Document:

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                                                                    EXHIBIT 10.5

                             CUPERTINO CITY CENTER

                               NET OFFICE LEASE

                                 by and between

                        CUPERTINO CITY CENTER BUILDINGS,

                       a California limited partnership,

                                   as Lessor

                                      and

                           CHORDIANT SOFTWARE, INC.,

                            a Delaware corporation,

                                   as Lessee
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                               Table Of Contents

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                                                                          Page
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1.   SUMMARY OF LEASE PROVISIONS......................................       1

2.   PREMISES DEMISED.................................................       2

3.   TERM; OPTION TO EXTEND...........................................       2

4.   POSSESSION.......................................................       4

5.   RENT.............................................................       5

6.   SECURITY DEPOSIT.................................................       5

7.   PROJECT TAXES AND OPERATING EXPENSE ADJUSTMENTS..................       5

8.   USE..............................................................       9

9.   COMPLIANCE WITH LAWS.............................................      10

10.  ALTERATIONS AND ADDITIONS........................................      11

11.  REPAIRS..........................................................      12

12.  LIENS............................................................      12

13.  ASSIGNMENT AND SUBLETTING........................................      13

14.  HOLD HARMLESS....................................................      15

15.  SUBROGATION......................................................      16

16.  LESSEE'S INSURANCE...............................................      16

17.  SERVICES AND UTILITIES...........................................      17

18.  RULES AND REGULATIONS............................................      18

19.  HOLDING OVER.....................................................      18

20.  ENTRY BY LESSOR..................................................      18

21.  RECONSTRUCTION...................................................      18

22.  DEFAULT..........................................................      19

23.  REMEDIES UPON DEFAULT............................................      20

24.  EMINENT DOMAIN...................................................      21

25.  OFFSET STATEMENT:  MODIFICATIONS FOR LENDER......................      21

26.  PARKING..........................................................      21

27.  AUTHORITY........................................................      22

28.  SURRENDER OF PREMISES............................................      22

29.  LESSOR DEFAULT AND MORTGAGEE PROTECTION..........................      22

30.  RIGHTS RESERVED BY LESSOR........................................      23

31.  EXHIBITS.........................................................      23

32.  WAIVER...........................................................      23

33.  NOTICES..........................................................      23

34.  JOINT OBLIGATIONS................................................      23

35.  MARGINAL HEADING.................................................      23

36.  TIME.............................................................      24

37.  SUCCESSORS AND ASSIGNS...........................................      24

38.  RECORDATION......................................................      24

39.  QUIET POSSESSION.................................................      24

40.  LATE CHARGES; ADDITIONAL RENT AND INTEREST.......................      24

41.  PRIOR AGREEMENTS.................................................      24
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                               Table Of Contents
                                  (continued)

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42.  INABILITY TO PERFORM.............................................      24

43.  ATTORNEYS' FEES..................................................      24

44.  SALE OF PREMISES BY LESSOR.......................................      25

45.  SUBORDINATION/ATTORNMENT.........................................      25

46.  NAME.............................................................      25

47.  SEVERABILITY.....................................................      25

48.  CUMULATIVE REMEDIES..............................................      25

49.  CHOICE OF LAW....................................................      25

50.  SIGNS............................................................      25

51.  GENDER AND NUMBER................................................      26

52.  CONSENTS.........................................................      26

53.  BROKERS..........................................................      26

54.  SUBSURFACE AND AIRSPACE..........................................      26

55.  COMMON AREA......................................................      26

56.  LABOR DISPUTES...................................................      26

57.  CONDITIONS.......................................................      27

58.  LESSEE'S FINANCIAL STATEMENTS....................................      27

59.  LESSOR NOT A TRUSTEE.............................................      27

60.  MERGER...........................................................      27

61.  NO PARTNERSHIP OR JOINT VENTURE..................................      27

62.  LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS.....................      27

63.  PLANS............................................................      27

64.  INTENTIONALLY OMITTED............................................      27

65.  WAIVER OF JURY...................................................      27

66.  JOINT PARTICIPATION..............................................      27

67.  COUNTERPARTS.....................................................      27
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                             CUPERTINO CITY CENTER

                               NET OFFICE LEASE

For and in consideration of rentals, covenants, and conditions hereinafter set
forth, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
herein described Premises for the term, at the rental rate specified herein and
subject to and upon all of the terms, covenants and agreements set forth in this
lease ("Lease"):

1.   SUMMARY OF LEASE PROVISIONS.
     ---------------------------

     a.   Lessee: CHORDIANT SOFTWARE, INC., a Delaware corporation ("Lessee").
          ------

     b.   Lessor: CUPERTINO CITY CENTER BUILDINGS, a California limited
          ------
          partnership ("Lessor").

     c.   Date of Lease (for reference purposes only): June ___, 1998.
          -------------------------------------------

     d.   Premises: That certain office space commonly known as 20400 Stevens
          --------
          Creek Boulevard, Suites 250 and 400, Cupertino, California, being all
          of the fourth (4th) floor and a portion of the second (2nd) floor of
          the Building, and shown cross-hatched on the reduced floor plans
          attached hereto as Exhibit "A" consisting of approximately thirty-one
          thousand seventy-one (31,071) square feet of Rentable Area ("the
          Premises"). (ARTICLE 2)

     e.   Term: Seventy-two (72) months. (ARTICLE 3)
          ----

     f.   Commencement Date: July 15, 1998 ("Commencement Date"). (ARTICLE 3)
          -----------------

     g.   Lease Termination: July 14, 2004 ("Expiration Date"), unless sooner
          -----------------
          terminated pursuant to the terms of this Lease. (ARTICLE 3)

     h.   Base Rent: (ARTICLE 5)
          ---------

                                                   Base Rent Per Month
                                                   Per SF of Rentable
          Months                                   Area
          ---------------------------              --------------------
          July 15, 1998-June 30, 1999              $2.17
          July 1, 1999-June 30, 2000               $2.6875
          July 1, 2000-June 30, 2001               $2.7875
          July 1, 2001-June 30, 2002               $2.8875
          July 1, 2002-June 30, 2003               $2.9875
          July 1, 2003-June 30, 2004               $3.0875

     i.   Security Deposit: $179,590.38 (based upon $5.78 per square foot of
          ----------------
          Rentable Area in the Premises). (ARTICLE 6)

     j.   Lessee's Percentage Share: A fraction (expressed as a percentage),
          -------------------------
          the numerator of which is the Rentable Area of the Premises and the
          denominator of which is the Rentable Area of the Building.
          (ARTICLE 7)

     k.   Parking: Non-Exclusive right to use no more than three and one-half
          -------
          (3.5) unreserved, uncovered spaces per each one thousand (1,000)
          square feet of Usable Area in the Premises (rounded to the nearest
          whole number) without charge during the Term, subject to the
          provisions of Article 26. (ARTICLE 26)

     l.   Addresses for Notice
          --------------------

          Lessor: c/o Maxim Property Management
                  350 Bridge Parkway
                  Redwood City, California 94065-1517
                  Attn: Mr. Sanford Diller
                  Telephone No.: (650) 596-5300
                  Fax No.: (650) 596-5377

                  with a concurrent copy to:

                  c/o Maxim Property Management
                  350 Bridge Parkway
                  Redwood City, California 94065-1517
                  Attn: Ms.Vicki Mullins
                  Telephone No.: (650) 596-5300
                  Fax No.: (650) 596-5377

                                      -1-
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                  and with a concurrent copy to the
                  Project Management Office at:

                  20400 Stevens Creek Boulevard, Suite 200
                  Cupertino, California 95014
                  Telephone No.: (408) 873-0121
                  Fax No.: (408) 973-9122

          Lessee: Prior to the Commencement Date:
                  Chordiant Software, Inc.
                  1810 Embarcadero Road
                  Palo Alto, California 94303
                  Attn: Mr. Steven Springsteel
                  Telephone No.: (650) 493-3800
                  Fax No.: (650) 493-2215

                  Following the Commencement Date:
                  Chordiant Software, Inc.
                  20400 Stevens Creek Boulevard, Suite 400
                  Attn: Mr. Steven Springsteel
                  Cupertino, California 95014
                  Telephone No.: (408)
                  Fax No.: (408)

                  with a concurrent copy to:

                  Cooley Godward LLP
                  Five Palo Alto Square
                  3000 E) Camino Real
                  Palo Alto, California 94306-2155
                  Attn: Eric Jensen, Esq.
                  Telephone No.: (650) 843-5000
                  Fax No.: (650) 857-0663

     m.   Broker: Cornish & Carey Commercial as both Lessor's broker and
          ------
          Lessee's broker. (ARTICLE 53)

     n.   Summary Provisions in General.  Parenthetical references in this
          -----------------------------
          Article 1 to other articles in this Lease are for convenience of
          reference, and designate some of the other Lease articles where
          applicable provisions are set forth.  All of the terms and conditions
          of each such referenced article shall be construed to be incorporated
          within and made a part of each of the above referred to Summary of
          Lease Provisions.  If any conflict exists between any Summary of Lease
          Provisions as set forth above and the balance of the Lease, then the
          latter shall control.

2. PREMISES DEMISED.  Lessor does hereby lease to Lessee and Lessee hereby
   ----------------
leases from Lessor the Premises described in Article 1.d., subject,
nevertheless, to all of the terms and conditions of this Lease.  Calculation of
the actual "Rentable Area" of the Premises, Building and Project shall be
performed by Lessor's architect in accordance with Building measurement
standards, which calculation shall be conclusive and binding upon Lessor and
Lessee.  Following the determination of the actual Rentable Area of the
Premises, all amounts payable under this Lease based upon the Rentable Area of
the Premises shall be retroactively and prospectively adjusted and the parties
shall within fifteen (15) days following such determination, make such
reconciliation payments or refunds, as are applicable based thereon.  The
Premises is approximately as shown as cross-hatched on the floor plans attached
hereto as Exhibit "A."  As used in this Lease, the term "Building" shall mean
the building at the address listed in Article 1.d.  above in which the Premises
is located.  The Building is situated upon the parcel(s) of land shown on
Exhibit "B" attached hereto (collectively, the "Parcel").  The Building and the
'Exterior Common Area" (as defined in Article 55 below) and all other
improvements as now or hereafter located on the Parcel, if any, are herein
sometimes referred to collectively as the "Project".

3. TERM; OPTION TO EXTEND.
   ----------------------

     a.   Term.  The term of this Lease shall be for the period designated in
          ----
Article 1.f., commencing on the Commencement Date and ending on the Expiration
Date set forth in Article 1.g., unless sooner terminated or extended pursuant to
this Lease ("Term").  The expiration or sooner termination of the Lease is
hereinafter referred to as "Lease Termination".

     b.   Option to Extend.  Lessee shall have the option to extend the Term for
          ----------------
a period of five (5) years immediately following the expiration of the initial
Term (the "Extended Term"), on all provisions contained in this Lease (except
for Base Rent and such other terms and conditions as are specifically or by
their operation limited to the initial Term only and except that Lessee shall
have no further right or option to extend the term upon the expiration of the
Extended Term), by giving notice of exercise of the option (the "Option Notice")
to Lessor at least twelve (12) months but not more than fifteen (15) months
before the expiration of the then applicable Term.

     Lessor's ability to plan for the orderly transaction of its rental
business, to accommodate the needs of other existing and potential tenants, and
to enjoy the benefits of increasing rentals at such times as Lessor is able to
do so in its sole and absolute discretion, are fundamental elements of Lessor's
willingness to provide Lessee with the

                                      -2-
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option to extend contained herein. Accordingly, Lessee hereby acknowledges that
strict compliance with the notification provisions contained herein, and
Lessee's strict compliance with the time period for such notification contained
herein, are material elements of the bargained for exchange between Lessor and
Lessee and are material elements of Lessee's consideration paid to Lessor in
exchange for the grant of the option. Therefore, Lessee's failure to adhere
strictly and completely to the provisions and time frame contained in this
provision shall render the option automatically null, void and of no further
force or effect, without notice, acknowledgement, or any action of any nature or
sort, required of Lessor. Lessee acknowledges that no other act or notice, other
than the express written notice set forth hereinabove, shall act to put Lessor
on notice of Lessee's intent to extend, and Lessee hereby waives any claims to
the contrary, notwithstanding any other actions of Lessee during the Term of
this Lease or any statements, written or oral, of Lessee to Lessor to the
contrary during the Term of this Lease. Notwithstanding the foregoing, if Lessee
is in default (after the expiration of any applicable period for cure pursuant
to Article 22 below) on the date of giving the Option Notice, the Option Notice
shall be totally ineffective, or if Lessee is in default (after the expiration
of any applicable period for cure pursuant to Article 22 below) on the date the
Extended Term is to commence, in addition to any and all other remedies
available to Lessor under this Lease. at Lessor's election, the exercise of the
option shall be deemed null and void, the Extended Term shall not commence, and
this Lease shall expire at the end of the Term. Further, the option to extend
granted pursuant hereto and this entire Article 3.b. shall be null and void and
of no further force or effect if during the twelve (12) month period prior to
the delivery of the Option Notice, Lessee has incurred two or more late charges
pursuant to Article 40.a. below, due to late payment of Base Rent (regardless of
whether such late payment was subsequently cured).

     The option to extend granted pursuant hereto is personal to original Lessee
signatory to this Lease and cannot be assigned, transferred or conveyed to, or
exercised for the benefit of, any other person or entity (voluntarily,
involuntarily.  by operation of law or otherwise) including, without limitation,
to any assignee or subtenant permitted under Article 13, other than a "Permitted
Transferee" (as defined in Article 13).  All of Lessee's rights under this
Article 3.b.  shall terminate upon the expiration of the initial Term or sooner
termination of this Lease.

     The parties shall have thirty (30) days after Lessor receives the Option
Notice in which to agree upon the Base Rent to be payable during the Extended
Term.  The Base Rent payable during the Extended Term shall be an amount equal
to the then current "Fair Market Rental Value" (defined below) of the Premises
at the time of commencement of the proposed Extended Term.  However, in no event
shall the Base Rent during the Extended Term be less than the Base Rent payable
at the expiration of the initial Term.  The term "Fair Market Rental Value" of
the Premises as used in this Lease shall mean the then prevailing fair market
rent for the Premises as of the commencement of the Extended Term.  In
determining such rate, the parties may consider first class office space
comparable in size and quality to the Premises, if any, located in the vicinity
of the Project and located in the Building and other buildings comparable in
size and quality to the Building in which the Premises is located, and taking
into consideration all other factors normally considered when determining fair
market rental value (including, without limitation, the duration of the Extended
Term and such rental increases as may be appropriate during such period).

     Upon determination of the Fair Market Rental Value for the Premises, the
parties shall immediately execute an amendment to this Lease stating the Base
Rent to be paid during the Extended Term.  In the event Lessee has retained the
services of a real estate broker to represent Lessee during the negotiations in
connection with the Extended Term, it is expressly understood that Lessor shall
have no obligation for the payment of all or any part of a real estate
commission or other brokerage fee to Lessee's real estate broker in connection
with the Extended Term.  Lessee shall be solely responsible for payment of fees
for services rendered to Lessee by such broker in connection with the Extended
Term.

     If the parties are unable to agree, in their sole and absolute discretion,
on the Fair Market Rental Value for the Premises within such thirty (30) day
period, then the Fair Market Rental Value for the Extended Term shall be
determined as follows:

          a.   Following the expiration of such thirty (30) day period, Lessor
and Lessee shall meet and endeavor in good faith to agree upon a licensed
commercial real estate agent with at least seven (7) years full-time experience
as a real estate agent active in leasing of commercial office buildings in the
area of the Premises to appraise and set the Fair Market Rental Value for the
Extended Term.  If Lessor and Lessee fad to reach agreement upon such agent
within fifteen (15) days following the expiration of such thirty (30) day
period, then, within fifteen (15) days thereafter, each party, at its own cost
and by giving notice to the other party, shall appoint a licensed commercial
real estate agent with at least seven (7) years full-time experience as a real
estate agent active in leasing of commercial office buildings in the area of the
Premises to appraise and set the Fair Market Rental Value for the Extended Term.
If a party does not appoint an agent within fifteen (15) days after the other
party has given notice of the name of its agent, the single agent appointed
shall be the sole agent and shall set the Fair Market Rental Value for the
Extended Term.  If there are two (2) agents appointed by the parties as stated
above, the agents shall meet within ten (10) days after the second agent has
been appointed and attempt to set Fair Market Rental Value for the Extended
Term.  If the two (2) agents are unable to agree on such Fair Market Rental
Value within fifteen (15) days after the second agent has been appointed, they
shall, within fifteen (15) days after the last day the two (2) agents were to
have set such Fair Market Rental Value, attempt to select a third agent who
shall be a licensed commercial real estate agent meeting the qualifications
stated above.  If the two (2) agents are unable to agree on the third agent
within such twenty (20) day period, either Lessor or Lessee may request the
President of the local chapter of the Society of Industrial and Office Realtors
(SIOR) or a then equivalent organization if SIOR is not then  in existence to
select a third agent meeting the qualifications stated in this subsection.  Each
of the parties shall bear one-half (1/2) of the cost of appointing the third
agent and of paying the third agent's fee.  No agent shall be employed by, or
otherwise be engaged in business with or affiliated with Lessor or Lessee,
except as an independent contractor.

          b.   Within fifteen (15) days after the selection of the third agent,
a majority of the agents shall set the Fair Market Rental Value for the Extended
Term. If a majority of the agents are unable to set such Fair

                                      -3-
<PAGE>

Market Rental Value within the stipulated period of time, each agent shall make
a separate determination of such Fair Market Rental Value and the three (3)
appraisals shall be added together and the total shall be divided by three (3).
The resulting quotient shall be the Fair Market Rental Value for the Premises
for the Extended Term. If, however, the low appraisal and/or high appraisal
is/are more than twenty percent (20%) lower and/or higher than the middle
appraisal, the low appraisal and/or the high appraisal shall be disregarded. If
only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be
added together and their total divided by two (2), and the resulting quotient
shall be Fair Market Rental Value for the Extended Term. If both the low
appraisal and the high appraisal are disregarded as stated in this subsection,
the middle appraisal shall be the Fair Market Rental Value for the Extended
Term.

               c.   Each agent shall hear, receive and consider such information
as Lessor and I as each care to present regarding the determination of Fair
Market Rental Value for the Extended Term and each agent shall have access to
the information used by each other agent. Upon determination of the Fair Market
Rental Value for the Extended Term, the agents shall immediately notify the
parties hereto in writing of such determination by certified mail, return
receipt requested.

4. POSSESSION.
   ----------

     a.   Delay in Possession.  The parties acknowledge that the Premises is
          -------------------
presently vacant and available for delivery of possession to Lessee.  However,
if Lessor, for any reason whatsoever, cannot deliver possession of all or any
part of the Premises to Lessee by the date specified in Article 1.f. above, then
this Lease shall not be void or voidable, nor shall Lessor be liable to Lessee
for any loss or damage resulting therefrom; except, however, that in such event,
the "Commencement Date" for all purposes of this Lease shall be adjusted to be
the date when Lessor delivers possession or such earlier date upon which such
delivery of possession would have occurred but for delay in delivery of
possession of the Premises caused and/or contributed to by Lessee and/or
Lessee's agents, officers, employees, representatives, contractors, servants,
invitees and/or guests (collectively "Lessees Agents"), and the "Expiration
Date" for all purposes of this Lease shall be the date which is the period of
the Term specified in Article 1.e. following such Commencement Date.  Lessor
shall be deemed to have delivered possession of the Premises to Lessee on the
date of the execution and delivery of this Lease by Lessor and Lessee.

     b.   Early Possession.  Subject to Article 4.c. below, Lessee shall be
          ----------------
permitted access to the Premises prior to the Commencement Date and following
the full execution and delivery of this Lease for purposes of construction of
certain improvements to be permanently affixed to the Premises (the "Lessee
Improvements") and installation of Lessee's furnishings, trade fixtures and
equipment.  Subject in all events to compliance with the requirements of the
City of Cupertino and other applicable governmental requirements, Lessor hereby
approves the general schematics for the Lessee Improvements prepared by Reel
Grobman, dated as of June 9, 1998, a copy of which has been provided by Lessee
to Lessor prior to the execution of this Lease, and agrees to reasonably approve
the final plans and specifications for the Lessee Improvements when submitted to
the extent consistent with, and logical extensions of, such general schematics,
and otherwise consistent with Building systems.  Lessee's construction of the
Lessee Improvements shall be governed by the provisions of this Lease respecting
Lessee's making of Alterations to the Premises including, without limitation,
the requirement set forth in this Lease that Lessor's prior written consent be
obtained for any such Alterations; except, however, that as to the removal of
the Lessee Improvements, the parties agree as follows:  Lessor shall specify in
writing at the time of approval of Lessee's plans and specifications for the
Lessee Improvements, which items of the Lessee Improvements shall be required to
be removed by Lessee by the expiration of the Term, provided that Lessee shall
not be required to remove any compartment walls or electrical/mechanical
distribution system.  Lessee's occupancy of the Premises prior to the
Commencement Date shall be subject to all the provisions of this Lease other
than Lessee's obligation for payment of Base Rent and Lessee's Percentage Share
of Building Expenses.  Said early possession shall not advance the Expiration
Date.

     c.   Certificates and Licenses.  Prior to occupancy, Lessee shall provide
          -------------------------
to Lessor the certificate(s) of insurance required by Article 16 and a copy of
all licenses and authorizations that may be required for the lawful operation of
Lessee's business upon the Premises including any City business licenses as may
be required.

     d.   Condition of Promises on Delivery.  Promptly following the execution
          ---------------------------------
of this Lease, Lessor shall, at Lessor's sole cost, install or cause the
installation of demising walls and any governmentally required corridor, as
required to separately demise the portion of the Premises on the second (2nd)
floor of the Building approximately as shown on Exhibit "A" attached hereto.
Lessee acknowledges that except as specifically otherwise provided in this Lease
and subject to Lessor's representations, warranties and covenants set forth in
this Lease, (i) the lease of the Premises by Lessee pursuant hereto shall be on
in its present "AS IS" condition, in the broadest sense of that term, with all
faults, if any, (ii) neither Lessor nor any employee, representative or agent of
Lessor has made any representation or warranty, express or implied, with respect
to the Premises or any other portion of the Project, and (iii) Lessor shall have
no obligation to improve or alter the Premises or Project for the benefit of
Lessee. Without regard to Lessee's particular use of, or Alterations to, the
Premises, upon the delivery of possession of the Premises to Lessee, the
Building roof, parking lot serving the Project, and HVAC, electrical, plumbing
and lighting systems serving the Premises shall be in good working condition. In
the event it is established within ninety (90) days following delivery of
possession of the Premises that, other than as a result of work necessitated by
Lessee's particular use of, or Alterations to the Premises, the Building roof,
parking lot serving the Project, and/or HVAC, electrical, plumbing and/or
lighting systems serving the Premises were not in good working condition as of
the delivery of possession of the Premises. Lessor shall promptly thereafter
commence and diligently prosecute to completion the work necessary to restore
such system to working order (provided that Lessor shall not be responsible for
any increased costs of performance of such work resulting from Lessee's
particular use (as opposed to mere general office use) of, or Alterations to,
the Premises). Without regard to Lessee's particular use of, or Alterations
(including, without limitation, the Lessee Improvements) to, the Premises, to
Lessor's actual knowledge, as of the delivery of possession, the Premises shall
comply with the all applicable laws (as enforced upon the execution of this
Lease; the parties hereby acknowledging that the foregoing reference to "as
enforced" shall be deemed to relate to changes in the manner of interpretation
and/or enforcement of the requirements of current laws

                                      -4-
<PAGE>

as opposed to a failure of governmental authorities to have identified pre-
existing non-compliance with applicable laws in effect upon the execution of
this Lease) other than any pre-existing non-compliance where compliance work is
not presently required to be performed (as opposed to pre-existing non-
compliance where compliance work is legally mandated even in the absence of
subsequent improvements, alterations or change in use). If it is determined
following the delivery of possession that upon the delivery of possession the
Premises was not in compliance with all applicable laws (as enforced upon the
execution of this Lease) where the correcting compliance work was required to be
performed as of the execution of this Lease (as opposed to pre-existing non-
compliance where compliance work was not legally mandated in the absence of
subsequent improvements, alterations or change in use), then Lessor shall
promptly thereafter commence and diligently prosecute to completion, at Lessor's
expense, the work necessary to cause such compliance (provided that Lessor shall
not be responsible for any increased costs of causing such compliance resulting
from Lessee's particular use (as opposed to mere general office use) of, or
Alterations (including, without limitation, the Lessee Improvements) to, the
Premises).

5. RENT.  Lessee agrees to pay to Lessor as rental for the Premises, without
   ----
offset, deduction, prior notice or demand (except as may be otherwise expressly
provided in this Lease), the monthly Base Rent designated in Article 1.h.  Base
Rent shall be payable monthly in advance on or before the first day of each
calendar month during the Term, except that Base Rent for the first full
calendar month during the Term shall be paid upon the execution of this Lease,
and if the Commencement Date is other than the first day of a calendar month,
Base Rent for the initial partial calendar month during the Term shall be
prorated and paid upon the Commencement Date.  Base Rent for any period during
the Term which is for less than one (1) month shall be prorated based upon a
thirty (30) day month.  Base Rent and all other amounts owing to Lessor pursuant
to this shall be paid to Lessor in lawful money of the United States of America
which shall be legal tender at the time of payment, at the office of the
Project, or to such other person or at such other place as Lessor may from time
to time designate in writing.

6. SECURITY DEPOSIT.  Upon Lessee's execution of this Lease, Lessee shall
   ----------------
deposit with Lessor the sum set forth in Article 1.i. as the security deposit
("Security Deposit").  The Security Deposit shall be held by Lessor as security
for the faithful performance by Lessee of all the terms, covenants and
conditions of this Lease to be kept and performed by Lessee during the Term.  If
Lessee defaults with respect to any provision of this Lease, including, but not
limited to the provisions relating to the payment of Rentals or relating to the
condition of the Premises at Lease Termination, Lessor may (but shall not be
required to) use, apply or retain all or any part of the Security Deposit for
the payment of any Rental or any other sum in default, or for the payment of any
amount which Lessor may spend or become obligated to spend by reason of Lessee's
default, or to compensate Lessor for any other loss or damage which Lessor may
suffer by mason of Lessee's default.  If any portion of the Security Deposit is
so used or applied, Lessee shall within five (5) days after written demand
therefor, deposit cash with Lessor in an amount sufficient to restore the
Security Deposit to its original amount and Lessee's failure to do so shall be a
material breach of this Lease.  Lessor shall not be required to keep the
Security Deposit separate from its general funds, and Lessee shall not be
entitled to interest on the Security Deposit.  Lessor is not a trustee of the
Security Deposit and may use it in ordinary business, transfer it or assign it,
or use it in any combination of such ways.  Any remaining portion of the
Security Deposit shall be returned to Lessee (or, at Lessor's option, to the
last assignee of Lessee's interest hereunder) within two (2) weeks after Lease
Termination and vacation of the Premises by Lessee or its last assignee;
provided, however if any portion of the Security Deposit is to be applied to
repair damages to the Premises caused by Lessee or Lessee's Agents or to clean
the Premises, then the balance of the Security Deposit shall be returned to
Lessee (or, at Lessor's option to the last assignee of Lessee's interests
hereunder) no later than thirty (30) days from the date Lessor receives
possession of the Premises.  Lessee shall not transfer or encumber the Security
Deposit nor shall Lessor be bound by Lessee's attempt to do so.  If Lessor's
interest in this Lease is terminated, Lessor may transfer the Security Deposit
to Lessor's successor in interest, and upon such transfer, Lessor shall be
released from any liability to Lessee with respect to the Security Deposit and
Lessee shall look only to the transferee for any return of the Security Deposit
to which Lessee may be entitled.

7. PROJECT TAXES AND OPERATING EXPENSE ADJUSTMENTS.
   -----------------------------------------------

     a.   Intentionally omitted.

     b.   Building Taxes and Building Operating Expenses.  Lessee shall pay to
          ----------------------------------------------
Lessor, as additional rent and without deduction or offset, Lessee's percentage
share set forth in Article 1.j. ("Lessee's Percentage Share") of the amount of
annual "Building Taxes' and "Building Operating Expenses" (as such terms are
defined below).  Building Taxes and Building Operating Expenses are collectively
referred to herein as "Building Expenses".  Lessee's Percentage Share shall be
determined by dividing the Rentable Area of the Premises by the total Rentable
Area in the Building.  Lessee's Percentage Share shall be subject to an
equitable adjustment upon a condemnation, sale by Lessor of part of the
Building, reconstruction after damage or destruction or expansion or reduction
of the areas within the Building.  Lessee's Percentage Share of Building
Expenses shall be payable during the Term in equal monthly installments on the
first day of each month in advance, without deduction, offset or prior demand.

     At any time during the Term, Lessor may give Lessee notice of Lessor's
estimate of the Building Expenses for the current calendar year.  An amount
equal to one twelfth (1/12) of Lessee's Percentage Share of the estimated
Building Expenses shall be payable monthly by Lessee as aforesaid, commencing on
the first day of the calendar month following thirty (30) days written notice
and continuing until receipt of any notice of adjustment from Lessor given
pursuant to this paragraph.  Until notice of the estimated Building Expenses for
a subsequent calendar year is delivered to Lessee, Lessee shall continue to pay
its Percentage Sham of Building Expenses on the basis of the prior year's
estimate.  Lessor may at any time during the Term adjust estimates of the
Building Expenses to reflect current expenditures and following Lessor's written
notice to Lessee of such revised estimate, subsequent payments by Lessee shall
be based upon such revised estimate.

     If the Commencement Date is on a date other than the first day of a
calendar year, the amount of the Building Expenses payable by Lessee in such
calendar year shall be prorated based upon a fraction, the numerator of

                                      -5-
<PAGE>

which is the number of days from the Commencement Date to the end of the
calendar year in which the Commencement Date falls, and the denominator of which
is three hundred sixty (360).

     Within one hundred twenty (120) days after the end of each calendar year
during the Term or as soon thereafter as practicable, Lessor will furnish to
Lessee a statement("Lessor's Statement") setting forth in reasonable detail the
actual Building Expenses paid or incurred by Lessor during the preceding year,
and thereupon within ten (10) days an adjustment will be made by Lessee's
payment to Lessor or credit to Lessee by Lessor against the Building Expenses
next becoming due from Lessee, as, the case may require, to the end that Lessor
shall receive the entire amount of Lessee's Percentage Share of Building
Expenses for such calendar year and no more.  If based on Lessor's Statement a
payment from Lessee is required, Lessee shall not have the right to withhold or
defer such payment pending a review of Lessor's books and records pursuant to
the following paragraph or the resolution of any dispute relating to Building
Expenses; provided that Lessee may make such payment under protest and the
making of such payment pursuant hereto shall not limit Lessee's right to review
such books and records as hereinafter provided.  If the Expiration Date is on a
day other than the last day of a calendar year, the amount of Building Expenses
payable by Lessee for the calendar year in which Lease Termination falls shall
be prorated on the basis which the number of days from the commencement of such
calendar year to and including such Expiration Date bears to three hundred sixty
(360).  The termination of this Lease shall not affect the obligations of Lessor
and Lessee pursuant to this Article 7.

     Within sixty (60) days after Lessee receives a statement of actual Building
Expenses paid or incurred for a calendar year, Lessee shall have the right, upon
written demand and reasonable notice, to inspect Lessor's books and records
relating to such Building Expenses for the calendar year covered by Lessor's
Statement for the purpose of verifying the amount set forth in such Statement.
Such inspection shall be made during Lessor's normal business hours, at the
place where such books and records are customarily maintained by Lessor.  In no
event may any such inspection be performed by a person or entity being
compensated on a contingency fee basis or based upon a sham of any refund
obtained by Lessee.  Information obtained by such inspection shall be kept in
the strictest confidence by Lessee.  Unless Lessee asserts in writing a specific
error within ninety (90) days following Lessee's receipt of Lessor's Statement,
the amounts set forth in Lessor's Statement shall be conclusively deemed correct
and binding on Lessee.

          (i)  Operating Expense.  As used in this Lease, "Building Operating
               -----------------
Expenses" means all of the Building Service Expenses and an allocable portion of
the Project Expenses as follows:

               (A)  Building Service Expenses.  Building Operating Expenses
                    -------------------------
shall include all costs of operation, maintenance, repair (which for purposes of
this Lease shall be deemed to include, without limitation, replacement as and
when deemed appropriate by Lessor) and management of the Building and Building
Common Area (defined in Article 55), hereinafter collectively referred to as
"Building Service Expenses, " as determined by Lessor's standard accounting
practices. Building Service Expenses as used herein shall include, but not be
limited to, all sums expended in connection with all general maintenance,
repairs, painting, cleaning, sweeping and janitorial services; maintenance and
repair of signs, indoor plants, and atriums; trash removal; sewage; electricity,
gas, water and any other utilities (including any Temporary or permanent utility
surcharge or other exaction whether now or hereafter imposed); maintenance and
repair of any rim protection systems. elevator systems, lighting systems, storm
drainage systems, heating, ventilation and air conditioning systems and other
utility and/or mechanical systems; any governmental imposition or surcharge
imposed upon Lessor with respect to the Building or assessed against the
Building; all costs and expenses pertaining to a security alarm system or other
security services or measures for the Building, if Lessor deems necessary in
Lessor's sole business judgment; materials; supplies; tools; depreciation on
maintenance and operating machinery and equipment (if owned) and rental paid for
such machinery and equipment (if rented); service agreements on equipment;
maintenance. and repair of the roof (including repair of leaks and resurfacing)
and the exterior surfaces of all improvements (including painting); non-
structural maintenance and repair of structural parts (including repair of leaks
and resurfacing) and the exterior surfaces of all improvements (including
painting); window cleaning, elevator or escalator services; materials handling;
fees for licenses and permits relating to the Building; the cost of complying
with rules, regulations and orders of governmental authorities; Building office
rent or rental value; accounting and legal fees; the cost of contesting the
validity or applicability of any governmental enactment which may affect
Building Service Expenses; personnel to implement such services, including, if
Lessor deems necessary, the cost of security guards and valet attendants; public
liability, environmental impairment, property damage and fire and extended
coverage insurance on the Building (in such amounts and providing such coverage
as determined in Lessor's sole discretion and which may include, without
limitation, liability, all risk property, lessor's risk liability, war risk,
vandalism, malicious mischief, boiler and machinery, rental income, earthquake,
flood and worker's compensation insurance); compensation and fringe benefits
payable to all persons employed by Lessor in connection with the operation,
maintenance, repair and management of the Building; and a management fee equal
to five percent (5%) of gross receipts from the Building (including, without
limitation, all rentals and parking receipts from Building tenants and/or
visitors). Lessor may cause any or all of said services to be provided by an
independent contractor or contractors, or they may be rendered by Lessor. It is
the intent of the parties hereto that Building Service Expenses shall include
every cost paid or incurred by Lessor in connection with the operation,
maintenance, repair and management of the Building, and the specific examples of
Building Service Expenses stated in this Article 7 are in no way intended to,
and shall not, limit the costs comprising Building Service Expenses, nor shall
such examples be deemed to obligate Lessor to incur such costs or to provide
such services or to take such actions, except as may be expressly required of
Lessor in other portions of this Lease, or except as Lessor, in its sole
discretion, may elect. The maintenance of the Building shall be at the sole
discretion of Lessor and all costs incurred by Lessor in good faith shall be
deemed conclusively binding on Lessee. If less than one hundred percent (100%)
of the Rentable Area of the Building is occupied during any calendar year, then
in calculating Building Service Expenses for such year, the components of
Building Service Expenses which vary based upon occupancy level shall be
adjusted to equal Lessor's reasonable estimate of the amount of such Building
Service Expenses had one hundred percent (100%) of the total Rentable Area of
the Building been occupied during the entirety of such year. Notwithstanding
anything to the contrary contained in this Lease, in no event shall Building
Service Expenses include (1) any costs relating to the

                                      -6-
<PAGE>

structural repairs to maintain the structural integrity of the Building
(including, without limitation, the structural repairs to the structural
elements of the exterior walls, roof, columns, footings and floor slab of the
Building), (2) costs, including permit, license and inspection costs, incurred
with respect to the installation of tenant improvements to other tenant's leased
premises within the Building or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant leasable space within the Building,
(3) costs in order to market space to potential tenants, leasing commissions,
and attorneys' fees in connection with the negotiation and preparation of
letters, deal memos, letters of intent, leases, subleases and/or assignments or
other costs in connection with lease, sublease and/or assignment negotiations
with present or prospective tenants or other occupants of the Building, (4)
costs incurred for restoration following condemnation to the extent reimbursed
by condemnation award or for repair of damage to the Building to the extent
reimbursed by insurance proceeds (provided that insurance deductibles and
uninsured casualty damage up to $100,000.00 per occurrence shall be included in
Building Service Expenses), (5) reserves for future expenses beyond anticipated
expenses for the current year, (6) ground lease rental on any underlying ground
lease or interest, principal, points and/or fees on debts or amortization on any
mortgage or mortgages or any other debt instrument encumbering the Building, or
(7) to the extent any employee of Lessor spends only a portion of his or her
time working with respect to the Building (as opposed to full time work with
respect to the Building), a prorated amount of such employee's wages, salaries
and compensation based upon the portion of time spent by such employee with
respect to the projects other than the Building.  In addition, if any capital
expenditure otherwise includable in Building Service Expenses costs more than
fifty cents ($0.50) per square foot of Rentable Area in the Building, then such
capital expenditure shall be amortized over the useful life of the applicable
item as reasonably determined by Lessor, and Building Service Expenses shall not
include the entire cost of such expenditure in the year incurred, but shall
include annual amortization of such expenditure during each year of such useful
life.

               (B)  Project Expenses.  Building Operating Expenses shall include
                    ----------------
the Buildings equitable share of all direct costs of operation, maintenance,
repair and management of the Project (as opposed to expenses relating solely to
the Building or any other particular building within the Project) and/or the
Exterior Common Area, determined by Lessor's standard accounting practices
(collectively, "Project Expenses"). Such costs shall be allocated by Lessor
between the Building containing the Premises and the other buildings located
within the Project from time to time, in such manner as Lessor reasonably
determines in good faith. Project Expenses as used herein shall include, but not
be limited to, all sums expended in connection with all general maintenance,
repairs, resurfacing, painting, restriping, cleaning, sweeping, and janitorial
services; maintenance and repair of sidewalks, curbs, signs and other Exterior
Common Areas; maintenance and repair of sprinkler systems, planting, and
landscaping; trash removal; sewage; electricity, gas, water and any other
utilities (including any Temporary or permanent utility surcharge or other
exaction whether now or hereafter imposed); maintenance and repair of
directional signs and other markers and bumpers; maintenance and repair of any
fire protection systems, elevator systems, lighting systems, storm drainage
systems and other utility systems; any governmental imposition or surcharge
imposed upon Lessor or assessed against the Exterior Common Area or the Project;
materials; supplies, tools; depreciation on maintenance and operating machinery
and equipment (if owned) and rental paid for such machinery and equipment (if
rented); service agreements on equipment; maintenance and repair of parking
areas and parking structures, if any; non-structural maintenance and repair of
structural parts (including foundations and floor slabs); elevator services, if
applicable; material handling; fees for licenses and permits relating to the
Exterior Common Area; the cost of complying with rules, regulation and orders of
governmental authorities; accounting and legal fees; the cost of contesting the
validity or applicability of any governmental enactment which may affect Project
Expenses; personnel to implement such services, including if Lessor deems
necessarily, the cost of security guards and valet attendants; all annual
assessments and special assessments levied or charged against the Project and/or
Lessor pertaining to the Project by the Cupertino City Center Owner's
Association pursuant to the "CC&R's" (as hereinafter defined); public liability,
environmental impairments, property, damage and fire and extended coverage
insurance on Exterior Common Area (in such amounts and providing such coverage
as determined in Lessor's sole discretion and which may include, without
limitation, liability, all risk property, lessor's risk liability, war risk,
vandalism, malicious mischief, sprinkler leakage, boiler and machinery, parking
income, earthquake, flood and worker's compensation insurance), compensation and
fringe benefits payable to all persons employed by Lessor in connection with the
operation, maintenance, repair and management of the Exterior Common Area; and a
management fee equal to five percent (5%) of gross receipts from the Project
(exclusive of amounts collected from tenants of any building within the Project
under their respective leases). Lessor may cause any or all of said services to
be provided by an independent contractor or contractors, or they may be rendered
by Lessor. It is the intent of the parties hereto that Project Expenses shall
include every cost paid or incurred by Lessor in connection with the operation,
maintenance, repair and management of the Exterior Common Area, and the specific
examples of Project Expenses stated in this Article 7 are in no way intended to,
and shall not limit the costs comprising Project Expenses, nor shall such
examples be deemed to obligate Lessor to incur such costs or to provide such
services or to take such actions except as Lessor may be expressly required in
other portions of this Lease, or except as Lessor, in its sole discretion, may
elect. The maintenance of the Exterior Common Areas shall be at the sole
discretion of Lessor and all costs incurred by Lessor in good faith shall be
deemed conclusively binding on Lessee. If less than one hundred percent (100%)
of the Rentable Area of the Project is occupied during any calendar year, then
in calculating Project Expenses for such year, the components of Project
Expenses which vary based upon occupancy level shall be adjusted to equal
Lessor's reasonable estimate of the amount of such Project Expenses had one
hundred percent (100%) of the total Rentable Area of the Project been occupied
during the entirety of such year. Notwithstanding anything to the contrary
contained in this Lease, in no event shall Project Expenses include (1) any
costs relating to the structural repairs to maintain the structural integrity of
the Project, (2) costs, including permit, license and inspection costs, incurred
with respect to the installation of tenant improvements to other tenant's leased
premises within the Project or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant leasable space within the Project,
(3) costs in order to market space to potential tenants, leasing commissions,
and attorneys' fees in connection with the negotiation and preparation of
letters, deal memos, letters of intent, leases, subleases and/or assignments or
other costs in connection with lease, sublease and/or assignment negotiations
with present or prospective tenants or other occupants of the Project, (4) costs
incurred for restoration following condemnation to the extent reimbursed by
condemnation award or for repair of damage to the Project to the extent
reimbursed by insurance proceeds (provided that insurance deductibles and
uninsured casualty damage up to

                                      -7-
<PAGE>

$100,000.00 per occurrence shall be included in Project Expenses), (5) reserves
for future expenses beyond anticipated expenses for the current yen, (6) ground
lease rental on any underlying ground lease or interest, principal, points
and/or fees on debts or amortization on any mortgage or mortgages or any other
debt instrument encumbering the Project, or (7) to the extent any employee of
Lessor spends only a portion of his or her time working with respect to the
Project (as opposed to full time work with respect to the Project), a prorated
amount of such employee's wages, salaries and compensation based upon the
portion of time spent by such employee with respect to the projects other than
the Project. In addition, if any capital expenditure otherwise includable in
Project Expenses costs more than fifty cents ($0.50) per square foot of Rentable
Area in the Project, then such capital expenditure shall be amortized over the
useful life of the applicable item as reasonably determined by Lessor, and
Project Expenses shall not include the entire cost of such expenditure in the
year incurred, but shall include annual amortization of such expenditure during
each year of such useful life.

               (ii)  Project Taxes.  "Building Taxes" as used in this Lease
                     -------------
shall mean those items of "Project Taxes" (as hereinafter defined) which relate
solely to the Building, plus an equitable share of Project Taxes which relate to
the land underlying the Project, to the Exterior Common Areas and/or to the
Project as a whole (as opposed to Project Taxes relating solely to the Building
or any other particular building within the Project), which equitable share
shall be allocated by Lessor between the Building and the other buildings
located within the Project from time to time, in such manner as Lessor
reasonably determines in good faith. The term "Project Taxes' as used in this
Lease shall collectively mean (to the extent any of the following are not paid
by Lessee pursuant to Article 7.c. below) all: real estate taxes and general or
assessments (including, but not limited to, assessments for public improvements
or benefits); personal property taxes; taxes based on vehicles utilizing parking
areas on the Parcel; taxes computed or based on rental income (including without
limitation any municipal business tax but excluding federal, state and municipal
net income taxes); Environmental Surcharges; excise taxes; gross receipts taxes;
sales and/or use taxes; employee taxes; water and sewer taxes, levies,
assessments and other charges in the nature of taxes or assessments (including,
but not limited to, assessments for public improvements or benefit); and all
other governmental, quasi-governmental or special district impositions of any
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 which during the Lease Term are laid, levied, assessed or imposed upon
Lessor and/or become a lien upon or chargeable against the Project or the
Premises, Building, Common Area and/or Parcel under or by virtue of any present
or future laws, statutes, ordinances, regulations, or other requirements of any
governmental authority or quasi-governmental authority or special district
having the direct or indirect power to tax or levy assessments whatsoever. The
term 'Environmental Surcharges" 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 imposed by 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 Project including the Premises, Building, Common
Area and/or Parcel. The term "Project Taxes" shall include (to the extent the
same are not paid by Lessee pursuant to Article 7.c. below), without limitation:
the cost to Lessor of contesting the amount or validity or applicability of any
Project Taxes described above, and all taxes, assessments, levies, fees,
impositions or charges levied, imposed, assessed, measured, or based in any
manner whatsoever upon or with respect to the use, possession, occupancy,
leasing, operation or management of the Project (including, without limitation,
the Premises, Building, Common Area and/or Parcel) or in lieu of or equivalent
to any Project Taxes set forth in this Article 7.b.(ii). In no event shall
Project Taxes include Lessor's net income, succession, transfer, gift,
franchise, estate, or inheritance taxes.

     If at any time during the Term, Project Taxes are under-assessed by the
taxing authorities so that they are not computed on a fully-completed and
occupied basis in accordance with the then applicable taxing authority of the
governmental entities having jurisdiction, Lessor shall have the right, but not
the obligation, to adjust Project Taxes to reflect the amount that Project Taxes
would be if the Project were assessed on a fully-completed and occupied basis,
as determined in Lessor's reasonable discretion, and such adjusted amount shall
be allocated to the Project in accordance with the terms of this Lease.

     c.   Other Taxes.  Lessee shall pay the following:
          -----------

               (i)   Lessee shall pay (or reimburse Lessor as additional rent if
Lessor is assessed), before delinquency, any and all taxes levied or assessed,
and which become payable for or in connection with any period during the Term,
upon all of the following (collectively, "Leasehold Improvements and Personal
Property"): Lessee's Leasehold Improvements, the Lessee Improvements, equipment,
furniture, furnishings, fixtures, merchandise, inventory, machinery, appliances
and other personal property located in the Premises; except only that which has
been paid for by Lessor and is the standard of the Building. Lessee hereby
acknowledges receipt of a copy of a schedule setting forth the improvements
comprising the standard of the Building. If any or all of the Leasehold
Improvements and Personal Property are assessed and taxed with the Project,
Lessee shall pay to Lessor such taxes within ten (10) days after delivery to
Lessee by Lessor of a statement in writing setting forth the amount applicable
to the Leasehold Improvements and Personal Property. If the Leasehold
Improvements and Personal Property are not separately assessed on the tax
statement or bill, Lessor's good faith determination of the amount of such taxes
applicable to the Leasehold Improvements and Personal Property shall be a
conclusive determination of Lessee's obligation to pay such amount as so
determined by Lessor.

               (ii)  Lessee shall pay (or reimburse Lessor if Lessor is
assessed, as additional rent), prior to delinquency or within ten (10) days
after receipt of a statement thereof, any and all other taxes, levies,
assessments, or surcharges payable by Lessor or Lessee and relating to this
lease, the Premises or Lessee's activities in the Premises (other than Lessor's
net income, succession, transfer, gift, franchise, estate, or inheritance
taxes), whether or not now customary or within the contemplation of the parties
hereto, now in force or which may hereafter become effective, including but not
limited to taxes: (1) upon, allocable to, or measured by the area of the
Premises or on the Rentals payable hereunder, including without limitation any
gross income, gross receipts, excise, or other tax

                                      -8-
<PAGE>

levied by the state, any political subdivision thereof, city or federal
government with respect to the receipt of such Rentals; (2) upon or with respect
to the use, possession, occupancy, leasing, operation and management of the
Premises or any portion thereof; (3) upon this transaction or any document to
which Lessee is a party creating or transferring an interest or an estate in the
Premises; or (4) imposed as a means of controlling or abating environmental
pollution or the use of energy, including, without limitation, any parking
taxes, levies or charges or vehicular regulations imposed by any governmental
agency. Lessee shall also pay, prior to delinquency, all privilege, sales,
excise, use, business, occupation, or other taxes, assessments, license fees, or
charges levied, assessed, or imposed upon Lessee's business operations conducted
at the Premises. If any such taxes are payable by Lessor and it shall not be
lawful for Lessee to reimburse Lessor for such taxes, then the Rentals payable
hereunder shall be increased to net Lessor the net Rental after imposition of
any such tax upon Lessor as would have been payable to Lessor prior to the
imposition of any such tax.

               (iii) Any payments made by Lessee directly to the applicable
taxing authority pursuant to this subsection 7.c. shall be made prior to the
applicable delinquency date for such payment, and Lessee shall deliver evidence
of such payment to Lessor within fifteen (15) days thereafter.

8. USE.
   ---

     a.   In no event shall Lessee use or permit the use of the Premises for any
purpose other than general office use (which may include, subject to compliance
with applicable laws and governmental requirements, use of the Premises for non-
destructive, research and development purposes and for other incidental lawful
uses, all not involving Hazardous Materials (other than "Standard Office
Hazardous Materials" as hereinafter defined), and all in a manner consistent
with operation within a first-class general office use building, so as not to
exceed the capacity of the mechanical and utility systems serving, and/or the
floor load capacity of, the Premises or interfere with the use or occupancy of
any other occupant of the Building).  Lessor and Lessee hereby acknowledge and
agree that the foregoing use restriction is an absolute prohibition against a
change in use of the Premises as contemplated under California Civil Code
Section 1997.230.  Lessee shall not do or permit to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate of or affect any fire or other insurance upon the Building or the
Project or any of its contents, or cause cancellation of any insurance policy
covering the Building or the Project or any part thereof or any of its contents.
Lessee shall not, without prior consent of Lessor, bring into the Building or
the Premises or use or incorporate in the Premises any apparatus, equipment or
supplies that may cause substantial noise, odor, or vibration or overload the
Premises or the Building or any of its utility or elevator systems or jeopardize
the structural integrity of the Building or any part thereof.  Lessee and
Lessee's Agents shall not use, store, or dispose of any "Hazardous Materials"
(defined below) on any portion of the Project, except, however, that nothing
contained in this Lease shall be deemed to prohibit Lessee's use of customary
general office supplies typically used in an office area in the ordinary course
of business.  such as copier toner, liquid paper, glue and ink, for use in the
manner for which they were designed, in such amounts and in a manner as is
normal for first-class general office use but containing substances technically
constituting Hazardous Materials under this Lease (collectively, "Standard
Office Hazardous Materials").  Without limiting the generality of the foregoing,
Lessee shall not (either with or without negligence) cause or permit the escape,
disposal or release of any Hazardous Materials in, on or below the Premises or
Any other portion of the Project.  If any lender or governmental agency shall
ever require testing to ascertain whether or not them has been any release or
other use of Hazardous Materials at the Premises during the Term of this Lease,
then the reasonable costs thereof shall be reimbursed by Lessee to Lessor upon
demand as additional rent.  In addition, Lessee shall execute such affidavits,
representations and certifications as may be reasonably required by Lessor from
time to time concerning Lessee's best knowledge and belief regarding the
presence of Hazardous Materials at the Premises.  Lessee shall indemnify, defend
with counsel acceptable to Lessor, and hold Lessor and Lessor's employees,
agents, partners, officers, directors and shareholders harmless from and against
any and all claims, actions, suits, proceedings.  orders, judgment, losses,
costs, damages, liabilities.  penalties, or expenses (including, without
limitation, attorneys' fees) arising in connection with the breach of the
obligations described in any of the previous four sentences and the obligations
of Lessee pursuant hereto and under the previous four sentences shall survive
the Lease Termination.  As used in this paragraph, "Hazardous Materials" means
any chemical, substance or material which has been determined or is hereafter
determined by any  federal, state, or local governmental authority to be capable
of posing risk of injury to health or safety, including, without limitation,
petroleum, asbestos, polychlorinated biphenyls, radioactive materials, radon
gas, and/or biologically and/or chemically active materials.  Without limiting
the generality of the foregoing.  the definition of "Hazardous Materials" shall
include those definitions found in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. (S)(S) 9601 et seq., the
                                                               -- ---
Resource Conservation and Recovery Act of 1976, 42 U.S.C. (S)(S) 6901 et seq.,
                                                                      -- ---
the Hazardous Materials Transportation Authorization Act, 49 U.S.C. (S)(S) 5101

et seq., the National Environmental Policy Act, 42 U.S.C. (S)(S) 4321 et seq.,
-- ---                                                                -- ---
the Clean Water Act, 33 U.S.C. (S)(S) 1251 et seq., the Clean Air Act, 42 U.S.C.
                                           -- ---
(S)(S) 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601 et
            -- ---                                                           --
seq., the Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f et seq., the
---                                                      -- ---
Occupational Safety and Health Act, 29 U.S.C. (S)(S) 651 et seq., Division 20 of
                                                         -- ---
the California Health and Safety Code commencing at Section 24000, Division 7 of
the California Water Code commencing at Section 13000, each as amended from time
to time, and all similar federal, state and local statutes and ordinances and
all rules, regulations or policies promulgated thereunder.  Lessee shall not do
or permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or the Project or injure or annoy them or use or allow the Premises to
be used for any improper, immoral, unlawful or objectionable purpose, nor shall
Lessee cause, maintain or permit any nuisance in, on or about the Promises.
Lessee shall not commit or suffer to be committed any waste in or upon the
Premises.

   Lessor shall promptly notify Lessee of any Hazardous Materials actually known
by Lessor (without duty of investigation or imputation of knowledge) to exist in
or about the Premises or other portions of the Project at levels in violation of
applicable laws or which otherwise pose a material risk of having a material and
adverse affect upon the operation of Lessee's business from the Premises
(including, without limitation, access to and/or use of the Premises and parking
areas serving the Project).  If requested by I as within thirty (30) days
following the execution of this Lease, Lessor shall promptly provide to Lessee
copies of any Hazardous Materials reports or other

                                      -9-
<PAGE>

environmental reports respecting the Project then existing in Lessor's
possession, which reports shall be maintained by Lessee in strict confidence.
Notwithstanding anything to the contrary contained herein, Lessee shall not be
responsible (either directly or as an item of Building Service Expenses or as an
item of Project Expenses) for costs related to the testing, remediation and/or
presence of Hazardous Materials on or about the Premises or Project except to
the extent caused to be present thereon or thereabout by Lessee, any subtenant
of Lessee and/or any of their respective employees, agents, representatives,
contractors and/or invitees.

     b.   Effect of Use Restriction.  Lessor and Lessee hereby acknowledge and
          -------------------------
agree that the use restriction set forth in subsection 8.a. above shall be
deemed reasonable in all respects and under all circumstances.  Lessor and
Lessee further acknowledge and agree that, notwithstanding any provision of this
Lease to the contrary, (i) in the event Lessee requests Lessor's consent to a
proposed assignment of this Lease or subletting of the Premises, Lessor shall be
deemed reasonable in withholding its consent to such assignment or subletting if
the proposed assignee or subtenant desires to use the Premises for any purpose
other than as expressly provided in subsection 8.a. above, and (ii) in the event
of a default by Lessee under the Lease, the enforcement of the use restriction
set forth in subsection 8.a. above shall be deemed reasonable for purposes of
computing the rental loss that could be or could have been reasonably avoided by
Lessor pursuant to California Civil Code Section 1951.2 and in connection with
the exercise of Lessor's remedies under California Civil Code Section 1951.4.

   Notwithstanding the preceding to the contrary, if Lessor withholds its
consent to an assignment of the Lease or subletting of the Premises based upon
the desire of the proposed assignee or subtenant to use the Premises for any
purpose other than as expressly provided in subsection 8.a. above, or if Lessee
is in default under this Lease, then, prior to commencing or pursuing any claim
or defense against Lessor based upon the unreasonableness of the use restriction
set forth in subsection 8.a. above, Lessee shall provide Lessor with written
notice (by certified mail, postage prepaid and return receipt requested) setting
forth Lessee's objections to the enforcement of the use restriction in such
instance, the basis upon which Lessee intends to demonstrate that the
enforcement of such use restriction would be unreasonable in such instance, and
the use(s) which Lessee believes Lessor should allow Lessee or its proposed
assignee or subtenant, as the case may be, to make of the Premises. Within
thirty (30) days of Lessor's receipt of Lessee's written notice of objection,
Lessor shall provide Lessee with written notice of Lessor's election to either
(A) enforce the use restriction set forth in subsection 8.a. above, or (B)
permit a change in the use of the Premises, provided that such proposed use
shall in no event (1) require the use, storage or disposal of Hazardous
Materials on or about the Premises or the Project, (2) increase or affect any
fire or other insurance covering the Building or the Project, (3) interfere with
the rights of other tenants of the Building or Project, including, without
limitation, any exclusive use rights of such tenants, (4) be in violation of
applicable federal, state or local laws, rules, regulations, codes or
ordinances, or (5) require Lessor to construct or install, or to provide any
allowance for the construction or installation of, any tenant improvements in
the Premises. Notwithstanding the preceding to the contrary, in no event shall
Lessor have any obligation to allow a change in the use of the premises, it
being expressly understood by the parties that the use restriction set forth in
subsection 8.a. above is an absolute prohibition against a change in use of the
Premises. In the event Lessor fails to provide Lessee with written notice of its
election to either enforce the use restriction or allow a change in use of the
Premises within said thirty (30) day period, Lessor shall be deemed to have
elected to enforce the use restriction. In the event Lessor elects or is deemed
to have elected to enforce the use restriction as provided hereinabove, Lessee
shall have the right to pursue such valid claims or defenses against Lessor as
may be permitted under California Civil Code section 1997.040 and which Lessee
is able to prove.

9. COMPLIANCE WITH LAW.  Lessee shall not use the Premises or permit anything to
   -------------------
be done in or about the Premises which will in any way conflict with or violate
any law, statute, ordinance, order or governmental rule or regulation or
requirement of duly constituted public authorities or quasi-public authorities
now in force or which may hereafter be enacted or promulgated.  Lessee shall, at
its sole cost and expense, promptly comply with all laws, statutes, ordinances,
orders and governmental or quasi-governmental rules, regulations or requirements
now in force or which may hereafter be in force and with all recorded documents
which relate to or affect the condition, use or occupancy of the Premises,
including, without limitation.  that certain Declaration of Covenants,
Conditions and Restrictions and Grant of Easements for Cupertino City Center,
recorded October 9, 1995, Series No. 8554457 of the Official Records of Santa
Clara County, California, as amended by First Amendment to Declaration of
Covenants, Conditions and Restrictions and Grant of Easements for Cupertino City
Center recorded September 12, 1987, Series No. 9417820 of the Official Records
of Santa Clara County, California (as amended, the "CC&R's ").  and with the
requirements of any board of fire insurance underwriters or other similar bodies
now or hereafter constituted, relating to, or affecting the condition, use or
occupancy of the Premises, excluding structural changes not related to or
affected by Lessee's improvements, acts or use or occupancy of the Premises.
The judgment of any court of competent jurisdiction or the admission of Lessee
in any action against Lessee, whether Lessor be a party thereto or not, that
Lessee has violated any law, statute, ordinance, or governmental or quasi-
governmental rule, regulation or requirement, shall be conclusive of that fact
as between the Lessor and Lessee.  Lessee shall obtain, prior to taking
possession of the Premises, all permits, licenses, or other authorizations for
the lawful operation of its business at the Premises.  Lessee shall indemnify,
defend with counsel acceptable to Lessor and hold Lessor and Lessor's employees,
agents, partners, officers, directors and shareholders harmless from and against
any claim, action, suit, proceeding, order, judgment, liability.  penalty or
expense (including, without limitation, attorneys' fees) arising out of the
failure of Lessee to comply with any applicable law, statute, ordinance, order,
rule, regulation, requirement or recorded document.  Lessee acknowledges that
Lessee has independently investigated and is satisfied that the Premises are
suitable for Lessee's intended use and that neither Lessor nor any of its
agents, employees, representatives or contractors has made any representation or
warranty as to whether the Building and/or Premises meets applicable
governmental and quasi-governmental requirements for such intended use (except
as may be specifically otherwise provided in this Lease).

   Lessor and Lessee acknowledge that, in accordance with the provisions of the
Americans with Disabilities Act of 1990 (the "ADA"), responsibility for
compliance with the terms and conditions of Title III of the ADA may be
allocated as between Lessor and Lessee.  In this regard and notwithstanding
anything to the contrary contained in the Lease, Lessor and Lessee agree that
the responsibility for compliance with the ADA (including, without limitation,

                                      -10-
<PAGE>

the removal of architectural and communications barriers and the provision of
auxiliary aids and services to the extent required) shall be allocated as
follows: (i) Lessee shall be responsible for compliance with the provisions of
Title I of the ADA, and of Title II and Title III of the ADA as Titles II and
III relate to any construction, renovations, alterations and repairs made within
the Premises if such construction, renovations, alterations and repairs are made
by Lessee, at its expense without the assistance of Lessor; (ii) Lessor shall be
responsible for compliance with the provisions of Title II and III of the ADA
for all construction, renovations, alterations and repairs which Lessor is
required, under this Lease, to make within the Premises, whether (pursuant to
the relevant provisions of the Lease) at Lessor's or Lessee's expense; and (iii)
Lessor shall be responsible for compliance with the provisions of Title III of
the ADA for all exterior and interior areas of the Building not included within
the Premises except to the extent such compliance is necessitated as a result of
Lessee's particular use of, or alterations to, the Premises. Lessor agrees to
indemnify, defend and hold Lessor harmless from and against any claims, damages,
costs and liabilities arising out of Lessor's failure, or alleged failure, as
the case may be, to comply with the ADA, to the extent such compliance has been
allocated to Lessor herein, which indemnification obligation shall survive the
expiration or termination of this Lease if the Lease has not been terminated by
reason of a default by Lessee. Lessee agrees to indemnify, defend and hold
Lessor harmless from and against any claims, damages, costs and liabilities
arising out of Lessee's failure, or alleged failure, as the case may be, to
comply with the ADA to the extent such compliance has been allocated to Lessee
herein, which indemnification obligation shall survive the expiration or
termination of this Lease. Lessor and Lessee each agree that the allocation of
responsibility for ADA compliance shall not require Lessor or Lessee to
supervise, monitor or otherwise review the compliance activities of the other
with respect to its assumed responsibilities for ADA compliance as set forth in
this Article 9. Lessor shall, in complying with the ADA (to the extent such
compliance has been allocated to Lessor herein), be entitled to rely upon
representations made to, or information given to Lessor by Lessee in regard to
Lessee's use of the Premises, Lessee's employees, and other matters pertinent to
compliance with the ADA. The indemnity of Lessee set forth above shall apply as
to any liability arising against Lessor by reason of any misrepresentations or
misinformation given by Lessee to Lessor. The allocation of responsibility for
ADA compliance between Lessor and Lessee, and the obligations of Lessor and
Lessee established by such allocations, shall supersede any other provisions of
the Lease that may contradict or otherwise differ from the requirements of this
Article 9; except, however, that in the event of any conflict between the
provisions of Article 4.d. above and the provisions of this Article 9, the
provisions of Article 4.d. above shall control.

10.  ALTERATIONS AND ADDITIONS.
     -------------------------

     a. Lessee's Alterations.  Lessee shall not make or suffer to be made any
        --------------------
alterations, additions, changes or improvements (collectively, "Alterations") to
or of the Premises, or any part thereof without Lessor's prior written consent,
which consent shall not, except as otherwise expressly provided in the Lease, be
unreasonably withheld; except, however, that Lessee mar, without Lessor's prior
consent but upon at least fifteen (15) days prior written notice to Lessor, make
interior, non-structural Alterations to the Premises costing less than Ten
Thousand Dollars ($10,000.00) per work of Alterations and not (1) requiring the
demolition of any existing improvements or (2) affecting the mechanical or
utility systems serving the Premises or the exterior appearance of the Building.
Lessor may impose, as a condition to the aforesaid consent, such requirements as
Lessor may deem necessary in its sole reasonable discretion, including without
limitation: the manner in which the work is done; a right of approval of the
contractor by whom the work is to be performed; the times during which such work
is to be accomplished; the requirement that Lessee post a payment and
performance bond (or its equivalent) in an amount equal to one and one-half
times any and all estimated Alterations costs and otherwise in form satisfactory
to Lessor to insure Lessor against any liability for mechanics' and
materialmen's liens and to insure completion of the work; the requirement that
Lessee reimburse Lessor, as additional rent, for Lessor's reasonable costs
incurred in reviewing any proposed Alterations, whether or not Lessor's consent
is granted; and the requirement that at Lease Termination, either (i) Lessee, at
its expense, will remove any and all such Alterations installed by Lessee and
shall, at its cost, promptly repair all damages to the Project caused by such
removal, or (ii) the Alterations made by Lessee shall remain with the Premises,
be a part of the realty, and belong to Lessor. If Lessor consents to any
Alterations to the Premises by Lessee, the same shall be made by Lessee at
Lessee's sole cost and expense in accordance with plans and specifications
approved by Lessor. Any such Alterations made by Lessee shall be performed in
accordance with all applicable laws, ordinances and codes and in a first class
workmanlike manner, and shall not weaken or impair the structural strength or
lessen the value of the Building, shall not invalidate, diminish, or adversely
affect any warranty applicable to the Building or any other improvements located
within the Project, including any equipment therein, and shall be performed in a
manner causing Lessor and Lessor's agents and other tenants of the Building the
least interference and inconvenience practicable under the circumstances. In
making any such Alterations, Lessee shall, at Lessee's sole cost and expense:

    (i)   File for and secure any necessary permits or approvals from all
governmental departments or authorities having jurisdiction, and any utility
company having an interest therein,

    (ii)  Notify Lessor in writing at least fifteen (15) days prior to the
commencement of work on any Alteration, so that Lessor can post and record
appropriate notices of non-responsibility, and

    (iii) Provide Lessor with copies of all drawings and specifications prior to
commencement of construction of any Alterations, and provide Lessor with "as
built" plans and specifications (on CAD diskette if available) following
completion of such Alterations.

In no event shall Lessee make or suffer to be made any Alteration to the
mechanical or utility systems of the Building, to the Common Area or the
structural portions of the Building or any part thereof without Lessor's prior
written consent, which consent may be withheld in Lessor's sole discretion.

     b. Removal. Upon Lease Termination, Lessee shall, upon written demand by
        -------
Lessor at Lessee's sole cost and expense, forthwith and with all due diligence
remove any Alterations made by Lessee, which is then designated

                                      -11-
<PAGE>

by Lessor to be removed (provided that Lessor has, at the time of Lessee's
making of such Alterations, notified Lessee that such removal may be required)
and Lessee shall, forthwith and with all due diligence at its sole cost and
expense, repair any damage to the Project caused by such removal. Lessee shall
also, upon Lease Termination, remove Lessee's movable equipment, furnishings,
trade fixtures and other personal property (excluding any Alterations made by
Lessee not specifically designated by Lessor to be removed). provided that
Lessee shall, forthwith and with all due diligence at its sole cost and expense,
repair any damages to the Project caused by such removal. Unless Lessor elects
to have Lam remove any such Alterations, all such Alterations except for movable
furniture and trade fixtures of Lessee not affixed to the Premises, shall become
the property of Lessor upon Lease Termination (without any payment therefor) and
remain upon and be surrendered with the Premises.

     c. Alterations Required by Law. Subject to Article 4.d. above, Lessee shall
        ---------------------------
pay to Lessor as additional rent, the cost of any structural or non-structural
alteration, addition or change to the Building and/or at Lessor's election,
shall promptly make, at Lessee's sole expense and in accordance with the
provisions of subsection 10.a. above, any structural or non-structural
alteration, addition or change to the Premises required to comply with laws,
regulations, ordinances or orders of any public agencies, whether now existing
or hereinafter promulgated, where such alterations, additions or changes am
required by reason of: Lessee's or Lessee's Agents' acts; Lessee's use or change
of use to the Premises; alterations or improvements to the Premises made by or
for Lessee; or Lessee's application for any permit or governmental approval.

     d. Lessor's Improvements. All fixtures, improvements or equipment which are
        ---------------------
installed, constructed on or attached to the Premises, or any part of the
Project by Lessor at its expense shall be a part of the realty and belong to
Lessor.

11.  REPAIRS.
     -------

      a.  By Lessee.  Subject to the express provisions of this Lease, by taking
          ---------
possession of the Premises, Lessee shall be deemed to have accepted the Premises
as being in good and sanitary order, condition and repair and to have accepted
the Premises in their condition existing as of the date of such possession,
subject to all applicable laws, covenants, conditions, restrictions, easements,
and other matters of public record and the Rules and Regulations from time to
time promulgated by Lessor governing the use of any portion of the Project.
Lessee shall at Lessee's sole cost and expense, keep every pan of the Premises
in good condition and repair, damage thereto from causes beyond the control of
Lessee (and riot caused by any act or omission of Lessee or Lessee's Agents) and
ordinary wear and tear excepted. If Lessee fails to maintain the Premises as
required by this Lease, Lessor may give Lessee notice to do such acts as are
reasonably required to so maintain the Premises and if Lessee fails to commence
such work immediately in an emergency or where immediate action is required to
protect the Premises or any portion of the Project, or within ten (10) days
after such notice is given under other circumstances, and diligently prosecute
it to completion, then Lessor or Lessor's agents, in addition to all of the
rights and remedies available hereunder or by law and without waiving any
alternative remedies, shall have the right to enter the Premises and to do such
acts and expend such funds at the expense of Lessee as are reasonably required
to perform such work. Any amount so expended by Lessor shall be paid by Lessee
to Lessor as additional rent, upon demand. With respect to any work performed by
Lessor pursuant to this Article 11.a., Lessor shall be liable to Lessee only for
physical damage caused to Lessee's personal property located within the Premises
to the extent such damage is caused by Lessor's active negligence or willful
misconduct and is not covered by the insurance required to be maintained by
Lessee pursuant to this Lease. In no event shall Lessor have any liability to
Lessee for any other damages, or for any inconvenience or interference with the
use of the Premises by Lessee, or for any consequential damages, including lost
profits, as a result of performing any such work. Except as specifically
provided in this Lease, Lessor shall have no obligation whatsoever to alter,
remodel, improve, repair, decorate or paint the Premises or any pan thereof and
the parties hereto affirm that Lessor has made no representations or warranties,
express or implied, to Lessee respecting the condition of the Premises or any
part of the Project except as specifically set forth in this Lease.

      b.  By Lessor. The costs of repairs and maintenance which are the
          ---------
obligation Lessor under this Lease or which Lessor elects to perform under this
Lease except such repairs and maintenance which are the responsibility of Lessee
hereunder, shall be an Operating Expense, subject to the express provisions of
Article 7 above limiting the inclusion of certain costs in Operating Expenses.
Lessor shall repair and maintain the structural portions of the Building,
including the basic plumbing, air conditioning, heating and electrical systems
installed or furnished by Lessor, unless such maintenance or repairs are caused
in part or in whole by the act, neglect, fault or omission of any duty by Lessee
or Lessee's Agents, in which case Lessor shall pay to Lessor the reasonable cost
of such maintenance or repairs as additional rent. Lessor shall not be liable
for any failure to make any such repairs or to perform any maintenance for which
Lessor is responsible as provided above unless Lessor fails to commence such
work for a period of more than thirty (30) days after written notice of the need
of such repairs or maintenance is given to Lessor by Lessee and the failure is
due solely to causes within Lessor's reasonable control. Except as provided in
Article 21 of this Lease, there shall be no statement of Rentals, and in any
event them shall be no liability of Lessor by reason of any injury to or
interference with Lessee's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Project or in or to
fixtures, appurtenances and equipment therein. Lessee waives the benefits of any
statute now or hereafter in effect (including, without limitation, the
provisions of subsection 1 of Section 1932, Section 1941 and Section 1942 of the
California Civil Code and any similar or dissimilar law, statute or ordinance
now or hereafter in effect) which would otherwise afford Lessee the right to
make repairs at Lessor's expense (or to deduct the cost of such repairs from
Rentals due hereunder) or to terminate this Lease because of Lessor's failure to
keep the Premises in good and sanitary order.

12.  LIENS.  Lessee shall keep the Premises and every portion of the Project
     -----
free from any and all mechanics', materialmen's and other liens, and claims
thereof, arising out of any work performed, materials furnished or obligations
incurred by or for Lessee.  Lessee shall indemnify and defend with counsel
acceptable to Lessor and hold Lessor harmless from and against any liens,
demands, claims, actions, suits, proceedings, orders, losses, costs, damages,
liabilities, penalties, expenses, judgments or encumbrances (including without
limitation, attorneys' fees)

                                      -12-
<PAGE>

arising out of any work or services performed or materials furnished by or at
the direction of Lessee or Lessee's Agents or any contractor employed by Lessee
with respect to the Premises. Should any claims of lien relating to work
performed, materials furnished or obligations incurred by Lessee be filed
against, or any action be commenced affecting the Premises, any part of the
Project, and/or Lessee's interest therein Lessee shall give Lessor notice of
such lien or action within three (3) business days after Lessee receives notice
of the filing of the lien or the commencement of the action. If Lessee does not,
within twenty (20) days following the imposition of any such lien, cause such
lien to be released of record by payment or posting of a proper bond, Lessor
shall have, in addition to all other remedies provided herein and by law, the
right, but not the obligation, to cause the Sam to be released by such means as
it shall deem proper, including by payment of the claim giving rise to such lien
or by posting a proper bond, or by requiring Lessee to post for Lessor's benefit
a bond, surety, or cash amount equal to one and one-half (1-1/2) times the
amount of lien and sufficient to release the Premises and Project from the lien.
All sums paid by Lessor pursuant to this Article 12 and all expenses incurred by
it in connection therewith including attorneys' fees and costs shall be payable
to Lessor by Lessee as additional rent on demand.

13.  ASSIGNMENT AND SUMMING.
     ----------------------

      a.   Prohibitions in General.  Lessee shall not (whether voluntarily,
           -----------------------
involuntarily, or by operation of law) assign this Lease or allow all or any
part of the Premises to be sublet, without Lessor's prior written consent in
each instance, which consent shall not be unreasonably withheld, subject,
nevertheless, to the provisions of this Article 13. Notwithstanding anything to
the contrary contained herein, Lessor shall have the right without Lessor's
prior consent and without being subject to Article 13.e. or 13.g. below, but
upon not less than fifteen (15) days prior written notice to Lessor, (i) to
assign this Lease or sublet the Premises to any entity (A) controlling,
controlled by or having fifty percent (50%) or more common control with Lessee,
or (B) resulting from a merger or consolidation with Lessee or acquiring
substantially all of the assets and/or substantially all of the stock of Lessee;
provided that any such entity shall have a tangible net worth no less than the
greater of Lessee's tangible net worth as of the execution of this Lease or the
time of such proposed assignment or subletting, and shall assume the obligations
and liabilities of Lessee under this Lease, and no such assignment or sublease
shall in any manner release Lessee from its primary liability under this Lease;
and/or (ii) to allow any person or company which is a client or customer of
Lessee or which is providing service to Lessee or one of Lessee's clients, to
occupy certain portions of the Premises for the permitted use under this Lease
and otherwise subject to the other provisions of this Lease, without such
occupancy being deemed an assignment or subleasing as long as no new demising
walls are constructed to accomplish such occupancy and as long as such
relationship was not created as a subterfuge to avoid the consent requirements
and other applicable provisions of this Article 13, provided that no such
occupancy shall in any manner release Lessee for its primary liability for its
obligations under this Lease. For all purposes of this Lease, a "Permitted
Transferee" shall mean an assignee or subtenant of Lessee under an assignment or
subletting which is permitted without Lessor's prior consent pursuant to clause
(i) above. Except for an allowed assignment or subletting or occupancy pursuant
to the foregoing provisions of this Article 13.a., Lessee shall not (whether
voluntarily, involuntarily, or by operation of law) (1) allow all or any part of
the Premises to be occupied or used by any person or entity other than Lessee,
(2) transfer any right appurtenant to this Lease or the Premises, (3) mortgage,
hypothecate or encumber the Lease or Lessee's interest in the Lease or Premises
(or otherwise use the Lease as a security device) in any manner; provided that
Lessee may encumber and grant security interests in its personal property
located at, but not permanently affixed to, the Premises, on terms and
conditions which shall be subject to Lessor's reasonable approval and Lessor
hereby agrees to execute a Subordination Agreement using Lessor's standard form
(a copy of which the parties acknowledge to have previously been delivered to
Lessee), for the benefit of any personal property lender to Lessee,
subordinating any lien or interest which Lessor may have in such personal
property on the terms and conditions set forth in such agreement; or (4) permit
any person to assume or succeed to any interest whatsoever in this Lease,
without Lessor's prior written consent in each instance, which consent may be
withheld in Lessor's sole and absolute discretion.

      Any assignment, sublease, hypothecation, encumbrance, or transfer
(collectively "Transfer") without Lessor's consent shall constitute a default by
Lessee and shall be voidable. Lessor's consent to any one Transfer shall not
constitute a waiver of the provisions of this Article 13 as to any subsequent
Transfer nor a consent to any subsequent Transfer. The provisions of this
subsection 13.a. expressly apply to all heirs, successors, sublessees, assigns
and transferees of Lessee. If Lessor consents to a proposed Transfer, such
Transfer shall be valid and the transferee shall have the right to take
possession of the Premises only if the Assumption Agreement described in
subsection 13.c. below is executed and delivered to Lessor, Lessee has paid the
costs and fees described in subsection 13.i. below, and an executed counterpart
of the assignment, sublease or other document evidencing the Transfer is
delivered to Lessor and such transfer document contains the same terms and
conditions as stated in Lessee's notice given to Lessor pursuant to subsection
13.d. below, except for any such modifications Lessor has consented to in
writing. The acceptance of Rentals by Lessor from any person or entity other
than Lessee shall not be deemed to be a waiver by Lessor of any provision of
this Lease or to be a consent to any Transfer.

      b.  Collection of Rent.  Lessee irrevocably assigns to Lessor, as security
          ------------------
for Lessee's obligations under this Lease, all rent not otherwise payable to
Lessor by reason of any Transfer of all or any pan of the Premises or this
Lease. Lessor, as assignee of Lessee, or a receiver for Lessee appointed on
Lessor's application, may collect such rent and apply it toward Lessee's
obligations under this Lease; provided, however, that until the occurrence of
any default by Lessee or except as provided by the provisions of subsection
13.i. below, Lessee shall have the right to collect such rent.

      c. Assumption Agreement. As a condition to Lessor's consent to any
         --------------------
Transfer of Lessee's interest in this Lease or the Premises, Lessee and Lessee's
assignee, sublessee, encumbrancer, hypothecate, or transferee (collectively
"Transferee"), shall execute a written Assumption Agreement, in a form
reasonably approved by Lessor, which Agreement shall include a provision that
Lessee's Transferee shall expressly assume all obligations of Lessee under this
Lease, and shall be and remain jointly and severally liable with Lessee for the
performance of all conditions, covenants, and obligations under this Lease from
the effective date of the Transfer of Lessee's interest in this Lease (except
that as to a subletting, such Assumption Agreement shall relate only to
performance of Lessee's

                                      -13-
<PAGE>

non-rent payment obligations under this Lease relating to the portion of the
Premises subleased). In no event shall Lessor have any obligation to materially
amend or modify this Lease in connection with any proposed Transfer, including,
without limitation, amending or modifying the use restriction set forth in
subsection 8.a. above.

      d.  Request for Transfer. Lessee shall give Lessor at least thirty (30)
          --------------------
days prior written notice of any desired Transfer and of the proposed terms of
such Transfer, including but not limited to: the name and legal composition of
the proposed Transferee; a reasonably detached financial statement the proposed
Transferee prepared in accordance with standard accounting principles within one
year prior to the proposed effective date of the Transfer reviewed by the
Transferee's certified public accountants and certified by the Transferee as
being true and correct; the nature of the proposed Transferee's business to be
carried on in the Premises; the payment to be made or other consideration to be
given on account of the Transfer; and other such pertinent information as may be
reasonably requested by Lessor, all in sufficient detail to enable Lessor to
evaluate the proposed Transfer and the prospective Transferee. Lessee's notice
shall not be deemed to have been served or given until such time as Lessee has
provided Lessor with all information specified above and all additional
information requested by Lessor pursuant to this subsection 13.d. Lessee shall
immediately notify Lessor of any modification to the proposed terms of such
Transfer.

      e.  No Bonus Value. It is the intent of the parties hereto that this Lease
          --------------
confer upon Lessee only the right to use and occupy the Premises, and to
exercise such other rights as are conferred upon Lessee by this Lease. The
parties agree that this Lease is not intended to have a bonus value, nor to
serve as a vehicle whereby Lessee may profit by a future Transfer of this Lease
or the right to use or occupy the Premises as a result of any favorable terms
contained herein or any future changes in the market for leased space. It is the
intent of the parties that any such bonus value that may attach to this Lease
shall be and remain the exclusive property of Lessor. Accordingly, it shall be
presumptively reasonable for Lessor to require, as a condition to its consent
that any and all rent to be paid by a Transferee. including, but not limited to,
any rent in excess of the Rentals to be paid under this Lease (prorated in the
event that a sublease is of less than the entire Premises), net of Lessee's
reasonable out-of-pocket costs incurred for brokerage commissions, attorneys'
fees and any Alterations to the Premises specifically in connection with such
Transfer, shall be paid by Lessee directly to Lessor at the time and place
specified in this Lease. For the purposes of this Article 13, the term "rent"
shall include any consideration of any kind received, or to be received, by
Lessee from a Transferee, if such sums am related to Lessee's interest in this
Lease or in the Premises, including, but not limited to, key money, bonus money,
and payments (in excess of the fair market value thereof) for Lessee's assets,
fixtures, trade fixtures, inventory, accounts, goodwill, equipment, furniture,
general intangibles, and any capital stock or other equity ownership interest of
Lessee.

      f.  Standards for Consent.  Without otherwise limiting the criteria upon
          ---------------------
which Lessor may withhold its consent to any proposed Transfer, the parties
hereby agree that it shall be deemed presumptively reasonable for Lessor to
withhold its consent to a proposed Transfer if:

            (i) The proposed Transferee's net worth (according to generally
accepted accounting principles) is not sufficient in Lessor's good faith
business judgment given the obligations to be performed by the proposed
Transferee pursuant to the proposed Transfer;

           (ii) The proposed Transferee's use of the Premises is inconsistent
with the permitted use of the Premises set forth in this Lease or the proposed
Transferee is of a character or reputation which is not consistent with the
quality of the Building or Project;

           (iii) As to a Transfer of less than all of the Premises, the space to
be Transferred is not regular in shape with appropriate means of ingress and
egress suitable for normal leasing purposes;

           (iv) The proposed Transferee is a governmental agency or
instrumentality thereof or a person or entity (or an affiliate thereof)
currently leasing or occupying space within the Project (provided that Lessor
has sufficient available space within the Project to accommodate the space needs
of such current tenant or occupant) or with whom Lessor is then negotiating for
the lease or occupancy of space within the Project;

           (v) The proposed Transfer will result in more than a reasonable and
safe number of occupants per floor within the space proposed to be Transferred
or will result in insufficient parking for the Building; or

           (vi) The rent proposed to be payable by the proposed Transferee will
be less (on a per square foot of Rentable Area basis) than the then applicable
fair market rental for the space proposed to be Transferred.

      g.  Right of Recapture.  In addition to and without limitation upon, the
          ------------------
other rights of Lessor in the event of a proposed Transfer by Lessee pursuant to
this Article 13, in the event of a proposed Transfer by Lessee, Lessor may elect
(by written notice delivered to Lessee within thirty (30) days following
Lessee's submission to Lessor of all information required pursuant to subsection
13.d. above) to terminate this Lease effective as of the date Lessee proposes to
enter into such Transfer (or in the case of a proposed Transfer of less than all
of the Premises, terminate this Lease as to the portion of the Premises proposed
to be Transferred as of the date of such proposed Transfer); provided that
Lessee shall have the right to nullify such an election to terminate by Lessor
pursuant hereto by withdrawing such request for a proposed Transfer within
fifteen (15) days following Lessee's receipt of such termination notice from
Lessor. Except as expressly provided in the immediately preceding sentence,
nothing contained in this Article shall be deemed to nullify Lessor's right to
elect to terminate this Lease in accordance with this subsection 13.g.
including, but not limited to, Lessor's failure to exercise the right to
terminate this Lease with respect to any previous Transfer. Further, Lessee
understands and acknowledges that Lessor's option to terminate this Lease rather
than approve a proposed Transfer is a material inducement for Lessor's agreeing
to lease the

                                      -14-
<PAGE>

Premises to Lessee upon the terms and conditions herein set forth and is deemed
a reasonable limitation upon Lessee's right to enter into a Transfer.

      h. Corporations and Partnerships. If Lessee is a partnership, a withdrawal
         -----------------------------
or substitution (whether voluntary, involuntary, or by operation of law and
whether occurring at one time or over a period of time) of any partner(s) owning
fifty percent (50%) or mom of the partnership, any assignment(s) of fifty
percent (50%) or more (cumulatively) of any interest in the capital or profits
of the partnership, or the dissolution of the partnership shall be deemed a
Transfer of this Lease. Subject to the provisions of Article 13.a. above, if
Lessee is a corporation, limited liability company or other entity, any
dissolution, merger, consolidation or other reorganization of Lessee, any sale
or transfer (or cumulative sales or transfers) of the capital stock of or equity
interests in Lessee in excess of twenty-five percent (25%) or any sale (or
cumulative sales) of more than fifty percent (50%) of the value of the assets of
Lessee shall be deemed a Transfer of this Lease. This subsection 13.h. shall not
apply to corporations the capital stock of which is publicly traded.

      i. Attorneys' Fees and Costs.  Lessee shall pay, as additional rent,
         -------------------------
Lessor's actual costs and attorneys' fees incurred for reviewing, investigating,
processing and/or documenting any requested Transfer, whether or not Lessor's
consent is granted.

      j. Miscellaneous. Regardless of Lessor's consent, no Transfer shall
         -------------
release of Lessee's obligations under this Lease or alter the primary liability
of Lessee to pay the Rentals and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of Rentals by Lessor from any
other person shall not be deemed to be a waiver by Lessor of any provision
hereof. Upon default by any assignee of Lessee or any successor of Lessee in the
performance of any of the terms hereof, Lessor may proceed directly against
Lessee without the necessity of exhausting remedies against said assignee or
successor. Lessor may consent to subsequent assignments or subletting of this
Lease or amendments or modifications to this Lease with any assignee of Lessee,
without notifying Lessee, or any successor of Lessee , and without obtaining its
or their consent thereto and such action shall not relieve Lessee of liability
under this Lease.

      k. Reasonable Provisions.  Lessee acknowledges that, but for Lessee's
         ---------------------
identity, financial condition and ability to perform the obligations of Lessee
under the Lease, Lessor would not have entered into this Lease nor demised the
Premises in the manner set forth in this Lease, and that in entering into this
Lease. Lessor has relied specifically on Lessee's identity, financial condition.
responsibility and capability of performing the obligations of Lessee under the
Lease. Lessee acknowledges that Lessor's rights under this Article 13, including
the right to terminate this Lease or withhold consent to certain Transfers in
Lessor's sole and absolute discretion, are reasonable, agreed upon and bargained
for rights of Lessor and that the Rentals set forth in the Lease have taken into
consideration such rights. Lessee expressly agrees that the provisions of this
Article 13 are not unreasonable standards or conditions for purposes of Section
1951.4(b)(2) of the California Civil Code, as amended from time to time, under
the Federal Bankruptcy Code or for any other purpose.

14.  HOLD HARMLESS.  Lessee shall to the fullest extent permitted by law,
     -------------
indemnify, defend with counsel acceptable to Lessor, and hold Lessor and
Lessor's employees, agents, partners, officers, directors and shareholders
harmless from and against any and all claims, damages, losses, liabilities,
penalties, judgments, and costs and expenses (including, without limitation.
attorneys' fees) and any suit, action or proceeding brought pursuant thereto
(collectively, "Claims"), including, without limitation, Claims for property
damage, or personal injury including death, arising out of (i) Lessee's use of
the Premises or any part thereof, or any activity, work or other thing done in
or about the Premises, (ii) any activity, work or other thing done, permitted in
or about the Premises, or any part thereof, (iii) any breach or default in the
performance of any obligation on Lessee's part to be performed under the terms
of this Lease, (including, without limitation, a failure to maintain insurance
as provided in Article 16), or (iv) any act or negligence of the Lessee or
Lessee's Agents; provided, however, that Lessee shall not be required to
indemnify Lessor pursuant hereto to the extent of any Claims (1) arising as a
result of Lessor's default under this Lease, or the negligence or willful
misconduct of Lessor or any of Lessor's employees, agents or contractors, and
(2) not covered by the insurance required to be maintained by Lessee pursuant to
Article 16 below.

      The indemnity herein shall extend to the costs and expenses incurred by
Lessor for administrative expenses, consultant fees, expert costs, investigation
expenses and costs incurred in settling indemnified claims, whether such costs
occurred before or after any litigation is commenced. The obligations of Lessee
pursuant to this Article 14 and elsewhere in this Lease with respect to
indemnification of Lessor shall survive the Lease Termination and shall continue
in effect until any and all claims, actions or causes of action with respect to
any of the matters indemnified against are fully and finally barred by the
applicable statute of limitations. In no event shall any of insurance provisions
set forth in Article 16 of this Lease be construed as any limitation on the
scope of indemnification set forth herein.

     As a material part of the consideration to Lessor, as between Lessee and
Lessor, Lessee hereby assumes all risk of damage or loss to property or injury
or death to person in, upon or about all portions of the Project from any cause
except as hereinafter stated. Lessor or its agents shall not be liable for any
damage or loss to property entrusted to Lessor's employees nor for loss or
damage to any property of Lessee or Lessee's Agents by theft or otherwise, nor
for any injury or death to Lessee or any of Lessee's Agents or for damage or
loss to persons or property of Lessee or any of Lessee's Agents resulting from
any accident, casualty or condition occurring in or about any portion of the
Project, or to any equipment, appliances or fixtures of Lessee or any of
Lessee's Agents therein. Lessee's assumption of risk and the exculpation of
Lessor pursuant hereto is unqualified with the single exception that it shall
not apply to the portion of any claim, damage or loss to the extent arising out
of the negligence or willful misconduct of Lessor or any of Lessor's employees,
agents or contractors, and which is not covered by the insurance required to be
maintained by Lessee pursuant to Article 16 below. Lessor or its agents shall
not be liable for interference with the light or other incorporeal
hereditaments, nor shall Lessor be liable for any latent defect in the Premises
or in the Building. Notwithstanding any other provision of this Lease, in no
vent shall Lessor have

                                      -15-
<PAGE>

any liability for loss of business (including, without limitation, lost profits)
by Lessee. Lessee shall give prompt written notice to Lessor in case of fire or
accidents in the Premises or in the Building or of defects therein or in the
fixtures or equipment.

      If, by reason of any act or omission of Lessee or Lessee's Agents, Lessor
is made a party defendant to any litigation concerning this Lease or any part of
the Project or otherwise, Lessee shall indemnify, defend with counsel acceptable
to Lessor, and hold Lessor harmless from any liability and damages incurred by
(or threatened against) Lessor as a party defendant, including without
limitation all damages, costs and expenses, including attorneys' fees.

15.  SUBROGATION.  Lessor releases Lessee and Lessee's officers, directors,
     -----------
agents, employees, partners and shareholders from any and all claims or demands
for damages, loss, expense or injury arising out of any perils to the extent
covered by insurance carried by Lessor, or that are due to the negligence of
Lessee or Lessee's officers, directors, agents, employees, partners and
shareholders and regardless of cost or origin, to the extent such waiver is
permitted by Lessor's insurers and does not prejudice the insurance required to
be carried by Lessor under this Lease. Lessee releases Lessor and Lessor's
officers, directors, agents, employees, partners and shareholders from any and
all claims or demands for damages, loss, expense or injury arising out of any
perils which are insured against under any insurance carried by Lessee, whether
due to the negligence of Lessor or its officers, directors, agents, employees,
partners and shareholders and regardless of cost or origin, to the extent such
waiver is permitted by Lessee's insurers and does not prejudice the insurance
required to be carried by Lessee under this Lease.

16.  LESSEE'S INSURANCE.
     ------------------

      a. Lessee shall, at Lessee's expense, obtain and keep in force during the
Term a policy of commercial general liability insurance, including the broad
form endorsement, insuring Lessor and Lessee against any liability arising out
of the ownership, use, occupancy, maintenance, repair or improvement of the
Premises and all areas appurtenant thereto. Such insurance shall provide single
limit liability coverage of not less than Three Million Dollars ($3,000,000.00)
per occurrence for bodily injury or death and property damage. Such insurance
shall name Lessor and, at Lessor's request, Lessor's mortgagee, each as an
additional insured, and shall provide that Lessor and any such mortgagee,
although an additional insured, may recover for any loss suffered by Lessor or
Lessor's agents by reason of Lessee's or Lessee's Agent's negligence. All such
insurance shall be primary and noncontributing with respect to any insurance
maintained by Lessor and shall specifically insure Lessee's performance of the
indemnity and hold harmless agreements contained in Article 14 above although
Lessee's obligations pursuant to Article 14 shall not be limited to the amount
of any insurance required of or carried by Lessee under this Article 16 and
Lessee is responsible for ensuring that the amount of liability insurance
carried by Lessee is sufficient for Lessee's purposes. Lessee may carry said
insurance under a blanket policy provided that such policy conforms with the
requirements specified in this Article and the coverage afforded Lessor is not
diminished thereby.

      b. Lessee acknowledges and agrees that insurance coverage carried by
Lessor will not cover Lessee's property within the Premises or within the
Building. Lessee shall, at Lessee's expense, obtain and keep in force during the
Term a policy of "All Risk" property insurance, including without limitation,
coverage for earthquake and flood; broiler and machinery (if applicable),
sprinkler damage; vandalism; malicious mischief, and demolition, increased cost
of construction and contingent liability from changes in building laws on all
leasehold improvements installed in the Premises by Law at its expense (if any),
and on all equipment, trade fixtures, inventory, fixtures and personal property
located on or in the Premises, including improvements or fixtures hereinafter
constructed or installed on the Premises. Such insurance shall be in an amount
equal to the full replacement cost of the aggregate of the foregoing and shall
provide coverage comparable to the coverage in the Standard ISO All Risk form,
when such form is supplemented with the coverage required above.

      c. If Lessee fails to procure and maintain any insurance required to be
procured and maintained by Lessee pursuant to this Lease, Lessor may, but shall
not be required to, procure and maintain all or any portion of the same, at the
expense of Lessee after providing Lessee no less than ten (10) days written
notice of its intent to purchase such coverage. Lessor's election pursuant to
this subsection 16.c. to procure and maintain all or any portion of the
insurance which Lessee fails to procure and maintain is acknowledged by Lessee
to be for Lessor's sole benefit. Lessee acknowledges that any insurance procured
and maintained by Lessor pursuant to this subsection 16.c. may not be sufficient
to adequately protect Lessee. Any personal property insurance procured and
maintained by Lessor for Lessee's equipment, trade fixtures, inventory, fixtures
and personal property located on or in the Premises, including improvements or
fixtures hereinafter constructed or installed on the Premises, may not
sufficiently cover the replacement cost thereof. Any insurance procured and
maintained by Lessor pursuant to this subsection 16.c. may provide for less
coverage than is required to be maintained by Lessee pursuant to this Lease.
Lessee acknowledges and agrees that Lessee is and shall remain solely
responsible for procuring insurance sufficient for Lessee's purposes,
notwithstanding the fact that Lessor has procured or maintained any insurance
pursuant to this subsection 16.c. Any insurance required to be maintained by
Lessee hereunder shall be in companies with a security rating of A or better,
and a financial size category rating of X or better, in the then most recently
published "Best's Insurance Guide". Prior to occupancy of the Premises (and
thereafter annually with respect to renewals, not later than thirty (30) days
prior to expiration of then existing policies), Lessee shall deliver to Lessor
copies of the policies of insurance required to be kept by Lessee hereunder, or
certificates evidencing the existence and amount of such insurance, with
evidence satisfactory to Lessor of payment of premiums. No policy shall be
cancelable or subject to reduction of coverage except after thirty (30) days
prior written notice to Lessor.

      d.  Not more frequently than once every year, Lessee shall increase the
amounts of insurance as follows: (i) as recommended by Lessor's insurance broker
provided that the amount of insurance recommended by such broker shall not
exceed the amount customarily required of tenants in comparable projects located
within Cupertino, California, or (ii) as required by Lessor's lender. Any limits
set forth in this Lease on the amount or type of coverage required by Lessee's
insurance shall not limit the liability of Lessee under this Lease.

                                      -16-
<PAGE>

      e.  As an item of Building Service Expenses, Lessor hereby agrees to
maintain in effect during the Term of this Lease (i) a policy or policies of
"all risk" insurance (or its then equivalent coverage) in an amount not less
than ninety percent (90%) of the full replacement cost of the Building
(exclusive of footings, foundations and excavation), (ii) a policy of commercial
general liability insurance, including the broad form endorsement, insuring
Lessor against any liability arising out of the ownership, use, occupancy,
maintenance, repair or improvement of the Project, with coverage of not less
than Three Million Dollars ($3,000,000.00) combined single limit per occurrence
for bodily injury or death and property damage, and (iii) such other insurance
coverages in such other amounts as Lessor determines to be appropriate.
Insurance maintained by Lessor may be maintained under so-called blanket,
umbrella and/or excess liability policies of insurance.

17.  SERVICES AND UTILITIES.  Subject to the rules and regulations of the
     ----------------------
Building of which the Premises are a pan, Lessor agrees to furnish to the
Premises during the hours of 7:00 a.m. to 6:00 p.m., Monday through Friday,
other than recognized Building holidays (collectively, "Building Hours"),
heating and air-conditioning service which is required in Lessor's good faith
judgment for the comfortable use and occupation of the Premises, and at all
times electricity for normal lighting, water and elevator service which am
required in Lessor's good faith judgment for the comfortable use and occupation
of the Premises. During recognized business days for the Building, and subject
to the reasonable rules and regulations of the Building and Project. Lessor
shall furnish to the Premises and the Common Areas, janitorial service, window
washing, fluorescent tube replacement and toilet supplies; provided, however,
Lessor shall not be required to provide janitorial services for any portion of
the Premises to the extent required as a result of the preparation or
consumption of food or beverages (provided that nothing in this paragraph shall
be construed as a consent by Lessor to the preparation or consumption of such
food or beverages unless otherwise expressly provided elsewhere in this Lease).
Lessor shall also maintain and keep lighted during such hours and after-hours
(at levels sufficient for after-hours usage) the common stairs, common entries
and toilet rooms in the Building. Lessor shall not be liable for, and Lessee
shall not be entitled to, any reduction of Rentals by reason of Lessor's failure
to furnish any of the foregoing when such failure is caused by casualty, Act of
God, accident, breakage, repairs, strikes, lockouts or other labor disturbances
or labor disputes of any character, or by any other cause, similar or
dissimilar, beyond the reasonable control of Lessor. Lessor shall not be liable
under any circumstances for injury to or death of or loss or damage to persons
or property or damage to Lessee's business, however occurring, through or in
connection with or incidental to failure to furnish any of the foregoing.
Wherever heat generating machines or equipment are used in the Premises which
affect the Temperature otherwise maintained by the air conditioning system,
Lessor reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Lessee to Lessor upon
demand by Lessor as additional rent. The costs of all utilities and services
furnished by Lessor to Lessee pursuant to this Article 17 which am not specified
as being reimbursed or paid directly by Lessee shall be included as items of
Building Operating Expenses.

      Lessee will not, without the prior written consent of Lessor, use or
permit the use of any apparatus or device in or upon the Premises (including,
but without limitation thereto, machines using in excess of 120 volts), which
will in any way increase the amount of gas, electricity or water usually
furnished or supplied for the use of the Premises as general office space
(which, as to electricity consumption, the parties hereby agree to mean not more
than three (3) watts per square foot of usable area on a demand load basis); nor
will Lessee connect or permit connection of any apparatus or device for the
purpose of using gas, electric current or water with electric current, gas or
water supply lines, except for electricity through existing electrical outlets
in the Premises. If Lessee requires water or electric current in excess of that
usually furnished or supplied for the use of the Premises as general office
space (including, without limitation, as a result of use at times other than
during Building Hours), Lessee shall first procure the written consent of Lessor
to the use thereof (which consent may be granted or withheld in Lessor's sole
and absolute discretion, except that no such consent shall be required for mere
operation by Lessee during times other than Building Hours) and Lessor may cause
a water or gas meter or electric current meter to be installed in the Premises
so as to measure the amount of water, gas and electric current consumed for any
such use. The cost of any such meters and of installation, maintenance and
repair thereof shall be paid for by the Lessee and Lessee agrees to pay to
Lessor, as additional rent, promptly upon demand therefor by Lessor for all such
water, gas and electric current consumed as shown by said meters, at the rates
charged for such services by the local public utility furnishing the same, plus
any additional expense incurred in keeping account of the water, gas and
electric current so consumed. If a separate meter is not installed, such excess
cost for such water, gas and electric current will be conclusively established
by an estimate made by a utility company or electrical engineer selected by
Lessor.

      Lessor hereby represents that the Project is presently serviced by an
emergency back-up generator intended to provide electrical service to the
Building in the event of power failure, which Lessor hereby represents and
warrants to Lessor's actual knowledge to be in good operating condition;
provided that Lessor makes no representation whether such back-up generator
shall be sufficient for Lessee's needs in the event of a power failure. Any
connection by Lessee of Lessee's critical electrical systems to such emergency
back-up generator shall be subject to Lessor's reasonable approval (including,
without limitation, as to manner of connection and capacity of systems within
the Premises required to be serviced by such generator).

      If requested by Lessee at least one (1) business day in advance, heating,
ventilation and air conditioning ("HVAC") service shall be provided to the
Premises other than during Building Hours (for a minimum period of three (3)
consecutive hours at a time, except for after-hours HVAC service immediately
following Building Hours, at which time the minimum period shall be one (1)
hour), provided that Lessee shall pay to Lessor for each such hour of HVAC
service during non-Building Hours, the then prevailing charge by Lessor for such
service (which shall equal Lessor's determination in Lessor's sole business
judgment of the actual cost of providing such non-Building Hours HVAC service,
including, without limitation, a reasonable administrative charge), which is
presently Twenty-Five Dollars ($25.00) per hour per zone (the parties hereby
acknowledge that there are two (2) zones for purposes hereof per each floor of
the Building). Amounts payable by Lessee hereunder shall be paid as additional
rent within thirty (30) days following Lessee's receipt of Lessor's billing
therefor.

                                      -17-
<PAGE>

18.  RULES AND REGULATIONS.  Lessee shall faithfully observe and comply with the
     ---------------------
rules and regulations that Lessor shall from time to time promulgate for the
Building and the Project. Lessor reserves the right from time to time to make
all reasonable modifications to said rules and regulations. The additions and
modifications to these rules and regulations shall be binding upon Lessee upon
delivery of a copy of them to Lessee. Lessor shall not be responsible to Lessee
for the non-performance of any said rules by any other tenants or occupants. The
current "Rules and Regulations" are attached hereto as Exhibit He". In the event
of a conflict between the specific provisions of this Lease and such Rules and
Regulations, the specific provisions of this Lease shall prevail.

19.  HOLDING OVER.  If Lessee remains in possession of the Premises or any part
     ------------
thereof after Lease Termination, with the express written consent of Lessor,
such occupancy shall be a tenancy from month to month at a Base Rent in the
amount of one hundred fifty percent (130%) of the Base Rent in effect
immediately preceding such Lease Termination, plus all other rental charges
payable hereunder, and upon all the terms hereof applicable to a month to month
tenancy. In such case, either party may thereafter terminate this Lease at any
time upon giving not less than thirty (30) days written notice to the other
party. For any possession of the Premises after the Lease Termination without
Lessor's consent, Lessee shall be liable for all detriment proximately caused by
Lessee's possession, including without limitation, attorneys' fees, costs and
expenses, claims of any succeeding tenant founded on Lessee's failure to vacate
and for payment to Lessor of Base Rent in an amount equal to the greater of (a)
one hundred fifty percent (150%) of the Base Rent in effect immediately
preceding such Lease Termination, or (b) the fair market rental value for the
Base Rent for the Premises, together with such other Rentals provided in this
Lease to the date Lessee actually vacates the Premises, and such other remedies
as are provided by law, in equity or under this Lease, including without
limitation punitive damages recoverable under California Code of Civil Procedure
Section 1174.

20.  ENTRY BY LESSOR.  Lessor reserves and shall at any and all reasonable times
     ---------------
have the right to enter the Premises, inspect the same, supply janitorial
service and any other service to be provided by Lessor to Lessee hereunder, to
submit said Premises to prospective purchasers, mortgagees, lenders or tenants,
to post notices of non-responsibility, and to alter, improve or repair the
Premises and any portion of the Building that Lessor may deem necessary or
desirable, without any statement of Rentals, and may for such purposes erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed, provided that the entrance to the
Premises shall not be unreasonably blocked thereby, and further provided that
the business of the Lessee shall not be interfered with unreasonably. In no
event shall Lessor have any liability to Lessee for, and Lessee hereby waives
any claim for, damages or for any injury or inconvenience to or interference
with Lessee's business, any loss of occupancy or quiet enjoyment of the
Premises, and any other damage or loss occasioned thereby. For each of the
aforesaid purposes, Lessor shall at all times have and retain a key with which
to unlock all of the doors in, upon and about the Premises, excluding Lessee's
vaults, safes and files, and Lessor shall have the right to use any and all
means which Lessor may deem proper to open said doors in an emergency in order
to obtain entry to the Premises, without liability to Lessee except for any
failure to exercise due care for Lessee's property under the circumstances of
each entry. Any entry to the Premises obtained by Lessor by any of said means or
otherwise shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an eviction
of Lessee from the Premises or any portion thereof. If Lessee has removed
substantially all of Lessee's property from the Premises, Lessor may, without
statement of Rentals, enter the Premises for alteration, renovation or
decoration during the last thirty (30) days of the Term. With respect to any
entry by Lessor into the Premises, Lessor shall be liable to Lessee solely for
physical damage caused to Lessee's personal property located within the Premises
to the extent such damage is caused by Lessor's active negligence or willful
misconduct and which is not covered by the insurance required to be maintained
by Lessee pursuant to this Lease, and only with respect to an entry in an non-
emergency situation.

21.  RECONSTRUCTION.  If the Premises are damaged and rendered substantially
     --------------
untenantable, or if the Building is damaged (regardless of damage to the
Premises) or destroyed, Lessor may, within ninety (90) days after the casualty,
notify Lessee of Lessor's election not to repair, in which event this Lease
shall terminate at the expiration of the ninetieth (90th) day. If Lessor elects
to repair the damage or destruction, this Lease shall remain in effect and the
then current Base Rent and Lessee's Percentage Share of Building Expenses shall
be proportionately reduced during the period of repair. The reduction shall be
based upon the extent to which the making of repairs interferes with Lessee's
business conducted in the Premises, as reasonably determined by Lessor. All
other Rentals due hereunder shall continue unaffected, and Lessee shall have no
claim against Lessor for compensation for inconvenience or loss of business
during any period of repair or reconstruction. Lessee shall continue the
operation of its business on the Premises during any period of reconstruction or
repair to the extent reasonably practicable from the standpoint of prudent
business management. Upon Lessor's election to repair, Lessor shall diligently
repair the damage to the extent of insurance proceeds available to Lessor.
Lessor shall not be required to repair or replace, whether injured or damaged by
fire or other cause, any item required to be insured by Lessee under this Lease
including Lessee's fixtures, equipment, merchandise, personal property,
inventory, panels, decoration, furniture, railings, floor covering, partitions
or any other improvements, alterations, additions, or property made or installed
by Lessee to the Premises, and Lessee shall be obligated to promptly rebuild or
restore the same to the same condition as they were in immediately before the
casualty. Lessee hereby waives all claims for loss or damage to the foregoing.
Lessee waives any rights to terminate this Lease if the Premises are damaged or
destroyed, including without limitation any rights pursuant to the provisions of
Subdivision 2 of Section 1932 and Subdivision 4 of Section 1933 of the Civil
Code of California, as amended from time to time, and the provisions of any
similar law hereinafter enacted. If the Lease is terminated by Lessor pursuant
to this Article 21, the unused balance of the Security Deposit and any Rentals
unearned as of the effective date of termination shall be refunded to Lessee.
Lessee shall pay to Lessor any Rentals or other charges due Lessor under the
Lease, prorated as of the effective date of termination. Notwithstanding
anything to the contrary in the foregoing, if the damage is due to the fault or
neglect of Lessee, or Lessee's Agents, them shall be no statement of Base Rent
or any other Rentals.

      Notwithstanding the foregoing, if less than thirty-three percent (33%) of
the Rentable Area of the Building is damaged from an insured casualty and the
insurance proceeds actually available to Lessor for reconstruction (net of costs
to recover such proceeds and after all claimants thereto including lienholders
have been satisfied or waive

                                      -18-
<PAGE>

their respective claims) ("Net Insurance Proceeds") are sufficient to completely
restore the Building, Lessor agrees to make such reparations and continue this
Lease in effect. If, upon damage of less than thirty-three percent (33%) of the
Rentable Area of the Building there are not sufficient insurance proceeds
actually available to allow Lessor to completely restore the Building, Lessor
shall not be obligated to repair the Building and the provisions of the first
paragraph of this Article shall control.

      Lessee shall not be entitled to any compensation or damages from Lessor
for loss of the use of the whole or any part of the Premises, or for any damage
to Lessee's business, or any inconvenience or annoyance occasioned by such
damage, or by any repair, reconstruction or restoration by Lessor, or by any
failure of Lessor to make any repairs, reconstruction or restoration under this
Article or any other provision of this Lease. However, notwithstanding anything
to the contrary contained in this Lease, in the event of material casualty
damage to the Premises not resulting in termination of this Lease, Lessor shall
deliver written notice to Lessee within ninety (90) days following such casualty
damage or occurrence setting forth Lessor's good faith estimate of the time
required for completion of repair and/or restoration of the Premises, and if
such estimated time exceeds two hundred seventy (270) days from the occurrence
of the casualty, Lessee may elect to terminate this Lease by written notice to
Lessor within fifteen (15) days following Lessee's receipt of such notice. In
addition, if such repair is not substantially completed so as to permit Lessee's
resumption of business from the Premises without material interference from any
uncompleted repair work within two hundred seventy (270) days from the
occurrence of the casualty (or such longer period as may have been estimated in
Lessor's written notice to Lessee pursuant hereto), then Lessee shall have the
right to terminate this Lease upon thirty (30) days prior written notice to
Lessor (provided that if such repair work is so substantially completed prior to
the expiration of such thirty (30) day period, then Lessee's election to
terminate shall be nullified and this Lease shall continue in full force and
effect).

22.  DEFAULT.  The occurrence of any one or mom of the following events shall
     -------
constitute a material default and breach of this Lease by Lessee:

      a.  Lessee's failure to pay when due Base Rent or any other Rentals or
other sums payable hereunder where such failure is not cured within five (5)
days following Lessor's delivery of written notice thereof (which notice shall
be in lieu of, and not in addition to, any notice required under applicable
laws, including, without limitation, notices required under California Code of
Civil Procedure Section 1161 or any similar or successor statute);

      b.  Intentionally omitted;

      c.  Commencement, and continuation for at least thirty (30) days, of any
case, action, or proceeding by, against, or concerning Lessee, or any guarantor
of Lessee's obligations under this Lease ("Guarantor"), under any federal or
state bankruptcy, insolvency, or other debtor's relief law, including without
limitation, (i) a case under Title 11 of the United States Code concerning
Lessee, or a Guarantor, whether under Chapter 7, 11, or 13 of such Title or
under any other Chapter, or (ii) a case, action, or proceeding seeking Lessee's
or a Guarantor's financial reorganization or an arrangement with any of Lessee's
or a Guarantor's creditors;

      d.  Voluntary or involuntary appointment of a receiver, trustee, keeper,
or other person who takes possession for more than thirty (30) days of
substantially all of Lessee's or a Guarantor's assets, or of any asset used in
Lessee's business on the Premises, regardless of whether such appointment is as
a result of insolvency or any other cause;

      e.  Execution of an assignment for the benefit of creditors of
substantially all assets of Lessee or a Guarantor available by law for the
satisfaction of judgment creditors;

      f.  Commencement of proceedings for winding up or dissolving (whether
voluntary or involuntary) the entity of Lessee or a Guarantor, if Lessee or such
Guarantor is a corporation, partnership, limited liability company or other
entity;

      g.  Levy of a writ of attachment or execution on Lessee's interest under
this Lease, if such writ continues for a period of ten (10) days;

      h.  Any Transfer or attempted Transfer of this Lease by Lessee contrary to
the provisions of Article 13 above;

      i.  With respect to any report that Lessee is required to submit
hereunder, the willful submission by Lessee of a report which Lessee knows to be
materially inaccurate;

      j.  The use or occupancy of the Premises for any use or purpose not
specifically allowed by the terms of this Lease; or

      k.  Breach by Lessee of any term, covenant, condition, warranty, or
provision contained in this Lease or of any other obligation owing or due to
Lessor other than as described in subsections 22.a., b., c., d., e., f., g., h.,
i. or j, of this Article 22, where such failure shall continue for the period
specified in this Lease or if no such period is specified, for a period of
thirty (30) days after written notice thereof by Lessor to Lessee; provided,
however, that if the nature of Lessee's default is such that more than thirty
(30) days are reasonably required for its cure, Lessee shall not be deemed to be
in default if Lessee commences such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion; provided that any such
notice from Lessor shall be in lieu of, and not in addition to, any notice
required under applicable laws, including, without limitation, notices required
under California Code of Civil Procedure Section 1161 or any similar or
successor statute.

                                      -19-
<PAGE>

23.  REMEDIES UPON DEFAULT.  Upon any default or breach by Lessee which is not
     ---------------------
cured within any applicable period for cure provided for in Article 22 above, at
any time thereafter, with or without notice or demand, and without limiting
Lessor in the exercise of any right or remedy which Lessor may have hereunder or
otherwise at law or in equity by reason of such default or breach Lessor may do
the following:

      a. Termination of Lease. Lessor may terminate this Lease or Lessee's right
         --------------------
to possession of the Premises by notice to Lessee or any other lawful means, in
which case this Lease shall terminate and Lessee shall immediately surrender
possession of the Premises to Lessor. In such event Lessor shall be entitled to
recover from Lessee:

        (i) The worth at the time of award of the unpaid Rentals which had been
earned at the time of termination;

        (ii) The worth at the time of award of the amount by which the unpaid
Rentals which would have been earned after termination until the time of award
exceeds the amount of such rental loss that Lessee proves could have been
reasonably avoided;

        (iii) The worth at the time of award (computed by discounting at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent) of the amount by which the unpaid Rentals for the balance of
the Term after the time of award exceeds the amount of such rental loss that
Lessee proves could be reasonably avoided; and

        (iv) Any other amounts necessary to compensate Lessor for detriment
proximately caused by the default by Lessee or which in the ordinary course of
events would likely result, including without limitation the reasonable costs
and expenses incurred by Lessor for:

             (A) Retaking possession of the Premises;

             (B) Cleaning and making repairs and alterations (including
installation of leasehold improvements, whether or not the same shall be funded
by a reduction of rent, direct payment or otherwise) necessary to return the
Premises to good condition and preparing the Premises for reletting;

             (C) Removing, transporting, and storing any of Lessee's property
left at the Premises (although Lessor shall have no obligation to remove,
transport, or store any of the property);

             (D) Reletting the Premises, including without limitation, brokerage
commissions, advertising costs, and attorneys' fees;

             (E) Attorneys' fees, expert witness fees and court costs,

             (F) Any unamortized real estate brokerage commissions paid in
connection with this Lease; and

             (G) Costs of carrying the Premises, such as repairs, maintenance,
taxes and insurance premiums. utilities and security precautions, if any.

      The "worth at the time of award" of the amounts referred to in Articles
23.a.(i) and 23.a.(ii) is computed by allowing interest at an annual rate equal
to the greater of: ten percent (10%); or five percent (5%) plus the rate
established by the Federal Reserve Bank of San Francisco, as of the 25th day of
the month immediately preceding the default by Lessee, on advances to member
banks under Section 13 and 13(a) of the Federal Reserve Act, as not in effect or
hereafter from time to time amended (the "Stipulated Rate"). The computation of
the amount of rental loss that could be or could have been reasonably avoided by
Lessor pursuant to California Civil Code section 1951.2 shall take into account
the use restrictions set forth in Article 8.a. above except to the extent that
Lessee proves that under all circumstances the enforcement of the use
restriction would be unreasonable.

      b. Continuation of Lease. Lessor may continue this Lease in full force and
         ---------------------
effect, and the Lease shall continue in effect as long as Lessor does not
terminate Lessee's right to possession, and Lessor shall have the right to
enforce all rights and remedies under this Lease including the right to collect
all Rentals when due. During the period Lessee is in default, Lessor can enter
the Premises and relet them, or any part of them, to third parties for Lessee's
account. Lessee shall be liable immediately to Lessor for all costs Lessor
incurs in reletting the Premises, including without limitation, those items
outlined in subsections a.(i) through a.(iv) of this Article 23, and other like
costs. Reletting can be for a period shorter or longer than the remaining Term.
Lessee shall pay to Lessor all Rentals due under this Lease on the date the
Rentals am due, less the rent Lessor receives from any reletting. The use
restriction provided in Article 8.a. above shall apply to Lessor's remedies
under California Civil Code section 1951.4 except to the extent that Lessee
proves that under all circumstances enforcement of the use restriction would be
unreasonable.

      c. Other Remedies. Lessor may pursue any other remedy now or hereafter
         --------------
available to Lessor under the laws or judicial decisions of the State in which
the Premises are located.

      d. General.  The following shall apply to Lessor's remedies:
         -------

        (i) No entry upon or taking of possession of the Premises or any part
thereof by Lessor,  nor any letting or subletting thereof by Lessor for Lessee,
nor any appointment of a receiver, nor any other act of Lessor, whether
acceptance of keys to the Premises or otherwise, shall constitute or be
construed as an election by Lessor to

                                      -20-
<PAGE>

terminate this Lease or Lessee's right to possession of the Premises unless a
written notice of such election be given to Lessee by Lessor.

       (ii) If Lessor elects to terminate this Lease or Lessee's right to
possession hereunder, Lessee shall surrender and vacate the Premises in broom-
clean condition, and Lessor may re-enter and take possession of the Premises and
may eject all parties in possession or eject some and not others or eject none.
Any personal property of or under the control of Lessee remaining on the
Premises at the time of such re-entry may be considered and treated by Lessor as
abandoned.

24. EMINENT DOMAIN. If more than twenty-five percent (25%) of the area of the
    --------------
Premises is taken or appropriated for any public or quasi-public use under the
power of eminent domain, or conveyed in lieu thereof, either party hereto shall
have the right, at its option, to terminate this Lease by written notice to the
other party given within ten (10) days of the date of such taking, appropriation
or conveyance, and Lessor shall be entitled to any and all income, rent, award,
or any interest therein whatsoever which may be paid or made (the "Award") in
connection with such public or quasi-public use or purpose, and Lessee shall
have no claim against Lessor for (and hereby assigns to Lessor any claim which
Lessee may have for) the value of any unexpired Term of this Lease. If any part
of the Building or the Project other than the Premises may be so taken,
appropriated or conveyed, Lessor shall have the right at its option to terminate
this Lease. and in any such event Lessor shall be entitled to the entire Award
whether or not this Lease is terminated. If this Lease is terminated as provided
above: (i) the termination shall be effective as of the date upon which title to
the Premises, the Building, the Project, or a portion thereof, passes to and
vests in the condemnor or the effective date of any order for possession if
issued prior to the date title vests in the condemnor; (ii) Lessor shall refund
to Lessee any prepaid but unearned Rentals and the unused balance of the
Security Deposit; and (iii) Lessee shall pay to Lessor any Rentals or other
charges due Lessor under the Lease, prorated as of the date of taking.

     If less than twenty-five percent (25%) of the Premises is so taken,
appropriated or conveyed, or more than twenty-five percent (25%) thereof is so
taken, appropriated or conveyed and neither party elects to terminate as herein
provided, (i) Lessor shall be entitled to the entirety of the Award, and Lessee
shall be entitled to make a claim for any separate award attributable to any
taking of Lessee's trade fixtures so long as any such award to Lessee does not
reduce the amount of the Award available to Lessor; and (ii) the Rental
thereafter to be paid hereunder for the Premises shall be reduced in the same
ratio that the percentage of the area of the Premises so taken, appropriated or
conveyed bears to the total area of the Premises immediately prior to the
taking,  appropriation or conveyance.  In addition, if any Rentable Area in the
Building containing the Premises is so taken, appropriated or conveyed and this
Lease is not terminated by Lessor, Lessee's Percentage Share of Building
Expenses shall be adjusted pursuant to Article 7.

     Notwithstanding this Article 24 above, upon a temporary taking of all or
any portion of the Premises, the Lease shall remain in effect and Lessee shall
continue to pay and be liable for all Rentals under this Lease.  Upon such
temporary taking, Lessee shall be entitled to any Award for the Temporary use of
the portion of the Premises taken which is attributable to the period prior to
the date of Lease Termination, and Lessor shall be entitled to any portion of
the Award for such use attributable to the period after Lease Termination.  As
used in this paragraph, a temporary taking shall mean a taking for a period of
one year or less and does not include a taking which is to last for an
indefinite period and/or which will terminate only upon the happening of a
specified event unless it can be determined at the time of the taking when such
event will occur.

25.  OFFSET STATEMENT:  MODIFICATIONS FOR LENDER.  Lessee shall at any time and
     -------------------------------------------
from time to time within ten (10) days following request from Lessor execute,
acknowledge and deliver to Lessor a statement in writing, (i) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease as so modified is
in full force and effect), (ii) acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of the Lessor hereunder, or
specifying such defaults if any am claimed, (iii) certifying the date Lessee
entered into occupancy of the Premises and that Lessee is open and conducting
business at the Premises, (iv) certifying the date to which Rentals and other
charges are paid in advance, if any, (v) evidencing the status of this Lease as
may be required either by a lender making a loan affecting or a purchaser of the
Premises, or pan of the Project from Lessor, (vi) certifying that all
improvements to be constructed on the Premises by Lessor are substantially
completed (if applicable), except for any punch list items which do not prevent
Lessee from using the Premises for its intended use, and (vii) certifying such
other matters relating to this Lease and/or the Premises as may be requested by
Lessor or a lender making a loan to Lessor or a purchaser of the Premises, or
any part of the Project from Lessor.  Any such statement may be relied upon by
any prospective purchaser or encumbrancer of all or any portion of the Project,
or any interest therein.  Lessee shall, within ten (10) days following request
of Lessor, deliver such other documents including Lessee's financial statements
as are reasonably requested in connection with the sale of, or loan to be
secured by, any portion of the Project, or any interest therein; provided that
for so long as Lessee is a corporation whose stock is traded on a public
exchange, delivery of Lessee's annual 10-K as supplemented by an subsequent 10-Q
filings with the SEC shall be sufficient to satisfy Lessee's requirement for
delivery of financial statements pursuant hereto.

     If in connection with obtaining financing for all or any portion of the
Project, any lender shall request modifications of this Lease as a condition to
Lessor obtaining such financing, Lessee will not unreasonably withhold,  delay
or condition its consent thereto, provided that such modifications do not
increase the financial obligations of Lessee hereunder or materially and
adversely affect the leasehold interest hereby created or Lessee's rights
hereunder.

26.  PARKING.  Lessee shall have the right to use the number of non-exclusive
     -------
parking spaces located within the Project as designated in Article 1.k. without
charge during the Term, except, however, notwithstanding anything to the
contrary contained in this Lease, if a charge, fee, tax or other imposition is
assessed against Lessor or the Project by applicable governmental authorities
based upon use of parking space at the Project or is required by applicable

                                      -21-
<PAGE>

governmental authorities to be assessed by Lessor upon users of parking spaces
at the Project, then Lessee shall pay its equitable share of such charge, fee,
tax or other imposition to Lessor monthly in advance as additional rent.  Use of
all parking spaces shall be subject to reasonable rules and regulations
established by Lessor which may be altered at any time and from time to time
during the Term.  The location of all parking spaces may be designated from time
to time by Lessor.  Neither Lessee nor Lessee's Agents shall at any time use
more parking spaces than the number so allocated to Lessee or park or permit the
parking of their vehicles in any portion of the Parcel not designated by Lessor
as a non-exclusive parking area.  Lessee and Lessee's Agents shall not have the
exclusive right to use any specific parking space, except as expressly stated in
this Article 26.  Lessor shall designate a number of stalls (which shall be at
least such number as Lessor determines in the exercise of its business judgment
to provide reasonable parking for visitors to the Building and the adjacent
"Building 4") in the underground parking garage serving the Project as "visitor
parking".

     Notwithstanding the number of parking spaces designated for Lessee's non-
exclusive use, in the event by reason of any rule, regulation, order, law.
statute or ordinance of any governmental or quasi-governmental authority
relating to or affecting parking on the Parcel, or any cause beyond Lessor's
reasonable control, Lessor is required to reduce the number of parking spaces on
the Parcel, Lessor shall have the right to proportionately reduce the number of
Lessee's parking spaces and the non-exclusive parking spaces of other tenants of
the Building.  Lessor reserves the right in its reasonable discretion:  to
determine whether parking facilities are becoming overcrowded and in such event
to re-allocate parking spaces on a pro rata basis among Lessee and other tenants
of the Project; to have any vehicles owned by Lessee or Lessee's Agents which
are parked in violation of the provisions of this Article 26 or Lessor's rules
and regulations relating to parking, towed away at Lessee's cost, after having
given Lessee reasonable notice.  In the event Lessor elects or is required by
any law to limit or control parking on the Parcel, by validation of parking
tickets or any other method, Lessee agrees to participate in such validation or
other program under such reasonable rules and regulations as are from time to
time established by Lessor.  Lessor shall have the right to close all or any
portion of the parking areas at reasonable times for any purpose, including,
without limitation, the prevention of a dedication thereof, or the accrual of
rights in any person or the public therein.  Employees of Lessee shall be
required to park in areas designated for employee parking, if any.  The parking
area shall not be used by Lessee or Lessee's Agents for any purpose other than
the parking of motor vehicles and the ingress and egress of pedestrians and
motor vehicles.

27.  AUTHORITY. If Lessee is a corporation, partnership, limited liability
     ---------
company or other entity, each individual executing this Lease on behalf of said
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of said entity in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with
the by-laws of said corporation or on behalf of said partnership in accordance
with the partnership agreement of such partnership or otherwise on behalf of
said entity in accordance with the organizational documents governing such
entity, and that this Lease is binding upon said entity in accordance with its
terms.  If Lessee is a corporation or other entity, Lessee shall, upon execution
of this Lease, deliver to Lessor a certified copy of a resolution of the Board
of Directors of said corporation or other evidence of organizational approval
authorizing or ratifying the execution of this Lease.  If Lessee fails to
deliver such resolution or other evidence to Lessor upon execution of this
Lease, Lessor shall not be deemed to have waived its right to require delivery
of such resolution or other evidence, and at any time during the Term Lessor may
request Lessee to deliver the same, and Lessee agrees it shall thereafter
promptly deliver such resolution or other evidence to Lessor.  If Lessee is a
corporation or other entity, Lessee hereby represents, warrants, and covenants
that (i) Lessee is a valid and existing corporation or other entity; (ii) Lessee
is qualified to do business in California; (iii) all fees and all franchise and
corporate taxes of Lessee are paid to date, and will be paid when due; (iv) all
required forms and reports will be filed when due; and (v) the signers of this
Lease are properly authorized to execute this Lease on behalf of Lessee and to
bind Lessee hereto.

28.  SURRENDER OF PREMISES.
     ---------------------

      a. Condition of Premises. Lessee shall, upon Lease Termination, surrender
         ---------------------
the Premises in the condition required pursuant to subsection 10.b. above, and
otherwise in broom clean, trash free, and in the same condition as received and
with approved Alterations (unless required to be removed at the time of approval
of such Alterations pursuant to this Lease), reasonable wear and tear, and
casualties and condemnation excepted. By written notice to Lessee, Lessor may
elect to cause Lessee to remove from the Premises or cause to be removed, at
Lessee's expense, any logos, signs, notices, advertisements or displays placed
on the Premises by Lessee. If the Premises is not so surrendered as required by
this Article 28, Lessee shall indemnify, defend and hold harmless Lessor from
and against any loss or liability resulting from Lessee's failure to comply with
the provisions of this Article 28, including, without limitation, any claims
made by any succeeding tenant or losses to Lessor due to lost opportunities to
lease to succeeding tenants, and the obligations of Lessee pursuant hereto shall
survive the Lease Termination.

      b. Removal of Personal Property. Lessee shall remove all its personal
         ----------------------------
property from the Premises upon Lease Termination, and shall immediately repair
all damage to the Premises, Building and Common Area caused by such removal. Any
personal property remaining on the Premises after Lease expiration or sooner
termination may be packed, transported, and stored at a public warehouse at
Lessee's expense. If after Lease Termination and, within ten (10) days after
written demand by Lessor, Lessee fails to remove Lessee's personal property or,
if removed by Lessor, fails to pay the removal expenses, the personal property
may be deemed abandoned property by Lessor and may be disposed of as Lessor deem
appropriate. Lessee shall repair any damage to the Premises caused by or in
connection with the removal of any personal property, including without
limitation, the floor and patch and paint the walls, when required by Lessor, to
Lessor's reasonable satisfaction, all at Lessee's sole cost and expense. The
provisions of this Article 29 shall survive Lease Termination.

29.   LESSOR DEFAULT AND MORTGAGEE PROTECTION. Lessor shall not be in default
      ---------------------------------------
under this Lease unless Lessee shall have given Lessor written notice of the
breach, and, within thirty (30) days after notice, Lessor has not cured the
breach or, if the breach is such that it cannot reasonably be cured under the
circumstances within thirty (30) days, has not commenced diligently to prosecute
the cure to completion.  The liability of Lessor

                                      -22-
<PAGE>

pursuant to this Lease shall be limited to Lessor's interest in the Building and
any money judgment obtained by Lessee based upon Lessor's breach of this Lease
or otherwise relating to this Lease or the Premises, shall be satisfied only out
of the proceeds of the sale or disposition of Lessor's interest in the Building
(whether by Lessor or by execution of judgment). Lessee agrees that the
obligations of Lessor under this Lease do not constitute personal obligations of
the individual partners, whether general or limited, members, directors,
officers or shareholders of Lessor, and Lessee shall not seek recourse against
the individual partners, members, directors, officers or shareholders of Lessor
or any of their personal assets for satisfaction of any liability with respect
to this Lease. Upon any default by Lessor under this Lease, Lessee shall give
notice by registered mail to any beneficiary or mortgagee of a deed of trust or
mortgage encumbering the Premises, and/or any portion of the Project, whose
address shall have been furnished to it, and shall offer such beneficiary or
mortgagee a reasonable opportunity to cure the default, including time to obtain
possession of the Premises, and/or Project, or any portion thereof, by power of
sale or judicial foreclosure, if such should prove necessary to effect a cure.

30.  RIGHTS RESERVED BY LESSOR. Lessor reserves the right from time to time,
     -------------------------
without abatement of Rentals and without limiting Lessor's other rights under
this Lease: (i) to install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Project above the ceiling surfaces, below the floor surfaces, within the
walls and in the central core areas, and to relocate any pipes, ducts, conduits,
wires and appurtenant meters and equipment included in the Premises which am
located in the Premises or located elsewhere outside the Premises, and to expand
any building within the Project; (ii) to designate other land outside the
current boundaries of the Project be a part of the Project, in which event the
Parcel shall be deemed to include such additional land, and the Common Areas
shall be deemed to include Common Areas upon such additional land; (iii) to add
additional buildings and/or other improvements (including, without limitation,
additional parking structures or extension of existing parking structures) to
the Project, which may be located on land added to the Project pursuant to
clause (ii) above; (iv) to make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscape areas and walkways; (v) to close
Temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available; (vi) to use the Common
Areas while engaged in making additional improvements, repairs or alterations to
the Building or the Project, or any portion thereof, (vii) to grant the right to
the use of the Exterior Common Area to the occupants of other improvements
located on the Parcel; (viii) to designate the name, address, or other
designation of the Building and/or Project, without notice or liability to
Lessee; (ix) to close entrances, doors, corridors, elevators, escalators or
other Building facilities or Temporarily abate their operation: (x) to change or
revise the business hours of the Building; and (xi) to do and perform such other
acts and make such other changes in, to or with respect to the Common Areas, the
Building or any other portion of the Project as Lessor deems to be appropriate
in the exercise of its reasonable business judgment.

31.  EXHIBITS. Exhibits and riders, if any, signed by the Lessor and the Lessee
     --------
and endorsed on or affixed to this Lease are a part hereof.

32.  WAIVER. No covenant, term or condition in this Lease or the breach thereof
     ------
shall be deemed waived, except by written consent of the party against whom the
waiver is claimed. Any waiver of the breach of any covenant, term or condition
herein shall not be deemed to be a waiver of any preceding or succeeding breach
of the same or any other covenant, term or condition. Acceptance by Lessor of
any performance by Lessee after the time the same shall have become due shall
not constitute a waiver by Lessor of the breach or default of any covenant, term
or condition unless otherwise expressly agreed to by Lessor in writing. The
acceptance by Lessor of any sum less than that which is required to be paid by
Lessee shall be deemed to have been received only on account of the obligation
for which it is paid (or for which it is allocated by Lessor, in Lessor's
absolute discretion, if Lessee does not designate the obligation as to which the
payment should be credited), and shall not be deemed an accord and satisfaction
notwithstanding any provisions to the contrary written on any check or contained
in a letter of transmittal. Lessor's efforts to mitigate damages caused by any
default by Lessee shall not constitute a waiver of Lessor's right to recover
damages for any default by Lessee. No custom or practice which may arise between
the parties hereto in the administration of the terms hereof shall be construed
as a waiver or diminution of Lessor's right to demand performance by Lessee in
strict accordance with the terms of this Lease.

33.  NOTICES. All notices, consents and demands which may or are to be required
     -------
or permitted to be given by either party to the other hereunder shall be in
writing. All notices, consents and demands by Lessor to Lessee shall be
personally delivered, sent by overnight courier providing receipt of delivery
(such as Federal Express), or sent by United States Certified Mail, postage
prepaid return receipt requested, addressed to Lessee as designated in Article
1.1., or to such other place as Lessee may from time to time designate in a
notice to Lessor pursuant to this Article 33. All notices and demands by Lessee
to Lessor shall be personally delivered, sent by overnight courier providing
receipt of delivery (such as Federal Express) or sent by United States Certified
Mail, postage prepaid return receipt requested (provided that a copy of any such
notice or demand so sent by United States Certified Mail shall be concurrently
sent by Lessee to Lessor by facsimile transmission), addressed to Lessor as
designated in Article 1.1., or to such other person or place as Lessor may from
time to time designate in a notice to Lessee pursuant to this Article 33.
Notices sent by overnight courier shall be deemed delivered upon the next
business day following deposit with such overnight courier for next business day
delivery. Mailed notices shall be deemed delivered two (2) business days after
deposit in the United States mail as required by this Article 33.

34.  JOINT OBLIGATION. If Lessee consists of more than one person or entity, the
     ----------------
obligations of each Lessee under this Lease shall be joint and several.

35.  MARGINAL HEADING. The captions of paragraphs and articles of this Lease am
     ----------------
not a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.

                                     -23-
<PAGE>

36.  TIME. Time is of the essence of this Lease and each and all of its
     ----
provisions in which performance is a factor except as to the delivery of
possession of the Premises to Lessee.

37.  SUCCESSORS AND ASSIGNS. The covenants and conditions herein contained,
     ----------------------
subject to the provisions of Article 13, apply to and bind the heirs,
successors, executors, administrators, legal representatives and assigns of the
parties hereto.

38.  RECORDATION. This Lease shall not be recorded. Upon request by either
     -----------
party, the parties shall execute and acknowledge a short form of this Lease for
recording in form reasonably approved by both parties, which may be recorded in
the Official Records of Santa Clara County, California, at the election and cost
of the requesting party. The provisions of this Lease shall control, however, in
regard to any omissions from such short form of lease, or in respect to any
provisions hereof which may be in conflict, with such short form of lease. In
the event either party so records such short form of lease, upon the expiration
of the Term of this Lease or earlier termination of this Lease, Lessee shall
execute and, if Lessee was the party who recorded the short form of lease, cause
to be recorded in the Official Records of Santa Clara County, California, at
Lessee's sole cost, a quitclaim deed in such form as is reasonably requested by
Lessor.

39.  QUIET POSSESSION. Upon Lessee paying the Rentals reserved hereunder and
     ----------------
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire Term, subject to all the provisions of
this Lease and subject to any ground or underlying leases, mortgages or deeds of
trust now or hereafter affecting the Premises or the Building and the rights
reserved by Lessor hereunder.

40.  LATE CHARGES; ADDITIONAL RENT AND INTEREST.
     ------------------------------------------

      a. Late Charges. Lessee acknowledges that late payment by Lessee to Lessor
         ------------
of Rentals or other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which are impracticable or
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any mortgage or trust deed covering the Premises or any
part of the Project. Accordingly, if any installment of Rentals or any other sum
due from Lessee is not received by Lessor or Lessor's designee within three (3)
business days after the due date, then Lessee shall pay to Lessor, in each case,
a late charge equal to five percent (5%) of such overdue amount. The Parties
agree that such late charge represents a fair and reasonable estimate of the
cost that Lessor will incur by reason of late payment by Lessee. Acceptance of
any late charges by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from exercising
any of its other rights and remedies under this Lease.

      b. Rentals, Additional Rent and Interest. All taxes, charges, costs,
         -------------------------------------
expenses, and other amounts which Lessee is required to pay hereunder, including
without limitation Lessee's Percentage Share of Building Expenses and all
interest and charges (including late charges) that may accrue thereon upon
Lessee's failure to pay the same and all damages, costs and expenses which
Lessor may incur by reason of any default by Lessee shall be deemed to be
additional rent hereunder. Upon nonpayment by Lessee of any additional rent,
Lessor shall have all the rights and remedies with respect thereto as Lessor has
for the nonpayment of Base Rent. The term "Rentals" as used in this Lease is
Base Rent and all additional rent. Any payment due from Lessee to Lessor
(including but not limited to Base Rent and all additional rent) which is not
paid within three (3) business days of when due shall bear interest from the
date when due until paid, at an annual rate equal to the maximum rate that
Lessor is allowed to contract for by law. Payment of such interest shall not
excuse or cure any default by Lessee. In addition, Lessee shall pay all costs
and attorneys' fees incurred by Lessor in collection of such amounts. All
Rentals and other moneys due under this Lease shall survive the Lease
Termination. Interest on Rentals past due as provided herein shall be in
addition to the late charges levied pursuant to 40.a. above. All Rentals shall
be paid to Lessor, in lawful money of the United States of America which shall
be legal tender at the time of payment, at the address of Lessor as provided
herein, or to such other person or at such other place as Lessor may from time
to time designate in writing. If at any time during the Term Lessee pays any
Rentals by check which is returned for insufficient funds, Lessor shall have the
right, in addition to any other rights or remedies Lessor may have hereunder, to
require that Rentals thereafter be paid in cash or by cashier's or certified
check.

41.  PRIOR AGREEMENTS. This Lease contains all of the agreements of the parties
     ----------------
hereto with respect to the Premises, this Lease or any matter covered or
mentioned in this Lease, and no prior agreements or understanding pertaining to
any such matters shall be effective for any purpose. No provision of this Lease
may be amended or added to except by an agreement in writing signed by the
parties hereto or their respective successors in interest. This Lease shall not
be effective or binding on Lessor until fully executed by Lessor.

42.  INABILITY TO PERFORM. This Lease and the obligations of the Lessee
     --------------------
hereunder shall not be affected or impaired because the Lessor is unable to
fulfill any of its obligations hereunder or is delayed in doing so, if such
inability or delay is caused by reason of strike, labor troubles, Acts of God,
or any other cause, similar or dissimilar, beyond the reasonable control of the
Lessor.

43.  ATTORNEYS' FEES. If either party to this agreement shall bring an action to
     ---------------
interpret or enforce this agreement or for any relief against the other,
including, but not limited to, declaratory relief or a proceeding in
arbitration, the losing party shall pay to the prevailing party a reasonable sum
for attorney's fees, expert witness and other costs incurred in such action or
proceeding. Additionally, the prevailing party shall be entitled to all
additional attorney's fees and costs incurred in enforcing and collecting any
such judgment or award. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of attorney's and costs
incurred in enforcing such award or judgment.

                                     -24-
<PAGE>

44.  SALE OF PREMISES BY LESSOR. Upon a sale or conveyance by the Lessor herein
     --------------------------
named (and in case of any subsequent transfers or conveyances, the then grantor)
of Lessor's interest in the Building, other than a transfer for security
purposes only, the Lessor herein named (and in case of any subsequent transfers
or conveyances, the then grantor) shall be relieved, from and after the date of
such transfer, of all obligations and liabilities accruing thereafter on the
part of Lessor, provided that any funds in the hands of Lessor or the then
grantor at the time of transfer and in which Lessee has an interest, less any
deductions permitted by law or this Lease, shall be delivered to Lessor's
successor. Following such sale or conveyance by Lessor or the then grantor,
Lessee agrees to look solely to the responsibility of the successor-in-interest
of Lessor in and to this Lease for matters relating to the period from and after
the sale or conveyance. This Lease shall not be affected by any such sale or
conveyance and Lessee agrees to attorn to the purchaser or assignee.

45.  SUBORDINATION/ATTORNMENT. This Lease shall automatically be subject and
     ------------------------
subordinate to all ground or underlying leases which now exist or may hereafter
be executed affecting any portion of the Project and to the lien of any
mortgages or deeds of trust (including all advances thereunder, renewals,
replacements. modifications, supplements, consolidations, and extensions
thereof) in any amount or amounts whatsoever now or hereafter placed on or
against any portion of the Project, or on or against Lessor's interest or estate
therein, or on or against any ground or underlying lease, without the necessity
of the execution and delivery of any further instruments on the part of Lessee
to effectuate such subordination. Lessee covenants and agrees to execute and
deliver upon demand and without charge therefor, such further instruments
evidencing the subordination of this Lease to such ground or underlying leases
and/or to the lien of any such mortgages or deeds of trusts as may be required
by Lessor or a lender making a loan affecting the Project; provided that such
mortgagee or beneficiary under such mortgage or deed of trust or lessor under
such ground or underlying lease agrees in writing that so long as Lessee is not
in default under this Lease, this Lease shall not be terminated in the event of
any foreclosure or termination of any ground or underlying lease. Failure of
Lessee to execute such instruments evidencing subordination of this Lease shall
constitute a default by Lessee under this Lease. If any mortgagee, beneficiary
or lessor elects to have this Lease prior to the lien of its mortgage, dead of
trust or lease, and shall give written notice thereof to Lessee, this Lease
shall be deemed prior to such mortgage, deed of trust or lease, whether this
Lease is dated prior or subsequent to the date of said mortgage, deed of trust,
or lease or the date of the recording thereof.

     If any proceedings are brought to terminate any ground or underlying leases
or for foreclosure, or upon the exercise of the power of sale, under any
mortgage or deed of trust covering any portion of the Project, Lessee shall
attorn to the lessor or purchaser upon any such termination, foreclosure or sale
and recognize such lessor or purchaser as the Lessor under this Lease. So long
as Lessee is not in default hereunder and attorns as required above, this Lease
shall remain in full force and effect for the full term hereof after any such
termination, foreclosure or sale.

     Notwithstanding anything to the contrary contained in the foregoing, Lessor
shall use commercially reasonable efforts (i) to obtain from any future
mortgagee or trust deed beneficiary under a mortgage or deed of trust hereafter
encumbering the Project or Building to which this Lease is subordinated, non-
disturbance protection for Lessee (which shall be deemed to include an election
by such mortgagee or beneficiary allow its lien to be subordinate to this Lease)
on commercially reasonable terms, and (ii) to obtain from any existing mortgagee
or trust deed beneficiary under a mortgage or deed of trust encumbering the
Project or Building as of the execution of this Lease, non-disturbance
protection for Lessee (which shall be deemed to include an election by such
mortgagee or beneficiary to subordinate its lien to this Lease) on commercially
reasonable terms within thirty (30) days following the execution of this Lease.

46.  NAME. Lessee shall not use any name, picture or representation of the
     ----
Building or Project for any purpose other than as an address of the business to
be conducted by the Lessee in the Premises.

47.  SEVERABILITY. Any provision of this Lease which proves to be invalid, void
     ------------
or illegal shall in no way affect, impair or invalidate any other provision of
this Lease and all such other provisions shall remain in full force and effect;
however, if Lessee's obligation to pay the Rentals is determined to be invalid
or unenforceable, this Lease shall terminate at the option of Lessor.

48.  CUMULATIVE REMEDIES. Except has otherwise expressly provided in this Lease,
     -------------------
no remedy or election hereunder shall be deemed exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in equity.

49.  CHOICE OF LAW. This Lease shall be governed by the laws of the State of
     -------------
California.

50.  SIGNS. Lessee shall not inscribe, paint, affix or place any sign, awning,
     -----
canopy, advertising matter, decoration or lettering upon any portion of the
Premises, including, without limitation, any exterior door, window or wall,
without Lessor's prior written consent, which shall not be unreasonably
withheld. Subject in all events to the requirements of the City of Cupertino and
other applicable governmental requirements and any other restrictions of record
or to which the Project is subject, Lessee shall be entitled to Building
standard identification of Lessee upon the common Building lobby directory board
sign to be installed by Lessor in the Building lobby. In addition, subject to
the provisions of Article 10 above, Lessee shall have the right, at Lessee's
sole cost, to install first-class signage identifying Lessee on the Premises
entry doors. The parties acknowledge that there is presently no monument signage
available for the Building along Stevens Creek Boulevard. If monument signage
along Stevens Creek Boulevard is hereafter approved for the Building by the City
of Cupertino and any other required applicable governmental authorities, then
Lessee shall be entitled to identification on a pro rata share of such monument
signage, subject to compliance with applicable governmental requirements. The
exact location, size, materials, coloring and lettering of all Lessee signage
(including, without limitation, any such future monument signage) shall be
subject to Lessor's prior written approval.

                                     -25-
<PAGE>

51.  GENDER AND NUMBER. Wherever the context so requires, each gender shall
     -----------------
include any other gender, and the singular number shall include the plural and
vice-versa.

52.  CONSENTS. Whenever the consent of Lessor is required herein, the giving or
     --------
withholding of such consent in any one or any number of instances shall not
limit or waive the need for such consent in any other or future instances. Any
consent given by Lessor shall not be binding upon Lessor unless in writing and
signed by Lessor or Lessor's agents. Notwithstanding any other provision of this
Lease, where Lessee is required to obtain the consent of Lessor to do any act,
or to refrain from the performance of any act, Lessee agrees that if Lessee is
in default (after the expiration of any applicable period for cure pursuant to
Article 22 above) with respect to any material term, condition, covenant or
provision of this Lease, then Lessor shall be deemed to have acted reasonably in
withholding its consent if said consent is, in fact, withheld.

53.  BROKER.  Lessor shall be responsible, pursuant to separate written
     ------
agreement, for the payment of the commission in connection with this Lease owing
to the brokers designated in Article 1.m. above. Lessor warrants that it has had
no dealing with any real estate broker or agents in connection with the
negotiation of this Lease excepting only the broker or agent designated in
Article 1.m., and that it knows of no other real estate broker or agent who is
entitled to or can claim a commission in connection with this Lease. Lessor
agrees to indemnify, defend and hold Lessee harmless from and against any and
all claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) with respect to any alleged leasing commission or equivalent
compensation alleged to be owing on account of Lessor's dealings with any such
other real estate broker or agent. Lessee warrants that it has had no dealing
with any real estate broker or agents in connection with the negotiation of this
Lease excepting only the broker or agent designated in Article 1.m., and that it
knows of no other real estate broker or agent who is entitled to or can claim a
commission in connection with this Lease. Lessee agrees to indemnify, defend and
hold Lessor harmless from and against any and all claims, demands, losses,
liabilities, lawsuits, judgments, and costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) with respect to any alleged
leasing commission or equivalent compensation alleged to be owing on account of
Lessee's dealings with any such other real estate broker or agent.

54.  SUBSURFACE AND AIRSPACE. This Lease confers on Lessee no rights either with
     -----------------------
respect to the subsurface of the Parcel or with regard to airspace above the top
of the Building or above any paved or landscaped areas on the Parcel or Common
Area and Lessor expressly reserves the right to use such subsurface and airspace
areas, including without limitation the right to perform construction work
thereon and in regard thereto. Any diminution or shutting off of light, air or
view by any structure which may be erected by Lessor on those portions of the
Parcel, Common Area and/or Building reserved by Lessor shall in no way affect
this Lease or impose any liability on Lessor. Lessor shall have the exclusive
right to use all or any portion of the roof, side and rear walls of the Premises
and Building for any purpose. Lessee shall have no right whatsoever to the
exterior of the exterior walls or the roof of the Premises or any portion of the
Project outside the Premises except as provided in Article 55 of this Lease.

55.  COMMON AREA. For purposes of the Lease, "Common Area" shall collectively
     -----------
mean the following:

      a.  Exterior Common Area. That portion of the Parcel other than the land
          --------------------
comprising the property, and all facilities and improvements on such portion for
the non-exclusive use of Lessee in common with other authorized users,
including, but not limited to, vehicle parking areas, driveways, sidewalks,
landscaped areas, and the facilities and improvements necessary for the
operation thereof (the "Exterior Common Area"); and

      b.  Building Common Area. That portion of the Building in which the
          --------------------
Premises are located, and all of the facilities therein, set aside by Lessor for
the non-exclusive use of Lessee in common with other authorized users,
including, but not limited to, entrances, lobbies, halls, atriums, corridors,
toilets and lavatories, passenger elevators and service areas (the "Building
Common Area").

     Subject to the limitations and restrictions contained in this Lease, and
the Rules and Regulations, Lessor grants to Lessee and Lessee's Agents the
nonexclusive right to use the Common Area in common with Lessor, Lessor's agent,
other occupants of the Building and Project, other authorized users and their
agents, subject to the provisions of this Lease. The right to use the Common
Area shall terminate upon Lease Termination.

56.  LABOR DISPUTES. If Lessee becomes involved in or is the object of a labor
     --------------
dispute which subjects the Premises or any part of the Project to any picketing,
work stoppage, or other concerted activity which in the reasonable opinion of
Lessor is in any manner detrimental to the operation of any part of the Project,
or its tenants. Lessor shall have the right to require Lessee, at Lessee's own
expense and within a reasonable period of time specified by Lessor, to use
Lessee's best efforts to either resolve such labor dispute or terminate or
control any such picketing, work stoppage or other concerted activity to the
extent necessary to eliminate any interference with the operation of the
Projector its tenants. To the extent such labor dispute interferes with the
performance of Lessor's duties hereunder, Lessor shall be excused from the
performance of such duties and Lessee hereby waives any and all claims against
Lessor for damages or losses in regard to such duties. If Lessee fails to use
its best efforts to so resolve such dispute or terminate or control such
picketing, work stoppage or other concerted activity within the period of time
specified by Lessor, then Lessee shall be in default under this Lease. Nothing
contained in this Article 56 shall be construed as placing Lessor in an
employer-employee relationship with any of Lessee's employees or with any other
employees who may be involved in such labor dispute. Lessee shall indemnify,
defend and hold harmless Lessor from and against any and all liability
(including, without limitation, attorneys' fees and expenses) arising from any
labor dispute in which Lessee is involved and which affects any part of the
Project.

                                     -26-
<PAGE>

57.  CONDITIONS. All agreements by Lessee contained in this Lease, whether
     ----------
expressed as covenants or conditions, shall be construed to be both covenants
and conditions, conferring upon Lessor, upon breach thereof, the right to
terminate this Lease.

58.  LESSEE'S FINANCIAL STATE. Lessee hereby warrants that all financial
statements delivered by Lessee to Lessor prior to the execution of this Lease by
Lessee, or that shall be delivered in accordance with the terms hereof, are or
shall be at the time delivered true, correct, and complete, and prepared in
accordance with generally accepted accounting principles. Lessee acknowledges
and agrees that Lessor is relying on such financial statements in accepting this
Lease, and that a breach of Lessee's warranty as to such financial statements
shall constitute a default by Lessee.

59.  LESSOR NOT A TRUSTEE. Lessor shall not be deemed to be a trustee of any
     --------------------
funds paid to Lessor by Lessee (or held by Lessor for Lessee) pursuant to this
Lease.  Lessor shall not be required to keep any such funds separate from
Lessor's general funds or segregated from any funds paid to Lessor by (or held
by Lessor for) other tenants of the Building. Any funds held by Lessor pursuant
to this Lease shall not bear interest.

60.  MERGER. 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 the Lessor, terminate all or any existing subleases or subtenancies, or may,
at the option of Lessor, operate as an assignment to it of any or all such
subleases or subtenancies.

61.  NO PARTNERSHIP OR JOINT VENTURE. Nothing in this Lease shall be construed
     -------------------------------
as creating a partnership or joint venture between Lessor, Lessee, or any other
party, or cause Lessor to be responsible for the debts or obligations of Lessee
or any other party.

62.  LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS. Except as otherwise expressly
     --------------------------------------------
provided herein, if Lessee fails at any time to make any payment or perform any
other act on its part to be made or performed under this Lease, then upon ten
(10) days written notice to Lessee (provided that no such notice shall be
required in the event of an emergency), Lessor may, but shall not be obligated
to, and without waiving or releasing Lessee from any obligation under this
Lease, make such payment or perform such other act to the extent that Lessor may
deem desirable, and in connection therewith, pay expenses and employ counsel.
All sums so paid by Lessor and all penalties, interest and costs in connection
therewith shall be due and payable by Lessee to Lessor as additional rent upon
demand.

63.  PLANS. Lessee acknowledges that any plan of the Project which may have been
     -----
displayed or furnished to Lessee or which may be a part of Exhibit "A" or
Exhibit "B" is tentative; Lessor may from time to time change the shape, size,
location, number, and extent of the improvements shown on any such plan and
eliminate or add any improvements to the Project, in Lessor's sole discretion.

64.  INTENTIONALLY OMITTED.
     ---------------------

65.  WAIVER OF JURY. LESSOR AND LESSEE HEREBY WAIVE THEIR RESPECTIVE RIGHT TO
     --------------
TRIAL BY JURY ON ANY CAUSE OF ACTION, CLAIM, COUNTER-CLAIM OR CROSS-COMPLAINT IN
ANY ACTION, PROCEEDING AND/OR HEARING BROUGHT BY EITHER LESSOR AGAINST LESSEE OR
LESSEE AGAINST LESSOR ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE.

66.  JOINT PARTICIPATION. Lessor and Lessee hereby acknowledge that both parties
     -------------------
have been represented by counsel in connection with this Lease and that both
parties have participated in the negotiation and drafting of all of the terms
and provisions hereof. By reason of this joint participation, no term or
provision of this Lease will be construed against either party as the "drafter"
thereof, which terms and provisions shall include, without limitation, Article
14 hereof.

67.  COUNTERPARTS. This Lease may be executed in any number of counterparts,
     ------------
each of which shall be deemed to be an original, but any number of which, taken
together, shall be deemed to constitute one and the same instrument.

IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE LESSOR
BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTIONS
RELATING THERETO.

                                     -27-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have entered into this Lease as of the
date first written above.

<TABLE>
<CAPTION>
LESSOR:                                                          LESSEE:
<S>                                                              <C>
CUPERTINO CITY CENTER BUILDINGS,                                 CHORDIANT SOFTWARE, INC.,
a California limited partnership                                 a Delaware corporation

By: SUNSET RIDGE DEVELOPMENT CO., INC                            By: /s/ Steven R. Springsteel
    a California corporation, its general partner

    By: PROM MANAGEMENT GROUP, INC.,                             Print Name: Steven R. Springsteel
        a California corporation, dba Maxim
        Property Management, agent for owner                     Its: EVP/CFO

     By: /s/ Vicki R. Mullins                                    Date: June 11, 1998

     Print Name: Vicki R. Mullins                                By:________________________________

     Its: EVP and CFO                                            Print Name:________________________

     Date: 6/19, 1998                                            Its:_______________________________

                                                                 Date: ___________________, 1998
</TABLE>

                                     -28-
<PAGE>

                                  EXHIBIT "A"

                          FLOOR PLAN OF THE PREMISES
                          --------------------------

     [Floor Plan of Premises showing layout of offices on the fourth and second
floors of 20400 Stevens Creek Blvd.  Layout shows location of offices, elevator
shafts, stairways and other service areas.  Layout also shows the shape and
orientation of offices and service areas.]
<PAGE>

                                  EXHIBIT "B"

                           DEPICTION OF THE PROJECT
                           ------------------------

     [Map showing location of 20400 Stevens Creek Blvd. in relation to Torre
Ave. and De Anza Blvd.  Map also shows location and dimensions of adjacent
properties and dimensions of 20400 Stevens Creek Blvd.  Map also shows location,
dimensions and shape of nearby common areas, parks and parking lots.]
<PAGE>

                                  EXHIBIT "C"
                                  -----------

                             RULES AND REGULATIONS
                             ---------------------

1.   No sign, placard, picture, advertisement, name or notice &hall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building without prior written consent of Lessor. Lessor shall
have the right to remove any such sign, placard, picture, advertisement, name or
notice without notice to and at the expense of Lessee. All approved signs or
lettering on doors shall be printed, painted, affixed or inscribed at the
expense of Lessee by a person approved of by Lessor. Lessee shall not place
anything or allow anything to be placed near the glass of any exterior window,
door, partition or wall which may appear unsightly from outside the Premises.
Lessee shall not, without prior written consent of Lessor cover or otherwise
sunscreen any window.

2.   The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by Lessee or used by Lessee for any purpose other than
for ingress or egress from its Premises.

3.   Lessor will furnish Lessee, free of charge, with two keys to each door lock
in the Premises. Lessor may make a reasonable charge for any additional keys.
Lessee shall return all keys issued for the Premises. Lessee shall pay to Lessor
the costs of re-keying the Premises if 0 keys are not returned. Without Lessor's
prior approval and otherwise complying with the provisions of this Lease
governing the making of Alterations, Lessee shall not alter any lock or install
any new or additional locks or any bolts on any doors or windows of the
Premises.

4.   The Common Area toilet rooms, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed and
no foreign substance of any kind whatsoever shall be thrown therein and the
expense of any breakage, stoppage or damage resulting from the violation of this
rule shall be borne by the Lessee who, or whose agents, officers, employees,
contractors, servants, invitees or guests shall have caused it.

5.   Lessee shall not overload the floor of the Premises or in any way deface
the Premises or any part thereof. Lessor shall have the right to prescribe the
weight, size and position of all safes and other heavy equipment brought into
the Building and also the time and manner of moving the saw in and out of the
Building. Safes and other heavy objects shall, if considered necessary by
Lessor, stand on supports of such thickness as is necessary to properly
distribute the weight. Lessor will not be responsible for loss of or damage to
any such safe or property from any cause and all damage done to the Building by
moving or maintaining any such safe or other property shall be repaired at the
expense of Lessee.

6.   No furniture, freight or equipment of any kind (other than small items
customarily transported in passenger elevators in first-class office buildings)
shall be brought into the Building without prior notice to Lessor and all moving
of the same into or out of the Building shall be done at such time and in such
manner as Lessor shall designate. Unless otherwise agreed to in writing by
Lessor, any such movement of furniture, freight, or equipment shall be made
during non-business hours for the Building.

7.   Lessee shall have the right to use the loading facilities provided at the
Building, if any, in common with the other tenants. All Lessee deliveries of
bulk items shall be through the Building loading facilities, if any. Freight
elevator(s) will be available for use by all tenants in the Building, subject to
such reasonable scheduling as Lessor, in its discretion, deems appropriate.
Lessor shall have the right at its sole discretion to prohibit Lessee's delivery
through the main lobbies.

8.   Lessee shall not use, keep or permit to be used or kept, any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to Lessor or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be in or kept in or about the Premises or Building
(other than "seeing-eye" dogs or other animals providing assistance to disabled
persons).

9.   The Premises will not be used for lodging, storage of merchandise, washing
clothes, or manufacturing of any kind, nor shall the Premises be used for any
improper, immoral or objectionable purpose. No cooking will be done or permitted
on the Premises without Lessor's consent, except the use by Lessee of
Underwriters Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages shall be permitted, and the use of a microwave
oven for employees use will be permitted, provided that such equipment and use
is in accordance with all applicable federal, state, county and city laws,
codes, ordinances, rules and regulations.

10.  Lessee shall not use or keep in the Premises or the Building any kerosene,
gasoline or inflammable or combustible fluid or material. or any method of
heating or air conditioning other than supplied by Lessor (unless otherwise
approved by Lessor in the course of approval of Lessee Improvements and/or
Lessee Alterations).

11.  Lessor shall approve in writing the method of attachment of any objects
affixed to walls, ceilings or doors. Lessor will direct electricians as to where
and how telephone and telegraph wires are to be introduced. No boring or cutting
for the wires will be allowed without the consent of Lessor. The location of
telephones, call boxes and other office equipment affixed to the Premises shall
be subject to the approval of Lessor. Lessee shall not install any wiring above
the ceiling tiles that does not comply with the fire codes. Any such wiring
shall be removed immediately at the expense of Lessee. Lessee will not affix any
floor covering to the floor of the Premises in any manner except as approved by
Lessor.

12.  All cleaning and janitorial services for the Building and the Premises will
be provided exclusively through Lessor, and except with the written consent of
Lessor, no person or persons other than those approved by Lessor will be
employed by Lam or permitted to enter the Building for the purpose of cleaning
the sum.

13.  Lessee will store all its trash and garbage within its Premises or in other
facilities provided by Lessor. Lessee will not place in any trash box or
receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash

                                    PAGE 1
<PAGE>

and garbage disposal. All garbage and refuse disposal is to be made in
accordance with directions issued from time to time by Lessor.

14.  On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 p.m. and 7:00 a.m. the following day, access to the Building, or
to the halls, corridors, elevators or stairways in the Building, or to the
Premises may be refused unless the person seeking access is known to the person
or employee of the Building in charge and has a pass or is properly identified.
Lessor shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In case of invasion,
mob, not, public excitement or other commotion, Lessor reserves the right to
prevent access to the Building during the continuance of the same by closing the
doors or otherwise, for the safety of the tenants and protection of the Building
and of property in the Building.

15.  Lessee will not waste electricity, water or air conditioning and agrees to
cooperate fully with Lessor to assure the most effective operation of the
Building's heating and air conditioning and to comply with any governmental
energy-saving rules, laws or regulations of which Lessee has actual notice, and
will refrain from attempting to adjust controls. Lessee will keep corridor doors
closed, and shall keep all window coverings pulled down.

16.  Lessor reserves the right to exclude or expel from the Building any person
who, in the judgment of Lessor, is intoxicated or under the influence of liquor
or drugs, or who shall in any manner do any act in violation of any of the rules
and regulations of the Building.

17.  Except for Lessee's own use, no vending machine or machines of any
description shall be installed, maintained or operated upon the Premises without
the written consent of Lessor.

18.  Lessor shall have the right, exercisable without notice and without
liability to Lessee to change the name and street address of the Building or the
Project.

19.  Lessee shall not disturb, solicit or canvass any occupant of the Building
or Project and shall cooperate to prevent the same.

20.  Lessor shall have the right to control and operate the public portions of
the Buildings and the public facilities, and heating and air conditioning, as
well as facilities furnished for the common use of the tenants, in such manner
as it deems best for the benefit of the tenants generally.

21.  All entrance doors in the Premises shall be left locked when the Premises
am not in use and all doors opening to public corridors shall be kept closed
except for normal ingress or egress from the Premises.

22.  Without the written consent of Lessor, Lessee shall not use the name of the
Building or Project in connection with or in promoting or advertising the
business of Lessee except at Lessee's address.

23.  Lessee shall place pads under all desk chairs, or have carpet coasters to
protect chairs.

24.  The current "Building Hours" are between 7:00 a.m. to 6:00 p.m. on
weekdays, Monday through Friday, except generally recognized Building holidays.

25.  Lessee will not install any radio or television antenna, loudspeaker,
satellite dishes or other devices on the roof(s) or exterior walls of the
Building or the Project. Lessee will not interfere with radio or television
broadcasting or reception from or in the Project or elsewhere. If Lessee desires
telegraphic, telephonic, burglar alarm, satellite dishes, antennae or similar
services, it will first obtain Lessor's approval, and comply with, Lessor's
reasonable rules and requirements applicable to such services, which may include
(without limitation) separate licensing by, and fees paid to, Lessor.

26.  Lessee agrees to comply with all safety, fire protection and evacuation
procedures and regulations established by Lessor or any governmental agency.

27.  Lessee assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage.  which includes keeping doors locked and other
means of entry to the Premises closed.

28.  Lessor may prohibit smoking in the Building and/or any other portion of the
Project and may require Lessee and any of its employees, agents, clients,
customers, invitees and guests who desire to smoke, to smoke within designated
smoking areas within the Project, if any such smoking areas are provided.

29.  Lessee's requirements will be attended to by Lessor only upon appropriate
application to Lessor's management office for the Project by an authorized
individual of Lessee. Employees of Lessor will not perform any work or do
anything outside of their regular duties unless under special instructions from
Law, and no employee of Lessor will admit any person (Lam or otherwise) to any
office without specific instructions from Lessor.

30.  In the event of any conflict between these Rules and Regulations and the
Lease of which they are a part, the other provisions of the Lease shall prevail.
Lessor may waive any one or more of these Rules and Regulations for the benefit
of Lessee or any other tenant, but no such waiver by Lessor will be construed as
a waiver of such Rules and Regulations in favor of Lessee or any other tenant,
nor prevent Lessor from thereafter enforcing any such Rules and Regulations
against any or all of the tenants of the Project.

                                    PAGE 2<PAGE>

                                                                    EXHIBIT 10.8

April 24, 1998

Sam Spadafora
19188 Crisp Avenue
Saratoga, CA 95070

Re: Employment at Chordiant Software, Inc.

Dear Sam:

Chordiant Software, Inc. (the "Company" or "Chordiant") is pleased to offer you
the position of President and Chief Executive Officer on the terms described
below:

1.  As President and CEO of Chordiant, you will work in Palo Alto, California
    and perform the duties customarily associated with this position, and such
    duties as may be assigned to you by the Company's Board of Directors. Your
    start date will be June 1, 1998.

2.  Your initial base salary will be $250,000 per year, less standard deductions
    and withholdings, paid semi-monthly. Starting in 1999, you will be eligible
    for a $200,000 incentive bonus at the discretion of the Board based on
    annualized objectives to be established by the Board for your position. As
    with all executives, receipt of year-end bonus will be subject to the
    achievement of our annual financial plan and individual management
    objectives. For 1998, you will be eligible for a $125,000 incentive bonus
    based on revised annualized objectives established by the Board after your
    employment with the Company commences. You will also receive a $100,000
    hiring bonus, less standard deductions and withholdings. This hiring bonus
    will be paid in equal payments on the Company's ordinary payroll dates over
    a four-month period starting on September 1, 1998, provided that your
    employment with the Company does not terminate for any reason.

3.  Upon approval by the Board (which approval will be on or about the date your
    employment commences with Chordiant), (i) the Company will grant to you a
    stock option (the "Stock Option") under the terms of the Company's 1997
    Equity Incentive Plan (the "Plan") and (ii) you will be appointed as a
    member of the Company's Board of Directors. To the maximum extent possible,
    the Stock Option will be an "incentive stock option" (as defined under
    Section 422(b) of the Internal Revenue Code of 1986, as amended). The number
    of shares subject to the Stock Option shall be 3,615,300, equal to
    approximately 7% of the outstanding shares of the Company, including all
    outstanding options. The stock option will have an exercise price equal to
    the fair market value of Chordiant Common Stock on the date of grant and
    will vest over three years, with one-sixth vesting after your first six
    months of employment, and five-sixths vesting in equal monthly installments
    during the remaining 30 months. In the event of: (a) a sale of substantially
    all of the assets of the Company, (b) a merger or consolidation in which the
    Company is not the surviving corporation, or (c) the transfer of more than
    50% of the voting interests of the Company (each a "Change in Control"),
    then you will immediately vest in 50% of the then unvested shares on the
    closing date of such Change in Control. Other terms of the stock option will
    be consistent with the Company's Plan, this offer letter and the terms of
    the Company's standard form of incentive stock option agreement. From time
    to time, the Board reviews the
<PAGE>

    outstanding option grants for senior Company executives and may issue
    additional options in the future at its discretion.

4.  The Company will reimburse you for reasonable documented business expenses
    pursuant to Company policy. In addition to your salary and incentive
    compensation, you will be eligible for the following Company benefits
    consistent with Company policy: three weeks of vacation per year, $1,000,000
    keyman life insurance, and medical and dental coverage. Dependent medical
    and dental coverage is also available, paid in part by the Company and in
    part by you, in accordance with Chordiant policy. Details about these
    benefits are provided in the Associate Handbook and Summary Plan
    Descriptions. Of course, the Company reserves the right to modify your
    compensation and benefits from time to time, as it deems necessary.

5.  You will be expected to abide by all of the Company's policies and
    procedures. As a further condition of your employment, you agree to refrain
    from any unauthorized use or disclosure of the Company's proprietary or
    confidential information or materials. You also agree to sign and comply
    with the Company's Proprietary Information and Inventions Agreement
    (attached). By accepting this offer, you are representing that you are not a
    party to any agreement or subject to any restrictions (e.g., a non-compete)
    with any third party or prior employer that would conflict with or inhibit
    your performance of your duties with Chordiant.

6.  Either you or the Company may terminate your employment relationship at any
    time for any reason whatsoever, with or without cause or advance notice. If
    the Company terminates your employment without cause at any time, (i) the
    Company will: (a) make severance payments to you in the form of continuation
    of your base salary in effect on the termination date for 12 months
    following the termination date, payable on the Company's ordinary payroll
    dates, subject to standard payroll deductions and withholdings; and (b) if
    you elect continued coverage under COBRA, the Company will pay your COBRA
    premiums for up to 12 months, provided, however, that the Company's
    obligation to make these payments will cease immediately if you become
    eligible for other health insurance benefits at the expense of a new
    employer; and (ii) the vesting under the Stock Option will be automatically
    accelerated so that you will immediately vest in 50% of the then unvested
    shares. As a condition to your right to receive any of the payments or
    benefits provided above you agree that you shall provide to the Company a
    full release and waiver of any claims or rights against the Company or
    related parties, in a form acceptable to the Company.

7.  If you resign or your employment is terminated for cause, all compensation
    and benefits will cease immediately, and you will receive none of the items
    listed under items (a) through (d) of paragraph 6 above. For purposes of
    this letter agreement, "cause" means misconduct, including: (a) conviction
    of any felony or an crime involving moral turpitude or dishonesty; (b)
    participation in a fraud or act of dishonesty against the Company; (c)
    willful breach of the Company's policies; (d) intentional damage to the
    Company's property; (e) material breach of this Agreement or your
    Proprietary Information and Inventions Agreement; or (f) conduct by you
    that, in the good faith and reasonable determination of the Board,
    demonstrates gross unfitness to serve. Physical or mental disability will
    not constitute cause.

8.  This letter constitutes the complete, final and exclusive embodiment of the
    entire agreement between you and Chordiant with respect to the terms and
    conditions of your employment. In entering into this agreement, neither
    party is relying upon any promise or representation, written or oral, other
    than those expressly contained herein, and this agreement supersedes any
    other

                                       2
<PAGE>

    such promises, representations or agreements. It may not be amended or
    modified except in a written agreement signed by you and a duly authorized
    Company officer. As required by law, this offer of employment is subject to
    proof of your right to work in the United States.

If you choose to accept our offer as described above, please sign below and
return this letter to me by the close of business on May 4, 1998.

I am enthusiastic about the prospect of your leading the Chordiant team, and
look forward to working with you to build an outstanding Company.

                              Very truly yours,

                              Chordiant, Inc.

                                  /s/ Kathryn Gould
                              By: Kathryn Gould
                                  Director

Attachment A - Proprietary Information and Inventions Agreement

Agreed and Accepted:

By: /s/ Sam Spadafora
    _________________________
    Sam Spadafora

Date: 5/4/98
      _______________________

                                       3
<PAGE>

                                                                    ATTACHMENT A

                            CHORDIANT SOFTWARE, INC.

                        EMPLOYEE PROPRIETARY INFORMATION
                            AND INVENTIONS AGREEMENT

     In consideration of my employment or continued employment by CHORDIANT
SOFTWARE, INC. (the "Company"), and the compensation now and hereafter paid to
me, I hereby agree as follows:

1.   NONDISCLOSURE

     1.1 Recognition of Company's Rights; Nondisclosure. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

     1.2 Proprietary Information. The term "Proprietary Information" shall mean
any and all confidential and/or proprietary knowledge, data or information of
the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.

     1.3 Third Party Information. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.

     1.4 No Improper Use of Information of Prior Employers and Others. During my
employment by the Company I will not improperly use or disclose any confidential
information or trade secrets, if any, of any former employer or any other person
to whom I have an obligation of confidentiality, and I will not bring onto the
premises of the Company any unpublished documents or any property belonging to
any former employer or any other person to whom I have an obligation of
confidentiality unless consented to in writing by that former employer or
person. I will use in the performance of my duties only information which is
generally known and used by persons with training and experience comparable to
my own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the Company.

2.   ASSIGNMENT OF INVENTIONS.

     2.1 Proprietary Rights. The term "Proprietary Rights" shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.

     2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I
made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit B (Previous Inventions) attached hereto a
<PAGE>

complete list of all Inventions that I have, alone or jointly with others,
conceived, developed or reduced to practice or caused to be conceived, developed
or reduced to practice prior to the commencement of my employment with the
Company, that I consider to be my property or the property of third parties and
that I wish to have excluded from the scope of this Agreement (collectively
referred to as "Prior Inventions"). If disclosure of any such Prior Invention
would cause me to violate any prior confidentiality agreement, I understand that
I am not to list such Prior Inventions in Exhibit B but am only to disclose a
cursory name for each such invention, a listing of the party(ies) to whom it
belongs and the fact that full disclosure as to such inventions has not been
made for that reason. A space is provided on Exhibit B for such purpose. If no
such disclosure is attached, I represent that there are no Prior Inventions. If,
in the course of my employment with the Company, I incorporate a Prior Invention
into a Company product, process or machine, the Company is hereby granted and
shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide
license (with rights to sublicense through multiple tiers of sublicensees) to
make, have made, modify, use and sell such Prior Invention. Notwithstanding the
foregoing, I agree that I will not incorporate, or permit to be incorporated,
Prior Inventions in any Company Inventions without the Company's prior written
consent.

     2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "Company Inventions."

     2.4 Nonassignable Inventions. This Agreement does not apply to an Invention
which qualifies fully as a nonassignable Invention under Section 2870 of the
California Labor Code (hereinafter "Section 2870"). I have reviewed the
notification on Exhibit A (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

     2.5 Obligation to Keep Company Informed. During the period of my employment
and for six (6) months after termination of my employment with the Company, I
will promptly disclose to the Company fully and in writing all Inventions
authored, conceived or reduced to practice by me, either alone or jointly with
others. In addition, I will promptly disclose to the Company all patent
applications filed by me or on my behalf within a year after termination of
employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.

     2.6 Government or Third Party. I also agree to assign all my right, title
and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.

     2.7 Works for Hire. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).

     2.8 Enforcement of Proprietary Rights. I will assist the Company in every
proper way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition, I
will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company with respect to
Proprietary Rights relating to such Company Inventions in any and all countries
shall continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my
<PAGE>

termination for the time actually spent by me at the Company's request on such
assistance.

In the event the Company is unable for any reason,  after reasonable  effort, to
secure my  signature  on any  document  needed in  connection  with the  actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact,  which  appointment  is coupled with an interest,  to act for and in my
behalf  to  execute,  verify  and file any such  documents  and to do all  other
lawfully permitted acts to further the purposes of the preceding  paragraph with
the same  legal  force  and  effect  as if  executed  by me. I hereby  waive and
quitclaim to the Company any and all claims, of any nature  whatsoever,  which I
now or may hereafter have for  infringement of any  Proprietary  Rights assigned
hereunder to the Company.

3.  RECORDS. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.

4.  ADDITIONAL ACTIVITIES. I agree that during the period of my employment by
the Company I will not, without the Company's express written consent, engage in
any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for one (l) year after the date
of termination of my employment with the Company I will not induce any employee
of the Company to leave the employ of the Company. I agree further that for the
period of my employment with the Company and for one (1) year after the date of
termination of my employment with the Company, I will not solicit the business
of any client or customer of the Company (other than on behalf of the Company).

5.  NO CONFLICTING OBLIGATION. I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence information acquired by me in confidence or
in trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any agreement either written or oral in conflict
herewith.

6.  RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together with all copies thereof, and any
other material containing or disclosing any Company Inventions, Third Party
Information or Proprietary Information of the Company. I further agree that any
property situated on the Company's premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice. Prior to
leaving, I will cooperate with the Company in completing and signing the
Company's termination statement.

7.  LEGAL AND EQUITABLE REMEDIES. Because my services are personal and unique
and because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.

8.  NOTICES. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or registered mail,
three (3) days after the date of mailing.

9.  NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.

10. GENERAL PROVISIONS.

     10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will
be governed by and construed according to the laws of the State of California,
as such laws are applied to agreements entered into and to be performed entirely
within California between California residents. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in Santa Clara
County, California for any lawsuit filed there against me by Company arising
from or related to this Agreement.
<PAGE>

     10.2 Severability. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.

     10.3 Successors and Assigns. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.

     10.4 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.

     10.5 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.

     10.6 Waiver. No waiver by the Company of any breach of this Agreement shall
be a waiver of any preceding or succeeding breach. No waiver by the Company of
any right under this Agreement shall be construed as a waiver of any other
right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.

     10.7 Entire Agreement. The obligations pursuant to Sections 1 and 2 of this
Agreement shall apply to any time during which I was previously employed, or am
in the future employed, by the Company as a consultant if no other agreement
governs nondisclosure and assignment of inventions during such period. This
Agreement is the final, complete and exclusive agreement of the parties with
respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.

     This Agreement shall be effective as of the first day of my employment with
the Company, namely: _______________, 19__.

     I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.

Dated:  ___________

_______________________________________
(Signature)

_______________________________________
(Printed Name)

ACCEPTED AND AGREED TO:

CHORDIANT SOFTWARE, INC.

By:____________________________________

Title:_________________________________

_______________________________________
(Address)

_______________________________________

Dated: _______
<PAGE>

                                    EXHIBIT A

                         LIMITED EXCLUSION NOTIFICATION

     THIS IS TO NOTIFY you in accordance with Section 2872 of the California
Labor Code that the  foregoing  Agreement  between you and the Company  does not
require you to assign or offer to assign to the Company any  invention  that you
developed  entirely  on your own time  without  using the  Company's  equipment,
supplies,  facilities or trade secret  information  except for those  inventions
that either:

     1. Relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company;

     2. Result from any work performed by you for the Company.

     To the extent a provision in the foregoing Agreement purports to require
you to assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.

     This limited exclusion does not apply to any patent or invention covered by
a contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

     I ACKNOWLEDGE RECEIPT of a copy of this notification.

                                            By:_________________________________
                                               (PRINTED NAME OF EMPLOYEE)

                                            Date:_______________________________
WITNESSED BY:

_______________________________________
(PRINTED NAME OF REPRESENTATIVE)
<PAGE>

                                    EXHIBIT B

TO:       CHORDIANT SOFTWARE, INC.

FROM:     ________________________

DATE:     ________________________

SUBJECT:  Previous Inventions

1.  Except as listed in Section 2 below, the following is a complete list of all
inventions or improvements relevant to the subject matter of my employment by
CHORDIANT SOFTWARE, INC. (the "Company") that have been made or conceived or
first reduced to practice by me alone or jointly with others prior to my
engagement by the Company:

    [_]   No inventions or improvements.

    [_]   See below:

          ______________________________________________________________________

          ______________________________________________________________________

          ______________________________________________________________________

    [_]   Additional sheets attached.

     2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):

<TABLE>
<CAPTION>
    Invention or Improvement           Party(ies)               Relationship
<S>                                    <C>                      <C>

1.   ______________________            _______________          ________________

2.   ______________________            _______________          ________________

3.   ______________________            _______________          ________________
</TABLE>

[_]  Additional sheets attached.

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