Document:

<PAGE>   1
                                                                   EXHIBIT 10.20

                                 SELECTICA, INC.

                            STOCK PURCHASE AGREEMENT

                                JANUARY 31, 2000

<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                               Page No.
                                                                                               --------
<S>                                                                                            <C>
1.  Purchase and Sale of Stock...............................................................     1
        1.1  Sale and Issuance of Stock......................................................     1
        1.2  The Closing.....................................................................     1

2.  Representations and Warranties of the Company............................................     1
        2.1  Organization and Good Standing..................................................     1
        2.2  Authorization...................................................................     2
        2.3  Valid Issuance of Stock.........................................................     2
        2.4  Title to Property and Assets....................................................     2
        2.5  Compliance with Other Documents.................................................     2
        2.6  Registration Statement..........................................................     2
        2.8  Litigation......................................................................     3
        2.9  Intellectual Property...........................................................     3
        2.10  Financial Statements...........................................................     3
        2.11  Changes........................................................................     3
        2.12  Taxes..........................................................................     3

3.  Representations and Warranties of the Investor...........................................     3
        3.1  Authorization...................................................................     3
        3.2  Investigation...................................................................     4
        3.3  Accredited Investor.............................................................     4
        3.4  Purchase Entirely for Own Account...............................................     4
        3.5  Restricted Securities...........................................................     4

4.  Conditions to the Investor's Obligation at Closing.......................................     4
        4.1  Representations and Warranties..................................................     4
        4.2  Securities Laws.................................................................     4
        4.3  Authorizations..................................................................     4
        4.5  Initial Public Offering of Common Stock.........................................     5

5.  Conditions to the Company's Obligations at Closing.......................................     5
        5.1  Representations and Warranties..................................................     5
        5.2  Securities Laws.................................................................     5
        5.4  Authorizations..................................................................     5
        5.5  Initial Public Offering of Common Stock.........................................     5
        5.6  Payment of Purchase Price.......................................................     5
        5.7  Lock-Up Agreement...............................................................     5

6.  Covenants of the Company and the Investor................................................     5
        6.1  Agreement Not to Transfer.......................................................     5
        6.2  Market Stand-Off................................................................     6
        6.5  Registration of Stock...........................................................     6
</TABLE>

                                       i

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<TABLE>
<S>                                                                                            <C>

7.  Miscellaneous............................................................................     6
        7.1  Governing Law...................................................................     6
        7.2  Survival; Additional Securities.................................................     6
        7.3  Successors and Assigns..........................................................     7
        7.4  Entire Agreement................................................................     7
        7.5  Notices.........................................................................     7
        7.6  Amendments and Waivers..........................................................     7
        7.7  Legal Fees......................................................................     7
        7.8  Expenses........................................................................     7
        7.9  Titles and Subtitles............................................................     7
        7.10  Counterparts...................................................................     7
        7.11  Severability...................................................................     7
        7.13  Confidentiality................................................................     8
</TABLE>

                                       ii

<PAGE>   4
                            STOCK PURCHASE AGREEMENT

               THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
the 31st day of January, 2000, by and between Selectica, Inc., a Delaware
corporation (the "Company") and Samsung SDS (the "Investor").

               WHEREAS, the Investor has indicated a desire to purchase
1,000,000 shares of the Company's Common Stock .

               WHEREAS, the Company has indicated a desire to sell 1,000,000
shares of the Company's Common Stock to the Investor on the terms set forth
herein.

               WHEREAS, the Company and the Investor have agreed that this
Agreement shall constitute the entire understanding and agreement between the
parties with regard to the subject matter hereof.

               NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

               1. Purchase and Sale of Stock.

                      1.1 Sale and Issuance of Stock. Subject to the terms and
conditions of this Agreement, the Company agrees to sell to the Investor and the
Investor agrees to purchase from the Company the number of shares of the
Company's Common Stock indicated on Exhibit A hereto (the "Stock"), having the
rights, preferences, privileges and restrictions set forth in the Second Amended
and Restated Certificate of Incorporation of the Company (the "Restated
Certificate") to be filed with the Delaware Secretary of State upon the Closing
(as defined below), the form of which has been filed as Exhibit 3.2 to the
Company's Registration Statement (the "Registration Statement") on Form S-1
(File No. 333-92545) for the Company's initial public offering (the "IPO").

                      1.2 The Closing. The purchase and sale of the Stock shall
be held at the Company's offices immediately following the closing of the IPO
or, if later, upon satisfaction or waiver of each of the conditions set forth in
Sections 4 and 5 (the "Closing"). At the Closing, the Company will deliver the
Stock to the Investor against payment of the purchase price therefor by check
payable to the order of the Company or by wire transfer. The per share purchase
price for the Stock shall be ninety-six percent (96%) the "Price to Public" for
one share of the Company's Common Stock specified in the final prospectus with
respect to the IPO.

               2. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor that:

                      2.1 Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry out the transaction contemplated by this Agreement and to carry on its
business as now conducted. The Company is duly qualified to

<PAGE>   5
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or
properties.

                      2.2 Authorization. All corporate action on the part of the
Company, its officers, directors, stockholders and any third party necessary for
the authorization, execution and delivery of this Agreement, the performance of
all obligations of the Company hereunder, and the authorization, issuance, sale
and delivery of the Stock has been taken or will be taken prior to the Closing,
and this Agreement constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.

                      2.3 Valid Issuance of Stock. The Stock, when issued, sold
and delivered in accordance with the terms hereof for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and under applicable state and federal securities laws.
There are no statutory or contractual shareholders' preemptive rights or rights
of first refusal with respect to the issuance of the Stock other than rights
that have been satisfied or waived. Subject in part to the truth and accuracy of
the Investor's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Stock as contemplated by this Agreement are
exempt from the registration requirements of any applicable state and federal
securities laws.

                      2.4 Title to Property and Assets. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens that arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.

                      2.5 Compliance with Other Documents. The execution and
delivery of this Agreement, consummation of the transactions contemplated
hereby, and compliance with the terms and provisions hereof will not conflict
with or result in a breach of the terms and conditions of, or constitute a
default under the Certificate of Incorporation or Bylaws of the Company or of
any contract or agreement to which the Company is now a party, except where such
conflict, breach or default of any such contract or agreement, either
individually or in the aggregate, would not have a material adverse effect on
the Company's business, financial condition or results of operations.

                      2.6 Registration Statement. The Registration Statement
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the Securities and Exchange
Commission ("SEC"), contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.

                                       2

<PAGE>   6
                      2.7 Litigation. Except as disclosed in the Registration
Statement, there are no actions, proceedings or investigations pending against
the Company, that, either in any case or in the aggregate, would result in any
material adverse change in the business, financial condition, or results of
operations of the Company.

                      2.8 Intellectual Property. Except as disclosed in the
Registration Statement, the Company owns, possesses or can acquire on reasonable
terms, adequate trade names and other rights to inventions, know-how,
copyrights, confidential information and other intellectual property and, to the
Company's knowledge, trademarks and patents (collectively, "Intellectual
Property Rights") necessary to conduct the business now operated by it, or
presently employed by it, and has not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company, would individually
or in the aggregate have a material adverse effect on the condition (financial
or other), business, properties or results of operations.

                      2.9 Financial Statements. The financial statements
included in the Registration Statement present fairly the financial position of
the Company as of the dates shown and its results of operations and cash flows
for the periods shown, reflect all material liabilities to which the Company is
subject, and, except as otherwise disclosed in the Registration Statement, such
financial statements have been prepared in conformity with the generally
accepted accounting principles in the United States applied on a consistent
basis.

                      2.10 Changes. Except as disclosed in the Registration
Statement, since the date of the latest audited financial statements included in
the Registration Statement there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of operations of
the Company taken as a whole.

                      2.11 Taxes. The Company has filed on a timely basis all
tax returns and reports (including information returns and reports) as required
by law. These returns and reports are true and correct in all material respects
except to the extent that a reserve has been reflected on the Company's
financial statements in accordance with generally accepted accounting
principles. The Company has paid all taxes and other assessments due, except
those contested by it in good faith and except to the extent that a reserve has
been reflected on the Company's financial statements in accordance with
generally accepted accounting principles. The provision for taxes of the Company
as shown in the Company's financial statements is adequate for taxes due or
accrued as of the date thereof.

               3. Representations and Warranties of the Investor. The Investor
hereby represents and warrants that:

                      3.1 Authorization. This Agreement constitutes the valid
and legally binding obligation of the Investor, enforceable in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and by general principles of equity.

                                       3

<PAGE>   7
                      3.2 Investigation. The Investor acknowledges that it has
had an opportunity to discuss the business, affairs and current prospects of the
Company with the Company's chief executive officer or other executive officers.
The Investor further acknowledges having had access to information about the
Company that it has requested or considers necessary for purposes of purchasing
the Stock. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.

                      3.3 Accredited Investor. The Investor is an "accredited
investor" as such term is defined in Regulation D adopted by the SEC.

                      3.4 Purchase Entirely for Own Account. This Agreement is
made with the Investor in reliance upon the Investor's representation to the
Company, which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Stock will be acquired for investment for the Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Investor has no present intention
of selling, granting any participation in, or otherwise distributing the same.

                      3.5 Restricted Securities. Investor understands that the
Stock it is purchasing are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, Investor represents that it is familiar with
SEC Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Act.

               4. Conditions to the Investor's Obligation at Closing. The
obligation of the Investor to purchase the Stock at the Closing is subject to
the fulfillment to the Investor's satisfaction on or prior to the Closing of the
following conditions:

                      4.1 Representations and Warranties. The representations
and warranties made by the Company in Section 2 hereof shall be true and correct
when made, and shall be true and correct as of the Closing with the same force
and effect as if they had been made on and as of such date, and all covenants
made by the Company shall have been performed to Investor's satisfaction. The
Chief Executive Officer of the Company shall deliver at the Closing a
certificate stating that the condition specified in the preceding sentence has
been fulfilled.

                      4.2 Securities Laws. The offer and sale of the Stock to
the Investor pursuant to this Agreement shall be exempt from the registration
requirements of the Act and qualification requirements of all applicable state
securities laws.

                      4.3 Authorizations. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body that are
required in connection with the lawful issuance and sale of the Stock pursuant
to this Agreement shall have been duly obtained and shall be effective on and as
of the Closing.

                                       4

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                      4.4 Initial Public Offering of Common Stock. The closing
of the IPO shall have occurred.

               5. Conditions to the Company's Obligations at Closing. The
obligation of the Company to sell the Stock at the Closing is subject to the
fulfillment to the Company's satisfaction on or prior to the Closing of the
following conditions:

                      5.1 Representations and Warranties. The representations
and warranties of the Investor contained in Section 3 hereof shall be true as of
the Closing with the same force and effect as if they had been made on and as of
such date, subject to changes contemplated by this Agreement.

                      5.2 Securities Laws. The offer and sale of the Stock to
the Investor pursuant to this Agreement shall be exempt from the registration
requirements of the Act qualification requirements of all applicable state
securities laws.

                      5.3 Authorizations. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body that are
required in connection with the lawful issuance and sale of the Stock pursuant
to this Agreement shall have been duly obtained and shall be effective on and as
of the Closing.

                      5.4 Initial Public Offering of Common Stock. The closing
of the IPO shall have occurred.

                      5.5 Payment of Purchase Price. The Investor shall have
delivered to the Company the purchase price for the Stock as set forth in
Section 1.2 hereof.

                      5.6 Lock-Up Agreement. The Investor shall have delivered
to the Company an executed Lock-Up Agreement with Credit Suisse First Boston
Corporation, the form of which is attached as Exhibit B hereto.

               6. Covenants of the Company and the Investor.

                      6.1 Agreement Not to Transfer.

                           (a) Prior to the first anniversary of the Closing,
the Investor shall not, directly or indirectly, sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of any securities of the Company held
by it at any time during such period (a "Transfer") unless the Company consents
to such Transfer and the transferee agrees to be bound by this Agreement;
provided, however, that the Investor may transfer shares of the Company's Common
Stock to an entity in which the Investor holds fifty percent (50%) or more of
the voting stock or to any partner, limited partner or affiliate of such
Investor without the Company's consent so long as the transferee agrees to be
bound by this Agreement; and provided further, however, that beginning 181 days
after the date of the final prospectus with respect to the IPO, the Investor may
hedge up to all of the Stock if not less than 5 days prior thereto the Investor
delivers to the Company the written opinion of its counsel, in form and
substance reasonably acceptable to the Company, to the effect that such
transaction, either alone or together with all other such transactions by the

                                       5

<PAGE>   9
Investor, will not jeopardize or otherwise adversely affect the exemption from
registration under the Securities Act relied upon by the Company for the
issuance of the Stock.

                           (b) In order to enforce the restrictions on Transfer
set forth in 6.1(a) above (the "Transfer Restrictions"), the Company may impose
stop transfer instructions with respect to the Stock until the end of the
restricted period.

                      6.2 Market Stand-Off. In addition to the Transfer
Restrictions (which shall in no way be limited by the following), in connection
with any underwritten public offering by the Company of its equity securities
pursuant to an effective registration statement filed under the Act, the
Investor shall not Transfer any shares of the Stock, except for Common Stock
included in such registration, without the prior written consent of the Company
and its underwriters. Such restriction (the "Market Stand-Off") shall be in
effect for such period of time from and after the effective date of the final
prospectus for the offering as may be requested by the Company or such
underwriters; provided, however, that (i) such Market Stand-Off shall not exceed
one hundred eighty (180) days, and (ii) the Investor shall be subject to the
Market Stand-Off only if all officers, directors, entities that are affiliates
of any director and any shareholder owning at least 5% of the outstanding shares
of the Company enter into similar agreements. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the
Stock until the end of the applicable stand-off period.

                      6.3 Registration of Stock. The Company agrees that, with
regard to the Stock, the Investor shall have the registration rights described
in Exhibit C attached hereto. The Investor understands and agrees that (i) the
Stock will be characterized as "restricted securities" under the federal
securities laws inasmuch as it is being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances, and (ii) each certificate
representing the Stock and any other securities issued in respect of the Stock
upon any stock split, stock dividend, recapitalization, merger or similar event
(unless no longer required in the opinion of counsel for the Company) shall be
stamped or otherwise imprinted with appropriate legends mandated by federal and
state securities laws.

               7. Miscellaneous.

                      7.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California, without regard to the conflict of law provisions thereof.

                      7.2 Survival; Additional Securities. The representations
and warranties set forth in Sections 2 and 3 shall survive until two years after
the date of the Closing. The covenants and agreements set forth in Section 6
shall survive in accordance with their terms. Any new, substituted or additional
securities which are by reason of any stock split, stock dividend,
recapitalization or reorganization distributed with respect to the Stock ("Stock
Distributions") shall be immediately subject to the covenants and agreements set
forth in Section 6 to the same extent the Stock is at such time covered by such
provisions.

                                       6

<PAGE>   10
                      7.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. Notwithstanding
anything to the contrary contained herein, the covenants set forth in Section 6
shall not be binding upon any entity (other than an affiliate of the Investor)
which acquires any shares of the Stock or a Stock Distribution in a transaction
permitted hereunder.

                      7.4 Entire Agreement. This Agreement constitutes the
entire understanding and agreement between the parties with regard to the
subject matter hereof.

                      7.5 Notices. Except as otherwise provided, all notices and
other communications required or permitted hereunder shall be in writing, shall
be effective when given, and shall in any event be deemed to be given upon
receipt or, if earlier, (i) five (5) days after deposit with the U.S. postal
service or other applicable postal service, if delivered by first class mail,
postage prepaid, (ii) upon delivery, if delivered by hand, (iii) one (1)
business day after the day of deposit with Federal Express or similar overnight
courier, freight prepaid, if delivered by overnight courier or (iv) one (1)
business day after the day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed, (a) if to the Investor, at the Investor's address set forth below its
signature, or (b) if to the Company, at its address as set forth below its
signature, or at such other address as the Company shall have furnished to the
Investor in writing.

                      7.6 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of the Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and the Investor.

                      7.7 Legal Fees. In the event of any action at law, suit in
equity or arbitration proceeding in relation to this Agreement or the Stock or
any Stock Distribution, the prevailing party shall be paid by the other party a
reasonable sum for the attorneys' fees and expenses incurred by such prevailing
party.

                      7.8 Expenses. Irrespective of whether the Closing is
effected, the Company and the Investor shall each pay their own costs and
expenses incurred with respect to the negotiation, execution, delivery and
performance of this Agreement.

                      7.9 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

                      7.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

                      7.11 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement

                                       7

<PAGE>   11
and the balance of the Agreement shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its terms.

                      7.12 Confidentiality. The parties hereto agree that:

                           (a) except with the prior written permission of the
other party, it shall at all times keep confidential and not divulge, furnish,
or make accessible to anyone any confidential information, knowledge, or data
concerning or relating to the business or financial affairs of such other party
to which said party has been or shall become privy by reason of this Agreement,
discussions or negotiations relating to this Agreement, or the performance of
its obligations hereunder.

                           (b) the Company shall not disclose Investor's (or any
of its Affiliates') name or identity as an investor in the Company in any press
release or other public announcement or in any document or material filed with
any governmental entity (including the Registration Statement, without the prior
written consent of Investor (or its applicable Affiliate(s)), unless such
disclosure is required by applicable law or governmental regulations or by order
of a court of competent jurisdiction, in which case prior to making such
disclosure the Company shall give written notice to Investor (as applicable),
describing in reasonable detail the proposed content of such disclosure and
shall permit Investor (as applicable), to review and comment upon the form and
substance of such disclosure; provided, however, that once such information has
been disclosed pursuant to this section 7.12, the Company shall not be required
to obtain Investor's consent or consultation for subsequent disclosures of such
information.

                                       8

<PAGE>   12
               IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year hereinabove first written.

                             SELECTICA, INC.

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

                  Address:   3 West Plumeria Drive
                             San Jose, California  95134

                             SAMSUNG SDS

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

                  Address:
                             ------------------------------------------

<PAGE>   13
                                    EXHIBIT A

<TABLE>
<CAPTION>
Investor                                    Number of Shares
--------                                    ----------------
<S>                                         <C>
Samsung SDS                                 1,000,000
</TABLE>

                                      E-2

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                                    EXHIBIT B

                                      E-3

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                                    EXHIBIT C

               1. Registration Rights. The Company covenants and agrees as
follows:

                      1.1 Definitions. For purposes of this Exhibit C,
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Stock Purchase Agreement between the Company and the
Investor to which this Exhibit C is attached. In addition, the following terms
used herein shall have the following meanings: (a) the term "1934 Act" means the
Securities Exchange Act of 1934, as amended; and (b) the term "register",
"registered," and "registration" refer to a registration effected by preparing
and filing a registration statement or similar document in compliance with the
Act, and the declaration or ordering of effectiveness of such registration
statement or document.

                      1.2 Company Registration.

                           (a) If, at any time 180 days after the Registration
Statement is declared effective by the SEC, the Company proposes to register any
of its stock or other securities under the Act in connection with the public
offering of such securities (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, a registration
relating to a corporate reorganization or other transaction under Rule 145 of
the Act, a registration on any form that does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Stock, or a registration in which the only Common Stock
being registered is Common Stock issuable upon conversion of debt securities
that are also being registered), the Company shall, at such time, promptly give
Investor written notice of such registration. Upon the written request of
Investor given within twenty (20) days after mailing of such notice by the
Company, the Company shall, subject to the provisions of Section 1.2(c) below,
use all reasonable efforts to cause to be registered under the Act all of the
Stock that each Investor has requested to be registered. Nothing contained in
this Section 1.2 obligates the Company to register any of its stock or other
securities under the Act.

                           (b) The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 1.2 prior to the
effectiveness of such registration whether or not Investor has elected to
include securities in such registration.

                           (c) In connection with any offering involving an
underwriting of shares of the Company's capital stock, the Company shall not be
required under this Section 1.2 to include any of the Investor's securities in
such underwriting unless Investor accepts the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters) and enter into an underwriting
agreement in customary form with an underwriter or underwriters selected by the
Company, and then only in such quantity as the underwriters determine in their
sole discretion will not jeopardize the success of the offering by the Company.
If the total amount of securities, including share of the Stock, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including shares of the Stock, that

                                      E-4

<PAGE>   16
the underwriters determine in their sole discretion will not jeopardize the
success of the offering. The securities to be so included shall be apportioned
pro rata among the selling stockholders, including the Investor, the Holders of
Registrable Securities (as such terms are defined in that certain Amended and
Restated Investor Rights Agreement dated June 16, 1999, by and among the Company
and certain of its stockholders) and any other stockholder of the Company
entitled to similar registration rights, according to the total amount of
securities entitled to be included therein owned by each selling stockholder or
in such other proportions as shall mutually be agreed to by such selling
stockholders.

                      1.3 Investor Obligation to Furnish Information. It shall
be a condition precedent to the obligations of the Company to take any action
pursuant hereto with respect to the Stock that the Investor shall furnish to the
Company such information regarding itself, the Stock, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Stock.

                      1.4 Expenses of Registration. All expenses incurred in
connection with registrations, filings or qualifications pursuant hereto,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the Investor hereunder but excluding the fees and disbursements of
any other counsel for the Investor) shall be borne by the Company.

                      1.5 Indemnification. In the event any Stock is included in
a registration statement under Section 1.2:

                           (a) To the extent permitted by law, the Company will
indemnify and hold harmless the Investor, any underwriter (as defined in the
Act) for the Investor and each person, if any, who controls the Investor or
underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to the Investor, or such underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection (a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and

                                      E-5

<PAGE>   17
in conformity with written information furnished expressly for use in connection
with such registration by any such Investor, underwriter or controlling person.

                           (b) To the extent permitted by law, the Investor will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, and any
controlling person of any such underwriter, against any losses, claims, damages,
or liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Investor expressly for
use in connection with such registration; and each such Investor will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection (b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection (b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Investor, which consent shall not be unreasonably withheld; provided, that, in
no event shall any indemnity under this subsection (b) exceed the gross proceeds
from the offering received by the Investor.

                           (c) Promptly after receipt by an indemnified party
under this Section 1.5 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.5,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.5, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.5.

                           (d) If the indemnification provided for in this
Section 1.5 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to there in, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions

                                      E-6

<PAGE>   18
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.

                           (e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in an underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.

                           (f) The obligations of the Company and the Investor
under this Section 1.5 shall survive the completion of any offering of the Stock
in a registration statement pursuant hereto, and otherwise.

                      1.6 Termination. The Company's obligation to register the
Stock pursuant to this agreement shall terminate on the earlier of (i) the third
anniversary of the Closing and (ii) the date on which all shares of the Stock
held by the Investor may immediately be sold under Rule 144 during any 90-day
period.

                                      E-7<PAGE>   1
                                                                   EXHIBIT 10.21

                                                         BLDG:    Orchard 4
                                  LEASE AGREEMENT        OWNER:   1
                                                         PROP:    0029
                                                         UNIT:    1
                                                         TENANT:  SELE01
                                                         LEASE:   0029-SELE01-01

     THIS LEASE, made this 1st day of October, 1999 between JOHN ARRILLAGA,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S
TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter
called Landlord, and SELECTICA, INC., a California corporation, hereinafter
called Tenant.

                                   WITNESSETH:

     Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises (the "Premises") outlined in red on Exhibit "A",
attached hereto and incorporated herein by this reference thereto more
particularly described as follows:

All of that certain 79,803(+/-) square foot, two-story building located at 3 W.
Plumeria Drive, San Jose, California 95134. Said Premises is more particularly
shown within the area outlined in Red on Exhibit A attached hereto. The entire
parcel, of which the Premises is a part, is shown within the area outlined in
Green on Exhibit A attached. The Premises shall be improved by Landlord as
shown on Exhibit B to be attached hereto, and is leased on an "as-is" basis, in
its present condition, and in the configuration as shown in Red on Exhibit B to
be attached hereto.

As used herein the Complex shall mean and include all of the land outlined in
Green and described in Exhibit "A", attached hereto, and all of the buildings,
improvements, fixtures and equipment now or hereafter situated on said land.

     Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.

1. USE  Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of general
office, light manufacturing, research and development, and storage and other
uses necessary for Tenant to conduct Tenant's business, provided that such uses
shall be in accordance with all applicable governmental laws and ordinances and
for no other purpose. Tenant shall not do or permit to be done in or about the
Premises or the Complex nor bring or keep or permit to be brought or kept in or
about the Premises or the Complex anything which is prohibited by or will in
any way increase the existing rate of (or otherwise affect) fire or any
insurance covering the Complex or any part thereof, or any of its contents, or
will cause a cancellation of any insurance covering the Complex or any part
thereof, or any of its contents. Tenant shall not do or permit to be done
anything in, on or about the Premises or the Complex which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Complex or injure or annoy them, or use or allow the Premises to be used for
any improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises or the
Complex. No sale by auction shall be permitted on the Premises. Tenant shall
not place any loads upon the floors, walls, or ceiling, which endanger the
structure, or place any harmful fluids or other materials in the drainage
system of the building, or overload existing electrical or other mechanical
systems. No waste materials or refuse shall be dumped upon or permitted to
remain upon any part of the Premises or outside of the building in which the
Premises are a part, except in trash containers placed inside exterior
enclosures designated by Landlord for that purpose or inside of the building
proper where designated by Landlord. No materials, supplies, equipment,
finished products or semi-finished products, raw materials or articles of any
nature shall be stored upon or permitted to remain outside the Premises or on
any portion of common area of the Complex. No loudspeaker or other device,
system or apparatus which can be heard outside the Premises shall be used in or
at the Premises without the prior written consent of Landlord. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises. Tenant
shall indemnify, defend and hold Landlord harmless against any loss, expense,
damage, attorneys' fees, or liability arising out of failure of Tenant to
comply with any applicable law. Tenant shall comply with any covenant,
condition, or restriction ("CC&R's") affecting the Premises. The provisions of
this paragraph are for the benefit of Landlord only and shall not be construed
to be for the benefit of any tenant or occupant of the Complex.

2. TERM *

     A. The term of this Lease shall be for a period of TEN (10) years SIXTEEN
(16) days (unless sooner terminated as hereinafter provided) and, subject to
Paragraphs 2(B) and 3, shall commence on the 15th day of November, 1999 and end
on the 30th day November of 2009.

     B. Possession of the Premises shall be deemed tendered and the term of
this Lease shall commence when the first of the following occurs:

        (a) One day after a Certificate of Occupancy is granted by the proper
governmental agency, or, if the governmental agency having jurisdiction over the
area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed; or

        (b) Upon the occupancy of the Premises by any of Tenant's operating
personnel; or

        (c) When the Tenant Improvements have been substantially completed for
Tenant's use and occupancy, in accordance and compliance with Exhibit B of this
Lease Agreement; or

        (d) As otherwise agreed in writing.

3. POSSESSION  If Landlord, for any reason whatsoever, cannot deliver possession
of said premises to Tenant at the commencement of the said term, as
hereinbefore specified, this Lease shall not be void or voidable; no obligation
of Tenant shall be affected thereby; nor shall Landlord or Landlord's agents be
liable to Tenant for any loss or damage resulting therefrom; but in that event
the commencement and termination dates of the Lease, and all other dates
affected thereby shall be revised to conform to the date of Landlord's delivery
of possession, as specified in Paragraph 2(b), above. The above is, however,
subject to the provision that the period of delay, of delivery of the premises
shall not exceed 45 days from the commencement date herein (except those delays
caused by Acts of God, strikes, war, utilities, governmental bodies, weather,
unavailable materials, and delays beyond Landlord's control shall be excluded
in calculating such period) in which instance Tenant, at its option, may, by
written notice to Landlord, terminate this Lease.

* It is agreed in the event said Lease commences on a date other than the first
day of the month the term of the Lease will be extended to account for the
number of days in the partial month. The Basic Rent during the resulting
partial month will be pro-rated (for the number of days in the partial month)
at the Basic Rent scheduled for the projected commencement date as shown in
Paragraph 43.

                                page 1 of 8
<PAGE>   2
                                                                          36/100
4. RENT
   A. Basic Rent. Tenant agrees to pay to Landlord at such place as Landlord
may designate without deduction, offset, prior notice, or demand, and Landlord
agrees to accepts as Basic rent for the leased Premises the total sum of TWENTY
ONE MILLION SIX HUNDRED SIXTY FOUR THOUSAND SEVEN HUNDRED FORTY AND
($21,664,740.36) Dollars in lawful money of the United States of America,
payable as follows:

See Paragraph 43 for Basic Rent Schedule

   B. Time for Payment. In the event that the term of this Lease commences on a
date other than the first day of a calendar month, on the date of commencement
of the term hereof Tenant shall pay to Landlord as rent for the period from
such date of commencement to the first day of the next succeeding calendar
month that proportion of the monthly rent hereunder which the number of days
between such date of commencement and the first day of the next succeeding
calendar month bears to thirty (30). In the event that the term of this Lease
for any reason ends on a date other than the last day of a calendar month, on
the first day of the last calendar month of the term hereof Tenant shall pay to
Landlord as rent for the period from said first day of said last calendar month
to and including the last day of the term hereof that proportion of the monthly
rent hereunder which the number of days between said first day of said last
calendar month and the last day of the term hereof bears to thirty (30).

   C. Late Charge. Notwithstanding any other provision of this Lease, if Tenant
is in default in the payment of rental as set forth in this Paragraph 4 when
due, or any part thereof, Tenant agrees to pay Landlord, in addition to the
delinquent rental due, a late charge for each rental payment in default ten
(10) days. Said late charge shall equal ten (10%) percent of each rental
payment so in default.

   D.  Additional Rent. Beginning with the commencement date of the term of
this Lease, Tenant shall pay to Landlord in addition to the Basic Rent and as
Additional Rent the following:

   (a)   Tenant's proportionate share of all Taxes relating to the Complex as
         set forth in Paragraph 12, and

   (b)   Tenant's proportionate share of all premiums and deductibles relating
         to the Complex, as set forth in Paragraph 15, and

   (c)   Tenant's proportionate share of expenses for the operation, management,
         maintenance and repair of the Building (including common areas of the
         Building) and Common areas of the Complex in which the Premises are
         located as set forth in Paragraph 7, and

   (d)   All charges, costs and expenses, which Tenant is required to pay
         hereunder, together with all Interest and penalties, costs and expenses
         including attorneys' fees and legal expenses, that may accrue thereto
         in the event of Tenant's failure to pay such amounts, and all damages,
         reasonable costs and expenses which Landlord may incur by reason of
         default of Tenant or failure on Tenant's part to comply with the terms
         of this Lease. In the event of nonpayment by Tenant of Additional Rent
         Landlord shall have all the rights and remedies with respect thereto as
         Landlord has for nonpayment of rent.

The Additional Rent due hereunder shall be paid to Landlord or Landlord's agent
(i) within five days for taxes and insurance and within thirty days for all
other Additional Rent items after presentation of invoice from Landlord or
Landlord's agent setting forth such Additional Rent and/or (ii) at the option
of Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's prorate
share of an amount estimated by Landlord to be Landlord's approximate average
monthly expenditure for such Additional Rent items, which estimated amount
shall be reconciled within 120 days of the end of each calendar year or more
frequently if Landlord so elects to do so at Landlord's sole and absolute
discretion, as compared to landlord's actual expenditure for said Additional
Rent items, with Tenant paying to Landlord, upon demand, any amount of actual
expenses expended by Landlord in excess of said estimated amount, or Landlord
crediting to Tenant (providing Tenant is not in default in the performance of
any of the terms, covenants and conditions of this Lease) any amount of
estimated payments made by Tenant in excess of Landlord's actual expenditures
for said Additional Rent items.

   The respective obligations of Landlord and Tenant under this paragraph shall
survive the expiration or other termination of the term of this Lease, and if
the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year preceding such expiration of termination bears to
365.

   E. Fixed Management Fee. Beginning with the Commencement Date of the Term of
this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent and
Additional Rent, a fixed monthly management fee equal to 2% of the Basic Rent
due for each month during the Lease Term ("Management Fee").

   F. Place of Payment of Rent and Additional Rent. All Basic Rent hereunder
and all payments hereunder for Additional Rent shall be paid to Landlord at the
office of Landlord at Peery/Arrillaga, File 1504, Box 60000, San Francisco, CA
94160 or to such other person or to such other place as Landlord may from time
to time designate in writing.

   G. Security Deposit. Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the sum of FOUR HUNDRED THIRTY EIGHT THOUSAND
($438,916.50) Dollars. Said sum shall be held by Landlord as a Security Deposit
for the faithful performance by Tenant of all of the terms, covenants and
conditions of this Lease to be kept and performed by Tenant during the term
hereof. If Tenant defaults with respect to any provisions of this Lease,
including, but not limited to the provisions relating to the payment of rent and
any of the monetary sums due herewith. Landlord may (but shall not be required
to) use, apply or retain all or any part of this Security Deposit for the
payment of any other amount which Landlord may spend by reason of Tenant's
default or to compensate Landlord for any other loss or damage which landlord
may suffer by reason of Tenant's default. If any portion of said Deposit is so
used or applied, Tenant shall, within ten (10) days after written demand
therefor, deposit cash with Landlord in the amount sufficient to restore the
Security Deposit to its original amount. Tenant's failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep this
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such Deposit. If Tenant fully and faithfully performs
every provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option, to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease
term and after Tenant has vacated the Premises. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said Deposit to
Landlord's successor in interest whereupon Tenant agrees to release Landlord
from liability for the return of such Deposit or the accounting therefor.

   5. RULES AND REGULATIONS AND COMMON AREA. Subject to the terms and conditions
of this Lease and such Rules and Regulations as Landlord may from time to time
prescribe, Tenant and Tenant's employees, invitees and customers shall, in
common with other occupants of the Complex in which the Premises are located,
and their respective employees, invitees and customers, and others entitled to
the use thereof, have the non-exclusive right to use the access roads, parking
areas, and facilities provided and designated by Landlord for the general use
and convenience of the occupants of the Complex in which the Premises are
located, which areas and facilities are referred to herein as "Common Area".
This right shall terminate upon the termination of this Lease. Landlord reserves
the right from time to time to make changes in the shape, size, location, amount
and extent of Common Area. Landlord further reserves the right to promulgate
such reasonable rules and regulations relating to the use of the Common Area,
and any part of parts thereof, as Landlord may deem appropriate for the best
interests of occupants of the Complex. The Rules and Regulations shall be
binding upon Tenant upon delivery of a copy of them to Tenant, and Tenant shall
abide by them and cooperate in their observance. Such Rules and Regulations may
be amended by Landlord from time to time, with or without advance notice, and
all amendments shall be effective upon delivery of a copy to Tenant. Landlord
shall be not be responsible to Tenant for the non-performance by any other
tenant or occupant of the Complex of any of said Rules and Regulations.

   Landlord shall operate, manage and maintain the Common Area. The manner in
which the Common Area shall be maintained and the expenditures for such
maintenance shall be at the discretion of Landlord.

                                  Page 2 of 8
<PAGE>   3
     6. PARKING  Tenant shall have the right to use with other tenants or
occupants of the Complex 220 parking spaces in the common parking areas of the
Complex. Tenant agrees, that Tenant, Tenant's employees, agents, representatives
and/or invitees shall not use parking spaces in excess of said 220 spaces
allocated to Tenant hereunder. Landlord shall have the right, at Landlord's sole
discretion, to specifically designate the location of Tenant's parking spaces
within the common parking areas of the Complex in the event of a dispute among
the tenants occupying the building and/or Complex referred to herein, in which
event Tenant agrees that Tenant, Tenant's employees, agents, representatives
and/or invitees shall not use any parking spaces other than those parking spaces
specifically designated by Landlord for Tenant's use. Said parking spaces, if
specifically designated by Landlord to Tenant, may be relocated by Landlord at
any time, and from time to time, Landlord reserves the right, at Landlord's sole
discretion, to rescind any specific designation of parking spaces, thereby
returning Tenant's parking spaces to the common parking area. Landlord shall
give Tenant written notice of any change in Tenant's parking spaces. Tenant
shall not, at any time, park, or permit to be parked, any trucks or vehicles
adjacent to the loading areas so as to interfere in any way with the use of such
areas, nor shall Tenant at any time park, or permit the parking of Tenant's
trucks or other vehicles or the trucks and vehicles of Tenant's suppliers or
others, in any portion of the common area not designated by Landlord for such
use by Tenant. Tenant shall not park nor permit to be parked, any inoperative
vehicles or equipment on any portion of the common parking area or other common
areas of the Complex. Tenant agrees to assume responsibility for compliance by
its employees with the parking provision contained herein. If Tenant or its
employees park in other than such designated parking areas, then Landlord may
charge Tenant, as an additional charge, and Tenant agrees to pay, ten ($10.00)
Dollars per day for each day or partial day each such vehicle is parked in any
area other than that designated. Tenant hereby authorizes Landlord at Tenant's
sole expense to tow away from the Complex any vehicle belonging to Tenant or
Tenant's employees parked in violation of these provisions, or to attach
violation stickers or notices to such vehicles. Tenant shall use the parking
areas for vehicle parking only, and shall not use the parking areas for storage.

7.  EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF
THE COMPLEX  As Additional Rent and in accordance with Paragraph 4D of this
Lease, Tenant shall pay to Landlord Tenant's proportionate share (calculated on
a square footage or other equitable basis as calculated by Landlord) of all
expenses of operation, management, maintenance and repair of the Common Areas of
the Complex including, but not limited to, license, permit, and inspection fees;
security; utility charges associated with exterior landscaping and lighting
(including water and sewer charges); all charges incurred in the maintenance and
replacement of landscaped areas, lakes, parking lots and paved areas (including
repairs, replacement, resealing and restriping), sidewalks, driveways;
maintenance, repair and replacement of all fixtures and electrical, mechanical,
and plumbing systems; structural elements and exterior surfaces of the
buildings; salaries and employee benefits of personnel and payroll taxes
applicable thereto; supplies, materials, equipment and tools; the cost of
capital expenditures which have the effect of reducing operating expenses,
provided, however, that in the event Landlord makes such capital improvements,
Landlord may amortize its investment in said improvements (together with
interest at the rate of fifteen (15%) percent per annum on the unamortized
balance) as an operating expense in accordance with standard accounting
practices, provided, that such amortization is not at a rate greater than the
anticipated savings in the operating expenses.

     "Additional rent" as used herein shall not include Landlord's debt
repayments; interest on charges; expenses directly or indirectly incurred by
Landlord for the benefit of any other tenant; cost for the installation of
partitioning or any other tenant improvements; cost of attracting tenants;
depreciation; interest, or executive salaries.

8.  ACCEPTANCE AND SURRENDER OF PREMISES  By entry hereunder, Tenant accepts the
Premises as being in good and sanitary order, condition and repair and accepts
the building and improvements included in the Premises in their present
condition and without representation or warranty by Landlord as to the condition
of such building or as to the use or occupancy which may be made thereof. Any
exceptions to the foregoing must be by written agreement executed by Landlord
and Tenant. Tenant agrees on the last day of the Lease term, or on the sooner
termination of this Lease, to surrender the Premises promptly and peaceably to
Landlord in good condition and repair (damage by Acts of God, fire, normal wear
and tear excepted), with all interior walls painted, or cleaned so that they
appear freshly painted, and repaired and replaced, if damaged; all floors
cleaned and waxed; all carpets cleaned and shampooed; the air conditioning and
heating equipment serviced by a reputable and licensed service firm and in good
operating condition (provided the maintenance of such equipment has been
Tenant's responsibility during the term of this Lease) together with all
alterations, additions, and improvements which may have been made in, to, or on
the Premises (except movable trade fixtures installed at the expense of Tenant)
except that Tenant shall ascertain from Landlord within thirty (30) days before
the end of the term of this Lease whether Landlord desires to have the Premises
or any part or parts thereof restored to their condition and configuration as
when the Premises were delivered to Tenant and if Landlord shall so desire, then
tenant shall restore said Premises or such part or parts thereof before the end
of this Lease at Tenant's sole cost and expense. Tenant, on or before the end of
the term or sooner termination of this Lease, shall remove all of Tenant's
personal property and trade fixtures from the premises, and all property not so
removed on or before the end of the term or sooner termination of this Lease
shall be deemed abandoned by Tenant and title to same shall thereupon pass to
Landlord without compensation to Tenant. Landlord may, upon termination of this
Lease, remove all moveable furniture and equipment so abandoned by Tenant, at
Tenant's sole cost, and repair any damage caused by such removal at Tenant's
sole cost. If the Premises be not surrendered at the end of the term or sooner
termination of this Lease, Tenant shall indemnify Landlord against loss or
liability resulting from the delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding tenant founded
on such delay. Nothing contained herein shall be construed as an extension of
the term hereof or as a consent of Landlord to any holding over by Tenant. The
voluntary or other surrender of this Lease or the Premises by Tenant or a mutual
cancellation of this Lease shall not work as a merger and, at the option of
Landlord, shall either terminate all or any existing subleases or subtenancies
or operate as an assignment to Landlord of all or any such subleases or
subtenancies.

9.  ALTERATIONS AND ADDITIONS  Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises, or any part thereof, without the written
consent of Landlord first had and obtained by Tenant, but at the cost of Tenant,
and any addition to, or alteration of, the Premises, except moveable furniture
and trade fixtures, shall at once become a part of the Premises and belong to
Landlord. Landlord reserves the right to approve all contractors and mechanics
proposed by Tenant to make such alterations and additions. Tenant shall retain
title to all moveable furniture and trade fixtures placed in the Premises. All
heating, lighting, electrical, air conditioning, floor to ceiling partitioning,
drapery, carpeting, and floor installations made by Tenant, together with all
property that has become an integral part of the Premises, shall not be deemed
trade fixtures. Tenant agrees that it will not proceed to make such alteration
or additions, without having obtained consent from Landlord to do so, and until
five (5) days from the receipt of such consent, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material suppliers
for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work. Tenant
shall, if required by Landlord, secure at Tenant's own cost and expense, a
completion and lien indemnity bond, satisfactory to Landlord, for such work.
Tenant further covenants and agrees that any mechanic's lien filed against the
Premises or against the Complex for work claimed to have been done for, or
materials claimed to have been furnished to Tenant, will be discharged by
Tenant, by bond or otherwise, within ten (10) days after the filing thereof, at
the cost and expense of Tenant. Any exceptions to the foregoing must be made in
writing and executed by both Landlord and Tenant.

10. TENANT MAINTENANCE  Tenant shall, at its sole cost and expense, keep and
maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, and in good and sanitary condition. Tenant's
maintenance and repair responsibilities herein referred to include, but are not
limited to, all windows, window frames, plate glass, glazing, truck doors,
plumbing systems (such as water and drain lines, sinks, toilets, faucets,
drains, showers and water fountains), electrical systems (such as panels,
conduits, outlets, lighting fixtures, lamps, bulbs, tubes, ballasts), heating
and air-conditioning systems (such as compressors, fans, air handlers, ducts,
mixing boxes, thermostats, time clocks, boilers, heaters, supply and return
grills), store fronts, roofs, downspouts, all interior improvements within the
premises including but not limited to wall coverings, window coverings, carpet,
floor coverings, partitioning, ceilings, doors (both interior and exterior,
including closing mechanisms, latches, locks, skylights (if any), automatic fire
extinguishing systems, and elevators and all other interior improvements of any
nature whatsoever. Tenant agrees to provide carpet shields under all rolling
chairs or to otherwise be responsible for wear and tear of the carpet caused by
such rolling chairs if such wear and tear exceeds that caused by normal foot
traffic in surrounding areas. Areas of excessive wear shall be replaced at
Tenant's sole expense upon Lease termination. Tenant hereby waives all rights
under, and benefits of, subsection 1 of Section 1932 and Section 1941 and 1942
of the California Civil Code and under any similar law, statute or ordinance now
or hereafter in effect.

11. UTILITIES  Tenant shall pay promptly, as the same become due, all charges
for water, gas, electricity, telephone, telex and other electronic
communications services, sewer service, waste pick-up and any other utilities,
materials or services furnished directly to or used by Tenant on or about the
Premises during the term of this Lease, including, without limitation, any
temporary or permanent utility surcharge or other exactions whether or not
hereinafter imposed.

     Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.

12. TAXES  A. As Additional Rent and in accordance with Paragraph 4D of this
Lease, Tenant shall pay to Landlord Tenant's proportionate share of all Real
Property Taxes, which prorata share shall be allocated to the leased Premises by
square footage or other equitable basis, as calculated by Landlord. The term
"Real Property Taxes", as used herein, shall mean (i) all taxes, assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all installments of principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessment caused by

                                  page 3 of 8
<PAGE>   4
any change in ownership of the Complex) now or hereafter imposed by any
governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy or use of, all or any
portion of the Complex (as now constructed or as may at any time hereafter be
constructed, altered, or otherwise changed) or Landlord's interest therein; any
improvements located within the Complex (regardless of ownership); the fixtures,
equipment and other property of Landlord, real or personal, that are an
integral part of and located in the Complex; or parking areas, public
utilities, or energy within the Complex; (ii) all charges, levies or fees
imposed by reason of environmental regulation or other governmental control of
the Complex; and (iii) all costs and fees (including attorney's fees) incurred
by Landlord in contesting any Real Property Tax and in negotiating with public
authorities as to any Real Property Tax. If at any time during the term of this
Lease the taxation or assessment of the Complex prevailing as of the
commencement date of this lease shall be altered so that in lieu of or in
addition to any Real Property Tax described above there shall be levied,
assessed or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate
or additional tax or charge (i) on the value, use or occupancy of the Complex
or Landlord's interest therein or (ii) on or measured by the gross receipts,
income or rentals from the Complex, on Landlord's business of leasing the
Complex, or computed in any manner with respect to the operation of the Complex,
then any such tax or charge, however designated, shall be included within the
meaning of the term "Real Property Taxes" for purposes of this Lease. If any
Real Property Tax is based upon property or rents unrelated to the Complex,
then only that part of such real Property Tax that is fairly allocable to the
Complex shall be included within the meaning of the term "Real Property Taxes".
Notwithstanding the foregoing, the term "Real Property Taxes" shall not include
estate, inheritance, gift or franchise taxes of Landlord or the federal or
state net income tax imposed on Landlord's income from all sources. The term
"Real Estate Taxes" shall also include supplemental taxes related to the period
of Tenant's Lease Term whenever levied, including any such taxes that may be
levied after the Lease Term has expired.

     B. Taxes on Tenant's Property

     (a) Tenant shall be liable for and shall pay ten days before delinquency,
taxes levied against any personal property or trade fixtures placed by Tenant in
or about the Premises. If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property or if the assessed
value of the Premises is increased by the inclusion therein of a value placed
upon such personal property or trade fixtures of Tenant and if Landlord, after
written notice to Tenant, pays the taxes based on such increased assessment,
which Landlord shall have the right to do regardless of the validity thereof,
but only under proper protest if requested by Tenant, Tenant shall upon demand,
as the case may be, repay to Landlord the taxes so levied against Landlord, or
the proportion of such taxes resulting from such increase in the assessment;
provided that in any such event Tenant shall have the right, in the name of
Landlord and with Landlord's full cooperation, to bring suit in any court of
competent jurisdiction to recover the amount of any such taxes so paid under
protest, and any amount so recovered shall belong to Tenant.

     (b) If the Tenant Improvements in the Premises, whether installed, and/or
paid for by Landlord or Tenant and whether or not affixed to the real property
so as to become a part thereof, are assessed for real property tax purposes at
a valuation higher than the valuation at which standard office improvements in
other space in the Complex are assessed, then the real property taxes and
assessments levied against Landlord or the Complex by reason of such excess
assessed valuation shall be deemed to be taxes levied against personal property
of Tenant and shall be governed by the provisions of 12Ba above. If the records
of the County Assessor are available and sufficiently detailed to serve as a
basis for determining whether said Tenant improvements are assessed at a higher
valuation than standard office improvements in other space in the Complex, such
records shall be binding on both the Landlord and the Tenant. If the records of
the County Assessor are not available or sufficiently detailed to serve as a
basis for making said determination, the actual cost of construction shall be
used.

13.  LIABILITY INSURANCE Tenant at Tenant's expense, agrees to keep in force
during the term of this Lease a policy of commercial general liability insurance
with a combined single limit coverage of not less than Two Million Dollars
($2,000,000) per occurrence for injuries to or death of persons occurring in,
on or about the Premises or the Complex, and property damage insurance with
limits of $500,000. The policy or policies affecting such insurance,
certificates of insurance of which shall be furnished to Landlord, shall name
Landlord as additional insureds, and shall insure any liability of Landlord,
contingent or otherwise, as respects acts or omissions of Tenant, its agents,
employees or invitees or otherwise by any conduct or transactions of any said
persons in or about or concerning the Premises, including any failure of Tenant
to observe or perform any of its obligations hereunder; shall be issued by an
insurance company admitted to transact business in the State of California; and
shall provide that the insurance effected thereby shall not be canceled, except
upon thirty (30) days' prior written notice to Landlord. If, during the term of
this Lease, in the considered opinion of Landlord's Lender, insurance advisor,
or counsel, the amount of insurance described in this paragraph 13 is not
adequate, Tenant agrees to increase said coverage to such reasonable amount as
Landlord's Lender, insurance advisor, or counsel shall deem adequate.

14.  TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE
Tenant shall maintain a policy or policies of fire and property damage
insurance in "all risk" form with a sprinkler leakage endorsement insuring the
personal property, inventory, trade fixtures, and leasehold improvements within
the leased Premises for the full replacement value thereof. The proceeds from
any of such policies shall be used for the repair or replacement of such items
so insured.

     Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with all
laws.

15.  PROPERTY INSURANCE Landlord shall purchase and keep in force and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord) Tenant's
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the deductibles on insurance claims and the cost of
policy or policies of insurance covering loss or damage to the Premises and
Complex in the amount of the full replacement value thereof, providing
protection against those perils included within the classification of "all
risks" insurance and flood and/or earthquake insurance, if available, plus a
policy of rental income insurance in the amount of one hundred (100%) percent of
twelve (12) months Basic rent, plus sums paid as Additional Rent and any
deductibles related thereto. If such insurance cost is increased due to
Tenant's use of the Premises or the Complex, Tenant agrees to pay to Landlord
the full cost of such increase. Tenant shall have no interest in nor any right
to the proceeds of any insurance procured by Landlord for Complex.

     Landlord and Tenant do each hereby respectively release the other, to the
extent of insurance coverage of the releasing party, from any liability for
loss or damage caused by fire or any of the extended coverage casualties
included in the releasing party's insurance policies, irrespective of the cause
of such fire or casualty; provided, however, that if the insurance policy of
either releasing party prohibits such waiver, then this waiver shall not take
effect until consent to such waiver is obtained. If such waiver is so
prohibited, the insured party affected shall promptly notify the other party
thereof.

16.  INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises or the Complex by
or from any cause whatsoever, including, without limitation, gas, fire, oil,
electricity or leakage of any character from the roof, walls, basement or other
portion of the Premises or the Complex but excluding, however, the willful
misconduct or negligence of Landlord, its agents, servants, employees,
invitees, or contractors of which negligence Landlord has knowledge and
reasonable time to correct. Except as to injury to persons or damage to
property to the extent arising from the willful misconduct or the negligence of
Landlord, its agents, servants, employees, invitees, or contractors. Tenant
shall hold Landlord harmless from and defend Landlord against any and all
expenses, including reasonable attorneys' fees, in connection therewith,
arising out of any injury to or death of any person or damage to or destruction
of property occurring in, on or about the Premises, or any part thereof, from
any cause whatsoever.

17.  COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply
with all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted; and with
any direction or occupancy certificate issued pursuant to law by any public
officer; provided, however, that no such failure shall be deemed a breach of
the provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision, shall be
conclusive of the fact as between Landlord and Tenant. This paragraph shall not
be interpreted as requiring Tenant to make structural changes or improvements,
except to the extent such changes or improvements are required as a result of
Tenant's use of the Premises. Tenant shall, at its sole cost and expense,
comply with any and all requirements pertaining to said Premises, of any
insurance organization or company, necessary for the maintenance of reasonable
fire and public liability insurance covering the Premises.

18.  LIENS Tenant shall keep the Premises and the Complex free from any liens
arising out of any work performed, materials furnished or obligation incurred
by Tenant. In the event that Tenant shall not, within ten (10) days following
the imposition of such lien, cause the same to be released of record, Landlord
shall have, in addition to all other remedies provided herein and by law, the
right, but no obligation, to cause the same to be released by such means as it
shall deem proper, including payment of the claim giving rise to such lien. All
sums paid by Landlord for such purpose, and all expenses incurred by it in
connection therewith, shall be payable to Landlord by Tenant on demand with
interest at the prime rate of interest as quoted by the Bank of America.

                                  page 4 of 8
<PAGE>   5
19. ASSIGNMENT AND SUBLETTING  Tenant shall not assign, transfer, or hypothecate
the leasehold estate under this Lease, or any interest herein, and shall not
sublet the Premises, or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person or entity to occupy or use the Premises, or
any portion thereof, without, in each case, the prior written consent of
Landlord which consent will not be unreasonably withheld. As a condition for
granting this consent to any assignment, transfer, or subletting, Landlord shall
require Tenant to pay to Landlord, as Additional Rent, all rents and/or
additional consideration due Tenant from its assignees, transferees, or
subtenants in excess of the Rent payable by Tenant to Landlord hereunder, for
the assigned, transferred and/or subleased space. Tenant shall, by thirty (30)
days written notice, advise Landlord of its intent to assign or transfer
Tenant's interest in the Lease or sublet the Premises or any portion thereof for
any part of the term hereof. Within thirty (30) days after receipt of said
written notice, Landlord may, in its sole discretion, elect to terminate this
Lease as to the portion of the Premises described in Tenant's notice on the date
specified in Tenant's notice by giving written notice of such election to
terminate. If no such notice to terminate is given to Tenant within said thirty
(30) day period, Tenant may proceed to locate an acceptable sublessee, assignee,
or other transferee for presentment to Landlord for Landlord's approval, all in
accordance with the terms, covenants, and conditions of this paragraph 19. If
Tenant intends to sublet the entire Premises and Landlord elects to terminate
this Lease, this Lease shall be terminated on the date specified in Tenant's
notice. If, however, this Lease shall terminate pursuant to the foregoing with
respect to less than all the Premises, the rent, as defined and reserved
hereinabove shall be adjusted on a pro rata basis to the number of square feet
retained by Tenant, and this Lease as so amended shall continue in full force
and effect. In the event Tenant is allowed to assign, transfer or sublet the
whole or any part of the Premises, with the prior written consent of Landlord,
no assignee, transferee or subtenant shall assign or transfer this Lease, either
in whole or in part, or sublet the whole or any part of the Premises, without
also having obtained the prior written consent of Landlord. A consent of
Landlord to one assignment, transfer, hypothecation, subletting, occupation or
use by any other person shall not release Tenant from any of Tenant's
obligations hereunder or be deemed to be a consent to any subsequent similar or
dissimilar assignment, transfer, hypothecation, subletting, occupation or use by
any other person. Any such assignment, transfer, hypothecation, subletting,
occupation or use without such consent shall be void and shall constitute a
breach of this Lease by Tenant and shall, at the option of Landlord exercised by
written notice to Tenant, terminate this Lease. The leasehold estate under this
Lease shall not, nor shall any interest therein, be assignable for any purpose
by operation of law without the written consent of Landlord. As a condition to
its consent, Landlord shall require Tenant to pay all expenses in connection
with the assignment, and Landlord shall require Tenant's assignee or transferee
(or other assignees or transferees) to assume in writing all of the obligations
under this Lease and for Tenant to remain liable to Landlord under the Lease.
Notwithstanding the above, in no event will Landlord consent to a sub-sublease.

20. SUBORDINATION AND MORTGAGES  In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust, upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord,
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding any such subordination, Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay all rent and observe and perform all of the provisions set forth in
this Lease.

21. ENTRY BY LANDLORD  Landlord reserves, and shall at all reasonable times,
after at least 24 hours notice (except in emergencies) have, the right to enter
the Premises to inspect them; to perform any services to be provided by Landlord
hereunder; to submit the Premises to prospective purchasers, mortgagers or
tenants; to post notices of nonresponsibility; and to alter, improve or repair
the Premises and any portion of the Complex, all without abatement of rent; and
may erect scaffolding and other necessary structures in or through the Premises
where reasonably required by the character of the work to be performed;
provided, however that the business of Tenant shall be interfered with to the
least extent that is reasonably practical. For each of the foregoing purposes,
Landlord shall at all times have and retain a key with which to unlock all of
the doors in an emergency in order to obtain entry to the Premises, and any
entry to the Premises obtained by Landlord by any of said means, or otherwise,
shall not under any circumstances be construed or deemed to be a forcible or
unlawful entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from the Premises or any portion thereof. Landlord shall
also have the right at any time to change the arrangement or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets or other public parts of the Complex and to change the name, number or
designation by which the Complex is commonly known, and none of the foregoing
shall be deemed an actual or constructive eviction of Tenant, or shall entitle
Tenant to any reduction of rent hereunder.

22. BANKRUPTCY AND DEFAULT  The commencement of a bankruptcy action or
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option,
constitute a breach of this Lease by Tenant. If the trustee or receiver
appointed to serve during a bankruptcy, liquidation, reorganization, insolvency
or similar action elects to reject Tenant's unexpired Lease, the trustee or
receiver shall notify Landlord in writing of its election within thirty (30)
days after an order for relief in a liquidation action or within thirty (30)
days after the commencement of any action.

      Within thirty (30) days after court approval of the assumption of this
Lease, the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under said Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, as used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent, and other
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach substantial any provision, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.

      Nothing contained in this section shall affect the existing right of
Landlord to refuse to accept an assignment upon commencement of or in connection
with a bankruptcy, liquidation, reorganization or insolvency action or an
assignment of Tenant for the benefit of creditors or other similar act. Nothing
contained in this Lease shall be construed as giving or granting or creating an
equity in the demised Premises to Tenant. In no event shall the leasehold estate
under this Lease, or any interest therein, be assigned by voluntary or
involuntary bankruptcy proceeding without the prior written consent of Landlord.
In no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency or reorganization proceedings.

      The failure to perform or honor any covenant, condition or representation
made under this Lease shall constitute a default hereunder by Tenant upon
expiration of the appropriate grace period hereinafter provided. Tenant shall
have a period of five (5) days from the date of written notice from Landlord
within which to cure any default in the payment of rental or adjustment thereto.
Tenant shall have a period of thirty (30) days from the date of written notice
from Landlord within which to cure any other default under this Lease; provided,
however, that if the nature of Tenant's failure is such that more than thirty
(30) days is reasonably required to cure the same, Tenant shall not be in
default so long as Tenant commences performance within such thirty (30) day
period and thereafter prosecutes the same to completion. Upon an uncured default
of this Lease by Tenant, Landlord shall have the following rights and remedies
in addition to any other rights or remedies available to Landlord at law or in
equity:

      (a). The rights and remedies provided for by California Civil Code Section
1951.2, including but not limited to, recovery of 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 rental loss for the same period that Tenant
proves could be reasonably avoided, as computed pursuant to subsection (b) of
said Section 1951.2. Any proof by Tenant under subparagraphs (2) and (3) of
Section 1951.2 of the California Civil Code of the amount of rental loss that
could be reasonably avoided shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker in the business of
renting property of the same type and use as the Premises and in the same
geographic vicinity. Such two real estate brokers shall select a third licensed
real estate broker, and the three licensed real estate brokers so selected shall
determine the amount of the rental loss that could be reasonably avoided from
the balance of the term of this Lease after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.

      (b). The rights and remedies provided by California Civil Code Section
which allows Landlord to continue the Lease in effect and to enforce all of its
rights and remedies under this Lease, including the right to recover rent as it
becomes due, for so long as Landlord does not terminate Tenant's right to
possession; acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's right
to possession.

      (c). The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.

      (d). To the extent permitted by law the right and power to enter the
Premises and remove therefrom all persons and property, to store such
property in a public warehouse or elsewhere at the cost of and for the account
of Tenant, and to sell such property and apply such proceeds therefrom pursuant
to applicable California law. Landlord may from time to time sublet the Premises
or any part thereof for such term or terms (which may extend beyond the term of
this Lease) and at such rent and such other terms as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises. Upon each subletting, (i) Tenant shall be immediately liable to
pay Landlord, in addition to indebtedness other than rent due hereunder, the
cost of such subletting, including, but not limited to, reasonable attorneys'
fees, and any real estate commissions actually paid, and the cost of such
alterations and repairs incurred by Landlord and the amount, if any, by which
the rent hereunder for the period of such subletting (to the extent such period
does not exceed the term hereof) exceeds the amount to be paid as rent for the
Premises for such period or (ii) at the option of Landlord, rents received from
such subletting shall be applied first to payment of indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the payment of any costs
of such subletting and of such alterations and repairs; third to payment of rent
due and unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of future rent as the same becomes due hereunder. If Tenant
has been credited with any rent to be received by such subletting under option
(i) and such rent shall not be promptly paid to Landlord by the subtenant(s), or
if such rentals received from such subletting under option (ii) during any month
be less than that to be paid during that month by Tenant hereunder, Tenant shall
pay any such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly. No taking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a written
notice of such

                                  page 5 of 8
<PAGE>   6
intention be given to Tenant. Notwithstanding any such subletting without
termination, Landlord may at any time hereafter elect to terminate this Lease
for such previous breach.

     (e)  The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply and rental collected
from the Premises and to exercise all other rights and remedies granted to
Landlord pursuant to subparagraph d, above.

23.  ABANDONMENT Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease and if Tenant shall abandon, vacate or surrender
said Premises, or be dispossessed by the process of law, or otherwise, any
personal property belonging to Tenant and left on the Premises shall be deemed
to be abandoned at the option of Landlord, except such property as may be
mortgaged to Landlord.

24.  DESTRUCTION In the event the Premises are destroyed in whole or in part
from any cause, except for routine maintenance and repairs and incidental
damage and destruction caused from vandalism and accidents for which Tenant is
responsible for under Paragraph 10, Landlord may, at its option:

     (a)  Rebuild or restore the Premises to their condition prior to the damage
          or destruction, or

     (b)  Terminate this Lease (provided that the Premises is damaged to the
          extent of 33 1/3% of the replacement cost).

     If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior
to the damage or destruction. Tenant shall be entitled to a reduction in rent
while such repair is being made in the proportion that the area of the Premises
rendered untenantable by such damage bears to the total area of the Premises.
If Landlord initially estimates that the rebuilding or restoration will exceed
180 days or if Landlord does not complete the rebuilding or restoration within
one hundred eighty (180) days following the date of destruction (such period of
time to be extended for delays caused by the fault or neglect of Tenant or
because of Acts of God, acts of public agencies, labor disputes, strikes,
fires, freight embargoes, rainy or stormy weather, inability to obtain
materials, supplies or fuels, acts of contractors or subcontractors, or delay
of the contractors or subcontractors due to such causes or other contingencies
beyond the control of Landlord), then Tenant shall have the right to terminate
this Lease by giving fifteen (15) days prior written notice to Landlord.
Notwithstanding anything herein to the contrary, Landlord's obligation to
rebuild or restore shall be limited to the building and interior improvements
constructed by Landlord as they existed as of the commencement date of the
Lease and shall not include restoration of Tenant's trade fixtures, equipment,
merchandise, or any improvements, alterations or additions made by Tenant to
the Premises, which Tenant shall forthwith replace or fully repair at Tenant's
sole cost and expense provided this Lease is not cancelled according to the
provisions above.

     Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932, Subdivision 2, in section 1933, Subdivision 4 of the
California Civil Code.

     In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than 33 1/3% of the replacement
cost thereof, Landlord may elect to terminate this Lease, whether the Premises
be injured or not. Notwithstanding anything to the contrary herein, Landlord may
terminate this Lease in the event of an uninsured event or if insurance proceeds
are insufficient to cover one hundred percent of the rebuilding costs net of the
deductible.

25. EMINENT DOMAIN  If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or conveyance
in lieu thereof, this Lease shall terminate as to any portion of the Premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award, or any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business.
Tenant's personal property, moving cost or loss or goodwill, shall be and
remain the property of Tenant.

     If (i) any action or proceeding is commenced for such taking of the
Premises or any part thereof, or if Landlord is advised in writing by any entity
or body having the right or power of condemnation of its intention to condemn
the premises or any portion thereof, or (ii) any of the foregoing events occur
with respect to the taking of any space in the Complex not leased hereby, or if
any such spaces so taken or conveyed in lieu of such taking and Landlord shall
decide to discontinue the use and operation of the Complex, or decide to
demolish, alter or rebuild the Complex, then, in any of such events Landlord
shall have the right to terminate this Lease by giving Tenant written notice
thereof within sixty (60) days of the date of receipt of said written advice, or
commencement of said action or proceeding, or taking conveyance, which
termination shall take place as of the first to occur of the last day of the
calendar month next following the month in which such notice is given or the
date on which title to the Premises shall vest in the condemnor.

     In the event of such a partial taking or conveyance of the Premises, if the
portion of the Premises taken or conveyed is so substantial that the Tenant can
no longer reasonably conduct its business, Tenant shall have the privilege of
terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do and upon
giving of such notice this Lease shall terminate on the last day of the
calendar month next following the month in which such notice is given, upon
payment by Tenant of the rent from the date of such taking or conveyance to the
date of termination.

     If a portion of the Premises be taken by condemnation or conveyance in lieu
thereof and neither Landlord nor Tenant shall terminate this Lease as provided
herein, this Lease shall continue in full force and effect as to the part of the
Premises not so taken or conveyed, and the rent herein shall be apportioned as
of the date of such taking or conveyance so that thereafter the rent to be paid
by Tenant shall be in the ratio that the area of the portion of the Premises not
so taken or conveyed bears to the total area of the Premises prior to such
taking.

26. SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the
Complex or any interest therein, by any owner of the reversion then constituting
Landlord, the transferor shall thereby be released from any further liability
upon any of the terms, covenants or conditions (express or implied) herein
contained in favor of Tenant, and in such event, insofar as such transfer is
concerned. Tenant agrees to look solely to the responsibility of the successor
in interest of such transferor in and to the Complex and this Lease. This Lease
shall not be affected by any such sale or conveyance, and Tenant agrees to
attorn to the successor in interest of such transferor.

27. ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord in
the land and buildings in which the leased Premises are located (whether such
interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by the lender or any
third party through judicial foreclosure or by exercise of a power of sale at
private trustee's foreclosure sale, Tenant hereby agrees to attorn to the
purchaser at any such foreclosure sale and to recognize such purchaser as the
Landlord under this Lease. In the event the lien of the deed of trust securing
the loan from a Lender to Landlord is prior and paramount to the Lease, this
Lease shall nonetheless continue in full force and effect for the remainder of
the unexpired term hereof, at the same rental herein reserved and upon all the
other terms, conditions and covenants herein contained.

28. HOLDING OVER Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly
provided in this Lease. Any holding over after the expiration or other
termination of the term of this Lease, with the consent of Landlord, shall be
construed to be a tenancy from month to month, on the same terms and conditions
herein specified insofar as applicable except that the monthly Basic Rent shall
be increased in an amount equal to one hundred fifty (150%) percent of the
monthly Basic Rent required during the last month of the Lease term.

29. CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten (10)
days' prior written notice to Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any, are claimed. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that this Lease is in full force and effect, without modification
except as may be represented by Landlord; that there are no uncured defaults in
Landlord's performance, and that not more than one month's rent has been paid in
advance.

30. CONSTRUCTION CHANGES It is understood that the description of the Premises
and the location of ductwork, plumbing and other facilities therein are subject
to such minor changes as Landlord or Landlord's architect determines to be
desirable in the course of construction of the Premises, and no such changes, or
any changes in plans for any other portions of the Complex shall affect this
Lease or entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant. Landlord does not guarantee the accuracy of any
drawings supplied to Tenant and verification of the accuracy of such drawings
rests with Tenant.

31. RIGHT OF LANDLORD TO PERFORM All terms, covenants and conditions of this
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent, required to be paid by
it hereunder and such failure shall continue for five (5) days after written
notice thereof by Landlord, or shall fail to perform any other term or covenant
hereunder on its part to be performed, and such failure shall continue for
thirty (30) days after written notice thereof by Landlord, Landlord, without
waiving or releasing Tenant from any obligation of Tenant hereunder, may, but
shall not be obligated to, make any such payment or perform

                                  page 6 of 8
<PAGE>   7

any such other term or covenant on Tenant's part to be performed. All sums so
paid by Landlord and all necessary costs of such performance by Landlord
together with interest thereon at the rate of the prime rate of interest per
annum as quoted by the Bank of America from the date of such payment or
performance by Landlord, shall be paid (and Tenant covenants to make such
payment) to Landlord on demand by Landlord, and Landlord shall have (in addition
to any other right or remedy of Landlord) the same rights and remedies in the
event of nonpayment by Tenant as in the case of failure by Tenant in the payment
of rent hereunder.

32. ATTORNEYS' FEES

     (A) In the event that either Landlord or Tenant should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease, or
because of the breach of any provision of this Lease, or for any other relief
against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgement.
     (B) Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.

33. WAIVER The waiver by either party of the other party's failure to perform
or observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any way
affect, the right of either party to insist upon performance and observance by
the other party in strict accordance with the terms hereof.

34. NOTICES All notices, demands, requests, advices or designations which may
be or are required to be given by either party to the other hereunder shall be
in writing. All notices, demands, requests, advices or designations by Landlord
to Tenant shall be sufficiently given, made or delivered if personally served on
Tenant by leaving the same at the Premises or if sent by United States certified
or registered mail, postage prepaid, addressed to Tenant at the Premises. All
notices demands, requests, advices or designations by Tenant to Landlord shall
be sent by United States certified or registered mail, postage prepaid,
addressed to Landlord at its offices at Peery/Arrillaga, 2560 Mission College
Blvd., #101, Santa Clara, CA 95054. Each notice, request, demand, advice or
designation referred to in this paragraph shall be deemed received on the date
of the personal service or mailing thereof in the manner herein provided, as the
case may be.

35. EXAMINATION OF LEASE Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a lease,
and this instrument is not effective as a lease or otherwise until its execution
and delivery by both Landlord and Tenant.

36. DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event earlier than thirty (30) days after written notice by Tenant to Landlord
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have heretofore been furnished to Tenant in
writing, specifying wherein Landlord has failed to perform such obligations;
provided, however, that if the nature of Landlord's obligations is such that
more than thirty (30) days are required for performance, then Landlord shall not
be in default if Landlord commences performance within such thirty (30) day
period and thereafter diligently prosecutes the same to completion.

37. CORPORATE AUTHORITY If Tenant is a corporation, (or a partnership) each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnership)
in accordance with its terms. If Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to Landlord a certified
copy of the resolution of the Board of Directors of said corporation authorizing
or ratifying the execution of this Lease.

39. LIMITATION OF LIABILITY In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord:

   (i)    the sole and exclusive remedy shall be against Landlord's interest in
          the Premises leased herein;

   (ii)   no partner of Landlord shall be sued or named as a party in any suit
          or action (except as may be necessary to secure jurisdiction of the
          partnership)

   (iii)  no service of process shall be made against any partner of Landlord
          (except as may be necessary to secure jurisdiction of the
          partnership)

   (iv)   no partner of Landlord shall be required to answer or otherwise plead
          to any service of process;

   (v)    no judgment will be taken against any partner of Landlord;

   (vi)   any judgment taken against any partner of Landlord may be vacated and
          set aside at any time without hearing;

   (vii)   no writ of execution will ever be levied against the assets of any
           partner of Landlord;

   (viii)  these covenants and agreements are enforceable both by Landlord and
           also by any partner of Landlord.

     Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.

40. MISCELLANEOUS AND GENERAL PROVISIONS

     a. Tenant shall not, without the written consent of Landlord, use the name
     of the building for any purpose other than as the address of the business
     conducted by Tenant in the Premises.

     b. This Lease shall in all respects be governed by and construed in
     accordance with the laws of the State of California. If any provision of
     this Lease shall be invalid, unenforceable or ineffective for any reason
     whatsoever, all other provisions hereof shall be and remain in full force
     and effect.

     c. The term "Premises" includes the space leased hereby and any
     improvements now or hereafter installed therein or attached thereto. The
     term "Landlord" or any pronoun used in place thereof includes the plural as
     well as the singular and the successors and assigns of Landlord. The term
     "Tenant" or any pronoun used in place thereof includes the plural as well
     as the singular and individuals, firms, associations, partnerships and
     corporations, and their and each of their respective heirs, executors,
     administrators, successors and permitted assigns, according to the context
     hereof, and the provisions of this Lease shall inure to the benefit of and
     bind such heirs, executors, administrators, successors and permitted
     assigns.

          The term "person" includes the plural as well as the singular and
     individuals, firms, associations, partnerships and corporations. Words used
     in any gender include other genders. If there be more than one Tenant the
     obligations of Tenant hereunder are joint and several. The paragraph
     headings of this Lease are for convenience of reference only and shall have
     no effect upon the construction or interpretation of any provision hereof.

     d. Time is of the essence of this Lease and of each and all of its
     provisions.

                                  page 7 of 8
<PAGE>   8
       e.  At the expiration or earlier termination of this Lease, Tenant shall
       execute, acknowledge and deliver to Landlord, within ten (10) days after
       written demand from Landlord to Tenant, any quitclaim deed or other
       document required by any reputable title company, licensed to operate in
       the State of California, to remove the cloud or encumbrance created by
       this Lease from the real property of which Tenant's Premises are a part.

       f.  This instrument along with any exhibits and attachments hereto
       constitutes the entire agreement between Landlord and Tenant relative to
       the Premises and this agreement and the exhibits and attachments may be
       altered, amended or revoked only by an instrument in writing signed by
       both Landlord and Tenant. Landlord and Tenant agree hereby that all prior
       or contemporaneous oral agreements between and among themselves and their
       agents or representatives relative to the leasing of the Premises are
       merged in or revoked by this agreement.

       g.  Neither Landlord nor Tenant shall record this Lease or a short form
       memorandum hereof without the consent of the other.

       h.  Tenant further agrees to execute any amendments required by a lender
       to enable Landlord to obtain financing, so long as Tenant's rights
       hereunder are not substantially affected.

       i.  Paragraphs 43 through 52 are added hereto and are included as a part
       of this lease.

       j.  Clauses, plats and riders, if any, signed by Landlord and Tenant and
       endorsed on or affixed to this Lease are a part hereof.

       k.  Tenant covenants and agrees that no diminution or shutting off of
       light, air or view by any structure which may be hereafter erected
       (whether or not by Landlord) shall in any way affect his Lease, entitle
       Tenant to any reduction of rent hereunder or result in any liability of
       Landlord to Tenant.

41. BROKERS  Tenant warrants that it had dealings with only the following real
estate brokers or agents in connection with the negotiation of this Lease:  none
that it knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.

42. SIGNS  No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written
consent of Landlord first had and obtained and Landlord shall have the right to
remove any such sign, placard, picture, advertisement, name or notice without
notice to and at the expense of Tenant. If Tenant is allowed to print or affix
or in any way place a sign in, on, or about the Premises, upon expiration or
other sooner termination of this Lease, Tenant at Tenant's sole cost and expense
shall both remove such sign and repair all damage in such a manner as to
restore all aspects of the appearance of the Premises to the condition prior to
the placement of said sign.

     All approved signs or lettering on outside doors shall be printed, painted,
     affixed or inscribed at the expense of Tenant by a person approved of by
     Landlord.

     Tenant shall not place anything or allow anything to be placed near the
     glass of any window, door partition or wall which may appear unsightly
     from outside the Premises.

     IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
     Lease as of the day and year last written below.

<TABLE>
<S>                                            <C>
LANDLORD:                                      TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST                SELECTICA, INC.
                                               a California corporation

By /s/ JOHN ARRILLAGA                          By /s/ [SIGNATURE ILLEGIBLE]
   -------------------------------------          --------------------------
   John Arrillaga

Date:    10/6/99                               Title Vice President, Finance & CEO
      ----------------------------------             -------------------------------

RICHARD T. PEERY SEPARATE PROPERTY TRUST
                                               Print or Type Name /s/ [SIGNATURE ILLEGIBLE]
                                                                  --------------------------
                                               Date:   10-6-99
                                                    ----------------------------------------
By /s/ RICHARD T. PEERY
   -------------------------------------
   Richard T. Peery, Trustee

Date:   10/6/99
      ----------------------------------
</TABLE>

                                  page 8 of 8
<PAGE>   9
Paragraphs 43 through 52 to Lease Agreement dated October 1, 1999, By and
Between the John Arrillaga Survivor's Trust and the Richard T. Peery Separate
Property Trust, as Landlord, and Selectica, Inc., a California corporation, as
Tenant for 79,803(+/-) Square Feet of Space Located at 3 W. Plumeria Drive, San
Jose, California.

43.  BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate
sum of TWENTY ONE MILLION SIX HUNDRED SIXTY FOUR THOUSAND SEVEN HUNDRED
FORTY AND 36/100 DOLLARS ($21,664,740.36), shall be payable as follows:

     On November 15, 1999, the sum of FIFTY NINE THOUSAND TWO HUNDRED AND
NO/100 DOLLARS ($59,200.00) shall be due, representing the prorated Basic Rent
for the period of November 15, 1999 through November 30, 1999.

     On December 1, 1999, the sum of ONE HUNDRED ELEVEN THOUSAND AND NO/100
DOLLARS ($111,000.00) shall be due, and a like sum due on the first day of each
month thereafter, through and including October 1, 2000.

     On November 1, 2000, the sum of ONE HUNDRED THIRTY THOUSAND FIVE HUNDRED
THIRTY EIGHT AND 96/100 DOLLARS ($130,538.96) shall be due, representing the
prorated Basic Rent due for the month of November 2000.

     On December 1, 2000, the sum of ONE HUNDRED FIFTY FIVE THOUSAND SIX
HUNDRED FIFTEEN AND 85/100 DOLLARS ($155,615.85) shall be due, and a like sum
due on the first day of each month thereafter, through and including November
1, 2001.

     On December 1, 2001, the sum of ONE HUNDRED SIXTY THREE THOUSAND FIVE
HUNDRED NINETY SIX AND 15/100 DOLLARS ($163,596.15) shall be due, and a like sum
due on the first day of each month thereafter, through and including November 1,
2001.

     On December 1, 2002, the sum of ONE HUNDRED SEVENTY TWO THOUSAND FIVE
HUNDRED SEVENTY SIX AND 45/100 DOLLARS ($171,576.45) shall be due, and a like
sum due on the first day of each month thereafter, through and including
November 1, 2003.

     On December 1, 2003, the sum of ONE HUNDRED SEVENTY NINE THOUSAND FIVE
HUNDRED FIFTY SIX AND 75/100 DOLLARS ($179,556.75) shall be due, and a like sum
due on the first day of each month thereafter, through and including November
1, 2004.

     On December 1, 2004, the sum of ONE HUNDRED EIGHTY SEVEN THOUSAND FIVE
HUNDRED THIRTY SEVEN AND 05/100 DOLLARS ($187,537.05) shall be due, and a like
sum due on the first day of each month thereafter, through and including
November 1, 2005.

     On December 1, 2005, the sum of ONE HUNDRED NINETY FIVE THOUSAND FIVE
HUNDRED SEVENTEEN AND 35/100 DOLLARS ($195,517.35) shall be due, and a like sum
due on the first day of each month thereafter, through and including November 1,
2006.

     On December 1, 2006, the sum of TWO HUNDRED THREE THOUSAND FOUR HUNDRED
NINETY SEVEN AND 65/100 DOLLARS ($203,497.65) shall be due, and a like sum due
on the first day of each month thereafter, through and including November 1,
2007.

     On December 1, 2007, the sum of TWO HUNDRED ELEVEN THOUSAND FOUR HUNDRED
SEVENTY SEVEN AND 95/100 DOLLARS ($211,477.95) shall be due, and a like sum due
on the first day of each month thereafter, through and including November 1,
2008.

     On December 1, 2008, the sum of TWO HUNDRED NINETEEN THOUSAND FOUR HUNDRED
FIFTY EIGHT AND 25/100 DOLLARS ($219,458.25) shall be due, and a like sum due
on the first day of each month thereafter, through and including November 1,
2009; or until the entire aggregate sum of TWENTY ONE MILLION SIX HUNDRED SIXTY
FOUR THOUSAND SEVEN HUNDRED FORTY AND 36/100 DOLLARS ($21,664,740.36) has been
paid.

44.  "AS-IS" BASIS: Subject only to Landlord making the improvements shown on
Exhibit B to be attached hereto, it is hereby agreed that the Premises leased
hereunder is leased strictly on an

                                     Page 9
<PAGE>   10
"as-is" basis and in its present condition, and in the configuration as shown
on Exhibit B to be attached hereto, and by reference made a part hereof. It is
specifically agreed between the parties that after Landlord makes the interior
improvements as shown on Exhibit B, Landlord shall not be required to make, nor
be responsible for any cost, in connection with any repair, restoration, and/or
improvement to the Premises in order for this Lease to commence, or thereafter,
throughout the Term of this Lease. Notwithstanding anything to the contrary
within this Lease, Landlord makes no warranty or representation of any kind or
nature whatsoever as to the condition or repair of the Premises, nor as to the
use or occupancy which may be made thereof.

45.  CONSENT: Whenever the consent of one party to the other is required
hereunder, such consent shall not be unreasonably withheld.

46.  CHOICE OF LAW; SEVERABILITY. This Lease shall in all respects be governed
by and construed in accordance with the laws of the State of California. If any
provisions of this Lease shall be invalid, unenforceable, or ineffective for
any reason whatsoever, all other provisions hereof shall be and remain in full
force and effect.

47.  AUTHORITY TO EXECUTE. The parties executing this Lease Agreement hereby
warrant and represent that they are properly authorized to execute this Lease
Agreement and bind the parties on behalf of whom they execute this Lease
Agreement and to all of the terms, covenants and conditions of this Lease
Agreement as they relate to the respective parties hereto.

48.  ASSESSMENT CREDITS: The demised property herein may be subject to a
special assessment levied by the City of San Jose as part of an Improvement
District. As a part of said special assessment proceedings (if any), additional
bonds were or may be sold and assessments were or may be levied to provide for
construction contingencies and reserve funds. Interest shall be earned on such
funds created for contingencies and on reserve funds which will be credited for
the benefit of said assessment district. To the extent surpluses are created in
said district through unused contingency funds, interest earnings or reserve
funds, such surpluses shall be deemed the property of Landlord. Notwithstanding
that such surpluses may be credited on assessments otherwise due against the
Leased Premises, Tenant shall pay to Landlord, as additional rent if, and at
the time of any such credit of surpluses, an amount equal to all such surpluses
so credited. For example: if (i) the property is subject to an annual
assessment of $1,000.00, and (ii) a surplus of $200.00 is credited towards the
current year's assessment which reduces the assessment amount shown on the
property tax bill from $1,000.00 to $800.00, Tenant shall, upon receipt of
notice from Landlord, pay to Landlord said $200.00 credit as Additional Rent.

49.  ASSIGNMENT AND SUBLETTING (CONTINUED):

     A.   Notwithstanding the foregoing, Landlord and Tenant agree that it
shall not be unreasonable for Landlord to refuse to consent to a proposed
assignment, sublease or other transfer ("Proposed Transfer") if the Premises or
any other portion of the Property would become subject to additional or
different Government Requirements as a direct or indirect consequence of the
Proposed Transfer and/or the Proposed Transferee's use and occupancy of the
Premises and the Property. However, Landlord may, in its sole discretion,
consent to such a Proposed Transfer where Landlord is indemnified by Tenant and
(i) Subtenant or (ii) Assignee, in form and substance satisfactory to
Landlord's counsel, by Tenant and/or the Proposed Transferee from and against
any and all costs, expenses, obligations and liability arising out of the
Proposed Transfer and/or the Proposed Transferee's use and occupancy of the
Premises and the Property.

     B.   Any and all sublease agreement(s) between Tenant and any and all
subtenant(s) (which agreements must be consented to by Landlord, pursuant to
the requirements of this Lease) shall contain the following language:

          "If Landlord and Tenant jointly and voluntarily elect, for any reason
     whatsoever, to terminate the Master Lease prior to the scheduled Master
     Lease termination date, then this Sublease (if then still in effect) shall
     terminate concurrently with the termination of the Master Lease. Subtenant
     expressly acknowledges and agrees that (1) the voluntary termination of the
     Master Lease by Landlord and Tenant and the resulting termination of this
     Sublease shall not give Subtenant any right or power to make any legal or
     equitable claim against

                                    Page 10

<PAGE>   11
     Landlord, including without limitation any claim for interference with
     contract or interference with prospective economic advantage, and (2)
     Subtenant hereby waives any and all rights it may have under law or at
     equity against Landlord to challenge such an early termination of the
     Sublease, and unconditionally releases and relieves Landlord, and its
     officers, directors, employees and agents, from any and all claims,
     demands, and/or causes of action whatsoever (collectively, "Claims"),
     whether such matters are known or unknown, latent or apparent, suspected or
     unsuspected, foreseeable or unforeseeable, which Subtenant may have arising
     out of or in connection with any such early termination of this Sublease.
     Subtenant knowingly and intentionally waives any and all protection which
     is or may be given by Section 1542 of the California Civil Code which
     provides as follows: "A general release does not extend to claims which the
     creditor does not know or suspect to exist in his favor at the time of
     executing the release, which if known by him must have materially affected
     his settlement with debtor.

          The term of this Sublease is therefore subject to early termination.
     Subtenant's initials here below evidence (a) Subtenant's consideration of
     and agreement to this early termination provision, (b) Subtenant's
     acknowledgment that, in determining the net benefits to be derived by
     Subtenant under the terms of this Sublease, Subtenant has anticipated the
     potential for early termination, and (c) Subtenant's agreement to the
     general waiver and release of Claims above.

          Initials: _______________               Initials: _______________
                    Subtenant                               Tenant

50.  BANKRUPTCY AND DEFAULT: Paragraph 22 is modified to provide that with
respect to non-monetary defaults not involving Tenant's failure to pay Basic
Rent or Additional Rent, Tenant shall not be in default of any non-monetary
obligation if (i) more than thirty (30) days is required to cure such
non-monetary default, and (ii) Tenant commences cure of such default as soon as
reasonably practicable after receiving written notice of such default from
Landlord and thereafter continuously and with due diligence prosecutes such
cure to completion.

51.  ABANDONMENT: Paragraph 23 is modified to provide that Tenant shall not be
in default under the Lease if it leaves all or any part of Premises vacant so
long as (i) Tenant is performing all of its other obligations under the Lease
including the obligation to pay Basic Rent and Additional Rent (ii) Tenant
provides on-site security during normal business hours for those parts of the
Premises left vacant, (iii) such vacancy does not materially and adversely
affect the validity or coverage of any policy of insurance carried by Landlord
with respect to the Premises, and (iv) the utilities and heating and
ventilation system are operated and maintained to the extent necessary to
prevent damage to the Premises or its systems.

52.  HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect to
the existence or use of "Hazardous Materials" (as defined herein) on, in, under
or about the Premises and real property located beneath said Premises and the
common areas of the Complex (hereinafter collectively referred to as the
"Property"):

     A.   As used herein, the term "Hazardous Materials" shall mean any
material, waste, chemical, mixture or byproduct which is or hereafter is
defined, listed or designated under Environmental Laws (defined below) as a
pollutant, or as a contaminant, or as a toxic or hazardous substance, waste or
material, or any other unwholesome, hazardous, toxic, biohazardous, or
radioactive material, waste, chemical, mixture or byproduct, or which is listed,
regulated or restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions thereof,
polychlorinated biphenyls, or asbestos). As used herein, the term "Environmental
Laws" shall mean any applicable Federal, State of California or local government
law (including common law), statute, regulation, rule, ordinance, permit,
license, order, requirement, agreement, or approval, or any determination,
judgment, directive, or order of any executive or judicial authority at any
level of Federal, State of California or local government (whether now existing
or subsequently adopted or promulgated) relating to pollution or the protection
of the environment, ecology, natural resources, or public health and safety.

     B.   Tenant shall obtain Landlord's written consent, which may be withheld
in

                                    Page 11
<PAGE>   12
Landlord's discretion, prior to the occurrence of any Tenant's Hazardous
Materials Activities (defined below); provided, however, that Landlord's
consent shall not be required for normal use in compliance with applicable
Environmental Laws of customary household and office supplies (Tenant shall
first provide Landlord with a list of said materials use), such as mild
cleaners, lubricants and copier toner. As used herein, the term "Tenant's
Hazardous Materials Activities" shall mean any and all use, handling,
generation, storage, disposal, treatment, transportation, release, discharge,
or emission of any Hazardous Materials on, in, beneath, to, from, at or about
the Property, in connection with Tenant's use of the Property, or by Tenant or
by any of Tenant's agents, employees, contractors, vendors, invitees, visitors
or its future subtenants or assignees. Tenant agrees that any and all Tenant's
Hazardous Materials Activities shall be conducted in strict, full compliance
with applicable Environmental Laws at Tenant's expense, and shall not result in
any contamination of the Property or the environment. Tenant agrees to provide
Landlord with prompt written notice of any spill or release of Hazardous
Materials at the Property during the term of the Lease of which Tenant becomes
aware, and further agrees to provide Landlord with prompt written notice of any
violation of Environmental Laws in connection with Tenant's Hazardous Materials
Activities of which Tenant becomes aware. If Tenant's Hazardous Materials
Activities involve Hazardous Materials other than normal use of customary
household and office supplies, Tenant also agrees at Tenant's expense: (i) to
install such Hazardous Materials monitoring, storage and containment devices as
Landlord reasonably deems necessary (Landlord shall have no obligation to
evaluate the need for any such installation or to require any such
installation); (ii) provide Landlord with a written inventory of such Hazardous
Materials, including an update of same each year upon the anniversary date of
the Commencement Date of the Lease ("Anniversary Date"); and (iii) on each
Anniversary Date, to retain a qualified environmental consultant, acceptable to
Landlord, to evaluate whether Tenant is in compliance with all applicable
Environmental Laws with respect to Tenant's Hazardous Materials Activities.
Tenant, at its expense, shall submit to Landlord a report from such
environmental consultant which discusses the environmental consultant's
findings within two (2) months of each Anniversary Date. Tenant, at its
expense, shall promptly undertake and complete any and all steps necessary, and
in full compliance with applicable Environmental Laws, to fully correct any and
all problems or deficiencies identified by the environmental consultant, and
promptly provide Landlord with documentation of all such corrections.

     C.   Prior to termination or expiration of the Lease, Tenant, at its
expense, shall (i) properly remove from the Property all Hazardous Materials
which come to be located at the Property in connection with Tenant's Hazardous
Materials Activities, and (ii) fully comply with and complete all facility
closure requirements of applicable Environmental Laws regarding Tenant's
Hazardous Materials Activities, including but not limited to (x) properly
restoring and repairing the Property to the extent damaged by such closure
activities, and (y) obtaining from the local Fire Department or other
appropriate governmental authority with jurisdiction a written concurrence that
closure has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
such closure activities.

     D.   If Landlord, in its sole discretion, believes that the Property has
become contaminated as a result of Tenant's Hazardous Materials Activities,
Landlord in addition to any other rights it may have under this Lease or under
Environmental Laws or other laws, may enter upon the Property and conduct
inspection, sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of determining the
nature and extent of such contamination. Tenant shall promptly reimburse
Landlord for the costs of such an investigation, including but not limited to
reasonable attorneys' fees Landlord incurs with respect to such investigation,
that discloses Hazardous Materials contamination for which Tenant is liable
under this Lease. Notwithstanding the above, Landlord may, at its option and in
its sole and absolute discretion, choose to perform remediation and obtain
reimbursement for cleanup costs as set forth herein from Tenant. Any cleanup
costs incurred by Landlord as the result of Tenant's Hazardous Materials
Activities shall be reimbursed by Tenant within thirty (30) days of presentation
of written documentation of the expense to Tenant by Landlord. Such
reimbursable costs shall include, but not be limited to, any reasonable
consultant and attorney fees incurred by Landlord. Tenant shall take all
actions necessary to preserve any claims it has against third parties,
including, but not limited to, its insurers, for claims related to its
operation, management of Hazardous Materials or contamination of the Property.
Except as may be required of Tenant by applicable Environmental Laws, Tenant
shall not perform any sampling, testing, or drilling to identify the presence
of any Hazardous Materials at the Property, without Landlord's prior written
consent which may be withheld in Landlord's discretion. Tenant shall promptly
provide Landlord with copies of any claims, notices, work plans, data and
reports prepared, received or submitted in connection with any sampling,
testing or drilling performed pursuant to the preceding sentence.

     E.   Tenant shall indemnify, defend (with legal counsel acceptable to
Landlord, whose

                                    Page 12
<PAGE>   13
consent shall not unreasonably be withheld) and hold harmless Landlord, its
employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not limited
to third party claims from a private party or a government authority),
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's Hazardous
Materials Activities; (ii) any Hazardous Materials contamination caused by
Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any
obligation of Tenant under this Paragraph 52 (collectively, "Tenant's
Environmental Indemnification"). Tenant's Environmental Indemnification shall
include but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution in fair
market value of the Property. Tenant's Environmental Indemnification shall
further include but is not limited to the obligation to diligently and properly
implement to completion, at Tenant's expense, any and all environmental
investigation, removal, remediation, monitoring, reporting, closure activities,
or other environmental response action (collectively, "Response Actions").
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
Response Actions.

It is agreed that the Tenant's responsibilities related to Hazardous Materials
will survive the expiration or termination of this Lease and that Landlord may
obtain specific performance of Tenant's responsibilities under this paragraph
52.

                                    Page 13

<PAGE>   14

                             [GRAPHIC -- SITE PLAN]

EXHIBIT A TO LEASE AGREEMENT DATED OCTOBER 1, 1999 BY AND BETWEEN THE JOHN
ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS
LANDLORD, AND SELECTICA, INC., AS TENANT.

                                   ORCHARD 4

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