                           --------  -------
that in each case (A) such grant, release, dedication, transfer, imposition or
amendment will not cause the Property or any portion thereof to fail to comply
with the provisions of this Lease or any Requirements of Law (including, without
limitation, any applicable zoning, planning, building and subdivision
ordinances, all applicable restrictive covenants and all applicable
architectural approval requirements); (B) any and all governmental consents or
approvals required prior to such grant, release, dedication, transfer,
imposition, annexation or amendment have been obtained, and any and all filings
required prior to such action have been made; (C) the Lessee shall remain
obligated under this Lease and under any instrument executed by the Lessee
consenting to the assignment of the Lessor's interests in this Lease as security
for indebtedness, in each such case in accordance with their terms,
substantially as though such grant, release, dedication, transfer, imposition or
amendment had not been effected and (D) the Lessee shall pay and perform any
obligations of the Lessor under such grant, release, dedication, transfer,
imposition or amendment. Without limiting the effectiveness of the foregoing,
the Lessor shall, upon the request of the Lessee, and at the Lessee's sole cost
and expense, execute and deliver any instruments necessary or appropriate to
confirm any such grant, release, dedication, transfer, imposition or amendment
to any Person permitted under this Section 11.2(a) including landlord waivers
with respect to any of the foregoing, provided that the Lessor does not incur
any liability or obligations thereunder.

          11.3  Deed of Trust.  Provided that no Lease Default or Lease Event of
                -------------
Default shall have occurred and be continuing, at the request of Lessee, Lessor
shall promptly execute and deliver a deed of trust with respect to the Property
to secure a loan made to Lessee, provided that such deed of trust is non-
recourse in all respects to Lessor, Lessor shall have no obligations or
liability whatsoever under such deed of trust, and Lessee shall have no claims
whatsoever against Lessor with respect to a foreclosure of the Property under
such deed of trust or exercise of any other remedy by the trustee or beneficiary
under such deed of trust.

          11.4  Additional Encumbrances. Other than as provided in Section 11.3
                -----------------------
and as otherwise requested by Lessee and agreed to by Lessor (if such agreement
is required), Lessor shall not take any affirmative action to place any Lien on
the Property. This Section 11.4 shall not apply to any Liens placed on the
Property as a result of the action or inaction of Lessee or the failure of
Lessee to comply with the terms of this Lease (such as the failure of Lessee to
pay property taxes on the Property), or Liens not otherwise caused by the
affirmative action of Lessee.
<PAGE>

                                                                               9

          11.5  Sale of the Property.  Lessor shall not sell, transfer or
                --------------------
convey the Property or any portion thereof except to Lessee (or Lessee's
designee) to the extent expressly provided in this Agreement.

                                  ARTICLE XII

                              PERMITTED CONTESTS

          12.1  Permitted Contests in Respect of Applicable Law Other Than
                ----------------------------------------------------------
Impositions.  Except to the extent otherwise provided in Section 27.3(b) hereof
-----------
regarding Taxes and other Impositions, if, to the extent and for so long as (a)
a test, challenge, appeal or proceeding for review of any Applicable Law
relating to the Property shall be prosecuted diligently and in good faith in
appropriate proceedings by the Lessee or (b) compliance with such Applicable Law
shall have been excused or exempted by a valid nonconforming use, variance
permit, waiver, extension or forbearance, then, provided no Lease Default or
Lease Event of Default has occurred and is continuing, the Lessee shall not be
required to comply with such Applicable Law but only if and so long as any such
test, challenge, appeal, proceeding, waiver, extension, forbearance or
noncompliance shall not, in the reasonable opinion of the Lessor, involve (A)
any risk of criminal liability being imposed on the Lessor, or (B) any risk of
(1) foreclosure, forfeiture or loss of the Property, or any material part
thereof, or (2) the nonpayment of Rent or (C) any substantial risk of (1) the
sale of, or the creation of any Lien (other than Permitted Property Lien) on,
any part of the Property, (2) civil liability being imposed on the Lessor or the
Property, or (3) enjoinment of, or interference with, the use, possession or
disposition of the Property in any material respect.  Lessor, at Lessee's sole
cost and expense and without any liability to or obligation of the Lessor,
shall execute and deliver to Lessee such authorizations and other documents as
may reasonably be required in connection with any such permitted contest.

           The Lessor will not be required to join in any proceedings pursuant
to this Section 12.1 unless a provision of any Applicable Law requires that such
proceedings be brought by or in the name of the Lessor; and in that event the
Lessor will join in the proceedings or permit them or any part thereof to be
brought in its name if and so long as the Lessee pays all related expenses and
indemnifies the Lessor with respect to such proceedings.

                                 ARTICLE XIII

                                   INSURANCE

          13.1  Insurance by the Lessee During the Lease Term.
                ---------------------------------------------

          (a)   During the Lease Term, the Lessee shall procure and carry, or
cause others to procure and carry, at the Lessee's sole cost and expense,
insurance policies with insurance
<PAGE>

                                                                              10

companies authorized to do business in the State of California (if required by
law or regulation) with (i) a Best Insurance Reports rating of "A-" or better
and a financial size category of "VIII" or higher, (ii) or a Standard & Poors
financial strength rating of "BBB+" or higher, or (iii) other companies
acceptable to the Lessor.

               (i)   Workers' Compensation Insurance.  Workers' compensation
                     -------------------------------
          insurance as required by applicable California laws.

               (ii)  Employer's Liability Insurance.  Employer's liability
                     ------------------------------
          insurance for the Lessee's liability arising out of injury to or death
          of employees of the Lessee in the amount of $1,000,000 per accident.

               (iii) General Liability Insurance.  Liability insurance on an
                     ---------------------------
          occurrence basis against claims filed in the United States of America
          and occurring in anywhere in the world for the Lessee's liability
          arising out of claims for personal injury (including bodily injury and
          death) and property damage. Such insurance shall provide coverage for
          all operations of the Lessee with a $1,000,000 minimum limit per
          occurrence for combined bodily injury and property damage; provided
          that policy aggregates, if any, shall apply separately to claims
          occurring with respect to the Property.

               (iv)  Automobile Liability Insurance.  Automobile liability
                     ------------------------------
          insurance for the Lessee's liability arising out of claims for bodily
          injury and property damage covering all owned (if any), leased, non-
          owned and hired vehicles of the Lessee, including loading and
          unloading, with a $1,000,000 minimum limit per accident for combined
          bodily injury and property damage and containing appropriate no-fault
          insurance provisions wherever applicable.

               (v)   Excess Liability Insurance.  Excess liability insurance on
                     --------------------------
          an occurrence basis covering claims (on at least a following form
          basis) in excess of the underlying insurance described in the
          foregoing subsections (ii), (iii) and (iv), with a $25,000,000 minimum
          limit per occurrence, provided that aggregate limits of liability, if
          any, shall apply separately to claims occurring with respect to the
          Property.

               The amounts of insurance required in the foregoing subsections
          (ii), (iii), (iv) and this subsection (v) may be satisfied by the
          Lessee purchasing coverage in the amounts specified or by any
          combination of primary and excess insurance, so long as the total
          amount of insurance meets the requirements specified above.

               (vi)  Operational Property Damage Insurance.  To the extent
                     -------------------------------------
          applicable, property damage insurance on an "all risk" basis insuring
          the Lessee and the Lessor, as their interests may appear, including
          coverage against damage or loss caused by earth movement (including
          but not limited to earthquake, landslide,
<PAGE>

                                                                              11

     subsidence and volcanic eruption), flood, and boiler and machinery
     accidents, and in form and substance reasonably satisfactory to the Lessor
     and its Insurance Consultant.

                (1)  Property Insured.  The property damage insurance shall
                     ----------------
          provide coverage for (i) the buildings, structures, boilers,
          machinery, equipment, facilities, fixtures, supplies and other
          properties constituting a part of the Improvements, (ii) the cost of
          recreating plans, drawings or any other documents or computer system
          records, (iii) electronic equipment, and (iv) foundations and other
          property below the surface of the ground.

                (2)  Additional Coverages.  The property damage insurance shall
                     --------------------
          insure (i) attorney's fees, engineering and other consulting costs,
          and permit fees directly incurred in order to repair or replace
          damaged insured property, (ii) the cost of preventive measures to
          reduce or prevent a loss (sue and labor), (iii) increased cost of
          construction and loss to undamaged property as the result of
          enforcement of building laws or ordinances, (iv) debris removal, and
          (v) expediting expenses.

                (3)  Special Clauses.  The property damage policy shall include
                     ---------------
          (i) a 72 hour clause for flood, windstorm and earthquakes, (ii) an
          unintentional errors and omissions clause, (iii) a requirement that
          the insurer pay losses within forty (40) days after receipt of an
          acceptable proof of loss or partial proof of loss, and (iv) an other
          insurance clause making this insurance primary over any other
          insurance.

                (4)  Sum Insured.  Losses shall be valued at their repair or
                     -----------
          replacement cost, without deductible for physical depreciation or
          obsolesce, including custom duties, taxes and fees. The property
          damage policy shall insure the Property in an amount not less than the
          "Full Insurable Value." For purposes of this subsection, "Full
                                                                    ----
          Insurable Value" shall mean the full replacement value of the
          ---------------
          Improvements, including any equipment and supplies, without deduction
          for physical depreciation and/or obsolescence. The earth movement
          (which may be self insured pursuant to Section 13.4) and flood shall
          be insured with a sub-limit of no less than $50,000,000.00; provided,
                                                                      --------
          however, that such sub-limit for earth movement shall be adjusted by
          -------
          the Lessee, if the Lessor determines that any of the parameters or
          inputs listed on the earth movement study prepared by Risk Management
          Solutions, Inc., and attached hereto as Exhibit B shall change or be
                                                  ---------
          amended after the date hereof.

          (vii) Endorsements.  All policies of liability insurance (except for
                ------------
     workers' compensation and employers' liability insurance) required to be
     maintained by the Lessee shall be endorsed as follows:
<PAGE>

                                                                              12

                 (1)  To name the Lessor as additional;

                 (2)  To provide a severability of interests and cross liability
          clause; and

                 (3)  That the insurance shall be primary and not excess to or
          contributing with any insurance or self-insurance maintained by the
          Lessor.

          (viii) Waiver of Subrogation.  The Lessee hereby waives any and
                 ---------------------
     every claim for recovery from the Lessor for any and all loss or damage
     covered by any of the insurance policies to be maintained under this Lease
     to the extent that such loss or damage is recovered under any such policy.

     (b)  Conditions.

          (i)    Loss Notification. The Lessee shall promptly notify the Lessor
                 -----------------
     of any single loss or event likely to give rise to a claim against an
     insurer for an amount in excess of $50,000 covered by any insurance
     policies providing operational property damage.

          (ii)   Policy Cancellation and Change.  All policies of insurance
                 ------------------------------
     required to be maintained pursuant to this Article XIII shall be endorsed
                                                ------------
     so that if at any time they are canceled, or their coverage is reduced (by
     any party including the insured) so as to affect the interests of the
     Lessor, such cancellation or reduction shall not be effective as to the
     Lessor for sixty (60) days, except for non-payment of premium which shall
     be for ten (10) days, after receipt by the Lessor of written notice from
     such insurer of such cancellation or reduction.

          (iii)  Separation of Interests.  All policies (other than in respect
                 -----------------------
     to liability or workers compensation insurance) shall insure the interests
     of the Lessor regardless of any breach or violation by the Lessee or any
     other Party of warranties, declarations or conditions contained in such
     policies, any action or inaction of the Lessees or others, or any
     foreclosure relating to the Property or any change in ownership of all or
     any portion of the Property.

     13.2 Evidence of Insurance.  The Lessee shall furnish the Lessor with (a)
          ---------------------
certificates of insurance or binders, in a form acceptable to the Lessor,
evidencing all of the insurance required by the provisions of this Article XIII
                                                                   ------------
and (b) a schedule of the insurance policies held by or for the benefit of the
Lessee and required to be in force by the provisions of this Article XIII. Such
                                                             ------------
certificates of insurance/binders shall be executed by each insurer or by an
authorized representative of each insurer where it is not practical for such
insurer to execute the certificate itself. Such certificates of
insurance/binders shall identify underwriters, the type of insurance, the
insurance limits and the policy term and shall specifically list the special
provisions enumerated for such insurance required by this Article XIII. Upon
                                                          ------------
request, the Lessee
<PAGE>

                                                                              13

will promptly furnish the Lessor with copies of all insurance policies, binders
and cover notes or other evidence of such insurance relating to the insurance
required to be maintained by the Lessee.

          13.3  Self-Insurance.  During the Lease Term, the Lessee shall have
                --------------
the right to self-insure with respect to earthquake insurance required under
this Lease so long as (i) the Lessee is a publicly traded domestic corporation
whose stock is traded on a nationally recognized exchange; (ii) the Lessee has
not assigned this Lease; (iii) the Lessee maintains a Consolidated Tangible Net
Worth of at least $400 million according to its most recent audited financial
statements and (iv) the Lessee governs and manages its self-insurance program in
a manner consistent with programs managed by prudent businesses in similar
seismic zones whose stock is publicly traded on a nationally recognized
exchange. Upon request, the Lessee shall supply the Lessor from time to time
with evidence reasonably satisfactory to the Lessor of the Lessee's net worth
and the satisfaction of the condition set forth in the above clauses (i)-(iv).
If the Lessee elects to self-insure, the Lessee shall be responsible for losses
or liabilities which would have been assumed by the insurance companies issuing
the insurance required of the Lessee under the Lease. The Lessee will notify the
Lessor in advance of any period for which it intends to self-insure and shall
provide the Lessor with satisfactory evidence of its compliance with these
requirements in order to give the Lessor an opportunity to confirm the
satisfaction of the conditions set forth in the above clauses (i)-(iv).

                                  ARTICLE XIV

                CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS

          14.1  Casualty and Condemnation.
                -------------------------

          (a)   Subject to the provisions of this Article XIV, if all or a
                                                  -----------
portion of the Property is damaged or destroyed in whole or in part by a
Casualty or if use, access, occupancy, easement rights or title to the Property
or any part thereof, is the subject of a Condemnation, then any insurance
proceeds or condemnation award shall be payable to Lessee.

          (b)   The Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or insurance
payment on account of any such Casualty or Condemnation and shall pay all
expenses thereof. At the Lessee's reasonable request, and at the Lessee's sole
cost and expense, the Lessor shall participate in any such proceeding, action,
negotiation, prosecution or adjustment. The Lessor and the Lessee agree that
this Lease shall control the rights of the Lessor and the Lessee in and to any
such award, compensation or insurance payment.

          (c)  In no event shall a Casualty or Condemnation affect the Lessee's
obligations to pay Rent pursuant to Article III and any other amounts hereunder
                                    -----------
or to perform its obligations hereunder.
<PAGE>

                                                                              14

          14.2  Environmental Matters.  If the Lessee gains knowledge of the
                ---------------------
existence of an Environmental Violation with respect to the Property, the Lessee
shall promptly notify the Lessor in writing of such Environmental Violation.

          14.3  Notice of Environmental Matters.  Promptly, but in any event
                -------------------------------
within fifteen (15) Business Days from the date the Lessee has knowledge thereof
pursuant to written notice from any Governmental Authority, the Lessee shall
provide the Lessor written notice of any pending or threatened claim, action or
proceeding involving any Environmental Law or any Hazardous Materials Laws or
any Release on or in connection with the Property. All such notices shall
describe in reasonable detail the nature of the claim, action or proceeding and
the Lessee's proposed response thereto. In addition, the Lessee shall provide to
the Lessor, within thirty (30) Business Days of receipt, copies of all written
communications with any Governmental Authority relating to any Environmental
Violation in connection with the Property. The Lessee shall also promptly
provide such detailed reports of any such material environmental claims.

                                  ARTICLE XV

                              TERMINATION OF LEASE

          15.1  Termination upon Certain Events.  If any of the following occurs
                -------------------------------
during the Lease Term with respect to the Property:

                (i)  a Significant Condemnation occurs; or

                (ii) an Environmental Violation occurs or is discovered;

then Lessor shall have the right to immediately terminate this Lease and
transfer the Property to Lessee in accordance with Section 15.4.

          15.2  Termination by Lessee.  At any time during the Lease Term,
                ---------------------
Lessee shall have the right to terminate this Lease for all or any separately
legally subdivided portion of Property by written notice to Lessor received by
Lessor at least 10 Business Days prior to the date of such termination, in which
event, Lessor shall convey the Property (or such separately legally subdivided
portion, if applicable) to Lessee (or Lessee's designee) in accordance with the
terms of Section 15.4.

          15.3  Expiration of Lease Term; Lease Default.  This Lease shall
                ---------------------------------------
automatically terminate upon the Expiration Date. Lessor shall have the right to
immediately terminate this Lease at any time after the occurrence and during the
continuance of a Lease Event of Default; provided that this Lease will
automatically terminate upon the occurrence of a Lease Event of Default
specified in Sections 16.1(g) and/or 16.1(h). Upon a termination in accordance
with this Section 15.3, Lessor shall convey the Property to Lessee in accordance
with the terms of Section 15.4.
<PAGE>

                                                                              15

          15.4  Termination Procedures.  Upon a termination of this Lease in
                 ----------------------
accordance with Section 15.1, 15.2 or 15.3, this Lease shall terminate, neither
party shall have further rights or obligations hereunder except for such rights
and obligations which expressly survive the termination of this Lease, and fee
title to the Property shall be conveyed to the Lessee (or to Lessee's designee)
"AS IS" and in its then present physical condition. Lessor shall execute and
deliver to Lessee (or to Lessee's designee if Lessee has provided Lessor with
notice of such designee at least 5 days prior to such termination), a grant deed
in the form of Exhibit C (the "Deed"), without representation or warranty other
               ---------       ----
than as provided under Applicable Law, of the Property in recordable form,
together with a FIRPTA Affidavit and such assignments reasonably requested by
Lessee, without any representations or warranties of Lessor, to assign all of
the Lessor's right, title and interest in and to any Net Proceeds with respect
to the Property not previously received by the Lessor and to assign any of
Lessor's rights under warranties and other contracts relating to the Property.
Lessee shall (or shall cause its designee, if applicable), to accept the Deed
and any such assignment. Lessor shall have the right, but no obligation, at
Lessee's expense, to record the Deed in the appropriate land records without any
further action of or consent by Lessee or its designee. Lessee shall pay (or
reimburse Lessor to the extent paid by Lessor) all costs and expenses (including
without limitation Lessor's attorneys' fees and disbursements, recordation fees
and any applicable transfer taxes) in connection with the termination of this
Lease and the transfer of the Property to Lessee or its designee in accordance
with this Section 15.4.

                                  ARTICLE XVI

                               EVENTS OF DEFAULT

          16.1  Lease Events of Default.  The occurrence of any one or more of
                -----------------------
the following events (whether such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall constitute a "Lease Event of
                                                                --------------
Default":
-------

          (a)   the Lessee shall fail to make payment of (i) any Basic Rent when
due and payable, or (ii) any Supplemental Rent due and payable or any amounts
due under Article XXVII hereof within five (5) days after receipt of written
          -------------
notice thereof; or

          (b)   the Lessee shall fail to observe or perform any term, covenant
or condition under this Lease and such failure shall have continued unremedied
for thirty (30) days after written notice; provided, that such cure period shall
be extended from thirty (30) days to ninety (90) days if such term, covenant or
condition is, without material prejudice to the Lessor, curable or remediable
and the Lessee is at all times during such extended period diligently taking
action reasonably satisfactory to the Lessor to so cure or remedy default;
provided, further, that, for purposes of clarification, the failure by the
--------  -------
Lessee to comply with clauses (a), (c), (d), (e), (f), (g)
<PAGE>

                                                                              16

or (h) of this Section 16.1 shall not be subject to any cure period except as
expressly set forth in such clauses (a), (c), (d), (e), (f), (g) or (h);

          (c)  any representation or warranty made or deemed made by the Lessee
herein shall prove to have been incorrect or false in any material respect on or
as of the date made or deemed made, unless the fact or condition which made such
representation of warranty incorrect or false is, without material prejudice to
the Lessor, curable or remediable and the Lessee is at all times diligently
taking action reasonably satisfactory to the Lessor to so cure or remedy such
fact or condition in order to make such representation and/or warranty true and
correct in all material respects, in which event the Lessee shall have one-
hundred and twenty (120) days from the date a Responsible Officer gains
knowledge, by receipt of notice or otherwise, that such representation or
warranty was incorrect or false to cure or remedy such default;

          (d)  any judgments or orders for the payment of money, in any case not
covered by insurance, individually or in the aggregate in excess of $10,000,000
shall be rendered against the Lessee and such judgment or order shall continue
unsatisfied and unstayed (pursuant to laws, rules or court orders) for a period
of thirty (30) days;

          (e)  a default shall occur in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
Indebtedness of the Lessee having a principal amount, individually or in the
aggregate, in excess of $10,000,000, or a default shall occur in the performance
or observance of any obligation or condition with respect to such Indebtedness
if the effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any applicable period
of time sufficient to permit the holder or holders of such Indebtedness, or any
trustee or agent for such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity;

          (f)  the Lessee shall fail to maintain the insurance required under
Article XIII hereof, including compliance with the requirements of Section 13.4
------------                                                       ------------
if the Lessee elects to self-insure with respect to earthquake insurance;

          (g)  the Lessee shall (i) admit in writing its inability to pay its
debts generally as they become due, (ii) file a petition under the United States
bankruptcy laws or any other applicable insolvency law or statute of the United
States of America or any State or Commonwealth thereof or other applicable
jurisdiction, (iii) make a general assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself or the whole or any
substantial part of its property, (v) fail to cause the discharge of any
custodian, trustee or receiver appointed for the Lessee or the whole or a
substantial part of its property within sixty (60) days after such appointment,
or (vi) file a petition or answer seeking or consenting to reorganization under
the United States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth thereof or
other applicable jurisdiction; or
<PAGE>

                                                                              17

          (h)   insolvency proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency law or statute of the United
States of America or any State or Commonwealth thereof or other applicable
jurisdiction shall be filed against the Lessee and not dismissed within sixty
(60) days from the date of its filing (provided, that the Lessee hereby
                                       --------
expressly authorizes the Lessor to appear in any court conducting any such
proceeding during such sixty (60) day period to preserve, protect and defend
their respective rights under this Lease), or a court of competent jurisdiction
shall enter an order or decree appointing, without the consent of the Lessee, a
receiver of the Lessee, or the whole or a substantial part of any of its
property, and such order or decree shall not be vacated or set aside within
sixty (60) days from the date of the entry thereof.

          16.2  Remedies.  (a)  If a Lease Event of Default shall have occurred
                --------
and be continuing, the Lessor shall have the right to recover, by demand to the
Lessee and at the Lessor's election, and the Lessee shall pay to the Lessor, as
and for a final payment, but exclusive of the indemnities payable under this
Lease, and in lieu of all damages beyond the date of such demand, the sum of all
amounts owing in respect of Basic Rent and Supplemental Rent theretofore
accruing under this Lease; provided, however, that if a Lease Event of Default
                           --------  -------
has occurred pursuant to Section 16.1(g) or (h), such final payment shall be
immediately due and payable without demand or notice. Upon payment of the amount
specified pursuant to the first sentence of this Section 16.2, the Lessee shall
be entitled to receive from the Lessor, at the Lessee's request and cost, an
assignment of Lessor's right, title and interest in the Property pursuant to the
provisions of Section 15.4.

          (b)   The Lessor may, by facsimile notice to the Lessee, rescind or
terminate this Lease as of the date specified in such notice in accordance with
Article XV.
----------

          (c)   Subject to Lessee's right at any time to terminate the Lease in
accordance with Section 15.2, the Lessor may, at its option, elect not to
terminate this Lease with respect to the Property and continue to collect all
Basic Rent, Supplemental Rent, and all other amounts due to the Lessor (together
with all costs of collection) and enforce the Lessee's obligations under this
Lease as and when the same become due, or are to be performed, and at the option
of the Lessor, upon any abandonment of the Property by the Lessee or re-entry of
same by the Lessor, the Lessor may enforce, by suit or otherwise, all other
covenants and conditions hereof to be performed or complied with by the Lessee
hereunder and to exercise all other remedies permitted by Applicable Law.

          (d)   The Lessor may exercise any other right or remedy that may be
available to it under Applicable Law, or proceed by appropriate court action
(legal or equitable) to enforce the terms hereof or to recover damages for the
breach hereof. Separate suits may be brought to collect any such damages for any
period(s), and such suits shall not in any manner prejudice the Lessor's right
to collect any such damages for any subsequent period(s), or the Lessor may
defer any such suit until after the expiration of the Lease Term, in which event
such suit shall be deemed not to have accrued until the expiration of the Lease
Term;
<PAGE>

                                                                              18

          (e)  No remedy herein conferred upon or reserved to the Lessor is
intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute. Every power or remedy given by this Lease to the Lessor or to which it
may otherwise be entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by the Lessor. In no event
shall the Lessor, in the exercise of the remedies provided in this instrument,
be deemed a "mortgagee in possession", and the Lessor shall not in any way be
made liable for any act, either of commission or omission, in connection with
the exercise of such remedies.

          16.3  Waiver of Certain Rights. Subject to the foregoing, if this
                ------------------------
Lease shall be terminated pursuant to Section 16.2, the Lessee waives, to the
fullest extent permitted by law, (a) any notice of re-entry or the institution
of legal proceedings to obtain re-entry or possession; (b) any right of
redemption, re-entry or repossession except as expressly provided herein; (c)
the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt or limiting the Lessor with respect to the
election of remedies; and (d) any other rights which might otherwise limit or
modify any of the Lessor's rights or remedies under this Article XVI and Article
                                                         -----------     -------
XV.
---

                                 ARTICLE XVII

                            LESSOR'S RIGHT TO CURE

          17.1  The Lessor's Right to Cure the Lessee's Lease Defaults. The
                ------------------------------------------------------
Lessor, with notice to the Lessee but without waiving or releasing any
obligation or Lease Event of Default, may (but shall be under no obligation to)
remedy any Lease Event of Default for the account and at the sole cost and
expense of the Lessee, including the failure by the Lessee to maintain the
insurance required by Article XIII, and may, to the fullest extent permitted by
                      ------------
law, and notwithstanding any right of quiet enjoyment in favor of the Lessee,
enter upon the Property for such purpose and take all such action thereon as may
be necessary or appropriate therefor. No such entry shall be deemed an eviction
of the Lessee. All reasonable out-of-pocket costs and expenses so incurred
(including fees and expenses of counsel), together with interest thereon at the
Overdue Rate from the date on which such sums or expenses are paid by the
Lessor, shall be paid by the Lessee to the Lessor as Supplemental Rent.

                                 ARTICLE XVIII

                              PURCHASE PROVISIONS

          18.1  Purchase Option. Lessee has, by letter to Lessor dated as of the
                ---------------
date hereof, exercised the purchase option contained in Section 18.1 of the
Master Lease, and has paid the Purchase Price (as defined in the Master Lease)
to Lessor. At Lessee's request, Lessor has continued to hold title to the
Property and continued to lease the Property to Lessor in accordance with the
terms of this Lease. Lessee has the right to terminate this Lease in
<PAGE>

                                                                              19

accordance with Section 15.2 hereof and in such case cause Lessor to convey fee
title to Lessee or Lessor's designee in accordance with Section 15.4.

                                  ARTICLE XIX

                             INTENTIONALLY OMITTED

                                  ARTICLE XX

                             INTENTIONALLY OMITTED

                                  ARTICLE XXI

                             INTENTIONALLY OMITTED

                                 ARTICLE XXII

                             ESTOPPEL CERTIFICATES

          22.1  Estoppel Certificates. At any time and from time to time upon
                ---------------------
not less than fifteen (15) Business Days' prior request by the Lessor or the
Lessee (the "Requesting Party"), the other party (whichever party shall have
             ----------------
received such request, the "Certifying Party") shall furnish to the Requesting
                            ----------------
Party a certificate signed by an individual having the office of vice president
or higher in the Certifying Party certifying that this Lease is in full force
and effect (or that this Lease is in full force and effect as modified and
setting forth the modifications); the dates to which the Basic Rent and
Supplemental Rent have been paid; to the best knowledge of the signer of such
certificate, whether or not the Requesting Party is in default under any of its
obligations hereunder (and, if so, the nature of such alleged default); and such
other matters under this Lease as the Requesting Party may reasonably request.
Any such certificate furnished pursuant to this Article XXII may be relied upon
                                                ------------
by the Requesting Party, and any existing or prospective mortgagee, purchaser or
lender, and any accountant or auditor, of, from or to the Requesting Party (or
any Affiliate thereof).

                                 ARTICLE XXIII

                            ACCEPTANCE OF SURRENDER

          23.1  Acceptance of Surrender. No surrender to the Lessor of this
                -----------------------
Lease or of all or any of the Property or of any part of any thereof or of any
interest therein shall be valid or effective unless agreed to and accepted in
writing by the Lessor, and no act by the Lessor or any
<PAGE>

                                                                              20

representative or agent of the Lessor, other than a written acceptance, shall
constitute an acceptance of any such surrender.

                                 ARTICLE XXIV

                              NO MERGER OF TITLE

          24.1  No Merger of Title. There shall be no merger of this Lease or of
                ------------------
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) the fee or ground leasehold estate in the Property,
except as may expressly be stated in a written instrument duly executed and
delivered by the appropriate Person or (c) a beneficial interest in the Lessor.

                                  ARTICLE XXV

                             INTENT OF THE PARTIES

          25.1  Nature of Transaction. It is the intent of the parties that the
                ---------------------
Lease and other transactions contemplated will result in the Lessee being
recognized as the owner of the Property for Federal and state income tax and
bankruptcy purposes. Each of the parties hereto agrees that it will not, nor
will it permit any Affiliate to at any time, take any action or fail to take any
action with respect to the preparation or filing of any income tax return,
including an amended income tax return, to the extent that such action or such
failure to take action would be inconsistent with the intention of the parties
expressed in this Section 25.1.

                                 ARTICLE XXVI

                                 MISCELLANEOUS

          26.1  Survival; Severability; Etc. Anything contained in this Lease to
                ---------------------------
the contrary notwithstanding, all claims against and liabilities of the Lessee
or the Lessor arising from events commencing prior to the expiration or earlier
termination of this Lease shall survive such expiration or earlier termination.
If any term or provision of this Lease or any application thereof shall be
declared invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. If any
right or option of the Lessee provided in this Lease, including any right or
option described in Article XIV or XV would, in the absence of the limitation
                    -----------    --
imposed by this sentence, be invalid or unenforceable as being in violation of
the rule against perpetuities or any other rule of law relating to the vesting
of an interest in or the suspension of the power of alienation of property, then
such right or option shall be exercisable only during the period which shall end
twenty-one (21) years after the date of death of the last survivor of the
descendants of Franklin D. Roosevelt, the former
<PAGE>

                                                                              21

President of the United States and John D. Rockefeller, the founder of the
Standard Oil Company, known to be alive on the date of the execution,
acknowledgment and delivery of this Lease. The provisions of Article XXVII shall
                                                             -------------
survive the termination of this Lease.

          26.2  Amendments and Modifications. Neither this Lease nor any
                ----------------------------
provision hereof may be amended, waived, discharged or terminated except by an
instrument in writing in recordable form signed by the Lessor and the Lessee.

          26.3  No Waiver. No failure by the Lessor or the Lessee to insist upon
                ---------
the strict performance of any term hereof or to exercise any right, power or
remedy upon a default hereunder, and no acceptance of full or partial payment of
Rent during the continuance of any such default, shall constitute a waiver of
any such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.

          26.4  Notices. All notices, demands, requests, consents, approvals and
                -------
other communications hereunder shall be in writing by facsimile transmission,
with receipt confirmed, or by delivery by a nationally recognized courier
service, with receipt confirmed, and shall be directed to the address of such
Person as indicated below. From time to time any party may designate a new
address for purposes of notice hereunder by written notice to each of the other
parties hereto in accordance with this Section.

If to Lessor:       SOCIETE GENERALE FINANCIAL CORPORATION
                    1221 Avenue of the Americas
                    New York, NY 10020
                    Attention: Paul Sottnik
                    Facsimile No.: (212) 278-7320
                    Telephone No.: (212) 278-6446

If to Lessee:       PALM, INC.
                    5470 Great America Parkway
                    Santa Clara, CA 95052
                    Attention: Karen McCoy or John Igoe
                    Facsimile No.: (408) 326-3309
                    Telephone No.: (408) 326-8212

                    with a copy to:

                    PALM, INC.
                    5470 Great America Parkway
                    Santa Clara, CA 95052
                    Attention: General Counsel
<PAGE>

                                                                              22

          26.5  Successors and Assigns. All the terms and provisions of this
                ----------------------
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither party shall have the right to assign
its rights or delegate its obligations under this Lease except to the extent
expressly permitted hereunder.

          26.6  Headings and Table of Contents. The headings and table of
                ------------------------------
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.

          26.7  Counterparts. This Lease may be executed in any number of
                ------------
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.

          26.8  GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED
                -------------
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES,

          26.9  Liability Limited. The parties hereto agree that except as
                -----------------
specifically set forth in this Lease, the Lessor shall have no personal
liability whatsoever to the Lessee or its successors and assigns for any claim
based on or in respect of this Lease or arising in any way from the transactions
contemplated hereby or thereby and the recourse shall be solely had against the
Lessor's interest in the Property; provided, however, that Lessor shall be
liable in its individual capacity for its own willful misconduct or gross
negligence.

                                 ARTICLE XXVII

                               INDEMNIFICATIONS

          27.1  General Indemnification. The Lessee agrees to assume liability
                -----------------------
for, and to indemnify, protect, defend, save and keep harmless Lessor and its
Affiliates, successors, assigns, directors, shareholders, partners, officers,
employees and agents (collectively, the "Indemnitees"), on an After Tax Basis,
from and against, any and all Claims that may be imposed on, incurred by or
asserted against such Indemnitee (whether because of action or omission by such
Indemnitee or otherwise), as to Property in any way relating to or arising out
of:

          (a)   the Property or any part thereof or interest therein;

          (b)   the purchase, design, construction, preparation, installation,
inspection, delivery, nondelivery, acceptance, rejection, ownership, management,
possession, operation, rental, lease, sublease, repossession, maintenance,
repair, alteration, modification, addition or substitution, storage, transfer of
title, redelivery, use, financing, refinancing, disposition, operation,
condition, sale (including, without limitation, any sale pursuant to this
Lease), return or other disposition of all or any part or any interest in the
Land and/or Improvements or the imposition of any Lien (or incurring of any
liability to refund or pay over any amount as a result
<PAGE>

                                                                              23

of any Lien) thereon, including, without limitation: (1) Claims or penalties
arising from any violation of law or in tort (on the basis of strict liability
or otherwise), (2) latent or other defects, whether or not discoverable, (3) any
Claim based upon a violation or alleged violation of the terms of any
restriction, easement, condition or covenant or other matter affecting title to
any of the Property, (4) the making of any Modifications in violation of any
standards imposed by any insurance policies required to be maintained by the
Lessee pursuant to the Lease which are in effect at any time with respect to any
of the Property or any part thereof, (5) any Claim for patent, trademark or
copyright infringement, (6) Claims arising from any public improvements with
respect to the Property resulting in any change or special assessments being
levied against any Property or any plans to widen, modify or realign any street
or highway adjacent to any of the Properties, or any Claim for utility "tap-in"
fees, (7) Claims with respect to any deed of trust placed on the Property in
accordance with Section 11.3, and (8) any other Claims whatsoever relating to
Lessor's ownership of the Property;

          (c)   the breach by the Lessee of any covenant, representation or
warranty made by it or deemed made by it in the Lease;

          (d)   the retaining or employment of any broker, finder or financial
advisor by the Lessee to act on its behalf in connection with this Lease or the
Property;

          (e)   the existence of any Lien on or with respect to the Property,
the Improvements, any Basic Rent or Supplemental Rent, title thereto, or any
interest therein including any Liens which arise out of the possession, use,
occupancy, construction, repair or rebuilding of the Property or by reason of
labor or materials furnished or claimed to have been furnished to the Lessee, or
any of its contractors or agents or by reason of the financing of any personalty
or equipment purchased or leased by the Lessee or Modifications constructed by
the Lessee; or

          (f)   the transactions contemplated by the Lease in respect of the
application of Parts 4 and 5 of Subtitle B of Title I of ERISA and any
prohibited transaction described in Section 4975(c) of the Code;

provided, however, that the Lessee shall not be required to indemnify any
--------  -------
Indemnitee under this Section 27.1 for any Claim to the extent resulting from
the willful misconduct or gross negligence of such Indemnitee.  Each Indemnitee
shall, at the expense of the Lessee, supply the Lessee with such information and
documents reasonably requested by the Lessee as are necessary or advisable for
the Lessee to defend in any action, suit or proceeding to the extent permitted
by Section 27.1.  The Lessee and each Indemnitee agree to give each other prompt
written notice of any Claim hereby indemnified against but the giving of any
such notice by an Indemnitee shall not be a condition to the Lessee's
obligations under this Section 27.1.

          27.2  Environmental Indemnity. Without limitation of the other
                -----------------------
provisions of this Article XXII, the Lessee hereby agrees to indemnify, hold
                   ------------
harmless and defend each Indemnitee from and against any and all claims
(including, without limitation, third party claims
<PAGE>

                                                                              24

for personal injury or real or personal property damage), losses, damages,
liabilities, fines, penalties, charges, administrative and judicial proceedings
(including informal proceedings) and orders, judgments, remedial action,
requirements, enforcement actions of any kind, and all reasonable and documented
costs and expenses incurred in connection therewith (including, but not limited
to, reasonable and documented attorneys' and/or paralegals' fees and expenses),
including, but not limited to, all costs incurred in connection with any
investigation or monitoring of site conditions or any clean-up, remedial,
removal or restoration work by any federal, state or local government agency,
arising in whole or in part, out of

          (a)  the presence on or under the Property of any Hazardous Materials,
or any Releases or discharges of any Hazardous Materials on, under, from or onto
any of the Property,

          (b)  any activity, including, without limitation, construction,
carried on or undertaken on or off the Property, and whether by the Lessee or
any predecessor in title or any employees, agents, contractors or subcontractors
of the Lessee or any predecessor in title, or any other Persons (including such
Indemnitee), in connection with the handling, treatment, removal, storage,
decontamination, clean-up, transport or disposal of any Hazardous Materials that
at any time are located or present on or under or that at any time migrate,
flow, percolate, diffuse or in any way move onto or under the Property,

          (c)  loss of or damage to any property or the environment (including,
without limitation, clean-up costs, response costs, remediation and removal
costs, costs of corrective action, costs of financial assurance, fines and
penalties and natural resource damages), or death or injury to any Person, and
all expenses associated with the protection of wildlife, aquatic species,
vegetation, flora and fauna, and any mitigative action required by or under
Hazardous Materials Laws,

          (d)  any claim concerning lack of compliance with Hazardous Materials
Laws, or any act or omission causing an environmental condition that requires
remediation or would allow any Governmental Authority to record a Lien on the
land records, or

          (e)  any residual contamination on or under any of the Land, or
affecting any natural resources, and to any contamination of any property or
natural resources arising in connection with the generation, use, handling,
storage, transport or disposal of any such Hazardous Materials, and irrespective
of whether any of such activities were or will be undertaken in accordance with
applicable laws, regulations, codes and ordinances;

provided, however, that the Lessee shall not be required to indemnify any
--------  -------
Indemnitee under this Section 27.2 for any Claim to the extent resulting from
the willful misconduct or gross negligence of such Indemnitee.

          27.3  Tax Indemnity.
                -------------
<PAGE>

                                                                              25

          (a)  Indemnification. (i)  The Lessee shall pay and assume liability
               ---------------
for, and does hereby agree to indemnify, protect and defend the Property and all
Indemnitees, and hold them harmless against, all Impositions on an After Tax
Basis.

               (ii)   All payments to or for the benefit of any Indemnitee under
          the Lease (including without limitation, Basic Rent and Supplemental
          Rent) shall be made free and clear of and without deduction for any
          and all present or future Impositions. If the Lessee and any
          Indemnitee or any other Person ("Applicable Payor") shall be required
                                           ----------------
          by law to deduct any Impositions from or in respect of any amounts
          payable under the Lease to or for the benefit of the any Indemnitee
          ("Applicable Payee"), (A) the amounts payable by such Applicable Payor
            ----------------
          (as rent, interest or otherwise) shall be increased by the amount
          necessary so that after making all required deductions (including
          deductions applicable to additional sums payable under this Section
          27.3(a)(ii)) the Applicable Payee shall receive an amount equal to the
          sum it would have received had no such deductions been made, (B) the
          Applicable Payor shall make such deductions and (C) the Applicable
          Payor shall pay the full amount deducted to the relevant taxing
          authority or other Governmental Authority in accordance with all
          Applicable Laws. The Lessee will indemnify each Indemnitee on demand
          for the full amount of any sums paid or owed by such Indemnitee
          pursuant to the second sentence of this Section 27.3(a)(ii) on an
          After Tax Basis and any liability the Indemnitee may incur or be
          required to pay.

               (iii)  Subject to the terms of Section 27.3(b), the Lessee shall
          pay or cause to be paid all Impositions directly to the taxing
          authorities where feasible and otherwise to the Indemnitee, as
          appropriate, and the Lessee shall at its own expense, upon such
          Indemnitee's reasonable request, furnish to such Indemnitee copies of
          official receipts or other satisfactory proof evidencing such payment.

               (iv)   In the case of Impositions for which no contest is
          conducted pursuant to Section 27.3(b) and which the Lessee pays
          directly to the taxing authorities, the Lessee shall pay such
          Impositions (together with any interest thereon) prior to the latest
          time permitted by the relevant taxing authority for timely payment
          (other then in the case of withholding taxes, which shall be paid
          immediately). In the case of Impositions for which the Lessee
          reimburses a Indemnitee, the Lessee shall do so (together with any
          interest thereon) within twenty (20) days after receipt by the Lessee
          of demand by such Indemnitee describing in reasonable detail the
          nature of the Impositions and the basis for the demand (including the
          computation of the amount payable and interest thereon), but in no
          event shall the Lessee be required to pay such reimbursement prior to
          fifteen (15) days before the latest time permitted by the relevant
          taxing authority for timely payment. In the case of Impositions for
          which a contest is conducted pursuant to Section 27.3(b), the Lessee
          shall pay such Impositions or reimburse such Indemnitee for such
          Impositions, to the extent not previously paid or
<PAGE>

                                                                              26

          reimbursed pursuant to subsection (i), prior to the latest time
          permitted by the relevant taxing authority for timely payment after
          conclusion of all contests under Section 27.3(b) unless payment shall
          be required before commencement of such contest, in which case the
          Lessee shall pay such Impositions or reimburse the Indemnitee for such
          Impositions prior to the latest time permitted by the relevant taxing
          authority for timely payment prior to commencement of such contest.

               (v)   Impositions imposed for a billing period during which the
          Lease expires or terminates shall be adjusted and prorated on a daily
          basis between the Lessee and the Lessor, whether or not such
          Imposition is imposed before or after such expiration or termination
          and each party shall pay or reimburse the other for each party's pro
          rata share thereof.

               (vi)  The determination of all Impositions to be paid or
          indemnified against by the Lessee under this Section 27.3(a) on an
          After Tax Basis shall be made (in good faith) by Indemnitee. Such
          determination shall state with reasonable clarity and detail the basis
          for such determination and shall, absent manifest error, be final and
          conclusive and binding on the Lessee. In no event shall the Lessee in
          connection with this Section 27.3(a) or for any other purpose
          whatsoever under the Lease have any right to examine any Tax return or
          related books and records of any Indemnitee.

               (vii) As between the Lessee and any Indemnitee, the Lessee shall
          be responsible for, and the Lessee shall indemnify and hold harmless
          the Indemnitee (without duplication of any indemnification required by
          subsection (a)) on an After Tax Basis against, any obligation for
          United States withholding taxes imposed in respect of payments under
          the Lease to the extent, but only to the extent, the Indemnitee has
          actually paid funds to a taxing authority with respect to such
          withholding taxes (and, if the Indemnitee receives a demand for such
          payment from any taxing authority, the Lessee shall discharge such
          demand on behalf of the Indemnitee).

          (b)  Contests.  If any claim shall be made against any Indemnitee or
               --------
if any proceeding shall be commenced against any Indemnitee (including a written
notice of such proceeding) for any Imposition as to which the Lessee may have an
indemnity obligation pursuant to this Section 27.3, or if any Indemnitee shall
determine that any Imposition to which the Lessee may have an indemnity
obligation pursuant to this Section 27.3 may be payable, such Indemnitee shall,
within thirty (30) days, notify the Lessee in writing (provided that failure to
so notify the Lessee within thirty (30) days shall not alter such Indemnitee's
rights under this Section 27.3 except to the extent such failure precludes the
ability to conduct a contest of any indemnified Taxes) and shall not take any
action with respect to such claim, proceeding or Impositions without the written
consent of the Lessee (such consent not to be unreasonably withheld or
unreasonably delayed) for thirty (30) days after the receipt of such notice by
the Lessee; provided, however, that in the case of any such claim or proceeding,
            --------  -------
if such Indemnitee
<PAGE>

                                                                              27

shall be required by law or regulation to take action prior to the end of such
30-day period, such Indemnitee shall in such notice to the Lessee, so inform the
Lessee, and such Indemnitee shall not take any action with respect to such
claim, proceeding or Impositions without the consent of the Lessee (such consent
not to be unreasonably withheld or unreasonably delayed) for ten (10) days after
the receipt of such notice by the Lessee unless such Indemnitee shall be
required by law or regulation to take action prior to the end of such 10-day
period.

              The Lessee shall be entitled for a period of sixty (60) days from
receipt of such notice from such Indemnitee (or such shorter period as such
Indemnitee has notified the Lessee is required by law or regulation for such
Indemnitee to commence such contest), to request in writing that such Indemnitee
contest the imposition of such Tax, at the Lessee's expense.  If (x) such
contest can be pursued in the name of the Lessee and independently from any
other proceeding involving a Tax liability of such Indemnitee for which the
Lessee has not agreed to indemnify such Indemnitee or (y) such Indemnitee so
requests, then the Lessee shall be permitted to control the contest of such
claim, provided, that by taking control of the contest, the Lessee acknowledges
that it is responsible for the Impositions ultimately determined to be due by
reason of such claim.  In all other claims requested to be contested by the
Lessee, such Indemnitee shall control the contest of such claim, acting through
counsel reasonably acceptable to the Lessee.  In no event shall the Lessee be
permitted to contest (or such Indemnitee required to contest) any claim (A) if
such Indemnitee provides the Lessee with a legal opinion of counsel reasonably
acceptable to the Lessee that such action, suit or proceeding involves a risk of
imposition of criminal liability or will involve a material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a Permitted
Property Lien) on the Property or any part of any thereof unless the Lessee
shall have posted and maintained a bond or other security satisfactory to the
relevant Indemnitee in its sole discretion in respect to such risk, (B) if a
Lease Event of Default has occurred and is continuing, unless the Lessee shall
have posted and maintained a bond or other security satisfactory to the relevant
Indemnitee in its sole discretion in respect of the Taxes subject to such claim
and any and all expenses for which the Lessee is responsible hereunder is
reasonably foreseeable in connection with the contest of such claim, (C) unless
the Lessee shall have agreed to pay and shall pay, to such Indemnitee on demand
all reasonable out-of-pocket costs, losses and expenses that such Indemnitee may
incur in connection with contesting such Impositions including all reasonable
legal, accounting and investigatory fees and disbursements, or (D) if such
contest shall involve the payment of the Tax prior to the contest, unless the
Lessee shall provide to such Indemnitee an interest-free advance in an amount
equal to the Impositions that the Indemnitee is required to pay (with no
additional net after-tax costs to such Indemnitee).  In addition, for Indemnitee
controlled contests and claims contested in the name of such Indemnitee in a
public forum, no contest shall be required:  (A) unless the amount of the
potential indemnity (taking into account all similar or logically related claims
that have been or could be raised in any audit involving such Indemnitee with
respect to any period for which the Lessee may be liable to pay an indemnity
under this Section 27.3(b)) exceeds $100,000 and (B) unless, if requested by
such Indemnitee, the Lessee shall have provided to such Indemnitee an opinion of
counsel selected by the Lessee and reasonably acceptable to such Indemnitee
(except, in the case of income taxes indemnified hereunder, in which case such
opinion shall be an opinion of independent tax counsel selected by such
Indemnitee and
<PAGE>

                                                                              28

reasonably acceptable to the Lessee) that a reasonable basis exists to contest
such claim (or, in the case of an appeal of an adverse determination, and
opinion of such counsel to the effect that there is substantial authority for
the position asserted in such appeal). In no event shall an Indemnitee be
required to appeal an adverse judicial determination to the United States
Supreme Court. In addition, an Indemnitee shall not be required to contest any
claim in its name (or that of an Affiliate) if the subject matter thereof shall
be of a continuing nature and shall have previously been decided adversely by a
court of competent jurisdiction pursuant to the contest provisions of this
Section 27.3(b), unless there shall have been a change in law (or interpretation
thereof) and the Indemnitee shall have received, at the Lessee's expense, an
opinion of independent tax counsel selected by the Lessee and reasonably
acceptable to the Indemnitee stating that as a result of such change in law (or
interpretation thereof), it is more likely than not that the Indemnitee will
prevail in such contest.

              The party conducting the contest shall consult in good faith with
the other party and its counsel with respect to the contest of such claim for
Taxes but the decisions regarding what actions to be taken shall be made by the
controlling party in its sole judgement. In addition, the controlling party
shall keep the noncontrolling party reasonably informed as to the progress of
the contest, and shall provide the noncontrolling party with a copy of (or
appropriate excerpts from) any reports or claims issued by the relevant auditing
agents or taxing authority to the controlling party thereof, in connection with
such claim or the contest thereof.

              Each Indemnitee shall, at the Lessee's expense, supply the Lessee
with such information and documents reasonably requested by the Lessee as are
necessary or advisable for the Lessee to participate in any action, suit or
proceeding to the extent permitted by this Section 27.3(b). Notwithstanding
anything in this Section 27.3(b) to the contrary, no Indemnitee shall enter into
any settlement or other compromise or fail to appeal an adverse ruling with
respect to any claim which is entitled to be indemnified under this Section 27.3
(and with respect to which contest is required under this Section 27.3(b))
without the prior written consent of the Lessee, unless such Indemnitee waives
its right to be indemnified under this Section 27.3 with respect to such claim.
No settlement of any contest may be made by the Lessee without the Indemnitee's
written consent, which consent shall not be unreasonably withheld.

               Notwithstanding anything contained herein to the contrary, a
Indemnitee will not be required to contest (and the Lessee shall not be
permitted to contest) a claim with respect to the imposition of any Tax if such
Indemnitee shall waive its right to indemnification under this Section 27.3 with
respect to such claim (and any claim with respect to such year or any other
taxable year the contest of which is materially adversely affected as a result
of such waiver).

               (c)  Reports.  The Lessee shall be responsible for preparing and
                    -------
filing any real and personal property or ad valorem tax returns in respect of
the Property. In case any other report or tax return shall be required to be
made with respect to any obligations of the Lessee under or arising out of
subsection (a) and of which the Lessee has knowledge, the Lessee, at its sole
cost and expense, shall notify the relevant Indemnitee of such requirement and
(except if such Indemnitee notifies the Lessee that such Person intends to file
such report or return) (A) to
<PAGE>

                                                                              29

the extent required or permitted by and consistent with Requirements of Law,
make and file in its own name such return, statement or report; and (B) in the
case of any other such return, statement or report required to be made in the
name of such Indemnitee, advise such Indemnitee of such fact and prepare such
return, statement or report for filing by such Indemnitee or, where such return,
statement or report shall be required to reflect items in addition to any
obligations of the Lessee under or arising out of subsection (a), provide such
Indemnitee at the Lessee's expense with information sufficient to permit such
return, statement or report to be properly made with respect to any obligations
of the Lessee under or arising out of subsection (a). Such Indemnitee shall,
upon the Lessee's request and at the Lessee's expense, provide any data
regularly maintained by such Indemnitee (and not otherwise within the control of
the Lessee) with respect to the Property, which the Lessee may reasonably
require to prepare any required tax returns or reports.

          27.4  Indemnity Payments in Addition to Lease Obligations.  The Lessee
                ---------------------------------------------------
acknowledges and agrees that the Lessee's obligations to make indemnity payments
under this Article XXVII are separate from, in addition to, and do not reduce,
           -------------
the Lessee's obligation to pay Rent and any other amounts due under the Lease.

          27.5  Proceedings in Respect of Claims.  Any amount payable to an
                --------------------------------
Indemnitee pursuant to this Article XXVII shall be paid to such Indemnitee
                            -------------
promptly upon receipt of a written demand therefor from such Indemnitee,
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable.

          27.6  Survival.  It is expressly understood and agreed that the
                --------
indemnities provided for in this Article XXVII shall survive the expiration or
                                 -------------
termination of the Lease and shall be separate and independent from any remedy
under the Lease.
<PAGE>

                                                                              30

          IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.

                              PALM, INC., as Lessee

                              By:  /s/ Judy Bruner
                                   ---------------------------------------------
                                   Name:  Judy Bruner
                                   Title: Senior Vice President and Chief
                                          Financial Officer

                              SOCIETE GENERALE FINANCIAL CORPORATION, as Lessor

                              By:  /s/ Sean Rheuben
                                   ---------------------------------------------
                                   Name:  Sean Rheuben
                                   Title: Assistant Vice President
<PAGE>

                    APPENDIX A to Amended and Restated Lease

                         DEFINITIONS AND INTERPRETATION

          A.   Interpretation. In the Lease, unless a clear contrary intention
               --------------
               appears:

               (i)    the singular number includes the plural number and vice
          versa;

               (ii)   reference to any Person includes such Person's successors
          and assigns but, if applicable, only if such successors and assigns
          are permitted by the Lease, and reference to a Person in a particular
          capacity excludes such Person in any other capacity or individually;

               (iii)  reference to any gender includes each other gender;

               (iv)   reference to any agreement (including any the Lease),
          document or instrument means such agreement, document or instrument as
          amended, supplemented, amended and restated or otherwise modified and
          in effect from time to time in accordance with the terms thereof;

               (v)    reference to any Applicable Law means such Applicable Law
          as amended, modified, codified, replaced or reenacted, in whole or in
          part, and in effect from time to time, including rules and regulations
          promulgated thereunder and reference to any section or other provision
          of any Applicable Law means that provision of such Applicable Law from
          time to time in effect and constituting the substantive amendment,
          modification, codification, replacement or reenactment of such section
          or other provision;

               (vi)   reference in the Lease to any Article, Section, Appendix,
          Schedule or Exhibit means such Article or Section thereof or Appendix,
          Schedule or Exhibit thereto;

               (vii)  "hereunder", "hereof'", "hereto" and words of similar
          import shall be deemed references to the Lease as a whole and not to
          any particular Article, Section or other provision thereof;

               (viii) "including" (and with correlative meaning "include") means
          including without limiting the generality of any description preceding
          such term;

               (ix)   relative to the determination of any period of time,
          "from" means "from and including" and "to" means "to but excluding";

               (x)    with respect to any rights and obligations of the parties
          under the Lease, all such rights and obligations shall be construed to
          the extent permitted by Applicable Law; and

               (xi)   reference to the obligations being paid and performed at
          any time shall mean those obligations that are known at such time.
<PAGE>

          B.   Computation of Time Periods. For purposes of computation of
               ---------------------------
periods of time under the Lease, the word "from" means "from and including" and
the words "to" and "until" each mean "to but excluding".

          C.   Accounting Terms and Determinations. Unless otherwise specified
               -----------------------------------
in any Operative Document, all terms of an accounting character used therein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared,
in accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Lessee's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Lessee's and its consolidated Subsidiaries delivered
to the Lessor, unless with respect to any such change concurred in by the
Lessee's independent public accountants or required by GAAP, in determining
compliance with any of the provisions of the Lease, the Lessee shall have
objected to determining such compliance on such basis at the time of delivery of
such financial statements, in which event such calculations shall be made on a
basis consistent with those used in the preparation of the latest financial
statements as to which such objection shall not have been made.

          D.   Intentionally Omitted.
               ---------------------

          E.   Legal Representation of the Parties. The Lease was negotiated by
               -----------------------------------
the parties with the benefit of legal representation and any rule of
construction or interpretation otherwise requiring the Lease to be construed or
interpreted against any party shall not apply to any construction or
interpretation hereof or thereof.

          F.   Defined Terms. Unless a clear contrary intention appears, terms
               -------------
defined herein have the respective indicated meanings when used in the Lease.

          "Affiliate" means, with respect to any Person, any other Person
           ---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person (excluding any trustee under, or any committee
with responsibility for administering, any Pension Plan or welfare plan). For
purposes of this definition, "control" when used with respect to any Person
means the power to direct or cause the direction of the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

          "After Tax Basis" means, with respect to any payment to be received,
           ---------------
the amount of such payment increased so that, after deduction of the amount of
all taxes required to be paid by the recipient (less any tax savings actually
realized by the recipient as a result of such payment) with respect to the
receipt by the recipient of such amounts, such increased payment (as so reduced)
is equal to the payment otherwise required to be made.

          "Applicable Law" means all existing and future applicable laws, rules,
           --------------
regulations (including Hazardous Materials Laws) statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Governmental Authority, and applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other

                                       2
<PAGE>

administrative, judicial or quasi-judicial tribunal or agency of competent
jurisdiction (including those pertaining to health, safety or the environment
(including, without limitation, wetlands) and those pertaining to the
construction, use or occupancy of the Property) or in each case affecting the
Lessee, the Property or any material interests in any other kind of property or
asset, whether real, personal or mixed, or tangible or intangible, of the
Lessee.

          "Basic Rent" is defined in Section 3.1 of the Lease.
           ----------

          "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
           ------------
Friday which is not a day on which banks in San Francisco, California, New York,
New York are generally authorized or obligated, by law or executive order, to
close.

          "Capital Lease" means any lease of property, real or personal, the
           -------------
obligations with respect to which are required to be capitalized on a balance
sheet of a lessee in accordance with GAAP.

          "Capital Lease Obligations" means the capitalized lease obligations
           -------------------------
relating to a Capital Lease determined in accordance with GAAP.

          "Casualty" means any damage or destruction of all or any portion of
           --------
the Property as a result of a fire, flood, gas explosion, earthquake or other
casualty or catastrophe.

          "CERCLA" means the Comprehensive Environmental Response, Compensation,
           ------
and Liability Act of 1980, 42 U.S.C. (S)(S)_9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986, as otherwise amended or
modified from time to time, or any successor statute thereto.

          "Certifying Party" is defined in Section 22.1 of the Lease.
           ----------------

          "Claims" means any and all obligations, liabilities, losses, actions,
           ------
suits, damages, judgments, penalties, fines, claims, demands, settlements, costs
and expenses (including, without limitation, reasonable legal fees and expenses)
of any nature whatsoever.

          "Code" means the Internal Revenue Code of 1986, as amended from time
           ----
to time, or any successor statute thereto.

          "Condemnation" means, with respect to the Property, any condemnation,
           ------------
requisition, confiscation, seizure or other taking or sale of the use, access,
occupancy, easement rights or title to the Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including an action by a Governmental
Authority to change the grade of, or widen the streets adjacent to, the Property
or alter the pedestrian or vehicular traffic flow to the Property so as to
result in change in access to the Property, or by or on account of an eviction
by paramount title or any transfer made in lieu of any such proceeding or
action.

                                       3
<PAGE>

          "Consolidated Tangible Assets" means, as of any date of determination,
           ----------------------------
Consolidated Total Assets minus the following: (i) all assets which would be
classified as intangible assets in accordance with GAAP, including goodwill,
organizational expense, research and development expense, patent applications,
patents, trademarks, trade names, brands, copyrights, trade secrets, customer
lists, licenses, franchises and covenants not to compete; (ii) all unamortized
debt discount and expense; (iii) all treasury stock; and to the extent remaining
after consolidation (iv) all receivables from Affiliates, directors, officers or
employees of the Lessee.

          "Consolidated Tangible Net Worth" means, as of any date of
           -------------------------------
determination, Consolidated Tangible Assets minus Consolidated Total Liabilities
plus (minus) the cumulative foreign currency translation adjustment as of such
----  -----
date, as determined in accordance with GAAP.

          "Consolidated Total Assets" means, with respect to the Lessee, as of
           -------------------------
any date of determination, the total assets of the Lessee on a consolidated
basis, as determined in accordance with GAAP.

          "Consolidated Total Liabilities" means, with respect to the Lessee, as
           ------------------------------
of any date of determination, the total liabilities of the Lessee on a
consolidated basis, as determined in accordance with GAAP

          "Contingent Obligation" means, as to any Person, any direct or
           ---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
                                                     -------------------
another Person (the "primary obligor"), including any obligation of that Person,
                     ---------------
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain solvency or any balance sheet
item, level of income or financial condition of the primary obligor, or (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner or any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof. The amount of any Contingent Obligation shall be deemed equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof; provided, however,
                                                             --------  -------
that the term "Contingent Obligation" shall not include endorsements of
instruments for deposit or collection in the ordinary course of business

          "Contractual Obligations" means, as to any Person, any provision of
           -----------------------
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.

          "Deed" is defined in Section 15.4 of the Lease.
           ----

          "Dollars" and "$" mean dollars in lawful currency of the United States
           -------       -
of America.

                                       4
<PAGE>

          "Environmental Law" means any and all applicable foreign, Federal,
           -----------------
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes or decrees of any Governmental Authority or other Requirement
of Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment or
the use, storage, handling, disposal, transport, treatment or generation of
Hazardous Materials, as now or may at any time be in effect, including, without
limitation, the California Environmental Quality Act and any Requirement of Law
related to the protection of the Western Burrowing Owl (athene cunicularia
hypngaea) and any rules, regulations and guidance documents promulgated
thereunder.

          "Environmental Violation" means, with respect to the Property, any
           -----------------------
activity, occurrence or condition that violates or results in non-compliance
with any Environmental Law or Hazardous Materials Law.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
           -----
amended, or any successor statute.

          "Expiration Date" is defined in Section 2.2 of the Lease.
           ---------------

          "Fair Market Sales Value" means with respect to the Property, the sum
           -----------------------
of the Fair Market Sales Value (Land) plus the Fair Market Sales Value
(Improvements).

          "Fair Market Sales Value (Improvements)" means, with respect to the
           -------------------------------------
Improvements, the amount, which in any event shall not be less than zero, that
would be paid in cash in an arm's-length transaction between an informed and
willing purchaser and an informed and willing seller, neither of whom is under
any compulsion to purchase or sell, respectively, for the ownership (or the
economic equivalent thereof) of the Improvements.

          "Fair Market Sales Value (Land)" means, with respect to the Land, the
           ------------------------------
amount, which in any event shall not be less than zero, that would be paid in
cash in an arm's-length transaction between an informed and willing purchaser
and an informed and willing seller, neither of whom is under any compulsion to
purchase or sell, respectively, for the ownership (or the economic equivalent
thereof) of the Land.

          "FIRPTA Affidavit" means, the certification of Nonforeign Status in
           ----------------
accordance with Internal Revenue Code Section 897 and Section 1445(b)(2) of the
Foreign Investment and Real Property Tax Act, as amended.

          "Full Insurable Value" is defined in Section 13.1(a)(vi)(4) of the
           --------------------
Lease.

          "GAAP" means United States generally accepted accounting principles
           ----
(including principles of consolidation) consistently applied.

          "Governmental Authority" means any nation or government, any state or
           ----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and having jurisdiction over the Property or the Lease, as
applicable.

                                       5
<PAGE>

          "Hazardous Activity" means any activity, process, procedure or
           ------------------
undertaking that (a) directly or indirectly (i) produces, generates or creates
any Hazardous Material; (ii) causes or results in (or threatens to cause or
result in) the Release of any Hazardous Material into the environment (including
air, water vapor, surface water, groundwater, drinking water, land (including
surface or subsurface), plant, aquatic and animal life) or (iii) involves the
containment or storage of any Hazardous Material and (b) is regulated as
hazardous waste treatment, storage or disposal within the meaning of any
Hazardous Materials Law.

          "Hazardous Materials" means any hazardous, toxic or dangerous
           -------------------
materials, substances, chemicals, wastes or pollutants that from time to time
are defined by or pursuant to or are regulated under any Hazardous Materials
Laws, including asbestos, polychlorinated biphenyls, petroleum, petroleum
derivatives or by-products, other hydrocarbons, urea formaldehyde and any
material, substance, pollutant or waste that is defined as a hazardous waste
under RCRA or defined as a hazardous substance under CERCLA.

          "Hazardous Materials Laws" means all laws, statutes, rules,
           ------------------------
regulations or ordinances of Governmental Authority, now or hereafter in effect,
relating to the generation, recycling, use, reuse, sale, storage, handling,
transport, treatment or disposal of Hazardous Materials, including CERCLA, RCRA,
the Clean Air Act, 42 U.S.C. (S)(S) 7401, et seq. ("CAA"), the Toxic Substances
                                                    ---
Control Act, 15 U.S.C. (S)(S)_2601 et seq. ("TSCA") and any rules, regulations
                                             ----
and guidance documents promulgated or published thereunder, and any statute,
law, rule, regulation or ordinance of Governmental Authority now or hereafter in
effect that relates to public health, safety or the discharge, emission or
disposal of Hazardous Materials in or to air, water, land or groundwater, to the
withdrawal or use of groundwater, to the use, handling or disposal of asbestos,
polychlorinated biphenyls, petroleum, petroleum derivatives or by-products,
other hydrocarbons or urea formaldehyde, to the treatment, storage, disposal or
management of Hazardous Materials, to exposure to Hazardous Materials or to the
transportation, storage, disposal, management or release of gaseous or liquid
substances, and any regulation, order, injunction, judgment, declaration, notice
or demand issued thereunder.

          "Impositions" means any and all liabilities, losses, expenses and
           -----------
costs of any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever imposed by any foreign,
United States Federal, state or local authority ("Taxes") (including, without
                                                  -----
limitation, (i) real and personal property taxes, including personal property
taxes on any property covered by the Lease that is classified by Governmental
Authorities as personal property, and real estate or ad valorem taxes in the
nature of property taxes; (ii) sales taxes, use taxes and other similar taxes
(including rent taxes and intangibles taxes); (iii) any excise taxes; (iv) real
estate transfer taxes, conveyance taxes, mortgage taxes, intangible taxes, stamp
taxes and documentary recording taxes and fees; (v) taxes that are, or are in
the nature of, franchise, income, value added, gross receipts, privilege and
doing business taxes, license and registration fees or taxes; and (vi)
assessments on the Property, including all assessments for public improvements
or benefits, whether or not such improvements are commenced or completed within
the Lease Term), and in each case all interest, additions to tax and penalties
thereon, which at any time may be levied, assessed or imposed upon or with
respect to (a) any Indemnitee, the Property or any part thereof or interest
therein, or the Lessee or any sublessee or user of the Property; (b) the
financing, refinancing, demolition, construction,

                                       6
<PAGE>

substitution, subleasing, assignment, control, condition, occupancy, servicing,
maintenance, repair, ownership, possession, purchase, rental, lease, activity
conducted on, delivery, insuring, use, operation, improvement, transfer, return
or other disposition of the Property or any part thereof or interest therein;
(c) the Rent and all other rentals, receipts or earnings arising from the
Property or any part thereof or interest therein; (d) the Lease or any payment
made or accrued pursuant thereto; (e) the income or other proceeds received with
respect to the Property or any part thereof or interest therein upon the sale or
disposition thereof; (f) any contract relating to the construction, acquisition
or delivery of the Improvements or any part thereof or interest therein; or (g)
otherwise in connection with the transactions contemplated by the Lease.

          The term "Impositions" shall not mean or include the following Taxes,
unless such taxes are incurred or increased, directly or indirectly, by actions
of the Lessee on or after the date of the Lease (other than actions specifically
required of the Lessee under the Lease):

               (i)    Taxes (other than Taxes that are, or are in the nature of,
          sales, use, rental, value added, transfer or property taxes) that are
          imposed on a Indemnitee by the United States federal government (other
          than any taxes imposed by means of withholding at source) that are
          based on or measured by the net income (including taxes based on
          capital gains and minimum taxes) of such Person; provided that this
                                                           --------
          clause (i) shall not be interpreted to prevent a payment from being
          made on an After Tax Basis if such payment is otherwise required to be
          so made;

               (ii)   Taxes (other than Taxes that are, or are in the nature of,
          sales, use, rental, value added, transfer or property taxes) that are
          (x) imposed by any state or local jurisdiction or taxing authority
          within any state or local jurisdiction to the extent such Indemnitee
          is organized or otherwise a taxpayer in such jurisdiction without
          regard to the transactions contemplated by the Lease and (y) based
          upon or measured by the gross or net income (including any minimum
          taxes, withholding taxes or taxes on or measured by capital, net
          worth, excess profits or items of tax preference or taxes that are
          capital stock, franchise or doing business taxes), except that this
          clause (ii) shall not apply to (and thus shall not exclude) any such
          Taxes imposed on a Indemnitee by a state (or any local taxing
          authority thereof or therein) where the Property is located, possessed
          or used under the Lease unless the Indemnitee was subject to such tax
          in such jurisdiction without regard to the transaction contemplated by
          the Lease and the Lease; provided that this clause (ii) shall not be
                                   --------
          interpreted to prevent a payment from being made on an After Tax Basis
          if such payment is otherwise required to be so made;

               (iii)  any Taxes imposed by the United States federal government
          by means of withholding at the source if and to the extent that such
          Taxes are not attributable to a change in applicable Law after the
          effective date which such Person became Lessor;

               (iv)   any Tax to the extent, but only to such extent, it relates
          to any act, event or omission that occurs, or relates to a period,
          after the termination of the Lease, except when such termination is
          the result of the exercise of remedies after

                                       7
<PAGE>

          a Lease Event of Default occurs, in which case such exclusion shall
          commence only after the sale of all the Property (but not any Tax or
          imposition that relates to any period prior to the termination of the
          Lease);

               (v)    any interest, additions to tax or penalties imposed on a
          Indemnitee as a result of a Indemnitee's failure to file any return or
          other documents timely and as prescribed by Applicable Law; provided
          that this clause (v) shall not apply (x) if such interest or penalties
          arise as a result of a position taken (or requested to be taken) by
          the Lessee in a contest controlled by the Lessee under Section 27.3(b)
          of the Lease or (y) if such failure is attributable to a failure by
          the Lessee to fulfill its obligations under the Lease with respect to
          any such return;

               (vi)   any Taxes imposed upon a Indemnitee with respect to any
          voluntary transfer, sale, financing or other voluntary disposition of
          any interest in the Property or any part thereof, or any interest
          therein (other than any transfer contemplated by the express terms of
          the Lease, including in connection with (1) the exercise by the Lessee
          of its purchase option or any termination option or other purchase or
          sale of the Property by the Lessee, (2) the occurrence of a Lease
          Event of Default, (3) a Casualty or Condemnation or Environmental
          Violation affecting the Property, (4) any sublease, modification or
          addition to the Property by the Lessee, or (5) the expiration of the
          Lease Term);

               (vii)  any Taxes imposed against or payable by a Indemnitee that
          would not have been imposed but for, the gross negligence or willful
          misconduct of such Indemnitee;

               (viii) Taxes to the extent resulting from such Indemnitee's
          failure to comply with the provisions of Section 27.3(b) of the Lease,
          which failure precludes the ability to conduct a contest pursuant to
          Section 27.3(b) of the Lease (unless such failure is caused by the
          Lessee's breach of its obligations);

               (ix)   Taxes imposed on or with respect to or payable by a
          Indemnitee resulting from, or that would not have been imposed but for
          the existence of, any Lien created by or through such Indemnitee or an
          Affiliate thereof and not caused by acts or omissions of the Lessee,
          unless required to be removed by the Lessee; and

               (x)    Taxes imposed on or with respect to or payable by a
          Indemnitee that would not have been imposed but for an amendment,
          supplement, modification, consent or waiver to the Lease not
          initiated, requested or consented to by the Lessee unless such
          amendment, supplement, modification, consent or waiver (A) arises due
          to, or in connection with there having occurred, a Lease Event of
          Default or (B) is required by the terms of the Lease or is executed in
          connection with any amendment to the Lease required by law.

          "Improvements" means any improvements to real property.
           ------------

                                       8
<PAGE>

          "Indebtedness" of any Person means, without duplication (a) all
           ------------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business pursuant to ordinary
terms); (c) all reimbursement obligations with respect to surety bonds, letters
of credit, bankers' acceptances and similar instruments (in each case, to the
extent material or non-contingent); (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale or other
title retention agreement (including holding title or security under synthetic
lease transactions) and including, without duplication, five times the aggregate
annual payments to be made on Operating Leases in the next succeeding twelve
months, or incurred under any similar financing, in either case with respect to
property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (f) all Capital Lease Obligations; (g)
all net obligations with respect to Rate Contracts; (h) all indebtedness
referred to in clauses (a) through (g) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contracts
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness (but only to the extent of the
lesser of such Indebtedness or the fair market value of the property subject to
such Lien); and (i) all Contingent Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a) through (g) above.

          "Indemnitees" is defined in Section 27.1 of the Lease.
           -----------

          "Insurance Consultant" means AON Risk Services.
           --------------------

          "Insurance Requirements" means all terms and conditions of any
           ----------------------
insurance policy either required by the Lease to be maintained by the Lessee and
all requirements of the issuer of any such policy.

          "Land" is defined in the Recitals of the Lease.
           ----

          "Lease" means the Amended and Restated Lease to which this Addendum is
           -----
attached.

          "Lease Default" means any event or condition which, with the lapse of
           -------------
time or the giving of notice, or both, would constitute a Lease Event of
Default.

          "Lease Event of Default" is defined in Section 16.1 of the Lease.
           ----------------------

          "Lease Term" is defined in Section 2.2 of the Lease.
           ----------

          "Lessee" means Palm, Inc., a Delaware corporation, and its successors
           ------
and assigns expressly permitted under the Lease.

                                       9
<PAGE>

          "Lessor" means Societe Generale Financial Corporation, a Delaware
           ------
corporation, together with its successors and assigns.

          "Lien" means any mortgage, deed of trust, pledge, security interest,
           ----
encumbrance, lien, easement, servitude or charge of any kind, including, without
limitation, any irrevocable license, conditional sale or other title retention
agreement, any lease in the nature thereof, or any other right of or arrangement
with any creditor to have its claim satisfied out of any specified property or
asset with the proceeds therefrom prior to the satisfaction of the claims of the
general creditors of the owner thereof, whether or not filed or recorded, or the
filing of, or agreement to execute as "debtor", any financing or continuation
statement under the Uniform Commercial Code of any jurisdiction or any federal,
state or local lien imposed pursuant to any Environmental Law.

          "Master Lease" is defined in the Recitals of the Lease.
           ------------

          "Memorandum of Lease" means the Memorandum of Lease and Deed of Trust,
           -------------------
dated as of November 16, 2000, among the Lessor, Lessee and the Trustee, as
amended.

          "Modifications" is defined in Section 10.1 of the Lease.
           -------------

          "Net Proceeds" means all amounts received by the Lessor in connection
           ------------
with any Casualty or Condemnation, and all interest earned thereon, less any
Impositions arising in connection with such amounts, if any, and less the
expense of claiming and collecting such amounts, including all costs and
expenses in connection therewith for which the Lessor is entitled to be
reimbursed pursuant to the Lease.

          "Operating Lease" means, with respect to any Person, any leasing or
           ---------------
similar arrangement as which such Person is the obligor or lessee, which is not
a Capital Lease.

          "Overdue Rate" means 2%. In the event that the Overdue Rate is in
           ------------
violation of any usury or similar law, then the Overdue Rate shall be reduced to
the extent necessary to cause the Overdue Rate to comply with any usury or
similar law.

          "Pension Plan" means a "pension plan", as such term is defined in
           ------------
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Lessee or any corporation, trade or business that is, along with the Lessee, a
member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of section 4063
of ERISA at any time since its date of incorporation, or by reason of being
deemed to be a contributing sponsor under section 4069 of ERISA.

          "Permitted Property Liens" means, with respect to the Property, any of
           ------------------------
the following:

               (i)  the respective rights and interests of the parties to the
          Lease;

                                       10
<PAGE>

               (ii)   the rights of any sublessee under a sublease permitted by
          the terms of the Lease;

               (iii)  Liens for Taxes that either are not yet due or are being
          contested in accordance with the provisions of Section 12.1 of the
          Lease;

               (iv)   Liens arising by operation of law, materialmen's,

          mechanics', workers', repairmen's, employees', carriers',
          warehousemen's and other like Liens relating to the construction of
          the Improvements or in connection with any Modifications or arising in
          the ordinary course of business for amounts that either are not more
          than thirty (30) days past due or are being diligently contested in
          good faith by appropriate proceedings, so long as such proceedings
          satisfy the conditions for the continuation of proceedings to contest
          Taxes set forth in Section 12.1 of the Lease;

               (v)    Liens of any of the types referred to in clause (iv) above
          that have been bonded for not less than the full amount in dispute (or
          as to which other security arrangements satisfactory to the Lessor
          have been made), which bonding (or arrangements) shall comply with
          applicable Requirements of Law, and has effectively stayed any
          execution or enforcement of such Liens;

               (vi)   easements, rights of way and other encumbrances on title
          to real property pursuant to Section 11.2 of the Lease;

               (vii)  Liens described on the title insurance policy delivered
          with respect to the Property.

          "Person" means any individual, corporation, partnership, joint
           ------
venture, association, joint stock company, trust, unincorporated organization,
Governmental Authority or any other entity.

          "Property" is defined in the Recitals of the Lease.
           --------

          "Rate Contracts" means interest rate and currency swap agreements,
           --------------
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuation in interest or currency exchange rates.

          "RCRA" means the Resource Conservation and Recovery Act of 1976, as
           ----
amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C.
(S)(S) 6901 et seq., or as otherwise amended or modified or any successor
statute thereto.

          "Release" means any release, pumping, pouring, emptying, injecting,
           -------
escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or
emission of a Hazardous Material.

                                       11
<PAGE>

          "Rent" means, collectively, the Basic Rent and the Supplemental Rent,
           ----
in each case payable under the Lease.

          "Requesting Party" is defined in Section 22.1 of the Lease.
           ----------------

          "Requirement of Law" means, as to any Person, (a) the partnership
           ------------------
agreement, certificate of incorporation, bylaws or other organizational or
governing documents of such Person, and (b) all statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of any Governmental
Authority affecting the Property, the acquisition of the Property, the
Improvements or the demolition, construction, use or alteration thereof, whether
now or hereafter enacted and in force, including any that require repairs,
modifications or alterations in or to the Property or in any way limit the use
and enjoyment thereof (including all building, zoning and fire codes and the
Americans with Disabilities Act of 1990, 42 U.S.C. (S)(S) 1201 et. seq. and any
other similar Federal, state or local laws or ordinances and the regulations
promulgated thereunder) and any that may relate to environmental requirements
(including all Environmental Laws and Hazardous Materials Laws), and all
permits, certificates of occupancy, licenses, authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments which are either of record or known to the Lessee
affecting the Property and any easements, licenses or other agreements entered
into pursuant to Section 11.2 of the Lease.

          "Responsible Officer" with respect to the Lessee means, in connection
           -------------------
with all financial matters, the Vice President - Treasury, and in connection
with all other matters, a Vice President or higher.

          "Significant Condemnation" means (a) a Condemnation that involves a
           ------------------------
taking of the Lessor's entire title to the Land and/or the Improvements, or (b)
a Condemnation that in the reasonable, good faith judgment of the Lessor (i)
renders the Property unsuitable for continued use as property of the type of the
Property immediately prior to such Condemnation, or (b) is so substantial in
nature that restoration of the related property to substantially its condition
as it existed immediately prior to such Condemnation would be impracticable or
impossible.

          "Supplemental Rent" means all amounts, liabilities and obligations
           -----------------
(other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor
or any other Person under the Lease.

          "Taxes" is defined in the definition of "Impositions".
           -----

          "Trustee" means the trustee from time to time named in the Memorandum
           -------
of Lease.

          "Uniform Commercial Code" and "UCC" means the Uniform Commercial Code
           -----------------------       ---
as in effect in any applicable jurisdiction.

                                       12<PAGE>

                                                                    EXHIBIT 10.3

                             TERMINATION AGREEMENT
                             ---------------------

     TERMINATION AGREEMENT (this "Agreement") dated as of May 31, 2001 among
                                  ---------
PALM, INC., a Delaware corporation ("Palm"), as Lessee, Construction Agent and
                                     ----
Guarantor; SOCIETE GENERALE FINANCIAL CORPORATION ("SGFC"), as Lessor; SOCIETE
                                                    ----
GENERALE ("SG"), acting through its New York Branch, as Administrative Agent and
           --
Tranche A Lender, and KBC BANK NV and THE FUJI BANK, LIMITED, as Tranche B
Lenders.

                                  BACKGROUND

     A.   Palm, SGFC and SG are parties to that certain Participation Agreement
dated as of November 16, 2000 (the "Participation Agreement").  All capitalized
                                    -----------------------
terms used herein and not otherwise defined herein shall have the meaning
ascribed to such terms in the Participation Agreement.

     B.   By Letter to SGFC dated as of the date hereof, Lessee has exercised
the Purchase Option under Section 18.1 of the Master Lease. In connection with
the exercise of such Purchase Option, simultaneously with the execution of this
Agreement, Lessee has paid to Lessor the Purchase Price in accordance with the
provisions of Section 18.1 of the Master Lease.

     C.   Lessee has requested that, notwithstanding its payment of the Purchase
Price, Lessor continue to hold title to the Property and lease it to the Lessee
pursuant to the terms of the Master Lease, as amended and restated pursuant to
that certain Amended and Restated Lease dated as of the date hereof (the
"Amended and Restated Lease") between Lessor and Lessee. Lessor has agreed
 --------------------------
to Lessor's request.

     D.   In connection with Lessee's payment of the Purchase Price, the parties
hereto have agreed to terminate the Operative Documents (other than the Master
Lease, as amended and restated in accordance with the Amended and Restated
Lease, and the Memorandum of Lease, as amended and restated in accordance with
the Amended and Restatement of Memorandum of Lease dated as of the date hereof
(the "Amendment and Restatement of Memorandum of Lease") in accordance with, and
      ------------------------------------------------
to the extent provided in, the terms of this Agreement.

                                   AGREEMENT

     NOW THEREFORE, in consideration of the agreements of the parties set forth
herein and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agrees as follows:

     1.   Termination.  (a) Each of the parties hereto agrees that, except for
          -----------
(i) (A) the Master Lease, as amended by the Amended and Restated Lease, and (B)
the Memorandum of Lease, as amended and restated in accordance with the
Amendment and Restatement of
<PAGE>

                                                                               2

Memorandum of Lease, and (ii) those provisions of the Operative Documents that
expressly survive the termination of any of the Operative Documents (including
without limitation the indemnity obligations contained in Article XIII of the
Participation Agreement), the Operative Documents are hereby terminated as of
the date hereof and shall be of no further force and effect.

          (b)  Notwithstanding the termination set forth in Section 1(a), (i)
the Master Lease, as amended and restated in accordance with the Amended and
Restated Lease, and (ii) the Memorandum of Lease, as amended and restated in
accordance with the Amendment and Restatement of Memorandum of Lease, are not
terminated and are and shall remain in full force and effect.

          (c)  Notwithstanding the termination set forth in Section 1(a), those
provisions of the Operative Documents that expressly survive the termination of
any of the Operative Documents (including without limitation the indemnity
obligations contained in Article XIII of the Participation Agreement), are not
terminated and are and shall remain in full force and effect.

          2.   Delivery of Instruments. To further evidence the termination of
               -----------------------
the Operative Agreements provided in Section 1(a), the respective parties
thereto shall execute and/or deliver, as of the date hereof, the documents,
satisfactions, releases, and terminations listed on Schedule 1 attached hereto
                                                    ----------
(the "Termination Documents"). In addition, Lessor and Lessee shall execute and
      ---------------------
deliver the Amended and Restated Lease and the Amendment and Restatement of
Memorandum of Lease as of the date hereof.

          3.   Further Assurances. Each of the parties hereto agrees to execute
               ------------------
and deliver, at the sole cost and expense of Lessee, such further documents as
Lessee may reasonably require from time to time to effectuate the provisions of
this Agreement.

          4.   Counterparts.  This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
<PAGE>

                                                                               3

          5.   Governing Law. This Agreement shall be governed by and construed
               -------------
in accordance with the laws of the State of New York.

          IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date written above.

                                    PALM, INC., as Lessee, Construction Agent
                                    and Guarantor

                                    By:  /s/ Judy Bruner
                                         -----------------------------
                                         Name:   Judy Bruner
                                         Title:  Senior Vice President and Chief
                                                 Financial Officer

                                    SOCIETE GENERALE FINANCIAL CORPORATION, as
                                    Lessor

                                    By:  /s/ Sean Rheuben
                                         -----------------------------
                                         Name: Sean Rheuben
                                         Title: Assistant Vice President

                                    SOCIETE GENERALE, acting through its New
                                    York Branch, as Administrative Agent and
                                    Tranche A Lender

                                    By:  /s/ Sean Rheuben
                                         -----------------------------
                                         Name: Sean Rheuben
                                         Title: Assistant Vice President

                                    KBC BANK N.V., as a Tranche B Lender

                                    By:  /s/ Robert Snauffer
                                         -----------------------------
                                         Name: Robert Snauffer
                                         Title: First Vice President

                                    By:  /s/ Jean-Pierre Diels
                                         -----------------------------
                                         Name: Jean-Pierre Diels
                                         Title: First Vice President

                                    THE FUJI BANK, LIMITED, as a Tranche B
                                    Lender

                                    By:  /s/ Masahito Fukuda
                                         -----------------------------
                                         Name:  Masahito Fukuda
                                         Title: Senior Vice President and Group
                                                Head
<PAGE>

                                                                               4
                                  Schedule 1

                             Termination Documents
                             ---------------------

1.   Delivery of Tranche A Loan Note, marked cancelled, from Tranche A Lender to
     Lessor

2.   Delivery of Tranche B Loan Notes, marked cancelled, from each Tranche B
     Lender to Lessor

3.   Request for Full Reconveyance with respect to the Deed of Trust Release, in
     recordable form

4.   Release of Assignment of Leases Release, in recordable form

5.   UCC Termination Statements
     a. No. 15463623 -- Santa Clara County
     b. No. 0033060686 - Secretary of State of California
     c. No. 0081479 - Secretary of State of Delaware
     d. No. 15531759 - Santa Clara County
     e. No. 0033560573 - Secretary of State of California
     f. No. 0081241 -- Secretary of State of Delaware
     g. No. 001584541 -- Secretary of State of Delaware
     h. No. 1001353 -- Secretary of State of Delaware
     i. No. 010106400 - Secretary of State of California

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