Sublease Of Manufacturing Space

Subject to the conditions set forth herein, the undersigned (sometimes referred to herein as the "Landlord") hereby consents to the attached Sublease Agreement (defined below) entered into on or about August 25, 1997, between 3Dfx Interactive, a California corporation ("Sublessor") and AG Associates, a California corporation ("Sublessee"), and all its terms (the "Sublease Agreement"). This Consent does not release or discharge Sublessor from any liability as lessee under that certain Lease dated August 7, 1996, between South Bay/Fortran, a California limited partnership, Landlord's predecessor in interest, and Sublessor (the "Lease") including, without limitation the obligation to pay rent. This consent is granted by Landlord subject to the following terms and conditions:


1. Sublessee shall not assign the Sublease Agreement nor sublet the premises described in the Sublease Agreement (the "Subleased Premises") in whole or part; and shall not permit Sublessee's interest in the Sublease Agreement to be vested in any third party by operation of law or otherwise.


2. This Consent shall not be deemed to be a consent to any subsequent assignment or subletting. Sublessor shall not make any subsequent amendment to the Sublease Agreement without Landlord's prior written consent, which consent shall not be unreasonably withheld. Landlord shall not be deemed to have waived any rights under the Lease. by virtue of this Consent.


3. The Sublease Agreement is in all respects subordinate to the terms of the Lease. Insofar as the specific terms of the Sublease Agreement purport to amend or modify or are in conflict with the specific terms of the Lease, the terms of the Lease shall control. Landlord assumes no liability whatsoever on account of anything contained in the Sublease Agreement.


4. Any rights under the Sublease Agreement may be enforced only against Sublessor, and Sublessee shall have no right to enforce any of Sublessor's rights under the Lease against Landlord by virtue of the Sublease Agreement, this Consent, or otherwise.


5. Sublessor shall pay in addition to all other amounts due Landlord under the Lease, the sum of (i) $200 (which sum represents the reasonable costs incurred by Landlord in connection with the review of the Sublease Agreement and the processing of this Consent thereto, and (ii) the amount, if any, which represents fifty percent (50%) of the positive difference between the rent received by Sublessor under the Sublease and the rent payable by Sublessor to Landlord under the Lease for the Sublease Premises.


IN WITNESS WHEREOF, the undersigned has executed this Consent of Landlord as of this lst day of September, 1997.


LANDLORD:


CARRAMERICA REALTY CORPORATION, a Maryland corporation


By:_______________________________ Its: Managing Director


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SUBLEASE AGREEMENT


1. Parties. This Sublease Agreement (Sublease") is entered into by and between 3Dfx Interactive, a California corporation (Sublessor"), and AG Associates, a California corporation ("Sublessee"), as a sublease under that certain lease dated for reference purposes only August 7, 1996 entered into by and between South Bay/Fortran, a California Limited Partnership predecessor to Carr Realty Corporation, a Maryland corporation, as Landlord ('Lessor"), and Sublessor, as Tenant (the "Lease"). The Lease and all Exhibits thereto is attached hereto as Exhibit "A.".


2. Provisions Constituting Sublease.


(a). Subordination: Default Under Master Lease. This Sublease is subject and subordinate to all of the terms and conditions of the Lease, and to the matters to which the Lease is subject and subordinate in accordance with its terms. Sublessee shall assume and perform the obligations of Sublessor as "Tenant' in the Lease, to the extent said terms and conditions are applicable to the Premises subleased pursuant to this Sublease. Sublessee shall not commit or permit its agents, employees, contractors, or invitees to commit any act or omission which shall violate any term or condition of the Lease. In the event of the termination of Sublessors interest as Tenant under the Lease for any reason other than a voluntary termination negotiated between Lessor and Sublessor which is not otherwise permitted under the terms of the Lease, then this Sublease shall terminate coincidentally therewith without any liability of Sublessor to Sublessee. Sublessor shall not voluntarily commit or permit its agents, employees, contractors, or invitees to commit any act or omission which shall materially violate any term or condition of the Lease.


(b). Provisions Constituting Sublease. All of the terms and conditions contained in the Lease are incorporated herein, except for Sections 2, 3,4A, 4B, 4C, 4F, 4G, 23, 24, 37-39C,39D,and39L. For purposes of this Sublease, with respect to those sections incorporated from the Lease, all references to "Landlord" and "Tenant' shall be deemed to be references to "Sublessor" and "Sublessee,' respectively; all references to the "Lease" shall be deemed to be references to this "Sublease;" and all references to "Premises!' shall be deemed to be references to the Premises as defined under this Sublease. The foregoing notwithstanding, all references to "Landlord" in Sections 7A, 7B, 7C, 8B, 8C, 10A, 10B, 10C, 11, 13, 27, and 38A shall mean and refer to the "Lessor" hereunder (except with respect to any payments to be made by Sublessee, which shall be made directly to Sublessor and not Lessor); all references to "Landlord" in Sections 6, the last paragraph of 7B, 8A, 8E, 9, 14, 18, 19, 21, 25, 28, 32, 35, 38B-H, 39F, 39G, 391, 39J, 39K, and 39N of the Lease shall mean and refer to both "Sublessor" and "Lessor" hereunder. Those provisions incorporated into this Sublease from the Lease, together with the paragraphs set out in this Sublease, shall be the complete terms and conditions of the Sublease.


3. Premises. Sublessor leases to Sublessee and Sublessee hires from Sublessor the following described premises, together with appurtenances, situated in the City of San Jose, County of Santa Clara, State of California: four thousand nine hundred fifty-nine (4,959) square feet of warehouse space (the "Premises") situated in that certain building located at: 4435 Fortran Court, San Jose, California (the "Building"), and more particularly illustrated on the plan attached hereto as Exhibit "B." The Building is located on a larger parcel containing other buildings.


4. Rental.


(a) Base Rent. Sublessee shall pay to Sublessor at 4435 Fortran Court, San Jose, CA Attn: Mr. Gary Martin, CFO as monthly base rent ("Rent") for the Premises in advance on the first day of each calendar month of the term of this Sublease without deduction, offset, prior notice or demand, in lawful money of the United States, the sum of Four Thousand Nine Hundred Fifty-nine Dollars and No Cents ($4,959.00). If the Commencement Date (defined in Section 5 below) is not the first day of the month or if the Sublease termination date is not the last day of the month, a prorated monthly installment shall be paid for the fractional month during which the Sublease commences and/or terminates at the rate of one-thirtieth (1/30th) thereof per day.


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(b) Additional Rent. Sublessee shall timely pay to Sublessor all charges, costs expenses, and other sums which Sublessee is required to timely pay hereunder together with all interest and charges that may accrue thereon and all payments due under the provisions of the Lease, as incorporated herein, together with all interest and charges that may accrue thereon, and all damages, costs and expenses which Sublessor may incur by reason of any default by Sublessee (collectively, "Additional Rent"). Any payments or charges due in accordance with the provisions of the Lease, as incorporated herein, shall be due in the same manner, upon the same terms and conditions and at the same time as required under the Lease, except that payment shall be made to Sublessor.


In the event of nonpayment by Sublessee of any Additional Rent, Sublessor shall have all rights and remedies with respect thereto as Sublessor has for nonpayment of Rent. The term "Rentals" as used in this Sublease shall mean Rent and Additional Rent.


(c) Security Deposit. The provisions of Section 5 of the Lease shall apply except that Sublessee, as Tenant, shall deposit with Sublessor the sum of Four Thousand Nine Hundred Fifty-nine Dollars and No Cents ($4,959.00) as the security deposit.


(d) Sublessee's Prorata Share. The provisions of Section 7B to the contrary notwithstanding, as of the Commencement Date, Sublessee's Prorata Share is six and thirty-seven hundredths percent (6.37%).


5. Term. The term of this Sublease ("Sublease Term") shall commence on August 15, 1997 ('Commencement Date!') and shall terminate at 5:00 p.m. PDT on August 14, 1998, unless sooner terminated pursuant to the terms of this Sublease or the Lease.


If Sublessee takes possession of the Premises Nor to the Commencement Date, Sublessee shall do so subject to all of the terms, covenants, and conditions hereof and shall pay Rentals for the period from the date of possession until the Commencement Date at the same Rentals as those prescribed for the first month of the Sublease Term prorated at the rate of one-thirtieth (1 /30th) thereof per day.


6. Use. The provisions of Section 6 of the Lease notwithstanding, Sublessee shall only use the Premises for shipping, receiving, and warehouse use, and for no other purpose, without Sublessor's Nor written consent. Sublessee's business shall be established and conducted throughout the Sublease Term hereof in a first class manner. Sublessee shall not do or suffer anything to be done upon the Premises which will cause injury to the Premises or the Building. No use shall be made of the Premises which will in any way impair the efficient operation of the sprinkler system (if any) within the Building. Sublessee shall not leave the Premises vacant for more than twenty (20) consecutive days during the Sublease Term. Sublessee shall not use or permit the use of the Premises or any part thereof for any purpose which will increase the existing rate of insurance upon the Building, or cause a cancellation of any insurance policy covering the Building or any part thereof. If any act on the part of Sublessee or use of the Premises by Sublessee shall cause, directly or indirectly, any increase of Sublessor's insurance expense, said additional expense shall be paid by Sublessee to Sublessor upon demand. No such payment by Sublessee shall limit Sublessor in the exercise of any other rights or remedies, or constitute a waiver of Sublessor's right to require Sublessee to discontinue such act or use.


7. Notices. Any notice or demand required or desired to be given under this Sublease shall be in writing addressed to the party to be served at the address set forth below and shall be (i) personally served, or (ii) deposited with the United States Postal Service as first class, registered or certified mail, return receipt requested, and postage prepaid, or (iii) delivered by a national overnight courier service, or (iv) sent by facsimile provided such notice is also sent by one of the other forms of delivery set forth in (i), (ii), or (iii) above. Such notice shall be deemed delivered if personally served or sent by facsimile on the date of such personal service or facsimile transmission, if given by mail, on the date set forth on the return receipt, but in no event longer than forty-eight (48) hours following the time when such notice was deposited in the United States mail, or if sent by overnight courier service on the next business day following the date deposited with such courier. The parties may change its address by giving notice of


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4 such new address in accordance with this section. The parties agree that any notice required pursuant to California Civil Code Section 1946 or California Code of Civil Procedure Section 1161 and 1161(a) may be served to the address below as Tenant's primary residence and in the foregoing manner, and if so served, shall constitute proper service of process under said statutory provisions. Sublessee shall send to Sublessor a copy of all notices and other communications it shall send to or receive from Lessor within twenty-four (24) hours of delivery or receipt, as the case may be.


SUBLESSEE: SUBLESSOR:


AG Associates 3Dfx Interactive 4425 Fortran Drive 4435 Fortran Court San Jose, CA 95134-2300 San Jose, CA 95134 Attn: Ms. Anita Gat Attn: Mr. Gary Martin, CFO/VP Admin. Fax: (408) 935-2700 Fax: (408) 262-8874


LESSOR: WITH A COPY TO: Carr Realty Corporation Carr Realty Corporation 1820 Gateway Drive, Suite 107 1700 Pennsylvania Avenue, NW San Mateo, CA 94404 Washington DC 20006 Attn: Mr. Byron Woodworth Attn: Leasing Administration Fax: (650) 655-6803


8. Utilities. The provisions of Section 9 of the Lease to the contrary notwithstanding, Sublessee shall pay to Sublessor on a monthly basis with the payment of Rent following written demand therefore, Sublessee's Prorata Share of all water, gas, light, heat, power, electricity, trash pick-up, sewer charges and any and all other services supplied to or consumed on the Premises, which are not separately metered, and all taxes and surcharges thereon.


9. Damage and Destruction. Sublessor shall have no obligation to rebuild, restore or repair any of the Premises in the event of any damage or destruction thereto, Sublessor and Sublessee acknowledging that such obligation is Lessor's pursuant to Section 16 of the Lease. If Lessor elects to terminate the Lease pursuant to the terms and conditions of Section 16 of the Lease, this Sublease shall terminate concurrently therewith without any liability of Sublessor to Sublessee.


If Sublessor is entitled to terminate the Lease pursuant to Section 16 thereof, and Sublessor elects to so terminate the Lease, then this Sublease shall terminate concurrently with the termination of the Lease. Sublessee hereby waives the provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code, as amended from time to time, and the provisions of any similar law hereinafter enacted, which relate to the termination of the hiring of a thing upon its substantial damage and destruction. In the event of damage to the Premises which does not result in the termination of this Sublease, Rent and Additional Rent shall be reduced proportionately in the same proportion and for the same period that Monthly Installments (defined in Section 4A. of the Lease) and Additional Rent (defined in Section 4E of the Lease) for the Premises (defined in Section 2 of the Lease) is reduced pursuant to Section 16 of the Lease. Sublessee shall not be entitled to any compensation or damages from Sublessor or Lessor for loss of Sublessee's property or any inconvenience or annoyance caused by such damage and destruction or repair and restoration.


10. Condemnation. If Lessor elects to terminate the Lease pursuant to the terms and conditions of Section 17 of the Lease, this Sublease shall terminate concurrently therewith without any liability of Sublessor to Sublessee.


If Sublessor is entitled to terminate the Lease pursuant to Section 17 thereof, and Sublessor elects to so terminate the Lease, then this Sublease shall terminate concurrently with the termination of the Lease. Sublessee shall have no right to any part of any condemnation award.


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11. Condition of Premises. Sublessor shall not be required to make any alterations, additions or improvements to the Premises and the Premises shall be leased to Sublessee in an "as-is" condition, without representation or warranty, actual or implied, on the part of Sublessor or Sublessors agents, representatives, officers, or employees as to the suitability of the Premises for Sublessee's use.


12. Maintenance. The provisions of Section 10B of the Lease to the contrary notwithstanding, Sublessor shall maintain in effect the HVAC service contract and shall make any repairs required in connection therewith, Sublessee shall pay to Sublessor Sublessee's Prorata Share of any costs arising in connection with the maintenance or repair of the HVAC within fifteen (15) days following receipt of written demand for payment from Sublessor. The reference to Landlord in the last paragraph of Section 10B of the Lease shall refer to "Lessor". The provisions of the Lease to the contrary notwithstanding, (a) Sublessee shall not make any alterations, additions, or modifications to the Premises without the prior written consent of Sublessor, and (b) Except as expressly agreed in this Sublease, Sublessor shall have no obligation to repair or replace all or any part of the Premises it being understood by the parties that such obligations are Lessors under the Lease or Sublessee's under this Sublease. In the event Lessor fails to maintain, repair or otherwise provide those services required to be performed by Lessor under the Lease with respect to the Premises, Sublessor, following written notice by Sublessee, shall request such performance by Lessor.


In the event Sublessor incurs any costs in connection with the replacement of the HVAC as provided in Section 10C of the Lease, Sublessee shall pay to Sublessor within thirty (30) days after receipt of billing, as Additional Rent, its Prorata Share of a portion of the cost of the HVAC replacement, which portion shall be calculated by multiplying such replacement cost by a percentage expressed as a fraction the numerator of shall be the number of calendar months remaining in the Sublease Term at the time of replacement of the HVAC and the denominator shall be the number of calendar months in the useful life to the HVAC


13. Common Areas. The provisions of Section 11 to the contrary notwithstanding, Sublessee shall have no right to use any of the parking space located in the Common Area. The reference to Landlord in the last paragraph of Section 11 shall refer to Lessor.


14. Attorneys' Fees. In the event any party shall bring any action, arbitration proceeding or legal proceeding alleging a breach of any provision of this Sublease, to recover rent, to terminate this Sublease, or to enforce, protect, determine or establish any term or covenant of this Sublease or the rights or duties hereunder of either party, the prevailing party shall be entitled to recover from the non-prevailing party as part of such action or proceeding, or in a separate action for that purpose brought within one year from the determination of such proceeding, reasonable attorneys! fees, expert witness fees, court costs and other reasonable expenses incurred by the prevailing party. In the event that Sublessor shall be required to retain counsel to enforce any provision of this Sublease, and if Sublessee shall thereafter cure (or desire to cure) such default, Sublessor shall be conclusively deemed the prevailing party and Sublessee shall pay to Sublessor all attorneys' fees, expert witness fees, court costs and other reasonable expenses so incurred by Sublessor promptly upon demand. Sublessor may enforce this provision by either (i) requiring Sublessee to pay such fees and costs as a condition to curing his default or (ii) bringing a separate action to enforce such payment, it being agreed by and between Sublessor and Sublessee that Sublessee's failure to pay such fees and costs upon demand shall constitute a breach of this Sublease in the same manner as a failure by Sublessee to pay the Rent, giving Sublessor the same rights and remedies as if Sublessee failed to pay the Rent.


15. Compliance with Laws. It is the intent of the parties to this Sublease that Sublessee shall comply with all laws, rules, and regulations as provided in the Lease, including without limitation, as provided in Section 6 and 20 of the Lease, but that any costs arising in connection with such compliance shall be governed by this Section 15 as follows:


If during the Sublease Term any structural or non-structural alteration, addition, or change of any sort to all or any portion of the Building is required by law, regulation, ordinance or order of any public agency (a) as a result of Sublessee's particular use of the Premises or Sublessee's application for a permit or governmental approval or Sublessees construction or installation of improvements or modification of the Premises, then Sublessee shall make the same at its sole cost and expense, or (b) as a result of Sublessor's particular use of


August 20,1997 4


6 the Building or Sublessor's application for a permit or governmental approval or Sublessor's construction or installation of improvements or modification of the Building, then Sublessor shall make the same at its sole cost and expense, or (c) for any reason other than as set forth in (a) or (b) above, then Sublessor shall make the same pursuant to the terms of Section 13 of the Lease, and Sublessee shall reimburse Sublessor for its Prorata Share of such costs.


16. Effectiveness of Lease. Sublessor, to its actual knowledge without any investigation or inquiry, represents to Sublessee that as of the effective date of this Sublease (i) the Lease attached hereto as EXHIBIT A is the entire agreement between Lessor and Sublessor with respect to the Premises and the Lease has not been amended or modified except as expressly set forth in this Sublease, (ii) the Lease is in full force and effect, and (iii) neither Lessor or Sublessor is in material breach of any term, covenant, condition or provision of the Lease.


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


SUBLESSOR: SUBLESSEE:


3Dfx Interactive, a California AG Associates, corporation,


By:_____________________________ By:_____________________________
Gary Martin, CFO/VP Admin. Its:_____________________________


Dated: August 25, 199797 Dated: August 8/25, 1997


The undersigned, Lessor under the Lease attached as Exhibit "A", hereby consents to the subletting of the premises described herein on the terms and conditions contained in this Sublease. This consent shall apply only to this Sublease and shall not be deemed to be a consent to any other sublease. By consenting to this Sublease, Lessor shall not be deemed to have waived any of its rights under the Lease as to the Tenant.


LESSOR:


Dated:________________________ Carr Realty Corporation


By:_____________________________
Its:_____________________________


August 20, 1997 5


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LEASE AGREEMENT


1. Parties. This Lease, dated for reference purposes only, August 7, 1996, ie made by and between South Bay/Fortran, a California limited partnership, ("Landlord"), and 3Dfx interactive, a California corporation ("Tenant")


2. Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, upon the terms and conditions hereinafter set forth, those certain premises (the "Premises") presently known, as of the date of this Lease, as 4435 Fortran Court, situated in the City of San Jose, County of Santa Clara, State of California, described as follows: for purposes of this Lease, the rentable square footage area of the Building shall be deemed to be approximately seventy-seven thousand eight hundred five (77,805) square feet (the "Building"), as shown cross-hatched on the site plan (the "Site Plan') attached hereto as Exhibit "A". The Building is located on a larger parcel "(the "Parcel") containing other buildings (the "Buildings") as shown on the Site Plan, which Parcel is described in Exhibit "B" attached hereto. In the event Landlord subdivides the Parcel in the future into two (2) or more legal parcels, the term "Parcel" shall thereafter refer to the legal parcel on which the Premises are located. Landlord shall not be required to make any alterations, additions or improvements to the Premises and the Premises shall be leased to Tenant in an "as-is" condition, except Landlord shall complete, at Landlord's expense, minor, previously planned, structural improvements and modif ications required by the Americans with Disabilities Act (ADA) with regard to the existing Premises. Landlord shall not be responsible to pay for the cost of any improvements required to comply with ADA which is a result of any work of improvement to the Premises initiated or completed by Tenant. If Landlord's Work is not completed prior to Commencement Date, Tenant shall cooperate with Landlord and Landlord's contractor in the performance of Landlord's Work. To the extent Landlord's work interferes with Tenant I a use of the premises, the Monthly Installment of rent shall be reduced during the period of such interference in proportion to the square footage of the area of the Premises which is not usable by Tenant during the performance of Landlord's Work.


3. Term. The term of this Lease ("Lease Term") shall be for ten (10) years, commencing on the earlier of (i) May 1 1997 or (ii) the date of termination of the existing lease between Landlord and Reply Corporation (the "Commencement Date") , and ending ten (10) years thereafter, unless sooner terminated pursuant to any provision hereof . Notwithstanding said scheduled Commencement


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Date, if for any reason Landlord cannot deliver possession of the Premises to Tenant on said date, Landlord shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Tenant hereunder, but in such case Tenant shall not be obligated to pay rent until possession of the Premises is tendered to Tenant and the commencement and termination dates of this Lease shall be revised to conform to the date of Landlord's delivery of possession.


4. Rent.


A. Time of Payment. Tenant shall pay to Landlord as rent for the Premises the respective sums specified in Paragraphs 4.13 and 4.C below (the "Monthly Installment") each month in advance on the first day of each calendar month, without deduction or of offset prior notice or demand, commencing on the Commencement Date and continuing through the term of this Lease, together with such additional rents as are payable by Tenant to Landlord under the terms of this Lease. The Monthly Installment for any period during the Lease Term which period is less than one (1) full month shall be a prorata portion of the Monthly Installment based upon a thirty (30) day month. .


B. Monthly Installment. The initial Monthly Installment of rent payable each month during the f irst (1st) through the twenty-fourth (24th) months of the Lease Term shall be the sum of Seventy Thousand Twenty-five and no/100ths Dollars ($70,025.00) per month.


C. Rental Adjustments. The Monthly Installment of rent payable each month shall increase during the Lease Term as follows:


(a) Commencing on the twenty-fifth (25th) month of the Lease Term and continuing through the forty-eighth (48th) month Of the Lease Term, the Monthly Installment of rent payable each month shall be Seventy-seven Thousand Eight Hundred Five and no/100ths Dollars ($77,805.00).


(b) Commencing an the forty-ninth (49th) month of the Lease Term and continuing through the seventy-second (72nd) month of the Lease Term, the monthly Installment of rent payable each month shall be Eighty-five Thousand Five Hundred Eighty-six and no/100ths Dollars ($85,586.00).


(c) Commencing on the seventy-third (73rd) month of the Lease Term and continuing through the ninety-sixth (96th) month, the Monthly Installment of rent payable each month shall be Ninety-three Thousand Three Hundred Sixty-six and no/100ths ...