Document:

<PAGE>

                                                                    EXHIBIT 10.4

                . 1400 65/th/ STREET, EMERYVILLE, CALIFORNIA .

                         . OFFICE BUILDING NET LEASE .

                            BASIC LEASE INFORMATION

Date of Lease:      November 3, 1999

Landlord:           BEP-EMERYVILLE, L.P.

Landlord's Address: c/o Ellis Partners, Inc.
                    433 California Street, Suite 610
                    San Francisco, California 94104
                    Attention:  James F. Ellis

Tenant:             EVOLVE SOFTWARE, INC.

Tenant's Address:   Prior to the Term Commencement Date:

                    615 Battery Street, Suite 400
                    San Francisco, CA 94111
                    Attn: John Bantleman

                    After the Term Commencement Date:
                    1400 65/th/ Street
                    Emeryville, CA 94608
                    Attn: John Bantleman

Building:           EmeryTech Building located at 1400-65/th/ Street,
                    Emeryville, California

Leased Premises:    Approximately 51,261 rentable square feet on the entire
                    East-Hi-Bay and the ground floor of the West-Hi-Bay of the
                    Building.

Rentable Area:      Approximately 51,261 rentable square feet

Scheduled Term

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Commencement Date:  March 1, 2000

Scheduled Term
Expiration Date:    February 28, 2007

Option to Extend:   Number of Extension Periods: One (1)
                    Years per Extension Period:  Five (5)

Base Rent (NNN):    $112,774.20.00 (calculated on the basis of $2.20 per month
                    per rentable square foot); beginning in the second year of
                    the Term, Base Rent (NNN) shall increase at three percent
                    (3%) per annum

Tenant's Proportionate
Share:              Approximately thirty-four and twenty-four one hundredths
                    percent (34.24%)

Parking Spaces:     153 (subject to additional spaces pursuant to Section
                    9.01 of the Lease)

Security Deposit:   $2,000,000.00 (subject to Section 5.14 of the Lease)

Guarantor:          None

Landlord's Broker:  CB Richard Ellis

Tenant's Broker:    Colliers International

                                      ii
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The foregoing BASIC LEASE INFORMATION is incorporated herein and made a part of
the LEASE to which it is attached.  If there is any conflict between the BASIC
LEASE INFORMATION and the LEASE, the BASIC LEASE INFORMATION shall control.

                            "LANDLORD":

                            BEP-EMERYVILLE, L.P.,
                            a Delaware limited partnership

                            By:  EPI Investors 103 LLC,
                                 a California limited liability company
                                 Its:  General Partner

                                 By:  Ellis Partners, Inc.,
                                      a California corporation
                                      Its: Managing Member

                                      By:
                                            --------------------------
                                      Name:
                                            --------------------------
                                      Title:
                                            --------------------------

                            "TENANT":

                            EVOLVE SOFTWARE, INC.,
                            a Delaware corporation

                            By:
                                   --------------------------
                            Name:
                                   --------------------------
                            Title:
                                   --------------------------
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                               TABLE OF CONTENTS
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                                                                          PAGE
                                                                          ----
<C>     <C>        <S>                                                    <C>
Article 1.         Definitions.........................................    1

        1.01.      Definitions.........................................    1
        1.02.      "Additional Rent"...................................    1
        1.03.      "Base Expenses".....................................    1
        1.04.      "Base Rent".........................................    1
        1.05.      "Base Year".........................................    1
        1.06.      "Basic Operating Cost"..............................    1
        1.07.      "Building"..........................................    1
        1.08.      "Building Standard Improvements"....................    1
        1.09       "Common Areas"......................................    1
        1.10.      "Computation Year"..................................    1
        1.11       "Landlord's Broker".................................    1
        1.12.      "Landlord's Contribution"...........................    1
        1.13.      "Landlord's Work"...................................    2
        1.14.      "Leased Premises"...................................    2
        1.15.      "Net Rent"..........................................    2
        1.16.      "Permitted Use".....................................    2
        1.17.      "Project"...........................................    2
        1.18.      "Rent"..............................................    2
        1.19.      "Rentable Area".....................................    2
        1.20.      "Security Deposit"..................................    2
        1.21.      "Substantial Completion"............................    2
        1.22.      "Tenant Extra Improvements".........................    3
        1.23.      "Tenant Improvements"...............................    3
        1.24.      "Tenant's Broker"...................................    3
        1.25.      "Tenant's Physical Possession Date".................    3
        1.26.      "Tenant's Proportionate Share"......................    3
        1.27.      "Term"..............................................    3
        1.28.      "Term Commencement Date"............................    3
        1.29.      "Term Expiration Date"..............................    3
        1.30.      Other Terms.........................................    3

Article 2.         Leased Premises.....................................    3

        2.01.      Lease...............................................    3
        2.02.      Acceptance of Leased Premises.......................    3
        2.03.      Right To Relocate Leased Premises...................    3
        2.04.      Reservation of Rights...............................    4

Article 3.         Term, Use and Rent..................................    4
</TABLE>
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<TABLE>
<CAPTION>
<C>     <C>        <S>                                                     <C>
        3.01.      Term................................................    4
        3.02.      Use.................................................    4
        3.03.      Base Rent...........................................    4
        3.04.      Tenant's Proportionate Share of Basic
                   Operating Cost......................................    5
        3.05.      Basic Operating Cost................................    7

Article 4          Landlord's Covenants................................    9

        4.01.      Basic Services......................................    9
        4.02.      Extra Services......................................   10
        4.03.      Window Coverings....................................   11
        4.04.      Graphics and Signage................................   11
        4.05.      Tenant Extra Improvements...........................   12
        4.06.      Repair Obligation...................................   12
        4.07.      Peaceful Enjoyment..................................   12

Article 5          Tenant's Covenants..................................   12

        5.01.      Payments by Tenant..................................   12
        5.02.      Tenant Improvements.................................   12
        5.03.      Taxes on Personal Property and Tenant
                   Extra Improvements..................................   13
        5.04.      Repairs by Tenant...................................   13
        5.05.      Waste...............................................   13
        5.06.      Assignment or Sublease..............................   13
        5.07.      Alterations, Additions and Improvements.............   15
        5.08.      Compliance With Laws and Insurance Standards........   16
        5.09.      No Nuisance; No Overloading.........................   16
        5.10.      Furnishing of Financial Statements; Tenant's
                   Representations.....................................   16
        5.11.      Entry by Landlord...................................   17
        5.12.      Nondisturbance and Attornment.......................   17
        5.13.      Estoppel Certificate................................   17
        5.14.      Security Deposit....................................   17
        5.15.      Surrender...........................................   17
        5.16.      Tenant's Remedies...................................   19
        5.17.      Rules and Regulations...............................   19

Article 6          Environmental Matters...............................   19

        6.01.      Hazardous Materials Prohibited......................   19
        6.02.      Limitations on Assignment and Subletting............   20
        6.03.      Right of Entry......................................   21
        6.04.      Notice to Landlord..................................   21
</TABLE>
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<TABLE>
<CAPTION>
<C>     <C>        <S>                                                    <C>

Article 7.         Insurance, Indemnity, Condemnation, Damage
                   and Default.........................................   21

        7.01.      Landlord's Insurance................................   21
        7.02.      Tenant's Liability Insurance........................   21
        7.03.      Tenant's Additional Insurance Requirements..........   22
        7.04.      Indemnity and Exoneration...........................   23
        7.05.      Waiver of Subrogation...............................   24
        7.06.      Condemnation........................................   24
        7.07.      Damage or Destruction...............................   25
        7.08.      Default by Tenant...................................   26

Article 8.         Options to Renew and Terminate......................   30
*
        8.01.      Option to Renew.....................................   30

Article 9.         Miscellaneous Matters...............................   32

        9.01.      Parking.............................................   32
        9.02.      Brokers.............................................   32
        9.03.      No Waiver...........................................   33
        9.06.      Transfers by Landlord...............................   33
        9.07.      Attorneys' Fees.....................................   33
        9.08.      Termination; Merger.................................   34
        9.09       Amendments; Interpretation..........................   34
        9.10.      Severability........................................   34
        9.11.      Notices.............................................   34
        9.12.      Force Majeure.......................................   34
        9.14.      Successors and Assigns..............................   35
        9.15.      Further Assurances..................................   35
        9.16.      Incorporation of Prior Agreements...................   35
        9.17.      Applicable Law......................................   35
        9.18.      Time of the Essence.................................   35
        9.19.      No Joint Venture....................................   35
        9.20.      Authority...........................................   35
        9.21.      Declaration of Covenants, Conditions
                   and Restrictions....................................   35
        9.22.      Offer...............................................   36
        9.23.      Building Access.....................................   36
</TABLE>
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<C>     <C>        <S>                                               <C>

        9.24.      Exhibits; Addenda..................................    35
        9.25       Approvals..........................................    35
        9.26.      Depreciation.......................................    35
        9.27.      Sublease to Reel.com...............................    35
</TABLE>
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EXHIBITS:

     Exhibit A-1 - Site Plan of the Leased Premises
     Exhibit A-2 - Floor Plan of the Leased Premises
     Exhibit B  -  Initial Improvement of the Leased Premises
     Exhibit B-1-  Preliminary Plans
     Exhibit B-2-  Warm Shell Specifications
     Exhibit C  -  Confirmation of Term of Lease
     Exhibit D  -  Confidentiality Agreement
     Exhibit E  -  Building Rules and Regulations
     Exhibit F  -  Estimated Budget
<PAGE>

                           OFFICE BUILDING NET LEASE

     THIS LEASE, made as of the date specified in the BASIC LEASE INFORMATION
sheet, by and between the landlord specified in the BASIC LEASE INFORMATION
sheet ("Landlord") and the tenant specified in the BASIC LEASE INFORMATION sheet
("Tenant").

                                   Article 1

                                  Definitions

      1.01.    Definitions: Terms used herein shall have the following meanings:

      1.02.    "Additional Rent" shall mean all monetary obligations of Tenant
under this Lease other than the obligation for payment of Net Rent.

      1.03.    "Base Rent" shall mean the sums due from time to time as rental
for the Leased Premises.

      1.04.    [Intentionally Deleted]

      1.05.    "Basic Operating Cost" shall have the meaning given in Section
3.05.

      1.06.    "Building" shall mean the building and other improvements
associated therewith identified on the Basic Lease Information sheet, commonly
known as EmeryTech and having a Rentable Area of approximately 149,834 square
feet of office space, all as generally identified on Exhibit A-1 hereto which is
                                                     -----------
made a part hereof.

      1.07.    "Building Standard Improvements" shall mean the standard
materials ordinarily used by Landlord in the improvement of the Leased Premises.

      1.08.    "Common Areas" shall mean (a) the areas on individual floors of
the Building devoted to non-exclusive uses such as common corridors, lobbies,
fire vestibules, elevator foyers, stairways, elevators, electric and telephone
closets, restrooms, mechanical closets, janitor closets and other similar
facilities for the benefit of all tenants (and invitees) on the particular floor
and other floors and (b) other areas of the Project available for the use and
benefit of all tenants (and invitees).

      1.09.    "Computation Year" shall mean a fiscal year consisting of the
calendar year commencing January 1st of each year during the Term, commencing in
the year 2000 and continuing through the Term with a short or stub fiscal year
in (i) in the year 2000 for the period between the Term Commencement Date and
December 31 of such year and (ii) any partial fiscal year in which the Lease
expires or is terminated for the period between January 1 of such year and the
date of lease termination or expiration.

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      1.10.    "Landlord's Broker" shall mean the individual or corporate broker
identified on the Basic Lease Information sheet as the broker for Landlord.

      1.11.    "Landlord's Contribution" shall have the meaning given in Exhibit
                                                                         -------
B.
-

      1.12.    "Landlord's Work" shall mean the improvements to the Leased
Premises and the Common Areas to be installed at Landlord's expense pursuant to

Exhibit B attached hereto.
---------

      1.13.    "Leased Premises" shall mean the floor area more particularly
shown on the floor plan attached hereto as Exhibit A-2, containing the Rentable
                                           -----------
Area (as such term is defined in Section 1.18 below) specified on the Basic
Lease Information sheet.

      1.14.    "Net Rent" shall mean the total of Base Rent and Tenant's
Proportionate Share of Basic Operating Cost.

      1.15.    "Permitted Use" shall mean general office, and any other related
lawful use; provided, however, that Permitted Use shall not include (a) offices
or agencies of any foreign government or political subdivision thereof; (b)
offices of any agency or bureau of any state, county or city government; (c)
offices of any health care professionals; (d) schools or other training
facilities which are not ancillary to corporate, executive or professional
office use; or (e) retail or restaurant uses.

      1.16.    "Project" shall mean the Building situated at 1400 65/th/ Street,
Emeryville, California, the parking areas affiliated therewith, and the real
property on which the Building and the parking areas are located.

      1.17.    "Rent" shall mean Net Rent plus Additional Rent.

      1.18.    "Rentable Area" shall mean the area or areas of space in the
Building determined in accordance with the Standard Method for Measuring Floor
Area in Office Buildings as most recently published by the Building Owners and
Managers Association International (ANSI-Z65.1-1996) and including a
proportionate allocation of the square footage of the Building's elevator and
mechanical equipment areas, telephone and electrical rooms, janitorial service
areas, public lobbies and corridors, which method of measurement shall be
subject to reasonable revision by Landlord from time to time.  The Rentable Area
of the Leased Premises has been calculated on the basis of the foregoing
definition and the application of a twelve percent (12%) load factor to the
useable area determined in accordance with such definition, and prior to the
execution of this Lease, Tenant has had an opportunity to verify Landlord's
calculation of Rentable Area and make its own measurements thereof.  It is
agreed for all purposes of this Lease to be the amount stated on the Basic Lease
Information sheet.

     1.19.     "Security Deposit" shall mean the amount specified on the Basic
Lease Information sheet to be paid by Tenant to Landlord and held and applied
pursuant to Section 5.14.

     1.20.     "Substantial Completion" shall mean (and the Leased Premises
shall be deemed "Substantially Complete") when (i) installation of Landlord's
Work and the Tenant Improvements

                                       2
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(and any Tenant Extra Improvements installed by Landlord's contractor, or, if
permitted by Landlord, any Tenant Extra Improvements installed by Tenant's
contractor within the time schedule established by Landlord's contractor or
consultant for performance of such work) has occurred; (ii) the parking
facilities are available for use by Tenant and its employees and Tenant has
direct access from the street to the elevator lobby on the floor (or floors)
where the Leased Premises are located; (iii) basic services (as described in
Section 4.01) are available to the Leased Premises; (iv) Landlord's architect
has issued a certificate of Substantial Completion with respect to the Leased
Premises; (v) the Common Areas of the Project have been completed and are
available for use by Tenant and other tenants of the Building; and (vi) a
certificate of occupancy or its equivalent or a temporary occupancy permit for
the Leased Premises has been issued by appropriate governmental authorities.
Substantial Completion shall be deemed to have occurred notwithstanding a
requirement to complete "punchlist" items or similar corrective work.

      1.21.    "Tenant Extra Improvements" shall mean the improvements to the
Leased Premises approved by Landlord and to be installed at Tenant's expense
pursuant to Exhibit B, if any.
            ---------

      1.22.    "Tenant Improvements" shall mean the tenant improvements and the
Tenant Extra Improvements (if any) installed or to be installed for Tenant by
Landlord pursuant to Exhibit B subject to the Landlord's Contribution.
                     ---------

      1.23.    "Tenant's Broker" shall mean the individual or corporate broker
identified on the Basic Lease Information sheet as the broker for Tenant.

      1.24.    "Tenant's Physical Possession Date" shall mean February 1, 2000
or  thirty (30) days prior to the Term Commencement Date, whichever is later.

      1.25.    "Tenant's Proportionate Share" is specified on the Basic Lease
Information sheet and is based on the percentage which the Rentable Area of the
Leased Premises bears to the total Rentable Area of the Project, subject to
adjustment in the event of the remeasurement of the Building or the Project as
permitted under Section 1.17 above.

      1.26.    "Term" shall mean the period commencing with the Term
Commencement Date and ending at midnight on the Term Expiration Date.

      1.27.    "Term Commencement Date" shall mean the date when the Term
commences as determined pursuant to Section 3.01 hereof.

      1.28.    "Term Expiration Date" shall mean the date when the Term shall
end as determined pursuant to Section 3.01 hereof, unless sooner terminated
pursuant to the terms of this Lease or unless extended pursuant to the
provisions of Section 8.01.

      1.29.    Other Terms.  Other terms used in this Lease and on the Basic
Lease Information sheet shall have the meanings given to them herein and
thereon.

                                       3
<PAGE>

                                  Article 2.
                                Leased Premises

      2.01.    Lease.  Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Leased Premises upon all of the terms, covenants and
conditions set forth in this Lease.

      2.02.    Acceptance of Leased Premises.  Tenant acknowledges that: (a) it
has been advised by Landlord, Landlord's Broker and Tenant's Broker, if any, to
satisfy itself with respect to the present and future suitability of the Leased
Premises for Tenant's intended use; (b) Tenant has made such inspection and
investigation as it deems necessary with reference to such matters and assumes
all responsibility therefor as the same relate to Tenant's occupancy of the
Leased Premises and the term of this Lease; and (c) neither Landlord nor
Landlord's Broker nor any of Landlord's agents has made any oral or written
representations or warranties with respect to the condition, suitability or
fitness of the Leased Premises other than as may be specifically set forth in
this Lease.  Except as specifically otherwise set forth in this Lease, Tenant
accepts the Leased Premises in its AS IS condition existing on the date Tenant
executes this Lease, subject to all matters of record and applicable laws,
ordinances, rules and regulations.  Tenant acknowledges that neither Landlord
nor Landlord's Broker nor any of Landlord's agents has agreed to undertake any
alterations or additions or to perform any maintenance or repair of the Leased
Premises except for the routine maintenance and janitorial work specified herein
and except as may be expressly set forth in Exhibit B. Notwithstanding the
                                            ---------
foregoing and anything to the contrary in this Lease, (i) prior to the Term
Commencement Date, Landlord shall complete the Landlord's Work and Substantially
Complete the Tenant Improvements, all in accordance with the provisions of

Exhibit B, and (ii) Landlord warrants that (A) for a period of one (1) year from
---------
the date of Substantial Completion of each component of the Tenant Improvements
and the Landlord Improvements, each such component shall remain in good
condition and repair and free of defects, and (B)  as of the Term Commencement
Date, the roof and all other portions of the Leased Premises shall be in good
condition and working order and free of defects.  In the event that it is
determined that the foregoing warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting forth
with specificity the nature of the violation, to promptly, at Lessor's sole
cost, rectify such violation.  Lessee's failure to give written notice to Lessor
of patent defects within one hundred eighty (180) days after the Term
Commencement Date shall cause the conclusive presumption that Lessor has
complied with all of Lessor's obligations hereunder (except that Lessor shall
remain obligated to correct any latent defects).  Notwithstanding the foregoing,
the cost of the Tenant Improvements shall include the cost incurred within the
Leased Premises, prior to the Term Commencement Date, of causing the Tenant
Improvements to be constructed in accordance with the terms of this Lease
including applicable government rules and regulations.

      2.03.    [Intentionally Deleted].

      2.04.    Reservation of Rights.  Landlord reserves the right from time to
time, so long as the parking facilities and reasonable access and basic services
to the Leased Premises remain available, to install, use, maintain, repair,
relocate and/or replace pipes, conduits, wires and equipment within and around
the Building and to do and perform such other acts and make such other changes
in, to or with respect to the Building or the Project (including without
limitation with respect to the driveways, parking areas, walkways and entrances
to the Project) as Landlord may, in the exercise

                                       4
<PAGE>

of sound business judgment, and good property management practices, determine to
be appropriate. In connection therewith, Landlord shall have the right to close
temporarily any of the Common Areas so long as reasonable access to the parking
facilities and the Leased Premises remains available. The Landlord shall provide
Tenant with not less than twenty-four (24) hours prior notice (except in cases
of emergency) and shall use reasonable efforts to conduct its activities in a
manner which is least disruptive to Tenant's use.

      2.05.    Associated Rights Granted to Tenant.

               (a)   Tenant shall have the right to install on the roof, in
areas specified by Landlord in Landlord's sole and absolute discretion, and at
Tenant's sole cost, the following equipment (the "Equipment"):

                      (1)   Satellite Dish. One satellite dish with a diameter
                            --------------
no greater than two (2) feet.

                      (2)   Supplemental HVAC.  A supplemental HVAC for the
                            -----------------
specific, limited purpose of cooling a single server room within the Leased
Premises of not more than 1,000 square feet in size and which shall be part of
the Tenant Improvements.

               (b)   In installing the Equipment, Tenant shall adhere to
industry standards for installation and workmanship, all work to be completed to
Landlord's reasonable satisfaction. All engineering and design work shall be
undertaken by Tenant, at its sole expense. Upon termination of the Lease, Tenant
shall, if so requested by Landlord, remove the Equipment and shall repair, to
Landlord's reasonable satisfaction, any damage caused by the installation or
removal of the Equipment. To maintain any roof warranty of the Building, Tenant
shall use such roofing contractors as directed by Landlord.

               (c)   Tenant shall, at its sole cost, immediately repair and
restore to its prior condition any damage to the Leased Premises, the Building
or the Project caused by the installation, operation or maintenance of the
Equipment. If Tenant fails to repair and restore damage caused to the Leased
Premises, the Building or the Project within a reasonable time, Landlord shall
have the right to repair and restore such damage and receive reimbursement from
Tenant of all costs incurred by Landlord.

               (d)   No installation of the Equipment shall be made by Tenant
without the prior written consent of Landlord, which shall not be unreasonably
withheld. Tenant shall obtain all necessary governmental permits required for
any installation, alteration, addition, or improvement approved by Landlord and
shall comply with all applicable governmental law, regulations, ordinances, and
codes.

                                  Article 3.
                              Term, Use and Rent

      3.01.    Term.  Except as otherwise provided in this Lease, the Term shall
commence on the Scheduled Term Commencement Date, and shall continue in full
force for the Term.  Landlord shall use reasonable efforts to deliver the Leased
Premises to Lessee on or before the Scheduled Term

                                       5
<PAGE>

Commencement Date. Provided that Landlord uses such reasonable efforts, if the
Leased Premises are not Substantially Complete by the Scheduled Term
Commencement Date for any reason, Landlord shall not be subject to any claims,
damages or liabilities by reason thereof, but (i) the Term Commencement Date
shall become the earlier of (a) the day when the Leased Premises are
Substantially Complete, or (b) the day when the Leased Premises would have been
Substantially Complete but for Tenant Delay (as defined in Exhibit B), and (ii)
the Term Expiration Date shall become the date which will allow for the same
length of term as originally contemplated on the Basic Lease Information sheet
(plus any partial month). Landlord shall provide Tenant as much notice as
circumstances allow of the date when Landlord expects to achieve Substantial
Completion, based upon the progress of the Tenant Improvements. Tenant's
obligation to pay Rent and its other obligations under this Lease shall commence
upon the Term Commencement Date (except as expressly otherwise provided herein
with respect to obligations arising earlier). When the Term Commencement Date
and the Term Expiration Date have been ascertained, the parties shall promptly
execute a Confirmation of Term of Lease substantially in the form attached as
Exhibit C. Tenant shall be given physical possession of the Leased Premises on
---------
the Tenant's Physical Possession Date in order for Tenant to install furniture,
equipment, cabling and fixtures, and otherwise to prepare the Leased Premises
for occupancy. From the Tenant's Physical Possession Date through the Term
Commencement Date, Tenant shall be subject to all of the covenants in this
Lease, except that Tenant shall not be obligated to pay Rent. Tenant's
obligation to pay Rent shall commence in accordance with Section 3.03 below. In
the event the Term Commencement Date shall not have occurred for any reason
whatsoever (other than a Tenant Delay or a delay of a type described in Section
9.12 of this Lease) on or before August 1, 2000, then Tenant may terminate this
Lease upon written notice to Landlord whereupon any monies previously paid by
Tenant to Landlord shall be reimbursed to Tenant; provided, however, that the
August 1, 2000 date may not be extended for more than thirty (30) days on
account of delays of a type described in Section 9.12 of this Lease.

      3.02.    Use.  Tenant shall use the Leased Premises solely for the
Permitted Use and for no other use or purpose, except as permitted by Landlord
pursuant to Landlord's written consent, which consent will not be unreasonably
withheld.  It shall not be deemed unreasonable for Landlord to withhold its
consent to a proposed change of use if the proposed use is one set forth in
Section 1.15(a) through (e).

      3.03.    Base Rent.

               (a)   Tenant shall pay the Base Rent to Landlord in accordance
with the Basic Lease Information sheet and in the manner described below. Tenant
shall pay the Base Rent for the first (1/st/) month of the Term upon execution
of this Lease. Commencing with the first day of the second (2/nd/) calendar
month of the Term, Tenant shall pay the Net Rent (consisting of Base Rent plus,
when applicable in accordance with Section 3.04 below, Tenant's Proportionate
Share of Basic Operating Cost) in monthly installments on or before the first
day of each calendar month during the Term and any extensions or renewals
thereof, in advance without demand and without any reduction, abatement,
counterclaim or setoff, in lawful money of the United States at Landlord's
address specified on the Basic Lease Information sheet or at such other address
as may be designated by Landlord in the manner provided for giving notice under
Section 9.11 hereof.

                                       6
<PAGE>

               (b)   If the Term commences on other than the first day of a
month, then the Base Rent provided for such partial month shall be prorated
based upon a thirty (30)-day month and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date
together with the other amounts payable on that day. If the Term terminates on
other than the last day of a calendar month, then the Net Rent provided for such
partial month shall be prorated based upon a thirty (30)-day month and the
prorated installment shall be paid on the first day of the calendar month in
which the date of termination occurs.

      3.04.    Tenant's Proportionate Share of Basic Operating Cost.

               (a) Commencing on the Term Commencement Date and continuing
through the remainder of the Term, Tenant shall pay to Landlord Tenant's
Proportionate Share of the Basic Operating Cost attributable to each Computation
Year.

               (b) During the first Computation Year, on or before the first day
of each month during such Computation Year, Tenant shall pay to Landlord one-
twelfth (1/12th) of Landlord's estimate of the amount payable by Tenant under
Section 3.04(a) as set forth in Landlord's written notice to Tenant delivered on
or before the Term Commencement Date. During the last month of each Computation
Year (or as soon thereafter as practicable), Landlord shall give Tenant notice
of Landlord's estimate of the amount payable by Tenant under Section 3.04(a) for
the following Computation Year. On or before the first day of each month during
the following Computation Year, Tenant shall pay to Landlord one-twelfth (1/12)
of such estimated amount, provided that if Landlord fails to give such notice in
the last month of the prior year, then Tenant shall continue to pay on the basis
of the prior year's estimate until the first day of the calendar month next
succeeding the date such notice is given by Landlord; and from the first day of
the calendar month following the date such notice is given, Tenant's payments
shall be adjusted so that the estimated amount for that Computation Year will be
fully paid by the end of that Computation Year. If at any time or times Landlord
determines that the amount payable under Section 3.04(a) for the current
Computation Year will vary from its estimate given to Tenant, Landlord, by not
less than thirty (30) days' notice to Tenant, may revise its estimate for such
Computation Year, and subsequent payments by Tenant for such Computation Year
shall be based upon such revised estimate.

               (c) Within sixty (60) days following the end of each Computation
Year, Landlord shall deliver to Tenant a statement of amounts payable under
Section 3.04(a) for such Computation Year prepared by Landlord's agent. If such
statement shows an amount owing by Tenant that is less than the payments for
such Computation Year previously made by Tenant, Landlord shall credit such
amount to the next payment(s) of Net Rent falling due under this Lease. If such
statement shows an amount owing by Tenant that is more than the estimated
payments for such Computation Year previously made by Tenant, Tenant shall pay
the deficiency to Landlord within thirty (30) days after delivery of such
statement. If, within one (1) year of Tenant's receipt of Landlord's statement,
Tenant notifies Landlord that Tenant desires to audit or review Landlord's
statement, Landlord shall cooperate with Tenant to permit such audit or review
during normal business hours. Landlord shall make available in the San Francisco
Bay Area at Landlord's, or at Landlord's election at Landlord's property
manager's place of business, such books and records as are reasonably necessary
for Tenant to conduct and complete such audit, which books and records shall be
prepared and maintained in accordance with generally accepted accounting
principles applied on a consistent basis. Tenant shall

                                       7
<PAGE>

have the right to make copies of such books and records at Tenant's sole cost
and expense. Tenant shall bear all other costs and expenses associated with
Tenant's audit (including fees of Tenant's auditor) except as otherwise provided
below. If Tenant conducts a review (rather than an audit as described below) of
Landlord's books and records, Tenant may thereafter cause the same to be audited
at any time within thirty (30) days of completion of such review; provided,
however, that Tenant must notify Landlord of its desire to audit Landlord's
statement within ninety (90) days of Tenant's receipt of Landlord's statement.
Within ten (10) business days of completion of any audit, if Tenant desires to
challenge Landlord's statement, then Tenant shall provide Landlord with a copy
of Tenant's auditor's report. Within thirty (30) days of Landlord's receipt of
Tenant's auditor's report, Landlord shall notify Tenant as to whether Landlord
agrees or disagrees with the conclusions reached in Tenant's auditor's report.
Landlord's failure to respond shall be deemed to constitute a disagreement with
the Tenant's auditor's report. After Landlord's notice, Landlord and Tenant
shall endeavor to resolve any disagreements regarding Tenant's auditor's report.
In the event such audit reveals a discrepancy in Tenant's favor, and Landlord
agrees with the conclusions of Tenant's auditor, then Landlord shall credit the
amount of such discrepancy to the next payment(s) of Net Rent falling due under
this Lease, and if such discrepancy exceeds five percent (5%) of the amount
property payable by Tenant for the Computation Year covered by the audit,
Landlord also shall pay all reasonable costs of the audit. In the event such
audit reveals a discrepancy in Landlord's favor, Tenant shall pay the amount of
the discrepancy to Landlord within ten (10) business days of completion of the
audit. Any such audit may only be conducted by an independent locally or
nationally recognized accounting firm or a locally or nationally recognized real
estate management or consulting firm that is not being compensated by Tenant on
a contingency fee basis. The failure of Tenant to notify Landlord that Tenant
desires an audit within one (1) year of Tenant's receipt of Landlord's statement
under this Section 3.04(c) shall constitute an acceptance by Tenant of
Landlord's statement and a waiver by Tenant of its right to audit for such
Computation Year. If Tenant commences an audit in accordance with this Section
3.04(c), then such audit and the Tenant's auditor's report must be completed
within forty-five (45) days of Tenant's notice to Landlord of Tenant's desire to
audit. Failure of Tenant to complete the audit within such forty-five (45) day
period shall constitute an acceptance by Tenant of Landlord's statement for such
Computation Year. The respective obligations of Landlord and Tenant under this
Section 3.04(c) shall survive the Term Expiration Date, and, if the Term
Expiration Date is a day other than the last day of a Computation Year, the
adjustment in Tenant's Proportionate Share of Basic Operating Cost pursuant to
this Section 3.04(c) for the Computation Year in which the Term Expiration Date
occurs shall be prorated in the proportion that the number of days in such
Computation Year preceding the Term Expiration Date bears to three hundred
sixty-five (365).

               (d) Landlord shall have the same remedies for a default in the
payment of Tenant's Proportionate Share of Basic Operating Cost as for a default
in the payment of Base Rent. If any review or audit conducted by another tenant
of the Project reveals an overcharge which also is applicable to Tenant, then
without regard to whether Tenant has exercised its review and audit rights
hereunder, Landlord shall promptly notify Tenant of the discrepancy and credit
the excess amount against the next payment(s) of Net Rent. In the event that
Landlord modifies any statement of Basic Operating Costs for a particular
Computation Year after Tenant's review and audit rights for such Computation
Year have lapsed, Tenant's review and audit rights shall be reinstated for the
time periods and upon the terms set forth in Section 3.04(c).

                                       8
<PAGE>

               (e) If the parties cannot agree on the results of Tenant's audit
within sixty (60) days following delivery of Tenant's auditor's report to
Landlord, then either party may commence arbitration with respect to the matters
disputed in Tenant's audit by notice to the other party ("Arbitration Notice").
The failure of Tenant to provide an Arbitration Notice within one hundred twenty
(120) days of Tenant's delivery of the Tenant's auditor's report to Landlord
shall constitute a waiver by Tenant of its right to arbitrate hereunder, and
except for such adjustments as have been agreed to by Landlord, Landlord's
statement provided under Section 3.04(c) shall be conclusive and binding to
Tenant. Within thirty (30) days of the Arbitration Notice, Landlord and Tenant
shall jointly select an arbitrator, who shall be unaffiliated in any manner with
either Landlord or Tenant and shall have been active over the five (5) year
period ending on the date of such appointment in the leasing of comparable
commercial properties in the vicinity of the Building. Neither Landlord nor
Tenant shall consult with such arbitrator as to his or her opinion as to the
disputed matters prior to the appointment. The determination of the arbitrator
shall be limited solely to issues raised by Tenant's auditor's report or by
Landlord's response to Tenant's auditor's report. Such arbitrator may hold
hearings and require such briefs as the arbitrator, in his or her sole
discretion, determines is necessary. In addition, Landlord or Tenant may submit
to the arbitrator with a copy to the other party within five (5) business days
after the appointment of the arbitrator any data and additional informa tion
that such party deems relevant to the determination by the arbitrator and the
other party may submit a reply in writing within five (5) business days after
receipt of such data and additional information. The arbitrator shall conduct
such evidentiary hearings as the arbitrator deems necessary or appropriate, and
shall conduct such arbitration in accordance with the commercial rules of the
American Arbitration Association, insofar as the same are not expressly
inconsistent with the provisions of this Section 3.04(e).

                   (1)  The arbitrator shall, within thirty (30) days of his or
her appointment, reach a decision as to the disputed matters in Tenant's
auditor's report, and shall notify Landlord and Tenant of such determination.

                   (2)  The decision of the arbitrator shall be binding upon
Landlord and Tenant.

                   (3)  If Landlord and Tenant fail to agree upon and appoint
such arbitrator, then the appointment of the arbitrator shall be made by the
American Arbitration Association.

                   (4)  If Landlord and Tenant fail to agree upon other matters
relating to the arbitration, then the rules of the American Arbitration
Association shall govern such arbitration.

                   (5)  The cost of arbitration shall be paid by the
substantially unsuccessful party. As used herein, Landlord shall only be deemed
to be the substantially unsuccessful party if the discrepancy in Tenant's favor
is greater then five percent (5%) of Tenant's Proportionate Share of Basic
Operating Cost paid by Tenant for the Computation Year being audited.

                   (6)  The arbitration proceeding and all evidence given or
discovered pursuant thereto shall be maintained in confidence by all parties.

                                       9
<PAGE>

                   (7)  Judgment upon the award rendered by the arbitrator may
be entered by either party into any court having jurisdiction, or application
may be made to such court for a judicial recognition of the award or an order of
enforcement thereof, as the case may be.

      3.05.    Basic Operating Cost.

               (a) Basic Operating Cost shall mean all commercially reasonable
and necessary expenses and costs (but not specific costs which are separately
billed to and paid by particular tenants of the Project ) as determined by
Landlord in its reasonable opinion of every kind and nature which Landlord shall
pay or become obligated to pay because of or in connection with the management,
ownership, maintenance, repair, preservation and operation of the Project and
its supporting facilities directly servicing the Project (determined in
accordance with generally accepted accounting principles, consistently applied)
including, but not limited to, the following:

                   (1)  Wages, salaries and related expenses and benefits of all
on-site and off-site employees and personnel engaged in the operation,
maintenance, repair and security of the Project, to the extent such charges are
directly allocable to services rendered by the employees and personnel for the
benefit of the Project.

                   (2)  Costs of Landlord's office (or of a property management
office if Landlord is not the property manager) and office operation in the
Project (provided, however, if such office is used for business activities other
than Project management, only a reasonable allocation of such cost may be
included in Basic Operating Cost), as well as the costs of operation of a room
for delivery and distribution of mail to tenants of the Building.

                   (3)  All supplies, materials, equipment and equipment rental
used in the operation, maintenance, repair and preservation of the Project.

                   (4)  Utilities, including water, sewer and power, telephone,
communication and cable television facilities, lighting, heating, air
conditioning and ventilating the entire Project; provided, however that the
Leased Premises shall be (A) separately metered  for lights and convenience
power, and (B) separately metered using Landlord's energy management system for
the Project for air conditioning and ventilation.

                   (5)  All maintenance, janitorial and service agreements for
the Project and the equipment therein, including, without limitation, alarm
and/or security service, window cleaning, elevator maintenance, sidewalks,
landscaping, Building exterior and service areas; provided, however, that Tenant
shall have the right to employ its own janitor to clean the Leased Premises, in
which event Tenant shall not be charged by Landlord for janitorial services to
the Leased Premises but Tenant shall be responsible for its prorata share of
janitorial services to the Common Areas.

                   (6)  A management cost recovery in an amount not to exceed
the lesser of four percent (4%) of all Rent (excluding such management cost
recovery) derived from the Project or the actual costs charged by the property
manager.

                                       10
<PAGE>

                   (7)  Day-to-day ordinary and reasonable legal and accounting
services incurred to the extent attributable to the normal operation of the
Project, excluding those expenses incurred in lease negotiations, termination of
leases, extension of leases or legal costs incurred in proceedings by or against
any specific tenant.

                   (8)  All insurance costs, including, but not limited to, the
cost of all risk property and liability coverage and rental income and
earthquake insurance applicable to the Project and Landlord's personal property
used in connection therewith, as well as commercially reasonable deductible
amounts applicable to such insurance; provided, however, that Landlord may, but
shall not be obligated to, carry earthquake insurance.

                   (9)  Repairs, replacements and general maintenance (except
for repairs paid by proceeds of insurance or by Tenant or other tenants of the
Project or third parties, and alterations attributable solely to tenants of the
Project other than Tenant).

                   (10) All real estate or personal property taxes, possessory
interest taxes, business or license taxes or fees, service payments in lieu of
such taxes or fees, annual or periodic license or use fees, excises, transit
charges, housing fund assessments, open space charges, assessments, bonds,
levies, fees or charges, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, of any kind which are assessed, levied, charged,
confirmed or imposed by any public authority upon the Project (or any portion or
component thereof), its operations, this Lease, or the Rent due hereunder (or
any portion or component thereof), except: (i) inheritance or estate taxes
imposed upon or assessed against the Project, or any part thereof or interest
therein, and (ii) Landlord's personal or corporate income, gift, franchise or
transfer taxes.

                   (11) Amortization in accordance with generally accepted
accounting principles, consistently applied (together with reasonable financing
charges) of capital improvements made to the Project subsequent to the Term
Commencement Date which are designed to improve the operating efficiency of the
Project (provided that the amortized amount shall not exceed the anticipated
cost savings), or which may be required by governmental authorities pursuant to
laws not in effect on the Term Commencement Date, including those improvements
required for energy conservation and for the benefit of individuals with
disabilities ("ADA Improvements") or for energy conservation.

          (b)  With respect to subsection 3.05(a)(11) above, to the best of
Landlord's knowledge, the Project is in compliance with the Americans with
Disabilities Act and state law applicable to access by disabled persons
(collectively, "ADA") .  ADA Improvements, as defined in subsection 3.05(a)(11)
above, includes ADA compliance work in any part of the Project required by
governmental authorities due to changes in law, rules or regulations after the
date of this Lease. ADA Improvements, for the purposes of Section 3.05(a)(11),
shall not include any ADA compliance work in other tenant's spaces in the
Project which is triggered by virtue of tenant improvement work in such space.
Tenant shall not be responsible for the cost of improvements for ADA compliance
work triggered by multi-tenanting of the Building.  Tenant shall be responsible
for one hundred percent (100%) of the cost of ADA compliance work triggered by
the Tenant Improvements (or any subsequent alterations or additions made by
Tenant).  Tenant shall promptly reimburse Landlord for any costs incurred by
Landlord with respect thereto.   If not otherwise paid for by Tenant, Landlord

                                       11
<PAGE>

shall be entitled to deduct from Landlord's Contribution any amount incurred by
Landlord with respect to ADA compliance work triggered by the Tenant
Improvements.  Notwithstanding the foregoing, Landlord and not Tenant shall be
responsible for ADA compliance work exterior to the Leased Premises triggered by
the Tenant Improvements which Landlord was obligated to comply with on the Term
Commencement Date.

          (c)  In the event any of the Basic Operating Costs are not allocable
solely to the Building or are not provided on a uniform basis, Landlord shall
make an appropriate and equitable adjustment, in Landlord's commercially
reasonable judgment, to the relevant cost allocations to the Building and Tenant
shall pay its proportionate share of such Basic Operating Costs allocable solely
to the Building and 100% of such Basic Operating Costs allocable solely to the
Leased Premises.

          (d)  Notwithstanding any other provision of this Lease to the
contrary, in the event that the Project is not fully occupied during any year of
the Term, an adjustment shall be made in computing Basic Operating Cost for such
year so that Basic Operating Cost shall be computed as though the Project had
been 95% occupied during such year. Exhibit F to this Lease sets forth
                                    ---------
Landlord's good faith, itemized estimate of the Basic Operating Costs for the
Building.

          (e)  The following items shall be excluded from Basic Operating Costs:
(i) depreciation on the Building and the Project; (ii) debt service; (iii)
rental under any ground or underlying lease; (iv) attorneys' fees and expenses
incurred in connection with lease negotiations with prospective Project tenants
or alleged defaults with other Project tenants; (v) the cost of any improvements
or equipment which would be properly classified as capital expenditures (except
for any capital expenditures expressly included in Section 3.05(a)(11)); the
                                                   -------------------
cost of decorating, improving for tenant occupancy, painting or redecorating
portions of the Building or Project to be demised to tenants; (vii) advertising
expenses relating to vacant space; or (viii) real estate brokers' or other
leasing commissions.  Notwithstanding anything to the contrary in this Lease,
"Basic Operating Costs" shall not include and Tenant shall in no event have any
obligation to perform or to pay directly, or to reimburse Landlord for, all or
any portion of the following repairs, maintenance, improvements, replacements,
premiums, claims, losses, fees, charges, costs and expenses (collectively,
"Costs"): (a) Costs occasioned by the act, omission or violation of any law by
Landlord, any other occupant of the Project, or their respective agents,
employees or contractors; (b) Costs occasioned by casualties or by the exercise
of the power of eminent domain; (c) Costs to correct any construction defect in
the Project or to comply with any covenant, condition, restriction,
underwriter's requirement or law applicable to the Project on the Term
Commencement Date; (d) Costs of any renovation, improvement, painting or
redecorating of any portion of the Project not made available for Tenant's use;
(e) earthquake insurance to the extent such premiums are not commercially
reasonable and insurance Costs for coverage not customarily paid by tenants of
similar projects in the vicinity of the Leased Premises, increases in insurance
Costs caused by the activities of another occupant of the Project, insurance
deductibles in excess of $10,000 per year, and co-insurance payments; (f) Costs
incurred in connection with the presence of any Hazardous Material, except to
the extent caused by the release or emission of the Hazardous Material in
question by Tenant, its agents, employees, contractors or invitees; (g) expense
reserves; (h) Costs of structural repairs to the Project; (i) Cost which could
reasonably be allocated to other buildings in the Project; and (j) any tax or
assessment expense or any increase therein (i) levied on Landlord's rental
income, unless such tax or assessment expense is imposed in lieu of real
property taxes; (ii) in excess of the

                                       12
<PAGE>

amount which would be payable if such tax or assessment expense were paid in
installments over the longest permitted term; or (iii) attributable to
Landlord's inheritance, transfer, estate or state taxes.

                                  Article 4.
                             Landlord's Covenants

      4.01.    Basic Services.  Landlord shall operate the Project to a standard
of quality consistent with that of other similar-class office projects in the
Emeryville office market, and, subject to Tenant's obligation to pay Tenant's
Proportionate Share of Basic Operating Cost, Landlord shall:

               (a) Administer improvement of the Leased Premises in accordance
with Exhibit B (if any).
     ---------

               (b) Furnish Tenant during Tenant's occupancy of the Leased
Premises the following basic services:

                   (1)  Hot and cold water at those points of supply provided
     for general use of other tenants in the Project; central heat and air
     conditioning in season, during the Building hours of operation (which shall
     be specified in the rules and regulations for the Project adopted pursuant
     to Section 5.17, but in any case shall be not less than 7:00 a.m. to 6:00
     p.m. weekdays and 8:00 a.m. to 1:00 p.m. Saturdays, excluding public
     holidays) and at such temperatures and in such amounts as are considered
     reasonably required for the comfortable use and occupancy of the Leased
     Premises (which shall not be less than 65 degrees Fahrenheit or greater
     than 76 degrees Fahrenheit, provided that the outdoor temperature is not
     greater than 95 degrees Fahrenheit) or, in all events, as may be permitted
     or controlled by applicable laws, ordinances, rules and regulations.

                   (2)  Structural and exterior maintenance (including exterior
     glass and glazing) and routine maintenance, repairs and electric lighting
     service for all public areas and service areas of the Project in the manner
     and to the extent reasonably deemed by Landlord to be standard.

                   (3)  Janitorial service to both the Common Areas and the
     Leased Premises on a five (5) day per week basis, excluding holidays.

                   (4)  Electric lighting service throughout the Leased Premises
     and electrical facilities to provide sufficient power for standard size
     personal computers, network servers and equipment comparable thereto, and
     other standard office machines of similar low electrical consumption, but
     not including electricity required for special lighting in excess of
     Building Standard Improvements, and any other item of electrical equipment
     which consumes electricity in amounts in excess of standard office
     equipment, which standard shall be not less than 3 watts per rentable
     square foot for convenience power and 1.5 watts per rentable square foot
     for lighting, and not more than a total of 6 watts per rentable square foot
     for convenience power and lighting combined. Electric power within the
     Leased Premises,

                                       13
<PAGE>

     except for the HVAC system, shall be separately metered at Tenant's expense
     (or as a cost deducted from the Landlord's Contribution for Tenant
     Improvements). Electric power for the HVAC system within the Leased
     Premises shall be separately metered to Tenant through Landlord's energy
     management system for the Project and billed directly to Tenant by Landlord
     (without profit or mark-up).

               (5) Building Standard lamps, bulbs, starters and ballasts used in
     the Leased Premises.

               (6) Public and handicap elevator service serving the floors on
     which the Leased Premises are situated, including freight elevator service
     when prearranged with Landlord, subject to such rules and regulations as
     Landlord shall promulgate from time to time.

          (c)  Landlord shall not be liable for damages to either person or
property, nor shall Landlord be deemed to have evicted Tenant, nor shall there
be any abatement of Rent, nor shall Tenant be relieved from performance of any
covenant on its part to be performed under this Lease by reason of any (i)
deficiency in the provision of basic services; (ii) breakdown of equipment or
machinery utilized in supplying services; or (iii) curtailment or cessation of
services due to causes or circumstances beyond the reasonable control of
Landlord or by the making of the necessary repairs or improvements, unless such
deficiency, breakdown, curtailment or cessation is due to the active gross
negligence or willful misconduct of Landlord; provided, however, there shall be
an abatement of Net Rent in the event and to the extent that there is a material
diminishment in Tenant's ability to conduct its business at the Leased Premises
as a result of the presence of any Hazardous Materials which does not result
from Tenant's or Tenant's agents', employees', contractors', invitees' or
licensees' release or emission of such Hazardous Material persisting for more
than eleven (11) consecutive days, or as a result of the absence of (A)
electrical lighting services and/or electrical facilities or services for more
than forty-eight (48) hours, or (B) water for more than seventy-two (72) hours,
and in the event said interference persists for one hundred eighty (180) days,
Tenant may, at its option, terminate this Lease by written notice to Landlord.
Landlord shall use reasonable diligence to make such repairs as may be required
to machinery or equipment within the Project to provide restoration of services
and, where the cessation or interruption of service has occurred due to
circumstances or conditions beyond Project boundaries, to cause the same to be
restored, by diligent application or request to the provider thereof.  In no
event shall any mortgagee or the beneficiary under any deed of trust referred to
in Section 5.12 be or become liable for any default of Landlord under this
Section 4.01(c).

      4.02.    Extra Services.  Landlord shall provide to Tenant at Tenant's
sole cost and expense (and subject to the limitations hereinafter set forth) the
following extra services:

               (a) If Tenant does not elect to provide its own janitorial
services for the Leased Premises, such extra cleaning and janitorial services
required if Tenant Improvements necessitate extra cleaning efforts or are not
consistent in quality and quantity with Building Standard Improvements
(provided, however, that Landlord has notified Tenant in connection with
approvals of Tenant's plans and specifications under Exhibit B that Landlord's
approval is conditioned upon the application of this Section 4.02(a));

                                       14
<PAGE>

               (b) Additional air conditioning and ventilating capacity required
by reason of any electrical, data processing or other equipment, facilities or
services required to support the same, in excess of the amounts provided for in
Section 4.01(b)(4) above, when prearranged with Landlord;

               (c) Heating, ventilation, air conditioning or extra electrical
service provided by Landlord to Tenant (i) during hours other than the Building
hours of operation specified in the rules and regulations for the Project
adopted pursuant to Section 5.17, which shall provide for Building hours of
operation of not less than 7:00 A.M. to 6:00 P.M., Monday through Friday
(excluding holidays) and from 8:00 A.M. to 1:00 P.M. on Saturday, or (ii) on
Saturdays after 1:00 P.M., Sundays, or holidays, all said heating, ventilation
and air conditioning or extra electrical service to be furnished pursuant to
such uniform procedures as may be established from time to time by Landlord for
the Building; provided, however, that because Tenant will be billed by Landlord
for Tenant's actual use of the air conditioning system within the Leased
Premises, the only additional charge for air conditioning under this Section
4.02(c) (i.e. other than the additional direct charges for actual use) shall be
the five percent (5%) management fee referenced in the last sentence of this
Section 4.02 which is intended to compensate Landlord for use of the air
conditioning system during hours other than the Building hours of operation and
shall be applied against the additional direct charges for actual use.

               (d) Maintaining and replacing non-Building Standard lamps, bulbs,
starters and ballasts (whether or not the light fixtures were installed by
Landlord as part of the Tenant Improvements);

               (e) Repair and maintenance service which is the obligation of
Tenant under this Lease, where either Tenant requests that the same be performed
by Landlord or where Tenant has failed to perform its obligation in a timely
manner;

               (f) Repair, maintenance or janitorial service to the Leased
Premises, the Common Areas or the Project parking area which is required as a
result of the acts or omissions of Tenant, its agents, employees, contractors,
invitees or licensees; and

               (g) Any basic service in amounts determined by Landlord to exceed
the amounts required to be provided under Section 4.01(b), but only if Landlord
elects to provide such additional or excess service.

               For the purposes of this Section 4.02, if, in Landlord's
reasonable opinion, Tenant's use of electrical and/or water service at the
Leased Premises is excessive, Landlord may install a separate meter(s) at the
Leased Premises to measure the amount of electricity and/or water consumed by
Tenant therein; provided, however, that Tenant's use of electrical services
shall not be excessive if it does not exceed the total amount provided for in
Section 4.01(b)(4). The cost of such installation and of such excess electricity
and/or water (at the rates charged for such services by the local public
utility) shall be paid by Tenant to Landlord upon receipt by Tenant of a bill
therefor.

               The cost chargeable to Tenant for all extra services shall
constitute Additional Rent and shall include a management fee payable to
Landlord of five percent (5%). Additional Rent shall be paid monthly by Tenant
to Landlord concurrently with the payment of Base Rent.

                                       15
<PAGE>

      4.03.    Window Coverings. All window coverings for the Leased Premises
shall be those provided by Landlord as Building Standard Improvements.  Tenant
shall not place or maintain any window coverings, blinds, curtains or drapes
other than those supplied by Landlord on any exterior window without Landlord's
prior written approval, which Landlord shall have the right to grant or withhold
in its absolute and sole discretion.

      4.04.    Graphics and Signage. Landlord shall provide identification of
Tenant's name and suite numerals (i) on a building directory in the Building
lobby and (ii) at the main entrance door to the Leased Premises.  Landlord
reserves the right to exclude any other names from the building directory.  All
signs, notices, advertisements and graphics of every kind or character, visible
in or from the Common Areas or the exterior of the Leased Premises shall be
subject to Landlord's prior written approval, which Landlord shall have the
right to withhold in its absolute and sole discretion. Landlord may remove,
without notice to and at the expense of Tenant, any sign, notice, advertisement
or graphic of any kind inscribed, displayed or affixed in violation of the
foregoing requirement.  All approved signs, notices, advertisements or graphics
shall be printed, affixed or inscribed at Tenant's expense by a person selected
by Landlord.  Landlord shall be entitled to revise the Project graphics and
signage standards at any time at Tenant's sole cost and expense; provided,
however, after the initial such revision, any further revision shall be at
Landlord's sole cost and expense.  Notwithstanding the foregoing,  Tenant shall
have exterior signage on southeast corner of the East-Hi-Bay of the Building
subject to Landlord's reasonable approval (which may require that such signage
is commensurate with Tenant's proportionate share of space in the Project) and
any government approvals.  Such signage may be of a size comparable to the
artist renderings of the Building in the Project brochure furnished to Tenant.
Tenant shall be responsible for the cost of any exterior signage.

      4.05.    Tenant Extra Improvements. All Tenant Extra Improvements (if any)
shall be installed at Tenant's cost, such installation to be made and paid for
pursuant to the provisions of Exhibit B.  For purposes hereof, "costs" shall
                              ---------
include, without limitation, all building permit fees for Tenant Extra
Improvements (not already included in the permit fees paid with respect to the
Landlord's or Tenant Improvements); payments to architects, engineers and other
design consultants for services and disbursements; and such reasonable
inspection fees as Landlord may incur. Landlord shall not seek the benefits of
depreciation deductions or income tax credit allowances for federal or state
income tax reporting purposes with respect to any Tenant Extra Improvements for
which Tenant has fully reimbursed Landlord under this Section 4.05.

      4.06.    Repair Obligation.  Subject to Tenant's obligations under Section
3.04 to pay Tenant's Proportionate Share of Basic Operating Cost, Landlord shall
maintain and repair, in a manner consistent with the Comparable Buildings (as
defined in Section 8.01(a)(2)), all elements of the Project that are not the
express obligation of Tenant or other tenants of the Project, including without
limitation: (i) the structural portions of the Building; (ii) the exterior walls
of the Building, including exterior glass and glazing; (iii) the roof (including
both membrane and structure); (iv) all mechanical (including the HVAC system),
electrical, plumbing and life safety systems; (v) the Common Areas; (vi) the
Project parking area; and (vii) landscaped areas (if any).  However, Landlord
shall not have any obligation to repair damage caused by Tenant, its agents,
employees, contractors, invitees or licensees.  Landlord shall have the right,
but not the obligation, to undertake work of repair which Tenant is required to
perform under this Lease and which Tenant defaults in

                                       16
<PAGE>

its obligation to perform. Tenant shall reimburse Landlord upon demand, as
Additional Rent, for all costs reasonably incurred by Landlord in performing any
such repair for the account of Tenant, together with an amount equal to five
percent (5%) of such costs to reimburse Landlord for its administration and
managerial effort. Except as specifically set forth in this Lease, Landlord
shall have no obligation whatsoever to maintain or repair the Leased Premises.
The parties intend that the terms of this Lease govern their respective
maintenance and repair obligations. Tenant expressly waives the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with respect to such obligations or which affords Tenant the
right to make repairs at the expense of Landlord or terminate this Lease by
reason of the condition of the Leased Premises or any needed repairs. Landlord
shall perform and construct, and Tenant shall have no responsibility to perform
or construct, any repair, maintenance or improvements (a) necessitated by the
acts or omissions of Landlord or any other occupant of the Building, or their
respective agents, employees or contractors, (b) for which Landlord has a right
of reimbursement from others, and (c) which could be treated as a "capital
expenditure" under generally accepted accounting principles. Notwithstanding the
foregoing, Tenant shall pay for its share of the repairs described in subsection
(c) to the extent such costs are properly included in Basic Operating Costs.

      4.07.    Peaceful Enjoyment.  Landlord covenants with Tenant that upon
Tenant paying the Rent and all other charges required under this Lease and
performing all of Tenant's covenants and agreements herein contained within
applicable notice and cure periods, Tenant shall peacefully have, hold and enjoy
the Leased Premises subject to all of the terms of this Lease and to any deed of
trust, mortgage or other agreement to which this Lease may be subordinate.  This
covenant and the other covenants of Landlord contained in this Lease shall be
binding upon Landlord and its successors only with respect to breaches occurring
during its or their respective ownerships of Landlord's interest hereunder.

                                  Article 5.
                              Tenant's Covenants

      5.01.    Payments by Tenant.  Tenant shall pay Rent at the times and in
the manner provided in this Lease.  All obligations of Tenant hereunder to make
payments to Landlord shall constitute Rent and failure to pay the same when due
shall give rise to the rights and remedies provided for in Section 7.08.  If
there is more than one Tenant, the obligations imposed under this Lease upon
Tenant shall be joint and several.

      5.02.    Tenant Improvements.  The Tenant Improvements shall be installed
and constructed by Landlord pursuant to Exhibit B.  All Landlord's Work shall
                                        ---------
become the property of Landlord upon installation and shall be surrendered to
Landlord without compensation to Tenant upon termination of this Lease by lapse
of time or otherwise.  All Tenant Extra Improvements permanently installed
pursuant to Section 4.05 (if any) shall become the property of Landlord upon
installation and shall be surrendered to Landlord without compensation to Tenant
upon termination of this Lease by lapse of time or otherwise.

      5.03.    Taxes on Personal Property and Tenant Extra Improvements.  In
addition to, and wholly apart from its obligation to pay Tenant's Proportionate
Share of Basic Operating Costs, Tenant shall be responsible for, and shall pay
prior to delinquency, all taxes or governmental service

                                       17
<PAGE>

fees, possessory interest taxes, fees or charges in lieu of any such taxes,
capital levies, and any other charges imposed upon, levied with respect to, or
assessed against Tenant's personal property, on the value of its Tenant Extra
Improvements (if any) and on its interest pursuant to this Lease. To the extent
that any such taxes are not separately assessed or billed to Tenant, Tenant
shall pay the amount thereof as invoiced to Tenant by Landlord. In no event
shall Tenant have to pay any portion of taxes, capital levies, and any other
charges imposed upon, levied with respect to, or assessed against the personal
property or the improvements of other tenants in the Project.

      5.04.    Repairs by Tenant.  Subject to Section 4.06, Tenant shall be
obligated to maintain and repair the Leased Premises, to keep the same at all
times in good order, condition and repair, and, upon expiration of the Term, to
surrender the same to Landlord in the same condition as on the Term Commencement
Date, reasonable wear and tear, taking by condemnation, and damage that is
Landlord's responsibility under Section 7.07.  Tenant's obligations shall
include, without limitation, the obligation to maintain and repair all walls,
floors, ceilings and fixtures and to repair all damage caused by Tenant, its
agents, employees, contractors, invitees and others using the Leased Premises
with Tenant's expressed or implied permission.  At the request of Tenant,
Landlord shall perform the work of maintenance and repair constituting Tenant's
obligation under this Section 5.04 at Tenant's sole cost and expense and as an
extra service to be rendered pursuant to Section 4.02(e). Any work of repair and
maintenance performed by or for the account of Tenant by persons other than
Landlord shall be performed by contractors approved by Landlord, which approval
shall not be unreasonably withheld, and in accordance with procedures Landlord
shall from time to time establish.  Tenant shall give Landlord prompt notice of
any damage to or defective condition in any part of the Building's mechanical,
electrical, plumbing, life safety or other system servicing, located in or
passing through the Leased Premises of which Tenant has actual notice.

      5.05.    Waste.  Tenant shall not commit or allow its agents, employees,
contractors, invitees or licensees to commit any waste or damage in any portion
of the Leased Premises or the Project.

      5.06.    Assignment or Sublease.

               (a) Tenant shall not voluntarily or by operation of law assign,
transfer or encumber (collectively "Assign") or sublet all or any part of
Tenant's interest in this Lease or in the Leased Premises without Landlord's
prior written consent given under and subject to the terms of this Section 5.06.
Notwithstanding anything to the contrary contained in this Lease, Landlord and
Tenant agree as follows, Tenant may assign this Lease or sublet the Leased
Premises, or any portion thereof, without Landlord's consent and without being
subjected to Section 5.06(c) or (e) below (but with prior written notice to
Landlord as discussed below):  (i) an entity controlling, controlled by or under
common control with Tenant, (ii) a successor entity related to Tenant by merger,
consolidation, reorganization or government action, or (iii) a purchaser of
substantially all of Tenant's assets located in the Leased Premises.

               (b) If Tenant desires to Assign this Lease or any interest herein
or sublet the Leased Premises or any part thereof, Tenant shall give Landlord
written notice of such intent. Tenant's notice shall specify the date the
proposed assignment or sublease would be effective and be accompanied by
information pertinent to Landlord's determination as to the financial and
operational responsibility and appropriateness of the proposed assignee or
subtenant, including,

                                       18
<PAGE>

without limitation, its name, business and financial condition, financial
details of the proposed transfer, the intended use (including any modification)
of the Leased Premises, and exact copies of all of the proposed agreement(s)
between Tenant and the proposed assignee or subtenant. Tenant shall promptly
provide Landlord with (i) such other or additional information or documents
reasonably requested (within ten (10) days after receiving Tenant's notice) by
Landlord, and (ii) an opportunity to meet and interview the proposed assignee or
subtenant, if requested by Landlord.

               (c) Landlord shall have a period of ten (10) business days
following such interview and receipt of such additional information (or fifteen
(15) business days from the date of Tenant's original notice if Landlord does
not request additional information or an interview) within which to notify
Tenant in writing that Landlord elects either (i) to terminate this Lease as to
the space so affected as of the effective date specified by Tenant, in which
event Tenant will be relieved of all further obligations hereunder as to such
space, or (ii) to permit Tenant to Assign this Lease or sublet such space,
subject, however, to prior written approval of the proposed assignee or
sublessee by Landlord, such consent not to be unreasonably withheld so long as
the use of the Leased Premises by such proposed assignee or sublessee would be a
Permitted Use (unless otherwise approved by Landlord), the proposed assignee or
sublessee is of sound financial condition as determined by Landlord in its
reasonable discretion, the proposed assignee executes such reasonable assumption
documentation as Landlord shall require, and the proposed assignee or sublessee
is not already a tenant in the Building. Notwithstanding the foregoing, if
Landlord elects option (i) above, Tenant may elect to withdraw Tenant's request
to sublet or assign such portion of the Leased Premises by written notice to
Landlord given on or before the date which is five (5) business days following
Landlord's notice to Tenant of its intent to recapture such space. Upon such
notice by Tenant, Landlord's election to recapture the subject space in that
instance shall be null and void and Tenant shall retain possession of such
subject space. If Landlord fails to notify Tenant in writing of such election
within said period, Landlord shall be deemed to have waived option (i) above,
but written approval by Landlord of the proposed assignee or sublessee shall
still be required. Failure by Landlord to approve a proposed subtenant or
assignee shall not cause a termination of this Lease.

               (d) In the event Tenant shall request the consent of Landlord to
any assignment or subletting hereunder, Tenant shall pay Landlord a processing
fee of $250.00 and shall reimburse Landlord for Landlord's reasonable attorneys'
fees incurred in connection therewith not to exceed $1,000. All such fees shall
be deemed Additional Rent under this Lease.

               (e) Any rent or other consideration realized by Tenant under any
such sublease or assignment in excess of the Rent payable hereunder, after
recovery of the reasonable cost of Tenant Extra Improvements for which Tenant
has paid and reasonable subletting and assignment costs, including without
limitation any broker's commissions, attorneys' fees and remodeling fees shall
be divided and paid as follows: forty percent (40%) to Tenant and sixty percent
(60%) to Landlord.

               (f) In any event in which Landlord has no right to recapture,
Tenant shall diligently seek to obtain not less than fair market rent for the
space to sublet. In any assignment of this Lease in whole or in part, Tenant
shall seek to obtain from the assignee consideration reflecting a value of not
less than fair market rent for the space subject to such assignment.

                                       19
<PAGE>

           (g) The consent of Landlord to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Tenant or to
any subsequent or successive assignment or subletting by the assignee or
subtenant.  However, Landlord may consent to subsequent assignments and
sublettings of the Lease or sublease or amendments or modifications thereto,
without notifying Tenant or any other party liable on the Lease or sublease and
without obtaining their consent.  Such action shall not relieve Tenant or any
such other party from liability under this Lease or a sublease.

           (h) No assignment or subletting by Tenant shall relieve Tenant of any
obligation under this Lease.  In the event of default by an assignee or
subtenant of Tenant or any successor of Tenant in the performance of any of the
terms hereof, Landlord may proceed directly against Tenant without the necessity
of exhausting remedies against such assignee, subtenant or successor.  Any
assignment or subletting which conflicts with the provisions hereof shall be
void and, at Landlord's option, shall constitute a default under this Lease.

           (i) Notwithstanding any other provision of this Section 5.06 (other
than Subsection 5.06(i)), Tenant shall have the right to sublease up to 15,896
square feet of space within the Leased Premises for a sublease term that does
not exceed the first twenty-four (24) months following the Term Commencement
Date, and Tenant shall be allowed to keep any excess rent derived from such
sublease and Landlord shall not have the right to recapture the subleased
premises during such initial twenty-four (24) month period.

     5.07. Alterations, Additions and Improvements.

           (a) Tenant shall not make or allow to be made any alterations or
additions in or to the Leased Premises without first obtaining the written
consent of Landlord; provided, however, Tenant may, without Landlord's consent,
perform interior non-structural alterations or additions not involving material
modifications to the Building and its mechanical, electrical, HVAC and life
safety systems so long as (i) for alterations or additions requiring government
permits, the cost thereof during any calendar year does not exceed Ten Thousand
Dollars ($10,000.00) during any calendar year, or (ii) for alterations or
additions not requiring government permits, the cost thereof during any calendar
year does not exceed Forty Thousand Dollars ($40,000.00).  Landlord's consent
will not be unreasonably withheld with respect to proposed alterations and
additions which (i) comply with all applicable laws, ordinances, rules and
regulations; (ii) are compatible with and does not adversely affect the Building
and its mechanical, electrical, HVAC and life safety systems; (iii) will not
affect the structural portions of the Building; (iv) will not interfere with the
use and occupancy of any other portion of the Building by any other tenant, its
employees or invitees; and (v) will not trigger any additional costs to
Landlord.  Specifically, but without limiting the generality of the foregoing,
Landlord's right of consent shall encompass plans and specifications for the
proposed alterations or additions, construction means and methods, the identity
of any contractor or subcontractor to be employed on the work of alterations or
additions, and the time for performance of such work. Tenant shall supply to
Landlord any additional documents and information requested by Landlord in
connection with Tenant's request for consent hereunder.  Notwithstanding
anything to the contrary contained in the paragraph, in connection with any
request for consent hereunder, Tenant may request that Landlord advise Tenant
whether or not Landlord will require Tenant to remove the alteration at the
expiration of the Lease.  Unless Landlord advises Tenant in writing that
Landlord

                                       20
<PAGE>

will not require Tenant to remove such alteration at the expiration of the
Lease, the parties agree that Tenant shall be obligated to remove such
alteration at the expiration of the Lease. Further, Landlord acknowledges that
Tenant will not be required to remove any Tenant Improvements to the Leased
Premises.

          (b) Any consent given by Landlord under this Section 5.07 shall be
deemed conditioned upon:  (i) Tenant's acquiring all applicable permits required
by governmental authorities; (ii) Tenant's furnishing to Landlord copies of such
permits, together with copies of the approved plans and specifications, prior to
commencement of the work thereon; and (iii) the compliance by Tenant with the
conditions of all applicable permits and approvals in a prompt and expeditious
manner.

          (c) Tenant shall provide Landlord with not less than fifteen (15) days
prior written notice of commencement of the work so as to enable Landlord to
post and record appropriate notices of non-responsibility.  All alterations and
additions permitted hereunder shall be made and performed by Tenant without cost
or expense to Landlord.  Tenant shall pay the contractors and suppliers all
amounts due to them when due and keep the Leased Premises and the Project free
from any and all mechanics', materialmen's and other liens and claims arising
out of any work performed, materials furnished or obligations incurred by or for
Tenant.  For work costing in excess of Two Hundred Fifty Thousand Dollars
($250,000.00), Landlord may require, at its sole option, that Tenant provide to
Landlord, at Tenant's expense, a lien and completion bond in an amount equal to
at least one and one half (1 1/2) times the total estimated cost of any
alterations, additions or improvements to be made in or to the Leased Premises,
to protect Landlord against any liability for mechanics', materialmen's and
other liens and claims, and to ensure timely completion of the work.  In the
event any alterations or additions to the Leased Premises are performed by
Landlord hereunder, whether by prearrangement or otherwise, Landlord shall be
entitled to charge Tenant a five percent (5%) administration fee in addition to
the actual costs of labor and materials provided.  Such costs and fees shall be
deemed Additional Rent under this Lease, and may be charged and payable prior to
commencement of the work.

          (d) Any and all alterations, additions or improvements made to the
Leased Premises by Tenant shall become the property of Landlord upon
installation and shall be surrendered to Landlord without compensation to Tenant
upon the termination of this Lease by lapse of time or otherwise unless (i)
Landlord conditioned its approval of such alterations, additions or improvements
on Tenant's agreement to remove them, or (ii) Landlord notifies Tenant prior to
(or promptly after) the Term Expiration Date that the alterations, additions
and/or improvements must be removed, in which case Tenant shall, by the Term
Expiration Date (or promptly thereafter), remove such alterations, additions and
improvements, repair any damage resulting from such removal and restore the
Leased Premises to their condition existing prior to the date of installation of
such alterations, additions and improvements.  Notwithstanding anything to the
contrary set forth above, this clause shall not apply to equipment, trade
fixtures or furniture owned by Tenant.  Tenant's trade fixtures, furniture,
equipment and other personal property shall at all times be and remain Tenant's
Property ("Tenant's Property").  Except for alterations that cannot be removed
without structural injury to the Leased Premises, at any time Tenant may remove
Tenant's Property from the Leased Premises.

                                       21
<PAGE>

Tenant shall repair at its sole cost and expense all damage caused to the Leased
Premises and the Project by removal of Tenant's movable equipment or furniture
and such other alterations, additions and improvements as Tenant shall be
required or allowed by Landlord to remove from the Leased Premises.

           (e) All alterations, additions and improvements permitted under this
Section 5.07 shall be constructed diligently, in a good and workmanlike manner
with new, good and sufficient materials and in compliance with all applicable
laws, ordinances, rules and regulations (including, without limitation, building
codes and those related to accessibility and use by individuals with
disabilities).  Tenant shall, promptly upon completion of the work, furnish
Landlord with "as built" drawings for any alterations, additions or improvements
performed under this Section 5.07.

     5.08. Compliance With Laws and Insurance Standards.  Landlord
represents and warrants that, at the Term Commencement Date, all elements of the
Building encompassed within a "warm shell" (as defined in Exhibit B) are in
compliance with all applicable laws, ordinances and other legal requirements.
Tenant shall not occupy or use, or permit any portion of the Leased Premises to
be occupied or used in a manner that violates any applicable law, ordinance,
rule, regulation, order, permit, covenant, easement or restriction of record, or
the recommendations of Landlord's engineers or consultants, relating in any
manner to the Project, or for any business or purpose which is disreputable,
objectionable or productive of fire hazard.  Tenant shall not do or permit
anything to be done which would result in the cancellation of the all risk
property insurance coverage on the Project and/or its contents.  If Tenant does
or permits anything to be done which increases the cost of any insurance
covering or affecting the Project, then Tenant shall reimburse Landlord, upon
demand, as Additional Rent, for such additional costs.  Landlord shall deliver
to Tenant a written statement setting forth the amount of any such insurance
cost increase and showing in reasonable detail the manner in which it has been
computed.  Tenant shall, at Tenant's sole cost and expense, comply with all
laws, ordinances, rules, regulations and orders (state, federal, municipal or
promulgated by other agencies or bodies having or claiming jurisdiction) related
to the use, condition or occupancy of the Leased Premises now in effect or which
may hereafter come into effect including, but not limited to, (a) accessibility
and use by individuals with disabilities, but only insofar as the same require
work within the Leased Premises or work outside the Leased Premises that Tenant
is responsible for pursuant to other provisions of this Lease, and (b)
environmental conditions in, on or about the Leased Premises caused by Tenant or
its agents, employees or contractors.  If anything done by Tenant in its use or
occupancy of the Leased Premises shall create, require or cause imposition of
any requirement by any public authority for structural or other upgrading of or
alteration or improvement to the Project, Tenant shall, at Landlord's option,
either perform the upgrade, alteration or improvement at Tenant's sole cost and
expense or reimburse Landlord upon demand, as Additional Rent, for the cost to
Landlord of performing such work.  The judgment of any court of competent
jurisdiction or the admission by Tenant in any action against Tenant, whether
Landlord is a party thereto or not, that Tenant has violated any law, ordinance,
rule, regulation, order, permit, covenant, easement or restriction shall be
conclusive of that fact as between Landlord and Tenant.  Notwithstanding the
foregoing, Tenant shall not be obligated to make any structural repairs or
alterations to the Leased Premises or any modifications to the mechanical,
electrical, plumbing and life safety systems of the Building to comply with such
laws, ordinances, rules, regulations or orders

                                       22
<PAGE>

unless the need for such compliance arises exclusively by virtue of Tenant's
particular use of the Leased Premises or Tenant's alterations, additions or
improvements made subsequent to the Term Commencement Date.

     5.09. No Nuisance; No Overloading. Tenant shall use and occupy the Leased
Premises, and control its agents, employees, contractors, invitees and visitors
in such manner so as not to create any nuisance, or unreasonably interfere with,
annoy or disturb (whether by noise, odor, vibration or otherwise) any other
tenant or occupant of the Project or Landlord in its operation of the Project.
Tenant shall not place or permit to be placed any loads upon the floors, walls
or ceilings in excess of the maximum designed load specified by Landlord or
which might damage the Leased Premises, the Building, or any portion thereof.

     5.10. Furnishing of Financial Statements; Tenant's Representations.  In
order to induce Landlord to enter into this Lease, Tenant agrees that it shall
promptly furnish Landlord, from time to time, within ten (10) business days of
receipt of Landlord's written request therefor, with Tenant's most recent
financial statements in Tenant's customary form reflecting Tenant's financial
condition as of the date of such statements.  Tenant represents and warrants
that all financial statements, records and information furnished by Tenant to
Landlord in connection with this Lease are true, correct and complete in all
respects.  Prior to Tenant's providing Landlord with any financial information,
Landlord agrees that it will execute a Nondisclosure Agreement in the form of
Exhibit D hereto which is made a part hereof.  If Tenant or its parent is a
---------
public company, Tenant's obligation under this Section 5.10 shall be satisfied
by delivery to Landlord of Tenant's most recent publicly disclosed financial
information.

     5.11. Entry by Landlord.  Landlord, its employees, agents and consultants,
shall have the right to enter the Leased Premises at any time, in cases of an
emergency, and otherwise at reasonable times upon twenty-four (24) hours' prior
written notice to inspect the same, to clean, to perform such work as may be
permitted or required under this Lease, to make repairs to or alterations of the
Leased Premises or other portions of the Project, to deal with emergencies, to
post such notices as may be permitted or required by law to prevent the
perfection of liens against Landlord's interest in the Project or to show the
Leased Premises to prospective tenants (but only during the last six (6) months
of the Term), purchasers, encumbrancers or others, or for any other purpose as
Landlord may reasonably deem necessary or desirable; provided, however, that
Tenant may require that an employee of Tenant accompany Landlord during any non-
emergency entry and Landlord shall use its best efforts to minimize interference
with Tenant's business operations in the Leased Premises. Tenant shall not be
entitled to any abatement of Rent or damages by reason of the exercise of any
such right of entry. Any such entry shall comply with the Tenant's reasonable
security measures.

     5.12. Nondisturbance and Attornment.

           (a) This Lease and the rights of Tenant hereunder shall be subject
and subordinate to the lien of any deed of trust, mortgage or other
hypothecation or security instrument (collectively, "Security Device") now or
hereafter placed upon, affecting or encumbering the Project or any part thereof
or interest therein, and to any and all advances made thereunder, interest
thereon or costs incurred and any modifications, renewals, supplements,
consolidations, replacements and

                                       23
<PAGE>

extensions thereof. With respect to any Security Device entered into by Landlord
after execution of this Lease, such subordination is conditioned on Landlord's
obtaining assurance in a commercially reasonable form (a "nondisturbance
agreement") from the holder of or beneficiary under such encumbrance that
Tenant's possession of the Leased Premises will not be disturbed, and Tenant's
rights under this Lease will be recognized, so long as Tenant is not in default
under this Lease (after expiration of applicable notice and cure periods) and
attorns to the record owner of the Leased Premises and any subordination of this
Lease shall be conditioned on Tenant's receipt of such an agreement. Without the
consent of Tenant, the holder of any such Security Device or the beneficiary
thereunder shall have the right to elect to be subject and subordinate to this
Lease, such subordination to be effective upon such terms and conditions as such
holder or beneficiary may direct which are not inconsistent with the provisions
hereof. Tenant agrees to attorn to and recognize as the Landlord under this
Lease the holder or beneficiary under a Security Device or any other party that
acquires ownership of the Leased Premises by reason of a foreclosure or sale
under any Security Device (or deed in lieu thereof), provided such holder,
beneficiary or other party has become bound by a nondisturbance agreement as of
the date the Security Device gained priority over this Lease. The new owner
following such foreclosure, sale or deed shall be responsible for the completion
of the Tenant Improvements and shall be responsible for the Security Deposit but
shall not be (i) liable for any act or omission of any prior landlord or with
respect to events occurring prior to acquisition of ownership except relating to
a continuing default; (ii) subject to any offsets or defenses which Tenant might
have against any prior landlord; or (iii) bound by prepayment of more than one
(1) month's Rent unless actually received. Landlord shall, in good faith, use
its best efforts to cause the current holder of a Security Device on the Project
to execute and deliver a nondisturbance agreement to Tenant within thirty (30)
days of execution of this Lease. Landlord shall, however, obtain such
nondisturbance agreement from the holders of all existing Security Devices prior
to the Term Commencement Date.

           (b) Tenant shall not unreasonably withhold its consent to changes or
amendments to this Lease requested by the holder of a Security Device so long as
these changes do not alter the basic business terms of this Lease or otherwise
materially diminish any rights or materially increase any obligations of Tenant
hereunder.  In connection with any amendment to this Lease required under this
paragraph, Landlord shall reimburse Tenant's reasonable attorneys' fees and
costs, not to exceed $1,000.00 in any single instance.  If, within ten (10)
business days after notice from Landlord, Tenant fails or refuses to execute
with Landlord the amendment(s) to this Lease accomplishing the change(s) or
amendment(s) which are requested by such holder, Landlord, at its sole option,
shall have the right to do either or both of the following: (i) to execute any
instrument for or on behalf of Tenant as its attorney-in-fact (in acknowledgment
thereof, Tenant hereby appoints Landlord as its irrevocable attorney-in-fact
solely to execute any instruments required to carry out the intent of this
Section 5.12(b) on behalf of Tenant); and/or (ii) to provide Tenant with a
further notice and if Tenant fails or refuses to execute the amendment(s) within
five (5) business days of such additional notice, Landlord shall have the right
to terminate this Lease.

     5.13. Estoppel Certificate.  Within ten (10) days following Landlord's
request, Tenant shall execute, acknowledge and deliver written estoppel
certificates addressed to (i) any mortgagee or prospective mortgagee of
Landlord, or (ii) any purchaser or prospective purchaser of all or any portion
of, or interest in, the Project, on a form specified by Landlord, certifying as
to such facts (if true) and agreeing to such notice provisions and other matters
(provided, however that such notice

                                       24
<PAGE>

provisions and other matters shall not alter the basic business terms of this
Lease or otherwise materially diminish any rights or materially increase any
obligations of Tenant hereunder, and if such estoppel certificate includes any
matters not strictly of a factual nature, Tenant shall have a right to
reimbursement of reasonable attorney's fees in connection with the review
thereof, in accordance with Section 5.12 above) as such mortgagee(s) or
purchaser(s) may reasonably require, including, without limitation, the
following: (a) that this Lease is unmodified and in full force and effect (or in
full force and effect as modified, and stating the modifications); (b) the
amount of, and date to which Rent and other charges have been paid in advance;
(c) the amount of any Security Deposit; and (d) acknowledging that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating the nature of the alleged default). However, in no event shall any such
estoppel certificate require an amendment of the provisions of this Lease or
otherwise affect or abridge Tenant's rights hereunder. Any such estoppel
certificate may be relied upon by any such mortgagee or purchaser. Failure by
Tenant to execute and deliver any such estoppel certificate within the time
requested shall be conclusive upon Tenant that (1) this Lease is in full force
and effect and has not been modified except as represented by Landlord; (2) not
more than one month's Rent has been paid in advance; and (3) Landlord is not in
default under this Lease. Failure by Tenant to execute and deliver any such
estoppel certificate within five days of Landlord's further notice to Tenant
that Tenant has failed to execute and deliver any such estoppel certificate
within the initial ten (10) day notice period, shall constitute a default under
this Lease. If requested by Tenant upon reasonable written notice, Landlord
shall execute and deliver an estoppel certificate covering the factual matters
outlined in clauses (a) through (d) above (except in case of (d) certifying as
to the absence of any default by Tenant or identifying any such claimed
default), which may be relied upon solely for purposes of Tenant's obtaining
financial accommodations.

     5.14. Security Deposit.

           (a) By no later than November 24, 1999, Tenant shall pay to Landlord
the agreed upon Security Deposit as security for the full and faithful
performance of Tenant's obligations under this Lease. If at any time during the
Term, Tenant shall be in default in the payment of Rent or in default for any
other reason after expiration of applicable notice and cure periods, Landlord
may use, apply or retain all or part of the Security Deposit for payment of any
amount due Landlord or to cure such default or to reimburse or compensate
Landlord for any liability, loss, cost, expense or damage (including attorneys'
fees) which Landlord may suffer or incur by reason of Tenant's defaults. If
Landlord uses or applies all or any part of the Security Deposit, Tenant shall,
on demand, pay to Landlord a sum sufficient to restore the Security Deposit to
the full amount required by this Lease. Upon expiration of the Term or earlier
termination of this Lease and after Tenant has vacated the Leased Premises,
Landlord shall return the Security Deposit to Tenant, reduced by such amounts as
may be required by Landlord to remedy defaults on the part of Tenant in the
payment of Rent, to repair damages to the Leased Premises caused by Tenant and
to clean the Leased Premises. The portion of the deposit not so required shall
be paid over to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest in this Lease) within thirty (30) days after expiration of the
Term or earlier termination hereof. Landlord shall hold the Security Deposit for
the foregoing purposes; provided, however, that Landlord shall have no
obligation to segregate the Security Deposit from its general funds or to pay
interest in respect thereof. No part of the Security Deposit shall be considered
to be held in trust, or to be prepayment of any monies to be paid by Tenant
under this Lease.

                                       25
<PAGE>

           (b) The Security Deposit shall increase proportionally with
any increase in Base Rent resulting from Landlord's funding of additional Tenant
Improvements in accordance with paragraph 5(c) of Exhibit B to this Lease, and
such funding being repaid through amortization payments made to Landlord along
with Base Rent in accordance with paragraph 5(c) of Exhibit B to this Lease. The
amount of the Security Deposit shall decrease twenty percent (20%) per year
beginning on the second (2/nd/) anniversary of the Term Commencement Date.

           (c) In lieu of a cash deposit, Tenant may deliver the Security
Deposit to Landlord in the form of a clean and irrevocable letter of credit (the
"Letter of Credit") issued by and drawable upon (said issuer being referred to
as the "Issuing Bank") a financial institution which is approved by Landlord in
its sole discretion, provided that Landlord shall not unreasonably withhold its
consent to an Issuing Bank which has outstanding unsecured, uninsured and
unguaranteed indebtedness, or shall have issued a letter of credit or other
credit facility that constitutes the primary security for any outstanding
indebtedness (which is otherwise uninsured and unguaranteed), that is then
rated, without regard to qualification of such rating by symbols such as "+" or
"-" or numerical notation, "Aa" or better by Moody's Investors Service and "AA"
or better by Standard & Poor's Rating Service, and has combined capital, surplus
and undivided profits of not less than $100,000,000. Landlord hereby approves of
Merrill Lynch International Bank Limited, London as an issuing bank. Such Letter
of Credit shall (a) name Landlord as beneficiary, (b) be in the amount of the
Security Deposit, (c) have a term of not less than one year, (d) permit multiple
drawings, (e) be fully transferable by Landlord, and (f) otherwise be in form
and content reasonably satisfactory to Landlord. If upon any transfer of the
Letter of Credit, any fees or charges shall be so imposed, then such fees or
charges shall be payable solely by Tenant and the Letter of Credit shall so
specify. The Letter of Credit shall provide that it shall be deemed
automatically renewed, without amendment, for consecutive periods of one year
each thereafter during the Term unless the Issuing Bank sends a notice (the
"Non-Renewal Notice") to Landlord by certified mail, return receipt requested,
not less than 45 days next preceding the then expiration date of the Letter of
Credit stating that the Issuing Bank has elected not to renew the Letter of
Credit. Landlord shall have the right, upon receipt of the Non-Renewal Notice,
to draw the full amount of the Letter of Credit, by sight draft on the Issuing
Bank, and shall thereafter hold or apply the cash proceeds of the Letter of
Credit pursuant to the terms of this Article. Notwithstanding the foregoing,
Tenant shall thereafter have the right to provide Landlord with a replacement
Letter of Credit in compliance with this Section, in which case Landlord shall
provide Tenant such cash sums drawn on the Letter of Credit. The Issuing Bank
shall agree with all drawers, endorsers and bona fide holders that drafts drawn
under and in compliance with the terms of the Letter of Credit will be duly
honored upon presentation to the Issuing Bank at an office location in San
Francisco. The Letter of Credit shall be subject in all respects to the Uniform
Customs and Practice for Documentary Credits (1993 revision), International
Chamber of Commerce Publication No. 500. Tenant shall have the right at any time
to replace the Letter of Credit with a (i) cash security deposit, (ii) a
replacement Letter of Credit that meets all of the conditions of this Section
5.14, or (iii) a combination of items (i) and (ii).

     5.15. Surrender.  Subject to the provisions of Section 5.07 hereof, on the
Term Expiration Date (or earlier termination of this Lease), Tenant shall quit
and surrender possession of the Leased Premises to Landlord in as good order and
condition as they were in on the Term Commencement Date, reasonable wear and
tear, casualties, taking by condemnation and repairs which are Landlord's
responsibility excepted. Reasonable wear and tear shall not include any

                                       26
<PAGE>

damage or deterioration that would have been prevented by good maintenance
practice or by Tenant performing all of its obligations under this Lease. Tenant
shall, without cost to Landlord, remove all furniture, equipment, trade
fixtures, debris and articles of personal property owned by Tenant in the Leased
Premises, and shall repair any damage to the Project resulting from such
removal. Any such property not removed by Tenant by the Term Expiration Date (or
earlier termination of this Lease) shall be considered abandoned, and Landlord
may remove any or all of such items and dispose of same in any lawful manner or
store same in a public warehouse or elsewhere for the account and at the expense
and risk of Tenant. If Tenant shall fail to pay the cost of storing any such
property after storage for thirty (30) days or more, Landlord may sell any or
all of such property at public or private sale, in such manner and at such times
and places as Landlord may deem proper in accordance with applicable law,
without notice to or demand upon Tenant. Landlord shall apply the proceeds of
any such sale as follows: first, to the costs of such sale; second, to the costs
of storing any such property; third, to the payment of any other sums of money
which may then or thereafter be due to Landlord from Tenant under any of the
terms of this Lease; and fourth, the balance, if any, to Tenant.

     5.16. Tenant's Remedies.  Landlord shall not be deemed in breach of this
Lease unless Landlord fails within a reasonable time to perform an obligation
required to be performed by Landlord. For purposes of this Section 5.16, a
reasonable time shall in no event, be less than thirty (30) days after receipt
by Landlord, and by the holders of any ground lease, deed of trust or mortgage
covering the Leased Premises whose name and address shall have been furnished
Tenant in writing for such purpose, of written notice specifying wherein such
obligation of Landlord has not been performed; provided, however, that if the
nature of Landlord's obligation is such that more than thirty (30) days after
such notice are reasonably required for its performance, then Landlord shall not
be in breach of this Lease if performance is commenced within said thirty (30)-
day period and thereafter diligently pursued to completion. If Landlord fails to
cure such default within the time provided for in this Lease, the holder of any
such ground lease, deed of trust or mortgage shall have an additional thirty
(30) days to cure such default; provided that if such default cannot reasonably
be cured within that thirty (30) day period, then such holder shall have such
additional time to cure the default as is reasonably necessary under the
circumstances. Tenant shall look solely to Landlord's interest in the Project,
insurance proceeds, condemnation awards and the proceeds thereof for recovery of
any judgment from Landlord. Neither Landlord nor any of its trustees, directors,
officers, agents, employees or representatives (or, if Landlord is a
partnership, its partners, whether general or limited) shall ever be personally
liable for any such judgment. Any lien obtained to enforce any such judgment and
any levy of execution thereon shall be subject and subordinate to any lien, deed
of trust or mortgage to which Section 5.12 applies or may apply. Except as
otherwise specifically provided for in this Lease, Tenant shall not have the
right to terminate this Lease or withhold, reduce or offset any amount against
any payments of Rent due and payable under this Lease by reason of a breach of
this Lease by Landlord.

     5.17. CC&Rs/Rules and Regulations. Tenant shall comply with (i) the rules
and regulations for the Project attached as Exhibit E and such reasonable
                                            ---------
amendments thereto as Landlord may adopt from time to time with prior notice to
Tenant, and (ii) such reasonable covenants, conditions and restrictions for the
Project ("CC&Rs") as Landlord may adopt from time to time with prior notice to
Tenant.  Tenant shall not be required to comply with any new rule or regulation
or CC&Rs unless the same applies non-discriminatorily to all occupants of the
Project,

                                       27
<PAGE>

does not unreasonably interfere with Tenant's use of the Leased Premises and
does not materially increase the obligations or decrease the rights of Tenant
under the Lease. In case of any conflict between (i) the rules and regulations
and/or CC&Rs and (ii) the provisions of this Lease, this Lease shall control.

                                  Article 6.
                             Environmental Matters

     6.01. Hazardous Materials Prohibited.

           (a) Except with Landlord's prior written consent, Tenant shall not
cause or permit any Hazardous Materials (as defined in Section 6.01(c) below) to
be brought, kept, used, generated, released or disposed in, on, under or about
the Leased Premises or the Project by Tenant, its agents, employees, contractors
or invitees; provided, however, that Tenant may use, store and dispose of, in
accordance with applicable Laws, limited quantities of standard office and
janitorial supplies, but only to the extent reasonably necessary for Tenant's
operations in the Leased Premises.  Tenant hereby indemnifies Landlord from and
against (i) any breach by Tenant of the obligations stated in the preceding
sentence, (ii) any breach of the obligations stated in Section 6.01(b) below, or
(iii) any claims or liability resulting from Tenant's use of Hazardous Materials
in violation of applicable laws or provisions hereof.  Tenant hereby agrees to
defend and hold Landlord harmless from and against any and all claims,
liability, losses, damages, costs and/or expenses (including, without
limitation, diminution in value of the Project, or any portion thereof, damages
for the loss or restriction on use of rentable or usable space or of any amenity
of the Project, damages arising from any adverse impact on marketing of space in
the Project, and sums paid in settlement of claims, fines, penalties, attorneys'
fees, consultants' fees and experts' fees) which are caused by any breach of the
obligations stated in Sections 6.01(a) or 6.01(b) or otherwise resulting from
Tenant's use of Hazardous Materials in the Project in violation of applicable
laws or provisions hereof.  This indemnification of Landlord by Tenant includes,
without limitation, death of or injury to person, damage to any property or the
environment and costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal, or restoration work required by
any federal, state or local governmental agency or political subdivision because
of any Hazardous Material present in, on, under or about the Leased Premises or
the Project (including soil and ground water contamination) which results from
such a breach.  Without limiting the foregoing, if the presence of any Hazardous
Material in, on, under or about the Leased Premises or the Project caused or
permitted by Tenant results in any contamination of the Leased Premises or the
Project, Tenant shall promptly take all actions at its sole expense as are
necessary to return the same to the condition existing prior to the introduction
of such Hazardous Material as required under applicable laws; provided that
Landlord's approval of such actions, and the contractors to be used by Tenant in
connection therewith, shall first be obtained. This indemnification of Landlord
by Tenant shall survive the expiration or sooner termination of this Lease.

           (b) Tenant covenants and agrees that Tenant shall at all times be
responsible and liable for, and be in compliance with, all federal, state, local
and regional laws, ordinances, rules, codes and regulations, as amended from
time to time ("Governmental Requirements"), relating to health and safety and
environmental matters, arising, directly or indirectly, out of Tenant's use of
Hazardous Materials (as defined in Section 6.01(c) below) in the Project. Health
and safety and

                                       28
<PAGE>

environmental matters for which Tenant is responsible under this paragraph
include, without limitation (i) notification and reporting to governmental
agencies, (ii) the provision of warnings of potential exposure to Hazardous
Materials to Landlord and Tenant's agents, employees, licensees, contractors and
others, (iii) the payment of taxes and fees, (iv) the proper off-site
transportation and disposal of Hazardous Materials, and (v) all requirements,
including training, relating to the use of equipment. Immediately upon discovery
of a release of Hazardous Materials associated with Tenant's activities, Tenant
shall give written notice to Landlord, whether or not such release is subject to
reporting under Governmental Requirements. The notice shall include information
on the nature and conditions of the release and Tenant's planned response.
Tenant shall be liable for the cost of any clean-up of the release of any
Hazardous Materials by Tenant on the Project.

           (c) As used in this Lease, the term "Hazardous Material" means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of California or the United States
Government.  The term "Hazardous Material" includes, without limitation, any
substance, material or waste which is (i) defined as a "hazardous waste" or
similar term under the laws of the jurisdiction where the Project is located;
(ii) designated as a "hazardous substance" pursuant to Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. (S) 1317); (iii) defined as a
"hazardous waste" pursuant to Section 1004 of the Federal Resource, Conservation
and Recovery Act, 42 U.S.C. (S) 6901 et seq. (42 U.S.C. (S) 6903); (iv) defined
                                     -- ---
as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
                                                                           --
seq.  (42 U.S.C. (S) 9601); (v) hydrocarbons, petroleum, gasoline, crude oil or
---
any products, by-products or fractions thereof; or (vi) asbestos in any form or
condition.

           (d) As used in this Article 6, the term "Laws" means any applicable
federal, state or local laws, ordinances, rules or regulations relating to any
Hazardous Material affecting the Project, including, without limitation, the
specific laws, ordinances and regulations referred to in Section 6.01(c) above.
References to specific Laws shall also be references to any amendments thereto
and to any applicable successor Laws.

           (e) To the best of Landlord's knowledge, except as disclosed in the
environmental reports (the "Environmental Reports") provided to Tenant (i) there
are no Hazardous Materials, PCB transformers or underground storage tanks on the
Project, and (ii) the Project is in compliance with all Laws relating to any
Hazardous Material.  Tenant acknowledges its receipt and review of the
Environmental Reports prior to entering into this Lease.  Landlord represents
and warrants that (i) during the period of its ownership of the Project prior to
entering into this Lease, neither it nor its agents, employees, contractors, or
invitees have released or authorized the release of any Hazardous Materials on
the Project, and (ii) after entering into this Lease, Landlord will not release
any Hazardous Materials on the Project. Landlord hereby agrees to indemnify,
protect, defend and hold the Tenant harmless of and from any and all claims,
liability, costs, penalties, fines, damages, injury, judgments, forfeiture,
losses or expenses (including without limitation reasonable attorneys' fees)
arising out of or in any way related to or resulting from any Hazardous
Materials discovered in the Leased Premises or on the Project which were not
brought, kept, used, generated, released or disposed in, on, under or about the
Leased Premises or the Project by Tenant, its agents, employees, contractors or
invitees.  This Section 6.01 of the Lease constitutes the entire agreement of
Landlord and Tenant regarding Hazardous Materials.

                                       29
<PAGE>

     6.02. Limitations on Assignment and Subletting. It shall not be
unreasonable for Landlord to withhold its consent to any proposed assignment or
subletting of the Leased Premises if the proposed assignee's or sublessee's
anticipated use of the Leased Premises involves the generation, storage, use,
treatment, or disposal of Hazardous Material (excluding standard office and
janitorial supplies; in limited quantities as hereinabove provided).

     6.03. Right of Entry.  Landlord, its employees, agents and consultants,
shall have the right to enter the Leased Premises at any time, in case of an
emergency, and otherwise during reasonable hours and upon reasonable notice to
Tenant, in order to conduct periodic environmental inspections and tests to
determine whether any Hazardous Materials are present.  The costs and expenses
of such inspections shall be paid by Landlord unless a default or breach of this
Lease, violation of Laws or contamination caused or permitted by Tenant is found
to exist.  In such event, Tenant shall reimburse Landlord upon demand, as
Additional Rent, for the reasonable costs and expenses of such inspections if it
is determined that Tenant has failed to perform its obligations under this Lease
with regard to Hazardous Materials.

     6.04. Notice to Landlord.  Tenant shall promptly notify Landlord in
writing of:  (i) any enforcement, clean-up, removal or other governmental or
regulatory action instituted or threatened regarding the Leased Premises or the
Project pursuant to any Laws caused by Tenant's use or storage of Hazardous
Materials; (ii) any claim made or threatened by any person against Tenant or the
Leased Premises relating to damage, contribution, cost recovery, compensation,
loss or injury resulting from or claimed to result from  Tenant's use or storage
of any Hazardous Material; and (iii) any reports made to or received from any
governmental agency arising out of or in connection with any Hazardous Material
in or removed from the Leased Premises or the Project, including any complaints,
notices, warnings or asserted violations in connection therewith.  Tenant shall
also supply to Landlord as promptly as possible, and in any event within three
(3) business days after Tenant first receives or sends the same, copies of all
claims, reports, complaints, notices, warnings, asserted violations or other
communications relating in any way to the Leased Premises or Tenant's use
thereof.

                                  Article 7.
            Insurance, Indemnity, Condemnation, Damage and Default

     7.01. Landlord's Insurance. Landlord shall secure and maintain policies
of insurance for the Project (including the Leased Premises) covering loss of or
damage to the Project, including the Tenant Improvements (as shown on the "as-
built" plans provided to Landlord after completion of construction of the Tenant
Improvements) and all subsequent alterations, additions and improvements to the
Leased Premises approved by Landlord in writing, with loss payable to Landlord
and to the holders of any deeds of trust, mortgages or ground leases on the
Project. Landlord shall not be obligated to obtain insurance for Tenant's trade
fixtures, equipment, furnishings, machinery or other property.  Such policies
shall provide protection against fire and extended coverage perils and such
additional perils as Landlord deems suitable, in the amount of the estimated
replacement cost thereof and with such deductible(s) as Landlord shall deem
reasonably appropriate.  Landlord shall further secure and maintain commercial
general liability insurance with respect to the Project in such amount as
Landlord shall determine, such insurance to be in addition to, and not in lieu
of, the liability insurance required to be maintained by Tenant.  In addition,

                                       30
<PAGE>

Landlord may secure and maintain rental income insurance.  If the annual cost to
Landlord for any such insurance exceeds the standard rates because of the nature
of Tenant's operations, Tenant shall, upon receipt of appropriate invoices,
reimburse Landlord for such increases in cost, which amounts shall be deemed
Additional Rent hereunder.  Tenant shall not be named as an additional insured
on any policy of insurance maintained by Landlord.

     7.02. Tenant's Liability Insurance.

           (a) Tenant (with respect to both the Leased Premises and the Common
Areas) shall secure and maintain, at its own expense, at all times during the
Term, a policy or policies of commercial general liability insurance with the
premiums thereon fully paid in advance, protecting Tenant and naming Landlord,
the holders of any deeds of trust, mortgages or ground leases on the Project,
and Landlord's representatives (which term, whenever used in this Article 7,
shall be deemed to include Landlord's partners, trustees, ancillary trustees,
officers, directors, shareholders, beneficiaries, agents, employees and
independent contractors) as additional insureds against claims for bodily
injury, personal injury, advertising injury and property damage (including
attorneys' fees) based upon, involving or arising out of Tenant's operations,
assumed liabilities or Tenant's use, occupancy or maintenance of the Leased
Premises and the Common Areas of the Project.  Such insurance shall provide for
a minimum amount of Two Million Dollars ($2,000,000.00) for property damage or
injury to or death of one or more than one person in any one accident or
occurrence, with an annual aggregate limit of at least Four Million Dollars
($4,000,000.00). The coverage required to be carried shall include fire legal
liability, blanket contractual liability, personal injury liability (libel,
slander, false arrest and wrongful eviction), broad form property damage
liability, products liability and completed operations coverage (as well as
owned, non-owned and hired automobile liability if an exposure exists) and the
policy shall contain an exception to any pollution exclusion which insures
damage or injury arising out of heat, smoke or fumes from a hostile fire.  Such
insurance shall be written on an occurrence basis and contain a separation of
insureds provision or cross-liability endorsement acceptable to Landlord.
Tenant shall provide Landlord with a certificate evidencing such insurance
coverage.  The certificate shall indicate that the insurance provided
specifically recognizes the liability assumed by Tenant under this Lease
(including without limitation performance by Tenant under Section 7.04) and that
Tenant's insurance is primary to and not contributory with any other insurance
maintained by Landlord, whose insurance shall be considered excess insurance
only.  Following the initial Term of the Lease, not more frequently that every
two (2) years, if, in the opinion of any mortgagee of Landlord or of the
insurance broker retained by Landlord, the amount of liability insurance
coverage at that time is not adequate, then Tenant shall increase its liability
insurance coverage as reasonably required by either any mortgagee of Landlord or
Landlord's insurance broker.

           (b) Subject to Section 5.08 of this Lease, Tenant shall, at Tenant's
expense, comply with (i) all insurance company requirements pertaining to the
use of the Leased Premises and (ii) all rules, orders, regulations or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and with any similar body.

     7.03. Tenant's Additional Insurance Requirements.

                                       31
<PAGE>

           (a) Tenant shall secure and maintain, at Tenant's expense, at all
times during the Term, a policy of physical damage insurance on all of Tenant's
fixtures, furnishings, equipment, machinery, merchandise and personal property
in the Leased Premises and alterations, additions or improvements made by or for
Tenant upon the Leased Premises, all for the full replacement cost thereof
without deduction for depreciation of the covered items and in amounts that meet
any co-insurance clauses of the policies of insurance.  Such insurance shall
insure against those risks customarily covered in an "all risk" policy of
insurance covering physical loss or damage.  Tenant may use the proceeds from
such insurance for the replacement of fixtures, furnishings, equipment and
personal property and for restoration of alterations, additions or improvements
to the Leased Premises after the Term Commencement Date.  Landlord shall be
named as loss payee to the extent of the value of any such improvements after
the Term Commencement Date.  In addition, Tenant shall secure and maintain, at
all times during the Term, loss of income, business interruption and extra
expense insurance in such amounts as will reimburse Tenant for direct or
indirect loss of earnings and incurred costs attributable to all perils commonly
insured against by prudent tenants or attributable to prevention of access to
the Leased Premises or to the Building as a result of such perils; such
insurance shall be maintained with Tenant's property insurance carrier.
Further, Tenant shall secure and maintain at all times during the Term workers'
compensation insurance in such amounts as are required by law, employer's
liability insurance in the amount of One Million Dollars ($1,000,000.00) per
occurrence, and all such other insurance as may be required by applicable law or
as may be reasonably required by Landlord.  In the event Tenant makes any
alterations, additions or improvements to the Leased Premises, prior to
commencing any work in the Leased Premises, Tenant shall secure "builder's all
risk" insurance which shall be maintained throughout the course of construction,
such policy being an all risk builder's risk completed value form, in an amount
approved by Landlord, but not less than the total contract price for the
construction of such alterations, additions or improvements and covering the
construction of such alterations, additions or improvements, and such other
insurance as Landlord may require, it being understood and agreed that all of
such alterations, additions or improvements shall be insured by Tenant pursuant
to this Section 7.03 immediately upon completion thereof.  Tenant shall provide
Landlord with certificates of all such insurance.  The property insurance
certificate shall confirm that the waiver of subrogation required to be obtained
pursuant to Section 7.05 is permitted by the insurer.  Tenant shall, at least
thirty (30) days prior to the expiration of any policy of insurance required to
be maintained by Tenant under this Lease, furnish Landlord with an "insurance
binder" or other satisfactory evidence of renewal thereof.

           (b) All policies required to be carried by Tenant under this Lease
shall be issued by and binding upon a reputable insurance company of good
financial standing licensed to do business in the State of California with a
rating of at least A-VII, or such other rating as may be required by a lender
having a lien on the Project, as set forth in the most current issue of "Best's
Insurance Reports."  Tenant shall not do or permit anything to be done that
would invalidate the insurance policies referred to in this Article 7.  Evidence
of insurance provided to Landlord shall include an endorsement showing that
Landlord, its representatives and the holders of any deeds of trust, mortgages
or ground leases on the Project are included as additional insureds on general
liability insurance, and as loss payees for property insurance, to the extent
required hereunder, and an endorsement whereby the insurer agrees not to cancel,
non-renew or materially alter the policy without at least thirty (30) days prior
written notice to Landlord, its representatives and any mortgagee of Landlord.

                                       32
<PAGE>

           (c) In the event that Tenant fails to provide evidence of insurance
required to be provided by Tenant under this Lease, prior to commencement of the
Term, and thereafter during the Term, within ten (10) days following Landlord's
request therefor, and thirty (30) days prior to the expiration date of any such
coverage, Landlord shall be authorized (but not required), after giving Tenant
two (2) business days advance written notice of Landlord's intention to do so
(which notice may be included in the ten (10) day notice referenced above in
this subparagraph (c)) to procure such coverage in the amounts stated with all
costs thereof (plus a five percent (5%) administrative fee) to be chargeable to
Tenant and payable upon written invoice therefor, which amounts shall be deemed
Additional Rent hereunder.

           (d) The minimum limits of insurance required by this Lease, or as
carried by Tenant, shall not limit the liability of Tenant nor relieve Tenant of
any obligation hereunder.

     7.04. Indemnity and Exoneration.

           (a) To the extent not prohibited by law, except to the extent due to
the gross negligence or willful misconduct of Landlord, its employees, agents,
contractors or invitees, or Landlord's breach of this Lease, Landlord and
Landlord's representatives shall not be liable for any loss, injury or damage to
person or property of Tenant, Tenant's agents, employees, contractors, invitees
or any other person, whether caused by theft, fire, act of God, acts of the
public enemy, riot, strike, insurrection, war, court order, requisition or order
of governmental body or authority or which may arise through repair, alteration
or maintenance of any part of the Project or failure to make any such repair or
from any other cause whatsoever, except as expressly otherwise provided in
Sections 7.06 and 7.07.  Landlord shall not be liable for any loss, injury or
damage arising from any act or omission of any other tenant or occupant of the
Project, nor shall Landlord be liable under any circumstances for damage or
inconvenience to Tenant's business or for any loss of income or profit
therefrom..

           (b) Tenant shall indemnify, protect, defend and hold the Project,
Landlord and its representatives, harmless of and from any and all claims,
liability, costs, penalties, fines, damages, injury, judgments, forfeiture,
losses (including without limitation diminution in the value of the Leased
Premises) or expenses (including without limitation attorneys' fees, consultant
fees, testing and investigation fees, expert fees and court costs) arising out
of or in any way related to or resulting directly or indirectly from (i) the use
or occupancy of the Leased Premises, (ii) the activities of Tenant, its agents,
employees, contractors or invitees in or about the Leased Premises or the
Project (where not covered by Landlord's insurance), (iii) any failure to comply
with any applicable law to the extent required hereunder, and (iv) any default
or breach by Tenant in the performance of any obligation of Tenant under this
Lease; provided, however, that the foregoing indemnity shall not be applicable
to claims to the extent due to the gross negligence or willful misconduct of
Landlord, its employees, agents, contractors or invitees, or Landlord's breach
of this Lease.

           (c) Tenant shall indemnify, protect, defend and hold the Project,
Landlord and its representatives,  harmless of and from any and all claims,
liability, costs, penalties, fines, damages, injury, judgments, forfeiture,
losses (including without limitation diminution in the value of the Leased
Premises) or expenses (including without limitation attorneys' fees, consultant
fees, testing and investigation fees, expert fees and court costs) arising out
of or in any way related to or

                                       33
<PAGE>

resulting directly or indirectly from work or labor performed, materials or
supplies furnished to or at the request of Tenant or in connection with
obligations incurred by or performance of any work done for the account of
Tenant in the Leased Premises or the Project, excluding, however, any work to be
performed by or under the direction of Landlord.

           (d) The provisions of this Section 7.04 shall survive the expiration
or sooner termination of this Lease.  BY SIGNING ITS INITIALS BELOW, TENANT
ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF
THE PROVISIONS SET FORTH IN THIS SECTION 7.04 AND FURTHER ACKNOWLEDGES THAT SUCH
PROVISIONS WERE SPECIFICALLY NEGOTIATED.

________________________
Tenant's Initials

           (e) To the extent not prohibited by law, Tenant shall not be liable
for any loss, injury or damage in or about the Project, nor shall Tenant be
liable for any damage or inconvenience to Landlord or Landlord's business or for
any loss of income or profit therefrom to the extent such loss, injury or damage
arises from any gross negligence or willful misconduct of Landlord or its
employees, agents, contractors or invitees, or Landlord's breach of this Lease.

           (f) To the extent not prohibited by law, Landlord shall indemnify,
protect, defend and hold Tenant and its representatives, harmless of and from
any and all claims, liability, costs, penalties, fines, damages, injury,
judgments, forfeiture, losses or expenses (including without limitation
reasonable attorneys' fees, consultant fees, testing and investigation fees,
expert fees and court costs) by reason of (i) any damage or injury occurring on
the Project to the extent that such damage or injury shall be caused by or arise
from any gross negligence or willful misconduct by Landlord, its employees,
agents, contractors or invitees, or Landlord's breach of this Lease, (ii)
Landlord's failure to comply with any governmental laws, ordinances and
regulations applicable to the Project, or (iii) any default or breach beyond the
expiration of the applicable cure period on the part of Landlord in the
performance of any obligation of Landlord to be performed pursuant to this
Lease; provided however, that the foregoing indemnity shall not be applicable to
claims to the extent arising by reason of any negligence or willful misconduct
of Tenant.

     7.05. Waiver of Subrogation.  Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each waives all rights of recovery, claim,
action or cause of action against the other, its agents (including partners,
both general and limited), trustees, officers, directors, and employees, for any
loss or damage that may occur to the Leased Premises, or any improvements
thereto, or the Project or any personal property of such party therein, by
reason of any cause required to be insured against under this Lease, regardless
of cause or origin, including negligence of the other party hereto, and each
party covenants that, to the fullest extent permitted by law, no insurer shall
hold any right of subrogation against such other party.  Tenant shall advise its
insurers of the foregoing and such waiver shall be a part of each policy
maintained by Tenant which applies to the Leased Premises, any part of the
Project or Tenant's use and occupancy of any part thereof.

                                       34
<PAGE>

     7.06. Condemnation.

           (a) If the Leased Premises are taken under the power of eminent
domain or sold under the threat of the exercise of such power (all of which are
referred to herein as "condemnation"), this Lease shall terminate as to the part
so taken as of the date the condemning authority takes title or possession,
whichever first occurs (the "date of taking"). If the Leased Premises or any
portion of the Project is taken by condemnation to such an extent as to render
the Leased Premises untenantable as reasonably determined by Tenant and
Landlord, this Lease shall, at the option of either party to be exercised in
writing within thirty (30) days after receipt of written notice of such taking,
forthwith cease and terminate as of the date of taking. All proceeds from any
condemnation of the Leased Premises shall belong and be paid to Landlord,
subject to the rights of any mortgagee of Landlord's interest in the Project or
the beneficiary of any deed of trust which constitutes an encumbrance thereon;
provided that Tenant shall be entitled to any compensation separately awarded to
Tenant for Tenant's relocation expenses, loss of business goodwill and loss of
Tenant's trade fixtures and the unamortized value of improvements made to the
Leased Premises at Tenant's expense. If this Lease continues in effect after the
date of taking pursuant to the provisions of this Section 7.06(a), Landlord
                                                  ---------------
shall proceed with reasonable diligence to repair, at its expense, the remaining
parts of the Project and the Leased Premises to substantially their former
condition to the extent that the same is feasible (subject to reasonable changes
which Landlord shall deem desirable) and so as to constitute a complete and
tenantable Project and Leased Premises.  Net Rent shall abate to the extent
appropriate during the period of restoration, and Net Rent shall thereafter be
equitably adjusted according to the remaining Rentable Area of the Leased
Premises and the Building.

           (b) In the event of a temporary taking of all or a portion of the
Leased Premises for the period of ninety (90) days or less, there shall be no
abatement of Rent and Tenant shall remain fully obligated for performance of all
of the covenants and obligations on its part to be performed pursuant to the
terms of this Lease.  All proceeds awarded or paid with respect thereto shall
belong to Tenant.

     7.07. Damage or Destruction. In the event of a fire or other casualty in
the Leased Premises, Tenant shall immediately give notice thereof to Landlord.
The following provisions shall then apply:

           (a) If the damage is limited solely to the Leased Premises and the
Leased Premises can, in Landlord's reasonable opinion, be made tenantable with
all damage repaired within twelve (12) months from the date of damage, then
Landlord shall be obligated to rebuild the same to substantially their former
condition to the extent that the same is feasible (subject to reasonable changes
which Landlord shall deem desirable and such changes as may be required by
applicable law) and shall proceed with reasonable diligence to do so and this
Lease shall remain in full force and effect.

           (b) If portions of the Project outside the boundaries of the Leased
Premises are damaged or destroyed (whether or not the Leased Premises are also
damaged or destroyed) and the Leased Premises and the Project can, in Landlord's
opinion, both be made tenantable with all damage repaired within six (6) months
from the date of damage or destruction, and provided that Landlord

                                       35
<PAGE>

determines that it is economically feasible, then Landlord shall be obligated to
rebuild the same to substantially their former condition to the extent that the
same is feasible (subject to reasonable changes which Landlord shall deem
desirable and such changes as may be required by applicable law) and shall
proceed with reasonable diligence to do so and this Lease shall remain in full
force and effect; provided, however, that Landlord shall not terminate this
Lease if it rebuilds the Project and/or the Leased Premises.

           (c) Notwithstanding anything to the contrary contained in Sections
                                                                     --------
7.07(a) or 7.07(b) above, Landlord shall not have any obligation whatsoever to
-------    -------
repair, reconstruct or restore the Leased Premises and Tenant shall have the
right to terminate this Lease, when any substantial damage thereto or to the
Project occurs during the last nine (9) months of the Term and Tenant has not
effectively exercised any option granted to Tenant to extend the Term.  Under
such circumstances, Landlord shall promptly notify Tenant of its decision not to
rebuild, whereupon the Lease shall terminate as of the date of such notice.

           (d) If neither Section 7.07(a) nor 7.07(b) above applies, Landlord
shall so notify Tenant within sixty (60) days after the date of the damage or
destruction and either Tenant or Landlord may terminate this Lease within thirty
(30) days after the date of such notice, such termination notice to be
immediately effective; provided, however, that Landlord shall have the right to
elect to reconstruct the Project and the Leased Premises, in which event (i)
Landlord shall notify Tenant of such election within said sixty (60) day period
and Tenant shall thereupon have no right to terminate this Lease, and (ii)
Landlord shall proceed with reasonable diligence to rebuild the Project and the
Leased Premises to substantially their former condition to the extent that the
same is feasible (subject to reasonable changes which Landlord shall reasonably
deem desirable and such changes as may be required by applicable law).

           (e) During any period when Tenant's use of the Leased Premises is
significantly impaired by damage or destruction, Net Rent shall abate in
proportion to the degree to which Tenant's use of the Leased Premises is
impaired until such time as the Leased Premises are made tenantable as
reasonably determined by Landlord.  If the Leased Premises are damaged by any
peril and Landlord does not terminate the Lease, then Tenant shall have the
option to terminate the Lease if the Leased Premises cannot be, or are not in
fact, substantially restored by Landlord to their prior condition within 180
days after the condemnation or damage, with such 180 day period extended (up to
60 additional days) for periods of delay as provided under Section 9.12 and
periods of delays beyond the reasonable control of Landlord (including any
delays in obtaining permits).

           (f) The proceeds from any insurance paid by reason of damage to or
destruction of the Project or any part thereof insured by Landlord shall belong
to and be paid to Landlord, subject to the rights of any mortgagee of Landlord's
interest in the Project or the beneficiary of any deed of trust which
constitutes an encumbrance thereon.  Tenant shall be responsible at its sole
cost and expense for the repair, restoration and replacement of (i) its
fixtures, furnishings, equipment, machinery, merchandise and personal property
in the Leased Premises, and (ii) its alteration, additions and improvements.

           (g) Landlord's repair and restoration obligations under this Section
7.07 shall not impair or otherwise affect the rights and obligations of the
parties set forth elsewhere in this Lease.

                                       36
<PAGE>

Subject to Section 7.07(e), Landlord shall not be liable for any inconvenience
or annoyance to Tenant, its employees, agents, contractors or invitees, or
injury to Tenant's business resulting in any way from such damage or the repair
thereof. Landlord and Tenant agree that the terms of this Lease shall govern the
effect of any damage to or destruction of the Leased Premises or the Project
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute or law to the extent inconsistent therewith.

     7.08. Default by Tenant.

           (a) Events Of Default.  The occurrence of any of the following shall
constitute an event of default on the part of Tenant:

               (1) Abandonment.  Abandonment of the Leased Premises for a
continuous period of sixty (60) days;

               (2) Nonpayment Of Rent. Failure to pay any installment of Rent
due and payable hereunder on the date when payment is due, such failure
continuing for a period of three (3) business days after written notice of such
failure; provided, however, that Landlord shall not be required to provide such
notice more than two (2) times in a calendar year with respect to non-payment of
Net Rent or Additional Rent, the third such non-payment in a calendar year
constituting default without requirement of notice; furthermore, if Tenant shall
be served with a demand for the payment of past due Rent, any payment(s)
tendered thereafter to cure any default by Tenant shall be made only by
cashier's check, wire-transfer or direct deposit of immediately available funds;

               (3) Other Obligations. Failure to perform any obligation,
agreement or covenant under this Lease other than those matters specified in
Sections 7.08(a)(1) and 7.08(a)(2), such failure continuing for a period of
thirty (30) days after written notice of such failure (or such longer period as
is reasonably necessary to remedy such default, provided that Tenant commences
the remedy within such thirty (30)-day period and continuously and diligently
pursues such remedy at all times until such default is cured);

               (4) General Assignment.  Any general arrangement or assignment by
Tenant for the benefit of creditors;

               (5) Bankruptcy.  The filing of any voluntary petition in
bankruptcy by Tenant, or the filing of an involuntary petition against Tenant,
which involuntary petition remains undischarged for a period of sixty (60) days.
In the event that under applicable law the trustee in bankruptcy or Tenant has
the right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, within such time period as may be
permitted by the bankruptcy court having jurisdiction, cure all defaults of
Tenant hereunder outstanding as of the date of the affirmance of this Lease and
provide to Landlord such adequate assurances as may be necessary to ensure
Landlord of the continued performance of Tenant's obligations under this Lease;

                                       37
<PAGE>

               (6) Receivership.  The appointment of a trustee or receiver to
take possession of all or substantially all of Tenant's assets or the Leased
Premises, where possession is not restored to Tenant within ten (10) business
days;

               (7) Attachment.  The attachment, execution or other judicial
seizure of all or substantially all of Tenant's assets or the Leased Premises,
if such attachment or other seizure remains undismissed or undischarged for a
period of ten (10) business days after the levy thereof;

               (8) Insolvency.  The admission by Tenant in writing of its
inability to pay its debts as they become due; the filing by Tenant of a
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation; the filing by Tenant of an answer admitting or failing timely
to contest a material allegation of a petition filed against Tenant in any such
proceeding; or, if within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have been
dismissed;

               (9)  [Intentionally Deleted.]

               (10) Partner.  If Tenant is a partnership or consists of more
than one (1) person or entity, if any partner of the partnership or any person
or entity constituting Tenant is involved in any of the events or acts described
in subsections 7.08(a)(4) through (8); or

               (11) Misrepresentation.   The discovery by Landlord that any
representation, warranty or financial statement intentionally given to Landlord
by Tenant or any guarantor of Tenant's obligations under this Lease was
materially false or misleading.

           (b)  Remedies Upon Default:

                (1) Termination.  If an event of default occurs, Landlord shall
have the right, with or without notice or demand, immediately (after expiration
of any applicable grace period specified herein) to terminate this Lease, and at
any time thereafter recover possession of the Leased Premises or any part
thereof and expel and remove therefrom Tenant and any other person occupying the
same, by any lawful means, and again repossess and enjoy the Leased Premises
without prejudice to any of the remedies that Landlord may have under this
Lease, or at law or in equity by reason of Tenant's default or of such
termination.

               (2) Continuation After Default.  Even though Tenant has breached
this Lease and/or abandoned the Leased Premises, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession
under subsection 7.08(b)(1) hereof in writing, and Landlord may enforce all of
its rights and remedies under this Lease, including (but without limitation) the
right to recover Rent as it becomes due, and Landlord, without terminating this
Lease, may exercise all of the rights and remedies of a landlord under Section
1951.4 of the Civil Code of the State of California or any amended or successor
code section. Acts of maintenance or preservation, efforts to relet the Leased
Premises or the appointment of a receiver upon application

                                       38
<PAGE>

of Landlord to protect Landlord's interest under this Lease shall not constitute
an election to terminate Tenant's right to possession.

                                       39
<PAGE>

               (3) Damages Upon Termination.  Should Landlord terminate this
Lease pursuant to the provisions of subsection 7.08(b)(1) hereof, Landlord shall
have all the rights and remedies of a landlord provided by Section 1951.2 of the
Civil Code of the State of California. Upon such termination, in addition to any
other rights and remedies to which Landlord may be entitled under applicable
law, Landlord shall be entitled to recover from Tenant: (i) the worth at the
time of award of the unpaid Rent and other amounts which had been earned at the
time of termination; (ii) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of award exceeds the
amount of such Rent loss that Tenant proves could be reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which, in the ordinary course of things, would be likely to result
therefrom. The "worth at the time of award" of the amounts referred to in
clauses (i) and (ii) shall be computed with interest at the lesser of twelve
percent (12%) per annum or the maximum rate then allowed by law. The "worth at
the time of award" of the amount referred to in clause (iii) shall be computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of the award plus one percent (1%).

               (4) Computation of Rent for Purposes of Default.  For purposes of
computing unpaid Rent which would have accrued and become payable under this
Lease pursuant to the provisions of Section 7.08(c), unpaid Rent shall consist
of the sum of:

                   (i)   the total Base Rent for the balance of the Term, plus

                   (ii)  a computation of Tenant's Proportionate Share of Basic
Operating Cost for the balance of the Term, the assumed amount for the
Computation Year of the default and each future Computation Year in the Term to
be equal to Tenant's Proportionate Share of Basic Operating Cost for the
Computation Year immediately prior to the year in which default occurs,
compounded at a per annum rate equal to the mean average rate of inflation for
the preceding five (5) calendar years as determined by the United States
Department of Labor, Bureau of Labor Statistics Consumer Price Index (All Urban
Consumers, all items (1982-84=100)) for the Metropolitan Area or Region in which
the Project is located.  If such Index is discontinued or revised, the average
rate of inflation shall be determined by reference to the index designated as
the successor or substitute index by the government of the United States.

               (5) Late Charge. If any payment required to be made by Tenant
under this Lease is not received by Landlord within five (5) days after the same
is due (or following written notice if required hereunder), Tenant shall pay to
Landlord an amount equal to five percent (5%) of the delinquency. The parties
agree that Landlord would incur costs not contemplated by this Lease by virtue
of such delinquencies, including without limitation administrative, collection,
processing and accounting expenses, the amount of which would be extremely
difficult to compute, and the amount stated herein represents a reasonable
estimate thereof. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's breach or default with respect to such
delinquency, or prevent Landlord from exercising any of Landlord's other rights
and remedies.

                                       40
<PAGE>

               (6) Interest on Past-Due Obligations. Except as expressly
otherwise provided in this Lease, any Rent due Landlord hereunder, other than
late charges, which is not received by Landlord on the date on which it was due,
shall bear interest from the day after it was due at the lesser of maximum rate
then allowed by law, or twelve percent (12%) per annum, in addition to the late
charge provided for in Section 7.08(e).

               (7) Landlord's Right to Perform. Notwithstanding anything to the
contrary set forth elsewhere in this Lease, in the event Tenant fails to perform
any affirmative duty or obligation of Tenant under this Lease, then within the
periods set forth in Section 7.08(a) hereof (and without notice in case of an
emergency) Landlord may (but shall not be obligated to) perform such duty or
obligation on Tenant's behalf, including, without limitation, the obtaining of
insurance policies or governmental licenses, permits or approvals.  Tenant shall
reimburse Landlord upon demand for the costs and expenses of any such
performance (including penalties, interest and attorneys' fees incurred in
connection therewith).  Such reasonable costs and expenses incurred by Landlord
shall be deemed Additional Rent hereunder.

               (8) Remedies Cumulative.  All rights, privileges and elections or
remedies of Landlord are cumulative and not alternative with all other rights
and remedies at law or in equity to the fullest extent permitted by law.

                                  Article 8.

                       Option to Renew, Option to Expand

     8.01.    Option to Renew.

     (a) Landlord hereby grants to Tenant one (1) option (the "Option") to
extend the term of this Lease for an additional period of five (5) years (the
"Option Term"), all on the following terms and conditions:

         (1)  The Option must be exercised, if at all, by written notice
irrevocably exercising the Option ("Option Notice") delivered by Tenant to
Landlord not later than nine (9) months prior to the Term Expiration Date.
Further, the Option shall not be deemed to be properly exercised if, as of the
date of the Option Notice or at the Term Expiration Date, (i) Tenant is in
default under this Lease after the delivery of any notice required hereunder and
passage of any applicable cure period, (ii) Tenant has assigned this Lease or
its interest therein (other than an assignment for which Landlord's consent is
not required), or (iii) Tenant, or Tenant's affiliate or subsidiary, is in
possession of less than fifty percent (50%) of the square footage of the Leased
Premises.  Provided Tenant has properly and timely exercised the Option, the
term of this Lease shall be extended for the period of the Option Term, and all
terms, covenants and conditions of this Lease shall remain unmodified and in
full force and effect, except that the Base Rent shall be modified as set forth
in subsection 8.01(a)(2) below.

         (2)  The Base Rent payable for the Option Term shall be the then-
current rental rate per rentable square foot (as further defined below, "FMRR")
being agreed to in new leases by the Landlord and other landlords of buildings
in the Emeryville, California area which are comparable in quality, location and
prestige to the Building ("Comparable Buildings") and tenants leasing space

                                       41
<PAGE>

in the Building or Comparable Buildings. As used herein, "FMRR" shall mean the
rental rate per rentable square foot for which Landlord and other landlords are
entering into new leases (excluding the value of improvements made at Tenant's
expense) within the time period of nine (9) to six (6) months prior to the Term
Expiration Date ("Market Determination Period"), with new tenants leasing from
Landlord and/or other landlords office space in the Building and/or Comparable
Buildings ("Comparative Transactions"). Landlord shall provide its determination
of the FMRR to Tenant within twenty (20) days after Landlord receives the Option
Notice. Tenant shall have fifteen (15) days ("Tenant's Review Period") after
receipt of Landlord's notice of the FMRR within which to accept such FMRR or to
reasonably object thereto in writing. In the event Tenant objects to the FMRR
submitted by Landlord, Landlord and Tenant shall attempt to agree upon such
FMRR. If Landlord and Tenant fail to reach agreement on such FMRR within fifteen
(15) days following Tenant's Review Period (the "Outside Agreement Date"), then
each party shall place in a separate sealed envelope its final proposal as to
FMRR and such determination shall be submitted to arbitration in accordance with
subparagraph 8.01(b) below.

     (b) Landlord and Tenant shall meet with each other within five (5) business
days of the Outside Agreement Date and exchange the sealed envelopes and then
open such envelopes in each other's presence.  If Landlord and Tenant do not
mutually agree upon the FMRR within one (1) business day of the exchange and
opening of envelopes, then, within ten (10) business days of the exchange and
opening of envelopes, Landlord and Tenant shall agree upon and jointly appoint
one arbitrator who shall be by profession be a real estate appraiser or broker
who shall have been active over the five (5) year period ending on the date of
such appointment in the leasing of comparable commercial properties in the
vicinity of the Building.  Neither Landlord nor Tenant shall consult with such
broker or appraiser as to his or her opinion as to FMRR prior to the
appointment.  The determination of the arbitrator shall be limited solely to the
issue of whether Landlord's or Tenant's submitted FMRR for the Premises is the
closer to the FMRR for the Leased Premises.  Such arbitrator may hold such
hearings and require such briefs as the arbitrator, in his or her sole
discretion, determines is necessary.  In addition, Landlord or Tenant may submit
to the arbitrator with a copy to the other party within five (5) business days
after the appointment of the arbitrator any data and additional information that
such party deems relevant to the determination by the arbitrator ("Data") and
the other party may submit a reply in writing within five (5) business days
after receipt of such Data.

         (1)  The arbitrator shall, within thirty (30) days of his or her
appointment, reach a decision as to whether the parties shall use Landlord's or
Tenant's submitted FMRR, and shall notify Landlord and Tenant of such
determination.

         (2)  The decision of the arbitrator shall be binding upon Landlord and
Tenant.

         (3)  If Landlord and Tenant fail to agree upon and appoint such
arbitrator, then the appointment of the arbitrator shall be made by the American
Arbitration Association.

         (4)  The cost of arbitration shall be paid by the party whose
submitted FMRR is not selected by the arbitrator.

                                       42
<PAGE>

         (5)  The arbitration proceeding and all evidence given or discovered
pursuant thereto shall be maintained in confidence by all parties.

     Notwithstanding anything to the contrary contained in this Section, if the
rent during any extended term is determined by arbitration and if Tenant does
not, in its sole discretion, approve the rental amount established by such
appraisal, Tenant may rescind its exercise of the Option by giving Landlord
written notice of such election to rescind within ten (10) days after receipt of
the arbitrator's decision.  If Tenant rescinds its exercise of the Option, then
(i) the Lease shall terminate, at Landlord's election, either on the date that
is two hundred seventy (270) days after Tenant's notice of rescission or on the
date the Lease would have otherwise terminated absent Tenant's exercise of the
Option; and (ii) Tenant shall pay all costs and expenses of the arbitration.

                                  Article 9.

                             Miscellaneous Matters

     9.01. Parking.

           (a) Landlord agrees to provide Tenant for use by the employees,
agents, customers and invitees of Tenant the number of parking spaces designated
on the Basic Lease Information sheet on an unreserved and unassigned basis on
those portions of the Project designated by Landlord for parking.  Such parking
spaces shall be free of charge during the Term and any extension thereof.  At
any time during the first year of following the Term Commencement Date, Tenant
may elect to lease, for a period from the date of such election to the end of
the initial Term, up to an additional forty-six (46) parking stalls at the rate
$55.00 per stall per month during the first year of the initial Term.  Tenant
may make multiple elections provided that all elections must occur during the
first year of the initial Term.  During subsequent years of the initial Term,
the parking rate for the Additional Spaces shall increase at the lesser of
market increases or three percent (3%) over the prior year.   The parking spaces
will not be separately identified and Landlord shall have no obligation to
monitor the use of the parking area; provided,  however, the entrance to the
Building garage shall be through a card-key system implemented by Landlord.  If
a parking density problem occurs during the Term, Landlord shall address the
problem, in its reasonable discretion, which solution may include initiating a
parking permit system or a reserved parking system and any costs associated
therewith (including, without limitation, costs of patrolling the Building
garage and/or parking area outside of the Building for compliance with the
parking system) shall constitute a Basic Operating Cost.  All parking shall be
subject to any and all rules and regulations adopted by Landlord in its
reasonable discretion from time to time.  Only automobiles no larger than full
size passenger automobiles or pick-up trucks or standard business use vehicles
(which do not require parking spaces larger than full size passenger
automobiles) may be parked in the Project parking area.  Tenant shall not permit
or allow any vehicles that belong to or are controlled by Tenant or Tenant's
employees, agents, customers or invitees to be loaded, unloaded or parked in
areas other then those designated by Landlord for such activities.  A failure by
Tenant or any of its employees, agents, customers or invitees to comply with the
foregoing provisions shall afford Landlord the right, but not the obligation,
without notice, in addition to any other rights and remedies available under
this Lease, to remove and to tow away the vehicles involved and to charge the
cost to Tenant, which cost shall be immediately due and payable upon demand by
Landlord.

                                       43
<PAGE>

           (b) Landlord reserves the right to charge a per-car parking fee
during the Term (in additional to any fees otherwise provided under this Lease)
if such parking fees are mandated or otherwise imposed by applicable law. Rates
to be charged by Landlord or its operator for such parking shall be the then-
prevailing market rate for parking in such area as established by Landlord or
its operator from time to time. If a parking fee is charged, Tenant's right to
use of the Building garage and/or a parking area shall be subject to timely
payment of the established parking fees.

     9.02. Brokers.  Landlord has been represented in this transaction by
Landlord's Broker. Tenant has been represented in this transaction by Tenant's
Broker.  Upon full execution of this Lease by both parties, Landlord shall pay
to (i) Landlord's Broker a fee for brokerage services rendered by it in this
transaction if provided for in a separate written agreement between Landlord and
Landlord's Broker, and (ii) Tenant's broker pursuant to Landlord's published
commission schedule or, in the event no such schedule exists, pursuant to a
separate agreement by and between Landlord and Tenant's broker.  Tenant
represents and warrants to Landlord that the brokers named in the Basic Lease
Information sheet are the only agents, brokers, finders or other similar parties
with whom Tenant has had any dealings in connection with the negotiation of this
Lease and the consummation of the transaction contemplated hereby.  Tenant
hereby agrees to indemnify, defend and hold Landlord free and harmless from and
against liability for compensation or charges which may be claimed by any other
agent, broker, finder or other similar party by reason of any dealings with or
actions of Tenant in connection with the negotiation of this Lease and the
consummation of this transaction, including any costs, expenses and attorneys'
fees incurred with respect thereto.

     9.03. No Waiver. No waiver by either party of the default or breach of any
term, covenant or condition of this Lease by the other shall be deemed a waiver
of any other term, covenant or condition hereof, or of any subsequent default or
breach by the other of the same or of any other term, covenant or condition
hereof. Landlord's consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of Landlord's consent to, or approval of, any
subsequent or similar act by Tenant, or be construed as the basis of an estoppel
to enforce the provision or provisions of this Lease requiring such consent.
Regardless of Landlord's knowledge of a default or breach at the time of
accepting Rent, the acceptance of Rent by Landlord shall not be a waiver of any
preceding default or breach by Tenant of any provision hereof, other than the
failure of Tenant to pay the particular Rent so accepted. Any payment given
Landlord by Tenant may be accepted by Landlord on account of monies or damages
due Landlord, notwithstanding any qualifying statements or conditions made by
Tenant in connection therewith, which statements and/or conditions shall be of
no force or effect whatsoever unless specifically agreed to in writing by
Landlord at or before the time of deposit of such payment.

     9.04. Recording.  Neither this Lease nor a memorandum thereof shall be
recorded without the prior written consent of Landlord, which consent may be
withheld in Landlord's sole discretion.

     9.05. Holding Over.   If Tenant holds over after expiration or
termination of this Lease, Tenant shall pay for each month of hold-over tenancy
one hundred fifty percent (150%) times the Base Rent which Tenant was obligated
to pay for the month immediately preceding the end of the Term for each month or
any part thereof of any such hold-over period, together with such other amounts
as may become due hereunder.  No holding over by Tenant after the Term shall
operate to extend the Term.  In the event of any unauthorized holding over,
Tenant shall indemnify, defend and

                                       44
<PAGE>

hold Landlord harmless from and against all claims, demands, liabilities,
losses, costs, expenses (including attorneys' fees), injury and damages incurred
by Landlord as a result of Tenant's delay in vacating the Leased Premises.

     9.06. Transfers by Landlord.  The term "Landlord" as used in this Lease
shall mean the owner(s) at the time in question of the fee title to the Leased
Premises or, if this is a sublease, of the Tenant's interest in the master
lease.  If Landlord transfers, in whole or in part, its rights and obligations
under this Lease or in the Project, upon its transferee's assumption of
Landlord's obligations hereunder and delivery to such transferee of any unused
Security Deposit then held by Landlord, no further liability or obligations
shall thereafter accrue against the transferring or assigning person as Landlord
hereunder.  Subject to the foregoing, the obligations and/or covenants in this
Lease to be performed by the Landlord shall be binding only upon the Landlord as
defined in this Section 9.06.

     9.07. Attorneys' Fees. In the event either party places the enforcement of
this Lease, or any part of it, or the collection of any Rent due, or to become
due, hereunder, or recovery of the possession of the Leased Premises, in the
hands of an attorney, or files suit upon the same, the prevailing party shall
recover its reasonable attorneys' fees, costs and expenses, including those
which may be incurred on appeal. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not suit is filed or any suit that may
be filed is pursued to decision or judgment. The term "prevailing party" shall
include, without limitation, a party who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other party of its claim or defense. The attorneys'
fee award shall not be computed in accordance with any court fee schedule, but
shall be such as to fully reimburse all attorneys' fees reasonably incurred.

     9.08. Termination; Merger.  No act or conduct of Landlord, including,
without limitation, the acceptance of keys to the Leased Premises, shall
constitute an acceptance of the surrender of the Leased Premises by Tenant
before the scheduled Term Expiration Date.  Only a written notice from Landlord
to Tenant shall constitute acceptance of the surrender of the Leased Premises
and accomplish a termination of this Lease.  Unless specifically stated
otherwise in writing by Landlord, the voluntary or other surrender of this Lease
by Tenant, the mutual termination or cancellation hereof, or a termination
hereof by Landlord for default by Tenant, shall automatically terminate any
sublease or lesser estate in the Leased Premises; provided, however, Landlord
shall, in the event of any such surrender, termination or cancellation, have the
option to continue any one or all of any existing subtenancies.  Landlord's
failure within thirty (30) days following any such event to make any written
election to the contrary by written notice to the holder of any such lesser
interest, shall constitute Landlord's election to have such event constitute the
termination of such interest.

     9.09. Amendments; Interpretation.  This Lease may not be altered,
changed or amended, except by an instrument in writing signed by the parties in
interest at the time of the modification. The captions of this Lease are for
convenience only and shall not be used to define or limit any of its provisions.

     9.10. Severability.  If any term or provision of this Lease, or the
application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease,

                                       45
<PAGE>

or the application of such provision to persons or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby,
and each provision of this Lease shall be valid and shall be enforceable to the
fullest extent permitted by law.

     9.11. Notices.  All notices, demands, consents and approvals which are
required or permitted by this Lease to be given by either party to the other
shall be in writing and shall be deemed to have been fully given by personal
delivery or by recognized overnight courier service or when deposited in the
United States mail, certified or registered, with postage prepaid, and addressed
to the party to be notified at the address for such party specified on the Basic
Lease Information sheet, or to such other place as the party to be notified may
from time to time designate by at least fifteen (15) days' notice to the
notifying party given in accordance with this Section 9.11, except that upon
Tenant's taking possession of the Leased Premises, the Leased Premises shall
constitute Tenant's address for notice purposes.   A copy of all notices given
to Landlord under this Lease shall be concurrently transmitted to such party or
parties at such addresses as Landlord may from time to time hereafter designate
by notice to Tenant.

     Any notice sent by registered or certified mail, return receipt requested,
shall be deemed given on the date of delivery shown on the receipt card, or if
no delivery date is shown, the postmark thereon.  Notices delivered by
recognized overnight courier shall be deemed given twenty-four (24) hours after
delivery of the same to the courier.  If notice is received on a Saturday,
Sunday or legal holiday, it shall be deemed received on the next business day.

     9.12. Force Majeure.  Any prevention, delay or stoppage of work to be
performed by Landlord or Tenant which is due to strikes, labor disputes,
inability to obtain labor, materials, equipment or reasonable substitutes
therefor, acts of God, governmental restrictions or regulations or controls,
judicial orders, enemy or hostile government actions, civil commotion, or other
causes beyond the reasonable control of the party obligated to perform
hereunder, shall excuse performance of the work by that party for a period equal
to the duration of that prevention, delay or stoppage. Nothing in this Section
9.12 shall excuse or delay Tenant's obligation to pay Rent or other charges due
under this Lease.

     9.13. Guarantor.  None.

     9.14. Successors and Assigns. This Lease shall be binding upon and inure to
the benefit of Landlord, its successors and assigns (subject to the provisions
hereof, including, without limitation, Section 5.15), and shall be binding upon
and inure to the benefit of Tenant, its successors, and to the extent assignment
or subletting, may be approved by Landlord hereunder, Tenant's assigns or
subtenants.

     9.15. Further Assurances. Landlord and Tenant each agree to promptly sign
all documents reasonably requested to give effect to the provisions of this
Lease.

     9.16. Incorporation of Prior Agreements. This Lease, including the exhibits
and addenda attached to it, contains all agreements of Landlord and Tenant with
respect to any matter referred to herein. No prior agreement or understanding
pertaining to such matters shall be effective.

                                       46
<PAGE>

     9.17. Applicable Law. This Lease shall be governed by, construed and
enforced in accordance with the laws of the State of California.

     9.18. Time of the Essence.  Time is of the essence of each and every
covenant of this Lease.  Each and every covenant, agreement or other provision
of this Lease on Tenant's part to be performed shall be deemed and construed as
a separate and independent covenant of Tenant, not dependent on any other
provision of this Lease or on any other covenant or agreement set forth herein.

     9.19. No Joint Venture.  This Lease shall not be deemed or construed to
create or establish any relationship of partnership or joint venture or similar
relationship or arrangement between Landlord and Tenant hereunder.

     9.20. Authority. If Tenant is a corporation, trust or general or limited
partnership, each individual executing this Lease on behalf of Tenant represents
and warrants that he or she is duly authorized to execute and deliver this Lease
on Tenant's behalf and that this Lease is binding upon Tenant in accordance with
its terms. If Tenant is a corporation, trust or partnership, Tenant shall,
within ten (10) business days after request by Landlord, deliver to Landlord
evidence satisfactory to Landlord of such authority.

     9.21. Declaration of Covenants, Conditions and Restrictions. Tenant
acknowledges that it has received and read any CC&Rs for the Project that have
been recorded as of the date hereof, and agrees to comply with and be bound by
all terms, conditions and provisions thereof.  Tenant further acknowledges and
agrees that a default by Tenant under the CC&Rs shall constitute a default
hereunder.  All obligations of Landlord hereunder shall be limited to the extent
performance of same is prohibited, restricted or limited under the CC&Rs.

     9.22. Offer.  Preparation of this Lease by Landlord or Landlord's agent
and submission of same to Tenant shall not be deemed an offer to lease to
Tenant.  This Lease is not intended to be binding and shall not be effective
until fully executed by both Landlord and Tenant.

     9.23. Building Access.  Tenant shall have access to the Leased Premises
twenty-four (24) hours per day, seven (7) days per week.  The Building shall be
open from 7:00 a.m. to 6:00 p.m. Monday through Friday, and from 8:00 a.m. to
1:00 p.m. Saturday.  Landlord shall provide a cardkey system for access to the
Building and the adjacent garage after such hours.  Landlord shall provide
security measures in and around the Building that will include, but may not be
limited to, security cameras and roving security patrols.

     9.24. Exhibits; Addenda. The following Exhibits and addenda are attached
to, incorporated in and made a part of this Lease: Exhibit A-1 Site Plan of
                                                   -----------
the Building; Exhibit A-2 Floor Plan of the Leased Premises;  Exhibit B
              -----------                                     ---------
Initial Improvement of the Leased Premises; Exhibit B-1 Preliminary Plans;
                                            -----------
Exhibit B-2 Warm Shell Specifications; Exhibit C Confirmation of Term of Lease;
-----------                            ---------
Exhibit D Confidentiality Agreement; Exhibit E Building Rules and Regulations;
---------                            ---------
and Exhibit F Estimated Budget.
    ---------

                                       47
<PAGE>

     9.25. Approvals. Unless otherwise specified in this Lease, whenever the
Lease requires an approval, consent, determination, selection or judgment by
either Landlord or Tenant, such approval, consent, determination, selection or
judgment and any conditions imposed thereby shall be reasonable and shall not be
unreasonably withheld or delayed and, in exercising any regret or remedy
hereunder, each party shall at all times act reasonably and in good faith.

     9.26. Depreciation.  For all tax purposes, Landlord shall have the right to
depreciate the cost of Landlord's Work and the Tenant Improvements (except for
the cost of Tenant Improvements in excess of Landlord's Contribution (which
Landlord's Contribution shall include the amount referenced in Paragraph 5(c) of
Exhibit B); and Tenant shall have the right to depreciate all Tenant Extra
Improvements and all alterations to the Leased Premises paid for by Tenant.

     9.27. Sublease to Reel.com. Landlord shall have the option (the "Option")
to require that Tenant sublease to Reel.com up to 5,000 rentable square feet of
the Leased Premises on the West-Hi-Bay of the first (1/st/) floor (the "Sublease
Space") for a period commencing on the Term Commencement Date and expiring one
year thereafter. The terms of such sublease (including, without limitation, the
exact location of the Sublease Space) shall be as reasonably acceptable to
Tenant except that (i) rent shall not exceed the Rent under the Lease with
respect to the Sublease Space after subtracting Tenant's actual costs to
sublease the Sublease Space (which shall not include any brokerage commissions
and costs associated with the Tenant Improvements), (ii) Reel.com shall
reimburse Tenant for Tenant's reasonable attorneys' fees in connection with the
Sublease, and (iii) Reel.com shall be responsible, at its sole cost, to demise
the Sublease Space from the Leased Premises as may be reasonably required by
Tenant. Landlord's right to exercise its right under this Section 9.27 shall
expire fifteen (15) days from the date of full execution of this Lease and shall
be exercised by Landlord's giving written notice to Tenant prior to the end of
such period. Notwithstanding the foregoing, Tenant shall not be required to
sublease the Sublease Space to Reel.com in the event the rent payable under such
sublease by Reel.com is less than the Rent hereunder or Tenant is required to
incur costs in subleasing the Sublease Space which will not be reimbursed by
Reel.com or Landlord.

             [Balance of page has been intentionally left blank.]

                                       48
<PAGE>

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

                            "LANDLORD":

                            BEP-EMERYVILLE, L.P.,
                            a Delaware limited partnership

                            By:  EPI Investors 103 LLC.,
                                 a California limited liability company
                                 Its:  General Partner

                            By:  Ellis Partners, Inc.,
                                 a California corporation
                                 Its: Managing Member

                              By:    ___________________________________
                              Name:  ___________________________________
                              Title:
                                 _______________________________________

                          "TENANT":

                            EVOLVE SOFTWARE, INC.,
                            a Delaware corporation

                            By:    _____________________________________
                            Name:  _____________________________________
                            Title:______________________________________

                                       49
<PAGE>

                                  EXHIBIT A-1

                                   SITE PLAN
                                    OF THE
                                   BUILDING

                                       1
<PAGE>

                                  EXHIBIT A-2

                                  FLOOR PLAN
                                    OF THE
                                LEASED PREMISES

                                       2
<PAGE>

                                   EXHIBIT B

                  INITIAL IMPROVEMENT OF THE LEASED PREMISES

     1.   Tenant Improvements.  Landlord shall construct and install the Tenant
          -------------------
Improvements in the Leased Premises, substantially in accordance with plans,
working drawings and specifications ("Tenant's Plans") prepared by Landlord's
architect, Kava Massih Architects, Inc., in consultation with Tenant.  Tenant's
Plans shall include design build mechanical, electrical and plumbing plans and
specifications.  The costs of preparing Tenant's Plans and performing the Tenant
Improvements shall be allocated between, and paid by, Landlord and Tenant as set
forth in this Exhibit B. Landlord shall use its best efforts to minimize the
              ---------
cost of preparing the Tenant's Plans and performing the Tenant Improvements.

     2.   Tenant's Plans.
          --------------

          As soon as reasonably possible Tenant and Landlord shall approve
Tenant's Plans. Landlord shall cause Landlord's architect to cause Tenant's
Plan's (i) to comply with all applicable codes, laws, ordinances, rules and
regulations, (ii) not adversely affect the Building shell or core or any
systems, components or elements of the Building, (iii) be in a form sufficient
to secure the approval of all government authorities with jurisdiction over the
Building, and (iv) be otherwise satisfactory to Landlord in Landlord's
reasonable discretion.  Tenant's Plans shall be complete plans, working drawings
and specifications for the layout, improvement and finish of the Leased Premises
consistent with the design and construction of the Building, including
mechanical and electrical drawings and decorating plans, showing as many of the
following as possible:

          (a)  Location and type of all partitions;

          (b)  Location and type of all doors, with hardware and keying
     schedule;

          (c)  Ceiling plans, including light fixtures;

          (d)  Location of telephone equipment room, with all special electrical
     and cooling requirements;

          (e)  Location and type of all electrical outlets, switches, telephone
     outlets, and lights;

          (f)  Location of all sprinklers;

          (g)  Location and type of all equipment requiring special electrical
     requirements;

                                       1
<PAGE>

          (h)  Location, weight per square foot and description of any heavy
     equipment or filing system exceeding fifty (50) pounds per square foot live
     and dead load;

          (i)  Requirements for special air conditioning or ventilation;

          (j)  Type and color of floor covering;

          (k)  Location, type and color of wall covering;

          (l)  Location, type and color of paint or finishes;

          (m)  Location and type of plumbing;

          (n)  Location and type of kitchen equipment;

          (o)  Indicate critical dimensions necessary for construction;

          (p)  Details showing all millwork with verified dimensions and
     dimensions of all equipment to be built in, corridor entrances, bracing or
     support of special walls or glass partitions, and any other items or
     information requested by Landlord; and

          (q)  Location of all cabling.

     3.   Landlord shall cause to be prepared, as quickly as possible, the
Tenant's Plans, as well as an estimate of the total cost of the Tenant
Improvements ("Cost Estimate"), all of which shall conform to or represent
logical evolutions of or developments from the preliminary plans attached hereto
as Exhibit B-1 (the "Initial Preliminary Plans").  The parties intend to replace
   -----------
the Initial Preliminary Plans with a final space plan within sixty (60) days of
execution of this Lease (the "Final Preliminary Plans"); provided, however, that
the failure of the parties to replace the Initial Preliminary Plans with the
Final Preliminary Plans shall not affect the enforceability of this Lease. The
Tenant's Plans and Cost Estimate shall be delivered to Tenant immediately upon
completion. Within three (3) business days after receipt thereof, at its
election (a) Tenant may approve the Tenant's Plans and Cost Estimate, or (b)
Tenant may deliver to Landlord the specific written changes to such plans that
are necessary, in Tenant's opinion, to conform such plans to the Final
Preliminary Plans or to reduce costs.  If Tenant desires changes, Landlord shall
not unreasonably withhold its approval of such changes and the parties shall
confer and negotiate in good faith to reach agreement on modifications to the
Tenant's Plans and the Cost Estimate as a consequence of such change.  As soon
as approved by Landlord and Tenant, Landlord shall submit the Tenant's Plans to
all appropriate governmental agencies and thereafter the Landlord shall use its
best efforts to obtain required governmental approvals as soon as practicable.

     4.   Construction.
          ------------

          (a)  Landlord, at its sole cost and expense and with no deduction from
Landlord's Contribution (as defined below), shall provide the "warm shell" of
the Leased Premises as further shown on Exhibit B-2 (the "Landlord's Work"),
                                        -----------
which shall include the following: (i) windows, side

                                       2
<PAGE>

walls and an entry door; (ii) the restroom core; (iii) HVAC on the roof, but not
distributed; (iv) insulation; (v) line for plumbing, but not distributed; (vi)
main sprinkler lines, but not distributed; and (vii) Common Areas servicing the
Leased Premises.

          (b)  Landlord shall complete the Landlord's Work and the Tenant
Improvements in the Leased Premises (including all Tenant Improvements relating
to the Sublease Space (as such term is defined in Section 9.27 of the Lease))
substantially in accordance with Tenant's Plans and in a good and workmanlike
manner and in compliance with all applicable codes, laws, ordinances, rules and
regulations.  Landlord shall be entitled to charge a construction supervision
fee equal to the lesser of (i) three and one-half percent (3.5%) of the total
costs of the Tenant Improvements, or (ii) $1.00 per square foot of the Rentable
Area of the Leased Premises.  Such administration fee shall be deducted from
Landlord's Contribution. Landlord shall pay Landlord's Contribution directly to
the Contractor in installments as the Tenant Improvements are constructed, upon
Landlord' receipt of a written request for payment accompanied by written
invoices and other written evidence reasonably satisfactory to Landlord showing
the costs incurred, until Landlord's Contribution is exhausted.  Notwithstanding
the foregoing, Landlord's payment with respect to any invoice submitted by the
Contractor shall not exceed a fixed percentage of the amount of such invoice,
such fixed percentage to be equal to the ratio of Landlord's Contribution to the
contract price for the Tenant Improvements.  Within ten (10) days of Tenant's
receipt from Landlord of a copy of a written invoice showing Tenant's share of
such invoice (i.e. the total amount of such invoice less Landlord's share as
determined by the preceding sentence), Tenant shall pay to Landlord the balance
of such invoice and Landlord shall pay to the Contractor the full amount of such
invoice.  Landlord shall have no liability to Tenant if the Leased Premises are
not suitable for Tenant's occupancy so long as the Leased Premises are
constructed in accordance with Tenant's Plans.  Landlord represents and warrants
that the entire Landlord Contribution shall be available to Tenant for its
intended use and that no portion of the Landlord Contribution has been
previously committed by Landlord for items already constructed or currently
being constructed except for the following: (i) sprinkler distribution laterals
and heads that have been installed, and (ii) telecom conduit and cable that has
been extended from the north electrical distribution room to the south
electrical distribution room.

          (c)  Landlord shall enter into a construction contract (the
"Construction Contract") for the Tenant's Improvements with a general contractor
(the "Contractor") selected on a competitive bid basis from the following group
of general contractors: (i) Hillhouse Construction, (ii) DPR, (iii) Pankow
Construction, and (iv) at Tenant's option, a general contractor proposed by
Tenant subject to Landlord's reasonable approval.  The Construction Contract
shall be written on a "guaranteed maximum price" basis (the "Guaranteed Maximum
Price") and will be subject to Tenant's prior written approval, which will not
be unreasonably withheld.  The Construction Contract shall require Contractor to
seek competitive bids from subcontractors in each of the major trades, with a
minimum of three bids where possible.  Pricing below the guaranteed maximum
amount shall be based upon the actual hard costs of construction (calculated on
an open book basis) with a mark-up for the Contractor's general conditions,
overhead and profit not to exceed the lesser of the mark-up charged for other
tenant improvements at the Project or a commercially reasonable mark-up.

          (d) Notwithstanding anything to the contrary in the Lease, Landlord
shall solely be responsible for, the cost of the Tenant Improvements shall not
include and the Landlord's Contribution shall not be used for the following: (i)
costs for improvements which are not shown on

                                       3
<PAGE>

or described in the final Tenant's Plans or the general construction contract
documents relating to the Construction Contract unless otherwise approved by
Tenant; (ii) costs incurred to remove Hazardous Materials from the Leased
Premises or the surrounding area; (iii) attorneys' fees incurred in connection
with negotiation of construction contracts including the Construction Contract;
(iv) interest and other costs of financing construction costs not caused by
Tenant's failure to make any payments required under Paragraphs 4 or 5 of this
Exhibit B; (v) costs incurred as a consequence of construction defects during
the course of construction of the Tenant Improvements (provided, however, that
this clause (v) shall not expand the scope of any warranty set forth in this
Lease); (vi) costs recovered by Landlord on account of warranties and insurance
(and Landlord hereby agrees to act in a commercially reasonable manner to
exercise all rights it has to recover costs under such warranties and
insurance); (vii) restoration costs as a consequence of casualties where the
restoration costs are in excess of the sum of insurance proceeds plus any
applicable deductibles (with such deductibles not to exceed $10,000.00) under
the applicable insurance policies; (viii) penalties and late charges
attributable to Landlord's failure to pay construction costs unless caused by
Tenant's failure to make any payments required under Paragraphs 4 or 5 of this
Exhibit B; (ix) costs to bring any item which is part of the "warm shell" set
forth on Exhibit B-2 into compliance with applicable laws and restrictions,
including, without limitation, the Americans with Disabilities Act and
environmental laws; (x) wages, labor and overhead for overtime and premium time
unless otherwise agreed by the parties; (xi) offsite management, supervision
fees or other general overhead costs incurred by Landlord other than the fee set
forth in Paragraph 4(b) of this Exhibit B; and (xii) costs exceeding those
authorized pursuant to the terms of the Construction Contract.

     5.   Landlord's and Tenant's Contributions.
          -------------------------------------

          (a)  Landlord shall pay for Landlord's Work.

          (b)  As Landlord's contribution for the costs of Tenant Improvements,
Landlord shall give Tenant an allowance in the maximum amount of $25.00 per
square foot of Rentable Area, which equals $1,281,525.00 based upon 51,261
rentable square feet ("Landlord's Contribution"). Landlord's Contribution may be
used only for direct hard and soft costs, including construction costs,
architect fees, and consultant fees; provided, however, that, in the event that
a portion of Landlord's Contribution remains after payment in full for the
Tenant Improvements, such portion shall be a credit against Base Rent.  Any
costs of preparing Tenant's Plans and constructing the Tenant Improvements in
excess of Landlord's Contribution shall be paid by Tenant and shall constitute
Tenant's Extra Improvements.

          (c) In the event that the actual cost of the Tenant Improvements
exceeds $1,281,525.00, Landlord shall make available up to an additional
$256,305.00 for the Tenant Improvements.  Tenant may pay such actual costs in
cash or may elect to have any portion of such amount amortized over the initial
lease Term and paid monthly with Base Rent along with interest calculated at the
lesser of the maximum rate allowed by law or 11.5%.

     6.   Changes.  Except for minor and immaterial changes, if Tenant requests
          -------
any change in Tenant's Plans after final approval thereof by Landlord and
Tenant, Tenant shall request such change in a written notice to Landlord.  Each
such request shall be accompanied by proper plans and specifications prepared by
Tenant, at Tenant's expense, necessary to show and explain such change

                                       4
<PAGE>

from the previously approved Tenant's Plans. All changes in Tenant's Plans
(except for minor and immaterial changes) shall be subject to the prior written
approval of Landlord which shall be given within five (5) business days (which
shall not be unreasonably withheld).

     7.   Other Work by Tenant.  All work not within the scope of the normal
          --------------------
construction trades employed on the Building, such as the furnishing and
installing of furniture, telephone equipment, office equipment and wiring, shall
be furnished and installed by Tenant at Tenant's expense.

     8.   Requirements for Work Performed by Tenant.  All work performed at the
          -----------------------------------------
Building or in the Project by Tenant or Tenant's contractor or subcontractors
shall be subject to the following additional requirements:

          a.  Such work shall not proceed until Landlord has approved in
     writing:  (i) Tenant's contractor, (ii) the amount and coverage of public
     liability and property damage insurance, with Landlord named as an
     additional insured, carried by Tenant's contractor, (iii) complete and
     detailed plans and specifications for such work, and (iv) a schedule for
     the work.

          b.  All work shall be done in conformity with a valid permit when
     required, a copy of which shall be furnished to Landlord before such work
     is commenced.  In any case, all such work shall be performed in accordance
     with all applicable laws.  Notwithstanding any failure by Landlord to
     object to any such work, Landlord shall have no responsibility for Tenant's
     failure to comply with applicable laws.

          c.  Tenant or Tenant's contractor shall arrange for necessary utility,
     hoisting and elevator service, on a nonexclusive basis, with Landlord.
     Landlord shall have the right to require any necessary movement of
     materials by the elevator to be done after regular working hours.

          d.  Tenant shall be responsible for cleaning the Leased Premises, the
     Building and the Project and removing all debris in connection with the
     Tenant Improvements and its other work.  All completed work shall be
     subject to inspection and acceptance by Landlord. Tenant shall reimburse
     Landlord for the cost of third party supervision of construction of the
     Tenant Improvements (which may be deducted by Landlord from Landlord's
     Contribution) upon demand and for all extra expense incurred by Landlord by
     reason of faulty work done by Tenant or Tenant's contractor or by reason of
     inadequate cleanup by Tenant or Tenant's contractor.  Landlord will provide
     Tenant with copies of third party consultant invoices within five (5)
     business days of Tenant's request for such invoices.

          e. Tenant shall be responsible for the cost of separately metering
     electrical utilities to the Leased Premises (or such cost may be paid and
     deducted from Landlord's Contribution.

     9.   Tenant Delay.  If the completion of the Tenant Improvements is delayed
          ------------
(i) at the request of Tenant, (ii) by Tenant's failure to comply with the
foregoing provisions (including failure to pay any sums payable by Tenant within
the time periods specified herein), (iii) by changes in the Tenant's Plans
ordered by Tenant after such Tenant's Plans were already approved by Landlord
and

                                       5
<PAGE>

Tenant or by extra work ordered by Tenant, (iv) because Tenant chooses to have
additional work performed by Landlord, or (v) because of any other act or
omission of Tenant not within Tenant's specific rights under this Lease
(collectively, "Tenant Delay"), then Tenant shall be responsible for all costs
and any expenses occasioned by such Tenant Delay including, without limitation,
any costs and expenses attributable to increases in labor or materials (but only
where such increased costs exceed Landlord's Contribution under paragraph 5(b));
and, if such delay actually delays the Term Commencement Date, then Tenant shall
pay Lessor the Base Rent for the entire period of such delay.

     10.  Binding Arbitration.  Any dispute ("Dispute") between the parties with
          -------------------
respect to the Tenant's Plans and/or the Construction Contract shall be resolved
in accordance with the following procedures.   Either party may commence
arbitration with respect to a Dispute by giving notice to the other party
("Arbitration Notice").  Within ten (10) days of the Arbitration Notice,
Landlord and Tenant shall jointly select an arbitrator, or if they are unable to
reach agreement on the arbitrator, in accordance with the then current
arbitration rules and procedures (the "Rules") of JAMS-Endispute ("JAMS") from a
list of qualified people maintained by JAMS.  Neither Landlord nor Tenant shall
consult with such arbitrator as to his or her opinion as to the Dispute prior to
the appointment.  The determination of the arbitrator shall be limited solely to
the Dispute.  The arbitration shall take place in San Francisco, California and
all expedited procedures prescribed by the Rules shall apply.  Such arbitrator
may hold hearings and require such briefs as the arbitrator, in his or her sole
discretion, determines is necessary.  In addition, Landlord or Tenant may submit
to the arbitrator, with a copy to the other party, within five (5) business days
after the appointment of the arbitrator any data and additional information that
such party deems relevant to the determination by the arbitrator and the other
party may submit a reply in writing within five (5) business days after receipt
of such data and additional information.  The arbitrator shall conduct such
evidentiary hearings as the arbitrator deems necessary or appropriate.

          (a)  The arbitrator shall, within twenty-one (21) days of his or her
appointment, reach a decision as to the Dispute, and shall notify Landlord and
Tenant of such determination.

          (b)  The decision of the arbitrator shall be binding upon Landlord and
Tenant.

          (c)  If Landlord and Tenant fail to agree upon other matters relating
to the arbitration, then the Rules shall govern such arbitration.

          (d)  The cost of the arbitration shall be paid by the substantially
unsuccessful party.

          (e)  The arbitration proceeding and all evidence given or discovered
pursuant thereto shall be maintained in confidence by all parties.

          (f)  Judgment upon the award rendered by the arbitrator may be entered
by either party in any court having jurisdiction, or application may be made to
such court for a judicial recognition of the award or an order of enforcement
thereof, as the case may be.

                                       6
<PAGE>

                                   EXHIBIT C

                         CONFIRMATION OF TERM OF LEASE

     This Confirmation of Term of Lease is made by and between BEP-EMERYVILLE,
L.P., a Delaware limited partnership, as Landlord, and
___________________________________________________________________________, a
_____________________________________________________________, as Tenant, who
agree as follows:

     1.   Landlord and Tenant entered into a Lease dated ____________________,
19_____ (the "Lease"), in which Landlord leased to Tenant and Tenant leased from
Landlord the Leased Premises described in the Basic Lease Information sheet of
the Lease (the "Leased Premises").

     2.   Pursuant to Section 3.01 of the Lease, Landlord and Tenant agree to
confirm the commencement date and expiration date of the Term of the Lease as
follows:

          a. _________________________, 19_____, is the Term Commencement
             Date;

          b. _________________________, 19_____, is the Term Expiration Date;

          c. _________________________, 19_____, is the commencement date of
             Rent under the Lease.

     3.   Tenant hereby confirms that the Lease is in full force and effect and:

          a. It has accepted possession of the Leased Premises as provided in
             the Lease;

          b. The improvements and space required to be furnished by Landlord
             under the Lease have been furnished;

          c. Landlord has fulfilled all its duties of an inducement nature;

          d. The Lease has not been modified, altered or amended, except as
             follows: ________________________________________________________
             _____________; and

          e. There are no setoffs or credits against Rent and no security
             deposit has been paid except as expressly provided by the Lease.

                                       1
<PAGE>

     4.   The provisions of this Confirmation of Term of Lease shall inure to
the benefit of, or bind, as the case may require, the parties and their
respective successors, subject to the restrictions on assignment and subleasing
contained in the Lease.

     DATED:  _________________________, 19_____

<TABLE>
<CAPTION>
"LANDLORD":                                                        "TENANT":
<S>                                                               <C>
BEP-EMERYVILLE, L.P.,                                              EVOLVE SOFTWARE, INC.,
a Delaware limited partnership                                     a Delaware corporation

By: EPI Investors 103 LLC,                                         By:  ___________________________________________
      a California limited liability company                       Name:     ______________________________________
      Its:  General Partner                                        Title:    ______________________________________

By: Ellis Partners, Inc.,
      a California corporation
      Its: Managing Member

By:  __________________________________________
Name:     _____________________________________
Title:    _____________________________________

By:  __________________________________________
Name:     _____________________________________
Title:    _____________________________________
</TABLE>

                                2
<PAGE>

                                   EXHIBIT D

                           CONFIDENTIALITY AGREEMENT

                                       2
<PAGE>

                                   EXHIBIT E

                        BUILDING RULES AND REGULATIONS

     1.   The sidewalks, doorways, halls, stairways, vestibules and other
similar areas shall not be obstructed by Tenant or used by it for any purpose
other than ingress to and egress from the Leased Premises, and for going from
one part of the Building to another part.  Corridor doors, when not in use,
shall be kept closed.  Before leaving the Building, Tenant shall make
commercially reasonable efforts to ensure that all doors to the Leased Premises
are securely locked and all water faucets and electricity are shut off.

     2.   Plumbing fixtures shall be used only for their designated purpose, and
no foreign substances of any kind shall be deposited therein.  Damage to any
such fixtures resulting from misuse by Tenant or any employee or invitee of
Tenant shall be repaired at the expense of Tenant.

     3.   Nails, screws and other attachments to the Building require prior
written consent from Landlord, except for the routine hanging of pictures and
diplomas or certifications.  Tenant shall not mar or deface the Leased Premises
in any way.  Tenant shall not place anything on or near the glass of any window,
door or wall which may appear unsightly from outside the Leased Premises.

     4.   All contractors and technicians rendering any installation service to
Tenant shall be subject to Landlord's approval and supervision prior to
performing services.  This applies to all work performed in the Building,
including, but not limited to, installation of telephones, telegraph equipment,
wiring of any kind, and electrical devices, as well as all installations
affecting floors, walls, woodwork, windows, ceilings and any other physical
portion of the Building.

     5.   Movement in or out of the Building of furniture, office equipment,
safes or other bulky material which requires the use of elevators, stairways, or
the Building entrance and lobby shall be restricted to hours established by
Landlord.  All such movement shall be under Landlord's supervision, and the use
of an elevator for such movements shall be restricted to the Building's freight
elevator.  Arrangements shall be made at least 24 hours in advance with Landlord
regarding the time, method, and routing of such movements.  Tenant shall pay for
the services of the employees of the elevator service company employed when
safes and other heavy articles are moved into or from the Building, and Tenant
shall assume all risks of damage and pay the cost of repairing or providing
compensation for damage to the Building, to articles moved and injury to persons
or property resulting from such moves.  Landlord shall not be liable for any
acts or damages resulting from any such activity.

     6.   Landlord shall have the right to limit the weight and size of, and to
designate the location of, all safes and other heavy property brought into the
Building.

     7.   Tenant shall cooperate with Landlord in maintaining the Leased
Premises.  Tenant shall not employ any person for the purpose of cleaning the
Leased Premises other than the Building's cleaning and maintenance personnel.
Window, carpet and wall cleaning shall be done only by

                                       1
<PAGE>

Landlord's agents at such times and during such hours as Landlord shall elect
but in no event less than once per year.  Janitorial services will not be
furnished on nights when rooms are locked and occupied after 7:00 P.M.

     8.   Deliveries of water, soft drinks, newspapers or other such items to
the Leased Premises shall be restricted to hours established by Landlord and
made by use of the freight elevator if Landlord so directs.

     9.   Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds, fish or animals of any kind shall be brought into
or kept in, on or about the Leased Premises, with the exception of guide dogs
where necessary.

     10.  No cooking shall be done in the Leased Premises except in connection
with a convenience lunch room for the sole use of employees and guests (on a
non-commercial basis) in a manner which complies with all of the provisions of
the Lease and which does not produce fumes or odors.

     11.  Food, soft drink or other vending machines shall not be placed within
the Leased Premises without Landlord's prior written consent.

     12.  Tenant shall not install or operate on the Leased Premises any
electric heater, stove or similar equipment without Landlord's prior written
consent.  Tenant shall not use or keep on the Leased Premises any kerosene,
gasoline, or inflammable or combustible fluid or material other than limited
quantities reasonably necessary for the operation and maintenance of office
equipment utilized at the Leased Premises.  No explosives shall be brought onto
the Project at any time.

     13.  Tenant shall not waste electricity, water or air conditioning and
agrees to reasonably cooperate with Landlord to assure the effective operation
of the Building's heating and air conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice.  Tenant shall not tamper with or attempt to adjust temperature control
thermostats in the Leased Premises; Landlord shall make reasonable adjustments
in thermostats upon request from Tenant.

     14.  The Building air conditioning system is designed for operation only
with all outside Building windows closed; accordingly, Tenant shall not open or
allow any outside window to be opened at any time.

     15.  Tenant, its employees, agents and invitees shall each comply with all
requirements necessary for the security of the Leased Premises, including, if
implemented by Landlord, the use of service passes issued by Landlord for after-
hours movement of office equipment/packages, and the signing of a security
register in the Building lobby after hours.  Landlord reserves the right to
refuse entry to the Building after normal business hours to Tenant, its
employees, agents or invitees, or any other person without satisfactory
identification showing his or her right of access to the Building at such time.
Landlord shall not be liable for any damages resulting from any error in regard
to any such identification or from such admission to or exclusion from the
Building. Landlord shall not be liable to Tenant for losses due to theft or
burglary, or for damage by

                                       2
<PAGE>

unauthorized persons in, on or about the Project, and Tenant assumes full
responsibility for protecting the Leased Premises from theft, robbery and
pilferage, which includes keeping doors locked and other means of entry closed.

     16.  Landlord will furnish Tenant with one hundred (100) initial keys for
entrance doors into the Leased Premises, and may charge Tenant for additional
keys thereafter.  All such keys shall remain the property of Landlord.  No
additional locks are allowed on any door of the Leased Premises without
Landlord's prior written consent and Tenant shall not make any duplicate keys.
Upon termination of this Lease, Tenant shall surrender to Landlord all keys to
the Leased Premises, and give to Landlord the combination of all locks for safes
and vault doors, if any, in the Leased Premises.

     17.  Tenant shall not bring into (or permit to be brought into) the
Building any bicycle or other type of vehicle.

     18.  Landlord retains the right at any time, without liability to Tenant,
to change the name and street address of the Building, except as otherwise
expressly provided in the Lease with respect to signage; provided, however, that
after an initial such change, Landlord shall reimburse Tenant its actual
reasonable costs thereof.

     19.  Canvassing, peddling, soliciting, and distribution of handbills in or
at the Project are prohibited and Tenant will cooperate to prevent these
activities.

     20.  The Building hours of operation are 7:00 A.M.  to 6:00 P.M., Monday
through Friday, excluding holidays.  Landlord reserves the right to close and
keep locked all entrance and exit doors of the Building on Saturdays, Sundays
and legal holidays, and between the hours of 6:00 P.M. of any day and 7:00 A.M.
of the following day, and during such other hours as Landlord may deem advisable
for the protection of the Building and the tenants thereof.  Card key access to
the Building will be provided to Tenant during such closed hours.

     21.  The requirements of Tenant will be attended to only upon application
to the Project manager.  Employees will not perform any work or do anything
outside of their regular duties unless under specific instruction from the
Project manager.

     22.  Tenant shall cooperate fully with the life safety program of the
Building as established and administered by Landlord.  This shall include
participation by Tenant and its employees in exit drills, fire inspections, life
safety orientations and other programs relating to fire and life safety that may
be established by Landlord.

     23.  No smoking shall be permitted in the Building.

     24.  Subject to the provisions of this Lease, Landlord reserves the right
to rescind any of these rules and regulations and to make future reasonable
rules and regulations required for the safety, protection and maintenance of the
Project, the operation and preservation of the good order thereof, and the
protection and comfort of the tenants and their employees and visitors.  Such
rules and regulations, when made and written notice thereof given to Tenant,
shall be binding as if

                                       3
<PAGE>

originally included herein. Landlord shall not be responsible to Tenant for the
non-observance or violation of these rules and regulations by any other tenant
of the Building. Landlord reserves the right to exclude or expel from the
Project any person who, in Landlord's judgment, is under the influence of liquor
or drugs, or who shall in any manner do any act in violation of any of these
rules and regulations.

                                       4
<PAGE>

                                   EXHIBIT F

                               ESTIMATED BUDGET

                                       1<PAGE>

                                                                    EXHIBIT 10.5

                             EVOLVE SOFTWARE, INC.

                            1995 STOCK OPTION PLAN

                           (as adopted March 2, 1995
                         and as amended July 16, 1996,
                    January 15, 1999 and November 18, 1999)

     1.  Purposes of the Plan.  The purposes of this Stock Option Plan are
         --------------------
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business.  Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.

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

          (a) "Administrator" means the Board or any of its Committees appointed
               -------------
pursuant to Section 4 of the Plan.

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

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

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

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

          (f) "Company" means Evolve Software, Inc., a Delaware corporation.
               -------

          (g) "Consultant" means any person who is engaged by the Company or any
               ----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.  If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.

          (h) "Continuous Status as an Employee or Consultant" means that the
               ----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated.  Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any
<PAGE>

Subsidiary, or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed 90 days, unless reemployment upon expiration
of such leave is guaranteed by statute or contract, including Company policies.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option.

          (i) "Employee" means any person, including Officers and directors,
               --------
employed by the Company or any Parent or Subsidiary of the Company.  The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

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

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

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

              (ii)  If the Common Stock is quoted on the NASDAQ System (but not
on the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;

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

          (l) "Incentive Stock Option" means an Option intended to qualify as an
               ----------------------
incentive stock option within the meaning of Section 422 of the Code.

          (m) "Nonstatutory Stock Option" means an Option not intended to
               -------------------------
qualify as an Incentive Stock Option.

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

                                       2
<PAGE>

          (o) "Option" means a stock option granted pursuant to the Plan.
               ------

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

          (q) "Optionee" means an Employee or Consultant who receives an Option.
               --------

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

          (s) "Plan" means this 1995 Stock Option Plan.
               ----

          (t) "Share" means a share of the Common Stock, as adjusted in
               -----
accordance with Section 11 below.

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

     3.  Stock Subject to the Plan.  Subject to the provisions of Section 11 of
         -------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 20,000,000 Shares.  The Shares may be authorized, but
unissued, or reacquired Common Stock.

          If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
                                                               --------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan.  For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.

     4.  Administration of the Plan.
         --------------------------

          (a) Administrator.  The Plan shall be administered by the Board or a
              -------------
Committee appointed by the Board, which Committee shall be constituted to comply
with applicable laws.

          (b) Powers of the Administrator.  Subject to the provisions of the
              ---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:

                                       3
<PAGE>

               (i)   to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;

               (ii)  to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;

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

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

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

               (vi)   to determine the terms and conditions of any award granted
hereunder;

               (vii)  to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;

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

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

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

     5.  Eligibility.
         -----------

          (a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.

          (b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option.  However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:

              (i) of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, any Parent or Subsidiary, which become exercisable for
the first time during any

                                       4
<PAGE>

calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

          (c) Neither the Plan nor any Option shall confer upon any Optionee any
right with respect to continuation of employment or consulting relationship with
the Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.

     6.  Term of Plan.  The Plan shall become effective upon the earlier to
         ------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan.  It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.

     7.  Term of Option.  The term of each Option shall be the term stated in
         --------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof.  However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.

     8.  Option Exercise Price and Consideration.
         ---------------------------------------

          (a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:

               (i)   In the case of an Incentive Stock Option

                     (A)  granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.

                     (B)  granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

               (ii)  In the case of a Nonstatutory Stock Option

                                       5
<PAGE>

                     (A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.

                     (B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.

          (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment.  In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

     9.  Exercise of Option.
         ------------------

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option
              -----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan, but in no case at a rate of less than 20% per year over five (5) years
from the date the Option is granted.

          An Option may not be exercised for a fraction of a Share.

          An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company.  Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option.  The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option.  No
adjustment will be

                                       6
<PAGE>

made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.

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

          (b)  Termination of Employment or Consulting Relationship.  In the
               ----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the ninety-
first (91st) day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that Optionee was entitled
to exercise it at the date of such termination.  To the extent that Optionee was
not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.

          (c) Disability of Optionee.  In the event of termination of an
              ----------------------
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the day three months and
one day following such termination.  To the extent that Optionee is not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

          (d) Death of Optionee.  In the event of the death of an Optionee, the
              -----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death.  If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan.  If, after death,
the Optionee's estate or a person who acquired the right to exercise the

                                       7
<PAGE>

Option by bequest or inheritance does not exercise the Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

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

     10.  Non-Transferability of Options.  Options may not be sold, pledged,
          ------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

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

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

          (b) Dissolution or Liquidation.  In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction.  The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable.  In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated.  To the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed action.

                                       8
<PAGE>

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

     12.  Time of Granting Options.  The date of grant of an Option shall, for
          ------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board.  Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.

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

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

          (b) Shareholder Approval.  The Board shall obtain shareholder approval
              --------------------
of any Plan amendment to the extent necessary and desirable to comply with
applicable laws.

          (c) Effect of Amendment or Termination.  No amendment, alteration,
              ----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing

                                       9
<PAGE>

and signed by the Optionee and the Company. Termination of the Plan shall not
affect the Administrator's ability to exercise the powers granted to it
hereunder with respect to Options granted under the Plan prior to the date of
such termination.

     14.  Conditions Upon Issuance of Shares.  Shares shall not be issued
          ----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares shall comply with applicable laws and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.

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

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

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

     16.  Agreements.  Options shall be evidenced by written agreements in such
          ----------
form as the Board shall approve from time to time.

     17.  Shareholder Approval.  Continuance of the Plan shall be subject to
          --------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted.  Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.

     18.  Information to Optionees and Purchasers.  The Company shall provide to
          ---------------------------------------
each Optionee, not less frequently than annually during the period such Optionee
has one or more Options outstanding, copies of annual financial statements.  The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.

                                       10

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