10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2004
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to          .

Commission File No. 1-10317

LSI LOGIC CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-2712976
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1621 Barber Lane

Milpitas, California 95035

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(408) 433-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each Exchange on which registered
Common Stock, $0.01 par value	New York Stock Exchange
Preferred Share Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

(Title of class)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

      The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant, based upon the closing price of the Common Stock on July 2, 2004, as reported on the New York Stock Exchange, was approximately $2,707,056,534. Shares of Common Stock held by each executive officer and director and by each person who owns more than 5% of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

      As of March 11, 2005, the Registrant had 387,760,836 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Parts of the following document are incorporated by reference into Part III of this Form 10-K Report: Proxy Statement for Registrant’s 2005 Annual Meeting of Stockholders to be held on May 12, 2005.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS
PART I
	Item 1. Business
RISK FACTORS
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	Item 9A. Controls and Procedures
	Item 9B. Other Information
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accountant Fees and Services
PART IV
	Item 15. Exhibits and Financial Statement Schedule
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 10.28
EXHIBIT 10.29
EXHIBIT 10.30
EXHIBIT 10.31
EXHIBIT 10.32
EXHIBIT 10.33
EXHIBIT 10.34
EXHIBIT 10.35
EXHIBIT 10.36
EXHIBIT 10.37
EXHIBIT 10.38
EXHIBIT 10.39
EXHIBIT 21.1
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

FORWARD-LOOKING STATEMENTS

      This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties, including the risk factors set forth below and elsewhere in this Report. See “Risk Factors” in Part I, Item 1. Statements made herein are as of the date of the filing of this Form 10-K with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. We expressly disclaim any obligation to update information presented herein, except as may otherwise be required by law.

PART I

Item 1. Business

General

      LSI Logic Corporation (together with its subsidiaries collectively referred to as “LSI Logic,” “LSI,” or the “Company” and referred to as “we,” “us,” and “our”) designs, develops, manufactures and markets complex, high-performance integrated circuits and storage systems. We are focused on four markets: communications, consumer products, storage components and storage systems. Our integrated circuits are used in a wide range of communication devices, including devices used for wireless and broadband data networking applications. We also provide other types of integrated circuit products and board-level products for use in consumer applications, communications, high-performance storage controllers and systems for storage area networks.

      We operate in two segments — the Semiconductor segment and the Storage Systems segment — in which we offer products and services for a variety of electronic systems applications. Our products are marketed primarily to original equipment manufacturers (“OEMs”) that sell products targeted for applications in our major markets.

      For the year ended December 31, 2004, revenues from the Semiconductor segment were $1,249 million (73% of total consolidated revenues) and the loss from operations was $450 million. In the Semiconductor segment, we use advanced process technologies and comprehensive design methodologies to design, develop, manufacture and market highly complex integrated circuits (“ICs”). These system-on-a-chip solutions include both application specific integrated circuits, commonly referred to as ASICs, and standard products. Semiconductor segment product offerings also include host bus adapters, RAID adapters (“redundant array of independent disks”) and related products and services. ASICs are designed for a specific application defined by the customer, whereas standard products are for market applications that we define. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II.

      Leveraging key competencies into fast time-to-market platform ASIC capability, we have developed methods of designing integrated circuits based on a library of building blocks of industry-standard electronic functions, interfaces and protocols. Among these is our CoreWare® design methodology. Our advanced deep sub-micron manufacturing process technologies allow our customers to combine one or more CoreWare library elements with memory and their own proprietary logic to integrate a highly complex, system-level solution on a single chip. We have developed and use complementary metal oxide semiconductor (“CMOS”) process technologies to manufacture our integrated circuits.

      For the year ended December 31, 2004, revenues from the Storage Systems segment were $452 million (27% of total consolidated revenues) and the income from operations was $13 million. In the Storage Systems segment, our enterprise storage systems are designed, manufactured and sold by our majority-owned subsidiary — Engenio Information Technologies, Inc. (“Engenio” or “Storage Systems segment”). On May 6, 2004, LSI Logic announced that it had changed the name of LSI Logic Storage Systems, Inc. to Engenio. Our high-performance, highly scalable open storage area network systems and storage solutions are available through leading OEMs and a specialized network of resellers. Products and solutions distributed

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through these channels may exclude Engenio’s brand identification. When included, Engenio’s brand identity may appear alone or in tandem with OEM brand identification.

      In November 2003, the Company announced its intention to separate the Storage Systems segment and create an independent storage systems company. On February 19, 2004, Engenio filed a registration statement on Form S-1 with the Securities and Exchange Commission for the initial public offering of its common stock. On July 29, 2004, the Company announced that it had decided to postpone the initial public offering of Engenio’s common stock due to then present market conditions.

      LSI Logic Corporation was incorporated in California on November 6, 1980, and was reincorporated in Delaware on June 11, 1987. Our principal offices are located at 1621 Barber Lane, Milpitas, California 95035, and our telephone number at that location is (408) 433-8000. Our home page on the Internet is www.lsilogic.com. The contents of this website are not incorporated in or otherwise to be regarded as part of this annual report on Form 10-K. Copies of this and other annual reports, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports are available free of charge on our website as soon as reasonably practicable after such documents are filed electronically with the Securities and Exchange Commission (“SEC”). Any materials that the Company files with the SEC can be read at the SEC’s website on the Internet at http://www.sec.gov or read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800) 732-0330.

Business Strategy

Semiconductor Business Strategy

      Our objective is to continue our industry leadership in the design, development, manufacture and marketing of highly integrated, complex integrated circuits and other electronic components and system-level products that provide our customers with silicon-based system-level solutions. To achieve this objective, our business strategy includes the following key elements:

•  Target Growth Markets and Selected Customers. We concentrate our sales and marketing efforts on leading OEM customers in targeted growth markets, including communications, consumer products and storage components applications. Our engineering expertise is focused on developing technologies that will meet the needs of leading-edge customers in order to succeed in these market areas.

•  Emphasize CoreWare Methodology and System-on-a-Chip Capability. Our CoreWare® design methodology enables the integration of one or more pre-designed circuit elements with customer-specified elements and memory to create system capabilities on a single chip. This results in higher product functionality, higher performance, greater differentiation and faster time to market. We also have used this design methodology to develop proprietary standard products.

      We leverage our in-depth system-level expertise, extensive CoreWare IP library, innovative technology, understanding of customer requirements and philosophy of providing predictable Right First Time, On Time^tm silicon solutions to serve customers with highly specific needs in the communications, consumer and storage markets worldwide.

      We have expanded our technology product offerings to include the RapidChip® product. The RapidChip platform ASIC fills the void between the field programmable gate arrays (“FPGAs”) and standard-cell ASIC products.

•  Promote Highly Integrated Design and Manufacturing Technology. We use proprietary and leading third-party electronic design automation, or EDA, software design tools. Our design tool environment is highly integrated with our manufacturing process requirements so that it will accurately simulate product performance. This integration reduces design time and project cost. We continually evaluate and, as appropriate, develop expertise with third-party EDA tools from leading and emerging suppliers of such products.

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•  Provide Flexibility in Design Engineering. We engage with customers of our semiconductor products under various arrangements whereby the extent of the engineering support we provide will be determined in accordance with the customer’s requirements. For example, a customer may primarily use its own engineers for substantial development of its product design and retain our support for silicon-specific engineering work. We also enter into engineering design projects, including those on a “turn-key” basis.

•  Maintain High-Quality and Cost-Effective Manufacturing. Our wafer manufacturing strategy is a combination of our own manufacturing facilities and outsourcing arrangements with third-party foundries. We perform substantially all of our packaging, assembly and final test operations through subcontractors in Asia.

•  Leverage Alliances with Key Partners. We are continually seeking to establish relationships with key partners in a diverse range of semiconductor technologies to promote new products, services, operating standards and manufacturing capabilities and to avail ourselves of cost efficiencies that may be obtained through collaborative development.

•  Forge Successful Partnerships with Leading Distribution Partners. Our partner program is designed to effectively market the Company’s host bus adapter product families and integrated circuit products utilizing distribution and reseller partnerships. Such partnerships enable us to provide an extended population of customers with the full range of product offerings, services and support needed to enable their success.

•  Develop and Drive Industry Standards to Achieve Market Advantage. We are a leader in developing and promoting important industry standard architectures, functions, protocols and interfaces. We believe that this strategy will enable us to quickly launch new standard-based products, allowing our customers to achieve time-to-market and other competitive advantages.

•  Operate Worldwide. We market our products and engage with our customers on a worldwide basis through direct sales, marketing and field technical staff and through independent sales representatives and distributors. Our network of design centers located in major markets allows us to provide customers with highly experienced engineers, to interact with customer engineering management and system architects, to develop designs for new products and to provide continuing after-sale customer support.

Storage Systems Business Strategy

      Our objective is to be the leading provider to server and storage OEMs of modular disk storage systems and sub-assemblies. We intend to enhance our market position by:

•  Continuing to innovate and extend our product offering. We intend to lead the market in adopting and implementing new storage system technologies, interfaces, features and customer requirements. In addition, we intend to define, design and develop products that enable our channel customers to offer a broad storage system product line, which incorporates their own intellectual property, to address multiple markets. In this manner, we intend to continue to expand our product offerings further into the entry-level, mid-range and high-end markets.

•  Adding feature functionality to meet expanding enterprise requirements. Implementation and management of storage systems within the enterprise is increasingly complex. To address this increasing complexity, we plan to develop additional premium software management and hardware system features to enhance reliability, data availability and serviceability of our products. We also intend to expand our Engenio Solutions program implementation guides, which are designed to help our customers rapidly implement our products for specific business applications.

•  Enhancing interoperability among our products, our customers’ products and other leading enterprise products. We provide significant value to our channel customers and enterprises by testing and certifying our products with the products of other leading enterprise information technology vendors to

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	ensure broad interoperability and compatibility. We intend to work closely with our channel customers and enterprises to extend and enhance the capabilities of our storage sub-assemblies and storage management software. We also seek to enhance our position in the storage industry by actively participating in a variety of organizations focused on developing standards for emerging technologies and facilitating industry-wide interoperability.
•	Obtaining new channel customers. Our channel customers sell storage solutions based on or incorporating our products and technology through their direct sales forces and other channels. We will continue to seek new customers in domestic and international markets in order to expand the total marketing and sales resources that are focused on our products. In this manner, we intend to increase the market addressable by our products.
•	Expanding our joint marketing and sales efforts with existing and new channel customers. We seek to add value to our customers’ sales, marketing and support initiatives through the provision of extensive training, customized go-to-market campaigns, product positioning, marketing materials, competitive analysis and product support infrastructure. We maintain 15 Experience Centers worldwide, which allow our channel customers to demonstrate to enterprise users the performance and benefits of storage deployments incorporating our products. We plan to open additional centers to reach a broader customer base in the future.
•	Promoting our brand. We believe that a strong association of our brand with innovation and integrity is valuable in achieving increased scale, market leadership and OEM acceptance within our industry. Furthermore, we believe that brand recognition and reputation will become more important as OEMs increasingly outsource their storage system offerings and their customers focus on the performance and reliability of the storage systems or sub-assemblies integrated into OEM storage solutions. We intend to continue to promote our brand and build brand equity to establish and bolster our position in the disk storage systems and related storage management software markets.

Technology, Products and Services

ASIC Technology

      We have been continuously supplying ASIC products for over 20 years. We leverage our system level expertise and technology providing silicon solutions primarily in communications, consumer and storage markets worldwide.

      Our CoreWare design methodology offers a comprehensive design approach for creating a system-on-a-chip efficiently, predictably and rapidly. Our CoreWare libraries include high-level intellectual property building blocks created around industry standards. Our CoreWare cells are connected electronically with other memory and logic elements to form an entire system on a single chip.

      Our ASIC product offerings now consist of our cell-based product for complex, high volume, high performance, system level designs and our RapidChip platform product.

      Our RapidChip platform products address a growing market need for a flexible, cost-effective and fast time-to-market solution with performance comparable to cell-based ASICs and at a cost significantly lower than FPGAs. Products based on the RapidChip methodology are innovative semiconductor platforms set to reshape the way complex chips are designed and manufactured. A key feature of the RapidChip methodology is the customer-friendly interface that dramatically simplifies the underlying complexity of the design tools and flows associated with system-on-a-chip design. Rule sets automatically manage architectural design, verification and physical design. As a result, design schedules for high-performance chips can be more predictable.

      Typically, the ASIC design process involves participation by both LSI Logic and customer engineers. We engage our customers early in their new system product development process and accept large design assignments where we share development costs with the customer. We provide advice on the product design strategies to optimize product performance and suitability for the targeted application. In addition, our

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capabilities include support in the areas of architecture, system-level design simulation, verification and synthesis used in the development of complex integrated circuits.

      Our software design tool environment supports and automatically performs key elements of the design process from circuit concept to physical layout of the circuit design. The design tool environment features a combination of internally developed proprietary software and third-party tools that are highly integrated with our manufacturing process requirements. The design environment includes expanded interface capabilities with a range of third-party tools from leading EDA vendors and features hardware/ software co-verification capability. We provide a suite of MIPS cores and ARM processors, in addition to industry-standard interface cores such as USB, PCI-Express, DDR1&2, QDR, SPI4, SFI, XAUI, XGXS and others.

      After completion of the ASIC engineering design effort, we produce and test prototype circuits for shipment to the customer. We then begin volume production of integrated circuits that have been developed through one or more of the arrangements described above in accordance with the customer’s quantity and delivery requirements.

Semiconductor Products

      In our semiconductor components business, we design, manufacture and supply ASICs, standard products, host bus adapters and RAID storage adapters and related software to customers competing in global communications, consumer and storage markets.

      ASICs are semiconductors that are designed for unique, customer-specified applications. Standard products are developed for market applications we define and are targeted to be sold to multiple customers. Both ASIC and standard products are sold to customers for incorporation into system-level products and may incorporate our intellectual property building blocks. Our ASIC, RapidChip and standard products are predominantly designed and manufactured using our proprietary process technologies.

      Storage Components. Our ASIC and standard product solutions offered to customers in worldwide storage component markets make possible data transmission and storage between a host computer and peripheral devices such as magnetic and optical disk drives, scanners, printers and disk and tape-based storage systems. We offer Fibre Channel and SCSI standard products, including host adapter ICs for motherboard and adapter applications, SCSI expander ICs, storage adapter boards and our own Fusion-MPT^tm software drivers for these product families. We are also an industry leader in the on-going development of new storage interface standards and products, including Serial-Attached SCSI (“SAS”).

      In addition, we offer the industry’s widest spectrum of direct-attach RAID solutions, spanning from integrated RAID in our Fusion-MPT storage IC and adapter products and our IDEal software-based RAID products to our MegaRAID® product family. Our MegaRAID products include integrated single-chip RAID on motherboard solutions and a broad family of PCI and PCI Express RAID controller boards featuring ATA, Serial ATA (“SATA”) and SCSI interfaces, along with fully featured software and utilities for robust storage configuration and management.

      We also offer solutions using our ASIC and RapidChip technology to customers who develop Fibre Channel storage area network (“SAN”) switches and host adapters, storage systems, hard disk drives and tape peripherals. Through leveraging our extensive experience in providing solutions for these applications, LSI Logic has developed a full portfolio of high-speed interface CoreWare that is employed on the ASIC or RapidChip platform providing a connection to the network, the SAN, memory and host buses. Using these pre-verified interfaces, our customers reduce development risk and achieve quicker time to market. Our CoreWare offerings include the GigaBlaze® high performance SerDes Core supporting Fibre Channel, SATA, Gigabit Ethernet, Infiniband, SAS, Serial RapidIO and PCI-Express industry standards and a family of high-performance Fibre Channel, RapidIO, PCI-E, SAS and SATA protocol controllers.

      Consumer Products. For the consumer market, we offer a broad array of semiconductor products, including both standard products and custom solutions.

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      Consumer standard products. We design, develop, manufacture and market semiconductor devices, software and reference designs for digital video and audio applications, enabling new digital video and audio applications. We are focused on providing solutions for high-growth applications such as DVD recorders, flat panel displays, digital video recorders, digital set-top boxes, as well as broadcast encoders and video editing systems.

      Consumer custom solutions. We also offer system-on-a-chip solutions for consumer applications. We focus on consumer market segments employing our intellectual property portfolio, design methodology and turn-key product offerings (including manufacturing, assembly and test) to provide a customized solution. Our focus is in video game console, digital cameras and camcorders, portable digital audio and video, and other emerging multimedia applications where a standard product solution is not available or our customers want customized solutions for differentiation.

      At the center of our strategy is our industry leading DoMiNo® architecture. Products based on this flexible architecture provide software programmable, cost effective solutions to our customers in our target markets.

      Communications. LSI Logic offers highly integrated, high-performance, system-on-a-chip silicon solutions for use in the design of communications equipment. We focus on delivering custom semiconductor solutions to customers who develop systems for the Enterprise, Metropolitan and Wide Area Network sectors. Our standard-cell ASIC and RapidChip programs constitute two distinct paths for realizing custom silicon, providing a good fit – regardless of whether schedule, performance, power or price is the driving consideration. Our cell-based program continues to deliver LSI Logic’s wide portfolio of communications-related intellectual property in compact, high-performance solutions, while our RapidChip program delivers the same intellectual property with lower initial cost and faster time to market.

      Leading edge switches and routers require tera-bit throughput capability. LSI Logic’s HyperPHY® SerDes (Serializer-Deserializer) technology enables chip-to-chip and back-plane connectivity at speeds in excess of 6 Gbits/second. We also provide our customers with CoreWare intellectual property in support of key industry standard interconnect technologies, including RapidIO, HyperTransport, SPI-4, SPI-5, SFI-4, SFI-5, NPSI, PCI Express and 10/100/1G/10G Ethernet, as well as a wide range of proprietary interfaces. In addition to the above, our solutions incorporate a variety of embedded processors: ARM, MIPS, and ZSP® processors (LSI Logic’s widely-adopted digital signal processor) with all the sub-system collateral for communications applications.

Storage Systems Products

      We offer a broad line of open, modular storage products comprised of complete systems and sub-assemblies configured from modular components, such as our storage controller modules, disk drive enclosure modules and related management software. The modularity of our products provides channel customers with the flexibility to either integrate our sub-assemblies with third-party components, such as disk drives, or software to form their own storage system products. Our modular product approach allows channel customers to create highly customized storage systems, which can then be integrated with value-added software and services and delivered as a complete, differentiated data storage solution to enterprises.

      We design and develop storage systems, sub-assemblies and management software that operate within all major open operating systems, including Windows, UNIX and UNIX variants and Linux environments. We test and certify our products, both independently and jointly with our customers, with those of other hardware, networking and software storage vendors to ensure a high level of interoperability and performance. Our products are targeted at a wide variety of data storage applications, including Internet-based applications such as online transaction processing and e-commerce, data warehousing, video editing and post-production and high-performance computing.

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Marketing and Distribution

Semiconductor Marketing and Distribution

      The highly competitive semiconductor industry is characterized by rapidly changing technology, short product cycles and emerging standards. Our marketing strategy requires that we accurately forecast trends in the evolution of product and technology development. We must then act upon this knowledge in a timely manner to develop competitively priced products offering superior performance. As part of this strategy, we are active in the formulation and adoption of critical industry standards that influence the design specifications of our products. Offering products with superior price and performance characteristics is essential to satisfy the rapidly changing needs of our customers in the dynamic communications, consumer and storage markets.

      Our semiconductor products and design services are primarily sold through our network of direct sales and marketing and field engineering offices located in North America, Europe, Japan and elsewhere in Asia. Our sites are interconnected by means of advanced computer networking systems that allow for the continuous, uninterrupted exchange of information that is vital for the proper execution of our sales and marketing activities. International sales are subject to risks common to export activities, including governmental regulations, geopolitical risks, tariff increases and other trade barriers, and currency fluctuations.

      We rely primarily on direct sales and marketing, but we also work with independent component and commercial distributors and manufacturers’ representatives or other channel partners in North America, Europe, Japan and elsewhere in Asia. Some of our distributors possess engineering capabilities, and design and purchase both ASICs and standard products from us for resale to their customers. Other distributors focus solely on the sale of standard products. Our agreements with distributors generally grant limited rights to return standard product inventory and we defer revenue for such inventory until the distributor sells the product to a third party.

Storage Systems Marketing and Distribution

      Our products are sold worldwide through our channel customers and, to a smaller degree, to a limited installed base of end-users. We closely develop and manage our channel customer relationships to meet the diverse needs and requirements of enterprises. By selling products through our channel customers, we are able to address more markets, reach a greater number of enterprises, and reduce our overall sales and marketing expenditures.

      Our marketing efforts are designed to support our channel customers with programs targeted at developing differentiated go-to-market strategies and increasing sales effectiveness. Depending on the nature of our channel customer engagement, our marketing teams offer various levels of assistance in assessing and analyzing the competitive landscape, defining product strategy and roadmap, developing product positioning and pricing, creating product launch support materials and assisting in closing the sales process. These marketing teams carefully coordinate joint product development and marketing efforts between our customers and us to ensure that we address and effectively target enterprise requirements. We maintain sales and marketing organizations at our headquarters in Milpitas, and also in regional offices in Dallas, Texas; Chicago, Illinois; Houston, Texas; Los Angeles and Irvine, California; New York, New York; Parsippany, New Jersey; Reston, Virginia; and Wichita, Kansas. We also market our products internationally in China, France, Germany, Japan, Sweden and the United Kingdom.

Customers

      In 2004, IBM accounted for approximately 16% of our consolidated revenues. No other customer accounted for greater than 10% of consolidated revenues. We currently have a highly concentrated customer base; we are therefore dependent on a limited number of customers for a substantial portion of our revenues as a result of this strategy to focus our marketing and sales efforts on select, large-volume customers. The loss of any of our significant customers, any substantial decline in sales to these customers, or any significant change in the timing or volume of purchases by our customers, could result in lower revenues and could harm our business, financial condition or results of operations.

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Semiconductor Customers

      We seek to leverage our expertise in the fields of communications, consumer and storage components by marketing our products and services predominately to market leaders. Our current strategic account focus is on large, well-known companies that produce high-volume products incorporating our semiconductors. We recognize that this strategy may result in increased dependence on a limited number of customers for a substantial portion of our revenues. It is possible that we will not achieve anticipated sales volumes from one or more of the customers we focus on. While this could result in lower revenues, we believe this strategy provides us with an opportunity to drive further growth in sales and unit volumes. With the introduction of our RapidChip methodology, we have not only created new opportunities with our existing accounts, but also created opportunities within the broader industrial, medical and military/aerospace markets as well as smaller accounts in the communications, consumer and storage segments.

Storage Systems Customers

      Our customers can be characterized into two major go-to-market categories:

•  OEM Partners. These channel customers independently resell or distribute OEM-branded or Engenio co-branded products, which may be integrated with value-added services, hardware and software and delivered as differentiated complete storage solutions to enterprises. OEM Partners receive basic training services to enhance their abilities to sell and support our products. After receiving our basic training services, OEM Partners independently market, sell and support our products, requiring limited ongoing product support from us.

•  OEM+ Partners. In addition to providing our OEM+ Partners with products and basic services as described above, we also assist our OEM+ Partners with additional resources that may provide tailored, account-specific education, training and sales and marketing assistance, allowing our OEM+ Partners to leverage our storage products and industry expertise.

Manufacturing

Semiconductor Manufacturing

      Our semiconductor manufacturing operations convert a product design from the development stage into an integrated circuit. Manufacturing begins with wafer fabrication, where the design is transferred to silicon wafers through a series of processes, including photolithography, ion implantation, deposition of numerous films and the etching of these various films and layers. Each circuit on the wafer is tested in the wafer sort operation. The good circuits are identified and the wafer is then separated into individual die. Each good die is then assembled into a package using different standards and advanced assembly technologies. This package encapsulates the circuit for protection and allows for electrical connection to the printed circuit board. The final step in the manufacturing process is final test, where the finished devices undergo stringent and comprehensive testing using computer systems.

      The wafer fabrication operation is very complex and costly, and the industry trend has been towards outsourcing all or a portion of this operation to silicon foundries located throughout the world. The Company’s strategy is a combination of internal and external fabrication. In 2004, the majority of the Company’s wafers were fabricated internally, however, in the future we expect to increase our reliance on external sources for wafer fabrication.

      We currently outsource portions of our wafer fabrication to a variety of wafer foundries in Taiwan, Japan, China and Malaysia. For the more advanced deep sub-micron technologies, we use a combination of standard foundry process technologies and process technologies jointly developed with our foundry partners. These joint development agreements provide us access to leading edge technology and additional wafer capacity.

      Our final assembly and test operations are performed by independent subcontractors in South Korea, Taiwan, the Philippines, Malaysia, Thailand and China. The Company has a long history of outsourcing these

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operations and therefore can offer a wide range of high performance packaging solutions for system-on-a-chip designs, including flip chip technology.

      Development of advanced manufacturing technologies in the semiconductor industry frequently requires that critical selections be made as to those vendors from which essential equipment (including future enhancements) and after-sales service and support will be purchased. Some of our equipment selections require that we procure specific types of materials or components specifically designed to our specifications. Therefore, when we implement these technology choices, we may become dependent upon certain sole source vendors. Accordingly, our capability to switch to other technologies and vendors may be substantially restricted and a switch may involve significant expense and could delay our technology advancements and decrease manufacturing capabilities.

Storage Systems Manufacturing

      We use third-party suppliers for standard components, such as disk drives and standard computer processors, which are designed and incorporated into our products. Additionally, we outsource the manufacturing of the majority of our product components, such as printed circuit boards, in order to take advantage of quality and cost benefits afforded by using third-party manufacturing services. We believe that using outsourced manufacturing services allows us to focus on product development and increases operational flexibility, both in terms of adjusting manufacturing capacity in response to customer demand and rapidly introducing new products.

      The assembly of our storage system products involves integrating supplied components and manufactured sub-assemblies into final products, which are configured and rigorously tested before being delivered to our customers. The highly modularized nature of our storage system products allows for flexible assembly and delivery models, which include build-to-order, configure-to-order, direct shipment, bulk shipment and local fulfillment services. We have implemented these models in an effort to reduce requisite lead times for delivery of our products and to provide channel customers with multiple manufacturing and delivery alternatives that best complement their operations.

•  United States Assembly. Our wholly-owned United States manufacturing facility in Wichita, Kansas, assembles and tests complete storage systems and sub-assemblies configured from modular components, such as our storage controller modules and disk drive enclosure modules. ISO-9001 certification at our Kansas manufacturing facility has been maintained since April 1992. This facility has been certified as ISO-9001:2000 compliant since October of 2001. Product quality is achieved through extensive employee training, exhaustive and automated testing, and sample auditing. Quality control and measurement is extended through the subcomponent supplier and component manufacturer base with continuous reporting and ongoing qualification programs.

•  European Assembly. We outsource manufacturing in Cork, Ireland, to a Flextronics International Ltd. facility. ISO-9001:2000 certification at the Cork assembly facility has been maintained since December 2001. This facility is capable of the assembly and testing of complete storage systems and sub-assemblies configured from modular components, such as our storage controller modules and disk drive enclosure modules. The site in Ireland was established to provide operational flexibility in meeting surges in demand, address growing European demand and to serve as a backup site in the event of natural or human-made disasters that could disrupt the operations of our Wichita facility.

Backlog

Semiconductor Backlog

      In the Semiconductor segment, we generally do not have long-term volume purchase contracts with our customers. Instead, customers place purchase orders that are subject to acceptance by us. The timing of the design activities for which we receive payment and the placement of orders included in our backlog at any particular time is generally within the control of the customer. For example, there could be a significant time lag between the commencement of design work and the receipt of a purchase order for the units of a developed

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product. Also, customers may from time to time revise delivery quantities or delivery schedules to reflect their changing needs. For these reasons, our backlog as of any particular date may not be a meaningful indicator of future annual sales.

Storage Systems Backlog

      Due to the nature of our business, we maintain relatively low levels of backlog in the Storage Systems segment. Consequently, we believe that backlog is not a good indicator of future sales, and our quarterly revenues depend largely on orders booked and shipped in that quarter. Because lead times for delivery of our products are relatively short, we must build in advance of orders. This subjects us to certain risks, most notably the possibility that expected sales will not materialize, leading to excess inventory, which we may be unable to sell to our customers.

Competition

Semiconductor Competitors

      The semiconductor industry is intensely competitive and characterized by constant technological change, rapid product obsolescence, evolving industry standards and price erosion. Many of our competitors are larger, diversified companies with substantially greater financial resources. Some of these are also customers who have internal semiconductor design and manufacturing capacity. We also compete with smaller and emerging companies whose strategy is to sell products into specialized markets or to provide only a portion of the products and services that we offer.

      Our major competitors in the Semiconductor segment include large companies such as Agere Systems, Inc., International Business Machines Corporation, Philips Electronics, N.V., STMicroelectronics, Texas Instruments, Inc., and Toshiba Corporation. Other competitors in strategic markets include Adaptec, Inc., ATI Technologies, Inc., Broadcom Corporation, Cirrus Logic, Inc., ESS Technology, Inc., Genesis Microchip, Inc., Marvell Technology Group, Ltd., MediaTek Incorporated, NEC Corporation, Pixelworks, Inc., Trident Microsystems, Inc. and Zoran Corporation.

      The principal competitive factors in the semiconductor industry include:

•  design capabilities;

•  differentiating product features;

•  product performance characteristics;

•  time to market;

•  price;

•  manufacturing processes; and

•  utilization of emerging industry standards.

      It is possible that our competitors will develop other design solutions that could have a material adverse impact on our competitive position. Our competitors may also decide from time to time to aggressively lower prices of products that compete with our products in order to sell related products or achieve strategic goals. Due to their customized nature, ASICs are not as susceptible to price fluctuations as standard products. However, strategic pricing by competitors can place strong pricing pressure on our products in certain transactions, resulting in lower selling prices and lower gross profit margins for those transactions.

      The markets into which we sell our semiconductor products are subject to severe price competition. We expect to continue to experience declines in the selling prices of our semiconductor products over the life cycle of each product. In order to offset or partially offset declines in the selling prices of our products, we continue to reduce the costs of products through product design changes, manufacturing process changes, yield improvements and procurement of wafers from outsourced manufacturing partners.

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      We emphasize our CoreWare design methodology and system-on-a-chip capability. Competitive factors that continue to be important to the success of this strategy include:

•  selection, quantity and quality of our CoreWare library elements;

•  our ability to offer our customers system-level expertise; and

•  quality of software to support system-level integration.

      Competition in this area is increasing, and there is no assurance that our CoreWare methodology approach and product offerings will continue to receive market acceptance. Customers in our targeted markets frequently require system-level solutions. Our ability to deliver complete solutions may also require that we succeed in obtaining licenses to necessary software and integrating this software with our semiconductors.

Storage Systems Competitors

      The market for our storage system products is highly competitive, rapidly evolving and subject to changing technology, customer needs and new product introductions. We compete with products from large well-capitalized storage system companies such as EMC Corporation, Hitachi Data Systems and Network Appliance, Inc., as well as with other storage system and component providers, such as Adaptec, Inc., Dot Hill Systems Corporation, Infortrend Technology Inc., XIOtech Corporation, Xyratex Group Limited and the internal storage divisions of existing and potential channel customers. We also compete with internally developed products and, indirectly, through our channel customers, with third-party products being sold by major server vendors such as Dell Inc., Hewlett-Packard Company, International Business Machines Corporation and Sun Microsystems, Inc. The competitive factors affecting the market for our storage system products include:

•  features and functionality;

•  product performance and price;

•  reliability, scalability and data availability;

•  interoperability with other networking devices;

•  support for emerging industry and customer standards;

•  levels of training, marketing and customer support;

•  level of easily customizable features;

•  quality and availability of supporting software;

•  quality of system integration; and

•  technical services and support.

      Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of product development and customer support. To be successful in the future, we believe that we must respond promptly and effectively to the challenges of technological change and our competitors’ innovations by continually enhancing our product offerings. We must also continue to aggressively recruit and retain employees highly qualified and technically experienced in hardware and software development in order to achieve industry leadership in product development and support.

Patents, Trademarks and Licenses

      We maintain a patent program, and believe that our patents and other intellectual property rights have value to our business. We have filed a number of patent applications and currently hold more than 3,000 issued United States (“U.S.”) patents and additional issued foreign patents, expiring from 2005 to 2023, in both the Semiconductor and the Storage Systems segments combined. In both segments, we also maintain trademarks for certain of our products and services and claim copyright protection for certain proprietary software and

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documentation. Patents, trademarks and other forms of protection for our intellectual property are important, but we believe our future success principally depends upon the technical competence and creative skills of our employees.

      We continue to expand our portfolio of patents and trademarks. We offer a staged incentive to employees to identify, document and submit invention disclosures. We have developed an internal review procedure to maintain a high level of disclosure quality and to establish criteria, priorities and plans for filings both in the United States and abroad. The review process is based solely on engineering, business, legal and management judgment, with no assurance that a specific filing will issue or, if issued, will deliver any lasting value to us. There is no assurance that the rights granted under any patent will provide competitive advantages to us or will be adequate to protect our innovations, products or services. Moreover, the laws of certain countries in which our products are or may be manufactured or sold may not protect our products and intellectual property rights to the same extent as the U.S. legal system.

      As is typical in the high technology industry, from time to time, we have received communications from other parties asserting that certain of our products or processes infringe upon their patent rights, copyrights, trademark rights or other intellectual property rights. We regularly evaluate such assertions. In light of industry practice, we believe that, with respect to existing or future claims, any licenses or other rights that may be necessary may generally be obtained on commercially reasonable terms. Nevertheless, there is no assurance that licenses will be obtainable on acceptable terms or that a claim will not result in litigation or other administrative proceedings.

      In the Semiconductor segment, we protect our know-how, trade secrets and other proprietary information through confidentiality agreements with our customers, suppliers, employees and consultants, and through other security measures. We have entered into certain patent cross-license agreements that generally provide for the non-exclusive licensing of rights to design, manufacture and sell products and, in some cases, for cross-licensing of future improvements developed by either party.

      In the Storage Systems segment, we own a portfolio of patents and patent applications concerning a variety of storage technologies. We also maintain trademarks for certain of our products and services and claim copyright protection for certain proprietary software and documentation. Similar to the Semiconductor segment, we protect our trade secrets and other proprietary information through agreements and other security measures, and have implemented internal procedures to obtain patent protection for inventions and pursue protection in selected jurisdictions.

      Please see Item 3, Legal Proceedings for information regarding pending patent litigation against the Company. Please also refer to the additional risk factors set forth in the Risk Factors section and Note 12 of the Notes to the Consolidated Financial Statements (“Notes”) for additional information.

Research and Development

      Our industry is characterized by rapid changes in products, design tools and process technologies. We must continue to improve our existing products, design-tool environment and process technologies, and to develop new ones in a cost-effective manner to meet changing customer requirements and emerging industry standards. If we are not able to successfully introduce new products, design tools and process technologies or to achieve volume production of products at acceptable yields using new manufacturing processes, there could be a material adverse impact on our operating results and financial condition.

      We operate the majority of our research and development facilities in Arizona, California, Colorado, Georgia, Kansas, Maryland, Minnesota, Oregon and Texas. Internationally, we also have facilities in Russia,

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Canada, Germany, India, China and the United Kingdom. The following table shows our expenditures on research and development activities for each of the last three fiscal years (in thousands).

			Percent of
Year	Amount		Revenue
2004	$	421,516		25	%
2003	$	432,695		26	%
2002	$	457,351		25	%

      Research and development activities primarily consist of materials expenses, salaries and related costs of employees engaged in ongoing research, design and development activities and subcontracting costs.

Working Capital

      Information regarding our working capital practices is incorporated herein by reference from Item 7 of Part II hereof under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition, Capital Resources and Liquidity.”

Financial Information about Segments and Geographic Areas

      This information is included in Note 4 (“Segment and Geographic Information”) of the Notes, which information is incorporated herein by reference from Item 8 of Part II.

      For a discussion of various risks attendant to foreign operations, see (1) “Risk Factors” in this Item 1, in particular “We are exposed to fluctuations in foreign currency exchange rates,” “We procure parts and raw materials from limited domestic and foreign sources,” and “Our global operations expose the Company to numerous international business risks,” and (2) the section in Item 7A of Part II entitled “Foreign Currency Exchange Risk.” This information is incorporated herein by reference.

Environmental Regulation

      Federal, state and local regulations, in addition to those of other nations, impose various environmental controls on the use and discharge of certain chemicals and gases used in semiconductor and storage product processing. Our facilities have been designed to comply with these regulations through the implementation of environmental management systems. We believe that our activities conform to current environmental regulations. However, increasing public attention has been focused on the environmental impact of electronics and semiconductor manufacturing operations. While to date we have not experienced any material adverse impact on our business from environmental regulations, we cannot provide assurance that such regulations will not be amended so as to impose expensive obligations on us in the future. In addition, violations of environmental regulations or impermissible discharges of hazardous substances could result in the necessity for the following actions:

•  additional capital improvements to comply with such regulations or to restrict discharges;

•  liability to our employees and/or third parties; and/or

•  business interruptions as a consequence of permit suspensions or revocations or as a consequence of the granting of injunctions requested by governmental agencies or private parties.

Employees

      As of December 31, 2004, we had 4,414 full-time employees, of which 934 were employees of our Storage Systems segment.

      As a result of the decline in revenues in the semiconductor industry and a corresponding decline in the Company’s outlook as of the latter part of the third quarter of 2004, in October 2004, the Company initiated a comprehensive restructuring program, which included asset impairments, a global reduction in workforce of

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approximately 560 employees and the consolidation of certain facilities. See Note 3 of the Notes to the Consolidated Financial Statements for further discussion.

      Our future success depends upon the continued service of our key technical and management personnel and on our ability to continue to attract and retain qualified employees, particularly those highly skilled design, process and test engineers involved in the manufacture of existing products and the development of new products and processes. We currently have favorable employee relations, but the competition for technical personnel is intense, and the loss of key employees or the inability to hire such employees when needed could have a material adverse impact on our business and financial condition.

Seasonality

      The Company’s business is largely focused on the information technology and consumer products markets. Due to seasonality in these markets, the Company typically expects to see stronger growth in the last two quarters of the year.

RISK FACTORS

      Keep these risk factors in mind when you read “forward-looking” statements elsewhere in this Form 10-K and in the documents incorporated herein by reference. These are statements that relate to our expectations for future events and time periods. Generally, the words, “anticipate,” “expect,” “intend” and similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements.

      A general economic weakness may reduce our revenues. The semiconductor industry is cyclical in nature and is characterized by wide fluctuations in product supply and demand. In addition, our results of operations are dependent on the global economy. Any geopolitical factors such as terrorist activities, armed conflict or global health conditions, which adversely affects the global economy, may adversely impact our operating results and financial condition. In addition, goodwill and other long-lived assets could be impacted by a further decline in revenues because impairment is measured based upon estimates of future cash flows. These estimates include assumptions about future conditions within our company and industry.

      We operate in highly competitive markets. The Semiconductor and Storage Systems segments in which we conduct business are characterized by rapid technological change, short product cycles and evolving industry standards. We believe our future success depends, in part, on our ability to improve on existing technologies and to develop and implement new ones in order to continue to reduce semiconductor chip size and improve product performance and manufacturing yields. We must also be able to adopt and implement emerging industry standards in a timely manner and to adapt products and processes to technological changes. If we are not able to implement new process technologies successfully or to achieve volume production of new products at acceptable yields, our operating results and financial condition may be adversely impacted.

      Our competitors include many large domestic and foreign companies that have substantially greater financial, technical and management resources than we do. Several major diversified electronics companies offer ASIC products and/or other standard products that are competitive with our product lines. Other competitors are specialized, rapidly growing companies that sell products into the same markets that we target. Some of our large customers may develop internal design and production capabilities to manufacture their own products, thereby displacing our products. There is no assurance that the price and performance of our products will be superior relative to the products of our competitors. As a result, we may experience a loss of competitive position that could result in lower prices, fewer customer orders, reduced revenues, reduced gross profit margins and loss of market share.

      We are dependent on a limited number of customers. Our concentrated customer base accounts for a substantial portion of our revenues. IBM represented 16% of our total consolidated revenues for the year ended December 31, 2004.

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      Our operating results and financial condition could be significantly affected if:

•  we do not win new product designs from major existing customers;

•  major customers reduce or cancel their existing business with us;

•  major customers make significant changes in scheduled deliveries; or

•  there are declines in the prices of products that we sell to these customers.

      Our new products may not achieve market acceptance. We introduce many new products each year. We must continue to develop and introduce new products that compete effectively on the basis of price and performance and that satisfy customer requirements. We continue to emphasize engineering development and acquisition of CoreWare building blocks and integration of our CoreWare libraries into our design capabilities. Our cores and standard products are intended to be based upon industry standard functions, interfaces, and protocols so that they are useful in a wide variety of systems applications. Development of new products and cores often requires long-term forecasting of market trends, development and implementation of new or changing technologies and a substantial capital commitment. We cannot provide assurance that the cores or standard products that we select for investment of our financial and engineering resources will be developed or acquired in a timely manner or will enjoy market acceptance.

      The manufacturing facilities we operate are highly complex and require high fixed costs. Our wafer fabrication site is located in Gresham, Oregon. In addition, we own our Storage Systems segment manufacturing facility in Wichita, Kansas. The manufacture and introduction of our products is a complicated process. We continually strive to implement the latest process technologies and manufacture products in a clean and tightly controlled environment. We confront challenges in the manufacturing process that require us to:

•  maintain a competitive manufacturing cost structure;

•  implement the latest process technologies required to manufacture new products;

•  exercise stringent quality control measures to ensure high yields;

•  effectively manage the subcontractors engaged in the wafer fabrication, test and assembly of products; and

•  update equipment and facilities as required for leading edge production capabilities.

      We outsource a substantial portion of wafers manufactured. We have consolidated our internal semiconductor manufacturing in Gresham, Oregon. We have developed outsourcing arrangements for the manufacture of some of our products based on process technology that is unique to the supplier. There is no assurance that the third party manufacturer will be able to produce and deliver wafers that meet our specifications or that our supplier will be able to successfully provide the process technology. If the third party is not able to deliver products and process technology on a timely and reliable basis, our results of operations could be adversely affected.

      We have significant capital requirements to maintain and grow our business. We continue to make significant investments in our facilities and capital equipment, and, as a result, our fixed costs for manufacturing remain high. We also seek to obtain access to advanced manufacturing capacities through strategic supplier alliances with wafer foundries. In general, we seek to optimally allocate the manufacture of our products between our facilities and those of our foundry suppliers. Nonetheless, a high level of capital expenditures in our facilities results in relatively high fixed costs. If demand for our products does not absorb the available capacity, the fixed costs and operating expenses related to our production capacity could have a material adverse impact on our operating results and financial condition.

      We finance our capital expenditure needs from operating cash flows, bank financing and capital market financing. As of December 31, 2004, we had convertible notes outstanding of approximately $772 million. We may need to seek additional equity or debt financing from time to time and cannot be certain that additional

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financing will be available on favorable terms. Moreover, any future equity or equity-linked financing may dilute the equity ownership of existing stockholders.

      We are exposed to fluctuations in foreign currency exchange rates. We have some exposure to fluctuations in foreign currency exchange rates. We have international subsidiaries and distributors that operate and sell our products globally. We routinely hedge these exposures in an effort to minimize the impact of currency fluctuations. However, we may still be adversely affected by changes in foreign currency exchange rates or declining economic conditions in these countries.

      We procure parts and raw materials from limited domestic and foreign sources. We do not maintain an extensive inventory of parts and materials for manufacturing. We purchase a portion of our requirements for parts and raw materials from a limited number of sources, primarily from suppliers in Japan and their U.S. subsidiaries, and we obtain other material inputs on a local basis. There is no assurance that, if we have difficulty in obtaining parts or materials in the future, alternative suppliers will be available, or that these suppliers will provide parts and materials in a timely manner or on favorable terms. As a result, we may be adversely affected by delays in product shipments. If we cannot obtain adequate materials for manufacture of our products or if such materials are not available at reasonable prices, there could be a material adverse impact on our operating results and financial condition.

      We utilize indirect channels of distribution over which we have limited control. Our financial results could be adversely affected if our relationship with resellers or distributors were to deteriorate or if the financial condition of these resellers or distributors were to decline. In addition, as our business grows, we may have an increased reliance on indirect channels of distribution. There can be no assurance that we will be successful in maintaining or expanding these indirect channels of distribution. This could result in the loss of certain sales opportunities. Furthermore, the partial reliance on indirect channels of distribution may reduce our visibility with respect to future business, thereby making it more difficult to accurately forecast orders.

      Our operations are affected by cyclical fluctuations. The Semiconductor and Storage Systems segments in which we compete are subject to cyclical fluctuations in demand. The Semiconductor industry has in the past experienced periods of rapid expansion of production capacity followed by periods of significant downturn. Even when the demand for our products remains constant, the availability of additional excess production capacity in the industry creates competitive pressure that can degrade pricing levels, which can reduce revenues. Furthermore, customers who benefit from shorter lead times may defer some purchases to future periods, which could adversely affect revenues in the short term. As a result, we may experience downturns or fluctuations in demand for our products and experience adverse effects on our operating results and financial condition.

      We engage in acquisitions and alliances giving rise to economic and technological risks. We are continually exploring strategic acquisitions that build upon our existing library of intellectual property, human capital and engineering talent, and increase our leadership position in the markets where we operate. We completed two acquisitions in 2004 and two acquisitions in 2002. We did not complete any material acquisitions or alliances in 2003. Mergers and acquisitions of high-technology companies bear inherent risks. No assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition. We must manage any growth effectively. Failure to manage growth effectively and to integrate acquisitions could adversely affect our operating results and financial condition.

      In addition, we intend to continue to make investments in companies, products and technologies through strategic alliances. Investment activities often involve risks, including the need to acquire timely access to needed capital for investments related to alliances and to invest in companies and technologies that contribute to the growth of our business.

      The price of our securities may be subject to wide fluctuations. Our stock has experienced substantial price volatility, particularly as a result of quarterly variations in results, the published expectations of analysts and announcements by our competitors and us. In addition, the stock market has experienced price and volume fluctuations that have affected the market price of many technology companies and that have often

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been unrelated to the operating performance of such companies. The price of our securities may also be affected by general global, economic and market conditions. While we cannot predict the individual effect that these and other factors may have on the price of our securities, these factors, either individually or in the aggregate, could result in significant variations in price during any given period of time. These fluctuations in our stock price also impact the price of our outstanding convertible securities and the likelihood of the convertible securities being converted into cash or equity. If our stock price is below the conversion price of our convertible bonds on the date of maturity, they may not convert into equity and we may be required to redeem the convertible securities for cash. However, in the event they do not convert to equity, we believe that our current cash position and expected future operating cash flows will be adequate to meet these obligations as they mature.

      We may rely on capital and bank markets to provide liquidity. In order to finance strategic acquisitions, capital assets needed in our manufacturing facilities and other general corporate needs, we may rely on capital and bank markets to provide liquidity. Historically, we have been able to access capital and bank markets, but this does not necessarily guarantee that we will be able to access these markets in the future or at terms that are acceptable to us. The availability of capital in these markets is affected by several factors, including geopolitical risk, the interest rate environment and the condition of the economy as a whole. In addition, our own operating performance, capital structure and expected future performance impact our ability to raise capital. We believe that our current cash, cash equivalents, short-term investments and future cash provided by operations will be sufficient to fund our needs in the foreseeable future. This includes repaying our existing convertible debt when due. However, if our operating performance falls below expectations, we may need additional funds.

      We design and develop highly complex cell-based ASICs. As technology advances to 0.13 micron and smaller geometries, there are increases in the complexity, time and expense associated with the design, development and manufacture of ASICs. We must incur substantial research and development costs to confirm the technical feasibility and commercial viability of any ASIC products that in the end may not be successful. Therefore, we cannot guarantee that any new ASIC products will result in market acceptance.

      Our global operations expose us to numerous international business risks. We have substantial business activities in Asia and Europe. Both manufacturing and sales of our products may be adversely impacted by changes in political and economic conditions abroad. A change in the current tax laws, tariff structures, export laws, regulatory requirements or trade policies in either the United States or foreign countries could adversely impact our ability to manufacture or sell our products in foreign markets. Moreover, a significant decrease in sales by our customers to end users in either Asia or Europe could result in a decline in orders.

      We subcontract wafer manufacturing, test and assembly functions to independent companies located in Asia. A reduction in the number or capacity of qualified subcontractors or a substantial increase in pricing could cause longer lead times, delays in the delivery of products to customers or increased costs.

      The high technology industry in which we operate is prone to intellectual property litigation. Our success is dependent in part on our technology and other proprietary rights, and we believe that there is value in the protection afforded by our patents, copyright rights and trademarks. We have a program whereby we actively protect our intellectual property by acquiring patent and other intellectual property rights. However, the industry is characterized by rapidly changing technology and our future success depends primarily on the technical competence and creative skills of our personnel.

      As is typical in the high technology industry, from time to time we have received communications from other parties asserting that certain of our products, processes, technologies or information infringe upon their patent rights, copyrights, trademark rights or other intellectual property rights. We regularly evaluate such assertions. In light of industry practice, we believe, with respect to existing or future claims that any licenses or other rights that may be necessary may generally be obtained on commercially reasonable terms. Nevertheless, there is no assurance that licenses will be obtainable on acceptable terms or that a claim will not result in litigation or other administrative proceedings. Resolution of whether our product or intellectual property has infringed on valid rights held by others could have a material adverse effect on our financial position or results of operations and may require material changes in production processes and products.

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      See “Legal Matters” in Note 12 (“Commitments and Contingencies”) of the Notes regarding current patent litigation.

      Our manufacturing facilities are subject to disruption. Operations at any of our primary manufacturing facilities may be disrupted for reasons beyond our control, including work stoppages, fire, earthquake, tornado, floods or other natural disasters, which could have a material adverse effect on our financial position or results of operation.

      We depend on independent foundry subcontractors to manufacture a portion of our current products, and any failure to secure and maintain sufficient foundry capacity could materially and adversely affect our business. Outside foundry subcontractors, located in Asia, manufacture a portion of our semiconductor devices in current production. Availability of foundry capacity has in the recent past been reduced due to strong demand. In addition, a recurrence of SARS or the occurrence of another public health emergency in Asia could further affect the production capabilities of our manufacturers by resulting in quarantines or closures. If we are unable to secure sufficient capacity at our existing foundries, or in the event of a quarantine or closure at any of these foundries, our revenues, cost of revenues and results of operations would be negatively impacted. If any of our foundries experiences a shortage in capacity, or suffers any damage to its facilities due to earthquakes or other natural disasters, experiences power outages, encounters financial difficulties or any other disruption of foundry capacity, we may need to qualify an alternative foundry in a timely manner. Even our current foundries need to have new manufacturing processes qualified if there is a disruption in an existing process. We typically require several months to qualify a new foundry or process before we can begin shipping products from it. If we cannot accomplish this qualification in a timely manner, we may experience a significant interruption in supply of the affected products.

      Because we rely on outside foundries with limited capacity, we face several significant risks, including:

•  a lack of guaranteed wafer supply and potential wafer shortages and higher wafer prices;

•  limited control over delivery schedules, quality assurance, manufacturing yields and production costs; and

•  the unavailability of, or potential delays in obtaining access to, key process technologies.

      In addition, the manufacture of integrated circuits is a highly complex and technologically demanding process. Although we work closely with our foundries to minimize the likelihood of reduced manufacturing yields, our foundries have from time to time experienced lower than anticipated manufacturing yields. This often occurs during the production of new products or the installation and start-up of new process technologies. Poor yields from our foundries could result in product shortages or delays in product shipments, which could seriously harm our relationships with our customers and materially and adversely affect our results of operations.

      The ability of each foundry to provide us with semiconductor devices is limited by its available capacity and existing obligations. Although we have entered into contractual commitments to supply specified levels of products to some of our customers, we do not have a long-term volume purchase agreement or a significant guaranteed level of production capacity with any of our foundries. Foundry capacity may not be available when we need it or at reasonable prices. Availability of foundry capacity has in the recent past been reduced from time to time due to strong demand. We place our orders on the basis of our customers’ purchase orders or our forecast of customer demand, and the foundries can allocate capacity to the production of other companies’ products and reduce deliveries to us on short notice. It is possible that foundry customers that are larger and better financed than we are, or that have long-term agreements with our main foundries, may induce our foundries to reallocate capacity to them. This reallocation could impair our ability to secure the supply of components that we need. Although we use a number of independent foundries to manufacture our semiconductor products, most of our components are not manufactured at more than one foundry at any given time, and our products typically are designed to be manufactured in a specific process at only one of these foundries. Accordingly, if one of our foundries is unable to provide us with components as needed, we could experience significant delays in securing sufficient supplies of those components. Also, our third party foundries typically migrate capacity to newer, state-of-the-art manufacturing processes on a regular basis,

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which may create capacity shortages for our products designed to be manufactured on an older process. We cannot assure you that any of our existing or new foundries will be able to produce integrated circuits with acceptable manufacturing yields, or that our foundries will be able to deliver enough semiconductor devices to us on a timely basis, or at reasonable prices. These and other related factors could impair our ability to meet our customers’ needs and have a material and adverse effect on our operating results.

      Although we may utilize new foundries for other products in the future, in using new foundries we will be subject to all of the risks described in the foregoing paragraphs with respect to our current foundries.

      We depend on third-party subcontractors to assemble, obtain packaging materials for, and test substantially all of our current products. If we lose the services of any of our subcontractors or if these subcontractors are unable to attain sufficient packaging materials, shipments of our products may be disrupted, which could harm our customer relationships and adversely affect our net sales. Third-party subcontractors located in Asia assemble, obtain packaging materials for, and test substantially all of our current products. Because we rely on third-party subcontractors to perform these functions, we cannot directly control our product delivery schedules and quality assurance. This lack of control has in the past resulted, and could in the future result, in product shortages or quality assurance problems that could delay shipments of our products or increase our manufacturing, assembly or testing costs.

      If our third-party subcontractors are unable to obtain sufficient packaging materials for our products in a timely manner, we may experience a significant product shortage or delay in product shipments, which could seriously harm our customer relationships and materially and adversely affect our net sales. If any of these subcontractors experiences capacity constraints or financial difficulties, suffers any damage to its facilities, experiences power outages or any other disruption of assembly or testing capacity, we may not be able to obtain alternative assembly and testing services in a timely manner. Due to the amount of time that it usually takes us to qualify assemblers and testers, we could experience significant delays in product shipments if we are required to find alternative assemblers or testers for our components. Any problems that we may encounter with the delivery, quality or cost of our products could damage our customer relationships and materially and adversely affect our results of operations. We are continuing to develop relationships with additional third-party subcontractors to assemble and test our products. However, even if we use these new subcontractors, we will continue to be subject to all of the risks described above.

      We are increasingly exposed to various legal, business, political and economic risks associated with our international operations. We currently obtain a substantial portion all of our manufacturing, and all of our assembly and testing services from suppliers located outside the United States. We also frequently ship products to our domestic customers’ international manufacturing divisions and subcontractors. We also undertake design and development activities in Canada, China, India, Taiwan and the United Kingdom. We intend to continue to expand our international business activities and to open other design and operational centers abroad. The recent war in Iraq and the lingering effects of terrorist attacks in the United States and abroad, the resulting heightened security and the increasing risk of extended international military conflicts may adversely impact our international sales and could make our international operations more expensive. International operations are subject to many other inherent risks, including but not limited to:

•  political, social and economic instability;

•  exposure to different legal standards, particularly with respect to intellectual property;

•  natural disasters and public health emergencies;

•  nationalization of business and blocking of cash flows;

•  trade and travel restrictions;

•  the imposition of governmental controls and restrictions;

•  burdens of complying with a variety of foreign laws;

•  import and export license requirements and restrictions of the United States and each other country in which we operate;

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•  unexpected changes in regulatory requirements;

•  foreign technical standards;

•  changes in tariffs;

•  difficulties in staffing and managing international operations;

•  fluctuations in currency exchange rates;

•  difficulties in collecting receivables from foreign entities or delayed revenue recognition; and

•  potentially adverse tax consequences.

      Any of the factors described above may have a material adverse effect on our ability to increase or maintain our foreign sales.

      Additionally, our operations may be impacted by SARS-related factors, including, but not limited to, disruptions at our third-party manufacturers that are primarily located in Asia, reduced sales in our international retail channels and increased supply chain costs. If SARS recurs or spreads to other areas, or other similar public health emergencies arise, our international sales and operations could be harmed.

      We must attract and retain key employees in a highly competitive environment. Our employees are vital to our success and our key management, engineering and other employees are difficult to replace. We do not generally have employment contracts with our key employees. Despite the economic slowdown of the last few years, competition for certain key technical and engineering personnel remains intense. Our continued growth and future operating results will depend upon our ability to attract, hire and retain significant numbers of qualified employees.

      Engenio Information Technologies, Inc. represents a significant portion of our business, and an initial public offering, sale or spin-off of the Storage Systems segment, may cause our operating results to suffer and may cause net revenues and income to decline. Engenio Information Technologies, Inc. represents a significant portion of our business, and it is currently reported as a separate segment in our consolidated financial statements. For the fiscal years ended 2004, 2003, and 2002, the Storage Systems segment represented 27%, 25%, and 18% of our revenues, respectively.

      If we engage in a transaction that results in Engenio no longer being our subsidiary, the Storage Systems segment’s financial results, including its net revenues and net income, will no longer be included in our consolidated financial statements. Consequently, our financial results may be harmed as a result of a spin-off or sale of the storage systems business, which may cause our stock price to decline. Accordingly, our historical consolidated financial results may not necessarily reflect our future financial position, results of operations and cash flows after Engenio ceases to be a subsidiary

      The separation and possible initial public offering, sale or spin-off of Engenio Information Technologies, Inc. from us is a substantial undertaking that may disrupt our ongoing business and may increase expenses, which may affect our results of operations or financial condition. The separation of Engenio, and the possible initial public offering of the subsidiary’s common stock to the public and the potential spin-off of the subsidiary to our stockholders continues to require the substantial dedication of management resources. Furthermore, we expect to incur significant expenses in future periods related to the separation. We have not yet made any adjustments to our historical financial information to reflect the significant changes that may occur in our cost structure, funding and operations as a result of the separation. In addition, the efforts required to complete the separation of Engenio from us may disrupt our ongoing business activities, may result in employee distraction and may harm Engenio’s and our ability to attract, retain and motivate key employees. If any of the foregoing occurs, our results of operations or financial condition may suffer.

      Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected fluctuations and affect our reported results of operations. Financial accounting standards in the United States are constantly under review and may be changed from time to time. We would be required to apply these changes when adopted. Once implemented, these changes could result in material

21

fluctuations in our financial results of operations and/or the way in which such results of operations are reported. Similarly, we are subject to taxation in the United States and a number of foreign jurisdictions. Rates of taxation, definitions of income, exclusions from income, and other tax policies are subject to change over time. Changes in tax laws in a jurisdiction in which we have reporting obligations could have a material impact on our results of operations.

      We expect that the adoption of Statement of Financial Accounting Standard (“SFAS”) No. 123 (Revised 2004), entitled “Share-Based Payment,” effective for the periods commencing after June 15, 2005, will have a material and adverse impact on our reported results as described under “Recent Accounting Pronouncements.” Because the factors which will affect compensation expense we incur due to the adoption of SFAS No. 123 (Revised 2004) are unknown, the impact on our operating results at the point of adoption, or in the future, cannot be determined. Changes in these or other rules, or modifications to our current practices, may have a significant adverse effect on our reported operating results or in the way in which we conduct our business in the future.

      We face uncertainties related to the effectiveness of internal controls. Public companies in the United States are required to review their internal controls over financial reporting under the Sarbanes-Oxley Act of 2002. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will achieve its stated goal under all potential future conditions, regardless of how remote.

      Internal control deficiencies or weaknesses that are not yet identified could emerge. Over time we may identify and correct deficiencies or weaknesses in our internal controls and, where and when appropriate, report on the identification and correction of these deficiencies or weaknesses. However, the internal control procedures can provide only reasonable, and not absolute, assurance that deficiencies or weaknesses are identified. Deficiencies or weaknesses that are not yet identified could emerge and the identification and corrections of these deficiencies or weaknesses could have a material impact on the results of operations for the Company.

      Internal control issues that appear minor now may later become reportable conditions. We are required to publicly report on deficiencies or weaknesses in our internal controls that meet a materiality standard as required by law. While the Company meets its statutory obligations, management may, at a point in time, accurately categorize a deficiency or weakness as immaterial or minor and therefore not be required to publicly report such deficiency or weakness. Such determination, however, does not preclude a change in circumstances such that the deficiency or weakness could, at a later time, become a reportable condition that could have a material impact on our results of operations.

Item 2. Properties

      The Company leases approximately 527,000 square feet of real property in Milpitas, California for its corporate headquarters, administration and engineering offices. Engenio leases approximately 38,000 square feet for its corporate headquarters in a separate facility also located in Milpitas, California.

      The Company owns the land and buildings housing its 588,000 square foot manufacturing facilities for the Semiconductor segment in Gresham, Oregon. The Company also owns the land and buildings housing sales and engineering offices in Fort Collins and Colorado Springs, Colorado, and owns the logistics center in Tsuen Wan, Hong Kong.

      In the Storage Systems segment, the Company owns the manufacturing and executive offices site in Wichita, Kansas, which includes approximately 330,000 square feet of space, and leases a facility in Boulder, Colorado, which consists of approximately 50,000 square feet.

      The Company also maintains leased executive offices, design centers and sales offices in Norcross, Georgia, Bracknell, United Kingdom and Tokyo, Japan. In addition, the Company maintains leased sales and engineering offices, regional office space for its field sales, marketing and design center offices for both its

22

Semiconductor segment and its Storage Systems segment at various other locations in North America, Europe, Japan, China, India, Canada and Russia. Leased facilities described in this section are subject to operating leases that expire in 2005 through 2014. (See Note 12 of the Notes.)

      We believe that our existing facilities and equipment are well maintained, in good operating condition, suitable for our operations and are adequate to meet our current requirements.

Item 3. Legal Proceedings

      This information is included in Note 12 (“Commitments and Contingencies”) of the Notes, which information is incorporated herein by reference from Item 8 of Part II hereof.

Item 4. Submission of Matters to a Vote of Security Holders

      Not applicable.

Executive Officers of the Company

      The executive officers of the Company, who are elected by and serve at the discretion of the Board of Directors, are as follows. Their ages are as of December 31, 2004.

Name	Age		Position
Wilfred J. Corrigan		66	Chairman and Chief Executive Officer
John D’Errico		61	Executive Vice President, Storage and Communications Components
Donald Esses		53	Executive Vice President, Worldwide Operations
Thomas Georgens		45	Executive Vice President, Storage Systems (and Chief Executive Officer, Engenio Information Technologies, Inc.)
Jon R. Gibson		57	Vice President, Human Resources
Christopher L. Hamlin		61	Senior Vice President, Chief Technology Officer
Bryon Look		50	Executive Vice President and Chief Financial Officer
W. Richard Marz		61	Executive Vice President, Worldwide Strategic Marketing
Umesh Padval		47	Executive Vice President, Consumer Products
David G. Pursel		59	Vice President, General Counsel and Corporate Secretary
Frank A. Tornaghi		50	Executive Vice President, Worldwide Sales
Joseph M. Zelayeta		58	Executive Vice President, ASIC Technology & Methodology

      Mr. Corrigan is the principal founder of the Company and has served as its Chairman and Chief Executive Officer since its organization in January 1981. Prior to founding the Company, he was President, Chairman and Chief Executive Officer of Fairchild Camera and Instrument Corporation. Mr. Corrigan is also a member of the Board of Directors of FEI Company, a semiconductor equipment and solutions provider.

      John D’Errico was named Executive Vice President, Storage and Communications Components in January 2003. He served as Executive Vice President Storage Components from August 2000 to January 2003 and as Executive Vice President, Storage Components and Colorado Operations from August 1998 to August 2000. Mr. D’Errico joined us in 1984 and has held various senior management and executive positions at our manufacturing facilities in the U.S. and Japan.

      Donald Esses was named Executive Vice President, Worldwide Operations in December 2003. He joined the Company in 1983 and has held management positions in process and product engineering. From July 1994

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to November 2000, Mr. Esses held the position of Vice President, U.S. Manufacturing. From November 2000 to December 2003, he was Vice President of Supply Chain Management.

      Thomas Georgens has served as Chief Executive Office of Engenio Information Technologies, Inc. since February of 2004 and Executive Vice President of LSI Logic Storage Systems since November 2000. From August 1998, upon the acquisition of Symbios, Inc., by the Company, to November 2000, Mr. Georgens served as the Company’s Senior Vice President and General Manager, Storage Systems.

      Jon Gibson was named Vice President, Human Resources in November 2001. He joined LSI in September 1984 as Employee Relations Manager. Mr. Gibson was named Director of Human Resources in October 1987. From March 1999 until November 2001, Mr. Gibson served as Senior Director of Human Resources.

      Dr. Christopher Hamlin joined the Company in May 2000, as Senior Vice President and Chief Technology Officer. He served as Chief Technology Officer of Ridge Technologies, a data storage company, from September 1997 until that company was acquired by Adaptec Inc., a data storage company, in May 1998. From December 1998 until he joined LSI Logic, Dr. Hamlin was Chief Technology Officer and Vice President of New Technologies for Western Digital Corporation, a data storage company.

      Bryon Look was named Executive Vice President and Chief Financial Officer in November 2000. Mr. Look joined the Company in March 1997 as Vice President, Corporate Development and Strategic Planning. Prior to joining the Company, he was manager of business development at Hewlett-Packard’s corporate development department. During a 21-year career at Hewlett-Packard, Mr. Look held a variety of management positions in finance and research and development.

      W. Richard Marz was named Executive Vice President, Strategic Worldwide Marketing in December 2003. He joined the Company in September 1995 as Senior Vice President, North American Marketing and Sales, and was named Executive Vice President, Geographic Markets in May 1996, a position he held until July 2001. He served as Executive Vice President, ASIC Technology from July 2001 to January 2002 and served as Executive Vice President, Communications and ASIC Technology from January 2003 to December 2003.

      Umesh Padval was named Executive Vice President, Consumer Products in August 2004. He served as Senior Vice President and General Manager for LSI Logic’s Broadband Entertainment Division, a position he held since June 2001, when LSI Logic acquired C-Cube Microsystems Inc., a Delaware corporation. Mr. Padval served as the Chief Executive Officer of C-Cube from May 2000 until June 2001, and President of C-Cube’s semiconductor division from 1998 to 2000. Prior to joining C-Cube, Mr. Padval was Senior Vice President and General Manager of the Consumer Digital Entertainment and Computing Products Divisions at VLSI Technology, Inc.

      David G. Pursel serves as Vice President, General Counsel and Corporate Secretary. He was named to this position in June 2000. Mr. Pursel joined LSI Logic in February 1996 as Associate General Counsel, Chief Intellectual Property Counsel and Assistant Secretary.

      Frank A. Tornaghi was named Executive Vice President, Worldwide Sales in July 2001. Since joining the Company in 1984, Mr. Tornaghi has held several management positions in sales at LSI Logic and was named a vice president in 1993. He served as Vice President, North America Sales, from May 1993 to July 2001.

      Joseph M. Zelayeta was named Executive Vice President ASIC Technology and Methodology in December 2003. He served as Executive Vice President, Worldwide Operations from September 1997 to December 2003. Mr. Zelayeta joined LSI Logic in 1981 and has held various management positions with the Company, including Senior Vice President of U.S. Manufacturing and General Manager Gresham Operations, Vice President of Research and Development and Vice President of U.S. Operations.

      There are no family relationships among any executive officers and directors.

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Corporate Governance

      The Board of Directors (the “Board”) is the ultimate decision-making body of the Company except with respect to those matters reserved for decision by the stockholders. The Board is responsible for selection of the executive management team, providing oversight responsibility and direction to management, and evaluating the performance of this team on behalf of the stockholders. Responsibility for day-to-day management of operations is delegated to the executive management team. The Board has adopted Corporate Governance Guidelines to assist it in the exercise of its responsibilities. These Guidelines are available on the Company’s website at www.lsilogic.com.

      The Company has adopted a Code of Ethics for principal executive and senior financial officers. A copy of this Code of Ethics is available on the Company’s website at www.lsilogic.com.

      The Board is composed of a majority of independent directors. Currently, seven out of eight directors are independent, as defined by the New York Stock Exchange Listing Standards. The Board has a lead director. The Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The Audit, Compensation and Nominating and Corporate Governance Committees consist solely of non-employee, independent directors. All Committees operate under charters approved by the Board. These charters are available on the Company’s website at www.lsilogic.com. The Board of Directors appoints the members and chairs of the committees annually.

      The Audit Committee reviews the Company’s accounting policies and practices, internal controls, financial reporting practices, contingent risks and risk management strategies and plans. The Audit Committee selects and retains the Company’s independent accountants to serve the following year to examine the Company’s accounts, reviews the independence of the independent accountants as a factor in making these determinations and pre-approves all audit and non-audit services performed by the independent accountants. The Audit Committee regularly meets alone with the Company’s management, independent accountants and the director of the Company’s Internal Audit Department, and grants them unfettered access to the Audit Committee at any time. All members of the Audit Committee are financially literate, as such qualification is interpreted by the Company’s Board in its business judgment. In addition, three members of the Committee are financial experts.

      At least annually, the Compensation Committee reviews the compensation plans for the Company’s executive officers and directors and amends or recommends that the Board amend these plans if the Committee deems it appropriate. The Compensation Committee evaluates and reviews, at least annually, the performance of the Chief Executive Officer and other executive officers in light of the goals of these plans. Based upon such an evaluation, the Compensation Committee establishes the Company’s overall executive compensation strategy, and, in particular, determines the compensation structure for the Chief Executive Officer and other executive officers of the Company. The Committee approves any incentive, bonus or similar plans of the Company based upon the recommendations submitted by the Chief Executive Officer and the Vice President of Human Resources. The Committee reviews and approves the Company’s stock option and other stock incentive award programs and reviews, as needed (with an independent consultant), executive compensation matters and significant issues that relate to executive compensation.

      The Nominating and Corporate Governance Committee provides assistance to the Board in recommending to the Board individuals qualified to serve as directors of the Company and on committees of the Board, recommending to the Board the director nominees for the next annual meeting of stockholders, advising the Board with respect to Board composition, procedures and whether to form or dissolve committees, advising the Board with respect to the corporate governance principles applicable to the Company and developing criteria for oversight of the evaluation of the Board and management. The Nominating and Corporate Governance Committee will consider shareholder recommendations for candidates to the Company’s Board.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

      Our stock trades on the New York Stock Exchange (“NYSE”) under the symbol “LSI.” The Company’s Chief Executive Officer has certified to the NYSE that he is unaware of any violation by the Company of the NYSE’s corporate governance listing standards. The high and low closing sales prices for the stock for each full quarterly period within the two most recent fiscal years as reported on the NYSE are:

	2004		2003
	High — Low		High — Low
First Quarter	$	11.45 — 8.64	$	6.32 — 3.97
Second Quarter	$	9.91 — 7.15	$	7.74 — 4.44
Third Quarter	$	6.80 — 4.03	$	11.96 — 7.08
Fourth Quarter	$	5.81 — 4.27	$	10.14 — 8.30
Year	$	11.45 — 4.03	$	11.96 — 3.97

      At March 11, 2005, there were 3,642 owners of record of our common stock.

      We have never paid cash dividends on our common stock. It is presently our policy to reinvest our earnings, and we do not anticipate paying any cash dividends to stockholders in the foreseeable future.

Equity Compensation Plan Information

As of December 31, 2004

					(c)
					Number of
	(a)		(b)		Securities
	Number of		Weighted-		Remaining Available
	Securities to be		Average Exercise		for Future Issuance
	Issued upon		Price of		under Equity
	Exercise of		Outstanding		Compensation Plans
	Outstanding		Options,		(Excluding
	Options, Warrants		Warrants and		Securities Reflected
Plan Category	and Rights		Rights		in Column(a))
Equity compensation plans approved by security holders(1)		30,240,882	$	17.06		56,391,762
Equity compensation plans not approved by security holders(2)		37,492,191	$	12.56		19,362,028
Total		67,733,073	$	14.57		75,753,790

(1)  Equity compensation plans approved by security holders are the following:

      (i) The Employee Stock Purchase Plan, amended and restated (“US ESPP”), under which rights are granted to LSI Logic employees in the United States to purchase shares of common stock at 85% of the lesser of the fair market value of such shares at the beginning of a 12-month offering period or the end of each six-month purchase period within such an offering period. There are 14,796,431 shares remaining available for future issuance under this plan. The US ESPP includes an annual replenishment calculated at 1.15% of the Company’s common stock issued and outstanding at the fiscal year end less the number of shares available for future grants under the US ESPP. No shares have been added to the US ESPP from the annual replenishment since January 2001.

      (ii) The 2003 Equity Incentive Plan was approved by stockholders in May 2003. Under this plan, the Company may grant stock options or restricted stock to employees, officers and consultants. There are 10,172,141 shares remaining available for future issuance under this plan, including 595,334 shares reserved for restricted stock awards that have been granted, but will not be issued until the awards have vested. Stock options will have an exercise price that is no less than the fair market value of the stock on

26

the date of grant. The term of each option or restricted stock award is determined by the Board of Directors and for options grants on or after February 12, 2004, will generally be seven years. Options generally vest in annual increments of 25% per year commencing one year from the date of grant. Restricted stock awards may be granted with the vesting requirements determined by the Board of Directors.

      (iii) Under the 1991 Equity Incentive Plan the Company may grant stock options to employees, officers and consultants, with an exercise price that is no less than the fair market value of the stock on the date of grant. The term of each option is determined by the Board of Directors and has generally been ten years. For options granted on or after February 12, 2004, the term of the options will generally be seven years. Options generally vest in annual increments of 25% per year commencing one year from the date of grant. With respect to shares previously approved by stockholders, no incentive stock options may be granted under this plan after March 2001.

      (iv) Under the 1995 Director Option Plan new directors receive an initial grant of 30,000 options to purchase shares of common stock and directors receive subsequent automatic grants of 30,000 options to purchase shares of common stock each year thereafter. The initial grants vest in annual increments of 25% per year, commencing one year from the date of grant. Subsequent option grants become exercisable in full six months after the grant date. The term of each option is ten years. The exercise price of the options granted is equal to the fair market value of the stock on the date of grant.

(2)  Equity compensation plans not previously approved by security holders are the following:

      (i) An aggregate of 6,527,893 options with a weighted-average exercise price of $12.44 per share are outstanding that were assumed in acquisitions. No further options may be granted under these assumed plans.

      (ii) A total of 316,042 shares of common stock were reserved under the 2001 Supplemental Stock Issuance Plan, of which 14,830 shares remain available for future issuance. Shares of common stock may be issued under this plan pursuant to share right awards, which entitle the recipients to receive those shares upon the satisfaction of the following service requirements: 20% of the shares subject to an award will be issued upon completion of three months of continuous service measured from the award date, an additional 30% of the shares will be issued upon completion of 12 months of continuous service measured from the award date and the remaining 50% of the shares will be issued upon completion of 24 months of continuous service measured from the award date.

      (iii) Under the 1999 Nonstatutory Stock Option Plan the Company may grant stock options to its employees, excluding officers, with an exercise price that is no less than the fair market value of the stock on the date of grant. The term of each option is determined by the Board of Directors and has generally been ten years. For options granted on or after February 12, 2004, the term of the options will be seven years. Options generally vest in annual increments of 25% per year commencing one year from the date of grant.

      (iv) Under the International Employee Stock Purchase Plan rights are granted to LSI Logic employees (excluding executive officers) outside of the United States to purchase shares of common stock at 85% of the lesser of the fair market value of such shares at the beginning of a 12-month offering period or the end of each six-month purchase period within such an offering period. There are 1,565,180 shares remaining available for future issuance under this plan.

      On July 28, 2000, the Company’s Board of Directors authorized a stock repurchase program in which up to 5 million shares of the Company’s common stock may be repurchased in the open market from time to time. There is no expiration date for the plan. No shares were repurchased under this plan during 2004. There are 3.5 million shares available for repurchase under this plan as of December 31, 2004.

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Item 6. Selected Financial Data

Five-Year Consolidated Summary

			Year Ended December 31,
			2004			2003			2002			2001			2000
			(In thousands, except per share amounts)
Revenues			$	1,700,164		$	1,693,070		$	1,816,938		$	1,784,923		$	2,737,667
Cost of revenues				964,556			1,015,865			1,122,696			1,160,432			1,557,232
Additional excess inventory and related charges				—			—			45,526			210,564			11,100
		Total cost of revenues		964,556			1,015,865			1,168,222			1,370,996			1,568,332
Gross profit				735,608			677,205			648,716			413,927			1,169,335
Research and development				421,516			432,695			457,351			503,108			378,936
Selling, general and administrative				243,498			234,156			230,202			307,310			306,962
Acquired in-process research and development				—			—			2,920			96,600			77,438
Restructuring of operations and other items, net				423,444			180,597			67,136			219,639			2,781
Amortization of non-cash deferred stock compensation				8,449			26,021			77,303			104,627			41,113
Amortization of intangibles				75,050			76,352			78,617			188,251			72,648
(Loss)/ income from operations				(436,349	)		(272,616	)		(264,813	)		(1,005,608	)		289,457
Interest expense				(25,320	)		(30,703	)		(51,977	)		(44,578	)		(41,573	)
Interest income and other, net				17,066			18,933			26,386			14,529			51,766
Gain on sale of equity securities				5,104			—			—			5,302			80,100
(Loss)/ income before income taxes and minority interest				(439,499	)		(284,386	)		(290,404	)		(1,030,355	)		379,750
Provision for/ (benefit from) income taxes				24,000			24,000			1,750			(39,198	)		142,959
(Loss)/ income before minority interest				(463,499	)		(308,386	)		(292,154	)		(991,157	)		236,791
Minority interest in net income of subsidiary				32			161			286			798			191
Net (loss)/ income			$	(463,531	)	$	(308,547	)	$	(292,440	)	$	(991,955	)	$	236,600
Basic net (loss)/ income per share			$	(1.21	)	$	(0.82	)	$	(0.79	)	$	(2.84	)	$	0.76
Diluted net (loss)/ income per share			$	(1.21	)	$	(0.82	)	$	(0.79	)	$	(2.84	)	$	0.70
Year-end status:
	Total assets		$	2,874,001		$	3,447,901		$	4,012,736		$	4,525,077		$	4,092,762
	Long-term obligations		$	859,545		$	1,007,079		$	1,315,557		$	1,547,197		$	970,761
	Stockholders’ equity		$	1,618,046		$	2,042,450		$	2,300,355		$	2,479,885		$	2,498,137

      The Company’s fiscal years ended on December 31 for each of the years presented above. During 2004, the Company recorded $423 million in charges for restructuring of operations and other items, net. (See Note 3 of the Notes.)

      During 2003, the Company recorded $181 million in charges for restructuring of operations and other items, net. (See Note 3 of the Notes.) On January 1, 2003, the Company adopted SFAS No. 146,

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“Accounting for Exit or Disposal Activities.” SFAS No. 146 has been applied to restructuring activities initiated after December 31, 2002 and changes the timing of when restructuring charges are recorded to the date when the liabilities are incurred.

      During 2002, the Company recorded $46 million in additional excess inventory and related charges and $67 million in charges for restructuring of operations and other items, net. (See Notes 3 and 6 of the Notes.) The Company adopted SFAS No. 142 “Goodwill and Other Intangible Assets” on January 1, 2002, as a result of which goodwill is no longer amortized.

      During 2001, the Company recorded $211 million in additional excess inventory and related charges, a $97 million in-process research and development (“IPR&D”) charge associated with the acquisitions of C-Cube and AMI, which were effective on May 11, 2001 and August 31, 2001, respectively. In addition, the Company recorded charges of $220 million for restructuring of operations and other items, net.

      During 2000, the Company recorded a $77 million IPR&D charge associated with the acquisitions of ParaVoice, DataPath, IntraServer and the purchases of divisions of NeoMagic and Cacheware. The Company began recording amortization of non-cash deferred stock compensation as a result of the adoption of FASB interpretation (“FIN”) No. 44, “Accounting for Certain Transactions Involving Stock Compensation,” which was effective for acquisitions after July 1, 2000.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

      Statements in this discussion and analysis include forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements included in this discussion and analysis are based on information available to us on the date of filing of this Annual Report on Form 10-K, and we assume no obligation to update any such forward-looking statements. These statements involve known and unknown risks and uncertainties. Our actual results in future periods may be significantly different from any future performance suggested in this report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “intends,” “projects,” “predicts,” or similar expressions. For such statements, we claim the protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. For a detailed discussion of risk factors, refer to the “Risk Factors” section set forth in Part I, Item 1 of this Annual Report on Form  10-K, which is incorporated by reference into this Part II, Item 7.

      While management believes that the discussion and analysis in this report is adequate for a fair presentation of the information, we recommend that you read this discussion and analysis in conjunction with the remainder of this Annual Report on Form 10-K.

OVERVIEW

      We design, develop, manufacture and market complex, high-performance integrated circuits and storage systems. We operate in two segments — the Semiconductor segment and the Storage Systems segment. Within the Semiconductor segment, we offer three enabling system-on-a-chip technologies — standard-cell ASICs, Platform ASICs and application specific standard products that are focused on the consumer, communication and storage component markets. Within the Storage Systems segment we focus on high-performance modular disk storage systems, sub-assemblies and storage management software. Our products are marketed primarily to original equipment manufacturers (“OEMs”) that sell products targeted for applications in these markets.

      Our business is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. Our financial results are affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor and storage systems industries, the timely implementation of new technologies and the ability to safeguard inventions and other intellectual

29

property in a rapidly evolving market. In addition, the semiconductor and storage systems markets have historically been cyclical and subject to significant economic downturns at various times.

      We reported revenues of $1,700.2 million in 2004, a slight increase over $1,693.1 million in 2003. We reported a net loss for the year ended December 31, 2004 of $463.5 million or $1.21 loss per diluted share, largely as a result of $423 million in charges for restructuring of operations and other items, net recorded in the second half of the year. The charges were the result of our initiation of a comprehensive restructuring program, which included asset impairments, primarily related to our Gresham manufacturing facility, a global reduction in workforce and the consolidation of certain non-manufacturing leased facilities. The restructuring activities were triggered by the decline in revenues in the semiconductor industry and a corresponding decline in our outlook as of the latter part of the third quarter of 2004. For a complete discussion of our restructuring actions, see the “Restructuring of operations and other items, net” section later in this MD&A.

      We continued the build-out of the RapidChip® Platform ASIC infrastructure during 2004. Our customer base for RapidChip technology encompasses a range from small start-up companies to major system OEMs throughout all of our geographic markets. Markets for our RapidChip Platform ASIC solutions include communications, storage, consumer, industrial and others. Design wins and product shipments for RapidChip platform products increased during 2004 as compared to 2003.

      We generated $91 million and $190 million in cash from operations during 2004 and 2003, respectively. We reduced our long-term debt to $782 million as of December 31, 2004, through open-market purchases in 2004 of approximately $69 million of our 2001 Convertible Subordinated Notes due in 2006.

      Through the restructuring actions taken during 2004, we continued to improve our cost structure and align our resources to higher value opportunities. We have adopted a balanced manufacturing strategy in the Semiconductor segment, supplementing the capabilities of our Gresham manufacturing facility with strategic foundry engagements with partners in Taiwan, Japan, China and Malaysia. We expect revenue growth in 2005 to be driven by our strong technology and market share in products such as semiconductors used in DVD recorder products, Ultra320 SCSI controllers, SAS (Serial Attached SCSI), FibreChannel, RAID adapters, our RapidChip Platform ASICs, and modular-scalable storage systems.

      Separation of our Storage Systems business. On November 13, 2003, we announced our intention to separate our storage systems operations — Engenio Information Technologies, Inc. (“Engenio” or “Storage Systems segment”) and create an independent storage systems company. A more comprehensive discussion of the separation and related agreements is set forth in Note 13 of the Notes. On February 19, 2004, Engenio filed a registration statement on Form S-1 with the Securities and Exchange Commission for the initial public offering of its common stock. On July 29, 2004, LSI announced jointly with Engenio the postponement of the initial public offering of its common stock due to then current market conditions.

      Significant acquisitions and other major transactions. We are continually exploring strategic acquisitions that build upon our existing library of intellectual property, human capital, including engineering talent, and seeking to increase our leadership position in the markets in which we operate. All of our acquisitions in 2004 and 2002 were accounted for as purchases and accordingly, the estimated fair value of assets acquired and liabilities assumed and the results of operations were included in our Consolidated Financial Statements as of the effective date of each acquisition. The transactions are summarized below. There were no significant differences between our accounting policies and those of the companies acquired. (See Note 2 of the Notes.)

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2004

      We acquired Velio Communications, Inc. (“Velio”) during the first quarter of 2004 and Accerant Inc. (“Accerant”) during the second quarter of 2004. The transactions are summarized in the table below (in millions):

Fair Value of

Entity Name;

Tangible Net

Segment Included in;

Total

Assets/

Deferred

Description of Acquired

Acquisition

Purchase

Type of

(Liabilities)

Amortizable

Stock

Business

Date

Price

Consideration

Acquired

Goodwill

Intangible Assets

Compensation

Velio Communications, Inc.;

April 2, 2004

$

20.8

$19.8 cash; and

$

1.5

—

$

18.3

$

1.0

Semiconductor segment;

0.1 million

High-speed interconnect and

restricted common

switch fabric application

shares

specific standard products

Accerant, Inc.;

May 11, 2004

$

15.9

$14.1 cash; and

$

—

$

8.0

$

6.1

$

1.8

Semiconductor segment;

0.2 million

Consumer product

restricted common

applications

shares

2003

      There were no material acquisitions in 2003.

2002

      On August 29, 2002, we finalized an Asset Purchase Agreement with International Business Machines Corporation (“IBM”). Under the agreement, we acquired certain tangible and intangible assets associated with IBM’s Mylex business unit. This acquisition has enhanced product offerings in the expanding entry-level storage systems space within the Storage Systems segment and the PCI-RAID offering in the Semiconductor segment. The details of the acquisitions in 2002 are summarized below (in millions):

Entity Name or Type of

Fair Value

Technology;

of Tangible

Segment Included in;

Total

Net Assets/

Amortizable

In-Process

Description of Acquired

Purchase

Type of

(Liabilities)

Intangible

Research and

Deferred Stock

Business

Acquisition Date

price

Consideration

Acquired

Goodwill

Assets

Development

Compensation

Mylex Business Unit of

August 2002

$

50.5

Cash

$

14.1

$

20.5

$

14.0

$

1.9

$

—

IBM;

Entry-level storage

systems in the Storage

Systems and PCI-RAID

products in the

Semiconductor segment

Digital video product

November 2002

$

6.7

Cash

$

(0.2

)

$

2.9

$

1.8

$

1.0

$

1.2

technologies;

Semiconductor segment

      Stock option exchange program. On August 20, 2002, we filed with the Securities and Exchange Commission an offer to exchange stock options outstanding under the 1991 Equity Incentive Plan and the 1999 Nonstatutory Stock Option Plan for new options. Under the exchange offer, eligible employees had the opportunity to exchange eligible stock options for the promise to grant new options under the 1999 Nonstatutory Stock Option Plan. Our directors and executive officers were not eligible to participate in this program. The exchange offer expired on September 18, 2002, and we accepted options to purchase an aggregate of 16,546,370 shares for exchange. On March  20, 2003, we granted a new option that covered two shares of LSI Logic common stock for every three shares covered by an option that an employee had elected to exchange. The exercise price per share of the new options was equal to the fair market value of our common stock on the grant date. We granted options to purchase 10,691,139 shares at an exercise price of $5.06 per share. The exchange program did not result in the recording of any compensation expense in the statement of operations.

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      Where more than one significant factor contributed to changes in results from year to year, we have quantified such factors throughout the Management’s Discussion & Analysis (“MD&A”) where practicable and useful to the discussion.

RESULTS OF OPERATIONS

Revenues:

	Year Ended December 31,
	2004		2003		2002
	(In millions)
Semiconductor segment	$	1,248.6	$	1,269.7	$	1,481.4
Storage Systems segment		451.6		423.4		335.5
Consolidated	$	1,700.2	$	1,693.1	$	1,816.9

      There were no significant inter-segment revenues during the periods presented.

2004 compared to 2003

      Total consolidated revenues for 2004 increased $7.1 million or less than one percent as compared to 2003.

      Revenues for the Semiconductor segment decreased $21.1 million or 2% in 2004 as compared to 2003. The decrease in revenues in the Semiconductor segment is primarily attributable to a decrease in average selling prices and demand for semiconductors used in video game products, and a decrease in demand for semiconductors used in office automation products and enterprise switch products. These decreases were offset in part by the following:

•  Increases in demand for semiconductors used in storage product applications such as our Ultra320 SCSI and Ultra320 RAID products, as well as ASICs used in hard disk drives and host adapter boards. The Ultra320 product line was introduced in the latter part of 2003.

•  Increases in demand for semiconductors used in consumer product applications such as DVD-recorders. We introduced our DVD-recorder semiconductor product in the latter part of 2003 and early 2004.

•  Increases in demand for semiconductors used in communication product applications such as wireless solutions.

      Revenues for the Storage Systems segment increased $28.2 million or 7% in 2004 from 2003. The increase in revenues in the Storage Systems segment was primarily attributable to increased demand from IBM, StorageTek and the Teradata division of NCR for our entry-level controller products that were introduced in late April 2003 and increased demand for our other controller and disk enclosure related products. In addition to our introduction of the new entry-level controller product, we believe that the increased demand from our largest customers was driven by the trend toward purchasing modular storage systems, our increased focus on sales of our products to our channel customers, the economic rebound that began in the middle of 2003, increased spending on information technology by organizations and increased outsourcing by OEMs.

      We expect total consolidated revenues in the first quarter of 2005 to be within a range of $420 million to $435 million.

2003 compared to 2002

      Total consolidated revenues for 2003 decreased $123.8 million or 7% as compared to 2002. Revenues for the Semiconductor segment decreased $211.7 million or 14% in 2003 as compared to the previous year. The decline in revenues was primarily attributable to lower demand for our semiconductors sold into certain product applications such as set-top box, DVD playback, video games and applications for the wide-area-network (WAN) market. The above-noted declines in revenues were partially offset by growth in revenues

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from semiconductors used in product applications such as DVD recorders, Ultra320 SCSI and ASICs supplied to the disk-drive industry.

      Revenues for the Storage Systems segment increased $87.9 million or 26% in 2003 from 2002. The increase was due to a significant increase in sales to IBM, from $120.4 million in 2002 to $219.4 million in 2003. As a percentage of Storage Systems revenues, revenues from IBM increased to 52% in 2003 from 36% in 2002. The increase in revenues from IBM was primarily due to growth in demand for our high-performance controller products and an entry-level controller product introduced during the year, together with the enclosure products that are generally sold with these controllers. In addition, this increase was due to IBM’s purchases of products added to our product line pursuant to the acquisition of IBM’s Mylex business unit in August 2002. Growth in the demand for our premium software features also contributed to an increase in revenues. The growth in revenues for 2003 over 2002 was offset in part by a decrease in aggregate revenues of $10.8 million from StorageTek and the Teradata division of NCR. As a percentage of Storage Systems revenues, sales to these two customers decreased in 2003 as compared to 2002.

      Significant Customers. The following table summarizes the number of our significant customers, each of whom accounted for 10% or more of our revenues, along with the percentage of revenues they individually represent on a consolidated basis and by segment:

		Year Ended December 31,
		2004		2003		2002
Semiconductor segment:
	Number of significant customers		—		1		1
	Percentage of segment revenues		—		18%		22%
Storage Systems segment:
	Number of significant customers		3		3		3
	Percentage of segment revenues		54%, 14%, 12%		52%, 14%, 11%		36%, 20%, 15%
Consolidated:
	Number of significant customers		1		2		1
	Percentage of consolidated revenues		16%		15%, 13%		18%

      Revenues by geography. The following table summarizes our revenues by geography:

		Year Ended December 31,
		2004		2003		2002
		(In millions)
Revenues:
North America		$	852.5	$	863.6	$	905.3
Asia, including Japan			655.1		677.3		748.9
Europe			192.6		152.2		162.7
	Total	$	1,700.2	$	1,693.1	$	1,816.9

      Revenues by geography are accumulated based on the revenues generated by our subsidiaries located within the three geographic areas noted in the above table. In 2004, Engenio formed new subsidiaries within Europe. These subsidiaries recorded approximately $48 million in revenues. In prior years, all revenues generated by Engenio in Europe were reported in North America.

      In 2004, revenues decreased in North America and Asia, including Japan, while increasing in Europe as compared to 2003. The decrease in revenues in North America is primarily attributable to a decrease in revenues for modular storage products associated with Engenio as a result of the allocation of revenue to the newly formed subsidiaries in Europe, as discussed above, a decrease in demand for semiconductors used in storage and consumer product applications, such as cable and set-top-box solutions. The decrease in North America was offset in part by an increase in demand for semiconductors used in communication product applications such as routers, switches and wireless solutions. The decrease in revenues in Asia, including

33

Japan, is primarily due to decreased demand for semiconductors used in consumer product applications, such as video game products, and semiconductors used in communication product applications, such as office automation products and switches. The decrease in Asia, including Japan, was offset in part by an increase in demand for semiconductors used in consumer product applications, such as DVD-recorders, and semiconductors used in storage product applications, such as hard disk drives and our Ultra320 product line. The increase in Europe is a result of the allocation of revenue to the newly formed subsidiaries in Europe for Engenio as previously discussed, offset in part by decreased demand across all semiconductor product applications.

      In 2003, revenues declined in all geographic regions as compared to 2002. The decline in revenues in North America for 2003 was mainly due to the continued economic downturn in the United States. The decline in revenues in Asia, including Japan, in 2003 compared to 2002 is primarily attributable to lower demand for our semiconductors used in certain consumer product applications such as DVD playback and video games. The decline in revenues for Asia, including Japan, was partially offset by growth in revenues from semiconductors used in consumer product applications such as DVD recorders and semiconductors used in storage product applications such as Ultra320 SCSI and ASICs supplied to the disk-drive industry.

      Operating costs and expenses. Key elements of the consolidated statements of operations for the respective segments are as follows:

Gross profit margin:

		Year Ended December 31,
		2004		2003		2002
		(In millions)
Semiconductor segment		$	573.8	$	518.2	$	523.4
	Percentage of segment revenues		46%		41%		35%
Storage Systems segment		$	161.8	$	159.0	$	125.3
	Percentage of segment revenues		36%		38%		37%
Consolidated		$	735.6	$	677.2	$	648.7
	Percentage of revenues		43%		40%		36%

2004 compared to 2003

      The consolidated gross profit margin as a percentage of revenues increased to 43% in 2004 from 40% in 2003. The following factors contributed to the improvement in gross profit margins in 2004 as compared to 2003:

•  A favorable shift in the overall mix to products with higher margins, including the introduction of new products such as semiconductors used in consumer product applications such as DVD-recorders, and semiconductors used in storage product applications such as our Ultra320 product line and ASICs used in hard disk drives for the year ended December 31, 2004, as compared to the same period of 2003. The improvement was offset in part by higher sales of storage systems by Engenio, which typically have lower gross profit margins, and lower average selling prices for semiconductors used in video game products;

•  Lower manufacturing variances for the Gresham manufacturing facility associated with yield improvements and better factory utilization;

•  A reduction in cost of revenues as a result of the sale of our Japan manufacturing facility in the fourth quarter of 2003;

•  Lower period costs in 2004 as compared to 2003, as a result of the implementation of our 130 nanometer manufacturing process technology during 2003; and

•  A reduction in compensation-related costs and equipment-related depreciation and rent expense primarily as a result of the restructuring and lease refinancing initiatives during 2004.

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      Sales of previously reserved inventories were not significant compared to such inventory sales in 2003.

      The gross profit margin, as a percentage of revenues for the Semiconductor segment, increased to 46% in 2004 from 41% in 2003. The following factors contributed to the improvement in the Semiconductor segment’s gross profit margins in 2004 as compared to the prior year:

•  A favorable shift in the overall mix of products sold to products with higher margins, including the introduction of new products such as semiconductors used in consumer product applications such as DVD-recorders and semiconductors used in storage product applications such as our Ultra320 product line and ASICs used in hard disk drives, offset in part by lower average selling prices for semiconductors used in video game products for the year ended December 31, 2004, as compared to the same period of 2003;

•  Lower manufacturing variances for the Gresham manufacturing facility associated with yield improvements and better factory utilization;

•  A reduction in cost of revenues as a result of the sale of our Japan manufacturing facility in the fourth quarter of 2003;

•  Lower period costs in 2004 as compared to 2003, as a result of the implementation of our 130 nanometer manufacturing process technology during 2003; and

•  A reduction in compensation-related costs and equipment-related depreciation and rent expense primarily as a result of the restructuring actions and lease refinancing initiatives during 2004.

      Sales of previously reserved inventories were not significant compared to such inventory sales in 2003.

      The gross profit margin as a percentage of revenues for the Storage Systems segment decreased to 36% in 2004 from 38% in 2003 primarily as a result of an unfavorable shift in the mix of products sold. In 2004, we continued to see an increase, as a percentage of total Storage Systems revenues, in the sale of entry-level controller and related drive products, which have lower gross profit margins than other products offered within the Storage Systems segment.

2003 compared to 2002

      In September 2003, we entered into a definitive agreement to sell the Tsukuba, Japan facility to Rohm, a Japanese company. The sale closed during November 2003 for 2.82 billion Yen (approximately $25.8 million). See Note 3 of the Notes. With these actions, we completed the consolidation of our internal manufacturing into our Gresham, Oregon campus, supplemented by strategic foundry relationships from which we acquire wafers. Utilizing a diversity of manufacturing sources allows us to better manage our manufacturing needs, including investment in and access to world-class process technology.

      The consolidated gross profit margin as a percentage of revenues increased to 40% in 2003 from 36% in 2002. The following factors were primarily attributable to the improvement in gross profit margins in 2003 as compared to 2002:

•  Lower charges for obsolete and unmarketable inventories in 2003 as compared to 2002 in the Semiconductor segment;

•  Lower manufacturing variances associated primarily with yield improvements in 2003 related to our 0.18 –micron technology;

•  Lower compensation-related costs for manufacturing in the Semiconductor segment;

•  Higher sales of previously reserved inventory. In 2003, sales of previously reserved inventory improved gross profit margins by less than one percentage point as compared to sales of previously reserved inventory in 2002. The majority of this improvement in gross profit margin was in the Semiconductor segment;

•  A favorable change in product mix for the Semiconductor segment during 2003; and

35

•  A favorable change in product mix for the Storage Systems segment, offset by higher compensation related costs, due to headcount increases, and higher freight costs incurred during 2003.

      The gross profit margin as a percentage of revenues for the Semiconductor segment increased to 41% from 35%. The gross profit margin improved in 2003 as compared to 2002, even though Semiconductor segment revenues were lower in 2003 as compared to 2002. The following factors were primarily attributable to the improvement in the Semiconductor segment’s gross profit margins in 2003 as compared to 2002:

•  Lower charges for obsolete and unmarketable inventories in 2003 as compared to 2002;

•  Lower manufacturing variances associated primarily with yield improvements in 2003 related to our 0.18–micron technology;

•  Lower compensation-related costs for manufacturing;

•  A favorable change in product mix during 2003; and

•  Higher sales of previously reserved inventory. In 2003, sales of previously reserved inventory improved gross profit margins by less than one percentage point as compared to sales of previously reserved inventory in 2002.

      The gross profit margin as a percentage of revenues for the Storage Systems segment increased to 38% in 2003 from 37% in 2002. The slight increase in gross profit margin as a percentage of revenues was primarily a function of the mix of products sold. Offsetting this increase were higher compensation-related costs for manufacturing, due to headcount increases, and higher freight costs incurred during 2003.

Research and development:

			Year Ended December 31,
			2004		2003		2002
			(In millions)
Semiconductor segment			$	362.5	$	386.9	$	421.3
		Percentage of segment revenues		29%		30%		28%
Storage Systems segment			$	59.0	$	45.8	$	36.1
	Percentage of segment revenues			13%		11%		11%
Consolidated			$	421.5	$	432.7	$	457.4
	Percentage of revenues			25%		26%		25%

2004 compared to 2003

      Research and development (“R&D”) expenses, on a consolidated basis, decreased $11.2 million or 3% during 2004 as compared to 2003.

      R&D expenses for the Semiconductor segment decreased $24.4 million or 6% in 2004 as compared to 2003. The decrease is primarily a result of benefits from the cost-cutting measures implemented as part of the restructuring actions in 2003 and 2004 (see Note 3 of the Notes) including lower compensation-related costs and benefits from the consolidation of our non-manufacturing facilities. In addition, we had lower equipment-related costs as a result of entering into two equipment operating leases to replace two existing operating leases for the same equipment in the third quarter of 2004, the buyout and write-down of the purchased equipment from the new operating leases in the fourth quarter of 2004, and certain assets becoming fully depreciated during 2004.

      We develop advanced sub-micron product technologies. We continued the build-out of the RapidChip Platform ASIC infrastructure in 2004. Products utilizing RapidChip technology combine the high-density, high-performance and proven intellectual property benefits of cell-based ASICs with the advantages of lower development costs and faster time to market. We expect products utilizing RapidChip technology to have performance comparable to cell-based ASICs at a cost significantly lower than Field Programmable Gate

36

Arrays (“FPGAs”). Markets for our RapidChip Platform ASIC solutions include communications, storage, consumer, industrial and others. Our customer base for RapidChip technology encompasses a range from small start-up companies to major system OEMs throughout all of our geographic markets. Design wins and product shipments for RapidChip platform products increased during 2004 as compared to 2003.

      R&D expenses for the Storage Systems segment consist primarily of employee salaries and materials used in product development, as well as deprecation of capital equipment and facilities. In addition to the significant resources required to support hardware technology transitions, we devote significant resources to developing and enhancing software features and functionality to remain competitive. R&D expenses for the Storage Systems segment increased by $13.2 million or 29% in 2004 as compared to 2003. This is primarily a result of increased compensation costs due to higher headcount, higher expenses for outside service providers related to development programs and higher depreciation expense related to assets purchased for product development.

2003 compared to 2002

      R&D expenses, on a consolidated basis, decreased $24.7 million or 5% during 2003 as compared to 2002.

      R&D expenses for the Semiconductor segment decreased $34.4 million or 8% in 2003 as compared to 2002. The decrease in R&D expenses for the Semiconductor segment is primarily due to benefits from the cost-cutting measures implemented as part of the restructuring actions of 2001 to 2003 (see Note 3 of the Notes). The decrease was offset in part because the technology transfer agreement entered into with Silterra during 1999 ended in 2002, which included a benefit of $8 million for 2002. We continued the build-out of the current generation RapidChip platform infrastructure in 2003. We shipped our first RapidChip platform products in the fourth quarter of 2003. R&D expenses for the Semiconductor segment increased to 30% of revenues in 2003 from 28% in 2002.

      R&D expenses for the Storage Systems segment increased by $9.7 million or 27% in 2003 as compared to 2002. The increase primarily resulted from our strategy to invest in R&D programs to enhance the features, functionality and performance of our existing products and to add new products to our portfolio. In particular, we incurred additional R&D expenses in 2003 as a result of hiring 91 additional R&D employees in connection with our August 2002 acquisition of IBM’s Mylex business unit. R&D expenses as a percentage of revenues for the Storage Systems segment remained unchanged at 11% in 2003 and 2002.

Selling, general and administrative:

		Year Ended December 31,
		2004		2003		2002
		(In millions)
Semiconductor segment		$	168.7	$	171.8	$	181.2
	Percentage of segment revenues		14%		14%		12%
Storage Systems segment		$	74.8	$	62.4	$	49.0
	Percentage of segment revenues		17%		15%		15%
Consolidated		$	243.5	$	234.2	$	230.2
	Percentage of revenues		14%		14%		13%

2004 compared to 2003

      Consolidated selling, general and administrative (“SG&A”) expenses increased $9.3 million or 4% during 2004 as compared to 2003.

      SG&A expenses for the Semiconductor segment decreased $3.1 million or 2% in 2004 as compared to 2003. The decrease is primarily a result of benefits from the cost-cutting measures implemented as part of the restructuring actions in 2003 and 2004 (see Note 3 of the Notes) including lower compensation related costs, benefits from the consolidation of our non-manufacturing facilities and other cost savings.

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      SG&A expenses for the Storage Systems segment increased $12.4 million or 20% in 2004 as compared to 2003. On July 29, 2004, we announced jointly with Engenio the postponement of the initial public offering of its common stock due to then current market conditions. The increase in SG&A expenses in the Storage Systems segment is primarily due to higher compensation-related costs mainly as a result of employees hired in anticipation of the proposed initial public offering; higher legal, accounting and other professional fees in preparation for the proposed initial public offering; and $3.5 million of expenses associated with the proposed initial public offering, which includes fees for professional services that were directly and solely related to the initial public offering.

2003 compared to 2002

      Consolidated SG&A expenses increased $4.0 million or 2% during 2003 as compared to 2002.

      SG&A expenses for the Semiconductor segment decreased $9.4 million or 5% in 2003 as compared to 2002. The decrease for the Semiconductor segment was primarily attributable to the various cost reduction measures implemented from 2001 to 2003 (see Note 3 of the Notes) offset in part by a slight increase in compensation-related costs. For the Semiconductor segment, SG&A expenses as a percentage of revenues increased to 14% in 2003 from 12% in 2002. This is primarily a function of lower semiconductor segment revenues, offset in part by lower SG&A expenses.

      SG&A expenses for the Storage Systems segment increased $13.4 million or 27% in 2003 as compared to 2002. The increase is primarily a result of spending increases on sales and related activities to support existing channel customers and develop new channel customers. In addition, higher revenues resulted in higher selling commissions. For the Storage Systems segment, SG&A expenses as a percentage of revenues remained unchanged at 15% in 2003 as compared to 2002.

Acquired in-process research and development:

      There were no acquired in-process research and development (“IPR&D”) expenses in 2004 and 2003. We recorded a charge of $2.9 million for the year ended December 31, 2002 associated with IPR&D primarily in connection with an acquisition as summarized in the table below:

	Acquisition							Revenue Projections
Company	Date		IPR&D		Discount Rate			Extend Through
	(Dollar amounts in millions)
Mylex unit of IBM		August 2002	$	1.9		25	%		2006

      Mylex unit of IBM. On August 29, 2002, we finalized an Asset Purchase Agreement with IBM. Under the agreement, we acquired certain tangible and intangible assets associated with IBM’s Mylex business unit. The acquisition has enhanced product offerings in the expanding entry-level storage systems space within the Storage Systems segment and the PCI-RAID offering in the Semiconductor segment. As of the acquisition date, there were several projects in process. Development of storage systems hardware technology started in 2000, while development of firmware and subsystems components technology started in 2002. As of August 29, 2002, we estimated that the projects were from 10% to 50% complete. As of the acquisition date, the cost to complete these projects was estimated at $4.6 million in 2002 and $2.6 million in 2003. As of December 31, 2003, the projects were completed. For additional information regarding the methodology used in determining IPR&D, see Note 2 of the Notes.

Restructuring of operations and other items, net:

2004

      We recorded net charges of $423.4 million in restructuring of operations and other items for the year ended December 31, 2004, consisting of $433.5 million in charges for restructuring of operations and impairment of long-lived assets and a gain of $10.1 million for other items. Of these charges, $420.2 million was recorded in the Semiconductor segment and $3.2 million was included in the Storage Systems segment. In 2005, we expect to realize savings of approximately $80 million as a result of these restructuring actions.

38

Restructuring and impairment of long-lived assets:

First quarter of 2004:

      We recorded a gain of $3.3 million on the sale of fixed assets that had previously been held for sale and an expense of $1.1 million for the abandonment of fixed assets that had previously been held for sale. In addition, an expense of $1.1 million was recorded for the write-down of fixed assets due to impairment.

      An expense of $0.3 million was recorded to reflect the change in time value of accruals for facility lease termination costs, net of adjustments for changes in sublease assumptions for certain previously accrued facility lease termination costs. An expense of $0.2 million was recorded primarily for severance and termination benefits for four employees involved in research and development.

Second quarter of 2004:

      We recorded a gain of $1.0 million on the sale of fixed assets that had previously been held for sale and an expense of $4.0 million primarily for the write-down of the Colorado Springs fabrication facility to reflect a decline in fair market value and to write down certain spare parts for fixed assets.

      An expense of $0.4 million was recorded to reflect the change in time value of accruals for facility lease termination costs, net of adjustments for changes in sublease assumptions for certain previously accrued facility lease termination costs. Previously accrued contract termination fees of $0.4 million were reversed as the result of favorable than expected negotiations to terminate those contracts.

Third quarter of 2004:

      As a result of the decline in revenues in the semiconductor industry and a corresponding decline in our outlook as of the latter part of the third quarter of 2004, we initiated a comprehensive restructuring program, which included asset impairments, a global reduction in workforce and the consolidation of certain facilities as described further below.

      We concluded in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” that the Gresham manufacturing facility assets were impaired. Accordingly, an asset write down of $205.5 million was recorded in the semiconductor segment during the third quarter of 2004. The fair values of impaired equipment and facilities were researched and estimated by management.

      We announced workforce reductions of approximately 560 positions worldwide across all job functions and recorded a charge of $14.6 million in the Semiconductor segment for severance and termination benefits.

      We recorded a gain of $1.9 million on the sale of fixed assets that had previously been held for sale and an expense of $3.4 million for the write-down of the Colorado Springs fabrication facility to reflect a decline in fair market value, the impairment of certain acquired intangible assets in the Semiconductor segment and the write down of leasehold improvements related to the facility operating leases discussed below.

      In the third quarter of 2004, we consolidated additional non-manufacturing facilities and recorded $6.1 million for costs associated with exiting certain operating leases for real estate as the facilities ceased being used. An expense of $0.4 million was recorded to reflect the change in time value of prior accruals for facility lease termination costs. In addition, an expense of $1.8 million was recorded for changes in sublease assumptions for certain previously accrued facility lease termination costs.

Fourth quarter of 2004:

      In November 2004, we exercised our right to purchase all of the wafer fabrication equipment that had previously been under two operating lease and security agreements. The purchase amount was $332 million. Cash collateral of $311 million associated with the leases was returned to us. Termination fees under the lease agreements were not significant. The formerly leased equipment is part of the Gresham manufacturing facility, but was not impaired in the third quarter of 2004, because we did not own the equipment until November of 2004, as discussed above. Accordingly, in the fourth quarter of 2004, after purchasing the previously leased

39

equipment, we recorded an additional impairment charge of $177.7 million in restructuring of operations and other items within the Semiconductor segment. The charge includes a write-down of $247.7 million to reflect the equipment at fair value, the reversal of a $56.0 million deferred gain previously recorded in non-current liabilities related to the sale-leaseback of equipment during 2003, lease termination fees and the write-off of capitalized lease fees and deferred rent. The fair values of the impaired equipment were researched and estimated by management.

      In the Semiconductor segment, we recorded a gain of $0.6 million on the sale of fixed assets that had previously been held for sale; an expense of $11.4 million for the write-down of the Colorado Springs fabrication facility to reflect a decline in fair market value; and an expense of $0.3 million for the write-down of leasehold improvements related to the facility operating leases discussed below and other fixed assets.

      During the third quarter of 2004, we reclassified a parcel of land in Japan with a book value of $1.4 million from a long-term asset to a current asset held for sale. The land was part of the total assets in the Semiconductor segment. The land was sold in the fourth quarter of 2004 and a gain of $0.2 million was recorded.

      As part of the restructuring program initiated in the third quarter, we decided to discontinue development of a product line in the Semiconductor segment that had been acquired in connection with the Datapath acquisition in 2000. As a result, we performed an analysis of the future net cash flows related to the affected product line and determined that certain acquired intangible assets were impaired. An impairment charge of $4.7 million for the write-down of the acquired intangible assets to fair market value was recorded in the Semiconductor segment.

      In the fourth quarter of 2004, we consolidated additional non-manufacturing facilities and recorded $1.9 million for costs associated with exiting certain operating leases for real estate as the facilities ceased being used. An expense of $0.5 million was recorded to reflect the change in time value of accruals for facility lease termination costs. Previously accrued lease termination fees of $0.3 million were reversed as the result of favorable negotiations to terminate those contracts.

      We recorded $2.5 million for additional severance and termination benefits in the Semiconductor segment related to the workforce reductions described in the third quarter of 2004 above, primarily in Europe and the United States due to changes in estimates.

      In our Storage Systems segment, during the fourth quarter, we initiated realignment of our product portfolio and overhead cost structures driven by the future operating and financial performance goals of the Storage Systems segment. In connection with this action we recorded a $1.5 million charge for severance and termination benefits for 70 employees across multiple activities and functions. In addition, we recorded a charge of $1.7 million for the write-off of previously capitalized software development costs. We cancelled the related project based upon our determination that this project would not achieve the desired future financial performance goals.

      The fair values of impaired equipment and facilities were researched and estimated by management. Given that current market conditions for the sale of older fabrication facilities and related equipment may fluctuate due to demand for used semiconductor equipment, there can be no assurance that we will realize the current net carrying value of the assets held for sale. We reassess the realizability of the carrying value of these assets at the end of each quarter until the assets are sold or otherwise disposed of and additional adjustments may be necessary. Assets held for sale of $11 million and $30 million were included as a component of prepaid expenses and other current assets as of December 31, 2004 and 2003, respectively. Assets classified as held for sale are not depreciated. We are making appropriate efforts to sell assets held for sale within the next twelve months.

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      The following table sets forth our restructuring reserves as of December 31, 2004, which are included in other accrued liabilities on the balance sheet:

		Balance at		Restructuring		Release of			Utilized			Balance at
		December 31,		Expense		Reserve			During			December 31,
		2003		2004		2004			2004			2004
		(In thousands)
Write-down of excess assets and decommissioning costs(a)		$	2,661	$	404,723	$	(760	)	$	(405,417	)	$	1,207
Lease terminations and maintenance contracts(b)			21,021		11,388		(665	)		(11,679	)		20,065
Facility closure and other exit costs(c)			2,136		64		—			(1,657	)		543
Payments to employees for severance(d)			874		18,812		(18	)		(12,260	)		7,408
	Total	$	26,692	$	434,987	$	(1,443	)	$	(431,013	)	$	29,223

(a)  The amounts utilized in 2004 reflect $411.6 million of non-cash write-downs of long-lived assets in the U.S. due to impairment and $0.8 million in cash payments to decommission and sell assets, offset by a $7.0 million realized gain on the sale of fixed assets previously held for sale. The write-downs of long-lived assets were accounted for as a reduction of the assets and did not result in a liability. The $1.2 million balance as of December 31, 2004, relates to machinery and equipment decommissioning costs in the U.S. and estimates of selling costs for assets held for sale that is expected to be utilized during 2005.

(b)	Amounts utilized represent cash payments. The balance remaining for primarily real estate lease terminations will be paid during the remaining terms of these contracts, which extend through 2011.
(c)	Amounts utilized represent cash payments. The balance remaining for facility closure and other exit costs is expected to be paid during 2005.
(d)	Amounts utilized represent cash severance payments to 495 employees during the year ended December 31, 2004. The balance remaining for severance benefits is expected to be paid by the end of 2005.

Other Items:

      During the second quarter of 2004, we reclassified a parcel of land in Colorado with a book value of $1.4 million from a long-term asset to a current asset held for sale. The land is part of total assets in the Semiconductor segment. We expect to sell the property within the next 12 months for an amount in excess of book value.

      During the third quarter of 2004, we entered into two new lease agreements for wafer fabrication equipment. The equipment was previously on lease immediately prior to the closing of the new lease agreements. The Company had capitalized and was amortizing fees related to the previous leases. Upon entering into the new lease agreements, $2.5 million in remaining unamortized fees for the previous leases were recorded as an expense in the statement of operations.

      During the third quarter of 2004, we discontinued hedge accounting treatment on the interest rate swap related to the equipment operating leases that were refinanced and recorded the $3.8 million balance in accumulated comprehensive income as a gain in the statement of operations (see Note 8 of the Notes).

      During the fourth quarter of 2004, we released $8.8 million in accruals that were established in years prior to 2004, because management determined that the accruals were no longer necessary.

2003

      We recorded net charges of $180.6 million in restructuring of operations and other items for the year ended December 31, 2003 consisting of $182.8 million in charges for restructuring of operations and a gain of $2.2 million for other items. Of these charges, $165.7 million was recorded in the Semiconductor segment and $14.9 million was included in the Storage Systems segment.

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Restructuring and impairment of long-lived assets:

      On January 1, 2003, we adopted SFAS No. 146, “Accounting for Exit or Disposal Activities.” SFAS No. 146 has been applied to restructuring activities initiated after December 31, 2002 and changes the timing of when restructuring charges are recorded to the date when the liabilities are incurred.

First quarter of 2003:

      In February 2003, we downsized operations and recorded $35.7 million in charges for restructuring of operations and other items. Of this charge, $21.1 million was associated with the Semiconductor segment and $14.6 million was attributable to the Storage Systems segment. The charges consisted of severance and termination benefits of $4.5 million for 210 employees involved in manufacturing operations, R&D and SG&A; $1.4 million for costs associated with exiting certain operating leases primarily for real estate; and write-downs of $24.1 million for certain acquired intangible assets, $3.5 million for capitalized software and $2.2 million for fixed assets. During the year ended December 31, 2003, payments related to the February 2003 restructuring actions consisted of approximately $4.4 million for severance and termination benefits and $0.6 million for lease and contract terminations.

Second quarter of 2003:

      In April 2003, we announced a restructuring of our operations that included a reduction in workforce and the consolidation of certain non-manufacturing facilities. A charge of $32.4 million was recorded in the Semiconductor segment consisting of severance and termination benefits of $9.1 million for 325 employees involved in manufacturing operations, research and development, marketing, sales and administration; $18.6 million for costs associated with exiting certain operating leases primarily for real estate; other exit costs of $0.2 million; and a write-down of $4.5 million for fixed assets due to impairment. During the year ended December 31, 2003, payments related to the April 2003 restructuring actions consisted of approximately $9.0 million for severance and termination benefits, $2.6 million for lease and contract terminations and $0.1 million for other exit costs.

      In June 2003, we announced the decision to sell the Tsukuba, Japan manufacturing facility. During the second quarter, a charge of $72.9 million was recorded in the Semiconductor segment to write-down fixed assets to their fair market value. The fair value was reclassified from property, plant and equipment to other current assets to reflect the intention to dispose of the facility within the next twelve months. In addition, approximately $2.0 million in restructuring charges were recorded in the second quarter for severance and other exit costs. See further discussion in the third quarter below.

      In June 2003, we also recorded $19.4 million of additional fixed asset write-downs to reflect the decrease in fair market value of assets held for sale during the period. This write-down included a reduction in the value of the Colorado Springs fabrication facility of $16.4 million to reflect continued and accelerated efforts to sell the facility.

Third quarter of 2003:

Agreement to sell Japan fabrication facility:

      In September 2003, we entered into a definitive agreement to sell the Tsukuba, Japan manufacturing facility to Rohm, a Japanese company. The sale closed during November 2003 for 2.82 billion Yen (approximately $25.8 million). As part of the definitive agreement, we agreed to purchase a minimum amount of production wafers from Rohm for a period of 15 months following the close of the transaction. As a result, a charge of $4.3 million was recorded in cost of revenues during the third quarter of 2003. This charge is a result of the application of our policy to accrue for non-cancelable inventory purchase commitments in excess of 12 months of estimated demand. Included in the $4.3 million charge to cost of revenues is a reclassification of $3.0 million from restructuring expense originally recorded in the second quarter of 2003 to better reflect the terms of the definitive agreement. Also in the quarter, $1.8 million was recorded for additional severance benefits to be paid and for contract termination and other exit costs associated with the definitive agreement.

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During the year ended December 31, 2003, payments related to the Japan restructuring actions consisted of approximately $1.3 million for severance and termination benefits and $0.2 million for lease and contract terminations.

Other third quarter 2003 restructuring actions:

      In the third quarter of 2003, we continued to consolidate non-manufacturing facilities and recorded $1.5 million for costs associated with exiting certain operating leases for real estate as the facilities ceased being used.

      In September 2003, we decided to discontinue development programs and to refocus sales and marketing efforts for certain product lines in the Semiconductor segment. As a result of an analysis of future net cash flows related to the affected product lines, it was determined that certain acquired intangible assets were impaired. An impairment charge of $21.0 million related to the write-down of the acquired intangible assets to fair market value was recorded in the third quarter of 2003. These intangible assets were originally acquired in connection with the acquisition of C-Cube Microsystems in the second quarter of 2001. In addition, $3.2 million in restructuring charges were recorded in the third quarter of 2003. These charges related to severance and termination benefits for 97 employees primarily involved in research and development and for certain contract termination costs and fixed asset write-downs due to impairment. The severance benefits were paid during the third quarter of 2003.

Fourth quarter of 2003:

      In the fourth quarter of 2003, we reversed approximately $2.2 million of previously accrued restructuring expenses. The reversal was primarily due to the combination of a favorable negotiation to terminate leases for real property and severance payments that were lower than expected due to the timing of the sale of the Japan manufacturing facility to Rohm. An expense of $1.6 million was recorded primarily to reflect the change in time value of accruals for facility lease termination costs and the write-down of fixed assets due to impairment. Certain other reclassifications were made between asset decommissioning costs and other facility closure costs to reflect changes in management estimates for the remaining costs for these activities.

      In December 2003, we recorded $1.6 million of additional fixed asset write-downs to reflect the decrease in fair market value of assets held for sale during the period. We also recorded a realized gain of $5.1 million on the sale of fixed assets that had been previously held for sale.

      The following table sets forth our restructuring reserves as of December 31, 2003, which are included in other accrued liabilities on the balance sheet:

		Balance at		Restructuring		Release of			Utilized			Balance at
		December 31,		Expense		Reserve and			During			December 31,
		2002		2003		Reclassifications			2003			2003
		(In thousands)
Write-down of excess assets and decommissioning costs(a)		$	6,008	$	147,454	$	(6,422	)	$	(144,379	)	$	2,661
Lease terminations and maintenance contracts(b)			6,757		23,444		(1,146	)		(8,034	)		21,021
Facility closure and other exit costs(c)			8,129		1,072		1,203			(8,268	)		2,136
Payments to employees for severance(d)			1,391		18,095		(928	)		(17,684	)		874
	Total	$	22,285	$	190,065	$	(7,293	)	$	(178,365	)	$	26,692

(a)  The amounts utilized in 2003 reflect $142.4 million of non-cash write-downs of amortizable intangible and other long-lived assets in the U.S and Japan due to impairment, and $2.0 million in cash payments to decommission and sell assets. The write-downs of the intangible and other long-lived assets were accounted for as a reduction of the assets and did not result in a liability. The $2.7 million balance as of

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December 31, 2003, relates to machinery and equipment decommissioning costs in the U.S and estimates of selling costs for assets held for sale.

(b)	Amounts utilized represent cash payments. The balance remaining for primarily real estate lease terminations and maintenance contracts will be paid during the remaining terms of these contracts, which extend through 2011.
(c)	Amounts utilized represent cash payments.
(d)	Amounts utilized represent cash severance payments to 777 employees during 2003. The $0.9 million balance as of December 31, 2003 was paid during 2004.

Other items:

      A gain of approximately $2.2 million was recorded in restructuring and other items, net during the second quarter of 2003 associated with additional sales of intellectual property associated with the CDMA handset product technology.

2002

      We recorded approximately $67.1 million in restructuring of operations and other items for the year ended December 31, 2002, consisting of $75.2 million for restructuring of operations, and a gain of $8.1 million for other items, including the gain on sale of CDMA handset product technology. Restructuring of operations and other items were primarily included in the Semiconductor segment; the restructuring expense included in the Storage Systems segment was not significant.

Restructuring and impairment of long-lived assets:

      In the first quarter of 2002, we announced a set of actions to reduce costs and streamline operations. These actions included a worldwide reduction in workforce, downsizing our manufacturing operations in Tsukuba, Japan, and the decision to exit CDMA handset product technology. During the three months ended March 31, 2002, we recorded a restructuring charge for severance for 1,150 employees worldwide and exit costs primarily associated with cancelled contracts and operating leases. As a result of the restructuring actions, we recorded fixed asset write-downs due to impairment in the U.S. and Japan for assets to be disposed of by sale. In the second quarter of 2002, we completed the sale of CDMA handset product technology to a third party, recognizing a net gain of $6.4 million.

      During the fourth quarter of 2002, we reversed approximately $5 million of previously accrued restructuring expenses. As a result of our decision to terminate fewer employees than the original plan contemplated in Tsukuba, Japan, we reversed previously accrued restructuring expenses for termination benefits, including outplacement costs and certain contract termination fees of $7 million. This was offset by additional expense accruals of $2 million for costs related to the previously announced closure of the Colorado Springs fabrication facility. Certain other reclassifications were made between lease and contract terminations and facility closure and other exit costs to reflect changes in management estimates for the remaining costs for these activities.

      In September 2002, we recorded $13 million of additional fixed asset write-downs to reflect the decrease in the fair market value of the assets during the period.

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      The following table sets forth our restructuring reserves as of December 31, 2002, which are included in other accrued liabilities on the balance sheet:

		Balance at		Restructuring		Release of			Utilized			Balance at
		December 31,		Expense		Reserve and			During			December 31,
		2001		2002		Reclassifications			2002			2002
		(In thousands)
Write-down of excess assets and decommissioning costs(a)		$	3,762	$	38,918	$	5,147		$	(41,819	)	$	6,008
Lease terminations and maintenance contracts(c)			10,695		12,871		(10,559	)		(6,250	)		6,757
Facility closure and other exit costs(c)			14,153		415		4,058			(10,497	)		8,129
Payments to employees for severance(b)			724		27,490		(3,150	)		(23,673	)		1,391
	Total	$	29,334	$	79,694	$	(4,504	)	$	(82,239	)	$	22,285

(a)  Amounts utilized in 2002 reflect a non-cash write-down of fixed assets in the U.S. and Japan due to impairment of $38.3 million and cash payments for machinery and equipment decommissioning costs of $3.5 million. The fixed asset write-downs were accounted for as a reduction of the assets and did not result in a liability. The $6.0 million balance as of December 31, 2002 relates to machinery and equipment decommissioning costs in the U.S and selling costs for assets held for sale.

(b)	Amounts utilized represent cash severance payments to 1,290 employees during the year ended December 31, 2002. The $1.4 million balance as of December 31, 2002 was paid during 2003.
(c)	Amounts utilized represent cash payments.

Other items:

      We recorded a net gain of $1.7 million in other items during the first quarter of 2002, which consisted of a nonrefundable deposit paid to us in the first quarter of 2002 related to the termination of the agreement to sell the Colorado Springs fabrication facility during 2001, offset in part by certain costs associated with maintaining CDMA handset product technology held for sale.

Amortization of non-cash deferred stock compensation:

      Amortization of non-cash deferred stock compensation of $8.4 million, $26.0 million and $77.3 million was recorded in 2004, 2003 and 2002, respectively. The acquisitions for which deferred stock compensation and related amortization were recorded consisted primarily of the Accerant transaction in the second quarter of 2004; the Velio transaction in the first quarter of 2004 (see Note 2 of the Notes for both acquisitions); an acquisition in the fourth quarter of 2002; the acquisition of C-Cube, and the RAID business from AMI in 2001; and the acquisition of DataPath in 2000. No deferred stock compensation was recorded in connection with the acquisition of the Mylex business unit in 2002. We also recorded non-cash deferred stock compensation for restricted common shares issued to our employees, Engenio employees and the non-employee directors of Engenio during 2004. We amortize deferred stock compensation ratably over the related vesting periods. Deferred stock compensation is adjusted to reflect the forfeitures prior to vesting. At December 31, 2004, the deferred stock compensation that remained was $8.9 million, which is expected to be amortized over the next four years.

Amortization of intangibles:

      Amortization of intangibles decreased to $75.1 million in 2004 from $76.4 million in 2003. The decrease is due in part to the write-down of intangible assets during 2003, as discussed below. In addition, during the fourth quarter of 2004, we recorded a charge in restructuring and other items to write-down $4.7 million of intangible assets originally acquired in connection with the acquisition of Datapath, which was added to our

45

Semiconductor segment during 2000. Certain intangible assets became fully amortized during 2004. These decreases were offset in part by amortization of intangible assets acquired in the first and second quarters of 2004. As of December 31, 2004, we had $108.5 million of intangible assets, net of accumulated amortization that will continue to amortize.

      Amortization of intangibles decreased to $76.4 million in 2003 from $78.6 million in 2002. Amortization decreased during 2003 as a result of the write-down in the first quarter of $15.1 million of intangible assets in the Semiconductor segment and $9.0 million of intangible assets in the Storage Systems segment. In the third quarter of 2003 we wrote down an additional $21.0 million of intangible assets originally acquired in connection with the acquisition of C-Cube Microsystems, which was added to our Semiconductor segment in the second quarter of 2001. The charges were recorded in restructuring and other items, net in 2003. See Note 3 of the Notes. These decreases were offset in part by a full year of amortization for intangible assets acquired during the third and fourth quarters of 2002.

Interest expense:

      With the objective of protecting our cash flows and earnings from the impact of fluctuations in interest rates, while minimizing the cost of capital, we may enter into or terminate interest rate swaps. In June 2002, we entered into interest rate swaps (“the Swaps”) with various investment banks. The Swaps effectively converted fixed interest payments on a portion of our Convertible Subordinated Notes (“Convertible Notes”) to LIBOR-based floating rates. The Swaps qualified for hedge accounting treatment. (See Note 8 of the Notes.) During the second quarter of 2003, we terminated the Swaps, resulting in a deferred gain of $44.1 million that is being amortized as a benefit to interest expense over the remaining term of the hedged Convertible Notes. A portion of the deferred gain was written off as part of the net gain or loss on the repurchase/redemption of the hedged Convertible Notes during 2003 and 2004. As of December 31, 2004, a deferred gain of $10.3 million was recorded as a component of the Convertible Notes.

      Interest expense decreased by $5.4 million to $25.3 million in 2004 from $30.7 million in 2003. The decrease is due to the repurchase/redemption of $710.0 million of Convertible Notes during 2003, an additional repurchase of $68.5 million in the third quarter of 2004 and changes in the benefit received from the Swaps prior to termination and the benefit from the amortization of the deferred gain after termination of the Swaps, offset by the issuance of $350.0 million of Convertible Notes during the second quarter of 2003 (see Note 9 of the Notes).

      Our interest expense continued to be below the stated coupon rate of approximately 4% as a result of the Swaps on the Convertible Notes entered into in the second quarter of 2002.

      Interest expense decreased by $21.3 million to $30.7 million in 2003 from $52.0 million in 2002. The decrease is due to the repurchase/redemption of $710.0 million of Convertible Notes during 2003 and $135.0 million during 2002. The decrease from the repurchases and redemptions was partly offset by interest expense on the $350 million of 4% Convertible Notes issued on May 12, 2003 (see Note 9 of the Notes).

Interest income and other, net:

      Interest income and other, net, was $22.2 million in 2004 as compared to $18.9 million in 2003. Interest income decreased by $9.6 million to $18.7 million in 2004 from $28.3 million in 2003. The decrease in interest income is mainly due to lower returns on our short-term investments during the year ended December 31, 2004 as compared to the same period of 2003.

      Other income, net of $3.5 million in 2004 included the following:

•  A pre-tax gain of $3.0 million associated with our investment in marketable available-for-sale equity securities of a certain technology company that was acquired by another publicly traded technology company;

•  A pre-tax gain of $5.1 million on sales of certain marketable available-for-sale equity securities;

•  A pre-tax gain of $1.8 million on repurchase of 2001 Convertible Notes (see Note 9 of the Notes);

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•  A pre-tax loss of $6.2 million on impairment of our investment in certain marketable and non-marketable available-for-sale equity securities and other miscellaneous items. Management considered the impairments to be other than temporary (See Note 5 of the Notes).

      Interest income and other, net, was $18.9 million in 2003 as compared to $26.4 million in 2002. Interest income decreased by $3.3 million to $28.3 million in 2003 from $31.6 million in 2002. The decrease in interest income is mainly due to lower returns on our short-term investments during the year ended December 31, 2003 as compared to the same period of 2002.

      Other expenses net of $9.4 million in 2003 included $8.5 million in charges associated with write-downs of investments in marketable and non-marketable available-for-sale equity securities due to impairments, that were considered by management to be other than temporary (See Note 5 of the Notes), a net loss on the redemption/repurchase of Convertible Notes of $3.9 million, and currency option premium expenses, which were offset in part by net foreign exchange gains, gains on sale of miscellaneous assets, and other expenses that were individually insignificant.

      Other expense of $5.2 million in 2002 included the following:

•  A gain of $14.3 million on the repurchase of a portion of the Convertible Notes, net of the write-off of debt issuance costs associated with the issuance of the Convertible Notes. During the third and fourth quarters of 2002, we repurchased and retired $115.0 million of the $500 million 4% Convertible Notes issued in 2000 and $20.0 million of the $345 million 4¹/4% Convertible Notes issued in 1999. Effective January 1, 2002, we early adopted the provisions of Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” related to extinguishment of debt. As a result, the gain on the repurchase of debt is included in interest income and other, net, in the statement of operations (See Note 9 of the Notes);

•  A net write-down of investments in certain marketable and non-marketable available-for-sale equity securities for $19.4 million due to impairment considered by our management to be other than temporary (See Note 5 of the Notes); and

•  A gain on miscellaneous asset sales, the cost of purchased option contracts, bank fees and other miscellaneous expenses.

      For all investment in debt and equity securities, unrealized losses are evaluated to determine if they are other than temporary. The Company frequently monitors the credit quality of its investments in marketable debt securities. In order to determine if impairment has occurred for equity securities, we review the financial performance of each investee, industry performance and outlook for each investee, the trading prices of marketable equity securities and pricing in current rounds of financing for non-marketable equity securities. If an unrealized loss is determined to be other than temporary, a loss is recognized as a component of interest income and other. For marketable equity securities, the impairment losses were measured using the closing market price of the marketable securities on the date management determined that the investments were impaired. For non-marketable equity securities, the impairment losses were measured by using pricing in current rounds of financing.

Provision for income taxes:

      During 2004, we recorded an income tax expense of $24.0 million, which represents an effective tax rate of approximately (5%). This rate differs from the U.S. statutory rate primarily due to increases in net deferred tax assets not currently benefited in the U.S., losses of certain foreign subsidiaries which are benefited at lower rates and earnings of certain foreign subsidiaries taxed in the U.S. The Company operates in multiple jurisdictions throughout the world. The Company’s income tax expense is primarily related to taxable income in certain foreign jurisdictions, which are not reduced by separate losses in other foreign jurisdictions.

      During 2003, we recorded an income tax expense of $24.0 million, which represents an effective tax rate of approximately (8%). This rate differs from the U.S. statutory rate primarily due to losses of our foreign

47

subsidiaries, which are not benefited or are benefited at lower rates, earnings of certain foreign subsidiaries taxed in the U.S., and alternative minimum taxes. The effect of these charges has been partially offset by the benefit of foreign tax and research and development tax credits.

      In 2002, we recorded an income tax expense of $1.8 million, which represents an effective tax rate of approximately (1%). This rate differs from the U.S. statutory rate primarily due to losses of our foreign subsidiaries, which are not benefited or are benefited at lower rates, foreign tax expense in certain jurisdictions, and reductions in the value of our deferred tax assets with the corresponding charge to income tax expense of approximately $62 million. The effect of these charges was partially offset by the expanded net operating loss carry-back provided by a law change in 2002, as well as the reversal of taxes previously accrued and the conclusion of a federal income tax audit with the Internal Revenue Service for the income tax years 1995 through 2000.

      See Note 11 of the Notes.

Minority interest in net income of subsidiary:

      Minority interest in net income of subsidiary was not significant for the periods presented. The changes in minority interest were attributable to the composition of earnings and losses in our majority-owned Japanese subsidiary for each of the respective years.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

      Cash, cash equivalents and short-term investments increased to $814.6 million at December 31, 2004, from $813.7 million at December 31, 2003. The increase is mainly due to cash and cash equivalents provided by operating activities, partially offset by net cash outflows from investing and financing activities as described below.

      Working capital. Working capital decreased by $29.8 million to $969.0 million at December 31, 2004, from $998.8 million as of December 31, 2003. Working capital declined in 2004 as a result of the following:

•  Prepaid expenses and other current assets decreased by $84.5 million, primarily due to:

-  A decrease of $57.8 million in the current portion of the collateral balance on the equipment operating leases. During the fourth quarter of 2004, we exercised our right to buyout or purchase all of the wafer fabrication equipment that had previously been under two operating lease and security agreements (see Note 12 of the Notes). The associated collateral was returned to us;

-  An $18.8 million decrease in assets held for sale primarily due to write-downs as a result of decreases in fair value, as well as sales, net of additions (see Note 3 of the Notes); and

-  The receipt of a $6.6 million income tax refund in the first quarter of 2004.

•  Accounts payable increased by $19.8 million due to the timing of payments.

•  Income taxes payable increased by $14.5 million due to the timing of tax payments made and the income tax provision recorded in 2004.

•  Current deferred tax assets, net of current deferred tax liabilities decreased by $2.5 million due to net changes in underlying temporary differences (see Note 11 of the Notes).

      The decrease in working capital was offset, in part, by the following:

•  Accounts receivable increased by $40.9 million to $272.1 million as of December 31, 2004 from $231.2 million at December 31, 2003. The increase is mainly attributable to slower collections due to some major customers with longer payment terms and fewer customers with letter of credit or cash in advance arrangements in the fourth quarter of 2004 as compared to the fourth quarter of 2003.

48

•  Inventories increased by $20.4 million to $218.9 million as of December 31, 2004 from $198.5 million as of December 31, 2003. The increase was attributable to a build-up in finished goods and raw materials inventories to support future sales.

•  Accrued salaries, wages and benefits decreased by $17.5 million primarily due to timing differences in payment of salaries and bonuses and a decrease in headcount as a result of the restructuring actions taken during 2004 (see Note 3 of the Notes).

•  Other accrued liabilities decreased by $11.6 million mainly due to our reversal of estimates for certain accrued liabilities of $8.8 million that management no longer considered to be necessary (See Note 3 of the Notes).

      Cash and cash equivalents generated from operating activities. During 2004, we generated $90.8 million of net cash and cash equivalents from operating activities compared to $189.8 million generated in 2003. Cash and cash equivalents generated from operating activities for the year ended December 31, 2004 were the result of the following:

•  Income (before depreciation and amortization, non-cash restructuring and other items, amortization of non-cash deferred stock compensation, loss on write-down of equity securities, net of gain on sales, gain or loss on repurchase/redemption of Convertible Notes, and gain on the sale of property and equipment). The non-cash items and other non-operating adjustments are quantified in our Consolidated Statements of Cash Flows included in this Current Report on Form 10-K;

•  Offset by a net decrease in assets and liabilities, net of assets acquired and liabilities assumed in business combinations including changes in working capital components from December 31, 2004 as compared to December 31, 2003 as discussed above.

      During 2003, we received cash of $44.9 million upon termination of the Swaps. The fair value of the Swaps was formerly included in other non-current assets.

      Cash and cash equivalents used in investing activities. Cash and cash equivalents used in investing activities during 2004 were $89.6 million as compared to $0.2 million used in 2003. The investing activities or changes during 2004 were as follows:

•  Purchases of debt and equity securities available for sale, net of sales and maturities.

•  Purchases of property and equipment.

•  Proceeds from the sale of property and equipment.

•  Acquisition of companies (see Note 2 of the Notes).

•  During the third quarter of 2004, we entered into two new operating leases for wafer fabrication equipment, replacing two existing operating leases for the same wafer fabrication equipment. Non-current assets and deposits decreased as a result of a refund of collateral from the former equipment operating leases and increased as a result of collateral deposited on the new equipment operating leases.

•  During the fourth quarter of 2004, we exercised our right to buyout or purchase all of the wafer fabrication equipment that had previously been under two operating lease and security agreements (see Note 3 of the Notes). The early termination or buyout amount was $332 million. Cash collateral of $311 million associated with the leases was returned to us. Termination fees under the lease agreements were not significant.

•  Non-current assets and deposits also decreased during 2004 as a result of collateral refunded due to the termination of a letter of credit arrangement during the first quarter of 2004 and the termination of the Lease Swap during the third quarter of 2004 (see Note 8 of the Notes).

      We expect capital expenditures to be approximately $80 million in 2005. In recent years we have reduced our level of capital expenditures as a result of our focus on establishing strategic supplier alliances with

49

foundry semiconductor manufacturers, which enables us to have access to advanced manufacturing capacity, and reduces our capital spending requirements.

      Cash and cash equivalents used in financing activities. Cash and cash equivalents used in financing activities during 2004 were $48.6 million as compared to $375.0 million in 2003. The financing activities during 2004 were as follows:

•  The repurchase of a portion of the Convertible Notes due in 2006;

•  Additional purchase of minority interests in our Japanese subsidiary;

•  The issuance of common stock under our employee stock option and purchase plans; and

•  The repayment of debt obligations.

      It is our policy to reinvest our earnings and we do not anticipate paying any cash dividends to stockholders in the foreseeable future.

      We believe that our existing cash, cash equivalents, short-term investments and funds generated from operations will be adequate to meet our operating and capital requirements in the short-term. These resources, combined with funds from financing and our ability to borrow funds, will be adequate to meet our operating and capital requirements and obligations for the foreseeable future. We may seek additional equity or debt financing from time to time. We cannot be certain that additional financing will be available on favorable terms. Moreover, any future equity or convertible debt financing will decrease the percentage of equity ownership of existing stockholders and may result in dilution, depending on the price at which the equity is sold or the debt is converted.

CONTRACTUAL OBLIGATIONS

      The following table summarizes our contractual obligations at December 31, 2004, and the effect these obligations are expected to have on our liquidity and cash flow in future periods.

		Payments Due by Period
		Less than						After
Contractual Obligations		1 Year		1-3 Years		4-5 Years		5 Years		Total
		(In millions)
Convertible Subordinated Notes		$	—	$	421.5	$	—	$	350.0	$	771.5
Operating lease obligations			56.7		81.0		39.6		34.4		211.7
Capital lease obligations			0.1		—		—		—		0.1
Purchase commitments			273.1		20.3		—		—		293.4
	Total	$	329.9	$	522.8	$	39.6	$	384.4	$	1,276.7

Convertible Subordinated Notes

      As of December 31, 2004, we have $422 million of Convertible Notes due in November 2006 (“2001 Convertible Notes”) and $350 million of the 2003 Convertible Notes due in May 2010 (“2003 Convertible Notes”). All of the Convertible Notes are subordinated to all existing and future senior debt and are convertible at the holder’s option, at any time prior to the maturity date of the Convertible Notes, into shares of our common stock. The 2001 and 2003 Convertible Notes have conversion prices of approximately $26.34 per share and $13.42 per share, respectively. The 2001 Convertible Notes are redeemable at our option, in whole or in part, on at least 30 days notice at any time on or after the call date, which is two years before the due date. We cannot elect to redeem the 2003 Convertible Notes prior to maturity. Each holder of the 2001 and 2003 Convertible Notes has the right to cause us to repurchase all of such holder’s convertible notes at 100% of their principal amount plus accrued interest upon the occurrence of any fundamental change, which includes a transaction or event such as an exchange offer, liquidation, tender offer, consolidation, merger or combination. Interest is payable semiannually.

50

      Fluctuations in our stock price impact the prices of our outstanding convertible securities and the likelihood of the convertible securities being converted into cash or equity. If we are required to redeem any of the Convertible Notes for cash, it may affect our liquidity position. In the event they do not convert to equity, we believe that our current cash position and expected future operating cash flows will be adequate to meet these obligations as they mature. From time to time, we may repurchase or redeem Convertible Notes.

Operating Lease Obligations

      We lease real estate, certain non-manufacturing equipment and software under non-cancelable operating leases.

      See Note 12 of the Notes for a discussion of the two operating leases for manufacturing equipment that were refinanced in the third quarter of 2004 and then terminated and bought out during the fourth quarter 2004. As of December 31, 2004, there are no future payments under these leases included in the table above.

Purchase Commitments

      We maintain certain purchase commitments primarily for raw materials with suppliers and for some non-production items. Purchase commitments for inventory materials are generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary among different suppliers.

Standby letters of credit

      At December 31, 2004 and 2003, we had outstanding standby letters of credit of $5 million and $77 million, respectively. These instruments are off-balance sheet commitments to extend financial guarantees for leases and certain self-insured risks, import/export taxes and performance under contracts, and generally have one-year terms. The fair value of the letters of credit approximates the contract amount. The decline in standby letters of credit as of December 31, 2004 compared to December 31, 2003 reflects the termination and buyout of the two operating leases for manufacturing equipment further discussed in Note 12 of the Notes.

CRITICAL ACCOUNTING ESTIMATES

      The discussion and analysis of our financial condition and results of operations are based on the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Note 1 of the Notes describes the significant accounting policies essential to the consolidated financial statements. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts and disclosures.

      We believe the following to be critical accounting estimates. They are both important to the portrayal of our Company’s financial condition and results, and they require significant management judgments and estimates about matters that are inherently uncertain. As a result of the inherent uncertainty, there is a likelihood that materially different amounts would be reported under different conditions or using different assumptions. Although we believe that our judgments and estimates are reasonable, appropriate and correct, actual future results may differ materially from our estimates.

      Inventory Valuation Methodology. Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. We write down our inventories for estimated obsolescence and unmarketable inventory in an amount equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. Inventory impairment charges create a new cost basis for inventory.

      We balance the need to maintain strategic inventory levels to ensure competitive delivery performance to our customers with the risk of inventory obsolescence due to rapidly changing technology and customer requirements, product life-cycles, life-time buys at the end of supplier product runs and a shift of production to outsourcing. If actual demand or market conditions are less favorable than we project or our customers fail to

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CORPORATE INFORMATION

                                                                                   PROXY STATEMENT

meet projections, additional inventory write-downs may be required. Our inventory balance was approximately $219 million and $199 million as of December 31, 2004, and 2003, respectively.

      If market conditions are more favorable than expected, we could experience more favorable gross profit margins going forward as we sell inventory that was previously written down. See discussion in “Gross Profit Margin” section earlier in this MD&A.

      Valuation of long-lived assets, intangible assets and goodwill. We operate our own wafer fabrication facilities and make significant capital expenditures to ensure that we are technologically competitive. In addition, we have actively pursued the acquisition of businesses, which has resulted in significant goodwill and intangible assets. We assess the impairment of long-lived assets, identifiable intangibles and related goodwill annually or sooner if events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include the following: (i) significant negative industry or economic trends; (ii) exiting an activity in conjunction with a restructuring of operations; (iii) current, historical or projected losses that demonstrate continuing losses associated with an asset; or (iv) a significant decline in our market capitalization, for an extended period of time, relative to net book value. When we determine that there is an indicator that the carrying value of long-lived assets, identifiable intangibles or related goodwill may not be recoverable, we measure impairment based on estimates of future cash flows. These estimates include assumptions about future conditions such as future revenues, gross margins, operating expenses within our Company; the fair values of certain assets based on thoroughly researched management estimates; and industry trends. See Notes 6 and 7 to the Notes for more details on long-lived assets, intangible assets and goodwill.

      As of December 31, 2004 we have a goodwill balance of $973.1 million that is not amortized. We monitor the recoverability of goodwill recorded in connection with acquisitions annually, or sooner if events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment, if any, would be determined in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangibles Assets,” which uses a fair value model for determining the carrying value of goodwill.

      As a result of the decline in revenues in the semiconductor industry and the corresponding decline in our outlook as of the latter part of the third quarter of 2004 and the conclusion that the Gresham manufacturing facility was impaired (see Note 3 of the Notes), we reviewed goodwill by reporting unit for impairment as of September 30, 2004, which was updated as of December 31, 2004. Our reporting units are Semiconductor and Storage Systems or Engenio. The impairment testing is a two-step process. The first step requires comparing the fair value of each reporting unit to its net book value. We concluded that goodwill was not impaired under the first step as of September 30, 2004 and December 31, 2004. The second step is only performed if impairment is indicated after the first step is performed, as it involves measuring the actual impairment to goodwill. Our next annual test for the impairment of goodwill will be performed in our fourth fiscal quarter in 2005. We use management estimates of future cash flows to perform the first step of the goodwill impairment test. These estimates include assumptions about future conditions such as future revenues, gross margins and operating expenses within LSI. Two methodologies were used to obtain the fair value for each reporting unit as of September 30, 2004: Discounted Cash Flow and Market Multiple.

      The Discounted Cash Flow and Market Multiple methodologies include assumptions about future conditions within our reporting units and related industries. These assumptions include estimates of future market size and growth, expected trends in technology, timing of new product introductions by our competitors and us, and the nature of the industry in which comparable companies and we operate. If significant changes to these assumptions occur, goodwill could become impaired in the future.

      Restructuring reserves. We have recorded reserves/accruals for restructuring costs related to the restructuring of operations. The restructuring reserves include payments to employees for severance, termination fees associated with leases and other contracts, decommissioning and selling costs associated with assets held for sale, and other costs related to the closure of facilities. After the adoption of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” on January 1, 2003, the reserves have been recorded when management has approved a plan to restructure operations and a liability has been

52

incurred rather than the date upon which management has approved and announced a plan. The restructuring reserves are based upon management estimates at the time they are recorded. These estimates can change depending upon changes in facts and circumstances subsequent to the date the original liability was recorded. For example, existing accruals for severance may be modified if employees are redeployed due to circumstances not foreseen when the original plans were initiated, accruals for outplacement services may not be fully utilized by former employees, and severance accruals could change for statutory reasons in countries outside the United States. Accruals for facility leases under which we ceased using the benefits conveyed to us under the lease may change if market conditions for subleases change or if we later negotiate a termination of the lease. Prior to the adoption of SFAS No. 146, restructuring reserves were recorded at the time we announced a plan to exit certain activities and were based on estimates of the costs and length of time to exit those activities. See Note 3 of the Notes for a complete discussion of our restructuring actions and all related restructuring reserves by type as of December 31, 2004. See discussion in “Restructuring of operations and other items, net” earlier in this MD&A for changes in estimates made during 2004, 2003 and 2002.

      Income taxes. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of the assets and liabilities. We have recorded a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. See Note 11 of the Notes for more details about our deferred tax assets and liabilities.

      The calculation of our tax liabilities involves the application of United States generally accepted accounting principles to complex tax rules and regulations within multiple jurisdictions throughout the world. Our tax liabilities include estimates for all income and related taxes that we believe are probable and that can be reasonably estimated. To the extent that our estimates are understated, additional charges to income tax expense would be recorded in the period in which we determine such understatement. If our income tax estimates are overstated, income tax benefits will be recognized when realized.

Recent Accounting Pronouncements

      The information contained in Part II, Item 8 in Note 1 of the Notes under the heading “Recent Accounting Pronouncements” is hereby incorporated by reference into this Part II, Item 7.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

      Interest rate sensitivity. With the objective of protecting our cash flows and earnings from the impact of fluctuations in interest rates, while minimizing the cost of capital, we may enter into or terminate interest rate swaps.

      In June 2002, we entered into interest rate swap transactions (the “Swaps”) with several investment banks. The Swaps effectively converted fixed interest payments on a portion of our 4% and 4.25% Convertible Notes to LIBOR-based floating rates. The Swaps qualified for hedge accounting as fair value hedges, with changes in the fair value of the interest rate risk on the Convertible Notes being offset by changes in the fair values of the Swaps recorded as a component of interest expense. (See Note 8 of the Notes.)

      In the second quarter of 2003, we terminated Swaps with a notional amount of $740 million. The termination resulted in a deferred gain of $44 million being recorded as a component of the Convertible Notes and to be amortized as a benefit to interest expense over the remaining term of the hedged Convertible Notes. A portion of the deferred gain was written off as part of the net gain or loss on the repurchase/redemption of the hedged Convertible Notes during 2003 and 2004. As of December 31, 2004, a deferred gain of $10.3 million remains to be amortized. In 2003, before termination, the difference between the changes in the fair values of the derivative and the hedged risk resulted in a benefit to interest expense of $1 million.

      In May 2003, we entered into an interest rate swap transaction to effectively convert the LIBOR-based floating rate interest payments on the equipment operating lease, with an original notional amount of $395 million, to a fixed interest rate (“Lease Swap”). An expense of approximately $2 million was recorded to

53

cost of revenues in 2004 as the lease payments were made. In August 2004, the Company entered into two new equipment operating leases for the wafer fabrication equipment that was previously on the above-mentioned leases. As a result of entering into the new leases, the hedged forecasted interest payments were no longer probable. Hedge accounting treatment was discontinued prospectively and the balance in accumulated comprehensive income was immediately recorded as a gain of $3.8 million in restructuring and other items in the statement of operations. In September 2004, the Company terminated the Lease Swap.

      In 2004, an interest rate move of 40 basis points (10% of our weighted-average worldwide interest rate on outstanding debt in 2004) affecting our fixed and floating rate financial instruments as of December 31, 2004, including investments and debt obligations, would not have had a significant effect on our financial position, results of operations and cash flows over the next fiscal year, assuming that the debt and investment balances remain consistent. In 2003, an interest rate move of 33 basis points (10% of our weighted-average worldwide interest rate on outstanding debt in 2003) affecting our floating rate financial instruments as of December 31, 2003, including debt obligations, investments and fabrication equipment leases, would not have had a significant effect on our financial position, results of operations and cash flows over the next fiscal year, assuming that the investment balance remains consistent.

      Foreign currency exchange risk. We have foreign subsidiaries that operate and sell our products in various global markets. As a result, our cash flows and earnings are exposed to fluctuations in foreign currency exchange rates. We attempt to limit these exposures through operational strategies and financial market instruments. We use various hedge instruments, primarily forward contracts with maturities of twelve months or less and currency option contracts, to manage our exposure associated with net asset and liability positions and cash flows denominated in non-functional currencies. We did not enter into derivative financial instruments for trading purposes during 2004 and 2003.

      Based on our overall currency rate exposures at December 31, 2004, including derivative financial instruments and non-functional currency-denominated receivables and payables, a near-term 10% appreciation or depreciation of the U.S. dollar would not have a significant effect on our financial position, results of operations and cash flows over the next fiscal year. In 2003, a near-term 10% appreciation or depreciation of the U.S. dollar would also not have had a significant effect.

      Equity price risk. We have investments in available-for-sale equity securities included in long-term assets. The fair values of these investments are sensitive to equity price changes. Changes in the value of these investments are ordinarily recorded through accumulated comprehensive income. The increase or decrease in the fair value of the investments would affect our results of operations to the extent the investments were sold or that declines in value were concluded by management to be other than temporary.

      If prices of the available-for-sale equity securities increase or decrease 10% from their fair value as of December 31, 2004, it would increase or decrease the investment values by $3.8 million. As of December 31, 2003, a 10% increase or decrease in fair value would have increased or decreased the investment values by $3.5 million. We do not use any derivatives to hedge the fair value of our marketable available-for-sale equity securities.

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Item 8. Financial Statements and Supplementary Data

LSI Logic Corporation

Consolidated Balance Sheets

		December 31,
		2004			2003
		(In thousands, except per-share
		amounts)
ASSETS
Cash and cash equivalents		$	218,723		$	269,682
Short-term investments			595,862			544,007
Accounts receivable, less allowances of $6,600 and $7,415			272,065			231,184
Inventories			218,900			198,517
Prepaid expenses and other current assets			59,737			146,647
	Total current assets		1,365,287			1,390,037
Property and equipment, net			311,916			481,489
Other intangible assets, net			108,457			161,236
Goodwill			973,130			968,483
Non-current assets and deposits			—			318,176
Other assets			115,211			128,480
	Total assets	$	2,874,001		$	3,447,901
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	122,422		$	102,632
Accrued salaries, wages and benefits			58,516			75,968
Other accrued liabilities			142,278			153,857
Income taxes payable			72,935			58,417
Current portion of long-term obligations			129			377
	Total current liabilities		396,280			391,251
Long-term debt and capital lease obligations			781,846			865,606
Tax related liabilities and other			77,570			141,096
	Total long-term obligations and other liabilities		859,416			1,006,702
Commitments and contingencies (Note 12)
Minority interest in subsidiary			259			7,498
Stockholders’ equity:
Preferred shares; $.01 par value; 2,000 shares authorized; none outstanding			—			—
Common stock; $.01 par value; 1,300,000 shares authorized; 387,490 and 381,491 shares outstanding			3,875			3,815
Additional paid-in capital			2,969,478			2,950,051
Deferred stock compensation			(8,936	)		(24,839	)
Accumulated deficit			(1,384,321	)		(920,790	)
Accumulated other comprehensive income			37,950			34,213
	Total stockholders’ equity		1,618,046			2,042,450
	Total liabilities and stockholders’ equity	$	2,874,001		$	3,447,901

The accompanying notes are an integral part of these Consolidated Financial Statements.

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LSI Logic Corporation

Consolidated Statements of Operations

		Year Ended December 31,
		2004			2003			2002
		(In thousands, except per share amounts)
Revenues		$	1,700,164		$	1,693,070		$	1,816,938
Cost of revenues			964,556			1,015,865			1,122,696
Additional excess inventory and related charges			—			—			45,526
	Total cost of revenues		964,556			1,015,865			1,168,222
Gross profit			735,608			677,205			648,716
Research and development			421,516			432,695			457,351
Selling, general and administrative			243,498			234,156			230,202
Acquired in-process research and development			—			—			2,920
Restructuring of operations and other items, net			423,444			180,597			67,136
Amortization of non-cash deferred stock compensation(*)			8,449			26,021			77,303
Amortization of intangibles			75,050			76,352			78,617
Loss from operations			(436,349	)		(272,616	)		(264,813	)
Interest expense			(25,320	)		(30,703	)		(51,977	)
Interest income and other, net			22,170			18,933			26,386
Loss before income taxes and minority interest			(439,499	)		(284,386	)		(290,404	)
Provision for income taxes			24,000			24,000			1,750
Loss before minority interest			(463,499	)		(308,386	)		(292,154	)
Minority interest in net income of subsidiary			32			161			286
Net loss		$	(463,531	)	$	(308,547	)	$	(292,440	)
Net loss per share:
	Basic and diluted	$	(1.21	)	$	(0.82	)	$	(0.79	)
Shares used in computing per share amounts:
	Basic and diluted		384,070			377,781			370,529

(*)  Amortization of non-cash deferred stock compensation, if not shown separately, would have been included in cost of revenues, research and development, and selling, general and administrative expenses, as shown below:

	Year Ended December 31,
	2004		2003		2002
	(In thousands)
Cost of revenues	$	198	$	446	$	1,520
Research and development		6,289		20,412		58,623
Selling, general and administrative		1,962		5,163		17,160
Total	$	8,449	$	26,021	$	77,303

The accompanying notes are an integral part of these Consolidated Financial Statements.

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LSI Logic Corporation

Consolidated Statements of Stockholders’ Equity

														Accumulated
	Common Stock				Additional									Other
					Paid-In			Deferred Stock			Accumulated			Comprehensive
	Shares		Amount		Capital			Compensation			Deficit			Income/(Loss)			Total
	(In thousands)
Balances at December 31, 2001		368,446	$	3,684	$	2,905,638		$	(124,091	)	$	(319,803	)	$	14,457		$	2,479,885
Net loss												(292,440	)
Change in foreign currency translation adjustments															11,358
Change in unrealized gain on available-for-sale securities															(20,089	)
Total comprehensive loss																		(301,171	)
Issuance to employees under stock option and purchase plans		6,292		63		45,102												45,165
Issuance of common stock in conjunction with acquisitions (Note 2)		358		4		3,542												3,546
Deferred stock compensation (Note 2)									(4,373	)								(4,373	)
Amortization of deferred stock compensation									77,303									77,303
Balances at December 31, 2002		375,096		3,751		2,954,282			(51,161	)		(612,243	)		5,726			2,300,355
Net loss												(308,547	)
Change in foreign currency translation adjustments															21,309
Change in unrealized gain on available-for-sale securities															5,183
Change in unrealized gain on derivative instruments designated and qualifying as cash-flow hedges															1,995
Total comprehensive loss																		(280,060	)
Issuance to employees under stock option and purchase plans		6,386		64		30,886												30,950
Issuance or return from escrow of common stock in conjunction with acquisitions		9				(6,816	)											(6,816	)
Forfeiture of restricted shares (Note 10)						(301	)		301
Cash paid for call spread options (Note 9)						(28,000	)											(28,000	)
Amortization of deferred stock compensation									26,021									26,021
Balances at December 31, 2003		381,491		3,815		2,950,051			(24,839	)		(920,790	)		34,213			2,042,450
Net loss												(463,531	)
Change in foreign currency translation adjustments															1,948
Change in unrealized gain on available-for-sale securities															3,784
Change in unrealized gain on derivative instruments designated and qualifying as cash-flow hedges															(1,995	)
Total comprehensive loss																		(459,794	)
Issuance to employees under stock option and purchase plans		5,852		59		27,928												27,987
Issuance or return from escrow of common stock in conjunction with acquisitions (Note 2)		147		1		(414	)											(413	)
Grants of restricted shares (Note 10)						6,401			(6,401	)								—
Forfeiture of restricted shares and stock options assumed in an acquisition (Note 10)						(14,488	)		14,488									—
Amortization of deferred stock compensation									7,816									7,816
Balances at December 31, 2004		387,490	$	3,875	$	2,969,478		$	(8,936	)	$	(1,384,321	)	$	37,950		$	1,618,046

The accompanying notes are an integral part of these Consolidated Financial Statements.

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LSI Logic Corporation

Consolidated Statements of Cash Flows

				Year Ended December 31,
				2004			2003			2002
				(In thousands)
Operating activities:
	Net loss			$	(463,531	)	$	(308,547	)	$	(292,440	)
	Adjustments:
		Depreciation and amortization			176,606			262,728			349,326
		Amortization of non-cash deferred stock compensation			8,449			26,021			77,303
		Acquired in-process research and development			—			—			2,920
		Non-cash restructuring and other items			401,058			148,252			46,050
		(Gain) on sale of equity securities/loss on write-down			(1,913	)		8,518			19,423
		(Gain)/loss on redemption/repurchase of Convertible Subordinated Notes			(1,767	)		3,885			(14,260	)
		(Gain)/loss on sale of property and equipment, including assets held-for-sale			(6,348	)		(6,896	)		2,928
		Changes in deferred tax assets and liabilities			4,895			(646	)		61,385
	Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
		Accounts receivable, net			(40,076	)		18,220			(54,619	)
		Inventories			(20,660	)		(4,232	)		75,579
		Prepaid expenses and other assets			23,377			63,325			18,648
		Accounts payable			21,056			1,684			(35,828	)
		Accrued and other liabilities			(10,329	)		(22,559	)		(91,619	)
			Net cash provided by operating activities		90,817			189,753			164,796
Investing activities:
	Purchase of debt securities available-for-sale				(747,096	)		(2,219,484	)		(1,771,809	)
	Proceeds from maturities and sales of debt securities available-for-sale				679,483			2,203,313			1,478,596
	Purchases of equity securities				(2,250	)		(200	)		(11,894	)
	Proceeds from sales of equity securities				10,518			1,060			—
	Purchases of property and equipment				(52,776	)		(78,189	)		(48,245	)
	Proceeds from sale of property and equipment				10,936			24,737			6,745
	Buyout of equipment operating lease				(332,396	)		—			—
	Increase in non-current assets and deposits				(313,013	)		(390,135	)		(8,920	)
	Decrease in non-current assets and deposits				688,994			272,868			9,156
	Acquisitions of companies, net of cash acquired				(32,025	)		—			(55,916	)
	Proceeds from the sale-lease back of equipment				—			160,000			—
	Proceeds from the sale of the Japan manufacturing facility				—			25,846			—
			Net cash used in investing activities		(89,625	)		(184	)		(402,287	)
Financing activities:
	Redemption/ Repurchase of Convertible Subordinated Notes				(68,117	)		(715,983	)		(118,938	)
	Issuance of common stock				27,988			30,306			43,992
	Purchase of minority interest in subsidiary				(8,020	)		—			—
	Repayment of debt obligations				(438	)		(327	)		(332	)
	Proceeds from borrowings				—			350,000			—
	Debt issuance costs				—			(10,984	)		—
	Cash paid for call spread options				—			(28,000	)		—
			Net cash used in financing activities		(48,587	)		(374,988	)		(75,278	)
Effect of exchange rate changes on cash and cash equivalents					(3,564	)		6,254			4,478
Decrease in cash and cash equivalents					(50,959	)		(179,165	)		(308,291	)
Cash and cash equivalents at beginning of year					269,682			448,847			757,138
Cash and cash equivalents at end of year				$	218,723		$	269,682		$	448,847

The accompanying notes are an integral part of these Consolidated Financial Statements.

58

LSI Logic Corporation

Notes to Consolidated Financial Statements

Note 1 — Significant Accounting policies

      Nature of the business. LSI Logic Corporation (“the Company” or “LSI”) designs, develops, manufactures and markets complex, high-performance integrated circuits and storage systems. The Company operates in two segments — the Semiconductor segment and the Storage Systems segment. Within the Semiconductor segment, the Company offers three enabling system-on-a-chip technologies — standard-cell ASICs, Platform ASICs and application specific standard products that are focused on the consumer, communication and storage component markets. Within the Storage Systems segment, the Company focuses on high-performance modular disk storage systems, sub-assemblies and storage management software. The Company’s products are marketed primarily to original equipment manufacturers (“OEMs”) that sell products targeted for applications in these markets.

      The semiconductor and storage systems industries are characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. The Company’s financial results are affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor and storage systems industries, the timely implementation of new technologies and the ability to safeguard patents and intellectual property in a rapidly evolving market. In addition, the semiconductor and storage systems markets have historically been cyclical and subject to significant economic downturns at various times.

      Basis of presentation. The consolidated financial statements include the accounts of the Company and all of its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

      Minority interest in a subsidiary represents the minority stockholders’ proportionate share of the net assets and the results of operations for one of the Company’s majority-owned Japanese subsidiaries. Sales of common stock of the Company’s subsidiary and purchases of such shares may result in changes in the Company’s proportionate share of the subsidiary’s net assets. During 2004, the Company purchased a portion of the minority interest. At December 31, 2004, the Company owned approximately 99.84% of the Japanese affiliate.

      The Company began applying the provisions of Financial Accounting Standards Board Interpretation 46-Revised (“FIN 46-R”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” during the second quarter of 2004. FIN 46-R requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company does not have relationships with any variable interest entities.

      Where the functional currency of the Company’s foreign subsidiaries is the local currency, all assets and liabilities are translated into U.S. dollars at the current rates of exchange as of the balance sheet date and revenues and expenses are translated using weighted average rates prevailing during the period. Accounts and transactions denominated in foreign currencies have been remeasured into functional currencies before translation into U.S. dollars. Foreign currency transaction gains and losses are included as a component of interest income and other. Gains and losses from foreign currency translation are included as a separate component of comprehensive income.

      Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from these estimates.

59

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Acquisitions. The estimated fair value of acquired assets and assumed liabilities and the results of operations of purchased businesses are included in the Company’s consolidated financial statements as of the effective date of the purchase, through the end of the period. The total purchase price is allocated to the estimated fair value of assets acquired and liabilities assumed based on management estimates. The fair value of common shares issued for acquisitions was determined using the average closing stock price for the period of two days before and after the date the number of LSI common shares to be issued was fixed. The purchase price includes direct acquisition costs consisting of investment banking, legal and accounting fees. There were no significant differences between the accounting policies of the Company and the acquired entities. See Note 2.

      Revenue recognition. The majority of the Company’s product revenues are recognized upon shipment, when persuasive evidence of a sales arrangement exists, the price is fixed or determinable, title has transferred and collection of resulting receivables is reasonably assured or probable in the case of software. Standard products sold to distributors are subject to specific rights to return products; therefore, revenue recognition is deferred until the distributor sells the product to a third party. Revenues from the licensing of the Company’s design and manufacturing technology is recognized when the significant contractual obligations have been fulfilled. Royalty revenues are recognized upon the sale of products subject to royalties. The Company uses the percentage-of-completion method for recognizing revenues on fixed-fee design arrangements. All amounts billed to a customer related to shipping and handling are classified as revenues while all costs incurred by the Company for shipping and handling are classified as cost of revenues. Consideration given to customers, when offered, is primarily in the form of discounts and rebates. Such consideration is accounted for as a reduction to revenues in the period the related sale is made. Reserves for estimated sales returns are established based on historical returns experience. The Company has substantial historical experience to form a basis for estimating returns when products are shipped.

      In arrangements that include a combination of our hardware and our software products that are also sold separately, where software is more than incidental and essential to the functionality of the product being sold, the Company follows the guidance in Emerging Issues Task Force (“EITF”) Issue No. 03-05, “Applicability of AICPA Statement of Position 97-2 to Non-software Deliverables in an Arrangement Containing More-Than-Incidental Software,” accounts for the entire arrangement as a sale of software and software-related items and follows the revenue recognition criteria in Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” and related interpretations.

      The provisions of EITF Issue No. 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” apply to sales arrangements with multiple arrangements that include a combination of hardware, software and/or services. For multiple element arrangements, revenue is allocated to the separate elements based on fair value, which is determined using the price charged when the element is sold separately. If an arrangement includes undelivered elements that are not essential to the functionality of the delivered elements, the Company defers the fair value of the undelivered elements and the residual revenue is allocated to the delivered elements. If the undelivered elements are essential to the functionality of the delivered elements, no revenue is recognized. Discounts are allocated only to the delivered elements. Undelivered elements typically include installation, training, software warranty and maintenance, hardware maintenance and professional services.

60

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Earnings per share. Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS is computed using the weighted-average number of common and dilutive potential common shares outstanding during the period using the treasury-stock method for outstanding stock options and restricted stock awards and the if-converted method for convertible notes. A reconciliation of the numerators and denominators of the basic and diluted per share amount computations is as follows:

		Year Ended December 31,
		2004								2003								2002
							Per-Share								Per-share								Per-Share
		(Loss)*			Shares+		Amount			(Loss)*			Shares+		Amount			(Loss)*			Shares+		Amount
		(In thousands except per share amounts)
Basic EPS:
	Net loss available to common stockholders	$	(463,531	)		384,070	$	(1.21	)	$	(308,547	)		377,781	$	(0.82	)	$	(292,440	)		370,529	$	(0.79	)
	Effect of dilutive securities		—			—		—			—			—		—			—			—		—
Diluted EPS:
	Net loss available to common stockholders	$	(463,531	)		384,070	$	(1.21	)	$	(308,547	)		377,781	$	(0.82	)	$	(292,440	)		370,529	$	(0.79	)

*  Numerator

+ Denominator

      Options to purchase approximately 67,733,073, 69,165,802 and 57,064,593 shares were outstanding at December 31, 2004, 2003 and 2002, respectively, and were excluded from the computation of diluted shares because of their antidilutive effect on net loss per share. The exercise price of these options ranged from $0.06 to $72.25 at December 31, 2004, 2003 and 2002.

      Weighted average restricted common shares of 282,488, 100,599 and 846,000 were outstanding at December 31, 2004, 2003 and 2002, respectively, and were excluded from the computation of diluted shares because of their antidilutive effect on net loss per share.

      A total of 43,728,665 weighted average potentially dilutive shares associated with the 2003 and 2001 Convertible Notes were excluded from the calculation of diluted shares because of their antidilutive effect on loss per share for the year ended December 31, 2004. A total of 50,850,649 weighted average potentially dilutive shares associated with the 2003, 2001, 2000 and 1999 Convertible Notes were excluded from the calculation of diluted shares because of their antidilutive effect on loss per share for the year ended December 31, 2003. For the year ended December 31, 2002, 47,059,516 weighted average potentially dilutive shares associated with the 2001, 2000 and 1999 Convertible Notes were excluded from the calculation of diluted shares because of their antidilutive effect on loss per share.

      Advertising. Advertising costs are charged to expense in the period incurred. Advertising expense was $5 million, $4 million and $3 million for the years ended December 31, 2004, 2003 and 2002, respectively.

      Cash equivalents. All highly liquid investments purchased with an original maturity of 90 days or less are considered to be cash equivalents. Cash equivalents are reported at amortized cost plus accrued interest.

      Accounts receivable and allowance for doubtful accounts. Trade receivables are reported in the balance sheet reduced by an allowance for doubtful accounts for estimated losses resulting from receivables not considered to be collectible. The allowance for doubtful accounts is estimated by evaluating customer’s history and credit worthiness as well as current economic and market trends.

61

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Investments. Available-for-sale investments include marketable short-term investments and long-term investments in marketable and non-marketable shares of technology companies. Short-term investments in marketable debt securities are reported at fair value and include all debt securities regardless of their maturity dates. Long-term investments in marketable equity securities are reported at fair value with unrealized gains and losses, net of related tax, recorded as a separate component of comprehensive income in stockholders’ equity until realized. The investments in long-term non-marketable equity securities are recorded at adjusted cost basis consist primarily of common and preferred stock of various non-marketable technology companies. Gains and losses on securities sold are determined based on the specific identification method and are included in interest income and other or research and development in the statement of operations. The Company does not hold any of these securities for speculative or trading purposes.

      For all investment securities, unrealized losses that are considered to be other than temporary are considered impairment losses and recognized as a component of interest income and other in the statement of operations. In order to determine if an impairment has occurred, the Company reviews the financial performance and outlook of each investee, industry performance, the trading prices of marketable securities and pricing in current rounds of financing for non-marketable equity securities. For marketable equity securities, impairment losses are measured using the closing market prices of the marketable securities on the date management determined that the investments were impaired. For non-marketable equity securities, impairment losses are generally measured by using pricing in current rounds of financing. The fair values of the Company’s non-marketable equity investments are not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the investment because it is not practicable to estimate such fair values.

      Inventories. Inventories are stated at the lower of cost or market. Cost is computed on a currently adjusted standard basis (which approximates first-in, first-out) for raw materials, work-in-process and finished goods. Inventory reserves are established when conditions indicate that the selling price could be less than cost due to physical deterioration, obsolescence, changes in price levels, or other causes. Reserves are established for excess inventory generally based on inventory levels in excess of 12 months of demand, as judged by management, for each specific product.

      Property and equipment. Property and equipment are recorded at cost and include interest on funds borrowed during the construction period (see Note 6). Depreciation and amortization for property and equipment are calculated based on the straight-line method over the estimated useful lives of the assets as presented below:

Buildings and improvements	20-40 years
Equipment	3-5 years
Furniture and fixtures	5 years

      Amortization of leasehold improvements is computed using the shorter of the remaining term of the Company’s facility leases or the estimated useful lives of the improvements. While the majority of the Company’s equipment is depreciated over a three to five year period, some tools are being depreciated over a seven-year period.

      Software. The Company capitalizes both purchased software and, to a lesser extent, certain software development costs associated with the Storage Systems segment. Purchased software primarily includes software and external consulting fees related to the purchase and implementation of software projects used for business operations and engineering design activities. Capitalized software projects are amortized over the estimated useful lives of the projects, typically a two-to-five year period. Development costs for software that will be sold to customers and/or embedded in certain hardware products are capitalized beginning when a product’s technological feasibility has been established. Prior to the establishment of technological feasibility, software development costs are expensed as research and development. Capitalized development costs are

62

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

amortized on a straight-line basis to cost of revenues when ready for general release to customers over the estimated useful life of the product, typically an 18 to 24 month period. On a quarterly basis, the Company assesses the realizability of each product. The amount by which the unamortized capitalized software development costs exceed the estimated net realizable value is written-off immediately.

      Impairment of long-lived assets. The Company evaluates the carrying value of long-lived assets whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use and eventual disposition of the asset. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values. When assets are removed from operations and held for sale, the impairment loss is estimated as the excess of the carrying value of the assets over their fair value.

      Goodwill. Goodwill is not amortized. The Company monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or sooner if events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s two reporting units are Semiconductor and Storage Systems or Engenio. Impairment, if any, would be determined in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, which uses a fair value model for determining the carrying value of goodwill. The impairment test is a two-step process. The first step requires comparing the fair value of each reporting unit to its net book value. The Company uses management estimates of future cash flows to perform the first step of the goodwill impairment test. These estimates include assumptions about future conditions such as future revenues, gross margins and operating expenses. Discounted Cash Flow and Market Multiple methodologies are used to obtain the fair value for each reporting unit. The second step is only performed if impairment is indicated after the first step is performed, as it involves measuring the actual impairment to goodwill.

      Fair value disclosures of financial instruments. The estimated fair value of financial instruments is determined by the Company, using available market information and valuation methodologies considered to be appropriate. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of investments, derivative instruments and convertible debt are based on market data. Carrying amounts of accounts receivable and accounts payable approximate fair value due to the short maturity of these financial instruments.

      Derivative instruments. All of the Company’s derivative instruments are recognized as assets or liabilities in the statement of financial position and measured at fair value (see Note 8). The Company does not enter into derivative financial instruments for speculative or trading purposes. On the date a derivative contract is entered into, the Company designates its derivative as either a hedge of the fair value of a recognized asset or liability (“fair-value” hedge), as a hedge of the variability of cash flows to be received (“cash-flow” hedge), or as a foreign-currency hedge. Changes in the fair value of a derivative that is highly effective and is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on firm commitments), are recorded in current period earnings. Effective changes in the fair value of a derivative that is highly effective and is designated and qualifies as a cash-flow hedge, are recorded in other comprehensive income, until earnings are affected by the variability of the cash flows. Changes in the fair value of derivatives that are highly effective, and are designated and qualify as a foreign-currency hedge, are recorded in either current period earnings or other comprehensive income, depending on whether the hedge transaction is a fair-value hedge (e.g., a hedge of a firm commitment that is to be settled in a foreign currency) or a cash-flow hedge (e.g., a foreign-currency-denominated forecasted transaction).

63

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair-value, cash-flow or foreign-currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items. If it were to be determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company would discontinue hedge accounting prospectively, as discussed below.

      The Company would discontinue hedge accounting prospectively when (1) it is determined that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item (including firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated or exercised; (3) the derivative is no longer designated as a hedge instrument, because it is unlikely that a forecasted transaction will occur; (4) the hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designation of the derivative as a hedge instrument is no longer appropriate.

      When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as a highly effective fair-value hedge, the derivative will continue to be carried on the balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for changes in fair value. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the derivative will continue to be carried on the balance sheet at its fair value, and any asset or liability that was previously recorded pursuant to recognition of the firm commitment will be removed from the balance sheet and recognized as a gain or loss in current period earnings. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative will continue to be carried on the balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive income will be recognized immediately in earnings. When a fair value hedge on an interest-bearing financial instrument (such as an interest rate swap) is cancelled and hedge accounting is discontinued, the hedged item is no longer adjusted for changes in its fair value, and the remaining asset or liability will be amortized to earnings over the remaining life of the hedged item.

      Concentration of credit risk of financial instruments. Financial instruments that potentially subject the Company to credit risk consist of cash equivalents, short-term investments and accounts receivable. Cash equivalents and short-term investments are maintained with high quality institutions, the composition and maturities of which are regularly monitored by management. A majority of the Company’s trade receivables are derived from sales to large multinational computer, communication, networking, storage and consumer electronics manufacturers, with the remainder distributed across other industries. There is one customer that accounted for 22% of trade receivables as of December 31, 2004. No customers accounted for greater than 10% of trade receivables as of December 31, 2003. Concentrations of credit risk with respect to all other trade receivables are considered to be limited due to the quantity of customers comprising the Company’s customer base and their dispersion across industries and geographies. The Company performs ongoing credit evaluations of its customers’ financial condition and requires collateral as considered necessary. Write-offs of uncollectable amounts have not been significant.

      Self-insurance. The Company retains certain exposures in its insurance plan under self-insurance programs. Reserves for claims made and reserves for estimated claims incurred but not yet reported are recorded as current liabilities.

      Product warranties. The Company warrants finished goods against defects in material and workmanship under normal use and service for periods of one to five years for Semiconductor products and Storage Systems’

64

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

hardware products and 90 days for Storage Systems’ software products. A liability for estimated future costs under product warranties is recorded when products are shipped (see Note 12).

      Litigation and Settlement Costs. The Company is involved in legal actions arising in the ordinary course of business. The Company aggressively defends these legal actions. In accordance with SFAS No. 5, “Accounting for Contingencies,” the Company records an estimated loss for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements, and (ii) the amount of loss can be reasonably estimated.

      Stock-based compensation. The Company accounts for stock-based compensation, including stock options granted, restricted stock awards and shares issued under the Employee Stock Purchase Plan, using the intrinsic value method as prescribed in APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Compensation cost for stock options, if any, is measured as the excess of the quoted market price at grant date over the exercise price and recognized ratably over the vesting period. The Company’s policy is to grant options with an exercise price equal to the quoted market price of the Company’s stock on the grant date.

      For all acquisitions that closed after July 2000, the intrinsic value of the unvested options, restricted awards and warrants assumed as part of the acquisitions as of the closing date of the acquisitions was recorded as deferred stock compensation as a component of the purchase price to be amortized over the respective vesting periods of the options and awards. The Company calculated the value of restricted shares issued using the closing price of its common stock on the date of consummation of the purchase. The fair value of the vested options and warrants assumed was determined using the Black-Scholes model. Deferred stock compensation is included as a component of stockholders’ equity and is amortized straight line over the vesting period of one to four years. Forfeitures of acquisition related stock awards prior to vesting would result in any recognized compensation cost being reduced to zero in the period of forfeiture and any remaining unearned compensation cost being reversed through equity.

      The following table provides pro forma disclosures as if the Company had recorded compensation costs based on the estimated grant date fair value, as defined by SFAS No. 123, for all awards granted under its stock-based compensation plans. In such case, the Company’s net loss per share would have been adjusted to the pro forma amounts below.

		Year Ended December 31,
		2004			2003			2002
		(In thousands, except per share amounts)
Net loss, as reported		$	(463,531	)	$	(308,547	)	$	(292,440	)
Add: Amortization of non-cash deferred stock compensation expense determined under the intrinsic value method as reported in net loss, net of related tax effects*			3,494			9,243			30,583
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects			(120,265	)		(200,470	)		(253,599	)
Pro forma net loss		$	(580,302	)	$	(499,774	)	$	(515,456	)
Loss per share:
	Basic and diluted -as reported	$	(1.21	)	$	(0.82	)	$	(0.79	)
	Basic and diluted -pro forma	$	(1.51	)	$	(1.32	)	$	(1.39	)

*  This amount excludes amortization of non-cash deferred stock compensation on restricted stock awards.

65

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      The pro forma disclosure provided above may not be representative of the effect of applying SFAS No. 123 (Revised 2004). (See further discussion in “Recent Accounting Pronouncements” later in this Note 1.)

      The stock-based compensation expense determined under the fair value method, included in the table above, was calculated using the Black-Scholes model. The Black-Scholes model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. This model also requires highly subjective assumptions, including future stock price volatility and expected time until exercise, which greatly affect the calculated grant date fair value. The following weighted average assumptions were used in determining the estimated grant date fair values:

Employee Stock Options Granted	2004			2003			2002
Weighted average estimated grant date fair value	$	4.39		$	4.95		$	8.29
Assumptions in calculation:
Expected life (years)		3.90			3.85			3.84
Risk-free interest rate		3.03	%		2.73	%		3.97	%
Volatility		79.72	%		81.56	%		77.00	%
Dividend yield		—			—			—

Employee Stock Purchase Plan Right to Purchase Stock	2004			2003			2002
Weighted average estimated grant date fair value	$	2.65		$	3.09		$	3.44
Assumptions in calculation:
Expected life (years)		0.91			0.87			0.87
Risk-free interest rate		2.05	%		1.18	%		1.69	%
Volatility		69.17	%		88.59	%		80.39	%
Dividend yield		—			—			—

      Income Taxes. The calculation of the Company’s tax liabilities involves the application of United States generally accepted accounting principles to complex tax rules and regulations within multiple jurisdictions throughout the world. The Company’s tax liabilities include estimates for all income and related taxes that the Company believes are probable and that can be reasonably estimated. To the extent that the Company’s estimates are understated, additional charges to income tax expense would be recorded in the period in which the Company determines such understatement. If the Company’s income tax estimates are overstated, income tax benefits will be recognized when realized.

      Deferred tax assets and liabilities are recognized for temporary differences between financial statement and income tax bases of assets and liabilities. Valuation allowances are provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

      Related party transactions. There were no significant related party transactions during the years ended December 31, 2004, 2003 and 2002.

Recent accounting pronouncements.

      In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 123 (Revised 2004), entitled “Share-Based Payment.” This statement eliminates the alternative to use the intrinsic value method of accounting for stock options issued to employees. This statement requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. This statement applies to all

66

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

awards granted, modified, repurchased or cancelled as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The Company will apply the Statement beginning in the third fiscal quarter of 2005. In addition, compensation cost will be recognized on or after the effective date for the portion of outstanding awards for which the requisite service has not been rendered, based on the grant-date fair value of those awards calculated under SFAS No. 123 for pro forma disclosures. This statement also requires additional disclosures in the notes to the consolidated financial statements. We are currently evaluating the impact of adopting this statement; however, we expect that it will have a significant impact on our consolidated balance sheet and statement of operations. The impact on our financial statements will be dependent on the transition method, the option-pricing model used to compute fair value and the inputs to that model such as volatility and expected life. The pro forma disclosures of the impact of SFAS No. 123 provided earlier in this Note 1 may not be representative of the impact of adopting this statement.

      In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets-an amendment of APB Opinion No. 29.” This statement amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated balance sheet or statement of operations.

      On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the “Act”). The Act introduced a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer (repatriation provision), provided certain criteria are met. The Company has yet to complete its evaluation of the Foreign Earnings Repatriation Provision within the Act. At this time the Company has not been able to reasonably estimate the income tax effect of the Foreign Earnings Repatriation Provision. The Company plans to complete its evaluation in the second half of 2005.

      In November 2004, the FASB issued SFAS No. 151, “Inventory Costs-an amendment of ARB No. 43, Chapter 4.” This statement clarifies the accounting for abnormal amounts of facility expense, freight, handling costs and wasted materials (spoilage) to require them to be recognized as current-period charges. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated balance sheet or statement of operations.

      In November 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,’ in Determining Whether to Report Discontinued Operations.” EITF No. 03-13 provides guidance on when a component of an entity should be reported in discontinued operations if the entity will have cash flows from or continuing involvement in the component that is disposed of or held for sale. The consensus is effective for components of an entity disposed of or classified as held for sale in fiscal periods beginning after December 15, 2004. The adoption of this consensus is not expected to have a material impact on the Company’s consolidated balance sheet or statement of operations.

      In October 2004, EITF issued EITF Issue No. 04-08, “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings Per Share.” This issue addresses when contingently convertible instruments should be included in diluted earnings per share computations. The pronouncement is effective for the reporting periods ending after December 15, 2004. The adoption of this standard did not have an impact to the Company’s computation of diluted earnings per share.

      In October 2004, the EITF issued EITF Issue No. 04-10, “Applying Paragraph 19 of Statement of Financial Accounting Standards No. 131, in Determining Whether to Aggregate Operating Segments that do

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LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

not meet the Quantitative Thresholds.” SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information”, requires that a public business enterprise report financial and descriptive information about its reportable operating segments. This issue addresses how to aggregate operating segments that do not meet the quantitative thresholds in SFAS No. 131. The pronouncement is effective for fiscal years beginning in 2005. The adoption of this standard will not have an impact to the existing reportable operating segments of the Company.

      In March 2004, the EITF reached a consensus on Issue No. 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” EITF No. 03-01 provides guidance on recording other-than-temporary impairments of cost-method investments and requires additional disclosures for those investments. In September 2003, a FASB Staff Position was issued that delays the recognition and measurement guidance in EITF No. 03-01 until the final issuance of FASB Staff Position Issue 03-01 a. The adoption of the recognition and measurement provisions is not expected to have a material impact on the Company’s consolidated balance sheet or statement of operations.

Note 2 — Business Combinations

      The Company is continually exploring strategic acquisitions that build upon our existing library of intellectual property, human capital and engineering talent, and seeking to increase our leadership position in the markets in which we operate. Below is a discussion of recent acquisitions and acquired in-process research and development.

2004

      Acquisition of Accerant Inc. On May 11, 2004, the Company acquired Accerant Inc. (“Accerant”). The acquisition is anticipated to expand consumer product offerings within the Semiconductor segment. The acquisition was accounted for as a purchase of a business.

      The Company paid approximately $14.1 million in cash for the acquisition. In addition, as of the acquisition date, the Company agreed to issue approximately 234,000 restricted common shares to certain Accerant employees hired as part of the transaction. The resulting deferred stock compensation is being amortized to expense over a vesting period of two years using the straight-line method. See Note 10 for forfeitures of restricted shares prior to vesting. The total purchase price was allocated to the estimated fair value of net assets acquired based on management estimates as follows (in thousands):

Fair value of tangible net assets acquired	$	31
Current technology		5,700
Non-compete agreements		400
Goodwill		7,972
Total purchase price excluding deferred stock compensation		14,103
Deferred stock compensation		1,765
Total purchase price	$	15,868

      Useful life of intangible assets. The amounts allocated to current technology and non-compete agreements are being amortized over their estimated useful lives of 5 and 2 years, respectively, using the straight-line method.

      The Company may also pay additional cash of up to $2.5 million if certain revenue targets are achieved over the year ending December 31, 2005. Such contingent consideration will represent additional purchase price and accordingly goodwill when and if such targets are met.

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LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Acquisition of Velio Communications. On April 2, 2004, the Company acquired Velio Communications, Inc. (“Velio”). The acquisition is anticipated to expand product offerings for high-speed interconnect and switch fabric application specific standard products (“ASSPs”) for the communications market within the Semiconductor segment. The acquisition was accounted for as a purchase of a business.

      The Company paid approximately $19.8 million in cash for the acquisition. In addition, as of the acquisition date, the Company agreed to issue approximately 100,000 restricted common shares to certain Velio employees hired as part of the transaction. The resulting deferred stock compensation is being amortized to expense over a vesting period of two years using the straight-line method. See Note 10 for forfeitures of restricted shares prior to vesting. The total purchase price was allocated to the estimated fair value of net assets acquired based on management estimates as follows (in thousands):

Fair value of tangible net assets acquired	$	1,529
Current technology		8,788
Customer base		8,788
Non-compete agreements		450
Existing purchase orders		200
Total purchase price excluding deferred stock compensation		19,755
Deferred stock compensation		1,000
Total purchase price	$	20,755

      Useful life of intangible assets. The amounts allocated to current technology, customer base, non-compete agreements and existing purchase orders are being amortized over their estimated useful lives of 9 months to 5.5 years using the straight-line method.

      Pro forma statements of earnings information have not been presented because the effect of these acquisitions was not material either individually or on an aggregate basis.

2003

      There were no material acquisitions during 2003.

2002

      During 2002, the Company completed two acquisitions accounted for under the purchase method of accounting. Pro forma statements of earnings information have not been presented because the effect of these

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LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

2002 acquisitions was not material either on an individual or an aggregate basis. See summary table below (in millions):

Entity Name or Type

Fair Value

of Technology;

of Tangible

Segment Included in;

Net Assets/

Amortizable

In-Process

Description of

Total Purchase

Type of

(Liabilities)

Intangible

Research and

Deferred Stock

Acquired Business

Acquisition Date

Price

Consideration

Acquired

Goodwill

Assets

Development

Compensation

Mylex Business Unit of

August 2002

$

50.5

Cash

$

14.1

$

20.5

$

14.0

$

1.9

$

—

IBM;

Entry-level storage

systems in the Storage

Systems segment and

PCI-RAID products in

the Semiconductor

segment

Digital video product

November 2002

$

6.7

Cash

$

(0.2

)

$

2.9

$

1.8

$

1.0

$

1.2

technologies;

Semiconductor segment

      Acquired in-process research and development. The Company did not record any acquired in-process research and development (“IPR&D”) charges in 2004 or 2003. The Company recorded charges of $3 million for the year ended December 31, 2002 associated with IPR&D primarily in connection with an acquisition as summarized in the table below.

										Revenue
	Acquisition				Discount			Percentage of		projections extend
Company	Date		IPR&D		Rate			Completion		through
	(Dollar amounts in millions)
Mylex Division of IBM		August 2002	$	1.9		25	%		10% to 50%		2006

      The amounts of IPR&D were determined by identifying research projects for which technological feasibility had not been established and no alternative future uses existed as of the respective acquisition dates. The value of the projects identified to be in progress was determined by estimating the future cash flows from the projects once commercially feasible, discounting the net cash flows back to their present value and then applying a percentage of completion to the calculated value. The net cash flows from the identified projects were based on estimates of revenues, cost of revenues, research and development costs, selling, general and administrative costs and applicable income taxes for the projects. Total revenues for the projects are expected to extend through the dates noted in the table above by acquisition. These projections were based on estimates of market size and growth, expected trends in technology and the expected timing of new product introductions by our competitors and the Company. These estimates did not account for any potential synergies realizable as a result of the acquisition and were in line with industry averages and growth estimates.

      The percentage of completion for the projects was determined by calculating expenses incurred up to the acquisition date as a percentage of total research and development expenses to bring the projects to technological feasibility.

      A discount rate is used for the projects to account for the risks associated with the inherent uncertainties surrounding the successful development of the IPR&D, market acceptance of the technology, the useful life of the technology, the profitability level of such technology and the uncertainty of technological advances, which could impact the estimates described above. As of December 31, 2003, all projects were completed.

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LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

Note 3 — Restructuring and other items

2004

      The Company recorded net charges of $423.4 million in restructuring of operations and other items for the year ended December 31, 2004, consisting of $433.5 million in charges for restructuring of operations and impairment of long-lived assets and a gain of $10.1 million for other items. Of these charges, $420.2 million was recorded in the Semiconductor segment and $3.2 million was included in the Storage Systems segment.

Restructuring and impairment of long-lived assets:

First quarter of 2004:

      The Company recorded a gain of $3.3 million on the sale of fixed assets that had previously been held for sale and an expense of $1.1 million for the abandonment of fixed assets that had previously been held for sale. In addition, an expense of $1.1 million was recorded for the write-down of fixed assets due to impairment.

      An expense of $0.3 million was recorded to reflect the change in time value of accruals for facility lease termination costs, net of adjustments for changes in sublease assumptions for certain previously accrued facility lease termination costs. An expense of $0.2 million was recorded primarily for severance and termination benefits for four employees involved in research and development.

Second quarter of 2004:

      The Company recorded a gain of $1.0 million on the sale of fixed assets that had previously been held for sale and an expense of $4.0 million primarily for the write-down of the Colorado Springs fabrication facility to reflect a decline in fair market value and to write down certain spare parts for fixed assets.

      An expense of $0.4 million was recorded to reflect the change in time value of accruals for facility lease termination costs, net of adjustments for changes in sublease assumptions for certain previously accrued facility lease termination costs. Previously accrued contract termination fees of $0.4 million were reversed as the result of more favorable than expected negotiations to terminate those contracts.

Third quarter of 2004:

      As a result of the decline in revenues in the semiconductor industry and a corresponding decline in the Company’s outlook as of the latter part of the third quarter of 2004, the Company initiated a comprehensive restructuring program, which included asset impairments, a global reduction in workforce and the consolidation of certain facilities as described further below.

      The Company concluded in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” that the Gresham manufacturing facility assets were impaired. Accordingly, an asset write-down of $205.5 million was recorded in the semiconductor segment during the third quarter of 2004. The fair values of equipment and facilities were researched and estimated by management.

      The Company announced workforce reductions of approximately 560 positions worldwide across all job functions and recorded a charge of $14.6 million in the Semiconductor segment for severance and termination benefits.

      The Company recorded a gain of $1.9 million on the sale of fixed assets that had previously been held for sale and an expense of $3.4 million for the write-down of the Colorado Springs fabrication facility to reflect a decline in fair market value, the impairment of certain acquired intangible assets in the Semiconductor segment and the write-down of leasehold improvements related to the facility operating leases discussed below.

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LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      In the third quarter of 2004, the Company consolidated additional non-manufacturing facilities and recorded $6.1 million for costs associated with exiting certain operating leases for real estate as the facilities ceased being used. An expense of $0.4 million was recorded to reflect the change in time value of prior accruals for facility lease termination costs. In addition, an expense of $1.8 million was recorded for changes in sublease assumptions for certain previously accrued facility lease termination costs.

Fourth quarter of 2004:

      In November 2004, the Company exercised its right to purchase all of the wafer fabrication equipment that had previously been under two operating lease and security agreements. The purchase amount was $332 million. Cash collateral of $311 million associated with the leases was returned to the Company. Termination fees under the lease agreements were not significant. The formerly leased equipment is part of the Gresham manufacturing facility, but was not impaired in the third quarter of 2004 because the Company did not own the equipment until November of 2004, as discussed above. Accordingly, in the fourth quarter of 2004, after purchasing the previously leased equipment, the Company recorded an additional impairment charge of $177.7 million in restructuring of operations and other items within the Semiconductor segment. The charge includes a write-down of $247.7 million to reflect the equipment at fair value, the reversal of a $56.0 million deferred gain previously recorded in non-current liabilities related to the sale-leaseback of equipment during 2003, lease termination fees and the write-off of capitalized lease fees and deferred rent. The fair values of the impaired equipment were researched and estimated by management.

      In the Semiconductor segment, the Company recorded a gain of $0.6 million on the sale of fixed assets that had previously been held for sale; an expense of $11.4 million for the write-down of the Colorado Springs fabrication facility to reflect a decline in fair market value; and an expense of $0.3 million for the write-down of leasehold improvements related to the facility operating leases discussed below and other fixed assets.

      During the third quarter of 2004, the Company reclassified a parcel of land in Japan with a book value of $1.4 million from a long-term asset to a current asset held for sale. The land was part of the total assets in the Semiconductor segment. The land was sold in the fourth quarter of 2004 and a gain of $0.2 million was recorded.

      As part of the restructuring program initiated in the third quarter, the Company decided to discontinue development of a product line in the Semiconductor segment that had been acquired in connection with the Datapath acquisition in 2000. As a result, an analysis of the future net cash flows related to the affected product line was performed and the Company determined that certain acquired intangible assets were impaired. An impairment charge of $4.7 million for the write-down of the acquired intangible assets to fair market value was recorded in the Semiconductor segment.

      In the fourth quarter of 2004, the Company consolidated additional non-manufacturing facilities and recorded $1.9 million for costs associated with exiting certain operating leases for real estate as the facilities ceased being used. An expense of $0.5 million was recorded to reflect the change in time value of accruals for facility lease termination costs. Previously accrued lease termination fees of $0.3 million were reversed as the result of favorable negotiations to terminate those contracts.

      The Company recorded $2.5 million for additional severance and termination benefits in the Semiconductor segment related to the workforce reductions described in the third quarter of 2004 above, primarily in Europe and the United States due to changes in estimates.

      In our Storage Systems segment, during the fourth quarter, we initiated realignment of our product portfolio and overhead cost structures driven by the future operating and financial performance goals of the Storage Systems segment. In connection with this action the Company recorded a $1.5 million charge for severance and termination benefits for 70 employees across multiple activities and functions. In addition, the Company recorded a charge of $1.7 million for the write-off of previously capitalized software development

72

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

costs. The Company cancelled the related project based upon the determination that this project would not achieve the desired future financial performance goals.

      Assets held for sale of $11 million and $30 million were included as a component of prepaid expenses and other current assets as of December 31, 2004 and December 31, 2003, respectively. Assets classified as held for sale are not depreciated. The fair values of impaired equipment and facilities were researched and estimated by management. Given that current market conditions for the sale of older fabrication facilities and related equipment may fluctuate due to demand for used semiconductor equipment, there can be no assurance that the Company will realize the current net carrying value of the assets held for sale. The Company reassesses the realizability of the carrying value of these assets at the end of each quarter until the assets are sold or otherwise disposed of and additional adjustments may be necessary.

      The following table sets forth our restructuring reserves as of December 31, 2004, which are included in other accrued liabilities on the balance sheet:

		Balance at		Restructuring		Release of			Utilized			Balance at
		December 31,		Expense		Reserve			During			December 31,
		2003		2004		2004			2004			2004
		(In thousands)
Write-down of excess assets and decommissioning costs(a)		$	2,661	$	404,723	$	(760	)	$	(405,417	)	$	1,207
Lease terminations and maintenance contracts(b)			21,021		11,388		(665	)		(11,679	)		20,065
Facility closure and other exit costs(c)			2,136		64		—			(1,657	)		543
Payments to employees for severance(d)			874		18,812		(18	)		(12,260	)		7,408
	Total	$	26,692	$	434,987	$	(1,443	)	$	(431,013	)	$	29,223

(a)  The amounts utilized in 2004 reflect $411.6 million of non-cash write-downs of long-lived assets in the U.S. due to impairment and $0.8 million in cash payments to decommission and sell assets, offset by a $7.0 million realized gain on the sale of fixed assets previously held for sale. The write-downs of long-lived assets were accounted for as a reduction of the assets and did not result in a liability. The $1.2 million balance as of December 31, 2004, relates to machinery and equipment decommissioning costs in the U.S. and estimates of selling costs for assets held for sale and is expected to be utilized during 2005.

(b)	Amounts utilized represent cash payments. The balance remaining for primarily real estate lease terminations and maintenance contracts will be paid during the remaining terms of these contracts, which extend through 2011.
(c)	Amounts utilized represent cash payments. The balance remaining for facility closure and other exit costs will be paid during 2005.
(d)	Amounts utilized represent cash severance payments to 495 employees during the year ended December 31, 2004. The balance remaining for severance benefits is expected to be paid by the end of 2005.

Other Items:

      During the second quarter of 2004, the Company reclassified a parcel of land in Colorado with a book value of $1.4 million from a long-term asset to a current asset held for sale. The land is part of total assets in the Semiconductor segment. The Company expects to sell the property within the next 12 months for an amount in excess of book value.

      During the third quarter of 2004, the Company entered into two new lease agreements for wafer fabrication equipment. The equipment was previously on lease immediately prior to the closing of the new

73

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

lease agreements. The Company had capitalized and was amortizing fees related to the previous leases. Upon entering into the new lease agreements, $2.5 million in remaining unamortized fees for the previous leases were recorded as an expense in the statement of operations.

      During the third quarter of 2004, the Company discontinued hedge accounting treatment on the interest rate swap related to the equipment operating leases that were refinanced and recorded the $3.8 million balance in accumulated comprehensive income as a gain in the statement of operations (see Note 8).

      During the fourth quarter of 2004, the Company released $8.8 million in accruals that were established in years prior to 2004, because management determined that the accruals were no longer necessary.

2003

      The Company recorded net charges of $181 million in restructuring of operations and other items for the year ended December 31, 2003 consisting of $183 million in charges for restructuring of operations and a gain of $2 million for other items. Of these charges, $166 million was recorded in the Semiconductor segment and $15 million was included in the Storage Systems segment.

Restructuring and impairment of long-lived assets:

      On January 1, 2003, the Company adopted SFAS No. 146, “Accounting for Exit or Disposal Activities.” SFAS No. 146 has been applied to restructuring activities initiated after December 31, 2002 and changes the timing of when restructuring charges are recorded to the date when the liabilities are incurred.

First quarter of 2003:

      In February 2003, the Company downsized operations and recorded $36 million in charges for restructuring of operations and other items. Of this charge, $21 million was associated with the Semiconductor segment and $15 million was attributable to the Storage Systems segment. The charges consisted of severance and termination benefits of $5 million for 210 employees involved in manufacturing operations, research and development and marketing and sales; $1 million for costs associated with exiting certain operating leases primarily for real estate; and write-downs of $24 million for certain acquired intangible assets, $4 million for capitalized software and $2 million for fixed assets. During the year ended December 31, 2003, payments related to the February 2003 restructuring actions consisted of approximately $4 million for severance and termination benefits and $1 million for lease and contract terminations.

Second quarter of 2003:

      In April 2003, the Company announced a restructuring of its operations that included a reduction in workforce and the consolidation of certain non-manufacturing facilities. A charge of $33 million was recorded in the Semiconductor segment consisting of severance and termination benefits of $9 million for 325 employees involved in manufacturing operations, research and development, marketing, sales and administration; $19 million for costs associated with exiting certain operating leases primarily for real estate; other exit costs of $0.2 million; and a write-down of $5 million for fixed assets due to impairment. During the year ended December 31, 2003, payments related to the April 2003 restructuring actions consisted of approximately $9 million for severance and termination benefits, $3 million for lease and contract terminations and $0.1 million for other exit costs.

      In June 2003, the Company announced the decision to sell the Tsukuba, Japan manufacturing facility. During the second quarter, a charge of $73 million was recorded in the Semiconductor segment to write-down fixed assets to their fair market value. The fair value was reclassified from property, plant and equipment to other current assets to reflect the intention to dispose of the facility within the next twelve months. In addition,

74

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

approximately $2 million in restructuring charges were recorded in the second quarter for severance and other exit costs. See further discussion in the third quarter below.

      In June 2003, the Company also recorded $19 million of additional fixed asset write-downs to reflect the decrease in fair market value of the assets during the period. This write-down included a reduction in the value of the Colorado Springs fabrication facility of $16 million to reflect continued and accelerated efforts to sell the facility.

Third quarter of 2003:

Agreement to sell Japan fabrication facility:

      In September 2003, the Company entered into a definitive agreement to sell the Tsukuba, Japan facility to Rohm Company Ltd. (“Rohm”), a Japanese company. The sale closed during November 2003 for 2.82 billion Yen (approximately $26 million). As part of the definitive agreement, the Company agreed to purchase a minimum amount of production wafers from Rohm for a period of 15 months following the close of the transaction. As a result, a charge of $4 million was recorded in cost of revenues during the third quarter of 2003. This charge is a result of the application of our policy to accrue for non-cancelable inventory purchase commitments in excess of 12 months of estimated demand. Included in the $4 million charge to cost of revenues is a reclassification of $3 million from restructuring expense originally recorded in the second quarter of 2003 to better reflect the terms of the definitive agreement. Also in the quarter, $2 million was recorded for additional severance benefits to be paid and for contract termination and other exit costs associated with the definitive agreement. During the year ended December 31, 2003, payments related to the Japan restructuring actions consisted of approximately $1 million for severance and termination benefits and $0.2 million for lease and contract terminations.

Other third quarter 2003 restructuring actions:

      In the third quarter of 2003, the Company continued to consolidate non-manufacturing facilities and recorded $2 million for costs associated with exiting certain operating leases for real estate as the facilities ceased being used.

      In September 2003, the Company decided to discontinue development programs and to refocus sales and marketing efforts for certain product lines in the Semiconductor segment. As a result of an analysis of future net cash flows related to the affected product lines, it was determined that certain acquired intangible assets were impaired. An impairment charge of $21 million related to the write-down of the acquired intangible assets to fair market value was recorded in the third quarter of 2003. These intangible assets were originally acquired in connection with the acquisition of C-Cube Microsystems in the second quarter of 2001. In addition, $3 million in restructuring charges were recorded in the third quarter of 2003. These charges related to severance and termination benefits for 97 employees primarily involved in research and development and for certain contract termination costs and fixed asset write-downs due to impairment. The severance benefits were paid during the third quarter of 2003.

Fourth quarter of 2003:

      In the fourth quarter of 2003, the Company reversed approximately $2 million of previously accrued restructuring expenses. The reversal was primarily due to the combination of a favorable negotiation to terminate leases for real property and severance payments that were lower than expected due to the timing of the sale of the Japan manufacturing facility to Rohm. An expense of $1 million recorded to reflect the change in time value of accruals for facility lease termination costs and the write-down of fixed assets due to impairment. Certain other reclassifications were made between asset decommissioning costs and other facility closure costs to reflect changes in management estimates for the remaining costs for these activities.

75

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      In December 2003, the Company recorded $2 million of additional fixed asset write-downs to reflect the decrease in fair market value of the assets during the period. The Company also recorded a realized gain of $5 million on the sale of fixed assets that had previously been held for sale.

      The following table sets forth the Company’s restructuring reserves as of December 31, 2003, which are included in other accrued liabilities on the balance sheet:

		Balance at		Restructuring		Release of			Utilized			Balance at
		December 31,		Expense		Reserve and			During			December 31,
		2002		2003		Reclassifications			2003			2003
		(In thousands)
Write-down of excess assets and decommissioning costs(a)		$	6,008	$	147,454	$	(6,422	)	$	(144,379	)	$	2,661
Lease terminations and maintenance contracts(b)			6,757		23,444		(1,146	)		(8,034	)		21,021
Facility closure and other exit costs(c)			8,129		1,072		1,203			(8,268	)		2,136
Payments to employees for severance(d)			1,391		18,095		(928	)		(17,684	)		874
	Total	$	22,285	$	190,065	$	(7,293	)	$	(178,365	)	$	26,692

(a)  The amounts utilized in 2003 reflect $142 million of non-cash write-downs of amortizable intangible and other long-lived assets in the U.S. and Japan due to impairment, and $2 million in cash payments to decommission and sell assets. The write-downs of the intangible and other long-lived assets were accounted for as a reduction of the assets and did not result in a liability. The $3 million balance as of December 31, 2003 relates to machinery and equipment decommissioning costs in U.S. and estimates of selling costs for assets held for sale.

(b)	Amounts utilized represent cash payments. The balance remaining for primarily real estate lease terminations and maintenance contracts will be paid during the remaining terms of these contracts, which extend through 2011.
(c)	Amounts utilized represent cash payments.
(d)	Amounts utilized represent cash severance payments to 777 employees during 2003. The $0.9 million balance as of December 31, 2003 was paid during 2004.

Other items:

      A gain of approximately $2.2 million was recorded in restructuring and other items, net during the second quarter of 2003 associated with additional sales of intellectual property associated with the CDMA handset product technology.

2002

      The Company recorded approximately $67.1 million in restructuring of operations and other items for the year ended December 31, 2002, consisting of $75.2 million for restructuring of operations, and a gain of $8.1 million for other items, including the gain on sale of CDMA handset product technology. Restructuring of operations and other items were primarily included in the Semiconductor segment; the restructuring expense included in the Storage Systems segment was not significant.

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LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

Restructuring and impairments of long-lived assets:

      In the first quarter of 2002, the Company announced a set of actions to reduce costs and streamline operations. These actions included a worldwide reduction in workforce, downsizing the Company’s manufacturing operations in Tsukuba, Japan and the decision to exit the CDMA handset product technology. During the three months ended March 31, 2002, the Company recorded a restructuring charge for severance for 1,150 employees worldwide and exit costs primarily associated with cancelled contracts and operating leases. As a result of the restructuring actions, the Company recorded fixed asset write-downs due to impairment in the U.S. and Japan for assets to be disposed of by sale. In the second quarter of 2002, the Company completed the sale of CDMA handset product technology to a third party, recognizing a net gain of $6.4 million.

      During the fourth quarter of 2002, the Company reversed approximately $5 million of previously accrued restructuring expenses. As a result of the Company’s decision to terminate fewer employees than the original plan contemplated in Tsukuba, Japan, previously accrued restructuring expenses were reversed for termination benefits, including outplacement costs and certain contract termination fees of $7 million. This was offset by additional expense accruals of $2 million for costs related to the previously announced closure of the Colorado Springs fabrication facility. Certain other reclassifications were made between lease and contract terminations and facility closure and other exit costs to reflect changes in management estimates for the remaining costs for these activities.

      In September 2002, the Company recorded $13 million of additional fixed asset write-downs to reflect the decrease in the fair market value of the assets during the period.

      The following table sets forth the Company’s restructuring reserves as of December 31, 2002, which are included in other accrued liabilities on the balance sheet:

		Balance at		Restructuring		Release of			Utilized			Balance at
		December 31,		Expense		Reserve and			During			December 31,
		2001		2002		Reclassifications			2002			2002
		(In thousands)
Write-down of excess assets and decommissioning costs(a)		$	3,762	$	38,918	$	5,147		$	(41,819	)	$	6,008
Lease terminations and maintenance contracts(c)			10,695		12,871		(10,559	)		(6,250	)		6,757
Facility closure and other exit costs(c)			14,153		415		4,058			(10,497	)		8,129
Payments to employees for severance(b)			724		27,490		(3,150	)		(23,673	)		1,391
	Total	$	29,334	$	79,694	$	(4,504	)	$	(82,239	)	$	22,285

(a)  Amounts utilized in 2002 reflect a non-cash write-down of fixed assets in the U.S. and Japan due to impairment of $38.3 million and cash payments for machinery and equipment decommissioning costs of $3.5 million. The fixed asset write-downs were accounted for as a reduction of the assets and did not result in a liability. The $6.0 million balance as of December 31, 2002 relates to machinery and equipment decommissioning costs in the U.S. and selling costs for assets held for sale.

(b)	Amounts utilized represent cash severance payments to 1,290 employees during the year ended December 31, 2002. The $1.4 million balance as of December 31, 2002 was paid during 2003.
(c)	Amounts utilized represent cash payments.

77

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

Other items:

      The Company recorded a net gain of $1.7 million in other items during the first quarter of 2002, which consisted of a nonrefundable deposit paid to the Company in the first quarter of 2002 related to the termination of the agreement to sell the Colorado Springs fabrication facility during 2001, offset in part by certain costs associated with maintaining CDMA handset product technology until sold.

Note 4 — Segment and Geographic Information

      The Company operates in two reportable segments: the Semiconductor segment and the Storage Systems segment. The Storage Systems segment may also be referred to as Engenio. In the Semiconductor segment, the Company uses advanced deep sub-micron process technologies and comprehensive design methodologies to design, develop, manufacture and market highly complex integrated circuits. These system-on-a-chip solutions include both application specific integrated circuits, commonly referred to as ASICs, and application specific standard products in silicon, or ASSPs. Semiconductor segment product offerings also include host bus adapters, RAID adapters and related products, and services. In the Storage Systems segment, the Company designs, manufactures and sells high-performance, highly scalable open storage area network systems and storage solutions to original equipment manufacturers and a specialized network of resellers. The Storage Systems’ products are sold as complete storage systems or sub-assemblies configured from modular components, including our disk array controller boards and related enclosures, disk drive enclosures and related management software.

      In November 2003, the Company announced its intention to separate its majority-owned subsidiary, Engenio, from the Company and create an independent storage systems company. The separation of Engenio from the Company, including the transfer of related assets, liabilities and intellectual property rights, was substantially completed in December 2003. The Company has entered into agreements to address various arrangements between Storage Systems and the Company as discussed in Note 13. The separation agreements did not materially change the reported assets or results of operations for the Storage Systems segment during 2004 when compared to prior years.

      Information about profit or loss and assets. The following is a summary of operations by segment for the years ended December 31, 2004, 2003 and 2002:

			Year Ended December 31,
			2004			2003			2002
			(In thousands)
Revenues:
	Semiconductor		$	1,248,531		$	1,269,708		$	1,481,386
	Storage Systems			451,633			423,362			335,552
		Total	$	1,700,164		$	1,693,070		$	1,816,938
Income/(loss) from operations:
	Semiconductor		$	(449,686	)	$	(295,710	)	$	(290,017	)
	Storage Systems			13,337			23,094			25,204
		Total	$	(436,349	)	$	(272,616	)	$	(264,813	)

      Intersegment revenues for the periods presented above were not significant. Restructuring of operations and other items were included in both segments.

78

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      The following is a summary of total assets by segment as of December 31, 2004, 2003 and 2002:

		December 31,
		2004		2003		2002
		(In thousands)
Total assets:
	Semiconductor	$	2,549,016	$	3,115,610	$	3,721,282
	Storage Systems		324,985		332,291		291,454
	Total	$	2,874,001	$	3,447,901	$	4,012,736

      Significant Customers. The following table summarizes the number of our significant customers, each of whom accounted for 10% or more of our revenues, along with the percentage of revenues they individually represent on a consolidated basis and by segment:

		Year Ended December 31,
		2004		2003		2002
Semiconductor segment:
	Number of significant customers		—		1		1
	Percentage of segment revenues		—		18%		22%
Storage Systems segment:
	Number of significant customers		3		3		3
	Percentage of segment revenues		54%, 14%, 12%		52%, 14%, 11%		36%, 20%, 15%
Consolidated:
	Number of significant customers		1		2		1
	Percentage of consolidated revenues		16%		15%, 13%		18%

      Information about geographic areas. The Company’s significant operations outside the United States include sales offices in Europe, Asia and Japan. The following is a summary of revenues and long-lived assets by entities located within the indicated geographic areas.

			Year Ended December 31,
			2004		2003		2002
			(In thousands)
Revenues:
	North America		$	852,453	$	863,620	$	905,323
	Asia, including Japan			655,077		677,266		748,906
	Europe			192,634		152,184		162,709
		Total	$	1,700,164	$	1,693,070	$	1,816,938

			December 31,
			2004		2003		2002
			(In thousands)
Long-lived assets:
	North America		$	380,527	$	865,567	$	968,976
	Asia, including Japan			37,870		50,471		133,953
	Europe			3,686		4,623		5,559
		Total	$	422,083	$	920,661	$	1,108,488

79

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      In 2004, Engenio formed new subsidiaries within Europe. These subsidiaries recorded approximately $48 million in revenues. In prior years, all revenues generated by Engenio in Europe were reported in North America.

      Long-lived assets consist of net property and equipment, capitalized software and other long-term assets, excluding long-term deferred tax assets.

Note 5 — Cash, Cash Equivalents and Investments

			December 31,
			2004		2003
			(In thousands)
Cash and cash equivalents
Cash in financial institutions			$	51,172	$	108,989
Cash equivalents:
	Overnight deposits and money market funds			146,292		103,185
	Commercial paper			18,260		39,294
	Corporate and municipal debt securities			—		11,370
	U.S. government and agency securities			2,999		6,844
	Total cash equivalents			167,551		160,693
	Total cash and cash equivalents		$	218,723	$	269,682
Available-for-sale debt securities
Asset and mortgage-backed securities			$	292,898	$	345,625
U.S. government and agency securities				234,787		104,173
Corporate and municipal debt securities				68,177		90,730
Auction rate preferred stock				—		3,150
Foreign debt securities				—		329
		Total short-term investments	$	595,862	$	544,007
Long-term investments in equity securities
Marketable equity securities			$	28,372	$	22,912
Non-marketable equity securities				9,307		12,543
		Total long-term investments in equity securities	$	37,679	$	35,455

      Contractual maturities of available-for-sale debt securities as of December 31, 2004 were as follows (in thousands):

Due within one year	$	77,090
Due in 1-5 years		330,152
Due in 5-10 years		45,175
Due after 10 years		143,445
Total	$	595,862

      The maturities of asset and mortgage-backed securities were allocated based on contractual principal maturities assuming no prepayments.

      Net realized gains on sales of available-for-sale debt securities were $1 million, $10 million and $8 million for the years ended December 31, 2004, 2003 and 2002, respectively.

80

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      The Company realized pre-tax gains of $8 million related to the following for the year ended December 31, 2004:

•  A $3 million pre-tax gain associated with marketable available-for-sale equity securities of a certain technology company that was acquired by another technology company in the first quarter of 2004; and

•  A $5 million pre-tax gain related to the sales of certain marketable available-for-sale equity securities in the second quarter of 2004.

      The above pre-tax gains were recorded under interest income and other, net in Consolidated Statements of Operations.

      The following table includes the details of pre-tax losses related to investments in equity securities that the Company has recorded. Management believed that the declines in value were other than temporary.

		Non-Marketable		Marketable
		Equity		Equity
		Investments		Investments
		(In millions)
Pre-tax loss:
	Year ended December 31, 2004	$	3.3	$	4.1
	Year ended December 31, 2003		7.9		2.7
	Year ended December 31, 2002		15.5		6.0
Total carrying value of impaired investments as of December 31, 2004		$	4.8	$	2.9

Investments in available-for-sale securities

	Adjusted		Gross Unrealized		Gross Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	(In thousands)
December 31, 2004
Short-term debt securities	$	600,527	$	728	$	(5,393	)	$	595,862
Long-term marketable equity securities		5,912		22,460		—			28,372
December 31, 2003
Short-term debt securities		544,540		1,900		(2,433	)		544,007
Long-term marketable equity securities		10,406		12,506		—			22,912

      The following table shows the gross unrealized losses and fair values of the Company’s investments that have been in a continuous unrealized loss position for less than and greater than 12 months, aggregated by investment category as of December 31, 2004.

	Less than 12 Months				Greater than 12 Months
	Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses
	(In thousands)
Asset and mortgage-backed securities	$	107,680	$	1,177	$	38,287		1,192
U.S. government and agency securities		167,660		2,321		13,822		383
Corporate and municipal debt securities		52,029		320		—		—
	$	327,369	$	3,818	$	52,109	$	1,575

      Marketable Debt Securities. The Company’s investments in marketable debt securities primarily consist of asset-backed, mortgage-backed, U.S. government, U.S. agency, corporate and municipal debt securities.

81

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

The unrealized losses on the Company’s investments in marketable debt securities were primarily caused by rising interest rates. The Company frequently monitors the credit quality of its investments in marketable debt securities and, as of December 31, 2004, there were no known material problems with issuer credit quality. Since the unrealized losses were primarily the result of changes in interest rates rather than credit quality, the Company considered these unrealized losses to be temporary as of December 31, 2004.

82

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

Note 6 — Balance Sheet Detail

		December 31,
		2004			2003
		(In thousands)
Inventories:
	Raw materials	$	20,022		$	15,352
	Work-in-process		106,818			116,340
	Finished goods		92,060			66,825
		$	218,900		$	198,517
Prepaid expenses and other current assets:
	Deferred tax assets	$	5,661		$	8,116
	Assets held for sale		11,034			29,883
	Current portion of assets and deposits		—			57,805
	Prepaid expense and other current assets		43,042			50,843
		$	59,737		$	146,647
Property and equipment:
	Land	$	31,305		$	37,569
	Buildings and improvements		109,891			359,402
	Equipment		463,271			667,899
	Furniture and fixtures		30,697			30,567
	Leasehold improvements		30,608			34,226
	Construction in progress		10,622			26,903
			676,394			1,156,566
	Accumulated depreciation and amortization		(364,478	)		(675,077	)
		$	311,916		$	481,489
Depreciation for property and equipment totaling $86 million, $149 million and $206 million was included in the Company’s results of operations during 2004, 2003 and 2002, respectively
Other assets:
	Deferred tax assets	$	5,044		$	7,484
	Software, net		22,959			21,755
	Investment in equity securities		37,679			35,455
	Debt issuance costs, net		11,901			17,123
	Other assets		37,628			46,663
		$	115,211		$	128,480
Software amortization totaling $12 million, $25 million and $43 million was included in the Company’s results of operations during 2004, 2003 and 2002, respectively
Other accrued liabilities:
	Accrued expenses	$	87,094		$	105,870
	Warranty reserves		10,040			9,474
	Restructuring reserves		29,223			26,692
	Sales tax payable		11,118			6,532
	Interest payable		4,803			5,289
		$	142,278		$	153,857
Tax related liabilities and other:
	Other long-term tax-related liabilities	$	77,313		$	77,161
	Deferred gain on sale of equipment under operating lease		—			56,601
	Liability for the fair value of residual value guarantees on operating lease		—			6,700
	Other long-term liabilities		257			634
		$	77,570		$	141,096
Accumulated other comprehensive income:
	Net unrealized gains on available-for-sale securities, net of tax of $6,228 and $4,190	$	11,567		$	7,783
	Unrealized gain on cash-flow hedges, net of tax of $-and $698		—			1,995
	Foreign currency translation adjustments		26,383			24,435
		$	37,950		$	34,213

      The Company recorded, as a component of cost of revenues, additional excess inventory and related charges of $46 million for the year ended December 31, 2002. The charges were due to underutilization

83

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

related to a temporary idling of the Company’s fabrication facilities due to reduced demand and a sudden and significant decrease in forecasted revenue. The charges were calculated in accordance with the Company’s policy, which is primarily based on inventory levels in excess of 12 months’ judged demand for each specific product.

      An allocation of interest costs incurred on borrowings during a period required to complete construction of the asset was capitalized as part of the historical cost of acquiring certain assets. No interest was capitalized during 2004 and 2003. Gross capitalized interest included in property and equipment totaled $29 million at December 31, 2003. Accumulated amortization of capitalized interest was $22 million at December 31, 2003. Capitalized interest, net of accumulated amortization was written-off in the third quarter of 2004 as a result of the impairment of the Gresham manufacturing facility (see Note 3).

      Other long-term tax-related liabilities includes $37 million in income taxes payable as of December 31, 2004 and 2003.

Note 7 — Intangible Assets and Goodwill

      Intangible assets by reportable segment are comprised of the following (in thousands):

			December 31, 2004					December 31, 2003
			Gross Carrying		Accumulated			Gross Carrying		Accumulated
			Amount		Amortization			Amount		Amortization
Semiconductor:
	Current technology		$	318,402	$	(239,973	)	$	319,364	$	(195,837	)
	Trademarks			29,685		(20,496	)		29,684		(15,981	)
	Customer base			8,788		(1,198	)		—		—
	Non-compete agreements			849		(195	)		—		—
	Existing purchase orders			200		(200	)		—		—
		Subtotal		357,924		(262,062	)		349,048		(211,818	)
Storage Systems:
	Current technology			50,039		(41,424	)		50,039		(33,802	)
	Trademarks			3,750		(2,950	)		3,750		(2,458	)
	Customer base			5,010		(3,420	)		5,010		(2,540	)
	Supply agreement			7,247		(5,657	)		7,247		(3,240	)
		Subtotal		66,046		(53,451	)		66,046		(42,040	)
Total			$	423,970	$	(315,513	)	$	415,094	$	(253,858	)

84

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Amortization expense and the weighted average lives of intangible assets are shown in the table below:

	Weighted		Year Ended December 31,
	Average Lives
	(in months)		2004		2003		2002
			(In thousands)
Current technology		79	$	65,153	$	67,742	$	70,713
Trademarks		83		5,007		5,334		6,248
Customer base		68		2,078		856		836
Supply agreement		36		2,417		2,420		820
Non-compete agreements		46		195		—		—
Existing purchase orders		9		200		—		—
Total		78	$	75,050	$	76,352	$	78,617

      The estimated future amortization expense of intangible assets as of December 31, 2004 is as follows (in millions):

Fiscal Year:	Amount:
2005	$	63
2006		31
2007		7
2008		4
2009		3
	$	108

      The changes in the carrying amount of goodwill for the years ended December 31, 2004 and 2003 are as follows (in thousands):

	Semiconductor			Storage Systems
	Segment			Segment		Total
Balance as of December 31, 2002	$	887,990		$	80,474	$	968,464
Adjustment to goodwill acquired in prior periods		2			17		19
Balance as of December 31, 2003	$	887,992		$	80,491	$	968,483
Goodwill acquired during the year		8,106			—		8,106
Adjustment to goodwill acquired in a prior year for the resolution of a pre-acquisition income tax contingency		(4,463	)		—		(4,463	)
Adjustment to goodwill acquired in prior periods		—			142		142
Purchase of minority interest		862			—		862
Balance as of December 31, 2004	$	892,497		$	80,633	$	973,130

      As a result of the decline in revenues in the semiconductor industry, the corresponding decline in the Company’s outlook as of the latter part of the third quarter of 2004 and the conclusion that the Gresham manufacturing facility was impaired (see Note 3), the Company reviewed goodwill by reporting unit for impairment as of September 30, 2004, which was updated as of December 31, 2004. The Company concluded that goodwill was not impaired under the first step of the test for impairment, as described in Note 1, as of September 30, 2004 and December 31, 2004. The Company’s next annual test for the impairment of goodwill

85

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

will be performed in the fourth fiscal quarter in 2005. The annual impairment test performed as of December 31, 2003 indicated that goodwill was not impaired.

Note 8 — Derivative Instruments

Foreign currency risk

      The Company has foreign subsidiaries that operate and sell the Company’s products in various global markets. As a result, the Company is exposed to changes in foreign currency exchange rates and interest rates. The Company utilizes various hedge instruments, primarily forward contracts and currency option contracts, to manage its exposure associated with firm intercompany and third-party transactions and net asset and liability positions denominated in non-functional currencies.

      The Company enters into forward contracts that are designated as foreign currency cash-flow hedges of forecasted payments in Euros. Changes in the fair value of the forward contracts due to changes in time value are excluded from the assessment of effectiveness and are recognized in interest income and other, net. There were no such hedges outstanding at December 31, 2004. As of December 31, 2003, the Company held forward contracts designated as foreign currency cash flow hedges of forecasted Euro payment transactions that were set to expire over a twelve-month period. For the years ended December 31, 2003 and 2004, the change in time value of these forward contracts was not significant. There were no unrealized gains or losses included in accumulated other comprehensive income as of December 31, 2003 and 2004. There was a $1 million hedge benefit reflected in the income statement for the year ended December 31, 2003. The hedge expense reflected in the income statement for the year ended December 31, 2004 was not material. The Company did not record any gains or losses due to hedge ineffectiveness for the years ended December 31, 2003 and 2004.

      The Company entered into purchased currency option contracts that were designated as foreign currency cash-flow hedges of third-party Yen revenue exposures. Changes in the fair value of currency option contracts due to changes in time value were excluded from the assessment of effectiveness and were recognized in interest income and other, net. During the second quarter of 2003, the Company terminated all outstanding purchased currency options hedging previously forecasted Yen revenues because the underlying revenue agreements were modified to be denominated in U.S. dollars. At the time the options were terminated, there were no unrealized gains or losses in accumulated other comprehensive income. For the year ended December 31, 2003, the change in option time value was approximately $1 million. During the year ended December 31, 2003, amounts reclassified to revenues from other comprehensive income were not significant. The Company did not record any gains or losses due to hedge ineffectiveness for the year ended December 31, 2003. There were no option contracts outstanding as of December 31, 2004 and 2003.

      In October 2003, the Company entered into a forward contract to protect the U.S. dollar value of a portion of the net investment in the Company’s wholly-owned Japanese subsidiary denominated in Yen. The derivative was designated as and qualified as a net investment hedge and was recorded as an asset or liability in the statement of financial position while the forward contract was outstanding. The forward contract was settled in December 2003, and the realized loss of approximately $0.5 million has been recorded in accumulated other comprehensive income until such time as the subsidiary has been liquidated. The time value of the forward contract was excluded from the assessment of hedge effectiveness.

      Forward exchange contracts and options are also used to hedge certain foreign currency-denominated assets or liabilities. These derivatives do not qualify for SFAS No. 133 hedge accounting treatment. Accordingly, changes in the fair value of these hedges are recorded immediately in earnings to offset the changes in fair value of the assets or liabilities being hedged. The related gains and losses included in interest income and other, net were not significant.

86

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

Interest rate risk

      With the objective of protecting cash flows and earnings of the Company from the impact of fluctuations in interest rates, while minimizing the cost of capital, the Company may enter into or terminate interest rate swaps, such as the below mentioned transactions.

      The Company entered into interest rate swap transactions (the “Swaps”) with several investment banks in June 2002. The Swaps were entered into to convert the fixed rate interest expense on the Company’s 4% and 4.25% Convertible Subordinated Notes (“Convertible Notes”) to a floating rate based on LIBOR (see Note 9). The Swaps qualified for hedge accounting as fair value hedges, with changes in the fair value of the interest rate risk on the Convertible Notes being offset by changes in the fair values of the Swaps recorded as a component of interest expense. Before the termination described below, the difference between the changes in the fair values of the derivative and the hedged risk resulted in a benefit to interest expense of $1 million for the year ended December 31, 2003.

      In the second quarter of 2003, the Company terminated Swaps with a notional amount of $740 million. The deferred gain of $44 million from the termination of these Swaps was included as a component of the Convertible Notes. Deferred gains on terminated Swaps associated with Convertible Notes repurchased or redeemed during 2004 and 2003 were written-off as part of the net gain or loss on redemption of the Convertible Notes. As of December 31, 2004, a deferred gain of $10 million was included as a component of the Convertible Notes and is being amortized as an adjustment to interest expense using the effective-interest method over the remaining term of the hedged Convertible Notes (see Note 9).

      In the second quarter of 2003, the Company entered into an interest rate swap transaction to effectively convert the LIBOR-based floating rate interest payments on operating leases for wafer fabrication equipment, with an initial notional amount of $395 million, to a fixed interest rate (the “Lease Swap”). The Lease Swap qualified to be accounted for as a cash-flow hedge of the forecasted interest payments attributable to the benchmark interest rate on the operating leases for the wafer fabrication equipment through September 2006. An expense of approximately $2 million was recorded to cost of revenues as the lease payments were made in 2004. In August 2004, the Company entered into two new equipment operating leases for the wafer fabrication equipment that was previously on the above-mentioned leases. As a result of entering into the new leases, the hedged forecasted interest payments were no longer probable. Hedge accounting treatment was discontinued prospectively and the balance in accumulated other comprehensive income was immediately recorded as a gain of $3.8 million in restructuring and other items in the statement of operations. In September 2004, the Company terminated the Lease Swap.

Note 9 — Debt

									December 31,
				Interest			Conversion
		Maturity		Rate*			Price		2004			2003
									(In thousands)
2003 Convertible Subordinated Notes			2010		4.00	%	$	13.4200	$	350,000		$	350,000
2001 Convertible Subordinated Notes			2006		4.00	%	$	26.3390		421,500			490,000
Deferred gain on terminated swap										10,346			25,416
Capital lease obligations										129			567
										781,975			865,983
Current portion of long-term debt and capital lease obligations										(129	)		(377	)
	Long-term debt and capital lease obligations								$	781,846		$	865,606

87

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

*  The interest rate on a portion of the Convertible Subordinated Notes was converted to floating rates through interest rate swaps. Interest rate swaps with a notional amount of $740 million were terminated in the second quarter of 2003 (see Note 8). The weighted average interest rate on the Convertible Notes, after adjusting for the impact of the interest rate swaps, for the years ended December 31, 2004 and 2003, was 4.00% and 3.30%, respectively.

      As of December 31, 2004, we have $422 million of Convertible Subordinated Notes due in October 2006 (“2001 Convertible Notes”) and $350 million of Convertible Subordinated Notes due in May 2010 (“2003 Convertible Notes”). All of the Convertible Notes are subordinated to all existing and future senior debt and are convertible at the holder’s option, at any time prior to the maturity date of the Convertible Notes, into shares of our common stock. The 2001 and 2003 Convertible Notes have conversion prices of approximately $26.34 per share and $13.42 per share, respectively. The 2001 Convertible Notes are redeemable at our option, in whole or in part, on at least 30 days notice at any time on or after the call date, which is two years before the due date. We cannot elect to redeem the 2003 Convertible Notes prior to maturity. Each holder of the 2001 and 2003 Convertible Notes has the right to cause us to repurchase all of such holder’s Convertible Notes at 100% of their principal amount plus accrued interest upon the occurrence of any fundamental change to us, which includes a transaction or event such as an exchange offer, liquidation, tender offer, consolidation, merger or combination. Interest is payable semiannually. The proceeds of the 2003 Convertible Notes were used to repurchase $288 million of the 1999 and 2000 Convertible Notes during the second quarter of 2003. The Company paid approximately $14 million and $11 million in debt issuance costs related to the 2001 and 2003 Convertible Notes, respectively, that are being amortized using the interest method. As of December 31, 2004 and 2003, total debt issuance costs, net are included in other long-term assets (see Note 6).

      Aggregate principal payments required on outstanding capital lease and debt obligations are $0.1 million and $421.5 million for the years ending December 31, 2005 and 2006, respectively, and $350 million in 2010.

      The Company paid $33 million, $42 million and $47 million in interest during 2004, 2003 and 2002, respectively.

      At December 31, 2004, the estimated fair values of the 2001 and 2003 Convertible Notes were $417 million and $326 million, respectively.

      Approximately $28 million of the proceeds from issuance of the 2003 Convertible Notes were used to purchase call spread options on LSI’s common stock (the “Call Spread Options”). The Call Spread Options, including fees and costs, have been accounted for as capital transactions in accordance with EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.” The Call Spread Options cover approximately 26.1 million shares of Company common stock, which is the number of shares that are initially issuable upon conversion of the 2003 Convertible Notes in full. The Call Spread Options are designed to mitigate dilution from conversion of the 2003 Convertible Notes in the event that the market price per share of the Company’s common stock upon exercise of the Call Spread Options is greater than $13.42 and is less than or equal to $23.875. The Call Spread Options may be settled at the Company’s option in either net shares or in cash and expire in 2010. Settlement of the Call Spread Options in net shares on the expiration date would result in the Company receiving a number of shares, not to exceed 26.1 million shares, of our common stock with a value equal to the amount otherwise receivable on cash settlement. Should there be an early unwinding of the Call Spread Options, the amount of cash or net shares potentially receivable by the Company will be dependent upon then existing overall market conditions, and on the Company’s stock price, the volatility of the Company’s stock and the amount of time remaining on the Call Spread Options.

      During 2004, the Company repurchased approximately $69 million of the 2001 Convertible Notes. During 2003, the Company repurchased/redeemed $325 million and $385 million of the 1999 and 2000 Convertible Notes, respectively. During 2004, a net pre-tax gain of approximately $2 million and during 2003,

88

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

a net pre-tax loss of approximately $4 million were recognized in interest income and other, net, for the repurchases/redemptions. The pre-tax gain or loss is net of the write-off of debt issuance costs and a portion of the deferred gain on the terminated Swaps (see Note 8).

Note 10 — Common Stock, Stock-Based Compensation and Other Employee Compensation Plans

      Stock option plans. The Company has stock-based compensation plans to grant stock options or restricted stock awards to officers, employees and consultants. Under these plans, the Company may grant stock options with an exercise price that is no less than the fair market value of the stock on the date of grant. The term of each option is determined by the Board of Directors and has generally been ten years. Options granted on or after February 12, 2004 will generally have a term of seven years. Options generally vest in annual increments of 25% per year commencing one year from the date of grant. Under the 2003 Equity Incentive Plan (“2003 Plan”), the Company may also grant restricted stock awards. No participant may be granted more than 0.5 million shares of restricted stock in any year. The vesting requirements for the restricted stock awards are determined by the Board of Directors. As of December 31, 2004, the 2003 Plan, the 1999 Nonstatutory Stock Option Plan (“1999 Plan”) and the 1991 Equity Incentive Plan (“1991 Plan”) have 10 million, 18 million and 31 million common shares available for future grants, respectively.

      The 1995 Director Option Plan, as amended (“1995 Director Plan”), provides for an initial grant to new directors of options to purchase 30,000 shares of common stock and subsequent automatic grants of options to purchase 30,000 shares of common stock each year thereafter. The initial grants vest in annual increments of 25% per year, commencing one year from the date of grant. Subsequent option grants become exercisable in full six months after the grant date. The exercise price of the options granted is equal to the fair market value of the stock on the date of grant. As of December 31, 2004, there are 1 million shares available for future grants under the 1995 Director Plan.

      There are a total of 127 million shares of common stock reserved for issuance upon exercise of options, including options available for future grants, outstanding under all stock option plans.

      Stock option exchange program. On August 20, 2002, the Company filed with the Securities and Exchange Commission an offer to exchange stock options outstanding under the 1991 Plan and the 1999 Plan for new options. Under the exchange offer, eligible employees had the opportunity to exchange eligible stock options for the promise to grant new options under the 1999 Plan. Directors and executive officers of the Company were not eligible to participate in this program. The exchange offer expired on September 18, 2002, and the Company accepted options to purchase an aggregate of 16,546,370 shares for exchange. On March 20, 2003, the Company granted a new option that covered two shares of LSI Logic common stock for every three shares covered by an option that an employee had elected to exchange. The exercise price per share of the new options was equal to the fair market value of the Company’s common stock on the grant date. The Company granted options to purchase 10,691,139 shares at an exercise price of $5.06 per share. The exchange program did not result in the recording of any compensation expense in the statement of operations.

89

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      The following table summarizes the Company’s stock options for each of the years ended December 31, 2004, 2003 and 2002 (share amounts in thousands):

	2004						2003						2002
				Weighted						Weighted						Weighted
				Average						Average						Average
				Exercise						Exercise						Exercise
	Number of			Price per			Number of			Price per			Number of			Price per
	Shares			Share			Shares			Share			Shares			Share
Options outstanding at January 1,		69,166		$	15.17			57,065		$	18.24			73,997		$	22.44
Options assumed in acquisitions		—			—			—			—			—			—
Options canceled		(7,993	)		(14.01	)		(7,282	)		(16.39	)		(23,751	)		(30.57	)
Options granted		7,450			7.39			20,191			6.56			8,425			14.21
Options exercised		(890	)		(5.87	)		(808	)		(5.94	)		(1,606	)		(8.57	)
Options outstanding at December 31,		67,733		$	14.57			69,166		$	15.17			57,065		$	18.24
Options exercisable at December 31,		44,301		$	17.54			38,936		$	18.03			34,333		$	17.02

      During the years ended December 31, 2004, 2003 and 2002, all options were granted at an exercise price equal to the market value of the Company’s common stock at the date of grant.

      Significant option groups outstanding as of December 31, 2004 are as follows (share amounts in thousands):

	Outstanding						Exercisable
					Weighted				Weighted
					Average				Average
			Remaining		Exercise				Exercise
Options with Exercise	Number		Contractual Life		Price per		Number of		Price per
Price Ranging from:	of Shares		(Years)		Share		Shares		Share
$ 0.06 to $ 5.00		3,520		6.67	$	4.47		331	$	3.64
$ 5.01 to $10.00		24,974		6.78		7.14		12,599		7.83
$10.01 to $15.00		13,853		4.72		12.18		9,499		12.64
$15.01 to $20.00		10,024		5.47		17.24		7,931		17.32
$20.01 to $25.00		7,758		5.97		22.11		6,337		22.08
$25.01 to $30.00		3,352		4.58		29.19		3,352		29.19
$30.01 to $72.25		4,252		5.17		42.75		4,252		42.75
		67,733		5.86	$	14.57		44,301	$	17.54

      Restricted stock awards of LSI common stock granted during the years ended December 31, 2004, 2003 and 2002 are as follows (share amounts in thousands):

2004

2003

2002

Weighted

Weighted

Weighted

Average

Average

Average

Number of

Grant Date

Number of

Grant Date

Number of

Grant Date

Shares

Fair Value

Shares

Fair Value

Shares

Fair Value

Restricted stock awards granted

892

$

6.75

—

$

—

179

$

6.74

      Forfeitures of stock options and restricted stock awards prior to vesting. During 2004, forfeitures were recorded related to certain stock options assumed in connection with the Datapath acquisition that occurred in July 2000 and certain restricted shares issued in connection with the acquisition of Velio in April 2004, the acquisition of Accerant in May 2004 and restricted shares issued to employees of the Company during 2004.

90

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

During 2003, forfeitures were recorded related to certain restricted shares issued in connection with the AMI acquisition that occurred in August 2001.

      Stock purchase plans. The Company has Employee Stock Purchase Plans under which rights are granted to all employees to purchase shares of common stock at 85% of the lesser of the fair market value of such shares at the beginning of a 12-month offering period or the end of each six-month purchase period within such an offering period. The maximum number of shares that can be purchased in a single purchase period is 1,000 shares per employee. Sales under the Employee Stock Purchase Plans in 2004, 2003 and 2002 were approximately 5.0 million, 5.6 million and 4.8 million shares of common stock at an average price of $4.60, $4.85 and $7.67 per share, respectively. In May 2004, the stockholders approved an increase in the number of shares of common stock reserved for issuance under the Company’s Employee Stock Purchase Plan by 10 million shares. There were approximately 16 million shares of common stock reserved for issuance under the Employee Stock Purchase Plan as of December 31, 2004. The Employee Stock Purchase Plan for employees in the United States (“US ESPP”) includes an annual replenishment calculated at 1.15% of the Company’s common stock issued and outstanding at the fiscal year end less the number of shares available for future grants under the US ESPP. No shares have been added to the US ESPP from the annual replenishment since January 2001.

      Stock repurchase program. On July 28, 2000, the Company’s Board of Directors authorized a stock repurchase program in which up to 5 million shares of the Company’s common stock were authorized to be repurchased in the open market from time to time. There is no expiration date for the program. There were no stock repurchases in 2004, 2003 or 2002. As of December 31, 2004, there are 3.5 million shares available for repurchase under this plan.

      Stock purchase rights. In November 1988, the Company implemented a plan to protect stockholders’ rights in the event of a proposed takeover of the Company. The plan was amended and restated in November 1998. Under the plan, each share of the Company’s outstanding common stock carries one Preferred Share Purchase Right. Each Preferred Share Purchase Right entitles the holder, under certain circumstances, to purchase one-thousandth of a share of Preferred Stock of the Company or its acquirer at a discounted price. The Preferred Share Purchase Rights are redeemable by the Company and will expire in 2008.

      LSI 401(k) Defined Contribution Plan. Eligible employees in the U.S. may participate in the LSI Logic Corporation 401(k) Plan (“LSI 401(k) Plan”). Beginning in April 2002, the Company provides a base matching contribution to employees of 100% of the first 2% of employee contributions. When the Company achieves operating profitability during a quarter, as defined by the Company, of 1% or greater of revenues, an additional matching contribution of 50% of the next 3% of an employee’s contribution is made during the following quarter. Prior to April 2002, the Company provided a matching contribution of 150% of the first 2% of employee contributions plus 50% of the next 3% of an employee’s contribution. Company contributions to the LSI 401(k) Plan were $12 million, $10 million and $11 million during 2004, 2003 and 2002, respectively.

91

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

Note 11 — Income Taxes

      The provision for taxes consisted of the following:

			Year Ended December 31,
			2004		2003			2002
			(In thousands)
Current:
	Federal		$	3,815	$	8,679		$	(83,885	)
	State			615		600			—
	Foreign			14,689		15,056			24,250
		Total		19,119		24,335			(59,635	)
Deferred:
	Federal			—		—			36,775
	State			—		—			8,006
	Foreign			4,881		(335	)		16,604
		Total		4,881		(335	)		61,385
Total			$	24,000	$	24,000		$	1,750

      The domestic and foreign components of loss before income taxes and minority interest were as follows:

	Year Ended December 31,
	2004			2003			2002
	(In thousands)
Domestic	$	(392,070	)	$	(42,382	)	$	(69,078	)
Foreign		(47,429	)		(242,004	)		(221,326	)
Loss before income taxes and minority interest	$	(439,499	)	$	(284,386	)	$	(290,404	)

92

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2004 and 2003 were as follows:

		December 31,
		2004			2003
		(In thousands)
Deferred tax assets:
	Net operating loss carryforwards	$	35,633		$	23,244
	Tax credit carryovers		232,013			203,027
	Depreciation and amortization		116,192			—
	Future deductions for purchased intangible assets		85,043			81,334
	Future deductions for reserves and other		51,163			77,174
	Future deductions for inventory reserves		29,894			26,265
	Total deferred tax assets		549,938			411,044
	Valuation allowance		(539,233	)		(366,197	)
	Net deferred tax assets		10,705			44,847
Deferred tax liabilities:
	Depreciation and amortization		—			(29,247	)
Total net deferred tax assets		$	10,705		$	15,600

      In accordance with SFAS No. 109, “Accounting for Income Taxes,” current and long-term net deferred taxes have been netted to the extent they are in the same tax jurisdiction. Valuation allowances reduce the deferred tax assets to the amount that, based upon all available evidence, is more likely than not to be realized. The deferred tax assets’ valuation allowance is attributed to U.S. federal, state and certain foreign deferred tax assets primarily consisting of reserves, other one-time charges, purchased intangible assets, tax credit carryovers and net operating loss carryovers that could not be benefited under existing carry-back rules. During 2004, both the deferred tax assets and the valuation allowance of the Company increased approximately $12 million due to carryforward income tax attributes from acquisitions. Approximately $95 million of the valuation allowance at December 31, 2004 relates to tax benefits of stock option deductions, which will be credited to equity if and when realized.

      At December 31, 2004, the Company had federal, state and foreign net operating loss carryovers of approximately $72 million, $142 million and $27 million, respectively. The federal and state net operating losses will expire beginning in 2004 through 2023. The foreign net operating losses will carry forward indefinitely. Approximately $48 million of the federal net operating loss carryover and $45 million of the state net operating loss carryover relate to recent acquisitions and are subject to certain limitations under the Internal Revenue Code of 1986, as amended, Section 382. As of December 31, 2004, the Company had tax credits of approximately $220 million, which will expire beginning in 2005.

93

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Differences between the Company’s effective tax rate and the federal statutory rate were as follows:

	2004
						2003
	Year Ended December 31,
											2002
	)
	(In thousands
Federal statutory rate	$	(153,825	)	(35	)%	$	(99,535	)	(35	)%	$	(101,642	)	(35	)%
State taxes, net of federal benefit		400		—			390		—			8,006		3	%
Net operating loss and future deductions not currently benefited		122,423		28	%		19,590		7	%		46,526		16	%
Difference between U.S. and foreign tax rates		35,148		8	%		79,820		28	%		74,858		26	%
Nondeductible expenses		10,054		2	%		7,055		3	%		33,733		12	%
Foreign earnings taxed in the U.S.		6,191		1	%		59,539		21	%		—		—
Benefit of net operating losses and deferred tax assets not previously recognized		(854	)	—			(5,378	)	(2	)%		—		—
Foreign tax credits		—		—			(27,469	)	(10	)%		—		—
Research and development tax credit		—		—			(15,905	)	(6	)%		—		—
Alternative minimum tax		—		—			8,679		3	%		—		—
Release of income taxes previously accrued		—		—			—		—			(61,386	)	(21	)%
Other		4,463		1	%		(2,786	)	(1	)%		1,655		—
Effective tax rate	$	24,000		5	%	$	24,000		8	%	$	1,750		1	%

      The Company paid/received (refunds) of $1 million, ($2 million) and $16 million for income taxes in 2004, 2003 and 2002, respectively.

      In 2004, the Inland Revenue Department of Hong Kong began an income tax audit of certain foreign subsidiaries of the Company for the years 1996 through 2000.

      In 2003, the Internal Revenue Service (“IRS”) began an income tax audit of the Company’s 2001 federal income tax return. On February 16, 2005, the Company received ratification from the Internal Revenues Services that its audit of the 2001 federal income tax return was closed as of that date. The finalization of the audit had no impact to the Company’s Consolidated Financial Statements.

      In December 2002, the IRS concluded its audit of the Company’s federal income tax returns for the fiscal years 1995 through 1996. As part of the final closing agreement, the IRS and the Company agreed to expand the scope of the audit for the years 1995 and 1996 to all fiscal years up to and including 2000. All adjustments for the fiscal years up to and including 2000 are final and have been reflected in the Company’s income tax expense for 2002. Upon conclusion of the audit, the Company reassessed its reserve requirements and consequently reversed approximately $61 million of previously accrued income taxes.

      Undistributed earnings of the Company’s foreign subsidiaries aggregate approximately $6 million at December 31, 2004, and are indefinitely reinvested in foreign operations or will be remitted substantially free of additional tax. No material provision has been made for taxes that might be payable upon remittance of such earnings, nor is it practicable to determine the amount of this liability.

94

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

Note 12 — Commitments and Contingencies

Operating Leases

      On March 28, 2003, the Company entered into two lease and security agreements, each with Bank of America, National Association (“BANA”), acting as the Lessor, and Wells Fargo Bank Northwest, as the Agent, for a total of $395 million for certain wafer fabrication equipment (the “Equipment”). The leases qualified for operating lease accounting treatment. Each lease had a term of 3.5 years with no option for renewal. The first lease was for $235 million and was for equipment that was previously on lease immediately prior to closing this transaction. In October 2003, BANA, with the Company’s approval, assigned its rights as Lessor on the first lease to Bank of the West. The second lease was for $160 million and was for Equipment that was sold to BANA and then immediately leased back in a transaction commonly referred to as a sale-leaseback. The Equipment sold had a book value of approximately $103 million. The resulting $56 million gain on the sale of the equipment was to be deferred until the end of the lease term and was recorded as a non-current liability until immediately prior to the lease termination and buyout on November 29, 2004, as discussed further below.

      On August 6, 2004, the Company entered into two lease and security agreements, each with Wells Fargo Bank Northwest, acting as the Agent. One lease for $134 million was with Bank of the West acting as the Lessor, and the second lease for $201 million was with BTM Capital Corporation acting as the Lessor. The leases were for the Equipment that was previously on the above-mentioned lease immediately prior to closing this transaction. The new leases qualified for operating lease accounting treatment. Each lease had a term of 3 years. The Company was able to, at the end of the lease term, return or purchase, at a pre-determined amount, all of the Equipment.

      On October 27, 2004, the Company notified the required parties of its intention to exercise its early buyout right to purchase all of the Equipment under the two lease and security agreements. On November 29, 2004, the Company purchased the equipment on the leases for $332 million and related collateral of $311 million was returned to the Company. Termination fees under the lease agreements were not significant. The Company recorded an impairment charge of approximately $178 million in restructuring of operations and other items during the fourth quarter of 2004 in connection with the impairment of the Gresham manufacturing facility and the purchase of the equipment on the leases. The fourth quarter impairment charge is net of the reversal of the deferred gain of $56 million as discussed above, lease termination fees and the write-off of capitalized lease fees and deferred rent. See Note 3 of the Notes for a more detailed discussion of the impairment charges taken in connection with the Company’s Gresham manufacturing facility.

      The Company leases the majority of its facilities, certain non-manufacturing equipment and software under non-cancelable operating leases, which expire through 2014. The facilities lease agreements typically provide for base rental rates that are increased at various times during the terms of the lease and for renewal options at the fair market rental value. Future minimum payments under the operating lease agreements for the above-mentioned facilities, equipment and software are $57 million, $55 million, $26 million, $21 million, $19 million and $34 million for the years ending December 31, 2005, 2006, 2007, 2008, 2009 and thereafter, respectively.

      Rental expense under all operating leases was $90 million, $121 million and $125 million for the years ended December 31, 2004, 2003 and 2002, respectively.

Indemnifications

      The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify others with respect to certain matters. Typically, these obligations arise in connection with licenses and other agreements, including those for the sale of assets, under which the Company customarily agrees to hold another party harmless against losses arising from a breach of warranties, representations or covenants related

95

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

to such matters as title to assets sold, validity of certain intellectual property rights, non-infringement of third-party rights, and certain income tax-related matters. In each of these circumstances, payment by the Company is typically subject to the other party making a claim and their cooperation with the Company pursuant to the procedures specified in the particular agreement. These procedures usually allow the Company to challenge the claims or, in case of an alleged breach of an intellectual property representation or covenant, to control the defense and settlement of any third-party claims. Further, the Company’s obligations under these agreements are usually limited in terms of the actions that may be requested of the Company (typically to replace or correct the products or terminate the agreement with a refund to the other party), duration and/or dollar amounts. In some instances, the Company may have recourse against third parties and/or insurance coverage with respect to the payments made by the Company.

Guarantees

      Product warranties.

	Years Ended
	December 31,
	2004			2003
	(In thousands)
Balance at the beginning of the period	$	9,474		$	6,328
Accruals for warranties issued during the period		10,955			9,399
Accruals related to pre-existing warranties (including changes in estimates)		(463	)		3,802
Settlements made during the period (in cash or in kind)		(9,926	)		(10,055	)
Balance at the end of the period	$	10,040		$	9,474

      Standby letters of credit. At December 31, 2004 and 2003, the Company had outstanding standby letters of credit of $5 million and $77 million, respectively. These instruments are off-balance sheet commitments to extend financial guarantees for leases and certain self-insured risks, import/export taxes as well as performance under contracts, and generally have one-year terms. The fair value of the letters of credit approximates the contract amount.

      Purchase commitments. The Company maintains certain purchase commitments primarily for raw materials with suppliers and for some non-production items. Purchase commitments for inventory materials are generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary among different suppliers. As of December 31, 2004, total purchase commitments were $293 million, which are due through 2007.

Legal Matters

      In February 1999, a lawsuit alleging patent infringement was filed in the United States District Court for the District of Arizona by the Lemelson Medical, Education & Research Foundation, Limited Partnership (“Lemelson”) against 88 electronics industry companies, including us. The case number is CIV990377PHXRGS. The patents involved in this lawsuit are alleged to relate to semiconductor manufacturing and computer imaging, including the use of bar coding for automatic identification of articles. The plaintiff has sought a judgment of infringement, an injunction, treble damages, attorneys’ fees and further relief as the court may provide. In September 1999, the Company filed an answer denying infringement and raising affirmative defenses. In addition, the Company asserted a counterclaim for declaratory judgment of non-infringement, invalidity and unenforceability of Lemelson’s patents. A claim construction hearing was held and completed in December 2004; a ruling on the claim construction is pending. No trial date has been set.

96

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

While the Company can give no assurances regarding the final outcome of this lawsuit, the Company believes the allegations are without merit and is defending the actions vigorously.

      On May 4, 2001, Ning “Frank” Hui caused a lawsuit to be filed against C-Cube Microsystems Inc. in the Superior Court of California for the County of Santa Clara. Hui caused the lawsuit to be filed on his behalf and on behalf of all others similarly situated, approximately 600 employees of C-Cube Microsystems who were employed by C-Cube Microsystems in May 2000 at the time of the acquisition of certain C-Cube Microsystems’ assets by Harmonic, Inc. Subsequent to the filing of the lawsuit, the Superior Court granted Hui’s motion for class certification. In the Complaint, Hui alleges that C-Cube Microsystems’ management improperly reduced the conversion factor for unvested employee stock options when such options were converted at the time of the Harmonic transaction. The Company, without admitting liability, has tentatively entered into a settlement agreement with Hui, which is contingent on a number of factors, including approval by the Superior Court. Although the terms of the agreement are confidential, if confirmed by the Superior Court and finalized by the parties, the contemplated agreement will not have a material adverse effect on the consolidated results of operations or financial condition of the Company.

      On June 14, 2002, Plasma Physics Corporation (“Plasma Physics”) filed suit against the Company in the United States District Court for the Eastern District of New York, alleging that the Company is willfully and deliberately infringing two U.S. patents. LSI was served with the lawsuit in December of 2002. The case is number CV 02-3462 (LDW) (WDW). The two Plasma Physics patents at issue are numbered 5,470,784 and 6,245,648. No specific Company products were identified in the complaint. The plaintiff sought a judgment of infringement, an injunction, treble damages, attorneys’ fees and further relief as the court may provide. Similar lawsuits were also filed at the same time against several other corporations. In January of 2003, the Company answered the complaint denying infringement and asserting affirmative defenses. In addition, the Company asserted counterclaims seeking declaratory judgments of patent non-infringement, patent invalidity, and that the patents are unenforceable. In June of 2004, the parties agreed to submit to the Court a Voluntary Notice of Dismissal with Prejudice. Although the terms of the agreement are confidential, the agreement did not have a material adverse effect on the consolidated results of operations or financial condition.

      The Company is a party to other litigation matters and claims that are normal in the course of its operations. While the results of such litigation and claims cannot be predicted with certainty, the Company aggressively defends such legal matters and does not believe, based on currently available facts and circumstances, that the final outcome of such matters will have a material adverse effect on the Company’s consolidated results of operations and financial condition.

Note 13 — Separation of Engenio Information Technologies, Inc.

      In November 2003, the Company announced its intention to separate its wholly-owned subsidiary, Engenio Information Technologies, Inc. (“Engenio” or “Storage Systems segment”), from the Company and create an independent storage systems company. The separation of Engenio from the Company, including the transfer of related assets, liabilities and intellectual property rights, was substantially completed in December 2003. The Company has entered into agreements to address various arrangements between Storage Systems and the Company as discussed below. The major separation agreements are outlined below.

      On July 29, 2004, LSI announced jointly with Engenio the postponement of the initial public offering of its common stock due to then current market conditions. During the year ended December 31, 2004, the Company recorded expenses of $3.5 million for fees related to the initial public offering in selling, general and administrative expenses in the statement of operations. These fees include professional services that were directly and solely related to the postponed initial public offering of Engenio’s common stock.

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LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Master Separation Agreement. The master separation agreement contains the framework with respect to Engenio’s separation from the Company and provides for the execution of various ancillary agreements summarized herein that further specify the terms of the separation.

      General Assignment and Assumption Agreement. The general assignment and assumption agreement governs the transfer of assets and assumption of liabilities relating to Engenio’s business, to the extent that the other separation ancillary agreements do not provide for the specific transfer of those assets or the assumption of those liabilities. The agreement also describes when and how these transfers and assumptions will occur.

      Intellectual Property Agreement. The intellectual property agreement provides mechanisms by which, the technology and intellectual property rights that relate only to Engenio’s business (but to which the Company has legal title or that are licensed by the Company) reside with Engenio. This technology and intellectual property includes software and other technology, the copyrights on that software and technology, the applications, trademarks and domain names. The intellectual property agreement provides that, where legal title to technology and intellectual property allocated to Engenio is owned by the Company, the Company will transfer and assign to Engenio the legal title in that technology and intellectual property.

      In addition to the allocations of technology and intellectual property, pursuant to the intellectual property agreement, the Company grants Engenio non-exclusive licenses under patents and other intellectual property rights included in Engenio’s products or used in Engenio’s business. The Company also grants Engenio a right to use, for a limited time, specified Company trademarks related to or used to identify Engenio’s business or products but not owned by Engenio. Engenio grants the Company a non-exclusive license, under Engenio’s patent and other intellectual property rights, to operate and conduct the Company’s retained businesses.

      Employee Matters Agreement. Engenio has entered into an employee matters agreement with the Company to allocate assets, liabilities and responsibilities relating to Engenio’s current and former U.S. employees as well as certain designated non-U.S. employees assigned to Engenio’s business and their participation in the employee benefits plans that the Company currently sponsors and maintains.

      Engenio’s eligible employees generally will remain able to participate in the Company’s benefit plans for a period of time. Engenio intends to have its own benefit plans established by the time its employees no longer are eligible to participate in the Company’s benefit plans. Once Engenio’s own benefit plans are established, Engenio will have the ability to modify or terminate each plan in accordance with the terms of those plans and its policies.

      Indemnification and Insurance Matters Agreement. This agreement provides that, effective as of the separation date, Engenio and the Company will each release the other from any liabilities arising from events occurring on or before the separation date. The agreement also contains provisions governing indemnification. In general, Engenio and the Company will each indemnify the other for all liabilities arising from their respective businesses, liabilities, contracts or breaches of the separation agreement. In addition, Engenio has agreed to indemnify the Company with respect to any liability arising from any untrue statement of material fact or an omission of a material fact in the prospectus relating to Engenio’s proposed initial public offering. The agreement also contains cross-indemnification provisions regarding liabilities resulting from environmental conditions.

      Tax Sharing Agreement. The Tax Sharing Agreement sets forth the principal arrangements between the Company and Engenio regarding the filing of tax returns, the payment of taxes and the conduct of tax audits or disputes. The Tax Sharing Agreement provides that Engenio’s stand-alone tax liability equals its taxable income multiplied by the highest corporate tax rate in effect for the year, modified by taking into account its losses and loss carryovers from prior years and, to the extent actually used, its credits. Engenio is obligated to pay the Company the amount of its stand-alone tax liability to the extent Engenio is included in any consolidated, combined or unitary tax return with the Company.

98

LSI Logic Corporation

Notes to Consolidated Financial Statements — (Continued)

      Under the Tax Sharing Agreement, the Company is required to prepare and file all consolidated, combined or unitary tax returns of the Company and Engenio through the date that Engenio ceases to be a member of the Company’s consolidated or combined group, including the final consolidated federal income tax return. The Company has the right to review and consent to the federal and state income tax returns filed for the first tax year after Engenio ceases to be a member of the Company’s consolidated group, which may not be withheld unreasonably. In addition, the Company has sole and complete authority to control and resolve all tax audits and other disputes relating to any consolidated, combined or unitary returns filed by the Company. However, the Company may not enter into any dispute settlement that would materially increase Engenio’s liability under the Tax Sharing Agreement without Engenio’s consent, which cannot be withheld unreasonably.

      Transition Services Agreement. The Transition Services Agreement governs the provisions by the Company to Engenio of services such as finance, accounting and treasury, human resources, sales support, legal matters and information technology.

      Real Estate Matters Agreement. The Real Estate Matters Agreement describes the manner in which the Company will transfer to or share with Engenio various properties leased and owned by the Company. The agreement provides that all reasonable costs required to effect the transfers, including landlord consent fees and landlord attorneys’ fees, will be paid by the Company.

      Investor Rights Agreement. The Investor Rights Agreement provides for specified registration and other rights relating to the Company’s ownership of Engenio’s shares of Class B common stock.

      Equity Incentive Plan. Engenio’s Board of Directors adopted the 2004 Equity Incentive Plan in February 2004. The Equity Incentive Plan Provides for the grant of the following types of incentive awards: (1) stock options; (2) stock appreciation rights; (3) restricted stock; (4) performance units; and (5) performance shares. The Compensation Committee of Engenio’s Board of Directors administers the plan. As of December 31, 2004, there are 4.5 million shares of Engenio’s common stock reserved for grant under the 2004 Equity Incentive Plan.

99

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

of LSI Logic Corporation:

      We have completed an integrated audit of LSI Logic Corporation’s 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

      In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1), present fairly, in all material respects, the financial position of LSI Logic Corporation and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

      Also, in our opinion, management’s assessment, included in “Management’s Report on Internal Control Over Financial Reporting,” appearing in Item 9A on page 102, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial

100

statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

San Jose, California

March 14, 2005

101

Supplementary Financial Data

Interim Financial Information (Unaudited)

	Quarter
	First			Second			Third			Fourth
	(In thousands, except per share amounts)
Year Ended December 31, 2004
Revenues	$	452,357		$	447,897		$	380,217		$	419,693
Gross profit		201,432			208,816			151,799			173,561
Net income/(loss)		9,085			7,242			(282,432	)		(197,426	)
Basic income/(loss) per share:	$	0.02		$	0.02		$	(0.73	)	$	(0.51	)
Diluted income/(loss) per share:	$	0.02		$	0.02		$	(0.73	)	$	(0.51	)
Year Ended December 31, 2003
Revenues	$	372,785		$	407,213		$	450,227		$	462,845
Gross profit		124,717			168,744			184,984			198,760
Net (loss)/income		(122,425	)		(162,084	)		(31,652	)		7,614
Basic (loss)/income per share:	$	(0.33	)	$	(0.43	)	$	(0.08	)	$	0.02
Diluted (loss)/income per share:	$	(0.33	)	$	(0.43	)	$	(0.08	)	$	0.02

      During the first, second, third and fourth quarters of 2004, the Company recorded (benefit)/charges for restructuring of operations and other items of approximately $(1) million, $3 million, $229 million and $192 million, respectively. See Note 3 of the Notes.

      During the first, second, third and fourth quarters of 2003, the Company recorded charges/(benefit) for restructuring of operations and other items of approximately $36 million, $125 million, $24 million and $(4) million, respectively. See Note 3 of the Notes.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

      Not applicable.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

      The Company maintains disclosure controls and procedures to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Our management evaluated, with the participation of our chief executive officer and our chief financial officer, the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our chief executive officer and our chief financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2004.

Management’s Report on Internal Control Over Financial Reporting

      Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

102

      Our management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2004.

      Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included on page 100 herein.

Changes in Internal Control over Financial Reporting.

      There was no change in our internal control over financial reporting that occurred during the fourth quarter of 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

      None.

PART III

      Certain information required by Part III is omitted from this Report in that the Company will file a definitive proxy statement within 120 days after the end of its fiscal year pursuant to Regulation 14A (the “Proxy Statement”) for its Annual Meeting of Stockholders to be held May 12, 2005, and certain of the information to be included therein is incorporated by reference herein.

Item 10. Directors and Executive Officers of the Registrant

      The information regarding the Company’s executive officers required by this Item is incorporated by reference from the section entitled “Executive Officers of the Company” in Part I of this Form 10-K.

      The information regarding the Company’s directors is incorporated by reference from “Election of Directors” in the Company’s Proxy Statement.

      The information concerning Section 16(a) reporting is incorporated by reference from “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s Proxy Statement.

      The information regarding the identification of Audit Committee members and the Audit Committee Financial Expert required by this Item is incorporated by reference from the section entitled “Board Meetings and Committees” in the Company’s Proxy Statement.

      The Company has adopted a Code of Ethics for principal executive and senior financial officers. A copy of this Code of Ethics is located on the Company’s website at www.lsilogic.com. The Company also intends to post any waivers of or amendments to its Code of Ethics on its website.

Item 11. Executive Compensation

      The information required by this Item is incorporated by reference from “Executive Compensation” in the Company’s Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

      The information regarding equity compensation plans required by this Item is incorporated by reference from “Equity Compensation Plan Information” in Part II, Item 5 of this Form 10-K.

      The information regarding stock ownership by principal stockholders and management required by this Item is incorporated by reference from “Security Ownership” in the Company’s Proxy Statement.

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Item 13. Certain Relationships and Related Transactions

      The information required by this Item is incorporated by reference to “Certain Transactions” in the Company’s Proxy Statement.

Item 14. Principal Accountant Fees and Services

      The information required by this Item is incorporated by reference to the report of the Audit Committee of the Board of Directors in the Company’s Proxy Statement.

PART IV

Item 15. Exhibits and Financial Statement Schedule

      (a) The following documents are filed as a part of this Report:

      1. FINANCIAL STATEMENTS. The following Consolidated Financial Statements of LSI Logic Corporation and Report of Independent Accountants are contained in this Form 10-K:

	Page in the
	Form 10-K
Consolidated Balance Sheets — As of December 31, 2004 and 2003		55
Consolidated Statements of Operations — For the Three Years Ended December 31, 2004, 2003 and 2002		56
Consolidated Statements of Stockholders’ Equity — For the Three Years Ended December 31, 2004, 2003 and 2002		57
Consolidated Statements of Cash Flows — For the Three Years Ended December 31, 2004, 2003 and 2002		58
Notes to Consolidated Financial Statements		59
Report of Independent Registered Public Accounting Firm		100

      Fiscal years 2004, 2003 and 2002 were 52-week years with a December 31 fiscal year end.

      2. FINANCIAL STATEMENT SCHEDULE.

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SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Column A	Column B		Column C		Column D			Column E
	Balance at		Additions Charged to					Balance at
	Beginning		Costs, Expenses or					End of
Description	of Period		Other Accounts		Deductions*			Period
	(In millions)
2004
Allowance for doubtful accounts	$	7	$	5	$	(5	)	$	7
2003
Allowance for doubtful accounts	$	7	$	5	$	(5	)	$	7
2002
Allowance for doubtful accounts	$	20	$	9	$	(22	)	$	7

*  Deductions include write-offs of uncollectable accounts and collections of amounts previously reserved.

      3. EXHIBITS:

2	.1	Agreement and Plan of Reorganization dated March 26, 2001 by and among Registrant, Clover Acquisition Corporation and C-Cube Microsystems Inc. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-4 (No. 333-58862) on April 13, 2001.
2	.2	Master Separation Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.3	General Assignment and Assumption Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.4	Intellectual Property Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.5	Indemnification and Insurance Matters Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.6	Employee Matters Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.7	Real Estate Matters Agreement between LSI Logic Corporation and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
2	.8	Tax Sharing Agreement between LSI Logic Corporation and LSI Logic Storage Systems, Inc., effective as of March 15, 2004. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
2	.9	Transition Services Agreement between LSI Logic Corporation and LSI Logic Storage Systems, Inc., effective as of March 15, 2004. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
2	.10	Investor Rights Agreement between LSI Logic Corporation and LSI Logic Storage Systems, Inc., effective as of March 15, 2004. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
3	.1	Restated Certificate of Incorporation of Registrant. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-46436) on September 22, 2000.
3	.2	By-laws of Registrant. Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K filed on September 3, 2004.

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4	.1	Indenture dated March 15, 1999 between LSI Logic Corporation and State Street Bank and Trust Company of California, N.A., as Trustee, covering $345,000,000 principal amount of 41/4% Convertible Subordinated Notes due 2004. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-3 (No. 333-80611) on June 14, 1999.
4	.2	Indenture dated February 15, 2000 between LSI Logic Corporation and State Street Bank and Trust Company of California, N.A., as Trustee. Incorporated by reference to exhibits filed with the Registrant’s Current Report on Form 8-K filed on February 24, 2000.
4	.3	Indenture dated as of October 30, 2001, between LSI Logic Corporation and State Street Bank and Trust Company of California, N.A., as Trustee. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-3 (No. 333-81434) on January 25, 2002.
4	.4	Indenture dated as of May 16, 2003, between LSI Logic Corporation and U.S. Bank, N.A., as Trustee. Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.
4	.5	See Exhibit 3.1.
10	.1	Form of Indemnification Agreement between Registrant and our officers, directors and certain key employees. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1987.*
10	.2	Amended and Restated LSI Logic Corporation 1991 Equity Incentive Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-96543) on July 16, 2002.*
10	.3	1995 Director Option Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-106205) on June 17, 2003.*
10	.4	LSI Logic Corporation International Employee Stock Purchase Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-115762) on May 21, 2004.*
10	.5	Form of LSI Logic Corporation Change of Control Severance Agreement between LSI Logic Corporation and each of its executive officers. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.*
10	.6	Technology Transfer Agreement between LSI Logic Corporation and Wafer Technology (Malaysia) Sdn. Bhd., dated September 8, 1999. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
10	.7	Mint Technology, Inc. Amended 1996 Stock Option Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-34285) on August 25, 1997.*
10	.8	Registrant’s Amended and Restated Employee Stock Purchase Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-115762) on May 21, 2004.*
10	.9	Symbios Logic, Inc. 1995 Stock Plan. Incorporated by reference to exhibits filed with the Registrant’s Form S-8 (No. 333-62159) on August 25, 1998.
10	.10	LSI Logic Corporation 1999 Nonstatutory Stock Option Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-96549) on July 16, 2002.*
10	.11	SEEQ Technology, Inc. Amended and Restated 1982 Stock Option Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-81435) on June 24, 1999.*
10	.12	IntraServer Technology, Inc. 1998 Stock Option Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-38746) on June 7, 2000.
10	.13	DataPath Systems, Inc. Amended 1994 Stock Option Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-42888) on August 2, 2000.*
10	.14	DataPath Systems, Inc. Amended and Restated 1997 Stock Option Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-42888) on August 2, 2000.*

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10	.15	Syntax Systems, Inc. Restated Stock Option Plan of January 5, 1999. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-52050) on December 18, 2000.*
10	.16	C-Cube Microsystems Inc. 2000 Stock Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-62960) on June 14, 2001.
10	.17	Wilfred J. Corrigan Employment Agreement dated as of September 20, 2001. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001.*
10	.18	Manufacturing Technology Joint Development and Foundry Supply Agreement dated as of March 30, 2001 by and between the Registrant and Taiwan Semiconductor Manufacturing Co., Ltd. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002.
10	.19	LSI Logic Corporation 2003 Equity Incentive Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on From S-8 (No. 333-106206) on June 17, 2003.*
10	.20	Registration Rights Agreement between LSI Logic Corporation and Morgan Stanley & Co., Inc., dated May 16, 2003. Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.
10	.21	Change in Control Severance Agreement between the Registrant and Thomas Georgens, dated as of November 20, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.*
10	.22	LSI Logic Corporation 1991 Equity Incentive Plan Nonqualified Stock Option Agreement. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
10	.23	Form of Notice of Grant under LSI Logic Corporation Nonqualified Stock Option Agreement. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
10	.24	LSI Logic Corporation 2003 Equity Incentive Plan Restricted Stock Unit Agreement. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
10	.25	Engenio Information Technologies, Inc. Amended and Restated 2004 Equity Incentive Plan. Incorporated by reference from exhibits filed with the Current Report on Form 8-K on November 4, 2004.
10	.26	Engenio Information Technologies, Inc. 2004 Equity Incentive Plan Nonqualified Stock Option Agreement. Incorporated by reference from exhibits filed with the Current Report on Form 8-K on November 4, 2004.
10	.27	Form of Notice of Grant under Engenio Information Technologies, Inc. 2004 Equity Incentive Plan Nonqualified Stock Option Agreement. Incorporated by reference from exhibits filed with the Current Report on Form 8-K on November 4, 2004.
10	.28	Lease Agreement dated June 30, 2004, for 670 N. McCarthy Boulevard, Milpitas, California between Engenio Information Technologies, Inc. and The Irvine Company. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.29	First Amendment, dated October 28, 2004, to the Lease Agreement (dated June 30, 2004), for 670 N. McCarthy Boulevard, Milpitas, California between Engenio Information Technologies, Inc. and The Irvine Company. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.30	Lease Agreement dated December 31, 2003, for 1621 Barber Lane, Milpitas, California, between the Registrant and Limar Realty Corp. #9. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.31	Lease Agreement dated December 31, 2003, for 765 Sycamore Drive, Milpitas, California, between the Registrant and Limar Realty Corp. #4. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.

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10	.32	Lease Agreement dated December 31, 2003, for 1501 McCarthy Boulevard, Milpitas, California, between the Registrant and Limar Realty Corp. #4. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.33	Lease Agreement dated February 20, 2004, for 1855 Barber Lane, Milpitas, California, between the Registrant and TriNet Milpitas Associates, LLC. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.34	Lease Agreement dated February 20, 2004, for 560 Cottonwood Drive, Milpitas, California, between the Registrant and TriNet Milpitas Associates, LLC. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.35	Assignment and Assumption of Lease dated May 27, 2004, for 5400 Airport Boulevard, Suites 100 and 200, Boulder, Colorado, between LakeCentre Plaza Limited, Ltd., LLLP and Engenio Information Technologies, Inc. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.36	Lease Modification Agreement dated June 21, 2004, for 5400 Airport Boulevard, Suites 100 and 200, Boulder, Colorado, between LakeCentre Plaza Limited, Ltd., LLLP and Engenio Information Technologies, Inc. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.37	Form of Notice of Grant of Restricted Stock Units under LSI Logic Corporation 2003 Equity Incentive Plan. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.38	LSI Logic Corporation 2004 16(b) Executive Officer Incentive Plan. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.*
10	.39	Summary Description of the Engenio Information Technologies, Inc. 2004 Incentive Plan. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.*
21	.1	List of Subsidiaries.
23	.1	Consent of Independent Registered Public Accounting Firm.
24	.1	Power of Attorney (See page 110).
31	.1	Certification of the Chief Executive Officer pursuant to Securities and Exchange Act Rules 13a-15(e) and 15d-1(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2	Certification of the Chief Financial Officer pursuant to Securities and Exchange Act Rules 13a-15(e) and 15de-1(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32	.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

*  Denotes management contract or compensatory plan or arrangement.

**  Furnished, not filed.

108

      (b) EXHIBITS.

      See Item 14(a)(3), above.

      (c) FINANCIAL STATEMENT SCHEDULE

      See Item 15(a)(2), above.

TRADEMARK ACKNOWLEDGMENTS

      The LSI Logic logo design, ATMizer, CoreWare, G10, GigaBlaze, HyperPHY, MegaRAID, MetaStor, MiniRISC, and SeriaLink are registered trademarks of LSI Logic Corporation; Cablestream, ContinuStor, FusionMPT, G11, G12, Gflx, HotScale, LogicStor, Merlin, RapidChip, RapidSlices, Right First Time, On Time, StreamSlice, SANtricity, and SANshare are trademarks of LSI Logic Corporation.

      ARM is a registered Trademark of Advanced RISC Machines Limited, used under license. All other brand and product names appearing in this report are the trademarks of their respective companies.

109

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

LSI LOGIC CORPORATION

By:  /s/ WILFRED J. CORRIGAN

Wilfred J. Corrigan

Chairman of the Board and Chief Executive Officer

Dated: March 15, 2005

POWER OF ATTORNEY

      KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Wilfred J. Corrigan and David G. Pursel, jointly and severally, their attorneys-in-fact, each with the power of substitution, for them in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ WILFRED J. CORRIGAN (Wilfred J. Corrigan)	Chairman of the Board, Chief Executive Officer (Principal Executive Officer) and Director	March 15, 2005
/s/ BRYON LOOK (Bryon Look)	Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 15, 2005
/s/ T.Z. CHU (T.Z. Chu)	Director	March 15, 2005
/s/ MALCOLM R. CURRIE (Malcolm R. Currie)	Director	March 15, 2005
/s/ JAMES H. KEYES (James H. Keyes)	Director	March 15, 2005
/s/ R. DOUGLAS NORBY (R. Douglas Norby)	Director	March 15, 2005

110

Signature	Title	Date
/s/ MATTHEW O’ROURKE (Matthew O’Rourke)	Director	March 15, 2005
/s/ GREGORIO REYES (Gregorio Reyes)	Director	March 15, 2005
/s/ LARRY W. SONSINI (Larry W. Sonsini)	Director	March 15, 2005

111

INDEX TO EXHIBITS

2	.1	Agreement and Plan of Reorganization dated March 26, 2001 by and among Registrant, Clover Acquisition Corporation and C-Cube Microsystems Inc. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-4 (No. 333-58862) on April 13, 2001.
2	.2	Master Separation Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.3	General Assignment and Assumption Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.4	Intellectual Property Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.5	Indemnification and Insurance Matters Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.6	Employee Matters Agreement between Registrant and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.
2	.7	Real Estate Matters Agreement between LSI Logic Corporation and LSI Logic Storage Systems, Inc., effective as of December 31, 2003. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
2	.8	Tax Sharing Agreement between LSI Logic Corporation and LSI Logic Storage Systems, Inc., effective as of March 15, 2004. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
2	.9	Transition Services Agreement between LSI Logic Corporation and LSI Logic Storage Systems, Inc., effective as of March 15, 2004. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
2	.10	Investor Rights Agreement between LSI Logic Corporation and LSI Logic Storage Systems, Inc., effective as of March 15, 2004. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
3	.1	Restated Certificate of Incorporation of Registrant. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-46436) on September 22, 2000.
3	.2	By-laws of Registrant. Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K filed on September 3, 2004.
4	.1	Indenture dated March 15, 1999 between LSI Logic Corporation and State Street Bank and Trust Company of California, N.A., as Trustee, covering $345,000,000 principal amount of 41/4% Convertible Subordinated Notes due 2004. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-3 (No. 333-80611) on June 14, 1999.
4	.2	Indenture dated February 15, 2000 between LSI Logic Corporation and State Street Bank and Trust Company of California, N.A., as Trustee. Incorporated by reference to exhibits filed with the Registrant’s Current Report on Form 8-K filed on February 24, 2000.
4	.3	Indenture dated as of October 30, 2001, between LSI Logic Corporation and State Street Bank and Trust Company of California, N.A., as Trustee. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-3 (No. 333-81434) on January 25, 2002.
4	.4	Indenture dated as of May 16, 2003, between LSI Logic Corporation and U.S. Bank, N.A., as Trustee. Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.
4	.5	See Exhibit 3.1.
10	.1	Form of Indemnification Agreement between Registrant and our officers, directors and certain key employees. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1987.*

10	.2	Amended and Restated LSI Logic Corporation 1991 Equity Incentive Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-96543) on July 16, 2002.*
10	.3	1995 Director Option Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-106205) on June 17, 2003.*
10	.4	LSI Logic Corporation International Employee Stock Purchase Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-115762) on May 21, 2004.*
10	.5	Form of LSI Logic Corporation Change of Control Severance Agreement between LSI Logic Corporation and each of its executive officers. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.*
10	.6	Technology Transfer Agreement between LSI Logic Corporation and Wafer Technology (Malaysia) Sdn. Bhd., dated September 8, 1999. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
10	.7	Mint Technology, Inc. Amended 1996 Stock Option Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-34285) on August 25, 1997.*
10	.8	Registrant’s Amended and Restated Employee Stock Purchase Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-115762) on May 21, 2004.*
10	.9	Symbios Logic, Inc. 1995 Stock Plan. Incorporated by reference to exhibits filed with the Registrant’s Form S-8 (No. 333-62159) on August 25, 1998.
10	.10	LSI Logic Corporation 1999 Nonstatutory Stock Option Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-96549) on July 16, 2002.*
10	.11	SEEQ Technology, Inc. Amended and Restated 1982 Stock Option Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 (No. 333-81435) on June 24, 1999.*
10	.12	IntraServer Technology, Inc. 1998 Stock Option Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-38746) on June 7, 2000.
10	.13	DataPath Systems, Inc. Amended 1994 Stock Option Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-42888) on August 2, 2000.*
10	.14	DataPath Systems, Inc. Amended and Restated 1997 Stock Option Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-42888) on August 2, 2000.*
10	.15	Syntax Systems, Inc. Restated Stock Option Plan of January 5, 1999. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-52050) on December 18, 2000.*
10	.16	C-Cube Microsystems Inc. 2000 Stock Plan. Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-8 (No. 333-62960) on June 14, 2001.
10	.17	Wilfred J. Corrigan Employment Agreement dated as of September 20, 2001. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001.*
10	.18	Manufacturing Technology Joint Development and Foundry Supply Agreement dated as of March 30, 2001 by and between the Registrant and Taiwan Semiconductor Manufacturing Co., Ltd. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002.
10	.19	LSI Logic Corporation 2003 Equity Incentive Plan. Incorporated by reference to exhibits filed with the Registrant’s Registration Statement on From S-8 (No. 333-106206) on June 17, 2003.*
10	.20	Registration Rights Agreement between LSI Logic Corporation and Morgan Stanley & Co., Inc., dated May 16, 2003. Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.
10	.21	Change in Control Severance Agreement between the Registrant and Thomas Georgens, dated as of November 20, 2003. Incorporated by reference to exhibits filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.*

10	.22	LSI Logic Corporation 1991 Equity Incentive Plan Nonqualified Stock Option Agreement. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
10	.23	Form of Notice of Grant under LSI Logic Corporation Nonqualified Stock Option Agreement. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
10	.24	LSI Logic Corporation 2003 Equity Incentive Plan Restricted Stock Unit Agreement. Incorporated by reference to exhibits filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ending October 3, 2004.
10	.25	Engenio Information Technologies, Inc. Amended and Restated 2004 Equity Incentive Plan. Incorporated by reference from exhibits filed with the Current Report on Form 8-K on November 4, 2004.
10	.26	Engenio Information Technologies, Inc. 2004 Equity Incentive Plan Nonqualified Stock Option Agreement. Incorporated by reference from exhibits filed with the Current Report on Form 8-K on November 4, 2004.
10	.27	Form of Notice of Grant under Engenio Information Technologies, Inc. 2004 Equity Incentive Plan Nonqualified Stock Option Agreement. Incorporated by reference from exhibits filed with the Current Report on Form 8-K on November 4, 2004.
10	.28	Lease Agreement dated June 30, 2004, for 670 N. McCarthy Boulevard, Milpitas, California between Engenio Information Technologies, Inc. and The Irvine Company. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.29	First Amendment, dated October 28, 2004, to the Lease Agreement (dated June 30, 2004), for 670 N. McCarthy Boulevard, Milpitas, California between Engenio Information Technologies, Inc. and The Irvine Company. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.30	Lease Agreement dated December 31, 2003, for 1621 Barber Lane, Milpitas, California, between the Registrant and Limar Realty Corp. #9. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.31	Lease Agreement dated December 31, 2003, for 765 Sycamore Drive, Milpitas, California, between the Registrant and Limar Realty Corp. #4. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.32	Lease Agreement dated December 31, 2003, for 1501 McCarthy Boulevard, Milpitas, California, between the Registrant and Limar Realty Corp. #4. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.33	Lease Agreement dated February 20, 2004, for 1855 Barber Lane, Milpitas, California, between the Registrant and TriNet Milpitas Associates, LLC. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.34	Lease Agreement dated February 20, 2004, for 560 Cottonwood Drive, Milpitas, California, between the Registrant and TriNet Milpitas Associates, LLC. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.35	Assignment and Assumption of Lease dated May 27, 2004, for 5400 Airport Boulevard, Suites 100 and 200, Boulder, Colorado, between LakeCentre Plaza Limited, Ltd., LLLP and Engenio Information Technologies, Inc. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.36	Lease Modification Agreement dated June 21, 2004, for 5400 Airport Boulevard, Suites 100 and 200, Boulder, Colorado, between LakeCentre Plaza Limited, Ltd., LLLP and Engenio Information Technologies, Inc. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.37	Form of Notice of Grant of Restricted Stock Units under LSI Logic Corporation 2003 Equity Incentive Plan. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.
10	.38	LSI Logic Corporation 2004 16(b) Executive Officer Incentive Plan. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.*
10	.39	Summary Description of the Engenio Information Technologies, Inc. 2004 Incentive Plan. Included as an Exhibit to this Annual Report on Form 10-K for the year ended December 31, 2004.*
21	.1	List of Subsidiaries.

23	.1	Consent of Independent Registered Public Accounting Firm.
24	.1	Power of Attorney (See page 110).
31	.1	Certification of the Chief Executive Officer pursuant to Securities and Exchange Act Rules 13a-15(e) and 15d-1(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2	Certification of the Chief Financial Officer pursuant to Securities and Exchange Act Rules 13a-15(e) and 15de-1(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32	.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

*  Denotes management contract or compensatory plan or arrangement

**  Furnished, not filed.

EX-10.28

Exhibit 10.28

LEASE

(Multi-Tenant; Net)

McCarthy Center

BETWEEN

THE IRVINE COMPANY

AND

ENGENIO INFORMATION TECHNOLOGIES, INC.

INDEX TO LEASE

ARTICLE I. BASIC LEASE PROVISIONS	1
ARTICLE II. PREMISES	3
SECTION 2.1. LEASED PREMISES	3
SECTION 2.2. ACCEPTANCE OF PREMISES	3
SECTION 2.3. BUILDING NAME AND ADDRESS	3
ARTICLE III. TERM	4
SECTION 3.1. GENERAL	4
SECTION 3.2. DELAY IN POSSESSION	4
SECTION 3.3. RIGHT TO EXTEND THIS LEASE	5
ARTICLE IV. RENT AND OPERATING EXPENSES	6
SECTION 4.1. BASIC RENT	6
SECTION 4.2. OPERATING EXPENSES	6
SECTION 4.3. SECURITY DEPOSIT	8
ARTICLE V. USES	8
SECTION 5.1. USE	8
SECTION 5.2. SIGNS	9
SECTION 5.3. HAZARDOUS MATERIALS	9
ARTICLE VI. COMMON AREAS; SERVICES	11
SECTION 6.1. UTILITIES AND SERVICES	11
SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS	11
SECTION 6.3. USE OF COMMON AREAS	11
SECTION 6.4. PARKING	12
SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD	12
ARTICLE VII. MAINTAINING THE PREMISES	12
SECTION 7.1. TENANT’S MAINTENANCE AND REPAIR	12
SECTION 7.2. LANDLORD’S MAINTENANCE AND REPAIR	13
SECTION 7.3. ALTERATIONS	13
SECTION 7.4. MECHANIC’S LIENS	14
SECTION 7.5. ENTRY AND INSPECTION	14
SECTION 7.6. SPACE PLANNING AND SUBSTITUTION
ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANTS PROPERTY	14
ARTICLE IX. ASSIGNMENT AND SUBLETTING	14
SECTION 9.1. RIGHTS OF PARTIES	14
SECTION 9.2. EFFECT OF TRANSFER	16
SECTION 9.3. SUBLEASE REQUIREMENTS	16
SECTION 9.4. CERTAIN TRANSFERS	16
ARTICLE X. INSURANCE AND INDEMNITY	17
SECTION 10.1. TENANT’S INSURANCE	17
SECTION 10.2. LANDLORD’S INSURANCE	17
SECTION 10.3. TENANT’S INDEMNITY	17
SECTION 10.4. LANDLORD’S NONLIABILITY	17
SECTION 10.5. WAIVER OF SUBROGATION	18
ARTICLE XI. DAMAGE OR DESTRUCTION	18
SECTION 11.1. RESTORATION	18
SECTION 11.2. LEASE GOVERNS	19
ARTICLE XII, EMINENT DOMAIN	19
SECTION 12.1. TOTAL OR PARTIAL TAKING	19
SECTION 12.2. TEMPORARY TAKING	19
SECTION 12.3. TAKING OF PARKING AREA	19
ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS	19
SECTION 13.1. SUBORDINATION	19
SECTION 13.2. ESTOPPEL CERTIFICATE	20
SECTION 13.3. FINANCIALS	20
ARTICLE XIV, EVENTS OF DEFAULT AND REMEDIES	20
SECTION 14.1. TENANT’S DEFAULTS	20

i

SECTION 14.2. LANDLORD’S REMEDIES	21
SECTION 14.3. LATE PAYMENTS	22
SECTION 14.4. RIGHT OF LANDLORD TO PERFORM	22
SECTION 14.5. DEFAULT BY LANDLORD	22
SECTION 14.6. EXPENSES AND LEGAL FEES	23
SECTION 14.7. WAIVER OF JURY TRIAL	23
SECTION 14.8. SATISFACTION OF JUDGMENT	23
SECTION 14.9. LIMITATION OF ACTIONS AGAINST LANDLORD	23
ARTICLE XV. END OF TERM	23
SECTION 15.1. HOLDING OVER	23
SECTION 15.2. MERGER ON TERMINATION	23
SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY	23
ARTICLE XVI. PAYMENTS AND NOTICES	24
ARTICLE XVII. RULES AND REGULATIONS	24
ARTICLE XVIII. BROKER’S COMMISSION	24
ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST	24
ARTICLE XX. INTERPRETATION	24
SECTION 20.1. GENDER AND NUMBER	24
SECTION 20.2 HEADINGS	25
SECTION 20.3 JOINT AND SEVERAL LIABILITY	25
SECTION 20.4. SUCCESSORS	25
SECTION 20.5. TIME OF ESSENCE	25
SECTION 20.6. CONTROLLING LAW/VENUE	25
SECTION 20.7. SEVERABILITY	25
SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES	25
SECTION 20.9. INABILITY TO PERFORM	25
SECTION 20.10 ENTIRE AGREEMENT	25
SECTION 20.1l. QUIET ENJOYMENT	25
SECTION 20.12. SURVIVAL	25
SECTION 20.13 INTERPRETATION	25
ARTICLE XXI. EXECUTION AND RECORDING	25
SECTION 21.1. COUNTERPARTS	25
SECTION 21.2. CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY	25
SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER	26
SECTION 21.4. RECORDING	26
SECTION 21.5. AMENDMENTS	26
SECTION 21.6. EXECUTED COPY	26
SECTION 21.7. ATTACHMENTS	26
ARTICLE XXII. MISCELLANEOUS	26
SECTION 22.1. NONDISCLOSURE OF LEASE TERMS	26
SECTION 22.2. GUARANTY	26
SECTION 22.3. CHANGES REQUESTED BY LENDER	26
SECTION 22.4. MORTGAGEE PROTECTION	26
SECTION 22.5. COVENANTS AND CONDITIONS	26
SECTION 22.6. SECURITY MEASURES	27

EXHIBITS
Exhibit A	Description of Premises
Exhibit B	Environmental Questionnaire
Exhibit C	Landlord’s Disclosures
Exhibit D	Insurance Requirements
Exhibit E	Rules and Regulations
Exhibit F	Standard Improvements
Exhibit X	Work Letter
Exhibit Y	Project Site Plan

ii

LEASE
(Multi-Tenant; Net)

     THIS LEASE is dated for reference purposes only as of the 30^th day of June, 2004, by and between THE IRVINE COMPANY, a Delaware corporation hereafter called “Landlord,” and ENGENIO INFORMATION TECHNOLOGIES, INC., a Delaware corporation, hereinafter called “Tenant.”

ARTICLE I. BASIC LEASE PROVISIONS

     Each reference in this Lease to the “Basic Lease Provisions” shall mean and refer to the following collective terms, the application of which shall be governed by the provisions in the remaining Articles of this Lease. Any dates or times for performance calculated from the date of this Lease shall be calculated from the date of the last party to sign this Lease and not from the reference date noted above.

1.	Premises: Suite No. 100 (the Premises are more particularly described in Section 2.1).
	Address of Building: 670 N. McCarthy Boulevard, Milpitas, CA
2.	Project Description (if applicable): McCarthy Center
3.	Use of Premises: General office including data center and customer service “experience” center.
4.	Estimated Delivery Date: two (2) weeks after the date of the last signatory hereto.
5.	Term: Sixty (60) months, plus such additional days as may be required to cause this Lease to terminate on the final day of the calendar month.
6.	Basic Rent: During the initial six (6) months of the Term of this Lease (and subject to the provisions of Section 14.2(d) of the Lease), Tenant shall not be obligated to pay Basic Rent.
	Basic Rent is subject to adjustment as follows:
	Commencing six (6) months following the Commencement Date, the Basic Rent shall be $21,565.18 per month, based on $.82 per rentable square foot.
	Commencing twelve (12) months following the Commencement Date, the Basic Rent shall be $22,091.16 per month, based on $.84 per rentable square foot.
	Commencing twenty-four (24) months following the Commencement Date, the Basic Rent shall be $22,880.13 per month, based on $.87 per rentable square foot.
	Commencing thirty-six (36) months following the Commencement Date, the Basic Rent shall be $23,669.10 per month, based on $.90 per rentable square foot.
	Commencing forty-eight (48) months following the Commencement Date, the Basic Rent shall be $24,195.08 per month, based on $.92 per rentable square foot.
7.	Guarantor(s): None

8.	Floor Area: Approximately 26,299 rentable square feet and approximately 23,720 useable square feet.
9.	Security Deposit: $24,195.08.
10.	Broker(s): Julien J. Studley
11.	Additional Insureds: McCarthy Center Partners LLC, a Delaware limited liability company
12.	Address for Payments and Notices:

LANDLORD	TENANT
THE IRVINE COMPANY	ENGENIO INFORMATION
dba Office Properties	TECHNOLOGIES, INC.
8105 Irvine Center Drive, Suite 300	670 N. McCarthy Boulevard,Suite 100
Irvine, CA 92618	Milpitas, CA 95035
Attn: Vice President, Operations,Technology Portfolio	Attention: Vice President and General Counsel

1

	with a copy of notices to:
	THE IRVINE COMPANY dba Office Properties 8105 Irvine Center Drive, Suite 300 Irvine, CA 92618 Attn: Senior Vice President, Operations Office Properties
13.	Tenant’s Liability Insurance Requirement: $2,000,000.00
14.	Vehicle Parking Spaces: One hundred five (105)

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ARTICLE II. PREMISES

     SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant leases from Landlord the premises shown in Exhibit A (the “Premises”), containing approximately the rentable square footage set forth as the “Floor Area” in Item 8 of the Basic Lease Provisions and known by the suite number identified in Item 1 of the Basic Lease Provisions. The Premises are located in the building identified in Item 1 of the Basic Lease Provisions (the Premises together with such building and the underlying real property, are called the “Building”), and is a portion of the project identified in Item 2 of the Basic Lease Provisions and shown in Exhibit Y, if any (the “Project”). All references to “Floor Area” in this Lease shall mean the rentable square footage set forth in Item 8 of the Basic Lease Provisions. The rentable square footage set forth in Item 8 may include or have been adjusted by various factors, including, without limitation, a load factor to allocate a proportionate share of any vertical penetrations, stairwells, common lobby or common features or areas of the Building. Tenant agrees that the Floor Area set forth in Item 8 shall be binding on Landlord and Tenant for purposes of this Lease regardless of whether any future or differing measurements of the Premises or the Building are consistent or inconsistent with the Floor Area set forth in Item 8. The Premises are a portion of certain real property which is leased by Landlord pursuant to that certain Master Lease dated December 31, 2003 (the “Master Lease”) by and between McCarthy Center Partners LLC, a Delaware limited liability company (“Master Lessor”), as “Landlord”, and Landlord as “Tenant”. That certain Master Lease (Short Form — Memorandum) was recorded on December 31, 2003 as Document No. 17553727 in the Official Records of Santa Clara County, California

     SECTION 2.2. ACCEPTANCE OF PREMISES. Except as expressly set forth in this Lease, Tenant acknowledges that neither Landlord nor any representative of Landlord has made any representation or warranty with respect to the Premises, the Building or the Project or their respective suitability or fitness for any purpose other than general office use, including without limitation any representations or warranties regarding the compliance of Tenant’s use of the Premises with the applicable zoning or regarding any other land use matters, and Tenant shall be solely responsible as to such matters. Further, neither Landlord nor any representative of Landlord has made any representations or warranties regarding (i) what other tenants or uses may be permitted or intended in the Building or the Project, (ii) any exclusivity of use by Tenant with respect to its permitted use of the Premises as set forth in Item 3 of the Basic Lease Provisions, or (iii) any construction of portions of the Project not yet completed. Tenant further acknowledges that neither Landlord nor any representative of Landlord has agreed to undertake any alterations or additions or construct any improvements to the Premises except as expressly provided in this Lease. As of the Commencement Date, Tenant shall be conclusively deemed to have accepted the Premises and those portions of the Building and Project in which Tenant has any rights under this Lease, which acceptance shall mean that it is conclusively established that the Premises and those portions of the Building and Project in which Tenant has any rights under this Lease were in satisfactory condition and in conformity with the provisions of this Lease. If no items are required of Landlord under the Work Letter attached hereto as Exhibit X (“Work Letter”), Tenant shall be conclusively deemed to have accepted the Premises, and those portions of the Building and Project in which Tenant has any rights under this Lease, in their existing condition as of the Commencement Date, and to have waived any and all right or claim regardless of the nature thereof against Landlord arising out of the condition of the Premises, the Building or the Project. Nothing contained in this Section shall affect the commencement of the Term or the obligation of Tenant to pay rent.

     Notwithstanding the foregoing, Landlord shall deliver the Premises to Tenant on the Commencement Date (as defined in Section 3.1) clean and free of debris with all items of Landlord’s work pursuant to the Work Letter, including without limitation, the installation of the Tenant Improvements (as defined in Section 3.1) completed in accordance with the terms of the Work Letter. Landlord warrants to Tenant that the roof, plumbing, fire sprinkler system, lighting, heating, ventilation and air conditioning systems and electrical systems in the Premises, shall be in good operating condition on the Commencement Date and during the initial twelve (12) months of the Term. In the event of a non-compliance with such warranty, Landlord shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Tenant setting forth the nature and extent of such non-compliance, rectify same at Landlord’s cost and expense. Further, in connection with the construction of the Tenant Improvements pursuant to the Work Letter, Tenant shall use commercially reasonable efforts to obtain customary warranties and guaranties from the contractor(s) performing such work and/or the manufacturers of equipment installed therein, but shall be under no obligation to incur additional expense in order to obtain or extend such warranties. If Tenant is required to make repairs to any component of the Premises or any of its systems not covered by the Landlord’s warranty contained in this Section 2.2 but for which Landlord has obtained a contractor’s or manufacturer’s warranty, then Landlord shall, upon request by Tenant, use its commercially reasonable efforts to pursue its rights under any such warranties for the benefit of Tenant. Under no circumstances will Tenant have the right to enforce any of the warranties and guaranties obtained by Landlord.

     SECTION 2.3. BUILDING NAME AND ADDRESS. Tenant shall not utilize any name selected by Landlord from time to time for the Building and/or the Project as any part of Tenant’s corporate or trade name. Landlord shall have the right to change the name, address, number or designation of the Building or Project without liability to Tenant.

     SECTION 2.4. RIGHT OF FIRST REFUSAL.

     (a) Provided Tenant is not then in default after the expiration of the applicable cure period, Landlord hereby grants Tenant the one time right of first refusal in accordance with the terms of this Section 2.4 (the “First Refusal Right”) to lease such space (“First Refusal Space”) that (i) is located in the Building and contiguous to the Premises; and (ii) Landlord has received a bona fide signed letter of intent to lease the space described in Section 2.4(i) from a potential tenant that is acceptable to Landlord as Landlord shall determine in its sole and absolute discretion (“Acceptable LOI”). The First Refusal Right shall apply only to the first Acceptable LOI that Landlord receives during the eighteen (18) month period immediately following the date of execution of this Lease.

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If Tenant fails to exercise the First Refusal Right, Landlord fails to receive an Acceptable LOI during the eighteen (18) month period immediately following the date of execution of this Lease or Tenant exercises the First Refusal Right with respect to an Acceptable LOI, the First Refusal Right shall be of no further force and effect and the Tenant shall not have any right of first refusal to lease any additional space in the Building. Promptly after receipt of an Acceptable LOI, Landlord shall prepare an amendment to this Lease setting forth the terms upon which Tenant may lease the First Refusal Space and deliver same to Tenant for Tenant’s consideration. Such lease amendment shall be on the same terms and conditions set forth in this Lease as modified by each and every term and condition set forth in the Acceptable LOI. If Tenant desires to exercise the First Refusal Right, Tenant shall execute and return to Landlord the aforementioned lease amendment within three (3) business days after delivery by Landlord. Tenant’s failure to timely return such lease amendment shall be deemed Tenant’s election not to exercise the First Refusal Right and Landlord shall be free to lease the First Refusal Space free and clear of the First Refusal Right. If requested by Landlord following Tenant’s failure to exercise the First Refusal Right, Tenant shall execute a waiver and release of the First Refusal Right and deliver same to Landlord within three (3) business days after demand. Tenant’s failure to deliver such waiver and release shall constitute a material default hereunder. Tenant’s rights under this Section 2.4(a) shall belong solely to Engenio Information Technologies, Inc., a Delaware corporation, and may not be assigned or transferred by it. Any attempted assignment or transfer shall be void and of no force or effect. Notwithstanding anything contained in this Section 2.4(a) to the contrary, it is understood that Tenant’s First Refusal Right shall be subordinate to the intervening rights of first offer, if any, of the Ground Lessor under the ground lease underlying the First Refusal Space, and to any preexisting extension or expansion rights granted by Landlord to any third party tenant leasing, or with the right to lease the First Refusal Space or any portion thereof, and in no event shall the First Refusal Space be subject to the provisions of this First Refusal Right unless and until such prior rights are waived and/or not exercised by the holder thereof.

     (b) In addition to the rights set forth in Section 2.4(a) above, provided Tenant is not then in default after the expiration of the applicable cure period, Landlord hereby grants Tenant the right (“Suite 120 Leasing Right”) to lease that certain space located in the Building and identified as Suite 120 and consisting of approximately eleven thousand nine hundred fifty two rentable square feet as set forth on the attached Exhibit A (“Suite 120”). The Suite 120 Leasing Right shall commence on the date of execution of this Lease and shall expire on the date that is six (6) months after such execution date if the Tenant has not provided written notice of its election to exercise the Suite 120 Leasing Right. Tenant’s failure to exercise the Suite 120 Leasing Right shall not limit Tenant’s rights set forth in Section 2.4(a) above. The Suite 120 Leasing Right shall be on the same terms and conditions of this Lease, including, but not limited to, the per rentable square foot (i) Basic Rent; (ii) Security Deposit; (iii) tenant improvement allowance provided pursuant to the Work Letter and (iv) vehicle parking spaces; but excepting therefrom, (a) the Lease term for Suite 120 will expire concurrently with the expiration of the Premises; (b) Basic Rent payments shall commence concurrently with the Basic Rent for the Premises; and (c) the estimated delivery date for Suite 120 will be forty five (45) days after Tenant’s exercise of the Suite 120 Leasing Right. In addition, the Floor Area and Tenant’s Share will be appropriately adjusted. Promptly after receipt Tenant’s notice exercising the Suite 120 Leasing Right, Landlord shall prepare an amendment to this Lease (the “Amendment”) setting forth the terms upon which Tenant may lease Suite 120 and deliver same to Tenant for Tenant’s consideration. If the Amendment is acceptable to Tenant, Tenant shall execute and return the Amendment to Landlord within ten (10) business days after delivery by Landlord. Tenant’s failure to timely return such lease amendment shall act to void Tenant’s exercise of the Suite 120 Leasing Right and Landlord shall be free to lease Suite 120, subject to Tenant’s rights set forth in Section 2.4(a) above. Tenant’s rights under this Section 2.4(b) shall belong solely to Engenio Information Technologies, Inc., a Delaware corporation, and may not be assigned or transferred by it. Any attempted assignment or transfer shall be void and of no force or effect.

ARTICLE III. TERM

     SECTION 3.1. GENERAL. The term of this Lease (“Term”) shall be for the period shown in Item 5 of the Basic Lease Provisions. Subject to the provisions of Section 3.2 below, the Term shall commence (“Commencement Date”) on the earlier of (a) the date Tenant commences business operations in the Premises, and (b) the date the tenant improvements constructed pursuant to the Work Letter (“Tenant Improvements”) have been substantially completed in accordance with the Work Letter (as evidenced by written approval thereof in accordance with the building permits issued for the Tenant Improvements or issuance of a temporary or final certificate of occupancy for the Premises); and (c) December 10, 2004. Tenant shall commence construction of the Tenant Improvements promptly after the execution of this Lease and shall diligently prosecute the construction thereof to completion. Should Tenant fail to promptly commence such construction or fail to diligently prosecute such construction to completion, the date for completion of the Tenant Improvements pursuant to subsection (b) above shall be accelerated on a day for day basis resulting from such failure. The date on which this Lease is scheduled to terminate is referred to as the “Expiration Date.” Promptly after the Commencement Date is established, the parties shall memorialize on a customary form provided by Landlord the actual Commencement Date and the Expiration Date of this Lease. Tenant’s failure to execute that form shall not affect the validity of Landlord’s determination of those dates or Tenant’s obligation to pay rent hereunder. From and after the execution of this Lease, Tenant shall have access to the Premises for the purpose of completing construction of the Tenant Improvements and to enable Tenant to install fixtures, furniture, computers, telephone and cabling equipment in the Premises. Such access shall be subject to all of the terms and conditions of this Lease, except that Tenant’s rental obligation shall not commence to accrue until the Commencement Date hereof.

     SECTION 3.2. DELAY IN POSSESSION. If Landlord, for any reason whatsoever, cannot deliver possession of the Premises to Tenant on or before the date that is two weeks after the date of the last signatory hereto (“Estimated Delivery Date”), this Lease shall not be void or voidable nor shall Landlord be liable to Tenant for any resulting loss or damage. However, Tenant shall not be liable for any rent until the Commencement Date occurs as provided in Section 3.1 above, except that if Landlord cannot tender possession of the Premises in accordance with the provisions of Section 3.1 above due to any action or inaction of Tenant, then the Commencement Date shall be deemed to have occurred and Landlord shall be entitled to full performance by Tenant

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(including the payment of rent) from the date Landlord would have been able to so tender possession of the Premises to Tenant but for Tenant’s action or inaction. For purposes of determining the Commencement Date pursuant to Section 3.1, the date set forth in Section 3.1(c) above shall be extended on a day for day basis for each day Landlord is delayed in delivering possession of the Premises to Tenant beyond the Estimated Delivery Date; provided, however, if such delay is caused or contributed to by Tenant, the date set forth in Section 3.1(c) above shall not be extended as a result of such delay.

     Notwithstanding anything to the contrary contained in this Section 3.2, if for any reason other than Tenant Delays, or other matters beyond Landlord’s reasonable control, the actual Commencement Date has not occurred by the date that is one hundred twenty (120) days following the Estimated Delivery Date, then Tenant may, by written notice to Landlord given within ten (10) days thereafter, but prior to the actual occurrence of the Commencement Date, elect to terminate this Lease. Notwithstanding the foregoing, if at any time during the construction period for the Tenant Improvements, Landlord reasonably believes that the Commencement Date will not occur on or before one hundred twenty (120) days following the Estimated Delivery Date, Landlord may notify Tenant in writing of such fact and of a new outside date on or before which the Commencement Date will occur, and Tenant must elect within ten (10) days of receipt of such notice to either terminate this Lease or waive its right to terminate this Lease provided the Commencement Date occurs on or prior to the new outside date established by Landlord in such notice to Tenant. Tenant’s failure to elect to terminate this Lease within such ten (10) day period shall be deemed Tenant’s waiver of its right to terminate this Lease as provided in this paragraph as to the previous outside date, but not as to the new outside date established by said notice,

     SECTION 3.3. RIGHT TO EXTEND THIS LEASE. Provided that no Event of Default has occurred under any provision of this Lease, either at the time of exercise of the extension right granted herein or at the time of the commencement of such extension, then Tenant may extend the Term of this Lease for one (1) period of thirty-six (36) months. Tenant shall exercise its right to extend the Term by and only by delivering to Landlord, not less than nine (9) months or more than twelve (12) months prior to the expiration date of the Term, Tenant’s irrevocable written notice of its commitment to extend (the “Commitment Notice”). The Basic Rent payable under the Lease during any extension of the Term shall be ninety five percent (95%) of the fair market rental rate as determined in the following provisions.

     If Landlord and Tenant have not by then been able to agree upon the Basic Rent for the extension of the Term, then within ten (10) business days after the receipt of the Commitment Notice, Landlord shall notify Tenant in writing of the Basic Rent that would reflect ninety five percent (95%) of the fair market rental rate for a 36-month renewal of comparable space in the Project (together with any increases thereof during the extension period) as of the commencement of the extension period (“Landlord’s Determination”). Should Tenant disagree with the Landlord’s Determination, then Tenant shall, not later than twenty (20) days thereafter, notify Landlord in writing of Tenant’s determination of those rental terms (“Tenant’s Determination”). Within ten (10) days following delivery of the Tenant’s Determination, the parties shall attempt to agree on a licensed real estate broker with at least ten (10) years experience in the Milpitas/San Jose/Highway 237 market to determine the fair market rental. If the parties are unable to agree in that time, then each party shall designate a broker within ten (10) days thereafter. Should either party fail to so designate a broker within that time, then the broker designated by the other party shall determine the fair market rental. Should each of the parties timely designate a broker, then the two brokers so designated shall appoint a third broker who shall, acting alone, determine the fair market rental for the Premises.

     Within ten (10) business days following the selection of the broker and such broker’s receipt of the Landlord’s Determination and the Tenant’s Determination, the broker shall determine whether the rental rate determined by Landlord or by Tenant more accurately reflects ninety five percent (95%) of the fair market rental rate for the 36-month renewal of the Lease for the Premises, as reasonably extrapolated to the commencement of the extension period. Accordingly, either the Landlord’s Determination or the Tenant’s Determination shall be selected by the broker as the fair market rental rate for the extension period. In making such determination, the broker shall consider rental comparables for the Project and rental comparables for similarly improved space within the Milpitas/San Jose/Highway 237 market with appropriate adjustment for location and quality of project, but the broker shall not attribute any factor for market tenant improvement allowances for renewal leases or brokerage commissions in making its determination of the fair market rental rate. At any time before the decision of the broker is rendered, either party may, by written notice to the other party, accept the rental terms submitted by the other party, in which event such terms shall be deemed adopted as the agreed fair market rental. The fees of the broker(s) shall be borne entirely by the party whose determination of the fair market rental rate was not accepted by the broker.

     Within twenty (20) days after the determination of the rental rate, Landlord shall prepare an appropriate amendment to this Lease for the extension period, and Tenant shall execute and return same to Landlord within ten (10) days after Tenant’s receipt of same. Should the rental rate not be established by the commencement of the extension period, then Tenant shall continue paying rent at the rate in effect during the last month of the initial Term, and a lump sum adjustment shall be made promptly upon the determination of such new rental.

     If Tenant fails to timely comply with any of the provisions of this paragraph, Tenant’s right to extend the Term shall be extinguished and the Lease shall automatically terminate as of the expiration date of the Term, without any extension and without any liability to Landlord. Tenant shall have no other right to extend the Term beyond the single thirty-six (36) month extension period created by this paragraph. Unless agreed to in a writing signed by Landlord and Tenant, any extension of the Term, whether created by an amendment to this Lease or by a holdover of the Premises by Tenant, or otherwise, shall be deemed a part of, and not in addition to, any duly exercised extension period permitted by this paragraph. Tenant’s rights under this Section 3.3 shall be personal to Engenio Information Technologies, Inc., and shall not be transferable without the prior written consent of the Landlord, which consent may be withheld in Landlord’s sole and absolute discretion; provided, however, Engenio Information Technologies, Inc., may assign its rights under this Section 3.3 to a Permitted Transferee without

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obtaining Landlord’s consent. In addition, if Tenant enters into permitted subleases of the Premises totaling more than fifty percent (50%) of the rentable square footage of the Premises, Tenant’s rights under this Section 3.3 shall terminate at the option of Landlord.

ARTICLE IV. RENT AND OPERATING EXPENSES

     SECTION 4.1. BASIC RENT. From and after the Commencement Date, Tenant shall pay to Landlord without deduction or offset, the rental amount for the Premises shown in Item 6 of the Basic Lease Provisions (the “Basic Rent”), as such may be increased pursuant to Section II(D) of the Work Letter and including subsequent adjustments, if any. Any rental adjustment to Basic Rent shown in Item 6 shall be deemed to occur on the specified month, whether or not the Commencement Date occurs at the end of a calendar month. The rent shall be due and payable in advance commencing on the Commencement Date (as prorated for any partial month) and continuing thereafter on the first day of each successive calendar month of the Term. No demand, notice or invoice shall be required for the payment of Basic Rent. An installment of rent in the amount of one (1) full month’s Basic Rent at the initial rate specified in Item 6 of the Basic Lease Provisions and one (1) month’s estimated Tenant’s Share of Operating Expenses (as defined in Section 4.2) shall be delivered to Landlord concurrently with Tenant’s execution of this Lease and shall be applied against the Basic Rent and Operating Expenses first due hereunder.

     SECTION 4.2. OPERATING EXPENSES.

     (a) From and after Commencement Date, Tenant shall pay to Landlord, as additional rent, Tenant’s Share of all Operating Expenses, as defined in Section 4.2(f), incurred by Landlord in the operation of the Building and the Project. The term “Tenant’s Share” means that portion of any Operating Expenses determined by multiplying the cost of such item by a fraction, the numerator of which is the Floor Area (set forth in item 8 of the Basic Lease Provisions) and the denominator of which is the total rentable square footage, as determined from time to time by Landlord, of (i) the Building, for expenses determined by Landlord to benefit or relate substantially to the Building rather than the entire Project, (ii) all of the buildings in the Project, as determined by Landlord, for expenses determined by Landlord to benefit or relate substantially to the entire Project rather than any specific building or (iii) all or some of the buildings within the Project as well as all or a portion of other property owned by Landlord and/or its affiliates, for expenses which benefit or relate to such buildings within the Project and such other real property. In the event that Landlord determines in its reasonable discretion that any premises within the Building or any building within the Project or any portion of a building or project within a larger area incurs a non-proportional benefit from any expense, or is the non-proportional cause of any such expense, Landlord may, allocate a greater percentage of such Operating Expense to such premises, building or project, as applicable. The full amount of any management fee payable by Landlord for the management of Tenant’s Premises that is calculated as a percentage of the rent payable by Tenant shall be paid in full by Tenant as additional rent.

     (b) Prior to the start of each full Expense Recovery Period (as defined in this Section 4.2), Landlord shall give Tenant a written estimate of the amount of Tenant’s Share of Operating Expenses for the applicable Expense Recovery Period. Failure to provide such estimate shall not relieve Tenant from its obligation to pay Tenant’s Share of Operating Expenses or estimated amounts thereof, if and when Landlord provides such estimate or final payment amount. Tenant shall pay the estimated amounts to Landlord in equal monthly installments, in advance concurrently with payments of Basic Rent. If Landlord has not furnished its written estimate for any Expense Recovery Period by the time set forth above, Tenant shall continue to pay monthly the estimated Tenant’s Share of Operating Expenses in effect during the prior Expense Recovery Period; provided that when the new estimate is delivered to Tenant, Tenant shall, at the next monthly payment date, pay any accrued estimated Tenant’s Share of Operating Expenses based upon the new estimate. For purposes hereof, “Expense Recovery Period” shall mean every twelve month period during the Term (or portion thereof for the first and last lease years) commencing July 1 and ending June 30, provided that Landlord shall have the right to change the date on which an Expense Recovery Period commences in which event appropriate reasonable adjustments shall be made to Tenant’s Share of Operating Expenses so that the amount payable by Tenant shall not materially vary as a result of such change.

     (c) Within one hundred twenty (120) days after the end of each Expense Recovery Period, Landlord shall furnish to Tenant a statement showing in reasonable detail the actual or prorated Tenant’s Share of Operating Expenses incurred by Landlord during the period, and the parties shall within thirty (30) days thereafter make any payment or allowance necessary to adjust Tenant’s estimated payments of Tenant’s Share of Operating Expenses, if any, to the actual Tenant’s Share of Operating Expenses as shown by the annual statement. Any delay or failure by Landlord in delivering any statement hereunder shall not constitute a waiver of Landlord’s right to require Tenant to pay Tenant’s Share of Operating Expenses pursuant hereto. Any amount due Tenant shall be credited against installments next coming due under this Section 4.2, and any deficiency shall be paid by Tenant together with the next installment. Should Tenant fail to object in writing to Landlord’s determination of Tenant’s Share of Operating Expenses within ninety (90) days following delivery of Landlord’s expense statement, Landlord’s determination of Tenant’s Share of Operating Expenses for the applicable Expense Recovery Period shall be conclusive and binding on the parties for all purposes and any future claims to the contrary shall be barred.

     Provided no Event of Default has occurred which has not either been cured by Tenant or waived by Landlord, Tenant shall have the right to cause a certified public accountant, engaged on a non-contingency fee basis, to audit Operating Expenses by inspecting Landlord’s general ledger of expenses not more than once during any Expense Recovery Period. However, to the extent that insurance premiums or any other component of Operating Expenses is determined by Landlord on the basis of an internal allocation of costs utilizing information Landlord in good faith deems proprietary, such expense component shall not be subject to audit. Tenant shall give notice to Landlord of Tenant’s intent to audit within ninety (90) days after Tenant’s receipt of Landlord’s expense statement which sets forth Tenant’s Share of Landlord’s actual Operating Expenses. Such audit shall be conducted at a mutually agreeable time during normal business hours at the office of Landlord or its management agent where such accounts are maintained. If Tenant’s audit determines that actual Operating Expenses have been overstated by

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more than five percent (5%), then subject to Landlord’s right to review and/or contest the audit results, Landlord shall reimburse Tenant for the reasonable out-of-pocket costs of such audit. Tenant’s rent shall be appropriately adjusted to reflect any overstatement in Operating Expenses. In the event of a dispute between Landlord and Tenant regarding such audit, such dispute shall be submitted and resolved by binding arbitration pursuant to Section 22.7 below. All of the information obtained by Tenant and/or its auditor in connection with such audit, as well as any compromise, settlement, or adjustment reached between Landlord and Tenant as a result thereof, shall be held in strict confidence and, except as may be required pursuant to litigation, shall not be disclosed to any third party, directly or indirectly, by Tenant or its auditor or any of their officers, agents or employees. Landlord may require Tenant’s auditor to execute a separate confidentiality agreement affirming the foregoing as a condition precedent to any audit. In the event of a violation of this confidentiality covenant in connection with any audit, then in addition to any other legal or equitable remedy available to Landlord, Tenant shall forfeit its right to any reconciliation or cost reimbursement payment from Landlord due to said audit (and any such payment theretofore made by Landlord shall be promptly returned by Tenant), and Tenant shall have no further audit rights under this Lease.

     (d) Even though this Lease has terminated and the Tenant has vacated the Premises, when the final determination is made of Tenant’s Share of Operating Expenses for the Expense Recovery Period in which this Lease terminates, Tenant shall within thirty (30) days of written notice pay the entire increase over the estimated Tenant’s Share of Operating Expenses already paid. Conversely, any overpayment by Tenant shall be rebated by Landlord to Tenant not later than thirty (30) days after such final determination..

     (e) If, at any time during any Expense Recovery Period, any one or more of the Operating Expenses are increased to a rate(s) or amount(s) in excess of the rate(s) or amount(s) used in calculating the estimated Tenant’s Share of Operating Expenses for the year, then the estimate of Tenant’s Share of Operating Expenses may be increased by written notice from Landlord for the month in which such rate(s) or amount(s) becomes effective and for all succeeding months by an amount equal to Tenant’s Share of the increase. If Landlord gives Tenant written notice of the amount or estimated amount of the increase, the month in which the increase will or has become effective, then Tenant shall pay the increase to Landlord as a part of Tenant’s monthly payments of the estimated Tenant’s Share of Operating Expenses as provided in Section 4.2(b), commencing with the month following Tenant’s receipt of Landlord’s notice. In addition, Tenant shall pay upon written request any such increases which were incurred prior to the Tenant commencing to pay such monthly increase.

     (f) The term “Operating Expenses” shall mean and include all Project Costs, as defined in subsection (g), and Property Taxes, as defined in subsection (h).

     (g) The term “Project Costs” shall include all expenses of operation, repair and maintenance of the Building and the Project, including without limitation all appurtenant Common Areas (as defined in Section 6.2), and shall include the following charges by way of illustration but not limitation: water and sewer charges; insurance premiums and deductibles and/or reasonable premium and deductible equivalents should Landlord elect to self-insure all or any portion of any risk that Landlord is authorized to insure hereunder; license, permit, and inspection fees; light; power; window washing; trash pickup; janitorial services to any interior Common Areas; heating, ventilating and air conditioning; supplies; materials; equipment; tools; the cost of any insurance or tax consultant utilized by Landlord in connection with the Building and/or Project; establishment of reasonable reserves for roof replacement and/or repairs; costs incurred in connection with compliance with any laws or changes in laws applicable to the Building or the Project; the cost of any capital investments or replacements (other than tenant improvements for specific tenants) to the extent of the amortized amount thereof over the useful life of such capital investments or replacements calculated at a market cost of funds, all as determined by Landlord, for each such year of useful life during the Term; costs associated with the maintenance of an air conditioning, heating and ventilation service agreement, and maintenance of an intrabuilding network cable service agreement for any intrabuilding network cable telecommunications lines within the Project, and any other installation, maintenance, repair and replacement costs associated with such lines; capital costs associated with a requirement related to demands on utilities by Project tenants, including without limitation the cost to obtain additional phone connections; labor; reasonably allocated wages and salaries, fringe benefits, and payroll taxes for administrative and other personnel directly applicable to the Building and/or Project, including both Landlord’s personnel and outside personnel; any expense incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and 10.2; and a reasonable overhead/management fee for the professional operation of the Project not to exceed the then current market fee charged by owners of similarly improved space within the Milpitas/San Jose/Highway 237 market. Tenant acknowledges that (i) Landlord is currently charging a management fee of 3% of Basic Rent and Operating Expenses; and (ii) such fee is considered market competitive for purposes of this Lease. It is understood and agreed that Project Costs may include competitive charges for direct services (including, without limitation, management and/or operations services) provided by any subsidiary, division or affiliate of Landlord.

     Notwithstanding the provisions of Section 4.2(g) above, Project Costs shall not include: (a) the cost of capital improvements (except as set forth above); (b) all fees, costs, principal and interest related to any mortgage(s) or deed(s) of trust, all payments made under any ground or underlying lease and all other non-operating debts of Landlord; (c) the cost of repairs or other work to the extent Landlord is reimbursed by insurance or condemnation proceeds; (d) costs in connection with leasing space in the Building (including, without limitation, brokerage commissions, marketing costs, attorneys’ fees, lease concessions, rental abatements and construction allowances granted to specific tenants); (e) costs incurred in connection with the sale, financing or refinancing of the Building or Project; (f) fines, interest and penalties incurred due to the late payment of Property Taxes or Project Costs not caused to by Tenant’s failure to timely pay Basic Rent, Operating Expenses or Property Taxes; (g) any penalties or damages that Landlord pays to Tenant under this Lease or to other tenants in the Building or Project under their respective leases; (h) any costs, fines, or penalties incurred due to violations by Landlord of any governmental rule or authority; (i) the cost of any service provided to Tenant or other occupants of the Building or Project for which Landlord is actually reimbursed by another tenant in the Building; (j) costs associated with damage or repairs to the Project or Common Areas necessitated by the willful misconduct of Landlord or Landlord’s

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employees or authorized agents; (k) salaries and benefits or employees over the level of property manager; (1) legal fees, accountant fees and other expenses incurred in disputes with other tenants or occupants of the Building or Project or associated with the enforcement of any other leases or defense of Landlord’s title to or interest in the Building, Project or any part thereof; (m) services or installations furnished to any tenant in the Building that are not also furnished to Tenant; (n) the cost of any service provided to Tenant or other occupants of the Building or Project for which Landlord is actually reimbursed; and (o) costs or fees payable to public authorities in connection with any future construction, renovation and/or improvements to the Project (other than the Tenant Improvements or any improvements made to the Premises by or for Tenant) including fees for transit, housing, schools, open space, child care, arts programs, traffic mitigation measures, environmental impact reports, traffic studies, and transportation system management plans; provided, however, any of the foregoing that would be considered part of Property Taxes and/or billed as such may be included in Property Taxes.

     (h) The term “Property Taxes” as used herein shall include any form of federal, state, county or local government or municipal taxes, fees, charges or other impositions of every kind (whether general, special, ordinary or extraordinary) related to the ownership, leasing or operation of the Premises, Building or Project, including without limitation, the following: (i) all real estate taxes or personal property taxes, as such property taxes may be reassessed from time to time; and (ii) other taxes, charges and assessments which are levied with respect to this Lease or to the Building and/or the Project, and any improvements, fixtures and equipment and other property of Landlord located in the Building and/or the Project, (iii) all assessments and fees for public improvements, services, and facilities and impacts thereon, including without limitation arising out of any Community Facilities Districts, “Mello Roos” districts, similar assessment districts, and any traffic impact mitigation assessments or fees; (iv) any tax, surcharge or assessment which shall be levied in addition to or in lieu of real estate or personal property taxes, other than taxes covered by Article VIII; and (v) taxes based on the receipt of rent (including gross receipts or sales taxes applicable to the receipt of rent), and (vi) costs and expenses incurred in contesting the amount or validity of any Property Tax by appropriate proceedings. Notwithstanding the foregoing, Property Taxes shall not include any (i) net income, capital, stock, succession, transfer, franchise, gift, estate or inheritance tax; (ii) any item to the extent otherwise included in Project Costs; (iii) any environmental assessments, charges or liens arising in connection with the remediation of Hazardous Materials from the Project, the causation of which arose prior to the Commencement Date or to the extent caused by Landlord, its agents, employees or contractors or any tenant of the Project (other than Tenant or its sublessees or assignees); or (iv) reserves for future Property Taxes. If any Property Taxes are payable in installments over a period of time, Tenant shall be liable only for the payment of those installments falling due and payable during the Term, with appropriate proration for fractional years.

     SECTION 4.3. SECURITY DEPOSIT. Concurrently with Tenant’s delivery of this Lease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9 of the Basic Lease Provisions, to be held by Landlord as security for the full and faithful performance of all of Tenant’s obligations under this Lease (the “Security Deposit”). Landlord shall not be required to keep this Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Security Deposit. Subject to the last sentence of this Section, the Security Deposit shall be understood and agreed to be the property of Landlord upon Landlord’s receipt thereof, and may be utilized by Landlord in its sole and absolute discretion towards the payment of all expenses by Landlord for which Tenant would be required to reimburse Landlord under this Lease, including without limitation brokerage commissions and Tenant Improvement costs. Upon any Event of Default by Tenant (as defined in Section 14.1), Landlord may, in its sole and absolute discretion, retain, use or apply the whole or any part of the Security Deposit to pay any sum which Tenant is obligated to pay under this Lease, sums that Landlord may expend or be required to expend by reason of the Event of Default by Tenant or any loss or damage that Landlord may suffer by reason of the Event of Default or costs incurred by Landlord in connection with the repair or restoration of the Premises pursuant to Section 15.3 of this Lease upon expiration or earlier termination of this Lease. In no event shall Landlord be obligated to apply the Security Deposit upon an Event of Default and Landlord’s rights and remedies resulting from an Event of Default, including without limitation, Tenant’s failure to pay Basic Rent, Tenant’s Share of Operating Expenses or any other amount due to Landlord pursuant to this Lease, shall not be diminished or altered in any respect due to the fact that Landlord is holding the Security Deposit. If any portion of the Security Deposit is applied by Landlord as permitted by this Section, Tenant shall within five (5) business days after written demand by Landlord deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount. If Tenant fully performs its obligations under this Lease, the Security Deposit shall be returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest in this Lease) within thirty (30) days after the expiration of the Term, provided that Tenant agrees that Landlord may retain the Security Deposit to the extent and until such time as all amounts due from Tenant in accordance with this Lease have been determined and paid in full and Tenant agrees that Tenant shall have no claim against Landlord for Landlord’s retaining such Security Deposit to the extent provided in this Section.

ARTICLE V. USES

     SECTION 5.1. USE. Tenant shall use the Premises only for the purposes stated in Item 3 of the Basic Lease Provisions, all in accordance with applicable laws and restrictions and pursuant to approvals to be obtained by Tenant from all relevant and required governmental agencies and authorities. The parties agree that any contrary use shall be deemed to cause material and irreparable harm to Landlord and shall entitle Landlord to injunctive relief in addition to any other available remedy. Tenant, at its expense, shall procure, maintain and make available for Landlord’s inspection throughout the Term, all governmental approvals, licenses and permits required for the proper and lawful conduct of Tenant’s permitted use of the Premises. Tenant shall not do or permit anything to be done in or about the Premises which will in any way unreasonably interfere with the rights of other occupants of the Building or the Project, or use or allow the Premises to be used for any unlawful purpose, nor shall Tenant permit any nuisance or commit any waste in the Premises or the Project. Tenant shall not perform any work or conduct any business whatsoever in the Project other than inside the Premises. Tenant shall not do or permit to be done anything which will invalidate or increase the cost of any insurance policy(ies) covering the Building, the Project and/or their contents, and shall comply with all applicable insurance underwriters rules. Subject to the provisions of Article IV,

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Tenant shall comply at its expense with all present and future laws, ordinances, restrictions, regulations, orders, rules and requirements of all governmental authorities that pertain to Tenant or its use of the Premises, including without limitation all federal and state occupational health and safety requirements, whether or not Tenant’s compliance will necessitate expenditures or interfere with its use and enjoyment of the Premises. Tenant shall comply at its expense with all present and future covenants, conditions, easements or restrictions now or hereafter affecting or encumbering the Building and/or Project, and any amendments or modifications thereto, including without limitation the payment by Tenant of any periodic or special dues or assessments charged against the Premises or Tenant which may be allocated to the Premises or Tenant in accordance with the provisions thereof; provided, however, such future restrictions or requirements do not materially derogate the rights of Tenant or materially increase the obligations of Tenant under this Lease. Tenant shall promptly upon demand reimburse Landlord for any additional insurance premium charged by reason of Tenant’s failure to comply with the provisions of this Section, and shall indemnify Landlord from any liability and/or expense resulting from Tenant’s noncompliance.

     SECTION 5.2. SIGNS. Tenant, and its successors and assigns, shall have the right to install and maintain during the Term one (1) exterior “eye-brow” sign on the Building (the “Eye-Brow Sign”). Landlord, acting reasonably and in good faith, shall designate the location of the Eye-Brow Sign. Except as approved in writing by Landlord, in its sole and absolute discretion, Tenant shall have no right to maintain signs in any other location in, on or about the Premises, the Building or the Project and shall not place or erect any other signs that are visible from the exterior of the Building. The size, design, graphics, material, style, color and other physical aspects of any permitted sign shall be subject to Landlord’s written determination, as determined solely by Landlord, prior to installation, that signage is in compliance with any covenants, conditions or restrictions encumbering the Premises and Landlord’s signage program for the Project, as in effect from time to time and approved by the City in which the Premises are located (“Signage Criteria”). Prior to placing or erecting any such signs, Tenant shall obtain and deliver to Landlord a copy of any applicable municipal or other governmental permits and approvals and comply with any applicable insurance requirements for such signage. Tenant shall be responsible for the cost of any permitted sign, including the fabrication, installation, maintenance and removal thereof and the cost of any permits therefor. If Tenant fails to maintain its sign in good condition, or if Tenant fails to remove same upon termination of this Lease and repair and restore any damage caused by the sign or its removal, Landlord may do so at Tenant’s expense. Landlord shall have the right to temporarily remove any signs in connection with any repairs or maintenance in or upon the Building. The term “sign” as used in this Section shall include all signs, designs, monuments, displays, advertising materials, logos, banners, projected images, pennants, decals, pictures, notices, lettering, numerals or graphics.

     SECTION 5.3. HAZARDOUS MATERIALS.

     (a) For purposes of this Lease, the term “Hazardous Materials” includes (i) any “hazardous material” as defined in Section 25501(o) of the California Health and Safety Code, (ii) hydrocarbons, polychlorinated biphenyls or asbestos, (iii) any toxic or hazardous materials, substances, wastes or materials as defined pursuant to any other applicable state, federal or local law or regulation, and (iv) any other substance or matter which may result in liability to any person or entity as result of such person’s possession, use, release or distribution of such substance or matter under any statutory or common law theory.

     (b) Except for ordinary quantities of office and cleaning supplies customarily used in projects similar to the Project, which shall be used in full compliance with all Hazardous Materials laws, Tenant shall not cause or permit any Hazardous Materials to be brought upon, stored, used, generated, released or disposed of on, under, from or about the Premises (including without limitation the soil and groundwater thereunder) without the prior written consent of Landlord, which consent may be given or withheld in Landlord’s sole and absolute discretion. Notwithstanding the foregoing, Tenant shall have the right, without obtaining prior written consent of Landlord: (A) to utilize within the Premises a reasonable quantity of standard office products that may contain Hazardous Materials (such as photocopy toner, “White Out”, and the like), provided however, that (i) Tenant shall maintain such products in their original retail packaging, shall follow all instructions on such packaging with respect to the storage, use and disposal of such products, and shall otherwise comply with all applicable laws with respect to such products, and (ii) all of the other terms and provisions of this Section 5.3 shall apply with respect to Tenant’s storage, use and disposal of all such products, and (B) to utilize within the Premises those Hazardous Materials in kind and content listed on the Environmental Questionnaire delivered to Landlord prior to the execution of this Lease to the extent the use of such Hazardous Materials are permitted by Landlord’s insurance and do not increase the amount of the premiums of such insurance, provided that Tenant shall comply with all applicable laws with respect to such Hazardous Materials and all of the other terms and provisions of this Section 5.3 shall apply with respect to Tenant’s storage, use and disposal of such Hazardous Materials. Landlord may, in its sole and absolute discretion, place such conditions as Landlord deems appropriate with respect to Tenant’s use of any such Hazardous Materials, and may further require that Tenant demonstrate that any such Hazardous Materials are necessary or useful to Tenant’s business and will be generated, stored, used and disposed of in a manner that complies with all applicable laws and regulations pertaining thereto and with good business practices. Tenant understands that Landlord may utilize an environmental consultant to assist in determining conditions of approval in connection with the storage, generation, release, disposal or use of Hazardous Materials by Tenant on or about the Premises, and/or to conduct periodic inspections of the storage, generation, use, release and/or disposal of such Hazardous Materials by Tenant on and from the Premises, and Tenant agrees that any costs incurred by Landlord in connection therewith shall be reimbursed by Tenant to Landlord as additional rent hereunder upon demand; however, Tenant shall have no obligation to reimburse Landlord for any costs incurred in connection with any environmental consultant retained by Landlord pursuant to this Section unless Tenant shall be in default under this Section 5.3 and such costs are covered by Tenant’s indemnity obligations contained in this Section 5.3.

     (c) Prior to the execution of this Lease, Tenant shall complete, execute and deliver to Landlord an Environmental Questionnaire and Disclosure Statement (the “Environmental Questionnaire”) in the form of Exhibit B attached hereto. The completed Environmental Questionnaire shall be deemed incorporated into this

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Lease for all purposes, and Landlord shall be entitled to rely fully on the information contained therein. On each anniversary of the Commencement Date until the expiration or sooner termination of this Lease, Tenant shall disclose to Landlord in writing the names and amounts of all Hazardous Materials which were stored, generated, used, released and/or disposed of on, under or about the Premises for the twelve-month period prior thereto, and which Tenant desires to store, generate, use, release and/or dispose of on, under or about the Premises for the succeeding twelve-month period. In addition, to the extent Tenant is permitted to utilize Hazardous Materials upon the Premises, Tenant shall promptly provide Landlord with complete and legible copies of all the following environmental documents relating thereto: reports filed pursuant to any self-reporting requirements; permit applications, permits, monitoring reports, emergency response or action plans, workplace exposure and community exposure warnings or notices and all other reports, disclosures, plans or documents (even those which may be characterized as confidential) relating to water discharges, air pollution, waste generation or disposal, and underground storage tanks for Hazardous Materials; orders, reports, notices, listings and correspondence (even those which may be considered confidential) of or concerning the release, investigation of, compliance, cleanup, remedial and corrective actions, and abatement of Hazardous Materials; and all complaints, pleadings and other legal documents filed by or against Tenant related to Tenant’s use, handling, storage, release and/or disposal of Hazardous Materials.

     (d) Landlord and its agents shall have the right, but not the obligation, to inspect, sample and/or monitor the Premises and/or the soil or groundwater thereunder at any time to determine whether Tenant is complying with the terms of this Section 5.3, and in connection therewith Tenant shall provide Landlord with full access to all facilities, records and personnel related thereto. If Tenant is not in compliance with any of the provisions of this Section 5.3, or in the event of a release of any Hazardous Material on, under or about the Premises caused or permitted by Tenant, its agents, employees, contractors, licensees or invitees, Landlord and its agents shall have the right, but not the obligation, without limitation upon any of Landlord’s other rights and remedies under this Lease, to immediately enter upon the Premises without notice and to discharge Tenant’s obligations under this Section 5.3 at Tenant’s expense, including without limitation the taking of emergency or long-term remedial action. Landlord and its agents shall endeavor to minimize interference with Tenant’s business in connection therewith, but shall not be liable for any such interference. In addition, Landlord, at Tenant’s expense, shall have the right, but not the obligation, to join and participate in any legal proceedings or actions initiated in connection with any claims arising out of the storage, generation, use, release and/or disposal by Tenant or its agents, employees, contractors, licensees or invitees of Hazardous Materials on, under, from or about the Premises.

     (e) If the presence of any Hazardous Materials on, under, from or about the Premises or the Project caused or permitted by Tenant or its agents, employees, contractors, licensees or invitees results in (i) injury to any person, (ii) injury to or any contamination of the Premises or the Project, or (iii) injury to or contamination of any real or personal property wherever situated, Tenant, at its expense, shall promptly take all actions necessary to return the Premises and the Project and any other affected real or personal property owned by Landlord to the condition existing prior to the introduction of such Hazardous Materials and to remedy or repair any such injury or contamination, including without limitation, any cleanup, remediation, removal, disposal, neutralization or other treatment of any such Hazardous Materials. Notwithstanding the foregoing, Tenant shall not, without Landlord’s prior written consent, which consent may be given or withheld in Landlord’s sole and absolute discretion, take any remedial action in response to the presence of any Hazardous Materials on, from, under or about the Premises or the Project or any other affected real or personal property owned by Landlord or enter into any similar agreement, consent, decree or other compromise with any governmental agency with respect to any Hazardous Materials claims; provided however, Landlord’s prior written consent shall not be necessary in the event that the presence of Hazardous Materials on, under or about the Premises or the Project or any other affected real or personal property owned by Landlord (i) imposes an immediate threat to the health, safety or welfare of any individual and (ii) is of such a nature that an immediate remedial response is necessary and it is not possible to obtain Landlord’s consent before taking such action. To the fullest extent permitted by law, Tenant shall indemnify, hold harmless, protect and defend (with attorneys reasonably acceptable to Landlord) Landlord and Master Lessor, and any successors to all or any portion of Landlord’s and/or Master Lessor’s interest in the Premises and in the Project and in any other real or personal property owned by Landlord or Master Lessor, from and against any and all liabilities, losses, damages, diminution in value, judgments, fines, demands, claims, recoveries, deficiencies, costs and expenses (including without limitation reasonable attorneys’ fees, court costs and other professional expenses), whether foreseeable or unforeseeable, arising directly or indirectly out of the use, generation, storage, treatment, release, on- or off-site disposal or transportation of Hazardous Materials by Tenant or Tenant’s agents, employees, contractors, licensees or invitees on, into, from, under or about the Premises, the Building or the Project and any other real or personal property owned by Landlord or Master Lessor. Such indemnity obligation shall specifically include, without limitation, the cost of any required or necessary repair, restoration, cleanup or detoxification of the Premises, the Building and the Project and any other real or personal property owned by Landlord or Master Lessor, the preparation of any closure or other required plans, whether or not such action is required or necessary during the Term or after the expiration of this Lease and any loss of rental due to the inability to lease the Premises or any portion of the Building or Project as a result of such Hazardous Material or remediation thereof. If it is at any time discovered that Hazardous Materials have been released on, into, from, under or about the Premises during the Term, or that Tenant or its agents, employees, contractors, licensees or invitees may have caused or permitted the release of a Hazardous Material on, under, from or about the Premises, the Building or the Project or any other real or personal property owned by Landlord or Master Lessor, Tenant shall, at Landlord’s request, immediately prepare and submit to Landlord a comprehensive plan, subject to Landlord’s approval, specifying the actions to be taken by Tenant to return the Premises, the Building or the Project or any other real or personal property owned by Landlord or Master Lessor, to the condition existing prior to the introduction of such Hazardous Materials. Upon Landlord’s approval of such cleanup plan, Tenant shall, at its expense, and without limitation of any rights and remedies of Landlord under this Lease or at law or in equity, immediately implement such plan and proceed to cleanup such Hazardous Materials in accordance with all applicable laws and as required by such plan and this Lease. The provisions of this Section 5.3(e) shall expressly survive the expiration or sooner termination of this Lease.

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     (f) Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, certain facts relating to Hazardous Materials at the Project known by Landlord to exist as of the date of this Lease, as more particularly described in Exhibit C attached hereto. Tenant shall have no liability or responsibility with respect to the Hazardous Materials facts described in Exhibit C, nor with respect to any Hazardous Materials which were not used, generated, stored, treated, released, disposed or transported on- or off-site, by Tenant or Tenant’s agents, employees, contractors, licensees or invitees. Notwithstanding the preceding two sentences, Tenant agrees to notify its agents, employees, contractors, licensees, and invitees of any exposure or potential exposure to Hazardous Materials at the Premises that Landlord brings to Tenant’s attention. Provided such information is accurate, Tenant hereby acknowledges that this disclosure satisfies any obligation of Landlord to Tenant pursuant to California Health & Safety Code Section 25359.7, or any amendment or substitute thereto or any other disclosure obligations of Landlord. Landlord shall take responsibility, at its sole cost and expense, for any govenrmentally-required clean-up, remediation, removal, disposal, neutralization or other treatment of Hazardous Materials conditions described in this Section 5.3(f). The foregoing obligation on the part of Landlord shall include the reasonable costs (including, without limitation, reasonable attorney’s fees) of defending Tenant from and against any legal action or proceeding instituted by any governmental agency in connection with such clean-up, remediation, removal, disposal, neutralization or other treatment of such conditions, provided that Tenant promptly tenders such defense to Landlord. Tenant agrees to notify its agents, employees, contractors, licensees, and invitees of any exposure or potential exposure to Hazardous Materials at the Premises that Landlord brings to Tenant’s attention.

ARTICLE VI. COMMON AREAS; SERVICES

     SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for and shall pay promptly, directly to the appropriate supplier, all charges for water, gas, electricity, sewer, heat, light, power, telephone, telecommunications service, refuse pickup, janitorial service, interior landscape maintenance and all other utilities, materials and services furnished directly to Tenant or the Premises or used by Tenant in, on or about the Premises during the Term, together with any taxes thereon. If any utilities or services are not separately metered or assessed to Tenant, Landlord shall make a reasonable determination of Tenant’s proportionate share of the cost of such utilities and services, and Tenant shall pay such amount to Landlord, as an item of additional rent, within twenty (20) days after receipt of Landlord’s statement or invoice therefor. Alternatively, Landlord may elect to include such cost in the definition of Project Costs in which event Tenant shall pay Tenant’s proportionate share of such costs in the manner set forth in Section 4.2. Landlord shall not be liable for damages or otherwise for any failure or interruption of any utility or other service furnished to the Premises, and no such failure or interruption shall be deemed an eviction or entitle Tenant to terminate this Lease or withhold or abate any rent due hereunder. Notwithstanding the foregoing, if as a result of the direct actions of Landlord, its employees, contractors or authorized agents, for more than three (3) consecutive business days following written notice to Landlord there is no HVAC or electricity services to all or a portion of the Premises, or such an interruption of other essential utilities and building services, such as fire protection or water, so that all or a portion of the Premises cannot be used by Tenant, then Tenant’s Basic Rent (or an equitable portion of such Basic Rent to the extent that less than all of the Premises are affected) shall thereafter be abated until the Premises are again usable by Tenant; provided, however, that if Landlord is diligently pursuing the repair of such utilities or services and Landlord provides substitute services reasonably suitable for Tenant’s purposes, as for example, bringing in portable air-conditioning equipment, then there shall not be an abatement of Basic Rent. The foregoing provisions shall be Tenant’s sole recourse and remedy in the event of such an interruption of services, and shall not apply in case of the actions of parties other than Landlord, its employees, contractors or authorized agents, or in the case of damage to, or destruction of, the Premises (which shall be governed by the provisions of Article XI of the Lease). Any disputes concerning the foregoing provisions shall be submitted to and resolved by JAMS arbitration pursuant to Section 22.7 of this Lease. Landlord shall at all reasonable times have free access to the Building and Premises to install, maintain, repair, replace or remove all electrical and mechanical installations of Landlord. Tenant acknowledges that the costs incurred by Landlord related to providing above-standard utilities to Tenant, including, without limitation, telephone lines, may be charged to Tenant.

     SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS. During the Term, Landlord shall operate, repair and maintain all Common Areas within the Building and the Project. The term “Common Areas” shall mean all areas within the exterior boundaries of the Building and other buildings in the Project which are not held for exclusive use by persons entitled to occupy space, and all other appurtenant areas and improvements within the Project provided by Landlord for the common use of Landlord and tenants and their respective employees and invitees, including without limitation parking areas and structures, driveways, sidewalks, landscaped and planted areas, hallways and interior stairwells not located within the premises of any tenant, common electrical rooms and roof access entries, common entrances and lobbies, elevators, and restrooms not located within the premises of any tenant.

     SECTION 63. USE OF COMMON AREAS. The occupancy by Tenant of the Premises shall include the use of the Common Areas in common with Landlord and with all others for whose convenience and use the Common Areas may be provided by Landlord, subject, however, to compliance with all reasonable rules and regulations as are prescribed from time to time by Landlord. Landlord shall operate and maintain the Common Areas in the manner Landlord may determine to be appropriate. All costs incurred by Landlord for the maintenance and operation of the Common Areas shall be included in Project Costs except as expressly prohibited by Section 4.2 or to the extent any particular cost incurred is related to or associated with a specific tenant and can be charged to such tenant of the Project. Landlord shall at all times during the Term have exclusive control of the Common Areas, and may restrain or permit any use or occupancy, except as authorized by Landlord’s reasonable rules and regulations. Tenant shall keep the Common Areas clear of any obstruction or unauthorized use related to Tenant’s operations or use of Premises, including without limitation, planters and furniture. Landlord may temporarily close any portion of the Common Areas for repairs, remodeling and/or alterations, to prevent a public dedication or the accrual of prescriptive rights, or for any other reason deemed sufficient by Landlord, without liability to Landlord.

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Tenant shall have access to the Premises and Common Areas twenty-four (24) hours per day, three hundred sixty five (365) days per year.

     SECTION 6.4. PARKING. Tenant shall be entitled, at no additional cost, to the number of vehicle parking spaces set forth in Item 14 of the Basic Lease Provisions, which spaces shall be unreserved and unassigned, on those portions of the Common Areas designated by Landlord for parking. Landlord shall designate and mark fifteen (15) of such spaces in the front of the Premises as “reserved” for Tenant. Tenant shall not use more parking spaces than such number. All parking spaces shall be used only for parking of vehicles no larger than full size passenger automobiles, sports utility vehicles or pickup trucks. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant’s employees, suppliers, shippers, customers or invitees to be loaded, unloaded or parked in areas other than those designated by Landlord for such activities. If Tenant permits or allows any of the prohibited activities described above, then Landlord shall have the right, without notice, in addition to such other rights and remedies that Landlord may have, to remove or tow away the vehicle involved and charge the costs to Tenant. Parking within the Common Areas shall be limited to striped parking stalls, and no parking shall be permitted in any driveways, access ways or in any area which would prohibit or impede the free flow of traffic within the Common Areas. There shall be no parking of any vehicles for longer than a forty-eight (48) hour period unless otherwise authorized by Landlord, and vehicles which have been abandoned or parked in violation of the terms hereof may be towed away at the owner’s expense. Nothing contained in this Lease shall be deemed to create liability upon Landlord for any damage to motor vehicles of visitors or employees, for any loss of property from within those motor vehicles, or for any injury to Tenant, its visitors or employees, unless ultimately determined (i) to be caused by the willful misconduct of Landlord, Landlord’s employees or authorized agents; or (ii) that Landlord had knowledge of the likelihood of such condition, a reasonable opportunity to take reasonable protective measures and failed to do so. Landlord shall have the right to establish, and from time to time amend, and to enforce against all users all reasonable rules and regulations (including the designation of areas for employee parking) that Landlord may deem necessary and advisable for the proper and efficient operation and maintenance of parking within the Common Areas. Landlord shall have the right to construct, maintain and operate lighting facilities within the parking areas; to change the area, level, location and arrangement of the parking areas and improvements therein; to restrict parking by tenants, their officers, agents and employees to employee parking areas; to enforce parking charges (by operation of meters or otherwise); and to do and perform such other acts in and to the parking areas and improvements therein as, in the use of good business judgment, Landlord shall determine to be advisable. Any person using the parking area shall observe all directional signs and arrows and any posted speed limits. In no event shall Tenant interfere with the use and enjoyment of the parking area by other tenants of the Project or their employees or invitees. Parking areas shall be used only for parking vehicles. Washing, waxing, cleaning or servicing of vehicles, or the storage of vehicles for longer than 48-hours, is prohibited unless otherwise authorized by Landlord. Tenant shall be liable for any damage to the parking areas caused by Tenant or Tenant’s employees, suppliers, shippers, customers or invitees, including without limitation damage from excess oil leakage. Tenant shall have no right to install any fixtures, equipment or personal property in the parking areas.

     SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD. Landlord reserves the right to make alterations or additions to the Building or the Project, or to the attendant fixtures, equipment and Common Areas. Landlord may at any time relocate or remove any of the various buildings, parking areas, and other Common Areas, and may add buildings and areas to the Project from time to time. No change shall entitle Tenant to any abatement of rent or other claim against Landlord, provided that the change does not deprive Tenant of reasonable access to or use of the Premises. Notwithstanding the foregoing, no change by Landlord to the Common Areas shall: (i) materially impair access to and from the Premises from the parking areas, (ii) reduce the number of Tenant’s parking spaces granted under this Lease, or (iii) otherwise unreasonably interfere with Tenant’s access to and use of the Premises, the parking areas and the Common Areas adjacent to the Building in any material manner without Tenant’s prior written consent, which shall not be unreasonably withheld.

ARTICLE VII. MAINTAINING THE PREMISES

     SECTION 7.1. TENANT’S MAINTENANCE AND REPAIR. Tenant at its sole expense shall maintain and make all repairs and replacements necessary to keep the Premises in the condition as existed on the Commencement Date (or on any later date that the improvements may have been installed), excepting ordinary wear and tear, including without limitation all interior glass, doors, door closures, hardware, fixtures, electrical, plumbing, fire extinguisher equipment and other equipment installed in the Premises and all Alterations constructed by Tenant pursuant to Section 7.3 below. Notwithstanding the foregoing, Tenant shall have no obligation to repair, maintain or repair the roof, foundations, footings, structural systems, exterior glass, sky lights (including seals), electrical and mechanical systems, plumbing, sewer and other utility lines outside the Premises or within the Building’s slab, landscaping, walkways, fencing, parking areas, exterior lighting, exterior walls all of which shall be the responsibility of Landlord. Any damage or deterioration of the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices by Tenant. As part of its maintenance obligations hereunder, Tenant shall, at Landlord’s request, provide Landlord with copies of all maintenance schedules, reports and notices prepared by, for or on behalf of Tenant. All repairs and replacements shall be at least equal in quality to the original work, shall be made only by a licensed contractor approved in writing in advance by Landlord and shall be made only at the time or times approved by Landlord. Any contractor utilized by Tenant shall be subject to Landlord’s standard requirements for contractors, as modified from time to time. Landlord may impose reasonable restrictions and requirements with respect to repairs, as provided in Section 7.3, and the provisions of Section 7.4 shall apply to all repairs. Alternatively, Landlord may elect to perform any repair and maintenance of the electrical and mechanical systems and any air conditioning, ventilating or heating equipment serving the Premises and include the cost thereof as part of Tenant’s Share of Operating Expenses. If Tenant fails to properly maintain and/or repair the Premises as herein provided following Landlord’s notice and the expiration of the applicable cure period (or earlier if Landlord determines that such work must be performed prior to such time in order to avoid damage to the Premises or Building or other detriment), then Landlord may elect, but shall have no

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obligation, to perform any repair or maintenance required hereunder on behalf of Tenant and at Tenant’s expense, and Tenant shall reimburse Landlord upon demand for all reasonable costs incurred upon submission of an invoice.

     SECTION 7.2. LANDLORD’S MAINTENANCE AND REPAIR. Subject to Section 7.1 and Article XI, Landlord shall provide service, maintenance and repair with respect to any air conditioning, ventilating or heating equipment which serves the Premises (exclusive, however, of supplemental HVAC equipment serving only the Premises), and shall maintain in good repair all elements and portions of the roof, foundations, footings, the exterior surfaces of the exterior walls of the Building (including exterior glass), skylights (including seals), and the structural, electrical and mechanical systems, except that Tenant at its expense shall make all repairs which Landlord deems reasonably necessary as a result of the act or negligence of Tenant, its agents, employees, invitees, subtenants or contractors. Landlord shall have the right to employ or designate any reputable person or firm, including any employee or agent of Landlord or any of Landlord’s affiliates or divisions, to perform any service, repair or maintenance function; provided that any employee or affiliate of Landlord shall not charge in excess of the fair market value for such service. Landlord need not make any other improvements or repairs except as specifically required under this Lease, and nothing contained in this Section shall limit Landlord’s right to reimbursement from Tenant for maintenance, repair costs and replacement costs as provided elsewhere in this Lease. Tenant understands that it shall not make repairs at Landlord’s expense or by rental offset. Tenant further understands that Landlord shall not be required to make any repairs to the roof, foundations, footings, the exterior surfaces of the exterior walls of the Building (excluding exterior glass), or structural, electrical or mechanical systems unless and until Tenant has notified Landlord in writing of the need for such repair and Landlord shall have a reasonable period of time thereafter to commence and complete said repair, if warranted. Except as set forth in Section 4.2, all costs of any maintenance, repairs and replacement on the part of Landlord provided hereunder shall be considered part of Project Costs.

     SECTION 7.3. ALTERATIONS. Except as otherwise provided in this Section, Tenant shall make no alterations, additions, fixtures or improvements (“Alterations”) to the Premises or the Building without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, in the event that any requested Alteration would result in a change from Landlord’s building standard materials and specifications for the Project (“Standard Improvements”), Landlord may withhold consent to such Alteration in its sole and absolute discretion. In the event Landlord so consents to a change from the Standard Improvements (such change being referred to as a “Non-Standard Improvement”), Tenant shall be responsible for the cost of replacing such Non-Standard Improvement with the applicable Standard Improvement (“Replacements”) which Replacements shall be completed prior to the Expiration Date or earlier termination of this Lease. A copy of the Standard Improvements are attached hereto as Exhibit F. Landlord shall not unreasonably withhold its consent to any Alterations which cost less than Two Dollar ($2.00) per square foot of the Premises and do not (i) affect the exterior of the Building or outside areas (or be visible from adjoining sites), or (ii) affect or penetrate any of the structural portions of the Building, including but not limited to the roof, or (iii) require any change to the basic floor plan of the Premises (including, without limitation, the adding of any additional “office” square footage) or any change to any structural or mechanical systems of the Premises, or (iv) fail to comply with any applicable governmental requirements or require any governmental permit as a prerequisite to the construction thereof, or (v) result in the Premises requiring building services beyond the level normally provided to other tenants, or (vi) interfere in any manner with the proper functioning of, or Landlord’s access to, any mechanical, electrical, plumbing or HVAC systems, facilities or equipment located in or serving the Building, or (vii) diminish the value of the Premises (as determined by Landlord in its reasonable discretion) including, without limitation, using lesser quality materials than those existing in the Premises, or (viii) alter or replace Standard Improvements. Landlord may impose any condition to its consent, including but not limited to a requirement that the installation and/or removal of all Alterations and Replacements be covered by a lien and completion bond satisfactory to Landlord in its sole and absolute discretion and requirements as to the manner and time of performance of such work. Landlord shall in all events, whether or not Landlord’s consent is required, have the right to approve the contractor performing the installation and removal of Alterations and Replacements and Tenant shall not permit any contractor not approved by Landlord to perform any work on the Premises or on the Building. Tenant shall obtain all required permits for the installation and removal of Alterations and Replacements and shall perform the installation and removal of Alterations and Replacements in compliance with all applicable laws, regulations and ordinances, including without limitation the Americans with Disabilities Act, all covenants, conditions and restrictions affecting the Project, and the Rules and Regulations as described in Article XVII. Tenant understands and agrees that Landlord shall be entitled to a supervision fee in the amount of five percent (5%) of the cost of such Alterations either requiring a permit from the City of Milpitas or affecting any mechanical, electrical, plumbing or HVAC systems, facilities or equipment located in or serving the Building. Under no circumstances shall Tenant make any Alterations or Replacements which incorporate any Hazardous Materials, including without limitation asbestos-containing construction materials into the Premises, the Building or the Common Area. If any governmental entity requires, as a condition to any proposed Alterations by Tenant, that improvements be made to the Common Areas, and if Landlord consents to such improvements to the Common Areas (which consent may be withheld in the sole and absolute discretion of Landlord), then Tenant shall, at Tenant’s sole expense, make such required improvements to the Common Areas in such manner, utilizing such materials, and with such contractors, architects and engineers as Landlord may require in its sole and absolute discretion. Any request for Landlord’s consent to any proposed Alterations shall be made in writing and shall contain architectural plans describing the work in detail reasonably satisfactory to Landlord. Landlord may elect to cause its architect to review Tenant’s architectural plans, and the reasonable cost of that review shall be reimbursed by Tenant. Should the work proposed by Tenant and consented to by Landlord modify the basic floor plan of the Premises, then Tenant shall, at its expense, furnish Landlord with as-built drawings and CAD disks compatible with Landlord’s systems and standards. Unless Landlord otherwise agrees in writing, all Alterations made or affixed to the Premises, the Building or to the Common Area (excluding moveable trade fixtures and furniture), including without limitation all Tenant Improvements constructed pursuant to the Work Letter (except as otherwise provided in the Work Letter), shall become the property of Landlord and shall be surrendered with the Premises at the end of the Term; except that Landlord may, by notice to Tenant given either prior to or following the expiration or termination of this Lease, require Tenant to remove by the Expiration

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Date, or sooner termination date of this Lease, or within ten (10) days following notice to Tenant that such removal is required if notice is given following the Expiration Date or sooner termination, all or any of the Alterations installed either by Tenant or by Landlord at Tenant’s request, including without limitation all Tenant Improvements constructed pursuant to the Work Letter (except as otherwise provided in the Work Letter), and to repair any damage to the Premises, the Building or the Common Area arising from that removal and restore the Premises to their condition prior to making such Alterations.

     SECTION 7.4. MECHANIC’S LIENS. Tenant shall keep the Premises free from any liens arising out of any work performed, materials furnished, or obligations incurred by or for Tenant. Upon request by Landlord, Tenant shall promptly (but in no event later than ten (10) business days following such request) cause any such lien to be released by posting a bond in accordance with California Civil Code Section 3143 or any successor statute. In the event that Tenant shall not, within thirty (30) days following the imposition of any lien, cause the lien to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other available remedies, the right to cause the lien to be released by any means it deems proper, including payment of or defense against the claim giving rise to the lien. All reasonable and actual expenses so incurred by Landlord, including Landlord’s reasonable attorneys’ fees, and any foreseeable consequential or other damages proximately caused by such lien, shall be reimbursed by Tenant upon demand, together with interest from the date of payment by Landlord at the maximum rate permitted by law until paid. Tenant shall give Landlord no less than twenty (20) days’ prior notice in writing before commencing construction of any kind on the Premises or Common Area and shall again notify Landlord that construction has commenced, such notice to be given on the actual date on which construction commences, so that Landlord may post and maintain notices of non-responsibility on the Premises or Common Area, as applicable, which notices Landlord shall have the right to post and which Tenant agrees it shall not disturb. Tenant shall also provide Landlord notice in writing within ten (10) days following the date on which such work is substantially completed. The provisions of this Section shall expressly survive the expiration or sooner termination of this Lease.

     SECTION 7.5. ENTRY AND INSPECTION. Landlord shall at all reasonable times, upon at least twenty-four (24) hours written or oral notice (except in emergencies, when no notice shall be required) have the right to enter the Premises to inspect them, to supply services in accordance with this Lease, to have access to install, repair, maintain, replace or remove all electrical and mechanical installations of Landlord and to protect the interests of Landlord in the Premises, and to submit the Premises to prospective or actual purchasers or encumbrance holders (or, during the last one hundred and eighty (180) days of the Term or when an uncured Tenant Event of Default exists, to prospective tenants), all without being deemed to have caused an eviction of Tenant and without abatement of rent except as provided elsewhere in this Lease. Landlord shall have the right to use any and all means which Landlord may deem proper to open the doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord shall not under any circumstances be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or any eviction of Tenant from the Premises.

ARTICLE VII. TAXES AND ASSESSMENTS ON TENANT’S PROPERTY

     Tenant shall be liable for and shall pay, at least ten (10) days before delinquency, all taxes and assessments levied against all personal property of Tenant located in the Premises, and, if required by Landlord, against all Non Standard Improvements to the Premises (as defined in Section 7.3) made by Tenant, and against any Alterations (as defined in Section 7.3) made to the Premises or the Building by or on behalf of Tenant. If requested by Landlord, Tenant shall cause its personal property, Non-Standard Improvements and Alterations to be assessed and billed separately from the real property of which the Premises form a part. If any taxes required to be paid by Tenant on Tenant’s personal property, Non-Standard Improvements and/or Alterations are levied against Landlord or Landlord’s property and if Landlord pays the same, or if the assessed value of Landlord’s property is increased by the inclusion of a value placed upon the personal property, Non-Standard Improvements and/or Alterations and if Landlord pays the taxes based upon the increased assessment, Landlord shall have the right to require that Tenant pay to Landlord the taxes so levied against Landlord or the proportion of the taxes resulting from the increase in the assessment. In calculating what portion of any tax bill which is assessed against Landlord separately, or Landlord and Tenant jointly, is attributable to Tenant’s Non-Standard Improvements, Alterations and personal property, Landlord’s reasonable determination shall be conclusive.

ARTICLE IX. ASSIGNMENT AND SUBLETTING

     SECTION 9.1. RIGHTS OF PARTIES.

     (a) Notwithstanding any provision of this Lease to the contrary, and except as to transfers expressly permitted without Landlord’s consent pursuant to Section 9.4, Tenant will not, either voluntarily or by operation of law, assign, sublet, encumber, or otherwise transfer all or any part of Tenant’s interest in this Lease or the Premises, or permit the Premises to be occupied by anyone other than Tenant, without Landlord’s prior written consent, which consent shall not unreasonably be withheld in accordance with the provisions of Section 9.1(b). No assignment (whether voluntary, involuntary or by operation of law) and no subletting shall be valid or effective without Landlord’s prior written consent and, at Landlord’s election, any such assignment or subletting shall be void and of no force and effect and any such attempted assignment or subletting shall constitute an Event of Default of this Lease. Landlord shall not be deemed to have given its consent to any assignment or subletting by any course of action, including its acceptance of any name for listing in the Building directory, other than written consent. To the extent not prohibited by provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq., (the"Bankruptcy Code”), including Section 365(f)(l), Tenant on behalf of itself and its creditors, administrators and assigns waives the applicability of Section 365(e) of the Bankruptcy Code unless the proposed assignee of the Trustee for the estate of the bankrupt meets Landlord’s standard for consent as set forth in Section 9.1(b) of this Lease. If this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other considerations to be delivered in connection with the assignment of this Lease (but not in connection with the

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transfer of ownership of Tenant’s personal property) shall be delivered to Landlord, shall be and remain the exclusive property of Landlord and shall not constitute property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed to have assumed all of the obligations arising under this Lease on and after the date of the assignment, and shall upon demand execute and deliver to Landlord an instrument confirming that assumption.

     (b) If Tenant desires to transfer an interest in this Lease or the Premises, it shall first notify Landlord of its desire and shall submit in writing to Landlord: (i) the name and address of the proposed transferee; (ii) the nature of any proposed transferee’s business to be carried on in the Premises; (iii) the terms and provisions of any proposed sublease, assignment or other transfer, including a copy of the proposed assignment, sublease or transfer form; (iv) evidence that the proposed assignee, subtenant or transferee will comply with the requirements of Exhibit D hereto; (v) a completed Environmental Questionnaire from the proposed assignee, subtenant or transferee; (vi) any other information requested by Landlord and reasonably related to the transfer and (vii) the fee described in Section 9.1(e). Except as provided in Section 9.1 (c), Landlord shall not unreasonably withhold its consent, provided that the parties agree that it shall be reasonable for Landlord to withhold its consent if: (1) the use of the Premises will not be consistent with the provisions of this Lease; (2) the proposed assignee or subtenant has been required by any prior landlord, lender or governmental authority to take remedial action in connection with Hazardous Materials contaminating a property arising out of the proposed assignee’s or subtenant’s actions or use of the property in question or is subject to any enforcement order issued by any governmental authority in connection with the use, disposal or storage of a Hazardous Material; (3) insurance requirements of the proposed assignee or subtenant may not be brought into conformity with Landlord’s then current leasing practice; (4) a proposed subtenant or assignee has not demonstrated to the reasonable satisfaction of Landlord that it is financially responsible and reasonably able to fulfill the obligations set forth in this Lease as reasonably determined by Landlord after reviewing all available financial statement of such proposed subtenant or assignee for the two-year period preceding the request for Landlord’s consent, and/or a certification signed by the proposed subtenant or assignee that it has not been evicted or been in arrears in rent at any other leased premises for the 3-year period preceding the request for Landlord’s consent; (5) the proposed assignee or subtenant is an existing tenant of the Building or Project or a prospect with whom Landlord is actively negotiating to become a tenant at the Building or Project; or (6) the proposed transfer will impose additional burdens or adverse tax effects on Landlord. Tenant’s exterior signage rights are personal to Tenant and may not be assigned or transferred to any assignee of this Lease or subtenant of the Premises. Notwithstanding the foregoing, Tenant may assign its exterior signage rights in connection with an assignment of this Lease or sublease of the entire Premises that is either consented to by Landlord or a Permitted Transfer (as defined below); provided, however, that Landlord shall have the right of prior approval that such signage continues to comply with the Sign Criteria and the other requirements of Section 5.2 of this Lease, and provided further that any name and/or graphics on such signage do not materially devalue the Project as determined by Landlord in its sole and absolute discretion.

     If Landlord consents to the proposed transfer, Tenant may within ninety (90) days after the date of the consent effect the transfer upon the terms described in the information furnished to Landlord; provided that any material change in the terms shall be subject to Landlord’s consent as set forth in this Section 9.1. Landlord shall approve or disapprove any requested transfer within fifteen (15) business days following receipt of Tenant’s written request, the information set forth above, and the fee set forth below.

     (c) Notwithstanding the provisions of Section 9.1(b) above, in lieu of consenting to a proposed assignment or subletting, Landlord may elect, within the fifteen (15) business day period permitted for Landlord to approve or disapprove a requested transfer (provided such transfer involves at least substantially all of either the first or second floor of the Premises), to (i) sublease the Premises (or the portion proposed to be subleased), or take an assignment of Tenant’s interest in this Lease, upon substantially the same terms as offered to the proposed subtenant or assignee (excluding terms relating to the purchase of personal property, the use of Tenant’s name or the continuation of Tenant’s business), or (ii) terminate this Lease as to the portion of the Premises proposed to be subleased or assigned with a proportionate abatement in the rent payable under this Lease, effective thirty (30) days’ following written notice by Landlord of its election to so sublease or terminate. Landlord may thereafter, at its option, assign, sublet or re-let any space so sublet, obtained by assignment or obtained by termination to any third party, including without limitation the proposed transferee of Tenant.

     (d) In the event that Landlord approves the requested assignment or subletting, Tenant agrees that fifty percent (50%) of any amounts paid by the assignee or subtenant, however described, in excess of (i) the Basic Rent payable by Tenant hereunder, or in the case of a sublease of a portion of the Premises, in excess of the Basic Rent reasonably allocable to such portion as determined by Landlord, plus (ii) Tenant’s direct out-of-pocket costs which Tenant certifies to Landlord have been paid to provide occupancy related services to such assignee or subtenant of a nature commonly provided by landlords of similar space, shall be the property of Landlord and such amounts shall be payable directly to Landlord by the assignee or subtenant or, at Landlord’s option, by Tenant within ten (10) days of Tenant’s receipt thereof. Landlord shall have the right to review or audit the books and records of Tenant, or have such books and records reviewed or audited by an outside accountant, to confirm any such direct out-of-pocket costs. In the event that such direct out-of-pocket costs claimed by Tenant are overstated by more than five percent (5%), Tenant shall reimburse Landlord for any of Landlord’s costs related to such review or audit. At Landlord’s request, a written agreement shall be entered into by and among Tenant, Landlord and the proposed assignee or subtenant confirming the requirements of this Section 9. l(d).

     (e) Tenant shall pay to Landlord a fee equal to the greater of (i) Landlord’s actual costs related to such assignment, subletting or other transfer or (ii) Five Hundred Dollars ($500.00), to process any request by Tenant for an assignment, subletting or other transfer under this Lease. Tenant shall pay Landlord the sum of Five Hundred Dollars ($500.00) concurrently with Tenant’s request for consent to any assignment, subletting or other transfer, and Landlord shall have no obligation to consider such request unless accompanied by such payment. Tenant shall pay

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Landlord upon demand any costs in excess of such payment to the extent Landlord’s actual costs related to such request exceeds $500.00. Such fee is hereby acknowledged as a reasonable amount to reimburse Landlord for its costs of review and evaluation of a proposed transfer.

     SECTION 9.2. EFFECT OF TRANSFER. No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its obligation to pay rent and to perform all its other obligations under this Lease. Moreover, Tenant shall indemnify and hold Landlord harmless, as provided in Section 10.3, for any act or omission by an assignee or subtenant. Each assignee, other than Landlord, shall assume all obligations of Tenant under this Lease and shall be liable jointly and severally with Tenant for the payment of all rent, and for the due performance of all of Tenant’s obligations, under this Lease. No assignment or subletting shall be effective or binding on Landlord unless documentation in form and substance satisfactory to Landlord in its reasonable discretion evidencing the transfer, and in the case of an assignment, the assignee’s assumption of the obligations of Tenant under this Lease, is delivered to Landlord and both the assignee/subtenant and Tenant deliver to Landlord an executed consent to transfer instrument prepared by Landlord and consistent with the requirements of this Article. The acceptance by Landlord of any payment due under this Lease from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any transfer. Consent by Landlord to one or more transfers shall not operate as a waiver or estoppel to the future enforcement by Landlord of its rights under this Lease or as a consent to any subsequent transfer.

     SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and conditions shall apply to any subletting by Tenant of all or any part of the Premises and shall be deemed included in each sublease:

     (a) Each and every provision contained in this Lease (other than with respect to the payment of rent hereunder) is incorporated by reference into and made a part of such sublease, with “Landlord” hereunder meaning the sublandlord therein and “Tenant” hereunder meaning the subtenant therein.

     (b) Tenant hereby irrevocably assigns to Landlord all of Tenant’s interest in all rentals and income arising from any sublease of the Premises, and Landlord may collect such rent and income and apply same toward Tenant’s obligations under this Lease; provided, however, that until there is an Event of Default by Tenant, Tenant shall have the right to receive and collect the sublease rentals. Landlord shall not, by reason of this assignment or the collection of sublease rentals, be deemed liable to the subtenant for the performance of any of Tenant’s obligations under the sublease. Tenant hereby irrevocably authorizes and directs any subtenant, upon receipt of a written notice from Landlord stating that an uncured Event of Default exists in the performance of Tenant’s obligations under this Lease, to pay to Landlord all sums then and thereafter due under the sublease. Tenant agrees that the subtenant may rely on that notice without any duty of further inquiry and notwithstanding any notice or claim by Tenant to the contrary. Tenant shall have no right or claim against the subtenant or Landlord for any rentals so paid to Landlord.

     (c) In the event of the termination of this Lease for any reason, including without limitation as the result of an Event of Default by Tenant or by the mutual agreement of Landlord and Tenant, Landlord may, at its sole option, take over Tenant’s entire interest in any sublease and, upon notice from Landlord, the subtenant shall attorn to Landlord. In no event, however, shall Landlord be liable for any previous act or omission by Tenant under the sublease or for the return of any advance rental payments or deposits under the sublease that have not been actually delivered to Landlord, nor shall Landlord be bound by any sublease modification executed without Landlord’s consent or for any advance rental payment by the subtenant in excess of one month’s rent. The general provisions of this Lease, including without limitation those pertaining to insurance and indemnification, shall be deemed incorporated by reference into the sublease despite the termination of this Lease. In the event Landlord does not elect to take over Tenant’s interest in a sublease in the event of any such termination of this Lease, such sublease shall terminate concurrently with the termination of this Lease and such subtenant shall have no further rights under such sublease and Landlord shall have no obligations to such subtenant.

     SECTION 9.4. CERTAIN TRANSFERS. The following shall be deemed to constitute an assignment of this Lease; (a) other than to a Permitted Transferee, the sale of all or substantially all of Tenant’s assets (other than bulk sales in the ordinary course of business), (b) if Tenant is a privately held corporation, an unincorporated association, a limited liability company or a partnership (i), other than to a Permitted Transferee, the transfer, assignment or hypothecation of any stock or interest in such corporation, association, limited liability company or partnership in the aggregate of fifty percent (50%) (except for public offerings of shares of stock), or (ii) other than a merger with a Permitted Transferee, the merger by Tenant in which the stockholders of Tenant immediately prior to the merger hold less than fifty percent (50%) of the stock of the surviving entity immediately following the merger, or (c) if Tenant’s parent company is a privately held corporation (i) other than to a Permitted Transferee, the transfer, assignment or hypothecation of Tenant’s parent company’s stock in the aggregate in excess of fifty percent (50%) in a single transaction or series of related transactions or (ii) other than a merger with a Permitted Transferee, a merger by Tenant’s parent company in a single transaction or series of related transactions in which the stockholders of Tenant’s parent company hold less than fifty percent (50%) of the stock of the surviving entity immediately following such transaction or series of related transactions. For purposes hereof, a “Permitted Transferee” shall mean: (a) any person(s) or entity who controls, is controlled by or is under common control with Tenant, (b) to any entity resulting from the merger, consolidation or other reorganization with Tenant, whether or not Tenant is the surviving entity or (c) to any person or legal entity which acquires all or substantially all of the assets or stock of Tenant (each of the foregoing is hereinafter referred to as a “Tenant Affiliate”); so long as (i) the net worth of the successor or reorganized entity after such merger is at least equal to the greater of the net worth of Tenant as of the execution of this Lease by Landlord or the net worth of Tenant immediately prior to the date of such merger or reorganization, evidence of which, reasonably satisfactory to Landlord, shall be presented to Landlord prior to such merger or reorganization, (ii) Tenant has provided Landlord, prior to such merger or reorganization, written notice of such merger or reorganization and such assignment documentation, evidence and other information as Landlord may reasonably require to confirm the foregoing and in connection therewith, and

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(iii) all of the other terms and requirements Sections 9.2 and 9.3 shall apply with respect to such assignment, (iv) said Permitted Transferee shall assume, in full, the obligations of Tenant under this Lease, and (v) the use of the Premises by the Permitted Transferee shall be as set forth in Section 3 of the Basic Lease Provisions. For purposes of this paragraph, a public or private offering of Tenant debt or equity shall not be deemed an assignment of this Lease and the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management, affairs and policies of anyone, whether through the ownership of voting securities, by contract or otherwise. The bonus rental provisions of Section 9.1 (d) and the recapture provision of Section 9.1 (c) of this Lease shall not apply to an assignment or sublease by Tenant to a Tenant Affiliate.

ARTICLE X. INSURANCE AND INDEMNITY

     SECTION 10.1. TENANT’S INSURANCE. Tenant, at its sole cost and expense, shall provide and maintain in effect the insurance described in Exhibit D. Evidence of that insurance must be delivered to Landlord prior to the Commencement Date.

     SECTION 10.2. LANDLORD’S INSURANCE. Landlord may, at its election, provide any or all of the following types of insurance, with or without deductible and in amounts and coverages as may be determined by Landlord in its sole and absolute discretion: property insurance, subject to standard exclusions, covering the Building and/or Project, and such other risks as Landlord or its mortgagees may from time to time deem appropriate, including coverage for the Tenant Improvements constructed by Landlord pursuant to the Work Letter, and commercial general liability coverage. Landlord shall not be required to carry insurance of any kind on Tenant’s Alterations or on Tenant’s other property, including, without limitation, Tenant’s trade fixtures, furnishings, equipment, signs and all other items of personal property, and Landlord shall not be obligated to repair or replace that property should damage occur. All proceeds of insurance maintained by Landlord upon the Building and/or Project shall be the property of Landlord, whether or not Landlord is obligated to or elects to make any repairs. At Landlord’s option, Landlord may self-insure all or any portion of the risks for which Landlord elects to provide insurance hereunder.

     SECTION 10.3. JOINT INDEMNITY.

     (a) Tenant Indemnity. To the fullest extent permitted by law, Tenant shall defend, indemnify, protect, save and hold harmless Landlord and Master Lessor, and their respective agents, and affiliates of Landlord, including, without limitation, any corporations or other entities controlling, controlled by or under common control with Landlord or Master Lessor, from and against any and all claims, liabilities, costs or expenses arising either before or after the Commencement Date from Tenant’s use or occupancy of the Premises, the Building or the Common Areas, including, without limitation, the use by Tenant, its agents, employees, invitees or licensees of any recreational facilities within the Common Areas, or from the conduct of its business, or from any activity, work, or thing done, permitted or suffered by Tenant or its agents, employees, invitees or licensees in or about the Premises, the Building or the Common Areas, or from any Event of Default in the performance of any obligation on Tenant’s part to be performed under this Lease, or from any act or negligence of Tenant or its agents, employees, visitors, patrons, guests, invitees or licensees. Landlord may, at its option, require Tenant to assume Landlord’s defense in any action covered by this Section through counsel reasonably satisfactory to Landlord. The provisions of this Section shall expressly survive the expiration or sooner termination of this Lease. Tenant’s obligations under this Section shall not apply in the event that the claim, liability, cost or expense (i) is caused by the willful misconduct of Landlord, Landlord’s employees or authorized agents; or (ii) (1) relates to an obligation of Landlord hereunder; (2) is of the nature that Landlord had knowledge of the condition; (3) a reasonable opportunity to take reasonable curative measures; and (4) failed to do so; or (iii) that is Landlord’s responsibility to indemnify Tenant pursuant to Section 10.4 below.

     (b) Landlord Indemnity. To the fullest extent permitted by law, but subject to the express limitations on liability contained in this Lease (including, without limitation, the provisions of Sections 10.4, 10.5 and 14.8 of this Lease, Landlord shall defend, indemnify, protect, save and hold harmless Tenant, its agents and any and all affiliates of Tenant, including without limitation, any corporations, or other entities controlling, controlled by or under common control with Tenant, from and against any and all claims, liabilities, costs or expenses arising either before or after the Commencement Date that occurs in connection with the operation, maintenance and repair of the Common Areas of the Project and (i) is caused by the willful misconduct of Landlord, Landlord’s employees or authorized agents; or (ii) (1) relates to an obligation of Landlord hereunder; (2) is of the nature that Landlord had knowledge of the condition; (3) a reasonable opportunity to take reasonable curative measures; and (4) failed to do so. The provisions of this Subsection 10.3(b) shall expressly survive the expiration or sooner termination of this Lease.

     SECTION 10.4. LANDLORD’S NONLIABILITY. Subject to the express indemnity obligations contained in Section 10.3(b) of this Lease and such other applicable provisions of this Lease, Landlord shall not be liable to Tenant, its employees, agents and invitees, and Tenant hereby waives all claims against Landlord for personal injury or any other loss, cost, damage, injury or liability whatsoever resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak or flow from or into any part of the Premises or from the breakage, leakage, obstruction or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, electrical works or other fixtures in the Building. Notwithstanding any provision of this Lease to the contrary, including, without limitation, the provisions of Section 10.3(b) of this Lease, Landlord shall in no event be liable to Tenant, its employees, agents, and invitees, and Tenant hereby waives all claims against Landlord, for (i) loss or interruption of Tenant’s business or income (including, without limitation, any consequential damages and lost profit or opportunity costs), or (ii) any other loss, cost, damage, injury or liability resulting from, but not limited to, Acts of God (except with respect to restoration obligations pursuant to Article XI below), acts of civil disobedience or insurrection, acts or omissions (criminal or otherwise) of any third parties (other than Landlord’s employees or authorized agents), including without limitation, any other tenants within the Project or their agents,

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employees, contractors, guests or invitees. Landlord shall have no liability and, except as provided in Sections 11.1 and 12.1 below, there shall be no abatement of rent, by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements to any portion of the Building, including repairs to the Premises, nor shall any related activity by Landlord constitute an actual or constructive eviction; provided, however, that in making repairs, alterations or improvements, Landlord shall interfere as little as reasonably practicable with the conduct of Tenant’s business in the Premises. Tenant shall immediately notify Landlord in case of fire or accident in the Premises, the Building or the Project and of defects in any improvements or equipment.

     SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives all rights of recovery against the other and the other’s agents on account of loss and damage occasioned to the property of such waiving party to the extent that the waiving party is entitled to proceeds for such loss or damage under any property insurance policies carried of required to be carried by the provisions of this Lease; provided however, that the foregoing waiver shall not apply to the extent of Tenant’s obligations to pay deductibles under any such policies and this Lease. By this waiver it is the intent of the parties that neither Landlord nor Tenant shall be liable to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage insured against under any property insurance policies contemplated by this Lease, even though such loss or damage might be occasioned by the negligence of such party, its agents, employees, contractors, guests or invitees.

ARTICLE XI. DAMAGE OR DESTRUCTION

     SECTION 11.1. RESTORATION.

     (a) If the Premises or the Building or a part thereof are materially damaged by any fire, flood, earthquake or other casualty, Landlord shall have the right to terminate this Lease upon written notice to Tenant if: (i) Landlord reasonably determines that proceeds necessary to pay the full cost of repair is not available from Landlord’s insurance, including without limitation earthquake insurance, plus such additional amounts Tenant elects, at its option, to contribute, excluding however the deductible (for which Tenant shall be responsible for Tenant’s Share); (ii) Landlord reasonably determines that the Premises cannot, with reasonable diligence, be fully repaired by Landlord (or cannot be safely repaired because of the presence of hazardous factors, including without limitation Hazardous Materials, earthquake faults, and other similar dangers) within two hundred seventy (270) days after the date of the damage; (iii) an uncured Event of Default by Tenant has occurred; or (iv) the material damage occurs during the final twelve (12) months of the Term. Landlord shall notify Tenant in writing (“Landlord’s Notice”) within sixty (60) days after the damage occurs as to (A) whether Landlord is terminating this Lease as a result of such material damage and (B) if Landlord is not terminating this Lease, the number of days within which Landlord has estimated that the Premises, with reasonable diligence, are likely to be fully repaired. In the event Landlord elects to terminate this Lease, this Lease shall terminate as of the date specified for termination by Landlord’s Notice (which termination date shall in no event be later than sixty (60) days following the date of the damage, or, if no such date is specified, such termination shall be the date of Landlord’s Notice).

     (b) If Landlord has the right to terminate this Lease pursuant to Section 11.1 (a) and does not elect to so terminate this Lease, and provided that at the time of Landlord’s Notice neither an Event of Default exists nor has Landlord delivered Tenant a notice of any failure by Tenant to fulfill an obligation under this Lease which, unless cured by Tenant within the applicable grace period, would constitute an Event of Default, then within ten (10) days following delivery of Landlord’s Notice pursuant to Section 11.l(a), Tenant may elect to terminate this Lease by written notice to Landlord, but only if (i) Landlord’s Notice specifies that Landlord has determined that the Premises cannot be repaired, with reasonable diligence, within two hundred seventy (270) days after the date of damage or (ii) the casualty has occurred within the final twelve (12) months of the Term and such material damage has a materially adverse impact on Tenant’s continued use of the Premises. If Tenant fails to provide such termination notice within such ten (10) day period, Tenant shall be deemed to have waived any termination right under this Section 11.l(b) or any other applicable law.

     (c) In the event that neither Landlord nor Tenant terminates this Lease pursuant to this Section 11.1 as a result of material damage to the Building or Premises resulting from a casualty, Landlord shall repair all material damage to the Premises or the Building as soon as reasonably possible and this Lease shall continue in effect for the remainder of the Term. Subject to any provision to the contrary in the Work Letter, such repair by Landlord shall include repair of material damage to the Tenant Improvements constructed or paid for by Landlord pursuant to the Work Letter, if any, so long as insurance proceeds from insurance required to be carried by Tenant are made available to Landlord. Landlord shall have the right, but not the obligation, to repair or replace any other leasehold improvements made by Tenant or any Alterations (as defined in Section 7.3) constructed by Tenant. If Landlord elects to repair or replace such leasehold improvements and/or Alterations, all insurance proceeds available for such repair or replacement shall be made available to Landlord. Landlord shall have no liability to Tenant in the event that the Premises or the Building has not been fully repaired within the time period specified by Landlord in Landlord’s Notice to Tenant as described in Section 11.l(a). Notwithstanding the foregoing, the repair of damage to the Premises to the extent such damage is not material shall be governed by Sections 7.1 and 7.2.

     (d) Commencing on the date of such material damage to the Building, and ending on the sooner of the date the damage is repaired or the date this Lease is terminated, the rental to be paid under this Lease shall be abated in the same proportion that the Floor Area of the Premises that is rendered unusable by the damage from time to time bears to the total Floor Area of the Premises, as reasonably and in good faith determined by Landlord, but only to the extent business interruption insurance is required of Tenant pursuant to Exhibit D.

     (e) Landlord shall not be required to repair or replace any improvements or fixtures that Tenant is obligated to repair or replace pursuant to Section 7.1 or any other provision of this Lease and Tenant shall continue to be obligated to so repair or replace any such improvements or fixtures, notwithstanding any provisions to the contrary in this Article XI. In addition, but subject to the provisions of Section 10.5, in the event the damage or

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destruction to the Premises or Building are due in substantial part to the fault or neglect of Tenant or its employees, subtenants, invitees or representatives, the costs of such repairs or replacement to the Premises or Building shall be borne by Tenant in proportion to its responsibility for such damage or destruction, and in addition, Tenant shall not be entitled to terminate this Lease as a result, notwithstanding the provisions of Section 1 l.l(b).

     (f) Tenant shall fully cooperate with Landlord in removing Tenant’s personal property and any debris from the Premises to facilitate all inspections of the Premises and the making of any repairs. Notwithstanding anything to the contrary contained in this Lease, if Landlord in good faith believes there is a risk of injury to persons or damage to property from entry into the Building or Premises following any damage or destruction thereto, Landlord may restrict entry into the Building or the Premises by Tenant, its employees, agents and contractors in a non-discriminatory manner, without being deemed to have violated Tenant’s rights of quiet enjoyment to, or made an unlawful detainer of, or evicted Tenant from, the Premises. Upon request, Landlord shall consult with Tenant to determine if there are safe methods of entry into the Building or the Premises solely in order to allow Tenant to retrieve files, data in computers, and necessary inventory, subject however to all indemnities and waivers of liability from Tenant to Landlord contained in this Lease and any additional indemnities and waivers of liability which Landlord may require.

     SECTION 11.2. LEASE GOVERNS. Tenant agrees that the provisions of this Lease, including without limitation Section 11.1, shall govern any damage or destruction and shall accordingly supersede any contrary statute or rule of law.

ARTICLE XII. EMINENT DOMAIN

     SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion of the Premises which materially impairs Tenant’s ability to conduct its business in the Premises is taken by any lawful authority by exercise of the right of eminent domain, or sold to prevent a taking, either Tenant or Landlord may terminate this Lease effective as of the date possession is required to be surrendered to the authority. In the event title to a portion of the Building or Project, whether or not including a portion of the Premises, is taken or sold in lieu of taking, and if Landlord elects to restore the Building in such a way as to alter the Premises materially, either party may terminate this Lease, by written notice to the other party, effective on the date of vesting of title. In the event neither party has elected to terminate this Lease as provided above, then Landlord shall promptly, after receipt of a sufficient condemnation award, proceed to restore the Premises to substantially their condition prior to the taking, and a proportionate allowance shall be made to Tenant for the rent corresponding to the time during which, and to the part of the Premises of which, Tenant is deprived on account of the taking and restoration. In the event of a taking, Landlord shall be entitled to the entire amount of the condemnation award without deduction for any estate or interest of Tenant; provided that nothing in this Section shall be deemed to give Landlord any interest in, or prevent Tenant from seeking any award against the taking authority for, the taking of personal property and fixtures belonging to Tenant or for relocation or business interruption expenses recoverable from the taking authority.

     SECTION 12.2. TEMPORARY TAKING. No temporary taking of the Premises, Building or Common Area shall terminate this Lease or give Tenant any right to abatement of rent, and any award specifically attributable to a temporary taking of the Premises shall belong entirely to Tenant. A temporary taking shall be deemed to be a taking of the use or occupancy of the Premises for a period of not to exceed thirty (30) days.

     SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a taking of the parking area such that Landlord can no longer provide sufficient parking to comply with this Lease, Landlord may substitute reasonably equivalent parking in a location within 100 meters of the Building; provided that if Landlord fails to make that substitution within thirty (30) days following the taking and if the taking materially impairs Tenant’s use and enjoyment of the Premises, Tenant may, at its option, terminate this Lease by written notice to Landlord. If this Lease is not so terminated by Tenant, there shall be no abatement of rent and this Lease shall continue in effect.

ARTICLE XII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

     SECTION 13.1. SUBORDINATION. This Lease shall be subordinate to the Master Lease and to all renewals, modifications and extensions thereof. Further, at the option of Landlord or any lender of Landlord’s that obtains a security interest in the Building, this Lease shall be either superior or subordinate to all ground or underlying leases, mortgages and deeds of trust, if any, which may hereafter affect the Building, and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding the foregoing, so long as no Event of Default exists under this Lease, Tenant’s possession and quiet enjoyment of the Premises shall not be disturbed and this Lease shall not terminate in the event of termination of the Master Lessor or of any such ground or underlying lease, or the foreclosure of any such mortgage or deed of trust, to which this Lease has been subordinated pursuant to this Section. Tenant shall execute and deliver any commercially reasonable documents or agreements requested by Landlord, Master Lessor or such lessor or lender which provide Tenant with the non-disturbance protections set forth in this Section. In the event of a termination or foreclosure, Tenant shall become a tenant of and attorn to the successor-in-interest to Landlord upon the same terms and conditions as are contained in this Lease, and shall execute any instrument reasonably required by Landlord’s successor for that purpose. Tenant Shall also, upon written request of Landlord, execute and deliver all commercially reasonable instruments as may be required from time to time to subordinate the rights of Tenant under this Lease to any ground or underlying lease or to the lien of any mortgage or deed of trust (provided that such instruments include the nondisturbance and attornment provisions set forth above), or, if requested by Landlord, to subordinate, in whole or in part, any ground CO or underlying lease or the lien of any mortgage or deed of trust to this Lease. Tenant agrees that any purchaser at a foreclosure sale or lender taking title under a deed-in-lieu of foreclosure shall not be responsible for any act or omission of a prior landlord, shall not be subject to any offsets or defenses Tenant may have against a prior landlord, and shall not be liable for the return of the security deposit to the extent it is not actually received by such purchaser or bound by any rent paid for more than the current month in which the foreclosure occurred. Within thirty (30)

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days of the execution hereof, as a condition precedent to Tenant’s obligations under this Lease, Landlord shall deliver to Tenant executed and notarized nondisturbance agreements in writing from all lessors under all ground leases or underlying leases and lenders whose debt is secured by all or a portion of the Project, in form and content provided for in the applicable underlying ground lease or financing documents, as applicable, stating that so long as Tenant is not in default under any of the terms, covenants, conditions, or agreements of this Lease, this Lease and all of the terms, provisions, and conditions of this Lease, shall remain in full force and effect, and neither this Lease, nor Tenant’s rights nor Tenant’s possession of the Premises will be disturbed during the Term of this Lease or any extension thereof.

     SECTION 13.2. ESTOPPEL CERTIFICATE.

     (a) Each party shall, at any time upon not less than fifteen (15) business days prior written notice from the other, execute, acknowledge and deliver to the other, in any commercially reasonable form that the other may require, a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of the modification and certifying that this Lease, as modified, is in full force and effect) and the dates to which the rental, additional rent and other charges have been paid in advance, if any, and (ii) acknowledging that, to such party’s knowledge, there are no uncured defaults on the part of the other party, or specifying each default if any are claimed, and (iii) setting forth all further information that such party or any purchaser or encumbrancer may reasonably require. Tenant’s statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Building or Project.

     (b) Notwithstanding any other rights and remedies of Landlord or Tenant, Landlord’s or Tenant’s failure to deliver any estoppel statement within the provided time shall be conclusive upon Landlord or Tenant, as the case may be, that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) there are no uncured Events of Default in Landlord’s or Tenant’s performance, and (iii) not more than one month’s rental has been paid in advance.

     SECTION 13.3. FINANCIALS.

     Tenant has made available to Landlord prior to the execution of this Lease, the consolidated balance sheet and related consolidated statements of operations, of stockholder’s equity and of cash flows of Tenant and its subsidiaries (“Statements”) for the most recent prior year. In addition to the foregoing Statements, Tenant shall deliver to Landlord within fifteen (15) business days after request, Tenant’s current Statements for the most recent prior year, or, in the event Tenant is a publicly traded corporation on a nationally recognized stock exchange, Tenant’s current financial reports filed with the Securities and Exchange Commission, which Statements shall accurately and completely reflect the financial condition of Tenant. Landlord agrees that it will keep the Statements confidential, except that Landlord shall have the right to deliver the same to any proposed purchaser of the Building or Project, and to any encumbrancer of all or any portion of the Building or Project.

ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES

     SECTION 14.1. TENANT’S DEFAULTS. In addition to any other breaches of this Lease which are defined as Events of Default in this Lease, the occurrence of any one or more of the following events shall constitute an Event of Default by Tenant:

     (a) The failure by Tenant to make any payment of Basic Rent or additional rent required to be made by Tenant, as and when due, where the failure continues for a period of five (5) days after written notice from Landlord to Tenant; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 and 1161(a) as amended. For purposes of these Events of Default and remedies provisions, the term “additional rent” shall be deemed to include all amounts of any type whatsoever other than Basic Rent to be paid by Tenant pursuant to the terms of this Lease.

     (b) The assignment, sublease, encumbrance or other transfer of this Lease by Tenant, either voluntarily or by operation of law, whether by judgment, execution, transfer by intestacy or testacy, or other means, without the prior written consent of Landlord when consent is required by this Lease.

     (c) The discovery by Landlord that any financial statement provided by Tenant, or by any affiliate, successor or guarantor of Tenant, was materially false.

     (d) The failure of Tenant to timely and fully provide any subordination agreement, estoppel certificate or financial statements in accordance with the requirements of Article XIII.

     (e) The abandonment of the Premises by Tenant (provided that Tenant shall not be deemed to have abandoned the Premises if it vacates but continues to timely perform each and every of its obligations under this Lease).

     (f) The failure or inability by Tenant to observe or perform any of the express or implied covenants or provisions of this Lease to be observed or performed by Tenant, other than as specified in this Section 14.1, where the failure continues for a period of thirty (30) days after written notice from Landlord to Tenant or such shorter period as is specified in any other provision of this Lease; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 and 1161(a) as amended. However, if the nature of the failure is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to have committed an Event of Default if Tenant commences the cure within thirty (30) days, and thereafter diligently pursues the cure to completion.

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     (g) (i) The making by Tenant of any general assignment for the benefit of creditors; (ii) the filing by or against Tenant of a petition to have Tenant adjudged a Chapter 7 debtor under the Bankruptcy Code or to have debts discharged or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within thirty (30) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease, if possession is not restored to Tenant within thirty (30) days; (iv) the attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease, where the seizure is not discharged within thirty (30) days; or (v) Tenant’s convening of a meeting of its creditors for the purpose of effecting a moratorium upon or composition of its debts. Landlord shall not be deemed to have knowledge of any event described in this Section 14.1(g) unless notification in writing is received by Landlord, nor shall there be any presumption attributable to Landlord of Tenant’s insolvency. In the event that any provision of this Section 14.l(g) is contrary to applicable law, the provision shall be of no force or effect.

     SECTION 14.2. LANDLORD’S REMEDIES.

     (a) If an Event of Default by Tenant occurs, then in addition to any other remedies available to Landlord, Landlord may exercise the following remedies:

          (i) Landlord may terminate Tenant’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. Such termination shall not affect any accrued obligations of Tenant under this Lease. Upon termination, Landlord shall have the right to reenter the Premises and remove all persons and property. Landlord shall also be entitled to recover from Tenant:

               (1) The worth at the time of award of the unpaid Basic Rent and additional rent which had been earned at the time of termination;

               (2) The worth at the time of award of the amount by which the unpaid Basic Rent and additional rent which would have been earned after termination until the time of award exceeds the amount of such loss that Tenant proves could have been reasonably avoided;

               (3) The worth at the time of award of the amount by which the unpaid Basic Rent and additional rent for the balance of the Term after the time of award exceeds the amount of such loss that Tenant proves could be reasonably avoided;

               (4) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result from Tenant’s Event of Default, including, but not limited to, the cost of recovering possession of the Premises, refurbishment of the Premises, marketing costs, commissions and other expenses of reletting, including necessary repair, the unamortized portion of any tenant improvements and brokerage commissions funded by Landlord in connection with this Lease, reasonable attorneys’ fees, and any other reasonable costs; and

               (5) At Landlord’s election, all other amounts in addition to or in lieu of the foregoing as may be permitted by law. The term “rent” as used in the Lease shall be deemed to mean the Basic Rent, Tenant’s Share of Operating Expenses and any other sums required to be paid by Tenant to Landlord pursuant to the terms of this Lease, including, without limitation, any sums that may be owing from Tenant pursuant to Section 4.3 of this Lease. Any sum, other than Basic Rent, shall be computed on the basis of the average monthly amount accruing during the twenty-four (24) month period immediately prior to the Event of Default, except that if it becomes necessary to compute such rental before the twenty-four (24) month period has occurred, then the computation shall be on the basis of the average monthly amount during the shorter period. As used in Sections 14.2(a)(i) (1) and (2) above, the “worth at the time of award” shall be computed by allowing interest at the rate of ten percent (10%) per annum. As used in Section 14.2(a)(i)(3) above, the “worth at the time of award” shall be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

          (ii) Landlord may elect not to terminate Tenant’s right to possession of the Premises, in which event Landlord may continue to enforce all of its rights and remedies under this Lease, including the right to collect all rent as it becomes due. Efforts by the Landlord to maintain, preserve or relet the Premises, or the appointment of a receiver to protect the Landlord’s interests under this Lease, shall not constitute a termination of the Tenant’s right to possession of the Premises. In the event that Landlord elects to avail itself of the remedy provided by this Section 14.2(a)(ii), Landlord shall not unreasonably withhold its consent to an assignment or subletting of the Premises subject to the reasonable standards for Landlord’s consent as are contained in this Lease.

     (b) Landlord shall be under no obligation to observe or perform any covenant of this Lease on its part to be observed or performed which accrues after the date of any Event of Default by Tenant unless and until the Event of Default is cured by Tenant, it being understood and agreed that the performance by Landlord of its obligations under this Lease are expressly conditioned upon Tenant’s full and timely performance of its obligations under this Lease. The various rights and remedies reserved to Landlord in this Lease or otherwise shall be cumulative and, except as otherwise provided by California law, Landlord may pursue any or all of its rights and remedies at the same time.

     (c) No delay or omission of Landlord to exercise any right or remedy shall be construed as a waiver of the right or remedy or of any breach or Event of Default by Tenant. The acceptance by Landlord of rent shall not be

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a (i) waiver of any preceding breach or Event of Default by Tenant of any provision of this Lease, other than the failure of Tenant to pay the particular rent accepted, regardless of Landlord’s knowledge of the preceding breach or Event of Default at the time of acceptance of rent, or (ii) a waiver of Landlord’s right to exercise any remedy available to Landlord by virtue of the breach or Event of Default. The acceptance of any payment from a debtor in possession, a trustee, a receiver or any other person acting on behalf of Tenant or Tenant’s estate shall not waive or cure a breach or Event of Default under Section 14.1. No payment by Tenant or receipt by Landlord of a lesser amount than the rent required by this Lease shall be deemed to be other than a partial payment on account of the earliest due stipulated rent, nor shall any endorsement or statement on any check or letter be deemed an accord and satisfaction and Landlord shall accept the check or payment without prejudice to Landlord’s right to recover the balance of the rent or pursue any other remedy available to it. No act or thing done by Landlord or Landlord’s agents during the Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender shall be valid unless in writing and signed by Landlord. No employee of Landlord or of Landlord’s agents shall have any power to accept the keys to the Premises prior to the termination of this Lease, and the delivery of the keys to any employee shall not operate as a termination of this Lease or a surrender of the Premises.

     (d) Any agreement for free or abated rent or other charges, or for the giving or paying by Landlord to or for Tenant of any cash or other bonus, inducement or consideration for Tenant’s entering into this Lease (“Inducement Provisions”) shall be deemed conditioned upon Tenant’s full and faithful performance of the terms, covenants and conditions of this Lease. Upon an Event of Default under this Lease by Tenant, any such Inducement Provisions shall automatically be deemed deleted from this Lease and of no further force or effect and the amount of any rent reduction or abatement or other bonus or consideration already given by Landlord or received by Tenant as an Inducement shall be immediately due and payable by Tenant to Landlord, notwithstanding any subsequent cure of said Event of Default by Tenant. The acceptance by Landlord of rent or the cure of the Event of Default which initiated the operation of this Section 14.1 shall not be deemed a waiver by Landlord of the provisions of this Section 14.2(d).

     SECTION 14.3. LATE PAYMENTS.

     (a) Any payment due to Landlord under this Lease, including without limitation Basic Rent, Tenant’s Share of Operating Expenses or any other payment due to Landlord under this Lease, that is not received by Landlord within five (5) days following the date due shall bear interest at the maximum rate permitted by law from the date due until fully paid. The payment of interest shall not cure any breach or Event of Default by Tenant under this Lease. In addition, Tenant acknowledges that the late payment by Tenant to Landlord of Basic Rent and Tenant’s Share of Operating Expenses will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult and impracticable to ascertain. Those costs may include, but are not limited to, administrative, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any ground lease, mortgage or trust deed covering the Premises. Accordingly, if any Basic Rent or Tenant’s Share of Operating Expenses due from Tenant shall not be received by Landlord or Landlord’s designee within five (5) days following the date due, then Tenant shall pay to Landlord, in addition to the interest provided above, a late charge, which the Tenant agrees is reasonable, in a sum equal to the greater of five percent (5%) of the amount overdue or Two Hundred Fifty Dollars ($250.00) for each delinquent payment. Acceptance of a late charge by Landlord shall not constitute a waiver of Tenant’s breach or Event of Default with respect to the overdue amount, nor shall it prevent Landlord from exercising any of its other rights and remedies.

     (b) Should Tenant deliver to Landlord, at any time during the Term, two (2) or more insufficient checks, the Landlord may require that all monies then and thereafter due from Tenant be paid to Landlord by cashier’s check. If any check for any payment to Landlord hereunder is returned by the bank for any reason, such payment shall not be deemed to have been received by Landlord and Tenant shall be responsible for any applicable late charge, interest payment and the charge to Landlord by its bank for such returned check. Nothing in this Section shall be construed to compel Landlord to accept Basic Rent, Tenant’s Share of Operating Expenses or any other payment from Tenant if there exists an Event of Default unless such payment fully cures any and all such Event of Default. Any acceptance of any such payment shall not be deemed to waive any other right of Landlord under this Lease. Any payment by Tenant to Landlord may be applied by Landlord, in its sole and absolute discretion, in any order determined by Landlord to any amounts then due to Landlord.

     SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be performed by Tenant under this Lease shall be performed at Tenant’s sole cost and expense and without any abatement of rent or right of set-off. If Tenant fails to pay any sum of money, other than rent payable to Landlord, or fails to perform any other act on its part to be performed under this Lease, and the failure continues beyond any applicable grace period set forth in Section 14.1, then in addition to any other available remedies, Landlord may, at its election make the payment or perform the other act on Tenant’s part and Tenant hereby grants Landlord the right to enter onto the Premises in order to carry out such performance. Landlord’s election to make the payment or perform the act on Tenant’s part shall not give rise to any responsibility of Landlord to continue making the same or similar payments or performing the same or similar acts nor shall Landlord be responsible to Tenant for any damage caused to Tenant as the result of such performance by Landlord. Tenant shall, promptly upon demand by Landlord, reimburse Landlord for all sums paid by Landlord and all necessary incidental costs, together with interest at the maximum rate permitted by law from the date of the payment by Landlord.

     SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to be in default in the performance of any obligation under this Lease, and Tenant shall have no rights to take any action against Landlord, unless and until Landlord has failed to perform the obligation within thirty (30) days after written notice by Tenant to Landlord specifying in reasonable detail the nature and extent of the failure; provided, however, that if the nature of Landlord’s obligation is such that more than thirty (30) days are required for its performance, then Landlord shall not be deemed to be in default if it commences performance within the thirty (30) day period and thereafter diligently pursues the cure to completion. In the event of Landlord’s default under this Lease, Tenant’s sole remedies

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shall be to seek constructive eviction from the Premises, seek damages or specific performance from Landlord, provided that any damages shall be limited to Tenant’s actual out-of-pocket expenses and shall in no event include any consequential damages, lost profits or opportunity costs.

     SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred by Landlord in connection with any Event of Default by Tenant under this Lease or holding over of possession by Tenant after the expiration or earlier termination of this Lease, or any action related to a filing for bankruptcy or reorganization by Tenant, including without limitation all costs, expenses and actual accountants, appraisers, attorneys and other professional fees, and any collection agency or other collection charges, shall be due and payable to Landlord on demand, and shall bear interest at the rate of ten percent (10%) per annum. Should either Landlord or Tenant bring any action in connection with this Lease, the prevailing party shall be entitled to recover as a part of the action its reasonable attorneys’ fees, and all other costs. The prevailing party for the purpose of this Section shall be determined by the trier of the facts.

     SECTION 14.7. WAIVER OF JURY TRIAL. LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE. FURTHERMORE, THIS WAIVER AND RELEASE OF ALL RIGHTS TO A JURY TRIAL IS DEEMED TO BE INDEPENDENT OF EACH AND EVERY OTHER PROVISION, COVENANT, AND/OR CONDITION SET FORTH IN THIS LEASE.

     SECTION 14.8. SATISFACTION OF JUDGMENT. The obligations of Landlord do not constitute the personal obligations of the individual partners, trustees, directors, officers or shareholders of Landlord or its constituent partners. Should Tenant recover a money judgment against Landlord, such judgment shall be satisfied only from the interest of Landlord in the Project and out of the rent or other income from such property receivable by Landlord or out of consideration received by Landlord from the sale or other disposition of all or any part of Landlord’s right, title or interest in the Project and no action for any deficiency may be sought or obtained by Tenant.

     SECTION 14.9. INTENTIONALLY DELETED.

ARTICLE XV. END OF TERM

     SECTION 15.1. HOLDING OVER. This Lease shall terminate without further notice upon the expiration of the Term, and any holding over by Tenant after the expiration shall not constitute a renewal or extension of this Lease, or give Tenant any rights under this Lease, except when in writing signed by both parties. Any period of time following the Expiration Date or earlier termination of this Lease required for Tenant to remove its property or to place the Premises in the condition required pursuant to Section 15.3 (or for Landlord to do so if Tenant fails to do so) shall be deemed a holding over by Tenant. If Tenant holds over for any period after the Expiration Date (or earlier termination) of the Term without the prior written consent of Landlord, such possession shall constitute a tenancy at sufferance only and an Event of Default under this Lease; such holding over with the prior written consent of Landlord shall constitute a month-to-month tenancy commencing on the first (1st) day following the termination of this Lease and terminating thirty (30) days following delivery of written notice of termination by either Landlord or Tenant to the other. In either of such events, possession shall be subject to all of the terms of this Lease, except that (i) for the first two (2) months of such holdover tenancy, the monthly Basic Rent shall be one hundred fifty percent (150%) of the Basic Rent for the month immediately preceding the date of termination; and (ii) for each month following the period referred to in subsection (i) of this Section, the monthly Basic Rent shall be the greater of (a) one hundred fifty percent (150%) of the Basic Rent for the month immediately preceding the date of termination; and (b) the then current scheduled Basic Rent for the most recently leased comparable space in the Project. The acceptance by Landlord of monthly holdover rental in a lesser amount shall not constitute a waiver of Landlord’s right to recover the full amount due for any holdover by Tenant, unless otherwise agreed in writing by Landlord. If Tenant fails to surrender the Premises upon the expiration of this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability, including without limitation, any claims made by any succeeding tenant relating to such failure to surrender. The foregoing provisions of this Section are in addition to and do not affect Landlord’s right of re-entry or any other rights of Landlord under this Lease or at law.

     SECTION 15.2. MERGER ON TERMINATION. The voluntary or other surrender of this Lease by Tenant, or a mutual termination of this Lease, shall terminate any or all existing subleases unless Landlord, at its option, elects in writing to treat the surrender or termination as an assignment to it of any or all subleases affecting the Premises.

     SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Subject to the provisions of 7.3 of this Lease, upon the Expiration Date or upon any earlier termination of this Lease, Tenant shall quit and surrender possession of the Premises to Landlord in as good order, condition and repair as when received or as hereafter may be improved by Landlord or Tenant, reasonable wear and tear and repairs which are Landlord’s obligation excepted, and shall, without expense to Landlord, remove or cause to be removed from the Premises all personal property and debris, except for any items that Landlord may by written authorization allow to remain. Tenant shall repair all damage to the Premises resulting from the removal, which repair shall include the patching and filling of holes and repair of structural damage, provided that Landlord may instead elect to repair any structural

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damage at Tenant’s expense. If Tenant shall fail to comply with the provisions of this Section, Landlord may effect the removal and/or make any repairs, and the cost to Landlord shall be additional rent payable by Tenant upon demand. If Tenant fails to remove Tenant’s personal property from the Premises upon the expiration of the Term, Landlord may remove, store, dispose of and/or retain such personal property, at Landlord’s option, in accordance with then applicable laws, all at the expense of Tenant. If requested by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an instrument in writing releasing and quitclaiming to Landlord all right, title and interest of Tenant in the Premises.

ARTICLE XVI. PAYMENTS AND NOTICES

     All sums payable by Tenant to Landlord shall be deemed to be rent under this Lease and shall be paid, without deduction or offset, in lawful money of the United States to Landlord at its address set forth in Item 12 of the Basic Lease Provisions, or at any other place as Landlord may designate in writing. Unless this Lease expressly provides otherwise, as for example in the payment of Basic Rent and the Tenant’s Share of Operating Costs pursuant to Sections 4.1 and 4.2, all payments shall be due and payable within five (5) days after demand. All payments requiring proration shall be prorated on the basis of a thirty (30) day month and a three hundred sixty (360) day year. Any notice, election, demand, consent, approval or other communication to be given or other document to be delivered by either party to the other may be delivered in person or by courier or overnight delivery service to the other party, or may be deposited in the United States mail, duly registered or certified, postage prepaid, return receipt requested, and addressed to the other party at the address set forth in Item 12 of the Basic Lease Provisions, or if to Tenant, at that address or, from and after the Commencement Date, at the Premises (whether or not Tenant has departed from, abandoned or vacated the Premises). Either party may, by written notice to the other, served in the manner provided in this Article, designate a different address. If any notice or other document is sent by mail, it shall be deemed served or delivered seventy-two (72) hours after mailing. If more than one person or entity is named as Tenant under this Lease, service of any notice upon any one of them shall be deemed as service upon all of them.

ARTICLE XVII. RULES AND REGULATIONS

     Tenant agrees to observe faithfully and comply strictly with the Rules and Regulations, attached as Exhibit E. and any reasonable and nondiscriminatory amendments, modifications and/or additions as may be adopted and published by written notice to tenants by Landlord for the safety, care, security, good order, or cleanliness of the Premises, Building, Project and Common Areas provided that such additional rules and regulations do not materially decrease Tenant’s rights under this lease or materially increase Tenant’s obligations under this Lease. Landlord shall not be liable to Tenant for any violation of the Rules and Regulations or the breach of any covenant or condition in any lease by any other tenant or such tenant’s agents, employees, contractors, guests or invitees. One or more waivers by Landlord of any breach of the Rules and Regulations by Tenant or by any other tenant(s) shall not be a waiver of any subsequent breach of that rule or any other. Tenant’s failure to keep and observe the Rules and Regulations shall constitute a breach of this Lease. In the case of any conflict between the Rules and Regulations and this Lease, this Lease shall be controlling.

ARTICLE XVII. BROKER’S COMMISSION

     The parties recognize as the broker(s) who negotiated this Lease the firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, and agree that Landlord shall be responsible for the payment of brokerage commissions to those broker(s) unless otherwise provided in this Lease. Tenant warrants that it has had no dealings with any other real estate broker or agent in connection with the negotiation of this Lease, and Tenant agrees to indemnify and hold Landlord harmless from any cost, expense or liability (including reasonable attorneys’ fees) for any compensation, commissions or charges claimed by any other real estate broker or agent employed or claiming to represent or to have been employed by Tenant in connection with the negotiation of this Lease. The foregoing agreement shall survive the termination of this Lease. If Tenant fails to take possession of the Premises or if this Lease otherwise terminates prior to the Expiration Date as the result of failure of performance by Tenant, Landlord shall be entitled to recover from Tenant the unamortized portion of any brokerage commission funded by Landlord in addition to any other damages to which Landlord may be entitled.

ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST

     In the event of any transfer of Landlord’s interest in the Premises, the transferor shall be automatically relieved of all further obligations on the part of Landlord (but shall not be relieved of any obligations or liabilities arising during its ownership of such interest in the Premises), and the transferor shall be relieved of any obligation to pay any funds in which Tenant has an interest to the extent that such funds have been turned over, subject to that interest, to the transferee and Tenant is notified of the transfer as required by law. No beneficiary of a deed of trust to which this Lease is or may be subordinate, and no landlord under a so-called sale-leaseback, shall be responsible in connection with the Security Deposit, unless the mortgagee or beneficiary under the deed of trust or the landlord actually receives the Security Deposit. It is intended that the covenants and obligations contained in this Lease on the part of Landlord shall, subject to the foregoing, be binding on Landlord, its successors and assigns, only during and in respect to their respective successive periods of ownership.

ARTICLE XX. INTERPRETATION

     SECTION 20.1. GENDER AND NUMBER, Whenever the context of this Lease requires, the words “Landlord” and “Tenant” shall include the plural as well as the singular, and words used in neuter, masculine or feminine genders shall include the others.

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     SECTION 20.2. HEADINGS. The captions and headings of the articles and sections of this Lease are for convenience only, are not a part of this Lease and shall have no effect upon its construction or interpretation.

     SECTION 20.3. JOINT AND SEVERAL LIABILITY. If more than one person or entity is named as Tenant, the obligations imposed upon each shall be joint and several and the act of or notice from, or notice or refund to, or the signature of, any one or more of them shall be binding on all of them with respect to the tenancy of this Lease, including, but not limited to, any renewal, extension, termination or modification of this Lease.

     SECTION 20.4. SUCCESSORS. Subject to Articles IX and XIX, all rights and liabilities given to or imposed upon Landlord and Tenant shall extend to and bind their respective heirs, executors, administrators, successors and assigns. Nothing contained in this Section is intended, or shall be construed, to grant to any person other than Landlord and Tenant and their successors and assigns any rights or remedies under this Lease.

     SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to the performance of every provision of this Lease.

     SECTION 20.6. CONTROLLING LAW/VENUE. This Lease shall be governed by and interpreted in accordance with the laws of the State of California. Any litigation commenced concerning any matters whatsoever arising out of or in any way connected to this Lease shall be initiated in the Superior Court of the county in which the Project is located.

     SECTION 20.7. SEVERABILITY. If any term or provision of this Lease, the deletion of which would not adversely affect the receipt of any material benefit by either party or the deletion of which is consented to by the party adversely affected, shall be held invalid or unenforceable to any extent, the remainder of this Lease shall not be affected and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.

     SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES. One or more waivers by Landlord or Tenant of any breach of any term, covenant or condition contained in this Lease shall not be a waiver of any subsequent breach of the same or any other term, covenant or condition. Consent to any act by one of the parties shall not be deemed to render unnecessary the obtaining of that party’s consent to any subsequent act. No breach by Tenant of this Lease shall be deemed to have been waived by Landlord unless the waiver is in a writing signed by Landlord. The rights and remedies of Landlord under this Lease shall be cumulative and in addition to any and all other rights and remedies which Landlord may have.

     SECTION 20.9. INABILITY TO PERFORM. In the event that either party shall be delayed or hindered in or prevented from the performance of any work or in performing any act required under this Lease by reason of any cause beyond the reasonable control of that party, other than financial inability, then the performance of the work or the doing of the act shall be excused for the period of the delay and the time for performance shall be extended for a period equivalent to the period of the delay. The provisions of this Section shall not operate to excuse Tenant from the prompt payment of rent or from the timely performance of any other obligation under this Lease within Tenant’s reasonable control.

     SECTION 20.10. ENTIRE AGREEMENT. This Lease and its exhibits and other attachments cover in full each and every agreement of every kind between the parties concerning the Premises, the Building, and the Project, and all preliminary negotiations, oral agreements, understandings and/or practices, except those contained in this Lease, are superseded and of no further effect. Tenant waives its rights to rely on any representations or promises made by Landlord or others which are not contained in this Lease. No verbal agreement or implied covenant shall be held to modify the provisions of this Lease, any statute, law, or custom to the contrary notwithstanding.

     SECTION 20.11. QUIET ENJOYMENT. Upon the observance and performance of all the covenants, terms and conditions on Tenant’s part to be observed and performed, and subject to the other provisions of this Lease, Tenant shall have the right of quiet enjoyment and use of the Premises for the Term without hindrance or interruption by Landlord or any other person claiming by or through Landlord.

     SECTION 20.12. SURVIVAL. All covenants of Landlord or Tenant which reasonably would be intended to survive the expiration or sooner termination of this Lease, including without limitation any warranty or indemnity hereunder, shall so survive and continue to be binding upon and inure to the benefit of the respective parties and their successors and assigns.

     SECTION 20.13. INTERPRETATION. This Lease shall not be construed in favor of or against either party, but shall be construed as if both parties prepared this Lease.

ARTICLE XXI. EXECUTION AND RECORDING

     SECTION 21.1. COUNTERPARTS. This Lease may be executed in one or more counterparts, each of which shall constitute an original and all of which shall be one and the same agreement

     SECTION 21.2. CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY. The parties hereto represent and warrant that they are duly authorized to execute and deliver this Lease, and that this Lease is binding in accordance with its terms. If this Lease is not signed by two officers as provided in California Corporations Code Section 313, Tenant shall, at Landlord’s request, deliver a certified copy

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of its board of directors’ resolution, operating agreement or partnership agreement or certificate authorizing or evidencing the execution of this Lease.

     SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER.  The submission of this Lease to Tenant shall be for examination purposes only, and shall not constitute an offer to or option for Tenant to lease the Premises. Execution of this Lease by Tenant and its return to Landlord shall not be binding upon Landlord, notwithstanding any time interval, until Landlord has in fact executed and delivered this Lease to Tenant, it being intended that this Lease shall only become effective upon execution by Landlord and delivery of a fully executed counterpart to Tenant.

     SECTION 21.4. RECORDING.  Tenant shall not record this Lease without the prior written consent of Landlord. Tenant, upon the request of Landlord, shall execute and acknowledge a “short form” memorandum of this Lease for recording purposes.

     SECTION 21.5. AMENDMENTS.  No amendment or termination of this Lease shall be effective unless in writing signed by authorized signatories of Tenant and Landlord, or by their respective successors in interest. No actions, policies, oral or informal arrangements, business dealings or other course of conduct by or between the parties shall be deemed to modify this Lease in any respect.

     SECTION 21.6. EXECUTED COPY.  Any fully executed photocopy or similar reproduction of this Lease shall be deemed an original for all purposes.

     SECTION 21.7. ATTACHMENTS.  All exhibits, amendments, riders and addenda attached to this Lease are hereby incorporated into and made a part of this Lease.

ARTICLE XXII. MISCELLANEOUS 

     SECTION 22.1. NONDISCLOSURE OF LEASE TERMS.  Tenant acknowledges and agrees that the terms of this Lease are confidential and constitute proprietary information of Landlord. Disclosure of the terms could adversely affect the ability of Landlord to negotiate other leases and impair Landlord’s relationship with other tenants. Accordingly, Tenant agrees that it, and its partners, officers, directors, employees and attorneys, shall not intentionally and voluntarily disclose, by public filings or otherwise, the terms and conditions of this Lease (“Confidential Information”) to any third party, either directly or indirectly, without the prior written consent of Landlord, which consent may be given or withheld in Landlord’s sole and absolute discretion. The foregoing restriction shall not apply if either: (i) Tenant is required to disclose the Confidential Information in response to a subpoena or other regulatory, administrative or court order, (ii) independent legal counsel to Tenant advises Tenant is required to disclose the Confidential Information to, or file a copy of this Lease with, any governmental agency or any stock exchange; provided however, that in such event, Tenant shall, before making any such disclosure (A) provide Landlord with prompt written notice of such required disclosure, (B) at Tenant’s sole cost, take all reasonable legally available steps to resist or narrow such requirement, including without limitation preparing and filing a request for confidential treatment of the Confidential Information and (C) if disclosure of the Confidential Information is required by subpoena or other regulatory, administrative or court order, Tenant shall provide Landlord with as much advance notice of the possibility of such disclosure as practical so that Landlord may attempt to stop such disclosure or obtain an order concerning such disclosure. The form and content of a request by Tenant for confidential treatment of the Confidential Information shall be provided to Landlord at least five (5) business days before its submission to the applicable governmental agency or stock exchange and is subject to the reasonable prior written approval of Landlord. In addition, Tenant may disclose the terms of this Lease to prospective assignees of this Lease and prospective subtenants under this Lease with whom Tenant is actively negotiating such an assignment or sublease.

     SECTION 22.2. INTENTIONALLY DELETED. 

     SECTION 22.3. CHANGES REQUESTED BY LENDER.  If, in connection with obtaining financing for the Project, the lender shall request reasonable modifications in this Lease as a condition to the financing, Tenant will not unreasonably withhold or delay its consent, provided that the modifications do not materially increase the obligations or decrease the rights of Tenant or materially and adversely affect the leasehold interest created by this Lease.

     SECTION 22.4. MORTGAGEE PROTECTION.  No act or failure to act on the part of Landlord which would otherwise entitle Tenant to be relieved of its obligations hereunder shall result in such a release or termination unless (a) Tenant has given notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Building whose address has been furnished to Tenant by written notice and (b) such beneficiary is afforded a reasonable opportunity to cure the default by Landlord (which in no event shall be less than sixty (60) days), including, if necessary to effect the cure, time to obtain possession of the Building by power of sale or judicial foreclosure provided that such foreclosure remedy is diligently pursued. Tenant agrees that each beneficiary of a deed of trust or mortgage covering the Building is an express third party beneficiary hereof, Tenant shall have no right or claim for the collection of any deposit from such beneficiary or from any purchaser at a foreclosure sale unless such beneficiary or purchaser shall have actually received and not refunded the deposit, and Tenant shall comply with any written directions by any beneficiary to pay rent due hereunder directly to such beneficiary without determining whether a default exists under such beneficiary’s deed of trust.

     SECTION 22.5. COVENANTS AND CONDITIONS.  All of the provisions of this Lease shall be construed to be conditions as well as covenants as though the words specifically expressing or imparting covenants and conditions were used in each separate provision.

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     SECTION 22.6. SECURITY MEASURES. Tenant hereby acknowledges that Landlord shall have no obligation whatsoever to provide guard service or other security measures for the benefit of the Premises or the Project. Tenant assumes all responsibility for the protection of Tenant, its employees, agents, invitees and property from acts of third parties. Nothing herein contained shall prevent Landlord, at its sole option, from providing security protection for the Project or any part thereof, in which event the cost thereof shall be included within the definition of Project Costs.

LANDLORD:		TENANT:
THE IRVINE COMPANY		ENGENIO INFORMATION TECHNOLOGIES, INC.
a Delaware corporation		a Delaware corporation
By:	/s/ Steven Case	By:	/s/ Thomas Georgens
	Steven Case		Name (Print): Thomas Georgens
	Senior Vice President, Office Properties		Title (Print): President And Chief Executive Officer
By:	/s/ Steven E. Claton	By:	/s/ David E. Sanders
	Steven E. Claton, Vice President		Name: David E. Sanders
	Operations, Office Properties		Title: Vice President General Councel

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EXHIBIT A

DESCRIPTION OF PREMISES

1

EXHIBIT A

DESCRIPTION OF PREMISES

1

EXHIBIT B

THE IRVINE COMPANY — INVESTMENT PROPERTIES GROUP

HAZARDOUS MATERIAL SURVEY FORM

     The purpose of this form is to obtain information regarding the use of hazardous substances on Investment Properties Group (“IPG”) property. Prospective tenants and contractors should answer the questions in light of their proposed activities on the premises. Existing tenants and contractors should answer the questions as they relate to ongoing activities on the premises and should update any information previously submitted.

     If additional space is needed to answer the questions, you may attach separate sheets of paper to this form. When completed, the form should be sent to the following address:

THE IRVINE COMPANY MANAGEMENT OFFICE
8105 Irvine Center Drive, Suite 350
Irvine, CA 92618

     Your cooperation in this matter is appreciated. If you have any questions, please call your property manager at (949) 720-4400 for assistance.

1.	GENERAL INFORMATION.
	Name of Responding Company:
	Check all that apply:                                 Tenant           (    )                                    Contractor           (    )                                                                   Prospective   (    )                                    Existing               (    )
	Mailing Address:                                                                                                                      Contact person & Title:                                                                                                             Telephone Number: ( )
	Current TIC Tenant(s):
	Address of Lease Premises:
	Length of Lease or Contract Term:
	Prospective TIC Tenant(s):
	Address of Leased Premises:
	Address of Current Operations:
	Describe the proposed operations to take place on the property, including principal products manufactured or services to be conducted. Existing tenants and contractors should describe any proposed changes to ongoing operations.
2.	HAZARDOUS MATERIALS. For the purposes of this Survey Form, the term “hazardous material” means any raw material, product or agent considered hazardous under any state or federal law. The term does not include wastes which are intended to be discarded.

2.1   Will any hazardous materials be used or stored on site?

Chemical Products	Yes	(    )	No	(    )
Biological Hazards/
Infectious Wastes	Yes	(    )	No	(    )
Radioactive Materials	Yes	(    )	No	(    )
Petroleum Products	Yes	(    )	No	(    )

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2.2   List any hazardous materials to be used or stored, the quantities that will be on-site at any given time, and the location and method of storage (e.g., bottles in storage closet on the premises).

	Location and Method
Hazardous Materials	of Storage	Quantity
;	;	;
;	;	;
;	;	;
;	;	;

2.3	Is any underground storage of hazardous materials proposed or currently conducted on the premises? Yes ( ) No ( )
	If yes, describe the materials to be stored, and the size and construction of the tank. Attach copies of any permits obtained for the underground storage of such substances.

3.   HAZARDOUS WASTE. For the purposes of this Survey Form, the term “hazardous waste” means any waste (including biological, infectious or radioactive waste) considered hazardous under any state or federal law, and which is intended to be discarded.

3.1   List any hazardous waste generated or to be generated on the premises, and indicate the quantity generated on a monthly basis.

	Location and Method
Hazardous Materials	of Storage	Quantity
;	;	;
;	;	;
;	;	;
;	;	;

3.2   Describe the method(s) of disposal (including recycling) for each waste. Indicate where and how often disposal will take place.

	Location and Method
Hazardous Materials	of Storage	Quantity
;	;	;
;	;	;
;	;	;
;	;	;

3.3	Is any treatment or processing of hazardous, infectious or radioactive wastes currently conducted or proposed to be conducted on the premise? Yes( ) No ( )
	If yes, please describe any existing or proposed treatment methods.

3.4   Attach copies of any hazardous waste permits or licenses issued to your company with respect to its operations on the premises.

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4.   SPILLS

4.1 During the past year, have any spills or releases of hazardous materials occurred on the premises?       Yes      (   )      No      (   )

     If so, please describe the spill and attach the results of any testing conducted to determine the extent of such spills.

4.2   Were any agencies notified in connection with such spills?      Yes (   )     No (   )

     If so, attach copies of any spill reports or other correspondence with regulatory agencies.

4.3   Were any clean-up actions undertaken in connection with the spills?      Yes      (   )      No      (   )

     If so, briefly describe the actions taken. Attach copies of any clearance letters obtained from any regulatory agencies involved and the results of any final soil or groundwater sampling done upon completion of the clean-up work.

5.   WASTEWATER TREATMENT/DISCHARGE

5.1   Do you discharge industrial wastewater to:

;  storm drain?	;  sewer?
;  surface water?	;  no industrial discharge

5.2	Is your industrial wastewater treated before discharge?     Yes      (   )     No      (   )
	If yes, describe the type of treatment conducted.

5.3 Attach copies of any wastewater discharge permits issued to your company with respect to its operations on the premises.

6.   AIR DISCHARGES.

6.1	Do you have any air filtration systems or stacks that discharge into the air?     Yes      (   )       No (   )
6.2	Do you operate any equipment that require air emissions permits?       Yes      (   )     No      (   )
6.3	Attach copies of any air discharge permits pertaining to these operations.

7.   HAZARDOUS MATERIALS DISCLOSURES.

7.1 Does your company handle an aggregate of at least 500 pounds, 55 gallons or 200 cubic feet of hazardous material at any given time?      Yes       (   )      No      (   )

7.2 Has your company prepared a Hazardous Materials Disclosure — Chemical Inventory and Business Emergency Plan or similar disclosure document pursuant to state or county requirements?      Yes       (   )     No      (   )

           If so, attach a copy.

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7.3	Are any of the chemicals used in your operations regulated under Proposition 65?
	If so, describe the procedures followed to comply with these requirements.

7.4 Is your company subject to OSHA Hazard Communication Standard Requirements? Yes (   ) No (   )

               If so, describe the procedures followed to comply with these requirements.

8.   ANIMAL TESTING.

8.1 Does your company bring or intend to bring live animals onto the premises for research or development purposes Yes (   ) No (   )

               If so, describe the activity.

8.2 Does your company bring or intend to bring animal body parts or bodily fluids onto the premises for research or development purposes? Yes (   ) No (   )

               If so, describe the activity.

9.   ENFORCEMENT ACTIONS, COMPLAINTS.

9.1 Has your company ever been subject to any agency enforcement actions, administrative orders, lawsuits, or consent orders/decrees regarding environmental compliance or health and safety? Yes (   ) No (   )

               If so, describe the actions and any continuing obligations imposed as a result of these actions.

9.2 Has your company ever received any request for information, notice of violation or demand letter, complaint, or inquiry regarding environmental compliance or health and safety? Yes (   ) No (  )

9.3 Has an environmental audit ever been conducted which concerned operations or activities on premises occupied by you? Yes (   ) No (   )

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9.4 If you answered “yes” to any questions in this section, describe the environmental action or complaint and any continuing compliance obligation imposed as a result of the same.

By:	;
	Name:
	Title:
	Date:

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EXHIBIT C

LANDLORD’S DISCLOSURES

McCarthy Center

Tenant acknowledges the following disclosures by Landlord with respect to Hazardous Materials at the Premises. Tenant agrees to comply with the precautionary requirements and other provisions, set forth below, that are associated with these Hazardous Materials.

None.

EXHIBIT D

TENANT’S INSURANCE

     The following requirements for Tenant’s insurance shall be in effect at the Building, and Tenant shall also cause any subtenant to comply with these requirements. Landlord reserves the right to adopt reasonable nondiscriminatory modifications and additions to these insurance requirements. Tenant agrees to obtain and present evidence to Landlord that it has fully complied with the insurance requirements.

     1. Tenant shall, at its sole cost and expense, commencing on the date Tenant is given access to the Premises for any purpose and during the entire Term, procure, pay for and keep in full force and effect: (i) commercial general liability insurance with respect to the Premises and the operations of or on behalf of Tenant in, on or about the Premises, including but not limited to coverage for personal injury, independent contractors, broad form property damage, fire and water legal liability, products liability (if a product is sold from the Premises), and liquor law liability (if alcoholic beverages are sold, served or consumed within the Premises), which policy(ies) shall be written on an “occurrence” basis and for not less than the amount set forth in Item 13 of the Basic Lease Provisions, with a combined single limit (with a $50,000 minimum limit on fire legal liability) per occurrence for bodily injury, death, and property damage liability, or the current limit of liability carried by Tenant, whichever is greater, and subject to such increases in amounts as Landlord may determine from time to time; (ii) workers’ compensation insurance coverage as required by law, together with employers’ liability insurance of at least One Million Dollars ($1,000,000.00); (iii) with respect to Alterations and the like required or permitted to be made by Tenant under this Lease, builder’s risk insurance, in an amount equal to the replacement cost of the work; (iv) insurance against fire, vandalism, malicious mischief and such other additional perils as may be included in a standard “special form” policy, insuring Tenant’s Alterations, trade fixtures, furnishings, equipment and items of personal property of Tenant located in the Premises, in an amount equal to not less than ninety percent (90%) of their actual replacement cost (with replacement cost endorsement); and (v) business interruption insurance in amounts satisfactory to cover one (1) year of loss. In no event shall the limits of any policy be considered as limiting the liability of Tenant under this Lease.

     2. In the event Landlord consents to Tenant’s use, generation or storage of Hazardous Materials on, under or about the Premises pursuant to Section 5.3 of this Lease, Landlord shall have the continuing right to require Tenant, at Tenant’s sole cost and expense (provided the same is available for purchase upon commercially reasonable terms), to purchase insurance specified and approved by Landlord, with coverage not less than Five Million Dollars ($5,000,000.00), insuring (i) any Hazardous Materials shall be removed from the Premises, (ii) the Premises shall be restored to a clean, healthy, safe and sanitary condition, and (iii) any liability of Tenant, Landlord and Landlord’s officers, directors, shareholders, agents, employees and representatives, arising from such Hazardous Materials.

     3. All policies of insurance required to be carried by Tenant pursuant to this Exhibit D containing a deductible exceeding One Million Dollars ($1,000,000.00) per occurrence must be approved in writing by Landlord prior to the issuance of such policy. Tenant shall be solely responsible for the payment of all deductibles.

     4. All policies of insurance required to be carried by Tenant pursuant to this Exhibit D shall be written by responsible insurance companies authorized to do business in the State of California and with a general policyholder rating of not less than “A-” and financial rating of not less than “VIII” in the most current Best’s Insurance Report. Any insurance required of Tenant may be furnished by Tenant under any blanket policy carried by it or under a separate policy. A certificate of insurance, certifying that the policy has been issued, provides the coverage required by this Exhibit D and contains the required provisions, together with endorsements acceptable to Landlord evidencing the waiver of subrogation and additional insured provisions required below, shall be delivered to Landlord prior to the date Tenant is given the right of possession of the Premises. Proper evidence of the renewal of any insurance coverage shall also be delivered to Landlord not less than ten (10) days prior to the expiration of the coverage. Landlord may at any time, and from time to time, inspect any and all insurance policies required by this Lease.

     5. Each policy evidencing insurance required to be carried by Tenant pursuant to this Exhibit D shall contain the following provisions and/or clauses satisfactory to Landlord: (i) with respect to Tenant’s commercial general liability insurance, a provision that the policy and the coverage provided shall be primary and that any coverage carried by Landlord shall be noncontributory with respect to any policies carried by Tenant, together with a provision including Landlord, the Additional Insureds identified in Item 11 of the Basic Lease Provisions, and any other parties in interest designated by Landlord, as additional insureds; (ii) except with respect to Tenant’s commercial general liability insurance, a waiver by the insurer of any right to subrogation against Landlord, its agents, employees, contractors and representatives which arises or might arise by reason of any payment under the policy or by reason of any act or omission of Landlord, its agents, employees, contractors or representatives; and (iii) a provision that the insurer will not cancel or change the coverage provided by the policy without first giving Landlord thirty (30) days prior written notice.

     6. In the event that Tenant fails to procure, maintain and/or pay for, at the times and for the durations specified to this Exhibit D, any insurance required by this Exhibit D, or fails to carry insurance required by any governmental authority, Landlord may at its election procure that insurance and pay the premiums, in which event Tenant shall repay Landlord all sums paid by Landlord, together with interest at the maximum rate permitted by law and any related costs or expenses incurred by Landlord, within ten (10) days following Landlord’s written demand to Tenant.

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     NOTICE TO TENANT: IN ACCORDANCE WITH THE TERMS OF THIS LEASE, TENANT MUST PROVIDE EVIDENCE OF THE REQUIRED INSURANCE TO LANDLORD’S MANAGEMENT AGENT PRIOR TO BEING AFFORDED ACCESS TO THE PREMISES.

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EXHIBIT E

RULES AND REGULATIONS

     This Exhibit sets forth the rules and regulations governing Tenant’s use of the Premises leased to Tenant pursuant to the terms, covenants and conditions of the Lease to which this Exhibit is attached and therein made part thereof. In the event of any conflict or inconsistency between this Exhibit and the Lease, the Lease shall control.

     1. Tenant shall not place anything or allow anything to be placed near the glass of any window, door, partition or wall, which may appear unsightly from outside the Premises.

     2. The walls, walkways, sidewalks, entrance passages, elevators, stairwells, courts and vestibules shall not be obstructed or used for any purpose other than ingress and egress of pedestrian travel to and from the Premises, and shall not be used for smoking, loitering or gathering, or to display, store or place any merchandise, equipment or devices, or for any other purpose. The walkways, sidewalks, entrance passageways, courts, vestibules and roof are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence in the judgment of the Landlord shall be prejudicial to the safety, character, reputation and interests of the Building and its tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom Tenant normally deals in the ordinary course of Tenant’s business unless such persons are engaged in illegal activities. Smoking is permitted outside the building and within the project only in areas designated by Landlord. No tenant or employee or invitee or agent of any tenant shall be permitted upon the roof of the Building without prior written approval from Landlord.

     3. No awnings or other projection shall be attached to the outside walls of the Building. No security bars or gates, curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises without the prior written consent of Landlord. Neither the interior nor exterior of any windows shall be coated or otherwise sunscreened without the express written consent of Landlord.

     4. Tenant shall not mark, nail, paint, drill into, or in any way deface any part of the Premises or the Building except to affix standard pictures or other wall hangings on the interior walls of the premises so long as they are not visible from the exterior of the building. Tenant shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by Landlord in writing which approval shall not be unreasonably withheld, conditioned or delayed. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering shall be borne by Tenant.

     5. The toilet rooms, urinals, wash bowls and other plumbing apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. Any pipes or tubing used by Tenant to transmit water to an appliance or device in the Premises must be made of copper or stainless steel, and in no event shall plastic tubing be used for that purpose. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, caused it.

     6. Landlord shall direct electricians as to the manner and location of any future telephone wiring. No boring or cutting for wires will be allowed without the prior consent of Landlord which approval shall not be unreasonably withheld, conditioned or delayed. The locations of the telephones, call boxes and other office equipment affixed to the Premises shall be subject to the prior written approval of Landlord which approval shall not be unreasonably withheld, conditioned or delayed.

     7. The Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the permitted use of the Premises. No exterior storage shall be allowed at any time without the prior written approval of Landlord. The Premises shall not be used for cooking (except for the type of cooking normally conducted in similar office projects) or washing clothes without the prior written consent of Landlord, or for lodging or sleeping or for any immoral or illegal purposes.

     8. Tenant shall not make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of this or neighboring buildings or premises or those having business with them, whether by the use of any musical instrument, radio, phonograph, noise, or otherwise. Tenant shall not use, keep or permit to be used, or kept, any foul or obnoxious gas or substance in the Premises or permit or suffer the Premises to be used or occupied in any manner offensive or objectionable to Landlord or other occupants of this or neighboring buildings or premises by reason of any odors, fumes or gases.

     9. No animals, except for seeing eye dogs, shall be permitted at any time within the Premises.

     10. Tenant shall not use the name of the Building or the Project in connection with or in promoting or advertising the business of Tenant, except as Tenant’s address, without the written consent of Landlord. Landlord shall have the right to prohibit any advertising by any Tenant which, in Landlord’s reasonable opinion, tends to impair the reputation of the Project or its desirability for its intended uses, and upon written notice from Landlord any Tenant shall refrain from or discontinue such advertising.

     11. Canvassing, soliciting, peddling, parading, picketing, demonstrating or otherwise engaging in any conduct that unreasonably impairs the value or use of the Premises or the Project are prohibited and each Tenant shall cooperate to prevent the same. Landlord shall have full and absolute authority to regulate or prohibit the

1

entrance to the Premises of any vendor, supplier, purveyor, petitioner, proselytizer or other similar person if, in the good faith judgment of Landlord, such person will be involved in general solicitation activities, or the proselytizing, petitioning, or disturbance of other tenants or their customers or invitees, or engaged or likely to engage in conduct which may in Landlord’s opinion distract from the use of the Premises for its intended purpose. Notwithstanding the foregoing, Landlord reserves the absolute right and discretion to limit or prevent access to the Buildings by any food or beverage vendor, whether or not invited by Tenant, and Landlord may condition such access upon (he vendor’s execution of an entry permit agreement which may contain provisions for insurance coverage and/or the payment of a fee to Landlord.

     12. No equipment of any type shall be placed on the Premises which in Landlord’s reasonable opinion exceeds the load limits of the floor or otherwise threatens the soundness of the structure or improvements of the Building.

     13. Regular building hours of operation are from 6:00 AM to 6:00 PM Monday through Friday and 9:00 AM to 1:00 PM on Saturday. No air conditioning unit or other similar apparatus shall be installed or used by any Tenant without the prior written consent of Landlord which approval shall not be unreasonably withheld, conditioned or delayed.

     14. The entire Premises, including vestibules, entrances, doors, fixtures, interior windows and plate glass, shall at all times be maintained in a safe, neat and clean condition by Tenant. All trash, refuse and waste materials shall be regularly removed from the Premises by Tenant and placed in the containers at the locations designated by Landlord for refuse collection. All cardboard boxes must be “broken down” prior to being placed in the trash container. All styrofoam chips must be bagged or otherwise contained prior to placement in the trash container, so as not to constitute a nuisance. Pallets must be immediately disposed of by tenant and may not be disposed of in the Landlord provided trash container or enclosures. Pallets may be neatly stacked in an exterior location on a temporary basis (no longer than 5 days) so long as Landlord has provided prior written approval. The burning of trash, refuse or waste materials is prohibited.

     15. Tenant shall use at Tenant’s cost such pest extermination contractor as Landlord may direct and at such intervals as Landlord may reasonably require.

     16. All keys for the Premises shall be provided to Tenant by Landlord and Tenant shall return to Landlord any of such keys so provided upon the termination of the Lease. Tenant shall not change locks or install other locks on doors of the Premises, without the prior written consent of Landlord. In the event of loss of any keys furnished by Landlord for Tenant, Tenant shall pay to Landlord the costs thereof. Upon the termination of its tenancy, Tenant shall deliver to Landlord all the keys to lobby(s), suite(s) and telephone & electrical room(s) which have been furnished to Tenant or which Tenant shall have had made.

     17. No person shall enter or remain within the Project while intoxicated or under the influence of liquor or drugs. Landlord shall have the right to exclude or expel from the Project any person who, in the absolute discretion of Landlord, is under the influence of liquor or drugs.

     18. The moving of large or heavy objects shall occur only between the persons employed to move those objects in or out of the Building must be reasonably acceptable to Landlord. Without limiting the generality of the foregoing, no freight, furniture or bulky matter of any description shall be received into or moved out of the lobby of the Building or carried in the elevator.

     19. Tenant shall not install equipment, such as but not limited to electronic tabulating or computer equipment, requiring electrical or air conditioning service in excess of that to be provided by Landlord under the Lease without prior written consent of Landlord which approval shall not be unreasonably withheld, conditioned or delayed.

     20. Landlord may from time to time grant other tenants of the project individual and temporary variances from these Rules, provided that any variance does not have a material adverse effect on the use and enjoyment of the Premises by Tenant.

     21. Landlord reserves the right to amend or supplement the foregoing Rules and Regulations and to adopt and promulgate additional rules and regulations applicable to the Premises provided such amendment or supplements do not materially increase Tenant’s obligations or decrease Tenant’s rights under this Lease. Notice of such rules and regulations and amendments and supplements thereto, if any, shall be given to the Tenant.

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EXHIBIT X

WORK LETTER
(Tenant Buildout with Landlord’s Contribution)

1.   TENANT IMPROVEMENTS. The tenant improvement work (“Tenant Improvements”) shall consist of the work required to complete certain improvements to the Premises pursuant to approved ” Working Drawings and Specifications” (as defined below). Tenant shall employ Gensler & Associates (the “Architect”) for preparation of the Preliminary Plan and Working Drawings and Specifications (as hereinafter defined), and shall cause the Architect to inspect the Premises to become acquainted with all existing conditions. Tenant shall contract with San Jose Construction Co., Inc. (the ‘TI Contractor”) , to construct the Tenant Improvements at Tenant’s sole cost and expense, subject to Article II below. The Tenant Improvements work shall be undertaken and prosecuted in accordance with the following requirements:

a.

Tenant and Landlord have approved both (i) a detailed space plan for the Premises, prepared by the Architect, a copy of which is attached hereto as Exhibit X-1 (“Preliminary Plan”), and (ii) an estimate, itemized by discipline, materials and labor, of the cost to complete the Tenant Improvements in accordance with the Preliminary Plan (“Preliminary Cost Estimate”), which Preliminary Cost Estimate is attached hereto as Exhibit X-2. Within three (3)days after the date of this Work Letter, Tenant shall cause the Architect to prepare working drawings and specifications based on the approved Preliminary Plan (the “Working Drawings and Specifications”), and any change proposed by Tenant to the approved Working Drawings and Specifications (“Change”). Within three (3) business days following its submission to Landlord, Landlord shall approve (by signing a copy thereof) or shall disapprove the Working Drawings and Specifications and/or the Change. If Landlord disapproves the Working Drawings and Specifications or Change as a result of a failure of the foregoing to comply with the Preliminary Plan, Landlord shall specify in detail the reasons for disapproval and Tenant shall cause the Architect to modify Ihe Working Drawings and Specifications or Change to incorporate Landlord’s suggested revisions in a mutually satisfactory manner. Tenant agrees and acknowledges that Landlord will not check the Preliminary Plan, the Working Drawings and Specifications and/or any Change for building code compliance (or other federal, state or local law, ordinance or regulations compliance), and that Tenant and its Architect shall be solely responsible for such matters.

b.

It is understood that except as provided below, the Tenant Improvements shall only include actual improvements to the Premises set forth in the Preliminary Plan or the approved Working Drawings and Specifications, and shall exclude (but not by way of limitation) Tenant’s furniture, trade fixtures, partitions, equipment and signage improvements, if any. Further, the Tenant Improvements shall incorporate Landlord’s building standard materials and specifications (“Standards”). All aspects of the Preliminary Plan are considered Standards for purposes of this Work Letter. No deviations from the Standards may be required by Tenant with respect to doors and frames, finish hardware, entry graphics, the ceiling system, light fixtures and switches, mechanical systems, life and safety systems, and/or window coverings; provided that Landlord may, in its sole discretion, authorize in writing one or more of such deviations, in which event Tenant shall be solely responsible for the cost of replacing same with the applicable Standard item(s) upon the expiration or termination of this Lease. All non- standard items (“Non-Standard Improvements”) and Changes to the Preliminary Plan or Working Drawings and Specifications that are not customarily included in Landlord’s tenant improvements of other premises located in the Project shall be considered Non-Standard Improvements and shall be subject to the prior approval of Landlord, which may be withheld in Landlord’s sole discretion. Landlord shall in no event be required to approve any Non-Standard Improvement if Landlord determines that such improvements (i) is of a lesser quality than the corresponding Standard, (ii) fails to conform to applicable governmental requirements, (iii) requires building services beyond the level

Exhibit X

Page 1 of 5

	Landlord has agreed to provide Tenant under this Lease, or (iv) would have an adverse aesthetic impact from the exterior of the Premises.
c.	Tenant shall submit the approved Working Drawings and Specifications to the TI Contractor, who shall be the general contractor hired to construct the Tenant Improvements. TI Contractor shall solicit bids from at least three (3) subcontractors for each major trade, provided that, a bidding process shall not be required with respect to mechanical, electrical and plumbing. All subcontractors shall be subject to Landlord’s reasonable approval. Tenant shall provide copies of the bid responses to Landlord. Tenant shall enter into a “lump sum” construction contract (the “TI Contract”) with the TI Contractor for construction of the Tenant Improvements. If requested by Landlord, Tenant shall deliver a copy of the TI Contract to Landlord. Tenant shall cause the Tenant Improvements work to be constructed in a good and workmanlike manner in accordance with the approved Working Drawings and Specifications.
d.	Prior to the commencement of the Tenant Improvements work, Tenant shall deliver to Landlord a copy of the final application for permit and issued permit for the work.
e.	The TI Contractor and each of its subcontractors shall comply with landlord’s requirements as generally imposed on third party contractors, including without limitation all insurance coverage requirements and the obligation to furnish appropriate certificates of insurance to Landlord, prior to commencement of construction or the Tenant Improvements work.
f.	A construction schedule shall be provided to Landlord prior to commencement of the construction of the Tenant Improvements work, and weekly updates shall be supplied during the progress of the work; provided however, that the completion of the Tenant Improvements shall not be a condition of, or affect, the Commencement Date of this Lease.
g.	Tenant shall give Landlord ten (10) days prior written notice of the commencement of construction of the Tenant Improvements work so that Landlord may cause an appropriate notice of non-responsibility to be posted.
h.	The Tenant Improvements work shall be subject to inspection at all times by Landlord and its construction manager, and Landlord and/or its construction manager shall be permitted to attend weekly job meetings with the TI Contractor.
i.	Tenant shall apply and pay for all utility services required for the Tenant Improvements work.
j.	Upon completion of the work, Tenant shall cause to be provided to Landlord (i) as-built drawings of the Tenant Improvements work signed by the Architect, (ii) CADD tapes of the improved space compatible with Landlord’s CADD system, (iii) a final punch list signed by Tenant, (iv) final and unconditional lien waivers from the TI Contractor and all subcontractors, (v) a duly recorded notice of completion of the improvement work, and (vi) a certificate of occupancy for the Premises (collectively, the “Close-Out Package”).
k.	The Tenant Improvements work shall be prosecuted at all times in accordance with all state, federal and local laws, regulations and ordinances, including without limitation all OSHA and other safety laws, the Americans with Disabilities Act (“ADA”) and all applicable governmental permit and code requirements,
l.	All of the provisions of this Lease (including, without limitation, the provisions of Sections 7.4, 10.1 and 10.3) shall apply to, and shall be binding on Tenant with respect to, the construction of the Tenant Improvements.

Exhibit X

Page 2 of 5

m.	Landlord shall permit Tenant and its contractors to enter the Premises prior to the Commencement Date of the Lease in order that Tenant may construct the Tenant Improvements in the Premises through Tenant’s own contractors prior to the Commencement Date. The foregoing license to enter the Premises prior to the Commencement Date is, however, conditioned upon the compliance by Tenant’s contractors with all requirements imposed by Landlord on third party contractors, including without limitation the maintenance by Tenant and its contractors and subcontractors of workers’ compensation and public liability and property damage insurance in amounts and with companies and on forms satisfactory to Landlord, with certificates of such insurance being furnished to landlord prior to proceeding with any such entry. The entry shall be deemed to be under all of the provisions of the Lease. Landlord shall not be liable in any way for any injury, loss or damage which may occur to any such work being performed by Tenant, the same being solely at Tenant’s risk.
n.	Tenant hereby designates Don Higbee and Mark Avila (“Tenant’s Construction Representatives”), Telephone Nos. (408) 433-8140 and (408) 433-8284, each as its representative and agent for all matters related to the Tenant Improvements, including but not by way of limitation, for purposes of receiving notices, approving submittals and issuing requests for Changes, and Landlord shall be entitled to rely upon authorizations and directives of such person(s) as if given directly by Tenant. The foregoing authorization is intended to provide assurance to Landlord that it may rely upon the directives and decision making of the Tenant’s Construction Representatives with respect to the Tenant Improvement and is not intended to limit or reduce Landlord’s right to reasonably rely upon any decisions or directives given by other officers or representatives of Tenant. Tenant may amend the designation of its Tenant’s Construction Representative(s) at any time upon delivery of written notice to Landlord.
o.	Landlord hereby designates Steve Aldapa (“Landlord’s Construction Representative”), Telephone No. (310) 996-0202 as its representative and agent for all matters related to the Tenant Improvements, including but not by way of limitation, for purposes of receiving notices, approving submittals and Changes, and Tenant shall be entitled to rely upon authorizations and directives of such person(s) as if given directly by Landlord. The foregoing authorization is intended to provide assurance to Tenant that it may rely upon the directives and decision making of the Landlord’s Construction Representative with respect to the Tenant Improvements and is not intended to limit or reduce Tenant’s right to reasonably rely upon any decisions or directives given by other officers or representatives of Landlord. Landlord may amend the designation of its Landlord’s Construction Representative(s) at any time upon delivery of written notice to Tenant.

II.   COST OF THE TENANT IMPROVEMENTS WORK

a.

Subject to Section II(d) below, Landlord shall provide to Tenant a tenant improvement allowance in the amount of Six Hundred Forty Thousand Four Hundred Forty Dollars ($640,440.00) (the “Landlord’s Contribution”) based on Twenty Seven Dollars ($27.00) per usable square foot of the Premises, with any excess cost of the Tenant Improvements in accordance with the approved Working Drawings and Specifications, to be borne solely by Tenant. It is further understood and agreed that Landlord’s construction manager shall be entitled to a supervision/administrative fee equal to five percent (5%) of the cost of the Tenant Improvements work (not to exceed thirty thousand dollars ($30,000), which fee shall be paid from the Landlord’s Contribution. If the actual cost of completion of the Tenant Improvements is less than the maximum amount provided for the Landlord’s Contribution and the Additional Landlord Funding, such savings shall inure to the benefit of Landlord and Tenant shall not be entitled to any credit or payment.

b.

Landlord shall pay the Landlord’s Contribution and the Additional Landlord Funding (defined in Section II(d) below), provided Tenant has elected to exercise its right to the Additional Landlord Funding, in whole or in part to Tenant or Tenant’s designee within twenty (20) days in accordance with the following:

Exhibit X

Page 3 of 5

i.	Tenant must deliver to Landlord an invoice(s) with appropriate backup documents for the work performed that Tenant desires to be paid by the Landlord’s Contribution and/or Additional Landlord Funding.
ii.	Within twenty (20) days of Landlord’s receipt of such invoice(s) and backup documents, Landlord shall pay Tenant or Tenant’s designee a portion of the Landlord’s Contribution and/or Additional Landlord Funding sufficient to pay the invoice in full (unless the amount claimed under the invoice(s) exceeds the Landlord’s Contribution and/or the Additional Landlord Funding). Notwithstanding the foregoing, Landlord may retain ten percent (10%) of all invoiced amounts until Tenant submits the Close-Out Package to Landlord at which point Landlord shall pay Tenant any retained portions of the Landlord’s Contribution and Additional Landlord Funding within twenty (20) days.
iii.	Tenant may only request payments by Landlord from the Landlord’s Contribution and the Additional Landlord Funding once construction of the Tenant Improvements has been at least fifty percent (50%) completed and once construction of the Tenant Improvements has been substantially completed.

c.

It is understood that the foregoing Tenant Improvements may be done during Tenant’s occupancy of the Premises and, in this regard, Tenant agrees to assume any risk of injury, loss or damage which may result (unless caused by the willful misconduct of Landlord or Landlord’s authorized employees, agents or contractors). Tenant further agrees that it shall be solely responsible for relocating its office equipment and furniture in the Premises in order for the foregoing Tenant Improvements to be completed in the Premises, that the Commencement Date of the Lease is not conditioned upon nor shall such Commencement Date be extended by the completion of the foregoing Tenant Improvements, and that no rental abatement shall result while the foregoing Tenant Improvements are completed in the Premises. It is further understood and agreed that the Tenant Improvements shall be scheduled and shall be substantially completed not later than February 10, 2005, to be eligible for funding by Landlord, and that Landlord shall not be obligated to fund any Tenant Improvements commenced after such date. Notwithstanding the foregoing, each day after the deadline set forth in Section l(a) above that Landlord fails to deliver its approval or disapproval shall delay the date set forth in Section 3.1 (c) of the Lease by one (1) day.

d.

If requested by Tenant, Landlord shall fund the additional costs related to the Tenant Improvements in excess of Landlord’s Contribution by up to an additional Three Dollars ($3.00) per useable square foot (for a total additional funding of up to Seventy One Thousand One Hundred Sixty Dollars ($71,160.00) (“Additional Landlord Funding”). To the extent of the Additional Landlord Funding, Basic Rent shall increase, retroactive to the Commencement Date of this Lease, by an amount equal to the Additional Landlord Funding plus interest at the annual rate of eight percent (8%) amortized equally over the first sixty (60) months of the Lease. Upon request by Landlord, the amount of such rental adjustment shall be memorialized in a form provided by Landlord. In the event that the amount of the rental adjustment is finally determined subsequent to the Commencement Date, Tenant shall promptly pay to Landlord a lump sum amount equal to the total accrued sums owing due to the retroactive adjustment.

III.   DISPUTE RESOLUTION

a.   All claims or disputes between Landlord and Tenant arising out of, or relating to, this Work Letter shall be decided by the JAMS/ENDISPUTE (“JAMS”), or its successor, with such arbitration to be held in Santa Clara County, California, unless the parties mutually agree otherwise. Within ten (10) business days following submission to JAMS, JAMS shall designate three arbitrators and each party may, within five (5) business days thereafter, veto one of the three persons so designated. If two different designated arbitrators have been vetoed, the third arbitrator shall hear and decide the matter. If less than two (2) arbitrators are timely vetoed, JAMS shall select a single arbitrator from the non-vetoed

Exhibit X

Page 4 of 5

	arbitrators originally designated by JAMS, who shall hear and decide the matter. Any arbitration pursuant to this section shall be decided within thirty (30) days of submission to JAMS. The decision of the arbitrator shall be final and binding on the parties. All costs associated with the arbitration shall be awarded to the prevailing party as determined by the arbitrator.
b.	Notice of the demand for arbitration by either party to the Work Letter shall be filed in writing with the other party to the Work Letter and with JAMS and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrator shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. Except by written consent of the person or entity sought to be joined, no arbitration arising out of or relating to this Work Letter shall include, by consolidation, joinder or in any other manner, any person or entity not a party to the Work Letter unless (1) such person or entity is substantially involved in a common question of fact or law, (2) the presence of such person or entity is required if complete relief is to be accorded in the arbitration, or (3) the interest or responsibility of such person or entity in the matter is not insubstantial.
c.	The agreement herein among the parties to arbitrate shall be specifically enforceable under prevailing law. The agreement to arbitrate hereunder shall apply only to disputes arising out of, or relating to, this Work Letter, and shall not apply to other matters of dispute under the Lease except as may be expressly provided in the Lease.

Exhibit X

Page 5 of 5

EXHIBIT X-2

APPROVED PRELIMINARY COST ESTIMATE

[SEE ATTACHED]

Exhibit X-2

Page 1 of 1

San Jose Construction Co., Inc.
General Contractors

September 8, 2004

LSI LOGIC
1551 Mc Carthy Blvd., D-129
Milpitas, CA 95035
(408) 433-8140 Fax (408) 433-7484

Attn:	Mr. Don Higbee
Ref:	ENGENIO – 670 N. MC CARTHY BLVD., MILPITAS, CA
Subj.	Preliminary Budget Proposal

Dear Don:

San Jose Construction Co., Inc. is pleased to submit for your review our preliminary budget construction proposal for the above referenced property. Our ability to successfully coordinate and construct these improvements is based upon the extensive experience of our project management team and our ability to work with and coordinate a blend of the most proficient subcontractors in the Silicon Valley. The following is the lists the drawings for which our proposal is based upon:

Drawings provided by Gensler:
M670.100.FP	Construction Plan – First Floor	Dated 08/20/04
M670.100.PC	Power & Communication Plan – First Floor	Dated 08/20/04
M670.100.RC	Reflective Ceiling Plan – First Floor	Dated 08/20/04
M670.200.FP	Construction Plan – Second Floor	Dated 08/12/04
M670.200.PC	Power & Communication Plan – Second Floor	Dated 08/12/04
M670.200.RC	Reflective Ceiling Plan – Second Floor	Dated 08/12/04

TOTAL SUM.........$1,189,313.00

The following items have been EXCLUDED from our proposal:

•   Leveling and scraping of existing concrete floors by others

•   Any work not specifically listed in our cost breakdown

•   Drywall patch to existing walls not under construction

•   Any work to existing lobby, stairs or restroom cores

•   Paging system, telephone system & data cabling

•   Structural engineering or calculations

•   City and fire department corrections

•   Any work to existing HVAC units

•   Relocation of rain water leaders

•   P.G. & E. feeds & patching

•   Testing and inspection

LSI LOGICS
Page 2 of 2

The following items have been EXCLUDED from our proposal:

w	Corian or granite counter tops
w	Overtime/standby time
w	Any work to the site
w	Security system
w	Spiral ductwork
w	Card readers
w	Appliances
w	Signage
w	Permits

The following items are ALTERNATES to our proposal:

w   Upgrade hard surfaces for millwork, i.e. corian or granite, scope TBD (Allowance) ADD: 17,500.00

We are confident that we can provide you with the most effective, cost conscious and motivated contracting team for this project.

We look forward to teaming with you, and will make every effort to ensure that the facility is completed in a timely manner and to your total satisfaction.

Sincerely,
SAN JOSE CONSTRUCTION CO., INC.

[ILLEGIBLE]

Fran Conte
jt: lsimccarthyprop

SAN JOSE CONSTRUCTION CO., INC.

9/8/04

LSI LOGIC
670 NORTH MCCARTHY BLVD BLDG 8
MILPITAS , CA
PRELIMINARY BUDGET

				23,020
COST CODE	DESCRIPTION	TOTAL		SQ.FT		SUBCONTRACTOR
11200	GENERAL CONDITIONS		67,600		2.94	SJC
17100	PROGRESSIVE CLEAN UP (SJC)		2,650		0.12	SJC
17150	FINAL CLEAN UP		4,000		0.17	NOR CAL
17600	BLUEPRINTS (ALLOWANCE)		850		0.04	SJC
20700	FLOOR CORING (ALLOWANCE)		650		0.03	SJC
20770	INTERIOR DEMO @ LOBBY		1,200		0.05	SJC
61100	MISC. CARPENTRY (40HRS)		2,280		0.10	SJC
62000	MILLWORK		74,500		3.24	SCL
62002	MILLWORK (RECEPTION DESK ALLOWANCE)		20,000		0.87	SCL
72000	WALL INSULATION		7,627		0.33	SCL
75100	ROOF PATCH (ALLOWANCE)		1,500		0.07	KINGS ROOFING
82000	DOORS, FRAME & HARDWARE & SIDELITES		56,676		2.46	TRIM TECH
88000	GLASS & GLAZING		35,800		1.56	GRAND PRIX
88000	GLASS & GLAZING (STACKING DOOR)		16,000		0.70	GRAND PRIX
88000	REMOVE & REPLACE EXT GLAZING (STOCKING)		2,880		0.13	GRAND PRIX
88001	ALUMINUM SILL CAP @ EXTERIOR FURRED WAL
92500	DRYWALL & FRAME		118,535		5.15	ERIC STARK
95000	ACOUSTICAL CEILING		45,890		1.99	CAM ACOUSTICS
96800	FLOOR COVER		52,232		2.27	PRESTON HOLMES
96800	ACCENT CARPET @ 6 LOCATIONS (ALLOW)		7,000		0.30	PRESTON HOLMES
99000	PAINTING		15,325		0.67	BURDICK PAINTING
101100	WALLTALKERS @ CONF RMS		0		0.00	PSI
105200	FIRE EXTINGUISHERS		1,500		0.00	SJC
111300	PROJECTIONS SCREENS		18,738		0.00	PSI
125100	WINDOW COVER (ALLOWANCE)		16,000		0.00	PENINSULATORS
153000	FIRE SPRINKLERS		32,250		1.40	BROUGHTON
154000	PLUMBING & CONDENSATE		14,560		0.63	METRO
155000	HVAC		218,650		9.50	CAL-AIR
155001	HVAC CONTROLS (ASI)		76,111		3.31	AIR SYSTEMS
160000	ELECTRICAL		209,920		9.12	MID-STATE
160001	FIRE ALARM (ALLOWANCE)		7,125		0.31	MID-STATE
	SUBTOTAL		1,138,099		49.44
	GENERAL CONTRACTOR OH&P		45,524		198
	INSURANCE		5,690		0.25
	PROJECT TOTAL		1,189,313		51.66

EXHIBIT Y

Project Site Plan

EX-10.29

Exhibit 10.29

FIRST AMENDMENT TO LEASE

          THIS FIRST AMENDMENT TO LEASE (“Amendment”) is entered into as of October 28, by and between The Irvine Company, a Delaware corporation (“Landlord”), and Engenio Information Technologies, Inc., a Delaware corporation (“Tenant”).

RECITALS

A.	Landlord, as lessor, and Tenant, as lessee, entered into that certain Lease (Multi-Tenant; Net) dated for reference purposes as of June 30, 2004 (“Lease”), for certain premises commonly known 670 North McCarthy Boulevard, Suite 100, Milpitas, California (“Original Premises”). The capitalized terms used and not otherwise defined herein shall have the same meanings and definitions as set forth in the Lease.
B.	Landlord has received an Acceptable LOI with respect to the First Refusal Space and provided written notice of such to Tenant.
C.	Tenant has elected not to exercise the First Refusal Right.
D.	Tenant has delivered written notice to Landlord exercising the Suite 120 Leasing Right.
E.	Landlord and Tenant desire to amend the Lease to, amongst other matters, provide for the terms under which the Tenant will lease Suite 120 from the Landlord, all on the terms and conditions set forth below.

          NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1.	Recitals. The above Recitals are incorporated herein as if fully set forth herein.
2.	Leased Premises. Landlord leases to Tenant and Tenant leases from Landlord Suite 120, containing approximately the rentable square footage set forth in Section 2.4(b) of the Lease. Except as expressly set forth herein, (i) Suite 120 is added to the Original Premises and shall be considered a part of the Premises for all purposes under the Lease and the term “Premises” is hereby amended to include Suite 120; and (ii) Suite 120 is leased by Tenant on all of the terms and conditions set forth in the Lease for Tenant’s lease of the Original Premises. All references to “Floor Area” in the Lease shall mean approximately 38,251 rentable square feet of and approximately 34,436 useable square feet. The Suite 120 rentable square footage set forth in Section 2.4(b) of the Lease may include or have been adjusted by various factors, including, without limitation, a load factor to allocate a proportionate share of any vertical penetrations, stairwells, common lobby or common features or areas of the Building. Tenant agrees that the Floor Area set forth herein shall be binding on Landlord and Tenant for purposes of this Lease regardless of whether any future or differing measurements of the Premises or the Building are consistent or inconsistent with the Floor Area set forth herein.
3.	Acceptance of Suite 120. The first paragraph of Section 2.2 of the Lease is incorporated herein as if fully set forth herein with the words “Suite 120” replacing the word “Premises.” Notwithstanding the foregoing, Landlord shall deliver Suite 120 to Tenant clean and free of debris with all items of Landlord’s work pursuant to the Suite 120 Work Letter (as defined below), if any, completed in accordance with the terms of the Suite 120 Work Letter. Landlord warrants to Tenant that the roof, plumbing, fire sprinkler system,

Page 1 of 4

	lighting, heating, ventilation and air conditioning systems and electrical systems in Suite 120, shall be in good operating condition on the Commencement Date and during the initial twelve (12) months of the Term. In the event of a non-compliance with such warranty, Landlord shall, except as otherwise provided in the Lease, promptly after receipt of written notice from Tenant setting forth the nature and extent of such non-compliance, rectify same at Landlord’s cost and expense. Further, in connection with the construction of the Suite 120 Tenant Improvements (as defined below) pursuant to the Suite 120 Work Letter, Tenant shall use commercially reasonable efforts to obtain customary warranties and guaranties from the contractor(s) performing such work and/or the manufacturers of equipment installed therein, but shall be under no obligation to incur additional expense in order to obtain or extend such warranties. If Tenant is required to make repairs to any component of Suite 120 or any of its systems not covered by the Landlord’s warranty contained in this Section but for which Landlord has obtained a contractor’s or manufacturer’s warranty, then Landlord shall, upon request by Tenant, use its commercially reasonable efforts to pursue its rights under any such warranties for the benefit of Tenant. Under no circumstances will Tenant have the right to enforce any of the warranties and guaranties obtained by Landlord.
4.	Delivery Date. Landlord shall deliver Suite 120 to Tenant as soon as reasonably practicable following the date hereof (but not later than three (3) business days following the date hereof).
5.	Term and Commencement Date. The lease term for Suite 120 shall commence concurrently with the Commencement Date for the Original Premises and shall expire concurrently with the Expiration Date for the Original Premises, unless terminated earlier pursuant to the terms of the Lease. Notwithstanding anything contained herein to the contrary, the Commencement Date shall be determined without consideration of the Suite 120 Tenant Improvements and substantial completion thereof.
6.	Basic Rent. Basic Rent for the Premises is hereby amended to be:

Period:	Basic Rent:
The initial six (6) months of the Term (and subject to the provisions of Section 14.2(d) of the Lease)	$	00.00
Commencing six (6) months following the Commencement Date	$	31,365.82
Commencing twelve (12) months following the Commencement Date	$	32,130.84
Commencing twenty four (24) months following the Commencement Date	$	33,278.37
Commencing thirty six (36) months following the Commencement Date	$	34,425.90
Commencing forty eight (48) months following the Commencement Date	$	35,190.92

	In addition to the foregoing, the Basic Rent may be increased pursuant to Section II(D) of the Work Letter and/or Section II(D) of the Suite 120 Work Letter.
7.	Security Deposit. The Security Deposit is hereby increased from $24,195.08 to $35,190.92. Concurrently with Tenant’s execution of this Amendment, Tenant shall

Page 2 of 4

	deposit with Landlord the additional sum of $10,995.84, which sum shall be included by Landlord as part of the Security Deposit held under the Lease (as increased herein) and shall be held and applied by Landlord in accordance with the terms of the Lease.
8.	Vehicle Parking Spaces. Vehicle Parking Spaces are hereby amended to be one hundred fifty three (153).
9.	Right of First Refusal. Tenant hereby acknowledges that it has elected not to exercise its First Refusal Right and such right is hereafter void and of no further force and effect.
10.	Suite 120 Tenant Improvements. Except as expressly set forth herein, all references to “Tenant Improvements” in the Lease shall include the Suite 120 Tenant Improvements and all references to “Work Letter” in the Lease shall include the Suite 120 Work Letter. Tenant shall construct certain tenant improvements (“Suite 120 Tenant Improvements”) to Suite 120 as set forth in that certain Work Letter attached hereto as Exhibit A (“Suite 120 Work Letter”).
11.	Other Improvements.

(a)

Landlord acknowledges that Tenant may need to install additional HVAC equipment on the roof of the Building to serve the HVAC needs of Suite 120. Landlord hereby agrees that Tenant may install such additional HVAC units subject to Landlord’s consent pursuant to Section 7.3 of the Lease. Landlord acknowledges that Tenant may desire to install such HVAC equipment on the roof over the portion of the Buildings’ second floor not occupied by Tenant. If Tenant desires to install HVAC equipment in or around this location, Tenant shall provide for such installation when requesting Landlord’s consent pursuant to Section 7.3 of the Lease and Landlord shall consider such request pursuant to the procedures set forth in Section 7.3.

(b)

Landlord shall, at its sole cost and expense, remodel the lobby of the Building pursuant to plans and specifications prepared by the Architect (as defined in the Work Letter), which plans and specifications shall contain Landlord’s standard specifications for lobbies located in the Project and shall be subject to Tenant’s reasonable consent (the “Lobby Remodel”). If Tenant does not object to the plans and specifications within two (2) business days after receipt of such plans and specifications, Tenant shall be deemed to have consented to such. Landlord shall substantially complete the Lobby Remodel on or before February 10, 2005; provided, however, Landlord’s failure to substantially complete the Lobby Remodel shall neither constitute a default by Landlord nor permit Tenant any rights or remedies with respect to such failure.

12.   Brokers. The parties recognize as the broker(s) who negotiated this Amendment, the firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, and agree that Landlord shall be responsible for the payment of brokerage commissions to those broker(s) unless otherwise provided in this Amendment. Tenant warrants that it has had no dealings with any other real estate broker or agent in connection with the negotiation of this Amendment, and Tenant agrees to indemnify and hold Landlord harmless from any cost, expense or liability (including reasonable attorneys’ fees) for any compensation, commissions or charges claimed by any other real estate broker or agent employed or claiming to represent or to have been employed by Tenant in connection with the negotiation of this Amendment. The foregoing agreement shall survive the termination of the Lease. If Tenant fails to take possession of the Premises or if the

Page 3 of 4

	Lease otherwise terminates prior to the Expiration Date as the result of failure of performance by Tenant, Landlord shall be entitled to recover from Tenant the unamortized portion of any brokerage commission funded by Landlord in addition to any other damages to which Landlord may be entitled.
13.	Execution Date of Lease. The parties acknowledge that the Lease contains references to the “date of execution of this Lease” or other similar references and that the Lease does not include the date on which it was executed. The parties agree that for all purposes under the Lease, the date of execution of the Lease shall be September 29, 2004.
14.	Effect of Amendment. Except as otherwise modified by this Amendment, the Lease shall remain unmodified and in full force and effect. In the event of any conflict or inconsistency between the terms and conditions of the Lease, on the one hand, and the terms and conditions of this Amendment, on the other hand, the terms and conditions of this Amendment shall prevail.
15.	Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, all of which taken together shall be one and the same document.

             IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date and year first above written.

Landlord:			Tenant:
The Irvine company		Engenio Information Technologies, Inc.
a Delaware corporation		a Delaware corporation

By	/s/ Steven Case	By:	/s/ Tom Georgens
Steven Case		Name: Tom Georgens
Senior Vice President, Office Properties		Its : President
By	/s/ Danielle Sim	By:	/s/ Flavio Santoni
Danielle Sim		Name: Flavio Santoni
Senior Vice President, Operations		Its: Sr. VP Sales, Marketing & Customer Support
		Engenio — Legal Department
		Date: 10/21/04
		Approved as to form
		By: /s/ Peter McCabe

Page 4 of 4

EXHIBIT A

WORK LETTER

[see attached]

Exhibit A

Page 1 of 1

EXHIBIT A

WORK LETTER
(Tenant Buildout with Landlord’s Contribution)

1.   SUITE 120 TENANT IMPROVEMENTS. The tenant improvement work (“Suite 120 Tenant Improvements”) shall consist of the work required to complete certain improvements to Suite 120 pursuant to approved “Suite 120 Working Drawings and Specifications” (as defined below). Tenant shall employ Gensler & Associates (the “Architect”) for preparation of the Suite 120 Preliminary Plan and Suite 120 Working Drawings and Specifications (as hereinafter defined), and shall cause the Architect to inspect Suite 120 to become acquainted with all existing conditions. Tenant shall contract with San Jose Construction Co., Inc. (the “TI Contractor”), to construct the Suite 120 Tenant Improvements at Tenant’s sole cost and expense, subject to Article II below. The Suite 120 Tenant Improvements work shall be undertaken and prosecuted in accordance with the following requirements:

a.

Tenant and Landlord have approved a detailed space plan for Suite 120, prepared by the Architect, a copy of which is attached hereto as Exhibit A-1 (“Suite 120 Preliminary Plan”). Within three (3)days after the date of this Work Letter, Tenant shall cause the Architect to prepare Suite 120 Working Drawings and Specifications based on the approved Suite 120 Preliminary Plan (the “Suite 120 Working Drawings and Specifications”), and any change proposed by Tenant to the approved Suite 120 Working Drawings and Specifications (“Change”). Within three (3) business days following its submission to Landlord, Landlord shall approve (by signing a copy thereof) or shall disapprove the Suite 120 Working Drawings and Specifications and/or the Change. If Landlord disapproves the Suite 120 Working Drawings and Specifications or Change as a result of a failure of the foregoing to comply with the Suite 120 Preliminary Plan, Landlord shall specify in detail the reasons for disapproval and Tenant shall cause the Architect to modify the Suite 120 Working Drawings and Specifications or Change to incorporate Landlord’s suggested revisions in a mutually satisfactory manner. Tenant agrees and acknowledges that Landlord will not check the Suite 120 Preliminary Plan, the Suite 120 Working Drawings and Specifications and/or any Change for building code compliance (or other federal, state or local law, ordinance or regulations compliance), and that Tenant and its Architect shall be solely responsible for such matters.

b.

It is understood that except as provided below, the Suite 120 Tenant Improvements shall only include actual improvements to Suite 120 set forth in the Suite 120 Preliminary Plan or the approved Suite 120 Working Drawings and Specifications, and shall exclude (but not by way of limitation) Tenant’s furniture, trade fixtures, partitions, equipment and signage improvements, if any. Further, the Suite 120 Tenant Improvements shall incorporate Landlord’s building standard materials and specifications (“Standards”). All aspects of the Suite 120 Preliminary Plan are considered Standards for purposes of this Work Letter. No deviations from the Standards may be required by Tenant with respect to doors and frames, finish hardware, entry graphics, the ceiling system, light fixtures and switches, mechanical systems, life and safety systems, and/or window coverings; provided that Landlord may, in its sole discretion, authorize in writing one or more of such deviations, in which event Tenant shall be solely responsible for the cost of replacing same with the applicable Standard item(s) upon the expiration or termination of the Lease. All non-standard items (“Non-Standard Improvements”) and Changes to the Suite 120 Preliminary Plan or Suite 120 Working Drawings and Specifications that are not customarily included in Landlord’s tenant improvements of other premises located in the Project shall be considered Non-Standard Improvements and shall be subject to the prior approval of Landlord, which may be withheld in Landlord’s sole discretion. Landlord shall in no event be required to approve any Non-Standard Improvement if Landlord determines that such improvements (i) is of a lesser quality than the corresponding Standard, (ii) fails to conform to applicable governmental requirements, (iii) requires building services beyond the level Landlord has agreed to provide Tenant under the Lease, or (iv) would have an adverse aesthetic impact from the exterior of Suite 120.

Exhibit A

Page 1 of 5

c.	Tenant shall submit the approved Suite 120 Working Drawings and Specifications to the TI Contractor, who shall be the general contractor hired to construct the Suite 120 Tenant Improvements. TI Contractor shall solicit bids from at least three (3) subcontractors for each major trade, provided that, a bidding process shall not be required with respect to mechanical, electrical and plumbing. All subcontractors shall be subject to Landlord’s reasonable approval. Tenant shall provide copies of the bid responses to Landlord. Tenant shall enter into a “lump sum” construction contract (the “TI Contract”) with the TI Contractor for construction of the Suite 120 Tenant Improvements. If requested by Landlord, Tenant shall deliver a copy of the TI Contract to Landlord. Tenant shall cause the Suite 120 Tenant Improvements work to be constructed in a good and workmanlike manner in accordance with the approved Suite 120 Working Drawings and Specifications.
d.	Prior to the commencement of the Suite 120 Tenant Improvements work, Tenant shall deliver to Landlord a copy of the final application for permit and issued permit for the work.
e.	The TI Contractor and each of its subcontractors shall comply with Landlord’s requirements as generally imposed on third party contractors, including without limitation all insurance coverage requirements and the obligation to furnish appropriate certificates of insurance to Landlord, prior to commencement of construction or the Suite 120 Tenant Improvements work.
f.	A construction schedule shall be provided to Landlord prior to commencement of the construction of the Suite 120 Tenant Improvements work, and weekly updates shall be supplied during the progress of the work; provided however, that the completion of the Suite 120 Tenant Improvements shall not be a condition of, or affect, the Commencement Date of the Lease.
g.	Tenant shall give Landlord ten (10) days prior written notice of the commencement of construction of the Suite 120 Tenant Improvements work so that Landlord may cause an appropriate notice of non- responsibility to be posted.
h.	The Suite 120 Tenant Improvements work shall be subject to inspection at all times by Landlord and its construction manager, and Landlord and/or its construction manager shall be permitted to attend weekly job meetings with the TI Contractor.
i.	Tenant shall apply and pay for all utility services required for the Suite 120 Tenant Improvements work.
j.	Upon completion of the work, Tenant shall cause to be provided to Landlord (i) as-built drawings of the Suite 120 Tenant Improvements work signed by the Architect, (ii) CADD tapes of the improved space compatible with Landlord’s CADD system, (iii) a final punch list signed by Tenant, (iv) final and unconditional lien waivers from the TI Contractor and all subcontractors, (v) a duly recorded notice of completion of the improvement work, and (vi) a certificate of occupancy for Suite 120 (collectively, the “Close-Out Package”).
k.	The Suite 120 Tenant Improvements work shall be prosecuted at all times in accordance with all state, federal and local laws, regulations and ordinances, including without limitation all OSHA and other safety laws, the Americans with Disabilities Act (“ADA”) and all applicable governmental permit and code requirements.
l.	All of the provisions of the Lease (including, without limitation, the provisions of Sections 7.4,10.1 and 10.3) shall apply to, and shall be binding on Tenant with respect to, the construction of the Suite 120 Tenant Improvements.
m.	Landlord shall permit Tenant and its contractors to enter Suite 120 prior to the Commencement Date of the Lease in order that Tenant may construct the Suite 120 Tenant Improvements in Suite 120 through Tenant’s own contractors prior to the Commencement Date. The foregoing license to enter

Exhibit A

Page 2 of 5

	Suite 120 prior to the Commencement Date is, however, conditioned upon the compliance by Tenant’s contractors with all requirements imposed by Landlord on third party contractors, including without limitation the maintenance by Tenant and its contractors and subcontractors of workers’ compensation and public liability and property damage insurance in amounts and with companies and on forms satisfactory to Landlord, with certificates of such insurance being furnished to landlord prior to proceeding with any such entry. The entry shall be deemed to be under all of the provisions of the Lease. Landlord shall not be liable in any way for any injury, loss or damage which may occur to any such work being performed by Tenant, the same being solely at Tenant’s risk.
n.	Tenant hereby designates Don Higbee and Mark Avila (“Tenant’s Construction Representatives”), Telephone Nos. (408) 433-8140 and (408) 433-8284, each as its representative and agent for all matters related to the Suite 120 Tenant Improvements, including but not by way of limitation, for purposes of receiving notices, approving submittals and issuing requests for Changes, and Landlord shall be entitled to rely upon authorizations and directives of such person(s) as if given directly by Tenant. The foregoing authorization is intended to provide assurance to Landlord that it may rely upon the directives and decision making of the Tenant’s Construction Representatives with respect to the Tenant Improvement and is not intended to limit or reduce Landlord’s right to reasonably rely upon any decisions or directives given by other officers or representatives of Tenant. Tenant may amend the designation of its Tenant’s Construction Representative(s) at any time upon delivery of written notice to Landlord.
o.	Landlord hereby designates Steve Aldapa (“Landlord’s Construction Representative”), Telephone No. (310) 996-0202 as its representative and agent for all matters related to the Suite 120 Tenant Improvements, including but not by way of limitation, for purposes of receiving notices, approving submittals and Changes, and Tenant shall be entitled to rely upon authorizations and directives of such persons) as if given directly by Landlord. The foregoing authorization is intended to provide assurance to Tenant that it may rely upon the directives and decision making of the Landlord’s Construction Representative with respect to the Suite 120 Tenant Improvements and is not intended to limit or reduce Tenant’s right to reasonably rely upon any decisions or directives given by other officers or representatives of Landlord. Landlord may amend the designation of its Landlord’s Construction Representative(s) at any time upon delivery of written notice to Tenant.

II.   COST OF THE SUITE 120 TENANT IMPROVEMENTS WORK

a.

Subject to Section II(d) below, Landlord shall provide to Tenant a tenant improvement allowance in the amount of Two Hundred Eighty Nine Thousand Five Hundred Twenty One Dollars ($289,521.00) (the “Suite 120 Landlord’s Contribution”) based on Twenty Seven Dollars ($27.00) per useable square foot of Suite 120, with any excess cost of the Suite 120 Tenant Improvements in accordance with the approved Suite 120 Working Drawings and Specifications, to be borne solely by Tenant. It is further understood and agreed that Landlord’s construction manager shall be entitled to a supervision/administrative fee equal to five percent (5%) of the cost of the Suite 120 Tenant Improvements work, which fee shall be paid from the Suite 120 Landlord’s Contribution; provided, however, such supervision/administrative fee when combined with the supervision/administrative fee payable pursuant to the original Work Letter under the Lease shall in no event exceed Forty Three Thousand Five Hundred Fifty Three Dollars ($43,553.00) in the aggregate. If the actual cost of completion of the Suite 120 Tenant Improvements is less than the maximum amount provided for the Suite 120 Landlord’s Contribution and the Suite 120 Additional Landlord Funding, such savings shall inure to the benefit of Landlord and Tenant shall not be entitled to any credit or payment.

b.

Landlord shall pay the Suite 120 Landlord’s Contribution and the Suite 120 Additional Landlord Funding (defined in Section II(d) below), provided Tenant has elected to exercise its right to the Suite 120 Additional Landlord Funding, in whole or in part to Tenant or Tenant’s designee within twenty (20) days in accordance with the following:

Exhibit A

Page 3 of 5

i.	Tenant must deliver to Landlord an invoice(s) with appropriate backup documents for the work performed that Tenant desires to be paid by the Suite 120 Landlord’s Contribution and/or Suite 120 Additional Landlord Funding.
ii.	Within twenty (20) days of Landlord’s receipt of such invoice(s) and backup documents, Landlord shall pay Tenant or Tenant’s designee a portion of the Suite 120 Landlord’s Contribution and/or Suite 120 Additional Landlord Funding sufficient to pay the invoice in full (unless the amount claimed under the invoice(s) exceeds the Suite 120 Landlord’s Contribution and/or the Suite 120 Additional Landlord Funding). Notwithstanding the foregoing, Landlord may retain ten percent (10%) of all invoiced amounts until Tenant submits the Close-Out Package to Landlord at which point Landlord shall pay Tenant any retained portions of the Suite 120 Landlord’s Contribution and Suite 120 Additional Landlord Funding within twenty (20) days.
iii.	Tenant may only request payments by Landlord from the Suite 120 Landlord’s Contribution and the Suite 120 Additional Landlord Funding once construction of the Suite 120 Tenant Improvements has been at least fifty percent (50%) completed and once construction of the Suite 120 Tenant Improvements has been substantially completed.

c.

It is understood that the foregoing Suite 120 Tenant Improvements may be done during Tenant’s occupancy of Suite 120 and, in this regard, Tenant agrees to assume any risk of injury, loss or damage which may result (unless caused by the willful misconduct of Landlord or Landlord’s authorized employees, agents or contractors). Tenant further agrees that it shall be solely responsible for relocating its office equipment and furniture in Suite 120 in order for the foregoing Suite 120 Tenant Improvements to be completed in Suite 120, that the Commencement Date of the Lease is not conditioned upon nor shall such Commencement Date be extended by the completion of the foregoing Suite 120 Tenant Improvements, and that no rental abatement shall result while the foregoing Suite 120 Tenant Improvements are completed in Suite 120. It is further understood and agreed that the Suite 120 Tenant Improvements shall be scheduled and shall be substantially completed not later than February 10, 2005, to be eligible for funding by Landlord, and that Landlord shall not be obligated to fund any Suite 120 Tenant Improvements commenced after such date. Notwithstanding the foregoing, each day after the deadline set forth in Section I(a) above that Landlord fails to deliver its approval or disapproval shall delay the date set forth in Section 3.1 (c) of the Lease by one (1) day.

d.

If requested by Tenant, Landlord shall fund the additional costs related to the Suite 120 Tenant Improvements in excess of Suite 120 Landlord’s Contribution by up to an additional Three Dollars ($3.00) per useable square foot (for a total additional funding of up to Thirty Two Thousand One Hundred Sixty Nine Dollars ($32,169.00) (“Suite 120 Additional Landlord Funding”). To the extent of the Suite 120 Additional Landlord Funding, Basic Rent shall increase, retroactive to the Commencement Date of the Lease, by an amount equal to the Suite 120 Additional Landlord Funding plus interest at the annual rate of eight percent (8%) amortized equally over the first sixty (60) months of the Lease. Upon request by Landlord, the amount of such rental adjustment shall be memorialized in a form provided by Landlord. In the event that the amount of the rental adjustment is finally determined subsequent to the Commencement Date, Tenant shall promptly pay to Landlord a lump sum amount equal to the total accrued sums owing due to the retroactive adjustment.

III.   DISPUTE RESOLUTION

a.   All claims or disputes between Landlord and Tenant arising out of, or relating to, this Work Letter shall be decided by the JAMS/ENDISPUTE (“JAMS”), or its successor, with such arbitration to be held in Santa Clara County, California, unless the parties mutually agree otherwise. Within ten (10) business days following submission to JAMS, JAMS shall designate three arbitrators and each party may, within five (5) business days thereafter, veto one of the three persons so designated. If two different designated arbitrators have been vetoed, the third arbitrator shall hear and decide the matter. If less than two (2)

Exhibit A

Page 4 of 5

	arbitrators are timely vetoed, JAMS shall select a single arbitrator from the non-vetoed arbitrators originally designated by JAMS, who shall hear and decide the matter. Any arbitration pursuant to this section shall be decided within thirty (30) days of submission to JAMS. The decision of the arbitrator shall be final and binding on the parties. All costs associated with the arbitration shall be awarded to the prevailing party as determined by the arbitrator.
b.	Notice of the demand for arbitration by either party to the Work Letter shall be filed in writing with the other party to the Work Letter and with JAMS and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrator shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. Except by written consent of the person or entity sought to be joined, no arbitration arising out of or relating to this Work Letter shall include, by consolidation, joinder or in any other manner, any person or entity not a party to the Work Letter unless (1) such person or entity is substantially involved in a common question of fact or law, (2) the presence of such person or entity is required if complete relief is to be accorded in the arbitration, or (3) the interest or responsibility of such person or entity in the matter is not insubstantial.
c.	The agreement herein among the parties to arbitrate shall be specifically enforceable under prevailing law. The agreement to arbitrate hereunder shall apply only to disputes arising out of, or relating to, this Work Letter, and shall not apply to other matters of dispute under the Lease except as may be expressly provided in the Lease.

Exhibit A

Page 5 of 5

EXHIBIT A-l

APPROVED SUITE 120 PRELIMINARY PLAN

[SEE ATTACHED]

Exhibit A-l

Page 1 of 1

THE IRVINE COMPANY            project            Issuer/Rev            date            By            Drawing THE IRVINE COMPANY 1 10/06/04 PAR            A Gensler 670 N. McCARTHY BLVD. Project No. 35.4178.000 325 South first street Description REVISED FIT PLAN — 1ST FLOOR SAN JOES CA 95113 OPTION A. MODIFIED Tel: [ILLEGIBLE] [ILLEGIBLE] Fax: [ILLEGIBLE] [ILLEGIBLE]

EX-10.30

Exhibit 10.30

1621 BARBER LANE
MILPITAS, CALIFORNIA
STANDARD SINGLE TENANT NNN LEASE

w i t n e s s e t h

This lease (“Lease”) is entered into by and between Limar Realty Corp. #9, a California corporation (“Landlord”) and LSI Logic Corporation, a Delaware corporation (“Tenant”). For and in consideration of the payment of rents and the performance of the covenants herein set forth by Tenant, Landlord does lease to Tenant and Tenant accepts the Premises described below subject to the agreements herein contained.

1.   BASIC LEASE TERMS

a.	DATE OF LEASE:	December 31, 2003
b.	TENANT:	LSI Logic Corporation
	Address (of the Premises):	1621 Barber Lane
		Milpitas, California 95035
		Address (for Notices):
		LSI Logic Corporation
		1621 Barber Lane, M/S D-106 Milpitas, CA 95035-7458
		Attn: General Counsel
		With a required copy to:
		LSI Logic Corporation
		1621 Barber Lane, M/S D-129 Milpitas, CA 95035-7458
		Attn: Corporate Real Estate
c.	LANDLORD:	Limar Realty Corp. #9
	Address (for Notices):	1730 S. El Camino Real
		Suite 400
		San Mateo, California 94402
		Attn: Thomas A. Numainville
d.	TENANT’S USE OF PREMISES:	General Office and Engineering (dry) Labs
e.	PREMISES AREA:	181,812 Rentable Square Feet
f.	INSURING PARTY:	Landlord is the “Insuring Party” unless otherwise stated herein.
g.	TERM (inclusive):	Commencement Date: January 1, 2004 (“Commencement Date”)
		Expiration Date: December 31, 2014 (“Expiration Date”)
		Number of Months: 132
h.	INITIAL BASE RENT:	Seventy-Eight Thousand One Hundred Seventy-Nine and 16/100 Dollars ($78,179.16) per month.
i.	BASE RENT ADJUSTMENT
	Step Increase. The step adjustment provisions of ¶ 4.b. apply for the periods shown below:

Periods (inclusive)	Monthly Base Rent
1/1/06 – 12/31/06	$	121,814.04
1/1/07 – 12/31/07		125,468.46
1/1/08 – 12/31/08		129,232.51
1/1/09 – 12/31/09		133,109.49
1/1/10 – 12/31/10		137,102.77
1/1/11 – 12/31/11		141,215.85
1/1/12 – 12/31/12		145,452.33
1/1/13 – 12/31/13		149,815.90

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1/1/14 – 12/31/14 154,310.38

j.	TOTAL TERM BASE RENT:	$	16,726,560.60
k.	PREPAID BASE RENT:	None
I.	SECURITY DEPOSIT:	$	120,632.82
m.	BROKER(S):      Julien J. Studley, Inc. (Tenant)
n.	EXHIBITS:       Exhibits lettered “A” through “C” are attached hereto and made a part hereof.

2.   PREMISES

a.

Premises. Landlord leases to Tenant the premises described in ¶1. and in Exhibit A (the “Premises”). The term “Premises” includes all the land and improvements (including the buildings, landscaping, parking lot, etc.) as described on Exhibit A. Subject to any additional work Landlord has agreed herein to do, Tenant hereby accepts the Premises in their condition existing as of the date of the execution hereof, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Tenant acknowledges that neither Landlord nor Landlord’s Broker has made any representation or warranty as to the suitability of the Premises for the conduct of Tenant’s business. Tenant agrees with the square footage specified for the Premises in ¶1. and will not hereafter challenge such determination and agreement. The rental payable by Tenant pursuant to this Lease is not subject to revision in the event of any discrepancy in the rentable square footage for the Premises.

b.

Acceptance; Quiet Enjoyment. Landlord represents that it is the fee simple owner of the Premises and has full right and authority to make this Lease. Landlord hereby leases the Premises to Tenant and Tenant hereby accepts the same from Landlord, in accordance with the provisions of this Lease. Landlord covenants that Tenant shall have peaceful and quiet enjoyment of the Premises during the Term (as defined below) of this Lease.

3.   Term. The term (“Term”) of this Lease is for the period that commences at 12:01 a.m. on the Commencement Date and expires at 11:59 p.m. on the Expiration Date. If Landlord, for any reason, cannot deliver possession of the Premises to Tenant on or before the Commencement Date, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting from such delay. In that event, however, there shall be an abatement of Rent (as defined below) covering the period between the Commencement Date and the date when Landlord delivers possession to Tenant, and all other terms and conditions of this Lease shall remain in full force and effect. If a delay in possession is caused by Tenant’s failure to perform any obligation in accordance with this Lease, the Term shall commence as of the Commencement Date, and there shall be no reduction of Rent between the Commencement Date and the time Tenant takes possession.

4.   RENT

a.	Base Rent. Tenant shall pay Landlord in lawful money of the United States, without notice, demand, offset or deduction, rent in the amount(s) set forth in ¶1. which shall be payable in advance on the first day of each and every calendar month (“Base Rent”). Unless otherwise specified in writing by Landlord, all installments of Base Rent shall be payable at Limar Realty Corp. #9, Department #44294, P.O. Box 44000, San Francisco, CA 94144-4294. Base Rent for any partial month at the beginning or end of this Lease will be prorated in accordance with the number of days in the subject month. Tenant shall be entitled, at its option, to a refund or credit of the difference between the Initial Base Rent specified ¶1.h., paid monthly, and $105,451.00, paid monthly, from the date this Lease is signed by both Landlord and Tenant retroactive to January 1, 2004.
	For purposes of Section 467 of the Internal Revenue Code, the parties to this Lease hereby agree to allocate the stated Base Rent provided herein to the periods which correspond to the actual Base Rent payments as provided under the terms and conditions of this Agreement.
b.	Step Increase. The Base Rent shall be increased periodically to the amounts and at the times set forth in ¶1.i.
c.	Rent Without Offset and Late Charge. All Rent shall be paid without prior demand or notice and without any deduction or offset whatsoever. All Rent shall be paid in lawful currency of the United States of America. Tenant acknowledges that late payment by Tenant to Landlord of any Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such cost being extremely difficult and impracticable to ascertain. Such costs include, without limitation, processing and accounting charges and late charges that may be imposed on Landlord by the terms of any encumbrance or note secured by the Premises. Therefore, if any Rent is not received by Landlord within five (5) days of its due date, Tenant shall pay to Landlord a late charge equal to six percent (6%) of such overdue payment. Landlord and Tenant hereby agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of any such late payment and that the late charge is in addition to any and all remedies available to the Landlord and that the assessment and/or collection of the late charge shall not be deemed a

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waiver of any other default. Additionally, all such delinquent Rent or other sums, plus this late charge, shall bear interest from the due date thereof at the lesser of ten percent (10%) per annum or the maximum legal interest rate permitted by law. Any payments of any kind returned for insufficient funds will be subject to an additional handling charge of $25.00, and if a check is returned for non-sufficient funds more than twice during the Term of the Lease, Landlord may require Tenant to pay all future payments of Rent or other sums due by cashier’s check or by wire transfer.

d.

Rent. The term “Rent” as used in this Lease shall refer to Base Rent, Real Property Taxes, Operating Expenses, Security Deposit(s), Insurance Costs, repairs and maintenance costs, utilities, late charges and other similar charges payable by Tenant pursuant to this Lease either directly to Landlord or otherwise.

5.   OPERATING EXPENSES

a.

Payment by Tenant. During the Term of this Lease Tenant shall pay to Landlord, as additional Rent, on a monthly basis one hundred percent (100%) of the Operating Expenses.

b.

Operating Expenses. The term “Operating Expenses” shall mean all expenses, costs and disbursements (not specifically excluded from the definition of Operating Expenses below) of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, maintenance, repair and operation of the Premises. Operating Expenses shall include, but not be limited to, the following:

1)	Wages and salaries of all employees engaged in the operation, maintenance and security of the Premises, including taxes, insurance and benefits relating thereto; and the rental cost and overhead of any office and storage space used to provide such services.
2)	All supplies, materials and labor used in the operation, repair or maintenance of the Premises.
3)	Cost of all utilities, including surcharges, for the Premises, including the cost of water, power and lighting which are not separately billed to and paid for by Tenant.
4)	Cost of all maintenance and service agreements for the Premises and the equipment thereon, including but not limited to, security services, exterior window cleaning, janitorial service, engineers, gardeners and trash removal services.
5)	All Insurance Costs, as such term is defined ¶in 16.
6)	Cost of all repairs and general maintenance (excluding repairs and general maintenance paid by proceeds of insurance or by Tenant or other third parties).
7)	A reasonable management fee for the property management of the Premises.
8)	The costs of any additional services not provided to the Premises at the Commencement Date but thereafter provided by Landlord in its management of the Premises.
9)	The cost of any capital improvements made to the Premises after the date of this Lease, with such cost thereof to be amortized over the useful life of the improvements as reasonably determined by Landlord. Other than costs associated with repairs, replacements or refurbishments in the normal course and necessary for the normal operation of the Premises, Landlord shall not, without Tenant’s consent, which consent shall not be unreasonably withheld, conditioned or delayed, materially alter the physical features of the Premises in a manner which materially affects Tenant’s use, or construct additional square footage, the cost for either of which would be amortized over its useful life and passed through to Tenant as part of Operating Expenses. A roof re-coating shall be treated as an Operating Expense, while a roof replacement would be an amortizable capital expenditure.
10)	Real Property Taxes as that term is defined in ¶11.c.
11)	Assessments, dues and other amounts payable pursuant to the CC&R’s described in ¶7.C.

c.   Operating Expenses shall not include:

1)	Costs paid for directly by Tenant or other tenants;
2)	Costs incurred in connection with the financing, sale or acquisition of the Premises or any portion thereof;
3)	Costs incurred in leasing or procuring tenants (including without limitation, lease commissions, advertising expenses, attorneys’ fees and expenses of renovating space for tenants);
4)	Executive salaries of off-site personnel employed by Landlord except for the charge (or pro rata share) of the property manager of the Premises;

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5)	Subject to the provisions of ¶5.b.9) above, depreciation on the Building or other improvements on the Premises;
6)	Legal expenses for disputes with Tenant and any other professional fees of attorneys, auditors or consultants not incurred in connection with the normal maintenance and operation of the Premises;
7)	Costs incurred that are reimbursed by Tenant, or third parties, including insurers;
8)	Expenses for repair or replacement covered by warranties, and any costs due to casualty that are covered by insurance carried by Landlord;
9)	Rentals and other payments by Landlord under any ground lease or other lease underlying the Lease, and interest, principal, points and other fees on debt or amortization of any debt secured in whole or part by all or any portion of the Premises;
10)	Repairs or replacements caused by Landlord’s gross negligence or the gross negligence of Landlord’s employees or agents;
11)	Net income, franchise, capital stock, estate or inheritance taxes or taxes which are the personal obligation of Landlord;
12)	Landlord’s charitable or political contributions;
13)	Payments to subsidiaries and affiliates of Landlord for services to the Premises for supplies or other materials to the extent that the cost of such services, supplies or materials exceed the cost which would have been paid had the services, supplies or materials been provided by unaffiliated parties on a competitive basis (provided, however, any fee for management services paid to an affiliate of Landlord shall be in the amount set forth in ¶5.b.7);
14)	Payments to subsidiaries and affiliates of Landlord for services to the Project for supplies or other materials to the extent that the cost of such services, supplies or materials exceed the cost which would have been paid had the services, supplies or materials been provided by unaffiliated parties on a competitive basis (provided, however, any fee for management services paid to an affiliate of Landlord shall be in the amount set forth in ¶4.d.1)b);
15)	Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord;
16)	Advertising and promotional expenditures;
17)	Costs of repairs and other work occasioned by fire, windstorm or other casualty of an insurable nature to the extent covered by insurance; or
18)	Costs for sculpture, paintings or other objects of art other than for normal and customary lobby furnishings (nor insurance thereon or extraordinary security in connection therewith).

d.	Extraordinary Services. Tenant shall pay within thirty (30) days of receipt of an invoice from Landlord the cost of additional or extraordinary services provided to Tenant at Tenant’s request and not paid or payable by Tenant pursuant to other provisions of this Lease.
e.	Impound. Landlord reserves the right, at Landlord’s option from time to time during the calendar year, to estimate the annual cost of Operating Expenses incurred by Landlord (“Projected Operating Expenses”) and to require Tenant to pay Tenant’s Share thereof in advance. Except as provided below in this ¶5.e., Tenant shall pay to Landlord, monthly in advance as additional Rent, one-twelfth (1/12) of Tenant’s Share of the Projected Operating Expenses. The failure of Landlord to timely furnish to Tenant a schedule of the Projected Operating Expenses for any Calendar Year shall not preclude Landlord from enforcing its rights to collect any Projected Operating Expenses under this ¶5. Tenant’s share is 100% of Operating Expenses.
	When Landlord provides Tenant with a revised Projected Operating Expense Budget during any calendar year, the following payment adjustments will be due Landlord: (1) Effective the first of the month following notification of the new Projected Operating Expense Budget, Tenant shall pay monthly in advance, one-twelfth (1/12) of Tenant’s Share of the new Projected Operating Expenses, and 2) if the revised Projected Operating Expense Budget exceeds the prior Budget, Landlord shall invoice to Tenant a retroactive billing and Tenant shall pay said billing within thirty (30) days of receipt of same. The retroactive billing will reflect the additional amount payable by the Tenant for Tenant’s Share of the new Operating Expense Budget for the calendar year to date. For example, assume an annual existing Operating Expense Budget of $144,000 for a tenant with a share of 50% and where such tenant was initially making $6,000 a month of estimated payments. If the revised Operating Expense Budget increases by $12,000 to $156,000 and the tenant is notified in June, then the amounts due per 1) & 2) above are computed as follows:

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1	)	New Monthly Payment (Effective July 1):
		Revised Annual Operating Expense Budget	$	156,000
		Tenant’s Share @ 50%	$	78,000
		New Payment @ 1/12 Monthly	$	6,500
2	)	Retroactive Billing:
		Revised Annual Operating Expense Budget	$	156,000
		Tenant’s Share @ 50% for 6 (of 12) months	$	39,000
		Less payments, to date (6 @ $6,000)		(36,000	)
		Retroactive Balance Due	$	3,000

As an alternative to a retroactive billing, Landlord may, at Landlord’s option, spread the increase over the remaining months in the current calendar year in equal monthly payments.

f.   Adjustment.

1)	Accounting. Within one hundred eighty (180) days (or as soon thereafter as possible) after the close of each calendar year or portion thereof of occupancy, Landlord shall provide Tenant a statement of such year’s actual Operating Expenses showing the actual Operating Expenses compared to the Projected Operating Expenses. If the actual Operating Expenses are more than the Projected Operating Expenses then Tenant shall pay Landlord, within thirty (30) days of receipt of a bill therefor, the difference. If the actual Operating Expenses are less than the Projected Operating Expenses, then Tenant shall receive a credit against future Operating Expenses payments equal to the difference; provided, that in the case of an overpayment for the final lease year of the Term, Landlord shall credit the difference against any sums due from Tenant to Landlord in accordance with the terms of this Lease; and if no sums are due and unpaid, shall promptly refund the amount to Tenant.
2)	Tenant’s Right to Audit. Within ninety (90) days after receipt of Landlord’s statement setting forth actual Operating Expenses (the “Statement”), Tenant shall have the right to audit at Landlord’s local offices, at Tenant’s expense, Landlord’s accounts and records relating to Operating Expenses. Such audit shall be conducted by a certified public accountant approved by Landlord, which approval shall not be unreasonably withheld, or by Tenant’s independent lease administration consultants who shall not be compensated on a contingency or percentage basis. If such audit reveals that Landlord has overcharged Tenant, the amount overcharged shall be paid to Tenant within thirty (30) days after the audit is concluded. If such audit reveals that Landlord has undercharged Tenant, the amount of undercharge shall be paid by Tenant to Landlord within 30 days after the audit is conducted. In addition, if the Operating Expenses included in the Statement exceed the actual Operating Expenses which should have been charged to Tenant by more than five percent (5%), the cost of the audit shall be paid by Landlord. Tenant may not withhold any payment due as set forth in this Lease pending completion of the audit.
3)	Proration. Tenant’s liability to pay Operating Expenses shall be prorated on the basis of a 365 (or 366, as the case may be) day year to account for any fractional portion of a year included at the commencement or expiration of the Term of this Lease.
4)	Survival. Landlord and Tenant’s obligations to pay for or credit any increase or decrease in payments pursuant to this 5. shall survive this Lease.

g.   Failure to Pay. Except as otherwise provided herein, failure of Tenant to pay any of the charges required to be paid under this ¶5. shall constitute a material default and breach of this Lease and Landlord’s remedies shall be as specified in ¶21.

6.   SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deposit a security deposit (“Security Deposit”) in the amount set forth in  ¶1. with Landlord. If Tenant is in default beyond applicable cure periods, Landlord can (but without any requirement to do so) use the Security Deposit or any portion of it to cure the default or to compensate Landlord for any damages sustained by Landlord resulting from Tenant’s default. Upon demand, Tenant shall immediately pay to Landlord a sum equal to the portion of the Security Deposit expended or applied by Landlord to restore the Security Deposit to its full amount. In no event will Tenant have the right to apply any part of the Security Deposit to any Rent due under this Lease. Landlord’s obligations with respect to the Security Deposit are those of a debtor and not a trustee, and Landlord can commingle the Security Deposit with Landlord’s general funds. Landlord shall not be required to pay Tenant interest on the Security Deposit. Tenant hereby waives the provisions of California Civil Code Section 1950.7, and all other provisions of law now in force or which may become in force after the date of execution of this Lease that provide that Landlord may claim from its security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damages caused by the tenant, or to clean the premises or otherwise limit the application of a security deposit. With respect to the Security Deposit, Landlord and Tenant agree that Landlord may claim and employ the Security Deposit in connection with any and all sums reasonably necessary to compensate Landlord for any foreseeable or unforeseeable loss or damage caused by or resulting from any default by Tenant pursuant to this Lease as well as any foreseeable or unforeseeable loss or damage resulting from any act or omission by Tenant or Tenant’s officers, agents, employees, independent contractors, or invitees. If Tenant is not in default at the

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expiration or termination of this Lease and has fully complied with the provisions of ¶13.d.6) and 26., Landlord shall return the Security Deposit to Tenant.

7.       USE OF PREMISES

a.	Tenant’s Use. Tenant shall use the Premises solely for the purposes stated in ¶1 and for no other purposes without obtaining the prior written consent of Landlord. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises or with respect to the suitability of the Premises to the conduct of Tenant’s business, nor has Landlord agreed to undertake any modification, alteration or improvement to the Premises, except as provided in writing in this Lease. With reasonable notice to Tenant, Landlord may from time to time, at its sole discretion, make such modifications, alterations, deletions or improvements to the Premises as Landlord may reasonably deem necessary or desirable, without compensation to Tenant. Tenant shall promptly comply with all laws, statutes, ordinances, orders and governmental regulations now or hereafter existing affecting the Premises. Tenant shall not do or permit anything to be done in or about the Premises or bring or keep anything in the Premises that will in any way increase the premiums paid by Landlord on its insurance related to the Premises. Tenant will not perform any act or carry on any practices that may injure the Premises. Tenant shall not use the Premises for sleeping, washing clothes or the preparation, manufacture or mixing of anything that emits any objectionable odor, noises, vibrations or lights onto such other tenants. If sound insulation is required to muffle noise produced by Tenant on the Premises, Tenant at its own cost shall provide all necessary insulation. Tenant shall not do anything on the Premises which will overload any existing parking or service to the Premises. Pets and/or animals of any type (other than seeing eye dogs) shall not be kept on the Premises. Tenant covenants that it will not interfere with other tenants’ quiet enjoyment of their premises.
b.	Rules and Regulations. Tenant shall comply with and use the Premises in accordance with the Rules and Regulations attached hereto as Exhibit B and to any reasonable modifications to such Rules and Regulations as Landlord may adopt from time to time, provided however that if any rule or regulation is in conflict with any term, covenant or condition of this Lease, this Lease shall prevail. In addition, no such rule or regulation, or any subsequent amendment thereto adopted by Landlord, shall in any material way alter, reduce or adversely affect any of Tenant’s rights or materially enlarge Tenant’s obligations under this Lease.
c.	CC&R’s. Tenant agrees that this Lease is subject and subordinate to the Covenants, Conditions and Restrictions, a copy of which is attached hereto as Exhibit C, as they may be amended from time to time (“CC&R’s”), and further agrees that the CC&R’s are an integral part of this Lease. Throughout the Term or any extension thereof, notwithstanding any other provision hereof, Tenant shall faithfully and timely assume and perform all obligations of Landlord and/or Tenant under the CC&R’s and any modifications or amendments thereto, including the payment of any periodic or special dues or assessments against the Premises. Such dues and assessments shall be included within the definition of Operating Expenses pursuant to ¶5.b.11), and Tenant shall pay such amounts as further set forth in ¶5. Tenant shall hold Landlord, its subsidiaries, shareholders, directors, officers, agents and employees harmless and indemnify Landlord, its subsidiaries, shareholders, directors, officers, agents and employees against any loss, expense and damage, including attorneys’ fees and costs, arising out of the failure of Tenant to perform or comply with the CC&R’s.

8.   EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE

a.   Emissions. Tenant shall not:

1)	Knowingly permit any vehicle on the Premises to emit exhaust which is in violation of any governmental law, rule, regulation or requirement;
2)	Discharge, emit or permit to be discharged or emitted, any liquid, solid or gaseous matter, or any combination thereof, into the atmosphere or on, into or under the Premises, any building or other improvements of which the Premises are a part, or the ground or any body of water which matter, as reasonably determined by Landlord or any governmental entity to be in violation of law or regulation, and does or may pollute or contaminate the same, or is, or may become, radioactive or does, or may, adversely affect the (a) health or safety of persons, wherever located, whether on the Premises or anywhere else, (b) condition, use or enjoyment of the Premises or any other real or personal property, whether on the Premises or anywhere else, or (c) Premises or any of the improvements thereto including buildings, foundations, pipes, utility lines, landscaping or parking areas;
3)	Produce, or permit to be produced, any intense glare, light or heat in violation of law or regulation;
4)	Create, or permit to be created, any sound pressure level which will interfere with the quiet enjoyment of any real property outside the Premises, or which will create a nuisance or violate any governmental law, rule, regulation or requirement;
5)	Create, or permit to be created, any vibration that is discernible outside the Premises; or

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6)   Transmit, receive or permit to be transmitted or received from or to the Premises, any electromagnetic, microwave or other radiation which is or may be harmful or hazardous to any person or property in, or about the Premises, or anywhere else.

b.   Storage and Use.

1)	Storage. Subject to the uses permitted and prohibited to Tenant under this Lease, Tenant shall store in appropriate leak proof containers all solid, liquid or gaseous matter, or any combination thereof, which matter, if discharged or emitted into the atmosphere, the ground or any body of water would be in violation of law or regulation, and does or may (a) pollute or contaminate the same, or (b) adversely affect the (i) health or safety of persons, whether on the Premises or anywhere else, (ii) condition, use or enjoyment of the Premises or any real or personal property, whether on the Premises or anywhere else, or (iii) Premises.
2)	Use. In addition, without Landlord’s prior written consent, Tenant shall not use, store or permit to remain on the Premises any solid, liquid or gaseous matter which is, or may become dangerously radioactive. If Landlord does give its consent, Tenant shall store the materials in such a manner that no radioactivity will be detectable outside a designated storage area and Tenant shall use the materials in such a manner that (a) no real or personal property outside the designated storage area shall become contaminated thereby and (b) there are and shall be no adverse effects on the (i) health or safety of persons, whether on the Premises or anywhere else, (ii) condition, use or enjoyment of the Premises or any real or personal property thereon or therein, or (iii) Premises or any of the improvements thereto or thereon.
3)	Hazardous Materials. Subject to the uses permitted and prohibited to Tenant under this Lease, Tenant shall store, use, employ, transport and otherwise deal with all Hazardous Materials (as defined below) employed on or about the Premises in accordance with all federal, state, or local law, ordinances, rules or regulations applicable to Hazardous Materials in connection with or respect to the Premises.

c.   Disposal of Waste.

1)	Refuse Disposal. Tenant shall not keep any trash, garbage, waste or other refuse on the Premises except in sanitary containers and shall regularly and frequently remove same from the Premises. Tenant shall keep all incinerators, containers or other equipment used for storage or disposal of such materials in a clean and sanitary condition.
2)	Sewage Disposal. Tenant shall properly dispose of all sanitary sewage and shall not use the sewage disposal system (a) for the disposal of anything except sanitary sewage or (b) amounts in excess of the lesser of: (i) that reasonably contemplated by the uses permitted under this Lease or (ii) that permitted by any governmental entity. Tenant shall keep the sewage disposal system free of all obstructions and in good operating condition.
3)	Disposal of Other Waste. Tenant shall properly dispose of all other waste or other matter delivered to, stored upon, located upon or within, used on, or removed from, the Premises in such a manner that it does not, and will not, violate any law or regulation and adversely affect the (a) health or safety of persons, wherever located, whether on the Premises or elsewhere, (b) condition, use or enjoyment of the Premises or any other real or personal property, wherever located, whether on the Premises or anywhere else, or (c) Premises or any of the improvements thereto or thereon, foundations, pipes, utility lines, landscaping or parking areas.

d.	Information. Tenant or Landlord, as the case may be, shall each provide the other with any and all information regarding Hazardous Materials in the Premises, including copies of all filings and reports to governmental entities at the time they are originated, and any other information reasonably requested by the other party. In the event of any accident, spill or other incident involving Hazardous Materials, Tenant or Landlord, as the case may be, shall immediately report the same to the other and supply the other with all information and reports with respect to the same. All information described herein shall be provided regardless of any claim by either party that it is confidential or privileged, provided that the provision of these documents will not, in any way, alter any aspect of the document’s confidentiality or privileged nature.
e.	Compliance with Law. Notwithstanding any other provision in this Lease to the contrary, Tenant shall comply with all laws, statutes, ordinances, regulations, rules and other governmental requirements now or hereafter existing in complying with its obligations under this Lease, and in particular, relating to the storage, use and disposal of Hazardous Materials.
f.	Indemnity. Tenant hereby agrees to indemnify, defend and hold Landlord, its agents, employees, lenders, shareholders, directors, representatives, successors and assigns harmless from and against any and all actions, causes of action, losses, damages, costs, claims, expenses, penalties, obligations or liabilities of any kind whatsoever (including but not limited to reasonable attorneys’ fees) arising out of or relating to any Hazardous Materials employed, used, transported across, or otherwise dealt with by Tenant (or invitees, or persons or entities under the control of Tenant) in connection with or with respect to the Premises. Notwithstanding any of the provisions of this Lease, the indemnity obligation of Tenant pursuant to this ¶8.f. shall survive the termination of this

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Lease and shall relate to any occurrence as described in this ¶8.f. occurring in connection with this Lease. Landlord hereby agrees to indemnify, defend and hold Tenant harmless from and against any and all actions, causes of action, losses, damages, costs, claims, expenses, penalties, obligations or liabilities of any kind whatsoever (including reasonable attorneys’ fees) arising out of or relating to (i) Hazardous Materials employed, used, transported to the Premises, for which the Premises are a part thereof, by Landlord, its agents or employees or (ii) Hazardous Materials existing on, in or under the Premises as of the date of this Lease. For purposes of this Lease the term “Hazardous Materials” shall mean any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended, or the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended, or any other federal, state, or local law, ordinance, rule or regulation applicable to the Premises, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous, or any substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (PCB’s), or radon gas, urea formaldehyde, asbestos or lead.

9.	SIGNS AND COMMUNICATIONS ANTENNAE. Tenant shall not place any sign or communications antennae upon or adjacent to the Premises, except that Tenant may, with Landlord’s prior written consent, install such signs (but not on the roof) as are reasonably required to indicate Tenant’s company name or logo provided such signs are in compliance with Landlord’s standard sign criteria or install communications antennae used exclusively by Tenant provided such signs and/or communications antennae are in compliance with all applicable governmental requirements and the CC&R’s. The installation of any sign or communications antennae on or adjacent to the Premises by or for Tenant shall be subject to the provisions of 13. (Repairs and Maintenance). Tenant shall remove any sign or communications antennae placed on or adjacent to the Premises by Tenant upon the expiration of the Term or sooner termination of this Lease, and Tenant shall repair any damage or injury to the Premises caused thereby, all at Tenant’s expense. If any signs or communications antennae are not removed, or necessary repairs not made, Landlord shall have the right to remove the signs or communications antennae and repair any damage or injury to the Premises at Tenant’s sole cost and expense. Notwithstanding any other provision of this Lease to the contrary, Landlord reserves all rights to the use of the roof and the right to install and receive all revenues from the installation of such communications antennae on the Premises as do not unreasonably interfere with the conduct of Tenant’s business on the Premises. Landlord will, however, consult with Tenant regarding the location of any antennae placed on the Premises and attempt to comply with Tenant’s reasonable request as to location.
10.	PERSONAL PROPERTY TAXES. Tenant shall pay at least ten (10) days prior to delinquency all taxes assessed against and levied upon Tenant owned leasehold improvements, trade fixtures, furnishings, equipment and all personal property of Tenant contained in the Premises or elsewhere. When possible, Tenant shall cause its leasehold improvements, trade fixtures, furnishings, equipment and all other 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 thirty (30) days after receipt of a written statement setting forth the taxes applicable to Tenant’s property.
11.	REAL PROPERTY TAXES

a.	Payment of Taxes. Landlord shall pay the Real Property Taxes, as defined in ¶11.C., during the Term of this Lease. Subject to ¶11.b., Tenant shall promptly reimburse Landlord for such Real Property Taxes paid by Landlord.
b.	Advance Payment. In order to ensure payment when due and before delinquency of any or all Real Property Taxes, Landlord shall provide to Tenant a copy of the tax bill for the current Real Property Taxes applicable to the Premises upon receipt by Landlord, and Tenant shall pay that amount to Landlord at least ten (10) business days before the delinquency date of the tax bill. If the amounts paid to Landlord by Tenant under the provisions of this ¶11. are insufficient to discharge the obligations of Tenant to pay such Real Property Taxes as the same become due, Tenant shall pay to Landlord, upon Landlord’s demand, such additional sums as are necessary to pay such obligations. All moneys paid to Landlord under this ¶11. may be intermingled with other moneys of Landlord and shall not bear interest.
c.	Definition of “Real Property Taxes”. As used herein, the term “Real Property Taxes’ shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax or other fee, charge, or excise which may be imposed as a substitute for any of the foregoing (other than inheritance, personal income or estate taxes) imposed upon the Premises by any authority having the direct or indirect power to tax, including any city, county, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, levied against any legal or equitable interest of Landlord in the Premises, Landlord’s right to rent or other income therefrom, and/or Landlord’s business of leasing the Premises. 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, or changes in applicable law taking effect, during the Term of this Lease, including but not limited to a change in the ownership of the Premises or in the improvements thereon, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not contemplated by the parties hereto.

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d.   Appeals. In the event that either Landlord or Tenant desires to appeal or contest any aspect of any assessment or payment of any Real Property Tax, that party shall consult with the other and the parties shall mutually agree on which party is better suited to pursue the appeal. Whether Landlord or Tenant is the appealing party, Tenant shall be responsible for payment of the cost of the appeal.

12.	UTILITIES. Tenant 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. If any such services are not separately metered to Tenant, Tenant shall pay a reasonable proportion, to be determined by Landlord, of all charges jointly metered with other premises.
13.	REPAIRS AND MAINTENANCE

a.   Tenant’s Obligations.

1)	General. Tenant shall, at Tenant’s sole cost and expense and at all times, contract for janitorial services and supplies and keep the Premises and every part thereof in good order, condition and repair, structural and non-structural (whether or not such portion of the Premises requiring repairs, or the means of repairing same, are reasonably or readily accessible to Tenant, and whether or not the need for such repairs occurs as a result of Tenant’s use, any prior use, the elements or the age of such portion of the Premises), including, without limiting the generality of the foregoing, all equipment or facilities serving the Premises, such as plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, fired or unfired pressure vessels, fire sprinkler and/or standpipe and hose or other automatic fire extinguishing system, including fire alarm and/or smoke detection systems and equipment, fire hydrants, fixtures, walls (interior and exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways located in, on, about or adjacent to the Premises. Tenant shall not cause or permit any Hazardous Material to be spilled or released in, on, under or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Tenant’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, the elements surrounding same, or neighboring properties, that was caused or materially contributed to by Tenant, or pertaining to or involving any Hazardous Materials and/or storage tank brought onto the Premises by or for Tenant or under its control. Tenant, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices. Tenant’s obligations to reimburse Landlord as part of Operating Expenses shall include restorations, replacements (i.e., parking lot, landscaping) or renewals when necessary in Landlord’s reasonable discretion to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair.
2)	Contracts. Tenant shall, at Tenant’s sole cost and expense, procure and maintain contracts, with copies to Landlord, in customary form and substance for, and with contractors specializing and experienced in, the inspection, maintenance and service of the following equipment and improvements, if any, located on the Premises: (i) heating, air conditioning and ventilation equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler and/or standpipe and hose or other automatic fire extinguishing systems, including fire alarm and/or smoke detection, (iv) landscaping and irrigation systems, (v) roof covering and drain maintenance and (vi) asphalt and parking lot maintenance. Tenant shall keep a detailed preventative maintenance schedule and log showing the frequency of maintenance on all HVAC, mechanical, electrical and other systems of the Premises and provide Landlord with a copy of same quarterly.
3)	As-Is Condition. The parties affirm that Landlord, its subsidiaries, officers, shareholders, members, managers, directors, agents and/or employees have made no representations to Tenant respecting the condition of the Premises except as specifically stated herein.
4)	ADA. Tenant acknowledges that as of the Commencement Date, the Premises may not comply with the accessibility provisions of Title 24 of the California Code of Regulations as interpreted by the Office of the State Architect (“ADA”), and that Landlord shall have no obligation with respect to any such failure of the Premises to so comply. Tenant shall, at its cost, at any time during the Term as required by any applicable governmental agency having jurisdiction over the Premises, make such modifications and alterations to the Premises as may be required in order to fully comply with the provisions of the ADA, as from time to time amended, and any and all regulations issued pursuant to or in connection with the ADA in such a manner as to satisfy the applicable governmental agency or agencies requiring remediation. Tenant shall at least thirty (30) days prior to the commencement of any construction in connection with satisfaction of the ADA, give written notice to Landlord of its intended commencement of construction together with sufficient details so as to reasonably disclose to Landlord the nature of the proposed construction, copies of any notices received by Tenant from applicable governmental agencies in connection with the ADA and such other documents or information as Landlord may reasonably request. In any event, notwithstanding anything to the contrary contained in this Lease, prior to the termination of the Term, Tenant shall, at its cost, make such modifications and alterations to the Premises as may be required to comply fully with the

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ADA as from time to time amended and any and all regulations issued thereunder. Tenant shall give the Landlord thirty (30) days prior written notice as described above in connection with any such construction. Any and all construction required to so comply with the ADA shall be completed by Tenant prior to the expiration of the Term.

b.	Landlord’s Obligations. Landlord shall have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, whether structural or non structural, all of which obligations are intended to be that of the Tenant under ¶13.a. hereof.
c.	Compliance with Governmental Regulations. Tenant shall, at its own cost and expense, promptly and properly observe and comply with all present and future orders, regulations, directions, rules, laws, ordinances, and requirements of all governmental authorities (including but not limited to state, municipal, county and federal governments and their departments, bureaus, boards and officials) arising from the use or occupancy of, or applicable to, the Premises or privileges appurtenant to or in connection with the enjoyment of the Premises. Tenant shall also comply with all such rules, laws, ordinances and requirements at the time Tenant makes any alteration, addition or change to the Premises.
d.	Miscellaneous.

1)	Landlord and Tenant shall each do all acts required to comply with all applicable laws, ordinances and rules of any public authority relating to their respective maintenance obligations as set forth herein.
2)	Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford the Tenant the right to make repairs at Landlord’s expense or to terminate this Lease because of Landlord’s failure to keep the Premises in good order, condition and repair and Tenant hereby specifically waives the provisions of California Civil Code Sections 1941 and 1942.
3)	Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry, as determined by Landlord or Landlord’s structural engineer. The cost of any such determination made by Landlord’s structural engineer shall be paid for by Tenant upon demand.
4)	Except as otherwise expressly provided in this Lease, and except in instances of Landlord’s gross negligence or willful misconduct, Landlord shall have no liability to Tenant nor shall Tenant’s obligations under this Lease be reduced or abated in any manner whatsoever by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord making any repairs or changes which Landlord is required to make or is permitted to make by this Lease or by any tenant’s lease or is required by law to make in or to any portion of the Premises. Landlord shall nevertheless use reasonable efforts to minimize any interference with Tenant’s business in the Premises.
5)	Tenant shall give Landlord prompt notice of any damage to or defective condition in any part or appurtenance of the Premises’ mechanical, electrical, plumbing, HVAC or other systems serving, located in or passing through the Premises. Upon request by Landlord, Tenant shall provide Landlord with evidence reasonably acceptable to Landlord of service contracts on such systems.
6)	Landlord may, at Landlord’s option, choose to perform any of the Tenant’s obligations in this ¶13. (“Tenant’s Obligations”) as to the exterior of the Premises (e.g., landscaping, building exterior and parking lot). As to any Tenant’s Obligations as to the interior of the Premises, Landlord may perform only those Tenant’s Obligations which Tenant fails to perform itself. The cost of any such Tenant’s Obligations so performed by Landlord shall be at Tenant’s sole cost and expense. Tenant shall reimburse Landlord for any such costs incurred by Landlord in the performance of Tenant’s Obligations within thirty (30) days of receipt of a billing from Landlord.

14.   ALTERATIONS. Tenant shall not make any alterations to the Premises (“Alterations”) without Landlord’s prior written consent, which consent shall not be unreasonably withheld, provided however that Tenant may make non-structural alterations costing less than $10,000 per event without Landlord’s consent. Regardless of whether Landlord’s consent for an Alteration is required, Tenant must provide Landlord at least fifteen (15) business days prior to the commencement of any Alteration with a complete description of each such Alteration including any building permit drawing(s) and specifications. Landlord may post notices regarding non-responsibility in accordance with the laws of the state in which the Premises are located. All Alterations made by Tenant, whether or not subject to Landlord’s consent, shall be performed by Tenant and its contractors in a first class workmanlike manner and permits and inspections shall be obtained from all required governmental entities. Landlord shall respond to Tenant within fifteen (15) business days of actual receipt of Tenant’s written request for consent to any Alterations. If Landlord fails to respond within thirty (30) days of actual receipt, the Alterations shall be deemed approved and not subject to removal at the end of the Term. At the time Landlord gives its consent to any Alterations, it shall designate whether Tenant will be required to remove some or all of such Alterations upon the expiration or termination of this Lease or whether Tenant will be able to leave the Alterations and surrender them with the Premises. Everything else notwithstanding, in no event will Tenant be required to remove or restore Alterations that are generic office tenant improvements or engineering (dry) labs. Landlord may, upon 60 days prior written notice before the expiration of the Term, require Tenant to remove some or all of the Alterations for which

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	Landlord’s consent was not previously requested. Before the last day of the Term, Tenant shall at its own cost also remove those Alterations for which Landlord previously notified Tenant removal would be required. If Landlord so elects, Tenant shall at its own cost restore those Alterations for which consent was not previously requested to the condition designated by Landlord in its election, before the last day of the Term. Should Landlord consent in writing to Tenant’s Alteration of the Premises, Tenant shall contract with a contractor approved by Landlord for the construction of such Alterations, shall secure all appropriate governmental approvals and permits, and shall complete such Alterations with due diligence in compliance with plans and specifications approved by Landlord. Tenant shall pay all costs for such construction and shall keep the Premises free and clear of all mechanics’ liens which may result from construction by Tenant.
	Notwithstanding anything in this Lease to the contrary, Landlord will inspect the existing alterations and improvements in the Premises within ninety (90) days of the date the Lease is executed in full by both parties, and Tenant shall not be obligated to remove any elements of the existing alterations and improvements that Landlord approves, but subject to the paragraph immediately above, shall be obligated to remove as of the Expiration Date of this Lease any alterations and improvements to the Premises made subsequent to the Commencement Date of the Prior Lease (as defined below) which Landlord has not approved in writing. If Landlord fails to inspect or provide written notice regarding its approval to Tenant within the ninety (90) day period described above, all existing alterations and improvements shall be deemed approved and need not be removed as of the Expiration Date of this Lease.
15.	RELEASE AND INDEMNITY. As material consideration to Landlord, Tenant agrees that Landlord shall not be liable to Tenant for any damage to Tenant or Tenant’s property from any cause, except for damages resulting from Landlord’s gross negligence or willful misconduct, and Tenant waives all claims against Landlord for damage to persons or property arising for any reason, except for damage resulting directly from Landlord’s gross negligence or willful misconduct. Tenant shall indemnify and hold Landlord, its subsidiaries, officers, shareholders, directors, agents and employees harmless from all damages including attorneys’ fees and costs arising out of any damage to any person or property occurring in, on or about the Premises or Tenant’s use of the Premises or Tenant’s breach of any term of this Lease.
16.	INSURANCE

a.

Payment For Insurance. Regardless of whether the Landlord or Tenant is the Insuring Party, Tenant shall pay for all insurance for the Premises required under this ¶16. (“Insurance Costs”) either directly or by reimbursement to Landlord as set forth in this ¶16. Premiums for policy periods commencing prior to or extending beyond the Lease Term shall be prorated to correspond to the Lease Term. Payment shall be made by Tenant to Landlord within thirty (30) days following receipt of an invoice for any amount due.

b.

Liability Insurance.

1)

Carried by Tenant. Whether or not Tenant is the Insuring Party, Tenant shall obtain and keep in force during the Term of this Lease a commercial general liability policy of insurance protecting Tenant and Landlord (as an additional insured) against claims for bodily injury, personal injury and property damage based upon, involving 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 $5,000,000 per occurrence with an “Additional Insured-Managers or Landlords of Premises” endorsement and contain an “Amendment of the Pollution Exclusion” 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 Tenant’s indemnity obligations under this Lease. The limits of said insurance required by this Lease or as carried by Tenant shall not, however, limit the liability of Tenant nor relieve Tenant of any obligation hereunder. All insurance to be carried by Tenant shall be primary to and not contributory with any similar insurance carried by Landlord, whose insurance shall be considered excess insurance only. All insurance coverage required pursuant to this ¶16. which is to name Landlord as an additional named insured shall also name Landlord’s subsidiaries, directors, agents, members, managers, officers and employees as named insureds.

2)

Carried by Landlord. In the event Landlord is the Insuring Party, Landlord shall also maintain liability insurance as described in ¶16.b.1), in addition to, and not in lieu of the insurance required to be maintained by Tenant. In the event Tenant is the Insuring Party, Landlord shall in addition carry Lessor’s Risk Coverage and insure the Premises on Landlord’s umbrella policy. Tenant shall not be named as an additional insured therein under any insurance obtained by Landlord in accordance with this ¶16.b.2).

c.   Property Insurance - Building, Improvements and Rental Value.

1)   Building and Improvements. The Insuring Party shall obtain and keep in force during the Term of this Lease a policy or policies with Landlord named as an additional insured (if Tenant is the Insuring Party), with loss payable to Landlord and to the holders of any mortgages, deeds of trust or ground leases on the Premises (“Lender(s)”), 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 Lender(s), but in no event more than the commercially reasonable and

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	available insurable value thereof if, by reason of the unique nature or age of the improvements involved, such latter amount is less than full replacement cost. If the coverage is available at a commercially reasonable cost, such policy or policies shall insure against all risks of direct physical loss or damage (including Boiler and Machinery coverage and the perils of flood and earthquake), including coverage for any additional costs resulting from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Premises required to be demolished shall also contain an agreed valuation provision in lieu of any coinsurance clause and waiver of subrogation. If such insurance coverage has a deductible clause, then Tenant shall be liable for such deductible amount. Even if Landlord is the Insuring Party, Tenant’s personal property shall be insured by Tenant under ¶16.d. rather than by Landlord.
2)	Rental Value. The Insuring Party shall, in addition, obtain and keep in force during the term of this Lease a policy or policies with Landlord named as an additional insured (if Tenant is the Insuring Party), with loss payable to Landlord and Lender(s), insuring the loss of the full rental and other charges payable by Tenant to Landlord under this Lease for one (1) year (including all Real Property Taxes, Insurance Costs and any scheduled Rent increases). Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year’s loss of Rent from the date of any such loss. 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, Real Property Taxes, Insurance Costs and other expenses, if any, otherwise payable by Tenant, for the next twelve (12) month period. Tenant shall be liable for any deductible amount in the event of such loss.
3)	Adjacent Premises. If the Premises are part of a larger building, or if the Premises are part of a group of buildings owned by Landlord which are adjacent to the Premises, the Tenant shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase is caused by Tenant’s acts, omissions, use or occupancy of the Premises.
4)	Tenant’s Improvements. If the Landlord is the Insuring Party, the Landlord shall not be required to insure Tenant’s personal property and leasehold improvements unless the item in question has become the property of Landlord under the terms of this Lease. If Tenant is the Insuring Party, the policy carried by Tenant under this ¶16.c. shall insure Tenant’s personal property and leasehold improvements.

d.	Tenant’s Property Insurance. Subject to the requirements of ¶16.e., Tenant at its cost shall either by separate policy or by endorsement to a policy already carried, maintain insurance coverage on all of Tenant’s personal property and Tenant’s leasehold improvements in, on or about the Premises similar in coverage to that carried by the Insuring Party under ¶16.c. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $100,000 per occurrence. The proceeds from any such insurance shall be used by Tenant for the replacement of personal property or the restoration of Tenant owned leasehold improvements. Tenant shall be the Insuring Party with respect to the insurance required by this ¶16.d. and shall provide Landlord with written evidence that such insurance is in force.
e.	Insurance Policies. If Tenant is the Insuring Party, Insurance required per this ¶16. shall be with companies duly licensed to transact business in the state where the Premises are located, and maintaining during the policy term a “General Policyholders Rating” of at least A- X, or such other minimal rating as may be required by Lender(s) as set forth in the most current issue of “Best’s Insurance Guide”. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in this ¶16. If Tenant is the Insuring Party, Tenant shall cause to be delivered to Landlord certificates evidencing the existence and amounts of such insurance with the insureds and loss payable clauses as required by this Lease. No such policy shall be cancelable or subject to modification or lapse except after thirty (30) days prior written notice to Landlord. Tenant shall at least thirty (30) days prior to the expiration of such policies, furnish Landlord with evidence of renewals or certificates of insurance evidencing renewal thereof, or Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant to Landlord upon demand. If the Insuring Party shall fail to procure and maintain the insurance required to be carried by the Insuring Party under this ¶16., the other Party may, but shall not be required to, procure and maintain the same, but at Tenant’s expense.
f.	Mutual Waiver. Notwithstanding anything to the contrary contained in this Lease, to the extent that this release and waiver does not invalidate or impair their respective insurance policies, the parties hereto release each other and their respective agents, employees, officers, directors, shareholders, successors, assignees and subtenants from all liability for injury to any person or damage to any property that is caused by or results from a risk which is actually insured against pursuant to the provisions of this Lease without regard to the negligence or willful misconduct of the parties so released. Each party shall use its commercially reasonable efforts to cause each insurance policy it obtains to provide that the insurer thereunder waives all right of recovery by way of subrogation as required herein in connection with any injury or damage covered by the policy. If such insurance policy cannot be obtained with such waiver of subrogation, or if such waiver of subrogation is only available at additional cost and the party for whose benefit the waiver is not obtained does not pay such additional costs after reasonable notice, then the party obtaining such

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insurance shall promptly notify the other party of the inability to obtain insurance coverage with the waiver of subrogation.

g.

Tenant’s Option. Notwithstanding anything to the contrary contained in this Lease, if for any given policy period, Tenant is able to obtain insurance coverage which meets the requirements of this 16. at a cost lower than Landlord’s cost, then Tenant may be the Insuring Party. At least thirty (30) days prior to the beginning of any policy period for which Tenant desires to be the Insuring Party, Tenant shall submit to Landlord its insurance quote and proposed policy provisions. Within five (5) business days of receipt, Landlord shall review Tenant’s insurance quote and proposed policy provisions, and Landlord may request that the lender as to any loan(s) encumbering the property described in Exhibit A hereto (“Lender”) also review Tenant’s insurance quote and proposed policy provisions. Promptly following said reviews by Lender and Landlord, Landlord may, in its reasonable discretion, approve or reject Tenant’s proposed insurance. If approved, Tenant shall cause the approved policies to be issued, with copies of the insurance certificate(s) to be immediately provided to Landlord. If rejected, Landlord shall specify the reasons for such rejection in writing. Tenant shall have three (3) business days from the receipt of Landlord’s written notice of rejection to submit a revised insurance quote and proposed policy provisions. Within three (3) business days after Landlord’s receipt of Tenant’s revised insurance quote and policy provisions, Landlord shall accept Tenant’s revised insurance if it adequately addresses the reasons initially specified by Landlord for rejection. If in Landlord’s reasonable determination, such revised insurance quote and policy provisions do not adequately address the reasons initially specified by Landlord for rejection, Landlord may reject Tenant’s revised insurance quote and policy provisions by stating the reasons therefor in writing; however, such rejection shall be final in regard to that policy period, and Landlord shall be the Insuring Party for that policy period. If Landlord approves Tenant’s insurance, Tenant’s failure to provide the insurance certificate(s) to Landlord at least ten (10) business days prior to the commencement of the applicable policy period shall result in Landlord being the Insuring Party.

17.   DAMAGE AND DESTRUCTION

a.	Damage - Restoration Required. In the event that the Premises is damaged by fire or other casualty which is covered under insurance pursuant to the provisions of ¶16. above, Landlord shall restore such damage provided that: (i) the cost to repair the destruction of the Premises does not exceed sixty percent (60%) of the then replacement value of the Premises; (ii) the insurance proceeds are available (inclusive of any deductible amounts) to pay one hundred percent (100%) of the cost of restoration; and (iii) there exists at least eighteen (18) months before the end of the Term and, in the reasonable judgment of Landlord, the restoration can be completed within two hundred and seventy (270) days after the date of the damage or casualty under the laws and regulations of the state, federal, county and municipal authorities having jurisdiction. Regardless of whether Tenant or Landlord is the Insuring Party, the deductible amount of any insurance coverage shall be paid by Tenant except in the case of flood or earthquake and in such case the deductible amount in excess of $10,000 per occurrence shall be paid by Landlord. If such conditions apply so as to require Landlord to restore such damage pursuant to this ¶17.a., this Lease shall continue in full force and effect, unless otherwise agreed to in writing by Landlord and Tenant. Tenant shall be entitled to a proportionate reduction of Rent while such restoration takes place, such proportionate reduction to be based on the extent to which the damage and restoration efforts interfere with Tenant’s business in the Premises. Tenant’s right to a reduction of Rent hereunder shall be Tenant’s sole and exclusive remedy in connection with any such damage.
b.	Damage - Restoration Not Required. In the event that the Premises is damaged by a fire or other casualty and Landlord is not required to restore such damage in accordance with the provisions of ¶17.a. immediately above, Landlord shall have the option to either (i) repair or restore such damage, with the Lease continuing in full force and effect, but Rent to be proportionately abated as provided in ¶17.a. above; or (ii) give notice to Tenant at any time within thirty (30) days after the occurrence of such damage terminating this Lease as of a date to be specified in such notice which date shall not be less than thirty (30) nor more than sixty (60) days after the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent, reduced by any proportionate reduction in Rent as provided for in ¶17.a. above, shall be paid to the date of such termination. Notwithstanding the foregoing, if Tenant delivers to Landlord the funds necessary to make up the shortage (or absence) in insurance proceeds and the restoration can be completed in a two hundred seventy (270) day period, as reasonably determined by Landlord, and the destruction of the Premises does not exceed sixty percent (60%) of the then replacement value, Landlord shall restore the Premises as provided in ¶17.a. above.
c.	End of Term Casualty. Notwithstanding the provisions of ¶17.a. and ¶17.b. above, Landlord may terminate this Lease if the Premises is damaged by fire or other casualty (and Landlord’s reasonably estimated cost of restoration of the Premises exceeds twenty-five percent (25%) of the then replacement value of the Premises) and such damage or casualty occurs during the last twelve (12) months of the Term of this Lease (or the Term of any renewal option, if applicable) by giving the other notice thereof at any time within thirty (30) days following the occurrence of such damage or casualty. Such notice shall specify the date of such termination which date shall not be less than thirty (30) nor more than sixty (60) days following the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent shall be paid to the date of such termination.

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d.	Termination by Tenant. In the event that the destruction to the Premises cannot be restored as required herein under applicable laws and regulations within two hundred seventy (270) days of the damage or casualty, notwithstanding the availability of insurance proceeds, Tenant shall have the right to terminate this Lease by giving the Landlord notice thereof within thirty (30) days of date of the occurrence of such casualty specifying the date of termination which shall not be less than thirty (30) days nor more than sixty (60) days following the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent, reduced by any proportionate reduction in Rent as provided for in ¶17.a. above, shall be paid to the date of such termination.
e.	Restoration. Landlord agrees that, in any case in which Landlord is required to, or otherwise agrees to restore the Premises, that Landlord shall proceed with due diligence to make all appropriate claims and applications for the proceeds of insurance and to apply for and obtain all permits necessary for the restoration of the Premises. Landlord shall use reasonable efforts to enforce any and all provisions in any mortgage, deed of trust or other encumbrance on the Premises requiring Landlord and Lender to permit insurance proceeds to be used for restoration. Landlord shall restore the Premises to the condition existing prior to the date of the damage if permitted by applicable law. Landlord shall not be required to restore alterations made by Tenant, Tenant’s improvements, Tenant’s trade fixtures and Tenant’s personal property, such excluded items being the sole responsibility of Tenant to restore provided, however, that Landlord shall, to the extent of available insurance proceeds, restore Tenant Improvements to the Premises made by Tenant such as interior offices, lab and production improvements and other like improvements.
f.	Waiver. Tenant waives the provisions of Civil Code §1932(2) and Civil Code §1933(4) with respect to any destruction of the Premises.

18.   CONDEMNATION

a.	Definitions. The following definitions shall apply: (1) “Condemnation” means (a) the exercise of any governmental power of eminent domain, whether by legal proceedings or otherwise by condemnor, or (b) the voluntary sale or transfer by Landlord to any condemnor either under threat of condemnation or while legal proceedings for condemnation are proceeding; (2) “Date of Taking” means the date the condemnor has right to possession of the property being condemned; (3) “Award” means all compensation, sums or anything of value awarded, paid or received on a total or partial condemnation; and (4) “Condemnor” means any public or quasi-public authority, or private corporation or individual, having power of condemnation.
b.	Obligations to be Governed by Lease. If during the Term of the Lease there is any taking of all or any part of the Premises, the rights and obligations of the parties shall be determined strictly pursuant to this Lease. Each party waives the provisions of Code of Civil Procedure §1265.130 allowing either party to petition the Superior Court to terminate this Lease in the event of a partial condemnation of the Premises.
c.	Total or Partial Taking. If the Premises are totally taken by Condemnation, this Lease shall terminate on the Date of Taking. If any portion of the Premises is taken by Condemnation, this Lease shall remain in effect, except that Tenant can elect to terminate this Lease if the remaining portion of the Premises is rendered unsuitable for Tenant’s continued use of the Premises. If Tenant elects to terminate this Lease, Tenant must exercise its right to terminate by giving notice to Landlord within thirty (30) days after the nature and extent of the Condemnation have been finally determined. If Tenant elects to terminate this Lease, Tenant shall also notify Landlord of the date of termination, which date shall not be earlier than thirty (30) days nor later than ninety (90) days after Tenant has notified Landlord of its election to terminate; except that this Lease shall terminate on the Date of Taking if the Date of Taking falls on a date before the date of termination as designated by Tenant. If any portion of the Premises is taken by Condemnation and this Lease remains in full force and effect, on the Date of Taking the Base Rent shall be reduced by an amount in the same ratio as the total number of square feet in the building(s) which are a part of the Premises taken bears to the total number of square feet in the building(s) which are a part of the Premises immediately before the Date of Taking. Any Award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Landlord, whether such Award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Tenant shall be entitled to any compensation separately awarded to Tenant for Tenant’s relocation expenses and/or loss of Tenant’s trade fixtures.

19.   ASSIGNMENT OR SUBLEASE

a.   Tenant shall not assign or encumber its interest in this Lease or the Premises or sublease all or any part of the Premises or allow any other person or entity (except Tenant’s authorized representatives, employees, invitees, guests or a Permitted Transferee) to occupy or use all or any part of the Premises without first obtaining Landlord’s consent, which consent shall not be unreasonably withheld. Any assignment, encumbrance or sublease without Landlord’s prior written consent shall be voidable and at Landlord’s election, shall constitute a default. If Tenant is a partnership, a withdrawal or change, voluntary, involuntary or by operation of law of any partner, or the dissolution of the partnership shall be deemed a voluntary assignment. If Tenant consists of more than one person, a purported assignment, voluntary or involuntary or by operation of law

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from one person to the other shall be deemed a voluntary assignment. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, or sale or other transfer of a controlling percentage of the capital stock of Tenant, or the sale of at least fifty percent (50%) of the value of the assets of Tenant shall be deemed a voluntary assignment. Notwithstanding the sentence immediately above, if the Tenant is a corporation, the Tenant shall be entitled to assign this Lease without Landlord’s prior written consent in the event of a reorganization of Tenant through the sale of all or a portion of Tenant’s Capital Stock by Initial Public Offering (such event shall be referred to as a transfer to a “Permitted Transferee”). In connection with any assignment, Landlord shall be entitled to require an increase in the Security Deposit to the extent that such increase should be commercially reasonable in Landlord’s discretion given the financial condition of Tenant and the assignee following such event. In connection with any Sublease, Landlord shall be entitled to hold any Security Deposit paid by Sublessee to Sublessor, which Security Deposit shall be held by landlord in accordance with the provisions of the Sublease. Tenant shall give Landlord at least sixty (60) days prior written notice of any intended transfer to a Permitted Transferee and in connection with such transfer shall provide to Landlord copies of any documents or other information as Landlord may reasonably request. Unless otherwise expressly agreed in writing by Landlord, no assignment shall relieve Tenant of any of its obligations pursuant to this Lease.

In the event of a sublease all Sublease Rent received by Tenant in excess of the Rent payable by Tenant to Landlord under this Lease applicable to the portion of the Premises subleased shall be deemed the “Bonus Amount”, after deducting therefrom the “Subleasing Costs” which shall include (i) commercially reasonable brokerage commissions, (ii) tenant improvements made at the request of a subtenant and (iii) attorneys’ fees incurred by Tenant in negotiating and documenting the sublease, which Subleasing Costs shall be amortized over the Term of the Sublease for the purpose of determining the Bonus Amount. Fifty percent (50%) of the Bonus Amount shall be promptly paid to Landlord following receipt by Tenant. If the Subleasing Costs are not known at the commencement of the sublease, the fifty percent (50%) of Bonus Amount due Landlord will be computed without deduction of Subleasing Costs and promptly paid to Landlord. Once the Subleasing Costs are presented to and verified by Landlord, the Bonus Amount paid by Tenant to date will be adjusted and Landlord shall give Tenant a credit against the next payment(s) due to Landlord from Tenant. The term “Sublease Rent” as used herein shall include any consideration of any kind received by Tenant from or on behalf of any subtenant, if the sums are related in any manner to the Premises, including, without limitation Rent, operating expense payments, bonus money and payments for the purchase of or usage of Tenant’s furniture, fixtures, inventory, equipment, accounts, goodwill, general intangibles and other assets. Each sublease approved by Landlord shall stand alone as to the computation of the Bonus Amount.

In the event of an assignment all Transfer Payments received by Tenant shall be deemed the “Bonus Amount”, after deducting there from the “Assignment Costs” which shall include (i) commercially reasonable brokerage commissions and (ii) attorneys’ fees incurred by Tenant in negotiating and documenting the assignment. Fifty percent (50%) of the Bonus Amount shall be promptly paid to Landlord following receipt by Tenant. If the Assignment Costs are not known at the commencement of the Assignment, the fifty percent (50%) of Bonus Amount due Landlord will be computed without deduction of Assignment Costs and promptly paid to Landlord. Once the Assignment Costs are presented to and verified by Landlord, the Bonus Amount paid by Tenant to date will be adjusted and Landlord shall give Tenant a credit against the next payment(s) due to Landlord from Tenant. The term “Transfer Payments” as used herein shall include any consideration of any kind received by Tenant from or on behalf of any assignee, if the sums are related in any manner to the Premises, including, without limitation assignment consideration, Rent, operating expense payments, bonus money and payments for the purchase of or usage of Tenant’s furniture, fixtures, inventory, equipment, accounts, goodwill, general intangibles and other assets.

If Tenant requests Landlord to consent to a proposed assignment or subletting, Tenant shall pay to
Landlord, whether or not consent is ultimately given, an amount equal to Landlord’s reasonable attorneys’ fees and costs incurred in connection with such request, (not to exceed $5,000). Each request for consent to an assignment or subletting shall be in writing, and shall be accompanied by information as may be relevant to Landlord’s determination as to the financial and operational responsibility and stability of the proposed assignee or sublessee and the appropriateness of the proposed use by such assignee or sublessee. Such information shall include a summary of the proposed use of, and any proposed modifications to, the Premises. Tenant shall provide Landlord with such other or additional information and/or documentation as may reasonably be requested by Landlord. Tenant shall, upon completion of any assignment or subletting of all or any portion of the Premises, immediately and irrevocably assign to Landlord as security for Tenant’s obligations under the Lease, all Sublease Rent and/or Transfer Payments from any such subletting or assignment. Landlord, as assignee and attorney in fact for Tenant, shall have the right to collect all rent and other revenues collectable pursuant to any such sublet or assignment and apply such rent and other revenues towards Tenant’s obligations under the Lease.

b.   No interest of Tenant in this Lease shall be assignable by involuntary assignment through operation of law (including without limitation the transfer of this Lease by testacy or intestacy). Each of the following acts shall be considered an involuntary assignment: (a) if Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or institutes proceedings under the Bankruptcy Act in which Tenant is the bankrupt; or if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; or

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(b) if a writ of attachment or execution is levied on this Lease; or (c) if in any proceeding or action to which Tenant is a party, a receiver is appointed with authority to take possession of the Premises. An involuntary assignment shall constitute a default by Tenant and Landlord shall have the right to elect to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant.

c.

Notwithstanding any provision to this Lease to the contrary, in any event where Landlord’s consent is required for assignment or sublease, Landlord may at its option, elect to terminate the Lease instead of approving the requested assignment or sublease, except if the requested assignment or sublease is for a period of less than one year (including any renewal periods). Should Landlord so elect to terminate this Lease, all of the obligations of the parties thereunder, to the extent not accrued, shall terminate on the later of sixty (60) days following Landlord’s notice to Tenant of its election hereunder, or the effective date of the proposed assignment or subletting sought by the Tenant, but in no event later than one hundred twenty (120) days following the date of Landlord’s election under this ¶19.C. At the time of termination, all obligations of both parties hereunder shall terminate as to obligations thereafter accruing except as otherwise expressly provided in this Lease.

20.   DEFAULT. The occurrence of any of the following shall constitute a default by Tenant: (a) a failure of Tenant to pay Rent within ten (10) days of its due date; (b) abandonment of the Premises; or (c) failure to timely perform any other provision of this Lease where such failure continues for a period in excess of thirty days following notice of such failure, provided however, that if the nature of such failure is such that it cannot reasonably be cured within thirty days, then Tenant shall not be in default if Tenant commences to cure such failure within thirty days and thereafter diligently prosecutes the cure to completion. Tenant shall give written notice to Landlord of any default by Landlord of its obligations pursuant to this Lease asserted by Tenant (with a copy of such notice to any lender (“Lender”) against the Premises). Landlord and Landlord’s Lender shall be afforded a reasonable opportunity to cure any claimed default by Landlord and Landlord shall not be considered in default so long as Landlord (or Landlord’s Lender) commences such cure within a reasonable period of time and thereafter, continues to attempt to complete such cure. Prior to any obligation recited in this Lease to provide a Lender with any notice, Landlord shall provide Tenant with the name and address of its Lender in writing.

21.   LANDLORD’S REMEDIES. Landlord shall have the following remedies if Tenant is in default (these remedies are not exclusive; they are cumulative and in addition to any remedies now or later allowed by law):

a.

Landlord may continue this Lease in full force and effect, and this Lease will continue in effect so long as Landlord does not terminate Tenant’s right to possession, and Landlord shall have the right to collect Rent when due. During the period Tenant is in default, Landlord can enter the Premises and relet the Premises, or any part of the Premises, to third parties for Tenant’s account. Tenant shall be liable immediately to Landlord for all costs Landlord incurs in reletting the Premises, including without limitation, brokers’ commissions, expenses of remodeling the Premises required by the reletting, and like costs. Reletting can be for a period shorter or longer than the remaining Term of this Lease. Tenant shall pay to Landlord the Rent due under this Lease on the dates the Rent is due, less the Rent Landlord receives from any reletting. No act by Landlord allowed by this ¶21.a. shall terminate this Lease unless Landlord notifies Tenant in writing that Landlord elects to terminate this Lease. After Tenant’s default and for so long as Landlord does not terminate Tenant’s right to possession of the Premises, if Tenant obtains Landlord’s consent, Tenant shall have the right to assign or sublet its interest in this Lease, but Tenant shall not be released from liability. Landlord’s consent to such a proposed assignment or subletting shall not be unreasonably withheld. If Landlord elects to relet the Premises as provided in this ¶21.a., Rent that Landlord receives from reletting shall be applied to the payment of: first, any indebtedness from Tenant to Landlord other than Rent due from Tenant; second, all costs, including for maintenance incurred by Landlord in reletting; and third, Rent due and unpaid under this Lease. After deducting the payments referred to in this ¶21.a., any sum remaining from the Rent Landlord receives from reletting shall be held by Landlord and applied in payment of future Rent as Rent becomes due under this Lease. In no event shall Tenant be entitled to any excess Rent received by Landlord. If, on the date Rent is due under this Lease, the Rent received from the reletting is less than the Rent due on that date, Tenant shall pay to Landlord, in addition to the remaining Rent due, all costs including for maintenance Landlord incurred in reletting that remain after applying the Rent received from the reletting as provided in this 21.a.; and

b.

Landlord may terminate Tenant’s right to possession of the Premises at any such time. No act by Landlord other than giving express written notice thereof to Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on Landlord’s initiative to protect Landlord’s interest under this Lease shall not constitute a termination of Tenant’s right to possession. Upon termination of Tenant’s right to possession, Landlord has the right to recover from Tenant: (1) the Worth of the unpaid Rent that had been earned at the time of termination of Tenant’s right to possession; (2) the Worth of the amount by which the unpaid Rent that would have been earned after the date of termination until the time of award exceeds the amount of the loss of Rent that Tenant proves could have been reasonably avoided; (3) the Worth of the amount of the unpaid Rent that would have been earned after the award throughout the remaining Term of the Lease to the extent such unpaid Rent exceeds the amount of the loss of Rent that Tenant proves could have been reasonably avoided; and (4) any other amount, including but not limited to, reasonable expenses incurred to relet the Premises, court costs, attorneys’ fees and collection costs necessary to compensate Landlord for all detriment caused by Tenant’s default. The “Worth”, as used above in (1) and (2) in this ¶21.b. is to be computed by allowing

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interest at the lesser of eighteen percent (18%) per annum or the maximum legal interest rate permitted by law. The “Worth”, as used above in (3) in this ¶21.b. is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%).

22.   ENTRY OF PREMISES. Landlord and/or its authorized representatives shall have the right after reasonable notice except for emergencies to enter the Premises at all reasonable times for any of the following purposes: (a) to determine whether the Premises are in good condition and whether Tenant is complying with its obligations under this Lease; (b) to do any necessary maintenance and to make any restoration to the Premises that Landlord has the right or obligation to perform; (c) to post “for sale” signs at any time during the Term, or to post “for rent” or “for lease” signs during the last one hundred eighty (180) days of the Term or during any period while Tenant is in default; (d) to show the Premises to prospective brokers, lenders, agents, buyers, tenants or persons interested in leasing or purchasing the Premises, at any time during the Term; or (e) to repair, maintain or improve the Premises and to erect scaffolding and protective barricades around and about the Premises but not so as to prevent entry to the Premises or to unreasonably interfere with Tenant’s use of the Premises and to do any other act or thing necessary for the safety or preservation of the Premises. Landlord shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance or other damage arising out of Landlord’s entry onto the Premises as provided in this ¶22. Tenant shall not be entitled to an abatement or reduction of Rent if Landlord exercises any rights reserved in this ¶22. Landlord shall conduct its activities on the Premises as provided herein in a commercially reasonable manner that will lessen the inconvenience, annoyance or disturbance to Tenant.

23.   SUBORDINATION.

a.	Automatic Subordination. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, and at the election of Landlord or Landlord’s Lender, this Lease shall be subject and subordinate at all times to (i) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Premises, (ii) the lien of any mortgage or deed of trust which may now exist or hereafter be executed affecting the Premises, and (iii) the lien of any mortgage or deed of trust which may hereafter be executed in any amount for which the Premises, ground leases or underlying leases, or Landlord’s interest or estate in any of said items is specified as security. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest (including without limitation to Lender) to Landlord (“Successor”). In connection with any such termination of a ground lease or underlying lease or any foreclosure or conveyance in lieu of foreclosure made in connection with any mortgage or deed of trust, then so long as Tenant is not in default after all applicable notice and cure periods pursuant to this Lease, Tenant shall not be disturbed in its possession of the Premises or in the enjoyment of its rights pursuant to this Lease during the Term of this Lease or any extension or renewal thereof. Notwithstanding any subordination of this Lease to the lien of any mortgage or deed of trust, the Lender, at any time, shall be entitled to subordinate the lien of its mortgage or deed of trust to this Lease by filing a notice of subordination in the County in which the Premises are located, and Lender shall agree in connection with any such filing, that Tenant shall not be disturbed in its possession of the Premises so long as Tenant is not in default pursuant to this Lease. In connection with any such filing, Tenant shall be obligated to attorney to and to become a Tenant of any Successor.
b.	Additional Subordination. From time to time at the request of Landlord, Tenant covenants and agrees to execute and deliver within ten (10) business days following the date of written request from Landlord, documents evidencing the priority or subordination of this Lease with respect to any ground lease or underlying lease or the lien of any mortgage or deed of trust in connection with the Premises. Any and all such documents shall be in such form as is reasonably acceptable to the Lender(s). Any subordination agreement so requested by Landlord shall provide for Tenant to attorn to the Successor and shall further provide that Tenant shall not be disturbed in its possession of the Premises or in the enjoyment of its rights pursuant to this Lease so long as Tenant is not in default after all applicable notice and cure periods with respect to its obligations pursuant to the Lease. Any such Subordination, Non-disturbance and Attornment Agreement shall be recorded in the official records of the office of the County Recorder in the County in which the Premises is located.
c.	Notice from Lender. Tenant shall be entitled to rely upon any notice given by a Lender in connection with the Premises requesting that Tenant make all future Rent payments to such Lender, and Tenant shall not be liable to Landlord for any payment made to such Lender in accordance with such notice. Notwithstanding any provision to the contrary of this Lease, a Successor shall not be (i) obligated to recognize the payment of Rent for a period of more than one month in advance; (ii) responsible for liabilities accrued pursuant to this Lease prior to the date (“Succession Date”) upon which the Successor becomes the “Landlord” hereunder; (iii) responsible to cure defaults of the Landlord pursuant to this Lease existing as of the Succession Date, except for defaults of a continuing nature of which Successor received notice (as provided in Paragraph 20) and in respect of which Tenant afforded Successor a reasonable cure period following such notice; (iv) responsible for any Security Deposit delivered by Tenant pursuant to this Lease not actually received by the Successor; or (v) bound by any execution, modification, termination or extension of this Lease or any grant of a purchase option or right of first refusal or any other action taken by the Landlord pursuant to this Lease, except in accordance with the provisions of an assignment of Leases executed by Landlord in favor of a Lender.

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24.	ESTOPPEL CERTIFICATE; TENANT FINANCIAL STATEMENTS. Tenant, at any time and from time to time, upon not less than ten (10) business days written notice from Landlord, will execute, acknowledge and deliver to Landlord and, at Landlord’s request, to any existing or prospective purchaser, ground lessor or mortgagee of any part of the Premises, a certificate of Tenant stating: (a) that Tenant has accepted the Premises (or, if Tenant has not done so, Tenant has not accepted the Premises and specifying the reasons therefor); (b) the Commencement and Expiration Dates of this Lease; (c) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that same is in full force and effect as modified and stating the modifications); (d) whether or not to the best of Tenant’s knowledge there are then existing any defenses against the enforcement of any of the obligations of Tenant under this Lease (and, if so, specifying same); (e) whether or not to the best of Tenant’s knowledge there are then existing any defaults by Landlord in the performance of its obligations under this Lease (and, if so, specifying same); (f) the dates, if any, to which the Rent and other charges under this Lease have been paid; (g) whether or not there are Rent increases during the Lease Term and if so the amount of same; (h) whether or not the Lease contains any options or rights of first offer or first refusal; (i) the amount of any Security Deposit or other sums due Tenant; (j) the current notice address for Tenant; and (k) any other information that may reasonably be required by any of such persons. It is intended that any such certificate of Tenant delivered pursuant to this ¶24. may be relied upon by Landlord and any existing or prospective purchaser, ground lessor or mortgagee of the Premises. Provided Tenant is not a publicly traded company which files with the SEC, Tenant will, at any time upon request by Landlord, to deliver to Landlord the most recent financial statements of Tenant with an opinion of a certified public accountant, if available, including a balance sheet and profit and loss statement for the most recent prior three years all prepared in accordance with generally accepted accounting principles consistently applied. Landlord agrees to hold such financial statements confidential and to share them only with prospective lenders and purchasers of the Premises. Other than for prospective lenders and purchasers, Landlord shall not request financial statements more often than twice in any calendar year.
25.	WAIVER. No delay or omission in the exercise of any right or remedy by Landlord shall impair such right or remedy or be construed as a waiver. No act or conduct of Landlord, including without limitation, acceptance of the keys to the Premises, shall constitute an acceptance of the surrender of the Premises by Tenant before the expiration of the Term. Only written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Premises and accomplish termination of the Lease. Landlord’s consent to or approval of any act by Tenant requiring Landlord’s consent or approval shall not be deemed to waive or render unnecessary Landlord’s consent to or approval of any subsequent act by Tenant. Any waiver by Landlord of any Default must be in writing and shall not be a waiver of any other Default concerning the same or any other provision of the Lease.
26.	SURRENDER OF PREMISES. Upon expiration of the Term, Tenant shall surrender to Landlord the Premises and all tenant improvements and alterations clean and in the same condition as existed at the Commencement Date, except for ordinary wear and tear and Alterations which Tenant has the right or is obligated to remove under the provisions of ¶14. herein. Tenant shall remove all personal property including, without limitation, all wallpaper, paneling and other decorative improvements or fixtures and shall perform all restoration made necessary by the removal of any alterations or Tenant’s fixtures, furnishings, equipment and other personal property before the expiration of the Term, including, for example, restoring all wall surfaces to their condition as of the Commencement Date. In any event, Tenant shall cause the following to be done prior to the expiration or the sooner termination of this Lease: (i) all interior walls shall be cleaned so that they appear freshly painted; (ii) all tiled floors shall be cleaned and waxed; (iii) all carpets shall be cleaned and shampooed; (iv) all broken, marred, stained or nonconforming acoustical ceiling tile shall be replaced; (v) all exterior and interior windows shall be washed; (vi) the HVAC system shall be serviced by a reputable and licensed service firm and left in good operating condition and repair as so certified by such firm; and (vii) the plumbing and electrical systems and lighting shall be placed in good order and repair (including replacement of any burned out, discolored or broken light bulbs, ballasts, or lenses). Landlord can elect to retain or dispose of in any manner Tenant’s personal property not removed from the Premises by Tenant prior to the expiration of the Term. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord’s retention or disposition of Tenant’s personal property. Tenant shall be liable to Landlord for Landlord’s cost for storage, removal and disposal of Tenant’s personal property.
27.	HOLDOVER. If Tenant with Landlord’s consent remains in possession of the Premises after expiration of the Term or after the date in any notice given by Landlord to Tenant terminating this Lease, such possession by Tenant shall be deemed to be a month to month tenancy cancelable by either party on thirty (30) days written notice given at any time by either party and all provisions of this Lease, except those pertaining to Term, renewal options and Base Rent, shall apply and Tenant shall thereafter pay monthly Base Rent computed on a per month basis, for each month or part thereof (without reduction for any partial month) that Tenant remains in possession, in an amount equal to one hundred thirty-five percent (135%) of the Base Rent that was in effect for the last full calendar month immediately preceding expiration of the Term.
	If Tenant holds over after the expiration or earlier termination of the Term hereof, without the consent of Landlord, Tenant shall become a Tenant at sufferance only with a continuing obligation to pay Rent provided that the Base Rent shall be one hundred fifty percent (150%) of the Base Rent that was in effect for the last full calendar month immediately preceding expiration of the Term for the first thirty (30) days of such holdover, and two hundred percent (200%) of such Base Rent thereafter during the pendency of such holdover. In any such case of Holdover without the consent of Landlord, the monthly Base Rent shall be computed on a per-month basis, for each month or part thereof (without reduction for any partial month) that Tenant remains in possession. Acceptance by Landlord of Rent after expiration or earlier termination of the Term shall not constitute a consent to a holdover hereunder or result in a renewal. The foregoing

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provisions of this ¶27 are in addition to and do not affect Landlord’s right of re-entry or any rights of Landlord hereunder or as otherwise provided by law. If Tenant fails to surrender the Premises upon the expiration of this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability arising out of such failure, including without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender. No provision of this ¶27 shall be construed as implied consent by Landlord to any holding over by Tenant. Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon expiration or other termination of this Lease. The provisions of this ¶27 shall not be considered to limit or constitute a waiver of any other rights or remedies of Landlord provided in this Lease or at law.

28.

NOTICES. All notices, demands, or other communications required or contemplated under this Lease, including any notice delivered to Tenant by the Lender, shall be in writing and shall be deemed to have been duly given 48 hours from the time of mailing if mailed by registered or certified mail, return receipt requested, postage prepaid, or 24 hours from the time of shipping by overnight carrier, or the actual time of delivery if delivered by personal service to the parties at the addresses specified in ¶1. Either Tenant or Landlord may change the address to which notices are to be given to such party hereunder by giving written notice of such change of address to the other in accordance with the notice provisions hereof.

29.

OPTIONS TO EXTEND.

a.	Grant of Options. Tenant shall have the right, at its option, to extend the Lease for two (2) additional periods of thirty (30) months each (the “Extended Terms”) on an “as is” basis, each such Extended Term commencing at the expiration of the then current Term, provided that at the time of exercise and at the time of commencement of each Extended Term, Tenant is not in default under this Lease beyond the expiration of applicable notice and cure periods.
b.	Exercise of Option. If Tenant decides to extend the Lease for an Extended Term, Tenant shall give written notice to Landlord of its election to extend not less than nine (9) months prior to the expiration of the then current Term. Tenant’s failure to give timely notice to Landlord of Tenant’s election to extend shall be deemed a waiver of Tenant’s right to extend. The terms and conditions applicable to each Extended Term shall be the same terms and conditions contained in this Lease except that Tenant shall not be entitled to any further option to extend beyond these two extension options. The Base Rent for each Extended Term shall be determined in accordance with ¶29.c. below:
c.	Determination of Base Rent During Each Extended Term

1)

Agreement of Base Rent. Landlord shall provide Tenant with written notice of the proposed Fair Market Rental Value (as defined below) no later than three (3) months prior to the expiration of the then current Term. Landlord and Tenant shall have thirty (30) days after Landlord provides the proposed Fair Market Rental Value in which to agree on the Base Rent for that Extended Term. The “Fair Market Rental Value” of the Premises for that Extended Term shall be the Base Rent per rentable square foot as of the commencement of that Extended Term, including three percent (3%) annual increases, taking into consideration all relevant market factors, including the use of the Premises permitted under this Lease, the quality, size, design and location of the Premises, and the rental value paid by tenants for lease renewals or extensions in premises of comparable size, quality and location. Base Rent for the first twelve (12) months of that Extended Term shall be 95% of the Fair Market Rental Value, with 3% annual increases to be effective at the beginning of each subsequent lease year. If Landlord and Tenant agree on the Base Rent for that Extended Term during the thirty (30) day period, they shall immediately execute an amendment to this Lease stating the new Base Rent. Notwithstanding any other provision of this Lease, the Base Rent for the first twelve (12) months of each Extended Term shall be no less than the scheduled Base Rent for the last month of the previous Lease Term plus three percent (3%), with three percent (3%) annual increases to be effective at the beginning of each subsequent lease year.

2)

Selection of Appraisers. If Landlord and Tenant are unable to agree on the Base Rent for that Extended Term within the thirty (30) day period, then within ten (10) business days after the expiration of the thirty (30) day period and provided that Tenant has timely exercised the subject renewal option in accordance with ¶29.b., Landlord and Tenant each at its own cost and by giving notice to the other party, shall appoint a competent and disinterested real estate appraiser with at least five (5) years full-time commercial appraisal experience in the Milpitas, California, market area to appraise the Fair Market Rental Value of the Premises and set the Base Rent for that Extended Term. If either Landlord or Tenant does not appoint an appraiser within said ten (10) business days, the single appraiser appointed shall be the sole appraiser and shall set the Base Rent during that Extended Term. If two (2) appraisers are appointed by Landlord and Tenant as stated herein, they shall meet promptly and attempt to set the Base Rent for that Extended Term. If the two (2) appraisers are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third appraiser meeting the same qualifications within ten (10) business days after the last day the two (2) appraisers are given to set the Base Rent. If they are unable to agree on the third appraiser, either Landlord or Tenant, by giving ten (10) days’ notice to the other party, can apply to the then President of the Real Estate Board or to the Presiding Judge of the Superior Court of the County of Santa Clara, for the selection of a third appraiser who meets the qualifications

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stated herein. Landlord and Tenant each shall bear one-half (½) of the cost of appointing the third appraiser and of paying the third appraiser’s fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either Landlord or Tenant, or their affiliates.

3)

Value Determined by Three (3) Appraisers. Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall set the Base Rent for that Extended Term. If a majority of the appraisers are unable to set the Base Rent within the stipulated period of time, Landlord’s appraiser shall arrange for simultaneous exchange of written appraisals from each of the appraisers and the three (3) appraisals shall be added together and their total divided by three (3); the resulting quotient shall be the Base Rent for the Premises for that Extended Term. If, however, the low appraisal and/or the high appraisal are/is more than fifteen percent (15%) lower and/or higher than the middle appraisal, such low appraisal and/or high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2); the resulting quotient shall be the Base Rent for the Premises for that Extended Term. If both the low appraisal and the high appraisal are disregarded as stated in this ¶29.c.3), the middle appraisal shall be the Base Rent for the Premises at the commencement of that Extended Term.

30.	PREVIOUS LEASE. The previous lease for the Premises between the parties hereto (the “Prior Lease”) shall continue in full force and effect through December 31 , 2003, but shall have no effect thereafter except as to obligations existing as of December 31, 2003 but not yet satisfied including, without limitation, any and all indemnification obligations.
31.	MISCELLANEOUS PROVISIONS.

a.	Time of Essence. Time is of the essence of each provision of this Lease.
b.	Successor. This Lease shall be binding on and inure to the benefit of the parties and their successors, except as provided in ¶19.
c.	Landlord’s Consent. Any consent required by Landlord under this Lease must be granted in writing and may be withheld or conditioned by Landlord in its sole and absolute discretion unless otherwise provided.
d.	Personal Rights. Notwithstanding any other provision(s) of this Lease to the contrary, any provisions of this Lease providing for the renewal, extension or early termination of the Lease and/or for the expansion of the Premises (to include without limitation rights to negotiate, rights of first refusal, etc.) shall be (i) personal to the original Tenant and shall not be assignable or otherwise transferable other than to a Permitted Transferee (either voluntarily or involuntarily) to any third party for any reason whatsoever, and (ii) conditioned upon Tenant not then being in default under this Lease.
e.	Commissions. Each party represents that it has not had dealings with any real estate broker, finder or other person with respect to this Lease in any manner, except for the Broker(s) identified in ¶1., who shall be compensated by Landlord in accordance with the separate agreement between Landlord and the Broker(s).
f.	Other Charges; Legal Fees. If Landlord becomes a party to any litigation concerning this Lease or the Premises by reason of any act or omission of Tenant or Tenant’s authorized representatives, Tenant shall be liable to Landlord for reasonable attorneys’ fees and court costs incurred by Landlord in the litigation, after Landlord provides written notice of the action to Tenant. Notwithstanding the foregoing, Tenant will reimburse Landlord for up to $2,000 in reasonable attorney’s fees and court costs incurred prior to Landlord giving Tenant notice of the action. Should the court render a decision which is thereafter appealed by any party thereto, Tenant shall be liable to Landlord for reasonable attorneys’ fees and court costs incurred by Landlord in connection with such appeal.
	If either party commences any litigation against the other party or files an appeal of a decision arising out of or in connection with the Lease, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees and costs of suit. If Landlord employs an attorney to recover delinquent charges, Tenant agrees to pay all attorneys’ fees and costs charged to Landlord in addition to Rent, late charges, interest and other sums payable under this Lease.
g.	Landlord’s Successors. In the event of a sale or conveyance by Landlord of the Premises, the same shall operate to release Landlord from any liability under this Lease, including as to any Security Deposit to the extent transferred to Landlord’s successor-in-interest, and in such event Landlord’s successor in interest shall be solely responsible for all obligations of Landlord under this Lease.
h.	Interpretation. This Lease shall be construed and interpreted in accordance with the laws of the state in which the Premises are located. This Lease constitutes the entire agreement between the parties with respect to the Premises, except for such guarantees or modifications as may be executed in writing by the parties from time to time. When required by the context of this Lease, the singular shall include the plural, and the masculine shall include the feminine and/or neuter.“Party” shall mean Landlord or Tenant. If more than one person or entity constitutes Landlord or

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k.	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.
I.	Offer. Preparation of this Lease by Landlord or Landlord’s agent and submission of same to Tenant shall not be deemed an offer to lease to Tenant. This Lease is not intended to be binding until executed by all Parties hereto.
m.	Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. The parties shall amend this Lease from time to time to reflect any adjustments that are made to the Base Rent or other Rent payable under this Lease. As long as they do not materially change Tenant’s obligations hereunder, Tenant agrees to make reasonable non-monetary modifications to this Lease as may be reasonably required by Lender(s) in connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part.
n.	Construction. The Landlord and Tenant acknowledge that each has had its counsel review this Lease, and hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or in any amendments or exhibits hereto.
o.	Captions. Article, section and paragraph captions are not a part hereof.
p.	Exhibits. For reference purposes the Exhibits are listed below:

Exhibit A: The Premises

Exhibit B: Rules and Regulations

Exhibit C: Covenants, Conditions And Restrictions

LANDLORD:		TENANT:
LIMAR REALTY CORP. #4, a California corporation		LSI LOGIC CORPORATION, a Delaware corporation
By:	/s/ Theodore H. Kruttschnitt	By:	/s/ David G. Pursel
Name:	Theodore H. Kruttschnitt	Name:	David G. Pursel
Title:	President	Title:	Vice President, General Counsel & Corporate Secretary
Date:	3/29/04	Date:	March 15, 2004
		LSI Logic Legal Department
		Date:	03/15/04
		Approved as to form
		By	/s/ Andrew S. Hughes
		LSI Logic Corporate Real Estate
		Date:	3-16-04
		Approved as to form
		By	/s/ Donald A. Costello

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EXHIBIT A

The Premises

This Exhibit A is attached to and made a part of that certain Lease (the “Lease”) dated December 31, 2003, by and between Limar Realty Corp. #9 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

EXHIBIT A

The Premises
(continued)

Legal Description

The land referred to herein is situated in the State of California, County of Santa Clara, City of Milpitas, described as follows:

PARCEL ONE:

Parcel A, as shown on that certain Map entitled, “Parcel Map” which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California, on November 17, 1981, in Book 492 of Maps, at Page 37.

PARCEL ONE-A:

10 foot Private Storm Drain Easement.

In, on, under, over and across all that real property situate in the city of Milpitas, County of Santa Clara, state of California and more particularly described as follows:

A 10 foot wide strip of land, the centerline of which begins at a point distant North 63° 59’ 20” East 108.98 feet from the Northwesterly corner of that certain parcel of land shown as Parcel A on that certain Parcel Map recorded in Book 492 of Maps, at Page 37, Santa Clara County Records.

Thence from said point of beginning North 19° 15’ 26” West 38.70 feet; thence North 55° 21’ 31” West 71.75 feet; thence North 68° 49’ 41” East 537.36 feet; thence North 54° 29’ 32” East 54.62 feet to the Easterly line of Parcel A, as said parcel is shown on that certain Parcel Map recorded in Book 510 of Maps, at Page 10, Santa Clara County Records.

APN 086-03-081 (Affects Parcel 1)

COMMONLY KNOWN AS:	481 Cottonwood Drive
	Milpitas, CA (Parcel One)

EXHIBIT B

Rules & Regulations

This Exhibit B is attached to and made a part of that certain Lease dated December 31, 2003 by and between Limar Realty Corp. #9 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

For the purpose of these Rules & Regulations the word Premises shall refer to the Premises Tenant is leasing as described in the Lease.

1.	No sign, placard, picture, advertisement, name or notice (collectively, “Signs”) shall be installed or displayed on any part of the Premises after the Commencement Date without the prior written consent of Landlord, except that Tenant may post Signs inside the Building which are not visible from the exterior of the Building. Landlord shall have the right to remove, at Tenant’s expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant.
2.	Except for that which exists as of the Commencement Date or that consented to in writing by Landlord, no draperies, curtains, blinds, shades, screens or other devices shall be hung at or used in connection with any window or exterior door or doors of the Premises and no awning shall be permitted on any part of the Premises. Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Premises.
3.	Neither Tenant nor any employee or invitee of Tenant, shall make any structural roof or terrace penetrations.
4.	Tenant shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. Landlord shall not in any way be responsible to any Tenant for any loss of property on the Premises, or for any damage to any Tenant’s property.
5.	Landlord will furnish Tenant, free of charge, with six (6) keys to the Premises. Tenant shall not make or have made additional keys without Landlord’s prior written consent, and Tenant shall not alter any lock or install a new additional lock or bolt on any door of its Premises without Landlord’s prior written consent, except for electronic locks existing at the Commencement Date. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys of all locks for doors on the Premises, and in the event of loss of any keys furnished by Landlord, shall pay Landlord therefore.
6.	If Tenant requires telegraphic, telephonic, burglar alarm or similar services that do not exist as of the Commencement Date, it shall first obtain, and comply with, Landlord’s reasonable instructions in their installation.
7.	Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Landlord shall have the reasonable right to prescribe the weight, size and position of all equipment, materials, furniture or other property brought into the Premises. Heavy objects shall, if considered necessary by Landlord, stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Business machines and mechanical equipment belonging to Tenant, which cause noise or vibration that may be transmitted to the structure of the Premises to such a degree as to be objectionable to Landlord, shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate noise or vibrations. Landlord will not be responsible for loss of, or damage to, any such equipment or other property from any cause, and all damage done to the Premises by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant.
8.	Tenant shall not use or keep in the Premises any kerosene, gasoline or inflammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of office equipment. Tenant shall not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord by reason of noise, odors or vibrations. Tenant shall not bring or keep or permit to be brought or kept in the Premises any animal life form, other than human, except seeing eye dogs when in the company of their masters.
9.	Tenant agrees to cooperate fully with Landlord to comply with any governmental energy-saving rules, laws or regulations of which Tenant has actual notice.
10.	Landlord reserves the right, exercisable with one hundred twenty (120) days prior written notice but without liability to Tenant, to change the name and street address of the Premises.
11.	The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting for the violation of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused it.

EXHIBIT B

Rules & Regulations
(continued)

12.	Tenant shall not sell, or permit the retail sale of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the Premises. Tenant shall not use the Premises for any business or activity other than that specifically provided for in this Lease. Notwithstanding the above, Tenant shall have the right to install vending machines for use by Tenant, its employees and invitees.
13.	Tenant shall not interfere with radio or television broadcasting or reception from or in neighboring areas.
14.	Canvassing, soliciting and distribution of handbills or any other written materials, and peddling in the Property are prohibited, and Tenant shall cooperate to prevent same.
15.	Landlord reserves the right to exclude or expel from the Premises any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the Rules and Regulations of the Premises or in violation of the CC&R’s.
16.	Tenant shall store all its trash and garbage within its Premises or in reasonable locations specifically identified by Landlord for such purposes. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with reasonable directions issued from time to time by Landlord.
17.	The Premises shall not be used for the storage of merchandise held for sale to the general public, or for lodging nor shall the Premises by used for any improper, illegal or objectionable purpose. No cooking (other than customary heating or ordinary lunchroom items for Tenant’s employees, including existing cafeterias) shall be done or permitted by any tenant on the Premises, except that use by Tenant in its kitchen, if any, located in the Premises and Underwriters Laboratory’s approved equipment for brewing coffee, tea, hot chocolate and similar beverages and microwaving food shall be permitted, provided that such kitchen, equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations.
18.	Without the written consent of Landlord, Tenant shall not use the name of the Premises in connection with or in promoting or advertising the business of Tenant except as Tenant’s address.
19.	Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.
20.	Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage.
21.	The requirements of Tenant will be attended to only upon appropriate application to the office of Landlord by an authorized individual. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord.
22.	Tenant shall not park its vehicles in any parking areas outside the Premises. Tenant shall not store or abandon vehicles in the Premises parking areas nor park any vehicles in the Premises parking areas other than automobiles, motorcycles, motor driven or non-motor driven bicycles, four-wheeled trucks, or other equipment used in the operation of Tenant’s business. Tenant, its agents, employees and invitees shall not park any one (1) vehicle in more than one (1) parking space.
23.	Landlord reserves the right to make such other reasonable Rules and Regulations as, in its judgment, may from time to time be appropriate for safety and security, for care and cleanliness of the Premises and for the preservation of good order therein. Tenant agrees to abide for all such Rules and Regulations hereinabove stated and any additional Rules and Regulations which are adopted.
24.	Tenant shall be responsible for the observance of all of the foregoing Rules and Regulations by Tenant’s employees, agents, clients, customers, invitees and guests.

EXHIBIT C

Covenants, Conditions And Restrictions

This Exhibit C is attached to and made a part of that certain Lease dated December 31, 2003 by and between Limar Realty Corp. #9 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

E 545 PAGE 189

DECLARATION OF COVENANTS, CONDITIONS
AND RESTRICTIONS OF THE
OAK CREEK BUSINESS PARK

     THIS DECLARATION is made on May 15, 1979 by THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation (hereinafter called “Declarant”), as owner of that certain real property (the “Subject Property”) situated in the City of Milpitas, County of Santa Clara, State of California described in Exhibit “A” hereto which exhibit is by this reference incorporated herein as if fully set forth herein.

ARTICLE 1
 
DEFINITIONS

     1.1 Unless the context otherwise specifies or requires, the terms defined in this Article shall, for all purposes of this Declaration, have the meanings herein specified.

     1.2 Architect: The term “Architect” shall mean a person holding a certificate to practice architecture in the State of California under authority of the Business and Professions Code of the State of California.

     1.3 Declaration: The term “Declaration” shall mean this Declaration of Covenants, Conditions and Restrictions.

     1.4 Deed of Trust: The term “Deed of Trust” or “Trust Deed” shall mean a mortgage as well as a deed of trust.

E 545 PAGE 190

     1.5 Approving Agent: The term “Approving Agent” shall mean, in the following order or precedence:

          A. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, whose present address is 155 Moffett Park Drive, Building A, Suite 101, Sunnyvale, California 94086 (hereinafter referred to as “Prudential”), shall be the Approving Agent until Prudential shall have resigned as Approving Agent by executing a written resignation and causing an original of same to be recorded, and by giving written notice of such resignation to each Owner of record, as shown on the most recent county assessor’s roll, of real property then subject to this Declaration.

          B. Any association (whether or not incorporated) organized by the Owners of sixty-six and two-thirds percent (66-2/3%) of the land area (exclusive of portions dedicated to a public agency or authority for a public use) then subject to this Declaration for the purpose of acting as and assuming the functions of an Approving Agent, in which membership is available to all Owners and decisions are made on the basis of majority vote with one vote assigned for each square foot of land owned by each Owner, but only if the Owners organizing such association within not less than six (6) months from the date that Prudential shall have ceased to be the Approving Agent, shall have (i) organized such association and (ii) executed and recorded a statement

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in the form of an amendment to this Declaration as described in Paragraph 8.2 setting forth that such organization has been formed for the purpose of acting as Approving Agent pursuant to this Declaration and (iii) shall have, given written notice to all Owners of record of real property then subject to this Declaration that such association has been formed.

     1.6 Structures: The term “structure(s)” shall include all structures, buildings, outbuildings, sheds, fences and
screening walls over three (3) feet in height, barriers, or retaining walls.

     1.7 Mortgagee: The term “Mortgagee” shall mean a beneficiary under or a holder of a Deed of Trust as well as
a mortgagee under a mortgage.

     1.8 The Oak Creek Business Park: The term “The Oak Creek Business Park” shall mean all of the real property described in Exhibit “A” hereto.

     1.9 Restrictions; The term “Restrictions” shall mean the Covenants, Conditions and Restrictions set forth in this Declaration, as it may from time to time be amended or
supplemented.

     1.10 Owner: The term “Owner” shall mean and refer to any person owning a fee estate in the land, or any portion thereof, contained within the Oak Creek Business Park, but excluding either (a) any person who holds such interest as

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security for the payment of an obligation or (b) any person holding a leasehold estate.

     1.11 Record, Recorded: The terms “record” or “recorded” shall mean, with respect to any document, the recordation of said document in the office of the County Recorder of the County of Santa Clara, State of California.

     1.12 Sign: The term “sign” shall mean any structure, device or contrivance, electric or non-electric, and all parts thereof which are erected or used for advertising purposes upon or within which any poster, bill, bulletin, printing, lettering, painting, device or other advertising of any kind whatsoever is used, placed, posted or otherwise fastened or affixed to ground or structures.

     1.13 Streets: The term “street(s)” shall mean any publicly dedicated street, highway, or other publicly dedicated thoroughfare within or adjacent to the Oak Creek Business Park and shown on any recorded subdivision or parcel map, or record of survey, whether designated thereon as a publicly dedicated street, boulevard, place, drive, road, terrace, way, lane, circle or court.

     1.14 Visible From Neighboring Property: The term “visible from neighboring property” shall mean, with respect to any given object, that such object is or would be visible to a person six (6) feet tall having 20/20 vision and standing on any part of such neighboring property at an elevation

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no greater than the elevation of the base of the object being viewed.

     1.15 Person: The term “person” shall mean an individual, group of individuals, corporation, partnership, trust, unincorporated business association or such other legal entity as the context in which such term is used may imply.

     1.16 Lot: The term “lot” shall mean any parcel of land contained within the Oak Creek Business Park as divided or subdivided on subdivision or parcel map(s) recorded in the official records of the Recorder of Santa Clara County, California, as they from time to time become current.

     1.17 Front: The term “front” shall mean, with respect to any structure, any wall facing a street.

ARTICLE 2

PROPERTY SUBJECT TO THE

PARK RESTRICTIONS

     2.1 General Declaration Creating the Mutual Restrictions: Declarant hereby declares that all of the real property located in the County of Santa Clara, State of California as described in Exhibit “A”, which exhibit is attached hereto and incorporated herein by this reference, (sometimes hereinafter called the “Oak Creek Business Park”) is and shall be, conveyed, hypothecated, encumbered, leased, occupied, built upon or otherwise used, improved or trans-

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ferred, in whole or in part, subject to the Restrictions and that all of said Restrictions, and all the covenants, conditions and agreements herein contained, are declared and agreed to be in furtherance of a general plan for the subdivision, improvement and sale of said real property and are established for the purpose of enhancing and perfecting the value, desirability, and attractiveness of said real property and every part thereof. Declarant further declares that (a) that the Restrictions and each of the covenants, conditions and agreements herein contained are made for the direct, mutual and reciprocal benefit of each and every lot contained within the Oak Creek Business Park and that such Restrictions are and shall be mutual equitable servitudes burdening each lot for the benefit of all other lots within the Oak Creek Business Park and (b) the Restrictions and each of the covenants, conditions and agreements herein contained shall be “covenants running with the land” burdening each lot within the Oak Creek Business Park for the benefit of all other lots within the Oak Creek Business Park, the burdens of which shall be binding upon each Owner, lessee, licensee, occupant or user of each lot within the Oak Creek Business Park, his successors and assigns, for the benefit of each Owner of all other lots within the Oak Creek Business Park, his successors and assigns.

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ARTICLE 3

APPROVAL OF PLANS FOR STRUCTURES

     3.1 Approval Required: So long as there is a then serving Approving Agent, no structure shall be erected, placed, constructed, substantially remodeled, rebuilt or reconstructed on any land subject to this Declaration until the following procedures have been fully complied with and the Approving Agent has approved in writing the Preliminary Plans (as defined below) and the Final Plans (as defined below):

          A. The owner, or lessee, licensee, or other occupant of the lot to be improved or his authorized agent (the “Applicant”) shall deliver to the Approving Agent preliminary plans and specifications (the “Preliminary Plans”) in such form and containing such information as may be required by the Approving Agent for the following:

               (1) A site development plan showing the location of all proposed driveways, parking areas, walkways, landscaped areas, storage and refuse areas, and building area;

               (2) A landscaping plan for the particular lot;

               (3) A sign and lighting plan;

               (4) A building elevation plan showing dimensions, materials and exterior color schemes;

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               (5) A grading plan.

Such Preliminary Plans shall be submitted in writing in duplicate over the authorized signature of the Applicant.

          B. At such time as the Approving Agent shall have approved in writing the Preliminary Plans and prior to the submission of said Final Plans to the City of Milpitas, the Applicant shall submit to the Approving Agent complete and detailed final plans, specifications and working drawing (the “Final. Plans”) with regard to the proposed improvements, which Final Plans will be in such form as may then be required by the City of Milpitas for review by said City and shall contain such additional information as may be required by the Approving Agent; provided, such Final Plans need not include detailing with regard to interior improvements such as interior partitioning walls.

          C. No such prior approval of any Preliminary Plans or Final Plans shall be required if there is no then serving Approving Agent to so approve such plans. Changes in approved Preliminary Plans or approved Final Plans which materially affect landscaping, signing, building size, placement or external appearance must be similarly submitted to and approved by the Approving Agent.

     3.2 Additional Approval Required: So long as there is a then serving Approving Agent, no exterior surface of any structure or improvement existing on any lot subject to this

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Declaration shall be painted, texturized or otherwise changed, no alterations, additions or changes of any type whatsoever shall be made to any landscaping placed on any lot subject to this Declaration, and no additions or alterations to any paved area on any lot subject to this Declaration shall be made until plans for such painting, alterations, additions or changes, including samples of colors, materials, landscaping plans, and/or plans and specifications with regard to paving, as the case may require, together with such other information as shall be required by the Approving Agent, shall have been submitted to the Approving Agent and the Approving Agent shall have approved in writing such requested change.

     3.3 Basis for Approval: The Approving Agent shall have the right to disapprove any plans and specifications submitted hereunder for any reason (provided that such approval shall not be unreasonably withheld), including but not limited to any of the following:

          A. Failure to comply with any of the Restrictions;

          B. Failure to include information in such plans and specifications as may have been reasonably requested by the Approving Agent;

          C. Objection to the exterior design of the proposed structures or the appearance of materials to be

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used in the construction of any proposed structure, which are found by the Approving Agent to be incompatible with existing structures in the Oak Creek Business Park;

          D. Objections based upon the inadequacy of the number of onsite parking spaces considering (1) the contemplated use or future possible use of the structures proposed and (2) the availability of additional parking offsite.

          E. Objection to the location of any proposed structure upon any lot as it relates to other lots within the Oak Creek Business Park;

          F. Objection to the grading plan for any lot;

          G. Objection to the color scheme, finish, proportions, style or architecture, height, bulk or appropriateness of any structure as they relate to other structures within the Oak Creek Business Park;

          H. Objection to the landscaping materials as they relate to other landscaping materials then used or contemplated for use within the Oak Creek Business Park;

          I. Any other matter which, in the judgment of the Approving Agent, would render the proposed structure or structures or use inharmonious with the general plan for improvement of the Oak Creek Business Park or with structures or landscaping then located upon or proposed to be located upon other lots or other properties within the Oak Creek Business Park.

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     3.4 Approval: Upon approval by the Approving Agent of any plans and specifications submitted hereunder, a copy of such plans and specifications as approved shall be deposited for permanent record with the Approving Agent, and a copy of such plans and specifications bearing such approval, in writing, shall be returned to the applicant submitting the same.

     3.5 Result of Inaction: If the Approving Agent fails either to approve or disapprove either the Preliminary Plans or the Final Plans within thirty (30) days after such Preliminary Plans or Final Plans, as the case may be, have been submitted to it, it shall be conclusively presumed that the Approving Agent has approved said Preliminary or Final Plans; provided, however, that if within said thirty (30) day period, the Approving Agent gives written notice of the fact that more time is required for the review of such plans, there shall be no presumption that the same are approved until the expiration of a reasonable period of time as set forth in said notice not to exceed thirty (30) days. Such presumption shall not apply if the review fee required by Paragraph 3.9 was not paid at the time the plans were first submitted to the Approving Agent.

     3.6 Proceeding with Work: Upon receipt of approval from the Approving Agent pursuant to this Article, the Owner or lessee to whom the same is given shall as soon as practi-

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cable satisfy all conditions thereof and diligently proceed with the commencement and completion of all approved construction, refinishing, alterations and excavations. In all cases work shall be commenced within one (1) year from the date of such approval. If Applicant fails to commence construction of the structures within one (1) year from date of such approval, then the approval given pursuant to this Article shall be deemed revoked unless the Approving Agent upon request made prior to the expiration of said one (1) year period extends in writing the time for commencing work. In all cases work shall be completed in accordance with the Preliminary Plans and the Final Plans within two years from date of issuance of the first (or only) building permit with regard to such work.

     3.7 Limitation on Approving Agent: In no event shall the Approving Agent disapprove any plans and specifications solely by reason of the Applicant’s proposed use of the lot if such use is specifically permitted pursuant to Section 5.1.

     3.8 Liability: Neither the Declarant nor the Approving Agent shall be liable for any damage, loss or prejudice suffered or claimed on account of:

          A. The approval or disapproval of any plans, drawings and specifications, whether or not defective;

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          B. The construction or performance of any work, whether or not done pursuant to approved plans, drawings and specifications; or

          C. The development of any property within Oak Creek Business Park.

     3.9 Review Fee: An architectural review’ fee shall be paid to the Approving Agent as follows:

          A. At such time as Preliminary Plans pertaining to erection, placement, construction, remodeling or reconstruction of structures within the Oak Creek Business Park are submitted for approval based on the following schedule:

               (1) When the plans submitted are prepared by an architect, the architectural review fee shall be Fifty Dollars ($50);

               (2) In all other cases the architectural review fee shall be One Hundred Dollars ($100).

          B. At such time as documents required to be submitted pursuant to paragraph 3.2 above are submitted for approval, the architectural review fee shall be the sum of Fifty Dollars ($50).

     3.10 Certificate of Compliance: So long as there is an Approving Agent, such Approving Agent shall within twenty one (21) days following written request therefor by an Owner, execute and deliver to such requesting Owner a “Certificate of Compliance” stating that the lot specified

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by such Owner in said request for Certificate of Compliance is in compliance with Article 3 of these Restrictions, or, if such lot shall not be in compliance with Article 3 of these Restrictions, stating the nature of such non-compliance and the specific paragraph of this Article 3 with which said lot does not comply.

ARTICLE 4

LIMITATIONS ON IMPROVEMENTS

     4.1 Utility Lines: All onsite utility transmission lines shall be placed underground.

     4.2 Coverage: No more than forty five percent (45%) of the square foot area of any M-1 zoned lots shall be occupied by structures. No more than thirty five percent (35%) of the square foot area of any MPD or HS zoned lots shall be occupied by structures.

     4.3 Minimum Setback Lines: No structures, and no part thereof, shall be placed closer than fifty feet (50¢) from a property line fronting any street (“frontage setback area”); provided, however, no structure shall be placed closer than 20 feet (20¢) from any property line not fronting on any street (“interior setback area”).

     4.4 Parking Areas: Each parcel shall have facilities for parking sufficient to serve the business conducted thereon without using adjacent streets therefor, and no use shall be made of the structures in any parcel which would

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require parking in excess of the parking spaces on said parcel. No parking spaces shall be located within, and no parking shall be permitted within, a frontage setback area adjacent to any street, except that parking shall be permitted within said setback area if such parking is screened from view from the street by landscaping consisting of shrubbery or berms extending at least forty eight inches (48”) above the high point of the finished adjacent pavement in said parking area. In no case shall such parking area be closer than twenty five feet (25’) from a property line fronting on any street or closer than five feet (5¢) from any property line not fronting on any street.

     4.5 On Street Parking. No parking shall be allowed in any public street paved areas or rights of way located in the Oak Creek Business Park. Said restriction shall be enforced by municipal ordinances of the City of Milpitas.

     4.6 Storage and Loading Areas: No loading dock, truck loading, storage area or other such facility shall be located in the front of any building or structure or within any frontage setback area or between a front of any building or structure and the street which said front faces. All exterior storage areas shall be screened by chain link fence with redwood slats, a minimum of six feet (6¢) in height.

     4.7 Metal Buildings: No buildings or structures constructed with corragated metal exterior walls or so-called

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“Butler type” buildings shall be constructed within the Oak Creek Business Park.

     4.8 Exterior Screening. All electrical and mechanical apparatus, equipment, fixtures (other than lighting fixtures but including main electrical transformers), whether roof mounted, exterior wall mounted or pad mounted at grade, including but not limited to, conduit, ducts, vents, flues and pipes located on the exterior of any structure shall be concealed from view and shall be treated in a manner acceptable to the Architectural Control Committee.

ARTICLE 5

RESTRICTIONS ON OPERATION AND USE

     5.1 Permitted Uses: Subject to compliance with these Restrictions, the’ following uses shall be permitted in the Oak Creek Business Park.

          A. Manufacture (including storage of raw materials and finished products therefrom) of the following:

               (1) Pharmaceutical and cosmetic products;

               (2) Optical, electronic, timing and measuring instruments for use in research, development, business and professional facilities; and

               (3) Industrial, communication, transportation and utility equipment;

          B. Wholesaling, warehousing and distribution establishments and public utility facilities (excluding

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storing and warehousing of acids, chemicals, cement, plaster, petroleum products or explosive materials);

          C. Research, experimental and engineering laboratories;

          D. Catalog sales and mail order establishments;

          E. Establishments for the repair, cleaning and servicing of commercial or industrial equipment or products;

          F. Construction firms, but only construction firms whose activities are carried on entirely within an enclosed building and which have no construction yard on said lot;

          G. So long as there is an Approving Agent, any commercial use not specifically prohibited by Paragraph 5.3 which is first approved in writing by the Approving Agent;

          H. So long as there is an Approving Agent, any industrial or manufacturing use not specifically prohibited by Paragraph 5.3 which is first approved in writing by the Approving Agent;

          I. If there is no Approving Agent, any industrial manufacturing or commercial use permitted by the then existing zoning or other applicable land use regulations as promulgated, by requisite governmental authorities, except those uses specifically prohibited by Paragraph 5.3.

     5.2 Conduct of Permitted Uses: All permitted uses shall be performed or carried out entirely within a building

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that is so designed and constructed. Certain activities which cannot be carried on within a building may be permitted, but only (a) so long as there is then serving an Approving Agent, if the Approving Agent specifically consents to use and the location for such activity, in writing, or (b) if there is no then serving Approving Agent, if allowed under then existing zoning or other applicable land use regulations except for uses which are specifically prohibited pursuant to Paragraph 5.3; provided, however, that in either of the foregoing situations such use shall be permitted only if (i) such activity is screened so as not to be visible from neighboring property and streets and (ii) all lighting required for such use is shielded from adjacent streets.

     5.3 Prohibited Uses: The following operations and uses shall not be permitted on any property subject to these Restrictions:

          A. Residential of any type;

          B. Trailer courts, mobile home parks or recreation vehicle camp grounds;

          C. Junk yards or recycling facilities;

          D. Drilling for and/or the removal of oil, gas or other hydrocarbon substances (except that this provision shall not be deemed to prohibit the entry of the property below a depth of five hundred (500) feet for such purposes);

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          E. Commercial excavation except in the course of approved construction;

          F. Distillation of bones;

          G. Dumping, disposal, incineration or reduction of garbage, sewage, offal, dead animals or refuse;

          H. Fat rendering;

          I. Stockyard or slaughter of animals;

          J. Cemeteries;

          K. Refining of petroleum or of its products;

          L. Smelting of iron, tin, zinc, or other ores;

          M. Jail or honor farms;

          N. Labor or migrant worker camps;

          O. Truck, bus terminals;

          P. Petroleum storage yards.

          Q. Auto wrecking, auto repair or auto painting establishment.

     5.4 Emissions: No use shall be permitted to exist or operate any lot which:

          A. Emits dust, sweepings, dirt, cinders, fumes, odors, radiation, gases, vapors or discharges liquid or solid wastes or other harmful matter into the atmosphere or any stream, river or other body of water which may adversely affect (i) the health or safety of persons within the area or (ii) the use of property within the Oak Creek Business Park or (iii) vegetation within the Oak Creek Business Park,

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nor shall waste or any substance or materials of any kind be discharged into any public sewer serving the Oak Creek Business Park or any part thereof, in violation of any regulations of any public body having jurisdiction.

          B. Produces intense glare or heat unless such use is performed only within an enclosed or screened area and then only in such manner that the glare or heat emitted will not be discernible from any exterior lot line.

          C. Creates a sound pressure level in violation of any regulation of any public body having jurisdiction.

          D. Allows the visible emissions of smoke (outside any building) other than the exhausts emitted by motor vehicles or other transportation facilities in violation of any regulation of any public body having jurisdiction. This requirement shall also be applicable to the disposal of trash and waste materials.

          E. Creates a ground vibration that is perceptible, without instruments, at any point along any of the exterior lot lines.

     5.5 Signs: The Approving Agent may, from time to time, enact sign criteria setting forth such requirements for signs to be erected within the Oak Creek Business Park as the Approving Agent may deem desirable, which sign criteria shall become effective upon recordation thereof in the official records of Santa Clara County. All signs erected

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by any owner on a lot within the Oak Creek Business Park subsequent to the recoration of said sign criteria shall be in conformance with the criteria set forth therein. Except as specifically otherwise allowed in any then existing sign criteria, no sign shall be installed or erected or placed on any lot other than those signs identifying the name, business and products of the person or firm occupying the lot and those offering the lots for sale or lease. Until such time as sign criteria is enacted, all signs shall be approved by the Approving Agent prior to the installation of said signs.

     5.6 Landscaping Criteria: The Approving Agent may, from time to time, enact landscaping criteria setting forth such requirements for landscaping to be placed on or in lots located within the Oak Creek Business Park as the Approving Agent may deem desirable including, without limitation, amount of area to be plated in sod lawns or other plantings, type of plantings, placement of irrigation systems, requirements for trees and raised planter boxes, which landscape criteria shall become effective upon recordation thereof in the official records of Santa Clara County. All landscaping placed by any owner on a lot within the Oak Creek Business Park subsequent to the recordation of said landscape criteria shall be in conformance with the criteria set forth therein.

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     5.7 Storage and Refuse Collection Areas:

          A. No materials, supplies or equipment, including company owned or operated trucks or motor vehicles, shall be stored in any area on a lot except inside a closed building, or behind a visual barrier screening such areas so that they are not visible from the neighboring properties or streets. No storage areas shall be maintained between a street and the front of the structure nearest such street.

          B. All outdoor refuse collection areas shall be visually screened so as not to be visible from streets and neighboring property. No refuse collection areas shall be maintained between a street and the front of the structure nearest such street.

     5.8 Condition of Property: The Owner of each lot shall at all times keep and properly maintain the premises, structures, improvements, landscaping, paving and appurtenances situate thereon in a safe, clean, sightly and wholesome condition and in a good state of repair and shall comply in all respects with all governmental, health, fire and police requirements and regulations, and shall cause to be regularly removed at its own expense any rubbish of any character whatsoever which may accumulate on such lot, and in particular and without limitation:

          A. All areas of each lot not used for structures, walkways, paved driveways, parking or storage areas shall be

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at all times maintained by a professional landscape engineer or gardner in a fully and well kept landscaped condition utilizing ground cover and/or shrub and tree materials. Undeveloped areas proposed for future expansion shall be maintained in a weed-free condition. An automatic underground landscape irrigation system shall be provided by the Owner of each lot which is sufficient to properly irrigate all landscaped areas within such lot.

          B. Parking areas shall be paved so as to provide all-weather surfaces. Each parking space shall be designated by lines painted on the paved surfaces and shall be adequate in area, and all parking areas shall provide, in addition to parking spaces, adequate driveways and space for the movement of vehicles.

     5.9 Excavation: No excavation shall be made on, and no sand, gravel, soil, or other material shall be removed from, any lot, except in connection with the construction of structures. Upon completion of such construction, exposed openings shall be backfilled to grade, and disturbed ground shall be graded level and paved or landscaped in conformity with the requirements of this Declaration.

ARTICLE 6

APPROVALS OR VARIANCES IF NO

APPROVING AGENT EXISTS

     6.1 Variance by Approving Agent: So long as there shall be Approving Agent then serving, it shall have the

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exclusive right to grant variances from requirements set forth in Article 4 or waive entirely the restrictions set forth in said Article 4 with respect to any given lot, as the Approving Agent, in its sole discretion, shall determine is for the successful development of the Oak Creek Business Park.

     6.2 Granting of Variance: Any variance granted hereunder shall be effective upon, and only upon, the recordation of a Notice of Variance executed by the Approving Agent.

ARTICLE 7

ENFORCEMENT

     7.1 Remedy: So long as there is an Approving Agent, it shall have the exclusive right to enforce the provisions hereof, but without liability for failure so to do. In the event that the Approving Agent shall fail to take action respecting the breach or violation of any of the provisions of this Declaration within thirty (30) days from the written demand by any Owner within the Oak Creek Business Park to take such action or if such breach or violation of this Declaration shall occur at such time as there is no Approving Agent, then any Owner of a lot within the Oak Creek Business Park shall have the right to enforce the provisions contained in this Declaration.

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     7.2 Right to Enter: So long as Prudential shall be serving as the Approving Agent, Prudential, and only Prudential, in addition to any other remedy available, may, with respect to a violation or breach of the covenants to maintain as set forth in Paragraph 5.8, and only with respect to a breach or violation of the covenants to maintain as contained in paragraph 5.8, enter upon the lot on which such violation or breach shall then be occurring and take whatever action it may deem necessary to effect compliance with the provisions of said Paragraph 5.8, including without limitation making of such repairs or the performance of such required maintenance necessary to conform to the requirements imposed by these Restrictions at the expense of the Owner of said lot, provided that Prudential shall have first given to the Owner of such lot at least sixty (60) days prior written notice of its intention to do so and then, only if, said Owner of such lot shall have failed to correct said violation or breach within said sixty (60) day period if such violation or breach was curable within sixty (60) days, or if not curable within sixty (60) days then only if such Owner shall have failed to commence and then be diligently seeking to so cure such violation or breach. In the event that Prudential shall, after having complied with the above notice requirements, enter such lot and remedy such breach or violation, the Owner of such lot shall be respons-

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ible to reimburse Prudential forthwith upon demand for all costs and expenses incurred in connection therewith (“Non-Compliance Expenses”) in accordance with the provisions of this Section. Each Owner of any lot within the Oak Creek Business Park by acceptance of a deed or other conveyance whether or not it shall be so expressed in any such deed or other conveyance, is and shall be deemed to covenant and agree to pay to Prudential an assessment for any Non-Compliance Expenses incurred by Prudential in connection with such Owner’s lot.

          A. Prudential shall maintain accurate books and records reflecting any Non-Compliance Expenses, and shall provide each Owner of an affected lot a statement with respect thereto. ‘Each affected Owner shall pay Non-Compliance Expenses incurred applicable to such Owner’s lot within ten (10) days of receipt of a statement. If such statement is deposited in the United States mail duly certified or registered with postage prepaid and addressed to the Owner affected thereby at his lot, the same shall be deemed received by such Owner on the fifth (5th) business day after such deposit.

          B. Any Non-Compliance Expenses assessments, together with such interest thereon and costs of collection thereof as provided hereinbelow, shall be a charge on the lot and shall be a continuing lien upon the lot against

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which such assessments are made. The lien shall become effective upon recordation of a notice of claim of lien as provided herein. such assessment, together with such interest and costs, shall also be the personal obligation of the person who is the Owner of such lot at the time when the assessment, or any portion thereof, fell due but in no event shall the person who is the Owner of such lot be personally obligated for a sum in excess of Ten Thousand Dollars ($10,000) for any given violation (but without limiting the amount that may become a lien upon such lot for any given violation or the aggregate of the personal obligation for successive violations). Any personal obligation created hereunder shall not pass to such Owners successors in title unless it is expressly assumed by them but any lien created hereunder shall remain a charge against the lot except as to “bona fide purchasers or encumbrancers for value”, without notice of same. No Owner may waive or otherwise escape personal liability for the personal assessment provided herein by non-use or abandonment of his lot.

          C. If any Non-Compliance Expenses assessment or any portion thereof is not paid within ten (10) days after the date due it shall bear interest from the date of delinquency at the then legal rate, and, in addition to all other legal and equitable rights or remedies, Prudential may, at its option, bring an action at law against the Owner

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who is personally obligated to pay the same, or upon compliance with the notice provisions set forth hereinbelow, to foreclose the lien against the affected lot, and there shall be added to the amount of such assessment or any portion thereof, the interest thereon, all costs and expenses, including reasonable attorneys fees, incurred by Prudential and in collecting the delinquent assessment. In lieu of judicially foreclosing the lien, Prudential, at its option, may foreclose such lien by proceeding under a power of sale as provided hereinbelow, such a power of sale being given to Prudential, as to each and every lot for the purpose of collecting assessments.

          D. No action shall be brought to foreclose the lien, or to proceed under the power of sale, less than thirty (30) days after the date that a notice of claim of lien, executed by Prudential, is recorded, stating the amount claimed (which may include interest and cost of collection, including reasonable attorneys’ fees), a good and sufficient legal description of the lot being assessed, the name of the record Owner or reputed Owner thereof, and the name and address of Prudential as claimant. A copy of said notice of claim shall be deposited in the United States mail, certified or registered, with postage prepaid, to the Owner of said lot.

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          E. Any such sale provided for above shall be conducted in accordance with Sections 2924, 2924(b), and 2924(c) of the Civil Code of the State of California, applicable to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner permitted or provided by law. Prudential shall have the power to bid on the lot at the foreclosure sale, and to acquire and hold, mortgage and convey the same.

          F. Upon the timely curing of any default for which a notice of claim of lien was recorded by Prudential, Prudential is hereby authorized to file or record, as the case may be, an appropriate release of such notice, upon payment by the defaulting Owner of a fee to be determined by Prudential but not to exceed Five Hundred Dollars ($500), to cover the costs of preparing and filing or recording such release together with the payment of such other costs, interest or fees as shall have been incurred.

          G. The assessment lien and the rights to foreclosure and sale thereunder shall be in addition to and not in substitution for all other rights and remedies which Prudential may have hereunder, at law or in equity.

     7.3 Result of Violation: The result of every action or omission whereby the provisions of this Declaration are violated in whole or in part is hereby declared to be and to constitute a nuisance, and every remedy allowed by law or

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equity shall be available to any Owner of any lot within the Oak Creek Business Park.

     7.4 Attorney’s Fees: In any legal or equitable proceeding for the enforcement of the provisions of this Declaration, whether it be an action for damages, declaratory relief or injunctive relief, the losing party or parties shall pay the attorneys’ fees of the prevailing party or parties, in such reasonable amount as may be fixed by the court in such proceedings, or in a separate action brought for that purpose. The prevailing party shall be entitled to said attorneys’ fees, even though said proceeding is settled prior to judgment.

     7.5 Remedies Cumulative: All remedies provided herein, or at law or in equity shall be cumulative and not exclusive.

     7.6 Waiver: Failure by the Approving Agent to enforce the provisions of this Declaration shall in no event be deemed a waiver of the right to do so thereafter, nor of the right to enforce any other covenants or restrictions herein, nor of the rights of other Owners of the property within the Oak Creek Business Park to enforce same.

     7.7 Prudential: For purposes of this Article 7 the term “Prudential” shall include Prudential’s authorized employees.

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ARTICLE 8

DURATION, MODIFICATION AND REPEAL

     8.1 Duration of Restrictions: These Restrictions shall continue and remain in full force and effect at all times with respect to all property, and each part thereof, now or hereafter made subject to these Restrictions (subject, however, to the right to amend and repeal as provided for herein) until 2039.

     8.2 Termination and Modifications; This Declaration or any provision thereof, or any covenant, condition or restriction contained herein, may be terminated, extended, modified or amended, as to the whole of the Oak Creek Business Park upon the written consent of the Owners of sixty-six and two-thirds percent (66-2/3%) of the total square footage of the land area contained within the Oak Creek Business Park (exclusive of dedicated public streets); provided, however, that so long as Prudential is the Approving Agent, no such termination, extension or modification or amendment shall be effective without the written approval of Prudential. No such termination, extension, modification or amendment shall be effective until a proper instrument in. writing describing such termination, extension, modification or. amendment has been executed by the requisite number of Owners and by Prudential and recorded.

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ARTICLE 9

MISCELLANEOUS PROVISIONS

     9.1 Constructive Notice and Acceptance; Every person who now or hereafter owns, occupies or acquires any right, title or interest in or to any portion of the property made subject to these Restrictions is and shall be conclusively deemed to have consented and agreed to every covenant, condition and restriction contained herein, whether or not any reference to this Declaration is contained in the instrument by which such person acquired an interest in said property.

     9.2 Waiver of Liability; Neither the Declarant nor the Approving Agent shall be liable to any Owner, lessee, licensee, or occupant of land subject to this Declaration by reason of any mistake in judgment, negligence, nonfeasance, action or inaction or for the enforcement or failure to enforce any provision of this Declaration. Every Owner, lessee, licensee or occupant of any of said property by acquiring his interest therein agrees that he will not bring any action or suit against Prudential or any other Approving Agent to recover any such damages from or to seek equitable relief against the Declarant by reason of same.

     9.3 Rights of Mortgagee; No breach of the Restrictions and other provisions contained herein, or any enforcement thereof, shall defeat or render invalid the lien

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of any mortgage or deed of trust now or hereafter executed upon land subject to these Restrictions; provided, however, that if any portion of said property is sold under a foreclosure of any mortgage or under the provisions of any deed of trust, any purchaser at such sale and his successors and assigns shall hold any and all property so purchased subject to all of the Restrictions and other provisions of this Declaration. Any notice of claim of lien recorded pursuant to paragraph 7.2 hereof shall take its priority vis-a-vis other encumbrances as of the date of its recordation.

     9.4 Paragraph Headings: Paragraph headings, where used herein, are inserted for convenience only and are not intended to be a part of this Declaration or in any way to define, limit or describe the scope and intent of the particular paragraphs to which they refer.

     9.5 Effect of Invalidation: If any provision of this Declaration is held to be invalid by any Court, the invalidity of such provision shall not effect the validity of the remaining provisions hereof.

     IN WITNESS WHEREOF, the undersigned have executed this Declaration the day and year first above written.

		THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
	By	/s/ A.K, Jacobson
	A.K, Jacobson
Dated: 6/1/79	Title: Regional Vice-President, REO

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EX-10.31

Exhibit 10.31

765 SYCAMORE DRIVE
MILPITAS, CALIFORNIA
STANDARD SINGLE TENANT NNN LEASE

W I T N E S S E T H

This lease (“Lease”) is entered into by and between Limar Realty Corp. #4, a California corporation (“LANDLORD”) and LSI Logic Corporation, a Delaware corporation (“Tenant”). For and in consideration of the payment of rents and the performance of the covenants herein set forth by Tenant, Landlord does lease to Tenant and Tenant accepts the Premises described below subject to the agreements herein contained.

1.	BASIC LEASE TERMS
	a.	DATE OF LEASE:	December 31,2003
	b.	TENANT:	LSI Logic Corporation
		Address (of the Premises):	765 Sycamore Drive Milpitas, California 95035
			Address (for Notices): LSI Logic Corporation 1621 Barber Lane, M/S D-106 Milpitas, CA 95035-7458 Attn: General Counsel
			With a required copy to:
			LSI Logic Corporation 1621 Barber Lane, M/S D-129 Milpitas, CA 95035-7458 Attn: Corporate Real Estate
	c.	LANDLORD: Address (for Notices):	Limar Realty Corp. #4 1730 S. El Camino Real
			Suite 400
			San Mateo, California 94402 Attn: Thomas A. Numainville
	d.	TENANT’S USE OF PREMISES:	General Office and Engineering (dry) Labs
	e.	PREMISES AREA:	67,760 Rentable Square Feet
	f.	INSURING PARTY:	Landlord is the “Insuring Party” unless otherwise stated herein.
	g.	TERM (inclusive):	Commencement Date: January 1, 2004 (“Commencement Date”)
			Expiration Date: December 31, 2010 (“Expiration Date”)
			Number of Months: 84
	h.	INITIAL BASE RENT:	Twenty-Nine Thousand One Hundred Thirty-Six and 80/100 Dollars ($29,136.80) per month.
	i.	BASE RENT ADJUSTMENT
		Step Increase. The step adjustment provisions of ¶4.b. apply for the periods shown below:

Periods (inclusive)	Monthly Base Rent
1/1/06 - 12/31/06	$	45,399.20
1/1/07 - 12/31/07		46,761.18
1/1/08 - 12/31/08		48,164.02
1/1/09 - 12/31/09		49,608.94
1/1/10 - 12/31/10		51,097.21

j.	TOTAL TERM BASE RENT:	$3,591,649.80
k.	PREPAID BASE RENT:	None
I.	SECURITY DEPOSIT:	$44,958.97

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m.	BROKER(S): Julien J. Studley, Inc. (Tenant)
n.	EXHIBITS: Exhibits lettered “A” through “C” are attached hereto and made a part hereof.

2.   PREMISES

a.

Premises. Landlord leases to Tenant the premises described in ¶1. and in Exhibit A (the “Premises”). The term “Premises” includes all the land and improvements (including the buildings, landscaping, parking lot, etc.) as described on Exhibit A. Subject to any additional work Landlord has agreed herein to do, Tenant hereby accepts the Premises in their condition existing as of the date of the execution hereof, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Tenant acknowledges that neither Landlord nor Landlord’s Broker has made any representation or warranty as to the suitability of the Premises for the conduct of Tenant’s business. Tenant agrees with the square footage specified for the Premises in ¶1. and will not hereafter challenge such determination and agreement. The rental payable by Tenant pursuant to this Lease is not subject to revision in the event of any discrepancy in the rentable square footage for the Premises.

b.

Acceptance; Quiet Enjoyment. Landlord represents that it is the fee simple owner of the Premises and has full right and authority to make this Lease. Landlord hereby leases the Premises to Tenant and Tenant hereby accepts the same from Landlord, in accordance with the provisions of this Lease. Landlord covenants that Tenant shall have peaceful and quiet enjoyment of the Premises during the Term (as defined below) of this Lease.

3.   Term. The term (“Term”) of this Lease is for the period that commences at 12:01 a.m. on the Commencement Date and expires at 11:59 p.m. on the Expiration Date. If Landlord, for any reason, cannot deliver possession of the Premises to Tenant on or before the Commencement Date, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting from such delay. In that event, however, there shall be an abatement of Rent (as defined below) covering the period between the Commencement Date and the date when Landlord delivers possession to Tenant, and all other terms and conditions of this Lease shall remain in full force and effect. If a delay in possession is caused by Tenant’s failure to perform any obligation in accordance with this Lease, the Term shall commence as of the Commencement Date, and there shall be no reduction of Rent between the Commencement Date and the time Tenant takes possession.

4.   RENT

a.	Base Rent. Tenant shall pay Landlord in lawful money of the United States, without notice, demand, offset or deduction, rent in the amount(s) set forth in ¶1. which shall be payable in advance on the first day of each and every calendar month (“Base Rent”). Unless otherwise specified in writing by Landlord, all installments of Base Rent shall be payable at Limar Realty Corp. #4, Department #44294, P.O. Box 44000, San Francisco, CA 94144-4294. Base Rent for any partial month at the beginning or end of this Lease will be prorated in accordance with the number of days in the subject month. Tenant shall be entitled, at its option, to a refund or credit of the difference between the Initial Base Rent specified in ¶1h., paid monthly, and $61,627.72, paid monthly, from the date this Lease is signed by both Landlord and Tenant retroactive to January 1, 2004.
	For purposes of Section 467 of the Internal Revenue Code, the parties to this Lease hereby agree to allocate the stated Base Rent provided herein to the periods which correspond to the actual Base Rent payments as provided under the terms and conditions of this Agreement.
b.	Step Increase. The Base Rent shall be increased periodically to the amounts and at the times set forth in ¶1.i.
c.	Rent Without Offset and Late Charge. All Rent shall be paid without prior demand or notice and without any deduction or offset whatsoever. All Rent shall be paid in lawful currency of the United States of America. Tenant acknowledges that late payment by Tenant to Landlord of any Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such cost being extremely difficult and impracticable to ascertain. Such costs include, without limitation, processing and accounting charges and late charges that may be imposed on Landlord by the terms of any encumbrance or note secured by the Premises. Therefore, if any Rent is not received by Landlord within five (5) days of its due date, Tenant shall pay to Landlord a late charge equal to six percent (6%) of such overdue payment. Landlord and Tenant hereby agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of any such late payment and that the late charge is in addition to any and all remedies available to the Landlord and that the assessment and/or collection of the late charge shall not be deemed a waiver of any other default. Additionally, all such delinquent Rent or other sums, plus this late charge, shall bear interest from the due date thereof at the lesser of ten percent (10%) per annum or the maximum legal interest rate permitted by law. Any payments of any kind returned for insufficient funds will be subject to an additional handling charge of $25.00, and if a check is returned for non-sufficient funds more than twice during the Term of the Lease, Landlord may require Tenant to pay all future payments of Rent or other sums due by cashier’s check or by wire transfer.

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d.   Rent. The term “Rent” as used in this Lease shall refer to Base Rent, Real Property Taxes, Operating Expenses, Security Deposit(s), Insurance Costs, repairs and maintenance costs, utilities, late charges and other similar charges payable by Tenant pursuant to this Lease either directly to Landlord or otherwise.

5   OPERATING EXPENSES

a.

Payment by Tenant. During the Term of this Lease Tenant shall pay to Landlord, as additional Rent, on a monthly basis one hundred percent (100%) of the Operating Expenses.

b.

Operating Expenses. The term “Operating Expenses” shall mean all expenses, costs and disbursements (not specifically excluded from the definition of Operating Expenses below) of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, maintenance, repair and operation of the Premises. Operating Expenses shall include, but not be limited to, the following:

1)	Wages and salaries of all employees engaged in the operation, maintenance and security of the Premises, including taxes, insurance and benefits relating thereto; and the rental cost and overhead of any office and storage space used to provide such services.
2)	All supplies, materials and labor used in the operation, repair or maintenance of the Premises.
3)	Cost of all utilities, including surcharges, for the Premises, including the cost of water, power and lighting which are not separately billed to and paid for by Tenant.
4)	Cost of all maintenance and service agreements for the Premises and the equipment thereon, including but not limited to, security services, exterior window cleaning, janitorial service, engineers, gardeners and trash removal services.
5)	All Insurance Costs, as such term is defined in ¶16.
6)	Cost of all repairs and general maintenance (excluding repairs and general maintenance paid by proceeds of insurance or by Tenant or other third parties).
7)	A reasonable management fee for the property management of the Premises.
8)	The costs of any additional services not provided to the Premises at the Commencement Date but thereafter provided by Landlord in its management of the Premises.
9)	The cost of any capital improvements made to the Premises after the date of this Lease, with such cost thereof to be amortized over the useful life of the improvements as reasonably determined by Landlord. Other than costs associated with repairs, replacements or refurbishments in the normal course and necessary for the normal operation of the Premises, Landlord shall not, without Tenant’s consent, which consent shall not be unreasonably withheld, conditioned or delayed, materially alter the physical features of the Premises in a manner which materially affects Tenant’s use, or construct additional square footage, the cost for either of which would be amortized over its useful life and passed through to Tenant as part of Operating Expenses. A roof re-coating shall be treated as an Operating Expense, while a roof replacement would be an amortizable capital expenditure.
10)	Real Property Taxes as that term is defined in ¶11 .c.
11)	Assessments, dues and other amounts payable pursuant to the CC&R’s described in ¶7.C.

c.   Operating Expenses shall not include:

1)	Costs paid for directly by Tenant or other tenants;
2)	Costs incurred in connection with the financing, sale or acquisition of the Premises or any portion thereof;
3)	Costs incurred in leasing or procuring tenants (including without limitation, lease commissions, advertising expenses, attorneys’ fees and expenses of renovating space for tenants);
4)	Executive salaries of off-site personnel employed by Landlord except for the charge (or pro rata share) of the property manager of the Premises;
5)	Subject to the provisions of ¶5.b.9) above, depreciation on the Building or other improvements on the Premises;
6)	Legal expenses for disputes with Tenant and any other professional fees of attorneys, auditors or consultants not incurred in connection with the normal maintenance and operation of the Premises;

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7)	Costs incurred that are reimbursed by Tenant, or third parties, including insurers;
8)	Expenses for repair or replacement covered by warranties, and any costs due to casualty that are covered by insurance carried by Landlord;
9)	Rentals and other payments by Landlord under any ground lease or other lease underlying the Lease, and interest, principal, points and other fees on debt or amortization of any debt secured in whole or part by all or any portion of the Premises;
10)	Repairs or replacements caused by Landlord’s gross negligence or the gross negligence of Landlord’s employees or agents;
11)	Net income, franchise, capital stock, estate or inheritance taxes or taxes which are the personal obligation of Landlord;
12)	Landlord’s charitable or political contributions;
13)	Payments to subsidiaries and affiliates of Landlord for services to the Premises for supplies or other materials to the extent that the cost of such services, supplies or materials exceed the cost which would have been paid had the services, supplies or materials been provided by unaffiliated parties on a competitive basis (provided, however, any fee for management services paid to an affiliate of Landlord shall be in the amount set forth in ¶5.b.7);
14)	Payments to subsidiaries and affiliates of Landlord for services to the Project for supplies or other materials to the extent that the cost of such services, supplies or materials exceed the cost which would have been paid had the services, supplies or materials been provided by unaffiliated parties on a competitive basis (provided, however, any fee for management services paid to an affiliate of Landlord shall be in the amount set forth in ¶4.d.1)b);
15)	Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord;
16)	Advertising and promotional expenditures;
17)	Costs of repairs and other work occasioned by fire, windstorm or other casualty of an insurable nature to the extent covered by insurance; or
18)	Costs for sculpture, paintings or other objects of art other than for normal and customary lobby furnishings (nor insurance thereon or extraordinary security in connection therewith).

d.	Extraordinary Services. Tenant shall pay within thirty (30) days of receipt of an invoice from Landlord the cost of additional or extraordinary services provided to Tenant at Tenant’s request and not paid or payable by Tenant pursuant to other provisions of this Lease.
e.	Impound. Landlord reserves the right, at Landlord’s option from time to time during the calendar year, to estimate the annual cost of Operating Expenses incurred by Landlord (“Projected Operating Expenses”) and to require Tenant to pay Tenant’s Share thereof in advance. Except as provided below in this ¶5.e., Tenant shall pay to Landlord, monthly in advance as additional Rent, one-twelfth (1/12) of Tenant’s Share of the Projected Operating Expenses. The failure of Landlord to timely furnish to Tenant a schedule of the Projected Operating Expenses for any Calendar Year shall not preclude Landlord from enforcing its rights to collect any Projected Operating Expenses under this ¶5. Tenant’s share is 100% of Operating Expenses.
	When Landlord provides Tenant with a revised Projected Operating Expense Budget during any calendar year, the following payment adjustments will be due Landlord: (1) Effective the first of the month following notification of the new Projected Operating Expense Budget, Tenant shall pay monthly in advance, one-twelfth (1/12) of Tenant’s Share of the new Projected Operating Expenses, and 2) if the revised Projected Operating Expense Budget exceeds the prior Budget, Landlord shall invoice to Tenant a retroactive billing and Tenant shall pay said billing within thirty (30) days of receipt of same. The retroactive billing will reflect the additional amount payable by the Tenant for Tenant’s Share of the new Operating Expense Budget for the calendar year to date. For example, assume an annual existing Operating Expense Budget of $144,000 for a tenant with a share of 50% and where such tenant was initially making $6,000 a month of estimated payments. If the revised Operating Expense Budget increases by $12,000 to $156,000 and the tenant is notified in June, then the amounts due per 1) & 2) above are computed as follows:

1) New Monthly Payment (Effective July 1):
Revised Annual Operating Expense Budget	$	156,000
Tenant’s Share @ 50%	$	78,000
New Payment @ 1/12 Monthly	$	6,500

2) Retroactive Billing:
Revised Annual Operating Expense Budget	$	156,000
Tenant’s Share @ 50% for 6 (of 12) months	$	39,000
Less payments, to date (6 @ $6,000)		(36,000	)
Retroactive Balance Due	$	3.000

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As an alternative to a retroactive billing, Landlord may, at Landlord’s option, spread the increase over the remaining months in the current calendar year in equal monthly payments.

f.   Adjustment.

1)	Accounting. Within one hundred eighty (180) days (or as soon thereafter as possible) after the close of each calendar year or portion thereof of occupancy, Landlord shall provide Tenant a statement of such year’s actual Operating Expenses snowing the actual Operating Expenses compared to the Projected Operating Expenses. If the actual Operating Expenses are more than the Projected Operating Expenses then Tenant shall pay Landlord, within thirty (30) days of receipt of a bill therefor, the difference. If the actual Operating Expenses are less than the Projected Operating Expenses, then Tenant shall receive a credit against future Operating Expenses payments equal to the difference; provided, that in the case of an overpayment for the final lease year of the Term, Landlord shall credit the difference against any sums due from Tenant to Landlord in accordance with the terms of this Lease; and if no sums are due and unpaid, shall promptly refund the amount to Tenant.
2)	Tenant’s Right to Audit. Within ninety (90) days after receipt of Landlord’s statement setting forth actual Operating Expenses (the “Statement”), Tenant shall have the right to audit at Landlord’s local offices, at Tenant’s expense, Landlord’s accounts and records relating to Operating Expenses. Such audit shall be conducted by a certified public accountant approved by Landlord, which approval shall not be unreasonably withheld, or by Tenant’s independent lease administration consultants who shall not be compensated on a contingency or percentage basis. If such audit reveals that Landlord has overcharged Tenant, the amount overcharged shall be paid to Tenant within thirty (30) days after the audit is concluded. If such audit reveals that Landlord has undercharged Tenant, the amount of undercharge shall be paid by Tenant to Landlord within 30 days after the audit is conducted. In addition, if the Operating Expenses included in the Statement exceed the actual Operating Expenses which should have been charged to Tenant by more than five percent (5%), the cost of the audit shall be paid by Landlord. Tenant may not withhold any payment due as set forth in this Lease pending completion of the audit.
3)	Proration. Tenant’s liability to pay Operating Expenses shall be prorated on the basis of a 365 (or 366, as the case may be) day year to account for any fractional portion of a year included at the commencement or expiration of the Term of this Lease.
4)	Survival. Landlord and Tenant’s obligations to pay for or credit any increase or decrease in payments pursuant to this ¶5. shall survive this Lease.

g.   Failure to Pay. Except as otherwise provided herein, failure of Tenant to pay any of the charges required to be paid under this ¶5. shall constitute a material default and breach of this Lease and Landlord’s remedies shall be as specified in ¶21.

6.   SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deposit a security deposit (“Security Deposit”) in the amount set forth in ¶1. with Landlord. If Tenant is in default beyond applicable cure periods, Landlord can (but without any requirement to do so) use the Security Deposit or any portion of it to cure the default or to compensate Landlord for any damages sustained by Landlord resulting from Tenant’s default. Upon demand, Tenant shall immediately pay to Landlord a sum equal to the portion of the Security Deposit expended or applied by Landlord to restore the Security Deposit to its full amount. In no event will Tenant have the right to apply any part of the Security Deposit to any Rent due under this Lease. Landlord’s obligations with respect to the Security Deposit are those of a debtor and not a trustee, and Landlord can commingle the Security Deposit with Landlord’s general funds. Landlord shall not be required to pay Tenant interest on the Security Deposit. Tenant hereby waives the provisions of California Civil Code Section 1950.7, and all other provisions of law now in force or which may become in force after the date of execution of this Lease that provide that Landlord may claim from its security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damages caused by the tenant, or to clean the premises or otherwise limit the application of a security deposit. With respect to the Security Deposit, Landlord and Tenant agree that Landlord may claim and employ the Security Deposit in connection with any and all sums reasonably necessary to compensate Landlord for any foreseeable or unforeseeable loss or damage caused by or resulting from any default by Tenant pursuant to this Lease as well as any foreseeable or unforeseeable loss or damage resulting from any act or omission by Tenant or Tenant’s officers, agents, employees, independent contractors, or invitees. If Tenant is not in default at the expiration or termination of this Lease and has fully complied with the provisions of ¶13.d.6) and ¶26., Landlord shall return the Security Deposit to Tenant.

7. USE OF PREMISES

a.   Tenant’s Use. Tenant shall use the Premises solely for the purposes stated in ¶1. and for no other purposes without obtaining the prior written consent of Landlord. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises or with respect to the suitability of the Premises to the conduct of Tenant’s business, nor has Landlord agreed to undertake any modification, alteration or improvement to the Premises, except as provided in writing in this Lease. With reasonable notice to Tenant, Landlord may from time to time, at its sole discretion, make such modifications, alterations, deletions or

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improvements to the Premises as Landlord may reasonably deem necessary or desirable, without compensation to Tenant. Tenant shall promptly comply with all laws, statutes, ordinances, orders and governmental regulations now or hereafter existing affecting the Premises. Tenant shall not do or permit anything to be done in or about the Premises or bring or keep anything in the Premises that will in any way increase the premiums paid by Landlord on its insurance related to the Premises. Tenant will not perform any act or carry on any practices that may injure the Premises. Tenant shall not use the Premises for sleeping, washing clothes or the preparation, manufacture or mixing of anything that emits any objectionable odor, noises, vibrations or lights onto such other tenants. If sound insulation is required to muffle noise produced by Tenant on the Premises, Tenant at its own cost shall provide all necessary insulation. Tenant shall not do anything on the Premises which will overload any existing parking or service to the Premises. Pets and/or animals of any type (other than seeing eye dogs) shall not be kept on the Premises. Tenant covenants that it will not interfere with other tenants’ quiet enjoyment of their premises.

b.

Rules and Regulations. Tenant shall comply with and use the Premises in accordance with the Rules and Regulations attached hereto as Exhibit B and to any reasonable modifications to such Rules and Regulations as Landlord may adopt from time to time, provided however that if any rule or regulation is in conflict with any term, covenant or condition of this Lease, this Lease shall prevail. In addition, no such rule or regulation, or any subsequent amendment thereto adopted by Landlord, shall in any material way alter, reduce or adversely affect any of Tenant’s rights or materially enlarge Tenant’s obligations under this Lease.

c.

CC&R’s. Tenant agrees that this Lease is subject and subordinate to the Covenants, Conditions and Restrictions, a copy of which is attached hereto as Exhibit C. as they may be amended from time to time (“CC&R’s”), and further agrees that the CC&R’s are an integral part of this Lease. Throughout the Term or any extension thereof, notwithstanding any other provision hereof, Tenant shall faithfully and timely assume and perform all obligations of Landlord and/or Tenant under the CC&R’s and any modifications or amendments thereto, including the payment of any periodic or special dues or assessments against the Premises. Such dues and assessments shall be included within the definition of Operating Expenses pursuant to ¶5.b.11), and Tenant shall pay such amounts as further set forth in ¶5. Tenant shall hold Landlord, its subsidiaries, shareholders, directors, officers, agents and employees harmless and indemnify Landlord, its subsidiaries, shareholders, directors, officers, agents and employees against any loss, expense and damage, including attorneys’ fees and costs, arising out of the failure of Tenant to perform or comply with the CC&R’s.

8.    EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE

a.   Emissions. Tenant shall not:

1)	Knowingly permit any vehicle on the Premises to emit exhaust which is in violation of any governmental law, rule, regulation or requirement;
2)	Discharge, emit or permit to be discharged or emitted, any liquid, solid or gaseous matter, or any combination thereof, into the atmosphere or on, into or under the Premises, any building or other improvements of which the Premises are a part, or the ground or any body of water which matter, as reasonably determined by Landlord or any governmental entity to be in violation of law or regulation, and does or may pollute or contaminate the same, or is, or may become, radioactive or does, or may, adversely affect the (a) health or safety of persons, wherever located, whether on the Premises or anywhere else, (b) condition, use or enjoyment of the Premises or any other real or personal property, whether on the Premises or anywhere else, or (c) Premises or any of the improvements thereto including buildings, foundations, pipes, utility lines, landscaping or parking areas;
3)	Produce, or permit to be produced, any intense glare, light or heat in violation of law or regulation;
4)	Create, or permit to be created, any sound pressure level which will interfere with the quiet enjoyment of any real property outside the Premises, or which will create a nuisance or violate any governmental law, rule, regulation or requirement;
5)	Create, or permit to be created, any vibration that is discernible outside the Premises; or
6)	Transmit, receive or permit to be transmitted or received from or to the Premises, any electromagnetic, microwave or other radiation which is or may be harmful or hazardous to any person or property in, or about the Premises, or anywhere else.

b.   Storage and Use.

1)   Storage. Subject to the uses permitted and prohibited to Tenant under this Lease, Tenant shall store in appropriate leak proof containers all solid, liquid or gaseous matter, or any combination thereof, which matter, if discharged or emitted into the atmosphere, the ground or any body of water would be in violation of law or regulation, and does or may (a) pollute or contaminate the same, or (b) adversely affect the (i) health or safety of persons, whether on the Premises or anywhere else, (ii) condition, use or enjoyment of the Premises or any real or personal property, whether on the Premises or anywhere else, or (iii) Premises.

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2)

Use. In addition, without Landlord’s prior written consent, Tenant shall not use, store or permit to remain on the Premises any solid, liquid or gaseous matter which is, or may become dangerously radioactive. If Landlord does give its consent, Tenant shall store the materials in such a manner that no radioactivity will be detectable outside a designated storage area and Tenant shall use the materials in such a manner that (a) no real or personal property outside the designated storage area shall become contaminated thereby and (b) there are and shall be no adverse effects on the (i) health or safety of persons, whether on the Premises or anywhere else, (ii) condition, use or enjoyment of the Premises or any real or personal property thereon or therein, or (iii) Premises or any of the improvements thereto or thereon.

3)

Hazardous Materials. Subject to the uses permitted and prohibited to Tenant under this Lease, Tenant shall store, use, employ, transport and otherwise deal with all Hazardous Materials (as defined below) employed on or about the Premises in accordance with all federal, state, or local law, ordinances, rules or regulations applicable to Hazardous Materials in connection with or respect to the Premises.

c.   Disposal of Waste.

1)	Refuse Disposal. Tenant shall not keep any trash, garbage, waste or other refuse on the Premises except in sanitary containers and shall regularly and frequently remove same from the Premises. Tenant shall keep all incinerators, containers or other equipment used for storage or disposal of such materials in a clean and sanitary condition.
2)	Sewage Disposal. Tenant shall properly dispose of all sanitary sewage and shall not use the sewage disposal system (a) for the disposal of anything except sanitary sewage or (b) amounts in excess of the lesser of: (i) that reasonably contemplated by the uses permitted under this Lease or (ii) that permitted by any governmental entity. Tenant shall keep the sewage disposal system free of all obstructions and in good operating condition.
3)	Disposal of Other Waste. Tenant shall properly dispose of all other waste or other matter delivered to, stored upon, located upon or within, used on, or removed from, the Premises in such a manner that it does not, and will not, violate any law or regulation and adversely affect the (a) health or safety of persons, wherever located, whether on the Premises or elsewhere, (b) condition, use or enjoyment of the Premises or any other real or personal property, wherever located, whether on the Premises or anywhere else, or (c) Premises or any of the improvements thereto or thereon, foundations, pipes, utility lines, landscaping or parking areas.

d.	Information. Tenant or Landlord, as the case may be, shall each provide the other with any and all information regarding Hazardous Materials in the Premises, including copies of all filings and reports to governmental entities at the time they are originated, and any other information reasonably requested by the other party. In the event of any accident, spill or other incident involving Hazardous Materials, Tenant or Landlord, as the case may be, shall immediately report the same to the other and supply the other with all information and reports with respect to the same. All information described herein shall be provided regardless of any claim by either party that it is confidential or privileged, provided that the provision of these documents will not, in any way, alter any aspect of the document’s confidentiality or privileged nature.
e.	Compliance with Law. Notwithstanding any other provision in this Lease to the contrary, Tenant shall comply with all laws, statutes, ordinances, regulations, rules and other governmental requirements now or hereafter existing in complying with its obligations under this Lease, and in particular, relating to the storage, use and disposal of Hazardous Materials.
f.	Indemnity. Tenant hereby agrees to indemnify, defend and hold Landlord, its agents, employees, lenders, shareholders, directors, representatives, successors and assigns harmless from and against any and all actions, causes of action, losses, damages, costs, claims, expenses, penalties, obligations or liabilities of any kind whatsoever (including but not limited to reasonable attorneys’ fees) arising out of or relating to any Hazardous Materials employed, used, transported across, or otherwise dealt with by Tenant (or invitees, or persons or entities under the control of Tenant) in connection with or with respect to the Premises. Notwithstanding any of the provisions of this Lease, the indemnity obligation of Tenant pursuant to this ¶8.f. shall survive the termination of this Lease and shall relate to any occurrence as described in this ¶8.f. occurring in connection with this Lease. Landlord hereby agrees to indemnify, defend and hold Tenant harmless from and against any and all actions, causes of action, losses, damages, costs, claims, expenses, penalties, obligations or liabilities of any kind whatsoever (including reasonable attorneys’ fees) arising out of or relating to (i) Hazardous Materials employed, used, transported to the Premises, for which the Premises are a part thereof, by Landlord, its agents or employees or (ii) Hazardous Materials existing on, in or under the Premises as of the date of this Lease. For purposes of this Lease the term “Hazardous Materials” shall mean any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended, or the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended, or any other federal, state, or local law, ordinance, rule or regulation applicable to the Premises, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous, or any substance which contains gasoline,

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diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (PCB’s), or radon gas, urea formaldehyde, asbestos or lead.

9.	SIGNS AND COMMUNICATIONS ANTENNAE. Tenant shall not place any sign or communications antennae upon or adjacent to the Premises, except that Tenant may, with Landlord’s prior written consent, install such signs (but not on the roof) as are reasonably required to indicate Tenant’s company name or logo provided such signs are in compliance with Landlord’s standard sign criteria or install communications antennae used exclusively by Tenant provided such signs and/or communications antennae are in compliance with all applicable governmental requirements and the CC&R’s. The installation of any sign or communications antennae on or adjacent to the Premises by or for Tenant shall be subject to the provisions of ¶13. (Repairs and Maintenance). Tenant shall remove any sign or communications antennae placed on or adjacent to the Premises by Tenant upon the expiration of the Term or sooner termination of this Lease, and Tenant shall repair any damage or injury to the Premises caused thereby, all at Tenant’s expense. If any signs or communications antennae are not removed, or necessary repairs not made, Landlord shall have the right to remove the signs or communications antennae and repair any damage or injury to the Premises at Tenant’s sole cost and expense. Notwithstanding any other provision of this Lease to the contrary, Landlord reserves all rights to the use of the roof and the right to install and receive all revenues from the installation of such communications antennae on the Premises as do not unreasonably interfere with the conduct of Tenant’s business on the Premises. Landlord will, however, consult with Tenant regarding the location of any antennae placed on the Premises and attempt to comply with Tenant’s reasonable request as to location.
10.	PERSONAL PROPERTY TAXES. Tenant shall pay at least ten (10) days prior to delinquency all taxes assessed against and levied upon Tenant owned leasehold improvements, trade fixtures, furnishings, equipment and all personal property of Tenant contained in the Premises or elsewhere. When possible, Tenant shall cause its leasehold improvements, trade fixtures, furnishings, equipment and all other 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 thirty (30) days after receipt of a written statement setting forth the taxes applicable to Tenant’s property.
11.	REAL PROPERTY TAXES

a.	Payment of Taxes. Landlord shall pay the Real Property Taxes, as defined in ¶11.c., during the Term of this Lease. Subject to ¶11.b., Tenant shall promptly reimburse Landlord for such Real Property Taxes paid by Landlord.
b.	Advance Payment. In order to ensure payment when due and before delinquency of any or all Real Property Taxes, Landlord shall provide to Tenant a copy of the tax bill for the current Real Property Taxes applicable to the Premises upon receipt by Landlord, and Tenant shall pay that amount to Landlord at least ten (10) business days before the delinquency date of the tax bill. If the amounts paid to Landlord by Tenant under the provisions of this ¶11. are insufficient to discharge the obligations of Tenant to pay such Real Property Taxes as the same become due, Tenant shall pay to Landlord, upon Landlord’s demand, such additional sums as are necessary to pay such obligations. All moneys paid to Landlord under this ¶11. may be intermingled with other moneys of Landlord and shall not bear interest.
c.	Definition of “Real Property Taxes”. As used herein, the term “Real Property Taxes” shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax or other fee, charge, or excise which may be imposed as a substitute for any of the foregoing (other than inheritance, personal income or estate taxes) imposed upon the Premises by any authority having the direct or indirect power to tax, including any city, county, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, levied against any legal or equitable interest of Landlord in the Premises, Landlord’s right to rent or other income therefrom, and/or Landlord’s business of leasing the Premises. 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, or changes in applicable law taking effect, during the Term of this Lease, including but not limited to a change in the ownership of the Premises or in the improvements thereon, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not contemplated by the parties hereto.
d.	Appeals. In the event that either Landlord or Tenant desires to appeal or contest any aspect of any assessment or payment of any Real Property Tax, that party shall consult with the other and the parties shall mutually agree on which party is better suited to pursue the appeal. Whether Landlord or Tenant is the appealing party, Tenant shall be responsible for payment of the cost of the appeal.

12.	UTILITIES. Tenant 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. If any such services are not separately metered to Tenant, Tenant shall pay a reasonable proportion, to be determined by Landlord, of all charges jointly metered with other premises.
13.	REPAIRS AND MAINTENANCE

a.   Tenant’s Obligations.

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1)	General. Tenant shall, at Tenant’s sole cost and expense and at all times, contract for janitorial services and supplies and keep the Premises and every part thereof in good order, condition and repair, structural and non-structural (whether or not such portion of the Premises requiring repairs, or the means of repairing same, are reasonably or readily accessible to Tenant, and whether or not the need for such repairs occurs as a result of Tenant’s use, any prior use, the elements or the age of such portion of the Premises), including, without limiting the generality of the foregoing, all equipment or facilities serving the Premises, such as plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, fired or unfired pressure vessels, fire sprinkler and/or standpipe and hose or other automatic fire extinguishing system, including fire alarm and/or smoke detection systems and equipment, fire hydrants, fixtures, walls (interior and exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways located in, on, about or adjacent to the Premises. Tenant shall not cause or permit any Hazardous Material to be spilled or released in, on, under or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Tenant’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, the elements surrounding same, or neighboring properties, that was caused or materially contributed to by Tenant, or pertaining to or involving any Hazardous Materials and/or storage tank brought onto the Premises by or for Tenant or under its control. Tenant, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices. Tenant’s obligations to reimburse Landlord as part of Operating Expenses shall include restorations, replacements (i.e., parking lot, landscaping) or renewals when necessary in Landlord’s reasonable discretion to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair.
2)	Contracts. Tenant shall, at Tenant’s sole cost and expense, procure and maintain contracts, with copies to Landlord, in customary form and substance for, and with contractors specializing and experienced in, the inspection, maintenance and service of the following equipment and improvements, if any, located on the Premises: (i) heating, air conditioning and ventilation equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler and/or standpipe and hose or other automatic fire extinguishing systems, including fire alarm and/or smoke detection, (iv) landscaping and irrigation systems, (v) roof covering and drain maintenance and (vi) asphalt and parking lot maintenance. Tenant shall keep a detailed preventative maintenance schedule and log showing the frequency of maintenance on all HVAC, mechanical, electrical and other systems of the Premises and provide Landlord with a copy of same quarterly.
3)	As-Is Condition. The parties affirm that Landlord, its subsidiaries, officers, shareholders, members, managers, directors, agents and/or employees have made no representations to Tenant respecting the condition of the Premises except as specifically stated herein.
4)	ADA. Tenant acknowledges that as of the Commencement Date, the Premises may not comply with the accessibility provisions of Title 24 of the California Code of Regulations as interpreted by the Office of the State Architect (“ADA”), and that Landlord shall have no obligation with respect to any such failure of the Premises to so comply. Tenant shall, at its cost, at any time during the Term as required by any applicable governmental agency having jurisdiction over the Premises, make such modifications and alterations to the Premises as may be required in order to fully comply with the provisions of the ADA, as from time to time amended, and any and all regulations issued pursuant to or in connection with the ADA in such a manner as to satisfy the applicable governmental agency or agencies requiring remediation. Tenant shall at least thirty (30) days prior to the commencement of any construction in connection with satisfaction of the ADA, give written notice to Landlord of its intended commencement of construction together with sufficient details so as to reasonably disclose to Landlord the nature of the proposed construction, copies of any notices received by Tenant from applicable governmental agencies in connection with the ADA and such other documents or information as Landlord may reasonably request. In any event, notwithstanding anything to the contrary contained in this Lease, prior to the termination of the Term, Tenant shall, at its cost, make such modifications and alterations to the Premises as may be required to comply fully with the ADA as from time to time amended and any and all regulations issued thereunder. Tenant shall give the Landlord thirty (30) days prior written notice as described above in connection with any such construction. Any and all construction required to so comply with the ADA shall be completed by Tenant prior to the expiration of the Term.

b.

Landlord’s Obligations. Landlord shall have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, whether structural or non structural, all of which obligations are intended to be that of the Tenant under ¶13.a. hereof.

c.

Compliance with Governmental Regulations. Tenant shall, at its own cost and expense, promptly and properly observe and comply with all present and future orders, regulations, directions, rules, laws, ordinances, and requirements of all governmental authorities (including but not limited to state, municipal, county and federal governments and their departments, bureaus, boards and officials) arising from the use or occupancy of, or applicable to, the Premises or privileges appurtenant to or in connection with the enjoyment of the Premises. Tenant shall also

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comply with all such rules, laws, ordinances and requirements at the time Tenant makes any alteration, addition or change to the Premises.

d.   Miscellaneous.

1)	Landlord and Tenant shall each do all acts required to comply with all applicable laws, ordinances and rules of any public authority relating to their respective maintenance obligations as set forth herein.
2)	Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford the Tenant the right to make repairs at Landlord’s expense or to terminate this Lease because of Landlord’s failure to keep the Premises in good order, condition and repair and Tenant hereby specifically waives the provisions of California Civil Code Sections 1941 and 1942.
3)	Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry, as determined by Landlord or Landlord’s structural engineer. The cost of any such determination made by Landlord’s structural engineer shall be paid for by Tenant upon demand.
4)	Except as otherwise expressly provided in this Lease, and except in instances of Landlord’s gross negligence or willful misconduct, Landlord shall have no liability to Tenant nor shall Tenant’s obligations under this Lease be reduced or abated in any manner whatsoever by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord making any repairs or changes which Landlord is required to make or is permitted to make by this Lease or by any tenant’s lease or is required by law to make in or to any portion of the Premises. Landlord shall nevertheless use reasonable efforts to minimize any interference with Tenant’s business in the Premises.
5)	Tenant shall give Landlord prompt notice of any damage to or defective condition in any part or appurtenance of the Premises’ mechanical, electrical, plumbing, HVAC or other systems serving, located in or passing through the Premises. Upon request by Landlord, Tenant shall provide Landlord with evidence reasonably acceptable to Landlord of service contracts on such systems.
6)	Landlord may, at Landlord’s option, choose to perform any of the Tenant’s obligations in this ¶13. (“Tenant’s Obligations”) as to the exterior of the Premises (e.g., landscaping, building exterior and parking lot). As to any Tenant’s Obligations as to the interior of the Premises, Landlord may perform only those Tenant’s Obligations which Tenant fails to perform itself. The cost of any such Tenant’s Obligations so performed by Landlord shall be at Tenant’s sole cost and expense. Tenant shall reimburse Landlord for any such costs incurred by Landlord in the performance of Tenant’s Obligations within thirty (30) days of receipt of a billing from Landlord.

14.

ALTERATIONS. Tenant shall not make any alterations to the Premises (“Alterations") without Landlord’s prior written consent, which consent shall not be unreasonably withheld, provided however that Tenant may make non-structural alterations costing less than $10,000 per event without Landlord’s consent. Regardless of whether Landlord’s consent for an Alteration is required, Tenant must provide Landlord at least fifteen (15) business days prior to the commencement of any Alteration with a complete description of each such Alteration including any building permit drawing(s) and specifications. Landlord may post notices regarding non-responsibility in accordance with the laws of the state in which the Premises are located. All Alterations made by Tenant, whether or not subject to Landlord’s consent, shall be performed by Tenant and its contractors in a first class workmanlike manner and permits and inspections shall be obtained from all required governmental entities. Landlord shall respond to Tenant within fifteen (15) business days of actual receipt of Tenant’s written request for consent to any Alterations. If Landlord fails to respond within thirty (30) days of actual receipt, the Alterations shall be deemed approved and not subject to removal at the end of the Term. At the time Landlord gives its consent to any Alterations, it shall designate whether Tenant will be required to remove some or all of such Alterations upon the expiration or termination of this Lease or whether Tenant will be able to leave the Alterations and surrender them with the Premises. Everything else notwithstanding, in no event will Tenant be required to remove or restore Alterations that are generic office tenant improvements or engineering (dry) labs. Landlord may, upon 60 days prior written notice before the expiration of the Term, require Tenant to remove some or all of the Alterations for which Landlord’s consent was not previously requested. Before the last day of the Term, Tenant shall at its own cost also remove those Alterations for which Landlord previously notified Tenant removal would be required. If Landlord so elects, Tenant shall at its own cost restore those Alterations for which consent was not previously requested to the condition designated by Landlord in its election, before the last day of the Term. Should Landlord consent in writing to Tenant’s Alteration of the Premises, Tenant shall contract with a contractor approved by Landlord for the construction of such Alterations, shall secure all appropriate governmental approvals and permits, and shall complete such Alterations with due diligence in compliance with plans and specifications approved by Landlord. Tenant shall pay all costs for such construction and shall keep the Premises free and clear of all mechanics’ liens which may result from construction by Tenant.

Notwithstanding anything in this Lease to the contrary, Landlord will inspect the existing alterations and improvements in the Premises within ninety (90) days of the date the Lease is executed in full by both parties, and Tenant shall not be obligated to remove any elements of the existing alterations and improvements that Landlord approves, but subject to the paragraph immediately above, shall be obligated

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to remove as of the Expiration Date of this Lease any alterations and improvements to the Premises made subsequent to the Commencement Date of the Prior Lease (as defined below) which Landlord has not approved in writing. If Landlord fails to inspect or provide written notice regarding its approval to Tenant within the ninety (90) day period described above, all existing alterations and improvements shall be deemed approved and need not be removed as of the Expiration Date of this Lease.

15.

RELEASE AND INDEMNITY. As material consideration to Landlord, Tenant agrees that Landlord shall not be liable to Tenant for any damage to Tenant or Tenant’s property from any cause, except for damages resulting from Landlord’s gross negligence or willful misconduct, and Tenant waives all claims against Landlord for damage to persons or property arising for any reason, except for damage resulting directly from Landlord’s gross negligence or willful misconduct. Tenant shall indemnify and hold Landlord, its subsidiaries, officers, shareholders, directors, agents and employees harmless from all damages including attorneys’ fees and costs arising out of any damage to any person or property occurring in, on or about the Premises or Tenant’s use of the Premises or Tenant’s breach of any term of this Lease.

16.

INSURANCE

a.

Payment For Insurance. Regardless of whether the Landlord or Tenant is the Insuring Party, Tenant shall pay for all insurance for the Premises required under this ¶16. (“Insurance Costs”) either directly or by reimbursement to Landlord as set forth in this ¶16. Premiums for policy periods commencing prior to or extending beyond the Lease Term shall be prorated to correspond to the Lease Term. Payment shall be made by Tenant to Landlord within thirty (30) days following receipt of an invoice for any amount due.

b.

Liability Insurance.

1)   Carried by Tenant. Whether or not Tenant is the Insuring Party, Tenant shall obtain and keep in force during the Term of this Lease a commercial general liability policy of insurance protecting Tenant and Landlord (as an additional insured) against claims for bodily injury, personal injury and property damage based upon, involving 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 $5,000,000 per occurrence with an “Additional Insured-Managers or Landlords of Premises” endorsement and contain an “Amendment of the Pollution Exclusion” 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 Tenant’s indemnity obligations under this Lease. The limits of said insurance required by this Lease or as carried by Tenant shall not, however, limit the liability of Tenant nor relieve Tenant of any obligation hereunder. All insurance to be carried by Tenant shall be primary to and not contributory with any similar insurance carried by Landlord, whose insurance shall be considered excess insurance only. All insurance coverage required pursuant to this ¶16. which is to name Landlord as an additional named insured shall also name Landlord’s subsidiaries, directors, agents, members, managers, officers and employees as named insureds.

2)   Carried by Landlord. In the event Landlord is the Insuring Party, Landlord shall also maintain liability insurance as described in ¶16.b.1), in addition to, and not in lieu of the insurance required to be maintained by Tenant. In the event Tenant is the Insuring Party, Landlord shall in addition carry Lessor’s Risk Coverage and insure the Premises on Landlord’s umbrella policy. Tenant shall not be named as an additional insured therein under any insurance obtained by Landlord in accordance with this ¶16.b.2).

c.   Property Insurance - Building, Improvements and Rental Value.

1)

Building and Improvements. The Insuring Party shall obtain and keep in force during the Term of this Lease a policy or policies with Landlord named as an additional insured (if Tenant is the Insuring Party), with loss payable to Landlord and to the holders of any mortgages, deeds of trust or ground leases on the Premises (“Lender(s)”), 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 Lender(s), but in no event more than the commercially reasonable and available insurable value thereof if, by reason of the unique nature or age of the improvements involved, such latter amount is less than full replacement cost. If the coverage is available at a commercially reasonable cost, such policy or policies shall insure against all risks of direct physical loss or damage (including Boiler and Machinery coverage and the perils of flood and earthquake), including coverage for any additional costs resulting from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Premises required to be demolished shall also contain an agreed valuation provision in lieu of any coinsurance clause and waiver of subrogation. If such insurance coverage has a deductible clause, then Tenant shall be liable for such deductible amount. Even if Landlord is the Insuring Party, Tenant’s personal property shall be insured by Tenant under ¶16.d. rather than by Landlord.

2)

Rental Value. The Insuring Party shall, in addition, obtain and keep in force during the term of this Lease a policy or policies with Landlord named as an additional insured (if

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Tenant is the Insuring Party), with loss payable to Landlord and Lender(s), insuring the loss of the full rental and other charges payable by Tenant to Landlord under this Lease for one (1) year (including all Real Property Taxes, Insurance Costs and any scheduled Rent increases). Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year’s loss of Rent from the date of any such loss. 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, Real Property Taxes, Insurance Costs and other expenses, if any, otherwise payable by Tenant, for the next twelve (12) month period. Tenant shall be liable for any deductible amount in the event of such loss.

3)

Adjacent Premises. If the Premises are part of a larger building, or if the Premises are part of a group of buildings owned by Landlord which are adjacent to the Premises, the Tenant shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase is caused by Tenant’s acts, omissions, use or occupancy of the Premises.

4)

Tenant’s Improvements. If the Landlord is the Insuring Party, the Landlord shall not be required to insure Tenant’s personal property and leasehold improvements unless the item in question has become the property of Landlord under the terms of this Lease. If Tenant is the Insuring Party, the policy carried by Tenant under this ¶16.c. shall insure Tenant’s personal property and leasehold improvements.

d.	Tenant’s Property Insurance. Subject to the requirements of ¶16.e., Tenant at its cost shall either by separate policy or by endorsement to a policy already carried, maintain insurance coverage on all of Tenant’s personal property and Tenant’s leasehold improvements in, on or about the Premises similar in coverage to that carried by the Insuring Party under ¶16.c. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $100,000 per occurrence. The proceeds from any such insurance shall be used by Tenant for the replacement of personal property or the restoration of Tenant owned leasehold improvements. Tenant shall be the Insuring Party with respect to the insurance required by this ¶16.d. and shall provide Landlord with written evidence that such insurance is in force.
e.	Insurance Policies. If Tenant is the Insuring Party, Insurance required per this ¶16. shall be with companies duly licensed to transact business in the state where the Premises are located, and maintaining during the policy term a “General Policyholders Rating” of at least A- X, or such other minimal rating as may be required by Lender(s) as set forth in the most current issue of “Best’s Insurance Guide”. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in this ¶16. If Tenant is the Insuring Party, Tenant shall cause to be delivered to Landlord certificates evidencing the existence and amounts of such insurance with the insureds and loss payable clauses as required by this Lease. No such policy shall be cancelable or subject to modification or lapse except after thirty (30) days prior written notice to Landlord. Tenant shall at least thirty (30) days prior to the expiration of such policies, furnish Landlord with evidence of renewals or certificates of insurance evidencing renewal thereof, or Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant to Landlord upon demand. If the Insuring Party shall fail to procure and maintain the insurance required to be carried by the Insuring Party under this ¶16., the other Party may, but shall not be required to, procure and maintain the same, but at Tenant’s expense.
f.	Mutual Waiver. Notwithstanding anything to the contrary contained in this Lease, to the extent that this release and waiver does not invalidate or impair their respective insurance policies, the parties hereto release each other and their respective agents, employees, officers, directors, shareholders, successors, assignees and subtenants from all liability for injury to any person or damage to any property that is caused by or results from a risk which is actually insured against pursuant to the provisions of this Lease without regard to the negligence or willful misconduct of the parties so released. Each party shall use its commercially reasonable efforts to cause each insurance policy it obtains to provide that the insurer thereunder waives all right of recovery by way of subrogation as required herein in connection with any injury or damage covered by the policy. If such insurance policy cannot be obtained with such waiver of subrogation, or if such waiver of subrogation is only available at additional cost and the party for whose benefit the waiver is not obtained does not pay such additional costs after reasonable notice, then the party obtaining such insurance shall promptly notify the other party of the inability to obtain insurance coverage with the waiver of subrogation.
g.	Tenant’s Option. Notwithstanding anything to the contrary contained in this Lease, if for any given policy period, Tenant is able to obtain insurance coverage which meets the requirements of this ¶16. at a cost lower than Landlord’s cost, then Tenant may be the Insuring Party. At least thirty (30) days prior to the beginning of any policy period for which Tenant desires to be the Insuring Party, Tenant shall submit to Landlord its insurance quote and proposed policy provisions. Within five (5) business days of receipt, Landlord shall review Tenant’s insurance quote and proposed policy provisions, and Landlord may request that the lender as to any loan(s) encumbering the property described in Exhibit A hereto (“Lender”) also review Tenant’s insurance quote and proposed policy provisions. Promptly following said reviews by Lender and Landlord, Landlord may, in its reasonable discretion, approve or reject Tenant’s proposed insurance. If approved, Tenant shall cause the approved policies to be issued, with copies of the insurance certificate(s) to be immediately provided to Landlord. If rejected, Landlord shall specify the reasons for such

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rejection in writing. Tenant shall have three (3) business days from the receipt of Landlord’s written notice of rejection to submit a revised insurance quote and proposed policy provisions. Within three (3) business days after Landlord’s receipt of Tenant’s revised insurance quote and policy provisions, Landlord shall accept Tenant’s revised insurance if it adequately addresses the reasons initially specified by Landlord for rejection. If in Landlord’s reasonable determination, such revised insurance quote and policy provisions do not adequately address the reasons initially specified by Landlord for rejection, Landlord may reject Tenant’s revised insurance quote and policy provisions by stating the reasons therefor in writing; however, such rejection shall be final in regard to that policy period, and Landlord shall be the Insuring Party for that policy period. If Landlord approves Tenant’s insurance, Tenant’s failure to provide the insurance certificate(s) to Landlord at least ten (10) business days prior to the commencement of the applicable policy period shall result in Landlord being the Insuring Party.

17. DAMAGE AND DESTRUCTION

a.	Damage Restoration Required. In the event that the Premises is damaged by fire or other casualty which is covered under insurance pursuant to the provisions of ¶16. above, Landlord shall restore such damage provided that: (i) the cost to repair the destruction of the Premises does not exceed sixty percent (60%) of the then replacement value of the Premises; (ii) the insurance proceeds are available (inclusive of any deductible amounts) to pay one hundred percent (100%) of the cost of restoration; and (iii) there exists at least eighteen (18) months before the end of the Term and, in the reasonable judgment of Landlord, the restoration can be completed within two hundred and seventy (270) days after the date of the damage or casualty under the laws and regulations of the state, federal, county and municipal authorities having jurisdiction. Regardless of whether Tenant or Landlord is the Insuring Party, the deductible amount of any insurance coverage shall be paid by Tenant except in the case of flood or earthquake and in such case the deductible amount in excess of $10,000 per occurrence shall be paid by Landlord. If such conditions apply so as to require Landlord to restore such damage pursuant to this ¶17.a., this Lease shall continue in full force and effect, unless otherwise agreed to in writing by Landlord and Tenant. Tenant shall be entitled to a proportionate reduction of Rent while such restoration takes place, such proportionate reduction to be based on the extent to which the damage and restoration efforts interfere with Tenant’s business in the Premises. Tenant’s right to a reduction of Rent hereunder shall be Tenant’s sole and exclusive remedy in connection with any such damage.
b.	Damage - Restoration Not Required. In the event that the Premises is damaged by a fire or other casualty and Landlord is not required to restore such damage in accordance with the provisions of ¶17.a. immediately above, Landlord shall have the option to either (i) repair or restore such damage, with the Lease continuing in full force and effect, but Rent to be proportionately abated as provided in ¶17.a. above; or (ii) give notice to Tenant at any time within thirty (30) days after the occurrence of such damage terminating this Lease as of a date to be specified in such notice which date shall not be less than thirty (30) nor more than sixty (60) days after the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent, reduced by any proportionate reduction in Rent as provided for in ¶17.a. above, shall be paid to the date of such termination. Notwithstanding the foregoing, if Tenant delivers to Landlord the funds necessary to make up the shortage (or absence) in insurance proceeds and the restoration can be completed in a two hundred seventy (270) day period, as reasonably determined by Landlord, and the destruction of the Premises does not exceed sixty percent (60%) of the then replacement value, Landlord shall restore the Premises as provided in ¶17.a. above.
c.	End of Term Casualty. Notwithstanding the provisions of ¶17.a. and ¶17.b. above, Landlord may terminate this Lease if the Premises is damaged by fire or other casualty (and Landlord’s reasonably estimated cost of restoration of the Premises exceeds twenty-five percent (25%) of the then replacement value of the Premises) and such damage or casualty occurs during the last twelve (12) months of the Term of this Lease (or the Term of any renewal option, if applicable) by giving the other notice thereof at any time within thirty (30) days following the occurrence of such damage or casualty. Such notice shall specify the date of such termination which date shall not be less than thirty (30) nor more than sixty (60) days following the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent shall be paid to the date of such termination.
d.	Termination by Tenant. In the event that the destruction to the Premises cannot be restored as required herein under applicable laws and regulations within two hundred seventy (270) days of the damage or casualty, notwithstanding the availability of insurance proceeds, Tenant shall have the right to terminate this Lease by giving the Landlord notice thereof within thirty (30) days of date of the occurrence of such casualty specifying the date of termination which shall not be less than thirty (30) days nor more than sixty (60) days following the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent, reduced by any proportionate reduction in Rent as provided for in ¶17.a. above, shall be paid to the date of such termination.
e.	Restoration. Landlord agrees that, in any case in which Landlord is required to, or otherwise agrees to restore the Premises, that Landlord shall proceed with due diligence to make all appropriate claims and applications for the proceeds of insurance and to apply for and obtain all

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permits necessary for the restoration of the Premises. Landlord shall use reasonable efforts to enforce any and all provisions in any mortgage, deed of trust or other encumbrance on the Premises requiring Landlord and Lender to permit insurance proceeds to be used for restoration. Landlord shall restore the Premises to the condition existing prior to the date of the damage if permitted by applicable law. Landlord shall not be required to restore alterations made by Tenant, Tenant’s improvements, Tenant’s trade fixtures and Tenant’s personal property, such excluded items being the sole responsibility of Tenant to restore provided, however, that Landlord shall, to the extent of available insurance proceeds, restore Tenant Improvements to the Premises made by Tenant such as interior offices, lab and production improvements and other like improvements.

f.   Waiver. Tenant waives the provisions of Civil Code §1932(2) and Civil Code §1933(4) with respect to any destruction of the Premises.

18.   CONDEMNATION

a.	Definitions. The following definitions shall apply: (1) “Condemnation” means (a) the exercise of any governmental power of eminent domain, whether by legal proceedings or otherwise by condemnor, or (b) the voluntary sale or transfer by Landlord to any condemnor either under threat of condemnation or while legal proceedings for condemnation are proceeding; (2) “Date of Taking” means the date the condemnor has right to possession of the property being condemned; (3) “Award” means all compensation, sums or anything of value awarded, paid or received on a total or partial condemnation; and (4) “Condemnor” means any public or quasi-public authority, or private corporation or individual, having power of condemnation.
b.	Obligations to be Governed by Lease. If during the Term of the Lease there is any taking of all or any part of the Premises, the rights and obligations of the parties shall be determined strictly pursuant to this Lease. Each party waives the provisions of Code of Civil Procedure §1265.130 allowing either party to petition the Superior Court to terminate this Lease in the event of a partial condemnation of the Premises.
c.	Total or Partial Taking. If the Premises are totally taken by Condemnation, this Lease shall terminate on the Date of Taking. If any portion of the Premises is taken by Condemnation, this Lease shall remain in effect, except that Tenant can elect to terminate this Lease if the remaining portion of the Premises is rendered unsuitable for Tenant’s continued use of the Premises. If Tenant elects to terminate this Lease, Tenant must exercise its right to terminate by giving notice to Landlord within thirty (30) days after the nature and extent of the Condemnation have been finally determined. If Tenant elects to terminate this Lease, Tenant shall also notify Landlord of the date of termination, which date shall not be earlier than thirty (30) days nor later than ninety (90) days after Tenant has notified Landlord of its election to terminate; except that this Lease shall terminate on the Date of Taking if the Date of Taking falls on a date before the date of termination as designated by Tenant. If any portion of the Premises is taken by Condemnation and this Lease remains in full force and effect, on the Date of Taking the Base Rent shall be reduced by an amount in the same ratio as the total number of square feet in the building(s) which are a part of the Premises taken bears to the total number of square feet in the building(s) which are a part of the Premises immediately before the Date of Taking. Any Award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Landlord, whether such Award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Tenant shall be entitled to any compensation separately awarded to Tenant for Tenant’s relocation expenses and/or loss of Tenant’s trade fixtures.

19.   ASSIGNMENT OR SUBLEASE

a.   Tenant shall not assign or encumber its interest in this Lease or the Premises or sublease all or any part of the Premises or allow any other person or entity (except Tenant’s authorized representatives, employees, invitees, guests or a Permitted Transferee) to occupy or use all or any part of the Premises without first obtaining Landlord’s consent, which consent shall not be unreasonably withheld. Any assignment, encumbrance or sublease without Landlord’s prior written consent shall be voidable and at Landlord’s election, shall constitute a default. If Tenant is a partnership, a withdrawal or change, voluntary, involuntary or by operation of law of any partner, or the dissolution of the partnership, shall be deemed a voluntary assignment. If Tenant consists of more than one person, a purported assignment, voluntary or involuntary or by operation of law from one person to the other shall be deemed a voluntary assignment. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, or sale or other transfer of a controlling percentage of the capital stock of Tenant, or the sale of at least fifty percent (50%) of the value of the assets of Tenant shall be deemed a voluntary assignment. Notwithstanding the sentence immediately above, if the Tenant is a corporation, the Tenant shall be entitled to assign this Lease without Landlord’s prior written consent in the event of a reorganization of Tenant through the sale of all or a portion of Tenant’s Capital Stock by Initial Public Offering (such event shall be referred to as a transfer to a “Permitted Transferee”). In connection with any assignment, Landlord shall be entitled to require an increase in the Security Deposit to the extent that such increase should be commercially reasonable in Landlord’s discretion given the financial condition of Tenant and the assignee following such event. In connection with any Sublease, Landlord shall be entitled to hold any Security Deposit paid by Sublessee to Sublessor, which Security Deposit shall be held by Landlord in accordance with the provisions of the Sublease. Tenant shall give Landlord at least sixty (60) days prior written notice of any intended transfer to a Permitted Transferee and in connection with such transfer shall provide to Landlord copies of any documents

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or other information as Landlord may reasonably request. Unless otherwise expressly agreed in writing by Landlord, no assignment shall relieve Tenant of any of its obligations pursuant to this Lease.

	In the event of a sublease all Sublease Rent received by Tenant in excess of the Rent payable by Tenant to Landlord under this Lease applicable to the portion of the Premises subleased shall be deemed the “Bonus Amount”, after deducting therefrom the “Subleasing Costs” which shall include (i) commercially reasonable brokerage commissions, (ii) tenant improvements made at the request of a subtenant and (iii) attorneys’ fees incurred by Tenant in negotiating and documenting the sublease, which Subleasing Costs shall be amortized over the Term of the Sublease for the purpose of determining the Bonus Amount. Fifty percent (50%) of the Bonus Amount shall be promptly paid to Landlord following receipt by Tenant. If the Subleasing Costs are not known at the commencement of the sublease, the fifty percent (50%) of Bonus Amount due Landlord will be computed without deduction of Subleasing Costs and promptly paid to Landlord. Once the Subleasing Costs are presented to and verified by Landlord, the Bonus Amount paid by Tenant to date will be adjusted and Landlord shall give Tenant a credit against the next payment(s) due to Landlord from Tenant. The term “Sublease Rent” as used herein shall include any consideration of any kind received by Tenant from or on behalf of any subtenant, if the sums are related in any manner to the Premises, including, without limitation Rent, operating expense payments, bonus money and payments for the purchase of or usage of Tenant’s furniture, fixtures, inventory, equipment, accounts, goodwill, general intangibles and other assets. Each sublease approved by Landlord shall stand alone as to the computation of the Bonus Amount.
	In the event of an assignment all Transfer Payments received by Tenant shall be deemed the “Bonus Amount”, after deducting therefrom the “Assignment Costs” which shall include (i) commercially reasonable brokerage commissions and (ii) attorneys’ fees incurred by Tenant in negotiating and documenting the assignment. Fifty percent (50%) of the Bonus Amount shall be promptly paid to Landlord following receipt by Tenant. If the Assignment Costs are not known at the commencement of the Assignment, the fifty percent (50%) of Bonus Amount due Landlord will be computed without deduction of Assignment Costs and promptly paid to Landlord. Once the Assignment Costs are presented to and verified by Landlord, the Bonus Amount paid by Tenant to date will be adjusted and Landlord shall give Tenant a credit against the next payment(s) due to Landlord from Tenant. The term “Transfer Payments” as used herein shall include any consideration of any kind received by Tenant from or on behalf of any assignee, if the sums are related in any manner to the Premises, including, without limitation assignment consideration, Rent, operating expense payments, bonus money and payments for the purchase of or usage of Tenant’s furniture, fixtures, inventory, equipment, accounts, goodwill, general intangibles and other assets.
	If Tenant requests Landlord to consent to a proposed assignment or subletting, Tenant shall pay to Landlord, whether or not consent is ultimately given, an amount equal to Landlord’s reasonable attorneys’ fees and costs incurred in connection with such request, (not to exceed $5,000). Each request for consent to an assignment or subletting shall be in writing, and shall be accompanied by information as may be relevant to Landlord’s determination as to the financial and operational responsibility and stability of the proposed assignee or sublessee and the appropriateness of the proposed use by such assignee or sublessee. Such information shall include a summary of the proposed use of, and any proposed modifications to, the Premises. Tenant shall provide Landlord with such other or additional information and/or documentation as may reasonably be requested by Landlord. Tenant shall, upon completion of any assignment or subletting of all or any portion of the Premises, immediately and irrevocably assign to Landlord as security for Tenant’s obligations under the Lease, all Sublease Rent and/or Transfer Payments from any such subletting or assignment. Landlord, as assignee and attorney in fact for Tenant, shall have the right to collect all rent and other revenues collectable pursuant to any such sublet or assignment and apply such rent and other revenues towards Tenant’s obligations under the Lease.
b.	No interest of Tenant in this Lease shall be assignable by involuntary assignment through operation of law (including without limitation the transfer of this Lease by testacy or intestacy). Each of the following acts shall be considered an involuntary assignment: (a) if Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or institutes proceedings under the Bankruptcy Act in which Tenant is the bankrupt; or if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; or (b) if a writ of attachment or execution is levied on this Lease; or (c) if in any proceeding or action to which Tenant is a party, a receiver is appointed with authority to take possession of the Premises. An involuntary assignment shall constitute a default by Tenant and Landlord shall have the right to elect to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant.
c.	Notwithstanding any provision to this Lease to the contrary, in any event where Landlord’s consent is required for assignment or sublease, Landlord may at its option, elect to terminate the Lease instead of approving the requested assignment or sublease, except if the requested assignment or sublease is for a period of less than one year (including any renewal periods). Should Landlord so elect to terminate this Lease, all of the obligations of the parties thereunder, to the extent not accrued, shall terminate on the later of sixty (60) days following Landlord’s notice to Tenant of its election hereunder, or the effective date of the proposed assignment or subletting sought by the Tenant, but in no event later than one hundred twenty (120) days following the date of Landlord’s election under this ¶ 19.c. At the time of termination, all obligations of both parties hereunder shall

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terminate as to obligations thereafter accruing except as otherwise expressly provided in this Lease.

20.   DEFAULT. The occurrence of any of the following shall constitute a default by Tenant: (a) a failure of Tenant to pay Rent within ten (10) days of its due date; (b) abandonment of the Premises; or (c) failure to timely perform any other provision of this Lease where such failure continues for a period in excess of thirty days following notice of such failure, provided however, that if the nature of such failure is such that it cannot reasonably be cured within thirty days, then Tenant shall not be in default if Tenant commences to cure such failure within thirty days and thereafter diligently prosecutes the cure to completion. Tenant shall give written notice to Landlord of any default by Landlord of its obligations pursuant to this Lease asserted by Tenant (with a copy of such notice to any lender (“Lender”) against the Premises). Landlord and Landlord’s Lender shall be afforded a reasonable opportunity to cure any claimed default by Landlord and Landlord shall not be considered in default so long as Landlord (or Landlord’s Lender) commences such cure within a reasonable period of time and thereafter, continues to attempt to complete such cure. Prior to any obligation recited in this Lease to provide a Lender with any notice, Landlord shall provide Tenant with the name and address of its Lender in writing.

21.   LANDLORD’S REMEDIES. Landlord shall have the following remedies if Tenant is in default (these remedies are not exclusive; they are cumulative and in addition to any remedies now or later allowed by law):

a.

Landlord may continue this Lease in full force and effect, and this Lease will continue in effect so long as Landlord does not terminate Tenant’s right to possession, and Landlord shall have the right to collect Rent when due. During the period Tenant is in default, Landlord can enter the Premises and relet the Premises, or any part of the Premises, to third parties for Tenant’s account. Tenant shall be liable immediately to Landlord for all costs Landlord incurs in reletting the Premises, including without limitation, brokers’ commissions, expenses of remodeling the Premises required by the reletting, and like costs. Reletting can be for a period shorter or longer than the remaining Term of this Lease. Tenant shall pay to Landlord the Rent due under this Lease on the dates the Rent is due, less the Rent Landlord receives from any reletting. No act by Landlord allowed by this ¶ 21.a. shall terminate this Lease unless Landlord notifies Tenant in writing that Landlord elects to terminate this Lease. After Tenant’s default and for so long as Landlord does not terminate Tenant’s right to possession of the Premises, if Tenant obtains Landlord’s consent, Tenant shall have the right to assign or sublet its interest in this Lease, but Tenant shall not be released from liability. Landlord’s consent to such a proposed assignment or subletting shall not be unreasonably withheld. If Landlord elects to relet the Premises as provided in this ¶ 21.a., Rent that Landlord receives from reletting shall be applied to the payment of: first, any indebtedness from Tenant to Landlord other than Rent due from Tenant; second, all costs, including for maintenance incurred by Landlord in reletting; and third, Rent due and unpaid under this Lease. After deducting the payments referred to in this ¶ 21.a., any sum remaining from the Rent Landlord receives from reletting shall be held by Landlord and applied in payment of future Rent as Rent becomes due under this Lease. In no event shall Tenant be entitled to any excess Rent received by Landlord. If, on the date Rent is due under this Lease, the Rent received from the reletting is less than the Rent due on that date, Tenant shall pay to Landlord, in addition to the remaining Rent due, all costs including for maintenance Landlord incurred in reletting that remain after applying the Rent received from the reletting as provided in this ¶ 21.a.; and

b.

Landlord may terminate Tenant’s right to possession of the Premises at any such time. No act by Landlord other than giving express written notice thereof to Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on Landlord’s initiative to protect Landlord’s interest under this Lease shall not constitute a termination of Tenant’s right to possession. Upon termination of Tenant’s right to possession, Landlord has the right to recover from Tenant: (1) the Worth of the unpaid Rent that had been earned at the time of termination of Tenant’s right to possession; (2) the Worth of the amount by which the unpaid Rent that would have been earned after the date of termination until the time of award exceeds the amount of the loss of Rent that Tenant proves could have been reasonably avoided; (3) the Worth of the amount of the unpaid Rent that would have been earned after the award throughout the remaining Term of the Lease to the extent such unpaid Rent exceeds the amount of the loss of Rent that Tenant proves could have been reasonably avoided; and (4) any other amount, including but not limited to, reasonable expenses incurred to relet the Premises, court costs, attorneys’ fees and collection costs necessary to compensate Landlord for all detriment caused by Tenant’s default. The “Worth”, as used above in (1) and (2) in this ¶ 21.b. is to be computed by allowing interest at the lesser of eighteen percent (18%) per annum or the maximum legal interest rate permitted by law. The “Worth”, as used above in (3) in this ¶ 21.b. is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%).

22.   ENTRY OF PREMISES. Landlord and/or its authorized representatives shall have the right after reasonable notice except for emergencies to enter the Premises at all reasonable times for any of the following purposes: (a) to determine whether the Premises are in good condition and whether Tenant is complying with its obligations under this Lease; (b) to do any necessary maintenance and to make any restoration to the Premises that Landlord has the right or obligation to perform; (c) to post “for sale” signs at any time during the Term, or to post “for rent” or “for lease” signs during the last one hundred eighty (180) days of the Term or during any period while Tenant is in default; (d) to show the Premises to prospective brokers, lenders, agents, buyers, tenants or persons interested in leasing or purchasing the Premises, at any time during the Term; or (e) to repair, maintain or improve the Premises and to erect scaffolding and protective barricades around and about the Premises but not so as to prevent entry to the Premises or to

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unreasonably interfere with Tenant’s use of the Premises and to do any other act or thing necessary for the safety or preservation of the Premises. Landlord shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance or other damage arising out of Landlord’s entry onto the Premises as provided in this ¶ 22. Tenant shall not be entitled to an abatement or reduction of Rent if Landlord exercises any rights reserved in this ¶ 22. Landlord shall conduct its activities on the Premises as provided herein in a commercially reasonable manner that will lessen the inconvenience, annoyance or disturbance to Tenant.

23.   SUBORDINATION.

a.	Automatic Subordination. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, and at the election of Landlord or Landlord’s Lender, this Lease shall be subject and subordinate at all times to (i) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Premises, (ii) the lien of any mortgage or deed of trust which may now exist or hereafter be executed affecting the Premises, and (iii) the lien of any mortgage or deed of trust which may hereafter be executed in any amount for which the Premises, ground leases or underlying leases, or Landlord’s interest or estate in any of said items is specified as security. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest (including without limitation to Lender) to Landlord (“Successor”). In connection with any such termination of a ground lease or underlying lease or any foreclosure or conveyance in lieu of foreclosure made in connection with any mortgage or deed of trust, then so long as Tenant is not in default after all applicable notice and cure periods pursuant to this Lease, Tenant shall not be disturbed in its possession of the Premises or in the enjoyment of its rights pursuant to this Lease during the Term of this Lease or any extension or renewal thereof. Notwithstanding any subordination of this Lease to the lien of any mortgage or deed of trust, the Lender, at any time, shall be entitled to subordinate the lien of its mortgage or deed of trust to this Lease by filing a notice of subordination in the County in which the Premises are located, and Lender shall agree in connection with any such filing, that Tenant shall not be disturbed in its possession of the Premises so long as Tenant is not in default pursuant to this Lease. In connection with any such filing, Tenant shall be obligated to attorn to and to become a Tenant of any Successor.
b.	Additional Subordination. From time to time at the request of Landlord, Tenant covenants and agrees to execute and deliver within ten (10) business days following the date of written request from Landlord, documents evidencing the priority or subordination of this Lease with respect to any ground lease or underlying lease or the lien of any mortgage or deed of trust in connection with the Premises. Any and all such documents shall be in such form as is reasonably acceptable to the Lender(s). Any subordination agreement so requested by Landlord shall provide for Tenant to attorn to the Successor and shall further provide that Tenant shall not be disturbed in its possession of the Premises or in the enjoyment of its rights pursuant to this Lease so long as Tenant is not in default after all applicable notice and cure periods with respect to its obligations pursuant to the Lease. Any such Subordination, Non-disturbance and Attornment Agreement shall be recorded in the official records of the office of the County Recorder in the County in which the Premises is located.
c.	Notice from Lender. Tenant shall be entitled to rely upon any notice given by a Lender in connection with the Premises requesting that Tenant make all future Rent payments to such Lender, and Tenant shall not be liable to Landlord for any payment made to such Lender in accordance with such notice. Notwithstanding any provision to the contrary of this Lease, a Successor shall not be (i) obligated to recognize the payment of Rent for a period of more than one month in advance; (ii) responsible for liabilities accrued pursuant to this Lease prior to the date (“Succession Date”) upon which the Successor becomes the “Landlord” hereunder; (iii) responsible to cure defaults of the Landlord pursuant to this Lease existing as of the Succession Date, except for defaults of a continuing nature of which Successor received notice (as provided in Paragraph 20) and in respect of which Tenant afforded Successor a reasonable cure period following such notice; (iv) responsible for any Security Deposit delivered by Tenant pursuant to this Lease not actually received by the Successor; or (v) bound by any execution, modification, termination or extension of this Lease or any grant of a purchase option or right of first refusal or any other action taken by the Landlord pursuant to this Lease, except in accordance with the provisions of an assignment of Leases executed by Landlord in favor of a Lender.

24.   ESTOPPEL CERTIFICATE; TENANT FINANCIAL STATEMENTS. Tenant, at any time and from time to time, upon not less than ten (10) business days written notice from Landlord, will execute, acknowledge and deliver to Landlord and, at Landlord’s request, to any existing or prospective purchaser, ground lessor or mortgagee of any part of the Premises, a certificate of Tenant stating: (a) that Tenant has accepted the Premises (or, if Tenant has not done so, Tenant has not accepted the Premises and specifying the reasons therefor); (b) the Commencement and Expiration Dates of this Lease; (c) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that same is in full force and effect as modified and stating the modifications); (d) whether or not to the best of Tenant’s knowledge there are then existing any defenses against the enforcement of any of the obligations of Tenant under this Lease (and, if so, specifying same); (e) whether or not to the best of Tenant’s knowledge there are then existing any defaults by Landlord in the performance of its obligations under this Lease (and, if so, specifying same); (f) the dates, if any, to which the Rent and other charges under this Lease have been paid; (g) whether or not there are Rent increases during the Lease Term and if so the amount of same; (h) whether or not the Lease contains any options or rights of first offer or first refusal; (i) the amount of any Security Deposit or

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other sums due Tenant; (j) the current notice address for Tenant; and (k) any other information that may reasonably be required by any of such persons. It is intended that any such certificate of Tenant delivered pursuant to this ¶ 24. may be relied upon by Landlord and any existing or prospective purchaser, ground lessor or mortgagee of the Premises. Provided Tenant is not a publicly traded company which files with the SEC, Tenant will, at any time upon request by Landlord, to deliver to Landlord the most recent financial statements of Tenant with an opinion of a certified public accountant, if available, including a balance sheet and profit and loss statement for the most recent prior three years all prepared in accordance with generally accepted accounting principles consistently applied. Landlord agrees to hold such financial statements confidential and to share them only with prospective lenders and purchasers of the Premises. Other than for prospective lenders and purchasers, Landlord shall not request financial statements more often than twice in any calendar year.

25.	WAIVER. No delay or omission in the exercise of any right or remedy by Landlord shall impair such right or remedy or be construed as a waiver. No act or conduct of Landlord, including without limitation, acceptance of the keys to the Premises, shall constitute an acceptance of the surrender of the Premises by Tenant before the expiration of the Term. Only written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Premises and accomplish termination of the Lease. Landlord’s consent to or approval of any act by Tenant requiring Landlord’s consent or approval shall not be deemed to waive or render unnecessary Landlord’s consent to or approval of any subsequent act by Tenant. Any waiver by Landlord of any Default must be in writing and shall not be a waiver of any other Default concerning the same or any other provision of the Lease.
26.	SURRENDER OF PREMISES. Upon expiration of the Term, Tenant shall surrender to Landlord the Premises and all tenant improvements and alterations clean and in the same condition as existed at the Commencement Date, except for ordinary wear and tear and Alterations which Tenant has the right or is obligated to remove under the provisions of ¶ 14. herein. Tenant shall remove all personal property including, without limitation, all wallpaper, paneling and other decorative improvements or fixtures and shall perform all restoration made necessary by the removal of any alterations or Tenant’s fixtures, furnishings, equipment and other personal property before the expiration of the Term, including, for example, restoring all wall surfaces to their condition as of the Commencement Date. In any event, Tenant shall cause the following to be done prior to the expiration or the sooner termination of this Lease: (i) all interior walls shall be cleaned so that they appear freshly painted; (ii) all tiled floors shall be cleaned and waxed; (iii) all carpets shall be cleaned and shampooed; (iv) all broken, marred, stained or nonconforming acoustical ceiling tile shall be replaced; (v) all exterior and interior windows shall be washed; (vi) the HVAC system shall be serviced by a reputable and licensed service firm and left in good operating condition and repair as so certified by such firm; and (vii) the plumbing and electrical systems and lighting shall be placed in good order and repair (including replacement of any burned out, discolored or broken light bulbs, ballasts, or lenses). Landlord can elect to retain or dispose of in any manner Tenant’s personal property not removed from the Premises by Tenant prior to the expiration of the Term. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord’s retention or disposition of Tenant’s personal property. Tenant shall be liable to Landlord for Landlord’s cost for storage, removal and disposal of Tenant’s personal property.
27.	HOLDOVER. If Tenant with Landlord’s consent remains in possession of the Premises after expiration of the Term or after the date in any notice given by Landlord to Tenant terminating this Lease, such possession by Tenant shall be deemed to be a month to month tenancy cancelable by either party on thirty (30) days written notice given at any time by either party and all provisions of this Lease, except those pertaining to Term, renewal options and Base Rent, shall apply and Tenant shall thereafter pay monthly Base Rent computed on a per month basis, for each month or part thereof (without reduction for any partial month) that Tenant remains in possession, in an amount equal to one hundred thirty-five percent (135%) of the Base Rent that was in effect for the last full calendar month immediately preceding expiration of the Term.
	If Tenant holds over after the expiration or earlier termination of the Term hereof, without the consent of Landlord, Tenant shall become a Tenant at sufferance only with a continuing obligation to pay Rent provided that the Base Rent shall be one hundred fifty percent (150%) of the Base Rent that was in effect for the last full calendar month immediately preceding expiration of the Term for the first thirty (30) days of such holdover, and two hundred percent (200%) of such Base Rent thereafter during the pendency of such holdover. In any such case of Holdover without the consent of Landlord, the monthly Base Rent shall be computed on a per-month basis, for each month or part thereof (without reduction for any partial month) that Tenant remains in possession. Acceptance by Landlord of Rent after expiration or earlier termination of the Term shall not constitute a consent to a holdover hereunder or result in a renewal. The foregoing provisions of this ¶ 27 are in addition to and do not affect Landlord’s right of re-entry or any rights of Landlord hereunder or as otherwise provided by law. If Tenant fails to surrender the Premises upon the expiration of this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability arising out of such failure, including without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender. No provision of this ¶ 27 shall be construed as implied consent by Landlord to any holding over by Tenant. Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon expiration or other termination of this Lease. The provisions of this ¶ 27 shall not be considered to limit or constitute a waiver of any other rights or remedies of Landlord provided in this Lease or at law.
28.	NOTICES. All notices, demands, or other communications required or contemplated under this Lease, including any notice delivered to Tenant by the Lender, shall be in writing and shall be deemed to have been duly given 48 hours from the time of mailing if mailed by registered or certified mail, return receipt requested, postage prepaid, or 24 hours from the time of shipping by overnight carrier, or the actual time of

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delivery if delivered by personal service to the parties at the addresses specified in ¶ 1. Either Tenant or Landlord may change the address to which notices are to be given to such party hereunder by giving written notice of such change of address to the other in accordance with the notice provisions hereof.

29.   OPTIONS TO EXTEND.

a.	Grant of Options. Tenant shall have the right, at its option, to extend the Lease for two (2) additional periods of thirty (30) months each (the “Extended Terms”) on an “as is” basis, each such Extended Term commencing at the expiration of the then current Term, provided that at the time of exercise and at the time of commencement of each Extended Term, Tenant is not in default under this Lease beyond the expiration of applicable notice and cure periods.
b.	Exercise of Option. If Tenant decides to extend the Lease for an Extended Term, Tenant shall give written notice to Landlord of its election to extend not less than nine (9) months prior to the expiration of the then current Term. Tenant’s failure to give timely notice to Landlord of Tenant’s election to extend shall be deemed a waiver of Tenant’s right to extend. The terms and conditions applicable to each Extended Term shall be the same terms and conditions contained in this Lease except that Tenant shall not be entitled to any further option to extend beyond these two extension options. The Base Rent for each Extended Term shall be determined in accordance with ¶ 29.c. below:
c.	Determination of Base Rent During Each Extended Term

1)	Agreement of Base Rent. Landlord shall provide Tenant with written notice of the proposed Fair Market Rental Value (as defined below) no later than three (3) months prior to the expiration of the then current Term. Landlord and Tenant shall have thirty (30) days after Landlord provides the proposed Fair Market Rental Value in which to agree on the Base Rent for that Extended Term. The “Fair Market Rental Value” of the Premises for that Extended Term shall be the Base Rent per rentable square foot as of the commencement of that Extended Term, including three percent (3%) annual increases, taking into consideration all relevant market factors, including the use of the Premises permitted under this Lease, the quality, size, design and location of the Premises, and the rental value paid by tenants for lease renewals or extensions in premises of comparable size, quality and location. Base Rent for the first twelve (12) months of that Extended Term shall be 95% of the Fair Market Rental Value, with 3% annual increases to be effective at the beginning of each subsequent lease year. If Landlord and Tenant agree on the Base Rent for that Extended Term during the thirty (30) day period, they shall immediately execute an amendment to this Lease stating the new Base Rent. Notwithstanding any other provision of this Lease, the Base Rent for the first twelve (12) months of each Extended Term shall be no less than the scheduled Base Rent for the last month of the previous Lease Term plus three percent (3%), with three percent (3%) annual increases to be effective at the beginning of each subsequent lease year.
2)	Selection of Appraisers. If Landlord and Tenant are unable to agree on the Base Rent for that Extended Term within the thirty (30) day period, then within ten (10) business days after the expiration of the thirty (30) day period and provided that Tenant has timely exercised the subject renewal option in accordance with ¶ 29.b., Landlord and Tenant each at its own cost and by giving notice to the other party, shall appoint a competent and disinterested real estate appraiser with at least five (5) years full-time commercial appraisal experience in the Milpitas, California, market area to appraise the Fair Market Rental Value of the Premises and set the Base Rent for that Extended Term. If either Landlord or Tenant does not appoint an appraiser within said ten (10) business days, the single appraiser appointed shall be the sole appraiser and shall set the Base Rent during that Extended Term. If two (2) appraisers are appointed by Landlord and Tenant as stated herein, they shall meet promptly and attempt to set the Base Rent for that Extended Term. If the two (2) appraisers are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third appraiser meeting the same qualifications within ten (10) business days after the last day the two (2) appraisers are given to set the Base Rent. If they are unable to agree on the third appraiser, either Landlord or Tenant, by giving ten (10) days’ notice to the other party, can apply to the then President of the Real Estate Board or to the Presiding Judge of the Superior Court of the County of Santa Clara, for the selection of a third appraiser who meets the qualifications stated herein. Landlord and Tenant each shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser’s fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either Landlord or Tenant, or their affiliates.
3)	Value Determined by Three (3) Appraisers. Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall set the Base Rent for that Extended Term. If a majority of the appraisers are unable to set the Base Rent within the stipulated period of time, Landlord’s appraiser shall arrange for simultaneous exchange of written appraisals from each of the appraisers and the three (3) appraisals shall be added together and their total divided by three (3); the resulting quotient shall be the Base Rent for the Premises for that Extended Term. If, however, the low appraisal and/or the high appraisal are/is more than fifteen percent (15%) lower and/or higher than the middle appraisal, such low appraisal and/or high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and

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their total divided by two (2); the resulting quotient shall be the Base Rent for the Premises for that Extended Term. If both the low appraisal and the high appraisal are disregarded as stated in this ¶ 29.c.3), the middle appraisal shall be the Base Rent for the Premises at the commencement of that Extended Term.

30.	PREVIOUS LEASE. The previous lease for the Premises between the parties hereto (the “Prior Lease”) shall continue in full force and effect through December 31, 2003, but shall have no effect thereafter except as to obligations existing as of December 31, 2003 but not yet satisfied including, without limitation, any and all indemnification obligations.
31.	MISCELLANEOUS PROVISIONS.

a.	Time of Essence. Time is of the essence of each provision of this Lease.
b.	Successor. This Lease shall be binding on and inure to the benefit of the parties and their successors, except as provided in ¶ 19.
c.	Landlord’s Consent. Any consent required by Landlord under this Lease must be granted in writing and may be withheld or conditioned by Landlord in its sole and absolute discretion unless otherwise provided.
d.	Personal Rights. Notwithstanding any other provision(s) of this Lease to the contrary, any provisions of this Lease providing for the renewal, extension or early termination of the Lease and/or for the expansion of the Premises (to include without limitation rights to negotiate, rights of first refusal, etc.) shall be (i) personal to the original Tenant and shall not be assignable or otherwise transferable other than to a Permitted Transferee (either voluntarily or involuntarily) to any third party for any reason whatsoever, and (ii) conditioned upon Tenant not then being in default under this Lease.
e.	Commissions. Each party represents that it has not had dealings with any real estate broker, finder or other person with respect to this Lease in any manner, except for the Broker(s) identified in ¶ 1., who shall be compensated by Landlord in accordance with the separate agreement between Landlord and the Broker(s).
f.	Other Charges; Legal Fees. If Landlord becomes a party to any litigation concerning this Lease or the Premises by reason of any act or omission of Tenant or Tenant’s authorized representatives, Tenant shall be liable to Landlord for reasonable attorneys’ fees and court costs incurred by Landlord in the litigation, after Landlord provides written notice of the action to Tenant. Notwithstanding the foregoing, Tenant will reimburse Landlord for up to $2,000 in reasonable attorney’s fees and court costs incurred prior to Landlord giving Tenant notice of the action. Should the court render a decision which is thereafter appealed by any party thereto, Tenant shall be liable to Landlord for reasonable attorneys’ fees and court costs incurred by Landlord in connection with such appeal.
	If either party commences any litigation against the other party or files an appeal of a decision arising out of or in connection with the Lease, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees and costs of suit. If Landlord employs an attorney to recover delinquent charges, Tenant agrees to pay all attorneys’ fees and costs charged to Landlord in addition to Rent, late charges, interest and other sums payable under this Lease.
g.	Landlord’s Successors. In the event of a sale or conveyance by Landlord of the Premises, the same shall operate to release Landlord from any liability under this Lease, including as to any Security Deposit to the extent transferred to Landlord’s successor-in-interest, and in such event Landlord’s successor in interest shall be solely responsible for all obligations of Landlord under this Lease.
h.	Interpretation. This Lease shall be construed and interpreted in accordance with the laws of the state in which the Premises are located. This Lease constitutes the entire agreement between the parties with respect to the Premises, except for such guarantees or modifications as may be executed in writing by the parties from time to time. When required by the context of this Lease, the singular shall include the plural, and the masculine shall include the feminine and/or neuter. “Party” shall mean Landlord or Tenant. If more than one person or entity constitutes Landlord or Tenant, the obligations imposed upon that party shall be joint and several. The enforceability, invalidity or illegality of any provision shall not render the other provisions unenforceable, invalid or illegal.
i.	Auctions. Tenant shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Landlord’s prior written consent. Notwithstanding anything to the contrary in this Lease, Landlord shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.
j.	Quiet Possession. Upon payment by Tenant of the Rent for the Premises and the observance and performance of all of the covenants, conditions and provisions on Tenant’s part to be observed and performed under this Lease, Tenant shall have quiet possession of the Premises for the entire Term hereof subject to all of the provisions of this Lease.

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k.	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.
l.	Offer. Preparation of this Lease by Landlord or Landlord’s agent and submission of same to Tenant shall not be deemed an offer to lease to Tenant. This Lease is not intended to be binding until executed by all Parties hereto.
m.	Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. The parties shall amend this Lease from time to time to reflect any adjustments that are made to the Base Rent or other Rent payable under this Lease. As long as they do not materially change Tenant’s obligations hereunder, Tenant agrees to make reasonable non-monetary modifications to this Lease as may be reasonably required by Lender(s) in connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part.
n.	Construction. The Landlord and Tenant acknowledge that each has had its counsel review this Lease, and hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or in any amendments or exhibits hereto.
o.	Captions. Article, section and paragraph captions are not a part hereof
p.	Exhibits. For reference purposes the Exhibits are listed below:

Exhibit A: The Premises

Exhibit B: Rules and Regulations

Exhibit C: Covenants, Conditions And Restrictions

LANDLORD:		TENANT:
LIMAR REALITY CORP. #4, a California corporation		LSI LOGIC CORPORATION, a Delaware corporation
BY:	/s/ Theodore H. Kruttschnitt	By:	/s/ David G. Pursel
Name :	Theodore H. Kruttschnitt	Name :	David G. Pursel
Title:	President	Title :	Vice President, General Counsel &Corporate Secretary
Date :	3/29/04	Date:	March 15, 2004
		LSI Logic Legal Department
		Date:	03/15/04
		Approved as to from
		By	/s/ Andrew S. Hughes
		LSI Logic Corporate Real Estate
		Date :	3-16-04
		Approved as to from
		By	/s/ Donald A. Costello

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EXHIBIT A

The Premises

This Exhibit A is attached to and made a part of that certain Lease (the “Lease”) dated December 31, 2003, by and between Limar Realty Corp. #4 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

EXHIBIT A

The Premises
(continued)

Legal Description

All that certain Real Property in the City of Milpitas, County of Santa Clara, State of California, described as follows:

Parcel 2, as shown on Parcel Map filed March 6,1981 in Book 480 of Maps, at Pages 32 and 33, Santa Clara County Records.

EXHIBIT B

Rules & Regulations

This Exhibit B is attached to and made a part of that certain Lease dated December 31, 2003 by and between Limar Realty Corp. #4 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

For the purpose of these Rules & Regulations the word Premises shall refer to the Premises Tenant is leasing as described in the Lease.

1.	No sign, placard, picture, advertisement, name or notice (collectively, “Signs”) shall be installed or displayed on any part of the Premises after the Commencement Date without the prior written consent of Landlord, except that Tenant may post Signs inside the Building which are not visible from the exterior of the Building. Landlord shall have the right to remove, at Tenant’s expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant.
2.	Except for that which exists as of the Commencement Date or that consented to in writing by Landlord, no draperies, curtains, blinds, shades, screens or other devices shall be hung at or used in connection with any window or exterior door or doors of the Premises and no awning shall be permitted on any part of the Premises. Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Premises.
3.	Neither Tenant nor any employee or invitee of Tenant, shall make any structural roof or terrace penetrations.
4.	Tenant shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. Landlord shall not in any way be responsible to any Tenant for any loss of property on the Premises, or for any damage to any Tenant’s property.
5.	Landlord will furnish Tenant, free of charge, with six (6) keys to the Premises. Tenant shall not make or have made additional keys without Landlord’s prior written consent, and Tenant shall not alter any lock or install a new additional lock or bolt on any door of its Premises without Landlord’s prior written consent, except for electronic locks existing at the Commencement Date. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys of all locks for doors on the Premises, and in the event of loss of any keys furnished by Landlord, shall pay Landlord therefor.
6.	If Tenant requires telegraphic, telephonic, burglar alarm or similar services that do not exist as of the Commencement Date, it shall first obtain, and comply with, Landlord’s reasonable instructions in their installation.
7.	Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Landlord shall have the reasonable right to prescribe the weight, size and position of all equipment, materials, furniture or other property brought into the Premises. Heavy objects shall, if considered necessary by Landlord, stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Business machines and mechanical equipment belonging to Tenant, which cause noise or vibration that may be transmitted to the structure of the Premises to such a degree as to be objectionable to Landlord, shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate noise or vibrations. Landlord will not be responsible for loss of, or damage to, any such equipment or other property from any cause, and all damage done to the Premises by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant.
8.	Tenant shall not use or keep in the Premises any kerosene, gasoline or inflammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of office equipment. Tenant shall not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord by reason of noise, odors or vibrations. Tenant shall not bring or keep or permit to be brought or kept in the Premises any animal life form, other than human, except seeing eye dogs when in the company of their masters.
9.	Tenant agrees to cooperate fully with Landlord to comply with any governmental energy-saving rules, laws or regulations of which Tenant has actual notice.
10.	Landlord reserves the right, exercisable with one hundred twenty (120) days prior written notice but without liability to Tenant, to change the name and street address of the Premises.
11.	The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting for the violation of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused it.

EXHIBIT B

Rules & Regulations
(continued)

12.	Tenant shall not sell, or permit the retail sale of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the Premises. Tenant shall not use the Premises for any business or activity other than that specifically provided for in this Lease. Notwithstanding the above, Tenant shall have the right to install vending machines for use by Tenant, its employees and invitees.
13.	Tenant shall not interfere with radio or television broadcasting or reception from or in neighboring areas.
14.	Canvassing, soliciting and distribution of handbills or any other written materials, and peddling in the Property are prohibited, and Tenant shall cooperate to prevent same.
15.	Landlord reserves the right to exclude or expel from the Premises any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the Rules and Regulations of the Premises or in violation of the CC&R’s.
16.	Tenant shall store all its trash and garbage within its Premises or in reasonable locations specifically identified by Landlord for such purposes. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with reasonable directions issued from time to time by Landlord.
17.	The Premises shall not be used for the storage of merchandise held for sale to the general public, or for lodging nor shall the Premises by used for any improper, illegal or objectionable purpose. No cooking (other than customary heating or ordinary lunchroom items for Tenant’s employees, including existing cafeterias) shall be done or permitted by any tenant on the Premises, except that use by Tenant in its kitchen, if any, located in the Premises and Underwriters Laboratory’s approved equipment for brewing coffee, tea, hot chocolate and similar beverages and microwaving food shall be permitted, provided that such kitchen, equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations.
18.	Without the written consent of Landlord, Tenant shall not use the name of the Premises in connection with or in promoting or advertising the business of Tenant except as Tenant’s address.
19.	Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.
20.	Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage.
21.	The requirements of Tenant will be attended to only upon appropriate application to the office of Landlord by an authorized individual. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord.
22.	Tenant shall not park its vehicles in any parking areas outside the Premises. Tenant shall not store or abandon vehicles in the Premises parking areas nor park any vehicles in the Premises parking areas other than automobiles, motorcycles, motor driven or non-motor driven bicycles, four-wheeled trucks, or other equipment used in the operation of Tenant’s business. Tenant, its agents, employees and invitees shall not park any one (1) vehicle in more than one (1) parking space.
23.	Landlord reserves the right to make such other reasonable Rules and Regulations as, in its judgment, may from time to time be appropriate for safety and security, for care and cleanliness of the Premises and for the preservation of good order therein. Tenant agrees to abide for all such Rules and Regulations hereinabove stated and any additional Rules and Regulations which are adopted.
24.	Tenant shall be responsible for the observance of all of the foregoing Rules and Regulations by Tenant’s employees, agents, clients, customers, invitees and guests.

EXHIBIT C

Covenants, Conditions And Restrictions

This Exhibit C is attached to and made a part of that certain Lease dated December 31, 2003 by and between Limar Realty Corp. #4 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

E 545 PAGE 189

DECLARATION OF COVENANTS, CONDITIONS
AND RESTRICTIONS OF THE
          OAK CREEK BUSINESS PARK          

     THIS DECLARATION is made on May 15, 1979 by THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation (hereinafter called “Declarant”), as owner of that certain real property (the “Subject Property”) situated in the City of Milpitas, County of Santa Clara, State of California described in Exhibit “A” hereto which exhibit is by this reference incorporated herein as if fully set forth herein.

ARTICLE 1

DEFINITIONS

     1.1 Unless the context otherwise specifies or requires, the terms defined in this Article shall, for all purposes of this Declaration, have the meanings herein specified.

     1.2 Architect: The term “Architect” shall mean a person holding a certificate to practice architecture in the State of California under authority of the Business and Professions Code of the State of California.

     1.3 Declaration: The term “Declaration” shall mean this Declaration of Covenants, Conditions and Restrictions.

     1.4 Deed of Trust: The terra “Deed of Trust” or “Trust Deed” shall mean a mortgage as well as a deed of trust.

E 545 PAGE 190

     1.5 Approving Agent: The term “Approving Agent” shall mean, in the following order or precedence:

          A. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, whose present address is 155 Moffett Park Drive, Building A, Suite 101, Sunnyvale, California 94086 (hereinafter referred to as “Prudential”), shall be the Approving Agent until Prudential shall have resigned as Approving Agent by executing a written resignation and causing an original of same to be recorded, and by giving written notice of such resignation to each Owner of record, as shown on the most recent county assessor’s roll, of real property then subject to this Declaration.

          B. Any association (whether or not incorporated) organized by the Owners of sixty-six and two-thirds percent (66-2/3%) of the land area (exclusive of portions dedicated to a public agency or authority for a public use) then subject to this Declaration for the purpose of acting as and assuming the functions of an Approving Agent, in which membership is available to all Owners and decisions are made on the basis of majority vote with one vote assigned for each square foot of land owned by each Owner, but only if the Owners organizing such association within not less than six (6) months from the date that Prudential shall have ceased to be the Approving Agent, shall have (i) organized such association and (ii) executed and recorded a statement

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E 545 PAGE 191

in the form of an amendment to this Declaration as described in Paragraph 8.2 setting forth that such organization has been formed for the purpose of acting as Approving Agent pursuant to this Declaration and (iii) shall have, given written notice to all Owners of record of real property then subject to this Declaration that such association has been formed.

     1.6 Structures: The term “structure(s)” shall include all structures, buildings, outbuildings, sheds, fences and screening walls over three (3) feet in height, barriers, or retaining walls.

     1.7 Mortgagee: The term “Mortgagee” shall mean a beneficiary under or a holder of a Deed of Trust as well as a mortgagee under a mortgage.

     1.8 The Oak Creek Business Park: The term “The Oak Creek Business Park” shall mean all of the real property described in Exhibit “A” hereto.

     1.9 Restrictions: The term “Restrictions” shall mean the Covenants, Conditions and Restrictions set forth in this Declaration, as it may from time to time be amended or supplemented.

     1.10 Owner: The term “Owner” shall mean and refer to any person owning a fee estate in the land, or any portion thereof, contained within the Oak Creek Business Park, but excluding either (a) any person who holds such interest as

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E 545 PAGE 192

security for the payment of an obligation or (b) any person holding a leasehold estate.

     1.11 Record, Recorded: The terms “record” or “recorded” shall mean, with respect to any document, the recordation of said document in the office of the County Recorder of the County of Santa Clara, State of California.

     1.12 Sign: The term “sign” shall mean any structure, device or contrivance, electric or non-electric, and all parts thereof which are erected or used for advertising purposes upon or within which any poster, bill, bulletin, printing, lettering, painting, device or other advertising of any kind whatsoever is used, placed, posted or otherwise fastened or affixed to ground or structures.

     1.13 Streets: The term “street(s)” shall mean any publicly dedicated street, highway, or other publicly dedicated thoroughfare within or adjacent to the Oak Creek Business Park and shown on any recorded subdivision or parcel map, or record of survey, whether designated thereon as a publicly dedicated street, boulevard, place, drive, road, terrace, way, lane, circle or court.

     1.14 Visible From Neighboring Property: The term “visible from neighboring property” shall mean, with respect to any given object, that such object is or would be visible to a person six (6) feet tall having 20/20 vision and standing on any part of such neighboring property at an elevation

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no greater than the elevation of the base of the object being viewed.

     1.15 Person: The term “person” shall mean an individual, group of individuals, corporation, partnership, trust, unincorporated business association or such other legal entity as the context in which such term is used may imply.

     1.16 Lot: The term “lot” shall mean any parcel of land contained within the Oak Creek Business Park as divided or subdivided on subdivision or parcel map(s) recorded in the official records of the Recorder of Santa Clara County, California, as they from time to time become current.

     1.17 Front: The term “front” shall mean, with respect to any structure, any wall facing a street.

ARTICLE 2

PROPERTY SUBJECT TO THE

PARK RESTRICTIONS

     2.1 General Declaration Creating the Mutual Restrictions: Declarant hereby declares that all of the real property located in the County of Santa Clara, State of California as described in Exhibit “A”, which exhibit is attached hereto and incorporated herein by this reference, (sometimes hereinafter called the “Oak Creek Business Park”) is and shall be, conveyed, hypothecated, encumbered, leased, occupied, built upon or otherwise used, improved or trans-

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ferred, in whole or in part, subject to the Restrictions and that all of said Restrictions, and all the covenants, conditions and agreements herein contained, are declared and agreed to be in furtherance of a general plan for the subdivision, improvement and sale of said real property and are established for the purpose of enhancing and perfecting the value, desirability, and attractiveness of said real property and. every part thereof. Declarant further declares that (a) that the Restrictions and each of the covenants, conditions and agreements herein contained are made for the direct, mutual and reciprocal benefit of each and every lot contained within the Oak Creek Business Park and that such Restrictions are and shall be mutual equitable servitudes burdening each lot for the benefit of all other lots within the Oak Creek Business Park and (b) the Restrictions and each of the covenants, conditions and agreements herein contained shall be “covenants running with the land” burdening each lot within the Oak Creek Business Park for the benefit of all other lots within the Oak Creek Business Park, the burdens of which shall be binding upon each Owner, lessee, licensee, occupant or user of each lot within the Oak Creek Business Park, his successors and assigns, for the benefit of each Owner of all other lots within the Oak Creek Business Park, his successors and assigns.

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ARTICLE 3

APPROVAL OF PLANS FOR STRUCTURES

     3.1 Approval Required: So long as there is a then serving Approving Agent, no structure shall be erected, placed, constructed, substantially remodeled, rebuilt or reconstructed on any land subject to this Declaration until the following procedures have been fully complied with and the Approving Agent has approved in writing the Preliminary Plans (as defined below) and the Final Plans (as defined below):

          A. The owner, or lessee, licensee, or other occupant of the lot to be improved or his authorized agent (the “Applicant”) shall deliver to the Approving Agent preliminary plans and specifications (the “Preliminary Plans”) in such form and containing such information as may be required by the Approving Agent for the following:

               (1) A site development plan showing the location of all proposed driveways, parking areas, walkways, landscaped areas, storage and refuse areas, and building area;

               (2) A landscaping plan for the particular lot;

               (3) A sign and lighting plan;

               (4) A building elevation plan showing dimensions, materials and exterior color schemes;

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               (5) A grading plan.

Such Preliminary Plans shall be submitted in writing in duplicate over the authorized signature of the Applicant.

          B. At such time as the Approving Agent shall have approved in writing the Preliminary Plans and prior to the submission of said Final Plans to the City of Milpitas, the Applicant shall submit to the Approving Agent complete and detailed final plans, specifications and working drawing (the “Final Plans”) with regard to the proposed improvements, which Final Plans will be in such form as may then be required by the City of Milpitas for review by said City and shall contain such additional information as may be required by the Approving Agent; provided, such Final Plans need not include detailing with regard to interior improvements such as interior partitioning walls.

          C. No such prior approval of any Preliminary Plans or Final Plans shall be required if there is no then serving Approving Agent to so approve such plans. Changes in approved Preliminary Plans or approved Final Plans which materially affect landscaping, signing, building size, placement or external appearance must be similarly submitted to and approved by the Approving Agent.

     3.2 Additional Approval Required: So long as there is a then serving Approving Agent, no exterior surface of any structure or improvement existing on any lot subject to this

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Declaration shall be painted, texturized or otherwise changed, no alterations, additions or changes of any type whatsoever shall be made to any landscaping placed on any lot subject to this Declaration, and no additions or alterations to any paved area on any lot subject to this Declaration shall be made until plans for such painting, alterations, additions or changes, including samples of colors, materials, landscaping plans, and/or plans and specifications with regard to paving, as the case may require, together with such other information as shall be required by the Approving Agent, shall have been submitted to the Approving Agent and the Approving Agent shall have approved in writing such requested change.

     3.3 Basis for Approval: The Approving Agent shall have the right to disapprove any plans and specifications submitted hereunder for any reason (provided that such approval shall not be unreasonably withheld), including but not limited to any of the following:

          A. Failure to comply with any of the Restrictions;

          B. Failure to include information in such plans and specifications as may have been reasonably requested by the Approving Agent;

          C. Objection to the exterior design of the proposed structures or the appearance of materials to be

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used in the construction of any proposed structure which are found by the Approving Agent to be incompatible with existing structures in the Oak Creek Business Park;

          D. Objections based upon the inadequacy of the number of onsite parking spaces considering (1) the contemplated use or future possible use of the structures proposed and (2) the availability of additional parking offsite.

          E. Objection to the location of any proposed structure upon any lot as it relates to other lots within the Oak Creek Business Park;

          F. Objection to the grading plan for any lot;

          G. Objection to the color scheme, finish, proportions, style or architecture, height, bulk or appropriateness of any structure as they relate to other structures within the Oak Creek Business Park;

          H. Objection to the landscaping materials as they relate to other landscaping materials then used or contemplated for use within the Oak Creek Business Park;

          I. Any other matter which, in the judgment of the Approving Agent, would render the proposed structure or structures or use inharmonious with the general plan for improvement of the Oak Creek Business Park or with structures or landscaping then located upon or proposed to be located upon other lots or other properties within the Oak Creek Business Park.

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     3.4 Approval: Upon approval by the Approving Agent of any plans and specifications submitted hereunder, a copy of such plans and specifications as approved shall be deposited for permanent record with the Approving Agent, and a copy of such plans and specifications bearing such approval, in writing, shall be returned to the applicant submitting the same.

     3.5 Result of Inaction: If the Approving Agent fails either to approve or disapprove either the Preliminary Plans or the Final Plans within thirty (30) days after such Preliminary Plans or Final Plans, as the case may be, have been submitted to it, it shall be conclusively presumed that the Approving Agent has approved said Preliminary or Final Plans; provided, however, that if within said thirty (30) day period, the Approving Agent gives written notice of the fact that more time is required for the review of such plans, there shall be no presumption that the same are approved until the expiration of a reasonable period of time as set forth in said notice not to exceed thirty (30) days. Such presumption shall not apply if the review fee required by Paragraph 3.9 was not paid at the time the plans were first submitted to the Approving Agent.

     3.6 Proceeding with Work: Upon receipt of approval from the Approving Agent pursuant to this Article, the Owner or lessee to whom the same is given shall as soon as practi-

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cable satisfy all conditions thereof and diligently proceed with the commencement and completion of all approved construction, refinishing, alterations and excavations. In all cases work shall be commenced within one (1) year from the date of such approval. If Applicant fails to commence construction of the structures within one (1) year from date of such approval, then the approval given pursuant to this Article shall be deemed revoked unless the Approving Agent upon request made prior to the expiration of said one (1) year period extends in writing the time for commencing work. In all cases work shall be completed in accordance with the Preliminary Plans and the Final Plans within two years from date of issuance of the first (or only) building permit with regard to such work.

     3.7 Limitation on Approving Agent: In no event shall the Approving Agent disapprove any plans and specifications solely by reason of the Applicant’s proposed use of the lot if such use is specifically permitted pursuant to Section 5.1.

     3.8 Liability: Neither the Declarant nor the Approving Agent shall be liable for any damage, loss or prejudice suffered or claimed on account of:

          A. The approval or disapproval of any plans, drawings and specifications, whether or not defective;

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          B. The construction or performance of any work, whether or not done pursuant to approved plans, drawings and specifications; or

          C. The development of any property within Oak Creek Business Park.

     3.9 Review Fee: An architectural review fee shall be paid to the Approving Agent as follows:

          A. At such time as Preliminary Plans pertaining to erection, placement, construction, remodeling or reconstruction of structures within the Oak Creek Business Park are submitted for approval based on the following schedule:

               (1) When the plans submitted are prepared by an architect, the architectural review fee shall be Fifty Dollars ($50);

               (2) In all other cases the architectural review fee shall be One Hundred Dollars ($100).

          B. At such time as documents required to be submitted pursuant to paragraph 3.2 above are submitted for approval, the architectural review fee shall be the sum of Fifty Dollars ($50).

     3.10 Certificate of Compliance: So long as there is an Approving Agent, such Approving Agent shall within twenty one (21) days following written request therefor by an Owner, execute and deliver to such requesting Owner a “Certificate of Compliance” stating that the lot specified

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by such Owner in said request for Certificate of Compliance is in compliance with Article 3 of these Restrictions, or, if such lot shall not be in compliance with Article 3 of these Restrictions, stating the nature of such non-compliance and the specific paragraph of this Article 3 with which said lot does not comply.

ARTICLE 4

LIMITATIONS ON IMPROVEMENTS

     4.1 Utility Lines: All onsite utility transmission lines shall be placed underground.

     4.2 Coverage: No more than forty five percent (45%) of the square foot area of any M-l zoned lots shall be occupied by structures. No more than thirty five percent (35%) of the square foot area of any MPD or HS zoned lots shall be occupied by structures.

     4.3 Minimum Setback Lines: No structures, and no part thereof, shall be placed closer than fifty feet (50’) from a property line fronting any street (“frontage setback area”); provided, however, no structure shall be placed closer than 20 feet (20’) from any property line not fronting on any street (“interior setback area”).

     4.4 Parking Areas: Each parcel shall have facilities for parking sufficient to serve the business conducted thereon without using adjacent streets therefor, and no use shall be made of the structures in any parcel which would

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require parking in excess of the parking spaces on said parcel. No parking spaces shall be located within, and no parking shall be permitted within, a frontage setback area adjacent to any street, except that parking shall be permitted within said setback area if such parking is screened from view from the street by landscaping consisting of shrubbery or berms extending at least forty eight inches (48”) above the high point of the finished adjacent pavement in said parking area. In no case shall such parking area be closer than twenty five feet (25’) from a property line fronting on any street or closer than five feet (5’) from any property line not fronting on any street.

     4.5 On Street Parking. No parking shall be allowed in any public street paved areas or rights of way located in the Oak Creek Business Park. Said restriction shall be enforced by municipal ordinances of the City of Milpitas.

     4.6 Storage and Loading Areas: No loading dock, truck loading, storage area or other such facility shall be located in the front of any building or structure or within any frontage setback area or between a front of any building or structure and the street which said front faces. All exterior storage areas shall be screened by chain link fence with redwood slats, a minimum of six feet (6’) in height.

     4.7 Metal Buildings: No buildings or structures constructed with corragated metal exterior walls or so-called

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“Butler type” buildings shall be constructed within the Oak Creek Business Park.

     4.8 Exterior Screening. All electrical and mechanical apparatus, equipment, fixtures (other than lighting fixtures but including main electrical transformers), whether roof mounted, exterior wall mounted or pad mounted at grade, including but not limited to, conduit, ducts, vents, flues and pipes located on the exterior of any structure shall be concealed from view and shall be treated in a manner acceptable to the Architectural Control Committee.

ARTICLE 5

RESTRICTIONS ON OPERATION AND USE

     5.1 Permitted Uses: Subject to compliance with these Restrictions, the following uses shall be permitted in the Oak Creek Business Park.

          A. Manufacture (including storage of raw materials and finished products therefrom) of the following:

               (1) Pharmaceutical and cosmetic products;

               (2) Optical, electronic, timing and measuring instruments for use in research, development, business and professional facilities; and

               (3) Industrial, communication, transportation and utility equipment;

          B. Wholesaling, warehousing and distribution establishments and public utility facilities (excluding

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storing and warehousing of acids, chemicals, cement, plaster, petroleum products or explosive materials);

          C. Research, experimental and engineering laboratories;

          D. Catalog sales and mail order establishments;

          E. Establishments for the repair, cleaning and servicing of commercial or industrial equipment or products;

          F. Construction firms, but only construction firms whose activities are carried on entirely within an enclosed building and which have no construction yard on said lot;

          G. So long as there is an Approving Agent, any commercial use not specifically prohibited by Paragraph 5.3 which is first approved in writing by the Approving Agent;

          H. So long as there is an Approving Agent, any industrial or manufacturing use not specifically prohibited by Paragraph 5.3 which is first approved in writing by the Approving Agent;

          I. If there is no Approving Agent, any industrial manufacturing or commercial use permitted by the then existing zoning or other applicable land use regulations as promulgated by requisite governmental authorities, except those uses specifically prohibited by Paragraph 5.3.

     5.2 Conduct of Permitted Uses: All permitted uses shall be performed or carried out entirely within a building

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that is so designed and constructed. Certain activities which cannot be carried on within a building may be permitted, but only (a) so long as there is then serving an Approving Agent, if the Approving Agent specifically consents to use and the location for such activity, in writing, or (b) if there is no then serving Approving Agent, if allowed under then existing zoning or other applicable land use regulations except for uses which are specifically prohibited pursuant to Paragraph 5.3; provided, however, that in either of the foregoing situations such use shall be permitted only if (i) such activity is screened so as not to be visible from neighboring property and streets and (ii) all lighting required for such use is shielded from adjacent streets.

     5.3. Prohibited Uses: The following operations and uses shall not be permitted on any property subject to these Restrictions:

          A. Residential of any type;

          B. Trailer courts, mobile home parks or recreation vehicle camp grounds;

          C. Junk yards or recycling facilities;

          D. Drilling for and/or the removal of oil, gas or other hydrocarbon substances (except that this provision shall not be deemed to prohibit the entry of the property below a depth of five hundred (500) feet for such purposes);

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          E. Commercial excavation except in the course of approved construction;

          F. Distillation of bones;

          G. Dumping, disposal, incineration or reduction of garbage, sewage, offal, dead animals or refuse;

          H. Fat rendering;

          I. Stockyard or slaughter of animals;

          J. Cemeteries;

          K. Refining of petroleum or of its products;

          L. Smelting of iron, tin, zinc, or other ores;

          M. Jail or honor farms;

          N. Labor or migrant worker camps;

          O. Truck, bus terminals;

          P. Petroleum storage yards.

          Q. Auto wrecking, auto repair or auto painting establishment.

     5.4 Emissions: No use shall be permitted to exist or operate any lot which:

          A. Emits dust, sweepings, dirt, cinders, fumes, odors, radiation, gases, vapors or discharges liquid or solid wastes or other harmful matter into the atmosphere or any stream, river or other body of water which may adversely affect (i) the health or safety of persons within the area or (ii) the use of property within the Oak Creek Business Park or (iii) vegetation within the Oak Creek Business Park,

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nor shall waste or any substance or materials of any kind be discharged into any public sewer serving the Oak Creek Business Park or any part thereof, in violation of any regulations of any public body having jurisdiction.

          B. Produces intense glare or heat unless such use is performed only within an enclosed or screened area and then only in such manner that the glare or heat emitted will not be discernible from any exterior lot line.

          C. Creates a sound pressure level in violation of any regulation of any public body having jurisdiction.

          D. Allows the visible emissions of smoke (outside any building) other than the exhausts emitted by motor vehicles or other transportation facilities in violation of any regulation of any public body having jurisdiction. This requirement shall also be applicable to the disposal of trash and waste materials.

          E. Creates a ground vibration that is perceptible, without instruments, at any point along any of the exterior lot lines.

     5.5 Signs: The Approving Agent may, from time to time, enact sign criteria setting forth such requirements for signs to be erected within the Oak Creek Business Park as the Approving Agent may deem desirable, which sign criteria shall become effective upon recordation thereof in the official records of Santa Clara County. All signs erected

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by any owner on a lot within the Oak Creek Business Park subsequent to the recoration of said sign criteria shall be in conformance with the criteria set forth therein. Except as specifically otherwise allowed in any then existing sign criteria, no sign shall be installed or erected or placed on any lot other than those signs identifying the name, business and products of the person or firm occupying the lot and those offering the lots for sale or lease. Until such time as sign criteria is enacted, all signs shall be approved by the Approving Agent prior to the installation of said signs.

     5.6 Landscaping Criteria: The Approving Agent may, from time to time, enact landscaping criteria setting forth such requirements for landscaping to be placed on or in lots located within the Oak Creek Business Park as the Approving Agent may deem desirable including, without limitation, amount of area to be plated in sod lawns or other plantings, type of plantings, placement of irrigation systems, requirements for trees and raised planter boxes, which landscape criteria shall become effective upon recordation thereof in the official records of Santa Clara County. All landscaping placed by any owner on a lot within the Oak Creek Business Park subsequent to the recordation of said landscape criteria shall be in conformance with the criteria set forth therein.

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     5.7 Storage and Refuse Collection Areas:

          A. No materials, supplies or equipment, including company owned or operated trucks or motor vehicles, shall be stored in any area on a lot except inside a closed building, or behind a visual barrier screening such areas so that they are not visible from the neighboring properties or streets. No storage areas shall be maintained between a street and the front of the structure nearest such street.

          B. All outdoor refuse collection areas shall be visually screened so as not to be visible from streets and neighboring property. No refuse collection areas shall be maintained between a street and the front of the structure nearest such street.

     5.8 Condition of Property: The Owner of each lot shall at all times keep and properly maintain the premises, structures, improvements, landscaping, paving and appurtenances situate thereon in a safe, clean, sightly and wholesome condition and in a good state of repair and shall comply in all respects with all governmental, health, fire and police requirements and regulations, and shall cause to be regularly removed at its own expense any rubbish of any character whatsoever which may accumulate on such lot, and in particular and without limitation:

          A. All areas of each lot not used for structures, walkways, paved driveways, parking or storage areas shall be

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at all times maintained by a professional landscape engineer or gardner in a fully and well kept landscaped condition utilizing ground cover and/or shrub and tree materials. Undeveloped areas proposed for future expansion shall be maintained in a weed-free condition. An automatic underground landscape irrigation system shall be provided by the Owner of each lot which is sufficient to properly irrigate all landscaped areas within such lot.

          B. Parking areas shall be paved so as to provide all-weather surfaces. Each parking space shall be designated by lines painted on the paved surfaces and shall be adequate in area, and all parking areas shall provide, in addition to parking spaces, adequate driveways and space for the movement of vehicles.

     5.9 Excavation: No excavation shall be made on, and no sand, gravel, soil, or other material shall be removed from, any lot, except in connection with the construction of structures. Upon completion of such construction, exposed openings shall be backfilled to grade, and disturbed ground shall be graded level and paved or landscaped in conformity with the requirements of this Declaration.

ARTICLE 6

APPROVALS OR VARIANCES IF NO

APPROVING AGENT EXISTS

     6.1 Variance by Approving Agent: So long as there shall be Approving Agent then serving, it shall have the

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exclusive right to grant variances from requirements set forth in Article 4 or waive entirely the restrictions set forth in said Article 4 with respect to any given lot, as the Approving Agent, in its sole discretion, shall determine is for the successful development of the Oak Creek Business Park.

     6.2 Granting of Variance: Any variance granted hereunder shall be effective upon, and only upon, the recordation of a Notice of Variance executed by the Approving Agent.

ARTICLE 7

ENFORCEMENT

     7.1 Remedy: So long as there is an Approving Agent, it shall have the exclusive right to enforce the provisions hereof, but without liability for failure so to do. In the event that the Approving Agent shall fail to take action respecting the breach or violation of any of the provisions of this Declaration within thirty (30) days from the written demand by any Owner within the Oak Creek Business Park to take such action or if such breach or violation of this Declaration shall occur at such time as there is no Approving Agent, then any Owner of a lot within the Oak Creek Business Park shall have the right to enforce the provisions contained in this Declaration.

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     7.2 Right to Enter: So long as Prudential shall be serving as the Approving Agent, Prudential, and only Prudential, in addition to any other remedy available, may, with respect to a violation or breach of the covenants to maintain as set forth in Paragraph 5.8, and only with respect to a breach or violation of the covenants to maintain as contained in paragraph 5.8, enter upon the lot on which such violation or breach shall then be occurring and take whatever action it may deem necessary to effect compliance with the provisions of said Paragraph 5.8, including without limitation making of such repairs or the performance of such required maintenance necessary to conform to the requirements imposed by these Restrictions at the expense of the Owner of said lot, provided that Prudential shall have first given to the Owner of such lot at least sixty (60) days prior written notice of its intention to do so and then, only if, said Owner of such lot shall have failed to correct said violation or breach within said sixty (60) day period if such violation or breach was curable within sixty (60) days, or if not curable within sixty (60) days then only if such Owner shall have failed to commence and then be diligently seeking to so cure such violation or breach. In the event that Prudential shall, after having complied with the above notice requirements, enter such lot and remedy such breach or violation, the Owner of such lot shall be respons-

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ible to reimburse Prudential forthwith upon demand for all costs and expenses incurred in connection therewith (“Non-Compliance Expenses”) in accordance with the provisions of this Section. Each Owner of any lot within the Oak Creek Business Park by acceptance of a deed or other conveyance whether or not it shall be so expressed in any such deed or other conveyance, is and shall be deemed to covenant and agree to pay to Prudential an assessment for any Non-Compliance Expenses incurred by Prudential in connection with such Owner’s lot.

          A. Prudential shall maintain accurate books and records reflecting any Non-Compliance Expenses, and shall provide each Owner of an affected lot a statement with respect thereto.’ Each affected Owner shall pay Non-Compliance Expenses incurred applicable to such Owner’s lot within ten (10) days of receipt of a statement. If such statement is deposited in the United States mail duly, certified or registered with postage prepaid and addressed to the Owner affected thereby at his lot, the same shall be deemed received by such Owner on the fifth (5th) business day after such deposit.

          B. Any Non-Compliance Expenses assessments, together with such interest thereon and costs of collection thereof as provided hereinbelow, shall be a charge on the lot and shall be a continuing lien upon the lot against

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which such assessments are made. The lien shall become effective upon recordation of a notice of claim of lien as provided herein. Such assessment, together with such interest and costs, shall also be the personal obligation of the person who is the Owner of such lot at the time when the assessment, or any portion thereof, fell due but in no event shall the person who is the Owner of such lot be personally obligated for a sum in excess of Ten Thousand Dollars ($10,000) for any given violation (but without limiting the amount that may become a lien upon such lot for any given violation or the aggregate of the personal obligation for successive violations). Any personal obligation created hereunder shall not pass to such Owners successors in title unless it is expressly assumed by them but any lien created hereunder shall remain a charge against the lot except as to “bonafide purchasers or encumbrancers for value”, without notice of same. No Owner may waive or otherwise escape personal liability for the personal assessment provided herein by non-use or abandonment of his lot.

          C. If any Non-Compliance Expenses assessment or any portion thereof is not paid within ten (10) days after the date due it shall bear interest from the date of delinquency at the then legal rate, and, in addition to all other legal and equitable rights or remedies, Prudential may, at its option, bring an action at law against the Owner

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who is personally obligated to pay the same, or upon compliance with the notice provisions set forth hereinbelow, to foreclose the lien against the affected lot, and there shall be added to the amount of such assessment or any portion thereof, the interest thereon, all costs and expenses, including reasonable attorneys fees, incurred by Prudential and in collecting the delinquent assessment. In lieu of judicially foreclosing the lien, Prudential, at its option, may foreclose such lien by proceeding under a power of sale as provided hereinbelow, such a power of sale being given to Prudential, as to each and every lot for the purpose of collecting assessments.

          D. No action shall be brought to foreclose the lien, or to proceed under the power of sale, less than thirty (30) days after the date that a notice of claim of lien, executed by Prudential, is recorded, stating the amount claimed (which may include interest and cost of collection, including reasonable attorneys’ fees), a good and sufficient legal description of the lot being assessed, the name of the record Owner or reputed Owner thereof, and the name and address of Prudential as claimant. A copy of said notice of claim shall be deposited in the United States mail, certified or registered, with postage prepaid, to the Owner of said lot.

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          E. Any such sale provided for above shall be conducted in accordance with Sections 2924, 2924(b), and 2924(c) of the Civil Code of the State of California, applicable to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner permitted or provided by law. Prudential shall have the power to bid on the lot at the foreclosure sale, and to acquire and hold, mortgage and convey the same.

          F. Upon the timely curing of any default for which a notice of claim of lien was recorded by Prudential, Prudential is hereby authorized to file or record, as the case may be, an appropriate release of such notice, upon payment by the defaulting Owner of a fee to be determined by Prudential but not to exceed Five Hundred Dollars ($500), to cover the costs of preparing and filing or recording such release together with the payment of such other costs, interest or fees as shall have been incurred.

          G. The assessment lien and the rights to foreclosure and sale thereunder shall be in addition to and not in substitution for all other rights and remedies which Prudential may have hereunder, at law or in equity.

     7.3 Result of Violation: The result of every action or omission whereby the provisions of this Declaration are violated in whole or in part is hereby declared to be and to constitute a nuisance, and every remedy allowed by law or

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equity shall be available to any Owner of any lot within the Oak Creek Business Park.

     7.4 Attorney’s Fees: In any legal or equitable proceeding for the enforcement of the provisions of this Declaration, whether it be an action for damages, declaratory relief or injunctive relief, the losing party or parties shall pay the attorneys’ fees of the prevailing party or parties, in such reasonable amount as may be fixed by the court in such proceedings, or in a separate action brought for that purpose. The prevailing party shall be entitled to said attorneys’ fees, even though said proceeding is settled prior to judgment.

     7.5 Remedies Cumulative: All remedies provided herein, or at law or in equity shall be cumulative and not exclusive.

     7.6 Waiver: Failure by the Approving Agent to enforce the provisions of this Declaration shall in no event be deemed a waiver of the right to do so thereafter, nor of the right to enforce any other covenants or restrictions herein, nor of the rights of other Owners of the property within the Oak Creek Business Park to enforce same.

     7.7 Prudential: For purposes of this Article 7 the term “Prudential” shall include Prudential’s authorized employees.

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ARTICLE 8

DURATION, MODIFICATION AND REPEAL

     8.1 Duration of Restrictions: These Restrictions shall continue and remain in full force and effect at all times with respect to all property, and each part thereof, now or hereafter made subject to these Restrictions (subject, however, to the right to amend and repeal as provided for herein) until 2039.

     8.2 Termination and Modifications: This Declaration or any provision thereof, or any covenant, condition or restriction contained herein, may be terminated, extended, modified or amended, as to the whole of the Oak Creek Business Park upon the written consent of the Owners of sixty-six and two-thirds percent (66-2/3%) of the total square footage of the land area contained within the Oak Creek Business Park (exclusive of dedicated public streets); provided, however, that so long as Prudential is the Approving Agent, no such termination, extension or modification or amendment shall be effective without the written approval of Prudential. No such termination, extension, modification or amendment shall be effective until a proper instrument in writing describing such termination, extension, modification or amendment has been executed by the requisite number of Owners and by Prudential and recorded.

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ARTICLE 9

MISCELLANEOUS PROVISIONS

     9.1 Constructive Notice and Acceptance: Every person who now or hereafter owns, occupies or acquires any right, title or interest in or to any portion of the property made subject to these Restrictions is and shall be conclusively deemed to have consented and agreed to every covenant, condition and restriction contained herein, whether or not any reference to this Declaration is contained in the instrument by which such person acquired an interest in said property.

     9.2 Waiver of Liability: Neither the Declarant nor the Approving Agent shall be liable to any Owner, lessee, licensee, or occupant of land subject to this Declaration by reason of any mistake in judgment, negligence, nonfeasance, action or inaction or for the enforcement or failure to enforce any provision of this Declaration. Every Owner, lessee, licensee or occupant of any of said property by acquiring his interest therein agrees that he will not bring any action or suit against Prudential or any other Approving Agent to recover any such damages from or to seek equitable relief against the Declarant by reason of same.

     9.3 Rights of Mortgagee: No breach of the Restrictions and other provisions contained herein, or any enforcement thereof, shall defeat or render invalid the lien

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of any mortgage or deed of trust now or hereafter executed upon land subject to these Restrictions; provided, however, that if any portion of said property is sold under a foreclosure of any mortgage or under the provisions of any deed of trust, any purchaser at such sale and his successors and assigns shall hold any and all property so purchased subject to all of the Restrictions and other provisions of this Declaration. Any notice of claim of lien recorded pursuant to paragraph 7.2 hereof shall take its priority vis-a-vis other encumbrances as of the date of its recordation.

     9.4 Paragraph Headings: Paragraph headings, where used herein, are inserted for convenience only and are not intended to be a part of this Declaration or in any way to define, limit or describe the scope and intent of the particular paragraphs to which they refer.

     9.5 Effect of Invalidation: If any provision of this Declaration is held to be invalid by any Court, the invalidity of such provision shall not effect the validity of the remaining provisions hereof.

     IN WITNESS WHEREOF, the undersigned have executed this Declaration the day and year first above written.

	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
	By	-s- A. K. Jacobson
		A. K. Jacobson
Dated: 6/1/79		Title Regional Vice-President, REO

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EX-10.32

Exhibit 10.32

1501 MCCARTHY BOULEVARD
MILPITAS, CALIFORNIA
STANDARD SINGLE TENANT NNN LEASE

W I T N E S S E T H

This lease (“Lease”) is entered into by and between Limar Realty Corp. #4, a California corporation (“Landlord”) and LSI Logic Corporation, a Delaware corporation (“Tenant”). For and in consideration of the payment of rents and the performance of the covenants herein set forth by Tenant, Landlord does lease to Tenant and Tenant accepts the Premises described below subject to the agreements herein contained.

1.	BASIC LEASE TERMS
	a.	DATE OF LEASE:	December 31, 2003
	b.	TENANT:	LSI Logic Corporation
		Address (of the Premises):	1501 McCarthy Blvd. Milpitas, California 95035
			Address (for Notices):
			LSI Logic Corporation 1621 Barber Lane, M/S D-106 Milpitas, CA 95035-7458 Attn: General Counsel
			With a required copy to:
			LSI Logic Corporation 1621 Barber Lane, M/S D-129 Milpitas, CA 95035-7458 Attn: Corporate Real Estate
	c.	LANDLORD:	Limar Realty Corp. #4
		Address (for Notices):	1730 S. EI Camino Real Suite 400 San Mateo, California 94402 Attn: Thomas A. Numainville
	d.	TENANT’S USE OF PREMISES:	General Office and Engineering (dry) Labs
	e.	PREMISES AREA:	128,820 Rentable Square Feet
	f.	INSURING PARTY:	Landlord is the “Insuring Party” unless otherwise stated herein.
	g.	TERM (inclusive):	Commencement Date: January 1, 2004 (“Commencement Date”)
			Expiration Date: December 31, 2012 (“Expiration Date”)
			Number of Months: 108
	h.	INITIAL BASE RENT:	Fifty-Five Thousand Three Hundred Ninety-Two and 60/100 Dollars ($55,392.60) per month.
	i.	BASE RENT ADJUSTMENT
		Step Increase. The step adjustment provisions of ¶ 4.b. apply for the periods shown below:

Periods (inclusive)	Monthly Base Rent
1/1/06 - 12/31/06	$	86,309.40
1/1/07 - 12/31/07		88,898.68
1/1/08 - 12/31/08		91,565.64
1/1/09 - 12/31/09		94,312.61
1/1/10 - 12/31/10		97,141.99
1/1/11 - 12/31/11		100,056.25
1/1/12 - 12/31/12		103,057.94

j. TOTAL TERM BASE RENT: $9,265,532.52

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k.	PREPAID BASE RENT:   None
I.	SECURITY DEPOSIT: $ 85,472.47
m.	BROKER(S): Julien J. Studley, Inc. (Tenant)
n.	EXHIBITS: Exhibits lettered “A” through “C” are attached hereto and made a part hereof.

2.   PREMISES

a.

Premises. Landlord leases to Tenant the premises described in ¶ 1. and in Exhibit A (the “Premises”). The term “Premises” includes all the land and improvements (including the buildings, landscaping, parking lot, etc.) as described on Exhibit A. Subject to any additional work Landlord has agreed herein to do, Tenant hereby accepts the Premises in their condition existing as of the date of the execution hereof, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Tenant acknowledges that neither Landlord nor Landlord’s Broker has made any representation or warranty as to the suitability of the Premises for the conduct of Tenant’s business. Tenant agrees with the square footage specified for the Premises in ¶ 1. and will not hereafter challenge such determination and agreement. The rental payable by Tenant pursuant to this Lease is not subject to revision in the event of any discrepancy in the rentable square footage for the Premises.

b.

Acceptance; Quiet Enjoyment. Landlord represents that it is the fee simple owner of the Premises and has full right and authority to make this Lease. Landlord hereby leases the Premises to Tenant and Tenant hereby accepts the same from Landlord, in accordance with the provisions of this Lease. Landlord covenants that Tenant shall have peaceful and quiet enjoyment of the Premises during the Term (as defined below) of this Lease.

3.   Term. The term (“Term”) of this Lease is for the period that commences at 12:01 a.m. on the Commencement Date and expires at 11:59 p.m. on the Expiration Date. If Landlord, for any reason, cannot deliver possession of the Premises to Tenant on or before the Commencement Date, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting from such delay. In that event, however, there shall be an abatement of Rent (as defined below) covering the period between the Commencement Date and the date when Landlord delivers possession to Tenant, and all other terms and conditions of this Lease shall remain in full force and effect. If a delay in possession is caused by Tenant’s failure to perform any obligation in accordance with this Lease, the Term shall commence as of the Commencement Date, and there shall be no reduction of Rent between the Commencement Date and the time Tenant takes possession.

4.   RENT

a.   Base Rent. Tenant shall pay Landlord in lawful money of the United States, without notice, demand, offset or deduction, rent in the amount(s) set forth in ¶ 1. which shall be payable in advance on the first day of each and every calendar month (“Base Rent”). Unless otherwise specified in writing by Landlord, all installments of Base Rent shall be payable at Limar Realty Corp. #4, Department #44294, P.O. Box 44000, San Francisco, CA 94144-4294. Base Rent for any partial month at the beginning or end of this Lease will be prorated in accordance with the number of days in the subject month. Tenant shall be entitled, at its option, to a refund or credit of the difference between the Initial Base Rent specified in ¶ 1.h., paid monthly, and $117,161.79, paid monthly, from the date this Lease is signed by both Landlord and Tenant retroactive to January 1, 2004.

For purposes of Section 467 of the Internal Revenue Code, the parties to this Lease hereby agree to allocate the stated Base Rent provided herein to the periods which correspond to the actual Base Rent payments as provided under the terms and conditions of this Agreement.

b.

Step Increase. The Base Rent shall be increased periodically to the amounts and at the times set forth in ¶ 1.i.

c.

Rent Without Offset and Late Charge. All Rent shall be paid without prior demand or notice and without any deduction or offset whatsoever. All Rent shall be paid in lawful currency of the United States of America. Tenant acknowledges that late payment by Tenant to Landlord of any Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such cost being extremely difficult and impracticable to ascertain. Such costs include, without limitation, processing and accounting charges and late charges that may be imposed on Landlord by the terms of any encumbrance or note secured by the Premises. Therefore, if any Rent is not received by Landlord within five (5) days of its due date, Tenant shall pay to Landlord a late charge equal to six percent (6%) of such overdue payment. Landlord and Tenant hereby agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of any such late payment and that the late charge is in addition to any and all remedies available to the Landlord and that the assessment and/or collection of the late charge shall not be deemed a waiver of any other default. Additionally, all such delinquent Rent or other sums, plus this late charge, shall bear interest from the due date thereof at the lesser of ten percent (10%) per annum or the maximum legal interest rate permitted by law. Any payments of any kind returned for insufficient funds will be subject to an additional handling charge of $25.00, and if a check is

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	returned for non-sufficient funds more than twice during the Term of the Lease, Landlord may require Tenant to pay all future payments of Rent or other sums due by cashier’s check or by wire transfer.
d.	Rent. The term “Rent” as used in this Lease shall refer to Base Rent, Real Property Taxes, Operating Expenses, Security Deposit(s), Insurance Costs, repairs and maintenance costs, utilities, late charges and other similar charges payable by Tenant pursuant to this Lease either directly to Landlord or otherwise.

5.   OPERATING EXPENSES

a.

Payment by Tenant. During the Term of this Lease Tenant shall pay to Landlord, as additional Rent, on a monthly basis one hundred percent (100%) of the Operating Expenses.

b.

Operating Expenses. The term “Operating Expenses” shall mean all expenses, costs and disbursements (not specifically excluded from the definition of Operating Expenses below) of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, maintenance, repair and operation of the Premises. Operating Expenses shall include, but not be limited to, the following:

1)	Wages and salaries of all employees engaged in the operation, maintenance and security of the Premises, including taxes, insurance and benefits relating thereto; and the rental cost and overhead of any office and storage space used to provide such services.
2)	All supplies, materials and labor used in the operation, repair or maintenance of the Premises.
3)	Cost of all utilities, including surcharges, for the Premises, including the cost of water, power and lighting which are not separately billed to and paid for by Tenant.
4)	Cost of all maintenance and service agreements for the Premises and the equipment thereon, including but not limited to, security services, exterior window cleaning, janitorial service, engineers, gardeners and trash removal services.
5)	All Insurance Costs, as such term is defined in ¶ 16.
6)	Cost of all repairs and general maintenance (excluding repairs and general maintenance paid by proceeds of insurance or by Tenant or other third parties).
7)	A reasonable management fee for the property management of the Premises.
8)	The costs of any additional services not provided to the Premises at the Commencement Date but thereafter provided by Landlord in its management of the Premises.
9)	The cost of any capital improvements made to the Premises after the date of this Lease, with such cost thereof to be amortized over the useful life of the improvements as reasonably determined by Landlord. Other than costs associated with repairs, replacements or refurbishments in the normal course and necessary for the normal operation of the Premises, Landlord shall not, without Tenant’s consent, which consent shall not be unreasonably withheld, conditioned or delayed, materially alter the physical features of the Premises in a manner which materially affects Tenant’s use, or construct additional square footage, the cost for either of which would be amortized over its useful life and passed through to Tenant as part of Operating Expenses. A roof re-coating shall be treated as an Operating Expense, while a roof replacement would be an amortizable capital expenditure.
10)	Real Property Taxes as that term is defined in ¶ 11. c.
11)	Assessments, dues and other amounts payable pursuant to the CC&R’s described in ¶ 7.C.

c.   Operating Expenses shall not include:

1)	Costs paid for directly by Tenant or other tenants;
2)	Costs incurred in connection with the financing, sale or acquisition of the Premises or any portion thereof;
3)	Costs incurred in leasing or procuring tenants (including without limitation, lease commissions, advertising expenses, attorneys’ fees and expenses of renovating space for tenants);
4)	Executive salaries of off-site personnel employed by Landlord except for the charge (or pro rata share) of the property manager of the Premises;
5)	Subject to the provisions of ¶ 5.b.9) above, depreciation on the Building or other improvements on the Premises;

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6)	Legal expenses for disputes with Tenant and any other professional fees of attorneys, auditors or consultants not incurred in connection with the normal maintenance and operation of the Premises;
7)	Costs incurred that are reimbursed by Tenant, or third parties, including insurers;
8)	Expenses for repair or replacement covered by warranties, and any costs due to casualty that are covered by insurance carried by Landlord;
9)	Rentals and other payments by Landlord under any ground lease or other lease underlying the Lease, and interest, principal, points and other fees on debt or amortization of any debt secured in whole or part by all or any portion of the Premises;
10)	Repairs or replacements caused by Landlord’s gross negligence or the gross negligence of Landlord’s employees or agents;
11)	Net income, franchise, capital stock, estate or inheritance taxes or taxes which are the personal obligation of Landlord;
12)	Landlord’s charitable or political contributions;
13)	Payments to subsidiaries and affiliates of Landlord for services to the Premises for supplies or other materials to the extent that the cost of such services, supplies or materials exceed the cost which would have been paid had the services, supplies or materials been provided by unaffiliated parties on a competitive basis (provided, however, any fee for management services paid to an affiliate of Landlord shall be in the amount set forth in ¶ 5.b.7);
14)	Payments to subsidiaries and affiliates of Landlord for services to the Project for supplies or other materials to the extent that the cost of such services, supplies or materials exceed the cost which would have been paid had the services, supplies or materials been provided by unaffiliated parties on a competitive basis (provided, however, any fee for management services paid to an affiliate of Landlord shall be in the amount set forth in ¶ 4.d.1)b);
15)	Any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord;
16)	Advertising and promotional expenditures;
17)	Costs of repairs and other work occasioned by fire, windstorm or other casualty of an insurable nature to the extent covered by insurance; or
18)	Costs for sculpture, paintings or other objects of art other than for normal and customary lobby furnishings (nor insurance thereon or extraordinary security in connection therewith).

d.	Extraordinary Services. Tenant shall pay within thirty (30) days of receipt of an invoice from Landlord the cost of additional or extraordinary services provided to Tenant at Tenant’s request and not paid or payable by Tenant pursuant to other provisions of this Lease.
e.	Impound. Landlord reserves the right, at Landlord’s option from time to time during the calendar year, to estimate the annual cost of Operating Expenses incurred by Landlord (“Projected Operating Expenses”) and to require Tenant to pay Tenant’s Share thereof in advance. Except as provided below in this 5.e., Tenant shall pay to Landlord, monthly in advance as additional Rent, one-twelfth (1/12) of Tenant’s Share of the Projected Operating Expenses. The failure of Landlord to timely furnish to Tenant a schedule of the Projected Operating Expenses for any Calendar Year shall not preclude Landlord from enforcing its rights to collect any Projected Operating Expenses under this 5. Tenant’s share is 100% of Operating Expenses.
	When Landlord provides Tenant with a revised Projected Operating Expense Budget during any calendar year, the following payment adjustments will be due Landlord: (1) Effective the first of the month following notification of the new Projected Operating Expense Budget, Tenant shall pay monthly in advance, one-twelfth (1/12) of Tenant’s Share of the new Projected Operating Expenses, and 2) if the revised Projected Operating Expense Budget exceeds the prior Budget, Landlord shall invoice to Tenant a retroactive billing and Tenant shall pay said billing within thirty (30) days of receipt of same. The retroactive billing will reflect the additional amount payable by the Tenant for Tenant’s Share of the new Operating Expense Budget for the calendar year to date. For example, assume an annual existing Operating Expense Budget of $144,000 for a tenant with a share of 50% and where such tenant was initially making $6,000 a month of estimated payments. If the revised Operating Expense Budget increases by $12,000 to $156,000 and the tenant is notified in June, then the amounts due per 1) & 2) above are computed as follows:

                        1)

New Monthly Payment (Effective July 1):
Revised Annual Operating Expense Budget	$	156,000
Tenant’s Share @ 50%	$	78,000
New Payment @ 1/12 Monthly	$	6,500

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                        2)

2) Retroactive Billing:
Revised Annual Operating Expense Budget	$	156,000
Tenant’s Share @ 50% for 6 (of 12) months	$	39,000
Less payments, to date (6 @ $6,000)		(36,000	)
Retroactive Balance Due	$	3,000

As an alternative to a retroactive billing, Landlord may, at Landlord’s option, spread the increase over the remaining months in the current calendar year in equal monthly payments.

f.   Adjustment.

1)	Accounting. Within one hundred eighty (180) days (or as soon thereafter as possible) after the close of each calendar year or portion thereof of occupancy, Landlord shall provide Tenant a statement of such year’s actual Operating Expenses showing the actual Operating Expenses compared to the Projected Operating Expenses. If the actual Operating Expenses are more than the Projected Operating Expenses then Tenant shall pay Landlord, within thirty (30) days of receipt of a bill therefor, the difference. If the actual Operating Expenses are less than the Projected Operating Expenses, then Tenant shall receive a credit against future Operating Expenses payments equal to the difference; provided, that in the case of an overpayment for the final lease year of the Term, Landlord shall credit the difference against any sums due from Tenant to Landlord in accordance with the terms of this Lease; and if no sums are due and unpaid, shall promptly refund the amount to Tenant.
2)	Tenant’s Right to Audit. Within ninety (90) days after receipt of Landlord’s statement setting forth actual Operating Expenses (the “Statement”), Tenant shall have the right to audit at Landlord’s local offices, at Tenant’s expense, Landlord’s accounts and records relating to Operating Expenses. Such audit shall be conducted by a certified public accountant approved by Landlord, which approval shall not be unreasonably withheld, or by Tenant’s independent lease administration consultants who shall not be compensated on a contingency or percentage basis. If such audit reveals that Landlord has overcharged Tenant, the amount overcharged shall be paid to Tenant within thirty (30) days after the audit is concluded. If such audit reveals that Landlord has undercharged Tenant, the amount of undercharge shall be paid by Tenant to Landlord within 30 days after the audit is conducted. In addition, if the Operating Expenses included in the Statement exceed the actual Operating Expenses which should have been charged to Tenant by more than five percent (5%), the cost of the audit shall be paid by Landlord. Tenant may not withhold any payment due as set forth in this Lease pending completion of the audit.
3)	Proration. Tenant’s liability to pay Operating Expenses shall be prorated on the basis of a 365 (or 366, as the case may be) day year to account for any fractional portion of a year included at the commencement or expiration of the Term of this Lease.
4)	Survival. Landlord and Tenant’s obligations to pay for or credit any increase or decrease in payments pursuant to this ¶ 5. shall survive this Lease.

g.   Failure to Pay. Except as otherwise provided herein, failure of Tenant to pay any of the charges required to be paid under this 5. shall constitute a material default and breach of this Lease and Landlord’s remedies shall be as specified in ¶ 21.

6.   SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deposit a security deposit (“Security Deposit”) in the amount set forth in ¶ 1. with Landlord. If Tenant is in default beyond applicable cure periods, Landlord can (but without any requirement to do so) use the Security Deposit or any portion of it to cure the default or to compensate Landlord for any damages sustained by Landlord resulting from Tenant’s default. Upon demand, Tenant shall immediately pay to Landlord a sum equal to the portion of the Security Deposit expended or applied by Landlord to restore the Security Deposit to its full amount. In no event will Tenant have the right to apply any part of the Security Deposit to any Rent due under this Lease. Landlord’s obligations with respect to the Security Deposit are those of a debtor and not a trustee, and Landlord can commingle the Security Deposit with Landlord’s general funds. Landlord shall not be required to pay Tenant interest on the Security Deposit. Tenant hereby waives the provisions of California Civil Code Section 1950.7, and all other provisions of law now in force or which may become in force after the date of execution of this Lease that provide that Landlord may claim from its security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damages caused by the tenant, or to clean the premises or otherwise limit the application of a security deposit. With respect to the Security Deposit, Landlord and Tenant agree that Landlord may claim and employ the Security Deposit in connection with any and all sums reasonably necessary to compensate Landlord for any foreseeable or unforeseeable loss or damage caused by or resulting from any default by Tenant pursuant to this Lease as well as any foreseeable or unforeseeable loss or damage resulting from any act or omission by Tenant or Tenant’s officers, agents, employees, independent contractors, or invitees. If Tenant is not in default at the expiration or termination of this Lease and has fully complied with the provisions of 13.d.6) and 26., Landlord shall return the Security Deposit to Tenant.

7.   USE OF PREMISES

a.   Tenant’s Use. Tenant shall use the Premises solely for the purposes stated in 1. and for no other purposes without obtaining the prior written consent of Landlord. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect

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	to the Premises or with respect to the suitability of the Premises to the conduct of Tenant’s business, nor has Landlord agreed to undertake any modification, alteration or improvement to the Premises, except as provided in writing in this Lease. With reasonable notice to Tenant, Landlord may from time to time, at its sole discretion, make such modifications, alterations, deletions or improvements to the Premises as Landlord may reasonably deem necessary or desirable, without compensation to Tenant. Tenant shall promptly comply with all laws, statutes, ordinances, orders and governmental regulations now or hereafter existing affecting the Premises. Tenant shall not do or permit anything to be done in or about the Premises or bring or keep anything in the Premises that will in any way increase the premiums paid by Landlord on its insurance related to the Premises. Tenant will not perform any act or carry on any practices that may injure the Premises. Tenant shall not use the Premises for sleeping, washing clothes or the preparation, manufacture or mixing of anything that emits any objectionable odor, noises, vibrations or lights onto such other tenants. If sound insulation is required to muffle noise produced by Tenant on the Premises, Tenant at its own cost shall provide all necessary insulation. Tenant shall not do anything on the Premises which will overload any existing parking or service to the Premises. Pets and/or animals of any type (other than seeing eye dogs) shall not be kept on the Premises. Tenant covenants that it will not interfere with other tenants’ quiet enjoyment of their premises.
b.	Rules and Regulations. Tenant shall comply with and use the Premises in accordance with the Rules and Regulations attached hereto as Exhibit B and to any reasonable modifications to such Rules and Regulations as Landlord may adopt from time to time, provided however that if any rule or regulation is in conflict with any term, covenant or condition of this Lease, this Lease shall prevail. In addition, no such rule or regulation, or any subsequent amendment thereto adopted by Landlord, shall in any material way alter, reduce or adversely affect any of Tenant’s rights or materially enlarge Tenant’s obligations under this Lease.
c.	CC&R’s. Tenant agrees that this Lease is subject and subordinate to the Covenants, Conditions and Restrictions, a copy of which is attached hereto as Exhibit C, as they may be amended from time to time (“CC&R’s”), and further agrees that the CC&R’s are an integral part of this Lease. Throughout the Term or any extension thereof, notwithstanding any other provision hereof, Tenant shall faithfully and timely assume and perform all obligations of Landlord and/or Tenant under the CC&R’s and any modifications or amendments thereto, including the payment of any periodic or special dues or assessments against the Premises. Such dues and assessments shall be included within the definition of Operating Expenses pursuant to ¶ 5.b.11), and Tenant shall pay such amounts as further set forth in ¶ 5. Tenant shall hold Landlord, its subsidiaries, shareholders, directors, officers, agents and employees harmless and indemnify Landlord, its subsidiaries, shareholders, directors, officers, agents and employees against any loss, expense and damage, including attorneys’ fees and costs, arising out of the failure of Tenant to perform or comply with the CC&R’s.

8.   EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE

a.   Emissions. Tenant shall not:

1)	Knowingly permit any vehicle on the Premises to emit exhaust which is in violation of any governmental law, rule, regulation or requirement;
2)	Discharge, emit or permit to be discharged or emitted, any liquid, solid or gaseous matter, or any combination thereof, into the atmosphere or on, into or under the Premises, any building or other improvements of which the Premises are a part, or the ground or any body of water which matter, as reasonably determined by Landlord or any governmental entity to be in violation of law or regulation, and does or may pollute or contaminate the same, or is, or may become, radioactive or does, or may, adversely affect the (a) health or safety of persons, wherever located, whether on the Premises or anywhere else, (b) condition, use or enjoyment of the Premises or any other real or personal property, whether on the Premises or anywhere else, or (c) Premises or any of the improvements thereto including buildings, foundations, pipes, utility lines, landscaping or parking areas;
3)	Produce, or permit to be produced, any intense glare, light or heat in violation of law or regulation;
4)	Create, or permit to be created, any sound pressure level which will interfere with the quiet enjoyment of any real property outside the Premises, or which will create a nuisance or violate any governmental law, rule, regulation or requirement;
5)	Create, or permit to be created, any vibration that is discernible outside the Premises; or
6)	Transmit, receive or permit to be transmitted or received from or to the Premises, any electromagnetic, microwave or other radiation which is or may be harmful or hazardous to any person or property in, or about the Premises, or anywhere else.

b.   Storage and Use.

1)   Storage. Subject to the uses permitted and prohibited to Tenant under this Lease, Tenant shall store in appropriate leak proof containers all solid, liquid or gaseous matter, or any combination thereof, which matter, if discharged or emitted into the atmosphere, the ground or any body of water would be in violation of law or regulation, and does or may (a)

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	pollute or contaminate the same, or (b) adversely affect the (i) health or safety of persons, whether on the Premises or anywhere else, (ii) condition, use or enjoyment of the Premises or any real or personal property, whether on the Premises or anywhere else, or (iii) Premises.
2)	Use. In addition, without Landlord’s prior written consent, Tenant shall not use, store or permit to remain on the Premises any solid, liquid or gaseous matter which is, or may become dangerously radioactive. If Landlord does give its consent, Tenant shall store the materials in such a manner that no radioactivity will be detectable outside a designated storage area and Tenant shall use the materials in such a manner that (a) no real or personal property outside the designated storage area shall become contaminated thereby and (b) there are and shall be no adverse effects on the (i) health or safety of persons, whether on the Premises or anywhere else, (ii) condition, use or enjoyment of the Premises or any real or personal property thereon or therein, or (iii) Premises or any of the improvements thereto or thereon.
3)	Hazardous Materials. Subject to the uses permitted and prohibited to Tenant under this Lease, Tenant shall store, use, employ, transport and otherwise deal with all Hazardous Materials (as defined below) employed on or about the Premises in accordance with all federal, state, or local law, ordinances, rules or regulations applicable to Hazardous Materials in connection with or respect to the Premises.

c.   Disposal of Waste.

1)	Refuse Disposal. Tenant shall not keep any trash, garbage, waste or other refuse on the Premises except in sanitary containers and shall regularly and frequently remove same from the Premises. Tenant shall keep all incinerators, containers or other equipment used for storage or disposal of such materials in a clean and sanitary condition.
2)	Sewage Disposal. Tenant shall properly dispose of all sanitary sewage and shall not use the sewage disposal system (a) for the disposal of anything except sanitary sewage or (b) amounts in excess of the lesser of: (i) that reasonably contemplated by the uses permitted under this Lease or (ii) that permitted by any governmental entity. Tenant shall keep the sewage disposal system free of all obstructions and in good operating condition.
3)	Disposal of Other Waste. Tenant shall properly dispose of all other waste or other matter delivered to, stored upon, located upon or within, used on, or removed from, the Premises in such a manner that it does not, and will not, violate any law or regulation and adversely affect the (a) health or safety of persons, wherever located, whether on the Premises or elsewhere, (b) condition, use or enjoyment of the Premises or any other real or personal property, wherever located, whether on the Premises or anywhere else, or (c) Premises or any of the improvements thereto or thereon, foundations, pipes, utility lines, landscaping or parking areas.

d.	Information. Tenant or Landlord, as the case may be, shall each provide the other with any and all information regarding Hazardous Materials in the Premises, including copies of all filings and reports to governmental entities at the time they are originated, and any other information reasonably requested by the other party. In the event of any accident, spill or other incident involving Hazardous Materials, Tenant or Landlord, as the case may be, shall immediately report the same to the other and supply the other with all information and reports with respect to the same. All information described herein shall be provided regardless of any claim by either party that it is confidential or privileged, provided that the provision of these documents will not, in any way, alter any aspect of the document’s confidentiality or privileged nature.
e.	Compliance with Law. Notwithstanding any other provision in this Lease to the contrary, Tenant shall comply with all laws, statutes, ordinances, regulations, rules and other governmental requirements now or hereafter existing in complying with its obligations under this Lease, and in particular, relating to the storage, use and disposal of Hazardous Materials.
f.	Indemnity. Tenant hereby agrees to indemnify, defend and hold Landlord, its agents, employees, lenders, shareholders, directors, representatives, successors and assigns harmless from and against any and all actions, causes of action, losses, damages, costs, claims, expenses, penalties, obligations or liabilities of any kind whatsoever (including but not limited to reasonable attorneys’ fees) arising out of or relating to any Hazardous Materials employed, used, transported across, or otherwise dealt with by Tenant (or invitees, or persons or entities under the control of Tenant) in connection with or with respect to the Premises. Notwithstanding any of the provisions of this Lease, the indemnity obligation of Tenant pursuant to this ¶ 8.f. shall survive the termination of this Lease and shall relate to any occurrence as described in this 8.f. occurring in connection with this Lease. Landlord hereby agrees to indemnify, defend and hold Tenant harmless from and against any and all actions, causes of action, losses, damages, costs, claims, expenses, penalties, obligations or liabilities of any kind whatsoever (including reasonable attorneys’ fees) arising out of or relating to (i) Hazardous Materials employed, used, transported to the Premises, for which the Premises are a part thereof, by Landlord, its agents or employees or (ii) Hazardous Materials existing on, in or under the Premises as of the date of this Lease. For purposes of this Lease the term “Hazardous Materials” shall mean any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as

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amended, or the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended, or any other federal, state, or local law, ordinance, rule or regulation applicable to the Premises, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous, or any substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls (PCB’s), or radon gas, urea formaldehyde, asbestos or lead.

9.	SIGNS AND COMMUNICATIONS ANTENNAE. Tenant shall not place any sign or communications antennae upon or adjacent to the Premises, except that Tenant may, with Landlord’s prior written consent, install such signs (but not on the roof) as are reasonably required to indicate Tenant’s company name or logo provided such signs are in compliance with Landlord’s standard sign criteria or install communications antennae used exclusively by Tenant provided such signs and/or communications antennae are in compliance with all applicable governmental requirements and the CC&R’s. The installation of any sign or communications antennae on or adjacent to the Premises by or for Tenant shall be subject to the provisions of ¶ 13. (Repairs and Maintenance). Tenant shall remove any sign or communications antennae placed on or adjacent to the Premises by Tenant upon the expiration of the Term or sooner termination of this Lease, and Tenant shall repair any damage or injury to the Premises caused thereby, all at Tenant’s expense. If any signs or communications antennae are not removed, or necessary repairs not made, Landlord shall have the right to remove the signs or communications antennae and repair any damage or injury to the Premises at Tenant’s sole cost and expense. Notwithstanding any other provision of this Lease to the contrary, Landlord reserves all rights to the use of the roof and the right to install and receive all revenues from the installation of such communications antennae on the Premises as do not unreasonably interfere with the conduct of Tenant’s business on the Premises. Landlord will, however, consult with Tenant regarding the location of any antennae placed on the Premises and attempt to comply with Tenant’s reasonable request as to location.
10.	PERSONAL PROPERTY TAXES. Tenant shall pay at least ten (10) days prior to delinquency all taxes assessed against and levied upon Tenant owned leasehold improvements, trade fixtures, furnishings, equipment and all personal property of Tenant contained in the Premises or elsewhere. When possible, Tenant shall cause its leasehold improvements, trade fixtures, furnishings, equipment and all other 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 thirty (30) days after receipt of a written statement setting forth the taxes applicable to Tenant’s property.
11.	REAL PROPERTY TAXES

a.	Payment of Taxes. Landlord shall pay the Real Property Taxes, as defined in ¶ 11.C., during the Term of this Lease. Subject to 11.b., Tenant shall promptly reimburse Landlord for such Real Property Taxes paid by Landlord.
b.	Advance Payment. In order to ensure payment when due and before delinquency of any or all Real Property Taxes, Landlord shall provide to Tenant a copy of the tax bill for the current Real Property Taxes applicable to the Premises upon receipt by Landlord, and Tenant shall pay that amount to Landlord at least ten (10) business days before the delinquency date of the tax bill. If the amounts paid to Landlord by Tenant under the provisions of this 11. are insufficient to discharge the obligations of Tenant to pay such Real Property Taxes as the same become due, Tenant shall pay to Landlord, upon Landlord’s demand, such additional sums as are necessary to pay such obligations. All moneys paid to Landlord under this 11. may be intermingled with other moneys of Landlord and shall not bear interest.
c.	Definition of “Real Property Taxes”. As used herein, the term “Real Property Taxes” shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax or other fee, charge, or excise which may be imposed as a substitute for any of the foregoing (other than inheritance, personal income or estate taxes) imposed upon the Premises by any authority having the direct or indirect power to tax, including any city, county, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, levied against any legal or equitable interest of Landlord in the Premises, Landlord’s right to rent or other income therefrom, and/or Landlord’s business of leasing the Premises. 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, or changes in applicable law taking effect, during the Term of this Lease, including but not limited to a change in the ownership of the Premises or in the improvements thereon, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not contemplated by the parties hereto.
d.	Appeals. In the event that either Landlord or Tenant desires to appeal or contest any aspect of any assessment or payment of any Real Property Tax, that party shall consult with the other and the parties shall mutually agree on which party is better suited to pursue the appeal. Whether Landlord or Tenant is the appealing party, Tenant shall be responsible for payment of the cost of the appeal.

12.   UTILITIES. Tenant 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. If any such services are not separately metered to Tenant, Tenant shall pay a reasonable proportion, to be determined by Landlord, of all charges jointly metered with other premises.

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13.   REPAIRS AND MAINTENANCE

a.    Tenant’s Obligations.

1)	General. Tenant shall, at Tenant’s sole cost and expense and at all times, contract for janitorial services and supplies and keep the Premises and every part thereof in good order, condition and repair, structural and non-structural (whether or not such portion of the Premises requiring repairs, or the means of repairing same, are reasonably or readily accessible to Tenant, and whether or not the need for such repairs occurs as a result of Tenant’s use, any prior use, the elements or the age of such portion of the Premises), including, without limiting the generality of the foregoing, all equipment or facilities serving the Premises, such as plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, fired or unfired pressure vessels, fire sprinkler and/or standpipe and hose or other automatic fire extinguishing system, including fire alarm and/or smoke detection systems and equipment, fire hydrants, fixtures, walls (interior and exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways located in, on, about or adjacent to the Premises. Tenant shall not cause or permit any Hazardous Material to be spilled or released in, on, under or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Tenant’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, the elements surrounding same, or neighboring properties, that was caused or materially contributed to by Tenant, or pertaining to or involving any Hazardous Materials and/or storage tank brought onto the Premises by or for Tenant or under its control. Tenant, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices. Tenant’s obligations to reimburse Landlord as part of Operating Expenses shall include restorations, replacements (i.e., parking lot, landscaping) or renewals when necessary in Landlord’s reasonable discretion to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair.
2)	Contracts. Tenant shall, at Tenant’s sole cost and expense, procure and maintain contracts, with copies to Landlord, in customary form and substance for, and with contractors specializing and experienced in, the inspection, maintenance and service of the following equipment and improvements, if any, located on the Premises: (i) heating, air conditioning and ventilation equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler and/or standpipe and hose or other automatic fire extinguishing systems, including fire alarm and/or smoke detection, (iv) landscaping and irrigation systems, (v) roof covering and drain maintenance and (vi) asphalt and parking lot maintenance. Tenant shall keep a detailed preventative maintenance schedule and log showing the frequency of maintenance on all HVAC, mechanical, electrical and other systems of the Premises and provide Landlord with a copy of same quarterly.
3)	As-Is Condition. The parties affirm that Landlord, its subsidiaries, officers, shareholders, members, managers, directors, agents and/or employees have made no representations to Tenant respecting the condition of the Premises except as specifically stated herein.
4)	ADA. Tenant acknowledges that as of the Commencement Date, the Premises may not comply with the accessibility provisions of Title 24 of the California Code of Regulations as interpreted by the Office of the State Architect (“ADA”), and that Landlord shall have no obligation with respect to any such failure of the Premises to so comply. Tenant shall, at its cost, at any time during the Term as required by any applicable governmental agency having jurisdiction over the Premises, make such modifications and alterations to the Premises as may be required in order to fully comply with the provisions of the ADA, as from time to time amended, and any and all regulations issued pursuant to or in connection with the ADA in such a manner as to satisfy the applicable governmental agency or agencies requiring remediation. Tenant shall at least thirty (30) days prior to the commencement of any construction in connection with satisfaction of the ADA, give written notice to Landlord of its intended commencement of construction together with sufficient details so as to reasonably disclose to Landlord the nature of the proposed construction, copies of any notices received by Tenant from applicable governmental agencies in connection with the ADA and such other documents or information as Landlord may reasonably request. In any event, notwithstanding anything to the contrary contained in this Lease, prior to the termination of the Term, Tenant shall, at its cost, make such modifications and alterations to the Premises as may be required to comply fully with the ADA as from time to time amended and any and all regulations issued thereunder. Tenant shall give the Landlord thirty (30) days prior written notice as described above in connection with any such construction. Any and all construction required to so comply with the ADA shall be completed by Tenant prior to the expiration of the Term.

b.	Landlord’s Obligations. Landlord shall have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, whether structural or non structural, all of which obligations are intended to be that of the Tenant under ¶ 13.a. hereof.
c.	Compliance with Governmental Regulations. Tenant shall, at its own cost and expense, promptly and properly observe and comply with all present and future orders, regulations,

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directions, rules, laws, ordinances, and requirements of all governmental authorities (including but not limited to state, municipal, county and federal governments and their departments, bureaus, boards and officials) arising from the use or occupancy of, or applicable to, the Premises or privileges appurtenant to or in connection with the enjoyment of the Premises. Tenant shall also comply with all such rules, laws, ordinances and requirements at the time Tenant makes any alteration, addition or change to the Premises.

d.   Miscellaneous.

1)	Landlord and Tenant shall each do all acts required to comply with all applicable laws, ordinances and rules of any public authority relating to their respective maintenance obligations as set forth herein.
2)	Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford the Tenant the right to make repairs at Landlord’s expense or to terminate this Lease because of Landlord’s failure to keep the Premises in good order, condition and repair and Tenant hereby specifically waives the provisions of California Civil Code Sections 1941 and 1942.
3)	Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry, as determined by Landlord or Landlord’s structural engineer. The cost of any such determination made by Landlord’s structural engineer shall be paid for by Tenant upon demand.
4)	Except as otherwise expressly provided in this Lease, and except in instances of Landlord’s gross negligence or willful misconduct, Landlord shall have no liability to Tenant nor shall Tenant’s obligations under this Lease be reduced or abated in any manner whatsoever by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord making any repairs or changes which Landlord is required to make or is permitted to make by this Lease or by any tenant’s lease or is required by law to make in or to any portion of the Premises. Landlord shall nevertheless use reasonable efforts to minimize any interference with Tenant’s business in the Premises.
5)	Tenant shall give Landlord prompt notice of any damage to or defective condition in any part or appurtenance of the Premises’ mechanical, electrical, plumbing, HVAC or other systems serving, located in or passing through the Premises. Upon request by Landlord, Tenant shall provide Landlord with evidence reasonably acceptable to Landlord of service contracts on such systems.
6)	Landlord may, at Landlord’s option, choose to perform any of the Tenant’s obligations in this ¶ 13. (“Tenant’s Obligations”) as to the exterior of the Premises (e.g., landscaping, building exterior and parking lot). As to any Tenant’s Obligations as to the interior of the Premises, Landlord may perform only those Tenant’s Obligations which Tenant fails to perform itself. The cost of any such Tenant’s Obligations so performed by Landlord shall be at Tenant’s sole cost and expense. Tenant shall reimburse Landlord for any such costs incurred by Landlord in the performance of Tenant’s Obligations within thirty (30) days of receipt of a billing from Landlord.

14.   ALTERATIONS. Tenant shall not make any alterations to the Premises (“Alterations”) without Landlord’s prior written consent, which consent shall not be unreasonably withheld, provided however that Tenant may make non-structural alterations costing less than $10,000 per event without Landlord’s consent. Regardless of whether Landlord’s consent for an Alteration is required, Tenant must provide Landlord at least fifteen (15) business days prior to the commencement of any Alteration with a complete description of each such Alteration including any building permit drawing(s) and specifications. Landlord may post notices regarding non-responsibility in accordance with the laws of the state in which the Premises are located. All Alterations made by Tenant, whether or not subject to Landlord’s consent, shall be performed by Tenant and its contractors in a first class workmanlike manner and permits and inspections shall be obtained from all required governmental entities. Landlord shall respond to Tenant within fifteen (15) business days of actual receipt of Tenant’s written request for consent to any Alterations. If Landlord fails to respond within thirty (30) days of actual receipt, the Alterations shall be deemed approved and not subject to removal at the end of the Term. At the time Landlord gives its consent to any Alterations, it shall designate whether Tenant will be required to remove some or all of such Alterations upon the expiration or termination of this Lease or whether Tenant will be able to leave the Alterations and surrender them with the Premises. Everything else notwithstanding, in no event will Tenant be required to remove or restore Alterations that are generic office tenant improvements or engineering (dry) labs. Landlord may, upon 60 days prior written notice before the expiration of the Term, require Tenant to remove some or all of the Alterations for which Landlord’s consent was not previously requested. Before the last day of the Term, Tenant shall at its own cost also remove those Alterations for which Landlord previously notified Tenant removal would be required. If Landlord so elects, Tenant shall at its own cost restore those Alterations for which consent was not previously requested to the condition designated by Landlord in its election, before the last day of the Term. Should Landlord consent in writing to Tenant’s Alteration of the Premises, Tenant shall contract with a contractor approved by Landlord for the construction of such Alterations, shall secure all appropriate governmental approvals and permits, and shall complete such Alterations with due diligence in compliance with plans and specifications approved by Landlord. Tenant shall pay all costs for such construction and shall keep the Premises free and clear of all mechanics’ liens which may result from construction by Tenant.

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	Notwithstanding anything in this Lease to the contrary, Landlord will inspect the existing alterations and improvements in the Premises within ninety (90) days of the date the Lease is executed in full by both parties, and Tenant shall not be obligated to remove any elements of the existing alterations and improvements that Landlord approves, but subject to the paragraph immediately above, shall be obligated to remove as of the Expiration Date of this Lease any alterations and improvements to the Premises made subsequent to the Commencement Date of the Prior Lease (as defined below) which Landlord has not approved in writing. If Landlord fails to inspect or provide written notice regarding its approval to Tenant within the ninety (90) day period described above, all existing alterations and improvements shall be deemed approved and need not be removed as of the Expiration Date of this Lease.
15.	RELEASE AND INDEMNITY. As material consideration to Landlord, Tenant agrees that Landlord shall not be liable to Tenant for any damage to Tenant or Tenant’s property from any cause, except for damages resulting from Landlord’s gross negligence or willful misconduct, and Tenant waives all claims against Landlord for damage to persons or property arising for any reason, except for damage resulting directly from Landlord’s gross negligence or willful misconduct. Tenant shall indemnify and hold Landlord, its subsidiaries, officers, shareholders, directors, agents and employees harmless from all damages including attorneys’ fees and costs arising out of any damage to any person or property occurring in, on or about the Premises or Tenant’s use of the Premises or Tenant’s breach of any term of this Lease.
16.	INSURANCE

a.

Payment For Insurance. Regardless of whether the Landlord or Tenant is the Insuring Party, Tenant shall pay for all insurance for the Premises required under this ¶ 16. (“Insurance Costs”) either directly or by reimbursement to Landlord as set forth in this ¶ 16. Premiums for policy periods commencing prior to or extending beyond the Lease Term shall be prorated to correspond to the Lease Term. Payment shall be made by Tenant to Landlord within thirty (30) days following receipt of an invoice for any amount due.

b.

Liability Insurance.

1)

Carried by Tenant. Whether or not Tenant is the Insuring Party, Tenant shall obtain and keep in force during the Term of this Lease a commercial general liability policy of insurance protecting Tenant and Landlord (as an additional insured) against claims for bodily injury, personal injury and property damage based upon, involving 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 $5,000,000 per occurrence with an “Additional Insured-Managers or Landlords of Premises” endorsement and contain an “Amendment of the Pollution Exclusion” 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 Tenant’s indemnity obligations under this Lease. The limits of said insurance required by this Lease or as carried by Tenant shall not, however, limit the liability of Tenant nor relieve Tenant of any obligation hereunder. All insurance to be carried by Tenant shall be primary to and not contributory with any similar insurance carried by Landlord, whose insurance shall be considered excess insurance only. All insurance coverage required pursuant to this ¶ 16. which is to name Landlord as an additional named insured shall also name Landlord’s subsidiaries, directors, agents, members, managers, officers and employees as named insureds.

2)

Carried by Landlord. In the event Landlord is the Insuring Party, Landlord shall also maintain liability insurance as described in ¶ 16.b.1), in addition to, and not in lieu of the insurance required to be maintained by Tenant. In the event Tenant is the Insuring Party, Landlord shall in addition carry Lessor’s Risk Coverage and insure the Premises on Landlord’s umbrella policy. Tenant shall not be named as an additional insured therein under any insurance obtained by Landlord in accordance with this ¶ 16.b.2).

c.   Property Insurance - Building, Improvements and Rental Value.

1)   Building and Improvements. The Insuring Party shall obtain and keep in force during the Term of this Lease a policy or policies with Landlord named as an additional insured (if Tenant is the Insuring Party), with loss payable to Landlord and to the holders of any mortgages, deeds of trust or ground leases on the Premises (“Lender(s)”), 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 Lender(s), but in no event more than the commercially reasonable and available insurable value thereof if, by reason of the unique nature or age of the improvements involved, such latter amount is less than full replacement cost. If the coverage is available at a commercially reasonable cost, such policy or policies shall insure against all risks of direct physical loss or damage (including Boiler and Machinery coverage and the perils of flood and earthquake), including coverage for any additional costs resulting from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Premises required to be demolished shall also contain an agreed valuation provision in lieu of any coinsurance clause and waiver of subrogation. If such insurance coverage has a deductible clause, then Tenant shall be liable for such

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	deductible amount. Even if Landlord is the Insuring Party, Tenant’s personal property shall be insured by Tenant under ¶ 16.d. rather than by Landlord.
2)	Rental Value. The Insuring Party shall, in addition, obtain and keep in force during the term of this Lease a policy or policies with Landlord named as an additional insured (if Tenant is the Insuring Party), with loss payable to Landlord and Lender(s), insuring the loss of the full rental and other charges payable by Tenant to Landlord under this Lease for one (1) year (including all Real Property Taxes, Insurance Costs and any scheduled Rent increases). Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year’s loss of Rent from the date of any such loss. 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, Real Property Taxes, Insurance Costs and other expenses, if any, otherwise payable by Tenant, for the next twelve (12) month period. Tenant shall be liable for any deductible amount in the event of such loss.
3)	Adjacent Premises. If the Premises are part of a larger building, or if the Premises are part of a group of buildings owned by Landlord which are adjacent to the Premises, the Tenant shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase is caused by Tenant’s acts, omissions, use or occupancy of the Premises.
4)	Tenant’s Improvements. If the Landlord is the Insuring Party, the Landlord shall not be required to insure Tenant’s personal property and leasehold improvements unless the item in question has become the property of Landlord under the terms of this Lease. If Tenant is the Insuring Party, the policy carried by Tenant under this ¶ 16.c. shall insure Tenant’s personal property and leasehold improvements.

d.	Tenant’s Property Insurance. Subject to the requirements of ¶ 16.e., Tenant at its cost shall either by separate policy or by endorsement to a policy already carried, maintain insurance coverage on all of Tenant’s personal property and Tenant’s leasehold improvements in, on or about the Premises similar in coverage to that carried by the Insuring Party under ¶ 16.C. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $100,000 per occurrence. The proceeds from any such insurance shall be used by Tenant for the replacement of personal property or the restoration of Tenant owned leasehold improvements. Tenant shall be the Insuring Party with respect to the insurance required by this ¶ 16.d. and shall provide Landlord with written evidence that such insurance is in force.
e.	Insurance Policies. If Tenant is the Insuring Party, Insurance required per this ¶ 16. shall be with companies duly licensed to transact business in the state where the Premises are located, and maintaining during the policy term a “General Policyholders Rating” of at least A- X, or such other minimal rating as may be required by Lender(s) as set forth in the most current issue of “Best’s Insurance Guide”. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in this ¶ 16. If Tenant is the Insuring Party, Tenant shall cause to be delivered to Landlord certificates evidencing the existence and amounts of such insurance with the insureds and loss payable clauses as required by this Lease. No such policy shall be cancelable or subject to modification or lapse except after thirty (30) days prior written notice to Landlord. Tenant shall at least thirty (30) days prior to the expiration of such policies, furnish Landlord with evidence of renewals or certificates of insurance evidencing renewal thereof, or Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant to Landlord upon demand. If the Insuring Party shall fail to procure and maintain the insurance required to be carried by the Insuring Party under this ¶ 16., the other Party may, but shall not be required to, procure and maintain the same, but at Tenant’s expense.
f.	Mutual Waiver. Notwithstanding anything to the contrary contained in this Lease, to the extent that this release and waiver does not invalidate or impair their respective insurance policies, the parties hereto release each other and their respective agents, employees, officers, directors, shareholders, successors, assignees and subtenants from all liability for injury to any person or damage to any property that is caused by or results from a risk which is actually insured against pursuant to the provisions of this Lease without regard to the negligence or willful misconduct of the parties so released. Each party shall use its commercially reasonable efforts to cause each insurance policy it obtains to provide that the insurer thereunder waives all right of recovery by way of subrogation as required herein in connection with any injury or damage covered by the policy. If such insurance policy cannot be obtained with such waiver of subrogation, or if such waiver of subrogation is only available at additional cost and the party for whose benefit the waiver is not obtained does not pay such additional costs after reasonable notice, then the party obtaining such insurance shall promptly notify the other party of the inability to obtain insurance coverage with the waiver of subrogation.
g.	Tenant’s Option. Notwithstanding anything to the contrary contained in this Lease, if for any given policy period, Tenant is able to obtain insurance coverage which meets the requirements of this 16. at a cost lower than Landlord’s cost, then Tenant may be the Insuring Party. At least thirty (30) days prior to the beginning of any policy period for which Tenant desires to be the Insuring Party, Tenant shall submit to Landlord its insurance quote and proposed policy provisions. Within five (5) business days of receipt, Landlord shall review Tenant’s insurance quote and proposed policy provisions, and Landlord may request that the lender as to any loan(s) encumbering the

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property described in Exhibit A hereto (“Lender”) also review Tenant’s insurance quote and proposed policy provisions. Promptly following said reviews by Lender and Landlord, Landlord may, in its reasonable discretion, approve or reject Tenant’s proposed insurance. If approved, Tenant shall cause the approved policies to be issued, with copies of the insurance certificate(s) to be immediately provided to Landlord. If rejected, Landlord shall specify the reasons for such rejection in writing. Tenant shall have three (3) business days from the receipt of Landlord’s written notice of rejection to submit a revised insurance quote and proposed policy provisions. Within three (3) business days after Landlord’s receipt of Tenant’s revised insurance quote and policy provisions, Landlord shall accept Tenant’s revised insurance if it adequately addresses the reasons initially specified by Landlord for rejection. If in Landlord’s reasonable determination, such revised insurance quote and policy provisions do not adequately address the reasons initially specified by Landlord for rejection, Landlord may reject Tenant’s revised insurance quote and policy provisions by stating the reasons therefor in writing; however, such rejection shall be final in regard to that policy period, and Landlord shall be the Insuring Party for that policy period. If Landlord approves Tenant’s insurance, Tenant’s failure to provide the insurance certificate(s) to Landlord at least ten (10) business days prior to the commencement of the applicable policy period shall result in Landlord being the Insuring Party.

17.   DAMAGE AND DESTRUCTION

a.	Damage - Restoration Required. In the event that the Premises is damaged by fire or other casualty which is covered under insurance pursuant to the provisions of ¶ 16. above, Landlord shall restore such damage provided that: (i) the cost to repair the destruction of the Premises does not exceed sixty percent (60%) of the then replacement value of the Premises; (ii) the insurance proceeds are available (inclusive of any deductible amounts) to pay one hundred percent (100%) of the cost of restoration; and (iii) there exists at least eighteen (18) months before the end of the Term and, in the reasonable judgment of Landlord, the restoration can be completed within two hundred and seventy (270) days after the date of the damage or casualty under the laws and regulations of the state, federal, county and municipal authorities having jurisdiction. Regardless of whether Tenant or Landlord is the Insuring Party, the deductible amount of any insurance coverage shall be paid by Tenant except in the case of flood or earthquake and in such case the deductible amount in excess of $10,000 per occurrence shall be paid by Landlord. If such conditions apply so as to require Landlord to restore such damage pursuant to this ¶ 17.a., this Lease shall continue in full force and effect, unless otherwise agreed to in writing by Landlord and Tenant. Tenant shall be entitled to a proportionate reduction of Rent while such restoration takes place, such proportionate reduction to be based on the extent to which the damage and restoration efforts interfere with Tenant’s business in the Premises. Tenant’s right to a reduction of Rent hereunder shall be Tenant’s sole and exclusive remedy in connection with any such damage.
b.	Damage - Restoration Not Required. In the event that the Premises is damaged by a fire or other casualty and Landlord is not required to restore such damage in accordance with the provisions of ¶ 17.a. immediately above, Landlord shall have the option to either (i) repair or restore such damage, with the Lease continuing in full force and effect, but Rent to be proportionately abated as provided in ¶ 17.a. above; or (ii) give notice to Tenant at any time within thirty (30) days after the occurrence of such damage terminating this Lease as of a date to be specified in such notice which date shall not be less than thirty (30) nor more than sixty (60) days after the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent, reduced by any proportionate reduction in Rent as provided for in ¶ 17.a. above, shall be paid to the date of such termination. Notwithstanding the foregoing, if Tenant delivers to Landlord the funds necessary to make up the shortage (or absence) in insurance proceeds and the restoration can be completed in a two hundred seventy (270) day period, as reasonably determined by Landlord, and the destruction of the Premises does not exceed sixty percent (60%) of the then replacement value, Landlord shall restore the Premises as provided in ¶ 17.a. above.
c.	End of Term Casualty. Notwithstanding the provisions of ¶ 17.a. and ¶ 17.b. above, Landlord may terminate this Lease if the Premises is damaged by fire or other casualty (and Landlord’s reasonably estimated cost of restoration of the Premises exceeds twenty-five percent (25%) of the then replacement value of the Premises) and such damage or casualty occurs during the last twelve (12) months of the Term of this Lease (or the Term of any renewal option, if applicable) by giving the other notice thereof at any time within thirty (30) days following the occurrence of such damage or casualty. Such notice shall specify the date of such termination which date shall not be less than thirty (30) nor more than sixty (60) days following the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent shall be paid to the date of such termination.
d.	Termination by Tenant. In the event that the destruction to the Premises cannot be restored as required herein under applicable laws and regulations within two hundred seventy (270) days of the damage or casualty, notwithstanding the availability of insurance proceeds, Tenant shall have the right to terminate this Lease by giving the Landlord notice thereof within thirty (30) days of date of the occurrence of such casualty specifying the date of termination which shall not be less than thirty (30) days nor more than sixty (60) days following the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the

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	Rent, reduced by any proportionate reduction in Rent as provided for in ¶ 17.a. above, shall be paid to the date of such termination.
e.	Restoration. Landlord agrees that, in any case in which Landlord is required to, or otherwise agrees to restore the Premises, that Landlord shall proceed with due diligence to make all appropriate claims and applications for the proceeds of insurance and to apply for and obtain all permits necessary for the restoration of the Premises. Landlord shall use reasonable efforts to enforce any and all provisions in any mortgage, deed of trust or other encumbrance on the Premises requiring Landlord and Lender to permit insurance proceeds to be used for restoration. Landlord shall restore the Premises to the condition existing prior to the date of the damage if permitted by applicable law. Landlord shall not be required to restore alterations made by Tenant, Tenant’s improvements, Tenant’s trade fixtures and Tenant’s personal property, such excluded items being the sole responsibility of Tenant to restore provided, however, that Landlord shall, to the extent of available insurance proceeds, restore Tenant Improvements to the Premises made by Tenant such as interior offices, lab and production improvements and other like improvements.
f.	Waiver. Tenant waives the provisions of Civil Code §1932(2) and Civil Code §1933(4) with
	respect to any destruction of the Premises.

18.   CONDEMNATION

a.	Definitions. The following definitions shall apply: (1) “Condemnation” means (a) the exercise of any governmental power of eminent domain, whether by legal proceedings or otherwise by condemnor, or (b) the voluntary sale or transfer by Landlord to any condemnor either under threat of condemnation or while legal proceedings for condemnation are proceeding; (2) “Date of Taking” means the date the condemnor has right to possession of the property being condemned; (3) “Award” means all compensation, sums or anything of value awarded, paid or received on a total or partial condemnation; and (4) “Condemnor” means any public or quasi-public authority, or private corporation or individual having power of condemnation.
b.	Obligations to be Governed by Lease. If during the Term of the Lease there is any taking of all or any part of the Premises, the rights and obligations of the parties shall be determined strictly pursuant to this Lease. Each party waives the provisions of Code of Civil Procedure §1265.130 allowing either party to petition the Superior Court to terminate this Lease in the event of a partial condemnation of the Premises.
c.	Total or Partial Taking. If the Premises are totally taken by Condemnation, this Lease shall terminate on the Date of Taking. If any portion of the Premises is taken by Condemnation, this Lease shall remain in effect, except that Tenant can elect to terminate this Lease if the remaining portion of the Premises is rendered unsuitable for Tenant’s continued use of the Premises. If Tenant elects to terminate this Lease, Tenant must exercise its right to terminate by giving notice to Landlord within thirty (30) days after the nature and extent of the Condemnation have been finally determined. If Tenant elects to terminate this Lease, Tenant shall also notify Landlord of the date of termination, which date shall not be earlier than thirty (30) days nor later than ninety (90) days after Tenant has notified Landlord of its election to terminate; except that this Lease shall terminate on the Date of Taking if the Date of Taking falls on a date before the date of termination as designated by Tenant. If any portion of the Premises is taken by Condemnation and this Lease remains in full force and effect, on the Date of Taking the Base Rent shall be reduced by an amount in the same ratio as the total number of square feet in the building(s) which are a part of the Premises taken bears to the total number of square feet in the building (s) which are a part of the Premises immediately before the Date of Taking. Any Award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Landlord, whether such Award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Tenant shall be entitled to any compensation separately awarded to Tenant for Tenant’s relocation expenses and/or loss of Tenant’s trade fixtures.

19.   ASSIGNMENT OR SUBLEASE

a.   Tenant shall not assign or encumber its interest in this Lease or the Premises or sublease all or any part of the Premises or allow any other person or entity (except Tenant’s authorized representatives, employees, invitees, guests or a Permitted Transferee) to occupy or use all or any part of the Premises without first obtaining Landlord’s consent, which consent shall not be unreasonably withheld. Any assignment, encumbrance or sublease without Landlord’s prior written consent shall be voidable and at Landlord’s election, shall constitute a default. If Tenant is a partnership, a withdrawal or change, voluntary, involuntary or by operation of law of any partner, or the dissolution of the partnership, shall be deemed a voluntary assignment. If Tenant consists of more than one person, a purported assignment, voluntary or involuntary or by operation of law from one person to the other shall be deemed a voluntary assignment. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, or sale or other transfer of a controlling percentage of the capital stock of Tenant, or the sale of at least fifty percent (50%) of the value of the assets of Tenant shall be deemed a voluntary assignment. Notwithstanding the sentence immediately above, if the Tenant is a corporation, the Tenant shall be entitled to assign this Lease without Landlord’s prior written consent in the event of a reorganization of Tenant through the sale of all or a portion of Tenant’s Capital Stock by Initial Public Offering (such event shall be referred to as a transfer to a “Permitted Transferee”). In connection with any assignment, Landlord shall be entitled to require an increase in the Security Deposit to the extent that such

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	increase should be commercially reasonable in Landlord’s discretion given the financial condition of Tenant and the assignee following such event. In connection with any Sublease, Landlord shall be entitled to hold any Security Deposit paid by Sublessee to Sublessor, which Security Deposit shall be held by Landlord in accordance with the provisions of the Sublease. Tenant shall give Landlord at least sixty (60) days prior written notice of any intended transfer to a Permitted Transferee and in connection with such transfer shall provide to Landlord copies of any documents or other information as Landlord may reasonably request. Unless otherwise expressly agreed in writing by Landlord, no assignment shall relieve Tenant of any of its obligations pursuant to this Lease.
	In the event of a sublease all Sublease Rent received by Tenant in excess of the Rent payable by Tenant to Landlord under this Lease applicable to the portion of the Premises subleased shall be deemed the “Bonus Amount”, after deducting therefrom the “Subleasing Costs” which shall include (i) commercially reasonable brokerage commissions, (ii) tenant improvements made at the request of a subtenant and (iii) attorneys’ fees incurred by Tenant in negotiating and documenting the sublease, which Subleasing Costs shall be amortized over the Term of the Sublease for the purpose of determining the Bonus Amount. Fifty percent (50%) of the Bonus Amount shall be promptly paid to Landlord following receipt by Tenant. If the Subleasing Costs are not known at the commencement of the sublease, the fifty percent (50%) of Bonus Amount due Landlord will be computed without deduction of Subleasing Costs and promptly paid to Landlord. Once the Subleasing Costs are presented to and verified by Landlord, the Bonus Amount paid by Tenant to date will be adjusted and Landlord shall give Tenant a credit against the next payment(s) due to Landlord from Tenant. The term “Sublease Rent” as used herein shall include any consideration of any kind received by Tenant from or on behalf of any subtenant, if the sums are related in any manner to the Premises, including, without limitation Rent, operating expense payments, bonus money and payments for the purchase of or usage of Tenant’s furniture, fixtures, inventory, equipment, accounts, goodwill, general intangibles and other assets. Each sublease approved by Landlord shall stand alone as to the computation of the Bonus Amount.
	In the event of an assignment all Transfer Payments received by Tenant shall be deemed the “Bonus Amount”, after deducting therefrom the “Assignment Costs” which shall include (i) commercially reasonable brokerage commissions and (ii) attorneys’ fees incurred by Tenant in negotiating and documenting the assignment. Fifty percent (50%) of the Bonus Amount shall be promptly paid to Landlord following receipt by Tenant. If the Assignment Costs are not known at the commencement of the Assignment, the fifty percent (50%) of Bonus Amount due Landlord will be computed without deduction of Assignment Costs and promptly paid to Landlord. Once the Assignment Costs are presented to and verified by Landlord, the Bonus Amount paid by Tenant to date will be adjusted and Landlord shall give Tenant a credit against the next payment(s) due to Landlord from Tenant. The term “Transfer Payments” as used herein shall include any consideration of any kind received by Tenant from or on behalf of any assignee, if the sums are related in any manner to the Premises, including, without limitation assignment consideration, Rent, operating expense payments, bonus money and payments for the purchase of or usage of Tenant’s furniture, fixtures, inventory, equipment, accounts, goodwill, general intangibles and other assets.
	If Tenant requests Landlord to consent to a proposed assignment or subletting, Tenant shall pay to Landlord, whether or not consent is ultimately given, an amount equal to Landlord’s reasonable attorneys’ fees and costs incurred in connection with such request, (not to exceed $5,000). Each request for consent to an assignment or subletting shall be in writing, and shall be accompanied by information as may be relevant to Landlord’s determination as to the financial and operational responsibility and stability of the proposed assignee or sublessee and the appropriateness of the proposed use by such assignee or sublessee. Such information shall include a summary of the proposed use of, and any proposed modifications to, the Premises. Tenant shall provide Landlord with such other or additional information and/or documentation as may reasonably be requested by Landlord. Tenant shall, upon completion of any assignment or subletting of all or any portion of the Premises, immediately and irrevocably assign to Landlord as security for Tenant’s obligations under the Lease, all Sublease Rent and/or Transfer Payments from any such subletting or assignment. Landlord, as assignee and attorney in fact for Tenant, shall have the right to collect all rent and other revenues collectable pursuant to any such sublet or assignment and apply such rent and other revenues towards Tenant’s obligations under the Lease.
b.	No interest of Tenant in this Lease shall be assignable by involuntary assignment through operation of law (including without limitation the transfer of this Lease by testacy or intestacy). Each of the following acts shall be considered an involuntary assignment: (a) if Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or institutes proceedings under the Bankruptcy Act in which Tenant is the bankrupt; or if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; or (b) if a writ of attachment or execution is levied on this Lease; or (c) if in any proceeding or action to which Tenant is a party, a receiver is appointed with authority to take possession of the Premises. An involuntary assignment shall constitute a default by Tenant and Landlord shall have the right to elect to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant.
c.	Notwithstanding any provision to this Lease to the contrary, in any event where Landlord’s consent is required for assignment or sublease, Landlord may at its option, elect to terminate the Lease instead of approving the requested assignment or sublease, except if the requested assignment or

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sublease is for a period of less than one year (including any renewal periods). Should Landlord so elect to terminate this Lease, all of the obligations of the parties thereunder, to the extent not accrued, shall terminate on the later of sixty (60) days following Landlord’s notice to Tenant of its election hereunder, or the effective date of the proposed assignment or subletting sought by the Tenant, but in no event later than one hundred twenty (120) days following the date of Landlord’s election under this ¶ 19.C. At the time of termination, all obligations of both parties hereunder shall terminate as to obligations thereafter accruing except as otherwise expressly provided in this Lease.

20.

DEFAULT. The occurrence of any of the following shall constitute a default by Tenant: (a) a failure of Tenant to pay Rent within ten (10) days of its due date; (b) abandonment of the Premises; or (c) failure to timely perform any other provision of this Lease where such failure continues for a period in excess of thirty days following notice of such failure, provided however, that if the nature of such failure is such that it cannot reasonably be cured within thirty days, then Tenant shall not be in default if Tenant commences to cure such failure within thirty days and thereafter diligently prosecutes the cure to completion. Tenant shall give written notice to Landlord of any default by Landlord of its obligations pursuant to this Lease asserted by Tenant (with a copy of such notice to any lender (“Lender”) against the Premises). Landlord and Landlord’s Lender shall be afforded a reasonable opportunity to cure any claimed default by Landlord and Landlord shall not be considered in default so long as Landlord (or Landlord’s Lender) commences such cure within a reasonable period of time and thereafter, continues to attempt to complete such cure. Prior to any obligation recited in this Lease to provide a Lender with any notice, Landlord shall provide Tenant with the name and address of its Lender in writing.

21.

LANDLORD’S REMEDIES. Landlord shall have the following remedies if Tenant is in default (these remedies are not exclusive; they are cumulative and in addition to any remedies now or later allowed by law):

a.

Landlord may continue this Lease in full force and effect, and this Lease will continue in effect so long as Landlord does not terminate Tenant’s right to possession, and Landlord shall have the right to collect Rent when due. During the period Tenant is in default, Landlord can enter the Premises and relet the Premises, or any part of the Premises, to third parties for Tenant’s account. Tenant shall be liable immediately to Landlord for all costs Landlord incurs in reletting the Premises, including without limitation, brokers’ commissions, expenses of remodeling the Premises required by the reletting, and like costs. Reletting can be for a period shorter or longer than the remaining Term of this Lease. Tenant shall pay to Landlord the Rent due under this Lease on the dates the Rent is due, less the Rent Landlord receives from any reletting. No act by Landlord allowed by this ¶ 21.a. shall terminate this Lease unless Landlord notifies Tenant in writing that Landlord elects to terminate this Lease. After Tenant’s default and for so long as Landlord does not terminate Tenant’s right to possession of the Premises, if Tenant obtains Landlord’s consent, Tenant shall have the right to assign or sublet its interest in this Lease, but Tenant shall not be released from liability. Landlord’s consent to such a proposed assignment or subletting shall not be unreasonably withheld. If Landlord elects to relet the Premises as provided in this ¶ 21.a., Rent that Landlord receives from reletting shall be applied to the payment of: first, any indebtedness from Tenant to Landlord other than Rent due from Tenant; second, all costs, including for maintenance incurred by Landlord in reletting; and third, Rent due and unpaid under this Lease. After deducting the payments referred to in this ¶ 21.a., any sum remaining from the Rent Landlord receives from reletting shall be held by Landlord and applied in payment of future Rent as Rent becomes due under this Lease. In no event shall Tenant be entitled to any excess Rent received by Landlord. If, on the date Rent is due under this Lease, the Rent received from the reletting is less than the Rent due on that date, Tenant shall pay to Landlord, in addition to the remaining Rent due, all costs including for maintenance Landlord incurred in reletting that remain after applying the Rent received from the reletting as provided in this ¶ 21.a.; and

b.

Landlord may terminate Tenant’s right to possession of the Premises at any such time. No act by Landlord other than giving express written notice thereof to Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on Landlord’s initiative to protect Landlord’s interest under this Lease shall not constitute a termination of Tenant’s right to possession. Upon termination of Tenant’s right to possession, Landlord has the right to recover from Tenant: (1) the Worth of the unpaid Rent that had been earned at the time of termination of Tenant’s right to possession; (2) the Worth of the amount by which the unpaid Rent that would have been earned after the date of termination until the time of award exceeds the amount of the loss of Rent that Tenant proves could have been reasonably avoided; (3) the Worth of the amount of the unpaid Rent that would have been earned after the award throughout the remaining Term of the Lease to the extent such unpaid Rent exceeds the amount of the loss of Rent that Tenant proves could have been reasonably avoided; and (4) any other amount, including but not limited to, reasonable expenses incurred to relet the Premises, court costs, attorneys’ fees and collection costs necessary to compensate Landlord for all detriment caused by Tenant’s default. The “Worth”, as used above in (1) and (2) in this ¶ 21.b. is to be computed by allowing interest at the lesser of eighteen percent (18%) per annum or the maximum legal interest rate permitted by law. The “Worth”, as used above in (3) in this ¶ 21.b. is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%).

22.   ENTRY OF PREMISES. Landlord and/or its authorized representatives shall have the right after reasonable notice except for emergencies to enter the Premises at all reasonable times for any of the following purposes: (a) to determine whether the Premises are in good condition and whether Tenant is complying with its obligations under this Lease; (b) to do any necessary maintenance and to make any

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restoration to the Premises that Landlord has the right or obligation to perform; (c) to post “for sale” signs at any time during the Term, or to post “for rent” or “for lease” signs during the last one hundred eighty (180) days of the Term or during any period while Tenant is in default; (d) to show the Premises to prospective brokers, lenders, agents, buyers, tenants or persons interested in leasing or purchasing the Premises, at any time during the Term; or (e) to repair, maintain or improve the Premises and to erect scaffolding and protective barricades around and about the Premises but not so as to prevent entry to the Premises or to unreasonably interfere with Tenant’s use of the Premises and to do any other act or thing necessary for the safety or preservation of the Premises. Landlord shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance or other damage arising out of Landlord’s entry onto the Premises as provided in this ¶ 22. Tenant shall not be entitled to an abatement or reduction of Rent if Landlord exercises any rights reserved in this ¶ 22. Landlord shall conduct its activities on the Premises as provided herein in a commercially reasonable manner that will lessen the inconvenience, annoyance or disturbance to Tenant.

23.

SUBORDINATION.

a.	Automatic Subordination. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, and at the election of Landlord or Landlord’s Lender, this Lease shall be subject and subordinate at all times to (i) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Premises, (ii) the lien of any mortgage or deed of trust which may now exist or hereafter be executed affecting the Premises, and (iii) the lien of any mortgage or deed of trust which may hereafter be executed in any amount for which the Premises, ground leases or underlying leases, or Landlord’s interest or estate in any of said items is specified as security. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest (including without limitation to Lender) to Landlord (“Successor”). In connection with any such termination of a ground lease or underlying lease or any foreclosure or conveyance in lieu of foreclosure made in connection with any mortgage or deed of trust, then so long as Tenant is not in default after all applicable notice and cure periods pursuant to this Lease, Tenant shall not be disturbed in its possession of the Premises or in the enjoyment of its rights pursuant to this Lease during the Term of this Lease or any extension or renewal thereof. Notwithstanding any subordination of this Lease to the lien of any mortgage or deed of trust, the Lender, at any time, shall be entitled to subordinate the lien of its mortgage or deed of trust to this Lease by filing a notice of subordination in the County in which the Premises are located, and Lender shall agree in connection with any such filing, that Tenant shall not be disturbed in its possession of the Premises so long as Tenant is not in default pursuant to this Lease. In connection with any such filing, Tenant shall be obligated to attorn to and to become a Tenant of any Successor.
b.	Additional Subordination. From time to time at the request of Landlord, Tenant covenants and agrees to execute and deliver within ten (10) business days following the date of written request from Landlord, documents evidencing the priority or subordination of this Lease with respect to any ground lease or underlying lease or the lien of any mortgage or deed of trust in connection with the Premises. Any and all such documents shall be in such form as is reasonably acceptable to the Lender(s). Any subordination agreement so requested by Landlord shall provide for Tenant to attorn to the Successor and shall further provide that Tenant shall not be disturbed in its possession of the Premises or in the enjoyment of its rights pursuant to this Lease so long as Tenant is not in default after all applicable notice and cure periods with respect to its obligations pursuant to the Lease. Any such Subordination, Non-disturbance and Attornment Agreement shall be recorded in the official records of the office of the County Recorder in the County in which the Premises is located.
c.	Notice from Lender. Tenant shall be entitled to rely upon any notice given by a Lender in connection with the Premises requesting that Tenant make all future Rent payments to such Lender, and Tenant shall not be liable to Landlord for any payment made to such Lender in accordance with such notice. Notwithstanding any provision to the contrary of this Lease, a Successor shall not be (i) obligated to recognize the payment of Rent for a period of more than one month in advance; (ii) responsible for liabilities accrued pursuant to this Lease prior to the date (“Succession Date”) upon which the Successor becomes the “Landlord” hereunder; (iii) responsible to cure defaults of the Landlord pursuant to this Lease existing as of the Succession Date, except for defaults of a continuing nature of which Successor received notice (as provided in Paragraph 20) and in respect of which Tenant afforded Successor a reasonable cure period following such notice; (iv) responsible for any Security Deposit delivered by Tenant pursuant to this Lease not actually received by the Successor; or (v) bound by any execution, modification, termination or extension of this Lease or any grant of a purchase option or right of first refusal or any other action taken by the Landlord pursuant to this Lease, except in accordance with the provisions of an assignment of Leases executed by Landlord in favor of a Lender.

24.   ESTOPPEL CERTIFICATE; TENANT FINANCIAL STATEMENTS. Tenant, at any time and from time to time, upon not less than ten (10) business days written notice from Landlord, will execute, acknowledge and deliver to Landlord and, at Landlord’s request, to any existing or prospective purchaser, ground lessor or mortgagee of any part of the Premises, a certificate of Tenant stating: (a) that Tenant has accepted the Premises (or, if Tenant has not done so, Tenant has not accepted the Premises and specifying the reasons therefor); (b) the Commencement and Expiration Dates of this Lease; (c) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that same is in full force and effect as modified and stating the modifications); (d) whether or not to the best of Tenant’s knowledge there are then existing

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	any defenses against the enforcement of any of the obligations of Tenant under this Lease (and, if so, specifying same); (e) whether or not to the best of Tenant’s knowledge there are then existing any defaults by Landlord in the performance of its obligations under this Lease (and, if so, specifying same); (f) the dates, if any, to which the Rent and other charges under this Lease have been paid; (g) whether or not there are Rent increases during the Lease Term and if so the amount of same; (h) whether or not the Lease contains any options or rights of first offer or first refusal; (i) the amount of any Security Deposit or other sums due Tenant; (j) the current notice address for Tenant; and (k) any other information that may reasonably be required by any of such persons. It is intended that any such certificate of Tenant delivered pursuant to this ¶ 24. may be relied upon by Landlord and any existing or prospective purchaser, ground lessor or mortgagee of the Premises. Provided Tenant is not a publicly traded company which files with the SEC, Tenant will, at any time upon request by Landlord, to deliver to Landlord the most recent financial statements of Tenant with an opinion of a certified public accountant, if available, including a balance sheet and profit and loss statement for the most recent prior three years all prepared in accordance with generally accepted accounting principles consistently applied. Landlord agrees to hold such financial statements confidential and to share them only with prospective lenders and purchasers of the Premises. Other than for prospective lenders and purchasers, Landlord shall not request financial statements more often than twice in any calendar year.
25.	WAIVER. No delay or omission in the exercise of any right or remedy by Landlord shall impair such right or remedy or be construed as a waiver. No act or conduct of Landlord, including without limitation, acceptance of the keys to the Premises, shall constitute an acceptance of the surrender of the Premises by Tenant before the expiration of the Term. Only written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Premises and accomplish termination of the Lease. Landlord’s consent to or approval of any act by Tenant requiring Landlord’s consent or approval shall not be deemed to waive or render unnecessary Landlord’s consent to or approval of any subsequent act by Tenant. Any waiver by Landlord of any Default must be in writing and shall not be a waiver of any other Default concerning the same or any other provision of the Lease.
26.	SURRENDER OF PREMISES. Upon expiration of the Term, Tenant shall surrender to Landlord the Premises and all tenant improvements and alterations clean and in the same condition as existed at the Commencement Date, except for ordinary wear and tear and Alterations which Tenant has the right or is obligated to remove under the provisions of ¶ 14. herein. Tenant shall remove all personal property including, without limitation, all wallpaper, paneling and other decorative improvements or fixtures and shall perform all restoration made necessary by the removal of any alterations or Tenant’s fixtures, furnishings, equipment and other personal property before the expiration of the Term, including, for example, restoring all wall surfaces to their condition as of the Commencement Date. In any event, Tenant shall cause the following to be done prior to the expiration or the sooner termination of this Lease: (i) all interior walls shall be cleaned so that they appear freshly painted; (ii) all tiled floors shall be cleaned and waxed; (iii) all carpets shall be cleaned and shampooed; (iv) all broken, marred, stained or nonconforming acoustical ceiling tile shall be replaced; (v) all exterior and interior windows shall be washed; (vi) the HVAC system shall be serviced by a reputable and licensed service firm and left in good operating condition and repair as so certified by such firm; and (vii) the plumbing and electrical systems and lighting shall be placed in good order and repair (including replacement of any burned out, discolored or broken light bulbs, ballasts, or lenses). Landlord can elect to retain or dispose of in any manner Tenant’s personal property not removed from the Premises by Tenant prior to the expiration of the Term. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord’s retention or disposition of Tenant’s personal property. Tenant shall be liable to Landlord for Landlord’s cost for storage, removal and disposal of Tenant’s personal property.
27.	HOLDOVER. If Tenant with Landlord’s consent remains in possession of the Premises after expiration of the Term or after the date in any notice given by Landlord to Tenant terminating this Lease, such possession by Tenant shall be deemed to be a month to month tenancy cancelable by either party on thirty (30) days written notice given at any time by either party and all provisions of this Lease, except those pertaining to Term, renewal options and Base Rent, shall apply and Tenant shall thereafter pay monthly Base Rent computed on a per month basis, for each month or part thereof (without reduction for any partial month) that Tenant remains in possession, in an amount equal to one hundred thirty-five percent (135%) of the Base Rent that was in effect for the last full calendar month immediately preceding expiration of the Term.
	If Tenant holds over after the expiration or earlier termination of the Term hereof, without the consent of Landlord, Tenant shall become a Tenant at sufferance only with a continuing obligation to pay Rent provided that the Base Rent shall be one hundred fifty percent (150%) of the Base Rent that was in effect for the last full calendar month immediately preceding expiration of the Term for the first thirty (30) days of such holdover, and two hundred percent (200%) of such Base Rent thereafter during the pendency of such holdover. In any such case of Holdover without the consent of Landlord, the monthly Base Rent shall be computed on a per-month basis, for each month or part thereof (without reduction for any partial month) that Tenant remains in possession. Acceptance by Landlord of Rent after expiration or earlier termination of the Term shall not constitute a consent to a holdover hereunder or result in a renewal. The foregoing provisions of this ¶ 27 are in addition to and do not affect Landlord’s right of re-entry or any rights of Landlord hereunder or as otherwise provided by law. If Tenant fails to surrender the Premises upon the expiration of this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability arising out of such failure, including without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender. No provision of this ¶ 27 shall be construed as implied consent by Landlord to any holding over by Tenant. Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon expiration or other termination of this Lease. The provisions of this ¶ 27 shall not be

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	considered to limit or constitute a waiver of any other rights or remedies of Landlord provided in this Lease or at law.
28.	NOTICES. All notices, demands, or other communications required or contemplated under this Lease, including any notice delivered to Tenant by the Lender, shall be in writing and shall be deemed to have been duly given 48 hours from the time of mailing if mailed by registered or certified mail, return receipt requested, postage prepaid, or 24 hours from the time of shipping by overnight carrier, or the actual time of delivery if delivered by personal service to the parties at the addresses specified in ¶ 1. Either Tenant or Landlord may change the address to which notices are to be given to such party hereunder by giving written notice of such change of address to the other in accordance with the notice provisions hereof.
29.	OPTIONS TO EXTEND.

a.	Grant of Options. Tenant shall have the right, at its option, to extend the Lease for two (2) additional periods of thirty (30) months each (the “Extended Terms”) on an “as is” basis, each such Extended Term commencing at the expiration of the then current Term, provided that at the time of exercise and at the time of commencement of each Extended Term, Tenant is not in default under this Lease beyond the expiration of applicable notice and cure periods.
b.	Exercise of Option. If Tenant decides to extend the Lease for an Extended Term, Tenant shall give written notice to Landlord of its election to extend not less than nine (9) months prior to the expiration of the then current Term. Tenant’s failure to give timely notice to Landlord of Tenant’s election to extend shall be deemed a waiver of Tenant’s right to extend. The terms and conditions applicable to each Extended Term shall be the same terms and conditions contained in this Lease except that Tenant shall not be entitled to any further option to extend beyond these two extension options. The Base Rent for each Extended Term shall be determined in accordance with ¶ 29.c. below:
c.	Determination of Base Rent During Each Extended Term

1)	Agreement of Base Rent. Landlord shall provide Tenant with written notice of the proposed Fair Market Rental Value (as defined below) no later than three (3) months prior to the expiration of the then current Term. Landlord and Tenant shall have thirty (30) days after Landlord provides the proposed Fair Market Rental Value in which to agree on the Base Rent for that Extended Term. The “Fair Market Rental Value” of the Premises for that Extended Term shall be the Base Rent per rentable square foot as of the commencement of that Extended Term, including three percent (3%) annual increases, taking into consideration all relevant market factors, including the use of the Premises permitted under this Lease, the quality, size, design and location of the Premises, and the rental value paid by tenants for lease renewals or extensions in premises of comparable size, quality and location. Base Rent for the first twelve (12) months of that Extended Term shall be 95% of the Fair Market Rental Value, with 3% annual increases to be effective at the beginning of each subsequent lease year. If Landlord and Tenant agree on the Base Rent for that Extended Term during the thirty (30) day period, they shall immediately execute an amendment to this Lease stating the new Base Rent. Notwithstanding any other provision of this Lease, the Base Rent for the first twelve (12) months of each Extended Term shall be no less than the scheduled Base Rent for the last month of the previous Lease Term plus three percent (3%), with three percent (3%) annual increases to be effective at the beginning of each subsequent lease year.
2)	Selection of Appraisers. If Landlord and Tenant are unable to agree on the Base Rent for that Extended Term within the thirty (30) day period, then within ten (10) business days after the expiration of the thirty (30) day period and provided that Tenant has timely exercised the subject renewal option in accordance with ¶ 29.b., Landlord and Tenant each at its own cost and by giving notice to the other party, shall appoint a competent and disinterested real estate appraiser with at least five (5) years full-time commercial appraisal experience in the Milpitas, California, market area to appraise the Fair Market Rental Value of the Premises and set the Base Rent for that Extended Term. If either Landlord or Tenant does not appoint an appraiser within said ten (10) business days, the single appraiser appointed shall be the sole appraiser and shall set the Base Rent during that Extended Term. If two (2) appraisers are appointed by Landlord and Tenant as stated herein, they shall meet promptly and attempt to set the Base Rent for that Extended Term. If the two (2) appraisers are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third appraiser meeting the same qualifications within ten (10) business days after the last day the two (2) appraisers are given to set the Base Rent. If they are unable to agree on the third appraiser, either Landlord or Tenant, by giving ten (10) days’ notice to the other party, can apply to the then President of the Real Estate Board or to the Presiding Judge of the Superior Court of the County of Santa Clara, for the selection of a third appraiser who meets the qualifications stated herein. Landlord and Tenant each shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser’s fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either Landlord or Tenant, or their affiliates.
3)	Value Determined by Three (3) Appraisers. Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall set the Base Rent for that Extended Term. If a majority of the appraisers are unable to set the Base Rent within the stipulated

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period of time, Landlord’s appraiser shall arrange for simultaneous exchange of written appraisals from each of the appraisers and the three (3) appraisals shall be added together and their total divided by three (3); the resulting quotient shall be the Base Rent for the Premises for that Extended Term. If, however, the low appraisal and/or the high appraisal are/is more than fifteen percent (15%) lower and/or higher than the middle appraisal, such low appraisal and/or high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2); the resulting quotient shall be the Base Rent for the Premises for that Extended Term. If both the low appraisal and the high appraisal are disregarded as stated in this ¶ 29.c.3), the middle appraisal shall be the Base Rent for the Premises at the commencement of that Extended Term.

30.	PREVIOUS LEASE. The previous lease for the Premises between the parties hereto (the “Prior Lease”) shall continue in full force and effect through December 31, 2003, but shall have no effect thereafter except as to obligations existing as of December 31, 2003 but not yet satisfied including, without limitation, any and all indemnification obligations.
31.	MISCELLANEOUS PROVISIONS.

a.	Time of Essence. Time is of the essence of each provision of this Lease.
b.	Successor. This Lease shall be binding on and inure to the benefit of the parties and their successors, except as provided in ¶ 19.
c.	Landlord’s Consent. Any consent required by Landlord under this Lease must be granted in writing and may be withheld or conditioned by Landlord in its sole and absolute discretion unless otherwise provided.
d.	Personal Rights. Notwithstanding any other provision(s) of this Lease to the contrary, any provisions of this Lease providing for the renewal, extension or early termination of the Lease and/or for the expansion of the Premises (to include without limitation rights to negotiate, rights of first refusal, etc.) shall be (i) personal to the original Tenant and shall not be assignable or otherwise transferable other than to a Permitted Transferee (either voluntarily or involuntarily) to any third party for any reason whatsoever, and (ii) conditioned upon Tenant not then being in default under this Lease.
e.	Commissions. Each party represents that it has not had dealings with any real estate broker, finder or other person with respect to this Lease in any manner, except for the Broker(s) identified in 1., who shall be compensated by Landlord in accordance with the separate agreement between Landlord and the Broker(s).
f.	Other Charges; Legal Fees. If Landlord becomes a party to any litigation concerning this Lease or the Premises by reason of any act or omission of Tenant or Tenant’s authorized representatives, Tenant shall be liable to Landlord for reasonable attorneys’ fees and court costs incurred by Landlord in the litigation, after Landlord provides written notice of the action to Tenant. Notwithstanding the foregoing, Tenant will reimburse Landlord for up to $2,000 in reasonable attorney’s fees and court costs incurred prior to Landlord giving Tenant notice of the action. Should the court render a decision which is thereafter appealed by any party thereto, Tenant shall be liable to Landlord for reasonable attorneys’ fees and court costs incurred by Landlord in connection with such appeal.
	If either party commences any litigation against the other party or files an appeal of a decision arising out of or in connection with the Lease, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees and costs of suit. If Landlord employs an attorney to recover delinquent charges, Tenant agrees to pay all attorneys’ fees and costs charged to Landlord in addition to Rent, late charges, interest and other sums payable under this Lease.
g.	Landlord’s Successors. In the event of a sale or conveyance by Landlord of the Premises, the same shall operate to release Landlord from any liability under this Lease, including as to any Security Deposit to the extent transferred to Landlord’s successor-in-interest, and in such event Landlord’s successor in interest shall be solely responsible for all obligations of Landlord under this Lease.
h.	Interpretation. This Lease shall be construed and interpreted in accordance with the laws of the state in which the Premises are located. This Lease constitutes the entire agreement between the parties with respect to the Premises, except for such guarantees or modifications as may be executed in writing by the parties from time to time. When required by the context of this Lease, the singular shall include the plural, and the masculine shall include the feminine and/or neuter. “Party” shall mean Landlord or Tenant. If more than one person or entity constitutes Landlord or Tenant, the obligations imposed upon that party shall be joint and several. The enforceability, invalidity or illegality of any provision shall not render the other provisions unenforceable, invalid or illegal.
i.	Auctions. Tenant shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Landlord’s prior written consent. Notwithstanding anything to the contrary in this Lease, Landlord shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.

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j.	Quiet Possession. Upon payment by Tenant of the Rent for the Premises and the observance and performance of all of the covenants, conditions and provisions on Tenant’s part to be observed and performed under this Lease, Tenant shall have quiet possession of the Premises for the entire Term hereof subject to all of the provisions of this Lease.
k.	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.
I.	Offer. Preparation of this Lease by Landlord or Landlord’s agent and submission of same to Tenant shall not be deemed an offer to lease to Tenant. This Lease is not intended to be binding until executed by all Parties hereto.
m.	Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. The parties shall amend this Lease from time to time to reflect any adjustments that are made to the Base Rent or other Rent payable under this Lease. As long as they do not materially change Tenant’s obligations hereunder, Tenant agrees to make reasonable non-monetary modifications to this Lease as may be reasonably required by Lender(s) in connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part.
n.	Construction. The Landlord and Tenant acknowledge that each has had its counsel review this Lease, and hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or in any amendments or exhibits hereto.
o.	Captions. Article, section and paragraph captions are not a part hereof.
p.	Exhibits. For reference purposes the Exhibits are listed below:

Exhibit A: The Premises
Exhibit B: Rules and Regulations
Exhibit C: Covenants, Conditions And Restrictions

LANDLORD:		TENANT:
LIMAR REALTY CORP. #4, a California corporation		LSI LOGIC CORPORATION, a Delaware corporation
By:	/s/ Theodore H. Kruttschnitt	By:	/s/ David G. Pursel
Name:	Theodore H. Kruttschnitt	Name:	David G. Pursel
Title:	President	Title:	Vice President, General Counsel
			& Corporate Secretary
Date:	3/29/04	Date:	February 24, 2004
		LSI Logic Legal Department
		Date:	02/26/04
		Approved as to form
		By	/s/ Andrew S. Hughes
		LSI Logic Corporate Real Estate
		Date:	2/26/04
		Approved as to form
		By	/s/ Donald A. Costello

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EXHIBIT A

The Premises

This Exhibit A is attached to and made a part of that certain Lease (the “Lease”) dated December 31, 2003, by and between Limar Realty Corp. #4 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

EXHIBIT B

Rules & Regulations

This Exhibit B is attached to and made a part of that certain Lease dated December 31, 2003 by and between Limar Realty Corp. #4 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

For the purpose of these Rules & Regulations the word Premises shall refer to the Premises Tenant is leasing as described in the Lease.

1.	No sign, placard, picture, advertisement, name or notice (collectively, “Signs”) shall be installed or displayed on any part of the Premises after the Commencement Date without the prior written consent of Landlord, except that Tenant may post Signs inside the Building which are not visible from the exterior of the Building. Landlord shall have the right to remove, at Tenant’s expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant.
2.	Except for that which exists as of the Commencement Date or that consented to in writing by Landlord, no draperies, curtains, blinds, shades, screens or other devices shall be hung at or used in connection with any window or exterior door or doors of the Premises and no awning shall be permitted on any part of the Premises. Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Premises.
3.	Neither Tenant nor any employee or invitee of Tenant, shall make any structural roof or terrace penetrations.
4.	Tenant shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. Landlord shall not in any way be responsible to any Tenant for any loss of property on the Premises, or for any damage to any Tenant’s property.
5.	Landlord will furnish Tenant, free of charge, with six (6) keys to the Premises. Tenant shall not make or have made additional keys without Landlord’s prior written consent, and Tenant shall not alter any lock or install a new additional lock or bolt on any door of its Premises without Landlord’s prior written consent, except for electronic locks existing at the Commencement Date. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys of all locks for doors on the Premises, and in the event of loss of any keys furnished by Landlord, shall pay Landlord therefor.
6.	If Tenant requires telegraphic, telephonic, burglar alarm or similar services that do not exist as of the Commencement Date, it shall first obtain, and comply with, Landlord’s reasonable instructions in their installation.
7.	Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Landlord shall have the reasonable right to prescribe the weight, size and position of all equipment, materials, furniture or other property brought into the Premises. Heavy objects shall, if considered necessary by Landlord, stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Business machines and mechanical equipment belonging to Tenant, which cause noise or vibration that may be transmitted to the structure of the Premises to such a degree as to be objectionable to Landlord, shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate noise or vibrations. Landlord will not be responsible for loss of, or damage to, any such equipment or other property from any cause, and all damage done to the Premises by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant.
8.	Tenant shall not use or keep in the Premises any kerosene, gasoline or inflammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of office equipment. Tenant shall not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord by reason of noise, odors or vibrations. Tenant shall not bring or keep or permit to be brought or kept in the Premises any animal life form, other than human, except seeing eye dogs when in the company of their masters.
9.	Tenant agrees to cooperate fully with Landlord to comply with any governmental energy-saving rules, laws or regulations of which Tenant has actual notice.
10.	Landlord reserves the right, exercisable with one hundred twenty (120) days prior written notice but without liability to Tenant, to change the name and street address of the Premises.
11.	The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting for the violation of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused it.

EXHIBIT B

Rules & Regulations
(continued)

12.	Tenant shall not sell, or permit the retail sale of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the Premises. Tenant shall not use the Premises for any business or activity other than that specifically provided for in this Lease. Notwithstanding the above, Tenant shall have the right to install vending machines for use by Tenant, its employees and invitees.
13.	Tenant shall not interfere with radio or television broadcasting or reception from or in neighboring areas.
14.	Canvassing, soliciting and distribution of handbills or any other written materials, and peddling in the Property are prohibited, and Tenant shall cooperate to prevent same.
15.	Landlord reserves the right to exclude or expel from the Premises any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the Rules and Regulations of the Premises or in violation of the CC&R’s.
16.	Tenant shall store all its trash and garbage within its Premises or in reasonable locations specifically identified by Landlord for such purposes. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with reasonable directions issued from time to time by Landlord.
17.	The Premises shall not be used for the storage of merchandise held for sale to the general public, or for lodging nor shall the Premises by used for any improper, illegal or objectionable purpose. No cooking (other than customary heating or ordinary lunchroom items for Tenant’s employees, including existing cafeterias) shall be done or permitted by any tenant on the Premises, except that use by Tenant in its kitchen, if any, located in the Premises and Underwriters Laboratory’s approved equipment for brewing coffee, tea, hot chocolate and similar beverages and microwaving food shall be permitted, provided that such kitchen, equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations.
18.	Without the written consent of Landlord, Tenant shall not use the name of the Premises in connection with or in promoting or advertising the business of Tenant except as Tenant’s address.
19.	Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.
20.	Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage.
21.	The requirements of Tenant will be attended to only upon appropriate application to the office of Landlord by an authorized individual. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord.
22.	Tenant shall not park its vehicles in any parking areas outside the Premises. Tenant shall not store or abandon vehicles in the Premises parking areas nor park any vehicles in the Premises parking areas other than automobiles, motorcycles, motor driven or non-motor driven bicycles, four-wheeled trucks, or other equipment used in the operation of Tenant’s business. Tenant, its agents, employees and invitees shall not park any one (1) vehicle in more than one (1) parking space.
23.	Landlord reserves the right to make such other reasonable Rules and Regulations as, in its judgment, may from time to time be appropriate for safety and security, for care and cleanliness of the Premises and for the preservation of good order therein. Tenant agrees to abide for all such Rules and Regulations hereinabove stated and any additional Rules and Regulations which are adopted.
24.	Tenant shall be responsible for the observance of all of the foregoing Rules and Regulations by Tenant’s employees, agents, clients, customers, invitees and guests.

E 545 PAGE 189

EXHIBIT C

Covenants, Conditions And Restrictions

This Exhibit C is attached to and made a part of that certain Lease dated December 31, 2003 by and between Limar Realty Corp. #4 as Landlord and LSI Logic Corporation, a Delaware corporation, as Tenant.

DECLARATION OF COVENANTS, CONDITIONS
AND RESTRICTIONS OF THE
OAK CREEK BUSINESS PARK

     THIS DECLARATION is made on May 15, 1979 by THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation (hereinafter called “Declarant”), as owner of that certain real property (the “Subject Property”) situated in the City of Milpitas, County of Santa Clara, State of California described in Exhibit “A” hereto which exhibit is by this reference incorporated herein as if fully set forth herein.

ARTICLE 1

DEFINITIONS

     1.1 Unless the context otherwise specifies or requires, the terms defined in this Article shall, for all purposes of this Declaration, have the meanings herein specified.

     1.2 Architect: The term “Architect” shall mean a person holding a certificate to practice architecture in the State of California under authority of the Business and Professions Code of the State of California.

     1.3 Declaration: The term “Declaration” shall mean this Declaration of Covenants, Conditions and Restrictions.

     1.4 Deed of Trust: The term “Deed of Trust” or “Trust Deed” shall mean a mortgage as well as a deed of trust.

E 545 PAGE 190

     1.5 Approving Agent: The term “Approving Agent” shall mean, in the following order or precedence:

          A. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, whose present address is 155 Moffett Park Drive, Building A, Suite 101, Sunnyvale, California 94086 (hereinafter referred to as “Prudential”), shall be the Approving Agent until Prudential shall have resigned as Approving Agent by executing a written resignation and causing an original of same to be recorded, and by giving written notice of such resignation to each Owner of record, as shown on the most recent county assessor’s roll, of real property then subject to this Declaration.

          B. Any association (whether or not incorporated) organized by the Owners of sixty-six and two-thirds percent (66-2/3%) of the land area (exclusive of portions dedicated to a public agency or authority for a public use) then subject to this Declaration for the purpose of acting as and assuming the functions of an Approving Agent, in which membership is available to all Owners and decisions are made on the basis of majority vote with one vote assigned for each square foot of land owned by each Owner, but only if the Owners organizing such association within not less than six (6) months from the date that Prudential shall have ceased to be the Approving Agent, shall have (i) organized such association and (ii) executed and recorded a statement

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E 545 PAGE 191

in the form of an amendment to this Declaration as described in Paragraph 8.2 setting forth that such organization has been formed for the purpose of acting as Approving Agent pursuant to this Declaration and (iii) shall have, given written notice to all Owners of record of real property then subject to this Declaration that such association has been formed.

     1.6 Structures: The term “structure(s)” shall include all structures, buildings, outbuildings, sheds, fences and screening walls over three (3) feet in height, barriers, or retaining walls.

     1.7 Mortgagee: The term “Mortgagee” shall mean a beneficiary under or a holder of a Deed of Trust as well as a mortgagee under a mortgage.

     1.8 The Oak Creek Business Park: The term “The Oak Creek Business Park” shall mean all of the real property described in Exhibit “A” hereto.

     1.9 Restrictions: The term “Restrictions” shall mean the Covenants, Conditions and Restrictions set forth in this Declaration, as it may from time to time be amended or supplemented.

     1.10 Owner: The term “Owner” shall mean and refer to any person owning a fee estate in the land, or any portion thereof, contained within the Oak Creek Business Park, but excluding either (a) any person who holds such interest as

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E 545 PAGE 192

security for the payment of an obligation or (b) any person holding a leasehold estate.

     1.11 Record, Recorded: The terms “record” or “recorded” shall mean, with respect to any document, the recordation of said document in the office of the County Recorder of the County of Santa Clara, State of California.

     1.12 Sign: The term “sign” shall mean any structure, device or contrivance, electric or non-electric, and all parts thereof which are erected or used for advertising purposes upon or within which any poster, bill, bulletin, printing, lettering, painting, device or other advertising of any kind whatsoever is used, placed, posted or otherwise fastened or affixed to ground or structures.

     1.13 Streets: The term “street(s)” shall mean any publicly dedicated street, highway, or other publicly dedicated thoroughfare within or adjacent to the Oak Creek Business Park and shown on any recorded subdivision or parcel map, or record of survey, whether designated thereon as a publicly dedicated street, boulevard, place, drive, road, terrace, way, lane, circle or court.

     1.14 Visible from Neighboring Property: The term “visible from neighboring property” shall mean, with respect to any given object, that such object is or would be visible to a person six (6) feet tall having 20/20 vision and standing on any part of such neighboring property at an elevation

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no greater than the elevation of the base of the object being viewed.

     1.15 Person: The term “person” shall mean an individual, group of individuals, corporation, partnership, trust, unincorporated business association or such other legal entity as the context in which such term is used may imply.

     1.16 Lot: The term “lot” shall mean any parcel of land contained within the Oak Creek Business Park as divided or subdivided on subdivision or parcel map(s) recorded in the official records of the Recorder of Santa Clara County, California, as they from time to time become current.

     1.17 Front: The term “front” shall mean, with respect to any structure, any wall facing a street.

ARTICLE 2

PROPERTY SUBJECT TO THE

PARK RESTRICTIONS

     2.1 General Declaration Creating the Mutual Restrictions: Declarant hereby declares that all of the real property located in the County of Santa Clara, State of California as described in Exhibit “A”, which exhibit is attached hereto and incorporated herein by this reference, (sometimes hereinafter called the “Oak Creek Business Park”) is and shall be, conveyed, hypothecated, encumbered, leased, occupied, built upon or otherwise used, improved or trans-

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ferred, in whole or in part, subject to the Restrictions and that all of said Restrictions, and all the covenants, conditions and agreements herein contained, are declared and agreed to be in furtherance of a general plan for the subdivision, improvement and sale of said real property and are established for the purpose of enhancing and perfecting the value, desirability, and attractiveness of said real property and every part thereof. Declarant further declares that (a) that the Restrictions and each of the covenants, conditions and agreements herein contained are made for the direct, mutual and reciprocal benefit of each and every lot contained within the Oak Creek Business Park and that such Restrictions are and shall be mutual equitable servitudes burdening each lot for the benefit of all other lots within the Oak Creek Business Park and (b) the Restrictions and each of the covenants, conditions and agreements herein contained shall be “covenants running with the land” burdening each lot within the Oak Creek Business Park for the benefit of all other lots within the Oak Creek Business Park, the burdens of which shall be binding upon each Owner, lessee, licensee, occupant or user of each lot within the Oak Creek Business Park, his successors and assigns, for the benefit of each Owner of all other lots within the Oak Creek Business Park, his successors and assigns.

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ARTICLE 3

APPROVAL OF PLANS FOR STRUCTURES

     3.1 Approval Required: So long as there is a then serving Approving Agent, no structure shall be erected, placed, constructed, substantially remodeled, rebuilt or reconstructed on any land subject to this Declaration until the following procedures have been fully complied with and the Approving Agent has approved in writing the Preliminary Plans (as defined below) and the Final Plans (as defined below):

          A. The owner, or lessee, licensee, or other occupant of the lot to be improved or his authorized agent (the “Applicant”) shall deliver to the Approving Agent preliminary plans and specifications (the “Preliminary Plans”) in such form and containing such information as may be required by the Approving Agent for the following:

               (1) A site development plan showing the location of all proposed driveways, parking areas, walkways, landscaped areas, storage and refuse areas, and building area;

               (2) A landscaping plan for the particular lot;

               (3) A sign and lighting plan;

               (4) A building elevation plan showing dimensions, materials and exterior color schemes;

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               (5) A grading plan.

Such Preliminary Plans shall be submitted in writing in duplicate over the authorized signature of the Applicant.

          B. At such time as the Approving Agent shall have approved in writing the Preliminary Plans and prior to the submission of said Final Plans to the City of Milpitas, the Applicant shall submit to the Approving Agent complete and detailed final plans, specifications and working drawing (the “Final Plans”) with regard to the proposed improvements, which Final Plans will be in such form as may then be required by the City of Milpitas for review by said City and shall contain such additional information as may be required by the Approving Agent; provided, such Final Plans need not include detailing with regard to interior improvements such as interior partitioning walls.

          C. No such prior approval of any Preliminary Plans or Final Plans shall be required if there is no then serving Approving Agent to so approve such plans. Changes in approved Preliminary Plans or approved Final Plans which materially affect landscaping, signing, building size, placement or external appearance must be similarly submitted to and approved by the Approving Agent.

     3.2 Additional Approval Required: So long as there is a then serving Approving Agent, no exterior surface of any structure or improvement existing on any lot subject to this

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Declaration shall be painted, texturized or otherwise changed, no alterations, additions or changes of any type whatsoever shall be made to any landscaping placed on any lot subject to this Declaration, and no additions or alterations to any paved area on any lot subject to this Declaration shall be made until plans for such painting, alterations, additions or changes, including samples of colors, materials, landscaping plans, and/or plans and specifications with regard to paving, as the case may require, together with such other information as shall be required by the Approving Agent, shall have been submitted to the Approving Agent and the Approving Agent shall have approved in writing such requested change.

     3.3 Basis for Approval: The Approving Agent shall have the right to disapprove any plans and specifications submitted hereunder for any reason (provided that such approval shall not be unreasonably withheld), including but not limited to any of the following:

               A. Failure to comply with any of the Restrictions;

               B. Failure to include information in such plans and specifications as may have been reasonably requested by the Approving Agent;

               C. Objection to the exterior design of the proposed structures or the appearance of materials to be

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used in the construction of any proposed structure which are found by the Approving Agent to be incompatible with existing structures in the Oak Creek Business Park;

          D. Objections based upon the inadequacy of the number of onsite parking spaces considering (1) the contemplated use or future possible use of the structures proposed and (2) the availability of additional parking offsite.

          E. Objection to the location of any proposed structure upon any lot as it relates to other lots within the Oak Creek Business Park;

          F. Objection to the grading plan for any lot;

          G. Objection to the color scheme, finish, proportions, style or architecture, height, bulk or appropriateness of any structure as they relate to other structures within the Oak Creek Business Park;

          H. Objection to the landscaping materials as they relate to other landscaping materials then used or contemplated for use within the Oak Creek Business Park;

          I. Any other matter which, in the judgment of the Approving Agent, would render the proposed structure or structures or use inharmonious with the general plan for improvement of the Oak Creek Business Park or with structures or landscaping then located upon or proposed to be located upon other lots or other properties within the Oak Creek Business Park.

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     3.4 Approval: Upon approval by the Approving Agent of any plans and specifications submitted hereunder, a copy of such plans and specifications as approved shall be deposited for permanent record with the Approving Agent, and a copy of such plans and specifications bearing such approval, in writing, shall be returned to the applicant submitting the same.

     3.5 Result of Inaction: If the Approving Agent fails either to approve or disapprove either the Preliminary Plans or the Final Plans within thirty (30) days after such Preliminary Plans or Final Plans, as the case may be, have been submitted to it, it shall be conclusively presumed that the Approving Agent has approved said Preliminary or Final Plans; provided, however, that if within said thirty (30) day period, the Approving Agent gives written notice of the fact that more time is required for the review of such plans, there shall be no presumption that the same are approved until the expiration of a reasonable period of time as set forth in said notice not to exceed thirty (30) days. Such presumption shall not apply if the review fee required by Paragraph 3.9 was not paid at the time the plans were first submitted to the Approving Agent.

     3.6 Proceeding with Work: Upon receipt of approval from the Approving Agent pursuant to this Article, the Owner or lessee to whom the same is given shall as soon as practi-

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cable satisfy all conditions thereof and diligently proceed with the commencement and completion of all approved construction, refinishing, alterations and excavations. In all cases work shall be commenced within one (1) year from the date of such approval. If Applicant fails to commence construction of the structures within one (1) year from date of such approval, then the approval given pursuant to this Article shall be deemed revoked unless the Approving Agent upon request made prior to the expiration of said one (1) year period extends in writing the time for commencing work. In all cases work shall be completed in accordance with the Preliminary Plans and the Final Plans within two years from date of issuance of the first (or only) building permit with regard to such work.

     3.7 Limitation on Approving Agent: In no event shall the Approving Agent disapprove any plans and specifications solely by reason of the Applicant’s proposed use of the lot if such use is specifically permitted pursuant to Section 5.1.

     3.8 Liability: Neither the Declarant nor the Approving Agent shall be liable for any damage, loss or prejudice suffered or claimed on account of:

          A. The approval or disapproval of any plans, drawings and specifications, whether or not defective;

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          B. The construction or performance of any work, whether or not done pursuant to approved plans, drawings and specifications; or

          C. The development of any property within Oak Creek Business Park.

     3.9 Review Fee: An architectural review fee shall be paid to the Approving Agent as follows:

          A. At such time as Preliminary Plans pertaining to erection, placement, construction, remodeling or reconstruction of structures within the Oak Creek Business Park are submitted for approval based on the following schedule:

               (1) When the plans submitted are prepared by an architect, the architectural review fee shall be Fifty Dollars ($50);

               (2) In all other cases the architectural review fee shall be One Hundred Dollars ($100).

          B. At such time as documents required to be submitted pursuant to paragraph 3.2 above are submitted for approval, the architectural review fee shall be the sum of Fifty Dollars ($50).

     3.10 Certificate of Compliance: So long as there is an Approving Agent, such Approving Agent shall within twenty one (21) days following written request therefor by an Owner, execute and deliver to such requesting Owner a “Certificate of Compliance” stating that the lot specified

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by such Owner in said request for Certificate of Compliance is in compliance with Article 3 of these Restrictions, or, if such lot shall not be in compliance with Article 3 of these Restrictions, stating the nature of such non-compliance and the specific paragraph of this Article 3 with which said lot does not comply.

ARTICLE 4

LIMITATIONS ON IMPROVEMENTS

     4.1 Utility Lines: All onsite utility transmission lines shall be placed underground.

     4.2 Coverage: No more than forty five percent (45%) of the square foot area of any M-l zoned lots shall be occupied by structures. No more than thirty five percent (35%) of the square foot area of any MPD or HS zoned lots shall be occupied by structures.

     4.3 Minimum Setback Lines: No structures, and no part thereof, shall be placed closer than fifty feet (50¢) from a property line fronting any street (“frontage setback area”); provided, however, no structure shall be placed closer than 20 feet (20¢) from any property line not fronting on any street (“interior setback area”).

     4.4 Parking Areas: Each parcel shall have facilities for parking sufficient to serve the business conducted thereon without using adjacent streets therefor, and no use shall be made of the structures in any parcel which would

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require parking in excess of the parking spaces on said parcel. No parking spaces shall be located within, and no parking shall be permitted within, a frontage setback area adjacent to any street, except that parking shall be permitted within said setback area if such parking is screened from view from the street by landscaping consisting of shrubbery or berms extending at least forty eight inches (48²) above the high point of the finished adjacent pavement in said parking area. In no case shall such parking area be closer than twenty five feet (25¢) from a property line fronting on any street or closer than five feet (5¢) from any property line not fronting on any street.

     4.5 On Street Parking. No parking shall be allowed in any public street paved areas or rights of way located in the Oak Creek Business Park. Said restriction shall be enforced by municipal ordinances of the City of Milpitas.

     4.6 Storage and Loading Areas: No loading dock, truck loading, storage area or other such facility shall be located in the front of any building or structure or within any frontage setback area or between a front of any building or structure and the street which said front faces. All exterior storage areas shall be screened by chain link fence with redwood slats, a minimum of six feet (6¢) in height.

     4.7 Metal Buildings: No buildings or structures constructed with corragated metal exterior walls or so-called

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“Butler type” buildings shall be constructed within the Oak Creek Business Park.

     4.8 Exterior Screening. All electrical and mechanical apparatus, equipment, fixtures (other than lighting fixtures but including main electrical transformers), whether roof mounted, exterior wall mounted or pad mounted at grade, including but not limited to, conduit, ducts, vents, flues and pipes located on the exterior of any structure shall be concealed from view and shall be treated in a manner acceptable to the Architectural Control Committee.

ARTICLE 5

RESTRICTIONS ON OPERATION AND USE

     5.1 Permitted Uses: Subject to compliance with these Restrictions, the following uses shall be permitted in the Oak Creek Business Park.

          A. Manufacture (including storage of raw materials and finished products therefrom) of the following:

               (1) Pharmaceutical and cosmetic products;

               (2) Optical, electronic, timing and measuring instruments for use in research, development, business and professional facilities; and

               (3) Industrial, communication, transportation and utility equipment;

          B. Wholesaling, warehousing and distribution establishments and public utility facilities (excluding

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storing and warehousing of acids, chemicals, cement, plaster, petroleum products or explosive materials);

          C. Research, experimental and engineering laboratories;

          D. Catalog sales and mail order establishments;

          E. Establishments for the repair, cleaning and servicing of commercial or industrial equipment or products;

          F. Construction firms, but only construction firms whose activities are carried on entirely within an enclosed building and which have no construction yard on said lot;

          G. So long as there is an Approving Agent, any commercial use not specifically prohibited by Paragraph 5.3 which is first approved in writing by the Approving Agent;

          H. So long as there is an Approving Agent, any industrial or manufacturing use not specifically prohibited by Paragraph 5.3 which is first approved in writing by the Approving Agent;

          I. If there is no Approving Agent, any industrial manufacturing or commercial use permitted by the then existing zoning or other applicable land use regulations as promulgated by requisite governmental authorities, except those uses specifically prohibited by Paragraph 5.3.

     5.2 Conduct of Permitted Uses: All permitted uses shall be performed or carried out entirely within a building

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that is so designed and constructed. Certain activities which cannot be carried on within a building may be permitted, but only (a) so long as there is then serving an Approving Agent, if the Approving Agent specifically consents to use and the location for such activity, in writing, or (b) if there is no then serving Approving Agent, if allowed under then existing zoning or other applicable land use regulations except for uses which are specifically prohibited pursuant to Paragraph 5.3; provided, however, that in either of the foregoing situations such use shall be permitted only if (i) such activity is screened so as not to be visible from neighboring property and streets and (ii) all lighting required for such use is shielded from adjacent streets.

     5.3 Prohibited Uses: The following operations and uses shall not be permitted on any property subject to these Restrictions:

          A. Residential of any type;

          B. Trailer courts, mobile home parks or recreation vehicle camp grounds;

          C. Junk yards or recycling facilities;

          D. Drilling for and/or the removal of oil, gas or other hydrocarbon substances (except that this provision shall not be deemed to prohibit the entry of the property below a depth of five hundred (500) feet for such purposes);

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          E. Commercial excavation except in the course of approved construction;

          F. Distillation of bones;

          G. Dumping, disposal, incineration or reduction of garbage, sewage, offal, dead animals or refuse;

          H. Fat rendering;

          I. Stockyard or slaughter of animals;

          J. Cemeteries;

          K. Refining of petroleum or of its products;

          L. Smelting of iron, tin, zinc, or other ores;

          M. Jail or honor farms;

          N. Labor or migrant worker camps;

          O. Truck, bus terminals;

          P. Petroleum storage yards.

          Q. Auto wrecking, auto repair or auto painting establishment.

     5.4 Emissions: No use shall be permitted to exist or operate any lot which:

          A. Emits dust, sweepings, dirt, cinders, fumes, odors, radiation, gases, vapors or discharges liquid or solid wastes or other harmful matter into the atmosphere or any stream, river or other body of water which may adversely affect (i) the health or safety of persons within the area or (ii) the use of property within the Oak Creek Business Park or (iii) vegetation within the Oak Creek Business Park,

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nor shall waste or any substance or materials of any kind be discharged into any public sewer serving the Oak Creek Business Park or any part thereof, in violation of any regulations of any public body having jurisdiction.

          B. Produces intense glare or heat unless such use is performed only within an enclosed or screened area and then only in such manner that the glare or heat emitted will not be discernible from any exterior lot line.

          C. Creates a sound pressure level in violation of any regulation of any public body having jurisdiction.

          D. Allows the visible emissions of smoke (outside any building) other than the exhausts emitted by motor vehicles or other transportation facilities in violation of any regulation of any public body having jurisdiction. This requirement shall also be applicable to the disposal of trash and waste materials.

          E. Creates a ground vibration that is perceptible, without instruments, at any point along any of the exterior lot lines.

     5.5 Signs: The Approving Agent may, from time to time, enact sign criteria setting forth such requirements for signs to be erected within the Oak Creek Business Park as the Approving Agent may deem desirable, which sign criteria shall become effective upon recordation thereof in the official records of Santa Clara County. All signs erected

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by any owner on a lot within the Oak Creek Business Park subsequent to the recoration of said sign criteria shall be in conformance with the criteria set forth therein. Except as specifically otherwise allowed in any then existing sign criteria, no sign shall be installed or erected or placed on any lot other than those signs identifying the name, business and products of the person or firm occupying the lot and those offering the lots for sale or lease. Until such time as sign criteria is enacted, all signs shall be approved by the Approving Agent prior to the installation of said signs.

     5.6 Landscaping Criteria: The Approving Agent may, from time to time, enact landscaping criteria setting forth such requirements for landscaping to be placed on or in lots located within the Oak Creek Business Park as the Approving Agent may deem desirable including, without limitation, amount of area to be plated in sod lawns or other plantings, type of plantings, placement of irrigation systems, requirements for trees and raised planter boxes, which landscape criteria shall become effective upon recordation thereof in the official records of Santa Clara County. All landscaping placed by any owner on a lot within the Oak Creek Business Park subsequent to the recordation of said landscape criteria shall be in conformance with the criteria set forth therein.

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     5.7 Storage and Refuse Collection Areas:

          A. No materials, supplies or equipment, including company owned or operated trucks or motor vehicles, shall be stored in any area on a lot except inside a closed building, or behind a visual barrier screening such areas so that they are not visible from the neighboring properties or streets. No storage areas shall be maintained between a street and the front of the structure nearest such street.

          B. All outdoor refuse collection areas shall be visually screened so as not to be visible from streets and neighboring property. No refuse collection areas shall be maintained between a street and the front of the structure nearest such street.

     5.8 Condition of Property: The Owner of each lot shall at all times keep and properly maintain the premises, structures, improvements, landscaping, paving and appurtenances situate thereon in a safe, clean, sightly and wholesome condition and in a good state of repair and shall comply in all respects with all governmental, health, fire and police requirements and regulations, and shall cause to be regularly removed at its own expense any rubbish of any character whatsoever which may accumulate on such lot, and in particular and without limitation:

          A. All areas of each lot not used for structures, walkways, paved driveways, parking or storage areas shall be

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at all times maintained by a professional landscape engineer or gardner in a fully and well kept landscaped condition utilizing ground cover and/or shrub and tree materials. Undeveloped areas proposed for future expansion shall be maintained in a weed-free condition. An automatic underground landscape irrigation system shall be provided by the owner of each lot which is sufficient to properly irrigate all landscaped areas within such lot.

          B. Parking areas shall be paved so as to provide all-weather surfaces. Each parking space shall be designated by lines painted on the paved surfaces and shall be adequate in area and all parking areas shall provide, in addition to parking spaces, adequate driveways and space for the movement of vehicles.

     5.9 Excavation: No excavation shall be made on and no sand, gravel, soil, or other material shall be removed from, any lot, except in connection with the construction of structures. Upon completion of such construction, exposed openings shall be backfilled to grade, and disturbed ground shall be graded level and paved or landscaped in conformity with the requirements of this Declaration.

ARTICLE 6

APPROVALS OR VARIANCES IF NO

APPROVING AGENT EXISTS

     6.1 Variance by Approving Agent: So long as there shall be Approving Agent then serving, it shall have the

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exclusive right to grant variances from requirements set forth in Article 4 or waive entirely the restrictions set forth in said Article 4 with respect to any given lot, as the Approving Agent, in its sole discretion, shall determine is for the successful development of the Oak Creek Business Park.

     6.2 Granting of Variance: Any variance granted hereunder shall be effective upon, and only upon, the recordation of a Notice of Variance executed by the Approving Agent.

ARTICLE 7

ENFORCEMENT

     7.1 Remedy: So long as there is an Approving Agent, it shall have the exclusive right to enforce the provisions hereof, but without liability for failure so to do. In the event that the Approving Agent shall fail to take action respecting the breach or violation of any of the provisions of this Declaration within thirty (30) days from the written demand by any Owner within the Oak Creek Business Park to take such action or if such breach or violation of this Declaration shall occur at such time as there is no Approving Agent, then any Owner of a lot within the Oak Creek Business Park shall have the right to enforce the provisions contained in this Declaration.

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     7.2 Right to Enter: So long as Prudential shall be serving as the Approving Agent, Prudential, and only Prudential, in addition to any other remedy available, may, with respect to a violation or breach of the covenants to maintain as set forth in Paragraph 5.8, and only with respect to a breach or violation of the covenants to maintain as contained in paragraph 5.8, enter upon the lot on which such violation or breach shall then be occurring and take whatever action it may deem necessary to effect compliance with the provisions of said Paragraph 5.8, including without limitation making of such repairs or the performance of such required maintenance necessary to conform to the requirements imposed by these Restrictions at the expense of the Owner of said lot, provided that Prudential shall have first given to the Owner of such lot at least sixty (60) days prior written notice of its intention to do so and then, only if, said Owner of such lot shall have failed to correct said violation or breach within said sixty (60) day period if such, violation or breach was curable within sixty (60) days, or if not curable within sixty (60) days then only if such Owner shall have failed to commence and then be diligently seeking to so cure such violation or breach. In the event that Prudential shall, after having complied with the above notice requirements, enter such lot and remedy such breach or violation, the Owner of such lot shall be response-

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ible to reimburse Prudential forthwith upon demand for all costs and expenses incurred in connection therewith (“Non-Compliance Expenses”) in accordance with the provisions of this Section. Each Owner of any lot within the Oak Creek Business Park by acceptance of a deed or other conveyance whether or not it shall be so expressed in any such deed or other conveyance, is and shall be deemed to covenant and agree to pay to Prudential an assessment for any Non-Compliance Expenses incurred by Prudential in connection with such Owner’s lot.

          A. Prudential shall maintain accurate books and records reflecting any Non-Compliance Expenses, and shall provide each Owner of an affected lot a statement with respect thereto. Each affected Owner shall pay Non-Compliance Expenses incurred applicable to such Owner’s lot within ten (10) days of receipt of a statement. If such statement is deposited in the United States mail duly certified or registered with postage prepaid and addressed to the Owner affected thereby at his lot, the same shall be deemed received by such Owner on the fifth (5th) business day after such deposit.

          B. Any Non-Compliance Expenses assessments, together with such interest thereon and costs of collection thereof as provided hereinbelow, shall be a charge on the lot and shall be a continuing lien upon the lot against

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which such assessments are made. The lien shall become effective upon recordation of a notice of claim of lien as provided herein. Such assessment, together with such interest and costs, shall also be the personal obligation of the person who is the Owner of such lot at the time when the assessment, or any portion thereof, fell due but in no event shall the person who is the Owner of such lot be personally obligated for a sum in excess of Ten Thousand Dollars ($10,000) for any given violation (but without limiting the amount that may become a lien upon such lot for any given violation or the aggregate of the personal obligation for successive violations). Any personal obligation created hereunder shall not pass to such Owners successors in title unless it is expressly assumed by them but any lien created hereunder shall remain a charge against the lot except as to “bona fide purchasers or encumbrancers for value”, without notice of same. No Owner may waive or otherwise escape personal liability for the personal assessment provided herein by non-use or abandonment of his lot.

          C. If any Non-Compliance Expenses assessment or any portion thereof is not paid within ten (10) days after the date due it shall bear interest from the date of delinquency at the then legal rate, and, in addition to all other legal and equitable rights or remedies, Prudential may, at its option, bring an action at law against the Owner

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who is personally obligated to pay the same, or upon compliance with the notice provisions set forth hereinbelow, to foreclose the lien against the affected lot, and there shall be added to the amount of such assessment or any portion thereof, the interest thereon, all costs and expenses, including reasonable attorneys fees, incurred by Prudential and in collecting the delinquent assessment. In lieu of judicially foreclosing the lien, Prudential, at its option, may foreclose such lien by proceeding under a power of sale as provided hereinbelow, such a power of sale being given to Prudential, as to each and every lot for the purpose of collecting assessments.

          D. No action shall be brought to foreclose the lien, or to proceed under the power of sale, less than thirty (30) days after the date that a notice of claim of lien, executed by Prudential, is recorded, stating the amount claimed (which may include interest and cost of collection, including reasonable attorneys’ fees), a good and sufficient legal description of the lot being assessed, the name of the record Owner or reputed Owner thereof, and the name and address of Prudential as claimant. A copy of said notice of claim shall be deposited in the United States mail, certified or registered, with postage prepaid, to the Owner of said lot.

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          E. Any such sale provided for above shall be conducted in accordance with Sections 2924, 2924(b), and 2924(c) of the Civil Code of the State of California, applicable to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner permitted or provided by law. Prudential shall have the power to bid on the lot at the foreclosure sale, and to acquire and hold, mortgage and convey the same.

          F. Upon the timely curing of any default for which a notice of claim of lien was recorded by Prudential, Prudential is hereby authorized to file or record, as the case may be, an appropriate release of such notice, upon payment by the defaulting Owner of a fee to be determined by Prudential but not to exceed Five Hundred Dollars ($500), to cover the costs of preparing and filing or recording such release together with the payment of such other costs, interest or fees as shall have been incurred.

          G. The assessment lien and the rights to foreclosure and sale thereunder shall be in addition to and not in substitution for all other rights and remedies which Prudential may have hereunder, at law or in equity.

     7.3 Result of Violation: The result of every action or omission whereby the provisions of this Declaration are violated in whole or in part is hereby declared to be and to constitute a nuisance, and every remedy allowed by law or

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equity shall be available to any Owner of any lot within the Oak Creek Business Park.

     7.4 Attorney’s Fees: In any legal or equitable proceeding for the enforcement of the provisions of this Declaration, whether it be an action for damages, declaratory relief or injunctive relief, the losing party or parties shall pay the attorneys’ fees of the prevailing party or parties, in such reasonable amount as may be fixed by the court in such proceedings, or in a separate action brought for that purpose. The prevailing party shall be entitled to said, attorneys’ fees, even though said proceeding is settled prior to judgment.

     7.5 Remedies Cumulative: All remedies provided herein, or at law or in equity shall be cumulative and not exclusive.

     7.6 Waiver: Failure by the Approving Agent to enforce the provisions of this Declaration shall in no event be deemed a waiver of the right to do so thereafter, nor of the right to enforce any other covenants or restrictions herein, nor of the rights of other Owners of the property within the Oak Creek Business Park to enforce same.

     7.7 Prudential: For purposes of this Article 7 the term “Prudential” shall include Prudential’s authorized employees.

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ARTICLE 8

DURATION, MODIFICATION AND REPEAL

     8.1 Duration of Restrictions: These Restrictions shall continue and remain in full force and effect at all times with respect to all property, and each part thereof, now or hereafter made subject to these Restrictions (subject, however, to the right to amend and repeal as provided for herein) until 2039.

     8.2 Termination and Modifications: This Declaration or any provision thereof, or any covenant, condition or restriction contained herein, may be terminated, extended, modified or amended, as to the whole of the Oak Creek Business Park upon the written consent of the Owners of sixty-six and two-thirds percent (66-2/3%) of the total square footage of the land area contained within the Oak Creek Business Park (exclusive of dedicated public streets); provided, however, that so long as Prudential is the Approving Agent, no such termination, extension or modification or amendment shall be effective without the written approval of Prudential. No such termination, extension, modification or amendment shall be effective until a proper instrument in writing describing such termination, extension, modification or amendment has been executed by the requisite number of Owners and by Prudential and recorded.

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ARTICLE 9

MISCELLANEOUS PROVISIONS

     9.1 Constructive Notice and Acceptance: Every person who now or hereafter owns, occupies or acquires any right, title or interest in or to any portion of the property made subject to these Restrictions is and shall be conclusively deemed to have consented and agreed to every covenant, condition and restriction contained herein, whether or not any reference to this Declaration is contained in the instrument by which such person acquired an interest in said property.

     9.2 Waiver of Liability: Neither the Declarant nor the Approving Agent shall be liable to any Owner, lessee, licensee, or occupant of land subject to this Declaration by reason of any mistake in judgment, negligence, nonfeasance, action or inaction or for the enforcement or failure to enforce any provision of this Declaration. Every Owner, lessee, licensee or occupant of any of said property by acquiring his interest therein agrees that he will not bring any action or suit against Prudential or any other Approving Agent to recover any such damages from or to seek equitable relief against the Declarant by reason of same.

     9.3 Rights of Mortgagee: No breach of the Restrictions and other provisions contained herein, or any enforcement thereof, shall defeat or render invalid the lien

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of any mortgage or deed of trust now or hereafter executed upon land subject to these Restrictions; provided, however, that if any portion of said property is sold under a foreclosure of any mortgage or under the provisions of any deed of trust, any purchaser at such sale and his successors and assigns shall hold any and all property so purchased subject to all of the Restrictions and other provisions of this Declaration. Any notice of claim of lien recorded pursuant to paragraph 7.2 hereof shall take its priority vis-a-vis other encumbrances as of the date of its recordation.

     9.4 Paragraph Headings: Paragraph headings, where used herein, are inserted for convenience only and are not intended to be a part of this Declaration or in any way to define, limit or describe the scope and intent of the particular paragraphs to which they refer.

     9.5 Effect of Invalidation: If any provision of this Declaration is held to be invalid by any Court, the invalidity of such provision shall not effect the validity of the remaining provisions hereof.

     IN WITNESS WHEREOF, the undersigned have executed this Declaration the day and year first above written.

	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
	By	/s/ A.K. Jacobson
		A.K. Jacobson
Dated: 6/1/79		Title Regional Vice-President, REO

-33-

EX-10.33

Exhibit 10.33

LEASE
BY AND BETWEEN

TRINET MILPITAS ASSOCIATES, LLC,
a Delaware limited liability company

as Landlord

and

LSI LOGIC CORPORATION,
a Delaware corporation

as Tenant

February 20,  2004

1855 Barber Lane
MILPITAS, CALIFORNIA

TABLE OF CONTENTS

			Page
ARTICLE 1 REFERENCE				1
	1.1	References		1
ARTICLE 2 LEASED PREMISES TERM AND POSSESSION				3
	2.1	Demise Of Leased Premises		3
	2.2	Intentionally Deleted		3
	2.3	Lease Commencement Date; Lease Term		3
	2.4	Delivery Of Possession and Termination of Existing Lease; Tenant’s Right to Terminate		3
	2.5	Acceptance Of Possession		4
	2.6	Surrender Of Possession		4
ARTICLE 3 RENT, LATE CHARGES AND SECURITY DEPOSITS				4
	3.1	Base Monthly Rent		4
	3.2	Additional Rent		5
	3.3	Year-End Adjustments; Audits		5
	3.4	Late Charge, And Interest On Rent In Default		6
	3.5	Payment Of Rent		6
	3.6	Prepaid Rent		6
	3.7	Security Deposit		7
ARTICLE 4 USE OF LEASED PREMISES AND OUTSIDE AREA				7
	4.1	Permitted Use		7
	4.2	General Limitations On Use		7
	4.3	Noise And Emissions		8
	4.4	Trash Disposal		8
	4.5	Parking		8
	4.6	Signs		8
	4.7	Compliance With Laws And Private Restrictions		8
	4.8	Compliance With Insurance Requirements		8
	4.9	Landlord’s Right To Enter		9
	4.10	Use Of Outside Areas		9
	4.11	Environmental Protection		9
	4.12	Rules And Regulations		11
ARTICLE 5 REPAIRS, MAINTENANCE, SERVICES AND UTILITIES				11
	5.1	Repair And Maintenance		11
	5.2	Utilities		12
	5.3	Security		12
	5.4	Energy And Resource Consumption		12
	5.5	Limitation Of Landlord’s Liability		12
ARTICLE 6 ALTERATIONS AND IMPROVEMENTS				12
	6.1	By Tenant		12
	6.2	Ownership Of Improvements		13
	6.3	Alterations Required By Law		13
	6.4	Liens		14

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			Page
			14
ARTICLE 7 ASSIGNMENT AND SUBLETTING BY TENANT			14
	7.1	By Tenant	14
	7.2	Permitted Transfers	15
	7.3	Landlord’s Election	15
	7.4	Conditions To Landlord’s Consent	15
	7.5	Assignment Consideration And Excess Rentals Defined	16
	7.6	Payments	17
	7.7	Good Faith	17
	7.8	Effect Of Landlord’s Consent	17
	7.9	Options Personal	17
	7.10	Tenant’s Remedies	17
ARTICLE 8 LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY			17
	8.1	Limitation On Landlord’s Liability And Release	17
	8.2	Tenant’s Indemnification Of Landlord	18
	8.3	Landlord’s Indemnification of Tenant	18
ARTICLE 9 INSURANCE			18
	9.1	Tenant’s Insurance	18
	9.2	Landlord’s Insurance	19
	9.3	Mutual Waiver Of Subrogation	20
ARTICLE 10 DAMAGE TO LEASED PREMISES			20
	10.1	Landlord’s Duty To Restore	20
	10.2	Insurance Proceeds	20
	10.3	Landlord’s Right To Terminate	20
	10.4	Tenant’s Right To Terminate	21
	10.5	Tenant’s Waiver	21
	10.6	Abatement Of Rent	21
ARTICLE 1 1 CONDEMNATION			21
	11.1	Tenant’s Right To Terminate	21
	11.2	Landlord’s Right To Terminate	21
	11.3	Restoration	22
	11.4	Temporary Taking	22
	11.5	Division Of Condemnation Award	22
	11.6	Abatement Of Rent	22
	11.7	Taking Defined	22
ARTICLE 12 DEFAULT AND REMEDIES			22
	12.1	Events Of Tenant’s Default	22
	12.2	Landlord’s Remedies	23
	12.3	Landlord’s Default And Tenant’s Remedies	24
	12.4	Limitation Of Tenant’s Recourse	25
	12.5	Tenant’s Waiver	25
ARTICLE 13 GENERAL PROVISIONS			25
	13.1	Taxes On Tenant’s Property	25
	13.2	Holding Over	26
	13.3	Subordination To Mortgages	26
	13.4	Tenant’s Attornment Upon Foreclosure	26
	13.5	Mortgagee Protection	27

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			Page
	13.6	Estoppel Certificates	27
	13.7	Financial Statements and Information	27
	13.8	Transfer By Landlord	27
	13.9	Force Majeure	28
	13.10	Notices	28
	13.11	Attorneys’ Fees	28
	13.12	Definitions	29
	13.13	General Waivers	30
	13.14	Miscellaneous	31
ARTICLE 14 CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT			31
	14.1	Corporate Authority	31
	14.2	Brokerage Commissions	31
	14.3	Entire Agreement	31
	14.4	Landlord’s Representations	32
ARTICLE 15 OPTIONS TO EXTEND			32
ARTICLE 16 TELEPHONE SERVICE			34

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LEASE

     This Lease, dated February 20, 2004 (the “Effective Date of this Lease”), is made by and between Trinet Milpitas Associates, LLC, a Delaware limited liability company (“Landlord”), and LSI Logic CORPORATION, a Delaware corporation (“Tenant”).

ARTICLE 1

REFERENCE

1.1 References. All references in this Lease (subject to any further clarifications contained in this Lease) to the following terms shall have the following meaning or refer to the respective address, person, date, time period, amount, percentage, calendar year or fiscal year as below set forth:

Tenant’s Address for Notice:	LSI Logic Corporation
	1621 Barber Lane, M/S D-106
	Milpitas, California 95035-7458
	Attn: General Counsel
	With a required copy to:
	LSI Logic Corporation
	1621 Barber Lane, M/S D-129
	Milpitas, California 95035-7458
	Attn: Corporate Real Estate
Landlord’s Address for Notices:	c/o iStar Financial Inc.
	One Embarcadero Center
	Suite 3300
	San Francisco, CA 94111
Landlord’s Representative:	Erich Stiger, Asset Management
Phone Number:	(415)391-4300
Intended Commencement Date:	February 20, 2004
Intended Term:	Eight (8) Years
Lease Expiration Date:	Eight (8) Years from the Lease Commencement Date, unless
	earlier terminated in accordance with the terms of
	this Lease, or extended by Tenant pursuant to Article 15.
Options to Renew:	Two (2) option(s) to renew, each for a term of thirty (30)
	months.
Tenant’s Security Deposit:	$60,851.62
Late Charge Amount:	Five Percent (5%) of the Delinquent Amount
Tenant’s Required Liability Coverage:	$3,000,000 Combined Single Limit
Tenant’s Broker(s):	George Fox and Greg Bendis of Mien J. Studley, Inc.
Property:	That certain real property situated in the City of Milpitas,
	County of Santa Clara, State of California, together with
	all buildings and improvements thereon, which real
	property is

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	shown on the Site Plan attached hereto as
	Exhibit “A” and is commonly known as or otherwise
	described as follows: 1855 Barber Lane, Milpitas,
	California.
Building:	That certain building located on the Property in which the
	Leased Premises are located, which building is shown
	outlined on Exhibit“A”hereto (the“Building”). The
	Building is commonly known as or otherwise described as
	follows: 1855 Barber Lane, Milpitas, California.
Outside Areas:	The“Outside Areas” shall mean all areas within the Property
	which are located outside the Building, such as
	pedestrian walkways, parking areas, landscaped area, open
	areas and enclosed trash disposal areas.
Leased Premises:	The Property, including the Outside Areas, the Building and
	all the interior space within the Building, including
	stairwells, connecting walkways, and atriums, consisting
	of approximately 81,500 square feet and, for purposes of
	this Lease, agreed to contain said number of square feet.
Base Monthly Rent:	The term“Base Monthly Rent” shall mean the following:

Month	Base Monthly Rent
01-12	$	52,975.00
13-24	$	54,034.50
25-36	$	55,115.19
37-48	$	56,217.49
49-60	$	57,341.84
61-72	$	58,488.68
73-84	$	59,658.45
85-96	$	60,851.62

Use:	Office, research and development (including engineering labs)
Tenant’s Proportionate Share:	100%
Exhibits:	The term“Exhibits” shall mean the Exhibits of this Lease
	which are described as follows:
	Exhibit“A” – Site Plan showing the Leased Premises.
	Exhibit“B” – Floor Plan outlining the portion of the
	Leased Premises located within the Building
	Exhibit“C” – Rules and Regulations
	Exhibit“D” – Form of Subordination, Nondisturbance and
	Attornment Agreement
	Exhibit“E”– Form of Tenant Estoppel

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ARTICLE 2

LEASED PREMISES, TERM AND POSSESSION

2.1 Demise Of Leased Premises. Subject to Paragraph 2.4 and Article 7 below, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord for Tenant’s own use in the conduct of Tenant’s business and not for purposes of speculating in real estate, for the Lease Term and upon the terms and subject to the conditions of this Lease, that certain property described in Article 1 as the Leased Premises. Tenant’s lease of the Leased Premises shall be conditioned upon and be subject to the continuing compliance by Tenant with (i) all the terms and conditions of this Lease, (ii) all Laws governing the use of the Leased Premises, (iii) all Private Restrictions, easements and other matters now of public record respecting the use of the Leased Premises, and (iv) all reasonable rules and regulations from time to time established by Landlord as set forth in Paragraph 4.12 below.

2.2 Intentionally Deleted.

2.3 Lease Commencement Date; Lease Term. Subject to Paragraph 2.4 below, the term of this Lease shall begin, and the Lease Commencement Date shall be deemed to have occurred, on the Intended Commencement Date, as set forth in Article 1 (the “Lease Commencement Date”), and the term of this Lease shall end on the Lease Expiration Date (as set forth in Article 1). The “Lease Term” shall be that period of time commencing on the Lease Commencement Date and ending on the Lease Expiration Date.

2.4 Delivery Of Possession and Termination of Existing Lease; Tenant’s Right to Terminate.

     (a) Landlord shall deliver to Tenant possession of the Leased Premises under this Lease on the Intended Commencement Date. Landlord and Tenant acknowledge that prior to and as of the Effective Date of this Lease, Tenant has been and is in possession of the entire Leased Premises pursuant to that certain Lease dated July 20, 2000 between Landlord and Tenant, as successor-by-merger to C-Cube Microsystems, Inc. (the “Existing Lease”). Notwithstanding the foregoing or anything to the contrary in this Lease, Landlord’s obligation to deliver possession of the Leased Premises to Tenant under this Lease is hereby expressly conditioned on the execution by Landlord and Tenant of a termination agreement (a “Termination Agreement”), reasonably satisfactory to Landlord and Tenant, terminating the Existing Lease. If the condition precedent set forth in the preceding sentence has not been met on or before the Intended Commencement Date, then Landlord shall not be in default under this Lease, nor shall this Lease be void, voidable or cancelable by Landlord or Tenant until the lapse of ninety (90) days after the Intended Commencement Date (the “Delivery Grace Period”), and the Lease Commencement Date shall not be deemed to have occurred until Landlord and Tenant have executed a Termination Agreement, in which event the Lease Commencement Date shall be one (1) day after the effective termination date of the Existing Lease as set forth in the Termination Agreement. If Landlord or Tenant has not executed a Termination Agreement, or if Landlord shall not have delivered possession of the Leased Premises to Tenant as contemplated by this Lease, within the Delivery Grace Period, then either Landlord or Tenant shall have the right to terminate this Lease. Such right to terminate shall be each party’s sole remedy for such delay, and in no event shall either party be liable in damages to the other party for such delay. Notwithstanding the foregoing, both Landlord and Tenant shall use their best efforts to negotiate and execute the Termination Agreement prior to the Intended Commencement Date. In the event that the Lease Commencement Date does not occur on the Intended Commencement Date, the parties shall memorialize the Lease Commencement Date and the Lease Termination Date in a mutually acceptable letter to be signed by each party.

     (b) Tenant or any Successor Entity (as hereinafter defined), but not any other transferee, shall have the right to terminate this Lease effective at the end of the sixtieth (60^th) month of the Lease Term (the “Termination Date”) by providing Landlord with at least two hundred seventy (270) days advance written notice and paying Landlord on or before the Termination Date a termination fee in an amount equal to the sum of (i) that portion of the brokerage commissions paid by Landlord in connection with the execution of this Lease that has not been amortized as of the Lease Termination Date (Landlord shall promptly provide Tenant with such amount together with such supporting documentation as Tenant may reasonably request) and (ii) three times the Base Monthly Rent and Property Operating Expenses then in effect.

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2.5 Acceptance Of Possession. TENANT ACKNOWLEDGES THAT TENANT HAS BEEN IN POSSESSION OF THE LEASED PREMISES PRIOR TO THE EFFECTIVE DATE OF THIS LEASE AND THAT BY CONTINUING TO OCCUPY THE LEASED PREMISES PURSUANT TO THIS LEASE, TENANT SHALL BE DEEMED TO HAVE ACCEPTED THE LEASED PREMISES IN “AS-IS” CONDITION AS OF THE DATE OF THIS LEASE. EXCEPT FOR ANY EXPRESS REPRESENTATIONS AND WARRANTIES OF LANDLORD SET FORTH IN THIS LEASE (THE “EXPRESS REPRESENTATIONS”), LANDLORD DOES NOT, BY THE EXECUTION AND DELIVERY OF THIS LEASE, AND LANDLORD SHALL NOT, BY THE EXECUTION AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION WITH THIS LEASE, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE LEASED PREMISES, AND ALL SUCH REPRESENTATIONS AND WARRANTIES ARE HEREBY DISCLAIMED. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING PROVISION, LANDLORD MAKES, AND SHALL MAKE, NO EXPRESS OR IMPLIED WARRANTY AS TO MATTERS OF ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION (INCLUDING, WITHOUT LIMITATION, LAWS, RULES, REGULATIONS, ORDERS AND REQUIREMENTS PERTAINING TO THE USE, HANDLING, GENERATION, TREATMENT, STORAGE OR DISPOSAL OF ANY TOXIC OR HAZARDOUS WASTE OR TOXIC, HAZARDOUS OR REGULATED SUBSTANCE), VALUATION, GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE LEASED PREMISES (THE “DISCLAIMED MATTERS”). TENANT AGREES THAT, WITH RESPECT TO THE LEASED PREMISES, TENANT HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF LANDLORD OTHER THAN THE EXPRESS REPRESENTATIONS. TENANT WILL CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE LEASED PREMISES (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME.

2.6 Surrender Of Possession. Upon the expiration or upon the sooner termination of this Lease, Tenant shall remove all of Tenant’s signs from the exterior of the Building and shall remove all of Tenant’s inventory, equipment, trade fixtures, furniture, supplies, wall decorations and other personal property (collectively, “Tenant’s FF&E”) from within the Leased Premises, including the Building and the Outside Areas, and shall vacate and surrender the Leased Premises, and all portions thereof, to Landlord broom clean and in good condition, reasonable wear and tear excepted. Tenant shall repair all damage to the Leased Premises, and all portions thereof, caused by Tenant’s removal of Tenant’s property. Tenant shall patch and refinish, to Landlord’s reasonable satisfaction, all penetrations made by Tenant or its employees to the floor, walls or ceiling of the Leased Premises, whether such penetrations were made with Landlord’s approval or not. Tenant shall repair or replace all stained or damaged ceiling tiles, wall coverings and floor coverings to the reasonable satisfaction of Landlord. Tenant shall repair all damage caused by Tenant to the exterior surface of the Building and the paved surfaces of the Outside Areas and, where necessary, replace or resurface same. Additionally, to the extent that Landlord shall have notified Tenant in writing at the time Landlord approved any improvements requiring Landlord approval that it desired to have such improvements removed at the expiration or sooner termination of the Lease (“Required Removables”), Tenant shall, upon the expiration or sooner termination of the Lease, remove the Required Removables and repair all damage caused by such removal. If Tenant fails to comply with the terms of this Paragraph 2.6, Landlord may perform Tenant’s obligations at Tenant’s expense, and Tenant shall be liable to Landlord for all reasonable costs incurred by Landlord in performing such obligations for Tenant (including, without limitation, reasonable costs of Landlord’s oversight of removal, repair and replacement work). Tenant shall pay to Landlord the amount of all costs so incurred within fifteen (15) days of Landlord’s delivery to Tenant of an invoice together with reasonable supporting information. Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in surrendering the Leased Premises, including, without limitation, any claims made by any succeeding tenant or any losses to Landlord with respect to lost opportunities to lease to succeeding tenants.

ARTICLE 3

RENT, LATE CHARGES AND SECURITY DEPOSITS

3.1 Base Monthly Rent. Commencing on the Lease Commencement Date (as determined pursuant to Article 2 above) and continuing throughout the Lease Term, Tenant shall pay to Landlord, without prior demand therefor, in

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advance on or before the first day of each calendar month, the amount set forth as Base Monthly Rent in Article 1 (the “Base Monthly Rent”).

3.2 Additional Rent. Commencing on the Lease Commencement Date (as determined pursuant Article 2 above) and continuing throughout the Lease Term, in addition to the Base Monthly Rent and to the extent not required by Landlord to be contracted for and paid directly by Tenant, Tenant shall pay to Landlord as additional rent (the “Additional Rent”) the following amounts:

     (a) An amount equal to all Property Operating Expenses (as defined in Paragraph 13.12) incurred by Landlord. Payment shall be made by whichever of the following methods (or combination of methods) are from time to time designated by Landlord:

          (i) Landlord may forward invoices or bills for such Property Operating Expenses to Tenant, and Tenant shall, no later than fifteen (15) days following receipt of such invoices or bills from Landlord, pay such invoices or bills and deliver satisfactory evidence of such payment to Landlord, and/or

          (ii) Landlord may bill to Tenant, on a periodic basis not more frequently than monthly, the amount of such Property Operating Expenses (or group of Property Operating Expenses) as paid or incurred by Landlord, and Tenant shall pay to Landlord the amount of such Property Operating Expenses within fifteen (15) days after receipt of a written bill therefor from Landlord, and/or

          (iii) Except for any Property Operating Expenses which Tenant does not pay for directly in accordance with this Lease, Landlord may deliver to Tenant Landlord’s reasonable estimate of any given Property Operating Expenses (such as Landlord’s Insurance Costs or Real Property Taxes), or group of Property Operating Expenses, which it reasonably estimates will be paid or incurred for the ensuing calendar or fiscal year, in an amount as Landlord may reasonably determine, and Tenant shall pay to Landlord an amount equal to the estimated amount of such expenses for such year in equal monthly installments during such year with the installments of Base Monthly Rent.

     Landlord reserves the right to change from one of the three options set forth in this Paragraph 3.2(a) to another, from time to time, the methods of billing Tenant for any given expense or group of expenses or the periodic basis on which such expenses are billed. Landlord shall give Tenant reasonable prior written notice of any such change.

     (b) Landlord’s share of the consideration received by Tenant upon certain assignments and sublettings as required by Article 7.

     (c) Any legal fees and costs that Tenant is obligated to pay or reimburse to Landlord pursuant to Article 13; and

     (d) Any other charges or reimbursements due Landlord from Tenant pursuant to the terms of this Lease.

Tenant shall pay the Real Property Taxes directly to the applicable taxing authority. Tenant shall make such payments and deliver satisfactory evidence of payment to Landlord no later than ten (10) days before such Real Property Taxes become delinquent. Notwithstanding the foregoing, Landlord shall have the right to contest the amount or validity of any Real Property Taxes, in whole or in part, by appropriate administrative and legal proceedings, and to instruct Tenant to postpone payment of any such contested Real Property Taxes pending the prosecution of such proceedings and any appeals.

3.3 Year-End Adjustments; Audits. If Landlord bills Tenant for the Property Operating Expenses (or any group of such expenses) on an estimated basis in accordance with the provisions of Paragraph 3.2(a)(iii) above, Landlord shall furnish to Tenant within three months following the end of the applicable calendar or fiscal year, as the case may be, a statement and reasonably sufficient back-up information setting forth (i) the amount of such expenses paid or incurred during the just ended calendar or fiscal year, as appropriate, and (ii) the amount that Tenant has paid to Landlord for credit against such expenses for such period. If Tenant shall have paid more than its obligation for such expenses for the stated period, Landlord shall, at its election, either (i) credit the amount of such overpayment toward the next ensuing payment or payments of Rent that would otherwise be due or (ii) refund in cash to Tenant

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the amount of such overpayment. If such year-end statement shall show that Tenant did not pay its obligation for such expenses in full, then Tenant shall pay to Landlord the amount of such underpayment within thirty (30) days from Landlord’s billing of same to Tenant. The provisions of this Paragraph shall survive the expiration or sooner termination of this Lease. In the event Tenant objects in writing to any such year-end statement within ninety (90) days after receipt of such statement, then Tenant shall have the right, during the six (6) month period following delivery of such statement, at Tenant’s sole cost (except in the case where Tenant shows Landlord overcharged by at least 5% in which case Landlord shall reimburse for this cost, to the extent reasonably an actually incurred by Tenant), to review in Landlord’s offices Landlord’s records relevant to such statement. Such review shall be subject to Landlord’s reasonable audit procedures and shall be performed only by Tenant’s internal audit team, an independent firm of certified public accountants or another party, in any case which firm or party is (a) reasonably acceptable to Landlord, (b) not compensated on a contingency fee basis or in any other manner which is dependent upon the results of such audit or inspection (and Tenant shall deliver the fee agreement or other similar evidence of such fee arrangement to Landlord upon request) and (c) agrees with Landlord in writing to maintain the results of such audit confidential. If, as of the date ninety (90) days after Tenant’s receipt of such year-end statement, Tenant shall not have objected thereto in writing, or if, during the six (6) month period following delivery of such statement, Tenant shall not have carried out a review of Landlord’s records, then such year-end statement shall be final and binding upon Landlord and Tenant, and Tenant shall have no further right to object to such statement. If Tenant timely delivers a written objection to a year-end statement and, within such six (6) month period, Tenant conducts an audit and delivers to Landlord a written statement specifying objections to such annual statement, then Tenant and Landlord shall meet to attempt to resolve such objection within ten (10) business days after delivery of the objection statement. If such objection is not resolved within such ten (10) business day period, then either party shall have the right, at any time within sixty (60) days after the expiration of such ten (10) business day period, to require that the dispute be submitted to binding arbitration under the rules of the American Arbitration Association. If neither Landlord nor Tenant commences an arbitration proceeding within such sixty (60) day period, then the year-end statement in question shall be final and binding on Landlord and Tenant. Notwithstanding that any such dispute remains unresolved, Tenant shall be obligated to pay Landlord all amounts payable in accordance with this Paragraph 3 (including any disputed amount). The audit and arbitration procedures set forth in this Paragraph 3.3 shall be Tenant’s exclusive remedy with respect to the calculation of the amount of Tenant’s obligations under Paragraph 3.2.

3.4 Late Charge, And Interest On Rent In Default. Tenant acknowledges that the late payment by Tenant of any monthly installment of Base Monthly Rent or any Additional Rent will cause Landlord to incur certain costs and expenses not contemplated under this Lease, the exact amounts of which are extremely difficult or impractical to fix. Such costs and expenses will include without limitation, administration and collection costs and processing and accounting expenses. Therefore, if any installment of Base Monthly Rent or any Additional Rent is not received by Landlord from Tenant within ten (10) calendar days after the same becomes due, Tenant shall immediately pay to Landlord a late charge equal to the Late Charge Amount (as defined in Paragraph 1.1). Landlord and Tenant agree that this late charge represents a reasonable estimate of such costs and expenses and is fair compensation to Landlord for the anticipated loss Landlord would suffer by reason of Tenant’s failure to make timely payment. In no event shall this provision for a late charge be deemed to grant to Tenant a grace period or extension of time within which to pay any rental installment or prevent Landlord from exercising any right or remedy available to Landlord upon Tenant’s failure to pay each rental installment due under this Lease when due, including the right to terminate this Lease. If any rent remains delinquent for a period in excess often (10) calendar days, then, in addition to such late charge, Tenant shall pay to Landlord interest on any rent that is not so paid from the date due until paid at the then maximum rate of interest not prohibited or made usurious by Law.

3.5 Payment Of Rent. Except as specifically provided otherwise in this Lease, Rent shall be paid in lawful money of the United States, without any abatement, reduction or offset for any reason whatsoever, to Landlord at such address as Landlord may designate from time to time. Tenant’s obligation to pay Base Monthly Rent and Additional Rent shall be appropriately prorated at the commencement and expiration of the Lease Term. The failure by Tenant to pay any Additional Rent as required pursuant to this Lease when due shall be treated the same as a failure by Tenant to pay Base Monthly, and Landlord shall have the same rights and remedies against Tenant as Landlord would have had Tenant failed to pay the Base Monthly Rent when due.

3.6 Prepaid Rent. Tenant shall not be required to make any advance payment of rent as a credit against the first payment of Base Monthly Rent due hereunder. Tenant shall be entitled, at its option, to a refund or credit of the

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difference between the Base Monthly Rent specified in this Lease and the amounts paid to Landlord as base monthly rent under the Existing Lease retroactive to February 15, 2004.

3.7 Security Deposit. Upon Tenant’s execution of this Lease, Tenant shall deposit with Landlord the amount set forth in Article 1 as the “Security Deposit” as security for the performance by Tenant of the terms of this Lease to be performed by Tenant, and not as prepayment of rent. Landlord may apply such portion or portions of the Security Deposit as are reasonably necessary for the following purposes: (i) to remedy any Event of Default by Tenant in the payment of Base Monthly Rent or Additional Rent or a late charge or interest on defaulted rent, or any other monetary payment obligation of Tenant under this Lease; (ii) to repair damage to the Leased Premises caused or permitted to occur by Tenant; (iii) to clean and restore and repair the Leased Premises following their surrender to Landlord if not surrendered in the condition required pursuant to the provisions of Article 2, and (iv) to remedy any other Event of Default of Tenant to the extent permitted by Law including, without limitation, paying in full on Tenant’s behalf any sums claimed by materialmen or contractors of Tenant to be owing to them by Tenant for work done or improvements made at Tenant’s request to the Leased Premises. In this regard, Tenant hereby waives any restriction on the uses to which the Security Deposit may be applied as contained in Section 1950.7(c) of the California Civil Code and/or any successor statute. In the event the Security Deposit or any portion thereof is so used, Tenant shall pay to Landlord, promptly upon demand, an amount in cash sufficient to restore the Security Deposit to the full original sum. Landlord shall not be deemed a trustee of the Security Deposit. Landlord may use the Security Deposit in Landlord’s ordinary business and shall not be required to segregate it from Landlord’s general accounts. Tenant shall not be entitled to any interest on the Security Deposit. If Landlord transfers the Leased Premises or any portion thereof during the Lease Term, Landlord may pay the Security Deposit to any subsequent owner in conformity with the provisions of Section 1950.7 of the California Civil Code and/or any successor statute, in which event the transferring landlord shall be released from all liability for the return of the Security Deposit. Tenant specifically grants to Landlord (and Tenant hereby waives the provisions of California Civil Code Section 1950.7 to the contrary) a period of ninety (90) days following a surrender of the Leased Premises by Tenant to Landlord within which to inspect the Leased Premises, make required restorations and repairs, receive and verify workmen’s billings therefor, and prepare a final accounting with respect to the Security Deposit. In no event shall the Security Deposit or any portion thereof, be considered prepaid rent.

ARTICLE 4
USE OF LEASED PREMISES AND OUTSIDE AREA

4.1 Permitted Use. Tenant shall be entitled to use the Leased Premises solely for the “Permitted Use” as set forth in Article 1 and for no other purpose whatsoever. Notwithstanding anything to the contrary contained in this Lease, in no event shall the Leased Premises be used for any pornographic or obscene purposes, any commercial sex establishment, any pornographic, obscene, nude or semi-nude performances, modeling, or sexual conduct. Tenant shall have the right to use the Outside Areas in conjunction with its Permitted Use of the Leased Premises solely for the purposes for which they were designed and intended and for no other purposes whatsoever. In addition, notwithstanding Paragraph 4.2, Tenant shall have the exclusive right to use the roof of the Building for the placement and operation of Tenant’s own equipment, provided that any such equipment shall be subject to Landlord’s prior approval that it will not have a negative impact on the appearance of the Building, will not damage or impact the Building’s roof, roof membrane, structure or systems, will not violate any manufacturer’s warranties covering the roof and complies with all Laws.

4.2 General Limitations On Use. Except as expressly permitted under this Lease, Tenant shall not (i) do or permit anything to be done in or about the Leased Premises which does or could jeopardize the structural integrity of the Building or cause damage to any part of the Leased Premises, (ii) operate any equipment within the Leased Premises which does or could (a) injure, vibrate or shake the Leased Premises or any portion thereof, (b) damage, overload or impair the efficient operation of any electrical, plumbing, heating, ventilating or air conditioning systems within or servicing the Leased Premises, or (c) damage or impair the efficient operation of the sprinkler system (if any) within or servicing the Leased Premises. Except as expressly permitted under this Lease or as existing as of the Lease Commencement Date, Tenant shall not, without Landlord’s consent, which shall not be unreasonably withheld, conditioned or delayed, (1) install any equipment or antennas on or make any penetrations of the exterior walls or roof of the Building, (2) affix any equipment to or make any penetrations or cuts in the floor, ceiling, walls or roof

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of the Leased Premises, (3) place any loads upon the floors, walls, ceiling or roof systems which could endanger the structural integrity of the Building or damage its floors, foundations or supporting structural components, (4) place any explosive, flammable or harmful fluids or other waste materials in the drainage systems of the Leased Premises, (5) drain or discharge any fluids in the landscaped areas or across the paved areas of the Property, (6) use any of the Outside Areas for the storage of its materials, supplies, inventory or equipment and all such materials, supplies, inventory or equipment shall at all times be stored within the Building, or (7) commit nor permit to be committed any waste in or about the Leased Premises.

4.3 Noise And Emissions. All noise generated by Tenant in its use of the Leased Premises shall be confined or muffled so that it does not interfere with the businesses of or annoy the occupants and/or users of adjacent properties. All dust, fumes, odors and other emissions generated by Tenant’s use of the Leased Premises shall be sufficiently dissipated in accordance with sound environmental practice and exhausted from the Leased Premises in such a manner so as not to interfere with the businesses of or annoy the occupants and/or users of adjacent properties, or cause any damage to the Leased Premises or any component part thereof or the property of adjacent property owners.

4.4 Trash Disposal. Tenant shall provide trash bins or other adequate garbage disposal facilities within the trash enclosure areas provided or permitted by Landlord outside the Leased Premises sufficient for the interim disposal of all of its trash, garbage and waste. All such trash, garbage and waste temporarily stored in such areas shall be stored in such a manner so that it is not visible from outside of such areas, and Tenant shall cause such trash, garbage and waste to be regularly removed from the Leased Premises in a clean, safe and neat condition free and clear of all trash, garbage, waste and/or boxes, pallets and containers containing same at all times.

4.5 Parking. Tenant shall have the exclusive right to use all parking areas within the Leased Premises as depicted on Exhibit A (including the right to mark the parking spaces located immediately adjacent to the Building for use by Tenant’s executives, employees and visitors). Tenant shall not use any other location within the Leased Premises for the parking of vehicles. Tenant shall not, at any time, park or permit to be parked any recreational vehicles, inoperative vehicles or equipment (except as expressly set forth in this Lease) in the Outside Areas or on any other portion of the Leased Premises. Tenant agrees to assume responsibility for compliance by its employees and invitees with the parking provisions contained herein. If Tenant or its employees park any vehicle within the Leased Premises in violation of these provisions, then Landlord may, upon prior written notice to Tenant giving Tenant one (1) day (or any applicable statutory notice period, if longer than one (1) day) to remove such vehicle(s).

4.6 Signs. Tenant shall have the exclusive right to install signs identifying Tenant on, in or about the Leased Premises, subject to Landlord’s prior approval (except signs existing as of the Lease Commencement Date), which shall not be unreasonably withheld, conditioned or delayed and to all applicable Laws and Private Restrictions. Tenant shall be responsible for maintaining any such signs in first-class condition and shall remove such signs (including, without limitation, all signs existing as of the Lease Commencement Date) on or before the expiration or sooner termination of this Lease. Tenant shall repair all damage to the Leased Premises caused by the installation, maintenance or removal of such signs.

4.7 Compliance With Laws And Private Restrictions. Tenant shall abide by and shall promptly observe and comply with, at its sole cost and expense, all Laws and Private Restrictions respecting the use and occupancy of the Leased Premises, including, without limitation, all Laws governing the use and/or disposal of hazardous materials, and shall defend with competent counsel, indemnify and hold Landlord harmless from any claims, damages or liability resulting from Tenant’s failure to so abide, observe, or comply. Tenant’s obligations hereunder shall survive the expiration or sooner termination of this Lease.

4.8 Compliance With Insurance Requirements. With respect to any insurance policies required or permitted to be carried by Landlord in accordance with the provision of this Lease, copies of which have been or will, upon Tenant’s written request therefor, be provided to Tenant, Tenant shall not conduct nor permit any other person to conduct any activities nor keep, store or use (or allow any other person to keep, store or use) any item or thing within the Leased Premises which (i) is prohibited under the terms of any such policies, (ii) could result in the termination of the coverage afforded under any of such policies, (iii) could give to the insurance carrier the right to cancel any of such policies, or (iv) could cause an increase in the rates (over standard rates) charged for the coverage afforded under any of such policies (unless Tenant paid for such increase. Tenant shall comply with all reasonable

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requirements of any insurance company, insurance underwriter, or Board of Fire Underwriters which are necessary to maintain, at standard rates, the insurance coverage carried by either Landlord or Tenant pursuant to this Lease.

4.9 Landlord’s Right To Enter. Landlord and its agents shall have the right to enter the Leased Premises during normal business hours after giving Tenant reasonable notice and subject to Tenant’s reasonable security measures for the purpose of (i) inspecting the same; (ii) showing the Leased Premises to prospective purchasers, mortgagees or, during the last 270 days of the Lease Term, tenants; (iii) making alterations, additions or repairs as provided under this Lease; (iv) performing any of Tenant’s obligations when Tenant has failed to do so; (v) posting notices of non-responsibility (and for such purposes Tenant shall provide Landlord at least thirty days’ prior written notice of any work to be performed on the Leased Premises); and (vi) supplying any services to be provided by Landlord. Any entry into the Leased Premises obtained by Landlord in accordance with this paragraph shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Leased Premises, or an eviction, actual or constructive of Tenant from the Leased Premises or any portion thereof but shall be made so as not to interrupt Tenant in an unreasonable manner, not to interfere with Tenant’s business in an unreasonable manner and not to remain in the Leased Premises any longer than is reasonably necessary.

4.10 Use Of Outside Areas. Tenant, in its use of the Outside Areas, shall at all times keep the Outside Areas in a safe condition free and clear of all materials, equipment, debris, trash (except within existing enclosed trash areas), inoperable vehicles, and other items which are not specifically permitted by Landlord to be stored or located thereon by Tenant. If, in the reasonable opinion of Landlord, unauthorized persons are using any of the Outside Areas by reason of, or under claim of, the express or implied authority or consent of Tenant, then Tenant, upon demand of Landlord, shall use commercially reasonable efforts to restrain such use.

4.11 Environmental Protection. Tenant’s obligations under this Paragraph 4.11 shall survive the expiration or termination of this Lease.

     (a) As used herein, the term “Hazardous Materials” shall mean any toxic or hazardous substance, material or waste or any pollutant or infectious or radioactive material, including but not limited to those substances, materials or wastes regulated now or in the future under any of the following statutes or regulations and any and all of those substances included within the definitions of “hazardous substances,” “hazardous materials,” “hazardous waste,” “hazardous chemical substance or mixture,” “imminently hazardous chemical substance or mixture,” “toxic substances,” “hazardous air pollutant,” “toxic pollutant,” or “solid waste” in the (a) Comprehensive Environmental Response, Compensation and Liability Act of 1990 (“CERCLA” or “Superfund”), as amended by the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), 42 U.S.C. § 9601 et seq., (b) Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. § 6901 et seq., (c) Federal Water Pollution Control Act (“FSPCA”), 33 U.S.C. § 1251 et seq., (d) Clean Air Act (“CAA”), 42 U.S.C. § 7401 et seq., (e) Toxic Substances Control Act (“TSCA”), 14 U.S.C. § 2601 et seq., (f) Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., (g) Carpenter-Presley-Tanner Hazardous Substance Account Act (“California Superfund”), Cal. Health & Safety Code § 25300 et seq., (h) California Hazardous Waste Control Act, Cal. Health & Safety code § 25100 et seq., (i) Porter- Cologne Water Quality Control Act (“Porter-Cologne Act”), Cal. Water Code § 13000 et seq., (j) Hazardous Waste Disposal Land Use Law, Cal. Health & Safety codes §25220 et seq., (k) Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”), Cal. Health & Safety code § 25249.5 et seq., (1) Hazardous Substances Underground Storage Tank Law, Cal. Health & Safety code § 25280 et seq., (m) Air Resources Law, Cal. Health & Safety Code § 39000 et seq., and (n) regulations promulgated pursuant to said laws or any replacement thereof, or as similar terms are defined in the federal, state and local laws, statutes, regulations, orders or rules. Hazardous Materials shall also mean any and all other biohazardous wastes and substances, materials and wastes which are, or in the future become, regulated under applicable Laws for the protection of health or the environment, or which are classified as hazardous or toxic substances, materials or wastes, pollutants or contaminants, as defined, listed or regulated by any federal, state or local law, regulation or order or by common law decision, including, without limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and other chlorinated solvents, (ii) any petroleum products or fractions thereof, (iii) asbestos, (iv) polychlorinated biphenyls, (v) flammable explosives, (vi) urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials and wastes that are harmful to or may threaten human health, ecology or the environment.

     (b) Notwithstanding anything to the contrary in this Lease, Tenant, at its sole cost, shall comply with all Laws relating to the storage, use and disposal of Hazardous Materials; provided, however, that Tenant shall not be

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responsible for contamination of the Leased Premises by Hazardous Materials that existed as of the commencement date of the Existing Lease or that migrated or migrate onto the Leased Premises from neighboring properties/areas (collectively, “Pre-existing Hazardous Materials”), unless caused by Tenant or a Tenant Related Party. Tenant shall not store, use or dispose of any Hazardous Materials except for small quantities of typical office supplies and those Hazardous Materials listed in a Hazardous Materials management plan (“HMMP”) which Tenant shall deliver to Landlord within thirty (30) days of the Effective Date of this Lease and update at least annually with Landlord (“Permitted Materials”) which may be used, stored and disposed of provided (i) such Permitted Materials are used, stored, transported, and disposed of in strict compliance with applicable Laws, (ii) such Permitted Materials shall be limited to the materials listed on and may be used only in the quantities specified in the HMMP, and (iii) Tenant shall provide Landlord with copies of all material safety data sheets and other documentation required under applicable Laws in connection with Tenant’s use of Permitted Materials as and when such documentation is provided to any regulatory authority having jurisdiction. In no event shall Tenant cause or permit to be discharged into the plumbing or sewage system of the Leased Premises or onto the land underlying or adjacent to the Leased Premises any Hazardous Materials. Tenant shall be solely responsible for and shall defend, indemnify, and hold Landlord and its agents harmless from and against all claims, costs and liabilities, including reasonable attorneys’ fees and costs, arising out of or in connection with Tenant’s storage, use and/or disposal of Hazardous Materials in, on, under or near the Leased Premises. If the presence of Hazardous Materials on the Leased Premises caused or permitted by Tenant results in contamination or deterioration of water or soil, then Tenant shall promptly take any and all action necessary to clean up such contamination, but the foregoing shall in no event be deemed to constitute permission by Landlord to allow the presence of such Hazardous Materials. At any time prior to the expiration of the Lease Term if Tenant has a reasonable basis to suspect that there has been any release or the presence of Hazardous Materials in the ground or ground water on the Leased Premises which did not exist upon commencement of the Lease Term, Tenant shall have the right to conduct appropriate tests of water and soil and to deliver to Landlord the results of such tests to demonstrate that no contamination in excess of permitted levels has occurred as a result of Tenant’s use of the Leased Premises. Tenant shall further be solely responsible for, and shall defend, indemnify, and hold Landlord and its agents harmless from and against all claims, costs and liabilities, including reasonable attorneys’ fees and costs, arising out of or in connection with any removal, cleanup and restoration work and materials required hereunder to return the Leased Premises and any other property of whatever nature to their condition existing prior to the appearance of the Hazardous Materials.

     (c) Upon termination or expiration of the Lease, Tenant at its sole expense shall cause all Hazardous Materials placed in or about the Leased Premises by Tenant, its agents, contractors, or invitees, and all installations (whether interior or exterior) made by or on behalf of Tenant relating to the storage, use, disposal or transportation of Hazardous Materials to be removed from the property and transported for use, storage or disposal in accordance and compliance with all Laws and other requirements respecting Hazardous Materials used or permitted to be used by Tenant. Tenant shall apply for and shall obtain from all appropriate regulatory authorities (including any applicable fire department or regional water quality control board) all permits, approvals and clearances necessary for the closure of the Leased Premises and shall take all other actions as may be required to complete the closure of the Leased Premises.

     (d) At any time prior to expiration of the Lease Term, subject to reasonable prior notice (not less than forty-eight (48) hours) and Tenant’s reasonable security requirements and provided such activities do not unreasonably interfere with the conduct of Tenant’s business at the Leased Premises, Landlord shall have the right to enter in and upon the Leased Premises in order to conduct appropriate tests of water and soil to determine whether levels of any Hazardous Materials in excess of legally permissible levels has occurred as a result of Tenant’s use thereof. Landlord shall furnish copies of all such test results and reports to Tenant and, at Tenant’s option and cost, shall permit split sampling for testing and analysis by Tenant. Such testing shall be at Tenant’s expense if Landlord has a reasonable basis for suspecting and confirms the presence of Hazardous Materials in the soil or surface or ground water in, on, under, or about the Leased Premises, which has been caused by or resulted from the activities of Tenant, its agents, contractors, or invitees.

     (e) Notwithstanding any other provision of this Lease, Landlord represents that it is unaware of any Hazardous Materials in, on or about the Property in violation of applicable Laws. Notwithstanding this representation, Landlord shall (i) cause, at its sole cost and expense, any or all Pre-existing Hazardous Materials discovered in, on or about the Property (and not caused by Tenant or a Tenant Related Party) to be removed if and to the extent required by applicable Laws and (ii) indemnify and hold Tenant harmless against and from all liability

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and claims of any kind for loss or damage to Tenant, its employees or agents, and for all expenses and fees of Tenant (including, but not limited to, reasonable attorneys’ fees) incurred, directly or indirectly, as a result of (a) the existence of such Pre-existing Hazardous Materials in, on or about the Property or (b) any acts or omissions of Landlord or any Landlord Related Party with respect to their use, generation, disposal, storage or transportation of Hazardous Materials on or about the Property.

          (f) Landlord may voluntarily cooperate in a reasonable manner with the efforts of all governmental agencies in reducing actual or potential environmental damage. Except as otherwise provided in this Lease, Tenant shall not be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of such compliance or cooperation. Tenant agrees at all times to cooperate fully with the requirements and recommendations of governmental agencies regulating, or otherwise involved in, the protection of the environment.

4.12 Rules And Regulations. Tenant shall comply with the rules and regulations respecting the use of the Leased Premises that are attached hereto as Exhibit C. Landlord may, from time to time, change such rules and regulations for the safety, care, or cleanliness of the Leased Premises, provided that such changes will not unreasonably interfere with Tenant’s use and occupancy of the Leased Premises or materially increase Tenant’s cost of occupancy. A violation by Tenant of any of such rules and regulations shall constitute a default by Tenant under this Lease. If there is a conflict between the rules and regulations and any of the provisions of this Lease, the provisions of this Lease shall prevail.

ARTICLE 5

REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

5.1 Repair And Maintenance. Except in the case of damage to or destruction of the Leased Premises caused by an act of God or other peril, in which case the provisions of Article 10 shall control, the parties shall have the following obligations and responsibilities with respect to the repair and maintenance of the Leased Premises.

     (a) Tenant’s Obligations. Except as expressly provided in Paragraph 5.1 (b), Tenant shall, at all times during the Lease Term and at its sole cost and expense, regularly clean and continuously keep and maintain in good order, condition and repair the Leased Premises and every part thereof including, without limiting the generality of the foregoing, (i) all interior walls, floors and ceilings, (ii) all windows, doors and skylights, (iii) all electrical wiring, conduits, connectors and fixtures, (iv) all plumbing, pipes, sinks, toilets, faucets and drains, (v) all lighting fixtures, bulbs and lamps and all heating, ventilating and air conditioning equipment, (vi) all entranceways to the Leased Premises, and (vii) all paved areas. Tenant shall, at Tenant’s sole cost and expense, institute an industry standard preventative maintenance program using a qualified and licensed heating, ventilating and air conditioning company which regularly inspects and performs required maintenance on the heating, ventilating and air conditioning equipment and systems serving the Leased Premises. Notwithstanding the foregoing, Tenant shall have no obligation or liability for any roof maintenance or repair based on damage or wear and tear that existed prior to January 1, 2004, except to the extent that any act or omission of Tenant or any Tenant Related Party resulted or results in a violation of the roof warranty in effect as of the Lease Commencement Date. Tenant shall, at all times during the Lease Term, keep in a clean and safe condition the Outside Areas. As needed, Tenant shall sweep and clean the driveways and parking areas. Tenant shall, at its sole cost and expense, repair all damage to the Leased Premises caused by the activities of Tenant, its employees, invitees or contractors promptly following written notice from Landlord to so repair such damages. If Tenant shall fail to perform the required maintenance or fail to make repairs required of it pursuant to this paragraph within a reasonable period of time following notice from Landlord to do so, then Landlord may, at its election and without waiving any other remedy it may otherwise have under this Lease or at Law, perform such maintenance or make such repairs and charge to Tenant, as Additional Rent, the costs so incurred by Landlord for same. All glass within or a part of the Leased Premises, both interior and exterior, is at the sole risk of Tenant and any broken glass shall promptly be replaced by Tenant at Tenant’s expense with glass of the same kind, size and quality. In the event Tenant’s obligations under this Paragraph 5.1 (a) require that Tenant make a repair, replacement or expenditure whose benefit extends beyond the Lease Term and which is deemed a capital improvement in accordance with generally accepted accounting principles, then Landlord shall pay the cost thereof; however, such cost shall be amortized by Landlord, on a straight-line basis, over the useful life of such item,

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utilizing an interest rate of zero percent (0%), and the monthly amortized cost of such any item so amortized shall be included in the Property Maintenance Costs and charged to Tenant as Additional Rent.

     (b) Landlord’s Obligation. Landlord shall, at all times during the Lease Term and at Landlord’s sole cost and expense, maintain in good condition and repair the foundation, footings, structural exterior walls (excluding painting, sealing and other exterior surface maintenance), structural roof elements (excluding the roof membrane), poured concrete floors (excluding floor surfaces) and exterior utility connections up to the Building and under the foundation. In addition, Landlord shall, at all times during the Lease Term, maintain in good condition and repair the roof membrane, provided that the costs incurred by Landlord in performing such maintenance and repair of the roof membrane shall be included in the Property Maintenance Costs and charged to Tenant as Additional Rent. Landlord represents and warrants that as of the Effective Date of this Lease, the roof membrane is covered by effective warranties (copies of which have been provided to Tenant) and agrees that Tenant shall have no obligation to make or pay for any capital repairs or maintenance and repair to the non-structural elements of the roof, to the extent such capital repairs or maintenance and repair is covered by such warranty.

5.2 Utilities. Tenant shall arrange at its sole cost and expense and in its own name, for the supply of water, gas and electricity to the Leased Premises. In the event that such services are not separately metered, Tenant shall, at its sole expense, cause such meters to be installed. Tenant shall be responsible for determining if the local supplier of water, gas and electricity can supply the needs of Tenant and whether or not the existing water, gas and electrical distribution systems within the Leased Premises are adequate for Tenant’s needs. Tenant shall be responsible for determining if the existing sanitary and storm sewer systems now servicing the Leased Premises are adequate for Tenant’s needs. Tenant shall pay all charges for water, gas, electricity and storm and sanitary sewer services supplied to the Leased Premises, irrespective of whether or not the services are maintained in Landlord’s or Tenant’s name.

5.3 Security. Tenant acknowledges that Landlord has not undertaken any duty whatsoever to provide security for the Leased Premises and, accordingly, Landlord is not responsible for the security of same or the protection of Tenant’s property or Tenant’s employees, invitees or contractors. To the extent Tenant determines that such security or protection services are advisable or necessary, Tenant shall arrange for and pay the costs of providing same.

5.4 Energy And Resource Consumption. Landlord may, in its sole discretion, cooperate in a reasonable manner with the efforts of governmental agencies and/or utility suppliers in reducing energy or other resource consumption within the Leased Premises. Tenant agrees at all times to comply with the requirements of utility suppliers and governmental agencies regulating the consumption of energy and/or other resources.

5.5 Limitation Of Landlord’s Liability. Landlord shall not be liable to Tenant for injury to Tenant, its employees, agents, invitees or contractors, for damage to Tenant’s property or loss of Tenant’s business or profits, nor shall Tenant be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of (i) Landlord’s failure to provide security services or systems for the protection of the Leased Premises, or the protection of Tenant’s property or Tenant’s employees, invitees, agents or contractors, or (ii) Landlord’s failure to perform any maintenance or repairs to the Leased Premises until Tenant has notified Landlord, and the applicable cure period has expired, as provided in Paragraph 12.3, or (iii) any failure, interruption, rationing or other curtailment in the supply of water, electric current, gas or other utility service to the Leased Premises from whatever cause (other than Landlord’s gross negligence or willful misconduct), or (iv) the unauthorized intrusion or entry into the Leased Premises by third parties (other than Landlord or Landlord’s employees, agents or contractors).

ARTICLE 6

ALTERATIONS AND IMPROVEMENTS

6.1 By Tenant. Tenant shall not make any alterations to or modifications of the Leased Premises or construct any improvements within the Leased Premises until Landlord shall have first approved, in writing, the plans and specifications therefor, which approval shall not be unreasonably withheld, conditioned or delayed. Without limiting the generality of the foregoing, Tenant acknowledges that it shall be reasonable for Landlord to withhold its

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consent to any modification, alteration or improvement if, in Landlord’s reasonable judgment, such modification, alteration or improvement would adversely affect the structure of the Building, any of the Building’s systems, the appearance of the Building or the value or utility of the Leased Premises. All such modifications, alterations or improvements, once so approved, shall be made, constructed or installed by Tenant at Tenant’s expense (including all permit fees and governmental charges related thereto), using a licensed contractor first approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed), in substantial compliance with the aforementioned Landlord-approved plans and specifications therefore. All work undertaken by Tenant shall be done in accordance with all Laws and in a good and workmanlike manner using materials of good quality. Tenant shall not commence the making of any such modifications or alterations or the construction of any such improvements until (i) all required governmental approvals and permits shall have been obtained, (ii) all requirements regarding insurance imposed by this Lease have been satisfied, (iii) Tenant shall have given Landlord at lease five (5) business days prior written notice of its intention to commence such work so that Landlord may post and file notices of non-responsibility, and (iv) if requested by Landlord, Tenant shall have obtained contingent liability and broad form builder’s risk insurance in an amount satisfactory to Landlord in its reasonable discretion to cover any perils relating to the proposed work not covered by insurance carried by Tenant pursuant to Article 9. In no event shall Tenant make any modification, alterations or improvements whatsoever to the Outside Areas or the exterior or structural components of the Building including, without limitation, any cuts or penetrations in the floor, roof or exterior walls of the Leased Premises unless otherwise provided herein without Landlord’s prior consent, which shall not be unreasonably withheld, conditioned or delayed. As used in this Article, the term “modifications, alterations and/or improvements” shall include, without limitation, the installation of additional electrical outlets, overhead lighting fixtures, drains, sinks, partitions, doorways, or the like. Notwithstanding the foregoing, Tenant, without Landlord’s prior written consent (but subject to the other terms and conditions of this Article 6), shall be permitted to make alterations to the Leased Premises which do not affect the structure of the Building or the Leased Premises, do not affect the plumbing, electrical, mechanical or other systems of the Building and do not affect the appearance of the Leased Premises viewed from the exterior, provided that: (a) such alterations do not exceed $25,000 individually or $100,000 in the aggregate in each calendar year, (b) Tenant shall timely provide Landlord the notice required pursuant to Paragraph 4.9 above, (c) Tenant shall provide Landlord, promptly following the completion of the alteration, with a set of the plans and specifications therefor, either “as built” or marked to show construction changes made, and (d) if requested by Landlord, Tenant shall, on or before the expiration or earlier termination of this Lease, remove any such alteration that is not an improvement that would be typically found in an office space environment and restore the Leased Premises to their condition prior to such alteration, reasonable wear and tear excepted.

6.2 Ownership Of Improvements. All modifications, alterations and improvements made or added to the Leased Premises by Tenant (collectively, “Alterations”) during the Lease Term, other than Tenant’s FF&E, shall be deemed real property and a part of the Leased Premises, but shall remain the property of Tenant during the Lease. Any such Alterations (except for Tenant’s FF&E), once completed, shall not be altered or removed from the Leased Premises during the Lease Term without Landlord’s written approval if required by Paragraph 6.1 above. At the expiration or sooner termination of this Lease, all Alterations (other than Tenant’s FF&E) shall automatically become the property of Landlord and shall be surrendered to Landlord as part of the Leased Premises as required pursuant to Paragraph 2.6, unless Landlord shall require Tenant to remove any Alterations in accordance with the provisions of Paragraph 2.6, in which case Tenant shall remove such Alterations. Landlord shall have no obligation to reimburse Tenant for all or any portion of the cost or value of any Alterations so surrendered to Landlord. All modifications, alterations or improvements which are installed or constructed on or attached to the Leased Premises by Landlord and/or at Landlord’s expense shall be deemed real property and a part of the Leased Premises and shall be property of Landlord. All lighting, plumbing, electrical, heating, ventilation and air conditioning fixtures, partitioning, window coverings, wall coverings and floor coverings installed by Tenant shall be deemed improvements to the Leased Premises and not Tenant’s FF&E.

6.3 Alterations Required By Law. Tenant shall, at its sole cost, make all modifications, alterations and improvements to the Leased Premises that are required by any Law because of Tenant’s (i) use or occupancy of the Leased Premises, (ii) application for any permit or governmental approval, or (iii) making of any Alterations to or within the Leased Premises. If Landlord shall, at any time during the Lease Term, be required by any governmental authority to make any modifications, alterations or improvements to the Leased Premises, the cost incurred by Landlord in making such modifications, alterations or improvements, including interest at a rate equal to the sum of that rate quoted by Wells Fargo Bank, N.T. & S.A. from time to time as its prime rate, plus two percent (2%), shall

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be amortized by Landlord over the useful life of such modifications, alterations or improvements (based on generally accepted industry standards), on a straight line basis, and the monthly amortized cost of such modifications, alterations and improvements as so amortized shall be considered a Property Maintenance Cost.

6.4 Liens. Tenant shall keep the Leased Premises and every part thereof free from any lien, and shall pay when due all bills arising out of any work performed, materials furnished, or obligations incurred by Tenant, its agents, employees or contractors relating to the Leased Premises. If any such claim of lien is recorded against Tenant’s interest in this Lease, the Leased Premises or any part thereof, Tenant shall bond against, discharge or otherwise cause such lien to be entirely released within thirty (30) days after the same has been recorded. Tenant’s failure to do so shall be conclusively deemed a material default under the terms of this Lease.

ARTICLE 7

ASSIGNMENT AND SUBLETTING BY TENANT

7.1 By Tenant. Except as expressly permitted in Paragraph 7.2 below, Tenant shall not sublet the Leased Premises or any portion thereof or assign its interest in this Lease, whether voluntarily or by operation of Law, without Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Any attempted subletting or assignment without Landlord’s prior written consent, at Landlord’s election, shall constitute a default by Tenant under the terms of this Lease. The acceptance of rent by Landlord from any person or entity other than Tenant, or the acceptance of rent by Landlord from Tenant with knowledge of a violation of the provisions of this paragraph, shall not be deemed to be a waiver by Landlord of any provision of this Article or this Lease or to be a consent to any subletting by Tenant or any assignment of Tenant’s interest in this Lease. Without limiting the circumstances in which it may be reasonable for Landlord to withhold its consent to an assignment or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold its consent in the following instances:

     (a) the proposed assignee or sublessee is a governmental agency;

     (b) the proposed use is not a Permitted Use;

     (c) in Landlord’s reasonable judgment, the financial worth of a proposed assignee is less than that of Tenant or does not meet the credit standards applied by Landlord;

     (d) the proposed assignee or sublessee has, in the five years prior to the assignment or sublease, filed for bankruptcy protection, has been the subject of an involuntary bankruptcy that was not discharged within ninety (90) days of its filing, or has been adjudged insolvent;

     (e) Landlord has experienced a previous uncured material default by or is in litigation with the proposed assignee or sublessee;

     (f) the use of the Leased Premises by the proposed assignee or sublessee will violate any applicable Law, ordinance or regulation;

     (g) the proposed assignee or sublessee is, as of the date of this Lease, in negotiations with Landlord or any of its affiliates for a lease in a property owned by Landlord or any of its affiliates and located in the City of Milpitas, California;

     (h) the proposed assignment or sublease fails to include all of the terms and provisions required to be included therein pursuant to this Article 7;

     (i) there is an Event of Default under this Lease, or there have been three or more Events of Default during the 12 months preceding the date that Tenant shall request consent; or

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     (j) in the case of a subletting of less than the entire Leased Premises, if the subletting would result in the division of the Leased Premises into more than three subparcels or would require improvements to be made outside of the Leased Premises.

7.2 Permitted Transfers. Notwithstanding anything contained herein to the contrary regarding Landlord consent requirements, but otherwise subject to the provisions of this Article 7:

     (a) Tenant may sublet or assign to any Successor Entity (as hereinafter defined) without obtaining Landlord’s consent; provided that: (i) such Successor Entity’s tangible net worth (determined in accordance with generally accepted accounting principles) immediately after such transaction is at least equal to Tenant’s tangible net worth immediately prior to such transaction; (ii) in the event of a merger, if required by Landlord, the surviving Successor Entity assumes all obligations of Tenant under this Lease; and (iii) in the event of a sale of assets or stock of Tenant, if required by Landlord, the Successor Entity assumes in writing all obligations of Tenant under this Lease. “Successor Entity” means an entity controlling, controlled by or under common control with Tenant, as well as any entity into or with which Tenant is merged or otherwise consolidated or which purchases all or substantially all of Tenant’s assets or stock, and which entity succeeds to Tenant’s interest in this Lease by assignment or sublease.

     (b) Tenant may sublet or assign to LSI Logic Storage Systems, Inc.,or its successor, without obtaining Landlord’s consent, provided that such sublessee or assignee assumes all obligations of Tenant under this Lease (in the case of a sublease, to the extent applicable to the subleased portion of the Leased Premises).

     (c) Landlord’s consent shall not be required for a short-term license, not exceeding one (1) year, of any portion of the Leased Premises that are then not separately demised.

7.3 Landlord’s Election. If Tenant desires to assign its interest under the Lease or to sublet all or part of the Leased Premises (a “Proposed Transfer”), Tenant must first notify Landlord, in writing, of such Proposed Transfer, at least fifteen (15) business days in advance of the date it intends to close the Proposed Transfer, specifying (a) the size of the space to be so transferred, (b) the duration of the term of such Proposed Transfer and (c) the terms of the Proposed Transfer, including the name of the proposed assignee or sublessee, the proposed assignee’s or sublessee’s intended use of the Leased Premises, current financial statements (including a balance sheet, income statement and statement of cash flow, all prepared in accordance with generally accepted accounting principles) of such proposed assignee or sublessee, the form of documents to be used in effectuating such assignment or subletting and such other information as Landlord may reasonably request. Landlord shall have a period of fifteen (15) business days following receipt of such notice and the required information to consent or decline to consent to the Proposed Transfer. If Landlord does not respond within such fifteen (15) business day period, Landlord shall be deemed to have approved the Proposed Transfer. If Landlord declines to consent to the Proposed Transfer, Landlord shall notify Tenant in writing, specifying the reasons under this Lease that such refusal is justified. During such fifteen (15) business day period, Tenant covenants and agrees to supply to Landlord, promptly upon request, all necessary or relevant information which Landlord may reasonably request respecting such proposed assignment or subletting and/or the proposed assignee or sublessee.

7.4 Conditions To Landlord’s Consent. If Landlord elects to consent, or is deemed to have consented pursuant to Paragraph 7.3 above, or shall have been ordered to so consent by a court of competent jurisdiction, to such requested assignment or subletting, such consent shall be expressly conditioned upon the occurrence of each of the conditions below set forth, and any purported assignment or subletting made or ordered prior to the full and complete satisfaction of each of the following conditions shall be void and, at the election of Landlord, which election may be exercised at any time following such a purported assignment or subletting but prior to the satisfaction of each of the stated conditions, shall constitute a material default by Tenant under this Lease until cured by satisfying in full each such condition by the assignee or sublessee. The conditions are as follows:

     (a) The execution by Landlord, Tenant and the proposed assignee or sublessee of a commercially reasonable consent form.

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     (b) Each such sublessee or assignee having agreed, in writing reasonably satisfactory to Landlord, to assume, to be bound by, and to perform the obligations of this Lease not otherwise to be performed by Tenant which relate to space being subleased.

     (c) There being no then-existing Event of Default under this Lease, and there having been no more than two Events of Default during the preceding 12 months.

     (d) Tenant having reimbursed to Landlord all reasonable costs and reasonable attorneys’ fees incurred by Landlord in conjunction with the processing and documentation of any such requested subletting or assignment (not to exceed One Thousand Dollars ($1,000.00) in each case).

     (e) Tenant having delivered to Landlord a complete and fully-executed duplicate original of such sublease agreement or assignment agreement (as applicable) and all related agreements.

     (f) With respect to an assignment, Tenant having paid, or having agreed in writing to pay as to future payments, to Landlord fifty percent (50%) of all Assignment Consideration to be paid to Tenant or to any other on Tenant’s behalf or for Tenant’s benefit for such assignment as follows:

               (i) If Tenant assigns its interest under this Lease and if all or a portion of the consideration for such assignment is to be paid by the assignee at the time of the assignment, that Tenant shall have paid to Landlord and Landlord shall have received an amount equal to fifty percent (50%) of the Assignment Consideration so paid or to be paid (whichever is the greater) at the time of the assignment by the assignee; or

               (ii) If Tenant assigns its interest under this Lease and if Tenant is to receive all or a portion of the consideration for such assignment in future installments, that Tenant and Tenant’s assignee shall have entered into a written agreement with and for the benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and Tenant’s assignee jointly agree to pay to Landlord an amount equal to fifty percent (50%) of all such future Assignment Consideration installments to be paid by such assignee as and when such Assignment Consideration is so paid.

               (g) With respect to a sublease of all or a portion of the Leased Premises, Tenant and Tenant’s sublessee shall have entered into a written agreement with and for the benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and Tenant’s sublessee jointly agree to pay to Landlord the applicable percentage set forth below of all Excess Rentals to be paid by such sublessee as and when such Excess Rentals are so paid:

Portion of Leased Premises Subleased	Percentage of Excess Rentals to Landlord
Up to and including 25%		0	%
Between 25% and 50%		25	%
From 50% up to and including 100%		50	%

Landlord and Tenant agree that the percentages set forth above apply to the aggregate of all subleased portions of the Leased Premises during the Lease Term. For example, if Tenant initially subleases 20% of the Leased Premises, Landlord shall not be entitled to any portion of any Excess Rentals from such sublease; provided that, if Tenant subsequently subleases an additional 10% of the Leased Premises, then Landlord shall be entitled to 25% of the aggregate Excess Rentals payable with respect to the entire 30% portion of the Leased Premises that is then subleased.

7.5 Assignment Consideration And Excess Rentals Defined. For purposes of this Article, including any amendment to this Article by way of addendum or other writing, the term “Assignment Consideration” shall mean all consideration to be paid by the assignee to Tenant or to any other party on Tenant’s behalf or for Tenant’s benefit as consideration for such assignment, after deduction for the following costs actually paid or actually incurred by Tenant directly in connection with such assignment: market-rate leasing commissions; rent concessions; reasonable costs of tenant improvements, capital improvements, building upgrades and permit fees; and reasonable attorneys’ fees not to exceed five thousand dollars ($5,000.00). The term “Excess Rentals” shall mean all consideration to be

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paid by the sublessee to Tenant or to any other party on Tenant’s behalf or for Tenant’s benefit for the sublease of the Leased Premises in excess of the rent due to Landlord under the terms of this Lease for the same period, after deduction for the following costs actually paid or actually incurred by Tenant directly in connection with such sublease: market-rate leasing commissions; rent concessions; reasonable costs of tenant improvements, capital improvements, building upgrades and permit fees; and reasonable attorneys’ fees not to exceed five thousand dollars ($5,000.00). Tenant agrees that the portion of any Assignment Consideration and/or Excess Rentals arising from any assignment or subletting by Tenant which is to be paid to Landlord pursuant to this Article now is and shall then be the property of Landlord and not the property of Tenant.

7.6 Payments. All payments required by this Article to be made to Landlord shall be made in cash in full as and when they become due. At the time Tenant, Tenant’s assignee or sublessee makes each such payment to Landlord, Tenant or Tenant’s assignee or sublessee, as the case may be, shall deliver to Landlord an itemized statement in reasonable detail showing the method by which the amount due Landlord was calculated and certified by the party making such payment as true and correct.

7.7 Good Faith. The rights granted to Tenant by this Article are granted in consideration of Tenant’s express covenant that all pertinent allocations which are made by Tenant between the rental value of the Leased Premises and the value of any of Tenant’s personal property which may be conveyed or leased generally concurrently with and which may reasonably be considered a part of the same transaction as the permitted assignment or subletting shall be made fairly, honestly and in good faith. If Tenant shall breach this covenant, Landlord may immediately declare Tenant to be in default under the terms of this Lease and terminate this Lease and/or exercise any other rights and remedies Landlord would have under the terms of this Lease in the case of a material default by Tenant under this Lease.

7.8 Effect Of Landlord’s Consent. No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its personal and primary obligation to pay rent and to perform all of the other obligations to be performed by Tenant hereunder. Consent by Landlord to one or more assignments of Tenant’s interest in this Lease or to one or more sublettings of the Leased Premises shall not be deemed to be a consent to any subsequent assignment or subletting. If Landlord shall have been ordered by a court of competent jurisdiction to consent to a requested assignment or subletting, or such an assignment or subletting shall have been ordered by a court of competent jurisdiction over the objection of Landlord, such assignment or subletting shall not be binding between the assignee (or sublessee) and Landlord until such time as all conditions set forth in Paragraph 7.4 above have been fully satisfied (to the extent not then satisfied) by the assignee or sublessee, including, without limitation, the payment to Landlord of all agreed assignment considerations and/or excess rentals then due Landlord.

7.9 Options Personal. If Landlord consents to an assignment or subletting hereunder and this Lease contains any renewal options, expansion options, rights of first refusal, rights of first negotiation or any other rights or options pertaining to additional space in property owned by Landlord or any affiliate of Landlord, such rights and/or options shall not run to any assignee or subtenant other than a Successor Entity, it being agreed by the parties hereto that any such rights and options are personal to the original Tenant and any Successor Entity named herein and may not be otherwise transferred.

7.10 Tenant’s Remedies. Notwithstanding any contrary provision of law, including California Civil Code section 1995.310, Tenant shall have no right, and Tenant hereby waives and relinquishes any right, to cancel or terminate this Lease in the event Landlord is determined to have unreasonably withheld or delayed its consent to a proposed Transfer.

ARTICLE 8

LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY

8.1 Limitation On Landlord’s Liability And Release. Landlord shall not be liable to Tenant for, and Tenant hereby releases Landlord and its partners, principals, members, officers, agents, employees, lenders, attorneys, and consultants (collectively, the “Landlord Related Parties”) from, any and all liability, whether in contract, tort or on any other basis, for any injury to or any damage sustained by Tenant, Tenant’s agents, employees, contractors or

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invitees (collectively, the “Tenant Related Parties”), any damage to Tenant’s property, or any loss to Tenant’s business, loss of Tenant’s profits or other financial loss of Tenant resulting from or attributable to the condition of, the management of, the repair or maintenance of, the protection of, the supply of services or utilities to, the damage in or destruction of the Leased Premises, or any portion thereof, including without limitation (i) the failure, interruption, rationing or other curtailment or cessation in the supply of electricity, water, gas or other utility service to the Leased Premises; (ii) the vandalism or forcible entry into the Building or the Leased Premises; (iii) the penetration of water into or onto any portion of the Leased Premises; (iv) the failure to provide security and/or adequate lighting in or about the Leased Premises, (v) the existence of any design or construction defects within the Leased Premises; (vi) the failure of any mechanical systems to function properly (such as the HVAC systems); (vii) the blockage of access to any portion of the Leased Premises, except that Tenant does not so release Landlord from such liability to the extent such damage was proximately caused by Landlord’s or any Landlord Related Parties’ gross negligence, willful misconduct, or Landlord’s or any Landlord Related Parties’ failure to perform an obligation expressly undertaken pursuant to this Lease after a reasonable period of time shall have lapsed following receipt of written notice from Tenant to so perform such obligation.

8.2 Tenant’s Indemnification Of Landlord. Tenant shall defend with competent counsel reasonably satisfactory to Landlord any claims made or legal actions filed or threatened against Landlord or any of the Landlord Related Parties with respect to the violation of any Law, or the death, bodily injury, personal injury, property damage, or interference with contractual or property rights suffered by any third party occurring within the Leased Premises or resulting from Tenant’s use or occupancy of the Leased Premises, or resulting from Tenant’s activities in or about the Leased Premises, and Tenant shall indemnify and hold Landlord and the Landlord Related Parties harmless from any loss liability, penalties, or expense whatsoever (including reasonable attorneys’ fees and any loss attributable to vacant space which otherwise would have been leased, but for such activities) resulting therefrom, except to the extent proximately caused by the gross negligence or willful misconduct of Landlord or the Landlord Related Parties. This Paragraph 8.2 shall survive the expiration or earlier termination of this Lease.

8.3 Landlord’s Indemnification of Tenant. Landlord shall defend with competent counsel reasonably satisfactory to Tenant, and shall indemnify and hold harmless Tenant and the Tenant Related Parties, from and against any and all claims, demands, liabilities, causes of action, suits, judgments, damages and expenses (including reasonable attorneys’ fees) arising out of or in connection with Landlord’s failure to perform its obligations under this Lease or the violation of any Law by Landlord, except to the extent proximately caused by the gross negligence or willful misconduct of Tenant or the Tenant Related Parties. This Paragraph 8.3 shall survive the expiration or earlier termination of this Lease.

ARTICLE 9

INSURANCE

9.1 Tenant’s Insurance. Tenant shall maintain insurance complying with all of the following:

     (a) Tenant shall procure, pay for and keep in full force and effect, at all times during the Lease Term, the following:

               (i) Commercial general liability insurance insuring Tenant against liability for personal injury, bodily injury, death and damage to property occurring within the Leased Premises, or resulting from Tenant’s use or occupancy of the Leased Premises, or any portion thereof, or resulting from Tenant’s activities in or about the Leased Premises, with coverage in an amount equal to Tenant’s Required Liability Coverage (as set forth in Article 1), which insurance shall contain a “broad form liability” endorsement insuring Tenant’s performance of Tenant’s obligations to indemnify Landlord as contained in this Lease.

               (ii) Fire and property damage insurance in so-called “fire and extended coverage” form insuring Tenant against loss from physical damage to Tenant’s personal property, inventory, trade fixtures and improvements within the Leased Premises with coverage for the full actual replacement cost thereof;

               (iii) Plate glass insurance, at actual replacement cost;

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               (iv) Pressure vessel insurance, if applicable;

               (v) Workers’ compensation insurance and any other employee benefit insurance sufficient to comply with all Laws; and

               (vi) With respect to Alterations, contingent liability and builder’s risk insurance, in an amount and with coverage reasonably satisfactory to Landlord.

     (b) Each policy of liability insurance required to be carried by Tenant pursuant to this paragraph or actually carried by Tenant with respect to the Leased Premises: (i) shall, except with respect to insurance required by subparagraph (a)(vi) above, name Landlord, and such others as are reasonably designated by Landlord, as additional insureds; (ii) shall be primary insurance providing that the insurer shall be liable for the full amount of the loss, up to and including the total amount of liability set forth in the declaration of coverage, without the right of contribution from or prior payment by any other insurance coverage of Landlord; (iii) shall be in a form reasonably satisfactory to Landlord; (iv) shall be carried with companies reasonably acceptable to Landlord with Best’s ratings of at least A and XI; (v) shall provide that such policy shall not be subject to cancellation, lapse or change except after at least thirty days prior written notice to Landlord, and (vi) shall contain a so-called “severability” or “cross liability” endorsement. Each policy of property insurance maintained by Tenant with respect to the Leased Premises or any property therein (i) shall provide that such policy shall not be subject to cancellation, lapse or change except after at least thirty days prior written notice to Landlord and (ii) shall contain, to the extent commercially reasonable to obtain, a waiver and/or a permission to waive by the insurer of any right of subrogation against Landlord, its partners, principals, members, officers, employees, agents and contractors, which might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its partners, principals, members, officers, employees, agents and contractors.

     (c) Prior to the time Tenant or any of its contractors enters the Leased Premises, Tenant shall deliver to Landlord, with respect to each policy of insurance required to be carried by Tenant pursuant to this Article, a certificate of the insurer certifying in form reasonably satisfactory to Landlord that a policy has been issued, premium paid, providing the coverage required by this Paragraph and containing the provisions specified herein. With respect to each renewal or replacement of any such insurance, the requirements of this Paragraph must be complied with not less than fifteen days prior to the expiration or cancellation of the policies being renewed or replaced. Landlord may, at any time and from time to time, inspect any and all insurance policies required to be carried by Tenant pursuant to this Article. If Landlord’s Lender, insurance broker, advisor or counsel reasonably determines at any time that the amount of coverage set forth in Paragraph 9.1(a) for any policy of insurance Tenant is required to carry pursuant to this Article is not adequate, then Tenant shall increase the amount of coverage for such insurance to such greater amount as Landlord’s Lender, insurance broker, advisor or counsel reasonably deems adequate.

     (d) Tenant shall have the right to self-insure for the insurance required by this Paragraph 9.1 so long as the long-term, unsecured debt of Tenant is rated “A” or better by a major credit rating agency. Tenant shall also have the right to provide the insurance required hereunder with a so-called umbrella policy. Tenant shall have the right to self-insure for the insurance required by Paragraph 9.1(a)(v) so long as Tenant has obtained qualified self-insurer status for such insurance from the California Department of Industrial Relations.

9.2 Landlord’s Insurance. With respect to insurance maintained by Landlord:

     (a) Landlord shall maintain, as the minimum coverage required of it by this Lease, fire and property damage insurance in so-called “fire and extended coverage” form insuring Landlord (and such others as Landlord may designate) against loss from physical damage to the Leased Premises or any part thereof with coverage of not less than one hundred percent (100%) of the full actual replacement cost thereof and against loss of rents for a period of not less than six months. Such fire and property damage insurance, at Landlord’s election but without any requirements on Landlord’s behalf to do so, (i) may be written in so-called “all risk” form; (ii) may provide coverage for physical damage to the improvements so insured for up to the entire full actual replacement cost thereof; (iii) may be endorsed to cover loss or damage caused by any additional perils against which Landlord may elect to insure, including earthquake and/or flood; and/or (iv) may provide coverage for loss of rents for a period of up to twelve months. Landlord shall not be required to cause such insurance to cover any of Tenant’s personal

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property, inventory, and trade fixtures, or any modifications, alterations or improvements made or constructed by Tenant to or within the Leased Premises. Landlord shall use commercially reasonable efforts to obtain such insurance at competitive rates.

     (b) Landlord shall maintain commercial 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 in, on or about, or resulting from the use or occupancy of the Leased Premises, or any portion thereof, with combined single limit coverage of at least Three Million Dollars ($3,000,000). Landlord may carry such greater coverage as Landlord or Landlord’s Lender, insurance broker, advisor or counsel may from time to time determine is reasonably necessary, under the circumstances, for the adequate protection of Landlord and the Leased Premises.

     (c) Landlord may maintain any other insurance which in Landlord’s reasonable opinion is prudent to carry under the given circumstances, provided such insurance is commonly carried by owners of property similarly situated and operating under similar circumstances.

9.3 Mutual Waiver Of Subrogation. Landlord hereby releases Tenant, and Tenant hereby releases Landlord and its respective partners, principals, members, officers, agents, employees and servants, from any and all liability for loss, damage or injury to the property of the other in or about the Leased Premises which is caused by or results from a peril or event or happening which is covered by insurance actually carried and in force at the time of the loss by the party sustaining such loss; provided, however, that such waiver shall be effective only to the extent permitted by the insurance covering such loss and to the extent such insurance is not prejudiced thereby.

ARTICLE 10

DAMAGE TO LEASED PREMISES

10.1 Landlord’s Duty To Restore. If the Leased Premises or any portion thereof are damaged by any peril after the Effective Date of this Lease, Landlord shall restore the same, as and when required by this paragraph, unless this Lease is terminated by Landlord pursuant to Paragraph 10.3 or by Tenant pursuant to Paragraph 10.4. If this Lease is not so terminated, then upon the issuance of all necessary governmental permits, Landlord shall commence and diligently prosecute to completion the restoration of the Leased Premises to the extent then allowed by Law, to substantially the same condition in which it existed as of the Lease Commencement Date. Landlord’s obligation to restore shall be limited to actual receipt of insurance proceeds and to the improvements constructed by Landlord. Landlord shall have no obligation to restore any improvements made by Tenant to the Leased Premises after the Effective Date of this Lease or any of Tenant’s personal property, inventory or trade fixtures.

10.2 Insurance Proceeds. All insurance proceeds available from the fire and property damage insurance carried by Landlord shall be paid to and become the property of Landlord. If this Lease is terminated pursuant to either Paragraph 10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant which cover loss of property that is Landlord’s property or would become Landlord’s property on termination of this Lease shall be paid to and become the property of Landlord, and the remainder of such proceeds shall be paid to and become the property of Tenant. If this Lease is not terminated pursuant to either Paragraph 10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant which cover loss to property that is Landlord’s property shall be paid to and become the property of Landlord, and all proceeds available from such insurance which cover loss to property which would only become the property of Landlord upon the termination of this Lease shall be paid to and remain the property of Tenant. The determination of Landlord’s property and Tenant’s property shall be made pursuant to Paragraph 6.2.

10.3 Landlord’s Right To Terminate. Landlord shall have the option to terminate this Lease in the event any of the following occurs, which option may be exercised only by delivery to Tenant of a written notice of election to terminate within thirty days after the date of such damage or destruction:

     (a) The Leased Premises are damaged by any peril covered by valid and collectible insurance actually carried by Landlord and in force at the time of such damage or destruction (an “insured peril”) to such an extent that

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the estimated cost to restore the Leased Premises exceeds the insurance proceeds available from insurance actually carried by Landlord, plus the deductible amount specified in such insurance policy;

     (b) The Leased Premises are damaged by an uninsured peril, which peril Landlord was not required to insure against pursuant to the provisions of Article 9 of this Lease.

     (c) The Leased Premises are damaged by any peril and, because of Laws then in force, the Leased Premises (i) cannot be restored at reasonable cost or (ii) if restored, cannot be used for the same use being made thereof before such damage.

10.4 Tenant’s Right To Terminate. If the Leased Premises or any portion thereof are damaged by any peril and Landlord does not elect to terminate this Lease or is not entitled to terminate this Lease pursuant to this Article, then as soon as reasonably practicable, but in any event within ninety (90) days after the date of such damage or destruction, Landlord shall furnish Tenant with the written opinion of Landlord’s architect or construction consultant as to when the restoration work required of Landlord may be complete. Tenant shall have the option to terminate this Lease in the event any of the following occurs, which option may be exercised only by delivery to Landlord of a written notice of election to terminate within fifteen (15) days after Tenant receives from Landlord the estimate of the time needed to complete such restoration:

     (a) If the time estimated to substantially complete the restoration exceeds nine (9) months from and after the date the architect’s or construction consultant’s written opinion is delivered; or

     (b) If the damage occurred within eighteen (18) months of the last day of the Lease Term and the time estimated to substantially complete the restoration exceeds one-half (1/2) of the number of full months then remaining in the Lease Term from and after the date the architect’s or construction consultant’s written opinion is delivered.

10.5 Tenant’s Waiver. Landlord and Tenant agree that the provisions of Paragraph 10.4 above, captioned “Tenant’s Right To Terminate,” are intended to supersede and replace the provisions contained in California Civil Code, Section 1932, Subdivision 2, and California Civil Code, Section 1934, and accordingly, Tenant hereby waives the provisions of such Civil Code Sections and the provisions of any successor Civil Code Sections or similar laws hereinafter enacted.

10.6 Abatement Of Rent. In the event of damage to the Leased Premises which does not result in the termination of this Lease, the Base Monthly Rent (and any Additional Rent) shall be temporarily abated during the period of restoration in proportion to the degree to which Tenant’s use of the Leased Premises is impaired by such damage.

ARTICLE 11

CONDEMNATION

11.1 Tenant’s Right To Terminate. Except as otherwise provided in Paragraph 11.4 below regarding temporary takings, Tenant shall have the option to terminate this Lease if, as a result of any taking, all or a material portion of the Leased Premises is taken and the part of the Leased Premises that remains cannot, within a reasonable period of time, be made reasonably suitable for the continued operation of Tenant’s business as conducted in the Leased Premises immediately prior to the taking. Tenant must exercise such option within a reasonable period of time, to be effective on the later to occur of (i) the date that possession of that portion of the Leased Premises that is condemned is taken by the condemnor or (ii) the date Tenant vacated the Leased Premises.

11.2 Landlord’s Right To Terminate. Except as otherwise provided in Paragraph 11.4 below regarding temporary takings, Landlord shall have the option to terminate this Lease if, as a result of any taking, (i) all or a material portion of the Leased Premises is taken and the part of the Leased Premises that remains cannot, within a reasonable period of time, be made reasonably suitable for the continued operation of Tenant’s business as conducted in the Leased Premises immediately prior to the taking, or (iii) because of the Laws then in force, the Leased Premises may

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not be used for the same use being made before such taking, whether or not restored as required by Paragraph 11.3 below. Any such option to terminate by Landlord must be exercised within a reasonable period of time, to be effective as of the date possession is taken by the condemnor.

11.3 Restoration. If any part of the Leased Premises is taken and this Lease is not terminated, then Landlord shall, to the extent not prohibited by Laws then in force, repair any damage occasioned thereby to the remainder thereof to a condition reasonably suitable for Tenant’s continued operations and otherwise, to the extent practicable, in the manner and to the extent provided in Paragraph 10.1.

11.4 Temporary Taking. If a portion of the Leased Premises is temporarily taken for a period of nine (9) months or less and such period does not extend beyond the Lease Expiration Date, this Lease shall remain in effect. If any portion of the Leased Premises is temporarily taken for a period which exceeds nine (9) months or which extends beyond the Lease Expiration Date, then the rights of Landlord and Tenant shall be determined in accordance with Paragraphs 11.1 and 11.2 above.

11.5 Division Of Condemnation Award. Any award made for any taking of the Leased Premises, or any portion thereof, shall belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of its right, title and interest in any such award; provided, however, that Tenant shall be entitled to receive any portion of the award that is made specifically (i) for the taking of personal property, inventory or trade fixtures belonging to Tenant, (ii) for the interruption of Tenant’s business or its moving costs, or (iii) for the value of any leasehold improvements installed and paid for by Tenant. The rights of Landlord and Tenant regarding any condemnation shall be determined as provided in this Article, and each party hereby waives the provisions of Section 1265.130 of the California Code of Civil Procedure, and the provisions of any similar law hereinafter enacted, allowing either party to petition the Supreme Court to terminate this Lease and/or otherwise allocate condemnation awards between Landlord and Tenant in the event of a taking of the Leased Premises.

11.6 Abatement Of Rent. In the event of a taking of the Leased Premises which does not result in a termination of this Lease, then, as of the date possession is taken by the condemning authority, the Base Monthly Rent (and any Additional Rent) shall be abated in proportion to the degree to which, and during the period of time for which, Tenant’s use of the Leased Premises is impaired.

11.7 Taking Defined. The term “taking” or “taken” as used in this Article 11 shall mean any transfer or conveyance of all or any portion of the Leased Premises to a public or quasi-public agency or other entity having the power of eminent domain pursuant to or as a result of the exercise of such power by such an agency, including any inverse condemnation and/or any sale or transfer by Landlord of all or any portion of the Leased Premises to such an agency under threat of condemnation or the exercise of such power.

ARTICLE 12

DEFAULT AND REMEDIES

12.1 Events Of Tenant’s Default. Tenant shall be in default of its obligations under this Lease if any of the following events (each an “Event of Default”) occur:

     (a) Tenant shall have failed to pay Base Monthly Rent or any regularly scheduled Additional Rent when due and such failure continues for more than five (5) days after Landlord gives written notice thereof to Tenant; provided, however, that after the second such failure in a calendar year, only the passage of time, but no further notice, shall be required to establish an Event of Default in the same calendar year; or

     (b) Tenant shall have failed to pay any other Additional Rent or other amount of money or charge payable by Tenant hereunder as and when such additional rent or amount or charge becomes due and payable and such failure continues for more than ten (10) days after Landlord gives written notice to Tenant of Tenant’s failure to

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make payment when it was due; provided, however, that after the second such failure in a calendar year, only the passage of time, but no further notice, shall be required to establish an Event of Default in the same calendar year; or

     (c) Tenant shall have failed to perform any term, covenant or condition of this Lease (except those requiring the payment of Base Monthly Rent or Additional Rent, which failures shall be governed by subparagraphs (a) and (b) above) within thirty (30) days after written notice from Landlord to Tenant specifying the nature of such failure and requesting Tenant to perform same; provided, however, that Tenant shall use diligence to cure such failure as soon as reasonably practicable; and provide, further, that if, by the nature of such term, covenant or condition, such failure cannot reasonably be cured within such period of thirty (30) days, an Event of Default shall not exist as long as Tenant commences with due diligence and dispatch the curing of such failure within such period of thirty (30) days and, having so commenced, thereafter prosecutes with diligence and dispatch and completes the curing of such failure within a reasonable time; or

     (d) Tenant shall have sublet the Leased Premises or assigned or encumbered its interest in this Lease in violation of the provisions contained in Article 7, whether voluntarily or by operation of Law; or

     (e) Tenant shall have abandoned the Leased Premises (Tenant’s vacating the Leased Premises shall not be deemed an abandonment, so long as Tenant continues to pay Rent and to perform all of Tenant’s other obligations as required under this Lease); or

     (f) Tenant shall have permitted or suffered the sequestration or attachment of, or execution on, or the appointment of a custodian or receiver with respect to, all or any substantial part of the property or assets of Tenant or any property or asset essential to the conduct of Tenant’s business, and Tenant shall have failed to obtain a return or release of the same within thirty days thereafter, or prior to sale pursuant to such sequestration, attachment or levy, whichever is earlier; or

     (g) Tenant shall have made a general assignment of all or a substantial part of its assets for the benefit of its creditors; or

     (h) Tenant shall have allowed (or sought) to have entered against it a decree or order which: (i) grants or constitutes an order for relief, appointment of a trustee, or condemnation or a reorganization plan under the bankruptcy laws of the United States; (ii) approves as properly filed a petition seeking liquidation or reorganization under said bankruptcy laws or any other debtor’s relief law or similar statute of the United States or any state thereof; or (iii) otherwise directs the winding up or liquidation of Tenant; provided, however, if any decree or order was entered without Tenant’s consent or over Tenant’s objection, Landlord may not terminate this Lease pursuant to this Subparagraph if such decree or order is rescinded or reversed within thirty days after its original entry; or

     (i) Tenant shall have availed itself of the protection of any debtor’s relief law, moratorium law or other similar law which does not require the prior entry of a decree or order.

12.2 Landlord’s Remedies. In the event of an Event of Default by Tenant, and without limiting Landlord’s right to indemnification as provided in Article 8.2, Landlord shall have the following remedies, in addition to all other rights and remedies provided by law or otherwise provided in this Lease, to which Landlord may resort cumulatively, or in the alternative:

     (a) Landlord may, at Landlord’s election, keep this Lease in effect and enforce, by an action at law or in equity, all of its rights and remedies under this Lease including, without limitation, (i) the right to recover the rent and other sums as they become due by appropriate legal action, (ii) the right to make payments required by Tenant, or perform Tenant’s obligations and be reimbursed by Tenant for the cost thereof with interest at the then maximum rate of interest not prohibited by law from the date the sum is paid by Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive relief and specific performance to prevent Tenant from violating the terms of this Lease and/or to compel Tenant to perform its obligations under this Lease, as the case may be.

     (b) Landlord may, at Landlord’s election, if such election is made prior to a complete cure of the applicable Event of Default by Tenant, terminate this Lease by giving Tenant written notice of termination, in which

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event this Lease shall terminate on the date set forth for termination in such notice. Any termination under this subparagraph shall not relieve Tenant from its obligation to pay to Landlord all Base Monthly Rent and Additional Rent then or thereafter due, or any other sums due or thereafter accruing to Landlord, or from any claim against Tenant for damages previously accrued or then or thereafter accruing, In no event shall any one or more of the following actions by Landlord, in the absence of a written election by Landlord to terminate this Lease constitute a termination of this Lease:

          (i) Appointment of a receiver or keeper in order to protect Landlord’s interest hereunder;

          (ii) Consent to any subletting of the Leased Premises or assignment of this Lease by Tenant, whether pursuant to the provisions hereof or otherwise; or

          (iii) Any action taken by Landlord or its partners, principals, members, officers, agents, employees, or servants, which is intended to mitigate the adverse effects of any breach of this Lease by Tenant, including, without limitation, any action taken to maintain and preserve the Leased Premises on any action taken to relet the Leased Premises or any portion thereof for the account at Tenant and in the name of Tenant.

     (c) In the event Tenant breaches this Lease and abandons the Leased Premises, Landlord may terminate this Lease, but this Lease shall not terminate unless Landlord gives Tenant written notice of termination. If Landlord does not terminate this Lease by giving written notice of termination, Landlord may enforce all its rights and remedies under this Lease, including the right and remedies provided by California Civil Code Section 1951.4 (“lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations”), as in effect on the Effective Date of this Lease.

     (d) In the event Landlord terminates this Lease, Landlord shall be entitled, at Landlord’s election, to the rights and remedies provided in California Civil Code Section 1951.2, as in effect on the Effective Date of this Lease. For purposes of computing damages pursuant to Section 1951.2, an interest rate equal to the maximum rate of interest then not prohibited by law shall be used where permitted. Such damages shall include, without limitation:

          (i) 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 Tenant proves could be reasonably avoided, computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco, at the time of award plus one percent; and

          (ii) Any other amount reasonably necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease, or which in the ordinary course of things would be likely to result therefrom, including without limitation, the following: (i) expenses for cleaning, repairing or restoring the Leased Premises, (ii) expenses for altering, remodeling or otherwise improving the Leased Premises for the purpose of reletting, including removal of existing leasehold improvements and/or installation of additional leasehold improvements (regardless of how the same is funded, including reduction of rent, a direct payment or allowance to a new tenant, or otherwise), (iii) broker’s fees allocable to the remainder of the term of this Lease, advertising costs and other expenses of reletting the Leased Premises; (iv) costs of carrying and maintaining the Leased Premises, such as taxes, insurance premiums, utility charges and security precautions, (v) expenses incurred in removing, disposing of and/or storing any of Tenant’s personal property, inventory or trade fixtures remaining therein; (vi) reasonable attorney’s fees, expert witness fees, court costs and other reasonable expenses incurred by Landlord (but not limited to taxable costs) in retaking possession of the Leased Premises, establishing damages hereunder, and releasing the Leased Premises; and (vii) any other reasonable expenses, costs or damages otherwise incurred or suffered as a result of Tenant’s default.

12.3 Landlord’s Default And Tenant’s Remedies. In the event Landlord fails to perform its obligations under this Lease, Landlord shall nevertheless not be in default under the terms of this Lease until such time as Tenant shall have first given Landlord written notice specifying the nature of such failure to perform its obligations, and then only after Landlord shall have had thirty (30) days following its receipt of such notice within which to perform such obligations; provided that, Landlord shall use diligence to cure such failure as soon as reasonably practicable; and provided, further, that if longer than thirty (30) days is reasonably required in order to perform such obligations,

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Landlord shall have such longer period. In the event of Landlord’s default as above set forth, then, and only then, Tenant may then proceed in equity or at law to compel Landlord to perform its obligations and/or to recover damages proximately caused by such failure to perform (except as and to the extent Tenant has waived its right to damages as provided in this Lease). In addition, in the event that any entity not controlling, controlled by or under common control with iStar Financial Inc. succeeds to Landlord’s rights and obligations under this Lease, and such successor Landlord defaults beyond the notice and cure period as above set forth, then, and only then, Tenant may perform such obligations at such successor Landlord’s cost, in which event such successor Landlord shall promptly reimburse Tenant for the amount of such costs reasonably and actually incurred by Tenant (unless Tenant would have been responsible to pay such costs as Additional Rent had Landlord performed such obligations).

12.4 Limitation Of Tenant’s Recourse. Tenant’s recourse shall be limited to Landlord’s interest in the Leased Premises, which interest shall include undistributed net proceeds from a sale, other transfer or refinancing of the Leased Premises. In addition, if Landlord is a corporation, trust, partnership, joint venture, limited liability company, unincorporated association, or other form of business entity, Tenant agrees that (i) the obligations of Landlord under this Lease shall not constitute personal obligations of the officers, directors, trustees, partners, joint venturers, members, owners, stockholders, or other principals of such business entity, and (ii) Tenant shall have no recourse to the assets of such officers, directors, trustees, partners, joint venturers, members, owners, stockholders or principals, except as otherwise provided by Law. Additionally, if Landlord is a partnership or limited liability company, then Tenant covenants and agrees:

     (a) No partner or member of Landlord shall be sued or named as a party in any suit or action brought by Tenant with respect to any alleged breach of this Lease (except to the extent necessary to secure jurisdiction over the partnership and then only for that sole purpose);

     (b) No service of process shall be made against any partner or member of Landlord except for the sole purpose of securing jurisdiction over the partnership; and

     (c) No writ of execution will ever be levied against the assets of any partner or member of Landlord other than to the extent of his or her interest in the assets of the partnership or limited liability company constituting Landlord.

Tenant further agrees that each of the foregoing covenants and agreements shall be enforceable by Landlord and by any partner or member of Landlord and shall be applicable to any actual or alleged misrepresentation or nondisclosure made regarding this Lease or the Leased Premises or any actual or alleged failure, default or breach of any covenant or agreement either expressly or implicitly contained in this Lease or imposed by statute or at common law.

12.5 Tenant’s Waiver. Landlord and Tenant agree that the provisions of Paragraph 12.3 above are intended to supersede and replace the provisions of California Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant hereby waives the provisions of California Civil Code Sections 1932(1), 1941 and 1942 and/or any similar or successor law regarding Tenant’s right to terminate this Lease or to make repairs and deduct the expenses of such repairs from the rent due under this Lease.

ARTICLE 13

GENERAL PROVISIONS

13.1 Taxes On Tenant’s Property. Tenant shall pay before delinquency any and all taxes, assessments, license fees, use fees, permit fees and public charges of whatever nature or description levied, assessed or imposed against Tenant or Landlord by a governmental agency arising out of, caused by reason of or based upon Tenant’s estate in this Lease, Tenant’s ownership of property, improvements made by Tenant to the Leased Premises, improvements made by Landlord for Tenant’s use within the Leased Premises, Tenant’s use (or estimated use) of public facilities or services or Tenant’s consumption (or estimated consumption) of public utilities, energy, water or other resources (collectively, “Tenant’s Interest”). Upon demand by Landlord if Landlord suspects that such payments have not been made by Tenant, Tenant shall furnish Landlord with satisfactory evidence of these payments. If any such taxes,

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assessments, fees or public charges are levied against Landlord, Landlord’s property, the Leased Premises or any portion thereof, or if the assessed value of the Leased Premises or any portion thereof is increased by the inclusion therein of a value placed upon Tenant’s Interest, regardless of the validity thereof, Landlord shall have the right to require Tenant to pay such taxes, and if not paid and satisfactory evidence of payment delivered to Landlord prior to delinquency, then Landlord shall have the right to pay such taxes on Tenant’s behalf and to invoice Tenant for the same. If Tenant shall not have paid such taxes then Tenant shall, within thirty (30) days of the date it receives an invoice from Landlord setting forth the amount of such taxes, assessments, fees, or public charge so levied, pay to Landlord, as Additional Rent, the amount set forth in such invoice. Failure by Tenant to pay the amount so invoiced within such time period shall be conclusively deemed a default by Tenant under this Lease. Tenant shall have the right to bring suit in any court of competent jurisdiction to recover from the taxing authority the amount of any such taxes, assessments, fees or public charges so paid.

13.2 Holding Over. This Lease shall terminate without further notice on the Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant after expiration of the Lease Term shall neither constitute a renewal nor extension of this Lease nor give Tenant any rights in or to the Leased Premises except as expressly provided in this Paragraph. Any such holding over shall be construed to be a tenancy from month to month, on the same terms and conditions herein specified insofar as applicable, except that the Base Monthly Rent shall be increased to an amount equal to one hundred fifty percent (150%) of the Base Monthly Rent payable during the last full month immediately preceding such holding over.

13.3 Subordination To Mortgages. This Lease is subject to and subordinate to all ground leases, mortgages and deeds of trust which affect the Leased Premises or any portion thereof and which are of public record as of the Effective Date of this Lease, and to all renewals, modifications, consolidations, replacements and extensions thereof. However, if the lessor under any such ground lease or any lender holding any such mortgage or deed of trust shall advise Landlord that it desires or requires this Lease to be made prior and superior thereto, then, upon written request of Landlord to Tenant, Tenant shall promptly execute, acknowledge and deliver any and all customary or reasonable documents or instruments which Landlord and such lessor or lender deems necessary or desirable to make this Lease prior thereto. Tenant hereby consents to Landlord’s ground leasing the land underlying the Leased Premises and/or encumbering the Leased Premises or any portion thereof as security for future loans on such terms as Landlord shall desire, all of which future ground leases, mortgages or deeds of trust shall be subject to and subordinate to this Lease. However, if any lessor under any such future ground lease or any lender holding such future mortgage or deed of trust shall desire or require that this Lease be made subject to and subordinate to such future ground lease, mortgage or deed of trust, then Tenant agrees, within ten days after Landlord’s written request therefor, to execute, acknowledge and deliver to Landlord any and all commercially reasonable documents or instruments requested by Landlord or by such lessor or lender as may be necessary or proper to assure the subordination of this Lease to such future ground lease, mortgage or deed of trust, but only if such lessor or lender agrees to recognize Tenant’s rights under this Lease and agrees not to disturb Tenant’s quiet possession of the Leased Premises so long as there has been no Event of Default by Tenant. If Landlord assigns the Lease as security for a loan, Tenant agrees to execute such commercially reasonable documents as are reasonably requested by the lender and to provide reasonable provisions in the Lease protecting such lender’s security interest which are customarily required by institutional lenders making loans secured by a deed of trust. Landlord shall use reasonable efforts to provide Tenant, within ten (10) days after the Lease Commencement Date, with a Subordination, Nondisturbance and Attornment Agreement substantially in the form attached as Exhibit D hereto from any ground lessor(s), mortgage holder(s) or lien holder(s) (or in such other form such other party may reasonably require). In addition, during the Lease Term and any extensions thereof, Landlord shall use commercially reasonable efforts to provide Tenant with such a Subordination, Nondisturbance and Attornment Agreement from any future ground lessor, mortgage holder or lien holder that may require that this Lease be subordinated to its interest in the Leased Premises.

13.4 Tenant’s Attornment Upon Foreclosure. Tenant shall, upon request, attorn (i) to any purchaser of the Leased Premises or any portion thereof at any foreclosure sale or private sale conducted pursuant to any security instruments encumbering the Leased Premises or any portion thereof, (ii) to any grantee or transferee designated in any deed given in lieu of foreclosure of any security interest encumbering the Leased Premises or any portion thereof, or (iii) to the lessor under an underlying ground lease of the land underlying the Leased Premises or any portion thereof, should such ground lease be terminated; provided that such purchaser, grantee or lessor recognizes Tenant’s rights under this Lease, except that such purchaser, grantee or lessor shall not: (a) be liable for any act or

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omission of any prior landlord under this Lease; (b) be subject to any offsets or defenses which Tenant might have against any prior landlord (prior to such purchaser, grantee or lessor becoming landlord under this Lease); (c) be bound by any Rent or Additional Rent which Tenant might have paid to any prior landlord greater than the current month or more than one (1) month prior to the due date for the then current installment; or (d) be liable for any deposits made or prepaid Rent paid by Tenant hereunder unless such deposits or payments have been transferred to such purchaser, grantee or lessor.

13.5 Mortgagee Protection. In the event of any default on the part of Landlord, Tenant will give notice by registered mail to any Lender or lessor under any underlying ground lease who shall have requested, in writing, to Tenant that it be provided with such notice, and Tenant shall offer such Lender or lessor a reasonable opportunity to cure the default, including time to obtain possession of the Leased Premises by power of sale or judicial foreclosure or other appropriate legal proceedings if reasonably necessary to effect a cure.

13.6 Estoppel Certificates.

     (a) Tenant will, following any request by Landlord, promptly execute and deliver to Landlord an estoppel certificate in the form attached as Exhibit E (i) certifying that this Lease is unmodified and in full force and effect, or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect, (ii) stating the date to which the rent and other charges are paid in advance, if any, (iii) acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iv) certifying such other information about this Lease as may be reasonably requested by Landlord, its Lender or prospective lenders, investors or purchasers of the Leased Premises or any portion thereof. Tenant’s failure to execute and deliver such estoppel certificate within ten (10) business days after receipt of Landlord’s request therefor shall constitute an acknowledgment by Tenant that the statements included therein are true and correct without exception. Landlord and Tenant intend that any statement delivered pursuant to this paragraph may be relied upon by any Lender or purchaser or prospective Lender or purchaser of the Leased Premises, or any interest in any portion thereof.

     (b) Landlord will, following any request by Tenant, promptly execute and deliver to Tenant an estoppel certificate in reasonable form (i) certifying that this Lease is unmodified and in full force and effect, or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect, (ii) stating the date to which the rent and other charges are paid in advance, if any, (iii) acknowledging that there are not, to Landlord’s knowledge, any uncured defaults on the part of Tenant hereunder, or specifying such defaults if any are claimed, and (iv) certifying such other information about this Lease as may be reasonably requested by Tenant. Landlord’s failure to execute and deliver such estoppel certificate within ten (10) business days after receipt of Tenant’s request therefor shall constitute an acknowledgment by Landlord that the statements included therein are true and correct without exception.

13.7 Financial Statements and Information. If Tenant is not a reporting company under the Securities and Exchange Act of 1934, as amended, Tenant shall deliver to Landlord and to any lender or purchaser designated by Landlord the following information certified to be true, complete and correct by an officer of Tenant: within 90 days after the end of each fiscal year of Tenant, a balance sheet of Tenant and its consolidated subsidiaries as of the end of such year, a statements of profits and losses of Tenant and its subsidiaries for such year, and an audited statement of cash flows of Tenant and its consolidated subsidiaries for such year, setting forth in each case, in comparative form, the corresponding figures for the preceding fiscal year in reasonable detail and scope and certified by independent certified public accountants of recognized national standing selected by Tenant; and within 45 days after the end of each fiscal quarter of Tenant a balance sheet of Tenant and its consolidated subsidiaries as at the end of such quarter, statements of profits and losses of Tenant and its consolidated subsidiaries for such quarter and a statement of cash flows of Tenant and its consolidated subsidiaries for such quarter, setting forth in each case, in comparative form, the corresponding figures for the similar quarter of the preceding year, in reasonable detail and scope, and certified to be true and complete by a financial officer of Tenant having knowledge thereof; the foregoing financial statements all being prepared in accordance with generally accepted accounting principles, consistently applied.

13.8 Transfer By Landlord. Landlord and its successors in interest shall have the right to transfer their interest in the Leased Premises or any portion thereof at any time and to any person or entity. In the event of any such transfer,

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the Landlord originally named herein (and in the case of any subsequent transfer, the transferor), from the date of such transfer, (i) shall be automatically relieved, without any further act by any person or entity, of all liability for the performance of the obligations of the Landlord hereunder which may accrue after the date of such transfer and (ii) shall be relieved of all liability for the performance of the obligations of the Landlord hereunder which have accrued before the date of transfer if its transferee agrees to assume and perform all such prior obligations of the Landlord hereunder (provided such transfer is not a fraudulent conveyance). Tenant shall attorn to any such transferee. After the date of any such transfer, the term “Landlord” as used herein shall mean the transferee of such interest in the Leased Premises.

13.9 Force Majeure. The obligations of each of the parties under this Lease (other than the obligations to pay money) shall be temporarily excused if such party is prevented or delayed in performing such obligations by reason of any strikes, lockouts or labor disputes; government restrictions, regulations, controls, action or inaction; civil commotion; or extraordinary weather, fire or other acts of God.

13.10 Notices. Any notice required or desired to be given by a party regarding this Lease shall be in writing and shall be personally served, or in lieu of personal service may be given by reputable overnight courier service, postage prepaid, addressed to the other party as follows (any “copy to” notices may be given by regular U.S. mail):

If to Landlord:	TriNet Milpitas Associates, LLC
	c/o iStar Financial Inc.
	1114 Avenue of the Americas, 27th Floor
	New York, NY 10036
	Attention: Asset Manager
with a copy to:	TriNet Milpitas Associates, LLC
	c/o iStar Financial Inc.
	One Embarcadero Center, Suite 3300
	San Francisco, CA 94111
	Attention: Chief Operating Officer
and with a copy to:	TriNet Milpitas Associates, LLC
	c/o iStar Financial Inc.
	3480 Preston Ridge Road, Suite 575
	Alpharetta, GA 30005
	Attention: Director of Lease Administration
If to Tenant:	LSI Logic Corporation
	1621 Barber Lane, M/S D-106
	Milpitas, California 95035-7458
	Attn: General Counsel
with a copy to:	LSI Logic Corporation
	1621 Barber Lane, M/S D-129
	Milpitas, California 95035-7458
	Attn: Corporate Real Estate

Any notice given in accordance with the foregoing shall be deemed received upon actual receipt or refusal to accept delivery.

13.11 Attorneys’ Fees. In the event any party shall bring any action, arbitration proceeding or legal proceeding alleging a breach of any provision of this Lease, to recover Rent, to terminate this Lease, or to enforce, protect, determine or establish any term or covenant of this Lease or rights or duties hereunder of either party, the prevailing party shall be entitled to recover from the non-prevailing party as a 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.

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13.12 Definitions. Any term that is given a special meaning by any provision in this Lease shall, unless otherwise specifically stated, have such meaning wherever used in this Lease or in any Addenda or amendment hereto. In addition to the terms defined in Article 1, the following terms shall have the following meanings:

     (a) Real Property Taxes. The term “Real Property Tax” or “Real Property Taxes” shall each mean Tenant’s Proportionate Share of (i) all taxes, assessments, levies and other charges of any kind or nature whatsoever, general and special, foreseen and unforeseen (including all instruments of principal and interest required to pay any general or special assessments for public improvements and any increases resulting from reassessments caused by any change in ownership or new construction), now or hereafter imposed by any governmental or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments, which are levied or assessed for whatever reason against the Leased Premises or any portion thereof, or Landlord’s interest herein, or the fixtures, equipment and other property of Landlord that is an integral part of the Leased Premises and located thereon, (ii) all charges, levies or fees imposed by any governmental authority against Landlord by reason of or based upon the use of or number of parking spaces within the Leased Premises, the amount of public services or public utilities used or consumed (e.g. water, gas, electricity, sewage or waste water disposal) at the Leased Premises, the number of people employed by tenants of the Leased Premises, the size (whether measured in area, volume, number of tenants or whatever) or the value of the Leased Premises, or the type of use or uses conducted within the Leased Premises, and all costs and fees (including reasonable attorneys’ fees) reasonably incurred by Landlord in contesting any Real Property Tax and in negotiating with public authorities as to any Real Property Tax, and (iii) all tax increases due to improvements made to the Leased Premises by Tenant or by Landlord on behalf of Tenant. If, at any time during the Lease Term, the taxation or assessment of the Leased Premises prevailing as of the Effective Date of this Lease shall be altered so that in lieu of or in addition to any the Real Property Tax described above there shall be levied, awarded or imposed (whether by reason of a change in the method of taxation or assessment, creation of a new tax or charge, or any other cause) an alternate, substitute, or additional use or charge (i) on the value, size, use or occupancy of the Leased Premises or Landlord’s interest therein or (ii) on or measured by the gross receipts, income or rentals from the Leased Premises, or on Landlord’s business of owning, leasing or managing the Leased Premises or (iii) computed in any manner with respect to the operation of the Leased Premises, then any such tax or charge, however designated, shall be included within the meaning of the terms “Real Property Tax” or “Real Property Taxes” for purposes of this Lease. If any Real Property Tax is partly based upon property or rents unrelated to the Leased Premises, then only that part of such Real Property Tax that is fairly allocable to the Leased Premises shall be included within the meaning of the terms “Real Property Tax” or “Real Property Taxes.” Notwithstanding the foregoing, the terms “Real Property Tax” or “Real Property Taxes” shall not include any (a) estate, inheritance, transfer, gift, capital levy, capital stock, franchise or income tax, (b) items included as a Property Maintenance Cost, (c) reserves for future Real Property Taxes, (d) environmental assessments, charges or liens arising in connection with the remediation of Pre-existing Hazardous Materials (unless caused by Tenant or a Tenant or any Tenant Related Party) or of other Hazardous Materials caused by Landlord or any Landlord Related Party, or (e) any personal property taxes attributable to items not owned by Tenant or utilized by Tenant in connection with Tenant’s operations at the Leased Premises.

     (b) Landlord’s Insurance Costs. The term “Landlord’s Insurance Costs” shall mean Tenant’s Proportionate Share of the actual costs to Landlord to carry and maintain the policies of fire and property damage insurance for the Leased Premises or any portion thereof and general liability and any other insurance required or permitted to be carried by Landlord pursuant to Article 9, together with the amortized portion of any deductible amounts paid by Landlord upon the occurrence of any insured casualty or loss for which such amortization falls within the Lease Term (provided such amounts are amortized only if they are deemed a capital expense in accordance with generally accepted accounting principles, in which event they shall be amortized over the useful life of the applicable item, based on generally accepted industry standards).

     (c) Property Maintenance Costs. The term “Property Maintenance Costs” shall mean Tenant’s Proportionate Share of all costs and expenses (except Landlord’s Insurance Costs and Real Property Taxes) paid or incurred by Landlord in protecting, operating, maintaining, repairing and preserving the Leased Premises and all parts thereof, including without limitation, (i) a market rate professional management fee not to exceed four percent (4%) of Base Monthly Rent if Tenant is not self-managing the Leased Premises, (ii) the amortizing portion of any costs incurred by Landlord in the making of any modifications, alterations or improvements required by any governmental authority as set forth in Article 6, which are so amortized during the Lease Term, (iii) the amortizing portion of any costs incurred by Landlord pursuant to the last sentence of Paragraph 5.1(a), and (iv)such other

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reasonable costs as may be paid or incurred with respect to operating, maintaining, and preserving the Leased Premises, except those items specifically set forth in Paragraph 5.1(b) to be performed at Landlord’s sole cost and expense. To the extent that any Property Maintenance Costs are incurred for items deemed to be capital improvements in accordance with generally accepted accounting principles, then such costs shall be amortized by Landlord over the useful life of such items, and the monthly amortized cost of items as so amortized shall be considered a Property Maintenance Cost.

     (d) Intentionally Deleted.

     (e) Property Operating Expenses. The term “Property Operating Expenses” shall mean and include all Real Property Taxes, plus all Landlord’s Insurance Costs, plus all Property Maintenance Costs. Notwithstanding the foregoing, Property Operating Expenses shall not include: (a) the cost of capital improvements (except as set forth in this Lease); (b) depreciation; (c) all fees, costs, principal payments of mortgage and interest related to any mortgage(s) or deed(s) of trust, all payments made under any ground or underlying lease and all other non-operating debts of Landlord; (d) the cost of repairs or other work to the extent Landlord is reimbursed by insurance or condemnation proceeds; (e) costs in connection with leasing space in the Building, (including, without limitation, brokerage commissions, marketing costs, attorneys’ fees, lease concessions, rental abatements and construction allowances granted to specific tenants); (f) costs incurred in connection with the sale, financing or refinancing of the Leased Premises (other than any increase in Real Property Taxes that may result therefrom); (g) fines, interest and penalties incurred due to the late payment by Landlord of Property Operating Expenses (unless caused by the act or omission of Tenant); (h) organizational expenses associated with the creation, maintenance and operation of the entity which constitutes Landlord; (i) any penalties or damages that Landlord pays to Tenant under this Lease; (j) costs associated with damage or repairs to any part of the Project or necessitated by the gross negligence or willful misconduct of Landlord or any Landlord Related Party; (k) reserves for Landlord’s repair, replacement or improvement of the Leased Premises or any portion thereof; (1) executive salaries and benefits; (m) legal fees, accountant fees and other expenses incurred in connection with the defense of Landlord’s title to or interest in the Leased Premises or any part thereof; or (n) any costs, fines, or penalties incurred due to violations by Landlord or any Landlord Related Party of any governmental rule or authority, this Lease, or due to Landlord’s gross negligence or willful misconduct.

     (f) Law. The term “Law” or “Laws” shall mean any judicial decisions and any statute, constitution, ordinance, resolution, regulation, rule, administrative order, or other requirements of any municipal, county, state, federal, or other governmental agency or authority having jurisdiction over the parties to this Lease, the Leased Premises or any portion thereof, or either of them, in effect either at the Effective Date of this Lease or at any time during the Lease Term, including, without limitation, any regulation, order, or policy of any quasi-official entity or body (e.g. a board of fire examiners or a public utility or special district).

     (g) Lender. The term “Lender” shall mean the holder of any promissory note or other evidence of indebtedness secured by the Leased Premises or any portion thereof.

     (h) Private Restrictions. The term “Private Restrictions” shall mean (as they may exist from time to time) any and all covenants, conditions and restrictions, private agreements, easements, and any other recorded documents or instruments affecting the use of the Leased Premises or any portion thereof.

     (i) Rent. The term “Rent” shall mean collectively Base Monthly Rent and all Additional Rent.

13.13 General Waivers. One party’s consent to or approval of any act by the other party requiring the first party’s consent or approval shall not be deemed to waive or render unnecessary the first party’s consent to or approval of any subsequent similar act by the other party. No waiver of any provision hereof, or any waiver of any breach of any provision hereof, shall be effective unless in writing and signed by the waiving party. The receipt by Landlord of any Rent or payment with or without knowledge of the breach of any other provision hereof shall not be deemed a waiver of any such breach. No waiver of any provision of this Lease shall be deemed a continuing waiver unless such waiver specifically states so in writing and is signed by both Landlord and Tenant. No delay or omission in the exercise of any right or remedy accruing to either party upon any breach by the other party under this Lease shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring.

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The waiver by either party of any breach of any provision of this Lease shall not be deemed to be a waiver of any subsequent breach of the same or any other provisions herein contained.

13.14 Miscellaneous. Should any provisions of this Lease prove to be invalid or illegal, such invalidity or illegality shall in no way affect, impair or invalidate any other provisions hereof, and such remaining provisions shall remain in full force and effect. Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor. Any copy of this Lease which is executed by the parties shall be deemed an original for all purposes. This Lease shall, subject to the provisions regarding assignment, apply to and bind the respective heirs, successors, executors, administrators and assigns of Landlord and Tenant. The term “party” shall mean Landlord or Tenant as the context implies. If Tenant consists of more than one person or entity, then all members of Tenant shall be jointly and severally liable hereunder. This Lease shall be construed and enforced in accordance with the Laws of the State in which the Leased Premises are located. The captions in this Lease are for convenience only and shall not be construed in the construction or interpretation of any provision hereof. When the context of this Lease requires, the neuter gender includes the masculine, the feminine, a partnership, corporation, limited liability company, joint venture, or other form of business entity, and the singular includes the plural. The terms “must,” “shall,” “will,” and “agree” are mandatory. The term “may” is permissive. When a party is required to do something by this Lease, it shall do so at its sole cost and expense without right of reimbursement from the other party unless specific provision is made therefor. Where Landlord’s consent is required hereunder, the consent of any Lender shall also be required to the extent such Lender consent is required under the applicable loan documents. Landlord and Tenant shall both be deemed to have drafted this Lease, and the rule of construction that a document is to be construed against the drafting party shall not be employed in the construction or interpretation of this Lease. Where Tenant is obligated not to perform any act or is not permitted to perform any act, Tenant is also obligated to restrain any others reasonably within its control, including agents, invitees, contractors, subcontractors and employees, from performing such act. Landlord shall not become or be deemed a partner or a joint venturer with Tenant by reason of any of the provisions of this Lease.

ARTICLE 14

CORPORATE AUTHORITY

BROKERS AND ENTIRE AGREEMENT

14.1 Corporate Authority. If Tenant is a corporation, each individual executing this Lease on behalf of such corporation represents and warrants that Tenant is validly formed and duly authorized and existing, that Tenant is qualified to do business in the State in which the Leased Premises are located, that Tenant has the full right and legal authority to enter into this Lease, and that he or she is duly authorized to execute and deliver this Lease on behalf of Tenant in accordance with its terms. Landlord represents and warrants that Landlord has the full right and legal authority to enter into this Lease, and that the person(s) executing this Lease is duly authorized to execute and deliver this Lease on behalf of Landlord in accordance with its terms.

14.2 Brokerage Commissions. Within five (5) business days after the Effective Date of this Lease, Landlord shall pay to the Brokers (as named in Article 1) a one-time fee of $358,600.00. Tenant represents, warrants and agrees that it has not had any dealings with any real estate broker(s), leasing agent(s), finder(s) or salesmen, other than the Brokers with respect to the lease by it of the Leased Premises pursuant to this Lease, and that, except for the onetime fee described in the immediately foregoing sentence, it will assume all obligations and responsibility with respect to the payment of such Brokers, and that it will indemnify, defend with competent counsel, and hold Landlord harmless from any liability for the payment of any real estate brokerage commissions, leasing commissions or finder’s fees claimed by any other real estate broker(s), leasing agent(s), finder(s), or salesmen to be earned or due and payable by reason of Tenant’s agreement or promise (implied or otherwise) to pay (or to have Landlord pay) such a commission or finder’s fee by reason of its leasing the Leased Premises pursuant to this Lease.

14.3 Entire Agreement. This Lease and the Exhibits (as described in Article 1), which Exhibits are by this reference incorporated herein, constitute the entire agreement between the parties, and there are no other agreements, understandings or representations between the parties relating to the lease by Landlord of the Leased

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Premises to Tenant, except as expressed herein. No subsequent changes, modifications or additions to this Lease shall be binding upon the parties unless in writing and signed by both Landlord and Tenant.

14.4 Landlord’s Representations. Tenant acknowledges that neither Landlord nor any of its agents made any representations or warranties respecting the Leased Premises or any portion thereof, upon which Tenant relied in entering into the Lease, which are not expressly set forth in this Lease. Tenant further acknowledges that neither Landlord nor any of its agents made any representations as to (i) whether the Leased Premises may be used for Tenant’s intended use under existing Law, or (ii) the suitability of the Leased Premises for the conduct of Tenant’s business, or (iii) the exact square footage of the Leased Premises, and that Tenant relies solely upon its own investigations with respect to such matters. Tenant expressly waives any and all claims for damage by reason of any statement, representation, warranty, promise or other agreement of Landlord or Landlord’s agent(s), if any, not contained in this Lease or in any Exhibit attached hereto.

ARTICLE 15

OPTIONS TO EXTEND

15.1 So long as LSI Logic Corporation or any Successor Entity (but not any other transferee) is the Tenant hereunder and occupies at least fifty percent (50%) of the Leased Premises, and subject to the condition set forth in clause (b) below, Tenant shall have two options to extend the term of this Lease with respect to the entirety of the Leased Premises, the first for a period of thirty (30) months from the expiration of the eighth (8^th) year of the Lease Term (the “First Extension Period”), and the second (the “Second Extension Period”) for a period of thirty (30) months from the expiration of the First Extension Period, subject to the following conditions:

     (a) Each option to extend shall be exercised, if at all, by notice of exercise given to Landlord by Tenant not less than two hundred seventy (270) days prior to the expiration of the eighth (8^th) year of the Lease Term or the expiration of the First Extension Period, as applicable;

     (b) Anything herein to the contrary notwithstanding, if there is an Event of Default, either at the time Tenant exercises either extension option or on the commencement date of the First Extension Period or the Second Extension Period, as applicable, Landlord shall have, in addition to all of Landlord’s other rights and remedies provided in this Lease, the right to terminate such option(s) to extend upon notice to Tenant.

15.2 In the event the applicable option is exercised within the time periods set forth herein, the Lease shall be extended for the term of the applicable extension period upon all of the terms and conditions of this Lease, provided that the Base Monthly Rent for each extension period shall be ninety-five percent (95%) of the “Fair Market Rent” for the Leased Premises. For purposes hereof, “Fair Market Rent” shall mean the base rent for the Leased Premises, based upon the rental rate per square foot that an unaffiliated landlord and tenant would agree to for a lease on similar terms of this Lease for the relevant Extension Period for comparable premises (in quality and size) in the vicinity of the Leased Premises, with such comparable base rent including consideration for the presence or absence of tenant improvements or allowances existing or to be provided under the lease for such premises, rental abatements, lease takeovers/assumptions, moving expenses and other forms of rental concessions, real estate brokerage commissions, proposed term of lease, extent of service provided or to be provided under the lease for such premises, the date of the particular rate under consideration became or is to become effective and any other relevant terms or conditions, all determined pursuant to the process described below.

15.3 Within 30 days after receipt of Tenant’s notice of exercise, Landlord shall notify Tenant in writing of Landlord’s estimate of the Base Monthly Rent for the applicable extension period, based on the provisions of Paragraph 15.2 above. Within 30 days after receipt of such notice from Landlord, Tenant shall have the right, exercisable by delivering written notice to Landlord, either to (i) accept Landlord’s statement of Base Monthly Rent as the Base Monthly Rent for the applicable extension period; or (ii) reject Landlord’s statement of Base Monthly Rent as the Base Monthly Rent for the applicable extension period, in which case Landlord and Tenant, acting reasonably and in good faith, shall attempt to reach an agreement as to an acceptable Base Monthly Rent within ten (10) business days after delivery of Tenant’s rejection notice (the “Negotiation Period”). If the parties cannot agree upon an acceptable Base Monthly Rent by the end of the Negotiation Period, then Landlord’s estimate of Fair

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Market Rent shall be submitted to arbitration, which shall be conducted pursuant to the provisions hereof. Failure on the part of Tenant to accept or reject Landlord’s statement of Fair Market Rent within such 30-day period shall constitute acceptance of the Base Monthly Rent for the applicable extension period as calculated by Landlord. To the extent that arbitration has not been completed prior to the expiration of any preceding period for which Base Monthly Rent has been determined, Tenant shall pay Base Monthly Rent at the rate calculated by Landlord, with the potential for an adjustment to be made once Fair Market Rent is ultimately determined by arbitration.

15.4 In the event of arbitration, the judgment or the award rendered in any such arbitration may be entered in any court having jurisdiction and shall be final and binding between the parties. The arbitration shall be conducted and determined in the County of Santa Clara in accordance with the then prevailing rules of the American Arbitration Association or its successor for arbitration of commercial disputes except to the extent that the procedures mandated by such rules shall be modified as follows:

     (a) Tenant shall make demand for arbitration in writing no later than the last day of the Negotiation Period, specifying therein the name and address of the person to act as the arbitrator on its behalf. The arbitrator shall be qualified as a real estate appraiser familiar with the Fair Market Rent of similar industrial, research and development, or office space in the Silicon Valley area who would qualify as an expert witness over objection to give opinion testimony addressed to the issue in a court of competent jurisdiction. Failure on the part of Tenant to make a proper demand in a timely manner for such arbitration shall constitute a waiver of the right thereto. Within 15 days after the service of the demand for arbitration, Landlord shall give notice to Tenant, specifying the name and address of the person designated by Landlord to act as arbitrator on its behalf who shall be similarly qualified. If Landlord fails to notify Tenant of the appointment of its arbitrator, within or by the time above specified, then the arbitrator appointed by Tenant shall be the sole arbitrator to determine the issue.

     (b) In the event that two arbitrators are chosen pursuant to Paragraph 15.4(a) above, the arbitrators so chosen shall, within 15 days after the second arbitrator is appointed, select a third arbitrator, who shall be similarly qualified. If the arbitrators do not select a third arbitrator within said 15-day period, then either party, on behalf of both, may request appointment of such a qualified person by the then Chief Judge of the United States District Court having jurisdiction over the County of Santa Clara, acting in his private and not in his official capacity, and the other party shall not raise any question as to such Judge’s full power and jurisdiction to entertain the application for and make the appointment. The three arbitrators shall decide the dispute by following the procedure set forth below.

     (c) The arbitrator selected by each of the parties shall state in writing his or her determination of the Fair Market Rent supported by the reasons therefor with counterpart copies to each party. The arbitrators shall arrange for a simultaneous exchange of such proposed resolutions. The role of the third arbitrator shall be to select which of the two proposed resolutions most closely approximates his or her determination of Fair Market Rent. The third arbitrator shall have no right to propose a middle ground or any modification of either of the two proposed resolutions. The resolution he or she chooses as most closely approximating his determination shall constitute the decision of the arbitrators and be final and binding upon the parties.

     (d) In the event of a failure, refusal or inability of any arbitrator to act, his or her successor shall be appointed by him or her, but in the case of the third arbitrator, his or her successor shall be appointed in the same manner as provided for appointment of the third arbitrator. The arbitrators shall decide the issue within 15 days after the appointment of the third arbitrator. Any decision in which the arbitrator appointed by Landlord and the arbitrator appointed by Tenant concur shall be binding and conclusive upon the parties. Each party shall pay the fee and expenses of its respective arbitrator and both shall share the fee and expenses of the third arbitrator, and the attorneys’ fees and expenses of counsel for the respective parties and of witnesses shall be paid by the respective party engaging such counsel or calling such witnesses.

     (e) The arbitrators shall have the right to consult experts and competent authorities to obtain factual information or evidence pertaining to a determination of Fair Market Rent, but any such consultation shall be made in the presence of both parties with full right on their part to cross-examine. The arbitrators shall render their decision and award in writing with counterpart copies to each party. The arbitrators shall have no power to modify the provisions of this Lease.

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ARTICLE 16

TELEPHONE SERVICE

     Notwithstanding any other provision of this Lease to the contrary:

     (a) So long as the entirety of the Leased Premises is leased to Tenant:

          (i) Landlord shall have no responsibility for providing to Tenant any telephone equipment, including wiring, within the Leased Premises or for providing telephone service or connections from the utility to the Leased Premises; and

          (ii) Landlord makes no warranty as to the quality, continuity or availability of the telecommunications services in the Leased Premises or any portion thereof, and Tenant hereby waives any claim against Landlord for any actual or consequential damages (including damages for loss of business) in the event Tenant’s telecommunications services in any way are interrupted, damaged or rendered less effective, except to the extent caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Party. Tenant accepts the telephone equipment (including, without limitation, the INC, as defined below) in its “AS-IS” condition, and Tenant shall be solely responsible for contracting with a reliable third party vendor to assume responsibility for the maintenance and repair thereof (which contract shall contain provisions requiring such vendor to inspect the INC periodically (the frequency of such inspections to be determined by such vendor based on its experience and professional judgment), and requiring such vendor to meet local and federal requirements for telecommunications material and workmanship). Unless caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Party, Landlord shall not be liable to Tenant and Tenant waives all claims against Landlord whatsoever, whether for personal injury, property damage, loss of use of the Leased Premises, or otherwise, due to the interruption or failure of telephone services to the Leased Premises. Tenant hereby holds Landlord harmless and agrees to indemnify, protect and defend Landlord from and against any liability for any damage, loss or expense due to any failure or interruption of telephone service to the Leased Premises for any reason other than the gross negligence or willful misconduct of Landlord or any Landlord Related Party.

     (b) At such time as the entirety of the Leased Premises is no longer leased to Tenant, Landlord shall in its sole discretion have the right, by written notice to Tenant, to elect to assume limited responsibility for INC, as provided below, and upon such assumption of responsibility by Landlord, this subparagraph (b) shall apply prospectively.

          (i) Landlord shall provide Tenant access to all quantity of pairs in the Building intra-building network cable (“INC”). Tenant’s access to the INC shall be solely by arrangements made by Tenant, as Tenant may elect, directly with Pacific Bell or Landlord (or such vendor as Landlord may designate), and Tenant shall pay all reasonable charges as may be imposed in connection therewith. Pacific Bell’s charges shall be deemed to be reasonable. Subject to the foregoing, Landlord shall have no responsibility for providing to Tenant any telephone equipment, including wiring, within the Leased Premises or for providing telephone service or connections from the utility to the Leased Premises, except as required by law.

          (ii) Except as permitted in this Lease, Tenant shall not alter, modify, add to or disturb any telephone wiring in the Leased Premises without the Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Tenant shall be liable to Landlord for any damage to the telephone wiring in the Leased Premises due to the act, negligent or otherwise, of Tenant or any employee, contractor or other agent of Tenant. Tenant shall have access to the telephone closets within the Building in the manner and under such reasonable procedures established by Landlord. Tenant shall promptly notify Landlord of any actual or suspected failure of telephone service to the Leased Premises.

          (iii) All costs incurred by Landlord for the installation, maintenance, repair and replacement of telephone wiring in the Leased Premises shall be a Property Maintenance Cost, provided that, if any such cost is deemed a capital expenditure in accordance with generally accepted accounting principles, it shall be amortized over the useful life of the improvement as described elsewhere in this Lease.

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          (iv) Landlord makes no warranty as to the quality, continuity or availability of the telecommunications services in the Leased Premises, and Tenant hereby waives any claim against Landlord for any actual or consequential damages (including damages for loss of business) in the event Tenant’s telecommunications services in any way are interrupted, damaged or rendered less effective, except to the extent caused by the grossly negligent or willful act or omission by Landlord or any Landlord Related Party. Tenant acknowledges that Landlord meets its duty of care to Tenant with respect to the INC by contracting with a reliable third party vendor to assume responsibility for the maintenance and repair thereof (which contract shall contain provisions requiring such vendor to inspect the INC periodically (the frequency of such inspections to be determined by such vendor based on its experience and professional judgment), and requiring such vendor to meet local and federal requirements for telecommunications material and workmanship). Subject to the foregoing, unless caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Party, Landlord shall not be liable to Tenant and Tenant waives all claims against Landlord whatsoever, whether for personal injury, property damage, loss of use of the Leased Premises, or otherwise, due to the interruption or failure of telephone services to the Leased Premises. Tenant hereby holds Landlord harmless and agrees to indemnify, protect and defend Landlord from and against any liability for any damage, loss or expense due to any failure or interruption of telephone service to the Leased Premises for any reason other than the gross negligence or willful misconduct of Landlord or any Landlord Related Party.

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     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the Effective Date of this Lease first above set forth.

	LANDLORD:
	TRINET MILPITAS ASSOCIATES, LLC, a Delaware
	limited liability company
	By:	TriNet Realty Investors II, Inc., a Maryland corporation, its Managing Member
		By:	/s/ Erich Stiger
		Name:	Erich Stiger
		Title:	Vice President
	TENANT:
	LSI LOGIC CORPORATION,
	a Delaware corporation
	By:	/s/ Bryon Look
	Name: Bryon Look
	Title: EVP, Chief Financial Officer
	By:	/s/ John J. D’Errico
	Name: John J. D’Errico
	Title: EVP, Storage & Communications Components
LSI Logic Legal Department			LSI Logic Corp. Real Estate
Date 02/20/04			Date 02-20-04
Approved as to form			Approved as to form
By /s/ AndrewS. Hughes		By	/s/ Donald A. Costello

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Exhibit A

SITE PLAN

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Exhibit B

FLOOR PLAN

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Exhibit C

RULES AND REGULATIONS

     The following rules and regulations shall apply to the Leased Premises, the Building, the parking areas associated therewith, and the appurtenances thereto:

     1. Sidewalks, doorways, vestibules, halls, stairways, loading dock areas and associated overhead doors, and other similar areas shall not be obstructed by Tenant or any Tenant Related Party or used by Tenant or any Tenant Related Party for purposes other than ingress and egress to and from the Leased Premises and for going from one to another part of the Building.

     2. Plumbing (including outside drains and sump pumps), fixtures and appliances shall be used only for the purposes for which designed, and no sweepings, rubbish, rags or other unsuitable material shall be thrown or deposited therein. Damage resulting to any such fixtures or appliances from misuse by Tenant or any Tenant Related Party shall be paid by Tenant.

     3. No signs (other than those existing as of the Lease Commencement Date), advertisements or notices shall be painted or affixed on or to any windows or doors or other part of the Building visible from the exterior of the Leased Premises without the prior written consent of Landlord. Except as consented to in writing by Landlord or in accordance with Tenant’s building standard improvements, other than those existing as of the Lease Commencement Date, no draperies, curtains, blinds, shades, screens or other devices shall be hung at or used in connection with any window or exterior door or doors of the Leased Premises. No awning shall be permitted on any part of the Leased Premises. Tenant shall not place anything against or near glass partitions or doors, or windows which might appear unsightly from outside the Leased Premises.

     4. Tenant, at its expense, shall be responsible for providing all door locks in the Leased Premises and shall provide to Landlord, at Tenant’s expense, contemporaneously with the installation of such devices, a master key, card keys, access codes or other means to allow Landlord immediate access to all areas within the Leased Premises, subject to the terms and conditions of the Lease.

     5. Landlord may prescribe weight limitations and determine the locations for safes and other heavy equipment or items, which shall in all cases be placed in the Building so as to distribute weight in a manner reasonably acceptable to Landlord which may include the use of such supporting devices as Landlord may reasonably require. All damages to the Building caused by the installation or removal of any property of Tenant, or done by Tenant’s property while in the Building, shall be repaired at the expense of Tenant.

     6. Corridor doors, when not in use, shall be kept closed. Nothing shall be swept or thrown into the corridors, halls, elevator shafts or stairways. No birds or animals (other than seeing-eye dogs) shall be brought into or kept in, on or about the Leased Premises. No portion of the Leased Premises shall at any time be used or occupied as sleeping or lodging quarters.

     7. Tenant shall not make or permit any vibration or improper, objectionable or unpleasant noises-or odors in the Building. Tenant shall not introduce, disturb or release asbestos or PCBs into or from the Leased Premises.

     8. Tenant shall not keep in the Leased Premises any flammable or explosive fluid or substance. Tenant shall not install or operate any steam or gas engine or boiler, or other mechanical apparatus in the Leased Premises without the prior written consent of Landlord. The use of oil, gas or inflammable liquids for heating, lighting or any other purpose is expressly prohibited. Explosives or other articles deemed extra hazardous shall not be brought into the Leased Premises.

     9. Landlord will not be responsible for lost or stolen personal property, money or jewelry from the Leased Premises or any part thereof regardless of whether such loss occurs when the area is locked against entry or not.

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     10. All vehicles are to be currently licensed, in good operating condition, parked for business purposes having to do with Tenant’s business operated in the Leased Premises, parked within designated parking spaces, one vehicle to each space. No vehicle shall be parked as a “billboard” vehicle in the parking lot. Any vehicle parked improperly may be towed away. Tenant, Tenant’s agents, employees, vendors and customers who do not operate or park their vehicles as required shall subject the vehicle to being towed at the expense of the owner or driver.

     11. Tenant shall not permit storage outside the Building, including outside storage of trucks and other vehicles, or dumping of waste or refuse or permit any harmful materials to be placed in any drainage system or sanitary system in or about the Leased Premises.

     12. Tenant shall not park or operate any semi-trucks or semi-trailers in the parking areas associated with the Leased Premises.

     13. Tenant will not permit any person to bring onto the Leased Premises any handgun, firearm or other weapons of any kind, or illegal drugs.

     14. Landlord may, but shall not be required to, designate an area for smoking outside the Building.

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Exhibit D

FORM OF SUBORDINATION, NONDISTURBANCE & ATTORNMENT AGREEMENT

Deed of Trust: A Deed of Trust, Security Agreement and Fixture Filing dated as of executed by Landlord, to                     as Trustee, for the benefit of Beneficiary securing repayment of the Note to be recorded in the records of the County in which the Property is located.
Lease and Lease Date: The lease entered into by Landlord and Tenant dated as of covering the Premises. [Add amendments]
Property:	[Property Name]
	[Street Address]
	[City, State, Zip]
	The Property is more particularly described on Exhibit A.

     THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (the “Agreement”) is made by and among Tenant, Landlord, and Beneficiary and affects the Property described in Exhibit A. Certain terms used in this Agreement are defined in the Defined Terms. This Agreement is entered into as of the Execution Date with reference to the following facts:

          A. Landlord and Tenant have entered into the Lease covering [certain space in the improvements located in and upon] the Property (the “Premises”).

          B. Beneficiary has made or is making the Loan to Landlord evidenced by the Note. The Note is secured, among other documents, by the Deed of Trust.

          C. Landlord, Tenant and Beneficiary all wish to subordinate the Lease to the lien of the Deed of Trust.

          D. Tenant has requested that Beneficiary agree not to disturb Tenant’s rights in the Premises pursuant to the Lease in the event Beneficiary forecloses the Deed of Trust, or acquires the Property pursuant to the trustee’s power of sale contained in the Deed of Trust or receives a transfer of the Property by a conveyance in lieu of foreclosure of the Property (collectively, a “Foreclosure Sale”) but only if Tenant is not then in default under the Lease and Tenant attorns to Beneficiary or a third party purchaser at the Foreclosure Sale (a “Foreclosure Purchaser”).

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     NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties agree as follows:

           1. Subordination. The Lease and the leasehold estate created by the Lease and all of Tenant’s rights under the Lease are and shall remain subordinate to the Deed of Trust and the lien of the Deed of Trust, to all rights of Beneficiary under the Deed of Trust and to all renewals, amendments, modifications and extensions of the Deed of Trust.

           2. Acknowledgments by Tenant. Tenant agrees that: (a) Tenant has notice that the Lease and the rent and all other sums due under the Lease have been or are to be assigned to Beneficiary as security for the Loan. In the event that Beneficiary notifies Tenant of a default under the Deed of Trust and requests Tenant to pay its rent and all other sums due under the Lease to Beneficiary, Tenant shall pay such sums directly to Beneficiary or as Beneficiary may otherwise request, (b) Tenant shall, provided Landlord has given Tenant written notice of Beneficiary’s notice address, send a copy of any notice or statement under the Lease to Beneficiary at the same time Tenant sends such notice or statement to Landlord, and (c) this Agreement satisfies any condition or requirement in the Lease relating to the granting of a nondisturbance agreement.

           3.  Foreclosure and Sale. In the event of a Foreclosure Sale,

          (a) So long as Tenant complies with this Agreement and there is no Event of Default (as defined in the Lease), the Lease shall continue in full force and effect as a direct lease between Beneficiary and Tenant, and Beneficiary will not disturb the possession of Tenant, subject to this Agreement. To the extent that the Lease is extinguished as a result of a Foreclosure Sale, a new lease shall automatically go into effect upon the same provisions as contained in the Lease between Landlord and Tenant, except as set forth in this Agreement, for the unexpired term of the Lease (including any extensions). Tenant agrees to attorn to and accept Beneficiary as landlord under the Lease and to be bound by and perform all of the obligations imposed by the Lease, or, as the case may be, under the new lease, in the event that the Lease is extinguished by a Foreclosure Sale. Upon Beneficiary’s acquisition of title to the Property, Beneficiary will perform all of the obligations imposed on the Landlord by the Lease except as set forth in this Agreement; provided, however, that Beneficiary shall not be: (i) liable for any act or omission of a prior landlord (including Landlord); or (ii) subject to any offsets or defenses that Tenant might have against any prior landlord (including Landlord) unless such pre-paid rent or security deposit were transferred to Beneficiary; or (iii) bound by any rent or additional rent which Tenant might have paid in advance to any prior landlord (including Landlord) for a period in excess of one month or by any security deposit, cleaning deposit or other sum that Tenant may have paid in advance to any prior landlord (including Landlord); or (iv) bound by any amendment, modification, assignment or termination of the Lease made without the written consent of Beneficiary; or (v) liable to Tenant or any other party for any conflict between the provisions of the Lease and the provisions of any other lease affecting the Property which is not entered into by Beneficiary.

          (b) Upon the written request of Beneficiary after a Foreclosure Sale, the parties shall execute a lease of the Premises upon the same provisions as contained in the Lease between Landlord and Tenant, except as set forth in this Agreement, for the unexpired term of the Lease (including any extensions).

           4. Subordination and Release of Purchase Options. Tenant represents that it has no right or option of any nature to purchase the Property or any portion of the Property or any interest in the Borrower. To the extent Tenant has or acquires any such right or option, these rights or options are acknowledged to be subject and subordinate to the Mortgage and are waived and released as to Beneficiary and any Foreclosure Purchaser.

           5. Acknowledgment by Landlord. In the event of a default under the Deed of Trust, at the election of Beneficiary, Tenant shall and is directed to pay all rent and all other sums due under the Lease to Beneficiary.

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           6. Construction of Improvements. Beneficiary shall not have any obligation or incur any liability with respect to the completion of the tenant improvements located in the Premises at the commencement of the term of the Lease.

           7. Notice. All notices under this Agreement shall be deemed to have been properly given if delivered by overnight courier service or mailed by United States certified mail, with return receipt requested, postage prepaid to the party receiving the notice at its address set forth in the Defined Terms (or at such other address as shall be given in writing by such party to the other parties) and shall be deemed complete upon receipt or refusal of delivery.

           8. Miscellaneous. Beneficiary shall not be subject to any provision of the Lease that is inconsistent with this Agreement. Nothing contained in this Agreement shall be construed to derogate from or in any way impair or affect the lien or the provisions of the Deed of Trust. This Agreement shall be governed by and construed in accordance with the laws of the State of in which the Property is located.

           9. Liability and Successors and Assigns. This Agreement shall run with the land and shall inure to the benefit of the parties and, their respective successors and permitted assigns including a Foreclosure Purchaser. If a Foreclosure Purchaser acquires the Property or if Beneficiary assigns or transfers its interest in the Note and Deed of Trust or the Property, all obligations and liabilities of Beneficiary under this Agreement shall terminate and be the responsibility of the Foreclosure Purchaser or other party to whom Beneficiary’s interest is assigned or transferred. The interest of Tenant under this Agreement may not be assigned or transferred except in connection with an assignment of its interest in the Lease which has been consented to by Beneficiary.

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     IN WITNESS WHEREOF, the parties have executed this Subordination, Nondisturbance and Attainment Agreement as of the Execution Date.

     IT IS RECOMMENDED THAT THE PARTIES CONSULT WITH THEIR ATTORNEYS PRIOR TO THE EXECUTION OF THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT.

BENEFICIARY:	,          a
	By
	Its
TENANT:
	a
	By
	Its
LANDLORD:
	a
	By
	Its

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EXHIBIT A

PROPERTY DESCRIPTION

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State of                                                             

County of                                                             

On                                         200_ before me,                                                             personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/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.

Signature                                                                                  (Seal)

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Exhibit E

FORM OF TENANT ESTOPPEL CERTIFICATE

TENANT ESTOPPEL CERTIFICATE

To:	TriNet Milpitas Associates, LLC
	c/o iStar Financial, Inc.
	One Embarcadero Center, Suite 3300
	San Francisco, CA 94111
	ATTN: Asset Management
	ATTN:
		Re:     Lease,     dated     as     of                                         , 200___     between                                         , a                                         , as tenant (the original named tenant under the Lease, together with such tenant’s successors and assigns, being hereinafter referred to collectively as the “Tenant”), and TriNet Milpitas Associates, LLC, a Delaware limited liability company (“Landlord”), covering certain premises known by the street address                                                             in the City of Milpitas, County of Santa Clara, State of California (the “Leased Premises”), as amended as noted on attached Schedule A (collectively, the “Lease”)

Gentlemen:

     The undersigned Tenant hereby represents, warrants and certifies to (“                    ”) and Landlord, that:

     1. The Lease has not been modified, changed, altered or amended in any respect, either orally or in writing, except as may be indicated on Schedule A attached hereto, and constitutes the entire agreement between Tenant and Landlord affecting Tenant’s leasing of the Leased Premises. A true and correct copy of the Lease is attached as Schedule B. The Lease is in full force and effect and is not subject to any contingencies or conditions not set forth in the Lease.

     2. The term of the Lease commenced on , and will expire on                                                              ,                      and will expire on                                                              ,                     ; the Tenant has no option to renew the Lease Term except as follows:                    .

     3. The monthly base rent payable under the Lease as of the current month is $                     . Tenant has paid all fixed and additional rent and other sums which are due and payable under the Lease through the date hereof, and Tenant has not made and will not make any prepayments of fixed rent (except first month’s rent) for more than one month in advance. To Tenant’s best knowledge, there are no presently unexpired rental concessions or abatements due under the Lease except as set forth on Schedule A attached hereto. To Tenant’s best knowledge, Tenant has no credits, offsets, abatements, defenses, counterclaims or deductions against any rental or other payments due under the Lease or with respect to its performance of the other terms and conditions of the Lease, and has asserted no claims against Landlord except as set forth on Schedule A attached hereto.

     4.Tenant has paid to Landlord a security deposit in the amount of $                    . Landlord is the beneficiary under a letter of credit in the amount of $                     required by the Lease as additional security. Tenant has not made any other payments to Landlord as a security deposit, advance or prepaid rent (except first month’s rent).

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     5. Landlord has completed, and, if required under the Lease, paid for, any and all tenant work required under the Lease and Tenant has accepted the Leased Premises. Tenant is not entitled to any further payment or credit for tenant work.

     6. To Tenant’s current actual knowledge, Landlord is not in default in the performance of any of the terms of the Lease, nor is there now any fact or condition which, with notice or lapse of time or both, will become such a default except as set forth on Schedule A attached hereto. Tenant has not delivered to Landlord any notice of default with respect to the Landlord’s obligations under the Lease except as set forth on Schedule A attached hereto.

     7. Tenant is in actual possession of the entire Leased Premises and, to Tenant’s current actual knowledge, is not in any respect in default under any of the terms and conditions of the Lease, nor is there now any fact or condition which, with notice or lapse of time or both, will become such a default except as set forth on Schedule A attached hereto. Tenant has not received from Landlord any notice of default with respect to the Tenant’s obligations under the Lease except as set forth on Schedule A attached hereto.

     8. Tenant has not assigned, transferred, mortgaged or otherwise encumbered its interest under the Lease, nor subleased any of the Leased Premises, nor permitted any person or entity to use the Leased Premises, except as otherwise indicated on Schedule A annexed hereto.

     9. Except as expressly provided in the Lease, Tenant:

(i)	does not have any right to renew or extend the term of the lease,
(ii)	does not have any right to cancel or surrender the Lease prior to the expiration of the term of the Lease,
(iii)	does not have any option or rights of first refusal or first offer to purchase or lease all or any part of the Leased Premises or the real property of which the Leased Premises are a part,
(iv)	does not have any right, title or interest with respect to the Leased Premises other than as lessee under the lease, and
(v)	does not have any right to relocate into other property owned by Landlord or any of landlord’s affiliates.

     10. There has not been filed by or, to Tenant’s current actual knowledge, against Tenant a petition in bankruptcy, voluntary or otherwise, any assignment for the benefit of creditors, any petition seeking reorganization or arrangement under the bankruptcy laws of the United States, or any state thereof, or any other action brought under said bankruptcy laws with respect to Tenant except as set forth on Schedule A attached hereto.

     11. If Tenant is required to provide insurance coverage under the Lease, Tenant has not given or received written notice that Tenant’s insurance coverage will be canceled or will not be renewed except as set forth on Schedule A attached hereto.

     12. Tenant is not aware of any material defects or deficiencies in the systems, elements or components of the Leased Premises. Tenant has not received any written notice, citation or other claim alleging any material violation of any applicable building, zoning, land use, environmental, anti-pollution, health, fire, safety, access accommodations for the physically handicapped, subdivision, energy and resource conservation or similar laws, statutes, rules, regulations or ordinances, or any covenants, conditions and restrictions applicable to the Leased Premises except as set forth on Schedule A attached hereto.

     13. To the current actual knowledge of Tenant, any and all brokerage and leasing commissions relating to and/or resulting from Tenant’s execution and delivery of the Lease and occupancy of the Leased Premises have been paid in full except as set forth on Schedule A attached hereto.

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     14. The individual executing this Tenant Estoppel Certificate on behalf of Tenant represents and warrants that he has the power and the authority to execute this Tenant Estoppel Certificate on behalf of Tenant.

     15. This Tenant Estoppel Certificate shall inure to the benefit of                       and Landlord and their respective nominees, successors, assigns, participants and designees and shall be binding upon Tenant and its successors and assigns.

Dated this ____ day of                     , __________.

Tenant:                                         , a                                        

By:                                                            

Its:                                                            

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     in February 2005 the Company determined that two purchase accounting entries recorded in connection with the 2001 acquisition of the Quantum HDD business required correction. The first correction related to the fact that at the time of the acquisition, sufficient deferred tax assets were available to offset the $196.5 million deferred tax liability recorded as part of the acquisition and accordingly a reduction in the Company’s deferred tax asset valuation allowance should have been recorded rather than recognition of additional goodwill. The second correction related to the reversal of $13.8 million of a restructuring reserve associated with the acquisition to reflect discounting to present value of liabilities associated with such accrual. These errors were first discovered and brought to the attention of management by PricewaterhouseCoopers LLP in connection with their work on the audit for fiscal 2004. The Company restated its consolidated financial statements for each of the three years in the period ended December 27, 2003 by filing a Form 10-K/A for the year ended December 27, 2003 to correct these errors.

     The Company also recorded two adjustments identified by PricewaterhouseCoopers LLP in connection with their interim review of the Company’s third fiscal quarter of 2004 results and the preparation of the Form 10-Q for such quarter. These adjustments addressed the fact that the Company’s severance accrual computations omitted future severance payments for certain personnel who had been notified of termination under the Company’s announced restructuring plan and also the fact that the Company had failed to apply the appropriate discount rate to the facility accrual associated with the Company’s restructuring activities. The impact of these two adjustments did not require the restatement of any of the Company’s financial statements.

     The ineffective control over the application of generally accepted accounting principles in relation to complex, non-routine transactions in the financial reporting process could result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. As a result, management has determined that this control deficiency constituted a material weakness as of December 25, 2004. Because of the material weakness described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 25, 2004, based on criteria in Internal Control — Integrated Framework issued by the COSO. The Company’s management has identified the steps necessary to address the material weakness described above, and has begun to execute remediation plans, as discussed in “Section 9 A. Controls and Procedures” of this Report. The Company believes that these corrective actions, taken as a whole, have mitigated the control deficiencies with respect to our preparation of this Report and that these measures have been effective to ensure that information required to be disclosed in this Report has been recorded, processed, summarized and reported correctly. The Company is in the process of developing procedures for the testing of these controls to determine if the material weakness has been remediated and expects that testing of these controls will be substantially completed by the end of our fiscal first quarter.

EX-10.34

Exhibit 10.34

LEASE

BY AND BETWEEN

TRINET MILPITAS ASSOCIATES, LLC,
a Delaware limited liability company

as Landlord

and

LSI LOGIC CORPORATION,
a Delaware corporation

as Tenant

February 20,  2004

560 Cottonwood Drive
MILPITAS, CALIFORNIA

TABLE OF CONTENTS

	Page
ARTICLE 1 REFERENCE		1
1.1 References		1
ARTICLE 2 LEASED PREMISES, TERM AND POSSESSION		3
2.1 Demise Of Leased Premises		3
2.2 Intentionally Deleted		3
2.3 Lease Commencement Date; Lease Term		3
2.4 Delivery Of Possession and Termination of Existing Lease; Tenant’s Right to Terminate		3
2.5 Acceptance Of Possession		4
2.6 Surrender of Possession		4
ARTICLE 3 RENT, LATE CHARGES AND SECURITY DEPOSITS		5
3.1 Base Monthly Rent		5
3.2 Additional Rent		5
3.3 Year-End Adjustments; Audits		6
3.4 Late Charge, And Interest On Rent In Default		6
3.5 Payment Of Rent		6
3.6 Prepaid Rent		7
3.7 Security Deposit		7
ARTICLE 4 USE OF LEASED PREMISES AND OUTSIDE AREA		7
4.1 Permitted Use		7
4.2 General Limitations On Use		7
4.3 Noise And Emissions		8
4.4 Trash Disposal		8
4.5 Parking		8
4.6 Signs		8
4.7 Compliance With Laws And Private Restrictions		8
4.8 Compliance With Insurance Requirements		9
4.9 Landlord’s Right To Enter		9
4.10 Use Of Outside Areas		9
4.11 Environmental Protection		9
4.12 Rules And Regulations		11
ARTICLE 5 REPAIRS, MAINTENANCE, SERVICES AND UTILITIES		11
5.1 Repair And Maintenance		11
5.2 Utilities		12
5.3 Security		12
5.4 Energy And Resource Consumption		12
5.5 Limitation Of Landlord’s Liability		12
ARTICLE 6 ALTERATIONS AND IMPROVEMENTS		13
6.1 By Tenant		13
6.2 Ownership Of Improvements		13
6.3 Alterations Required By Law		14
6.4 Liens		14

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	Page
ARTICLE 7 ASSIGNMENT AND SUBLETTING BY TENANT		14
7.1 By Tenant		14
7.2 Permitted Transfers		15
7.3 Landlord’s Election		15
7.4 Conditions To Landlord’s Consent		15
7.5 Assignment Consideration And Excess Rentals Defined		17
7.6 Payments		17
7.7 Good Faith		17
7.8 Effect Of Landlord’s Consent		17
7.9 Options Personal		17
7.10 Tenant’s Remedies		17
ARTICLE 8 LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY		18
8.1 Limitation On Landlord’s Liability And Release		18
8.2 Tenant’s Indemnification Of Landlord		18
8.3 Landlord’s Indemnification of Tenant		18
ARTICLE 9 INSURANCE		18
9.1 Tenant’s Insurance		18
9.2 Landlord’s Insurance		19
9.3 Mutual Waiver Of Subrogation		20
ARTICLE 10 DAMAGE TO LEASED PREMISES		20
10.1 Landlord’s Duty To Restore		20
10.2 Insurance Proceeds		20
10.3 Landlord’s Right To Terminate		21
10.4 Tenant’s Right To Terminate		21
10.5 Tenant’s Waiver		21
10.6 Abatement Of Rent		21
ARTICLE 11 CONDEMNATION		21
11.1 Tenant’s Right To Terminate		21
11.2 Landlord’s Right To Terminate		22
11.3 Restoration		22
11.4 Temporary Taking		22
11.5 Division Of Condemnation Award		22
11.6 Abatement Of Rent		22
11.7 Taking Defined		22
ARTICLE 12 DEFAULT AND REMEDIES		22
12.1 Events Of Tenant’s Default		22
12.2 Landlord’s Remedies		23
12.3 Landlord’s Default And Tenant’s Remedies		25
12.4 Limitation Of Tenant’s Recourse		25
12.5 Tenant’s Waiver		25
ARTICLE 13 GENERAL PROVISIONS		26
13.1 Taxes On Tenant’s Property		26
13.2 Holding Over		26
13.3 Subordination To Mortgages		26
13.4 Tenant’s Attornment Upon Foreclosure		27
13.5 Mortgagee Protection		27

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	Page
13.6 Estoppel Certificates		27
13.7 Financial Statements and Information		27
13.8 Transfer By Landlord		28
13.9 Force Majeure		28
13.10 Notices		28
13.11 Attorneys’ Fees		29
13.12 Definitions		29
13.13 General Waivers		31
13.14 Miscellaneous		31
ARTICLE 14 CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT		31
14.1 Corporate Authority		31
14.2 Brokerage Commissions		31
14.3 Entire Agreement		32
14.4 Landlord’s Representations		32
ARTICLE 15 OPTIONS TO EXTEND		32
ARTICLE 16 TELEPHONE SERVICE		34

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LEASE

     This Lease, dated February 20, 2004 (the “Effective Date of this Lease”), is made by and between TriNet Milpitas Associates, LLC, a Delaware limited liability company (“Landlord”), and LSI Logic Corporation, a Delaware corporation (“Tenant”).

ARTICLE 1

REFERENCE

1.1 References. All references in this Lease (subject to any further clarifications contained in this Lease) to the following terms shall have the following meaning or refer to the respective address, person, date, time period, amount, percentage, calendar year or fiscal year as below set forth:

Tenant’s Address for Notice:	LSI Logic Corporation
	1621 Barber Lane, M/S D-106
	Milpitas, California 95035-7458
	Attn: General Counsel
	With a required copy to:
	LSI Logic Corporation
	1621 Barber Lane, M/S D-129
	Milpitas, California 95035-7458
	Attn: Corporate Real Estate
Landlord’s Address for Notices:	c/o iStar Financial Inc.
	One Embarcadero Center
	Suite 3300
	San Francisco, CA 94111
Landlord’s Representative:	Erich Stiger, Asset Management
Phone Number:	(415)391-4300
Intended Commencement Date:	February 20, 2004
Intended Term:	Eight (8) Years
Lease Expiration Date:	Eight (8) Years from the Lease Commencement Date, unless
	earlier terminated in accordance with the terms of
	this Lease, or extended by Tenant pursuant to Article
	15.
Options to Renew:	Two (2) option(s) to renew, each for a term of thirty (30)
	months.
Tenant’s Security Deposit:	$50,748.01
Late Charge Amount:	Five Percent (5%) of the Delinquent Amount
Tenant’s Required Liability Coverage:	$3,000,000 Combined Single Limit
Tenant’s Broker(s):	George Fox and Greg Bendis of Julien J. Studley, Inc.
Property:	That certain real property situated in the City of Milpitas,
	County of Santa Clara, State of California, together
	with all buildings and improvements thereon, which real
	property is

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	shown on the Site Plan attached hereto as Exhibit “A”
	and is commonly known as or otherwise described as
	follows: 560 Cottonwood Drive, Milpitas, California.
Building:	That certain building located on the Property in which the
	Leased Premises are located, which building is shown
	outlined on Exhibit “A” hereto (the “Building”). The
	Building is commonly known as or otherwise described as
	follows: 560 Cottonwood Drive, Milpitas, California.
Outside Areas:	The “Outside Areas” shall mean all areas within the Property
	which are located outside the Building, such as
	pedestrian walkways, parking areas, landscaped area,
	open areas and enclosed trash disposal areas.
Leased Premises:	The Property, including the Outside Areas, the Building and
	all the interior space within the Building, including
	stairwells, connecting walkways, and atriums, consisting
	of approximately 67,968 square feet and, for purposes of
	this Lease, agreed to contain said number of square feet.
Base Monthly Rent:	The term “Base Monthly Rent” shall mean the following:

Month	Base Monthly Rent.
01-12	$	44,179.20
13-24	$	45,062.78
25-36	$	45,964.04
37-48	$	46,883.32
49-60	$	47,820.99
61-72	$	48,777.41
73-84	$	49,752.95
85-96	$	50,748.01

Use:	Office, research and development (including engineering labs)
Tenant’s Proportionate Share:	100%
Exhibits:	The term “Exhibits” shall mean the Exhibits of this Lease
	which are described as follows:
	Exhibit “A” - Site Plan showing the Leased Premises.
	Exhibit “B” - Floor Plan outlining the portion of the
	Leased Premises located within the Building
	Exhibit “C” - Rules and Regulations
	Exhibit “D” - Form of Subordination, Nondisturbance and
	Attornment Agreement
	Exhibit “E” - Form of Tenant Estoppel

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ARTICLE 2

LEASED PREMISES, TERM AND POSSESSION

2.1 Demise Of Leased Premises. Subject to Paragraph 2.4 and Article 7 below, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord for Tenant’s own use in the conduct of Tenant’s business and not for purposes of speculating in real estate, for the Lease Term and upon the terms and subject to the conditions of this Lease, that certain property described in Article 1 as the Leased Premises. Tenant’s lease of the Leased Premises shall be conditioned upon and be subject to the continuing compliance by Tenant with (i) all the terms and conditions of this Lease, (ii) all Laws governing the use of the Leased Premises, (iii) all Private Restrictions, easements and other matters now of public record respecting the use of the Leased Premises, and (iv) all reasonable rules and regulations from time to time established by Landlord as set forth in Paragraph 4.12 below.

2.2 Intentionally Deleted.

2.3 Lease Commencement Date; Lease Term. Subject to Paragraph 2.4 below, the term of this Lease shall begin, and the Lease Commencement Date shall be deemed to have occurred, on the Intended Commencement Date, as set forth in Article 1 (the “Lease Commencement Date”), and the term of this Lease shall end on the Lease Expiration Date (as set forth in Article 1). The “Lease Term” shall be that period of time commencing on the Lease Commencement Date and ending on the Lease Expiration Date.

2.4 Delivery Of Possession and Termination of Existing Lease; Tenant’s Right to Terminate.

          (a) Landlord shall deliver to Tenant possession of the Leased Premises under this Lease on the Intended Commencement Date. Landlord and Tenant acknowledge that prior to and as of the Effective Date of this Lease, Tenant has been and is in possession of the entire Leased Premises pursuant to that certain Sublease Agreement dated October 4, 1995, by and between Atari Games Corporation, a California corporation (or the successor-in-interest thereto, “Atari”), and Tenant, as successor-by-merger to C-Cube Microsystems, Inc., which Sublease Agreement was made under that certain Lease dated April 1, 1995 between Landlord and Atari (as amended, the “Existing Lease”). Notwithstanding the foregoing or anything to the contrary in this Lease, Landlord’s obligation to deliver possession of the Leased Premises to Tenant under this Lease is hereby expressly conditioned on the execution by Landlord and Tenant and Atari of a termination agreement (a “Termination Agreement”), reasonably satisfactory to Landlord and Tenant, terminating the Existing Lease. If the condition precedent set forth in the preceding sentence has not been met on or before the Intended Commencement Date, then Landlord shall not be in default under this Lease, nor shall this Lease be void, voidable or cancelable by Landlord or Tenant until the lapse of ninety (90) days after the Intended Commencement Date (the “Delivery Grace Period”), and the Lease Commencement Date shall not be deemed to have occurred until Landlord and Tenant and Atari have executed a Termination Agreement, in which event the Lease Commencement Date shall be one (1) day after the effective termination date of the Existing Lease as set forth in the Termination Agreement. If Landlord or Tenant or Atari has not executed a Termination Agreement, or if Landlord shall not have delivered possession of the Leased Premises to Tenant as contemplated by this Lease, within the Delivery Grace Period, then either Landlord or Tenant shall have the right to terminate this Lease. Such right to terminate shall be each party’s sole remedy for such delay, and in no event shall either party be liable in damages to the other party for such delay. Notwithstanding the foregoing, both Landlord and Tenant shall use their best efforts to negotiate and execute the Termination Agreement prior to the Intended Commencement Date. In the event that the Lease Commencement Date does not occur on the Intended Commencement Date, the parties shall memorialize the Lease Commencement Date and the Lease Termination Date in a mutually acceptable letter to be signed by each party.

          (b) Tenant or any Successor Entity (as hereinafter defined), but not any other transferee, shall have the right to terminate this Lease effective at the end of the sixtieth (60^th) month of the Lease Term (the “Termination Date”) by providing Landlord with at least two hundred seventy (270) days advance written notice and paying Landlord on or before the Termination Date a termination fee in an amount equal to the sum of (i) that portion of the brokerage commissions paid by Landlord in connection with the execution of this Lease that has not been amortized as of the Lease Termination Date (Landlord shall promptly provide Tenant with such amount together with such

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supporting documentation as Tenant may reasonably request) and (ii) three times the Base Monthly Rent and Property Operating Expenses then in effect.

2.5 Acceptance Of Possession. TENANT ACKNOWLEDGES THAT TENANT HAS BEEN IN POSSESSION OF THE LEASED PREMISES PRIOR TO THE EFFECTIVE DATE OF THIS LEASE AND THAT BY CONTINUING TO OCCUPY THE LEASED PREMISES PURSUANT TO THIS LEASE, TENANT SHALL BE DEEMED TO HAVE ACCEPTED THE LEASED PREMISES IN “AS-IS” CONDITION AS OF THE DATE OF THIS LEASE. EXCEPT FOR ANY EXPRESS REPRESENTATIONS AND WARRANTIES OF LANDLORD SET FORTH IN THIS LEASE (THE “EXPRESS REPRESENTATIONS”), LANDLORD DOES NOT, BY THE EXECUTION AND DELIVERY OF THIS LEASE, AND LANDLORD SHALL NOT, BY THE EXECUTION AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION WITH THIS LEASE, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE LEASED PREMISES, AND ALL SUCH REPRESENTATIONS AND WARRANTIES ARE HEREBY DISCLAIMED. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING PROVISION, LANDLORD MAKES, AND SHALL MAKE, NO EXPRESS OR IMPLIED WARRANTY AS TO MATTERS OF ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITION (INCLUDING, WITHOUT LIMITATION, LAWS, RULES, REGULATIONS, ORDERS AND REQUIREMENTS PERTAINING TO THE USE, HANDLING, GENERATION, TREATMENT, STORAGE OR DISPOSAL OF ANY TOXIC OR HAZARDOUS WASTE OR TOXIC, HAZARDOUS OR REGULATED SUBSTANCE), VALUATION, GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE LEASED PREMISES (THE “DISCLAIMED MATTERS”). TENANT AGREES THAT, WITH RESPECT TO THE LEASED PREMISES, TENANT HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF LANDLORD OTHER THAN THE EXPRESS REPRESENTATIONS. TENANT WILL CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE LEASED PREMISES (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME.

2.6 Surrender Of Possession. Upon the expiration or upon the sooner termination of this Lease, Tenant shall remove all of Tenant’s signs from the exterior of the Building and shall remove all of Tenant’s inventory, equipment, trade fixtures, furniture, supplies, wall decorations and other personal property (collectively, “Tenant’s FF&E”) from within the Leased Premises, including the Building and the Outside Areas, and shall vacate and surrender the Leased Premises, and all portions thereof, to Landlord broom clean and in good condition, reasonable wear and tear excepted. Tenant shall repair all damage to the Leased Premises, and all portions thereof, caused by Tenant’s removal of Tenant’s property. Tenant shall patch and refinish, to Landlord’s reasonable satisfaction, all penetrations made by Tenant or its employees to the floor, walls or ceiling of the Leased Premises, whether such penetrations were made with Landlord’s approval or not. Tenant shall repair or replace all stained or damaged ceiling tiles, wall coverings and floor coverings to the reasonable satisfaction of Landlord. Tenant shall repair all damage caused by Tenant to the exterior surface of the Building and the paved surfaces of the Outside Areas and, where necessary, replace or resurface same. Additionally, to the extent that Landlord shall have notified Tenant in writing at the time Landlord approved any improvements requiring Landlord approval that it desired to have such improvements removed at the expiration or sooner termination of the Lease (“Required Removables”), Tenant shall, upon the expiration or sooner termination of the Lease, remove the Required Removables and repair all damage caused by such removal. If Tenant fails to comply with the terms of this Paragraph 2.6, Landlord may perform Tenant’s obligations at Tenant’s expense, and Tenant shall be liable to Landlord for all reasonable costs incurred by Landlord in performing such obligations for Tenant (including, without limitation, reasonable costs of Landlord’s oversight of removal, repair and replacement work). Tenant shall pay to Landlord the amount of all costs so incurred within fifteen (15) days of Landlord’s delivery to Tenant of an invoice together with reasonable supporting information. Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in surrendering the Leased Premises, including, without limitation, any claims made by any succeeding tenant or any losses to Landlord with respect to lost opportunities to lease to succeeding tenants.

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ARTICLE 3

RENT, LATE CHARGES AND SECURITY DEPOSITS

3.1 Base Monthly Rent. Commencing on the Lease Commencement Date (as determined pursuant to Article 2 above) and continuing throughout the Lease Term, Tenant shall pay to Landlord, without prior demand therefor, in advance on or before the first day of each calendar month, the amount set forth as Base Monthly Rent in Article 1 (the “Base Monthly Rent”).

3.2 Additional Rent. Commencing on the Lease Commencement Date (as determined pursuant Article 2 above) and continuing throughout the Lease Term, in addition to the Base Monthly Rent and to the extent not required by Landlord to be contracted for and paid directly by Tenant, Tenant shall pay to Landlord as additional rent (the “Additional Rent”) the following amounts:

     (a) An amount equal to all Property Operating Expenses (as defined in Paragraph 13.12) incurred by Landlord. Payment shall be made by whichever of the following methods (or combination of methods) are from time to time designated by Landlord:

          (i) Landlord may forward invoices or bills for such Property Operating Expenses to Tenant, and Tenant shall, no later than fifteen (15) days following receipt of such invoices or bills from Landlord, pay such invoices or bills and deliver satisfactory evidence of such payment to Landlord, and/or

          (ii) Landlord may bill to Tenant, on a periodic basis not more frequently than monthly, the amount of such Property Operating Expenses (or group of Property Operating Expenses) as paid or incurred by Landlord, and Tenant shall pay to Landlord the amount of such Property Operating Expenses within fifteen (15) days after receipt of a written bill therefor from Landlord, and/or

          (iii) Except for any Property Operating Expenses which Tenant does not pay for directly in accordance with this Lease, Landlord may deliver to Tenant Landlord’s reasonable estimate of any given Property Operating Expenses (such as Landlord’s Insurance Costs or Real Property Taxes), or group of Property Operating Expenses, which it reasonably estimates will be paid or incurred for the ensuing calendar or fiscal year, in an amount as Landlord may reasonably determine, and Tenant shall pay to Landlord an amount equal to the estimated amount of such expenses for such year in equal monthly installments during such year with the installments of Base Monthly Rent.

Landlord reserves the right to change from one of the three options set forth in this Paragraph 3.2(a) to another, from time to time, the methods of billing Tenant for any given expense or group of expenses or the periodic basis on which such expenses are billed. Landlord shall give Tenant reasonable prior written notice of any such change.

     (b) Landlord’s share of the consideration received by Tenant upon certain assignments and sublettings as required by Article 7.

     (c) Any legal fees and costs that Tenant is obligated to pay or reimburse to Landlord pursuant to Article 13;and

     (d) Any other charges or reimbursements due Landlord from Tenant pursuant to the terms of this Lease.

Tenant shall pay the Real Property Taxes directly to the applicable taxing authority. Tenant shall make such payments and deliver satisfactory evidence of payment to Landlord no later than ten (10) days before such Real Property Taxes become delinquent. Notwithstanding the foregoing, Landlord shall have the right to contest the amount or validity of any Real Property Taxes, in whole or in part, by appropriate administrative and legal proceedings, and to instruct Tenant to postpone payment of any such contested Real Property Taxes pending the prosecution of such proceedings and any appeals.

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3.3 Year-End Adjustments; Audits. If Landlord bills Tenant for the Property Operating Expenses (or any group of such expenses) on an estimated basis in accordance with the provisions of Paragraph 3.2(a)(iii) above, Landlord shall furnish to Tenant within three months following the end of the applicable calendar or fiscal year, as the case may be, a statement and reasonably sufficient back-up information setting forth (i) the amount of such expenses paid or incurred during the just ended calendar or fiscal year, as appropriate, and (ii) the amount that Tenant has paid to Landlord for credit against such expenses for such period. If Tenant shall have paid more than its obligation for such expenses for the stated period, Landlord shall, at its election, either (i) credit the amount of such overpayment toward the next ensuing payment or payments of Rent that would otherwise be due or (ii) refund in cash to Tenant the amount of such overpayment. If such year-end statement shall show that Tenant did not pay its obligation for such expenses in full, then Tenant shall pay to Landlord the amount of such underpayment within thirty (30) days from Landlord’s billing of same to Tenant. The provisions of this Paragraph shall survive the expiration or sooner termination of this Lease. In the event Tenant objects in writing to any such year-end statement within ninety (90) days after receipt of such statement, then Tenant shall have the right, during the six (6) month period following delivery of such statement, at Tenant’s sole cost (except in the case where Tenant shows Landlord overcharged by at least 5% in which case Landlord shall reimburse for this cost, to the extent reasonably an actually incurred by Tenant), to review in Landlord’s offices Landlord’s records relevant to such statement. Such review shall be subject to Landlord’s reasonable audit procedures and shall be performed only by Tenant’s internal audit team, an independent firm of certified public accountants or another party, in any case which firm or party is (a) reasonably acceptable to Landlord, (b) not compensated on a contingency fee basis or in any other manner which is dependent upon the results of such audit or inspection (and Tenant shall deliver the fee agreement or other similar evidence of such fee arrangement to Landlord upon request) and (c) agrees with Landlord in writing to maintain the results of such audit confidential. If, as of the date ninety (90) days after Tenant’s receipt of such year-end statement, Tenant shall not have objected thereto in writing, or if, during the six (6) month period following delivery of such statement, Tenant shall not have carried out a review of Landlord’s records, then such year-end statement shall be final and binding upon Landlord and Tenant, and Tenant shall have no further right to object to such statement. If Tenant timely delivers a written objection to a year-end statement and, within such six (6) month period, Tenant conducts an audit and delivers to Landlord a written statement specifying objections to such annual statement, then Tenant and Landlord shall meet to attempt to resolve such objection within ten (10) business days after delivery of the objection statement. If such objection is not resolved within such ten (10) business day period, then either party shall have the right, at any time within sixty (60) days after the expiration of such ten (10) business day period, to require that the dispute be submitted to binding arbitration under the rules of the American Arbitration Association. If neither Landlord nor Tenant commences an arbitration proceeding within such sixty (60) day period, then the year-end statement in question shall be final and binding on Landlord and Tenant. Notwithstanding that any such dispute remains unresolved, Tenant shall be obligated to pay Landlord all amounts payable in accordance with this Paragraph 3 (including any disputed amount). The audit and arbitration procedures set forth in this Paragraph 3.3 shall be Tenant’s exclusive remedy with respect to the calculation of the amount of Tenant’s obligations under Paragraph 3.2.

3.4 Late Charge, And Interest On Rent In Default. Tenant acknowledges that the late payment by Tenant of any monthly installment of Base Monthly Rent or any Additional Rent will cause Landlord to incur certain costs and expenses not contemplated under this Lease, the exact amounts of which are extremely difficult or impractical to fix. Such costs and expenses will include without limitation, administration and collection costs and processing and accounting expenses. Therefore, if any installment of Base Monthly Rent or any Additional Rent is not received by Landlord from Tenant within ten (10) calendar days after the same becomes due, Tenant shall immediately pay to Landlord a late charge equal to the Late Charge Amount (as defined in Paragraph 1.1). Landlord and Tenant agree that this late charge represents a reasonable estimate of such costs and expenses and is fair compensation to Landlord for the anticipated loss Landlord would suffer by reason of Tenant’s failure to make timely payment. In no event shall this provision for a late charge be deemed to grant to Tenant a grace period or extension of time within which to pay any rental installment or prevent Landlord from exercising any right or remedy available to Landlord upon Tenant’s failure to pay each rental installment due under this Lease when due, including the right to terminate this Lease. If any rent remains delinquent for a period in excess often (10) calendar days, then, in addition to such late charge, Tenant shall pay to Landlord interest on any rent that is not so paid from the date due until paid at the then maximum rate of interest not prohibited or made usurious by Law.

3.5 Payment Of Rent. Except as specifically provided otherwise in this Lease, Rent shall be paid in lawful money of the United States, without any abatement, reduction or offset for any reason whatsoever, to Landlord at such

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address as Landlord may designate from time to time. Tenant’s obligation to pay Base Monthly Rent and Additional Rent shall be appropriately prorated at the commencement and expiration of the Lease Term. The failure by Tenant to pay any Additional Rent as required pursuant to this Lease when due shall be treated the same as a failure by Tenant to pay Base Monthly, and Landlord shall have the same rights and remedies against Tenant as Landlord would have had Tenant failed to pay the Base Monthly Rent when due.

3.6 Prepaid Rent. Tenant shall not be required to make any advance payment of rent as a credit against the first payment of Base Monthly Rent due hereunder. Tenant shall be entitled, at its option, to a refund or credit of the difference between the Base Monthly Rent specified in this Lease and the amounts paid to Landlord as base monthly rent under the Existing Lease retroactive to February 15, 2004.

3.7 Security Deposit. Upon Tenant’s execution of this Lease, Tenant shall deposit with Landlord the amount set forth in Article 1 as the “Security Deposit” as security for the performance by Tenant of the terms of this Lease to be performed by Tenant, and not as prepayment of rent. Landlord may apply such portion or portions of the Security Deposit as are reasonably necessary for the following purposes: (i) to remedy any Event of Default by Tenant in the payment of Base Monthly Rent or Additional Rent or a late charge or interest on defaulted rent, or any other monetary payment obligation of Tenant under this Lease; (ii) to repair damage to the Leased Premises caused or permitted to occur by Tenant; (iii) to clean and restore and repair the Leased Premises following their surrender to Landlord if not surrendered in the condition required pursuant to the provisions of Article 2, and (iv) to remedy any other Event of Default of Tenant to the extent permitted by Law including, without limitation, paying in full on Tenant’s behalf any sums claimed by materialmen or contractors of Tenant to be owing to them by Tenant for work done or improvements made at Tenant’s request to the Leased Premises. In this regard, Tenant hereby waives any restriction on the uses to which the Security Deposit may be applied as contained in Section 1950.7(c) of the California Civil Code and/or any successor statute. In the event the Security Deposit or any portion thereof is so used, Tenant shall pay to Landlord, promptly upon demand, an amount in cash sufficient to restore the Security Deposit to the full original sum. Landlord shall not be deemed a trustee of the Security Deposit. Landlord may use the Security Deposit in Landlord’s ordinary business and shall not be required to segregate it from Landlord’s general accounts. Tenant shall not be entitled to any interest on the Security Deposit. If Landlord transfers the Leased Premises or any portion thereof during the Lease Term, Landlord may pay the Security Deposit to any subsequent owner in conformity with the provisions of Section 1950.7 of the California Civil Code and/or any successor statute, in which event the transferring landlord shall be released from all liability for the return of the Security Deposit. Tenant specifically grants to Landlord (and Tenant hereby waives the provisions of California Civil Code Section 1950.7 to the contrary) a period of ninety (90) days following a surrender of the Leased Premises by Tenant to Landlord within which to inspect the Leased Premises, make required restorations and repairs, receive and verify workmen’s billings therefor, and prepare a final accounting with respect to the Security Deposit. In no event shall the Security Deposit or any portion thereof, be considered prepaid rent.

ARTICLE 4

USE OF LEASED PREMISES AND OUTSIDE AREA

4.1 Permitted Use. Tenant shall be entitled to use the Leased Premises solely for the “Permitted Use” as set forth in Article 1 and for no other purpose whatsoever. Notwithstanding anything to the contrary contained in this Lease, in no event shall the Leased Premises be used for any pornographic or obscene purposes, any commercial sex establishment, any pornographic, obscene, nude or semi-nude performances, modeling, or sexual conduct. Tenant shall have the right to use the Outside Areas in conjunction with its Permitted Use of the Leased Premises solely for the purposes for which they were designed and intended and for no other purposes whatsoever. In addition, notwithstanding Paragraph 4.2, Tenant shall have the exclusive right to use the roof of the Building for the placement and operation of Tenant’s own equipment, provided that any such equipment shall be subject to Landlord’s prior approval that it will not have a negative impact on the appearance of the Building, will not damage or impact the Building’s roof, roof membrane, structure or systems, will not violate any manufacturer’s warranties covering the roof and complies with all Laws.

4.2 General Limitations On Use. Except as expressly permitted under this Lease, Tenant shall not (i) do or permit anything to be done in or about the Leased Premises which does or could jeopardize the structural integrity of the

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Building or cause damage to any part of the Leased Premises, (ii) operate any equipment within the Leased Premises which does or could (a) injure, vibrate or shake the Leased Premises or any portion thereof, (b) damage, overload or impair the efficient operation of any electrical, plumbing, heating, ventilating or air conditioning systems within or servicing the Leased Premises, or (c) damage or impair the efficient operation of the sprinkler system (if any) within or servicing the Leased Premises. Except as expressly permitted under this Lease or as existing as of the Lease Commencement Date, Tenant shall not, without Landlord’s consent, which shall not be unreasonably withheld, conditioned or delayed, (1) install any equipment or antennas on or make any penetrations of the exterior walls or roof of the Building, (2) affix any equipment to or make any penetrations or cuts in the floor, ceiling, walls or roof of the Leased Premises, (3) place any loads upon the floors, walls, ceiling or roof systems which could endanger the structural integrity of the Building or damage its floors, foundations or supporting structural components, (4) place any explosive, flammable or harmful fluids or other waste materials in the drainage systems of the Leased Premises, (5) drain or discharge any fluids in the landscaped areas or across the paved areas of the Property, (6) use any of the Outside Areas for the storage of its materials, supplies, inventory or equipment and all such materials, supplies, inventory or equipment shall at all times be stored within the Building, or (7) commit nor permit to be committed any waste in or about the Leased Premises.

4.3 Noise And Emissions. All noise generated by Tenant in its use of the Leased Premises shall be confined or muffled so that it does not interfere with the businesses of or annoy the occupants and/or users of adjacent properties. All dust, fumes, odors and other emissions generated by Tenant’s use of the Leased Premises shall be sufficiently dissipated in accordance with sound environmental practice and exhausted from the Leased Premises in such a manner so as not to interfere with the businesses of or annoy the occupants and/or users of adjacent properties, or cause any damage to the Leased Premises or any component part thereof or the property of adjacent property owners.

4.4 Trash Disposal. Tenant shall provide trash bins or other adequate garbage disposal facilities within the trash enclosure areas provided or permitted by Landlord outside the Leased Premises sufficient for the interim disposal of all of its trash, garbage and waste. All such trash, garbage and waste temporarily stored in such areas shall be stored in such a manner so that it is not visible from outside of such areas, and Tenant shall cause such trash, garbage and waste to be regularly removed from the Leased Premises in a clean, safe and neat condition free and clear of all trash, garbage, waste and/or boxes, pallets and containers containing same at all times.

4.5 Parking. Tenant shall have the exclusive right to use all parking areas within the Leased Premises as depicted on Exhibit A (including the right to mark the parking spaces located immediately adjacent to the Building for use by Tenant’s executives, employees and visitors). Tenant shall not use any other location within the Leased Premises for the parking of vehicles. Tenant shall not, at any time, park or permit to be parked any recreational vehicles, inoperative vehicles or equipment (except as expressly set forth in this Lease) in the Outside Areas or on any other portion of the Leased Premises. Tenant agrees to assume responsibility for compliance by its employees and invitees with the parking provisions contained herein. If Tenant or its employees park any vehicle within the Leased Premises in violation of these provisions, then Landlord may, upon prior written notice to Tenant giving Tenant one (1) day (or any applicable statutory notice period, if longer than one (1) day) to remove such vehicle(s).

4.6 Signs. Tenant shall have the exclusive right to install signs identifying Tenant on, in or about the Leased Premises, subject to Landlord’s prior approval (except signs existing as of the Lease Commencement Date), which shall not be unreasonably withheld, conditioned or delayed and to all applicable Laws and Private Restrictions. Tenant shall be responsible for maintaining any such signs in first-class condition and shall remove such signs (including, without limitation, all signs existing as of the Lease Commencement Date) on or before the expiration or sooner termination of this Lease. Tenant shall repair all damage to the Leased Premises caused by the installation, maintenance or removal of such signs.

4.7 Compliance With Laws And Private Restrictions. Tenant shall abide by and shall promptly observe and comply with, at its sole cost and expense, all Laws and Private Restrictions respecting the use and occupancy of the Leased Premises, including, without limitation, all Laws governing the use and/or disposal of hazardous materials, and shall defend with competent counsel, indemnify and hold Landlord harmless from any claims, damages or liability resulting from Tenant’s failure to so abide, observe, or comply. Tenant’s obligations hereunder shall survive the expiration or sooner termination of this Lease.

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4.8 Compliance With Insurance Requirements. With respect to any insurance policies required or permitted to be carried by Landlord in accordance with the provision of this Lease, copies of which have been or will, upon Tenant’s written request therefor, be provided to Tenant, Tenant shall not conduct nor permit any other person to conduct any activities nor keep, store or use (or allow any other person to keep, store or use) any item or thing within the Leased Premises which (i) is prohibited under the terms of any such policies, (ii) could result in the termination of the coverage afforded under any of such policies, (iii) could give to the insurance carrier the right to cancel any of such policies, or (iv) could cause an increase in the rates (over standard rates) charged for the coverage afforded under any of such policies (unless Tenant paid for such increase. Tenant shall comply with all reasonable requirements of any insurance company, insurance underwriter, or Board of Fire Underwriters which are necessary to maintain, at standard rates, the insurance coverage carried by either Landlord or Tenant pursuant to this Lease.

4.9 Landlord’s Right To Enter. Landlord and its agents shall have the right to enter the Leased Premises during normal business hours after giving Tenant reasonable notice and subject to Tenant’s reasonable security measures for the purpose of (i) inspecting the same; (ii) showing the Leased Premises to prospective purchasers, mortgagees or, during the last 270 days of the Lease Term, tenants; (iii) making alterations, additions or repairs as provided under this Lease; (iv) performing any of Tenant’s obligations when Tenant has failed to do so; (v) posting notices of non-responsibility (and for such purposes Tenant shall provide Landlord at least thirty days’ prior written notice of any work to be performed on the Leased Premises); and (vi) supplying any services to be provided by Landlord. Any entry into the Leased Premises obtained by Landlord in accordance with this paragraph shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Leased Premises, or an eviction, actual or constructive of Tenant from the Leased Premises or any portion thereof but shall be made so as not to interrupt Tenant in an unreasonable manner, not to interfere with Tenant’s business in an unreasonable manner and not to remain in the Leased Premises any longer than is reasonably necessary.

4.10 Use Of Outside Areas. Tenant, in its use of the Outside Areas, shall at all times keep the Outside Areas in a safe condition free and clear of all materials, equipment, debris, trash (except within existing enclosed trash areas), inoperable vehicles, and other items which are not specifically permitted by Landlord to be stored or located thereon by Tenant. If, in the reasonable opinion of Landlord, unauthorized persons are using any of the Outside Areas by reason of, or under claim of, the express or implied authority or consent of Tenant, then Tenant, upon demand of Landlord, shall use commercially reasonable efforts to restrain such use.

4.11 Environmental Protection. Tenant’s obligations under this Paragraph 4.11 shall survive the expiration or termination of this Lease.

     (a) As used herein, the term “Hazardous Materials” shall mean any toxic or hazardous substance, material or waste or any pollutant or infectious or radioactive material, including but not limited to those substances, materials or wastes regulated now or in the future under any of the following statutes or regulations and any and all of those substances included within the definitions of “hazardous substances,” “hazardous materials,” “hazardous waste,” “hazardous chemical substance or mixture,” “imminently hazardous chemical substance or mixture,” “toxic substances,” “hazardous air pollutant,” “toxic pollutant,” or “solid waste” in the (a) Comprehensive Environmental Response, Compensation and Liability Act of 1990 (“CERCLA” or “Superfund”), as amended by the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), 42 U.S.C. § 9601 et seq., (b) Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. § 6901 et set., (c) Federal Water Pollution Control Act (“FSPCA”), 33 U.S.C. § 1251 et seq., (d) Clean Air Act (“CAA”), 42 U.S.C. § 7401 et seq., (e) Toxic Substances Control Act (“TSCA”), 14 U.S.C. § 2601 et seq., (f) Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., (g) Carpenter-Presley-Tanner Hazardous Substance Account Act (“California Superfund”), Cal. Health & Safety Code § 25300 et seq., (h) California Hazardous Waste Control Act, Cal. Health & Safety code § 25100 et seq., (i) Porter-Cologne Water Quality Control Act (“Porter-Cologne Act”), Cal. Water Code § 13000 et seq., (j) Hazardous Waste Disposal Land Use Law, Cal. Health & Safety codes §25220 el seq., (k) Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”), Cal. Health & Safety code § 25249.5 et seq., (l) Hazardous Substances Underground Storage Tank Law, Cal. Health & Safety code § 25280 et seq., (m) Air Resources Law, Cal. Health & Safety Code § 39000 et seq., and (n) regulations promulgated pursuant to said laws or any replacement thereof, or as similar terms are defined in the federal, state and local laws, statutes, regulations, orders or rules. Hazardous Materials shall also mean any and all other biohazardous wastes and substances, materials and wastes which are, or in the future become, regulated under applicable Laws for the protection of health or the environment, or which are classified as hazardous or toxic substances, materials or wastes, pollutants or contaminants, as defined, listed or

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regulated by any federal, state or local law, regulation or order or by common law decision, including, without limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and other chlorinated solvents, (ii) any petroleum products or fractions thereof, (iii) asbestos, (iv) polychlorinated biphenyls, (v) flammable explosives, (vi) urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials and wastes that are harmful to or may threaten human health, ecology or the environment.

     (b) Notwithstanding anything to the contrary in this Lease, Tenant, at its sole cost, shall comply with all Laws relating to the storage, use and disposal of Hazardous Materials; provided, however, that Tenant shall not be responsible for contamination of the Leased Premises by Hazardous Materials that existed as of the commencement date of the Existing Lease or that migrated or migrate onto the Leased Premises from neighboring properties/areas (collectively, “Pre-existing Hazardous Materials”), unless caused by Tenant or a Tenant Related Party. Tenant shall not store, use or dispose of any Hazardous Materials except for small quantities of typical office supplies and those Hazardous Materials listed in a Hazardous Materials management plan (“HMMP”) which Tenant shall deliver to Landlord within thirty (30) days of the Effective Date of this Lease and update at least annually with Landlord (“Permitted Materials”) which may be used, stored and disposed of provided (i) such Permitted Materials are used, stored, transported, and disposed of in strict compliance with applicable Laws, (ii) such Permitted Materials shall be limited to the materials listed on and may be used only in the quantities specified in the HMMP, and (iii) Tenant shall provide Landlord with copies of all material safety data sheets and other documentation required under applicable Laws in connection with Tenant’s use of Permitted Materials as and when such documentation is provided to any regulatory authority having jurisdiction. In no event shall Tenant cause or permit to be discharged into the plumbing or sewage system of the Leased Premises or onto the land underlying or adjacent to the Leased Premises any Hazardous Materials. Tenant shall be solely responsible for and shall defend, indemnify, and hold Landlord and its agents harmless from and against all claims, costs and liabilities, including reasonable attorneys’ fees and costs, arising out of or in connection with Tenant’s storage, use and/or disposal of Hazardous Materials in, on, under or near the Leased Premises. If the presence of Hazardous Materials on the Leased Premises caused or permitted by Tenant results in contamination or deterioration of water or soil, then Tenant shall promptly take any and all action necessary to clean up such contamination, but the foregoing shall in no event be deemed to constitute permission by Landlord to allow the presence of such Hazardous Materials. At any time prior to the expiration of the Lease Term if Tenant has a reasonable basis to suspect that there has been any release or the presence of Hazardous Materials in the ground or ground water on the Leased Premises which did not exist upon commencement of the Lease Term, Tenant shall have the right to conduct appropriate tests of water and soil and to deliver to Landlord the results of such tests to demonstrate that no contamination in excess of permitted levels has occurred as a result of Tenant’s use of the Leased Premises. Tenant shall further be solely responsible for, and shall defend, indemnify, and hold Landlord and its agents harmless from and against all claims, costs and liabilities, including reasonable attorneys’ fees and costs, arising out of or in connection with any removal, cleanup and restoration work and materials required hereunder to return the Leased Premises and any other property of whatever nature to their condition existing prior to the appearance of the Hazardous Materials.

     (c) Upon termination or expiration of the Lease, Tenant at its sole expense shall cause all Hazardous Materials placed in or about the Leased Premises by Tenant, its agents, contractors, or invitees, and all installations (whether interior or exterior) made by or on behalf of Tenant relating to the storage, use, disposal or transportation of Hazardous Materials to be removed from the property and transported for use, storage or disposal in accordance and compliance with all Laws and other requirements respecting Hazardous Materials used or permitted to be used by Tenant. Tenant shall apply for and shall obtain from all appropriate regulatory authorities (including any applicable fire department or regional water quality control board) all permits, approvals and clearances necessary for the closure of the Leased Premises and shall take all other actions as may be required to complete the closure of the Leased Premises.

     (d) At any time prior to expiration of the Lease Term, subject to reasonable prior notice (not less than forty-eight (48) hours) and Tenant’s reasonable security requirements and provided such activities do not unreasonably interfere with the conduct of Tenant’s business at the Leased Premises, Landlord shall have the right to enter in and upon the Leased Premises in order to conduct appropriate tests of water and soil to determine whether levels of any Hazardous Materials in excess of legally permissible levels has occurred as a result of Tenant’s use thereof. Landlord shall furnish copies of all such test results and reports to Tenant and, at Tenant’s option and cost, shall permit split sampling for testing and analysis by Tenant. Such testing shall be at Tenant’s expense if Landlord has a reasonable basis for suspecting and confirms the presence of Hazardous Materials in the soil or surface or

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ground water in, on, under, or about the Leased Premises, which has been caused by or resulted from the activities of Tenant, its agents, contractors, or invitees.

     (e) Notwithstanding any other provision of this Lease, Landlord represents that it is unaware of any Hazardous Materials in, on or about the Property in violation of applicable Laws. Notwithstanding this representation, Landlord shall (i) cause, at its sole cost and expense, any or all Pre-existing Hazardous Materials discovered in, on or about the Property (and not caused by Tenant or a Tenant Related Party) to be removed if and to the extent required by applicable Laws and (ii) indemnify and hold Tenant harmless against and from all liability and claims of any kind for loss or damage to Tenant, its employees or agents, and for all expenses and fees of Tenant (including, but not limited to, reasonable attorneys’ fees) incurred, directly or indirectly, as a result of (a) the existence of such Pre-existing Hazardous Materials in, on or about the Property or (b) any acts or omissions of Landlord or any Landlord Related Party with respect to their use, generation, disposal, storage or transportation of Hazardous Materials on or about the Property.

     (f) Landlord may voluntarily cooperate in a reasonable manner with the efforts of all governmental agencies in reducing actual or potential environmental damage. Except as otherwise provided in this Lease, Tenant shall not be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of such compliance or cooperation. Tenant agrees at all times to cooperate fully with the requirements and recommendations of governmental agencies regulating, or otherwise involved in, the protection of the environment.

4.12 Rules And Regulations. Tenant shall comply with the rules and regulations respecting the use of the Leased Premises that are attached hereto as Exhibit C. Landlord may, from time to time, change such rules and regulations for the safety, care, or cleanliness of the Leased Premises, provided that such changes will not unreasonably interfere with Tenant’s use and occupancy of the Leased Premises or materially increase Tenant’s cost of occupancy. A violation by Tenant of any of such rules and regulations shall constitute a default by Tenant under this Lease. If there is a conflict between the rules and regulations and any of the provisions of this Lease, the provisions of this Lease shall prevail.

ARTICLE 5

REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

5.1 Repair And Maintenance. Except in the case of damage to or destruction of the Leased Premises caused by an act of God or other peril, in which case the provisions of Article 10 shall control, the parties shall have the following obligations and responsibilities with respect to the repair and maintenance of the Leased Premises.

     (a) Tenant’s Obligations. Except as expressly provided in Paragraph 5.1(b), Tenant shall, at all times during the Lease Term and at its sole cost and expense, regularly clean and continuously keep and maintain in good order, condition and repair the Leased Premises and every part thereof including, without limiting the generality of the foregoing, (i) all interior walls, floors and ceilings, (ii) all windows, doors and skylights, (iii) all electrical wiring, conduits, connectors and fixtures, (iv) all plumbing, pipes, sinks, toilets, faucets and drains, (v) all lighting fixtures, bulbs and lamps and all heating, ventilating and air conditioning equipment, (vi) all entranceways to the Leased Premises, and (vii) all paved areas. Tenant shall, at Tenant’s sole cost and expense, institute an industry standard preventative maintenance program using a qualified and licensed heating, ventilating and air conditioning company which regularly inspects and performs required maintenance on the heating, ventilating and air conditioning equipment and systems serving the Leased Premises. Notwithstanding the foregoing, Tenant shall have no obligation or liability for any roof maintenance or repair based on damage or wear and tear that existed prior to January 1, 2004, except to the extent that any act or omission of Tenant or any Tenant Related Party resulted or results in a violation of the roof warranty in effect as of the Lease Commencement Date. Tenant shall, at all times during the Lease Term, keep in a clean and safe condition the Outside Areas. As needed, Tenant shall sweep and clean the driveways and parking areas. Tenant shall, at its sole cost and expense, repair all damage to the Leased Premises caused by the activities of Tenant, its employees, invitees or contractors promptly following written notice from Landlord to so repair such damages. If Tenant shall fail to perform the required maintenance or fail to make repairs required of it pursuant to this paragraph within a reasonable period of time following notice from Landlord to do so, then Landlord may, at its election and without waiving any other remedy it may otherwise have under this

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Lease or at Law, perform such maintenance or make such repairs and charge to Tenant, as Additional Rent, the costs so incurred by Landlord for same. All glass within or a part of the Leased Premises, both interior and exterior, is at the sole risk of Tenant and any broken glass shall promptly be replaced by Tenant at Tenant’s expense with glass of the same kind, size and quality. In the event Tenant’s obligations under this Paragraph 5.1(a) require that Tenant make a repair, replacement or expenditure whose benefit extends beyond the Lease Term and which is deemed a capital improvement in accordance with generally accepted accounting principles, then Landlord shall pay the cost thereof; however, such cost shall be amortized by Landlord, on a straight-line basis, over the useful life of such item, utilizing an interest rate of zero percent (0%), and the monthly amortized cost of such any item so amortized shall be included in the Property Maintenance Costs and charged to Tenant as Additional Rent.

     (b) Landlord’s Obligation. Landlord shall, at all times during the Lease Term and at Landlord’s sole cost and expense, maintain in good condition and repair the foundation, footings, structural exterior walls (excluding painting, sealing and other exterior surface maintenance), structural roof elements (excluding the roof membrane), poured concrete floors (excluding floor surfaces) and exterior utility connections up to the Building and under the foundation. In addition, Landlord shall, at all times during the Lease Term, maintain in good condition and repair the roof membrane, provided that the costs incurred by Landlord in performing such maintenance and repair of the roof membrane shall be included in the Property Maintenance Costs and charged to Tenant as Additional Rent. Landlord represents and warrants that as of the Effective Date of this Lease, the roof membrane is covered by effective warranties (copies of which have been provided to Tenant) and agrees that Tenant shall have no obligation to make or pay for any capital repairs or maintenance and repair to the non-structural elements of the roof, to the extent such capital repairs or maintenance and repair is covered by such warranty.

5.2 Utilities. Tenant shall arrange at its sole cost and expense and in its own name, for the supply of water, gas and electricity to the Leased Premises. In the event that such services are not separately metered, Tenant shall, at its sole expense, cause such meters to be installed. Tenant shall be responsible for determining if the local supplier of water, gas and electricity can supply the needs of Tenant and whether or not the existing water, gas and electrical distribution systems within the Leased Premises are adequate for Tenant’s needs. Tenant shall be responsible for determining if the existing sanitary and storm sewer systems now servicing the Leased Premises are adequate for Tenant’s needs. Tenant shall pay all charges for water, gas, electricity and storm and sanitary sewer services supplied to the Leased Premises, irrespective of whether or not the services are maintained in Landlord’s or Tenant’s name.

5.3 Security. Tenant acknowledges that Landlord has not undertaken any duty whatsoever to provide security for the Leased Premises and, accordingly, Landlord is not responsible for the security of same or the protection of Tenant’s property or Tenant’s employees, invitees or contractors. To the extent Tenant determines that such security or protection services are advisable or necessary, Tenant shall arrange for and pay the costs of providing same.

5.4 Energy And Resource Consumption. Landlord may, in its sole discretion, cooperate in a reasonable manner with the efforts of governmental agencies and/or utility suppliers in reducing energy or other resource consumption within the Leased Premises. Tenant agrees at all times to comply with the requirements of utility suppliers and governmental agencies regulating the consumption of energy and/or other resources.

5.5 Limitation Of Landlord’s Liability. Landlord shall not be liable to Tenant for injury to Tenant, its employees, agents, invitees or contractors, for damage to Tenant’s property or loss of Tenant’s business or profits, nor shall Tenant be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of (i) Landlord’s failure to provide security services or systems for the protection of the Leased Premises, or the protection of Tenant’s property or Tenant’s employees, invitees, agents or contractors, or (ii) Landlord’s failure to perform any maintenance or repairs to the Leased Premises until Tenant has notified Landlord, and the applicable cure period has expired, as provided in Paragraph 12.3, or (iii) any failure, interruption, rationing or other curtailment in the supply of water, electric current, gas or other utility service to the Leased Premises from whatever cause (other than Landlord’s gross negligence or willful misconduct), or (iv) the unauthorized intrusion or entry into the Leased Premises by third parties (other than Landlord or Landlord’s employees, agents or contractors).

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ARTICLE 6

ALTERATIONS AND IMPROVEMENTS

6.1 By Tenant. Tenant shall not make any alterations to or modifications of the Leased Premises or construct any improvements within the Leased Premises until Landlord shall have first approved, in writing, the plans and specifications therefor, which approval shall not be unreasonably withheld, conditioned or delayed. Without limiting the generality of the foregoing, Tenant acknowledges that it shall be reasonable for Landlord to withhold its consent to any modification, alteration or improvement if, in Landlord’s reasonable judgment, such modification, alteration or improvement would adversely affect the structure of the Building, any of the Building’s systems, the appearance of the Building or the value or utility of the Leased Premises. All such modifications, alterations or improvements, once so approved, shall be made, constructed or installed by Tenant at Tenant’s expense (including all permit fees and governmental charges related thereto), using a licensed contractor first approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed), in substantial compliance with the aforementioned Landlord-approved plans and specifications therefor. All work undertaken by Tenant shall be done in accordance with all Laws and in a good and workmanlike manner using materials of good quality. Tenant shall not commence the making of any such modifications or alterations or the construction of any such improvements until (i) all required governmental approvals and permits shall have been obtained, (ii) all requirements regarding insurance imposed by this Lease have been satisfied, (iii) Tenant shall have given Landlord at lease five (5) business days prior written notice of its intention to commence such work so that Landlord may post and file notices of non-responsibility, and (iv) if requested by Landlord, Tenant shall have obtained contingent liability and broad form builder’s risk insurance in an amount satisfactory to Landlord in its reasonable discretion to cover any perils relating to the proposed work not covered by insurance carried by Tenant pursuant to Article 9. In no event shall Tenant make any modification, alterations or improvements whatsoever to the Outside Areas or the exterior or structural components of the Building including, without limitation, any cuts or penetrations in the floor, roof or exterior walls of the Leased Premises unless otherwise provided herein without Landlord’s prior consent, which shall not be unreasonably withheld, conditioned or delayed. As used in this Article, the term “modifications, alterations and/or improvements” shall include, without limitation, the installation of additional electrical outlets, overhead lighting fixtures, drains, sinks, partitions, doorways, or the like. Notwithstanding the foregoing, Tenant, without Landlord’s prior written consent (but subject to the other terms and conditions of this Article 6), shall be permitted to make alterations to the Leased Premises which do not affect the structure of the Building or the Leased Premises, do not affect the plumbing, electrical, mechanical or other systems of the Building and do not affect the appearance of the Leased Premises viewed from the exterior, provided that: (a) such alterations do not exceed $25,000 individually or $100,000 in the aggregate in each calendar year, (b) Tenant shall timely provide Landlord the notice required pursuant to Paragraph 4.9 above, (c) Tenant shall provide Landlord, promptly following the completion of the alteration, with a set of the plans and specifications therefor, either “as built” or marked to show construction changes made, and (d) if requested by Landlord, Tenant shall, on or before the expiration or earlier termination of this Lease, remove any such alteration that is not an improvement that would be typically found in an office space environment and restore the Leased Premises to their condition prior to such alteration, reasonable wear and tear excepted.

6.2 Ownership Of Improvements. All modifications, alterations and improvements made or added to the Leased Premises by Tenant (collectively, “Alterations”) during the Lease Term, other than Tenant’s FF&E, shall be deemed real property and a part of the Leased Premises, but shall remain the property of Tenant during the Lease. Any such Alterations (except for Tenant’s FF&E), once completed, shall not be altered or removed from the Leased Premises during the Lease Term without Landlord’s written approval if required by Paragraph 6.1 above. At the expiration or sooner termination of this Lease, all Alterations (other than Tenant’s FF&E) shall automatically become the property of Landlord and shall be surrendered to Landlord as part of the Leased Premises as required pursuant to Paragraph 2.6, unless Landlord shall require Tenant to remove any Alterations in accordance with the provisions of Paragraph 2.6, in which case Tenant shall remove such Alterations. Landlord shall have no obligation to reimburse Tenant for all or any portion of the cost or value of any Alterations so surrendered to Landlord. All modifications, alterations or improvements which are installed or constructed on or attached to the Leased Premises by Landlord and/or at Landlord’s expense shall be deemed real property and a part of the Leased Premises and shall be property of Landlord. All lighting, plumbing, electrical, heating, ventilation and air conditioning fixtures, partitioning,

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window coverings, wall coverings and floor coverings installed by Tenant shall be deemed improvements to the Leased Premises and not Tenant’s FF&E.

6.3 Alterations Required By Law. Tenant shall, at its sole cost, make all modifications, alterations and improvements to the Leased Premises that are required by any Law because of Tenant’s (i) use or occupancy of the Leased Premises, (ii) application for any permit or governmental approval, or (iii) making of any Alterations to or within the Leased Premises. If Landlord shall, at any time during the Lease Term, be required by any governmental authority to make any modifications, alterations or improvements to the Leased Premises, the cost incurred by Landlord in making such modifications, alterations or improvements, including interest at a rate equal to the sum of that rate quoted by Wells Fargo Bank, N.T. & S.A. from time to time as its prime rate, plus two percent (2%), shall be amortized by Landlord over the useful life of such modifications, alterations or improvements (based on generally accepted industry standards), on a straight line basis, and the monthly amortized cost of such modifications, alterations and improvements as so amortized shall be considered a Property Maintenance Cost.

6.4 Liens. Tenant shall keep the Leased Premises and every part thereof free from any lien, and shall pay when due all bills arising out of any work performed, materials furnished, or obligations incurred by Tenant, its agents, employees or contractors relating to the Leased Premises. If any such claim of lien is recorded against Tenant’s interest in this Lease, the Leased Premises or any part thereof, Tenant shall bond against, discharge or otherwise cause such lien to be entirely released within thirty (30) days after the same has been recorded. Tenant’s failure to do so shall be conclusively deemed a material default under the terms of this Lease.

ARTICLE 7

ASSIGNMENT AND SUBLETTING BY TENANT

7.1 By Tenant. Except as expressly permitted in Paragraph 7.2 below, Tenant shall not sublet the Leased Premises or any portion thereof or assign its interest in this Lease, whether voluntarily or by operation of Law, without Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Any attempted subletting or assignment without Landlord’s prior written consent, at Landlord’s election, shall constitute a default by Tenant under the terms of this Lease. The acceptance of rent by Landlord from any person or entity other than Tenant, or the acceptance of rent by Landlord from Tenant with knowledge of a violation of the provisions of this paragraph, shall not be deemed to be a waiver by Landlord of any provision of this Article or this Lease or to be a consent to any subletting by Tenant or any assignment of Tenant’s interest in this Lease. Without limiting the circumstances in which it may be reasonable for Landlord to withhold its consent to an assignment or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold its consent in the following instances:

     (a) the proposed assignee or sublessee is a governmental agency;

     (b) the proposed use is not a Permitted Use;

     (c) in Landlord’s reasonable judgment, the financial worth of a proposed assignee is less than that of Tenant or does not meet the credit standards applied by Landlord;

     (d) the proposed assignee or sublessee has, in the five years prior to the assignment or sublease, filed for bankruptcy protection, has been the subject of an involuntary bankruptcy that was not discharged within ninety (90) days of its filing, or has been adjudged insolvent;

     (e) Landlord has experienced a previous uncured material default by or is in litigation with the proposed assignee or sublessee;

     (f) the use of the Leased Premises by the proposed assignee or sublessee will violate any applicable Law, ordinance or regulation;

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     (g) the proposed assignee or sublessee is, as of the date of this Lease, in negotiations with Landlord or any of its affiliates for a lease in a property owned by Landlord or any of its affiliates and located in the City of Milpitas, California;

     (h) the proposed assignment or sublease fails to include all of the terms and provisions required to be included therein pursuant to this Article 7;

     (i) there is an Event of Default under this Lease, or there have been three or more Events of Default during the 12 months preceding the date that Tenant shall request consent; or

     (j) in the case of a subletting of less than the entire Leased Premises, if the subletting would result in the division of the Leased Premises into more than three subparcels or would require improvements to be made outside of the Leased Premises.

7.2 Permitted Transfers. Notwithstanding anything contained herein to the contrary regarding Landlord consent requirements, but otherwise subject to the provisions of this Article 7:

     (a) Tenant may sublet or assign to any Successor Entity (as hereinafter defined) without obtaining Landlord’s consent; provided that: (i) such Successor Entity’s tangible net worth (determined in accordance with generally accepted accounting principles) immediately after such transaction is at least equal to Tenant’s tangible net worth immediately prior to such transaction; (ii) in the event of a merger, if required by Landlord, the surviving Successor Entity assumes all obligations of Tenant under this Lease; and (iii) in the event of a sale of assets or stock of Tenant, if required by Landlord, the Successor Entity assumes in writing all obligations of Tenant under this Lease. “Successor Entity” means an entity controlling, controlled by or under common control with Tenant, as well as any entity into or with which Tenant is merged or otherwise consolidated or which purchases all or substantially all of Tenant’s assets or stock, and which entity succeeds to Tenant’s interest in this Lease by assignment or sublease.

     (b) Tenant may sublet or assign to LSI Logic Storage Systems, Inc., or its successor, without obtaining Landlord’s consent, provided that such sublessee or assignee assumes all obligations of Tenant under this Lease (in the case of a sublease, to the extent applicable to the subleased portion of the Leased Premises).

     (c) Landlord’s consent shall not be required for a short-term license, not exceeding one (1) year, of any portion of the Leased Premises that are then not separately demised.

7.3 Landlord’s Election. If Tenant desires to assign its interest under the Lease or to sublet all or part of the Leased Premises (a “Proposed Transfer”), Tenant must first notify Landlord, in writing, of such Proposed Transfer, at least fifteen (15) business days in advance of the date it intends to close the Proposed Transfer, specifying (a) the size of the space to be so transferred, (b) the duration of the term of such Proposed Transfer and (c) the terms of the Proposed Transfer, including the name of the proposed assignee or sublessee, the proposed assignee’s or sublessee’s intended use of the Leased Premises, current financial statements (including a balance sheet, income statement and statement of cash flow, all prepared in accordance with generally accepted accounting principles) of such proposed assignee or sublessee, the form of documents to be used in effectuating such assignment or subletting and such other information as Landlord may reasonably request. Landlord shall have a period of fifteen (15) business days following receipt of such notice and the required information to consent or decline to consent to the Proposed Transfer. If Landlord does not respond within such fifteen (15) business day period, Landlord shall be deemed to have approved the Proposed Transfer. If Landlord declines to consent to the Proposed Transfer, Landlord shall notify Tenant in writing, specifying the reasons under this Lease that such refusal is justified. During such fifteen (15) business day period, Tenant covenants and agrees to supply to Landlord, promptly upon request, all necessary or relevant information which Landlord may reasonably request respecting such proposed assignment or subletting and/or the proposed assignee or sublessee.

7.4 Conditions To Landlord’s Consent. If Landlord elects to consent, or is deemed to have consented pursuant to Paragraph 7.3 above, or shall have been ordered to so consent by a court of competent jurisdiction, to such requested assignment or subletting, such consent shall be expressly conditioned upon the occurrence of each of the conditions

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below set forth, and any purported assignment or subletting made or ordered prior to the full and complete satisfaction of each of the following conditions shall be void and, at the election of Landlord, which election may be exercised at any time following such a purported assignment or subletting but prior to the satisfaction of each of the stated conditions, shall constitute a material default by Tenant under this Lease until cured by satisfying in full each such condition by the assignee or sublessee. The conditions are as follows:

     (a) The execution by Landlord, Tenant and the proposed assignee or sublessee of a commercially reasonable consent form.

     (b) Each such sublessee or assignee having agreed, in writing reasonably satisfactory to Landlord, to assume, to be bound by, and to perform the obligations of this Lease not otherwise to be performed by Tenant which relate to space being subleased.

     (c) There being no then-existing Event of Default under this Lease, and there having been no more than two Events of Default during the preceding 12 months.

     (d) Tenant having reimbursed to Landlord all reasonable costs and reasonable attorneys’ fees incurred by Landlord in conjunction with the processing and documentation of any such requested subletting or assignment (not to exceed One Thousand Dollars ($1,000.00) in each case).

     (e) Tenant having delivered to Landlord a complete and fully-executed duplicate original of such sublease agreement or assignment agreement (as applicable) and all related agreements.

     (f) With respect to an assignment, Tenant having paid, or having agreed in writing to pay as to future payments, to Landlord fifty percent (50%) of all Assignment Consideration to be paid to Tenant or to any other on Tenant’s behalf or for Tenant’s benefit for such assignment as follows:

          (i) If Tenant assigns its interest under this Lease and if all or a portion of the consideration for such assignment is to be paid by the assignee at the time of the assignment, that Tenant shall have paid to Landlord and Landlord shall have received an amount equal to fifty percent (50%) of the Assignment Consideration so paid or to be paid (whichever is the greater) at the time of the assignment by the assignee; or

          (ii) If Tenant assigns its interest under this Lease and if Tenant is to receive all or a portion of the consideration for such assignment in future installments, that Tenant and Tenant’s assignee shall have entered into a written agreement with and for the benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and Tenant’s assignee jointly agree to pay to Landlord an amount equal to fifty percent (50%) of all such future Assignment Consideration installments to be paid by such assignee as and when such Assignment Consideration is so paid.

     (g) With respect to a sublease of all or a portion of the Leased Premises, Tenant and Tenant’s sublessee shall have entered into a written agreement with and for the benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and Tenant’s sublessee jointly agree to pay to Landlord the applicable percentage set forth below of all Excess Rentals to be paid by such sublessee as and when such Excess Rentals are so paid:

Portion of Leased Premises Subleased	Percentage of Excess Rentals to Landlord
Up to and including 25%		0	%
Between 25% and 50%		25	%
From 50% up to and including 100%		50	%

Landlord and Tenant agree that the percentages set forth above apply to the aggregate of all subleased portions of the Leased Premises during the Lease Term. For example, if Tenant initially subleases 20% of the Leased Premises, Landlord shall not be entitled to any portion of any Excess Rentals from such sublease; provided that, if Tenant subsequently subleases an additional 10% of the Leased Premises, then Landlord shall be entitled to 25% of the

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aggregate Excess Rentals payable with respect to the entire 30% portion of the Leased Premises that is then subleased.

7.5 Assignment Consideration And Excess Rentals Defined. For purposes of this Article, including any amendment to this Article by way of addendum or other writing, the term “Assignment Consideration” shall mean all consideration to be paid by the assignee to Tenant or to any other party on Tenant’s behalf or for Tenant’s benefit as consideration for such assignment, after deduction for the following costs actually paid or actually incurred by Tenant directly in connection with such assignment: market-rate leasing commissions; rent concessions; reasonable costs of tenant improvements, capital improvements, building upgrades and permit fees; and reasonable attorneys’ fees not to exceed five thousand dollars ($5,000.00). The term “Excess Rentals” shall mean all consideration to be paid by the sublessee to Tenant or to any other party on Tenant’s behalf or for Tenant’s benefit for the sublease of the Leased Premises in excess of the rent due to Landlord under the terms of this Lease for the same period, after deduction for the following costs actually paid or actually incurred by Tenant directly in connection with such sublease: market-rate leasing commissions; rent concessions; reasonable costs of tenant improvements, capital improvements, building upgrades and permit fees; and reasonable attorneys’ fees not to exceed five thousand dollars ($5,000.00). Tenant agrees that the portion of any Assignment Consideration and/or Excess Rentals arising from any assignment or subletting by Tenant which is to be paid to Landlord pursuant to this Article now is and shall then be the property of Landlord and not the property of Tenant.

7.6 Payments. All payments required by this Article to be made to Landlord shall be made in cash in full as and when they become due. At the time Tenant, Tenant’s assignee or sublessee makes each such payment to Landlord, Tenant or Tenant’s assignee or sublessee, as the case may be, shall deliver to Landlord an itemized statement in reasonable detail showing the method by which the amount due Landlord was calculated and certified by the party making such payment as true and correct.

7.7 Good Faith. The rights granted to Tenant by this Article are granted in consideration of Tenant’s express covenant that all pertinent allocations which are made by Tenant between the rental value of the Leased Premises and the value of any of Tenant’s personal property which may be conveyed or leased generally concurrently with and which may reasonably be considered a part of the same transaction as the permitted assignment or subletting shall be made fairly, honestly and in good faith. If Tenant shall breach this covenant, Landlord may immediately declare Tenant to be in default under the terms of this Lease and terminate this Lease and/or exercise any other rights and remedies Landlord would have under the terms of this Lease in the case of a material default by Tenant under this Lease.

7.8 Effect Of Landlord’s Consent. No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its personal and primary obligation to pay rent and to perform all of the other obligations to be performed by Tenant hereunder. Consent by Landlord to one or more assignments of Tenant’s interest in this Lease or to one or more sublettings of the Leased Premises shall not be deemed to be a consent to any subsequent assignment or subletting. If Landlord shall have been ordered by a court of competent jurisdiction to consent to a requested assignment or subletting, or such an assignment or subletting shall have been ordered by a court of competent jurisdiction over the objection of Landlord, such assignment or subletting shall not be binding between the assignee (or sublessee) and Landlord until such time as all conditions set forth in Paragraph 7.4 above have been fully satisfied (to the extent not then satisfied) by the assignee or sublessee, including, without limitation, the payment to Landlord of all agreed assignment considerations and/or excess rentals then due Landlord.

7.9 Options Personal. If Landlord consents to an assignment or subletting hereunder and this Lease contains any renewal options, expansion options, rights of first refusal, rights of first negotiation or any other rights or options pertaining to additional space in property owned by Landlord or any affiliate of Landlord, such rights and/or options shall not run to any assignee or subtenant other than a Successor Entity, it being agreed by the parties hereto that any such rights and options are personal to the original Tenant and any Successor Entity named herein and may not be otherwise transferred.

7.10 Tenant’s Remedies. Notwithstanding any contrary provision of law, including California Civil Code section 1995.310, Tenant shall have no right, and Tenant hereby waives and relinquishes any right, to cancel or terminate this Lease in the event Landlord is determined to have unreasonably withheld or delayed its consent to a proposed Transfer.

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ARTICLE 8

LIMITATION ON LANDLORD’S LIABILITY AND INDEMNITY

8.1 Limitation On Landlord’s Liability And Release. Landlord shall not be liable to Tenant for, and Tenant hereby releases Landlord and its partners, principals, members, officers, agents, employees, lenders, attorneys, and consultants (collectively, the “Landlord Related Parties”) from, any and all liability, whether in contract, tort or on any other basis, for any injury to or any damage sustained by Tenant, Tenant’s agents, employees, contractors or invitees (collectively, the “Tenant Related Parties”), any damage to Tenant’s property, or any loss to Tenant’s business, loss of Tenant’s profits or other financial loss of Tenant resulting from or attributable to the condition of, the management of, the repair or maintenance of, the protection of, the supply of services or utilities to, the damage in or destruction of the Leased Premises, or any portion thereof, including without limitation (i) the failure, interruption, rationing or other curtailment or cessation in the supply of electricity, water, gas or other utility service to the Leased Premises; (ii) the vandalism or forcible entry into the Building or the Leased Premises; (iii) the penetration of water into or onto any portion of the Leased Premises; (iv) the failure to provide security and/or adequate lighting in or about the Leased Premises, (v) the existence of any design or construction defects within the Leased Premises; (vi) the failure of any mechanical systems to function properly (such as the HVAC systems); (vii) the blockage of access to any portion of the Leased Premises, except that Tenant does not so release Landlord from such liability to the extent such damage was proximately caused by Landlord’s or any Landlord Related Parties’ gross negligence, willful misconduct, or Landlord’s or any Landlord Related Parties’ failure to perform an obligation expressly undertaken pursuant to this Lease after a reasonable period of time shall have lapsed following receipt of written notice from Tenant to so perform such obligation.

8.2 Tenant’s Indemnification Of Landlord. Tenant shall defend with competent counsel reasonably satisfactory to Landlord any claims made or legal actions filed or threatened against Landlord or any of the Landlord Related Parties with respect to the violation of any Law, or the death, bodily injury, personal injury, property damage, or interference with contractual or property rights suffered by any third party occurring within the Leased Premises or resulting from Tenant’s use or occupancy of the Leased Premises, or resulting from Tenant’s activities in or about the Leased Premises, and Tenant shall indemnify and hold Landlord and the Landlord Related Parties harmless from any loss liability, penalties, or expense whatsoever (including reasonable attorneys’ fees and any loss attributable to vacant space which otherwise would have been leased, but for such activities) resulting therefrom, except to the extent proximately caused by the gross negligence or willful misconduct of Landlord or the Landlord Related Parties. This Paragraph 8.2 shall survive the expiration or earlier termination of this Lease.

8.3 Landlord’s Indemnification of Tenant. Landlord shall defend with competent counsel reasonably satisfactory to Tenant, and shall indemnify and hold harmless Tenant and the Tenant Related Parties, from and against any and all claims, demands, liabilities, causes of action, suits, judgments, damages and expenses (including reasonable attorneys’ fees) arising out of or in connection with Landlord’s failure to perform its obligations under this Lease or the violation of any Law by Landlord, except to the extent proximately caused by the gross negligence or willful misconduct of Tenant or the Tenant Related Parties. This Paragraph 8.3 shall survive the expiration or earlier termination of this Lease.

ARTICLE 9

INSURANCE

9.1 Tenant’s Insurance. Tenant shall maintain insurance complying with all of the following:

     (a) Tenant shall procure, pay for and keep in full force and effect, at all times during the Lease Term, the following:

          (i) Commercial general liability insurance insuring Tenant against liability for personal injury, bodily injury, death and damage to property occurring within the Leased Premises, or resulting from Tenant’s use or occupancy of the Leased Premises, or any portion thereof, or resulting from Tenant’s activities in or about the

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Leased Premises, with coverage in an amount equal to Tenant’s Required Liability Coverage (as set forth in Article 1), which insurance shall contain a “broad form liability” endorsement insuring Tenant’s performance of Tenant’s obligations to indemnify Landlord as contained in this Lease.

          (ii) Fire and property damage insurance in so-called “fire and extended coverage” form insuring Tenant against loss from physical damage to Tenant’s personal property, inventory, trade fixtures and improvements within the Leased Premises with coverage for the full actual replacement cost thereof;

          (iii) Plate glass insurance, at actual replacement cost;

          (iv) Pressure vessel insurance, if applicable;

          (v) Workers’ compensation insurance and any other employee benefit insurance sufficient to comply with all Laws; and

          (vi) With respect to Alterations, contingent liability and builder’s risk insurance, in an amount and with coverage reasonably satisfactory to Landlord.

     (b) Each policy of liability insurance required to be carried by Tenant pursuant to this paragraph or actually carried by Tenant with respect to the Leased Premises: (i) shall, except with respect to insurance required by subparagraph (a)(vi) above, name Landlord, and such others as are reasonably designated by Landlord, as additional insureds; (ii) shall be primary insurance providing that the insurer shall be liable for the full amount of the loss, up to and including the total amount of liability set forth in the declaration of coverage, without the right of contribution from or prior payment by any other insurance coverage of Landlord; (iii) shall be in a form reasonably satisfactory to Landlord; (iv) shall be carried with companies reasonably acceptable to Landlord with Best’s ratings of at least A and XI; (v) shall provide that such policy shall not be subject to cancellation, lapse or change except after at least thirty days prior written notice to Landlord, and (vi) shall contain a so-called “severability” or “cross liability” endorsement. Each policy of property insurance maintained by Tenant with respect to the Leased Premises or any property therein (i) shall provide that such policy shall not be subject to cancellation, lapse or change except after at least thirty days prior written notice to Landlord and (ii) shall contain, to the extent commercially reasonable to obtain, a waiver and/or a permission to waive by the insurer of any right of subrogation against Landlord, its partners, principals, members, officers, employees, agents and contractors, which might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its partners, principals, members, officers, employees, agents and contractors.

     (c) Prior to the time Tenant or any of its contractors enters the Leased Premises, Tenant shall deliver to Landlord, with respect to each policy of insurance required to be carried by Tenant pursuant to this Article, a certificate of the insurer certifying in form reasonably satisfactory to Landlord that a policy has been issued, premium paid, providing the coverage required by this Paragraph and containing the provisions specified herein. With respect to each renewal or replacement of any such insurance, the requirements of this Paragraph must be complied with not less than fifteen days prior to the expiration or cancellation of the policies being renewed or replaced. Landlord may, at any time and from time to time, inspect any and all insurance policies required to be carried by Tenant pursuant to this Article. If Landlord’s Lender, insurance broker, advisor or counsel reasonably determines at any time that the amount of coverage set forth in Paragraph 9.1 (a) for any policy of insurance Tenant is required to carry pursuant to this Article is not adequate, then Tenant shall increase the amount of coverage for such insurance to such greater amount as Landlord’s Lender, insurance broker, advisor or counsel reasonably deems adequate.

     (d) Tenant shall have the right to self-insure for the insurance required by this Paragraph 9.1 so long as the long-term, unsecured debt of Tenant is rated “A” or better by a major credit rating agency. Tenant shall also have the right to provide the insurance required hereunder with a so-called umbrella policy. Tenant shall have the right to self-insure for the insurance required by Paragraph 9.1(a)(v) so long as Tenant has obtained qualified self-insurer status for such insurance from the California Department of Industrial Relations.

9.2 Landlord’s Insurance. With respect to insurance maintained by Landlord:

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     (a) Landlord shall maintain, as the minimum coverage required of it by this Lease, fire and property damage insurance in so-called “fire and extended coverage” form insuring Landlord (and such others as Landlord may designate) against loss from physical damage to the Leased Premises or any part thereof with coverage of not less than one hundred percent (100%) of the full actual replacement cost thereof and against loss of rents for a period of not less than six months. Such fire and property damage insurance, at Landlord’s election but without any requirements on Landlord’s behalf to do so, (i) may be written in so-called “all risk” form; (ii) may provide coverage for physical damage to the improvements so insured for up to the entire full actual replacement cost thereof; (iii) may be endorsed to cover loss or damage caused by any additional perils against which Landlord may elect to insure, including earthquake and/or flood; and/or (iv) may provide coverage for loss of rents for a period of up to twelve months. Landlord shall not be required to cause such insurance to cover any of Tenant’s personal property, inventory, and trade fixtures, or any modifications, alterations or improvements made or constructed by Tenant to or within the Leased Premises. Landlord shall use commercially reasonable efforts to obtain such insurance at competitive rates.

     (b) Landlord shall maintain commercial 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 in, on or about, or resulting from the use or occupancy of the Leased Premises, or any portion thereof, with combined single limit coverage of at least Three Million Dollars ($3,000,000). Landlord may carry such greater coverage as Landlord or Landlord’s Lender, insurance broker, advisor or counsel may from time to time determine is reasonably necessary, under the circumstances, for the adequate protection of Landlord and the Leased Premises.

     (c) Landlord may maintain any other insurance which in Landlord’s reasonable opinion is prudent to carry under the given circumstances, provided such insurance is commonly carried by owners of property similarly situated and operating under similar circumstances.

9.3 Mutual Waiver Of Subrogation. Landlord hereby releases Tenant, and Tenant hereby releases Landlord and its respective partners, principals, members, officers, agents, employees and servants, from any and all liability for loss, damage or injury to the property of the other in or about the Leased Premises which is caused by or results from a peril or event or happening which is covered by insurance actually carried and in force at the time of the loss by the party sustaining such loss; provided, however, that such waiver shall be effective only to the extent permitted by the insurance covering such loss and to the extent such insurance is not prejudiced thereby.

ARTICLE 10

DAMAGE TO LEASED PREMISES

10.1 Landlord’s Duty To Restore. If the Leased Premises or any portion thereof are damaged by any peril after the Effective Date of this Lease, Landlord shall restore the same, as and when required by this paragraph, unless this Lease is terminated by Landlord pursuant to Paragraph 10.3 or by Tenant pursuant to Paragraph 10.4. If this Lease is not so terminated, then upon the issuance of all necessary governmental permits, Landlord shall commence and diligently prosecute to completion the restoration of the Leased Premises to the extent then allowed by Law, to substantially the same condition in which it existed as of the Lease Commencement Date. Landlord’s obligation to restore shall be limited to actual receipt of insurance proceeds and to the improvements constructed by Landlord. Landlord shall have no obligation to restore any improvements made by Tenant to the Leased Premises after the Effective Date of this Lease or any of Tenant’s personal property, inventory or trade fixtures.

10.2 Insurance Proceeds. All insurance proceeds available from the fire and property damage insurance carried by Landlord shall be paid to and become the property of Landlord. If this Lease is terminated pursuant to either Paragraph 10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant which cover loss of property that is Landlord’s property or would become Landlord’s property on termination of this Lease shall be paid to and become the property of Landlord, and the remainder of such proceeds shall be paid to and become the property of Tenant. If this Lease is not terminated pursuant to either Paragraph 10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant which cover loss to property that is Landlord’s property shall be paid to and become the property of Landlord, and all proceeds available from such insurance which cover loss to property which would only become the property of Landlord upon the termination of this Lease shall be paid to and remain

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the property of Tenant. The determination of Landlord’s property and Tenant’s property shall be made pursuant to Paragraph 6.2.

10.3 Landlord’s Right To Terminate. Landlord shall have the option to terminate this Lease in the event any of the following occurs, which option may be exercised only by delivery to Tenant of a written notice of election to terminate within thirty days after the date of such damage or destruction:

     (a) The Leased Premises are damaged by any peril covered by valid and collectible insurance actually carried by Landlord and in force at the time of such damage or destruction (an “insured peril”) to such an extent that the estimated cost to restore the Leased Premises exceeds the insurance proceeds available from insurance actually carried by Landlord, plus the deductible amount specified in such insurance policy;

     (b) The Leased Premises are damaged by an uninsured peril, which peril Landlord was not required to insure against pursuant to the provisions of Article 9 of this Lease.

     (c) The Leased Premises are damaged by any peril and, because of Laws then in force, the Leased Premises (i) cannot be restored at reasonable cost or (ii) if restored, cannot be used for the same use being made thereof before such damage.

10.4 Tenant’s Right To Terminate. If the Leased Premises or any portion thereof are damaged by any peril and Landlord does not elect to terminate this Lease or is not entitled to terminate this Lease pursuant to this Article, then as soon as reasonably practicable, but in any event within ninety (90) days after the date of such damage or destruction, Landlord shall furnish Tenant with the written opinion of Landlord’s architect or construction consultant as to when the restoration work required of Landlord may be complete. Tenant shall have the option to terminate this Lease in the event any of the following occurs, which option may be exercised only by delivery to Landlord of a written notice of election to terminate within fifteen (15) days after Tenant receives from Landlord the estimate of the time needed to complete such restoration:

     (a) If the time estimated to substantially complete the restoration exceeds nine (9) months from and after the date the architect’s or construction consultant’s written opinion is delivered; or

     (b) If the damage occurred within eighteen (18) months of the last day of the Lease Term and the time estimated to substantially complete the restoration exceeds one-half (1/2) of the number of full months then remaining in the Lease Term from and after the date the architect’s or construction consultant’s written opinion is delivered.

10.5 Tenant’s Waiver. Landlord and Tenant agree that the provisions of Paragraph 10.4 above, captioned “Tenant’s Right To Terminate,” are intended to supersede and replace the provisions contained in California Civil Code, Section 1932, Subdivision 2, and California Civil Code, Section 1934, and accordingly, Tenant hereby waives the provisions of such Civil Code Sections and the provisions of any successor Civil Code Sections or similar laws hereinafter enacted.

10.6 Abatement Of Rent. In the event of damage to the Leased Premises which does not result in the termination of this Lease, the Base Monthly Rent (and any Additional Rent) shall be temporarily abated during the period of restoration in proportion to the degree to which Tenant’s use of the Leased Premises is impaired by such damage.

ARTICLE 11

CONDEMNATION

11.1 Tenant’s Right To Terminate. Except as otherwise provided in Paragraph 11.4 below regarding temporary takings, Tenant shall have the option to terminate this Lease if, as a result of any taking, all or a material portion of the Leased Premises is taken and the part of the Leased Premises that remains cannot, within a reasonable period of time, be made reasonably suitable for the continued operation of Tenant’s business as conducted in the Leased

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Premises immediately prior to the taking. Tenant must exercise such option within a reasonable period of time, to be effective on the later to occur of (i) the date that possession of that portion of the Leased Premises that is condemned is taken by the condemnor or (ii) the date Tenant vacated the Leased Premises.

11.2 Landlord’s Right To Terminate. Except as otherwise provided in Paragraph 11.4 below regarding temporary takings, Landlord shall have the option to terminate this Lease if, as a result of any taking, (i) all or a material portion of the Leased Premises is taken and the part of the Leased Premises that remains cannot, within a reasonable period of time, be made reasonably suitable for the continued operation of Tenant’s business as conducted in the Leased Premises immediately prior to the taking, or (iii) because of the Laws then in force, the Leased Premises may not be used for the same use being made before such taking, whether or not restored as required by Paragraph 11.3 below. Any such option to terminate by Landlord must be exercised within a reasonable period of time, to be effective as of the date possession is taken by the condemnor.

11.3 Restoration. If any part of the Leased Premises is taken and this Lease is not terminated, then Landlord shall, to the extent not prohibited by Laws then in force, repair any damage occasioned thereby to the remainder thereof to a condition reasonably suitable for Tenant’s continued operations and otherwise, to the extent practicable, in the manner and to the extent provided in Paragraph 10.1.

11.4 Temporary Taking. If a portion of the Leased Premises is temporarily taken for a period of nine (9) months or less and such period does not extend beyond the Lease Expiration Date, this Lease shall remain in effect. If any portion of the Leased Premises is temporarily taken for a period which exceeds nine (9) months or which extends beyond the Lease Expiration Date, then the rights of Landlord and Tenant shall be determined in accordance with Paragraphs 11.1 and 11.2 above.

11.5 Division Of Condemnation Award. Any award made for any taking of the Leased Premises, or any portion thereof, shall belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of its right, title and interest in any such award; provided, however, that Tenant shall be entitled to receive any portion of the award that is made specifically (i) for the taking of personal property, inventory or trade fixtures belonging to Tenant, (ii) for the interruption of Tenant’s business or its moving costs, or (iii) for the value of any leasehold improvements installed and paid for by Tenant. The rights of Landlord and Tenant regarding any condemnation shall be determined as provided in this Article, and each party hereby waives the provisions of Section 1265.130 of the California Code of Civil Procedure, and the provisions of any similar law hereinafter enacted, allowing either party to petition the Supreme Court to terminate this Lease and/or otherwise allocate condemnation awards between Landlord and Tenant in the event of a taking of the Leased Premises.

11.6 Abatement Of Rent. In the event of a taking of the Leased Premises which does not result in a termination of this Lease, then, as of the date possession is taken by the condemning authority, the Base Monthly Rent (and any Additional Rent) shall be abated in proportion to the degree to which, and during the period of time for which, Tenant’s use of the Leased Premises is impaired.

11.7 Taking Defined. The term “taking” or “taken” as used in this Article 11 shall mean any transfer or conveyance of all or any portion of the Leased Premises to a public or quasi-public agency or other entity having the power of eminent domain pursuant to or as a result of the exercise of such power by such an agency, including any inverse condemnation and/or any sale or transfer by Landlord of all or any portion of the Leased Premises to such an agency under threat of condemnation or the exercise of such power.

ARTICLE 12

DEFAULT AND REMEDIES

12.1 Events Of Tenant’s Default. Tenant shall be in default of its obligations under this Lease if any of the following events (each an “Event of Default”) occur:

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     (a) Tenant shall have failed to pay Base Monthly Rent or any regularly scheduled Additional Rent when due and such failure continues for more than five (5) days after Landlord gives written notice thereof to Tenant; provided, however, that after the second such failure in a calendar year, only the passage of time, but no further notice, shall be required to establish an Event of Default in the same calendar year; or

     (b) Tenant shall have failed to pay any other Additional Rent or other amount of money or charge payable by Tenant hereunder as and when such additional rent or amount or charge becomes due and payable and such failure continues for more than ten (10) days after Landlord gives written notice to Tenant of Tenant’s failure to make payment when it was due; provided, however, that after the second such failure in a calendar year, only the passage of time, but no further notice, shall be required to establish an Event of Default in the same calendar year; or

     (c) Tenant shall have failed to perform any term, covenant or condition of this Lease (except those requiring the payment of Base Monthly Rent or Additional Rent, which failures shall be governed by subparagraphs (a) and (b) above) within thirty (30) days after written notice from Landlord to Tenant specifying the nature of such failure and requesting Tenant to perform same; provided, however, that Tenant shall use diligence to cure such failure as soon as reasonably practicable; and provide, further, that if, by the nature of such term, covenant or condition, such failure cannot reasonably be cured within such period of thirty (30) days, an Event of Default shall not exist as long as Tenant commences with due diligence and dispatch the curing of such failure within such period of thirty (30) days and, having so commenced, thereafter prosecutes with diligence and dispatch and completes the curing of such failure within a reasonable time; or

     (d) Tenant shall have sublet the Leased Premises or assigned or encumbered its interest in this Lease in violation of the provisions contained in Article 7, whether voluntarily or by operation of Law; or

     (e) Tenant shall have abandoned the Leased Premises (Tenant’s vacating the Leased Premises shall not be deemed an abandonment, so long as Tenant continues to pay Rent and to perform all of Tenant’s other obligations as required under this Lease); or

     (f) Tenant shall have permitted or suffered the sequestration or attachment of, or execution on, or the appointment of a custodian or receiver with respect to, all or any substantial part of the property or assets of Tenant or any property or asset essential to the conduct of Tenant’s business, and Tenant shall have failed to obtain a return or release of the same within thirty days thereafter, or prior to sale pursuant to such sequestration, attachment or levy, whichever is earlier; or

     (g) Tenant shall have made a general assignment of all or a substantial part of its assets for the benefit of its creditors; or

     (h) Tenant shall have allowed (or sought) to have entered against it a decree or order which: (i) grants or constitutes an order for relief, appointment of a trustee, or condemnation or a reorganization plan under the bankruptcy laws of the United States; (ii) approves as properly filed a petition seeking liquidation or reorganization under said bankruptcy laws or any other debtor’s relief law or similar statute of the United States or any state thereof; or (iii) otherwise directs the winding up or liquidation of Tenant; provided, however, if any decree or order was entered without Tenant’s consent or over Tenant’s objection, Landlord may not terminate this Lease pursuant to this Subparagraph if such decree or order is rescinded or reversed within thirty days after its original entry; or

     (i) Tenant shall have availed itself of the protection of any debtor’s relief law, moratorium law or other similar law which does not require the prior entry of a decree or order.

12.2 Landlord’s Remedies. In the event of an Event of Default by Tenant, and without limiting Landlord’s right to indemnification as provided in Article 8.2, Landlord shall have the following remedies, in addition to all other rights and remedies provided by law or otherwise provided in this Lease, to which Landlord may resort cumulatively, or in the alternative:

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     (a) Landlord may, at Landlord’s election, keep this Lease in effect and enforce, by an action at law or in equity, all of its rights and remedies under this Lease including, without limitation, (i) the right to recover the rent and other sums as they become due by appropriate legal action, (ii) the right to make payments required by Tenant, or perform Tenant’s obligations and be reimbursed by Tenant for the cost thereof with interest at the then maximum rate of interest not prohibited by law from the date the sum is paid by Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive relief and specific performance to prevent Tenant from violating the terms of this Lease and/or to compel Tenant to perform its obligations under this Lease, as the case may be.

     (b) Landlord may, at Landlord’s election, if such election is made prior to a complete cure of the applicable Event of Default by Tenant, terminate this Lease by giving Tenant written notice of termination, in which event this Lease shall terminate on the date set forth for termination in such notice. Any termination under this subparagraph shall not relieve Tenant from its obligation to pay to Landlord all Base Monthly Rent and Additional Rent then or thereafter due, or any other sums due or thereafter accruing to Landlord, or from any claim against Tenant for damages previously accrued or then or thereafter accruing. In no event shall any one or more of the following actions by Landlord, in the absence of a written election by Landlord to terminate this Lease constitute a termination of this Lease:

          (i) Appointment of a receiver or keeper in order to protect Landlord’s interest hereunder;

          (ii) Consent to any subletting of the Leased Premises or assignment of this Lease by Tenant, whether pursuant to the provisions hereof or otherwise; or

          (iii) Any action taken by Landlord or its partners, principals, members, officers, agents, employees, or servants, which is intended to mitigate the adverse effects of any breach of this Lease by Tenant, including, without limitation, any action taken to maintain and preserve the Leased Premises on any action taken to relet the Leased Premises or any portion thereof for the account at Tenant and in the name of Tenant.

     (c) In the event Tenant breaches this Lease and abandons the Leased Premises, Landlord may terminate this Lease, but this Lease shall not terminate unless Landlord gives Tenant written notice of termination. If Landlord does not terminate this Lease by giving written notice of termination, Landlord may enforce all its rights and remedies under this Lease, including the right and remedies provided by California Civil Code Section 1951.4 (“lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations”), as in effect on the Effective Date of this Lease.

     (d) In the event Landlord terminates this Lease, Landlord shall be entitled, at Landlord’s election, to the rights and remedies provided in California Civil Code Section 1951.2, as in effect on the Effective Date of this Lease. For purposes of computing damages pursuant to Section 1951.2, an interest rate equal to the maximum rate of interest then not prohibited by law shall be used where permitted. Such damages shall include, without limitation:

          (i) 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 Tenant proves could be reasonably avoided, computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco, at the time of award plus one percent; and

          (ii) Any other amount reasonably necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease, or which in the ordinary course of things would be likely to result therefrom, including without limitation, the following: (i) expenses for cleaning, repairing or restoring the Leased Premises, (ii) expenses for altering, remodeling or otherwise improving the Leased Premises for the purpose of reletting, including removal of existing leasehold improvements and/or installation of additional leasehold improvements (regardless of how the same is funded, including reduction of rent, a direct payment or allowance to a new tenant, or otherwise), (iii) broker’s fees allocable to the remainder of the term of this Lease, advertising costs and other expenses of reletting the Leased Premises; (iv) costs of carrying and maintaining the Leased Premises, such as taxes, insurance premiums, utility charges and security precautions, (v) expenses incurred in removing, disposing of and/or storing any of Tenant’s personal property, inventory or trade fixtures remaining therein; (vi) reasonable attorney’s fees, expert witness fees, court costs and other reasonable

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expenses incurred by Landlord (but not limited to taxable costs) in retaking possession of the Leased Premises, establishing damages hereunder, and releasing the Leased Premises; and (vii) any other reasonable expenses, costs or damages otherwise incurred or suffered as a result of Tenant’s default.

12.3 Landlord’s Default And Tenant’s Remedies. In the event Landlord fails to perform its obligations under this Lease, Landlord shall nevertheless not be in default under the terms of this Lease until such time as Tenant shall have first given Landlord written notice specifying the nature of such failure to perform its obligations, and then only after Landlord shall have had thirty (30) days following its receipt of such notice within which to perform such obligations; provided that, Landlord shall use diligence to cure such failure as soon as reasonably practicable; and provided, further, that if longer than thirty (30) days is reasonably required in order to perform such obligations, Landlord shall have such longer period. In the event of Landlord’s default as above set forth, then, and only then, Tenant may then proceed in equity or at law to compel Landlord to perform its obligations and/or to recover damages proximately caused by such failure to perform (except as and to the extent Tenant has waived its right to damages as provided in this Lease). In addition, in the event that any entity not controlling, controlled by or under common control with iStar Financial Inc. succeeds to Landlord’s rights and obligations under this Lease, and such successor Landlord defaults beyond the notice and cure period as above set forth, then, and only then, Tenant may perform such obligations at such successor Landlord’s cost, in which event such successor Landlord shall promptly reimburse Tenant for the amount of such costs reasonably and actually incurred by Tenant (unless Tenant would have been responsible to pay such costs as Additional Rent had Landlord performed such obligations).

12.4 Limitation Of Tenant’s Recourse. Tenant’s recourse shall be limited to Landlord’s interest in the Leased Premises, which interest shall include undistributed net proceeds from a sale, other transfer or refinancing of the Leased Premises. In addition, if Landlord is a corporation, trust, partnership, joint venture, limited liability company, unincorporated association, or other form of business entity, Tenant agrees that (i) the obligations of Landlord under this Lease shall not constitute personal obligations of the officers, directors, trustees, partners, joint venturers, members, owners, stockholders, or other principals of such business entity, and (ii) Tenant shall have no recourse to the assets of such officers, directors, trustees, partners, joint venturers, members, owners, stockholders or principals, except as otherwise provided by Law. Additionally, if Landlord is a partnership or limited liability company, then Tenant covenants and agrees:

     (a) No partner or member of Landlord shall be sued or named as a party in any suit or action brought by Tenant with respect to any alleged breach of this Lease (except to the extent necessary to secure jurisdiction over the partnership and then only for that sole purpose);

     (b) No service of process shall be made against any partner or member of Landlord except for the sole purpose of securing jurisdiction over the partnership; and

     (c) No writ of execution will ever be levied against the assets of any partner or member of Landlord other than to the extent of his or her interest in the assets of the partnership or limited liability company constituting Landlord.

Tenant further agrees that each of the foregoing covenants and agreements shall be enforceable by Landlord and by any partner or member of Landlord and shall be applicable to any actual or alleged misrepresentation or nondisclosure made regarding this Lease or the Leased Premises or any actual or alleged failure, default or breach of any covenant or agreement either expressly or implicitly contained in this Lease or imposed by statute or at common law.

12.5 Tenant’s Waiver. Landlord and Tenant agree that the provisions of Paragraph 12.3 above are intended to supersede and replace the provisions of California Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant hereby waives the provisions of California Civil Code Sections 1932(1), 1941 and 1942 and/or any similar or successor law regarding Tenant’s right to terminate this Lease or to make repairs and deduct the expenses of such repairs from the rent due under this Lease.

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ARTICLE 13

GENERAL PROVISIONS

13.1 Taxes On Tenant’s Property. Tenant shall pay before delinquency any and all taxes, assessments, license fees, use fees, permit fees and public charges of whatever nature or description levied, assessed or imposed against Tenant or Landlord by a governmental agency arising out of, caused by reason of or based upon Tenant’s estate in this Lease, Tenant’s ownership of property, improvements made by Tenant to the Leased Premises, improvements made by Landlord for Tenant’s use within the Leased Premises, Tenant’s use (or estimated use) of public facilities or services or Tenant’s consumption (or estimated consumption) of public utilities, energy, water or other resources (collectively, “Tenant’s Interest”). Upon demand by Landlord if Landlord suspects that such payments have not been made by Tenant, Tenant shall furnish Landlord with satisfactory evidence of these payments. If any such taxes, assessments, fees or public charges are levied against Landlord, Landlord’s property, the Leased Premises or any portion thereof, or if the assessed value of the Leased Premises or any portion thereof is increased by the inclusion therein of a value placed upon Tenant’s Interest, regardless of the validity thereof, Landlord shall have the right to require Tenant to pay such taxes, and if not paid and satisfactory evidence of payment delivered to Landlord prior to delinquency, then Landlord shall have the right to pay such taxes on Tenant’s behalf and to invoice Tenant for the same. If Tenant shall not have paid such taxes then Tenant shall, within thirty (30) days of the date it receives an invoice from Landlord setting forth the amount of such taxes, assessments, fees, or public charge so levied, pay to Landlord, as Additional Rent, the amount set forth in such invoice. Failure by Tenant to pay the amount so invoiced within such time period shall be conclusively deemed a default by Tenant under this Lease. Tenant shall have the right to bring suit in any court of competent jurisdiction to recover from the taxing authority the amount of any such taxes, assessments, fees or public charges so paid.

13.2 Holding Over. This Lease shall terminate without further notice on the Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant after expiration of the Lease Term shall neither constitute a renewal nor extension of this Lease nor give Tenant any rights in or to the Leased Premises except as expressly provided in this Paragraph. Any such holding over shall be construed to be a tenancy from month to month, on the same terms and conditions herein specified insofar as applicable, except that the Base Monthly Rent shall be increased to an amount equal to one hundred fifty percent (150%) of the Base Monthly Rent payable during the last full month immediately preceding such holding over.

13.3 Subordination To Mortgages. This Lease is subject to and subordinate to all ground leases, mortgages and deeds of trust which affect the Leased Premises or any portion thereof and which are of public record as of the Effective Date of this Lease, and to all renewals, modifications, consolidations, replacements and extensions thereof. However, if the lessor under any such ground lease or any lender holding any such mortgage or deed of trust shall advise Landlord that it desires or requires this Lease to be made prior and superior thereto, then, upon written request of Landlord to Tenant, Tenant shall promptly execute, acknowledge and deliver any and all customary or reasonable documents or instruments which Landlord and such lessor or lender deems necessary or desirable to make this Lease prior thereto. Tenant hereby consents to Landlord’s ground leasing the land underlying the Leased Premises and/or encumbering the Leased Premises or any portion thereof as security for future loans on such terms as Landlord shall desire, all of which future ground leases, mortgages or deeds of trust shall be subject to and subordinate to this Lease. However, if any lessor under any such future ground lease or any lender holding such future mortgage or deed of trust shall desire or require that this Lease be made subject to and subordinate to such future ground lease, mortgage or deed of trust, then Tenant agrees, within ten days after Landlord’s written request therefor, to execute, acknowledge and deliver to Landlord any and all commercially reasonable documents or instruments requested by Landlord or by such lessor or lender as may be necessary or proper to assure the subordination of this Lease to such future ground lease, mortgage or deed of trust, but only if such lessor or lender agrees to recognize Tenant’s rights under this Lease and agrees not to disturb Tenant’s quiet possession of the Leased Premises so long as there has been no Event of Default by Tenant. If Landlord assigns the Lease as security for a loan, Tenant agrees to execute such commercially reasonable documents as are reasonably requested by the lender and to provide reasonable provisions in the Lease protecting such lender’s security interest which are customarily required by institutional lenders making loans secured by a deed of trust. Landlord shall use reasonable efforts to provide Tenant, within ten (10) days after the Lease Commencement Date, with a Subordination, Nondisturbance and Attornment Agreement substantially in the form attached as Exhibit D hereto from any ground

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lessor(s), mortgage holder(s) or lien holder(s) (or in such other form such other party may reasonably require). In addition, during the Lease Term and any extensions thereof, Landlord shall use commercially reasonable efforts to provide Tenant with such a Subordination, Nondisturbance and Attornment Agreement from any future ground lessor, mortgage holder or lien holder that may require that this Lease be subordinated to its interest in the Leased Premises.

13.4 Tenant’s Attornment Upon Foreclosure. Tenant shall, upon request, attorn (i) to any purchaser of the Leased Premises or any portion thereof at any foreclosure sale or private sale conducted pursuant to any security instruments encumbering the Leased Premises or any portion thereof, (ii) to any grantee or transferee designated in any deed given in lieu of foreclosure of any security interest encumbering the Leased Premises or any portion thereof, or (iii) to the lessor under an underlying ground lease of the land underlying the Leased Premises or any portion thereof, should such ground lease be terminated; provided that such purchaser, grantee or lessor recognizes Tenant’s rights under this Lease, except that such purchaser, grantee or lessor shall not: (a) be liable for any act or omission of any prior landlord under this Lease; (b) be subject to any offsets or defenses which Tenant might have against any prior landlord (prior to such purchaser, grantee or lessor becoming landlord under this Lease); (c) be bound by any Rent or Additional Rent which Tenant might have paid to any prior landlord greater than the current month or more than one (1) month prior to the due date for the then current installment; or (d) be liable for any deposits made or prepaid Rent paid by Tenant hereunder unless such deposits or payments have been transferred to such purchaser, grantee or lessor.

13.5 Mortgagee Protection. In the event of any default on the part of Landlord, Tenant will give notice by registered mail to any Lender or lessor under any underlying ground lease who shall have requested, in writing, to Tenant that it be provided with such notice, and Tenant shall offer such Lender or lessor a reasonable opportunity to cure the default, including time to obtain possession of the Leased Premises by power of sale or judicial foreclosure or other appropriate legal proceedings if reasonably necessary to effect a cure.

13.6 Estoppel Certificates.

     (a) Tenant will, following any request by Landlord, promptly execute and deliver to Landlord an estoppel certificate in the form attached as Exhibit E (i) certifying that this Lease is unmodified and in full force and effect, or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect, (ii) stating the date to which the rent and other charges are paid in advance, if any, (iii) acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iv) certifying such other information about this Lease as may be reasonably requested by Landlord, its Lender or prospective lenders, investors or purchasers of the Leased Premises or any portion thereof. Tenant’s failure to execute and deliver such estoppel certificate within ten (10) business days after receipt of Landlord’s request therefor shall constitute an acknowledgment by Tenant that the statements included therein are true and correct without exception. Landlord and Tenant intend that any statement delivered pursuant to this paragraph may be relied upon by any Lender or purchaser or prospective Lender or purchaser of the Leased Premises, or any interest in any portion thereof.

     (b) Landlord will, following any request by Tenant, promptly execute and deliver to Tenant an estoppel certificate in reasonable form (i) certifying that this Lease is unmodified and in full force and effect, or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect, (ii) stating the date to which the rent and other charges are paid in advance, if any, (iii) acknowledging that there are not, to Landlord’s knowledge, any uncured defaults on the part of Tenant hereunder, or specifying such defaults if any are claimed, and (iv) certifying such other information about this Lease as may be reasonably requested by Tenant. Landlord’s failure to execute and deliver such estoppel certificate within ten (10) business days after receipt of Tenant’s request therefor shall constitute an acknowledgment by Landlord that the statements included therein are true and correct without exception.

13.7 Financial Statements and Information. If Tenant is not a reporting company under the Securities and Exchange Act of 1934, as amended, Tenant shall deliver to Landlord and to any lender or purchaser designated by Landlord the following information certified to be true, complete and correct by an officer of Tenant: within 90 days after the end of each fiscal year of Tenant, a balance sheet of Tenant and its consolidated subsidiaries as of the end of such year, a statements of profits and losses of Tenant and its subsidiaries for such year, and an audited

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statement of cash flows of Tenant and its consolidated subsidiaries for such year, setting forth in each case, in comparative form, the corresponding figures for the preceding fiscal year in reasonable detail and scope and certified by independent certified public accountants of recognized national standing selected by Tenant; and within 45 days after the end of each fiscal quarter of Tenant a balance sheet of Tenant and its consolidated subsidiaries as at the end of such quarter, statements of profits and losses of Tenant and its consolidated subsidiaries for such quarter and a statement of cash flows of Tenant and its consolidated subsidiaries for such quarter, setting forth in each case, in comparative form, the corresponding figures for the similar quarter of the preceding year, in reasonable detail and scope, and certified to be true and complete by a financial officer of Tenant having knowledge thereof; the foregoing financial statements all being prepared in accordance with generally accepted accounting principles, consistently applied.

13.8 Transfer By Landlord. Landlord and its successors in interest shall have the right to transfer their interest in the Leased Premises or any portion thereof at any time and to any person or entity. In the event of any such transfer, the Landlord originally named herein (and in the case of any subsequent transfer, the transferor), from the date of such transfer, (i) shall be automatically relieved, without any further act by any person or entity, of all liability for the performance of the obligations of the Landlord hereunder which may accrue after the date of such transfer and (ii) shall be relieved of all liability for the performance of the obligations of the Landlord hereunder which have accrued before the date of transfer if its transferee agrees to assume and perform all such prior obligations of the Landlord hereunder (provided such transfer is not a fraudulent conveyance). Tenant shall attorn to any such transferee. After the date of any such transfer, the term “Landlord” as used herein shall mean the transferee of such interest in the Leased Premises.

13.9 Force Majeure. The obligations of each of the parties under this Lease (other than the obligations to pay money) shall be temporarily excused if such party is prevented or delayed in performing such obligations by reason of any strikes, lockouts or labor disputes; government restrictions, regulations, controls, action or inaction; civil commotion; or extraordinary weather, fire or other acts of God.

13.10 Notices. Any notice required or desired to be given by a party regarding this Lease shall be in writing and shall be personally served, or in lieu of personal service may be given by reputable overnight courier service, postage prepaid, addressed to the other party as follows (any “copy to” notices may be given by regular U.S. mail):

If to Landlord:	TriNet Milpitas Associates, LLC c/o iStar Financial Inc. 1114 Avenue of the Americas, 27th Floor New York, NY 10036 Attention: Asset Manager
with a copy to:	TriNet Milpitas Associates, LLC c/o iStar Financial Inc. One Embarcadero Center, Suite 3300 San Francisco, CA 94111 Attention: Chief Operating Officer
and with a copy to:	TriNet Milpitas Associates, LLC c/o iStar Financial Inc. 3480 Preston Ridge Road, Suite 575 Alpharetta, GA 30005 Attention: Director of Lease Administration
If to Tenant:	LSI Logic Corporation 1621 Barber Lane, M/S D-106 Milpitas, California 95035-7458 Attn: General Counsel
with a copy to:	LSI Logic Corporation 1621 Barber Lane, M/S D-129

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Milpitas, California 95035-7458
Attn: Corporate Real Estate

Any notice given in accordance with the foregoing shall be deemed received upon actual receipt or refusal to accept delivery.

13.11 Attorneys’ Fees. In the event any party shall bring any action, arbitration proceeding or legal proceeding alleging a breach of any provision of this Lease, to recover Rent, to terminate this Lease, or to enforce, protect, determine or establish any term or covenant of this Lease or rights or duties hereunder of either party, the prevailing party shall be entitled to recover from the non-prevailing party as a 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.

13.12 Definitions. Any term that is given a special meaning by any provision in this Lease shall, unless otherwise specifically stated, have such meaning wherever used in this Lease or in any Addenda or amendment hereto. In addition to the terms defined in Article 1, the following terms shall have the following meanings:

     (a) Real Property Taxes. The term “Real Property Tax” or “Real Property Taxes” shall each mean Tenant’s Proportionate Share of (i) all taxes, assessments, levies and other charges of any kind or nature whatsoever, general and special, foreseen and unforeseen (including all instruments of principal and interest required to pay any general or special assessments for public improvements and any increases resulting from reassessments caused by any change in ownership or new construction), now or hereafter imposed by any governmental or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments, which are levied or assessed for whatever reason against the Leased Premises or any portion thereof, or Landlord’s interest herein, or the fixtures, equipment and other property of Landlord that is an integral part of the Leased Premises and located thereon, (ii) all charges, levies or fees imposed by any governmental authority against Landlord by reason of or based upon the use of or number of parking spaces within the Leased Premises, the amount of public services or public utilities used or consumed (e.g. water, gas, electricity, sewage or waste water disposal) at the Leased Premises, the number of people employed by tenants of the Leased Premises, the size (whether measured in area, volume, number of tenants or whatever) or the value of the Leased Premises, or the type of use or uses conducted within the Leased Premises, and all costs and fees (including reasonable attorneys’ fees) reasonably incurred by Landlord in contesting any Real Property Tax and in negotiating with public authorities as to any Real Property Tax, and (iii) all tax increases due to improvements made to the Leased Premises by Tenant or by Landlord on behalf of Tenant. If, at any time during the Lease Term, the taxation or assessment of the Leased Premises prevailing as of the Effective Date of this Lease shall be altered so that in lieu of or in addition to any the Real Property Tax described above there shall be levied, awarded or imposed (whether by reason of a change in the method of taxation or assessment, creation of a new tax or charge, or any other cause) an alternate, substitute, or additional use or charge (i) on the value, size, use or occupancy of the Leased Premises or Landlord’s interest therein or (ii) on or measured by the gross receipts, income or rentals from the Leased Premises, or on Landlord’s business of owning, leasing or managing the Leased Premises or (iii) computed in any manner with respect to the operation of the Leased Premises, then any such tax or charge, however designated, shall be included within the meaning of the terms “Real Property Tax” or “Real Property Taxes” for purposes of this Lease. If any Real Property Tax is partly based upon property or rents unrelated to the Leased Premises, then only that part of such Real Property Tax that is fairly allocable to the Leased Premises shall be included within the meaning of the terms “Real Property Tax” or “Real Property Taxes.” Notwithstanding the foregoing, the terms “Real Property Tax” or “Real Property Taxes” shall not include any (a) estate, inheritance, transfer, gift, capital levy, capital stock, franchise or income tax, (b) items included as a Property Maintenance Cost, (c) reserves for future Real Property Taxes, (d) environmental assessments, charges or liens arising in connection with the remediation of Pre-existing Hazardous Materials (unless caused by Tenant or a Tenant or any Tenant Related Party) or of other Hazardous Materials caused by Landlord or any Landlord Related Party, or (e) any personal property taxes attributable to items not owned by Tenant or utilized by Tenant in connection with Tenant’s operations at the Leased Premises.

     (b) Landlord’s Insurance Costs. The term “Landlord’s Insurance Costs” shall mean Tenant’s Proportionate Share of the actual costs to Landlord to carry and maintain the policies of fire and property damage insurance for the Leased Premises or any portion thereof and general liability and any other insurance required or permitted to be carried by Landlord pursuant to Article 9, together with the amortized portion of any deductible

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amounts paid by Landlord upon the occurrence of any insured casualty or loss for which such amortization falls within the Lease Term (provided such amounts are amortized only if they are deemed a capital expense in accordance with generally accepted accounting principles, in which event they shall be amortized over the useful life of the applicable item, based on generally accepted industry standards).

     (c) Property Maintenance Costs. The term “Property Maintenance Costs” shall mean Tenant’s Proportionate Share of all costs and expenses (except Landlord’s Insurance Costs and Real Property Taxes) paid or incurred by Landlord in protecting, operating, maintaining, repairing and preserving the Leased Premises and all parts thereof, including without limitation, (i) a market rate professional management fee not to exceed four percent (4%) of Base Monthly Rent if Tenant is not self-managing the Leased Premises, (ii) the amortizing portion of any costs incurred by Landlord in the making of any modifications, alterations or improvements required by any governmental authority as set forth in Article 6, which are so amortized during the Lease Term, (iii) the amortizing portion of any costs incurred by Landlord pursuant to the last sentence of Paragraph 5.1(a), and (iv)such other reasonable costs as may be paid or incurred with respect to operating, maintaining, and preserving the Leased Premises, except those items specifically set forth in Paragraph 5.1(b) to be performed at Landlord’s sole cost and expense. To the extent that any Property Maintenance Costs are incurred for items deemed to be capital improvements in accordance with generally accepted accounting principles, then such costs shall be amortized by Landlord over the useful life of such items, and the monthly amortized cost of items as so amortized shall be considered a Property Maintenance Cost.

     (d) Intentionally Deleted.

     (e) Property Operating Expenses. The term “Property Operating Expenses” shall mean and include all Real Property Taxes, plus all Landlord’s Insurance Costs, plus all Property Maintenance Costs. Notwithstanding the foregoing, Property Operating Expenses shall not include: (a) the cost of capital improvements (except as set forth in this Lease); (b) depreciation; (c) all fees, costs, principal payments of mortgage and interest related to any mortgage(s) or deed(s) of trust, all payments made under any ground or underlying lease and all other non-operating debts of Landlord; (d) the cost of repairs or other work to the extent Landlord is reimbursed by insurance or condemnation proceeds; (e) costs in connection with leasing space in the Building, (including, without limitation, brokerage commissions, marketing costs, attorneys’ fees, lease concessions, rental abatements and construction allowances granted to specific tenants); (f) costs incurred in connection with the sale, financing or refinancing of the Leased Premises (other than any increase in Real Property Taxes that may result therefrom); (g) fines, interest and penalties incurred due to the late payment by Landlord of Property Operating Expenses (unless caused by the act or omission of Tenant); (h) organizational expenses associated with the creation, maintenance and operation of the entity which constitutes Landlord; (i) any penalties or damages that Landlord pays to Tenant under this Lease; (j) costs associated with damage or repairs to any part of the Project or necessitated by the gross negligence or willful misconduct of Landlord or any Landlord Related Party; (k) reserves for Landlord’s repair, replacement or improvement of the Leased Premises or any portion thereof; (1) executive salaries and benefits; (m) legal fees, accountant fees and other expenses incurred in connection with the defense of Landlord’s title to or interest in the Leased Premises or any part thereof; or (n) any costs, fines, or penalties incurred due to violations by Landlord or any Landlord Related Party of any governmental rule or authority, this Lease, or due to Landlord’s gross negligence or willful misconduct.

     (f) Law. The term “Law” or “Laws” shall mean any judicial decisions and any statute, constitution, ordinance, resolution, regulation, rule, administrative order, or other requirements of any municipal, county, state, federal, or other governmental agency or authority having jurisdiction over the parties to this Lease, the Leased Premises or any portion thereof, or either of them, in effect either at the Effective Date of this Lease or at any time during the Lease Term, including, without limitation, any regulation, order, or policy of any quasi-official entity or body (e.g. a board of fire examiners or a public utility or special district).

     (g) Lender. The term “Lender” shall mean the holder of any promissory note or other evidence of indebtedness secured by the Leased Premises or any portion thereof.

     (h) Private Restrictions. The term “Private Restrictions” shall mean (as they may exist from time to time) any and all covenants, conditions and restrictions, private agreements, easements, and any other recorded documents or instruments affecting the use of the Leased Premises or any portion thereof.

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     (i) Rent. The term “Rent” shall mean collectively Base Monthly Rent and all Additional Rent.

13.13 General Waivers. One party’s consent to or approval of any act by the other party requiring the first party’s consent or approval shall not be deemed to waive or render unnecessary the first party’s consent to or approval of any subsequent similar act by the other party. No waiver of any provision hereof, or any waiver of any breach of any provision hereof, shall be effective unless in writing and signed by the waiving party. The receipt by Landlord of any Rent or payment with or without knowledge of the breach of any other provision hereof shall not be deemed a waiver of any such breach. No waiver of any provision of this Lease shall be deemed a continuing waiver unless such waiver specifically states so in writing and is signed by both Landlord and Tenant. No delay or omission in the exercise of any right or remedy accruing to either party upon any breach by the other party under this Lease shall impair such right or remedy or be construed as a waiver of any such breach theretofore or thereafter occurring. The waiver by either party of any breach of any provision of this Lease shall not be deemed to be a waiver of any subsequent breach of the same or any other provisions herein contained.

13.14 Miscellaneous. Should any provisions of this Lease prove to be invalid or illegal, such invalidity or illegality shall in no way affect, impair or invalidate any other provisions hereof, and such remaining provisions shall remain in full force and effect. Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor. Any copy of this Lease which is executed by the parties shall be deemed an original for all purposes. This Lease shall, subject to the provisions regarding assignment, apply to and bind the respective heirs, successors, executors, administrators and assigns of Landlord and Tenant. The term “party” shall mean Landlord or Tenant as the context implies. If Tenant consists of more than one person or entity, then all members of Tenant shall be jointly and severally liable hereunder. This Lease shall be construed and enforced in accordance with the Laws of the State in which the Leased Premises are located. The captions in this Lease are for convenience only and shall not be construed in the construction or interpretation of any provision hereof. When the context of this Lease requires, the neuter gender includes the masculine, the feminine, a partnership, corporation, limited liability company, joint venture, or other form of business entity, and the singular includes the plural. The terms “must,” “shall,” “will,” and “agree” are mandatory. The term “may” is permissive. When a party is required to do something by this Lease, it shall do so at its sole cost and expense without right of reimbursement from the other party unless specific provision is made therefor. Where Landlord’s consent is required hereunder, the consent of any Lender shall also be required to the extent such Lender consent is required under the applicable loan documents. Landlord and Tenant shall both be deemed to have drafted this Lease, and the rule of construction that a document is to be construed against the drafting party shall not be employed in the construction or interpretation of this Lease. Where Tenant is obligated not to perform any act or is not permitted to perform any act, Tenant is also obligated to restrain any others reasonably within its control, including agents, invitees, contractors, subcontractors and employees, from performing such act. Landlord shall not become or be deemed a partner or a joint venturer with Tenant by reason of any of the provisions of this Lease.

ARTICLE 14

CORPORATE AUTHORITY

BROKERS AND ENTIRE AGREEMENT

14.1 Corporate Authority. If Tenant is a corporation, each individual executing this Lease on behalf of such corporation represents and warrants that Tenant is validly formed and duly authorized and existing, that Tenant is qualified to do business in the State in which the Leased Premises are located, that Tenant has the full right and legal authority to enter into this Lease, and that he or she is duly authorized to execute and deliver this Lease on behalf of Tenant in accordance with its terms. Landlord represents and warrants that Landlord has the full right and legal authority to enter into this Lease, and that the person(s) executing this Lease is duly authorized to execute and deliver this Lease on behalf of Landlord in accordance with its terms.

14.2 Brokerage Commissions. Within five (5) business days after the Effective Date of this Lease, Landlord shall pay to the Brokers (as named in Article 1) a one-time fee of $299,059.20. Tenant represents, warrants and agrees that it has not had any dealings with any real estate broker(s), leasing agent(s), finder(s) or salesmen, other than the Brokers with respect to the lease by it of the Leased Premises pursuant to this Lease, and that, except for the one-

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time fee described in the immediately foregoing sentence, it will assume all obligations and responsibility with respect to the payment of such Brokers, and that it will indemnify, defend with competent counsel, and hold Landlord harmless from any liability for the payment of any real estate brokerage commissions, leasing commissions or finder’s fees claimed by any other real estate broker(s), leasing agent(s), finder(s), or salesmen to be earned or due and payable by reason of Tenant’s agreement or promise (implied or otherwise) to pay (or to have Landlord pay) such a commission or finder’s fee by reason of its leasing the Leased Premises pursuant to this Lease.

14.3 Entire Agreement. This Lease and the Exhibits (as described in Article 1), which Exhibits are by this reference incorporated herein, constitute the entire agreement between the parties, and there are no other agreements, understandings or representations between the parties relating to the lease by Landlord of the Leased Premises to Tenant, except as expressed herein. No subsequent changes, modifications or additions to this Lease shall be binding upon the parties unless in writing and signed by both Landlord and Tenant.

14.4 Landlord’s Representations. Tenant acknowledges that neither Landlord nor any of its agents made any representations or warranties respecting the Leased Premises or any portion thereof, upon which Tenant relied in entering into the Lease, which are not expressly set forth in this Lease. Tenant further acknowledges that neither Landlord nor any of its agents made any representations as to (i) whether the Leased Premises may be used for Tenant’s intended use under existing Law, or (ii) the suitability of the Leased Premises for the conduct of Tenant’s business, or (iii) the exact square footage of the Leased Premises, and that Tenant relies solely upon its own investigations with respect to such matters. Tenant expressly waives any and all claims for damage by reason of any statement, representation, warranty, promise or other agreement of Landlord or Landlord’s agent(s), if any, not contained in this Lease or in any Exhibit attached hereto.

ARTICLE 15

OPTIONS TO EXTEND

15.1 So long as LSI Logic Corporation or any Successor Entity (but not any other transferee) is the Tenant hereunder and occupies at least fifty percent (50%) of the Leased Premises, and subject to the condition set forth in clause (b) below, Tenant shall have two options to extend the term of this Lease with respect to the entirety of the Leased Premises, the first for a period of thirty (30) months from the expiration of the eighth (8^th) year of the Lease Term (the “First Extension Period”), and the second (the “Second Extension Period”) for a period of thirty (30) months from the expiration of the First Extension Period, subject to the following conditions:

     (a) Each option to extend shall be exercised, if at all, by notice of exercise given to Landlord by Tenant not less than two hundred seventy (270) days prior to the expiration of the eighth (8^th) year of the Lease Term or the expiration of the First Extension Period, as applicable;

     (b) Anything herein to the contrary notwithstanding, if there is an Event of Default, either at the time Tenant exercises either extension option or on the commencement date of the First Extension Period or the Second Extension Period, as applicable, Landlord shall have, in addition to all of Landlord’s other rights and remedies provided in this Lease, the right to terminate such option(s) to extend upon notice to Tenant.

     15.2 In the event the applicable option is exercised within the time periods set forth herein, the Lease shall be extended for the term of the applicable extension period upon all of the terms and conditions of this Lease, provided that the Base Monthly Rent for each extension period shall be ninety-five percent (95%) of the “Fair Market Rent” for the Leased Premises. For purposes hereof, “Fair Market Rent” shall mean the base rent for the Leased Premises, based upon the rental rate per square foot that an unaffiliated landlord and tenant would agree to for a lease on similar terms of this Lease for the relevant Extension Period for comparable premises (in quality and size) in the vicinity of the Leased Premises, with such comparable base rent including consideration for the presence or absence of tenant improvements or allowances existing or to be provided under the lease for such premises, rental abatements, lease takeovers/assumptions, moving expenses and other forms of rental concessions, real estate brokerage commissions, proposed term of lease, extent of service provided or to be provided under the lease for such premises, the date of the particular rate under consideration became or is to become effective and any other relevant terms or conditions, all determined pursuant to the process described below.

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15.3 Within 30 days after receipt of Tenant’s notice of exercise, Landlord shall notify Tenant in writing of Landlord’s estimate of the Base Monthly Rent for the applicable extension period, based on the provisions of Paragraph 15.2 above. Within 30 days after receipt of such notice from Landlord, Tenant shall have the right, exercisable by delivering written notice to Landlord, either to (i) accept Landlord’s statement of Base Monthly Rent as the Base Monthly Rent for the applicable extension period; or (ii) reject Landlord’s statement of Base Monthly Rent as the Base Monthly Rent for the applicable extension period, in which case Landlord and Tenant, acting reasonably and in good faith, shall attempt to reach an agreement as to an acceptable Base Monthly Rent within ten (10) business days after delivery of Tenant’s rejection notice (the “Negotiation Period”). If the parties cannot agree upon an acceptable Base Monthly Rent by the end of the Negotiation Period, then Landlord’s estimate of Fair Market Rent shall be submitted to arbitration, which shall be conducted pursuant to the provisions hereof. Failure on the part of Tenant to accept or reject Landlord’s statement of Fair Market Rent within such 30-day period shall constitute acceptance of the Base Monthly Rent for the applicable extension period as calculated by Landlord. To the extent that arbitration has not been completed prior to the expiration of any preceding period for which Base Monthly Rent has been determined, Tenant shall pay Base Monthly Rent at the rate calculated by Landlord, with the potential for an adjustment to be made once Fair Market Rent is ultimately determined by arbitration.

15.4 In the event of arbitration, the judgment or the award rendered in any such arbitration may be entered in any court having jurisdiction and shall be final and binding between the parties. The arbitration shall be conducted and determined in the County of Santa Clara in accordance with the then prevailing rules of the American Arbitration Association or its successor for arbitration of commercial disputes except to the extent that the procedures mandated by such rules shall be modified as follows:

     (a) Tenant shall make demand for arbitration in writing no later than the last day of the Negotiation Period, specifying therein the name and address of the person to act as the arbitrator on its behalf. The arbitrator shall be qualified as a real estate appraiser familiar with the Fair Market Rent of similar industrial, research and development, or office space in the Silicon Valley area who would qualify as an expert witness over objection to give opinion testimony addressed to the issue in a court of competent jurisdiction. Failure on the part of Tenant to make a proper demand in a timely manner for such arbitration shall constitute a waiver of the right thereto. Within 15 days after the service of the demand for arbitration, Landlord shall give notice to Tenant, specifying the name and address of the person designated by Landlord to act as arbitrator on its behalf who shall be similarly qualified. If Landlord fails to notify Tenant of the appointment of its arbitrator, within or by the time above specified, then the arbitrator appointed by Tenant shall be the sole arbitrator to determine the issue.

     (b) In the event that two arbitrators are chosen pursuant to Paragraph 15.4(a) above, the arbitrators so chosen shall, within 15 days after the second arbitrator is appointed, select a third arbitrator, who shall be similarly qualified. If the arbitrators do not select a third arbitrator within said 15-day period, then either party, on behalf of both, may request appointment of such a qualified person by the then Chief Judge of the United States District Court having jurisdiction over the County of Santa Clara, acting in his private and not in his official capacity, and the other party shall not raise any question as to such Judge’s full power and jurisdiction to entertain the application for and make the appointment. The three arbitrators shall decide the dispute by following the procedure set forth below.

     (c) The arbitrator selected by each of the parties shall state in writing his or her determination of the Fair Market Rent supported by the reasons therefor with counterpart copies to each party. The arbitrators shall arrange for a simultaneous exchange of such proposed resolutions. The role of the third arbitrator shall be to select which of the two proposed resolutions most closely approximates his or her determination of Fair Market Rent. The third arbitrator shall have no right to propose a middle ground or any modification of either of the two proposed resolutions. The resolution he or she chooses as most closely approximating his determination shall constitute the decision of the arbitrators and be final and binding upon the parties.

     (d) In the event of a failure, refusal or inability of any arbitrator to act, his or her successor shall be appointed by him or her, but in the case of the third arbitrator, his or her successor shall be appointed in the same manner as provided for appointment of the third arbitrator. The arbitrators shall decide the issue within 15 days after the appointment of the third arbitrator. Any decision in which the arbitrator appointed by Landlord and the arbitrator appointed by Tenant concur shall be binding and conclusive upon the parties. Each party shall pay the fee and expenses of its respective arbitrator and both shall share the fee and expenses of the third arbitrator, and the

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attorneys’ fees and expenses of counsel for the respective parties and of witnesses shall be paid by the respective party engaging such counsel or calling such witnesses.

     (e) The arbitrators shall have the right to consult experts and competent authorities to obtain factual information or evidence pertaining to a determination of Fair Market Rent, but any such consultation shall be made in the presence of both parties with full right on their part to cross-examine. The arbitrators shall render their decision and award in writing with counterpart copies to each party. The arbitrators shall have no power to modify the provisions of this Lease.

ARTICLE 16

TELEPHONE SERVICE

     Notwithstanding any other provision of this Lease to the contrary:

     (a) So long as the entirety of the Leased Premises is leased to Tenant:

          (i) Landlord shall have no responsibility for providing to Tenant any telephone equipment, including wiring, within the Leased Premises or for providing telephone service or connections from the utility to the Leased Premises; and

          (ii) Landlord makes no warranty as to the quality, continuity or availability of the telecommunications services in the Leased Premises or any portion thereof, and Tenant hereby waives any claim against Landlord for any actual or consequential damages (including damages for loss of business) in the event Tenant’s telecommunications services in any way are interrupted, damaged or rendered less effective, except to the extent caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Party. Tenant accepts the telephone equipment (including, without limitation, the INC, as defined below) in its “AS-IS” condition, and Tenant shall be solely responsible for contracting with a reliable third party vendor to assume responsibility for the maintenance and repair thereof (which contract shall contain provisions requiring such vendor to inspect the INC periodically (the frequency of such inspections to be determined by such vendor based on its experience and professional judgment), and requiring such vendor to meet local and federal requirements for telecommunications material and workmanship). Unless caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Party, Landlord shall not be liable to Tenant and Tenant waives all claims against Landlord whatsoever, whether for personal injury, property damage, loss of use of the Leased Premises, or otherwise, due to the interruption or failure of telephone services to the Leased Premises. Tenant hereby holds Landlord harmless and agrees to indemnify, protect and defend Landlord from and against any liability for any damage, loss or expense due to any failure or interruption of telephone service to the Leased Premises for any reason other than the gross negligence or willful misconduct of Landlord or any Landlord Related Party.

     (b) At such time as the entirety of the Leased Premises is no longer leased to Tenant, Landlord shall in its sole discretion have the right, by written notice to Tenant, to elect to assume limited responsibility for INC, as provided below, and upon such assumption of responsibility by Landlord, this subparagraph (b) shall apply prospectively.

           (i) Landlord shall provide Tenant access to all quantity of pairs in the Building intra-building network cable (“INC”). Tenant’s access to the INC shall be solely by arrangements made by Tenant, as Tenant may elect, directly with Pacific Bell or Landlord (or such vendor as Landlord may designate), and Tenant shall pay all reasonable charges as may be imposed in connection therewith. Pacific Bell’s charges shall be deemed to be reasonable. Subject to the foregoing, Landlord shall have no responsibility for providing to Tenant any telephone equipment, including wiring, within the Leased Premises or for providing telephone service or connections from the utility to the Leased Premises, except as required by law.

           (ii) Except as permitted in this Lease, Tenant shall not alter, modify, add to or disturb any telephone wiring in the Leased Premises without the Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Tenant shall be liable to Landlord for any damage to the telephone

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wiring in the Leased Premises due to the act, negligent or otherwise, of Tenant or any employee, contractor or other agent of Tenant. Tenant shall have access to the telephone closets within the Building in the manner and under such reasonable procedures established by Landlord. Tenant shall promptly notify Landlord of any actual or suspected failure of telephone service to the Leased Premises.

           (iii) All costs incurred by Landlord for the installation, maintenance, repair and replacement of telephone wiring in the Leased Premises shall be a Property Maintenance Cost, provided that, if any such cost is deemed a capital expenditure in accordance with generally accepted accounting principles, it shall be amortized over the useful life of the improvement as described elsewhere in this Lease.

           (iv) Landlord makes no warranty as to the quality, continuity or availability of the telecommunications services in the Leased Premises, and Tenant hereby waives any claim against Landlord for any actual or consequential damages (including damages for loss of business) in the event Tenant’s telecommunications services in any way are interrupted, damaged or rendered less effective, except to the extent caused by the grossly negligent or willful act or omission by Landlord or any Landlord Related Party. Tenant acknowledges that Landlord meets its duty of care to Tenant with respect to the INC by contracting with a reliable third party vendor to assume responsibility for the maintenance and repair thereof (which contract shall contain provisions requiring such vendor to inspect the INC periodically (the frequency of such inspections to be determined by such vendor based on its experience and professional judgment), and requiring such vendor to meet local and federal requirements for telecommunications material and workmanship). Subject to the foregoing, unless caused by the gross negligence or willful misconduct of Landlord or any Landlord Related Party, Landlord shall not be liable to Tenant and Tenant waives all claims against Landlord whatsoever, whether for personal injury, property damage, loss of use of the Leased Premises, or otherwise, due to the interruption or failure of telephone services to the Leased Premises. Tenant hereby holds Landlord harmless and agrees to indemnify, protect and defend Landlord from and against any liability for any damage, loss or expense due to any failure or interruption of telephone service to the Leased Premises for any reason other than the gross negligence or willful misconduct of Landlord or any Landlord Related Party.

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     in witness whereof, Landlord and Tenant have executed this Lease as of the Effective Date of this Lease first above set forth.

landlord:
TRINET MILPITAS ASSOCIATES, LLC, a Delaware limited liability company
By:	TriNet Realty Investors II, Inc., a Maryland corporation, its Managing Member
	By:	/s/ Erich Stiger
	Name: Erich Stiger
	Title: Vice President
tenant:
LSI LOGIC CORPORATION, a Delaware corporation
By:	/s/ Bryon Look
Name: Bryon Look
Title: EVP, Chief Financial Officer
By:	/s/ John J. D’ Errico
Name: John J. D’Errico
Title: EVP, Storage & Communications Components

LSI Logic Legal Department		LSI Logic Corp. Real Estate
Date 2-20-04		Date 2-20-04
Approved as to form		Approved as to form.
By:	/s/ Andrew S. Hughes	By:	/s/ Donald A. Costello

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exhibit A

SITE PLAN

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Exhibit B

FLOOR PLAN

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560 Cottonwood

exhibitC

RULES AND REGULATIONS

     The following rules and regulations shall apply to the Leased Premises, the Building, the parking areas associated therewith, and the appurtenances thereto:

     1. Sidewalks, doorways, vestibules, halls, stairways, loading dock areas and associated overhead doors, and other similar areas shall not be obstructed by Tenant or any Tenant Related Party or used by Tenant or any Tenant Related Party for purposes other than ingress and egress to and from the Leased Premises and for going from one to another part of the Building.

     2. Plumbing (including outside drains and sump pumps), fixtures and appliances shall be used only for the purposes for which designed, and no sweepings, rubbish, rags or other unsuitable material shall be thrown or deposited therein. Damage resulting to any such fixtures or appliances from misuse by Tenant or any Tenant Related Party shall be paid by Tenant.

     3. No signs (other than those existing as of the Lease Commencement Date), advertisements or notices shall be painted or affixed on or to any windows or doors or other part of the Building visible from the exterior of the Leased Premises without the prior written consent of Landlord. Except as consented to in writing by Landlord or in accordance with Tenant’s building standard improvements, other than those existing as of the Lease Commencement Date, no draperies, curtains, blinds, shades, screens or other devices shall be hung at or used in connection with any window or exterior door or doors of the Leased Premises. No awning shall be permitted on any part of the Leased Premises. Tenant shall not place anything against or near glass partitions or doors, or windows which might appear unsightly from outside the Leased Premises.

     4. Tenant, at its expense, shall be responsible for providing all door locks in the Leased Premises and shall provide to Landlord, at Tenant’s expense, contemporaneously with the installation of such devices, a master key, card keys, access codes or other means to allow Landlord immediate access to all areas within the Leased Premises, subject to the terms and conditions of the Lease.

     5. Landlord may prescribe weight limitations and determine the locations for safes and other heavy equipment or items, which shall in all cases be placed in the Building so as to distribute weight in a manner reasonably acceptable to Landlord which may include the use of such supporting devices as Landlord may reasonably require. All damages to the Building caused by the installation or removal of any property of Tenant, or done by Tenant’s property while in the Building, shall be repaired at the expense of Tenant.

     6. Corridor doors, when not in use, shall be kept closed. Nothing shall be swept or thrown into the corridors, halls, elevator shafts or stairways. No birds or animals (other than seeing-eye dogs) shall be brought into or kept in, on or about the Leased Premises. No portion of the Leased Premises shall at any time be used or occupied as sleeping or lodging quarters.

     7. Tenant shall not make or permit any vibration or improper, objectionable or unpleasant noises or odors in the Building. Tenant shall not introduce, disturb or release asbestos or PCBs into or from the Leased Premises.

     8. Tenant shall not keep in the Leased Premises any flammable or explosive fluid or substance. Tenant shall not install or operate any steam or gas engine or boiler, or other mechanical apparatus in the Leased Premises without the prior written consent of Landlord. The use of oil, gas or inflammable liquids for heating, lighting or any other purpose is expressly prohibited. Explosives or other articles deemed extra hazardous shall not be brought into the Leased Premises.

     9. Landlord will not be responsible for lost or stolen personal property, money or jewelry from the Leased Premises or any part thereof regardless of whether such loss occurs when the area is locked against entry or not.

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     10. All vehicles are to be currently licensed, in good operating condition, parked for business purposes having to do with Tenant’s business operated in the Leased Premises, parked within designated parking spaces, one vehicle to each space. No vehicle shall be parked as a “billboard” vehicle in the parking lot. Any vehicle parked improperly may be towed away. Tenant, Tenant’s agents, employees, vendors and customers who do not operate or park their vehicles as required shall subject the vehicle to being towed at the expense of the owner or driver.

     11. Tenant shall not permit storage outside the Building, including outside storage of trucks and other vehicles, or dumping of waste or refuse or permit any harmful materials to be placed in any drainage system or sanitary system in or about the Leased Premises.

     12. Tenant shall not park or operate any semi-trucks or semi-trailers in the parking areas associated with the Leased Premises.

     13. Tenant will not permit any person to bring onto the Leased Premises any handgun, firearm or other weapons of any kind, or illegal drugs.

     14. Landlord may, but shall not be required to, designate an area for smoking outside the Building.

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EXHIBIT D

FORM OF SUBORDINATION, NONDISTURBANCE & ATTORNMENT AGREEMENT

Deed of Trust: A Deed of Trust, Security Agreement and Fixture Filing dated as of executed by Landlord, to                      as Trustee, for the benefit of Beneficiary securing repayment of the Note to be recorded in the records of the County in which the Property is located.
Lease and Lease Date: The lease entered into by Landlord and Tenant dated as of covering the Premises. [Add amendments]
Property:	[Property Name] [Street Address] [City, State, Zip] The Property is more particularly described on Exhibit A.

     THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (the “Agreement”) is made by and among Tenant, Landlord, and Beneficiary and affects the Property described in Exhibit A. Certain terms used in this Agreement are defined in the Defined Terms. This Agreement is entered into as of the Execution Date with reference to the following facts:

          A. Landlord and Tenant have entered into the Lease covering [certain space in the improvements located in and upon] the Property (the “Premises”).

          B. Beneficiary has made or is making the Loan to Landlord evidenced by the Note. The Note is secured, among other documents, by the Deed of Trust.

          C. Landlord, Tenant and Beneficiary all wish to subordinate the Lease to the lien of the Deed of Trust.

          D. Tenant has requested that Beneficiary agree not to disturb Tenant’s rights in the Premises pursuant to the Lease in the event Beneficiary forecloses the Deed of Trust, or acquires the Property pursuant to the trustee’s power of sale contained in the Deed of Trust or receives a transfer of the Property by a conveyance in lieu of foreclosure of the Property (collectively, a “Foreclosure Sale”) but only if Tenant is not then in default under the Lease and Tenant attorns to Beneficiary or a third party purchaser at the Foreclosure Sale (a “Foreclosure Purchaser”).

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     NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties agree as follows:

          1. Subordination. The Lease and the leasehold estate created by the Lease and all of Tenant’s rights under the Lease are and shall remain subordinate to the Deed of Trust and the lien of the Deed of Trust, to all rights of Beneficiary under the Deed of Trust and to all renewals, amendments, modifications and extensions of the Deed of Trust.

          2. Acknowledgments by Tenant. Tenant agrees that: (a) Tenant has notice that the Lease and the rent and all other sums due under the Lease have been or are to be assigned to Beneficiary as security for the Loan. In the event that Beneficiary notifies Tenant of a default under the Deed of Trust and requests Tenant to pay its rent and all other sums due under the Lease to Beneficiary, Tenant shall pay such sums directly to Beneficiary or as Beneficiary may otherwise request, (b) Tenant shall, provided Landlord has given Tenant written notice of Beneficiary’s notice address, send a copy of any notice or statement under the Lease to Beneficiary at the same time Tenant sends such notice or statement to Landlord, and (c) this Agreement satisfies any condition or requirement in the Lease relating to the granting of a nondisturbance agreement.

          3. Foreclosure and Sale. In the event of a Foreclosure Sale,

          (a) So long as Tenant complies with this Agreement and there is no Event of Default (as defined in the Lease), the Lease shall continue in full force and effect as a direct lease between Beneficiary and Tenant, and Beneficiary will not disturb the possession of Tenant, subject to this Agreement. To the extent that the Lease is extinguished as a result of a Foreclosure Sale, a new lease shall automatically go into effect upon the same provisions as contained in the Lease between Landlord and Tenant, except as set forth in this Agreement, for the unexpired term of the Lease (including any extensions). Tenant agrees to attorn to and accept Beneficiary as landlord under the Lease and to be bound by and perform all of the obligations imposed by the Lease, or, as the case may be, under the new lease, in the event that the Lease is extinguished by a Foreclosure Sale. Upon Beneficiary’s acquisition of title to the Property, Beneficiary will perform all of the obligations imposed on the Landlord by the Lease except as set forth in this Agreement; provided, however, that Beneficiary shall not be: (i) liable for any act or omission of a prior landlord (including Landlord); or (ii) subject to any offsets or defenses that Tenant might have against any prior landlord (including Landlord) unless such pre-paid rent or security deposit were transferred to Beneficiary; or (iii) bound by any rent or additional rent which Tenant might have paid in advance to any prior landlord (including Landlord) for a period in excess of one month or by any security deposit, cleaning deposit or other sum that Tenant may have paid in advance to any prior landlord (including Landlord); or (iv) bound by any amendment, modification, assignment or termination of the Lease made without the written consent of Beneficiary; or (v) liable to Tenant or any other party for any conflict between the provisions of the Lease and the provisions of any other lease affecting the Property which is not entered into by Beneficiary.

          (b) Upon the written request of Beneficiary after a Foreclosure Sale, the parties shall execute a lease of the Premises upon the same provisions as contained in the Lease between Landlord and Tenant, except as set forth in this Agreement, for the unexpired term of the Lease (including any extensions).

          4. Subordination and Release of Purchase Options. Tenant represents that it has no right or option of any nature to purchase the Property or any portion of the Property or any interest in the Borrower. To the extent Tenant has or acquires any such right or option, these rights or options are acknowledged to be subject and subordinate to the Mortgage and are waived and released as to Beneficiary and any Foreclosure Purchaser.

          5. Acknowledgment by Landlord. In the event of a default under the Deed of Trust, at the election of Beneficiary, Tenant shall and is directed to pay all rent and all other sums due under the Lease to Beneficiary.

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          6. Construction of Improvements. Beneficiary shall not have any obligation or incur any liability with respect to the completion of the tenant improvements located in the Premises at the commencement of the term of the Lease.

          7. Notice. All notices under this Agreement shall be deemed to have been properly given if delivered by overnight courier service or mailed by United States certified mail, with return receipt requested, postage prepaid to the party receiving the notice at its address set forth in the Defined Terms (or at such other address as shall be given in writing by such party to the other parties) and shall be deemed complete upon receipt or refusal of delivery.

          8. Miscellaneous. Beneficiary shall not be subject to any provision of the Lease that is inconsistent with this Agreement. Nothing contained in this Agreement shall be construed to derogate from or in any way impair or affect the lien or the provisions of the Deed of Trust. This Agreement shall be governed by and construed in accordance with the laws of the State of in which the Property is located.

          9. Liability and Successors and Assigns. This Agreement shall run with the land and shall inure to the benefit of the parties and, their respective successors and permitted assigns including a Foreclosure Purchaser. If a Foreclosure Purchaser acquires the Property or if Beneficiary assigns or transfers its interest in the Note and Deed of Trust or the Property, all obligations and liabilities of Beneficiary under this Agreement shall terminate and be the responsibility of the Foreclosure Purchaser or other party to whom Beneficiary’s interest is assigned or transferred. The interest of Tenant under this Agreement may not be assigned or transferred except in connection with an assignment of its interest in the Lease which has been consented to by Beneficiary.

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     IN WITNESS WHEREOF, the parties have executed this Subordination, Nondisturbance and Attornment Agreement as of the Execution Date.

     IT IS RECOMMENDED THAT THE PARTIES CONSULT WITH THEIR ATTORNEYS PRIOR TO THE EXECUTION OF THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT.

BENEFICIARY:		a
	By
	Its
TENANT:
	a
	By
	Its
LANDLORD:
	a
	By
	Its

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EXHIBIT A

PROPERTY DESCRIPTION

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State of                                        

County of                                        

On                                            200_ before me,                                                                    personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/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.

Signature                                                                        (Seal)

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Exhibit E

FORM OF TENANT ESTOPPEL CERTIFICATE

TENANT ESTOPPEL CERTIFICATE

To:  TriNet Milpitas Associates, LLC
c/o iStar Financial, Inc.
One Embarcadero Center, Suite 3300
San Francisco, CA 94 111
ATTN: Asset Management

                                                            
                                                            
                                                            
ATTN:                                               

Re: Lease, dated as of                      , 200 ___ between                                         , a                                         , as tenant (the original named tenant under the Lease, together with such tenant’s successors and assigns, being hereinafter referred to collectively as the “Tenant”), and TriNet Milpitas Associates, LLC, a Delaware limited liability company (“Landlord”), covering certain premises known by the street address                                          in the City of Milpitas, County of Santa Clara, State of California (the “Leased Premises”), as amended as noted on attached Schedule A (collectively, the “Lease”)

Gentlemen:

     The undersigned Tenant hereby represents, warrants and certifies to                                          (“                      “) and Landlord, that:

     1. The Lease has not been modified, changed, altered or amended in any respect, either orally or in writing, except as may be indicated on Schedule A attached hereto, and constitutes the entire agreement between Tenant and Landlord affecting Tenant’s leasing of the Leased Premises. A true and correct copy of the Lease is attached as Schedule B. The Lease is in full force and effect and is not subject to any contingencies or conditions not set forth in the Lease.

     2. The term of the Lease commenced on                      ___, ___and will expire on                     ___, ___; the Tenant has no option to renew the Lease Term except as follows:                     .

     3. The monthly base rent payable under the Lease as of the current month is $                     . Tenant has paid all fixed and additional rent and other sums which are due and payable under the Lease through the date hereof, and Tenant has not made and will not make any prepayments of fixed rent (except first month’s rent) for more than one month in advance. To Tenant’s best knowledge, there are no presently unexpired rental concessions or abatements due under the Lease except as set forth on Schedule A attached hereto. To Tenant’s best knowledge, Tenant has no credits, offsets, abatements, defenses, counterclaims or deductions against any rental or other payments due under the Lease or with respect to its performance of the other terms and conditions of the Lease, and has asserted no claims against Landlord except as set forth on Schedule A attached hereto.

     4. Tenant has paid to Landlord a security deposit in the amount of $                     . Landlord is the beneficiary under a letter of credit in the amount of $                      required by the Lease as additional security. Tenant has not made any other payments to Landlord as a security deposit, advance or prepaid rent (except first month’s rent).

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     5. Landlord has completed, and, if required under the Lease, paid for, any and all tenant work required under the Lease and Tenant has accepted the Leased Premises. Tenant is not entitled to any further payment or credit for tenant work.

     6. To Tenant’s current actual knowledge, Landlord is not in default in the performance of any of the terms of the Lease, nor is there now any fact or condition which, with notice or lapse of time or both, will become such a default except as set forth on Schedule A attached hereto. Tenant has not delivered to Landlord any notice of default with respect to the Landlord’s obligations under the Lease except as set forth on Schedule A attached hereto.

     7. Tenant is in actual possession of the entire Leased Premises and, to Tenant’s current actual knowledge, is not in any respect in default under any of the terms and conditions of the Lease, nor is there now any fact or condition which, with notice or lapse of time or both, will become such a default except as set forth on Schedule A attached hereto. Tenant has not received from Landlord any notice of default with respect to the Tenant’s obligations under the Lease except as set forth on Schedule A attached hereto.

     8. Tenant has not assigned, transferred, mortgaged or otherwise encumbered its interest under the Lease, nor subleased any of the Leased Premises, nor permitted any person or entity to use the Leased Premises, except as otherwise indicated on Schedule A annexed hereto.

     9. Except as expressly provided in the Lease, Tenant:

(i)	does not have any right to renew or extend the term of the lease,
(ii)	does not have any right to cancel or surrender the Lease prior to the expiration of the term of the Lease,
(iii)	does not have any option or rights of first refusal or first offer to purchase or lease all or any part of the Leased Premises or the real property of which the Leased Premises are a part,
(iv)	does not have any right, title or interest with respect to the Leased Premises other than as lessee under the lease, and
(v)	does not have any right to relocate into other property owned by Landlord or any of landlord’s affiliates.

     10. There has not been filed by or, to Tenant’s current actual knowledge, against Tenant a petition in bankruptcy, voluntary or otherwise, any assignment for the benefit of creditors, any petition seeking reorganization or arrangement under the bankruptcy laws of the United States, or any state thereof, or any other action brought under said bankruptcy laws with respect to Tenant except as set forth on Schedule A attached hereto.

     11. If Tenant is required to provide insurance coverage under the Lease, Tenant has not given or received written notice that Tenant’s insurance coverage will be canceled or will not be renewed except as set forth on Schedule A attached hereto.

     12. Tenant is not aware of any material defects or deficiencies in the systems, elements or components of the Leased Premises. Tenant has not received any written notice, citation or other claim alleging any material violation of any applicable building, zoning, land use, environmental, anti-pollution, health, fire, safety, access accommodations for the physically handicapped, subdivision, energy and resource conservation or similar laws, statutes, rules, regulations or ordinances, or any covenants, conditions and restrictions applicable to the Leased Premises except as set forth on Schedule A attached hereto.

     13. To the current actual knowledge of Tenant, any and all brokerage and leasing commissions relating to and/or resulting from Tenant’s execution and delivery of the Lease and occupancy of the Leased Premises have been paid in full except as set forth on Schedule A attached hereto.

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     14. The individual executing this Tenant Estoppel Certificate on behalf of Tenant represents and warrants that he has the power and the authority to execute this Tenant Estoppel Certificate on behalf of Tenant.

     15. This Tenant Estoppel Certificate shall inure to the benefit of                       and Landlord and their respective nominees, successors, assigns, participants and designees and shall be binding upon Tenant and its successors and assigns.

Dated this ____ day of                     , ______.

Tenant:                                         , a                    

By:                                        

Its:                                        

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EX-10.35

Exhibit 10.35

ASSIGNMENT AND ASSUMPTION OF LEASE

THIS ASSIGNMENT AND ASSUMPTION OF LEASE (referred to subsequently as this “Agreement”) is made on May 27, 2004, by LSI Logic Corporation, as successor in interest to International Business Machines Corporation (“Assignor”), and Engenio Information Technologies, Inc. (“Assignee”).

LakeCentre Plaza Ltd., LLLP, as Landlord (“Landlord”), and Assignor, as tenant, entered into a lease dated November 17, 1999, as assigned by Assignment and Assumption Agreement dated August 29, 2002, with regard to the premises known 5400 Airport Blvd., Suite 100 and 200, Boulder, Colorado 80301 (the “Premises”). That lease and assignment are attached hereto as Exhibit A and incorporated herein by this reference and are collectively referred to in this Agreement as the “Lease.” Assignor wishes to assign the Lease to Assignee, and Assignee wishes to accept such assignment and assume the obligations of tenant under the Lease, upon and subject to the terms and conditions set forth in this Agreement. Accordingly, Assignor and Assignee agree as follows:

     1. Assignment and Delivery of Possession. Effective May 31, 2004 (the “Effective Date”), Assignor hereby assigns, transfers and conveys to Assignee all of Assignor’s right, title and interest in and to the Lease, including, but not limited to, all of Assignor’s right, title and interest in and to: (a) the security deposit paid by Assignor under the Lease, and (b) the rent prepaid under the Lease. Assignor will deliver possession of the Premises to Assignee on the Effective Date, in the same condition in which the Premises exist on the date of Assignee’s signature on this Agreement.

     2. Assumption and Acceptance of Premise. Assignee hereby accepts the foregoing assignment and assumes and agrees to pay all rent and other charges and perform and observe all covenants, conditions, obligations and agreements of the tenant under the Lease to be paid, performed or observed on or after the Effective Date of this Agreement Assignee hereby accepts the Premises in the condition existing on the date of Assignee’s signature on this Agreement.

     3. Assignor’s Representations and Warranties. Assignor represents and warrants to Assignee that as of the date hereof and as of the Effective Date: (a) the Lease is in full force and effect, and unmodified, (b) Assignor’s interest in the Lease is free and clear of any liens, encumbrances, or adverse interests of third parties, (c) Assignor has full and lawful authority to assign its interest in the Lease, (d) there exists no default under the Lease by Assignor nor any circumstances which, with the passage of time or the giving of notice, or both, would be a default under the Lease, (e) to the best of Assignor’s knowledge, there exists no default under the Lease by Landlord nor any circumstances which, with the passage of time or the giving of notice, or both, would be a default under the Lease, (f) no part of the security deposit under the Lease has been used by Landlord, and (g) Assignor is not aware of any defects in the Premises not previously disclosed to Assignee in writing.

     4. Indemnification. Assignee shall not be responsible, to the Landlord, to Assignor, or to any other party, for the discharge or performance of any duties or obligations to be performed by the tenant under the Lease prior to the Effective Date of this Agreement, and Assignor agrees to and shall indemnify and hold Assignee harmless from and against any and all actions, claims, demands, losses, liabilities, damages and expenses (including reasonable attorneys’ fees): (a) arising out of or relating to any breach or failure to perform any duties or obligations under the Lease to be performed by the tenant thereunder prior to the Effective Date of this Agreement, or (b) resulting from a breach of any representation, warranty, covenant or agreement made by Assignor in this Agreement. Assignee agrees to and shall indemnify and hold Assignor harmless from and against any and all actions, claims, demands, losses, liabilities, damages and expenses (including reasonable attorneys’ fees), or (c) arising out of or relating to any breach or failure to perform any duties or obligations under the Lease to be performed by the tenant thereunder from and after the Effective Date of this Agreement, or (d) resulting from a breach of any covenant or agreement made by Assignee in this Agreement.

     5. Modification of Lease. Assignor agrees that Assignee and Landlord may amend the Lease in any way after the Effective Date of this Agreement, without notice to or consent of Assignor, and without in any manner releasing or relieving Assignor from liability under the Lease as is exists on the Effective Date of this Agreement, and Assignor shall remain liable under all the terms, covenants,

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conditions, obligations and agreements of the Lease as they exist on the Effective Date of this Agreement.

     6. Miscellaneous. This Agreement may be modified only by a written instrument signed by both Assignor and Assignee. This Agreement shall be binding upon Assignor and Assignee and their respective heirs, personal representatives, successors and assigns. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Colorado. In the event of any dispute or litigation arising out of or relating to this Agreement, the prevailing party shall be awarded and paid its expenses, including reasonable attorneys’ fees, from the non-prevailing party.

     Assignor and Assignee have executed this Agreement on the day and year first written above.

ASSIGNOR:			ASSIGNEE:
LSI Logic Corporation			Engenio Information Technologies, Inc.
By:	/s/ David G. Pursel		By:	/s/ David E Sanders
Its: VP, General Counsel & Corp Sec		.	Its: V.P. General Counsel
Date: May 27, 2004			Date 5-27-04

LSI Logic Legal Department
Date 05-27-2004 Approved as to form
By:	Andrew S. Hughes

CONSENT TO ASSIGNMENT

     The undersigned (Landlord identified above) hereby consents to the foregoing Assignment and Assumption of Lease, on the express conditions, agreed to by Assignor and Assignee by their signatures above, that: (i) Assignor (tenant under the Lease) will continue to remain primarily liable (jointly and severally with Assignee) for the payment of all rent and other sums and the performance and observance of all covenants, conditions, obligations and agreements required of tenant under the Lease, in accordance with the terms of the Lease; (ii) if any default under the Lease occurs, Landlord will have the right to collect the rent and other sums due under the Lease directly from either Assignor or Assignee or both without waiving any of Landlord’s rights against the other party; and (iii) no further assignment of the Lease, and no subletting of all or any portion of the Premises, will be made without the prior written consent of Landlord.

LANDLORD: LakeCentre Plaza Ltd., LLLP

By:

Its:

Date:

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conditions, obligations and agreements of the Lease as they exist on the Effective Date of this Agreement.

     6. Miscellaneous. This Agreement may be modified only by a written instrument signed by both Assignor and Assignee. This Agreement shall be binding upon Assignor and Assignee and their respective heirs, personal representatives, successors and assigns. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Colorado. In the event of any dispute or litigation arising out of or relating to this Agreement, the prevailing party shall be awarded and paid its expenses, including reasonable attorneys’ fees, from the non-prevailing party.

     Assignor and Assignee have executed this Agreement on the day and year first written above.

ASSIGNOR:			ASSIGNEE:
LSI Logic Corporation			Engenio Information Technologies, Inc.
By:	/s/ David G. Pursel		By:	/s/ David E Sanders
Its: VP, General Counsel & Corp Sec		.	Its: V.P. General Counsel
Date: May 27, 2004			Date 5-27-04

LSI Logic Legal Department
Date 05-27-2004 Approved as to form
By:	Andrew S. Hughes

CONSENT TO ASSIGNMENT

     The undersigned (Landlord identified above) hereby consents to the foregoing Assignment and Assumption of Lease, on the express conditions, agreed to by Assignor and Assignee by their signatures above, that: (i) Assignor (tenant under the Lease) will continue to remain primarily liable (jointly and severally with Assignee) for the payment of all rent and other sums and the performance and observance of all covenants, conditions, obligations and agreements required of tenant under the Lease, in accordance with the terms of the Lease; (ii) if any default under the Lease occurs, Landlord will have the right to collect the rent and other sums due under the Lease directly from either Assignor or Assignee or both without waiving any of Landlord’s rights against the other party; and (iii) no further assignment of the Lease, and no subletting of all or any portion of the Premises, will be made without the prior written consent of Landlord.

LANDLORD: LakeCentre Plaza Ltd., LLLP

By:	[ILLEGIBLE]
Its:	PARTNER
Date:	5/28/04

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EXHIBIT “A”

EXHIBIT D

ASSIGNMENT AND ASSUMPTION AGREEMENT

     THIS AGREEMENT made the 29^th day of August, 2002, by and between INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation, with an office at New Orchard Road, Armonk, New York 10504 (hereinafter “IBM”) and LSI Logic Corporation, a Delaware corporation, having an office at 1621 Barber Lane, Milpitas, California 95035, (hereinafter “Assignee”).

WITNESSETH:

     WHEREAS, by a certain lease dated as of November 17,1999 as amended and supplemented (hereinafter collectively called the “Lease”) IBM leases from Lake Centre Plaza, Ltd., LLLP, (“Lessor”) certain premises described in the Lease in the office building located at 5400 Airport Blvd., Suite 100, Boulder, Colorado 80301, and

     WHEREAS, IBM desires to assign the Lease to Assignee and Assignee is willing to assume the obligations imposed upon IBM under the Lease, subject to and conditioned upon agreements hereinafter set forth.

     NOW THEREFORE, in consideration of $1.00 paid by each of the parties hereto to the other, the receipt of which is hereby acknowledged, and for other good and valuable consideration, the parties hereto agree as follows:

     1. IBM hereby assigns to Assignee, effective on the date of the Closing as defined in the Asset Purchase Agreement between LSI Logic Corporation and IBM (“APA”), which shall have been executed concurrent with or immediately prior to the execution hereof (hereinafter the “Effective Date”), all of IBM’s rights and interests in and to the Lease, a true and complete copy of which is attached hereto, together with the leasehold estate thereof and all rights and interests of IBM in and to the premises created thereby (the “Premises”) in its “as is” condition, subject to Paragraphs 3(e) and 6 hereof.

     2. IBM, for itself and its legal representatives, successors and assigns, covenants and represents to Assignee and agrees as follows:

          (a) IBM has full right, authority and power to assign its rights and interests in and under the Lease, subject to Paragraph 6;

          (b) No other assignment of the Lease has been made by IBM, and the rights and interests of IBM in and under the Lease are now and will, on the Effective Date, be free and clear of any liens and encumbrances made by IBM;

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          (c) IBM is not on the date hereof, and will not on the Effective Date, be in default under any of the terms of the Lease, having performed all of the obligations imposed upon IBM as lessee under the Lease and, as of the date hereof, the Lease is in full force and effect and enforceable in accordance with its terms, and

          (d) IBM has no knowledge of any default in the performance and observance of obligations contained in the Lease to be kept, observed and performed by Lessor, or any condition which with the giving of notice or passage of time, or both, would constitute a default under the Lease.

     3. Assignee, for itself and its legal representatives, successors and assigns, covenants and represents to IBM and agrees as follows:

          (a) On and after the Effective Date, Assignee shall assume and hereby agrees promptly and faithfully to keep, fulfill, observe, perform and discharge each and every covenant, duty, debt and obligation on IBM’s part to be performed that may accrue and become performable, due or owing from and after the Effective Date under the terms of the Lease;

          (b) The Lease has not been and will not be further amended in any respect without the consent of Lessor, Assignee and IBM;

          (c) All rental payments required by the terms of the Lease, which become due and payable on and after the Effective Date, shall be made by Assignee in accordance with the terms of the Lease and sent directly to Lessor, unless otherwise directed in writing by Lessor;

          (d) On the Effective Date, Assignee shall accept delivery of the Premises in its then “as is” condition, broom clean;

          (e) Notwithstanding any provision in this Agreement to the contrary, Exhibit “F” (in its entirety), entitled “Option to Extend,” shall not be assigned to Assignee;

          (f) Neither Lessor’s consent nor any term or provision of the Assignment and Assumption Agreement shall be construed as constituting a consent by Lessor to any further assignments of the Lease or subletting of all or any portions of the Premises covered thereby without first obtaining the prior written consent of Lessor;

          (g) Neither Lessor’s consent nor any term or provision of the Assignment and Assumption Agreement shall be construed as constituting a release or discharge by Lessor of IBM from an obligation or liability as Tenant under the Lease; and

          (h) Neither Lessor’s consent nor any term or provision of the Assignment and Assumption Agreement shall be construed as constituting an amendment or modification of the Lease or waiver of any its terms or provisions, or of any existing or future defaults thereunder, except as set forth in Subparagraph 3(e) above.

     4. (a) Without limiting the generality of Paragraph 3(a), if Assignee defaults in the performance of any of the covenants made by Assignee in this Agreement (including, without

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limitation, the payment of rent under the Lease) and such default shall continue for a grace period of five (5) business days after receipt of notice thereof by IBM to Assignee, then in such event IBM may cure the default. Any sums reasonably required to be paid by IBM with respect to obligations, debts, duties and liabilities assumed under this Agreement but not performed by Assignee hereunder, and all sums expended by IBM to cure a default by Assignee under the Lease or this Agreement, are sums which are immediately due and owing to IBM from Assignee. Assignee shall promptly pay such sums to IBM upon written demand.

          (b) As security for the performance of its obligations under this Agreement, Assignee hereby assigns to IBM all of Assignee’s rights and interests in and to all subleases of the Premises, or part thereof, covered by the Lease which may in the future be made by Assignee. In the event of default by Assignee hereunder IBM, after giving seven (7) days notice to any such sublessee, shall be entitled to receive all rents, additional rents and profits payable under said subleases, but until such notice is given, Assignee shall be entitled to exercise all of its rights and interests in and to these subleases, including the receipt of such rents and profits. Assignee covenants that it will give written notice of this collateral assignment of subleases and rentals due thereunder to each sublessee at the time it makes any sublease. Upon execution of each sublease, Assignee shall deliver to IBM an executed agreement of assignment in accordance with the terms of this paragraph, together with a duplicate original of the sublease.

          (c) In no event shall Assignee remain in the Premises beyond the expiration date or earlier termination of the Lease term. If Assignee fails to surrender the Premises on or before such date as required by the terms of the Lease, Assignee shall be liable to IBM and reimburse IBM promptly on demand for all direct costs, expenses and fees, and all indirect, special and consequential damages incurred and suffered by IBM by reason of such holdover by Assignee.

          (d) This Paragraph 4 shall survive the expiration date or earlier termination of the Lease.

     5. Any notice to be given pursuant to this Agreement shall be in writing and shall be served by hand or private express mail carrier, or by United States certified or registered mail.

          (a) Notices to Assignee shall be mailed simultaneously to LSI Logic Corporation, 1621 Barber Lane, M/S D-106, Milpitas, California 95035-7458, Attention: General Counsel and LSI Logic Corporation, 1621 Barber Lane, M/S D-129, Milpitas, California 95035-7458, Attention: Corporate Real Estate, unless otherwise directed in writing by Assignee.

          (b) Notices to IBM shall be mailed simultaneously to IBM’s Program Manager at IBM Real Estate Services, 1501 LBJ Freeway, Suite 465, Dallas, Texas 75234, and to IBM Counsel, Real Estate Services, at IBM, New Orchard Road, Armonk, New York 10504, unless otherwise directed in writing by IBM.

     6. Notwithstanding any provision in this Agreement to the contrary, Assignee understands that IBM is required by Article 10 of the Lease to obtain the consent of Lessor to this assignment of the Lease. If for any reason Lessor fails or refuses to give such consent in writing on or before September 12,2002, either party may elect to terminate this Agreement by notice of such

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election to the other party, in which event neither IBM nor Assignee shall have any claim against the other hereunder. Assignee shall have no liability for any obligations of IBM that accrued prior to the Effective Date.

     7. This Agreement shall be binding on Assignee and its heirs, distributees and executors, and IBM, and their respective legal representatives, successors and permitted assigns.

     8. This Agreement shall not be changed except by written instrument signed by IBM and Assignee.

     IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized representatives of IBM and Assignee as of the date first above written.

WITNESS:	INTERNATIONAL BUSINESS MACHINES CORPORATION
	By:
	Title:
WITNESS:	LSI LOGIC CORPORATION
/s/ Andrew S. Hughes	By:  /s/ Tom Georgens
	Title:   Tom Georgens
WITNESS:	CONSENTED TO BY:
	LAKE CENTRE PLAZA, LTD., LLLP
	(Landlord)
	By:
	Title:

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LEASE AGREEMENT
OFFICE AND INDUSTRIAL SPACE

This Lease Agreement is made and entered into as of 17 day of November, 1999, by and between LakeCentre Plaza, Ltd., LLLP (“Landlord”), whose address is 4875 Pearl East Cr, #300. Boulder, CO 80301, and Mytex Corporation (Tenant”), whose address is 5400 Airport Blvd., Suite 100, Boulder, Colorado 80301.

In consideration of the covenants, terms, conditions, agreements and payments as herein Set forth, the Landlord and Tenant hereby enter into the following Lease:

1. Definition. Whenever the following words or phrases are used in this Lease, said words or phrases shall have the following meaning:

     A. “Area” shall mean the parcel of land depicted on Exhibit “A” attached hereto and commonly known and referred to as High Point Boulder, Colorado. The Area includes the Leased Premises and one or more buildings. The Area may include Common Areas.

     B. “Building”, shall mean a building located in the Area.

     C. “Common Areas” shall mean all entrances, exits, driveways, curbs, walkways, hallways,parking areas, landscaped areas, restrooms, loading and service areas, and like areas or facilities which are located in the Area and which are designated by the Landlord as area or facilities available for the nonexclusive use in common by persons designated by the Landlord.

     D. “Leased Premises” shall mean the premises herein leased to the Tenant by the Landlord.

     E. “Rentable Area” shall mean;

           (1) For a Single Tenant Floor. With respect to a single tenant floor, Rentable Area will mean the sum of (i) the floor area (measured in square feet from the outermost surface of all walls and the midpoint of any common walls) excluding standard openings in the floor slab used, for example, for Building stairs, elevator and other shafts and vertical ducts (collectively, the “Excluded Spaces”) , (ii) an allocation of the floor area of the Common Areas and Services Areas on such floor, and (iii) an allocation of the floor area of Common Areas located in or serving the Building.

          (2)  For a Multiple Tenant Floor. With respect to a multiple tenant floor, Rentable Area will mean the sum of (i) the floor area (in square feet) less any Excluded Spaces located within the Rentable Area, and (ii) an allocation of the floor area of the common Areas and Services Areas on such floor, and (iii) an allocation of the floor area of Common Areas located in or serving the Building.

           (3) Columns and Non-Standard Openings. No deductions will be made in either Paragraph 1.E.(1) or Paragraph 1.E.(2) for (i) columns and projections necessary to the structural support of the Building or (ii) for openings in the floor slab which were made at the request of Tenant or to accommodate items installed at the request of Tenant.

           (4) Tenant’s Rentable Area may change from time to time as the total rentable area in the Building is increased or decreased.

     F. “Tenant’s Prorata Share” as to the Building in which the Leased Premises are located shall mean an amount (expressed as a percentage) equal to the rentable area included in the Leased Premises divided by the total rentable area included in said Building. The Tenant’s Prorata Share as to Common Areas shall mean an amount (expressed as a percentage) equal to the rentable area included in the Leased Premises divided by the total rentable area included in all Buildings located in the Area. The Tenant’s Prorata Share for Common Areas may change from time to time as the rentable area in all Buildings located in the Area is increased or decreased. The Tenant’s Prorata Share is approximately 52.94% (43,725sf/82,589sf).

2. Leased Premises. The Landlord hereby leases into the Tenant, and the Tenant hereby leases from the Landlord, the following described premises:

Space 100 and 200 in Building 5400
consisting of approximately 43,725 square feet of rentable area,
all as depicted on Exhibit “B” attached hereto.

3.  Base Term, The term of this Lease shall commence at 12:00 noon on April 15, 2000, and, unless sooner terminated as herein provided for, shall end at 12:00 noon on May 1, 2007 (“Lease Term”). Except as specifically provided to the contrary herein, the Leased Premises shall, upon the termination of this Lease, by virtue of the expiration of the Lease Term or otherwise, be returned to the Landlord by the Tenant in as good or better condition than when entered upon by the Tenant, ordinary wear and tear excepted.

4. Rent. Tenant shall pay the following rent for the Leased Premises:

      A. Base Monthly Rent. Tenant shall pay to Landlord, without notice and without setoff, at the address of Landlord as herein set forth, the following Base Monthly Rent (“Base Monthly Rent”), said Base Monthly Rent to be paid in advance on the first day of each month during the term hereof. In the event that this Lease commences on a date other than the first day of a month, the Base Monthly Rent for the first month of the Lease Term shall be prorated for said partial month. Below is a schedule of Base Monthly Rental payments as agreed upon:

During Lease Term

For Period	To Period	A Base Monthly
Starting	Ending	Rent of
April 15, 2000	May 1, 2000	$24,595.00
May 1, 2000	May 1, 2001	$49,191.00
May 1, 2001	May 1, 2007	$49,19l.00 plus any cost of living adjustment Per paragraph 4C below.

     B. Lease Term Adjustment. If, for any reason, other than delays caused by the Tenant, the Leased Premises are not ready for Tenant’s.

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occupancy on April 15,2000, the Tenant’s rental obligation and other monetary expenses (i.e. taxes, utilities, etc.) shall be abated in direct proportion to the number of days of delay. It is hereby agreed that the premises shall be deemed ready for occupancy on the day the Landlord receives a T.C.O. or C.O. from the appropriate authority, or on the day the Landlord gives Tenant the keys to the Leased Premises if a building permit has not been applied for and/or is not required by the appropriate authority.

     C. Cost of Living Adjustment. The Base Monthly Rental specified in paragraph 4A above shall be recalculated for each Lease year as defined hereinafter following the first Lease Year of this Lease Agreement. The recalculated Base Monthly rental shall be hereinafter referred to as the “Adjusted Monthly Rental”. The Adjusted Monthly rental for each Lease year after the First Lease Year shall be the greater of: (i) the amount of the previous year’s Adjusted Monthly Rental, (or the Base Monthly Rental if calculating the Adjusted Monthly Rental for the second Lease Year), or (ii) an amount calculated by the rent adjustment formula set forth below. In applying the rent adjustment formula, the following definitions shall apply:

     (1) “Lease year” shall mean a period of twelve (12) consecutive full calendar months with the first Lease Year commencing on the date of the commencement of the term of this Lease and each succeeding Lease Year commencing upon the anniversary date of the first Lease Year; however if this Lease does not commence on the first day of a month, then, the first Lease Year and each succeeding Lease Year shall commence on the first day of the first month following each anniversary date of this Lease;

     (2) “Bureau” shall mean the Bureau of Labor Statistics of the United States Department of the Labor or any successor agency that shall issue the Price Index referred to in this Lease Agreement.

     (3) “Price Index” shall mean the “Consumer Price Index-All Urban Consumers-All Items (CPI-U) U.S. City Average (1982-84=100)” issued from time to time by the Bureau. In the event the Price Index shall hereafter be converted to a different standard reference base or otherwise revised, the determination of the increase in the Price Index shall be made with the use of such conversion factor, formula or table as may be published by Prentice-Hall, Inc. of failing such publication, by another nationally recognized publisher of similar statistical information. In the event the Price Index shall cease to be published, then, for the purposes of this paragraph 4C there shall be substituted for the Price Index such other index as the Landlord and the Tenant shall agree upon, and if they are unable to agree within sixty (60) days after the Price Index ceases to be published, such matter shall be determined by arbitration in accordance with the Rules of the American Arbitration Association.

     (4) “Base Price Index” shall mean the Price Index released to the public during the second calendar month preceding the commencement of this Lease Agreement.

     (5) “Revised Price Index” shall mean the Price Index released to the public during the second calendar month preceding the Lease Year for which the Base Annual Rental is to be adjusted:

     (6) “Basic Monthly Rental” shall mean the Basic Monthly Rental set forth in subparagraph 4A above. The rent adjustment formula used to calculate the Adjusted Monthly Rental is as follows:

Adjusted Monthly	=	Revised Price Index X Base Monthly Rental
Rental		Base Price Index

Not withstanding the above formula, the Adjusted Monthly Rental shall not be less than 103% or greater than 106% of the previous year’s Adjusted Monthly Rental, or the Basic Monthly Rental if such adjustment is for the Second Lease Year. The Adjusted monthly Rental as herein above provided shall continue to be payable monthly as required in paragraph 4A above without necessity of any further notice by the Landlord to the Tenant.

     D. Total Net Lease. The Tenant understands and agrees that this Lease is a total net lease (a “net, net, net lease”), whereby the Tenant has the obligation to reimburse the Landlord for a share of all costs and expenses (taxes, assessments, other charges, insurance, trash removal, Common Area operation and maintenance and like costs and expenses), incurred by the Landlord as a result of the Landlord’s ownership and operation of the Area.

     (E) Use of Premises. Tenant shall use the Leased Premises only for business offices, research and development and for no other purpose whatsoever except with the written consent of Landlord. Tenant shall not allow any accumulation of trash or debris on the Leased Premises or within any portion of the Area. All receiving an delivery of goods and merchandise and all removal of garbage and refuse shall be made only by way of the rear and/or other service door provided therefore. In the event the Leased Premises shall have no such door, then these matters shall be handled in a manner satisfactory to Landlord. No storage of any material outside of the Leased Premises shall be allowed unless first approved by Landlord in writing, and then in only such areas as are designated by Landlord. Tenant shall not commit or suffer any waste on the Leased premises nor shall Tenant permit any nuisance to be maintained on the Leased Premises or permit any disorderly conduct or other activity having a tendency to annoy or disturb any occupants of any part of the Area and/or any adjoining property.

     7. Laws and Regulations — Tenant Responsibility. The Tenant shall, at its sole cost and expense,comply with all laws and regulations of any Govermental entity, board, commission or agency having jurisdiction over the Leased Premises. Tenant agrees not to install any electrical equipment that overloads any electrical paneling, circuitry or wiring and further agrees to comply with the requirements of the insurance underwriter or any governmental authorities having jurisdiction thereof.

     8. Landlord’s Rules and Regulations. Landlord reserves the right to adopt and promulgate rules and regulations applicable to the leased premises and from time to time or supplement amend or supplement said rules or regulations, Notice of such rules and regulations amendments and supplements thereto shall be given to Tenant, and Tenant agrees to comply with the observe such rules and regulations and amendments and

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supplements thereto provided that the same apply uniformly to all Tenants of the Landlord in the Area

     9. Parking. If the Landlord provides off street parking for the common use of Tenants, employees and customers of the Area, the Tenant shall park all vehicles of whatever type used by Tenant and/or Tenant’s employees only in such areas thereof as are designated by Landlord for this purpose, and Tenant accepts the responsibility of seeing that Tenant’s employees park only in the areas so designated. Tenant shall, upon the request of the Landlord, provide to the Landlord license numbers of the Tenant’s vehicles and the vehicles of Tenant’s employees. During the duration of this lease, Landlord shall not decrease the 200 parking spaces allocated to the Area.

     10. Control of Common Areas - Exclusive control of the Landlord. All Common Areas shall at all times be subject to the exclusive control and management of Landlord, notwithstanding that Tenant and/or Tenant’s employees and/or customers may have a nonexclusive right to the use thereof. Landlord shall have the right from time to time to establish, modify and enforce rules and regulations with respect to the use of said facilities and Common Areas.

     11. Taxes.

            A. Real Property Taxes and Assessments. The Tenant shall pay to the Landlord on the first day of each month, as additional rent, the Tenant’s Prorata Share of all real estate taxes and special assessments levied and assessed against the Building in which the Leased Premises are located and the Common Areas. If the first and last years of the Lease Term are not calendar years, the obligations of the Tenant hereunder shall be prorated for the number of days during the calendar year that this Lease is in effect. The monthly payments for such taxes and assessments shall be $5,283.00 until the Landlord receives the first tax statement for the referred to properties. Thereafter, the monthly payments shall be based upon 1/12th of the prior year’s taxes and assessments. Once each year the Landlord shall determine the actual Tenant’s Prorata Share of taxes and assessments for the prior year and if the Tenant has paid less than the Tenant’s Prorata Share for the prior year the Tenant shall pay the deficiency to the Landlord with the next payment of Base Monthly Rent, or, if the Tenant has paid in excess of the Tenant’s Prorata Share for the prior year the Landlord shall forthwith refund said excess to the Tenant.

            B. Personal Property Taxes. Tenant shall be responsible for, and shall pay promptly when due, any and all taxes and/or assessments levied and/or assessed against any furniture, fixtures, equipment and items of a similar nature installed and/or located in or about the Leased Premises by Tenant.

            C. Rent Tax. If a special tax, charge or assessment is imposed or levied upon the rents paid or payable hereunder or upon the right of the Landlord to receive rents hereunder (other than to the extent that such rents are included as a part of the Landlord’s income for the purpose of an income tax), the Tenant shall reimburse the Landlord for the amount of such tax within fifteen (15) days after demand therefore is made upon the Tenant by the Landlord.

            D. Other Taxes, Fees and Charges. Tenant shall pay to Landlord, on the first day of each month, as additional rent, Tenant’s Pro Rata Share of any ’Other Charges’ (as hereinafter defined) levied, assessed, charged or imposed against the Area, as a whole. Unless paid directly by Tenant to the authority levying, assessing, charging or imposing same, Tenant shall also pay to Landlord, on the first day of the month following payment of same by Landlord, the entire costs of any such ’Other Charges’ levied, assessed, charged or imposed against the Leased Premises, Tenant’s use of same, or Tenant’s conduct of business thereon. For purposes of this provision, ’Other Charges’ shall mean and refer to any and all taxes, assessments, impositions, user fees, impact fees, utility fees, transportation fees, infrastructure fees, system fees, license fees, and any other charge or assessment imposed by any governmental authority or applicable subdivision on the Area, the Leased Premises or the ownership or use of the Area or Leased Premises, or the business conducted thereon, whether or not formally denominated as a tax, assessment, charge or other nominal description, whether now in effect or hereafter enacted or Imposed (excluding, however, Landlord’s Income taxes).

            E. Should Landlord protest and win a reduction in the real estate taxes for the Building and Areas, Tenant shall be obligated to pay its Prorata Share of the cost of such protest, if the protest is handled by a party other than the Landlord.

      12. Insurance.

           A. Landlord’s Insurance. Landlord shall obtain and maintain such fire and casualty insurance on the core and shell of the Building in which the Leased Premises are located and the Common Areas, as well as such loss of rents, business interruption, liability or any other insurance, as it deems appropriate, with such companies and on such terms and conditions as Landlord deems acceptable. Such insurance shall not be required to cover any of Tenant’s inventory, furniture, furnishings, fixtures, equipment or tenant improvements (whether or not installed on the Leased Premises by or for Tenant and whether or not included within the tenant finish provided by Landlord), and Landlord shall not be obligated to repair any damage thereto or replace any of same, and Tenant shall have no interest in any proceeds of Landlord’s insurance.

           B. Tenant’s Insurance. Tenant shall, at its sole cost and expense, obtain and maintain throughout the term of this Lease, on full replacement cost basis, “all risk” insurance covering all of Tenant’s Inventory, furniture, furnishings, fixtures, equipment and all tenant improvements or tenant finish (whether or not installed by Landlord) and betterments located on or within the Leased Premises. In addition, Tenant shall obtain and maintain, at its sole cost and expense, comprehensive, general public liability insurance providing coverage from and against any comprehensive injury and property damage. Such liability coverage shall be written on an "occurrence" basis, with limits of not less than $1,000,000.00 combined single limit coverage.

      All policies of insurance required to be carried by Tenant hereunder shall be written by an insurance company licensed to do business in the State of Colorado, and shall name Landlord as an additional named insured and/or less payee, as Landlord may direct. Each such policy shall provide that same shall not be changed or modified without at least thirty (30) days’ prior written notice to Landlord and any mortgages of Landlord. Certificates evidencing the extent and effectiveness of all Tenant’s insurance shall be delivered to Landlord. The limits of such insurance shall not, under any circumstances, limit the liability of Tenant under this Lease.

      In the event that Tenant fails to maintain any of the insurance required of it pursuant to this provision, Landlord shall have the right (but not the obligation) at Landlord’s election, to pay Tenant’s premiums or to arrange substitute insurance with an insurance company of Landlord’s choosing, in which event any premiums advanced by Landlord shall constitute additional rent payable under this Lease and shall be payable by Tenant to Landlord immediately upon demand for same. Landlord shall also have the right, but no the obligation, whether or not Tenant maintains coverage to carry any such insurance as Landlord may elect in order to provide coverage in the event Tenant fails to properly maintain such insurance.

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     The right of Landlord here under shall be in addition to, and not in lieu of, of any other rights or remedies available to Landlord under this Lease of provided by law or in equity. Without limiting the foregoing, in the event that coverage of any risk for which Tenant is responsible pursuant to this Section 12 is ultimately provided by coverage maintained by Landlord, whether due to Tenant’s failure to provided or maintain such insurance or otherwise, Tenant shall promptly reimburse Landlord for an amount equal to any deductible incurred, immediately upon demand for same.

          D. Tenant’s Share of Landlord Insurance Tenant shall pay the Landlord as additional rent Tenant’s Prorata Share of the insurance secured by the Landlord pursuant to “12A” above. Payment shall be made on the first day of each month as additional rent. The monthly payments for such insurance shall be $225,00 until changed by Landlord as a result of an Increase or decrease in the cost of such insurance.

          E Mutual Subrogation Waiver Landlord and Tenant hereby grant to each other, on behalf of any insurer providing fire and extended coverage to either of them covering the Leased Premises, Buildings or other improvements thereon or contents thereof, a waiver of any right of subrogation any such insurer of one party may acquire against the other or as against the Landlord or Tenant by virtue of payments of any loss under such insurance . Such a waiver shall be effective so long as the Landlord and Tenant are empowered to grant such waiver under the terms of their respective insurance policy or policies and such waiver shall stand mutually terminated as of the date either Landlord or Tenant gives notice to the other that the power to grant such waiver has been so terminated.

     13. Utilities

          A. Tenant shall be solely responsible for and promptly pay all charges (as part of the amount paid per Paragraph 16 below) for heat, water, gas, electric, sewer service and any other utility service used or consumed on the Leased Premises. In no event shall Landlord be liable for any interruption or failure in the supply of any such utility to the Leased Premises.

          In the event the utility company supplying water and or sewer to the Leased Premises determines that an additional service fee, impact fee, and/or assessment, of any other type of payment or penalty is necessary due to Tenant’s use and occupancy of the Building, nature of operation and/or consumption of utilities, said expense shall be born solely by the Tenant. Said expense shall be paid promptly and any repairs requested by the utility company shall be performed by Tenant immediately and without any delay.

          B. Landlord Controls Selection. Landlord has advised Tenant that presently Public Service Company of Colorado (“Utility Service Provider”) is the utility company selected by Landlord to provide electricity and gas service for the Building. Notwithstanding the foregoing, if permitted by Law, Landlord shall have the right at any time and from time to time during the Lease Term to either contract for service from a different company or companies providing electricity and/or gas service (each such company shall hereinafter be referred to as an (“Alternative Service Provider”) or continue to contract for service from the Utility Service Provider.

          C. Tenants Shall Give Landlord Access. Tenant shall cooperate with Landlord, Utility Service Provider and any Alternative Service Provider at all times and, as reasonably necessary, shall allow Landlord. Utility Service Provider, and any Alternative Service Provider reasonable access to the Building’s electric lines, feeders, risers, wiring, gas lines, and any other machinery within the Premises.

          D. Landlord Not Responsible for Interruption of Service. Landlord shall in no way be liable or responsible for any loss, damage, or expense that Tenant may sustain or incur by reason of any change, failure, interference, disruption or defect in the supply or character of the electrical and/or gas energy furnished to the Premises, or if the quantity or character of the electric and/or gas energy supplied by the Utility Service Provider or any Alternate Service Provider is no longer available or suitable for Tenant’s requirements, and no such change, failure, defect, unavailability, or unsuitability shall constitute an actual or constructive eviction, In whole or in part or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under the Lease.

     14. Maintenance Obligation of Landlord. Except as herein otherwise specifically provided for, Landlord shall keep and maintain the roof and exterior of the Building of which the Leased Premises are a part, and any equipment, which Landlord owned that provides services to the Building, in good repair and condition. Tenant shall repair and pay for any damage to roof, foundation and external wails caused by Tenant’s action, negligence or fault.

     15. Maintenance Obligation of the Tenants Subject only to the maintenance obligations of the Landlord as herein provided for, the Tenant shall, during the entire Lease Term, including all extensions thereof, at the Tenant’s sole cost and expense, keep and maintain the Leased Premises in good condition and repair, including specifically the following:

          A. Electrical System. Tenant agrees to maintain in good working order and to make all required repairs and replacements to the electrical systems for the Leased Premises. Tenant upon signing this Lease acknowledges that Tenant has inspected the existing electrical systems and all such systems are in good repair and working order.

          B. Plumbing System Tenant agrees to maintain in good working order and to make all required repairs or replacements to the plumbing systems for the Leased Premises. Tenant upon signing this Lease acknowledges that Tenant has inspected the existing plumbing systems and all such systems are in good repair and working order.

          C. Inspection and Service. Upon termination of Lease Agreement, Tenant agrees, before vacating premises, to employ at Tenant’s sole cost and expense, a licensed contractor to inspect service and write a written report on the systems referred to in “A” and “B” of this Paragraph. Landlord shall have the right to order such an inspection if Tenant fails to provide evidence of such inspection, and to follow the recommendations of such reports to charge the expense there of the Tenant.

          D. Tenant’s Responsibility for Building and Area Repairs. Tenant shall be responsible for any repairs required for any part of the Building or Area of which the Leased Premises are a part if such repairs are necessitated by the actions or inactions of Tenant.

          E. Cutting Roof. Tenant must obtain in writing the Landlord’s approval prior to making any roof penetrations. Failure by

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Tenant to obtain written permission to penetrate a roof shall relieve Landlord of any roof repair obligations as set forth in Paragraph “14” hereof. Tenant further agrees to repair, at its sole cost and expense, all roof penetrations made by the Tenant and to use, if so requested by Landlord, a licensed contractor selected by the Landlord to make such penetrations and repairs.

            F. Glass and Doors. The repair and replacement of all glass and doors on the Leased Premises shall be the responsibility of the Tenant. Any such replacements or repairs shall be promptly completed at the expense of the Tenant.

            G. Liability for Overload. Tenant shall be responsible for the repair or replacement of any damage to the Leased Premises the Building or the Area which result from the Tenant’s movement of heavy articles therein or thereon. Tenant shall not overload the floors of any part of the Leased Premises.

            H. Liability for Overuse and Overload of Operating Systems. Tenant shall be responsible for the repair, upgrade, modification, and/or replacement of any operating systems servicing the Leased Premises and/or all or a part of the Building which is necessitated by Tenant’s change or increase in use of or non-disclosed use of all or a part of the Leased Premises. Operating systems include, but are not limited to, electrical systems; plumbing systems (both water and natural gas); healing, ventilating, and air conditioning systems; telecommunications systems; computer and network systems; lighting systems, fire sprinkler systems; security systems; and building control systems, if any.

           I. Failure of Tenant to Maintain Premises. Should Tenant neglect to keep and maintain the Leased Premises as required herein, the Landlord shall have the right, but not the obligation, to have the work done and as reasonable costs plus a ten percent (10%) overhead charge therefore shall be charged to Tenant as additional rental and shall become payable by Tenant with the payment of the rental next due.

     16. Common Area Maintenance. Tenant shall be responsible for Tenant’s Prorata share of the total costs incurred for the operation, maintenance and repair of the Common Areas, including but not limited to, the costs and expenses incurred for the operation, maintenance and repair of parking areas (including restriping, and repeving); removal of snow; all utilities including water, gas and electric for the building; janitorial for common areas and tenant occupied space; normal HVAC maintenance and elevator maintenance (if applicable); trash removal; security to protect and secure the Area; common entrances, exits, and lobbies of the Building; all common utilities, including water to maintain landscaping; replanting in order to maintain a smart appearance of landscape areas; supplies; depreciation on the machinery and equipment used in such operation, maintenance and repair; the cost of personnel to implement such services; the cost of maintaining in good working condition the HVAC systems (s) for the Leased premises; the cost of maintaining in good working condition the elevator(s) for the Leased Premises, if applicable; and costs of cover Landlord’s management fees paid for the property. These costs shall be estimated on an annual basis by the Landlord and shall be adjusted upwards or downwards depending on the actual costs for the preceding twelve months. Tenant shall pay monthly, commencing with the first month of the Lease Team, as additional rent due under the terms hereof, a sum equal to Tenant’s Prorata Share of the estimated costs for said twelve(12) month period, divided by 12. The estimated initial monthly costs are $7,835.00. Once each year the Landlord shall determine the actual costs of the foregoing expenses for the prior year and if the actual costs are greater than the estimated costs, the Tenant shall pay its Tenant’s Prorata Share of the difference between the estimated costs and the actual costs to the Landlord with the next payment of Base Monthly Rent, or, if the actual costs are less than the estimated costs, the Landlord shall forthwith refund the amount of the Tenant's excess payment to the Tenant.

     17. Inspection of and Right of Entry to Leased Premises — Regular, Emergency, Reletting. Landlord and/or Landlord’s agents and employees, shall have the right to enter the Leased Premises at all times during regular business hours and, at all times during emergencies, to examine the Leased Premises, to make such repairs, alterations, improvements or additions as Landlord deems necessary, and Landlord shall be allowed to take all materials into and upon said Leased Premises that may be required therefore without the same constituting an eviction of Tenant in whole or in part, and the rent reserved shall in no way abate while such repairs, alterations, improvements or additions are being made, by reason of loss or interruption of business of Tenant or otherwise. During the six months prior to the expiration of the term of this Lease or any renewal thereof, Landlord may exhibit the Leased Premises to prospective tenants and/or purchasers and may place upon the Leased Premises the usual notices indicating that the Leased Premises are for lease and/or sale.

     18. Alternation-Changes and Additions-Responsibility. Unless the Landlord’s approval is first secured in writing, the Tenant shall not install or erect inside partitions, add to existing electric power service, add telephone outlets, add light fixtures install additional heating and/or air conditioning or make any other changes or alternations to the interior or exterior of the Leased Premises. Any such changes or alterations shall be made at the sole cost and expense of the Tenant. At the end of this Lease, all such fixtures, equipment, additions, changes and/or alterations except trade fixtures installed by Tenant) shall be and remain the property of Landlord; provided, however, Landlord shall have the option to require Tenant to remove any or all such fixtures, equipment, additions and/or alterations, other than those tenant improvements provided by Landlord or improvements approved by Landlord, and restore the Leased Premises to the condition existing immediately prior to such change and/or installation, normal wear and tear excepted, all at Tenant’s cost and expense. All such work shall be done in good and workmanlike manner and shall consist of new materials unless agreed to otherwise by Landlord. Any and all repairs, changes and/or modifications thereto shall be the responsibility of, and at the cost of, Tenant. Landlord may require adequate security from Tenant assuming no mechanics’ liens on account of work done on the Leased Premises by Tenant and may post the Leased Premises, or take such other action as is then permitted by law, to protect the Landlord and the Leased Premises against mechanics’ liens. Landlord may also require adequate security to assure Landlord that the Leased Premises will be restored to their original condition upon termination of this lease.

     19. Sign Approval. Except for signs which are located inside of the Leased Premises and which are not attached to any part of the Leased Premises, the Landlord must approve in writing any sign to be placed in or on the interior or exterior of the Leased Premises, regardless of size or value. Specifically, signs attached to windows of the Leased Premises must be so approved by the Landlord. As a condition to the granting of such approval, Landlord shall have the right to require Tenant to furnish a bond or other security acceptable to Landlord sufficient to insure completion of and payment for any such sign work to be so performed. Tenant shall, during the entire Lease Term, maintain Tenant’s signs in good condition and repair at Tenant’s sole cost and expense. Tenant shall, remove all signs at the termination of this lease, at Tenant’s sole risk and expense and shall in a workmanlike manner property repair any damage and close any holes caused by the installation and/or removal of Tenant’s signs. Tenant shall give Landlord prior notice of such removal so that a representative of Landlord shall have the opportunity of being present when the signage is removed, or shall pre-approve the manner and materials used to repair damage and close the holes caused by removal.

     20. Right of Landlord to Make Changes and Additions. Landlord reserves the right at any time to make alternations or additions to the Building or Area of which the Leased Premises are a part. Landlord also reserves the right to construct other building and/or improvements in the Area and to make alterations or additions thereto, all as Landlord shall determine. Easements for light and air are not included in the leasing of the Leased Premises to Tenant. Landlord further reserves the exclusive right to the roof of the Building of which the Leased Premises are a part.

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Landlord also reserves the right at any time to relocate, vary and adjust the size of any of the improvements or Common Areas located in the Area provided, however, that all such changes shall be in compliance with the requirements of governmental authorities having jurisdiction over the Area. Any such changes and additions shall not unreasonably interfere with Tenants ability to conduct business.

     21. Damage or Destruction of Leased Premises. In the event the Leased Premises and/or the Building of which the Leased Premises are a part shall be totally destroyed by fire or other casualty or so badly damaged that, in the opinion of Landlord, it is not feasible to repair or rebuild same, Landlord shall have the right to terminate this Lease upon written notice to Tenant. If the Leased Premises are partially damaged by fire or other casualty, except if caused by Tenant’s negligence, and said Leased Premises are not rendered untenable thereby, as determined by Landlords an appropriate reduction of the rent shall be allowed for the unoccupied portion of the Leased Premises until repair thereof shall be substantially completed. If the Landlord elects to exercise the right herein vested in it to terminate this Lease as a result of damage to or destruction of the Leased Premises or the Building In which the Leased Premises are located , said election shall be made by giving notice thereof to the Tenant within thirty (30) days after the date of said damage or destruction.

     22. Governmental Acquisition of Property. The parries agree that Landlord shall have complete freedom of negotiation and settlement of all matters pertaining to the acquisition of the Leased Premises, the Building, the Area, or any part thereof, by any governmental body or other person or entity via the excercise of the power of the eminent domain, it being understood and agreed that any financial settlement made or compensation paid respecting said land or improvements to be so taken, whether resulting from negotiation and agreement or legal proceedings, shall be the taking, Landlord shall have the right to terminate this Lease on the date possession in delivered to the condemning person or authority. Such taking of the property shall not be a breach of this Lease by Landlord not give rise to any claims in Tenant for damages or compensation from Landlord. Nothing herein contained shall be construed as depriving the Tenant of the right to retain as its sole property any compensation paid for any tangible personal property owned by the Tenant which is taken in any such condemnation proceeding.

     23. Assignment or Subletting. Tenant may not assign this Lease, or sublet the Leased Premises or any part thereof, without the written consent of Landlord, with consent shall not be unreasonably withheld. No such assignment or subletting if approved by the Landlord shall relieve Tenant of any of its obligations hereunder, and, the performance or nonperformance of any of the covenants herein contained by subtenants shall be considered as the performance or the nonperformance by the Tenant.

     24. Warranty of Title. Subject to the provisions of the following three(3) paragraphs hereof, Landlord covenants it has good right to lease the Leased Premises in the manner described herein and that Tenant shall peaceably and quietly have, hold, occupy and enjoy the Leased Premises during the term of the Lease.

     25. Access. Landlord shall provide Tenant nonexclusive access to the Leased Premises through and across land and/or other improvements owned by Landlord. Landlord shall have the right, during the term of this Leases, to designate, and to change, such nonexclusive access.

     26. Subordination. Tenant agrees that this Lease shall be subordinate to any mortgages, trust deeds or ground leases that may now exist or which may hereafter be placed upon said Leased Premises and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements and extensions thereof. Tenant shall execute and deliver whatever instruments may be required for the above purposes, and failing to do so within ten(10) days after demand in writing, does hereby make, constitute and irrevocably appoint Landlord as its attorney-in-fact and in its name, place and stand so to do. Tenant shall in the event of the sale or assignment of Landlord’s interest in the Area or in the Building of which the Leased Premises form a part, or in the event of any proceedings brought for the foreclosure of or in the event of exercise of the power of sale under any mortgage made by Landlord covering the Leased Premises, attorn to the purchaser and recognize such purchaser as Landlord under this Lease.

     27. Easements. The Landlord shall have the right to grant any easement on, over, under and above the Area for such purposes as Landlord determines, provided that such easements do not materially interfere with Tenant’s occupancy and use of the Leased Premises.

     28. Indemnification and Wolver. Except in the case of a breach or default in the performance of any obligation under this Lease, each party shall indemnify, defend and hold harmless the other party and nothing in this Lease shall be construed as imposing any liability on them for any loss, costs, expense (including reasonable attorney’s fees), or any claims, suits, actions or damages arising from the ownership, use, control or occupancy of any portion of the Project including the Building. Common Areas and Premises unless such loss, cost, expense, claim, suit or action is a result of or caused by the negligent acts or omissions of such other party or it’s agents, servants, employees, contractors, or invitees.

Tenant shall not indemnity Landlord for acts or failure to observe or comply with any of the rules by any other Tenant or occupant or the Building or Project that adversely affect Tenant’s use and occupancy in which Landlord has been put on notice of such adverse impact to Tenant.

     29. Acts or Omission or Others. The Landlord , or it’s employees or agents, or any of them, shall not be responsible or liable to the Tenant or to the Tenant’s guests, invitees, employees, agents or any other person or entity, for any loss or damage that may be caused by the acts or omissions of other Tenants , their guests or invitees, occupying any other part of the Area or by persons who are trespassers on or in the area, as for any loss or damage caused or resulting from the bursting stoppage, backing up or leaking of water, gas, electricity or sewers or caused in any other manner whatsoever, unless such loss or damage is caused by or results from the negligent acts or the Landlord, it’s agents or contractors.

     30. Interest on Past Due Obligations. Any amount due to Landlord not paid when due shall bear interest at two (2%) percent per month from due date until paid. Payment of such interest shall not excuse or cure any default by Tenant under this Lease.

     31. Holding Over-Double Last Month’s Rent. If Tenant shall remain in possession of the Leased Premises after the termination of this Lease, whether by expiration of the Lease Term or otherwise, without a written agreement as to such possession, then Tenant shall be deemed a month-to-month Tenant. The rent rate during such holdover tenancy shall be equivalent to double the monthly rent paid for the last full month of tenancy under this Lease, excluding any free rent concessions which may have been made for the last full moth of the Lease. No holding over by Tenant shall operate to renew or extend this Lease without the written consent of Landlord to such renewal or extension having been first obtained. Tenant shall indemnify Landlord against loss or liability resulting from the delay by Tenant in surrendering possession of the Leased Premises including , without limitation, any claims made with regard to any succeeding occupancy bounded by such holdover period.

     32. Modification or Extensions. No modification or extension of this Lease shall be binding upon the parties hereto unless in writing and unless signed by the parties hereto.

     33. Notice Procedure. All notices, demands and requests which may be or are required to be give by either party to the other shall be

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in writing and such that are to be given to Tenant shall be deemed to have been properly given if served on Tenant or an employee or Tenant or sent to Tenant by United States registered or certified mail, return receipt requested, properly sealed, stamped and addressed to Tenant at see page one or at such other place as Tenant may from time to time designate in a written notice to Landlord; and, such as are to be given to Landlord shall be deemed to have been properly given if personally served on Landlord or if sent to Landlord, United Stated registered of certified mail, return receipt requested, property sealed, stamped and addressed to Landlord at 4875 Pearl East Cr. #300, Boulder, CO 80301 or at such other place as Landlord may form time to time designate in a written notice to Tenant. Any notice given by mailing shall be effective as of the date of mailing.

     34. Memorandum of Lease-Notice to Mortgage. The Landlord and Tenant agree not to place this Lease of record, but upon request of either party to execute and acknowledge so the same may be recorded a short form lease indicating the names and respective addresses of the Landlord and Tenant, the Leased Premises, the Lease Term, the dates of the commencement and termination of the Lease Term and options or renewal, if any, but omitting rent and other terms of this Lease. Tenant agrees to an assignment by Landlord of rents and of the Landlord’s interest in this Lease to a mortgagee, if the same be made by Landlord. Tenant further agrees if requested to do so by the Landlord that it will give to said mortgagee a copy of any request for performance by Landlord or notice of default by Landlord; and in the event Landlord fails to cure such default the Tenant will give said mortgagee a sixty (60) day period in which to cure the same. Said period shall begin with the last day on which Landlord could cure such default before Tenant has the right to exercise any remedy by reason of such default. All notices to the mortgagee shall be sent by United States registered or certified mail, postage prepaid, return receipt requested.

     35. Controlling Law. The Lease, and all terms hereunder shall be construed consistent with the laws of the State of Colorado. Any dispute resulting in litigation hereunder shall be resolved in court proceedings instituted in Boulder County and in no other jurisdiction.

     36. Landlord Not a Partner With the Tenant. Nothing contained in this Lease shall be deemed, held or construed as creating Landlord as a partner, agent associate of or in joint venture with Tenant in the conduct of Tenant’s business, it being expressly understood and agreed that the relationship between the parties hereto is and shall at all times remain that of Landlord and Tenant.

     37. Partial Invalidity. If any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term, covenant or condition to persons and circumstances other than those to which it has been held invalid or unenforceable, shall not be affected thereby, and each term, covenant and condition of this Lease shall be valid and shall be enforced to the fullest extent permitted by law.

     38. Default-Remedies of Landlord.

          (A). The occurrence of any of the following events shall constitute a default by Tenant under this Lease:

                (1) Failure to make due and punctual payment of rent or any other changes, assessments or amounts due or payable or required to be paid under this Lease; or

                (2) Neglect or failure by Tenant to perform or observe, or any other breach of, any other term, covenant or condition of this Lease; or

                (3) Adjudication of Tenant as bankrupt or insolvent, or filing by or against Tenant of any petition in bankruptcy or for reorganization or for the adoption of any arrangement under the Bankruptcy Code; application is made for the appointment of receiver or conservator for Tenant’s business or property; or assignment by Tenant is made of its property for the benefit of its creditors; or Tenant’s interest in this Lease or any substantial amount of Tenant’s other real or personal property is levied or executed upon by process or law; or

                (4) Petition or other proceeding is made by or against Tenant for its dissolution or liquidation; or voluntary dissolution or liquidation of Tenant; or

                (5) Abandonment of the Leased Premised, or any part thereof, by Tenant for a period of time in excess of thirty(30) consecutive days.

           B. If Tenant shall default in the payment or rent or in the keeping of any of the terms, covenants or conditions of this Lease to be kept and/or performed by Tenant or shall otherwise commit any event of default as defined above, Landlord may upon the expiration of any applicable cure, immediately, or at any time thereafter, recent the Leased Premises, remove all persons and property therefore, without being liable to indictment, prosecution for damage therefore, or for forcible entry and detainer and repossess and enjoy the Leased Premises, together with all additions thereto or alterations and improvements thereof. Landlord may, at its option, at any time and from time to time thereafter, reflect the Leased Premises or any part thereof for the account of Tenant or otherwise, and receive and collect the rents therefore and apply the same first to the payment of such expenses as Landlord may have incurred in recovering possession and for putting the same in good order and condition for rerental, and expense, commissions and charges paid by Landlord in reletting the Leased Premises. Any such reletting may be for the remainder of the term of this Lease or for a longer or shorter period. In lieu of reletting such Leased Premises, Landlord may occupy, the same or cause the same to be occupied by others. Whether or not the Leased Premises or any part thereof be relief, Tenant shall pay the Landlord the rent and all other charges required to be paid by Tenant up to the time of the expiration of this Lease or such recovered possession, as the case may be and thereafter, Tenant, if required by Landlord, shall pay to Landlord until the end of the term of this Lease, the equivalent of the amount of all rent reserved herein and all other charges required to be paid by Tenant less the net amount received by Landlord for such reletting, If any, unless waived by written notice from Landlord to Tenant. No action by Landlord to obtain possession of the Leased Premises and/or to recover any amount due to Landlord hereunder shall be taken a waiver of Landlord’s right to required full and complete performance by Tenant of all terms hereof, including payment of all amounts due hereunder or as an election on the part of Landlord to terminate this Lease Agreement. If the Leased Premises shall be reoccupied by Landlords than from and after the date of repossession, Tenant shall be discharged of any obligations to Landlord under the provisions hereof for the payment of rent. If the Leased Premises are reoccupied by the Landlord pursuant hereto, and regardless of whether the Leased Premises shall be relief or possessed by Landlord, all fortunes, additions, furnitures, and the like then on the Leased Premises may be retained by Landlord. In the event Tenant is in default under the terms hereof and, by the sole determination of Landlord, has abandoned the Leased Premises, Landlord, shall have right to remove all the Tenant’s property from the Leased Premises and dispose of said property in such a manner as determined best by Landlord, at the sole cost and expense of Tenant and without liability of Landlord for the actions so taken and without liability on the part of Landlord for any action 50 taken.

           C. In the event an assignment of Tenant’s business or property shall be made for the benefit of creditors, or, if the Tenant’s leasehold interest under the terms of this Lease Agreement shall be levied upon by execution or seized by virtue of any writ of any court of law, or, if application be made for the appointment of a receiver for the business or property or Tenant, or, if a petition in bankruptcy shall be filed by or against Tenant, than and in any such case, at Landlord’s option, with or without notice, Landlord may terminate this Lease and immediately retake

Page 7 of 16

Possession of the Leased Premises without the same working any forfeiture of the obligations of Tenant hereunder.

           D. Tenant hereby grants to the Landlord a security interest in and to any and all of Tenant’s property located in, on or adjacent to the Leased Premises as security for Tenant’s full and complete performance of the terms and conditions of this Lease, which security interest is enforceable by Landlord as provided by the laws of the State of Colorado.

           E. In addition to all rights and remedies granted to Landlord by the terms hereof, Landlord shall have available any and all rights and remedies available at law or in equity, or under the statutes of the State of Colorado. No remedy herein or otherwise conferred upon or reserved to Landlord shall be considered exclusive of any other remedy but shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Further, all powers and remedies given by this Lease to Landlord may be exercised, from time to time, and as often as occasion may arise or as may be deemed expedient. No delay or omission of Landlord to exercise any right or power arising from any default shall impair any such right or power or shall be considered to be a waiver of any such default or acquiescence thereof. The acceptance of rent by Landlord shall not be deemed to be a waiver of any breach of any of the covenants herein contained or of any of the rights of Landlord to any remedies herein given.

           F. If Tenant shall, for any reason, vacate the Leased Premises before the current expiration date, landlord shall have the right to accelerate rental payments and any and all future rent payments due during the course of the Lease Term shall become immediately payable in full to the Landlord.

     39. Legal Proceedings-Responsibilities. In the event of proceeding at law or in equity by either party hereto, the defaulting party shall pay all costs and expenses, including all reasonable attorney’s fees incurred by the non-defaulting party in pursuing such remedy, if such non-defaulting party is awarded substantially the relief requested.

     40. Administrative Charges. In the event any check, bank draft or negotiable instrument given for any money payment hereunder shall be dishonored at any time and from time to time, for any reason whatsoever not attributable to Landlord, Landlord shall be entitled, in addition to any other remedy that may be available, (1) to make an administrative charge of $100.00 or three times the face value of the check, bank draft or negotiable instrument, whichever is smaller, and (2) at Landlord’s sole option, to require Tenant to make all future rental payments in cash or cashiers check.

     41. Hazardous Materials and Environmental Considerations.

           A. Tenant covenants and agrees that Tenant and its agents, employees, contractors and invitees shall comply with all Hazardous Materials Laws (as hereinafter defined). Without limiting the foregoings, Tenant covenants and agrees that it will not use, generate, store or dispose of, nor permit the use, generation, storage or disposal of Hazardous Materials (as hereinafter defined) on, under or about the Leased Premises, nor will it transport or permit the transportation of Hazardous Materials to or from the Leased Premises, except in full compliance with any applicable Hazardous Materials Laws. Any Hazardous Materials located on the Leased Premises shall be handled in an appropriately controlled environment which shall include the use of such equipment (at Tenant’s expense) as is necessary to meet or exceed standards imposed by any Hazardous Materials Laws and in such a way as not to interfere with any other tenant’s use of its premises. Upon breach of any covenant contained herein, Tenant shall, at Tenant’s sole expense, cure such breach by taking all action prescribed by any applicable Hazardous Materials Laws or by any governmental authority with jurisdiction over such matters.

           B. Tenant shall inform Landlord at any time of (i) any Hazardous Materials it intends to use, generate, handle, store or dispose of, on or about or transport from, the Leased Premises and (ii) of Tenant’s discovery of any event or condition which constitutes a violation of any applicable Hazardous Materials Laws. Tenant shall provide to Landlord copies of all communications to or from any governmental authority or any other party relating to Hazardous Materials affecting the Leased Premises.

           C. Tenant shall indemnify and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities, expenses or losses (including without limitation, diminution on value of the Leased Premises, damages for loss or restriction on use of all or part of the Leased Premises, sums paid in settlement of claims, investigation of site conditions, or any cleanup, removal or restoration work required by any federal, state or local governmental agency, attorney’s fees, consultant fees, and expert fees) which arise as a result of or in connection with any breach of the foregoing covenants or any other violation of any Hazardous Materials laws by Tenant. The indemnification contained herein shall also accrue to the benefit of the employees, agents, officers, directors and/or partners of Landlord.

           D. Upon termination of this Lease and/or vacation of the Leased Premises, Tenant shall properly remove all Hazardous Materials and shall then provide to Landlord an environmental audit report, prepared by a professional consultant satisfactory to Landlord and at Tenant’s sole expense, certifying that the Leased Premises have not been subjected to environmental harm caused by Tenant’s use and occupancy of the Leased Premises. Landlord shall grant to Tenant and its agents or contractors such access to the Leased Premises as is necessary to accomplish such removal and prepare such report.

           E. “Hazardous Materials” shall mean (a) any chemical, material, substance or pollutant which poses a hazard to the Leased Premises or to persons on or about the Leased Premises or would cause a violation of or is regulated by any Hazardous Materials Laws, and (b) any chemical, material or substance defined as or included in the definitions of hazardous substances’, “hazardous wastes”, “extremely hazardous waste”, “restricted hazardous waste”, “toxic substances”, “regulated substance”, or words of similar import under any applicable federal, state or local law or under the regulations adopted or publications promulgated pursuant thereto, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Sec. 1801 et seq.; the Resource Conservation and Recovery Act as amended, 42 U.S.C. Sec. 6901, et seq.; the Solid Waste Disposal Act. 42 U.S.C. Sec. 6991 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Sec. 1251, et seq.; and Sections 25-15-101, U.S. et seq., 25-16-101, et seq., 25-7-101, et seq., and 25-8-101, et seq., of the Colorado Revised Statues. “Hazardous Materials Laws” shall mean any federal state or local laws, ordinances, rules, regulation, or policies (including, but not limited to, those laws specified above) relating to the environment, health and safety or the use, handling, transportation, production, disposal, discharge or storage of Hazardous Materials, or to industrial hygiene or the environmental conditions on, under or about the Leased Premises. Said term shall be deemed to include all such laws as are now in effect or as hereafter amended and all other such laws as may hereafter be enacted or adopted during the term of this Lease.

           F. All obligations of Tenant hereunder shall survive and continue after the expiration of this Lease or its earlier termination for any reason.

           G. Tenant further covenants and agrees that it shall not install any storage tank (whether above or below the ground) on the

Page 8 of 16

Leased Premises without obtaining the prior written consent of the Landlord, which consent may be conditioned upon further requirements imposed by Landlord with respect to, among other thing, Compliance by Tenant with any applicable laws, rules, regulations or ordinances and safety measures or financial responsibility requirements.

          H. Should any local governmental entity having jurisdiction over the Leased Premises require any type of environment audit or report prior to or during the occupancy of the Leased Premises by the Tenant, such cost of the audit or report shall be the sole responsibility of the Tenant.

     42. Entire Agreement. It is expressly understood and agree by and between the parties hereto that this Lease sets forth all the promises, agreements, conditions, or understandings between Landlord and /or its agents and Tenant relative to the Leased Premises and that there are no promises, agreements, conditions, or understandings either oral or written, between them other than that are herein set forth.

     44. Esloppel Certificates. Within no more than 5 days after receipt of written request, the Tenant shall furnish to the owner a certificate, duly acknowledged, certifying, to the extent true:

A. That this Lease is in full force and effect.

B. That the Tenant knows of no default hereunder on the part of the owner, or if it has reason to believe that such a default exists, the nature thereof in reasonable detail.

C. The amount of the rent being paid and the last date to which rent has been paid.

D. That this Lease has not been modified, or it has been modified, the terms and dates of such modifications.

E. That the term of this Lease has commenced.

F. The commencement and expiration dates.

G. Whether all work to be performed by the owner has been completed.

H. Whether the renewal term option has been exercised if applicable.

I. Whether there exist any claims or deductions from, or defenses to, the payment of rent.

J. Such other matters as may be reasonably requested by owner.

If the Tenant fails to execute and deliver to the owner a completed certificate as required under this section, the Tenant hereby appoints the owner as its Attorney-in-Fact to execute and deliver such certificate for and on behalf of the Tenant.

     45. Financial Statements. As requested by the Landlord, as requested by lender for review, Tenant shall provide copies of its most recent financial statements and shall also provide Landlord with up to three (3) prior years of financial statements, if so requested.

     46. Brokers. Tenant represents and warrants that it has dealt only with The W.W. Reynolds Companies, Inc. (the “Broker”) in the negotiation of this Lease. Landlord shall make payment of the commission according to the terms of a separate agreement with the Broker. Tenant hereby agrees to indemnify and hold Landlord harmless of an from any and all loss, costs, damages or expenses (including, without limitation, all attorney’s fees and disbursements) by reason of any claim of, or liability to, any other broker or person claiming through Tenant and arising out of this Lease. Additionally, Tenant acknowledges and agrees that Landlord shall have no obligation for payment of any brokerage fee or similar compensation to any person with whom Tenant dealt or may deal with in the future with respect to leasing of any additional or expansion space in the Building or any renewals or extensions of this Lease unless specifically provided for by separate written agreement with Landlord. In the event any claim shall be made against Landlord by any other broker who shall claim to have negotiated this Lease on behalf of Tenant or to have introduced Tenant to the Building or to Landlord, Tenant hereby indemnifies Landlord, and Tenant shall be liable for the payment of all reasonable attorney’s fees, costs, and expenses incurred by Landlord in defending against the same, and in the event such broker shall be successful in any such action, Tenant shall, upon demand, make payment to such broker.

     47. Lease Exhibits Attached. This Lease includes the following Lease Exhibits which are incorporated herein and made a part of this Lease Agreement

     Exhibit” A” - Site Plan Depicting Area

     Exhibit “B” - Interior Space Plan

     Exhibit “C” - Landlord and Tenant’s Construction Obligations

     Exhibit “D” - Deleted

     Exhibit “E” - Additional Term and Conditions

     Exhibit “F” - Option to extend

     48. Miscellaneous. All marginal notations and paragraph headings are for purposes of reference and shall not affect the true meaning and intent of the terms hereof. Throughout this Lease, wherever the words “Landlord” and “Tenant” are used they shall include and imply to the singular, plural, persons both male and female, companies, partnership and corporations, and in reading said Lease, the necessary grammatical changes required to make the provision hereof mean and apply as aforesaid shall be made in the same manner as though originally included in said Lease.

IN WITNESS WHERE OF, the parties have executed this Lease as of the date hereof.

LANDLORD LakeCenter Plaza, Ltd, LLLP

By:	/s/ William W. Reynolds
	William W. Reynolds, partner
TENANT:	Mylex Corporation
By:	[ILLEGIBLE]

Page 9 of 16

Exhibit “A”
Site Plan Depicting Area

Page 10 of 16

Exhibit “B”
Interior Space Plan

Page 11 of 16

Exhibit “C”
Landlord and Tenant’s Construction Obligations

1. Landlord shall complete the Leased Premises per Exhibit “B” and per the attached set of “Standard Lease Space specification”. Said standard landlord tenant finish improvements will be strictly adhered to by Landlord.

2. Landlord shall provide Tenant with $25.00 per square foot Tenant Finish Allowance toward the completion of such Tenant improvements.

3. All other improvements to the Leased Premises shall be at the sole cost and expense of the Tenant, including but not limited to all costs in excess of the $25.00 per square foot Tenant Finish Allowance as described above.

4. Prior to the start of Tenant Finish, Landlord shall provide Tenant a budget outlining the cost of the Tenant Finish Construction.

Page 12 of 16

STANDARD LEASE SPACE SPECIFICATONS
OFFICE/INDUSTRIAL BUILDINGS

The following are standard specifications for the Leased Premises herein defined.

GENERAL

A. The leased space design/layout will conform to the Architectural drawings.

B. All work performed to complete the Leased Premises will be in accordance with all applicable codes and regulations.

C. Demising, corridor and partition walls separating offices from warehouse space to be 3-5/8” metal studs at 24” o.c. with 5/8” gypsum wallboard on each side. Partitions to extend from floor to underside of structure above. Partitions to have acoustical seatant at joints and sound attenuation batting between studs from floor to structure above. partitions to receive typical partition finish.

D. 1) Building interior space may be divided into fire containment areas. It is the responsibility of the Tenant to conform to all applicable regulations and fire codes, including, but not limited to, maintaining egness requirements during the term of occupancy.

     2) Fire containment walls to be 3-5/8” metal studs at 24“ o.c. with 5/8” gypsum wallboard on each side. Walls to extend from floor to underside of structure above. Doors in fire containment walls to be twenty minute fire rated, solid core oak weneer with closer and metal jambs.

E. Tenant will be responsible for identifying any equipment or areas requiring additional or special ventilation, lighting or electrical service prior to space planning.

OFFICE AREAS

A. INTERIOR PARTITIONS.

1. 3-5/8” metal studs at 24” o.c. from floor to underside of ceiling with 5/8” gypsum wallboard on each side.

2. All concrete block walls in office area to be furred and shealhed as interior partitions above unless otherwise noted on Architectural drawings.

B. PARTITION FINISH

All interior partitions, not prefinished, will receive paint. Paint to be Landlord’s standard two finish coats over one primer coal. Color to be selected by Tenant from among choices pre-selected by Landlord.

C. CEILING

To be suspended acoustical 2x4 ceiling tile. Tile and metal grid to be while.

D. FLOOR COVERING

1. Carpet to be Landlord’s standard (Cambridge-Oxford 28 oz. nylon textured loop. Installation to be glue down. Color to be selected by Tenant from among choices pre-selected by Landlord. Base at carpet to be 2-1/2” high solid oak funish to match doors.

2. Resilient flooring to be Landlord’s standard.

12“x12“X1/8”. Color to be selected by Tanant from among choices pre-selected by Landlord. Base at resident flooring to be Roppe 2-1/2” rubber cove.

E. INTERIOR DOORS

All interior doors to be solid core flush panel oak veneer with 3 coats natural color lacquer finish. Frames to be Timely Metal Frames. Door sizes to be 3"-0” x 7”-0” 1-3/4” unless otherwise noted on architectural drawings.

F. DOOR HARDWARE

To be sergent 6 line Orbital series, 260 brushed chrome or equal. All entry doors to have keyed cylinder lock sets. All office, conference, and storage room doors to have passage lock set. Restrooms to have privacy lock. All doors to have 1-1/2 pair 4” hinges and 1 lves concave wall stop 407 -1/2, or equal stainless steel finish.

G. LIGHTING

To be 2’x4’ 4 lamp, recessed, fluorescent with 4’ x 4’ parabolic lens light fixtures.

H. ELECTRICAL/PHONE

outlet locations as shown or Architictural drawings. All outlets, outlet covers, switches and switch plate covers to be white.

I. COMPUTER/TELEPHONE OUTLETS

Outlets to consist of empty junction box with 1/2’ conduit stubbed above ceiling.

J. TELEPHONE/COMPUTER LINES AND CABLING

Wiring and installation to be provided by Tenant 3/4” plywood phone board to be provided and installed by Landlord for telephone installation.

RESTROOMS INSIDE THE TENANT’S SPACE

A. CONSTRUCTION AND FINISHES

To be as per office area specifications except as follows:

1) Partitions and ceiling to receive 5/8” water resistant gypsum wallboard.

2) Walls to have 2 coats of epoxy paint from floor to 4’-0” above floor. Remaining wall surface and ceiling to have 2 finish coasts of semi-gloss acrylic over one primer coat. Color to be white.

3) Ceiling structure to be metal stud joists bearing on partition wall. Ceiling structure to support unit water heater for restroom. Ceiling height to be maximum allowable.

4) Counter tops to have plastic laminate finish with color to be selected by Tenant from among choices pre-selected by Landlord.

B. PLUMBING FIXTURES

Page 13 of 16

1) Toilet — Armitage Shanks, White, model # 109 or equal.

2) Lavatory — Armitage Shanks model #308, white, 19” self rimming china lavatory with Price Pfisler #H43-121 faucet or equal.

3) Lavatory — American Standard wall hung Royalyn Vitreous China 3 hole #1024.131 (20” x 18”) with Delta handle faucet #2520 or equal.

4) Urinal — Kohler model #402, white with Zom flush valve or equal.

C. ACCESSORIES

1) Mirror — Full HGT and with mirror with metal edge trim as shown on Architectural Drawings.

2) Mirror — Bobrick stainless steel channel frame mirror #B-165-1830 (18” x 30”) or equal.

3) Paper Towel Dispenser/Disposal — Bobrick B-369 recessed, stainless steel satin finish or equal.

4) Toilet Tissue Dispenser — Bobrick B-388 recessed, stainless steel stain finish or equal.

5) Utility Hook — Bobrick #B-670 polished stainless steel or equal mounted interior side of toilet and shower stall doors (if applicable) 66” above finished floor.

6) Grab Bars — Bobrick #b-490, stainless steel satin finish or equal.

D. LIGHTING

One surface mounted 2 tube fluorescent fixture with acrylic lens in drywall light valance over lavatory. Ceiling fixture, if called for in Architectural drawings, to be 2 tube fluorescent with acrylic wrap lens.

E. ELECTRICAL

One GFI electric outlet adjacent to lavatory. One exhaust fan in any toilet room.

MECHANICAL/ELECTRICAL

A. HEATING AND COOLING

The interior premises are heated or cooled by one or more roof-mounted mechanical units. The sizing of the mechanical units are designed to provide one (1) ton of cooling for every three hundred and eighty-three (383) square feet of floor area; provided that the internal load does not exceed three (3) watts per square foot. Individual thermostat control shall be centrally controlled allowing for automatic setback capabilities with external dial-in monitoring provided for the interior premises, with control areas not to exceed two thousand (2,000) square feet in size. Based upon the above, the system shall maintain a minimum temperature of 65 degrees Fahrenheit and a maximum temperature of 75 degrees fahrenheit in the separate rooms within the Leased Premises, so long as the minimum exterior temperature shall not be below zero degrees fahrenheit and the maximum exterior temperature shall not be in excess of 100 degrees fahrenheit.

B. ELECTRICAL

Standard electrical service provided to the building to be 120/206 volt, three phase, four wire. No additional service to be provided for Tenant equipment unless otherwise noted. One (1) light switch per office provided. Circuitry design is normally laid out to allocate 6 to 8 duplex outlets per 20 amp circuit.

C. ELECTRICAL OUTLETS

Restrooms to have one duplex electrical outlet. See Architectural drawings for outlet locations in other areas.

D. LIGHTING

Finished rooms, other than restrooms and storage areas will be lighted with 2’x4’ recessed, 4 lamp, fluorescent fixtures. All fixtures to be provided initially with lamps. Lights and switch locations will be as shown on Architectural drawings.

SUPPLEMENTAL ITEMS

See Architectural drawings for additional notes and locations if the items below are included in the tenant finish.

A. COFFEE BAR

1)	Base and upper cabinets to be Merrilat brand with style to be chosen by Landlord.
2)	Countertop and splash to be plastic laminate finish with color to be selected by Tenant from among choices pre-selected by Landlord.
3)	Kitchen sink, Dayton Kingsford #K-11515 single compartment sink with Delta #2171 faucet or equal.

B. SHOWER STALL

     Universal Rundle #6852, 36” unit fiberglass shower stall with glass shower door or equal. When shower stalls are provided substitute a 30 gallon hot water heater for the standard 6 gallon hot water heater.

C. PARTIAL HEIGHT PARTITIONS

     Partial height partitions to be 3-5/8” metal studs with 5/8“gypsum wallboard on each side and 1x oak cap. Finish to match full height partitions and oak base. See Architectural drawings for detail. Vertical posts will be provided as necessary for stability.

D. REAR 10’ X 10’ OPENINGS

     Any of the following shall be included as part of the tenant finish:

1)	Changing out an overhead door to glass
2)	Changing out glass to an overhead door
3)	As part of initial tenant finish on a new building filling an opening with either glass or an overhead door.

Page 14 of 16

Exhibit “E”
Additional Terms and Conditions

1. Landlord shall agrees to terminate Mylex Corporation’s existing lease’s and any addendums thereto in the Pearl East Business Park, at the time of occupancy in the new Premises.

2. Tenant shall be given the right to cancel this Lease Agreement after five (5) years of occupancy with twelve (12) months written notification in addition to payment of any remaining unamotized tenant improvements. This right to early termination will be applicable only after Tenant has been occupying the lease premises for four (4) full years (48 months) of this lease term. After the first four (4) years of occupancy, the Tenant may give written notification to terminate the lease after an additional twelve (12) months of occupancy from the date the written request to terminate the Lease has been received by the Landlord and Landlord has received the above described payment of any remaining unamortized tenant improvements. Said right to terminate the Lease shall be valid only during the initial base lease term. Any termination rights granted beyond the initial base lease term must be mutually agreed upon by both Tenant and Landlord and must be in writing. Following is an amortization schedule reflecting required payment in the event of early termination.

Principal	$	1,093.125
Years		7
Annual rate		12.0000	%

Months		84
Monthly rate		1.0000	%
Total Paid	$	1,620,918.06
Total Interest	$	527,793.06

MONTH	PAYMENT		INTEREST		PRINCIPAL		EXTRA PAID	BALANCE
60	$	19,296.64	$	4,249.73	$	15,046.91		$	409,926.07
61	$	19,296.64	$	4,099.26	$	15,197.38		$	394,728.69
62	$	19,296.64	$	3,947.29	$	15,349.36		$	379,379.33
63	$	19,296.64	$	3,793.79	$	15,502.85		$	363,876.48
64	$	19,296.64	$	3,638.76	$	15,657.88		$	348,218.60
65	$	19,296.64	$	3,482.19	$	15,814.46		$	332,404.15
66	$	19,296.64	$	3,324.04	$	15,972.60		$	316,431.54
67	$	19,296.64	$	3,164.32	$	16,132.33		$	300,299.22
68	$	19,296.64	$	3,002.99	$	16,293.65		$	284,005.56
69	$	19,296.64	$	2,840.06	$	16,456.59		$	267,548.98
70	$	19,296.64	$	2,675.49	$	16,621.15		$	250,927.82
71	$	19,296.64	$	2,509.28	$	16,787.37		$	234,140.46
72	$	19,296.64	$	2,341.40	$	16,955.24		$	217,185.22
73	$	19,296.64	$	2,171.85	$	17,124.79		$	200,060.43
74	$	19,296.64	$	2,000.60	$	17,296.04		$	182,764.39
75	$	19,296.64	$	1,827.64	$	17,469.00		$	165,295.39
76	$	19,296.64	$	1,852.95	$	17,643.69		$	147,651.70
77	$	19,296.64	$	1,476.52	$	17,820.13		$	129,831.57
78	$	19,296.64	$	1,298.32	$	17,996.33		$	111,833.24
79	$	19,296.64	$	1,118.33	$	18,178.31		$	93,654.93
80	$	19,296.64	$	936.55	$	18,360.09		$	75,294.84
81	$	19,296.64	$	752.95	$	18,543.70		$	56,751.14
82	$	19,296.64	$	567.51	$	18,729.13		$	38,022.01
83	$	19,296.64	$	380.22	$	18,916.42		$	19,105.59
84	$	19,296.64	$	191.06	$	19,105.59		$	0.00

Page 15 of 16

Exhibit “F”
Option To Extend

1. Option to Extend. The Tenant shall have the option to extend this Lease Agreement from 12:00 noon on May 1, 2007, to 12:00 noon on May 1, 2014, In the event the Tenant desires to exercise said option, Tenant shall give written notice of such exercise to Landlord not before June 1, 2006, nor later than June 30, 2006.

See below for Option Term Rent. In the event of such exercise, this Lease Agreement shall be automatically extended for the additional term. Notwithstanding the foregoing, this option shall be void and of no force or effect if the Tenant is in default hereunder either as of the date of the Tenant’s exercise of said option or as of the date of the commencement of the option or additional term.

2. Rent. Tenant shall pay the following rent for the Leased Premises:

During Option Term

For Period	To Period	A Base Monthly
Starting	Ending	Rent of
May 1, 2007	May 1, 2014	See below*

* Landlord and Tenant will attempt to agree upon a Fair Market Rental Value of the Leased Premises ( expressed on a dollar per square foot basis ) as determined by comparison to parcels of similar size located in shopping center in or near the City of Boulder, Colorado, having comparable development, use and density capability and such other characteristics as may be deemed relevant by a subject appraiser whose selection is outlined herein.

Landlord shall select an independent MAI real estate appraiser with at least ten (10) years’ experience in appraising commercial real property in the City of Boulder, Colorado ( a “Qualified Appraiser”). The Qualified Appraiser selected by the Landlord shall be referred to as the “Landlords Appraiser”. Within thirty (30) days of being selected by the Landlord, the Landlord’s the appraiser shall determine the Fair Market Rental Value of the leased Premises in accordance with the appraisal standards set forth above and shall immediately give the Landlord and the Tenant written notification of his determination.

If the Tenant AGREES with the Landlord’s Appraiser’s determination by multiplying the Fair Market Rental Value, than the Base Monthly Rent shall be determined by multiplying the Fair Market Rental Value by 43,725 and the new Base Monthly Rental shall become effective beginning with the first month of the Option Term. If the Tenant does not agree with the Landlord’s Appraiser’s determination of Fair Market Rental Value, the Tenant shall have the right to select its own Qualified Appraiser, its own Qualified Appraiser to determine the Fair Market Rental Value. If the Tenant does elect to appoint a Qualified Appraiser, (the Tenant’s Appraiser”), the Tenant shall select the Tenant’s Appraiser within thirty (30) business days after receiving the Landlord’s Appraiser’s Determination of Fair Market Rental Value. The Tenant’s Appraiser shall make his own determination if the Fair Market Rental Value in accordance with the provisions set forth above, within thirty (30) business days of being selected by the Tenant and shall immediately give the Landlord and the Tenant written notice of his determination.

If the Fair Market Rental Value as determined by the Landlord’s Appraiser and the Tenant’s Appraiser, respectively, differ by an amount which is equal to or less then five percent (5%) of the Fair Market Rental Value determined by the Landlord’s Appraiser, then the arithmetic mean of the two Fair Market Rental Values shall constitute the Fair Market Rental Value used to calculate the new Base Monthly Rental which will be in effect for the option Term. If the Fair Market Rental Value determined by the Landlord’s Appraiser and the Tenant’s Appraiser’s determination of the Fair Market Rental Value differ by more than five percent (5%), the Landlord’s Appraiser and the Tenant’s Appraiser shall agree upon and select a third Qualified appraiser who shall be independent of and have no prior or existing affiliation or relationship with either the Landlord or the Tenant (the “Independent Appraiser”). Within ten (10) business days of being appointed, the independent Appraiser shall, after exercising his best professional judgement, choose either the Landlord’s Appraiser’s or the Tenant’s Appraiser’s determination of the
Fair Market Rental Value which the judgment, best represents the Fair Market Rental Value at that point in time. Upon making such a selection, the independent Appraiser shall immediately give the Landlord or the Tenant written notice of this selection of the Fair Market Rental Value. The Fair Market Rental Value selected by the independent Appraiser shall be used to calculate the new Base Monthly Rental which will be in effect during the Extension Option, and such selection by the independent appraiser shall be binding and conclusive upon the Landlord and the Tenant.

All Appraisal fees required hereunder shall be shared equally by the Landlord and Tenant.

Page 16 of 16

EX-10.36

Exhibit 10.36

LEASE MODIFICATION AGREEMENT

LANDLORD: LakeCentre Plaza Ltd., LLLP

TENANT: Engenio Information Technologies, Inc., the successor in interest to LSI Logic Corporation, the successor in interest to International Business Machines Corporation.

LEASE: That certain Lease Agreement between Landlord and Tenant, dated November 17, 1999, as assigned by that certain Assignment and Assumption of Lease dated May 27, 2004 and that certain Assignment and Assumption Agreement dated August 29, 2002 for the premises known as 5400 Airport Blvd., Suite 100 and 200, Boulder, Colorado 80301.

CURRENT LEASE EXPIRATION: May 1, 2007

NEW LEASE EXPIRATION: May 1, 2010

MODIFIED LEASED PREMISES: Tenant agrees to increase the Leased Premises by approximately 6,000 square feet as referred to in Exhibit “A” attached to this Lease Modification Agreement.

43,725 Existing Lease Premises Square Footage
+ 6,000 Additional Leased Premises Square Footage
49,725 NEW TOTAL SQUARE FOOTAGE

NEW BASE MONTHLY RENT DURING LEASE TERM:

For Period Starting:	To Period Ending:	A Base Monthly rent of:
Effective Date	May 1, 2006	$	49,725.00
May 1, 2006	April 1, 2007	$	51,797.00
April 1, 2007	May 1, 2007	$	17,167.00
May 1, 2007	April 1, 2008	$	53,869.00
April 1, 2008	May 1, 2008	$	00.00
May 1, 2008	May 1, 2009	$	55,941.00
May 1, 2009	May 1, 2010	$	58,012.00

The “Effective Date” shall be the date on which Cisco System delivers the Additional Leased Premises (as defined herein) to Landlord.

REAL ESTATE TAXES: New total Real Estate Tax charges for the modified Leased Premises shall be $6,962.00 per month subject to modification and reconciliation per paragraph 11 of the Lease Agreement and effective on the Effective Date.

INSURANCE: New total Insurance charges for the modified Leased Premises shall be $580.00 per month subject to modification and reconciliation per paragraph 12 of the Lease Agreement and effective on the Effective Date.

COMMON AREA MAINTENANCE: New total Common Area Maintenance charges for the modified Leased Premises shall be $16,409.00 per month subject to modification and reconciliation per paragraph 16 of the Lease Agreement and effective on the Effective Date.

LANDLORD TENANT CONSTRUCTION OBLIGATIONS:

1.

Landlord shall provide a $15.00 per rentable square foot tenant improvements allowance for the additional 6,000 square fee for a total of $90,000.00 (the “Allowance”). Tenant shall use the Allowance to construct certain tenant improvements in or around the Leased Premises including, without limitation, all construction necessary to demise the Additional Leased Premises, demising walls, a new entrance and an additional conference room as further set forth in the space plan attached hereto as Exhibit A (collectively, the “Tenant Improvements”). If the plans for the Tenant Improvements are prepared by Landlord’s in-house architect, Landlord shall pay all costs associated with such plans. If Tenant opts to use its own architect to draw the plans for the Tenant Improvements, the costs of such architect shall be paid for by Tenant or with the Allowance or Additional Allowance.

2.

Should Tenant need additional tenant improvement dollars, the Landlord will provide up to an additional $3.00 per rentable square foot for the additional 6,000 square fee for a total of $18,000.00 (the “Additional

Page 1 of 4

Allowance”) to be fully amortized over the 72 month lease terms at 8% interest. Landlord shall pay Tenant or Tenant’s designee the amount of the Allowance and/or Additional Allowance Tenant requests within twenty (20) days of Landlord’s receipt of an invoice(s) evidencing that Tenant has incurred costs to construct the Tenant Improvements in the amount of the Allowance and/or Additional Allowance sought by Tenant.

3.

Tenant shall be responsible for constructing the Tenant Improvements. Subject to Landlord’s obligation to provide the Allowance and Additional Allowance, all construction costs related to the Tenant Improvements shall be at the sole cost and expense of Tenant, including but not limited to all costs to fully demise the Additional Leased Premises.

CONTINGENCIES: The occurrence of the Additional Leased Premises Effective Date is contingent upon Landlord’s ability to acquire said Additional Leased Premises from tenant now occupying same. Landlord shall use its best efforts to acquire the Additional Leased Premises from the current tenant as soon as possible. Notwithstanding the foregoing, if Landlord fails to acquire the Additional Leased Premises from the tenant occupying it and deliver possession of it to Tenant on or before June 30, 2004, Tenant may, at its option, terminate this Lease Modification Agreement without liability to Landlord.

FIRST RIGHT OF VACANCY: Subject to the terms and conditions of this Section and subject to any preexisting right of other tenants, at any time after Landlord learns that any premises (“Additional Space”) within the Building in which the Leased Premises are located will become available for lease to Tenant, and prior to offering the Additional Space for lease to any other prospective tenant, Landlord shall so notify Tenant, in writing. Such notice shall advise Tenant that Landlord intends to offer the Additional Space, on the market, shall describe the amount and location of the space that is available (and attach a floor plan showing the location of such space within the Building), shall state the rental rate at which Landlord intends to offer the space, shall state the date on which the space will be available and the term of the proposed lease, and shall set forth any tenant finish allowance or other special conditions, concessions or provisions pursuant to which Landlord intends to lease the Additional Space.

If Tenant delivers to Landlord written notice of Tenant’s desire to lease the Additional Space on said terms and conditions within ten business (10) days following receipt of such notice, such Additional Space shall be leased to Tenant on the same terms and conditions as set forth in this Lease (subject only to modification to reflect the terms specifically set forth in the notice of offer). If Tenant declines or fails to exercise such right as provided herein, or Tenant fails to execute the lease or amendment presented by Landlord (or fails to meet any other conditions of this Section), Tenant’s right to lease the Additional Space shall be null and void, and Landlord shall be free to negotiate with and lease such space to any and all other interested parties, without again offering the Additional Space to Tenant.

If Tenant exercises its right to accept the Additional Space, the lease of such Additional Space shall be evidenced by amendment of this Lease, incorporating the appropriate terms and conditions. The parties shall negotiate the terms of any such amendment in good faith and must be executed by Tenant and returned to Landlord within twenty (20) days following receipt of such notice by Tenant.

In no event shall Landlord be required to lease the Additional Space to Tenant if this Lease is not then in full force and effect, or if Tenant is in default under the terms of this Lease beyond any applicable cure period, either at the time of exercise of the right or at the time of commencement of the lease of the Additional Space. Additionally, Tenant’s rights under this section are expressly conditioned upon Landlord’s review and approval of Tenant’s most recent financial statement, provided, however, that such approval by Landlord shall not be unreasonably withheld, conditioned or delayed.

ASSIGNMENT AND SUBLETTING: Paragraph 23 of the Lease shall remain in full force and effect and shall further provide that Tenant may assign the lease, or may sublet the remises or any part thereof without landlord’s consent, to any subsidiary, parent, affiliate or controlled corporation or to any corporation into which Tenant may be converted or with which it may merge. For any other assignment or subletting, Landlord agrees it will not unreasonably withhold, condition or delay its consent. Landlord shall not have the right to recapture any space Tenant wishes to assign or sublet or be entitled to any profits of said subletting or assignment.

ASBESTOS AND OTHER HAZARDOUS MATERIALS: Landlord warrants and represents that no part of the Leased Premises or Building (including the walls, ceiling, structural steel, flooring or pipes) is wrapped, insulated or fireproofed with any asbestos, asbestos-containing material (ACM) or other hazardous material. If ACM is present, the Landlord, prior to delivery of the premises to Tenant, shall, at its sole cost and expense, remove it and re-fireproof. Such removal and re-fireproofing shall be performed in compliance with all applicable federal, state, county, and municipal codes, laws, rules, regulations and ordinances governing abatement, removal, handling and/or disposal of ACM

Page 2 of 4

OTHER TERMS AND CONDITIONS:

1.	Paragraph 31 of the Lease shall be modified to a holdover of 125% of the then current base monthly rent for three (3) months after the lease term expiration and a holder over of 150% of the them current base monthly rent after such three (3) months
2.	Section 2 of Exhibit “E” of the Lease shall be deleted in its entirety
3.	Exhibit “F” of the Lease shall be modified to grant Tenant two (2) consecutive renewal options of five (5) years duration on the same terms and conditions set forth therein, provided that Tenant must exercise these options by giving the Landlord at least nine(9)  months written notice prior to the expiration date of the initial term or renewal term. Rent during the renewal periods shall be at ninety five percent (95%) of the fair market rental as determined in Exhibit “F’.

All other terms and conditions of the above referenced Lease Agreement between Landlord and Tenant, dated November 17, 1999, as assigned by Assignment and Assumption Agreement dated August 29, 2002 for the premises known as 5400 Airport Blvd., Suite 100 and 200, Boulder, Colorado 80301, shall remain the same except as modified herein.

BROKER: Tenant represents and warrants that it has dealt only with Studley (the “Broker”) in the negotiation of this Lease. Landlord shall make payment of the commission according to the terms of a separate agreement with the Broker. Tenant hereby agrees to indemnify and hold Landlord harmless of and from any and all loss, costs, damages or expenses (including, without limitation, all reasonable attorney’s fees and disbursements) by reason of any claim of, or liability to, any other broker or person claiming through Tenant and arising out of this Lease Modification Agreement. Additionally, Tenant acknowledges and agrees that Landlord shall have no obligation for payment of any brokerage fee or similar compensation to any person with whom Tenant has dealt or may deal with in the future with respect to leasing of any additional or expansion space in the Building or any renewals or extensions of this Lease unless specifically provided for by separate written agreement with Landlord.

TERMINATION DATE OF MODIFICATION OFFER: This offer expires June 1, 2004 if not executed by Tenant and delivered to this office by such date.

LANDLORD: LakeCentre Plaza Ltd., LLLP	TENANT: Engenio Information Technologies, Inc.
/s/ William W. Reynolds	/s/ David E. Sanders
William W. Reynolds, Partner	By: VP GENERAL COUNSEL

Dated this 21st day of June, 2004.

Page 3 of 4

Exhibit A
Space Plan

Page 4 of 4

EX-10.37

Exhibit 10.37

Notice of Grant of Award	LSI LOGIC CORPORATION
	ID: 94-2712976
	1621 BARBER LANE
	MILPITAS, CALIFORNIA 95035

OPTIONEE NAME	Award Number: RS000011
Address	Plan: 2003
Address

Effective _________, you have been granted an award of ____________shares of LSI LOGIC CORPORATION common stock. These shares are restricted until the vest date(s) shown below.

The current total value of the award is $____________.

The number of shares indicated are scheduled to become fully vested on the date shown below. However, vesting will occur only if you have not incurred a Termination of Service prior to such date, as described in the attached LSI LOGIC CORPORATION Restricted Stock Unit Agreement (the “Agreement”). Capitalized terms that are not defined in this Notice of Grant of Award or the Agreement have the same meaning as in the LSI LOGIC CORPORATION referenced equity incentive plan.

Shares Full Vest

By your signature below, you agree that this award is granted under and governed by the terms and conditions of the Agreement (and the equity incentive plan referenced therein), which is attached and made a part of this document. You acknowledge that you have received, read and understand this Notice of Grant of Award, the Agreement and the LSI LOGIC CORPORATION referenced equity incentive plan, and that you have had an opportunity to obtain the advice of counsel prior to signing below. You agree to accept as binding, conclusive and final all decisions or interpretations of the Administrator regarding any questions relating to the LSI LOGIC CORPORATION referenced equity incentive plan, this Notice of Grant of Award and the Agreement.

OPTIONEE NAME Date

EX-10.38

Exhibit 10.38

2004 16(b) Executive Officer Incentive Plan

INTRODUCTION

The Company’s 2004 16(b) Executive Officer Incentive Plan (“EOIP”) is intended to provide short-term incentives to the 16(b) executive officers for their contributions towards achieving overall company success.

OBJECTIVES

The EOIP has three primary objectives:

•   Reward executive performance in meeting or exceeding stated business objectives,

•   Deliver competitive compensation, and

•   Build shareholder value.

The EOIP is designed to focus each participant on the key business objectives of his/her position, encourage teamwork to achieve success, and recognize and reward sustained personal contributions.

EFFECTIVE PLAN DATE AND DURATION

The effective plan date and duration is January 1, 2004 through December 31, 2004.

FUNDING

Funding for the 2004 EOIP is calculated as a percentage of operating income and a percentage of incremental revenue. The Compensation Committee of the Board of Directors approves funding of the plan. The percentages below reflect 2004 operating income target and may increase or decrease depending on the actual operating income achieved.

Performance Category	Operating Income % of Plan	Incremental Revenue % of Plan	2004 EOIP Incentive Pool Available
	<50%	<50%	$0
Threshold	50%	50%	$1,110,775
Target	100%	100%	$2,221,550
Maximum	150%	150%	$3,332,325

If the actual operating income falls between the target and the threshold, the incentive pool will be interpolated between the relevant two points by the plan administrators.

If planned awards exceed the incentive pool fund, the CEO and/or the Compensation Committee will make the appropriate adjustments to ensure that actual award expenditures do not exceed approved plan funding.

PARTICIPATION

Executive officers are nominated by the CEO and approved for participation on an annual basis by the Compensation Committee. Participation in the EOIP in any one year does not guarantee or imply continued participation in the EOIP in any subsequent year.

TARGET AWARD LEVEL

Targeted award levels, before the application of individual performance modifiers, are as follows:

Performance Category	Operating Income % of Plan	Target Award Level
Threshold Target Maximum	50% 100% 150%	50% 100% 150%

Notwithstanding the above stated targeted awards, the CEO has discretion to modify targeted awards in any way that, in his sole judgment, meets the objectives of the EOIP.

INDIVIDUAL TARGET INCENTIVES

At the beginning of the EOIP year, targets for each participant are established that reflect organizational structure and competitive pay opportunities. The target is the incentive amount that may be granted for achievement of the operating income and incremental revenue at plan with no performance modification. The targets may subsequently be modified in the order of corporate, division or organizational/functional performance first and individual performance factors second.

The targets are expressed as a percentage of the participant’s base salary. Base salaries at the beginning of the EOIP year (January 1, 2004) will be used for the calculation, except for hires or promotions during the first half of the year, when base salary at hire or promotion will be used. The CEO will present the executive officer targets to the Compensation Committee for approval.

PERFORMANCE MODIFIERS AND FACTORS

Targets for all participants may be modified dependent upon individual performance and organizational contribution, subject to the discretion of the CEO.

The Compensation Committee will have final approval of all executive officer performance awards.

AWARD CALCULATION

Operating income and incremental revenue will first be determined to calculate the size of the funding pool, and then the targets will be adjusted accordingly, as shown by the following examples:

Employee	Individual Target	Actual Operating Income %/Incremental Revenue % of Target	Calculation for Adjustment	Adjusted Target
1	55%	125%	x 1.00	100%
2	45%	100%	x 1.00	45%
3	45%	75%	x 0.75	34%

After the adjusted targets are determined, each participant’s target may be assigned an individual performance modifier based on individual performance. The adjusted target is then multiplied or divided by the performance modifier to calculate the final award, as shown below:

Employee	Adjusted Target	Individual Performance Modifier	Calculation	Final Award
1	100%	+32%	x 1.32	132%
2	45%	-27%	¸1.27	36%
3	34%	+10%	x 1.10	38%

AWARD PAYMENT

Actual award payments will be distributed as soon as possible following the close of the fiscal year and after securing all necessary approvals.

PLAN PROVISIONS

To receive an award payment, the employee must be on active status at the time of award distribution. The CEO and/or the Compensation Committee, as appropriate, must approve any exceptions to individual participants.

PLAN ADMINISTRATION

The Compensation Committee and the CEO will administer the 2004 EOIP. Administration shall include but is not limited to: modification, funding, participation, target award percentages, payout type, range and criteria, annual financial and strategic objectives as they relate to the EOIP.

In the event that there is a change in the equity or capitalization structure of the Company through merger, consolidation, reorganization, recapitalization, significant change in strategic direction or otherwise, the incentive payment may be adjusted by the EOIP administrators as they deem equitable and appropriate.

The EOIP administrators may modify or discontinue the EOIP at any time.

Participation in the EOIP does not constitute a contract of employment with the Company for any specified period of time nor is it an entitlement to participate in any other plan or any future performance period under this EOIP. Furthermore, participation in the EOIP does not constitute any promise of award payments even if all performance factors and funding mechanisms are achieved or surpassed. EOIP administrators may also include or exclude participation in the EOIP at any time and for any reason they deem appropriate. The Company may terminate a participant’s employment with the Company at any time for any reason, with or without cause.

In the event this EOIP requires legal interpretation or becomes the subject of litigation, it shall be governed by the laws of the State of California.

EX-10.39

Exhibit 10.39

Summary Description of Engenio Information Technologies, Inc. 2004 Incentive Plan

The Engenio Information Technologies, Inc. (“Engenio”) 2004 Incentive Plan (Engenio Plan) is a subset of the LSI Logic Corporation Section 16(b) Executive Officer Incentive Plan (“LSI Logic Plan”) and is administered by the Compensation Committee of the Board of Directors of LSI Logic Corporation. The Board of Directors of LSI Logic Corporation approved the Engenio Plan in February 2004. The targets and funding mechanics of the Engenio Plan are specific to Engenio and are as follows:

The funding of the Plan is determined using constant multiples of operating income and incremental revenue. A fixed percentage of operating income and incremental revenue fund the incentive pool. The bonus pool would increase if Engenio’s revenues grew during the year 2004.

The funding is subject to a threshold of a minimum of 50% to a maximum of 150% of targeted funding.

EX-21.1

Exhibit 21.1

LSI LOGIC CORPORATION SUBSIDIARIES
(as of December 31, 2004)

NAME	PLACE OF INCORPORATION
	OR ORGANIZATION
Accerant, Inc.		Delaware
C-Cube International Limited (Hong Kong)		Hong Kong
C-Cube Microsystems (Asia Pacific) Limited (Hong Kong)		Hong Kong
C-Cube Microsystems (Canada) Limited		Canada
C-Cube Microsystems International Ltd		Bermuda
C-Cube Technology Ltd.		Bermuda
C-Cube U.S.		Delaware
Engenio Enterprises, Inc.		Delaware
Engenio Holdings, ltd.		Cayman
Engenio Information Technologies, Inc.		Delaware
Engenio Information Technologies International Services, Inc.		Delaware
Engenio Information Technologies Europe Ltd.		Ireland
Engenio Information Technologies Ltd.		UK
Engenio Information Technologies GmbH		Germany
Engenio Information Technologies, SAS		France
LSI Logic LLC		Delaware
LSI Logic Manufacturing Services, Inc.		Delaware
LSI Logic A.B.		Sweden
LSI Logic Asia, Inc.		Delaware
LSI Logic Canada Corporation		Canada
LSI Logic Corporation of Canada, Inc.		Canada
LSI Logic Corporation of Korea, Inc.		Korea
LSI Logic Export Sales Corporation		U.S. Virgin Islands
LSI Logic Europe Limited		England
LSI Logic GmbH		Germany
LSI Logic HK Holdings		Cayman
LSI Logic Malta Ltd.		Maltese
LSI Logic Hungary LLC		Hungary
LSI Logic Hong Kong Ltd.		Hong Kong
LSI Logic India Private Ltd.		India
LSI Logic International Services, Inc.		California
LSI Logic Japan Semiconductor, Inc.		Japan
LSI Logic KK		Japan
LSI Logic Netherlands B.V.		Netherlands
LSI Logic Resale Corporation		Delaware
LSI Logic S.A.		France
LSI Logic Semiconductor Technology Development Company Ltd.		China
LSI Logic Singapore Ltd.		Singapore
LSI Logic S.P.A.		Italy
LSI Logic Storage Systems Europe Holdings Ltd.		Bermuda
Media Computer Technologies, Inc.		Delaware
Velio Communications, Inc.		Delaware
Velio International Ltd.		Cayman

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No.333-81434, No.333-86028, No333.107976 and all the amendments thereto) and Form S-8 (No.2-867474, No.2-91907, No.2-98732, No.33-6188, No.33-6203, No.33-13265, No.33-17720, No.33-30385, No.33-30386, No.33-36249, No.33-41999, No.33-42000, No.33-53054, No.33-66548, No.33-66546, No.33-55631, No.33-55633, No.33-66697, No.33-59981, No.33-59985, No.33-59987, No.333-12887, No.333-34285, No.333-57563, No.333-62159, No.333-74627, No.333-81433, No.333-81435, No.333-81437, No.333-90951, No.333-95421, No.333-38746 No.333-42888, No.333-43306, No.333-46436, No.333-52050, No.333-53584, No.333-57152, No.333-62960, No.333-66238, No.333-66240, No.333-69380, No.333.71900, No.333.95643, No.333-96549, No.333-96555, No.333-98807, No.333-106205, No.333-106206 and No.333-115762) of LSI Logic Corporation of our report dated March 14, 2005 relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

PricewaterhouseCoopers LLP

San Jose, California
March 14, 2005

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Wilfred J. Corrigan, certify that:

1. I have reviewed this Annual Report on Form 10-K of LSI Logic Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and presented in this report our conclusions about the effectiveness of the disclosure of controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a. All significant deficiencies and material weakness in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	March 15, 2005
By:	/s/ WILFRED J. CORRIGAN
Name:	Wilfred J. Corrigan
Title:	Chairman & Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Bryon Look, certify that:

1. I have reviewed this Annual Report on Form 10-K of LSI Logic Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4 The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and presented in this report our conclusions about the effectiveness of the disclosure of controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a. All significant deficiencies and material weakness in the design or operation of internal controls over financial reporting which could adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: March 15, 2005

By:	/s/ BRYON LOOK
Name:	Bryon Look
Title:	Executive Vice President & Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Wilfred J. Corrigan, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of LSI Logic Corporation on Form 10-K for the year ended December 31, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of LSI Logic Corporation.

By: /s/ WILFRED J. CORRIGAN

Name: Wilfred J. Corrigan

Title: Chairman & Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Bryon Look, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of LSI Logic Corporation on Form 10-K for the year ended December 31, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of LSI Logic Corporation.

By: /s/ BRYON LOOK

Name: Bryon Look

Title: Executive Vice President &
Chief Financial Officer