<PAGE>   1

                                                                    EXHIBIT 10.8

                                     LEASE

        THIS LEASE is made as of the 11th day of December, 1998, by and between
YARROW BAY OFFICE III LIMITED PARTNERSHIP, a Washington limited partnership
("Landlord"), and Pivotal Software USA Inc. ("Tenant").

        For and in consideration of the mutual promises, covenants and
conditions set forth in this Lease, Landlord and Tenant agree as follows:

                              SECTION I - PREMISES

        1.1     Premises. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord, those certain premises (the "Premises") having an agreed
rentable area of 13,627 square feet and an agreed usable area of 11,964 square
feet. The Premises are situated on the 4th floor of a building located on the
real property legally described in Exhibit A attached, and all improvements
thereon, and all rights appurtenant thereto (the "Building"). The Premises are
more particularly shown on the floor plan of the Building attached to this Lease
as Exhibit D-1. The Building is part of a multi-phase project located on the
real property legally described on Exhibit B attached, and all improvements
thereon, and all rights appurtenant thereto, commonly known as The Plaza at
Yarrow Bay (the "Park"). The Building is commonly referred to as Building III of
the Park. The Premises and Building shall be remeasured using the most current
BOMA standards and Landlord shall notify Tenant of the recalculated area of
both, and lease provisions affected, including but not limited to, Minimum Rent
and Tenant's Share shall be adjusted using the recalculated measurements.

        1.2     Reserved to Landlord. Landlord reserves all air rights over the
Premises, the use of the exterior walls, the roof, and the right to install,
maintain, use, repair and replace pipes, ducts, conduits and wires leading
through the Premises in locations which will not materially interfere with
Tenant's use thereof to serve other parts of the Building and/or the Park.

        1.3     Changes to Park. Landlord reserves the right at any time to make
alterations or additions to the Building and to build adjoining the same.
Landlord also reserves the right from time to time to construct other buildings
or improvements in the Park, to make alterations thereof or additions thereto,
and to relocate the various buildings, parking and other common areas comprising
the Park.

                                SECTION II - TERM

        2.1     Lease Term. This Lease shall be for a term of sixty (60) months
commencing on the earlier of the following two dates (the "Commencement Date"):
(a) the date Tenant occupies the Premises for a primary use other than
performing tenant improvement work, or (b) three (3) days after Landlord
notifies Tenant that Landlord has substantially completed the Premises in
accordance with Landlord's obligations under Section 7.1 below. The "Target
Commencement Date" is December 11, 1998, which date is only an estimate of the
date the Premises will be available for Tenant's occupancy. Landlord shall have
no liability to Tenant and this Lease shall not be void or voidable if the
Premises are not delivered to Tenant by the Target Commencement Date.



<PAGE>   2

        2.5     Possession. If Landlord is unable to deliver the Premises or any
portion thereof on or before the Target Commencement Date, Landlord shall not be
liable for any damage caused thereby, nor shall this Lease thereby become void
or voidable, but in such event, Tenant shall not be liable for payment of any
rent or additional rent until such time as Landlord delivers possession, and the
Term shall not commence until the Premises are so delivered.

        2.6     Option to Extend

                a.      So long as Tenant is not then in default under this
Lease, and so long as Tenant has not been ten (10) or more days late in payment
of rent more than a total of three (3) times during the term of this Lease,
Tenant shall have the right to extend the Lease term for one (1) additional five
(5) year period (the "Additional Term") on the terms and conditions stated in
this paragraph. To exercise its right to extend this Lease for the Additional
Term, Tenant must deliver to Landlord a written notice exercising its rights
under this paragraph at least two hundred seventy (270) days, but not more than
three hundred sixty (360) days, prior to the date the initial Lease term will
expire. All the terms and conditions of this Lease shall apply during the
Additional Term except (i) the minimum rent shall be an amount mutually agreed
to by Landlord and Tenant or determined by arbitration as set forth below; (ii)
unless otherwise agreed by Landlord in writing, there shall be no further
extension options; and (iii) Landlord shall have no tenant improvement
obligations with respect to the Premises. When the rental rate for the
Additional Term is determined, either by agreement of the parties or pursuant to
arbitration as provided below, Landlord and Tenant shall enter into a lease
extension agreement setting forth the new minimum rent for the Premises and such
other terms as may be applicable. If at the time Tenant delivers to Landlord its
written notice electing to extend this Lease term, or at any time between such
date and the commencement date of the Additional Term, Tenant defaults under
this Lease and fails to cure the default within the applicable cure period, if
any, Landlord shall have the option to declare Tenant's notice of exercise null
and void by written notice to Tenant, in which case the Lease term shall expire
on the expiration of the then current Lease term.

                b.      If Tenant exercises an extension right under this
paragraph, the minimum rent for the Additional Term shall be the then "fair
market rent" (defined below) for the Premises. For purposes of this lease, the
term "fair market rent" shall mean the fully serviced rate per rentable square
foot that willing, non-equity, non-renewal tenants are paying for comparable
space in the building and in comparable buildings in the Kirkland-Bellevue areas
for leases having a five (5) year term. Landlord shall advise Tenant in writing
of Landlord's determination of fair market rent for the Premises not later than
sixty (60) days after Tenant exercises its extension right. Within thirty (30)
days after receiving Landlord's determination of fair market rent, Tenant shall
notify Landlord in writing whether or not Tenant accepts Landlord's
determination of fair market rent. If Tenant disagrees with Landlord's
determination of fair market rent, Tenant shall advise Landlord of Tenant's
determination of fair market rent in the notice required pursuant to the
preceding sentence. If Tenant fails to so notify Landlord prior to expiration of
its thirty (30) day period to respond to Landlord's notice, then Tenant's notice
exercising its renewal rights under this paragraph shall be deemed null and
void, unless otherwise agreed in writing by Landlord and Tenant. If Tenant does
not accept Landlord's determination of fair market rent, the parties shall
promptly meet and attempt to resolve their differences.



<PAGE>   3

                                SECTION III - RENT

        3.1     Minimum Rent. Tenant shall pay to Landlord, c/o JSH Properties,
Inc., at 10220 N.E. Points Drive, Suite 203, Kirkland, Washington 98033, or to
such other entity or address as may be specified by Landlord from time to time,
without any set off or deduction whatsoever, as fixed minimum rent, the amounts
listed as follows:

<TABLE>
<CAPTION>
                        Period                    Amount
                     --------------               ----------
<S>                                               <C>
                     Months 01 - 12               $24,982.83
                     Months 13 - 24               $25,834.52
                     Months 25 - 36               $26,686.21
                     Months 37 - 48               $27,537.90
                     Months 49 - 60               $28,389.58
</TABLE>

        Monthly installments of fixed minimum rent are due on or before the
first day of each month of the Lease term. Rent for partial months shall be
prorated. The minimum rent is referred to herein as "rent," and it does not
include the additional rent payable by Tenant pursuant to this Section III. Upon
execution of this Lease, Tenant shall deposit with Landlord first month's rent.

        3.2     Additional Rent. In addition to rent, all other sums to be paid
or reimbursed by Tenant to Landlord, whether or not so designated, are
"additional rent" for the purposes of this Lease. If Tenant defaults in the
performance of any of its obligations hereunder, Landlord may, but shall not be
obligated to, perform such obligations, and the cost thereof to Landlord shall
also be additional rent. Unless otherwise specifically provided in this Lease,
Tenant shall pay Landlord all additional rent within ten (10) days after
Landlord's demand.

        3.3     Tenant's Contributions.

                3.3.1   On or before the Commencement Date, and no more than
ninety (90) days after the commencement of each calendar year thereafter,
Landlord will notify Tenant in writing of Landlord's estimate of Tenant's Share
of estimated "Operating Costs" and "Real Property Taxes" (such terms are defined
in Section 3.3.2 below) for the then current calendar year (or part thereof),
which amount Tenant shall pay in advance in twelve (12) equal monthly
installments, due and payable without set-off or deduction, on the first (1st)
day of each calendar month. As used herein, the term "Tenant's Share" (currently
16.48%), is determined by multiplying the cost to be shared by a fraction, the
numerator of which is the rentable area of the Premises from time to time and
the denominator of which is the rentable area of the Building for expenses
related to the Building, and the rentable area of the Park for expenses related
to the Park. If the rentable area of the Premises, the Building, or the Park
changes during the Lease Term, then the rentable area used for calculating the
Tenant's Share shall be the rentable area in effect during the period for which
the Tenant's Share is being determined. Within ninety (90) days after the end of
each year, Landlord will compute Tenant's Share for such year (or portion
thereof) based on actual costs and provide to Tenant an itemized statement (a
"Statement") of Tenant's Share for such year.



<PAGE>   4

        Notwithstanding any of the foregoing, Tenant shall not be entitled to
inspect or audit the books and records of Landlord more frequently than once
each calendar year.

                3.3.2   For purposes of this Section 3.3, the following
definitions apply:

                        (i)     "Operating Costs" shall mean all expenses paid
or incurred by Landlord or charged to Landlord for maintaining, operating,
repairing, replacing and administering the Building, the Park or both (including
common areas and facilities), and the personal property used in conjunction
therewith, together with a sum equal to five percent (5%) of the cost thereof
(exclusive of Real Property Taxes and professional management fees) as an
administrative fee, including, without limitation, the costs of refuse
collection, water, sewer, electricity, heat, air conditioning, fuel, light, fire
protection, and other utilities; services; supplies; janitorial and cleaning
services; window washing; snow, garbage and refuse removal; security services
and systems; resurfacing, repair, maintenance, painting, lighting, cleaning,
striping and securing parking facilities; elevator operation, repair and
maintenance; landscape maintenance; services of independent contractors;
compensation (including employment taxes and fringe benefits) of all persons who
perform duties in connection with the operation, maintenance, repair,
replacement and administration of the Park, the Building or both, their
equipment and common areas and facilities; insurance premiums for all insurance
carried with respect to the Building or the Park; licenses, permits and
inspection fees (but not Landlord's general business license and related fees);
subsidies and other payments required by public bodies, including those for
traffic signals and controls and for fire protection; professional management
fees (in amounts competitive with those charged by third party property managers
in connection with the management of comparable first class office properties);
legal and accounting expenses; and all other expenses or charges whether or not
hereinabove described which, in accordance with generally accepted accounting
and management practices, would be considered an expense of maintaining,
operating, repairing, replacing and administering the Building or the Park, but
excluding: (a) costs of any special services rendered to individual tenants
(including Tenant) for which a special charge is made; (b) Real Property Taxes;
(c) Capital costs, or the depreciation or amortization of costs, required to be
capitalized in accordance with generally accepted accounting principles (except
Operating Costs shall include amortization over their useful life, on a straight
line basis, of capital improvements made subsequent to the date the last party
executes this Lease which are either designed with a reasonable probability of
improving the operating efficiency of the Building or the Park, as applicable,
or are required to be made to operate the Building or the Park in accordance
with applicable federal, state and local laws, regulations, ordinances and
codes; (d) executive salaries (i.e., salaries of all persons above Building
management level); (e) salaries of Budding management and service personnel to
the extent such personnel perform services not solely in connection with the
management, operation, repair or maintenance of the Building or the Park, unless
such salaries are prorated to reflect time spent on operating and managing the
Building or the Park, vis a vis time spent on matters unrelated to operating and
managing the Budding or the Park; (f) real estate broker commissions; (g)
attorney's fees, costs and disbursements incurred by Landlord in any dispute
with a tenant;



<PAGE>   5

                        SECTION IV - CONDUCT OF BUSINESS

        4.1     Use of Premises. Tenant shall use the Premises only for general
office and related purposes, including as a facility for training Tenant's
employees and customers in the use of Tenant's products, excluding medical or
dental office, consistent with the operation of a first class office building.
Tenant shall not use or permit the use of the Premises for any other business or
purpose without Landlord's prior written consent, which consent Landlord may
grant or deny in its sole discretion. Tenant shall promptly comply with the
rules and regulations of the Building and the Park, as set forth in Exhibit C
attached, as the same may be changed from time-to-time by Landlord upon
reasonable notice to Tenant. Tenant shall not permit any public or private
nuisance to occur on the Premises, or any other act or circumstance which
disturbs the quiet enjoyment of any occupant of the Building or the Park.

        4.2     Appearance of Premises. Tenant shall maintain the Premises in a
clean, orderly and neat fashion to conform with the high standards of the
Building and the Park, permitting no odors to be emitted from the Premises and
neither commit waste nor permit any waste to be committed thereon. Tenant shall
not burn any trash in or about the Premises or permit any accumulation of trash.
Tenant shall store all trash, refuse and waste material so as not to constitute
a health or fire hazard or nuisance, in adequately covered containers which are
located within the Premises which are not visible to the general public or in
areas designated by Landlord.

        4.3     Unlawful Use. Tenant shall not use or permit the Premises or any
part thereof to be used for any purpose in violation of any municipal, county,
state or federal law, ordinance or regulation, or for any purpose offensive to
the standards of the community of which the Building is a part, or in any manner
which is not in the best interests of the tenants of the Building or the Park.
Tenant shall promptly comply, at its sole cost and expense, with all laws,
ordinances, and regulations now in force or hereafter adopted and with the
requirements of any board of fire underwriters or similar body relating to or
affecting the condition, use or occupancy of the Premises. Notwithstanding the
foregoing, Tenant shall not be responsible for the cost of compliance with the
violation of any law, ordinance, or regulation, which exists as of the date of
this Lease.

        Tenant shall not do or permit anything to be done in or about the
Premises, nor bring or keep anything therein which will increase the existing
rate of or affect any fire or other insurance upon the Building or any of its
contents, or cause a cancellation of any insurance policy covering the Building
or any part thereof or any of its contents. Tenant shall promptly upon demand
reimburse Landlord for any additional premium charged for any such policy by
reason of Tenant's failure to comply with the provisions of this Section.

        4.4     Liens and Encumbrances. Tenant shall keep the Premises free and
clear of all liens and encumbrances arising or growing out of its use and
occupancy of the Premises.



<PAGE>   6

        Without limiting the foregoing, if Tenant causes or permits the presence
of any hazardous substance on the Premises or the Building that results in
contamination, Tenant shall promptly, at its sole expense, take any and all
necessary actions to return the Premises or Building to the condition existing
prior to the presence of any such hazardous substance on the Premises or
Building. Tenant shall first obtain Landlord's approval for any such remedial
action.

        4.6     Signs. Tenant shall not erect or place, or permit to be erected
or placed, or maintain any signs of any nature or kind whatsoever on the
exterior walls or windows of the Premises or elsewhere in the Park. Tenant
agrees to abide by all signing rules and regulations, if any, promulgated by
Landlord. Landlord agrees to provide Tenant with the following signage
identifying Tenant as an occupant of the Building in size, color and style
acceptable to Landlord:

        a.      One (1) Building standard sign on the plaza level lobby
                directory.

        b.      One (1) Building standard sign at the main entry to the
                Premises.

        c.      One (1) Building standard sign on the Building III monument.

                     SECTION V - UTILITIES AND OTHER CHARGES

        5.1     Utilities and Services.

                5.1.1   In accordance with Section 3.3 of this Lease, as
additional rent, Tenant shall pay its share of all charges for heat, water,
light, gas, electricity, sewer, garbage, fire protection and any other utilities
and/or services used or consumed on or supplied to the Building and/or the Park,
including the Premises, and not separately metered or charged to Tenant or any
other tenant of the Building or the Park. Tenant shall be solely responsible for
and shall promptly pay when due all charges for telephone and all other charges,
which are separately metered or charged to the Premises.

                5.1.2   Landlord shall cause the public and common areas of the
Building, such as lobbies, elevators, stairs, corridors and restrooms, to be
maintained in reasonably good order and condition, except for damage occasioned
by any act or omission of Tenant or Tenant's officers, contractors, agents,
invitees, licensees or employees, the repair of which latter damage shall be
paid for by Tenant. Twenty-four (24) hours per day, seven (7) days per week,
Tenant shall have access to the Premises (subject to such Building and Park
security systems and procedures as may be in place from time to time), and
Tenant shall have available to it water and electrical service for lighting and
operation of 110-volt office machines. From 7:00 a.m. to 6:00 p.m. on weekdays
(i.e., Monday through Friday) and 8:00 a.m. to 1:00 p.m. on Saturdays, excluding
legal holidays and holiday weekends (collectively "Normal Business Hours"),
Landlord shall furnish the Premises with heat and air conditioning services. If
requested by Tenant, Landlord shall furnish such services at times other than
Normal Business Hours, and Tenant shall pay for the cost of such after-hours
services at rates established by Landlord from time to time.

                Landlord will provide janitorial services customary for
buildings comparable to the Building in quality and location. If Tenant requires
excessive or specialized janitorial services, Tenant shall promptly pay Landlord
the additional costs and expenses incurred by Landlord in providing such
services.



<PAGE>   7

        If Tenant breaches any covenant or condition of this Lease, including
but not limited to the payment of rent or additional rent, Landlord may apply
all or any part of the security deposit to the payment of any sum in default and
any damage suffered by Landlord as a result of Tenant's breach. In such event,
Tenant shall, within five (5) days after written demand therefor by Landlord,
deposit with Landlord the amount so applied. Any payment to Landlord from the
security deposit shall not be construed as a payment of liquidated damages for
any default. If Tenant complies with all of the covenants and conditions of this
Lease throughout the Lease term, the security deposit shall be repaid to Tenant
without interest within 30 days after the vacation of the Premises by Tenant.

        6.2     Letter of Credit. Upon execution of this Lease, Tenant shall
cause to be delivered to Landlord an irrevocable, standby Letter of Credit in
the sum of US $50,000.00, naming Landlord as beneficiary, issued by a lender
acceptable to Landlord and otherwise acceptable to Landlord in form and content.
Provided that Tenant is not then in default under this Lease, the Letter of
Credit may be reduced to the sum of US $25,000.00 on the third (3rd) anniversary
of the Commencement Date. The Letter of Credit shall not expire before the
fourth (4th) anniversary of the Commencement Date. If Tenant breaches any
covenant or condition of this Lease, including but not limited to the payment of
rent or additional rent, Landlord may draw on the Letter of Credit and apply any
sums so drawn to reimburse itself for any damages suffered as a result of
Tenant's breach, regardless of whether Landlord has previously applied Tenant's
security deposit or taken any other action against Tenant. Any payment to
Landlord from the Letter of Credit shall not be construed as a payment of
liquidated damages for any default.

                    SECTION VII - COMPLETION AND ALTERATIONS

        7.1     Delivery of Premises. Landlord shall deliver the Premises to
Tenant in a condition in accordance with Exhibit D attached. Additional
improvements shall be made to the Premises as provided in Exhibit D-1 attached.

        7.2     Alterations by Tenant. Tenant shall not make any alterations,
additions or improvements in or to the Premises without first submitting to
Landlord professionally prepared plans and specifications for such work and
obtaining Landlord's prior written approval thereof. Tenant covenants that it
will cause all such alterations, additions and improvements to be performed at
Tenant's sole cost and expense by Landlord or a contractor approved by Landlord
and in a manner which: (a) is consistent with the Landlord-approved plans and
specifications and any conditions imposed by Landlord in connection therewith;
(b) is in conformity with commercial standards; (c) includes acceptable
insurance coverage for Landlord's benefit; (d) does not affect the structural
integrity of the Building; (e) does not disrupt the business or operations of
adjoining tenants; and (f) does not invalidate or otherwise affect the
construction and systems warranties then in effect with respect to the Park.
With respect to any alterations, additions and improvements made by Landlord for
Tenant, Tenant shall pay Landlord a supervision fee which shall be in an amount
comparable to the fee a third party contractor would charge in connection with a
comparable project. Tenant shall secure all governmental permits and approvals,
as well as comply with all other applicable governmental requirements and
restrictions.



<PAGE>   8

        Landlord shall have the right from time to time to establish, modify and
enforce rules and regulations regarding the use of the Common Areas and the
right to change the area, level, location and arrangement of the Common Areas.

        9.2     Parking. Thirty (30) covered parking stalls in the Building
parking garage (currently at a monthly charge of $40.00 per stall) have been
allocated to the Premises and twelve (12) uncovered parking stalls elsewhere in
the Park (currently at no charge) have been allocated to the Premises. All of
the stalls allocated to the Premises are unreserved and available on a first
come, first served basis. There shall be no charge to Tenant for unreserved
parking stalls allocated to it pursuant to this paragraph. Tenant shall cause
its employees and invitees to comply with such rules and regulations from
time-to-time promulgated with respect to the parking areas of the Building and
the Park.

                       SECTION X - INSURANCE AND INDEMNITY

        10.1    Indemnification. Landlord shall not be liable for any injury to
any person, or for any loss of or damage to any property (including property of
Tenant) occurring in or about the Premises from any cause whatsoever, other than
the negligence or intentional misconduct of Landlord or its employees or agents,
or for interference with light, air or view or for any latent defect in the
Premises. Tenant shall indemnify, defend and save Landlord, its officers,
agents, employees and contractors, and other tenants and occupants of the Park,
harmless from all losses, damages, fines, penalties, liabilities and expenses
(including Landlord's personnel and overhead costs and attorneys' fees and other
costs incurred in connection with such claims, regardless of whether claims
involve litigation) resulting from any actual or alleged injury to any person or
from any actual or alleged loss of or damage to any property alleged to be
attributable to Tenant's operation or occupation of the Premises or caused by or
resulting from any act or omission of Tenant or any licensee, assignee, or
concessionaire, or of any officer, agent, employee, guest or invitee of any such
person in or about the Premises, including, but not limited to, the deposit or
release of hazardous or toxic materials or substances or Tenant's breach of its
obligations hereunder. Tenant agrees that the foregoing indemnity specifically
covers actions brought by its own employees. Notwithstanding any of the
foregoing, if losses, liabilities, damages, liens, costs and expenses so arising
are caused by the concurrent negligence of both Landlord and Tenant their
employees, agents, invitees and licensees, Tenant shall indemnify Landlord only
to the extent of Tenant's own negligence or that of its officers, agents,
employees, guests or invitees. As between Landlord and Tenant, the foregoing
indemnity is specifically and expressly intended to constitute a waiver of
Tenant's immunity under Washington's Industrial Insurance Act, RCW Title 51,
for the sole purpose of and only to the extent necessary to provide Landlord
with a full and complete indemnity from claims made against Landlord by Tenant's
employees. The indemnification provided for in this Section with respect to acts
or omissions during the term of this Lease shall survive termination or
expiration of this Lease. Tenant shall promptly notify Landlord of casualties or
accidents occurring in or about the Premises.



<PAGE>   9

                      SECTION XI - ASSIGNMENT AND SUBLETTING

        11.1    Assignment or Sublease. Tenant shall not voluntarily,
involuntarily or by operation of law, assign, sell, pledge, transfer, mortgage
or encumber this Lease or any interest therein, or sublet the whole or any part
of the Premises (any of which events being a "Transfer and any such assignee,
purchaser, mortgagee, pledgee or other transferee being a "Transferee" for
purposes of this Section XI) without first obtaining Landlord's written consent,
which shall not be unreasonably withheld if all of the following conditions
precedent are fully and completely satisfied, but which otherwise may be
withheld by Landlord in its sole discretion:

                (a)     The proposed Transferee is at least as creditworthy as
Tenant when Tenant entered into this Lease, and satisfies Landlord's then
current credit standards for tenants of the Building and the Park, and has the
financial strength and stability to perform all obligations under this Lease to
be performed by Tenant as and when they fall due.

                (b)     The proposed Transferee will use the Premises for a
purpose which in Landlord's opinion (i) is lawful, (ii) is consistent with the
permitted use of the Premises under this Lease, (iii) is consistent with the
general character of business carried on by tenants in similar office buildings,
(iv) does not conflict with any exclusive rights or covenants not to compete in
favor of any other tenant or proposed tenant in the Building and the Park, (v)
will not increase the likelihood of damage or destruction, (vi) will not
increase the rate of wear and tear to the Premises or common areas, (vii) will
not likely cause an increase in insurance premiums for insurance policies
applicable to the Building (unless the proposed Transferee agrees to pay such
additional cost), and (viii) will not require new tenant improvements
incompatible with then existing Building systems and components.

                (c)     Tenant pays to Landlord all of Landlord's attorneys'
fees and costs incurred in connection with negotiation, review and processing of
the Transfer, plus a processing fee of $1,000.

                (d)     Landlord is paid any increase in the Security Deposit
required by Landlord and permitted by law.

                (e)     At the time of the proposed Transfer, Tenant is not in
default under or in breach of any term, provision or covenant of this Lease.

                (f)     In Landlord's business judgment: (i) the proposed
Transferee must have a business reputation and financial strength equal to or
better than the average of all tenants occupying space at the Park at the time
of the proposed transfer, and (ii) the proposed transfer shall not create an
undesirable mix of tenants at the Park.

                (g)     At least fifty percent (50%) of the rentable area of the
Building and the Park is leased to paying tenants.

                (h)     The Transfer will not otherwise have or cause a material
adverse impact on Landlord's interests in the Park, the Building or the
Premises.



<PAGE>   10

provided (i) Landlord consents thereto pursuant to Section 11.1, (ii) Tenant
delivers to Landlord prior to the effective date of any such Transfer duplicate
originals of any instrument effecting such Transfer, in form and content
satisfactory to Landlord, and (iii) all amounts received by Tenant from the
Transferee in excess of the Rent payable hereunder for the area of the Premises
so Transferred and in excess of the costs described in Section 11.5(b) below
shall belong to and shall immediately be paid to Landlord as Additional Rent. No
action or inaction by Landlord in connection with its rights under this Section
11.3 shall constitute or be deemed to constitute an approval of a proposed
Transfer for purposes of Section 11.1 except as specifically set forth in a
notice from Landlord to Tenant.

        11.4    Assignee Obligation. Any Transferee other than a subtenant
approved by Landlord shall assume all obligations of Tenant and shall be jointly
and severally liable with Tenant for the payment of rent, additional rent and
other charges and performance of all of Tenant's obligations under this Lease.
Tenant shall provide Landlord with full and complete duplicate originals of all
instruments of assignment, sublease or assumption. It shall not be unreasonable
for Landlord to withhold consent to a proposed assignment or sublease because it
wishes to exercise its right to recapture all or part of the Premises under
Section 11.3 hereof, or because (a) the proposed transferee is any governmental
agency, federal, state, local or foreign government or incorporation, (b) the
transfer would cause the Landlord to violate another lease or agreement to which
Landlord is a party or would give a Building tenant the right to cancel its
lease, or (c) the proposed transferee occupies space in the Building or the
Park, is negotiating with Landlord to lease space in the Building or the Park,
or has negotiated with Landlord to lease space in the Building or the Park
during the six months immediately proceeding the notification from Tenant.

        11.5    Additional Consideration. If Tenant assigns its interest under
this Lease, or sublets all or any portion of the Premises, Tenant shall pay to
Landlord (in addition to minimum rent and all other amounts payable by Tenant
under this Lease) as additional rent, within ten (10) days after receipt, all
rent, bonus rent, assignment fees and other consideration payable by the
assignee or subtenant in excess of (a) the rent otherwise payable by Tenant from
time to time under this Lease, and (b) leasing commissions incurred by Tenant
due to the sublease or assignment, and out-of-pocket costs incurred by Tenant to
pay the hard costs of labor and materials (but not soft costs such as design
costs, interest, permit fees or other soft costs) for renovations made to the
premises to accommodate the assignee or subtenant.

        11.6    Assignment by Landlord. If Landlord sells or otherwise transfers
the Building, or if Landlord assigns its interest under this Lease (other than
for security purposes), such purchaser, transferee or assignee thereof shall be
deemed to have assumed Landlord's obligations hereunder, and Landlord shall
thereupon be relieved of all liabilities hereunder, but this Lease shall
otherwise remain in full force and effect.



<PAGE>   11

        The term "eminent domain" shall include the taking or damaging of
property by, through or under any governmental or statutory authority, and any
purchase or acquisition in lieu thereof, whether the damaging or taking is by
government or any other person.

        13.2    Partial Taking. If a taking of any part of the Premises by
eminent domain renders the remainder thereof unusable for the business of
Tenant, in the reasonable judgment of Landlord, this Lease may, at the option of
either party, be terminated by written notice given to the other party not more
than thirty (30) days after Landlord receives notice (and provides Tenant
written notice) of the taking, and such termination shall be effective as of the
date when Tenant is required to vacate the portion of the Premises so taken. If
this Lease is so terminated, all rent shall be paid to the date of termination.
Whenever any portion of the Premises is taken by eminent domain and this Lease
is not terminated, Landlord shall at its expense proceed with all reasonable
dispatch to restore, to the extent of available proceeds and to the extent it is
reasonably prudent to do so, the remainder of the Premises to the condition it
was in immediately prior to such taking, and Tenant shall at its expense proceed
with all reasonable dispatch to restore its fixtures, furniture, furnishings,
floor covering and equipment to the same condition they were in immediately
prior to such taking. The minimum rent payable hereunder shall be reduced from
the date Tenant is required to partially vacate the Premises in the same
proportion that the area taken bears to the total area of the Premises prior to
taking.

        13.3    Damages. Landlord reserves all right to the entire damage award
or payment for any taking by eminent domain or a transfer in lieu thereof, and
Tenant waives all claim whatsoever against Landlord for damages for termination
of its leasehold interest in the Premises or for interference with its business
as a result of such taking. Tenant hereby grants and assigns to Landlord any
right Tenant may now have or hereafter acquire to such damages and agrees to
execute and deliver such further instruments of assignment as Landlord may from
time to time request- however, Tenant shall have the right to claim from the
condemning authority all compensation that may be recoverable by Tenant on
account of any loss of or damage to improvements to the Premises installed by
Tenant, Tenant's trade fixtures and removable personal property, to the extent
such compensation is awarded separately in the eminent domain proceeding and not
as part of Landlord's damages.

                         SECTION XIV - DEFAULT OF TENANT

        14.1    Defaults.

                14.1.1 Time is of the essence of this Lease. Tenant shall
be in default under this Lease if (i) Tenant violates or breaches or fails to
keep or perform any covenant, term or condition of this Lease; (ii) Tenant or
any guarantor of Tenant's obligations under this Lease (a "Guarantor") files or
is the subject of a petition in bankruptcy; (iii) a trustee or receiver is
appointed for Tenant's or any Guarantor's assets; (iv) Tenant or any Guarantor
makes an assignment for the benefit of creditors; or (v) Tenant vacates or
abandons the Premises.



<PAGE>   12

plus (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease, including, but not limited, any costs or expenses incurred by
Landlord in (1) retaking possession of the Premises, including reasonable
attorneys' fees therefor, (2) maintaining or preserving the Premises after such
default, (3) preparing the Premises for reletting to a new tenant, including
repairs or alterations to the Premises for such reletting, (4) leasing
commissions, and (5) any other costs necessary or appropriate to relet the
Premises; plus (v) at Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by the laws of
the State of Washington; plus (vi) the total value at the time of the award of
all of the concessions granted to Tenant at the time of signing this Lease,
prorated based on the remainder of the initial term of the Lease. As used in
items (i) and (ii) above, the "worth at the time of award" is computed by
allowing interest at the interest rate specified in Section 3.4 hereof. As used
in item (iii) above, the "worth at the time of award" is computed by using a
discount rate of six percent (6%).

                14.1.4  For all purposes of this Section 14.1 only, the term
"rental" shall be deemed to be the minimum rent and all additional rent and
other sums required to be paid by Tenant pursuant to the terms of this Lease.
All such sums, other than the minimum rent, shall, for the purpose of
calculating any amount due under the provisions of subparagraph (iii) above, be
computed on the basis of the average monthly amount thereof accruing during the
immediately preceding twelve (12) month period, except that if it becomes
necessary to compute such rental before such a twelve (12) month period has
occurred then such rental shall be computed on the basis of the average monthly
amount hereof accruing during such shorter period.

        14.2    Legal Expenses. If either party consults an attorney in order to
enforce this Lease the prevailing party shall be entitled to reimbursement from
the non-prevailing party for the prevailing party's reasonable costs and
attorneys' fee, whether such costs and attorneys' fees are incurred with or
without litigation, in a bankruptcy court or on appeal.

        14.3    Remedies Cumulative; Waiver. Landlord's remedies hereunder are
cumulative, and Landlord's exercise of any right or remedy due to a default or
breach by Tenant shall not be deemed a waiver of, or alter, affect or prejudice
any other right or remedy which Landlord may have under this Lease or by law.
Neither the acceptance of rent nor any other acts or omissions of Landlord at
any time or times after the happening of any event authorizing the cancellation
or forfeiture of this Lease shall operate as a waiver of any past or future
violation, breach or failure to keep or perform any covenant, agreement, term or
condition hereof or to deprive Landlord of its right to cancel or forfeit this
Lease, upon the written notice provided for herein, at any time that cause for
cancellation or forfeiture may exist, or be construed so as at any future time
to estop Landlord from promptly exercising any other option, right or remedy
that it may have under any term or provision of this Lease.



<PAGE>   13

        Any holding over by Tenant after the expiration of the term hereof
without Landlord's consent shall be deemed to be a tenancy at will, terminable
at any time by Landlord at a rental rate equal to two (2) times the rental rate
in effect on the date of such expiration of the Lease term, prorated on a daily
basis, and otherwise on the terms, covenants and conditions of this Lease to the
extent applicable.

                         SECTION XVII - QUIET ENJOYMENT

        17.1    Landlord's Covenant. Tenant, upon fully complying with and
promptly performing all of the terms, covenants and conditions of this Lease on
its part to be performed, shall have and quietly enjoy the Premises for the term
set forth herein, if its performance of such terms, covenants and conditions
continues for such period, subject, however, to matters of record on the date
hereof and to those matters to which this Lease may be subsequently
subordinated.

                          SECTION XVIII - MISCELLANEOUS

        18.1    Notices. Any notices required in accordance with any of the
provisions herein shall be in writing and delivered or mailed by registered or
certified mail to the Landlord c/o JSH Properties, Inc., 10220 N.E. Points
Drive, Suite 203, Kirkland, Washington 98033, Attention: Property Manager; to
Tenant at the Premises; or to such other address as a party shall from time to
time advise the other party by a written notice given in accordance with this
Section 18.1. If Tenant is a partnership or joint enterprise, any notice
required or permitted hereunder may be given by or to any one partner thereof
with the same force and effect as if given by or to all thereof. A notice shall
be deemed received two (2) days after the postmark affixed on the envelope by
the United States Post Office.

        18.2    Successors or Assigns. All of the terms, conditions, covenants
and agreements of this Lease shall extend to and be binding upon Landlord,
Tenant and, subject to the terms of Section XI hereof, their respective heirs,
administrators, executors, successors and permitted assigns, and upon any person
or persons coming into ownership or possession of any interest in the Premises
by operation of law or otherwise, and shall be construed as covenants running
with the land.

        18.3    Insolvency. If a petition is filed under the Bankruptcy Act or
other law to have Tenant reorganized, dissolved or liquidated, or if a trustee
or receiver is appointed for Tenant's assets under the Bankruptcy Act or other
law or if a proceeding commenced to foreclose any mortgage or any other lien on
Tenant's interest in the Premises or on personal property kept or maintained
thereon, or if Tenant makes an assignment for the benefit of creditors, then
Tenant shall be deemed in default hereunder.

        18.4    Tenant Defined. The word "Tenant" as used herein shall mean each
and every person, partnership or corporation who is mentioned as Tenant herein
or who executes this Lease as Tenant. If there shall be more than one Tenant,
they shall all be bound jointly and severally by the terms, covenants and
agreements herein.



<PAGE>   14

(vi) that Landlord is not in default under this Lease (or is such is not the
case, the extent and nature of such default); (vii) that all required advanced
by Landlord to Tenant on account of tenant improvements have been made (or the
extent that such is not the case); (viii) on the date of such certification
there are no existing defenses or claims which Tenant has against the
enforcement of this Lease by Landlord (or if such is not the case, the extent
and nature of such defenses or claims); (ix) the amount of the Security Deposit
paid to Landlord; and (x) any other fact or representation that a mortgagee or
purchaser may reasonably request. It is intended that any such statement
delivered pursuant to this Section 18.8.2 shall be fully and completely binding
upon Tenant for all purposes of this Lease, may be relied upon by a prospective
purchaser or mortgagee of Landlord's interest, or any assignee of any mortgage
upon Landlord's interest in the Building or the Land. If Tenant shall fail to
respond within ten (10) days of receipt of a written request by Landlord
therefor, Tenant shall be deemed to have given a certificate as above provided
without modification and shall be conclusively deemed to have admitted the
accuracy of any information supplied by Landlord to a prospective purchaser or
mortgagee, that this Lease is full force and effect, that there are no uncured
defaults in Landlord's performance, that the Security Deposit is as stated in
this Lease and that not more than one month's Rent has been paid in advance.

                18.8.3  Notwithstanding anything to the contrary in this Lease,
Landlord shall not be in default under any provision of this Lease unless
written notice specifying such default is given to Landlord and to any lender
who has been identified to Tenant in writing as a party to whom notice must be
sent. Any lender of Landlord entitled to notice pursuant to the preceding
sentence shall have the right to cure any default on behalf of Landlord within
the later of (a) thirty (30) days after receipt of such notice, or (b) thirty
(30) days after the expiration of any cure period provided to Landlord pursuant
to this Lease; provided, if such default cannot reasonably be cured within such
thirty (30) day period, Landlord's lender shall be entitled to such additional
time as may be reasonably necessary to cure the default, if within the thirty
(30) day period the lender commences and thereafter diligently pursues the
actions necessary for the lender to cure such default by Landlord (including, if
possession of the Premises is necessary to cure the default, commencing such
judicial or non-judicial proceedings as may be necessary for lender or a
receiver to take possession of the Premises). So long as a lender is diligently
taking the actions reasonably necessary for it to cure Landlord's default,
Tenant shall not exercise its remedies for Landlord's default under this Lease.

        18.9    Financial Statements. Within ten (10) days after Landlord's
request therefor, Tenant shall deliver to Landlord such current financial
statements regarding Tenant as Landlord may reasonably request. Tenant shall
certify the accuracy of such statements. Landlord may make the financial
statements available to potential lenders or purchasers, but shall otherwise
preserve their confidentiality except in connection with legal proceedings
between the parties or as otherwise directed by court rule or order.

        18.10   Change of Location. Tenant shall move from the Premises at
Landlord's written request to another location in the Park, with substantially
the same number of square feet of area as in the Premises, with the new location
being substituted for the Premises, but all other terms hereof shall remain the
same with the exception of the minimum rent which shall be abated during the
period while Tenant is closed for business as the result of the move.



<PAGE>   15

        18.16   Tax on Rent. The Rent herein is exclusive of any sales, business
and occupation, gross receipts or other tax based on Rents, or tax on Tenant's
property or tax upon or measured by the number of employees of Tenant, or any
similar tax or charge. If any such tax or charge be hereinafter enacted, and
imposed upon Landlord, Tenant shall pay Landlord the amount thereof concurrently
with each monthly Rent payment. If it shall not be lawful for Tenant so to
reimburse Landlord, the monthly Rent payable to Landlord under this Lease shall
be revised to net Landlord the same net rental after imposition of any such tax
or charge upon Landlord as would have been payable to Landlord prior to the
imposition of such tax or charge. Tenant shall not be liable to reimburse
Landlord for any federal income tax or other income tax of a general nature
applicable to Landlord's income.

        18.17   Light, Air and View. Landlord does not guarantee the continued
present status of light or air over any property adjoining or in the vicinity of
the Building or the Park. Any diminution or shutting off of light, air or view
by any structure which may be erected near or adjacent to the Building or the
Park shall in no way affect this Lease or impose any liability on Landlord.

                        SECTION XIX - EXECUTION OF LEASE

        19.1    Execution by Landlord and Tenant; Approval of Lender. Landlord
shall not be deemed to have made an offer to Tenant by furnishing Tenant with a
copy of this Lease with particulars inserted. No contractual or other rights
shall exist or be created between Landlord and Tenant until all parties hereto
have executed this Lease and, if so indicated by Landlord, until it has been
approved in writing by Lender and fully executed copies have been delivered to
Landlord and Tenant. Tenant agrees to make such changes herein as may be
requested by Lender so long as such do not increase amounts due from Tenant
hereunder or otherwise materially alter its rights hereunder.

                 SECTION XX - ENTIRE AGREEMENT - APPLICABLE LAW

        20.1    Entire Agreement - Applicable Law. This Lease and the Exhibits
attached hereto, and by this reference incorporated herein, set forth the entire
agreement of Landlord and Tenant concerning the Premises, and there are no other
agreements or understanding, oral or written, between Landlord and Tenant
concerning the Premises.

        Any subsequent modification or amendment of this Lease shall be binding
upon Landlord and Tenant only if reduced to writing and signed by them. This
Lease shall be governed by, and construed in accordance with the laws of the
State of Washington.



<PAGE>   16

STATE OF WASHINGTON     )
                        )       ss.
COUNTY OF KING          )

On this 22nd day of December 1998, before me, a Notary Public in and for the
State of Washington, duly commissioned and sworn, personally appeared Paul
Manheim, to me known to be the Vice President of HAL Realty III, Inc., the
General Partner of YARROW BAY OFFICE III, LIMITED PARTNERSHIP, the partnership
named in and which executed the foregoing instrument; and he acknowledged to me
that he signed the same as the free and voluntary act and deed of said
partnership for the uses and purposes therein mentioned.

I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.

WITNESS my hand and official seal the day and year in this certificate above
written.



                                        /s/ DEIRDRE AFRICA
                                        ----------------------------------------
                                        Signature


                                        DEIRDRE AFRICA
                                        ----------------------------------------
                                        Print Name


                                        NOTARY PUBLIC in and for the State of
                                        Washington, residing at Seattle
                                        My commission expires 1-19-2000