BLAZE SOFTWARE INC, S-1/A, 2000-02-22

BLAZE SOFTWARE INC
S-1/A, 2000-02-22
PREPACKAGED SOFTWARE

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As filed with the Securities and Exchange Commission on February 22, 2000

Registration No. 333-94549
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT

Under

The Securities Act Of 1933

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BLAZE SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
California (before
reincorporation)
Delaware (after reincorporation) 7372 77-0081248
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

Blaze Software, Inc.

150 Almaden Boulevard

San Jose, CA 95113

(408) 275-6900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
-------------------
THOMAS KELLY
Chief Executive Officer
Blaze Software, Inc.

150 Almaden Boulevard

San Jose, CA 95113

(408) 275-6900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
<TABLE>
<S> <C>
LARRY W. SONSINI CHRISTOPHER L. KAUFMAN
ISSAC J. VAUGHN ROBERT A. KOENIG
YOICHIRO TAKU Latham & Watkins
JASON ALTIERI 135 Commonwealth Drive
BRIAN McDANIEL Menlo Park, CA 94025
Wilson Sonsini Goodrich & Rosati (650) 328-4600
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
</TABLE>
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed
Proposed maximum
Title of each class of Amount maximum aggregate Amount of
securities to be offering price offering registration
to be registered registered(1) per unit(2) price(2) fee(3)
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<S> <C> <C> <C> <C>
Common stock, $0.0001 4,600,000
par value............. shares $14.00 $64,400,000 $17,002
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</TABLE>
(1) Includes shares which the underwriters have the option to purchase to
cover over-allotments, if any.

(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.

(3) We previously paid a registration fee of $11,841.
-------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED FEBRUARY 22, 2000

[LOGO OF BLAZE SOFTWARE]

4,000,000 Shares

Common Stock

Blaze Software, Inc. is offering 4,000,000 shares of its common stock. This
is our initial public offering and no public market currently exists for our
shares. We have applied for approval for quotation of our common stock on the
Nasdaq National Market under the symbol "BLZE." We anticipate that the initial
public offering price will be between $12.00 and $14.00 per share.

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INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

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<CAPTION>
Per Share Total
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<S> <C> <C>
Public Offering Price.......................................... $ $
Underwriting Discounts and Commissions......................... $ $
Proceeds to Blaze Software, Inc................................ $ $
</TABLE>

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

The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.

Blaze Software, Inc. has granted the underwriters a 30-day option to purchase
up to an additional 600,000 shares of common stock to cover over-allotments.
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.

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

Robertson Stephens
Chase H&Q
Dain Rauscher Wessels

The date of this Prospectus is , 2000
<PAGE>

Two computer monitors are facing each other. Above the monitor on the left is
the caption "Web interaction." The monitor on the left is saying "Welcome,
Tom." Above the monitor on the right is the caption "Web interaction with
Blaze Software." The monitor on the right is saying "Good morning, Tom. Since
your last visit on Tuesday, two of the items you order most often have gone on
sale, and the new upgrade for your diagnostic system is now available. Would
you like to know more?"

The caption at the bottom of the page reads "Your e-business applications can
use Blaze Software to provide adaptable and personalized interactions based on
the rules that define your way of doing business."

The Blaze Software logo and the Blaze Software Web address appear at the
bottom of the page.

<PAGE>

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of the common stock.

Until , 2000, all dealers that buy, sell or trade our common
stock, whether or not participating in this offering, may be required to
deliver a prospectus. This requirement is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.

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

TABLE OF CONTENTS

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Page
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Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
You Should Not Rely on Forward-Looking Statements Because They Are
Inherently Uncertain................................................... 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations ......................................................... 23
Business................................................................. 35
Management............................................................... 47
Certain Transactions..................................................... 58
Principal Stockholders................................................... 62
Description of Capital Stock............................................. 64
Shares Eligible for Future Sale.......................................... 67
Underwriting............................................................. 69
Legal Matters............................................................ 72
Experts.................................................................. 72
Change in Independent Accountants........................................ 72
Where You Can Find Additional Information................................ 72
Index to Consolidated Financial Statements............................... F-1
</TABLE>

3
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PROSPECTUS SUMMARY

You should read this summary together with the more detailed information
and our consolidated financial statements and notes thereto appearing elsewhere
in this prospectus. Unless otherwise indicated, this prospectus assumes that
the underwriters have not exercised their option to purchase additional shares,
all shares of preferred stock have been automatically converted into shares of
common stock, we have completed a 1 for 2 reverse stock split and we have
completed our reincorporation in Delaware.

Blaze Software

Our Blaze Advisor Solutions Suite enables companies to translate these
business rules into a format that can be used by business applications. A
company's business applications can draw upon the business rules encoded in our
software to individually tailor interactions with customers, employees,
partners and suppliers based on market conditions, business practices and user
preferences and profiles. Blaze Advisor also enables companies to communicate
their unique way of doing business through these interactions, thereby
differentiating themselves from their competitors and providing incentives for
customers to use their products and services. Blaze Advisor allows business
persons to modify the business rules included in our software quickly and
easily, enabling companies to respond quickly to changes in market conditions,
business practices and user preferences. We also provide consulting and
professional services to help customers plan, develop and implement
personalization solutions using our software.

Many organizations are implementing Internet-based and electronic business
initiatives in order to extend and automate traditional business processes and
compete more effectively. These initiatives, commonly referred to as e-
business, allow companies to transact sales, manage customer service, and
interact and communicate with customers, employees, partners and suppliers
using both traditional and e-business communication channels, including the
Internet and other electronic means. Companies increasingly need software
solutions to help them capitalize on these interactions, maintain their
corporate personality and style and distinguish themselves from their
competitors while conducting an increasing number of transactions over a wide
variety of communication channels. The rapid growth of the Internet has made e-
business an important and fast-growing business channel for many companies, who
have begun to invest significantly in software to support their growing e-
business initiatives. International Data Corporation, a market research firm,
estimates that worldwide license revenues from Internet commerce application
software, which includes software for both business-to-business and business-
to-consumer applications, will grow from $1.7 billion in 1999 to $13.1 billion
in 2003.

Our objective is to maintain our leading position as a provider of software
for personalized e-business interactions. Key elements of our strategy include:

. expand our market presence;

. extend our technology and product leadership;

. target leading customers and independent software vendors;

. increase our professional services capabilities; and

. expand strategic alliances with key business partners.

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We maintain operations worldwide to sell and support our products through a
direct sales force and third-party system integrators. We have sold our
products to customers in the technology, financial, insurance, manufacturing,
telecommunications, and healthcare industries and our software is embedded in
many leading e-business software applications.

Corporate Information

We were incorporated in California as Neuron Data, Inc. in 1985. In August
1999, we changed our name to Blaze Software, Inc. We intend to reincorporate in
Delaware prior to the completion of this offering. Our headquarters are located
at 150 Almaden Boulevard, San Jose, California 95113 and our telephone number
at that location is (408) 275-6900. Our Web site is www.blazesoft.com. Our Web
site is not part of this prospectus.

The Offering

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<C> <S>
Common stock offered by Blaze Software............. 4,000,000 shares
Common stock to be outstanding after the offering.. 21,319,244 shares
Use of proceeds.................................... For general corporate
purposes, including
working capital. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol............. BLZE
</TABLE>

The number of shares of common stock to be outstanding after the offering
is based on the number of shares outstanding as of December 31, 1999. This
number excludes:

. 4,287,029 shares issuable upon the exercise of outstanding common stock
options at a weighted average exercise price of $0.52 per share;

. 6,005 shares issuable upon the exercise of outstanding common stock
warrants at a weighted average exercise price of $5.60 per share; and

. 445,529 shares available for future issuance under our 1996 stock plan
and 250,000 shares available for future issuance under our 2000 stock
plan. After December 31, 1999, an additional 1,250,000 shares were
reserved for future issuance under our 1996 stock plan and 750,000
shares were reserved for future issuance under our 2000 employee stock
purchase plan.

5
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Summary Consolidated Financial Data
(in thousands, except per share data)

The As Adjusted consolidated balance sheet data summarized below reflects
the conversion of all our preferred stock into shares of common stock upon the
completion of this offering and the application of the net proceeds from the
sale of the 4,000,000 shares of common stock offered by Blaze Software at an
assumed initial public offering price of $13.00 per share after deducting the
estimated underwriting discounts and commissions and offering expenses. See
note 2 of the notes to our consolidated financial statements for an explanation
of the determination of the number of shares used in computing per share data.

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<CAPTION>
Nine Months
Ended
Year ended March 31, December 31,
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1997 1998 1999 1998 1999
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(unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Net revenues:
Product licenses................. $3,296 $ 3,559 $ 3,722 $ 2,556 $ 5,371
Services and maintenance......... 327 803 5,332 3,486 6,378
Total revenues..................... 3,623 4,362 9,054 6,042 11,749
Gross profit....................... 2,980 3,776 6,122 4,145 7,366
Operating loss..................... (1,689) (2,970) (5,512) (4,592) (14,173)
Net loss from continuing
operations....................... (2,723) (3,631) (5,848) (4,756) (14,498)
Basic and diluted net loss per
common share from continuing
operations attributable to common
stockholders..................... $(3.56) $(37.37) $(19.15) $(16.09) $ (4.64)
Number of shares used in
calculation of basic and diluted
net loss per share............... 920 125 371 361 4,997
</TABLE>

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<CAPTION>
December 31, 1999
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Actual As Adjusted
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(unaudited)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................................. $ 16,326 $63,486
Working capital .......................................... 10,785 57,945
Total assets.............................................. 23,850 71,010
Capital lease obligations, net of current portion......... 298 298
Accumulated deficit....................................... (43,623) (43,623)
Total stockholders' equity ............................... 12,054 59,214
</TABLE>

6
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RISK FACTORS

Any investment in shares of our common stock involves a high degree of
risk. You should consider carefully the following information about these
risks, together with the other information contained in this prospectus, before
you decide to buy our common stock. If we are adversely affected by any of the
following risks, our business, results of operations and financial condition
would likely suffer. In these circumstances, the market price of our common
stock could decline, and you may lose all or part of the money you paid to buy
our common stock.

We have a history of losses, we expect losses in the future and we may never
become profitable.

We incurred net losses of $12.7 million in the nine months ended December
31, 1999, $5.6 million in fiscal 1999 and $5.8 million in fiscal 1998. We had
an accumulated deficit of $43.6 million as of December 31, 1999. We expect to
continue to incur losses in the foreseeable future. These losses may be
substantial, and we may never become profitable. We also expect to
significantly increase our expenses, especially in sales and marketing and
research and development. As a result, our operating results will be harmed if
our revenues do not keep pace with the expected increase in our expenses or are
not sufficient for us to achieve profitability. If we do achieve profitability
in any period, we cannot be certain that we will sustain or increase
profitability on a quarterly or annual basis.

Variations in quarterly operating results due to such factors as changes in
demand for our products and services and changes in our mix of revenues may
cause our stock price to decline.

Our quarterly revenues, expenses and operating results have varied in the
past and may vary significantly from quarter-to-quarter in the future. We
therefore believe that quarter-to-quarter comparisons of our operating results
may not be a good indication of our future performance, and you should not rely
on them to predict our future performance or the future performance of our
stock price. Our short-term expense levels are relatively fixed and are based
on our expectations of future revenues. As a result, a reduction in revenues in
a quarter may harm our operating results for that quarter. If our operating
results in future quarters fall below the expectations of market analysts and
investors, the price of our common stock will fall. Factors that may cause our
operating results to fluctuate on a quarterly basis include:

. varying size, timing and contractual terms of orders for our products;

. our ability to complete our implementation and service obligations
related to product sales in a timely manner;

. changes in the mix of revenues attributable to higher-margin product
license revenues as opposed to substantially lower-margin consulting
services revenues;

. customers' decisions to defer orders or implementations, particularly
large orders or implementations, from one quarter to the next;

. changes in demand for our Blaze Advisor Solutions Suite software or
for personalization software solutions generally;

. loss of significant customers;

. announcements or introductions of new products by our competitors;

. software defects and other product quality problems; and

. seasonal trends in sales of business software.

Our products have a long sales cycle that makes it difficult to plan our
expenses and forecast our results.

It typically takes us between two and six months to complete the majority
of our sales, but it can take us up to one year or longer. It is therefore
difficult to predict the quarter in which a particular sale will occur and

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to plan our expenditures accordingly. The period between our initial contact
with a potential customer and their purchase of our products and services is
relatively long due to several factors, including:

. the complex nature of our products;

. our need to educate potential customers about the uses and benefits of
our products;

. the purchase of our products requires a significant investment of
resources by a customer;

. our customers have budget cycles which affect the timing of purchases;

. many of our customers require competitive evaluation and internal
approval before purchasing our products; and

. potential customers may delay purchases due to announcements or
planned introductions of new products by us or our competitors.

The delay or failure to complete sales in a particular quarter could reduce
our revenues in that quarter, as well as subsequent quarters over which
revenues for the sale would likely be recognized. If our sales cycle
unexpectedly lengthens in general or for one or more large orders, it would
adversely affect the timing of our revenues. If we were to experience a delay
of several weeks on a large order, it could harm our ability to meet our
forecasts for a given quarter.

We depend significantly on sales of the Blaze Advisor Solutions Suite, and a
decrease in sales would harm our business.

We currently derive all of our revenues from continuing operations from
licenses of the Blaze Advisor Solutions Suite and Blaze Expert and related
consulting and maintenance revenues. We anticipate that revenues related to the
Blaze Advisor Solutions Suite will continue to comprise a substantial portion
of our revenues for the foreseeable future. In addition, our dependence on
revenues from the Blaze Advisor Solutions Suite will increase because we are
decreasing our emphasis on selling Blaze Expert and are discontinuing
operations associated with Blaze Presenter. Consequently, a decline in the
price of the Blaze Advisor Solutions Suite, or its failure to achieve broad
market acceptance, would harm our business.

If we fail to expand our direct sales capabilities, we may not be able to
increase revenues.

In order to grow our business, we need to increase market awareness and
sales of our products and services. To achieve this goal, we need to increase
our direct sales capabilities. If we fail to do so, this failure could harm our
ability to increase revenues. We currently receive substantially all of our
revenues from direct sales. Our products and services require a sophisticated
sales effort targeted at senior management and information technology managers
of our prospective customers. As of December 31, 1999, our direct sales
organization in North America consisted of 22 employees. Competition for
qualified sales personnel is intense, and we may not be able to hire the kind
and number of sales personnel we are targeting. New hires may require extensive
training and typically take several months to achieve productivity. We cannot
be certain that our recent hires will be as productive as necessary.

New product introductions and pricing strategies by our competitors could
adversely affect our ability to sell our products and could reduce our market
share or result in pressure to price our products in a manner that reduces our
margins.

The market for our products is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. Competition could seriously harm our
ability to sell additional software, maintenance renewals, and services on
terms favorable to us. Competitive pressures could reduce our market share or
require us to reduce the price of products and services, any of which could
harm our business. Competitors could offer new products with features or
functionality that

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are equal to or better than our products. We may not have sufficient
engineering staff, competitive awareness, management initiative, equipment, or
time to modify our products to match our competitors. In this case, we could
lose existing customers or new customers to competitors.

Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing, or other resources, or greater name
recognition than we do. As a result, our competitors may be able to respond
more quickly to new or emerging opportunities, technologies and changes in
customer requirements or devote greater resources to the development, promotion
and sale of their products than we can. Current and potential competitors may
have more extensive customer bases that could be leveraged, thereby gaining
market share to our detriment. Such competitors may be able to undertake more
extensive promotional activities, adopt more aggressive pricing policies, and
offer more attractive terms to purchasers than the Company. Moreover, certain
of our indirect and potential competitors, such as BroadVision, IBM, Oracle and
SAP, may bundle their products in a manner that may discourage users from
purchasing products offered by us. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to enhance their products. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share.

Customers may prefer more specific solutions to narrowly-bounded business
needs. If application needs are initially small or well-defined, a competitor
may offer a product that addresses those needs in a more efficient or time-
effective manner than we can provide. The cross-industry breadth of our
customer base may cause product enhancements to be added in many different
areas that fail to achieve solution dominance for any one industry or market
segment.

Some businesses may have already made a substantial investment in other
third party or internally developed software designed to personalize customer
interactions. These companies may be reluctant to abandon these investments in
favor of our software. In addition, information technology departments of
potential customers may resist purchasing our software solutions for a variety
of other reasons, particularly the potential displacement of their historical
role in creating and running software for their enterprises.

We are dependent on and plan to increase the size of our professional services
organization and if we are unsuccessful, our business would be harmed.

Customers that license our software typically engage our professional
services organization to assist with support, training, consulting and
implementation. We believe that growth in sales of the Blaze Advisor Solutions
Suite depends on our ability to provide our clients with these services. If our
internal professional services organization does not effectively implement and
support our products or if we are unable to expand our internal professional
services organization as needed to meet our customers' needs, our ability to
sell software will be harmed, affecting our revenues. We rely on customer
satisfaction for customer referrals and additional sales to customers, which
depends in part on the quality and timeliness of services provided by our
professional services organization. We plan to add more customer support
personnel in order to address current customer support needs. If we are not
successful in hiring such personnel, our business would be harmed. As of
December 31, 1999, our professional services organization in North America
consisted of 22 employees. We are in a new and evolving market and there are a
limited number of people who have the skills needed to provide the services
that our customers demand. Competition for qualified service personnel is
intense. We cannot be certain that we can attract or retain a sufficient number
of qualified service personnel for our business needs.

If the market in which we sell our products and services does not grow as we
anticipate, our revenues will be reduced.

If the market for personalization software does not grow as quickly or
become as large as we anticipate, our revenues will be reduced. Our market is
still emerging, and our success depends on its growth. Our potential customers
may:

. not understand or see the benefits of using these products;

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. not achieve favorable results using these products;

. experience technical difficulty in implementing or using these
products; or

. use alternative methods to solve the same business problems.

In addition, because our products can be used in connection with Internet
commerce and we are currently developing additional Internet commerce
solutions, if the Internet commerce market does not grow as quickly as we
anticipate, we may experience sales that are lower than our expectations.

If we fail to develop new products or improve our existing products to meet or
adapt to the changing needs and standards of our industry, sales of our
products may decline.

Our future success depends on our ability to address the rapidly changing
needs of our customers and potential customers. We must maintain and improve
our Blaze Advisor Solutions Suite and develop new products that respond to new
technological developments, keep pace with products of our competitors and
satisfy the changing requirements of our customers. If more end users access
the Internet or other electronic contact channels, our software may not provide
adequate response to meet our customers' transaction load requirements. Our
ability to deliver performance improvements could be adversely affected by
insufficient engineering resources, insufficient understanding of technology
platforms, lack of performance by required underlying technologies such as Java
or middleware, or other commitments taking priority. If we are unsuccessful in
improving our products and developing new products, we may not achieve market
acceptance and we may be unable to attract new customers. We may also lose
existing customers, to whom we seek to sell additional software solutions and
professional services.

We may commit to improvements and enhancements in products based on
requests and requirements from significant customers. These could consume
engineering staff, resources, and management and planning that would otherwise
be devoted to more generally marketable product work. This could reduce
satisfaction and renewals from existing customers and could reduce market
opportunities for new product sales.

We may not be successful in developing and marketing these or other new or
improved products. If we are not successful, we may lose sales to competitors.

We have grown very quickly and if we fail to manage our growth, our ability to
generate new revenues and achieve profitability would be harmed.

We have grown significantly since our inception and need to grow quickly in
the future. This growth has placed and will continue to place a strain on our
management, administrative, operational and financial infrastructure. Any
failure to manage this growth could impede our ability to increase revenues and
achieve profitability. The number of our employees has increased from 94 at
June 30, 1999 to 128 at December 31, 1999. Future expansion could be expensive
and strain our management and other resources. We relocated our corporate
headquarters in February 2000. Our employees may be distracted by this
relocation and productivity may suffer during this transition. Some employees
may be less productive or resign due to longer commutes. If we are unable to
manage growth effectively, our business may be harmed.

The loss of key personnel or any inability to attract and retain additional
personnel could affect our ability to successfully grow our business.

Our future success will depend in large part on our ability to hire and
retain a sufficient number of qualified personnel, particularly in sales,
customer services, marketing, research and development, and support. If we are
unable to do so, this inability could affect our ability to grow our business.
Competition for qualified personnel in high technology is intense, particularly
in the Silicon Valley region of Northern California where our principal offices
are located. Our future success also depends upon the continued service of our
executive officers and other key sales, engineering and technical staff. The
loss of the services of our executive officers

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and other key personnel would harm our operations. We do not maintain key
person insurance on any of our employees. We would also be harmed if one or
more of our executive officers or key employees decided to join a competitor or
otherwise compete with us.

If our products contain defects or our services are not perceived as high
quality, we could lose potential customers or be subject to damages.

Our products are complex and may contain errors, defects or failures,
particularly since new releases are regularly introduced. In the past we have
discovered software errors in some of our products after introduction. We may
not be able to detect and correct errors before releasing our products
commercially. Computer viruses could cause our products to act erratically or
fail. If our commercial products contain errors, we may be required to:

. expend significant resources to locate and correct the error;

. delay introduction of new products or commercial shipment of products;
or

. experience reduced sales and harm to our reputation from dissatisfied
customers.
Our customers also may encounter system configuration problems that require us
to spend additional consulting or support resources to resolve these problems.

Our software is installed on operating systems and runtime software
platforms such as Java that must operate correctly in order for us to deliver
proper results. Bugs in Java, an operating system, or a third party software
package used by one of our customers could result in improper operation of our
products. In such cases, the customer perception could be that our software is
at fault. We could also find it difficult or impossible to track down the root
cause of an error because of insufficient access to or familiarity with the
underlying software at fault. Even if the error is properly identified as the
fault and responsibility of a third party, it could impact our customer's
satisfaction with us or could influence them to choose a different
implementation strategy, resulting in lost revenues and decreased customer
goodwill.

Because our software products are used for customer interaction processes
by our customers, product defects may also give rise to product liability
claims. Customers may rely on our rule execution engine to process transactions
driving the response of their developed applications. Because customers are
free to write any combination of rules they wish, we cannot foresee or test all
possible rule execution scenarios. If our rule engine incorrectly executes
customer rules, incorrect output or application behavior may result. As Blaze
Advisor is used in more customer applications and with larger rule applications
from existing customers, the potential for a material error increases.
Customers could potentially seek restitution or damages from us in such cases.
Although our license agreements with customers typically contain provisions
designed to limit our exposure, some courts may not enforce all or part of
these limitations. Although we have not experienced any product liability
claims to date, we may encounter these claims in the future. Product liability
claims, whether or not successful, could:

. divert the attention of our management and key personnel from our
business;

. be expensive to defend; and

. result in large damage awards.

Our product liability insurance may not be adequate to cover all of the
expenses resulting from a claim. In addition, if our customers do not find our
services to be of high quality, they may elect to use other training,
consulting and product integration firms rather than contract for our services.
If customers are dissatisfied with our services, we may lose revenues.

Our international operations and our international sales efforts expose us to
risks.

Sales to customers outside the Americas accounted for 13.7% of total
revenues from continuing operations in the nine months ended December 31, 1999
and 23.4% of total revenues from continuing operations in fiscal 1999. We have
limited experience in marketing, selling and supporting our products and

11
<PAGE>

services abroad. Furthermore, our management team has had limited experience
managing our international operations. We intend to expand our international
sales efforts in the future, but we may face difficulties managing
international operations. If we are unable to grow our international operations
successfully and in a timely manner, our business and operating results could
be seriously harmed. In addition, doing business internationally involves
greater expense and many additional risks, particularly:

. longer sales cycles and collection of accounts receivable;

. agreements with customers with terms and conditions that differ from
agreements that we enter into with customers in the United States;

. unexpected changes in regulatory requirements, taxes, trade laws and
tariffs;

. reduced protection for intellectual property rights in some countries;

. differing labor regulations;

. compliance with a wide variety of complex regulatory requirements;

. changes in a specific country's or region's political or economic
conditions;

. greater difficulty in staffing and managing foreign operations;

. increased financial accounting and reporting burdens and complexities;
and

. fluctuating exchange rates.

Our international operations will require a significant amount of attention
from our management and substantial financial resources. We cannot be certain
that our investments in establishing facilities in other countries will produce
desired levels of revenues or profitability.

Our revenues depend on a small number of large orders from our top customers
and if we fail to complete one or more large orders, our revenues will be
reduced.

To date, we have received a significant portion of our total revenues from
a small number of large orders from our top customers. For example, Unisys
Corporation alone accounted for 25.2% of total revenues from continuing
operations for the nine months ended December 31, 1999. However, we do not have
any contracts or agreements with Unisys other than purchase orders in the
ordinary course of business. Our operating results may be harmed if we are not
able to complete one or more substantial product sales in any future period or
attract new customers.

If we fail to establish, maintain or expand our strategic relationships with
third parties, our ability to grow revenues could be harmed.

In order to grow our business, we must generate, retain and strengthen
strategic relationships with third parties. To date, we have established
relationships with several companies, including consulting organizations and
system integrators that implement our software. If the third parties with which
we have strategic relationships do not provide sufficient, high-quality service
or integrate and support our software correctly, or if we are unable to enter
into successful new strategic relationships, our revenues may be harmed. In
addition, the third parties with which we have strategic relationships may
offer products of other companies, including products that compete with our
products. We typically enter into contracts with third parties that generally
set out the nature of our strategic relationships. However, our contracts do
not require these third parties to devote resources to promoting, selling and
supporting our products. Therefore we have little control over these third
parties. We cannot assure you that we can generate and maintain strategic
relationships that offset the significant time and effort that are necessary to
develop these relationships.

If Sun Java loses popularity, demand for our products will be reduced.

Our software is written in the Java computer programming language developed
by Sun Microsystems. While a number of companies have introduced Web and
server-side applications based on Java, Java could fall

12
<PAGE>

out of favor and fail to be supported by Sun Microsystems or other companies.
In particular, Microsoft may offer substitute products or technologies. If
support for Java decreased or we could not continue to use Java or related Java
technologies, we could have to rewrite the source code for the Blaze Advisor
Solutions Suite to enable our products to run on other computer platforms.
Also, changes to Java could require us to change our products. If we were
unable to develop or implement appropriate modifications to our products on a
timely basis, we could lose revenue opportunities and our business could be
harmed. If open-source versions of Java become popular or if cross-platform
standardization is lost, we could be forced to write different versions of our
products for different hardware and software platforms, leading to increased
expenses and time to release products.

If others claim that we are infringing their intellectual property, we could
incur significant expenses or be prevented from selling our products.

We cannot assure you that others will not claim that we are infringing
their intellectual property rights or that we do not in fact infringe those
intellectual property rights. We have not conducted a search for existing
intellectual property registrations and we may be unaware of intellectual
property rights of others that may cover some of our technology.

Any litigation regarding intellectual property could be costly and time-
consuming and divert the attention of our management and key personnel from our
business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims of
intellectual property infringement might also require us to enter into costly
royalty or license agreements. However, we may not be able to obtain royalty or
licenses agreements on terms acceptable to us, or at all. We also may be
subject to significant damages or an injunction against use of our products. A
successful claim of patent or other intellectual property infringement against
us would have an immediate material adverse effect on our business and
financial condition.

If we are unable to protect our intellectual property rights, this inability
could weaken our competitive position, reduce our revenues and increase our
costs.

Our success depends in large part on our proprietary technology. We rely on
a combination of copyrights, trademarks, trade secrets, patents,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. We may be required to spend significant resources to
monitor and police our intellectual property rights. If we fail to successfully
enforce our intellectual property rights, our competitive position may be
harmed.

Our software uses license keys and we require contractual commitments from
end-users to prevent unauthorized use or copying of the products. In addition,
product pricing is typically based upon machine size used by the customer in
their application deployment. As applications become more complex or as more
users access the applications, our customers may need larger deployment
machines, resulting in additional license revenue opportunities. If our license
protection or contractual compliance is insufficient to prevent them from
copying our software or upgrading without payment, we could lose substantial
revenues. In addition, our software could be copied and resold without our
knowledge and the licensing algorithms could be deciphered or bypassed,
allowing copying, distribution, and use of our software without our knowledge
and without revenues to us.

Our patent, trademark or pending trademark registration applications may
not be allowed or competitors may successfully challenge the validity or scope
of these registrations. Other software providers could copy or otherwise obtain
and use our products or technology without authorization. They also could
develop similar technology independently which may infringe our proprietary
rights. We may not be able to detect infringement and may lose a competitive
position in the market before we do so. In addition, competitors may design
around our technology or develop competing technologies. The laws of some
foreign countries do not protect proprietary rights to the same extent as do
the laws of the United States.

13
<PAGE>

Our products are not tightly integrated with currently popular software
programs and we may lose sales opportunities to competitors.

Our Blaze Advisor Solutions Suite must work with commercially available
software programs that are currently popular. Various information and data may
be stored in a variety of our customers' existing software systems, including
leading systems from Oracle, PeopleSoft, Siebel Systems and SAP, running on a
variety of computer operating systems. If we do not update our software to be
compatible with these programs, we may lose sales opportunities to competitors.
If we fail to obtain access to development versions of these software products,
we may be unable to build and enhance our products on schedule. If we fail to
enhance our software to interact with these products, we may lose potential
customers. If we lose customers, our revenues and profitability may be harmed.

If we need additional financing to maintain and expand our business, financing
may not be available on favorable terms, if at all.

We expect to incur net losses for the foreseeable future. We may need funds
in addition to available cash resources and the net proceeds from this offering
to expand or meet all of our operating needs. If we need additional financing,
we cannot be certain that it will be available on favorable terms, if at all.
Further, if we issue common stock after this offering, stockholders will
experience additional dilution. If we need funds and cannot raise them on
acceptable terms, we may not be able to develop or enhance our products, take
advantage of future opportunities, or respond to customers and competition.

If we acquire any companies or technologies in the future, they could prove
difficult to integrate, disrupt our business, dilute stockholder value and
adversely affect our operating results.

We may acquire or make investments in complementary companies, services and
technologies in the future. Our ability as an organization to conduct
acquisitions or investments is unproven because we have only made one
acquisition to date. If we fail to properly evaluate and execute acquisitions
and investments and integrate new opportunities, our business and prospects may
be harmed. Our inability to successfully evaluate and integrate acquisitions or
technology may result in losses or our management may be distracted from our
day-to-day operations. In addition, if we conduct acquisitions using
convertible debt or equity securities, existing stockholders may be diluted
which could affect the market price of our stock.

Because a small number of existing stockholders will together own 64.3% of our
stock, the voting power of other stockholders, including purchasers in this
offering, may be limited.

After this offering, it is anticipated that our officers, directors and
five percent or greater stockholders will beneficially own or control, directly
or indirectly, 13,999,172 shares of common stock, which in the aggregate will
represent approximately 64.3% of the outstanding shares of common stock. As a
result, if some of these 13 persons or entities act together, they will have
the ability to control all matters submitted to our stockholders for approval,
including the election and removal of directors and the approval of any
business combination. This may delay or prevent an acquisition or cause the
market price of our stock to decline. Some of these persons or entities may
have interests different than yours. For example, they may be more interested
in selling Blaze Software to an acquiror than other investors or may want us to
pursue strategies that are different from the wishes of other investors.

Future sales of our common stock, including those purchased in this offering,
may depress our stock price.

If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Shares issued upon the exercise of outstanding

14
<PAGE>

options may also be sold in the public market. In addition, such sales could
create the perception to the public of difficulties or problems with our
products and services. As a result, these sales also might make it more
difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate.

Upon completion of this offering, we will have outstanding 21,319,244
shares of common stock, assuming no exercise of the underwriters' over-
allotment option and no exercise of outstanding options after December 31,
1999. Of these shares, 5,960,067 shares will be freely tradable upon the
closing of this offering, including the shares sold in this offering. The
remaining 15,359,177 shares will become eligible for sale in the public market
as follows:

<TABLE>
<CAPTION>
Number of
Date of Availability for Sale Shares
----------------------------- ----------
<S> <C>
181 days after the date of this prospectus..................... 13,124,941
At September 28, 2000.......................................... 281,501
At December 31, 2000........................................... 1,952,735
----------
Total............................................................ 15,359,177
==========
</TABLE>

The above table includes the effect of lock-up arrangements with the
underwriters and us which prevent our directors, officers and certain other
existing stockholders from selling or otherwise disposing of their shares of
common stock prior to 181 days after this offering. The underwriters may remove
these lock-up restrictions prior to 181 days after this offering without prior
notice. In addition, as of December 31, 1999, we have outstanding options to
purchase 4,287,029 shares with a weighted average exercise price of $0.52 per
share. Of these options, 2,402,481 are vested and 4,287,029 are exercisable,
subject to repurchase rights in favor of us with respect to unvested shares, as
of December 31, 1999, and will be resellable 181 days after the offering. As of
December 31, 1999, there are also outstanding warrants to purchase 6,005 shares
of our common stock with a weighted average exercise price of $5.60 per share.

We have broad discretion to use the offering proceeds and how we invest these
proceeds may not yield a favorable, or any, return for us and you may lose the
entire amount of your investment.

The net proceeds of this offering are not allocated for specific uses other
than working capital and general corporate purposes. Thus, our management has
broad discretion over how these proceeds are used and could spend the proceeds
in ways with which you may not agree. We cannot assure you that the proceeds
will be invested in a way that yields a favorable, or any, return for us.

Because this is our initial public offering our securities have no prior market
and we cannot assure you that our stock price will not decline after the
offering.

Before this initial public offering of our stock, there has not been a
public market for our common stock and an active public market for our common
stock may not develop or be sustained after this offering. Further, the price
of our common stock may decline below our initial public offering price. The
initial public offering price was determined by negotiations between the
representatives of the underwriters and us. This price may not directly relate
to our book value, assets, past operating results, financial condition or other
established criteria of value.

Provisions in our charter documents and Delaware law may delay or prevent an
acquisition of our company.

Our certificate of incorporation and bylaws that will be effective upon the
closing of this offering contain provisions that could make it harder for a
third party to acquire us without the consent of our board of directors. For
example, if a potential acquiror were to make a hostile bid for us, the
acquiror would not be able to call a

15
<PAGE>

special meeting of stockholders to remove our board of directors or act by
written consent without a meeting. In addition, our board of directors has
staggered terms, which makes it difficult to remove them all at once. The
acquiror would also be required to provide advance notice of its proposal to
remove directors at an annual meeting. The acquiror also will not be able to
cumulate votes at a meeting, which will require the acquiror to hold more
shares to gain representation on the board of directors than if cumulative
voting were permitted.

Our board of directors also has the ability to issue preferred stock that
would significantly dilute the ownership of a hostile acquiror. In addition,
Section 203 of the Delaware General Corporation Law limits business combination
transactions with 15% stockholders that have not been approved by the board of
directors. These provisions and other similar provisions make it more difficult
for a third party to acquire us without negotiation. These provisions may apply
even if the offer may be considered beneficial by some stockholders.

Our board of directors could choose not to negotiate with an acquiror that
it did not feel was in the strategic interests of Blaze Software. If the
acquiror was discouraged from offering to acquire us or prevented from
successfully completing a hostile acquisition by the antitakeover measures, you
could lose the opportunity to sell your shares at a favorable price.

We may encounter computer problems or a natural disaster at our headquarters,
which could cause us to lose revenues and customers.

Viruses or bugs introduced into our research and development, quality
assurance, production and shipping, customer support or financial and
administrative software systems could cause us to lose data, expose us to time
and expense in identifying and resolving the problem or delay product
shipments. Furthermore, our headquarters are located in a single location in
Mountain View, California. We could be particularly vulnerable in a natural
disaster, such as an earthquake. Any of these events could cause us to lose
customers or goodwill, which would decrease our revenues.

One of our directors has asserted claims against us that may require us to pay
substantial damages or issue additional shares.

On January 6, 2000, Patrick Perez, a founder and director of Blaze
Software, notified us of claims that he may assert against us. Mr. Perez
contends that his personal equity ownership of Blaze Software was diluted
improperly in connection with our Series AA preferred stock financing that
closed in June and September 1999. In particular, Mr. Perez contends that he
was wrongfully denied the opportunity to purchase shares at a price of $0.54
per share in connection with the financing. If Mr. Perez had participated in
the financing, he would have been able to purchase up to 1,710,949 shares. We
believe that Mr. Perez's assertions are without merit and intend to vigorously
defend any claims that Mr. Perez may bring against us. However, should any
litigation be decided adversely to us, we may be required to pay substantial
damages or issue additional shares to Mr. Perez. In addition, other
stockholders that did not participate in the financing may assert similar
claims against us. If we are required to issue additional shares to Mr. Perez
or other stockholders, then-existing stockholders would experience dilution of
their ownership and we would need to record an accounting charge in our
statement of operations equal to the fair market value of the shares at the
time of issuance.

If customers delay installations or purchases of our products to avoid having
to perform additional tests on their existing systems related to year 2000
compliance, our revenues will be reduced in the near term.

Many currently installed computer systems and software applications were
written to accept and process only two digits to represent the year when
storing dates. Beginning with the year 2000, these systems need to accept four
digit entries to distinguish 21st century dates from 20th century dates. As a
result, computer systems and/or software products used by many companies may
need to be upgraded to solve this problem to avoid incorrect or lost data. In
1999, a significant number of companies, including some of our current
customers, devoted a substantial amount of their information technology
resources to testing systems for

16
<PAGE>

year 2000 compliance and fixing existing year 2000 problems. Some companies may
delay installation of new systems to avoid having to perform additional year
2000 tests on their existing systems. If these customers also defer purchases
of our products until their year 2000 problems have been tested or resolved, it
will reduce our sales in the near term.

Potential year 2000 problems with our internal systems, our software products
or the products with which our software integrates could adversely affect our
business.

Although we have not experienced any year 2000 problems and have not been
informed of any material year 2000 problems by our customers and vendors, we
cannot assure you that we will not experience unanticipated negative
consequences relating to problems of computer systems in processing dates after
January 1, 2000. These negative consequences include costs associated with:

. problems with our products;

. problems of the interaction of our products with other software; and

. loss of data in our internal systems.

If tests of our products and inquiries of our customers and vendors did not
uncover all year 2000 problems, we could be exposed to damages resulting from
year 2000 failures and claims resulting from damages caused by any incorrect
data produced by our software, whether through a claim of breach of warranty,
product defect or otherwise.

If our professional services organization does not adequately address
existing year 2000 issues of our customers, or there are preexisting errors in
our customer databases, the usefulness of our software may be impaired.
Although we cannot control the year 2000 compliance of our customers and their
third-party vendors, we may still be subject to claims and liability based on
the fact that our products provided incorrect data. These claims could divert
significant management, financial and other resources and we may not have
adequate commercial insurance to cover these claims.

We may not be able to resolve year 2000 problems that we discover before we
suffer losses. We cannot assure you that our products and systems will be year
2000 compliant or that we will not incur material expenses or liability
relating to the year 2000 problem.

YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS
BECAUSE THEY ARE INHERENTLY UNCERTAIN

You should not rely on forward-looking statements in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify such
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described above and elsewhere in this prospectus.

This prospectus also contains market data and estimated projections related
to Internet-based commerce and Internet commerce application software. This
market information has been published and made generally available by
International Data Corporation, a market research firm. This market data is
based on analyses of key trends and surveys of vendors in the profiled market
space. Current estimates and forecasts of global market size have a significant
potential for inaccuracy caused by nonrepresentative vendor selection,
misrepresentation of sales performance, changes in global economic conditions,
and unforeseen technological advances or customer preferences. These markets
may not grow at the rates projected by these data. The failure of these markets
to grow at these projected rates may harm our business and the market price of
our common stock.

17
<PAGE>

USE OF PROCEEDS

Our net proceeds from the sale of the 4,000,000 shares of common stock we
are offering are estimated to be $47.2 million ($54.4 million if the
underwriters' over-allotment option is exercised in full) assuming an initial
public offering price of $13.00 per share and after deducting the estimated
underwriting discount and commissions and offering expenses.

We currently intend to use the proceeds of this offering as follows:
approximately $20.0 million for sales and marketing, approximately $9.0 million
for research and development, approximately $5.0 million for professional
services and the remainder for general corporate purposes. We may also use some
of the proceeds to acquire other companies, technology or products that
complement our business, although we are not currently planning any of these
transactions. Pending these uses, the net proceeds of this offering will be
invested in short-term, interest-bearing securities.

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We
currently expect to retain our future earnings, if any, for use in the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future. Covenants in our credit facility prohibit
the payment of cash dividends.

18
<PAGE>

CAPITALIZATION

The following table sets forth as of December 31, 1999:

. our actual capitalization;

. our pro forma capitalization to reflect the conversion of all
outstanding shares of preferred stock into 10,368,938 shares of common
stock; and

. our pro forma, as adjusted capitalization to reflect the proceeds from
the sale of 4,000,000 shares of our common stock offered hereby at an
assumed initial public offering price of $13.00 per share and after
deducting the estimated underwriting discount and commissions and
offering expenses.

<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except per
share data)
<S> <C> <C> <C>
Capital lease obligations, less current
portion................................... $ 298 $ 298 $ 298
-------- -------- -------
Stockholders' equity:
Preferred stock, $0.0001 par value;
Authorized: 20,950 shares actual,
10,000 shares pro forma, as adjusted
Issued and outstanding: 10,369 actual,
none pro forma and pro forma, as
adjusted................................ 1 -- --
Common stock, $0.0001 par value;
Authorized: 54,000 shares actual,
200,000 shares pro forma, as adjusted
Issued and outstanding(1): 6,950
shares, actual, 17,319 shares pro forma
and 21,319 shares pro forma, as
adjusted................................ 1 2 2
Additional paid-in capital................ 71,996 71,996 119,156
Cumulative translation adjustment......... 535 535 535
Unearned stock-based compensation......... (16,856) (16,856) (16,856)
Accumulated deficit....................... (43,623) (43,623) (43,623)
-------- -------- -------
Total stockholders' equity........... $ 12,054 $ 12,054 $59,214
======== ======== =======
Total capitalization................. $ 12,352 $ 12,352 $59,512
======== ======== =======
</TABLE>
- --------

(1) The number of shares of common stock outstanding at December 31, 1999
excludes:

. 4,287,029 shares issuable upon the exercise of outstanding common
stock options at a weighted average exercise price of $0.52;

. 6,005 shares issuable upon the exercise of outstanding common stock
warrants at a weighted average exercise price of $5.60; and

. 445,529 shares available for future issuance under our 1996 stock plan
and 250,000 shares available for future issuance under the 2000 stock
plan. After December 31, 1999, an additional 1,250,000 shares were
reserved for future issuance under a 1996 stock plan and 750,000
shares were reserved for future issuance under our 2000 employee stock
purchase plan.

19
<PAGE>

DILUTION

Our pro forma net tangible book value as of December 31, 1999 was
approximately $12.1 million, or approximately $0.70 per share of common stock.
Pro forma net tangible book value per share represents the amount of tangible
assets less total liabilities, divided by 17,319,244 shares of common stock
outstanding after giving effect to the conversion of all of our outstanding
preferred stock into common stock.

After giving effect to our sale of 4,000,000 shares of common stock in this
offering at an assumed initial public offering price of $13.00 per share and
after deduction of the estimated underwriting discount and commissions and
offering expenses, our pro forma, as adjusted, net tangible book value as of
December 31, 1999 would have been approximately $59.2 million, or $2.78 per
share. This represents an immediate increase in pro forma net tangible book
value of $2.08 per share to existing stockholders and an immediate dilution of
$10.22 per share to purchasers of common stock in this offering.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $13.00
Pro forma net tangible book value per share before
offering................................................. $0.70
Increase in pro forma net tangible book value per share
attributable to new investors............................ 2.08
-----
Pro forma, as adjusted net tangible book value per share
after offering............................................. 2.78
------
Pro forma net tangible book value dilution per share to new
investors.................................................. $10.22
======
</TABLE>

The following table sets forth, on a pro forma basis as of December 31,
1999, the total consideration paid and the average price per share paid by the
existing stockholders and by new investors, before deducting estimated
underwriting discounts and commissions and offering expenses payable by us at
an assumed initial public offering price of $13.00 per share.

<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 17,319,244 81.2% $37,529,000 41.9% $ 2.17
New investors.............. 4,000,000 18.8 52,000,000 58.1 13.00
---------- ----- ----------- -----
Total.................... 21,319,244 100.0% $89,529,000 100.0%
========== ===== =========== =====
</TABLE>

The foregoing computations exclude 4,287,029 shares of common stock
issuable upon the exercise of outstanding options under the 1996 stock plan as
of December 31, 1999, 695,529 shares reserved for future issuance under the
1996 stock plan and the 2000 stock plan and 6,005 shares issuable upon the
exercise of outstanding common stock warrants. After December 31, 1999, an
additional 1,250,000 shares were reserved for future issuance under our 1996
stock plan and 750,000 shares were reserved for future issuance under our 2000
employee stock purchase plan. To the extent that any of those options or
warrants are exercised, our investors will suffer immediate dilution.

20
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The consolidated statements
of operations data for the years ended March 31, 1997, 1998 and 1999 and the
balance sheet data as of March 31, 1998 and 1999 are derived from our
consolidated financial statements that are included elsewhere in this
prospectus. The statements of operations data for the years ended March 31,
1995 and 1996 and the balance sheet data as of March 31, 1995, 1996 and 1997
are derived from our consolidated financial statements that are not included in
this prospectus. The consolidated statements of operations data for the nine
month periods ended December 31, 1998 and 1999 and the consolidated balance
data as of December 31, 1999 are derived from our unaudited consolidated
financial statements that include, in the opinion of our management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. Historical results are
not necessarily indicative of results to be expected in any future period.

<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended March 31, December 31,
------------------------------------------- -----------------
1995 1996 1997 1998 1999 1998 1999
------- ------- ------- ------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data
Net revenues:
Product licenses...... $ -- $ -- $ 3,296 $ 3,559 $ 3,722 $ 2,556 $ 5,371
Services and
maintenance......... -- -- 327 803 5,332 3,486 6,378
------- ------- ------- ------- ------- ------- --------
Total revenues..... -- -- 3,623 4,362 9,054 6,042 11,749
------- ------- ------- ------- ------- ------- --------
Cost of revenues:
Product licenses...... -- -- 180 74 40 39 55
Services and
maintenance......... -- -- 463 512 2,892 1,858 4,328
------- ------- ------- ------- ------- ------- --------
Total cost of
revenues......... -- -- 643 586 2,932 1,897 4,383
------- ------- ------- ------- ------- ------- --------
Gross profit............ -- -- 2,980 3,776 6,122 4,145 7,366
------- ------- ------- ------- ------- ------- --------
Operating expenses:
Research and
development......... 906 1,138 1,370 1,938 3,843 2,908 3,488
Selling, general, and
administrative...... 4,279 3,538 3,299 4,808 7,791 5,829 8,744
Stock-based
compensation........ -- -- -- -- -- -- 9,307
------- ------- ------- ------- ------- ------- --------
Total operating
expenses......... 5,185 4,676 4,669 6,746 11,634 8,737 21,539
------- ------- ------- ------- ------- ------- --------
Operating loss.......... (5,185) (4,676) (1,689) (2,970) (5,512) (4,592) (14,173)
Interest expense, net... (197) (317) (434) (593) (249) (124) (217)
------- ------- ------- ------- ------- ------- --------
Net loss from continuing
operations before
income taxes.......... (5,382) (4,993) (2,123) (3,563) (5,761) (4,716) (14,390)
Provision for income
taxes................. (146) (755) (600) (68) (87) (40) (108)
------- ------- ------- ------- ------- ------- --------
Net loss from continuing
operations............ (5,528) (5,748) (2,723) (3,631) (5,848) (4,756) (14,498)
Income (loss) from
operations of
discontinued user
interface business,
net of income taxes... 5,864 2,316 (5,479) (2,174) 248 319 1,767
------- ------- ------- ------- ------- ------- --------
Net income (loss)....... 336 (3,432) (8,202) (5,805) (5,600) (4,437) (12,731)
Accretion of mandatorily
redeemable preferred
stock to redemption
value................. -- -- (554) (1,040) (1,258) (1,051) (442)
Beneficial conversion
feature of preferred
stock................. -- -- -- -- -- -- (8,241)
------- ------- ------- ------- ------- ------- --------
Net (loss) attributable
to common
stockholders.......... 336 (3,432) (8,756) (6,845) (6,858) (5,488) (21,414)
Other comprehensive
income (loss), net of
tax:
Translation
adjustments......... 4 62 64 (20) 180 278 245
------- ------- ------- ------- ------- ------- --------
Comprehensive income
(loss) income......... $ 340 $(3,370) $(8,692) $(6,865) $(6,678) $(5,210) $(21,169)
======= ======= ======= ======= ======= ======= ========
Basic loss per share
from continuing
operations............ $ (2.66) $ (2.56) $ (3.56) $(37.37) $(19.15) $(16.09) $ (4.64)
======= ======= ======= ======= ======= ======= ========
Diluted loss per share
from continuing
operations............ $ (2.55) $ (2.56) $ (3.56) $(37.37) $(19.15) $(16.09) $ (4.64)
======= ======= ======= ======= ======= ======= ========
Number of shares used in
calculation of basic
loss per share........ 2,078 2,246 920 125 371 361 4,997
======= ======= ======= ======= ======= ======= ========
Number of shares used in
calculation of diluted
loss per share........ 2,168 2,246 920 125 371 361 4,997
======= ======= ======= ======= ======= ======= ========
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
March 31,
--------------------------------------------- December 31,
1995 1996 1997 1998 1999 1999
------- ------- -------- -------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents........... $ 1,586 $ 1,117 $ 2,258 $ 6,591 $ 2,129 $ 16,326
Working capital
(deficit)............. 1,436 (1,519) (3,324) 628 (4,316) 10,785
Total assets............ 13,673 12,642 10,615 13,854 7,765 23,850
Capital lease
obligations, net of
current portion....... 446 646 236 91 19 298
Retained earnings
(accumulated
deficit).............. 388 (3,044) (11,800) (17,051) (22,651) (43,623)
Mandatory redeemable
preferred stock....... 3,275 3,275 9,684 19,624 20,882 --
Total stockholders'
equity (deficit)...... 664 (2,583) (10,795) (17,563) (24,203) 12,054
</TABLE>

22
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
consolidated financial statements and the related notes included elsewhere in
this prospectus.

Overview

We are a leading provider of software that enables companies to provide
customers, employees, partners and suppliers with adaptable and personalized
interactions that are consistent across all company communication channels
including the Internet, automated telephone response systems, manned customer
service centers, electronic kiosks and others. Our Blaze Advisor Solutions
Suite allows companies to implement their policies, practices and procedures,
or business rules, in e-business applications, enabling them to provide
individualized interactions across these communications channels. We also
provide consulting and professional services to help customers plan, develop
and implement e-business personalization solutions using our software.

We were incorporated in California as Neuron Data, Inc. in 1985. We
introduced our first software product in December 1986, a rules-based expert
system development and execution tool known as Nexpert. We introduced Open
Interface in 1991 to help customers design display forms and interactive
behavior for presenting and accepting information in computer applications,
known as user interfaces. Almost all of our product license revenues until
fiscal 1997 consisted of sales of these two C-language products, which are now
called Blaze Expert and Blaze Presenter. In June 1997, we released a new Java-
based product for the development and execution of business rules, known as
Blaze Advisor, which has become the core of the Blaze Advisor Solutions Suite.
Customer demand for C/C++ cross-platform user interface development software
has substantially diminished over the past two years as the use of Java and
HTML has increased. Therefore, we significantly decreased research and
development activities related to our products used for designing user
interfaces. In December 1999, our board of directors decided to discontinue
operations related to our user interface design products, which included Blaze
Presenter. Operating results related to the discontinued operations have been
excluded from our continuing operations and reported separately as discontinued
operations. We expect that we will sell the intangible assets related to the
Blaze Presenter product within the next 12 months. We have focused our
engineering and marketing efforts on the Blaze Advisor Solutions Suite, first
released in October 1999, which consists of Blaze Advisor Builder, Blaze
Advisor Rule Engine, and Blaze Advisor Rule Server. We are currently developing
Blaze Advisor Innovator, which we expect to release in the first half of 2000.
We changed our company name to Blaze Software, Inc. in August 1999.

We derive all of our revenues from continuing operations from the Blaze
Advisor Solutions Suite and Blaze Expert. We sell products to corporate
customers and to system integrators and distributors that install and provide
support for our products. We also license our products to independent software
vendors that incorporate our technology into their offerings. We sell products
that comprise the Blaze Advisor Solutions Suite in various configurations.
Pricing of our products is based on development and deployment rights. Blaze
Advisor Builder is priced at a fixed amount for each licensed user. Blaze
Advisor Rule Engine is priced on a sliding scale based on the total number of
processors used to support the deployed application. Blaze Advisor Rule Server
is priced as a percentage of the negotiated deployment fee for Blaze Advisor
Rule Engine. Deployment product revenues typically exceed development product
revenues for most customer sales. Pricing for independent software vendors is
usually offered at a base price for unlimited use of the full Blaze Advisor
Solutions Suite in developing a marketable product, plus a negotiated royalty
fee calculated as a percentage of the developed application's sale price to the
vendor's customers. We expect cumulative royalties over time to exceed the
initial use fee for most independent software vendor sales.

Product licenses revenues consist of license fees and royalty payments. We
recognize software license revenues upon shipment of a product if collection of
the resulting receivable is probable, an executed agreement or purchase order
has been received, the fee is fixed or determinable and objective evidence of
fair value exists to allocate revenue to any undelivered elements of the
arrangement. If an acceptance period is

23
<PAGE>

provided, we recognize revenue upon the earlier of customer acceptance or the
expiration of that period. For sales made through distributors, we recognize
revenue upon shipment only when the distributor has identified to us that a
valid end-user for the product exists. In those instances where a distributor
has not identified a valid end-user for the product, the revenue is deferred.
Distributors have no right of return.

Service and maintenance revenues consist primarily of professional
services, maintenance, support and training fees for the associated products.
We generally recognize revenues from maintenance contracts ratably over the
term of the contract. We recognize consulting and services revenues as the
training, implementation or consulting services are performed. If professional
or maintenance services are included in an arrangement that involves a license
agreement, amounts related to support or professional services are allocated
based upon objective evidence of fair value which is based on the price when
such elements are sold separately, or when not sold separately, the price
established by management having the relevant authority to do so.

We market our software and services primarily through our direct sales
organizations in the United States, Canada, France, Germany, Japan and the
United Kingdom, and to a lesser extent through distributors, system integrators
and independent software vendors. Our future success will depend, in part, on
the successful development of international markets for our products. In order
to increase sales, we need to expand our direct sales force by hiring
additional salespersons, sales engineers and sales management personnel and
establish and maintain relationships with distributors, system integrators,
independent software vendors and other third parties.

Our future success also depends on our continued investment in research and
development and the continued expansion of our sales, marketing and
professional services organization in order to build an infrastructure to
support our long-term growth strategy. As a result of this investment in our
infrastructure, we have incurred significant net losses in each fiscal year
since fiscal 1996. We incurred net losses from continuing operations of
$14.5 million in the nine months ended December 31, 1999, $5.8 million in
fiscal 1999 and $3.6 million in fiscal 1998. We had an accumulated deficit of
$43.6 million as of December 31, 1999. We expect to experience significant
growth in our operating expenses for the foreseeable future in order to grow
our business. As a result, we anticipate that operating expenses will
constitute a significant use of our cash resources and that we will continue to
generate net losses for the foreseeable future.

In the quarter ended September 30, 1999, we recorded a stock-based
compensation charge of $21.4 million in connection with the grant of stock
options to employees. We also recorded an additional stock-based compensation
charge of $4.7 million in the quarter ended December 31, 1999 in connection
with options granted in the quarter. These charges are being amortized over the
vesting period of the options, which is generally four years.

Of the total stock-based compensation, $9.3 million was amortized in the
nine months ended December 31, 1999. Based on the options granted through
December 31, 1999, approximately $3.1 will be amortized in the quarter ending
March 31, 2000, approximately $8.8 million will be amortized in fiscal 2001 and
approximately $3.6 million will be amortized in fiscal 2002.

In December 1999, we raised $13.9 million in gross proceeds from the sale
of Series BB preferred stock. In the quarter ended December 31, 1999, we
incurred a one-time charge to additional paid in capital of approximately $8.2
million as a result of the beneficial conversion feature of the preferred
stock.

24
<PAGE>

Results of Operations

The following table presents certain financial data as a percentage of
total revenues for the periods indicated:

<TABLE>
<CAPTION>
Nine Months
Year Ended March Ended
31, December 31,
----------------------- --------------
1997 1998 1999 1998 1999
------ ------ ----- ----- ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net revenues:
Product licenses................. 91.0 % 81.6 % 41.1 % 42.3 % 45.7 %
Services and maintenance......... 9.0 18.4 58.9 57.7 54.3
------ ------ ----- ----- ------
Total revenues................ 100.0 100.0 100.0 100.0 100.0
------ ------ ----- ----- ------
Cost of revenues:
Product licenses................. 5.0 1.7 0.4 0.6 0.5
Services and maintenance......... 12.8 11.7 31.9 30.8 36.8
------ ------ ----- ----- ------
Total cost of revenues........ 17.8 13.4 32.3 31.4 37.3
------ ------ ----- ----- ------
Gross profit....................... 82.2 86.6 67.7 68.6 62.7
Operating expenses:
Research and development......... 37.8 44.4 42.4 48.1 29.7
Selling, general and
administrative................. 91.0 110.2 86.1 96.5 74.4
Stock-based compensation......... -- -- -- -- 79.2
------ ------ ----- ----- ------
Total operating expenses...... 128.8 154.6 128.5 144.6 183.3
------ ------ ----- ----- ------
Operating loss..................... (46.6) (68.0) (60.8) (76.0) (120.6)
Interest expense, net.............. (12.0) (13.6) (2.8) (2.1) (1.7)
------ ------ ----- ----- ------
Net loss from continuing operations
before income taxes.............. (58.6) (81.6) (63.6) (78.1) (122.3)
Provision for income taxes......... (16.6) (1.6) (1.0) 0.7 1.0
------ ------ ----- ----- ------
Net loss from continuing
operations....................... (75.2) (83.2) (64.6) (78.8) (123.3)
------ ------ ----- ----- ------
Income (loss) from discontinued
user interface business.......... (151.2) (49.8) 2.7 (5.3) 15.0
------ ------ ----- ----- ------
Net loss........................... (226.4)% (133.0)% (61.9)% (73.5)% (108.3)%
====== ====== ===== ===== ======
</TABLE>

Nine Months Ended December 31, 1998 and 1999

Total Revenues

Total revenues increased $5.7 million, or 95.0%, to $11.7 million for the
nine months ended December 31, 1999, from $6.0 million for the nine months
ended December 31, 1998. This increase was due to an increase in the number and
average size of sales of our products and services and maintenance generated.
Total revenues from sales to customers outside the Americas were $1.6 million,
or 13.7% of total revenues for the nine months ended December 31, 1999 and
$1.6 million, or 26.7% of total revenues for the nine months ended December 31,
1998. Unisys Corporation accounted for 25.2% of total revenues for the nine
months ended December 31, 1999 and 12.8% for the nine months ended December 31,
1998. This was for products and services used in support of their design and
development work in connection with the deployment at Norwest Financial
Information Services.

Product Licenses. Product licenses revenues increased $2.8 million, or
107.7%, to $5.4 million for the nine months ended December 31, 1999, from $2.6
million for the nine months ended December 31, 1998.

25
<PAGE>

Services and Maintenance. Services and maintenance revenues increased
$2.9 million, or 82.9%, to $6.4 million for the nine months ended December 31,
1999, from $3.5 million for the nine months ended December 31, 1998.

Cost of Revenues

Product Licenses. Cost of product licenses consists of packaging,
documentation and associated shipping costs. Cost of product licenses increased
$16,000, or 41.0%, to $55,000 for the nine months ended December 31, 1999, from
$39,000 for the nine months ended December 31, 1998. As a percentage of product
licenses revenues, cost of product licenses were 1.0% for the nine months ended
December 31, 1999, and 1.5% for the nine months ended December 31, 1998.

Services and Maintenance. Cost of services and maintenance consists of
personnel and other costs related to professional services, training and
technical support. Cost of services and maintenance increased $2.4 million, or
126.3%, to $4.3 million for the nine months ended December 31, 1999 from
$1.9 million for the nine months ended December 31, 1998. As a percentage of
services and maintenance revenues, cost of services and maintenance were 67.2%
for the nine months ended December 31, 1999 and 54.3% for the nine months ended
December 31, 1998. This increase in dollars and as a percentage of services and
maintenance revenues was due to increased personnel costs as we shifted
personnel from supporting the user interface business in order to meet customer
requirements for our Blaze Advisor Solutions Suite. Cost of services and
maintenance as a percentage of services and maintenance revenues may vary
between periods due to our use of third-party professional services, and
varying gross margins on customer engagements.

Operating Expenses

Research and Development. Research and development expenses consist
primarily of salaries and benefits for software developers, project managers,
and quality assurance personnel, payments to outside software developers, and
general corporate overhead allocations for facilities and equipment used in the
research and development process. Research and development expenses increased
$580,000 or 20.0%, to $3.5 million for the nine months ended December 31, 1999
from $2.9 million for the nine months ended December 31, 1998. Of this
increase, 38.9% was due to increased costs associated with third-party
consultants, with the remainder attributable to increased personnel costs
associated with the increase due to research and development for the Blaze
Advisor Solutions Suite. Research and development expenses represented 29.7% of
total revenues for the nine months ended December 31, 1999 and 48.1% of total
revenues for the nine months ended December 31, 1998. We believe that a
significant increase in our research and development expenses will be necessary
to expand our market presence and to expand our technology and product
leadership. Therefore, we expect that research and development expenses will
increase in the future.

Selling, General and Administrative. Selling, general and administrative
expenses consist of salaries, commissions and bonuses earned by sales,
marketing, finance, administrative, and general management personnel, travel
and entertainment expenses, marketing and promotion expenses, and general
corporate overhead expenses. Selling, general and administrative expenses
increased $2.9 million, or 50.0%, to $8.7 million for the nine months ended
December 31, 1999 from $5.8 million for the nine months ended December 31,
1998. This increase was due to increased sales and marketing efforts for Blaze
Advisor Solutions Suite and a shift in personnel from supporting the user
interface business to supporting Blaze Advisor and Blaze Expert. Selling,
general and administrative expenses represented 74.4% of total revenues for the
nine months ended December 31, 1999 and 96.5% of total revenues for the nine
months ended December 31, 1998. We believe that a significant increase in our
sales and marketing expenses will be necessary to expand our market presence.
We intend to expand our direct sales force by hiring additional salespersons,
sales engineers and sales management personnel. Therefore, we expect that sales
and marketing expenses will increase significantly in the future. We believe
that our general and administrative expenses will continue to increase as a
result of expenses associated with being a public company, including annual and
other public reporting costs,

26
<PAGE>

increased directors and officers liability insurance, investor relations
programs and accounting and legal fees. Additionally, we relocated our
corporate headquarters in February 2000 and will be incurring additional rent
and related expenses.

Net Interest Expense

Net interest expense consists of interest expense incurred on our line of
credit, bridge loans and capital leases, offset by interest income earned on
our cash and cash equivalent balances. Net interest expense increased $93,000,
or 75.0%, to $217,000 for the nine months ended December 31, 1999 from $124,000
for the nine months ended December 31, 1998.

Provision for Income Taxes

Provision for income taxes consists of foreign and de minimis domestic
taxes paid. Provision for income taxes increased $68,000, or 170.0%, to
$108,000 for the nine months ended December 31, 1999, from $40,000 for the nine
months ended December 31, 1998. No provision for federal and state income taxes
has been recorded because we have experienced significant net losses, which
have resulted in deferred tax assets. In light of our recent history of
operating losses, we have provided a full valuation allowance for all deferred
tax assets as we are presently unable to conclude that it is more likely than
not that the deferred tax asset will be realized.

Income (Loss) from Discontinued Operations, Net of Income Taxes

Income from discontinued operations, net of income taxes increased $1.5
million to income of $1.8 million for the nine months ended December 31, 1999
from $319,000 for the nine months ended December 31, 1998. This increase was
due to a $3.4 million decrease in revenue to $3.8 million for the nine months
ended December 31, 1999 from $7.2 million for the nine months ended December
31, 1998, offset by a $4.9 million decrease in expenses to $2.0 million for the
nine months ended December 31, 1999 from $6.9 million for the nine months ended
December 31, 1998.

Years Ended March 31, 1998 and 1999

Total Revenues

Total revenues increased $4.7 million, or 107.6%, to $9.1 million in fiscal
1999 from $4.4 million in fiscal 1998. Of this increase, 43.2% was due to
increased requirements by Norwest Financial Information Services Group for on-
site professional services and training and maintenance related to Blaze
Expert. Total revenues from sales to customers outside the Americas were $2.1
million, or 23.4% of total revenues in fiscal 1999 and $871,000, or 20.0% of
total revenues in fiscal 1998. Unisys Corporation accounted for 19.4% of total
revenues for fiscal 1999 for products and services used in support of their
design and development work in connection with the deployment at Norwest
Financial Information Services Group. No customer accounted for more than 10%
of total revenues in fiscal 1998.

Product Licenses. Product licenses revenues increased $163,000, or 4.6%, to
$3.7 million in fiscal 1999 from $3.6 million in fiscal 1998.

Services and Maintenance. Services and maintenance revenues increased $4.5
million, or 560.4%, to $5.3 million in fiscal 1999 from $803,000 in fiscal
1998.

Cost of Revenues

Product Licenses. Cost of product licenses decreased $34,000, or 45.9%, to
$40,000 in fiscal 1999 from $74,000 in fiscal 1998. As a percentage of product
licenses revenues, cost of product licenses was 1.1% in fiscal 1999 and 2.1% in
fiscal 1998.

27
<PAGE>

Services and Maintenance. Cost of services and maintenance increased $2.4
million, or 464.8%, to $2.9 million in fiscal 1999 from $512,000 in fiscal
1998. As a percentage of services and maintenance revenues, cost of services
and maintenance was 54.2% in fiscal 1999 and 63.8% in fiscal 1998. This
increase in cost of services and maintenance is consistent with the increase in
services and maintenance revenues. Cost of services and maintenance revenues as
a percentage of service and maintenance revenues may vary between periods due
to our use of third-party professional services, and varying gross margins on
customer engagements.

Operating Expenses

Research and Development. Research and development expenses increased $1.9
million, or 100%, to $3.8 million in fiscal 1999 from $1.9 million in fiscal
1998. This increase was due to increased personnel costs as we shifted research
and development efforts to the Blaze Advisor Solutions Suite. Research and
development expenses represented 42.4% of total net revenues in fiscal 1999 and
44.4% of total net revenues in fiscal 1998.

Selling, General and Administrative. Selling, general and administrative
expenses increased $3.0 million, or 62.0%, to $7.8 million in fiscal 1999 from
$4.8 million in fiscal 1998. This increase was due to sales and marketing
efforts for the Blaze Advisor Solutions Suite. Selling, general and
administrative expenses represented 86.1% of total net revenues in fiscal 1999
and 110.2% in fiscal 1998.

Net Interest Expense

Net interest expense decreased $344,000, or 58.0%, to $249,000 in fiscal
1999 from $593,000 in fiscal 1998.

Provision for Income Taxes

Provision for income taxes increased $19,000, or 27.9%, to $87,000 for
fiscal 1999 from $68,000 for fiscal 1998. No provision for federal and state
income taxes has been recorded because we have experienced significant net
losses, which have resulted in deferred tax assets. In light of our recent
history of operating losses, we have provided a full valuation allowance for
all deferred tax assets as we are presently unable to conclude that it is more
likely than not that the deferred tax asset will be realized.

Income (Loss) from Discontinued Operations, Net of Income Taxes

Loss from discontinued operations, net of income taxes decreased $2.4
million to income of $248,000 in fiscal 1999 from loss of $2.2 million in
fiscal 1998. This decrease was due to a $9.2 million decrease in revenue to
$9.1 million in fiscal 1999 from $18.3 million in fiscal 1998, offset by an
$11.7 million in expenses to $8.8 million in fiscal 1999 from $20.5 million in
fiscal 1998.

Years Ended March 31, 1997 and 1998

Total Revenues

Total revenues increased $739,000, or 20.4%, to $4.4 million in fiscal 1998
from $3.6 million in fiscal 1997. Total revenues from sales to customers
outside the United States were $871,000, or 20.0% of total revenues in fiscal
1998 and $1.4 million, or 39.5% of total revenues in fiscal 1997. No customer
accounted for more than 10% of total revenues in fiscal 1997 or fiscal 1998.

Product Licenses. Product licenses revenues increased $263,000, or 8.0%, to
$3.6 million in fiscal 1998 from $3.3 million in fiscal 1997.

Services and Maintenance. Services and maintenance revenues increased
$476,000, or 145.6%, to $803,000 in fiscal 1998 from $327,000 in fiscal 1997.
This increase was due to increased sales of Blaze Expert.

28
<PAGE>

Cost of Revenues

Product Licenses. Cost of product licenses decreased $106,000, or 58.9%,
to $74,000 in fiscal 1998 from $180,000 in fiscal 1997. As a percentage of
product licenses revenues, cost of product licenses were 2.1% in fiscal 1998
and 5.5% in fiscal 1997. This decrease was due to a decrease in personnel in
the production department.

Services and Maintenance. Cost of services and maintenance increased
$49,000, or 10.6%, to $512,000 in fiscal 1998 from $463,000 in fiscal 1997. As
a percentage of services and maintenance revenues, cost of services and
maintenance was 63.8% in fiscal 1998 and 141.6% in fiscal 1997. This decrease
as a percentage of services and maintenance revenues was due to decreased
reliance on third-party service providers and improved terms and conditions on
consulting and maintenance contracts.

Operating Expenses

Research and Development. Research and development expenses increased
$568,000, or 41.5%, to $1.9 million in fiscal 1998 from $1.4 million in fiscal
1997. Research and development expenses represented 44.4% of total revenues in
fiscal 1998 and 37.8% in fiscal 1997.

Selling, General and Administrative. Selling, general and administrative
expenses increased $1.5 million, or 45.7%, to $4.8 million in fiscal 1998 from
$3.3 million in fiscal 1997. Selling, general and administrative expenses
represented 110.2% of total revenues in fiscal 1998 and 91.0% in fiscal 1997.
This increase was due to increased sales and marketing efforts for Blaze
Expert and Blaze Advisor.

Net Interest Expense

Net interest expense increased $159,000, or 36.6%, to $593,000 in fiscal
1998 from $434,000 in fiscal 1997.

Provision for Income Taxes

Provision for income taxes decreased $532,000, or 88.7%, to $68,000 in
fiscal 1998 from $600,000 in fiscal 1997. No provision for federal and state
income taxes has been recorded because we have experienced significant net
losses, which have resulted in deferred tax assets. In light of our recent
history of operating losses, we have provided a full valuation allowance for
all deferred tax assets as we are presently unable to conclude that it is more
likely than not that the deferred tax asset will be realized.

Income (Loss) from Discontinued Operations, Net of Income Taxes

Loss from discontinued operations, net of income taxes decreased $3.3
million, or 60.3%, to $2.2 million in fiscal 1998 from $5.5 million from
fiscal 1997. This decrease was due to a $3.6 million decrease in revenue to
$18.3 million in fiscal 1998 from $21.9 million in fiscal 1997, offset by $6.9
million decrease in expenses to $20.5 million in fiscal 1998 from $27.4
million in fiscal 1999.

29
<PAGE>

Quarterly Results of Operations

The following table presents our unaudited quarterly results of operations
for each of the seven quarters ended December 31, 1999. You should read the
following table in conjunction with our consolidated financial statements and
the notes related thereto. We have prepared this unaudited information on a
basis consistent with the audited consolidated financial statements. This table
includes all adjustments, consisting only of normal recurring adjustments, that
we consider necessary for a fair presentation of our financial position and
operating results for the quarters presented. You should not draw any
conclusions about our future results from our quarterly results of operations.

<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------
June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1999 1999 1999 1999
-------- --------- -------- --------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Net revenues:
Product licenses...... $ 790 $ 805 $ 961 $ 1,166 $ 1,394 $ 1,709 $ 2,268
Services and
maintenance......... 1,054 1,280 1,152 1,846 1,926 2,091 2,361
------- ------- ------- ------- ------- ------- -------
Total revenues..... 1,844 2,085 2,113 3,012 3,320 3,800 4,629
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Product licenses...... 26 10 3 1 10 36 9
Services and
maintenance......... 617 583 658 1,034 1,187 1,466 1,675
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues......... 643 593 661 1,035 1,197 1,502 1,684
------- ------- ------- ------- ------- ------- -------
Gross profit............ 1,201 1,492 1,452 1,977 2,123 2,298 2,945
Operating expenses:
Research and
development......... 1,015 1,057 836 935 1,260 1,083 1,145
Selling, general and
administrative...... 2,176 1,800 1,853 1,962 2,532 2,780 3,432
Stock-based
compensation........ -- -- -- -- -- 6,439 2,868
------- ------- ------- ------- ------- ------- -------
Total operating
expenses......... 3,191 2,857 2,689 2,897 3,792 10,302 7,445
------- ------- ------- ------- ------- ------- -------
Operating loss.......... (1,990) (1,365) (1,237) (920) (1,669) (8,004) (4,500)
Interest expense, net... (19) (15) (90) (125) (102) (50) (65)
------- ------- ------- ------- ------- ------- -------
Net loss from continuing
operations before
income taxes.......... (2,009) (1,380) (1,327) (1,045) (1,771) (8,054) (4,565)
Provision for income
taxes................. (9) (10) (21) (47) (12) (62) (34)
------- ------- ------- ------- ------- ------- -------
Net loss from continuing
operations............ $(2,018) $(1,390) $(1,348) $(1,092) $(1,783) $(8,116) $(4,599)
======= ======= ======= ======= ======= ======= =======
</TABLE>

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<PAGE>

The following table sets forth unaudited quarterly results of operations as
a percentage of total revenues for each of the seven quarters ended December
31, 1999.

<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------
June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1999 1999 1999 1999
-------- --------- -------- --------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Net revenues:
Product licenses...... 42.8% 38.6% 45.5% 38.7% 42.0% 45.0% 49.0 %
Services and
maintenance......... 57.2 61.4 54.5 61.3 58.0 55.0 51.0
------ ----- ----- ----- ----- ------ -----
Total revenues..... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ----- ----- ----- ----- ------ -----
Cost of revenues:
Product licenses...... 1.4 0.5 0.1 0.1 0.3 0.9 0.2
Services and
maintenance......... 33.5 27.9 31.1 34.3 35.8 38.6 36.2
------ ----- ----- ----- ----- ------ -----
Total cost of
revenues......... 34.9 28.4 31.2 34.4 36.1 39.5 36.4
------ ----- ----- ----- ----- ------ -----
Gross profit............ 65.1 71.6 68.8 65.6 63.9 60.5 63.6
Operating expenses:
Research and
development......... 55.0 50.7 39.6 31.0 38.0 28.5 24.7
Selling, general and
administrative...... 118.0 86.3 87.7 65.2 76.2 73.2 74.1
Stock-based
compensation........ 0.0 0.0 0.0 0.0 0.0 169.4 62.0
------ ----- ----- ----- ----- ------ -----
Total operating
expenses......... 173.0 137.0 127.3 96.2 114.2 271.1 160.8
------ ----- ----- ----- ----- ------ -----
Operating loss.......... (107.9) (65.4) (58.5) (30.6) (50.3) (210.6) (97.2)
Interest expense, net... (1.0) (0.7) (4.3) (4.1) (3.0) (1.3) (1.4)
------ ----- ----- ----- ----- ------ -----
Net loss from continuing
operations before
income taxes.......... (108.9) (66.1) (62.8) (34.7) (53.3) (211.9) (98.6)
Provision for income
taxes................. (0.5) (0.5) (1.0) (1.6) (0.4) (1.6) (0.7)
------ ----- ----- ----- ----- ------ -----
Net loss from continuing
operations............ (109.4)% (66.6)% (63.8)% (36.3)% (53.7)% (213.5)% (99.3)%
====== ===== ===== ===== ===== ====== =====
</TABLE>

Product revenues have increased each quarter since the quarter ended June
30, 1998. Since July 1998, we have focused our sales, marketing and research
and development resources on our rules products, especially the Blaze Advisor
Solutions Suite. Services and maintenance revenues have generally increased
each quarter since the quarter ended June 30, 1998, except for the quarter
ended December 31, 1998. Cost of services and maintenance have generally
increased each quarter since the quarter ended September 30, 1998. Cost of
services and maintenance as a percentage of service and maintenance revenues
may vary between periods due to our use of third-party professional services
and varying gross margins on customer engagements.

Research and development expenses decreased in the quarter ended December
31, 1998 from the previous quarter. This decrease was due to a decrease in
research and development personnel during the quarter. Research and development
expenses also decreased in the quarter ended September 30, 1999 from the
previous quarter. This decrease was due to the completion of a project
involving third-party engineers and a decrease in research and development
personnel.

Selling, general and administrative decreased in the quarter ended
September 30, 1999 from the previous quarter. This decrease was due to cost-
reduction measures initiated by the new management team.

Liquidity and Capital Resources

Since inception, we have financed our operations through private sales of
preferred stock, internally generated funds, and the use of our receivables
based line of credit with Coast Business Credit, a

31
<PAGE>

division of Southern Pacific Bank. As of December 31, 1999, we had $16.3
million of cash and cash equivalents. As of December 31, 1999, we had borrowed
$2.7 million under our credit facility with Coast Business Credit. Borrowings
under this facility bear interest at the prime rate plus 3% (12.0% as of
December 31, 1999).

Net cash used in operating activities was $3.2 million for the nine months
ended December 31, 1999, $4.3 million in fiscal 1999, $5.1 million in fiscal
1998 and $4.0 million in fiscal 1997. Net cash used for operating activities
was due to substantial net losses and changes in working capital accounts.

Net cash used for investing activities was $60,000 for the nine months
ended December 31, 1999, $779,000 in fiscal 1999, $140,000 in fiscal 1998 and
$451,000 in fiscal 1997. Cash used in investing activities included investments
in property and equipment. In fiscal 1997, cash used in investing activities
also included the acquisition of Microline Software, Inc.

Net cash provided by financing activities was $17.3 million for the nine
months ended December 31, 1999, $448,000 in fiscal 1999, $9.6 million in fiscal
1998 and $5.5 million in fiscal 1997. Cash provided by financing activities
during these periods was due to proceeds from the issuance of preferred and
common stock, bridge loans with our existing investors and borrowings under our
line of credit facility.

We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least the next 18
months. If cash generated from operations is insufficient to satisfy our
liquidity requirements, we may need to raise additional funds to finance more
rapid expansion, to develop new or enhance existing services or products, to
respond to competitive pressures or to acquire complementary products,
businesses or technologies. If additional funds are raised through the issuance
of equity or convertible debt securities, the percentage ownership of our
stockholders will be reduced and such securities may have rights, preferences
or privileges senior to those of our stockholders. We cannot assure you that
additional financing will be available on terms favorable to us, or at all. If
adequate funds are not available or are not available on acceptable terms, our
ability to fund our expansion, take advantage of unanticipated opportunities,
develop or enhance services or products or otherwise respond to competitive
pressures would be significantly limited. Our business, results of operations
and financial condition could be materially adversely affected by such
limitation.

Year 2000 Compliance

We have tested our Blaze Advisor Solutions Suite and our prior products and
believe that they are year 2000 compliant. We have also inquired of significant
vendors of our internal accounting, management and product development systems
as to their year 2000 readiness, and we have also tested our material internal
systems. We believe that, based on these tests and assurances of our vendors,
we will not incur material costs to resolve year 2000 issues for our products
and internal systems. Furthermore, we have not experienced any year 2000
problems and we have not been informed of any material year 2000 problems by
our customers and vendors.

We believe that we have identified all of the major information systems
used in connection with our internal operations and substantially completed all
modification, upgrades or replacements to minimize the possibility of material
disruption of our business from year 2000 problems. If it comes to our
attention that there are any year 2000 problems with our products or that some
of our third-party hardware and software used in our internal systems or our
products are not year 2000 compliant, then we will endeavor to make
modifications to our products and internal systems, or purchase new internal
systems, to quickly respond to the problem. Although we do not believe that the
cost of these modifications and replacements, if any, will materially affect
our operating results, we have no other contingency plan to address effects of
year 2000 problems with our products and internal systems. The cost already
incurred by us and our future cost related to year 2000 compliance is not
material.

32
<PAGE>

Qualitative and Quantitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to interest rate risk is limited to the exposure related to
our cash and cash equivalents and credit facility, which is tied to market
interest rates. As of December 31, 1999, we had cash and cash equivalents of
$16.3 million, which consisted of cash and highly liquid short-term
investments, both domestically and internationally. We ensure the safety and
preservation of our invested principal funds by investing in high credit
quality securities. Our short-term investments will decline in value by an
immaterial amount if interest rates increase, and therefore would not have a
material effect on our financial condition or results of operations. As of
December 31, 1999, we had borrowed $2.7 million under our credit facility with
Coast Business Credit. Borrowings under this facility bear interest at the
prime rate plus 3% (12.0% as of December 31, 1999). An increase or decrease in
the prime rate would accordingly result in increased or decreased interest
expense.

Foreign Currency Risk

We develop products in the United States and sell them in North America,
Asia and Europe. As a result, our financial results could be adversely affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Since our sales in Europe and Asia are currently
denominated in foreign currencies and generally translated on a monthly basis
to U.S. dollars, we could be adversely affected by fluctuations in foreign
currency exchange rates.

European Monetary Union

Within Europe, the European Economic and Monetary Union introduced a new
currency, the euro, on January 1, 1999. The new currency is in response to the
European Union's policy of economic convergence to harmonize trade policy,
eliminate business costs associated with currency exchange and to promote the
free flow of capital, goods and services.

On January 1, 1999, the participating countries adopted the euro as their
local currency, initially available for currency trading on currency exchanges
and non-cash transactions such as banking. The existing local currencies, or
legacy currencies, will remain legal tender through January 1, 2002. Beginning
on January 1, 2002, euro-denominated bills and coins will be issued for cash
transactions. For a period of up to six months from this date, both legacy
currencies and the euro will be legal tender. On or before July 1, 2002, the
participating countries will withdraw all legacy currencies and exclusively use
the euro.

Our transactions are recorded in both U.S. dollars and foreign currencies.
Future transactions may be recorded in the euro. We have not incurred and do
not expect to incur any significant costs from continued implementation of the
euro. However, the currency risk of the euro could harm our business.

Recently Issued Accounting Standards

For fiscal 1998 and prior years, we recognized revenues in accordance with
the American Institute of Certified Public Accountants Statement of Position
91-1. Commencing in fiscal 1999, we began recognizing revenues in accordance
with the American Institute of Certified Public Accountants Statement of
Position 97-2, Software Revenue Recognition, or SOP 97-2, as amended by
Statements of Position 98-4 and 98-9. Our adoption of these new standards has
not to date had any material effect on our revenue recognition. Further
implementation guidelines relating to these standards may result in
unanticipated changes in our revenue recognition practices, and these changes
could affect our future revenues and earnings.

33
<PAGE>

development stage, and amortize them over the software's estimated useful life.
SOP 98-1 is effective for fiscal years beginning after December 15, 1998. We do
not expect that the adoption of SOP 98-1 will have a material impact on our
financial statements and related disclosures.

In December 1998, AcSec released Statement of Position 98-9, Modification
of SOP 97-2, "Software Revenue Recognition," with respect to Certain
Transactions, or SOP 98-9. SOP 98-9 amends SOP 97-2 to require that an entity
recognize revenue for multiple element arrangements by means of the "residual
method" when (1) there is vendor-specific objective evidence, or VSOE, of the
fair values of all the undelivered elements that are not accounted for by means
of long-term contract accounting, (2) VSOE of fair value does not exist for one
or more of the delivered elements, and (3) all revenue recognition criteria of
SOP 97-2 (other than the requirements for VSOE of the fair value of each
delivered element) are satisfied. The provisions of SOP 98-9 that extend the
deferral of certain paragraphs of SOP 97-2 became effective December 15,1998.
These paragraphs of SOP 97-2 and SOP 98-9 will be effective for transactions
that are entered into in fiscal years beginning after March 15, 1999.
Retroactive application is prohibited. We do not expect that the adoption of
SOP 98-9 will have a material impact on our financial statements and related
disclosures.

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities, or SOP 98-5, which requires companies to expense the costs of
start-up activities and organization costs as incurred. In general SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. We believe the
adoption of SOP 98-5 will not have a material impact on our results of
operations.

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities, or SFAS
133, which establishes new standards of accounting and reporting for derivative
instruments and hedging activities. SFAS 133 requires that all derivatives be
recognized at fair value in the statement of financial position, and that the
corresponding gains or losses be reported either in the statement of operations
or as a component of comprehensive income, depending on the type of hedging
relationship that exists. SFAS 133 will be effective for fiscal years beginning
after June 15, 2000. We do not expect that the adoption of SFAS 133 will have a
material impact on our financial statements and related disclosures.

34
<PAGE>

BUSINESS

Overview

Industry Background

The Internet has emerged as a new and highly efficient medium for companies
to conduct commercial transactions. International Data Corporation, a market
research firm, estimates that worldwide sales of goods and services over the
Internet, known as "e-commerce," will grow from $111 billion in 1999 to $1.3
trillion by 2003. Given the current size and continued growth of e-commerce,
many organizations are implementing Internet-based and electronic business
initiatives in order to extend and automate traditional business processes and
compete more effectively. These initiatives, commonly referred to as "e-
business," allow companies to transact sales, manage customer service, and
interact and communicate with customers, employees, partners and suppliers
using the Internet and other electronic means. The rapid growth of the Internet
has made e-business an important and fast-growing business channel for many
companies. Companies have therefore begun to invest significantly in
infrastructure software to support their growing e-business initiatives. IDC
estimates that worldwide license revenues from Internet commerce application
software, which includes software for both business-to-business and business-
to-consumer applications, will grow from $1.7 billion in 1999 to $13.1 billion
in 2003.

The rapid growth of e-commerce has intensified competition among companies
as business customers and consumers now have access to more vendors as well as
the ability to change vendors easily. To remain competitive, companies are
implementing e-business initiatives to enable them to interact with their
customers, employees, partners and suppliers using both traditional and e-
business communication channels, including the Internet. As the number of e-
business interactions increases, companies seek methods to convert more Web
site visitors into customers, to improve customer retention and to effectively
take customers through complex

35
<PAGE>

selling processes using automated channels. Companies seek to use every
interaction as an opportunity to apply their best marketing practices to
customer interactions and to cross-sell complementary products, to up-sell
higher-end products and to increase revenues, customer satisfaction and
loyalty. Companies must also ensure that they provide the same level of
personal service online as is provided in person. Finally, companies must be
able to provide this consistent level of service 24 hours a day, 7 days a week
to satisfy customers who are increasingly demanding automated services.

Furthermore, as companies interact with customers, employees, partners and
suppliers through both traditional and electronic communication channels, they
gain valuable experiences and information from these interactions. Companies
need a means of ensuring that institutional knowledge gained from interactions
across all of these communication channels, including the Internet, will be
absorbed and communicated company-wide so that the entire enterprise can apply
such knowledge to future interactions. This allows companies to leverage their
understanding of their customers by customizing products and services based on
individual preferences and characteristics. Companies also seek a means of
ensuring that their personality and style, which differentiate them from their
competitors, are effectively communicated regardless of the communication
method. Finally, as companies modify their business practices in response to
changing market conditions, they must be able to rapidly incorporate these
changes and ensure that they are applied consistently across all communication
channels.

Because electronic communication channels such as the Internet enable a
high-volume of transactions to be completed automatically and without human
interaction, companies have found that the traditional means of applying the
policies, practices and procedures that define their methods of doing business
across the company are not effective. Because these policies, practices and
procedures constitute the rules by which a company conducts its business and
embody the company's best marketing practices and collective knowledge of
customer characteristics and preferences, they are commonly referred to as a
company's business rules. While many companies have established means of
applying their business rules using traditional person-to-person operations and
means of communication, they are seeking ways to consistently apply these
business rules to both traditional and e-business interactions in order to
maximize the value of each customer interaction and to differentiate themselves
from their competitors.

While companies have recognized the need to accomplish these objectives,
the solutions available have had various limitations. The most basic attempts
to personalize customer experiences consist of storing a user's name and gender
so that on subsequent visits they can greet the user in a superficially
personal manner. Another attempt, known as collaborative filtering, compares
each user's requests to statistics on others who have requested similar
services and attempts to treat them in the same way as close matches. This
automatic grouping does not allow business policies to react to the needs of
the individual. Some software vendors have introduced prepackaged e-commerce
applications that require companies to set their policies and to present
information in a rigid format defined by the software package. Attempts to
introduce unique or nonconforming business rules require extensive computer
programming and cannot be adjusted easily and quickly in response to changing
business needs. Moreover, most approaches to personalizing the interaction
between users and electronic systems have concentrated solely on the Web as a
communication channel. Rules that have been developed and implemented for Web
interaction with such approaches can not be extended for use by systems that
control behavior of automated telephone response systems, manned support
centers, electronic kiosks or other communication channels.

Companies increasingly need software solutions to help them capitalize on
their interactions with customers, employees, partners and suppliers, maintain
their corporate personality and style and distinguish themselves from their
competitors while conducting an increasing number of transactions over a wide
variety of communication channels.

36
<PAGE>

The Blaze Solution

We are a leading provider of software that enables companies to provide
their customers, employees, partners and suppliers with adaptable and
personalized interactions that are consistent across all company communications
channels, including the Internet, automated telephone response systems, manned
customer service centers, automated self-service electronic kiosks and others.
Our Blaze Advisor Solutions Suite allows companies to implement their policies,
practices and procedures in e-business applications, enabling them to provide
individualized interactions across these communication channels. Computer
programs can draw upon the rules encoded in our software to determine the
display of information and interaction with a user of a Web site, telephone
response system, automated self-service electronic kiosk, manned customer
service center, or other communication channel. Typical rules reflecting a
business's policies, practices and procedures may include setting special
pricing discounts for certain types of customers, checking for regulatory
compliance before allowing a transaction to complete, or offering different
promotional items to each user. Because these policies constitute a set of
rules under which the company has decided its business should be conducted,
they are commonly referred to as business rules. Offering individualized
interactions is a technique used to promote greater customer conversion and
retention, decreased costs and increased sales. By using a company's own
business rules as its foundation, Blaze Advisor also enables a company to
express its corporate personality and style consistently through each
interaction and across all of a company's communication channels, including the
Internet and other e-business channels. Finally, Blaze Advisor allows business
persons to modify business rules quickly and easily. This ease of modification
allows companies to respond quickly to dynamic market conditions, business
practices and user preferences. We also provide consulting and professional
services to help customers plan, develop and implement e-business
personalization solutions using our software.

Key benefits of our solution include:

. True One-to-One Interaction. Blaze Advisor allows companies to provide
the individualized responses necessary to maximize benefits from
customer interactions and to better attract and retain customers. One-
to-one interaction is accomplished through rich interactive dialogues,
individually targeted recommendations, responses designed to meet
customer goals and needs and preference- driven cross-selling and up-
selling.

. Adaptability. Blaze Advisor allows companies to quickly change
business rules while an e-business application is running, enabling
companies to respond to market conditions while providing continuous
service. Business persons without complex computer programming skills
can modify an e-business application's underlying business rules
without involvement by information technology professionals or
alterations to the application.

. Company Differentiation. Blaze Advisor's flexibility allows companies
to express their corporate styles, practices, and personalities by
incorporating their business rules in e-business applications. In this
way, a company's identity can be communicated to customers through Web
sites, automated telephone response systems, manned customer service
centers, electronic kiosks, and other communication channels, allowing
companies to differentiate themselves from their competitors.

. Enterprise Consistency. Blaze Advisor allows companies to consistently
present their corporate personality and style and apply their business
rules from transaction to transaction. A single set of business rules
can be accessed through Web sites, manned customer service centers,
voice-response systems, sales persons, and other customer contact
points to provide consistent customer interaction across an
organization.

. High Performance and Scalability. Blaze Advisor is designed to
efficiently process increasingly complex and numerous business rules
in support of expanding e-business applications. Blaze Advisor can be
deployed on sophisticated computer architectures to provide high
throughput with heavy transaction volumes.

37
<PAGE>

. Faster Time to Market. Blaze Advisor allows companies to implement
rules-based personalization systems quickly. We also enable software
vendors to incorporate our personalization technology in their e-
commerce application software without investing significant time and
expense developing their own solutions.

Blaze Strategy

Our objective is to maintain our position as a leading provider of software
that enables companies to provide their customers, employees, partners and
suppliers with adaptable and personalized interactions that are consistent
across all company communication channels, including the Internet, automated
telephone response systems, manned customer service centers, electronic kiosks
and others. Key elements of our strategy include:

Expand Our Market Presence. We plan to significantly expand our market
presence in order to promote awareness of our products and exploit the market
opportunity for e-business personalization solutions. We intend to increase our
sales by hiring additional direct sales personnel targeted at major
geographical markets to sell directly to corporate customers as well as to
independent software vendors that incorporate our products into their
offerings. We intend to expand our relationships with third-party system
integrators to supplement our direct sales efforts. We may also establish
additional foreign sales offices to penetrate new international markets. In
addition, we intend to substantially expand our marketing activities, including
advertising, trade shows, seminars, industry events and direct marketing, to
promote our Blaze Software brand.

Extend Our Technology and Product Leadership. We intend to maintain and
extend our leadership in rules-based personalization solutions by continuing to
develop our core Java-based technology. We believe that we are a technology
leader in rules-based personalization systems because of the ease of
deployment, scalability, flexibility and open architecture of our products. We
intend to continue to invest in technology development to extend the
capabilities and performance of our Blaze Advisor Solutions Suite, such as
Blaze Advisor Innovator. In addition, we may acquire complementary technologies
or businesses. Our goal is to expand our product offerings to include
application templates for specific industries that enable customers to deploy
high performance e-business applications more quickly and easily.

Target Leading Customers and Independent Software Vendors. We believe a
significant opportunity exists for us to sell our products to leading companies
worldwide as these companies expand their e-business initiatives. We have sold
our products to leading companies in a number of industries, including
financial services, telecommunications and manufacturing. We intend to target
leading Internet retailers as well as other large companies using the Internet
to conduct commerce. In addition, we have licensed our technology to leading
independent e-business application software vendors that incorporate our
products into their offerings. We have developed licensing relationships with
software vendors such as Active Software, Blue Martini Software, Chordiant
Software, IBM and Information Management Associates. Licensing arrangements
include the use of our software in development of their products, inclusion of
our software in their marketed products as installed at customer sites, and
cooperative agreements relating to marketing and promotion of our respective
companies and products. Our goal is to deepen our relationships with these
vendors and to establish relationships with additional e-business software
vendors.

Increase Our Professional Services Capabilities. We intend to maximize the
value of our solutions to our customers by offering professional services to
help them leverage our personalization capabilities in their e-business
systems. We currently provide our customers with a complete range of services,
including consulting, training, implementation, and customer support. Because
most of our customers use our professional services, our services are important
in expanding our customer relationships and understanding our customers'
evolving needs. We have recently expanded our direct sales force and plan to
hire additional sales personnel, including salespersons, sales engineers and
sales management personnel.

38
<PAGE>

Expand Strategic Alliances with Key Business Partners. To accelerate the
acceptance of our products and services and to target a broader customer base,
we intend to develop strategic relationships with leading system integrators
and independent software vendors. We intend to develop relationships with
third-party system integrators that provide consulting and implementation
services so that we can increase our license revenues through co-selling
efforts. We also intend to enhance our brand recognition through co-marketing
arrangements with system integrators and independent software vendors both
domestically and internationally.

Blaze Products

Blaze Advisor Solutions Suite. The Blaze Advisor Solutions Suite allows a
company's policies, practices, and procedures for conducting business to be
expressed in an intuitive language specifically designed to formalize these
rules in business terms. It contains a graphical development environment to
allow companies to build e-business personalization solutions with our
software. The Blaze Advisor Solutions Suite is designed to increase speed and
ease of development in enterprise-scale e-business applications. Putting
formalized policies into production use is facilitated by a powerful processing
component and runtime software that puts policy changes into effect without
interrupting business operations. Blaze Advisor stores business rules apart
from other programming instructions so companies can use the rules in multiple
business applications and communications channels. Blaze Advisor can be
deployed at our customers' locations or hosted by third parties, such as
application service providers.

The Blaze Advisor Solutions Suite consists of four products.

. Blaze Advisor Builder is a visual development environment for
defining, editing and testing business rules. Blaze Advisor Builder
allows business persons to write and modify rules in an intuitive
business rule language and to make use of graphical design and review
tools to clearly model business processes and components. Fill-in-the-
blank forms and choice lists are designed to simplify and speed the
creation of standard business rule elements. Blaze Advisor Builder is
offered in English, Chinese, French, German, Italian, Japanese,
Korean, Portuguese, and Spanish versions to facilitate application
creation in worldwide markets.

. Blaze Advisor Rule Engine is the runtime environment for monitoring,
executing and optimizing the performance of rules created with Blaze
Advisor Builder. Blaze Advisor Rule Engine allows flexibility in
choosing what computers to run a system on, with rule processing
performed on a workstation server or mainframe. Blaze Advisor Rule
Engine is designed to intelligently determine rules that need to be
examined under any set of circumstances and to execute them in an
efficient manner. Programming interfaces allow integration of Blaze
Advisor Rule Engine with custom-built, data architectures or with
third-party products.

. Blaze Advisor Rule Server provides ready-to-use support for deploying
personalized e-business applications powered by Blaze Advisor Builder
and processed by the Blaze Advisor Rule Engine. Blaze Advisor Rule
Server addresses the complex production issues involved in providing
services to many users at the same time in high availability e-
business applications. It offers simple interfaces to common means of
transferring data, automatically manages the replacement and updating
of business rules, and allows systems personnel to control the most
efficient use of computing resources.

. Blaze Advisor Innovator, which is expected to be released in the first
half of 2000, is being designed to further simplify the creation and
modification of business rules by non-technical business persons.
Blaze Advisor Innovator will allow business managers to bypass the
Blaze Advisor Builder development environment by accessing company-
defined forms through any common Web browser. Business rules may be
presented in a customizable format, allowing users to inspect, change,
add or delete criteria that affect the interactive customer
experience.

Blaze Expert. Blaze Expert is the predecessor to Blaze Advisor. It offers
business rules definition, modification and processing in C and C++
applications running on Windows or Unix platforms.

39
<PAGE>

Professional Services

Our professional services organization plays an integral role in
implementing our software for our customers as well as supporting and training
our customers. Our worldwide professional services organization is focused on
ensuring the successful implementation and support of each customer. We have
invested significantly in the deployment strategy, services and support
required to implement our technology. As of December 31, 1999, our professional
services organization in North America consisted of 22 employees. Our
professional services offerings include:

Training. Blaze Software courses, developed and taught by our education
services personnel, offer hands-on, role-based training. We provide courses
specifically designed for business analysts, beginning and advanced developers,
business rule writers and system architects. The primary goal of these courses
is to accelerate a customer's learning process, so they can become proficient
as quickly as possible. We offer courses at our offices as well as customer
locations. We are also able to customize training courses for customers with
unique educational requirements.

Service and Support. Our customers have direct access to us for technical
support. We provide direct-to-the-engineer telephone support to ensure rapid
response. Our support organization delivers the responsive service required by
business managers, information technology professionals, system integration
partners and independent software vendors to support mission-critical systems.
We offer problem resolution services via telephone, email, fax and the
Internet. Our technical support Web site, the Blaze Online Support System,
offers information on specific technical issues, interactive searches for
relevant cases, status updates on open technical support inquiries, product
documentation and release notes, tutorials and product use examples, and other
materials of use to our customers.

Consulting Services. Our professional services include system architecture
and design, business rule design, business rule writing, software integration
and project planning and management. Our professional services are focused on
providing our customers and partners with the skills and experience necessary
to take a project from planning and development to implementation and support.
Our professional services group has developed substantial experience in the
development and integration of business rule technology. Customers benefit from
the practical development and implementation skills that we have derived from
working on a wide range of applications across many industry segments. Working
closely with customers, our product specialists analyze business problems and
user requirements and transform business policies into executable business
rules in Blaze Advisor or Blaze Expert rule syntax. We generally charge for our
professional services on a time and materials basis and provide them worldwide
through our offices in the United States, Europe and Japan. Consulting
engagements vary in length according to customer requirements.

40
<PAGE>

Customers

Our customers are primarily large corporations and independent software
vendors. We also sell products to system integrators. We have sold our products
to customers in the technology, financial, insurance, manufacturing,
telecommunications, and healthcare industries and our software is embedded in
many leading e-business software applications. Customers in North America that
use Blaze Advisor and have spent more than $100,000 for licenses, professional
services, maintenance and training during the 18 month period ended December
31, 1999 include:

<TABLE>
<CAPTION>
End-users Software Vendors
- --------- ----------------
<S> <C>
American International Group Inc. Active Software, Inc.
Bernard C. Harris Publishing Company Inc. BCE Emergis, Inc.
California Franchise Tax Board Blue Martini Software
Fidelity Investments Institutional Services
Company, Inc. Buzzeo, Inc.
Ford Motor Company IBM
GEICO Direct Information Management Associates, Inc.
Los Angeles County Employees Retirement
Association John H. Harland Company
New York Life Insurance Company
PlanetRx.com Inc.
The Prudential Insurance Company of America
Sun Microsystems, Inc.
Western Asset Management Company
</TABLE>

The above customers accounted for 30.0% of total revenues in the nine
months ended December 31, 1999 and 8.5% of total revenues in fiscal 1999.

Selected Customer Examples

The selected customer examples below are intended to provide brief
descriptions of how our customers are using or plan to use our Blaze Advisor
Solutions Suite to provide e-business personalization solutions.

GEICO Direct. GEICO Direct is the second-largest direct marketer of auto
insurance in the United States. Each week, more than 10,000 drivers switch to
GEICO Direct. GEICO was an early adopter of Internet technology to sell auto
insurance policies directly to consumers across the United States without
requiring visits to field offices or agents. GEICO used Internet Information
Services (IIS), a systems integration partner of Blaze Software, to build a
Web-based self-service rate quote application using Blaze Advisor. Advisor
encapsulated GEICO's business rules and used them to dynamically determine the
most appropriate information to request from and display to the applicant.

Consumers in different states, with different driving histories and
insurance requirements, are now able to get the policy information that
directly match their needs, while answering only those questions applicable to
their situation. By using Blaze Advisor to personalize the process to each
individual, GEICO has improved their policy application efficiency and sped
their ability to implement business changes in their online systems. Since
implementation of the new system using Blaze Advisor, more users have completed
the GEICO application process and become customers.

Blue Martini Software. Blue Martini Software provides customer interaction
software for retailers and manufacturers selling direct-to-consumer on the
Internet. The Blue Martini Customer Interaction System delivers enhanced
capabilities for dynamic e-merchandising, e-marketing and e-service to leading
consumer goods manufacturers such as Levi Strauss & Co., retailers such as
Gymboree Corp., and Internet retailers such as Gloss.com. Blaze Advisor
provides the underlying business rules used to drive the personalized shopping
experience for each customer. The rules specify targeted assortments, cross-
sells, and promotions based on customer needs and profiles. The Blaze Advisor
Rule Engine allows Blue Martini to offer true individualized attention and
interaction for each site customer. Rich customer dialogue, driven by Blaze
Advisor business rules, allows Blue Martini customers to offer consumers
recommendations based on the companies' best business and customer-service
practices.

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<PAGE>

IBM. IBM recently announced a new version of their WebSphere Commerce Suite
product, which enables businesses to quickly, easily, and securely conduct
electronic commerce on the World Wide Web. It helps companies integrate
existing business process and legacy systems with the Web, as well as grow new
Web-based businesses. WebSphere Commerce Suite is scalable, open to
customization and integration, and can handle very large transaction volumes.
It comes with catalog templates, setup wizards, and advanced catalog tools to
help companies easily build effective and attractive electronic commerce sites.

IBM chose Blaze Advisor to provide the personalized interaction rules that
enable e-commerce sites to interactively service customer needs in an efficient
and individually appropriate manner. With Blaze Advisor, IBM offers their e-
commerce customers systems that can be tailored to reflect their individual
corporate identities and ways of doing business. Customers are able to modify
the Blaze business rules to implement marketing and selling policies driving
the interactive experience for the end consumer. IBM is marketing the new
WebSphere Commerce Suite on a worldwide basis, and is using Blaze Advisor's
ability to operate and make rule changes in ten languages.

The Prudential Insurance Company of America. The Prudential Insurance
Company of America is one of the largest diversified financial services
institutions in the world and, based on total assets, the largest insurance
company in North America. They offer a full range of insurance, investment, and
real estate products and services to individuals and institutions worldwide.
Prudential has integrated Blaze Advisor into its FORMS system, an intranet
application used by Prudential's agents for individualized support of
Prudential customers. With Blaze Advisor, the FORMS application enables
Prudential's agents to quickly identify, select and tailor annuity and pension
life annuity product application requests for new business applicants. Before
implementing the Blaze-enabled FORMS application, insurance agents needed to
consult an internal call center representative to determine the application
appropriate for a particular customer's request. With the new solution in
place, an agent can spend a few minutes at his browser screen and have all the
applicable forms and preparatory information presented in a clear and
consistent manner, ready to use in providing service to the customer.
Prudential is able to update regulatory and compliance guidelines as often as
necessary and have the new guidelines instantly available to all employees. Use
of the rules-based system reduces the number of specialists, systems, and
manuals an insurance agent needs to refer to, resulting in faster, more
accurate information delivered to the customer.

PlanetRx.com, Inc. is a leading Internet healthcare destination for
commerce, content and community. PlanetRx.com delivers a convenient,
personalized and informed health and beauty shopping experience to the
consumer. With products and services ranging from prescriptions to personal
care items to the latest medical information, PlanetRx.com gives consumers the
ability to manage their own healthcare in a convenient and secure environment.
PlanetRx.com has selected and is currently implementing Blaze Advisor to offer
customers individualized product recommendations and remedies for specific
health topics. The new Web site feature will be designed to help customers
conveniently and quickly make intelligent product selections that best fit
their individualized healthcare needs. Blaze Advisor will offer PlanetRx.com
the ability to deliver quick and convenient online customer product
recommendations determined by interactive dialog and analysis of the customer's
health concerns and brand preferences. Blaze Advisor will allow PlanetRx.com to
reflect its personality online, adapt quickly to its customers' needs and
provide interactive recommendations.

Blaze Technology and Architecture

The product components included in the Blaze Advisor Solutions Suite
incorporate business rules technology developed by us over several years. Core
business rules authoring and processing technologies are based on research and
development conducted for our Blaze Expert product. These technological
solutions are the foundation of Blaze Advisor. Key technological and
architectural attributes of Blaze Advisor are:

Business Rule Design. Users can express business rules in a proprietary
structured rule language that makes use of common English words. Our customers
can use a wide range of business condition expressions, such as relative
comparison, set membership, set counts, dates, or currency calculations.
Attributes of these

42
<PAGE>

business objects can be expressed in English such as "the level of Inventory"
or in shorthand "Inventory.level" notation. A drag-and-drop visual design tool
is used to create and modify basic business logic flows during the rule project
design phase. One business rule can apply to input from Web forms, database, or
remote legacy systems.

Integration With Existing Systems. Blaze Advisor business rules operate
with existing data and objects in the customer's business environment. These
objects may come from database rows, Java objects, Messaging systems, COM, or
Component Object Model, CORBA, or Common Object Request Broker Architecture,
XML, or Extensible Markup Language, or other custom model definitions. Blaze
Advisor Builder includes object import wizards to retrieve and establish
linkages to external business objects and databases. The Blaze Advisor Rule
Server includes published and documented Application Programming Interface
functions that allow operations to be controlled from Java applications or as
part of common application server platform operations including EJB, or
Enterprise Java Beans, Java, COM, CORBA, Messaging, Servlets and Java Server
Pages, and C++ through JNI, or Java Native Interface.

The Blaze Advisor Rule Engine and Rule Server operate in pure Java, giving
them the ability to be run on any hardware and operating system incorporating a
Sun-compatible Java Virtual Machine. Operating systems such as Microsoft
Windows NT, Sun Solaris, IBM AIX, IBM OS/390, IBM OS/400, Compaq Tru64, Compaq
NonStop-UX, Data General DG-UX, and Hewlett-Packard HP-UX are examples of
typical environments on which our customers are developing and deploying
server-based applications.

Performance. Blaze Advisor indexes business rules into an optimized network
to determine which rules apply to given objects. This gives the rule engine the
ability to manage large numbers of complex rule conditions, noting when objects
are changed and adding or removing rules from the execution list without
explicit programming by the rule developer. Conditions appearing in multiple
rules are unified and tested once, rather than multiple times. Objects and
object combinations satisfying rule conditions are held in memory to reduce the
number of tests performed when objects change. We have implemented a
proprietary algorithm to provide additional performance gains. The Blaze
Advisor Rule Engine is equally efficient with forward-chaining and backward-
chaining scenarios. Blaze Advisor also uses rulesets to logically group rules
associated with a particular business service. The Blaze Advisor Rule Engine
does not examine rules and objects not pertaining to the ruleset being
executed, leading to high performance efficiency.

Scalability. Customers can achieve application scalability by deploying
multiple Blaze Advisor Rule Servers on one or more computers. The application
server platform is used to assign work to the appropriate Rule Server. This
allows for customer-configurable load balancing, failover exception handling,
and workload monitoring and assignment. Blaze Advisor Rule Server can service
multiple clients simultaneously. The Blaze Advisor Rule Server can manage
multiple business services, each with its own rule project. This allows static
or dynamic load leveling between different aspects of the business.

Uninterrupted Operation. Blaze Advisor Rule Server is used to deploy rule
changes made in Blaze Advisor with no interruption to ongoing service. The Rule
Server handles internal monitoring of Blaze Advisor activity and ensures that
it continues unimpeded to its conclusion. The Rule Server manages client
sessions currently underway and oversees those waiting for execution. Rules
replacement is made automatically and users in process with a transaction are
unaffected; the next person to interact with the system receives the benefit of
the new rules.

Sales and Marketing

We sell our products primarily through our direct sales force to corporate
customers as well as to independent software vendors that incorporate our
products into their offerings. We typically approach both business persons and
information technology professionals with an integrated team from our sales and
professional services organizations. Our sales cycles typically include a
demonstration and physical evaluation of our product capabilities followed by
one or more detailed technical reviews.

43
<PAGE>

As of December 31, 1999, our sales and marketing organization in North
America consisted of 28 employees. Our sales offices are located in San Jose,
California; Denver, Colorado; New York, New York; Charlotte, North Carolina;
Dallas, Texas; Bracknell, England; Paris, France; Frankfurt, Germany; Tokyo,
Japan; and Toronto, Canada. We intend to expand the number of sales and service
teams in major geographic markets in the United States.

We use a variety of marketing programs to build market awareness of our
company, our brand name and our products, as well as to attract potential
customers. These programs include advertising, product and strategy updates
with industry analysts, public relations activities, direct mail programs,
seminars, trade shows, Web seminars and Web site marketing. We are currently
developing co-marketing arrangements with independent software vendors and
system integrators to expand market awareness and generate sales leads. We
expect to conduct telemarketing and telesales in the future. Our marketing
organization also supports sales to prospective customers by producing
marketing materials such as brochures, data sheets, white papers, presentations
and demonstrations.

Research and Development

Our research and development organization is responsible for developing new
software products, product architectures, core technologies, product testing,
quality assurance and ensuring the compatibility of our products with hardware
platforms, and software platforms. In addition, this organization supports pre-
sale and customer support activities. Our research and development organization
incorporates the input of our professional services, technical support, and
sales and marketing organizations to extend and enhance product features and
functionality. Our future success will depend in part on our ability to enhance
the Blaze Advisor suite of products, develop new products and capitalize on our
technology leadership to support a global customer base.

As of December 31, 1999, our research and development organization in North
America consisted of 31 employees, including software engineers, quality
assurance engineers, and technical writers. Our total expenses for research and
development on continuing operations were $3.5 million for the nine months
ended December 31, 1999 and $3.8 million for fiscal 1999.

Competition

The market for our products is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants.

We compete primarily with:

. in-house development efforts by potential customers or partners;

. Web content developers engaged to develop custom software or to
integrate other application software into custom solutions; and

. vendors of application software directed at interactive commerce,
interactive financial services and enterprise business-logic
automation, such as Art Technology Group Inc., Computer Associates
International, Inc., ILOG, Inc., Net Perceptions, Inc., Trilogy
Software, Inc. and Versata Inc.

Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing, or other resources, or greater name
recognition than we do. Our competitors may be able to respond more quickly to
new or emerging opportunities, technologies and changes in customer
requirements. Current and potential competitors may have more extensive
customer bases that could be leveraged, thereby gaining market share to our
detriment. Such competitors may be able to undertake more extensive promotional
activities, adopt more aggressive pricing policies, and offer more attractive
terms to purchasers. Moreover, certain of our indirect and potential
competitors, such as BroadVision, IBM, Oracle and SAP may bundle their products
in a manner that may discourage users from purchasing products offered by us.
In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with

44
<PAGE>

third parties to enhance their products. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition could seriously harm our
ability to sell additional software, maintenance renewals, and services on
terms favorable to us. Competitive pressures could reduce our market share or
require us to reduce the price of our products and services, any of which could
harm our business.

We compete on the basis of certain factors, including:

. quality, depth and breadth of functionality offered;

. ease of application development;

. time required for application development;

. adherence to industry standards;

. reliability, scalability, maintainability, personalization and other
features;

. quality of services and customer support; and

. price.

We believe that we presently compete favorably with respect to each of
these factors. However, the market for our products is still rapidly evolving
and we may not be able to compete successfully against current and potential
competitors.

Intellectual Property and Other Proprietary Rights

Our future success depends in part on legal protection of our technology.
To protect our technology, we rely on a combination of the following methods,
among others:

. technologies that limit installation and use of the software to
authorized companies and individuals;

. license agreements;

. employee and third-party nondisclosure agreements and confidentiality
procedures;

. copyright laws;

. trade secret laws;

. patent laws; and

. trademark laws.

Our end-user licenses are designed to prohibit unauthorized use, copying
and disclosure of our software and technology. However, these provisions may be
unenforceable under the laws of some jurisdictions and foreign countries. In
addition, some of our licensed users may allow unauthorized users to install
our software, and if we do not detect such use we could lose potential license
fees. Unauthorized third parties may be able to copy some portions of our
products or reverse engineer or obtain and use information and technology that
we regard as proprietary. Third parties could also independently develop
competing technology or design around our technology. If we are unable to
successfully detect infringement and enforce our rights in our technology, we
may lose competitive position in the market. We cannot assure you that our
means of protecting our proprietary rights in the United States or abroad will
be adequate or that competing companies will not independently develop similar
technology.

From time to time, we may encounter disputes over rights and obligations
concerning intellectual property. We believe that our products do not infringe
the intellectual property rights of third parties. However, we cannot assure
you that we will prevail in all intellectual property disputes. We have not
conducted a search for existing patents and other intellectual property
registrations, and we cannot assure you that our products do not infringe upon
issued patents. In addition, because patent applications in the United States
are not publicly disclosed until the patent is issued, applications may have
been filed which would relate to our products.

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<PAGE>

We indemnify some of our customers against claims that our products
infringe upon the intellectual property rights of others. We could incur
substantial costs in defending ourselves and our customers against infringement
claims. In the event of a claim of infringement, we or our customers may be
required to obtain one or more licenses from third parties. We cannot assure
you that such licenses could be obtained from third parties at a reasonable
cost, or at all. Defense of any lawsuit or failure to obtain any such required
license would have a material adverse effect on our business.

We have received one patent and several trademark registrations and applied
for additional trademarks. Blaze Software, Blaze Advisor, Blaze Advisor
Solutions Suite, Blaze Advisor Builder, Blaze Advisor Rule Engine, Blaze
Advisor Rule Server, Blaze Advisor Innovator, Blaze Expert, Blaze Presenter,
Beyond Personalization, Open Interface and the Blaze logo are our trademarks.
Our pending trademark applications may not be allowed. Our patents and
trademarks may not provide us a competitive advantage. Competitors may
successfully challenge the validity and scope of our patents and trademarks.

Other service marks, trademarks and trade names referred to in this
prospectus are the property of their respective owners.

Employees

As of December 31, 1999, we employed 128 people. 26 employees work outside
of North America. Of the full-time employees in North America, 21 are in
general and administrative functions, 28 in sales and marketing, 22 in
professional services, and 31 in research and development. From time to time we
also employ independent contractors to support our professional services,
product development, sales, marketing and business development organizations.

None of our employees are represented by a labor union and we have never
experienced an employee-related work stoppage. Management considers its
employee relations to be good.

Facilities

Our headquarters are located in San Jose, California in a leased building
of 27,000 square feet. We also lease office space in Denver, Colorado; New
York, New York; Charlotte, North Carolina; Dallas, Texas; Bracknell, England;
Paris, France; Frankfurt, Germany; Tokyo, Japan; and Toronto, Canada.

Legal Proceedings

From time to time, we may become involved in litigation relating to claims
arising from our ordinary course of business. We believe that there are no
claims or actions pending or threatened against us, the ultimate disposition of
which would have a material adverse effect on us.

Potential Claims

46
<PAGE>

MANAGEMENT

Executive Officers and Directors

The following table sets forth certain information with respect to the
executive officers and directors of Blaze Software as of February 21, 2000.

<TABLE>
<CAPTION>
Name Age Position
---------------------------------------- --- ----------------------------------------
<C> <C> <S>
Thomas F. Kelly......................... 47 President, Chief Executive Officer and
Chairman of the Board of Directors
Gary Shroyer............................ 47 Senior Vice President, Finance and
Administration and Chief Financial
Officer
Eric Kintzer............................ 45 Vice President and Chief Technology
Officer
Joseph Masarich......................... 40 Vice President, Sales
William Seawick......................... 45 Vice President, Marketing
Mark Fishwick........................... 42 Vice President, Professional Services
Jeffrey E. Fisher....................... 42 Vice President, Engineering
Charles M. Boesenberg(1)................ 51 Director
Mark J. DeNino(2)....................... 46 Director
Ken Goldman(1).......................... 50 Director
William J. Harding(2)................... 52 Director
L. George Klaus(1)...................... 59 Director
Patrick Perez........................... 41 Director
</TABLE>
- --------
(1)Member of the Audit Committee

(2)Member of the Compensation Committee

Thomas F. Kelly has been President, Chief Executive Officer and a director
of Blaze Software since July 1998. From March 1996 to March 1998, Mr. Kelly
held executive positions at Cirrus Logic, Inc., a semiconductor company, most
recently as Chief Operating Officer. From September 1993 to December 1995, Mr.
Kelly was Executive Vice President and Chief Financial Officer of Frame
Technology, a computer company. From January 1992 to July 1993, Mr. Kelly was
Senior Vice President and Chief Financial Officer of Cadence Design Systems,
Inc., a software company. Mr. Kelly received a B.S. in Economics from Santa
Clara University.

Gary Shroyer has been Senior Vice President, Finance and Administration and
Chief Financial Officer of Blaze Software since July 1998. From April 1996 to
June 1998, Mr. Shroyer was Vice President of Finance and Operations and Chief
Financial Officer at Accugraph Corp., a telecommunications software company.
From February 1993 to March 1996, Mr. Shroyer held various positions at Maxtor
Corporation, a computer hardware company, including director of finance, vice
president of finance and corporate controller. Mr. Shroyer received an M.B.A.
from the University of Colorado and a B.S. in Accounting from Ball State
University.

Eric Kintzer has been Vice President and Chief Technology Officer of Blaze
Software since March 1998. Mr. Kintzer was Vice President, Engineering from
April 1999 to February 2000. From January 1995 to February 1998, Mr. Kintzer
was Vice President of Technical Architecture of American Management Systems, a
software company. From April 1984 to September 1994, Mr. Kintzer was Vice
President and General Manager of Software Development of Syntelligence Systems,
a software company. Mr. Kintzer received an M.B.A. in Statistics and Management
Science and a B.S.E. in Industrial and Operations Engineering from the
University of Michigan.

Joseph Masarich has been Vice President of Sales of Blaze Software since
July 1999. From December 1997 to February 1999, Mr. Masarich was Senior Vice
President of Marketing and Sales at Summit Design, an enterprise EDA software
company. From December 1996 to May 1997, Mr. Masarich was Vice President of
Worldwide Sales at Technology Modeling Associates, a software company. From
August 1986 to December 1996, Mr. Masarich held various senior sales management
positions at Cadence Design Systems, Inc. Mr. Masarich received an M.S. in
Management from Stanford University and a B.S. in Mechanical Engineering from
the Pratt Institute.

47
<PAGE>

William Seawick has been Vice President, Marketing of Blaze Software since
May 1999. From May 1997 to April 1998, Mr. Seawick was Vice President of
Marketing at Kanisa, Inc., a consulting company. From May 1996 to May 1997, Mr.
Seawick was Senior Director of Marketing at Oracle Corporation, a database
software company. From June 1990 to May 1996, Mr. Seawick was Group Manager of
Business and Market Development at Sun Microsystems, Inc., a computer company.
Mr. Seawick received an M.B.A. from Cornell University Graduate School of
Business and a B.A. in European Economic History from the University of
Rochester.

Mark Fishwick has been Vice President, Professional Services of Blaze
Software since October 1999. From October 1997 to October 1999, Mr. Fishwick
was Senior Vice President of Customer Services at Chordiant Software, a
software company. From August 1993 to October 1997, Mr. Fishwick was Executive
Director of International Support at Informix Software, a database software
company. From January 1990 to July 1993, Mr. Fishwick was Customer Services
Director of Europe, Middle East and Africa at Informix Software, a database
software company. Mr. Fishwick received a M.A. in Geography from Pembroke
College, University of Oxford, England.

Jeffrey E. Fisher has been Vice President, Engineering of Blaze Software
since February 2000. From March 1996 to February 2000, Mr. Fisher was Vice
President of Product Development at Saratoga Systems, Inc., a software company.
From March 1993 to March 1996, he was Vice President of Engineering at Resumix,
Inc., a software company. Mr. Fisher received an M.S. in computer science from
West Coast University and a B.A. in mathematics from the University of
California at San Diego.

Charles M. Boesenberg has served as director of Blaze Software since
January 2000. Mr. Boesenberg joined Integrated Systems, Inc. in December 1998
as President, Chief Executive Officer and a director. From December 1997 to
December 1998, Mr. Boesenberg was President and Chief Executive Officer of
Magellan Corporation, a satellite-access products company. From January 1995
until it merged with Magellan Corporation in December 1997, Mr. Boesenberg was
President and Chief Executive Officer of Ashtech, Inc., a business-to-business
GPS company. Previously, he was President, Chief Executive Officer and Chairman
of Central Point Software, Inc., President of MIPS Computer Systems, Inc., and
Senior Vice President of Apple Computer, Inc. Mr. Boesenberg serves as a
director of Symantec Corporation. Mr. Boesenberg received an M.S. in Business
Administration from Boston University and a B.S. in Mechanical Engineering from
Rose Hulman Institute of Technology.

Mark J. DeNino has served as a director of Blaze Software since 1997. Mr.
DeNino has served as managing director of TL Ventures since 1994. From 1990 to
1994, Mr. DeNino was President of Crossroads Capital, Inc., an investment bank.
From 1986 to 1990, Mr. DeNino held various positions including head of
investment banking at Fidelity Bank and was President of its venture capital
Small Business Investment Company Group. Mr. DeNino also serves as a director
of Vuent, Inc., Coastal Security Systems, Inc., Cruise411.com, Inc.,
IPNetwork.com, Inc., Pac-West Telecom, Inc., Participate.com, Inc., and
Traffic.com, Inc. Mr. DeNino received his B.A. in Finance and Accounting from
Boston College and his M.B.A. from the Harvard Graduate School of Business
Administration.

Ken Goldman has served as a director of Blaze Software since December 1999.
Mr. Goldman has been Senior Vice President and Chief Financial Officer of
Excite@Home since he joined @Home Corporation, the predecessor to Excite@Home,
in July 1996. From July 1992 to July 1996, he was Senior Vice President and
Chief Financial Officer of Sybase, Inc., a database software and services
company. From 1989 to July 1992, Mr. Goldman was Vice President of Finance and
Administration and Chief Financial Officer at Cypress Semiconductor
Corporation, a semiconductor manufacturer. From 1983 to 1989, he was Vice
President and Chief Financial Officer of VLSI Technology Inc. Mr. Goldman
serves on the board of directors of One World Systems, several private
companies, and the American Electronic Association. Mr. Goldman is also a
member of the FASB Advisory Council. Mr. Goldman holds an M.B.A. from the
Harvard University Graduate School of Business and a B.S. in Electrical
Engineering from Cornell University.

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<PAGE>

William Harding has served as a director of Blaze Software since June 1996
and served as Chairman of the Board from June 1996 to July 1998. Dr. Harding
has been a Managing Member of Morgan Stanley Dean Witter Venture Partners, a
venture capital firm, since 1994. From 1985 to 1994, Dr. Harding was a General
Partner of J.H. Whitney & Co., an investment management company. Dr. Harding
currently serves on the board of directors of Commerce One, Inc., InterNAP
Network Services Corporation, Persistence Software, Inc and several private
companies. Dr. Harding received a Ph.D. in Engineering from Arizona State
University, and an M.S. in Systems Engineering from the University of Arizona
and a B.S. in Engineering Mathematics.

L. George Klaus has served as a director of Blaze Software since December
1999. Mr. Klaus has served as a director of Epicor Software and has served as
its President and Chief Executive Officer since February 1996 and Chairman of
the Board since September 1996. From July 1993 to November 1995, Mr. Klaus
served as President, Chief Executive Officer and Chairman of the Board of Frame
Technology, Inc., a software company. From September 1992 to July 1993, Mr.
Klaus was Chairman of the Board and President at Integral Systems, Inc., a
software company. From December 1991 to May 1992, Mr. Klaus was Chief Operating
Officer at Cadence Design Systems, Inc., a software company. In addition, Mr.
Klaus was President and Chief Operating Officer at Valid Logic Systems, Inc., a
supplier of electronic design automation software tools from October 1989 to
December 1991. Mr. Klaus currently serves on the board of FileNet Corporation.
Mr. Klaus received a B.S. in Mathematics from California State University at
Northridge.

Patrick Perez has served as a director of Blaze Software since 1985.

Committees of the Board of Directors

Our audit committee consists of Mr. Goldman, Mr. Boesenberg and Mr. Klaus.
The audit committee makes recommendations to the board of directors regarding
the selection of our independent auditors, reviews the results and scope of the
audit and other services provided by our independent auditors and reviews and
evaluates our control functions.

Our compensation committee consists of Mr. DeNino and Mr. Harding. The
compensation committee makes recommendations regarding our various incentive
compensation and benefit plans and determines salaries for our executive
officers and incentive compensation for our employees and consultants.

Board Composition

Our bylaws currently authorize eight directors. Our certificate of
incorporation and bylaws that become effective upon the completion of this
offering provide that our Board will be divided into three classes, Class I,
Class II and Class III, with each class serving staggered three-year terms. The
Class I directors, Messrs. DeNino and Mr. Harding, will stand for re-election
at the 2001 annual meeting of stockholders. The Class II directors, Messrs.
Boesenberg and Goldman, will stand for reelection at the 2002 annual meeting of
stockholders. The Class III directors, Messrs. Kelly and Klaus, will stand for
reelection at the 2003 annual meeting of stockholders. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This staggered classification of
the board of directors may have the effect of delaying or preventing changes in
control or management. There are no family relationships among any of our
directors, officers or key employees.

Voting Agreement

On February 25, 1998, Blaze Software and certain holders of preferred
stock, which was subsequently reconstituted into common stock, entered into an
amended and restated voting agreement. These holders include funds affiliated
with Morgan Stanley Dean Witter Venture Partners, funds affiliated with Alta
Partners, funds affiliated with Sofinnova Ventures, funds affiliated with TL
Ventures, funds managed by or affiliated with

49
<PAGE>

Burr, Egan, Deleage & Company, Patrick Perez and Alan Rappaport. Under the
terms of the voting agreement: Morgan Stanley Venture Capital and its
affiliated entities are entitled to have two nominees elected to our board;
Alta Partners and its affiliated entities are entitled to have one nominee
elected to our board; the holders of the then-outstanding shares of Series A
preferred stock and Series C preferred stock are entitled to have one nominee
elected to our board; the holders of the then-outstanding shares of Series B
preferred stock are entitled to have one nominee elected to our board; the
Chief Executive Officer will be nominated and elected to our board; and TL
Ventures is entitled to have two nominees elected to our board. In addition,
unless sooner terminated, until the earlier of June 28, 2000 or an initial
public offering of our common stock at a per share price of at least $17.25 (as
adjusted for stock dividends, stock splits and recapitalizations) and for a
total offering of more than $7,500,000, and to the extent that either Patrick
Perez or Alain Rappaport are not already on the board, they are entitled to
receive all notices and other materials for and have the right to attend, in a
non-voting capacity, all meetings of the board of directors. Moreover, we are
obligated to pay the expenses, up to $1,000.00 each, for Mr. Perez and Mr.
Rappaport to attend any board meetings in this capacity. Unless sooner
terminated, the voting agreement terminates upon the consummation of our
initial public offering, on a firm commitment basis, at a per share price of
not less than $17.25 (as adjusted for stock dividends, stock splits and
recapitalizations) and with aggregate proceeds in excess of $7,500,000.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee was, at any time since
our formation, an officer or employee of Blaze Software. None of our executive
officers serves as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving as a member of
our board of directors or compensation committee, except for Mr. Kelly, who
serves as a director of Epicor Software, of which Mr. Klaus is President, Chief
Executive Officer and a director. See "Certain Transactions" for a description
of transactions between Blaze Software and entities affiliated with members of
our compensation committee.

Director Compensation

We do not currently pay any cash compensation to our directors for their
services as members of the board of directors, although we reimburse them for
certain expenses in connection with attending our board and committee meetings.
We do not provide compensation for committee participation or special
assignments of the board of directors. From time to time, we have granted our
outside directors options to purchase shares of our common stock under the 1996
Stock Plan.

Advisory Board

We have established an advisory board to provide us with guidance on
strategy and insights Individual members are consulted as needed and meetings
of the full Advisory Board will be held periodically. The members of the
Advisory Board are as follows:

Michael A. Braun, the Chairman of our Advisory Board, was President and
Chief Executive Officer of Blaze Software from June 1996 to July 1998, and
Chairman of the Board from July 1998 until December 1999. Since August 1998,
Mr. Braun has been General Manager of the Consumer Division and Global Small
Business Unit at IBM Corporation, a computer company. From 1993 to 1996, he was
President and CEO of Kaleida Labs, a multimedia software joint venture between
IBM and Apple Computer. Prior to this, Mr. Braun held numerous executive
positions at IBM. Mr. Braun received an M.B.A. from the Simon School at the
University of Rochester and a B.A. in psychology from the University of
Rochester.

Debra Chrapaty is the Chief Media Officer for E*TRADE Group, Inc. Prior to
joining E*TRADE in July 1997, Ms. Chrapaty served as chief information officer
and chief technology officer of the National Basketball Association from 1994
to 1997. Ms. Chrapaty has also served as director, internal systems consulting,
at Bertelsmann C.I.S. from 1992 to 1994, and with EMI Records Group from 1990
to 1992. Her prior experience

50
<PAGE>

with financial organizations includes the Federal Reserve Bank of New York and
Chase Econometric/IDC. Ms. Chrapaty received an M.B.A. in information systems
at New York University and a B.A. in economics at Temple University.

Ed Kozel is a managing partner of Open Range Ventures. From 1989 to
recently, he worked at Cisco Systems, Inc. where he founded the Business
Development group responsible for Cisco's technology investment and corporate
acquisition activities, and was chief technology officer between 1994 and 1998.
He is a director of Cisco Systems and TIBCO Software, and several private
companies. Mr. Kozel has a B.S. in Electrical Engineering from the University
of California, and has participated in Internet technology and applications
since 1980.

Phillip E. White was Chief Executive Officer and a director of Informix
Corporation from January 1989 to July 1997. He held the additional office of
President from August 1990 and of Chairman from December 1992 to July 1997. Mr.
White also serves as a director of Adaptec, Inc., Legato Systems Inc., TIBCO
Software, Inc. and several private companies.

Executive Compensation

The following table sets forth the compensation paid by us during the year
ended March 31, 1999, to our Chief Executive Officer and to our four other most
highly compensated executive officers who earned more than $100,000 during our
last fiscal year. This prospectus refers to these executives as the Named
Executive Officers.

Summary Compensation Table

<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
---------------- ------------
Securities
Underlying
Name and Principal Position(1) Salary Bonus Options
- ------------------------------ -------- ------- ------------
<S> <C> <C> <C>
Thomas F. Kelly(2) ............................. $177,083 $45,000 400,000
Chief Executive Officer and President
Gary Shroyer(3)................................. 119,872 -- 100,000
Senior Vice President, Finance and
Administration and Chief Financial Officer
Eric Kintzer(4)................................. 150,000 18,000
Vice President and Chief Technology Officer
Michael Braun(5)................................ 92,783 17,250 --
Chief Executive Officer and President
Charles Page(6)................................. 127,281 64,068 500
Vice President, North American Field Operations
Christina Jette(7).............................. 160,000 17,850 --
Vice President, Engineering
</TABLE>
- --------
(1) William Seawick, Vice President, Marketing, joined us in May 1999. Joseph
Masarich, Vice President, Sales, joined us in July 1999. Mark Fishwick,
Vice President, Customer Services, joined us in October 1999.

(2) Mr. Kelly joined us in July 1998.

(3) Mr. Shroyer joined us in July 1998.

(4) Mr. Kintzer was also Vice President, Engineering until February 2000.

(5) Mr. Braun resigned as an officer in August 1998 and is currently a member
of our advisory board.

(6) Mr. Page resigned in February 1999.

(7) Ms. Jette resigned in July 1999.

51
<PAGE>

Option Grants in Last Fiscal Year

The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the year ended March 31, 1999.
All such options were awarded under our 1996 stock plan. In accordance with the
rules of the SEC, the following table sets forth the potential realizable value
over the term of the options based on assumed rates of stock appreciation of 5%
and 10% compounded annually. The term of the options are the period from the
grant date to the expiration date, or 10 years. These amounts do not represent
our estimate of future stock price performance. Actual realizable values, if
any, of stock options will depend on the future performance of the common
stock.

<TABLE>
<CAPTION>
Individual Grants Potential Realizable
-------------------------------------------- Value at Assumed
Number of Percent of Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted for Options Term
Options in Fiscal Exercise Expiration -------------------------
Granted(1) 1999(2) Price(3) Date 5% 10%
Name ---------- ------------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas F. Kelly(4)...... 400,000 64.1% $0.80 2008 $ 201,600 $ 508,800
Gary Shroyer(5)......... 100,000 16.0 0.80 2008 50,400 127,200
Eric Kintzer(6)......... -- -- -- -- -- --
Michael Braun(7)........ -- -- -- -- -- --
Charles Page(8)......... 500 0.1 0.80 2008 200 500
Christina Jette(9)...... -- -- -- -- -- --
</TABLE>
- --------
(1) Options were granted under our 1996 stock plan and generally vest over four
years from the date of grant.

(2) Based on an aggregate of 624,250 options granted by Blaze Software in the
year ended March 31, 1999 to our employees and directors, including the
Named Executive Officers.

(3) Options were granted at an exercise price equal to the fair market value
per share of common stock on the grant date, as determined by our board of
directors.

(4) Mr. Kelly also received options to purchase 1,068,376 shares of common
stock in fiscal 2000.

(5) Mr. Shroyer also received options to purchase 235,422 shares of common
stock in fiscal 2000.

(6) Mr. Kintzer also received options to purchase 359,639 shares of common
stock in fiscal 2000.

(7) Mr. Braun resigned as an officer in August 1998 and is currently a member
of our advisory board. Mr. Braun received options to purchase 37,500 shares
of common stock in fiscal 2000.

(8) Mr. Page resigned in February 1999. These options terminated pursuant to
their terms.

(9) Ms. Jette resigned in July 1999.

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<PAGE>

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth information for each of the Named Executive
Officers concerning option exercises for the fiscal year ended March 31, 1999,
and vested and unvested options held at March 31, 1999. The Named Executive
Officers did not exercise any options during the fiscal year ended March 31,
1999.

The "Value of Unexercised In-the-Money Options at March 31, 1999" is based
on a value of $13.00 per share of our common stock, which is the initial public
offering price, less the per share exercise price, multiplied by the number of
shares issued upon exercise of the option. All options were granted under our
1996 stock plan and are immediately exercisable.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at March 31, 1999 at March 31, 1999
-------------------------- ---------------------
Vested Unvested Vested Unvested
Name ------------ ------------- --------- -----------
<S> <C> <C> <C> <C>
Thomas F. Kelly................ $ -- $ 400,000 $ -- $ 5,200,000
Gary Shroyer................... 12,500 87,500 162,500 1,137,500
Eric Kintzer................... 18,750 56,250 243,750 731,250
Michael Braun.................. -- -- -- --
Charles Page................... 19,771 -- 257,023 --
Christina Jette................ 39,188 21,979 509,444 285,727
</TABLE>

Stock Plans

2000 Stock Plan. Our 2000 stock plan was adopted by the board of directors
in December 1999. As of December 31, 1999, no options were outstanding. A total
of 250,000 shares of common stock is currently reserved for issuance pursuant
to the 2000 stock plan, plus any shares which have been reserved but unissued
under the 1996 stock plan, any shares returned to the 1996 stock plan, and an
annual increases equal to the lesser of: (1) 50,000 shares, (2) 4% of the
outstanding shares or (3) a lesser amount determined by the board of directors.

The 2000 stock plan provides for the grant of incentive stock options (as
defined in Section 422 of the Internal Revenue Code) to employees and
nonstatutory stock options, stock purchase rights and stock bonus rights to
employees, directors and consultants. The 2000 stock plan may be administered
by different committees with respect to different groups of service providers.
Options granted as performance-based compensation within the meaning of Section
162(m) of the Internal Revenue Code are administered by a committee of two or
more outside directors. Option administration committees may make final and
binding determinations regarding the terms and conditions of the awards
granted, including the exercise price, the number of shares subject to the
award and the exercisability thereof, forms of agreement for use under the plan
and interpretation of plan terms.

The exercise price of incentive stock options granted under the 2000 stock
plan must be at least equal to the fair market value of our common stock on the
date of grant. However, for any employee holding more than 10% of the voting
power of all classes of our stock, the exercise price will be no less than 110%
of the fair market value. The exercise price of nonstatutory stock options is
set by the administrator of the 2000 stock plan. However, in the case of
nonstatutory stock options which is intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue
Code, the exercise price will be no less than 100% of the fair market value.
The maximum term of options granted under the 2000 stock plan is ten years.

An optionee whose relationship with Blaze Software or any related
corporation ceases for any reason, other than death or total and permanent
disability, may exercise options in the three-month period following such
cessation, or such other period of time as determined by the administrator,
unless such options terminate

53
<PAGE>

or expire sooner, or for nonstatutory stock options, later, by their terms. The
three-month period is extended to twelve months for terminations due to death
or total and permanent disability. In the event of a merger of Blaze Software
with or into another corporation, or the sale of substantially all of the
assets of Blaze Software, outstanding options would either be assumed by the
successor company or an equivalent option would be substituted by the successor
company. If any such options are not assumed or substituted, such options would
fully vest in and have the right to exercise the option as to all of the common
stock subject to the option.

None of our employees may be granted, in any fiscal year, options to
purchase more than 500,000 shares, and up to an additional 500,000 shares in
connection with an employee's initial employment with Blaze Software. The 2000
stock plan will terminate in December 2009, unless terminated earlier by the
board of directors.

Stock purchase rights may be granted to employees and consultants under the
2000 stock plan. Such grants are made pursuant to a restricted stock purchase
agreement, and the price to be paid for the shares granted thereunder is
determined by the administrator. Once the stock purchase right has been
exercised, the purchaser shall have the rights equivalent to those of a
stockholder. In addition, unless the adminstrator determines otherwise, Blaze
Software is generally granted a repurchase option exercisable in the event of
voluntary or involuntary termination of the purchaser's employment with Blaze
Software for any reason, including death or disability. The repurchase price
shall be the original purchase price paid by the purchaser. The repurchase
option shall lapse at a rate determined by the administrator.

1996 Stock Plan. Our 1996 stock plan was adopted by the Board of Directors
in July 1996. The 1996 stock plan, as amended and restated, provides for the
grant of incentive stock options to our employees and for the grant of
nonstatutory stock options to our employees, including officers and directors,
non-employee directors and consultants.

We have reserved for issuance under the 1996 stock plan a total of
5,753,429 shares of common stock. The total number of the shares issuable under
this plan will be subject to adjustment from time to time in order to prevent
the dilution or enlargement of benefits thereunder. As of December 31, 1999,
options to purchase 4,238,529 shares of common stock were outstanding under
this plan; 547,003 shares had been issued upon exercise of options, net of
repurchases, and 1,147,690 shares were available for future grants. Unless
terminated sooner, the 1996 stock plan will terminate automatically in 2006.

The 1996 stock plan is administered by the board of directors who determine
the terms of the options granted, including exercise price, the number of
shares subject to each option, and the vesting schedule. In addition, the board
of directors has complete and full power and authority to amend, suspend or
terminate the plan, provided that no such action may affect any optionees'
rights and obligations under their outstanding options. Unless delegated to a
committee of two or more board members, the board of directors has the
exclusive authority to interpret and apply the provisions of the 1996 stock
plan.

During the lifetime of the optionee, the option shall be exercisable only
by the optionee and shall not be assignable or transferable other than by will
or the laws of descent and distribution following the optionee's death. Unless
the terms of optionee's option agreement provide for an earlier termination,
options granted under the 1996 stock plan must generally be exercised within
three months of the end of optionee's status as our employee or consultant, or
within twelve months after his or her termination by death or disability, but
in no event later than the expiration of the option's ten year term.

The exercise price of the incentive options granted under the 1996 stock
plan must be at least equal to the fair market value of our common stock on the
date of grant and exercise price of the non-statutory options granted under the
1996 stock plan shall not be less than 85% of the fair market value of our
common stock on the date of grant. With respect to any participants of the plan
possessing more than 10% of the voting power of all classes of our outstanding
capital stock, the exercise price of the option must equal at least 110% of the
fair market value on the date of grant and the term of such option must not
exceed five years.

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<PAGE>

The board of directors has the discretion to determine the vesting schedule
of the options, although the board of directors may not impose a vesting
schedule upon any option grant or any shares of the common stock which is more
restrictive than 20% per year vesting, with the initial vesting to occur not
later that one year after the date of grant. However, this minimum vesting
requirement shall not be applicable with respect to any option granted to an
officer, director or consultant.

2000 Employee Stock Purchase Plan. Our 2000 employee stock purchase plan
provides employees of Blaze Software with an opportunity to purchase our common
stock through accumulated payroll deductions. A total of 750,000 shares of
common stock have been reserved for issuance under the purchase plan, plus
annual increases equal to the lesser of: (1) 500,000 shares, (2) 2% of the
outstanding shares, or (3) a lesser amount determined by the board of
directors. No shares have been issued under the purchase plan. The purchase
plan will be administered by our board of directors or by a committee of
members of the board appointed by the board. The purchase plan permits eligible
employees to purchase common stock through payroll deductions of up to 15% of
an employee's compensation, up to a maximum of $25,000 for all purchases ending
within the same calendar year. Employees are eligible to participate if they
are customarily employed by Blaze Software for at least 20 hours per week and
more than five months in any calendar year. Unless the board of directors or
its committee determines otherwise, each offering period will run for twenty-
four months and consist of four six-month purchase periods. The first offering
period will commence on the date of this prospectus and will terminate on
October 30, 2002. The first purchase period will commence on the date of this
prospectus and will terminate on October 31, 2000. New twenty-four month
offering periods and six month purchase periods will begin on May 1 and
November 1 of each year. In the event of an acquisition of Blaze Software,
offering periods then in progress will be shortened and all rights
automatically exercised. The price at which common stock will be purchased
under the purchase plan is equal to 85% of the fair market value of the common
stock on the first day of the purchase period or the last day of the offering
period, whichever is lower. Employees may end their participation in the
offering period at any time, and participation automatically ends on
termination of employment. The board may amend, modify or terminate the
purchase plan at any time as long as such amendment, modification or
termination does not impair vesting rights of plan participants. The purchase
plan will terminate in February 2010, unless terminated earlier in accordance
with its provisions.

401(k) Plan

In July 1992, we adopted a 401(k) plan covering our full-time employees
located in the United States. The 401(k) plan is intended to qualify under
Section 401(k) of the Internal Revenue Code, so that contributions to the
401(k) plan by employees or by us, and the investment earnings thereon, are not
taxable to employees until withdrawn from the 401(k) plan, and so that we can
deduct our contributions, if any, when made. Pursuant to the 401(k) plan,
employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit ($10,000 in 1999) and to have the amount of
such reduction contributed to the 401(k) plan. The 401(k) plan permits, but
does not require, that we provide additional matching contributions to the
40l(k) plan on behalf of all participants in the 401(k) plan. To date, we have
not made any contributions to the 401(k) plan.

Employment Agreements and Change of Control Arrangements

Thomas F. Kelly. In July 1998, Mr. Kelly entered into an employment
agreement to serve as our President and Chief Executive Officer. Under the
agreement, we agreed to pay Mr. Kelly an annual salary of $250,000 and a
guaranteed bonus of $15,000 for each of the fiscal quarters ending September
1998, December 1998 and March 1999. We also gave Mr. Kelly the opportunity to
earn an incentive bonus consisting of options to purchase up to 15,000 fully
vested shares of common stock in fiscal 1999 based upon personal and corporate
goals set by the board of directors. In conjunction with this employment
agreement, we granted Mr. Kelly an option to purchase 300,000 shares of common
stock at an exercise price of $0.80 per share. Of those shares, 25% vested on
the first anniversary of his commencement date, and the remaining shares vest
monthly thereafter through the fourth anniversary of the grant. In the event we
experience a change of control, 50% of the unvested portion of the option vests
on the closing date of the transaction, subject to a minimum aggregate vesting
of two-thirds of the shares. Under this employment agreement, we also granted
Mr. Kelly an additional

55
<PAGE>

option to purchase up to 100,000 shares of common stock at an exercise price of
$0.80 per share. All of the shares subject to the additional option will vest
on the seventh anniversary of the grant. Of the 100,000 shares subject to the
additional option, 50,000 shares will vest immediately if, for a period of 30
consecutive trading days, the closing selling price per share of our common
stock on any national securities exchange or Nasdaq National Market reaches a
level of $3.00 or more, or upon a change of control and 50,000 more shares will
vest immediately if, for a period of 30 consecutive trading days, the closing
selling price per share of our common stock on any national securities exchange
or Nasdaq National Market reaches a level of $6.00 or more, or upon a change of
control. The employment agreement also provides that Mr. Kelly is employed "at-
will" and the employment relationship may be terminated for any reason at any
time. If we terminate Mr. Kelly's employment without cause, we must pay Mr.
Kelly a severance payment in nine monthly installments of one month's salary
each payable at the rate of the annual base salary in effect at the time of
such termination plus the amount of the bonus prorated for such nine month
period at the target rate in effect on the effective date of such termination.

Gary Shroyer. In June 1998, Mr. Shroyer entered into an employment
agreement to serve as our Senior Vice President and Chief Financial Officer and
commenced employment in July 1998. Under the agreement, we agreed to pay an
annual salary of $170,000 and we also gave Mr. Shroyer an opportunity to earn
an annual incentive bonus consisting of options to purchase up to 10,000 fully-
vested shares of common stock at an exercise price of $0.80 per share, of which
we actually issued 1,875 shares. In conjunction with this employment agreement,
we granted Mr. Shroyer an option to purchase 75,000 shares of common stock at
an exercise price of $0.80 per share. Of these shares, 25% vested on July 20,
1999 and one thirty-sixth of the remaining shares vest monthly thereafter. In
the event we experience a change of control, 50% of the unvested portion of the
option vests on the closing date of the transaction, subject to a minimum
aggregate vesting of two-thirds of the option. Under the employment agreement,
we also granted Mr. Shroyer the additional option to purchase up to 25,000
shares of common stock at an exercise price of $0.80 per share. All of the
shares subject to the additional option will vest on the seventh anniversary of
the grant. The shares subject to the additional option will immediately vest
if, for a period of 30 consecutive trading days, the closing selling price per
share of our common stock on any national securities exchange or Nasdaq
National Market reaches a level of $3.00 or more for a period of 30 consecutive
trading days, or upon a change of control. The employment agreement provides
that Mr. Shroyer is employed "at-will" and the employment relationship may be
terminate for any reason at any time. If we terminate Mr. Shroyer's employment
without cause, we must pay Mr. Shroyer a severance payment in six monthly
installments of one month's salary, each payable at the rate of the annual base
salary in effect at the time of such termination plus the amount of the bonus
prorated for such six month period at the target rate in effect on the
effective date of such termination.

Eric Kintzer. In February 1998, Mr. Kintzer entered into an employment
agreement to serve as our Vice President and Chief Technology Officer and
commenced his employment in March 1998. Under the agreement, we agreed to pay
an annual salary of $150,000 and Mr. Kintzer is entitled to receive an annual
incentive bonus of 25% of his salary. In conjunction with this employment
agreement, we granted Mr. Kintzer an option to purchase 75,000 shares of common
stock at an exercise price of $0.80 per share. Of those options, 25% vested on
the first anniversary of his commencement date, and the remaining shares vest
monthly thereafter through the fourth anniversary of the grant. In the event we
experience a change of control, 50% of the unvested portion of the option vests
on the closing date of the transaction, subject to a minimum aggregate vesting
of two-thirds of the option. The employment agreement provides that Mr. Kintzer
is employed "at-will" and the employment relationship may be terminated for any
reason at any time.

Limitations of Liability and Indemnification Matters

Our certificate of incorporation that will be in effect at the time of this
offering limits the liability of directors to the maximum extent permitted by
Delaware law. Delaware law provides that directors of a corporation will not be
personally liable for monetary damages for breach of their fiduciary duties as
directors, except liability for any of the following:

. any breach of their duty of loyalty to the corporation or its
stockholders;

56
<PAGE>

. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or

. any transaction from which the director derived an improper personal
benefit.

This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.

Our bylaws provide that we shall indemnify our directors and executive
officers and may indemnify our other officers and employees and other agents to
the fullest extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in such capacity, regardless of whether the bylaws would
permit indemnification.

We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, indemnify our directors and executive officers
for certain expenses, including attorneys' fees, judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by us arising out of such person's services as our
director or executive officer, any of our subsidiaries or any other company or
enterprise to which the person provides services at our request. We believe
that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.

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<PAGE>

CERTAIN TRANSACTIONS

Private Placements of Securities

In June 1996, we sold 1,071,430 shares of our Series D preferred stock at a
price of $5.60 per share and granted options to purchase Series E preferred
stock at either $5.60 per share or $6.90 per share, depending upon whether we
achieved certain performance goals, to several investors, including the
following entities beneficially owning more than 5% of our outstanding stock or
entities affiliated with directors at that time:

<TABLE>
<CAPTION>
Numbers of Shares of
Number of Shares of Series E Preferred Stock
Investor Series D Preferred Subject to Option
----------------------------- ------------------- ------------------------
<S> <C> <C>
Morgan Stanley Dean Witter
Venture Partners(1)........ 892,858 270,563
Alta Partners(2)............. 178,572 86,581
</TABLE>
- --------

(1) Includes 591,816 shares held by Morgan Stanley Venture Capital Fund II,
L.P., 147,444 shares held by Morgan Stanley Venture Capital Fund II, C.V.
and 153,598 shares held by Morgan Stanley Venture Investors, L.P.

(2) Includes 173,421 shares held by Alta California Partners, L.P., and 5,151
shares held by Alta Embarcadero Partners, LLC.

In June 1996, two of our co-founders, Alain Rappaport and Patrick Perez,
sold an aggregate of 53,572 shares of Series B preferred stock at a price of
$5.60 per share to Alta California Partners, L.P. and Alta Embarcadero
Partners, LLC.

In September 1996, we made a loan to Michael Braun in the amount of $70,000
at an interest rate of 6.55% per annum to purchase 125,000 shares of our common
stock at $7.14 per share. Mr. Braun served as one of our directors and our
chief executive officer at time of the loan. Mr. Braun currently serves on our
advisory board. The loan has been repaid in full in connection with the
redemption of shares of common stock in 1998.

In April 1997, we borrowed money with an interest rate of 10% per annum
from the following persons who were officers of Blaze Software at the time and
Michael Braun who has served as a director and chief executive officer of Blaze
Software. Mr. Braun currently serves on our advisory board:

<TABLE>
<CAPTION>
Investor Amount of Loan
-------------------------------------------------------------- --------------
<S> <C>
Michael A. Braun.............................................. $84,333
Jack A. Bradley............................................... 24,750
Christina Jette............................................... 23,333
</TABLE>

These amounts were repaid in full in January 1998.

In September 1997, we granted those investors stock options under the 1996
plan to purchase up to the following amounts of common stock:

<TABLE>
<CAPTION>
Investor Number of Options
----------------------------------------------------------- -----------------
<S> <C>
Michael A. Braun........................................... 4,222
Jack A. Bradley............................................ 1,238
Christina Jette............................................ 1,167
</TABLE>

58
<PAGE>

In July 1997, we borrowed money with an interest rate of 25% per annum from
the following entities beneficially owning more than 5% of our outstanding
stock or entities affiliated with directors at that time:

<TABLE>
<CAPTION>
Investor Amount of Loan
-------------------------------------------------------------- --------------
<S> <C>
Morgan Stanley Dean Witter Venture Partners(1)................ $696,454
Alta Partners(2).............................................. 222,716
Burr, Egan, Deleage & Company(3).............................. 330,830
C.V. Sofinnova Ventures....................................... 250,000
</TABLE>
- --------
(1) Includes $461,749 loaned by Morgan Stanley Venture Capital Fund II, L.P.,
$114,915 loaned by Morgan Stanley Venture Capital Fund II, C.V. and
$119,790 loaned by Morgan Stanley Venture Investors, L.P.

(2) Includes $217,741 loaned by Alta California Partners, L.P. and $4,975
loaned by Alta Embarcadero Partners, LLC.

(3) Includes $279,783 loaned by Alta IV Limited Partnership and $51,047 loaned
by C.V. Sofinnova Partners Five.

These amounts were repaid in full in December 1997 in connection with our sale
of Series F preferred stock.

In November 1997, we borrowed money with an interest rate of 25% per annum
from the following entities beneficially owning more than 5% of our outstanding
stock or entities affiliated with directors at that time:

<TABLE>
<CAPTION>
Investor Amount of Loan
-------------------------------------------------------------- --------------
<S> <C>
Morgan Stanley Dean Witter Venture Partners(1)................ $352,086
Burr, Egan, Deleage & Company(2).............................. 167,994
Alta Partners(3).............................................. 154,918
C.V. Sofinnova Ventures....................................... 75,000
</TABLE>
- --------
(1) Includes $233,375 loaned by Morgan Stanley Venture Capital Fund II, L.P.,
$58,142 loaned by Morgan Stanley Venture Capital Fund II, C.V. and $60,569
loaned by Morgan Stanley Venture Investors, L.P.

(2) Includes $142,073 loaned by Alta IV Limited Partnership and $25,921 loaned
by C.V. Sofinnova Partners Five.

(3) Includes $151,458 loaned by Alta California Partners, L.P., and $3,460
loaned by Alta Embarcadero Partners, LLC.

These amounts were repaid in full in December 1997 in connection with our sale
of Series F preferred stock.

In December 1997, we sold 1,165,803 shares of our Series F preferred stock
at a price of $7.72 per share to several investors, including the following
entities beneficially owning more than 5% of our outstanding stock or entities
affiliated with directors at that time:

<TABLE>
<CAPTION>
Number of Shares of
Investor Series F Preferred
--------------------------------------------------------- -------------------
<S> <C>
TL Ventures(1)........................................... 971,504
Morgan Stanley Dean Witter Venture Partners(2)........... 90,214
Burr, Egan, Deleage & Company(3)......................... 42,853
Alta Partners(4)......................................... 28,849
C.V. Sofinnova Ventures.................................. 32,383
</TABLE>
- --------

(1) Includes 782,224 shares held by TL Ventures III L.P., 163,738 shares held
by TL Ventures III Offshore L.P. and 25,542 shares held by TL Ventures III
Interfund L.P.

(2) Includes 59,812 shares held by Morgan Stanley Venture Capital Fund II,
L.P., 14,885 shares held by Morgan Stanley Venture Capital Fund II, C.V.
and 15,517 shares held by Morgan Stanley Venture Investors, L.P.

59
<PAGE>

(3) Includes 36,241 shares held by Alta IV Limited Partnership and 6,612 shares
held by C.V. Sofinnova Partners Five.

(4) Includes 28,205 shares held by Alta California Partners, L.P. and 644
shares held by Alta Embarcadero Partners, LLC.

In November 1998, we borrowed money with an interest rate of 25% per annum
from the following entities beneficially owning more than 5% of our outstanding
stock or entities affiliated with directors at that time:

<TABLE>
<CAPTION>
Investor Amount of Loan
-------------------------------------------------------------- --------------
<S> <C>
Morgan Stanley Dean Witter Venture Partners(1)................ $319,149
Alta Partners(2).............................................. 102,122
TL Ventures(3)................................................ 315,394
Burr, Egan, Deleage & Company(4).............................. 70,833
C.V. Sofinnova Ventures....................................... 42,500
</TABLE>
- --------
(1) Includes $211,543 loaned by Morgan Stanley Venture Capital Fund II, L.P.,
$54,903 loaned by Morgan Stanley Venture Capital Fund II, C.V. and $52,703
loaned by Morgan Stanley Venture Investors, L.P.

(2) Includes $99,841 loaned by Alta California Partners, L.P. and $2,281 loaned
by Alta Embarcadero Partners, LLC.

(3) Includes $253,946 loaned by TL Ventures III L.P., $53,157 loaned by TL
Ventures III Offshore L.P. and $8,291.89 loaned by TL Ventures III
Interfund L.P.

(4) Includes $59,903 loaned by Alta IV Limited Partnership and $10,930 loaned
by C.V. Sofinnova Partners Five.

These amounts were repaid in full in June 1999 in connection with our sale of
Series AA preferred stock.

In March 1999, we borrowed money with an interest rate of 25% per annum
from the following entities beneficially owning more than 5% of our outstanding
stock or entities affiliated with directors at that time:

<TABLE>
<CAPTION>
Amount
Investor of Loans
-------------------------------------------------------------------- --------
<S> <C>
Morgan Stanley Dean Witter Venture Partners(1)...................... $244,056
TL Ventures(2)...................................................... 241,184
Alta Partners(3).................................................... 78,093
Burr, Egan, Deleage & Company(4).................................... 54,166
C.V. Sofinnova Ventures............................................. 32,500
</TABLE>
- --------
(1) Includes $161,768 loaned by Morgan Stanley Venture Capital Fund II, L.P.
$40,303 loaned by Morgan Stanley Venture Capital Fund II, C.V. and $41,985
loaned by Morgan Stanley Venture Investors L.P.

(2) Includes $194,194 loaned by TL Ventures III L.P., $40,649 loaned by TL
Ventures III Offshore L.P. and $6,341.

(3) Includes $76,349 loaned by Alta California Partners L.P. and $1,744 loaned
by Alta Embarcadero Partners L.L.C.

(4) Includes $45,808 loaned by Alta IV Limited Partnership and $8,358 loaned by
C.V. Sofinnova Partners Five.

These amounts were repaid in full in June 1999 in connection with our sale of
Series AA preferred stock.

In June and September 1999, we sold 8,416,215 shares of our Series AA
preferred stock at a price of $0.54 per share to several investors. In
connection with this financing, all shares of Series A, B, D and F preferred
stock converted to common stock at a ratio of 1:1. Series C preferred stock
also converted to common

60
<PAGE>

stock at a ratio of 1:1.04. Purchasers beneficially owning more than 5% of our
outstanding stock or entities affiliated with directors at that time included:

<TABLE>
<CAPTION>
Number of Shares of
Investor Series AA Preferred
--------------------------------------------------------- -------------------
<S> <C>
Alta Partners(1)......................................... 1,129,782
C.V. Sofinnova Ventures.................................. 292,311
Morgan Stanley Dean Witter Venture Partners(2)........... 2,197,533
TL Ventures(3)........................................... 3,813,057
Burr, Egan, Deleage & Company(4)......................... 702,030
</TABLE>
- --------

(1) Includes 1,104,088 shares held by Alta California Partners, L.P., 25,694
shares held by Alta Embarcadero Partners, LLC.

(2) Includes 1,456,599 shares held by Morgan Stanley Venture Capital Fund II,
L.P., 362,893 shares held by Morgan Stanley Venture Capital Fund II, C.V.
and 378,041 shares held by Morgan Stanley Venture Investors, L.P.

(3) Includes 3,070,156 shares held by TL Ventures III L.P., 642,654 shares held
by TL Ventures III Offshore L.P. and 100,247 shares held by TL Ventures III
Interfund L.P.

(4) Includes 593,594 shares held by Alta IV Limited Partnership and 108,436
shares held by C.V. Sofinnova Partners Five.

In December 1999, we sold 1,952,735 shares of our Series BB preferred stock
at a price of $7.14 per share to several investors, including the following
entities beneficially owning more than 5% of our outstanding stock, directors
and entities affiliated with directors:

<TABLE>
<CAPTION>
Number of Shares of
Investor Series BB Preferred Stock
-------------------------------------------------- -------------------------
<S> <C>
Sofinnova Ventures(1)............................. 560,224
L. George Klaus(2)................................ 28,011
Charles M. Boesenberg............................. 14,006
Ken Goldman....................................... 7,003
</TABLE>
- --------

(1) Includes 280,112 shares held by Sofinnova Capital III FCPR, 272,409 shares
held by Sofinnova Venture Partners IV, L.P., and 7,703 shares held by
Sofinnova Venture Affiliates IV, L.P.

(2) Includes 21,008 shares held by the L. George Klaus Trust and 7.003 shares
held by Julie Tafel Klaus, Mr. Klaus' spouse.

Holders of our preferred stock are entitled to registration rights with
respect to the shares of common stock that they will hold following this
offering. See "Description of Capital Stock--Registration Rights of Certain
Holders."

Other Transactions

From time to time, we have granted stock options to our executive officers
and directors.

We have entered into indemnification agreements with each of our directors
and executive officers that are described in this prospectus under the caption
"Management--Limitations of Liability and Indemnification Matters."

61
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock as of December 31, 1999, by the following
individuals or groups:

. each person, or group of affiliated persons, whom we know beneficially
owns more than 5% of our outstanding stock;

. each of our Named Executive Officers;

. each of our directors; and

. all of our directors and executive officers as a group.

Unless otherwise indicated, the address for each stockholder on this table
is c/o Blaze Software, Inc., 150 Almaden Boulevard, San Jose, CA 95113. Except
as otherwise noted, and subject to applicable community property laws, to the
best of our knowledge, the persons named in this table have sole voting and
investing power with respect to all of the shares of common stock held by them.

This table lists applicable percentage ownership based on 21,319,244 shares
of common stock outstanding as of December 31, 1999, as adjusted to reflect the
conversion of all outstanding shares of preferred stock into 10,368,950 shares
of common stock upon the closing of this offering, and also lists applicable
percentage ownership based on 21,319,244 shares of common stock outstanding
after completion of this offering. Options and warrants to purchase shares of
our common stock that are exercisable within 60 days of December 31, 1999 are
deemed to be beneficially owned by the persons holding these options or
warrants for the purpose of computing percentage ownership of that person, but
are not treated as outstanding for the purpose of computing any other person's
ownership percentage.

<TABLE>
<CAPTION>
Shares Beneficially Owned
---------------------------
Percent Percent
Before After
Number Offering Offering
Beneficial Owner --------- -------- --------
<S> <C> <C> <C>
Mark J. DeNino(1)................................. 4,784,561 27.6% 22.4%
Funds Affiliated with TL Ventures
435 Devon Park Drive
Building 700
Wayne, PA 19087
William Harding(2)................................ 3,451,168 19.9 16.2
Funds Affiliated with Morgan Stanley Dean Witter
Venture Partners
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Funds Affiliated with Alta Partners(3)............ 1,530,927 8.8 7.2
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Funds Affiliated with Sofinnova Ventures(4)....... 1,420,202 8.2 6.7
140 Geary Blvd., 10th Floor
San Francisco, CA 94108
Funds Managed by or Affiliated with Burr, Egan,
Deleage & Company(5)............................. 1,168,860 6.7 5.5
One Post Office Suite
Suite 3800
Boston, MA 02109
Thomas F. Kelly(6)................................ 541,649 3.1 2.5
Gary Shroyer(7)................................... 104,217 * *
Eric Kintzer(8)................................... 178,317 1.0 *
Michael Braun(9).................................. 12,500 * *
Christina Jette................................... 12,500 * *
Charles Page...................................... 19,771 * *
Charles M. Boesenberg(10)......................... 14,006 * *
L. George Klaus(11)............................... 26,012 * *
Ken Goldman(12)................................... 7,003 * *
Patrick Perez(13)................................. 727,479 4.2 3.4
All directors and executive officers as a group
(12 persons)(14)................................. 9,879,183 55.6% 45.4%
</TABLE>

62
<PAGE>

- --------
* Less than 1% of the outstanding shares of common stock.

(1) Includes 125,789 shares held by TL Ventures III Interfund L.P., 3,852,380
shares held by TL Ventures III L.P. and 806,392 shares held by TL
Ventures III Offshore L.P. Mr. DeNino, one of our directors, is the
general partner of TL Ventures. Mr. DeNino disclaims beneficial ownership
of the shares held by these funds except to the extent of his pecuniary
interest therein.

(2) Includes 569,902 shares held by Morgan Stanley Venture Fund II, C.V.,
2,287,565 shares held by Morgan Stanley Venture Capital Fund II, LP, and
593,701 shares held by Morgan Stanley Venture Investors LP. Dr. Harding,
one of our directors, is a general partner of these funds. Dr. Harding
disclaims beneficial ownership of the shares held by these funds except
to the extent of his pecuniary interest therein.

(3) Includes 1,493,849 shares held by Alta California Partners L.P., 37,077
shares held by Alta Embarcadero Partners LLC.

(4) Includes 854,978 shares by C.V. Sofinnova Ventures, 280,112 shares held
by Sofinnova Capital III FCPR, 272,409 shares held by Sofinnova Venture
Partners IV, L.P. and 7,703 shares held by Sofinnova Venture Affiliates
IV. Also includes 5,000 shares held by Mr. Alain Azan, one of our former
directors and the general partner of Sofinnova Ventures. Mr. Azan
disclaims beneficial ownership of the shares held by these funds except
to the extent of his pecuniary interest therein.

(5) Includes 988,396 shares held by Alta IV L.P. ("Alta") 180,465 shares held
by C.V. Sofinnova Partners Five ("Sofinnova" and together with Alta, the
"BEDFunds"). Burr, Egan, Deleage & Co. directly or indirectly provides
investment advisory services to Alta IV Limited Partnership and C.V.
Sofinnova Partners Five. The respective general partners of these funds
exercise sole voting and investment power in respect to the shares owned
by such funds. The principals of Burr, Egan, Deleage & Co. are general
partners of Alta IV Management Partners, L.P. (which is a general partner
of Alta IV Limited Partnership). As general partners of the fund, they
may be deemed to share voting and investment powers for the shares held
by the fund. Burr, Egan, Deleage & Co. serves as an advisor to C.V.
Sofinnova Partners Five. The principals of Burr, Egan, Deleage & Co.
disclaim beneficial ownership of the shares held by these funds except to
the extent of their pecuniary interest therein.

(6) As of December 31, 1999, Mr. Kelly had exercised options to purchase
300,000 shares of common stock, which shares are subject to a repurchase
option held by us. Mr. Kelly holds exercisable options to purchase
1,168,376 shares of common stock. Of the shares represented by these
options and the shares issued to Mr. Kelly upon the exercise of his
options, 541,649 shares are fully vested as of February 29, 2000.

(7) As of December 31, 1999, Mr. Shroyer had exercised options to purchase
125,001 shares of common stock, which shares are subject to a repurchase
option held by us. Mr. Shroyer holds exercisable options to purchase
210,422 shares of common stock. Of the shares represented by these
options and the shares issued to Mr. Shroyer upon the exercise of his
options, 104,217 shares are fully vested as of February 29, 2000.

(8) As of December 31, 1999, Mr. Kintzer had exercised options to purchase
39,500 shares of common stock, which shares are subject to a repurchase
option held by us. Mr. Kintzer holds exercisable options to purchase
395,139 shares of common stock. Of the shares represented by these
options and the shares issued to Mr. Kintzer upon the exercise of his
options, 178,317 shares are fully vested as of February 29, 2000.

(9) Mr. Braun holds exercisable options to purchase 37,500 shares of common
stock, of which 12,500 shares are fully vested as of February 29, 2000.

(10) Mr. Boesenberg also holds exercisable options to purchase 25,000 shares
of common stock, of which no shares are vested as of February 29, 2000.

(11) Includes 21,009 shares held by the L. George Klaus Trust and 7,003 shares
held by Julie Tafel Klaus, Mr. Klaus' spouse. Mr. Klaus also holds
exercisable options to purchase 25,000 shares of common stock, of which
no shares are vested as of February 29, 2000.

(12) Mr. Goldman also holds exercisable options to purchase 25,000 shares of
common stock, of which no shares are vested as of February 29, 2000.

(13) Includes 63,688 shares held by Guenolla Jonville, Mr. Perez's spouse.

(14) Includes 824,182 shares issuable upon exercise of fully vested options.

63
<PAGE>

DESCRIPTION OF CAPITAL STOCK

General

Our certificate of incorporation that becomes effective upon the closing of
this offering authorizes the issuance of up to 200,000,000 shares of common
stock, $0.0001 par value, and authorizes the issuance of 10,000,000 shares of
undesignated preferred stock, $0.0001 par value. From time to time, our board
of directors may establish the rights and preferences of the preferred stock.
As of December 31, 1999, 6,950,294 shares of common stock were issued and
outstanding and held by 151 stockholders, and 10,368,950 shares of preferred
stock were issued and outstanding and held by 49 stockholders. Upon the closing
of this offering, all outstanding shares of preferred stock will convert into
an aggregate of 10,368,950 shares of common stock. The following description of
our capital stock is, by necessity, not complete. We encourage you to refer to
our amended and restated certificate of incorporation and bylaws, which are
included as exhibits to the registration statement of which this prospectus
forms a part, and applicable provisions of Delaware law for a more complete
description.

Common Stock

Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any
subsequently outstanding shares of preferred stock, holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of Blaze Software, the holders of common stock are entitled to share
in our assets remaining after the payment of liabilities and the satisfaction
of any liquidation preferences granted to the holders of any outstanding shares
of preferred stock. Holders of common stock have no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable. The rights, preferences and privileges
of the holders of common stock are subject to, and may be adversely affected by
the rights of the holders of shares of any series of preferred stock which we
may designate in the future.

Preferred Stock

The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may
be greater than the rights of the common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of such preferred stock. However, the effects
might include, among other things:

. restricting dividends on the common stock;

. diluting the voting power of the common stock;

. impairing the liquidation rights of the common stock; or

. delaying or preventing a change in control of Blaze Software without
further action by the stockholders.

Upon the closing of this offering, no shares of preferred stock will be
outstanding, and Blaze Software has no present plans to issue any shares of
preferred stock.

Warrants and Other Obligations to Issue Capital Stock

As of December 31, 1999, we had outstanding warrants to purchase an
aggregate of 6,005 shares of common stock at an exercise price $5.60 per share.
These warrants are currently exercisable in full. Warrants to purchase 5,000
shares of common stock will expire on October 20, 2006 and warrants to purchase
1,005 shares of common stock will expire on August 14, 2007.

64
<PAGE>

Registration Rights of Certain Holders

After this offering, holders of 15,840,634 shares of common stock (the
"registrable securities") or their transferees are entitled to certain rights
with respect to the registration of such shares under the Securities Act. These
rights are provided under the terms of an agreement between Blaze Software and
the holders of the registrable securities. Beginning 180 days following the
date of this prospectus, holders of at least 40% of the registrable securities
may require on three occasions that we use our best efforts to register the
registrable securities for public resale. Blaze Software is obligated to
register these shares only if the outstanding registrable securities have an
anticipated aggregate public offering price of at least $5,000,000.
Furthermore, in the event Blaze Software elects to register any of its shares
of common stock for purposes of effecting any public offering, the holders of
registrable securities are entitled to include their shares of common stock in
the registration, but Blaze Software may reduce the number of shares proposed
to be registered in view of market conditions. These registration rights have
been waived with respect to this offering. Blaze Software will bear all
expenses in connection with any registration, other than underwriting discounts
and commissions. All registration rights will terminate ten years following the
consummation of this offering, or with respect to each holder of registrable
securities, at such time as the holder is entitled to sell all of its shares in
any 90-day period under Rule 144 of the Securities Act.

Certain Charter and Bylaw Provisions and Delaware Law

Certain provisions of Delaware law and Blaze Software's certificate of
incorporation and bylaws that become effective upon the closing of this
offering could make the following more difficult:

. the acquisition of Blaze Software by means of a tender offer;

. acquisition of Blaze Software by means of a proxy contest or
otherwise; or

. the removal of Blaze Software's incumbent officers and directors.

These provisions, summarized below, are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
Blaze Software to first negotiate with Blaze Software's board. Blaze Software
believes that the benefits of increased protection of its potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure Blaze Software outweigh the disadvantages of
discouraging such proposals because negotiation of such proposals could result
in an improvement of their terms.

Election And Removal Of Directors.

Our board of directors is divided into three classes. The directors in each
class will serve for a three-year term, with Blaze Software's stockholders
electing one class each year. See "Management--Board Composition." This system
of electing and removing directors may discourage a third party from making a
tender offer or otherwise attempting to obtain control of Blaze Software
because it generally makes it more difficult for stockholders to replace a
majority of the directors.

Stockholder Meetings.

Under our bylaws, only the board of directors, the chairman of the board
and the president may call special meetings of stockholders.

Requirements For Advance Notification Of Stockholder Nominations And
Proposals.

Our bylaws establish advance notice procedures for stockholder proposals
and the nomination of candidates for election as directors, other than
nominations made by or at the direction of the board of directors.

65
<PAGE>

Delaware Anti-takeover Law.

Blaze Software is subject to Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
the person became an interested stockholder, unless the "business combination"
or the transaction in which the person became an interested stockholder is
approved in a prescribed manner. Generally, a "business combination" includes a
merger, asset or stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. Generally, an "interested stockholder"
is a person who, together with affiliates and associates, owns or within three
years prior to the determination of interested stockholder status, did own, 15%
or more of a corporation's voting stock. The existence of this provision may
have an anti-takeover effect with respect to transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held
by stockholders.

Elimination Of Stockholder Action By Written Consent.

Our certificate of incorporation and bylaws that become effective upon the
closing of this offering eliminate the right of stockholders to act by written
consent without a meeting.

No Cumulative Voting.

Our certificate of incorporation and bylaws that become effective upon the
closing of this offering do not provide for cumulative voting in the election
of directors.

Undesignated Preferred Stock.

The authorization of undesignated preferred stock makes it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to effect a change in
control of Blaze Software. These and other provisions may have the effect of
deterring hostile takeovers or delaying changes in control or management of
Blaze Software.

Amendment Of Charter Provisions.

The amendment of any of the following provisions would require approval by
holders of at least 66 2/3% of the outstanding common stock:

. indemnification of our officers or directors;

. classification of directors;

. location of stockholder meetings;

. ability of stockholders to act by written consent;

. advance notice provisions for stockholder actions or nominations; and

. super-majority provision of our certificate of incorporation.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is Norwest Bank
Minnesota, N.A.

66
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for the common stock will
develop or be sustained after this offering. Future sales of substantial
amounts of common stock, including shares issued upon exercise of outstanding
options and warrants, in the public market following this offering could
adversely affect market prices prevailing from time to time and could impair
our ability to raise capital through sale of our equity securities. Sales of
substantial amounts of our common stock in the public market after the
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.

Upon completion of this offering, we will have 21,319,244 shares of common
stock outstanding based upon shares outstanding as of December 31, 1999,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants that do not expire prior to completion of
this offering. Of these shares, the 4,000,000 shares sold in this offering and
1,960,067 shares held by existing shareholders will be freely tradable without
restriction under the Securities Act, except for any shares held by our
"affiliates" as Rule 144 under the Securities Act as it defines that term. The
remaining 15,359,177 shares of common stock held by existing stockholders are
"Restricted Shares" as Rule 144 defines that term. 15,359,177 of such
Restricted Shares are subject to lock-up agreements providing that, with
certain limited exceptions, the stockholder will not offer, sell, contract to
sell or otherwise dispose of any common stock or any securities that are
convertible into common stock for a period of 180 days after the date of this
prospectus without the prior written consent of FleetBoston Robertson Stephens
or Blaze Software. As a result of these lock-up agreements, notwithstanding
possible earlier eligibility for sale under the provisions of Rules 144, 144(k)
and 701, none of these shares will be resellable until 181 days after the date
of this prospectus. Beginning 181 days after the date of this prospectus,
13,124,941 Restricted Shares will be eligible for sale in the public market
(subject in some cases to volume restrictions under Rule 144 or repurchase
rights in favor of Blaze Software). On September 28, 2000, 281,501 Restricted
Shares will be eligible for sale in the public market, all of which are subject
to volume limitations under Rule 144. On December 31, 2000, 1,952,735
Restricted Shares will be eligible for sale in the public market, all of which
are subject to volume limitations under Rule 144. In addition, as of December
31, 1999, there were outstanding options to purchase 4,238,529 shares of common
stock. Of these options, 2,402,481 are vested and 4,287,029 are exercisable,
subject to repurchase rights in favor of us with respect to unvested shares.
All such options are subject to lock-up agreements. In addition, as of December
31, 1999, there were outstanding warrants to purchase 6,005 shares of common
stock that are subject to lock-up agreements. FleetBoston Robertson Stephens
may, in their sole discretion and at any time without notice, release all or
any portion of the securities subject to lock-up agreements.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned Restricted
Shares for at least one year including the holding period of any prior owner
except an affiliate would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:

. 1% of the number of shares of common stock then outstanding, which
will equal approximately 213,192 shares immediately after this
offering; or

. the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale.

Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about Blaze Software. Under Rule 144(k), a person who is not deemed to have
been an affiliate of Blaze Software at any time during the three months
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years including the holding period of any prior owner except
an affiliate, is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule
144.

67
<PAGE>

Rule 701, as currently in effect, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any employee, officer or director of
or consultant to Blaze Software who purchased shares pursuant to a written
compensatory plan or contact may be entitled to rely on the resale provisions
of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144.
Rule 701 further provides that non-affiliates may sell such shares in reliance
on Rule 144 without having to comply with the holding period, public
information, volume limitation or notice provisions of Rule 144. All holders of
Rule 701 shares are required to wait until 90 days after the date of this
prospectus before selling such shares. However, most Rule 701 shares are
subject to lock-up agreements and will only become eligible for sale at the
earlier of the expiration of the 180-day lock-up agreements or no sooner than
90 days after the offering upon obtaining the prior written consent of
FleetBoston Robertson Stephens.

After this offering, we intend to file a registration statement on Form S-8
registering shares of common stock subject to outstanding options or reserved
for future issuance under our stock plans. As of December 31, 1999, options to
purchase a total of 4,287,029 shares were outstanding and 699,029 shares were
reserved for future issuance under our stock plans. An additional 2,000,000
shares were reserved for issuance under our stock plans after December 31,
1999. Common stock issued upon exercise of outstanding vested options or issued
pursuant to our employee stock purchase plan, other than common stock issued to
our affiliates is available for immediate resale in the open market.

Also beginning six months after the date of this offering, holders of
15,840,634 Restricted Shares will be entitled to certain rights with respect to
registration of such shares for sale in the public market. See "Description of
Capital Stock--Registration Rights." Registration of such shares under the
Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act, except for shares purchased by
affiliates, immediately upon the effectiveness of such registration.

68
<PAGE>

UNDERWRITING

The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Chase Securities Inc. and Dain Rauscher
Incorporated, have entered into an underwriting agreement with us to purchase
the number of shares of common stock listed opposite their names below. The
underwriters are obligated to purchase and pay for all the shares listed below
if any are purchased.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
FleetBoston Robertson Stephens Inc................................
Chase Securities Inc..............................................
Dain Rauscher Incorporated........................................
---------
Total........................................................... 4,000,000
=========
</TABLE>

The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the initial public offering price
set forth on the cover page of this prospectus and to certain dealers at that
price less a concession of not more than $ per share, of which $ may be
reallowed to other dealers. After this offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
such reduction shall change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus. The common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. The
underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.

Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 600,000 additional shares of common stock at the same price per
share as we will receive for the 4,000,000 shares that the underwriters have
agreed to purchase. If the underwriters exercise their over-allotment option to
purchase any of the additional 600,000 shares of common stock, the underwriters
have severally agreed, subject to certain conditions, to purchase approximately
the same percentage of these additional shares as the number of shares of
common stock to be purchased by each of them shown in the above table bears to
the total number of shares of common stock offered in this offering. If
purchased, these additional shares will be sold by the underwriters on the same
terms as those on which the shares offered hereby are being sold. We will be
obligated, pursuant to the over-allotment option, to sell shares to the
underwriters to the extent the over-allotment option is exercised. The
underwriters may exercise the over-allotment option only to cover over-
allotments made in connection with the sale of the shares of common stock
offered in this offering.

The following table summarizes the compensation to be paid to the
underwriters by us:

<TABLE>
<CAPTION>
Total
----------------------------------
Without With Over-
Per Share Over-allotment Allotment
--------- -------------- ---------
<S> <C> <C> <C>
Underwriting discounts and commissions
payable by us............................ $ $ $
</TABLE>

We estimate expenses payable by us in connection with this offering, other
than the underwriting discounts and commissions referred to above, will be
approximately $1,200,000.

Indemnification. The underwriting agreement contains covenants of indemnity
among the underwriters and us against specified civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.

Lock-Up Agreements. Each of our officers, directors and most of our
security holders have agreed, during the period of 180 days after the effective
date of this prospectus, subject to specified exceptions,

69
<PAGE>

not to sell, contract to sell or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock or any options or
warrants to purchase shares of common stock or any securities convertible into,
or exchangeable for, shares of common stock, owned as of the date of this
prospectus or thereafter acquired directly by those holders or with respect to
which they have the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens or us. FleetBoston Robertson Stephens may, in
its sole discretion and at any time without notice, release all or any portion
of the securities subject to lock-up agreements. All of the shares of common
stock subject to the lock-up agreements will be eligible for sale in the public
market upon the expiration of the lock-up agreements, subject to holding period
requirements, volume limitations and other conditions of Rule 144.

Future Sales. In addition, we have agreed that, during the period of 180
days after the effective date of this prospectus, we will not, without the
prior written consent of FleetBoston Robertson Stephens, subject to certain
exceptions, issue, sell, contract to sell or otherwise dispose of any shares of
common stock, any options or warrants to purchase any shares of common stock or
any securities convertible into, exercisable for or exchangeable for shares of
common stock, other than our sale of shares in this offering, the issuance of
common stock upon the exercise of outstanding options, our grant of options to
purchase shares of common stock under existing stock option or stock purchase
plans, and issuances of stock in connection with acquisitions.

No Prior Public Market. Prior to this offering, there was no public market
for our common stock. Consequently, the initial public offering price for the
common stock in this offering was determined through negotiations among us and
the representatives of the underwriters. The factors considered in these
negotiations included prevailing market conditions, our financial information,
the market valuation of other companies that we and the representatives believe
to be comparable to us, estimates of our business potential and the business
potential of the industry in which we compete, and assessment of our
management, our past and present operation and the prospects for our future
revenues.

Stabilization. The representatives have advised us that, based on
Regulation M under the Exchange Act, some persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, which may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of common stock on behalf of the
underwriters that is intended to fix or maintain the price of the common stock.
A "syndicate covering transaction" is the bid for or the purchase of common
stock on behalf of the underwriters to reduce a short position incurred by the
underwriters in connection with the offering. A "penalty bid" is an arrangement
that permits the representatives to reclaim the selling concession otherwise
accruing to an underwriter or syndicate member in connection with the offering
if the common stock originally sold by the underwriter or syndicate member is
purchased by the representatives in a syndicate covering transaction, and has
therefore not been effectively placed by this underwriter or syndicate member.
The representatives have advised us that these transactions may be effected on
the Nasdaq National Market and, if commenced, may be discontinued at any time.

Internet Distribution. E*TRADE Securities, Inc. will make the preliminary
prospectus available on its Web site when it becomes available. In this
offering, E*TRADE will not solicit conditional offers until two business days
before the expected effective date of the offering. If the effective date of
the offering is delayed beyond two business days, E*TRADE will allow,
consistent with the Wit Capital no-action letter, that any conditional offer
received from a customer remain valid for seven days from the date it was
submitted. If effectiveness and notice of allocation do not occur within seven
days after a conditional offer has been received, the customer will be required
to resubmit or reconfirm his or her conditional offer.

E*TRADE will provide customers a period after notice of effectiveness
during which they will continue to have the right to cancel their conditional
offers. This period will be until 8 p.m. E.S.T. (but in no event less than two
hours after notice of effectiveness) in the usual situation where the offering
becomes effective after the close of trading. If the offering becomes effective
after the close of trading. If the offering becomes effective prior to or
during the trading day, the period will be one hour after E*TRADE notifies its
customers of effectiveness.

70
<PAGE>

If an offering prices outside the expected price range indicated in the
preliminary prospectus or the price range for an offering changes, E*TRADE will
either (a) cancel its existing book of conditional offers and resolicit new
conditional offers or (b) require customers to reconfirm their existing
conditional offers as a condition to participating in the offering.

Directed Shares. At our request, the underwriters have reserved up to five
percent of the common stock to be issued by us in this offering for sale, at
the initial public offering price, to directors, officers, employees, business
associates and related persons of Blaze Software. The number of shares
available for sale to the general public will be reduced to the extent these
persons purchase the reserved shares. The underwriters will offer any reserved
shares not so purchased to the general public on the same basis as other shares
in this offering described above.

Participation in Previous Preferred Stock Financing. In December 1999, we
completed our Series BB preferred stock financing. Bayview 99 I, LP and Bayview
99 II, LP, affiliates of FleetBoston Robertson Stephens Inc., purchased an
aggregate of 28,011 shares. Hambrecht & Quist California, H&Q Employee Venture
Fund 2000, L.P., and Access Technology Partners Brokers Fund, L.P., affiliates
of Chase Securities Inc., purchased an aggregate of 28,012 shares. Dain
Rauscher Wessels Investors L.L.C., an affiliate of Dain Rauscher Incorporated,
purchased 28,012 shares. All of these shares will convert into common stock
upon completion of this offering.

71
<PAGE>

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
Blaze Software by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Latham & Watkins, Menlo Park,
California. Attorneys of Wilson Sonsini Goodrich & Rosati beneficially own an
aggregate of 26,963 shares of common stock.

EXPERTS

The financial statements of Blaze Software, Inc. at March 31, 1998 and
1999, and for each of the three years in the period ended March 31, 1999
appearing in this prospectus have so been included in reliance on the report of
PricewaterhouseCoopers, LLP, independent accountants, given upon the authority
of said firm as experts in accounting and auditing.

CHANGE IN INDEPENDENT ACCOUNTANTS

Effective April 1999, PricewaterhouseCoopers LLP was engaged as our
independent accountants and replaced KPMG LLP, who were dismissed as our
independent accountants. The decision to change accountants was approved by our
board of directors. The audit reports of KPMG LLP for the years ended March 31,
1998 and 1997 contained no adverse opinion or disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principle, except that the audit report issued by KPMG LLP for the years ended
March 31, 1998 and 1997 included an explanatory paragraph citing factors that
raised substantial doubt surrounding our ability to continue as a going
concern. In connection with its audits through March 31, 1998 and through the
date of their replacement, there were no disagreements with KPMG LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedures, which disagreements, if not resolved to their
satisfaction would have caused them to make reference in connection with their
opinion to the subject matter of the disagreement. KPMG LLP has not audited or
reported on any of the consolidated financial statements or information
included in this prospectus. For purposes of this filing, the consolidated
financial statements for the years ended March 31, 1998 and 1997 as well as the
consolidated financial statements for the year ended March 31, 1999 have been
audited by PricewaterhouseCoopers LLP. Prior to retaining
PricewaterhouseCoopers LLP, we had not consulted with PricewaterhouseCoopers
LLP on items that involved our accounting principles or the form of audit
opinion to be issued on our consolidated financial statements included in this
prospectus.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

Blaze Software has filed with the SEC a registration statement on Form S-1
under the Securities Act with respect to the common stock offered hereby. This
prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to Blaze Software and our common stock, reference is
made to the registration statement and the exhibits and schedules filed as a
part thereof. Statements contained in this prospectus as to the contents of any
contract or any other document referred to are not necessarily complete. In
each instance, reference is made to the copy of such contract or document filed
as an exhibit to the registration statement, and each such statement is
qualified in all respects by such reference. Copies of the registration
statement, including exhibits and schedules thereto, may be inspected without
charge at the SEC's principal office in Washington, D.C., or obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. The SEC maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
site is http://www.sec.gov.

72
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2

Consolidated Balance Sheets................................................ F-3

Consolidated Statements of Operations...................................... F-4

Consolidated Statements of Stockholders' Equity (Deficit) ................. F-5

Consolidated Statements of Cash Flows...................................... F-7

Notes to Consolidated Financial Statements................................. F-8
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Blaze Software, Inc.

The reincorporation and reverse stock split described in Note 12 of the
notes to the consolidated financial statements is not effective at February 18,
2000. When it is effective, we will be in a position to furnish the following
report:

"In our opinion, the accompanying consolidated balance sheets
and the related statements of operations, of stockholders'
deficit, and of cash flows present fairly, in all material
respects, the financial position of Blaze Software, Inc. and its
subsidiaries as of March 31, 1998 and 1999, and the results of
their operations and their cash flows for each of the three
years ended March 31, 1997, 1998 and 1999, in conformity with
accounting principles generally accepted in the United States.
These consolidated financial statements are the responsibility
of Blaze Software, Inc.'s management; our responsibility is to
express an opinion on these consolidated financial statements
based on our audits. We conducted our audits of these
consolidated financial statements in accordance with auditing
standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above."

San Jose, California

January 5, 2000, except for note 12

as to which the date is February 18, 2000

F-2
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Pro Forma
Stockholders'
March 31, Equity
------------------ December 31, December 31,
V1998 1999 1999 1999
-------- -------- ------------ -------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...... $ 6,591 $ 2,129 $ 16,326
Accounts receivable, net of
allowance for doubtful
accounts of $608, $443 and
$419 (unaudited),
respectively.................. 5,282 3,658 4,857
Prepaid expenses and other
current assets................ 430 964 1,100
Income taxes refundable........ 27 -- --
-------- -------- --------
Total current assets........ 12,330 6,751 22,283
Property and equipment, net..... 1,035 786 865
Restricted cash................. -- -- 434
Deposits and other assets....... 489 228 268
-------- -------- --------
Total assets.................... $ 13,854 $ 7,765 $ 23,850
======== ======== ========
LIABILITIES, MANDATORILY
REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank borrowings................ $ 2,678 $ 1,631 $ 2,658
Bridge loan from related
parties....................... -- 1,596 --
Current portion of capital
lease obligations............. 179 81 187
Note payable................... -- 129 --
Accounts payable............... 1,889 1,526 1,542
Accrued expenses............... 3,631 2,873 3,619
Deferred revenue............... 3,325 3,231 3,492
-------- -------- --------
Total current liabilities... 11,702 11,067 11,498
Long-term liabilities:
Capital lease obligations, net
of current portion............ 91 19 298
-------- -------- --------
Total liabilities........... 11,793 11,086 11,796
-------- -------- --------
Mandatorily Redeemable Preferred
Stock: par value $0.0001
Authorized: none (unaudited)
at December 31, 1999, actual
and pro forma; Issued and
outstanding: 3,179 at March
31, 1998 and 1999 and none
(unaudited) at December 31,
1999, actual and pro forma
(Aggregate liquidation
preference: $38,340 at March
31, 1999)..................... 19,624 20,882 --
-------- -------- --------
Commitments and contingencies
(Note 9)
Stockholders' Equity (Deficit):
Series B Convertible Preferred
Stock: par value $0.0001
Authorized: none (unaudited)
at December 31, 1999, actual
and pro forma; Issued and
outstanding: 2,273 at March
31, 1998 and 1999, and none
(unaudited) at December 31,
1999, actual and pro forma
(Aggregate liquidation
value: $13,350 at March 31,
1999)....................... -- -- -- $ --
Series AA Convertible
Preferred Stock: par value
$0.0001
Authorized: 8,416 (unaudited)
at December 31, 1999, actual
and none (unaudited)
pro forma; Issued and
outstanding: none at March
31, 1998 and 1999, 8,416
(unaudited) at December 31,
1999, actual and none
(unaudited) at December 31,
1999, pro forma............. -- -- 1 --
Series BB Convertible
Preferred Stock: par value
$0.0001
Authorized: 2,059 (unaudited)
at December 31, 1999, actual
and none (unaudited) pro
forma; issued and
outstanding: none at March
1998 and 1999, and 1,953
(unaudited) at December 31,
1999, actual and none
(unaudited) at December 31,
1999, pro forma............. -- -- -- --
Common Stock, $0.0001 par
value
Authorized: 54,000 shares
(unaudited) at December 31,
1999, actual and 200,000
shares (unaudited),
pro forma; Issued and
outstanding: 403 at March
31, 1998, 344 at March 31,
1999 and 6,950 (unaudited),
at December 31, 1999 and
17,319 (unaudited) at
December 31, 1999, pro
forma....................... -- -- 1 2
Additional paid-in capital..... (552) (1,842) 71,996 71,996
Notes receivable from
stockholders.................. (70) -- -- --
Cumulative translation
adjustment.................... 110 290 535 535
Unearned stock-based
compensation.................. -- -- (16,856) (16,856)
Accumulated deficit............ (17,051) (22,651) (43,623) (43,623)
-------- -------- -------- --------
Total stockholders' equity
(deficit) ................. (17,563) (24,203) 12,054 12,054
-------- -------- -------- --------
Total liabilities,
mandatorily redeemable
preferred stock and
stockholders' equity
(deficit) ................. $ 13,854 $ 7,765 $ 23,850 $ 23,850
======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Nine
Months Ended
Years Ended March 31, December 31,
------------------------- -----------------
1997 1998 1999 1998 1999
------- ------- ------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net revenues:
Product licenses.............. $ 3,296 $ 3,559 $ 3,722 $ 2,556 $ 5,371
Services and maintenance...... 327 803 5,332 3,486 6,378
------- ------- ------- ------- --------
Total revenues.............. 3,623 4,362 9,054 6,042 11,749
------- ------- ------- ------- --------
Cost of revenues:
Product licenses.............. 180 74 40 39 55
Services and maintenance...... 463 512 2,892 1,858 4,328
------- ------- ------- ------- --------
Total cost of revenues...... 643 586 2,932 1,897 4,383
------- ------- ------- ------- --------
Gross profit:................... 2,980 3,776 6,122 4,145 7,366
------- ------- ------- ------- --------
Operating expenses:
Research and development...... 1,370 1,938 3,843 2,908 3,488
Selling, general and
administrative............... 3,299 4,808 7,791 5,829 8,744
Stock-based compensation...... -- -- -- -- 9,307
------- ------- ------- ------- --------
Total operating expenses.... 4,669 6,746 11,634 8,737 21,539
------- ------- ------- ------- --------
Operating loss.................. (1,689) (2,970) (5,512) (4,592) (14,173)
Interest expense, net........... (434) (593) (249) (124) (217)
------- ------- ------- ------- --------
Net loss from continuing
operations before income
taxes.......................... (2,123) (3,563) (5,761) (4,716) (14,390)
Provision for income taxes...... (600) (68) (87) (40) (108)
------- ------- ------- ------- --------
Net loss from continuing
operations..................... (2,723) (3,631) (5,848) (4,756) (14,498)
Discontinued operations (Note
3):
Income (loss) from operations
of discontinued user
interface business (net of
income taxes)................ (5,479) (2,174) 248 319 1,767
------- ------- ------- ------- --------
Net (loss)...................... (8,202) (5,805) (5,600) (4,437) (12,731)
Accretion of mandatorily
redeemable preferred stock to
redemption value............... (554) (1,040) (1,258) (1,051) (442)
Beneficial conversion feature... -- -- -- -- (8,241)
------- ------- ------- ------- --------
Net loss attributable to common
stockholders................... (8,756) (6,845) (6,858) (5,488) (21,414)
Other comprehensive income
(loss), net of tax:
Translation adjustments....... 64 (20) 180 278 245
------- ------- ------- ------- --------
Comprehensive (loss)............ $(8,692) $(6,865) $(6,678) $(5,210) $(21,169)
======= ======= ======= ======= ========
Basic and diluted net earnings
(loss) per common share
attributable to common
stockholders:
(Loss) from continuing
operations................... $ (3.56) $(37.37) $(19.15) $(16.09) $ (4.64)
Earnings/(loss) from
discontinued operations...... (5.96) (17.39) 0.66 0.89 0.35
------- ------- ------- ------- --------
Basic and diluted net (loss) per
common share attributable to
common stockholders............ $ (9.52) $(54.76) $(18.49) $(15.20) $ (4.29)
======= ======= ======= ======= ========
Number of shares used in
calculation of basic and
diluted net (loss) per share... 920 125 371 361 4,997
======= ======= ======= ======= ========
Basic and diluted pro forma net
(loss) per share............... $ (0.96) $ (2.05)
======= ========
Shares used in computing pro
forma basic and diluted net
(loss) per share............... 5,843 6,226
======= ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Mandatorily Series B Series AA Series BB
Redeemable Convertible Convertible Convertible
Preferred Preferred Preferred Preferred
Stock Stock Stock Stock Common Stock
-------------- ------------- ------------- ------------- --------------
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
April 1, 1996.. 942 $ 3,275 -- $-- -- $ -- -- $ -- 2,254 $--
Issuance of
Common Stock
pursuant to
exercise of
options...... -- -- -- -- -- -- -- -- 148 --
Issuance of
Series D
Preferred
Stock at
$5.60, net
of Series E
Preferred
Stock
warrants and
issuance
costs of
$144......... 1,071 4,791 -- -- -- -- -- -- -- --
Issuance of
Series E
Preferred
Stock
warrants..... -- 1,064 -- -- -- -- -- -- -- --
Conversion of
Common Stock
to Series B
Preferred
Stock........ -- -- 2,268 -- -- -- -- -- (2,270) --
Issuance of
Series B
Preferred
Stock
pursuant to
exercise of
options...... -- -- 4 -- -- -- -- -- -- --
Issuance of
Common Stock
warrants..... -- -- -- -- -- -- -- -- -- --
Issuance of
Common Stock
related to
acquisition.. -- -- -- -- -- -- -- -- 100 --
Accretion of
Mandatorily
Redeemable
Preferred
Stock to
redemption
value........ -- 554 -- -- -- -- -- -- -- --
Net loss...... -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment... -- -- -- -- -- -- -- -- -- --
----- ------- ----- --- --- ---- --- ---- ------ ---
Balances at
March 31,
1997........... 2,013 $ 9,684 2,272 $-- -- $ -- -- $ -- 232 $--
Issuance of
Common Stock
pursuant to
exercise of
options...... -- -- -- -- -- -- -- -- 172 --
Repurchase of
Common
Stock........ -- -- -- -- -- -- -- -- (1) --
Issuance of
Series F
Preferred
Stock at
$7.72, net
of issuance
costs of
$100......... 972 7,400 -- -- -- -- -- -- -- --
Conversion of
bridge loan
to Series F
Preferred
Stock........ 194 1,500 -- -- -- -- -- -- -- --
Issuance of
Series B
Preferred
Stock
pursuant to
exercise of
options...... -- 1 -- -- -- -- -- -- --
Accretion of
Mandatorily
Redeemable
Preferred
Stock to
redemption
value........ -- 1,040 -- -- -- -- -- -- -- --
Net loss...... -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment... -- -- -- -- -- -- -- -- -- --
----- ------- ----- --- --- ---- --- ---- ------ ---
Balances at
March 31,
1998........... 3,179 $19,624 2,273 $-- -- $ -- -- $ -- 403 $--
- --------------------------------------------------
===== ======= ===== === === ==== === ==== ====== ===
<CAPTION>
Notes Total
Additional Receivable Cumulative Stockholders'
Paid-In from Translation Unearned Accumulated Equity
Capital Stockholders Adjustment Compensation Deficit (Deficit)
---------- ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at
April 1, 1996.. $ 395 $ -- $ 66 $ -- $ (3,044) $ (2,583)
Issuance of
Common Stock
pursuant to
exercise of
options...... 102 (70) -- -- -- 32
Issuance of
Series D
Preferred
Stock at
$5.60, net
of Series E
Preferred
Stock
warrants and
issuance
costs of
$144......... -- -- -- -- -- --
Issuance of
Series E
Preferred
Stock
warrants..... -- -- -- -- -- --
Conversion of
Common Stock
to Series B
Preferred
Stock........ -- -- -- -- -- --
Issuance of
Series B
Preferred
Stock
pursuant to
exercise of
options...... 7 -- -- -- -- 7
Issuance of
Common Stock
warrants..... 385 -- -- -- -- 385
Issuance of
Common Stock
related to
acquisition.. 56 -- -- -- -- 56
Accretion of
Mandatorily
Redeemable
Preferred
Stock to
redemption
value........ (554) -- -- -- -- (554)
Net loss...... -- -- -- -- (8,202) (8,202)
Cumulative
translation
adjustment... -- -- 64 -- -- 64
---------- ------------ ----------- ------------ ----------- -------------
Balances at
March 31,
1997........... $ 391 $(70) $130 $ -- $(11,246) $(10,795)
Issuance of
Common Stock
pursuant to
exercise of
options...... 97 -- -- -- -- 97
Repurchase of
Common
Stock........ (1) -- -- -- -- (1)
Issuance of
Series F
Preferred
Stock at
$7.72, net
of issuance
costs of
$100......... -- -- -- -- -- --
Conversion of
bridge loan
to Series F
Preferred
Stock........ -- -- -- -- -- --
Issuance of
Series B
Preferred
Stock
pursuant to
exercise of
options...... 1 -- -- -- -- 1
Accretion of
Mandatorily
Redeemable
Preferred
Stock to
redemption
value........ (1,040) -- -- -- (1,040)
Net loss...... -- -- -- -- (5,805) (5,805)
Cumulative
translation
adjustment... -- -- (20) -- -- (20)
---------- ------------ ----------- ------------ ----------- -------------
Balances at
March 31,
1998........... $ (552) $(70) $110 $ -- $(17,051) $(17,563)
- --------------------------------------------------
========== ============ =========== ============ =========== =============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)--(Continued)
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Mandatorily Series B Series AA Series BB
Redeemable Convertible Convertible Convertible
Preferred Preferred Preferred Preferred Notes
Stock Stock Stock Stock Common Stock Additional Receivable Cumulative
--------------- -------------- ------------- ------------- -------------- Paid-In from Translation
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Stockholder Adjustment
------ ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at March
31, 1998......... 3,179 $19,624 2,273 $ -- -- $ -- -- $-- 403 $ -- $ (552) $ (70) $ 110
Issuance of
Common Stock
pursuant to
exercise of
options......... -- -- -- -- -- -- -- -- 98 -- 56 -- --
Issuance of
Common Stock.... -- -- -- -- -- -- -- -- 1 -- -- -- --
Repurchase of
Common Stock.... -- -- -- -- -- -- -- -- (158) -- (88) 70 --
Accretion of
Mandatorily
Redeemable
Preferred Stock
to redemption
value........... -- 1,258 -- -- -- -- -- -- -- -- (1,258) -- --
Net loss........ -- -- -- -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment...... -- -- -- -- -- -- -- -- -- -- -- -- 180
------ ------- ------ ---- ----- ---- ----- --- ----- ---- ------- ----- -----
Balances at March
31, 1999......... 3,179 20,882 2,273 $ -- -- $ -- -- $-- 344 $ -- $(1,842) $ -- $ 290
Issuance of
Common Stock
pursuant to
exercise of
options......... -- -- -- -- -- -- -- -- 778 -- 171 -- --
Issuance of
Common Stock
pursuant to
conversion of
Series E
warrants........ -- -- -- -- -- -- -- -- 356 -- 36 -- --
Accretion of
Mandatorily
Redeemable
Preferred Stock
to redemption
value........... -- 442 -- -- -- -- -- -- -- -- (442) -- --
Beneficial
Conversion
Feature......... -- -- -- -- -- -- -- -- -- -- 8,241 -- --
Adjustment of
Mandatorily
Redeemable
Preferred Stock
Series C per
anti-dilution
provision....... 20 -- -- -- -- -- -- -- -- -- -- -- --
Conversion of
Mandatorily
Redeemable
Preferred Stock
to Common
Stock........... (3,199) (21,324) -- -- -- -- -- -- 3,199 1 21,323 -- --
Conversion of
Series B Stock
to Common
Stock........... -- -- (2,273) -- -- -- -- -- 2,273 -- -- -- --
Issuance of
Series AA
Preferred Stock
at $0.54 per
share, net of
issuance costs
of $141......... -- -- -- -- 8,416 1 -- -- -- -- 4,403 -- --
Issuance of
Series BB
Preferred Stock
at $7.14 ....... -- -- -- -- -- -- 1,953 -- -- -- 13,943 -- --
Unearned
compensation.... -- -- -- -- -- -- -- -- -- -- 26,163 -- --
Amortization of
unearned
compensation.... -- -- -- -- -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment...... -- -- -- -- -- -- -- -- -- -- -- -- 245
------ ------- ------ ---- ----- ---- ----- --- ----- ---- ------- ----- -----
Balances at
December 31,
1999,
(unaudited)...... -- $ -- -- $ -- 8,416 $ 1 1,953 $-- 6,950 $ 1 $71,996 $ -- $ 535
====== ======= ====== ==== ===== ==== ===== === ===== ==== ======= ===== =====
<CAPTION>
Total
Stockholders'
Unearned Accumulated Equity
Compensation Deficit (Deficit)
------------ ----------- -------------
<S> <C> <C> <C>
Balances at March
31, 1998......... $ -- $(17,051) $(17,563)
Issuance of
Common Stock
pursuant to
exercise of
options......... -- -- 56
Issuance of
Common Stock.... -- -- --
Repurchase of
Common Stock.... -- -- (18)
Accretion of
Mandatorily
Redeemable
Preferred Stock
to redemption
value........... -- -- (1,258)
Net loss........ -- (5,600) (5,600)
Cumulative
translation
adjustment...... -- -- 180
------------ ----------- -------------
Balances at March
31, 1999......... $ -- $(22,651) $(24,203)
Issuance of
Common Stock
pursuant to
exercise of
options......... -- -- 171
Issuance of
Common Stock
pursuant to
conversion of
Series E
warrants........ -- -- 36
Accretion of
Mandatorily
Redeemable
Preferred Stock
to redemption
value........... -- -- (442)
Beneficial
Conversion
Feature......... -- (8,241) --
Adjustment of
Mandatorily
Redeemable
Preferred Stock
Series C per
anti-dilution
provision....... -- -- --
Conversion of
Mandatorily
Redeemable
Preferred Stock
to Common
Stock........... -- -- 21,324
Conversion of
Series B Stock
to Common
Stock........... -- -- --
Issuance of
Series AA
Preferred Stock
at $0.54 per
share, net of
issuance costs
of $141......... -- -- 4,404
Issuance of
Series BB
Preferred Stock
at $7.14 ....... -- -- 13,943
Unearned
compensation.... (26,163) -- --
Amortization of
unearned
compensation.... 9,307 -- 9,307
Net loss........ -- (12,731) (12,731)
Cumulative
translation
adjustment...... -- -- 245
------------ ----------- -------------
Balances at
December 31,
1999,
(unaudited)...... $(16,856) $(43,623) $ 12,054
============ =========== =============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended March 31, December 31,
------------------------- -------------------
1997 1998 1999 1998 1999
------- ------- ------- -------- ---------
Cash flows from operating
activities: (unaudited)
<S> <C> <C> <C> <C> <C>
Net loss........................ $(8,202) $(5,805) $(5,600) $ (4,437) $ (12,731)
Add (deduct) loss (income) from
discontinued operations....... 5,479 2,174 (248) (319) (1,767)
------- ------- ------- -------- ---------
Loss from continuing
operations.................... (2,723) (3,631) (5,848) (4,756) (14,498)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Bridge loan interest
converted to equity......... -- -- 96 -- --
Depreciation and
amortization................ 1,075 868 899 548 417
Amortization of stock-based
compensation................ -- -- -- -- 9,307
Amortization of debt
discount.................... 77 -- -- -- --
Write-off of in process
research and development.... 259 -- -- -- --
Loss on write-off of
equipment................... -- -- 129 -- 71
Capital Lease for
construction-in-progress.... -- -- -- -- 40
Changes in assets and
liabilities:
Accounts receivable........ (467) (1,579) (557) 343 (1,114)
Income taxes refund
receivable............... (259) (4) 27 27 --
Prepaid expenses and
other.................... (2) 417 (533) (615) (136)
Accounts payable........... (96) (31) 7 (611) (2)
Other accrued expenses..... 583 (255) (757) 1,945 746
Deferred revenue........... (356) (569) (95) (957) 261
Deferred income taxes...... 265 -- -- -- --
Deposits and other assets.. -- 260 244 (40)
Other long-term
liabilities.............. -- -- -- -- --
------- ------- ------- -------- ---------
Net cash used in continuing
operations.................... (1,644) (4,784) (6,372) (3,832) (4,948)
Net cash (used in) provided by
discontinued operations....... (2,310) (294) 2,061 160 1,700
------- ------- ------- -------- ---------
Net cash used in
operating activities... (3,954) (5,078) (4,311) (3,672) (3,248)
------- ------- ------- -------- ---------
Cash flows from investing
activities:
Capital expenditures............ (321) (140) (779) (391) (60)
Acquisition..................... (130) -- -- -- --
------- ------- ------- -------- ---------
Net cash used in
investing activities... (451) (140) (779) (391) (60)
------- ------- ------- -------- ---------
Cash flows from financing
activities:
Proceeds from note payable...... -- -- 129 -- --
Repayment of note payable....... -- -- -- -- (129)
Payments of principal under
capital lease financing....... (685) (442) (172) (162) (215)
Bank borrowings, net............ 273 1,327 (1,047) 40 1,027
Repayment of note payable to
stockholder................... -- (310) -- -- --
Proceeds from issuance of Common
Stock......................... 32 96 56 49 172
Repurchase of Common Stock...... -- (1) (18) -- --
Proceeds from issuance of
Preferred Stock, Series B (net
of issuance costs)............ -- 1 -- -- --
Proceeds from issuance of
Preferred Stock, Series D and
Series E warrants (net of
issuance costs)............... 5,862 -- -- -- 36
Proceeds from issuance of
Preferred Stock, Series F (net
of issuance costs)............ -- 7,400 -- -- --
Proceeds from issuance of
Preferred Stock, Series AA
(net of issuance costs)....... -- -- -- -- 2,860
Proceeds from issuance of
Preferred Stock, Series BB.... -- -- -- -- 13,943
Proceeds from bridge loan....... -- 1,500 1,500 -- --
Increase in restricted cash..... -- -- -- -- (434)
------- ------- ------- -------- ---------
Net cash provided by
(used in) financing
activities............. 5,482 9,571 448 (73) 17,260
------- ------- ------- -------- ---------
Effect of exchange rate changes
in cash....................... 64 (20) 180 278 245
------- ------- ------- -------- ---------
Net increase (decrease) in cash
and cash equivalents.......... 1,141 4,333 (4,462) (3,858) 14,197
Cash and cash equivalents at
beginning of period........... 1,117 2,258 6,591 6,591 2,129
------- ------- ------- -------- ---------
Cash and cash equivalents at end
of period..................... $ 2,258 $ 6,591 $ 2,129 $ 2,733 $ 16,326
======= ======= ======= ======== =========
Supplemental disclosures of cash
flow information:
Cash paid during the year:
Interest...................... $ 435 $ 692 $ 202 $ 149 $ 217
Notes receivable from
(cancellation of) stockholder
note in exchange for Common
Stock......................... $ 70 $ -- $ (70) $ -- $ --
Assets acquired under capital
lease obligations............. $ 205 $ -- $ -- $ -- $ 468
Issuance of Common Stock
warrants in connection with
debt.......................... $ 385 $ -- $ -- $ -- $ --
Issuance of Common Stock related
to acquisition................ $ 56 $ -- $ -- $ -- $ --
Conversion of Common Stock to
Series B Preferred Stock...... $ 423 $ -- $ -- $ -- $ --
Accretion of cumulative
dividends on Preferred Stock.. $ 554 $ 1,040 $ 1,258 $ 629 $ 442
Unearned compensation related to
stock option grants........... $ -- $ -- $ -- $ -- $ (21,448)
Conversion of bridge loan to
Preferred Stock............... $ -- $ 1,500 $ -- $ -- $ 1,596
Conversion of Mandatorily
Redeemable Preferred Stock to
Common Stock.................. $ -- $ -- $ -- $ -- $ 20,882
Write-off of property and
equipment..................... $ (734) $ -- $(3,761) $ (2,676) $ (472)
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information Relating to the Nine Months Ended

December 31, 1998 and 1999 is Unaudited)

NOTE 1--FORMATION AND BUSINESS OF THE COMPANY:

Blaze Software, Inc. ("Blaze Software") was incorporated in California on
June 4, 1985 as Neuron Data, Inc. Its principal activities include the
development and licensing of infrastructure software that enables adaptable and
personalized interactions that are consistent across all company communication
channels, or touch points. This software enables companies to implement their
policies, practices and procedures, or business rules in e-business
applications across multiple touch points. Blaze Software also provides related
maintenance and consulting services. Blaze Software markets its products to a
wide range of customers mainly in North America, Europe, and Japan primarily
through a direct sales force.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principals of consolidation

The consolidated financial statements include the accounts of Blaze
Software, Inc. and its wholly owned subsidiaries, Blaze Software GmbH, Blaze
Software S.A.R.L., Blaze Software (UK) Ltd and Blaze Software Japan, Inc.
(together, "Blaze Software"). All material intercompany balances and
transactions have been eliminated.

Interim consolidated financial statements (unaudited)

The consolidated financial statements as of December 31, 1999 and for the
nine months ended December 31, 1998 and 1999 together with the related notes
are unaudited but have been prepared in accordance with generally accepted
accounting principles for interim consolidated financial statements and the
rules of the Securities and Exchange Commission and do not include all
disclosures required by generally accepted accounting principles for
consolidated annual financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation have been included. The results of operations of any interim
period are not necessarily indicative of the results of operations for the full
year.

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

Foreign currency translation

The functional currency of Blaze Software's subsidiaries is the local
currency. Accordingly, Blaze Software applies the current exchange rate to
translate the subsidiaries' assets and liabilities and the weighted average
exchange rate to translate the subsidiaries' revenues, expenses, gains and
losses into U.S. dollars. Translation adjustments are included as a separate
component of comprehensive income within stockholders' deficit in the
accompanying consolidated financial statements.

Cash and cash equivalents

Blaze Software considers all highly liquid investments with an original or
remaining maturity of three months or less at the time of purchase to be cash
equivalents.

F-8
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Business risk and concentration of credit risk

Blaze Software currently operates in a single business segment and revenue
from continuing operations is principally attributable to the sale of software
products and related maintenance, consulting and training services which are
characterized by rapid technological advances, changes in customer requirements
and industry standards. Any failure by Blaze Software to anticipate or to
respond adequately to technological changes in its industry, changes in
customer requirements or changes in industry standards, could have a material
adverse effect on Blaze Software's business and operating results.

Financial instruments which potentially subject Blaze Software to
concentrations of credit risk consist primarily of temporary cash investments,
including money market accounts. Blaze Software places its temporary cash
investments with two major financial institutions. Deposits at any point in
time may exceed the federally insured limits. Blaze Software performs ongoing
credit evaluations of its customers' financial condition and does not require
collateral. Blaze Software maintains allowances for potential credit losses and
such losses have been within management's expectations.

As of March 31, 1998, 1999 and December 31, 1999 (unaudited), there was one
customer that accounted for 13%, 12% and 12% of the aggregate accounts
receivable balance, respectively. No customer accounted for 10% or more of
aggregate revenues in fiscal years 1997 and 1998. For the fiscal year 1999 and
the nine months ended December 31, 1999 (unaudited), one customer accounted for
19% and 25% of the aggregate revenues, respectively.

Fair value of financial instruments

Carrying amounts of certain Blaze Software's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses and other liabilities approximate fair value due to their
short maturities. Based upon borrowing rates currently available to Blaze
Software for loans with similar terms, the carrying value of capital lease
obligations approximate fair value.

Property and equipment

Property and equipment are stated at cost and depreciated on a straight-
line basis over the estimated useful lives of the related assets, generally
three to five years. Leased assets are amortized on a straight-line basis over
the lesser of the estimated useful life or the lease term.

Maintenance and repairs are charged to expense as incurred. When assets are
sold or retired, the cost and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in operations.

Impairment of long-lived assets

Blaze Software evaluates the recoverability of long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of ("SFAS No. 121"). SFAS No. 121 requires recognition of impairment
of long-lived assets in the event the net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets.

Revenue recognition

Blaze Software's revenues are derived from two sources; product license
revenues and service revenues. Product license revenues are derived from
product sales to end users and independent software vendors as well

F-9
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

as royalties from independent software vendors. Service revenues are derived
from providing consulting and training, maintenance and support services to end
users.

Blaze Software recognizes revenues in accordance with the American
Institute of Certified Public Accountants Statement of Position No. 97-2,
Software Revenue Recognition, as amended by Statement of Position 98-4,
Deferral of the Effective Date of Certain Provisions of SOP 97-2, effective
July 1, 1998. License revenues from sales to end users and systems integrators
are recognized upon shipment of the product, if an executed agreement or
purchase order has been received, the fee is fixed and determinable and
collection is deemed probable. If an acceptance period is provided, revenue is
recognized upon the earlier of customer acceptance or the expiration of that
period. For enterprise application vendors, Blaze Software receives quarterly
reports from these vendors on sell-through of Blaze Software products to end
users. Blaze Software recognizes royalty revenues upon receipt of the quarterly
reports from vendors. For sales made through distributors, Blaze Software
recognizes revenues upon shipment only when the distributor has identified a
valid end-user for the product. In those instances where a distributor has not
identified a valid end-user for the product, the revenue is deferred.
Distributors have no right of return.

For contracts with multiple obligations (e.g., product licenses,
maintenance and other services), Blaze Software allocates revenue to each
component of the contract based on objective evidence of its fair value, which
is based on the price when each component is sold separately, or when not sold
separately, the price established by management. Blaze Software recognizes
revenue allocated to undelivered products when the criteria for product revenue
set forth above are met.

Service revenues from consulting, installation and training are recognized
as the related services are performed collectibility is probable and Blaze
Software has received notification of acceptance from the customer or the
acceptance period has elapsed. Revenues from maintenance and support
agreements, which includes product updates, are deferred and recognized on a
straight-line basis over the term of the related agreement. Payments of
maintenance fees are generally made in advance and are nonrefundable.

Prior to the adoption of SOP 97-2, Blaze Software recognized revenue from
the sale of products upon shipment if remaining obligations were insignificant,
collection of resulting accounts receivable was probable and product returns
reasonably estimable.

Advertising

Blaze Software expenses advertising costs as they are incurred. Advertising
expense for the years ended March 1997, 1998 and 1999 was $679,000, $1,071,000
and $431,000, respectively, and for the nine months ended December 31, 1999
(unaudited) was $412,000.

Income taxes

Blaze Software accounts for income taxes in accordance with Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. This statement prescribes the use of the
liability method whereby deferred tax assets and liabilities are determined
based on the differences between financial reporting and tax bases of assets
and liabilities and measured at tax rates that will be in effect when the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets where it is more likely than not the
deferred tax asset will not be realized.

Stock-based compensation

Blaze Software has elected to adopt the disclosure provisions of Statement
of Financial Accounting Standards No. 123, Accounting for Stock-based
Compensation ("SFAS No. 123"). Blaze Software accounts for stock-based
compensation using Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, ("APB No. 25") and, accordingly, pro forma
disclosures required under SFAS No. 123 have been presented (See Note 7). Under
APB No. 25, compensation expense is based on the difference, if any, on the

F-10
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

date of the grant, between the deemed fair value of Blaze Software's common
stock and the exercise price. Additionally, pursuant to SFAS No. 123, common
stock issued to non-employees is accounted for at the fair value of the equity
instruments issued, or at the fair value of the consideration received,
whichever is more reliably measurable.

Research and development expenditures

Costs related to research, design and development of products are charged
to research and development expense as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers. To date, attaining technological feasibility of Blaze Software's
products and general release have substantially coincided. As a result, Blaze
Software has not capitalized any software development costs.

Net loss per share

Blaze Software computes net loss per share in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share, ("SFAS No. 128").
Under the provisions of SFAS No. 128, basic net loss per share is computed by
dividing the net loss available to common stockholders for the period by the
weighted average number of common shares outstanding during the period. Diluted
net loss per share is computed by dividing the net loss for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Options, warrants, mandatorily redeemable preferred stock
and convertible preferred stock were not included in the computation of diluted
net loss per share because the effect would be antidilutive.

A reconciliation of shares used in the calculation of basic and diluted net
loss per share follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended March 31, December 31,
------------------------- -----------------
1997 1998 1999 1998 1999
------- ------- ------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Basic and diluted net loss per
share:
Numerator:
Net loss from continuing
operations..................... $(2,723) $(3,631) $(5,848) $(4,756) $(14,498)
Accretion of mandatorily
redeemable preferred stock to
redemption value............... (554) (1,040) (1,258) (1,051) (442)
Beneficial conversion feature of
preferred stock................ -- -- -- -- (8,241)
------- ------- ------- ------- --------
Net loss from continuing
operations attributable to
common stockholders............ (3,277) (4,671) (7,106) (5,807) (23,181)
Income (loss) from operations of
discontinued user interface
business....................... (5,479) (2,174) 248 319 1,767
------- ------- ------- ------- --------
Loss attributable to common
stockholders................... $(8,756) $(6,845) $(6,858) $(5,488) $(21,414)
======= ======= ======= ======= ========
Denominator:
Weighted average common shares
outstanding.................... 993 283 444 397 5,016
Weighted average unvested common
shares subject to repurchase... (73) (158) (73) (36) (19)
------- ------- ------- ------- --------
Denominator for basic and
diluted calculation............ 920 125 371 361 4,997
======= ======= ======= ======= ========
Basic and diluted net loss per
share attributable to common
stockholders................... $ (9.52) $(54.76) $(18.49) $(15.20) $ (4.29)
======= ======= ======= ======= ========
Antidilutive securities
including options, warrants and
preferred stock not included in
net loss per share
calculations................... 6,260 7,502 7,392 7,185 14,658
======= ======= ======= ======= ========
</TABLE>

F-11
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Pro forma net loss per share (unaudited)

Pro forma net loss per share for the year ended March 31, 1999 and the nine
months ended December 31, 1999, is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the conversion
of mandatory redeemable convertible preferred stock and preferred stock into
common stock on an as-if-converted basis. Pro forma diluted net loss per share
is computed using the pro forma weighted average number of common and common
equivalent shares outstanding. Common equivalent shares, composed of common
shares issuable upon the exercise of stock options and warrants, are not
included in pro forma diluted net loss per share as such shares are
antidilutive.

The following table sets forth the computation of pro forma basic and
diluted net loss per share (unaudited) (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
March 31, December 31,
1999 1999
---------- ------------
<S> <C> <C>
Numerator:
Net loss......................................... $(5,600) $(12,731)
======= ========
Denominator:
Shares used in computing basic and diluted net
loss per share................................. 371 4,997
Adjustment to reflect assumed conversion of all
preferred stock from date of issuance.......... 5,472 1,229
------- --------
Shares used in computing pro forma basic and
diluted net loss per share....................... 5,843 6,226
======= ========
Basic and diluted pro forma net loss per share..... $ (0.96) $ (2.05)
======= ========
Antidilutive securities including options and
warrants not included in pro forma net loss per
share calculation................................ 1,666 4,290
======= ========
</TABLE>

Recent accounting pronouncements

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, ("SOP 98-1"), which requires
companies to capitalize qualifying computer software costs, which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. Blaze Software does not expect that the adoption of SOP 98-1
will have a material impact on its financial statements and related
disclosures.

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"), which requires companies to expense the costs of
start-up activities and organization costs as incurred. In general, SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. Blaze Software
believes the adoption of SOP 98-5 will not have a material impact on its
results of operations.

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"), which establishes new standards of accounting and reporting for
derivative instruments and hedging activities. SFAS 133 requires that all
derivatives be recognized at fair value in the statement of financial position,
and that the corresponding gains or losses be

F-12
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

reported either in the statement of operations or as a component of
comprehensive income, depending on the type of hedging relationship that
exists. SFAS 133 is effective for fiscal years beginning after June 15, 2000.
Blaze Software is assessing the potential impact of this pronouncement on the
financial statements; however, they do not expect any significant impact.

In December 1998, AcSEC released Statement of Position 98-9, Modification
of SOP 97-2, Software Revenue Recognition ("SOP 98-9"), with Respect to Certain
Transactions. SOP 98-9 amends SOP 97-2 to require that an entity recognize
revenue for multiple element arrangements by means of the "residual method"
when (1) there is vendor-specific objective evidence ("VSOE") of the fair
values of all the undelivered elements that are not accounted for by means of
long-term contract accounting, (2) VSOE of fair value does not exist for one or
more of the delivered elements, and (3) all revenue recognition criteria of SOP
97-2 (other than the requirement for VSOE of the fair value of each delivered
element) are satisfied. The provisions of SOP 98-9 that extend the deferral of
certain paragraphs of SOP 97-2 became effective December 15, 1998. These
paragraphs of SOP 97-2 and SOP 98-9 will be effective for transactions that are
entered into in fiscal years beginning after March 15, 1999. Retroactive
application is prohibited. Blaze Software does not expect that the adoption of
SOP 98-9 will have a material impact on its financial statements.

NOTE 3--DISCONTINUED OPERATIONS:

In December 1999, the Company's Board of Directors resolved to discontinue
Blaze Software's entire user interface line of business. The Company expects
that it will sell the user interface business within twelve months. The
accompanying financial statements have been prepared to reflect the historical
results of operations and cash flows of the user interface business as
discontinued operations for all periods presented.

Balance sheet data (in thousands)

<TABLE>
<CAPTION>
As of March
31,
-------------- December 31,
1998 1999 1999
------ ------ ------------
(unaudited)
<S> <C> <C> <C>
Current assets.................................. $3,609 $1,183 $1,267
Current liabilities............................. (441) (70) (87)
------ ------ ------
Net assets of discontinued operations........... $3,168 $1,113 $1,180
====== ====== ======
</TABLE>

The current assets and current liabilities noted above comprise accounts
receivable and accounts payable, respectively.

Income statement data (in thousands)

<TABLE>
<CAPTION>
Nine Months
Ended December
As of March 31, 31,
--------------------------- ----------------
1997 1998 1999 1998 1999
-------- -------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues.................... $ 21,896 $ 18,313 $ 9,094 $ 7,254 $ 3,802
Costs and expenses.......... (27,375) (20,487) (8,846) (6,935) (2,035)
-------- -------- ------- ------- -------
(Loss) income from
discontinued operations... $ (5,479) $ (2,174) $ 248 $ 319 $ 1,767
======== ======== ======= ======= =======
</TABLE>

F-13
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Cash flow data

<TABLE>
<CAPTION>
Nine Months
Ended
As of March 31, December 31,
---------------------- -------------
1997 1998 1999 1998 1999
------- ----- ------ -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by
discontinued operations............ $(2,310) $(294) $2,061 $ 160 $ 1,700
======= ===== ====== ===== =======
</TABLE>

NOTE 4--PROPERTY AND EQUIPMENT:

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
As of March 31,
---------------- December 31,
1998 1999 1999
------- ------- ------------
(unaudited)
<S> <C> <C> <C>
Computer equipment.......................... $ 3,969 $ 1,626 $ 1,929
Furniture and fixtures...................... 882 337 226
Leasehold improvements...................... 377 412 347
------- ------- -------
5,228 2,375 2,502
Less: accumulated depreciation and
amortization.............................. (4,193) (1,589) (1,637)
------- ------- -------
$ 1,035 $ 786 $ 865
======= ======= =======
</TABLE>

Depreciation expense for the year ended March 31, 1997, 1998 and 1999 was
$1,075,000, $868,000 and $899,000, respectively and $417,000 (unaudited) for
the nine months ended December 31, 1999.

Property and equipment under capital leases, included in the above table,
consist of the following (in thousands):

<TABLE>
<CAPTION>
As of March
31,
-------------- December 31,
1998 1999 1999
------- ----- ------------
(unaudited)
<S> <C> <C> <C>
Computer equipment............................ $ 1,968 $ 268 $ 705
Less: accumulated depreciation and
amortization................................ (1,751) (206) (271)
------- ----- -----
$ 217 $ 62 $ 434
======= ===== =====
</TABLE>

NOTE 5--BANK BORROWINGS:

Blaze Software has a line of credit facility with Coast Business Credit, a
division of Southern Pacific Bank, whereby Blaze Software may borrow up to 80%
of eligible United States and United Kingdom accounts receivable with a maximum
borrowing of $5,000,000. Borrowings under the facility bear interest at the
prime rate plus 3% (10.75% as of March 31, 1999) and are collateralized by
certain assets of Blaze Software. The facility expires on March 1, 2000. As of
March 31, 1998 and 1999, Blaze Software had borrowed $2,678,000 and $1,631,000,
respectively, under this facility.

On November 10, 1998, Blaze Software entered into a bridge loan agreement
with several of its existing investors totaling $1.5 million. The loan bore
interest at the rate of 25%, was subordinated to the agreement between Blaze
Software and Coast Business Credit, and was collateralized by certain assets of
Blaze Software. The bridge loan was converted into 2,777,778 shares of Series
AA Preferred Stock on June 1, 1999.

F-14
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 6--MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:

In June and September 1999, Blaze Software issued a total of 8,416,000
shares of Series AA preferred stock and converted all of its outstanding
mandatorily redeemable preferred stock into common stock at the applicable
conversion rates. See Note 12, Subsequent Events, for details of conversion.

Mandatorily redeemable convertible preferred stock and warrants to purchase
mandatorily redeemable convertible preferred stock, as of March 31, 1999, was
comprised of the following (in thousands):

<TABLE>
<CAPTION>
Change in
Carrying
Value for the
Year-Ended
March 31,
Shares Issued and Carrying Liquidation -------------
Series Authorized Outstanding Value Value 1999 1998
------------------ ---------- ----------- -------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
A................. 500 500 $ 294 $ 3,092 $ 18 $ 26
C................. 442 442 3,563 6,030 218 320
D................. 1,071 1,071 6,124 12,994 399 797
E (Warrants)...... 357 -- 1,064 -- -- --
F................. 1,166 1,166 9,837 16,224 623 8,797
----- ----- ------- ------- ------ ------
Total........... 3,536 3,179 $20,882 $38,340 $1,258 $9,940
===== ===== ======= ======= ====== ======
</TABLE>

Warrants

All preferred stock had certain registration rights and antidilution
protection. A warrant to purchase up to $2,000,000 of Series E preferred stock
at an exercise price of $6.90 per share, or at $5.60 if specified operating
results were not met, was issued as part of the Series D preferred stock
financing and was valued at $1,064,000, its estimated fair market value at the
date of issuance using the Black-Scholes option pricing model. The estimated
fair value was allocated from the proceeds of the Series D preferred stock
financing. The assumptions used for the Black-Scholes option pricing model were
a three year life, a 75% volatility, a 6.5% risk-free interest rate and a zero
dividend yield. These warrants for preferred stock converted into warrants for
common stock as part of the Series AA preferred stock financing (see Note 12
for further details) and were subsequently exercised.

Conversion

Each share of Series A, C, D, E, and F preferred stock was convertible into
common stock on a one-for-one basis, subject to certain antidilution
provisions. Conversion was at the option of the stockholder or automatic upon
the closing of an initial public offering of Blaze Software's common stock at a
price equal to or exceeding $17.25 per share and aggregate proceeds of at least
$7,500,000 or by written consent or agreement of the holders of at least two-
thirds of the outstanding shares of Series D, E, and F preferred stock voting
together. In addition, each share of Series A, C, D, E, and F preferred stock
was convertible, at the option of the holder, into common stock on a one-for-
one basis, except for Series C which is on a 1:1.04 basis.

Dividends

The holders of the Series A, C, D, E, and F mandatorily redeemable
convertible preferred stock were entitled to receive cumulative dividends in
preference to any declaration or payment of dividend on Series B convertible
preferred stock or common stock, at the rate of $0.03, $0.414, $0.336, $0.336,
and $0.4632 per share per annum, respectively, before June 26, 2001, and at the
rate of $0.06, $0.828, $0.672, $0.672, and $0.9264 per share per annum,
respectively, on or after June 26, 2001. Such dividends accrued from June 26,

F-15
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1996, or from the date of issuance in the case of Series E and F, and were
payable when and if declared by Blaze Software's Board of Directors. Any
accumulation of dividends did not bear interest. No dividends were declared or
paid in fiscal 1998 or 1999.

Voting rights

The holder of each share of Series A, Series C, Series D, Series E and
Series F mandatorily redeemable convertible preferred stock had the right to
one vote for each share of common stock into which such Series A, Series C,
Series D, Series E and Series F preferred stock could then be converted, and
with respect to such vote, such stockholder had full voting rights and powers
equal to the voting rights and powers of the holders of common stock, and were
entitled to notice of any stockholders' meeting in accordance with the bylaws
of the corporation, and were entitled to vote, together with holders of common
stock, with respect to any question upon which holders of common stock have the
right to vote.

Liquidation

Upon the occurrence of a liquidation event, such as a dissolution of Blaze
Software or by merger or sale of assets, the available assets of Blaze Software
would be distributed first to the holders of Series C, D, E and F mandatorily
redeemable convertible preferred stock until they receive the amount per share
for which each such series was originally purchased plus any accrued dividends.
Holders of Series A mandatorily redeemable convertible preferred stock were
then entitled to receive the amount per share for which each such series was
originally purchased plus any accrued dividends. The remaining assets were to
be split equally among the holders of Series A, B, C, D, E and F preferred
stock until holders of each share of Series B preferred stock had received an
amount per share equal to $5.60.

The aggregate liquidation preferences for the mandatorily redeemable
convertible preferred stock as described in the preceding paragraph totaled
$38,339,753 as of March 31, 1999. If assets of Blaze Software remained
available for distribution after such preferences have been satisfied, such
remaining assets would have been distributed among the holders of Series A, B,
C, D, E and F preferred stock and common stock pro rata based on the "as if
converted" number of common stock shares.

Redemption

Blaze Software was required to redeem the Series A, C, D, E, and F
mandatorily redeemable convertible preferred stock in three annual installments
beginning on December 16, 2002, and continuing thereafter on December 16, 2003
and 2004. Blaze Software was to make payments equal to $0.50, $6.90, $5.60,
$5.60 and $7.72 per share plus all accrued but unpaid dividends on the Series
A, C, D, E, and F mandatorily redeemable convertible preferred stock,
respectively. Blaze Software may have redeemed at any time, in whole or in
part, the Series A, C, D, E, and F mandatorily redeemable convertible preferred
stock at $0.50, $6.90, $5.60, $5.60 and $7.72 per share, respectively. The
Series A, C, D, E and F mandatorily redeemable convertible stock was being
accreted to redemption value using the interest method to calculate the charge
to additional paid-in capital.

F-16
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table summarizes the redemption obligations related to the
mandatorily redeemable preferred stock as at March 31, 1999 (in thousands):

<TABLE>
<CAPTION>
A C D E F Total
---- ------ ------ ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
December 16, 2002................... $123 $1,502 $2,954 $ -- $ 4,166 $ 8,745
December 16, 2003................... 133 1,623 3,194 -- 4,526 9,476
December 16, 2004................... 143 1,746 3,435 -- 4,886 10,210
---- ------ ------ ---- ------- -------
Total............................. $399 $4,871 $9,583 $ -- $13,578 $28,431
==== ====== ====== ==== ======= =======
</TABLE>

NOTE 7--STOCKHOLDERS EQUITY:

Series B Preferred Stock

In June 1999, Blaze Software converted all of its outstanding preferred
stock. See Note 12, Subsequent Events, for further details.

Conversion

Each share of preferred stock was convertible into common stock on a one-
for-one basis, without antidilution protection.

Liquidation

The aggregate liquidation preference of Series B convertible preferred
stock totaled $13,350,000 as of March 31, 1999. If assets of Blaze Software
remained available for distribution after such preferences had been satisfied,
such remaining assets would have been distributed among the holders of Series
A, B, C, D, E and F preferred stock and common stock pro rata based on the "as
if converted" number of common stock shares.

Voting rights

The holder of each share of Series B convertible preferred stock had the
right to one vote for each share of common stock into which such preferred
stock could then have been converted, and with respect to such vote, such
shareholder had full voting rights and powers equal to the voting rights and
powers of the holders of common stock, and were entitled to notice of any
stockholders' meeting in accordance with the bylaws of the corporation, and
were entitled to vote, together with holders of common stock, with respect to
any question upon which holders of common stock have the right to vote.

Preferred Stock Warrants

In December 1996, warrants to purchase 107,143 shares of the Company's
Series B preferred stock were issued at a price per share of $5.60. These
warrants were still outstanding as of March 31, 1999. The fair value of these
warrants is not material to the financial statements.

Common Stock

Blaze Software is authorized to issue 54,000,000 shares of common stock. As
of March 31, 1999, 343,500 shares of common stock were issued and outstanding.

F-17
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Common Stock Warrants

The following table summarizes the activity on common stock warrants:

<TABLE>
<CAPTION>
Common Stock Warrants
Exercise
Shares Price Amount
------ -------- -------
<S> <C> <C> <C>
Balance, April 1, 1996.............................. -- $ --
Warrants granted.................................... 5,000 $5.60 28,000
----- -------
Balance, March 31, 1997............................. 5,000 28,000
Warrants granted.................................... 1,005 $5.60 5,625
----- -------
Balance, March 31, 1998 and 1999.................... 6,005 $33,625
----- -------
</TABLE>

The fair value of these common stock warrants is not material to these
financial statements.

Common Stock Subject To Repurchase

In 1997, 100,000 shares of common stock were issued pursuant to an
acquisition, 75,000 of which was subject to repurchase. Shares vested on a
quarterly basis over a two and a half year period. At March 31, 1998,
approximately 37,500 shares were subject to repurchase at the original purchase
price of $5.60. At March 31, 1999 no shares were subject to repurchase. In
April 1998, 32,666 shares were repurchased at the original purchase price.

Blaze Software has reserved shares of common stock for future issuance as
follows (in thousands):

<TABLE>
<CAPTION>
March 31, December 31,
1999 1999
--------- ------------
(unaudited)
<S> <C> <C>
Options outstanding................................... 1,196 4,287
Options available for future grants................... 121 696
Mandatorily redeemable preferred stock................ 3,179 --
Preferred stock....................................... 2,273 10,369
Outstanding warrants for preferred stock.............. 464 --
Outstanding warrants for common stock................. 6 6
----- ------
7,239 15,358
===== ======
</TABLE>

Stock Option Plan

In 1986, Blaze Software adopted the 1986 Stock Option Plan (the "1986
Plan") and had 1,254,500 shares of Common Stock reserved for issuance
thereunder. In 1996, the 1986 Plan was discontinued and replaced with the 1996
Stock Option Plan (the "1996 Plan").

Under the 1996 Plan, Blaze Software has reserved 6,003,429 shares of common
stock for issuance. Options granted may be incentive stock options or
nonqualified stock options and shall be granted at a price not less than 100%
or 85% of fair market value, respectively, or at a price not less than 110% of
fair market value under certain circumstances. Fair market value (as defined in
the 1996 Plan) and the vesting, of these options shall be determined by Blaze
Software's Board of Directors. The options expire no later than 10 years from
the date of grant. Unvested options on termination of employment are canceled
and returned to the 1996 Plan. Options can be exercised from the date of
issuance, even though they have not fully vested. Such shares are subject to
repurchase

F-18
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

on a pro rata basis over a four-year period from the date of issuance. As of
March 31, 1998 and 1999, there were approximately 54,000 and 73,500 shares,
respectively, subject to repurchase, at a weighted average price of $0.56 per
share. During 1998 and 1999, approximately 1,500 and 157,500 shares,
respectively, were repurchased.

Shares acquired under the 1996 Plan are subject to Stock Purchase
Agreements, which provide Blaze Software with a right of first refusal and
grant Blaze Software repurchase rights for unvested shares, at their original
cost.

Vesting requirements

Options granted under the plan have a term of ten years measured from the
grant date and are initially unvested. Participants vest in the option shares
granted over a four-year period with (i) twenty-five percent of the option
shares vesting upon the completion of one year of service, and (ii) the balance
of the option shares in thirty-six successive equal monthly installments upon
the participants completion of each additional month of service.

A summary of the status of Blaze Software's stock option plans as of March
31, 1997, 1998, 1999, and December 31, 1999 (unaudited) and changes during the
years ended on these dates is presented below (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
Options Outstanding
----------------------------
Weighted
Average
Exercise
Shares Number Exercise Price Aggregate
Available of Price per per Exercise
for Grant Shares Share Share Price
--------- ------ ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Options outstanding at
April 1, 1996.............. 1,280 356 $0.50-$3.30 $2.44 $ 867
Granted...................... (1,472) 1,472 $0.56-$3.00 $0.58 853
Exercised.................... -- (152) $0.56-$3.00 $0.72 (109)
Canceled..................... 445 (445) $0.56-$3.30 $2.06 (917)
------ ----- ----------- ----- ------
Options outstanding at March
31, 1997................... 253 1,231 $0.50-$3.00 $0.56 694
Granted...................... (673) 673 $0.56-$0.80 $0.62 420
Exercised.................... -- (173) $0.56-$1.00 $0.56 (97)
Canceled..................... 425 (425) $0.56-$3.00 $0.57 (241)
------ ----- ----------- ----- ------
Options outstanding at March
31, 1998................... 5 1,306 $0.50-$3.00 $0.59 776
Additional shares reserved... 104 -- -- -- --
Granted...................... (625) 625 $0.80-$0.80 $0.80 499
Exercised.................... -- (98) $0.56-$0.80 $0.57 (56)
Canceled..................... 637 (637) $0.56-$0.80 $0.59 (379)
------ ----- ----------- ----- ------
Options outstanding at March
31, 1999................... 121 1,196 $0.50-$3.00 $0.70 840
Additional shares reserved... 4,444 -- -- -- --
Granted...................... (4,033) 4,033 $0.10-$6.00 $0.41 1,640
Exercised.................... -- (778) $0.10-$1.00 $0.22 (171)
Canceled..................... 164 (164) $0.10-$3.00 $0.54 (88)
------ ----- ----------- ----- ------
Options outstanding at
December 31, 1999
(unaudited)................ 696 4,287 $0.10-$6.00 $0.52 $2,221
====== ===== =========== ===== ======
</TABLE>

F-19
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The weighted-average fair value of options granted in fiscal 1997, 1998 and
1999 was $0.14, $0.14 and $0.18, respectively.

The following table summarizes information concerning outstanding and
exercisable options under the plans as of March 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- ---------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Number of Average
Range of Number of Life Exercise Shares Exercise
Exercise Price Shares (Years) Price Exercisable Price
-------------- ---------- ----------- --------- ----------- ---------
(in (in
thousands) thousands)
<S> <C> <C> <C> <C> <C>
$0.50 2 1.16 $0.50 2 $0.50
$0.56 484 7.77 $0.56 484 $0.56
$0.80 708 9.32 $0.80 708 $0.80
$1.00 2 4.38 $1.00 2 $1.00
$3.00 -- 6.00 $3.00 -- $3.00
----- -----
1,196 8.67 $0.70 1,196 $0.70
===== =====
</TABLE>

Stock-based compensation

In connection with certain stock option grants during the nine months ended
December 31, 1999 (unaudited), Blaze Software recorded stock-based compensation
totaling $26.2 million, which is being amortized in accordance with FASB
Interpretation No. 28 over the vesting periods of the related options, which is
generally four years. Stock-based compensation amortization recognized during
the nine months ended December 31, (unaudited) 1999 totaled $9.3 million. If
the stock-based compensation for the nine months ended December 31, (unaudited)
1999 had been allocated across the relevant functional expense categories
within operating expenses, it would be allocated as follows:

<TABLE>
<CAPTION>
Nine Months
Ended
December 31,
1999
------------
(unaudited)
<S> <C>
Research and development...................................... $2,004
Selling, general and administrative........................... 7,303
------
$9,307
======
</TABLE>

Fair value disclosure

The following information concerning Blaze Software's stock option plans is
provided in accordance with SFAS No. 123. Blaze Software accounts for such
plans in accordance with APB No. 25.

F-20
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The fair value of each option grant has been estimated on the date of grant
using the Black-Scholes options-pricing model with the following weighted
average assumptions for grants:

<TABLE>
<CAPTION>
Years Ended March 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... 6.2% 5.3% 4.7%
Expected life..................................... 5 years 5 years 5 years
Dividend yield.................................... -- -- --
Expected volatility............................... 0% 0% 0%
</TABLE>

For purposes of pro forma disclosures, the estimated fair value of the
options are amortized over the option's vesting period. Blaze Software pro
forma information follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
Years ended March 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Net loss attributable to common stockholders.... $(8,756) $(6,845) $(6,858)
======= ======= =======
Net loss--FAS 123 adjusted...................... $(8,809) $(6,896) $(6,896)
======= ======= =======
Net loss per share--as reported
Basic and diluted............................. $ (9.52) $(54.76) $(18.49)
======= ======= =======
Net loss per share--FAS 123 adjusted
Basic and diluted............................. $ (9.58) $(55.17) $(18.59)
======= ======= =======
</TABLE>

The effects of applying SFAS No. 123 in this pro forma disclosure may not
be indicative of future amounts. Additional awards in future periods are
anticipated.

NOTE 8--COMPREHENSIVE INCOME:

Under Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130") Blaze Software displays all items required
to be recognized under accounting standards as components of its comprehensive
income.

Comprehensive income comprises foreign currency translation adjustments
which does not have a tax expense as a benefit.

NOTE 9--COMMITMENTS AND CONTINGENCIES:

Blaze Software leases administrative, engineering, and sales facilities in
the United States, the United Kingdom, France, Germany, and Japan under
noncancelable operating leases that expire at various dates through 2005. Blaze
Software is generally responsible for insurance and property taxes. Blaze
Software's primary lease in Mountain View, California, is subject to annual
payment increases based on the consumer price index. Blaze Software also leases
computer equipment under leases classified as capital leases.

F-21
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

As of March 31, 1999, the aggregate future minimum lease payments under all
noncancelable leases are as follows (in thousands):

<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
Year Ended March 31,
2000....................................................... $ 86 $ 759
2001....................................................... 19 383
2002....................................................... 1 165
2003....................................................... -- 120
2004....................................................... -- 90
2005....................................................... -- 60
---- ------
Total minimum lease payments............................... 106 1,577
======
Less: amount representing interest......................... (6)
----
Present value of capital lease obligations................. 100
Current portion............................................ (81)
----
Long-term portion.......................................... $ 19
====
</TABLE>

Rent expense in fiscal years 1997, 1998 and 1999 aggregated $1,369,000,
$871,00 and $1,002,000, respectively.

Employment agreements

Blaze Software has entered into employment agreements with certain officers
of the Company. Some employment agreements also provide for severance in the
event the individual is terminated without cause.

Litigation

From time to time, Blaze Software may be involved in litigation relating to
claims arising out of its ordinary course of business. Management believes that
there are no claims or actions pending or threatened against Blaze Software,
the ultimate disposition of which would have a material impact on Blaze
Software's financial position or results of operations. Blaze Software received
notification of claims from a founder and director that he may assert against
the Company. He contends that his personal equity ownership of Blaze Software
was diluted improperly in connection with a preferred stock financing. Blaze
Software believes that these assertions are without merit and intend to
rigorously defend any claims which may be brought against the Company.

NOTE 10--INCOME TAXES:

The components of income tax expense consisted of the following (in
thousands):

<TABLE>
<CAPTION>
As of March
31,
--------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Current:
Federal.................................................... $ -- $ -- $ --
Foreign.................................................... 335 68 82
State...................................................... -- -- 5
Deferred--federal and state.................................. 265 -- --
---- ---- ----
Income tax expense...................................... $600 $ 68 $ 87
==== ==== ====
</TABLE>

F-22
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The components of net deferred tax assets were as follows (in thousands):

<TABLE>
<CAPTION>
As of March 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Accrued liabilities.............................. $ 905 $ 707 $ 576
Deferred revenue................................. 59 -- 12
Net operating loss carryforwards................. 2,774 5,082 6,702
Credit carryforwards and other................... 1,393 1,311 1,428
------- ------- -------
5,131 7,100 8,718
Valuation allowance.............................. (5,131) (7,100) (8,718)
------- ------- -------
Net deferred tax assets........................ $ -- $ -- $ --
======= ======= =======
</TABLE>

Due to the uncertainty surrounding the realization of the deferred tax
asset in future tax returns, Blaze Software has placed a valuation allowance
against its net deferred tax assets. The valuation allowance increased by
$3,209,000, $1,969,000 and $1,618,000 during 1997, 1998 and 1999, respectively.

Blaze Software's expected US Federal statutory income tax rate (34%)
differs from the effective tax rate as follows:

<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
"Expected" income
benefit................. (34.0)% (34.0)% (34.0)%
Net operating loss not
benefited............... 34.0 34.0 34.0
Foreign income and
withholding taxes....... 4.5 1.4 1.6
Changes in valuation
allowance and other..... 3.6 -- --
----- ----- -----
Effective tax rate...... 8.1 % 1.4 % 1.6 %
===== ===== =====
</TABLE>

At March 31, 1999, Blaze Software had available net operating loss
carryforwards of approximately $18,900,000 and $6,100,000 to offset future
federal and state taxable income, respectively. At March 31, 1999, Blaze
Software also had available research and development credit carryforwards and
other credit carryforwards of approximately $835,000 and $271,000 to offset
future federal and state taxable income, respectively, and foreign tax credits
of approximately $322,000 available to offset future federal taxable income.
These carryforwards expire from 2000 to 2019.

For federal and state tax purposes, a portion of Blaze Software's net
operating loss carryforwards may be subject to certain limitation on annual
utilization in case of a change in ownership, as defined by federal and state
tax law.

F-23
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 11--SEGMENTAL INFORMATION:

Blaze Software, which operates in a single business segment, develops and
licenses component-based development software for building business-critical
applications and also provides related maintenance and consulting services.
Operations of Blaze Software's overseas subsidiaries consist of product license
revenues and service revenues.

Intercompany transfers between geographic areas are accounted for at prices
that approximate arm's length transactions.

Information regarding geographic areas at March 31, 1997, 1998 and 1999,
and for each of the years then ended, is as follows (in thousands):

<TABLE>
<CAPTION>
Geographic Area Americas Europe Asia Eliminations Total
- --------------------------------- -------- ------ ------ ------------ -------
<S> <C> <C> <C> <C> <C>
March 31, 1997 and for the year
then ended:
Sales to unaffiliated
customers.................... $ 2,191 $1,263 $ 169 $ -- $ 3,623
------- ------ ------ -------
Operating (loss) income........ (3,780) 449 1,642 -- (1,689)
------- ------ ------ -------
Liabilities--continued
operations................... 13,022 4,747 2,740 (8,783) 11,726
Liabilities--discontinued
operations................... -- -- -- -- --
------- ------ ------ -------- -------
Total Liabilities........... 13,022 4,747 2,740 (8,783) 11,726
------- ------ ------ -------- -------
Identifiable assets--continued
operations................... 9,314 2,676 1,050 (7,685) 5,355
Identifiable assets--
discontinued operations...... 2,901 1,301 1,058 -- 5,260
------- ------ ------ -------- -------
Total Identifiable assets... $12,215 $3,977 $2,108 $ (7,685) $10,615
------- ------ ------ -------- -------
March 31, 1998 and for the year
then ended:
Sales to unaffiliated
customers $ 3,492 $ 808 $ 62 $ -- $ 4,362
------- ------ ------ -------
Operating (loss) income........ (1,452) (1,713) 195 -- (2,970)
------- ------ ------ -------
Liabilities--continued
operations................... 15,041 4,502 3,307 (11,498) 11,352
Liabilities--discontinued
operations................... 441 -- -- -- 441
------- ------ ------ -------- -------
Total Liabilities........... 15,482 4,502 3,307 (11,498) 11,793
------- ------ ------ -------- -------
Identifiable assets--continued
operations................... 16,472 4,034 1,453 (11,714) 10,245
Identifiable assets--
discontinued operations 1,643 927 1,039 -- 3,609
------- ------ ------ -------- -------
Total Identifiable assets... $18,115 $4,961 $2,492 (11,714) 13,854
------- ------ ------ -------- -------
March 31, 1999 and for the year
then ended:
Sales to unaffiliated
customers.................... $ 6,933 $1,563 $ 558 $ -- $ 9,054
------- ------ ------ -------
Operating (loss) income........ (4,944) (603) 35 -- (5,512)
------- ------ ------ -------
Liabilities--continued
operations................... 13,718 5,764 3,838 (12,164) 11,156
Liabilities--discontinued
operations................... (70) -- -- -- (70)
------- ------ ------ -------- -------
Total Liabilities........... 13,648 5,764 3,838 (12,164) 11,086
------- ------ ------ -------- -------
Identifiable assets--continued
operations................... 11,233 5,408 2,320 (12,379) 6,582
Identifiable assets--
discontinued operations...... 417 416 350 -- 1,183
------- ------ ------ -------- -------
Total Identifiable assets... $11,650 $5,824 2,670 $(12,379) $ 7,765
------- ------ ------ -------- -------
</TABLE>

F-24
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 12--SUBSEQUENT EVENTS:

Issuance of preferred stock

In June 1999 and September 1999, Blaze Software issued a total of 8,416,215
shares of Series AA convertible preferred stock at a price of $0.54 per share.
Net proceeds to Blaze Software were cash of $2.8 million and the cancellation
of indebtedness of $1.6 million. Prior to the issuance of Series AA convertible
preferred stock, Blaze Software converted all of its outstanding shares of
Series A, Series B, Series C Series D, and Series F convertible preferred stock
into common stock and all of its warrants for Series E preferred stock into
warrants for common stock at the applicable conversion rates in effect for each
series.

On December 31, 1999 1,952,735 shares of Series BB preferred stock were
issued for gross proceeds of approximately $13.9 million. The issuance resulted
in a beneficial conversion feature of approximately $8.2 million, calculated in
accordance with Emerging Issues Task Force No. 98-5, which resulted in an
immediate charge to additional paid-in capital.

Each share of Series AA and BB preferred stock is convertible into common
stock on a one-for-one basis, subject to certain antidilution provisions.
Conversion is at the option of the stockholder or automatic upon the closing of
an initial public offering of Blaze Software's common stock at a price equal to
or exceeding $9.28 per share and aggregate proceeds of at least $15,000,000 or
by written consent or agreement of the holders of a majority of the then
outstanding shares of Series AA and BB Preferred Stock voting together as a
single class.

The holders of Series AA and BB preferred stock are entitled to receive
dividends in preference to any declaration or payment of dividend on common
stock, at the rate of $0.32 and $0.57 per share per annum, respectively.

The holders of each share of Series AA and BB preferred stock shall have
the right to one vote for each share of common stock into which such Series AA
and BB preferred stock could then be converted.

Upon the occurrence of a liquidation event, the available assets of Blaze
Software would be distributed first to the holders of Series BB preferred stock
until they receive an amount per share equal to the sum of $9.28 plus any
unpaid dividends. Hoder of Series AA are then entitled to receive the amount
per share equal to the sum of $2.70 plus any unpaid dividends. The remaining
assets are to be split equally among the holders of Series AA and BB preferred
stock and common stock.

Building lease

In November 1999, the Company entered into a new building lease for its
corporate headquarters, which is secured by a cash deposit of $434,000. This
deposit has been classified as restricted cash on the unaudited balance sheet
as of December 31, 1999. The new building lease requires minimum monthly
payments of approximately $87,000 and expires in 2005.

Reincorporation

In January 2000, Blaze Software's Board of Directors approved the
reincorporation of the Company from California to Delaware and approved the
change in the authorized share capital to 210 million, consisting of 200
million shares of common stock, $0.0001 par value and 10 million shares of
preferred stock, $0.0001 par value. All share data information has been
restated to reflect the reincorporation.

F-25
<PAGE>

BLAZE SOFTWARE, INC. AND SUBSIDIARIES
(FORMERLY NEURON DATA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

2000 Stock Plan

In December 1999 the Board of Directors adopted the 2000 Stock Plan and
reserved 250,000 shares of common stock for future issuance under this plan.

Employee Stock Purchase Plan

In February 2000, the Board of Directors adopted the 2000 employee stock
purchase plan and reserved 750,000 shares of common stock for future issuance
under this plan.

Reverse Stock Split

In February 2000, the Board of Directors approved a 1 for 2 reverse stock
split of the Company's preferred and common stock. All share data information
has been restated to reflect the reverse stock split.

F-26
<PAGE>

The text at the top of the page reads "Enabling enterprises to enhance
interactions across channels:" In a circle located in the center of the page,
in which there are four pictures, representing an ATM machine, a call center
(picture of woman on phone), a business manager and a Web site.

Lines from each picture lead to captions relating to the pictures.

The caption relating to the ATM machine reads "ATMs can use Blaze: "Your
checking balance has been above $15,000 for 2 months. To earn interest on
unused funds, press YES." The caption relating to the call center reads "Call
centers can use Blaze: "Your son is going to college. We can extend your
insurance to cover him with all costs offset by your lower homeowner's
insurance rates. They will go down due to increased police protection in your
neighborhood." The caption relating to the business manager reads "This is a
Blazed sales rep: "Our competition introduced a 10% discount. Let's change our
discount to 12% for all stores and self-service channels this afternoon." The
caption relating to the Web site reads: "Web sites can use Blaze: "Instead of
buying the items in your shopping cart separately, we recommend our Combo 7.
This Combo gives you higher quality for just a few dollars more, and today only
we will add free shipping. To take advantage of this special offer, click
here."

The Blaze Software logo and the Blaze Software Web address appear at the
bottom of the page.
<PAGE>

[LOGO OF BLAZE SOFTWARE]
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth all fees and expenses payable by Blaze
Software in connection with the registration of the common stock hereunder.
All of the amounts shown are estimates except for the SEC registration fee,
NASD filing fee and the Nasdaq National Market listing fees.

<TABLE>
<CAPTION>
Amount
To Be Paid
----------
<S> <C>
SEC Registration Fee................................................ $ 17,002
NASD Filing Fee..................................................... 6,940
Nasdaq National Market Listing Fee.................................. 1,000
Printing and Engraving Expenses..................................... 175,000
Legal Fees and Expenses............................................. 400,000
Accounting Fees and Expenses........................................ 450,000
Transfer Agent and Registrar Fees and Expenses...................... 15,000
Miscellaneous Expenses.............................................. 135,058
----------
Total............................................................. $1,200,000
==========
</TABLE>

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Our certificate of incorporation and our bylaws provide for
indemnification of our directors, officers, employees and other agents to the
extent and under the circumstances permitted by the Delaware General
Corporation Law. We have also entered into agreements with our directors and
executive officers that require Blaze Software among other things to indemnify
them against certain liabilities that may arise by reason of their status or
service as directors and executive officers to the fullest extent permitted by
Delaware law. We have also purchased directors and officers liability
insurance, which provides coverage against certain liabilities including
liabilities under the Securities Act.

Item 15. Recent Sales of Unregistered Securities

(a) Since January 1, 1997, we have issued and sold the following
unregistered securities:

(1) In December 1997, we issued and sold 1,165,803 shares of Series F
Preferred Stock to eleven investors for aggregate consideration of
$8,999,979.86.

(2) In June and September 1999, we issued and sold 8,416,215 shares of
Series AA Preferred Stock. At the first closing in June 1999, we sold
8,697,716 shares to twelve investors for aggregate consideration of
$4,392,808.65, of which $1,659,696.21 was cancellation of indebtedness. At
the second closing in September 1999, we sold 281,501 shares to seventeen
investors for aggregate consideration of $151,943.43.

(3) In December 1999, we issued and sold 1,952,735 shares of Series BB
Preferred Stock to 17 investors for aggregate consideration of
$13,942,506.48.

(4) Since January 1, 1997, we have granted options to purchase
5,834,840 shares of common stock to employees, directors and consultants
under our 1996 stock plan at exercise prices ranging from $0.10 to $6.00
per share. Of the shares granted, 4,545,949 remain outstanding.

II-1
<PAGE>

The sales and issuances of securities in the transactions described
above were deemed to be exempt from registration under the Securities Act
in reliance upon Section 4(2) of the Securities Act, Regulation D
promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the
Securities Act, as transactions by an issuer not involving any public
offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under Rule 701. The
recipients of securities in each transaction represented their intentions
to acquire the securities for investment only and not with a view to or
for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationship with Blaze
Software, to information about us.

(b) There were no underwritten offerings employed in connection with any
of the transactions set forth in Item 15(a).

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits.

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1** Form of Underwriting Agreement

3.1(a)** Amended and Restated Articles of Incorporation, as in effect upon
filing of the registration statement

3.1(b)** Amended and Restated Certificate of Incorporation to be filed upon
completion of the offering

4.1(a)** Bylaws of the registrant, as in effect upon filing of the
registration statement

4.1(b)** Bylaws of the registrant, as in effect upon completion of the
offering

4.2 Specimen common stock certificate

5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation

10.1** Amended and Restated Investors Rights Agreement dated December 31,
1999

10.2** 1996 Stock Plan and forms of agreements thereunder

10.3** 2000 Stock Plan and forms of agreements thereunder

10.4 2000 Employee Stock Purchase Plan

10.5** Form of Indemnification Agreement with executive officers and
directors

10.7** Offer letter for Thomas Kelly dated July 15, 1998

10.8** Offer letter for Gary Shroyer dated June 9, 1998

10.9** Offer letter for Eric Kintzer dated February 13, 1998

10.10** Loan Agreement dated March 11, 1994 between the registrant and
CoastFed Business Credit

10.11 Lease between the registrant and SJ Plaza, LLC dated November 12,
1999 for Leased Premises located at Suite 800 and Suite 900, 150
Almaden Blvd., San Jose, California
10.12 Amended and Restated Voting Agreement dated February 25, 1998

10.13 Series AA Preferred Stock Purchase Agreement dated June 1, 1999

10.14 Series BB Preferred Stock Purchase Agreement dated December 31, 1999

16.1* Letter from KPMG Peat Marwick LLP

21.1** Subsidiaries of the registrant

23.1 Consent of PricewaterhouseCoopers LLP, independent accountants

23.2 Consent of Counsel (included in exhibit 5.1)

24.1** Power of Attorney (see page II-5)

27.1 Financial Data Schedule
</TABLE>
- --------

*To be filed by amendment

**Previously filed

(b) Financial Statement Schedules.

II-2
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of Blaze Software, Inc.

The reincorporation and reverse stock split described in Note 12 of the notes
to the consolidated financial statements is not effective at February 18,
2000. When it is effective, we will be in a position to furnish the following
report:

"In connection with our audits of the consolidated financial statements of
Blaze Software, Inc. as of March 31, 1998 and 1999, and for each of the
three years in the period ended March 31, 1999, which consolidated
financial statements are included in the Prospectus, we have also audited
the financial statement schedule listed in Item 16(b) herein. In our
opinion, this financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein."

/s/ PricewaterhouseCoopers LLP

San Jose, California
January 5, 2000

II-3
<PAGE>

Valuation and Qualifying Accounts
(in thousands)

<TABLE>
<CAPTION>
Balance at Balance at
Beginning Additions End
of Year (Deductions) Write-offs of Year
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended March 31, 1997...... $ 769 $1,192 $(1,317) $ 644
Year ended March 31, 1998...... 644 753 (789) 608
Year ended March 31, 1999...... 608 366 (531) 443
Valuation allowance for deferred
tax assets:
Year ended March 31, 1997...... 1,922 3,209 -- 5,131
Year ended March 31, 1998...... 5,131 1,969 -- 7,100
Year ended March 31, 1999...... 7,100 1,618 -- 8,718
</TABLE>

Item 17. Undertakings

Insofar as indemnification by Blaze Software for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of Blaze Software, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by Blaze Software of expenses incurred or paid by a director,
officer or controlling person of Blaze Software in the successful defense of
any action, suit or proceeding) is asserted by a director, officer or
controlling person in connection with the securities being registered, we
will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by Blaze Software is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

We hereby undertake that:

(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by Blaze Software pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Blaze Software has duly caused this Amendment No. 1 to Registration Statement
on Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Mountain View, State of California, on the 22nd day
of February, 2000.

BLAZE SOFTWARE, INC.

/s/ Thomas F. Kelly
By: _________________________________
Thomas F. Kelly
Chief Executive Officer and
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement on Form S-1 has been signed by
the following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
* Chief Executive Officer, February 22, 2000
____________________________________ President and Chairman of
Thomas F. Kelly the Board of Directors
(Principal Executive
Officer)

/s/ Gary Shroyer Chief Financial Officer February 22, 2000
____________________________________ (Principal Financial and
Gary Shroyer Accounting Officer)

* Director February 22, 2000
____________________________________
Charles M. Boesenberg

* Director February 22, 2000
____________________________________
Mark J. DeNino

* Director February 22, 2000
____________________________________
William J. Harding

* Director February 22, 2000
____________________________________
L. George Klaus

* Director February 22, 2000
____________________________________
Ken Goldman

Director February 22, 2000
____________________________________
Patrick Perez
</TABLE>

*By:
<TABLE>
<S> <C> <C>
/s/ Gary Shroyer -
_____________________________________
Gary Shroyer, Attorney-In-Fact
</TABLE>

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement

3.1(a)** Amended and Restated Articles of Incorporation, as in effect upon
filing of the registration statement

3.1(b)** Amended and Restated Certificate of Incorporation to be filed upon
completion of the offering

4.1(a)** Bylaws of the registrant, as in effect upon filing of the
registration statement

4.1(b)** Bylaws of the registrant, as in effect upon completion of the
offering

4.2 Specimen common stock certificate

5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation

10.1** Amended and Restated Investors Rights Agreement dated December 31,
1999

10.2** 1996 Stock Plan and forms of agreements thereunder

10.3** 2000 Stock Plan and forms of agreements thereunder

10.4 2000 Employee Stock Purchase Plan

10.5** Form of Indemnification Agreement with executive officers and
directors

10.7** Offer letter for Thomas Kelly dated July 15, 1998

10.8** Offer letter for Gary Shroyer dated June 9, 1998

10.9** Offer letter for Eric Kintzer dated February 13, 1998

10.10** Loan Agreement dated March 11, 1994 between the registrant and
CoastFed Business Credit

10.13 Series AA Preferred Stock Purchase Agreement dated June 1, 1999

10.14 Series BB Preferred Stock Purchase Agreement dated December 31, 1999

16.1* Letter from KPMG Peat Marwick LLP

21.1** Subsidiaries of the registrant

23.1 Consent of PricewaterhouseCoopers LLP, independent accountants

23.2 Consent of Counsel (included in exhibit 5.1)

24.1** Power of Attorney (see page II-5)

27.1 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment

**Previously filed

<PAGE>

NUMBER BLAZE SHARES
BLZ SOFTWARE
COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS AND A
STATEMENT AS TO THE RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS OF SHARES

THIS CERTIFIES THAT CUSIP 09347T 10 9

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.0001 PER
SHARE OF
BLAZE SOFTWARE, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:

/s/ Gary Shroyer /s/ Thomas F. Kelly

CHIEF FINANCIAL OFFICER PRESIDENT AND CHIEF EXECUTIVE
AND SECRETARY OFFICER

BLAZE SOFTWARE, INC.
CORPORATE
[SEAL]
DEC. 30, 1999
DELAWARE

COUNTERSIGNED AND REGISTERED:
NORWEST BANK MINNESOTA, N.A.
TRANSFER AGENT AND REGISTRAR

AUTHORIZED SIGNATURE
<PAGE>

BLAZE SOFTWARE, INC

A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge at
the principal office of the Corporation.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM -- as tenants in common UNIF GIFT MIN - Custodian
TEN ENT -- as tenants by the entireties -------------- --------------
JT TEN -- as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
------------------------------------
(State)
UNIF TRF MIN ACT - Custodian (Until age )
--------------- -------
(Cust)

under/Uniform Transfers
--------------
(Minor)
to Minors Act
---------------------------
(State)
</TABLE>

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------

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

- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

Shares
- -------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
- -------------------------------------------------------------------------------
irrevocably constitute and appoint
Attorney
- ----------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with

- -------------------------------------------------------------------------------
full power of substitution in the premises.

Dated
---------------------------

--------------------------------------
THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.

Signature(s) Guaranteed

By
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS OR CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT
TO S.E.C. RULE 17Ad-15.

<PAGE>

[Letterhead of Wilson Sonsini Goodrich & Rosati]

Exhibit 5.1

February 20, 2000

Blaze Software, Inc.
1310 Villa Street
Mountain View, CA 94041

Re: Blaze Software, Inc. (the "Company") Registration Statement on Form S-1

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission (the "Commission") on or about February
20, 2000 (as such may be further amended or supplemented, the "Registration
Statement"), in connection with the registration under the Securities Act of
1933, as amended (the "Act"), of up to 4,600,000 shares of your Common Stock
(the "Shares"), assuming the effectivness of a two-for-one reverse stock split.
The Shares, which include up to 600,000 post-split shares of Common Stock
issuable pursuant to an over-allotment option granted to the underwriters (the
"Underwriters"), are to be sold to the Underwriters as described in such
Registration Statement for sale to the public. As your counsel in connection
with this transaction, we have examined the proceedings proposed to be taken by
you in connection with the issuance and sale of the Shares.

Based on the foregoing, it is our opinion that, upon conclusion of the
proceedings being taken or contemplated by us, as your counsel, to be taken
prior to the issuance of the Shares and upon completion of the proceedings taken
in order to permit such transactions to be carried out in accordance with the
securities laws of various states where required, the Shares, when issued and
sold in the manner described in the Registration Statement, will be legally and
validly issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
which has been approved by us, as such may be further amended or supplemented,
or incorporated by reference in any Registration Statement relating to the
prospectus file pursuant to Rule 462(b) of the Act.

Very truly yours,

WILSON SONSINI GOODRICH & ROSATI
Professional Corporation

/s/ Wilson Sonsini Goodrich & Rosati

<PAGE>

EXHIBIT 10.4

BLAZE SOFTWARE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN

The following constitute the provisions of the 2000 Employee Stock
Purchase Plan of Blaze Software, Inc. (the "Company").

1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

2. Definitions.
-----------

(a) "Board" shall mean the Board of Directors of the Company or any
-----
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----

(d) "Company" shall mean Blaze Software, Inc. and any Designated
-------
Subsidiary of the Company.

(e) "Compensation" shall mean all base straight time gross earnings
------------
only, but exclusive of payments for bonuses, commissions, overtime, shift
premium, incentive compensation, incentive payments and other compensation.

(f) "Designated Subsidiary" shall mean any Subsidiary that has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.

(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.

(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.

(i) "Exercise Date" shall mean the last Trading Day of each Purchase
-------------
Period.
<PAGE>

(j) "Fair Market Value" shall mean, as of any date, the value of Common
-----------------
Stock determined as follows:

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

(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;

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

(iv) For purposes of the Enrollment Date of the first Offering Period
under the Plan, the Fair Market Value shall be the initial price to the public
as set forth in the final prospectus included within the registration statement
in Form S-1 filed with the Securities and Exchange Commission for the initial
public offering of the Company's Common Stock (the "Registration Statement").

(k) "Offering Periods" shall mean the periods of approximately twenty-
----------------
four (24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1st and November
1st of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective (the "IPO Date") and ending on the last Trading Day on or
before October 31, 2002 The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.

(l) "Plan" shall mean this 2000 Employee Stock Purchase Plan.
----

(m) "Post-Split Basis" shall refer to the number of shares indicated after
----------------
the stock split which occurred on the same date as the adoption of this plan.

(n) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date. The first Purchase
Period of the first Offering Period under the Plan shall commence on the IPO
Date and end on October 31, 2000.

(o) "Purchase Price" shall mean 85% of the Fair Market Value of a share of
--------------
Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower;
provided however, that the Purchase Price may be adjusted by the Board pursuant
to Section 20.

-2-
<PAGE>

(p) "Reserves" shall mean the number of shares of Common Stock
--------
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.

(q) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.

(r) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.

3. Eligibility.
-----------

(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.

(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.

4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1st and November 1st each year, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 31, 2002. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced prior
to the scheduled beginning of the first Offering Period to be affected
thereafter.

5. Participation.
-------------

(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.

(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.

-3-
<PAGE>

6. Payroll Deductions.
------------------

(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen percent (15%) of the
Compensation which he or she receives on each pay day during the Offering
Period.

(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.

(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.

(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.

7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 5,000
shares (on a Post-Split Basis) of the Company's Common Stock (subject to any
adjustment pursuant to Section 19), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
The Board may, for future Offering Periods, increase or decrease, in its
absolute discretion, the

-4-
<PAGE>

maximum number of shares of the Company's Common Stock an Employee may purchase
during each Purchase Period of such Offering Period. Exercise of the option
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof. The option shall expire on the last day
of the Offering Period.

8. Exercise of Option.
------------------

(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.

(b) If the Board determines that, on a given Exercise Date, the number
of shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.

9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.

10. Withdrawal.
----------

(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant

-5-
<PAGE>

promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.

(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.

11. Termination of Employment.
-------------------------

Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.

12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.

13. Stock.
-----

(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 750,000 shares (on a Post-Split Basis) plus an annual increase to be
added on the first day of the Company's fiscal year beginning in 2001, equal to
the lesser of (i) 500,000 shares (on a Post-Split Basis), (ii) 2% of the
outstanding shares on such date or (iii) an amount determined by the Board.

(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.

(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.

14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.

-6-
<PAGE>

15. Designation of Beneficiary.
--------------------------

(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

17. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.

19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
- --------------------

(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of

-7-
<PAGE>

any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.

(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.

(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.

20. Amendment or Termination.
------------------------

(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.

(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount

-8-
<PAGE>

withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.

(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:

(i) altering the Purchase Price for any Offering Period including an
Offering Period underway at the time of the change in Purchase Price;

(ii) shortening any Offering Period so that Offering Period ends on a
new Exercise Date, including an Offering Period underway at the time of the
Board action; and

(iii) allocating shares.

Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.

21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

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

23. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.

-9-
<PAGE>

24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.

-10-
<PAGE>

EXHIBIT A
---------

BLAZE SOFTWARE, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

SUBSCRIPTION AGREEMENT

_____ Original Application Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)

1. ____________________ hereby elects to participate in the Blaze Software,
Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.

2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to 15%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)

3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.

4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.

5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).

6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
-
hereby agree to notify the Company in writing within 30 days after the date
---------------------------------------------------------------------------
of any disposition of my shares and I will make adequate provision for
----------------------------------------------------------------------
Federal, state or other tax withholding obligations, if any, which arise
------------------------------------------------------------------------
upon the
--------
<PAGE>

disposition of the Common Stock. The Company may, but will not be
-------------------------------
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.

7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.

8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:

NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)

_________________________ ___________________________________
Relationship
___________________________________
(Address)

-2-

<PAGE>

Employee's Social
Security Number: ____________________________________

Employee's Address: ____________________________________

____________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:_________________________ _______________________________________
Signature of Employee

_______________________________________
Spouse's Signature (If beneficiary
other than spouse)

-3-
<PAGE>

EXHIBIT B
---------

BLAZE SOFTWARE, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

The undersigned participant in the Offering Period of the Blaze Software,
Inc. Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.

Name and Address of Participant:

________________________________

Signature:

________________________________

Date:___________________________

<PAGE>

EXHIBIT 10.11

OFFICE LEASE

SJ PLAZA, LLC,
A Delaware limited liability company,
As Landlord

And

BLAZE SOFTWARE, INC.,
A California corporation,
As Tenant

For Leased Premises located at
Suite 800 and Suite 900, 150 Almaden Blvd., San Jose, California 95113
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S> <C>
ARTICLE 1 SALIENT LEASE TERMS...................................... 1
ARTICLE 2 ADDITIONAL DEFINITIONS................................... 3
ARTICLE 3 PREMISES AND COMMON AREAS................................ 8
ARTICLE 4 TERM AND POSSESSION...................................... 10
ARTICLE 5 MINIMUM MONTHLY RENT..................................... 11
ARTICLE 6 ADDITIONAL RENT.......................................... 11
ARTICLE 7 ACCORD AND SATISFACTION.................................. 13
ARTICLE 8 SECURITY DEPOSIT......................................... 13
ARTICLE 9 USE...................................................... 14
ARTICLE 10 COMPLIANCE WITH LAWS AND REGULATIONS..................... 14
ARTICLE 11 SERVICE AND EQUIPMENT.................................... 16
ARTICLE 12 ALTERATIONS.............................................. 18
ARTICLE 13 PROPERTY INSURANCE....................................... 20
ARTICLE 14 INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION........ 21
ARTICLE 15 LIABILITY INSURANCE...................................... 22
ARTICLE 16 INSURANCE POLICY REQUIREMENTS & INSURANCE DEFAULTS....... 22
ARTICLE 17 FORFEITURE OF PROPERTY................................... 23
ARTICLE 18 MAINTENANCE AND REPAIRS.................................. 23
ARTICLE 19 DESTRUCTION.............................................. 24
ARTICLE 20 CONDEMNATION............................................. 25
ARTICLE 21 ASSIGNMENT AND SUBLETTING................................ 26
ARTICLE 22 ENTRY BY LESSOR.......................................... 29
ARTICLE 23 SIGNS.................................................... 29
ARTICLE 25 REMEDIES UPON DEFAULT.................................... 30
ARTICLE 26 BANKRUPTCY............................................... 32
ARTICLE 27 SURRENDER OF LEASE....................................... 33
ARTICLE 28 LANDLORD'S EXCULPATION................................... 33
ARTICLE 29 ATTORNEYS' FEES.......................................... 33
ARTICLE 30 NOTICES.................................................. 34
ARTICLE 31 SUBORDINATION AND FINANCING PROVISIONS................... 34
ARTICLE 32 ESTOPPEL CERTIFICATES.................................... 35
ARTICLE 33 MISCELLANEOUS PROVISIONS................................. 35
</TABLE>
<PAGE>

OFFICE LEASE

THIS OFFICE LEASE ("Lease") is entered and dated for reference purposes
only as November 12, 1999, by and between "Landlord" and "Tenant" (as such terms
are defined below).

ARTICLE 1 SALIENT LEASE TERMS

In addition to the terms defined throughout this Lease, the following
salient terms shall have the following meanings when referred to in this Lease:

1.1 Rent Payment SJ PLAZA, LLC
Address: 100 Park Center Plaza, Suite 425
San Jose, CA 95113

1.2 "Landlord" SJ Plaza, LLC,
and c/o Divco West Group, LLC
Notice 100 Park Center Plaza, Suite 425
Address: San Jose, CA 95113
Attn.: Property Manager

With a copy to: Divco West Group, LLC
150 Almaden Blvd., Suite 700
San Jose, CA 95113
Attention: Asset Manager

1.3 "Tenant" BLAZE SOFTWARE, INC.
and 150 Almaden Blvd., Suite 800
Notice San Jose, CA
Address: Attn: Chief Financial officer

1.4 "Leased Approximately 27,586 square feet of Rentable Area
Premises:" (hereinafter defined), Premises:" as outlined in
Exhibit B attached hereto, located in Suites 800 and
---------
900 in the Building. The foregoing square footage for
the Rentable Area of the Leased Premises shall be
deemed the actual square footage for the Rentable Area
of Leased Premises.

1.5 "Building:" That building located at 150 Almaden Blvd., San Jose,
California, containing approximately 201,748 square
feet of Rentable Area, which shall be deemed the actual
square footage of Rentable Area in the Building.

1.6 "Complex:" Park Center Plaza, consisting of the Building and those
certain office buildings located at Park Center Plaza,
San Jose, California, and the Common Areas (hereinafter
defined) together with the parcel or parcels in common
ownership therewith and/or contiguous thereto, as
outlined in Exhibit A attached hereto.
---------

1.7 Estimated
Commencement
Date: February 1, 2000 ("Estimated Commencement Date")

1.8 "Term:" Sixty (60) months following the Commencement Date, plus
any partial month for the month in which the
Commencement Date occurs if the Commencement occurs on
other than the first day of a calendar month. If the
Commencement Date is other than the first

1
<PAGE>

day of a calendar month, the first month shall include
the remainder of the calendar month in which the
Commencement Date occurs plus the first full calendar
month thereafter, and minimum monthly rent for such
first month shall include the full monthly rent for the
first full calendar month plus monthly rent for the
partial month in which the Commencement Date occurs
prorated on a daily basis at the monthly rent provided
for the first calendar month.

1.9 "Minimum
Monthly Rent:" (A) Months Minimum Monthly Rent
------ --------------------
1 - 12 $ 86,895.90
13 - 24 $ 90,371.74
25 - 36 $ 93,986.61
37 - 48 $ 97,746.07
49 - 60 $101,655.91

(B) Advance Rent: $86,895.90

1.10 "Base Year
Costs:" The actual costs in calendar year 2000 for Base
Operating Costs, Base Taxes and Base Insurance.

1.11 "Security Deposit:" $434,480.00, which may be in the form of a Letter
of Credit as provided in Addendum No. 1 attached
hereto.

1.12 "Permitted Use:" The Leased Premises shall be used solely for
engineering offices and uses incidental thereto and
general office use, but for no other use.

1.13 Proportionate
Share: Tenant's initial Proportionate Share is 13.67%
based on the ratio that the Rentable Area of the
Leased Premises (i.e., 27,586 square feet) bears to
the Rentable Area of the Building (i.e., 201,748
square feet).

1.14 Declaration of
Restrictions: As set forth on Exhibit F attached hereto and
---------
incorporated herein.

1.15 "Broker:" Colliers International representing Tenant and
Ritchie Commercial representing Landlord.

1.16 "Reciprocal Easement
Agreement:" That certain Grant of Reciprocal Easements and
Agreement for Maintenance dated as of September 22,
1970 and recorded in Book 9072 at Page 22 of the
official Records of Santa Clara County, California,
as amended.

1.17 Contents: Included as part of this Lease are the following
Exhibits and addenda which are attached hereto and
incorporated herein by this reference:

Exhibits: A - Plan of the Complex
B - Floor Plan of the Leased Premises
C - Work Letter for Construction
Obligations
D - Acknowledgment of Commencement
Date
E - Rules & Regulations
F - Declaration of Restrictions

2
<PAGE>

Addendum No. 1

ARTICLE 2 ADDITIONAL DEFINITIONS

The terms defined in this Article 2 shall, for all purposes of this Lease
and all agreements supplemental hereto, have the meanings herein specified,
unless expressly stated otherwise.

"Base Operating Costs" means the Operating Costs for the calendar year set
--------------------
forth in Section 1.10 hereof.

"Base Insurance" means the Insurance Costs for the calendar year set forth
--------------
in Section 1.10 hereof.

"Base Taxes" means the Taxes for the calendar year set forth in Section
----------
1.10 hereof.

"Building" shall mean the structure which contains the Leased Premises.
--------

"Commencement Date" shall mean the earlier of (a) the date by which the
-----------------
Leasehold Improvements to be constructed by Landlord pursuant to Exhibit C have
---------
been Substantially Completed (as defined in Exhibit C) if Landlord is obligated
---------
to construct any Leasehold Improvements, subject to "Tenant Delays" and "Force
Majeure Delays" (as such terms are defined in Exhibit C attached hereto), or (b)
---------
the date Tenant takes possession of the Leased Premises. However, if there is
any delay in Substantially Completing the Leasehold Improvements due to any
Tenant Delay, then such delay shall thereupon effect a postponement of the date
by which Landlord is obligated to Substantially Complete the Leasehold
Improvements; however, the Commencement Date shall be deemed the date the
Leasehold Improvements would have been completed but for the Tenant Delays.
Thus, the date for commencement of Rent and all additional rent shall not be
delayed by Tenant Delay.

"Common Areas" shall mean all areas and facilities outside the Leased
------------
Premises within the exterior boundaries of the parcel of land containing the
Building of which the Leased Premises form a part, together with the exterior
plaza and access areas within the Complex, all as provided and designated by
Landlord from time to time for the general use and convenience of Tenant and of
other tenants of Landlord having the common use of such areas, and their
respective authorized representatives and invitees. Common Areas include,
without limitation, corridors, stairways, elevator shafts, janitor rooms in the
Building, the Park Center Plaza parking garage, the driveways and landscaped
areas in the Complex as generally outlined on Exhibit A attached hereto. Exhibit
A is tentative and Landlord reserves the right to make alterations thereto from
time to time.

"Insurance Costs" shall mean all premiums and costs and expenses for all
---------------
policies of insurance which may be obtained by Landlord in its discretion for
(a) the Leased Premises, Building and the Common Areas of the Complex, or any
blanket policies which include the Building or Complex, coveting damage thereto
and loss of rents caused by fire and other perils Landlord elects to cover,
including, without limitation, coverage for earthquakes and floods, (b)
commercial general liability insurance for the benefit of Landlord and its
designees and (c) such other coverage Landlord elects to obtain for the Leased
Premises, Building or Common Areas of the Complex, including, without
limitation, coverage for environmental liability and losses. Notwithstanding
anything to the contrary, Landlord reserves the right to adjust the Base
Insurance Costs if such Base Insurance costs include coverages for perils not
required or elected to be insured by Landlord in the future.

"Lease Year" means any calendar year, or portion thereof, following the
----------
commencement hereof, the whole or any part of which period is included within
the Term.

"Leased Premises" shall mean the portion of space leased to Tenant
---------------
hereunder.

"Leasehold Improvements" and "Tenant Improvements" shall mean the tenant
---------------------- -------------------
improvements, if any, to be constructed by Landlord pursuant to Exhibit C
---------
attached hereto.

3
<PAGE>

"Operating Costs" means the total amounts paid or. payable, whether by
---------------
Landlord or others on behalf of Landlord, in connection with the ownership,
maintenance, repair, and operations of the Building and the Common Areas of the
Complex in accordance with Landlord's standard accounting procedures. Since the
Complex consists of multiple buildings, certain Operating Costs may pertain to a
particular building(s) and other Operating Costs to the Complex as a whole (such
as Operating Costs for the Common Areas of the Complex). Operating Costs
applicable to any particular building within the Complex shall be charged to the
building in question whose tenants shall be responsible for payment of their
respective proportionate shares in the pertinent building and other Operating
Costs applicable to the Complex (such as the Common Areas of the Complex) shall
be charged to each building in the Complex (including the Building) with the
tenants in each such building being responsible for paying their respective
proportionate shares in such building of such costs to the extent required under
the applicable leases. Landlord shall in good faith attempt to allocate such
Operating Costs to the buildings (including the Building) and such allocation
shall be binding on Tenant. Operating Costs shall include, but not be limited
to, the aggregate of the amount paid for:

(1) all fuel used in heating and air conditioning of the
Building;

(2) the amount paid or payable for all electricity furnished by
Landlord to the Common Areas of the Complex, which shall be allocated to each
building as provided above (other than electricity furnished to and paid for by
other tenants by reason of their extraordinary consumption of electricity and
that furnished to the any other building in the Complex for which the tenants of
such other building are responsible for such electrical costs);

(3) the cost of periodic relamping and reballasting of lighting
fixtures;

(4) the amount paid or payable for all hot and cold water (other
than that chargeable to Tenants by reason of their extraordinary consumption of
water and that furnished to any other building in the Complex for which the
tenants of such other building are responsible for such water costs);

(5) the amount paid or payable for all labor and/or wages and
other payments including cost to Landlord of workers' compensation and
disability insurance, payroll taxes, welfare and fringe benefits made to
janitors, caretakers, and other employees, contractors and subcontractors of
Landlord (including wages of the Building manager) involved in the management,
operation, maintenance and repair of the Complex;

(6) painting for exterior walls of the Building and the Common
Areas of the Complex; the total charges of any independent contractors employed
in the repair, care, operation, maintenance, and cleaning of the Building and
Common Areas of the Complex;

(7) the amount paid or payable for all supplies used in
connection with the operation, repair and maintenance of the Building and the
Common Areas of the Complex;

(8) the cost of window and exterior wall cleaning, telephone and
utility costs of the Building and Common Areas of the Complex;

(9) the cost of accounting services necessary to compute the
rents and charges payable by Tenants and keep the books of the Building and
Common Areas of the Complex;

(10) fees for management, including, without limitation, office
rent, supplies, equipment, salaries, wages, bonuses and other compensation
(including fringe benefits, vacation, holidays and other paid absence benefits)
relating to employees of Landlord or its agents engaged in the management,
operation, repair, or maintenance of the Building and/or Common Areas of the
Complex;

4
<PAGE>

(11) fees for legal, accounting (including, without limitation,
any outside audit as Landlord may elect in its sole and absolute discretion),
inspection and consulting services incurred by Landlord in connection with
operation, repair or maintenance of the Building or Common Areas of the Complex;

(12) the cost of operating, repairing and maintaining the
Building elevators;

(13) the cost of porters, guards and other protection services;

(14) the cost of establishing and maintaining the Building's
directory board;

(15) payments for general maintenance and repairs to the plant
and equipment supplying climate control to the Building and Common Areas of the
Complex;

(16) the cost of supplying all services pursuant to Article 11
hereof to the extent such services are not paid by individual tenants;

(17) amortization of the costs, including repair and replacement,
of all maintenance and cleaning equipment and master utility meters and of the
costs incurred for repairing or replacing all other fixtures, equipment and
facilities serving or comprising the Building and Common Areas of the Complex
which by their nature require periodic or substantial repair or replacement, and
which are not charged fully in the year in which they are incurred, at rates on
the various items determined from time to time by Landlord in accordance with
sound accounting principles;

(18) community association dues, assessments and charges and
property owners' association dues, assessments and charges which may be imposed
upon Landlord by virtue of any recorded instrument affecting title to the
Building;

(19) all costs to upgrade, improve or change the utility,
efficiency or capacity of any utility or telecommunication system serving the
Building and the Common Areas of the Complex;

(20) the repair and replacement, resurfacing and/or repaying of
any paved areas, curbs or gutters within the Building or Common Area's of the
Complex;

(21) the repair and replacement of any equipment or facilities
serving or located within the Building or the Common Areas of the Complex,
except for the cost to construct any new structures; and

(22) the cost of any capital repairs, improvements and
replacements made by the Landlord to the Building or Common Areas of the Complex
("Capital Costs"). However, certain Capital Costs shall be includable in
Operating Costs each year only to the extent of that fraction allocable to the
year in question calculated by amortizing such Capital Cost over the reasonably
useful life of the improvement resulting therefrom, as determined by Landlord in
its good faith discretion, with interest on the unamortized balance at the
higher of (i) ten percent (10%) per annum; or (ii) the interest rate as may have
been paid by Landlord for the funds borrowed for the purpose of performing the
work for which the Capital Costs have been expended, but in no event to exceed
the highest rate permissible by law. The Capital Costs subject to such
amortization procedure are restricted to the following two categories: (a) those
costs for capital improvements to the Building or Common Areas of the Complex of
a type which do not normally recur more frequently than every five (5) years in
the normal course of operation and maintenance of such facilities (specifically
excluding painting of all or a portion of the Complex); and (b) costs incurred
for the purpose of reducing other operating expenses or utility costs, from
which Tenant can expect a reasonable benefit, or that are required by
governmental law, ordinance, regulation or mandate, not applicable to the
Complex at the time of the original construction.

5
<PAGE>

Operating Costs shall not include any of the following:

(a) legal or accounting expenses incurred expressly for
negotiating a lease with a particular tenant, or as a result of a default
of a specific tenant;

(b) the cost to construct any tenant improvements for other
tenants;

(d) the cost for Work to remove any asbestos or other hazardous
material in the Building or the Common Areas of the Complex; provided,
however if such work is due to any alteration by Tenant or otherwise caused
by Tenant or any of its officers, directors, employees, agents or
contractors, then Tenant shall be solely responsible for the cost of such
work;

(e) leasing commission or other cost to put a tenant into the
Complex;

(f) interest on debt or amortization payments on mortgages or
deeds of trust, ground lease payment or other debt for borrowed money;

(g) the cost for repairs resulting from any structural defect in
the original design or construction of the Building or Common Areas of the
Complex;

(h) the cost for repairs to the six story parking garage in
located at the 185 Building (as defined in the definition of Real Estate
Taxes) or to the main parking garage at the Complex; and

(i) the cost to construct any additional buildings or structures
to the Common Areas of the Complex or to construct additional improvements
to substantially expand the nature and quality of the improvements in the
Common Areas other than when reasonably determined by Landlord to be
necessary or desirable for the continued maintenance or operation of the
Building and all Common Areas.

In no event should Landlord account for, through inclusion in
Operating Costs and direct payment from any tenant or third party, more
than 100% of any item.

"Proportionate Share" or "Pro Rata Percent" shall be that fraction
------------------- ----------------
(converted to a percentage) the numerator of which is the Rentable Area
(hereinafter defined) of the Leased Premises and the denominator of which is the
Rentable Area of the Building. Tenant's Proportionate Share as of the
commencement of the term hereof is specified in Section 1.13. Said Proportionate
Share shall be recalculated by Landlord as may be required effective as at the
commencement of any period to which the calculation is applicable in this Lease.
Notwithstanding the preceding provisions of this Section, Tenant's Proportionate
Share as to certain expenses may be calculated differently to yield a higher
percentage share for Tenant as to certain expenses in the event Landlord permits
other tenants in the Building to directly incur such expenses rather than have
Landlord incur the expense in common for the Building (such as, by way of
illustration, wherein a tenant performs its own janitorial services). In such
case Tenant's proportionate share of the applicable expense shall be calculated
as having as its denominator the Rentable Area of all floors rentable to tenants
in the Building less the Rentable Area of tenants who have incurred such expense
directly. In any case in which Tenant, with Landlord's consent, incurs such
expenses directly, Tenant's proportionate share will be calculated specially so
that expenses of the same character which are incurred by Landlord for the
benefit of other tenants in the Building shall not be prorated to Tenant.
Nothing herein shall imply that Landlord will permit Tenant or any other tenant
of the Building to incur any Operating Costs. Any such permission shall be in
the sole discretion of the Landlord, which Landlord may grant or withhold in its
arbitrary judgment.

6
<PAGE>

"Real Estate Taxes" or "Taxes" shall mean and include all general and
----------------- -----
special taxes, assessments, fees of every kind and nature, duties and levies,
charged and levied upon or assessed by any governmental authority against the
parcel containing the Building and all other improvements on such parcel,
including the various estates in such parcel and the Building and improvements
thereon, any leasehold improvements, fixtures, installations, additions and
equipment, whether owned by Landlord or Tenant or any other tenant; except that
it shall exclude any taxes of the kind covered by Section 6.1 hereof to the
extent Landlord is reimbursed therefor by any tenant in the Building. Real
Estate Taxes shall also include the reasonable cost to Landlord of contesting
the amount, validity, or the applicability of any Taxes mentioned in this
Section but only to the extent of the savings. Further included in the
definition of Taxes herein shall be general and special assessments, license
fees, commercial rental tax, levy, or tax (other than inheritance or estate
taxes) imposed by any authority having the direct or indirect power to tax, as
against any legal or equitable interest of Landlord in the Leased Premises,
Building, parcel or in the Complex or on the act of entering into this Lease or,
as against Landlord's right to rent or other income therefrom, or as against
Landlord's business of leasing the Leased Premises, Building, parcel or the
Complex, any tax, fee, or charge with respect to the possession, leasing,
transfer of interest, operation, management, maintenance, alteration, repair,
use, or occupancy by Tenant, of the Leased Premises, Building, parcel or any
portion thereof or the Complex, or any tax imposed in substitution, partially or
totally, for any tax previously included within the definition of Taxes herein,
or any additional tax, the nature of which may or may not have been previously
included within the definition of Taxes. Further, if at any time during the term
of this Lease the method of taxation or assessment of real estate or the income
therefrom prevailing at the time of execution hereof shall be, or has been
altered so as to cause the whole or any part of the Taxes now or hereafter
levied, assessed or imposed on real estate to be levied, assessed or imposed
upon Landlord, wholly or partially, as a capital levy, business tax, fee, permit
or other charge, or on or measured by the Rents received therefrom, then such
new or altered taxes, regardless of their nature, which are attributable to the
land, the Building or to other improvements on the land shall be deemed to be
included within the term "Real Estate Taxes" for purposes of this Section,
whether in substitution for, or in addition to any other Real Estate Taxes, save
and except that such shall not be deemed to include any enhancement of said tax
attributable to other income of Landlord. With respect to any general or special
assessments which may be levied upon or against the Leased Premises, Building,
Complex, or the underlying realty, or which may be evidenced by improvement or
other bonds, and may be paid in annual or semi-annual installments, only the
amount of such installment, prorated for any partial year, and statutory
interest shall be included within the computation of Taxes for which Tenant is
responsible hereunder.

The parcel containing the Building is a separate tax parcel that also
contains a six story building with a 5 story parking garage and approximately
21,665 square feet of Rentable Area having a street address of 185 Park Center
Plaza, San Jose, California (the "185 Park Center Building"), together with all
other improvements on such parcel. Since the Building and the 185 Park Center
Building are currently included in the same Tax bill and contain different size
and types of improvements, Landlord shall have the right to reasonably allocate
the Taxes to each such building in accordance with Landlord's accounting and
management principles. Currently, Taxes are allocated 9.71% to the Building and
the balance to the 185 Park Center Building, but Landlord reserves the right to
re-adjust such allocation in its good faith discretion.

Notwithstanding anything to the contrary contained in the foregoing
definition of Real Estate Taxes, Tenant shall not be responsible or liable for
the payment of (a) any state or federal income taxes assessed against Landlord,
(b) any estate, succession or inheritance taxes of Landlord, (c) any corporation
franchise taxes imposed upon the corporate owner of the fee of the Building, or
(d) any transfer taxes to record any document to convey any interest in the
Building or the Complex (however any increase in taxes as result of any change
of ownership shall be included in Real Estate Taxes).

"Rent "rent" or "rental" means Minimum Monthly Rent and all other sums
----
required to be paid by Tenant pursuant to the terms of this Lease.

"Rentable Area" "Rentable Area" as used in the Lease shall be
-------------
determined as follows:

7
<PAGE>

(a) Single Tenant Floor. As to each floor of the Building on which
-------------------
the entire space rentable to tenants is or will be leased to one tenant,
Rentable Area shall be the entire area bounded by the inside surface of the
exterior glass walls on such floor, including all areas used for elevator
lobbies, corridors, special stairways, special elevators, restrooms, mechanical
rooms, electrical rooms and telephone closets, without deduction for columns and
other structural portions of the Building or vertical penetrations that are
included for the special use of Tenant, but excluding the area contained within
the interior walls of the Building stairs, fire towers, vertical ducts, elevator
shafts, flues, vents, stacks, pipe shafts, and the rentable square footage
described in Paragraph (c) below.

(b) Multi-Tenant Floor. As to each floor of the Building on which
------------------
space is or will be leased to more than one tenant, Rentable Area attributable
to each such lease shall be the total of (i) the entire area included within the
Leased Premises covered by such lease, being the area bounded by the inside
surface of any exterior glass walls, the exterior of all walls separating such
Leased Premises from any public corridors or other public areas on such floor,
and the centerline of all walls separating such Leased Premises from other areas
leased or to be leased to other tenants on such floors, (ii) a pro rata portion
of the area within the elevator lobbies, corridors, restrooms, mechanical rooms,
electrical rooms, telephone closets and their enclosing walls situated on such
floor and (iii) the rentable square footage described in Paragraph (c) below.

(c) Building Load. In any event, Rentable Area shall also include
-------------
Tenant's Proportionate Share of the lobbies of the Building and Tenant's
Proportionate Share of the area of the emergency equipment, fire pump equipment,
electrical switching gear, telephone equipment and mail delivery facilities
serving the Building.

(d) Deemed Square Footage. The Rentable Area of the Leased Premises
---------------------
is deemed to be the square footage set forth in section 1.4 of this Lease as of
the date hereof, and Rentable Area of the Building is deemed to be the square
footage set forth in section 1.5 hereof. From time to time at landlord's option,
Landlord may re-measure the Rentable Area of the Leased Premises and the
Building and the other building on the Land, which determination shall be
conclusive and thereon Tenant's Proportionate Share shall be adjusted
accordingly, but the Minimum Monthly Rent shall not be changed.

"Structural" as herein used shall mean any portion of the Leased Premises,
----------
Building or Common Areas of the Complex which provides bearing support to any
other integral member of the Leased Premises, Building or Common Areas of the
Complex such as, by limitation, the roof structure (trusses, joists, beams),
posts, load beating walls, foundations, girders, floor joists, footings, and
other load bearing members constructed by Landlord.

ARTICLE 3 PREMISES AND COMMON AREAS

3.1 Demising Clause. Landlord hereby leases to Tenant, and Tenant hires
---------------
from Landlord the Leased Premises, consisting of the approximate square footage
listed in the Salient Lease Terms, which the parties agree shall be deemed the
actual square footage, subject to change by Landlord in connection with changes
in the Rentable Area of the floor on which the Leased Premises are located.

3.2 Reservation. Landlord reserves the area beneath and above the Building
-----------
as well as the exterior thereof together with the right to install, maintain,
use, repair and replace pipes, ducts, conduits, wires, and structural elements
leading through the Leased Premises serving other parts of the Building and
Common Areas of the Complex, so long as such items are concealed by walls,
flooring or ceilings. Such reservation in no way affects the maintenance
obligations imposed herein. Landlord may change the shape, size, location,
number and extent of the improvements to any portion of the Building or Common
Areas of the Complex without the consent of Tenant; provided, however, that
Landlord agrees not to materially reduce the size of the parking area in the
parking garage in the Building, except for temporary reductions due to repairs,
maintenance and improvements and damage by casualty.

8
<PAGE>

3.3 Covenants, Conditions and Restrictions. The parties agree that this
--------------------------------------
Lease is subject to the effect of (a) any covenants, conditions, restrictions,
easements, mortgages or deeds of trust, ground leases, rights of way of record,
and any other matters or documents of record, including, without limitation, the
Declaration of Restrictions referred to in the Salient Lease Terms; (b) any
zoning laws of the city, county and state where the Complex is situated; and (c)
general and special taxes not delinquent. Tenant agrees that as to its leasehold
estate, Tenant and all persons in possession or holding under Tenant will
conform to and will not violate the terms of any covenants, conditions or
restrictions of record which may now or hereafter encumber the Building or the
Complex, including, without limitation, the Declaration of Restrictions referred
to in the Salient Lease Terms (hereinafter the "restrictions"). This Lease is
subordinate to the restrictions and any amendments or modifications thereto.

3.4 Common Areas. Landlord hereby grants to Tenant, for the benefit of
------------
Tenant and its employees, suppliers, shippers, customers and invitees, during
the term of this Lease, the non-exclusive right to use, in common with others
entitled to such use, the Common Areas as they exist from time to time, subject
to the limitation of Tenant's parking privileges as provided in Addendum No. 1
attached hereto and any rights, powers, and privileges reserved by Landlord
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Building or the Complex. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Landlord or Landlord's designated agent, which consent may be revoked
at any time. In the event that any unauthorized storage shall occur then
Landlord shall have the right, without notice, in addition to such other rights
and remedies that it may have, to remove the property and charge the cost to
Tenant, which cost shall be immediately payable upon demand by Landlord.

(a) Common Areas-Changes. Landlord shall have the right, in
--------------------
Landlord's sole discretion, from time to time:

(1) To make changes and reductions to the Common Areas,
including, without limitation, changes in the location, size, shape and number
of driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas and walkways;
provided, however, that Landlord agrees not to materially reduce the size of the
parking area in the parking garage in the Building, except for temporary
reductions due to repairs, maintenance and improvements and damage by casualty;

(2) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;

(3) To designate other land outside the boundaries of the
Building to be a part of the Common Areas;

(4) To add additional improvements to the Common Areas;

(5) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building or Complex, or any portion
thereof;

(6) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas, Building and Complex as
Landlord may, in the exercise of sound business judgment, deem to be
appropriate.

(b) Common Area Maintenance. Landlord shall, in Landlord's sole
-----------------------
discretion, maintain the Common Areas (subject to reimbursement pursuant to this
Lease), establish and enforce reasonable rules and regulations concerning such
areas, close any of the Common Areas to whatever extent required in the opinion

9
<PAGE>

of Landlord's counsel to prevent a dedication of any of the Common Areas or the
accrual of any rights of any person or of the public to the Common Areas, close
temporarily any of the Common Areas for maintenance purposes, and make changes
to the Common Areas including, without limitation, changes in the location of
driveways, corridors, entrances, exits, the designation of areas for the
exclusive use of others, the direction of the flow of traffic or construction of
additional buildings thereupon. Landlord may provide security for the Common
Areas, but is not obligated to do so. Under no circumstances shall Landlord be
liable or responsible for any acts or omissions of any party providing any
services to the Common Areas, Building or other improvements, including, without
limitation, any security service, notwithstanding anything to the contrary
contained in this Lease.

ARTICLE 4 TERM AND POSSESSION

4.1 Commencement Date. The Term of this Lease shall commence on the
-----------------
Commencement Date and shall be for the term specified in Section 1.8 hereof
(which includes as set forth in Section 1.8 any partial month at the
commencement of the Term if the Term commences other than on the first day of
the calendar month).

4.2 Acknowledgment of Commencement. After delivery of the Leased Premises
------------------------------
to Tenant, Tenant shall execute a written acknowledgment of the date of
commencement in the form attached hereto as Exhibit D, and by this reference it
shall be incorporated herein.

4.3 Pre-Term Possession. If the Leased Premises are to be constructed or
-------------------
remodeled by Landlord, Landlord will notify Tenant approximately 14 days prior
to the estimated date when the Leased Premises are ready for Tenant's fixturing
or Tenant's work, which may be prior to Substantial Completion of the Leased
Premises by Landlord, but Tenant must have at least 7 days of access to the
Leased Premises prior to the Commencement Date when carpeting has been installed
even though the Tenant Improvements may not have been Substantially Completed as
provided in Exhibit C attached hereto. Tenant may thereupon enter the Leased
Premises for such purposes at its own risk, to make such improvements as Tenant
shall have the right to make, to install fixtures, supplies, inventory and other
property. Tenant agrees that it shall not in any way interfere with the progress
of Landlord's work by such entry. Should such entry prove an impediment to the
progress of Landlord's work, in Landlord's judgment, Landlord may demand that
Tenant forthwith vacate the Leased Premises until such time as Landlord's work
is complete, and Tenant shall immediately comply with this demand. During the
course of any pre-term possession, whether such pre-term period arises because
of an obligation of construction on the part of Landlord,' or otherwise, all
terms and conditions of this Lease, except for rent and commencement, shall
apply, particularly with reference to indemnity by Tenant of Landlord under
section 10.4 and 14.4.

4.4 Delay. If Landlord, for any reason whatsoever, cannot deliver
-----
possession of the Leased Premises to Tenant with the Tenant Improvements
Substantially Completed (as defined in Exhibit C) by the Estimated Commencement
Date, this Lease shall not be void or voidable, nor shall Landlord be liable for
any loss or damage resulting therefrom, but in that event, there shall be no
accrual of Rent for the period between the Estimated Commencement Date and the
Commencement Date, except if the delay is due to a Tenant Delay (as defined in
Exhibit C). Notwithstanding the foregoing, if the Tenant Improvements have not
been Substantially Completed within 120 days of the Estimated Commencement Date
and such delay is not due to any Tenant Delay or Force Majeure Delay (as defined
in Exhibit C), then Tenant as its sole and exclusive remedy shall have the right
to terminate this Lease upon written notice to Landlord within the earlier of 10
days after (i) the end of said 120 day period (but prior to Substantial
Completion of the Tenant Improvements), or (ii) receipt of written notice from
Landlord of a delay beyond said time period.

4.5 Acceptance of Work.. Within fifteen (15) days following the date
-------------------
Tenant takes possession of each floor of the Leased Premises, Tenant may provide
Landlord with a punch list which sets forth any corrective work to be performed
by Landlord with respect to work performed by Landlord; provided, however,

10
<PAGE>

that Tenant's obligation to pay Rent and other sums under this Lease shall not
be affected thereby. If Tenant fails to submit a punch list to Landlord within
such fifteen (15) day period, Tenant agrees that by taking possession of the
Leased Premises it will conclusively be deemed to have inspected the Leased
Premises and found the Leased Premises in satisfactory condition, with all work
required of Landlord completed. Tenant acknowledges that neither Landlord, nor
any agent, employee or servant of Landlord, has made any representation or
warranty, expressed or implied, with respect to the Leased Premises, Building or
Common Areas of the Complex, or with respect to the suitability of them to the
conduct of Tenant's business, nor has Landlord agreed to undertake any
modifications,, alterations, or improvements of the Leased Premises, Building or
Common Areas of the Complex, except as specifically provided in this Lease.

4.6 Failure to Take Possession. Tenant's inability or failure to take
--------------------------
possession of the Leased Premises, or applicable portions thereof, when delivery
is tendered by Landlord shall not delay the Commencement Date of the Lease or
Tenant's obligation to pay Rent. Tenant acknowledges that Landlord shall incur
significant expenses upon the execution of this Lease, even if Tenant never
takes possession of the Leased Premises, including, without limitation,
brokerage commissions and fees, legal or other professional fees, the costs of
space planning and the costs of construction of Tenant Improvements in the
Premises. Tenant acknowledges that all of said expenses, in addition to all
other expenses incurred and damages suffered by Landlord, shall be included in
measuring Landlord's damages should Tenant breach the terms of this Lease.

ARTICLE 5 MINIMUM MONTHLY RENT

5.1 Payment. Tenant shall pay to Landlord at the address specified in
-------
Section 1.1, or at such other place as Landlord may otherwise designate, as
"Minimum Monthly Rent" for the Leased Premises the amount specified in Section
1.9 hereof, payable in advance on the first day of each month during the Term of
the Lease. If the Term commences on other than the first day of a calendar
month, the rent for the first partial month shall be prorated accordingly. All
payments of Minimum Monthly Rent (including sums defined as rent in Section 2
shall be in lawful money of the United States, and payable without deduction,
offset, counterclaim, prior notice or demand.

5.2 Advance Rent. The amount specified in Section 1.9(B) hereof is paid
------------
herewith to Landlord upon execution of this Lease as advance rent, receipt of
which is hereby acknowledged, provided, however, that such amount shall be held
by Landlord as an additional "Security Deposit" pursuant to this Lease until it
is applied by Landlord to the first Minimum Monthly Rent due hereunder.

5.3 Late Payment. If during any twelve (12) month period, Tenant fails to
------------
pay Rent within five (5) days after receipt of notice that payment is past due
on more than three occasions, then Landlord may, by giving written notice to
Tenant, require that Tenant pay the Minimum Monthly Rent and other Rent to
Landlord quarterly in advance.

ARTICLE 6 ADDITIONAL RENT

6.1 Personal Property, Gross Receipts, Leasing Taxes. This section is
------------------------------------------------
intended to deal with impositions or taxes directly attributed to Tenant or this
transaction, as distinct from taxes attributable to the Building or Common Areas
of the Complex which are to be allocated among various tenants and others.
Tenant shall pay before delinquency any and all taxes, assessments, license fees
and public charges levied, assessed or imposed against Tenant or Tenant's estate
in this Lease or the property of Tenant situated within the Premises which
become due during the Term. On demand by Landlord, Tenant shall furnish Landlord
with satisfactory evidence of these payments. If such taxes are included in the
bill for the Real Estate Taxes for the Building or Complex, then Tenant shall
pay to Landlord as additional rent the amount of such taxes within ten (10) days
after demand from Landlord.

11
<PAGE>

6.2 Operating Costs, Taxes and Insurance.
------------------------------------

(a) Base Year Increases. If the Operating Costs, Taxes and/or
-------------------
Insurance Costs for any Lease Year, calculated on the basis of the greater of
(i) actual Operating Costs, Taxes and Insurance Costs; or (ii) as if the
Building were at least one hundred percent (100%) occupied and operational for
the whole of such Lease Year, are more than the applicable Base Year Costs for
Base Operating Costs, Base Taxes and Base Insurance as set forth in section 1.10
(which Base Year Costs shall be calculated separately for each such category of
Base Year Costs), Tenant shall pay to Landlord its Proportionate Share of any
such increase in Operating Costs, Taxes and/or Insurance Costs, as the case may
be, as additional Rent as hereinafter provided.

(b) Partial Year. If any Lease Year of less than twelve (12) months
------------
is included within the Term, the amount payable by Tenant for such period shall
be prorated on a per diem basis (utilizing a thirty (30) day month, three
hundred sixty (360) day year).

6.3 Method of Payment. Any additional Rent payable by Tenant under
-----------------
Sections 6.1 and 6.2 hereof shall be paid as follows, unless otherwise provided:

(a) Estimated Monthly. During the Term, Tenant shall pay to Landlord
-----------------
monthly in advance with its payment of Minimum Monthly Rent, one-twelfth
(1/12th) of the amount of such additional Rent as estimated by Landlord in
advance, in good faith, to be due from Tenant. If at any time during the course
of the fiscal year, Landlord determines that Operating Costs, Insurance Costs
and/or Taxes are projected to vary from the then estimated costs for such items
by more than ten percent (10%), Landlord may, by written notice to Tenant,
revise the estimated Operating Costs, Insurance Costs and/or Taxes for the
balance of such fiscal year, and Tenant's monthly installments for the remainder
of such year shall be adjusted so that by the end of such fiscal year Tenant
will have paid to Landlord Tenant's Proportionate Share of the such revised
expenses for such year.

(b) Annual Reconciliation. Annually, as soon as is reasonably
---------------------
possible after the expiration of each Lease Year, Landlord shall prepare in good
faith and deliver to Tenant a comparative statement, which statement shall be
conclusive between the parties hereto, setting forth (1) the Operating Costs,
Taxes and Insurance Costs for such Lease Year, and (2) the amount of additional
Rent as determined in accordance with the provisions of this Article 6.

(c) Adjustment. If the aggregate amount of such estimated additional
----------
Rent payments made by Tenant in any Lease Year should be less than the
additional Rent due for such year, then Tenant shall pay to Landlord as
additional Rent upon demand the amount of such deficiency. If the aggregate
amount of such additional Rent payments made by Tenant in any Lease Year of the
Term should be greater than the additional Rent due for such year, then should
Tenant not be otherwise in default hereunder, the amount of such excess will be
applied by Landlord to the next succeeding installments of such additional Rent
due hereunder; and if there is any such excess for the last year of the Term,
the amount thereof will be refunded by Landlord to Tenant within sixty (60) days
of the last day of the Term, provided Tenant is not otherwise in default under
the terms of this Lease.

6.4 Inspection. Tenant shall have the right at its own expense to inspect
----------
the books and records of Landlord pertaining to Operating Costs, Insurance Costs
and Taxes once in any calendar year by any employee of Tenant or by a certified
public accountant mutually acceptable to Landlord and Tenant (provided such
certified public accountant charges for its service on an hourly basis and not
based on a percentage of any recovery or similar incentive method) at reasonable
times, and upon reasonable written notice to Landlord. Within ninety (90) days
after receipt of Landlord's annual reconciliation, Tenant shall have the right,
after at least ten (10) days prior written notice to Landlord, to inspect at the
offices of Landlord or its property manager, the books and records of Landlord
pertaining solely to the Operating Costs, Insurance Costs and Taxes for the
immediately preceding calendar year covered in such annual reconciliation
statement. All expenses of the

12
<PAGE>

inspection shall be borne by Tenant. If Tenant's inspection reveals a
discrepancy in the comparative annual reconciliation statement, Tenant shall
deliver a copy of the inspection report and supporting calculations to Landlord
within thirty (30) days after completion of the inspection. If Tenant and
Landlord are unable to resolve the discrepancy within thirty (30) days after
Landlord's receipt of the inspection report, either party may upon written
notice to the other have the matter decided by an inspection by an independent
certified public accounting firm approved by Tenant and Landlord (the "CPA
Firm"), which approval shall not be unreasonably withheld or delayed. If the
inspection by the CPA Firm shows that the actual amount of Operating Costs,
Insurance Costs or Taxes payable by Tenant is greater than the amount previously
paid by Tenant for such accounting period, Tenant shall immediately pay Landlord
the difference. If the inspection by the CPA Firm shows that the actual
applicable amount is less than the amount paid by Tenant, then the difference
shall be applied in payment of the next estimated monthly installments of
Operating Costs, Insurance Costs and/or Taxes owing by Tenant, or in the event
such accounting occurs following the expiration of the Term hereof, such
difference shall be refunded to Tenant. Tenant shall pay for the cost of the
inspection by the CPA Finn, unless such inspection shows that Landlord
overstated Operating Costs, Insurance Costs or Taxes by more than five percent
(5%), in which case Landlord shall pay for the cost of the inspection by the CPA
Firm.

ARTICLE 7 ACCORD AND SATISFACTION

7.1 Acceptance of Payment. No payment by Tenant or receipt by Landlord of
---------------------
a lesser amount of Minimum Monthly Rent or any other sum due hereunder, shall be
deemed to be other than on account of the earliest due rent or payment, nor
shall any endorsement or statement on any check or any letter accompanying any
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such rent or payment or pursue any other remedy available in this
Lease, at law or in equity. Landlord may accept any partial payment from Tenant
without invalidation of any contractual notice required to be given herein (to
the extent such contractual notice is required) and without invalidation of any
notice required to be given pursuant to California Code of Civil Procedure
Section 1161, et seq., or of any successor statute thereto.

ARTICLE 8 SECURITY DEPOSIT

8.1 Payment on Lease Execution. Tenant shall pay Landlord upon execution
--------------------------
hereof the sum specified in the Salient Lease Terms as a Security Deposit. This
sum is designated as a Security Deposit and shall remain the sole and separate
property of Landlord until actually repaid to Tenant (or at Landlord's option
the last assignee, if any, of Tenant's interest hereunder), said sum not being
earned by Tenant until all conditions precedent for its payment to Tenant have
been fulfilled. As this sum both in equity and at law is Landlord's separate
property, Landlord shall not be required to (1) keep said deposit separate from
his general accounts, or (2) pay interest, or other increment for its use. if
Tenant fails to pay rent or other charges when due hereunder, or otherwise
defaults with respect to any provision of this Lease, including and not limited
to Tenant's obligation to restore or clean the Leased Premises following
vacation thereof, Tenant, at Landlord's election, shall be deemed not to have
earned the right to repayment of the Security Deposit, or those portions thereof
used or applied by Landlord for the payment of any rent or other charges in
default, or for the payment of any other sum to which Landlord may become
obligated by reason of Tenant's default, or to compensate Landlord for any loss
or damage which Landlord may suffer thereby. Landlord may retain such portion of
the Security Deposit as it reasonably deems necessary to restore or clean the
Leased Premises following vacation by Tenant. The Security Deposit is not to be
characterized as rent until and unless so applied in respect of a default by
Tenant.

8.2 Restoration of Deposit. If Landlord elects to use or apply all or any
----------------------
portion of the Security Deposit as provided in Section 8.1, Tenant shall within
ten (10) days after written demand therefor pay to Landlord in cash, an amount
equal to that portion of the Security Deposit used or applied by Landlord, and
Tenant's failure to so do shall be a material breach of this Lease. The ten (10)
day notice specified in the preceding sentence shall insofar as not prohibited
by law, constitute full satisfaction of notice of default provisions required by
law or ordinance.

13
<PAGE>

ARTICLE 9 USE

9.1 Permitted Use. The Leased Premises may be used and occupied only for
-------------
the purposes specified in Section 1.12 hereof, and for no other purpose or
purposes. Tenant shall promptly comply with all laws, ordinances, orders and
regulations affecting the Leased Premises, their cleanliness, safety, occupation
and use. Tenant shall not use, or permit to be used, the Leased Premises in any
manner that will disturb any other tenant in the Building or Complex, or
obstruct or interfere with the rights of other tenant or occupants of the
Building or Complex, or injure or annoy them or create any unreasonable smells,
noise or vibrations (taking into account the nature and tenant-mix of the
Building). Tenant shall not allow the Leased Premises to be used for any
improper, immoral, unlawful Or objectionable purpose.

9.2 Safes, Heavy Equipment. Tenant shall not place a load upon any floor
----------------------
of the Leased Premises which exceeds the lesser of fifty (50) pounds per square
foot live load or such other amount specified in writing by Landlord from time
to time. Landlord reserves the right to prescribe the weight and position of all
safes and heavy installations which Tenant wishes to place in the Leased
Premises so as properly to distribute the weight thereof, or to require plans
prepared by a qualified structural engineer at Tenant's sole cost and expense
for such heavy objects. Notwithstanding the foregoing, Landlord shall have no
liability for any damage caused by the installation of such heavy equipment or
safes.

9.3 Machinery. Business machines and mechanical equipment belonging to
---------
Tenant which cause noise and/or vibration that may be transmitted to the
structure of the Building or to any other leased space to such a degree as to be
objectionable to Landlord or to any tenants in the Complex shall be placed and
maintained by the party possessing the machines or equipment, at such party's
expense, in settings of cork, rubber or spring type noise and/or vibration
eliminators, and Tenant shall take such other measures as needed to eliminate
vibration and/or noise. If the noise or vibrations cannot be eliminated, Tenant
must remove such equipment within ten (10) days following written notice from
Landlord.

9.4 Waste or Nuisance. Tenant shall not commit, or suffer to be committed,
-----------------
any waste upon the Leased Premises, or any nuisance, or other act or thing which
may disturb the quiet enjoyment of any other tenant or occupant of the Complex
in which the Leased Premises are located.

ARTICLE 10 COMPLIANCE WITH LAWS AND REGULATIONS

10.1 Compliance Obligations. Tenant shall, at its sole cost and expense,
----------------------
comply with all of the requirements of all municipal, state and federal
authorities now in force, or which may hereafter be in force, pertaining to the
Leased Premises, and shall faithfully observe in the use or occupancy of the
Leased Premises all municipal ordinances and state and federal statutes, laws
and regulations now or hereafter in force, including, without limitation, the
"Environmental Laws" (as hereinafter defined), and the Americans with
Disabilities Act, 42 U.S.C. (S)(S) 12101-12213 (and any rules, regulations,
restrictions, guidelines, requirements or publications promulgated or published
pursuant thereto) (herein referred to as the ("ADA"), whether or not any of the
foregoing were foreseeable or unforeseeable at the time of the execution of this
Lease. Tenant's obligation to comply with and observe such requirements,
ordinances, statutes and regulations shall apply regardless of whether such
requirements, ordinances, statutes and regulations regulate or relate to
Tenant's particular use of the Leased Premises or regulate or relate to the use
of premises in general, and regardless of the cost thereof. The judgment of any
court of competent jurisdiction, or the admission of Tenant in any action or
proceeding against Tenant, whether Landlord be a party thereto or not, that any
such requirement, ordinance, statute or regulation pertaining to the Leased
Premises has been violated, shall be conclusive of that fact as between Landlord
and Tenant.

Notwithstanding the foregoing, Landlord agrees, at its expense, to
make the improvements to the existing bathrooms in the Leased Premises if such
work is required under the ADA in connection with the construction by Tenant in
the future of any other alterations in the Leased Premises to the extent
Landlord does

14
<PAGE>

not construct such improvements as part of the initial Tenant Improvements.

10.2 Condition of Leased Premises. Subject to Landlord's work, if any, as
----------------------------
referred to in Exhibit C to this Lease, Tenant hereby accepts the Leased
Premises in the condition existing as of the date of occupancy, subject to all
applicable zoning, municipal, county and state laws, ordinances, rules,
regulations, orders, restrictions of record, and requirements in effect during
the Term or any part of the Term hereof regulating the Leased Premises, and
without representation, warranty or covenant by Landlord, express or implied, as
to the condition, habitability or safety of the Leased Premises, the suitability
or fitness thereof for their intended purposes, or any other matter.

10.3 Hazardous Materials.
-------------------

(a) Hazardous Materials. As used herein, the term "Hazardous
-------------------
Materials" shall mean any wastes, materials or substances (whether in the form
of liquids, solids or gases, and whether or not air-borne), which are or are
deemed to be (i) pollutants or contaminants, or which are or are deemed to be
hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or
injurious, or which present a risk to public health or to the environment, or
which are or may become regulated by or under the authority of any applicable
local, state or federal laws, judgments, ordinances, orders, rules, regulations,
codes or other governmental restrictions, guidelines or requirements, any
amendments or successor(s) thereto, replacements thereof or publications
promulgated pursuant thereto, including, without limitation, any such items or
substances which are or may become regulated by any of the Environmental Laws
(as hereinafter defined); (ii) listed as a chemical known to the State of
California to cause cancer or reproductive toxicity pursuant to Section 25249.8
of the California Health and Safety Code, Division 20, Chapter 6.6 (Safe
Drinking Water and Toxic Enforcement Act of 1986); or (iii) a pesticide,
petroleum, including crude oil or any fraction thereof, asbestos or an asbestos-
containing material, a polychlorinated biphenyl, radioactive material, or urea
formaldehyde.

(b) Environmental Laws. In addition to the laws referred to in section
------------------
10.3(a) above, the term "Environmental Laws" shall be deemed to include, without
limitation, 33 U.S.C. Section 1251 et seq., 42 U.S.C. Section 6901 et seq., 42
-- --- -- ---
U.S.C. Section 7401 et seq., 42 U.S.C. Section 9601 et seq., and California
-- --- -- ---
Health and Safety Code Section 25100 et seq., and 25300 et seq., California
-- --- -- ---
Water Code, Section 13020 et seq., or any successor(s) thereto, all local, state
-- ---
and federal laws, judgments, ordinances, orders, roles, regulations, codes and
other governmental restrictions, guidelines and requirements, any amendments and
successors thereto, replacements thereof and publications promulgated pursuant
thereto, which deal with or otherwise in any manner relate to, air or water
quality, air emissions, soil or ground conditions or other environmental matters
of any kind.

(c) Use of Hazardous Materials. Tenant agrees that during the Term of
--------------------------
this Lease, there shall be no use, presence, disposal, storage, generation,
leakage, treatment, manufacture, import, handling, processing, release, or
threatened release of Hazardous Materials on, from or under the Leased Premises
(individually and collectively, "Hazardous Use") except to the extent that, and
in accordance with such conditions as, Landlord may have previously approved in
writing in its sole and absolute discretion. However, without the necessity of
obtaining such prior written consent, Tenant shall be entitled to use and store
only those Hazardous Materials which are (i) typically used in the ordinary
course of business in an office for use in the manner for which they were
designed and in such limited amounts as may be normal, customary and necessary
for Tenant's business in the Premises, and (ii) in full compliance with
Environmental Laws, and all judicial and administrative decisions pertaining
thereto. For the purposes of this Section 10.3(c), the term Hazardous Use shall
include Hazardous Use(s) on, from or under the Leased Premises by Tenant or any
of its directors, officers, employees, shareholders, partners, invitees, agents,
contractors or occupants (collectively, "Tenant's Parties"), whether known or
unknown to Tenant, and whether occurring and/or existing during or prior to the
commencement of the Term of this Lease.

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(d) Compliance. Tenant agrees that during the Term of this Lease
----------
Tenant shall not be in violation of any federal, state or local law, ordinance
or regulation relating to industrial hygiene, soil, water, or environmental
conditions on, under or about the Leased Premises including, but not limited to,
the Environmental Laws.

(e) Inspection and Testing by Landlord. Landlord shall have the right
----------------------------------
at all times during the term of this Lease to (i) inspect the Leased Premises
and to (ii) conduct tests and investigations to determine whether Tenant is in
compliance with the provisions of this Section. Except in case of emergency,
Landlord shall give reasonable notice to Tenant before conducting any
inspections, tests, or investigations. The cost of all such inspections, tests
and investigations shall be borne by Tenant, if Tenant is in breach of Section
10.3 of this Lease. Neither any action nor inaction on the part of Landlord
pursuant to this Section 10.3(e) shall be deemed in any way to release Tenant
from, or in any way modify or alter, Tenant's responsibilities, obligations,
and/or liabilities incurred pursuant to Section 10.3 hereof.

10.4 Indemnity. Tenant shall indemnify, hold harmless, and, at Landlord's
---------
option (with such attorneys as Landlord may approve in advance and in writing),
defend Landlord and Landlord's officers, directors, shareholders, partners,
members, managers, employees, contractors, property managers, agents and
mortgagees and other lien holders, from and against any and all "Losses"
(hereinafter defined) arising from or related to: (a) any violation or alleged
violation by Tenant or any of Tenant's Parties of any of the requirements,
ordinances, statutes, regulations or other laws referred to in this Article 10,
including, without limitation the Environmental Laws; (b) any breach of the
provisions of this Article 10 by Tenant or any of Tenant's Parties; or (c) any
Hazardous Use on, about or from the Leased Premises of any Hazardous Material
approved by Landlord under this Lease. The term "Losses" shall mean all claims,
demands, expenses, actions, judgments, damages (whether consequential, direct or
indirect, known or unknown, foreseen or unforeseen), penalties, fines,
liabilities, losses of every kind and nature (including, without limitation,
property damage, diminution in value of Landlord's interest in the Leased
Premises or the Complex, damages for the loss or restriction on use of any space
or amenity within the Building or the Complex, damages arising from any adverse
impact on marketing space in the Complex, sums paid in settlement of claims and
any costs and expenses associated with injury, illness or death to or of any
person), suits, administrative proceedings, costs and fees, including, but not
limited to, attorneys' and consultants' fees and expenses, and the costs of
cleanup, remediation, removal and restoration, that are in any way related to
any matter covered by the foregoing indemnity.

ARTICLE 11 SERVICE AND EQUIPMENT

11.1 Climate Control. So long as Tenant is not in default under any of the
---------------
covenants of this Lease, Landlord shall provide climate control to the Leased
Premises from 7:00 a.m. to 6:00 p.m. (the "Climate Control Hours") on weekdays
and 9:00 a.m. to 1:00 p.m. Saturdays (Sundays and holidays excepted) to maintain
a temperature adequate for comfortable occupancy, provided that Landlord shall
have no responsibility or liability for failure to supply climate control
service when making repairs, alterations or improvements or when prevented from
so doing by strikes or any cause beyond Landlord's reasonable control. Any
climate control furnished for periods not within the Climate Control Hours
pursuant to Tenant's request shall be at Tenant's sole cost and expense in
accordance with rate schedules promulgated by Landlord from time to time. Upon
request, Landlord shall advise Tenant of the then current rate schedule and the
basis for its calculation. Tenant acknowledges that Landlord has installed in
the Building a system for the purpose of climate control. Any use of the Leased
Premises not in accordance with the design standards or any arrangement of
partitioning which interferes with the normal operation of such system may
require changes or alterations in the system or ducts through which the climate
control system operates. Any changes or alterations so occasioned, if such
changes can be accommodated by Landlord's equipment, shall be made by Tenant at
its cost and expense but only with the written consent of Landlord first had and
obtained, and in accordance with drawings and specifications and by a contractor
first approved in writing by Landlord. If installation of partitions, equipment
or fixtures by Tenant necessitates the re-balancing of the climate control
equipment in the Leased Premises, the same will be performed by Landlord at
Tenant's expense. Tenant acknowledges that up to

16
<PAGE>

one (1) year may be required after Tenant has fully occupied the Leased Premises
in order to adjust and balance the climate control systems, but Landlord agrees
to use its good faith efforts to adjust and balance such system as soon as is
commercially reasonable. Any charges to be paid by Tenant hereunder shall be due
within ten (10) days of receipt of an invoice from Landlord, which invoice may
precede Landlord's expenditure for the benefit of Tenant.

11.2 Elevator Service. Landlord shall provide elevator service (which may
----------------
be with or without operator at Landlord's option) provided that Tenant, its
employees, and all other persons using such services shall do so at their own
risk.

11.3 Cleaning Public Areas. Landlord shall maintain and keep clean the
---------------------
street level lobbies, sidewalks, truck dock, public corridors and other public
portions of the Building.

11.4 Refuse Disposal. Tenant shall pay Landlord, within ten (10) days of
---------------
being billed therefor, for the removal from the Leased Premises and the Building
of such refuse and rubbish of Tenant as shall exceed that ordinarily accumulated
daily in the routine of a reasonable office.

11.5 Janitorial Service. Landlord shall provide cleaning and janitorial
------------------
service in and about the Complex and Leased Premises each weekday unless such
service for a Friday is done on a weekend (Saturdays, Sundays and holidays
excepted except for service done on a weekend for a Friday) in accordance with
standards in first-class office buildings in the city in which the Building is
located.

11.6 Special Cleaning Service. To the extent that Tenant shall require
------------------------
special or more frequent cleaning and/or janitorial service (hereinafter
referred to as "Special Cleaning Service") Landlord may, upon reasonable advance
notice from Tenant, elect to furnish such Special Cleaning Service and Tenant
agrees to pay Landlord, within ten (10) days of being billed therefor,
Landlord's charge for providing such additional service. Special Cleaning
Service shall include but shall not be limited to the following to the extent
such services are beyond those typically provided pursuant to section 1.5 above:

(a) The cleaning and maintenance of Tenant eating facilities other
than the normal and ordinary cleaning and removal of garbage, which special
cleaning service shall include, without limitation, the removal of dishes,
utensils and excess garbage; it being acknowledged that normal and ordinary
cleaning service does not involve placing dishes, glasses and utensils in the
dishwasher, cleaning any coffee pot or other cooking mechanism or cleaning the
refrigerator or any appliances;

(b) The cleaning and maintenance of Tenant computer centers, including
peripheral areas other than the normal and ordinary cleaning and removal of
garbage if Tenant so desires;

(d) The cleaning and maintenance in areas of special security; and

(e) The provision of consumable supplies for private toilet rooms in
any separate office.

11.7 Electrical. During the Term of this Lease, there shall be available
----------
to the Leased Premises electrical facilities comparable to those supplied in
other comparable office buildings in the vicinity of the Building to provide
sufficient power for normal lighting and office machines of similar low
electrical consumption, and one personal computer for each desk station, but not
for any additional computers or extraordinary data processing equipment, special
lighting and any other item of electrical equipment which requires a voltage
other than one hundred ten (110) volts single phase, as determined by Landlord
in its sole and absolute discretion; and provided, however, that if the
installation of such electrical equipment requires additional air conditioning
capacity above that normally provided to tenants of the Building or above
standard

17
<PAGE>

usage of existing capacity as determined by Landlord in its sole and absolute
discretion, then the additional air conditioning installation and/or operating
costs attributable thereto shall be paid by Tenant. Tenant agrees not to use any
apparatus or device in, upon or about the Leased Premises which may in any way
increase the amount of such electricity usually furnished or supplied to the
Leased Premises, and Tenant further agrees not to connect any apparatus or
device to the wires, conduits or pipes or other means by which such electricity
is supplied, for the purpose of using additional or unusual amounts of
electricity, without the prior written consent of Landlord. At all times,
Tenant's use of electric current shall never exceed Tenant's share of the
capacity of the feeders to the Building or the risers or wiring installation.
Tenant shall not install or use or permit the installation or use in the Leased
Premises of any computer or electronic data processing or ancillary equipment or
any other electrical apparatus designed to operate on electrical current in
excess of 110 volts and 5 amps per machine, without the prior written consent of
Landlord, which may be exercised in Landlord's reasonable discretion. If Tenant
shall require electrical current in excess of that usually furnished or supplied
for use of the Leased Premises as general office space, Tenant shall first
procure the written consent of Landlord (which may be exercised in Landlord's
reasonable discretion) to the use thereof and Landlord or Tenant may (i) cause a
meter to be installed in or for the Leased Premises, or (ii) if Tenant elects
not to install said meter, Landlord may reasonably estimate such excess
electrical current. The cost of any meters (including, without limitation, the
cost of any installation) or surveys to estimate such excess electrical current
shall be paid by Tenant. Landlord's approval or any space plan, floor plan,
construction plans, specifications, or other drawings or materials regarding the
construction of the Tenant Improvements or any alterations shall not be deemed
or construed as consent by Landlord under this paragraph to Tenant's use of such
excess electrical current as provided above. Tenant agrees to pay to Landlord,
promptly upon demand therefor, all costs of such electrical current consumed as
well as an additional use charge calculated by said meters (at the rates charged
for such services to the Building by the municipality or the local public
utility) or the amount specified in said estimate, as the case may be, plus any
additional expense incurred in keeping account of the electrical current so
consumed, which additional expense Landlord shall advise Tenant within a
reasonable time after request by Tenant.

11.8 Water. During the Term of this Lease, if water is made available to
-----
the Leased Premises, then water shall be used for drinking, lavatory and office
kitchen purposes only as applicable. If Tenant requires, uses or consumes water
for any purpose in addition to ordinary drinking, lavatory, and office kitchen
purposes (as determined by Landlord in its sole and absolute discretion), as
applicable, Landlord may reasonably estimate such excess and Tenant shall pay
for same. At Tenant's sole cost and expense; Landlord may also install a water
meter and thereby measure Tenant's water consumption for all purposes, and
Tenant shall keep said meter and installation equipment in good working order
and repair at Tenant's own cost and expense. Tenant agrees to pay for water
consumed, as shown in said meter, as and when bill are rendered.

11.9 Interruptions. It is understood that Landlord does not warrant that
-------------
any of the services referred to above or any other services which Landlord may
supply will be free from interruption. Tenant acknowledges that any one or more
such services may be suspended or reduced by reason of repairs, alterations or
improvements necessary to be made, by strikes or accidents, by any cause beyond
the reasonable control of Landlord, or by orders or regulations of any federal,
state, county or municipal authority. Any such interruption or suspension of
services shall not be deemed an eviction or disturbance of Tenant's use and
possession of the Leased Premises or any part thereof, nor render Landlord
liable to Tenant for damages by abatement of Rent or otherwise, nor relieve
Tenant of performance of Tenant's obligations under this Lease. Landlord agrees
to use its good faith efforts to restore such service.

ARTICLE 12 ALTERATIONS

12.1 Consent of Landlord; Ownership. Tenant shall not make, or suffer to
------------------------------
be made, any alterations, additions or improvements, including, without
limitation, any alterations, additions or improvements that result in increased
telecommunication demands or require the addition of new communication or
computer wires, cables and related devises or expand the number of telephone or
communication lines dedicated to the Leased

18
<PAGE>

Premises by the Building's telecommunication design, (collectively,
"alterations") to the Leased Premises, or any part thereof, without the written
consent of Landlord first had and obtained, which will not be unreasonably
withheld. Any alterations, except trade fixtures, shall upon expiration or
termination of this Lease become a part of the realty and belong to Landlord.
Except as otherwise provided in this Lease, Tenant shall have the right to
remove its trade fixtures placed upon the Leased Premises provided that Tenant
restores the Leased Premises as indicated below.

12.2 Requirements. Any alterations, additions or installations performed
------------
by Tenant (hereinafter collectively "alterations") shall be subject to strict
conformity with the following requirements:

(a) All alterations shall be at the sole cost and expense of Tenant;

(b) Prior to commencement of any work of alteration, Tenant shall
submit detailed plans and specifications, including working drawings
(hereinafter referred to as "Plans"), of the proposed alterations, which shall
be subject to the consent of Landlord in accordance with the terms of Section
12.1 above;

(c) Following approval of the Plans by Landlord, Tenant shall give
Landlord at least ten (10) days' prior written notice of any commencement of
work in the Leased Premises so that Landlord may post notices of non-
responsibility in or upon the Leased Premises as provided by law;

(d) No alterations shall be commenced without Tenant having previously
obtained all appropriate permits and approvals required by and of governmental
agencies;

(e) All alterations shall be performed in a skillful and workmanlike
manner, consistent with the best practices and standards of the construction
industry, and pursued with diligence in accordance with said Plans previously
approved by Landlord and in full accord with all applicable laws and ordinances.
All material, equipment, and articles incorporated in the alterations are to be
new and of recent manufacture and of the most suitable grade for the purpose
intended;

(f) Tenant must obtain the prior written approval from Landlord for
Tenant's contractor before the commencement of the work. Tenant's contractor for
any work shall maintain all of the insurance reasonably required by Landlord,
including, without limitation, commercial general liability and workers'
compensation;

(g) As a condition of approval of alterations, Landlord may require
performance and labor and materialmen's payment bonds issued by a surety
approved by Landlord, in a sum equal to the cost of the alterations guarantying
the completion of the alterations free and clear of all liens and other charges
in accordance with the Plans. Such bonds shall name Landlord as beneficiary;

(h) The alterations must be performed in a manner such that they will
not interfere with the quiet enjoyment of the other Tenants in the Complex.

12.3 Liens. Tenant shall keep the Leased Premises and the Complex in which
-----
the Leased Premises are situated free from any liens arising out of any work
performed, materials furnished or obligations incurred by Tenant. In the event a
mechanic's or other lien is filed against the Leased Premises, Building or the
Complex as a result of a claim arising through Tenant, Landlord may demand that
Tenant furnish to Landlord a surety bond satisfactory to Landlord in an amount
equal to at least one hundred fifty percent (150%) of the amount of the
contested lien claim or demand, indemnifying Landlord against liability for the
same and holding the Leased Premises free from the effect of such lien or claim.
Such bond must be posted within ten (10) days following notice from Landlord. In
addition, Landlord may require Tenant to pay Landlord's reasonable attorneys'
fees and costs in participating in any action to foreclose such lien if Landlord
shall decide it is to its best interest to do so. If Tenant fails to post such
bond within said time period, Landlord after five (5) days prior written notice
to Tenant may pay the claim prior to the enforcement thereof, in which event
Tenant shall

19
<PAGE>

reimburse Landlord in full, including attorneys' fees, for any such expense, as
additional rent, with the next due rental.

12.4 Restoration. Tenant shall return the Leased Premises to Landlord at
-----------
the expiration or earlier termination of this Lease in good and sanitary order,
condition and repair, free of rubble and debris, broom clean, reasonable wear
and tear and damage by casualty excepted. However, Tenant shall ascertain from
Landlord at least thirty (30) days prior to the termination of this Lease,
whether Landlord desires the Leased Premises, or any part thereof, restored to
its condition prior to the making of permitted alterations, installations and
improvements, and if Landlord shall so desire, then Tenant shall forthwith
restore said Leased Premises or the designated portions thereof as the case may
be, to its original condition, entirely at its own expense, excepting normal
wear and tear. All damage to the Leased Premises caused by the removal of such
trade fixtures and other personal property that Tenant is permitted to remove
under the terms of this Lease and/or such restoration shall be repaired by
Tenant at its sole cost and expense prior to termination.

ARTICLE 13 PROPERTY INSURANCE

13.1 Use of Premises. No use shall be made or permitted to be made on the
---------------
Leased Premises, nor acts done, which will increase the existing rate of
insurance upon the building in which the Leased Premises are located or upon any
other Building in the Complex or cause the cancellation of any insurance policy
covering the Building, or any part thereof, nor shall Tenant sell, or permit to
be kept, used or sold, in or about the Leased Premises, any article which may be
prohibited by the standard form of "All Risk" fire insurance policies. Tenant
shall, at its sole cost and expense, comply with any and all requirements
pertaining to the Leased Premises, of any insurance organization or company,
necessary for the maintenance of reasonable property damage and commercial
general liability insurance, covering the Leased Premises, the Building, or the
Complex.

13.2 Increase in Premiums. Tenant agrees to pay Landlord, as additional
--------------------
Rent, within ten (10) days after receipt by Tenant of Landlord's billing
therefor, any increase in premiums for insurance policies which may be carried
by Landlord on the Leased Premises, Building or Complex resulting from any
negligent or intentional act or omission of Tenant or any of its contractors,
partners, officers, employees or agents.

13.3 Personal Property Insurance. Tenant shall maintain in full force and
---------------------------
effect on all of its fixtures, furniture, equipment and other business personal
property in the Leased Premises a policy or policies providing protection
against any peril included within the classification "All Risk" to the extent of
at least ninety percent (90%) of their replacement cost, or that percentage of
the replacement cost required to negate the effect of a co-insurance provision,
whichever is greater. No such policy shall have a deductible in a greater amount
than FIVE THOUSAND DOLLARS ($5,000.00). Tenant shall also insure in the same
manner the physical value of all its leasehold improvements and alterations in
the Leased Premises. During the term of this Lease, the proceeds from any such
policy or policies of insurance shall be used for the repair or replacement of
the fixtures, equipment, and leasehold improvements so insured. Landlord shall
have no interest in said insurance, and will sign all documents necessary or
proper in connection with the settlement of any claim or loss by Tenant. Tenant
shall also maintain business interruption insurance and insurance for all plate
glass (except for the exterior windows) upon the Leased Premises. All insurance
specified in this Section 13.3 to be maintained by Tenant shall be maintained by
Tenant at its sole cost.

13.4 Landlord's Insurance. In addition to any other insurance Landlord
--------------------
elects to maintain, Landlord agrees to maintain standard fire and extended
coverage insurance covering the Building in an amount not less than ninety
percent (90%) of the replacement cost thereof (or such greater percentage as may
be necessary to comply with the provisions of any co-insurance clauses of the
policy). Such insurance shall be issued in the names of Landlord and its lender,
as their interests appear, and shall be for the sole benefit of such parties and
under their sole control.

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<PAGE>

ARTICLE 14 INDEMNIFICATION, WAIVER OF CLAIMS AND SUBROGATION

14.1 Intent and Purpose. This Article 14 is written and agreed to in
------------------
respect of the intent of the parties to assign the risk of loss, whether
resulting from negligence of the parties or otherwise, to the party who is
obligated hereunder to cover the risk of such loss with insurance. Thus, the
indemnity and waiver of claims provisions of this Lease have as their object, so
long as such object is not in violation of public policy, the assignment of risk
for a particular casualty to the party carrying the insurance for such risk,
without respect to the causation thereof.

14.2 Waiver of Subrogation. Landlord and Tenant release each other, and
---------------------
their respective authorized representatives, from any claims for damage to the
Leased Premises and the Building and other improvements in which the Leased
Premises are located, and to the furniture, fixtures, and other business
personal property, Tenant's improvements and alterations of either Landlord or
Tenant, in or on the Leased Premises and the Building and other improvements in
which the Leased Premises are located, including loss of income, that are caused
by or result from risks insured or required under the terms of this Lease to be
insured against under any property insurance policies carried or to be carried
by either of the parties.

14.3 Form of Policy. Each party shall cause each such insurance policy
--------------
obtained by it to provide that the insurance company waives all rights of
recovery by way of subrogation against either party in connection with any
damage covered by such policy. Neither party shall be liable to the other for
any damage caused by any peril included within the classification "All Risk"
which is insured against under any property insurance policy carried under the
terms of this Lease.

14.4 Indemnity. Tenant, as a material part of the consideration to be
---------
rendered to Landlord, shall indemnify, defend, protect and hold harmless
Landlord against all actions, claims, demands, damages, liabilities, losses,
penalties, or expenses of any kind which may be brought or imposed upon Landlord
or which Landlord may pay or incur by reason of (a) injury or death to person or
damage to property, from whatever cause, including, without limitation, the
negligence of the parties hereto, all or in any way connected with the condition
or use of the Leased Premises, or the improvements or personal property therein
or thereon, including without limitation any liability or injury to the person
or property of Tenant, its agents, officers, employees or invitees, and (b) any
injury or death to any person or damage to property caused by the negligence of
Tenant or any of its officers, partners, employees or agents anywhere in the
Complex. Nothing contained herein shall obligate Tenant to indemnify Landlord
against the gross negligence or willful acts of Landlord or its officers,
employees or agents. Landlord agrees to indemnify Tenant for all actions,
claims, demands, liabilities, losses, costs and expenses arising out of the
gross negligence or willful misconduct of Landlord or its officers, employees
and agents anywhere in the Complex and the active negligence of Landlord or its
officers, employees or agents in the Common Areas of the Complex.

14.5 Defense of Claims. In the event any action, suit or proceeding is
-----------------
brought against Landlord by reason of any such occurrence, Tenant, upon
Landlord's request, will at Tenant's expense resist and defend such action, suit
or proceeding, or cause the same to be resisted and defended by counsel
designated either by Tenant or by the insurer whose policy covers the occurrence
and in either case approved by Landlord. The obligations of Tenant under this
Section arising by reason of any occurrence taking place during the Lease term
shall survive any termination of this Lease.

14.6 Waiver of Claims. Tenant, as a material part of the consideration to
----------------
be rendered to Landlord, hereby waives all claims against Landlord for damages
or injury, as described below, from any cause arising at any time, including
breach of the provisions of this Lease and the negligence of the parties hereto
except to the extent such damages or injury are caused by the gross negligence
or willful actions of Landlord, its agents, officers and employees:

21
<PAGE>

(a) damages to goods, Wares, merchandise and loss of business in, upon
or about the Leased Premises and injury to Tenant, its agents, employees,
invitees or third persons, in, upon or about the Leased Premises, Building or
Complex; and

(b) (notwithstanding anything to the contrary contained in this Lease,
including, without limitation, the definition of Operating Costs which includes
"policing") damages to goods, wares, merchandise and loss of business, in, upon
or about the Leased Premises or the Complex, and injury to Tenant, its agents,
employees, invitees or third persons in, upon or about the Leased Premises or
the Complex, where such damage or injury results from Landlord's failure to
police or provide security for the Complex or Landlord's negligence in
connection therewith.

14.7 References. Wherever in this Article the term Landlord or Tenant is
----------
used and such party is to receive the benefit of a provision contained in this
Article, such term shall refer not only to that party but also to its
shareholders, officers, directors, employees, partners, members, managers,
mortgagees and agents.

ARTICLE 15 LIABILITY INSURANCE

15.1 Tenant's Insurance. Tenant shall, at Tenant's expense, obtain and
------------------
keep in force during the term of this Lease, a commercial general liability
insurance policy insuring Tenant against the risks of, bodily injury and
property damage, personal injury, contractual liability, completed operations,
products liability, host liquor liability, owned and non-owned automobile
liability arising out of the ownership, use, occupancy or maintenance of the
Leased Premises and all areas appurtenant thereto. Such insurance shall be a
combined single limit policy in an amount not less than ONE MILLION DOLLARS
($1,000,000.00) per occurrence with a TWO MILLION DOLLAR ($2,000,000.00) annual
aggregate. Landlord and any lender and any other party in interest designated by
Landlord shall be named as additional insured(s). The policy shall contain cross
liability endorsements with coverage for Landlord for the negligence of Tenant
even though Landlord is named as an additional insured; shall insure performance
by Tenant of the indemnity provisions of this Lease; shall be primary, not
contributing with, and not in excess of coverage which Landlord may carry; shall
provide for severability of interest; shall provide that an act or omission of
one of the insured or additional insureds which would void or otherwise reduce
coverage shall not void or reduce coverages as to the other insured or
additional insureds; and shall afford coverage after the term of this Lease (by
separate policy or extension if necessary) for all claims based on acts,
omissions, injury or damage which occurred or arose (or the onset of which
occurred or arose) in whole or in part during the term of this Lease. The limits
of said insurance shall not limit any liability of Tenant hereunder. Not more
frequently than every year, if, in the reasonable opinion of Landlord, the
amount of liability insurance required hereunder is not adequate, Tenant shall
promptly increase said insurance coverage as required by Landlord.

15.2 Workers' Compensation Insurance. Tenant shall carry Workers'
-------------------------------
Compensation insurance as required by law, including an employers' liability
endorsement.

ARTICLE 16 INSURANCE POLICY REQUIREMENTS & INSURANCE DEFAULTS

16.1 General Requirements. All insurance policies required to be carried
--------------------
by Tenant (except Tenant's business personal property insurance) hereunder shall
conform to the following requirements:

(a) The insurer in each case shall carry a designation in "Best's
Insurance Reports" as issued from time to time throughout the term as follows:
Policyholders' rating of A; financial rating of not less than VII;

(b) The insurer shall be qualified to do business in the state in
which the Leased Premises are located;

22
<PAGE>

(d) Certificates of insurance shall be delivered to Landlord at
commencement of the term and certificates of renewal at least thirty (30) days
prior to the expiration of each policy;

(e) Each policy shall require that Landlord be notified in writing by
the insurer at least thirty (30) days prior to any cancellation or expiration of
such policy, or any reduction in the amounts of insurance carried.

16.2 Tenant's Insurance Defaults. If Tenant fails to obtain any insurance
---------------------------
required of it under the terms of this Lease, Landlord may, at its option, but
is not obligated to, obtain such insurance on behalf of Tenant and bill Tenant,
as additional rent, for the cost thereof. Payment shall be due within ten (10)
days of receipt of the billing therefor by Tenant.

ARTICLE 17 FORFEITURE OF PROPERTY

17.1 Removal of Personal Property. Tenant agrees that as at the date of
----------------------------
termination of this Lease or repossession of the Leased Premises by Landlord, by
way of default or otherwise, it shall remove all personal property to which it
has the right to ownership pursuant to the terms of this Lease. Any and all such
property of Tenant not removed by such date shall, at the option of Landlord,
irrevocably become the sole property of Landlord. Tenant waives all rights to
notice and all common law and statutory claims and causes of action which it may
have against Landlord subsequent to such date as regards the storage,
destruction, damage, loss of use and ownership of the personal property affected
by the terms of this Article. Tenant acknowledges Landlord's need to relet the
Leased Premises upon termination of this Lease or repossession of the Leased
Premises and understands that the forfeitures and waivers provided herein are
necessary to aid said reletting, and to prevent Landlord incurring a loss for
inability to deliver the Leased Premises to a prospective Tenant.

ARTICLE 18 MAINTENANCE AND REPAIRS

18.1 Landlord's Obligations. Subject to the other provisions of this Lease
----------------------
imposing obligations in this respect upon Tenant, Landlord shall repair, replace
and maintain the external and Structural parts of the Building and Common Areas
of the Complex which do not comprise a part of the Leased Premises and are not
leased to others, janitor and equipment closets and shafts within the Leased
Premises designated by Landlord for use by it in connection with the operation
and maintenance of the Complex, and all Common Areas. Landlord shall perform
such repairs, replacements and maintenance with reasonable dispatch, in a good
and workmanlike manner; but Landlord shall not be liable for any damages,
direct, indirect or consequential, or for damages for personal discomfort,
illness or inconvenience of Tenant by reason of failure of such equipment,
facilities or systems or reasonable delays in the performance of such repairs,
replacements and maintenance, unless caused by the gross negligence or
deliberate act or omission of Landlord. The cost for such repairs, maintenance
and replacement shall be included in Operating Costs.

18.2 Negligence of Tenant. If the Building, the elevators, boilers,
--------------------
engines, pipes or apparatus used for the purpose of climate control of the
Building or operating the elevators, or if the water pipes, drainage pipes,
electric lighting or other equipment of the Building, or the roof or the outside
walls of the Building, fall into a state of disrepair or become damaged or
destroyed through the gross negligence or intentional act of Tenant, its agents,
officers, partners, employees or servants, the cost of the necessary repairs,
replacements or alterations shall be borne by Tenant who shall pay the same to
Landlord as additional charges forthwith on demand, except to the extent
provided in section 14.2 (the waiver of subrogation) hereof.

18.3 Tenant's Obligations. Tenant shall repair the Leased Premises,
--------------------
including without limiting the generality of the foregoing, all interior
partitions and walls, fixtures, Leasehold Improvements and alterations in the
Leased Premises, fixtures and shelving, and special mechanical and electrical
equipment which equipment

23
<PAGE>

is not a normal part of the Leased Premises installed by or for Tenant,
reasonable wear and tear, damage with respect to which Landlord has an
obligation to repair as provided in Section 18.1 and Section 19 hereof only
excepted. Landlord may enter and view the state of repair and Tenant will repair
in a good and workmanlike manner according to notice in writing.

18.4 Cleaning. Tenant agrees at the end of each business day to leave the
--------
Leased Premises in a reasonably clean condition for the purpose of the
performance of Landlord's cleaning services referred to herein.

18.5 Waiver. Tenant waives all rights it may have under law to make
------
repairs at Landlord's expense.

18.6 Acceptance. Except as to the construction obligations of Landlord, if
----------
any, stated in Exhibit C to this Lease, Tenant shall accept the Leased Premises
in "as is" condition as of the date of execution of this Lease by Tenant, and
subject to the punch list items referenced in section 4.5, Tenant acknowledges
that the Leased Premises in such condition are in good and sanitary order,
condition and repair.

ARTICLE 19 DESTRUCTION

19.1 Rights of Termination. In the event the Leased Premises suffers (a)
---------------------
an "uninsured property loss" (as hereinafter defined) or (b) a property loss
which cannot be repaired within one hundred eighty (180) days from the date of
destruction under the laws and regulations of state, federal, county or
municipal authorities, or other authorities with jurisdiction, Landlord or
Tenant may terminate this Lease as of the date of the damage within twenty (20)
days of written notice from Landlord to Tenant that the damage from the casualty
was an uninsured property loss or that time to restore will exceed such one
hundred eighty (180) day period. For purposes of this Lease, the term "uninsured
property loss" shall mean any loss arising from a peril not covered by the
standard form of "All Risk" property insurance policy:

19.2 Repairs. In the event of a property loss which may be repaired within
-------
one hundred eight (180) days from the date of the damage, or, in the
alternative, in the event the parties do not elect to terminate this Lease under
the terms of Section 19.1 above, then this Lease shall continue in full force
and effect and Landlord shall forthwith undertake to make such repairs to
reconstitute the Leased Premises to as near the condition as existed prior to
the property loss as practicable. Such partial destruction shall in no way annul
or void this Lease except that Tenant shall be entitled to a proportionate
reduction of Minimum Monthly Rent following the property loss and until the time
the Leased Premises are restored. Such reduction shall be based on the ratio
that the square footage of the damaged portion of the Leased Premises bears to
the total square footage of the Leased Premises. Landlord's obligations to
restore shall in no way include any construction originally performed by Tenant
or subsequently undertaken by Tenant, but shall include solely that property
constructed by Landlord prior to commencement of the Term hereof.

19.3 Repair Costs. The cost of any repairs to be made by Landlord,
------------
pursuant to Section 19.2 of this Lease, shall be paid by Landlord utilizing
available insurance proceeds. Tenant shall reimburse Landlord upon completion of
the repairs for any deductible for which no insurance proceeds will be obtained
under Landlord's insurance policy, or if other premises are also repaired, a pro
rata share based on total costs of repair equitably apportioned to the Leased
Premises. Tenant shall, however, not be responsible to pay any deductible or its
share of any deductible to the extent that Tenant's payment would be in excess
of $10,000 if Tenant's consent has not been received by Landlord, unless such
denial of consent by Tenant is unreasonable.

19.4 Waiver. Tenant hereby waives all statutory or common law rights of
------
termination in respect to any partial destruction or property loss which
Landlord is obligated to repair or may elect to repair under the terms of this
Article.

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<PAGE>

19.5 Landlord's Election. In the event that the Complex or Building is
-------------------
destroyed to the extent of not less than thirty-three and one-third percent (33-
1/3%) of the replacement cost thereof, Landlord may elect to terminate this
Lease, whether the Leased Premises be injured or not, in the same manner as in
Section 19.1 above. In all events, a total destruction of the Complex or
Building shall terminate this Lease.

19.6 Damage Near End of Term. If at any time during the last twelve (12)
-----------------------
months of the term of this Lease there is, in Landlord's sole opinion,
substantial damage to the Leased Premises or the Building, whether or not such
casualty is covered in whole or in party by insurance, Landlord may at
Landlord's option cancel and terminate this Lease as of the date of Occurrence
of such damage by giving written notice to Tenant of Landlord's election to do
so within thirty (30) days after the date of occurrence of such damage and
Landlord shall have no further liability hereunder. Substantial damage shall be
defined as damage that will cost over $50,000.00 to repair.

ARTICLE 20 CONDEMNATION

20.1 Definitions.
-----------

(a) "Condemnation" means (i) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a condemnor and/or (ii) a
voluntary sale or transfer by Landlord to any condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.

(b) "Date of taking" means the date the condemnor has the right to
possession of the property being condemned.

(c) "Award" means all compensation, sums or anything of value awarded,
paid or received on a total or partial condemnation.

(d) "Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.

20.2 Total Taking. If the Leased Premises are totally taken by
------------
condemnation, this Lease shall terminate on the date of taking.

20.3 Partial Taking; Common Areas.
----------------------------

(a) If any portion of the Leased Premises is taken by condemnation,
this Lease shall remain in effect, except that Tenant can elect to terminate
this Lease if 33-1/3% or more of the total number of square feet in the Leased
Premises is taken.

(b) If any part of the Common Areas of the Complex is taken by
condemnation, this Lease shall remain in full force and effect so long as there
is no material interference with the access to the Leased Premises, except that
if thirty percent (30%) or more of the Common Areas is taken by condemnation,
Landlord or Tenant shall have the election to terminate this Lease pursuant to
this Section.

(c) If fifty percent (50%) or more of the Building in which the Leased
Premises are located is taken, Landlord shall have the election to terminate
this Lease in the manner prescribed herein.

20.4 Termination or Abatement. If either party elects to terminate this
------------------------
Lease under the provisions of Section 20.3 (such party is hereinafter referred
to as the "Terminating Party"), it must terminate by giving notice to the other
party (the "Nonterminating Party") within thirty (30) days after the nature and
extent of the taking have been finally determined (the "Decision Period"). The
Terminating Party shall notify the Nonterminating Party of the date of
termination, which date shall not be earlier than one hundred twenty (120) days
after the Terminating Party has notified the Nonterminating Party of its
election to terminate nor later than

25
<PAGE>

the date of taking. If Notice of Termination is not given within the Decision
Period, the Lease shall continue in full force and effect except that Minimum
Monthly Rent shall be reduced by subtracting therefrom an amount calculated by
multiplying the Minimum Monthly Rent in effect prior to the taking by a fraction
the numerator of which is the number of square feet taken from the Leased
Premises and the denominator of which is the number of square feet in the Leased
Premises prior to the taking.

20.5 Restoration. If there is a partial taking of the Leased Premises and
-----------
this Lease remains in full force and effect pursuant to this Article, Landlord,
at its cost, shall accomplish all necessary restoration so that the Leased
Premises is returned as near as practical to its condition immediately prior to
the date of the taking, but in no event shall Landlord be obligated to expend
more for such restoration than the extent of funds actually paid to Landlord by
the condemnor.

20.6 Award. Any award arising from the condemnation or the settlement
-----
thereof shall belong to and be paid to Landlord except that Tenant shall receive
from the award compensation for the following if specified in the award by the
condemning authority, so long as it does not reduce Landlord's award in respect
of the real property Tenant's trade fixtures, tangible personal property,
goodwill, loss of business and relocation expenses. At all events, Landlord
shall be solely entitled to all award in respect of the real property, including
the bonus value of the leasehold. Tenant shall not be entitled to any award
until Landlord has received the above sum in full.

ARTICLE 21 ASSIGNMENT AND SUBLETTING

21.1 Lease is Personal. The purpose of this Lease is to transfer
-----------------
possession of the Leased Premises to Tenant for Tenant's personal use in return
for certain benefits, including rent, to be transferred to the Landlord. Tenant
acknowledges and agrees that it has entered into this Lease in order to occupy
the Leased Premises for its own personal use and not for the purpose of
obtaining the right to assign or sublet the leasehold to others.

21.2 "Transfer of the Leased Premises" Defined. Except for an Affiliated
----------------------------------------
Transfer described in section 21.5 hereof, the terms "Transfer of the Leased
Premises" or "Transfer" as used herein shall include any assignment of all or
any part this Lease (including an assignment by operation of law), subletting of
all or any part the Leased Premises or transfer of possession, or right of
possession or contingent right of possession of all or any portion of the Leased
Premises including, without limitation, concession, mortgage, deed of trust,
devise, hypothecation, agency, franchise or management agreement, or the
occupancy or use by any other person (the agents and servants of Tenant
excepted) of any portion of the Leased Premises. If Tenant is a corporation
which is not deemed a public corporation, or is an unincorporated association,
partnership or limited liability company or partnership, or consists of more
than one party, the transfer, assignment or hypothecation of any stock or
interest in such corporation, association, partnership, limited liability
company or ownership interest, in the aggregate (whether in a single transaction
or series of separate but related transactions over a period of time) of twenty-
five percent (25%) or more, shall be deemed a Transfer of the Leased Premises.

21.3 No Transfer Without Consent. Except for an Affiliated Transfer
---------------------------
described in section 21.5 hereof, Tenant Shall not suffer a Transfer of the
Leased Premises or any interest therein, or any part thereof, or any right or
privilege appurtenant thereto without the prior written consent of Landlord, and
a consent to one Transfer of the Leased Premises shall not be deemed to be a
consent to any subsequent Transfer of the Leased Premises. Any Transfer of the
Leased Premises without such consent shall be void, and shall, at the option of
Landlord, terminate this Lease. Any Transfer of the Leased Premises without such
consent shall (i) be voidable, and (ii) terminate this Lease, in either case, at
the option of Landlord. The consent by Landlord to any Transfer shall not
include consent to the assignment or transferring of any lease renewal option
rights or space option rights of the Leased Premises, special privileges or
extra services granted to Tenant by this Lease, or addendum or amendment thereto
or letter of agreement (and such options, rights, privileges or services shall
terminate upon such assignment), unless Landlord specifically grants in writing
such options, rights, privileges or services to such assignee or subtenant.

26
<PAGE>

21.4 When Consent Granted. The consent of Landlord to a Transfer may not be
--------------------
unreasonably withheld, provided that it is agreed to be reasonable for Landlord
to consider any of the following reasons, which list is not exclusive, in
electing to deny consent:

(a) The financial strength of the proposed transferee at the time of
the proposed Transfer is not at least equal to that of Tenant at the time of
execution of this Lease;

(b) A proposed transferee whose occupation of the Leased Premises
would cause a diminution in the reputation of the Complex or the other
businesses located therein;

(c) A proposed transferee whose impact or affect on the common
facilities or the utility, efficiency or effectiveness of any utility or
telecommunication system serving the Building or the Complex or the other
occupants of the Complex would be adverse, disadvantageous or require
improvements or changes in any utility or telecommunication capacity currently
serving the Building or the Complex;

(d) A proposed transferee whose occupancy will require a variation in
the terms of this Lease (including, without limitation, a variation in the use
clause) or which otherwise adversely affects any interest of Landlord;

(e) Tenant agrees that its personal business skills and philosophy
were an important inducement to Landlord for entering into the Lease and that
Landlord may reasonably object to the Transfer of the Leased Premises to another
whose proposed use, while permitted by the Use clause of this Lease, would
involve a quality, manner or type of business skills different from those of
Tenant;

(f) The existence of any default by Tenant under any provision of this
Lease; or

(g) A proposed transferee who is or is likely to be, or whose business
is or is likely to be, subject to compliance with additional laws or other
governmental requirements beyond those to which Tenant or Tenant's business is
subject.

21.5 Affiliated Transfer. Notwithstanding the foregoing, Tenant shall have
-------------------
the right, without the consent of Landlord, but upon prior written notice to
Landlord, to assign this Lease or sublet the Leased Premises: (a) to a company
or other entity organized or to be organized by Tenant, provided that Tenant
owns or beneficially controls all of the issued and outstanding shares of stock
or interests of the company or other entity; (b) to any corporation or entity
which controls, is controlled by, or is under common control with the original
Tenant under this Lease; or (c) to a successor corporation which results from a
merger, consolidation or other non-bankruptcy or insolvency reorganization in
which Tenant is not the surviving corporation, so long as the surviving
corporation has a net worth at the time of such assignment that is equal to or
greater than the net worth of Tenant immediately prior to such transaction. In
addition, if Tenant becomes a publicly held corporation whose stock is listed on
a national stock exchange or is regularly traded in the over-the-counter market
and quoted on NASDAQ, the transfer of shares in Tenant in connection with its
public offering shall not be deemed a transfer requiring the consent of
Landlord. Any Transfer under this section shall be referred to as an "Affiliated
Transfer" and any transferee of an Affiliated Transfer shall be referred to as
an "Affiliated Transferee."

21.6 Procedure for Obtaining Consent. With respect to a Transfer requiting
-------------------------------
Landlord's consent, Landlord need not commence its review of any proposed
Transfer, or respond to any request by Tenant with respect to such, unless and
until it has received from Tenant adequate descriptive information concerning
the business to be conducted by the proposed transferee, the transferee's
financial capacity, and such other information as may reasonably be required in
order to form a prudent judgment as to the acceptability of the proposed
Transfer, including, without limitation, the following:

27
<PAGE>

(a) The past two years' audited annual Balance Sheets and Profit and
Loss statements, certified correct by a Certified Public Accountant for such
transfer, or if such transferee is privately owned company and does not have
such audited statements, then the past two years' Federal Income Tax returns of
the proposed transferee);

(b) Banking references of the proposed transferee;

(d) At least five (5) business and three (3) personal references for
the proposed transferee; and

(e) An executed copy of the instrument by which Tenant proposes to
effectuate the Transfer.

21.7 Recapture. By written notice to Tenant (the "Termination Notice")
---------
within thirty (30) days following submission to Landlord by Tenant of the
information specified in section 21.6, Landlord may (1) terminate this Lease in
the event of an assignment of this Lease or sublet of the entire Leased
Premises, or (2) terminate this Lease as to the portion of the Leased Premises
to be sublet, if the sublet is to be of less than the entire Leased Premises. If
Landlord elects to terminate under the provisions hereof, and the area to be
terminated is less than the entire Leased Premises, an amendment to this Lease
shall be executed in which Tenant's obligations for rent and other charges shall
be reduced in proportion to the reduction in the size of the Leased Premises
caused thereby by restating the description of the Leased Premises, and its
monetary obligations hereunder shall be reduced by multiplying such obligations
by a fraction, the numerator of which is the Rentable Area of the Leased
Premises offered for sublease and the denominator of which is the Rentable Area
of the Leased Premises immediately prior to such termination, as determined by
Landlord in its sole and absolute discretion. The provisions of this section
shall not apply to an Affiliated Transfer under Section 21.5 hereof.

21.8 Reasonable Restriction. The restrictions on Transfer described in
----------------------
this Lease are acknowledged by Tenant to be reasonable for all purposes,
including, without limitation, the provisions of California Civil Code (the
"Code") Section 1951.4(b)(2). Tenant expressly waives any rights which it might
otherwise be deemed to possess pursuant to applicable law, including, without
limitation, Section 1997.040 of the Code, to limit any remedy of Landlord
pursuant to Section 1951.2 or 1951.4 of the Code by means of proof that
enforcement of a restriction on use of the Leased Premises would be
unreasonable.

21.9 Effect of Transfer. If Landlord consents to a Transfer and does not
------------------
elect to recapture as provided in section 21.7, the following conditions shall
apply:

(a) Each and every covenant, condition or obligation imposed upon
Tenant by this Lease and each and every right, remedy or benefit afforded
Landlord by this Lease shall not be impaired or diminished as a result of such
Transfer.

(b) Tenant shall pay to Landlord on a monthly basis, eighty percent
(80%) of the excess of any sums of money, or other economic consideration
received by Tenant from the Transferee in such month (whether or not for a
period longer than one month), including higher rent, bonuses, key money, or the
like over the aggregate of (i) the amortized portion of the reasonable and
customary expenses actually paid by Tenant to unrelated third parties for
brokerage commissions, attorney's fees and design fees incurred as a direct
consequence of the Transfer, and (ii) the total sums which Tenant pays Landlord
under this Lease in such month, or the prorated portion thereof if the Leased
Premises transferred is less than the entire Leased Premises. The amount so
derived shall be paid with Tenant's payment of Minimum Monthly Rent. The term
"amortized portion" is that portion of the applicable expenses derived by
dividing such expenses by the number of months in the original term (excluding
extension options) of the Transfer transaction.

28
<PAGE>

(c) No Transfer, whether or not consent of Landlord is required
hereunder, shall relieve Tenant of its primary obligation to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. The
acceptance of rent by Landlord from any person shall not be deemed to be a
waiver by Landlord of any provision of this Lease or to be a consent to any
Transfer of the Leased Premises.

(d) If Landlord consents to a sublease, such sublease shall not
extend beyond the expiration of the Term of this Lease.

(e) No Transfer shall be valid and no transferee shall take
possession of the Leased Premises or any part thereof unless, Tenant shall
deliver to Landlord, at least ten (10) days prior to the effective date of such
Transfer, a duly executed duplicate original of the Transfer instrument in form
satisfactory to Landlord which provides that (i) the transferee in cases of an
assignment assumes Tenant's obligations for the payment of rent and for the full
and faithful observance and performance of the covenants, terms and conditions
contained herein, (ii) such transferee will, at Landlord's election, attorn
directly to Landlord in the event Tenant's Lease is terminated for any reason on
the terms set forth in the instrument of transfer and (iii) such instrument of
transfer contains such other assurances as Landlord reasonably deems necessary.

21.10 Costs. Tenant shall reimburse Landlord as additional rent for
-----
Landlord's reasonable costs and attorneys' fees incurred in conjunction with the
processing and documentation of any proposed Transfer of the Leased Premises,
whether or not consent is granted.

ARTICLE 22 ENTRY BY LESSOR

22.1 Rights of Landlord. Tenant shall permit Landlord and Landlord's
------------------
agents and any mortgagee under a mortgage or beneficiary under a deed of trust
encumbering the Building containing the Leased Premises and such party's agents
to enter the Leased Premises at all reasonable times for the purpose of (a)
inspecting the same, (b) maintaining the Building, (c) making repairs,
replacements, alterations or additions to any portion of the Building, including
the erection and maintenance of such scaffolding, canopies, fences and props as
may be required, (d) posting notices of non-responsibility for alterations,
additions or repairs, (c) placing upon the Building any usual or ordinary "for
sale" signs and showing the space to prospective purchasers, investors and
lenders, without any rebate of rent and without any liability to Tenant for any
loss of occupation or quiet enjoyment of the Leased Premises thereby occasioned,
and (e) placing on the Leased Premises any "to let" or "to lease" signs and
marketing and showing the Leased Premises to prospective tenants at any time
within six (6) months prior to the expiration of this Lease. This Section in no
way affects the maintenance obligations of the parties hereto.

ARTICLE 23 SIGNS

23.1 Approval, Installation and Maintenance. Tenant shall not place on the
--------------------------------------
Leased Premises or on the Building or Common Areas of the Complex, any exterior
signs or advertisements nor any interior signs or advertisements that are
visible from the exterior of the Leased Premises, without Landlord's prior
written consent, which Landlord reserves the right to withhold for any aesthetic
or other reason in its sole and absolute discretion. The cost of installation
and regular maintenance of any such signs approved by Landlord shall be at the
sole expense of Tenant, except that the cost to place Tenant's name in the
directory(ies) for the Building shall be included as part of the Operating
Costs. At the termination of this Lease, or any extension thereof, Tenant shall
remove all its signs (other than the its name in the directory(ies) for the
Building), and all damage caused by such removal shall be repaired at Tenant's
expense.

ARTICLE 24 DEFAULT

24.1 Definition. The occurrence of any of the following shall constitute a
----------
material default and breach of this Lease by Tenant:

29
<PAGE>

(a) Payment. Any failure by Tenant to pay the rent or to make any
-------
other payment required to be made by Tenant hereunder within five (5) days after
receipt of written notice;

(b) Other Covenants. A failure by Tenant to observe and perform any
---------------
other provision of this Lease to be observed or performed by Tenant, where such
failure continues for thirty (30) days after written notice thereof by Landlord
to Tenant; provided, however, that if the nature of the default is such that the
same cannot reasonably be cured within the thirty (30) day period allowed,
Tenant shall not be deemed to be in default if Tenant shall, within such thirty
(30) day period, commence to cure and thereafter diligently prosecute the same
to completion; or

(c) Receivership. Either (1) the appointment of a receiver (except a
------------
receiver appointed at the instance or request of Landlord) to take possession of
all or substantially all of the assets of Tenant, or (2) a general assignment by
Tenant for the benefit of creditors, or (3) any action taken or suffered by
Tenant under any insolvency or bankruptcy act shall constitute a breach of this
Lease by Tenant. In such event, Landlord may, at its option, declare this Lease
terminated and forfeited by Tenant, and Landlord shall be entitled to immediate
possession of the Leased Premises. Upon such notice of termination, this Lease
shall terminate immediately and automatically by its own limitation; or

(d) Multiple Defaults. Any two (2) failures by Tenant to observe and
-----------------
perform any provision of this Lease after receipt of written notice of such
failure and the expiration of five (5) days without curing such failure (except
for any additional time period provided in paragraph (b) above) during any
calendar year during the term, as such may be extended, shall constitute, at the
option of Landlord, a separate and non-curable default.

ARTICLE 25 REMEDIES UPON DEFAULT

25.1 Termination and Damages. In the event of any default by Tenant, then
-----------------------
in addition to any other remedies available to Landlord herein or at law or in
equity, Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder by giving written notice of such intention to
terminate. In the event that Landlord shall elect to so terminate this Lease,
then Landlord may recover from Tenant:

(a) The worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus

(b) The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the time of award
exceeds the amount of such rental loss Tenant proves could have been reasonably
avoided; plus

(c) The worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that Tenant proves could be reasonably avoided; plus

(d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of events would be likely to
result therefrom; and

(e) At Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by the applicable
law in the state in which the Leased Premises are located.

25.2 Definition. As used in subsections 26.1 (a) and (b) above, the "worth
----------
at the time of award" is computed by allowing interest at the rate of ten
percent (10%) per annum. As used in subsection 26.1(c) above, the "worth at the
time of award" is computed by discounting such amount at the discount rate of
the Federal Reserve Bank for the region in which the Complex is located at the
time of award plus one percent (1%).

30
<PAGE>

25.3 Personal Property. In the event of any default by Tenant, Landlord
-----------------
shall also have the right and option, with or without terminating this Lease, to
do any one or combination of the following:

(a) to reenter the Leased Premises and remove all persons and
property from the Leased Premises;

(b) to have all of Tenant's fixtures, furniture, equipment,
improvements, additions, alterations and other personal property remain upon the
Leased Premises during the length of any default by Tenant or a lesser period;
or

Landlord shall have the sole right to take exclusive possession of
such property and to use it, rent, or charge free, until all defaults are cured.
If Landlord shall remove property from the Leased Premises, Landlord may, in its
sole and absolute discretion, store such property in the Complex, in a public
warehouse or elsewhere. All costs incurred by Landlord under this section,
including, without limitation, those for removal and storage (including, without
limitation, charges imposed by Landlord for storage within the Complex), shall
be at the sole cost of and for the account of Tenant. The rights stated herein
are in addition to Landlord's rights described in Article 17.

25.4 Recovery of Rent; Reletting.
---------------------------

(a) In the event of the vacation or abandonment of the Leased
Premises by Tenant or in the event that Landlord shall elect to reenter as
provided in Section 25.3 above, or shall take possession of the Leased Premises
pursuant to legal proceeding or pursuant to any notice provided by law, then if
Landlord does not elect to terminate this Lease as provided in Section 25.1
above, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all its rights
and remedies under this Lease, including, without limitation, Landlord's right
from time to time, without terminating this Lease, to either recover all rental
as it becomes due or relet the Leased Premises or any part thereof for such term
or terms and at such rental or rentals and upon such other terms and conditions
as Landlord, in its sole discretion, may deem advisable with the right to make
alterations and repairs to the Leased Premises. Acts of maintenance or
preservation or efforts to relet the Leased Premises or the appointment of a
receiver upon initiation of Landlord or other legal proceeding granting Landlord
or its agent possession to protect Landlord's interest under this Lease shall
not constitute a termination of Tenant's right to possession.

(b) In the event that Landlord shall elect to so relet, then rentals
received by Landlord from such reletting shall be applied first, to the payment
of any indebtedness other than rent due hereunder from Tenant to Landlord;
second, to the payment of any cost of such reletting; third, to the payment of
the cost of any alterations and repairs to the Leased Premises; fourth, to the
payment of rent due and unpaid hereunder; and the residue, if any, shall be held
by Landlord and applied in payment of future rent as the same may become due and
payable hereunder. Should that portion of such rentals received from such
reletting during any month, which is applied by the payment of rent hereunder,
be less than the rent payable during that month by Tenant hereunder, then Tenant
shall pay such deficiency to Landlord immediately upon demand therefor by
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any costs and expenses incurred by
Landlord in such reletting or in making such alterations and repairs not covered
by the rentals received from such reletting.

(c) No reentry or taking possession of the Leased Premises or any
other action under this Section shall be construed as an election to terminate
this Lease unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination by Landlord because of any
default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such default.

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<PAGE>

(d) Landlord has the remedy described in California Civil Code
Section 1951.4 (Landlord may continue Lease in effect after Tenant's breach and
abandonment and recover rent as it becomes due, if Tenant has right to sublet or
assign, subject only to reasonable limitations).

25.5 No Waiver. Efforts by Landlord to mitigate the damages caused by
---------
Tenant's default in this Lease shall not constitute a waiver of Landlord's right
to recover damages hereunder, nor shall Landlord have any obligation to mitigate
damages hereunder.

25.6 Curing Defaults. Should Tenant fail to repair, maintain, and/or
---------------
service the Leased Premises, or any part or contents thereof at any time or
times, or perform any other obligations imposed by this Lease or otherwise, then
after having given Tenant reasonable notice of the failure or failures and a
reasonable opportunity which in no case shall exceed thirty (30) days, to remedy
the failure, Landlord may perform or contract for the performance of the repair,
maintenance, or other Tenant obligation, and Tenant shall pay Landlord for all
direct and indirect costs incurred in connection therewith within ten (10) days
of receiving a bill therefor from Landlord.

25.7 Cumulative Remedies. The various rights, options, election powers,
-------------------
and remedies of Landlord contained in this Article and elsewhere in this Lease
shall be construed as cumulative and no one of them exclusive of any others or
of any legal or equitable remedy which Landlord might otherwise have in the
event of breach or default, and the exercise of one right or remedy by Landlord
shall not in any way impair its right to any other right or remedy.

ARTICLE 26 BANKRUPTCY

26.1 Bankruptcy Events. If at any time during the term of this Lease there
-----------------
shall be filed by or against Tenant in any court pursuant to any statute either
of the United States or of any state a petition in bankruptcy or insolvency or
for reorganization or for the appointment of a receiver or trustee of all or a
portion of Tenant's property, or if a receiver or trustee takes possession of
any of the assets of Tenant, or if the leasehold interest herein passes to a
receiver, or if Tenant makes an assignment for the benefit of creditors or
petitions for or enters into an arrangement (any of which are referred to herein
as "a bankruptcy event"), then the following provisions shall apply:

(a) Assume or Reject. At all events any receiver or trustee in
----------------
bankruptcy or Tenant as debtor in possession ("debtor") shall either expressly
assume or reject this Lease within the earlier of sixty (60) days following the
entry of an "Order for Relief" or such earlier period of time provided by law.

(b) Cure. In the event of an assumption of the Lease by a debtor,
----
receiver or trustee, such debtor, receiver or trustee shall immediately after
such assumption (1) cure any default or provide adequate assurances that
defaults will be promptly cured; and (2) compensate Landlord for actual
pecuniary loss or provide adequate assurances that compensation will be made for
actual pecuniary loss; and (3) provide adequate assurance of future performance.

(c) Adequate Assurance. For the purposes of paragraph 26.1 (b),
------------------
adequate assurance of future performance of all obligations under this Lease
shall include, but is not limited to:

(1) written assurance that rent and any other consideration due
under the Lease shall first be paid before any other of Tenant's costs of
operation of its business in the Leased Premises is paid;

(2) written agreement that assumption of this Lease will not
cause a breach of any provision hereof including, but not limited to, any
provision relating to use or exclusivity in this or any other Lease, or
agreement relating to the Leased Premises, or if such a breach is caused, the
debtor, receiver or trustee

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<PAGE>

will indemnify Landlord against such loss (including costs of suit and
attorneys' fees), occasioned by such breach;

(d) Landlord's Obligation. Where a default exists under the Lease,
---------------------
the party assuming the Lease may not require Landlord to provide services or
supplies incidental to the Lease before its assumption by such trustee or
debtor, unless Landlord is compensated under the terms of the Lease for such
services and supplies provided before the assumption of such Lease.

(e) Assignment. The debtor, receiver, or trustee may assign this
----------
Lease only if adequate assurance of future performance by the assignee is
provided, whether or not there has been a default under the Lease. Any
consideration paid by any assignee in excess of the rental reserved in the Lease
shall be the sole property of, and paid to, Landlord. Upon assignment by the
debtor or trustee, the obligations of the Lease shall be deemed to have been
assumed, and the assignee shall execute an assignment agreement on request of
Landlord.

(f) Fair Value. Landlord shall be entitled to the fair market value
----------
for the Leased Premises and the services provided by Landlord (but in no event
less than the rental reserved in the Lease) subsequent to the commencement of a
bankruptcy event.

(g) Reservation of Rights. Landlord specifically reserves any and all
---------------------
remedies available to Landlord in Article 25 hereof or at law or in equity in
respect of a bankruptcy event by Tenant to the extent such remedies are
permitted by law.

ARTICLE 27 SURRENDER OF LEASE

27.1 No Merger. The voluntary or other surrender of this Lease by Tenant,
---------
or a mutual cancellation thereof, shall not work as a merger, and shall, at the
option of Landlord, terminate all or any existing subleases or subtenancies, or
may, at the option of Landlord, operate as an assignment to it of any or all
such subleases or subtenancies.

ARTICLE 28 LANDLORD'S EXCULPATION

28.1 Limited Liability. In the event of default, breach, or violation by
-----------------
Landlord (which term includes Landlord's partners, members, managers, co-
venturers, co-tenants, officers, directors, employees, agents, or
representatives) of any Landlord's obligations under this Lease, Landlord's
liability to Tenant shall be limited to its ownership interest in the Leased
Premises (or its interest in the Building, if applicable) or the proceeds of a
public sale of such interest pursuant to foreclosure of a judgment against
Landlord.

28.2 No Recourse. Landlord (as defined in Section 28.1) shall not be
-----------
personally liable for any deficiency beyond its interest in the Leased Premises.

ARTICLE 29 ATTORNEYS' FEES

29.1 Attorneys' Fees. In the event of any litigation or arbitration (if
---------------
each party in its sole and absolute discretion elects to use arbitration)
proceeding between the parties with respect to this Lease, then all costs and
expenses, including without limitation, all reasonable professional fees such as
appraisers', accountants' and attorneys' fees, incurred by the prevailing party
therein shall be paid or reimbursed by the other party. The "prevailing party"
means the party determined by the court or arbitrator (if the parties elected to
use arbitration) to have most nearly prevailed, even if such party did not
prevail in all matters, not necessarily the one in whose favor a judgment is
rendered. Further, in the event of any default by a party under this Agreement
after notice and the expiration of the applicable cure period, such defaulting
party shall pay all the expenses and attorneys' fees incurred by the other party
in connection with such default, whether or not any litigation is

33
<PAGE>

commenced. Should Landlord be named as a defendant or requested or required to
appear as a witness or produce any documents in any suit brought by Tenant
against any other party or against Tenant in connection with or arising out of
Tenant's occupancy hereunder, Tenant shall pay to Landlord its costs and
expenses incurred in such suit, including without limitation, all reasonable
professional fees such as appraisers', accountants' and attorneys' fees. The
provisions of this section shall survive the expiration or termination of this
Lease.

ARTICLE 30 NOTICES

30.1 Writing. All notices, demands and requests required or permitted to
-------
be given or made under any provision of this Lease shall be in writing and shall
be given or made by personal service or by mailing same by registered or
certified mail, return receipt requested, postage prepaid, or overnight by Fed
Ex or reputable courier which provides written evidence of delivery or other
means of confirmation of delivery (such as computer confirmation by Fed Ex), or
by facsimile with facsimile confirmation that the notice was sent, addressed to
the respective party at the address set forth in Section 1.2 of this Lease or at
such other address as the party may from time to time designate, by a written
notice sent to the other in the manner aforesaid.

30.2 Effective Date. Any such notice, demand or request ("notice") shall
--------------
be deemed given or made on the third day after the date so mailed.
Notwithstanding the foregoing, notice given by personal delivery or by fax to
the party at its address or fax number as aforesaid shall be deemed given on the
day on which delivery is made or the fax is sent, respectively. Notice given
overnight by a reputable courier service which provides written evidence of
delivery shall be deemed given on the business day immediately following deposit
with the courier service.

30.3 Authorization to Receive. Each person and/or entity whose signature
------------------------
is affixed to this Lease as Tenant or as guarantor of Tenant's obligations
("obligor") designates such other obligor its agent for the purpose of receiving
any notice pertaining to this Lease or service of process in the event of any
litigation or dispute arising from any obligation imposed by this Lease.

ARTICLE 31 SUBORDINATION AND FINANCING PROVISIONS

31.1 Priority of Encumbrances. This Lease shall be subordinate to any
------------------------
ground lease, mortgage, deed of trust or any other hypothecation for security
now or hereafter placed upon the real property of which the Leased Premises are
a part and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Leased Premises shall not be disturbed if Tenant is not in default and so long
as Tenant shall pay the rent and observe and perform all the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
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, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.

31.2 Execution of Documents. Tenant agrees to execute any documents
----------------------
required to effectuate such subordination or to make this Lease prior to the
lien of any mortgage, deed of trust or ground lease, as the case may be. It is
understood by all parties that Tenant's failure to execute the subordination
documents referred to above may cause Landlord serious financial damage by
causing the failure of a financing or sale transaction.

31.3 Attornment. If the holder of any ground lease, mortgage, deed of
----------
trust or security described above (or its successor-in-interest), enforces its
remedies provided by law or under the pertinent mortgage, deed of trust or
security instrument and succeeds to Landlord's interest in the Leased Premises,
Tenant shall, upon request of any person succeeding to the interest of such
lender as result of such enforcement, automatically

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<PAGE>

become the Tenant of said successor-in-interest without change in the terms or
other provisions of this Lease, provided, however, that said successor-in-
interest shall not be (i) bound by any payment of rent for more than thirty (30)
days in advance, except prepayment in the nature of security for the performance
by Tenant of its obligations under this Lease, (ii) liable for any act or
omission of any previous landlord (including Landlord), (iii) subject to any
offset, defense, recoupment or counterclaim that Tenant may have given to any
previous landlord (including Landlord), or (iv) liable for any deposit that
Tenant may have given to any previous landlord (including Landlord) that has
not, as such, been transferred to said successor-in-interest. Within ten (10)
days after receipt of request by said successor-in-interest, Tenant shall
execute and deliver an instrument or instruments confirming such attornment,
including a non-disturbance, attornment and subordination agreement in a form
required by any such successor-in-interest.

31.4 Notice and Right to Cure Default. Tenant agrees to give any
--------------------------------
mortgagee(s) and/or trust deed holders, by registered mail, a copy of any notice
of default served upon Landlord, provided that prior to such notice Tenant has
been notified, in writing (by way of Notice of Assignment of Rents and Leases,
or otherwise), of the address of such mortgagees and/or trust deed holders.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the mortgagees and/or trust
deed holders shall have an additional thirty (30) days within which to cure such
default or, if such default cannot be cured within that time, then such
additional time as may be necessary if, within such thirty (30) days, any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure), in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued.

ARTICLE 32 ESTOPPEL CERTIFICATES

32.1 Execution by Tenant. Within ten (10) days after receipt of written
-------------------
request by Landlord, Tenant shall execute and deliver to Landlord an estoppel
certificate acknowledging such facts regarding this Lease as Landlord may
reasonably require, including without limitation, that to the extent of Tenant's
knowledge (i) this Lease is in full force and effect, binding and enforceable in
accordance with its terms and unmodified (or if modified, specifying the written
modification documents); (ii) no default exists on the part of Landlord or
Tenant under this Lease; (iii) there are no events which with the passage of
time, or the giving of notice, or both, would create a default under this Lease;
(iv) no rent in excess of one month's rent has been paid in advance; (v) Tenant
has not received any written notice of any other sale, assignment, transfer,
mortgage or pledge of this Lease or the rent due hereunder; and (vi) Tenant has
no defense, setoff, recoupment or counterclaim against Landlord. Any such
estoppel certificate may be relied upon by Landlord, any lender and any
prospective purchaser of the Building or Complex or any interest therein. The
failure of Tenant to comply with this Article within ten (10) days after receipt
of a second written notice from Landlord shall be a material breach of this
Lease by Tenant giving Landlord all rights and remedies under this Lease, as
well as a right to damages caused by the loss of a loan or sale which may result
from such failure by Tenant.

32.2 Financing. If Landlord desires to finance or refinance the Leased
---------
Premises, or ally part thereof, or the Building, Tenant hereby agrees to deliver
to any lender designated by Landlord financial statements of Tenant of the type
typically provided or available from a publicly held company to the extent such
statements are in Tenant's possession. Such statements shall include the past
three (3) years' financial statements of Tenant. All such financial statements
shall be received by Landlord and such lender in confidence and shall be used
only for the purposes herein set forth.

ARTICLE 33 MISCELLANEOUS PROVISIONS

33.1 Effect of Waiver. The waiver by Landlord or Tenant of any breach of
----------------
any Lease provision by the other party shall not be deemed to be a waiver of
such Lease provision or any subsequent breach of the same or any other term,
covenant or condition therein 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 provision of this

35
<PAGE>

Lease, other than the failure of Tenant to pay the particular rental so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent. Any failure by Landlord or Tenant to insist
upon strict performance by the other of this Lease of any of the terms and
provisions of the Lease or any guaranty of this Lease shall not be deemed to be
a waiver of any of the terms or provisions of the Lease or such guaranty, and
Landlord or Tenant, as the case may be, shall have the right thereafter to
insist upon strict performance by the other of any and all of them.

33.2 Month-to-Month Tenancy on Acceptance. If Tenant should remain in
------------------------------------
possession of the Leased Premises after the expiration of the Lease term and
without executing a new Lease, then, upon acceptance of rent by Landlord, such
holding over shall be construed as a tenancy from month-to-month, subject to all
the conditions, provisions and obligations of this Lease as existed during the
last month of the term hereof, so far as applicable to a month to month tenancy,
except that the Minimum Monthly Rent shall be equal one hundred fifty percent
(150%) of the greater of (a) the Minimum Monthly Rent payable immediately prior
to the expiration or sooner termination of the Lease, or (b) the then fair
market rent; provided, however, that Tenant shall also be liable for any and all
damages suffered or sustained by Landlord as a result of such holdover,
including, without limitation, any loss of rental income from any other tenant
that was interested in leasing all or any portion of the Leased Premises,
brokerage commissions, design fees and any other damages as a result.
Additionally, in the event that upon termination of the Lease, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Leased
Premises or any other Tenant obligations as set forth in this Lease, then
Landlord shall have the right to perform any such obligations as it deems
necessary at Tenant's sole cost and expense, and any time required by Landlord
to complete such obligations shall be considered a period of holding over and
the terms of this section shall apply.

33.3 Binding Effect. The covenants and conditions herein contained shall,
--------------
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all of the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.

33.4 Time of the Essence. Time is of the essence of this Lease with
-------------------
respect to each and every article, section and subsection hereof.

33.5 Release of Landlord. If, during the term of this Lease, Landlord
-------------------
shall sell its interest in the Building or Complex of which the Leased Premises
form a part, or the Leased Premises, then from and after the effective date of
the sale or conveyance, Landlord shall be released and discharged from any and
all obligations and responsibilities under this Lease, except those already
accrued and provided Landlord transfers or provides a credit or other payment to
such successor of the Security Deposit to the extent not previously applied by
Landlord under the terms of this Lease.

33.6 Rules and Regulations. Landlord or such other person(s) as Landlord
---------------------
may appoint shall have the exclusive control and management of the Common Areas
and Building and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable rules and regulations with respect thereto. Tenant
agrees to abide by and conform to all such rules and regulations, and to cause
its employees; suppliers, shippers, customers, and invitees to so abide and
conform. Landlord shall not be responsible to Tenant for the non-compliance with
said rules and regulations by other tenants of the Building or Complex.

33.7 Transfer to Purchaser. If any security be given by Tenant to secure
---------------------
the faithful performance of all or any of the covenants of this Lease on the
part of Tenant, Landlord may transfer and/or deliver the security, as such, to
the purchaser of the reversion, in the event that the reversion be sold, and
thereupon Landlord shall be discharged from any further liability in reference
thereto.

33.8 Late Charges. Tenant acknowledges that late payment by Tenant to
------------
Landlord of rent or any other payment due hereunder will Cause Landlord to incur
costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult and impractical to fix. Such costs include, without
limitation,

36
<PAGE>

processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of any encumbrance and note secured by any encumbrance
covering the Leased Premises. Therefore, if any installment of rent, or any
other payment due hereunder from Tenant is not received by Landlord when due,
Tenant shall pay to Landlord an additional sum of ten percent (10%) of such rent
or other charge as a late charge. The parties agree that this late charge
represents a fair and reasonable estimate of the cost that Landlord will incur
by reason of late payment by Tenant. Acceptance of any late charge shall not
constitute a waiver of Tenant default with respect to the overdue amount, or
prevent Landlord from exercising any other rights or remedies available to
Landlord.

33.9 Interest. Any amount owed by Tenant to Landlord which is not paid
--------
when due shall bear interest at the lesser of ten percent (10%) per annum or the
maximum rate of interest permitted to be contracted for by law. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease.

33.10 Authorization to Execute. If Tenant is a corporation, limited
------------------------
liability company, partnership or other entity, each individual executing this
Lease on behalf of said organization represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said organization in
accordance with a duly adopted resolution or other applicable authorization of
said organization, and that this Lease is binding upon said organization in
accordance with its terms. Further, Tenant shall, within thirty (30) days after
execution of this Lease, deliver to Landlord a certified copy of a resolution or
other applicable authorization of said organization authorizing or ratifying the
execution of this Lease.

33.11 Captions. The captions of this Lease are for convenience only and
--------
are not a part of this Lease and do not in any way limit or amplify the terms
and provisions of this Lease.

33.12 Number and Gender. Whenever the singular number is used in this
-----------------
Lease and when required by the context, the same shall include the plural, the
plural shall include the singular, and the masculine gender shall include the
feminine and neuter genders, and the word "person" shall include corporation,
firm or association. If there be more than one Tenant, the obligations imposed
under this Lease upon Tenant shall be joint and several.

33.13 Modifications. This instrument contains all of the agreements,
-------------
conditions and representations made between the parties to this Lease and may
not be modified orally or in any other manner than by an agreement in writing
signed by all of the parties to this Lease.

33.14 Payments. Except as otherwise expressly stated, each payment
--------
required to be made by Tenant shall be in addition to and not in substitution
for other payments to be made by Tenant.

33.15 Severability. The invalidity of any provision of this Lease, as
------------
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

33.16 No offer. The preparation and submission of a draft of this Lease by
--------
either party to the other shall not constitute an offer, nor shall either party
be bound to any terms of this Lease or the entirety of the Lease itself until
both parties have fully executed a final document and an original signature
document has been received by both parties. Until such time as described in the
previous sentence, either party is free to terminate negotiations with no
obligation to the other.

33.17 Light, Air and View. No diminution of light, air, or view by any
-------------------
structure which may hereafter be erected (whether or not by Landlord) shall
entitle Tenant to any reduction of Rent, result in any liability of Landlord to
Tenant, or in any other way affect this Lease or Tenant's obligations hereunder.

37
<PAGE>

33.18 Public Transportation Information. Tenant shall establish and
---------------------------------
maintain during the Term hereof a program to encourage maximum use of public
transportation by personnel of Tenant employed on the Leased Premises, including
without limitation the distribution to such employees of written materials
explaining the convenience and availability of public transportation facilities
adjacent or proximate to the Complex, staggering working hours of employees, and
encouraging use of such facilities, all at Tenant's sole reasonable cost and
expense. Tenant shall comply with all requirements of any local transportation
management ordinance.

33.19 Joint and Several Liability. Should Tenant consist of more than one
---------------------------
person or entity, they shall be jointly and severally liable on this Lease.

33.20 Survival of Obligations. All obligations of Tenant which may accrue
-----------------------
or arise during the term of this Lease or as a result of any act or omission of
Tenant during said term shall, to the extent they have not been fully performed,
satisfied or discharged, survive the expiration or termination of this Lease.

33.21 Real Estate Brokers. Landlord and Tenant each represents and
-------------------
warrants to the other party that it has not authorized or employed, or acted by
implication to authorize or employ, any real estate broker or salesman to act
for it in connection with this Lease, except for the Broker identified in
Article 1. Landlord and Tenant shall each indemnify, defend and hold the other
party harmless from and against any and all claims by any real estate broker or
salesman whom the indemnifying party authorized or employed, or acted by
implication to authorize or employ, to act for the indemnifying party in
connection with this Lease.

33.22 Waiver of California Code Sections. In this Lease, numerous
----------------------------------
provisions have been negotiated by the parties, some of which provisions are
covered by statute. Whenever a provision of this Lease and a provision of any
statute or other law cover the same matter, the provisions of this Lease shall
control. Therefore, Tenant waives (for itself and all persons claiming under
Tenant) the provisions of Civil Code Sections 1932(2) and 1933(4) with respect
to the destruction of the Leased Premises; Civil Code Sections 1941 and 1942
with respect to Landlord's repair duties and Tenant's right to repair; Code of
Civil Procedure Section 1265.130, allowing either party to petition the Superior
Court to terminate this Lease in the event of a partial taking of the Leased
Premises by condemnation as herein defined; and any right of redemption or
reinstatement of Tenant under any present or future case law or statutory
provision (including Code of Civil Procedure Sections 473 and 1179 and Civil
Code Section 3275) in the event Tenant is dispossessed from the Leased Premises
for any reason. This waiver applies to future statutes enacted in addition to or
in substitution for the statutes specified herein.

33.23 Quiet Enjoyment. So long as Tenant pays all of the Minimum Monthly
---------------
Rent, all additional rent and other sums and charges under the Lease and
otherwise performs all of its obligations in the Lease, Tenant shall have the
right to possession and quiet enjoyment of the Leased Premises free from any
unreasonable disturbance or interference, subject to the terms and provisions of
the Lease. Landlord represents and warrants that it has the full right and power
to execute and perform this Lease and to grant the estate demised herein.

33.24 Counterparts. This Lease may be executed in One or more
------------
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one agreement.

38
<PAGE>

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

LANDLORD: TENANT:

SJ PLAZA, LLC, BLAZE SOFTWARE, INC.
a Delaware limited liability company a California corporation

By: Divco West Group, LLC By: /s/ Gary Shroyer
A Delaware limited liability company ---------------------------------
Its Agent Name: Gary Shroyer
-------------------------------
Its: VP CFO
--------------------------------

By: /s/ Scott L. Smithers By: /s/ Gary Shroyer
------------------------------- ---------------------------------
Name: Scott L. Smithers Name: Gary Shroyer
----------------------------- -------------------------------
Its: President Its: Corporate Secretary
------------------------------ --------------------------------

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<PAGE>

EXHIBIT C
---------

WORK LETTER FOR CONSTRUCTION OBLIGATIONS
----------------------------------------

This Exhibit C forms a part of that certain office Lease (the "Lease") by
and between SJ PLAZA, LLC, a Delaware limited liability company, as Landlord,
and BLAZE SOFTWARE, INC., as Tenant, to which this Exhibit is attached. If there
is any conflict between this Exhibit and the Lease, this Exhibit shall govern.

1. Defined Terms. All defined terms referred to in this Exhibit shall
-------------
have the same meaning as defined in the Lease to which this Exhibit is a part,
except where expressly defined to the contrary.

2. Additional Definitions. Each of the following terms shall have the
----------------------
following meaning:

"Construction Plans" -The complete plans and specifications for the
------------------
construction of the Tenant Improvements consisting of all architectural,
engineering, mechanical and electrical drawings and specifications which are
required to obtain all building permits, licenses and certificates from the
applicable governmental authority(ies) for the construction of the Tenant
Improvements. The Construction Plans shall be prepared by duly licensed and/or
registered architectural and/or engineering professionals selected by Landlord
in its sole and absolute discretion, and in all respects shall be in substantial
compliance with all applicable laws, rules, regulations, building codes for the
city and county where the Building is located.

"Force Majeure Delays" - Any delay, other than a Tenant Delay, by
--------------------
Landlord in completing the Tenant Improvements by the Estimated Commencement
Date set forth in the Lease by reason of (i) any strike, lockout or other labor
trouble or industrial disturbance (whether or not on the part of the employees
of either party hereto), (ii) governmental preemption of priorities or other
controls in connection with a national or other public emergency, civil
disturbance, riot, war, sabotage, blockade, embargo, inability to secure
customary materials, supplies or labor through ordinary sources by reason of
regulation or order of any government or regulatory body, or (iii) shortages of
fuel, materials, supplies or labor, (iv) lightning, earthquake, fire, storm,
tornado, flood, washout explosion, inclement weather or any other similar
industry-wide or Building-wide cause beyond the reasonable control of Landlord,
or (v) any other cause, whether similar or dissimilar to the above, beyond
Landlord's reasonable control. The time for performance of any obligation of
Landlord to construct Landlord's Work under this Work Letter or the Lease shall
be extended at Landlord's election by the period of any delay caused by any of
the foregoing events.

"Space Plan" - That certain Space Plan attached hereto as Exhibit C-l,
----------
which reflects the layout of the Tenant Improvements to be constructed by
Landlord. Landlord and Tenant hereby approve of the Space Plan.

"Substantial Completion," "Substantially Complete," "Substantially
-----------------------------------------------------------------
Completed"- The terms Substantial Completion, Substantially Completed and
- ---------
Substantially Complete shall mean when the following have occurred or would have
occurred but for Tenant Delays:

(a) Landlord has delivered to Tenant a written notice stating that
the Tenant Improvements have been Substantially Completed substantially in
accordance with the Construction

1
<PAGE>

Plans, except "punch list" items which may be completed without materially
impairing Tenant's use of the Leased Premises or a material portion thereof; and

(b) Landlord has obtained from the appropriate governmental
authority a temporary, conditional or final certificate of occupancy or signed
building permit (or equivalent), if one is required, for the Tenant Improvements
permitting occupancy of the Leased Premises by Tenant.

"Tenant Delay"- Any delay incurred by Landlord in completing the
------------
Tenant Improvements due to (i) a delay by Tenant, or by any person employed or
engaged by Tenant, in approving or delivering to Landlord any plans, schedules
or information, including, without limitation, the Construction Plans beyond the
applicable time period set forth in this Exhibit, if any; (ii) a delay in the
performance of work in the Premises by Tenant or any person employed by Tenant;
(iii) any changes requested by Tenant in or to previously approved work or in
the Space Plan or Construction Plans; (iv) requests for materials and finishes
which are not readily available, and/or delays in delivery of any materials
specified by Tenant through change orders; (v) the failure of Tenant to pay as
and when due under this Exhibits all costs and expenses to construct the Tenant
Improvements to the extent Tenant is required to pay for such costs in this
Exhibit; (vi) interference with the construction of the Tenant Improvements;
(vii) any delay attributable to the failure of Tenant to pay, when due, any
amounts required to be paid by Tenant pursuant to this Exhibit or otherwise
provided in the Lease. Landlord shall provide written notice to Tenant of any
event constituting a Tenant Delay and the estimated length of the delay promptly
following the date that Landlord has actual knowledge of such event constituting
a Tenant Delay. If Tenant disputes that the event constitutes a Tenant Delay or
the length of the Tenant Delay and the dispute is not resolved by the parties
within 20 days, the matter shall be resolved by Landlord's architect whose
decision on this subject shall be binding on the parties.

"Tenant Improvements" - The improvements to be installed by Landlord
-------------------
in the portion of the Leased Premises substantially in accordance with the
Construction Plans and the type and quality of the Tenant Improvements shall be
typical of standard interior improvements constructed by Landlord which are of
the nature and quality required by specifications developed for the building
containing the premises by Landlord's architect.

2. Construction of the Tenant Improvements.
---------------------------------------

2.1 Construction Plans. Concurrent with its execution of the Lease,
------------------
Tenant shall submit to Landlord or its architect all additional information,
including occupancy requirements for the Tenant Improvements in the Premises
("Information"), necessary to enable Landlord's architect to prepare
Construction Plans for the Tenant Improvements. Landlord shall be entitled to
rely upon all plans, drawings and information supplied by or for Tenant in
preparing the preliminary plans. As soon as is commercially reasonable after
receipt of the Information, Landlord shall cause to be prepared the Construction
Plans for the Tenant Improvements that are consistent with and are logical
evolutions of the Space Plan and the building standards and a copy of such
Construction Plans shall be delivered to Tenant for its review and approval
which shall not be unreasonably withheld. Tenant shall notify Landlord in
writing within five (5) business days after receipt of Construction Plans or any
preliminary plans that (i) Tenant approves of such plans; or (ii) Tenant
disapproves the plans because they vary in design from the Space Plan approved
by Landlord and Tenant in the particular instances specified by Tenant in such
notice (including, without limitation, the specific changes requested by
Tenant), but such disapproval shall constitute a Tenant Delay unless the plans
materially deviate from the Space Plan or changes in such Space Plan that have
been approved in writing by Landlord. The failure of Tenant to provide such
written notice within said five (5) business day period shall be deemed as
approval by Tenant of such plans.

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2.2 Construction. Landlord shall construct the Tenant Improvements
------------
substantially in accordance with the Construction Plans. The construction
contract for constructing the Tenant Improvements and the contractor(s) to
perform the work shall be approved and/or selected, as the case may be, by
Landlord at its sole and absolute discretion without the consent of Tenant. The
parties anticipate that the Tenant Improvements will be Substantially Completed
by the estimated Commencement Date, subject to Tenant Delays and Force Majeure
Delays.

2.3 Tenant's Responsibility. Tenant shall be solely responsible for
-----------------------
the suitability for the Tenant's needs and business of the design and function
of the Tenant Improvements. Tenant shall also be responsible for procuring or
installing in the Premises any trade fixtures, equipment, furniture,
furnishings, telephone equipment or other personal property ("Personal
Property") to be used in the Premises by Tenant, and the cost of such Personal
Property shall be paid by Tenant. Tenant shall conform to the Building's wiring
standards in installing any telephone equipment and shall be subject to any and
all rules of the site during construction.

3. Payment of Construction Costs. Landlord shall pay for the costs to
-----------------------------
construct the Tenant Improvements based on the Space Plan in existence as of the
date hereof. Any additional costs due to changes in the Tenant Improvements
reflected in the Space Plan or in the Construction Plans requested by Tenant or
as a result of any Tenant Delay shall be paid by Tenant as provided in section 4
below.

4. Changes in Work. Tenant shall not be permitted to make any change in
---------------
the Tenant Improvements without the prior written approval of Landlord, which
may be exercised, and made subject to such conditions as Landlord may require,
in its reasonable discretion. Any change approved by Landlord that in Landlord's
judgment results in a delay in constructing the Tenant Improvements shall be
deemed a Tenant Delay, and shall extend the time period by which Landlord must
Substantially Complete the Tenant Improvements, but shall not extend or postpone
the date for payment of rent or for commencement of the term under this Lease.
Tenant shall be responsible for the additional costs actually incurred by
Landlord for such change after considering any changes where there may have been
a savings, including the cost to revise the Construction Plans, obtain any
additional permits and construct any additional improvements required as a
result thereof, and the cost for materials and labor, and all other additional
costs incurred by Landlord from resulting delays in completing the Tenant
Improvements. Tenant shall make such payment to Landlord within ten (10) days
after Tenant's receipt of notice from Landlord. If Landlord does not receive
such payment within said ten (10) day period, Landlord shall have the right, in
addition to any other rights or remedies available under the Lease, at law or in
equity, to (i) discontinue all or any portion of the work until it receives said
payment; (ii) proceed with the other work not affected by such change until such
payment is received; (iii) proceed with the work contemplated with such change;
or (iv) proceed with the work without making such change; in which case the
commencement or completion of such work shall not be deemed a waiver of Tenant's
obligation to pay for same or any additional costs or expenses incurred as a
result thereof. Any delay caused as a result of such a change or request for a
change shall constitute a Tenant Delay.

3
<PAGE>

EXHIBIT D
---------

ACKNOWLEDGEMENT OF SUBSTANTIAL COMPLETION DATE

This Acknowledgement of Substantial Completion Date is dated as of
,1999 between SJ PLAZA, LLC, a Delaware limited liability company ("Landlord"),
and BLAZE. SOFTWARE, INC. ("Tenant"), who entered into a lease dated for
reference purposes as of ________________ covering certain premises located in
Suites 800 and 900 of the building at 150 Almaden Blvd., San Jose, California.
All capitalized terms, if not defined herein, shall be defined as they are
defined in the Lease.

1. The parties agree that the date of , is the date the Tenant
Improvements were Substantially Completed ( as defined in Exhibit C to the
Lease).

2. Tenant hereby confirms the following:

(a) That it has accepted possession of the Premises pursuant to the
terms of the Lease; and

(b) That the Tenant Improvements required to be furnished according
to the Lease by Landlord in the Premises have been Substantially Completed.

3. This agreement, each and all of the provisions hereof, shall inure to
the benefit, or bind, as the case may require, the parties hereto, and their
respective heirs, successors, and assigns subject to the restrictions upon
assignment and subletting contained in the Lease.

LANDLORD: TENANT:

SJ PLAZA, LLC, BLAZE SOFTWARE, INC.,
a Delaware limited liability company a California corporation

By: Divco West Group, LLC By:____________________________
A Delaware limited liability company Name:__________________________
Its Agent Its:___________________________

By:__________________________
Name:________________________
Its:_________________________
<PAGE>

EXHIBIT E
---------

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

All capitalized terms referred to in this Exhibit shall have the same
meaning provided in the Office Lease to which this Exhibit is attached, except
where expressly provided to the contrary in this Exhibit E.

1. No sidewalks, entrance, passages, courts, elevators, vestibules,
stairways, corridors or halls shall be obstructed or encumbered by Tenant or
used for any purpose other than ingress and egress to and from the Leased
Premises and if the Leased Premises are situated on the ground floor of the
Building, Tenant shall further, at Tenant's own expense, keep the sidewalks and
curb directly in front of the Leased Premises clean and free from rubbish.

2. No awning or other projection shall be attached to the outside walls or
windows of the Building or Complex without the prior written consent of Landlord
in its sole and absolute discretion. No curtains, blinds, shades, drapes or
screens shall be attached to or hung in, or used in connection with any window
or door of the Leased Premises, without the prior written consent of Landlord in
its sole and absolute discretion. Such awnings, curtains, blinds, shades,
drapes, screens and other fixtures must be of a quality, type, design, color,
material and general appearance approved by Landlord, and shall be attached in
the manner approved by Landlord in its sole and absolute discretion. All
lighting fixtures hung in offices or spaces along the perimeter of the Leased
Premises must be of a quality, type, design, bulb color, size and general
appearance approved by Landlord.

3. No sign, advertisement, notice, lettering, decoration or other thing
shall be exhibited, inscribed, painted or affixed by Tenant on any part of the
outside or inside of the Leased Premises or of the Building, without the prior
written consent of Landlord in its sole and absolute discretion. In the event of
the violation of the foregoing by Tenant, Landlord may remove same without any
liability, and may charge the expense incurred by such removal to Tenant.

4. The sashes, sash doors, skylights, windows and doors that reflect or
admit light or air into the halls, passageways or other public places in the
Building or Complex shall not be covered or obstructed by Tenant, nor shall any
bottles, parcels or other articles be placed on the window sills or in the
public portions of the Building or Complex.

5. No show cases or other articles shall be put in front of or affixed to
any part of the exterior of the Building or Complex, nor placed in public
portions thereof without the prior written consent of Landlord.

6. The restrooms, toilets, wash bowls, and other apparatus shall not be
used for any purpose other than that for which they were constructed, and no
sweepings, rubbish, rages or other foreign substance of any kind shall be thrown
into them. The expense of any breakage, stoppage, or damage resulting from
violation of this rule shall be borne by the tenant who caused, or whose agents,
servants, employees, contractors, visitors or licensees caused, the breakage,
stoppage, or damage.

7. Tenant shall not mark, paint or in any way deface any part of the
Leased Premises or the Building or Complex, but shall have the right to put
normal and customary decorations on the walls of the type typically found in
office buildings. No boring, cutting or stringing of wires shall be permitted,
except with the prior written consent of Landlord, and as Landlord may direct,
in its sole and absolute discretion.

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<PAGE>

8. No animal or bird or bicycle or vehicle of any kind shall be brought
into or kept in or about the Leased Premises, Building or Complex, except
seeing-eye dogs or other seeing-eye animals or other animals or equipment
required by any disabled employee or invitee of Tenant.

9. Prior to leaving the Leased Premises for the day, Tenant shall draw or
lower window coverings and extinguish all lights. Tenant shall assume all
responsibility, including keeping doors locked and other means of entry to the
Leased Premises closed, for protecting the Leased Premises from theft, robbery,
and pilferage.

10. Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with any occupant of the Building or
Complex, or neighboring buildings or premises, or those having business with
them. Tenant shall not harass or annoy any occupant of the Building or Complex,
including, without limitation, any act or conduct that may violate, breach or
infringe upon any federal, state or local laws or civil rights, including those
pertaining to the protection of the civil rights of any person based on sex,
race, religion, sexual preference, age or other consideration. Tenant shall not
throw anything out of the doors, windows or skylights or down the passageways.

11. Neither Tenant nor any of Tenant's agents, servants, employees,
contractors, visitors or licensees shall at any time bring or keep upon the
Leased Premises, Building or Complex any flammable, combustible or explosive
fluid, chemical or substance.

12. No additional locks, bolts or mail slots of any kind shall be placed
upon any of the doors or windows by Tenant, nor shall any change be made in
existing locks or the mechanism thereof. Tenant must, upon the termination of
the tenancy, restore to Landlord all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by Tenant, and in the event of the
loss of any keys so furnished, Tenant shall pay to Landlord the cost thereof.

13. No furniture, freight, or large equipment of any kind may be brought
into or out of the Building without prior notice to Landlord. All moving
activity into or out of the Building must be scheduled with Landlord and done
only at the time and in the manner designated by Landlord. No deliveries of
furniture, freight or large equipment (other than messenger services) shall be
allowed between the hours of 7:00 a.m. and 9:00 a.m., 12:00 p.m. and 1:00 p.m.,
and 4:00 p.m. and 6:00 p.m., Monday through Friday. Landlord may at any time
restrict the elevators and areas of the Building into which messengers may enter
and may require that deliveries be left at the lobby security desk for pickup by
Tenant. Landlord may prescribe the weight, size, and position of all safes and
other heavy property brought into the Building and the times and manner of
moving those items within and out of the Building. Tenant shall not overload the
floor of the Leased Premises. If considered necessary by Landlord, safes and
other heavy objects must stand on supports that are adequate to distribute the
weight properly. Landlord shall not be responsible for loss of or damage to any
safe or property. Any damage to any part of the Building or to its contents,
occupants, or visitors caused by moving or maintaining any safe or other
property referred to in this clause shall be the sole responsibility and expense
of Tenant. Landlord reserves the right to inspect all safes, freight or other
bulky articles to be brought into the Building and to exclude from the Building
all safes, freight or other bulky articles which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part. No
packages, supplies, equipment, or merchandise may be received in the Building or
carried up or down in the elevators, except between those hours and in that
specific elevator that Landlord shall designate.

14. Landlord shall have the right to prohibit any advertising or business
conducted by Tenant referring to the Building which, in Landlord's good faith
opinion, tends to impair the reputation of the

2
<PAGE>

Building or its desirability as a first class building for offices and/or
commercial services and upon notice from Landlord, Tenant shall refrain from or
discontinue such advertising.

15. Landlord reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 8:00 a.m. Monday through Friday, after 1:00 p.m. on
Saturdays and at all hours Sundays and legal holidays, all persons who do not
present a pass to the Building issued by Landlord. Such hours are subject to
change in Landlord's sole and absolute discretion upon written Landlord notice
from Landlord. Landlord may furnish passes to Tenant so that Tenant may validate
and issue same. Tenant shall safeguard said passes and shall be responsible for
all acts of persons in or about the Building who possess a pass issued to
Tenant. Landlord reserves the right to exclude or expel from the Building and
Complex any person who, in Landlord's judgment, is under the influence of
alcohol or drugs or commits any act in violation of any of these Rules and
Regulations.

16. Any person, including Tenant and Tenant's employees and agents, who
enters or leaves the Building at any time when it is locked or at any time
considered to be after the Building's normal business hours, may be required to
sign the Building register. Access to the Building may be refused unless the
person seeking access has proper identification or has previously arranged a
pass for access to the Building. Landlord and its agents shall not be liable for
damages for any error concerning the admission to, or exclusion from, the
Building of any person. Landlord reserves the right, in the event of invasion,
mob, riot, public excitement, or other commotion, to prevent access to the
Building or Complex during the continuance of that event by any means it
considers appropriate for the safety and protection of life and property.

17. Tenant's contractors shall, while in the Leased Premises, Building or
elsewhere in the Complex, be subject to and under the control and direction of
the Building Manager (but not as agent or servant of said Building Manager or of
Landlord).

18. If the Leased Premises is or becomes infested with vermin as a result
of the use or any misuse or neglect of the Leased Premises by Tenant, its
agents, servants, employees, contractors, visitors or licensees, Tenant shall
forthwith at Tenant's expense cause the same to be exterminated from time to
time to the satisfaction of Landlord and shall employ such licensed
exterminators as shall be approved in writing in advance by Landlord.

19. The requirements of Tenant will be attended to only upon application
at the office of the Building. Building personnel shall not perform any work or
do anything outside of their regular duties unless under special instructions
from the office of the Landlord.

20. Tenant and Tenant's employees, agents, contractors and invitees shall
not loiter in or on the entrances, corridors, sidewalks, lobbies, halls,
stairways, elevators, or common areas for the purpose of smoking tobacco
products Or for any other purpose. Tenant and Tenant's employees and agents
shall not obstruct those areas but use them only as a means of ingress to and
egress from the Leased Premises, Building or Complex. Canvassing, soliciting and
peddling in the Building or Common Areas of the Complex are prohibited and
Tenant shall cooperate to prevent the same.

21. No air conditioning unit or system or other apparatus shall be
installed or used by Tenant without the written consent of Landlord in its sole
and absolute discretion. Tenant shall not waste electricity, water, or air-
conditioning and shall cooperate fully with Landlord to ensure the most
effective operation of the Building's heating and air-conditioning system.

3
<PAGE>

22. There shall not be used in any premises, or in the public halls, plaza
areas, lobbies, or elsewhere in the Building or Complex, either by Tenant or by
jobbers or others, in the delivery or receipt of merchandise, any hand trucks or
dollies, except those equipped with rubber tires and sideguards.

23. Tenant, Tenant's agents, servants, employees, contractors, licensees,
or visitors shall not park any vehicles in any driveways, service entrances, or
areas posted "No Parking" and shall comply with any other parking restrictions
imposed by Landlord from time to time.

24. Tenant shall install and maintain, at Tenant's sole cost and expense,
an adequate visibly marked (at all times properly operational) fire extinguisher
next to any duplicating or photocopying machine or similar heat producing
equipment to the extent required by applicable law, which may or may not contain
combustible material, in the Leased Premises, Building or Complex.

25. Tenant shall keep its window coverings closed during any period of the
day when the sun is shining directly on the windows of the Leased Premises.

26. Tenant shall not use the name of the Building for any purpose other
than as the address of the business to be conducted by Tenant in the Leased
Premises, nor shall Tenant use any picture of the Building in its advertising,
stationery or in any other manner without the prior written permission of
Landlord. Landlord expressly reserves the right at any time to change said name
without in any manner being liable to Tenant therefor.

27. Tenant shall not prepare any food nor do any cooking, operate or
conduct any restaurant, luncheonette or cafeteria for the sale or service of
food or beverages to others, except that food and beverage preparation by
Tenant's employees using microwave ovens, equipment and/or coffee makers in
Tenant's kitchen in the Lease Premises shall be permitted; provided, however, no
odors of cooking or other processes may emanate from the Leased Premises. Tenant
shall not install or permit the installation or use of any vending machine or
permit the delivery of any food or beverage to the Leased Premises except for
normal and customary vending machines typically found in leased premises in
office buildings and for use or consumption by Tenant and its partners,
officers, employees, agents and invitees or as approved in advance in writing by
Landlord.

28. Business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's expense in settings sufficient in Landlord's
judgment to absorb and prevent vibration, noise and annoyance. Tenant shall not
install any machine or equipment which causes noise, heat, cold or vibration to
be transmitted to the structure of the Building in which the Leased Premises are
located without Landlord's prior written consent in its sole and absolute
discretion. Tenant shall not place a load upon any floor of the Leased Premises
exceeding the floor load per square foot which such floor was designed to carry
and which is allowed by law.

29. Smoking is prohibited in the Building, including, without limitation,
the main lobby, all hallways, all elevators, all elevator lobbies and all
restrooms.

30. Tenant shall store all trash and garbage within the interior of the
Leased Premises. Tenant shall not place or have placed in the trash boxes or
receptacles any material that may not or cannot be disposed of in the ordinary
and customary manner of removing and disposing of trash in the vicinity of the
Building. In disposing of trash and garbage, Tenant shall comply fully with any
law or ordinance governing that disposal. All trash, garbage, and refuse
disposal shall be made only through entry-ways and elevators provided for that
purpose and shall be made only at times designated by Landlord.

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<PAGE>

31. Tenant shall comply with requests by Landlord that Tenant inform
Tenant's employees of items of importance to Landlord.

32. Tenant may not introduce telephone, cable or other communication or
telecommunication wires or other wires into the Leased Premises without first
obtaining Landlord's approval of the method and location of such introduction.
No boring or cutting for telephone wires or other wires shall be allowed without
Landlord's consent. The location of telephones, call boxes, and other office
equipment affixed to the Premises shall be subject to Landlord's prior approval

33. Landlord reserves the right at any time to change or rescind any one
or more of these Rules and Regulations or to make any additional reasonable
Rules and Regulations that, in Landlord's sole and absolute discretion, may be
necessary for:

(a) The management, safety, care, and cleanliness of the Leased
Premises, Building or Complex;

(b) The preservation of good order; or

Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular tenants. No waiver by Landlord shall be construed
as a waiver of those Rules and Regulations in favor of any other tenant, and no
waiver shall prevent Landlord from enforcing those Rules or Regulations against
any other tenant of the Building or Complex.

5
<PAGE>

EXHIBIT F

DECLARATION OF RESTRICTIONS

That certain Ninth Amended Park Center Redevelopment Plan adopted June 25, 1996,
City Council Ordinance No. 25112.
<PAGE>

ADDENDUM NO. 1

This ADDENDUM NO. 1 (this "Addendum") is made in connection with and is a
part of that certain Lease, dated as of November 12, 1999 by and between SJ
Plaza, LLC, a Delaware limited liability company, as Landlord, and Blaze
Software, Inc., as Tenant, (the "Lease").

1. Definitions and Conflict. All capitalized terms referred to in this
------------------------
Addendum shall have the same meaning as provided in the Lease, except as
expressly provided to the contrary in this Addendum. In case of any conflict
between any term or provision of the Lease and any exhibits attached thereto and
this Addendum, this Addendum shall control.

2. Parking. Tenant shall have the right to the following parking
-------
privileges in the areas designated in section 2.1 below. The parking privileges
are not applicable in the other levels of any parking garage or any other
parking areas at the Complex. To exercise its rights to use any or all of such
spaces, Tenant agrees that it must enter into a parking agreement, in the form
required by the applicable tenant or operator of the Parking Garage (hereinafter
defined), and comply with the requirements of such tenant or operator of said
Parking Garage.

2.1 Number of Spaces. Tenant shall have the right to 50 monthly
----------------
parking spaces on levels P2 and P3 of the main parking garage at Park Center
Plaza and to 30 monthly parking spaces at the 5 story parking tower at 185 Park
Avenue (each such parking facility shall be referred to herein as the "Parking
Garage") for the Term of the Lease at the then prevailing market rate as set
forth by the tenant and/or operator of each such Parking Garage.

2.2 Notice of Exercise. Tenant hereby elects to have all of said
------------------
parking spaces. If Tenant does not enter into the parking agreement with the
tenant or operator of the Parking Garage or if Tenant elects on not less than
thirty (30) days prior written notice to Landlord and the tenant and/or operator
of the Parking Garage to discontinue using all or any specified number of
parking spaces Tenant previously elected to use, then Tenant shall not have any
right to use the parking spaces for which it did not enter into a parking
agreement or for which it rejected or subsequently discontinued, which spaces
may be available to Landlord, and any parking rights for Tenant hereunder as to
such rejected and subsequently discontinued spaces shall be null and void. Such
rejected or discontinued spaces may be made available to Tenant in the future
only to the extent such spaces become available, but there is not guaranty or
assurance that such spaces will become available again in the future.

2.3 General Procedures. The parking spaces will not be separately
------------------
identified and Landlord shall have no obligation to monitor the use of the
Parking Garage. The parking operator of the Parking Garage will be responsible
for monitoring the use of the Parking Garage. If Tenant discovers that the
parking spaces are not available due to over-parking at the applicable Parking
Garage, Landlord agrees to require the parking operator to implement a program
or procedure to make the parking spaces that Tenant is entitled to under this
Addendum available to Tenant. Landlord shall not be responsible for any loss or
damage to any vehicle or other property at the Parking Garage or for any injury
to any person. Said parking spaces shall be used only for parking of automobiles
no larger than full size passenger automobiles, SUV vehicles, pick-up trucks and
motorcycles. Tenant shall comply with all rules and regulations of the tenant or
operator of the Parking garage where the parking spaces are located. A failure
by Tenant or any of its employees, suppliers, shippers, customers or invitees to
comply with the foregoing provisions shall subject Tenant to the loss of use of
such parking spaces, in which case the Lease shall continue without any
abatement in rent or charge to Landlord.

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<PAGE>

2.4 Force Majeure. Landlord's agreement to provide or arrange for the
-------------
parking spaces as provided herein shall be subject to casualties, Acts of God
and other events beyond the control of Landlord.

2.5 Condition. Tenant's rights to any parking spaces under this
---------
section are expressly conditioned upon (a) Tenant not being in default (after
notice and the expiration of the applicable cure period) of any term or
provision of this Lease, and (b) Tenant and/or its assignee or sublessee using
the parking spaces only while such party is the Tenant under the Lease (or a
subtenant of Tenant) and for use only in connection with its use and occupancy
of the Leased Premises.

2.6 Limitation. Landlord shall not be responsible for any loss or
----------
damage to property or injury to persons in or about the Parking Garage; it being
acknowledged by the parties that Tenant assumes all risk of loss or damage at or
about any parking garage.

3. Option to Extend and Rent During the Extended Period: Tenant shall have
----------------------------------------------------
one option to extend the term of the Lease for a period of five (5) years (the
period shall be referred to as the "Extension Period") by giving written notice
of exercise of such option ("Extension Option Notice") at least two hundred
seventy (270) days, but not more than three hundred sixty-five (365) days, prior
to the expiration of the Term. The Extension Period shall commence, if at all,
immediately following the expiration of the initial Term of the Lease. If Tenant
is in default (after notice and the expiration of he applicable cure period)
under any term or provision of the Lease on the date of giving an Extension
Option Notice, or if Tenant is in default (after notice and the expiration of
the applicable cure period) under any term or provision of the Lease on the date
of the applicable Extension Period is to commence, the Extension Period at the
option of Landlord shall not commence and the Lease shall expire at the end of
initial term. The Extension Period shall be upon all of the terms and provisions
of the Lease, except that the Minimum Monthly Rent during such Extension Period
shall be one hundred percent (100%) of then Fair Market Rent.

3.1 Fair Market Rent. The term "Fair Market Rent" for purposes of
----------------
determining Minimum Monthly Rent during the Extension Period shall mean the
greater of (i) the Minimum Monthly Rent payable during the last month prior to
the commencement of the Extension Period, or (ii) the minimum monthly rent
generally applicable to full service office leases at first class office
buildings of comparable size, age, quality of the Leased Premises in the
downtown San Jose, California location projected as of the first day of the
Extension Period by giving due consideration for the quality of the Building and
improvements therein, for a term comparable to the Extension Period at the time
the commencement of the Extension Period is scheduled to commence, without any
deduction for amortization or cost of tenant improvements, allowances, capital
improvements or commissions whether or not incurred by Landlord, and otherwise
subject to the terms and conditions of this Lease that will be applicable during
the Extension Period.

3.2 Procedure to Determine Fair Market Rent. Landlord shall notify
---------------------------------------
Tenant in writing of Landlord's determination of the Fair Market Rent
("Landlord's FMR") within fifteen (15) days after receipt of the Extension
Option Notice. Within fifteen (15) days after receipt of such written notice of
Landlord's FMR, Tenant shall have the right either to: (i) accept Landlord's
FMR, or (ii) elect to have the Fair Market Rent determined in accordance with
the appraisal procedure set forth below. The failure of Tenant to provide
written notice of its election under the preceding sentence shall be deemed an
acceptance of Landlord's FMR. The election (or deemed election ) by Tenant under
this section shall be non-revocable and binding on the parties.

2
<PAGE>

3.3 Appraisers. If Tenant has elected to have the Fair Market Rent
----------
determined by an appraisal, then within ten (10) days after receipt of Tenant's
written notice of such an election, each party, by giving written notice to the
other party, shall appoint an appraiser to render a written opinion of the Fair
Market Rent for the Extension Period. Each appraiser must be a member of the
Appraisal Institute of America (MAI) for at least five years and with at least
five years experience in the appraisal of rental rates of leases in office
buildings in the area in which the Building is located and otherwise
unaffiliated with either Landlord or Tenant. The two appraisers shall render
their written opinion of the Fair Market Rent for the Extension Period to
Landlord and Tenant within thirty (30) days after the appointment of the second
appraiser. If the Fair Market Rent of each appraiser is within five percent (5
%) of each other, then the average of the two appraisals of Fair Market Rent
shall be the Minimum Monthly Rent for the Extension Period. If one party does
not appoint its appraiser as provided above, then the one appointed shall
determine the Fair Market Rent. The Fair Market Rent so determined under this
section shall be binding on Landlord and Tenant.

3.4 Third Appraiser. If the Fair Market Rent determined by the
---------------
appraisers is more than five percent (5%) apart, then the two appraisers shall
pick a third appraiser within ten (10) days after the two appraisers have
rendered their opinions of Fair Market Rent as provided above. If the two
appraisers are unable to agree on the third appraiser within said ten (10) day
period, Landlord and Tenant shall mutually agree on the third appraiser within
ten (10) days thereafter. If the parties do not agree on a third qualified
appraiser within ten (10) days, then at the request of either Landlord or
Tenant, such third appraiser shall be promptly appointed by the then Presiding
Judge of the Superior Court of the State of California for the County of Santa
Clara. The third appraiser shall be a person who has not previously acted in any
capacity for either party and must meet the qualifications stated above.

3.5 Impartial Appraisal. Within thirty (30) days after its
-------------------
appointment, the third appraiser shall render its written opinion of the Fair
Market Rent for the applicable Extension Period ("Third Opinion"). If the Fair
Market Rent set forth in the Third Opinion is equidistant from the Fair Market
Rent determination of Landlord's and Tenant's appraiser, then the Fair Market
Rent contained in the Third Opinion shall be the Minimum Monthly Rent during the
Extension Period. If the Fair Market Rent of the Third Opinion is not
equidistant from the Fair Market Rent made by Landlord's and Tenant's appraiser,
then the two closest fair market determinations made by Landlord's appraiser,
Tenant's appraiser and the Third Opinion shall be average and such average shall
be the Minimum Monthly Rent during the applicable Extension Period. The Fair
Market Rent determined in accordance with the foregoing procedure shall be
binding on the parties.

3.6 Appraisal Costs. Each party shall bear the cost of its own
---------------
appraiser and one-half (1/2) the cost of the third appraiser, unless the Fair
Market Rent of the Third Opinion is within three percent (3%) Landlord's FMR, in
which case Tenant shall bear the entire cost of the third appraiser.

3.7 Acknowledgment of Rent. After the Fair Market Rent for the
----------------------
Extension Period has been established in accordance with the foregoing
procedure, Landlord and Tenant shall promptly execute an amendment to the Lease
to reflect the minimum monthly rent for the Extension Period.

3.8 Personal Option. The foregoing option to extend is personal to
---------------
the original Tenant signing the Lease (and its Affiliated Transferee as defined
in Section 21.5 of the Lease), but may not be assigned or transferred to or
exercised by any other assignee, sublessee or transferee under a Transfer.

4. Expansion Right. If Tenant is not in default of any term or provision
---------------
of the Lease and has not assigned the Lease or sublet any space covered thereby
or agreed to do so in the future, Tenant

3
<PAGE>

shall have the one time right only during the initial Term (not any extended
term) of the Lease to expand into space in the sixth (6th) and seventh (7th)
floor(s) of the Building (the "Expansion Space") solely in accordance with the
terms of this section 4 and its subsections; provided, however, that such
expansion right shall not be applicable to (i) a renewal, assignment or sublease
of any lease or any new lease with any existing tenant for space in any portion
of the Expansion Space, (ii) any expansion options or similar rights granted to
any other existing tenant as of the date of this Lease in the Building pursuant
to its lease, (iii) any decision to permit an existing tenant in the Expansion
Space to expand into additional space on the floor where its leased premises
exists even though such existing tenant may not have further rights to expand in
its lease, or (iv) any election by Divco West Group, LLC, or any affiliate
thereof, in its sole and absolute discretion to lease all or any portion of the
seventh (7th) floor of the Building, including without limitation any space on
the 7th floor of the Building that Divco West Group, LLC does not currently
lease.

4.1 Expansion Right Procedure. If any Expansion Space is becomes
-------------------------
available for lease as determined by Landlord in its sole and absolute
discretion, Landlord shall notify Tenant of the portion of the Expansion Space
that is available for leasing by Tenant on the rental rates and all other terms
and provisions contained in the notice by Landlord, which terms and provisions
may differ from those contained in the Lease (the "Expansion Notice"). Tenant
shall have five (5) business days within which to provide written notice to
Landlord that Tenant elects to lease such Expansion Space on the terms contained
in the Expansion Notice. If Landlord does not receive such written notice within
said time period, then it shall be conclusively deemed an election by Tenant not
to lease such Expansion Space.

4.2 Effect of Non-Acceptance. If Tenant does not accept the offer to
------------------------
lease the portion of the Expansion Space contained in the Expansion Notice,
Landlord shall be free to lease all or any portion of the Expansion Space
(including, without limitation, any space that is part of the Expansion Space
but was not included in the Expansion Notice) to any other party on such terms
proposed in the Expansion Notice, or on any other terms which may be different
than the terms in the Expansion Space, in which case Tenant's right to lease all
or any portion of the Expansion Space shall automatically lapse and be of no
further force and effect, notwithstanding that Landlord may or may not actually
lease all or any portion of the Expansion Space to other parties. Tenant
acknowledge that Landlord shall have the right to lease portions of the
Expansion Space to different parties, but that Tenant's expansion right under
section 4 and its subsections only pertains to the Expansion Space contained in
an Expansion Notice.

4.4 Election to Expand. If Tenant elects to expand as provided under
------------------
this section 4 and its subsections, the Expansion Space shall be included within
the Leased Premises as of said commencement date and on the other terms and
conditions set forth in the Expansion Notice. The parties shall promptly execute
an amendment to the Lease, in the form prepared by Landlord, to include in the
Lease the Expansion Space, the length of the term of the lease for the Expansion
Space (which may be different than the length of the term for the original
Leased Premises), the rental rate and such other terms and conditions for the
lease of the Expansion Space as are necessary or appropriate to incorporate the
terms and conditions of the lease of such Expansion Space under the Expansion
Notice. Tenant acknowledges that the length of the term and other provisions for
the Expansion Space may be different that the applicable provision for the lease
of the original Leased Premises, notwithstanding that the original Leased
Premises and the Expansion Space will be covered under one lease agreement if
Tenant leases the Expansion Space under section 4 and its subsections.

5. Letter of Credit Security Deposit. Pursuant to the terms of the Lease,
---------------------------------
a Security Deposit of $434,480.00 is required from Tenant. In lieu of depositing
cash for the full amount of the Security Deposit, Tenant shall have the right to
deposit a letter of credit for up to the full amount of the Security

4
<PAGE>

Deposit, provided that at all times the amount of such letter of credit and cash
shall equal to full amount of the Security Deposit. Said letter of credit shall
be in the form of an irrevocable, unconditional and clean standby letter of
credit and otherwise in the form set forth below (the "Letter of Credit"). The
term Security Deposit shall mean the cash portion of the Security Deposit and
the Letter of Credit.

5.1 Form of Letter of Credit. The Letter of Credit shall be issued by
------------------------
a national bank acceptable to Landlord in its reasonable discretion, with
offices in the San Francisco Bay Area that will accept and pay on any draw on
the Letter of Credit. The Letter of Credit shall be issued for a term of at
least twelve (12) months (with a term during the last year of the Lease Term of
at least one full month following the expiration of the Lease Term) and shall be
in a form and with such content acceptable to Landlord in its sole and absolute
discretion. Any Letter of Credit that Tenant delivers to Landlord in replacement
of an existing Letter of Credit shall be in an amount equal to the replaced
Letter of Credit (prior to any draws but subject to any reductions under section
5.2 below) so that the cash and Letter of Credit together equal the amount of
the Security Deposit specified in the Lease. Any such replacement Letter of
Credit shall be delivered to and received by Landlord no later than thirty (30)
days prior to the expiration of the term of the Letter of Credit then in effect.
If Tenant fails to deposit a replacement Letter of Credit or renew the expiring
Letter of Credit, Landlord shall have the right to draw upon the expiring Letter
of Credit for the full amount thereof after providing notice to Tenant that
Landlord intends to draw on the Letter of Credit and hold the same as Security
Deposit, unless Tenant provides a replacement for or extension to the expiring
Letter of Credit prior to a draw by Landlord of the expiring Letter of Credit;
provided, however, that if Landlord draws on such expiring Letter of Credit and
Tenant provides a replacement Letter of Credit which meets the requirements of
this section, Landlord shall promptly return to Tenant in cash that amount of
the Letter of Credit that had been drawn upon by Landlord. The Letter of Credit
shall expressly permit full and partial draws. If for any reason the Letter of
Credit does not permit partial draws, then Landlord shall have the right to make
a full draw on the Letter of Credit, notwithstanding that the full amount may
not be required to cure any default by Tenant. The Letter of Credit shall
designate Landlord as beneficiary and shall be transferable by beneficiary to
any transferee, successor, and assign (including any lender of Landlord) at no
cost or expense to beneficiary. The Letter of Credit shall provide that it may
be drawn by Landlord (or its assignee) upon presentation by Landlord to the
issuing bank (at its offices in the San Francisco Bay Area) of a sight draft(s),
together with a written statement executed by Landlord stating that the amount
requested is due Landlord under the Lease. The amount of the draw requested by
Landlord shall be payable by the bank without further inquiry or any Other
documentation or further action required of the bank, Landlord, or Tenant. All
costs and expenses to obtain the Letter of Credit and all renewals shall be
borne by Tenant.

If the Letter of Credit is drawn upon by Landlord, Tenant shall,
within ten (10) days after written demand therefor, deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to amount required under
the Lease and this Addendum. At all times the Security Deposit, whether in the
form of cash and/or Letter of Credit, shall be in the amount specified in the
Lease. The use, application or retention of the Letter of Credit, or any portion
thereof, by Landlord shall not prevent Landlord from exercising any other right
or remedy provided by this Lease or by law, it being intended that Landlord
shall not first be required to use all or any part of the Letter of Credit or
cash portion of the Security Deposit, and such use shall not operate as a
limitation on any recovery to which Landlord may otherwise be entitled. Tenant
shall not be entitled to any interest on the cash portion of the Security
Deposit. The exercise of any rights of Landlord to the Security Deposit shall
not constitute a waiver of nor relieve Tenant from any liability or obligation
for any default by Tenant. If Landlord draws upon the entire amount of the
Letter of Credit, Tenant may deliver a replacement Letter of Credit to Landlord,
instead of depositing cash with Landlord, equal to the original amount of the
Letter of Credit.

5
<PAGE>

5.2 Reduction after Time. The amount of the Security Deposit may be
--------------------
reduced by $86,896.00 after each of the first four annual anniversary dates of
the Commencement Date; provided that (i) a default (after notice and the
expiration of the applicable cure period) by Tenant of any provision of the
Lease does not exist and no such default or breach occurred during the year
immediately prior to the effective date of the reduction under this section; and
(ii) at no time shall the Security Deposit be less than $86,896.00. If Tenant is
entitled to reduce the amount of the Letter of Credit pursuant to this paragraph
and Tenant delivers to Landlord written notice of its request to so reduce the
amount of the Security Deposit, then Tenant may, not less than (10) days after
Landlord's receipt of such notice, either obtain and deliver a new or amended
Letter of Credit to replace or amend, as the case may be, the then existing
Letter of Credit, in an amount required under this section.

6
<PAGE>

PARKING AGREEMENT

THIS AGREEMENT made as of November 12, 1999, between STANDARD PARKING
CORPORATION, an Illinois corporation ("Licensor") and BLAZE SOFTWARE, INC., a
California corporation ("Licensee").

1. The parties hereby acknowledge that Licensee has heretofore entered, or
is contemporaneously herewith entering, a certain office Lease dated as of
November 12, 1999 (the "Lease") with SJ Plaza, LLC, a Delaware limited liability
company ("Landlord") for certain leased premises known as Suites 800 and 900
(the "Premises") located in the building commonly known as 150 Almaden Blvd.,
San Jose, California ("Property").

2. Licensor hereby grants to Licensee and persons designated by Licensee a
license to use 50 parking spaces in the parking garage located on levels P2 and
--
P3 of the main parking garage at Park Center Plaza, San Jose, California and 30
--
parking spaces in the 5-story parking tower located at 185 Park Avenue, San
Jose, California (each such parking facility shall be referred to herein as the
"Garage") and not in the other levels of the parking facility at the Park Center
Plaza Complex. The term of such license shall commence on the Commencement Date
under the Lease and shall continue until the earlier to occur of the Expiration
Date under the Lease, or termination of the Lease or Licensee's abandonment of
the Premises thereunder. During the Term of this license, Licensee shall pay
Licensor the monthly charges established from time to time by Licensor for
parking in the Garage, payable in advance, to Licensor at 100 Park Center, Suite
104A, San Jose, CA 95113, attn.' Manager or such other place as Licensor may
from time to time designate by giving Licensee written notice thereof as
provided herein. The current market charge for each such space is $150.00, per
month. No deductions from the monthly charge shall be made for days at which the
Garage is not used by Licensee. However, Licensee may reduce the number of
parking spaces hereunder, at any time, by providing at least thirty (30) days
advance written notice to Licensor, accompanied by any key-card, sticker or
other identification or entrance system provided by Licensor; such cancellation
shall be irrevocable. Licensee may, from time to time, request additional
parking spaces, and if Licensor shall provide the same, such spaces shall be
provided and used on a month-to-month basis, and otherwise on the foregoing
terms and provisions, and such monthly charges as Licensor shall establish from
time to time. Licensee shall also pay to Licensor a deposit for each access or
parking card issued by Licensor to Licensee (and the current amount of such
deposit is $10.00 for each card).

3. Licensee shall at all times comply with all applicable ordinances,
rules, regulations, codes, laws, statutes and requirements of all federal,
state, county and municipal governmental bodies or their subdivisions respecting
the use of the Garage. Licensor reserves the right to adopt, modify and enforce
reasonable rules governing the use of the Garage from time to time, including
any key-card, sticker or other identification or entrance system, and hours of
operation. The rules set forth hereinafter are currently in effect. Licensor may
refuse to permit any person who violates such rules to park in the Garage, and
any violation of the Rules shall subject the car to removal from the Garage.

4. The parking spaces hereunder shall be provided on an unreserved "first-
come, first-served" basis except where otherwise expressly agreed in writing,
but Licensee shall be entitled to the number of spaces provided in this
agreement. Licensor shall have no liability whatsoever for any damage to
property or any other items located in the Garage, nor for any personal injuries
or death arising out of any matter relating to the Garage, and in all events,
Licensee agrees to look first to its insurance carrier and to require that
Licensee's employees look first to their respective insurance carriers for
payment of any losses sustained in connection with any use of the Garage.
Licensee hereby waives on

1
<PAGE>

behalf of its insurance carriers all rights of subrogation against Licensor or
Licensor's agents. Licensor reserves the right to assign specific spaces and to
reserve spaces for visitors, small cars, handicapped persons and for other
tenants, guests of tenants or other parties; and Licensee and persons designated
by Licensee hereunder shall not park in any such assigned or reserved spaces.
Licensor also reserves the right to close all or any portion of the Garage in
order to make repairs or perform, maintenance services, or to alter, modify,
restripe or renovate the Garage, of if required by casualty, strike,
condemnation, act of God, governmental law or requirement or other reason beyond
Licensor's reasonable control. In such event, Licensor shall refund any prepaid
parking rent hereunder, prorated on a per diem basis. If for any other reason,
Licensee or persons properly designated by Licensee, shall be denied access to
the Garage, and licensee or such persons shall have complied with the Agreement
and this Agreement shall be in effect, Licensor's liability shall be limited to
such parking charges (excluding tickets for parking violations) incurred by
Licensee or such persons in utilizing alternative parking, which amount Licensor
shall pay upon presentation of documentation supporting Licensee's claims in
connection therewith.

5. If Licensee shall default under this Agreement, Licensor shall have all
rights available to it by reason of such default, including without limitation
the right (i) to refuse further access to the Garage by Licensee (whether by
deactivation of key-cards or otherwise), and (ii) to remove from the Garage any
vehicles hereunder which shall have been involved or shall have been owned or
driven by parties involved in causing such default, without liability therefor
whatsoever. In addition, if Licensee shall default under this Agreement,
Licensor shall have the right to cancel this Agreement on ten days written
notice unless within such ten day period, Licensee cures such default. Such
cancellation right shall be cumulative and in addition to any other rights or
remedies available to Licensor at law or equity.

6. All notices or demands under this Agreement shall be in writing and
shall be served personally, by national overnight air courier service or by
registered or certified mail, return receipt requested, addressed to:

Licensor: with copies to:

Standard Parking Corporation Divco West Group, LLC
101 Park Center, Suite 104A 100 Park Center Plaza, Suite 425
San Jose, CA 95113 San Jose, CA 95113
Attn.: Property Manager

Licensee:

Blaze Software, Inc.
150 Almaden Blvd., Suite 800
San Jose, CA 95113
Attn.: Chief Financial officer
------------------------------

or such other addresses as the parties may therefore designate by written notice
so delivered. Each such notice or demand shall be deemed delivered immediately,
if personally delivered; the next business day, if sent by national overnight
air courier service; or on the date on which the return receipt is signed or
delivered, is refused or the notice is designated by the postal authorities as
not deliverable, as the case may be, if sent by certified mail.

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<PAGE>

7. Licensee shall have the right to assign all or any portion of its
rights under this Agreement to any assignee of all or part of Licensee's rights
under the Lease or any sublessee of all or part of the Premises. It is
understood and agreed that the identity of the Licensor may change from time to
time during the term of this Agreement and that Licensor's interest in this
Agreement shall be freely assignable. Licensee hereby consents to the
assignment, from time to time, of the initial or any successor Licensor's in
this Agreement to another Licensor, and upon any such assignment the Licensor
which is assigning its rights hereunder as set forth above shall be relieved of
any and all Obligations thereafter arising under this Agreement.

Rules
(subject to modification by the garage)

(i) Garage hours shall be 6 a.m. to 8 p.m. or such other hours as
Licensor shall determine from time to time; however, monthly parkers shall have
access to the Garage at all times.

(ii) Cars must be parked entirely within the stall lines painted on the
floor, and only small cars may be parked in areas reserved for small cars.

(iii) All directional signs and arrows must be observed.

(iv) The speed limit shall be 5 miles per hour.

(v) Spaces reserved for handicapped parking must be used only by
vehicles properly designated.

(vi) Parking is prohibited in all areas not expressly designated for
parking, including without
limitation:

(a) areas not striped for parking,
(b) aisles,
(c) where "no parking" signs are posted,
(d) ramps, and
(e) loading zones.

(vii) Parking stickers, key cards or any other devices or forms of
identification or entry supplied by Licensor shall remain the property of
Licensor. Such devices must be displayed as requested and may not be obliterated
in any manner. The serial number of the parking identification device may not be
obliterated. Devices are not transferable and any device in the possession of an
unauthorized holder will be void.

(viii) Monthly fees shall be payable in advance prior to the first day of
each month. Failure to do so will automatically cancel parking privileges and a
charge at the prevailing daily parking rate will be due. No deductions or
allowances from the monthly rate will be made for days on which the Garage is
not used by Licensee or its designees.

(ix) Garage managers or attendants are not authorized to make or allow
any exceptions to the rules.

(x) Every parker is required to park and lock his own car.

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<PAGE>
(xi) Loss or theft of parking identification key cards or other such
devices must be reported to Licensor or any garage manager immediately. Any
parking devices reported lost or stolen found on any unauthorized car will be
confiscated and the illegal holder will be subject to prosecution. Lost or
stolen devices found by Licensee or its employees must be reported to the office
of the garage immediately.

(xii) Washing, waxing, cleaning or servicing of any vehicle by the
customer and/or his agents is prohibited. Parking spaces may be used only for
parking automobiles, SUV vehicles, standard pick-up trucks and motorcycles.

(xiii) By signing this Parking Agreement, Licensee agrees to acquaint all
persons to whom Licensee assigns parking spaces of these rules.

LICENSOR: LICENSEE:

STANDARD PARKING CORPORATION, BLAZE SOFTWARE, INC.,
An Illinois corporation a California corporation

By: /s/ Scott L. Smith By: /s/ Gary Shroyer
------------------ -------------------
Name: Scott L. Smith Name: Gary Shroyer
------------------ -----------------
Its: President Its: VP CFO
------------------ ----------------

<PAGE>

EXHIBIT 10.12

AMENDED AND RESTATED VOTING AGREEMENT
-------------------------------------

THIS AMENDED AND RESTATED VOTING AGREEMENT is made as of the 25th day
of February 1998, by and among Neuron Data, Inc., a California corporation (the
"Company"), and the persons listed on Schedule A attached hereto (the
----------
"Shareholders").

WHEREAS, in connection with the Series F Preferred Stock Purchase
Agreement, dated December 16, 1997, by and between the Company and the parties
listed on Schedule A thereto, the parties previously entered into a Amended and
Restated Voting Agreement, dated as of December 16, 1997; and

WHEREAS, the parties hereto enter this Agreement for the additional
purpose of confirming the arrangements for election of directors.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. Agreement to Vote. During the term of this Agreement, to the
-----------------
extent they are entitled under the Company's Amended and Restated Articles of
Incorporation to vote on a particular matter, the Shareholders agree to vote all
of the shares of the Company's voting securities now or hereafter owned by them,
whether beneficially or otherwise (the "Shares") as follows:

a. Board of Directors Composition. The Shareholders shall vote
------------------------------
or act with respect to the Shares so as always to elect the following as
directors of the Company (collectively, the "Designees")

(1) two (2) designees of Morgan Stanley Venture Capital
Fund II, L.P., Morgan Stanley Venture Capital Fund II, C.V., and Morgan Stanley
Venture Investors, L.P. (collectively, "MSVCF") (the "MSVCF Designees"), which
designees shall initially be William J. Harding and Robert J. Loarie. Any
vacancy occurring because of the death, resignation or removal of the MSVCF
Designees shall be filled according to this paragraph 1 (a)(1).

(2) one (1) designee of Alta (the "Alta Designee"), which
designee shall initially be Garrett Gruener. Any vacancy occurring because of
the death, resignation or removal of the Alta Designee shall be filled according
to this paragraph l(a)(2).

(3) one (1) designee of the holders of a majority of the
outstanding shares of Series A and Series C Preferred Stock of the Company (the
"Series A and C Designee"), which designee shall initially be Alain Azan. Any
vacancy occurring because of the death, resignation or removal of the Series A
and C Designee shall be filled according to this paragraph l (a)(3).

1
<PAGE>

(4) one (1) designee of the holders of a majority of the
outstanding shares of Series B Preferred Stock for which shares of Common Stock
of the Company were exchanged (the "Series B Designee"), which designee shall
initially be Patrick Perez. Any vacancy occurring because of the death,
resignation or removal of the Series B Designee shall be filled according to
this paragraph l(a)(4).

(5) one (1) designee who is the Chief Executive Officer of
the Company (the "CEO Designee"), which designee shall initially be Michael A.
Braun. Any subsequent vacancy occurring because of the death, resignation or
removal of the CEO Designee shall be filled according to this paragraph l(a)(5).

(6) two (2) designees of TL Ventures (the "TL Ventures
Designees"), which designees shall initially be Mark DeNino and a second
director to be designated by TL Ventures. Any vacancy occurring because of the
death, resignation or removal of the TL Ventures Designees shall be filled
according to this paragraph l(a)(6).

b. Additional Director(s). The Shareholders shall vote or act
---------------------
with respect to the Shares so as to always elect as any remaining director(s)
(the "Additional Director(s)") not designated pursuant to 1 (a) one or more
individuals designated by the unanimous approval of all of the Designees elected
pursuant to subsection l(a). Any vacancy occurring because of the death,
resignation or removal of the Additional Director shall be filled according to
this paragraph l(b).

c. Board Size. The Shareholders shall vote or act with respect
----------
to the Shares so as to fix a number of directors constituting the board of
directors of the Company as designated by a majority of the Designees; however,
the Shareholders shall in no event vote or act with respect to the Shares to
reduce the number of directors below eight (8);

2. Observer Rights. Until the earlier of (i) June 28, 2000 or (ii)
---------------
the initial public offering of the Company's Common Stock at a per share public
offering price (prior to underwriter commission and expense) of not less than
$8.625 per share (adjusted to reflect subsequent stock dividends, stock splits
or recapitalization) and for a total offering of more than $7,500,000, to the
extent not a member of the Board of Directors already, Alain Rappaport and
Patrick Perez are invited to attend, or be included by conference call in, all
meetings of its Board of Directors in a nonvoting observer capacity and, in this
respect, the Company shall give Messrs. Rappaport and Perez copies of all
notices, minutes, consents, and other materials that it provides to its
directors, whether or not they attend the meeting, and shall pay all expenses of
attending each meeting up to the amount of $1,000 each.

3. Successors in Interest of the Shareholders and the Company. The
----------------------------------------------------------
provisions of this Agreement shall be binding upon the successors in interest of
the Shareholders to any of the Shareholders' Shares. The Company shall not
permit the transfer of any Shareholders' Shares on its books or issue a new
certificate representing any Shareholders' Shares unless and until the person to
whom such security is to be transferred shall have executed a written-agreement,
satisfactory in form-and substance to the remaining

2
<PAGE>

Shareholders, pursuant to which such person becomes a party to this Agreement
and agrees to be bound by all the provisions hereof as if such person was a
Shareholder hereunder.

4. Covenants of the Company. The Company agrees to take all actions
------------------------
required to ensure that the rights given to the Shareholders hereunder are
effective and that the Shareholders enjoy the benefits thereof. Such actions
include, without limitation, the use of the Company's best efforts to cause the
nomination of the designees of the Shareholders, as provided herein, for
election as directors of the Company. The Company will not, by any voluntary
action, avoid or seek to avoid the Observance or performance of any of the terms
to be performed hereunder by the Company, but will at all times in good faith
assist in the carrying out all of the provisions of this Agreement and in the
taking of all such actions as may be necessary: or appropriate in order to
protect the rights of the Investors hereunder against impairment.

5. Legend on Certificates. Each certificate representing shares held
----------------------
by the Shareholders and any assignees or transferees thereof, shall bear the
following legend:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AMENDED
AND RESTATED VOTING AGREEMENT WHICH HAS BEEN DEPOSITED WITH THE
COMPANY AT ITS PRINCIPAL OFFICE. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST FROM THE SECRETARY OF THE COMPANY.

A counterpart of this Agreement shall be deposited with the Company at
its principal office and shall be subject to the same rights of examination by a
shareholder of the Company (or a proposed bona fide assignee or transferee
thereof), in person or by agent or attorney, as are the books and records of the
Company.

6. No Liability for Election of Recommended Directors. Neither the
--------------------------------------------------
parties hereto nor any officer, director, shareholder, partner, employee or
agent of any such party, makes any representation or warranty as to the fitness
or competence of any Designee hereunder to serve on the Board of Directors of
the Company by virtue of such party's execution of this Agreement or by the act
of such party in voting for such nominee pursuant to this Agreement.

7. Grant of Proxy. Should the provisions of this Agreement be
--------------
construed to constitute the granting of proxies, such proxies shall be deemed
coupled with an interest and are irrevocable for the term of this Agreement.

8. Specific Enforcement. It is agreed and understood that monetary
--------------------
damages would not adequately compensate an injured party for the breach of this
Agreement by any party hereto, that this Agreement shall be specifically
enforceable, and that any breach of this Agreement shall be the proper subject
of a temporary or permanent injunction or restraining order. Further, each party
hereto waives any claim or defense that there is an adequate remedy at law for-
such breach or threatened breach.

3
<PAGE>

9. Manner of Voting. The voting of shares pursuant to this Agreement
----------------
may be effected in person, by proxy, by written consent or in any other manner
permitted by applicable law.

10. Termination. This Agreement shall terminate upon the consummation
-----------
of the Company's initial public offering on a firm underwriting basis at a per
share public offering price (prior to underwriter commission and expense) of not
less than $8.625 per share (adjusted to reflect subsequent stock dividends,
stock splits or recapitalization) and with aggregate proceeds to the Company in
excess of $7,500,000.

11. Amendments and Waivers. Any term hereof may be amended and the
----------------------
observance of any term hereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of each of (i) the Company, (ii) holders of a majority in interest of
the Series D and Series E Preferred Stock, voting together, (iii) holders of a
majority in interest of the Series A and Series C Preferred Stock, voting
together, (iv) holders of a majority in interest of the Series B Preferred Stock
for which Common Stock was exchanged and (v) holders of a majority in interest
of the Series F Preferred Stock. Any amendment or waiver so effected shall be
binding upon the Company and the Shareholders or their assigns.

12. Stock Splits, Stock Dividends, etc. In the event of any stock,
----------------------------------
split, stock dividend, recapitalization, reorganization or the like, any
securities issued with respect to the Shareholders' Shares shall become
Shareholders' Shares for purposes of this Agreement.

13. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

14. Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California, without regard to the conflict of
laws provisions thereof.

15. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

16. Successors and Assigns. Except as otherwise expressly provided in
----------------------
this Agreement, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and assigns of the parties hereto.

17. Other Matters. This Agreement shall not affect the rights of the
-------------
Shareholders with respect to voting on any matters on which shareholders of the
Company are entitled to vote, whether grated by law or by the Fifth Amended and
Restated Articles of

4
<PAGE>

Incorporation of the Company, as amended from time to time, except with respect
to the election of directors of the Company.

18. Entire Agreement. There are no further or other agreements or
----------------
understandings, written or oral, in effect between the parties relating to the
subject matter hereof except as expressly referred to herein.

5
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Voting Agreement as of the day and year hereinabove first written.

NEURON DATA, INC.

By: /s/ Michael A. Braun
-------------------------------------------
Michael A. Braun,
President and Chief Executive Officer

Address 1310 Villa Street
Mountain View, CA 94041

SHAREHOLDERS:

/s/ Alain Rappaport
----------------------------------------------
Alain Rappaport

/s/ Patrick Perez
----------------------------------------------
Patrick Perez

C.V. SOFINNOVA VENTURES

By: /s/ Alain Rappaport
-------------------------------------------

Address: One Market Plaza
Steuart Tower, Suite 2630
San Francisco, CA 94105

SIGNATURE PAGE TO AMENDED AND RESTATED VOTING AGREEMENT
<PAGE>

MORGAN STANLEY VENTURE CAPITAL
FUND II, L.P.

By: Morgan Stanley Venture Partners II, L.P.
its General Partner
By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By: /s/ William J. Harding
-------------------------------------------

MORGAN STANLEY VENTURE CAPITAL
FUND II, C.V.

By Morgan Stanley Venture Partners II, L.P.
its Investment General Partner
By Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By: /s/ William J. Harding
-------------------------------------------

MORGAN STANLEY VENTURE INVESTORS, L.P.

By: Morgan Stanley Venture Partners II, L.P.
its General Partner
By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By: /s/ William J. Harding
-------------------------------------------

SIGNATURE PAGE TO AMENDED AND RESTATED VOTING AGREEMENT
<PAGE>

C.V. SOFINNOVA PARTNERS FIVE
By Sofinnova (International) Five N.V.,
General Partner

By: /s/ XXX
-------------------------------------------
Under Power of Attorney

Address One Embarcadero Center
Suite 4050
San Francisco, CA 94111

ALTA IV LIMITED PARTNERSHIP
By: Alta IV Management Partners, L.P.

By: /s/ XXX
-------------------------------------------
General Partner

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

SIGNATURE PAGE TO AMENDED AND RESTATED VOTING AGREEMENT
<PAGE>

ALTA CALIFORNIA PARTNERS, L.P.
By: Alta California Management Partners, L.P.

By: /s/ XXX
-------------------------------------------
General Partner

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

ALTA EMBARCADERO PARTNERS, LLC

By: /s/ XXX
-------------------------------------------

Address One Embarcadero Center
Suite 4050
San Francisco, CA 94111

SIGNATURE PAGE TO AMENDED AND RESTATED VOTING AGREEMENT
<PAGE>

TL VENTURES III L.P.

By: TL VENTURES III MANAGEMENT
L.P., its general partner
By: TL VENTURES III LLC,
its general partner

By: /s/
-------------------------------------------
Name:
Title:

TL VENTURES III OFFSHORE L.P.

By: TL VENTURES III OFFSHORE
PARTNERS L.P., its general partner
By: TL VENTURES III OFFSHORE LTD.,
its general partner

By: /s/
-------------------------------------------
Name:
Title:

TL VENTURES III INTERFUND L.P.

By: TL VENTURES LLC, its general partner

By: /s/
-------------------------------------------
Name:
Title:

SIGNATURE PAGE TO AMENDED AND RESTATED VOTING AGREEMENT
<PAGE>

SCHEDULE A
----------

Schedule of Shareholders
------------------------

MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.

MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.

MORGAN STANLEY VENTURE INVESTORS, L.P.

ALTA CALIFORNIA PARTNERS, L.P.

ALTA EMBARCADERO PARTNERS, LLC

ALTA IV LIMITED PARTNERSHIP

C.V. SOFINNOVA PARTNERS FIVE

C.V. SOFINNOVA VENTURES

TL VENTURES III L.P.

TL VENTURES III OFFSHORE L.P.

TL VENTURES III INTERFUND L.P.

Alain Rappaport

Patrick Perez

<PAGE>

EXHIBIT 10.13

NEURON DATA, INC.

SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

June 1, 1999

<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
Page
<S> <C>
1. Purchase and Sale of Stock..................................................................... 1
1.1 Sale and Issuance of Series AA Preferred Stock.......................................... 1
1.2 Closing................................................................................. 1
1.3 Subsequent Sale of Series AA Preferred Stock............................................ 2
2. Representations and Warranties of the Company.................................................. 2
2.1 Organization, Good Standing and Qualification........................................... 2
2.2 Capitalization and Voting Rights........................................................ 2
2.3 Subsidiaries............................................................................ 3
2.4 Authorization........................................................................... 3
2.5 Valid Issuance of Preferred and Common Stock............................................ 3
2.6 Governmental Consents................................................................... 4
2.7 Offering................................................................................ 4
2.8 Litigation.............................................................................. 4
2.9 Proprietary Rights...................................................................... 4
2.10 Compliance with Other Instruments....................................................... 4
2.11 Agreements.............................................................................. 5
2.12 Related-Party Transactions.............................................................. 5
2.13 Permits................................................................................. 5
2.14 Environmental and Safety Laws........................................................... 5
2.15 Disclosure.............................................................................. 5
2.16 Investors' Rights....................................................................... 6
2.17 Corporate Documents..................................................................... 6
2.18 Title to Property and Assets............................................................ 6
2.19 Financial Statements.................................................................... 6
2.20 Changes................................................................................. 6
2.21 Employee Benefit Plans.................................................................. 7
2.22 Tax Returns, Payments and Elections..................................................... 7
2.23 Insurance............................................................................... 7
2.24 Minute Books............................................................................ 7
2.25 Labor Agreements and Actions............................................................ 8
2.26 U.S. Real Property Holding Corporation.................................................. 8
3. Representations and Warranties of the Investors................................................ 8
3.1 Authorization........................................................................... 8
3.2 Purchase Entirely for Own Account....................................................... 8
3.3 Disclosure of Information............................................................... 8
3.4 Investment Experience................................................................... 9
3.5 Accredited Investor..................................................................... 9
3.6 Restricted Securities................................................................... 9
3.7 Further Limitations on Disposition...................................................... 9
3.8 Legends................................................................................. 9
3.9 Further Representations by Foreign Investors............................................ 10
</TABLE>

i
<PAGE>

<TABLE>
<S> <C>
4. California Commissioner of Corporations........................................................ 10
4.1 Corporate Securities Law................................................................ 10
5. Conditions of Investor's Obligations at Closing................................................ 10
5.1 Representations and Warranties.......................................................... 10
5.2 Performance............................................................................. 10
5.3 Compliance Certificate.................................................................. 11
5.4 Qualifications.......................................................................... 11
5.5 Proceedings and Documents............................................................... 11
5.6 Opinion of Company Counsel.............................................................. 11
5.7 Amended and Restated Investors' Rights Agreement........................................ 11
5.8 Restated Articles....................................................................... 11
5.9 Board and Shareholder Approval for Increase in 1996 Stock Option/Stock Issuance Plan.... 11
5.10 Conversion of All Outstanding Preferred Stock........................................... 11
6. Conditions of the Company's Obligations at Closing............................................. 11
6.1 Representations and Warranties.......................................................... 12
6.2 Amended and Restated Investors' Rights Agreement........................................ 12
6.3 Payment of Purchase Price............................................................... 12
6.4 Qualifications.......................................................................... 12
7. Miscellaneous.................................................................................. 12
7.1 Survival of Warranties.................................................................. 12
7.2 Successors and Assigns.................................................................. 12
7.3 Governing Law........................................................................... 12
7.4 Counterparts............................................................................ 12
7.5 Titles and Subtitles.................................................................... 12
7.6 Notices................................................................................. 12
7.7 Finder's Fee............................................................................ 13
7.8 Expenses................................................................................ 13
7.9 Amendments and Waivers.................................................................. 13
7.10 Severability............................................................................ 13
7.11 Aggregation of Stock.................................................................... 13
7.12 Entire Agreement........................................................................ 13
</TABLE>

ii
<PAGE>

<TABLE>
<CAPTION>
SCHEDULE OF EXCEPTIONS
<S> <C>
SCHEDULE A Schedule of Investors

EXHIBIT A - Sixth Amended and Restated Articles of Incorporation
EXHIBIT B - Second Amended and Restated Investors' Rights Agreement
EXHIBIT C - Opinion of Counsel for the Company
</TABLE>

iii
<PAGE>

SERIES AA PREFERRED STOCK PURCHASE AGREEMENT
--------------------------------------------

THIS SERIES AA PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 1st day of June, 1999, by and among Neuron Data, Inc., a
California corporation (the "Company"), and the investors listed on Schedule A
----------
hereto (each an "Investor," and collectively the "Investors").

RECITALS
--------

A. The Company wishes to sell and issue Series AA Preferred Stock to
the Investors; and

B. The Company wishes to induce the Investors to purchase the Series
AA Preferred Stock; and

C. The Company and the Investors have entered into a Third Amended
and Restated Investors' Rights Agreement (the "Investors' Rights Agreement").

AGREEMENT
---------

NOW, THEREFORE, in consideration of the mutual premises set forth in
this Agreement and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties intending to be legally bound hereby,
agree as follows:

1. Purchase and Sale of Stock.
--------------------------

1.1 Sale and Issuance of Series AA Preferred Stock.
----------------------------------------------

(a) The Company shall adopt and file with the Secretary of State
of California, on or before the Closing (as defined below), the Sixth Amended
and Restated Articles of Incorporation in the form attached hereto as Exhibit A
---------
(the "Restated Articles").

(b) Subject to the terms and conditions of this Agreement, each
Investor shall, severally, purchase at the Closing, and the Company shall sell
and issue to each Investor at the Closing, that number of shares of the
Company's Series AA Preferred Stock set forth opposite each Investor's name on
Schedule A1 hereto for the purchase price set forth thereon or cancellation of
- -----------
indebtedness pursuant to certain bridge notes totaling approximately One Million
Five Hundred Thousand Dollars ($1,500,000) plus interest, previously issued by
the Company.

(c) Subject to the terms and conditions of this Agreement, each
Investor listed on Schedule A2 hereto shall, severally, purchase at the Closing,
-----------
and the Company shall sell and issue to such Investor that additional number of
shares of the Company's Series AA Preferred Stock set forth opposite each
Investor's name on Schedule A2 hereto for the purchase price set forth thereon.
-----------

1.2 Closing. The purchase and sale of the Series AA Preferred Stock
-------
(the "Closing") shall take place at the offices of Brobeck, Phleger & Harrison
LLP,
<PAGE>

Two Embarcadero Place, 2200 Geng Road, Palo Alto, California, at 10:00 A.M., on
June 1, 1999, or at such other time and place as the Company and the Investors
mutually agree upon orally or in writing (which time and place are designated as
the "Closing"). At the Closing, the Company shall deliver to each Investor a
certificate representing the Series AA Preferred Stock that such Investor is
purchasing against payment of the purchase price therefor by check, wire
transfer, cancellation of indebtedness or any combination thereof.

1.3 Subsequent Sale of Series AA Preferred Stock. The Company may
--------------------------------------------
sell up to the balance of the authorized number of shares of Series AA Preferred
Stock not sold at the Closing to such purchasers as it shall select, at a price
of $0.27 per share. Any such Investor shall become a party to this Agreement and
that certain Amended and Restated Investors' Rights Agreement dated as of even
date herewith, by and among the Company the Investors and certain Shareholders,
the form of which is attached hereto as Exhibit B (the "Investors' Rights
---------
Agreement") and shall have the rights and obligations hereunder and thereunder.

2. Representations and Warranties of the Company. Except as set forth on
---------------------------------------------
a Schedule of Exceptions (the "Schedule of Exceptions") furnished to each
Investor and counsel for the Investors, which exceptions shall be deemed to be
representations and warranties as if made hereunder, the Company hereby
represents and warrants that:

2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.

2.2 Capitalization and Voting Rights. Upon the consummation of the
--------------------------------
transactions contemplated hereby and effective as of the Closing, the authorized
capital of the Company will consist of:

(i) Preferred Stock. Thirty-Four Million (34,000,000) shares of
---------------
Preferred Stock (the "Preferred Stock"), Thirty-Four Million (34,000,000) of
which have been designated as Series AA Preferred Stock and up to all of which
will be sold pursuant to this Agreement. The rights, privileges and preferences
of the Series AA Preferred Stock will be as stated in the Company's Restated
Articles.

(ii) Common Stock. Fifty-Four Million (54,000,000) shares of
------------
common stock ("Common Stock"), of which 11,630,133 shares are issued and
outstanding.

(iii) Except for (A) the conversion privileges of the Series AA
Preferred Stock, (B) the rights provided in Section 2.4 of the Investors' Rights
Agreement, (C) that certain warrant to purchase up to 214,286 shares of Common
Stock issued to Solmex Systems Limited in exchange for the warrant to purchase
214,286 shares of Series B Preferred Stock, (D) that certain warrant to purchase
up to 2,009 shares of Common Stock issued to Indigo Partners, (E) that certain
warrant to purchase up to 10,000 shares of Common Stock issued to William
Grotzinger, (F) currently outstanding options to purchase 8,200 shares of Common
Stock granted to employees pursuant to the Company's 1986 Stock Option Plan (the

2
<PAGE>

"1986 Option Plan"), (G) currently outstanding options to purchase 2,378,693
shares of Common Stock granted to employees pursuant to the Company's 1996 Stock
Option Plan (the "1996 Option Plan") and (H) currently outstanding options to
purchase 714,286 shares of Common Stock issued to certain investors in exchange
for the Series E Preferred Stock options granted to certain investors pursuant
to the Series D Preferred Stock Purchase and Series E Preferred Stock Option
Agreement, dated June 28, 1996, there are not outstanding any options, warrants,
rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company of any shares of its capital stock. In
addition to the aforementioned options, the Company has reserved for purchase
upon exercise of options to be granted in the future under the 1996 Option Plan,
an additional amount of shares of its Common Stock that would increase the total
number of shares authorized for issuance pursuant to the 1996 Option Plan to 25%
of the fully-diluted capitalization of the Company, on a Common Stock equivalent
basis. The Company is not a party or subject to any agreement or understanding,
and, to the best of the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company.

2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity.

2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders has been taken or will be taken prior
to the Closing that is necessary for: (1) the authorization, execution and
delivery of this Agreement and the Investors' Rights Agreement, respectively;
(2) the performance of all obligations of the Company under this Agreement and
the Investors' Rights Agreement; and (3) the authorization, issuance (or
reservation for issuance), sale and delivery of the Series AA Preferred Stock
being sold hereunder and the Common Stock issuable upon conversion of the Series
AA Preferred Stock. This Agreement and the Investors' Rights Agreement each
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.

2.5 Valid Issuance of Preferred and Common Stock. The Series AA
--------------------------------------------
Preferred Stock that is being purchased by each of the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series AA Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Articles, will be duly and
validly issued, fully paid, and nonassessable and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
laws.

3
<PAGE>

2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for (i) the filing of the Restated
Articles with the Secretary of State of the State of California and (ii) the
filing pursuant to Section 25102(f) of the California Corporate Securities Law
of 1968, as amended, and the rules thereunder, which filing will be effected
within fifteen (15) days of the sale of the Series AA Preferred Stock.

2.7 Offering. Subject in part to the truth and accuracy of each
--------
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series AA Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act").

2.8 Litigation. There is no action, suit, proceeding or investigation
----------
pending against the Company that questions the validity of this Agreement or the
Investors' Rights Agreement, or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition or affairs of the Company. To its
knowledge, the Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending.

2.9 Proprietary Rights. To its knowledge, the Company has sufficient
------------------
title and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights, technology and
processes to conduct its business as now conducted (collectively, "Proprietary
Rights"). The Company is not aware that any of its employees is bound by or a
party to any options, licenses or agreements of any kind with respect to the
Proprietary Rights of any other person or entity. The Company has not received
any communications alleging that the Company has violated any of the Proprietary
Rights of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract or other agreement or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's commercially reasonable efforts to
promote the interests of the Company or that would conflict with the Company's
business.

2.10 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default in any material respect of any provision of its Restated
Articles or Bylaws, or in any material respect of any instrument, judgment,
order, writ, decree or material contract to which it is a party or by which it
is bound, or, to its knowledge, of any provision of any federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of this Agreement and the Investors' Rights Agreement, and the
consummation of the transactions contemplated hereby and thereby will not result
in any such violation or be in conflict with or constitute, either a default in
any material respect under any such provision, instrument, judgment, order,
writ, decree or contract or an event that results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Company.

4
<PAGE>

2.11 Agreements.
----------

(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement, there are no agreements between the Company and
any of its officers, directors, affiliates or any affiliate thereof.

(b) There are no agreements, instruments, contracts, judgments,
orders, writs or decrees to which the Company is a party or by which it is bound
that involve the license of any patent, copyright, trade secret or other
proprietary right to or from the Company other than those in the Company's
normal course of business as a software licensor.

(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any outstanding indebtedness for money
borrowed or any other liabilities individually in excess of $50,000 or, in the
case of indebtedness and/or liabilities individually less than $50,000, in
excess of $300,000 in the aggregate, or (iii) made any loans or advances to any
person, other than ordinary advances for travel and other customary employee
business expenses.

(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, instruments and contracts involving the
same person or entity (including persons or entities the Company has reason to
believe are affiliated therewith) shall be aggregated for the purpose of meeting
the individual minimum dollar amounts of such subsections.

(e) There are no agreements limiting the freedom of the Company
to compete in any line of business or in any geographic area or with any person.

2.12 Related-Party Transactions. No officer or director of the Company
--------------------------
or shareholder holding more than 100,000 shares of the Company's capital stock
or member of his or her immediate family is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them. To the Company's knowledge, no member of the immediate family of
any officer or director of the Company or shareholder holding more than 100,000
shares of the Company's capital stock is directly or indirectly interested in
any contract with the Company (other than as holders of less than 1% of any
class of securities of a publicly-traded company).

2.13 Permits. The Company has all permits and licenses necessary for
-------
the conduct of its business as now being conducted by it, the lack of which
could materially and adversely affect the business, properties or financial
condition of the Company. The Company is not in default in any material respect
under any of such permits and licenses.

2.14 Environmental and Safety Laws. To its knowledge, the Company is
-----------------------------
not in violation in any material respect of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and to
its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.

2.15 Disclosure. The Company has fully provided each Investor with
----------
all material information that such Investor would require in deciding whether to
purchase the

5
<PAGE>

Series AA Preferred Stock. Neither this Agreement, the Investors' Rights
Agreement nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.

2.16 Investors' Rights. Except as provided in the Investors' Rights
-----------------
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.

2.17 Corporate Documents. Except for amendments necessary to satisfy
-------------------
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Restated Articles and Bylaws
of the Company are in the form previously provided to counsel for the Investors.

2.18 Title to Property and Assets. The Company owns its property and
----------------------------
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that arise in the ordinary course of business and do
not materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases in all material respects.

2.19 Financial Statements. The Company has delivered to each Investor
--------------------
certain Company financial information, including a final draft of the audited
financial statements for the year ended and as of March 31, 1998 and unaudited
financial statements for the twelve (12) months ended as of March 31, 1999 (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject in the case of unaudited
Financial Statements to normal year-end audit adjustments.

2.20 Changes. Since March 31, 1999, and except with respect to this
-------
Agreement and the Investors' Rights Agreement and the transactions contemplated
hereby and thereby, there has not been:

(a) any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;

(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company;

(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is

6
<PAGE>

not material to the assets, properties, financial condition, operating results
or business of the Company;

(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;

(f) any material change in any compensation arrangement or
agreement with any executive officer;

(g) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets other than in
the ordinary course of business;

(h) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company;

(i) any loans or guarantees made by the Company to or for the
benefit of its officers or directors, or any members of their immediate
families, other than travel advances and other advances made in the ordinary
course of its business; or

(j) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company (other than repurchases from employees or consultants of the Company in
connection with their termination of employment).

2.21 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.

2.22 Tax Returns, Payments and Elections. The Company has filed all
-----------------------------------
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due. The provision for taxes of the Company as shown in the
Financial Statements is adequate for taxes due or accrued as of the date
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended (the "Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) that would have a material effect on the Company, its financial
condition, its business as presently conducted or proposed to be conducted or
any of its properties or material assets.

2.23 Insurance. The Company has valid fire and casualty insurance
---------
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed.

2.24 Minute Books. The minute books of the Company made available to
------------
the Investors contain a complete summary of all meetings of directors and
shareholders since the time of incorporation.

7
<PAGE>

2.25 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the Company's
knowledge, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the Company's knowledge, threatened, that could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
The employment of each officer and employee of the Company is terminable at the
will of the Company.

2.26 U.S. Real Property Holding Corporation. The Company is not now
--------------------------------------
and has never been a "United States Real Property Holding Corporation" as
defined in Section 897(c)(2) of the Internal Revenue Code of 1986, as amended
and Section 1.897-2(b) of the regulations promulgated by the Internal Revenue
Service.

3. Representations and Warranties of the Investors. Each Investor hereby
-----------------------------------------------
represents and warrants that:

3.1 Authorization. Such Investor has full power and authority to enter
-------------
into each of this Agreement and the Investors' Rights Agreement, and each such
Agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms.

3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series AA Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion, or exercise and conversion, thereof
(collectively, the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.

3.3 Disclosure of Information. Such Investor has received all the
-------------------------
information it considers necessary, desirable or appropriate for deciding
whether to purchase the Series AA Preferred Stock. Such Investor further
represents that it has asked all the questions that it desired to ask of the
Company, that it has received complete answers from the Company in response to
those questions, that such answers were to the satisfaction of the Investor for
the purpose of deciding whether to invest in the Company, and that as a result
of its due diligence regarding the terms and conditions of the offering of the
Series AA Preferred Stock and the business, properties, prospects and financial
condition of the Company it has an informed understanding of the Company for
investment purposes.

8
<PAGE>

3.4 Investment Experience. Such Investor is an investor in securities
---------------------
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Series AA Preferred Stock. If
other than an individual, the Investor also represents it has not been organized
for the purpose of acquiring the Series AA Preferred Stock.

3.5 Accredited Investor. Unless indicated to the contrary on the
-------------------
signature page hereof, such Investor is an "accredited investor" within the
meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation D,
as presently in effect.

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

3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, such Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until:

(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or

(b) Such transfer is made pursuant to Rule 144; or

(c) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company that
such disposition will not require registration of such shares under the Act, and
(iii) the transferee has agreed in writing for the benefit of the Company to be
bound by this Section 3, and the Investors' Rights Agreement.

(d) Notwithstanding the provisions of paragraphs (a), (b) and
(c) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor that is a partnership to a partner of
such partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his or her
spouse or to the siblings, lineal descendants or ancestors of such partner or
his or her spouse, if the transferee agrees in writing to be subject to the
terms hereof and of the Investors' Rights Agreement, to the same extent as if he
or she were an original Investor hereunder and thereunder.

3.8 Legends. It is understood that the certificates evidencing the
-------
Securities may bear one or all of the following legends:

9
<PAGE>

(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."

(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code.

3.9 Further Representations by Foreign Investors. If an Investor is
--------------------------------------------
not a United States person, such Investor hereby represents that he or she has
satisfied himself or herself as to the full observance of the laws of his or her
jurisdiction in connection with any invitation to subscribe for the Securities
or any use of this Agreement, including (i) the legal requirements within his
jurisdiction for the purchase of the Securities, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale, or transfer of the Securities. Such Investor's subscription and payment
for, and his or her continued beneficial ownership of the Securities, will not
violate any applicable securities or other laws of his or her jurisdiction.

4. California Commissioner of Corporations.
---------------------------------------

4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT ARE THE
------------------------
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.

5. Conditions of Investor's Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:

5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.

5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.

10
<PAGE>

5.3 Compliance Certificate. The President of the Company shall
----------------------
deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no material adverse change in the business, affairs,
operations, properties, assets or condition of the Company since the date of the
latest Financial Statements.

5.4 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.

5.5 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Investors' special counsel, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.

5.6 Opinion of Company Counsel. Each Investor shall have received
--------------------------
from Brobeck, Phleger & Harrison LLP, counsel for the Company, an opinion, dated
as of the Closing, in the form attached hereto as Exhibit C.
---------

5.7 Amended and Restated Investors' Rights Agreement. The Company and
------------------------------------------------
each Investor shall have entered into the Investors' Rights Agreement in the
form attached as Exhibit B.
---------

5.8 Restated Articles. The Company's Restated Articles shall have
-----------------
been accepted for filing by the office of the California Secretary of State and
the Company shall have properly authorized enough shares to issue the Series AA
Preferred Stock, the options to purchase shares of the Company's Common Stock
issued to the holders of Series E Options, the options to purchase shares of the
Company's Common Stock issued to the holders of Series B Options and reserved
for issuance such shares of Common Stock sufficient to effect the conversion of
the Series A, B, C, D and F Preferred Stock.

5.9 Board and Shareholder Approval for Increase in 1996 Stock
---------------------------------------------------------
Option/Stock Issuance Plan. The Company shall have received the required board
- --------------------------
and shareholder approval necessary to increase the shares authorized under the
Company's 1996 Stock Option/Stock Issuance Plan from 2,633,993 to 25% of the
fully-diluted capitalization of the Company on a Common Stock equivalent basis.

5.10 Conversion of All Outstanding Preferred Stock. The Company shall
---------------------------------------------
have converted all of its outstanding shares of Preferred Stock and options to
purchase shares of Preferred Stock into shares of the Company's Common Stock or
options to purchase shares of Common Stock at a conversion ratio of 1:1 for
Series A, B, D and F Preferred Stock and a conversion ratio of 1: 1.0448 for
Series C Preferred Stock.

6. Conditions of the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to each Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by that Investor:

11
<PAGE>

6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.

6.2 Amended and Restated Investors' Rights Agreement. The Company and
------------------------------------------------
each Investor shall have entered into the Investors' Rights Agreement in the
form attached as Exhibit B.
---------

6.3 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.2.

6.4 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.

7. Miscellaneous.
-------------

7.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.

7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.

7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

7.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given, or received, upon personal delivery to the party to be
notified or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate in writing, provided that such other address
is received at least ten (10) days prior to the giving of any notice required or
permitted under this Agreement.

12
<PAGE>

7.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible.

The Company agrees to indemnify and hold harmless each Investor from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.

7.8 Expenses. If and only if the issuance and sale of the Series AA
--------
Preferred Stock is consummated, the Company shall pay up to an aggregate of
$15,000 for the reasonable fees and expenses of one counsel to the Investors
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the Investors' Rights
Agreement and Right of First Refusal Agreement or the Restated Articles, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.

7.9 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Common Stock issued or issuable upon conversion of the Series AA Preferred Stock
purchased hereby. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and the
Company.

7.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.

7.11 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.

7.12 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.

13
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Series AA Preferred
Stock Purchase Agreement as of the date first above written.

NEURON DATA, INC.

By:
----------------------------------------
Thomas Kelly
President and Chief Executive Officer

Address: 1310 Villa Street
Mountain View, California 94041

INVESTOR:

By:
----------------------------------------
Name: Steven A. Yount

Address: 7762 Fenway Road
New Albany, OH 43054

Accredited Status: (Please Check)
[_] Accredited Investor
[_] Non-Accredited Investor

SIGNATURE PAGE TO THE
SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

14
<PAGE>

TL VENTURES III L.P.

By: TL VENTURES III MANAGEMENT
L.P., its general partner

By: TL VENTURES III LLC,
its general partner

By:
----------------------------------------
Name:
Title: Managing Director

TL VENTURES III OFFSHORE L.P.

By: TL VENTURES III OFFSHORE
PARTNERS L.P., its general partner

By: TL VENTURES III OFFSHORE LTD.,
its general partner

By:
----------------------------------------
Name:
Title: Vice President

TL VENTURES III INTERFUND L.P.

By: TL VENTURES LLC, its general partner

By:
----------------------------------------
Name:
Title: Managing Director

SIGNATURE PAGE TO THE
SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

15
<PAGE>

MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.

By: Morgan Stanley Venture Partners II, L.P.
its General Partner

By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By:
----------------------------------------

MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.

By: Morgan Stanley Venture Partners II, L.P.
its Investment General Partner

By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By:
----------------------------------------

MORGAN STANLEY VENTURE INVESTORS, L.P.

By: Morgan Stanley Venture Partners II, L.P.
its General Partner

By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By:
----------------------------------------
Vice President

SIGNATURE PAGE TO THE
SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

16
<PAGE>

ALTA EMBARCADERO PARTNERS, LLC

By:
----------------------------------------
Member

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

ALTA IV LIMITED PARTNERSHIP

By: Alta IV Management Partners, L.P.

By:
----------------------------------------
General Partner

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

SIGNATURE PAGE TO THE
SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

17
<PAGE>

C.V. SOFINNOVA PARTNERS FIVE

By: Sofinnova (International) Five N.V.
General Partner

By:
----------------------------------------
Under Power of Attorney

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

C.V. SOFINNOVA VENTURES

By:
----------------------------------------
Address: 140 Geary Street, 10th Floor
San Francisco, CA 94018

18
<PAGE>

MORGAN STANLEY VENTURE CAPITAL FUND II, L.P.

By: Morgan Stanley Venture Partners II, L.P.
its General Partner

By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By:
----------------------------------------

MORGAN STANLEY VENTURE CAPITAL FUND II, C.V.

By: Morgan Stanley Venture Partners II, L.P.
its Investment General Partner

By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By:
----------------------------------------

MORGAN STANLEY VENTURE INVESTORS, L.P.

By: Morgan Stanley Venture Partners II, L.P.
its General Partner

By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner

By:
----------------------------------------
Vice President

SIGNATURE PAGE TO THE
SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

19
<PAGE>

ALTA CALIFORNIA PARTNERS, L.P.

By: Alta California Management Partners, L.P.

By:
----------------------------------------
General Partner

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

ALTA EMBARCADERO PARTNERS, LLC

By:
----------------------------------------
Member

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

ALTA IV LIMITED PARTNERSHIP

By: Alta IV Management Partners, L.P.

By:
----------------------------------------
General Partner

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

SIGNATURE PAGE TO THE
SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

20
<PAGE>

C.V. SOFINNOVA PARTNERS FIVE

By: Sofinnova (International) Five N.V.
General Partner

By:
----------------------------------------
Under Power of Attorney

Address: One Embarcadero Center
Suite 4050
San Francisco, CA 94111

C.V. SOFINNOVA VENTURES

By:
----------------------------------------
Address: 140 Geary Street, 10th Floor
San Francisco, CA 94018

SIGNATURE PAGE TO THE
SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

21
<PAGE>

INVESTOR:

Print Name:
----------------------------------

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

---------------------------------------------
Signature of Investor

SIGNATURE PAGE TO THE
SERIES AA PREFERRED STOCK PURCHASE AGREEMENT

22
<PAGE>

SCHEDULE A1

SCHEDULE OF INVESTORS

First Closing: June 1, 1999

<TABLE>
<CAPTION>
Number of Shares of
Series AA Preferred Cancellation of Net Amount Paid Total Investment
Investor Stock Purchase Indebtedness Company Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alta California Partners LP 1,736,482 $ 195,039.92 $ 273,810.09 $ 468,850.01
- -------------------------------------------------------------------------------------------------------------------
Alta Embarcadero Partners LLC 39,672 $ 4,455.94 $ 6,255.50 $ 10,711.44
- -------------------------------------------------------------------------------------------------------------------
Alta IV Limited Partnership 874,873 $ 116,926.70 $ 119,289.00 $ 236,215.70
- -------------------------------------------------------------------------------------------------------------------
C.V. Sofinnova Partners Five 159,623 $ 21,334.64 $ 21,763.64 $ 43,098.28
- -------------------------------------------------------------------------------------------------------------------
C.V. Sofinnova Ventures 584,621 $ 82,847.60 $ 75,000.12 $ 157,847.72
- -------------------------------------------------------------------------------------------------------------------
Morgan Stanley Venture Capital 725,785 $ 102,956.17 $ 93,005.85 $ 195,962.02
Fund II, CV
- -------------------------------------------------------------------------------------------------------------------
Morgan Stanley Venture Capital 2,913,197 $ 413,251.18 $ 373,312.02 $ 786,563.20
Fund II, LP
- -------------------------------------------------------------------------------------------------------------------
Morgan Stanley Venture Investors 756,082 $ 107,253.84 $ 96,888.17 $ 204,142.01
LP
- -------------------------------------------------------------------------------------------------------------------
TL Venture III Interfund LP 103,122 $ 16,185.22 $ 11,657.76 $ 27,842.98
- -------------------------------------------------------------------------------------------------------------------
TL Ventures III LP 3,158,204 $ 495,686.50 $ 357,028.67 $ 852,715.17
- -------------------------------------------------------------------------------------------------------------------
TL Ventures III Offshore LP 661,084 $ 103,758.49 $ 74,734.23 $ 178,492.72
- -------------------------------------------------------------------------------------------------------------------
Steve Yount 241 $ 0.00 $ 65.07 $ 65.07
- -------------------------------------------------------------------------------------------------------------------
TOTALS 11,712,986 $1,659,696.21 $1,502,810.12 $3,162,506.33
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

23
<PAGE>

SCHEDULE A2

SCHEDULE OF INVESTORS

First Closing: June 1, 1999

<TABLE>
<CAPTION>
Number of Shares of Series AA Total Investment
Investor Preferred Stock Purchased Amount
-------- ----------------------------- ----------------
<S> <C> <C>
Alta California Partners LP 471,693 $ 127,357.20
Alta Embarcadero Partners LLC 11,715 $ 3,162.99
Alta IV Limited Partnership 312,315 $ 84,325.10
C.V. Sofinnova Partners Five 57,248 $ 15,457.03
TL Ventures III Interfund LP 97,372 $ 26,290.51
TL Ventures III LP 2,982,108 $ 805,169.23
TL Ventures III Offshore LP 624,223 $ 168,540.26
--------- -------------
Totals: 4,556,674 $1,230,302.32
========= =============
</TABLE>

24
<PAGE>

SCHEDULE A3

SCHEDULE OF INVESTORS

Second Closing: September 28, 1999

<TABLE>
<CAPTION>
Number of Shares of Series AA
Investor Preferred Stock Purchased Total Investment Amount
-------- ----------------------------- -----------------------
<S> <C> <C>
Michael Benson 56,303 $ 15,201.97
Jack Bradley 40,000 $ 10,800.00
Laurent Delamare 75,000 $ 20,250.00
Steven Friedman 21,270 $ 5,743.03
Robert Goodrich 77,948 $ 21,045.95
Albert Gouyet 55,555 $ 14,999.85
Kevin Q. Gu 2,604 $ 703.09
Ted C. Ho 23,761 $ 6,415.49
Ralph Love 25,782 $ 6,961.25
Emmanuel Mignot 38,872 $ 10,495.47
David Mowbray 2,000 $ 540.00
James Owen 19,079 $ 5,151.32
Paul Pelt 15,315 $ 4,134.98
Robert Tykulsker 5,633 $ 1,521.03
Michael Wilson 51,565 $ 13,922.50
David Wiser 51,565 $ 13,922.50
Steve Yount 500 $ 135.00
------- -----------
Totals: 562,752 $151,943.43
======= ===========
</TABLE>

25
<PAGE>

EXHIBIT A

SIXTH AMENDED AND RESTATED
ARTICLES OF INCORPORATION

See Tab 4

26
<PAGE>

EXHIBIT B

AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

See Tab 5

27
<PAGE>

EXHIBIT C

OPINION OF COUNSEL FOR THE COMPANY

See Tab 8

<PAGE>

Exhibit 10.14

BLAZE SOFTWARE, INC.

SERIES BB PREFERRED STOCK PURCHASE AGREEMENT

December 31, 1999
<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Purchase and Sale of Stock.................................. 1
1.1 Sale and Issuance of Series BB Preferred Stock........ 1
----------------------------------------------
1.2 Closing............................................... 1
-------
1.3 Subsequent Sale of Series BB Preferred Stock.......... 2
--------------------------------------------

2. Representations and Warranties of the Company............... 2
2.1 Organization, Good Standing and Qualification......... 2
---------------------------------------------
2.2 Capitalization and Voting Rights...................... 2
--------------------------------
2.3 Subsidiaries.......................................... 3
------------
2.4 Authorization......................................... 3
-------------
2.5 Valid Issuance of Preferred and Common Stock.......... 3
--------------------------------------------
2.6 Governmental Consents................................. 3
---------------------
2.7 Offering.............................................. 4
--------
2.8 Litigation............................................ 4
----------
2.9 Proprietary Rights.................................... 4
------------------
2.10 Compliance with Other Instruments..................... 4
---------------------------------
2.11 Agreements............................................ 5
----------
2.12 Related-Party Transactions............................ 5
--------------------------
2.13 Permits............................................... 5
-------
2.14 Environmental and Safety Laws......................... 6
-----------------------------
2.15 Disclosure............................................ 6
----------
2.16 Investors' Rights..................................... 6
-----------------
2.17 Corporate Documents................................... 6
-------------------
2.18 Title to Property and Assets.......................... 6
----------------------------
2.19 Financial Statements.................................. 6
--------------------
2.20 Changes............................................... 6
-------
2.21 Employee Benefit Plans................................ 7
----------------------
2.22 Tax Returns, Payments and Elections................... 7
-----------------------------------
2.23 Insurance............................................. 8
---------
2.24 Minute Books.......................................... 8
------------
2.25 Labor Agreements and Actions.......................... 8
----------------------------
2.26 U.S. Real Property Holding Corporation................ 8
--------------------------------------

3. Representations and Warranties of the Investors............. 9
3.1 Authorization......................................... 9
-------------
3.2 Purchase Entirely for Own Account..................... 9
---------------------------------
3.3 Disclosure of Information............................. 9
-------------------------
3.4 Investment Experience................................. 9
---------------------
3.5 Accredited Investor................................... 9
-------------------
3.6 Restricted Securities................................. 9
---------------------
3.7 Further Limitations on Disposition.................... 10
----------------------------------
3.8 Legends............................................... 10
-------
3.9 Further Representations by Foreign Investors.......... 10
--------------------------------------------
</TABLE>

i
<PAGE>

4. California Commissioner of Corporations..................... 11
4.1 Corporate Securities Law.............................. 11
------------------------

5. Conditions of Investor's Obligations at Closing............. 11
5.1 Representations and Warranties........................ 11
------------------------------
5.2 Performance........................................... 11
-----------
5.3 Compliance Certificate................................ 11
----------------------
5.4 Qualifications........................................ 11
--------------
5.5 Proceedings and Documents............................. 11
-------------------------
5.6 Opinion of Company Counsel............................ 12
--------------------------
5.7 Amended and Restated Investors' Rights Agreement...... 12
------------------------------------------------
5.8 Restated Articles..................................... 12
-----------------

6. Conditions of the Company's Obligations at Closing.......... 12
6.1 Representations and Warranties........................ 12
------------------------------
6.2 Amended and Restated Investors' Rights Agreement...... 12
------------------------------------------------
6.3 Payment of Purchase Price............................. 12
-------------------------
6.4 Qualifications........................................ 12
--------------

7. Miscellaneous............................................... 12
7.1 Survival of Warranties................................ 14
----------------------
7.2 Successors and Assigns................................ 14
----------------------
7.3 Governing Law......................................... 14
-------------
7.4 Counterparts.......................................... 14
------------
7.5 Titles and Subtitles.................................. 14
--------------------
7.6 Notices............................................... 14
-------
7.7 Finder's Fee.......................................... 14
------------
7.8 Expenses.............................................. 15
--------
7.9 Amendments and Waivers................................ 15
----------------------
7.10 Severability.......................................... 15
------------
7.11 Aggregation of Stock.................................. 15
--------------------
7.12 Entire Agreement...................................... 15
----------------
</TABLE>

ii
<PAGE>

SCHEDULE OF EXCEPTIONS

SCHEDULE A - Schedule of Investors

EXHIBIT A - Seventh Amended and Restated Articles of Incorporation
EXHIBIT B - Third Amended and Restated Investors' Rights Agreement
EXHIBIT C - Opinion of Counsel for the Company
EXHIBIT D - Form of Company's Proprietary Rights Agreement

iii
<PAGE>

SERIES BB PREFERRED STOCK PURCHASE AGREEMENT
--------------------------------------------

THIS SERIES BB PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 31st day of December, 1999, by and among Blaze Software, Inc., a
California corporation (the "Company"), and the investors listed on Schedule A
----------
hereto (each an "Investor," and collectively the "Investors").

RECITALS
--------

A. The Company wishes to sell and issue Series BB Preferred Stock to
the Investors; and

B. The Company wishes to induce the Investors to purchase the Series
BB Preferred Stock; and

C. The Company, the Investors, and the Existing Investors have
entered into a Third Amended and Restated Investors' Rights Agreement (the
"Investors' Rights Agreement) attached hereto as Exhibit B.
---------

AGREEMENT
---------

1. Purchase and Sale of Stock.
--------------------------

1.1 Sale and Issuance of Series BB Preferred Stock.
----------------------------------------------

(a) The Company shall adopt and file with the Secretary of State
of California, on or before the Closing (as defined below), the Seventh Amended
and Restated Articles of Incorporation in the form attached hereto as Exhibit A
---------
(the "Restated Articles").

(c) Subject to the terms and conditions of this Agreement, each
Investor listed on Schedule A hereto shall, severally, purchase at the Closing,
----------
and the Company shall sell and issue to such Investor that additional number of
shares of the Company's Series BB Preferred Stock set forth opposite each
Investor's name on Schedule A hereto for the purchase price set forth thereon.
----------

1.2 Closing. The purchase and sale of the Series BB Preferred Stock
-------
(the "Closing") shall take place at the offices of Wilson Sonsini Goodrich &
Rosati, 975 Page Mill Road, Palo Alto, California, at 9:00 A.M. Pacific Time, on
December 31, 1999, or at such other
<PAGE>

time and place as the Company and the Investors mutually agree upon orally or in
writing (which time and place are designated as the "Closing"). At the Closing,
the Company shall deliver to each Investor a certificate representing the Series
BB Preferred Stock that such Investor is purchasing against payment of the
purchase price therefor by check, wire transfer, cancellation of indebtedness or
any combination thereof.

1.3 Subsequent Sale of Series BB Preferred Stock. The Company may
--------------------------------------------
sell up to the balance of the authorized number of shares of Series BB Preferred
Stock not sold at the Closing prior to March 31, 2000 to such purchasers as it
shall select, at a price of $3.57 per share. Any such Investor shall become a
party to this Agreement and the Investors' Rights Agreement and shall have the
rights and obligations hereunder and thereunder. The Company intends to use the
proceeds from the sale for general corporate purposes, including working
capital.

(i) Preferred Stock. 20,950,059 shares of Preferred Stock
---------------
(the "Preferred Stock"), 16,832,412 of which have been designated as Series AA
Preferred Stock and all of which is issued and outstanding, and 4,117,647 of
which have been designated as Series BB Preferred Stock and up to all of which
will be sold pursuant to this Agreement. The rights, privileges and preferences
of the Series BB Preferred Stock will be as stated in the Company's Restated
Articles.

(ii) Common Stock. 54,000,000 shares of common stock
------------
("Common Stock"), of which 12,525,390 shares are issued and outstanding.

(iii) Except for (A) the conversion privileges of the Series
AA Preferred Stock and the Series BB Preferred Stock, (B) the rights provided in
Section 2.4 of the Investors' Rights Agreement, (C) that certain warrant to
purchase up to 214,286 shares of Common Stock issued to Solmex Systems Limited
(D) that certain warrant to purchase up to 2,009 shares of Common Stock issued
to Indigo Partners, (E) that certain warrant to purchase up to 10,000 shares of
Common Stock issued to William Grotzinger, (F) currently outstanding options to
purchase 9,710,567 shares of Common Stock granted to employees pursuant to the
Company's 1996 Stock Option Plan (the "1996 Option Plan"), (G) further options
to purchase

2
<PAGE>

96,290 shares of Common Stock reserved under the 1996 Option Plan, (H) 2,200,000
shares of Common Stock reserved under the 2000 Option Plan, and (I) the sale of
the Series BB Preferred Stock under this Agreement, there are no options,
warrants or other rights to purchase any of the Company's authorized and
unissued capital stock and the Company has no obligation (contingent or
otherwise) to issue any shares of capital stock or any subscription, warrant,
option, convertible or exchangeable security or other such right, or to issue or
distribute any evidence of indebtedness or assets of the Company, and the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of capital stock or any interest therein or to pay
any dividend or make any other distribution in respect thereof. The Company is
not a party or subject to any agreement or understanding, and, to the best of
the Company's knowledge, there is no agreement or understanding between any
persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.

2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity.

2.4 Authorization. All action on the part of the Company, its
-------------
officers, directors and shareholders has been taken or will be taken prior to
the Closing that is necessary for: (1) the authorization, execution and delivery
of this Agreement and the Investors' Rights Agreement, respectively; (2) the
performance of all obligations of the Company under this Agreement and the
Investors' Rights Agreement; and (3) the authorization, issuance (or reservation
for issuance), sale and delivery of the Series BB Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion of the Series BB
Preferred Stock. This Agreement and the Investors' Rights Agreement each
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.

2.5 Valid Issuance of Preferred and Common Stock. The Series BB
--------------------------------------------
Preferred Stock that is being purchased by each of the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series BB Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Articles, will be duly and
validly issued, fully paid, and nonassessable and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
laws.

3
<PAGE>

Restated Articles with the Secretary of State of the State of California and
(ii) the filing pursuant to Section 25102(f) of the California Corporate
Securities Law of 1968, as amended, and the rules thereunder, which filing will
be effected within fifteen (15) days of the sale of the Series BB Preferred
Stock.

2.7 Offering. Subject in part to the truth and accuracy of each
--------
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series BB Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act").

2.8 Litigation. There is no action, suit, proceeding or
----------
investigation pending against the Company that questions the validity of this
Agreement or the Investors' Rights Agreement, or the right of the Company to
enter into such agreements, or to consummate the transactions contemplated
hereby or thereby, or that might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition or affairs
of the Company. To its knowledge, the Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending.

2.9 Proprietary Rights. The Company has sufficient title and
------------------
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights, know-how, technology and
processes necessary to conduct its business as now conducted and as currently
proposed to be conducted (collectively, "Proprietary Rights"). The Company has
sufficient title and ownership of all software programs and databases necessary
to conduct its business as now conducted and as currently proposed to be
conducted. The Company is not aware that the use, reproduction, modification,
distribution, licensing, sublicensing, sale or any other exercise of the
Proprietary Rights as used, provided or offered by the Company infringes upon
any copyright, trade secret, trademark, service mark, trade name or trade dress,
or any patent, moral right or other intellectual property right, right of
privacy or right in personal data of any person. The Company is not aware that
any of its employees is bound by or a party to any options, licenses or
agreements of any kind with respect to the Proprietary Rights of any other
person or entity. The Company has not received any communications alleging that
the Company has violated any of the Proprietary Rights of any other person or
entity. The Company is not aware that any of its Proprietary Rights is not valid
and enforceable, or that any claim is pending or threatened to the effect that
any Proprietary Right owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company, or
that there is a basis for such claim. The Company is not aware that any of its
employees is obligated under any contract or other agreement or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's commercially reasonable efforts to
promote the interests of the Company or that would conflict with the Company's
business. The Company has caused its current employees to enter into a
proprietary information and invention agreement in the form attached hereto as
Exhibit D.

2.10 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default of any provision of its Restated Articles or Bylaws, or in
any material respect of any instrument, judgment, order, writ, decree or
material contract to which it is a party or by which it is bound, or of any
material provision of any federal or state statute, rule or regulation
applicable

4
<PAGE>

to the Company. The execution, delivery and performance of this Agreement and
the Investors' Rights Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
conflict with or constitute or require a consent or waiver (other than as
contemplated in the Investors' Rights Agreement or its predecessor), either a
default in any material respect under any such provision, instrument, judgment,
order, writ, decree or contract or an event that results in the creation of any
lien, charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Company.

2.11 Agreements.
----------

(b) There are no agreements, instruments, contracts, judgments,
orders, writs or decrees to which the Company is a party or by which it is bound
that involve the license of any Proprietary Right to or from the Company other
than those in the Company's normal course of business as a software licensor.

(e) There are no agreements limiting the freedom of the Company
to compete in any line of business or in any geographic area or with any
person.

2.12 Related-Party Transactions. No officer or director of the
--------------------------
Company or shareholder holding more than 100,000 shares of the Company's capital
stock or member of his or her immediate family is indebted to the Company, nor
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the Company's knowledge, no member of the immediate
family of any officer or director of the Company or shareholder holding more
than 100,000 shares of the Company's capital stock is directly or indirectly
interested in any contract with the Company (other than as holders of less than
1% of any class of securities of a publicly-traded company).

2.13 Permits. The Company has all permits and licenses necessary for
-------
the conduct of its business as now being conducted by it, the lack of which
could materially and

5
<PAGE>

adversely affect the business, properties or financial condition of the Company.
The Company is not in default in any material respect under any of such permits
and licenses.

2.15 Disclosure. The Company has fully provided each Investor with
----------
all material information that such Investor would require in deciding whether to
purchase the Series BB Preferred Stock. Neither this Agreement, the Investors'
Rights Agreement nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.

2.19 Financial Statements. The Company has delivered to each
--------------------
Investor certain Company financial information, including audited financial
statements for the fiscal year ended March 31, 1999, (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other, except that unaudited
Financial Statements may not contain all footnotes required by generally
accepted accounting principles. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein, subject in the case of unaudited Financial
Statements to normal year-end audit adjustments.

2.20 Changes. Since March 31, 1999, and except with respect to this
-------
Agreement and the Investors' Rights Agreement and the transactions contemplated
hereby and thereby, there has not been:

6
<PAGE>

(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company;

(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the assets, properties, financial
condition, operating results or business of the Company;

(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;

(f) any material change in any compensation arrangement or
agreement with any executive officer and no key employees or group of key
employees has been terminated or has otherwise been removed from the Company;

(g) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets other than in
the ordinary course of business;

(h) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company;

2.21 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.

7
<PAGE>

2.27 Merger Discussions. The Company has not engaged in the past
------------------
three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the merger of the Company with or into any
such corporation or corporations, (ii) with any representative of any
corporation, partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all of the
assets of the Company or a transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company would be
disposed of, or (iii) regarding any other form of liquidation, dissolution or
winding up of the Company.

2.28 Investment Company. The Company is not an "investment company"
------------------
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act").

2.29 Year 2000. All of the Company's software products, devices and
---------
programs will operate prior to, during and after the calendar year 2000 A.D.
without material error relating to the date data that represents or references
different centuries or more than one century other than such errors which have
not had nor would reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Company's business as presently
conducted or as proposed to be conducted.

8
<PAGE>

3. Representations and Warranties of the Investors. Each Investor hereby
-----------------------------------------------
represents and warrants that:

3.1 Authorization. Such Investor has full power and authority to
-------------
enter into each of this Agreement and the Investors' Rights Agreement, and each
such Agreement constitutes its valid and legally binding obligation, enforceable
in accordance with its terms.

3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series BB Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion, or exercise and conversion, thereof
(collectively, the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement that gives any person the right to cause such Investor to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.

3.3 Disclosure of Information. Such Investor has received all the
-------------------------
information it considers necessary, desirable or appropriate for deciding
whether to purchase the Series BB Preferred Stock. Such Investor further
represents that it has asked all the questions that it desired to ask of the
Company, that it has received complete answers from the Company in response to
those questions, that such answers were to the satisfaction of the Investor for
the purpose of deciding whether to invest in the Company, and that as a result
of its due diligence regarding the terms and conditions of the offering of the
Series BB Preferred Stock and the business, properties, prospects and financial
condition of the Company it has an informed understanding of the Company for
investment purposes.

3.4 Investment Experience. Such Investor is an investor in
---------------------
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series BB
Preferred Stock. If other than an individual, the Investor also represents it
has not been organized for the purpose of acquiring the Series BB Preferred
Stock.

9
<PAGE>

(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or

(b) Such transfer is made pursuant to Rule 144; or

(d) Notwithstanding the provisions of paragraphs (a), (b) and
(c) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor that is a partnership or a corporation
to a partner of such partnership or shareholder of such corporation or a retired
partner of such partnership or retired shareholder of such corporation who
retires after the date hereof, or to the estate of any such partner or
shareholder or retired partner or retired shareholder or the transfer by gift,
will or intestate succession of any partner or shareholder to his or her spouse
or to the siblings, lineal descendants or ancestors of such partner or
shareholder or his or her spouse, if the transferee agrees in writing to be
subject to the terms hereof and of the Investors' Rights Agreement, to the same
extent as if he or she were an original Investor hereunder and thereunder.

3.8 Legends. It is understood that the certificates evidencing the
--------
Securities may bear one or all of the following legends:

10
<PAGE>

obtained, and (iv) the income tax and other tax consequences, if any, that may
be relevant to the purchase, holding, redemption, sale, or transfer of the
Securities. Such Investor's subscription and payment for, and his or her
continued beneficial ownership of the Securities, will not violate any
applicable securities or other laws of his or her jurisdiction.

4. California Commissioner of Corporations.
---------------------------------------

4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT
------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.

5.2 Performance. The Company shall have performed and complied
-----------
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.

5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.

11
<PAGE>

5.6 Opinion of Company Counsel. Each Investor shall have received
--------------------------
from Wilson Sonsini Goodrich & Rosati, counsel for the Company, an opinion,
dated as of the Closing, in the form attached hereto as Exhibit C.
---------

5.7 Amended and Restated Investors' Rights Agreement. The Company
------------------------------------------------
and each Investor shall have entered into the Investors' Rights Agreement in the
form attached as Exhibit B.
---------

6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:

6.2 Amended and Restated Investors' Rights Agreement. The Company
------------------------------------------------
and each Investor shall have entered into the Investors' Rights Agreement in the
form attached as Exhibit B.
---------

6.3 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.2.

7. Additional Underwriters Agreement.
-----------------------------------

7.1 Certain Repurchase Option. If any Shares purchased by Bayview 99
-------------------------
I LP, Bayview 99 II LP, Hambrecht & Quist California, H&Q Employee Venture Fund
2000, L.P., Access Technology Partners, L.P., Access Technology Partners Brokers
Fund, L.P., Dain Rauscher Wessels Investors L.L.C., or their affiliates, (each
an "Investor/Underwriter" and collectively the "Investors/Underwriters") are
considered "underwriters compensation" under Section 2710 of the National
Association of Securities Dealers, Inc. ("NASD") Rules of Fair Practice and the
value of such Shares plus any other consideration considered "underwriters
compensation" in connection with any public offering of Company's securities in
which an "affiliate" of the Investors/Underwriters" participates exceeds the
amount considered by the NASD to be fair and reasonable, then at the Company's
option, (i) the Company, or its designee, shall have the right to repurchase a
number of Shares of the Series BB Preferred Stock held by such
Investor/Underwriter at a price of $3.57 per share (the "Company's Underwriter
Repurchase Option") such that the total amount of "underwriters compensation" in
connection with such public offering is considered fair and reasonable by the
NASD, and/or (ii) the

12
<PAGE>

Investor/Underwriter shall enter into a lockup agreement for a period of up to 3
years such that the total amount of "underwriters compensation" in connection
with such public offering is considered fair and reasonable by the NASD.

7.2 Expiration; Exercise of Repurchase Option. The Company's
-----------------------------------------
Underwriter Repurchase Option shall expire on December 31, 2000. The option may
be exercised by delivery of a written notification to the Investor/Underwriter's
address as indicated on the Signature Page to this Agreement with a check or
wire transfer for the Repurchase Price, as applicable.

7.3 "Market Stand-Off" Agreement. Each Investor/Underwriter hereby
---------------------------
agrees that for a period of 365 days following the effective date of a
registration statement of the Company filed under the Act, it shall not,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that such
agreement shall be applicable only to the first such registration statement of
the Company which covers common stock (or other securities) to be sold on its
behalf to the public in an underwritten offering.

In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor/Underwriter (and the shares or securities of every other person subject
to the foregoing restriction) until the end of such period.

Notwithstanding the foregoing, the obligations described in this
Section 7.3 shall not apply to a registration relating solely to employee
benefit plans on Form S-l or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-14 or Form S-15 or similar forms which may be promulgated
in the future.

7.4 Waiver of Certain Rights. Each Investor/Underwriter hereby
------------------------
waives:

(a) its right of first offer contained in Section 2.4 of the
Investors' Rights Agreement with respect to any offering that occurs after the
date which is 3 years from the effective date of the Company's first
underwritten public offering;

(b) its "demand" registration rights contained in Section 1.2 or 1.12
of the Investors' Rights Agreement with respect to any registration that occurs
after the first such registration pursuant to either Section 1.2 or 1.12 or with
respect to any registration that occurs after the date which is 5 years from the
effective date of the Company's first underwritten public offering; and

(c) its "piggyback" registration rights contained in Section 1.3 of
the Investors' Rights Agreement with respect to any registration that occurs
after the date which is 7 years from the effective date of the Company's first
underwritten public offering.

7.5 Further Agreement. Each Investor/Underwriter agrees to take any
-----------------
reasonable action necessary to prevent the sale of the Shares of the Series BB
Preferred Stock under this

13
<PAGE>

Agreement from being deemed by the NASD as compensation exceeding fair and
reasonable compensation in the company's first public registration.

8. Miscellaneous.
-------------

8.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.

8.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

8.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.

8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

8.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

8.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given, or received, upon personal delivery to the party to be
notified or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate in writing, provided that such other address
is received at least ten (10) days prior to the giving of any notice required or
permitted under this Agreement.

8.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible.

14
<PAGE>

8.8 Expenses. If and only if the issuance and sale of the Series BB
--------
Preferred Stock is consummated, the Company shall pay up to an aggregate of
$15,000 for the reasonable fees and expenses of Rogers & Wells LLP incurred with
respect to the negotiation, execution, delivery and performance of this
Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the Investors' Rights Agreement or the
Restated Articles, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.

8.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the Series
BB Preferred Stock purchased hereby. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.

8.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.

8.11 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.

8.12 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.

8.13 Specific Performance. Without limiting or waiving in any
--------------------
respect any rights or remedies of the Investors or the Company under this
Agreement, the Investors' Rights Agreement, or now or hereinafter existing at
law or in equity or by statute, the Company and the Investors agree that each of
the Company and the Investors shall be entitled to seek specific performance of
the obligations to be performed by the Investors or the Company respectively in
accordance with the provisions of this Agreement or the Investors' Rights
Agreement, as the case may be.

15
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Series BB Preferred
Stock Purchase Agreement as of the date first above written.

BLAZE SOFTWARE, INC.

By: _____________________________________
Thomas Kelly
President and Chief Executive Officer

Address: 1310 Villa Street
Mountain View, California 94041

SIGNATURE PAGE TO THE
SERIES BB PREFERRED STOCK PURCHASE AGREEMENT

<PAGE>

INVESTOR:

By: __________________________________
Name: ________________________________

Address: ___________________
___________________

Accredited Status: (Please Check)
[_] Accredited Investor
[_] Non-Accredited Investor

SIGNATURE PAGE TO THE
SERIES BB PREFERRED STOCK PURCHASE AGREEMENT

<PAGE>

HAMBRECHT & QUIST CALIFORNIA

By: _______________________________
Its: ______________________________

Address: One Bush Street
San Francisco, California 94104
Attn: Virginia Hull

H&Q EMPLOYEE VENTURE FUND 2000, L.P.

By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: General Partner

By: _________________________
Its:_________________________

Address: One Bush Street
San Francisco, California 94104
Attn: Virginia Hull

ACCESS TECHNOLOGY PARTNERS,
L.P.

By: ACCESS TECHNOLOGY
MANAGEMENT, L.L.C.
Its: General Partner

By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: Managing Member

By: _________________________
Its: _________________________

Address: One Bush Street
San Francisco, California 94104
Attn: Virginia Hull

SIGNATURE PAGE TO THE
SERIES BB PREFERRED STOCK PURCHASE AGREEMENT

<PAGE>

ACCESS TECHNOLOGY PARTNERS BROKERS
FUND, L.P.

By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: General Partner

By: _________________________
Its: _________________________

Address: One Bush Street
San Francisco, California 94104
Attn: Virginia Hull

DAIN RAUSCHER WESSELS INVESTORS L.L.C.

By: Dain Rauscher Incorporated
Its: Managing Member

By: ______________________________
Its: ______________________________

Address: 60 South Sixth Street
Minneapolis, MN 55402
Attn: Mary Zimmer

SELIGMAN COMMUNICATIONS AND
INFORMATION FUND, INC.

By: J. & W. Seligman & Co. Incorporated,
its investment adviser

By: ______________________________
Its: ______________________________

Address: 100 Park Avenue
New York, NY 10017
Attn: Jim Curtis

SIGNATURE PAGE TO THE
SERIES BB PREFERRED STOCK PURCHASE AGREEMENT

<PAGE>

SELIGMAN NEW TECHNOLOGIES FUND, INC.

By: J. & W. Seligman & Co. Incorporated,
Its investment adviser

By: ______________________________
Its: ______________________________

Address: 100 Park Avenue
New York, NY 10017
Attn: Jim Curtis

SELIGMAN INVESTMENT
OPPORTUNITIES (MASTER)
FUND-NTV PORTFOLIO