Document:

Exhibit 10.11

	

     EXHIBIT
10.11 

INTERNATIONAL
DISTRIBUTOR AGREEMENT

Agreement made this 24th
day of April, 2001 (“Effective Date”) by and between Castelle, Inc., a
California corporation having its principal place of business located at 855
Jarvis Drive, Suite 100,, Morgan Hill, California 95037, U.S.A. (hereinafter
referred to as “Castelle”), and AMS, Ltd., having its principal place
of business located at Bournemouth, England (hereinafter referred to as
“Distributor”). 

	1. 		APPOINTMENT
OF DISTRIBUTOR AND TERRITORY 

			1.1		 Purpose.
The purpose of this Agreement is to appoint a Distributor to promote the sale of
Castelle’s Products set forth in Exhibit A in the Territory.

			1.2		Appointment.
Subject to the terms and conditions set forth herein, Castelle
hereby appoints Distributor as Castelle’s non-exclusive, authorized
distributor for the Products in the Territory during the term of this Agreement,
and Distributor hereby accepts such appointment.

			1.3 		Territory.
The Distributor's Territory shall be the United Kingdom.

			1.4		Territorial Responsibility.
Distributor will pursue aggressive sales policies
and procedures to realize maximum sales potential for the Products in the
Territory. Distributor will maintain sufficient inventory of the Products to
provide competitive delivery schedules to its customers.

	2. 		TERM
OF AGREEMENT 

			2.1		Initial Term.
This Agreement shall become effective on the Effective Date set
forth above and shall continue for an initiaL term of one (1) year subject to
the terms and conditions set forth herein.

			2.2 		Effective Date.
The Effective Date of this Agreement shall be the date it is signed as accepted by
a duly authorized officer of Castelle.

			2.3		Renewal of Agreement.
This Agreement shall thereafter be renewed for successive
periods of one year unless terminated by either party by notice, in writing,
addressed to the other party, no less than 3 months prior to the expiration of
the term, and no more than six (6) months prior to the expiration of the initial
term.

	3. 		PRICING 

			3.1 		Distributor's Prices.
Subject to adjustments described herein, Distributor's prices for Products shall
be based upon a percentage of the U.S. Suggested List Price attached hereto as Exhibit A.
Castelle prices to Distributor shall not be greater than Castelle's prices to any other
U.K. Distributor for the term of this Agreement. All prices are stated in U.S. dollars,
F.O.B. Castelle, Morgan Hill, California, U.S.A.

			3.2		Minimum Purchase Commitment.
The Minimum Purchase Commitment, set forth in
Exhibit B, shall be the total purchase price, net of taxes, duties,
transportation and other charges, which Distributor has committed to purchase
each Time Period defined in Exhibit B of this Agreement. In the event
Distributor fails to meet the Minimum Purchase Commitment for any Time Period
and/or the total annual commitment, Castelle may, at its sole option, ipso jure
and without notice, eitheR (i) upon  thirty (30) days prior  written
notice,  increase  the base price to Distributor or (ii) terminate this Agreement.

	

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10.11 

			3.3		Price Adjustments.
Castelle may change its prices set forth on Exhibit A
attached hereto at any time, provided that no such price increase shall be
effective until thirty (30) days after notice by Castelle to Distributor of such
change. Price decreases may be effective immediately on the date of notification
by Castelle. Price increases will not be applied to Product that does not ship
within the thirty (30) day notice period as a result of any delays caused by
Castelle. In addition, Castelle reserves the right to adjust Distributor’s
prices in the event that Distributor fails to meet the Purchase Commitments set
forth in Exhibit B. All price adjustments shall apply to Products ordered, but
not shipped, after the effective date of such change.

			3.4 		Price Protection.
In the event Castelle should lower its Product prices to Distributor,
Castelle will grant Distributor a price protection credit to be applied against future
orders equal to Distributor's net unit price difference between the higher and lower
price on all new, unsold eligible Products in Distributor's inventory that Castelle has
shipped to Distributor within ninety (90) days before the effective date of the price
reduction.

			3.5 		Product List Price in Distributor's Territory.
Castelle and Distributor agree that it is in both
parties best interests that the end user purchaser's prices for the Products quoted by
the Distributor, or Distributor's resellers, in the Territory be competitive to motivate
and promote purchases by end users of Castelle Products. Castelle has provided
Distributor with Castelle's U.S. Suggested List Price for Castelle Products in Exhibit A.
Distributor shall exercise its best efforts to quote and promote Castelle's Suggested
List Price in the currency of the Territory.

4. ORDERS

			4.1		Purchase Orders.
Distributor shall purchase all Products hereunder by issuing
written Purchase Orders to Castelle not less than thirty (30) days prior to
Distributor’s requested ship date identifying the Products to be purchased,
the quantity, price, total Purchase Order price, shipping instructions,
requested ship dates and any other special information. Distributor may place
additional interim Purchase Orders at any time and with no notice requirement as
the market demand may from time to time require. Castelle will use its best
efforts to comply with Distributor’s Product shipment requirements for any
orders submitted with short notice delivery requirements.

			4.2		Acceptance of Purchase Orders.
Castelle, at its place of business in the U.S.A.,
or at any other place Castelle may select, may, at Castelle’s option,
accept or reject Distributor’s Purchase Order within ten (10) days of
Castelle’s receipt thereof. Castelle shall accept all Purchase Orders that
are issued in conformance with the provisions of this Agreement. Acceptance of
Purchase Orders shall be confirmed to Distributor by first class mail, telex or
confirmed telefax.

			4.3		Terms of Purchase Orders.
Distributor’s Purchase Orders submitted to
Castelle from time to time with respect to Products to be purchased hereunder
shall be governed by the terms and conditions of this Agreement, and
notwithstanding the content of Distributor’s Purchase Order, this Agreement
shall take precedence over such Purchase Orders, and any conflicting,
inconsistent, or additional terms of Distributor’s Purchase Order shall be
null and void, and are hereby waived by Distributor.

	

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10.11 

			4.4		Order Deferral, Cancellation and Modification.
Distributor may, by prior written
notice to Castelle, defer and/or cancel delivery of a Purchase Order once
without penalty, provided such notice is received by Castelle not less than ten
(10) business days prior to the scheduled ship date for order cancellation and
five (5) business days prior to the scheduled ship date for order deferrals.
Distributor may not cancel or defer orders placed for immediate shipment.

	5. 		DISTRIBUTOR
REPORTS, FORECASTS AND MINIMUM INVENTORY 

			5.1		Reports and Forecasts.
Distributor shall submit to Castelle a three (3) month
rolling forecast five (5) days before the end of each calendar month. In
addition, Distributor shall within ten (10) days after the end of each calendar
month submit a written or electronic report to Castelle setting forth the
previous month’s sales unit volume and current inventory by Product model.
Failure to provide monthly sales unit volume and current inventory by Product
model reports may forfeit the Distributor’s right to claim price protection
credit (reference section 3.4). Distributor shall within ten (10) days after the
end of each quarter submit a written or electronic report to Castelle setting
forth the previous quarter’s Named POS (point of sale) showing product
sales, services and support contracts to specific resellers, electronic
catalogs, retailers, system integrators, end users, etc.

			5.2		Inventory.
Distributor shall, at all times, maintain minimum inventory levels of
each Castelle Product sold by Distributor, sufficient to satisfy
Distributor’s order demands, and shall use its best efforts to always have
Castelle inventory on hand. Distributor shall maintain sufficient minimum
inventory levels of each Castelle Product to satisfy the demands of the
Territory.

	6. 		PACKAGING,
SHIPMENT, RISK OF LOSS AND ACCEPTANCE OF ORDERS 

			6.1		Packaging.
All Products delivered pursuant to the terms of this Agreement shall
be suitably packaged for shipment in Castelle’s standard shipping cartons,
marked for shipment to Distributor’s address, and delivered to Distributor
or its carrier agent. In the absence of shipping instructions from Distributor,
Castelle shall ship via air freight and shall select the carrier.

			6.2		Ship Dates.
Shipping dates committed by Castelle require prompt receipt of all
necessary documents from Distributor. Where existing priorities and schedules
prevent strict compliance with requested ship dates, Purchase Orders will be
scheduled as close as is practical to the requested ship date.

			6.3		Shipment Terms.
Shipments from Castelle shall be made Ex Works, Castelle’s
manufacturing plant, freight, duties and taxes collect, to distributor’s
address set forth on Distributor’s Purchase Orders. Distributors who do not
have pre-approved credit shall pay shipping charges in advance of shipment. In
no event shall Castelle have any liability in connection with shipment, nor
shall the carrier be deemed to be an agent of Castelle. Castelle shall not be
liable for damages or penalty for delay in delivery or for failure to give
notice of any delay.

			6.4		Title and Risk of Loss.
Risk of loss with respect to Products and Software shall pass from Castelle to Distributor
upon delivery. Delivery shall be deemed made upon transfer of possession to the initial
common carrier or Distributor’s representative at Castelle’s manufacturing
plant. Transfer of ownership and title to the Products and Software shall pass from
Castelle to Distributor only after payment in full by Distributor for the Products and
Software ordered by Distributor and shipped by Castelle.

	

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10.11 

			6.5		Acceptance.
Distributor shall inspect all Products promptly upon receipt thereof
at the ship-to location and may reject any Product that is defective. Any
Product not properly rejected by Distributor shall be deemed accepted. To reject
a Product, Distributor shall notify Castelle of its rejection, by telefax,
within ten (10) days of receipt of the shipment, and request a Return Material
Authorization (“RMA”) number. Distributor shall return the rejected
Product(s), freight collect, in its original shipping carton with the RMA number
displayed on the outside of the carton. Castelle may refuse to accept any
Product that does not bear a valid RMA number on the carton. Rejected Product(s)
must be shipped to arrive at Castelle no later than 60 days after the issuance
of the RMA number; the RMA number will no longer be valid after that time.

	7. 		PAYMENT 

			7.1		Products.
Payment by Distributor for all Products hereunder shall be by
Telephone Transfer (“TT”) for payment in the United States to Castelle
at a bank approved by Castelle.

			7.2		Distributor Credit and Payment Terms.
Distributor shall complete Castelle’s
Credit Application and apply for credit. Payment terms shall be net thirty (30)
days. In the event that Distributor’s account is past due, Castelle may,
ipso jure and without notice, charge and distributor shall pay a finance charge
equal to one and one-half percent (1 1/2%) per month, or the maximum amount
allowed by law, whichever is less, upon the unpaid balance, until the date of
payment, provided, however, that no such finance charge shall be assessed on any
invoice disputed in good faith by Distributor and for which Distributor has
notified Castelle by confirmed telefax within ten (10) days of receipt of
invoice. Distributor shall pay all of Castelle’s costs and expenses
(including reasonable attorney’s fees) incurred in enforcing
Castelle’s right under this Section 7.

			7.3		Taxes and Duties.
The prices stated are exclusive of Taxes and Duties. Any Taxes
and Duties related to this Agreement shall be paid by distributor (other than a
tax measured by Castelle’s net income) or in lieu thereof, Distributor
shall provide an exemption certificate acceptable to the local taxing
authorities. All Taxes and Duties shall be billed as a separate item on the
invoice.

			7.4		Withholding.
In the event that any Government in the Territory shall require the
withholding of any sums, however designated, which may be payable hereunder,
there shall be added to amounts due the amount of such withholding, so that
Castelle shall receive from Distributor the same and equal amount as it would
have received without such withholding. No such withholding as described above
shall become due as a result of actions taken by Castelle except as may be
otherwise defined herein.

			7.5		Currency.
All prices and charges under this Agreement are stated and shall be
paid in United States dollars. Distributor agrees to take all necessary actions
required, including registration of this Agreement and application for
permission to make payments to Castelle hereunder, with the appropriate
government authorities of Distributor’s jurisdiction, or such other
institution or official, and to take such other measures as may be necessary to
comply with any government currency controls in effect in Distributor’s
jurisdiction, as soon as reasonably practicable after execution of this
Agreement.

	

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10.11 

	8. 		LIMITED
WARRANTY 

			8.1		Castelle Warranty.
The Distributor shall provide and abide by Castelle’s
warranty. Castelle warrants that it has the right and interest in the Products
to make the sales and licenses contemplated herein. Castelle warrants the
Products against defects in materials and/or workmanship for one (1) year from
purchase by the end-user customer or fifteen (15) months from Castelle’s
initial shipment to Distributor, whichever is less. This warranty is contingent
upon proper use of a Product in the application for which it is intended and is
voided if Products are modified without Castelle’s approval or are
subjected to unusual physical or electrical stress.

					When a
defective Product is returned, freight prepaid, validly to Castelle's factory in Morgan
Hill, California, U.S.A., during the warranty period, Castelle, at its sole option, shall
repair or replace the defective Product at no charge. Castelle will furnish repair parts
and replacement Products on an exchange basis. Such parts and replacement Products may be
either reconditioned or new. After repair or replacement Castelle will return the
Products, freight paid, promptly at its expense by a carrier or method of delivery of its
choosing.

					Castelle does
not warrant that the Products or spare parts shall operate uninterrupted or without
error. The warranty shall be void on Products which have been subjected to abuse, misuse,
accident, alteration, neglect, unauthorized repair or installation. Castelle shall make
the final determination as to the existence and cause of any alleged defect. Expendable
items (such as lamps and fuses) are not warranted.

			8.2		No Other Warranty.
EXCEPT FOR THE LIMITED WARRANTY REFERENCED ABOVE, CASTELLE
GRANTS NO OTHER WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE,
REGARDING THE PRODUCTS, AND SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF
FITNESS FOR ANY PURPOSE, QUALITY, MERCHANTABILITY, OR OTHERWISE.

	9. 		CHANGES,
IMPROVEMENTS AND DISCONTINUANCE 

			9.1		Changes and Improvements.
During the term of this Agreement, Castelle agrees to
inform Distributor on a timely basis of changes and improvements in the
Products’ performance, serviceability, uses and applications. Castelle
reserves the right to make any changes to the Products which it deems
appropriate.

			9.2		Discontinued Product.
If during the term of this Agreement, Castelle
discontinues a Product(s), Castelle agrees to provide Distributor with sixty
(60) days prior written notice of Product’s discontinuance. Distributor may
place an order for such discontinued Product(s) during the notification period
for delivery within six (6) months after the end of such notice period, but
Castelle’s acceptance of such orders shall be on an “as
available” basis.

	10. 		STOCK
ROTATION 

			10.1		 At the beginning of each
calendar quarter during the term of this Agreement, Distributor may return one (1)
consolidated shipment of Products to Castelle, freight prepaid, for credit against future
orders provided Distributor meets the following criteria: (i) the value of the returned
Product(s) shall be no greater than the purchase value of the returned Product(s) based on
Castelle's then current Distributor Price List; (ii) all returned Products must be in
their unopened, original packaging, be in new condition, be on Castelle's currently
available Product Price List and not have been abused or damaged; (iii) Distributor shall
not return any Products for the same identical Product model; (iv) at the time of the
return, Distributor must place an irrevocable Purchase Order with Castelle having a net
value of not less than the value of the returned Product; (v) the total value of the
returned Product shall not exceed 20% of the value of the previous quarter's net shipments
to the Distributor. Distributor shall request a Return Material Authorization ("RMA")
number for the return of the Product(s). Distributor shall return the Product(s), in its
original shipping carton with the RMA number displayed on the outside of the carton.
Castelle may refuse to accept any Product that does not bear a valid RMA number on the
carton. Product(s) must be shipped to arrive at Castelle no later than 60 days after the
issuance of the RMA number; the RMA number will no longer be valid after that time.

	

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10.11 

	11. 		INTERNET
WEB SITE AND PRODUCT DOCUMENTATION 

			11.1 		Castelle Web Site.
Castelle agrees to provide Distributor with a current copy and future updates
of relavent portions of its Castelle U.S. web site to be replicated by Distributor in a
format appropriate for the U.K. market.

			11.2 		Distributor Web Site.
Distributor shall review and get approval from Castelle prior to making
modifications to the Castelle U.S. web site for implementation in the U.K. market.
Distributor web site may be listed as castelle.uk.co and have links to appropriate
Castelle U.S. web pages such the technical support data base, product evaluation
downloads, email newsletters, lead generation email blast tools, etc.

			11.3		Distributor Web Site Statistics and Information.
Distributor shall make available to Castelle information from its castelle.uk.co
web site including page hits, leads generated and other information that may be
deemed relevant.

			11.4		Product Documentation.
Castelle agrees to provide Distributor with a reasonable
initial quantity of Castelle’s advertising and promotional materials and
technical data related to the Products at no charge. Distributor may purchase
from Castelle any additional advertising and product promotional material and
technical data related to Castelle’s Products which it requires to promote
such Products.

	12. 		TRAINING,
SUPPORT AND SERVICES 

			12.1		Services by Distributor.
Distributor shall train its customers with respect to
the Products sold. The services shall be performed only by specially and
properly trained personnel of Distributor. Distributor will maintain sufficient
inventory of the Products to provide competitive delivery schedules and
satisfactory replacement services for DOA (“Dead-On-Arrival”) products
to its customers. DOA products are those that are on the current price list, and
that have failed within 30 days of shipment from the Distributor to the
Distributor’s customer.

			12.2		Services by Castelle.
Castelle shall provide technical training for a reasonable number of Distributor’s
personnel at no charge. Such personnel shall have the appropriate technical knowledge and
English language skills to benefit from such training. In addition, Castelle shall provide
periodic sales, service and installation training classes to Distributor at no charge.
Sales and service training shall be held at such places and times as Distributor and
Castelle shall mutually agree.

	

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			12.3		Spare Parts.
Castelle agrees to provide spare parts for Products sold hereunder
for a period of not less than one (1) year from the last date of shipment of
such Product to Distributor. Spare parts shall be made available to Distributor
at Castelle’s then current price in effect at the time Distributor orders
such spare parts.

			12.4		Support by Castelle.
Castelle agrees to provide during the principal period from
07:00 to 18:00 Pacific Standard Time, Monday through Friday, excluding Castelle
holidays, secondary technical support assistance to Distributor by telephone,
telefax and Internet for problem identification and resolution.

			12.5		Support in U.K. Market.
Distributor shall be responsible for supporting all
Products which it distributes to its customers. Distributor shall maintain
support personnel sufficiently knowledgeable with respect to the Products to
answer customer inquiries regarding the use and operation of the Products.
Distributor shall ensure that all customer questions are initially addressed to
and answered by Distributor.

			12.6 		Support outside U.K. Market.
Distributor shall be responsible for supporting customers in other
European Countries which approximate 5 to 10 calls/emails per week.

			12.7		Support Transition and Fees.
Distributor shall assume support responsibility for
the current Castelle support contract customers in the U.K. market and provide
support through the customer’s contract period without additional charge.
Prior to the expiration of the support contract date Distributor shall renew the
support agreement and bill, collect and receive all renewal fees.

			12.8 		Support Policy.
Distributor shall follow U.S. support policy guidelines and provide similar
support to its End User, VAR and Alliance Partner customers.

	13. 		TRADEMARKS
AND TRADENAMES 

			13.1		License.
During the term of this Agreement, Distributor shall have the right to
use Castelle’s Trademarks in connection with Distributor’s sale or
marketing of Products, and to indicate that it is an Authorized Castelle
Distributor. Nothing herein shall grant to Distributor any right, title or
interest in the Trademarks, except as specifically set forth herein.

			13.2		No Registration.
At no time during or after the term of this Agreement shall
Distributor attempt or assist others to register any trademarks, slogans,
designs or trade names confusingly similar to those of Castelle, or challenge or
assist others to challenge Castelle’s Trademarks or registrations thereof.

			13.3		No Removal.
Distributor shall not remove, alter, deface or otherwise obscure any
Castelle trademark or trade name appearing on any Product or documentation
without the express written permission of Castelle.

			13.4 		Approval of Representations.
All representations of Castelle Trademarks which Distributor intends
to use shall be first submitted to Castelle for approval (which shall not be unreasonably
withheld) of design, color and other details or shall be exact copies of those used by
Castelle. Distributor shall use all Castelle Trademarks only in accordance with the sales
of Castelle Products and consistent with Castelle's standards for the use of Castelle
Trademarks by the Distributor.

	

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10.11 

	14. 		PROMOTION 

			14.1		Distributor Promotion.
Distributor agrees to undertake during the term of the
Agreement such promotion and advertising campaigns and marketing strategies,
including advertising in local trade media, direct mail campaigns, Internet
marketing and trade show participation, as are necessary to stimulate and
promote the sale of the Products in the Territory. Distributor will make
available to Castelle copies of all sales literature, brochures and advertising
media relating to the Products.

			14.2		Distributor Focus.
Distributor has been a successful VAR in the territory and
understands it needs to focus on expanding the business through strong promotion
and support to other resellers, some of whom may be viewed at times as
competitors. A cooperative balance needs to be established between
“Castelle U.K.”, AMS and other Resellers.

			14.3		Cooperative Promotion Allowance.
Castelle agrees to allocate 2% of the previous quarters net sales as a product
promotion allowance. Distributor shall submit promotion to Castelle for review
prior to any initial release. Upon receipt of reasonable evidence of such
promotion expenditures, Castelle will credit the amount against future
Distributor purchases.

			14.4		Other Market Development Funds.
Castelle may, from time to time at its own
discretion, provide additional funding, on a split-the-cost basis, for other
market development projects. Approval and credit procedures would be the same as
for the Cooperative Promotion Allowance.

	15. 		TERMINATION 

			15.1		Termination for Insolvency.
To the extent permitted by law, Castelle may
terminate this Agreement effective immediately and without liability upon
written notice to Distributor if any one of the following events occurs: (i)
Distributor files a voluntary petition in bankruptcy or otherwise seeks
protection under any law for the protection of debtors; (ii) a proceeding is
instituted against Distributor under any provision of any bankruptcy, insolvency
or debtor’s relief law which is not dismissed within sixty (60) days; (iii)
a court assumes jurisdiction of the assets of Distributor; (iv) a trustee or
receiver is appointed by a court for all or a substantial portion of the assets
of Distributor; (v) Distributor becomes insolvent, is unable to or ceases to pay
its debts in the normal course, or suspends business, or (vi) Distributor makes
an assignment of its assets for the benefit of its creditors.

			15.2		Termination for Cause.
If either party fails to perform any material obligation under this Agreement, including,
in the case of Distributor, the failure to meet the Purchase Commitments set forth in
Exhibit B, then upon thirty (30) days written notice to the breaching party specifying
such default, the non-breaching party may terminate this Agreement, without liability,
unless: (i) the breach specified in the notice has been cured within the thirty (30) day
period; or (ii) the default reasonably requires more than thirty (30) days to correct (and
specifically excluding any failure to pay money), and the defaulting party has begun
substantial corrective action to correct the default within such thirty (30) day period
and diligently pursues such action, in which event, termination shall not be effective
unless ninety (90) days has expired from the date of the notice without corrective action
being completed and the default remedied.

	

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			15.3 		Effect of Termination.

					(a)  		Distributor's rights.
Upon termination or cancellation of this Agreement Distributor shall have no
further right to purchase Products for resale or to represent itself as an Authorized
Castelle Distributor except as specifically permitted in Paragraph 15.3 (b) below. All
unshipped orders shall be cancelled by Castelle without liability. 

					(b)  		Inventory.
Distributor may, unless notified otherwise in writing on or before the effective date of
termination, sell its remaining inventory of the Products after termination of this
Agreement. In the event that Distributor should elect not to sell its remaining
inventory, Castelle may, at its sole discretion, repurchase Distributor's inventory which
is fit, merchantable and in Castelle's original shipping carton at Castelle's then
current U.K. Distributor prices, less the aggregate amount of all credits previously
issued with respect to such Products. Castelle shall promptly inspect all Products
returned by Distributor and shall advise Distributor of any Product that is damaged and
not acceptable to Castelle for repurchase. 

	16. 		LIMITED
LIABILITY 

	 	
IN
NO EVENT SHALL CASTELLE'S TOTAL LIABILITY HEREUNDER EXCEED THE AMOUNT PAID BY DISTRIBUTOR
FOR PRODUCTS HEREUNDER, AND IN NO EVENT SHALL CASTELLE BE LIABLE FOR COSTS OF PROCUREMENT
OF SUBSTITUTE GOODS OR SERVICES BY ANYONE, OR FOR ANY SPECIAL CONSEQUENTIAL, INCIDENTAL
OR OTHER DAMAGES, HOWEVER CAUSED, WHETHER FOR BREACH OF CONTRACT, NEGLIGENCE OR
OTHERWISE, AND WHETHER OR NOT CASTELLE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE. THIS LIMITATIOIN SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF
ANY LIMITED REMEDY PROVIDED HEREIN.

	17. 		INTELLECTUAL
PROPERTY RIGHT INDEMNITY 

			17.1		Indemnity.
Subject to the restrictions set forth in this Paragraph, Castelle
agrees to defend and indemnify Distributor from and against all actions or
proceedings brought against Distributor arising out of any actual or alleged
infringement by the Products of any patent, copyright, trade secret or other
intellectual property right.

			17.2		Distributor Obligations.
Distributor shall promptly notify Castelle of any claim
hereunder upon becoming aware of the same and shall cooperate with and provide
all reasonable assistance to Castelle upon Castelle’s request and, at
Castelle’s expense, in the defense or settlement of such claim. Castelle
shall have sole authority to defend and/or settle any claim under this
Paragraph, provided, however, that Distributor may at its own cost, retain
separate representation.

	

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			17.3		Remedy for Infringement.
If any Product, or any portion thereof, is finally
adjudged to infringe a patent, copyright, trade secret or other intellectual
property right, or if in Castelle’s opinion is likely to become the subject
of such a claim, Castelle shall, at its option, either: (i) procure for
Distributor the right to continue using the Product(s); or (ii) replace or
modify the Products(s) so that it becomes non-infringing; or (iii) upon return
of all infringing Product(s), refund to Distributor the price actually paid by
Distributor for the infringing Products; or (iv) substitute for the infringing
Products(s) other suitable, non-infringing equipment.

			17.4		Entire Liability.
THE FOREGOING PROVISIONS OF THIS SECTION 17 STATE THE ENTIRE
LIABILITY AND OBLIGATIONS OF CASTELLE AND THE EXCLUSIVE REMEDY OF DISTRIBUTOR
WITH RESPECT TO ANY ALLEGED INTELLECTUAL PROPERTY RIGHT INFRINGEMENT BY THE
PRODUCTS.

	18. 		GENERAL
TERMS AND CONDITIONS 

			18.1		Notices.
All notices and requests required or authorized hereunder shall be
given in writing either by personal delivery, by registered or certified mail,
return receipt requested, or by telefax. Such notice shall be deemed to have
been given upon such date that it is so personally delivered; the date seven (7)
days after it is deposited in the mail; or the date the same is sent by telefax,
irrespective of the date appearing therein.

			18.2		Title.
Castelle warrants that is owns all right, title and interest in the
Products, including any Products hereafter made subject to this Agreement, and
in all of Castelle’s patents, trademarks, trade names, inventions,
copyrights, know-how and trade secrets relating to the design, manufacture,
operation or service of the products. Distributor understands and agrees that
the use of any of these proprietary rights is authorized solely for the purposes
set forth herein, and shall cease upon termination or expiration of this
Agreement.

			18.3 		Confidentiality and Proprietary Information.

					(a)  		Confidential relationship.
The parties agree and understand that by execution of this Agreement a
confidential relationship is created by which either party may have access to
confidential information owned or controlled by the other (including, but not limited to,
all drawings, blueprints, descriptions, specifications, software, and data) disclosed in
any form whether written, oral or on computer readable medium, and such information may
contain proprietary details and disclosures ("Confidential Information"). 

					(b)  		Duty.
Each party shall keep and have its agents and employees keep all Confidential Information
confidential and shall not copy or disclose the same except as specifically authorized by
this Agreement, without the prior written consent of the other. Nothing herein shall
limit either party's use or dissemination of information not derived from the disclosing
party or which has been or is subsequently made public by the disclosing party or a third
party with the authority to do so. Upon expiration or termination of this Agreement, each
party shall return to the other all copies of all Confidential Information, whether
printed or otherwise. 

					(c)  		Reverse engineering.
Distributor agrees and covenants that it will not disassemble or reverse
engineer any Product or portion thereof. No right or license is granted by this Agreement
to Distributor to use Confidential Information or information derived from Page 10 of 21
Confidential Information, for any purpose other than as expressly permitted under this
Agreement. 

	

Page 10 of 21 

	

     EXHIBIT
10.11 

			18.4		Export.
The parties agree and understand that all obligations of Castelle to
deliver, and of Distributor to accept, Products hereunder shall be specifically
subject to Castelle obtaining the necessary approvals and licenses from the
United States Government for export of the same. Castelle agrees to use its best
commercially reasonable efforts, and Distributor agrees to cooperate in
providing information and assistance requested by Castelle to obtain any such
necessary approvals.

			18.5 		Foreign Law Warranties and Obligations.

					(a)  		Government consent.
Distributor represents and warrants that, as of the date of this Agreement, no
consent, approval or authorization of, or designation, declaration or filing with, any
governmental authority in the Territory, including the E. C. Commission, which has not
been made or obtained by Distributor prior to the date hereof, is required in connection
with the valid execution, performance and delivery of this Agreement. Alternatively, if
any such actions are required, Distributor agrees to use its best efforts to obtain such
consent, approval or authorization and agrees to comply with all applicable laws in its
performance under this Agreement. 

					(b)  		Import
and export control. Distributor understands and acknowledges that Castelle is subject to
regulation by agencies of the U.S. government, including the U.S. Department of Commerce,
which prohibit export or diversion of certain products and technologies to certain
countries. Any and all obligations of Castelle to provide technical information,
technical assistance, any media in which any of the foregoing is contained, training and
related technical data (collectively "Data") shall be subject in all respects to such
United States laws and regulations as shall from time to time govern the license and
delivery of technology and products abroad subject to the jurisdiction of the United
States, including the Export Administration Act of 1979, as amended, any successor
legislation, and the Export Administration Regulations issued by the U.S. Department of
Commerce, Bureau of Export Administration. Distributor warrants that it will comply in
all respects with the export and reexport restrictions set forth in the export license
(if necessary) for every item shipped from Castelle and will otherwise comply with the
Export Administration Regulations or other United States laws and regulations in effect
from time to time. 

					(c)  		Representations of Distributor.
Without in any way limiting the provisions of this Agreement, Distributor
agrees that, unless prior written authorization is obtained from the U.S. Department of
Commerce, Bureau of Export Administration, it will not resell, export or reexport, either
directly or indirectly, any Product, or any portion thereof, to country groups Q,S,W,Y,
or Z (as defined in the Export Administration Regulations and which currently consists of
Albania, Bulgaria, Cambodia, Cuba, Czechoslovakia, Estonia, Hungary, Laos, Latvia, Libya,
Lithuania, Mongolia People's Republic, North Korea, Poland, Romania, the (former) Union
of Soviet Socialist Republics and Vietnam), or Afghanistan or the People's Republic of
China any of the Data (if the direct products are commodities, software, or technical
data described on the Control List with a letter "A" following its Export Control Number). 

			18.6 		Independent Contractors.
The relationship of Castelle and Distributor established by this Agreement is
that of independent contractors, and nothing contained herein shall be construed to (i)
give either party the power to direct and control the day-to-day activities of the other;
(ii) Page 11 of 21 constitute the parties as partners, joint venturers, co-owners or
otherwise as participants in a joint or common undertaking; or (iii) allow Distributor to
create or assume any obligation on behalf of Castelle for any purpose whatsoever. All
financial obligations associated with Distributor's business are the sole responsibility
of Distributor. All sales and other agreements between Distributor and its customers are
Distributor's exclusive responsibility and shall have no effect on Distributor's
obligations under this Agreement. Distributor shall be solely responsible for, and shall
indemnify and hold Castelle harmless from all claims, damages or lawsuits (including
Castelle's attorney's fees) arising out of the acts of Distributor, its employees or its
agents. 

	

Page 11 of 21 

	

     EXHIBIT
10.11 

			18.7		Force Majeure.
Except for the obligation to pay money properly due and owing,
either party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its control, including,
but not limited to, an act of God, earthquake, labor disputes, riots war, civil
insurrection, expropriation, novelty of product manufacture or other
unanticipated manufacturing problems, governmental requirements, inability to
secure materials on a timely basis, and transportation difficulties. The
obligations and rights of the party so excused shall be extended on a day-to-day
basis for the time period equal to the period of such excusable delay. In order
to obtain a suspension under this Paragraph, the party delayed shall send
written notice of the delay and the reason therefore to the other party within
seven (7) days from the time the party delayed knew of the cause of such delay.

			18.8		Arbitration.
Any dispute or claim arising out of, in relation to, or in
connection with this Agreement, or the interpretation, making, performance,
breach or termination thereof, shall be finally settled by binding arbitration
in Palo Alto, California under the Commercial Arbitration Rules of the American
Arbitration Association (“AAA”) by three arbitrators appointed in
accordance with said AAA Rules. Judgement on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.

			18.9		Governing Law.
This contract shall be governed by the law of the state of
California and not by any terms of the Convention in Contracts for International
Sales of Goods. Arbitrators shall apply California law to the merits of any
dispute or claim, without reference to rules of conflict of law. Arbitration
proceedings shall be governed by the AAA Rules, without reference to state
arbitration law.

			18.10		Survival of Certain Terms.
The provisions of Paragraphs 8 [Limited Warranty], 13.2 [No
Registration], 17 [Intellectual Property Right Indemnity], and 18 [General Terms
and Conditions], shall survive the expiration or termination for any reason of
this Agreement.

			18.11		Waiver.
Any waiver of any right or remedy under this Agreement must be in writing and
signed by the party to be bound to be effective. No delay or omission in
exercising any right or remedy shall operate as a waiver of such right or remedy
or any other right or remedy. A waiver on any one occasion shall not be
construed as a waiver of any right or remedy on any future occasion.

			18.12		Assignment.
Any assignment of this Agreement, or any of the rights hereunder, either
voluntarily or by operation of law, by Distributor shall be void without the
joint, prior written consent of Castelle and Distributor.

			18.13 		Severability.
If any provisions or portion thereof of this Agreement is held to be unenforceable or
invalid, the remaining provisions and portions thereof shall nevertheless be given full
force and effect, and the parties agree to negotiate in good faith, a substitute valid
provision which most nearly effects the parties' intent in entering into this Agreement.

	

Page 12 of 21 

	

     EXHIBIT
10.11 

			18.14		Language.
This Agreement shall be construed and interpreted in English, and any
translation hereof to a language other than English shall be for convenience
only.

	19. 		ENTIRE
AGREEMENT 

	 	
This
Agreement together with the Exhibits attached hereto, constitutes the entire agreement
between the parties with respect to the subject matter hereof, taking precedence over and
superseding any prior or contemporaneous oral or written agreements or understandings. No
subsequent alterations, amendments, or additions hereto shall be binding and valid unless
reduced to writing and signed by both parties hereto.

	 	
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated below: 

	 	
CASTELLE INCORPORATED   

By:   /s/ Donald L. Rich

Name:     Donald L. Rich

Title:   President & CEO

Date:   April 24, 2001  

	
AMS Ltd.                

By:  /s/ Dennis Buller  

Name:    Dennis Buller  

Title:   Director       

Date:   April 24, 2001  

	

Page 13 of 21 

	

     EXHIBIT
10.11 

EXHIBIT A

Distributor Price equal
to 65% of U.S. Price List MSRP

U.S. Price List and U.K.
Price List Included in Exhibit A

Page 14 of 21

	

     EXHIBIT
10.11 

U.S. Price
List

FaxPress
Network Fax Servers

	FaxPress Small Business
Edition (SBE), 2500, 5000, 7000 & 7500 Fax Server
	 	
Integrated network
faxservers for WindowsNT/2000/Terminal Server, NetWare, Linux

	

	Part Number	Description	 MSRP
	 
	6629860-1109	Small Business Edition (SBE) Ethernet 8MB memory 1 line 14.4 Kbps	$1495
	6629860-1100	FaxPress 2500† Ethernet 8MB memory • 2 lines 14.4 Kbps	$2995
	 	      New!! Reform for FaxPress Software Included with FP5000/7000/7500
	6629860-1055	FaxPress 5000† Ethernet • 16MB memory • 4 lines • 14.4 Kbps	$5995
	6629860-1056	FaxPress 5000† Ethernet • 32MB memory • 8 lines • 14.4 Kbps	$7995
	6629860-1136	FaxPress 7000† Ethernet • 10/100Base-T • 32MB memory • 8 lines • Rackmount	$8495
	6629860-1146	FaxPress 7500† Ethernet • 10/100Base-T • 32MB memory • 8L Fax/4L E&M • RM	$9995
	 

			†		
FaxPress 2500, 5000, 7000 and 7500 models come with software version 6.x PRO,
and include a choice of Exchange Direct, Exchange Connector, or SMTP gateway.
The 5000, 7000 and 7500 models now also include Reform for FaxPress software.

	

	FaxPress
PRO†† Software for Small Business Edition (SBE) 
	 	
New
Features Include: Single Sign On, Archive, ODBC Phone Books, Fax Approval, Multiprotocol,
SNMP Plus choice of Exchange Direct, Exchange Connector or SMTP Gateway

	

	PART NUMBER	DESCRIPTION	 MSRP
	 
	6629860-1084	  FaxPress v6.x Basic to v6.x PRO with E-Mail Gateway†††	$495

FaxPress
Add-Ons & Upgrades 

	

	FaxPress Software Upgrades to v6.x PRO††
	 	
New Features Include: Single Sign On, Archive, ODBC Phone Books, Fax
     Approval, Goldmine, Multiprotocol, SNMP

	

					NOTE:  		FaxPress
6.x software upgrades can only be sold to customers having FaxPress models 1500N, 3500,
OfficeConnect, SBE, 2500, 5000, 7000 or 7500. The purchase of a software upgrade does not
entitle the buyer/customer to any support on the FaxPress hardware. In cases where the
hardware needs to be upgraded in order to run the new software (including upgrades
necessitated by failures that can occur in the flashing of Boot PROM's or modifying of
EEPROM's), the cost of the hardware upgrade is the responsibility of the customer - it is
not included in the cost of the software. Customers that desire both software and
hardware support should investigate Castelle's Extended Support Agreement. Please contact
your Castelle Sales Representative for details.

	PART NUMBER	DESCRIPTION	 MSRP
	 

	6629860-1095	FaxPress v3.7.3 Upgrade to v6.x PRO with E-Mail Gateway†††	$1990
	6629860-1096	FaxPress v4.x Upgrade to v6.x PRO with E-Mail Gateway†††	$1690
	6629860-1097	FaxPress v5.x Upgrade to v6.x PRO with E-Mail Gateway†††	$1490
	 
	6629860-1081	FaxPress v3.7.3 Upgrade to v6.x PRO without E-Mail Gateway	$ 995
	6629860-1082	FaxPress v4.x Upgrade to v6.x PRO without E-Mail Gateway	$ 695
	6629860-1083	FaxPress v5.x Upgrade to v6.x PRO without E-Mail Gateway	$ 495

			††		
Certain features contained in v6.x PRO are activated with a “key code”
that is based on the serial number of the FaxPress unit that it will be loaded
onto. The serial number will be required when ordering.

	

Page 15 of 21

	

     EXHIBIT
10.11 

	††† 		Purchase
of this software upgrade includes choice of Exchange Direct, Exchange Connector or SMTP
gateway. Please indicate your choice when ordering.  

	

FaxPress
Hardware Upgrades

	PART NUMBER	DESCRIPTION	 MSRP
	 

	66298600-878	FaxPress 1500/1500-N 1-line Upgrade Kit	$6257
	66298600-650	FaxPress 3000/3500 2-line Upgrade Kit	$ 995
	6629860-1049	FaxPress 5000 4-line Upgrade Kit	$2495

	

FaxPress Software
Add-Ons for 5.x and 6.x

	PART NUMBER	DESCRIPTION	 MSRP
	 
	6629860-1006	FaxPress OCR Software (for v5.x or higher)	$595 
	6629860-1002	FaxPress cc:Mail 6.x Gateway, Windows Version (for v5.x or higher)	$995 
	6629860-1092	FaxPress 6.x Lotus Notes Gateway, Windows NT only‡	$995 
	6629860-1099	FaxPress 6.x SMTP Gateway (Windows NT only)‡	$995 
	6629860-1033	FaxPress Exchange Direct Software (for v5.x or higher)‡	$995 
	6629860-1134	FaxPress Exchange Connector Software (for 6.2 SP1 or higher)‡	$995 
	6629860-1152	Reform for FaxPress (for 6.2 SP2 or higher)‡‡ (New!)	$250 

			‡		
This software is activated with a “key code” that is based on the
serial number of the FaxPress unit that it will be loaded onto. The serial
number will be required when ordering. For Exchange Direct, please specify your
current FaxPress software revision also.

			‡‡		
This software is activated with a “key code” that is based on the
“seed number” of the Reform Software. After installing Reform, you can
find the seed number by clicking “Help” and then the
“Register” button in the Form Designer.

	

LANpress
Network Print Servers

	LANpress MP —	High-performance,
multi-protocol external print servers 
Supports Windows NT, Windows 95, Windows for
Workgroups, NetWare 2.x/3.x/4.x (NDS), AppleTalk & UNIX  

	

	PART NUMBER	DESCRIPTION	 MSRP
	 
	6629860-1108	LANpress Jr. 10/100	Ethernet •10/100Base-T	$199 
	6629860-1072	LANpress 2000 2+1	Ethernet •10/100Base-T •2 parallel + 1 serial	$339 
	66298600-955	LANpress 3P/100	Ethernet •10/100Base-T •3 parallel	$345 
	6629860-1042	LANpress Jr. MP	Ethernet •10Base-T	$149 
	6629860-1154	LANpress 2P	Wireless (New!)	$395 

	

Page 16 of 21

	

     EXHIBIT
10.11 

OfficeDirect
Server Appliances

	
OfficeDirect Storage and Message Servers

	 	
Plug-and-forget server appliances that bring internet and inter-office
     e-mail and fax communications to small and medium-sized companies

	

	PART NUMBER	DESCRIPTION	 MSRP
	 
	6629860-1130	OfficeDirect Storage Server	$995 
	6629860-1124	OfficeDirect Message Server	$995 

	

    InfoPress Information
Delivery Solutions
 —Universal document access and delivery via phone, fax, e-mail
and the Web

InfoPress
Fax-On-Demand for Fax Press

	PART NUMBER	DESCRIPTION	 MSRP
	 
	117-IP/FaxPress	2 voice and 1 Fax Port Licenses plus ProLine2V, 2 Port Voice Card	$3289

	

InfoPress Fax-On-Demand
Starting Bundles (includes FaxPress Integration Software)

	PART NUMBER	DESCRIPTION	 
	 
	117-HSEBundle	InfoPress Fax-On-Demand, 2x1 Hardware/Software Kit w/Email-On-Demand	$5489
	117-HSBundle	InfoPress Fax-On-Demand, 2x1 Hardware/Software Kit	$4389
	117-Sbundle	InfoPress Fax-On-Demand, 2X1 Software	$3289

	

InfoPress Additional
Software Licenses

	PART NUMBER	DESCRIPTION	 
	 
	117-V	InfoPress Software License, Voice (price per line)	$1425
	117-F	InfoPress Software License, Fax (price per line)	$1425

	

InfoPress
Email-On-Demand Enterprise Edition

	PART NUMBER	DESCRIPTION	 
	 
	117-EMOD1	InfoPress Email-On-Demand, Enterprise Edition, single address	$1095
	117-EMOD25	InfoPress Email-On-Demand, Enterprise Edition, 25 addresses	$5495
	117-EMOD100	InfoPress Email-On-Demand, Enterprise Edition, 100 addresses	$8245
	117-EMOD100+	InfoPress Email-On-Demand, Enterprise Edition, 100+ addresses	$10995

	

Page 17 of 21

	

     EXHIBIT
10.11 

U.K. Price List

FaxPress
Network Fax Servers

	

FaxPress Small Business Edition (SBE), 2500, 5000, 7000 & 7500 Fax Server

	 	

Integrated network faxservers for WindowsNT/2000/Terminal Server, NetWare, Linux

	Part Number	Description	 MSRP
	 
	6629860-1109	Small Business Edition (SBE) Ethernet 8MB memory 1 line 14.4 Kbps	£997
	6629860-1100	FaxPress 2500+ Ethernet 8MB memory • 2 lines 14.4 Kbps	£1997
	  	      New!! Reform for FaxPress Software Included with FP5000/7000/7500
	6629860-1055	FaxPress 5000+ Ethernet • 16MB memory • 4 lines • 14.4 Kbps	£3997
	6629860-1056	FaxPress 5000+ Ethernet • 32MB memory • 8 lines • 14.4 Kbps	£5330
	6629860-1136	FaxPress 7000+ Ethernet • 10/100Base-T • 32MB memory • 8 lines • Rackmount	£5663
	6629860-1146	FaxPress 7500+ Ethernet • 10/100Base-T • 32MB memory • 8L Fax/4L E&M • RM	£6663

		†		
FaxPress 2500, 5000, 7000 and 7500 models come with software version 6.x PRO,
and include a choice of Exchange Direct, Exchange Connector, or SMTP gateway.

	

	

FaxPress PRO†† Software for Small Business Edition (SBE)

	 	

New Features Include: Single Sign On, Archive, ODBC Phone Books, Fax Approval,
Multiprotocol, SNMP

	

	PART NUMBER	DESCRIPTION	 MSRP
	 
	6629860-1084	FaxPress v6.x Basic to v6.x PRO with E-Mail Gateway+++	£330

	

FaxPress
Add-Ons & Upgrades

	

FaxPress Software Upgrades to v6.x PRO††

	 	

New Features Include: Single Sign On, Archive, ODBC Phone Books, Fax Approval,
Multiprotocol, SNMP

	

					NOTE: 		FaxPress
6.x software upgrades can only be sold to customers having FaxPress models 1500N, 3500,
OfficeConnect, SBE, 2500, 5000, 7000 or 7500. The purchase of a software upgrade does not
entitle the buyer/customer to any support on the FaxPress hardware. In cases where the
hardware needs to be upgraded in order to run the new software (including upgrades
necessitated by failures that can occur in the flashing of Boot PROM's or modifying of
EEPROM's), the cost of the hardware upgrade is the responsibility of the customer - it is
not included in the cost of the software. Customers that desire both software and
hardware support should investigate Castelle's Extended Support Agreement. Please contact
your Castelle Sales Representative for details.

	PART NUMBER	DESCRIPTION	 MSRP
	 
	6629860-1095	FaxPress v3.7.3 Upgrade to v6.x PRO with E-Mail Gateway†††	£1327
	6629860-1096	FaxPress v4.x Upgrade to v6.x PRO with E-Mail Gateway†††	£1127
	6629860-1097	FaxPress v5.x Upgrade to v6.x PRO with E-Mail Gateway†††	£ 993
	 
	6629860-1081	FaxPress v3.7.3 Upgrade to v6.x PRO without E-Mail Gateway	£ 663
	6629860-1082	FaxPress v4.x Upgrade to v6.x PRO without E-Mail Gateway	£ 463
	6629860-1083	FaxPress v5.x Upgrade to v6.x PRO without E-Mail Gateway	£ 330

			††		
Certain features contained in v6.x PRO are activated with a “key code”
that is based on the serial number of the FaxPress unit that it will be loaded
onto. The serial number will be required when ordering.

	

Page 18 of 21

	

     EXHIBIT
10.11 

     ††† Purchase
of this software upgrade includes choice of Exchange Direct, Exchange Connector
or SMTP gateway. 

FaxPress
Hardware Upgrades

	PART NUMBER	DESCRIPTION	 MSRP
	 
	66298600-878	FaxPress 1500/1500-N 1-line Upgrade Kit	£ 417
	66298600-650	FaxPress 3000/3500 2-line Upgrade Kit	£ 663
	6629860-1049	FaxPress 5000 4-line Upgrade Kit	£1663

	

FaxPress Software
Add-Ons for 5.x and 6.x

	PART NUMBER	DESCRIPTION	 
	 
	6629860-1006	FaxPress OCR Software (for v5.x or higher)	£397
	6629860-1002	FaxPress cc:Mail 6.x Gateway, Windows Version (for v5.x or higher)	£663
	6629860-1092	FaxPress 6.x Lotus Notes Gateway, Windows NT only‡	£663
	6629860-1099	FaxPress 6.x SMTP Gateway (Windows NT only)‡	£663
	6629860-1033	FaxPress Exchange Direct Software (for v5.x or higher)‡	£663
	6629860-1134	FaxPress Exchange Connector Software (for 6.2 SP1 or higher)‡ (New!)	£663
	6629860-1152	Reform for FaxPress (for 6.2 SP2 or higher)‡‡ (New!)	£167

			‡		
This software is activated with a “key code” that is based on the
serial number of the FaxPress unit that it will be loaded onto. The serial
number will be required when ordering. For Exchange Direct, please specify your
current FaxPress software revision also.

			‡‡		
This software is activated with a “key code” that is based on the
“seed number” of the Reform Software. After installing Reform, you can
find the seed number by clicking “Help” and then the
“Register” button in the Form Designer.

	

LANpress
Network Print Servers

	LANpress MP — 	High-performance,
multi-protocol external print servers 
Supports Windows NT, Windows 95, Windows for
Workgroups, NetWare 2.x/3.x/4.x (NDS), AppleTalk & UNIX 

	

	PART NUMBER	DESCRIPTION	 MSRP
	 
	6629860-1108	LANpress Jr. 10/100	Ethernet •10/100Base-T (New!)	£133
	6629860-1072	LANpress 2000 2+1	Ethernet •10/100Base-T •2 parallel + 1 serial (New!)	£226
	66298600-955	LANpress 3P/100	Ethernet •10/100Base-T •3 parallel	£230
	6629860-1042	LANpress Jr.MP	Ethernet •10Base-T	£ 99
	6629860-1154	LANpress 2P	Wireless	£263

	

Page 19 of 21

	

     EXHIBIT
10.11 

OfficeDirect
Server Appliances

	
OfficeDirect Storage and Message Servers

	 	

     Plug-and-forget server appliances that bring internet and inter-office
     e-mail and fax communications to small and medium-sized companies

	

	PART NUMBER	DESCRIPTION	 MSRP
	 
	6629860-1130	OfficeDirect Storage Server(New!)	£663
	6629860-1124	OfficeDirect Message Server (New!)	£663

	

    InfoPress Information
Delivery Solutions
 —Universal document access and delivery via phone, fax, e-mail
and the Web

InfoPress
Fax-On-Demand for Fax Press

	PART NUMBER	DESCRIPTION	 MSRP
	 
	117-IP/FaxPress	2 voice and 1 Fax Port Licenses plus ProLine2V, 2 Port Voice Card	£2193

	

InfoPress Fax-On-Demand
Starting Bundles (includes FaxPress Integration Software)

	PART NUMBER	DESCRIPTION	 MSRP
	 
	117-HSEBundle	InfoPress Fax-On-Demand, 2x1 Hardware/Software Kit w/Email-On-Demand	£3659
	117-HSBundle	InfoPress Fax-On-Demand, 2x1 Hardware/Software Kit	£2926
	117-Sbundle	InfoPress Fax-On-Demand, 2X1 Software	£2193

	

InfoPress Additional
Software Licenses

	PART NUMBER	DESCRIPTION	 MSRP
	 
	117-V	InfoPress Software License, Voice (price per line)	£950
	117-F	InfoPress Software License, Fax (price per line)	£950

	

InfoPress
Email-On-Demand Enterprise Edition

	PART NUMBER	DESCRIPTION	 MSRP
	 
	117-EMOD1	InfoPress Email-On-Demand, Enterprise Edition, single address	£730
	117-EMOD25	InfoPress Email-On-Demand, Enterprise Edition, 25 addresses	£3663
	117-EMOD100	InfoPress Email-On-Demand, Enterprise Edition, 100 addresses	£5497
	117-EMOD100+	InfoPress Email-On-Demand, Enterprise Edition, 100+ addresses	£7330

	

Page 20 of 21

	

     EXHIBIT
10.11 

EXHIBIT B

Minimum Purchase Agreement

Distributor agrees to
purchase no less than US$100,000 per calendar quarter. 

Page 21 of 21Exhibit 10.12

	

     EXHIBIT
10.12 

STANDARD
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – NET

AMERICAN INDUSTRIAL REAL
ESTATE ASSOCIATION

	1. 		Basic
Provisions (“Basic Provisions”) 

					

			1.1 		Parties:
This Lease (“Lease”), dated for reference purposes only August 16, 2000, is made by Kyung
S .Lee and Ieesun Kim Lee (“Lessor”), and Castelle, Inc., a California Corporation
(“Lessee”), (collectively the “Parties”, or individually a “Party”).

			1.2(a) 		Premises:
That certain portion of the Project (as defined below), including all improvements herein
or to be provided by Lessor under the terms of this lease, commonly known by the street
address of 855 Jarvis Drive, Unit B located in the City of Morgan Hill, County of Santa
Clara, State of California, with zip code of 95037, as outlined on Exhibit A attached
herto (“Premises”) and generally described as (describe briefly the nature of the
Premises): an approximately 16,600 square foot portion of a 26,865 square foot R&D building.
In addition to Lessee’s rights to use and occupy the premises as hereinafter specified,
Lessee shall have non-exclusive rights to the Common Areas, (as defined in Paragraph 2.7
below) as hereinafter specified, but shall not have any rights to the roof, exterior
walls, or utility raceways of the building containing the Premises (“Building”) or to any
other buildings in the Project. The Premises, the Building, the Common Areas, the land
upon which they are located, along with all other improvements thereon, are herein
collectively referred to as the “Project”. (See also paragraph 2)

			1.2(b) 		Parking:
58 unreserved vehicle parking spaces (“Unreserved Parking Spaces”): and 0 reserved
vehicle parking spaces (Reserved Parking Spaces”). (See also Paragraph 2)

			1.3 		Term:
five (5) years and zero (0) months (“Original Term”) commencing November 1, 2000*
(“Commencement Date”) and ending October 30, 2005* (Expiration Date”). (See also
Paragraph 3) *See Paragraph 55.

			1.4
      		Early Possession:
September 5, 2000 for construction of Tenant Improvements. (“Early Possession
Date”) (See also paragraph 3.2 and 3.3)

			1.5
      		Base Rent:
$19,920.00 per month (“Base Rent”), payable on the first (1st) day of each
month commencing November 1,2000* * See paragraph 55.

     |X| If
this box is checked, there are provisions in this Lease for the Base Rent to be adjusted. 

			1.6
      		Lessee’s Share
of Common Area Operating Expenses: sixty one and eight tenths percent
(61.8%) (“Lessee’s Share”).

			1.7
      		Base Rent
      and Other Monies Paid Upon Execution:

					(a)
      		Base Rent:
      $19,1920.00 for the period November 1 - November 31, 2000 

					(b)
      		Common
      Area Operating Expenses: $3,818.00 for the period November 1 - November
      31, 2000 

					(c) 		Security Deposit:
$46,480.00 (“Security Deposit”). (See also Paragraph 5) 

 
					(d)
      		Other:
      $N/A 

					(e) 		Total
Due upon Execution of this Lease: $70,218.00 

			1.8 		Agreed
Use: General office, research, development, light manufacturing, marketing, sales and
other legal related uses. . (See also Paragraph 6.)

			1.9 		Insuring
Party: Lessor is the “Insuring Party”. (See also Paragraph 8)

			1.10 		Real
Estate Brokers: (See also Paragraph 15)

					(a) 		Representation:
The following real estate brokers (the “Brokers”) and brokerage relationships exist in
this transaction (check Applicable boxes) 

	|X| 		Grubb
& Ellis represents Lessor exclusively (“Lessor’s Broker”): 

	|X| 		Colliers
International represents Lessee exclusively (“Lessee’s Broker”): or 

	|_| 		Represents
both Lessor and Lessee (“Dual Agency”) 

	

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     EXHIBIT
10.12 

					(b) 		Payment
to Brokers: Upon execution and delivery of this Lease by both Parties, Lessor shall pay
to the Brokers the brokerage fee agreed to in a separate written agreement (or if there
is no such agreement, the sum of or % of the total Base Rent for the brokerage services
rendered by the Brokers). 

			1.11 		Guarantor:
The obligations of the Lessee under this Lease are to be guaranteed by N/A. (”Guarantor”)
(See also Paragraph 37)

			1.12 		Addenda
and Exhibits. Attached hereto is an Addendum or Addenda consisting of Paragraphs 50
through 58 and Exhibits A through C, all of which constitute a part of this Lease. 2.
Premises

			2.1 		Letting.
Lessor herby leases to Lessee, and Lessee herby leases from Lessor, the Premises, for the
term, at the rental, and upon all and upon all of the terms, covenants and conditions set
forth in this Lease. Unless otherwise provided herin, any statement of size set forth in
this Lease, or that may have been used in calculating Rent, is an approximation, which
the Parties agree, is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less.

			2.2 		Condition.
Lessor shall deliver that portion of the Premises contained within the Building (“Unit”)
to Lessee broom clean and free of debris on the Commencement Date or the Early Possession
Date, whichever first occurs (“Start Date”), and, so long as the required service
contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within
thirty days following the Start Date, warrants that the existing electrical, plumbing,
fire sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”),
loading doors, if any, and all other such elements in the Unit, other than those
constructed by Lessee, shall be in good operating condition on said date and that the
structural elements of the roof, bearing walls and foundation of the Unit shall be free
of material defects. If a non-compliance with such warranty exists as of the Start Date,
or if one of such systems or elements should malfunction or fail within the appropriate
warranty period, Lessor shall, as Lessor’s sole obligation with respect to such matter,
except as otherwise provided in this lease, promptly after receipt of written notice from
lessee setting forth with specificity the nature and extent of such non-compliance,
malfunction or failure, rectify same at Lessor’s expense. The warranty periods shall be
as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to the remaining
systems and other elements of the new Unit. If Lessee does not give Lessor the required
notice within the appropriate warranty period, correction of any such non-compliance,
malfunction or failure shall be the obligation of Lessee at Lessee’s sole cost and
expense (except for the repairs to the fire sprinkler systems, roof, foundations, and/or
bearing walls-see Paragraph 7).

			2.3 		Compliance.
Lessor warrants that the improvements on the Premises and the Common Areas comply with
the building codes that were in effect at the time that each such improvement, or portion
thereof, was constructed, and also with all applicable laws, covenants or restrictions of
record, regulations, and ordinances in effect on the Start Date (“Applicable
Requirements”). Said warranty does not apply to the use to which Lessee will put the
Premises or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a))
made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not
the Applicable Requirements, and especially the zoning, are appropriate for Lessee’s
intended use, and acknowledges that past uses of the Premises may no longer be allowed.
If the Premises do not comply with said warranty, Lessor shall, except as otherwise
provided promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify the same at Lessor’s
expense. If Lessee does not give Lessor written notice of a non-compliance with this
warranty within 6 months following the Start Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee’s sole cost and expense. If the Applicable
Requirements are hereafter changed so as to require during the term of this Lease the
construction of an addition to or an alteration of the Unit, Premises and/or Building,
the remediation of any Hazardous Substance, or the reinforcement or other physical
modification of the Unit, Premises and/or Building (“Capital Expenditure”), Lessor and
Lessee shall allocate the cost of such work as follows:

	

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     EXHIBIT
10.12 

					(a)  		Subject
to Paragraph 2.3(C) below, if such Capital Expenditures are required as a result of the
specific and unique use of the Premises by Lessee as compared with the uses by tenants in
general, Lessee shall be fully responsible for the cost thereof, provided, however that
if such Capital Expenditure is required during the last 2 years of this Lease and the
cost thereof exceeds 6 months’ Base Rent, Lessee may instead terminate this Lease unless
Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee’s termination
notice that Lessor has elected to pay the difference between the actual cost thereof and
the amount equal to 6 month’s Base Rent. If Lessee elects termination, Lessee shall
immediately cease the use of the Premises which requires such Capital Expenditure and
deliver to the Lessor written notice specifying a termination date at least 90 days
thereafter. Such termination date shall, however, in no event be earlier than the last
day that Lessee could legally utilize the Premises without commencing such Capital
Expenditure. 

					(b)  		If
such Capital Expenditure is not the result of the specific and unique use of the Premises
by Lessee (such as, governmentally mandated seismic modifications), then Lessor and
Lessee shall allocate the obligation to pay for the portion of such costs reasonably
attributable to the Premises pursuant to the formula set out in Paragraph 7.1 (d);
provided, however, that if such Capital Expenditure is required during the last 2 years
of this Lease or if Lessor reasonable determines that it is not economically feasible to
pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days
prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days
after receipt of Lessor’s termination notice that Lessee will pay for such Capital
Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any
such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest,
from Rent until Lessor’s share of such costs have been fully paid. If Lessee is unable to
finance Lessor’s share, or if the balance of the Rent due and payable for the remainder
of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee
shall have the right to terminate this Lease upon 30 days written notice to Lessor. 

					(c)  		Notwithstanding
the above, the provisions concerning Capital Expenditures are intended to apply only to
non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures
are instead triggered by Lessee as a result of an actual or proposed change in use,
change in intensity of use, or modification to the Premises then, and in that event,
Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any
right to terminate this Lease. 

			2.4 		Acknowledgements.
Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy
itself with respect to the condition of the Premises (including but not limited to the
electrical, HVAC and fire sprinkler systems, security, environmental aspects, and
compliance with Applicable Requirements and the Americans with Disabilities Act), and
their suitability for Lessee’s intended use, (b) Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility therefore
as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor’s
agents, nor Brokers have made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease. In addition, Lessor
acknowledges that: (i) Brokers have made no representations, promises or warranties
concerning Lessee’s ability to honor the Lease or suitability to occupy the Premises, and
(ii) it is Lessor’s sole responsibility to investigate the financial capability and/or
suitability of all proposed tenants.

			2.5 		Lessee
as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of no
force or effect if immediately prior to the Start Date Lessee was the owner or occupant
of the Premises. In such event, Lessee shall be responsible for any necessary corrective
work.

			2.6 		Vehicle
Parking. Lessee shall be entitle to use the number of Unreserved Parking Spaces and
Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common
Areas designated from time to time by Lessor for parking. Lessee shall not use more
parking spaces than said number. Said parking spaces shall be used for parking by
vehicles no larger than full-size passenger automobiles, pick up trucks or SUVs, herein
called “Permitted Size Vehicles.” Lessor may regulate the loading and unloading of
vehicles by adopting Rules and Regulations as provided in

	

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     EXHIBIT
10.12 

	 	Paragraph
2.9. No vehicles other than Permitted Size Vehicles may be parked in the Common Area
without the prior written permission of Lessor. 

					(a)  		Lessee
shall not permit or allow any vehicles that belong to or are controlled by Lessee or
Lessee’s employees, suppliers, shippers, customers, contractors or invitees to be loaded,
unloaded, or parked in areas other than those designated by Lessor for such activities. 

					(b)  		Lessee
shall not service or store any vehicles in the Common Areas. 

					(c)  		If
Lessee permits or allows any of the prohibited activities described in this Paragraph
2.6, then Lessor shall have the right, without notice, in addition to such other rights
and remedies that it may have, to remove or tow away the vehicle involved and charge the
cost to Lessee, which cost shall be immediately payable upon demand by Lessor. 

			2.7 		Common
Areas — Definition. The term “Common Areas” is defined as all areas and facilities
outside the Premises and within the exterior boundary line of the Project and interior
utility raceways and installations within the Unit that are provided and designated by
the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and
other tenants of the Project and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas, loading and unloading
areas, trash areas, roadways, walkways, driveways, and landscaped areas.

			2.8 		Common
Areas — Lessee’s Rights. Lessor grants to Lessee, for the benefit of Lessee and its
employees, suppliers, shippers, contractors, customers and invitees, during the term of
this Lease, the non-exclusive right to use, in common with others entitled to such use,
the Common Areas as they exist from time to time, subject to any rights, powers, and
privileges reserved by Lessor under the terms hereof or under the terms of any rules and
regulations governing the use of the Project. Under no circumstances shall the right
herein granted to use the Common Areas be deemed to include the right to store any
property, temporarily or permanently, in the Common Areas. Any such storage shall be
permitted only by the prior written consent of Lessor or Lessor’s designated agent, which
consent may be revoked at any time. In the event that any unauthorized storage shall
occur then the Lessor shall have the right, without notice, in addition to such other
rights and remedies that it may have, to remove the property and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.

			2.9 		Common
Areas — Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall
have the exclusive control and management of the Common Areas an shall have the right,
from time to time, to establish, modify, amend and enforce reasonable rules and
regulations (“Rules and Regulations”) for the management, safety, care, and cleanliness
of the grounds, the parking and unloading of vehicles and the preservation of good order,
as well as for the convenience of other occupants or tenants of the Building and the
Project and their invitees. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to causes its employees, suppliers, shippers, customers, contractors and
invitees to so abide and conform. Lessor shall not be responsible to Lessee for the
non-compliance with said Rules and Regulations by other tenants of the Project.

			2.10 		Common
Areas — Changes. Lessor shall have the right, in Lessor’s sole discretion, from time to
time:

					(a)  		To
make changes to the Common Areas, including, without limitation, changes in the location,
size, shape and number of driveways, entrances, parking spaces, parking areas, loading
and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways
and utility raceways; 

					(b)  		To
close temporarily any of the Common Areas for maintenance purposes so long as reasonable
access to the Premises remains available; 

					(c)  		To
designate other land outside the boundaries of the Project to be part of the Common Areas; 

					(d)  		To
add additional buildings and improvements to the Common Areas; 

					(e)  		To
use the Common Areas while engaged in making additional improvements, repairs or
alterations to the Project, or any portion thereof; and 

	

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     EXHIBIT
10.12 

					(f)  		To
do and perform such other acts and make such other changes in, to or with respect to the
Common Areas and Project as Lessor may, in the exercise of sound business judgment, deem
to be appropriate. 

	3. 		Term. 

			3.1 		Term.
The Commencement Date, Expiration Date and Original Term of this Lease are as specified
in Paragraph 1.3.

			3.2 		Early
Possession. If Lessee totally or partially occupies the Premises prior to the
Commencement Date, the obligation to pay Base Rent shall be abated for the period of such
early possession. All other terms of this Lease (including but not limited to the
obligations to pay Lessee’s Share of Common Area Operating Expenses, Real Property Taxes
and insurance premiums and to maintain the Premises) shall, however, be in effect during
such period. Any such early possession shall not affect the Expiration Date. Lessee shall
not be required to pay NNN expenses or Common Area operating expenses during early
occupancy but shall have liability insurance in full effect and be responsible for their
prorata share of utilities.

			3.3 		Delay
in Possession. Lessor agrees to use its best commercially reasonable efforts to deliver
possession of the Premises to Lessee by the Commencement Date. If, despite said efforts,
Lessor is unable to deliver possession as agreed, Lessor shall not be subject to any
liability thereof, nor shall such failure affect the validity of this Lease. Lessee shall
not, however be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within 60 days after the
Commencement Date, Lessee may, at its option, by notice in writing within 10 days after
the end of such 60 day period, cancel this Lease, in which event the Parties shall be
discharged from all obligations hereunder. If such written notice is not received by
Lessor within said 10-day period, Lessee’s right to cancel shall terminate. Except as
otherwise provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that Lessee
would otherwise have enjoyed shall run from the date of delivery of possession and
continue for a period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts or omissions of Lessee. If
possession of the Premises is not delivered within 4 months after the Commencement Date,
this Lease shall terminate unless other agreements are reached between Lessor and Lessee,
in writing.

			3.4 		Lessee
Compliance. Lessor shall not be required to tender possession of the Premises to Lessee
until Lessee complies with its obligation to provide evidence of insurance (Paragraph
8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its
obligations under this Lease from and after the Start Date, including the payment of
Rent, notwithstanding Lessor’s election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other conditions
prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may
elect to withhold possession until such conditions are satisfied.

	4. 		Rent. 

			4.1 		Rent
Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease
(except for the Security Deposit) are deemed to be rent (“Rent”).

			4.2 		Common
Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, in addition
to the Base Rent, Lessee’s Share (as specified in Paragraph 1.6) of all Common Area
Operating Expenses, as hereinafter defined, during each calendar year of the term of this
Lease, in accordance with the following provisions:

					(a)  		“Common
Area Operating Expenses” are defined, for purposes of this Lease, as all costs incurred
by Lessor relating to the ownership and operation of the Project, including, but not
limited to, the following: 

							(i)  		The
operation, repair and maintenance, in neat, clean, good order and condition of the
following: 

								(aa)  		The
Common Areas and Common Area improvements, including parking areas, loading and unloading
areas, trash areas, roadways, parkways, walkways, driveways, landscaped areas,
                              bumpers,  irrigation systems,  Common Area
                              lighting facilities,  fences and gates, elevators,
                              roofs, and roof drainage systems.

	

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     EXHIBIT
10.12 

								(bb)  		Exterior
signs and any tenant directories. 

								(cc)  		Any
fire detection and/or sprinkler systems. 

							(ii)  		The
cost of water, gas, electricity and telephone to service the Common Areas and any
utilities not separately metered. 

							(iii)  		Trash disposal,
pest control services, property management, not to exceed 3% of the lease rate, security
services, and the costs of any environmental inspections. 

							(iv)  		Reserves
set aside for maintenance and repair of Common Areas. 

							(v)  		Real
Property Taxes (as defined in Paragraph 10). 

							(vi)  		The
cost of the premiums for the insurance maintained by Lessor pursuant to Paragraph 8. 

							(vii)  		Any
deductible portion of an insured loss concerning the Building or the Common Areas. 

							(viii)  		The
cost of any Capital Expenditure to the Building or the Project not covered under the
provisions of Paragraph 2.3 provided; however, that Lessor shall allocate the cost of any
such Capital Expenditure over a 12 year period and Lessee shall not be required to pay
more than Lessee’s Share of 1/144th of the cost of such Capital Expenditure in any given
month. Construction defects and items covered by manufacturer’s warranties shall be
excluded. 

							(ix)  		Any
other services to be provided by Lessor that are stated elsewhere in this Lease to be a
Common Area Operating Expense. 

					(b)  		Any
Common Area Operating Expenses and Real Property Taxes that are specifically attributable
to the Unit, the Building or to any other building in the Project or to the operation,
repair and maintenance thereof, shall be allocated entirely to such Unit, Building, or
other building. However, any Common Area Operating Expenses and Real Property Taxes that
are not specifically attributable to the Building or to any other building or to the
operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Project. 

					(c)  		The
inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(a)
shall not be deemed to impose an obligation upon Lessor to either have said improvements
or facilities or to provide those services unless the Project already has the same,
Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to
provide the same or some of them. (d) Lessee’s Share of Common Area Operating Expenses
shall be payable by Lessee within 10 days after a reasonably detailed statement of actual
expenses is presented to Lessee. At Lessor’s option, however, an amount may be estimated
by Lessor from time to time of Lessee’s Share of annual Common Area Operating Expenses
and the same shall be payable monthly or quarterly, as Lessor shall designate, during
each 12 month period of the Lease term, on the same day a the Base Rent is due hereunder.
Lessor shall deliver to Lessee within 60 days after the expiration of each calendar year
a reasonably detailed statement showing Lessee’s Share of the actual Common Area
Operating Expenses incurred during the preceding year. If lessee’s payments under this
Paragraph 4.2(d) during the preceding year exceed Lessee’s Share as indicated on such
statement, Lessor shall be credited the amount of such over-payment against Lessee’s
Share of Common Area Operating Expenses next becoming due. If Lessee’s payments under
this Paragraph 4.2(d) during the preceding year were less than Lessee’s Share as
indicated on such statement, Lessee  shall  pay to Lessor  the  amount of the
                    deficiency within 10 days after delivery by Lessor to Lessee
                    of the statement.

	

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     EXHIBIT
10.12 

					4.3 		Payment.
Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United
States, without offset or deduction (except as specifically permitted in this Lease), on
or before the day on which it is due. Rent for any period during the term hereof, which
is for less than one full calendar month shall be prorated based upon the actual number
of days of said month. Payment of Rent shall be made to Lessor at its address stated
herein or to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall not be a
waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement
of any check so stating. In the event that any check, draft, or other instrument of
payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to
Lessor the sum of $25 in addition to any late charges which may be due. 

	5. 		Security
Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as
security for Lessee’s faithful performance of its obligations under this Lease. If Lessee
fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or
retain all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage
which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any
portion of the Security Deposit, Lessee shall within 10 days after written request
therefore deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Should the Agreed Use be amended to accommodate a
material change in the business of Lessee or to accommodate a sublessee or assignee,
Lessor shall have the right to increase the Security Deposit to the extent necessary, in
Lessor’s reasonable judgment, to account for any increased wear and tear that the
Premises may suffer as a result thereof. If a change in control of Lessee occurs during
this Lease and following such change the financial condition of Lessee is, in Lessor’s
reasonable judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially
reasonable level based in such change in financial condition. Lessor shall not be
required to keep the Security Deposit separate from its general accounts. Within 14 days
after the expiration or termination of this Lease, if Lessor elects to apply the Security
Deposit only to unpaid Rent, and otherwise within 30 days after the Premises have been
vacated pursuant to Paragraph 7.4 (c) below, Lessor shall return that portion of the
Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be
considered to be held in trust, to bear interest or to be prepayment for may monies to be
paid by Lessee under this Lease. 

	6. 		Use. 

			6.1 		Use.
Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use
which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or
permit the use of the Premises in a manner that is unlawful, creates damage, waste or a
nuisance, or that disturbs occupants of or cause damage to neighboring premises or
properties. Lessor shall not unreasonably withhold or delay its consent to any written
request for a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or electrical
systems therein, and/or is not significantly more burdensome to the Premises. If Lessor
elects to withhold consent, Lessor shall within 7 days after such request give written
notification of same, which notice shall include an explanation of Lessor’s objections to
the change in the Agreed Use.

			6.2 		Hazardous
Substances.

					(a)  		Reportable
Uses Require Consent. The term “Hazardous Substance” as used in this Lease shall mean any
product, substance, or waste whose presence, use, manufacture, disposal, transportation,
or release, either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or welfare,
the environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any governmental agency
or third party under any applicable statute or common law theory. Hazardous Substances
shall include, but not be 

	

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     EXHIBIT
10.12 

	 	limited
to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or
fractions thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior written
consent of Lessor and timely compliance (at Lessee’s expense) with all Applicable
Requirements. “Reportable Use” shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use, transportation,
or disposal of a Hazardous Substance that requires a permit from, or with respect to
which a report, notice, registration or business plan is required to be filed with, any
governmental authority, and/or (iii) the presence at the Premises of a Hazardous
Substance with respect to which any Applicable Requirements requires that a notice be
given to persons entering or occupying the Premises or neighboring properties.
Notwithstanding the foregoing, Lessee may use any ordinary and customary materials
reasonably required to be used in the normal course of the Agreed Use, so long as such
use is in compliance with all Applicable Requirements, is not a Reportable Use, and does
not expose the Premises or neighboring property to any meaningful risk of contamination
or damage or expose Lessor to any liability therefor. In addition, Lessor may condition
its consent to any Reportable Use upon receiving such additional assurances as Lessor
reasonably deems necessary to protect itself, the public, the Premises and/or the
environment against damage, contamination, injury and/or liability, including, but not
limited to, the installation (and removal on or before Lease expiration or termination)
of protective modifications (such as concrete encasements) and/or increasing the Security
Deposit. 

							(b)  		Duty
to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous
Substance has come to be located in, on, under or about the Premises, other than as
previously consented to by Lessor, Lessee shall immediately give written notice of such
fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other
documentation which it has concerning the presence of such Hazardous Substance. 

							(c)  		Lessee
Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under, or about the Premises (including through the plumbing or sanitary
sewer system) and shall promptly, at Lessee’s expense, take all investigatory and/or
remedial action reasonably recommended, whether or not formally ordered or required, for
the cleanup of any contamination of, and for the maintenance, security and/or monitoring
of the Premises or neighboring properties, that was caused or materially contributed to
by Lessee, or pertaining to or involving any Hazardous Substance brought onto the
Premises during the term of this Lease, by or for lessee, or any third party. 

							(d)  		Lessee
Indemnification. Lessee shall indemnify, defend and hold Lessor, its agents, employees,
lenders and ground lessor, if any, harmless from and against any and all loss of rents
and/or damages, liabilities, judgments, claims, expenses, penalties, and attorney’s and
consultants’ fees arising out of or involving any Hazardous Substance brought onto the
Premises by or for Lessee, or any third party invited by Lessee (provided, however, that
Lessee shall have no liability under this Lease with respect to underground migration of
any Hazardous Substance under the Premises from the areas outside of the Project).
Lessee’s obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or suffered by
Lessee. and the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration of termination of this Lease. No termination,
cancellation or release agreement entered into by Lessor and Lessee shall release Lessee
from its obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement. 

							(e)  		Lessor
Indemnification. Lessor and its successors and assigns shall indemnify, defend, reimburse
and hold Lessee, its employees and lenders, harmless from and against any and all
environmental damages, including the cost of remediation, which existed as a result of
Hazardous Substances on the Premises prior to the Start Date or which are caused by the
gross negligence or willful misconduct of Lessor, its agents or employees. Lessor’s
obligations, as and when required by the Applicable Requirements, shall include, but not
be limited to, the cost of investigation,
removal, remediation, restoration and/or abatement, and
shall survive the expiration or termination of this Lease.

	

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10.12 

					(f)  		Investigations
and Remediations. Lessor shall retain the responsibility and pay for any investigations
or remediation measures required by governmental entities having jurisdiction with
respect to the existence of Hazardous Substances on the Premises prior to the Start Date,
unless such remediation measure is required as a result of Lessee’s use (including
“Alterations”, as defined in paragraph 7.3(a) below) of the Premises, in which event
Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such
activities at the request of the Lessor, including allowing Lessor and Lessor’s agents to
have reasonable access to the Premises at reasonable times in order to carry out Lessor’s
investigative and remedial responsibilities. 

					(g)  		Lessor
Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs
during the term of this Lease, unless Lessee is legally responsible therefor (in which
case lessee shall make the investigation and remediation thereof required by the
Applicable Requirements and this Lease shall continue in full force and effect, but
subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13) Lessor may, at
Lessor’s option, either (i) investigate and remediate such Hazardous Substance Condition,
if required, as soon as reasonably possible at Lessor’s expense, in which event this
Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is
greater, give written notice to Lessee, within 30 days after receipt by Lessor of
knowledge of the occurrence of such Hazardous Substance Condition, of Lessor’s desire to
terminate this lease as of the date 60 days following the date of such notice. In the
event, Lessor elects to give a termination notice, Lessee may within 10 days thereafter
give written notice to Lessor of Lessee’s commitment to pay the amount by which the cost
of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12
times the then monthly Base Rent or $100,00, whichever is greater. Lessee shall provide
to Lessor with said funds or satisfactory assurance thereof within 30 days following such
commitment. In such event, this Lease shall continue in full force and effect, and Lessor
shall proceed to make such remediation as soon as reasonable possible after the required
funds are available. If Lessee does not give such notice and provide the required funds
or assurance thereof within the time provided, this Lease shall terminate as of the date
specified in Lessor’s notice of termination. 

			6.3 		Lessee’s
Compliance with Applicable Requirements. Except as otherwise provided in this Lease,
Lessee shall, at Lessee’s sole expense, fully, diligently and in a timely manner,
materially comply with all Applicable Requirements, the requirements of any applicable
fire insurance underwriter or rating bureau, and the recommendations of Lessor’s
engineers and /or consultants which relate in any manner to the Premises, without regard
to whether said requirements are now in effect or become effective after the Start Date.
Lessee shall, within 10 days after receipt of Lessor’s written request, provide Lessor
with copies of all permits and other documents, an other information evidencing Lessee’s
compliance with any Applicable Requirements specified by Lessor, and shall immediately
upon receipt, notify Lessor in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint or report pertaining to
or involving the failure of Lessee or the Premises to comply with any Applicable
Requirements.

			6.4 		Inspection;
Compliance. Lessor and Lessor’s “Lender” (as defined in Paragraph 30) and consultants
shall have the right to enter into Premises at any time, in the case of an emergency, and
otherwise at reasonable times, for the purpose of inspecting the condition of the
Premises and for verifying compliance by Lessee with this Lease. The cost of any such
inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is requested or ordered
by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for
the cost of such inspection, so long as such inspection is reasonably related to the
violation or contamination.

	7. 		Maintenance;
Repairs, Utility Installations; Trade Fixtures and Alterations. 

			7.1 		Lessee’s
Obligations.

	

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     EXHIBIT
10.12 

					(a)  		In
General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3
(Lessee’s Compliance with Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damage
or Destruction), 14 (Condemnation), Lessee shall, at Lessee’s sole expense, keep the
Premises, Utility Installations (intended for Lessee’s exclusive use, no matter where
located), and Alterations in good order, condition and repair (whether or not the portion
of the Premises requiring repairs, or the means of repairing the same, are reasonably or
readily accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee’s use, any prior use, the elements or the age of such portion of the
Premises), including, but not limited to, all equipment for facilities, such as plumbing,
HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures,
interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors,
plate glass, and skylights but excluding any items which are the responsibility of Lessor
pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order, condition and
repair, shall exercise and perform good maintenance practices, specifically including the
procurement and maintenance of the service contracts required by Paragraph 7.1(b) below.
Lessee’s obligations shall include restorations, replacements or renewals when necessary
to keep the Premises and all improvements thereon or part thereof in good order,
condition and state of repair. 

					(b)  		Service
Contracts. Lessee shall, at Lessee’s sole expense, procure and maintain contracts, with
copies to Lessor, in customary form and substance for, and with contractors specializing
and experienced in the maintenance of the following equipment and improvements, if any,
if and when installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure
vessels, (iii) clarifiers, and (iv) any other equipment, if reasonably required by
Lessor. However, Lessor reserves the right, upon notice to Lessee, to procure and
maintain any or all of such service contracts, and if Lessor so elects, Lessee shall
reimburse Lessor, upon, demand, for the cost thereof. 

					(c)  		Failure
to Perform. If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1,
Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee (except
in the case of an emergency, in which case no notice shall be required), perform such
obligations on Lessee’s behalf, and put the Premises in good order, condition and repair,
and Lessee shall promptly reimburse Lessor for the cost thereof. 

					(d)  		Replacement.
Subject to Lessee’s indemnification of Lessor as set forth in Paragraph 8.7 below, and
without relieving Lessee of liability resulting from Lessee’s failure to exercise and
perform good maintenance practices, if an item described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing such
item, then such item shall be replaced by Lessor, and the cost thereof shall be prorated
between the Parties and Lessee shall only be obligated to pay, each month during the
remainder of the term of this Lease, on the date on which Base Rent is due, an amount
equal to the product of multiplying the cost of such replacement by a fraction, the
numerator of which is one, and the denominator of which is 144 (i.e. 1/144th of the cost
per month). Lessee shall pay interest on the unamortized balance at a rate that is
commercially reasonable in the judgment of Lessor’s accountants. Lessee may, however,
prepay its obligation at any time. 

			7.2 		Lessor’s
Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or
Destruction) and 14 (Condemnation), Lessor, pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural condition of
interior bearing walls, exterior roof, excluding roof penetrations made by Lessee
including all HVAC unit penetrations; and subject to reimbursement, fire sprinkler
system. Common Area fire alarm and/or smoke detection systems, fire hydrants, parking
lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the services for
which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall
not be obligated to paint the exterior or interior surfaces of exterior walls nor shall
Lessor be obligated to maintain, repair or replace windows, doors or plate glass of the
Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect
to the extent it is inconsistent with the terms of this Lease.

	

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10.12 

					7.3 		Utility
Installations; Trade Fixtures; Alterations. 

							(a)  		Definitions.
The term “Utility Installations” refers to all floor and window coverings, air lines,
power panels, electrical distribution, security and fire protection systems,
communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on
the Premises. The term “Trade Fixtures” shall mean Lessee’s machinery and equipment that
can be removed without doing material damage to the Premises. The term “Alterations”
shall mean any modification of the improvements, other than Utility Installations or
Trade Fixtures, whether by addition or deletion. “Lessee Owned Alterations and/or Utility
Installations” are defined as Alterations and/or Utility Installations made by Lessee
that are not yet owned by Lessor pursuant to Paragraph 7.4(a). 

							(b)  		Consent.
Lessee shall not make any Alterations or Utility Installations to the Premises without
Lesssors prior written consent. Lessee may, however, make non-structural Utility
installations to the interior of the Premises (excluding the roof) without such consent
but upon notice to Lessor, as long as they are not visible from the outside, do not
involve puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3
month’s Base Rent in the aggregate or a sum equal to one month’s Base Rent in any one
year. Notwithstanding the foregoing, Lessee shall not make or permit any roof
penetrations and/or install anything on the proof without the prior written approval of
Lessor. Lessor may, as precondition to granting such approval, require Lessee to utilize
a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations
that Lessee shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee’s: (i) acquiring all applicable governmental permits, (ii)
furnishing Lessor with copies of both the permits and the plans and specifications prior
to commencement of the work, and (iii) compliance with all conditions of said permits and
other Applicable Requirements in a prompt and expeditious manner. Any Alterations or
Utility Installations shall be performed in a workmanlike manner with good and sufficient
materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and
specifications. For work which costs an amount in excess of one month’s Base Rent, Lessor
may condition its consent upon Lessee providing a lien and completion bond in an amount
equal to 150% of the estimated cost of such Alteration or Utility Installation and/or
upon Lessee’s posting an additional Security Deposit with Lessor. 

							(c)  		Indemnification.
Lessee shall pay, when due, all claims for labor or materials furnished or alleged to
have been furnished to or for Lessee at or for use on the Premises, which claims are or
may be secured by any mechanic’s or materialman’s lien against the Premises or any
interest therein. Lessee shall give Lessor not less than 10 days notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the right to
post notices of non-responsibility. If Lessee shall contest the validity of any such
lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof. If Lessor shall
require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of
such contested lien, claim or demand, indemnifying Lessor against liability for the same.
If Lessor elects to participate in any such action, Lessee shall pay Lessor’s attorneys’
fees and costs. 

					7.4 		Ownership;
Removal; Surrender; and Restoration. 

							(a)  		Ownership.
Subject to Lessor’s right to require removal or elect ownership as hereinafter provided,
all Alterations and Utility Installations made by lessee shall be the property of Lessee,
but considered a part of the Premises. Lessor may, at any time, elect in writing to be
the owner of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of this
Lease, become the property of Lessor and be surrendered by Lessee with the Premises. 

							(b)  		Removal.
By delivery to Lessee of written notice from Lessor not earlier than 90 and not later
than 30 days prior to the end of the term of this Lease, Lessor may require that any
or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or termination of this Lease.
Lessor may require the removal at any time of all or any
part of any Lessee Owned Alterations or Utility
Installations made without the required consent.

	

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10.12 

					(c)  		Surrender;
Restoration. Lessee shall surrender the Premises by the Expiration Date or an earlier
termination date, with all of the improvements, parts and surfaces thereof broom clean
and free of debris, and in good operating order, condition and state of repair, ordinary
wear and tear excepted. “Ordinary wear and tear” shall not include any damage or
deterioration that would have been prevented by good maintenance practice.
Notwithstanding the foregoing, if this Lease is for 12 months or less, then Lessee shall
surrender the Premises in the same condition as delivered to Lessee on the Start Date
with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned
by the installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations
and/or Utility Installations, furnishings, and equipment as well as the removal of any
storage tank installed by or for Lessee. Lessee shall also completely remove from the
Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or
any third party invited by Lessee (except Hazardous Substances which were deposited via
underground migration from areas outside of the Project) even if such removal would
require Lessee to perform or pay for work that exceeds statutory requirements. Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure
by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the
express written consent of Lessor shall constitute a holdover under the provisions of
Paragraph 26 below. 

	8. 		Insurance;
Indemnity. 

			8.1 		Payment
of Premiums. The cost of the premiums for the insurance policies required to be carried
by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a), and 8.3(b), shall be a Common Area
Operating Expenses. Premiums for policy periods commencing prior to, or extending beyond,
the term of this Lease shall be prorated to coincide with the corresponding Start Date or
Expiration Date.

			8.2 		Liability
Insurance.

					(a)  		Carried
by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of
insurance protecting Lessee and Lessor as an additional insured against claims for bodily
injury, personal injury and property damage based upon or arising out of the ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such
insurance shall be on an occurrence basis providing single limit coverage in an amount
not less than $1,000,000 per occurrence with an annual aggregate of not less than
$2,000,000, an “Additional Insured-Managers or Lessors of Premises Endorsement” and
contain the “Amendment of the Pollution Exclusion Endorsement” for damage caused by heat,
smoke or fumes from a hostile fire. The policy shall not contain any intra-insured
exclusions as between insured persons or organizations, but shall include coverage for
liability assumed under this Lease as an “insured contract” for the performance of
Lessee’s indemnity obligations under this Lease. The limits of said insurance shall not,
however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder.
All insurance carried by Lessee shall be primary to and not contributory with any similar
insurance carried by Lessor, whose insurance shall be considered excess insurance only. 

					(b)  		Carried
by Lessor. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in
addition to, and not in lieu of, the insurance required to be maintained by Lessee.
Lessee shall not be named as an additional insured therein. 

			8.3 		Property
Insurance - Building, Improvements and Rental Value.

					(a)  		Building
and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance
in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender
insuring loss or damage to the Premises. The amount of such insurance shall be equal to
the full replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by any Lender, but in no event more than the commercially reasonable
and available insurable value thereof. Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee’s personal property shall be insured by Lessee
under Paragraph 8.4. If the coverage is available and commercially appropriate, such
policy or policies shall insure against all risks of direct 

	

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     EXHIBIT
10.12 

	 	physical
loss or damage (except the perils of flood and/or earthquake unless required by a
Lender), including coverage of debris removal and the enforcement of any Applicable
Requirements requiring the upgrading, demolition, reconstruction or replacement of any
portion of the Premises as the result of a covered loss. Said policy or policies shall
also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual property
insurance coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where the
Premises are located. If such insurance coverage has a deductible clause, the deductible
amount shall not exceed $1,000 per occurrence.

					(b)  		Rental
Value. Lessor shall also obtain and keep in force a policy or policies in the name of
Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for
one year with an extended period of indemnity for an additional 180 days (“Rental Value
insurance”). Said insurance shall contain an agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the
projected Rent otherwise payable by Lessee, for the next 12 month period. 

					(c)  		Adjacent
Premises. Lessee shall pay for any increase in the premiums for the property insurance of
the Building and for the Common Areas or other buildings in the Project if said increase
is caused by Lessee’s acts, omissions, use or occupancy of the Premises. 

					(d)  		Lessee’s
Improvements. Since Lessor is the Insuring Party, Lessor shall not be required to insure
Lessee Owned Alterations and Utility Installations unless the item in question has become
the property of Lessor under the terms of this Lease. 

			8.4 		Lessee’s
Property; Business Interruption Insurance.

					(a)  		Property
Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee’s personal
property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such
insurance shall be full replacement cost coverage with a deductible of not to exceed
$1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and
Utility Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force. 

					(b)  		Business
Interruption. Lessee shall obtain and maintain loss of income and extra expense insurance
in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable
to all perils commonly insured against by prudent lessees in the business of Lessee or
attributable to prevention of access to the Premises as a result of such perils. 

					(c)  		No
Representation of Adequate Coverage. Lessor makes no representation that the limits or
forms of coverage of insurance specified herein are adequate to cover Lessee’s property,
business operations or obligations under this Lease. 

			8.5 		Insurance
Policies. Insurance required herein shall be by companies duly licensed or admitted to
transact business in the state where the Premises are located, and maintaining during the
policy term a “General Policyholders Rating” of at least B+, V, as set forth in the most
current issue of “Best’s Insurance Guide”, or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified
copies of policies of such insurance or certificates evidencing the existence and amounts
of the required insurance. No such policy shall be cancelable or subject to modification
except after 30 days prior to written notice to Lessor. Lessee shall, at least 30 days
prior to the expiration of such policies, furnish Lessor with evidence of renewals or
“insurance binders” evidencing renewal thereof, or Lessor may order such insurance and
charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand. Such policies shall be for a term of at least one year, or the length of the
remaining term of this Lease, whichever is less. If either Party shall fail to procure
and maintain the insurance required to be carried by it, the other Party may, but shall
not be required to, procure and maintain the same.

			8.6 		Waiver
of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each
hereby release and relieve the other, and waive their entire right to recover damages
against the other, for loss of or damage to its property arising out of or incident to
the perils required to be insured against herein.
The effect of such releases and waivers is not limited by the
amount of insurance carried or required, or by any deductibles
applicable hereto. The Parties agree to have their respective
property damage insurance carriers waive any right to subrogation
that such companies may have against Lessor or Lessee, as the
case may be, so long as the insurance is not invalidated thereby.

	

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10.12 

			8.7 		Indemnity.
Except for Lessor’s gross negligence or willful misconduct, Lessee shall indemnify,
protect, defend and hold harmless the Premises, Lessor and its agents, Lessor’s master or
ground lessor, partners and Lenders, from and against any and all claims, loss of rents
and/or damages, liens, judgments, penalties, attorneys’ and consultants’ fees, expenses
and/or liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought against
Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the
same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid any such claim in
order to be defended or indemnified.

			8.8 		Exemption
of Lessor from Liability. Lessor shall not be liable for injury or damage to the person
or goods, wares, merchandise or other property of Lessee, Lessee’s employees,
contractors, invitees, customers, or any other person in or about the Premises, whether
such damage or injury is caused by or results from fire, steam, electricity, gas, water
or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire
sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building, or from other sources or places. Lessor
shall not be liable for any damages arising from any act or neglect of any other tenant
of Lessor nor from the failure of Lessor to enforce the provisions of any other lease in
the Project. Notwithstanding Lessor’s negligence or breach of this Lease, Lessor shall
under no circumstances be liable for injury to Lessee’s business or for any loss of
income or profit there from.

	9. 		Damage
or Destruction. 

			9.1 		Definitions.

					 		 

					(a)  		“Premises
Partial Damage” shall mean damage or destruction to the improvements on the Premises,
other than Lessee Owned Alterations and Utility Installations, which can reasonably be
repaired in 3 months or less from the date of the damage or destruction, and the cost
thereof does not exceed a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in
writing within 30 days from the date of the damage or destruction as to whether or not
the damage is Partial or Total. 

					(b)  		“Premises
Total Destruction” shall mean damage or destruction to the improvements on the Premises,
other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which
cannot reasonably be repaired in 3 months or less from the date of the damage or
destruction and/or the cost thereof exceeds a sum equal to 6 month’s Base Rent. Lessor
shall notify Lessee in writing within 30 days from the date of the damage or destruction
as to whether or not the damage is Partial or Total. 

					(c)  		“Insured
Loss” shall mean damage or destruction to improvements on the Premises, other than Lessee
Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an
event required to be covered by the insurance described in Paragraph 8.3(a), irrespective
of any deductible amounts or coverage limits involved. 

					(d)  		“Replacement
Cost” shall mean the cost to repair or rebuild the improvements owned by Lessor at the
time of the occurrence to their condition existing immediately prior thereto, including
demolition, debris removal and upgrading required by the operation of Applicable
Requirements, and without deduction for depreciation. 

					(e)  		“Hazardous
Substance Condition” shall mean the occurrence or discovery of a condition involving the
presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a),
in, on, or under the Premises. 

			9.2 		Partial
Damage — Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then
Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures

	

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10.12 

	 	
or
Lessee Owned Alterations and Utility Installation) as soon as reasonably possible and
this Lease shall continue in full force and effect; provided, however, that Lessee shall,
at Lessor’s election, make the repair of any damage or destruction the total cost to
repair of which is $5,000 or less, and, in such event, Lessor shall make any applicable
insurance proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party shall
promptly contribute the shortage in proceeds as and when required to complete said
repairs. In the event, however, such shortage was due to the fact that, by reason of the
unique nature of the improvements, full replacement cost insurance coverage was not
commercially reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the Premises
unless Lessee provides Lessor with the funds to cover same, or adequate assurance
thereof, within 10 days following receipt of written notice of such shortage and request
therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day
period, the party responsible for making the repairs shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If such funds
or assurance are not received, Lessor may nevertheless elect by written notice to Lessee
within 10 days thereafter to: (i) make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall
remain in full force and effect, or (ii) have this Lease terminate 30 days thereafter.
Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or earthquake
shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available for the
repairs if made either Party.

			9.3 		Partial
Damage — Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs,
unless caused by a negligent or willful act of Lessee (in which event Lessee shall make
the repairs at Lessee’s expense), Lessor may either: (i) repair such damage as soon as
reasonably possible at Lessor’s expense, in which event this Lease shall continue in full
force and effect, or (ii) terminate this Lease by giving written notice to Lessee within
30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such
termination shall be effective 60 days following the date of such notice. In the event
Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after
the receipt of the termination notice to give written notice to Lessor of Lessee’s
commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee
shall provide Lessor with said funds or satisfactory assurance thereof within 30 days
after making such commitment. In such event this Lease shall continue in full force and
effect, and Lessor shall proceed to make such repairs as soon as reasonably possible
after the required funds are available. If Lessee does not make the required commitment,
this Lease shall terminate as of the date specified in the termination notice.

			9.4 		Total
Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction
occurs, this Lease shall terminate 60 days following such Destruction. If the damage or
destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor
shall have the right to recover Lessor’s damages from Lessee, except as provided in
Paragraph 8.6.

			9.5 		Damage
Near End of Term. If at any time during the last 6 months of this Lease there is damage
for which the cost to repair exceeds one month’s Base Rent, whether or not an Insured
Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence
of such damage by giving a written termination notice to Lessee within 30 days after the
date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time
has an exercisable option to extend this Lease or to purchase the Premises, then Lessee
may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any
shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is 10 days after Lessee’s receipt of
Lessor’s written notice purporting to terminate this Lease, or (ii) the day prior to the
date upon which such option expires. If Lessee duly exercises such option during such
period and provides Lessor with funds (or adequate assurance thereof) to cover any
shortage in insuranceproceeds, Lessor shall, at Lessor’s commercially
reasonable expense, repair such damage as soon as reasonably
possible and this Lease shall continue in full force and effect.
If Lessee fails to exercise such option and provide such funds of
assurance during such period, then this Lease shall terminate on
the date specified in the termination notice and Lessee’s option
shall be extinguished.

	

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     EXHIBIT
10.12 

					9.6 		Abatement
of Rent; Lessee’s Remedies. 

					(a)  		Abatement.
In the event of Premises Partial Damage or Premise Total Destruction or a Hazardous
Substance Condition for which Lessee is not responsible under this Lease, the Rent
payable by Lessee for the period required for the repair, remediation or restoration of
such damage shall be abated in proportion to the degree to which Lessee’s use of the
Premises is impaired, but not to exceed the proceeds received from the Rental Value
insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and
Lessor shall have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein. 

					(b)  		Remedies.
If Lessor shall be obligated to repair or restore the Premises and does not commence, in
a substantial and meaningful way, such repair or restoration within 90 days after such
obligation shall accrue, Lessee may, at any time prior to the commencement of such repair
or restoration, give written notice to Lessor and to any Lenders of which Lessee has
actual notice, of Lessee’s election to terminate this Lease on a date not less than 60
days following the giving of such notice. If Lessee gives such notice and such repair or
restoration is not commenced within 30 days thereafter, this Lease shall terminate as of
the date specified in said notice. If the repair or restoration is commenced within such
30 days, this Lease shall continue in full force and effect. “Commence” shall mean either
the unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs. 

			9.7 		Termination;
Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or
Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any
other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to
Lessee so much of Lessee’s Security Deposit as has not been, or is not then required to
be, used by Lessor.

			9.8 		Waive
Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of
any damage to or destruction of the Premises with respect to the termination of this
Lease and hereby waive the provisions of any present or future stature to the extent
inconsistent herewith.

	10. 		Real
Property Taxes. 

			10.1 		Definition.
As used herein, the term “Real Property Taxes” shall include any form of assessment; real
estate, general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes)’ improvement bond; and/or license fee
imposed upon or levied against any legal or equitable interest of Lessor in the Project,
Lessor’s right to other income therefrom, and/or Lessor’s business of leasing, by any
authority having the direct or indirect power to tax and where the funds are generated
with reference to the Project address and where the proceeds so generated are to be
applied by the city, county or other local taxing authority of a jurisdiction within
which the Project is located. The term “real Property Taxes” shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of events
occurring during the term of this Lease, including but not limited to, a changed in the
ownership of the Project or any portion thereof or a change in the improvements thereon.
In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any
real estate tax year shall be included in the calculation of Real Property Taxes for such
calendar year based upon the number of days which such calendar year and tax year have in
common.

			10.2 		Payment
of Taxes. Lessor shall pay the Real Property Taxes applicable to the Project, and except
as otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions of
Paragraph 4.2

			10.3 		Additional
Improvements. Common Area Operating Expenses shall not include Real Property Taxes
specified in the tax assessor’s records and work sheets as being caused by additional
improvements placed upon the Project by other lessees or by Lessor for the exclusive
enjoyment of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall,
however, pay to Lessor at the time Common Area operating Expenses are payable
under Paragraph 4.2, the entirety of any increase in Real
Property Taxes if assessed solely by reason of Alterations, Trade
Fixtures or Utility Installations placed upon the Premises by
Lessee or at Lessee’s request.

	

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     EXHIBIT
10.12 

			10.4 		Joint
Assessment. If the Building is not separately assessed, Real Property Taxes allocated to
the Building shall be an equitable proportion of the Real Property Taxes for all the land
and improvements included within the tax parcel assessed, such proportion to be
determined by Lessor from the respective valuations assigned in the assessor’s work
sheets or such other information as may be reasonably available. Lessor’s reasonable
determination thereof, in good faith, shall be conclusive.

			10.5 		Personal
Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and
levied upon Lessee Owned Alterations and Utility Installations, Trade Fixtures,
furnishings, equipment and all personal property of Lessee contained in the Premises.
When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations,
Trade Fixtures, furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Lessor. If any of Lessee’s said property
shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes
attributable to Lessee’s property within 10 days after receipt or a written statement
setting forth the taxes applicable to Lessee’s property.

	11. 		Utilities.
Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and
other utilities and services supplied to the Premises, together with any taxes thereon.
Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor’s sole
judgment, Lessor determines that Lessee is using a disproportionate amount of water,
electricity or other commonly metered utilities, or that Lessee is generating such a
large volume of trash as to require an increase in the size of the dumpster and/or an
increase in the number of times per month that the dumpster is emptied, then Lessor may
increase Lessee’s Base Rent by an amount equal to such increased costs. 

	12. 		Assignment
and Subletting. 

			12.1 		Lessor’s
Consent Required.

					(a)  		Lessee
shall not voluntarily or by operation of law assign, transfer, mortgage or encumber
(collectively, “assign or assignment”) or sublet all or part of Lessee’s interest in this
Lease or in the Premises without Lessor’s prior written consent. 

					(b)  		A
change in the control of Lessee shall constitute an assignment requiring consent. The
transfer, on a cumulative basis, of 25% or more of the voting control of Lessee shall
constitute a change in control for this purpose. 

					(c)  		The
involvement of Lessee or its assets in any transaction, or series of transactions (by way
of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise),
whether or not a formal assignment or hypothecation of this Lease or Lessee’s assets
occurs, which results or will result in a reduction of the Net Worth of Lessee by an
amount greater than 25% of such Net Worth as it was represented at the time of the
execution of this Lease or at the time of the most recent assignment to which Lessor has
consented, or as it exists immediately prior to said transaction or transactions
constituting such reduction, whichever was or is greater shall be considered an
assignment of this Lease to which Lessor may withhold its consent. “Net Worth of Lessee”
shall mean the net worth of Lessee (excluding any guarantors) established under generally
accepted accounting principles. 

					(d)  		An
assignment or subletting without consent shall, at Lessor’s option, be a Default curable
after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any
notice and grace period. If Lessor elects to treat such unapproved assignment or
subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii)
upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then
in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase
price of any option to purchase the Premises held by Lessee shall be subject to similar
adjustment to 110% of the price previously in effect, an (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be increased to
110% of the scheduled adjusted rent. 

	

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     EXHIBIT
10.12 

					(e)  		Lessee’s
remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory
damages and/or injunctive relief. 

			12.2 		Terms
and Conditions Applicable to Assignment and Subletting.

					(a)  		Regardless
of Lessor’s consent, no assignment or subletting shall: (i) be effective without the
express written assumption by such assignee or sublessee of the obligations of Lessee
under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the
primary liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee. 

					(b)  		Lessor
may accept Rent or performance of Lessee’s obligations from any person other than Lessee
pending approval or disapproval of an assignment. Neither a delay in the approval or
disapproval of such assignment nor the acceptance of Rent or performance shall constitute
a waiver or estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or
Breach. 

					(c)  		Lessor’s
consent to any assignment or subletting shall not constitute a consent to any subsequent
assignment or subletting. 

					(d)  		In
the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee,
any Guarantors or anyone else responsible for the performance of Lessee’s obligations
under this Lease, including any assignee or sublessee, without first exhausting Lessor’s
remedies against any other person or entity responsible therefore to Lessor, or any
security held by Lessor. 

					(e)  		Each
request for consent to an assignment or subletting shall be in writing, accompanied by
information relevant to Lessor’s determination as to the financial and operational
responsibility and appropriateness of the proposed assignee or sublessee, including but
not limited to the intended use and/or required modification of the Premises, if any,
together with a fee of $500 as consideration for Lessor’s considering and processing said
request. Lessee agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested. 

					(f)  		Any
assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment
or entering into such sublease, be deemed to have assumed and agreed to conform and
comply with each and every term, covenant, condition and obligation herein to be observed
or performed by Lessee during the term of said assignment or sublease, other than such
obligations as are contrary to or inconsistent with provisions of an assignment or
sublease to which Lessor has specifically consented to in writing. 

					(g)  		Lessor’s
consent to any assignment or subletting shall not transfer to the assignee or sublessee
any Option granted to the original Lessee by this Lease unless such transfer is
specifically consented to by Lessor in writing. (See Paragraph 39.2). 

			12.3 		Additional
Terms and Conditions Applicable to Subletting. The following terms and conditions shall
apply to any subletting by Lessee of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly incorporated therein:

					(a)  		Lessee
hereby assigns and transfers to Lessor all of Lessee’s interest in all Rent payable on
any sublease, and Lessor may collect such Rent and apply same toward Lessee’s obligations
under this Lease; provided, however, that until a Breach shall occur in the performance
of Lessee’s obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by any reason of the collection of
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply
with any of Lessee’s obligations to such sublessee. Lessee hereby irrevocably authorizes
and directs any such sublessee, upon receipt of a written notice from Lessor stating that
Breach exists in the performance of Lessee’s obligations under this Lease, to pay Lessor
all Rent due and to become due under the sublease. Sublessee shall rely upon any such
notice from Lessor and shall pay all Rents to Lessor without any obligation or right to
inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the
contrary. 

					(b)  		In
the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn
to Lessor, in which event Lessor shall undertake the obligations of the sublessor      under such sublease from the time of the exercise
                    of said option to the expiration of such sublease; provided,
                    however, Lessor shall not be liable for any prepaid rents or
                    security deposit paid by such sublessee to such sublessor or
                    for any prior Defaults or Breaches of such sublessor.

	

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     EXHIBIT
10.12 

					(c)  		Any
matter requiring the consent of the sublessor under a sublease shall also require the
consent of Lessor. 

					(d)  		No
sublessee shall further assign or sublet all or any part of the Premises without Lessor’s
prior written consent. 

					(e)  		Lessor
shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who
shall have the right to cure the Default of Lessee within the grace period, if any,
specified in such notice. The sublessee shall have a right of reimbursement and offset
from and against Lessee for any such Defaults cured by the sublessee. 

	13. 		Default;
Breach; Remedies. 

			13.1 		Default;
Breach. A “Default” is defined as a failure by the Lessee to comply with or perform any
of the terms, covenants, conditions or Rules and Regulations under this Lease. A “Breach”
is defined as the occurrence of one or more of the following Defaults, and the failure of
Lessee to cure such Default within any applicable grace period:

					(a)  		The
abandonment of the Premises; or the vacating of the Premises without providing a
commercially reasonable level of security, or where the coverage of the property
insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without
providing reasonable assurance to minimize potential vandalism. 

					(b)  		The
failure of Lessee to make any payment of Rent or any Security Deposit required to be made
by Lessee hereunder, whether to Lessor or to a third party, when due, to provide
reasonable evidence of insurance or surety bond, or to fulfill any obligation under this
Lease which endangers or threatens life or property, where such failure continues for a
period of 3 business days following written notice to Lessee. 

					(c)  		The
failure by Lessee to provide (i) reasonable written evidence of compliance with
Applicable Requirements, (ii) the service contracts, (iii) the rescission of an
unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a requested
subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document
requested under Paragraph 41 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of this Lease,
where any such failure continues for a period of 10 days following written notice to
Lessee. 

					(d)  		A
Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or
of the rules adopted under Paragraph 2.9 hereof, other than those described in
subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of 30
days after written notice; provided, however, that if the nature of Lessee’s Default is
such that more than 30 days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said 30 day period and
thereafter diligently prosecutes such cure to completion. 

					(e)  		The
occurrence of any of the following events: (i) the making of any general arrangement or
assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C.
ss 101 or any successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee’s assets located at the
Premises or of Lessee’s interest in this Lease, where possession is not restored to
Lessee within 30 day; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in
this Lease, where such seizure is not discharged within 30 days; provided, however, in
the event that any provision of this subparagraph (e) is contrary to any applicable law,
such provision shall be of no force or effect, and not affect the validity of the
remaining provisions. 

					(f)  		The
discovery that any financial statement of Lessee or of any Guarantor given to Lessor was
materially false. 

	

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10.12 

					(g)  		If
the performance of Lessee’s obligations under this lease is guaranteed: (i) the death of
a Guarantor, (ii) the termination of a Guarantor’s liability with respect to this Lease
other than in accordance with the terms of such guaranty, (iii) a Guarantor’s becoming
insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s refusal to honor the
guaranty, or (v) a Guarantor’s breach of its guaranty obligation on an anticipatory
basis, and Lessee’s failure, within 60 days following written notice of any such event,
to provide written alternative assurance or security, which, when coupled with the then
existing resources of Lessee, equals or exceeds the combines financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease. 

			13.2 		Remedies.
If Lessee fails to perform any of its affirmative duties or obligations, within 10 days
after written notice (or in case of an emergency, without notice), Lessor may, at its
option, perform such duty or obligation on Lessee’s behalf, including but not limited to
the obtaining of reasonably required bonds, insurance policies, or governmental licenses,
permits or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefore. If any check given to Lessor
by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made by Lessee to be by cashier’s check. In the
event of a Breach, Lessor may, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of
such Breach:

					(a)  		Terminate
Lessee’s right to possession of the Premises by any lawful means, in which case this
Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had
been earned at the time of termination; (ii) the worth at the time of award of the amount
by which the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have been
reasonably avoided; (iii) 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
such rental loss that the Lessee proves could be avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s
failure to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including but not limited to the cost of
recovering possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion
of any leasing commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of the award of the amount referred
to in provision (iii) of the immediately preceding sentence shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of the District
within which the Premises are located at the time of award plus one percent. Efforts by
Lessor to mitigate damages caused by Lessee’s Breach of this Lease shall not waive
Lessor’s right to recover damages under Paragraph 12. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or
Lessor may reserve the right to recover all or any part thereof in a separate suit. If a
notice and grace period required under Paragraph 13.1 was not previously given, a notice
to pay rent or quit, or to perform or to quit given to Lessee under the unlawful detainer
statute shall also constitute the notice required by Paragraph 13.1. In such case, the
applicable grace period required by Paragraph 13.1 and the unlawful detainer statute
shall run concurrently, and the failure of Lessee to cure the Default within the greater
of the two such grace periods shall constitute both an unlawful detainer and a Breach of
this Lease entitling Lessor to the remedies provided for in this Lease and/or said
statute. 

					(b)  		Continue
the Lease and Lessee’s right to possession and recover the Rent as it becomes due, in
which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of
maintenance, efforts to relet, and/or the appointment of a receiver to protect the
Lessor’s interests, shall not constitute a termination of the Lessee’s right to
possession. 

					(c)  		Pursue
any other remedy now or hereafter available under the laws or judicial decisions of the
state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee’s right to possession shall
not  relieve  Lessee  from  liability  under  any  indemnity
provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee’s occupancy of
the Premises.

	

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10.12 

			13.3 		Inducement
Recapture. Any agreement for free or abated rent or other charges, or for the giving or
paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration
for Lessee’s entering into this Lease, all of which concessions are hereinafter referred
to as “Inducement Provisions”, shall be deemed conditioned upon Lessee’s full and
faithful performance of all of the terms, covenants and conditions of this Lease. Upon
Breach of this Lease by Lessee, any such Inducement Provision shall automatically be
deemed deleted from this Lease and of no further force or effect, and any rent, other
charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an Inducement Provision shall be immediately due and payable by Lessee to
Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this paragraph
shall not be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.

			13.4 		Late
Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor
to incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by any Lender.
Accordingly, if any Rent shall not be received by Lessor within 5 says after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to 10% of each such overdue amount or $100, whichever
is greater. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late payment.
Acceptance of such late charge by Lessor shall in no event constitute a waiver of
Lessee’s Default or Breach with respect to such overdue amount, nor prevent the exercises
of any of other rights and remedies granted hereunder. In the event that a late charge is
payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent,
then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at
Lessor’s option, become due and payable quarterly in advance. Lessee will have one time
exemption from the 10% late fee but shall apply should rent be late a second time and all
times thereafter.

			13.5 		Interest.
Any monetary payment due Lessor hereunder, other than late charges, not received by
Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following
the date on which it was due for non-scheduled payment, shall bear interest from the date
when due, as to scheduled payments, or the 31st day after it was due as to non-scheduled
payments. The interest (“Interest”) charged shall be equal to the prime rate reported in
the Wall Street Journal as published closest prior to the date when due plus 4%, but
shall not exceed the maximum rate allowed by law. Interest is payable in addition to the
potential late charge provided for in Paragraph 13.4.

			13.6 		Breach
By Lessor.

					(a)  		Notice
of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within
a reasonable time to perform an obligation required to be performed by Lessor. For
purposes of this Paragraph, a reasonable time shall in no event be less than 30 days
after receipt by Lessor, and any Lender whose name and address shall have been furnished
Lessee in writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of Lessor’s
obligation is such that more than 30 days are reasonably required for its performance,
then Lessor shall not be in breach if performance is commenced within such 30 day period
and thereafter diligently pursued to completion. 

					(b)  		Performance
by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said
breach within 30 days after receipt of said notice, or if having commenced said cure they
do not diligently pursue it to completion, then Lessee may elect to cure said breach at
Lessee’s expense and offset from Rent an amount equal to the greater of one month’s Base
Rent or the Security Deposit, and to pay an excess of such expense under protest,
reserving Lessee’s right to reimbursement from Lessor. Lessee shall document
the cost of said cure and supply said documentation to
Lessor.

	

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10.12 

	14. 		Condemnation.
If the Premises or any portion thereof are taken under the power of eminent domain or
sold under the threat of the exercise of said power (collectively “Condemnation”), this
Lease shall terminate as to the part taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than 10% of the floor area of the
Unit, or more than 25% of Lessee’s Reserved Parking Spaces, is taken by Condemnation,
Lessee may, at Lessee’s option, to be exercised in writing within 10 days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such notice,
within 10 days after the condemning authority shall have taken possession) terminate this
Lease as of the date of the condemning authority takes such possession. If Lessee does
not terminate this Lease in accordance with the foregoing, this Lease shall remain in
full force and effect as to the portion of the Premises remaining, except that the Base
Rent shall be reduced in proportion to the reduction in utility of the Premises caused by
such Condemnation. Condemnation awards and/or payments shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided, however, that
Lessee shall be entitled to any compensation for the Lessee’s relocation expenses, loss
of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease
is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility
Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be
considered the property of the Lessee and Lessee shall be entitled to any and all
compensation which is payable therefor. In the event that this Lease is not terminated by
the reason of the Condemnation, Lessor shall repair any damage to the Premises caused by
such Condemnation. 

	15. 		Brokerage
Fees. 

			15.1 		Additional
Commission. In addition to the payments owed pursuant to Paragraph 1.10 above, and unless
Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee
exercises any Option, (b) if Lessee acquires from Lessor any rights to the Premises or
other premises owned by Lessor and located within the Project, (c) if Lessee remains in
possession of the Premises, with the consent of Lessor, after the expiration of this
Lease, or (d) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the
schedule of the Brokers in effect at the time of the execution of this Lease.

			15.2 		Assumption
of Obligations. Any buyer or transferee of Lessor’s interest in this Lease shall be
deemed to have assumed Lessor’s obligation hereunder. Brokers shall be third party
beneficiaries of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay
to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due,
then such amounts shall accrue Interest. In addition, Lessee’s Broker shall be deemed to
be a third party beneficiary of any commission agreement entered into by and/or between
Lessor and Lessor’s Broker for the limited purpose of collecting any brokerage fee owed.

			15.3 		Representations
and Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to
the other that it has had no dealings with any person, firm, broker or finder (other than
the Brokers, if any) in connection with this Lease, and that no one other than said named
Brokers is entitled to any commission or finder’s fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless
from and against liability for compensation or charges which may be claimed by such
unnamed broker, finder other similar party by reason of any dealings or actions of the
indemnifying Party, including any costs, expenses, attorneys’ fees reasonably incurred
with respect thereto.

	16. 		Estoppel
Certificates. 

					(a)  		Each
Party (as “Responding Party”) shall within 10 days after written notice from the other
Party (the “Requesting Party”) execute, acknowledged and deliver to the Requesting Party
a statement in writing in from similar to the then most current “Estoppel Certificate”
form published by the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by the
Requesting Party. 

	

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10.12 

					(b)  		If
the Responding Party shall fail to execute or deliver the Estoppel Certificate within
such 10 day period, the Requesting Party may execute an Estoppel Certificate stating
that: (i) the Lease is in full force and effect without modification except as may be
represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting
Party’s performance, and (iii) if Lessor is the Requesting Party, not more than one
month’s rent has been paid in advance. Prospective purchasers and encumbrances may rely
upon the Requesting Party’s Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate. 

					(c)  		If
Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee
and all Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements as may be reasonably required by such lender or
purchaser, including but not limited to Lessee’s financial statements for the past 3
years. All such financial statements shall be received by Lessor and such lender or
purchaser in confidence and shall be used only for the purposes herein set forth. 

	17. 		Definition
of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the time in
question of the fee title to the Premises, of, if this is a sublease, of the Lessee’s
interest in the prior lease. In the event of a transfer of Lessor’s title or interest in
the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash
or by credit) any unused Security Deposit held by Lessor. Except as provided in Paragraph
15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by the
Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the
above, and subject to the provisions of Paragraph 20 below, the original Lessor under
this Lease, and all subsequent holders of the Lessor’s interest in this Lease shall
remain liable and responsible with regard to the potential duties and liabilities of
Lessor pertaining to Hazardous Substances as outlined in Paragraph 6.2 above. 

	18. 		Severability.
The invalidity of any provision of this Lease, as determined by a court of competent
jurisdiction, shall in no way affect the validity of any other provision hereof. 

	19. 		Days.
Unless otherwise specifically indicated to the contrary, the word “days” as used in this
Lease shall mean and refer to calendar days. 

	20. 		Limitation
and Liability. Subject to the provisions of Paragraph 17 above, the obligations of Lessor
under this Lease shall not constitute personal obligations of Lessor, the individual
partners of Lessor or its or their individual partners, directors, officers, or
shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor,
for the satisfaction of any liability of Lessor with respect to this Lease, and shall not
seek recourse against the individual partners of Lessor, or its or their individual
partners, directors, officers or shareholders, or any of their personal assets for such
satisfaction. 

	21. 		Time
of Essence. Time is of the essence with respect to the performance of all obligations to
be performed or observed by the Parties under this Lease. 

	22. 		No
Prior Other Agreements; Broker Disclaimer. This Lease contains all agreements between the
Parties with respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective. Lessor and Lessee each
represents and warrants to the Brokers that it has made, and is relying solely upon, its
own investigation as to the nature, quality, character and financial responsibility of
the other Party to this Lease and as to the use, nature, quality and character of the
Premises. Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party. The liability (including court costs and
attorneys’ fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or modification
hereto shall be limited to an amount up the fee received by such Broker pursuant to this
Lease; provided, however, that the foregoing limitation on each Broker’s liability shall
not be applicable to any gross negligence or willful misconduct of such Broker. 

	

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10.12 

	23. 		Notices. 

			23.1 		Notice
Requirements. All notices required or permitted by this Lease or applicable law shall be
in writing and may be delivered in person (by hand or by courier) or may be sent by
regular, certified or registered mail or U.S. Postal Service Express Mail, with postage
prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party’s
signature on this Lease shall be that Party’s address for delivery or mailing of notices.
Either Party may by written notice to the other specify a different address for notice,
except that upon Lessee’s taking possession of the Premises, the Premises shall
constitute Lessee’s address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor may from
time to time hereafter designate in writing.

			23.2 		Date
of Notice. Any notice sent by registered or certified mail, return receipt requested,
shall be deemed given on the date of delivery shown on the receipt card, or if no
delivery date is show, the postmark thereon. If sent by regular mail the notice shall be
deemed given 48 hours after the same is addressed as required herein and mailed with
postage prepaid. Notices delivered by United States Express Mail or overnight courier
that guarantee next day delivery shall be deemed given 24 hours after delivery of the
same to the Postal Service or courier. Notices transmitted by facsimile transmission or
similar means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also delivered
via delivery or mail. If notice is received on a Saturday, Sunday, or legal holiday, it
shall be deemed received on the next business day.

	24. 		Waivers.
No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by
Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of
any subsequent Default or Breach by Lessee of the same or of any other term, covenant or
condition hereof. Lessor’s consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of Lessor’s consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. The acceptance of Rent by
Lessor shall not be waiver of any Default or Breach by Lessee. Any payment by Lessee may
be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith, which such
statements and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of deposit of such
payment. 

	25. 		Disclosures
Regarding The Nature of a Real Estate Agency Relationship. 

					(a)  		When
entering into a discussion with a real estate agent regarding a real estate transaction,
a Lessor or Lessee should from the outset understand what type of agency relationship or
representation it has with the agent or agents in the transaction. Lessor and Lessee
acknowledge being advised by the Brokers in this transaction, as follows: 

							(i)  		Lessor’s
Agents. A Lessor’s agent under a listing agreement with the Lessor acts as the agent for
the Lessor only. A Lessor’s agent or subagent has the following affirmative obligations:
To the Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in
dealings with the Lessor. To the Lessee and the Lessor: (a) Diligent exercise of
reasonable skills and care in performance of the agent’s duties. (b) A duty of honest and
fair dealing and good faith. (c) A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not known to, or
within the diligent attention and observation of, the Parties. An agent is not obligated
to reveal to either Party any confidential information obtained from the other Party
which does not involve the affirmative duties set forth above.  

							(ii)  		Lessee’s
Agents. An agent can agree to act as agent for the Lessee only. In these situations, the
agent is not the Lessor’s agent, even if by agreement the agent may receive
compensation for services rendered, either in full or in part from the Lessor. An agent
acting only for a Lessee has the following affirmative obligations. To the Lessee: A
fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the
Lessee. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care
in performance of the agent’s duties. (b) A duty of 

	

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10.12 

	 	honest
and fair dealing and good faith. (c) A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not known to, or
within the diligent attention and observation of, the Parties. An agent is not obligated
to reveal to either Party any confidential information obtained from the other Party
which does not involve the affirmative duties set forth above.

							(iii)  		Agent
Representing Both Lessor and Lessee. A real estate agent, either acting directly or
through one or more associate licenses, can legally be the agent of both the Lessor and
the Lessee in a transaction, but only with the knowledge and consent of both the Lessor
and the Lessee. In a dual agency situation, the agent has the following affirmative
obligations to both the Lessor and the Lessee: (a) A fiduciary duty of utmost care,
integrity, honesty and loyalty in the dealings with either Lessor or the Lessee. (b)
Other duties to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii).
In representing both Lessor and Lessee, the agent may not without the express permission
of the respective Party, disclose to the other Party that the Lessor will accept rent in
an amount less than that indicated in the listing or that the Lessee is willing to pay a
higher rent than that offered. The above duties of the agent in a real estate transaction
do not relieve a Lessor or Lessee from the responsibility to protect their own interests.
Lessor and Lessee should carefully read all agreements to assure that they adequately
express their understanding of the transaction. A real estate agent is a person qualified
to advise about real estate. If legal or tax advice is desired, consult a competent
professional. 

					(b)  		Brokers
have no responsibility with respect to any default or breach hereof by either Party. The
liability (including court costs and attorneys’ fees), of any Broker with respect to any
breach of duty, error or omission relating to this Lease shall not exceed the fee
received by such Broker pursuant to this Lease; provided, however, that foregoing
limitation on each Broker’s liability shall not be applicable to any gross negligence or
willful misconduct of such Broker. 

					(c)  		Buyer
and Seller agree to identify to Brokers as “Confidential” any communication or
information given Brokers that is considered by such Party to be confidential. 

	26. 		No
Right to Holdover. Lessee has no right to retain possession of the Premises or any part
thereof beyond the expiration or termination of this Lease. In the event that Lessee
holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable
immediately preceding the expiration or termination. Nothing contained herein shall be
construed as consent by Lessor to any holding over by Lessee. 

	27. 		Cumulative
Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in equity. 

	28. 		Covenants
and Conditions; Construction of Agreement. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions. In construing this Lease, all
headings and titles are for the convenience of the Parties only and shall not be
considered a part of this Lease. Whenever required by the context, the singular shall
include the plural and vice versa. This Lease shall not be construed as if prepared by
one of the Parties, but rather according to its fair meaning as a whole, as if both
Parties had prepared it. 

	29. 		Binding
Effect; Choice of Law. This Lease shall be binding upon the parties, their personal
representatives, successors and assigns and be governed by the laws of the State in which
the Premises are located. Any litigation between the Parties hereto concerning this Lease
shall be initiated in the county in which the Premises are located. 

	30. 		Subordination;
Attornment; Non-Disturbance. 

			30.1 		Subordination.
This Lease and any Option granted hereby shall be subject and subordinate to any ground
lease, mortgage, deed of trust, or other hypothecation or security device (collectively,
“Security Device”), now or hereafter placed upon the Premises, to any and all advances
made on the security thereof, and to all renewals, modifications, and extensions thereof.
Lessee agrees that the holders of any such Security Devices (in this Lease together
referred to as “Lender”) shall have no liability or obligation to perform any of the
obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or
Option granted hereby superior to the lien of its Security Device by giving written
notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device,
notwithstanding the relative dates of the documentation or
recordation thereof.

	

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10.12 

			30.2 		Attornment.
In the event that Lessor transfers title to the Premises, or the Premise are acquired by
another upon the foreclosure or termination of a Security Device to which this Lease is
subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph
30.3, attorn to such new owner, and upon request, enter into a new lease, containing all
of the terms and provisions of this Lease, with such new owner for the remainder of the
term hereof, or, at the election of such new owner, this Lease shall automatically become
a new Lease between Lessee and such new owner, upon all of the terms and conditions
hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter be
relieved of any further obligations hereunder and such new owner shall assume all of
Lessor’s obligations hereunder, except that such new owner shall not: (a) be liable for
any act or omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might
have against any prior lessor, (c) be bound by prepayment of more than one month’s rent,
or (d) be liable for the return of any security deposit paid to any prior lessor. Lessor
shall transfer Lessee’s security deposit in the event of a sale.

			30.3 		Non-Disturbance.
With respect to Security Devices entered into by Lessor after the execution of this
Lease, Lessee’s subordination of this Lease shall be subject to receiving a commercially
reasonable non-disturbance agreement (a “Non-Disturbance Agreement”) from the Lender
which Non-Disturbance Agreement provides that Lessee’s possession of the Premises, and
this Lease, including any options to extend the term hereof, will not be disturbed so
long as Lessee is not in Breach hereof and attorns to the record owner of the Premises.
Further, within 60 days after the execution of this Lease, Lessor shall use its
commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of
any pre-existing Security Device which is secured by the Premises. In the event that
Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then
Lessee may, at Lessee’s option, directly contact Lender and attempt to negotiate for the
execution and delivery of a Non-Disturbance Agreement.

			30.4 		Self-Executing.
The agreements contained in this Paragraph 30 shall be effective without the execution of
any further documents; provided, however, that upon written request from Lessor or a
Lender in connection with a sale, financing or refinancing of the Premises, Lessee and
Lessor shall execute such further writings as may be reasonably required to separately
document any subordination, attornment and/or Non-Disturbance Agreement provided for
herein.

	31. 		Attorneys’
Fees. If any Party or Broker brings an action or proceeding involving the Premises
whether founded in tort, contract or equity, or to declare rights hereunder, the
Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon
shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding is pursued
to decision or judgment. The term, “Prevailing Party” shall include, without limitation,
a Party or Broker who substantially obtains or defeats the relief sought, as the case may
be, whether by compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys’ fees award shall not be computed in
accordance with any court fee schedule, but shall be such as to fully reimburse all
attorneys’ fees reasonably incurred. In addition, Lessor shall be entitled to attorneys’
fee, costs and expenses incurred in the preparation and service of notices of Default and
consultations in connection therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach ($200 is a reasonable
minimum per occurrence for such services and consultation). 

	32. 		Lessor’s
Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to
enter the Premises at any time, in the case of an emergency, and otherwise at reasonable
times for the purpose of showing the same to prospective purchasers, lenders, or tenants,
and making such alterations, repairs, improvements or additions to the Premises as Lessor
may deem necessary. All such activities shall be without abatement of rent or liability
to Lessee. Lessor may at any time place on the Premises any ordinary “For Sale” signs and
Lessor may during the last 6 months of the term hereof place on the Premises and
ordinary “For Lease” signs. Lessee may at any time place on the Premises any
ordinary “For Sublease” sign.

	

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10.12 

	33. 		Auctions.
Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises
without Lessor’s prior written consent. Lessor shall not be obligated to exercise any
standard of reasonableness in determining whether to permit an auction. 

	34. 		Signs
Except for ordinary “For Sublease” signs which may be placed on the Premises, Lessee
shall not place any sign upon the Project without Lessor’s prior written consent. All
signs must comply with all Applicable Requirements. 

	35. 		Termination;
Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other
surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a
termination hereof by Lessor for Breach by Lessee, shall automatically terminate any
sublease or lesser estate in the Premises; provided, however, that Lessor may elect to
continue any one or all existing subtenancies. Lessor’s failure within 10 days following
any such event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor’s election to have such event constitute the
termination of such interest. 

	36. 		Consents.
Except as otherwise provided herein, wherever in this Lease the consent of a Party is
required to an act by or for the other Party, such consent shall not be unreasonably
withheld or delayed. Lessor’s actual reasonable costs and expenses (including but not
limited to architects’, attorneys’ engineers’ and other consultants’ fees) incurred in
the consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the presence or
use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and
supporting documentation therefore. Lessor’s consent to any act, assignment or subletting
shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default or Breach,
except as my be otherwise specifically stated in writing by Lessor at the time of such
consent. The failure to specify herein any particular condition to Lessor’s consent shall
not precluded the imposition by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter for which
consent is being given. In the event that either Party disagrees with any determination
made by the other hereunder and reasonably requests the reasons for such determination,
the determining party shall furnish its reasons in writing and in reasonable detail
within 10 business days following such request. 

	37. 		Guarantor. 

			37.1 		Execution.
The Guarantors, if any, shall each execute a guaranty in the form most recently published
by the American Industrial Real Estate Association, and each such Guarantor shall have
the same obligations as Lessee under this Lease.

			37.2 		Default.
It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon
request to provide: (a) evidence of the execution of the guaranty, including the
authority of the party signing on Guarantor’s behalf to obligate Guarantor, and in the
case of a corporate Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements, (c) an
Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

			 

	38. 		Quiet
Possession. Subject to payment by Lessee of the Rent and performance of all of the
covenants, conditions and provisions on Lessee’s part to be observed and performed under
this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during
the term hereof. 

	39. 		Options.
If Lessee is granted an option, as defined below, then the following provisions shall
apply. 

			39.1 		Definition.
“Option” shall mean:

					(a)  		the
right to extend the term of or renew this Lease or to extend or renew any lease that
Lessee has on other property of Lessor; 

					(b)  		the
right of first refusal or first offer to lease either the Premises or other property of
Lessor; 

					(c)  		the
right to purchase or the right of first refusal to purchase the Premises or other
property of Lessor. 

	

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10.12 

					

			39.2 		Options
Personal to Original Lessee. Any Option granted to Lessee in this Lease is personal to
the original Lessee, and cannot be on assigned or exercised by anyone other than said
original Lessee and only while the original Lessee is in full possession of the Premises
and, if requested by Lessor, with Lessee certifying that Lessee has no intention of
thereafter assigning or subletting.

			39.3 		Multiple
Options. In the event that Lessee has any multiple Options to extend or renew this Lease,
a later Option cannot be exercised unless the prior Options have been validly exercised.

			39.4 		Effect
of Default on Options.

					(a)  		Lessee
shall have no right to exercise an Option (i) during the period commencing with the
giving of any notice of Default and continuing until said Default is cured, (ii) during
the period of time any Rent is unpaid (without regard to whether notice thereof is given
Lessee), (iii) during the time Lessee is in Breach of this Lease, (iv) in the event that
Lessee has been given 3 more notices of separate Default, whether or not the Defaults are
cured, during the 12 month period immediately preceding the exercise of the Option.  

					(b)  		The
period of time within which an Option may be exercised shall not be extended or enlarged
by reason of Lessee’s inability to exercise an Option because of the provisions of
Paragraph 39.4(a) .  

					(c)  		An
Option shall terminate and be of no further force or effect, notwithstanding Lessee’s
due and timely exercise of the Option, if, after such exercise and prior to the
commencement of the extended term, (i) Lessee fails to pay Rent for a period of 30 days
after such Rent becomes due (without any necessity of Lessor to give notice thereof), (
ii) Lessor gives to Lessee 3 or more notices of separate Default during any 12 month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of
this Lease. 

	40. 		Security
Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not
include the cost of guard service or other security measures, and that Lessor shall have
no obligation whatsoever to provide same. Lessee assumes all responsibility for the
protection of the Premises, Lessee, its agents and invitees and their property from the
act of third parties. 

	41. 		Reservations.
Lessor reserves the right: (i) to grant, without the consent or joinder of Lessee, such
easements, rights and dedications that Lessor deems necessary, (ii) to cause the
recordation of parcel maps and restrictions, and (iii) to create and/or install new
utility raceways, so long as such easements, rights, dedications, maps, restrictions, and
utility raceways do not unreasonably interfere with the use of the Premises by Lessee.
Lessee agrees to sign any documents reasonably by Lessor to effectuate such rights. 

	42. 		Performance
Under Protest. If at any time a dispute shall arise as to any amount or sum of money to
be paid by one Party to the other under the provisions hereof, the Party against whom the
obligation to pay the money is asserted shall have the right to make payment “under
protest” and such payment shall not be regarded as a voluntary payment and there shall
survive the right on the part of said Party to institute suit for recovery of such sum.
If it shall be adjudged that there was no legal obligation on the part of said Party to
pay such sum or any part thereof, said Party shall be entitled to recover such sum or so
much thereof as it was not legally require to pay. 

	43. 		Authority.
If either Party hereto is a corporation, trust, limited liability company, partnership,
or similar entity, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver this
Lease on its behalf. Each party shall, within 30 days after request, deliver to the other
party satisfactory evidence of such authority. 

	44. 		Conflict.
Any conflict between the printed provisions of this Lease and the typewritten or
handwritten provisions shall be controlled by the typewritten or handwritten provisions. 

	45. 		Offer.
Preparation of this Lease by either party or their agent and submission of same to the
other Party shall not be deemed an offer to lease to the other Party. This Lease is not
intended to be binding until executed and delivered by all Parties hereto. 

	46. 		Amendments.
This Lease may be modified only in writing, signed by the Parties in interest at the time
of the modification. As long as they do not materially change Lessee’s obligations
hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease
as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises. 

	

Page 28 of 41 

	

     EXHIBIT
10.12 

	47. 		Multiple
Parties. If more than one person or entity is named herein as either Lessor or Lessee,
such multiple Parties shall have joint and several responsibility to comply with the
terms of this Lease. 

	48. 		Waiver
of Jury Trial. The Parties hereby waive their respective rights to trial by jury in any
action or proceeding involving the Property or arising out of this Agreement. 

	49. 		Mediation
and Arbitration of Disputes. An Addendum requiring the Mediation and/or the Arbitration
of all disputes between the Parties and/or Brokers arising out of this Lease |X| is
attached |_| is not attached to this Lease. 

	50. 		Base
Rent Adjustment. 

			
	 	Months	Lease Rate
	 	1-12	$1.20 NNN
	 	13-24	$1.25 NNN
	 	25-36	$1.30 NNN
	 	37-48	$1.35 NNN
	 	49-60	$1.40 NNN

	51. 		Option
to Extend. Lessee shall have the option and right to extend the term of this Lease for
one (1) option period of three (3) years commencing with rent at ninety-five percent
(95%) of “fair Market Value”, as defined in paragraph below, only under the following
conditions precedent: (1) That Lessee is not in default at the time of such exercise;
(ii) Lessee and its successors and assigns, hereby expressly acknowledges and agrees that
this Option to Extend is personal to Lessee; and (iii) Lessee has delivered written
notice by certified mail to Lessor no less than one hundred eighty (180) days prior to
the expiration of that then existing term of the Lease of Lessee’s intention to extend
the term of the Lease. 

	 	
Fair
Market Value: For purposes of this Lease, the term “Fair Market Value” shall mean the
going market rental as of the date of commencement of the Renewal Term, for equivalent
space of similar age and construction, with improvements and equipment in similar
condition and for a Lessee proposing to sign a three (3) year lease and having financial
qualifications similar to Lessee, it being understood that in determining “Fair Market
Value” the parties shall negotiate in good faith in order to reach agreement; and in the
event the parties are unable to reach agreement and Lessee desires to proceed, the matter
shall be referred to arbitration by three (3) M.A.I. appraisers, experienced in the
evaluation of similar rental properties in the County of Santa Clara, State of
California. Lessor and Lessee shall each appoint one of such arbitrator within thirty
(30) days of a written request for arbitration from the other, and the two (2)
arbitrators so selected shall select a third arbitrator within fifteen (15) days after
the selection of the second arbitrator. The determination of the three (3) arbitrators
shall be made by the vote of two (2) or more the three (3) arbitrators within thirty (30)
days from the date of the appointment of the third arbitrator and shall be final for all
purposes. If two (2) of the three (3) appraisers are not able to agree on the Fair Market
Value, and if the difference between the higher and lower appraisal is fiver percent (5%)
or less of the middle appraisal, the average of the three (3) appraisals shall be the
Fair Market Value. If the difference exceeds five percent (5%) of the higher appraisal,
the Fair Marker Value shall be determined as follows:

					a.  		If
the difference between the lowest appraisal (“Lowest Appraisal”) and the middle
appraisals is more than five percent (5%) of the middle appraisal, then the Lowest
Appraisal shall be disregarded in determining the Fair Market Value; 

					b.  		If
the difference between the highest appraisal (“the Highest Appraisal”) and the middle
appraisal is more than five percent (5%) of the middle appraisal, then the Highest
Appraisal shall be disregarded in determining the Fair Market Value. 

					c.  		The
middle appraisal and the Lowest Appraisal (unless it is to be disregarded as set forth
above) and the Highest Appraisal (unless it is to be disregarded as set forth above)
shall be added together and divided by the number of
                    appraisals utilized,  to determine the Fair Market Value. If
                    both the  Highest  Appraisal  and the Lowest  Appraisal  are
                    disregarded,  then the middle appraisal (neither the highest
                    nor the lowest) shall be deemed the Fair Market Value.

	

Page 29 of 41 

	

     EXHIBIT
10.12 

	 	
The
cost of arbitration shall be shared equally. In no event shall “Fair Market Value” by
less than the rental paid during the last month of the Lease term.

	52. 		Tenant
Improvement Allowance. Lessor will provide Lessee with Four Hundred Fifteen Thousand and
No/100 ($415,000) for the construction of their improvements. Lessee is responsible for
all costs over and above Four Hundred Fifteen Thousand and No/100 ($415,000) and must
complete the Improvements shown in Exhibits A and B. All monies to be paid directly to
contractors from First Union Bank, the Lessor’s lender, who is providing Lessor with a
construction loan for tenant improvements and will be paid to Lessee’s and Lessor’s
contractor building said improvements in the form of progress payments contractor has
already agreed to. Lessee at each progress payment will pay the additional percentage
they owe for additional improvements to the contractor. 

	53. 		First
Right of Expansion. Lessee shall have the first right of expansion should the Lessor
decide to vacate his unit. Lessee will have thirty (30) days from written notification
from Lessor to accept or decline the expansion right. If Lessee fails to respond to said
notice within thirty (30) days, this first right of expansion shall become null and void. 

	54. 		Improvements
and Alterations. Lessor reserves the right to approve any and all alterations Lessee will
make to the Premises now and through the term of the Lease or any associated option. 

	55. 		Delivery
of Premises. Lessor and Lessee together will use their best efforts to complete their
respective buildouts before November 1, 2000; should construction time run beyond
November 1, 2000, then the second month’s rent due under this lease shall be prorated for
each day the Lessee’s space is not substantially compete and shall be defined as the day
the City of Morgan Hill issues a “Certificate of Occupancy”. Should the Lessee’s space
not be issued a “Certificate of Occupancy” (C of O) by November 30, 2000, then the new
first month for the purposes of this lease shall be December 2000 and will also be
prorated for each day the “C of O” is not issued, in no case will there be proration of
the second month’s rent beyond December 31, 2000 and the first month of this lease will
be no later than January 2001 regardless of condition. The term of this lease shall be
for 5 years and will end 5 years from the day the Lessee is issued their “C of O” or
December 31, 2005, whichever date is earlier. Lessor will provide a fully framed demising
wall between Unit A and Unit B not containing drywall on the Unit B side, a 2000 amp main
panel which the Lessee can pull up to 800 amps from, a roof screen for the full building
provided the requirements for a roof screen based on the Lessee’s tenant improvements do
not exceed the Lessor’s original plans (Lessee will be responsible for all additional
costs, if any), and within six (6) months of the occupancy date install any landscaping
(if none exists) directly adjacent to the building which was not installed during shell
construction. Lessee will, however, be responsible through the expenses of the building
for their prorata share of the maintenance for all landscaping and all exterior
maintenance including, but not limited to, utilities to service the common area as
defined in Section 4.2 herein. 

	56. 		Signage.
Signage for Lessee shall comply with the signage rules for the development and the City
of Morgan Hill. Lessee will bear the cost of any and all signage for their use and will
be provided with one-half (1/2) of a monument sign which they will pay their prorata
share of if Lessor chooses to install one and is within the rules of the development and
the City of Morgan Hill. 

	57. 		Lessor’s
Approval of Lessee’s Tenant Improvements. Notwithstanding anything to the contrary in
this lease, upon presentation of Lessee’s Tenant Improvement plan to Lessor, Lessor will
approve or disapprove said plans within 48 hours. Should Lessor disapprove plans,
comments will be made as to possible modification or Lessee’s removal of said improvement
at the end of the lease term. If Lessor approves the plans either as presented or as
amended, then the Lessee shall have no obligation to remove any improvements at the end
of the lease term. Exhibit C of this lease agreement shall be a work letter outlining the
Lessor’s approval or disapproval calling out individual items of Exhibits A and B to be
removed at the end of the Lease term. 

	

Page 30 of 41 

	

     EXHIBIT
10.12 

	58. 		Permitted
Transfers. An “Affiliate” mans any entity that (i) controls, is controlled by, or is
under common control with Lessee, (ii) results from the transfer of all or substantially
all of Lessee’s assets or stock, or (iii) results from the merger or consolidation of
Lessee with another entity. “Control” means the direct or indirect ownership of more than
twenty-five percent (25%) of the voting securities of an entity or possession of the
right to vote more than twenty-five percent (25%) of the voting interest in the ordinary
direction of the entity’s affairs. Notwithstanding anything to the contrary contained in
this Lease, Lessor’s consent is not required for any assignment of this Lease or sublease
of all or a portion of the Premises to an Affiliate so long as the following conditions
are met: (a) Lessee is not then in default under this Lease; (b) if the transfer is an
assignment or any other transfer to an Affiliate other than a sublease, the intended
assignee assumes in writing all of Lessee’s obligations under this Lease relation to the
Premises in form satisfactory to Lessor or, if the transfer is a sublease, the intended
sublessee accepts the sublease in form satisfactory to Lessor, (c) the intended
transferee has a net worth at least equal to that of Lessee; (d) the Premises shall
continue to be operated solely for the specified use in the Basic Lease Information; and
(e) Lessee shall pay to Lessor all costs reasonably incurred by Lessor, including,
without limitation, reasonable attorneys’ fees. No transfer to an Affiliate in accordance
with this subparagraph shall relieve Lessee named herein of any obligation under this
Lease or alter the primary liability of Lessee named herein for the payment of Rent or
for the performance of any other obligation to be performed by Lessee. Lessee shall
provide Lessor with a copy of any assignment or sublease document to an Affiliate.
Notwithstanding anything to the contrary in this Lease, the transfer of outstanding
capital stock or other listed equity interests, or the purchase or outstanding capital
stock or other listed equity interests, or the purchase of equity interests issued in an
initial public offering of stock, by persons or parties other than “insiders” within the
meaning of the Securities Exchange Act of 1934, as amended, through the
“over-the-counter” market or any recognized national or international securities
exchanged shall not be included in determining whether control has been transferred. For
purposes of section 51, a transfer by Lessee to an Affiliate shall not terminate the
option set out in section 51. 

	

LESSOR
AND LESSE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION
CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY
CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECTUED, THE
TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF
LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. ATTENTION: NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY
BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR
THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO: 

	1.		SEEK ADVICE
OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. 

	2. 		RETAIN
APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES.
SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS
SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE
ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE
SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED USE.

	

     WARNING:
IF THE PREMISES ARE LOCATEDIN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE
LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES
ARE LOCATED  

	

Page 31 of 41 

	

     EXHIBIT
10.12 

The parties hereto have executed
this Lease at the place and on the dates specified above their respective signatures. 

Attachment: California Sale/Lease
Americans with Disabilities Act, Hazardous Materials, and Tax Disclosure 

				
	Executed at:	Sunnyvale, California
	Executed at:	Santa Clara, California

	on:	August 2000
	on:	August 31, 2000

	By Lessor:	 	By Lessee:
	Kyung S. Lee and Ieesun Kim Lee
	Castelle Inc.

	By: /S/	Kyung S Lee
	By:	/S/ Paul Cheng

	Name Printed:	Kyung S Lee
	Name Printed:	Paul Cheng

	Title:	Owner
	Title:	VP Finance & Admin.

	

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     EXHIBIT
10.12 

	

CALIFORNIA SALE/LEASE
AMERICANS WITH DISABILITIES ACT,
 HAZARDOUS MATERIALS, AND TAX DISCLOSURE

The Americans with Disabilities Act
is intended to make many business establishments equally accessible to persons with a
variety of disabilities; modifications to real property may be required. State and local
laws also may mandate changes. The real estate brokers in this transaction are not
qualified to advise you as to what, if any, changes may be required now, or in the
future. Owners and tenants should consult the attorneys and qualified design
professionals of their choice for information regarding these matters. Real estate
brokers cannot determine which attorneys or design professionals have the appropriate
expertise in this area. 

Various construction materials may
contain items that have been or may in the future be determined to be hazardous (toxic)
or undesirable and may need to be specifically treated/handled or removed. For example,
some transformers and other electrical components contain PCBs, and asbestos has been
used in components such as fire-proofing, heating and cooling systems, air duct
insulation, spray-on and tile acoustical materials, linoleum, floor tiles, roofing, dry
wall and plaster. Due to prior or current uses of the Property or in the area, the
Property may have hazardous or undesirable metals (including lead-based paint), minerals,
chemicals, hydrocarbons, or biological or radioactive items (including electrical and
magnetic fields) in soils, water, building components, above or below-ground containers
or elsewhere in areas that may or may not be accessible or noticeable. Such items may
leak or otherwise be released. Real estate brokers have no expertise in the detection or
correction of hazardous or undesirable items. Expert inspections are necessary. Current
or future laws may require clean up by past, present, and/or future owners and/or
operators. It is the responsibility of the Seller/Lessor and the Buyer/Tenant to retain
qualified experts to detect and correct such matters and to consult with legal counsel of
their choice to determine what provisions, if any, they may include in transaction
documents regarding the Property. 

Sellers/Lessors are required under
California Health and Safety Code Section 25915 et seq. to disclose reports and surveys
regarding asbestos to certain persons, including their employees, contractors, co-owners,
purchasers and tenants. Buyers/Tenants have similar disclosure obligations.
Sellers/Lessors and Buyers/Tenants have additional hazardous material disclosure
responsibilities to each other under California Health and Safety Code Section 25359.7
and other California laws. Consult your attorney regarding this matter, and make proper
disclosures. Grubb and Ellis Company is not qualified to assist you in this matter or
provide you with other legal or tax advice. 

Sale, lease and other transactions
can have local, state and federal tax consequences for the seller/lessor and/or
buyer/tenant. In the event of a sale, Internal Revenue Code Section 1445 requires that
all buyers of an interest in any real property located in the United States must withhold
and pay over to the Internal Revenue Service (IRS) an amount equal to ten percent (10%)
of the gross sales price within ten (10) days of the date of the sale unless the buyer
can adequately establish that the seller was not a foreigner, generally by having the
seller sign a Non-Foreign Seller Certificate. Note that depending upon the structure of
the transaction, the tax withholding liability could exceed the net cash proceeds to be
paid to the seller at closing. California poses an additional withholding requirement
equal to three and one-third percent (3 1/3%) of the gross sales price not only on
foreign sellers but also out-of-state sellers and sellers leaving the state if the sale
price exceeds $100,000. Generally, withholding is required if the sales proceeds are
disbursed outside California, if the last known address of the seller is outside of
California or if a financial intermediary is used. Consult your tax and legal advisor.
Real estate brokers are not qualified to give legal or tax advice or to determine whether
any other person is properly qualified to provide legal or tax advice. 

	

Page 33 of 41 

	

     EXHIBIT
10.12 

	LESSOR	LESSEE
	Entity Name:	Kyung S. Lee and Ieesun Kim Lee 
	Entity Name: 	Castelle, Inc. A California Corporation

	By: 	/s/ Kyung S. Lee  
	By:	 /s/ Paul Cheng

	By:	Owner  
	Title: 	VP of Finance and Administration

	Date: 	9/7/2000
 	Date:	8/31/2000

	Title:	Owner
	Title:	VP Finance & Admin.

	Property Address:  855 Jarvis Drive, Unit B, Morgan Hill, CA

	

Page 34 of 41 

	

     EXHIBIT
10.12 

	
RECORDATION REQUESTED BY:
	 	
The
Money Store Commercial 
Mortgage Inc. 
P.O. Box 162247
 Sacramento, CA 95816-2247

	
WHEN RECORDED MAIL TO:
	 	
  TMSIC/TMSCMI

         P.O. Box 15143

         Sacramento, CA  95851

	

FOR RECORDER’S USE ONLY

SUBORDINATION
AGREEMENT - LEASE

NOTICE: THIS SUBORDINATION
AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF
LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. 

THIS SUBORDINATION OF LEASE
AGREEMENT dated _______________ is entered into between Kyung Soo Lee (“Borrower”),
Shinhwa Infosys Inc. (“Lessee”) and The Money Store Commercial Mortgage Inc. (“Lender”). 

LEASE.
Lessee has executed one or more leases dated 07-05-2000 of the following described
property (the “Subordinated Lease”). 

REAL PROPERTY DESCRIPTION. The
Lease covers the following described real property (the “Real Property”) located in Santa
Clara County, State of California:

	 	     See
Exhibit “A”, attached hereto and incorporated herein by this reference.

	

The Real Property or its address
is commonly known as 855 Jarvis Drive, Morgan Hill, CA 95037. The Assessor’s Parcel
Number for the Real Property is 726-30-002. 

REQUESTED FINANCIAL
ACCOMMODATIONS. Borrower and Lessee each want Lender to provide financial accommodations
to Borrower (the “Superior Indebtedness”) in the form of (a) new credit or loan advances,
(b) an extension of time to pay or other compromises regarding all or part of Borrower’s
present indebtedness to Lender, or (c) other benefits to Borrower. Now, therefore,
Borrower and Lessee each represent and acknowledge to Lender that Lessee will benefit as
a result of these financial accommodations from Lender to Borrower, and Lessee
acknowledges receipt of valuable consideration for entering into this agreement. 

 

LENDER’S LIEN. As a condition to
the granting of the requested financial accommodations, Lender has required that its
mortgage, deed of trust or other lien on the Real Property (“Lender’s Lien”) be and
remain superior to Lessee’s interest in the Subordinated Lease. 

NOW THEREFORE THE PARTIES TO THIS
AGREEMENT HEREBY AGREE AS FOLLOWS: SUBORDNATION. All of lessee’s right, title and
interest in and to the Subordinated Lease and the Real Property is hereby subordinated in
all respects to Lender’s Lien and the Superior Indebtedness, and it is hereby agreed that
Lender’s Lien shall be and remain, at all times, prior and superior to Lessee’s interests
in the Subordinated Lease and the Real Property. Lessee also subordinates to Lender’s
Lien all other Security interests in the Real Property held by Lessee, whether now
existing or hereafter acquired. The words “Security Interest” mean and include without
limitation any type of collateral security, whether in the form of a lien, charge,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor’s
lien, equipment trust, conditional sale, trust receipt, lien or title retention contract,
lease or consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise. LESSEE’S
REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants to Lender that: (a) no
representations or agreements of any kind have been made to Lessee which would limit or
qualify in any way the terms of this Agreement; (b) this Agreement is executed at
Borrower’s request and not at the request of Lender; (c) Lender has made no
representation to Lessee as to the creditworthiness of Borrower; and (d) Lessee has
established adequate means of obtaining from Borrower on a continuing basis information
regarding Borrower’s financial condition. Lessee agrees to keep adequately informed from
such means of any facts, events, or circumstances which might in any way affect Lessee’s
risks under this Agreement, and Lessee further agrees that Lender shall have no
obligation to disclose to Lessee information or material acquired by Lender in the course
of its relationship with Borrower. 

 
	

Page 35 of 41 

	

     EXHIBIT
10.12 

SUBORDINATION
AGREEMENT - LEASE
(Continued)

Loan No 510367196  

LESSEE’S WAIVERS. Lessee waives
any right to require Lender: (a) to make, extend, renew, or modify any loan to Borrower
or to grant any other financial accommodations to Borrower whatsoever; (b) to make any
presentment, protest, demand, or notice of any kind, including notice of any nonpayment
of any Superior Indebtedness secured by Lender’s Lien, or notice of any action or
nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Superior Indebtedness, or in connection with the creation of new or
additional indebtedness; (c) to resort for payment or to proceed directly or at once
against any person, including Borrower; (d) to proceed directly against or exhaust any
collateral held by Lender from Borrower, any other guarantor, or any other person; (e) to
pursue any other remedy within Lender’s power; or (f) to commit any act or omission of
any kind, at any time, with respect to any matter whatsoever. 

LENDER’S RIGHTS. Lender may take
or omit any and all actions with respect to Lender’s Lien without affecting whatsoever
any of Lender’s rights under this Agreement. In particular, without limitation, Lender
may, without notice of any kind to lessee, (a) make one or more additional secured or
unsecured loans to Borrower; (b) repeatedly alter, compromise, renew, extend, accelerate,
or otherwise change the time for payment or other terms of the Superior Indebtedness or
any part thereof, including increases and decreases of the rate of interest on the
Superior Indebtedness; extensions may be repeated an may be for longer than the original
loan term; (c) take and hold collateral for the payment of the Superior Indebtedness, and
exchange, enforce, waive, and release any such collateral, with or without the
substitution of new collateral; (d) release, substitute, agree not to sue, or deal with
any one or more of Borrower’s sureties, endorsers, or guarantors on any terms or manner
Lender chooses; (e) determine how, when and what application of payments and credits,
shall be made on the Superior Indebtedness; (f) apply such security and direct the order
or manner of sale thereof, as Lender in its discretion may determine; and (g) assign this
Agreement in whole or in part. DEFAULT BY BORROWER. If Borrower becomes insolvent or
bankrupt, this Agreement shall remain in full force and effect. MISCELLANEOUS PROVISIONS.
The following miscellaneous provisions are a part of this Agreement: Applicable Law. This
Agreement has been delivered to Lender and accepted by Lender in the State of California.
If there is a lawsuit, Lessee and Borrower agree upon Lender’s request to submit to the
jurisdiction of the courts of Sacramento County, State of California. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California. No provision contained in this Agreement shall be construed (a) as requiring
Lender to grant to Borrower or to Lessee any financial assistance or other
accommodations, or (b) as limiting or precluding Lender from the exercise of Lender’s own
judgment and discretion about amounts and times of payment in making loans or extending
accommodations to Borrower. Amendments. This Agreement constitutes the entire
understanding and agreement of the parties as to the matters set forth in this Agreement.
No alteration of or amendment to this Agreement shall be effective unless made in writing
and signed by Lender, Borrower, and Lessee. Attorneys’ Fees: Expenses. Lessee and
Borrower agree to pay upon demand all of Lender’s costs and expenses, including
attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement
of this Agreement. Lender may pay someone else to help enforce this Agreement, and Lessee
and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings (and including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Lessee and Borrower also shall pay all
court costs and such additional fees as may be directed by the court. Successors. This
Agreement shall extend to and bind the respective heirs, personal representatives,
successors and assigns of the parties to this Agreement, and the covenants of Borrower
and Lessee herein in favor of Lender shall extend to , include, and be enforceable by any
transferee or endorsee to whom Lender may transfer any or all of the Superior
Indebtedness. Waiver. Lender shall not be deemed to have waived any rights under this
agreement unless such waiver is given in writing and signed by Lender. No delay or
omission on the part of lender in exercising any right shall operate as a waiver of such
right or any other right. A waiver by Lender of a provision of this Agreement shall not
prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance
with that provision or any other provision of this Agreement. No prior waiver by lender,
nor any course of dealing between Lender and Lessee, shall constitute a waiver of any of
Lender’s rights or of any of Lessee’s obligations as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or withheld
in the sole discretion of Lender. 

	

Page 36 of 41 

	

     EXHIBIT
10.12 

SUBORDINATION
AGREEMENT - LEASE
(Continued)

Loan No 510367196 

NOTICE: THIS SUBORDINATION
AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR REAL PROPERTY
SECURITY TO OBTAIN A LOAN, A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN
IMPROVEMENT OF THE LAND. 

EACH PARTY TO THIS SUBORDINATION
AGREEMENT - LEASE ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT, AND EACH
PARTY AGREES TO ITS TERMS. 

BORROWER: 

	X 		 
Kyung
Soo Lee 

	

     LESSEE: 

Shinhwa Infosys Inc. 

	By 		Samuel
Yang 

	

LENDER: 

The Money Store Commercial
Mortgage Inc. 

	By 		Authorized
Officer 

	

Page 37 of 41 

	

     EXHIBIT
10.12 

SUBORDINATION
AGREEMENT - LEASE
(Continued)

Loan No 510367196  

CERTIFICATE OF
ACKNOWLEDGMENT

			
	STATE OF	California
	)
	 	 	) ss
	COUNTY OF	Santa Clara
	)

	

On August 2, 2000 , before me,
Michael S. Chae , personally appeared Kyung Soo Lee, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument. 

WITNESS my hand and official seal. 

	Signature

	
	(Seal)

	

CERTIFICATE OF
ACKNOWLEDGMENT

			
	STATE OF	California
	)
	 	 	) ss
	COUNTY OF	Santa Clara
	)

	

On August 2, 2000 , before me,
Michael S. Chae , personally appeared Samuel Yang, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument. 

WITNESS my hand and official seal. 

	Signature

	
	(Seal)

	

Page 38 of 41 

	

     EXHIBIT
10.12 

SUBORDINATION
AGREEMENT - LEASE
(Continued)

Loan No 510367196 

CERTIFICATE OF
ACKNOWLEDGMENT

			
	STATE OF	California
	)
	 	 	) ss 
	COUNTY OF	Santa Clara
	)

	

On August 2, 2000 , before me,
Michael S. Chae , personally appeared Kyung See Lee ? Samuel Yang, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument. 

WITNESS my hand and official seal. 

	Signature

	
	(Seal)

	

LASER
PRO, Reg. U.S. Pat. &T.M. Off., Ver. 3.28(C)1900 CFI ProServices, Inc. All rights
reserved. (CA-G215 FO007001.LN C22.OVL] 

	

Page 39 of 41 

	

     EXHIBIT
10.12 

SUBORDINATION
AGREEMENT - LEASE
(Continued)

Loan No 510367196 

Exhibit “A” to Subordination
Agreement - Lease 

All that certain real property
situate in the City of Morgan Hill, County of Santa Clara, State of California, described
as follows: 

PARCEL ONE: 

Parcel 3, as shown on that Parcel
Map filed for record in the office of the Recorder of the County of Santa Clara, State of
California on May 3, 1999, in Book 714 of Maps, page(s) 33 and 34. 

PARCEL TWO: 

Reciprocal rights of Ingress and
Egress over those portions of Parcels 1, 2 and 4, as said parcels are shown on that
certain Parcel Map, filed on May 3, 1999 in Map Book 714, page(s) 33 and 34, Santa Clara
County Records, designated thereon as “25' Ingress and Egress and P.U.E. Easement for the
benefit of Parcels 1, 2, 3 and 4”. 

PARCEL THREE: 

Easement for Ingress and Egress over
those portions of Parcels 1,2 and 4, as said parcels are shown on that certain Parcel
Map, filed on May 3, 1999 in Map Book 714, page(s) 33 and 34, Santa Clara County Records,
designated thereon as “40' Driveway Easement for ingress and egress, PSE and PUE for the
benefit of Parcels 1,2, 3 and 4. 

ARB No: 727-12-033.07.03 
APN No:
726-30-002 

	

Page 40 of 41 

	

     EXHIBIT
10.12 

SUBORDINATION
AGREEMENT - LEASE
(Continued)

Loan No 510367196 

STATE OF California 
COUNTY OF Yolo 

On July 21, 2000, before me, Julie
Wright, personally appeared Wendi M. Davison personally known to me to be the person
whose name is subscribed to the within instrument and acknowledged to me that she
executed the same in her authorized capacity, and that by her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the instrument. 

WITNESS MY HAND AND OFFICIAL SEAL 

Julie Wright, Notary Public 

	
	OPTIONAL 

	 	Capacity Claimed by Signer	Description of Attached Document
	[  ]	Individual	 
	[X]	Corporate Officer	Title or Type of Document:
	 	 	Subordination Agreement — Lease
	Title(s):	Assistant Vice President
	 
	  	 	
	[  ]	Partners    [  ] Limited
	 	                   [  ] General	Number of Pages:
	 
	[  ]	Attorney-In-Fact	 
	[  ]	Trustee(s)	Date of Document:
	[  ]	Guardian/Conservator	 
	[  ]	Other:	 
			Signer(s) Other Than Named Above:

	

Signer is Representing: 

The Money Store Commercial
Mortgage Inc.  

	

Page 41 of 41

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