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                                                                EXHIBIT 10.07

                                  Attachment F

        Agreement for Purchase and Sale of Custom Semiconductor Products
                               (Reserved Capacity)

                         AGREEMENT NUMBER: TM-MFG-121297

This Agreement is entered into by and between International Business Machines
Corporation ("IBM"), incorporated under the laws of the State of New York and
with an address for purposes of this Agreement of 1000 River Street, Essex
Junction, Vermont, 05452 and Transmeta Corporation ("Customer"), incorporated
under the laws of the State of California with an address for purposes of this
Agreement of 3940 Freedom Circle, Santa Clara, CA. 95054. IBM and Customer agree
as follows:

The parties acknowledge that work required by this Agreement has occurred prior
to the date of execution of this Agreement. Both parties agree that the terms
and conditions of this Agreement shall apply to all such work.

This Agreement is a master purchase agreement for the manufacture and sale of
custom integrated circuit foundry products ("Products(s)"). Unless the parties
agree otherwise in writing, this Agreement, and its work orders ("Task Orders")
issued under this Agreement, shall define Product deliveries by part number and
shall solely govern IBM's manufacture and sale of Products to Customer. A Task
Order is not binding unless and until it has been mutually agreed upon and shall
become subject to this Agreement when it has been signed by IBM and Customer.
Task Orders shall describe the respective responsibilities of the parties (e.g.,
deliverable materials and specifications, Product description(s), manufacture
and qualification of Product prototypes, as well as technical responsibilities)
with regard to specific Product(s), as well as specific purchasing information
(e.g., manufacturing lead times, Product pricing and ordering, as well as
billing locations). Task Orders shall be in the form as set forth in Exhibit A.
The term of a Task Order shall run from the effective date on the Task Order
until the earlier of: 1) the completion of the Task Order; 2) the expiration
date stated in the Task Order; or 3) termination of this Agreement or the Task
Order. In the event of an inconsistency between the terms and conditions of this
Agreement and those of a Task Order, the Task Order will prevail.

1. TERM OF AGREEMENT: This Agreement is effective on December 12, 1997 (the
"Commencement Date"). This Agreement will expire on the later of December 30,
2003 or upon completion of the last Task Order, subject to Section 15
(Termination Rights).

2. FORECASTS:

First Task Order Forecast. Each Task Order shall contain a forecast of
Customer's anticipated unit production demand requirements for Product(s) for at
least the twelve (12) month period immediately following execution of the Task
Order. Customer shall submit a purchase order with said forecast (placed in
accordance with Section 3), by which Customer orders the quantity of Products
forecast for the first [*], at a minimum, of the [*]. IBM agrees that it

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

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shall provide capacity to Customer such that if ordered, IBM would satisfy
Customer's forecasted requirements for the [*]of the [*].

Subsequent Forecasts. Customer shall provide an updated forecast to IBM, on a
monthly basis, in writing, and by no later than the fifth (5th) day of each
month during the term of the Task Order. Each such forecast will cover at least
a rolling twelve (12) month period (not to exceed the term of the Task Order),
and will be reviewed for acceptance by IBM, acceptance not to be unreasonably
withheld. IBM shall notify Transmeta of whether said forecast has been accepted
or rejected, within ten (10) business days after receipt by IBM. IBM shall have
the right to reject a forecast if Customer changes the quantity of Products
forecasted for [*] of a previously accepted forecast, thereby holding Customer
to the most recently accepted forecast. For example, assume Customer submits a
forecast in February and said forecast designates [*] and IBM accepts that
forecast. Further assume that Customer's next forecast designates only [*]. IBM
has the right to reject that forecast and hold Customer to the accepted
forecast.

Customer shall submit a purchase order (placed in accordance with Section 3)
with each updated forecast (if one has not already been submitted), by which
Customer orders the quantity of Products forecast for the [*] of the forecast
([*] having already been committed under purchase order(s) pursuant to previous
forecast(s)). IBM agrees that it shall provide capacity to Customer such that if
ordered, IBM would satisfy Customer's forecasted requirements for the [*] of
each forecast, subject to the following paragraph. In consideration for IBM
agreeing to grant that capacity, Customer agrees that if it does not order
against previously accepted forecasts, as discussed in Section 11 of the Task
Order, then Customer shall be subject to cancellation charges as discussed in
said section. IBM agrees to consider, but is not obligated to accept, purchase
orders seeking upside (meaning, for a quantity of units in excess of [*] of the
forecast) and forecasts greater than that of a previously accepted forecast.

IBM will accept purchase orders for units forecasted to be delivered in [*] of
any accepted forecast, provided the orders are placed in accordance with Section
3 and the quantities requested are within [*] of the most recently accepted
forecast for said months. Customer is not obligated to submit said orders until
the aforesaid [*] roll into the [*] of a forecast. For example, assume Customer
submits a forecast and said forecast designates [*]. Once that month rolls into
the [*] of a forecast, IBM will accept a purchase order from Customer as long as
Customer actually orders between [*] for delivery during that [*]. By way of a
final example, assume that on January 5 Customer forecasts [*] and that IBM
accepts the forecast. Further assume that Customer changes the forecast to [*].
IBM may reject the [*] forecast, and thereby hold Customer to the January
forecast, or accept the [*] forecast of [*]. If IBM accepts the new forecast,
Customer is obligated to submit a purchase order [*] that is between [*].

[*] (or greater, if Customer submits forecasts beyond [*]) of each forecast are
non-binding on Customer and IBM, and provided for convenience purposes only.

All forecasts shall be in the same format as set forth in the Task Order.
Forecasts shall be provided to IBM's Technical Coordinator identified in the
applicable Task Order. On a regular basis, as mutually agreed to in writing, the
parties will meet to review the historical Product unit volumes, manufacturing
cycle times, and foundry Product pricing.

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

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The parties agree that the [*] will be manufactured initially in IBM's [*]
process technology. In addition, the parties agree that Customer will be offered
access to IBM's [*] CMOS [*] foundry process for a shrink of the [*] (where
Customer will be responsible for performing the design-related shrink effort) in
a time frame generally consistent with that provided to IBM's other foundry
customers. Customer acknowledges that the prices quoted in the initial Task
Order are for manufacturing in [*] process technology and that IBM will requote
for manufacturing in such follow on process. The specific details on the timing
of a shrink into such follow on process technology are subject to a [*].

Customer may purchase Product in the form of finished goods (which are fully
assembled, tested and marked), or in wafer form (either bumped or unbumped, and
probed or unprobed).

3. ORDERS: After the parties have executed a Task Order, Customer will request
delivery of Products by issuing written purchase orders to IBM's Technical
Coordinator by the fifth (5th) day of each calendar month. As set forth in
Section 2, Customer will maintain a minimum of four (4) months rolling purchase
orders on IBM and may place purchase order(s) for months five (5) and six (6) of
each forecast. Purchase orders are subject to, and IBM will accept and ship
against purchase orders that comply with, the terms and conditions of this
Agreement and the applicable Task Order, and are consistent with the most
recently accepted forecasts and the most recent Customer credit limit as granted
by IBM. Purchase orders shall only specify the following items on their face
unless otherwise mutually agreed to in writing by duly authorized
representatives of the parties:

                   a) PO number

                   b) Tax status - exempt or non-exempt

                   c) Ship to location - complete address

                   d) Bill to location - complete address

                   e) Order from location - complete address

                   f) Product part numbers and quantities being ordered;

                   g) The Product's applicable unit price;

                   h) Shipping instructions, including preferred carrier.

                   i) Requested shipment dates

                   j) The Agreement Number of this Agreement.

                   k) Name of Customer contact

In accordance with the above language in this Section 3, provided IBM accepts a
purchase order, IBM shall issue a written sales acknowledgment within a maximum
of ten (10) business days after IBM's receipt of Customer's purchase order,
which shall recite the Agreement Number, Product and Customer's shipping
instructions, as well as establish the quantities being sold, the Product's
applicable unit price and the estimated shipment dates.

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

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This Agreement shall take precedence over and govern in case of any additional,
different or conflicting terms and conditions in any purchase order(s) or any
other form of either party. Purchase orders and other forms of either party may
not vary the terms of this Agreement. Additional, different or conflicting terms
and conditions on a purchase order or other form shall be of no effect unless
specifically agreed to in writing by the parties. This Agreement does not
constitute a purchase order. No verbal communications shall result in a
financial obligation by Customer or IBM.

4. LEAD TIMES, SHIPMENT, TITLE AND RISK OF LOSS: The Product's manufacturing
lead times shall be as set forth in the applicable Task Order. IBM will use
reasonable efforts to set shipment dates in accordance with the lead time
specified for Product as stated in the Task Order. Customer will keep at least a
rolling four (4) months worth of purchase orders placed on IBM to support IBM's
efforts to schedule and supply Product to Customer's requirements. Customer may
request shipment dates with lead times less than those agreed to in the relevant
Task Order, and IBM, at its option, may use reasonable efforts to set a shipment
date that is coincident with the shipment date requested by Customer. Customer
acknowledges that it may be required to pay additional charges for expedited
shipment.

IBM agrees to set delivery lead times for the Product in a manner that is
generally consistent for other OEM customers using the same manufacturing and
technology process.

Products shall be shipped from the manufacturing location FOB for domestic U.S.
destinations and ExWorks (as defined in the 1990 INCO Terms) for international
shipments. Title and risk of loss for a Product passes to Customer when IBM
delivers the Product to the Customer-specified carrier for shipment (said
carrier to be identified in Customer's purchase order). [*]. IBM also agrees to
accommodate any reasonable specific packaging and/or shipping requirements as
may be required to meet the requirements of Customer's end customers. In cases
where IBM is more than five (5) days late to agreed upon Product delivery dates,
due to IBM's sole fault, IBM shall pay the difference between overnight
expedited shipping and the normal carrier rates, if so requested by Customer. In
all other instances Customer shall pay for shipping costs. Customer is
responsible for all packaging costs.

5. PRICES, INVOICING, PAYMENT TERMS AND TAXES: The engineering charges and the
price/quantity matrix in the applicable Task Order will apply to the Products.
IBM will invoice Customer for engineering charges associated with Products in
accordance with such Task Order. IBM will invoice Customer for Products upon
shipment. All payments owed by Customer to IBM under this Agreement, including,
without limitation, cancellation and engineering charges, as well as payment for
Products purchased, are payable in U.S. dollars and receipt of payment by IBM
will be due net thirty (30) days after the date of the invoice; provided,
however, that if Customer's account becomes in arrears or if Customer exceeds a
credit limit agreed to by IBM, in addition to any other right under this
Agreement, IBM reserves the right to cease manufacturing or stop shipment to
Customer or ship to Customer on a cash-in-advance basis until Customer's account
is again current. Customer will be liable for interest on any overdue payment
under this Agreement, up to the prime interest rate as reported by Citibank of
New York on the date the payment was due, plus three percent. Customer

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

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is responsible for all taxes actually charged related to Products. However, in
no event will Customer be liable for taxes based on IBM's net income. For the
situation where Customer grants any IBM business unit merchant market sales
rights to any Product under this Agreement, and IBM and Customer are selling the
said Product in the merchant market, [*].

6. ORDER CHANGES:

        a) For a purchase order which is more than thirty (30) days, but less
than sixty (60) days, from its scheduled shipment date, Customer may request in
writing a onetime deferral of the scheduled shipment date not to exceed thirty
(30) days, with no cancellation charge imposed.

        b) If Customer cancels an order or reduces an order or exceeds the
foregoing Product shipment rescheduling rights in this Section 6, Customer
agrees to pay the Product cancellation charges as described in the relevant Task
Order.

7. SUPPLY CONSTRAINTS: If IBM's ability to supply Product(s) to Customer is
constrained for any reason, including, without limitation, availability of
manufacturing materials or tools, and any IBM agreed-to Product shipment date
will be missed, IBM will reduce the quantities of Product(s) supplied to
Customer in proportion to the reduction in quantities of products of the same
technology or utilizing the same manufacturing process to be supplied to satisfy
others. [*]. Receipt of such allocated supply and later delivery of all
undelivered ordered quantities (unless canceled as set forth above) after the
constraint ends constitutes IBM's entire liability and Customer's exclusive
remedy in the event of such Product supply constraint.

8. ENGINEERING CHANGES: IBM may implement engineering changes required to
satisfy governmental standards, or for environmental, health or safety reasons
("Mandatory Engineering Changes").

For all previously shipped Product not incorporating Mandatory Engineering
Changes, IBM may provide replacement Products (including parts, materials and
documentation) at the expense of the party at fault. Customer must use
reasonable efforts to install Mandatory Engineering Changes on all Customer
installed Products and Products in its inventory. If IBM requests the return of
Products displaced by installation of replacement Products, Customer will
promptly return any displaced Products to IBM after installation of such
replacement Products, at IBM's expense. IBM will use reasonable efforts to
cooperate with Customer in cases where Customer's end customers require specific
information regarding changes under this Section 8.

In addition to Mandatory Engineering Changes, IBM may implement engineering
changes that result in cost reductions to the Product ("Elective Engineering
Changes") with prior approval from Customer. Such approval from Customer shall
not be unreasonably withheld. IBM shall give Customer prompt notice of proposed
Elective Engineering Changes.

IBM may make available other Engineering Changes ("Optional Engineering
Changes"). The cost of any Optional Engineering Changes that Customer desires to
implement will be borne by Customer and will be determined through a request for
quote process.

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

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9. CONFIDENTIAL INFORMATION EXCHANGES: Information containing the confidential
information of either party shall be identified as that party's confidential
information and shall be exchanged pursuant to the terms of the agreement for
exchange of confidential information (agreement number: V1290-01), between IBM
and Customer dated September 30, 1996 and any amendments thereto, until or
unless the Technology License Agreement is executed by both parties. If the
Technology License agreement is so executed, the terms and conditions of Section
5.0 of that Agreement shall control all of which are hereby incorporated by
reference. All other information exchanged by the parties shall be deemed
non-confidential, except that the parties agree that the specific terms and
conditions of this Agreement constitute mutual confidential information of the
parties.

10. CUSTOMER REPRESENTATIONS: Customer warrants it is the originator, rightful
owner or licensee of all designs, information, and materials supplied to IBM
hereunder, and that no part of such materials knowingly infringes the
intellectual property rights of any third party. All computer data provided to
IBM by Customer will have gone through Customer's best efforts to ensure that it
is free from any virus, worm or other routines that would permit unauthorized
access or otherwise harm software, hardware or data. Best efforts shall include,
but not be limited to, establishing and following a documented process to
prevent its computer data from being infected with such virus, worm or other
routine. Customer will provide IBM with the process upon request. Customer will
be responsible for any damages caused by any virus, worm or other routine.

Customer will not utilize Products in conjunction with any medical implantation
or other direct life support applications where malfunction may result in
injury, harm or death to persons, or used in conjunction with aviation, nuclear
materials, or other ultra-hazardous activities (collectively, "Ultra-hazardous
Uses"). Customer agrees to incorporate the foregoing restriction in all
contracts or sale documents under which Customer sells the Product or a device
incorporating the Product to Customer's customers.

Customer agrees to defend, indemnify and hold IBM harmless from and against all
claims, whether based in contract, tort or otherwise for any losses, expenses,
damages and liabilities which may arise out of Customer's use, distribution or
sale of Products, except those caused solely by Product defects in materials or
workmanship as warranted under Section 13 (Limited Warranty) or by the sole
negligence of IBM .

11. INTELLECTUAL PROPERTY RIGHTS: For the purposes of this Agreement,
"intellectual property rights" shall mean all legally cognizable rights with
regards to applicable patent laws, copyright laws and trade secret laws. IBM
shall own any physical masks made by IBM using data provided by Customer.
Notwithstanding the foregoing sentence, unless otherwise agreed to in writing,
IBM's sole use of such physical masks shall be to perform its obligations under
this Agreement. IBM will use tangible GDS II (or any other file format as agreed
to by the parties) data received from Customer or generated exclusively for
Customer hereunder, and any masks made from such data, only to manufacture
Products for sale to Customer. In addition, to the extent that Customer has
ownership rights and excluding any rights IBM has in its semiconductor
technology or any IBM technology licensed to Customer under the Technology
License Agreement, the Customer retains and reserves to itself all rights in,
and ownership of, all intellectual property in and to the P95 Processor and
other Products manufactured pursuant to Task Orders under this Agreement.

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The purchase, receipt or possession of Products from or through IBM carries no
license or immunity, express or implied, under any patent of IBM covering the
combination of such Products with other products purchased from others or the
use of any such combination, or under any patent or other intellectual property
right of any third party relating to such Products or their combinations with
any other products.

However, IBM intends that its sale of Products to Customer will, to the extent
under law, exhaust the patent rights of IBM as to such Products and the patent
rights of third party licensors to IBM.

Neither this Agreement, nor the sale of Products hereunder, shall be deemed to
give either party any right to use the other party's trademarks or any of the
other party's trade names without specific, prior written consent.

12. INTELLECTUAL PROPERTY INDEMNIFICATION: IBM shall indemnify Customer from and
against any damages finally settled or awarded by a court of competent
jurisdiction resulting from any direct infringement of any intellectual property
rights of a third party in any country in which IBM sells similar products,
arising as a result of any of IBM's manufacturing process, equipment or testing,
that is not specifically required by Customer's designs, specifications or
instructions. IBM shall defend at its own expense, including attorney's fees,
any suit brought against Customer alleging such infringement. In the event that
Customer becomes enjoined from using Product in its inventory or possession due
to such infringement, IBM at its option and expense, will secure for Customer
the right to continue to use and market the Product, or modify or replace the
Product with a non-infringing product. If IBM determines that neither of the
foregoing alternatives is reasonably available, Customer may return the Product
in Customer's inventory or possession to IBM for a credit equal to the price
paid for units of Product affected. IBM shall have no obligation regarding any
claim based upon modification of the Product by Customer or its customers, use
of the Product in other than its intended operating environment or the
combination, operation or use of the Product with non-IBM products or equipment.

Customer shall indemnify IBM from and against any damages finally settled or
awarded by a court of competent jurisdiction resulting from any direct
infringement of any intellectual property rights of a third party in any country
where Customer uses or distributes the Product, arising as a result of IBM's
compliance with any of Customer's design, specifications, instructions or
modifications of the Product by Customer and shall defend at its own expense,
including attorney's fees, any suit brought against IBM alleging any such
infringement.

The rights provided in this Section 12 are contingent upon the party seeking to
enforce indemnification giving prompt written notice to the indemnifying party
regarding any claim, demand or action for which the indemnified party seeks
indemnification. The indemnified party is required to fully cooperate with the
indemnifying party at the indemnifying party's expense and shall allow the
indemnifying party to control the defense or settlement of any such claim,
demand or action, including obtaining the written consent of the indemnifying
party prior to any settlement proposal or settlement. IBM shall have the right
to waive Customer's obligations under this Section 12 and provide for its own
defense, at IBM's sole discretion and expense.

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Except as expressly stated in this Agreement, this Section 12 states the entire
liability of the parties and their exclusive remedies with respect to
infringement of third party rights and all other warranties against infringement
of any intellectual property rights, statutory, express or implied are hereby
disclaimed.

13. LIMITED WARRANTY: [*]. IBM warrants Product(s) to be free from defects in
material and workmanship for one (1) year after the date of delivery to
Customer. Customer acknowledges that the functionality of Products is contingent
upon Customer's designs and, therefore, no warranty applies to the functionality
of Products manufactured for or sold to Customer. For warranty purposes only,
Products will be deemed delivered [*] after the date of shipment. This warranty
applies only to Customer, as the original purchaser from IBM, and Customer may
not transfer this warranty to any third party without first obtaining IBM's
written authorization, [*]. If Customer believes that a Product is not as
warranted, Customer will: 1) promptly notify IBM in writing; and 2) at IBM's
request, return the Product freight prepaid to IBM's designated location. If IBM
reasonably determines that the Product does not meet its warranty, IBM will, at
IBM's option, repair or replace the Product, or issue a credit or refund of the
purchase price. This warranty will not include credit, repair, or replacement of
a Product which has a defect due to Customer's or a third party's actions or
omissions.

PRODUCT PROTOTYPES PROVIDED TO CUSTOMER BY IBM ARE PROVIDED "AS IS" WITHOUT
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED INCLUDING BUT NOT LIMITED TO ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS OR USE FOR A PARTICULAR PURPOSE.

THE FOREGOING PRODUCT WARRANTIES AS STATED IN THIS SECTION 13 (LIMITED WARRANTY)
ARE IN LIEU OF ALL OTHER PRODUCT WARRANTIES FROM IBM, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS OR USE FOR A PARTICULAR PURPOSE.

14. LIMITED LIABILITY: The following sets forth IBM's entire liability and
Customer's exclusive remedy:

        a) In all situations involving claims for non-conforming or defective
Products furnished under this Agreement, Customer's exclusive remedy is the
replacement or repair of the Products or a credit or refund to Customer of the
purchase price paid for such units by Customer, at IBM's sole discretion; as
provided in Section 13.

        b) IBM's liability for actual damages for any cause whatsoever (other
than as set forth in Section 14 a. above), shall be limited to the greater of
fifty thousand dollars ($50,000) or the applicable unit price for the specific
units of Product that caused the damages or that are the subject matter of, or
are directly related to, the cause of action. This limitation will apply, except
as otherwise stated in this Section, regardless of the form of action, whether
in contract or in tort, including negligence. This limitation will not apply to
the payment of costs, damages and attorney's fees referred to in Section 12
(Intellectual Property Indemnification). This limitation will also not apply to
claims by Customer for bodily injury or damage to real property or tangible
personal property caused by IBM's negligence.

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

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        c) In no event will either party be liable to the other party for any
lost profits, lost savings, incidental damages or other consequential damages,
except as provided in Section 12. In addition, IBM will not be liable for any
claim based on any third-party claim, except as provided in Section 12. In no
event will a party be liable for any damages caused by the other party's failure
to perform its responsibilities hereunder.

        d). In addition, IBM shall have no liability when the Products are used
in conjunction with any Ultra-hazardous Uses.

15. TERMINATION RIGHTS: If either party is in default of any material provision
of this Agreement, the party not in default may provide a termination notice to
the defaulting party. The termination notice shall specify:

        a) the nature of the default;

        b) the date, at least thirty (30) days from the date of such notice, by
        which the defaulting party shall demonstrate a cure of the default; and

        c) the date upon which the Agreement will terminate if the defaulting
        party does not cure the default.

In addition, either party may terminate this Agreement immediately upon written
notice if the other party: becomes insolvent, files a petition in bankruptcy,
becomes dissolved or liquidated, files a petition for dissolution or
liquidation, makes an assignment for benefit of creditors, or has a receiver
appointed for its business; or is subject to property attachment or court
injunction or court order which has a substantial negative effect on its ability
to fulfill its obligations under this Agreement.

In addition, IBM may terminate this Agreement on nine (9) months prior written
notice if Customer transfers all or substantially all of its business or assets
to a third party, or undergoes any change of control as defined in the
Technology License Agreement between the two parties, to which this Foundry
Agreement is appended.

IBM may cease manufacturing Product and shall be under no further obligation
with respect to the relevant Task Order(s) if IBM receives a well founded and/or
substantiated charge or claim that any of Customer's deliverable items (which
include, without limitation, GDS II tape, specifications, instructions, test
data, as well as those items described under "Customer Deliverable Items" of the
applicable Task Order) infringes third party intellectual property rights. IBM
shall thereafter provide Customer's Technical Coordinator with a written
statement of the reasons why IBM has ceased production. If Customer fails to
reach a resolution satisfactory to IBM regarding such actual or potential
infringement after ninety (90) days, IBM may terminate the relevant Task
Order(s) upon written notice.

If this Agreement is terminated, all Task Orders still in effect shall be deemed
terminated on the effective date of the Agreement's termination. Any Products
ordered by Customer and which IBM commences to manufacture under this Agreement
are non-cancelable after wafer start and Customer agrees to pay the Production
Price (as stated in the applicable Task Order) for all such Product upon receipt
of IBM's invoice in the event that this Agreement or Task Order(s) are either
terminated or will be terminated.

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All amounts due for Prototypes or Product or NRE Services performed under this
Agreement prior to termination or expiration shall be paid in accordance with
the terms and conditions of this Agreement, notwithstanding any termination or
expiration of this Agreement.

If any event triggers a termination under both this Agreement and the
aforementioned Technology License Agreement, and a specific right or remedy for
such termination are inconsistent between the agreements, the terminating Party
has the right to choose which right or remedy will apply in that case.

16. ASSIGNMENT: Neither party to this Agreement may assign its rights or
delegate its duties in whole or in part without the prior written consent of the
other except that if the assets or stock of that portion of IBM to which this
Agreement pertains hereafter becomes owned or controlled, directly or
indirectly, by a third party, IBM may assign its entire right, title and
interest in this Agreement to such third party (so long as such third party
remains bound to the obligations of IBM herein), without Customers consent. Any
other assignments or delegations will be void.

17. RELATIONSHIP OF THE PARTIES: Each party hereto is an independent contractor
and is not an agent of the other party for any purpose whatsoever. Neither party
shall make any warranties or representations on the other party's behalf, nor
shall it assume or create any other obligations on the other party's behalf. For
the term of this Agreement, each party agrees not to solicit or recruit
engineers of the other party who have been or are assigned to perform work under
this Agreement. This does not restrict any employee of one party, on that
employee's own initiative or in response to general solicitations, to seek
employment from the other party.

18. COMPETITIVE PRODUCTS AND SERVICES: Neither this Agreement, nor any Task
Orders issued hereunder, will impair any right of IBM or Customer to design,
develop, manufacture, market, service, or otherwise deal in, directly or
indirectly, other products or services, including, without limitation, those
which are competitive with those offered by IBM or Customer; provided, however,
that nothing in this Agreement or any Task Order authorizes either party to use
any of the other party's intellectual property accept as expressly provided
herein.

19. PROMOTIONAL ACTIVITY: Press releases and other like publicity, advertising
or promotional material which mention the other party by name, this Agreement or
any term hereof shall not be released without the prior written consent of both
parties. Notwithstanding the immediately prior sentence, however, no permission
will be required by Customer pursuant to its disclosing under appropriately
protective confidentiality agreements to potential and actual customers,
financiers, acquirers or joint venture partners that IBM is manufacturing
Products for Customer.

20. NOTICES: All notices, requests, consents and other communications under this
Agreement shall be in writing and shall be sent by a traceable means of
delivery. Such communications shall be deemed delivered when received by the
party's designee referenced below. Each party may change its designee upon
written notice to the other party's designee.

          IBM                                      Transmeta Corporation
          Dept.  VLZV/862-1                        Dept.

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          1000 River Street                        3940 Freedom Circle
          Essex Junction, VT 05452                 Santa Clara, CA. 95054
          FAX: 802-769-3988                        FAX:  (408) 327-9840
          Attn: Contract Administrator             Attn: Chief Financial Officer

Day to day activities under Task Orders will be directed by technical
coordinators who will be responsible for maintaining technical liaison between
the parties ("Technical Coordinators"). Task Orders shall designate a Technical
Coordinator for each party. Either party may change its respective individual
designated for receipt of notices, and/or Technical Coordinator and their
addresses designated for notices by notifying the other party's Technical
Coordinator.

21. GENERAL: This Agreement may be executed in any number of identical
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument when each party has
signed one such counterpart.

The activities of each party and its employees, agents or representatives while
on the other party's premises (including any design center) shall comply with
the host company's policies and procedures for such facilities, including
security procedures and visitation guidelines.

IBM shall not change the place of manufacture of Products without prior written
notice to Customer.

If any provision of this Agreement is found to be invalid, illegal or
unenforceable under any applicable statute or rule of law, they are to that
extent to be deemed omitted from this Agreement . The validity, legality and
enforceability of such provision and the remainder of this Agreement shall
continue in effect in every other respect, so long as the remaining provisions
of this Agreement still expresses the intent of the parties. If the intent of
the parties cannot be preserved, this Agreement shall be either renegotiated or
terminated.

Except for Customer's obligation to pay amounts due under this Agreement,
neither party will be responsible for any failure or delay in its performance
under this Agreement due to causes, including, without limitation, acts of God,
natural disasters, fire, acts of civil or military authority, insurrections,
epidemics, riots, wars, sabotage, labor shortages and governmental actions,
which are beyond such party's reasonable control, provided that the affected
party: (a) gives the other party prompt written notice of such cause; and (b)
uses its reasonable efforts to correct such failure or delay in its performance.
[*].

This Agreement shall be construed, and the legal relations between the parties
hereto shall be determined, in accordance with the substantive laws of the State
of New York, without regard to the conflict of laws principles thereof. Any
proceedings to resolve disputes relating to this Agreement shall be commenced in
the State of New York. The parties hereto expressly waive any right they may
have to a jury trial and agree that any proceeding under this Agreement shall be
tried by a judge without a jury.

[*].

No actions arising out of this Agreement may be brought by either party more
than two (2) years after the cause of action has arisen, except those seeking to
enforce indemnification

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       11
<PAGE>   12

rights, or, in the case of nonpayment, more than two (2) years from the date the
last payment was due.

Each party will comply with all applicable federal, state and local laws,
regulations and ordinances including, without limitation, the regulations of the
U.S. Government relating to the export of commodities and technical data insofar
as they relate to the activities under this Agreement. Customer agrees that
Products, and technical data provided under this Agreement are subject to
restrictions under the export control laws and regulations of the United States
of America and other country or country group, laws and regulations, including,
without limitation, the U.S. Export Administration Act and the U.S. Export
Administration Regulations. Customer hereby gives its written assurance that
neither Products nor technical data provided by IBM under this Agreement, nor
the direct product thereof, will be exported, or re-exported, directly or
indirectly, to prohibited countries or nationals thereof without first obtaining
applicable government approval. Customer agrees it is responsible for obtaining
required government documents and approvals prior to export of any Product, or
technical data.

All obligations and duties which by their nature survive the expiration or
termination of this Agreement shall remain in effect beyond expiration or
termination and remain in effect and apply to respective successors and assigns
until they have been fulfilled. A waiver or failure by a party to demand
performance or to exercise a right, when entitled, will not prejudice the
party's ability to enforce such performance or right.

The United Nations Convention on Contracts for the International Sale of Goods
does not apply to this Agreement.

The headings in this Agreement are for reference only. They will not affect the
meaning or interpretation of this Agreement.

This Agreement, as well as any Task Orders issued hereunder, may only be
modified by a written amendment signed by both parties. This Agreement shall not
be supplemented or modified by any course of dealing, course of performance or
trade usage. The term "this Agreement" as used herein includes any applicable
Attachments or future written amendment(s) made in accordance with this Section.

22. SOLE AGREEMENT: Each party acknowledges that it has read this Agreement,
understands it, and agrees to be bound by its terms and conditions. Further, the
parties agree that this Agreement, any mutually agreed to Confidentiality
Disclosure Agreements relating to this Agreement, Task Orders, amendments, and
the Technology License Agreement (as it affects this Agreement), represent the
entire and complete agreement between the parties, which supersedes all prior
proposals, agreements, and all other communications (whether oral or written)
between the parties relating to the subject matter hereof.

AGREED TO AND ACCEPTED BY:

INTERNATIONAL BUSINESS MACHINES              TRANSMETA CORPORATION
CORPORATION

BY:  /S/ HANK J. GEIPEL                      BY:  /S/ DAVID R. DITZEL

                                       12
<PAGE>   13

    NAME: HANK J. GEIPEL                     NAME: DAVID R. DITZEL
    TITLE: VP, ADVANCED STANDARD             TITLE: PRESIDENT AND CEO
           PRODUCTS IBM
           MICROELECTRONICS

      DATED:   DECEMBER 17, 1997             DATED:  DECEMBER 18, 1997

                                       13
<PAGE>   14

                                    Exhibit A

                                   Task Order
                          (Task Order #TASK-121297-P95)

This Task Order is governed by the terms and conditions of Agreement Number:
TM-MFG-121297

1.0 TERM OF TASK ORDER: This Task Order will be effective on December 12, 1997
and will expire on December 12, 2000.

2.0 PRODUCT NAME AND DESCRIPTION:

Product Name: [*]

Description: A very-long-instruction-word microprocessor containing a
combination of logic functions (e.g. integer unit, floating point unit,
peripheral control, etc) and memory functions (e.g. SRAM-cell type cache
memory).

Customer may purchase the Product as untested wafers, tested wafers, untested
modules or tested modules.

3.0   DELIVERABLE ITEMS:

3.1 Customer

<TABLE>
<CAPTION>
        Item                                              Date
        ------------------------------------------------------
<S>                                                       <C>
        GDSII Tape in CMOS [*] groundrule format          [*]
        Packaging Specification                           [*]
        P95 wafer test specification and vectors          5 weeks after GDS II tape out
        P95 module test specification and vectors         5 weeks after GDS II tape out
</TABLE>

3.2 IBM

<TABLE>
<CAPTION>
        Item                                              Date
        ------------------------------------------------------
<S>                                                       <C>
        CMOS [*] Design Manual                            Complete
        CMOS [*] Spice models                             Complete
</TABLE>

4.0 PRODUCT SPECIFICATIONS, PROCESS TECHNOLOGY, WAFER ACCEPTANCE CRITERIA, YIELD
AND COST REDUCTION INCENTIVES, ASSUMPTIONS:

4.1 Product Specifications:

        Die Size:  [*]
        Package:  473 C4 CBGA -[*] 25mm x 32.5mm, [*]

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       14
<PAGE>   15

4.2 Process Technology: The [*] will be manufactured in IBM's [*]
process technology with [*] levels of metal, [*] CMOS [*].

4.3 Wafer Acceptance Criteria:  Exhibit B

4.4 Module Acceptance Criteria:

        The product will be tested according to the Customer's test
specification and test vectors, as identified in Section 3 of this Exhibit A.
The Product will be packaged according to the module physical outline drawing
for the 473 C4 CBGA package.

5.0 SCHEDULE: ATTACHMENT 3

Yield and Cost Reduction Incentives: IBM and Customer will work together from
time to time to attempt to put in place mutually agreed upon programs whereby
both parties are financially interested in reducing the manufacturing cost,
reducing and eliminating burn in, improving the yield of the Products and
lowering the price of the Products to Customer.

6.0 PRODUCT DEMAND FORECAST:

The Parties anticipate that they will meet approximately once per calendar
quarter to review forecasts under this Task Order. The forecast listed below is
for tested modules.

<TABLE>
<CAPTION>
Year: 1998
Month :   Jan.    Feb.   March  April  May     June   July   Aug.   Sept.  Oct.    Nov.   Dec.
          ---     ---    -----  -----  ---     ----   ----   ---    ----   ---     ---    ---
<S>       <C>     <C>    <C>    <C>    <C>     <C>    <C>    <C>    <C>    <C>     <C>    <C>
           [*]    [*]    [*]    [*]    [*]     [*]    [*]    [*]    [*]    [*]     [*]    [*]
</TABLE>

<TABLE>
<CAPTION>
Year: 1999
        1Q99          2Q99          3Q99           4Q99
        ----          ----          ----           ----
<S>                   <C>           <C>            <C>
        [*]           [*]           [*]            [*]
</TABLE>

<TABLE>
<CAPTION>
Year: 2000
        1Q00          2Q00
        ----          ----
<S>                   <C>
        [*]           [*]
</TABLE>

7.0 ENGINEERING EFFORT AND ENGINEERING CHARGES  (NRE CHARGES):

Engineering Effort:

        1) Prototypes NRE is [*] and includes the following:
               Design center technical and logistical support
               Spice models
               CMOS process design rules
               Processing of GDS II type tape (GDSII tape delivered in [*]
               Ground Rules) Mask build
               Delivery of [*] packaged and tested modules

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       15
<PAGE>   16

        2) Packaging NRE
               Electrical, thermal and mechanical modeling       [*]
               Package design                                    [*]
               Fabricate masks                                   [*]
               Fixtures (volume dependent)                       [*]

        3)  Test NRE:
               Wafer Test:
                   - Customer will supply the test specifications and vectors
                   - IBM will write, compile, simulate and debug the
                      manufacturing test program for the   [*]   [*]
                   - IBM will develop the  software required to implement
                      memory cell redundancy                     [*]
                   - Probe cards                                 [*]

               Module Test:
                   - Customer will supply the test specifications and vectors
                   - IBM will write, compile, simulate and debug the
                      manufacturing test program for the   [*]   [*]
                   - Module DIB                                  [*]
                   - Burn-in boards                              [*]
        4) Metal mask revisions NRE
                    - Per mask                                   [*]
                    - Engineering Charge per  Revision (RIT)     [*]

NRE Charges payable 50% at placement of purchase order and 50% upon delivery of
prototypes. Placement of purchase order for the mask set to be made
approximately [*].

8.0 PROTOTYPE UNIT PRICING AND DELIVERY:

The NRE Engineering Charges include delivery of [*] prototype parts per design.
These prototypes will be delivered having been tested to and successfully passed
test vectors provided by Customer and mutually agreed upon process control
monitors. Customer is responsible to insure the test program is correctly
testing the prototypes.

Additional [*] prototypes off of the initial lots (up to the quantity listed
below) can be purchased at the price quoted below. The additional order must be
placed at least [*] prior to the delivery of the original [*] prototypes.

<TABLE>
<CAPTION>
                             Quantity              Price
                             --------              -----
<S>                          <C>                   <C>
CMOS 6X3 5LM Die              [*]                   [*]
</TABLE>

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       16
<PAGE>   17
<TABLE>
<CAPTION>
                             Quantity              Price
                             --------              -----
<S>                          <C>                   <C>
CMOS 6X3 5LM Wafer            [*]                   [*]
</TABLE>

Any further quantities beyond the initial prototype lots above may be purchased
by Customer using the [*] price quoted below.

9.0  PRODUCTION PRICE/QUANTITY MATRIX (PRODUCT UNIT PRICE)

<TABLE>
<CAPTION>
                                    1998 Price     1999 Price    2000 Price
<S>                                 <C>            <C>           <C>
CMOS [*]Wafer[*]
[*] wafers/year                     [*]            [*]           [*]
[*] wafers/year                     [*]            [*]           [*]
[*] wafers/year                     [*]            [*]           [*]
[*] wafers/year                     [*]            [*]           [*]
[*] wafers/year                     [*]            [*]           [*]

[*]                                                [*]           [*]

CMOS [*]                                           [*]           [*]

473 CBGA Package                                   [*]           [*]
[*]

Test [*]                                           [*]           [*]

[*] Burn-in                                        [*]           [*]

[*].
</TABLE>

10.0 MANUFACTURING LEAD TIME (PURCHASE ORDER LEAD TIME):

Minimum Order Quantity (MOQ): MOQ is [*].

Minimum Ship Pack Quantity (SPQ): SPQ is [*]

Prototype: Delivery of the [*] prototype parts will be [*] from receipt of a [*]
GDS II tape by IBM.

Wafer Production: Production lead time for the Product in tested wafer form
using the [*] process will be [*] from receipt of Customer's purchase order by
IBM.

Module Production: Production lead time for finishing the product in tested
module form will be [*]. Forecasts and purchase orders for tested modules will
be placed per Section 2 and Section 3 of the Agreement.

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       17
<PAGE>   18

11.0  CANCELLATION CHARGES:

        In accordance with Sections 2 and 6 of the Agreement, the following
        charges will apply for failure to order against accepted forecasts and
        for any canceled Customer order or portion thereof.

        I. Canceled or Changed Forecast

               a) If Customer fails to order forecasted quantities for [*] as
described in Section 2 of the Agreement, Customer will pay [*].

        II. Canceled or Changed Purchase Orders

               a) If any purchase order is canceled prior to wafer start date,
Customer shall pay [*],

               b) If any purchase order is canceled after wafer start, Customer
shall pay [*].

12.0 TASK ORDER TECHNICAL COORDINATORS:

<TABLE>
<S>                                                       <C>
        International Business Machines Corporation       Transmeta Corporation
        Dept.  DZOV                                       Dept.
        1000 River Street                                 3940 Freedom Circle
        Essex Jct., VT 05452                              Santa Clara, CA. 95054
        PH: (802) 769-3519                                PH: (408) 327-9830 x 244
        FAX: (802) 769-6800                               FAX: (408) 327-9840
        EMAIL: wslatter@us.ibm.com                        EMAIL: dal@transmeta.com
        Attn: Bill Slattery                                      Attn: Doug Laird, VP VLSI
                                                                 Engineering
</TABLE>

13.0 SHIPPING/BILLING/ORDERING LOCATIONS:

        Customer's Ship to Location: To be specified in individual purchase
orders

        Customer's Bill to Location:
               Transmeta Corporation
               3940 Freedom Circle
               Santa Clara, CA. 95054
               Attention: Accounts Payable
               ph: (408) 327-9830
               fax: (408) 327-9840

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       18
<PAGE>   19

        IBM's Ordering Location:
               International Business Machines Corporation
               1055 Joaquin Rd.
               Mountain View, CA 94043
               Attention: Joe Larkins
               Fax: (650) 694-3157

AGREED TO AND ACCEPTED BY:

INTERNATIONAL BUSINESS MACHINES              TRANSMETA CORPORATION
CORPORATION

BY:  /S/ HANK J. GEIPEL                     BY:  /S/ DAVID R. DITZEL

 NAME: HANK J. GEIPEL                       NAME: DAVID R. DITZEL
 TITLE: VP, ADVANCED STANDARD PRODUCTS      TITLE: PRESIDENT AND CEO
 IBM MICROELECTRONICS

DATED:  DECEMBER 17, 1997                   DATED: DECEMBER 18, 1997

                                       19
<PAGE>   20

                                    EXHIBIT B

Wafer Acceptance Criteria (for tested wafers)

        1.     Nothing in this Exhibit modifies or expands Customer's warranty
               rights under the Agreement.

        2.     IBM Products, with the reasonable cooperation of the Customer,
               will be subject to the following quality standards.

               A)   Wafer Specifications

                      a.  Wafer Size: IBM will ship 8 inch diameter wafers.

                      b.  Wafer Thickness and Finish: IBM and Customer will
                          agree upon specifications for wafer thickness and back
                          finish.

                      c.  Die Layout: IBM will be responsible for the reticle
                          layout and stepping of the Customer's die, consistent
                          with IBM's normal defect monitoring strategy

                      d.  Packing:

                               1. Tested wafers: Tested wafers will be shipped
                               in containers using shipping methods approved by
                               the Customer, which approval will not be
                               unreasonably withheld.

                               2. Damaged Goods: The Customer will provide
                               feedback on wafers damaged during transit which
                               are related to inadequate packing. IBM will then
                               take reasonable corrective action if the damages
                               were caused by IBM. Customer may return the wafer
                               per Section 13 of the base foundry Agreement.

               B)   Wafer Yields:

                      a.  Circuit limited yield loss is solely the
                          responsibility of the Customer [*].

                      b.  Minimum Yields: [*].

               C)   Visual Criteria: The Customer's production Product will meet
                    the IBM's [*].

               D)   Electrical Criteria:

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       20
<PAGE>   21

                      a.  Parametrics: [*].

               E)    Prototypes:

                      a.  Prototypes and other similar non-production material
                          will be accepted by the Customer and may not meet the
                          quality criteria described herein. Customer may not
                          use this material for production shipments.

               F)   Documentation:

                      a.  [*].

               G)   Test: Electrical test using functional, scan and memory
               based tests [*]. The details to be identified after the
               completion of the first prototype wafers delivered 1Q98.

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       21
<PAGE>   22

                                   Task Order

                          (Task Order #TASK-043099-P95)

This Task Order is governed by the terms and conditions of Agreement Number
TM-MFG-121297 (the "Agreement").

1.0 TERM OF TASK ORDER: This Task Order will be effective on April 30, 1999 and
will expire on March 31, 2001.

2.0 PRODUCT NAME AND DESCRIPTION:

2.1 Product Name: [*]

Die Size:      [*]

Package:       474 C4 CBGA - [*], 25mm x 32.5mm, [*]

Process Technology: The P95 Processor will be manufactured in IBM's [*] process
technology with [*] levels of metal, [*] CMOS [*].

Customer may purchase the Product as untested wafers or tested wafers; provided,
however, that Customer may only purchase Product in the form forecasted by
Customer, under forecasts accepted by IBM (meaning, for example, that if
Customer forecasts tested wafers, and IBM accepts such forecasts, then Customer
may purchase such Product; if Customer does not forecast tested wafers, then
Customer may not purchase such Product).

Customer may also purchase substrates and Bond, Assembly and Test Services ("BAT
Services") under this Task Order. As discussed above, Customer's forecasts must
identify the form in which Customer will purchase Product; if Customer wants
modules, whether tested or not, then Customer must submit forecasts for BAT
Services that identify the quantity of substrates and BAT Services requested by
Customer, on a monthly basis.

3.0     DELIVERABLE ITEMS:

3.1     Customer

<TABLE>
<CAPTION>
               Item                                              Date
               --------------------------------------------------------------
<S>                                                              <C>
               GDSII Tape in CMOS [*] groundrule format          Complete
               Packaging Specification                           Complete
               P95 wafer test specification and vectors          Complete
               P95 module test specification and vectors         Complete
</TABLE>

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       22
<PAGE>   23

3.2     IBM

<TABLE>
<CAPTION>
               Item                                              Date
               --------------------------------------------------------------
<S>                                                              <C>
               CMOS [*] Design Manual                            Complete
               CMOS [*] Spice models                             Complete
</TABLE>

4.0 PRODUCT INSPECTION AND RELATED INFORMATION

4.1 Wafer Inspection Criteria: Attached hereto as Exhibit 1 to this Task Order.

4.2 Module Testing and Packaging Criteria: The Product will be tested by IBM
according to Customer's test specification and test vectors, as identified in
Section 3 of this Task Order. The Product will be packaged by IBM according to
the module physical outline drawing for the 474 C4 CBGA package, presently in
IBM's possession.

4.3 CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR ANY PRODUCT RELATED DEFECT IS THE
WARRANTY PROVISION IN THE AGREEMENT (SEE SECTION 13 OF THE AGREEMENT). CUSTOMER
HAS NO RECOURSE AGAINST IBM FOR ANY BREACH BY IBM OF ANY OF THE FOREGOING
CRITERIA, UNLESS CUSTOMER WOULD OTHERWISE HAVE A WARRANTY CLAIM UNDER SECTION 13
OF THE AGREEMENT RESULTING FROM SUCH BREACH. HOWEVER, IN NO EVENT SHALL ANY OF
THE CRITERIA IN ANY WAY EXPAND, MODIFY, CHANGE OR EXTEND THE WARRANTY PROVIDED
BY IBM IN SECTION 13 OF THE AGREEMENT.

5.0 SCHEDULE: ATTACHMENT 3

Yield and Cost Reduction Incentives: IBM and Customer agree to discuss the
possibility of implementing programs whereby both parties would be financially
interested in reducing the manufacturing cost of Product, reducing and
eliminating burn in, improving Product yield and lowering Product price;
provided, however, that neither party shall have any obligation to the other
unless such obligation is set forth in a mutually agreed upon writing, signed by
authorized representatives of both parties.

6.0     PRODUCT DEMAND FORECAST:

The parties anticipate that they will meet approximately once per calendar
quarter to review forecasts under this Task Order.

Tested Modules:

Year:  1999

<TABLE>
<CAPTION>
  Month:    Jan.  Feb.  March   April   May   June   July  Aug.   Sept.  Oct.   Nov.   Dec.
  -----     ----  ----  -----   -----   ---   ----   ----  ----   -----  ----   ----   ----
<S>         <C>   <C>   <C>     <C>     <C>   <C>    <C>   <C>    <C>    <C>    <C>    <C>
            [*]   [*]    [*]     [*]    [*]    [*]   [*]    [*]    [*]   [*]    [*]    [*]
</TABLE>

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       23
<PAGE>   24

<TABLE>
<CAPTION>
        Year:  2000          1Q00           2Q00          3Q00          4Q00
                             -----------------------------------------------
<S>                          <C>            <C>           <C>           <C>
                             [*]            [*]           [*]           [*]
</TABLE>

<TABLE>
<CAPTION>
        Year:  2001          1Q01           2Q01
                             -------------------
<S>                          <C>            <C>
                             [*]            [*]
</TABLE>

Tested Wafers:

Year:  1999                                                         Year:  2000

<TABLE>
<CAPTION>
  Month:    April   May   June   July  Aug.   Sept.  Oct.   Nov.  Dec.   Jan.  Feb.    March
  -----     -----   ---   ----   ----  ----   -----  ----   ----  ----   ----  ----    -----
<S>         <C>     <C>   <C>    <C>   <C>    <C>    <C>    <C>   <C>    <C>   <C>     <C>
             [*]    [*]    [*]   [*]    [*]    [*]    [*]   [*]    [*]   [*]    [*]     [*]
</TABLE>

For the avoidance of doubt, Customer acknowledges and agrees that each forecast
for Product, which is accepted by IBM, creates binding purchase obligations for
Customer, pursuant to Sections 2 and 3 of the Agreement. As such, the above
forecasts each create separate and independent Customer obligation to purchase
Products.

Forecasts for substrates and BAT Services:

        In addition to providing forecasts for Products, Customer shall provide
        IBM's customer account representative with a forecast for substrates and
        BAT Services, which shall each cover a minimum of [*] broken out by
        month. The initial accepted forecasts for substrates and BAT Services
        are set forth below. By the fifth (5th) calendar day of every month
        during the term of this Task Order, Customer will provide IBM's customer
        account representative with updated demand forecasts (in writing, fax or
        email) covering a rolling [*] period (not to extend beyond the term of
        this Task Order), which will be reviewed for acceptance by IBM. IBM
        shall notify Customer whether the forecast has been accepted or rejected
        within [*] after receipt. Such forecasts shall constitute good faith
        estimates of Customer's anticipated requirements but shall not
        contractually obligate IBM to supply, not contractually obligate
        Customer to purchase, the quantities of substrates and BAT Services set
        forth therein; provided, however, that Customer is committed to its
        forecasts for Products, as set forth in Sections 2 and 3 of the
        Agreement, and the failure of Customer to order the required quantity of
        Products shall lead to a charge being assessed against Customer,
        consistent with Section 11 of this Task Order.

        No Product will be started based on substrate forecasts.

Year:  1999                                                          Year:  2000

<TABLE>
<CAPTION>
     Month:        April   May   June   July  Aug.   Sept.  Oct.   Nov.   Dec.   Jan.  Feb.   March
     -----         -----   ---   ----   ----  ----   -----  ----   ----   ----   ----  ----   -----
<S>                <C>     <C>   <C>    <C>   <C>    <C>    <C>    <C>    <C>    <C>   <C>    <C>
   Substrates       [*]    [*]    [*]   [*]    [*]    [*]   [*]    [*]     [*]   [*]   [*]     [*]
</TABLE>

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       24
<PAGE>   25

<TABLE>
<S>                <C>     <C>   <C>    <C>   <C>    <C>    <C>    <C>    <C>    <C>   <C>    <C>
  BAT Services      [*]    [*]    [*]   [*]    [*]    [*]   [*]    [*]     [*]   [*]   [*]     [*]
    (modules)
</TABLE>

7.0     ENGINEERING EFFORT AND ENGINEERING CHARGES (NRE CHARGES):

Engineering Effort:

        1)     Prototype NRE is [*] and includes the following:

                      Design center technical and logistical support (in an
                      amount determined by IBM)

                      Spice models

                      CMOS process design rules

                      Processing of GDS II type tape (GDSII tape delivered in
                      CMOS [*] Ground Rules)

                      Mask build

                      Delivery of [*] Prototypes

        2)     Packaging NRE

                      Package design                                 [*]
                      Fabricate masks                                [*]

        3)     Test NRE:

                      Wafer Test:
                          -  Customer will supply the test specifications and
                             vectors
                          -  IBM will write, compile, simulate and debug
                             the manufacturing test program for the
                             [*]                                             [*]

                          -  Probe cards                                     [*]

                      Module Test:
                          -  Customer will supply the test specifications and
                             vectors
                          -  IBM will write, compile, simulate and debug
                             the manufacturing test program for the
                             [*]                                             [*]
                          -  Module Device Interface Board                   [*]
                          -  Burn-in boards                                  [*]

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       25
<PAGE>   26

        4)     Metal mask revisions NRE:

                          -  Per mask                                        [*]
                          -  Engineering Charge per Revision (RIT)           [*]

For Prototype NRE: NRE Charges payable 50% at placement of purchase order and
50% upon delivery of Prototypes. Placement of purchase order for the mask set to
be made approximately [*].

For Packaging, Test and Metal mask revisions NRE: NRE Charges payable 50% at
placement of relevant purchase order and 50% upon completion of the services at
issue [*].

8.0 PROTOTYPE UNIT PRICING AND DELIVERY:

The Prototype NRE includes delivery of [*] Prototypes. The balance of the
remaining die on the wafers from which the Prototypes were taken are the
property of the Customer. Should Customer so request that IBM package these
additional die, then the cost of packaging these additional Prototypes will be
[*] the sum of the low volume price tiers [*] for substrates and BAT services
set forth in Section 9.0.

        Prototypes are preliminary versions of a Product which may or may not be
        functional, are intended for internal use and testing, are not for
        resale, and are not suitable for production in commercial quantities.
        ALL PROTOTYPES ARE PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND. IBM
        EXPRESSLY DISCLAIMS ALL WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF
        MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

9.0 PRODUCTION PRICE/QUANTITY MATRIX (PRODUCT UNIT PRICE)

<TABLE>
<CAPTION>
                            1999 Price     Dec. 99 Price     2000 Price     Dec. 2000     2001 Price
<S>                         <C>            <C>               <C>            <C>           <C>
  CMOS [*] Wafer [*]
      Volume/Year
          [*]                  [*]              [*]             [*]            [*]            [*]
          [*]                  [*]              [*]             [*]            [*]            [*]
          [*]                  [*]              [*]             [*]            [*]            [*]
          [*]                  [*]              [*]             [*]            [*]            [*]
          [*]                  [*]              [*]             [*]            [*]            [*]
          [*]                  [*]              [*]             [*]            [*]            [*]
</TABLE>

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       26
<PAGE>   27

474 CBGA Package
[*]

        SUBSTRATES

<TABLE>
<CAPTION>
      Volume/Year                 1999           2000
<S>                               <C>            <C>
         [*]                      [*]             [*]
         [*]                      [*]             [*]
         [*]                      [*]             [*]
         [*]                      [*]             [*]
         [*]                      [*]             [*]
         [*]                      [*]             [*]
</TABLE>

BOND AND ASSEMBLY (includes shipping trays)

<TABLE>
<CAPTION>
      Volume/Year                1999            2000
<S>                              <C>             <C>
         [*]                      [*]             [*]
         [*]                      [*]             [*]
         [*]                      [*]             [*]
         [*]                      [*]             [*]
         [*]                      [*]             [*]
         [*]                      [*]             [*]
</TABLE>

If Customer desires Modules, whether tested or untested, then the pricing is
that of the applicable wafer price, plus the applicable substrate and BAT
Services prices.

<TABLE>
<CAPTION>
  TEST*                   1Q99      2Q99     3Q99      4Q99      1Q00     2Q00     3Q00    4Q00
                          ----      ----     ----      ----      ----     ----     ----    ----
<S>                       <C>       <C>      <C>       <C>       <C>      <C>      <C>     <C>
            Per Wafer      [*]       [*]      [*]       [*]       [*]      [*]     [*]      [*]
            Per Module     [*]       [*]      [*]       [*]       [*]      [*]     [*]      [*]
            Burn-in        [*]       [*]      [*]       [*]       [*]      [*]     [*]      [*]
</TABLE>

* Dependencies:

1)      Test prices are based on the following matrix of parameters (tested on a
        [*]).

        Wafer Test

<TABLE>
<CAPTION>
                             2Q99   3Q99    4Q99   1Q00    2Q00   3Q00    4Q00
                             ----   ----    ----   ----    ----   ----    ----
<S>                          <C>    <C>     <C>    <C>     <C>    <C>     <C>
Test Time (sec)              [*]    [*]     [*]    [*]     [*]    [*]     [*]
Data Log (sec)               [*]    [*]     [*]    [*]     [*]    [*]     [*]
</TABLE>

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       27
<PAGE>   28

<TABLE>
<S>                          <C>    <C>     <C>    <C>     <C>    <C>     <C>
Data Log Sample/Wafer        [*]    [*]     [*]    [*]     [*]    [*]     [*]

        Module Test

Test Time (sec)              [*]    [*]     [*]    [*]     [*]    [*]     [*]
Data Log (sec)               [*]    [*]     [*]    [*]     [*]    [*]     [*]
Data Log Sample (%)          [*]    [*]     [*]    [*]     [*]    [*]     [*]
Number of Times tested       [*]    [*]     [*]    [*]     [*]    [*]     [*]
</TABLE>

2)      Burn-in price includes burn-in per module as set forth below:

<TABLE>
<CAPTION>
                             2Q99    3Q99     4Q99    1Q00    2Q00   3Q00    4Q00
                            -------------------------------------------------------
<S>                          <C>     <C>      <C>     <C>     <C>    <C>     <C>
Hours of [*] Burn In         [*]      [*]      [*]     [*]    [*]     [*]    [*]
</TABLE>

[*].

10.0    MANUFACTURING LEAD TIME (PURCHASE ORDER LEAD TIME):

Minimum Order Quantity (MOQ):

        Wafers:       [*]

        Modules:      the number of modules resulting from [*], whichever is
                      greater

Minimum Ship Pack Quantity (SPQ):

        Modules:      [*]

        Wafers:       [*]

Prototypes: Delivery of the [*] Prototypes will be [*] from receipt of a [*] GDS
II tape by IBM.

Wafer Production: For tested wafers, Production lead time is listed in the
following table in calendar days from receipt of Customer's purchase order by
IBM. IBM will provide lead times for untested wafers if Customer so desires.

                     2Q99                [*]
                     3Q99                [*]

Substrate Production: For substrates the Production lead time is [*] from the
receipt of the Customer's purchase order by IBM.

BAT Services:  Production lead time will be [*].

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       28
<PAGE>   29

11.0    CANCELLATION CHARGES:

        In accordance with Sections 2 and 6 of the Agreement, the following
        charges will apply for failure to order against accepted forecasts and
        for any canceled Customer order or portion thereof. The rescheduling
        rights set forth in Section 6 of the Agreement do not apply to
        Substrates and BAT Services. The terms governing rescheduling and
        cancellation of Substrates and BAT Services are set forth below.

        I.     Canceled or Changed Forecast

               A.     Wafers:

                          1) If Customer fails to order forecasted quantities
                      [*] of any accepted forecast, as described in Section 2 of
                      the Agreement, Customer will pay [*].

               B.     Substrates:  [*].

               C.     Bond Assembly Test Services:  [*].

        II.    Canceled or Changed Purchase Orders

               A.     Wafers:

                          1) If any purchase order is canceled prior to wafer
                      start date, Customer shall pay [*].

                          2) If any purchase order is canceled after wafer
                      start, Customer shall pay [*].

        III.   Substrates*

                          1) Customer may cancel or reschedule an order for
                      substrates only upon the written agreement of IBM. In the
                      event of a cancellation, Customer shall pay [*] as of the
                      date the cancellation notice is received by IBM. In
                      addition to such payment, for any substrates partially
                      built as of the date the cancellation notice is received
                      by IBM, Customer shall pay [*].

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       29
<PAGE>   30

        IV.    Bond Assembly Test Services*

                          1) Customer may cancel or reschedule an order for
                      services only upon the written agreement of IBM. In the
                      event of a cancellation, Customer shall pay [*] as of the
                      date the cancellation notice is received by IBM. In
                      addition to such payment, for any services partially
                      performed as of the date the cancellation notice is
                      received by IBM, Customer shall pay [*].

* Cancellation of Substrates and BAT Services are governed by Section 6.0 of the
Agreement.

12.0    TASK ORDER TECHNICAL COORDINATORS:

           International Business Machines            Transmeta Corporation
           Corporation                                Dept.
           Dept. DZOV                                 3940 Freedom Circle
           1000 River Street                          Santa Clara, CA  95054
           Essex Jct., VT  05452                      PH: (408) 327-9830 x 244
           PH: (802) 769-3519                         FAX: (408) 327-9840
           FAX: (802) 769-6800                        EMAIL: dal@transmeta.com
           EMAIL: wslatter@us.ibm.com                 Attn:  Doug Laird, VP VLSI
           Attn:  Bill Slattery                       Engineering

13.0    SHIPPING/BILLING/ORDERING LOCATIONS:

        Customer's Ship to Location: To be specified in individual purchase
        orders.

        Customer's Bill to Location:

              Transmeta Corporation
              3940 Freedom Circle
              Santa Clara, CA  95054
              Attention:  Accounts Payable
              ph: (408) 327-9830
              fax: (408) 327-9840

        IBM's Ordering Location:

              International Business Machines Corporation
              1055 Joaquin Rd.
              Mountain View, CA  94043
              Attn:  Joe Larkins

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       30
<PAGE>   31

              Fax: (650) 694-3157

Agreed To And Accepted By:
International Business Machines
Corporation                                 Transmeta Corporation

By:                                         By:
Authorized Signature                        Authorized Signature
Name:   Peter Hansen                        Name:   David R. Ditzel
Title:  V.P. North America Sales            Title:  President and Ceo
        IBM Microelectronics                        Transmeta Corporation

Dated:  June 23, 1999                       DATED:  JUNE 1, 1999

                                       31
<PAGE>   32

                       Exhibit 1 to Task Order #043099-P95

Product Inspection Criteria - Tested Wafers

1.      Wafers:

        a. Wafer Size: IBM will ship 8 inch diameter wafers.

        b. Wafer Thickness and Finish: IBM and Customer will agree upon
        specifications for wafer thickness and back finish. (*see note below)

        c. Die Layout: IBM will be responsible for the reticles layout and
        stepping of the Customer's die, consistent with IBM's normal defect
        monitoring strategy.

        d. Packing:

               1. Tested wafers: Tested wafers will be shipped in containers
               using shipping methods approved by the Customer, which approval
               will not be unreasonably withheld.

               2. Damaged Goods: The Customer will provide feedback on wafers
               damaged during transit which are related to inadequate packing.
               IBM will then take reasonable corrective action if the damages
               were caused by IBM. If IBM determines that it was the cause of
               the damages, then Customer may return the wafer using IBM's RMA
               process, and IBM will provide a new wafer or credit for the
               wafer, at IBM's option. This is Customer's exclusive remedy
               against IBM for transit related damages caused by IBM.

2.      Wafer Yields:

        a. Circuit limited yield loss is solely the responsibility of the
        Customer; [*].

        b. Minimum Yields: [*].

3.      Visual Criteria:

        Product will meet IBM's [*].

4.      Electrical Criteria:

        [*]

5.      Prototypes:

        Prototypes and other similar non-production material may not meet the
        criteria described in this Exhibit.

6.      Documentation:

        [*].

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       32
<PAGE>   33

7.      Test:

        Electrical test using functional, scan and memory based tests [*] the
        details to be identified after completion of the first Prototype wafers.

(*Note: Failure of the parties to arrive at mutually acceptable specifications,
data, and/or tests within [*] after execution of this Task Order by both
parties, will result in IBM, at its sole discretion, determining the
specifications, data and/or tests.)

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       33
<PAGE>   34

                                     International Business Machines Corporation
                                                                  1000 River St.
                                                            Essex Jct. Vt. 05452

April 28, 1999

TRANSMETA CORPORATION
LARRY SLADOWSKI
3940 FREEDOM CIRCLE
SANTA CLARA, CA 95054

Subject:  [*]

General Information:

Product Name:  [*]
Technology:  CMOS [*]
Custom Design
Image x dim:  [*]
Package:  474 CBGA [*] 25x32mm
Reliability Grade:  [*]
This quote does not include product qualification
Wafer manufacturing:  Burlington
        This product will have plated C4s:  East Fishkill
Substrate manufacturing:  East Fishkill
Bond, Assembly and Test:  Bromont, Canada

Key Dates:

Purchase Order Place:  5/28/99
GL-1 Data Available:  [*]
Test Programs Available:  [*]
Assumptions:

Prototype Build
        [*]

Burn In
        [*]

Test
        Wafer test time of [*].
        Module test time of [*].
        [*].

Manufacturing Ramp

<TABLE>
<CAPTION>
         Jan    Feb    Mar    Apr    May   Jun    Jul    Aug    Sep    Oct   Nov    Dec
<S>      <C>    <C>    <C>    <C>    <C>   <C>    <C>    <C>    <C>    <C>   <C>    <C>
2000     [*]    [*]    [*]    [*]    [*]   [*]    [*]    [*]    [*]    [*]   [*]    [*]
</TABLE>

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       34
<PAGE>   35

<TABLE>
<S>      <C>    <C>    <C>    <C>    <C>   <C>    <C>    <C>    <C>    <C>   <C>    <C>
2001     [*]    [*]    [*]    [*]    [*]   [*]    [*]    [*]
</TABLE>

Early User Hardware:

This schedule will consume [*].

<TABLE>
<CAPTION>
    Committed          Committed
       Date              Supply
    ---------          ---------
<S>                    <C>
       [*]                [*]

       [*]                [*]    Note: if there are enough good die to build [*]
</TABLE>

NRE:

Prototypes:                                                      [*]
        Design center technical and logistical support Spice models CMOS process
        design rules Processing GDS II type tape
        Mask build [*]
        Delivery of 30 packaged and tested modules
Packaging:                                                       [*]
        Package Design
        Mask build [*]
Test:                                                            [*]
        Probes cards
        Module Dibs
        Program support

Burn In:                                                         [*]
        Development support
                                            Total                [*]

[*]                                                              [*]
        Process Development
Unique Marking NRE:                         TBD
B RIT:
        Each Mask Level                     [*]
        Engineering Support                 [*]
        Per Wafer Charge                    [*]
        Rocket Slot Charge                  [*]

Volume Production:

Minimum Order Quantity

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       35
<PAGE>   36

Wafers:  [*]
Substrates:  [*]
Bond Assembly Services:  [*]

UNTESTED WAFER WITH C4
        Prices include:       [*]
Wafer Volume Tier            1999            2000             2001
          [*]                 [*]             [*]              [*]

          [*]                 [*]             [*]              [*]

          [*]                 [*]             [*]              [*]

          [*]                 [*]             [*]              [*]

          [*]                 [*]             [*]              [*]

WAFER TEST
                             1999     2000      2001
per wafer                     [*]      [*]      [*]

MODULE TEST (PER MODULE)
                             1999     2000     2001
per module test               [*]      [*]      [*]

Burn-in Price per Module
                             1999     2000     2001
[*]                           [*]      [*]      [*]

[*]                           [*]      [*]      [*]

[*]                           [*]      [*]      [*]

SUBSTRATE
         Volume Tier          1999         2000         2001

               [*]            [*]          [*]          [*]
               [*]            [*]          [*]          [*]
               [*]            [*]          [*]          [*]
               [*]            [*]          [*]          [*]
               [*]            [*]          [*]          [*]

BOND AND ASSEMBLY (includes shipping trays)

<TABLE>
<CAPTION>
         Volume Tier          1999         2000         2001
<S>                           <C>          <C>          <C>
         [*]                  [*]          [*]          [*]
         [*]                  [*]          [*]          [*]
         [*]                  [*]          [*]          [*]
         [*]                  [*]          [*]          [*]
         [*]                  [*]          [*]          [*]
</TABLE>

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       36
<PAGE>   37

Productivity Estimates:

Raw chips per wafer:  [*]

Good chips per Wafer

                              1Q      2Q     3Q      4Q
               [*]                                   [*]
               [*]            [*]     [*]    [*]     [*]
               [*]            [*]     [*]    [*]     [*]

Good Modules per Wafer

                              1Q      2Q     3Q      4Q
               [*]                                   [*]
               [*]            [*]     [*]    [*]     [*]
               [*]            [*]     [*]    [*]     [*]

Principal Terms and Conditions (Full contract T's and C's available upon
request)

1       IBM will ship to within [*] wafer of the ordered quantity, whichever is
        greater.

2       IBM reserves the right to schedule the delivery according to factory
        capacity.

3       Shipments are FOB factory. Cost of shipment is borne by customer.

4       Wafers to be shipped according to IBM's wafer acceptance criteria,
        available upon request.

5       Standard and minimum yield targets are mutually agreed by IBM and
        customer after first [*].

6       IBM reserves the right to temporarily suspend shipment of products at
        these prices and volumes if the yield should fall below [*] of the
        expected target yield for an extended time. The customer will provide
        product and yield improvement resources to resolve.

7       Customer to provide [*] firm orders (rolling). With an additional [*]
        rolling forecast that is non-binding on the Customer and IBM.

8       NRE payments are due 50% at initiation and 50% at completion of the NRE
        work item pending adequate credit. License NRE is due 100% at delivery
        of the Intellectual Property.

9       Payment term is net 30 days assuming adequate credit limit has been
        established. IBM will stop shipment if account is in arrears.

10      Customer assumes full responsibility for, and indemnifies IBM against
        any claims beyond warranty.

11      Minimum order quantity is [*].

Warranty

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       37
<PAGE>   38

IBM warrants Product(s) to be free from defects in material and workmanship for
one (1) year after the date of delivery to Customer. Customer acknowledges that
the functionality of Products is contingent upon Customer's designs and,
therefore, no warranty applies to the functionality of Products manufactured for
or sold to Customer.

8.0  General

THIS BUDGETARY FOUNDRY QUOTATION IS FOR INFORMATION PURPOSES ONLY AND SHALL NOT
BE CONSTRUED AS AN OFFER TO SELL. THIS INFORMATION IS CONTINGENT UPON THE
EXECUTION, BY CUSTOMER AND IBM, OF A WRITTEN AGREEMENT FOR THE PURCHASE BY
CUSTOMER OF IBM MANUFACTURED PRODUCTS. THIS INFORMATION IS VALID FOR A PERIOD OF
THIRTY (30) DAYS FROM THE DATE OF ISSUE AND IS SUBJECT TO EXTENSION OR
REVOCATION BY IBM UPON WRITTEN NOTICE TO CUSTOMER. THIS INFORMATION IS EXPRESSLY
LIMITED TO THE PRODUCT(S) AND/OR SERVICE(S) DESCRIBED ABOVE. IBM CONSIDERS THIS
INFORMATION TO BE CONFIDENTIAL AND REQUESTS THAT YOU NOT REVEAL ITS CONTENTS TO
THIRD PARTIES WITHOUT IBM'S PRIOR WRITTEN CONSENT.

/s/ W. J. Slattery

William J. Slattery
Technical Coordinator
IBM Microelectronics

                                       38
<PAGE>   39

         Section 5 of the Agreement being referenced in Section 9 above.

5.0     INFORMATION TRANSFERS / TRANSFER OF LICENSED TECHNOLOGY

5.1     Deliverables. The IBM Deliverables and Transmeta Deliverables, discussed
        in Section 2.0 and deliverables disclosed under a Section 4.0 project
        agreement, contain Information which may or may not be confidential
        Information of the Party disclosing the Information. Such Information
        shall be treated in accordance with this Section 5.0.

5.2     Additional Confidential Information Disclosure: IBM or Transmeta may
        have at its disposal Information, other than as set forth in Section
        5.1, developed independent of this Agreement which may be useful for the
        development of Microprocessors or otherwise of interest to the other
        Party. In the event that the Party that has such information, in its
        sole discretion, chooses to disclose any such Information to the other
        Party, upon written agreement by the Technical Coordinators, such
        information may be so transferred to the other Party, who shall treat
        such information as part of the confidential Information of the
        disclosing Party (so long as such Information is disclosed pursuant to
        the requirements of Section 5.4).

5.3     Status of Disclosed Information: Unless otherwise agreed to in a project
        agreement or in this Agreement, all disclosures of Information by a
        Party will be deemed to be non-confidential, unless specifically
        designated at the time of disclosure, pursuant to Section 5.4, as
        including Information which is confidential to the disclosing Party.
        With respect to all Information, except any such Information which is
        designated as being confidential to the disclosing Party, the disclosing
        Party grants to the receiving Party and its Subsidiaries, to the extent,
        if any, of its interest therein, a nonexclusive, paid-up, irrevocable,
        unrestricted, and worldwide license, subject to the applicable
        copyrights (whether or not registered) and Patent rights of the
        disclosing Party, to use, have used, disclose to others, and dispose of
        such non-confidential Information in any manner it determines, including
        the use of such non-confidential Information in the development,
        manufacture, marketing, and maintenance of products and services
        incorporating such non-confidential Information.

5.4     Identification of Confidential Information:

        (a) Any confidential Information disclosed by one Party to the other in
        performance of this Agreement or any project related work shall be
        clearly designated (in writing, orally or otherwise), at the time of
        disclosure, as confidential to the disclosing Party (such as "IBM
        Confidential" or "Transmeta Confidential", for example). Any such
        disclosure which is made orally or visually shall be confirmed in
        summary written form (e.g. a listing of descriptive topics) under a like
        designation within thirty (30) days after the date of disclosure unless
        there has been distributed contemporaneously with such disclosure a

                                       39
<PAGE>   40

        written document or slide identifying that the meeting topics were
        confidential, so long as the written document or slide provides a
        summary of the confidential Information discussed. An occasional and
        unintentional failure to designate particular Information as
        confidential shall not signify that the Information is not confidential,
        so long as that Information is routinely, and in the ordinary course,
        appropriately designated confidential or is subsequently identified as
        confidential within a reasonable period of time, not to exceed ninety
        (90) days from the date of disclosure, sufficient so that the Technical
        Coordinator of the Receiving Party can identify and notify all
        recipients. Notwithstanding the foregoing sentence, a Receiving Party
        will not be responsible for (i) disclosures that may have occurred prior
        to such identification and notification; and (ii) disclosures that occur
        subsequent to such identification and notification provided that the
        Receiving Party has made reasonable attempts to notify recipients of the
        confidential nature of such Information.

        (b) The Technical Coordinators shall be responsible for monitoring
        disclosure of confidential Information. The Technical Coordinators may
        mutually agree in writing that certain narrowly defined Information
        exchanges may be declared "IBM or Transmeta Confidential", with the
        result that future disclosures of such narrowly defined Information no
        longer require such markings (e.g., in the event both Parties are
        working jointly under exigent circumstances, on the discovery and fix of
        a chip bug, then the two Technical Coordinators may agree that
        subsequent Information disclosures pertaining to the chip bug are
        confidential).

5.5     Jointly Developed Information: Jointly developed Information shall be
        deemed by each Party to be the confidential Information of both Parties,
        shall be marked with both "IBM Confidential" and "Transmeta
        Confidential" legends, and shall be subject to the confidentiality
        restrictions referred to in this Section 5.0. However, each Party shall
        be deemed the owner of such confidential Information for disclosure
        purposes and may disclose and use it in the ordinary course of business
        in the manner it does its own confidential Information. Notwithstanding
        the foregoing, IBM and Transmeta will each continue to own, under their
        respective Intellectual Property Rights, their respective confidential,
        preexisting or independently developed Information, disclosed to the
        other Party which may be incorporated into any jointly developed
        Information. Accordingly, to the extent any jointly developed
        Information contains preexisting or independently developed confidential
        Information of either Party, such portions of the jointly developed
        Information shall be subject to the rights and obligations regarding
        such confidential Information of the other Party contained in this
        Section 5.0 and Section 6.0.

5.6     Restrictions on Confidentiality and Use: Except as otherwise provided in
        this Agreement, for a period of five (5) years from the date of
        disclosure ([*]) the receiving Party shall use the same efforts to avoid
        publication or dissemination of confidential Information of the other
        Party as it employs with respect to Information of its own which it does
        not desire to be published or disseminated.

*    Confidential treatment has been requested for the bracketed portions. The
     confidential redacted portion has been omitted and filed separately with
     the Securities Exchange Commission.

                                       40
<PAGE>   41

        In addition to the foregoing restrictions on disclosure, the use of
        confidential Information is subject to the rights and licenses granted
        in this Agreement.

5.7     Limited Disclosure to Customers: Transmeta may disclose IBM confidential
        Information relating to Category I Products to its customers in the
        process of selling and marketing those products. IBM may disclose
        Transmeta confidential Information relating to Category II and III
        Products to its customers in the process of selling and marketing those
        products. Such disclosures shall be to the extent required for such
        sales and marketing efforts, and to the extent permitted under the
        license rights of Section 6.0 and under confidentiality terms no less
        restrictive than those set forth in this Section 5.0. This does not
        include the disclosure of any Source Code of x86-CMS or Design Databases
        or process technology that either Party may disclose to the other.

5.8     Residual Information: Notwithstanding anything to the contrary in
        Section 5.6 and in Section 6.0, the receiving Party and its Subsidiaries
        shall be free to use all Residual Information which is retained by the
        receiving Party in non-tangible form, for any purpose it may deem
        appropriate, subject only to the copyrights (whether or not registered)
        and Patent rights of the other Party and subject to the confidential
        Information of the other Party not being disclosed to third parties
        except as provided for in this Section 5.0. It is understood that
        receipt of any confidential Information under this Agreement shall not
        create any obligation in any way limiting or restricting the assignment
        and/or reassignment of employees within the receiving Party or to or
        from or within any Subsidiary of the receiving Party.

5.9     Supporting Documentation and Publication: The announcement, marketing,
        and support of any product or service by either Party or its
        Subsidiaries, including any supporting documentation thereof, which
        inherently discloses confidential Information of either Party required
        for the use or support of the product or service shall not in itself be
        deemed publication or disclosure of such Information prevented by
        Section 5.6 of this Agreement. The term "supporting documentation" as
        used in this Section shall not, however, include any semiconductor
        development, process, manufacturing or testing documentation, or Source
        Code of x86-CMS or Design Databases. Notwithstanding the above, both
        Parties agree that prior written approval is required for technical
        topics being published in technical journals or otherwise disclosed to
        the public through conferences, interviews or publications, where
        information contained therein discloses the confidential Information of
        the other Party.

5.10    Non-Disclosure Exceptions: Disclosure of confidential Information shall
        not be precluded, if such disclosure is:

        (a) in response to a valid order of a court or other governmental body
        of the United States or any political subdivision thereof; provided,
        however that the receiving Party shall first have given notice to the
        disclosing Party and made a

                                       41
<PAGE>   42

        reasonable effort to obtain a protective order requiring that the
        Information and/or documents so disclosed be used only for the purposes
        for which the order was issued;

        (b) otherwise required by law; or

        (c) necessary to establish rights under this Agreement.

5.11    Applicable Confidential Information: Notwithstanding any other
        provisions of this Agreement, the nondisclosure obligations specified in
        Section 5.6 shall not apply to any Information which:

        (a) is, at the time of an alleged breach of Section 5.6, already in the
        possession of the receiving Party without obligation of confidentiality;

        (b) is, at the time of an alleged breach of Section 5.6, publicly
        available without breach of this Agreement;

        (c) has been, at the time of an alleged breach of Section 5.6, released
        for public disclosure by the disclosing Party with its written consent;

        (d) can be shown by the receiving Party, as of the time of an alleged
        breach of Section 5.6, to have been rightfully received independently of
        this Agreement from a third party without any obligation of
        confidentiality; or

        (e) can be shown by the receiving Party to have been internally
        developed by it completely independently of this Agreement prior to the
        date of an alleged breach of Section 5.6.

5.12    Effect of Disclosures under Prior Agreement. Any disclosures made under
        the Prior Agreement shall be governed by the confidentiality terms in
        the Prior Agreement; however, the Parties acknowledge that those terms
        are the same as those in this amended Agreement and that confidential
        Information delivered under the Prior Agreement shall also be treated as
        confidential Information under this amended Agreement for purposes of
        exploitation of license rights under this amended Agreement.

5.13    Intentionally omitted.

5.14    Disclosures to Partners/Subcontractors. Notwithstanding the
        confidentiality obligations set forth herein, each Party and its
        Subsidiaries may release confidential Information to third party design
        sources, IBM Alliance Partners (but excluding release of Source Code for
        x86-CMS, except to the extent that such an IBM Alliance Partner is only
        acting in the capacity of a development subcontractor to IBM), have-made
        manufacturers, subcontractors, and original equipment manufacturer's
        ("OEM's") under confidentiality obligations no less restrictive than
        those contained herein where the purpose is to have the third party

                                       42
<PAGE>   43

        assist in the design, in-kind services or development work to be
        performed for a Party to this Agreement that has made the disclosure or
        in furtherance of that Party's rights and licenses under this Agreement.

5.15    Use of Tools, Tests and Models. Notwithstanding the foregoing, Design
        Tools embodying Transmeta's confidential Information (other than
        Genesys-x86 licensed pursuant to Attachment H hereto) delivered by
        Transmeta to IBM shall be used by IBM only for the purpose of exploiting
        the rights licensed under this Agreement or on a project sanctioned by
        this Agreement. Notwithstanding the foregoing, x86-Tests and Transmeta's
        x86 Architecture Simulator Model delivered by Transmeta to IBM, shall be
        used by IBM solely as provided for in Attachment H.

5.16    Removal of Information from Sites. Each Party agrees that its employees
        shall not remove any tangible Information from the premises of the other
        Party without first obtaining permission from the other Party's
        Technical Coordinator and giving the other Party's Technical Coordinator
        the opportunity to mark Information as confidential if appropriate.

                                       43<PAGE>   1

                           SINGLE TENANT LEASE FORM*
                                   (NET FORM)

THIS LEASE, dated April 6, 2000 for reference purposes only, is made by and
between RENCO INVESTMENT COMPANY ("Landlord") and VA LINUX SYSTEMS CORPORATION,
a Delaware Corporation ("Tenant"), to be effective and binding upon the parties
as of the date the last of the designated signatories to this Lease shall have
executed this Lease (the "Effective Date of this Lease").

                                   ARTICLE 1
                                   REFERENCES

     1.1  REFERENCES: All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time
period, amount, percentage, calendar year or fiscal year as below set forth:

          A.   Tenant's Address for Notices:   VA LINUX SYSTEMS, INCORPORATED

          B.   Tenant's Representative:        Mr. Todd Schull
                    Business Phone Number:     _________________________________
                    Home Phone Number:         _________________________________
                    Home Address:              _________________________________

          C.   Landlord's Address for Notices: 1285 Oakmead Parkway,
                                               Sunnyvale, CA 94086

          D.   Landlord's Representative:      Gerald E. Hodnefield
                    Phone Number:              (408) 730-5500

          E.   Lease Commencement Date:        June 1, 2000

          F.   Lease Term:                     Ten (10) Years

          G.   Lease Expiration Date:          May 31, 2010

          H.   Tenant's Punchlist Period:      Thirty calendar days from
                                               delivery of The Premises to
                                               Tenant

          I.   First Month's Prepaid Rent:     *

          J.   Last Month's Prepaid Rent:      None

          K.   Tenant's Security Deposit:      *

          L.   Late Charge Amount:             Six (6%) Percent of the late
                                               amount(s)

          M.   Tenants Liability Coverage:     Three Million ($3,000,000)
                                               Dollar Single Limit

          N.   Parking Spaces:                 All spaces provided within the
                                               Project

          O.   Leased Premises: That certain space which is a combination of
buildings containing 139,311 square feet of leasable area referred to as Renco
42 and Renco 47 (the "Project" or the "Property"), which space is shown outlined
in red on the Floor Plan attached hereto as Exhibit "B" consisting of
approximately 139,311 square feet of leasable area measuring to the outside edge
of the outside walls and drip lines, but not including the connecting hallway,
and, for purposes of this Lease, agreed between Landlord and Tenant to contain
said number of square feet. The Leased Premises are commonly known by address as
follows: 47071 and 46939 Bayside Parkway, Fremont, California, 94538.

          P.   Base Monthly Rent: The term "Base Monthly Rent" shall mean the
amount of rent due and payable on the first day of each month of the Lease Term
which for purposes of this Lease is agreed to be the monthly sum of * for each
full month of the first year of the Lease Term, * for each full month of the
second year of the Lease Term, * for each full month of the third year of the
Lease Term, * for each full month of the fourth year of the Lease Term, * for
each full month of the fifth year of the Lease Term, * for each full month of
the sixth year of the Lease Term, * for each full month of the seventh year of
the Lease Term, * for each full month of the eighth year of the Lease Term, *
for each full month of the ninth year of the Lease Term, and * for each full
month of the tenth year of the Lease Term. Any partial month shall be prorated
on the basis of a 30 day month.

          Q.   Permitted Use: The term "Permitted Use" shall mean that Landlord
and Tenant agree that Tenant shall use the Premises for: manufacture, assembly,
repair, sales, marketing and distribution of electronic parts and components,
internet services, and related office and support functions and for no other
use.

          R.   Exhibits: The term "Exhibits" shall mean the Exhibits to this
Lease which are described as follows:

               Exhibit "A" -- Site Plan showing the "Project" (or "Property")
                              and delineating the Building in which the Leased
                              Premises are located.

               Exhibit "B" -- Floor Plan outlining the Leased Premises.

               Exhibit "C" -- Tenant Improvements Agreement.

          S.   Addenda: The term "Addenda" shall mean the Addendum (or Addenda)
to this Lease which is (or are) described as follows:

                    Signage Criteria
                    Option to Renew Lease
                    Letter of Credit securitizing Lease costs

                                   ARTICLE 2
                      LEASED PREMISES, TERM AND POSSESSION

     2.1  LEASE OF PREMISES: Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord that certain interior space described above as the Leased
Premises (or "Premises"). Landlord reserves the right to install, maintain, use
and replace ducts, wires, conduits and pipes leading through the Leased
Premises in locations which will not materially interfere with Tenant's use of
the Leased Premises. Tenant's use of the Leased Premises, together with the
appurtenant right to use the Common Areas shall be conditioned upon and be
subject to the continuing compliance by Tenant with (i) all the terms and
conditions of the Lease, (ii) all Laws governing the use of the Leased Premises
and the Project, (iii) all Private Restrictions, easements and other matters
now of public record respecting the use of the Leased Premises and the Project,
and (iv) all reasonable rules and regulations from time to time established by
Landlord.

-------
   * Portions of this exhibit have been redacted pursuant to a confidential
     treatment request filed with the Commission.

                                      -1-

<PAGE>   2

     2.2  RIGHT TO USE COMMON AREAS: As an appurtenant right to Tenant's right
to the use of the Leased Premises, Tenant shall have the exclusive right, except
to the extent noted elsewhere herein, to use the Common Areas.

     2.3  LEASE COMMENCEMENT DATE AND LEASE TERM: The term of this Lease shall
begin, and the Lease Commencement Date shall be deemed to have occurred, on the
Commencement Date (as set forth in Article 1.1. The term of the Lease shall
expire on the Lease Expiration Date, subject, however, to the Option to Renew
Lease attached hereto.

     2.4  DELIVERY OF POSSESSION: Landlord shall deliver to Tenant possession of
the Leased Premises on the business day subsequent to the delivery of all fully
executed lease documents, lease exhibits, and lease addenda, together with all
monies required thereof from Tenant to Landlord.

     2.5  ACCEPTANCE OF POSSESSION: Upon the expiration of Tenant's Punchlist
Period, Tenant shall be conclusively deemed to have accepted the condition of
the Leased Premises in their then-existing condition as so delivered by Landlord
to Tenant, except as to those items reasonably set forth in the punchlist
submitted to Landlord prior to the expiration of said period. Landlord agrees to
correct all items reasonably set forth in Tenant's punchlist, at Landlord's sole
cost and expense, provided that such punchlist was submitted to Landlord within
Tenant's Punchlist Period. The punchlist items shall consist of making the
repairs and effecting the service as noted below, and shall be limited to such.
Landlord agrees to place in good working order all existing plumbing, lighting,
ceiling tiles, skylights (including replacing cracked or duct-taped skylights),
elevator, electrical systems, heating, ventilating and air conditioning systems
within the Leased Premises and all man doors and roll-up truck doors serving the
Leased Premises to the extent that such systems and/or items are not in good
operating condition as of the date Tenant accepts possession of the Leased
Premises, or as quickly thereafter as can be reasonably accomplished, provided
that, and only if, Tenant notifies Landlord in writing of such failures or
deficiencies within thirty calendar days from the date Tenant so accepts
possession of the Leased Premises. Notwithstanding the foregoing, Landlord
warrants and represents that the Leased Premises shall comply with all Laws,
(including, without limitation, the ADA) as of the Lease Execution Date.

     2.6  SURRENDER OF POSSESSION: Immediately prior to the expiration or sooner
termination of this Lease, Tenant shall remove all of Tenant's signs from the
exterior of the Building and shall remove all of Tenant's equipment, trade
fixtures, furniture, supplies, wall decorations and other personal property from
the Leased Premises, and shall vacate and surrender the Leased Premises to
Landlord in the same condition, broom clean, as existed at the Lease
Commencement Date, reasonable wear and tear, damage from casualty and
condemnation, and the Initial Tenant Improvements excepted. Landlord, at
Tenant's expense, shall retain a mechanical contractor to service all heating,
ventilation and air conditioning equipment, and Tenant shall pay the cost to
restore (or replace as required), said equipment to good working order. Tenant
shall repair all damage to the Leased Premises caused by Tenant or by Tenant's
removal of Tenant's property and all damage to the exterior of the Building
caused by Tenant's removal of Tenant's signs. Tenant shall patch and refinish,
to Landlord's reasonable satisfaction, all penetrations made by Tenant or its
employees to the floor, walls or ceiling of the Leased Premises, whether such
penetrations were made with Landlord's approval or not. Tenant shall replace all
stained or damaged ceiling tiles and shall repair or replace, as necessary, all
wall coverings and clean or replace, as may be required, floor coverings to the
reasonable satisfaction of Landlord. Tenant shall replace all burned out light
bulbs and damaged or stained light lenses. Tenant shall repair all damage caused
by Tenant to the exterior surface of the Building and the paved surfaces of the
outside areas adjoining the Leased Premises and, where necessary, replace or
resurface same. Additionally, Tenant shall, prior to the expiration or sooner
termination of this Lease, remove any improvements constructed or installed by
Tenant, (other than the Initial Tenant Improvements), which Landlord requests,
at the time of consent to such improvements, be so removed by Tenant and repair
all damage caused by such removal. If the Leased Premises are not surrendered to
Landlord in the condition required by this Article at the expiration or sooner
termination of this Lease, Landlord may, at Tenant's expense, so remove Tenant's
signs, property and/or improvements not so removed and make such repairs and
replacements not so made or hire, at Tenant's expense, independent contractors
to perform such work. Tenant shall be liable to Landlord for all costs incurred
by Landlord in returning the Leased Premises to the required condition and
Tenant shall be deemed to have impermissibly held over until such time as such
required work is completed. Tenant shall pay Base Monthly Rent and Additional
Rent in accordance with the terms of Section 13.2 (Holding Over) until such work
is completed.

                                   ARTICLE 3
                    RENT, LATE CHARGES AND SECURITY DEPOSITS

     3.1  BASE MONTHLY RENT: Commencing on the Lease Commencement Date and
continuing throughout the Lease Term, Tenant shall pay to Landlord, without
prior written or oral demand in advance on the first day of each calendar month,
as base monthly rent, the amount set forth as "Base Monthly Rent" in Article 1.

     3.2  ADDITIONAL RENT: Commencing on the Lease Commencement Date and
continuing throughout the Lease Term, in addition to the Base Monthly Rent,
Tenant shall pay to Landlord as additional rent (the "Additional Rent") all
Building Operating Expenses (as defined in Article 13). Payment shall be made by
one of the following methods: Landlord may bill to Tenant, on a periodic basis
not more frequently than monthly, such expenses (or group of expenses) as paid
or incurred by Landlord, and Tenant shall pay such expenses within ten days
after receipt of a written bill therefore from Landlord; and/or Landlord may
budget the annual projected expenses and bill to Tenant on a monthly basis,
one-twelfth of the annual amount. If Landlord elects the latter of the
alternatives, Landlord shall reconcile the budgeted amounts with the actual
amounts on an annual basis during the first quarter of the subsequent year and
bill Tenant for any additional amounts or credit Tenant any overpayments against
future Additional Rent amounts.

     3.3  LATE CHARGE AND INTEREST ON RENT IN DEFAULT: Tenant acknowledges that
the late payment by Tenant of any monthly installment of Base Monthly Rent or
any Additional Rent will cause Landlord to incur certain costs and expense not
contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include, without
limitation, administration and collection costs and processing and accounting
expenses. If any installment of Base Monthly Rent or Additional Rent is not
received

                                      -2-

<PAGE>   3
by Landlord from Tenant within six calendar days after the same becomes due,
Tenant shall immediately pay to Landlord a late charge in an amount equal to
six percent of the amounts due and not so paid. Landlord and Tenant agree that
this late charge represents a reasonable estimate of such costs and expenses
and is fair compensation to Landlord for the anticipated loss Landlord would
suffer by reason of Tenant's failure to make timely payment. In no event shall
this provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rental installment or prevent
Landlord from exercising any right or remedy available to Landlord upon
Tenant's failure to pay each rental installment due under this Lease when due.
If any rent remains delinquent for a period in excess of six calendar days,
then, in addition to such late charge, Tenant shall pay to Landlord interest on
any rent that is not so paid from said six day at the then maximum rate of
interest not prohibited by Law until paid. Notwithstanding the foregoing, no
such late charge shall be payable on the first such failure to pay Base Monthly
Rent or Additional Rent in any twelve (12) month period unless Landlord shall
have given Tenant notice of such failure to pay and Tenant fails to pay such
Base Monthly Rent or Additional Rent within five (5) days of such notice.

     3.4  PAYMENT OF RENT: All rent shall be paid without any abatement,
deduction or offset for any reason whatsoever, to Landlord at such address as
Landlord may designate from time to time. Tenant's obligation to pay Base
Monthly Rent and all Additional Rent shall be prorated at the commencement and
expiration of the Lease Term. The failure by Tenant to pay any Additional Rent
as required pursuant to this Lease when due shall be treated the same as a
failure by Tenant to pay Base Monthly Rent when due, and Landlord shall have
the same rights and remedies against Tenant as Landlord would have if Tenant
failed to pay the Base Monthly Rent when due.

     3.5  SECURITY DEPOSIT: Upon signing this Lease, Tenant shall immediately
deposit with Landlord the amount set forth in Article 1 as the "Security
Deposit" as security for the performance by Tenant of the terms of this Lease
and not as prepayment of rent. Landlord may apply such portion or portions of
the Security Deposit as are reasonably necessary for the following purposes:
(i) to remedy any default (beyond applicable notice and cure periods) by Tenant
in the payment of Base Monthly Rent or Additional Rent or a late charge or
interest on defaulted rent; (ii) to repair damage to the Leased Premises caused
by Tenant; (iii) to clean and repair the Leased Premises following their
surrender to Landlord if not surrendered in the condition required pursuant to
the provisions of Article 2; and (iv) to remedy any other default of Tenant to
the extent permitted by Law including, without limitation, paying in full on
Tenant's behalf any sums claims by materialmen or contractors or Tenant to be
owing to them by Tenant for work done or improvements made at Tenant's request
to the Leased Premises. Tenant shall not be entitled to any interest on the
Security Deposit. If Landlord transfers the Building during the Lease Term,
Landlord may pay the Security Deposit to any subsequent owner in conformity
with the California Civil Code, in which event the transferring landlord shall
be released from all liability for the return of the Security Deposit. In no
event shall the Security Deposit, or any portion thereof, be considered prepaid
rent.

     3.6  LETTER OF CREDIT: As additional consideration for Landlord's entering
into this Lease and performing under its terms and conditions, Tenant agrees to
provide Landlord with an irrevocable letter of credit in a form reasonably
satisfactory to Landlord in the amount of Two Million, Two Hundred and Fifty
Thousand ($2,250,000.00) Dollars. Such Letter of Credit shall be annually
renewed and Tenant shall provide Landlord with such Letter of Credit for a
minimum period of Five years commencing with the Commencement Date and Expiring
at the end of the Sixtieth month thereafter if, and only if, Tenant has not been
in material default of the Lease or its terms beyond applicable notice and cure
periods. Such Letter of Credit shall be reduced by Twenty (20%) Percent of its
original face amount ($450,000.00) on each anniversary date of the Commencement
Date such that by the end of the sixtieth month of the Lease Term, the remaining
amount of the Letter of Credit shall be cancelled. In the event of a material
default beyond applicable notice and cure periods on the part of Tenant during
the term of the Letter of Credit, the Letter of Credit amount shall be renewed
at the level existing at the time of said material default and shall be renewed
each year of the Lease Term at such level during the remainder of the Lease
Term. The Letter of Credit shall have the following provisions:

          1)   In the event a material default beyond applicable notice and
cure periods by Tenant has occurred and is continuing, Landlord shall be
entitled to make a draw for the sum of the face amount of the Letter of Credit,
or any portion thereof.

          2)   Landlord shall be entitled to make a draw for the sum of the
face amount of the Letter of Credit in the event Tenant fails, within 30 days
prior to the expiration of the existing Letter of Credit, to deliver a new
Letter of Credit to Landlord in the amount agreed upon under the terms of this
Lease.

          3)   The Letter of Credit shall be transferable in whole but not in
part to a new owner and Landlord.

          4)   Partial drawing shall be allowed.

          5)   The Letter of Credit shall be subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication 500.

          6)   The Letter of Credit shall be from a US National Bank
(reasonably acceptable to Landlord) with a branch located in the Greater San
Francisco Bay Area.

It is hereby agreed between Landlord and Tenant that any amounts drawn on the
Letter of Credit by Landlord shall be used by Landlord to satisfy Tenant's
breach of the Lease and/or to reimburse Landlord for damages occasioned by a
breach of the Lease which may include, without limitation, the following: (a)
Landlord's brokerage commissions with respect to the Lease; (b) Landlord's
Tenant Improvement Costs pursuant to Exhibit C of the Lease; and (c) Landlord's
legal expenses occasioned by the breach. It is expressly agreed, however, that
the foregoing shall not in any way modify the Letter of Credit nor create any
defense or excuse for the bank paying all or any portion of the Letter of
Credit upon Landlord complying with the draw requirements set forth in the
Letter of Credit. Should Landlord inadvertently draw down the Letter of Credit
more than is necessary to cure such Lease breaches, such excess shall be added
to the Security Deposit under Article 3.5 above.

                                   ARTICLE 4

                    USE OF LEASED PREMISES AND COMMON AREAS

     4.1  PERMITTED USE: Tenant shall be entitled to use the Leased Premises
solely for the "Permitted Use" as set forth in Article 1 and for no other
purpose whatsoever. Subject to the limitations contained in this Article 4,
Tenant shall have the right to use the Common Areas, solely for the purposes
for which they were intended and for

                                      -3-

<PAGE>   4
no other purposes whatsoever. Tenant shall not have the right to use the
exterior surfaces of exterior walls without the prior written consent of
Landlord.

    4.2 GENERAL LIMITATIONS ON USE: Tenant shall not do or permit anything to
be done in or about the Leased Premises, the Building, the Common Areas or the
Project which does or could (i) interfere with the rights of neighboring
tenants, (ii) jeopardize the structural integrity of the Building or the
Project, or (iii) cause damage to any part of the Building or the Project.
Tenant shall not operate any equipment within the Leased Premises which does or
could (i) injure, vibrate or shake the Leased Premises or the Building, (ii)
damage, overload, corrode, or impair the efficient operation of any electrical,
plumbing, sewer, heating, ventilating or air conditioning systems within or
servicing the Leased Premises or the Building or (iii) damage or impair the
efficient operation of the sprinkler system within or servicing the Leased
Premises or the Building. Tenant shall not install any equipment or antennas on
or make any penetrations of the exterior walls or roof of the Building. Tenant
shall not affix any equipment to or make any penetrations or cuts in the
floor, ceiling or walls of the Leased Premises. Tenant shall not place any
loads upon the floors, walls, ceiling or roof systems which could endanger the
structural integrity of the Building or damage its floors, foundations or
supporting structural components. Tenant shall not place any explosive,
flammable or harmful fluids, including Hazardous Materials in any sanitary or
storm sewer or place any waste materials in the storm drainage systems of the
Building or the Project. Tenant shall not drain or discharge any fluids in the
landscaped areas or across the paved areas of the Project. Tenant shall not use
any area located outside the Leased Premises for the storage of its materials,
supplies, inventory or equipment, and all such materials, supplies, inventory
and equipment shall at all times be stored within the Leased Premises. Tenant
shall not commit nor permit to be committed any waste in or about the Leased
Premises, the Common Areas or the Project.

    4.3 NOISE AND EMISSIONS: All noise generated by Tenant in its use of the
Leased Premises shall be confined or muffled so that it does not interfere with
the businesses of or annoy neighboring tenants. All dust, fumes, odors and
other emissions generated by Tenant's use of the Leased Premises shall be
sufficiently dissipated in accordance with sound environmental practices and
exhausted from the Leased Premises in such a manner so as not to interfere with
the businesses of or annoy neighboring tenants, or cause any damage to the
Leased Premises or the Building or any component part thereof or the property
of neighboring tenants.

    4.4 TRASH DISPOSAL: Tenant shall provide trash and garbage disposal
facilities inside the Leased Premises for all of its trash, garbage and waste
requirements unless Landlord shall have provided fenced areas for "dumpsters"
and shall cause such trash, garbage and waste to be regularly removed from the
Leased Premises at Tenant's sole cost. Tenant shall keep all areas outside the
Leased Premises and all fire corridors and mechanical equipment rooms in or
about the Leased Premises free and clear of all trash, garbage, waste and boxes
containing same at all times.

    4.5 PARKING. Tenant and its employees and invitees shall have the exclusive
right to use all of the parking spaces provided within the Project. In the
event Landlord is required by any Law to limit or control parking within the
Project, whether by validation of parking tickets or any other method, Tenant
agrees to participate in such validation or other program as reasonably
established by Landlord. Tenant shall not, at any time, park or permit to be
parked any trucks or vehicles adjacent to entryways or loading areas within the
Project 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 Areas not designated by Landlord for such use. Tenant
shall not, at any time, park or permit to be parked any recreational vehicles,
inoperative vehicles or equipment on any portion of the common parking area or
other Common Areas of the Project. Tenant agrees to assume responsibility for
compliance by its employees and invitees with the parking provisions contained
herein. Tenant hereby authorizes Landlord, at Tenant's sole expense, to tow
away from the Project and store until redeemed by its owner any vehicle
belonging to Tenant or Tenant's employees parked in violation of these
provisions.

    4.6 SIGNS: Tenant shall not place or install on or within any portion of the
Leased Premises, the Building, the Common Areas or the Project any sign (other
than a business identification sign first approved by Landlord in accordance
with this Article), advertisements, banners, placards or pictures which are
visible from the exterior of the Leased Premises. Tenant shall not place or
install on or within any portion of the Leased Premises, the Building, the
Common Areas or the Project any business identification sign which is visible
from the exterior of the Leased Premises until Landlord shall have first
approved in writing the location, size, content, design, method of attachment
and material to be used in the making of such sign. Any signs, once approved by
Landlord, shall be installed only in strict compliance with Landlord's approval,
at Tenant's expense, using a person first approved by Landlord to install same.
Landlord may remove any signs (not first approved in writing by Landlord),
advertisements, banners, placards or pictures so placed by Tenant on or within
the Leased Premises, the Building, the Common Areas or the Project and charge to
Tenant the cost of such removal, together with any costs incurred by Landlord to
repair any damage caused thereby, including any cost incurred to restore the
surface upon which such sign was so affixed to its original condition. Tenant
shall remove any such signs, repair any damage caused thereby, and restore the
surface upon which the sign was affixed to its original condition, all to
Landlord's reasonable satisfaction, upon the termination of this Lease.
Notwithstanding the foregoing, however, Tenant shall be allowed to place its
identification signs and logos in the areas which were previously used by
Syquest Technologies, Inc. on the same buildings and upon the same monuments.

    4.7 LANDLORD'S RIGHT TO ENTER: Landlord and its agents shall have the right
to enter the Leased Premises during normal business hours upon at least twenty
four (24) hours prior notice (except in the event of an emergency) and subject
to Tenant's reasonable security measures for the purpose of (i) inspecting the
same; (ii) supplying any services to be provided by Landlord to Tenant; (iii)
showing the Leased Premises to prospective purchasers, mortgagees or tenants;
(iv) making necessary alterations, additions or repairs; (v) performing any of
Tenant's obligations when Tenant has failed to do so after giving Tenant
reasonable written notice of its intent to do so; and (vi) posting notices of
non-responsibility or "For Lease" or "For Sale" signs. Additionally, Landlord
shall have the right to enter the Leased Premises without notice to Tenant at
times of emergency. Notwithstanding the foregoing, Landlord shall not show the
Leased Premises to tenants or post "For Lease" signs except during the last six
(6) months of the Lease Term (including extensions thereof).

    4.8 CONTROL OF COMMON AREAS: Landlord shall at all times have the
administrative control of the

                                      -4-

<PAGE>   5
Common Areas including without limitation, the right to prohibit mobile food
and beverage or other vendors from entering the Property.

     4.9  RULES AND REGULATIONS: Landlord shall have the right from time to
time to establish reasonable rules and regulations regarding the use of the
Common Areas. Upon delivery to Tenant of a copy of such reasonable rules and
regulations, Tenant shall comply with such rules and regulations.

     4.10 OUTSIDE AREAS: No materials, pallets, supplies, tanks or containers
whether above or below ground level, equipment, finished products or
semi-finished products, raw materials, inoperable vehicles or articles of any
nature shall be stored upon or permitted to remain outside of the Leased
Premises except in fully fenced and screened areas outside the Building which
have been designed for such purpose and have been approved in writing by
Landlord for such use by Tenant.

4.11 HAZARDOUS MATERIALS: Landlord and Tenant agree that with respect to the
existence or use of Hazardous Materials (as defined as such under current laws
or regulations as may be amended from to time) on the Property, any handling,
transportation, storage, treatment, disposal or use of Hazardous Materials
(other than the use of ordinary office and janitorial products), in any amount,
by Tenant, Tenant's agents, or any other party associated with Tenant must be
absolutely and completely disclosed to and approved in writing by Landlord prior
to its arrival in the Premises. Landlord may uncontestably withhold Landlord's
approval at Landlord's sole discretion. Any withholding from Landlord of
information relating to Hazardous Materials used or stored by Tenant shall
constitute a material default under the terms of the Lease and shall be cause
for lease termination at Landlord's option. Any use or storage of any disclosed
Hazardous Materials in or about the Property, which use or storage shall have
been approved by Landlord, shall strictly comply with all applicable Hazardous
Materials laws. Tenant shall, upon request by Landlord, provide proof of
approvals by the governing authorities. Landlord's consent or approval once
given shall not constitute approval for any subsequent bringing of Hazardous
Materials onto the Premises or Project. Tenant shall indemnify, defend upon
demand with counsel reasonably acceptable to Landlord, and hold harmless
Landlord from and against any and all liabilities, losses, claims, damages, lost
profits, consequential damages, interest, penalties, fines, court costs,
remediation costs, investigation costs, and other expenses which result from or
arise in any manner whatsoever out of the use, storage, treatment,
transportation, release, or disposal of Hazardous Materials on or about the
Leased Premises or the Property by Tenant, Tenant's agents, permittees, or
invitees. If the presence of Hazardous Materials on the Leased Premises, the
Building, or the Project caused or permitted by Tenant, Tenant's agents,
permittees, or invitees result in contamination or deterioration to any extent
of water, soil, or any part of the Lease Premises, the Building, or the Project,
then Tenant shall promptly take any and all action necessary to remove said
Hazardous Materials and to return the Project (and any other property of
whatever nature) to their condition existing prior to the appearance of such
Hazardous Materials. Landlord may at any time and at Tenant's sole cost perform
any tests or investigations (including the installation of testing wells), it
deems appropriate to determine the presence of Hazardous Materials on the
Project. The terms of this clause shall survive the expiration or sooner
termination of this Lease. To the best knowledge of Landlord, (a) no Hazardous
Material is present on the Project or the soil, surface water or groundwater
thereof, (b) no underground storage leaks are present on the Project, and (c) no
action, proceeding or claim is pending or threatened regarding the Project
concerning any Hazardous Material or pursuant to any environmental law. Under no
circumstance shall Tenant be liable for, and Landlord shall indemnify, defend,
protect and hold harmless Tenant, its agents, contractors, stockholders,
directors, successors, representatives, and assigns from and against all losses,
costs, claims, liabilities and damages (including reasonable attorneys' and
consultants' fees) of every type and nature, directly or indirectly arising out
of or in connection with any Hazardous Material present at any time on or about
the Project, or the soil, air, improvements, groundwater or surface water
thereof, or the violation of any laws, orders or regulations, relating to any
such Hazardous Material except to the extent that any of the foregoing actually
results from the release or emission of Hazardous Material by Tenant or its
agents or employees in violation of applicable environmental laws.

                                   ARTICLE 5
                  REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

     5.1  REPAIRED AND MAINTENANCE: The parties shall have the following
obligations and responsibilities with respect to the repair and maintenance of
the Leased Premises, the Building and the Common Areas.

          A. Tenant's Obligation: Tenant shall, at all times during the Lease
Term and at its sole cost and expense, regularly clean and continuously keep
and maintain in good order, condition and repair the Leased Premises and every
part thereof and all appurtenances thereto, including, without limiting the
generality of the foregoing, (i) all interior walls, floors and ceilings, (ii)
all windows, doors and skylights, (iii) all electrical wiring, conduits,
connectors and fixtures, (iv) all plumbing, pipes, sinks, toilets, faucets and
drains, (v) all lighting fixtures, bulbs and lamps, (vi) all heating,
ventilating and air conditioning equipment located within the Leased Premises
or located outside the Leased Premises (e.g. rooftop compressors) and serving
the Leased Premises and (vii) all entranceways to the Leased Premises. Tenant,
if requested to do so by Landlord, shall hire, at Tenant's sole cost and
expense, a licensed heating, ventilating and air conditioning contractor to
regularly, and periodically inspect (not less frequently than every three
months) and perform required maintenance on the heating, ventilating and air
conditioning equipment and systems serving the Leased Premises, or
alternatively, Landlord may, at its election, contract in its own name for such
regular and periodic inspections of and maintenance on such heating,
ventilating and air conditioning equipment and systems and charge to Tenant, as
Additional Rent, the cost thereof. Tenant shall, at its sole cost and expense,
repair all damage to the Building, the Common Areas or the Project caused by
the activities of Tenant, its employees, invitees or contractors promptly
following written notice from Landlord to so repair such damage. If Tenant
shall fail to perform the required maintenance or fail to make repairs required
of it pursuant to this Article within a reasonable period of time following
notice from Landlord to do so, then Landlord may, at its election and without
waiving any other remedy it may otherwise have under this Lease or at Law,
perform such maintenance or make such repairs and charge to Tenant, as
Additional Rent, the costs so incurred by Landlord for same. All glass within
or a part of the Leased Premises, both interior and exterior, is at the sole
risk of Tenant and any broken glass shall promptly be replaced by Tenant at
Tenant's expense with glass of the same kind, size and quality.

                                      -5-

<PAGE>   6
                   B. Landlord's Obligation: Landlord shall, during the Lease
Term or any extensions thereof, and at Landlord's sole cost and expense, repair
the exterior structural parts of the Building (including the foundation,
concrete walls, and roof structure) (the "Structural Portions"). In addition,
Landlord, at Tenant's sole cost and expense, shall be responsible for
maintaining in good and servicable repair, the roof membrane, the glazing, the
Common Area, the paved areas (including driving surfaces, curbs and gutters and
landscaping. During the time that Renco Investment Company owns the Project,
Landlord shall, also maintain in good condition and repair: the exterior
finishes including paint, and the electrical and plumbing systems located
outside the Leased Premises which service the Building, all heating, ventilating
and air conditioning equipment located within the Leased Premises or located
outside the Leased Premises (e.g. rooftop compressors). Landlord shall charge
Tenant, as Additional Rent, the costs incurred by Landlord in making such
non-structural repairs and maintenance. In the event that Landlord elects to
replace the roof membrane or elects to replace the parking and driveway areas,
(as opposed to repairing such items) such cost shall be paid for by Landlord and
the cost of such replacement(s) shall be amortized at the interest rate of Ten
(10%) Percent per annum over the useful life of the replacement. The monthly
amortized amount shall become a Building Operating Expense and Tenant shall pay
such amortized portions of such Building Operating Expense as provided in
Section 13.11.G.

    5.2 SERVICES AND UTILITIES: The parties shall have the following
responsibilities and obligations with respect to obtaining and paying the cost
of providing the following utilities and other services to the Leased Premises.

                   A. Gas and Electricity: Tenant shall arrange, at its sole
cost and expense and in its own name, for the supply of gas and electricity to
the Leased Premises. Tenant shall be responsible for determining if the local
supplier of gas and/or electricity can supply the needs of Tenant and whether
or not the existing gas and/or electrical distribution systems within the
Building and the Leased Premises are adequate for Tenant's needs. Tenant shall
pay all charges for gas and electricity as so supplied to the Leased Premises.

                   B. Water: Tenant shall arrange, at its sole cost and expense
and in its own name, for the supply of water to the Leased Premises.

                   C. Security Service: Tenant acknowledges that Landlord is
not responsible for the security of the Leased Premises or the protection of
Tenant's property or Tenant's employees, invitees or contractors, and that to
the extent Tenant determines that such security or protection services are
advisable or necessary, Tenant shall arrange for and pay the costs of providing
same.

                   D. Trash Disposal: Tenant acknowledges that Landlord is not
responsible for the disposal of Tenant's waste, garbage or trash and that Tenant
shall arrange, in its own name and at its sole cost, for the regular and
periodic removal of such waste, garbage, or trash from the Leased Premises. In
no event shall Landlord be required to provide trash bins for the disposal of
Tenant's waste, garbage or trash.

     5.3 LIMITATION OF LANDLORD'S LIABILITY: Landlord shall not be liable to
Tenant for injury to Tenant, its employees, agents, invitees or contractors,
damage to Tenant's property or loss of Tenant's business or profits, nor shall
Tenant be entitled to terminate this lease or to any reduction in or abatement
of rent by reason of (i) any failure, interruption, rationing or other
curtailment in the supply of water, electric current, gas or other utility
service to the Leased Premises, the Building or the Project from whatever cause
(other than Landlord's active negligence or willful misconduct), or (ii) the
unauthorized intrusion or entry into the Leased Premises by third parties.

                                   ARTICLE 6
                          ALTERATIONS AND IMPROVEMENTS

     6.1 BY TENANT: Tenant shall not make any alterations to or modifications of
the Leased Premises or construct any improvements to or within the Leased
Premises without Landlord's prior written approval, and then not until Landlord
shall have first approved, in writing, the plans and specifications therefore,
which approval shall not be unreasonably withheld. Tenant may, however, make
nonstructural alterations without Landlord's consent to the extent the cost of
any particular project is less than twenty-five thousand dollars ($25,000). All
such modifications, alterations or improvements, once so approved, shall be
made, constructed or installed by Tenant at Tenant's expense, using a licensed
contractor first approved by Landlord, in substantial compliance with the
Landlord-approved plans and specifications therefore. All work undertaken by
Tenant shall be done in accordance with all Laws and in a good and workmanlike
manner using new materials of good quality that match or complement the original
improvements existing as of the Lease Commencement Date. Tenant shall not
commence the making of any such modifications or alterations or the construction
of any such improvements until (i) all required governmental approvals and
permits shall have been obtained, (ii) all requirements regarding insurance
imposed by this Lease have been satisfied, (iii) Tenant shall have given
Landlord at least five business days prior written notice of its intention to
commence such work so that Landlord may post and file notices of
non-responsibility, and (iv) if requested by Landlord, Tenant shall have
obtained contingent liability and broad form builder's risk insurance in an
amount satisfactory to Landlord to cover any perils relating to the proposed
work not covered by insurance carried by Tenant pursuant to Article 9. In no
event shall Tenant make any modifications, alterations or improvements to the
Common Areas or any areas outside of the Leased Premises. As used in this
Article, the term "modifications, alterations and/or improvements" shall
include, without limitation, the installation of additional electrical outlets,
overhead lighting fixtures, drains, sinks, partitions, doorways, or the like.
Tenant shall pay Landlord's reasonable costs to inspect the construction of
Tenant's alterations or modifications and to have Landlord's architect revise
Landlord's drawings to show the work performed by Tenant. Notwithstanding the
above provisions, however, Landlord and Tenant acknowledge that as a part of the
consideration of Tenant and Landlord having entered into this Lease Agreement,
that Tenant intends to modify the interior of the Leased Premises. By the terms
of Exhibit "C" hereof, Landlord agrees to reimburse Tenant for a portion of the
expense in the modification of said interior (the "Initial Tenant
Improvements").

     6.2 OWNERSHIP OF IMPROVEMENTS: All modifications, alterations or
improvements made or added to the Leased Premises by Tenant (other than
Tenant's inventory, equipment, movable furniture, wall decorations and trade
fixtures) shall be deemed real property and a part of the Leased Premises, but
shall remain the property of Tenant during the Lease Term. Any such
modifications, alterations or improvements, once completed, shall not be
altered or removed from the Leased Premises during the Lease Term without
Landlord's written approval first obtained in accordance with the provisions of
the Article above. At the expiration or sooner termination of the Lease, all
such modifications, alterations and improvements (other than Tenant's inventory,
equipment, movable furniture, wall decorations and trade fixtures) shall
automatically become the property of Landlord and shall be surrendered to

                                      -6-

<PAGE>   7
Landlord as a part of the Leased Premise as required pursuant to Article 2,
unless Landlord shall require Tenant to remove any of such modifications,
alterations or improvements by giving Tenant written notice of such requirement
at the time of consent, in which case Tenant shall so remove same on or before
the expiration of the Lease Term (including extensions thereof). Landlord shall
not require Tenant to remove any of the Initial Tenant Improvements. Landlord
shall have no obligations to reimburse to Tenant all or any portion of the cost
or value of any such modifications, alterations or improvements so surrendered
to Landlord. All modifications, alterations or improvements which are installed
or constructed on or attached to the Leased Premises by Landlord at Landlord's
expense shall be deemed real property, and a part of the Leased Premises and
shall be the property of Landlord. All lighting, plumbing, electrical, heating,
ventilating and air conditioning fixtures, partitioning, window coverings, wall
coverings and floor coverings installed by Tenant shall be deemed improvements
to the Leased Premises and not trade fixtures of Tenant.

     6.3 ALTERATIONS: Throughout the terms of this Lease or any extensions
thereof, at its sole cost, Tenant shall make all modifications, alterations and
improvements to the Leased Premises that are required by any Law for any
reason. Notwithstanding the foregoing, in no event shall Tenant be required to
cause the Structural Portions of the Buildings (concrete walls, foundations,
and the structural portions of the roof) to comply with Laws unless such
requirement is due solely to Tenant's particular use.

     6.4 LIENS: Tenant shall keep the Leased Premises, the Building and the
Property free from any liens and shall pay when due all bills arising out of
any work performed, materials furnished, or obligations incurred by Tenant, its
agents, employees or contractors relating to the Leased Premises.

                                   ARTICLE 7
                      ASSIGNMENT AND SUBLETTING BY TENANT

    7.1 BY TENANT: Tenant shall not sublet the Leased Premises (or any portion
thereof) or assign or encumber its interest in this Lease, whether voluntarily
or by operation of Law, without Landlord's prior written consent first obtained
in accordance with the provisions of this Article 7. Any attempted subletting,
assignment or encumbrance without Landlord's prior written consent, at
Landlord's election, shall constitute a default by Tenant under the terms of
this Lease. The acceptance of rent by Landlord from any person or entity other
than Tenant, or the acceptance of rent by Landlord from Tenant with knowledge
of a violation of the provisions of this Article, shall not be deemed to be a
waiver by Landlord of any provision of this Article or this Lease or to be a
consent to any subletting by Tenant  or any assignment or encumbrance of
Tenant's interest in this Lease. Notwithstanding the foregoing, however,
Landlord hereby gives its consent to sublet the premises commonly known and
referred to as Renco 47 consisting of approximately 51,767 square feet of space
for only the initial period of 36 months from the Commencement Date, without
Landlord's participation in Assignment Consideration and Excess Rentals and
without being subject to any recapture or termination rights under Section
7.3. Such subletting shall be to a reasonable subtenant and Landlord shall have
the same rights as described in this Article 7 saving and excepting therefrom
only the provision that Tenant share with the Landlord, Assignment
Consideration and Excess Rentals. Notwithstanding anything to the contrary
herein, Tenant may, without Landlord's prior written consent, sublet the Leased
Premises or assign the Lease to (a) a subsidiary, affiliate, division or
corporation controlling, controlled by or under common control with Tenant, (b)
a successor corporation related to Tenant by merger, consolidation,
non-bankruptcy reorganization, or government action, or (c) a purchaser of
substantially all of Tenant's assets located in the Premises. A sale or
transfer of Tenant's capital stock shall not be deemed an assignment, subletting
or any other transfer of the Lease or the Leased Premises.

     7.2 INTENTIONALLY DELETED

     7.3 LANDLORD'S ELECTION: If Tenant or Tenant's successors shall desire to
assign its interest under this Lease or to sublet the Leased Premises, Tenant
and Tenant's successors must first notify Landlord, in writing, of its intent to
so assign or sublet, at least thirty days in advance of the date it intends to
so assign its interest in this Lease or sublet the Leased Premises but not
sooner than sixty days in advance of such date, specifying in detail the terms
of such proposed assignment or subletting, including the name of the proposed
assignee or sublessee, the proposed assignee's or Sublessee's intended use of
the Leased Premises, a current financial statement of such proposed assignee or
sublessee and the form of documents to be used in effectuating such assignment
or subletting. Landlord shall have a period of fifteen days following receipt of
such notice and receipt of all information reasonably requested by Landlord
regarding the proposed assignee or sublessee within which to do one of the
following: (a) in the event of an assignment or sublease of more than fifty
(50%) percent of an entire Building for substantially the remaining Lease Term,
to terminate the Lease as to that part of the Leased Premises proposed to be so
sublet, or assigned or (b) if Landlord shall not have elected to or does not
have the option to cancel and terminate this Lease, to either (i) consent to
such requested assignment or subletting subject to Tenant's and Tenant's
successors' compliance with the conditions set forth in Article 7.4 below or
(ii) refuse to so consent to such requested assignment or subletting, provided
that such consent shall not be unreasonably refused. It shall not be
unreasonable for Landlord to withhold its consent to any proposed assignment or
subletting if (i) the proposed assignee's or subtenant's anticipated use of the
Premises involves the storage, use or disposal of a Hazardous Material; (ii) if
the proposed assignee or subtenant has been required by any prior landlord,
lender or governmental authority to clean up Hazardous Materials unlawfully
discharged by the proposed assignee or subtenant; or (iii) if the proposed
assignee or subtenant is subject to investigation or enforcement order or
proceeding by any governmental authority in connection with the use, disposal or
storage of a Hazardous Material. Tenant and Tenant's successors covenant and
agree to supply to Landlord, upon request, with all necessary or relevant
information which Landlord may reasonably request respecting such proposed
assignment or subletting and/or the proposed assignee or sublessee. Landlord's
review period shall not commence until Landlord has received all information
requested by Landlord.

     7.4 CONDITIONS TO LANDLORD'S CONSENT: If Landlord elects to consent, or
shall have been ordered to so consent by a court of competent jurisdiction, to
such requested assignment, subletting or encumbrance, such consent shall be
expressly conditioned upon the occurrence of each of the conditions below set
forth. The conditions are as follows:

                                      -7-
<PAGE>   8
          A. Landlord having approved in form and substance the assignment or
sublease agreement (or the encumbrance agreement), which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.

          B. Each such sublessee or assignee having agreed, in writing
satisfactory to Landlord and its counsel and for the benefit of Landlord, to
assume, to be bound by, and to perform the obligations of this Lease to be
performed by Tenant (or, in the case of an encumbrance, each such encumbrancer
having similarly agreed to assume, be bound by and to perform Tenant's
obligations upon a foreclosure or transfer in lieu thereof).

          C. Tenant being in full compliance, having cured any defaults under
the terms of this Lease through and including the date of the requested consent,
as well as through and including the date such assignment or subletting is to
become effective.

          D. Tenant having reimbursed to Landlord all reasonable costs and
attorneys fees incurred by Landlord in conjunction with the processing and
documentation of any such requested subletting, assignment or encumbrance.

          E. Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement, assignment or encumbrance (as
applicable) and all related agreements.

          F. Tenant having paid, or having agreed in writing to pay as to future
payments, to Landlord fifty percent of all assignment consideration or excess
rentals to be paid to Tenant or to any other on Tenant's behalf or for Tenant's
benefit for such assignment or subletting as follows:

          (1) If Tenant assigns its interest under the Lease and if all or a
portion of the consideration for such assignment is to be paid by the assignee
at the time of the assignment, that Tenant shall have paid to Landlord and
Landlord shall have received an amount equal to fifty percent of the assignment
consideration so paid or to be paid (whichever is the greater) at the time of
the assignment by the assignee after subtracting Tenant's reasonable costs in
connection therewith (including, without limitation reasonable brokerage
commissions and attorneys' fees and the unamortized portion of Tenant
Improvements paid for solely by Tenant ("Assignment/Subletting Costs"), all
reduced to a monthly amount to be allocated over the remaining term of the
Lease; or

          (2) If Tenant assigns its interest under this Lease and if Tenant is
to receive all or a portion of the consideration for such assignment in future
installments, that Tenant and Tenant's assignee shall have entered into a
written agreement with and for the benefit of Landlord satisfactory to Landlord
and its counsel whereby Tenant and Tenant's assignee jointly agree to pay to
Landlord an amount equal fifty percent of all such future assignment
consideration installments to be paid by such assignee as and when such
assignment consideration is so paid after subtracting Tenant's
Assignment/Subletting Costs.

          (3) If Tenant subleases the Leased Premises, that Tenant and Tenant's
sublessee shall have entered into a written agreement with and for the benefit
of Landlord satisfactory to Landlord and its counsel whereby Tenant and Tenant's
sublessee jointly agree to pay to Landlord fifty percent of all excess rentals
to be paid by such sublessee as and when such excess rentals are so paid after
subtracting Tenant's Assignment/Subletting Costs.

     7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED: For purposes of
this article, the term "Assignment Consideration" shall mean all consideration
to be paid by the Assignee as consideration for such assignment, and the term
"Excess Rentals" shall mean all consideration to be paid by the Sublessee in
excess of the rent to be paid by said Sublessee/Sublessor for the premises
subleased for the same period. It is specifically intended and agreed that this
provision is intended to be a fifty percent profit sharing clause, such that
Tenant and Landlord shall share and share alike in any profits (after
reasonable costs of subletting or assignment) as a result of any transfer of an
interest in the Lease or the Leased Premises or any other property, as more
particularly described herein. In the event Tenant or Tenant's successors
sublease a portion of the Leased Premises, "Excess Rentals" shall be calculated
by subtracting the rent payable by the Sublessor for the portion of the Leased
Premises so sublet from all consideration to be paid by such Sublessee. Rent
payable by the Sublessor for the portion of the Leased Premises so sublet shall
be calculated by multiplying the Base Monthly Rent payable by the Sublessor for
the Leased Premises leased by such Sublessor by a fraction, the numerator of
which is the area in square fee subleased and the denominator of which is the
total floor area of the Leased Premises leased by such Sublessor also in square
feet. Tenant and Tenant's Successors agree that fifty percent of any Assignment
Consideration and/or Excess Rentals hereunder after subtracting Tenant's
Assignment/Subletting Costs shall be the property of Landlord and fifty percent
of such shall be the property of Tenant.

     7.6 PAYMENTS: All payments required by this Article to be made to Landlord
shall be made in cash in full as and when they become due. At the time Tenant,
Tenant's assignee or sublessee makes each such payment to Landlord, Tenant or
Tenant's assignee or sublessee, as the case may be, shall deliver to Landlord
an itemized statement in reasonable detail showing the method by which the
amount due Landlord was calculated and certified by the party making such
payment as true and correct. Landlord may require that all payments of Excess
Rentals and/or Assignment Consideration to be made hereunder be made directly
to Landlord by such Transferee.

     7.7 GOOD FAITH: The rights granted to Tenant by this Article are granted
in consideration of Tenant's express covenant that all pertinent allocations
which are made by Tenant between the rental value of the Leased Premises and
the value of any of Tenant's personal property which may be conveyed or leased
concurrently with and which may reasonably be considered a part of the same
transaction as the permitted assignment or subletting shall be made fairly,
honestly and in good faith. If Tenant shall breach this Covenant of Good Faith,
Landlord may immediately declare Tenant to be in default under the terms of
this Lease and terminate this Lease and/or exercise any other rights and
remedies Landlord would have under the terms of this Lease in the case of a
material default by Tenant under this Lease.

     7.8 EFFECT OF LANDLORD'S CONSENT: No subletting, assignment or encumbrance,
even with the consent of Landlord, shall relieve Tenant of its personal and
primary obligation to pay rent and to perform all of the obligations to be
performed by Tenant hereunder. Consent by Landlord to one or more assignments or
encumbrances of Tenant's interest in this Lease or to one or more sublettings of
the Leased Premises shall not be deemed to be a consent to any subsequent
assignment, encumbrance or subletting. If Landlord shall have been ordered by a
court of competent jurisdiction to consent to a requested assignment or
subletting, or such an assignment or subletting shall have been ordered over the
objection of Landlord, such assignment or subletting shall not be binding
between the assignee (or sublessee) and Landlord until such time as all
conditions set forth in Article 7.4 above have been fully satisfied (to the
extent not then satisfied) by the assignee or sublessee, including, without
limitation, the payment to Landlord of all agreed assignment considerations
and/or excess rentals then due Landlord.

                                      -8-

<PAGE>   9
                                   ARTICLE 8
               LIMITATIONS ON LANDLORD'S LIABILITY AND INDEMNITY

     8.1  LIMITATION ON LANDLORD'S LIABILITY AND RELEASE: Except to the extent
of the active negligence or willful misconduct of Landlord or its agents or
contractors or a breach of Landlord's obligations under the Lease, Landlord
shall not be liable to Tenant for, and Tenant hereby releases Landlord and its
partners and officers from, any and all liability, whether in contract, tort or
on any other basis, for any injury to or any damage sustained by Tenant, its
agents, employees, contractors or invitees; any damage to Tenant's property; or
any loss to Tenant's business, loss of Tenant's profits or other financial loss
of Tenant resulting from or attributable to the condition of, the management of,
the maintenance of, or the protection of the Leased Premises or the failure of
any component of the Premises, the Building, the Project or the Common Areas,
including, without limitation, any such injury, damage or loss resulting from
(i) the failure, interruption, rationing or other curtailment or cessation in
the supply of electricity, water, gas or other utility service to the Project,
the Building or the Leased Premises; (ii) the vandalism or forcible entry into
the Building or the Leased Premises; (iii) the penetration of water into or onto
any portion of the Leased Premises through roof leaks or otherwise; (iv) the
failure to provide security and/or adequate lighting in or about the Project,
the Building or the Leased Premises; (v) the existence of any design or
construction defects within the Project, the Building or the Leased Premises;
(vi) the failure of any mechanical systems to function properly (such as the
HVAC systems); or (vii) the blockage of access to any portion of the Project,
the Building or the Leased Premises.

     8.2  TENANT'S INDEMNIFICATION OF LANDLORD: Except to the extent of the
active negligence or willful misconduct of Landlord or its agents or contractors
or a breach of Landlord's obligations under the Lease, Tenant shall defend
Landlord, with competent counsel reasonably satisfactory to Landlord, against
and claims made or legal actions filed or threatened by third parties against
Landlord which result from the death, bodily injury, personal injury, damage to
property or interference with contractual or other rights suffered by any third
party, (including other Tenants within the Project) which (i) occurred within
the Leased Premises or the Common Areas or (ii) resulted from Tenant's use or
occupancy of the Leased Premises or the Common Areas or (iii) resulted from
Tenant's activities in or about the Leased Premises, the Building or the
Project, and Tenant shall indemnify and hold Landlord, Landlord's principals,
employees and agents harmless from any loss (including loss of rents by reason
of vacant space which otherwise would have been leased but for such
activities), liabilities, penalties, or expense whatsoever (including all legal
fees incurred by Landlord with respect to defending such claims) resulting
therefrom. The terms of his indemnity agreement pertain to events which shall
have occurred during the term of this Lease but the indemnity shall survive the
expiration or sooner termination of this Lease.

                                   ARTICLE 9
                                   INSURANCE

     9.1  TENANT'S INSURANCE: Tenant shall maintain insurance complying with
all of the following:

          A.   Tenant shall procure, pay for and keep in force and effect, at
all times during the Lease Term, the following:

               (1)  Commercial General Liability insurance insuring Tenant
against liability for bodily injury, death, property damage and personal injury
occurring at the Leased Premises, or resulting from Tenant's use or occupancy of
the Leased Premises or the Building, Outside Areas, Property, or Common Areas or
resulting from Tenant's activities in or about the Leased Premises. Such
insurance shall be on an occurrence basis with a combined single limit of
liability of not less than the amount of Tenant's Required Liability Coverage
(as set forth in Article 1). The policy or policies shall be endorsed to name
Landlord and such others as are designated by Landlord as additional insureds
and shall contain the following additional endorsement: "The insurance afforded
to the additional insureds is primary insurance. If the additional insureds have
other insurance which is applicable to the loss on a contributing, excess or
contingent basis, the amount of this insurance company's liability under this
policy shall not be reduced by the existence of such other insurance. Any
insurance carried by the additional insureds shall be excess and non
contributing with the insurance provided by the Tenant." The policy shall not be
canceled or reduced without at least 30 days written notice to additional
insureds. If the policy insures more than one location, it shall be endorsed to
show that the limits and aggregate apply per location. Tenant's policy shall
also contain the severability of interest and cross-liability endorsement or
clauses.

               (2)  Fire and property damage insurance in so-called Special
Form insuring Tenant against loss from physical damage to Tenant's personal
property, inventory, stock, trade fixtures and improvements within the Leased
Premises with coverage for the full actual replacement cost thereof;

               (3)  Plate-glass insurance, at actual replacement cost;

               (4)  Product Liability insurance shall not be required by
Landlord.

               (5)  Workers' compensation insurance and any other employee
benefit insurance sufficient to comply with all Laws which policy shall be
endorsed to provide thirty (30) days written notice of cancellation to Landlord.

               (6)  Comprehensive Auto Liability insurance with a combined
single limit coverage of not less than the amount of Tenant's Required
Liability Coverage (as set forth in Article 1.1 M. Each policy of liability
insurance required to be carried by Tenant pursuant to this Article or actually
carried by Tenant with respect to the Leased Premises or the Property (i) shall
be in a form satisfactory to Landlord, (ii) Shall be provided by carriers
admitted to do business in the State of California, with a Best rating of
"A/VI" or better and/or acceptable to Landlord. Property insurance shall
contain a waiver and/or a permission to waive by the insurer any right of
subrogation against Landlord, its principals, employees, agents and contractors
which might arise by reason of any payment under such policy or by reason of
any act or omission of Landlord, its principals, employees, agents or
contractors.

               (7)  Business Interruption Insurance which shall adequately
compensate Tenant for any losses incurred due to Tenant's inability to use the
Premises whether caused by the act or failure to act by Landlord or any other
reason Tenant shall have been denied the full and normal use of the Premises or
any portion thereof.

          C.   Prior to the time Tenant or any of its contractors enters the
Leased Premises, Tenant shall deliver to the Landlord with respect to each
policy of insurance required to be carried by Tenant pursuant to this Article,
a certificate of the insurer certifying, in a form reasonably satisfactory to
the Landlord, that the policy has been issued and premium paid providing the
coverage required by this Article and containing the provisions herein.
Attached to

                                      -9-
<PAGE>   10
such a certificate shall be endorsements naming Landlord as additional insured,
and including the wording under primary insurance above. Landlord may at any
time and from time-to-time inspect and/or copy any and all insurance policies
required to be carried by Tenant pursuant to this article.

     D.   The Commercial General Liability insurance carried by Tenant shall
specifically insure the performance by Tenant of the Indemnification provisions
set forth in Article 8.2 of this lease provided, however, nothing contained in
this Article 9 shall be construed to limit the liability of Tenant under the
Indemnification provisions set forth in said Article 8.2.

     E.   Notwithstanding anything contained herein to the contrary, all
insurance policies and coverages required under the terms of this Lease shall
require a minimum notice to Landlord of Thirty (30) days prior to a
cancellation, of such coverages or providers.

     F.   In the event that Tenant shall not have acquired all of the insurance
coverages and policies as required above, by the Lease Commencement Date,
Landlord shall have the right but not the obligation to acquire such coverages
and policies on behalf of Tenant at Tenant's sole cost and expense, and Tenant
shall, upon demand by Landlord, reimburse to Landlord, all costs associated
with the premiums, acquisition, and administration of such coverages and
policies, and such costs shall be a Building Operating Expense.

 9.2 LANDLORD'S INSURANCE: With respect to insurance maintained by Landlord:

     A.   Landlord shall maintain, as the minimum coverage required of it by
this Lease, property insurance insuring Landlord (and such others as Landlord
may designate) against loss from physical damage to the Building with coverage
of not less than one hundred percent of the full actual replacement cost thereof
and against loss of rents for a period of not less than twelve months. Such
property damage insurance, at Landlord's election but without any requirement on
Landlord's behalf to do so, (i) may be written in so-called Special Form,
excluding only those perils commonly excluded from such coverage by Landlord's
then property damage insurer; (ii) may provide coverage for physical damage to
the improvements so insured for up to the entire full actual replacement cost
thereof; (iii) may be endorsed to include (or separate policies which may be
carried to cover) loss or damage caused by any additional perils against which
Landlord may elect to insure, including earthquake and/or flood; (iv) may
provide coverage for loss of rents for a period of up to twelve months; and/or
(v) may contain "deductibles" per occurrence in an amount reasonably acceptable
to Landlord. Landlord shall not be required to cause such insurance to cover any
of Tenant's personal property, inventory and trade fixtures, or any
modifications, alterations or improvements made or constructed by Tenant to or
within the Leased Premises.

     B.   Landlord shall maintain Commercial General Liability insurance
insuring Landlord (and such others as are designated by Landlord) against
liability for personal injury, bodily injury, death, and damage to property
occurring in, on or about, or resulting from the use or occupancy of the
Project, or any portion thereof, with combined single limit coverage of at least
Two Million Dollars. Landlord may carry such greater coverage as Landlord or
Landlord's Lender, insurance broker or advisor or counsel may from time to time
determine is reasonably necessary for the adequate protection of Landlord and
the Project.

     C.   Landlord may maintain any other insurance which in the opinion of its
lender, insurance broker or advisor, or legal counsel is reasonably prudent to
carry under the given circumstances.

 9.3 MUTUAL WAIVER OF SUBROGATION: Notwithstanding anything to the contrary in
the Lease, Landlord hereby releases Tenant, and Tenant hereby releases Landlord
and its respective partners and officers, agents, employees and servants, from
any and all liability for loss, damage or injury to the property of the other
in or about the Leased Premises which is caused by or results from a peril or
event or happening which would be covered by insurance required to be carried
under the terms of this Lease, or is covered by insurance actually carried and
in force at the time of the loss, by the party sustaining such loss.

                                   ARTICLE 10
                           DAMAGE TO LEASED PREMISES

10.1 LANDLORD'S DUTY TO RESTORE: If the Leased Premises are damaged by any
peril after the Effective Date of this Lease, Landlord shall restore the Leased
Premises, as and when required by this Article, unless this Lease is terminated
by Landlord pursuant to Article 10.2 or by Tenant pursuant to Article 10.3. All
insurance proceeds available from the fire and property damage insurance
carried by Landlord shall be paid to and become the property of Landlord. If
this Lease is terminated pursuant to either Article 10.2 or 10.3, all insurance
proceeds available from insurance carried by Tenant which cover loss to
property that is Landlord's property or would become Landlord's property on
termination of this Lease shall be paid to and become the property of Landlord
(except to the extent such property was installed at Tenant's sole cost) and
the remainder of such proceeds shall be paid to and become the property of
Tenant. If this Lease is not terminated pursuant to either Article 10.2 or
10.3, all insurance proceeds available from insurance carried by Tenant which
cover loss to property that is Landlord's property shall be paid to and become
the property of Landlord, and all proceeds available which cover loss to
property which would become the property of Landlord upon the termination of
this Lease shall be paid to and remain the property of Tenant provided that
Tenant agrees to restore such property. If this Lease is not so terminated,
then upon receipt of the insurance proceeds (if the loss is covered by
insurance) and the issuance of all necessary governmental permits, Landlord
shall commence and diligently prosecute to completion the restoration of the
Leased Premises, to the extent then allowed by Law, to substantially the same
condition in which the Leased Premises existed as of the time just prior to
such damage or destruction. Landlord's obligation to restore shall be limited
to the Leased Premises and interior improvements constructed by Landlord.
Landlord shall have no obligation to restore any other improvements to the
Leased Premises or any of Tenant's personal property, inventory or trade
fixtures. Upon completion of the restoration by Landlord, Tenant shall
forthwith replace or fully repair all of Tenant's personal property, inventory,
trade fixtures and other improvements constructed by Tenant to like or similar
condition as existed at the time of such damage or destruction.

10.2 LANDLORD'S RIGHT TO TERMINATE: Landlord shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:

     A.   The Building is damaged by any peril covered by valid and collectible
insurance actually carried by Landlord and in force at the time of such damage
or destruction (an "insured peril") to such an extent that the estimated cost
to restore the Building exceeds the lesser of (i) the insurance proceeds
(including deductibles) available

                                      -10-
<PAGE>   11

from insurance carried by Landlord, or (ii) seventy-five percent of the then
actual estimated replacement cost thereof;

            B. The Building is damaged by an uninsured peril.
            D. The Building is damaged by any peril and, because of the Laws
then in force, the Building (i) can not be restored at reasonable cost or (ii)
if restored, can not be used for the same use being made thereof before such
damage. Notwithstanding the foregoing, in the event of either A or B above,
Tenant may but is not required to elect to contribute the shortfall of proceeds
within thirty (30) days of Landlord's written notice of such shortfall, in which
event Landlord shall restore the Leased Premises and shall not have the right to
terminate the Lease. In no event shall Landlord have the right to terminate the
Lease if the damage to the Leased Premises is relatively minor (e.g. repair or
restoration which would cost less than ten (10%) percent of the replacement cost
of the Leased Premises.

10.3 TENANT'S RIGHT TO TERMINATE: If the Leased Premises are damaged by any
peril and Landlord does not elect to terminate this Lease or is not entitled to
terminate this Lease pursuant to this Article, then as soon as reasonably
practicable, Landlord shall furnish Tenant with the written opinion of
Landlord's architect or construction consultant as to when the restoration work
required of Landlord may be complete. Tenant shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised in the case of A or B below only by delivery to Landlord of a written
notice of election to terminate with seven days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:

            A. The Leased Premises are damaged by any peril and, in the
reasonably opinion of Landlord's architect or construction consultant, the
restoration of the Leased Premises cannot be substantially completed within
nine (9) months after the date of such notice from Landlord; or
            B. The Leased Premises are damaged by any peril within nine
months of the last day of the Lease Term and, in the reasonable opinion of
Landlord's architect or construction consultant, the restoration of the Leased
Premises cannot be substantially completed within ninety days after the date
such restoration is commenced.

     10.4 TENANT'S WAIVER: Landlord and Tenant agree that the provisions of
Article 10.3 above, captioned "Tenant's Right to Terminate", are intended to
supersede and replace the provisions contained in California Civil Code, Section
1932, Subdivision 2, and California Civil Code, Section 1934, and accordingly,
Tenant hereby waives the provisions of said Civil Code Sections and the
provisions of any successor Code Sections or similar Laws hereinafter enacted.

     10.5 ABATEMENT OF RENT: In the event of damage to the Leased Premises which
does not result in the termination of this Lease, the Base Monthly Rent (and any
Additional Rent) shall be temporarily abated during the period of restoration
in proportion to the degree to which Tenant's use of the Leased Premises is
impaired by such damage.

                                   ARTICLE 11
                                  CONDEMNATION

     11.1 RIGHT TO TERMINATE: Subject to Article 11.3, Tenant and Landlord each
shall have the option to terminate this Lease, if, as a result of a taking by
means of the exercise of the power of eminent domain, a portion greater than
thirty three (33%) percent of the Leased Premises are so taken.

     11.2 INTENTIONALLY LEFT BLANK

     11.3 TEMPORARY TAKING: If any portion of the Leased Premises is temporarily
taken for one year or less, this Lease shall remain in effect. If more than 33%
of the Leased Premises is temporarily taken for a period which either exceeds
one year or which extends beyond the natural expiration of the Lease Term, then
Landlord and Tenant shall each independently have the option to terminate this
Lease, effective on the date possession is taken by the condemnor.

     11.4 RESTORATION AND ABATEMENT OF RENT: If any part of the Leased Premises
is taken by condemnation and this Lease in not terminated, then Landlord shall
repair any damage occasioned thereby to the remainder of the Leased Premises to
a condition reasonably suitable for Tenant's continued operations, to the extent
practicable. As of the date possession is taken by the condemning authority, (i)
the Base Monthly Rent shall be reduced in the same proportion that the area of
that part of the Leased Premises so taken bears to the area of the Leased
Premises immediately prior to such taking, and (ii) Tenant's Proportionate Share
shall be appropriately adjusted.

     11.5  DIVISION OF CONDEMNATION AWARD: Any award made for any condemnation
of the Project, the Building, the Common Areas or the Lease Premises, or any
portion thereof, shall belong to and be paid to Landlord, and Tenant hereby
assigns to Landlord all of its right, title and interest in any such award.
Tenant shall, however, be entitled to made a claim for a separate award for
Tenant's fixtures and equipment, moving expenses, loss of goodwill and the
unamortized portion of improvements paid for by Tenant.

                                   ARTICLE 12
                              DEFAULT AND REMEDIES

     12.1 EVENTS OF TENANT'S DEFAULT: The occurrence of any of the following
shall constitute a default by Tenant: (a) failure to pay rent or other charges
when due where such failure is not cured within five days after written notice
of nonpayment; (b) failure to perform any other provision of this Lease within
the time periods provided where such failure is not cured within thirty (30)
days after written notice of such failure or such longer period as is reasonably
necessary to effect such cure.

     12.2 LANDLORD'S REMEDIES: Landlord shall have the following remedies (which
are cumulative and not exclusive and are in addition to any remedies now or
later allowed by law) if Tenant is in default beyond applicable notice and cure
periods. Landlord may terminate Tenant's right to possession of the Premises at
any time. No act by Landlord other than giving notice to Tenant shall terminate
this Lease. Acts of maintenance, efforts to relet the Premises, or the
appointment of a receiver on Landlord's initiative to protect Landlord's
interest under the terms of

                                      -11-

<PAGE>   12
this Lease shall not constitute a termination of Tenants right to possession.
Upon termination of Tenant's right to possession, Landlord has the right to
recover from Tenant: (1) the worth of the unpaid rent that had been earned at
the time of termination of Tenant's right to possession; (2) the worth of the
amount of the unpaid rent that would have been earned after the date of
termination of Tenant's right to possession after subtracting the amount Tenant
reasonably proves could reasonably be avoided by Landlord; (3) any other
amount, including but not limited to expenses incurred to relet the premises,
court, attorney and collection costs, necessary to compensate Landlord for any
all losses caused by Tenant's default. "The worth," as used in this article, is
to be computed by allowing interest at the maximum legal interest rate
permitted by law.

     12.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES: In the event Landlord fails
to perform any of its obligations under this Lease, Landlord shall nevertheless
not be in default under the terms of this Lease until such time as Tenant shall
have first given Landlord written notice specifying the nature of such failure
to perform its obligations, and then only after Landlord shall have had a
reasonable period of time following its receipt of such notice within which to
perform such obligations. In the event of Landlord's default as above set
forth, then, and only then, Tenant may then proceed at law to compel Landlord
to perform its obligations and/or to recover damages proximately caused by such
failure to perform. In the event Landlord fails to perform any of its
obligations herein or under the Lease within such reasonable time period
(except in case of emergency posing an immediate threat to persons or property,
in which case no prior notice shall be required), then Tenant shall have the
right but not the obligation to cure such default and to demand reimbursement
by Landlord for the reasonable cost of such cure with interest thereon at the
rate of ten (10%) percent per annum or the highest rate allowed by law,
whichever is less, from the date of the expenditure until repaid. Nothing in
this Article 12.3 shall entitle Tenant to offset rent or deduct such amounts
from the Base Monthly Rent or Additional Rent due under the terms of this Lease.

     12.4 LIMITATION ON TENANT'S RECOURSE: Tenant agrees that the obligations
of Landlord under this Lease shall not constitute personal obligations of the
officers, directors, trustees, partners, joint venturers, members, owners,
stockholders, or other principals of any business entity which holds title to
the Project. Tenant shall have recourse only to the assets of the Project (as
shown on the Site Plan) for the satisfaction of such obligations and not to the
other assets of any individual owner such officers, directors, trustees,
partners, joint venturers, members, owners, stockholders or principals.
Additionally, if Landlord is a corporation, partnership or limited liability
corporation, then Tenant covenants and agrees:

               A. No partner, stockholder, or officer of Landlord shall be sued
or named as a party in any suit or action brought by Tenant with respect to any
alleged breach of this Lease (except to the extent necessary to secure
jurisdiction over the entity and then only for that sole purpose);

               B. No service of process shall be made against any partner,
stockholder, or officer of Landlord except for the sole purpose of securing
jurisdiction over the entity; and

               C. No writ of execution shall be levied against the assets of
any partner or officer of Landlord other than to the extent of his interest in
the assets of the Project. Tenant further agrees that each of the foregoing
covenants and agreements shall be enforceable by Landlord and by any partner or
officer of Landlord and shall be applicable to any actual or alleged
misrepresentation or non-disclosure made respecting this Lease or the Leased
Premises or any actual or alleged failure, default or breach of any covenant or
agreement either expressly or implicitly contained in this Lease or imposed by
statute or at common law.

     12.5 TENANT'S WAIVER: Landlord and Tenant agree that the provisions of
Article 12.3 above are intended to supersede and replace the provisions of
California Civil Code 1932(1), 1941 and 1942, and accordingly, Tenant hereby
waives the provisions of Section 1932(1), 1941 and 1942 of the California Civil
Code and/or any similar or successor Law regarding Tenant's right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from the
rent due under this Lease. Tenant hereby waives any right of redemption or
relief from forfeiture under the Laws of the State of California, or under any
other present or future Law, in the event Tenant is evicted or Landlord takes
possession of the Leased Premises by reason of any default by Tenant.

                                   ARTICLE 13
                               GENERAL PROVISIONS

     13.1 TAXES ON TENANT'S PROPERTY: Tenant shall pay before delinquency any
and all taxes, assessments, license fees, use fees, permit fees and public
charges of whatever nature or description levied, assessed or imposed against
Tenant or Landlord by a governmental agency arising out of, caused by reason of
or based upon Tenant's estate in this Lease, Tenant's ownership of property,
improvements made by Tenant to the Leased Premises, improvements made by
Landlord for Tenant's use within the Leased Premises, Tenant's use (or
estimated use) of public facilities or services or Tenant's consumption (or
estimated consumption) of public utilities, energy, water or other resources.
On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence
of these payments. If any such taxes, assessments, fees or public charges are
levied against Landlord, Landlord's property, the Building or the Project, or
if the assessed value of the Building or the Project is increased by the
inclusion therein of a value placed upon same, then Landlord, after giving
written notice to Tenant, shall have the right, regardless of the validity
thereof, to pay such taxes, assessment, fee or public charge and bill Tenant,
as Additional Rent, the amount of such taxes, assessment, fee or public charge
so paid on Tenant's behalf. Tenant shall, within ten days from the date it
receives an invoice from Landlord setting forth the amount of such taxes,
assessment, fee or public charge so levied, pay to Landlord, as Additional
Rent, the amount set forth in said invoice. Failure by Tenant to pay the amount
so invoiced within said ten day period shall be conclusively deemed a default
by Tenant under this Lease. Tenant shall have the right, and with Landlord's
full cooperation if Tenant is not then in default under the terms of this
Lease, to bring suit in any court of competent jurisdiction to recover from the
taxing authority the amount of any such taxes, assessment, fee or public charge
so paid.

     13.2 HOLDING OVER: This Lease shall terminate without further notice on
the Lease Expiration Date (as set forth in Article 1) as the same may be
extended pursuant to the terms of the Lease. Any holding over after the
expiration of the Lease shall be deemed an unlawful detainer of the Leased
Premises unless Landlord has consented to same in writing. Any holding over by
Tenant with written permission of Landlord shall be construed to be a tenancy
from month to month, on the same terms and conditions herein specified insofar
as applicable, except that the Base Monthly Rent shall be increased to an
amount equal to one hundred fifty percent of the Base Monthly Rent payable
during the last full month immediately preceding such period of holding over.

                                      -12-
<PAGE>   13
    13.3 SUBORDINATION TO MORTGAGES: This Lease is subject and subordinate to
all underlying ground leases and to all mortgages and deeds of trust which
affect the Building and are of public record as of the Effective Date of this
Lease, and to all renewals, modifications, consolidations, replacements and
extensions thereof. However, if the lessor under any such ground lease or any
Lender holding any such mortgage or deed of trust shall advise Landlord that it
desires or requires this Lease to be made prior and superior thereto, then, upon
written request of Landlord to Tenant, Tenant shall promptly execute,
acknowledge and deliver any and all documents or instruments which Landlord and
such lessor or Lender deem necessary or desirable to make this Lease prior
thereto. Tenant hereby consents to Landlord's ground leasing the land underlying
the Building and/or encumbering the Building as security for future loans on
such terms as Landlord shall desire, all of which future ground leases,
mortgages or deeds of trust shall be subject and subordinate to this Lease.
However, if any lessor under any such future ground lease or any Lender holding
such future mortgage or deed of trust shall desire or require that this Lease be
made subject and subordinate to such future ground lease, mortgage or deed of
trust, then Tenant agrees, within twenty (20) days after Landlord's written
request therefore, to execute, acknowledge and deliver to Landlord any and all
documents or as requested by Landlord or such lessor or Lender as may be
necessary or proper to assure the subordination of this Lease to such future
ground lease, mortgage or deed of trust; but only if such lessor or Lender
agrees to recognize Tenant's rights under this Lease and not to disturb Tenant's
quiet possession of the Leased Premises so long as Tenant is not in default
under this Lease. Tenant's failure to execute and deliver such subordination
agreement within twenty (20) days after Landlord's request therefore (after the
passage of an additional five (5) day cure period after written notice to Tenant
of such failure) shall be a material default by Tenant under this Lease, and
Landlord shall have all of the rights and remedies available to Landlord as
Landlord would otherwise have in the case of any other material default by
Tenant, including the right to terminate this Lease and sue for damages
proximately caused thereby, it being agreed and understood by Tenant that
Tenant's failure to so deliver such subordination agreement in a timely manner
could result in Landlord being unable to perform committed obligations to other
third parties which were made by Landlord in reliance upon this covenant of
Tenant. Landlord and Tenant intend that any statement delivered pursuant to this
Article may be relied upon by any Lender or purchaser or prospective Lender or
purchaser of the Building, the Project, or any interest therein. Landlord shall,
within ninety (90) days of written request by Tenant following full execution of
this Lease, use its best efforts to cause all mortgagees, lenders, and other
parties currently holding a security interest affecting the Leased Premises to
execute a recognition and non-disturbance agreement which (i) provides that this
Lease shall not be terminated so long as Tenant is not in default under this
Lease and (ii) recognizes all of Tenant's rights hereunder.

    13.4 TENANT'S ATTORNMENT UPON FORECLOSURES: Tenant shall, upon request,
attorn (i) to any purchaser of the Building at any foreclosure sale or private
sale conducted pursuant to any security instrument encumbering the Building,
(ii) to any grantee or transferee designated in any deed given in lieu of
foreclosure of any security interest encumbering the Building, or (iii) to the
lessor under any underlying ground lease of the land underlying the Building,
should such ground lease be terminated; provided that such purchaser, grantee
or lessor recognizes Tenant's rights under this Lease.

    13.5 MORTGAGEE PROTECTION: In the event of any default on the part of
Landlord, Tenant will give notice by registered mail to any Lender or lessor
under any underlying ground lease who shall have requested, in writing, to
Tenant that it be provided with such notice, and Tenant shall offer such Lender
or lessor a reasonable opportunity to cure the default, including time to
obtain possession of the Leased Premises by power of sale or judicial
foreclosure or other appropriate legal proceedings if reasonably necessary to
effect a cure.

    13.6 ESTOPPEL CERTIFICATES: Tenant will, following any request(s) by
Landlord, promptly execute and deliver to Landlord an estoppel certificate (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, (ii) stating the date to
which the rent and other charges are paid in advance, if any, (iii)
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, and (iv) certifying such other information about this Lease as may be
reasonably requested by Landlord. Tenant's failure to execute and deliver such
estoppel certificate within ten days after Landlord's request therefore (after
the passage of an additional five (5) day cure period after written notice to
Tenant of such failure) shall be a material default by Tenant under this Lease,
and Landlord shall have all of the rights and remedies available to Landlord as
Landlord would otherwise have in the case of any other material default by
Tenant, including the right to terminate this Lease and sue for damages
proximately caused thereby, it being agreed and understood by Tenant that
Tenant's failure to so deliver such estoppel certificate in a timely manner
could result in Landlord being unable to perform committed obligations to
other third parties which were made by Landlord in reliance upon this covenant
of Tenant. Landlord and Tenant intend that any statement delivered pursuant to
this Article may be relied upon by any Lender or purchaser or prospective
Lender or purchaser of the Building, the Project, or any interest therein.

    13.7 TENANT'S FINANCIAL INFORMATION: Tenant shall, within ten business days
after Landlord's request therefore, deliver to Landlord a copy of Tenant's most
recent, publicly disclosed, audited financial statement certified by Tenant in
writing as to its accuracy) including a publicly disclosed income statement and
balance sheet.

    13.8 FORCE MAJEURE: The obligations of each of the parties under this Lease
(other than the obligation to pay money) shall be temporarily excused if such
party is prevented or delayed in performing such obligation by reason of any
strikes, lockouts or labor disputes; inability to obtain labor, materials,
fuels or reasonable substitutes therefore; governmental restrictions,
regulations, controls, action or inaction; civil commotion; inclement weather,
fire or other acts of God; or other causes (except financial inability) beyond
the reasonable control of the party obligated to perform (including acts or
omissions of the other party for a period equal to the period of any such
prevention, delay or stoppage.

    13.9 NOTICES: Any notice required or desired to be given by a party
regarding this Lease shall be in writing and shall be personally served, or in
lieu of personal service may be given by depositing such notice in the United
States mail, postage prepaid, addressed to the other party at the address
specified in Article 1.1 above. Any notice required under the Lease that is
sent by mail shall be deemed received if properly addressed, three (3) business
days after any such notice is deposited in the United States mail certified,
postage prepaid, return-receipt requested.

                                      -13-
<PAGE>   14
     13.10     ATTORNEYS' FEES: In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision
of this Lease to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, all reasonable expenses incurred by the prevailing party.
In the event that Landlord shall be required to retain counsel to enforce any
provision of this Lease; or if Tenant defaults under this Lease and thereafter
cures (or desires to cure) such default with Landlord's consent, Tenant shall
pay to Landlord all reasonable expenses so incurred by Landlord promptly upon
demand. Landlord may enforce this provision by requiring Tenant to pay such
fees and costs as a condition to curing its default.

     13.11     DEFINITIONS: Any term that is given a special meaning by any
provision in this Lease shall, unless otherwise specifically stated, have such
meaning whenever used in this Lease or in any Addenda or amendment hereto. In
addition to the terms defined in Article 1, the following terms shall have the
following meanings:

          A. REAL PROPERTY TAXES: The term "Real Property Tax" or "Real Property
Taxes" shall each mean (i) all taxes, assessments, levies and other charges of
any kind or nature whatsoever, general and special (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 or new construction), 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 for whatever reason against the Project or any portion thereof, or
Landlord's interest therein, or the fixtures, equipment and other property of
Landlord that is an integral part of the Project and located thereon, or
Landlord's business of owning, leasing or managing the Project or the gross
receipts, income or rentals from the Project; (ii) all charges, levies or fees
imposed by any governmental authority against Landlord by reason of or based
upon the use of or number of parking spaces within the project, the amount of
public services or public utilities used or consumed (e.g. water, gas,
electricity, sewage or surface water disposal) at the Project, the number of
persons employed by tenants of the Project, the size (whether measured in area,
volume or number of tenants) or the value of the Project, or the type of use or
uses conducted within the Project; and (iii) all costs and fees (including
reasonable attorneys' fees) incurred by Landlord in contesting any Real Property
Tax and in negotiating with public authorities as to any Real Property Tax. If,
at any time during the Lease Term, the taxation or assessment of the Project
prevailing as of the Effective 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, substitute, or additional tax or charge (i) on the value, size, use
or occupancy of the Project or Landlord's interest therein or (ii) on or
measured by the gross receipts, income or rentals from the Project, or on
Landlord's business of owning, leasing or managing the Project or (iii) computed
in any manner with respect to the operation of the Project, then any such tax or
charge, however designated, shall be included within the meaning of the terms
"Real Property Taxes" for purposes of this Lease. If any Real Property Tax is
partly based upon property or rents unrelated to the Project, then only that
part of such Real Property Tax that is fairly allocable to the Project shall be
included within the meaning of the terms "Real Property Taxes". Notwithstanding
the foregoing, the term "Real Property Taxes" shall not include estate,
inheritance, transfer, gift or franchise taxes of Landlord or the federal or
state income tax imposed on Landlord's income from all sources. "Real Property
Taxes" shall not include and Tenant shall not be required to pay any portion of
any tax or assessment expense or any increase therein in excess of the amount
which would be payable if such tax or assessment expense were paid in
installments over the longest term allowed by the assessing or taxing authority.

          B. LANDLORD'S INSURANCE COSTS: The term "Landlord's Insurance Costs"
shall mean the costs to Landlord to carry and maintain the policies of fire and
property damage insurance, including earthquake and flood, for the Project and
Landlord's general liability insurance carried by Landlord pursuant to Article
9, together with any deductible amounts paid by Landlord upon the occurrence of
any insured casualty or loss.

          C. PROJECT MAINTENANCE COSTS: The term "Project Maintenance Costs"
shall mean all costs and expenses (except Landlord's Insurance Costs and Real
Property Taxes) paid or incurred by Landlord in protecting, operating,
maintaining, repairing and preserving the Project and all parts thereof,
including without limitation, (i) professional management fees equal to three
percent of the annualized Base Monthly Rent, (ii) the amortizing portion of any
costs incurred by Landlord in the making of any modifications, alterations or
improvements which are so amortized during the Lease Term, (iii) costs of
complying with ADA standards imposed upon Landlord, governmental regulations
governing Tenant's use of Hazardous Materials, and Landlord's costs of
monitoring Tenant's use of Hazardous Materials including fees charged by
Landlord's consultants to periodically inspect the Premises and the Property,
all costs associated with the maintaining and repairing of the parts of the
drainage district, and (v) such other costs as may be paid or incurred with
respect to operating, maintaining and preserving the Project, such as repairing
replacing and resurfacing the exterior surfaces of the buildings (including
roof membranes but not the structural portions of the roof), repairing,
replacing portions of and resurfacing paved areas, cleaning, maintaining,
repairing, or replacing the interior of the Leased Premises both during the
Lease Term and upon the termination of the Lease, and maintaining, repairing or
replacing, when necessary electrical, plumbing, sewer, drainage, heating,
ventilating and air conditioning systems serving the buildings, providing
utilities to the common areas, maintenance, repair, replacement or installation
of lighting fixtures, directional or other signs and signals, irrigation or
drainage systems, trees, shrubs, materials, maintenance of all landscaped
areas, and any rental paid for machinery and equipment (if leased).

          D. READY FOR OCCUPANCY: The term "Ready for Occupancy" shall mean the
date upon which all of the Lease documents have been fully executed and
delivered to the respective parties and all monies required by the terms of the
Lease have been paid. Notwithstanding the Ready For Occupancy provision of this
Lease, and the definition thereof, the Base Monthly Rent and the Additional
Rent shall not commence until June 1, 2000.

          E. TENANT'S PROPORTIONATE SHARE: The term "Tenant's Proportionate
Share" or "Tenant's Share", as used with respect to an item pertaining to the
Building, shall each mean one hundred percent of the square footage of the
Leased Premises and of the Project.

          F. BUILDING'S PROPORTIONATE SHARE: Not applicable in this Single
Tenant Lease wherein Tenant is leasing both buildings.

          G. BUILDING OPERATING EXPENSES: The term "Building Operating Expenses"
shall mean and include all of the of all Real Property Taxes, all Insurance
Costs, including Landlord's general liability costs and any insurance costs
relating to Article [9.1 F] herein contained, all Project Maintenance Costs, and
an accounting fee equal to three percent of the combined total of all such
costs. Notwithstanding anything to the

                                      -14-
<PAGE>   15

contrary in the Lease, "Building Operating Expenses" shall not include and
Tenant shall not have any obligation to perform or to pay for the following
(collectively, "Costs"): (a) Costs occasioned by the act omission or violation
of any law by Landlord; (b) Costs occasioned by a casualty or by the exercise of
the power of eminent domain; (c) Costs to correct any construction defect as
certified by a licensed architect with at least 10 years experience in the
design and construction of industrial type concrete tilt-up buildings in Santa
Clara County, in the Leased Premises or the Project on the Lease execution date;
(d) Costs incurred in connection with the presence of any Hazardous Material in,
on, under, or about the Project except to the extent caused by the release or
emission of the Hazardous Material in question by Tenant, Tenant's agents or
Tenant's employees; (e) interest, charges and fees incurred on debt; (f) Costs
of repair, maintenance and replacement of the Structural Portions of the
Buildings (concrete walls, foundations, and the structural portions of the roof)
and costs to cause such structural portions to comply with Laws.

                H. LAW: The term "Law" shall mean any judicial decision and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirement of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Project, or any of them in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).

                I. LENDER: The term "Lender" shall mean the holder of any note
or other evidence of indebtedness secured by the Project or any portion thereof.

                J. PRIVATE RESTRICTIONS: The term "Private Restrictions" shall
mean all recorded covenants, conditions and restrictions, private agreements,
easements, and any other recorded instruments affecting the use of the Project,
as they may exist from time to time.

                K. RENT: The term "rent" shall mean collectively Base Monthly
Rent and all Additional Rent, and all other amounts owed by Tenant to Landlord.

                L. COMMON AREAS: Those areas surrounded the enclosed Leased
Premises upon which exists landscaping areas, parking areas, driveway and
access areas, trash enclosures, sidewalks, and so forth which areas compose a
portion of The Project.

        13.12 GENERAL WAIVERS: One party's consent to or approval of any act by
the other party, requiring the first party's consent or approval shall not be
deemed to waive or render unnecessary the first party's consent to or approval
of any subsequent similar act by the other party. No waiver of any provision
hereof shall be effective unless in writing and signed by the waiving party. The
receipt by Landlord of any rent or payment with or without knowledge of the
breach of any provision hereof shall not be deemed a waiver of any such breach.
No waiver of any provision of this Lease shall be deemed a continuing waiver
unless such waiver specifically states so in writing and is signed by both
Landlord and Tenant. No delay or omission in the exercise of any right or remedy
accruing to either party upon any breach by the other party under this Lease
shall impair such right or remedy or be construed as a waiver of any such breach
theretofore or thereafter occurring. The waiver by either party of any breach of
any provision of this Lease shall not be deemed to be a waiver of any subsequent
breach of the same or any other provisions herein contained.

        13.13 MISCELLANEOUS: Should any provision of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect, impair
or invalidate any other provision hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time or performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term "party"
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State of California. The language in all parts
of this Lease shall in all cases be construed as a whole according to its fair
meaning, and not strictly for or against either Landlord or Tenant. The captions
used in this Lease are for convenience only and shall not be considered in the
construction or interpretation of any provision hereof. When the context of this
Lease requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the
plural. The terms "must", "shall", "will" and "agree" are mandatory. The term
"may" is permissive. When a party is required to do something by this Lease, it
shall do so at its sole cost and expense without right of reimbursement from the
other party unless specific provision is made therefore. Where Tenant is
obligated not to perform any act or is not permitted to perform any act, Tenant
is also obligated to restrain any others reasonably within its control,
including agents, invitees, contractors, subcontractors and employees, from
performing said act. Landlord shall not become or be deemed a partner or a joint
venturer with Tenant by reason of any of the provisions of this Lease.

        13.14 REASONABLE EXPENSES: Any expenditure by a party permitted or
required under the Lease, for which such party is entitled to demand and does
demand reimbursement from the other party, shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred, and
shall be substantiated by documentary evidence available for inspection and
review by the other party or its representative during normal business hours.

        13.15 APPROVALS: Whenever the Lease requires an approval, consent,
designation, determination, selection or judgment by either Landlord or Tenant,
such approval, consent, designation, determination, selection or judgment and
any conditions imposed thereby shall be reasonable and shall not be unreasonably
withheld or delayed and, in exercising any right or remedy hereunder, each party
shall at all times act reasonably and in good faith.

                                   ARTICLE 14
                              CORPORATE AUTHORITY

        14.1 CORPORATE AUTHORITY: If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
Tenant is validly formed and duly authorized and existing, that Tenant is
qualified to do business in the State of California, that Tenant has the full
right and legal authority to enter into this Lease, that he or she is duly
authorized to execute and deliver this Lease on behalf of Tenant in accordance
with the bylaws and/or a board of directors' resolution of Tenant, and that
this Lease is binding upon Tenant in accordance with its terms.

5/2/00

                                      -15-
<PAGE>   16

14.2 ENTIRE AGREEMENT: This Lease, the Exhibits (as described in Article 1) and
the Addenda (as described in Article 1), which Exhibits and Addenda are by this
reference incorporated herein, constitute the entire agreement between the
parties, and there are no other agreements, understandings or representations
between the parties relating to the lease by Landlord of the Leased Premises to
Tenant, except as expressed herein. No subsequent changes, modifications or
additions to this Lease shall be binding upon the parties unless in writing and
signed by both Landlord and Tenant.

14.3 LANDLORD'S REPRESENTATIONS: Tenant acknowledges that neither Landlord nor
any of its agents made any representations or warranties respecting the
Project, the Building or the Leased Premises, upon which Tenant relied in
entering into this Lease, which are not expressly set forth in this Lease.
Tenant further acknowledges that neither Landlord nor any of its agents made
any representations as to (i) whether the Leased Premises may be used for
Tenant's intended use under existing Law or (ii) the suitability of the Leased
Premises for the conduct of Tenant's business or (iii) the exact square footage
of the Leased Premises, that Tenant relied solely upon its own investigations
respecting said matters and that upon its execution of this Lease, accepts the
leasable area as specified herein. Tenant expressly waives any and all claims
for damage by reason of any statement, representation, warranty, promise or
other agreement of Landlord or Landlord's agent(s), if any, not contained in
this Lease or in any Addenda hereto.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
respective dates below set forth with the intent to be legally bound thereby as
of the Effective Date of this Lease.

AS LANDLORD:                                    AS TENANT:

RENCO INVESTMENT COMPANY                  VA LINUX SYSTEMS, INCORPORATED

BY: /s/ GERALD E. HODNEFIELD              BY: /s/ BRIAN BILES
   ----------------------------------        ---------------------------------
Gerald E. Hodnefield, General Partner     Brian Biles, VP Mktg

BY: /s/ DONALD E. VERMEIL                 BY: /s/ TODD SCHULL
   ----------------------------------        ---------------------------------
Donald E. Vermeil, General Partner        Todd Schull, CFO

BY: /s/ RICHARD PEERY
   ----------------------------------
Richard Peery, General Partner

TITLE:
      -------------------------------

DATE:  5/2/00                             DATE:  5/2/00
     --------------------------------          --------------------------------

                                      -16-
<PAGE>   17
                                   EXHIBIT A

                            BAYSIDE TECHNOLOGY PARK
                          46393-47071 BAYSIDE PARKWAY

                                     [MAP]
<PAGE>   18
                                  EXHIBIT "B"

                          SYQUEST TECHNOLOGY INTERIOR
                      47911 BAYSIDE PARKWAY    FREMONT CA

                                 [INTERIOR MAP]
<PAGE>   19
                                  EXHIBIT "B"

                          SYQUEST TECHNOLOGY INTERIOR
                       47911 BAYSIDE PARKWAY   FREMONT CA

                                 [INTERIOR MAP]
<PAGE>   20
                                  EXHIBIT "B"

                          SYQUEST TECHNOLOGY INTERIOR

                                 [INTERIOR MAP]
<PAGE>   21
                                  EXHIBIT "C"
                      TENANT IMPROVEMENT ALLOWANCE LETTER
                               INTERIOR ALLOWANCE

1. Landlord agrees that it will provide tenant improvement money for the
improvement of the interior of the Leased Premises as follows:

Subject to Landlord's reasonable approval Tenant shall have the flexibility to
design a floor plan that suits Tenant's needs so long as Tenant's plan
preserves the general purpose nature of the building and the interior.

The term "general purpose improvements" is intended to mean those improvements
(and the configuration of such improvements) that can be used by a majority of
users who have or are likely to locate in electronic manufacturing or support
type industrial or office buildings or for mandated upgrades due to ADA
requirements. Special purpose improvements include but are not limited to the
following: raised computer floors, compressed air systems, gas or liquid
distribution systems, haylon fire extinguishing systems, excess or redundant
HVAC equipment or distribution systems, flammable or solvent storage or waste
systems, special electrical systems, lighting levels in excess of Title 24
limitations, redundant or backup electrical power, telephone systems, alarm
systems, public address systems, fire sprinkler monitoring equipment, computer
cabling, burn in rooms, sound insulated rooms, plumbing other than for domestic
use, clean rooms, window covering, moveable partitions, equipment used in
eating or food handling facilities, materials (or the arrangement of materials)
that are unique to one segment of users, the connection of Tenant's equipment
to building HVAC, electric, or plumbing systems ("fit up"), and the like.
Subject to Landlord's approval, Tenant at its sole cost and expense shall
install all required improvements and fixtures to provide for any Hazardous
Materials which have been approved in writing by Landlord.

Landlord reimburse Tenant for the cost of general purpose Tenant Improvements up
to a maximum of *. Tenant agrees to pay in cash the entire cost of construction
(if any) of Tenant Improvements in excess of the above amount.

Tenant shall provide to Landlord a Conceptual Plan (Conceptual Plan) for the
Tenant Improvements showing Tenant's preference for the location of: doors,
partitions, ceilings, air conditioned areas, restrooms, offices, conference
areas, entries, assembly or manufacturing areas, storage and distribution
areas, and any proposed alterations to existing improvements in Landlord's
Building. Landlord shall be allowed 3 business days to approve or make
suggestions as to changes in the Conceptual Plan. Landlord's approval shall not
be unreasonably withheld. Tenant shall pay the costs of such special purpose
improvements at Tenants sole  costs and expense.

Tenant shall also be solely responsible for the design, approval, and payment
of the costs of construction for any and all work, fixtures, or materials
required for the construction of Tenant's interior improvements as shown on
Construction Drawings approved by Landlord and Tenant. Landlord shall reimburse
Tenant for construction costs as specified above, with the exceptions noted,
upon the following terms and conditions:

     1) Provide Landlord with a Conceptual Plan as noted above and as
            approved by Landlord.
     2) Complete construction by December 31, 2000
     3) Comply with the provisions of Article 6 of the Lease

*redacted, confidential treatment requested
<PAGE>   22

Tenant Improvement Agreement
Interior Allowance
Page 2

      4) Use materials and construction techniques (where appropriate) which
            match, complement, or exceed the quality of those used by Landlord
            in the construction of the existing improvements
      5) Provide Landlord with reproducible drawings showing the construction
            performed by Tenant

The funds that Landlord has agreed to spend specifically exclude any and all
fees charged by governmental agencies for Tenant's use of Hazardous Materials
(approved in writing by Landlord) or Tenant's service of food which fees
include but are not limited to: sewer or sanitary district fees, health
department fees, air quality fees, excess water usage fees, and the like. Any
and all such fees shall be paid by Tenant to the appropriate governmental
agency.

Upon being presented with evidence reasonably satisfactory to Landlord that all
the construction bills have been paid and that the dates for any liens have
expired or lien rights waived by materialmen, suppliers, contractors and
subcontractors, Landlord shall reimburse Tenant to Tenant's construction costs
as provided above.

<PAGE>   23
                             OPTION TO RENEW LEASE

This Option to Renew Lease ("Option") is entered into by and between RENCO
INVESTMENT COMPANY, a California General Partnership ("Landlord") and VA LINUX
SYSTEMS, INCORPORATED, A Delaware Corporation ("Tenant") to be effective as of
the date the last of the designated signatories to this Option shall have
executed this Option, with respect to the following described Lease (the
"Lease") for the following described premises (the "Leased Premises"):

        "That certain Lease dated as of April 6, 2000, by and between Landlord
and Tenant for the lease of approximately 139,311 square feet in those certain
buildings consisting of 87,544 and 51,767 square feet, more or less, located at
46939 and 47071 Bayside Parkway, Fremont, CA 94538.

1.      For and in consideration of Tenant entering into the Lease and other
valuable consideration, Landlord hereby grants to Tenant an option to renew the
Lease for an additional term of Five (5) years (the "Renewal Term") commencing
on the expiration of the Lease (the "Renewal Commencement Date") and ending
Five) years thereafter (Renewal Expiration Date").

2.      The lease of the Leased Premises for the Renewal Term shall be on the
same terms and conditions as set forth in the Lease, except:

        A.      That the rental for the Leased Premises during the Renewal Term
shall be as set forth below in Paragraph 5, and

        B.      That the Security Deposit shall be increased to the rental
amount determined in Paragraph 5 (the "Increased Security Deposit Amount") plus
the sum of Five Hundred ($500) Dollars.

        C.      Exhibit "C" shall be inoperative in that there shall be no
Tenant Improvement Allowance for the modification of the interior of the Leased
Premises for the option period.

3.      Provided that Tenant shall not have been in default under the Lease
prior to the exercise of this Option as defaults are defined in Section 4
below, Tenant shall notify Landlord of Tenant's exercise of its right to renew
the Lease for Renewal Term only by giving to Landlord written notice not sooner
than seven (7) months prior to the Renewal Commencement Date and not later than
five (5) months prior to the Renewal Commencement Date (time is expressly of
the essence to Landlord). Any attempted exercise of this Option made other than
within the time period stated or in the manner stated shall be void and of no
force or effect.

4.      This Option to Renew Lease is expressly conditioned upon Tenant
having performed each and every of its covenants under the Lease at all times
during the entire Lease Term in a timely fashion (time being made expressly of
the essence), with the full and complete understanding that if, at any time
during the Lease Term, Tenant shall fail to perform any of its covenants or
obligations under the Lease in a timely fashion, this Option shall terminate
without notice and be of no further effect irrespective of whether or not
Tenant shall have cured such breach.

<PAGE>   24

Tenant acknowledges that Tenant's promise to faithfully perform each of its
covenants and obligations under the Lease in a timely fashion was material
inducement to Landlord in granting to Tenant this Option to Renew Lease.

      For purposes of this Option to Renew Lease, Tenant shall be deemed to
have paid the Base Monthly Rent according to the terms of the Lease if Tenant
shall have paid such monthly rental within six (6) days of being notified by
Landlord of such rental being due and unpaid.

      With respect to matters other than monies due Landlord, Tenant shall be
deemed to have performed according to the terms and conditions of the Lease if
Tenant shall have commenced a cure within ten (10) days of having been notified
of a default under such Lease and shall have completed such cure within thirty
(30) days thereafter or, in the event such a default is not curable within said
30 day period, Tenant shall have diligently pursued such cure to the reasonable
satisfaction of Landlord.

5.    If Tenant shall properly and timely exercised its right to extend the term
of the Lease and provided that Tenant shall not have been in default under the
terms of the Lease as of the Renewal Commencement Date, the term of the Lease
shall be so extended for such Renewal Term on the same terms and conditions
contained in the Lease; provided, however, there shall be no Tenant Improvement
Allowance Letter and the Base Monthly Rent for each month of the first Twelve
(12) months Renewal Term shall be calculated as follows: The new Base Monthly
Rent of the Renewal Term shall be the greater of: (i) the Base Monthly Rent
being paid by Tenant to Landlord during the final full month of the initial
Lease Term, or (ii) the Then Market Rental Rate for the Lease Premises.

6.    For purposes of this Option to Renew Lease, the term "Then Monthly
Market Rental Rate" shall be determined by mutual agreement between Landlord
and Tenant or, in the event such agreement cannot be made within ten (10) days
from the date Tenant shall have exercised this Option, Landlord and Tenant
shall each appoint a real estate appraiser with at least five (5) years
full-time commercial/industrial appraisal experience in Santa Clara County to
appraise and determine the fair market monthly rental rate the Lease Premises,
in their then existing condition for the use specified in the Lease could be
leased for, on the same terms and conditions set forth in the Lease, to a
qualified tenant ready, willing and able to lease the Leased Premises for a
term equal to the Renewal Term. Notwithstanding the above, however, the
appraisers shall take into consideration the value of the Tenant in place, and
the avoided costs of retaining an existing Tenant in His/Her efforts to
determine a fair and representative "Then Monthly Market Rental Rate. If either
party does not appoint an appraiser within ten (10) days after the other party
has given notice of the name of its appraiser, the other party can then apply
to the President of the Santa Clara County Real Estate Board or the presiding
Judge of the Superior Court of that County for the selection of a second
appraiser who meets the qualifications stated above. The failing party shall
bear the cost of appointing the second appraiser and of paying the second
appraiser's fee. The two appraisers shall attempt to establish the Then Monthly
Market Rental Rate for the Leased Premises. If the two appraisers are unable to
agree on the Then Monthly Market Rental Rate for the Leased Premises within ten
(10) days after the second appraiser has been selected or appointed, then the
two appraisers shall attempt to select a third appraiser meeting the
qualifications stated above. If they

<PAGE>   25

fail to agree on a third appraiser, either party can follow the above procedure
for having an appraiser appointed by the Real Estate Board or a judiciary. Each
of the parties shall bear one-half (1/2) of the cost of appointing the third
appraiser and of paying the third appraiser's fee. Unless the three appraisers
are able to agree on the Then Monthly Market Rental Rate for the Leased
Premises within ten (10) days after the selection or appointment of the third
appraiser, the two appraisal amounts being calculated most closely together,
after having discarded the appraisal amount which most greatly varies from the
other two appraisal amounts, shall be added together then divided by two (2).
The resulting rental amount shall be defined as the Then Monthly Market Rental
Rate for the Leased Premises. In no event, however, shall the resulting Then
Monthly Market Rental Rate be less than the Base Monthly Rent paid during the
final full month of the Initial Lease Term. If the Then Monthly Market Rental
is determined by appraisal and if Tenant does not, in Tenant's sole discretion,
approve the rental amount established thereby, then Tenant may rescind its
exercise of the renewal option by giving Landlord written notice of such
election to rescind within ten (10) days after the Then Monthly Rental has been
established. If Tenant rescinds its exercise of the renewal option, then (i)
the Lease shall terminate on the date the Lease Term would otherwise have
expired absent Tenant's exercise of the renewal option, or at Landlord's
option, may be extended by ninety (90) days, and (ii) Tenant shall pay all
costs and expenses of all appraisals.

     The Base Monthly Rent shall be adjusted upward (increased) at the
anniversary of each year of the extended lease term commencing with the
beginning of the Thirteenth Month of the extended lease term, by the amount of
Three Percent of the Base Monthly Rent calculated for the prior Twelve Month
period. Such increased rental amount shall be effective during the subsequent
Twelve (12) month period of the extended term.

7.   This Option to renew is subject and subordinate to any underlying ground
leases and to all mortgages and deeds of trust which affect the Building and
are of public record as of the Effective Date of this Option to Renew Lease,
and to all renewals, modifications, consolidations, replacements and extensions
thereof. However, if the lessor under any such ground lease or any Lender
holding any such mortgage or deed of trust shall advise Landlord that it
desires or requires this Option to Renew Lease to be made prior and superior
thereto, then, upon written request of Landlord to Tenant, Tenant shall
promptly execute, acknowledge and deliver any and all documents or instruments
which Landlord and such lessor or Lender deem necessary or desirable to make
this Option to Renew Lease prior thereto. Tenant hereby consents to Landlord's
ground leasing the land underlying the Building and/or encumbering the Building
as security for future loans on such terms as Landlord shall desire, all of
which future ground leases, mortgages or deeds of trust shall be subject and
subordinate to this Option to Renew Lease. However, if any lessor under any
such future ground lease or any Lender holding such future mortgage or deed of
trust shall desire or require that this Option to Renew Lease by made subject
and subordinate to such future ground lease, mortgage or deed of trust, then
Tenant agrees, within twenty (20) days after Landlord's written request
therefore, to execute, acknowledge and deliver to Landlord any and all
documents or instruments requested by Landlord or such lessor or Lender as may
be necessary or proper to assure the subordination of this Option to Renew
Lease to such future ground

<PAGE>   26
lease, mortgage or deed of trust; but only if such lessor or Lender agrees to
recognize Tenant's rights under this Option to Renew Lease so long as Tenant is
not in default under the Lease, or this Option to Renew Lease.

IN WITNESS WHEREOF, the parties have executed this Option to Renew Lease on the
dates below set forth to be effective as of the date referenced above.

AS LANDLORD:                            AS TENANT:

RENCO INVESTMENT COMPANY                VA LINUX SYSTEMS, INCORPORATED
A California General Partnership        A Delaware Corporation

By /s/ [Signature Illegible]            By /s/ BRIAN BILES
  -------------------------------         -------------------------------
General Partner                           Brian Biles

                                        Title: VP Marketing
                                              ---------------------------

By /s/ [Signature Illegible]            By /s/ TODD SCHULL
  -------------------------------         -------------------------------
General Partner                                Todd Schull

                                        Title: Chief Financial Officer
                                               ---------------------------
By /s/ [Signature Illegible]
  -------------------------------
General Partner

DATE: 5/2/00                            DATE:  5/2/00
     ----------------------------            -----------------------------

<PAGE>   27
                            BAYSIDE TECHNOLOGY PARK
                           EXTERIOR SIGNAGE STANDARDS

In an effort to encourage and maintain High Quality Architectural Signage
Standards and to also provide for good Tenant visibility, this Exterior Sign
Program has been adopted.

BUILDING MOUNTED SIGNAGE

MULTI-TENANT BUILDINGS

Exterior Wall signs are not permitted unless the building is designed to
accommodate signage in the design of the elevations. At this time there are no
Multi-Tenant buildings with this design feature.

SINGLE TENANT BUILDINGS

Custom Logos, Type styles and Colors can be recommended for approval if the
following criteria is observed.

Scale Plans showing the dimensioned sizes, square footage used, placement,
colors, materials and finishes must be submitted to RENCO PROPERTIES, INC.  for
approval by the review board prior to acquiring City Sign Permits.

The overall look of the building elevation must be considered when selecting
size, colors, materials and finishes. Since there are many creative building
designs, what may look good on one building may not necessarily be appropriate
on another.

Buildings can be allowed One Sign Location facing each different street
frontage.

Bayside Technology Park is not a Retail environment, and only High Quality
Corporate Images are desired. However, your Custom Image is welcome as long as
it can be adopted to the building exterior as a Identification Mark and NOT a
BIG SIGN. Sign design, fabrication and installation should look clean and
contemporary, with attempts made to hide bolts, rivets and other fasteners.

The content of the Wall Sign is limited to the Corporate or Company Name, Logo,
Trademark, and/or Division Name. No description of Products or Services,
Slogans, Phone Numbers, Banners, or any other type of sign is permitted.
Shipping & Receiving Hours Signs located on the back of the building are exempt.

<PAGE>   28
Bayside Technology Park
Exterior Signage Standards
Page 2

Illuminated Individual Channel Letters are permitted. The letters can have
transparent faces which illuminate or solid opaque faces which create a halo
effect back illuminated against the building wall. Electrical raceways should
be hidden whenever possible. Exposed Neon is not desired in signage. However,
it could be used if incorporated with the building architectural design such as
in as restaurant exterior.

The following Square Footage GUIDELINES will help your designer. Define the
area by using eight or fewer perimeter lines and figure the Square Footage Area.

VERY SHORT NAMES (5 Letters & Logo) can use 40 Square Feet.

SHORT NAMES (10 Letters & Logo) can use 50 Square Feet.

MEDIUM NAMES (15 Letters & Logo) can use 70 Square Feet.

LONG NAMES (20 Letters & Logo) can use 70 Square Feet.

These guidelines are for signs on building walls that face into Bayside
Technology Park.

Signs that directly face Freeway 880 may be up to 35% larger than these
guidelines, with a maximum of 75 Square Feet.

INFORMATIONAL & DIRECTIONAL SIGNAGE

MULTI-TENANT BUILDINGS

Informational signs are not permitted unless the building is designed to
accommodate this kind of signage in the design of the site plans. At this time
there are no Multi-Tenant buildings with this design feature. If a
Shipping/Receiving sign is necessary at a driveway entrance, it will be a sign
that is in keeping with the building design, with address numbers and arrows as
needed, but not a listing of tenants names.

INFORMATIONAL SIGNS BY THE STREET (15' SETBACK IS STILL REQUIRED)
Maximum panel size is 18" tall x 32" wide, (which is 4 square feet), with the
overall height 42" maximum. The signs should be made from painted aluminum and
not plywood, as it not as durable.

SINGLE TENANT BUILDINGS

April 16, 1996

<PAGE>   29
Bayside Technology Park
Exterior Signage Standards
Page 3

Informational signs are permitted at the building driveways. The signs will be
in keeping with the building design, with address numbers and arrows as needed,
and can include the Corporate Name & Logo, and be in the corporate colors.

INFORMATIONAL SIGNS BY THE STREET (15' SETBACK IS STILL REQUIRED) Maximum panel
size is 18" tall x 32" wide, (which is 4 sq. feet), with the overall height 42"
maximum.

DIRECTIONAL SIGNS WITHIN THE PARKING AREAS Standard panel size is 18" tall x
32" wide, (which is 4 sq. feet), with the overall height 42". A Multi-Building
Campus with a single tenant may have larger directional signs up to 10 square
feet, like 40" tall x 36- wide, with the overall height 60- maximum. These
signs m- not be located within 50 feet from any street frontage.

GENERAL NOTES ON INFORMATIONAL & DIRECTIONAL SIGNS

Informational & Directional Signs are not intended to be advertising signs, so
if there is heavy directional copy, the name and/or logo may have to be left
off, or kept small.

Directional signs with changeable or switchable panels can be approved if the
directory is recessed into the main sign face with screws showing.

These signs should be fabricated from aluminum and not plywood, as it not as
durable. Acrylic Polyurethane finishes in Semi-gloss finishes will provide 7 to
12 years of paint.

Informational & Directional Signs can be 2-sided as required.

Scale Plans showing the dimensioned sizes, square footage used, placement,
colors, materials and finishes must be submitted to RENCO PROPERTIES, INC. for
approval by the review board prior to acquiring City Sign Permits.

After the review board has given written approval, contact Fred Broumand at the
City of Fremont, (415) 790-6642. He is responsible for Exterior Sign Permits.
All exterior signs must be approved by the City of Fremont Planning & Building
Department and have a valid Sign Permit. This can be a 4-5 week approval
process if the sign is visible from Highway 880, Fremont Avenue or West Warren
Avenue. The planning staff may require these major street locations to go
through their SPAR review process. On smaller streets within the park the
approval process can sometimes take just a few days. The City of Fremont
requires that all electrical signs have a UL label, a permit label and a
manufacturers' label.

April 16, 1996

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