Document:

<PAGE>   1
                                                                   EXHIBIT 10.11

                                                         BLDG:        Marriott 7
                                 LEASE AGREEMENT         OWNER:       500
                                                         PROP:        107
                                                         UNIT:        1
                                                         TENANT:      10702

        THIS LEASE, made this 2nd day of April 1998 between JOHN ARRILLAGA,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S
TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter
called Landlord, and TRANSMETA CORPORATION, a California corporation,
hereinafter called Tenant.

                                   WITNESSETH:

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

        All of that certain 45,000+ square foot, two-story building located at
        3990 Freedom Circle, Santa Clara, California 95054. Said Premises is
        more particularly shown within the area outlined in Red on Exhibit A
        attached hereto. The entire parcel, of which the Premises is a part, is
        shown within the area outlined in Green on Exhibit A attached. The
        Premises is leased on an "as-is" basis, in its present condition, and in
        the configuration as shown in Red on Exhibit B attached hereto.

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

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

1. USE. Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of general
office, light manufacturing, research and development, and storage and other
uses necessary for Tenant to conduct Tenant's business, provided that such uses
shall be in accordance with all applicable governmental laws and ordinances, and
for no other purpose. Tenant shall not do or permit to be done in or about the
Premises or the Complex nor bring or keep or permit to be brought or kept in or
about the Premises of the Complex anything which is prohibited by or will in any
way increase the existing rate of (or otherwise affect) fire or any insurance
covering the Complex or any part thereof, or any of its contents, or will cause
a cancellation of any insurance covering the Complex or any part thereof, or any
of its contents. Tenant shall not knowingly do or permit to be done anything in,
on or about the Premises or the Complex which will in any way obstruct or
interfere with the

                                    1 of 31
<PAGE>   2

rights of other tenants or occupants of the Complex or injure or annoy them, or
use or allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant knowingly cause, maintain or permit any
nuisance in, on or about the Premises or the Complex and agrees to take
immediate corrective action upon becoming aware of such a problem in this area
should one exist. No sale by auction shall be permitted on the Premises. Tenant
shall not place any loads upon the floors, walls, or ceiling, which endanger the
structure, or place any harmful fluids or other materials in the drainage system
of the building, or overload existing electrical or other mechanical systems. No
waste materials or refuse shall be dumped upon or permitted to remain upon any
part of the Premises or outside of the building in which the Premises are a
part, except in trash containers placed inside exterior enclosures designated by
Landlord for that purpose or inside of the building proper where designated by
Landlord. No materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain outside the Premises or on any portion of common area of the
Complex. No loudspeaker or other device, system or apparatus which can be heard
outside the Premises shall be used in or at the Premises without the prior
written consent of Landlord. Tenant shall not commit or suffer to be committed
any waste in or upon the Premises. Tenant shall indemnify, defend and hold
Landlord harmless against any loss, expense, damage, attorneys' fees, or
liability arising out of failure of Tenant to comply with any applicable law.
Tenant shall comply with any covenant, condition, or restriction ("CC&R's")
affecting the Premises. The provisions of this paragraph are for the benefit of
Landlord only and shall not be construed to be for the benefit of any tenant or
occupant of the Complex.

2. TERM*

        A. Subject to Paragraph 56, the term of this Lease shall be for a period
of TEN (10) years (unless sooner terminated as hereinafter provided) and,
subject to Paragraphs 2(B) and 3, shall commence on the 1st day of July 1998 and
end on the 30th day June of 2008.

        B. Possession of the Premises shall be deemed tendered and the term of
this Lease shall commence on July 1, 1998, or as otherwise agreed in writing.

3. POSSESSION. If landlord, for any reason whatsoever, cannot deliver possession
of said premises to Tenant at the commencement of the said term, as hereinbefore
specified, this Lease shall not be void or voidable; no obligation of Tenant
shall be affected thereby; nor shall Landlord or Landlord's agents be liable to
Tenant for any loss or damage resulting therefrom; but in that event the
commencement and termination dates of the Lease, and all other dates affected
thereby shall be revised to conform to the date of Landlord's delivery of
possession, as specified in Paragraph 2(b), above. The above is, however,
subject to the provision that the period of delay of delivery of the premises
shall not exceed 60 days from the commencement date herein (except those delays
caused by Acts of God, strikes, war, utilities, governmental bodies, weather,
unavailable materials, and delays beyond Landlord's control shall be excluded in
calculating such period) in which instance Tenant, at its option, may, by
written notice to Landlord, terminate this Lease.

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

                                    2 of 31
<PAGE>   3

4. RENT

        A. Basic Rent. Tenant agrees to pay to Landlord at such place as
Landlord may designate without deduction, offset, prior notice, or demand, and
Landlord agrees to accept as Basic Rent for the leased Premises the total sum of
Thirteen Million Nine Hundred Eighty Six Thousand and no/100 ($13,986,000.00)
Dollars in lawful money of the United States of America, payable as follows: See
Paragraph 43 for Basic Rent Schedule.

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

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

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

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

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

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

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

                                    3 of 31
<PAGE>   4

             Additional Rent, Landlord shall have all the rights and remedies
             with respect thereto as Landlord has for nonpayment of rent.

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

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

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

        G. Security Deposit. On or before July 1, 2000, Tenant shall deposit
with Landlord the sum of Two Hundred Eighty Three Thousand Five Hundred and
no/100 ($283,500.00) Dollars. Said sum shall be held by Landlord as a Security
Deposit for the faithful performance by Tenant of all of the terms, covenants,
and conditions of this Lease to be kept and performed by Tenant during the term
hereof. If Tenant defaults with respect to any provision of this Lease,
including, but not limited to, the provisions relating to the payment of rent
and any of the monetary sums due herewith, Landlord may (but shall not be
required to) use, apply or retain all or any part of this Security Deposit for
the payment of any other amount which Landlord may spend by reason of Tenant's
default or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of Tenant's default. If any portion of said Deposit is so
used or applied, Tenant shall, within ten (10) days after written demand
therefore, deposit cash with Landlord in the amount sufficient to restore the
Security Deposit to its original amount. Tenant's failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep this
Security Deposit from its general funds, and Tenant shall not be entitled to
interest on such Deposit. If Tenant fully and faithfully performs every
provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option, to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease
term and after Tenant has vacated the Premises. In the event of termination of
Landlord's

                                    4 of 31
<PAGE>   5

interest in this Lease, Landlord shall transfer said Deposit to Landlord's
successor in interest whereupon Tenant agrees to release Landlord from liability
for the return of such Deposit or the accounting therefor.

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

6. PARKING. Tenant shall have the right to use with other tenants or occupants
of the Complex 135 parking spaces in the common parking areas of the Complex.
Tenant agrees, that Tenant, Tenant's employees, agents, representatives and/or
invitees shall not use parking spaces in excess of said 135 spaces allocated to
Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion,
to specifically designate the location of Tenant's parking spaces within the
common parking areas of the Complex in the event of a dispute among the tenants
occupying the building and/or Complex referred to herein, in which event Tenant
agrees that Tenant, Tenant's employees, agents, representatives and/or invitees
shall not use any parking spaces other than those parking spaces specifically
designated by Landlord for Tenant's use. Said parking spaces, if specifically
designated by Landlord to Tenant may be relocated by Landlord at any time, and
from time to time. Landlord reserves the right, at Landlord's sole discretion,
to rescind any specific designation of parking spaces, thereby returning
Tenant's parking spaces to the common parking area. Landlord shall give Tenant
written notice of any change in Tenant's parking spaces. Tenant shall not, at
any time, park, or permit to be parked, any trucks or vehicles adjacent to the
loading areas so as to interfere in any way with the use of such areas, nor
shall Tenant at any time park, or permit the parking of Tenant's trucks or other
vehicles or the trucks and vehicles of Tenant's suppliers or others, in any
portion of the common area not designated by Landlord for such use by Tenant.
Tenant shall not park nor permit to be parked, any inoperative vehicles or
equipment on any portion of the common parking area or other common areas of the
Complex. Tenant agrees to assume responsibility for compliance by its employees
with the parking provision contained herein. If Tenant or its employees park in
other than such designated parking areas, then Landlord may charge Tenant, as an
additional

                                    5 of 31
<PAGE>   6

charge, and Tenant agrees to pay, ten ($10.00) Dollars per day for each day or
partial day each such vehicle is parked in any area other than that designated.
Tenant hereby authorizes Landlord at Tenant's sole expense to tow away from the
Complex any vehicle belonging to Tenant or Tenant's employees parked in
violation of these provisions, or to attach violation stickers or notices to
such vehicles. Tenant shall use the parking areas for vehicle parking only, and
shall not use the parking areas for storage. There will be no charge for
parking, except as noted herein.

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

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

8. ACCEPTANCE AND SURRENDER OF PREMISES. Subject to Paragraph 53 and by entry
hereunder, Tenant accepts the Premises as being in good and sanitary order,
condition and repair and accepts the building and improvements included in the
Premises in their present condition and without representation or warranty by
Landlord as to the condition of such building or as to the use or occupancy
which may be made thereof. Any exceptions to the foregoing must be by written
agreement executed by Landlord and Tenant. Tenant agrees on the last day of the
Lease term, or on the sooner termination of this Lease, to surrender the
Premises promptly and peaceably to Landlord in good condition and repair (damage
by Act of God, fire, normal wear and tear excepted), with all interior walls
painted, or cleaned so that they appear freshly painted, and repaired and
replaced, if damaged; all floors cleaned and waxed; all carpets cleaned and
shampooed; the airconditioning and heating equipment serviced by a reputable and
licensed service firm and in good operating condition (provided the maintenance
of such equipment has been Tenant's responsibility during the term of this
Lease) together with all alterations, additions, and improvements which may have
been made in, to, or on the Premises (except movable trade fixtures installed at
the expense of Tenant) except that Tenant shall

                                    6 of 31
<PAGE>   7

ascertain from Landlord within thirty (30) days before the end of the term of
this Lease whether Landlord desires to have the Premises or any part or parts
thereof restored to their condition and configuration as when the Premises were
delivered to Tenant and if Landlord shall so desire, then Tenant shall restore
said Premises or such part or parts thereof before the end of this Lease at
Tenant's sole cost and expense. Tenant, on or before the end of the term or
sooner termination of this Lease, shall remove all of Tenant's personal property
and trade fixtures from the Premises, and all property not so removed on or
before the end of the term or sooner termination of this Lease shall be deemed
abandoned by Tenant and title to same shall thereupon pass to Landlord without
compensation to Tenant. Landlord may, upon termination of this Lease, remove all
moveable furniture and equipment so abandoned by Tenant, at Tenant's sole cost,
and repair any damage caused by such removal at Tenant's sole cost. If the
Premises be not surrendered at the end of the term or sooner termination of this
Lease, Tenant shall indemnify Landlord against loss or liability resulting from
the delay by Tenant in so surrendering the Premises including, without
limitation, any claim made by any succeeding tenant founded on such delay.
Nothing contained herein shall be construed as an extension of the term hereof
or as a consent of Landlord to any holding over by Tenant. The voluntary or
other surrender of this Lease or the Premises by Tenant or a mutual cancellation
of this Lease shall not work as a merger and, at the option of Landlord, shall
either terminate all or any existing subleases or subtenancies or operate as an
assignment to Landlord of all or any such subleases or subtenancies.

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

10. TENANT MAINTENANCE. Except for the maintenance of any Common Area as
provided for in Paragraph 49A, Tenant shall, at its sole cost and expense, keep
and maintain the Premises (including appurtenances) and every part thereto in a
high standard of maintenance and repair, and in good and sanitary condition.
Tenant's maintenance and repair responsibilities

                                    7 of 31
<PAGE>   8

herein referred to include, but are not limited to, all windows, window frames,
plate glass, glazing, truck doors, plumbing systems (such as water and drain
lines, sinks, toilets, faucets, drains, showers and water fountains), electrical
systems (such as panels, conduits, outlets, lighting fixtures, lamps, bulbs,
tubes, ballasts), heating and air-conditioning systems (such as compressors,
fans, air handlers, ducts, mixing boxes, thermostats, time clocks, boilers,
heaters, supply and return grills), store fronts, roof membrane downspouts, all
interior improvements within the premises including but not limited to wall
coverings, window coverings, carpet, floor coverings, partitioning, ceilings,
doors (both interior and exterior, including closing mechanism, latches, locks,
skylights (if any), automatic fire extinguishing systems, and elevators and all
other interior improvements of any nature whatsoever. Tenant agrees to provide
carpet shields under all rolling chairs or to otherwise be responsible for wear
and tear of the carpet caused by such rolling chairs if such wear and tear
exceeds that caused by normal foot traffic in surrounding areas. Areas of
excessive wear shall be replaced at Tenant's sole expense upon Lease
termination. Tenant hereby waives all rights under, and benefits of, subsection
1 of Section 1932 and Section 1941 and 1942 of the California Civil Code and
under any similar law, statute or ordinance now or hereafter in effect. See
Paragraph 53.

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

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

12. TAXES. A. As Additional Rent and in accordance with Paragraph 4 D of this
Lease, Tenant shall pay to Landlord Tenant's proportionate share of all Real
Property Taxes, which prorata share shall be allocated to the leased Premises by
square footage or other equitable basis, as calculated by Landlord. The term
"Real Property Taxes", as used herein, shall mean (i) all taxes, assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all installments of principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessments caused by any change in ownership of
the Complex) now or hereafter imposed by any governmental or quasi-governmental
authority or special district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against, or with respect to the value,
occupancy or use of, all or any portion of the Complex (as now constructed or as
may at any time hereafter be constructed, altered, or otherwise changed) or
Landlord's interest therein; any improvements located within the Complex
(regardless of ownership); the fixtures, equipment and other property of
Landlord, real or personal, that are an integral part of and located in the
Complex; or parking areas, public utilities, or energy within the Complex; (iii)
all charges, levies or fees imposed by reason of environmental regulation or
other governmental control of the Complex; and (iii) all costs and fees
(including attorneys' fees) incurred by Landlord in contesting any Real Property
Tax and in negotiating with public authorities as to any Real

                                    8 of 31
<PAGE>   9

Property Tax. If at any time during the term of this Lease the taxation or
assessment of the Complex prevailing as of the commencement date of this Lease
shall be altered so that in lieu of or in addition to any Real Property Tax
described above there shall be levied, assessed or imposed (whether by reason of
a change in the method of taxation or assessment, creation of a new tax or
charge, or any other cause) an alternate or additional tax or charge (i) on the
value, use or occupancy of the Complex or Landlord's interest therein or (ii) on
or measured by the gross receipts, income or rentals from the Complex, on
Landlord's business of leasing the Complex, or computed in any manner with
respect to the operation of the Complex, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Complex, then only that part of such real
Property Tax that is fairly allocable to the Complex shall be included within
the meaning of the term "Real Property Taxes". Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax imposed on
Landlord's income from all sources.

        B. Taxes on Tenant's Property

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

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

13. LIABILITY INSURANCE. Tenant, at Tenant's expense, agrees to keep in force
during the term of this Lease a policy of commercial general liability insurance
with a combined single

                                    9 of 31
<PAGE>   10

limit coverage of not less than Two Million Dollars ($2,000,000) per occurrence
for injuries to or death of persons occurring in, on or about the Premises or
the Complex, and property damage insurance with limits of $550,000. The policy
or policies affecting such insurance, certificates of insurance of which shall
be furnished to Landlord, shall name Landlord as additional insureds, and shall
insure any liability of Landlord, contingent or otherwise, as respects acts or
omissions of Tenant, its agents, employees or invitees or otherwise by any
conduct or transactions of any of said persons in or about or concerning the
Premises, including any failure of Tenant to observe or perform any of its
obligations hereunder, shall be issued by an insurance company admitted to
transact business in the State of California; and shall provide that the
insurance effected thereby shall not be canceled, except upon thirty (30) days'
prior written notice to Landlord. If, during the term of this Lease, in the
considered opinion of Landlord's Lender, insurance advisor, or counsel, the
amount of insurance described in this paragraph 13 is not adequate, Tenant
agrees to increase said coverage to such reasonable amount as Landlord's Lender,
insurance advisor, or counsel shall deem adequate.

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

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

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

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

                                    10 of 31
<PAGE>   11

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

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

18. LIENS. Tenant shall keep the Premises and the Complex free from any liens
arising out of any work performed, materials furnished or obligation incurred by
Tenant. In the event that Tenant shall not, within twenty (20) days following
the imposition of such lien, cause the same to be released of record, Landlord
shall have, in addition to all other remedies provided herein and by law, the
right, but no obligation, to cause the same to be released by such means as it
shall deem proper, including payment of the claim giving rise to such lien. All
sums paid by Landlord for such purpose, and all expenses incurred by it in
connection therewith, shall be payable to Landlord by Tenant on demand with
interest at the prime rate of interest as quoted by the Bank of America.

19. ASSIGNMENT AND SUBLETTING. Tenant shall not assign, transfer, or hypothecate
the leasehold estate under this Lease, or any interest herein, and shall not
sublet the Premises, or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person or entity to occupy or use the Premises, or
any portion thereof, without, in each case, the prior written consent of
Landlord which consent will not be unreasonably withheld. As a condition for

                                    11 of 31
<PAGE>   12

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

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

                                    12 of 31
<PAGE>   13

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

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

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

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

                                    13 of 31
<PAGE>   14

rights or privileges hereunder be an asset of Tenant under any bankruptcy,
insolvency or reorganization proceedings.

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

        (a) The rights and remedies provided for by California Civil Code
Section 1951,2, including but not limited to, recovery of the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of rental loss for the same period
that Tenant proves could be reasonably avoided, as computed pursuant to
subsection (b) of said Section 1951.2. Any proof by Tenant under subparagraphs
(2) or (3) of Section 1951.2 of the California Civil Code of the amount of
rental loss that could be reasonably avoided shall be made in the following
manner: Landlord and Tenant shall each select a licensed real estate broker in
the business of renting property of the same type and use as the Premises and in
the same geographic vicinity. Such two real estate brokers shall select a third
licensed real estate broker, and the three licensed real estate brokers so
selected shall determine the amount of the rental loss that could be reasonably
avoided from the balance of the term of this Lease after the time of award. The
decision of the majority of said licensed real estate brokers shall be final and
binding upon the parties hereto.

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

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

        (d) To the extent permitted by law the right and power to enter the
Premises and remove therefrom all persons and property, to store such property
in a public warehouse or elsewhere at the cost of and for the account of Tenant,
and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord, may from time to time sublet the Premises
or any part thereof for such term or terms (which may extend beyond the term of
this Lease) and at such rent and such other terms as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises. Upon each subletting, (i) Tenant shall be immediately liable to
pay Landlord, in addition to indebtedness

                                    14 of 31
<PAGE>   15

other than rent due hereunder, the cost of such subletting, including, but not
limited to, reasonable attorneys' fees, and any real estate commissions actually
paid, and the cost of such alterations and repairs incurred by Landlord and the
amount, if any, by which the rent hereunder for the period of such subletting
(to the extent such period does not exceed the term hereof) exceeds the amount
to be paid as rent for the Premises for such period or (ii) at the option of
Landlord, rents received from such subletting shall be applied first to payment
of indebtedness other than rent due hereunder from Tenant to Landlord; second,
to the payment of any costs of such subletting and of such alterations and
repairs; third to payment of rent due and unpaid hereunder, and the residue, if
any, shall be held by Landlord and applied in payment of future rent as the same
becomes due hereunder. If Tenant has been credited with any rent to be received
by such subletting under option (i) and such rent shall not be promptly paid to
Landlord by the subtenant(s), or if such rental received from such subletting
under option (ii) during any month be less than that to be paid during that
month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord.
Such deficiency shall be calculated and paid monthly. No taking possession of
the Premises by Landlord shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Tenant. Notwithstanding any such subletting without termination, Landlord may at
any time hereafter elect to terminate this Lease for such previous breach.

        (e) The right to have a receiver appointed for Tenant upon application
by Landlord, to take possession of the Premises, and to apply any rental
collected from the Premises and to exercise all other rights and remedies
granted to Landlord pursuant to subparagraph d above (except that Tenant may
vacate so long as it pays rent, provides an on-site security guard during normal
business hours from Monday through Friday, and otherwise performs its
obligations hereunder).

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

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

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

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

        If landlord does not give Tenant notice in writing within thirty (30)
days from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior to
the damage or destruction. Tenant shall be entitled to a reduction in rent while
such

                                    15 of 31
<PAGE>   16

repair is being made in the proportion that the area of the Promises rendered
untenantable by such damage bears to the total area of the Premises. If Landlord
initially estimates that the rebuilding or restoration will exceed 180 days or
60 days if the destruction occurs within the last eighteen (18) months of the
Lease Term, or if Landlord does not complete the rebuilding or restoration
within one hundred eighty (180) days (or sixty (60) days if the destruction
occurs within the last eighteen (18) months of the Lease Term) following the
date of destruction (such period of time to be extended for delays caused by the
fault or neglect of Tenant or because of Acts of God, acts of public agencies,
labor disputes, strikes, fires, freight embargoes, rainy or stormy weather,
inability to obtain materials, supplies or fuels, acts of contractors or
subcontractors, or delay of the contractors or subcontractors due to such causes
or other contingencies beyond the control of Landlord), then Tenant shall have
the right to terminate this Lease by giving fifteen (15) days prior written
notice to Landlord. Notwithstanding anything herein to the contrary, Landlord's
obligation to rebuild or restore shall be limited to the building and interior
improvements constructed by Landlord as they existed as of the commencement date
of the Lease and shall not include restoration of Tenant's trade fixtures,
equipment, merchandise, or any improvements, alterations or additions made by
Tenant to the Premises, which Tenant shall forthwith replace or fully repair at
Tenant's sole cost and expense provided this Lease is not cancelled according to
the provisions above.

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

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

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

        If (i) any action or proceeding is commenced for such taking of the
Premises or any part thereof, or if Landlord is advised in writing by any entity
or body having the right or power of condemnation of its intention to condemn
the premises or any portion thereof, or (ii) any of the foregoing events occur
with respect to the taking of any space in the Complex not leased hereby, or if
any such spaces so taken or conveyed in lieu of such taking and Landlord shall
decide to discontinue the use and operation of the Complex, or decide to
demolish, alter or rebuild the Complex, then, in any of such events Landlord
shall have the right to terminate this Lease by

                                    16 of 31
<PAGE>   17

giving Tenant written notice thereof within sixty (60) days of the date of
receipt of said written advice, or commencement of said action or proceeding, or
taking conveyance, which termination shall take place as of the first to occur
of the last day of the calendar month next following the month in which such
notice is given or the date on which title to the Premises shall vest in the
condemnor.

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

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

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

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

28. HOLDING OVER. Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as

                                    17 of 31
<PAGE>   18

applicable except that the monthly Basic Rent shall be increased to an amount
equal to one hundred fifty (150%) percent of the monthly Basic Rent required
during the last month of the Lease term.

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

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

31. RIGHT OF LANDLORD TO PERFORM. All terms, covenants and conditions of this
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent, required to be paid by
it hereunder and such failure shall continue for five (5) days after written
notice thereof by Landlord, or shall fail to perform any other term or covenant
hereunder on its part to be performed, and such failure shall continue for
thirty (30) days after written notice thereof by Landlord, Landlord, without
waiving or releasing Tenant from any obligation of Tenant hereunder, may, but
shall not be obligated to, make any such payment or perform any such other term
or covenant on Tenant's part to be performed. All sums so paid by Landlord and
all necessary costs of such performance by Landlord together with interest
thereon at the rate of the prime rate of interest per annum as quoted by the
Bank of America from the date of such payment or performance by Landlord, shall
be paid (and Tenant covenants to make such payment) to Landlord on demand by
Landlord, and Landlord shall have (in addition to any other right or remedy of
Landlord) the same rights and remedies in the event of nonpayment by Tenant as
in the case of failure by Tenant in the payment of rent hereunder.

32. ATTORNEYS' FEES.

        (A) In the event that either Landlord or Tenant should bring full suit
for the possession of the Premises, for the recovery of any sum due under this
Lease, or because of the breach of any provision of this Lease, or for any other
relief against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party

                                    18 of 31
<PAGE>   19

therein shall be paid by the other party, which obligation on the part of the
other party shall be deemed to have accrued on the date of the commencement of
such action and shall be enforceable whether or not the action is prosecuted to
judgment.

        (B) Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.

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

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

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

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

37. CORPORATE AUTHORITY. If Tenant is a corporation (or a partnership), each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation

                                    19 of 31
<PAGE>   20

(or partnership) in accordance with the by-laws of said corporation (or
partnership in accordance with the partnership agreement) and that this Lease is
binding upon said corporation (or partnership) in accordance with its terms. If
Tenant is a corporation, Tenant shall, within thirty (30) days after execution
of this Lease, deliver to Landlord a certified copy of the resolution of the
Board of Directors of said corporation authorizing or ratifying the execution of
this Lease.

38. [Intentionally Deleted.]

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

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

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

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

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

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

        (vi)    no judgment taken against any partner of Landlord may be vacated
                and set aside at any time without hearing;

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

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

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

40. MISCELLANEOUS AND GENERAL PROVISIONS

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

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

                                    20 of 31
<PAGE>   21

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

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

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

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

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

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

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

            i   Paragraphs 43 through 56 are added hereto and are included as a
                part of this lease.

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

            k   Tenant covenants and agrees that no diminution or shutting off
                of light, air or view by any structure which may be hereafter
                erected (whether or not by Landlord) shall

                                    21 of 31
<PAGE>   22

                in any way affect his Lease, entitle Tenant to any reduction of
                rent hereunder or result in any liability of Landlord to Tenant.

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

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

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

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

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

LANDLORD:                               TENANT:
JOHN ARRILLAGA                          TRANSMETA CORPORATION
SURVIVOR'S TRUST                        a California corporation

   /s/ JOHN ARRILLAGA                      /s/ COLIN HUNTER
   --------------------------------        ---------------------------------
By: John Arrillaga, Trustee             By:

Date: 6/8/98                            Title:       CFO
                                              ------------------------------

                                                     Colin Hunter
                                        ------------------------------------
                                        Print or Type Name

RICHARD T. PERRY
SEPARATE PROPERTY TRUST

                 /s/                    Date:  June 5, 1998
    -------------------------------
By: Richard T. Peery, Trustee

Date: 6/8/98

                                    22 of 31
<PAGE>   23

Paragraphs 43 through 55 to Lease Agreement dated April 2, 1998, By and Between
the John Arrillaga Survivor's Trust and the Richard T. Peery Separate Property
Trust, as Landlord, and TRANSMETA CORPORATION, a California corporation, as
Tenant for 45,000+ Square Feet of Space Located at 3990 Freedom Circle, Santa
Clara, California.

43. BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate sum
of THIRTEEN MILLION NINE HUNDRED EIGHTY SIX THOUSAND AND NO/100 DOLLARS
($13,986,000.00), shall be payable as follows:

        On July 1, 1998, the sum of SEVENTY EIGHT THOUSAND SEVEN HUNDRED FIFTY
AND NO/100 DOLLARS ($78,750.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including June 1, 2000.

        On July 1, 2000, the sum of ONE HUNDRED TEN THOUSAND TWO HUNDRED FIFTY
AND NO/100 DOLLARS ($110,250.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including June 1, 2001.

        On July 1, 2001, the sum of ONE HUNDRED FOURTEEN THOUSAND SEVEN HUNDRED
FIFTY AND NO/100 DOLLARS ($114,750.00) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2002.

        On July 1, 2002, the sum of ONE HUNDRED NINETEEN THOUSAND TWO HUNDRED
FIFTY AND NO/100 DOLLARS ($119,250.00) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2003.

        On July 1, 2003, the sum of ONE HUNDRED TWENTY THREE THOUSAND SEVEN
HUNDRED FIFTY AND NO/100 DOLLARS ($123,750.00) shall be due, and a like sum due
on the first day of each month thereafter, through and including June 1, 2004.

        On July 1, 2004, the sum of ONE HUNDRED TWENTY EIGHT THOUSAND TWO
HUNDRED FIFTY AND NO/100 DOLLARS ($128,250.00) shall be due, and a like sum due
on the first day of each month thereafter, through and including June 1, 2005.

        On July 1, 2005, the sum of ONE HUNDRED THIRTY TWO THOUSAND SEVEN
HUNDRED FIFTY AND NO/100 DOLLARS ($132,750.00) shall be due, and a like sum due
on the first day of each month thereafter, through and including June 1, 2006.

        On July 1, 2006, the sum of ONE HUNDRED THIRTY SEVEN THOUSAND TWO
HUNDRED FIFTY AND NO/100 DOLLARS ($137,250.00) shall be due, and a like sum due
on the first day of each month thereafter, through and including June 1, 2007.

        On July 1, 2007, the sum of ONE HUNDRED FORTY ONE THOUSAND SEVEN HUNDRED
FIFTY AND NO/100 DOLLARS ($141,750.00) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2008; or until
the entire

                                    23 of 31
<PAGE>   24

aggregate sum of THIRTEEN MILLION NINE HUNDRED EIGHTY SIX THOUSAND AND NO/100
DOLLARS ($13,986,000.00) has been paid.

44. "AS-IS" BASIS: Subject only to Paragraph 53, it is hereby agreed that the
Premises leased hereunder is leased strictly on an "as-is" basis and in its
present condition, and in the configuration as shown on Exhibit B attached
hereto, and by reference made a part hereof. Except as noted herein, it is
specifically agreed between the parties that Landlord shall not be required to
make, nor be responsible for any cost, in connection with any repair,
restoration, and/or improvement to the Premises in order for this Lease to
commence, or thereafter, throughout the Term of this Lease. Notwithstanding
anything to the contrary within this Lease, Landlord makes no warranty or
representation of any kind or nature whatsoever as to the condition or repair of
the Premises, nor as to the use or occupancy which may be made thereof.

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

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

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

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

                                    24 of 31
<PAGE>   25

49. ASSIGNMENT AND SUBLETTING (CONTINUED):

        A. Proposed Sublet Premises. Landlord hereby acknowledges that, during
the first two years of the Lease Term, Tenant intends to sublease one hundred
percent of the Leased Premises. Provided Tenant is not in default of this Lease,
Landlord agrees that it will not exercise its right, as provided for in
Paragraph 19, to terminate the Lease as a result of a request by Tenant to
sublease the Premises for a sublease term not to extend beyond June 30, 2000. In
such event, Landlord agrees to issue Landlord's standard consent to said
sublease, subject to (a) Tenant submitting to Landlord a copy of said sublease
(prior to said sublease commencing), (b) Landlord, Tenant and Subtenant
thereafter executing Landlord's standard Consent to Sublease agreement and (c)
Landlord receives payment from Tenant of Landlord's costs for processing said
Sublease Consent prior to said sublease commencing.

        In addition to and notwithstanding anything to the contrary in Paragraph
19, prior to sharing any rents due Tenant from a subtenant on the Proposed
Sublet Premises in excess of the Rent payable by Tenant to Landlord hereunder
("Excess Rent"), Tenant shall be first entitled to recover from such Excess Rent
the amount of all reasonable leasing commissions on said Proposed Sublet
Premises paid to third parties not affiliated with Tenant.

        The parties hereto agree that Landlord will accommodate Tenant by
assisting Tenant in finding a subtenant to lease the Proposed Sublet Premises
for a sublease term not to exceed June 30, 2000 ("Sublease Term"). Tenant shall
be responsible for entering into a sublease agreement with said subtenant and
Landlord shall issue its standard Consent to Sublease form which shall be
executed by Landlord, Tenant and the subtenant. Said sublease entered into
between Tenant and subtenant shall provide for the subtenant to issue payments
due under the sublease directly to Landlord during the Sublease Term and
Landlord shall make reasonable efforts to collect the amounts due from the
subtenant. Said amounts so collected by Landlord shall be credited to Tenant's
account under this Lease; however, Landlord shall not be responsible or liable
to Tenant for its failure to collect the amounts due from said subtenant, nor
shall Tenant be relieved of any of its obligations under the Lease due to
Landlord's agreement to collect the amounts due from the subtenant and Tenant
shall not be entitled to an offset of the amounts due under Tenant's Lease for
Landlord's failure to collect the amounts due from said subtenant under the
sublease. Subject to the terms and conditions of this Paragraph 49A, Landlord
also agrees to provide reasonable improvements to the Proposed Sublet Premises,
at Landlord's expense, provided: (i) Tenant is not in default of this Lease and
(ii) said Sublease Term does not exceed June 30, 2000. Notwithstanding the
above, Landlord retains the sole and absolute right to determine what
improvements are considered reasonable and shall not be liable to Tenant, in any
manner whatsoever, for Landlord's refusal to provide said improvements if
Landlord determines, in its sole and absolute discretion, that the subtenant
improvements are not reasonable. The parties hereto acknowledge and agree that
Landlord shall not be liable, in any manner whatsoever, to Tenant if Landlord
does not find a subtenant for the Proposed Sublet Premises and Tenant shall have
no claim, of any type whatsoever, against Landlord for Landlord's failure to
find a subtenant for the Proposed Sublet Premises.

                                    25 of 31
<PAGE>   26

        In the event the Proposed Sublet Premises is subleased to more that one
subtenant, Landlord further agrees to maintain the common areas of the Building.
The manner in which the Common Area shall be maintained and the expenditures for
such maintenance shall be at the discretion of Landlord. As Additional Rent and
in accordance with Paragraph 4D of this Lease, Tenant and any subtenants shall
pay their proportionate share (calculated on a square footage or other equitable
basis as calculated by Landlord) of the cost of operation (including common
utilities), management, maintenance, and repair of the building (including
common areas such as lobbies, restrooms, janitor's closets, hallways, elevators,
mechanical and telephone rooms, stairwells, entrances, spaces above the ceilings
and janitorization of said common areas) in which the Proposed Sublet Premises
are located. The maintenance items herein referred to include, but are not
limited to, all windows, window frames, plate glass, glazing, truck doors, main
plumbing systems of the building (such as water drain lines, sinks, toilets,
faucets, drains, showers and water fountains), main electrical systems (such as
panels and conduits), heating and air conditioning systems (such as compressors,
fans, air handlers, ducts, boilers, heaters), store fronts, roofs, downspouts,
building common area interiors (such as wall coverings, window coverings, floor
coverings and partitioning), ceilings, building exterior doors, skylights (if
any), automatic fire extinguishing systems, and elevators (if any); license,
permit and inspection fees; security, salaries and employee benefits of
personnel and payroll taxes applicable thereto; supplies, materials, equipment
and tools; the cost of capital expenditures which have the effect of reducing
operating expenses, provided, however, that in the event Landlord makes such
capital improvements, Landlord may amortize its investment in said improvements
(together with interest at the rate of fifteen (15%) percent per annum on the
unamortized balance) as an operating expense in accordance with standard
accounting practices, provided, that such amortization is not at a rate greater
than the anticipated savings in the operating expenses. Tenant hereby waives all
rights hereunder, and benefits of, subsection 1 of Section 1932 and Sections
1941 and 1942 of the California Civil Code and under any similar law, statute or
ordinance now or hereafter in effect.

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

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

        "If Landlord and Tenant jointly and voluntarily elect, for any reason
whatsoever, to terminate the Master Lease prior to the scheduled Master Lease
termination date, then this

                                    26 of 31
<PAGE>   27

Sublease (if then still in effect) shall terminate concurrently with the
termination of the Master Lease. Subtenant expressly acknowledges and agrees
that (1) the voluntary termination of the Master Lease by Landlord and Tenant
and the resulting termination of this Sublease shall not give Subtenant any
right or power to make any legal or equitable claim against Landlord, including
without limitation any claim for interference with contract or interference with
prospective economic advantage, and (2) Subtenant hereby waives any and all
rights it may have under law or at equity against Landlord to challenge such an
early termination of the Sublease, and unconditionally releases and relieves
Landlord, and its officers, directors, employees and agents, from any and all
claims, demands, and/or causes of action whatsoever (collectively, "Claims"),
whether such matters are known or unknown, latent or apparent, suspected or
unsuspected, foreseeable or unforeseeable, which Subtenant may have arising out
of or in connection with any such early termination of this Sublease. Subtenant
knowingly and intentionally waives any and all protection which is or may be
given by Section 1542 of the California Civil Code which provides as follows: "A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with debtor.

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

           Initials:__________                  Initials:__________"
                    Subtenant                            Tenant

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

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

                                    27 of 31
<PAGE>   28

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

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

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

                                    28 of 31
<PAGE>   29

Materials Activities. Tenant, at its expense, shall submit to Landlord a report
from such environmental consultant which discusses the environmental
consultant's findings within two (2) months of each Anniversary Date. Tenant, at
its expense, shall promptly undertake and complete any and all steps necessary,
and in full compliance with applicable Environmental Laws, to fully correct any
and all problems or deficiencies identified by the environmental consultant, and
promptly provide Landlord with documentation of all such corrections.

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

        D. If Landlord, in its sole discretion, believes that the Property has
become contaminated as a result of Tenant's Hazardous Materials Activities,
Landlord in addition to any other rights it may have under this Lease or under
Environmental Laws or other laws, may enter upon the Property and conduct
inspection, sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of determining the
nature and extent of such contamination. Tenant shall promptly reimburse
Landlord for the costs of such an investigation, including but not limited to
reasonable attorneys' fees Landlord incurs with respect to such investigation,
that discloses Hazardous Materials contamination for which Tenant is liable
under this Lease. Except as may be required of Tenant by applicable
Environmental Laws, Tenant shall not perform any sampling, testing, or drilling
to identify the presence of any Hazardous Materials at the Property, without
Landlord's prior written consent which may be withheld in Landlord's discretion.
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
sampling, testing or drilling performed pursuant to the preceding sentence.

        E. Tenant shall indemnify, defend (with legal counsel acceptable to
Landlord, whose consent shall not unreasonably be withheld) and hold harmless
Landlord, its employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not limited
to third party claims from a private party or a government authority),
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's Hazardous
Materials Activities; (ii) any Hazardous Materials contamination caused by
Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any
obligation of Tenant under this Paragraph 52 (collectively, "Tenant's
Environmental Indemnification"). Tenant's Environmental Indemnification shall
include but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution in fair
market value of the Property. Tenant's Environmental Indemnification shall

                                    29 of 31
<PAGE>   30

further include but is not limited to the obligation to diligently and properly
implement to completion, at Tenant's expense, any and all environmental
investigation, removal, remediation, monitoring, reporting, closure activities,
or other environmental response action (collectively, "Response Actions").
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
Response Actions.

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

53. MAINTENANCE OF THE PREMISES: Notwithstanding anything to the contrary in
Paragraph 10, Landlord shall repair, damage to the structural shell, foundation,
and roof structure (but not the interior improvements, roof membrane, or
glazing) of the building leased hereunder at Landlord's cost and expense
provided Tenant has not caused such damage, in which event Tenant shall be
responsible for 100 percent of any such costs for repair or damage so caused by
the Tenant. Notwithstanding the foregoing, a crack in the foundation or exterior
walls, or any other defect in the Building that does not endanger the structural
integrity of the building for which Tenant is not responsible, or which is not
life-threatening, shall not be considered material, and Landlord may elect, in
its sole and absolute discretion, not to repair and/or replace the same.

54. LEASE TERMS CO-TERMINOUS: It is hereby acknowledged that (i) Landlord and
Tenant have previously executed two separate lease agreements, dated November 1,
1995 for premises located at 3940 Freedom Circle, Santa Clara, California
(hereinafter referred to as the "Marriott A Lease") and dated January 29, 1997
for premises located at 2540 Mission College Blvd., Santa Clara, California
(hereinafter referred to the "Marriott B Lease"), (ii) concurrently with the
execution of this Amendment, Landlord and Tenant shall execute a separate lease
agreement, dated April 2, 1998, for premises located at 2560 Mission College
Blvd., Santa Clara California (the "Marriott C Lease") and (iii) it is the
intention of the parties that the Term of this Lease be co-terminous with the
terms of the Marriott A Lease, the Marriott B Lease and the Marriott C Lease
(collectively the "Marriott A, B, and C Leases") such that the terms of all
leases expire on the same date; provided, however, the termination of this Lease
resulting from the terms and conditions stated under Paragraph 22 ("Bankruptcy
and Default") (subject to Landlord's option as stated below and in the Marriott
A, B and C Leases' "Cross Default Paragraph) or Paragraph 24 ("Destruction") or
Paragraph 25 ("Eminent Domain") shall not result in a termination of the
Marriott A, B or C Leases, unless Landlord elects, at its sole and absolute
discretion, to terminate any or all of the Marriott A, B or C Leases."

55. CROSS DEFAULT: As a material part of the consideration for the execution of
this Lease by Landlord, it is agreed between Landlord and Tenant that a default
under this Lease, or a default under said Marriott A, B and/or C Lease may, at
the option of Landlord, be considered a default under all four leases, in which
event Landlord shall be entitled (but in no event required)

                                    30 of 31
<PAGE>   31

to apply all rights and remedies of Landlord under the terms of one lease to all
four leases including, but not limited to, the right to terminate one or all of
said leases by reason of a default under said Marriott A, B and/or C Lease or
hereunder."

                                    31 of 31<PAGE>   1

                                                                   EXHIBIT 10.12

                                    SUBLEASE

Sublandlord: Transmeta Corporation             Master
                                               Premises: 3990 Freedom Circle
                                                         Santa Clara, California

Subtenant: Mitel, Inc.                         Date: October 28, 1998

1.   Parties:

     This Sublease is made and entered into as of Wednesday, October 28, 1998,
by and between Transmeta Corporation ("Sublandlord") and Mitel, Inc.
("Subtenant"), under the Master Lease dated April 2, 1998 between John Arrillaga
and Richard T. Peery as "Landlord", and Sublandlord as "Tenant", ("Master
Lease"). A copy of the Master Lease is attached hereto as "Attachment I" and
incorporated herein by this reference. Pursuant to the Master Lease, Sublandlord
leases all of that certain Forty-five Thousand (45,000+/-) square foot,
two-story building located at 3990 Freedom Circle, Santa Clara, California (the
"Master Premises").

2.   Provisions Constituting Sublease:

     2.1  This Sublease is subject to all of the terms and conditions of the
Master Lease. Subtenant hereby assumes and agrees to perform all of the
obligations of "Tenant" under the Master Lease to the extent said obligations
apply to the Subleased Premises and Subtenant's use of the Common Areas as
depicted in "Exhibit A" attached, except as specifically set forth herein.
Sublandlord hereby agrees to use reasonable efforts to cause Landlord under the
Master Lease to perform all of the obligations of Landlord thereunder to the
extent said obligations apply to the Subleased Premises and Subtenant's use of
the Common Areas. Neither Subtenant nor its employees, agents, contractors or
invitees ("Subtenant's Agents") shall commit on the Subleased Premises or on any
other portion of the Master Premises any act or omission which violates the
rights of any other party or parties hereto who are affected thereby, neither of
the parties hereto will, by renegotiation of the Master Lease assignment,
subletting, default or any other voluntary action, avoid or seek to avoid the
observance or performance of the terms to be observed or performed hereunder by
such party, but will at all times in good faith assist in carrying out all the
terms of this Sublease and in taking all such action as may be necessary or
appropriate to protect the rights of the other party or parties hereto who are
affected thereby against impairment. Nothing contained in this Section 2.1 or
elsewhere in this Sublease shall prevent or prohibit Sublandlord (a) from
exercising its right to terminate the Master Lease pursuant to the terms thereof
or (b) from assigning its interest in this Sublease or subletting portions of
the Master Premises other than the Subleased Premises.

     2.2  With respect to all of the provisions of the Master Lease incorporated
into this Sublease, wherever the word "Premises" is used in the Master Lease,
for purposes of this Sublease, the word "Subleased Premises" shall be
substituted and any calculation of charges shall be prorated on the basis of the
proportionate share which the Subleased Premises represents per paragraph 3.2
below (i.e. 30,000 square feet); wherever in the Master Lease the word "Tenant"
appears, for purposes of this Sublease, the word "Subtenant" shall be
substituted; wherever in the Master Lease the word "Landlord" appears, for the
purposes of this Sublease, the word "Sublandlord" shall be substituted.
Notwithstanding the foregoing,

<PAGE>   2

the word "Landlord" in Paragraph 5 of the Master Lease shall be deemed to refer
to "Master Landlord", and the word "Sublandlord" shall not be substituted
therefor. All of the terms and conditions contained in the Master Lease are
incorporated herein, except as specifically provided below, and the terms and
conditions of this Sublease, except the following paragraphs of the Master Lease
which shall solely be the obligation of Sublandlord: the description of the
premises leased pursuant to the Master Lease, Paragraphs 2, 3, 4A, 4F, 34, 41,
43, 55 and substitute "Exhibit B" with "Exhibit A of the Sublease" in Paragraph
44, and substitute the amount of $283,500.00 as noted in Paragraph 4g of the
Master Lease with $29,400.00.

3.   Subleased Premises and Rent:

     3.1  Subleased Premises:

     Sublandlord leases to Subtenant and Subtenant leases from Sublandlord the
Subleased Premises upon all of the terms, covenants and conditions contained in
the Sublease. The Subleased Premises consists of approximately 33,600 +/- square
feet of the Master Premises and as shown in red on "Exhibit A" attached hereto,
approximately 22,500 square feet on the second floor and 11,100 square feet on
the first floor. Sublandlord represents and warrants to Subtenant that
Sublandlord is presently in possession of the Subleased Premises and has been
continuously since July 1, 1998. Sublandlord reserves the option to recapture a
certain approximate 2,846 to 2,890 +/- square feet on the first floor, as shown
on Exhibit A as indicated in "Exhibit A." In order to exercise this option,
Sublandlord must provide Subtenant with 60 days prior written notice and is
solely responsible for the cost and expense of demising and securing the space.
In the event that Sublandlord does recapture this space, there will be no
reduction in the monthly gross rent due from the Subtenant.

     3.2  Rent:

<TABLE>
<CAPTION>
Approximate
Month                NNN Rent                  Base Rent          Rentable Area
<S>                  <C>                       <C>                <C>
01 - 12              $56,700.00 per month      $1.89/sf/mo.       30,000 sq.ft.
13 - 24              $56,700.00 per month      $1.89/sf/mo.       30,000 sq.ft.
25 - 36              $66,900.00 per month      $2.23/sf/mo.       30,000 sq.ft.
</TABLE>

     Subtenant shall pay to Sublandlord rent for the Subleased Premises without
deductions, offset, prior notice or demand. Rent shall be payable by Subtenant
to Sublandlord in consecutive monthly installments on or before the first day of
each calendar month during the Sublease Term. This is a net rent. As set forth
in the Master Lease, Subtenant shall be responsible for all additional rent,
including, but not limited to Paragraphs 7, 10, 11, 12 and 15, based only on
30,000 square feet. All such expenses shall be determined on a pro-rata basis
and paid monthly to Sublandlord as additional rent, except Sublandlord shall be
responsible for costs associated with repairing or replacing the roof membrane
under Paragraph 10 of the Master Lease for the first twelve (12) months of the
Sublease term. All personal property insurance of Subtenant shall be the sole
responsibility of the Subtenant. Sublandlord shall not be responsible for
providing janitorial for Subleased Premises, however, Sublandlord shall be
responsible for maintaining the Common Areas as identified in "Exhibit A"
including, but not limited to, the restrooms. Maintenance shall be provided five
(5) days a week.

                                       2
<PAGE>   3

     3.3. Security Deposit:

     In addition to the Rent specified above, Subtenant shall pay to Sublandlord
$70,000.00 as a non-interest bearing Security Deposit. Sublandlord shall return
to Subtenant, within ten days after Subtenant has vacated the Subleased
Premises, the Security Deposit less any sums due and owing to Sublandlord and/or
the cost to Sublandlord to cure any other of the Subtenant's breaches of the
Sublease, all in accordance with California Civil Code Section 1950.7 or any
successor statute thereto.

     3.4  Subsequent to execution of the Sublease Agreement by both parties and
upon consent thereto by Landlord, Subtenant shall pay to Sublandlord the
Security Deposit and the first month's base rent and additional rent.

4.   Rights of Access and Use:

     4.1  Use:

     Subtenant shall use the Subleased Premises only for those purposes
permitted in the Master Lease and the purpose of sales office, unless
Sublandlord and Master Landlord consent in writing to other uses prior to the
commencement thereof.

5.   Sublease Term:

     5.1  Sublease Term:

     The Sublease Term shall commence on the earlier of December 1, 1998, or
upon substantial completion of Sublandlord's tenant improvements (demising the
space and restroom upgrade), whichever is sooner and subject to adjustment as
set forth in Paragraph 5.3 ("Commencement Date") and terminate thirty-six (36)
months after Sublease commencement. In no event shall the Sublease Term extend
beyond the Term of the Master Lease.

     5.2  Upon the Commencement Date, Sublandlord shall deliver the Subleased
Premises with the roof, fire sprinkler system, HVAC system, electrical
(including all outlets), plumbing, exterior doors, interior doors and lighting
in good working condition. Sublandlord to have all systems serviced and warrant
that all are in a good, safe, working condition at Sublandlord's cost before
December 1, 1998.

     5.3  Inability to Deliver Possession:

     In the event Sublandlord is unable to deliver possession of the Subleased
Premises on December 1, 1998, Sublandlord shall not be liable for any damage
caused thereby, nor shall this Sublease be void or voidable except as provided
for in this paragraph 5.3 but Subtenant shall not be liable for Rent until such
time as Sublandlord offers to deliver possession of the Subleased Premises to
Subtenant, but the term hereof shall not be extended by such delay. If
Subtenant, with Sublandlord's consent, takes possession prior to commencement of
the term, Subtenant shall do so subject to all the covenants and conditions
hereof and shall pay Rent for the period ending with the commencement of the
term at the same rental as that prescribed for the first month of the term
prorated at the rate of 1/30th thereof per day. In the event Sublandlord has
been unable to deliver possession of the Subleased Premises or secure Landlord's
consent to this Sublease by Ninety (90) days Subtenant, at Subtenant's

                                       3
<PAGE>   4

option, may terminate this Sublease and Sublandlord shall return to Subtenant
all money Subtenant may have paid whether as a security deposit, rent or
otherwise.

6.   Parking:

Sublandlord will grant Subtenant their prorata share of the parking spaces
granted to the building by the Master Lease. Said proration to be determined by
dividing square footage of Subleased Premises per paragraph 3.2 below (i.e.
30,000 square feet) by the total Master Premises' square footage (i.e. 45,000
square feet) then multiplying this percent (66.67%) by the total parking spaces
granted (135) for a total of approximately 90 parking spaces. Sublandlord will
not charge Subtenant for parking except as noted in Paragraph 6 in the Master
Lease.

7.   HVAC Maintenance:

Notwithstanding Paragraph 10 of the Master Lease, Sublandlord shall be
responsible for maintaining heating and air conditioning systems which service
the Subleased Premises only, the cost of which will be included as part of
Subtenant's additional rent due on a monthly basis.

8.   Tenant Improvements:

Sublandlord, at Sublandlord's sole cost and expense, shall demise the Subleased
Premises with floor to ceiling walls and upgrade the restrooms and all entrances
and egress routes within the Premises to current ADA code. Subtenant will have
to remove and restore only those improvements or alterations that Sublandlord
designates as such upon Sublandlord's approval of these improvements or
alterations. Sublandlord will provide Subtenant with an improvement allowance of
$280,000.00 based on the attached Exhibit A, which will be paid to the Subtenant
15 days after receipt of invoice and after verification by Transmeta's architect
and representative that the work has been completed. Any additional improvements
beyond this allowance will be at Subtenant's sole cost and expense. Subtenant
shall be responsible for constructing all improvements with Sublandlord's prior
written approval, and will employ a contractor jointly agreed upon by
Sublandlord and Subtenant. Sublandlord will not withhold its consent
unreasonably. Subtenant shall have both Sublandlord's and Master Landlord's
prior written consent.

9.   Alterations:

Subtenant shall not make any alterations to the interior or exterior of the
Premises without prior written consent of Sublandlord.

10.  Notices:

Any notice or report required or desired to be given regarding this Sublease
shall be in writing, may be given by personal delivery, by facsimile, by courier
service or by certified mail, return receipt requested. Any notice or report
addressed to Subtenant or to Sublandlord at the address shown below, shall be
deemed to have been given (I) on the date the U.S. Post Office certifies
delivery, nondeliverability or refusal of delivery if such notice or report was
deposited in the United States mail, certified, postage prepaid, (ii) when
delivered if given by personal delivery, (iii) on the business day following
deposit, cost prepaid, with Federal Express or similar private carrier, if next
business day delivery was requested and a delivery receipt is generated, and
(iv) in all other cases when actually received. Either party may change its
address by giving notice of the same in accordance with this Paragraph. The term
"business day" shall mean a day on which the carrier used (Federal Express or
other private carrier, or the U.S. Postal Service, as applicable) delivers,
whether by special request or in the ordinary course of operations.

                                       4
<PAGE>   5

All notices, demands, requests, advices or designations by Subtenant shall be
addressed to Sublandlord at its offices at Transmeta Corporation, 2540 Mission
College Boulevard, Santa Clara, California 95054. All notices, demands,
requests, advices or designations by Sublandlord or Master Landlord shall be
addressed to Subtenant at its offices at 205 Van Buren Street, Suite 400,
Herndon, VA 20170-5336 Attention: Law Department.

11.  Agency:

Sublandlord and Subtenant acknowledge that CPS represents the Sublandlord, and
CPS and Cushman Realty represent the Subtenant, and therefore CPS will be acting
as a dual agent of each of the parties. We understand and consent to this dual
agency and waive any possible or actual conflict of interest which may arise
from this representation.

As a dual agent, CPS is obligated to disclose to both parties all material facts
or confidential information known to it which would affect the decisions of a
party. However, CPS will not be obligated to disclose, nor will it disclose, the
fact that either party is willing to offer more favorable terms than that
party's last authorized offer.

12.  Broker Fee:

Sublandlord shall pay CPS and Cushman Realty, licensed real estate brokers
representing Sublandlord and Subtenant, fees set forth in a separate agreement
between Sublandlord and Broker. Subtenant shall have no obligation to Broker for
payment of any fees.

13.  Broker:

Each party warrants and represents to the other party hereto that it has not
dealt with any brokers in connection with this Sublease other than the brokers
identified in Paragraph 12 of this Sublease (the "Brokers"). Each party hereby
indemnifies and holds the other party harmless from any and all loss, damage,
claim, liability, cost or expense (including, but not limited to, reasonable
attorneys' fees, expenses and court costs) arising out of or in connection with
any breach of the foregoing warranty and representation. The provisions of this
Paragraph shall survive the expiration or earlier termination of this Sublease.

14.  Assignment and Subletting:

Notwithstanding any provision to the contrary in this Sublease, including,
without limitation, any provision of the Master Lease incorporated herein,
Sublandlord shall not withhold its consent to any assignment or subletting which
either does not require the consent of Master Landlord or which requires the
consent of Master Landlord and to which Master Landlord consents. If Subtenant
desires to Sublease the Subleased Premises, Sublandlord shall have Right of
First Refusal of such space. Upon receiving written notice of Subtenant's desire
to Sublease, Sublandlord shall respond in writing its decision to Sublease
within ten (10) days. The rental rate shall be the same as Paragraph 3.3.

15.  Waiver of Subrogation:

Notwithstanding any provision to the contrary in this Sublease, including,
without limitation, any provision incorporated from the Master Lease, the
parties hereto release each other and their respective agents, employees,
successors, assignees and subtenants from all liability for damage to any
property that is caused by or results from a risk which is actually insured
against, which is required to be insured against by either party under this
Sublease or the Master Lease,

                                       5
<PAGE>   6

or which would normally be covered by the standard form of "all risk extended
coverage" property insurance, without regard to the negligence or willful
misconduct of the entity so released. Each party shall use its best efforts to
cause each insurance policy it obtains to provide that the insurer thereunder
waives all right of recovery by way of subrogation as required herein in
connection with any injury or damage covered by the policy. If such insurance
policy cannot be obtained with such waiver of subrogation, or if such waiver of
subrogation is only available at additional cost and the party for whose benefit
the waiver is not obtained does not pay such additional cost, then the party
obtaining such insurance shall immediately notify the other party of that fact.

16.  Waiver of Subrogation in Master Lease:

Upon Master Landlord's execution of the Consent to Sublease which follows this
Sublease, the waiver of subrogation provision in Paragraph 15 of the Master
Lease, notwithstanding any provision to the contrary in this Sublease or the
Master Lease, shall be effective between Master Landlord and Subtenant with
respect to insured casualties regarding the Subleased Premises as well as
between Master Landlord and Sublandlord.

17.  Master Lease Enforcement

Sublandlord shall diligently attempt to enforce Master Landlord's obligations
under the Master Lease with respect to or affecting the Sublandlord Premises
and/or any common areas used (or available for use by Subtenant). Subtenant
acknowledges that Sublandlord is under no duty to make repairs or improvements
to the Subleased Premises accept as specifically set forth in the Master Lease.

18.  Sublandlord's Cooperation

If Master Landlord's consent is required for any action which Subtenant desires
to take under this Sublease, Sublandlord shall cooperate with Subtenant to
obtain such consent. If Master Landlord fails to perform any of its obligations
under the Master Lease, Sublandlord, at the request of Subtenant, shall use its
good faith efforts to obtain Master Landlord's performance of such
obligation(s). Sublandlord shall cooperate with Subtenant in bringing any suit
or other action against Landlord in the event that Subtenant would otherwise be
barred from bringing such suit for want of privity, or any other reason.

19.  Subtenant's Corporate Authority

Subtenant represents (a) that it is a corporation organized and existing under
the laws of the State of Delaware and is qualified to do business in the State
of California; (b) that this Sublease has been duly authorized by all required
corporate actions; and (c) that the persons executing the Sublease are
authorized to execute this Sublease on behalf of Subtenant.

20.  Renewal Option

Tenant will have an option to extend the lease on the following terms:

     a.   One (1), twelve (12) month option;

     b.   To be exercised by written notice no earlier than 270 days nor later
          than 180 days prior to the termination of the lease;

     c.   At a new base monthly rent of: $76,500.00 NNN; and

     d.   The option term will be granted only if Tenant is in compliance with
          all lease terms when notice is given and on the first day of the
          option period.

                                       6

<PAGE>   7

21. Access

Subtenant shall have access to the Subleased Premises and the Common Areas 24
hours a day, every day. Master Landlord and Sublessor agree to be accompanied by
a Mitel employee if access is required.

SUBLANDLORD    : Transmeta Corporation

BY: /s/ David R. Ditzel                 BY: /s/ Colin Hunter
    -------------------------------         ---------------------------------

TITLE: President & CEO                  TITLE: Corporate Secretary
       ----------------------------            ------------------------------

DATE: 10/29/98                          DATE: 10/29/98
      -----------------------------           -------------------------------

SUBTENANT: Mitel, Inc.

BY: /s/                                 BY: /s/
    -------------------------------         ---------------------------------

TITLE: Asst. Corp. Ser.                 TITLE: Corporate Secretary
       ----------------------------            ------------------------------

DATE: 10/28/98                          DATE: 10/28/98
      -----------------------------           -------------------------------

NOTICE TO SUBLANDLORD AND SUBTENANT: CPS IS NOT AUTHORIZED TO GIVE LEGAL OR TAX
ADVICE; NOTHING CONTAINED IN THIS SUBLEASE FOR ANY DISCUSSIONS BETWEEN CPS AND
SUBLANDLORD AND SUBTENANT SHALL BE DEEMED TO BE A REPRESENTATION OR
RECOMMENDATION BY CPS, OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL IMPACT OR TAX
CONSEQUENCES OF THIS DOCUMENT OR ANY TRANSACTION RELATING THERETO. ALL PARTIES
ARE ENCOURAGED TO CONSULT WITH THEIR INDEPENDENT FINANCIAL CONSULTANTS AND/OR
ATTORNEYS REGARDING THE TRANSACTION CONTEMPLATED BY THIS PROPOSAL.

CONSENT BY MASTER LANDLORD: The undersigned, Landlord under the Master Lease in
Exhibit "C", hereby consents to the subletting of the Premises described herein
on the terms and conditions contained in this Sublease. This consent shall apply
only to this Sublease and shall not be deemed to be a consent to any other
Sublease.

MASTER LANDLORD:

BY:________________________________     BY:________________________________

TITLE:_____________________________     TITLE:_____________________________

DATE:______________________________      DATE:_____________________________

                                       7
<PAGE>   8

October 29, 1998

Mr. Richard Stiller
TRANSMETA CORPORATION
3940 Freedom Circle
Santa Clara, CA 95054

Re: CONSENT TO SUBLEASE TO MITEL, INC., A DELAWARE CORPORATION FOR A PERIOD OF
    THREE YEARS, COMMENCING DECEMBER 1, 1998 AND TERMINATING NOVEMBER 30, 2001

Gentlemen:

This letter is written with regard to your proposed sublease of approximately
33,600 square feet of space (as shown on Exhibit A attached hereto) (the "Sublet
Premises") of the 45,000 square feet of space leased by Tenant at 3990 Freedom
Circle, Santa Clara, California, under Lease Agreement dated April 2, 1998
("Master Lease"), by and between John Arrillaga Survivor's Trust and Richard T.
Peery Separate Property Trust ("Master Landlord"), and Transmeta Corporation, a
California corporation ("Tenant"), which Tenant is proposing to sublease to
Mitel, Inc., a Delaware corporation ("Subtenant") on the terms and conditions
set forth in the proposed Sublease dated October 28, 1998, submitted by Tenant
to Master Landlord on October 29, 1998 (the "Sublease").

Pursuant to Master Lease Paragraph 19 ("Assignment and Subletting") Master
Landlord hereby approves Tenant's subleasing said space to Subtenant for the
thirty six month period ending November 30, 2001, subject to the following terms
and conditions:

1.      Master Landlord's Consent shall in no way void or alter any of the terms
        of the Lease by and between Master Landlord and Tenant, nor shall this
        Consent alter or diminish in any way Tenant's obligations to Master
        Landlord.

2.      Tenant shall not give Subtenant any rights or privileges in excess of
        those given Tenant under the terms of the Master Lease.

3.      Subtenant shall not have a separate address from the address of the
        Premises. Therefore, Tenant shall provide Subtenant with internal mail
        delivery. Tenant and Subtenant shall share (the prorata shares to be
        determined in a separate agreement between Tenant and Subtenant) the
        existing signage allocated to Tenant for the Premises.

4.      Notwithstanding anything to the contrary herein, Master Landlord has not
        reviewed the

<PAGE>   9

        terms of any agreement between Tenant and Subtenant, and in approving
        said Sublease, Master Landlord is in no way approving any term, covenant
        or condition therein contained, and said Sublease is subject and
        subordinate to all terms, covenants and conditions of the Master Lease.
        Master Landlord shall not be bound by any agreement other than the terms
        of the Master Lease between Master Landlord and Tenant. Except as noted
        herein, in the event of conflict in the terms, covenants and conditions
        between the Sublease and the Master Lease, the terms, covenants and
        conditions of the Master Lease shall prevail and take precedence over
        said Sublease. Master Landlord does not make any warranties or
        representations as to the condition of the Leased Premises or the terms
        of the Lease between Master Landlord and Tenant. This Consent to
        Sublease shall in no event be construed as consent to any future
        sublease agreement (including any extensions and/or amendments to the
        current Sublease) between Tenant and Subtenant, or any other party; and
        any future sublease agreement (including any extensions and/or
        amendments to the current Sublease) between Tenant and Subtenant, or any
        other party shall require the prior written consent of Master Landlord.
        Under no circumstances will Master Landlord consent to a sub-sublease or
        assignment under the Sublease.

5.      A. It is agreed by all parties hereto that in the event Master Landlord
        terminates the Master Lease, pursuant to any right therein contained,
        said Sublease shall automatically terminate simultaneously with the
        Master Lease. Unless Master Landlord, at Master Landlord's sole option
        and election, chooses to allow Subtenant to remain in possession of the
        Sublet Premises leased under said Sublease subject to all terms,
        covenants and conditions of said Master Lease by giving Subtenant
        written notice prior to the effective date of termination of said Master
        Lease, of Master Landlord's election to allow Subtenant to remain in
        possession of the Sublet Premises in which event Subtenant shall be
        entitled and obligated to remain in possession of the Sublet Premises
        under the terms of said Sublease, subject to all terms, covenants and
        conditions of the Master Lease, including, without limitation to,
        payment of Basic Rent at the greater of: (i) the rate provided for in
        the Master Lease, or (ii) the rate provided for in the Sublease. Such
        election by Master Landlord shall not operate as a waiver of any claims
        Master Landlord may have against Tenant. Following such written notice
        by Master Landlord Subtenant shall then, as of the effective date of
        said termination of said Master Lease, be liable to and shall attorn in
        writing directly to Master Landlord as though said Sublease were
        executed directly between Master Landlord and Subtenant; provided,
        however, it is specifically agreed between the parties hereto, that
        whether Master Landlord elects to allow Subtenant to remain in
        possession of the Sublet Premises under the terms of the Sublease,
        subject to the Master Lease, or allow said Sublease to automatically
        terminate simultaneously with the Master Lease, Master Landlord shall
        not, in any event, nor under any circumstances be responsible or liable
        to Subtenant for (i) the return of any security deposit paid by
        Subtenant to Tenant, nor shall Subtenant be given credit for any prepaid
        rental or other monetary consideration paid by Subtenant to Tenant under
        said Sublease; (ii) any other claim or damage of any kind or nature
        whatsoever by reason of or in connection with Master Landlord's
        termination of said Master Lease and/or Sublease; and (iii) any default
        of Tenant under the Sublease.

<PAGE>   10

        B. In the event Master Landlord has terminated the Master Lease, and has
        not elected, in writing prior to the effective date of termination of
        said Master Lease, to allow Subtenant to remain in the Sublet Premises
        as set forth above, said Sublease shall terminate co-terminously with
        the effective termination of the Master Lease automatically, without
        notice, and Subtenant and/or Tenant, jointly and severally, shall
        surrender the Sublet Premises to Master Landlord in good condition and
        repair as of the effective termination of the Master Lease, with Master
        Landlord having no obligation or liability whatsoever to Subtenant by
        reason of or in connection with such early termination of the Master
        Lease. In the event Subtenant and/or Tenant fails to timely surrender
        the Sublet Premises to Master Landlord in good condition and repair as
        of the date the Master Lease terminates, Subtenant and/or Tenant,
        jointly and severally, shall be liable to Master Landlord in such event
        for all damages, costs, claims, losses, liabilities, fees or expenses
        sustained by Master Landlord, including, but not limited to, loss of
        rental income, attorney's fees and court costs resulting from or in
        connection with Subtenant's failure to timely vacate the Sublet Premises
        and surrender the Sublet Premises to Master Landlord as of the effective
        termination date of said Master Lease.

        C. As a condition to Landlord's consent to the Sublease, by execution of
        this Consent to Sublease, Subtenant hereby agrees to be bound by the
        following provision in relation to both Tenant and Master Landlord:

             If Master Landlord and Tenant jointly and voluntarily elect, for
             any reason whatsoever, to terminate the Master Lease prior to the
             scheduled Master Lease Termination Date, then this Sublease (if
             then still in effect) shall terminate concurrently with the
             termination of the Master Lease. Subtenant expressly acknowledges
             and agrees that (1) the voluntary termination of the Master Lease
             by Master Landlord and Tenant and the resulting termination of this
             Sublease shall not give Subtenant any right or power to make any
             legal or equitable claim against Master Landlord, including without
             limitation any claim for interference with contract or interference
             with prospective economic advantage, and (2) Subtenant hereby
             waives any and all rights it may have under law or at equity to
             challenge such an early termination of the Sublease, and
             unconditionally releases and relieves Master Landlord, and its
             officers, directors, employees and agents, from any and all claims,
             demands, and/or causes of action whatsoever (collectively,
             "Claims"), whether such matters are known or unknown, latent or
             apparent, suspected or unsuspected, foreseeable or unforeseeable,
             which Subtenant may have arising out of or in connection with any
             such early termination of this Sublease. Subtenant knowingly and
             intentionally waives any and all protection which is or may be
             given by Section 1542 of the California Civil Code which provides
             as follows: "A general release does not extend to claims which the
             creditor does not know or suspect to exist in his favor at the time
             of executing the release, which if known by him must have
             materially affected his settlement with debtor." The term of this
             Sublease is therefore subject to early termination. Subtenant's
             initials here below evidence (a) Subtenant's consideration of and
             agreement to this early termination provision, (b) Subtenant's
             acknowledgment that, in determining the net benefits to be derived
             by

<PAGE>   11

             Subtenant under the terms of this Sublease, Subtenant has
             anticipated the potential for early termination, and (c)
             Subtenant's agreement to the general waiver and release of Claims
             above.

               Initials:    /s/                Initials:    /s/
                        -----------                     ----------
                        Subtenant                       Tenant

6.      In consideration of Master Landlord's consent to the Sublease, Tenant
        irrevocably assigns to Master Landlord, as security for Tenant's
        obligations under this Lease, all rent and income payable to Tenant
        under the Sublease. Therefore Master Landlord may collect all rent due
        under the Sublease and apply it towards Tenant's obligations under the
        Master Lease. Notwithstanding anything to the contrary herein or in the
        Master Lease, Tenant and Subtenant agree to pay same to Master Landlord
        upon demand without further consent of Tenant and Subtenant required;
        provided, however, that until the occurrence of a default by Tenant
        under the Master Lease, Tenant shall have the right and obligation to
        collect such rent. Tenant hereby irrevocably authorizes and directs
        Subtenant, upon receipt of a written notice from Master Landlord stating
        that a default exists in the performance of Tenant's obligations under
        the Master Lease, to pay to Master Landlord the rents due and to become
        due under the Sublease. Tenant agrees that Subtenant shall have the
        right to rely on any such statement and request from Master Landlord,
        and that Subtenant shall pay such rents to Master Landlord without any
        obligation or right to inquire as to whether such default exists and
        notwithstanding any notice or claim from Tenant to the contrary. Tenant
        shall have no right or claim against Subtenant or Master Landlord for
        any such rents so paid by Subtenant to Master Landlord. It is further
        agreed between the parties hereto that neither Tenant's assignment of
        such rent and income, nor Master Landlord's acceptance of any payment of
        rental or other sum due by Subtenant to Tenant under said sublease,
        whether payable directly to Master Landlord or endorsed to Master
        Landlord by Tenant, shall in any way nor in any event be construed as
        creating a direct contractual relationship between Master Landlord and
        Subtenant, unless the Parties expressly so agree in writing and such
        acceptance shall be deemed to be an accommodation by Master Landlord to,
        and for the convenience of, Tenant and Subtenant. Any direct contractual
        agreement between Master Landlord and Subtenant must be in writing.

7.      Pursuant to the provisions of Paragraph 19 entitled "Assignment and
        Subletting" of the Master Lease, Master Landlord hereby requires Tenant
        to pay to Master Landlord, as Additional Rent, all rents and/or
        additional consideration received by Tenant from said Sublease in excess
        of the Basic Rent payable to Master Landlord in said Lease (after
        deducting reasonable leasing commissions as provided for in the Lease)
        (hereinafter referred to as "Excess Rent"). Tenant and Subtenant
        acknowledge that any Excess Rent is owed to Master Landlord and Tenant
        hereby agrees to pay any Excess Rent to Master Landlord as due under
        said Sublease. Tenant and Subtenant represent and warrant to Master
        Landlord that: (1) the information to be completed and provided by
        Tenant and Subtenant on the attached Exhibit B "Summary of
        Amounts/Consideration to be Paid by

<PAGE>   12

        Subtenant" accurately represents amounts to be paid by Subtenant under
        said Sublease; (2) no additional consideration is due Tenant under said
        Sublease, other than the additional consideration (if any) identified on
        Exhibit B; and (3) no changes in the terms and/or conditions of said
        Sublease shall be made without Master Landlord's prior written approval.

8.      This Consent is conditional upon Master Landlord's receipt of Master
        Landlord's reasonable costs and attorney's fees, to which Master
        Landlord is entitled under Paragraph 19 of the Master Lease. Tenant
        shall pay such fees and costs to Landlord, pursuant to the invoice
        provided to Tenant by Landlord with this Consent, upon execution of this
        Consent by Tenant and Subtenant.

9.      This Consent to Sublease shall only be considered effective, and Master
        Landlord's consent to the Sublease given, when (i) Landlord receives
        payment from Tenant of Landlord's costs, and (ii) this Letter Agreement
        is executed by Master Landlord, Tenant, and Subtenant, and Guarantors
        (if any) under the Master Lease.

Please execute this letter in the space provided below, obtain the signature of
Subtenant, and return all copies to our office no later than November 13, 1998.
IN THE EVENT TENANT FAILS TO RETURN THE FULLY EXECUTED DOCUMENTS TO LANDLORD BY
NOVEMBER 13, 1998, THIS CONSENT SHALL BE AUTOMATICALLY RESCINDED, IN WHICH
EVENT, TENANT SHALL BE REQUIRED TO RESUBMIT ITS REQUEST IN THE EVENT TENANT
DESIRES TO GO FORWARD WITH SAID SUBLEASE. A fully executed copy will be returned
to you after execution by the Master Landlord.

                                       Very truly yours,

                                       PEERY/ARRILLAGA

                                       By  /s/ JOHN ARRILLAGA
                                         ------------------------------------
                                         John Arrillaga

(SIGNATURES CONTINUED ON FOLLOWING PAGE)

<PAGE>   13

THE UNDERSIGNED Tenant and Subtenant do hereby jointly and severally agree to
the terms and conditions of this Consent to Sublease.

TENANT:                                 SUBTENANT:

TRANSMETA CORPORATION                   MITEL, INC.
a California corporation                a Delaware corporation

By  /s/ DAVID DITZEL                    By         /s/
   -------------------------------        --------------------------------

Print Name      David Ditzel            Print Name
           -----------------------                ------------------------

Title  President & CEO                  Title
      ----------------------------           -----------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}]]