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                                                                   EXHIBIT 10.09

                               LEASE AGREEMENT                  BLDG: Marriott 2
                                                                OWNER: 500
                                                                PROP: 102
                                                                UNIT: 101
                                                                TENANT: 10203

        THIS LEASE, made this 29th day of January, 1997 between JOHN ARRILLAGA,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (ARRILLAGA FAMILY TRUST) as
amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated
7/20/77 (RICHARD T PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter called
Landlord, and TRANSMETA CORPORATION, a California corporation, hereinafter
called Tenant.

                                   WITNESSETH:

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

All of that certain 22,500+/- square foot, one-story building located at 2540
Mission College Blvd., Santa Clara, California 95054. Said Premises is more
particularly shown within the area outlined in Red on Exhibit A attached hereto.
The entire parcel, of which the Premises is a part, is shown within the area
outlined in Green on Exhibit A attached. The Premises is leased on an "as-is"
basis, in its present condition, and in the configuration as shown in Red on
Exhibit B attached hereto.

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

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

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

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

2.      TERM

        A.     The term of this Lease shall be far a period of five (5) years
nine (9) months (unless sooner terminated as hereinafter provided) and, subject
to Paragraphs 2(B) and 3, shall commence on the 1st day of March, 1997 and end
on the 30th day November of 2002.

        B.     Subject to Paragraph 54, possession of the Premises shall be
deemed tendered and the term of this Lease shall commence on March 1, 1997 or as
otherwise agreed in writing.

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

* It is agreed in the event said Lease commences on a date other than the first
day of the month the term of the Lease will be extended to account for the
number of days in the partial month.

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The Basic Rent during the resulting partial month will be pro-rated (for the
number of days in the partial month) at the Basic Rent scheduled for the
projected commencement date as shown in Paragraph 43.

4.      RENT

        A.     Basic Rent. Tenant agrees to pay to Landlord at such place as
Landlord may designate without deduction, offset, prior notice, or demand, and
Landlord agrees to accept as Basic Rent for the leased Premises the total sum of
THREE MILLION TWO HUNDRED NINETY THOUSAND SIX HUNDRED TWENTY FIVE AND NO/100
($3,290,625.00) Dollars in lawful money of the United States of America, payable
as follows:

See Paragraph 43 for Basic Rent Schedule

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

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

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

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

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

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

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

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

The Additional Rent due hereunder shall be paid to Landlord or Landlord's agent
(i) within five days for taxes and insurance and within thirty days for all
other Additional Rent items after presentation of invoice from Landlord or
Landlord's agent setting the forth such Additional Rent and/or (ii) at the
option of Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's
prorata share of an amount estimated by Landlord to be Landlord's approximate
average monthly expenditure for such Additional Rent Items, which estimated
amount shall be reconciled within 120 days of the end of each calendar year or
more frequently if Landlord so elects to do so at Landlord's sole and absolute
discretion, as compared to Landlord's actual expenditure for said Additional
Rent items, with Tenant paying to Landlord, upon demand, any amount of actual
expenses expended Landlord in excess of said estimated amount, or Landlord
refunding to Tenant (providing Tenant is not in default in the performance of
any of the terms, covenants and conditions of this Lease) any amount of
estimated payments made by Tenant in excess of Landlord's actual expenditures
for said Additional Rent items. The respective obligations of Landlord and
Tenant under this paragraph shall survive the expiration or other termination of
the term of this Lease, and if the term hereof shall expire or shall otherwise
terminate on a day other than the last day of a calendar year, the actual
Additional Rent incurred for the calendar year in which the term hereof expires
or otherwise terminates shall be determined and settled on the basis of the
statement of actual Additional Rent for such calendar year and shall be prorated
in the proportion which the number of days in such calendar year preceding such
expiration or termination bears to 365.

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

        G.     Security Deposit. Concurrently with Tenant's execution of this
Lease, Tenant shall deposit with Landlord the sum of ONE HUNDRED ONE THOUSAND
TWO HUNDRED FIFTY AND NO/100 ($101,250.00) Dollars. Said sum shall be held by
Landlord as a Security Deposit for the faithful performance by Tenant of all of
the terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the term hereof. If Tenant defaults with respect to any provision
of this Lease, including, but not limited to, the provisions relating to the
payment of rent and any of the monetary sums due herewith, Landlord may (but
shall not be required to) use, apply or retain all or any part of this Security
Deposit for the payment of any other amount which Landlord may spend by reason
of Tenant's default or to compensate

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Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default. If any portion of said Deposit is so used or applied, Tenant
shall, within ten (10) days after written demand therefor, deposit cash with
Landlord in the amount sufficient to restore the Security Deposit to its
original amount. Tenant's failure to do so shall be a material breach of this
Lease. Landlord shall not be required to keep this Security Deposit separate
from its general funds, and Tenant shall not be entitled to interest on such
Deposit. If Tenant fully and faithfully performs every provision of this Lease
to be performed by it, the Security Deposit or any balance thereof shall be
returned to Tenant (or at Landlord's option, to the last assignee of Tenant's
interest hereunder) at the expiration of the Lease term and after Tenant has
vacated the Premises. In the event of termination of Landlord's Interest in this
Lease, Landlord shall transfer said Deposit to Landlord's successor in interest
whereupon Tenant agrees to release Landlord from liability for the return of
such Deposit or the accounting therefor.

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

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

6.      PARKING. Tenant shall have the right to use with other tenants or
occupants of the Complex 67 parking spaces in the common parking areas of the
Complex. Tenant agrees, that Tenant, Tenant's employees, agents, representatives
and/or invitees shall not use parking spaces in excess of said 67 spaces
allocated to Tenant hereunder. Landlord shall have the right, at Landlord's sole
discretion, to specifically designate the location of Tenant's parking spaces
within the common parking areas of the Complex in the event of a dispute among
the tenants occupying the building and/or Complex referred to herein, in which
event Tenant agrees that Tenant, Tenant's employees, agents, representatives
and/or invitees shall not use any parking spaces other than those parking spaces
specifically designated by Landlord for Tenant's use. Said parking spaces, if
specifically designated by Landlord to Tenant, may be relocated by Landlord at
any time, and from time to time. Landlord reserves the right, at Landlord's sole

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discretion, to rescind any specific designation of parking spaces, thereby
returning Tenant's parking spaces to the common parking area. Landlord shall
give Tenant written notice of any change in Tenant's parking spaces. Tenant
shall not, at any time, park, or permit to be parked, any trucks or vehicles
adjacent to the loading areas so as to interfere in any way with the use of such
areas, nor shall Tenant at any time park, or permit the parking of Tenant's
trucks or other vehicles or the trucks and vehicles of Tenant's suppliers or
others, in any portion of the common area not designated by Landlord for such
use by Tenant. Tenant shall not park nor permit to be parked, any inoperative
vehicles or equipment on any portion of the common parking area or other common
areas of the Complex. Tenant agrees to assume responsibility for compliance by
its employees with the parking provision contained herein. If Tenant or its
employees park in other than such designated parking areas, then Landlord may
charge Tenant, as an additional charge, and Tenant agrees to pay, ten ($10.00)
Dollars per day for each day or partial day each such vehicle is parked in any
area other than that designated. Tenant hereby authorizes Landlord at Tenant's
sole expense to tow away from the Complex any vehicle belonging to Tenant or
Tenant's employees parked in violation of these provisions, or to attached
violation stickers or notices to such vehicles. Tenant shall use the parking
areas for vehicle parking only, and shall not use the parking areas for storage.

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

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

8.      ACCEPTANCE AND SURRENDER OF PREMISES. Subject to Paragraphs 48 and 49,
and by entry hereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair and accepts the building and improvements
included in the Premises in their present condition and without representation
or warranty by Landlord as to the condition of such building or as to the use or
occupancy which may be made thereof. Any exceptions to the foregoing must be by
written agreement executed by Landlord and Tenant. Tenant agrees on the

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

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

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Tenant, will be discharged by Tenant, by bond or otherwise, within ten (10) days
after the filing thereof, at the cost and expense of Tenant. Any exceptions to
the foregoing must be made in writing and executed by both Landlord and Tenant.

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

11.     UTILITIES. Tenant shall pay promptly, as the same become due, all
charges for water, gas, electricity, telephone, telex and other electronic
communications service, sewer service, waste pick-up and any other utilities,
materials or services furnished directly to or used by Tenant on or about the
Premises during the term of this Lease, including, without limitation, any
temporary or permanent utility surcharge or other exactions whether or not
hereinafter imposed. Landlord shall not be liable for and Tenant shall not be
entitled to any abatement or reduction of rent by reason of any interruption or
failure of utility services to the Premises when such interruption or failure is
caused by accident, breakage, repair, strikes, lockouts, or other labor
disturbances or labor disputes of any nature, or by any other cause, similar or
dissimilar, beyond the reasonable control of Landlord.

12.     TAXES      A. As Additional Rent and in accordance with Paragraph 4D of
this Lease, Tenant shall pay to Landlord Tenant's proportionate share of all
Real Property Taxes, which prorata share shall be allocated to the leased
Premises by square footage or other equitable basis, as calculated by Landlord.
The term "Real Property Taxes", as used herein, shall mean (i) all taxes,
assessments, levies and other charges of any kind or nature whatsoever, general
and special, foreseen and unforeseen (including all installments of principal
and interest required to pay any general or special assessments for public
improvements and any increases resulting, from reassessment caused by any change
in ownership of the Complex) now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessment, which are levied or assessed against, or with
respect to the value, occupancy or use of, all or any portion of the Complex (as
now constructed or as may at any time hereafter be constructed, altered, or
otherwise changed) or Landlord's

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interest therein: any improvements located within the Complex (regardless of
ownership); the fixtures, equipment and other property of Landlord, real or
personal, that are an integral part of and located in the Complex; or parking
areas, public utilities, or energy within the Complex; (ii) all charges, levies
or fees imposed by reason of environmental regulation or other governmental
control of the Complex; and (iii) all costs and fees (including 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 term
of this Lease the taxation or assessment of the Complex prevailing as of the
commencement date of this Lease shall be altered so that in lieu of or in
addition to any Real Property Tax described above there shall be levied,
assessed or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate or
additional tax or charge (i) on the value, use or occupancy of the Complex or
Landlord's interest therein or (ii) on or measured by the gross receipts, income
or rentals from the Complex, on Landlord's business of leasing the Complex, or
computed in any manner with respect to the operation of the Complex, then any
such tax or charge, however designated, shall be included within the meaning of
the term "Real Property Taxes" for purposes of this Lease. If any Real Property
Tax is based upon property or rents unrelated to the Complex, then only that
part of such Real Property Tax that is fairly allocable to the Complex shall be
included within the meaning of the term "Real Property Taxes". Notwithstanding
the foregoing, the term "Real Property Taxes" shall not include estate,
inheritance, gift or franchise taxes of Landlord or the federal or state net
income imposed on Landlord's income from all sources.

        B.     Taxes on Tenant's Property

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

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

                                       9

<PAGE>   10

Complex, such records shall be binding on both the Landlord and the Tenant. If
the records of the County Assessor are not available or sufficiently detailed to
serve as a basis for making said determination, the actual cost of construction
shall be used.

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

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

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

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

                                       10

<PAGE>   11

of either releasing party prohibits such waiver, then this waiver shall rim take
effect until consent to such waiver is obtained. If such waiver is so
prohibited, the insured party affected shall promptly notify the other party
thereof.

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

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

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

19.     ASSIGNMENT AND SUBLETTING. Tenant shall not assign, transfer, or
hypothecate the leasehold estate under this Lease, or any interest herein, and
shall not sublet the Premises, or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person or entity

                                       11
<PAGE>   12

to occupy or use the Premises, or any portion thereof, without, in each case,
the prior written consent of Landlord which consent will not be unreasonably
withheld. As a condition for granting this consent to any assignment, transfer,
or subletting, Landlord shall require Tenant to pay to Landlord, as additional
rent, fifty percent (50%) of all rents and additional consideration due Tenant
from its assignees, transferees, or subtenants in excess of the Basic Rent
payable by Tenant to Landlord hereunder. Tenant shall, by thirty (30) days
written notice, advise Landlord of its intent to assign or transfer Tenant's
interest in the Lease or sublet the Premises or any portion thereof for any part
of the term hereof. Within thirty (30) days after receipt of said written
notice, Landlord may, in its sole discretion, elect to terminate this Lease as
to the portion of the Premises described in Tenant's notice on the date
specified in Tenant's notice by giving written notice of such election to
terminate. If no such notice to terminate is given to Tenant within said thirty
(30) day period, Tenant may proceed to locate an acceptable sublessee, assignee,
or other transferee for presentment to Landlord for Landlord's approval, all in
accordance with the terms, covenants, and conditions of this paragraph 19. If
Tenant intends to sublet the entire Premises and Landlord elects to terminate
this Lease, this Lease shall be terminated on the date specified in Tenant's
notice. If, however, this Lease shall terminate pursuant to the foregoing with
respect to less than all the Premises, the rent, as defined and reserved
hereinabove shall be adjusted on a pro rata basis to the number of square feet
retained by Tenant, and this Lease as so amended shall continue in full force
and effect. In the event Tenant is allowed to assign, transfer or sublet the
whole or any part of the Premises, with the prior written consent of Landlord,
no assignee, transferee or subtenant shall assign or transfer this Lease, either
in whole or in part, or sublet the whole or any part of the Premises, without
also having obtained the prior written consent of Landlord. A consent of
Landlord to one assignment, transfer, hypothecation, subletting, occupation or
use by any other person shall not release Tenant from any of Tenant's
obligations hereunder or be deemed to be a consent to any subsequent similar or
dissimilar assignment, transfer, hypothecation, subletting, occupation or use by
any other person. Any such assignment, transfer, hypothecation, subletting,
occupation or use without such consent shall be void and shall constitute a
breach of this Lease by Tenant and shall, at the option of Landlord exercised by
written notice to Tenant, terminate this Lease. The leasehold estate under this
Lease shall not, nor shall any interest therein, be assignable for any purpose
by operation of law without the written consent of Landlord. As a condition to
its consent, Landlord shall require Tenant to pay all expenses in connection
with the assignment, and Landlord shall require Tenant's assignee or transferee
(or other assignees or transferees) to assume in writing all of the obligations
under this Lease and for Tenant to remain liable to Landlord under the Lease.
Notwithstanding the above, in no event will Landlord consent to a sub-sublease.
See Paragraph 49

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

                                       12
<PAGE>   13

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

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

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

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

                                       13
<PAGE>   14

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

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

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

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

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

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

                                       14
<PAGE>   15

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

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

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

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

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

        If landlord does not give Tenant notice in writing within thirty (30)
days from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior to
the damage or destruction. Tenant shall be entitled to a reduction in rent while
such repair is being made in the proportion that the area of the Promises
rendered untenantable by such damage bears to the total area of the Premises. If
Landlord initially estimates that the rebuilding or restoration will exceed 180
days or 60 days if the destruction occurs within the last eighteen (18) months
of the Lease Term, or if Landlord does not complete the rebuilding or
restoration within one hundred eighty (180) days (or sixty (60) days if the
destruction occurs

                                       15
<PAGE>   16

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

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

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

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

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

                                       16
<PAGE>   17

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

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

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

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

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

29.     CERTIFICATE OF ESTOPPEL. Tenant shall at any time upon not less than ten
(10) days' prior written notice to Landlord execute, acknowledge and deliver to
Landlord a statement

                                       17
<PAGE>   18

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

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

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

32.     ATTORNEYS' FEES.

        (A)    In the event that either Landlord or Tenant should bring suit for
the possession of the Premises, for the recovery of any sum due under this
Lease, or because of the breach of any provision of this Lease, or for any other
relief against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgment.

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

                                       18
<PAGE>   19

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

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

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

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

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

38.     [Intentionally Deleted.]

                                       19

<PAGE>   20

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

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

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

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

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

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

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

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

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

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

40.     MISCELLANEOUS AND GENERAL PROVISIONS

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

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

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

               The term "person" includes the plural as well as the singular and
        individuals, firms, associations, partnerships and corporations. Words
        used in any gender include

                                       20

<PAGE>   21

        other genders. If there be more than one Tenant the obligations of
        Tenant hereunder are joint and several. The paragraph headings of this
        Lease are for convenience of reference only and shall have no effect
        upon the construction or interpretation of any provision hereof.

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

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

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

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

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

        i.     Paragraphs 43 through 54 are added hereto and are included as a
        part of this lease.

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

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

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

42.     SIGNS. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any unauthorized sign, placard, picture, advertisement, name or notice without
notice to and at the expense of Tenant. If Tenant is allowed to print or

                                       21

<PAGE>   22

affix or in any way place a sign in, on, or about the Premises, upon expiration
or other sooner termination of this Lease, Tenant at Tenant's sole cost and
expense shall both remove such sign and repair all damage in such a manner as to
restore all aspects of the appearance of the Premises to the condition prior to
the placement of said sign.

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

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

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

LANDLORD:                               TENANT:

ARRILLAGA FAMILY TRUST                  TRANSMETA CORPORATION
                                        a California corporation

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

Date:   3/10/97                         Title   CFO
      -----------------------------           ------------------------------

RICHARD T. PEERY SEPARATE
PROPERTY TRUST

By   /s/ RICHARD T. PEERY               Print or Type Name   Colin Hunter
   --------------------------------                        -----------------
Richard T. Peery, Trustee

Date:   2/28/97                         Date:   2/7/97
      -----------------------------           ------------------------------

                                       22

<PAGE>   23

Paragraphs 43 through 54 to Lease Agreement dated January 29, 1997, By and
Between the Arrillaga Family Trust and the Richard T. Peery Separate Property
Trust, as Landlord, and TRANSMETA CORPORATION, a California corporation, as
Tenant for 22,500 (plus or minus) Square Feet of Space Located at 2540 Mission
College Blvd., Santa Clara, California.

43.     BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate
sum of THREE MILLION TWO HUNDRED NINETY THOUSAND SIX HUNDRED TWENTY FIVE AND
NO/100 DOLLARS ($3,290,625.00), shall be payable as follows:

        On March 1, 1997, the sum of FORTY FIVE THOUSAND AND NO/100 DOLLARS
($45,000.00) shall be due, and a like sum due on the first day of each month
thereafter, through and including February 1, 1998.

        On March 1, 1998, the sum of FORTY SIX THOUSAND ONE HUNDRED TWENTY FIVE
AND NO/100 DOLLARS ($46,125.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including February 1, 1999.

        On March 1, 1999, the sum of FORTY SEVEN THOUSAND TWO HUNDRED FIFTY AND
NO/100 DOLLARS ($47,250.00) shall be due, and a like sum due on the first day of
each month thereafter, through and including February 1, 2000.

        On March 1, 2000, the sum of FORTY EIGHT THOUSAND THREE HUNDRED SEVENTY
FIVE AND NO/100 DOLLARS ($48,375.00) shall be due, and a like sum due on the
first day of each month thereafter, through and including February 1, 2001.

        On March 1, 2001, the sum of FORTY NINE THOUSAND FIVE HUNDRED AND NO/100
DOLLARS ($49,500.00) shall be due, and a like sum due on the first day of each
month thereafter, through and including February 1, 2002.

        On March 1, 2002, the sum of FIFTY THOUSAND SIX HUNDRED TWENTY FIVE AND
NO/100 DOLLARS ($50,625.00) shall be due, and a like sum due on the first day of
each month thereafter, through and including November 1, 2002; or until the
entire aggregate sum of THREE MILLION TWO HUNDRED NINETY THOUSAND SIX HUNDRED
TWENTY FIVE AND NO/100 DOLLARS ($3,290,625.00) has been paid.

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

                                       23

<PAGE>   24

the condition or repair of the Premises, nor as to the use or occupancy which
may be made thereof.

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

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

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

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

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

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

                                       24

<PAGE>   25

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

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

              Initials: __________              Initials: _________"
                        Subtenant                          Tenant

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

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

                                       25
<PAGE>   26

promulgated) relating to pollution or the protection of the environment,
ecology, natural resources, or public health and safety.

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

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

                                       26
<PAGE>   27

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

        E.     Tenant shall indemnify, defend (with legal counsel acceptable to
Landlord, whose consent shall not unreasonably be withheld) and hold harmless
Landlord, its employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not limited
to third party claims from a private party or a government authority),
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's Hazardous
Materials Activities; (ii) any Hazardous Materials contamination caused by
Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any
obligation of Tenant under this Paragraph 50 (collectively, "Tenant's
Environmental Indemnification"). Tenant's Environmental Indemnification shall
include but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution in fair
market value of the Property. Tenant's Environmental Indemnification shall
further include but is not limited to the obligation to diligently and properly
implement to completion, at Tenant's expense, any and all environmental
investigation, removal, remediation, monitoring, reporting, closure activities,
or other environmental response action (collectively, "Response Actions").
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
Response Actions.

It is agreed that the Tenant's responsibilities related to Hazardous Materials
will survive the expiration or termination of this Lease and that Landlord may
obtain specific performance of Tenant's responsibilities under this Paragraph
50.

51.     LEASE TERMS CO-TERMINOUS: It is acknowledged that (i) Landlord and
Tenant have previously executed a separate lease agreement, dated November 1,
1995, for premises located at 3940 Freedom Circle, Santa Clara, California
(hereinafter referred to as the "Marriott A Lease"), which property is
contiguous to the Premises leased hereunder, and (ii) it is the intention of the
parties that the Term of this Lease be co-terminous with the term of the
Marriott A Lease such that the terms of both leases expire on the same date;
provided, however, the

                                       27
<PAGE>   28

termination of this Lease resulting from the terms and conditions stated under
Paragraph 22 ("Bankruptcy and Default") (subject to Landlord's option as stated
below and in the Marriott A Lease's "Cross Default" Paragraph) or Paragraph 24
("Destruction") or Paragraph 25 ("Eminent Domain") shall not result in a
termination of the Marriott A Lease, unless Landlord elects, at its sole and
absolute discretion, to terminate either or both of the leases.

52.     CROSS DEFAULT: As a material part of the consideration for the execution
of this Lease by Landlord, it is agreed between Landlord and Tenant that a
default under this Lease, or a default under said Marriott A Lease may, at the
option of Landlord, be considered a default under both leases, in which event
Landlord shall be entitled (but in no event required) to apply all rights and
remedies of Landlord under the terms of one lease to both leases including, but
not limited to, the right to terminate one or both of said leases by reason of a
default under said Marriott A Lease or hereunder.

53.     MAINTENANCE OF THE PREMISES: Notwithstanding anything to the contrary in
Paragraph 10, Landlord shall repair damage to the structural shell, foundation,
and roof structure (but not the interior improvements, roof membrane, or
glazing) of the building leased hereunder at Landlord's cost and expense
provided Tenant has not caused such damage, in which event Tenant shall be
responsible for 100 percent of any such costs for repair or damage so caused by
the Tenant. Notwithstanding the foregoing, a crack in the foundation, or
exterior walls that does not endanger the structural integrity of the building,
or which is not life-threatening, shall not be considered material, nor shall
Landlord be responsible for repair of same.

54.     LEASE CONTINGENT UPON LANDLORD OBTAINING TERMINATION AGREEMENT WITH
CURRENT TENANT: This Lease is subject to and conditional upon Landlord obtaining
from UB Networks, Inc. ("UB Networks"), the current tenant occupying the
Premises leased hereunder, a Termination Agreement satisfactory to Landlord on
or before February 28, 1997. In the event Landlord is unable to obtain said
satisfactory Termination Agreement on or before February 28, 1997, this Lease
Agreement shall, at Landlord's option (a) be rescinded, or (b) the Commencement
Date hereof shall be modified to reflect the date Landlord so obtains said
satisfactory Termination Agreement and receives possession of the Premises
hereunder free and clear of UB Networks' occupancy; provided, however, that said
period of delay caused by UB Networks shall not extend beyond April 30, 1997. In
the event this Lease does not commence by April 30, 1997 (subject only to the
delays covered in Paragraph 3) this Lease shall be automatically rescinded.

                                       28
<PAGE>   29

                                 AMENDMENT NO. 1
                                    TO LEASE

        THIS AMENDMENT NO. 1 is made and entered into this 2nd day of April,
1998, by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated
7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) (previously known as the "Arrillaga
Family Trust") as amended, and RICHARD T. PEERY, Trustee, or his Successor
Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended,
collectively as LANDLORD, and TRANSMETA CORPORATION, a California corporation,
as TENANT.

                                    RECITALS

        A.     WHEREAS, by Lease Agreement dated January 29, 1997 Landlord
leased to Tenant all of that certain 22,500 (plus or minus) square foot building
located at 2540 Mission College Blvd., Santa Clara, California, the details of
which are more particularly set forth in said January 29, 1997 Lease Agreement,
and

        B.     WHEREAS, it is now the desire of the parties hereto to amend the
Lease by (i) extending the Term for five years and seven months, changing the
Termination Date from November 30, 2002 to June 30, 2008, (ii) amending the
Basic Rent schedule and Aggregate Rent accordingly, (iii) increasing the
Security Deposit required under the Lease, and (iv) replacing Lease Paragraphs
51 ("Lease Terms Co-terminous") and 52 ("Cross Default") of said Lease Agreement
as hereinafter set forth.

                                    AGREEMENT

        NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:

        1.     TERM OF LEASE: It is agreed between the parties that the Term of
said Lease Agreement shall be extended for an additional five (5) year seven (7)
month period, and the Lease Termination Date shall be changed from November 30,
2002 to June 30, 2008.

        2.     BASIC RENTAL FOR EXTENDED TERM OF LEASE: The monthly Basic Rental
for the Extended Term of Lease shall be as follows:

        On December 1, 2002, the sum of FIFTY NINE THOUSAND SIX HUNDRED TWENTY
FIVE AND NO/100 DOLLARS ($59,625.00) shall be due, and a like sum due on the
first day of each month thereafter through and including June 1, 2003.

        On July 1, 2003, the sum of SIXTY ONE THOUSAND EIGHT HUNDRED SEVENTY
FIVE AND NO/100 DOLLARS ($61,875.00) shall be due, and a like sum due on the
first day of each month thereafter through and including June 1, 2004.

                                       29

<PAGE>   30

        On July 1, 2004, the sum of SIXTY FOUR THOUSAND ONE HUNDRED TWENTY FIVE
AND NO/100 DOLLARS ($64,125.00) shall be due, and a like sum due on the first
day of each month thereafter through and including June 1, 2005.

        On July 1, 2005, the sum of SIXTY SIX THOUSAND THREE HUNDRED SEVENTY
FIVE AND NO/100 DOLLARS ($66,375.00) shall be due, and a like sum due on the
first day of each month thereafter through and including June 1, 2006.

        On July 1, 2006, the sum of SIXTY EIGHT THOUSAND SIX HUNDRED TWENTY FIVE
AND NO/100 DOLLARS ($68,625.00) shall be due, and a like sum due on the first
day of each month thereafter through and including June 1, 2007.

        On July 1, 2007, the sum of SEVENTY THOUSAND EIGHT HUNDRED SEVENTY FIVE
AND NO/100 DOLLARS ($70,875.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including June 1, 2008.

        The Aggregate Basic Rent for the Lease shall be increased by
$4,399,875.00 or from $3,290,625.00 to $7,690,500.00.

        3.     SECURITY DEPOSIT: Tenant's Security Deposit shall be increased by
$40,500.00, or from $101,250.00 to $141,750.00, payable upon Tenant's execution
of this Amendment No. 1.

        4.     LEASE TERMS CO-TERMINOUS: Lease Paragraph 51 ("Lease Terms
Co-terminous") is hereby deleted in its entirety and replaced with the
following:

        "LEASE TERMS CO-TERMINOUS: It is hereby acknowledged that (i) Landlord
and Tenant have previously executed a separate lease agreement, dated November
1, 1995, for premises located at 3940 Freedom Circle, Santa Clara, California
(hereinafter referred to as the "Marriott A Lease"), (ii) concurrently with the
execution of this Amendment, Landlord and Tenant shall execute two separate
lease agreements, dated April 2, 1998, for premises located at 2560 Mission
College Blvd., Santa Clara California (the "Marriott C Lease") and for premises
located at 3990 Freedom Circle, Santa Clara, California (the "Marriott D Lease")
and (iii) it is the intention of the parties that the Term of this Lease be
co-terminous with the terms of the Marriott A Lease, the Marriott C Lease and
the Marriott D Lease (collectively the "Marriott A, C, and D Leases") such that
the terms of all leases expire on the same date; provided, however, the
termination of this Lease resulting from the terms and conditions stated under
Paragraph 22 ("Bankruptcy and Default") (subject to Landlord's option as stated
below and in the Marriott A, C and D Leases' "Cross Default Paragraph) or
Paragraph 24 ("Destruction") or Paragraph 25 ("Eminent Domain") shall not result
in a termination of the Marriott A, C or D Leases, unless Landlord elects, at
its sole and absolute discretion, to terminate any or all of the Marriott A, C
or D Leases."

        5.     CROSS DEFAULT: Lease Paragraph 52 ("Cross Default") is hereby
deleted in its entirety and replaced with the following:

        "CROSS DEFAULT: As a material part of the consideration for the
execution of this Lease by Landlord, it is agreed between Landlord and Tenant
that a default under this Lease, or a default under said Marriott A, C and/or D
Lease may, at the option of Landlord, be considered a default under all four
leases, in which event Landlord shall be entitled (but in no event required) to
apply all rights and remedies of Landlord under the terms of one lease to all
four leases including, but not limited to, the right

                                       30

<PAGE>   31

to terminate one or all of said leases by reason of a default under said
Marriott A, C and/or D Lease or hereunder."

        EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of
said January 29, 1997 Lease Agreement shall remain in full force and effect.

        IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
No. 1 to Lease as of the day and year last written below.

LANDLORD:                               TENANT:

JOHN ARRILLAGA SURVIVOR'S TRUST         TRANSMETA CORPORATION
                                        a California corporation

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

Date: 6/8/98                            Colin Hunter
      -----------------------------     -----------------------------------
                                        Print or Type Name

RICHARD T. PEERY SEPARATE               Title: CFO
PROPERTY TRUST                                 ----------------------------

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

Date: 6/8/98
      -----------------------------

                                       31<PAGE>   1
                                                                   EXHIBIT 10.10

                                                               BLDG:  Marriott 1
                                LEASE AGREEMENT                OWNER: 500
                                                               PROP:  101
                                                               UNIT:  102
                                                               TENANT: 10110

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

                                   WITNESSETH:

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

A portion of that certain 45,000+ square foot, two-story building located at
2560 Mission College Blvd., Suite 102, Santa Clara, California 95054, consisting
of approximately 36,225+/- square feet on the first and second floors of the
building. Said Premises is more particularly shown within the area outlined in
Red on EXHIBIT A attached hereto. The entire parcel, of which the Premises is a
part, is shown within the area outlined in Green on Exhibit A attached. The
Premises is leased on an "as-is" basis, in its present condition, and in the
configuration as shown in Red on Exhibit B attached hereto.

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

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

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

<PAGE>   2

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

2. TERM*

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

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

3. POSSESSION If Landlord, for any reason whatsoever, cannot deliver possession
of said premises to Tenant at the commencement of the said term, as hereinbefore
specified, this Lease shall not be void or voidable; no obligation of Tenant
shall be affected thereby; nor shall Landlord or Landlord's agents be liable to
Tenant for any loss or damage

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

<PAGE>   3
resulting therefrom; but in that event the commencement and termination dates of
the Lease, and all other dates affected thereby shall be revised to conform to
the date of Landlord's delivery of possession, as specified in Paragraph 2(b),
above. The above is, however, subject to the provision that the period of delay,
of delivery of the premises shall not exceed 60 days from the commencement date
herein (except those delays caused by Acts of God, strikes, war, utilities,
governmental bodies, weather, unavailable materials, and delays beyond
Landlord's control shall be excluded in calculating such period) in which
instance Tenant, at its option, may, by written notice to Landlord, terminate
this Lease.

4. RENT

        A. Basic Rent. Tenant agrees to pay to Landlord at such place as
Landlord may designate without deduction, offset, prior notice, or demand, and
Landlord agrees to accept as Basic Rent for the leased Premises the total sum of
ELEVEN MILLION SIX HUNDRED FIFTY NINE THOUSAND TWO HUNDRED SEVENTY TWO AND
NO/100 ($11,659,272.00) Dollars in lawful money of the United States of America,
payable as follows:

SEE PARAGRAPH 43 FOR BASIC RENT SCHEDULE.

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

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

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

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

<PAGE>   4

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

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

               (d) All charges, costs and expenses, which Tenant is required to
pay hereunder, together with all interest and penalties, costs and expenses
including attorneys' fees and legal expenses, that may accrue thereto in the
event of Tenant's failure to pay such amounts, and all damages, reasonable costs
and expenses which Landlord may incur by reason of default of Tenant or failure
on Tenant's part to comply with the terms of this Lease. In the event of
nonpayment by Tenant of Additional Rent, Landlord shall have all the rights and
remedies with respect thereto as Landlord has for nonpayment of rent. The
Additional Rent due hereunder shall be paid to Landlord or Landlord's agent (i)
within five days for taxes and insurance and within thirty days for all other
Additional Rent items after presentation of invoice from Landlord or Landlord's
agent setting forth such Additional Rent and/or (ii) at the option of Landlord,
Tenant shall pay to Landlord monthly, in advance, Tenant's prorata share of an
amount estimated by Landlord to be Landlord's approximate average monthly
expenditure for such Additional Rent items, which estimated amount shall be
reconciled within 120 days of the end of each calendar year or more frequently
if Landlord so elects to do so at Landlord's sole and absolute discretion, as
compared to Landlord's actual expenditure for said Additional Rent items, with
Tenant paying to Landlord, upon demand, any amount of actual expenses expended
by Landlord in excess of said estimated amount, or Landlord crediting to Tenant
(providing Tenant is not in default in the performance of any of the terms,
covenants and conditions of this lease) any amount of estimated payments made by
Tenant in excess of Landlord's actual expenditures for said Additional Rent
items.

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

        E. Fixed Management Fee. Beginning with the Commencement Date of the
Term of this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent
and Additional Rent, a fixed monthly management fee ("Management Fee") equal to
3% of the Basic Rent due for each month during the Lease Term.

        F. Place of Payment of Rent and Additional Rent. All Basic Rent
hereunder and all payments hereunder for Additional Rent shall be paid to
Landlord at the office of

<PAGE>   5

Landlord at Peery/Arrillaga, File 1504 Box 60000, San Francisco, CA 94160 or to
such other person or to such other place as Landlord may from time to time
designate in writing.

        *G. Security Deposit. Concurrently with Tenant's execution of this
Lease, Tenant shall deposit with Landlord the sum of TWO HUNDRED TWENTY EIGHT
THOUSAND TWO HUNDRED SEVENTEEN AND 50/100 ($228,217.50) Dollars. Said sum shall
be held by Landlord as a Security Deposit for the faithful performance by Tenant
of all of the terms, covenants, and conditions of this Lease to be kept and
performed by Tenant during the term hereof. If Tenant defaults with respect to
any provision of this Lease, including, but not limited to, the provisions
relating to the payment of rent and any of the monetary sums due herewith,
Landlord may (but shall not be required to) use, apply or retain all or any part
of this Security Deposit for the payment of any other amount which Landlord may
spend by reason of Tenant's default or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant' s default. If any
portion of said Deposit is so used or applied, Tenant shall, within ten (10)
days after written demand therefor, deposit cash with Landlord in the amount
sufficient to restore the Security Deposit to its original amount. Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall not be
required to keep this Security Deposit separate from its general funds, and
Tenant shall not be entitled to interest on such Deposit. If Tenant fully and
faithfully performs every provision of this Lease to be performed by it, the
Security Deposit or any balance thereof shall be returned to Tenant (or at
Landlord's option, to the last assignee of Tenant's interest hereunder) at the
expiration of the Lease term and after Tenant has vacated the Premises. In the
event of termination of Landlord's interest in this Lease, Landlord shall
transfer said Deposit to Landlord's successor in interest whereupon Tenant
agrees to release Landlord from liability for the return of such Deposit or the
accounting therefor.

5. RULES AND REGULATIONS AND COMMON AREA Subject to the terms and conditions of
this Lease and such Rules and Regulations as Landlord may from time to time
prescribe, Tenant and Tenant's employees, invitees and customers shall, in
common with other occupants of the Complex in which the Premises are located,
and their respective employees, invitees and customers, and others entitled to
the use thereof, have the non-exclusive right to use the access roads, parking
areas, and facilities provided and designated by Landlord for the general use
and convenience of the occupants of the Complex in which the Premises are
located, which areas and facilities are referred to herein as "Common Area".
This right shall terminate upon the termination of this Lease. Landlord reserves
the right from time to time to make changes in the shape, size, location, amount
and extent of Common Area. Landlord further reserves the right to promulgate
such reasonable rules and regulations relating to the use of the Common Area,
and any part or parts thereof, as Landlord may deem appropriate for the best
interests of the occupants of the Complex. The Rules and Regulations shall be
binding upon Tenant upon delivery of a copy of them to Tenant, and Tenant shall
abide by them and cooperate in their observance. Such Rules and Regulations may
be amended by Landlord from time to time,

----------

* $146,708.10 due upon Lease execution
  $81,509.40 Promissory Note due July 1, 1999.

<PAGE>   6

with or without advance notice, and all amendments shall be effective upon
delivery of a copy to Tenant, Landlord shall not be responsible to Tenant for
the non-performance by any other tenant or occupant of the Complex of any of
said Rules and Regulations.

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

6. PARKING Tenant shall have the right to use with other tenants or occupants of
the Complex 109 parking spaces in the common parking areas of the Complex.
Tenant agrees, that Tenant, Tenant's employees, agents, representatives and/or
invitees shall not use parking spaces in excess of said 109 spaces allocated to
Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion,
to specifically designate the location of Tenant's parking spaces within the
common parking areas of the Complex in the event of a dispute among the tenants
occupying the building and/or Complex referred to herein, in which event Tenant
agrees that Tenant, Tenant's employees, agents, representatives and/or invitees
shall not use any parking spaces other than those parking spaces specifically
designated by Landlord for Tenant's use. Said parking spaces, if specifically
designated by Landlord to Tenant, may be relocated by Landlord at any time, and
from time to time, Landlord reserves the right, at Landlord's sole discretion,
to rescind any specific designation of parking spaces, thereby returning
Tenant's parking spaces to the common parking area. Landlord shall give Tenant
written notice of any change in Tenant's parking spaces. Tenant shall not, at
any time, park, or permit to be parked, any trucks or vehicles adjacent to the
loading areas so as to interfere in any way with the use of such areas, nor
shall Tenant at any time park, or permit the parking of Tenant's trucks or other
vehicles or the trucks and vehicles of Tenant's suppliers or others, in any
portion of the common area not designated by Landlord for such use by Tenant.
Tenant shall not park nor permit to be parked, any inoperative vehicles or
equipment on any portion of the common parking area or other common areas of the
Complex. Tenant agrees to assume responsibility, for compliance by its employees
with the parking provision contained herein. If Tenant or its employees park in
other than such designated parking areas, then Landlord may charge Tenant, as an
additional charge, and Tenant agrees to pay, ten ($10.00) Dollars per day for
each day or partial day each such vehicle is parked in any area other than that
designated. Tenant hereby authorizes Landlord at Tenant's sole expense to tow
away from the Complex any vehicle belonging to Tenant or Tenant's employers
parked in violation of these provisions, or to attach violation stickers or
notices to such vehicles. Tenant shall use the parking areas for vehicle parking
only, and shall not use the parking areas for storage. There will be no charge
for parking, except as noted herein.

7. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF THE
COMPLEX AND BUILDING IN WHICH THE PREMISES ARE LOCATED As Additional Rent and in
accordance with Paragraph 4 D of this Lease, Tenant shall pay to Landlord
Tenant's proportionate share (calculated on a square footage or other equitable
basis as calculated by Landlord) of all expenses of operation, management,
maintenance and repair of the Common Areas of the Complex including, but not
limited to, license, permit, and inspection fees; security; utility charges

<PAGE>   7

associated with exterior landscaping and lighting (including water and sewer
charges); all charges incurred in the maintenance and replacement of landscaped
areas, lakes, parking lots and paved areas (including repairs, replacement,
resealing and restriping), sidewalks, driveways; maintenance, repair and
replacement of all fixtures and electrical, mechanical, and plumbing systems;
structural elements and exterior surfaces of the buildings; salaries and
employee benefits of personnel and payroll taxes applicable thereto; supplies,
materials, equipment and tools; the cost of capital expenditures which have the
effect of reducing operating expenses, provided, however, that in the event
Landlord makes such capital improvements, Landlord may amortize its investment
in said improvements (together with interest at the rate of fifteen (15%)
percent per annum on the unamortized balance) as an operating expense in
accordance with standard accounting practices, provided, that such amortization
is not at a rate greater than the anticipated savings in the operating expenses.

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

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

<PAGE>   8

8. ACCEPTANCE AND SURRENDER OF PREMISES Subject to Paragraph 53 and by entry
hereunder, Tenant accepts the Premises as being in good and sanitary order,
condition and repair and accepts the building and improvements included in the
Premises in their present condition and without representation or warranty by
Landlord as to the condition of such building or as to the use or occupancy
which may be made thereat. Any exceptions to the foregoing must be by written
agreement executed by Landlord and Tenant. Tenant agrees on the last day of the
Lease term, or on the sooner termination of this Lease, to surrender the
Premises promptly and peaceably to Landlord in good condition and repair (damage
by Acts of God, fire, normal wear and tear excepted), with all interior walls
painted, or cleaned so that they appear freshly painted, and repaired and
replaced, if damaged; all floors cleaned and waxed; all carpets cleaned and
shampooed; the airconditioning and heating equipment serviced by a reputable and
licensed service firm and in good operating condition (provided the maintenance
of such equipment has been Tenant's responsibility during the term of this
Lease) together with all alterations, additions, and improvements which may have
been made in, to, or on the Premises (except movable trade fixtures installed at
the expense of Tenant) except that Tenant shall ascertain from Landlord within
thirty (30) days before the end of the term of this Lease whether Landlord
desires to have the Premises or any part or parts thereof restored to their
condition and configuration as when the Premises were delivered to Tenant and if
Landlord shall so desire, then Tenant shall restore said Premises or such part
or parts thereof before the end of this Lease at Tenants sole cost and expense.
Tenant, on or before the end of the term or sooner termination of this Lease,
shall remove all of Tenant's personal property and trade fixtures from the
Premises, and all property not so removed on or before the end of the term or
sooner termination of this Lease shall be deemed abandoned by Tenant and title
to same shall thereupon pass to Landlord without compensation to Tenant.
Landlord may, upon termination of this Lease, remove all moveable furniture and
equipment so abandoned by Tenant, at Tenant's sole cost, and repair any damage
caused by such removal at Tenant's sole cost. If the Premises be not surrendered
at the end of the term or sooner termination of this Lease, Tenant shall
indemnify Landlord against loss or liability resulting from the delay by Tenant
in so surrendering the Premises including, without limitation, any claims made
by any succeeding tenant founded on such delay. Nothing contained herein shall
be construed as an extension of the term hereof or as a consent of Landlord to
any holding over by Tenant. The voluntary or other surrender of this Lease or
the Premises by operate as an assignment to landlord of all or any such
subleases or subtenancies.

9. ALTERATIONS AND ADDITIONS Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises, or any part thereof, without the written
consent of Landlord first had and obtained by Tenant, but at the cost of Tenant,
and any addition to, or alteration of, the Premises, except moveable furniture
and trade futures, shall at once become a part of Premises and belong to
Landlord. Landlord reserves the right to approve all contractors and mechanics
proposed by Tenant to make such alterations and additions. Tenant shall retain
title to all moveable furniture and trade fixtures placed in the Premises. All
heating, lighting, electrical, airconditioning, floor to ceiling partitioning,
drapery, carpeting, and floor installations made by Tenant, together with all
property that has

<PAGE>   9

become an integral part of the Premises, shall not be deemed fixtures. Tenant
agrees that it will not proceed to make such alteration or additions, without
having obtained consent from Landlord to do so, and until five (5) days from
receipt of such consent, in order that Landlord may post appropriate notices to
avoid any liability to contractors or material suppliers for payment for
Tenant's improvements. Tenant will at all times permit such notices to be posted
and to remain posted until the completion of work. Tenant shall, if required by
Landlord, secure at Tenant's own cost and expense, a completion and lien
indemnity bond, satisfactory to landlord, for such work. Tenant further
covenants and agrees that any mechanic's lien filed against the Premises or
against the Complex for work claimed to have been done for, or materials claimed
to have been furnished to Tenant, will be discharged by bond or otherwise,
within ten (10) days after the filing thereof, at the cost and expense of
Tenant. Any exceptions to the foregoing must be made in writing and executed by
both Landlord and Tenant.

10. TENANT MAINTENANCE Team shall, at its sole cost and expense, keep and
maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, and in good and sanitary condition. Tenant's
maintenance and repair responsibilities herein referred to include, but are not
limited to, janitorization, plumbing systems within the non-common areas of the
Premises (such as water and drain lines, sinks), electrical systems within the
non-common areas of the Premises (such as outlets, lighting fixtures, lamps,
bulbs, tubes, ballasts), heating and air-conditioning, controls within the
non-common areas of the Premises (such as mixing boxes, thermostats, time
clocks, supply and return grills), all interior improvements within the premises
including but not limited to: wall coverings, window coverings, acoustical
ceilings, vinyl tile, carpeting, partitioning, doors (both interior and
exterior, including closing mechanisms, latches, locks), and all other interior
improvements of any nature whatsoever. Tenant agrees to provide carpet shields
under all rolling chairs or to otherwise be responsible for wear and tear of the
carpet caused by such rolling chairs if such wear and tear exceeds that caused
by normal foot traffic in surrounding areas. Areas of excessive wear shall be
replaced at Tenant's sole expense upon Lease termination.

11. UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED As Additional
Rent and in accordance with paragraph 4 D of this Lease, Tenant shall pay its
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the cost of all utility charges such us water, gas,
electricity, telephone, telex and other electronic communications service, sewer
service, waste-pick-up and any other utilities, materials or services furnished
directly to the building in which the Premises are located, including, without
limitation, any temporary or permanent utility surcharge or other exactions
whether or not hereinafter imposed.

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

<PAGE>   10

        Provided that Tenant is not in default in the performance or observance
of any of the terms, covenants or conditions of this Lease to be performed or
observed by it, Landlord shall furnish to the Premises between the hours of 8:00
AM and 6:00 PM, Mondays through Fridays (holidays excepted) and subject to the
roles and regulations of the Complex hereinbefore referred to, reasonable
quantities of water, gas and electricity suitable for the intended use of the
Premises and heat and air-conditioning required in Landlord's judgment for the
comfortable use and occupation of the Premises for such purposes. Tenant agrees
that at all times it will cooperate fully with Landlord and abide by all
regulations and requirements that Landlord may prescribe for the proper
functioning and protection of the building heating, ventilating and
airconditioning systems. Whenever heat generating machines, equipment, or any
other devices (including exhaust fans) are used in the Premises by Tenant which
affect the temperature or otherwise maintained by the airconditioning system,
Landlord shall have the right to install supplementary airconditioning units in
the Premises and the cost thereof, including the cost of installation and the
cost of operation and maintenance thereof, shall be paid by Tenant to Landlord
upon demand by Landlord. Tenant will not, without the written consent of
Landlord, use any apparatus or device in the Premises (including, without
limitation), electronic data processing machines or machines using current in
excess of 110 Volts which will in any way increase the amount of electricity,
gas, water or air conditioning usually furnished or supplied to premises being
used as general office space, or connect with electric current (except through
existing electrical outlets in the Premises), or with gas or water pipes any
apparatus or device for the purposes of using electric current, gas, or water.
If Tenant shall require water, gas or electric current in excess of that usually
furnished or supplied to premises being used as general office space. Tenant
shall first obtain the written consent of Landlord, which consent shall not be
unreasonably withheld and Landlord may cause an electric current, gas, or water
meter to be installed in the Premises in order to measure the amount of electric
current, gas or water consumed for any such excess use. The cost of any such
meter and of the installation, maintenance and repair thereof, all charges for
such excess water, gas and electric current consumed (as shown by such meters
and at the rates then charged by the furnishing public utility); and any
additional expense incurred by Landlord in keeping account of electric current,
gas, or water so consumed shall be paid by Tenant, and Tenant agrees to pay
Landlord therefor promptly upon demand by Landlord.

12. TAXES A. As Additional Rent and in accordance with Paragraph 4 D of this
Lease, Tenant shall pay to Landlord Tenant's proportionate share of all Real
Property Taxes, which prorata share shall be allocated to the leased Premises by
square footage or other equitable basis, as calculated by Landlord. The term
"Real Property Taxes", as used herein, shall mean (i) all taxes, assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all installments or principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessments caused by any change in ownership of
the Complex) now or hereafter imposed by any governmental or quasi-governmental
authority of special district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against, or with respect to the value,
occupancy or use of, all or any portion of the Complex (as now constructed or as
may at

<PAGE>   11

any time hereafter be constructed, altered, or otherwise changed) or Landlord's
interest therein; any improvements located within the Complex (regardless of
ownership); the fixtures, equipment and other property of Landlord, real or
personal, that are an integral part of and located in the Complex; or parking
areas, public utilities, or energy within the Complex; (ii) all charges, levies
or fees imposed by reason of environmental regulation or other governmental
control of the Complex; and (iii) all costs and fees (including 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 term
of this Lease the taxation or assessment of the Complex prevailing as of the
commencement date of this Lease shall be altered so that in lieu or in addition
to any Real Property Tax described above there shall be levied, assessed or
imposed (whether by reason of a change in the method of taxation or assessment,
creation of a new tax or charge, or any other cause) an alternate or additional
tax or charge (i) on the value, use or occupancy of the Complex or Landlord's
interest therein or (ii) on or measured by the gross receipts, income or rentals
from the Complex, on Landlord's business of leasing the Complex, or computed in
any manner with respect to the operation of the Complex, then any such tax or
charge, however designated, shall be included within the meaning of the term
"Real Property Taxes" for purposes of this Lease. If any Real Property Tax is
based upon property or rents unrelated to the Complex, then only that part of
such real Property Tax that is fairly allocable to the Complex shall be included
within the meaning of the term "Real Property Taxes". Notwithstanding the
foregoing, the term "Real Property Taxes" shall not include estate, inheritance,
gift or franchise taxes of Landlord or the federal or state net income tax
imposed on Landlord's income from all sources.

        B. Taxes on Tenant's Property

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

               (b) if the Tenant improvements in the Premises, whether
installed, and/or paid for by Landlord or Tenant and whether or not affixed to
the real property so as to become a part thereof, are assessed for real property
tax purposes at a valuation higher than the valuation at which standard office
improvements in other space in the Complex are assessed, then the real property
taxes and assessments levied against Landlord or the

<PAGE>   12

Complex by reason of such excess assessed valuation shall be deemed to be taxes
levied against personal property of Tenant and shall be governed by the
provisions of 12Ba, above. If the records of the County Assessor are available
and sufficiently detailed to serve as a basis for determining whether said
Tenant improvements are assessed at a higher valuation than standard office
improvements in other space in the Complex, such records shall be binding on
both the Landlord and the Tenant. If the records of the County Assessor are not
available or sufficiently detailed to serve as a basis for making said
determination, the actual cost of construction shall be used.

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

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

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

15. PROPERTY INSURANCE Landlord shall purchase and keep in force and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord), Tenant's
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the deductibles on insurance claims and the cost of
policy or policies of insurance covering loss or damage to the Premises and
Complex in the amount of the full replacement value thereof, providing
protection against those perils included within the classification of "all
risks" insurance and flood and/or earthquake insurance, if available, plus a
policy of rental income insurance in the amount of one hundred (100%) percent
of twelve (12) months

<PAGE>   13

Basic Rent, plus sums paid as Additional Rent. If such insurance cost is
increased due to Tenant's use of the Premises or the Complex, Tenant agrees to
pay to Landlord the full cost of such increase. Tenant shall have no interest in
nor any right to the proceeds of any insurance procured by Landlord for the
Complex.

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

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

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

<PAGE>   14

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

19. ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or hypothecate
the leasehold estate under this Lease, or any interest therein, and shall not
sublet the Premises, or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person or entity to occupy or use the Premises, or
any portion thereof, without, in each case, the prior written consent of
Landlord which consent will not be unreasonably withheld. As a condition for
granting this consent to any assignment, transfer, or subletting, Landlord shall
require Tenant to pay to Landlord, as Additional Rent, all rents and/or
additional to consideration due Tenant from its assignees, transferees, or
subtenants in excess of the Rent payable by Tenant to Landlord hereunder for the
assigned, transferred, and/or subleased space. Tenant shall, by thirty (30) days
written notice, advise Landlord of its intent to assign or transfer Tenant's
interest in the Lease or sublet the Premises or any portion thereof for any part
of the term hereof. Within thirty (30) days after receipt of said written
notice, Landlord may, in its sole discretion, elect to terminate this Lease as
to the portion of the Premises described in Tenant's notice on the date
specified in Tenant's notice by giving written notice of such election to
terminate. If no such notice to terminate is given to Tenant within said thirty
(30) day period, Tenant may proceed to locate an acceptable sublessee, assignee,
or other transferee for presentment to Landlord for Landlord's approval, all in
accordance with the terms, covenants, and conditions of this paragraph 19. If
Tenant intends to sublet the entire Premises and Landlord elects to terminate
this Lease, this Lease shall be terminated on the date specified in Tenant's
notice. If, however, this Lease shall terminate pursuant to the foregoing with
respect to less than all the Premises, the rent, as defined and reserved
hereinabove shall be adjusted on a pro rata basis to the number of square feet
retained by Tenant, and this Lease as so amended shall continue in full force
and effect. In the event Tenant is allowed to assign, transfer or sublet the
whole or any part of the Premises, with the prior written consent of Landlord,
no assignee, transferee or subtenant shall assign or transfer this Lease, either
in whole or in part, or sublet the whole or any part of the Premises, without
also having obtained the prior written consent of Landlord. A consent of
Landlord to one assignment, transfer, hypothecation, subletting, occupation or
use by any other person shall not release Tenant from any of Tenant's
obligations hereunder or be deemed to be a consent to any subsequent similar or
dissimilar assignment, transfer, hypothecation, subletting, occupation or use by
any other person. Any such assignment, transfer, hypothecation, subletting,
occupation or use without such consent shall be void and shall constitute a
breach of this Lease by Tenant and shall, at the option of Landlord exercised by
written notice to Tenant, terminate this Lease. The leasehold estate under this

<PAGE>   15

Lease shall not, nor shall any interest therein, be assignable for any purpose
by operation of law without the written consent of Landlord. As a condition to
its consent, Landlord shall require Tenant to pay all expenses in connection
with the assignment, and Landlord shall require Tenant's assignee or transferee
(or other assignees or transferees) to assume in writing all of the obligations
under this Lease and for Tenant to remain liable to Landlord under the Lease.
Notwithstanding the above, in no event will Landlord consent to a sub-sublease.

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

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

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

<PAGE>   16

after an order for relief in a liquidation action or within thirty (30) days
after the commencement of any action.

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

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

        The failure to perform or honor any covenant, condition or
representation made under this Lease shall constitute a default hereunder by
Tenant upon expiration of the appropriate grace period hereinafter provided.
Tenant shall have a period of five (5) days from the date of written notice from
Landlord within which to cure any default in the payment of rental or adjustment
thereto. Tenant shall have a period of thirty (30) days from the date of written
notice from Landlord within which to cure any other default under this Lease.
Upon an uncured default of this Lease by Tenant, Landlord shall have the
following rights and remedies in addition to any other rights or remedies
available to Landlord at law or in equity:

        (a) The rights and remedies provided for by California Civil Code
Section 1951.2, including but nut limited to, recovery of the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of rental loss for the same period
that Tenant proves could be reasonably avoided, as computed pursuant to
subsection (b) of said Section 1951.2. Any proof by Tenant under subparagraphs
(2) and (3) of Section 1951.2 of the California Civil Code of the amount of
rental loss that could be reasonably avoided shall be made in the following
manner; Landlord and Tenant shall each select a licensed real estate broker in
the business of rending property of the same type and use as the Premises and in
the same geographic vicinity. Such two real estate brokers shall select a third
licensed real estate broker, and the three licensed real estate brokers so
selected shall determine the amount of the renal loss that could be reasonably
avoided from the balance of the term of this Lease

<PAGE>   17

after the time of award. The decision of the majority of said licensed real
estate brokers shall be final and binding upon the parties hereto.

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

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

        (d) To the extent permitted by law the right and power, to enter the
Premises and remove therefrom all persons and property, to store such property
in a public warehouse or elsewhere at the cost of and for the account of Tenant,
and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord, may from time to time sublet the Premises
or any part thereof for such term or terms (which may extend beyond the term of
this Lease) and at such rent and such other terms as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises. Upon each subletting, (i) Tenant shall be immediately liable to
pay Landlord, in addition to indebtedness other than rent due hereunder, the
cost of such subletting, including, but not limited to, reasonable attorneys'
fees, and any real estate commissions actually paid, and the cost of such
alterations and repairs incurred by Landlord and the amount, if any, by which
the rent hereunder for the period of such subletting (to the extent such period
does not exceed the term hereof) exceeds the amount to be paid as rent for the
Premises for such period or (ii) at the option of Landlord, rents received from
such subletting shall be applied first to payment of indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the payment of any costs
of such subletting and or such alterations and repairs; third to payment of rent
due and unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of future rent as the same becomes due hereunder. If Tenant
has been credited with any rent to be received by such subletting under option
(i) and such rent shall not be promptly paid to Landlord by the subtenant(s), or
if such rentals received from such subletting under option (ii) during any month
be less than that to be paid during that month by Tenant he hereunder, Tenant
shall pay any such deficiency to Landlord. Such deficiency shall be calculated
and paid monthly. For all purposes set forth in this subparagraph d. No taking
possession of the Premises by Landlord, shall be construed as an election on its
part to terminate this Lease unless a written notice of such intention be given
to Tenant. Notwithstanding any such subletting without termination, Landlord may
at any time hereafter elect to terminate this Lease for such previous breach.

        (e) The right to have a receiver appointed for Tenant upon application
by landlord, to take possession of the Premises and to apply any rental
collected from the

<PAGE>   18

Premises and to exercise all other rights and remedies granted to Landlord
pursuant to subparagraph d above.

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

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

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

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

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

<PAGE>   19

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

               In the event that the building in which the Premises are situated
is damaged or destroyed to the extent of not less than 33 1/3% of the
replacement cost thereof, Landlord may elect to terminate this Lease, whether
the Premises be insured or not. Notwithstanding anything to the contrary herein,
Landlord may terminate this Lease in the event of an uninsured event or if
insurance proceeds are insufficient to cover 100% of the rebuilding costs net of
the deductible.

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

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

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

<PAGE>   20

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

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

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

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

29. CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten (10)
days' prior written notice from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such

<PAGE>   21

defaults, if any, are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises. Tenant's
failure to deliver such statement within such time shall be conclusive upon
Tenant that this Lease is in full force and effect, without modification except
as may be represented by Landlord; that there are no uncured defaults in
Landlord's performance, and that not more than one month's rent has been paid in
advance.

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

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

32. ATTORNEYS' FEES.

        (A) In the event that either Landlord or Tenant should bring suit for
the possession of the Premises, for the recovery of any sum due under this
Lease, or because of the breach of any provision of this Lease, or for any other
relief against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgement.

        (B) Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall

<PAGE>   22

pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.

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

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

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

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

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

<PAGE>   23

Landlord a certified copy of the resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.

38. [Intentionally Deleted.]

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

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

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

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

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

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

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

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

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

40. MISCELLANEOUS AND GENERAL PROVISIONS.

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

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

        c.      The term "Premises" includes the space leased hereby and any
                improvements now or hereafter installed therein or attached
                thereto. The term "Landlord" or any pronoun used in place
                thereof includes the plural as well as the singular and the
                successors and assigns of Landlord. The term "Tenant" or any
                pronoun used in place thereof includes the plural as well as the
                singular and individuals, firms, associations, partnerships and

<PAGE>   24

                corporations, and their and each of their respective heirs,
                executors, administrators, successors and permitted assigns.

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

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

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

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

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

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

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

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

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

<PAGE>   25

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

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

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

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

<PAGE>   26

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

LANDLORD:                                TENANT:

JOHN ARRILLAGA SURVIVOR'S TRUST          TRANSMETA CORPORATION
                                         a California corporation

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

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

RICHARD T. PEERY SEPARATE                Type or Print Name   Colin Hunter
PROPERTY TRUST                                             ---------------------

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

Date:        6/8/98
     -----------------------------

<PAGE>   27

Paragraphs 43 through 55 to Lease Agreement dated April 2, 1998, By and Between
the John Arrillaga Survivor's Trust and the Richard T. Peery Separate Property
Trust, as Landlord, and TRANSMETA CORPORATION, a California corporation, as
Tenant for 36,225+ Square Feet of Space Located at 2560 Mission College Blvd.,
Suite 102, Santa Clara, California.

43. BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate sum
of ELEVEN MILLION SIX HUNDRED FIFTY NINE THOUSAND TWO HUNDRED SEVENTY TWO AND
NO/100 DOLLARS ($11,659,272.00), shall be payable as follows:

        On July 1, 1998, the sum of SEVENTY FIVE THOUSAND THIRTY SEVEN AND
25/100 DOLLARS ($75,037.25) shall be due, and a like sum due on the first day of
each month thereafter, through and including June 1, 1999.

        On July 1, 1999, the sum of EIGHTY FIVE THOUSAND ONE HUNDRED TWENTY
EIGHT AND 75/100 DOLLARS ($85,128.75) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2000.

        On July 1, 2000, the sum of EIGHTY EIGHT THOUSAND SEVEN HUNDRED FIFTY
ONE AND 25/100 DOLLARS ($88,751.25) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2001.

        On July 1, 2001, the sum of NINETY TWO THOUSAND THREE HUNDRED SEVENTY
THREE AND 75/100 DOLLARS ($92,373.75) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2002.

        On July 1, 2002, the sum of NINETY FIVE THOUSAND NINE HUNDRED NINETY SIX
AND 25/100 DOLLARS ($95,996.25) shall be due, and a like sum due on the first
day of each month thereafter, through and including June 1, 2003.

        On July 1, 2003, the sum of NINETY NINE THOUSAND SIX HUNDRED EIGHTEEN
AND 75/100 DOLLARS ($99,618.75) shall be due, and a like sum due on the first
day of each month thereafter, through and including June 1, 2004.

        On July 1, 2004, the sum of ONE HUNDRED THREE THOUSAND TWO HUNDRED FORTY
ONE AND 25/100 DOLLARS ($103,241.25) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2005.

        On July 1, 2005, the sum of ONE HUNDRED SIX THOUSAND EIGHT HUNDRED SIXTY
THREE AND 75/100 DOLLARS ($106,863.75) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2006.

<PAGE>   28

        On July 1, 2006, the sum of ONE HUNDRED TEN THOUSAND FOUR HUNDRED EIGHTY
SIX AND 25/100 DOLLARS ($110,486.25) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2007.

        On July 1, 2007, the sum of ONE HUNDRED FOURTEEN THOUSAND ONE HUNDRED
EIGHT AND 75/100 DOLLARS ($114,108.75) shall be due, and a like sum due on the
first day of each month thereafter, through and including June 1, 2008; or until
the entire aggregate sum of ELEVEN MILLION SIX HUNDRED FIFTY NINE THOUSAND TWO
HUNDRED SEVENTY TWO AND NO/100 DOLLARS ($11,659,272.00) has been paid.

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

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

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

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

48. ASSESSMENT CREDITS: The demised property herein may be subject to a special
assessment levied by the City of Santa Clara as part of an Improvement District.
As a part of said special assessment proceedings (if any), additional bonds were
or may be sold and assessments were or may be levied to provide for construction
contingencies and reserve

<PAGE>   29

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

49. ASSIGNMENT AND SUBLETTING (CONTINUED):

        A. Proposed Sublet Premises. Landlord hereby acknowledges that, during
the first year of the Lease Term, Tenant intends to sublease approximately
12,938 square feet of the Leased Premises, which space is located on the first
floor of the Building ("Proposed Sublet Premises"). Provided Tenant is not in
default of this Lease, Landlord agrees that it will not exercise its right, as
provided for in Paragraph 19, to terminate the Lease as a result of a request by
Tenant to sublease the Proposed Sublet Premises for a sublease term not to
extend beyond June 30, 1999. In such event, Landlord agrees to issue Landlord's
standard consent to said sublease, subject to (a) Tenant submitting to Landlord
a copy of said sublease (prior to said sublease commencing), (b) Landlord,
Tenant and Subtenant thereafter executing Landlord's standard Consent to
Sublease agreement and (c) Landlord receives payment from Tenant of Landlord's
costs for processing said Sublease Consent prior to said sublease commencing.

        As an accommodation to Tenant, Landlord has reduced the Base Rent Rate
on the Proposed Sublet Premises for the first year of the Lease Term to $1.75
per square foot per month, and as such, Tenant specifically acknowledges that
the Base Rent Tenant shall pay for the first year of the Lease Term is a blended
rate. Any rents due Tenant from a subtenant on the Proposed Sublet Premises in
excess of $1.75 per square foot per month shall be considered excess rent
("Excess Rent"), and pursuant to the terms of Paragraph 19, Tenant shall pay one
hundred percent of such Excess Rent to Landlord. However, prior to sharing such
Excess Rent, Tenant shall be first entitled to recover from such Excess Rent the
amount of all reasonable leasing commissions on said Proposed Sublet Premises
paid to third parties not affiliated with Tenant.

        The parties hereto agree that Landlord will accommodate Tenant by
assisting Tenant in finding a subtenant to lease the Proposed Sublet Premises
for a sublease term not to exceed June 30, 1999 ("Sublease Term"). Tenant shall
be responsible for entering into a sublease agreement with said subtenant and
Landlord shall issue its standard Consent to Sublease form which shall be
executed by Landlord, Tenant and the subtenant. Said sublease entered into
between Tenant and subtenant shall provide for the subtenant to issue

<PAGE>   30

payments due under the sublease directly to Landlord during the Sublease Term
and Landlord shall make reasonable efforts to collect the amounts due from the
subtenant. Said amounts so collected by Landlord shall be credited to Tenant's
account under this Lease; however, Landlord shall not be responsible or liable
to Tenant for its failure to collect the amounts due from said subtenant, nor
shall Tenant be relieved of any of its obligations under the Lease due to
Landlord's agreement to collect the amounts due from the subtenant and Tenant
shall not be entitled to an offset of the amounts due under Tenant's Lease for
Landlord's failure to collect the amounts due from said subtenant under the
sublease. Subject to the terms and conditions of this Paragraph 49A, Landlord
also agrees to provide reasonable improvements to the Proposed Sublet Premises,
at Landlord's expense, provided: (i) Tenant is not in default of this Lease and
(ii) said Sublease Term does not exceed June 30, 1999. Notwithstanding the
above, Landlord retains the sole and absolute right to determine what
improvements are considered reasonable and shall not be liable to Tenant, in any
manner whatsoever, for Landlord's refusal to provide said improvements if
Landlord determines, in its sole and absolute discretion, that the subtenant
improvements are not reasonable. The parties hereto acknowledge and agree that
Landlord shall not be liable, in any manner whatsoever, to Tenant if Landlord
does not find a subtenant for the Proposed Sublet Premises and Tenant shall have
no claim, of any type whatsoever, against Landlord for Landlord's failure to
find a subtenant for the Proposed Sublet Premises.

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

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

        "If Landlord and Tenant jointly and voluntarily elect, for any reason
whatsoever, to terminate the Master Lease prior to the scheduled Master Lease
termination date, then this Sublease (if then still in effect) shall terminate
concurrently with the termination of the Master Lease. Subtenant expressly
acknowledges and agrees that (1) the voluntary termination of the Master Lease
by Landlord and Tenant and the resulting termination of this Sublease shall not
give Subtenant any right or power to make any legal or equitable claim against
Landlord, including without limitation any claim for interference with contract
or interference with prospective economic advantage, and (2) Subtenant hereby

<PAGE>   31

waives any and all rights it may have under law or at equity against Landlord to
challenge such an early termination of the Sublease, and unconditionally
releases and relieves Landlord, and its officers, directors, employees and
agents, from any and all claims, demands, and/or causes of action whatsoever
(collectively, "Claims"), whether such matters are known or unknown, latent or
apparent, suspected or unsuspected, foreseeable or unforeseeable, which
Subtenant may have arising out of or in connection with any such early
termination of this Sublease. Subtenant knowingly and intentionally waives any
and all protection which is or may be given by Section 1542 of the California
Civil Code which provides as follows: "A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have materially
affected his settlement with debtor.

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

         Initials:__________              Initials:__________"
               Subtenant                           Tenant

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

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

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

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

<PAGE>   32

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

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

        D. If Landlord, in its sole discretion, believes that the Property has
become contaminated as a result of Tenant's Hazardous Materials Activities,
Landlord in addition to any

<PAGE>   33

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

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

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

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

<PAGE>   34

material, and Landlord may elect, in its sole and absolute discretion, not to
repair and/or replace the same.

54. LEASE TERMS CO-TERMINOUS: It is hereby acknowledged that (i) Landlord and
Tenant have previously executed two separate lease agreements, dated November 1,
1995 for premises located at 3940 Freedom Circle, Santa Clara, California
(hereinafter referred to as the "Marriott A Lease") and dated January 29, 1997
for premises located at 2540 Mission College Blvd., Santa Clara, California
(hereinafter referred to the "Marriott B Lease"), (ii) concurrently with the
execution of this Amendment, Landlord and Tenant shall execute a separate lease
agreement, dated April 2, 1998, for premises located at 3990 Freedom Circle,
Santa Clara California (the "Marriott D Lease") and (iii) it is the intention of
the parties that the Term of this Lease be co-terminous with the terms of the
Marriott A Lease, the Marriott B Lease and the Marriott D Lease (collectively
the "Marriott A, B, and D Leases") such that the terms of all leases expire on
the same date; provided, however, the termination of this Lease resulting from
the terms and conditions stated under Paragraph 22 ("Bankruptcy and Default")
(subject to Landlord's option as stated below and in the Marriott A, B and D
Leases' "Cross Default Paragraph) or Paragraph 24 ("Destruction") or Paragraph
25 ("Eminent Domain") shall not result in a termination of the Marriott A, B or
D Leases, unless Landlord elects, at its sole and absolute discretion, to
terminate any or all of the Marriott A, B or D Leases."

55. CROSS DEFAULT: As a material part of the consideration for the execution of
this Lease by Landlord, it is agreed between Landlord and Tenant that a default
under this Lease, or a default under said Marriott A, B and/or D Lease may, at
the option of Landlord, be considered a default under all four leases, in which
event Landlord shall be entitled (but in no event required) to apply all rights
and remedies of Landlord under the terms of one lease to all four leases
including, but not limited to, the right to terminate one or all of said leases
by reason of a default under said Marriott A, B and/or D Lease or hereunder."

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