Document:

Exhibit 10.1
         LEASE

         Lease  (referred  to herein as the  "Lease")  made as of the 1st day of
June 2000, between SPACELY LLC, a Delaware limited liability company, authorized
to transact business in New York State, having an office at 345 Park Avenue, New
York,  New York, as Landlord  (referred to herein as "Owner"),  and PWR SYSTEMS,
INC., a Delaware corporation authorized to transact business in the State of New
York,  having an office at 3512 Veterans  Memorial  Highway,  Bohemia,  New York
11716, as Tenant (referred to as "Tenant").

                              W I T N E S S E T H :

         WHEREAS:

                  1. Owner is the owner of the  buildings  (referred  to herein,
collectively,  as the  "Building")  at 3500  Sunrise  Highway  known as the Long
Island Technology Center in the Town of Islip,  County of Suffolk,  State of New
York.  The  Building  together  with the plot of land  upon  which it  stands is
referred to as the "Real Property".

                  2. Tenant  desires to lease a portion of the Tech  Building on
the first (1st) floor indicated by outlining and diagonal  markings on the floor
plan annexed as Exhibit 1 for a period of five (5) years and three (3) months to
be used as general and/or executive offices; and

                  3.  Owner is  willing to lease such space to Tenant and Tenant
is  willing  to enter  into  such  lease  all under  the  terms,  covenants  and
conditions set forth herein.

         NOW,  THEREFORE,  in consideration  of the mutual  covenants  contained
herein the parties agree as follows:

         FIRST:  Grant of Lease and Demised  Term:  Owner does  hereby  grant to
Tenant upon the terms and  conditions  of this Lease a lease to use a portion of
the Building which is delineated by outlining and diagonal markings on the floor
plan  annexed  hereto and made a part hereof as Exhibit 1 (referred to herein as
the "Demised  Premises").  The Lease shall be for a term  (referred to herein as
the  "Demised  Term") of five (5) years and three (3) months to commence on June
1, 2000, (such date is referred to herein as the "Commencement Date") and to end
on August 31,  2005,  (the  "Expiration  Date"),  unless the Demised  Term shall
sooner  terminate  pursuant to any of the terms or  conditions  of this Lease or
pursuant to law. Tenant waives any right to recover

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any damages which may result from Owner's  failure to deliver  possession of the
Demised Premises to Tenant on the Commencement Date.

         SECOND:  Rent: (A) Tenant shall pay to Owner an annual rent  (sometimes
referred  to as "Fixed  Rent") of EIGHTY  TWO  THOUSAND  SIXTY  FIVE and  50/100
($82,065.50)  DOLLARS with respect to the period from the  Commencement  Date to
and  including  May 31, 2002 ("1st Rent  Period");  EIGHTY FIVE  THOUSAND  EIGHT
HUNDRED EIGHTY TWO and 50/100 ($85,882.50) DOLLARS with respect to the next year
of the Demised  Term ("2nd Rent  Period")  and EIGHTY NINE  THOUSAND SIX HUNDRED
NINETY NINE and 50/100 ($89,699.50) DOLLARS with respect to the remainder of the
Demised  Term  ("3rd  Rent  Period").  Such Fixed Rent shall be payable in equal
monthly  installments each in the sum of SIX THOUSAND EIGHT HUNDRED THIRTY EIGHT
and  79/100  ($6,838.79)  DOLLARS  with  respect to the 1st Rent  Period,  SEVEN
THOUSAND ONE HUNDRED  FIFTY SIX and 88/100  ($7,156.88)  DOLLARS with respect to
the 2nd Rent Period and SEVEN  THOUSAND  FOUR  HUNDRED  SEVENTY  FOUR and 96/100
($7,474.96) DOLLARS with respect to the 3rd Rent Period, and shall be payable in
advance on the first (1st) day of each month of the Demised Term  without  prior
demand therefor and without any offset or deduction whatsoever.  The Owner shall
have all of the rights and  remedies  at law to collect  Fixed Rent and shall be
paid in lawful money of the United States.

               (B) Upon  execution and delivery of this Lease,  Tenant shall pay
to  Owner  the  sum of SIX  THOUSAND  EIGHT  HUNDRED  THIRTY  EIGHT  and  79/100
($6,838.79) DOLLARS as the monthly installment of Fixed Rent for the period July
1, 2000 to July 31, 2000 both dates inclusive.

               (C)  Provided  Tenant  is not then in  default  under  any of the
terms,  covenants or conditions of this Lease on Tenant's part to be observed or
performed  beyond the  applicable  grace period  provided for the curing of such
default,  tenant shall not be required to pay the then applicable Fixed Rent for
the periods  from (i) June 1, 2000 to June 30,2000  both dates  inclusive,  (ii)
June 1, 2001 to June 30,  2001 both  dated  inclusive  and (iii) June 1, 2002 to
June 30, 2002 both dates  inclusive,  but Tenant shall  otherwise be required to
comply with all of the other terms,  covenants  and  conditions of this Lease on
Tenant's part to be observed or performed.

          THIRD:  Use. (A) The Demised  Premises  shall be used by Tenant solely
for  general  and/or  executive  offices  and  for  no  other  purpose.   Tenant
acknowledges  and agrees that no  representations  have been made to Tenant with
respect to the use, if any, to which the Demised Premises may be put.

               (B)  Tenant  shall  not  use or  occupy,  or  permit  the  use or
occupancy of the Demised  Premises or any part  thereof,  for any purpose  other
than the purpose specifically set forth in Paragraph A of this Article THIRD, or
in any  manner  which,  in  Owner's  judgment,  (a)  shall  adversely  affect or
interfere with (i) any services required to be provided by Owner to Tenant or to
any other tenant or occupant of the Building,  or (ii) the

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proper  and  economical  rendition  of any such  service,  or  (iii)  the use or
enjoyment or any part of the  Building by any other  tenant or occupant,  or (b)
shall tend to impair the character or dignity of the Building.  Without limiting
the  aforesaid,  Tenant  shall  conduct  its  business  and  control its agents,
employees,  invitees and visitors in such manner as not to create any  nuisance,
or interfere with, annoy or disturb Owner or any tenant, user or occupant of the
Building.

               (C) Without in any way limiting the  generality of Section (B) of
this Article THIRD,  Tenant shall not use or occupy, or sublet or permit the use
or  occupancy  of the Demised  Premises or any part  thereof,  for use as a call
center.  For the purposes of this Article, a call center is defined as any group
of one hundred (100) or more employees or other persons that primarily perform a
task involving in-bound or out-bound telephone  conversations with customers for
the purpose of selling goods or services or  responding  to customer  inquiries.
Excluded  from this  definition  are  functions  that are dedicated to providing
technical assistance to existing customers.

          FOURTH:  Alterations.  Tenant shall not make any  changes,  additions,
improvements, alterations or other physical changes to the Demised Premises, the
Building  or any  portions  thereof,  or any of the  systems  therein or thereon
(referred  to  collectively  as  "Alterations"  and  singly as an  "Alteration")
without the prior written consent of Owner in each instance, which consent shall
not be unreasonably  withheld,  and in the event that Owner grants such consent,
such  Alteration  shall be made in compliance  with all Legal  Requirements  and
performed in a manner and at such times as Owner reasonably  designates and such
Alterations or installations shall not, in any event, interfere with the use and
operation  of the  Building  by Owner or any tenant,  occupant or user  thereof.
Without limiting the aforesaid,  Tenant agrees that (a) prior to any Alterations
by  Tenant or the  installation  of any of  Tenant's  equipment  in the  Demised
Premises,  Tenant shall submit detailed plans and  specifications of the planned
Alteration or  installation to Owner for Owner's  approval,  provided that in no
event will Owner's approval of such plans be deemed a  representation  that they
comply with applicable Legal Requirements,  and will not cause interference with
communication  operations  of Owner,  or any  tenant,  user or  occupant  of the
Building  and any such  Alterations  shall be made only in  accordance  with the
plans and specifications  approved by Owner, (b) all contractors  performing any
Alterations, modification or maintenance work on behalf of Tenant at the Demised
Premises or in the Building  shall be subject to the prior  written  approval of
Owner  prior to the  commencement  of such  work,  which  approval  shall not be
unreasonably  withheld.  In the event Owner or its agents employ any independent
architect or engineer to examine any plans or specifications submitted by Tenant
to Owner in  connection  with any proposed  Alteration,  Tenant agrees to pay to
Owner a sum  equal to any  reasonable  fees  incurred  by  Owner  in  connection
therewith.  Nothing in this Lease shall be construed in any way as  constituting
the consent or request of Owner,  express or implied, by inference or otherwise,
to any contractor,  subcontractor,  laborer or material men, for the performance
of any labor or the  furnishing of any material for any specific  Alteration to,
or repair of, the Demised  Premises,  the  Building,  or any part  thereof.  Any
mechanic's or other lien filed against the Building,  or the Real Property,  for
work claimed to have been done for, or materials  claimed to have been furnished
to, Tenant or any person claiming  through or under Tenant or based upon any act
or

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omission  or  alleged  act or  omission  of Tenant or any such  person  shall be
discharged  by Tenant (by bond or  otherwise) at Tenant's sole cost and expense,
within twenty (20) days after the filing of such lien.

         FIFTH: Repairs and Maintenance.  (1) Tenant shall, at its sole cost and
expense,  maintain  and  take  good  care of (i) the  Demised  Premises  and all
fixtures,  installations and  appurtenances  contained therein and (ii) Tenant's
personal property and equipment,  and all replacements and additions thereto and
Tenant shall make all repairs,  structural or otherwise,  foreseen or unforeseen
as and when needed to keep the Demised Premises,  and Tenant's personal property
and  equipment  in good order and  repair.  Owner  shall have no  obligation  to
maintain, repair, operate or safeguard Tenant's equipment.

                    (2)  Supplementing  the provisions of Section (1), Owner, at
Owner's sole cost and expense,  shall timely make (i) all structural  repairs to
the Demised Premises as and when required, (ii) all repairs necessary to furnish
the plumbing,  electrical, air conditioning,  ventilating,  heating and elevator
services  required to be furnished by Owner to Tenant  under the  provisions  of
this  Lease,  and (iii) all  necessary  repairs  to the public  portions  of the
Building which affect Tenant's use and enjoyment of the Demised Premises, except
that Owner  shall not be  required  to make any of the  repairs  referred  to in
subdivision  (i),  (ii) or (iii) of this sentence if Tenant is obligated to make
such repairs  pursuant to the  provisions of Section (1) of this Article  FIFTH.
Notwithstanding  the foregoing  provisions of this Section,  Owner shall have no
obligation to make any repairs  unless and until  specific  actual notice of the
necessity therefor shall have been given to Owner.

         SIXTH: Utilities and Services: Section 6.01. Electricity:  A. Owner, at
Owner's expense,  shall  redistribute or furnish electrical energy to or for the
use of Tenant in the Demised Premises for the operation of the lighting fixtures
and  the  electrical  receptacles  installed  in  the  Demised  Premises  on the
Commencement  Date.  There shall be no specific  charge by way of measuring such
electrical  energy on any meter or  otherwise,  as the charge for the service of
redistributing  or furnishing  such  electrical  energy has been included in the
Fixed  Rent on a  so-called  "rent  inclusion"  basis.  The  parties  agree that
although the charge for the service of redistributing  or furnishing  electrical
energy is included in the Fixed Rent on a so-called "rent inclusion"  basis, the
value to Tenant of such  service may not be fully  reflected  in the Fixed Rent.
Accordingly,  Tenant  agrees  that  Owner  may cause an  independent  electrical
engineer  or  electrical   consulting  firm,   selected  by  Owner,  to  make  a
determination, following the commencement of Tenant's normal business activities
in the Demised  Premises,  of the full value to Tenant of such services supplied
by Owner,  to wit: the potential  electrical  energy supplied to Tenant annually
based upon the estimated capacity of the electrical  feeders,  risers and wiring
and other electrical  facilities serving the Demised Premises.  Such engineer or
consulting firm shall certify such determination in writing to Owner and Tenant.
If it shall be  determined  that the full value to Tenant of such  service is in
excess of FIVE THOUSAND SEVEN HUNDRED TWENTY FIVE and 50/100 ($5,725.50) DOLLARS
(such sum is referred to as the "  Electrical  Inclusion  Factor"),  the parties
shall enter into a written  supplementary  agreement,  in form  satisfactory  to
Owner,  modifying this Lease as of the Commencement Date by increasing the Fixed
Rent and the  Electrical  Inclusion  Factor  for the entire  Demised  Term by an
annual amount equal to such excess.  However,

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if it shall be so determined  that the full value to Tenant of such service does
not exceed the Electrical  Inclusion Factor, no such agreement shall be executed
and there shall be no  increase or decrease in the Fixed Rent or the  Electrical
Inclusion  Factor by reason of such  determination.  If either the  quantity  or
character of electrical  service is changed by the  corporation(s)  and/or other
entity(ies) selected by Owner to supply electrical service to the Building or is
no longer  available  or suitable  for  Tenant's  requirements,  no such change,
unavailability  or  unsuitability  shall  constitute  an actual or  constructive
eviction,  in whole or in part, or entitle Tenant to any abatement or diminution
of rent,  or relieve  Tenant from any of its  obligations  under this Lease,  or
impose any liability upon Owner, or its agents,  by reason of  inconvenience  or
annoyance  to Tenant,  or injury to or  interruption  of Tenant's  business,  or
otherwise,  unless such change,  unavailability  or  unsuitability  is caused by
Owner's negligence or willful misconduct or the negligence or willful misconduct
of Owner's agents, employees or contractors.

               B. Owner represents that the electrical  feeder or riser capacity
serving the Demised Premises on the Commencement Date shall be adequate to serve
the  lighting  fixtures  and  electrical  receptacles  installed  in the Demised
Premises on the Commencement  Date. Subject to the provisions of Subsection C(1)
of this  Section  6.01,  any  additional  feeders  or risers to supply  Tenant's
additional electrical requirements, and all other equipment proper and necessary
in  connection  with such  feeders or risers,  shall be  installed by Owner upon
Tenant's  request,  at the sole cost and expense of Tenant,  provided  that,  in
Owner's  judgment,  such  additional  feeders  or risers are  necessary  and are
permissible  under applicable laws (including,  but not limited to, the New York
State Energy Conservation  Construction Code) and insurance  regulations and the
installation of such feeders or risers will not cause permanent damage or injury
to the  Building  or the  Demised  Premises  or cause or create a  dangerous  or
hazardous  condition or entail excessive or unreasonable  alterations or repairs
or interfere with or disturb other tenants or occupants of the Building.  Tenant
covenants  that at no time  shall the use of  electrical  energy in the  Demised
Premises  exceed the  capacity of the existing  feeders or wiring  installations
then serving the Demised Premises.  Tenant shall not make or perform,  or permit
the making or performance of, any Alterations to wiring  installations  or other
electrical facilities in or serving the Demised Premises or any additions to the
business machines,  office equipment or other appliances in the Demised Premises
which  utilize  electrical  energy  without  the prior  consent of Owner in each
instance,   which  consent  shall  not  be  unreasonably   withheld.   Any  such
Alterations, additions or consent by Owner shall be subject to the provisions of
Subsection C(1) of this Section 6.01, as well as to the other provisions of this
Lease including, but not limited to, the provisions of Article FOURTH.

               C. (1) If, at any time or times  prior to or during  the  Demised
Term, electrical feeders,  risers, wiring or other electrical facilities serving
the Demised Premises shall be installed by Owner, Tenant or others, on behalf of
Tenant or any person  claiming  through or under  Tenant in addition to feeders,
risers,  wiring or other electrical  facilities  necessary to serve the lighting
fixtures and  electrical  receptacles  installed in the Demised  Premises on the
Commencement  Date, the Fixed Rent and the Electrical  Inclusion Factor shall be
increased  in an annual  amount  which shall  reflect the value to Tenant of the
additional  service to be

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furnished by Owner,  to wit: the  potential  additional  electrical  energy made
available  to  Tenant  annually  based  upon  the  estimated  capacity  of  such
additional electrical feeders,  risers,  wiring or other electrical  facilities.
The amount of any such increase in the Fixed Rent and the  Electrical  Inclusion
Factor shall be finally  determined  by an  independent  electrical  engineer or
consulting  firm  selected  by Owner who shall  certify  such  determination  in
writing to Owner and  Tenant.  Following  such  determination,  Owner and Tenant
shall enter into a written  supplementary  agreement,  in form  satisfactory  to
Owner,  modifying  this Lease by  increasing  the Fixed Rent and the  Electrical
Inclusion Factor for the remainder of the Demised Term in an annual amount equal
to the value of such  additional  service as so  determined.  Any such  increase
shall be  effective as of the date of the first  availability  to Tenant of such
additional service and shall be retroactive to such date if necessary.

                    (2) If, at any time or times after March 29, 2000,  the rate
at which Owner purchases electrical energy from the corporation(s)  and/or other
entity(ies) Owner has selected to supply  electrical  service to the Building or
any charges incurred or taxes payable by Owner in connection  therewith shall be
increased or  decreased,  Owner shall notify Tenant of such increase or decrease
within ninety (90) days of the date thereof.  The Fixed Rent and the  Electrical
Inclusion  Factor  shall be  increased  or  decreased,  as the case may be, upon
demand  of  either   party,   in  an  annual   amount  which  shall  fairly  and
proportionately  reflect the estimated increase or decrease, as the case may be,
in the annual cost to Owner of  purchasing  electrical  energy for the  Building
provided  that  notwithstanding  anything  to  the  contrary  contained  in  the
provisions of this Section 6.01 in no event shall (a) the  Electrical  Inclusion
Factor  ever be  decreased  below  the  original  amount  thereof  set  forth in
Subsection  A of this  Section and (b) the Fixed Rent ever be  decreased by more
than such  decrease  in the  Electrical  Inclusion  Factor as so  limited by the
provisions of the aforesaid Subdivision (a) of this Subsection C.(2). If, within
ten (10) days after any such  demand,  Owner and Tenant shall fail to agree upon
the amount of such  increase or decrease,  as the case may be, in the Fixed Rent
and the  Electrical  Inclusion  Factor  then,  in lieu of such  agreement,  such
estimated increase or decrease,  as the case may be, shall be finally determined
by an independent  electrical  engineer or consulting firm selected by Owner, at
the sole cost and expense of Owner,  who shall  certify  such  determination  in
writing to Owner and Tenant.  Following  any such  agreement  or  determination,
Owner and Tenant  shall enter into a written  supplementary  agreement,  in form
satisfactory to Owner, modifying this Lease by increasing, or decreasing, as the
case  may be,  the  Fixed  Rent  and the  Electrical  Inclusion  Factor  for the
remainder  of the  Demised  Term in an  annual  amount  equal to such  estimated
increase or decrease as so agreed or  determined.  Any such increase or decrease
in the Fixed Rent and the Electrical  Inclusion  Factor shall be effective as of
the effective  date of such increase or decrease,  and shall be  retroactive  to
such date if necessary.

                    (3)  Any  increase  in  the  Fixed  Rent   pursuant  to  the
provisions of Subsection A of this Section or this  Subsection C with respect to
the period from the effective date of such increase to the last day of the month
in which such  increase  shall be fixed by agreement or  determination  shall be
payable by Tenant upon demand of Owner.  Any decrease in the Fixed Rent pursuant
to the  provisions  of this  Subsection  C with  respect to the period  from the
effective  date of such  decrease  to the  last day of the  month in

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which  such  decrease  shall be fixed by  agreement  or  determination  shall be
credited to Tenant  against the next monthly  installment of the Fixed Rent. The
monthly  installments  of the Fixed Rent  payable  after the date upon which any
such  increase  or decrease  is so fixed  shall be  proportionately  adjusted to
reflect such increase or decrease in the Fixed Rent.

               D.   Owner  may,   at  any  time,   elect  to   discontinue   the
redistribution  or  furnishing of  electrical  energy.  In the event of any such
election by Owner,  (i) Owner agrees to give  reasonable  advance  notice of any
such  discontinuance  to Tenant,  (ii) Owner agrees to permit  Tenant to receive
electrical  service directly from the  corporation(s)  and/or other  entity(ies)
Owner has  selected to supply  electrical  service to the Building and to permit
the existing feeders, risers, wiring and other electrical facilities serving the
Demised  Premises  to be used by Tenant for such  purpose to the extent they are
suitable and safely  capable,  (iii) Owner agrees to pay such charges and costs,
if any, as such corporation(s) and/or other entity(ies) may impose in connection
with  the  installation  of  Tenant's  meters,  (iv)  the  Fixed  Rent  shall be
decreased,  as of the date of such  discontinuance,  by an  amount  equal to the
Electrical Inclusion Factor to reflect such  discontinuance;  and (v) this Lease
shall  remain  in full  force  and  effect  and such  discontinuance  shall  not
constitute an actual or constructive  eviction,  in whole or in part, or entitle
Tenant to any abatement or  diminution  of rent except as expressly  provided in
subdivision  (iv) of  this  Subsection  D, or  relieve  Tenant  from  any of its
obligations  under this Lease,  or impose any liability upon Owner or its agents
by reason of inconvenience or annoyance to Tenant,  or injury to or interruption
of Tenant's business, or otherwise.

               E. The following  method of computation  shall be employed by any
electrical engineer or electrical  consulting firm selected by Owner pursuant to
the  provisions of Subsection  C(2) of this Section 6.01 in finally  determining
any  estimated  increase  or  decrease  in the  Fixed  Rent  and the  Electrical
Inclusion  Factor,  under the  provisions  of this  Section  resulting  from the
corporation(s)  and/or other entity(ies) Owner has selected to supply electrical
service to the  Building  referred to  individually  and  collectively  as " The
Corporation")  electrical rate and fuel charge changes and taxes (collectively "
Electrical Changes") payable in connection therewith:

                    (1) Owner's bills from The  Corporation for the Building for
the twelve (12) month period  immediately  preceding  the  Electrical  Change in
question shall be averaged for demand and  consumption (Kw and Kwh) and the rate
structure in effect immediately prior to the Electrical Change in question shall
be applied to such average demand and  consumption  factors of Owner's  billings
for the  Building  for said  twelve  (12) month  period  resulting  in an agreed
determination  of the cost to Owner of electricity for the Building  immediately
prior to the Electrical Change in question; and

                    (2) The new rate structure pursuant to which Owner is billed
by The  Corporation,  i.e.,  the rate  structure  which  includes the Electrical
Change in  question,  shall be applied  to the

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average demand and consumption  factors of Owner's billings for the Building for
said twelve (12) month  period  resulting  in an agreed  estimate of the cost to
Owner by reason of the Electrical Change in question; and

                    (3) The difference in the costs  determined  pursuant to the
foregoing  subdivisions  (1) and (2)  shall be  deemed  to be the  amount of the
estimated  annual change in cost and the amount of such estimated  annual change
in cost  shall be  divided  by the cost  determined  pursuant  to the  foregoing
subdivision (1); and

                    (4) The resulting quotient shall be applied to Tenant's then
current  Electrical  Inclusion Factor to produce the increase or decrease in the
Fixed Rent and Electrical Inclusion Factor.

          (For example:  Assume (1) an Electrical  Change i.e. a rate  increase;
(2) an  application  of the rate  schedule in effect  immediately  prior to such
Electrical  Change to the averaged  electrical  demand and  consumption  factors
shown on Owner's  electrical bills for the twelve (12) month period  immediately
preceding  such  Electrical  Change  resulting  in an  estimated  annual cost of
$100,000.00;  (3) an  application  of the  new  rate  schedule  to the  averaged
electrical  demand  and  consumption  factors  shown on the  bills  in  question
resulting in an estimated  annual cost of $110,000.00;  (4) deduction of the sum
of $100,000.00  referred to in step (2) from said sum of $110,000.00 referred to
in step (3),  resulting in a difference  of  $10,000.00;  and (5) that  Tenant's
Electrical  Inclusion  Factor was  $3,000.00.  The $10,000.00  annual  estimated
increase for the Building,  when divided by  $100,000.00,  the estimated  annual
cost to Owner of electricity for the Building prior to the Electrical  Change in
question,  results  in a  quotient  of  10%  which,  when  applied  to  Tenant's
Electrical  Inclusion  Factor  increases  the  Fixed  Rent  and  the  Electrical
Inclusion Factor by $300.00.)

               F.  Notwithstanding  anything to the  contrary  set forth in this
Lease, any sums payable or granted in any way by the corporation(s) and/or other
entity(ies) Owner has selected to supply  electricity to the Building  resulting
from the  installation  in the  Demised  Premises of energy  efficient  lamping,
special  supplemental  heating,  ventilation and air conditioning systems or any
other  Alterations,  which  sums  are paid or  given  by way of  rebate,  direct
payment,  credit or  otherwise,  shall be and remain the property of Owner,  and
Tenant  shall not be  entitled  to any portion  thereof,  unless  such  lamping,
supplemental  heating,   ventilation  and  air  conditioning  systems  or  other
Alterations were installed by Tenant,  solely at Tenant's  expense,  without any
contribution,  credit or  allowance  by  Owner,  in  accordance  with all of the
provisions of this Lease. Nothing contained in the foregoing sentence,  however,
shall be deemed to obligate  Owner to supply or install in the Demised  Premises
any such lamping, supplemental heating, ventilation and air conditioning systems
or other Alterations.

          Section 6.02 Elevators:  If all or any portion of the Demised Premises
is located on other than the ground  floor of the  Building,  Owner,  at Owner's
expense,  shall have a passenger  elevator

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subject  to call at all  times.  Owner  shall not be  required  to  furnish  any
operator service for automatic elevators.  If Owner shall, at any time, elect to
furnish operator service for any automatic elevators, Owner shall have the right
to  discontinue  furnishing  such  service  with the same effect as if Owner had
never elected to furnish such service.

          Section 6.03 Heat:  Owner, at Owner's  expense,  shall furnish heat to
the Demised  Premises,  as and when  required by law, on business days from 8:00
A.M. to 7:00 P.M.

          Section  6.04 Air  Conditioning  and  Ventilation:  Owner,  at Owner's
expense,  shall furnish and distribute to the Demised  Premises (i)  conditioned
air at  reasonable  temperatures,  pressures  and  degrees  of  humidity  and in
reasonable volumes and velocities,  on business days from 8:00 A.M. to 7:00 P.M.
during the  months of May,  June,  July,  August,  September  and  October  when
required  for the  comfortable  occupancy  of the  Demised  Premises;  and  (ii)
mechanical  ventilation through the Building air conditioning system on business
days from 8:00 A.M. to 7:00 P.M.,  except when  conditioned air or heat is being
furnished, to the extent required pursuant to law. Notwithstanding the foregoing
provisions  of this  Section,  Owner  shall  not be  responsible  if the  normal
operation  of the  Building  air  conditioning  system  shall  fail  to  provide
conditioned air at reasonable temperatures,  pressures or degrees of humidity or
in reasonable  volumes or velocities in any portions of the Demised Premises (a)
which,  by reason of any  machinery  or  equipment  installed by or on behalf of
Tenant or any person claiming through or under Tenant,  shall have an electrical
load in excess of four (4) watts per square foot of usable area for all purposes
(including  lighting and power), or which shall have a human occupancy factor in
excess of one person per one hundred  seventy-five  (175)  square feet of usable
area (the  average  electrical  load and human  occupancy  factors for which the
Building   air   conditioning   system  is  designed)  or  (b)  because  of  any
rearrangement  of partitioning or other  Alterations  made or performed by or on
behalf of Tenant or any person claiming  through or under Tenant.  Whenever said
air conditioning system is in operation,  Tenant agrees to cause all the windows
in the Demised  Premises to be kept closed and to cause the  Venetian  blinds in
the Demised  Premises to be kept closed if necessary  because of the position of
the sun.  Tenant  agrees to cause all the windows in the Demised  Premises to be
closed  whenever the Demised  Premises are not occupied.  Tenant shall cooperate
fully  with  Owner at all times and abide by all  regulations  and  requirements
which Owner may reasonably  prescribe for the proper  functioning and protection
of the air conditioning and ventilating system. In addition to any and all other
rights and  remedies  which Owner may invoke for a violation or breach of any of
the foregoing  provisions of this Section,  Owner may discontinue  heating,  air
conditioning and/or, if Owner so provides same, ventilating service,  during the
period of such violation or breach, and such discontinuance shall not constitute
an actual or  constructive  eviction,  in whole or in part, or entitle Tenant to
any  abatement  or  diminution  of  rent,  or  relieve  Tenant  from  any of its
obligations under this Lease, or impose any liability upon Owner, or its agents,
by reason of inconvenience or annoyance to Tenant,  or injury to or interruption
of Tenant's business, or otherwise.

          Section 6.05 Cleaning: (1) Tenant, at Tenant's expense, shall keep the
Demised  Premises in order,  shall cause the Demised  Premises to be cleaned and
shall cause Tenant's refuse and rubbish to be removed,  all at regular intervals
in accordance  with  standards and practices  adopted by Owner for the Build-

                                       9
<PAGE>

ing. Tenant shall cooperate with any waste and garbage  recycling program of the
Building and shall comply with all  reasonable  rules and  regulations  of Owner
with respect thereto.  Tenant, at Tenant's expense,  shall cause all portions of
the Demised Premises used for the storage,  preparation,  service or consumption
of food or beverages to be cleaned daily in a manner  satisfactory to Owner, and
to be exterminated  against infestation by vermin,  roaches or rodents regularly
and, in addition, whenever there shall be evidence of any infestation.

                    (2)  Owner,  at  Owner's  expense,  shall  clean the  public
portions of the Building at regular  intervals in accordance  with practices and
standards adopted by Owner for the Building.

                    (3) The removal of refuse and rubbish and the  furnishing of
office  cleaning  services  to  Tenant  by  persons  other  than  Owner  and its
contractors   shall  be  performed  in  accordance  with  such  regulations  and
requirements as, in Owner's judgment,  are necessary for the proper operation of
the Building,  and Tenant agrees that Tenant will not permit any person to enter
the Demised  Premises or the Building for such  purposes,  or for the purpose of
providing  extermination services required to be performed by Tenant pursuant to
Subsection A of this Section,  other than persons first approved by Owner,  such
approval not unreasonably to be withheld.

          Section 6.06 Water: If Tenant requires, uses or consumes water for any
purpose in  addition to  ordinary  lavatory  and  drinking  purposes,  Owner may
install a hot water meter and a cold water meter and  thereby  measure  Tenant's
consumption of water for all purposes. Tenant shall pay to Owner the cost of any
such meters and their  installation,  and Tenant  shall keep any such meters and
any such  installation  equipment in good working order and repair,  at Tenant's
cost and  expense.  Tenant  agrees  to pay for water  consumed  as shown on said
meters, and sewer charges,  taxes and any other governmental charges thereon, as
and when bills are  rendered.  In  addition  to any sums  required to be paid by
Tenant  for  hot  water  consumed  and  sewer  charges,   taxes  and  any  other
governmental  charges  thereon under the  foregoing  provisions of this Section,
Tenant  agrees to pay to Owner,  for the  heating of said hot  water,  an amount
equal to three (3X) times the total of said sums  required  to be paid by Tenant
for hot water and sewer charges  thereon.  For the purposes of  determining  the
amount of any sums required to be paid by Tenant under this Section, all hot and
cold water  consumed  during any period when said meters are not in good working
order shall be deemed to have been consumed at the rate of  consumption  of such
water  during the most  comparable  period when such meters were in good working
order.

          Section  6.07  Overtime  Periods:  The Fixed Rent does not  reflect or
include any charge to Tenant for the furnishing or distributing of any necessary
elevator  facilities,  heat,  conditioned  air or mechanical  ventilation to the
Demised Premises during periods (referred to as " Overtime  Periods") other than
the  hours and days set  forth  above in this  Article  for the  furnishing  and
distributing  of such  services.  Accordingly,  if Owner shall  furnish any such
elevator  facilities,  heat,  conditioned  air or mechanical  ventilation to the
Demised Premises at the request of Tenant during Overtime Periods,  Tenant shall
pay Owner for such services at the standard reasonable rates then fixed by Owner
for the Building or, if no such rates are then fixed, at reasonable

                                       10
<PAGE>

rates.  Owner shall not be required to furnish any such services during Overtime
Periods,  unless  Owner has  received  reasonable  advance  notice  from  Tenant
requesting  such  services.  If Tenant  fails to give Owner  reasonable  advance
notice  requesting such services during any Overtime Periods,  then,  whether or
not the Demised Premises are habitable during such Overtime Periods,  failure by
Owner to furnish or distribute  any such services  during such Overtime  Periods
shall not constitute an actual or constructive eviction, in whole or in part, or
entitle  Tenant to any abatement or  diminution of rent, or relieve  Tenant from
any of its  obligations  under this Lease, or impose any liability upon Owner or
its agents by reason of  inconvenience  or annoyance to Tenant,  or injury to or
interruption of Tenant's business or otherwise.

          Section 6.08 Owner's Right to Stop Service:  Owner  reserves the right
to stop the service of the heating,  air  conditioning,  ventilating,  elevator,
plumbing,  electrical,  communications or other mechanical systems or facilities
in the  Building  when  necessary  by reason of  accident or  emergency,  or for
repairs,  alterations,  replacements or improvements,  which, in the judgment of
Owner are desirable or necessary, until said repairs, alterations,  replacements
or improvements  shall have been completed.  Except in an emergency for which no
notice is required, Owner shall provide Tenant with reasonable advance notice of
same.  The  exercise  of such right by Owner shall not  constitute  an actual or
constructive  eviction,  in whole or in part, or entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations  under this
Lease,  or  impose  any  liability  upon  Owner  or  its  agents  by  reason  of
inconvenience  or annoyance to Tenant,  or injury to or interruption of Tenant's
business, or otherwise. Owner shall employ reasonable diligence in attempting to
restore the operation of any such systems or facilities  without any obligation,
however, to employ labor at overtime or other premium pay rates.

          Section  6.09  Parking Lot:  The Real  Property  presently  contains a
parking lot (referred to as the "Parking Lot") with 1,700 parking spaces. Tenant
shall be entitled  to the  nonexclusive  use,  in common with other  tenants and
occupants of the Building and their business visitors, of the Parking Lot solely
for the parking of cars of Tenant's  employees and business  visitors on a first
come first serve basis.  Owner shall have the right to  reconfigure  the Parking
Lot and add  additional  buildings in the Parking Lot and may increase or reduce
the number of spaces in the  Parking  Lot. No such  reconfiguration,  additional
buildings  or  reduction  in the  number of spaces  in the  Parking  Lot for any
reason,  including, but not limited to, the construction of additional buildings
therein or any acquisition or condemnation set forth in Article  TWELFTH,  shall
constitute an actual or constructive  eviction,  in whole or in part, or entitle
Tenant to any abatement or diminution of rent or relieve  Tenant from any of its
obligations  under this Lease or impose any liability upon Owner, or its agents,
or upon any lessor under any superior lease, or upon the holder of any mortgage.
Tenant  shall  have  no  rights  in  and to  the  Parking  Lot  other  than  the
nonexclusive  use, in common with other tenants and occupants and their business
visitors,  for Tenant and Tenant's  business visitors to park their cars therein
on a first come first serve  basis.  The Building  Rules  referred to in Article
NINETEENTH may, at Owner's election, cover the Parking Lot.

                                       11
<PAGE>

     SEVENTH:  Condition of the Demised Premises:  Tenant shall take the Demised
Premises  in  the  condition  that  the  Demised  Premises  shall  be in on  the
Commencement  Date "as is" and Owner shall have no  obligation to do any work or
perform any  installations in order to prepare the Demised Premises for tenant's
occupancy, except that on or about the Commencement Date, Owner shall repair the
sealing on the back door of the Demised Premises to the reasonable  satisfaction
of Tenant.

     EIGHTH:  End of Demised Term. Tenant shall vacate the Demised Premises upon
the Expiration Date broom clean and in good order and in the same condition that
the Demised Premises existed on the  Commencement  Date,  ordinary wear and tear
and damage from fire or other casualty  excepted,  and Tenant shall, on or prior
to the Expiration Date,  remove all of Tenant's  personal property and all other
property and effects of Tenant and all persons  claiming through or under Tenant
from the Demised Premises and the Building and Tenant shall repair all damage to
the Demised  Premises and the Building  occasioned by such removal.  Owner shall
have the right to retain any property and effects of Tenant or such person which
shall  remain in the  Demised  Premises  after the  Expiration  Date and any net
proceeds  from the sale  thereof,  without  waiving  any of Owner's  rights with
respect to any "Event of Default"  (as  hereinafter  defined) by Tenant.  Tenant
hereby  expressly waives for itself and for any person claiming through or under
Tenant any rights which Tenant or any such person may have under the  provisions
of Section 2201 of the New York Civil  Practice  Law and Rules or any  successor
law of like  import  then in  force in  connection  with  any  holdover  summary
proceedings  which Owner may  institute to enforce the  foregoing  provisions of
this  Article  EIGHTH.  If the date upon which the  Demised  Term shall  expire,
terminate or end shall fall on a Sunday or holiday,  then  Tenant's  obligations
under the first  sentence of this Article  EIGHTH shall be performed on or prior
to the Saturday or business day  immediately  preceding  such Sunday or holiday.
Tenant's  obligations  under this Article  EIGHTH shall  survive the  Expiration
Date.

     NINTH:  Assignment  and  Subletting.Section  9.01  Tenant may not assign or
transfer  this  Lease,  without  the  prior  written  consent  of  Owner in each
instance,  which  consent Owner may withhold in its sole  discretion.  The sale,
pledge,  transfer or other  alienation of (a) any of the issued and  outstanding
capital stock of any corporate Tenant (unless such stock is publicly traded on a
recognized  security exchange or over-the counter market) or (b) any interest in
any partnership or joint venture of Tenant, however accomplished, and whether in
a single  transaction or in a series of related and/or  unrelated  transactions,
resulting in a change of more than  forty-nine  (49%) percent of the then issued
and  outstanding  capital  stock of any corporate  Tenant  (unless such stock is
publicly traded on a recognized security exchange or over-the-counter market) or
the  interests  in  any   partnership  or  joint  venture  of  Tenant,   however
accomplished,   and  whether  in  a  single   transaction  or  in  a  series  of
related/unrelated  transactions,  shall  be  deemed,  for the  purposes  of this
Article  NINTH,  as an  assignment  of this Lease which shall  require the prior
consent of Owner in each instance.

          Section  9.02 As long as  Tenant  is not in  default  under any of the
terms, covenants or conditions of this Lease on Tenant's part to be observed and
performed beyond applicable notice and cure periods, Tenant shall have the right
without the prior consent of Owner, to permit the use or occupancy of all or any
part of the Demised  Premises by any  subsidiary  or  affiliate  of Tenant named
herein for the use  permitted  in

<PAGE>

this Lease only for such period as it shall remain such subsidiary or affiliate.
For the  purposes of this  Article:  (a) a  "subsidiary"  of Tenant named herein
shall  mean any  corporation  not less than  fifty-one  (51%)  percent  of whose
outstanding  voting stock at the time shall be owned by Tenant named herein, and
(b)  an  "affiliate"  of  Tenant  named  herein  shall  mean  any   corporation,
partnership or other  business  entity which controls or is controlled by, or is
under common control with Tenant named herein. For the purpose of the definition
of "affiliate" the word "control" (including,  "controlled by" and "under common
control  with") as used with respect to any  corporation,  partnership  or other
business  entity,  shall mean the possession of the power to direct or cause the
direction of the  management  and policies of such  corporation,  partnership or
other business  entity,  whether  through the ownership of voting  securities or
contract. However, no such use and occupancy shall be valid unless, Tenant shall
give prompt  notice to Owner of any such use or  occupancy of all or any part of
the Demised  Premises and such use or occupancy shall be subject and subordinate
to all of the terms,  covenants  and  conditions  of this Lease.  No such use or
occupancy shall operate to vest in the user or occupant any right or interest in
this Lease or the Demised Premises.

          Section 9.03 Sublet Rights: A. (1) As long as Tenant is not in default
under any of the terms,  covenants or  conditions of this Lease on Tenant's part
to be observed or performed,  Owner agrees not to unreasonably  withhold Owner's
prior  consent to a subletting by Tenant of the entire  Demised  Premises to one
(1) subtenant for undivided  occupancy by such subtenant,  for the use expressly
permitted in this Lease i.e., as general  offices for an information  technology
business.

                    (2) Without  Owner's  prior  consent,  Tenant  shall not (a)
negotiate  or enter into a proposed  subletting  with any tenant,  subtenant  or
occupant  of any  space  in the  Building  or (b)  list  or  otherwise  publicly
advertise  the Demised  Premises or any part thereof for  subletting at a rental
lower than the  rental at which the Owner is then  offering  to rent  comparable
space in the Building.

                    (3)  At  least  thirty  (30)  days  prior  to  any  proposed
subletting,  Tenant  shall  submit to Owner a statement  (the " Proposed  Sublet
Statement")  containing  the name and  address of the  proposed  subtenant,  the
nature of the proposed subtenant's business and its current financial status, if
such status is obtained by Tenant, and all of the principal terms and conditions
of  the  proposed  subletting  including,  but  not  limited  to,  the  proposed
commencement and expiration dates of the term thereof.

                    (4) Owner may withhold consent to a proposed  subletting if,
(a) in Owner's reasonable judgment, the occupancy of the proposed subtenant will
tend to impair the character or dignity of the Building or impose any additional
burden upon Owner in the operation of the Building, or (b) in Owner's reasonable
judgment,  the  occupancy  of the  proposed  subtenant  will tend to impair  the
reputation of (i) the Building as an information  technology  center or (ii) the
floor  on  which  the  Demised  Premises  are  located  as a  floor  devoted  to
information  technology  tenants or (c) the proposed subtenant shall be a person
or entity with

<PAGE>

whom Owner is then  negotiating  or discussing to lease space in the Building or
(d) if Owner shall have any other reasonable objections to such subletting.

                    (5) In the event of any dispute  between Owner and Tenant as
to  the  reasonableness  of  Owner's  failure  or  refusal  to  consent  to  any
subletting,  such dispute shall be submitted to arbitration  in accordance  with
the provisions of Article TWENTY-THIRD.

                    (6) Tenant shall  reimburse Owner on demand for any costs or
expense that may be incurred by Owner's review of any Proposed Sublet  Statement
or in connection  with any sublease  consented to by Owner,  including,  without
limitation,  any  reasonable  processing  fee,  reasonable  attorneys'  fees and
disbursements  and the  reasonable  costs  of  making  investigations  as to the
acceptability of the proposed subtenant.

               B. Notwithstanding the foregoing provisions of this Section 9.03,
Owner shall have the following  rights with respect to each proposed  subletting
by Tenant:

                    (1) in the  event  Tenant  proposes  to sublet  the  Demised
Premises,  whether or not such subletting is for all or substantially all of the
remainder of the Demised Term,  Owner,  at Owner's  option,  may give to Tenant,
within thirty (30) days after the  submission by Tenant to Owner of the Proposed
Sublet  Statement,  a notice  terminating this Lease on the date (referred to as
the " Earlier Termination Date") immediately prior to the proposed  commencement
date of the term of the proposed subletting, as set forth in the Proposed Sublet
Statement,  and, in the event such  notice is given,  this Lease and the Demised
Term shall come to an end and expire on the  Earlier  Termination  Date with the
same  effect  as if it were  the  Expiration  Date,  the  Fixed  Rent  shall  be
apportioned as of said Earlier Termination Date and any prepaid portion of Fixed
Rent for any period after such date shall be refunded by Owner to Tenant; or

                    (2) In the  event  Tenant  proposes  to sublet  the  Demised
Premises for less than  substantially  all of the remainder of the Demised Term,
Owner, at Owner's option, may give to Tenant,  within thirty (30) days after the
submission by Tenant to Owner, of the Proposed Sublet  Statement  required to be
submitted in connection  with such  proposed  subletting,  a notice  electing to
recapture the Demised Premises during the period (referred to as the " Recapture
Period")  commencing on the date (referred to as " Recapture Date")  immediately
prior to the proposed  commencement date of the term of the proposed subletting,
as set forth in the  Proposed  Sublet  Statement,  and  ending  on the  proposed
expiration  date of the term of the  proposed  subletting,  as set  forth in the
Proposed Sublet  Statement,  and in the event such notice is given the following
shall apply:

          (a) The  Demised  Premises  shall be  recaptured  by Owner  during the
          Recapture Period;

<PAGE>

          (b) Tenant shall  surrender the Demised  Premises to Owner on or prior
          to the  Recapture  Date in the same  manner  as if said  Date were the
          Expiration Date;

          (c) During  the  Recapture  Period  Tenant  shall have no rights  with
          respect to the Demised  Premises nor any  obligations  with respect to
          the Demised Premises,  including,  but not limited to, any obligations
          to pay Fixed Rent or any increases therein or any additional rent, and
          any prepaid  portion of Fixed Rent  allocable to the Recapture  Period
          shall be refunded by Owner to Tenant;

          (d) There shall be an equitable  apportionment  of any increase in the
          Fixed Rent pursuant to Articles TWENTY-FIRST and TWENTY-SECOND for the
          Escalation  Year and Tax Escalation Year (as defined in said Articles)
          in which said Recapture Date shall occur;

          (e) Upon the expiration of the Recapture Period, the Demised Premises,
          in its then existing condition, shall be deemed restored to Tenant and
          Tenant  shall have all rights  with  respect to the  Demised  Premises
          which are set forth in this Lease and all obligations  with respect to
          the Demised Premises which are set forth in this Lease, including, but
          not limited to, the  obligations for the payment of Fixed Rent and any
          increases  therein  and any  additional  rent (as they would have been
          adjusted if Tenant occupied the Demised  Premises during the Recapture
          Period) during the period (referred to as the " Recapture  Restoration
          Period")  commencing on the date next  following the expiration of the
          Recapture  Period and  ending on the  Expiration  Date,  except in the
          event that Owner is unable to give  Tenant  possession  of the Demised
          Premises at the  expiration of the  Recapture  Period by reason of the
          holding  over or  retention  of  possession  of any  tenant  or  other
          occupant,  in which event (x) the Recapture  Restoration  Period shall
          not commence and the Demised  Premises  shall not be deemed  available
          for Tenant's occupancy and Tenant shall not be required to comply with
          the  obligations  of Tenant under this Lease until the date upon which
          Owner shall give Tenant  possession  of the Demised  Premises  free of
          occupancies,  (y) neither the Expiration Date nor the validity of this
          Lease nor the obligations of Tenant under this Lease shall be affected
          thereby, and (z) Tenant waives any rights to rescind this Lease and to
          recover  any  damages  which may result  from the  failure by Owner to
          deliver possession of the Demised Premises at the end of the Recapture
          Period;  Owner agrees to institute,  within thirty (30) days after the
          expiration of the Recapture Period, possession proceedings against any
          tenants and occupants who have not so vacated and  surrendered  all or
          any  portions of the Demised  Premises  and agrees to  prosecute  such
          proceedings with reasonable diligence; and

<PAGE>

          (f) There shall be an equitable  apportionment  of any increase in the
          Fixed Rent pursuant to Articles TWENTY FIRST AND TWENTY SECOND for the
          Escalation  Year  and Tax  Escalation  Year  in  which  the  Recapture
          Restoration Period shall commence.

At the request of Owner,  Tenant  shall  execute and  deliver an  instrument  or
instruments,  in form satisfactory to Owner,  setting forth any modifications to
this Lease  contemplated  in or resulting  from the  operation of the  foregoing
provisions of this Subsection 9.03; however,  neither Owner's failure to request
any such  instrument  nor  Tenant's  failure  to  execute  or  deliver  any such
instrument shall vitiate the effect of the foregoing provisions of this Section.
The failure by Owner to exercise any option under this Section 9.03 with respect
to any  subletting  shall not be deemed a waiver of such option with  respect to
any extension of such  subletting or any  subsequent  subletting of the premises
affected  thereby or any other  portion of the Demised  Premises.  Tenant  shall
indemnify Owner from all loss, cost, liability,  damage and expense,  including,
but not limited to, reasonable counsel fees and disbursements,  arising from any
claims against Owner by any broker or other person,  for a brokerage  commission
or other similar  compensation in connection with any such proposed  subletting,
in the event (a) Owner  shall  (i) fail or  refuse to  consent  to any  proposed
subletting,  or (ii) exercise any of its options under this Section 9.03, or (b)
any proposed subletting shall fail to be consummated for any reason whatsoever.

               C. Tenant agrees that (1) any increase in the rental value of the
Demised  Premises  over  and  above  the  Fixed  Rent  payable  pursuant  to the
provisions of this Lease,  as such Fixed Rent may be increased from time to time
pursuant to the  provisions  of this Lease,  and (2) any  consideration  paid to
Tenant or any  subtenant  or other  person  claiming  through or under Tenant in
connection with an assignment of Tenant's interest in this Lease or the interest
of any  subtenant  or other  person  claiming  through or under Tenant under any
sublease whether or not such assignment shall be effected with court approval in
a proceeding of the types  described in Article  SIXTEENTH  (A)(iii),  or in any
similar proceeding,  or otherwise,  shall accrue to the benefit of Owner and not
to the benefit of Tenant,  or of any subtenant or other person claiming  through
or under Tenant, or of the creditors of Tenant or of any such subtenant or other
person  claiming  through or under  Tenant.  Accordingly,  Tenant agrees that if
Owner shall fail to exercise  its option to sooner  terminate  this Lease or its
option to  recapture  the  Demised  Premises  in  connection  with any  proposed
subletting by Tenant,  or if any subtenant or other person  claiming  through or
under  Tenant shall  sublet all or any portion of the Demised  Premises,  Tenant
shall  pay to  Owner a sum  equal  to any  Subletting  Profit,  as such  term is
hereinafter defined. All rentals and other sums (including,  but not limited to,
sums  payable for the sale or rental of any  fixtures,  leasehold  improvements,
equipment,  furniture or other personal property,  less, in the case of the sale
thereof,  the then net unamortized  [on a  straight-line  basis over the term of
this  Lease  or,  in the  event of a  further  subletting,  over the term of the
initial  sublease,  as the case may be] cost  thereof,  which were  provided and
installed in the sublet  premises at the sole cost and expense of Tenant or such
subtenant  or other  person  claiming  through or under  Tenant and for which no
allowance or other credit has been given by Owner)  payable by any  subtenant to

<PAGE>

Tenant or to any subtenant or other person  claiming  through or under Tenant in
connection  with any  subletting  in excess of the Fixed  Rent then  payable  by
Tenant to Owner  under  this  Lease are  referred  to,  in the  aggregate,  as "
Subletting  Profit";  in computing any Subletting Profit it shall be deemed that
the rental reserved under any such subletting shall commence to accrue as of the
commencement  of the  term of such  subletting  even  if  such  rental  actually
commences to accrue as of a date subsequent to such commencement and there shall
be deducted a reasonable  single  brokerage  commission,  if any such commission
shall be paid by Tenant or any such subtenant or other person  claiming  through
or under Tenant in  connection  with such  subletting  which  deduction for such
reasonable  single  brokerage  commission  shall be amortized on a straight line
basis over the entire term of such  subletting.  Owner and Tenant  agree that if
Tenant, or any subtenant or other person claiming through or under Tenant, shall
assign or have  assigned its interest as Tenant under this Lease or its interest
as  subtenant  under  any  sublease  as the  case  may be,  whether  or not such
assignment  shall be effected  with court  approval in a proceeding of the types
described  in Article  SIXTEENTH  (A)(iii),  or in any  similar  proceeding,  or
otherwise,  Tenant shall pay to Owner a sum equal to any  consideration  paid to
Tenant or any  subtenant  or other person  claiming  through or under Tenant for
such assignment.  All sums payable hereunder to Tenant shall be paid to Owner as
additional rent  immediately upon such sums becoming payable to Tenant or to any
subtenant or other person claiming  through or under Tenant and, if requested by
Owner,  Tenant shall promptly enter into a written  agreement with Owner setting
forth the  amount of such sums to be paid to  Owner,  however,  neither  Owner's
failure to request the  execution  of such  agreement  nor  Tenant's  failure to
execute such  agreement  shall vitiate the  provisions of this Section.  For the
purposes of this Section,  a trustee,  receiver or other  representative  of the
Tenant's or any  subtenant's  estate under any federal or state  bankruptcy  act
shall be deemed a person claiming through or under Tenant.

               D.  Neither  Owner's  consent  to  any  subletting  nor  anything
contained  in this  Section  shall be deemed to grant to any  subtenant or other
person  claiming  through or under Tenant the right to sublet all or any portion
of the Demised  Premises or to permit the occupancy of all or any portion of the
Demised  Premises by others.  Neither any subtenant  referred to in this Section
nor its heirs, distributees,  executors,  administrators, legal representatives,
successors  nor assigns,  without the prior  consent of Owner in each  instance,
shall (i) assign,  whether by merger,  consolidation  or otherwise,  mortgage or
encumber its interest in any sublease,  in whole or in part, or (ii) sublet,  or
permit the  subletting  of, that part of the Demised  Premises  affected by such
subletting  or any  portion  thereof,  or (iii)  permit such part of the Demised
Premises  affected by such subletting or any part thereof to be occupied or used
for desk space,  mailing privileges or otherwise,  by any person other than such
subtenant  and any sublease  shall  provide that any  violation of the foregoing
provisions of this sentence shall be an event of default  thereunder.  The sale,
pledge, transfer or other alienation of (a) a controlling interest in the issued
and outstanding  capital stock of any corporate  subtenant (unless such stock is
publicly traded on any recognized security exchange or over-the-counter  market)
or (b) a controlling  interest in any  partnership  or joint venture  subtenant,
however  accomplished,  and  whether in a single  transaction  or in a series of
related or  unrelated  transactions,  shall be deemed for the  purposes  of this
Section to be an  assignment  of such  sublease  which  shall  require the prior
consent of Owner in each instance and any sublease shall so provide.

<PAGE>

     TENTH:  Owner Access. (A) (1) Owner and its agents shall have the following
rights in and about the Demised  Premises:  (i) to enter the Demised Premises at
all times to examine the Demised  Premises or for any of the  purposes set forth
in this Article TENTH or for the purpose of performing  any  obligation of Owner
under this Lease or  exercising  any right or remedy  reserved  to Owner in this
Lease,  or  complying  with any Legal  Requirement  which Owner is  obligated to
comply  with  hereunder,  and if  Tenant,  its  officers,  partners,  agents  or
employees shall not be personally  present or shall not open and permit an entry
into the  Demised  Premises at any time when such entry  shall be  necessary  or
permissible, to use a master key or to forcibly enter the Demised Premises; (ii)
to erect, install, use and maintain pipes, ducts and conduits in and through the
Demised Premises;  (iii) to exhibit the Demised Premises to others; (iv) to make
such decorations, repairs, alterations, improvements or additions, or to perform
such maintenance, including, but not limited to, the maintenance of all heating,
air conditioning, ventilating, elevator, plumbing, electrical, telecommunication
and other mechanical facilities,  as Owner may deem necessary or desirable;  (v)
to take all materials into and upon the Demised Premises that may be required in
connection  with  any  such  decorations,  repairs,  alterations,  improvements,
additions or maintenance;  and (vi) to alter,  renovate and decorate the Demised
Premises at any time during the Demised Term if Tenant shall have removed all or
substantially all of Tenant's  property from the Demised  Premises.  The lessors
under any superior lease and the holders of any mortgage shall have the right to
enter the Demised Premises from time to time through their respective employees,
agents,  representatives  and  architects  to  inspect  the  same or to cure any
default of Owner or Tenant relating  thereto.  Owner shall have the right,  from
time to time, to change the name, number or designation by which the Building is
commonly known which right shall include, without limitation,  the right to name
the Building after any tenant of the Building.

                    (2) Supplementing the provisions of this Paragraph A, Owner,
agrees that,  except in cases of emergency,  any entry upon the Demised Premises
shall be made at reasonable  times,  and only after  reasonable  advance  notice
(which may be mailed, delivered or left at the Demised Premises, notwithstanding
any contrary  provisions of this Lease), and any work performed or installations
made by Owner shall be made with reasonable  diligence and any such entry,  work
or  installations  shall be made in a manner  designed to minimize  interference
with Tenant's normal business  operations  (however,  nothing  contained in this
Section  shall  be  deemed  to  impose  upon  Owner  any  obligation  to  employ
contractors or labor at so-called overtime or other premium pay rates).

               (B) Owner's  Reservation  of Rights to Portions of the  Building:
All parts (except  surfaces facing the interior of the Demised  Premises) of all
walls,  windows and doors  bounding  the Demised  Premises  (including  exterior
Building  walls,  core corridor  walls,  doors and  entrances),  all  balconies,
terraces and roofs adjacent to the Demised Premises, all space in or adjacent to
the  Demised  Premises  used  for  shafts,  stacks,  stairways,  chutes,  pipes,
conduits,  ducts, fan rooms, heating, air conditioning,  ventilating,  plumbing,
electrical,  telecommunication and other mechanical facilities, closets, service
closets and other Building  facilities,  and the use thereof,  as well as access
thereto through the Demised Premises for the purposes of

<PAGE>

operation,  maintenance,  alteration and repair,  are hereby  reserved to Owner.
Owner also reserves the right at any time to change the  arrangement or location
of  entrances,  passageways,  doors,  doorways,  corridors,  elevators,  stairs,
toilets and other  public parts of the  Building,  provided any such change does
not  permanently  and  unreasonably  obstruct  Tenant's  access  to the  Demised
Premises.  Nothing  contained in this Article TENTH shall impose any  obligation
upon Owner with respect to the operation,  maintenance,  alteration or repair of
the Demised Premises or the Building, except as provided in Article Fifth.

               (C) Access to Third Parties:  Owner and its agents shall have the
right to permit access to the Demised  Premises,  whether or not Tenant shall be
present,  to any  receiver,  trustee,  assignee  for the  benefit of  creditors,
sheriff,  marshal or court officer  entitled to, or reasonably  purporting to be
entitled to, such access for the purpose of taking  possession  of, or removing,
any property of Tenant or any other occupant of the Demised Premises, or for any
other lawful purpose,  or by any representative of the fire,  police,  building,
sanitation  or other  department  of the  City,  State or  Federal  Governments.
Neither anything  contained in this Article TENTH, nor any action taken by Owner
under this  Paragraph  (C),  shall be deemed to constitute  recognition by Owner
that any person other than Tenant has any right or interest in this Lease or the
Demised Premises.

               (D) No Actual or Constructive  Eviction: The exercise by Owner or
its agents or by the  lessor  under any  superior  lease or by the holder of any
mortgage  of any  right  reserved  to  Owner in this  Article  TENTH  shall  not
constitute an actual or constructive  eviction,  in whole or in part, or entitle
Tenant to any abatement or diminution of rent, or relieve Tenant from any of its
obligations under this Lease, or impose any liability upon Owner, or its agents,
or upon any  lessor  under  any  superior  lease or upon the  holder of any such
mortgage,  by reason of  inconvenience  or annoyance to Tenant,  or injury to or
interruption of Tenant's business, or otherwise.

     ELEVENTH:  Legal  Compliance:(A)  Tenant agrees that its use of the Demised
Premises and the  installation,  operation and maintenance of Tenant's  personal
property and equipment shall at all times, at Tenant's expense,  strictly comply
with all applicable "Legal Requirements", and the orders and requirements of all
"Government Authorities".  The term " Legal Requirements" shall mean all present
and  future  laws,  codes,  ordinances,  statutes,   requirements,   orders  and
regulations,  ordinary  and  extraordinary,  foreseen  and  unforeseen,  of  any
Governmental Authority  (hereinafter defined) and all directions,  requirements,
orders and notices of violations  thereof.  The term "  Governmental  Authority"
shall mean the United  States of America,  the State of New York,  the County of
Suffolk,  Town of Islip,  any  political  subdivision  thereof  and any  agency,
department,   commission,  board,  bureau  or  instrumentality  of  any  of  the
foregoing,  now existing or hereafter created,  having  jurisdiction over Owner,
Tenant, the use of the Demised Premises or the Building.

               (B) In addition to the aforesaid,  Tenant shall (i) not generate,
store, install, dispose of or otherwise handle any substance,  waste or material
which is deemed  hazardous,  toxic, a pollutant or contami-

<PAGE>

nant,  under any Legal  Requirement  now or hereinafter  in effect  (referred to
herein as "Hazardous  Substances") in the Demised Premises,  or in or around the
Building, in any manner contrary to any applicable Legal Requirements;  (ii) not
install or place in the Demised  Premises  any  asbestos or  asbestos-containing
materials  (iii) at Tenant's  cost and expense  remove,  clean-up and remedy any
Hazardous Substance in the Demised Premises or the Building to the extent and in
the manner  required by any applicable  Legal  Requirements,  if the presence of
such Hazardous  Substances  resulted from the action or inaction of Tenant,  its
employees,  contractors,  subcontractors,  agents, occupants or invitees. Tenant
shall   not   remove,   clean  up,   abate,   or   disturb   any   asbestos   or
asbestos-containing  material in or about the Demised  Premises  except as Owner
shall direct.

     TWELFTH:  Casualty  and  Condemnation.(A)  In the  event  that the  Demised
Premises  shall  be  damaged  by fire or other  casualty,  Owner  shall  have no
obligation to repair such damage provided that if Owner gives Tenant notice that
it intends to repair  such  damage  within  ninety  (90) days of such  damage or
casualty  then,  this Lease shall remain in full force and effect  provided that
Owner shall  undertake  such repairs with  reasonable  diligence.  If the Tenant
shall be unable  to use all or  substantially  all of the  Demised  Premises  or
Tenant's  equipment by reason of a fire or casualty  which was not the result of
the act or negligence of Tenant, then, during such period of inability the Fixed
Rent,  increases  therein or other sums  payable by Tenant to Owner  shall abate
until the earlier of the date (i) such damage is repaired or (ii) Tenant  begins
to use Demised  Premises  or (iii) this Lease and the Demised  Term shall end as
provided in this Article TWELFTH,  provided however, that in the event that only
a portion of the Demised  Premises is so rendered  unusable then, the Fixed Rent
shall be abated in the same  portion  that the  usable  portion  of the  Demised
Premises  bears to the total amount of the Demised  Premises.  In the event that
Owner shall not give notice that it intends to repair such damage,  then, Tenant
shall have the  option,  by notice to Owner  within  thirty  (30) days after the
initial  ninety  (90) day period,  to cancel this Lease and the Demised  Term in
which event this Lease and the Demised Term shall terminate and be of no further
force and effect as of the date of such notice and except for those  obligations
which  survive  expiration  of the Demised  Term,  neither  party shall have any
further  obligation  or  liability  under this  Lease for any period  after such
effective termination date.

               (B)  Notwithstanding  anything  contained  in this  Lease  to the
contrary,  in the event that any of the  following  listed  events  shall  occur
(sometimes referred to herein as the "Termination Events"),  then this Lease and
the Demised Term shall terminate and be of no further force and effect as of the
effective date that this Lease shall so terminate.  For the purposes  hereof the
Termination Events shall be any of the following:

                    (i) if (a) the Demised Premises or (b) the Building shall be
          damaged by fire or other casualty (whether or not in such instance the
          Demised  Premises  shall be so damaged)  and Owner shall decide not to
          repair or restore such damage,  the Demised Term shall terminate as of
          the date of such fire or casualty, if the Demised Premises was damaged
          thereby.

<PAGE>

                    (ii)  the  Demised  Premises  or a  substantial  part of the
          Building shall be acquired or condemned by any legal  authority or for
          public use or purpose in which event the Lease granted hereunder shall
          terminate upon a notice by Owner to Tenant  terminating this Lease and
          the  Demised  Term as of the date of such  taking  and Owner  shall be
          entitled to the entire  award  therefor.  However,  nothing  contained
          herein shall prohibit Tenant from seeking a separate  award,  provided
          same shall not reduce Owner's award. (C) Tenant  acknowledges  that it
          has been advised that Owner's insurance policies do not cover Tenant's
          personal  property  or any other  property  of  Tenant in the  Demised
          Premises;  accordingly,  it shall be Tenant's obligation to obtain and
          maintain  insurance  covering  its  property in the Demised  Premises.
          Tenant shall  attempt to obtain and maintain,  throughout  the Demised
          Term,  in Tenant's  casualty  and other  insurance  policies  covering
          Tenant's personal property and other property of Tenant in the Demised
          Premises, so-called "waiver subrogation" provisions to the effect that
          such policies  shall not be invalidated  should the insured waive,  in
          writing,  prior to a loss,  any or all right of  recovery  against any
          party  for loss  occasioned  by fire or other  casualty.  If Tenant is
          unable  to obtain  such  provisions  in  Tenant's  property  and other
          insurance  policies,  Tenant shall name Owner as an additional insured
          but not as a loss payee under such policies,  it being  understood and
          agreed  that  Owner  shall  have  no  right  whatsoever  to any of the
          proceeds of such insurance.  As long as such or similar provisions are
          included  in such  insurance  policies  then in force,  Tenant  hereby
          waives  (and  agrees  to cause any other  permitted  occupants  of the
          Demised  Premises to execute and deliver to Owner written  instruments
          waiving) any right of recovery  against  Owner,  any lessors under any
          ground or underlying lease, the holders of any mortgage, and all other
          tenants or occupants of the  Building,  and any  servants,  employees,
          agents or  contractors of Owner,  or of any such lessor,  or holder or
          any such other tenants or occupants,  for any loss  occasioned by fire
          or  other  casualty.  In the  event  that at any time  such  insurance
          carriers  shall not  include  such or similar  provisions  in any such
          insurance policy,  the waiver set forth in the foregoing  sentence (or
          in any written instrument  executed by any other permitted occupant of
          the Demised  Premises) shall, upon notice given by Tenant to Owner, be
          deemed of no further force or effect from and after the giving of such
          notice.  During any period  while any such waiver of right of recovery
          is in effect,  Tenant, or any other permitted  occupant of the Demised
          Premises,  as the case may be,  shall look  solely to the  proceeds of
          such policies to compensate  Tenant or such other  permitted  occupant
          for any loss occasioned by fire or other casualty.

     THIRTEENTH:  Indemnity and  Insurance:  (A) Tenant  covenants and agrees to
defend,  protect,  indemnify and hold harmless Owner, Rudin Management  Company,
Inc. and Cogswell  Realty  Group,  LLC,  and their  agents  (including,  but not
limited to CRG  Management,  LLC,  which is  Owner's  managing  agent),  and the
agents,  servants and employees of each of the foregoing and such other entities
as may be designated by the Owner  (individually,  "Indemnitee" and collectively
the  "Indemnitees")  from and against  each and every  claim,  demand,  cause of
action,  liability,  cost,  damage,  loss,  penalty,  fine,  judgment or expense
(including, but not limited to, attorneys' fees and expenses incurred in defense
of the Indemnitees) which (i) may be made, asserted,

<PAGE>

brought or recovered by any person, firm or corporation arising out of any death
or bodily or personal  injury  (including  sickness or disease) or any damage to
property  to the extent  caused by,  resulting  from or in any way  directly  or
indirectly  incidental to or in connection with the use of the Demised  Premises
or the  operation  of the  Tenant's  equipment,  and/or  any  act,  omission  or
negligence  of Tenant and its agents  contractors  or  employees  and (ii) shall
arise  or  result  from  or be  incurred  in  connection  with  or in any way be
incidental  to (1) any breach by Tenant of its  obligations  under this Lease or
(2) any  violation of any Legal  Requirement  by Tenant or any fine,  penalty or
governmental  order issued to or enforced against Owner or any Indemnitee by any
relevant  Governmental  Authority  with  regard  to  such  violation;  the  term
"expense" shall include,  but not be limited to, any attorneys' fees or expenses
incurred  by Owner in  connection  with the  aforesaid  and  attorneys'  fees or
expenses  incurred in connection with any action to recover such attorneys' fees
or expenses.  The obligations of Tenant  hereunder shall survive the expiration,
cancellation or termination of this Lease and the Demised Term.

               (B)  Without   limiting  the  aforesaid,   Tenant  agrees  to  be
responsible  for any damage  caused to the Building,  and/or any other  property
owned by Owner or any tenant, Tenant, user or occupant of the Building which may
be  caused by Tenant or any of its  agents or  representatives.  Throughout  the
Demised Term and for so long as Tenant (or any person  through or under  Tenant)
shall use or occupy the Demised  Premises,  Tenant  shall,  at Tenant's cost and
expense,  obtain and maintain  throughout the Demised Term comprehensive  public
liability and water legal  liability  insurance  against any claims by reason of
personal  injury,  death and property  damage  occurring in or about the Demised
Premises  covering,  without  limitation,  the  operation  of  any  private  air
conditioning equipment and any private elevators,  escalators or conveyors in or
serving the Demised  Premises or any part thereof,  whether  installed by Owner,
Tenant or others,  and shall furnish to Owner  certificates of such insurance at
least ten (10) days  prior to the  Commencement  Date and at least ten (10) days
prior to the expiration of the term of any such policy  previously  furnished by
Tenant,  in which  policies  Owner,  and Owner's  Indemnitees  shall be named as
additional insureds,  which policies shall be issued by companies,  and shall be
in form and amounts, satisfactory to Owner.

     FOURTEENTH:  Subordination. This Lease and all of Tenant's rights hereunder
shall  remain,  subject  and  subordinate  in  all  respects  to all  ground  or
underlying  leases now or hereafter in effect and to all mortgages which may now
or hereafter  affect such leases and/or the Building  and/or the Real  Property,
and to all advances  made or hereafter to be made under such  mortgages,  and to
all renewals,  modifications,  consolidations,  correlations,  replacements  and
extensions of, and substitutions  for, such leases and mortgages.  The foregoing
provisions of this Article shall be self-operative  and no further instrument of
subordination shall be required.

     FIFTEENTH: Owner Liability Limitation. Except as provided for herein, Owner
shall  incur no  liability  to  Tenant  or to any  person,  firm or  corporation
claiming  by,  through  or under  Tenant in  connection  with this  Lease or the
revocation  thereof,  or the use by Tenant of all or any portions of the Demised
Premises or the Building.  Owner shall have no  responsibility  or liability for
any loss or damage that may occur to Tenant's  property or effects while located
in the  Demised  Premises  or the  Building  unless  such  damage  is due to the

<PAGE>

negligence of Owner. No general or limited partner, officer, director,  employee
or shareholder of Owner or any agent thereof shall be personally  liable for the
performance of Owner's  obligation  under this Lease. The liability of Owner for
any of Owner's obligations under this Lease shall be limited to Owner's interest
in the  Building,  and Tenant shall not look to any of Owner's  other assets for
enforcement  or  satisfaction  of any such  obligation,  nor shall  Tenant  seek
recourse for such  enforcement  or  satisfaction  against any general or limited
partner,  officer,  director,  employee  or  shareholder  of Owner or any  agent
thereof. Tenant acknowledges and agrees that (i) Owner shall not be obligated to
provide  security or any other type of protection  for any  equipment,  personal
property or  installation  in the Demised  Premises,  (ii) neither Owner nor its
agents  shall be liable or  responsible  to Tenant for any loss or damage to any
property  or  person  occasioned  by  theft,  fire,  act of God,  public  enemy,
injunction, riot, strike,  insurrection,  war, court order, requisition or other
order of  governmental  body or  authority,  or for any damage or  inconvenience
which may arise  through  maintenance,  repair or  alteration of any part of the
Building. Owner and Tenant agree that neither party shall be liable to the other
for any special or consequential damages, including lost profits or revenues, as
a result of such parties' default of its obligations under this Lease,  provided
that nothing contained herein shall otherwise limit, modify or violate any claim
or remedy in law or equity by one party hereof  against the other by reason of a
breach or default in the other's obligations under this Lease.

     SIXTEENTH:  Default/Remedies.(A)  If at any  time  prior to or  during  the
Demised Term, any one or more of the following events (referred to as "Events of
Default")  shall occur:  (i) if Tenant shall  default in the payment when due of
any  installment  of Fixed Rent or in the payment when due of any other sums due
Owner  hereunder,  and such default shall continue for a period of ten (10) days
after notice by Owner to Tenant of such default, or (ii) if Tenant shall default
in the observance or performance of any term,  covenant or condition (other than
the  covenants  to make  payment  of Fixed Rent or other sums due Owner) of this
Lease on  Tenant's  part to be observed or  performed  and Tenant  shall fail to
remedy such default  within  thirty (30) days after notice by Owner to Tenant of
such default;  or (iii) if Tenant shall file a voluntary  petition in bankruptcy
or insolvency,  or such proceeding  shall be commenced  against Tenant or Tenant
shall be  adjudicated  a bankrupt or  insolvent,  or Tenant  shall file or there
shall be filed against Tenant any petition or answer seeking any reorganization,
arrangement,  composition,  readjustment,  liquidation,  dissolution  or similar
relief under present or any future  federal  bankruptcy act or any other present
or future  applicable  federal,  state or other  statute or law, or Tenant shall
make an assignment for the benefit of creditors, or Tenant shall seek or consent
to or acquiesce in the  appointment  of any trustee,  receiver or liquidator for
Tenant  or of all or any part of  Tenant's  property;  or (iv) if  Tenant  shall
default in the observance or  performance of any term,  covenant or condition on
the part of Tenant to be observed or performed  under any other  agreement  with
Owner and such default shall continue  beyond any grace period set forth in such
other agreement for the remedying of such default; or (v) if Tenant shall desert
or abandon the  Demised  Premises  or  Tenant's  equipment;  or (vi) if Tenant's
interest in this Lease  shall  devolve  upon or pass to any  person,  whether by
operation of law or otherwise  except as provided in Article  NINTH hereof then,
upon the occurrence, at any time prior to or during the Demised Term, of any one
or more of such Events of Default,  Owner,  at any time  thereafter,  at Owner's
option,  may give to Tenant a ten (10) days' notice of

<PAGE>

termination of this Lease and, in the event such notice is given, this Lease and
the Demised Term shall come to an end and expire upon the expiration of said ten
(10) days with the same  effect  as if the date of  expiration  of said ten (10)
days were the  expiration  date of the Demised  Term and this Lease,  but Tenant
shall remain liable for damages and all other sums payable  pursuant to law. Any
notice given by Owner to Tenant under this Article  SIXTEENTH  shall be deemed a
"ten day  notice  to quit"  under  the  provisions  of  Section  713 of the Real
Property Actions and Proceedings Law.

               (B) In the event that this Lease shall end,  Owner and its agents
and  servants  may  immediately,  or at any time after such default or after the
date upon which this Lease and the Demised Term shall expire and come to an end,
re-enter the Demised  Premises or any part thereof,  without  notice,  either by
summary proceedings or by any other applicable action or proceeding, or by force
or  otherwise  (without  being  liable to  indictment,  prosecution  or  damages
therefor),  and may repossess the Demised Premises and dispossess Tenant and any
other persons from the Demised Premises and remove any and all of their property
and effects from the Demised Premises including Tenant's equipment and Owner, at
Owner's  option,  may  release  the  whole or any  part or parts of the  Demised
Premises,  from time to time, either in the name of Owner or otherwise,  to such
tenant  or  tenants,  for such  term or terms  ending  before,  on or after  the
expiration  date of the Demised Term, at such rental or rental fees or otherwise
and upon such other  conditions,  which may  include  concessions  and free rent
periods, as Owner, in its sole discretion,  may determine.  Tenant hereby waives
the  service  of any notice of  intention  to  re-enter  or to  institute  legal
proceedings  to that end which may  otherwise  be required to be given under any
present or future  law.  Tenant,  on its own behalf and on behalf of all persons
claiming through or under Tenant,  including all creditors,  does further hereby
waive any and all rights which Tenant and all such persons might  otherwise have
under any present or future law to redeem the Demised  Premises,  or to re-enter
or repossess  the Demised  Premises,  or to restore the operation of this Lease,
after (i) Tenant shall have been dispossessed by a judgment or by warrant of any
court or judge,  or (ii) any  re-entry  by Owner,  or (iii)  any  expiration  or
termination  of this  Lease  and the  Demised  Term,  whether  such  dispossess,
re-entry,  expiration or termination shall be by operation of law or pursuant to
the provisions of this Lease.

     SEVENTEENTH:  Inability  to Perform.  (A) If, by reason of strikes or other
labor  disputes,  fire or other casualty (or reasonable  delays in adjustment of
insurance),  accidents,  Legal  Requirement  or any  orders  of  any  Government
Authority,  or any other  cause  beyond  Owner or Tenant's  reasonable  control,
whether or not such other cause shall be similar in nature to those hereinbefore
enumerated,  Owner or Tenant, as the case may be, is unable to perform,  fulfill
or is delayed in fulfilling any of their respective obligations under this Lease
or any instrument collateral thereto, then the performance or observance of such
obligation  shall be  suspended to the extent of and during the duration of such
inability  and (i) no such  inability  or delay  shall  constitute  an actual or
constructive  eviction of Tenant,  in whole or in part, or entitle Tenant to any
abatement or diminution of any of the Fixed Rent or any other sum due Owner from
Tenant  hereunder,  or (ii) no such  inability or delay shall  relieve  Owner or
Tenant, as the case may be, from any of their respective  obligations under this
Lease which are not affected by such inability or delay, or impose any liability
upon  Owner,  or  Tenant  as the case may be,  or their

<PAGE>

agents, by reason of inconvenience or annoyance to the other party, or injury to
or  interruption  of Tenant's  business,  or otherwise.  The  provisions of this
Article SEVENTEENTH shall not apply to the obligations of either Owner or Tenant
to pay any  monies due the other  party.  Owner and  Tenant,  as the case may be
applicable, each agrees to employ reasonable diligence to eliminate the cause of
any inability or delay referred to in this Article,  however,  the provisions of
this  sentence  shall not apply in the event of any strike or labor  dispute and
neither party shall be required to employ labor at overtime or any other premium
pay rates unless there is a danger or threatened  danger to the health or safety
of any occupant of the Building or the environmental condition thereof.

               (B) If by reason of  strikes  or other  labor  disputes,  fire or
other  casualty (or  reasonable  delays in adjustment  of insurance)  accidents,
orders or regulations of any Federal,  State, County or Municipal authority,  or
any other cause beyond Tenant's reasonable control,  Tenant is unable to fulfill
any of Tenant's obligations under this Lease or any collateral  instrument [with
the  exception of any  obligations  on Tenant's part to pay any sum of money due
Owner,  including,  without  limitation,  the payment of Fixed Rent or increases
thereof,  or  any  additional  rent,  which  monetary  obligation  shall  remain
unaffected by the provisions of this Section (B)],  Tenant shall not be required
to fulfill  such  non-monetary  obligations  during the period that Tenant is so
unable to fulfill  them by reason of the above,  provided  however,  that Tenant
shall employ  reasonable  diligence  to attempt to  eliminate  the cause of such
inability referred to in this Section (B).

     EIGHTEENTH:  Notices. Any bills, statements,  notices, demands, requests or
other  communications given or required to be given pursuant to this Lease shall
be  effective  only if  rendered  or given in  writing,  sent by  registered  or
certified mail, return receipt  requested,  addressed (a) to Tenant,  Att: Vinny
DiSpigno (i) at the address set forth  above,  or (ii) at any place where Tenant
or any agent or employee of Tenant may be found if mailed subsequent to Tenant's
vacating,  abandoning  or  surrendering  the  Demised  Premises,  with a copy to
Kaufman & Moomjian,LLC,  50 Charles  Lindbergh  Blvd.,  Mitchel Field,  New York
11533,  Attn: Neil M. Kaufman and to Vizacom,  Glenpointe Centre East, 300 Frank
W. Burr Blvd., 7th Floor,  Teaneck, New Jersey 07666, Attn: Judy Kumreuther,  or
(b) to Owner at the address set forth  above,  with a copy to Goldfarb & Fleece,
345 Park Avenue,  New York, New York 10154,  Att.:  PARTNER IN CHARGE.  Any such
bill, statement,  notice, demand, request or other communication shall be deemed
to have been  rendered  or given on the date when it shall  have been  mailed as
provided herein.

     NINETEENTH:  Miscellaneous.  (A) This Lease  embodies and  constitutes  the
entire  understanding  between  the  parties  with  respect  to the  transaction
contemplated herein. This Lease may not be modified,  amended or terminated, and
Tenant's  obligations  hereunder  shall  in no  way  be  discharged,  except  as
expressly  provided  in this  Lease or by  written  instrument  executed  by the
parties hereto. This Lease shall be governed by and construed in accordance with
the laws of the State of New York.  This Lease shall not be binding or effective
until this Lease is executed and  delivered by Owner and Tenant.  This Lease may
be executed in several counterparts, each of which shall constitute an original,
but all of which together shall constitute one and the same instrument.

<PAGE>

               (B) The term " business days" as used in this Lease shall exclude
Saturdays,  Sundays and  holidays,  the term " Saturdays"  as used in this Lease
shall exclude holidays and the term " holidays" as used in this Lease shall mean
all days observed as legal  holidays by either the New York State  Government or
the Federal Government.  The terms " Person" and "persons" as used in this Lease
shall be deemed to include natural persons,  firms,  corporations,  associations
and any other  private or public  entities,  whether  any of the  foregoing  are
acting  on their  own  behalf  or in a  representative  capacity.  If any  term,
covenant or condition of this Lease or any application  thereof shall be invalid
or unenforceable,  the remainder of this Lease and any other application of such
term,  covenant or condition shall not be affected thereby.  This Lease shall be
construed without regard to any presumption or other rule requiring construction
against the party causing this Lease to be drafted.  In the event of any action,
suit,  dispute or proceeding  affecting the terms of this Lease, no weight shall
be given to any  deletions  or  striking  out of any of the terms of this  Lease
contained in any draft of this Lease and no such deletion or strike out shall be
entered into evidence in any such action,  suit or dispute or  proceeding  given
any weight therein.

               (C) Owner and Tenant mutually  represent and warrant to the other
that they had no dealings  with any  brokers,  consultants,  individuals  or any
other entities in the negotiation  and/or  consummation of this Lease. Owner and
Tenant hereby mutually agree to indemnify and hold the other party harmless from
and against any claims,  costs, expenses (including,  without limitation,  legal
fees) and other  liabilities  incurred by the other party by reason of any claim
or action for a commission or fee or other  compensation by any person or broker
in connection with this Lease with whom the  indemnifying  party may have dealt.
The  provisions of this  Paragraph  (C) shall survive the  expiration or earlier
termination of the Demised Term and this Lease.

               (D) This Lease shall be binding  upon and inure to the benefit of
the parties hereto and their  respective legal  representatives,  successors and
assigns.

               (E)  Tenant  shall  have no right  to  record  this  Lease or any
memorandum thereof.

               (F) Tenant shall comply with all reasonable  building rules Owner
may from time to time adopt and of which Owner shall notify Tenant thereof.

               (G) Owner  covenants  and agrees with  Tenant that upon  Tenant's
paying Fixed Rent and  additional  rent reserved in this Lease and observing and
performing all of the terms,  covenants and conditions of this Lease on Tenant's
part to be observed and  performed,  Tenant may  peaceably and quietly enjoy the
Demised  Premises  during  the  Demised  Term,  subject,  however  to the terms,
covenants and conditions of this Lease.

<PAGE>

               (H) Owner shall  provide a space for  Tenant's  back up generator
behind the rear of the  Demised  Premises  provided  Tenant  shall  comply  with
Owner's rules and regulations with respect thereto.

     TWENTIETH.  Security.  The sum of FOURTEEN THOUSAND NINE HUNDRED FORTY NINE
and  92/100  ($14,949.92)  DOLLARS  representing  security  (referred  to  as  "
Security") for the faithful  performance  and observance by Tenant of the terms,
covenants  and  conditions  of this Lease on Tenant's  part to be  observed  and
performed is due and payable at the time of the  execution  and delivery of this
Lease. In the event of any default by Tenant in the observance or performance of
any of the terms, covenants or conditions of this Lease on the part of Tenant to
be  observed  or  performed  including,  but not  limited to, any default in the
payment when due of any monthly installment of the Fixed Rent or increase in the
Fixed Rent  payable  pursuant  to the  provisions  of Articles  TWENTY-FIRST  or
TWENTY-SECOND  or of any additional rent, Owner may use or apply all or any part
of the Security for the payment to Owner for Tenant's account of any sum or sums
due under this Lease,  without  thereby  waiving any other rights or remedies of
Owner with respect to such  default.  Tenant agrees to replenish all or any part
of the  Security  so used or applied  during  the  Demised  Term.  After (i) the
Expiration  Date or any other date upon which the Demised  Term shall expire and
come to an end, and (ii) the full observance and performance by Tenant of all of
the  terms,  covenants  and  conditions  of this  Lease on  Tenant's  part to be
observed and performed, including, but not limited to, the provisions of Article
EIGHTH, Owner shall return to Tenant the balance of the Security,  together with
accrued  interest  thereon,  then held or retained by Owner.  Owner agrees that,
unless  prohibited by law or by the general policies of lending  institutions in
New York City, Owner shall deposit the Security in an  interest-bearing  savings
account  with a bank  selected by Owner,  in which event all  interest  accruing
thereon  shall be added to and become part of the Security and shall be retained
by Owner under the same conditions as the sum originally  deposited as Security.
Tenant agrees that Tenant shall not assign or encumber any part of the Security,
and no  assignment or  encumbrance  by Tenant of all or any part of the Security
shall be binding upon Owner, whether made prior to, during, or after the Demised
Term.  Owner shall not be required to exhaust  its  remedies  against  Tenant or
against the Security  before having  recourse to any other form of security held
by Owner and  recourse  by Owner to any form of  security  shall not  affect any
remedies of Owner which are  provided  in this Lease or which are  available  to
Owner in law or equity.  In the event of any sale,  assignment  or  transfer  by
Owner named herein (or by any subsequent  Owner) of its interest in the Building
as owner or lessee,  Owner (or such  subsequent  owner)  shall have the right to
assign or transfer the Security to its grantee,  assignee or transferee  and, in
the  event  of such  assignment  or  transfer,  Owner  named  herein,  (or  such
subsequent  Owner)  shall  have no  liability  to Tenant  for the  return of the
Security and Tenant shall look solely to the grantee, assignee or transferee for
such return.  A lease of the entire  Building shall be deemed a transfer  within
the meaning of the foregoing sentence.  Notwithstanding anything to the contrary
set forth in the foregoing  provisions of this Article,  Owner shall be entitled
to  retain  the one  (1%)  percent  administrative  fee  permitted  by law to be
retained by landlords with respect to security deposits.

<PAGE>

     TWENTY-FIRST.  Tax Escalation. A. Definitions:  In the determination of any
increase  in the Fixed  Rent under the  provisions  of this  Article,  Owner and
Tenant agree that the following terms shall have the following meanings:

                    (1) The term "Tax  Escalation  Year"  shall mean each fiscal
year  commencing  December 1st and ending on the  following  November 30th which
shall include any part of the Demised Term.

                    (2) The term " Taxes" shall be deemed to mean a sum equal to
all real  estate  taxes and  assessments,  special  or  otherwise,  upon or with
respect to the Real Property imposed by the Town of Islip,  County of Suffolk or
any other  taxing  authority to create a source of revenue  through  taxation of
real  estate as such.  If,  due to any  change in the  method of  taxation,  any
franchise,  income,  profit,  sales,  rental,  use and occupancy or other tax or
payments in lieu of any such taxes shall be  substituted  for, or levied against
Owner or any owner of the  Building  or the Real  Property,  in lieu of any real
estate taxes or assessments upon or with respect to the Real Property,  such tax
or  payments  in lieu of any such taxes  shall be included in the term Taxes for
the purposes of this Article.

                    (3) The term " Tenant's  Proportionate Share" shall mean the
fraction, 3,817/355,000.

                    (4) The term "Owner's Basic Tax Liability"  shall mean a sum
equal to Taxes,  as finally  determined,  payable  for the Tax  Escalation  Year
commencing December 1st 1999 expiring November 30th 2000.

               (B) If Taxes payable in any Tax Escalation  Year shall be in such
amount as shall  constitute an increase above Owner's Basic Tax  Liability,  the
Fixed Rent for such Tax  Escalation  Year shall be  increased  by a sum equal to
Tenant's  Proportionate  Share of any such  increase.  Tenant shall pay any such
amounts  owing to Owner  pursuant to the  foregoing  provisions  of this Article
within ten (10) days after the submission by Owner to Tenant of a bill therefor,
Tenant's obligation to make such payments shall survive the expiration or sooner
termination  of this  Lease.  All  sums  payable  under  this  Article  shall be
collectible by Owner in the same manner as Fixed Rent.

     TWENTY-SECOND. Consumer Price Index Escalation

               A. Definitions. In the determination of any increase in the Fixed
Rent under the provisions of this Article, Owner and Tenant agree as follows:

<PAGE>

                    (1) The term "Escalation Year" shall mean each calendar year
which shall include any part of the Demised Term.

                    (2) The term  "Owner's CPI  Statement"  shall mean a writing
setting forth a computation  of any increase in the Fixed Rent for the preceding
Escalation Year pursuant to the provisions of this Article.

                    (3) The term "Price  Index"  shall mean the  Consumer  Price
Index for Urban Wage Earners and  Clerical  Workers  based on the United  States
Cities national monthly average for all group  commodities and items,  published
by the U.S.  Department  of Labor,  Bureau of Labor  Statistics,  or a successor
substitute  index.  If in any Escalation  Year, the 1982-84 average of 100 is no
longer  used as the basis of  calculation  of the  Price  Index,  then,  for the
purposes  of this  Article,  the Price Index for such  Escalation  Year shall be
recalculated  as  though  such  1982-84  average  of 100 was  still the basis of
calculation of the Price Index for such Escalation Year. In the event such Price
Index  (or  a  substitute   successor  index)  is  not  available,   a  reliable
governmental  or  other  non-partisan  publication  evaluating  the  information
theretofore  used in  determining  the Price  Index shall be used to reflect the
increase in the national cost of living.

                    (4) The term "Base  Price  Index  Rate" shall mean the Price
Index for the month in which the Commencement Date shall occur.

               B. The Fixed Rent for each  Escalation Year shall be increased by
a sum determined by multiplying (i) the Fixed Rent for such Escalation  Year, by
(ii) the  percentage  increase  in the Price  Index for the month of December in
such  Escalation  Year above the Base Price  Index Rate.  Appropriate  Proration
shall be made for any partial Escalation Year. Tenant shall pay any such amounts
owing to Owner  pursuant to the foregoing  provisions of this Article within ten
(10) days after the submission by Owner to Tenant of a bill  therefor.  Tenant's
obligation  to make  such  payments  shall  survive  the  expiration  or  sooner
termination  of this  Lease.  All  sums  payable  under  this  Article  shall be
collectible by Owner in the same manner as Fixed Rent.

<PAGE>

     TWENTY-THIRD.  Arbitration Any dispute with respect to the reasonability of
any  failure or refusal of Owner to grant its consent or approval to any request
for such  consent or approval  pursuant to the  provisions  of Section 9.03 with
respect to which request Owner has agreed, in such Section,  not unreasonably to
withhold  such consent or approval  which is submitted to  arbitration  shall be
finally determined by arbitration in the City of New York in accordance with the
rules and regulations then obtaining of the American Arbitration  Association or
its  successor.  Any such  determination  shall be final  and  binding  upon the
parties,  whether  or not a judgment  shall be  entered in any court.  In making
their  determination,  the  arbitrators  shall  not  subtract  from,  add to, or
otherwise  modify any of the provisions of this Lease.  Owner and Tenant may, at
their own expense,  be represented by counsel and employ expert witnesses in any
such  arbitration.  Any dispute with respect to the reasonability of any failure
or refusal of Owner to grant its  consent or  approval  to any  request for such
consent or approval  pursuant to any of the provisions of this Lease (other than
Section 9.03) with respect to which Owner has  covenanted  not  unreasonably  to
withhold such consent or approval,  and any dispute  arising with respect to the
increases  in Fixed  Rent due to the  provisions  of  Article  TWENTY-FIRST  and
Article  TWENTY-SECOND  shall be determined by applicable legal proceedings.  If
the  determination  of any such legal  proceedings,  or of any arbitration  held
pursuant to the  provisions  of this Section  with  respect to disputes  arising
under  Section  9.03 shall be adverse  to Owner,  Owner  shall be deemed to have
granted the requested  consent or approval,  or be bound by any determination as
to Taxes and Consumer  Price Index  Escalation  and the  increases in Fixed Rent
relating thereto, but that shall be Tenant's sole remedy in such event and Owner
shall not be liable to Tenant for a breach of Owner's  covenant not unreasonably
to withhold such consent or approval, or otherwise. Each party shall pay its own
counsel and expert  witness fees and expenses,  if any, in  connection  with any
arbitration held pursuant to the provisions of this Section and the parties will
share all other expenses and fees of any such arbitration.

     IN WITNESS  WHEREOF,  the parties  hereto have hereunto set their hands and
seals as of the day and year first above written.

                                 SPACELY LLC, Owner

                                 By: Rudin LITC Associates, Managing Member
                                     --------------------------------------

                                 By: /s/ William Rudin
                                     --------------------------------------
                                 Name:  William Rudin
                                 Title: Managing Member
                                        Owner

                                 PWR SYSTEMS, INC.

                                 By: /s/ David Salav
                                     --------------------------------------
                                     Name:  David Salav
                                     Title: President

<PAGE>

UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
                             (Within New York State)

State of New York      )
                       :ss.:
County of Suffolk      )

     On the 26th day of May, in the year 2000, before me, the undersigned,
personally appeared David N. Salar, personally known to me or proved to me on
the basis of satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he executed the same in
his/her/their capacity(ies), and that by his signature on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.

                                   /s/ Mary Greene
                      ----------------------------------------------------------
                      (Signature and Office of individual taking acknowledgment)

                   UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT

     (Outside of New York State)

State, District of Columbia, Territory,
Possession or Foreign Country
____________________________________):ss.:

          On the _____ day of _______ in the year _________, before me, the
undersigned, personally appeared ___________________________________________,
personally known to me or proved tome on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument, and that such individual made such appearance before
the undersigned in the ___________________. (Insert the city or other political
subdivision and the state or country or other place the acknowledgment was
taken.)

                      ----------------------------------------------------------
                      (Signature and office of individual taking acknowledgment)

<PAGE>

         EXHIBIT 1

This floor plan is annexed to
the Lease and made a part
thereof solely to indicate by
outlining and diagonal
markings the Demised Premises.
All areas, dimensions,
locations and conditions are
approximate.<PAGE>   1

                                                                    Exhibit 10.1

                                 LEASE AGREEMENT

        THIS LEASE AGREEMENT ("Lease"), dated as of April 10, 2000, is made by
and between KAISER ALUMINUM & CHEMICAL CORPORATION, through its agent, KAISER
CENTER, INC. ("Landlord") and VERSATA, INC., a Delaware corporation ("Tenant").
Landlord is the prime subtenant of the premises under a master lease (the
"Master Lease"), and this Lease constitutes a sublease of the premises by
Landlord to Tenant.

1.      PREMISES

        1.01 Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, subject to the agreements, conditions and provisions set forth in this
Lease, space on floors twelve (12), thirteen (13), fourteen (14) and fifteen
(15) (the "Premises") in the tower located on the city block bounded by Webster,
20th, 21st and Harrison Streets in Oakland, California (the "Building"). The
Premises, as more particularly described in Exhibit A, consists of approximately
99,228 rentable square feet, calculated according to BOMA standards as set forth
in the Building Owners and Managers Association Standard Method for Measuring
Floor Area in Office Buildings (August 1990 edition).

        1.02 Tenant shall have the right to use and enjoy, throughout the term
of this Lease, the elevator lobbies, corridors, sidewalks, elevators, stairways,
and other public areas of the Building (the "Common Areas"). The Common Areas
shall be subject to the exclusive control and management of Landlord. Landlord,
in its sole discretion, may from time to time alter, eliminate, relocate or
reserve for private use any of the Common Areas. In addition, Landlord may
temporarily close or restrict the use of any Common Areas for repairs or other
purposes. Changes in the Common Areas may be made by Landlord without liability
to Tenant and without affecting Tenant's obligations under this Lease so long as
Tenant's normal use of the Premises is not unreasonably impaired.

        1.03 Master Lease. Landlord represents and warrants to Tenant that: (i)
to the Landlord's knowledge, the Master Lease is in full force and effect, (ii)
neither the Landlord, as tenant, or the landlord, as landlord, under the Master
Lease is in default thereunder, nor, to Landlord's knowledge, is there any
current set of circumstances which, with notice and the passage of time, would
be an event of default under the Master Lease, and (iii) this Lease does not
violate the terms of the Master Lease, nor is the consent of the landlord
thereunder necessary, or, if such consent is necessary, it has been obtained.
Landlord agrees that, during the Term of this Lease, Landlord shall: (a) only
terminate, assign, amend or modify the Master Lease in such a manner so as not
to materially and adversely affect Tenant's rights under this Lease (Landlord
and Tenant acknowledge that a reduction of the term of the Master Lease would
materially and adversely affect Tenant's rights under this Lease); and (b)
perform all of Landlord's obligations as tenant under the Master Lease.

<PAGE>   2

2.      TERM AND POSSESSION

        2.01 Term. The Premises are leased to Tenant for the term (the "Term")
commencing on the Commencement Date set forth as follows, through the Expiration
Date set forth in Section 2.02 below:
<TABLE>
<CAPTION>

         ----------------------------------------------------------
                <S>                    <C>
                Floor                  Commencement Date
         ----------------------------------------------------------
                 12                     August 15, 2000
         ----------------------------------------------------------
                 13                     January 1, 2001
         ----------------------------------------------------------
                 14                     August 15, 2000
         ----------------------------------------------------------
                 15                     August 15, 2000
         ----------------------------------------------------------
</TABLE>

               The Commencement Dates set forth above shall be postponed by the
exact number of days thereafter on which occurs any Landlord's Delays or Force
Majeure Event (as defined in the Work Letter attached as Exhibit B. The word
"Term" as used in this Lease shall include the Extended Term if Tenant exercises
its option to extend the Term in accordance with Section 2.04 below.

        2.02 Expiration Date. The Term shall expire at 11:59 p.m. on August 31,
2008 (the "Expiration Date"), unless earlier terminated pursuant to the
provisions of this Lease. Notwithstanding the foregoing, in the event that
Landlord does not exercise its right to extend the term under the Master Lease,
the Expiration Date shall be when the Master Lease expires. Notwithstanding any
provision herein, Landlord has no obligation whatsoever to Tenant to exercise
any rights Landlord may have to extend the term of the Master Lease for any of
the period covered by the Term described herein.

        2.03 Early Entry. Notwithstanding anything to the contrary in this
Lease, Tenant shall have the right to occupy the 14th Floor of the Premises upon
delivery of possession thereof until the Commencement Date upon all of the terms
and conditions of this Lease, except the obligation to pay Rent or utilities
during such time period.

        2.04 Possession. Landlord shall deliver possession of the Premises in
accordance with the Work Letter attached hereto as Exhibit B. Notwithstanding
the foregoing, Tenant's rights to the 13th floor of the building shall be
subject to the existing tenant leases of space within such floor (the "Existing
Leases") shown on Schedule 1 attached hereto. Landlord represents and warrants
that the list of tenants, base rent, lease expiration date and presence or
absence of rights to extend the term shown on Schedule 1 are true, correct and
complete. Tenant may not occupy the space occupied by such tenants until their
vacation of such space, but agrees to pay Rent thereon as of the Commencement
Date for such Floor. Upon the Commencement Date, Landlord shall assign all of
the rents payable thereunder commencing January 1, 2001 under the Existing
Leases to Tenant, in a form of assignment and assumption acceptable to Landlord
and Tenant. Landlord shall continue to exercise its rights and fulfill the
obligations of the landlord

                                       2
<PAGE>   3

under the Existing Leases during such time period, except that Landlord may not
extend the term, grant options or extend or reduce the rent due under the
Existing Leases without the prior written consent of Tenant. Further, (i)
Landlord shall cooperate with Tenant, at Tenant's sole expense, to relocate any
of the tenants under the Existing Leases off of the 13th floor prior to the
expiration of their lease, and (ii) if Landlord and Tenant agree to extend any
Existing Leases, to the extent requested by Tenant Landlord shall increase the
rent of such tenants of Existing Leases at the expiration of the terms of such
Existing Leases. Notwithstanding the foregoing, in the event the tenants on the
13th floor relocate within the Building, then Landlord shall pay that portion of
the relocation costs for such tenants in an amount not to exceed Twelve Dollars
($12.00) per square foot of the new premises (the "Relocation Cost"). Tenant
acknowledges that it shall be responsible for payment of any costs in excess of
the Relocation Cost for such tenants who relocate within the Building.

               a. If Landlord is unable to deliver possession of all or a
portion of the Premises to Tenant by the date specified in Section 2.01, this
Lease shall not be void or voidable and the Expiration Date and Tenant's
obligations under this Lease, including the obligation to commence paying rent,
shall not be affected, nor shall Landlord be liable to Tenant for any loss or
damage attributable to any delay.

               b. By taking possession of the Premises, Tenant acknowledges that
the Premises are in good and tenantable condition and repair and that Landlord
has substantially complied with all of its obligations to be performed prior to
commencement of the Term of this Lease, including Premises improvements
described in Exhibit B.

        2.05 Option to Extend. On the condition that Landlord, at its sole and
absolute discretion, has elected to exercise its right to extend the term under
the Master Lease beyond the Expiration Date, Tenant shall have two (2) options
to extend the Term of this Lease for two (2) additional terms, hereinafter
referred to as the "Extended Term," as hereinafter provided. Tenant acknowledges
that Landlord has certain renewal/repurchase rights under the Master Lease. No
later than twelve (12) months prior to the expiration of the Master Lease,
Landlord shall inform Tenant if it intends to exercise such rights of
renewal/repurchase.

               a. The initial Extended Term shall be for a five (5) year period
commencing on the day after the Expiration Date (the "Extended Term Commencement
Date"), and the second Extended Term shall be for a five (5) year period
commencing on the day after the initial Extended Term ends; provided, however,
that if the Master Lease terminates prior to the fifth or tenth anniversary of
the Extended Term Commencement Date, as applicable, then the Extended Term then
in effect shall terminate on the date the Master Lease terminates. Tenant shall
have no right to extend the Term beyond the first Extended Term if it is
terminated on the date the Master Lease terminates, and following exercise of
its second option to extend. Notwithstanding any provision herein, Landlord has
no obligation whatsoever to Tenant to exercise any rights Landlord may have to
extend the term of the Master Lease for any of the period covered by the Term
described herein.

                                       3
<PAGE>   4

               b. Each Extended Term shall be on all of the terms and conditions
of this Lease except that during such Extended Term, Base Rent shall be adjusted
pursuant to Section 3.02, the Base Year shall instead be the first year of the
relevant extension period, initial Base Rent shall be determined as hereinafter
provided, and Landlord shall have no responsibility for commissions and Tenant
Improvements, except that Landlord shall, at Landlord's sole expense, repaint
the interior walls of the Premises with one (1) coat of the paint color
currently thereon immediately upon the commencement of such extension period. To
exercise the option to extend the Term, Tenant shall give to Landlord written
notice of exercise of the option to extend (the "Extension Notice") no later
than nine (9) months prior to the expiration of the preceding term. However, in
no event shall Tenant give such notice to Landlord earlier than twelve (12)
months prior to the expiration of the Term. If Tenant is in default beyond any
applicable notice and cure period on the date of giving such Extension Notice,
such Extension Notice shall be void. In addition, if Tenant is in default beyond
any applicable notice and cure period on, or if this Lease has been otherwise
terminated prior to, the date that any of the Extended Term would otherwise
commence, this Lease shall expire at the end of the initial Term.

               c. On the commencement of the Extended Term, the initial Base
Rent hereunder for the Extended Term shall be adjusted to the market rental
value of the Premises ("MRV") as follows: Four months prior to commencement of
the Extended Term, Landlord and Tenant shall meet to establish an agreed upon
MRV for the specified term. If agreement cannot be reached, then: (i) Landlord
and Tenant shall immediately appoint a mutually acceptable appraiser or broker
to establish the MRV within the next 30 days, in which case any associated costs
will be split equally between the parties; or (ii) Landlord and Tenant shall
each immediately select and pay the appraiser or broker of their choice to
establish a MRV within the next 30 days. If both appraisals are completed and
the two appraisers/brokers cannot agree on a reasonable average MRV, then they
shall immediately select a third mutually acceptable appraiser/broker to
establish a third MRV within the next 30 days. The average of the two appraisals
closest in value shall then become the new MRV. The costs of the third appraisal
will be split equally between the parties. In any event, the MRV for the
Extended Term shall be no less than the Base Rent payable for the month
immediately proceeding the commencement of the applicable Extended Term. Upon
determination of the MRV as provided above, such MRV shall be the initial Base
Rent for such Extended Term.

3.      RENT

        3.01 Base Rent. Effective as of the Commencement Date for each floor of
the Premises, Tenant shall pay to Landlord as Base Rent, without deduction,
set-off, prior notice or demand, Thirty-Nine Dollars ($39.00) per square foot of
the Premises per annum (the "Base Rent"), payable in twelve (12) equal
installments on the first day of each calendar month. One full month's Base Rent
shall be paid to Landlord upon Tenant's execution of this Lease, which amount
shall be credited against the first month's Base Rent due under this Lease. Base
Rent or any change in Base Rent shall be prorated based on a thirty day month.

                                       4
<PAGE>   5

        3.02 Base Rent Increases. Beginning on January 1, 2002 and on each
annual anniversary thereafter during the Term, the Base Rent shall be increased
by three and one-half percent (3.5%) per annum. The January 1, 2002 adjustment
shall include the adjustment for the period commencing on August 15, 2000 and
ending on December 31, 2001. The adjustment for that period shall be billed
within the first calendar quarter of 2002. Notwithstanding the foregoing, the
increased Base Rent amount for the 13th Floor shall first be payable by Tenant
on January 1, 2002. Each annual increase shall be calculated on the Base Rent of
the preceding year.

        3.03 Additional Rent. All sums payable by Tenant under this Lease, other
than Base Rent pursuant to this Section 3 and the Stock Investment (as such term
is defined in Section 19), if any, shall be Additional Rent.

        3.04 Rent. Base Rent and Additional Rent are collectively referred to in
this Lease as "Rent."

4.      LETTERS OF CREDIT

        4.01 As security for the performance by Tenant of its covenants and
obligations under this Lease, upon execution of this Lease, Tenant shall deliver
to Landlord an original, unconditional, irrevocable and self-renewing letter of
credit in the applicable amount designated in Section 4.02, naming Landlord as
beneficiary (the "First Letter of Credit"). Within three (3) months following
the execution of this Lease, the Tenant shall deliver to Landlord a second
original, unconditional irrevocable and self-renewing letter of credit in the
applicable amount designated in Section 4.02, naming Landlord as beneficiary
(the "Second Letter of Credit"). The First Letter of Credit and the Second
Letter of Credit shall be collectively referred to herein as the "Letter of
Credit." The Letter of Credit shall be substantially in the form of Exhibit C,
and shall be issued by a major commercial bank reasonably acceptable to
Landlord, with a service and claim point for the Letter of Credit in the San
Francisco Bay Area.

        4.02 Amount. The amount of the First Letter of Credit shall be Four
Million Eight Hundred Eighty-Six Thousand Nine Hundred Seventy-Nine and 00/100
Dollars ($4,886,979.00) and the amount of the Second Letter of Credit shall be
Nine Hundred Sixty Seven Thousand Four Hundred Seventy Three Dollars
($967,473.00). The initial combined amount of the First Letter of Credit and
Second Letter of Credit equals of Five Million Eight Hundred Fifty Four Thousand
Four Hundred Fifty-Two and 00/100 Dollars ($5,854,452.00). If Tenant is not then
in default under this Lease beyond any applicable notice and cure period, then
upon each anniversary of the Commencement Date, the Letter of Credit shall be
reduced by the annual amortized amount of brokerage commissions and Tenant
Improvement Allowance assuming amortization on a straight line basis over the
Term, which amount the Landlord and Tenant acknowledge is approximately Two
Hundred Forty-Eight Thousand Seventy and 00/100 Dollars ($248,070.00) per annum
(the "Commissions/TI Reduction". At any time during the Term, provided Tenant is
not then in default under this Lease beyond any applicable notice and cure
period, if Tenant demonstrates to Landlord's reasonable satisfaction that its
ratio of current

                                       5
<PAGE>   6

assets (as shown on audited financial statements certified by accountants
acceptable to Landlord in its reasonable discretion), to its total liability
hereunder, equals or exceeds 3:1, then the face amount of the Letter of Credit
may in addition be reduced by the equivalent of six (6) months of Base Rent,
which for the purposes of this Section 4.02 the parties agree is One Million
Nine Hundred Thirty Four Thousand Nine Hundred Forty Six Dollars ($1,934,946.00)
(the "Asset/Liability Reduction"). In addition, after the twenty fourth (24th)
month following the Commencement Date, provided the Tenant is not then in
default beyond any applicable notice and cure period, if Tenant demonstrates to
Landlord's reasonable satisfaction that its annual net profits for its prior
fiscal year (as shown on audited financial statements certified by accountants
acceptable to Landlord in its reasonable discretion) equal three (3) years of
Base Rent, which for the purposes of this Section 4.02 the parties agree is
Eleven Million Six Hundred Nine Thousand Six Hundred Seventy Six Dollars
($11,609,676.00), then the face amount of the Letter of Credit may in addition
be reduced by the equivalent of three (3) months of Base Rent, which for the
purposes of this Section 4.02 the parties agree is Nine Hundred Sixty Seven
Thousand Four Hundred Seventy Three Dollars ($967,473.00) (the "Profits/Base
Rent Reduction"). If the Term of this Lease is extended for any Extended Term,
then, provided that Tenant is not then in default under the terms of this Lease
beyond any applicable notice and cure period, the amount of the Letter of Credit
(or, at Tenant's election, cash security deposit) shall be negotiated by
Landlord and Tenant.

        4.03 Term of Letter of Credit. Except as otherwise provided herein, the
Letter of Credit shall expire not earlier than the Expiration Date of the Lease
as may be extended pursuant to the Extended Term.

        4.04 Landlord Draws. Landlord may draw on all or a portion of the Letter
of Credit to cure any default beyond any applicable notice and cure period under
this Lease or to compensate Landlord for any damage Landlord incurs as a result
of Tenant's failure to perform any of Tenant's obligations under this Lease. If
Landlord draws on the Letter of Credit, Landlord may hold the funds received
from the Letter of Credit as security for Tenant's performance under this Lease
(the "Security"), and Landlord shall not be required to segregate the Security
from its other funds and no interest shall accrue or be payable to Tenant with
respect to the Security. No holder of a Superior Interest, as defined in Section
17.02, nor any purchaser at any judicial or private foreclosure sale of the
Building or any portion thereof, shall be responsible to Tenant for the Security
unless and only to the extent such holder or purchaser shall have actually
received the Security. If Landlord transfers the Security to the grantee or
transferee of Landlord's interest in the Building or the underlying real
property, Landlord shall be released from any further responsibility or
liability for the Security. Any draw on the Letter of Credit by Landlord shall
not constitute a waiver of any other rights of Landlord with respect to a
default or failure to perform by Tenant.

        4.05 Replenishment. If Landlord draws on the Letter of Credit, Tenant
shall replenish the Letter of Credit within ten (10) business days of demand
therefor, or provide Landlord with an additional letter of credit conforming to
the requirements of this Section 4 so that the total amount available to
Landlord under Tenant's letter(s) of credit is the amount specified in Section
4.02. Notwithstanding the foregoing, the total amount of such letter(s) of
credit shall reflect

                                       6
<PAGE>   7

reductions thereto, if any, previously allowed as provided in Section 4.02
above. In the event Tenant fails to deliver any replacement, additional, or
extension of the Letter of Credit, or evidence of renewal of Letter of Credit,
within the time specified under this Lease, Tenant shall be in default hereunder
and Landlord shall be entitled to draw upon all or any portion of the Letter of
Credit then in effect.

        4.06 Return. Within thirty (30) days of expiration or earlier
termination of this Lease, and provided that Tenant is not then in default
hereunder, Landlord shall return to Tenant the Letter of Credit and/or the
balance of the Security then held by Landlord, as applicable; provided, however,
that in no event shall any such return be construed as an admission by Landlord
that Tenant has complied with all of its covenants and obligations under this
Lease.

5.      OPERATING EXPENSE ADJUSTMENT

        5.01 "Base Year" shall mean the year January 1, 2000 through December
31, 2000. Beginning January 1, 2002 and continuing annually thereafter, in
addition to Base Rent, Tenant shall pay to Landlord, as Additional Rent,
Tenant's share of any increase in Operating Expense for the forthcoming calendar
year over Operating Expense for the Base Year. Additionally, on January 1, 2002,
Tenant shall pay to Landlord, as Additional Rent, Tenant's share of any increase
in Operating Expense over the Base Year for the period January 1, 2001 through
December 31, 2001. "Tenant's Share" shall mean the percentage that the total
rentable square footage in the Premises is of the total rentable square footage
in the Building, which percentage the parties agree equals thirteen and
52/100ths percent (13.52%). Tenant's Share shall be adjusted each time Tenant
leases any additional space in the Building, based on the new total rentable
square footage in the Premises to the total square footage in the Building. In
no event shall Rent be decreased below the Base Rent provided for in Section 3
of this Lease.

        5.02 "Operating Expense" as used in this Lease shall mean the total of
all actual costs (but not specific costs which are separately billed to and paid
by specific tenants) of every kind and nature incurred in connection with the
ownership, management, operation, maintenance and repair of the Building and the
real property upon which the Building is located, including but not limited to
the following:

               a. All real property taxes and assessments levied on or assessed
against the Property and the Building, including (i) all tax increases resulting
from any reassessment of the Property and the Building pursuant to Article XIII
A of the California Constitution on sale, construction or otherwise; (ii) all
taxes levied in whole or part in lieu of real property taxes; and (iii) all
other present or future taxes, charges, excises or fees with respect to the
Property and the Building including taxes on rent, on the making of a lease, on
the occupancy of a tenant, on environmental or energy taxes or charges, and
taxes for special uses or districts, and excluding only income taxes measured by
Landlord's net income from all sources.

                                       7
<PAGE>   8

               b. All premiums for insurance which Landlord deems necessary or
desirable, including, without limitation, fire and other casualty insurance,
public liability and property damage insurance, earthquake and business
interruption insurance.

               c. All costs of services to the Premises, including without
limitation, the repair and maintenance of the structure, roof, elevators, air
conditioning equipment, plumbing equipment, other equipment and wall, floor and
window coverings; painting, janitorial service, garbage disposal, pest control
and cleaning costs; the cost of Building and other supplies, fuel, materials,
equipment and tools; water, gas, electric energy, steam and other utilities;
wages and other labor costs of personnel engaged in management, operation and
maintenance (including overtime, holiday and other premium pay, the cost of
Social Security, unemployment and other payroll taxes, workers' compensation
insurance and employee benefits, such as, but not limited to, vacation, pension,
group insurance and other fringe benefits), legal, accounting and other
administrative fees, service contracts, reasonable management fees, landscaping
services and supplies, and the fair market value of the property manager's
offices in the Building.

               d. The amortization of the cost of the purchase and installation
by Landlord of capital investment items which Landlord deems necessary to (i)
achieve economies in the operation, maintenance and repair of the Building (to
the extent of the annual savings realized only), (ii) to comply with the
requirements of any governmental authority (including but not limited to any
statutes or ordinances) or with mandatory or voluntary controls or guidelines on
Landlord or the Building relating to the provision of any utilities or services
provided with respect to this Lease; or (iii) comply with any insurance
requirement. The cost shall be capitalized on the books of Landlord in
accordance with generally accepted accounting practices and amortized by
multiplying the actual cost, including financing costs, by the constant annual
percentage required to fully amortize the cost over the useful life of the
capital improvement, as determined by generally accepted accounting principles.

               e. In no event shall Operating Expenses include any of the
following, and nothing contained herein shall be deemed to require Tenant to pay
any of the following: (i) brokerage commissions, advertising costs and other
related expenses incurred in connection with the leasing of the Building; (ii)
payments of principal or interest on any mortgage including ground lease
payments and points, commissions and legal fees associated with financing; (iii)
depreciation; (iv) costs (including permit, license and inspection fees)
incurred in renovating or otherwise improving, decorating, painting or altering
space leased to other tenants in the Building; (v) any cost or expense related
to the testing for, removal, transportation or storage of Hazardous Materials
from the Premises included as part of the original base building construction;
(vi) interest, penalties or other costs arising out of Landlord's failure to
make timely payments of its obligations; and (vii) property management fees of
any property management firm in excess of four percent (4%) of the gross
revenues of the Building.

        5.03 Tenant's Share of the increase, if any, in estimated annual
Operating Expense over the Operating Expense for the Base Year shall be paid by
Tenant to Landlord, commencing on January 1, 2002, as Additional Rent in twelve
(12) equal monthly installments in advance on

                                       8
<PAGE>   9

the first day of each calendar month without notice or demand. For each year
subsequent to the Base Year, Landlord shall provide Tenant with a written
estimate of the Operating Expense Landlord reasonably anticipates for the
following year. In addition, Landlord may adjust the estimate of Operating
Expense during the year if Landlord concludes that it underestimated actual or
overestimated Operating Expense. Tenant shall continue to pay one-twelfth (1/12)
of Landlord's last estimate of Tenant's Share of the increase, if any, in annual
Operating Expense on the first day of each calendar month until notified of a
new estimate.

        5.04 Within a reasonable period after the end of each year, Landlord
shall give Tenant a statement, certified by Landlord's controller, showing
actual Operating Expense for such year, the actual increase, if any, of
Operating Expense for such year over the actual Operating Expense for the Base
Year, Tenant's Share of any such increase, and the total payments made by Tenant
on the basis of any previous estimate of Operating Expense. If Tenant's share of
the actual increase in Operating Expense exceeds the monthly installments paid
by Tenant during the year, Tenant shall pay the deficiency to Landlord within
thirty (30) days of delivery of such statement. If Tenant's monthly installments
exceed Tenant's Share of the actual increase in Operating Expense, Landlord
shall give Tenant a credit in the amount of the excess against the next
installments of rent due from Tenant or, in the case of a statement after
expiration of the Term, reimburse Tenant such excess amount within thirty (30)
days of the time such statement is delivered. Tenant's Share of the increase in
Operating Expense for the year in which this Lease commences and terminates
shall be prorated on the basis of a 365-day year. Expiration of the term of this
Lease shall not affect the obligations of Landlord or Tenant to adjust the
payment of Tenant's Share of increases in Operating Expense pursuant to this
Section 5.04.

        5.05 Any dispute between the parties concerning the proper determination
of any increases in rent shall be referred to Landlord's certified public
accountants and the determination of any dispute by such firm shall be binding
and conclusive on the parties. Any charges made or expenses incurred by the
certified public accountants in connection with any such determination shall be
borne and paid for by Landlord if the amount set forth in Landlord's statement
is revised, downward by five percent (5%) or more, and by Tenant if it is less
than five percent (5%) downward.

6.      LATE CHARGE

        Tenant acknowledges that late payment of rent and other sums will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult and impractical to fix. These costs include,
without limitation, processing and accounting charges, and late charges that may
be imposed on Landlord by the terms of any encumbrance, and notes secured by any
encumbrance, covering the Premises. Therefore, if any installment of rent or
other amounts due from Tenant are not paid in full within five (5) days of the
due date, Tenant shall pay to Landlord as Additional Rent six percent (6%) of
the delinquent amount. The parties agree that acceptance of the late charge
shall not constitute a waiver of Tenant's default with respect to the overdue
amount, or prevent Landlord from exercising any of the rights and remedies
available to Landlord under this Lease or by law.

                                       9
<PAGE>   10

7.      USE

        7.01 Tenant shall use and occupy the Premises only for the purpose of a
general business office and related client training sessions, and for no other
purpose.

        7.02 Tenant shall not use or occupy the Premises, or permit the use or
occupancy of the Premises, in any manner or for any purpose (a) which would
violate any law, order or regulation of any governmental authority, (b) which
will in any way increase the existing rate or affect any fire or other insurance
upon the Building or any of its contents or cause a cancellation of any such
insurance policy, (c) which would violate any provision of this Lease or any
certificate of occupancy for the Premises or the Building, (d) which might
impair or interfere with any of the services and systems of the Building,
including without limitation, the heating, elevator, air-conditioning,
ventilation and mechanical systems and the janitorial, security and building
maintenance services, (e) which would overload the Premises, cause substantial
noise or vibration, or jeopardize the structural integrity of the Building, (f)
which would obstruct or interfere with the rights of other tenants or occupants
of the Building or injure or annoy other tenants or occupants, (g) which would
impair the appearance of the Building or be prejudicial to the business or
reputation of Landlord or the Building or confuse or mislead the public as to
the relationship between Landlord and Tenant.

        7.03 Within thirty (30) days after receipt of demand by Landlord, Tenant
shall reimburse Landlord for additional premiums charged for any insurance
policy by reason of Tenant's failure to comply with the provisions of Section
7.02 and for any other costs incurred by Landlord in enforcing the provisions of
Section 7.02.

        7.04 Tenant shall be bound by and comply with the Rules and Regulations
attached to this Lease as Exhibit D, and, after notice, by all reasonable
modifications and additions to the Rules and Regulations as from time to time
promulgated in writing by Landlord. Landlord shall have the right to modify the
Rules and Regulations in its sole discretion. Landlord shall not be responsible
to Tenant for violation of any Rules or Regulations by any other tenant or
occupant of the Building.

        7.05 Tenant shall not maintain or display any sign, lettering, drapes,
shades, blinds or lights on the exterior or interior (including windows) of the
Premises unless approved by Landlord in writing. Notwithstanding the foregoing,
Landlord will provide Tenant with first (1st) and second (2nd) floor lobby
directory signage in its customary size and form. Tenant shall be permitted to
place a sign comprised of its corporate logo in the lobby of each full floor it
occupies (the "Interior Signs") and, subject to the existing rights of other
tenants (as identified below), Landlord grants Tenant an option, to be exercised
by Tenant no later than January 1, 2001 (or else such option shall thereafter be
null and void) to install one (1) illuminated exterior building sign at the
parapet level of the Building facing 21st Street similar in size to, but not
larger than, the existing "Kaiser" sign (the "Exterior Sign") (the Interior
Signs and the Exterior Sign are collectively referred to herein as the "Signs").
Tenant acknowledges that its signage

                                       10
<PAGE>   11

rights, as provided herein, may be subject to the rights, if any, held by the
following tenants: 1) Bank of America; 2) California Bank & Trust; and 3)
Computer Sciences Corporation (successor to TRW, Inc.). In consideration of such
option, Tenant shall pay Landlord the sum of Ten Thousand Dollars ($10,000.00)
upon execution of this Lease. Such consideration shall be reimbursed to Tenant
if the signage rights of Tenant hereunder are denied. Tenant shall maintain the
Signs in accordance with the building standards. Tenant shall pay all costs
associated with the installation, maintenance and removal of the Signs. Tenant
shall pay rent for the Exterior Sign at the rate of Ten Thousand Dollars
($10,000.00) per month, commencing on January 1, 2001 and ending on the
termination of this Lease. Tenant may install the Signs following the prior
written approval of Landlord (of the design, size and location of the Signs) and
any appropriate municipal agencies. Except as otherwise provided herein, Tenant
shall have exclusive signage rights on the upper parapet area only for the side
of the Building facing 21st Street. The Sign rights contained herein are granted
for the exclusive use of Tenant and any Affiliate thereof (as defined in Section
15.02 hereof) only, provided that the name of the tenant on such Signs remains
"Versata," and shall terminate upon the Expiration Date of the Lease.
Notwithstanding anything to the contrary contained herein, any change in the
name on the sign from "Versata" shall require the prior written consent of
Landlord, which consent shall not be unreasonably withheld, and in any event,
Landlord shall have the right to withhold its consent if any change of name on
the Signs would violate the existing rights of other tenants, or any local
ordinances. Upon termination of the Sign rights, Tenant at its sole expense
shall remove all Signs, and repair all damages to the Building resulting from
the installation, maintenance or removal of such Signs, including without
limitation any cleaning of all or a portion of the dolomite curtain wall upon
which the Exterior Sign is placed.

8.      ALTERATIONS

        8.01 Landlord shall have no responsibility for any loss or damage to any
fixtures, equipment or other property installed or left in the Premises from any
cause except as results from the intentional or grossly negligent acts of
Landlord. Tenant's entry prior to the commencement of the term shall be subject
to all of the applicable provisions of this Lease, except for the obligation to
pay Rent. Tenant shall furnish Landlord with copies of all certificates and
approvals relating to any installation work done by Tenant which may be issued
or required by any governmental authorities. Tenant shall diligently prosecute
such work to completion and with all due diligence shall open the Premises for
the conduct of its business.

        8.02 Tenant shall not make or permit to be made any alterations,
additions or improvements to the Premises or any part of the Premises, or attach
any fixtures or equipment, without first obtaining Landlord's written consent,
which consent shall not be unreasonably withheld or delayed. Any alterations,
additions or improvements to the Premises consented to by Landlord shall be made
by a contractor approved by Landlord (which approval shall not be unreasonably
withheld or delayed) for Tenant's account, and Tenant shall reimburse Landlord,
as Additional Rent, for the cost, including a reasonable charge for Landlord's
overhead, for work done by Landlord, within ten (10) days after receipt of a
statement. All alterations, additions, fixtures and improvements, whether
temporary or permanent in character, made in or upon the

                                       11
<PAGE>   12

Premises either by Tenant or Landlord, shall immediately become Landlord's
property (except that Tenant shall be entitled to all tax benefits accruing
therefrom) and, at the end of the Term of the Lease, shall remain on the
Premises without compensation to Tenant.

        8.03 If Landlord so elects by notice in writing to Tenant at least
thirty (30) days prior to the expiration or earlier termination of this Lease,
then Tenant shall remove from the Premises all property changed or altered, and
all additions or improvements (except walls, doors, carpets and other tenant
improvements typically found in office space) resulting from Tenant's changes,
alterations, additions and improvements upon the Premises as Landlord shall
select. Tenant shall repair at Tenant's own cost and expense and to Landlord's
satisfaction all damage caused by any removal of property permitted or required
to be removed under this Section 8.03, and all such removals and repairs shall
be completed by the date of expiration or other termination of this Lease. If
Tenant shall fail to so remove such property or repair such damage, Landlord may
do so at Tenant's expense.

9.      SERVICES

        9.01 Landlord shall furnish to the Premises during the periods from 7:00
a.m. to 6:00 p.m., Monday through Friday, excluding holidays, and subject to
rules and regulations from time to time established by Landlord, heating,
air-conditioning and ventilation in amounts required, in Landlord's reasonable
judgment, for the use and occupancy of the Premises for normal business
purposes. Landlord shall provide the following services seven days a week on a
twenty-four (24) hour basis: (a) passenger elevator service, (b) electric
current in amounts required for normal lighting by standard overhead fluorescent
fixtures and for normal office machines, (c) water for lavatory and drinking
purposes, and (d) security for the Building; provided, however, that Landlord
shall not be liable for personal injuries or for losses due to theft or
burglary, or for damages done by unauthorized persons in or around the Building.
Landlord shall provide janitorial service on a five-day week basis, excluding
Saturdays, Sundays and holidays.

        9.02 Landlord may impose a reasonable charge and establish reasonable
rules and regulations for the use of any additional or unusual janitorial
services required by Tenant. Landlord shall not be required to provide
janitorial services for portions of the Premises used for preparing or consuming
food or beverages, or for storage, or as a lavatory. Landlord shall provide, at
Landlord's sole expense, starters and ballasts and new initial lamps and bulbs;
however, Tenant shall reimburse Landlord for the cost and expense of maintaining
and replacing lamps, bulbs, starters and ballasts.

        9.03 If Tenant desires any service at any time other than during the
hours set forth in Section 9.01 or in amounts exceeding the basic services
provided by Landlord, Tenant shall pay Landlord the cost of providing the
additional services (based on the actual cost thereof to Landlord, without
mark-up or profit), as Additional Rent. If in Landlord's sole discretion Tenant
utilizes excess electric current, Landlord shall have the right to install an
electric current meter in the Premises to meter the amount of electric current
consumed on the Premises. The cost of any such meter and separate conduit,
wiring or panel requirements and installation, maintenance and

                                       12
<PAGE>   13

repair shall be paid for by Tenant and Tenant agrees to reimburse Landlord
promptly upon demand by Landlord for all excess electric current as shown by the
meter, at the rates charged for such services, plus any additional expense
incurred in keeping account of the electric current so consumed, as Additional
Rent. If the temperature otherwise maintained in any portion of the Premises by
the heating, air-conditioning or ventilation systems is affected as a result of
any lights, machines or equipment (including without limitation electronic data
processing machines) used by Tenant in the Premises, or an excess electrical
load in the Premises, or by alterations to the Premises made by Tenant or at
Tenant's request, Landlord shall have the right to install any machinery and
equipment that Landlord reasonably deems necessary to restore temperature
balance, including without limitation, modifications to the standard air
conditioning equipment. The cost of installation and any additional cost of
operations and maintenance incurred shall be paid by Tenant to Landlord within
ten (10) days after written demand by Landlord, as Additional Rent.

        9.04 Landlord reserves the right, without notice to Tenant and without
giving rise to any claim of constructive eviction, to stop the heating,
elevator, lighting, ventilating, air-conditioning, power and water systems of
the Building or cleaning or other services, if any, and to interrupt the use of
any of the Building facilities, at such times as may be necessary and for as
long as may reasonably be required by reason of accidents, strikes, lock-outs or
other labor disputes, or the making of repairs, alterations or improvements or
inability to secure a proper supply of fuel, steam, water, electricity, labor or
supplies, or by reason of any cause beyond the control of Landlord; provided,
however, that if any interruption of utilities or services is discontinued for
more than ten (10) consecutive business days for reasons within Landlord's
control, and such discontinuance substantially affects Tenant's ability to use
any portion of the Premises, then Rent due hereunder shall be abated for the
portion(s) of the Premises affected until the utilities or services are
continued. If such services are rationed by governmental authority, public
utility or other entity, Landlord may apportion such services among the Tenants
of the Building in accordance with Landlord's best judgment without liability
and without affecting Tenant's obligations under this Lease.

10.     REPAIRS AND MAINTENANCE

        10.01 Landlord shall repair and maintain in good order and serviceable
condition the exterior and structural portions of the Premises, the common areas
of the Building and the basic electrical system, elevators, heating and
air-conditioning equipment and plumbing serving the Premises, provided that
Landlord shall have no obligation to (a) repair damage caused by the intentional
acts or negligence of Tenant, its employees, invitees, licensees, agents and
contractors, subject to the terms of Section 11.01 hereof; (b) repair, repaint
or redecorate the interior of the Premises; or (c) make repairs which are
required to be made by Tenant pursuant to the provisions of Section 10.02.
Except as expressly provided in this Section 10.01 and in Section 12, Landlord
shall have no responsibility, obligation or liability with respect to the
repair, restoration or maintenance of the Premises.

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<PAGE>   14

        10.02 Tenant shall, at its own cost and expense, repair and maintain
(except for maintenance provided by Landlord under Section 9 with respect to
janitorial service) in good order and condition the nonstructural interior
portions of the Premises, including interior doors, partitions, carpeting and
floor coverings. Subject to the terms of Section 11.01 hereof, regardless of any
other provisions of this Lease, Tenant shall, at its own cost and expense,
repair or restore any damage or destruction to any portion of the Premises or to
the Building caused by the intentional acts or negligence of Tenant, its
employees, invitees, licensees, agents and contractors, except to the extent
such damage or destruction is covered by fire and extended coverage insurance
obtained by Landlord as provided in Section 11.01 of this Lease.

        10.03 In the case of emergencies (as reasonably determined by Landlord),
or if Tenant refuses or neglects to commence repairs which it is obligated to
make and complete with reasonable diligence, Landlord may make or cause repairs
to be made and shall not be responsible to Tenant for any loss or damage that
may accrue to its property or business by reason thereof. If Landlord makes such
repairs, and if the same are repairs required to be made by Tenant hereunder,
Tenant shall reimburse Landlord for the cost of such repairs, as Additional
Rent, within thirty (30) days after written demand by Landlord.

        10.04 The provisions of this Section 10 are in lieu of any rights
otherwise accruing to Tenant by virtue of sections 1941 and 1942 of the Civil
Code of the State of California (or any successor provisions), and the
provisions of such sections are hereby waived by Tenant.

        10.05 Tenant shall keep the Premises and the Building free from any
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant. If a mechanic's lien or another lien is filed against the
Building, Tenant shall do all acts necessary to discharge the lien within thirty
(30) days of filing or, if Tenant desires to contest the lien, then Tenant shall
deposit with Landlord within thirty (30) days of filing such security as
Landlord, the landlord under the Master Lease, and their lenders may demand to
secure the payment of the lien claim. Landlord shall have the right to post and
keep posted on the Premises any notices that may be provided by law or which
Landlord may deem to be proper for the protection of Landlord, the Premises and
the Building from liens.

        10.06 At least ten (10) days prior to delinquency, Tenant shall pay all
taxes levied or assessed upon tenant's equipment, furniture, fixtures and other
personal property located in or about the Premises. If the assessed value of
Landlord's property is increased by inclusion of a value placed upon Tenant's
equipment, furniture, fixtures or other personal property, Tenant shall pay to
Landlord, upon written demand, the taxes so levied against Landlord, or the
proportion of taxes resulting from the increase in assessment.

        10.07 Landlord may enter the Premises at reasonable hours, upon prior
notice thereof at least twenty-four (24) hours in advance (except in case of
emergency or routine services), for any proper purpose including but not limited
to the following: (a) inspection purposes, (b) to exhibit the Premises to
prospective purchasers or lenders, or, during the last nine (9) months of the
Term of the Lease, or any other time that Landlord has exercised its recapture
rights, to

                                       14
<PAGE>   15

prospective tenants, (c) to determine whether Tenant is complying with all its
obligations under this Lease, (d) to supply janitor service and any other
service to be provided by Landlord under this Lease, (e) to post notices of
non-responsibility, and (f) to make repairs required of Landlord under the terms
of this Lease or repairs to any adjoining space or utility services or to make
repairs, alterations or improvements to any other portion of the Building;
provided, however, that all repair work shall be done as promptly as reasonably
possible and so as to cause as little interference to Tenant as reasonably
possible. Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises or any other loss occasioned by any entry,
except to the extent caused by the gross negligence or willful misconduct of
Landlord.

11.     INSURANCE

        11.01 Landlord shall obtain and keep in force during the term or any
earlier occupancy by Tenant such fire and other insurance upon the Premises as
Landlord may in its discretion determine, and Tenant shall, at its sole expense,
obtain and keep in force during the term of this Lease the fire and extended
coverage insurance upon Tenant's fixtures, goods, wares and merchandise and
other personal property in and upon the Premises as Tenant may in its discretion
determine, provided, however, that Landlord hereby waives against Tenant and
Tenant hereby waives against Landlord any and all claims and demands, of any
nature, loss or injury to the Premises or to Tenant's fixtures, goods, wares and
merchandise and other personal property in and upon the Premises, as the case
may be, which shall be caused by or result from fire and other perils, events or
happenings which are covered by fire and extended coverage insurance.

        11.02 During the term of this Lease or any earlier occupancy by Tenant,
Tenant shall procure and maintain in full force and effect bodily injury
liability insurance with limits of not less than TWO MILLION DOLLARS
($2,000,000.00) per occurrence, and insurance against damage to property with a
limit of not less than ONE MILLION DOLLARS ($1,000,000.00), insuring against any
and all liability of Tenant with respect to the Premises or arising out of the
maintenance, use or occupancy of the Premises. Tenant shall provide to Landlord,
prior to Tenant's occupancy of the Premises, and thirty (30) days prior to
expiration of any policy, certificates issued by Tenant's insurance carrier
evidencing the continued coverages herein required and naming Landlord and any
and all of its employees, agents, partners, directors, officers and assigns as
it may designate from time to time, as additional named insureds. The
certificate shall also provide that the policy or policies shall not be canceled
or modified without thirty (30) days' prior written notice to Landlord. The
policy or policies evidenced by such certificate shall be subject to Landlord's
approval as to form and substance.

        11.03 Landlord shall not at any time or to any extent whatsoever be
liable, responsible or in any way accountable for any loss, injury, death or
damage to persons or property which at any time may be suffered or sustained by
Tenant or by any person who may at any time be using or occupying or visiting
the Premises or be in, on or about the Premises, caused by or resulting from or
arising out of, any act, omission or negligence of Tenant in the use of the
Premises, or from any failure of Tenant to keep the Premises in good order,
condition and repair, as provided

                                       15
<PAGE>   16

in this Lease, and Tenant shall indemnify, defend, hold and save Landlord free
and harmless of, from and against any and all claims, liability, loss or damage
whatsoever on account of any such loss, injury, death or damage. Tenant hereby
waives all claims against Landlord and its employees, agents, partners,
directors, officers or assigns for damages to fixtures, furniture and equipment,
goods, wares and merchandise or any other property, in or about the Premises,
and for injuries to or death of any persons in or about the Premises, from any
cause except Landlord's gross negligence or intentional tortious acts.

12.     DAMAGE OR DESTRUCTION

        12.01 The term "Casualty" as used herein shall mean and be limited to
(a) any fire, (b) any other occurrence or event covered by the usual form of
extended coverage endorsement on fire insurance policies, (c) any earthquake,
and (d) any other occurrence or event covered by insurance actually carried by
Landlord and in force at the time of the happening of any such occurrence or
event. If, during the term of this Lease the Building in which the Premises are
located or any portion of the Building shall be damaged or destroyed as a result
of any Casualty, then, anything contained in Section 10 to the contrary
notwithstanding, the following provisions shall apply and govern.

        12.02 Except as provided to the contrary in Sections 12.03 and 12.04,
Landlord shall repair or restore the Building as soon as reasonably practicable.
Any damage to or destruction of the Building or the Premises and any delay in
effecting repairs or restoration shall not constitute an actual or constructive
eviction of Tenant and this Lease shall continue in full force and effect except
that to the extent the Premises are unusable by Tenant as a result of such
damage or destruction, Tenant shall be entitled to an appropriate abatement of
the Rent provided for in Section 3. Landlord's obligations hereunder shall be
subject to the rights of the holders of any deeds of trust, mortgages, ground or
prime leases or other encumbrances on the Building or the Property and shall be
limited to the amount of insurance proceeds received by Landlord.

        12.03 If by reason of a Casualty (other than earthquake) there is damage
to or destruction of the Building and if the cost of restoring the Building as
estimated by Landlord, or the landlord under the Master Lease, would exceed
33-1/3% of the replacement cost of the Building or the proceeds recovered by
Landlord on account of such damage or destruction under any insurance policy
respecting the Building, then Landlord or the landlord under the Master Lease,
may elect not to restore the Building.

        12.04 If by reason of earthquake there is damage to or destruction of
the Building and if the cost of restoring the same as estimated by Landlord, or
the landlord under the Master Lease, would exceed $1,000,000, then Landlord, or
the landlord under the Master Lease, may elect not to restore the Building.

        12.05 If Landlord, or the landlord under the Master Lease, elects not to
restore the Building, Landlord shall notify Tenant of such election in writing,
which notice in the case of Landlord's election, shall in no event be given
later than 120 days after the date of the damage or

                                       16
<PAGE>   17

destruction. If Landlord delivers notice within the time specified, Tenant
shall, to the extent that a portion of the Premises are unusable by reason of
damage or destruction, be entitled to an appropriate abatement of the Rent
provided for in Section 3 from the date of damage or destruction, and if fifty
percent (50%) or more of the Premises remain unusable by Tenant, and the time
necessary to repair the portion of the Premises damaged by casualty exceeds
three hundred sixty-five (365) days, Tenant may, by delivery of written notice
to Landlord at any time within thirty (30) days after receipt of Landlord's
notice, elect to terminate this Lease, and this Lease shall so terminate as of
thirty (30) days after the date Tenant's notice of such election is received by
Landlord.

        12.06 In no event shall Landlord be required to restore or replace any
of the fixtures, furnishings, equipment or other personal property installed in
the Premises by Tenant or located in the Premises and Landlord's obligation
under this Section 12 with respect to the Premises is expressly limited to the
repair or restoration of the Premises to the general condition in which
possession thereof was made available to Tenant at the commencement of the term
of this Lease. Tenant shall cause to be performed at its own cost and expense
any other or further repairs or restorations which may be necessary to place the
Premises in substantially the same condition as they existed immediately prior
to such Casualty. Nothing contained in this Section 12 shall relieve Tenant of
liability to Landlord for any damage or destruction to the Premises of the
Building arising out of the intentional acts or negligence of Tenant, its
employees, agents, invitees, licensees and contractors.

13.     EMINENT DOMAIN

        13.01 If any part of the Premises shall be taken or condemned for a
public or quasi-public use or shall be sold by Landlord or the landlord under
the Master Lease to any entity having the right of eminent domain after notice
of intent to exercise such right has been given to Landlord by such entity, this
Lease shall immediately terminate as to the part so taken, condemned or sold. If
a part of the Premises remains which is susceptible of the reasonable conduct of
the business of Tenant, as determined by Landlord, this Lease shall remain in
full force and effect as to the portion of the Premises not so taken, condemned
or sold, as the case may be, but the rent payable under this Lease shall be
adjusted so that Tenant shall be required to pay for the remainder of the term
only the proportion of the rent as the area measured in square feet of the part
remaining after the taking or sale bears to the total area measured in square
feet of the Premises at the date of taking or sale; provided, however, that
Landlord shall have the option to terminate this Lease in its entirety as of the
date when title to the part so taken or sold vests in the condemner or purchaser
by giving Tenant notice in writing of Landlord's election to so terminate within
ten (10) days after the date of such taking or sale, as the case may be.

        13.02 If the entire Premises, or such substantial part of the Premises
is taken, condemned or sold so that there does not remain a portion susceptible
of the reasonable conduct of Tenant's business, as determined by Landlord, this
Lease shall terminate as of the date of taking or sale.

                                       17
<PAGE>   18

        13.03 If a part or all of the Premises are taken, condemned or sold, all
compensation awarded upon such taking or condemnation or the payment made upon
any such sale (except any compensation specifically awarded for the taking of
any of Tenant's trade fixtures or personal property or both, or for Tenant's
relocation costs associated with such a taking or sale) shall go to Landlord and
Tenant shall have no claim thereto, and Tenant hereby irrevocably assigns and
transfers to Landlord any right to compensation or damages to which Tenant may
become entitled during the term of this Lease by reason of the permanent or
temporary condemnation or sale to the condemning authority of all, or a part of
the Premises.

14.     DEFAULT

        14.01 The word "default" as used in this Section 14 shall mean and
include any one or more of the following events or occurrences:

               a. The failure by Tenant to perform or observe any of the
covenants and agreements of this Lease, including specifically, but without
limitation, Tenant's covenants for the payment of Rent.

               b. The issuance of any execution or attachment against Tenant or
any of Tenant's property, whereby the Premises or any portion of the Premises
shall be taken or occupied, or attempted to be taken or occupied, by someone
other than Tenant (except the existing tenants of the 13th floor pursuant to the
Existing Leases).

               c. The filing at any time after the date of execution of this
Lease and prior to the expiration or termination of this Lease, against Tenant
in any court pursuant to any statute, either of the United States or of any
state, of a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or any portion of Tenant's
property, which petition is not dismissed or discharged within thirty (30) days
after filing.

               d. The filing by Tenant of a petition in bankruptcy or insolvency
or for reorganization or for the appointment of a receiver or trustee, or the
making of an assignment for the benefit of creditors or entering into any
agreement for the relief of debtors.

               e. Tenant's abandonment of the Premises or any substantial
portion thereof.

        14.02 The word "abandonment" as used in this Section 14 shall mean and
include any one or more of the following events or occurrences:

               a. The relinquishment by Tenant of its right to possession of the
Premises or any substantial portion thereof.

               b. The cessation by Tenant of the conduct in the entire Premises,
or any substantial portion thereof, of the business to be carried on by Tenant
in the Premises for a

                                       18
<PAGE>   19

period of more than sixty (60) consecutive business days without Tenant's
performing its maintenance and repair and security obligations pursuant to this
Lease.

               c. The removal by Tenant of all or a substantial portion of its
personal property and trade fixtures from the Premises without replacing the
same, where the effect of such removal, in Landlord's reasonable judgment,
indicates that the Tenant intends to cease the conduct in the Premises of the
business to be carried on by Tenant in the Premises.

        14.03 In the event of the occurrence of any one or more of the events of
default specified in Section 14.01 by Tenant or an abandonment of the Premises
or any substantial part of the Premises, Landlord may at its election treat such
default in the manner provided in Section 14.04 or, without notice to Tenant,
elect to allow this Lease to continue in full force and effect without
terminating Tenant's rights to possession of the Premises and to enforce all of
Landlord's rights and remedies under this Lease, including without limitation
the right to recover rent as it becomes due. Acts of maintenance, preservation
or efforts to lease the Premises or the appointment of a receiver upon
application of Landlord to protect Landlord's interest under the Lease shall not
constitute an election to terminate Tenant's right to possession.

        14.04 In the event of the occurrence of any one or more of the events of
default by Tenant specified in Section 14.01, and except as provided in Section
14.05 below, Landlord may at any time thereafter, even if Landlord shall elect
to continue this Lease under Section 14.03 above, serve a three (3) day written
notice upon Tenant, with respect to defaults in the payment of rent or other
monetary charges, or a fifteen (15) day written notice with respect to any other
default, specifying the nature of such default. Upon the expiration of the three
(3) days or fifteen (15) days, as the case may be, if Tenant shall have failed
to remedy such default (provided that if such default is of a non-monetary
nature and cannot be cured within such fifteen (15) day period, Tenant shall not
be in default hereunder so long as Tenant has commenced such cure within said
fifteen (15) day period, is proceeding diligently to cure the same and completes
such cure within forty five (45) days), then Landlord may serve upon Tenant a
written three (3) day notice to vacate the Premises, and upon the expiration of
such three (3) days this Lease shall terminate and Tenant shall peaceably quit,
vacate and return the Premises to Landlord. Such notices shall be in lieu of,
and not in addition to, any notices required by law.

        14.05 Notwithstanding any notice provisions or any other provisions of
this Section 14, this Lease, at the election of Landlord, shall terminate
immediately upon the occurrence of any event or events specified in Section
14.01(d).

        14.06 Upon the termination of this Lease for default as provided under
Section 14.04 and 14.05, Landlord may, without notice to Tenant, re-enter the
Premises, either by force or otherwise and with process of law and without any
liability for damages therefor, and dispossess Tenant or the legal
representative of Tenant or other occupant of the Premises by summary
proceedings or otherwise, and remove and store, at Tenant's cost, their personal
property, trade fixtures and other effects, and hold the Premises as if this
Lease had not been made, but Tenant shall remain liable as hereinafter provided,
and Tenant waives any and all rights of redemption

                                       19
<PAGE>   20

or re-entry or repossession or to restore the operation of this Lease. Upon the
termination of this Lease under Section 14.04 or 14.05, Tenant shall immediately
become liable to and shall pay to Landlord an amount equal to the combined total
of the following:

               a. Any and all amounts due to Landlord by reason of the breach of
any of the terms, covenants or conditions of this Lease other than the payment
of rent; and

               b. The unpaid rent earned to the date of termination of this
Lease, with interest thereon at fifteen percent (15%) per annum from the date
the same became due, or such lesser maximum rate allowed by law; and

               c. The unpaid rent which would have been due between the date of
termination and the date of payment by Tenant of all sums due under this Section
14.06 or the date of an award of judgment, whichever occurs earlier, with
interest thereon at fifteen percent (15%) per annum from the date the same
became due or such lesser maximum rate allowed by law; and

               d. The rent which would have been due between the date of payment
of all sums due under this Section 14.06 or the date of an award of judgment,
whichever occurs earlier, and the date upon which this Lease would have expired
in accordance with its terms, discounted at the discount rate of the Federal
Reserve Bank of San Francisco at the time of such payment of judgment award plus
one percent (1%) or at the lowest discount rate permitted under applicable law;
and

               e. Any and all costs and expenses which Landlord may have
reasonably incurred as the result of Tenant's breach of this Lease, including
costs and expenses of attempting to relet or actually reletting the Premises or
any portion thereof including, without limitation, legal expenses, attorneys'
fees, real estate brokerage fees and the reasonable costs of alterations and
repairs to the Premises made in connection with the reletting of the Premises.

        14.07 Upon termination of this Lease for default as provided under
Sections 14.04 and 14.05, Landlord shall immediately have the right to relet or
attempt to relet the Premises or any portion thereof for a term or terms which
may at Landlord's option be less than or exceed the period which would otherwise
have constituted the balance of the term of this Lease and may grant concessions
or free rent for a reasonable period or periods for the purpose of inducing such
reletting. If Landlord is successful in reletting the Premises or any portion of
the Premises prior to the payment by Tenant to Landlord of the amounts set forth
in Section 14.06 or prior to an award of judgment for such amounts, the amounts
owing under subsections (b), (c) and (d) of Section 14.06 shall be reduced by
the amount which the rental under the new lease reduces Landlord's rental loss
arising by virtue of the termination of this Lease.

        14.08 Landlord shall not be deemed to be in default in the performance
of any obligation required to be performed by it hereunder unless and until it
has failed to perform such obligation within thirty (30) days after written
notice by Tenant to Landlord specifying wherein

                                       20
<PAGE>   21

Landlord has failed to perform such obligation; provided, however, that if the
nature of Landlord's obligation is such that more than thirty (30) days are
required for its performance, then Landlord shall not be deemed to be in default
if it shall commence such performance within such thirty (30) day period and
thereafter shall prosecute the same to completion. All rights to cure provided
to Landlord under this Section shall also be accorded to any mortgagee under any
mortgage or deed of trust securing the Building. Tenant shall give prompt notice
to Landlord in case of fire or accidents in the Premises or in the Building or
of defects therein or in fixtures or equipment.

15.     ASSIGNMENT AND SUBLETTING

        15.01 Tenant shall not directly or indirectly, voluntarily or by
operation of law sell, assign, encumber, pledge or otherwise transfer or
hypothecate all or any part of the Premises or Tenant's leasehold estate
(collectively "Assignment"), or permit the Premises to be occupied by anyone
other than Tenant or sublet the Premises or any portion of the Premises
(collectively "Sublease") without Landlord's prior written consent (which
consent shall not be unreasonably be withheld, conditioned or delayed) in each
instance. The consent of Landlord shall be subject to the qualification and
limitation that the Assignment or Sublease be effectuated without any additional
cost to Landlord, and that any and all expenses that accrue as a result of the
permissible Assignment or Sublease, including but not limited to legal costs, be
borne jointly and severally by Tenant and the assignee or sublessee.

        15.02 Upon notice to Landlord, Tenant may assign this Lease or sublet
any portion of the Premises without Landlord's consent to any of the following,
provided that such notice includes evidence demonstrating, to Landlord's
reasonable satisfaction, that such entity has a net worth equal to or greater
than the lesser of the net worth of Tenant as of the date of this Lease or as of
the date immediately prior to such transfer: (i) any corporation which controls,
is controlled by or under common control with Tenant; (ii) any corporation
resulting from the merger or consolidation of Tenant; (iii) any person or entity
which acquires all of the assets of Tenant as a going concern of the business
that is being conducted on the Premises (collectively, an "Affiliate"), provided
that: (a) such assignee assumes in full the obligations of Tenant under the
Lease, and (b) if the net worth of the new entity is less than the net worth of
Tenant as of the date of this Lease, and the Letter of Credit has been reduced
pursuant to the terms of Section 4.02 above, Tenant shall increase the amount of
the Letter of Credit so that the total amount of such Letter of Credit shall be
equal to the total of the next twelve (12) months Rent thereafter due hereunder
and the remaining amount of brokerage commissions and Tenant Improvement
Allowances that have not been previously deducted from face amount of the Letter
of Credit. Such increased Letter of Credit shall be subject to the
Commissions/TI Reduction, the Asset/Liability Reduction, and the Profits/Base
Rent Reduction on the terms provided in Section 4.02.

        15.03 If Tenant desires at any time to enter into an Assignment of this
Lease or a Sublease of the Premises, Tenant shall first give written notice to
Landlord of its desire to do so. The notice shall contain (a) the name of the
proposed assignee, subtenant or occupant, (b) the

                                       21
<PAGE>   22

nature of the proposed assignee's, subtenant's or occupant's business to be
carried on in the Premises, (c) the terms and provisions of the proposed
Assignment or Sublease, including the space affected and the date Tenant intends
to assign or sublet the space, and a copy of the proposed documentation, and (d)
any financial, operations or other information Landlord may reasonably request
concerning the proposed assignee, subtenant or occupant.

        15.04 Landlord shall then have a fifteen (15) business day period
following receipt of the notice within which to elect to (i) terminate the Lease
as to the space Tenant proposed to assign or sublet on the date specified in the
notice (except that Landlord shall have no such recapture right with respect to
sublettings, for a period of two (2) years or less, of up to one half of either
the entire 12th floor, or the entire 14th floor or the entire 15th floor, or
sublettings of all or any portion of the 13th floor, provided that if Tenant
sublets one half or more of the 13th floor, Tenant shall no longer have the
right as provided in this Section 15.04 to sublet up to one half of each of the
other floors of the Premises without Landlord's recapture rights), in which
event Tenant will be relieved of all further obligations under this Lease, or
(ii) to permit Tenant to assign or sublease the space on the terms stated in its
written notice, subject, however, to prior written approval of the proposed
tenant by Landlord, or (iii) disapprove the Sublease or Assignment. If Landlord
fails to notify Tenant in writing within the fifteen (15) business day period,
Landlord shall be deemed to have waived the option to terminate this Lease, but
written approval of the proposed tenant by Landlord shall be required. Landlord
shall be entitled to condition consent in any reasonable manner not inconsistent
with this Lease. Failure by Landlord to approve a proposed tenant shall not
cause a termination of this Lease.

        15.05 Except as otherwise provided herein, all rents or other
considerations realized by Tenant under any Assignment or Sublease, in excess of
the rent and other sums payable by Tenant under this Lease, shall be divided and
paid 50% to Landlord and 50% to Tenant, after Tenant has recovered from such
excess rent the cost, if due and payable, of brokerage fees incurred by Tenant
in connection with the Assignment or Sublease and the cost amortized over the
Assignment or Sublease term of any specific improvements made by Tenant to
accommodate the proposed tenant. Notwithstanding the foregoing, the Tenant may
retain any net profit realized under any short-term Sublease which covers not
more than one half of the 12th floor, one half of the 14th floor or one half of
the 15th floor of the Premises, or all or any portion of the 13th floor of the
Premises provided that if Tenant sublets one half or more of the 13th floor,
Tenant shall no longer have the right as provided in this Section 15.05 to
sublet up to one half of each of the other floors of the Premises without
Landlord's rights to excess rent as provided in this Section 15.05. The phrase
"short-term Sublease" for the purposes of the previous sentence shall be defined
as a Sublease with a term of two (2) years or less.

        15.06 No consent by Landlord to any Assignment or Sublease by Tenant
shall relieve Tenant of any obligation to be performed by Tenant under this
Lease. The consent by Landlord to any Assignment or Sublease shall not relieve
Tenant from the obligation to obtain Landlord's express written consent to any
other Assignment or Sublease. Any Assignment or Sublease which is not in
compliance with this Section 15 shall be void and, at the option of Landlord,
shall constitute a default by Tenant under this Lease. The acceptance of rent by
Landlord from a

                                       22
<PAGE>   23

proposed assignee or sublessee shall not constitute consent to such Assignment
or Sublease by Landlord.

        15.07 Except for transfers permitted pursuant to Section 15.02 of this
Lease, any sale or other transfer, including by consolidation, merger or
reorganization, of a majority of the voting stock of Tenant, if Tenant is a
corporation, or any sale or other transfer of a majority of the partnership
interests in Tenant, if Tenant is a partnership, shall be an Assignment for
purposes of this Section 15.

        15.08 Tenant hereby irrevocably assigns to Landlord, as security for
Tenant's obligations under this Lease, all rent from any subletting of all or
part of the Premises as permitted by this Lease, and Landlord, as assignee and
as attorney in fact for Tenant, may collect such rent, and apply it toward
Tenant's obligations under this Lease; except that, until the occurrence of an
act of default by Tenant, Tenant shall have the right to collect the rent.

16.     SURRENDER OF PREMISES

        Upon any re-entry by Landlord, either upon the expiration or other
termination of the term of this Lease or otherwise, Tenant shall quit and
surrender to Landlord the Premises in good order and condition, reasonable use
and wear thereof and damage by Casualty, as defined in Section 11, act of God or
the elements excepted, and repairs for which Landlord is responsible under this
Lease excepted, and Tenant shall remove all of its personal property, trade
fixtures and improvements (to the extent required under Section 8). Tenant's
obligations to observe or perform this covenant, and any other obligations of
Tenant under this Lease which by reasonable implication are intended to survive,
shall survive the expiration or other termination of the term of this Lease.

17.     TRANSFERS BY LANDLORD

        17.01 Landlord shall have the right to transfer and assign, in whole or
in part, all of its rights and obligations under this Lease and in the Building.
If Landlord's transferee assumes Landlord's obligations under this Lease, all
covenants of Landlord contained in this Lease shall be binding upon Landlord
only with respect to breaches occurring during its ownership of Landlord's
interest under this Lease.

        17.02 Tenant agrees that this Lease is and shall be subject and
subordinate to all ground leases, mortgages, deeds of trust, or any other
encumbrances now placed or which may be placed in the future upon the Building
or real property on which the Building is located (the "Superior Interests"),
and Tenant further agrees that within ten (10) days after being requested in
writing to do so by Landlord, or the lessors under any said ground lease, Tenant
will execute, sign, acknowledge and deliver any documents required to effectuate
such subordination and attornment. Should Tenant fail to execute, acknowledge
and deliver such instruments within ten (10) days after such written request,
Tenant hereby appoints Landlord and the lessors under any ground lease, and each
of their successors and assigns, as Tenant's attorney in fact irrevocably to

                                       23
<PAGE>   24

execute, acknowledge and deliver any such instrument or instruments for and on
behalf of Tenant.

        17.03 In addition to and not in derogation of the subordination set
forth above, in the event of the termination of any ground lease or in the event
of the institution of any foreclosure proceedings, Tenant agrees, upon request
of the ground lessor, the mortgagee, the trustee or any purchaser at foreclosure
sale, as the case may be, (1) to attorn and pay rent and to execute and deliver
any instruments necessary or appropriate to evidence or effectuate such
attornment or (2) to execute a new lease with such ground lessor, mortgagee,
trustee or purchaser as Landlord for the remainder of the term upon the same
terms and conditions as set forth herein. In the event the mortgagee, trustee or
ground lessor shall elect to have this Lease prior to the lien of its mortgage,
deed of trust or ground lease, and shall give written notice thereof to Tenant,
this Lease shall be deemed prior to such mortgage, deed of trust or ground
lease.

        17.04 Tenant agrees that no entry under any such mortgage, deed of trust
or sale for the purpose of foreclosing the same shall be regarded as an eviction
of the Tenant, constructive or otherwise, or give the Tenant any right to
terminate this Lease, whether it attorns or becomes tenant of the ground lessor,
mortgagee, trustee or purchaser or not. Nothing contained in the foregoing or in
any such documents evidencing Tenant's right to continue in possession as tenant
shall, however, affect the prior rights of the holder of any mortgage or deed of
trust with respect to the proceeds of any award in condemnation or of any fire
or casualty insurance policies affecting the Building, or impose upon any such
holder any liability (i) for the erection or completion of the Building, or (ii)
in the event of damage or destruction to the Building or to the Premises by fire
or other casualty, for any repairs, replacements, rebuilding or restoration, or
(iii) for any default by Landlord under this Lease occurring prior to any date
upon which such holder shall become Tenant's Landlord, or (iv) for any credits,
offsets or claims against the rent under this Lease as a result of any acts or
omissions of Landlord committed or omitted prior to such date.

18.     TENANT IMPROVEMENTS

        18.01 Tenant Improvements. Before the Commencement Date, Landlord shall
use its best efforts to construct the Premises and perform the work and make the
installations in the Premises, substantially in accordance with complete working
drawing and the plans and specifications provided by Tenant's architect and
Tenant's engineers and approved by Landlord ("Approved Plans") and with those
provisions of the attached Exhibit B that describe construction, at least two
(2) copies of which shall have been initialed as of the date of this Lease by
the duly authorized representatives of Landlord and Tenant. Said work and the
resulting installations are referred to in this Lease as the "Tenant
Improvements" and Exhibit B is referred to herein as the "Work Letter."

        18.02 Tenant Improvement Allowance. Landlord shall provide to Tenant a
tenant improvement allowance of Twelve Dollars ($12.00) per rentable square foot
of the Premises, towards the actual costs incurred by Tenant (including
demolition costs and Landlord's oversight

                                       24
<PAGE>   25

fees described in Section 18.04 below) for the Tenant Improvements on the terms
and conditions provided for in the Work Letter. Notwithstanding the foregoing,
Tenant, upon its election, may apply the applicable Tenant Improvement Allowance
allotted for the 13th floor on that particular floor or any other floor
comprising the Premises, provided Tenant shall deliver written notice of such
election to Landlord prior to the date on which the construction of such tenant
improvement commences. The allowance provided by Landlord under this Section
18.02(a) comprise the "Tenant Improvement Allowance." The Tenant Improvement
Allowance may be applied to the costs of outside consultants, including
architects, engaged by Tenant to analyze its space needs and to assist in the
design, preparation of space plans and construction documents, Tenant's move and
the costs of obtaining permits or other necessary approvals. If the costs for
Tenant Improvements exceed the Tenant Improvement Allowance, Tenant shall pay
all excess costs. Notwithstanding anything to the contrary herein, Landlord
shall have no obligation to fund the Tenant Improvement Allowance unless and
until Tenant has delivered to Landlord the Letter of Credit required herein.

        18.03 Landlord Improvements. Landlord shall, at Landlord's sole expense
(i) make restrooms on Floors 12, 13, 14, and 15 of the Premises compliant , in
its reasonable discretion, with the Americans with Disabilities Act (ADA); (ii)
remove any asbestos within the Premises; (iii) replace all 1' x 4' fluorescent
light lenses within the Premises with building standard parabolic lenses used in
the Building, (iv) replace any non-electronic ballasts with electronic ballasts
throughout the Premises, and (v) install sprinkler loops (but not sprinkler
distribution systems), if not previously installed and required by any
governmental agency with applicable jurisdiction, for each of the floors of the
Premises. Landlord shall have no obligation to commence such work until Tenant
has delivered to Landlord the Letter of Credit required herein.

        18.04 Landlord Services. Landlord will provide management oversight
services for the Tenant Improvements, up to a maximum of eighty (80) hours. Any
management oversight time in excess of eighty (80) hours will be deducted from
the Tenant Improvement Allowance at the rate of Seventy Five Dollars ($75.00)
per hour. In addition, space planning and architectural services provided by
Landlord or its contractors shall be deducted from the Tenant Improvement
Allowance.

19.     STOCK INVESTMENT

        19.01 Tenant may elect to buy down or reduce the Base Rent by an amount
up to $0.25 per square foot of the Premises (which amount shall be increased by
3.5% following each anniversary of the Commencement Date) by granting Landlord
secondary stock offering rights in Tenant, on terms mutually agreed to in
writing by Landlord and Tenant (the "Stock Investment"). The parties acknowledge
that the terms and form of agreement with respect to the Stock Investment must
be approved by the Boards of Directors of each party.

20.     RIGHT OF FIRST OFFER

                                       25
<PAGE>   26

        20.01 Right of First Offer. Throughout the Term of this Lease, Tenant
shall have a right of first offer to lease any adjacent space in the mid-rise
elevator bank of the Building on floors eleven (11), sixteen (16), seventeen
(17) and eighteen (18) as it becomes available (the "Expansion Space"), subject
to those rights held by other tenants or subtenants of the Building as of the
date of this Lease and identified on Schedule 2 attached hereto, on the terms
hereinafter provided.

        20.02 Terms of Right of First Offer. Upon Landlord's determination that
the Expansion Space is available to lease, prior to offering such Expansion
Space for lease (except as may otherwise be required pursuant to rights held by
other tenants or subtenants of the Building as of the date of this Lease and
identified on Schedule 2 attached hereto), Landlord shall deliver written notice
to Tenant, setting forth the specifications of the Expansion Space. Tenant shall
then have a period of ten (10) business days from receipt of such written notice
to exercise its rights to such Expansion Space upon the terms of this Section
20. If Tenant shall fail to exercise such option within such ten (10) day time
period, then, subject to Section 20.03 below, Landlord shall be free to lease
the Expansion Space in question to other third party tenants. The rent for the
Expansion Space contained in such offer shall be at the then current prevailing
market rates for similar size class A space in the downtown Oakland area,
provided, however, in no event shall rent be less than the Rent payable under
this Lease, the Base Year shall be the first year of the term for such Expansion
Space and the term for such Expansion Space shall be coterminous with the Term
of this Lease, including Extension Periods, for up to two (2) additional floors.
If Tenant elects to exercise its rights to lease the Expansion Space, Landlord
shall deliver to Tenant a lease amendment incorporating the terms of such
tenancy, executed by Landlord. Within ten (10) days thereafter, Tenant shall
accept such offer.

        20.03 Survival of Expansion Option. Notwithstanding anything herein to
the contrary, so long as Tenant is not then in default hereunder, in no event
shall Tenant's failure to exercise Tenant's rights to any Expansion Space
hereunder terminate: (i) Tenant's right to any other Expansion Space which might
become available during the Term of the Lease, (ii) Tenant's right to the
Expansion Space specified in Landlord's previous notice should it become
available for lease again during the Term of this Lease, or (iii) Tenant's right
to the Expansion Space specified in Landlord's previous notice should it not be
leased within one hundred eighty (180) days after the date Tenant failed to
exercise its options hereunder.

21.     GENERAL PROVISIONS

        21.01 Binding Effect. This Lease and the covenants and conditions herein
contained shall be binding upon and shall inure to the benefit of and shall
apply to the successors and assigns of Landlord and to the permitted successors
and assigns of Tenant.

        21.02 Notices. All notices, demands, or other writings to be given,
made, or sent hereunder, or which may be so given or made or sent by any party
to the other, shall be deemed to have been fully given, made, or sent when made
in writing and deposited in the United States Mail, postage prepaid, and
addressed to the respective parties as specified below. The address to

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<PAGE>   27

which any notice, demand or other writing may be given, made or sent to any
party may be changed upon written notice given by such party reasonably in
advance as above provided.

To Landlord:                         with a copy to:
Kaiser Center, Inc.                  Kaiser Aluminum & Chemical Corporation
300 Lakeside Drive, Suite 130        General Counsel
Oakland, California  94612           5847 San Felipe, Suite 2600
                                     Houston, Texas  77057
To Tenant:
                                     Prior to the Commencement Date:
Versata, Inc.
                                     2101 Webster Street, Suite 800
                                     Oakland, California  94612
                                     Attention:  Chief Financial Officer
                                     Attention:  Mr. Cliff Rogers, Senior
                                                        Facilities Manager

                                     After the Commencement Date:

                                     The Premises

                                     with a copy to:

                                     Brobeck, Phleger & Harrison LLP
                                     One Market
                                     Spear Street Tower
                                     San Francisco, California  94105
                                     Attention:  Douglas G. Van Gessel

        21.03 The waiver by Landlord or Tenant of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.

        21.04 Time. Time is hereby expressly declared to be of the essence of
each and every covenant, term, condition and provision of this Lease which
relates to a date or period of time, except delivery of the Premises.

        21.05 Remedies. The remedies in this Lease given to Landlord shall be
cumulative and are given without impairing any other rights or remedies given
Landlord by any statute or law

                                       27
<PAGE>   28

now existing or hereinafter enacted. The exercise of any one remedy by Landlord
shall not exclude the exercise of any other remedy.

        21.06 Interpretation. The language in all parts of this Lease shall in
all respects be construed as a whole according to its fair meaning, and not
strictly for or against Landlord or Tenant. The section headings in this Lease
are for convenience only and are not to be construed as a part of this Lease or
in any way limiting or amplifying the provisions of this Lease.

        21.07 Severability. If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.

        21.08 Holdover. If, with the express or implied consent of Landlord,
Tenant holds possession of the Premises after the expiration of the term of this
Lease, then such possession by Tenant shall be construed as a tenancy from month
to month, upon the terms herein specified but at a monthly rental equivalent to
one hundred sixty percent (160%) of the Base Rent payable by Tenant at the
expiration of the term of this Lease, payable in advance on or before the first
day of each month. Any such tenancy from month to month shall continue until
terminated by the Landlord or Tenant by the giving of at least thirty (30) days'
prior written notice of such termination to the other party. Tenant shall be
liable for all damages, consequential as well as direct, caused by such holding
over.

        21.09 Master Landlord Consent. If this Lease has a term (including any
optional renewal periods) of five (5) years or more and an annual base rent
equal to or in excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000), this Lease may
not be amended, modified or terminated (except in accordance with its terms)
without the prior written consent of the landlord under the Master Lease
referred to on page 1 of this Lease and the Mortgage Lender (as defined in such
Master Lease), and any such attempted amendment, modification or termination
(except in accordance with its terms) without such consent shall be null and
void, nor shall Tenant prepay or Landlord accept the payment of rent for more
than sixty (60) days in advance of its due date.

        21.10 Attorneys' Fees. In any action or proceeding which Landlord or
Tenant brings to enforce its respective rights hereunder or to enforce any
judgment granted in connection therewith, the unsuccessful party shall pay all
costs incurred by the prevailing party (whether or not the action or proceeding
is pursued to judgment), including reasonable attorneys' fees.

        21.11 Waivers. The parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or in
any way connected with this Lease, the relationship of Landlord and Tenant,
Tenant's use or occupancy of the Premises and any claim of injury or damage, or
both. In the event Landlord commences any proceedings for nonpayment of rent,

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<PAGE>   29

Tenant will not interpose any counterclaim of whatever nature or description in
any such proceedings. This shall not, however, be construed as a waiver of the
Tenant's right to assert such claims in any separate action or actions brought
by the Tenant.

        21.12 Landlord Management. The liability of Management (which, for the
purposes of this Lease, shall include Landlord and the owner of the Building if
other than Landlord) to Tenant for any default by Landlord under the terms of
this Lease shall be limited to the interest of Management and its present or
future partners in the Building and Tenant agrees to look solely to Management
or Management's present or future partners' interest in the Building, for the
recovery of any judgment from Management, it being intended that Management
shall not be personally liable for any judgment or deficiency.

        21.13 Integration. This Lease contains all the terms, covenants,
conditions and agreements between Landlord and Tenant relating in any manner to
the rental, use and occupancy of the Premises. No prior or other agreement or
understanding pertaining to the same shall be valid or of any force and effect;
and the terms, covenants and conditions of this Lease cannot be altered,
changed, modified or added to, except in writing signed by Landlord and Tenant.
No representation, inducements, understanding or anything of any nature
whatsoever, made, stated or represented by Landlord or anyone acting for on
Landlord's behalf, either orally or in writing, have induced Tenant to enter
this Lease, and Tenant acknowledges, represents and warrants that Tenant has
entered into this Lease under and by virtue of Tenant's own independent
investigation.

        21.14 Parking. During the Term, Tenant shall have the right to enter
into month-to-month parking space contracts with Landlord for up to one Hundred
(100) parking spaces in the Building garage ("Base Parking Spaces"), on a
reserved or unreserved basis, at Landlord's applicable monthly parking rates in
effect from time to time. Fifty (50) additional parking spaces ("Additional
Parking Spaces"), if available, shall be made available to Tenant to contract
for at applicable monthly parking rates in effect from time to time on the
following terms. If Tenant fails to contract for any of the Additional Parking
Spaces, or has contracted for but not used any of the Additional Parking Spaces
for two (2) consecutive months, then Landlord may notify Tenant thereof after
January 1, 2002. In the event that within the next thirty (30) days Tenant fails
to use or contract for such Additional Parking Spaces, then Tenant's rights to
contract for or use such Additional Parking Spaces shall terminate. Tenant may
thereafter elect to terminate the Additional Parking Spaces by providing written
notice to Landlord, at least thirty (30) days prior to the date of such
termination, which termination date must occur upon a month end. Tenant shall
have the right to utilize the parking spaces contracted for hereunder upon terms
and conditions as favorable as terms and conditions from time to time enjoyed by
the general public. To the extent Tenant contracts for such spaces, Tenant shall
be billed monthly, in advance, for parking at the monthly rates in effect from
time to time for the Base Parking Spaces and Additional Parking Spaces, as
applicable, and such amounts shall constitute Additional Rent under this Lease.
Notwithstanding anything herein to the contrary, the option to lease parking
spaces herein granted to Tenant may be terminated by Landlord with respect to
any or all of the parking spaces upon the material failure of Tenant or any
person to whom Tenant

                                       29
<PAGE>   30

has assigned any of the parking spaces to comply with any reasonable rule or
regulation for the operation of the parking facilities or upon the material
failure of Tenant or any person to whom Tenant has assigned any parking space to
perform the obligations under any applicable parking agreement. Tenant shall
designate from time to time as requested by Landlord the names of persons to
whom Tenant has assigned the parking spaces. If any person to whom Tenant has
assigned a parking space violates any reasonable rule for the operation of the
parking facilities, Landlord may bar such person from future use of the parking
facilities after reasonable notice.

        21.15 Estoppel Certificate. This Lease shall at the option of Landlord
be subject to and subordinate to the lien of any and all mortgages or deeds of
trust now or that may at any time hereafter be placed on the Building, the land
on which it is located, or the leasehold estate therein, and to any agreements
at anytime modifying or supplementing such mortgages or deeds of trust. Within
ten (10) business days following any written request which Landlord may make
from time to time, Tenant shall execute and deliver to Landlord a certificate
substantially in the form attached hereto as Exhibit E and made a part hereof,
indicating thereon any exceptions thereto which may exist at that time. Failure
by Tenant to execute and deliver such certificate shall constitute an acceptance
of the Premises and acknowledgment by Tenant that the statements included in
Exhibit E are true and correct without exception. Landlord and Tenant intend
that any statement delivered pursuant to this paragraph may be relied upon by
any mortgagee, beneficiary, purchaser or prospective purchaser of the Building
or any interest therein. Landlord shall have the right to substitute for the
attached Exhibit E a certificate in form required by Landlord's mortgagee or
provider of financing or purchaser. Landlord may charge Tenant the amount of One
Hundred Dollars ($100.00) per day for each day that Tenant fails to provide such
certificate after the ten (10) day period described herein. Alternatively,
Landlord may by written notice to Tenant after the expiration of such ten (10)
day period, declare Tenant in default of this Lease.

        21.16  Commissions.

               a. Commission Payment. Upon execution of this Lease, Landlord
shall pay AEGIS Realty Partners (Broker #2) a commission pursuant to a separate
agreement between such parties, and the parties are informed that Broker #2
shall thereupon pay C.B. Richard Ellis, Inc. (Broker #1) a commission equal to
$4.00 per square foot. Landlord and Tenant acknowledge that C.B. Richard Ellis,
Inc. (Broker #1) is the exclusive real estate broker for Tenant and that AEGIS
Realty Partners (Broker #2) is the exclusive real estate broker for Landlord.
(Broker #1 and Broker #2 are collectively referred to herein "Broker"). Landlord
and Tenant agree that all commissions due to Broker in connection with this
Lease shall be paid pursuant to separate agreements.

               b. Warranties. Landlord hereby represents and warrants to Tenant
and Tenant hereby represents and warrants to Landlord that no real estate broker
or finder other than Broker #1, in the case of Tenant, and Broker #2, in the
case of Landlord, has been engaged in connection with the transaction
contemplated by this Agreement and that no real estate broker's commissions or
finder's fees except the commissions referenced in the section above are payable

                                       30
<PAGE>   31

in connection herewith. Landlord and Tenant agree that the foregoing warranties
shall inure to the benefit of the successors and assigns of Landlord and Tenant.
Landlord and Tenant further agree to give testimony in accordance with these
warranties in case any action or proceeding shall be instituted by any purported
broker or finder, licensed or otherwise, in connection with this transaction.

               c. Indemnifications. Any party breaching the foregoing warranties
agrees to indemnify and hold the other parties harmless from any claim, suit,
damage, cause of action, cost or expense, including attorneys' fees, incurred as
a result thereof.

        NOW THEREFORE, the parties have executed this Lease as of the day and
year first above written.

LANDLORD:

KAISER ALUMINUM & CHEMICAL CORPORATION
By KAISER CENTER, INC., Its Agent

--------------------------------------
By:     Robert B. Burke
Its:    Vice President

TENANT:
VERSATA, INC.

--------------------------------------
By:     Kevin B. Ferrell
Its:    Chief Financial Officer

ATTACHMENTS:

Exhibit A - Description of Premises
Exhibit B - Work Letter
Exhibit C - Letter of Credit
Exhibit D - Rules and Regulations
Exhibit E - Tenant Estoppel Certificate

                                    EXHIBIT A

                             DESCRIPTION OF PREMISES

                                       31
<PAGE>   32

                                    EXHIBIT B

                                   WORK LETTER

        This Agreement ("Work Letter") is entered into as of April 10, 2000.
This is the Work Letter referenced in Section 2 of the lease between KAISER
CENTER, INC., as agent for KAISER ALUMINUM & CHEMICAL CORPORATION ("Landlord")
and VERSATA INC. ("Tenant") dated as of April 10, 2000 (the "Lease").

         1. Tenant's Work. Tenant desires to make certain tenant improvements to
the Premises, referred to herein as "Tenant's Work."

        2. Plan Preparation, Review and Approval. Plans for any proposed
improvements to the Premises shall be submitted, reviewed and approved by
Landlord, whose consent shall not be unreasonably withheld or delayed. After the
final plans are approved by Landlord, any further changes or change orders
during construction ("Minor Changes") shall be submitted by Tenant to Landlord
for review with appropriate plans to describe the nature of the change. Landlord
will review any Minor Changes and provide Tenant with any requested changes
within five (5) days after receipt by Landlord. The final plans, together with
any Minor Changes that have been approved by Landlord, are referred to herein as
the "Approved Plans."

        3. Construction of Tenant's Work. Tenant will diligently construct and
install the Tenant's Work in a good and proper manner, free from defects in
design, materials, and workmanship, and in strict compliance with the Approved
Plans. No material deviations from or material changes to the Approved Plans
will be made except with the written consent of Landlord. All electrical and
mechanical work shall be performed by Red Top Electric and Linford Services. All
contractor(s) employed by Tenant and any subcontractors shall be duly licensed
in California and shall be subject to Landlord's prior written approval.

        4. Close-Out Documentation. Upon the completion of Tenant's Work, Tenant
shall furnish to Landlord the following documentation ("Close-Out
Documentation"): (1) complete as-built drawings of Tenant's Work from all
trades, in the form of one set of reproducible drawings, one set of prints, and
an electronic version on floppy discs in AutoCAD R13 format; (2) air balancing
reports on the HVAC system; (3) copies of all permits issued in connection with
Tenant's Work and copies of all finalized permit inspection cards; (4) copies of
any required certificate of occupancy from the City of Oakland for the Building
Premises; (5) an Unconditional Waiver And Release Upon Final Payment in
accordance with California Civil Code Section 3262, executed by each and every
contractor, subcontractor and materialman concerned with Tenant's Work,
including but not limited to each entity or person who has served a Preliminary
20-day Notice in connection with Tenant's Work; (6) releases for any and all
mechanics' liens filed by contractors, subcontractors and materialmen concerned
with Tenant's Work; (7) appropriate documentation of the actual amounts paid or
incurred by Tenant for the completion of Tenant's Work for which Tenant is
seeking reimbursement from Landlord,

                                       32
<PAGE>   33

including invoices submitted by the contractors performing Tenant's Work; and
(8) such other customary project close-out documentation as Landlord may
reasonably require.

        5. Tenant Improvement Allowance. The Tenant Improvement Allowance will
be provided and may be applied in accordance with Section 18 of the Lease during
the course of construction of the tenant improvements, provided that Tenant
complies with the payment procedures of Section 6 below. Other than as
specifically provided in the Lease, no disbursements from the Tenant Improvement
Allowance will be made to reimburse Tenant for anything other than the actual
cost to Tenant of work performed by a licensed contractor, licensed
subcontractor, or third party supplier of equipment or materials, furnishing
work, equipment or materials for fixed improvements to the Premises. Because
Tenant is not a licensed contractor and Tenant is required to employ only
licensed contractors for the performance of Tenant's Work, no disbursements from
the Tenant Improvement Allowance will be made on account of work by Tenant's own
employees (other than as specifically provided in Section 18.2 of the Lease),
nor for Tenant's administrative costs, supervision costs, overhead or markup.

        6. Payment Procedures. Except as otherwise provided herein, the Tenant
Improvement Allowance will be paid directly by Landlord to Tenant (less a 10%
retention fee as provided below) within seven (7) days after Landlord's receipt
of (1) an Unconditional Waiver and Release Upon Final Payment in accordance with
California Civil Code Section 3262, executed by each and every contractor,
subcontractor and materialman, including but not limited to each entity or
person who has served a Preliminary 20-day Notice in connection with Tenant's
Work, and (2) releases for any and all mechanic's liens filed in connection with
Tenant's Work. Landlord shall withhold 10% of each payment request (the
aggregate amount of such retention fees shall be defined herein as the "Final
Retention Payment") submitted by Tenant in connection with the Tenant's Work
until all Close-Out Documentation is received pursuant to Section 4 of this Work
Letter. Following Landlord's receipt of all Close-Out Documentation, Landlord
shall deliver a check to Tenant equal to the amount of the Final Retention
Payment. To the extent the total cost of Tenant's Work exceeds the Tenant
Improvement Allowance, Tenant shall be responsible for all costs over and above
the Tenant Improvement Allowance needed to complete Tenant's Work in full
compliance with the Approved Plans, this Work Letter, and the conditions of all
permits, licenses, and approvals applicable to Tenant's Work. Notwithstanding
anything to the contrary herein, if Landlord shall act as agent for Tenant in
preparing the Tenant's Work, Landlord shall pay the Tenant Improvement Allowance
to the applicable contractor in draw requests, subject to the need for the
documentation described above. Once that Tenant Improvement Allowance has been
paid in its entirety, Tenant shall pay the remaining cost of the Tenant's Work
to such contractor.

        7. Indemnification for Tenant's Work. In addition to any indemnities
provided for in the Lease, Tenant shall indemnify, defend and hold harmless
Landlord, its officers, agents, employees, contractors, invitees, and licensees
from and against any and all claims, actions, damages, liabilities and expenses
(including reasonable attorneys' fees) ("Claims") arising out of or in
connection with the construction of Tenant's Work. This indemnity includes, but
is not

                                       33
<PAGE>   34

limited to, Claims arising out of or in connection with the construction of
Tenant's Work based on personal injuries, property damage or the failure of
Tenant or any of its agents, contractors or subcontractors to pay for
construction work. This indemnity shall apply according to its terms to Claims
whether caused in whole or in part by the negligence of Landlord, its officers,
agents, contractors, invitees and employees, but shall not apply to the extent
such Claims result from the gross negligence or willful misconduct of Landlord,
its officers, agents, contractors, invitees and employees.

        8. Contractors' Insurance. Tenant will furnish Landlord with
certificates evidencing (a) Worker's Compensation, (b) public liability and
property damage insurance in the amount of Five Million Dollars ($5,000,000), in
forms and with companies reasonably satisfactory to Landlord, for all
contractors employed by Tenant for Tenant's Work.

        9. Agency and Contractual Privity. Tenant is not authorized to act as
the agent of Landlord for any purpose, and Tenant hereby covenants that Tenant
will not represent itself or hold itself out to any third party as the agent of
Landlord with respect to the construction of improvements at the Building
Premises or otherwise. Tenant shall notify all contractors employed for Tenant's
Work that such contractors are employed by Tenant alone and are not employed by
or in contract with Landlord, and shall require such contractors to provide the
same notice to all subcontractors, materialmen and employees acting under them.

        10. Notice of Nonresponsibility. Tenant will provide Landlord with at
least five (5) days' prior written notice of the date Tenant will commence any
Tenant's Work, for the purpose of allowing Landlord to post at the Building
Premises and to record at the county recorder's office a notice of
nonresponsibility for mechanics' liens in accordance with California Civil Code
`3094 and `3129.

        11. Safety and Clean-Up. At all times during the performance of Tenant's
Work, Tenant shall maintain the area in and about the Building and the Premises
in a clean, safe and orderly condition. Tenant shall comply fully with all laws,
orders, citations, rules, regulations, standards and statutes affecting or
relating to occupational health and safety, the handling and storage of
hazardous materials, accident prevention, safety equipment and practices
including but not limited to any safety rules and regulations of Landlord that
are generally applicable to the Building. Tenant shall conduct inspections to
determine that safe working conditions and equipment exist and accepts sole
responsibility for providing a safe place to work for its contractors,
subcontractors and employees during the performance of Tenant's Work. Upon
completion of Tenant's Work, Tenant shall remove from the work site all
hazardous materials, temporary structures, debris and waste incident to Tenant's
Work.

        12. Compliance with Laws. Tenant's Work shall be designed and
constructed in full compliance with all local, state and federal laws, rules,
codes, ordinances and regulations. Tenant shall obtain all necessary permits and
licenses for Tenant's Work, and shall pay all manufacturers' taxes, sales taxes,
use taxes and processing taxes which arise from Tenant's Work. Tenant's Work
shall include the design and construction of modifications to the Building

                                       34
<PAGE>   35

outside the Premises necessary for applicable code compliance, to the extent
required by governmental agencies as a condition of any permits or governmental
approvals for Tenant's Work within the Premises.

        13. Risk of Loss. All work, materials, installations, and decorations of
any nature brought on or installed in the Premises as part of Tenant's Work will
be at Tenant's risk of loss. Neither Landlord nor any party acting on Landlord's
behalf will be responsible for any damage, loss or destruction to same except to
the extent such loss is due to Landlord's gross negligence or willful
misconduct.

        14. Contractor Rules. All contractors and subcontractors performing
Tenant's Work shall comply with the Kaiser Center Contractor Rules presently in
effect for the Building, together with any reasonable future amendments thereto
that are enforced by Landlord in a nondiscriminatory manner for all tenant
construction work. A copy of the Kaiser Center Contractor Rules presently in
effect is attached to this Work Letter.

        15. Post-Acceptance Correction. Within thirty (30) days after Tenant
takes possession of the Premises, Tenant may notify Landlord in writing of
details of construction and other adjustments and items of the type commonly
found on an architect's punch list, necessary to complete the Tenant
Improvements in accordance with the final Approved Plans, excluding those which
should reasonably have been detectable by visual inspection prior to deliver of
the Premises ("Post-Acceptance Correction Items"). Landlord shall diligently
pursue correction of all Post Acceptance Correction Items as soon as reasonably
practicable after Landlord receives Tenant's notice thereof. Following
Landlord's cure of the Post-Acceptance Correction Items, Tenant shall execute
and deliver a Certificate of Final Completion. Nothing in this Section 15 shall
be construed to constitute a Force Majeure Event or Landlord Delay or shall in
any way affect the Commencement Date in the Lease.

        16. Force Majeure Event. If Landlord is rendered unable, financial
inability excepted, wholly or in part, by a "Force Majeure Event," as defined
below, to deliver possession of the Premises by the date contemplated in the
Lease, upon giving timely notice and reasonably full particulars to Tenant such
obligations shall be suspended during the continuance of the Force Majeure
Event. The term "Force Majeure Event" shall include, without limitation, acts of
God and the public enemy, insurrections, the elements, epidemics, fire,
accidents, breakdowns, riots, strikes, differences with workmen, Year 2000
issues, and any other industrial, civil or public disturbance, inability to
obtain materials, supplies, energy, permits or labor, any act or omission by
parties not controlled by Landlord after exercising due diligence, and any
restrictions or restraints imposed by laws, orders, rules, regulations or acts
of any government or governmental body or authority, civil or military.

        17. Landlord's Delay. Except as expressly provided herein, the term
"Landlord's Delay" means any failure by Landlord to deliver possession of the
Premises by the required date other than due to (i) Tenant's Delay, or (ii) a
Force Majeure Event, or any combination of (i) and (ii) above.

                                       35
<PAGE>   36

        18. Tenant's Delay. Except as expressly provided herein, the term
"Tenant's Delay" means any failure by Tenant to take possession of the Premises
by the required date other than due to (i) Landlord's Delay, or (ii) a Force
Majeure Event, or any combination of (i) and (ii) above.

        19. Landlord as Tenant's Agent. At Tenant's option, Tenant may elect to
appoint Landlord as Tenant's agent to enter into agreements with contractors
necessary to perform and complete Tenant's Work (the "Contractor Agreements").
The parties acknowledge this is an accommodation by Landlord to facilitate
construction and completion of Tenant's Work. Tenant acknowledges and agrees
that if Landlord acts as Tenant's agent, Tenant shall be solely responsible for
all obligations of Tenant and Landlord under the Contractor Agreements, and
Landlord shall have no liability under the Contractor Agreements. Each
Contractor Agreement shall expressly provide that Landlord is acting only as
agent of Tenant and that the contractor agrees not to assert Claims against
Landlord. The indemnity provisions of Section 7 of this Work Letter expressly
apply to all Claims in connection with the Contractor Agreements, and Tenant
acknowledges and agrees that nothing herein shall reduce or eliminate Tenant's
obligations under the Lease and this Work Letter.

        IN WITNESS WHEREOF, the parties have executed this Work Letter as of the
date first above written.

LANDLORD:                                     TENANT:

Kaiser Aluminum & Chemical Corporation        VERSATA, INC.
By:  Kaiser Center, Inc., Its Agent

------------------------------------          ----------------------------------
By:  Robert B. Burke                          By:  Kevin B. Ferrell
Its:  Vice President                          Its:  Chief Financial Officer

                                       36
<PAGE>   37

                                    EXHIBIT C

                                LETTER OF CREDIT

                               [Bank's letterhead]

Date:  _____________________

Beneficiary:   Kaiser Center, Inc., As agent for
               Kaiser Aluminum & Chemical Corporation
               300 Lakeside Drive, Suite 130
               Oakland, California  94612

Applicant:     [Insert Tenant's info]

Amount: ____________________ Dollars in United States currency ($_______ USD)

Expiration:    ______________________, 20__

To Beneficiary:

        We hereby establish in your favor our irrevocable standby letter of
credit number ______, partial and multiple draws on which are permitted upon
presentation of the following at the office of the undersigned:

               (1) original of this letter of credit;

               (2) your drafts at sight drawn on ________________ [bank]; and

               (3) your signed certification that Tenant is in default under
that certain lease agreement dated ______________ for space at 300 Lakeside
Drive, Oakland, California, and/or that you have received written notice that
this Letter of Credit will not be renewed and Tenant has failed to deliver a
replacement letter of credit.

        This Letter of Credit shall expire on _______________, but such
expiration date shall be automatically extended without amendment for a period
of one (1) year and on each successive expiration date, unless, at least sixty
(60) days before any expiration date, we notify you by registered mail or
overnight courier service at the above address (or such other address as may be
designated by you), that this Letter of Credit will not be extended beyond the
expiration date of the Lease.

        We hereby agree with you that the draft(s) drawn under and in compliance
with the terms of this Letter of Credit will be duly honored upon presentation.

        This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 revision), International Chamber of Commerce
Publication No. 500 (UCP 500), is otherwise governed by the law of the State of
California.

--------------------------------                --------------------------------

                                       37
<PAGE>   38

Authorized Signature                        Authorized Signature

                                       38

<PAGE>   39

                                    EXHIBIT D

                  RULES AND REGULATIONS OF THE KAISER BUILDING

     Tenants, their agents, employees or patrons, shall not loiter in or in
any way obstruct the driveways, sidewalks, entrances, lobbies, corridors,
stairways, escalators and elevators of Kaiser Center, and shall use the same
only as a means of passage to and from their respective leased premises.

        Tenants, their agents, employees or patrons, shall not make or permit
any improper noises or improper or noxious odors in the Kaiser Building, or
interfere in any way with other Tenants or those having business with such other
Tenants.

        Tenants, their agents, employees or patrons, shall not use any part of
the Kaiser Building for lodging or sleeping purposes, and cooking and eating of
meals is prohibited except in those parts of the Kaiser Building specifically
designated by Lessor for those functions.

        If Tenant plans to have a gathering in the premises such as an open
house, holiday celebration, etc., Tenant must notify Kaiser Center, Inc. leasing
office at least one week prior to the event in order to confirm that such usage
is in conformance with its lease and to make proper arrangements for security,
heat and air-conditioning, parking and janitorial services. If alcoholic
beverages are to be served during the gathering, the caterer must have a proper
permit to dispense such beverages and Tenant's insurance must adequately cover
such event. If dignitaries or political figures are invited, tenant must notify
Kaiser Center, Inc.'s leasing/security office accordingly.

        No trade, occupation, game or business shall be conducted in the Kaiser
Building which shall be unlawful or of a so-called "get-rich-quick" character,
nor shall the leased premises be used for gambling of any nature or for any
immoral purpose whatsoever.

        Tenants, their agents and employees, shall not throw substances of any
kind out of the doors or down the passages of the Kaiser Building, or bring into
the Kaiser Building or keep therein any animal or animals, except guide dogs.

        Automobiles, trucks, motorcycles, scooters, bicycles, or other vehicles
may be brought into the Kaiser Center Garage and Parking Lots only in those
areas specifically designated for the driving and parking of such vehicles,
where the operators thereof shall comply with all traffic regulations in effect.

        Windows, glass doors and store fronts shall not be covered or
obstructed. Curtains and drapes, other than those provided by Lessor, may be
used only upon specific approval of Lessor.

        No sign, advertisement, or notice shall be inscribed, painted or fixed
on to any part of the outside or inside of any portions of the Kaiser Building,
except as is permitted by the Lease,

                                       39
<PAGE>   40

unless it be of such color, size and style and in such place upon or within the
premises, as may be designated by Lessor in writing.

        Toilets, urinals, lavatories and sinks shall not be used for any
purposes other than those for which they were constructed, and no rubbish,
newspapers or other substances of any kind shall be thrown into them. Waste and
excessive or unusual use of water shall not be allowed.

        Tenants shall not in any way deface floors, ceilings, partitions, walls
or other surfaces, except they may drive nails, screw or drill into, glue or
otherwise adhere to any surface for the purpose of affixing articles of
decoration and/or equipment customarily used in business offices within a
first-class building.

        Under the carpeting of each floor there are two metal pans which are
about six inches wide and four inches deep and run the length of the building.
One of these contains electrical wiring and is not to be disturbed by the Tenant
without the consent and under the direction of Lessor. The other is to
accommodate telephone and other communication equipment which is to be provided
and maintained by the Tenant at its expense. To gain access to this pan it is
necessary to lift the carpeting and remove the pan lid. Lessor will provide this
service to Tenant for a fee. In any event, it is the Tenant's responsibility to
guard these pans when they are open and prevent injury or damage to persons or
property and Lessor is to be held harmless by Tenant from any costs or liability
resulting from the opening of these pans.

        The number, size, type and capacity of pieces of electrical equipment
and lighting of any kind used by the Tenants are subject to approval by Lessor.
Tenants receiving electrical power without additional charge as part of the
Lease may be charged separately for power used by pieces of office and other
electrical equipment, if warranted in the reasonable opinion of Lessor.

        All freight shall be moved into, within and out of the Kaiser Building
according to such regulations as Lessor may reasonably prescribe. Lessor shall
not be responsible for loss or damage to any such freight from any cause or
causes whatsoever.

        Lessor shall prescribe the times and methods of moving any item of
Tenant's property in or out of the Kaiser Building. Lessor shall not be
responsible for any loss or damage to any such property from any cause
whatsoever, except Lessor's sole gross negligence or Lessor's intentional
tortuous acts, and all damage done to the Kaiser Building by moving or
maintaining any Tenant's property shall be repaired to Lessor's full
satisfaction at the sole expense of Tenant.

        Lessor may, at its sole discretion, limit the weight or size, or may
prescribe the location of safes, file cabinets, machinery and other property
brought into the Kaiser Building.

        Tenants shall not place any additional lock or locks on any door,
hatchway or other opening unless written consent of Lessor shall have first been
obtained. Initial keys shall be furnished by Lessor for the entrance to the
suite and two (2) keys for each private office within

                                       40
<PAGE>   41

the suite. Additional keys will be at the expense of Tenant. All keys shall be
surrendered to Lessor upon expiration or other termination of this lease.

        At the end of each wing are located emergency exits. Fire codes require
that these remain closed at all times excepting when they are used for ingress
or egress. However, the stairways may be used for access to adjacent floors by
multi-floor tenants as long as Tenant holds Lessor free from any liability from
using these stairways.

        Tenants shall not employ any person or persons other than those provided
or approved in advance by Lessor for the purpose of cleaning the premises
without the consent of Lessor. Lessor shall be in nowise liable or responsible
to any Tenant for any loss of property located in or upon the leased premises,
however occurring, except as a result of Lessor's sole negligence or intentional
tortuous acts.

        Tenants shall not employ any person or persons other than those provided
or approved in advance by Lessor for the purpose of maintaining, repairing,
revising, modifying or constructing within the leased premises without the
consent of Lessor.

        Requirements of tenants will be attended to only upon application to
Lessor's designated representatives. Lessor's employees shall not perform any
work or do anything outside of their regular duties unless under special
instructions from said representatives.

        Towels, laundry, florist service, bottled water and similar service
shall be furnished to Tenants only by such persons as may be satisfactory to
Lessor.

        Lessor shall have sole control of directories in the lobbies and other
common areas of the Kaiser Building, and only such names as have been approved
by Lessor will be placed thereon. Initial signage will be provided by Lessor at
no cost to Tenant. Any additional names added or removed from existing
directories will be at the expense of Tenant. Tenant shall request any
addition/deletion of names in writing.

        At any time while the Kaiser Building is under security control, any
person entering or leaving will be required to display a pass, sign a building
register or otherwise satisfy the security watchman on duty as to his business
therein. Anyone not satisfying the watchman as to his right to enter the Kaiser
Building may be excluded by him.

        Lessor shall require written authorization from a Tenant before
permitting anyone to remove Tenant's office equipment or other personal property
from the Kaiser Building.

        I. Lessor reserves the right, but shall not be held obligated, to
exclude or reject from the building any or all solicitors, canvassers or
peddlers, and also any other class of persons and individuals who conduct
themselves in such a manner as, in the opinion of Lessor, to be any annoyance to
any of the Tenants of the Kaiser Building or to interfere with Lessor's
operation thereof or to be otherwise undesirable.

                                       41
<PAGE>   42

        II. Lessor may waive any one or more of these Rules and Regulations for
the benefit of any particular Tenant or Tenants of the Kaiser Building, but no
such waiver by Lessor shall be construed as a waiver of such Rules and
Regulations in favor of any other Tenant or Tenants, nor prevent Lessor from
thereafter enforcing any such Rules and Regulations against any or all of the
Tenants of the Kaiser Building.

        III. Lessor reserves the right to make such other and further Rules and
Regulations as in its judgement may from time to time be necessary for the
safety and cleanliness of, and for the preservation of good order in the Kaiser
Building.

         IV. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify, alter or amend, in whole or in part, the terms,
conditions and covenants of the Lease.

         V. Tenant, its employees or patrons will obey any and all ordinances
passed by the City of Oakland relating to smoking.

        VI. Tenant has been informed that the interior blinds on the building
window walls are an integral part of the building heating, ventilation and air
conditioning system. If Tenant fails to close the blinds, Lessor cannot
guarantee the comfort level of the Premises.

        Any food operators or restaurants shall retain approved contractors to
perform maintenance of grease traps, including installation of pump stations for
chemical treatment; maintenance of all drain lines to ensure free flowing
operations; and maintenance of all hoods and kitchen exhaust systems as required
by applicable codes and regulations.

        Any food operators or restaurants shall engage Lessor's designated pest
control company on an appropriate schedule to maintain the premises free from
pests and vermin.

                                       42
<PAGE>   43

                                    EXHIBIT E

                           TENANT ESTOPPEL CERTIFICATE

[Date]

_____________________________
_____________________________
_____________________________
_____________________________

        Re:  ____________________________

Ladies and Gentlemen:

        The undersigned, as Tenant under that certain lease (the "Lease") dated
as of ___________ 20__, made with _________________ as Landlord (the
"Landlord"), does hereby certify:

        That the copy of the Lease attached hereto as Exhibit A is a true and
complete copy of the Lease, and there are no amendments, modifications or
extensions of or to the Lease and the Lease is now in full force and effect.

        That its premises at the above location leased pursuant to the Lease
have been completed in accordance with the terms of the Lease, that it has
accepted possession of said premises, and that it now occupies the same.

        That it began paying rent on ______, 2000, and that, save only as may be
required by the terms of the Lease, no rental has been paid in advance, nor has
the undersigned deposited any sums with the Landlord as security, except for the
letter of credit described therein.

        That, to Tenant's knowledge, there exist no defenses or offsets to
enforcement of the Lease by the Landlord and, so far as is known to the
undersigned, the Landlord is not, as of the date hereof, in default in the
performance of the Lease, nor, to Tenant's knowledge, has the Landlord committed
any breach thereof, nor has any event occurred which, with the passage of time
or the giving of notice, or both, would constitute a default or breach by the
Landlord.

        The undersigned acknowledges that you are relying on the above
representation of the undersigned in advancing funds to fund a mortgage loan
covering the building in which the leased premises are located or in purchasing
the building in which the leased premises are located and does hereby warrant
and affirm to and for your benefit, and that of your successors and assigns,
that each of the foregoing representations is true, correct and complete as of
the date hereof.

[TENANT]

-----------------------------
By:
Its:

                                     43
<PAGE>   44
                       FIRST AMENDMENT TO LEASE AGREEMENT
                       BETWEEN KAISER ALUMINUM & CHEMICAL
                          CORPORATION AND VERSATA, INC.

        This First Amendment to Lease Agreement (the "First Amendment") dated
and effective as of July ___, 2000 is an amendment to that certain Lease
Agreement (the "Lease") by and between Kaiser Aluminum & Chemical Corporation,
through its agent, KAISER CENTER, INC., a Delaware corporation ("Landlord"), and
VERSATA, INC., a Delaware corporation ("Tenant"), dated April 10, 2000,
governing the lease of office space in the tower located on the city block
bounded by Webster, 20th, 21st, and Harrison Streets in Oakland, California,
(the "Premises").

        For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:

        1.     General

               a. All terms used in this Amendment shall have the meanings
        ascribed to them in the Lease unless otherwise indicated herein.

               b. The Lease shall be in full force and effect except as
        specifically provided herein.

        2.     Amendments

               The area comprising the Premises, as described in the second
        sentence of Section 1.01, is hereby reduced from 99,228 rentable square
        feet to 97,882 rentable square feet.

               a. Exhibit A, as referenced in the Lease, is hereby replaced by
        the revised Exhibit A attached hereto.

               a. Section 4.02 is hereby deleted in its entirety and replaced as
        follows:

               4.02 Amount. The amount of the First Letter of Credit shall be
Four Million Eight Hundred Twenty Thousand Six Hundred Sixty Six and---50/100
Dollars ($4,820,688.50) and the amount of the Second Letter of Credit shall be
Nine Hundred Fifty Four Thousand Three Hundred Forty Nine-50/100 Dollars
($954,349.50). The initial combined amount of the First Letter of Credit and
Second Letter of Credit equals of Five Million Seven Hundred Seventy Five
Thousand Thirty Eight and 00/100 Dollars ($5,775,038.00). If Tenant is not then
in default under this Lease beyond any applicable notice and cure period, then
upon each anniversary of the Commencement Date, the Letter of Credit shall be
reduced by the annual amortized amount of brokerage commissions and Tenant
Improvement Allowance assuming amortization on a straight line basis over the
Term, which amount the Landlord and Tenant acknowledge is approximately Two
Hundred Forty Four Thousand Seven Hundred Five and---00/100 Dollars
($244,705.00) per annum (the Commissions/TI Reduction"). At any time during the
Term, provided Tenant is not then in default under this Lease beyond any
applicable notice and cure

<PAGE>   45
                                                                               2

period, if Tenant demonstrates to Landlord's reasonable satisfaction that its
ratio of current assets (as shown on audited financial statements certified by
accountants acceptable to Landlord in its reasonable discretion), to its total
liability hereunder, equals or exceeds 3:1, then the face amount of the Letter
of Credit may in addition be reduced by the equivalent of six (6) months of Base
Rent, which for the purposes of this Section 4.02 the parties agree is One
Million Nine Hundred Eight Thousand Six Hundred Ninety Nine Dollars
($1,908,699.00) (the "Asset/Liability Reduction"). In addition, after the twenty
fourth (24th) month following the Commencement Date, provided the Tenant is not
then in default beyond any applicable notice and cure period, if Tenant
demonstrates to Landlord's reasonable satisfaction that its annual net profits
for its prior fiscal year (as shown on audited financial statements certified by
accountants acceptable to Landlord in its reasonable discretion) equal three (3)
years of Base Rent, which for the purposes of this Section 4.02 the parties
agree is Eleven Million Four Hundred Fifty Two Thousand One Hundred Ninety Four
Dollars ($11,452,194.00), then the face amount of the Letter of Credit may in
addition be reduced by the equivalent of three (3) months of Base Rent, which
for the purposes of this Section 4.02 the parties agree is Nine Hundred Fifty
Four Thousand Three Hundred Forty Nine-50/100 Dollars ($954,349.50) (the
"Profits/Base Rent Reduction"). If the Term of this Lease is extended for any
Extended Term, then, provided that Tenant is not then in default under the terms
of this Lease beyond any applicable notice and cure period, the amount of the
Letter of Credit (or, at Tenant's election, cash security deposit) shall be
negotiated by Landlord and Tenant.

               a. The third sentence in Section 5.01 of the Lease is hereby
deleted in its entirety and replaced as follows:

               "Tenant's Share" shall mean the percentage that the total
        rentable square footage in the Premises is of the total rentable square
        footage in the Building, which percentage the parties agree equals
        thirteen and three hundred thirty five one thousandths percent
        (13.335%).

        All other provisions of the Lease not specifically amended by the terms
of this First Amendment remain unchanged and in full force and effect.

        IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year first written above.

<PAGE>   46

                                                                               3

LANDLORD:                                      TENANT:

KAISER ALUMINUM &                              VERSATA, INC.
CHEMICAL CORPORATION
By KAISER CENTER, INC., Its Agent

---------------------------------------        --------------------------------
                                               By:     Kevin B. Ferrell
By:     Robert B. Burke                        Its:    Chief Financial Officer
Its:    Vice President

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