Lease Agreement

LEASE AGREEMENT



1. Parties. This Lease, dated for reference purposes only, August 7, 1996, is 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 ~An. 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 Premise 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 modifications required by the Americans with Disabilities Act (ADA) with regard to the existing Premises. Landlord shall not be responsible to pay or 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's 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 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.B and 4.C below (the "Monthly Installment".) each month in advance on the first day of each calendar month, without deduction or 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 prorate 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 first (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 on 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 Dollars ($93,366.00).



(d) Commencing on the ninety-seventh month (97th) and continuing through the one hundred and twentieth (120th) month, the Monthly Installment of rent payable each month shall be One Hundred One Thousand One Hundred Forty-seven and no/100ths Dollars ($101,147.00).



D. Late Charge. Tenant acknowledges that late payment by Tenant to Landlord of rent and other sums due hereunder will cause Landlord 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 on Landlord by the terms of any mortgage or deed of trust covering the Premises. Accordingly, if any





installment of rent or any other sum due from Tenant shall not be received by Landlord within ten (10) days after such amount shall be due, Tenant shall pay to Landlord, as additional rent, a late charge equal to five percent (5%) or such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant.



E. Additional Rent. All taxes, insurance premiums, Common Area Charges, late charges, costs and expenses which Tenant is required to pay hereunder, together with all interest and penalties that may accrue thereon in the event of Tenant's failure to pay such amounts, and all reasonable damages, costs and attorneys, fees and expenses which Landlord may incur by reason of any default of Tenant or failure on Tenant's part to comply with the terms of this Lease, shall be deemed to be additional rent ("Additional Rent") and shall be paid in addition to the Monthly Installment of rent, and, in the event of nonpayment of the Monthly Installment of rent.



F. Place of Payment. Rent shall be payable in lawful money of the United States of America to Landlord at 511 Division Street, Campbell CA, or to such other person(s) or at such other place(s) as Landlord may designate in writing.



G. Advance Payment. Concurrently with the execution of this Lease, Tenant shall pay to Landlord the sum of Seventy Thousand Twenty-Five Dollars ($70,025.00) to be applied to the Monthly Installment of rent first accruing under this Lease.



5. Security Deposit. Tenant shall deposit the sum of Seventy Thousand Twenty-Five Dollars ($70,025.00) (the "Security Deposit") upon execution of this Lease, to secure the faithful performance by Tenant of each term, covenant and condition of this Lease. On each date that the Monthly Installment of rent is increased pursuant to Paragraph 4.C above, Tenant shall deposit with Landlord an additional sum to increase the Security Deposit to an amount equal to the Monthly Installment of rent then payable under the Lease. If Tenant shall at any time fail to make any payment or fail to keep or perform any term, covenant or condition on its part to be made or performed or kept under this Lease, Landlord may, but shall not be obligated to and without waiving or releasing Tenant from any obligation under this Lease, use, apply or retain the whole or any part of the Security Deposit (A) to the extent of any sum due to Landlord; (B) to make any required payment on Tenant's behalf; or (C) to compensate Landlord for any loss, damages, attorneys' fees or expense sustained by Landlord due to Tenant's default. In such event, Tenant shall, within five (5) days of written demand by Landlord, remit to Landlord sufficient funds to restore the Security Deposit to its original sum. No interest shall accrue on the Security Deposit. Landlord shall not be required to keep the Security Deposit separate from its general funds. Should Tenant comply with all the terms, covenants, and conditions of this Lease and at the end of the term of this Lease leave the Premises in the condition required by this Lease, then said Security Deposit, less any sums owing to Landlord, shall be returned to Tenant within thirty (30) days after the termination of this Lease and vacancy of the Premises by Tenant.





6. Use of Premises. Tenant shall use the Premises only in conformance with applicable governmental laws, regulations, rules and ordinances for the purpose of general office, sales, manufacturing, assembly, distribution and warehousing of electronics materials and for no other purpose. Tenant shall indemnify, protect, defend, and hold Landlord harmless against any loss, expense, damage, attorneys' fees or liability arising out of the failure of Tenant to comply with any applicable law. Tenant shall not commit or suffer to be committed, any waste upon the Premises, or any nuisance, or other acts or things which may disturb the quiet enjoyment of any other tenant in the buildings adjacent to the Premises, or allow any sale by auction upon the Premises, or allow the Premises to be used for any unlawful purpose, or place any loads upon the floor, walls or ceiling which endanger the structure, or place any harmful liquids in the drainage system of the Building. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises outside of the Building proper, except in trash containers placed inside exterior enclosures designated for that purpose by Landlord. No materials, supplies, equipment, finished products or semi-finished products, raw materials or articles of any nature shall be stored upon or permitted to remain on any portion of the Premises outside of the Building proper. Tenant shall strictly comply with the provisions of Paragraph 39 below.



7. Taxes and Assessments.



A. Tenant's Property. Tenant shall pay before delinquency any and all taxes and assessments, license fees and public charges levied, assessed or imposed upon or against Tenant's fixtures, equipment, furnishings, furniture, appliances and persona' property installed or located on or within the Premises. Tenant shall petition the applicable taxing authority to cause said fixtures, equipment, furnishings, furniture, appliances and personal property to be assessed and billed separately from the real property of Landlord. If any of Tenant's said personal property shall be assessed with Landlord's real property, Tenant shall pay Landlord the taxes attributable to Tenant within ten (10) days after receipt of a written statement from Landlord setting forth the taxes applicable to Tenant's property.



B. Property Taxes. Tenant shall pay, as additional rent, its Pro Rata Share (as defined below) of all Property Taxes levied or assessed with respect to the land comprising the Parcel and with respect to all buildings and improvements located on the Parcel which become due or accrue during the term of this Lease. Tenant shall pay such Property Taxes to Landlord within thirty (30) days after receipt of billing. Provided that Landlord bills Tenant at least thirty (30) days prior to the delinquency date of such Property Taxes, Tenant shall pay such Property Taxes to Landlord at least ten (10) days prior to the delinquency date, and if Tenant fails to do so, Tenant shall reimburse Landlord, on demand, for all interest, late fees and penalties that the taxing authority charges Landlord. In the event Landlord's mortgagee requires an impound for Property Taxes, then on the first day of each month during the Lease Term, Tenant shall pay Landlord one twelfth (1/12) of its annual share of such Property Taxes. Tenant's liability hereunder shall be prorated to reflect the Commencement and termination dates of this Lease. If Landlord elects to pay any assessment imposed against the Premises or the Building in full (which assessment could have been paid in





installments), the amount of any such~ assessment to be included in the calculation of Tenant's Pro Rata Share of Property Taxes shall be limited to the installments of the principal and interest which would have become due during the Lease Term had Landlord elected to pay such assessment installments over the longest period available to Landlord.



As used in this Lease, the term "Tenant's Pro Rata Share" shall mean a fraction, expressed as a percentage, the numerator of which is the number of square feet of floor space contained in the Premises and the denominator of which is the number of square feet of floor space contained in all of the Buildings located on the Parcel. As of the Commencement Date, Tenant's Pro Rata Share is twenty-five and eighty-five hundredths percent (25.85~).



For the purpose of this Lease, "Property Taxes" means and includes all taxes, assessments (including, but not limited to, assessments for public improvements or benefits), taxes based on vehicles, utilizing parking areas, taxes based or measured by the rent paid, payable or received under this Lease, taxes on the value, use, or occupancy of the Premises, the Buildings and/or the Parcel, Environmental Surcharges, and all other governmental impositions and charges of every kind and nature whatsoever, whether or not customary or within the contemplation of the parties hereto and regardless of whether the same shall be extraordinary or ordinary, general or special, unforeseen or foreseen, or similar or dissimilar to any of the foregoing which, at any time during the Lease Term, shall be applicable to the Premises, the Buildings and/or the Parcel or assessed, levied or imposed upon the Premises, the Buildings e: d/or the Parcel, or become due and payable and a lien or charge upon the Premises, the Buildings and/or the Parcel, or any part thereof, under or by virtue of any present or future laws, statutes, ordinances, regulations or other requirements of any governmental authority whatsoever. The term "Environmental Surcharges" shall mean and include any and all expenses, taxes, charges or penalties imposed by the Federal Department of Energy, the Federal Environmental protection Agency, the Federal Clean Air Act, or any regulations promulgated thereunder or any other local, state or federal governmental agency or entity now or hereafter vested with the power to impose taxes, assessments, or other types of surcharges as a means of controlling or abating environmental pollution or the use of energy. The term "Property Taxes" shall not include any federal, state or local net income, estate, or inheritance tax imposed on Landlord.



C. Proposition 13 Limitation. If, during the first three (3) years of the Lease Term, Landlord voluntarily sells or transfers ownership of the Premises, and if such sale or transfer causes Property Taxes to be increased to such an extent that Tenant's Pro Rata Share of Property Taxes would exceed $1.20 per square foot of rentable area of the Premises per year, then in such case, and only in such case, Tenant shall not be obligated to pay that portion of Tenant's Pro Rata Share of Property Taxes which (i) exceeds $1.20 per square foot of rentable area of the Premises per year, and (ii) is attributable to the increase in Property Taxes caused by such sale or transfer; provided, however, that the foregoing limitation on Tenant's obligation to pay Property Taxes shall not apply to increases in Property Taxes resulting from (i) a transfer caused by foreclosure (whether resulting from a judicial foreclosure, non-judicial foreclosure or deed-in-lieu thereof) of a first





mortgage or first deed of trust encumbering the Premises or (ii) any sale or transfer occurring after the first three (3) years of the Lease Term.



D. Other Taxes. Tenant shall, as additional rent, pay or reimburse Landlord for any tax based upon, allocable to, or measured by the area of the Premises or the Buildings or the Parcel; or by the rent paid, payable or received under this Lease; any tax upon or with respect to the possession, leasing, operation, any tax upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy of the Premises or any portion thereof; any privilege tax, excise tax, business and occupation tax, gross receipts tax, sales and/or use tax, water tax, sewer tax, employee tax, occupational license tax imposed upon Landlord or Tenant with respect to the Premises; any tax upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.



8. Insurance.



A. Indemnity. Tenant agrees to indemnify, protect and defend Landlord against and hold Landlord harmless from any and all claims, causes of action, judgements, obligations or liabilities, and all reasonable expenses incurred in investigating or resisting the same (including reasonable attorneys' fees), on account of, or arising out of, the operation, maintenance, use or occupancy of the Premises and all areas appurtenant thereto. This Lease is made on the express understanding that Landlord shall not be liable for, or suffer loss by reason of, injury to person or property, from whatever cause (except for negligence or willful misconduct of Landlord or its Agents), which in any way may be connected with the operation, use or occupancy of the Premises specifically including, without limitation, any liability for injury to the person or property of Tenant, its agents, officers, employees, licensees and invitees.



B. Liability Insurance. Tenant shall, at Tenant's expense, obtain and keep in force during the term of this Lease a policy of comprehensive public liability insurance insuring Landlord and Tenant against claims and liabilities arising out of the operation, use, or occupancy of the Premises and all areas appurtenant thereto, including parking areas. Such insurance shall be in an amount of not less than Three Million Dollars ($3,000,000.00) for bodily injury or death as a result of any one occurrence and Five Hundred Thousand Dollars ($500,000.00) for damage to property as a result of any one occurrence. The insurance shall be with companies approved by Landlord, which approval Landlord agrees not to withhold unreasonably. Tenant shall deliver to Landlord, prior to possession, and at least thirty (30) days prior to the expiration thereof, a certificate of insurance evidencing the existence of the policy required hereunder and such certificate shall certify that the policy (1) names Landlord as an additional insured, (2) shall not be cancelled or altered without thirty (30) days prior written notice to Landlord, (3) insures performance of the indemnity set forth in Paragraph 8.A above, (4) the coverage is primary and any coverage by Landlord is in excess thereto and (5) contains a cross-liability endorsement.



Landlord may maintain a policy or policies of comprehensive general liability insurance insuring Landlord (and such others as are designated by Landlord), against liability for personal





injury, bodily injury, death and damage to property occurring or resulting from an occurrence in, on or about the Premises or the Common Area, with such limits of coverage as Landlord may from time to time determine are reasonably necessary for its protection. The cost of any such liability insurance maintained by Landlord shall be a Common Area Charge and Tenant shall pay, as Additional Rent, Tenant's Pro Rata Share of such cost to Landlord as provided in Paragraph 12 below.



C. Property Insurance. Landlord shall, as a Common Area Charge, obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises and the Buildings, in the amount of the full replacement value thereof, providing protection against those perils included within the classification of "all risk" insurance, plus a policy of rental income insurance in the amount of one hundred percent (100%) of twelve (12) months rent (including, without limitation, sums payable as Additional Rent), plus, at Landlord's option, flood insurance and earthquake insurance, and any other coverages which may be required from time to time by Landlord's mortgagee. Tenant shall have no interest in nor any right to the proceeds of any insurance procured by Landlord on the Premises. The full cost of such insurance procured and maintained by Landlord shall be a Common Area Charge and Tenant shall pay, as Additional Rent, Tenant's Pro Rata Share of such cost to Landlord pursuant to Paragraph 12 below. Tenant acknowledges that such insurance procured by Landlord shall contain a deductible which reduces Tenant~s cost for such insurance and, in the event of loss or damage, Tenant shall be required to pay to Landlord the amount of such deductible.



Notwithstanding the foregoing, Tenant shall not be required to pay that portion of the annual cost of earthquake insurance which exceeds forty cents (40(cent)) per $100.00 of insured value.



D. Tenant's Insurance. Tenant acknowledges that the insurance to be maintained by Landlord on the Premises pursuant to Subparagraph C above will not insure any of Tenant's property. Accordingly, Tenant, at Tenant's own expense, shall maintain in full force and effect on all of its fixtures, equipment, leasehold improvements and personal property in the Premises, a policy of "All Risk" coverage insurance to the extent of at least ninety percent (90%) of their insurable value.



E. Mutual Waiver of Subrogation. Tenant and Landlord hereby mutually waive their respective rights of recovery against each other of any loss of or damage to the property of either party, to the extent such loss or damage is insured by any insurance policy required to be maintained by this Lease or otherwise in force at the time of such loss or damage. Each party shall obtain any special endorsements, if required by the insurer, whereby the insurer waives its right of subrogation against the other party hereto. The provisions of this Subparagraph 8.E shall not apply in those instances in which the waiver of subrogation would cause either party's insurance coverage to be voided or otherwise made uncollectible; provided, however, if either party's insurance carrier is not willing to waive its right of subrogation or if either party's insurance carrier notifies such party that such waiver of subrogation would cause such party's insurance coverage to be voided or made uncollectible, such party shall notify the other party of such fact, in which case, the other party shall





not be required to obtain such waiver of subrogation from its insurance carrier. Each party shall use its best efforts to obtain such waiver of subrogation from its insurance carrier.



9. Utilities. Tenant shall pay for all water, gas, light, heat, power, electricity, telephone, trash pick-up, sewer charges and all other services supplied to or consumed on the Premises, and all taxes and surcharges thereon. In addition, the cost of any utility services supplied to the Common Area or not separately metered to the Premises shall be a Common Area Charge and Tenant shall pay its share of such costs to Landlord as provided in Paragraph 12 below. Landlord shall not take any action or knowingly consent to any action by a third party which cuts-off or interrupts utility service to the Premises.



10. Repairs and Maintenance.



A. Landlord's Repairs. Subject to provisions of Paragraph :6, Landlord shall (i) keep and maintain the exterior roof, structural elements and exterior walls of the Building in good order and repair and (ii) repair any defects in Landlord's Work (as defined in Paragraph 2 above), including the failure to perform Landlord's Work in compliance with applicable Laws in effect at the time of such construction. Landlord shall not, however, be required to maintain, repair or replace the interior surface of exterior walls, nor shall Landlord be required to maintain, repair or replace windows, doors, skylights or plate glass. Landlord shall have no obligation to make repairs under this Subparagraph until a reasonable time after receipt of written notice from Tenant of the need for such repairs. Tenant shall reimburse Landlord, as Additional Rent, within thirty (30) days after receipt of billing, for the cost of such repairs and maintenance which are the obligation of Landlord hereunder, provided however, that Tenant shall not be required to reimburse Landlord for the (i) cost of maintenance and repairs of the structural elements of the Building unless such maintenance or repair is required because of the negligence or willful misconduct of Tenant or its employees, agents or invitees; or (ii) any amounts paid or payable by Landlord in connection with the repair of any defects in Landlord's Work (as defined in Paragraph 2); or (iii) any cost for which Landlord is reimbursed by any third party, including, without limitation, by insurance or condemnation proceeds; or (iv) any amounts paid or payable by Landlord in connection with the repairs or maintenance necessitated by (a) negligence or willful misconduct of Landlord or its Agents; (b) Landlord's failure to perform any of the Landlord's obligations under this Lease; or (c) the occurrence of any damage or destruction or condemnation as provided in Paragraphs 16 and 17, respectively (except with respect to payment by Tenant of Tenant's Pro Rata Share of any deductible); and (v) costs pertaining to Hazardous Materials (as defined in Paragraph 39) which are not the responsibility of Tenant under Paragraph 39 of this Lease. As used herein, the term 'structural elements of the Building" shall mean and be limited to the foundation, footings, floor slab (but not flooring), structural walls, and roof structure (but not roofing or roof membrane).



B. Tenant's Repairs. Except as expressly provided in Subparagraph A above, Tenant shall, at its sole cost, keep and maintain the entire Premises and every part thereof, including without limitation, the windows, window frames, plate glass, glazing, skylights, truck doors, doors





and all door hardware, the walls and partitions, and the electrical, plumbing, lighting, heating, ventilating and air conditioning systems and equipment in good order, condition and repair. The term "repair' shall include replacements, restorations and/or renewals when necessary as well as painting. Tenant's obligation shall extend to all alterations, additions and improvements to the Premises, and all fixtures and appurtenances therein and thereto. Tenant shall, at all times during the Lease Term, have in effect a service contract for the maintenance of the heating, ventilating and air conditioning ("HVAC") equipment with an HVAC repair and maintenance contractor approved by Landlord. The HVAC service contract shall provide for periodic inspection and servicing at least once every three (3) months during the term hereof, and Tenant shall provide Landlord with a copy of such contract and all periodic service reports. Tenant shall not be responsible for any repairs or maintenance to the Premises necessitated by (i) the negligence or willful misconduct of Landlord or its agents; (ii) the failure of Landlord to perform any of Landlord's obligations under this Lease; or (iii) the occurrence of any damage or destruction or condemnation as provided in Paragraphs 16 and 17, respectively, except as otherwise provided in Paragraph 16 below. Should Tenant fail to make repairs required of Tenant hereunder within thirty (30) days after receipt of written notice of the need thereof from Landlord to Tenant, or if such repairs cannot be made within such thirty (30) day period, then such additional time as may be necessary to make such repairs provided Tenant has commenced such repairs within the thirty (30) day period and is diligently pursuing the repairs to completion, Landlord, in addition to all othe ...