<PAGE>   1

                                                                   EXHIBIT 10.17

                               STANDARD FORM LEASE

PARTIES: This Lease, executed in duplicate at Cupertino, California, on August
13, 1998, by and between Mission West Properties, L.P., a Delaware Limited
Partnership, and Gadzoox Networks, Inc., a Delaware Corporation, hereinafter
called respectively Lessor and Lessee, without regard to number or gender.

USE: Witnesseth: That Lessor hereby leases to Lessee, and Lessee hires from
Lessor, the Premises (defined below) for the purpose of conducting therein
office, research and development, light manufacturing, and warehouse activities,
and any other legal activity; and for no other purpose without obtaining the
prior written consent of Lessor.

PREMISES: The real property with appurtenances as shown on Exhibit A (the
"Premises") situated in the City of San Jose, County of Santa Clara, State of
California, and more particularly described as follows:

        Lessee to occupy a 64,805 square feet portion of the Premises as shown
        on Exhibit A.1. Phase I is 53,405 square feet including the improvements
        thereto and the right to use up to 192 unreserved parking spaces. Phase
        II is 11,400 square feet including improvements thereto and the right to
        use up to 42 unreserved parking spaces. Phase I and Phase II are
        designated on Exhibit A.1. The address for the Premises is 5850 Hellyer
        Ave., San Jose, California. Lessee's pro-rata share of Premises during
        Phase I is 48.68% and during Phase II is 59.07%.

TERM: The term shall be for eighty-four (84) months unless extended pursuant to
Section 35 of this Lease (the "Lease Term"), commencing on the Commencement Date
as defined in Section 1 and ending eighty-four (84) months thereafter.

RENT: Base rent shall be payable in monthly installments as follows:

<TABLE>
<CAPTION>
                                            Base rent        Estimated CAC*      Total
                                            ---------        --------------      -----
        <S>                                 <C>              <C>                <C>
        Months 1 through 12                 $61,682            $12,016*         $73,698
        Months 13 through 24                $79,062            $14,581          $93,643
</TABLE>

Monthly base rent to increase by 4% over the prior years rent on the annual
anniversary of the Commencement Date each year during the Lease Term.

* CAC charges to be adjusted per Common Area Charges Section below.

Base rent and CAC shall be payable in advance on the first day of each calendar
month during the Lease Term. The term "Rent," as used herein, shall be deemed to
be and to mean the base monthly rent and all other sums required to be paid by
Lessee pursuant to the terms of this Lease. Rent shall be paid in lawful money
of the United States of America, without offset or deduction, and shall be paid
to Lessor at such place or places as may be designated from time to time by
Lessor. Rent for any period less than a calendar month shall be a pro rata
portion of the monthly installment. Upon execution of this Lease, Lessee shall
deposit with Lessor the total first month's rent of Seventy Three Thousand Six
Hundred Ninety Eight Dollars ($73,698).

SECURITY DEPOSIT: Lessee shall deposit with Lessor the sum of Seventy Three
Thousand Six Hundred Ninety Eight Dollars ($73,698) (the "Security Deposit").
The Security Deposit shall be held by Lessor as security for the faithful
performance by Lessee of all of the terms, covenants, and conditions of this
Lease applicable to Lessee. If Lessee commits a default as provided for herein,
including but not limited to a default with respect to the provisions contained
herein relating to the condition of the Premises, Lessor may (but shall not be
required to) use, apply or retain all or any part of the Security Deposit for
the payment of any amount which Lessor may spend by reason of default by Lessee.
If any portion of the Security Deposit is so used or applied, Lessee shall,
within ten days after written demand therefor, deposit cash with Lessor in an
amount sufficient to restore the

                                       4


<PAGE>   2

Security Deposit to its original amount. Lessee's failure to do so shall be a
default by Lessee. Any attempt by Lessee to transfer or encumber its interest in
the Security Deposit shall be null and void. Upon execution of this Lease,
Lessee shall deposit with Lessor the Security Deposit.

COMMON AREA CHARGES: Lessee shall pay to Lessor, as additional Rent, an amount
equal to Lessee's pro-rate share of the total common area charges of the
Premises ("CAC"). Lessee shall pay to Lessor as Rent, on or before the first day
of each calendar month during the Lease Term, subject to adjustment and
reconciliation as provided hereinbelow, the sum of Twelve Thousand Sixteen
Dollars ($12,016), said sum representing Lessee's estimated monthly payment of
Lessee's percentage share of CAC. It is understood and agreed that Lessee's
obligation under this paragraph shall be prorated to reflect the Commencement
Date and the end of the Lease Term. In addition, the estimated CAC shall be
increased to Fourteen Thousand Five Hundred Eighty One Dollars ($14,581)
effective with the completion of the Phase II Improvements.

Lessee's estimated monthly payment of CAC payable by Lessee during the calendar
year in which the Lease commences is set forth above. At or prior to the
commencement of each succeeding calendar year term (or as soon as practical
thereafter), Lessor shall provide Lessee with Lessee's estimated monthly payment
for CAC which Lessee shall pay to Lessor as Rent. Within 120 days of the end of
the calendar year and the end of the Lease Term, Lessor shall provide Lessee a
statement of actual CAC incurred including capital reserves for HVAC, roof,
parking lot and exterior painting for the preceding year or other applicable
period in the case of a termination year. If such statement shows that Lessee
has paid less than its actual percentage, then Lessee shall on demand pay to
Lessor the amount of such deficiency. If such statement shows that Lessee has
paid more than its actual percentage, then Lessor shall, promptly refund such
excess to Lessee or credit the amount thereof to the Rent next becoming due from
Lessee. Lessor reserves the right to revise any estimate of CAC if the actual or
projected CAC show an increase or decrease in excess of 10% from an earlier
estimate for the same period. In such event, Lessor shall provide a revised
estimate to Lessee, together with an explanation of the reasons therefor, and
Lessee shall revise its monthly payments accordingly. Lessor's and Lessee's
obligation with respect to adjustments at the end of the Lease Term or earlier
expiration of this Lease shall survive the Lease Term or earlier expiration.

As used in this Lease, CAC shall include but is not limited to: (i) items as
specified in Sections 5(b), 6, 16 and 31; (ii) all costs and expenses including
but not limited to supplies, materials, equipment and tools used or required in
connection with the operation and maintenance of the Premises; (iii) licenses,
permits and inspection fees; (iv) all other costs incurred by Lessor in
maintaining and operating the Premises; (v) all reserves for capital
replacements and government regulations imposed on the Premises not related to
Lessee's use and occupancy of the Premises; and (vi) an amount equal to five
percent (5%) of the aggregate of all CAC, as compensation for Lessor's
accounting and processing services. Lessee shall have the right to review the
basis and computation analysis which shall be based on reasonable commercial
standards in the industry used to derive the CAC applicable to this Lease
annually. Lessor's estimate of Lessee's CAC for Phase I for the first twelve
months of the Lease Term is set forth on Exhibit C.

LATE CHARGES: Lessee hereby acknowledges that a late payment made by Lessee to
Lessor of Rent and other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges, which may be imposed on Lessor
according to the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of Rent or any other sum due from Lessee is not
received by Lessor or Lessor's designee within ten (10) days after such amount
is due, Lessee shall pay to Lessor a late charge equal to five (5%) percent of
such overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payments made by Lessee. Acceptance of such late charges by Lessor shall in no
event constitute a waiver of Lessee's default with respect to such overdue


                                       5
<PAGE>   3

amount, nor shall it prevent Lessor from exercising any of the other rights and
remedies granted hereunder. Notwithstanding the above, Lessor agrees to waive
one late charge per any twelve month period if it is the result of a
non-recurring unusual event such as a accounting error.

QUIET ENJOYMENT: Lessor covenants and agrees with Lessee that upon Lessee paying
Rent and performing its covenants and conditions under this Lease, Lessee shall
and may peaceably and quietly have, hold and enjoy the Premises for the Lease
Term, subject, however, to the rights reserved by Lessor hereunder. Lessor shall
provide Lessee with a Non-Disturbance Agreement in a commercially reasonable
form from any existing or future lienholder of Lessor.

LESSEE EXPANSION: Lessor shall agree to cancel this Lease at any time during the
Lease Term upon Lessee signing a new lease with Lessor on terms and conditions
acceptable to Lessor for an amount of space exceeding 100,000 square feet in a
building that Lessor owns or builds that is available for lease by Lessor.

IT IS FURTHER MUTUALLY AGREED BETWEEN THE PARTIES AS FOLLOWS:

1. POSSESSION: For Phase I and Phase II possession shall be deemed tendered and
the term shall commence upon the first to occur of the following (the
"Commencement Date"): (i) the Premises are Substantially Complete or (ii) Lessee
occupies the Premises and commences to conduct business operations or (iii) if
Lessor is prevented from or delayed in completing its work under this Lease due
to Lessee Delays, such work will be deemed Substantially Complete as of the date
on which it would have been Substantially Complete had it not been for such
Lessee Delays. Subject to the foregoing, it is the intention of Lessee and
Lessor that October 1, 1998 shall be the Commencement Date for Phase I. It is
the intention of Lessee and Lessor that the date of occupancy by Lessee of Phase
II space shall be the Commencement Date for Phase II, but in no case later than
October 1, 1999 provided Premises are Substantially Complete.

"Substantially Complete" shall mean that: (i) Lessor has tendered possession of
Premises to Lessee, (ii) Lessor has met all legal requirements for occupancy and
Lessor has obtained all related city and fire marshal approvals, (iii) The
Lessee Interior Improvements are materially complete per the approved plans,
exclusive of telephone or other communication systems, punchlist items and there
remains no incomplete or defective items of work which would materially
adversely affect Lessee's intended use of the Premises, (iv) said interior of
the building is in a "broom clean" condition.

1.1 COMMENCEMENT DATE MEMORANDUM: When the actual Commencement Date for Phase I
is determined, the parties shall execute a Commencement Date Memorandum setting
forth the Commencement Date for Phase I, the expiration date of the Lease Term,
but failure to do so shall not affect the continuing validity and enforceability
of this Lease, which shall remain in full force and effect.

When the actual Commencement Date for Phase II is determined, the parties shall
execute a Commencement Date Memorandum setting forth the Commencement Date for
Phase II, but failure to do so shall not affect the continuing validity and
enforceability of this Lease, which shall remain in full force and effect.

2. LESSEE'S IMPROVEMENTS

2.1 LESSEE'S IMPROVEMENTS FOR PHASE I: The "Lessee Interior Improvements for
Phase I" shall be defined as all items not part of the Building Shell (the
"Building Shell" is defined on attached Exhibit B) and shall be constructed by
independent contractors to be employed by and under the supervision of Lessor,
in accordance with complete plans and specifications prepared by Lessor for
submission to the City of San Jose ("Lessee Improvement Plans for Phase I"),
complete with all mechanical and electrical


                                       6
<PAGE>   4

design, approved in writing by Lessee, and then to be attached hereto as Exhibit
E.1. Lessee and its designated representatives, shall at all times during the
construction of the Lessee Interior Improvements for Phase I have access to the
Premises to monitor the progress of construction and Lessor's compliance with
its obligation hereunder; provided however, that such access shall not
unreasonably interfere with the activities of Lessor or its contractors.

2.1.1 BUDGET: Before entering into any contract with a contractor furnishing
labor or materials in connection with the construction of the Lessee Interior
Improvements for Phase I where the payment due under such contract is estimated
by Lessor to be in excess of Fifty Thousand Dollars ($50,000), Lessor shall
request bids from at least three (3) qualified contractors selected by lessor
and approved by Lessee (which approval shall not be unreasonably withheld) for
bidding. Lessor will accept the lowest bid. Lessee shall have the opportunity to
review and approve the bidders list prepared by Lessor, which approval shall not
be unreasonable withheld, and may select a bidder of their choice for the bid,
provided the bidder, meets the Lessor's reasonable requirements.

2.1.2 LESSOR'S ALLOWANCE: Lessor shall contribute up to One million Six Hundred
Two Thousand One Hundred Fifty Dollars ($1,602,150) towards construction of the
Lessee Interior Improvements for Phase I (the " Phase I TI Allowance").

2.1.3 COST STATEMENT & LESSEE'S CONTRIBUTION: Lessor has prepared and Lessee has
approved the cost statement substantially in the form of attached as Exhibit D
(the "Phase I Cost Statement"), showing the expected construction cost of the
Lessee Interior Improvements for Phase I, the Phase I TI Allowance, and the
maximum cost Lessee must pay for construction of the Lessee Interior
Improvements for Phase I. Lessor may include in the Phase I Cost Statement, a
construction management fee, covering its overhead, profit, and other similar
costs not otherwise expressly indicated on the Phase I Cost Statement, equal to
six percent (6%) of all other costs shown on the Phase I Cost Statement.
Lessee's Phase I Cost Statement indicates that Lessee's share of the
construction cost of Lessee Interior Improvements for Phase I shall be Two
Hundred Seventy Five Thousand Dollars ($275,000) (the " Lessee Maximum Phase I
Contribution"). If Lessor's actual cost exceed the above, Lessee may pay the
excess or remove items until the total costs are acceptable to Lessee. Lessor
and Lessee shall negotiate in good faith to reduce the costs for construction of
the Lessee Interior Improvements for Phase I by modifying the plans or taking
other appropriate actions Lessor shall not exceed above without approval of
Lessee. Lessee shall pay its approved share of the cost for construction of the
Lessee Interior Improvements for Phase I within fifteen (15) days after Lessor
has provided Lessee with evidence that the approved work for the Lessee Interior
Improvements for Phase I is complete. All costs payable by Lessee for
construction of the Lessee Interior Improvements for Phase I shall be reasonably
documented and subject to verification by Lessee.

2.1.4 CHANGE ORDERS: No change made to the plans for the Lessee Interior
Improvements for Phase I and Phase I Cost Statement after the final approval by
the parties thereof shall be effective, unless such change is approved in
writing by Lessor and Lessee, which approval shall not be unreasonably withheld.
In this regard, Lessor shall not be required to approve any change which will
increase its cost contribution above the Phase I TI Allowance, structurally
impair the Premises, or materially and adversely effect the outside appearance
of the subject building and Tenant shall not be required to approve any change
which will increase its cost contribution above the Lessee's Maximum Phase I
Contribution, interfere with the conduct of Tenant's business, or materially
detract from the inside appearance of the Premises. Change orders shall be
written and shall describe the nature of the change and the reasonably
determined increase or decrease in each item of the Phase I Cost Statement
(including the Lessor's management fee) occasioned by the change. If Lessee
requests a change which will delay the Substantial Completion of the Lessee
Interior Improvements for Phase I beyond the Scheduled Completion Date (defined
below), the maximum amount of Lessee delay that can be attributed to the change
shall also be specified in the change order.


                                       7
<PAGE>   5

2.1.5 INABILITY TO OBTAIN MATERIALS: If Lessor notifies Lessee that any
fittings, finished or other materials specified by Lessee for the Lessee
Interior Improvements for Phase I cannot be obtained within sixty (60) days
after placing an order therefore and Lessor reasonably determines that such
extended delivery time will prohibit Lessor from Substantially Completing the
Lessee Interior Improvements for Phase I by the Scheduled Completion Date, and
information that will permit Lessee reasonably to select an alternative fitting,
finish, or material, including, without limitation any expected delays in the
Scheduled Completion Date associated with each alternative. Within three (3)
business days, Lessee shall either (i) execute a change order in accordance with
the foregoing requirements selecting an alternative presented by Lessor or
developed by Lessee and approved by Lessor, which approval shall not be
unreasonably withheld, or (ii) agree that any delay in the Substantial
Completion of the Lessee Interior Improvements for Phase I as a consequence of
the inability to obtain the item will be a Lessee Delay.

2.1.6 TIME PERIODS FOR APPROVAL: Lessee shall approve or disapprove any
preliminary plan or change order on or before the third (3rd) business day
following submission to Lessee of the plan and or change order to Lessee. Lessee
shall approve or disapprove on or before the fifth (5th) business day following
submission to Lessee of any final plans. If plans or change orders are
disapproved, Lessee shall state the reason for disapproval and Lessor and Lessee
shall act in good faith to resolve any issues.

2.1.7 COMPLETION OF THE WORK & DELAY: Lessor shall use its best efforts to
Substantially Complete the Building Shell and the Lessee Interior Improvements
(collectively the "Improvements") on or before October 1, 1998 (the "Scheduled
Completion Date"). Lessor and Lessee agree that Substantial Completion of the
Lessee Interior Improvements for Phase I after the Scheduled Completion Date
will cause Lessee and Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Accordingly, if
the Lessee Interior Improvements for Phase I are not Substantially Completed on
or before November 1, 1998, then Lessor agrees to reduce the base monthly rental
first payable by Lessee under this Lease by an amount equal to one day of base
rental for each day of delay. The parties agree that the abatement of base
monthly rent specified herein represents a fair and reasonable settlement for
both parties and neither party shall have further liability to the other for any
damages associated with delay in Substantial Completion of the Lessee Interior
Improvements for Phase I. If the Lessee Interior Improvements for Phase I are
not Substantially Completed on or before December 1, 1998, the ("Required
Completion Date"), Lessee may as its sole option, by delivery of written notice
to Lessor at any time after the Required Completion Date, until the Substantial
Completion of the Lessee Interior Improvements for Phase I, terminate this
Lease. Notwithstanding the foregoing, the Scheduled Completion Date and the
Required Completion Date shall be extended one date for each day Lessor's
Substantial Completion of the Improvements is actually delayed due to (i)
governmental action after receipt of the building permits for the Lessee
Interior Improvements for Phase I (other than governmental refusal to approve
work which fails to comply with applicable Law or the building permit), (ii)
acts of God, (iii) due to circumstances beyond Lessor's control and (iv) "Lessee
Delay" means an actual delay in Substantial Completion of the Lessee Interior
Improvements for Phase I resulting from (i) the Lessee's failure (through no
fault of Lessor) to meet Lessee's deadlines for approval of the plans for the
Lessee Interior Improvements for Phase I as set forth above, (ii) any change in
the work requested by Lessee (up to the maximum delay specified in the change
order), and (iii) any delay Lessee agrees in writing to bear because of the
inability to obtain any fitting, finish or material pursuant to Subsection
2.1.5, above.

2.1.8 STANDARD OF PERFORMANCE: Lessor shall be responsible for ensuring that the
Building Shell and the Lessee Interior Improvements for Phase I conform to all
applicable Laws and the approved plans for the Lessee Interior Improvements for
Phase I. Neither Lessee's approval of the plans for the Lessee Interior
Improvements for Phase I, the Phase I Cost Estimate, or any contractor or
architect, nor Lessee's recommendation of any contractor or architect for the
work, shall relieve Lessor of its obligations under this Lease nor make Lessee
liable to Lessor or any contractor or architect, or their subcontractors with
respect to the work.


                                       8
<PAGE>   6

2.1.9 IDENTIFICATION OF TENANT'S PROPERTY: If Lessee pays a portion of the cost
for construction of the Lessee Interior Improvements for Phase I, then as soon
as reasonably practicable after Substantial Completion of the Lessee Interior
Improvements, Lessor and Lessee shall designate as Lessee's property Lessee
Interior Improvements for Phase I that have a cost approximately equal to the
construction cost amount paid by Lessee. Lessee shall be entitled to all
investment tax credit, depreciation and other tax and ownership attributes
associated with the improvements so designated as Lessee's property, including
the right to remove such items from the Premises at any time.

Lessee shall be permitted during the installation of Lessee Improvements by
Lessor to install Lessee items such as telephone, security and moveable
partitions and other Lessee related work provided it does not interfere with or
delay Lessor's work or final approvals. ("Lessee's Work")

2.2 LESSEE'S IMPROVEMENTS FOR PHASE II: The "Lessee Interior Improvements for
Phase II" shall be defined as all items not part of the Building Shell and shall
be constructed by independent contractors to be employed by and under the
supervision of Lessor, in accordance with complete plans and specifications
prepared by Lessor for submission to the City of San Jose ("Lessee Improvement
Plans for Phase II"), complete with all mechanical and electrical design,
approved in writing by Lessee, and then to be attached hereto as Exhibit E.2.
Lessee and its designated representatives, shall at all times during the
construction of the Lessee Interior Improvements for Phase II have access to the
Premises for phase II to monitor the progress of construction and Lessor's
compliance with its obligation hereunder; provided however, that such access
shall not unreasonably interfere with the activities of Lessor or its
contractors.

2.2.1 BUDGET: Before entering into any contract with a contractor furnishing
labor or materials in connection with the construction of the Lessee Interior
Improvements for Phase II where the payment due under such contract is estimated
by Lessor to be in excess of Fifty Thousand Dollars ($50,000), Lessor shall
request bids from at least three (3) qualified contractors selected by lessor
and approved by Lessee (which approval shall not be unreasonably withheld) for
bidding. Lessor will accept the lowest bid. Lessee shall have the opportunity to
review and approve the bidders list prepared by Lessor, which approval shall not
be unreasonable withheld, and may select a bidder of their choice for and bid,
provided the bidder, gets the Lessor's reasonable requirements.

2.2.2 LESSOR'S ALLOWANCE: Lessor shall contribute up to Three Hundred Forty Two
Thousand Dollars ($342,000) towards construction of the Lessee Interior
Improvements for Phase I (the " Phase II TI Allowance").

2.2.3 COST STATEMENT & LESSEE'S CONTRIBUTION: Lessor has prepared and Lessee has
approved the cost statement substantially in the form of attached as Exhibit D
(the "Phase II Cost Statement"), showing the expected construction cost of the
Lessee Interior Improvements for Phase II, the Phase II TI Allowance, and the
maximum cost Lessee must pay for construction of the Lessee Interior
Improvements for Phase II. Lessor may include in the Phase II Cost Statement, a
construction management fee, covering its overhead, profit, and other similar
costs not otherwise expressly indicated on the Phase II Cost Statement, equal to
six percent (6%) of all other costs shown on the Phase II Cost Statement. Lessor
shall not exceed above the Phase II TI Allowance without approval of Lessee.
Lessee shall pay its approved share of the cost for construction of the Lessee
Interior Improvements for Phase II within fifteen (15) days after Lessor has
provided Lessee with evidence that the approved work for the Lessee Interior
Improvements for Phase II is complete. All costs payable by Lessee for
construction of the Lessee Interior Improvements for Phase II shall be
reasonably documented and subject to verification by Lessee.


                                       9
<PAGE>   7

2.2.4 CHANGE ORDERS: No change made to the plans for the Lessee Interior
Improvements for Phase II and Phase II Cost Statement after the final approval
by the parties thereof shall be effective, unless such change is approved in
writing by Lessor and Lessee, which approval shall not be unreasonably withheld.
In this regard, Lessor shall not be required to approve any change which will
increase its cost contribution above the Phase II TI Allowance, structurally
impair the Premises, or materially and adversely effect the outside appearance
of the subject building and Tenant shall not be required to approve any change
which will increase its cost contribution above the Lessee's Maximum Phase II
Contribution, interfere with the conduct of Tenant's business, or materially
detract from the inside appearance of the Premises. Change orders shall be
written and shall describe the nature of the change and the reasonably
determined increase or decrease in each item of the Phase II Cost Statement
(including the Lessor's management fee) occasioned by the change. If Lessee
requests a change which will delay the Substantial Completion of the Lessee
Interior Improvements for Phase II beyond the Scheduled Completion Date (defined
below), the maximum amount of Lessee delay that can be attributed to the change
shall also be specified in the change order.

2.2.5 INABILITY TO OBTAIN MATERIALS: If Lessor notifies Lessee that any
fittings, finished or other materials specified by Lessee for the Lessee
Interior Improvements for Phase II cannot be obtained within sixty (60) days
after placing an order therefore and Lessor reasonably determines that such
extended delivery time will prohibit Lessor from Substantially Completing the
Lessee Interior Improvements for Phase II by the Scheduled Completion Date, and
information that will permit Lessee reasonably to select an alternative fitting,
finish, or material, including, without limitation any expected delays in the
Scheduled Completion Date associated with each alternative. Within three (3)
business days, Lessee shall either (i) execute a change order in accordance with
the foregoing requirements selecting an alternative presented by Lessor or
developed by Lessee and approved by Lessor, which approval shall not be
unreasonably withheld, or (ii) agree that any delay in the Substantial
Completion of the Lessee Interior Improvements for Phase II as a consequence of
the inability to obtain the item will be a Lessee Delay.

2.2.6 TIME PERIODS FOR APPROVAL: Lessee shall approve or disapprove any
preliminary plan or change order on or before the third (3rd) business day
following submission to Lessee of the plan and or change order to Lessee. Lessee
shall approve or disapprove on or before the fifth (5th) business day following
submission to Lessee of any final plans. If plans or change orders are
disapproved, Lessee shall state the reason for disapproval and Lessor and Lessee
shall act in good faith to resolve any issues.

2.2.7 COMPLETION OF THE WORK & DELAY: Lessor shall use its best efforts to
Substantially Complete the Building Shell and the Lessee Interior Improvements
(collectively the "Improvements") on or before October 1, 1999 (the "Scheduled
Completion Date"). Lessor and Lessee agree that Substantial Completion of the
Lessee Interior Improvements for Phase II after the Scheduled Completion Date
will cause Lessee and Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Accordingly, if
the Lessee Interior Improvements for Phase II are not Substantially Completed on
or before November 1, 1999, then Lessor agrees to reduce the base monthly rental
first payable by Lessee under this Lease by an amount equal to one day of base
rental for each day of delay. The parties agree that the abatement of base
monthly rent specified herein represents a fair and reasonable settlement for
both parties and neither party shall have further liability to the other for any
damages associated with delay in Substantial Completion of the Lessee Interior
Improvements for Phase II. If the Lessee Interior Improvements for Phase II are
not Substantially Completed on or before December 1, 1999, the ("Required
Completion Date"), Lessee may as its sole option, by delivery of written notice
to Lessor at any time after the Required Completion Date, until the Substantial
Completion of the Lessee Interior Improvements for Phase II, terminate this
Lease. Notwithstanding the foregoing, the Scheduled Completion Date and the
Required Completion Date shall be extended one date for each day Lessor's
Substantial Completion of the Improvements is actually delayed due to (i)
governmental action after receipt of the building permits for the Lessee
Interior Improvements for Phase II (other than governmental refusal to approve
work which fails to comply with applicable Law or the building permit), (ii)
acts of God, (iii) due to circumstances beyond Lessor's control and (iv) "Lessee
Delay" means an actual delay in Substantial Completion of the


                                       10
<PAGE>   8

Lessee Interior Improvements for Phase II resulting from (i) the Lessee's
failure (through no fault of Lessor) to meet Lessee's deadlines for approval of
the plans for the Lessee Interior Improvements for Phase II as set forth above,
(ii) any change in the work requested by Lessee (up to the maximum delay
specified in the change order), and (iii) any delay Lessee agrees in writing to
bear because of the inability to obtain any fitting, finish or material pursuant
to Subsection 2.1.5, above.

2.2.8 STANDARD OF PERFORMANCE: Lessor shall be responsible for ensuring that the
Building Shell and the Lessee Interior Improvements for Phase II conform to all
applicable Laws and the approved plans for the Lessee Interior Improvements for
Phase II. Neither Lessee's approval of the plans for the Lessee Interior
Improvements for Phase II, the Phase II Cost Estimate, or any contractor or
architect, nor Lessee's recommendation of any contractor or architect for the
work, shall relieve Lessor of its obligations under this Lease nor make Lessee
liable to Lessor or any contractor or architect, or their subcontractors with
respect to the work.

2.2.9 IDENTIFICATION OF TENANT'S PROPERTY: If Lessee pays for a portion of the
costs for construction of the Lessee Interior Improvements for Phase II, then as
soon as reasonably practicable after Substantial Completion of the Lessee
Interior Improvements, Lessor and Lessee shall designate as Lessee's property
Lessee Interior Improvements for Phase II, that have a cost approximately equal
to the construction cost amount paid by Lessee. Lessee shall be entitled to all
investment tax credit, depreciation and other tax and ownership attributes
associated with the improvements so designated as Lessee's property, including
the right to remove such items from the Premises at any time.

Lessee shall be permitted during the installation of Lessee Improvements by
Lessor to install Lessee items such as telephone, security and moveable
partitions and other Lessee related work provided it does not interfere with or
delay Lessor's work or final approvals. ("Lessee's Work")

2.3 ACCEPTANCE OF PREMISES AND COVENANTS TO SURRENDER: Lessor represents that
the Premises shall be in good order and repair, and shall comply with all
requirements for occupancy as of the Commencement Date. Lessee agrees on the
last day of the Lease Term, or on the sooner termination of this Lease, to
surrender the Premises to Lessor in Good Condition and Repair except for insured
casualties, condemnations, and Hazardous Materials condemnation which is not the
responsibility of the Lessee under Section 33. Good Condition and Repair ("Good
Condition and Repair") shall not mean original condition, nor a condition as bad
as would exist, if ordinary wear and tear was not addressed by performance of
commercially reasonable maintenance. Instead, "Good Condition and Repair" shall
generally mean that the Premises are in the condition that one would expect the
Premises (as Substantially Completed by Lessor) to be in, if throughout the
Lease Term Lessee (i) uses and maintains the Premises in a commercially
reasonable manner and in accordance with the requirements of this Lease and (ii)
makes all Required Replacements. "Required Replacements" are the replacements to
worn-out equipment, fixtures and improvements that a commercially reasonable
owner-use would make. All of the following are to be in Good Condition and
Repair; (i) the interior walls and floors of all offices and other interior
areas, (ii) all suspended ceilings and any carpeting are to be cleaned, (iii)
all glazing, windows, doors and closures, plate glass and (iv) all electrical
systems including light fixtures and ballasts, plumbing and HVAC including
temperature control systems. . Lessee, on or before the end of the Lease Term or
sooner termination of this Lease, shall remove all its personal property and
trade fixtures from the Premises, and all such property not so removed shall be
deemed to be abandoned by Lessee. Lessee shall reimburse Lessor for all
disposition costs incurred by Lessor relative to Lessee's abandoned property. If
the Premises are not surrendered at the end of the Lease Term or earlier
termination of this Lease, Lessee shall indemnify Lessor against loss or
liability resulting from any delay caused by Lessee in surrendering the Premises
including, without limitation, any claims made by any succeeding Lessee founded
on such delay.



                                       11
<PAGE>   9

3. USES PROHIBITED: Lessee shall not commit, or suffer to be committed, any
waste upon the Premises, or any nuisance, or other act or thing which may
disturb the quiet enjoyment of any other tenant in or around the buildings in
which the subject Premises are located or allow any sale by auction upon the
Premises, or allow the Premises to be used for any improper, immoral, unlawful
or objectionable purpose, or place any loads upon the floor, walls, or ceiling
which may endanger the structure, or use any machinery or apparatus which will
in any manner vibrate or shake the Premises or the building of which it is a
part, or place any harmful liquids in the drainage system of the building. No
waste materials or refuse shall be dumped upon or permitted to remain upon any
part of the Premises outside of the building proper. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain on any
portion of the Premises outside of the building structure, unless approved by
the local, state federal or other applicable governing authority. Lessor
consents to Lessee's use of materials which are incidental to the normal,
day-to-day operations of any office user, such as copier fluids, cleaning
materials, etc., but this does not relieve Lessee of any of its obligations not
to contaminate the Premises and related real property or violate any Hazardous
Materials Laws.

4. ALTERATIONS AND ADDITIONS: Lessee shall not make, or suffer to be made, any
alteration or addition to said Premises, or any part thereof, without the
express, advance written consent of Lessor. All alterations and improvements
made to the Premises by Lessee shall be Lessee's property and Lessee may remove
such alterations and improvements, other than replacements or substitutions of
the improvements constructed at Lessor's expense (herein "Substitutions"), from
the Premises at any time. Lessee shall be entitled to all investment tax credit,
depreciation, other tax attributes, insurance proceeds, and condemnation
proceeds for the alterations and improvements made by Lessee which are not
Substitutions. Lessee agrees that it will not proceed to make such alterations
or additions until all required government permits have been obtained and after
having obtained consent from Lessor to do so, until five (5) days from the
receipt of such consent, so that Lessor may post appropriate notices to avoid
any liability to contractors or material suppliers for payment for Lessee's
improvements. Lessee shall at all times permit such notices to be posted and to
remain posted until the completion of work. At the end of the Lease Term or
earlier termination of this Lease, Lessee may be required by Lessor to remove
its special tenant improvements, all related equipment, and any additions or
alterations installed by Lessee at or during the Lease Term and Lessee shall
return the Premises to the condition that existed before the installation of the
tenant improvements. Notwithstanding the above, Lessor agrees to allow any
reasonable alterations and improvements and will notify Lessee at the time of
approval if such improvements or alterations are to be removed at the end of the
Lease Term or earlier termination of this Lease. Lessee may make nonstructural
improvements up to $25,000 in any calendar year without approval of Lessor
subject to other terms stated herein. Lessee may install or furnish in and to
the Premises all furniture, furnishings, fixtures, trade fixtures, equipment,
supplies, shelving, racking, bins and inventory which it requires for its use of
the Premises, and all of same will remain Lessee's property and may be removed
by Lessee at any time before expiration of the term provided that Lessee will
repair any damage caused by such removal.

5. MAINTENANCE OF PREMISES:

    (a) Lessee shall at its sole cost and expense keep, repair, and maintain the
    interior of the Premises, including, but not limited to, all lighting
    systems, temperature control systems, and plumbing systems in Good Condition
    and Repair, including any required replacements. Lessee shall maintain all
    wall surfaces and floor coverings in Good Condition and Repair, free of
    holes, gouges, or defacements and provide interior and exterior window
    washing as needed.

    (b) Lessor shall, at Lessee's expense, keep, repair, and maintain in Good
    Condition and Repair including replacements (based on a pro-rata share of
    (i) costs based on square footage or (ii) costs directly related to Lessee's
    use of the Premises) the following, which shall be included in the monthly
    CAC:



                                       12
<PAGE>   10

        1. The exterior of the building, any appurtenances and every part
        thereof, including but not limited to, glazing, sidewalks, parking
        areas, electrical systems, HVAC systems, roof membrane, and painting of
        exterior walls.
        2. The HVAC by a service contract with a licensed air conditioning and
        heating contractor which contract shall provide for a minimum of
        quarterly maintenance of all air conditioning and heating equipment at
        the Premises including HVAC repairs or replacements which are either
        excluded from such service contract or any existing equipment
        warranties.
        3. The landscaping by a landscape contractor to water, maintain, trim
        and replace, when necessary, any shrubbery and landscaping at the
        Premises.
        4. The roof membrane by a service contract with a licensed reputable
        roofing contractor which contract shall provide for a minimum of
        semi-annual maintenance, cleaning of storm gutters, drains, removing of
        debris, and trimming overhanging trees, repair of the roof and
        application of a finish coat every five years to the building at the
        Premises.
        5. Exterior pest control.
        6. Fire monitoring services.

        Notwithstanding the above, any single item of replacement that is not
included in the estimated CAC over fifteen Fifteen Thousand Dollars ($15,000)
shall be amortized (calculated in terms of months) over the estimated useful
life of the repair, replacement, alteration or improvement, not to exceed 10
years, commencing when the work is substantially complete, at Wells Fargo's
prime rate (as of the date) plus one percent (1%) and Lessee shall pay to Lessor
the monthly amortized amount which shall be added to the CAC.

    (c) Lessee hereby waives any and all rights to make repairs at the expense
    of Lessor as provided in Section 1942 of the Civil Code of the State of
    California, and all rights provided for by Section 1941 of said Civil Code.

    (d) Lessor, at its sole cost and expense, shall be responsible for the
    repair of any structural defects in the Premises including the roof
    structure (not membrane), exterior walls and foundation during the Lease
    Term.

6. INSURANCE:

    A) HAZARD INSURANCE: Lessee shall not use, or permit said Premises, or any
    part thereof, to be used, for any purpose other than that for which the
    Premises are hereby leased; and no use shall be made or permitted to be made
    of the Premises, nor acts done, which may cause a cancellation of any
    insurance policy covering the Premises, or any part thereof, nor shall
    Lessee sell or permit to be kept, used or sold, in or about said Premises,
    any article which may be prohibited by a fire and extended coverage
    insurance policy. Lessee shall comply with any and all requirements,
    pertaining to said Premises, of any insurance organization or company,
    necessary for the maintenance of reasonable fire and extended coverage
    insurance, covering the Premises. Lessor shall, at Lessee's sole cost and
    expense, purchase and keep in force fire and extended coverage insurance,
    covering loss or damage to the Premises in an amount equal to the full
    replacement cost of the Premises, as determined by Lessor, with proceeds
    payable to Lessor. In the event of a loss per the insurance provisions of
    this paragraph, Lessee shall be responsible for deductibles up to a maximum
    of $5,000 per occurrence. Lessee acknowledges that the insurance referenced
    in this paragraph does not include coverage for Lessee's personal property.

    B) LOSS OF RENTS INSURANCE: Lessor shall, at Lessee's sole cost and expense,
    purchase and maintain in full force and effect, a policy of rental loss
    insurance, in an amount equal to the amount of Rent payable by Lessee
    commencing within sixty (60)



                                       13
<PAGE>   11

    days of date of loss or on date of loss if reasonably available for the next
    ensuing one (1) year, as reasonably determined by Lessor with proceeds
    payable to Lessor ("Loss of Rents Insurance").

    C) LIABILITY AND PROPERTY DAMAGE INSURANCE: Lessee, as a material part of
    the consideration to be rendered to Lessor, hereby waives all claims against
    Lessor and Lessor's Agents for damages to goods, wares and merchandise, and
    all other personal property in, upon, or about the Premises, and for
    injuries to persons in, upon, or about the Premises, from any cause arising
    at any time, and Lessee will hold Lessor and Lessor's Agents exempt and
    harmless from any damage or injury to any person, or to the goods, wares,
    and merchandise and all other personal property of any person, arising from
    the use or occupancy of the Premises by Lessee, or from the failure of
    Lessee to keep the Premises in Good Condition and Repair, as herein
    provided. Lessee shall, at Lessee's sole cost and expense, purchase and keep
    in force a standard policy of commercial general liability insurance and
    property damage policy covering the Premises and all related areas insuring
    the Lessee having a combined single limit for both bodily injury, death and
    property damage in an amount not less than five million dollars
    ($5,000,000.00). The limits of said insurance shall not, however, limit the
    liability of Lessee hereunder. Lessee shall, at its sole cost and expense,
    comply with all of the legal insurance requirements of all local, municipal,
    state and federal authorities now in force, or which may hereafter be in
    force, pertaining to Lessee's use and occupancy of the said Premises.

    D) PERSONAL PROPERTY INSURANCE: Lessee shall obtain, at Lessee's sole cost
    and expense, a policy of fire and extended coverage insurance including
    coverage for direct physical loss special form, and a sprinkler leakage
    endorsement insuring the personal property of Lessee. The proceeds from any
    personal property damage policy shall be payable to Lessee.

All insurance policies required in 6 C) and 6 D) above shall: (i) provide for a
certificate of insurance evidencing the insurance required herein, being
deposited with Lessor ten (10) days prior to the Commencement Date, and upon
each renewal, such certificates shall be provided 30 days prior to the
expiration date of such coverage, (ii) be in a form reasonably satisfactory to
Lessor and shall provide the coverage required by Lessee in this Lease, (iii) be
carried with companies with a Best Rating of A minimum, (iv) specifically
provide that such policies shall not be subject to cancellation, reduction of
coverage, or other change except after 30 days prior written notice to Lessor,
and (v) name Lessor, Lessor's lender, and any other party with an insurable
interest in the Premises as additional insureds by endorsement to policy.

Lessee agrees to pay to Lessor, as additional Rent, on demand, the full cost of
the insurance polices referenced in 6 A) and 6 B) above as evidenced by
insurance billings to Lessor which shall be included in the CAC. If Lessee does
not occupy the entire property covered by any such policy, the insurance
premiums shall be allocated to the portion of the Premises occupied by Lessee on
a pro-rata square footage or other equitable basis, as determined by Lessor and
the liable party shall pay the deductible unless it applies to all Lessee's. It
is agreed that Lessee's obligation under this paragraph shall be prorated to
reflect the Commencement Date and the end of the Lease Term.

Lessor and Lessee hereby waive any rights each may have against the other
related to any loss or damage caused to Lessor or Lessee as the case may be, or
to the Premises or its contents, and which may arise from any insured risk
generally covered by fire and extended coverage insurance. The parties shall
provide that their respective insurance policies insuring the property or the
personal property include a waiver of any right of subrogation, which said
insurance company may have against Lessor or Lessee, as the case may be.

7. ABANDONMENT: Lessee shall not vacate or abandon the Premises at any time
during the Lease Term; and if Lessee shall abandon, vacate or surrender said
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging



                                       14
<PAGE>   12

to Lessee and left on the Premises shall be deemed to be abandoned, at the
option of Lessor. Notwithstanding the above, the Premises shall not be
considered vacated or abandoned if Lessee maintains the Premises in Good
Condition and Repair, provides security and is not in default.

8. FREE FROM LIENS: Lessee shall keep the subject Premises and the property in
which the subject Premises are situated, free from any and all liens including
but not limited to liens arising out of any work performed, materials furnished,
or obligations incurred by Lessee. However, the Lessor shall allow Lessee to
contest a lien claim, so long as the claim is discharged prior to any
foreclosure proceeding being initiated against the property and provided Lessee
provides Lessor a bond if the lien exceeds $5,000.

9. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Lessee shall, at its sole cost and
expense, comply with all of the requirements of all local, municipal, state and
federal authorities now in force, or which may hereafter be in force, pertaining
to the Premises, and shall faithfully observe in the use and occupancy of the
Premises all local and municipal ordinances and state and federal statutes now
in force or which may hereafter be in force. Lessee shall not be required to pay
for the construction of any single improvement required under this paragraph in
excess of $15,000, unless such improvement is required to comply with Lessee's
particular use of the Premises; if such improvement is not required due to
Lessee's particular use of the Premises and such improvement cost exceeds
$15,000, such improvement cost shall be amortized over the estimated useful life
of the improvement, not to exceed 12 years at Wells Fargo prime rate plus one
percent (1%). Lessee shall pay to Lessor the amortized costs of such improvement
on a monthly basis over the Lease Term as part of its base rent.

10. INTENTIONALLY OMITTED.

11. ADVERTISEMENTS AND SIGNS: Lessee shall not place or permit to be placed, in,
upon or about the Premises any unusual or extraordinary signs, or any signs not
approved by the city, local, state, federal or other applicable governing
authority. Lessee shall not place, or permit to be placed upon the Premises, any
signs, advertisements or notices without the written consent of the Lessor, and
such consent shall not be unreasonably withheld. A sign so placed on the
Premises shall be so placed upon the understanding and agreement that Lessee
will remove same at the end of the Lease Term or earlier termination of this
Lease and repair any damage or injury to the Premises caused thereby, and if not
so removed by Lessee, then Lessor may have the same removed at Lessee's expense.

12. UTILITIES: Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities supplied to the Premises. Any charges for sewer
usage, PG&E and telephone site service or related fees shall be the obligation
of Lessee and paid for by Lessee. If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion of all charges which
are jointly metered, the determination to be made by Lessor acting reasonably
and on any equitable basis. Lessor and Lessee agree that Lessor shall not be
liable to Lessee for any disruption in any of the utility services to the
Premises.

13. ATTORNEY'S FEES: In case suit should be brought for the possession of the
Premises, for the recovery of any sum due hereunder, because of the breach of
any other covenant herein, or to enforce, protect, or establish any term,
conditions, or covenant of this Lease or the right of either party hereunder,
the losing party shall pay to the Prevailing Party reasonable attorney's fees
which shall be deemed to have accrued on the commencement of such action and
shall be enforceable whether or not such action is prosecuted to judgment. The
term "Prevailing Party" shall mean the party that received substantially the
relief requested, whether by settlement, dismissal, summary judgment, judgment,
or otherwise.

14.1 DEFAULT: The occurrence of any of the following shall constitute a default
and breach of this Lease by Lessee: a) Any failure by Lessee to pay Rent or to
make any other payment required to be made by Lessee hereunder when due if not
cured within ten (10) days after written notice thereof by Lessor to Lessee; b)
The abandonment of the Premises by Lessee except as provided in



                                       15
<PAGE>   13

Section 7; c) failure by Lessee to observe and perform any other provision of
this Lease to be observed or performed by Lessee, where such failure continues
for thirty days after written notice thereof by Lessor to Lessee; provided,
however, that if the nature of such default is such that the same cannot be
reasonably cured within such thirty (30) day period, Lessee shall not be deemed
to be in default if Lessee shall, within such period, commence such cure and
thereafter diligently prosecute the same to completion; d) The making by Lessee
of any general assignment for the benefit of creditors; the filing by or against
Lessee of a petition to have Lessee adjudged a bankrupt or of a petition for
reorganization or arrangement under any law relating to bankruptcy which
persists for more than 60 days; e) the appointment of a trustee or receiver to
take possession of substantially all of Lessee's assets or Lessee's interest in
this Lease, or the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease.

14.2 SURRENDER OF LEASE: In the event of any such default by Lessee, then in
addition to any other remedies available to Lessor at law or in equity, Lessor
shall have the immediate option to terminate this Lease before the end of the
Lease Term and all rights of Lessee hereunder, by giving written notice of such
intention to terminate. In the event that Lessor terminates this Lease due to a
default of Lessee, then Lessor may recover from Lessee: a) the worth at the time
of award of any unpaid Rent which had been earned at the time of such
termination; plus b) the worth at the time of award of unpaid Rent which would
have been earned after termination until the time of award exceeding the amount
of such rental loss that the Lessee proves could have been reasonably avoided;
plus c) the worth at the time of award of the amount by which the unpaid Rent
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonably avoided; plus
d) any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform his obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and e) at Lessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable
California law. As used in (a) and (b) above, the "worth at the time of award"
is computed by allowing interest at the rate of Wells Fargo's prime rate plus
two percent (2%) per annum. As used in (c) above, the "worth at the time of
award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).

14.3 RIGHT OF ENTRY AND REMOVAL: In the event of any such default by Lessee,
Lessor shall also have the right, with or without terminating this Lease, to
re-enter the Premises and remove all persons and property from the Premises;
such property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Lessee.

14.4 ABANDONMENT: In the event of the abandonment, except as provided in Section
7, of the Premises by Lessee or in the event that Lessor shall elect to re-enter
as provided in paragraph 14.3 above or shall take possession of the Premises
pursuant to legal proceeding or pursuant to any notice provided by law, and
Lessor does not elect to terminate this Lease as provided in Section 14.2 above,
then Lessor may from time to time, without terminating this Lease, either
recover all Rent as it becomes due or relet the Premises or any part thereof for
such term or terms and at such rental rates and upon such other terms and
conditions as Lessor, in its sole discretion, may deem advisable with the right
to make alterations and repairs to the Premises. In the event that Lessor elects
to relet the Premises, then Rent received by Lessor from such reletting shall be
applied; first, to the payment of any indebtedness other than Rent due hereunder
from Lessee to Lessor; second, to the payment of any cost of such reletting;
third, to the payment of the cost of any alterations and repairs to the
Premises; fourth, to the payment of Rent due and unpaid hereunder; and the
residue, if any, shall be held by Lessor and applied to the payment of future
Rent as the same may become due and payable hereunder. Should that portion of
such Rent received from such reletting during any month, which is applied by the
payment of Rent hereunder according to the application procedure outlined above,
be less than the Rent payable during that month by Lessee hereunder, then Lessee
shall pay such deficiency to Lessor immediately upon demand therefor by Lessor.
Such deficiency shall be calculated and paid monthly. Lessee shall also pay to
Lessor, as soon as ascertained, any costs and expenses



                                       16
<PAGE>   14

incurred by Lessor in such reletting or in making such alterations and repairs
not covered by the rentals received from such reletting.

14.5 NO IMPLIED TERMINATION: No re-entry or taking possession of the Premises by
Lessor pursuant to Section 14.3 or Section 14.4 of this Lease shall be construed
as an election to terminate this Lease unless a written notice of such intention
is given to Lessee or unless the termination thereof is decreed by a court of
competent jurisdiction. Notwithstanding any reletting without termination by
Lessor because of any default by Lessee, Lessor may at any time after such
reletting elect to terminate this Lease for any such default.

15. SURRENDER OF LEASE: The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Lessor, terminate all or any existing subleases or sub tenancies,
or may, at the option of Lessor, operate as an assignment to him of any or all
such subleases or sub tenancies.

16. TAXES: Lessee shall pay and discharge punctually and when the same shall
become due and payable without penalty, all real estate taxes, personal property
taxes, taxes based on vehicles utilizing parking areas in the Premises, taxes
computed or based on rental income (other than federal, state and municipal net
income taxes), Environmental Surcharges, privilege taxes, excise taxes, business
and occupation taxes, school fees or surcharges, gross receipts taxes, sales
and/or use taxes, employee taxes, occupational license taxes, water and sewer
taxes, assessments (including, but not limited to, assessments for public
improvements or benefit), assessments for local improvement and maintenance
districts, and all other governmental impositions and charges of every kind and
nature whatsoever, regardless of whether now customary or within the
contemplation of the parties hereto and regardless of whether resulting from
increased rate and/or valuation, or whether extraordinary or ordinary, general
or special, unforeseen or foreseen, or similar or dissimilar to any of the
foregoing (all of the foregoing being hereinafter collectively called "Tax" or
"Taxes") which, at any time during the Lease Term, shall be applicable to Lessee
or which shall be a lien against the Premises, or shall become due and payable
and a lien or charge upon the Premises under or by virtue of any present or
future laws, statutes, ordinances, regulations, or other requirements of any
governmental authority whatsoever. Lessee shall only be responsible for its
proportionate share of any taxes assessed against Premises and not for any other
portion of the property. All taxes shall be prorated to the term of the lease
and only sums applicable to the term of the lease shall be included therein.
Lessee's obligation to pay taxes will not mean the following: fines, interest,
penalties (except as a result of actions of Lessee); franchise, estate, gift,
inheritance, successorship, capital levy, capital stock or transfer taxes:
income, excess profits, or other similar revenue tax, assessment, charge or levy
on rent; installments of taxes other than the then current installment;
installments which are not applicable to the term of the lease; cost and
expenses associated with contesting taxes (provided that Lessee's share of any
refund as a result of such contest may be reduced by Lessee's share of Lessor's
reasonable costs and expenses of obtaining such refund). The term "Environmental
Surcharge" shall include any and all expenses, taxes, charges or penalties
imposed by the Federal Department of Energy, Federal Environmental Protection
Agency, the Federal Clean Air Act, or any regulations promulgated thereunder, or
any other local, state or federal governmental agency or entity now or hereafter
vested with the power to impose taxes, assessments or other types of surcharges
as a means of controlling or abating environmental pollution or the use of
energy in regard to the use, operation or occupancy of the Premises, but will
not include costs directly related to investigation or remediation of
environmental conditions unless related to actions or omissions of Lessee as
provided in Section 33 or as a result of an area wide assessment not related to
a specific tenant. The term "Tax" shall include, without limitation, all taxes,
assessments, levies, fees, impositions or charges levied, imposed, assessed,
measured, or based in any manner whatsoever (i) in whole or in part on the Rent
payable by Lessee under this Lease, (ii) upon or with respect to the use,
possession, occupancy, leasing, operation or management of the Premises, (iii)
upon this transaction or any document to which Lessee is a party creating or
transferring an interest or an estate in the Premises, (iv) upon Lessee's
business operations conducted at the Premises, (v) upon, measured by or
reasonably attributable to the cost or value of Lessee's equipment, furniture,



                                       17
<PAGE>   15

fixtures and other personal property located on the Premises or the cost or
value of any leasehold improvements made in or to the Premises by or for Lessee,
regardless of whether title to such improvements shall be in Lessor or Lessee,
or (vi) in lieu of or equivalent to any Tax set forth in this Section 16. In the
event any such Taxes are payable by Lessor and it shall not be lawful for Lessee
to reimburse Lessor for such Taxes, then the Rent payable thereunder shall be
increased to net Lessor the same net rent after imposition of any such Tax upon
Lessor as would have been payable to Lessor prior to the imposition of any such
Tax. It is the intention of the parties that Lessor shall be free from all such
Taxes and all other governmental impositions and charges of every kind and
nature whatsoever. However, nothing contained in this Section 16 shall require
Lessee to pay any Federal or State income, franchise, estate, inheritance,
succession, transfer or excess profits tax imposed upon Lessor. If any general
or special assessment is levied and assessed against the Premises, Lessor agrees
to use its best reasonable efforts to cause the assessment to become a lien on
the Premises securing repayment of a bond sold to finance the improvements to
which the assessment relates which is payable in installments of principal and
interest over the maximum term allowed by law. It is understood and agreed that
Lessee's obligation under this paragraph will be prorated to reflect the
Commencement Date and the end of the Lease Term. It is further understood that
if Taxes cover more than the Premises and Lessee does not occupy the entire
property to which such taxes shall apply, the Taxes will be allocated to the
portion of the Premises occupied by Lessee based on a pro-rata square footage or
other equitable basis, as determined by Lessor. All tax payment by Lessee
required herein shall be paid as part of the monthly CAC.

Subject to any limitations or restrictions imposed by any deeds of trust or
mortgages now or hereafter covering or affecting the Premises, Lessee shall have
the right to contest or review the amount or validity of any Tax by appropriate
legal proceedings but which is not to be deemed or construed in any way as
relieving, modifying or extending Lessee's covenant to pay such Tax at the time
and in the manner as provided in this Section 16. However, as a condition of
Lessee's right to contest, if such contested Tax is not paid before such contest
and if the legal proceedings shall not operate to prevent or stay the collection
of the Tax so contested, Lessee shall, before instituting any such proceeding,
protect the Premises and the interest of Lessor and of the beneficiary of a deed
of trust or the mortgagee of a mortgage affecting the Premises against any lien
upon the Premises by a surety bond, issued by an insurance company acceptable to
Lessor and in an amount equal to one and one-half (1 1/2) times the amount
contested or, at Lessor's option, the amount of the contested Tax and the
interest and penalties in connection therewith. Any contest as to the validity
or amount of any Tax, whether before or after payment, shall be made by Lessee
in Lessee's own name, or if required by law, in the name of Lessor or both
Lessor and Lessee. Lessee shall defend, indemnify and hold harmless Lessor from
and against any and all costs or expenses, including attorneys' fees, in
connection with any such proceedings brought by Lessee, whether in its own name
or not. Lessee shall be entitled to retain any refund of any such contested Tax
and penalties or interest thereon, which have been paid by Lessee. Nothing
contained herein shall be construed as affecting or limiting Lessor's right to
contest any Tax at Lessor's expense.

17. NOTICES: Unless otherwise provided for in this Lease, any and all written
notices or other communication (the "Communication") to be given in connection
with this Lease shall be given in writing and shall be given by personal
delivery, facsimile transmission or by mailing by registered or certified mail
with postage thereon or recognized overnight courier, fully prepaid, in a sealed
envelope addressed to the intended recipient as follows:

(a)     to the Lessor at:    10050 Bandley Drive
                             Cupertino, California 95014
                             Attention: Carl E. Berg


(b)     to the Lessee at:    5850 Hellyer Ave.



                                       18
<PAGE>   16

                             San Jose, California 95119
                             Attention: C.F.O.

(c)     Prior to Commencement

        to the leasee at:    6840 Via Del Oro, Suite 290
                             San Jose, CA 95119
                             Attn: CFO

or such other addresses, or individual as may be designated by a Communication
given by a party to the other parties as aforesaid. Any Communication given by
personal delivery shall be conclusively deemed to have been given and received
on a date it is so delivered at such address provided that such date is a
business day, otherwise on the first business day following its receipt, and if
given by registered or certified mail, on the day on which delivery is made or
refused or if given by recognized overnight courier, on the first business day
following deposit with such overnight courier and if given by facsimile
transmission, on the day on which it was transmitted provided such day is a
business day, failing which, on the next business day thereafter.

18. ENTRY BY LESSOR: Lessee shall permit Lessor and its agents to enter into and
upon said Premises at all reasonable times using the minimum amount of
interference and inconvenience to Lessee and Lessee's business, subject to any
security regulations of Lessee, for the purpose of inspecting the same or for
the purpose of maintaining the building in which said Premises are situated, or
for the purpose of making repairs, alterations or additions to any other portion
of said building, including the erection and maintenance of such scaffolding,
canopies, fences and props as may be required, without any rebate of Rent and
without any liability to Lessee for any loss of occupation or quiet enjoyment of
the Premises; and shall permit Lessor and his agents, at any time within ninety
(90) days prior to the end of the Lease Term, to place upon said Premises any
usual or ordinary "For Sale" or "For Lease" signs and exhibit the Premises to
prospective tenants at reasonable hours.

19. DESTRUCTION OF PREMISES: In the event of a partial destruction of the said
Premises during the Lease Term from any cause which is covered by Lessor's
property insurance, Lessor shall forthwith repair the same, provided such
repairs can be made within one hundred eighty (180) days after receipt of
building permit under the laws and regulations of State, Federal, County, or
Municipal authorities, but such partial destruction shall in no way annul or
void this Lease, except that Lessee shall be entitled to a proportionate
reduction of Rent while such repairs are being made to the extent of payments
received by Lessor under its Loss of Rents Insurance coverage (coverage shall
start within sixty (60) days and last up to twelve (12) months after start).
With respect to any partial destruction which Lessor is obligated to repair or
may elect to repair under the terms of this paragraph, the provision of Section
1932, Subdivision 2, and of Section 1933, Subdivision 4, of the Civil Code of
the State of California are waived by Lessee. In the event that the building in
which the subject Premises may be situated is destroyed to an extent greater
than fifty percent (50%) of the replacement cost thereof, Lessor may, at its
sole option, elect to terminate this Lease, whether the subject Premises is
insured or not. A total destruction of the building in which the subject
Premises are situated shall terminate this Lease. Notwithstanding the above,
Lessor is only obligated to repair or rebuild to the extent of available
insurance proceeds including any deductible amount. Should Lessor determine that
insufficient or no insurance proceeds are available for repair or reconstruction
of Premises (for any reason other than Lessor's failure to carry the insurance
required by Section 6), Lessor, at its sole option, may terminate the Lease.
Lessee shall have the option of continuing this Lease by agreeing to pay all
repair costs to the subject Premises. If the Premises or the building are so
damaged or made unusable by fire or casualty that same cannot be restored and
made suitable and safe within 180 days from such damage or destruction, Lessee
may terminate the Lease effective as of the date of such fire or casualty by
written notice given to Lessor, whereupon the Lease will terminate and all rent
and other charges then due under the lease will be apportioned as of the date of
such fire casualty.



                                       19
<PAGE>   17

20. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this Lease, or any
interest therein, and shall not sublet the said Premises or any part thereof, or
any right or privilege appurtenant thereto, or cause any other person or entity
(a bona fide successor - in interest, subsidiary or affiliate of Lessee
excepted) to occupy or use the Premises, or any portion thereof, without the
advance written consent of Lessor. Any such assignment or subletting without
such consent shall be void, and shall, at the option of the Lessor, terminate
this Lease. This Lease shall not, or shall any interest therein, be assignable,
as to the interest of Lessee, by operation of law, without the written consent
of Lessor. Notwithstanding Lessor's obligation to provide reasonable approval,
Lessor reserves the right to withhold its consent for any proposed sublessee or
assignee of Lessee if the proposed sublessee or assignee is a user or generator
of Hazardous Materials at the Premises. If Lessee desires to assign its rights
under this Lease or to sublet, all or a portion of the subject Premises, over
20,000 square feet or for a term including all options of thirty six (36) months
or more, to a party other than a bona fide successor - in interest, subsidiary
or affiliate of Lessee, Lessee shall first notify Lessor of the proposed terms
and conditions of such assignment or subletting. Lessor shall have the right of
first refusal to enter into a direct Lessor-lessee relationship with such party
under such proposed terms and conditions, in which event Lessee shall be
relieved of its obligations hereunder to the extent of the Lessor - Lessee
relationship entered into between Lessor and such third party. Notwithstanding
the foregoing, Lessee may assign this Lease to a successor in interest or other
legal entity which controls, is controlled by, or is under common control with
Lessee, whether by merger or acquisition, provided there is no substantial
reduction in the net worth of the resulting entity and the resulting entity is
not a user or generator of Hazardous Materials at the Premises. Whether or not
Lessor's consent to a sublease or assignment is required, in the event of any
sublease or assignment, Lessee shall be and shall remain primarily liable for
the performance of all conditions, covenants, and obligations of Lessee
hereunder and, in the event of a default by an assignee or sublessee, Lessor may
proceed directly against the original Lessee hereunder and/or any other
predecessor of such assignee or sublessee without the necessity of exhausting
remedies against said assignee or sublessee.

21. CONDEMNATION: If any part of the Premises shall be taken for any public or
quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and a part thereof remains which is susceptible of
occupation hereunder, this Lease shall as to the part so taken, terminate as of
the date title vests in the condemnor or purchaser, and the Rent payable
hereunder shall be adjusted so that the Lessee shall be required to pay for the
remainder of the Lease Term only that portion of Rent as the value of the part
remaining, if Lessor determines that it will no longer lease the Premises to
Lessee or anyone else. The rental adjustment resulting will be computed at the
same Rental rate for the remaining part not taken; however, Lessor shall have
the option to terminate this Lease as of the date when title to the part so
taken vests in the condemnor or purchaser. If all of the Premises, or such part
thereof be taken so that there does not remain a portion susceptible for
occupation hereunder, this Lease shall thereupon terminate, for the purposes
hereof, a portion susceptible for occupancy shall mean a portion of the Premises
in excess of 85% thereof. If a part or all of the Premises be taken, all
compensation awarded upon such taking shall be payable to the Lessor. Lessee may
file a separate claim and be entitled to any award granted to Lessee.

22. EFFECTS OF CONVEYANCE: The term "Lessor" as used in this Lease, means only
the owner for the time being of the land and building constituting the Premises,
so that, in the event of any sale of said land or building, or in the event of a
Lease of said building, Lessor shall be and hereby is entirely freed and
relieved of all covenants and obligations of Lessor hereunder, and it shall be
deemed and construed, without further agreement between the parties and the
purchaser of any such sale, or the Lessor of the building, that the purchaser or
lessor of the building has assumed and agreed to carry out any and all covenants
and obligations of the Lessor hereunder. If any security is given by Lessee to
secure the faithful performance of all or any of the covenants of this Lease on
the part of Lessee, Lessor may transfer and deliver the security, as such, to
the purchaser at any such sale of the building, and thereupon the Lessor shall
be discharged from any further liability.



                                       20
<PAGE>   18

23. SUBORDINATION: This Lease, in the event Lessor notifies Lessee in writing,
shall be subordinate to any ground lease, deed of trust, or other hypothecation
for security now or hereafter placed upon the real property at which the
Premises are a part and to any and all advances made on the security thereof and
to renewals, modifications, replacements and extensions thereof. Lessee agrees
to promptly execute any commercially reasonable documents which may be required
to effectuate such subordination. Notwithstanding such subordination, if Lessee
is not in default and so long as Lessee shall pay the Rent and observe and
perform all of the provisions and covenants required under this Lease, Lessee's
right to quiet possession of the Premises and Lessee's right and remedies under
this Lease shall not be disturbed or effected by any subordination, and each
successor to Lessor's interest in the Lease (by foreclosure, deed-in-lieu of
foreclosure, or otherwise) shall be bound by and shall perform the obligations
of the Lessor to be performed after the date it acquires the Lessor's interest
in the Lease (except that the successor shall not be liable for any prior
defaults of the Lessor, the return of any security deposit not transferred tot
he successor, nor for the cost of restoring the Premises following a peril or
condemnation in excess of the insurance and condemnation in the excess of the
insurance and condemnation proceeds actually received).


24. WAIVER: The waiver by Lessor or Lessee of any breach of any term, covenant
or condition, herein contained shall not be construed to be a waiver of such
term, covenant or condition or any subsequent breach of the same or any other
term, covenant or condition therein contained. The subsequent acceptance of Rent
hereunder by Lessor shall not be deemed to be a waiver of Lessee's breach of any
term, covenant, or condition of the Lease.

25. HOLDING OVER: Any holding over after the end of the Lease Term requires
Lessor's written approval prior to the end of the Lease Term, which,
notwithstanding any other provisions of this Lease, Lessor may withhold. Such
holding over shall be construed to be a tenancy at sufferance from month to
month. Lessee shall pay to Lessor monthly base rent equal to one and one-half
(1.5) times the monthly base rent installment due in the last month of the Lease
Term and all other additional rent and all other terms and conditions of the
Lease shall apply, so far as applicable. Holding over by Lessee without written
approval of Lessor shall subject Lessee to the liabilities and obligations
provided for in this Lease and by law, including, but not limited to those in
Section 2 of this Lease. Lessee shall indemnify and hold Lessor harmless against
any loss or liability resulting from any delay caused by Lessee in surrendering
the Premises, including without limitation, any claims made or penalties
incurred by any succeeding lessee or by Lessor. No holding over shall be deemed
or construed to exercise any option to extend or renew this Lease in lieu of
full and timely exercise of any such option as required hereunder.

26. LESSOR'S LIABILITY: If Lessee should recover a money judgment against Lessor
arising in connection with this Lease, the judgment shall be satisfied only out
of the Lessor's interest in the Premises and neither Lessor or any of its
partners shall be liable personally for any deficiency.

27. ESTOPPEL CERTIFICATES: Lessee or Lessor shall at any time during the Lease
Term, upon not less than ten (10) business days prior written notice, execute
and deliver a statement in writing certifying that, this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification) and the dates to which the Rent and other charges have been paid
in advance, if any, and acknowledging that there are not, to their knowledge,
any uncured defaults on the part of Lessor hereunder or specifying such defaults
(if they are claimed). Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises. Failure to deliver such a
statement within such time shall be conclusive upon the Lessee that (a) this
Lease is in full force and effect, without modification except as may be
represented in the certificate presented for execution; by Lessor, and (b) there
are no uncured defaults in performance.

28. TIME: Time is of the essence of the Lease.


                                       21
<PAGE>   19

29. CAPTIONS: The headings on titles to the paragraphs of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part thereof. This instrument contains all of the
agreements and conditions made between the parties hereto and may not be
modified orally or in any other manner than by an agreement in writing signed by
all of the parties hereto or their respective successors in interest.

30. PARTY NAMES: Landlord and Tenant may be used in various places in this Lease
as a substitute for Lessor and Lessee respectively.

31. EARTHQUAKE INSURANCE: As a condition of Lessor agreeing to waive the
requirement for earthquake insurance, Lessee agrees that it will pay, as
additional Rent, which shall be included in the monthly CAC, an amount not to
exceed Twenty-one Thousand Two Hundred Dollars ($21,200) per year for earthquake
insurance if Lessor desires to obtain some form of earthquake insurance in the
future, if and when available, on terms acceptable to Lessor as determined in
the sole and absolute discretion of Lessor. Lessee shall have no obligation for
a deductible in excess of $100,000 on an earthquake insurance.

32. HABITUAL DEFAULT: Notwithstanding anything to the contrary contained in
Section 14 herein, Lessor and Lessee agree that if Lessee shall have defaulted
in the payment of Rent for three or more times during any twelve month period
during the Lease Term, then such conduct shall, at the option of the Lessor,
represent a separate event of default which cannot be cured by Lessee. Lessee
acknowledges that the purpose of this provision is to prevent repetitive
defaults by the Lessee under the Lease, which constitute a hardship to the
Lessor and deprive the Lessor of the timely performance by the Lessee hereunder.

33. HAZARDOUS MATERIALS

33.1 DEFINITIONS: As used in this Lease, the following terms shall have the
following meaning:

        a. The term "Hazardous Materials" shall mean (i) polychlorinated
        biphenyls; (ii) radioactive materials and (iii) any chemical, material
        or substance now or hereafter defined as or included in the definitions
        of "hazardous substance" "hazardous water", "hazardous material",
        "extremely hazardous waste", "restricted hazardous waste" under Section
        25115, 25117 or 15122.7, or listed pursuant to Section 25140 of the
        California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous
        Waste Control Law), (ii) defined as "hazardous substance" under Section
        25316 of the California Health and Safety Code, Division 20, Chapter 6.8
        (Carpenter-Presley-Tanner Hazardous Substances Account Act), (iii)
        defined as "hazardous material", "hazardous substance", or "hazardous
        waste" under Section 25501 of the California Health and Safety Code,
        Division 20, Chapter 6.95 (Hazardous Materials Release, Response, Plans
        and Inventory), (iv) defined as a "hazardous substance" under Section
        25181 of the California Health and Safety Code, Division 201, Chapter
        6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi)
        asbestos, (vii) listed under Article 9 or defined as "hazardous" or
        "extremely hazardous" pursuant to Article II of Title 22 of the
        California Administrative Code, Division 4, Chapter 20, (viii) defined
        as "hazardous substance" pursuant to Section 311 of the Federal Water
        Pollution Control Act, 33 U.S.C. 1251 et seq. or listed pursuant to
        Section 1004 of the Federal Water Pollution Control Act (33 U.S.C.
        1317), (ix) defined as a "hazardous waste", pursuant to Section 1004 of
        the Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 et
        seq., (x) defined as "hazardous substance" pursuant to Section 101 of
        the Comprehensive Environmental Responsibility Compensations, and
        Liability Act, 42 U.S.C. 9601 et seq., or (xi) regulated under the Toxic
        Substances Control Act, 156 U.S.C. 2601 et seq. b. The term "Hazardous
        Materials Laws" shall mean any local, state and federal laws, rules,
        regulations, or ordinances relating to the use, generation,
        transportation, analysis, manufacture, installation, release, discharge,
        storage or disposal of Hazardous Material.



                                       22
<PAGE>   20

        c. The term "Lessor's Agents" shall mean Lessor's agents,
        representatives, employees, contractors, subcontractors, directors,
        officers and partners. d. The term "Lessee's Agents" shall mean Lessee's
        agents, representatives, employees, contractors, subcontractors,
        directors, officers, partners, invitees, former employees or relatives
        of employees and former employees.

33.2 LESSEE'S RIGHT TO INVESTIGATE: Lessee shall be entitled to cause such
inspection, soils and ground water tests, and other evaluations to be made of
the Premises as Lessee deems necessary regarding (i) the presence and use of
Hazardous Materials in or about the Premises, and (ii) the potential for
exposure to Lessee's employees and other persons to any Hazardous Materials used
and stored by previous occupants in or about the Premises. Lessee shall provide
Lessor with copies of all inspections, tests and evaluations. Lessee shall
indemnify, defend and hold Lessor harmless from any cost, claim or expense
arising from such entry by Lessee or from the performance of any such
investigation by such Lessee.

33.3 LESSOR'S REPRESENTATIONS: Lessor hereby represents and warrants to the best
of Lessor's knowledge that the Premises are, as of the date of this Lease, in
compliance with all Hazardous Material Laws.

33.4 LESSEE'S OBLIGATION TO INDEMNIFY: Lessee, at its sole cost and expense,
shall indemnify, defend, protect and hold Lessor and Lessor's Agents harmless
from and against any and all cost or expenses, including those described under
subparagraphs i, ii and iii herein below set forth, arising from or caused in
whole or in part, directly or indirectly by:

        a. Lessee's or Lessee's Agents' use, analysis, storage, transportation,
        disposal, release, threatened release, discharge or generation of
        Hazardous Material to, in, on, under, about or from the Premises in
        violation of applicable laws; or
        b. Lessee's or Lessee's Agents failure to comply with Hazardous Material
        laws; or
        c. Any release of Hazardous Material, in, on, under, about, from or onto
        the Premises caused by or occurring as a result of acts or omissions of
        Lessee or Lessee's Agents or occurring during the Lease Term, except
        contamination where the source is from off the Premises or not arising
        from or caused by Lessee or Lessee's Agents.

The cost and expenses indemnified against include, but are not limited to the
following:

        i. Any and all claims, actions, suits, proceedings, losses, damages,
        liabilities, deficiencies, forfeitures, penalties, fines, punitive
        damages, cost or expenses;
        ii. Any claim, action, suit or proceeding for personal injury (including
        sickness, disease, or death), tangible or intangible property damage,
        compensation for lost wages, business income, profits or other economic
        loss, damage to the natural resources of the environment, nuisance,
        pollution, contamination, leaks, spills, release or other adverse
        effects on the environment;
        iii. The cost of any repair, clean-up, treatment or detoxification of
        the Premises necessary to bring the Premises into compliance with all
        Hazardous Material Laws, including the preparation and implementation of
        any closure, disposal, remedial action, or other actions with regard to
        the Premises, and expenses (including, without limitation, reasonable
        attorney's fees and consultants fees, investigation and laboratory fees,
        court cost and litigation expenses).

33.5 LESSEE'S OBLIGATION TO REMEDIATE CONTAMINATION: Lessee shall, at its sole
cost and expense, promptly take any and all action necessary as required by
applicable Hazardous Materials Laws to remediate contamination of the Premises
by Hazardous Materials for which Lessee or Lessee's Agents is responsible under
Article 33.4

33.6 OBLIGATION TO NOTIFY: Lessor and Lessee shall each give written notice to
the other as soon as reasonably practical of (i) any communication received from
any governmental authority concerning Hazardous Material which related to the
Premises and (ii) any contamination of the Premises by Hazardous Materials which
constitutes a violation of any Hazardous Material Laws.



                                       23
<PAGE>   21

33.7 SURVIVAL: The obligations of Lessee under this Section 33 shall survive the
Lease Term or earlier termination of this Lease.

33.8 CERTIFICATION AND CLOSURE: On or before the end of the Lease Term or
earlier termination of this Lease, Lessee shall deliver to Lessor a
certification executed by Lessee stating that, to the best of Lessee's
knowledge, there exists no violation of Hazardous Material Laws resulting from
Lessee's obligation in Paragraph 33. If pursuant to local ordinance, state or
federal law, Lessee is required, at the expiration of the Lease Term, to submit
a closure plan for the Premises to a local, state or federal agency, then Lessee
shall furnish to Lessor a copy of such plan.

33.9 PRIOR HAZARDOUS MATERIALS: Notwithstanding anything to the contrary in this
Lease. Lessee shall have no obligation to clean up comply with any Hazardous
Materials Laws or to hold Lessor harmless or reimburse Lessor with respect to
any Hazardous Material or wastes discovered on the Premises which were
introduced into, in, on, about, from or under the Premises prior or subsequent
to the Lease Term or any Hazardous Materials from sources off Premises provided
that the violation of Hazardous Materials Laws were not caused or did not occur
as a result of acts or omissions of Lessee or Lessee's Agents.

34. BROKERS: Lessor and Lessee represent that they have not utilized or
contacted a real estate broker or finder with respect to this Lease other than
Blickman Turkus ("BT") and Lessee agrees to indemnify and hold Lessor harmless
against any claim, cost, liability or cause of action asserted by any broker or
finder claiming through Lessee other than BT. Lessor shall at its sole cost and
expense pay the brokerage commission per Lessor's standard commission schedule
to BT in connection with this transaction. Lessor represents and warrants that
it has not utilized or contacted a real estate broker or finder with respect to
this Lease other than BT and Lessor agrees to indemnify and hold Lessee harmless
against any claim, cost, liability or cause of action asserted by any broker or
finder claiming through Lessor.

35. OPTION TO EXTEND: A. Option: Lessor hereby grants to Lessee one (1) option
to extend the Lease Term, for a period of five (5) years, on the following terms
and conditions, which shall apply separately to each option to extend:

        (i) Lessee shall give Lessor written notice of its exercise of one of
        its options to extend no earlier than twenty-four (24) calendar months,
        nor later than nine (9) calendar months before the Lease Term would end
        but for said exercise. Time is of the essence.

        (ii) Lessee may not extend the Lease Term pursuant to any option granted
        by this section 35 if Lessee is in default as of the date of the
        exercise of its option. If Lessee has committed a monetary or material
        non-monetary default as defined in Section 14 that has not been cured or
        waived by Lessor in writing by the date that any extended term is to
        commence, then Lessor may elect not to allow the Lease Term to be
        extended, notwithstanding any notice given by Lessee of an exercise of
        this option to extend.

        (iii) Lessee must exercise each option consecutively, and if it fails to
        exercise any one option, it waives the right to exercise the subsequent
        option and the Lease Term shall not be extended further.

        (iv) All terms and conditions of this Lease shall apply during each
        extended term, except that the Base Rent and rental increases for each
        extended term shall be determined as provided in Section 35 (B) below

        (iv) Lessee must provide Lessor written notice of its exercise of its
        options as provided hereunder at least nine (9) months before the Lease
        Term would end but for said exercise for purposes of negotiating rental
        terms. Lessee may withdraw its notice of exercise of an extension option
        for any reason prior to six (6) months before the Lease Term



                                       24
<PAGE>   22

        would end but for said exercise. Lessor shall provide Lessee with
        Lessor's proposed base monthly rent for the option period within twenty
        (20) days of Lessee's request. However, once Lessee delivers a notice of
        exercise of an option to extend the Lease Term it may not be withdrawn
        unless notice in writing is provided to Lessor at least six (6) months
        before the Lease Term would end but for said exercise and, subject to
        the provisions of this Section 35, such notice shall operate to rescind
        Lessee's election to extend the Lease Term. Upon any extension of the
        Lease Term pursuant to this Section 35, the term "Lease Term" as used in
        this Lease shall thereafter include the then extended term.

        (v) Once Lessee delivers a notice of exercise of one of its options to
        extend the Lease Term, Lessee may not withdraw such exercise and subject
        to the provisions of this Section 35, such notice shall operate to
        extend the Lease Term. Upon any extension of the Lease Term pursuant to
        this Section 35, the term "Lease Term" as used in this Lease shall
        thereafter include the then extended term.

        (vi) The option rights of Gadzoox Networks, Inc. granted under this
        Section 35 are granted for Gadzoox Networks, Inc.'s personal benefit and
        may not be assigned or transferred by Gadzoox Networks, Inc. or
        exercised if Gadzoox Networks, Inc. is not occupying the Premises at the
        time of exercise. (bona fide successor - in interest, subsidiary or
        affiliate or other legal entity which controls, is controlled by, or is
        under common control of Gadzoox Networks, Inc. excepted)

B. Extended Term Rent - Option Period: The monthly base Rent for the Premises
during the extended term shall equal the fair market monthly base Rent for the
Premises as of the commencement date of the extended term, but in no case, less
than the Rent during the last month of the prior Lease term. Promptly upon
Lessee's exercise of the option to extend, Lessee and Lessor shall meet and
attempt to agree on the fair market monthly base Rent for the Premises as of the
commencement date of the extended term. In the event the parties fail to agree
upon the amount of the monthly base Rent for the extended term prior to
commencement thereof, the monthly base Rent for the extended term shall be
determined by appraisal in the manner hereafter set forth; provided, however,
that in no event shall the monthly Rent for the extended term be less than in
the immediate preceding period. Annual base rent increases during the extended
term shall be four percent (4%) per year. In the event it becomes necessary
under this paragraph to determine the fair market monthly base Rent of the
Premises by appraisal, Lessor and Lessee each shall appoint a real estate
appraiser who shall be a member of the American Institute of Real Estate
Appraiser ("AIREA") and such appraisers shall each determine the fair market
monthly Rent for the Premises taking into account the value of the Premises and
the amenities provided by the outside areas, the common areas, and the Building,
and prevailing comparable Rentals in the area. Such appraisers shall, within
twenty (20) business days after their appointment, complete their appraisals and
submit their appraisal reports to Lessor and Lessee. If the fair market monthly
Rent of the Premises established in the two (2) appraisals varies by five
percent (5%) or less of the higher Rent, the average of the two shall be
controlling. If said fair market monthly Rent varies by more than five percent
(5%) of the higher Rental, said appraisers, within ten (10) days after
submission of the last appraisal, shall appoint a third appraiser who shall be a
member of the AIREA and who shall also be experienced in the appraisal of Rent
values and adjustment practices for commercial properties in the vicinity of the
Premises. Such third appraiser shall, within twenty (20) business days after his
appointment, determine by evaluating the first two appraisals which more
accurately reflects the fair market monthly Rent of the Premises taking into
account the same factors referred to above, and submit his appraisal report to
Lessor and Lessee. If the two appraisers appointed by Lessor and Lessee are
unable to agree upon a third appraiser within the required period in accordance
with the foregoing, application shall be made within twenty (20) days thereafter
by either Lessor or Lessee to AIREA, which shall appoint a member of said
institute willing to serve as appraiser. The cost of all appraisals under this
subparagraph shall be borne equally be Lessor and Lessee. If rent is not
determined at least ten (10) days before the date which is six (6) months prior
to expiration of the Lease Term, the deadline for



                                       25
<PAGE>   23

Lessee's right to rescind its election to renew will be extended ten (10) days
after the parties shall agree upon the base rent for the renewal term or ten
(10) days after Lessee receives notice of determination of the third appraiser.

36. APPROVALS: Whenever in this Lease the Lessor's or Lessee's consent is
required, such consent shall not be unreasonably or arbitrarily withheld or
delayed. In the event that the Lessor or Lessee does not respond to a request
for any consents which may be required of it in this Lease within ten business
days of the request of such consent in writing by the Lessee or Lessor, such
consent shall be deemed to have been given by the Lessor or Lessee.

37. AUTHORITY: Each party executing this Lease represents and warrants that he
or she is duly authorized to execute and deliver the Lease. If executed on
behalf of a corporation, that the Lease is executed in accordance with the
by-laws of said corporation (or a partnership that the Lease is executed in
accordance with the partnership agreement of such partnership), that no other
party's approval or consent to such execution and delivery is required, and that
the Lease is binding upon said individual, corporation (or partnership) as the
case may be in accordance with its terms.

38. INDEMNIFICATION OF LESSOR: Except to the extent caused by the sole
negligence or willful misconduct of Lessor or Lessor's Agents, Lessee shall
defend, indemnify and hold Lessor harmless from and against any and all
obligations, losses, costs, expenses, claims, demands, attorney's fees,
investigation costs or liabilities on account of, or arising out of the use, or
occupancy of the Premises or any act or omission to act of Lessee or Lessee's
Agents, including, without limitation, any of the foregoing provisions arising
out of the use, generation, manufacture, installation, release, discharge,
storage, or disposal of Hazardous Materials by Lessee or Lessee's Agents. It is
understood that Lessee is and shall be in control and possession of the Premises
and that Lessor shall in no event be responsible or liable for any injury or
damage or injury to any person whatsoever, happening on, in, about, or in
connection with the Premises, or for any injury or damage to the Premises or any
part thereof unless caused by the sole negligence or willfulness conduct of
Lessor or Lessor's Agents, Lessee releases and indemnifies Lessor from all other
liability arising out of the condition, use or occupancy of the Premises.. This
Lease is entered into on the express condition that Lessor shall not be liable
for, or suffer loss by reason of injury to person or property, from whatever
cause, which in any way may be connected with the use, condition or occupancy of
the Premises or personal property located herein unless caused by the sole
negligence or willfulness conduct of Lessor or Lessor's Agents, Lessee releases
and indemnifies Lessor from all other liability arising out of the condition,
use or occupancy of the Premises. The provisions of this Lease permitting Lessor
to enter and inspect the Premises are for the purpose of enabling Lessor to
become informed as to whether Lessee is complying with the terms of this Lease
and Lessor shall be under no duty to enter, inspect or to perform any of
Lessee's covenants set forth in this Lease. Lessee shall further indemnify,
defend and hold harmless Lessor from and against any and all claims arising from
any breach or default in the performance of any obligation on Lessee's part to
be performed under the terms of this Lease. The provisions of Section 38 shall
survive the Lease Term or earlier termination of this Lease with respect to any
damage, injury or death occurring during the Lease Term.

39. SUCCESSORS AND ASSIGNS: The covenants and conditions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all of the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.

40. RIGHT OF FIRST OFFER TO LEASE: After November 1, 1999, prior to Lessor
accepting any offer to lease future buildings and improvements on the Expansion
Land (defined below), or prior to Lessor making any offer to lease future
building and improvements on the Expansion Land, Lessor shall give Lessee
written notice of such offer and Lessee shall have the opportunity to lease the
Expansion Land or the part thereof offered for lease on the terms and conditions
set forth in notice of offer. Lessee shall have the option, which may be
exercised by written notice to Lessor at any time within thirty (30) days from
the receipt of the Lessor's notice to agree to lease the portion of the
Expansion Land specified in the notice to Lessee. If Lessee



                                       26
<PAGE>   24

fails to exercise its option within the 30-day period, Lessor shall have 270
days thereafter to lease the Expansion Land specified in the notice, but in no
case on terms more favorable than those offered to Lessee.

If Lessor elects, within 270 days of Lessor's notice, to lease the Expansion
Land to a third party on terms more favorable to the third party lessee than the
terms set forth in Section 44, then Lessor must re-offer the Expansion Land to
Lessee on the same terms and conditions offered to the third party buyer
("Lessor's Second Notice"). Lessee shall have five (5) business days from
Lessee's receipt of Lessor's Second Notice to elect to lease the Expansion Land.
If Lessee does not respond in writing accepting all terms and conditions, Lessor
shall thereafter be entitled to lease the Expansion Land to the third party on
the terms and conditions set forth in Lessor's Second Notice or on other terms
and conditions at least as favorable to Lessor as said terms and conditions in
Lessor's Second Notice for a period of 270 days after which Lessee's Right of
First Offer to Lease shall again be in effect for the Premises or individual
Expansion Land.

41. EXPANSION AGREEMENTS: Lessor and Lessee agree to the following related to
future facilities expansion: (a) Lessor shall hold that portion of the Assessor
Parcel 678-14-81, 58, 33, 62 and 74 as shown on the attached Exhibit A that is
not a part of the Premises ("Expansion Land") without carry cost to Lessee until
November 1, 1999. After November 1, 1999, Lessor will grant Lessee a Right of
First Offer to Lease as provided in Section 40 to lease future buildings and
improvements from Lessor on the Expansion Land throughout Lessee's occupancy of
the Premises.

(b) If Lessee elects to expand into an additional buildings on the Expansion
Land (the "Expansion Property"), the Building Shell shall be similar in quality
to the Premises and the Lessee Interior Improvements shall include a $30.00 per
square foot allowance. Required terms for any individual Expansion Property
shall be a seven year lease with a minimum of 50,000 square feet, parking for
3.5 cars per 1,000 square feet and the lease shall conform to the Lease on the
Premises. Lessee's existing Lease (including, without limitation, any extension
option) shall be extended to new building's termination date. Upon written
request from Lessee, Lessor shall construct future building in general
conformance to the terms of Section 2 herein. Lessor shall use its best efforts
to complete any construction within 9 months of Lessee's request for future
buildings subject to delays due to weather. The initial Base rent for the
Expansion Property shall be on the terms stated below based on a start of
construction by January 1, 2000:

               $1.24 per square feet NNN

Subject to the following adjustments:
Every 1/4% increase the ten year treasury rate (as published in the Wall Street
Journal, base to be 5.5%) shall increase the initial rent by $.0125 per square
foot per month. Additionally every 1% change in the actual cost of shell
construction from November 1, 1998 as reasonably proven by Lessor shall increase
initial rent by $.00758 per square foot per month. Additionally the Base rent
shall increase every twelve (12) months by 4% over the rent at the end of the
prior twelve (12) months.

42. MISCELLANEOUS PROVISIONS: All rights and remedies hereunder are cumulative
and not alternative to the extent permitted by law and is in addition to all
other rights or remedies in law and in equity.

43. CHOICE OF LAW: This lease shall be construed and enforced in accordance with
the substantive laws of the State of California. The language of all parts of
this lease shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either Lessor or Lessee.

44. ENTIRE AGREEMENT: This Lease is the entire agreement between the parties,
and there are no agreements or representations between the parties except as
expressed herein. Except as otherwise provided for herein, no subsequent change
or addition to this Lease shall be binding unless in writing and signed by the
parties hereto.



                                       27
<PAGE>   25









IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease effective, the
day and year first above written.


LESSOR                                    LESSEE
MISSION WEST PROPERTIES, L.P.             GADZOOX NETWORKS, INC.

By:  Berg & Berg Enterprises, Inc.
        General Partner


By: /s/ CARL E. BERG                      By: /s/ CHRISTINE E. MUNSON
   -----------------------------------       -----------------------------------
signature of authorized representative    signature of authorized representative


        CARL E. BERG                              CHRISTINE E. MUNSON
--------------------------------------       -----------------------------------
printed name                                 printed name


         PRESIDENT                                CFO
--------------------------------------       -----------------------------------
Title                                        title


     August 13, 1998                              August 13, 1998
--------------------------------------       -----------------------------------
Date                                         date



                                       28
<PAGE>   26

                          LEASE AMENDMENT AGREEMENT #1

This Lease Amendment Agreement #1 ("Agreement") is made and entered into this
30th day of December, 1998 by and between Mission West Properties,
L.P.("Lessor"), a Delaware Limited Partnership, and Gadzoox Networks, Inc.
("Lessee"), a Delaware Corporation.

                                    RECITALS

A. Lessee currently leases from Lessor approximately 64,805 square feet of space
located at 5850 Hellyer Ave., San Jose, California (the "Premises") pursuant to
that certain lease dated August 13, 1998 (the "Lease").

B. Lessee and Lessor desire to amend and clarify the Lease.

NOW, THEREFORE, the parties hereto agree to amend the Lease as follows:

1. TERM: The Lease Term commenced November 8, 1998 (the Commencement Date) and
ends November 30, 2005.

2. BASE RENT: Base monthly rent shall be adjusted as follows:

<TABLE>
               <S>                                        <C>
               Nov. 8, 1998 to Nov. 30, 1998              $46,641.73
               Dec. 1, 1998 to Nov. 30, 1999              $61,682.00
</TABLE>

3. LESSEE'S IMPROVEMENTS FOR PHASE II: Paragraph 2.2 thru 2.2.9 of the Lease is
deleted and Lessor shall have no further obligation to make or fund additional
Lessee Improvements.

4. RATIFICATION OF LEASE: Except as modified herein, the Lease is hereby
ratified, approved and confirmed upon all the terms, covenants, and conditions.

MISSION WEST PROPERTIES, L.P.               GADZOOX NETWORKS, INC.,
By:     Mission West Properties, Inc.       a Delaware Corporation
        General Partner

By: /s/ CARL E. BERG                        By: /s/ CHRISTINE E. MUNSON
   ----------------------------------          ---------------------------------
        Carl E. Berg

Title: President of General Partner         Title: CFO of Gadzoox Networks, Inc.
       ------------------------------             ------------------------------

Date: December 30, 1998                     Date: December 30, 1998
      -------------------------------            -------------------------------



                                       29