1.8 COMMON AREA CHARGES: Lessee shall pay to Lessor, as additional Rent,an amount equal to Lessee’s pro-rata share of the total common area charges ofthe Premises as defined below (the common area charges for the Premises isreferred to herein as (“CAC”)). Lessee shall pay to Lessor as Rent, on or beforethe first day of each calendar month during the Lease Term, subject toadjustment and reconciliation as provided herein below, the sum of Two Thousandand Two Hundred Dollars ($2,200), said sum representing Lessee’s estimatedmonthly payment of Lessee’s percentage share of CAC. It is understood and agreedthat Lessee’s obligation under this paragraph shall be prorated to reflect theCommencement Date and the end of the Lease Term.Lessee’s estimated monthly payment of CAC payable by Lessee during the calendaryear in which the Lease commences is set forth above. At or prior to thecommencement of each succeeding calendar year term (or as soon as practicalthereafter), Lessor shall provide Lessee with Lessee’s estimated monthly paymentfor CAC which Lessee shall pay to Lessor as Rent. Within 120 days of the end ofthe calendar year and the end of the Lease Term, Lessor shall provide Lessee astatement of actual CAC incurred for the preceding year or other applicableperiod in the case of a termination year. If such statement shows that Lesseehas paid less than its actual percentage, then Lessee shall on demand pay toLessor the amount of such deficiency. If such statement shows that Lessee haspaid more than its actual percentage, then Lessor shall, at its option, promptlyrefund such excess to Lessee or credit the amount thereof to the Rent nextbecoming due from Lessee. Lessor reserves the right to revise any estimate ofCAC if the actual or projected CAC show an increase or decrease in excess of 10%from an earlier estimate for the same period. In such event, Lessor shallprovide a revised estimate to Lessee, together with an explanation of thereasons therefore, and Lessee shall revise its monthly payments accordingly.Lessor’s and Lessee’s obligation with respect to adjustments at the end of theLease Term or earlier expiration of this Lease shall survive the Lease Term orearlier expiration.As used in this Lease, CAC shall include but is not limited to: (i) landscapingrepair, replacement, and maintenance; (ii) all costs and expenses including butnot limited to supplies, materials, equipment and tools used or required inconnection with the operation and maintenance of the Premises; (iii) licenses,permits and inspection fees; (iv) all other costs incurred by Lessor inmaintaining and operating the Premises; and (v) an amount equal to ten percent(10%) of items (i) through (iv) above. Lessee shall have the right to reviewthe basis and computation analysis used to derive the CAC applicable to thisLease annually.     1.9 LATE CHARGES: Lessee hereby acknowledges that a late payment made byLessee to Lessor of Rent and other sums due hereunder will cause Lessor to incurcosts not contemplated by this Lease, the exact amount of which will beextremely difficult to ascertain. Such costs include, but are not limited to,processing and accounting charges, and late charges, which may be imposed onLessor according to the terms of any mortgage or trust deed covering thePremises. Accordingly, if any installment of base monthly rent or monthlyestimate of CAC is not received by Lessor or Lessor’s designee within five (5)days after such amount is due or if any other Rent or other sum payable toLessor is not received by Lessor or Lessor’s designee within ten (10) days afterLessor delivers a written notice to Lessee, Lessee shall pay to Lessor a latecharge equal to five percent (5%) of such overdue amount. The parties herebyagree that such late charge represents a fair and reasonable estimate of thecosts Lessor will incur by reason of late payments made by Lessee. Acceptance ofsuch late charges by Lessor shall in no event constitute a waiver of Lessee’sdefault with respect to such overdue amount, nor shall it prevent Lessor fromexercising any of the other rights and remedies granted hereunder.     1.10 QUIET ENJOYMENT: Lessor covenants and agrees with Lessee that uponLessee paying Rent and performing its covenants and conditions under this Lease,Lessee shall and may peaceably and quietly have, hold and enjoy the Premises forthe Lease Term, subject, however, to the rights reserved by Lessor hereunder.
 

 
     1.11 POSSESSION: Lessee is in possession of Premises. Terms andconditions of this lease shall commence on January 1, 2001. On January 1, 2001,this Lease will supercede and replace all prior agreements between Lessee andLessor related to Lessee’s use of the Premises.2. LESSEE IMPROVEMENTS     2.1 ACCEPTANCE OF PREMISES AND COVENANTS TO SURRENDER: Lessee acceptsthe Premises in an “AS IS” condition and “AS IS” state of repair. Lessee hasoccupied the Premises for over five (5) years under an existing NNN lease.Lessee agrees on the last day of the Lease Term, or on the sooner termination ofthis Lease, to surrender the Premises to Lessor in Good Condition and Repair.“Good Condition and Repair” shall generally mean that the Premises are in thecondition that one would expect the Premises to be in, if throughout the LeaseTerm Lessee (i) uses and maintains the Premises in a commercially reasonablemanner and in an accordance with the requirements of this Lease and (ii) makesall Required Replacements. “Required Replacements” are the replacements toworn-out equipment, fixtures, and improvements that a commercially reasonableowner-user would make. All of the following shall be in Good Condition andRepair: (i) the interior walls and floors of all offices and other interiorareas, (ii) all suspended ceilings and any carpeting shall be clean and in goodcondition, (iii) all glazing, windows, doors and door closures, plate glass, and(iv) all electrical systems including light fixtures and ballasts, plumbing,temperature control systems, and those additional items listed in Section 5 ofthe Lease. Lessee, on or before the end of the Lease Term or sooner terminationof this Lease, shall remove all its personal property and trade fixtures fromthe Premises, and all such property not so removed shall be deemed to beabandoned by Lessee. Lessee shall reimburse Lessor for all disposition costsincurred by Lessor relative to Lessee’s abandoned property. If the Premises arenot surrendered at the end of the Lease Term or earlier termination of thisLease, Lessee shall indemnify Lessor against loss or liability resulting fromany delay caused by Lessee in surrendering the Premises including, withoutlimitation, any claims made by any succeeding Lessee founded on such delay.Notwithstanding the above, Lessor shall install, at Lessor’s cost, new roofmembrane on all remaining space by December 31, 2001.3. USES PROHIBITED: Lessee shall not commit, or suffer to be committed, anywaste upon the Premises, or any nuisance, or other act or thing which maydisturb the quiet enjoyment of any other tenant in or around the buildings inwhich the subject Premises are located or allow any sale by auction upon thePremises, or allow the Premises to be used for any improper, immoral, unlawfulor objectionable purpose, or place any loads upon the floor, walls, or ceilingwhich may endanger the structure, or use any machinery or apparatus which willin any manner vibrate or shake the Premises or the building of which it is apart, or place any harmful liquids in the drainage system of the building. Nowaste materials or refuse shall be dumped upon or permitted to remain upon anypart of the Premises outside of the building proper. No materials, supplies,equipment, finished products or semi-finished products, raw materials orarticles of any nature shall be stored upon or permitted to remain on anyportion of the Premises outside of the building structure, unless approved bythe local, state, federal or other applicable governing authority. Lessorconsents to Lessee’s use of materials which are necessary to the operation ofLessee’s business, or which are incidental to the normal, day-to-day operationsof any office user, such as copier fluids, cleaning materials, etc., but thisdoes not relieve Lessee of any of its obligations not to contaminate thePremises and related real property or violate any Hazardous Materials Laws. Forthe purposes of this paragraph “building structure” includes fenced-in storageareas attached to the building. Lessee agrees to comply with the regulations ofall local, state, federal and other applicable governing authorities withrespect to storage of articles of any nature in the “building structure” andPremises.
 

 
4. ALTERATIONS AND ADDITIONS: Lessee shall not make, or suffer to be made, anyalteration or addition to said Premises, or any part thereof, without theexpress, advance written consent of Lessor; any addition or alteration to saidPremises, except movable furniture and trade fixtures, shall become at once apart of the realty and belong to Lessor at the end of the Lease Term or earliertermination of this Lease. Alterations and additions which are not deemed astrade fixtures shall include HVAC systems, lighting systems, electrical systems,partitioning, carpeting, or any other installation which has become an integralpart of the Premises. Lessee agrees that it will not proceed to make suchalterations or additions until all required government permits have beenobtained and after having obtained consent from Lessor to do so, until five (5)days from the receipt of such consent, so that Lessor may post appropriatenotices to avoid any liability to contractors or material suppliers for paymentfor Lessee’s improvements. Lessee shall at all times permit such notices to beposted and to remain posted until the completion of work. At the end of theLease Term or earlier termination of this Lease, Lessee shall remove and shallbe required to remove its special tenant improvements, all related equipment,and any additions or alterations installed by Lessee at or during the Lease Termand Lessee shall return the Premises to the condition that existed before theinstallation of the tenant improvements. Notwithstanding the above, Lessoragrees to allow any reasonable alterations and improvements and will use itsbest efforts to notify Lessee at the time of approval if such improvements oralterations are to be removed at the end of the Lease Term or earliertermination of this Lease.5. MAINTENANCE OF PREMISES:Lessee shall at its sole cost and expense keep, repair, and maintain thePremises in Good Condition and Repair, including, but not limited to:1. The interior walls and floors of all offices and otherinterior areas, doors and door closures, all lighting systems,temperature control systems, and plumbing systems.2. The interior and exterior window washing as needed.3. The HVAC by a service contract with a licensed airconditioning and heating contractor which contract shall providefor a minimum of quarterly maintenance of all air conditioningand heating equipment at the Premises including HVAC repairs orreplacements which are either excluded from such servicecontract or any existing equipment warranties.4. The roof membrane by a service contract with a licensedreputable roofing contractor which contract shall provide for aminimum of semi-annual maintenance, cleaning of storm gutters,drains, removing of debris, and trimming overhanging trees,repair of the roof and application of a finish coat every fiveyears to the building at the Premises.5. Exterior pest control.6. Fire monitoring services.7. Elevator repair, inspection, and replacements.Lessor will at Lessee’s sole cost and expense keep, repair, andmaintain the exterior of the building, any appurtenances andevery part thereof, including but not limited to, glazing,sidewalks, parking areas, electrical systems, and painting ofexterior walls. The parking lot to receive a finish coat everyfive to seven years.(c) Lessee hereby waives any and all rights to make repairs at theexpense of Lessor as provided in Section 1942 of the Civil Code of theState of California, and all rights provided for by Section 1941 of saidCivil Code.
 

 
(d) Lessor shall be responsible for the repair of any structural defectsin the Premises including the roof structure (not membrane), exteriorwalls and foundation during the Lease Term.(e) Lessee shall be responsible for and pay for all RequiredReplacements of any items in this Section 5 on Lease Termination.6. INSURANCE:A) HAZARD INSURANCE: Lessee shall not use, or permit said Premises, orany part thereof, to be used, for any purpose other than that for whichthe Premises are hereby leased; and no use shall be made or permitted tobe made of the Premises, nor acts done, which may cause a cancellationof any insurance policy covering the Premises, or any part thereof, norshall Lessee sell or permit to be kept, used or sold, in or about saidPremises, any article which may be prohibited by a fire and extendedcoverage insurance policy. Lessee shall comply with any and allrequirements, pertaining to said Premises, of any insurance organizationor company, necessary for the maintenance of reasonable fire andextended coverage insurance, covering the Premises. Lessor shall, atLessee’s sole cost and expense, purchase and keep in force fire andextended coverage insurance, covering loss or damage to the Premises inan amount equal to the full replacement cost of the Premises, asdetermined by Lessor, with proceeds payable to Lessor. In the event of aloss per the insurance provisions of this paragraph, Lessee shall beresponsible for deductibles up to a maximum of $5,000 per occurrence.Lessee acknowledges that the insurance referenced in this paragraph doesnot include coverage for Lessee’s personal property.B) LOSS OF RENTS INSURANCE: Lessor shall, at Lessee’s sole cost andexpense, purchase and maintain in full force and effect, a policy ofrental loss insurance, in an amount equal to the amount of Rent payableby Lessee commencing within sixty (60) days of the date of the loss oron the date of loss if reasonably available for the next ensuing one (1)year, as reasonably determined by Lessor with proceeds payable to Lessor(“Loss of Rents Insurance”).C) LIABILITY AND PROPERTY DAMAGE INSURANCE: Lessee, as a material partof the consideration to be rendered to Lessor, hereby waives all claimsagainst Lessor and Lessor’s Agents for damages to goods, wares andmerchandise, and all other personal property in, upon, or about thePremises, and for injuries to persons in, upon, or about the Premises,from any cause arising at any time, and Lessee will hold Lessor andLessor’s Agents exempt and harmless from any damage or injury to anyperson, or to the goods, wares, and merchandise and all other personalproperty of any person, arising from the use or occupancy of thePremises by Lessee, or from the failure of Lessee to keep the Premisesin Good Condition and Repair, as herein provided. Lessee shall, atLessee’s sole cost and expense, purchase and keep in force a standardpolicy of commercial general liability insurance and property damagepolicy covering the Premises and all related areas insuring the Lesseehaving a combined single limit for both bodily injury, death andproperty damage in an amount not less than five million dollars($5,000,000.00) and Lessee’s insurance shall be primary. The limits ofsaid insurance shall not, however, limit the liability of Lesseehereunder. Lessee shall, at its sole cost and expense, comply with allof the insurance requirements of all local, municipal, state and federalauthorities now in force, or which may hereafter be in force, pertainingto Lessee’s use and occupancy of the said Premises.D) PERSONAL PROPERTY INSURANCE: Lessee shall obtain, at Lessee’s solecost and expense, a policy of fire and extended coverage insuranceincluding coverage for direct physical loss special form, and asprinkler leakage endorsement insuring the personal property of Lessee.The proceeds from any personal property damage policy shall be payableto Lessee.
 

 
All insurance policies required in 6 C) and 6 D) above shall: (i) provide for acertificate of insurance evidencing the insurance required herein, beingdeposited with Lessor ten (10) days prior to the Commencement Date, and uponeach renewal, such certificates shall be provided prior to the expiration dateof such coverage, (ii) be in a form reasonably satisfactory to Lessor and shallprovide the coverage required by Lessee in this Lease, (iii) be carried withcompanies with a Best Rating of A minimum, (iv) specifically provide that suchpolicies shall not be subject to cancellation or reduction of coverage exceptafter 30 days prior written notice to Lessor, (v) name Lessor, and any otherparties requested by Lessor that have an insurable interest in the Premises asadditional insureds by endorsement to policy, and (vi) shall be primary.Lessee agrees to pay to Lessor, as additional Rent, on demand, the full cost ofthe insurance polices referenced in 6 A) and 6 B) above as evidenced byinsurance billings from Lessor. If Lessee does not occupy the entire Premises,the insurance premiums shall be allocated to the portion of the Premisesoccupied by Lessee on a pro-rata square footage or other equitable basis, asdetermined by Lessor. It is agreed that Lessee’s obligation under this paragraphshall be prorated to reflect the Commencement Date and the end of the LeaseTerm.Lessor and Lessee hereby waive any rights each may have against the otherrelated to any loss or damage caused to Lessor or Lessee as the case may be, orto the Premises or its contents, and which may arise from any risk covered byfire and extended coverage insurance and those risks required to be coveredunder Lessee’s personal property insurance. The parties shall provide that theirrespective insurance policies insuring the property or the personal propertyinclude a waiver of any right of subrogation which said insurance company mayhave against Lessor or Lessee, as the case may be.7. ABANDONMENT: Lessee shall not vacate or abandon the Premises at any timeduring the Lease Term; and if Lessee shall abandon, vacate or surrender saidPremises, or be dispossessed by process of law, or otherwise, any personalproperty belonging to Lessee and left on the Premises shall be deemed to beabandoned, at the option of Lessor. Notwithstanding the above, the Premisesshall not be considered vacated or abandoned if Lessee maintains the Premises inGood Condition and Repair, provides security and is not in default.8. FREE FROM LIENS: Lessee shall keep the subject Premises and the property inwhich the subject Premises are situated, free from any and all liens includingbut not limited to liens arising out of any work performed, materials furnished,or obligations incurred by Lessee. However, the Lessor shall allow Lessee tocontest a lien claim, so long as the claim is discharged prior to anyforeclosure proceeding being initiated against the property and provided Lesseeprovides Lessor a bond if the lien exceeds $5,000.9. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Lessee shall, at its sole cost andexpense, comply with all of the requirements of all local, municipal, state andfederal authorities now in force, or which may hereafter be in force, pertainingto the Premises, and shall faithfully observe in the use and occupancy of thePremises all local and municipal ordinances and state and federal statutes nowin force or which may hereafter be in force.10. INTENTIONALLY OMITTED.11. ADVERTISEMENTS AND SIGNS: Lessee shall not place or permit to be placed, in,upon or about the Premises any unusual or extraordinary signs, or any signs notapproved by the city, local, state, federal or other applicable governingauthority. Lessee shall not place, or permit to be placed upon the Premises, anysigns, advertisements or notices without the written consent of the Lessor, andsuch consent shall not be unreasonably withheld. A sign so placed on thePremises shall be so placed upon the understanding and agreement that Lesseewill remove same at the end of the
 

 
Lease Term or earlier termination of this Lease and repair any damage or injuryto the Premises caused thereby, and if not so removed by Lessee, then Lessor mayhave the same removed at Lessee’s expense.12. UTILITIES: Lessee shall pay for all water, gas, heat, light, power,telephone and other utilities supplied to the Premises. Any charges for sewerusage, PG&E and telephone site service or related fees shall be the obligationof Lessee and paid for by Lessee. If any such services are not separatelymetered to Lessee, Lessee shall pay a reasonable proportion of all charges whichare jointly metered, the determination to be made by Lessor acting reasonablyand on any equitable basis. Lessor and Lessee agree that Lessor shall not beliable to Lessee for any disruption in any of the utility services to thePremises.13. ATTORNEY’S FEES: In case suit should be brought for the possession of thePremises, for the recovery of any sum due hereunder, because of the breach ofany other covenant herein, or to enforce, protect, or establish any term,conditions, or covenant of this Lease or the right of either party hereunder,the losing party shall pay to the Prevailing Party reasonable attorney’s feeswhich shall be deemed to have accrued on the commencement of such action andshall be enforceable whether or not such action is prosecuted to judgment. Theterm “Prevailing Party” shall mean the party that received substantially therelief requested, whether by settlement, dismissal, summary judgment, judgment,or otherwise.14. DEFAULT     14.1 LESSEE DEFAULT: The occurrence of any of the following shallconstitute a default and breach of this Lease by Lessee: a) Any failure byLessee to pay Rent or to make any other payment required to be made by Lesseehereunder when due if not cured within ten (10) days after written noticethereof by Lessor to Lessee; b) The abandonment or vacation of the Premises byLessee except as provided in Section 7; c) A failure by Lessee to observe andperform any other provision of this Lease to be observed or performed by Lessee,where such failure continues for thirty days after written notice thereof byLessor to Lessee; provided, however, that if the nature of such default is suchthat the same cannot be reasonably cured within such thirty (30) day period,Lessee shall not be deemed to be in default if Lessee shall, within such period,commence such cure and thereafter diligently prosecute the same to completion;d) The making by Lessee of any general assignment for the benefit of creditors;the filing by or against Lessee of a petition to have Lessee adjudged a bankruptor of a petition for reorganization or arrangement under any law relating tobankruptcy; e) the appointment of a trustee or receiver to take possession ofsubstantially all of Lessee’s assets or Lessee’s interest in this Lease, or theattachment, execution or other judicial seizure of substantially all of Lessee’sassets located at the Premises or of Lessee’s interest in this Lease.     14.2 SURRENDER OF LEASE: In the event of any such default by Lessee,then in addition to any other remedies available to Lessor at law or in equity,Lessor shall have the immediate option to terminate this Lease before the end ofthe Lease Term and all rights of Lessee hereunder, by giving written notice ofsuch intention to terminate. In the event that Lessor terminates this Lease dueto a default of Lessee, then Lessor may recover from Lessee: a) the worth at thetime of award of any unpaid Rent which had been earned at the time of suchtermination; plus b) the worth at the time of award of unpaid Rent which wouldhave been earned after termination until the time of award exceeding the amountof such rental loss that the Lessee proves could have been reasonably avoided;plus c) the worth at the time of award of the amount by which the unpaid Rentfor the balance of the Lease Term after the time of award exceeds the amount ofsuch rental loss that the Lessee proves could have been reasonably avoided; plusd) any other amount necessary to compensate Lessor for all the detrimentproximately caused by Lessee’s failure to perform his obligations under thisLease or which in the ordinary course of things would be likely to resulttherefrom; and e) at Lessor’s election, such other amounts in addition to or inlieu of the foregoing as may be permitted from time to time by applicableCalifornia law. As used in (a) and (b) above, the “worth at the time of award”is computed by allowing
 

 
interest at the rate of Wells Fargo’s prime rate plus two percent (2%) perannum. As used in (c) above, the “worth at the time of award” is computed bydiscounting such amount at the discount rate of the Federal Reserve Bank of SanFrancisco at the time of award plus one percent (1%).     14.3 RIGHT OF ENTRY AND REMOVAL: In the event of any such default byLessee, Lessor shall also have the right, with or without terminating thisLease, to re-enter the Premises and remove all persons and property from thePremises; such property may be removed and stored in a public warehouse orelsewhere at the cost of and for the account of Lessee.     14.4 ABANDONMENT: In the event of the vacation or abandonment, except asprovided in Section 7, of the Premises by Lessee or in the event that Lessorshall elect to re-enter as provided in paragraph 14.3 above or shall takepossession of the Premises pursuant to legal proceeding or pursuant to anynotice provided by law, and Lessor does not elect to terminate this Lease asprovided in Section 14.2 above, then Lessor may from time to time, withoutterminating this Lease, either recover all Rent as it becomes due or relet thePremises or any part thereof for such term or terms and at such rental rates andupon such other terms and conditions as Lessor, in its sole discretion, may deemadvisable with the right to make alterations and repairs to the Premises. In theevent that Lessor elects to reset the Premises, then Rent received by Lessorfrom such reletting shall be applied; first, to the payment of any indebtednessother than Rent due hereunder from Lessee to Lessor; second, to the payment ofany cost of such reletting; third, to the payment of the cost of any alterationsand repairs to the Premises; fourth, to the payment of Rent due and unpaidhereunder; and the residue, if any, shall be held by Lessor and applied to thepayment of future Rent as the same may become due and payable hereunder. Shouldthat portion of such Rent received from such reletting during any month, whichis applied by the payment of Rent hereunder according to the applicationprocedure outlined above, be less than the Rent payable during that month byLessee hereunder, then Lessee shall pay such deficiency to Lessor immediatelyupon demand therefore by Lessor. Such deficiency shall be calculated and paidmonthly. Lessee shall also pay to Lessor, as soon as ascertained, any costs andexpenses incurred by Lessor in such reletting or in making such alterations andrepairs not covered by the rentals received from such reletting.     14.5 NO IMPLIED TERMINATION: No re-entry or taking possession of thePremises by Lessor pursuant to Section 14.3 OR Section 14.4 of this Lease shallbe construed as an election to terminate this Lease unless a written notice ofsuch intention is given to Lessee or unless the termination thereof is decreedby a court of competent jurisdiction. Notwithstanding any reletting withouttermination by Lessor because of any default by Lessee, Lessor may at any timeafter such reletting elect to terminate this Lease for any such default.15. SURRENDER OF LEASE: The voluntary or other surrender of this Lease byLessee, or a mutual cancellation thereof, shall not work a merger, and shall, atthe option of Lessor, terminate all or any existing subleases or sub tenancies,or may, at the option of Lessor, operate as an assignment to him of any or allsuch subleases or sub tenancies.16. TAXES: Lessee shall pay and discharge punctually and when the same shallbecome due and payable without penalty to Lessor, all real estate taxes,personal property taxes, taxes based on vehicles utilizing parking areas in thePremises, taxes computed or based on rental income (other than federal, stateand municipal net income taxes), Environmental Surcharges, privilege taxes,excise taxes, business and occupation taxes, school fees or surcharges, grossreceipts taxes, sales and/or use taxes, employee taxes, occupational licensetaxes, water and sewer taxes, assessments (including, but not limited to,assessments for public improvements or benefit), assessments for localimprovement and maintenance districts, and all other governmental impositionsand charges of every kind and nature whatsoever, regardless of whether nowcustomary or within the contemplation of the parties hereto and regardless ofwhether resulting from increased rate and/or valuation, or whether extraordinaryor ordinary, general or special, unforeseen or foreseen, or similar ordissimilar to any of the foregoing (all of the foregoing being hereinafter
 

 
collectively called “Tax” or “Taxes”) which, at any time during the Lease Term,shall be applicable or against the Premises, or shall become due and payable anda lien or charge upon the Premises under or by virtue of any present or futurelaws, statutes, ordinances, regulations, or other requirements of anygovernmental authority whatsoever. The term “Environmental Surcharge” shallinclude any and all expenses, taxes, charges or penalties imposed by the FederalDepartment of Energy, Federal Environmental Protection Agency, the Federal CleanAir Act, or any regulations promulgated thereunder, or any other local, state orfederal governmental agency or entity now or hereafter vested with the power toimpose taxes, assessments or other types of surcharges as a means of controllingor abating environmental pollution or the use of energy in regard to the use,operation or occupancy of the Premises. The term “Tax” shall include, withoutlimitation, all taxes, assessments, levies, fees, impositions or charges levied,imposed, assessed, measured, or based in any manner whatsoever (i) in whole orin part on the Rent payable by Lessee under this Lease, (ii) upon or withrespect to the use, possession, occupancy, leasing, operation or management ofthe Premises, (iii) upon this transaction or any document to which Lessee is aparty creating or transferring an interest or an estate in the Premises, (iv)upon Lessee’s business operations conducted at the Premises, (v) upon, measuredby or reasonably attributable to the cost or value of Lessee’s equipment,furniture, fixtures and other personal property located on the Premises or thecost or value of any leasehold improvements made in or to the Premises by or forLessee, regardless of whether title to such improvements shall be in Lessor orLessee, or (vi) in lieu of or equivalent to any Tax set forth in this Section16. In the event any such Taxes are payable by Lessor and it shall not be lawfulfor Lessee to reimburse Lessor for such Taxes, then the Rent payable thereundershall be increased to net Lessor the same net rent after imposition of any suchTax upon Lessor as would have been payable to Lessor prior to the imposition ofany such Tax. It is the intention of the parties that Lessor shall be free fromall such Taxes and all other governmental impositions and charges of every kindand nature whatsoever. However, nothing contained in this Section 16 shallrequire Lessee to pay any Federal or State income, franchise, estate,inheritance, succession, transfer or excess profits tax imposed upon Lessor. Ifany general or special assessment is levied and assessed against the Premises,Lessor agrees to use its best reasonable efforts to cause the assessment tobecome a lien on the Premises securing repayment of a bond sold to finance theimprovements to which the assessment relates which is payable in installments ofprincipal and interest over the maximum term allowed by law. It is understoodand agreed that Lessee’s obligation under this paragraph will be prorated toreflect the Commencement Date and the end of the Lease Term. It is furtherunderstood that if Taxes cover the Premises and Lessee does not occupy theentire Premises, the Taxes will be allocated to the portion of the Premisesoccupied by Lessee based on a pro-rata square footage or other equitable basis,as determined by Lessor.Subject to any limitations or restrictions imposed by any deeds of trust ormortgages now or hereafter covering or affecting the Premises, Lessee shall havethe right to contest or review the amount or validity of any Tax by appropriatelegal proceedings but which is not to be deemed or construed in any way asrelieving, modifying or extending Lessee’s covenant to pay such Tax at the timeand in the manner as provided in this Section 16. However, as a condition ofLessee’s right to contest, if such contested Tax is not paid before such contestand if the legal proceedings shall not operate to prevent or stay the collectionof the Tax so contested, Lessee shall, before instituting any such proceeding,protect the Premises and the interest of Lessor and of the beneficiary of a deedof trust or the mortgagee of a mortgage affecting the Premises against any lienupon the Premises by a surety bond, issued by an insurance company acceptable toLessor and in an amount equal to one and one-half (1 1/2) times the amountcontested or, at Lessor’s option, the amount of the contested Tax and theinterest and penalties in connection therewith. Any contest as to the validityor amount of any Tax, whether before or after payment, shall be made by Lesseein Lessee’s own name, or if required by law, in the name of Lessor or bothLessor and Lessee. Lessee shall defend, indemnify and hold harmless Lessor fromand against any and all costs or expenses, including attorneys’ fees, inconnection with any such proceedings brought by Lessee, whether in its own nameor not. Lessee shall be entitled to retain any refund of any such contested Taxand penalties or interest thereon which have been paid by Lessee. Nothingcontained herein shall be construed as affecting or limiting Lessor’s right tocontest any Tax at Lessor’s expense.
 

 
17. NOTICES: Unless otherwise provided for in this Lease, any and all writtennotices or other communication (the “Communication”) to be given in connectionwith this Lease shall be given in writing and shall be given by personaldelivery, facsimile transmission or by mailing by registered or certified mailwith postage thereon or recognized overnight courier, fully prepaid, in a sealedenvelope addressed to the intended recipient as follows:   (a) to the Lessor at: 10050 Bandley Drive  Cupertino, California 95014  Attention: Carl E. Berg  Fax No: (408) 725-1626   (b) to the Lessee at: 3560 Bassett Street  Santa Clara, California  Attention: Charley Eddy  Fax No: 408.727.5739or such other addresses, facsimile number or individual as may be designated bya Communication given by a party to the other parties as aforesaid. AnyCommunication given by personal delivery shall be conclusively deemed to havebeen given and received on a date it is so delivered at such address providedthat such date is a business day, otherwise on the first business day followingits receipt, and if given by registered or certified mail, on the day on whichdelivery is made or refused or if given by recognized overnight courier, on thefirst business day following deposit with such overnight courier and if given byfacsimile transmission, on the day on which it was transmitted provided such dayis a business day, failing which, on the next business day thereafter.18. ENTRY BY LESSOR: Lessee shall permit Lessor and its agents to enter into andupon said Premises at all reasonable times using the minimum amount ofinterference and inconvenience to Lessee and Lessee’s business, subject to anysecurity regulations of Lessee, for the purpose of inspecting the same or forthe purpose of maintaining the building in which said Premises are situated, orfor the purpose of making repairs, alterations or additions to any other portionof said building, including the erection and maintenance of such scaffolding,canopies, fences and props as may be required, without any rebate of Rent andwithout any liability to Lessee for any loss of occupation or quiet enjoyment ofthe Premises; and shall permit Lessor and his agents, at any time within ninety(90) days prior to the end of the Lease Term, to place upon said Premises anyusual or ordinary “For Sale” or “For Lease” signs and exhibit the Premises toprospective tenants at reasonable hours.19. DESTRUCTION OF PREMISES: In the event of a partial destruction of a buildingin said Premises during the Lease Term from any cause which is covered byLessor’s property insurance, Lessor shall forthwith repair the same, providedsuch repairs can be made within one hundred eighty (180) days after receipt ofbuilding permit under the laws and regulations of State, Federal, County, orMunicipal authorities, but such partial destruction shall in no way annul orvoid this Lease, except that Lessee shall be entitled to a proportionatereduction of Rent while such repairs are being made to the extent of paymentsreceived by Lessor under its Loss of Rents Insurance coverage. With respect toany partial destruction which Lessor is obligated to repair or may elect torepair under the terms of this paragraph, the provision of Section 1932,Subdivision 2, and of Section 1933, Subdivision 4, of the Civil Code of theState of California are waived by Lessee. In the event that a building in thesubject Premises is destroyed to an extent greater than thirty-three andone-third percent (33 1/3%) of the replacement cost thereof, Lessor may, at itssole option, elect to terminate this Lease as to that building, whether thesubject Premises is insured or not. A total destruction of more than 50% of thesubject Premises shall terminate this Lease. Notwithstanding the above, Lessoris only obligated to repair
 

 
or rebuild to the extent of available insurance proceeds including anydeductible amount paid by Lessee. Should Lessor determine that insufficient orno insurance proceeds are available for repair or reconstruction of Premises,Lessor, at its sole option, may terminate the Lease. Notwithstanding the above,Lessee shall have the option of continuing this Lease by agreeing to pay allrepair costs to the subject Premises which are not otherwise reimbursable byinsurance.20. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this Lease, or anyinterest therein, and shall not sublet the said Premises or any part thereof, orany right or privilege appurtenant thereto, or cause any other person or entity,to occupy or use the Premises, or any portion thereof, without the advancewritten consent of Lessor. Notwithstanding the above, Lessee may, without theconsent of Lessor, assign this Lease or sublet all or any part of the Premisesto a bona fide subsidiary or affiliate of Lessee, an entity in which or withwhich Lessee merges or an entity which acquires all or substantially all of theassets of Lessee (“Excepted Party”). Any such assignment or subletting requiringLessor’s consent made without Lessor’s consent shall be void, and shall, at theoption of the Lessor, terminate this Lease. This Lease shall not, or shall anyinterest therein, be assignable, as to the interest of Lessee, by operation oflaw, without the written consent of Lessor. Notwithstanding Lessor’s obligationto provide reasonable approval, Lessor reserves the right to withhold itsconsent for any proposed sublessee or assignee of Lessee if the proposedsublessee or assignee is a user or generator of Hazardous Materials. If Lesseedesires to assign its rights under this Lease or to sublet all or any part ofthe Premises to a party other than an Excepted Party, Lessee shall first notifyLessor of the proposed terms and conditions of such assignment or subletting.Lessor, at its sole option, shall have the right (i) to enter into a directLessor-lessee relationship with such party under such proposed terms andconditions, in which event Lessee shall be relieved of its obligations hereunderto the extent of the Lessor-lessee relationship entered into between Lessor andsuch third party, or (ii) to terminate the Lease and relieve Lessee of all Leaseobligations occurring after the termination of the Lease. Notwithstanding theforegoing, Lessee may assign this Lease to an Excepted Party, provided there isno substantial reduction in the net worth of the resulting guarantor. Whether ornot Lessor’s consent to a sublease or assignment is required, in the event ofany sublease or assignment, Lessee shall be and shall remain primarily liablefor the performance of all conditions, covenants, and obligations of Lesseehereunder and, in the event of a default by an assignee or sublessee, Lessor mayproceed directly against the original Lessee hereunder and/or any otherpredecessor of such assignee or sublessee without the necessity of exhaustingremedies against said assignee or sublessee. If Lessee merges or sellssubstantially all of its assets and the net worth of the resulting entity issubstantially less than that of Lessee, such sale shall be a default under thisLease unless approved by Lessor.21. CONDEMNATION: If any part of the Premises shall be taken for any public orquasi-public use, under any statute or by right of eminent domain or privatepurchase in lieu thereof, and a part thereof remains which is susceptible ofoccupation hereunder, this Lease shall as to the part so taken, terminate as ofthe date title vests in the condemnor or purchaser, and the Rent payablehereunder shall be adjusted so that the Lessee shall be required to pay for theremainder of the Lease Term only that portion of Rent as the value of the partremaining. The rental adjustment resulting will be computed at the same Rentalrate for the remaining part not taken; however, Lessor shall have the option toterminate this Lease as of the date when title to the part so taken vests in thecondemnor or purchaser. If all of the Premises, or such part thereof be taken sothat there does not remain a portion susceptible for occupation hereunder, thisLease shall thereupon terminate. If a part or all of the Premises be taken, allcompensation awarded upon such taking shall be payable to the Lessor. Lessee mayfile a separate claim and be entitled to any award granted to Lessee.22. EFFECTS OF CONVEYANCE: The term “Lessor” as used in this Lease, means onlythe owner for the time being of the land and building constituting the Premises,so that, in the event of any sale of said land or building, or in the event of aLease of said building, Lessor shall be and hereby is entirely freed andrelieved of all covenants and obligations of Lessor hereunder, and it shall bedeemed and construed, without further agreement between the parties and the
 

 
purchaser of any such sale, or the Lessor of the building, that the purchaser orlessor of the building has assumed and agreed to carry out any and all covenantsand obligations of the Lessor hereunder. If any security is given by Lessee tosecure the faithful performance of all or any of the covenants of this Lease onthe part of Lessee, Lessor may transfer and deliver the security, as such, tothe purchaser at any such sale of the building, and thereupon the Lessor shallbe discharged from any further liability.23. SUBORDINATION: This Lease, in the event Lessor notifies Lessee in writing,shall be subordinate to any ground lease, deed of trust, or other hypothecationfor security now or hereafter placed upon the real property at which thePremises are a part and to any and all advances made on the security thereof andto renewals, modifications, replacements and extensions thereof. Lessee agreesto promptly execute any documents which may be required to effectuate suchsubordination. Notwithstanding such subordination, if Lessee is not in defaultand so long as Lessee shall pay the Rent and observe and perform all of theprovisions and covenants required under this Lease, Lessee’s right to quietpossession of the Premises shall not be disturbed or effected by anysubordination.24. WAIVER: The waiver by Lessor or Lessee of any breach of any term, covenantor condition, herein contained shall not be construed to be a waiver of suchterm, covenant or condition or any subsequent breach of the same or any otherterm, covenant or condition therein contained. The subsequent acceptance of Renthereunder by Lessor shall not be deemed to be a waiver of Lessee’s breach of anyterm, covenant, or condition of the Lease.25. HOLDING OVER: Any holding over after the end of the Lease Term requiresLessor’s written approval prior to the end of the Lease Term, which,notwithstanding any other provisions of this Lease, Lessor may withhold. Suchholding over shall be construed to be a tenancy at sufferance from month tomonth. Lessee shall pay to Lessor monthly base rent equal to one and one-half(1.5) times the monthly base rent installment due in the last month of the LeaseTerm and all other additional rent and all other terms and conditions of theLease shall apply, so far as applicable. Holding over by Lessee without writtenapproval of Lessor shall subject Lessee to the liabilities and obligationsprovided for in this Lease and by law, including, but not limited to those inSection 2.1 of this Lease. Lessee shall indemnify and hold Lessor harmlessagainst any loss or liability resulting from any delay caused by Lessee insurrendering the Premises, including without limitation, any claims made orpenalties incurred by any succeeding lessee or by Lessor. No holding over shallbe deemed or construed to exercise any option to extend or renew this Lease inlieu of full and timely exercise of any such option as required hereunder.26. LESSOR’S LIABILITY: If Lessee should recover a money judgment against Lessorarising in connection with this Lease, the judgment shall be satisfied only outof the Lessor’s interest in the Premises and neither Lessor nor any of itspartners shall be liable personally for any deficiency.27. ESTOPPEL CERTIFICATES: Lessee shall at any time during the Lease Term, uponnot less than ten (10) days prior written notice from Lessor, execute anddeliver to Lessor a statement in writing certifying that, this Lease isunmodified and in full force and effect (or, if modified, stating the nature ofsuch modification) and the dates to which the Rent and other charges have beenpaid in advance, if any, and acknowledging that there are not, to Lessee’sknowledge, any uncured defaults on the part of Lessor hereunder or specifyingsuch defaults if they are claimed. Any such statement may be conclusively reliedupon by any prospective purchaser or encumbrancer of the Premises. Lessee’sfailure to deliver such a statement within such time shall be conclusive uponthe Lessee that (a) this Lease is in full force and effect, without modificationexcept as may be represented by Lessor; (b) there are no uncured defaults inLessor’s performance.28. TIME: Time is of the essence of the Lease.
 

 
29. CAPTIONS: The headings on titles to the paragraphs of this Lease are not apart of this Lease and shall have no effect upon the construction orinterpretation of any part thereof. This instrument contains all of theagreements and conditions made between the parties hereto and may not bemodified orally or in any other manner than by an agreement in writing signed byall of the parties hereto or their respective successors in interest.30. PARTY NAMES: Landlord and Tenant may be used in various places in this Leaseas a substitute for Lessor and Lessee respectively.31. EARTHQUAKE INSURANCE: If Lessor desires to obtain some form of earthquakeinsurance in the future, if and when available, on terms acceptable to Lessor asdetermined in the sole and absolute discretion of Lessor, then as a condition ofLessor agreeing to waive the requirement for earthquake insurance, Lessee agreesthat it will pay, as additional Rent, which shall be included in the monthlyCAC, an amount not to exceed Forty Seven Thousand Eight Hundred and Thirty ThreeDollars ($47,833) per year.32. HABITUAL DEFAULT: Notwithstanding anything to the contrary contained inSection 14 herein, Lessor and Lessee agree that if Lessee shall have defaultedin the payment of Rent for two or more times during any twelve month periodduring the Lease Term, then such conduct shall, at the option of the Lessor,represent a separate event of default which cannot be cured by Lessee. Lesseeacknowledges that the purpose of this provision is to prevent repetitivedefaults by the Lessee under the Lease, which constitute a hardship to theLessor and deprive the Lessor of the timely performance by the Lessee hereunder.33. HAZARDOUS MATERIALS33.1 DEFINITIONS: As used in this Lease, the following terms shall havethe following meaning:a. The term “Hazardous Materials” shall mean (i) polychlorinatedbiphenyls; (ii) radioactive materials and (iii) any chemical, materialor substance now or hereafter defined as or included in the definitionsof “hazardous substance” “hazardous water”, “hazardous material”,“extremely hazardous waste”, “restricted hazardous waste” under Section25115, 25117 or 15122.7, or listed pursuant to Section 25140 of theCalifornia Health and Safety Code, Division 20, Chapter 6.5 (HazardousWaste Control Law), (ii) defined as “hazardous substance” under Section25316 of the California Health and Safety Code, Division 20, Chapter 6.8(Carpenter-Presley-Tanner Hazardous Substances Account Act), (iii)defined as “hazardous material”, “hazardous substance”, or “hazardouswaste” under Section 25501 of the California Health and Safety Code,Division 20, Chapter 6.95 (Hazardous Materials Release, Response, Plansand Inventory), (iv) defined as a “hazardous substance” under Section25181 of the California Health and Safety Code, Division 201, Chapter6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi)asbestos, (vii) listed under Article 9 or defined as “hazardous” or“extremely hazardous” pursuant to Article II of Title 22 of theCalifornia Administrative Code, Division 4, Chapter 20, (viii) definedas “hazardous substance” pursuant to Section 311 of the Federal WaterPollution Control Act, 33 U.S.C. 1251 et seq. or listed pursuant toSection 1004 of the Federal Water Pollution Control Act (33 U.S.C.1317), (ix) defined as a “hazardous waste”, pursuant to Section 1004 ofthe Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 etseq., (x) defined as “hazardous substance” pursuant to Section 101 ofthe Comprehensive Environmental Responsibility Compensations, andLiability Act, 42 U.S.C. 9601 et seq., or (xi) regulated under the ToxicSubstances Control Act, 156 U.S.C. 2601 et seq.
 

 
b. The term “Hazardous Materials Laws” shall mean any local, state andfederal laws, rules, regulations, or ordinances relating to the use,generation, transportation, analysis, manufacture, installation,release, discharge, storage or disposal of Hazardous Material.c. The term “Lessor’s Agents” shall mean Lessor’s agents,representatives, employees, contractors, subcontractors, directors,officers and partners.d. The term “Lessee’s Agents” shall mean Lessee’s agents,representatives, employees, contractors, subcontractors, directors,officers, partners, invitees or any other person in or about thePremises.     33.2 LESSEE’S RIGHT TO INVESTIGATE: Lessee shall be entitled to causesuch inspection, soils and ground water tests, and other evaluations to be madeof the Premises as Lessee deems necessary regarding (i) the presence and use ofHazardous Materials in or about the Premises, and (ii) the potential forexposure to Lessee’s employees and other persons to any Hazardous Materials usedand stored by previous occupants in or about the Premises. Lessee shall provideLessor with copies of all inspections, tests and evaluations. Lessee shallindemnify, defend and hold Lessor harmless from any cost, claim or expensearising from such entry by Lessee or from the performance of any suchinvestigation by such Lessee.     33.3 INTENTIONALLY OMITTED.     33.4 LESSEE’S OBLIGATION TO INDEMNIFY: Lessee, at its sole cost andexpense, shall indemnify, defend, protect and hold Lessor and Lessor’s Agentsharmless from and against any and all cost or expenses, including thosedescribed under subparagraphs i, ii and iii herein below set forth, arising fromor caused in whole or in part, directly or indirectly by:a. Lessee’s or Lessee’s Agents’ use, analysis, storage, transportation,disposal, release, threatened release, discharge or generation ofHazardous Material to, in, on, under, about or from the Premises; orb. Lessee’s or Lessee’s Agents failure to comply with Hazardous Materiallaws; orc. Any release of Hazardous Material to, in, on, under, about, from oronto the Premises caused by or occurring as a result of acts oromissions of Lessee or Lessee’s Agents, except ground watercontamination from other parcels where the source is from off thePremises not arising from or caused by Lessee or Lessee’s Agents.The cost and expenses indemnified against include, but are not limited to thefollowing:i. Any and all claims, actions, suits, proceedings, losses, damages,liabilities, deficiencies, forfeitures, penalties, fines, punitivedamages, cost or expenses;ii. Any claim, action, suit or proceeding for personal injury (includingsickness, disease, or death), tangible or intangible property damage,compensation for lost wages, business income, profits or other economicloss, damage to the natural resources of the environment, nuisance,pollution, contamination, leaks, spills, release or other adverseeffects on the environment;iii. The cost of any repair, clean-up, treatment or detoxification ofthe Premises necessary to bring the Premises into compliance with allHazardous Material Laws, including the preparation and implementation ofany closure, disposal, remedial action, or other actions with regard tothe Premises, and expenses (including, without limitation, reasonableattorney’s fees and consultants fees, investigation and laboratory fees,court cost and litigation expenses).
 

 
     33.5 LESSEE’S OBLIGATION TO REMEDIATE CONTAMINATION: Lessee shall, atits sole cost and expense, promptly take any and all action necessary toremediate contamination of the Premises by Hazardous Materials occurring as aresult of acts or omissions of Lessee or Lessee’s Agents.     33.6 OBLIGATION TO NOTIFY: Lessor and Lessee shall each give writtennotice to the other as soon as reasonably practical of (i) any communicationreceived from any governmental authority concerning Hazardous Material whichrelated to the Premises and (ii) any contamination of the Premises by HazardousMaterials which constitutes a violation of any Hazardous Material Laws.     33.7 SURVIVAL: The obligations of Lessee under this Section 33 shallsurvive the Lease Term or earlier termination of this Lease.     33.8 CERTIFICATION AND CLOSURE: On or before the end of the Lease Termor earlier termination of this Lease, Lessee shall deliver to Lessor acertification executed by Lessee stating that, to the best of Lessee’sknowledge, there exists no violation of Hazardous Material Laws resulting fromLessee’s obligation in Paragraph 33. If pursuant to local ordinance, state orfederal law, Lessee is required, at the expiration of the Lease Term, to submita closure plan for the Premises to a local, state or federal agency, then Lesseeshall comply at its sole cost and expense with the requirements of the closureplan and furnish to Lessor a copy of such plan.     33.9 PRIOR HAZARDOUS MATERIALS: Lessee shall have no obligation to cleanup or to hold Lessor harmless with respect to any Hazardous Material or wastesdiscovered on the Premises which were not introduced into, in, on, about, fromor under the Premises during Lessee’s prior occupancy or during the Lease Termor ground water contamination from other parcels where the source is from offthe Premises not arising from or caused by Lessee or Lessee’s Agents. Lesseewill reimburse Lessor for its pro-rata share of Environmental Surcharges relatedto the Premises. As of the time of signing of this Lease, Lessor was not awareof any Environmental Surcharges due or expected to be due related to thePremises.34. BROKERS: Lessor and Lessee represent that they have not utilized orcontacted a real estate broker or finder with respect to this Lease. Lesseeagrees to indemnify and hold Lessor harmless against any claim, cost, liabilityor cause of action asserted by any broker or finder claiming through Lessee.Lessor represents and warrants that it has not utilized or contacted a realestate broker or finder with respect to this Lease and Lessor agrees toindemnify and hold Lessee harmless against any claim, cost, liability or causeof action asserted by any broker or finder claiming through Lessor.35. OPTION TO EXTENDA. OPTION: Lessor hereby grants to Lessee one (1) option to extend the LeaseTerm, with the extended term to be for a period of five (5) years, on thefollowing terms and conditions:(i) Lessee shall give Lessor written notice of its exercise of itsoption to extend no earlier than twelve (12), nor later than six (6)calendar months before the Lease Term would end but for said exercise.If Lessee and Lessor have not agreed to rental terms in writing, Lesseemay withdraw its notice of exercise of an extension option prior to six(6) months before the Lease Term would end but for said exercise. Lessorshall provide Lessee with Lessor’s proposed base monthly rent for theoption period within twenty (20) days of Lessee’s written request.Lessee’s acceptance, in writing, of Lessor’s proposed base monthly rentshall operate to
 

 
extend the Lease Term. Upon any extension of the Lease Term pursuant tothis Section 35, the term “Lease Term” as used in this Lease shallthereafter include the then extended term. Time is of the essence.(ii) Lessee may not extend the Lease Term pursuant to any option grantedby this Section 35 if Lessee is in default as of the date of theexercise of its option. If Lessee has committed a default by Lessee asdefined in Section 14 or 32 that has not been cured or waived by Lessorin writing by the date that any extended term is to commence, thenLessor may elect not to allow the Lease Term to be extended,notwithstanding any notice given by Lessee of an exercise of this optionto extend.(iii) All terms and conditions of this Lease shall apply during theextended term, except that the base rent and rental increases for eachextended term shall be determined as provided in Section 35 (B) below(iv) The option rights of Intevac granted under this Section 35 aregranted for Intevac’s personal benefit and may not be assigned ortransferred by Intevac or exercised if Intevac is not occupying thePremises at the time of exercise.B. EXTENDED TERM RENT — OPTION PERIOD: The monthly Rent for the Premises duringthe extended term shall equal the fair market monthly Rent for the Premises asof the commencement date of the extended term, but in no case, less than theRent during the last month of the prior Lease term. Promptly upon Lessee’sexercise of the option to extend, Lessee and Lessor shall meet and attempt toagree on the fair market monthly Rent for the Premises as of the commencementdate of the extended term. In the event the parties fail to agree upon theamount of the monthly Rent for the extended term prior to commencement thereof,the monthly Rent for the extended term shall be determined by appraisal in themanner hereafter set forth; provided, however, that in no event shall themonthly Rent for the extended term be less than in the immediate precedingperiod. Annual base rent increases during the extended term shall be fourpercent (4%) per year. In the event it becomes necessary under this paragraph todetermine the fair market monthly Rent of the Premises by appraisal, Lessor andLessee each shall appoint a real estate appraiser who shall be a member of theAmerican Institute of Real Estate Appraiser (“AIREA”) and such appraisers shalleach determine the fair market monthly Rent for the Premises taking into accountthe value of the Premises and the amenities provided by the outside areas, thecommon areas, and the Building, and prevailing comparable Rentals in the area.Such appraisers shall, within twenty (20) business days after their appointment,complete their appraisals and submit their appraisal reports to Lessor andLessee. If the fair market monthly Rent of the Premises established in the two(2) appraisals varies by five percent (5%) or less of the higher Rent, theaverage of the two shall be controlling. If said fair market monthly Rent variesby more than five percent (5%) of the higher Rental, said appraisers, within ten(10) days after submission of the last appraisal, shall appoint a thirdappraiser who shall be a member of the AIREA and who shall also be experiencedin the appraisal of Rent values and adjustment practices for commercialproperties in the vicinity of the Premises. Such third appraiser shall, withintwenty (20) business days after his appointment, determine by appraisal the fairmarket monthly Rent of the Premises taking into account the same factorsreferred to above, and submit his appraisal report to Lessor and Lessee. Thefair market monthly Rent determined by the third appraiser for the Premisesshall be controlling, unless it is less than that set forth in the lowerappraisal previously obtained, in which case the value set forth in said lowerappraisal shall be controlling, or unless it is greater than that set forth inthe higher appraisal previously obtained in which case the Rent set for in saidhigher appraisal shall be controlling. If either Lessor or Lessee fails toappoint an appraiser, or if an appraiser appointed by either of them fails,after his appointment to submit his appraisal within the required period inaccordance with the foregoing, the appraisal submitted by the appraiser properlyappointed and timely submitting his appraisal shall be controlling. If the twoappraisers appointed by Lessor and Lessee are unable to agree upon a thirdappraiser within the required period in accordance with the foregoing,application shall be made within twenty (20) days thereafter by either Lessor orLessee to AIREA, which shall appoint
 

 
a member of said institute willing to serve as appraiser. The cost of allappraisals under this subparagraph shall be borne equally be Lessor and Lessee.36. APPROVALS: Whenever in this Lease the Lessor’s or Lessee’s consent isrequired, such consent shall not be unreasonably or arbitrarily withheld ordelayed. In the event that the Lessor or Lessee does not respond to a requestfor any consents which may be required of it in this Lease within ten businessdays of the request of such consent in writing by the Lessee or Lessor, suchconsent shall be deemed to have been given by the Lessor or Lessee.37. AUTHORITY: Each party executing this Lease represents and warrants that heor she is duly authorized to execute and deliver the Lease. If executed onbehalf of a corporation, that the Lease is executed in accordance with theby-laws of said corporation (or a partnership that the Lease is executed inaccordance with the partnership agreement of such partnership), that no otherparty’s approval or consent to such execution and delivery is required, and thatthe Lease is binding upon said individual, corporation (or partnership) as thecase may be in accordance with its terms.38. INDEMNIFICATION OF LESSOR: Except to the extent caused by the solenegligence or willful misconduct of Lessor or Lessor’s Agents, Lessee shalldefend, indemnify and hold Lessor harmless from and against any and allobligations, losses, costs, expenses, claims, demands, attorney’s fees,investigation costs or liabilities on account of, or arising out of the use,condition or occupancy of the Premises or any act or omission to act of Lesseeor Lessee’s Agents or any occurrence in, upon, about or at the Premises,including, without limitation, any of the foregoing provisions arising out ofthe use, generation, manufacture, installation, release, discharge, storage, ordisposal of Hazardous Materials by Lessee or Lessee’s Agents. It is understoodthat Lessee is and shall be in control and possession of the Premises and thatLessor shall in no event be responsible or liable for any injury or damage orinjury to any person whatsoever, happening on, in, about, or in connection withthe Premises, or for any injury or damage to the Premises or any part thereof.This Lease is entered into on the express condition that Lessor shall not beliable for, or suffer loss by reason of injury to person or property, fromwhatever cause, which in any way may be connected with the use, condition oroccupancy of the Premises or personal property located herein. The provisions ofthis Lease permitting Lessor to enter and inspect the Premises are for thepurpose of enabling Lessor to become informed as to whether Lessee is complyingwith the terms of this Lease and Lessor shall be under no duty to enter, inspector to perform any of Lessee’s covenants set forth in this Lease. Lessee shallfurther indemnify, defend and hold harmless Lessor from and against any and allclaims arising from any breach or default in the performance of any obligationto Lessee’s part to be performed under the terms of this Lease. The provisionsof Section 38 shall survive the Lease Term or earlier termination of this Leasewith respect to any third party claims, damage, injury or death occurring duringthe Lease Term.39. SUCCESSORS AND ASSIGNS: The covenants and conditions herein contained shall,subject to the provisions as to assignment, apply to and bind the heirs,successors, executors, administrators and assigns of all of the parties hereto;and all of the parties hereto shall be jointly and severally liable hereunder.40. MISCELLANEOUS PROVISIONS: All rights and remedies hereunder are cumulativeand not alternative to the extent permitted by law and are in addition to allother rights or remedies in law and in equity.41. CHOICE OF LAW: This lease shall be construed and enforced in accordance withthe substantive laws of the State of California. The language of all parts ofthis lease shall in all cases be construed as a whole according to its fairmeaning and not strictly for or against either Lessor or Lessee.
 

 
42. ENTIRE AGREEMENT: This Lease is the entire agreement between the parties,and there are no agreements or representations between the parties except asexpressed herein. Except as otherwise provided for herein, no subsequent changeor addition to this Lease shall be binding unless in writing and signed by theparties hereto.In Witness Whereof, Lessor and Lessee have executed this Lease, the day and yearfirst above written.         LESSOR LESSEE  MISSION WEST PROPERTIES, L.P. III INTEVAC CORPORATION  BY: MISSION WEST PROPERTIES, INC.,        ITS GENERAL PARTNER               By: /s/ Carl E. Berg By: /s/ Charles B. Eddy           Signature of authorized representative Signature of authorized representative           Carl E. Berg Charles B. Eddy       Printed name Printed name           President Chief Financial Officer       Title Title           2/7/01 2-5-01       Date Date  
 

 
[MAP OF SITE PLAN]
 

 

 
FIRST AMENDMENT TO LEASE
This First Amendment to Lease (“Amendment”), is made and entered into this 23rd day ofFebruary, 2004 by and between Mission West Properties, L.P. III, a Delaware limited partnership(“Mission” or “Lessor”) and Intevac Corporation, a California corporation (“Lessee”).
RECITALS
A.  Lessee currently leases from Lessor approximately 119,583 square feet of space located at3560-3580 Bassett Street, Santa Clara, California (the “Premises”) pursuant to that certain lease datedFebruary 5, 2001 (the “Lease”). B.  The term of the Lease expires on March 31, 2007. C.  Lessee has elected and Mission has agreed to extend the term of Lease until March 31, 2012subject to the terms and conditions set forth herein:
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which areacknowledged, the parties hereto agree to amend the Lease as follows:
 1.  TERM: The term of the Lease is hereby extended for five (5) years until March 31, 2012..