Exhibit 10.32


 


THIRD
AMENDMENT TO LEASE


 


This Third Amendment to
Lease (this “Amendment”) is made and entered into as of this 14th day of
December, 2004, by and between CARRAMERICA REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership, successor in interest to CarrAmerica Realty
Corporation, a Maryland corporation (“Landlord”), and FOCUS ENHANCEMENTS, INC.,
a Delaware corporation, as tenant (“Tenant”).


 


Recitals:


 


A.            Under that certain Lease Agreement dated May 31, 2000, by
and among Landlord and Tenant, as modified by that certain First Amendment to
Lease, dated June 30, 2000, and further modified by that certain Second
Amendment to Lease, dated June 3, 2004 (collectively, the “Lease”), Tenant
leased from Landlord the premises located at Sunset Corporate Park, Building A,
22867 NW Bennett Street, Hillsboro, Oregon 97124 (the “Current Premises”).


 


B.            Tenant now desires to relocate and expand the Current
Premises.


 


C.            Tenant and Landlord now desire to amend the Lease as set
forth below.  Except as
so modified, the parties intend the Lease to remain in full force and effect in
accordance with its terms.


 


Agreement:


 


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


 


1.             NEW PREMISES.  Effective as of the
Commencement Date, set forth in Section 2 below, Tenant shall lease from
Landlord a total of 17,771 rentable square feet (“RSF”) of space located in
Building A of Sunset Corporate Park, 22867 NW Bennett Street, Hillsboro, Oregon
97124 (the “New Premises”), 16,189 RSF of which is located on the second floor
of Building A, and 1,582 RSF of which is located on the first floor of Building
A, all as shown as the cross-hatched portion of the floor plan, attached as Exhibit
A, and by this reference incorporated herein.  Tenant’s occupancy of the Current Premises
shall terminate at 11:59 p.m., the day before the Commencement Date, defined
below.


 


2.             TERM.  Tenant shall occupy the New
Premises beginning on the later of: (i) January 1, 2005; or (ii) delivery of
the New Premises by Landlord (“Commencement Date”).  The initial term for the New Premises shall
be five (5) years (“Term”), expiring, if the Commencement Date is January 1,
2005, on December 31, 2009 (“Expiration Date”), subject to extension as set
forth in Exhibit B, attached hereto and by this reference incorporated
herein.  If the Commencement Date is a
date other than the first day of a calendar month, the Expiration Date shall be
the last day of the calendar month during which the fifth (5th)
anniversary of the Commencement Date occurs.


 


3.             BASE RENT.  The monthly Base Rent for
the New Premises shall be as set forth below:


 




	
  Lease Year

  	
   

  	
  Square Feet

  	
   

  	
  Rental Rate

  	
   

  	
  Monthly Base Rent

  	
   

  
	
  Year 1

  	
   

  	
  15,295*

  	
   

  	
  $

  	
  9.00/SF/Year

  	
   

  	
  $

  	
  11,471.25

  	
  **

  
	
  Year 2

  	
   

  	
  17,771

  	
   

  	
  $

  	
  9.50/SF/Year

  	
   

  	
  $

  	
  14,068.71

  	
   

  
	
  Year 3

  	
   

  	
  17,771

  	
   

  	
  $

  	
  10.00/SF/Year

  	
   

  	
  $

  	
  14,809.17

  	
   

  
	
  Year 4

  	
   

  	
  17,771

  	
   

  	
  $

  	
  10.50/SF/Year

  	
   

  	
  $

  	
  15,549.63

  	
   

  
	
  Year 5

  	
   

  	
  17,771

  	
   

  	
  $

  	
  11.00/SF/Year

  	
   

  	
  $

  	
  16,290.01

  	
   

  






 





















 










*Tenant’s monthly Base
Rent for the First Lease Year shall be abated with respect to 2,476 RSF of the
New Premises.


**Tenant’s monthly Base
Rent for the first four (4) months of the Term shall be $0.00.


 


4.             TENANT’S PROPORTIONATE SHARE.  Subject to the limitations contained in
Section 6 of this Amendment: (a) 40.650% (based upon a total of 43,717 RSF for
Building A) as to all Operating Costs relating to Building A; (b) 13.409%  (based upon a total
of 132,531 RSF in the Project) of all Operating Costs of the Project, excluding
all Operating Costs attributable to all or any part of  any Building in the Project; and (c) 13. 409%
of all Taxes (provided, however, that should Building A and the land on which
it is located be separately assessed from the remainder of the Project, Tenant’s
Proportionate Share of Taxes shall be 40.650% of Taxes payable with respect to
such separately assessed parcel).  Tenant
shall also pay an amount fairly and equitably apportioned by Landlord of the
overhead costs relating to Landlord’s local management office, based on the RSF
of the Premises and the total square footage of the buildings managed by
Landlord’s local management office.


 


5.             TENANT IMPROVEMENTS.  Prior to the Commencement Date, Landlord
shall construct, at Landlord’s sole cost and expense, a building-standard
turnkey Tenant improvement build-out. 
Additionally, Landlord shall provide Tenant an allowance equal to $2.50
per RSF, that is $44,427.50, for Tenant move-related
expenses, including the installation of telecommunications and access systems
and network cabling for the New Premises (“Moving Expenses”).  Landlord shall reimburse Tenant within twenty
(20) days of Tenant’s delivery of invoices for the Moving Expenses.  Landlord, at Landlord’s expense, shall supply
all engineering working drawings for the New Premises, including mechanical,
electrical, and plumbing.  Except as
specifically stated in this Section 5, Tenant accepts the New Premises AS-IS,
and Landlord shall not be required to make any other changes to the New
Premises.  Tenant shall have a license to
enter the New Premises before the Commencement Date, pursuant to the terms of Exhibit
C, attached hereto and by this reference incorporated herein.


 


6.             CONTROLABLE OPERATING EXPENSES.


 


6.1           The Controllable Operating Cost Share
Rent (defined below) applicable to the Second Fiscal Year of the Lease shall be
the lesser of (i) Tenant’s Proportionate Share of Controllable Operating Costs
during the Second Fiscal Year, or (ii) the sum of Tenant’s Proportionate Share
of Controllable Operating Costs for the First Fiscal Year, plus four percent
(4%) of such amount (such sum is the “Cap Amount”).


 


6.2           The Controllable Operating Cost Share
Rent applicable to each Fiscal Year thereafter shall be the lesser of (i)
Tenant’s Proportionate Share of Controllable Operating Costs during the
applicable Fiscal Year, or (ii) the sum of the Cap Amount for the immediately
preceding Fiscal Year, plus four percent (4%)of such amount.


 


6.3           “Controllable Operating Cost Share
Rent” shall be an amount equal to Tenant’s Proportionate Share of Controllable
Operating Costs.  “Controllable
Operating Costs” means only services contracted for by Landlord.  All other Operating Costs including without
limitation costs related to insurance, collectively bargained union wages,
electricity, other utilities and all real estate taxes and assessments are, “Non-Controllable
Operating Costs”.  There shall be no
cap on Non-Controllable Operating Costs. Operating Cost Share Rent shall
include both Controllable Cost Share Rent and Non-Controllable Cost Share Rent.


 


6.4           Assume, for example, Controllable
Operating Cost Share Rent for the First Fiscal Year of $100.00.  In the Second Fiscal Year, Controllable
Operating Cost Share Rent would be the lesser of (i) Tenant’s Proportionate
Share of Controllable Operating Costs for the Second Fiscal Year, or (ii)
$104.00 ($100.00 plus 4% ($4.00), which would be the Cap Amount). In the Third
Fiscal Year, Controllable Operating Cost Share Rent would be the lesser of
(i) Tenant’s Proportionate Share of Controllable Operating Costs for the
Third Fiscal Year, or (ii) $108.16 ($104.00 plus 4% ($4.16) which becomes
the Cap Amount for the following Fiscal Year).


 


6.5           Landlord estimates that Controllable
Operating Costs for the current Fiscal Year will be approximately $0.86 per
RSF.  The foregoing is a good-faith
estimate, ventured without investigation, and not a guaranty.


 


 





















 


7.             DEPOSIT.  Upon the execution of this
Amendment, Landlord delivers to Tenant $3,709.99 in cash, as a deduction in the
current Security Deposit of $20,000, the receipt of which Tenant hereby
acknowledges, reducing the total Security Deposit to an amount equal to
$16,290.01.  Also in conjunction with the
execution of this Amendment, Landlord returns to Tenant the Letter of Credit,
the receipt of which is hereby acknowledged by Tenant.


 


8.             DEFAULT. Tenant
shall not be in default under this Lease the first time in a twelve (12)
consecutive month period that Tenant fails to pay Rent when due, but only so
long as Tenant pays such overdue Rent within five (5) days of receipt of
written notice from Landlord that such Rent is overdue.


 


9.             HOLDING OVER.
Tenant shall have the option to holdover for an additional term of three (3)
months upon not less than one hundred twenty (120) days prior written notice to
Landlord.  Tenant shall pay Base Rent,
Operating Cost Share Rent and Tax Share Rent at a rate equal to one hundred
fifteen percent (115%) of the rate in effect immediately prior to such
holdover, computed on a monthly basis for each full or partial month of the
holdover term.


 


10.          TENANT NOTICE.  Any notice required to be delivered to Tenant
pursuant to the Lease or this Amendment shall be delivered to the New Premises
and to the following address:


 


Focus Enhancements, Inc.


1370 Dell Ave.


Campbell, CA 95008

Attn: CFO


 


and


 


Focus Enhancements, Inc.


22867 NW Bennett Street,
Suite 200


Hillsboro, OR 97124


Attn: Executive
Vice-President/General Manager


 


11.          LANDLORD’S
CONSENT.  Section 17. B., of
the Lease is hereby deleted, and replaced with the following:


 


Landlord
will not unreasonably withhold its consent to any proposed assignment or
subletting.  It shall be reasonable for
Landlord to withhold its consent to any assignment or sublease if (i) Tenant is
in default under this Lease, (ii) the proposed assignee or subtenant is a tenant
in the Project or an affiliate of such a tenant or a party that Landlord has
identified as a prospective tenant in the Project, (iii) the financial
responsibility, nature of business, and character of the proposed assignee or
subtenant are not all reasonably satisfactory to Landlord, (iv) in the
reasonable judgment of Landlord the purpose for which the assignee or subtenant
intends to use the Premises (or a portion thereof) is not in keeping with
Landlord’s standards for the Building or are in violation of the terms of this
Lease or any other leases in the Project, (v) the proposed assignee or
subtenant is a government entity, or (vi) the proposed assignment is for less
than the entire Premises or for less than the remaining Term of the Lease.  It shall not be reasonable for Landlord to
withhold its consent to a sublease because the sublease is for less than the
entire Premises or less than the remaining Term of the Lease.  The foregoing shall not exclude any other
reasonable basis for Landlord to withhold its consent.


 


12.          SIGNAGE RIGHTS.
 Subject
to Landlord’s prior written approval of the size, design, materials and
location of the sign, Tenant shall have the right to install, maintain, and
replace an exterior sign for its commercial identification on the façade of the
Building.  Landlord’s approval of Tenant’s
sign shall not be unreasonably withheld or delayed, provided that the sign
complies with all applicable codes and ordinances, and is aesthetically
compatible with the Building and the Project. The parties agree to work
together in good faith to determine the exact location for the sign, taking
into account factors such as its appearance on the Building and visibility from
adjacent streets.  Tenant shall pay for
all costs of construction, installation, maintenance and repair of its sign,
and shall remove the sign upon the expiration or sooner termination of the
Lease at Tenant’s sole cost.


 





















 


13.          LANLDLORD
NOTICE AND PAYMENT ADDRESS.  Effective immediately, Rent
payments and any notices to be delivered by Tenant to Landlord shall be
addressed as follows:


 


CarrAmerica Realty
OP, LP, Portland


t/a  Sunset Corporate Park


P.O. Box 642914


Pittsburgh, PA 15264-2914


 


14.          EFFECT OF AMENDMENT.  Except as specifically
amended and modified herein, all other terms and conditions of the Lease shall
remain in full force and effect.  Any
capitalized and undefined term used in this Amendment shall have the definition
given in the Lease,


 


IN WITNESS WHEREOF, the
parties have executed this Amendment as of the date set forth above.


 


TENANT:


 


	
  FOCUS ENHANCEMENTS,
  INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Tom Hamilton

  	
   

  
	
  Name:

  	
  Tom Hamilton

  	
   

  
	
  Title:

  	
  Exec. VP and GM

  	
   

  
	
  Date:

  	
  November 30, 2004

  	
   

  
						



 


LANDLORD:


 


CARRAMERICA REALTY
OPERATING PARTNERSHIP, L.P.,

a Delaware limited partnership


 


BY:          CarrAmerica
Realty Corporation,


a
Maryland corporation, its general partner


 


 


	
  By: 

  	
  /s/ Clete Casper

  	
   

  	
   

  
	
  Name: 

  	
  Clete Casper

  	
   

  	
   

  
	
  Title: 

  	
  Managing Director

  	
   

  	
   

  
	
  Date: 

  	
  December 14, 2004

  	
   

  	
   

  
					



 


Exhibits
omitted.