Exhibit 10.2

SUBLEASE AGREEMENT

I.
DEFINED TERMS

             
Basic Rent:

  Months   Monthly Basic Rent
 
  1-12   $ 24,308.75*  

  13-24   $ 25,281.10  

  25-36   $ 26,253.45  

  37-48   $ 28,198.15  

  49-60   $ 29,170.50  

* The monthly basic rent rate set forth above for months 1-12 shall apply to the
period commencing on the Commencement Date and ending on December 31, 2006

     
Broker:
  CRESA Partners (representing both Sublessor and Sublessee)
 
   
Building:
  Buildings E, F and G located at 1841 Page Mill Road, Palo Alto, California
 
   
Effective Date:
  August 9, 2004
 
   
Expiration Date:
  December 31, 2010
 
   
Landlord:
  Interval Research Corporation, a Washington corporation
 
   
Master Lease:
  That certain Office Building Lease dated as of August 18, 1999 by and between
Page Mill Road Properties Inc., the predecessor-in-interest to Landlord, as
landlord, and Incyte Pharmaceuticals, Inc., the predecessor-in-interest to
Sublessor, as tenant, as amended by that certain First Amendment to the Lease
dated as of July 19, 2000 (the “First Amendment”) by and between Landlord and
Incyte Genomics, Inc., the predecessor-in-interest to Sublessor
 
   
Permitted Uses:
  The uses permitted in Section 1.16 of the Master Lease, and for no other uses
 
   
Premises:
  Improved real property, as more particularly described in the Master Lease
attached hereto as Exhibit A, consisting of approximately 59,056 rentable square
feet
 
   
Commencement Date:
  The earlier of (i) January 1, 2006, or (ii) the date Sublessee commences
business operations in the Sublet Space

1.

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Letter of Credit:
  $145,852.50
 
   
Sublessee:
  Connetics Corporation, a Delaware corporation
 
   
Sublessee’s Address:
  Prior to January 1, 2005:
 
   

  Connetics Corporation

  3290 West Bayshore Road

  Palo Alto, CA 94303

  Attn: Christopher T. Holman,

  Director of Facilities and Production Planning
 
   

  On and after January 1, 2005:
 
   

  Connetics Corporation

  3160 Porter Drive

  Palo Alto, CA 94304

  Attn: Christopher T. Holman,

  Director of Facilities and Production Planning
 
   
Sublessee’s Share:
  32.93% with respect to the Building and 10.66% with respect to the Development
 
   
Sublessor:
  Incyte Corporation, a Delaware corporation
 
   
Sublessor’s Address:
  Incyte Corporation

  Experimental Station

  Route 141 and Henry Clay Road

  Building 336

  Wilmington, DE 19880

  Attn: General Counsel
 
   

  with a copy to:
 
   

  Incyte Corporation

  Experimental Station

  Route 141 and Henry Clay Road

  Building 336

  Wilmington, DE 19880

  Attn: Chief Financial Officer
 
   
Sublet Space:
  That portion of the Premises, as more particularly described in the Sublet
Space Floor Plan attached hereto as Exhibit B, consisting of approximately
19,447 rentable square feet located on the first and second floors of Building E
 
   
Sublease Term:
  Sixty (60) months

2.

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Exhibits:
  Exhibit A — Master Lease

  Exhibit B — Sublet Space Floor Plan

  Exhibit C — List of FF&E

  Exhibit D — Determination of Prevailing Market Rent

II.

     THIS SUBLEASE AGREEMENT (this “Sublease”) is entered as of the Effective
Date by and between Sublessor and Sublessee. Sublessor and Sublessee are each
sometimes referred to in this Sublease as a “Party” and collectively as
“Parties.”

     THE PARTIES ENTER this Sublease on the basis of the following facts,
understandings and intentions:

     A. Sublessor is presently the lessee of the Premises pursuant to the Master
Lease by and between Landlord and Sublessor. A copy of the Master Lease, with
all exhibits and addenda thereto, is attached hereto as Exhibit A.

     B. Sublessor desires to sublease the Sublet Space to Sublessee and
Sublessee desires to sublease the Sublet Space from Sublessor on all of the
terms, covenants and conditions hereinafter set forth.

     C. All of the terms and definitions in the Defined Terms section of this
Sublease are incorporated herein by this reference. Capitalized terms used in
this Sublease and not otherwise defined herein shall have the meanings given to
them in the Master Lease.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of
the Parties, the Parties hereto agree as follows:

     1. Sublease Term.

          a. Commencement and Expiration of Sublease Term. The Sublease Term
shall commence on the Commencement Date and end on the Expiration Date. If for
any reason Sublessor does not deliver possession of the Sublet Space to
Sublessee on or before January 1, 2006, then this Sublease shall not terminate.
Sublessor will have no liability for such failure to deliver the Sublet Space,
but the Basic Rent and Additional Rent due hereunder shall not commence until
the date possession of the Sublet Space is given to Sublessee. Sublessor shall
sublease to Sublessee, and Sublessee shall sublease from Sublessor the Sublet
Space for the Sublease Term upon all of the terms, covenants and conditions
herein contained.

          b. Early Access. Prior to January 1, 2006 (but in no event earlier
than July 1, 2005), Sublessee shall be permitted access to the Sublet Space for
the sole purpose of performing improvements and installing Sublessee’s
equipment, furniture and other personal property, at Sublessee’s sole cost and
expense. In the event Sublessee desires such early access

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to the Sublet Space, Sublessee shall deliver written notice thereof to Sublessor
no later than thirty (30) days prior to the date Sublessee desires such access
to the Sublet Space. The date (which in no event shall be earlier than July 1,
2005) upon which Sublessor provides Sublessee such early access to the Sublet
Space pursuant to this Section 1.b shall be referred to herein as the “Early
Access Period Commencement Date.” The period from the Early Access Period
Commencement Date through the earlier of (i) December 31, 2005, or (ii) the date
immediately preceding the date Sublessee commences business operations in the
Sublet Space shall be referred to herein as the “Early Access Period.” Under no
circumstances shall or may Sublessee conduct business in the Sublet Space during
the Early Access Period. All the terms and conditions of this Sublease
(including without limitation, Sublessee’s indemnity, insurance and maintenance
and repair obligations hereunder and Sublessee’s obligation hereunder to pay
utilities and services and Sublessee’s Share of Operating Expenses for the
Building, Operating Expenses for the Common Areas of the Development, and
Transit Assessments for the Development) shall apply during the Early Access
Period, except that Sublessee shall not be obligated to pay Basic Rent during
the Early Access Period. Without limiting the generality of the foregoing,
Sublessee shall be responsible for repairing, at its cost, any damage to the
Building or the Development arising out of or resulting from Sublessee’s
performance of any Alterations (as defined in the Master Lease) and/or
installation of equipment, furniture or other personal property during the Early
Access Period. Sublessee’s early access shall also be conditioned upon
Sublessee’s not being in default hereunder and the Parties having received the
prior written consent of Landlord to this Sublease. Any Alterations performed by
Sublessee during the Early Access Period (or thereafter) shall be performed in
accordance with the terms of this Sublease (including, without limitation, the
need to obtain the prior written consent of Sublessor and Landlord thereto and
Sublessee’s obligation to pay any construction supervisory fees charged by
Landlord and/or Sublessor in connection with such Alterations). Without limiting
the generality of the foregoing, the Parties agree that Sublessor may withhold
its consent to any Alterations which have not been approved by Landlord. With
respect to any Alterations that Sublessee proposes to make during the Early
Access Period, Sublessor agrees to request that Landlord undertake Landlord’s
review of such Alterations concurrent with Sublessor’s review of such
Alterations; provided, however, Sublessee acknowledges that Landlord has no
obligation to agree to undertake such review concurrently, and therefore
Sublessor makes no representation or warranty to Sublessee that Landlord will
agree to such concurrent review. Sublessor further agrees that its written
approval (or disapproval, as the case may be) of any Alterations that Sublessee
proposes to make during the Early Access Period shall be delivered to Sublessee
within seven (7) business days after Sublessor’s receipt of Landlord’s written
approval (or disapproval, as the case may be) of such Alterations. Sublessee, at
its sole cost and expense and in accordance with the terms of the Master Lease,
shall be responsible for removing from the Sublet Space upon the expiration or
earlier termination of this Sublease any Alterations made by or for the benefit
of Sublessee and designated by Landlord to be removed pursuant to the Master
Lease.

          c. Confirmation of Dates. At any time during the Sublease Term,
Sublessor may deliver to Sublessee a statement confirming the Early Access
Period Commencement Date (if applicable) and the Commencement Date, which
statement (provided it accurately reflects such dates) Sublessee shall execute
and return to Sublessor within ten (10) days after Sublessee’s receipt thereof.

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     2. Condition of Sublet Space.

          a. Physical Condition. Sublessor shall deliver the Sublet Space with
all plumbing, electrical and HVAC systems within the Sublet Space in good
working order and condition as of the Early Access Period Commencement Date or
the Commencement Date, whichever occurs first. As of the Effective Date,
Sublessee acknowledges that Sublessee shall have conducted Sublessee’s own
investigation of the Sublet Space and the physical condition thereof, including
accessibility and location of utilities, and improvements, which in Sublessee’s
judgment affect or influence Sublessee’s use of the Sublet Space and Sublessee’s
willingness to enter this Sublease, and subject to the first sentence of this
Section 2.a, shall accept the Sublet Space in “AS IS” condition and repair.
Sublessee acknowledges that Sublessor has made no representations of any kind in
connection with improvements or physical conditions on, or bearing on, the use
of the Sublet Space. Sublessee shall rely solely on Sublessee’s own inspection
and examination of such items and not on any representations of Sublessor,
express or implied. Without limiting the generality of the foregoing, Sublessee
acknowledges and agrees that Sublessor shall not provide any fiber access to the
Sublet Space other than any fiber access that may currently exist in the Sublet
Space as of the Effective Date. Subject to the first sentence of this
Section 2.a, Sublessee further recognizes and agrees that neither Sublessor nor
Landlord shall be required to perform any work of construction or alteration to
the Sublet Space to ready the same for Sublessee’s occupancy.

          b. Further Inspection. Sublessee represents and warrants to Sublessor
that, as of the Effective Date, Sublessee has examined and inspected all matters
with respect to taxes, income and expense data, insurance costs, bonds,
permissible uses, the Master Lease, zoning, covenants, conditions and
restrictions and all other matters which in Sublessee’s judgment bear upon the
value and suitability of the Sublet Space for Sublessee’s purposes. Sublessee
has and will rely solely on Sublessee’s own inspection and examination of such
items, and not on any representations of Sublessor, express or implied. By
taking possession of the Sublet Space, Sublessee accepts the Sublet Space in its
existing condition, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Development or any part thereof, and any covenants, conditions or restrictions
of record, including, without limitation, the CC&Rs (as defined in Section 7.2
of the Master Lease), and accepts this Sublease subject thereto and to all
matters disclosed thereby. Sublessee acknowledges that neither Sublessor nor its
agent has made any representation or warranty, express or implied, as to the
present or future suitability of the Development or any part thereof for the
conduct of Sublessee’s business.

          c. Transfer of FF&E. Effective as of the Early Access Period
Commencement Date or the Commencement Date, whichever occurs first (the “FF&E
Effective Date”), Sublessor transfers to Sublessee, in consideration of the sum
of One Hundred Twenty Thousand and 00/100 Dollars ($120,000.00) to be paid by
Sublessee to Sublessor upon the FF&E Effective Date and as a condition precedent
to the effectiveness of such transfer, Sublessor’s right, title and interest in
and to the furniture, trade fixtures and equipment located in the Sublet Space
as of the Effective Date and identified on Exhibit B attached hereto and
incorporated herein by this reference (collectively, the “FF&E”). SUBLESSEE
HEREBY ACKNOWLEDGES AND AGREES THAT THE FF&E IS USED AND CONVEYED AND ACCEPTED
“AS-IS” WITHOUT ANY WARRANTIES OR REPRESENTATIONS OF ANY

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KIND OR NATURE, INCLUDING, WITHOUT LIMITATION, AS TO MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, WHETHER EXPRESS OR IMPLIED, OR WHETHER WRITTEN OR
ORAL, CONCERNING ANY AND ALL DEFECTS OF A PHYSICAL NATURE, WHETHER IN MATERIAL
OR WORKMANSHIP AND WHETHER OR NOT SUCH DEFECT WOULD BE VISIBLE OR APPARENT UPON
SUBLESSEE’S FULL INSPECTION AND EXAMINATION OF THE FF&E. Sublessee, at its sole
cost and expense, shall be responsible for repairing, maintaining and insuring
(in accordance with the terms of the Master Lease) the FF&E. In addition,
Sublessee, at its sole cost and expense, shall be responsible for removing the
FF&E from the Sublet Space, in accordance with the terms of the Master Lease,
upon the expiration or earlier termination of this Sublease. In addition,
Sublessee, at its sole cost and expense, shall be responsible for any and all
licensing, connection requirements and maintenance fees and contracts associated
with the FF&E.

     3. Sublease Subject to Master Lease.

          a. Inclusions. It is expressly understood, acknowledged and agreed by
Sublessee that all of the other terms, conditions and covenants of this Sublease
shall be those stated in the Master Lease except as excluded in Section 3.c
herein. Whenever the word “Premises” is used in the Master Lease, for purposes
of this Sublease, the word “Sublet Space” shall be substituted. Sublessee shall
be subject to, bound by and comply with all of said Articles and Sections of the
Master Lease with respect to the Sublet Space and shall satisfy all applicable
terms and conditions of the Master Lease for the benefit of both Sublessor and
Landlord, it being understood and agreed that, for purposes of this Sublease,
wherever in the Master Lease the word “Tenant” appears, the word “Sublessee”
shall be substituted, and wherever the word “Landlord” appears, for the purposes
of this Sublease, the word “Sublessor” shall be substituted; wherever the words
“Tenant’s Percentage Share” appears, for the purposes of this Sublease, the
words “Sublessee’s Share” shall be substituted; and that upon the breach by
Sublessee of any of said terms, conditions or covenants of the Master Lease
incorporated into this Sublease or upon the failure of Sublessee to pay Rent or
otherwise comply with any of the provisions of this Sublease, Sublessor may, but
shall not be obligated to, exercise any and all rights and remedies granted to
Landlord by the Master Lease. In the event of any conflict between the terms of
this Sublease and the terms of the Master Lease, the terms of this Sublease
shall control as between Sublessor and Sublessee. It is further understood and
agreed that Sublessor has no duty or obligation to Sublessee under the aforesaid
Articles and Sections of the Master Lease other than to maintain the Master
Lease in full force and effect during the Sublease Term; provided, however, that
Sublessor shall not be liable to Sublessee for any termination of the Master
Lease prior to the Expiration Date which is not caused solely by the fault or
default of Sublessor. Whenever the provisions of the Master Lease incorporated
as provisions of this Sublease require the written consent of Landlord, said
provisions shall be construed to require the written consent of both Landlord
and Sublessor. Sublessee hereby acknowledges that it has read and is familiar
with all the terms of the Master Lease, and agrees that this Sublease is
subordinate and subject to the Master Lease and that any termination of the
Master Lease shall likewise terminate this Sublease unless Landlord and
Sublessee have entered into a recognition and attornment agreement whereby
Landlord has agreed to accept this Sublease as a direct lease between Landlord
and Sublessee.

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          b. Modification of Incorporated Provisions. The following provisions
of the Master Lease, which have been incorporated into this Sublease pursuant to
Section 3.a above, shall be modified for purposes of this Sublease as follows:
(i) as used in Section 2.3 of the Master Lease, the term “Landlord” shall mean
Landlord, not Sublessor; (ii) as used in the sixth sentence of Section 10 of the
Master Lease, the term “Landlord” shall mean Landlord, not Sublessor; (iii) as
used in the first and second sentences of Section 12.1 of the Master Lease, the
term “Landlord” shall mean Landlord, not Sublessor; (iv) as used in the fourth,
fifth and sixth sentences of Section 12.1 of the Master Lease, the term
“Landlord” shall mean Landlord and Sublessor; (v) as used in Section 15.2 of the
Master Lease, the term “Landlord” shall mean Landlord and Sublesssor; (vi) in
the first and second sentences of Section 18.1.1 of the Master Lease, the words
“the Building” shall be deleted and replaced with the words “the Sublet Space”;
(vii) as used in Section 18.3 of the Master Lease, the term “Landlord” shall
mean Landlord, not Sublessor; (viii) as used in Section 19 of the Master Lease,
(A) the term “Landlord” shall mean Landlord, not Sublessor; (B) the term
“Tenant” shall mean Sublessor, not Sublessee, and (C) the term “Premises” shall
mean the Premises; (ix) as used in Section 20 of the Master Lease, (A) the term
“Landlord” shall mean Landlord, not Sublessor, (B) the term “Tenant” shall mean
Sublessor, not Sublessee, and (C) the term “Premises” shall mean the Premises;
and (x) as used in Section 32 of the Master Lease, the term “Landlord” shall
mean Landlord, not Sublessor. In addition, Sublessee acknowledges and agrees
that by incorporating Section 9 of the Master Lease into this Sublease pursuant
to Section 3.a above, Sublessee shall be obligated to pay all holdover rent
payable by Sublessor to Landlord under the Master Lease in the event of any
holdover by Sublessee.

          c. Exclusions. The following Sections and portions of the Master Lease
shall not be incorporated into this Sublease: Sections 1.1, 1.2, 1.3, 1.4 as to
the size of the rentable space, 1.6, 1.7, 1.8, 1.9, 1.10, 1.12, 1.13, 1.14,
1.15, 1.19, 1.20, 2.1, the first sentence of Section 2.2, Section 3,
Sections 4.1, 4.2 and 4.3, Section 6, Section 8, the first five sentences of
Section 10, Section 12.2, Section 15.1, Section 23 (other than Section 23.4,
which is incorporated into this Sublease by this reference), the second, fourth
and last sentences of Section 24, Section 45, Section 46, Section 49.5,
Section 55, Exhibit B and Exhibit F.

          d. Time for Notice. The time limits provided for in the provisions of
the Master Lease for the giving of notice, making of demands, performance of any
act, condition or covenant, or the exercise of any right, remedy or option, are
amended for the purposes of this Sublease by lengthening or shortening the same
in each instance by five (5) days, as appropriate, so that notices may be given,
demands made, or any act, condition or covenant performed, or any right, remedy
or option hereunder exercised, by Sublessor or Sublessee, as the case may be,
within the time limit relating thereto contained in the Master Lease. If the
Master Lease allows only five (5) days or less for Sublessor to perform any act,
or to undertake to perform such act, or to correct any failure relating to the
Premises or the Lease, then Sublessee shall nevertheless be allowed three
(3) days to perform such act, undertake such act and/or correct such failure.
Notwithstanding the foregoing, in the event Landlord provides concurrent written
notice to Sublessor and Sublessee, which written notice copies both Parties, of
any failure by Sublessee to perform any act, or to undertake to perform such
act, or to correct any failure relating to the Premises or the Lease, then
Sublessee shall be entitled to the same time limit provided for in the
provisions of the Master Lease for Sublessor to perform such act, undertake to
perform such act and/or correct such failure.

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     4. Performance by Sublessor; Status of Master Lease.

          a. Sublessor’s Performance Conditioned on Landlord’s Performance.
Sublessee recognizes that Sublessor is not in a position to render any of the
services or to perform any of the obligations required of Landlord by the terms
of the Master Lease. Therefore, despite anything to the contrary in this
Sublease, Sublessee agrees that performance by Sublessor of Sublessor’s
obligations under this Sublease is conditioned on performance by Landlord of
Landlord’s corresponding obligations under the Master Lease, and Sublessor will
not be liable to Sublessee for any default of Landlord under the Master Lease.
Sublessee will not have any claim against Sublessor based on Landlord’s failure
or refusal to comply with any of the provisions of the Master Lease unless that
failure or refusal is a result of Sublessor’s act or failure to act. Despite
Landlord’s failure or refusal to comply with any of those provisions of the
Master Lease, this Sublease will remain in full force and effect and Sublessee
will pay the Basic Rent and additional rent and all other charges provided for
in this Sublease without any abatement, deduction or setoff, except and then
only to the extent Sublessor is entitled to and receives any abatement,
deduction or setoff under the express terms of the Master Lease. Except as
expressly provided in this Sublease, Sublessee agrees to be subject to, and
bound by, all of the covenants, agreements, terms, provisions, and conditions of
the Master Lease applicable to the Sublet Space, as though Sublessee was the
Tenant under the Master Lease with respect to the Sublet Space.

          b. Obtaining Landlord’s Consent. Whenever the consent of Landlord is
required under the Master Lease, or whenever Landlord fails to perform its
obligations under the Master Lease, Sublessor agrees to use Sublessor’s
reasonable, good faith efforts to obtain, upon Sublessee’s written request and
at Sublessee’s sole cost and expense, such consent or performance on behalf of
Sublessee.

     5. Rent.

          a. Basic Rent. Sublessee shall pay to Sublessor the Basic Rent in
advance on the first day of each month of the Sublease Term, commencing on the
Commencement Date (with the Parties acknowledging that, provided the terms and
conditions of Section 15 below have been satisfied, Basic Rent for the original
Sublet Space for the months of January 2006, February 2006 and March 2006 during
the Sublease Term and for the months of April 2010, May 2010, June 2010,
July 2010, August 2010, September 2010, October 2010, November 2010 and
December 2010 during the Sublease Term shall be paid pursuant to such Section 15
). In the event the first day of the Sublease Term shall not be the first day of
a calendar month or the last day of the Sublease Term is not the last day of the
calendar month, the Basic Rent shall be appropriately prorated based on a thirty
(30) day month. In addition, in the event the Commencement Date occurs prior to
January 1, 2006 (as a result of Sublessee’s early access to the Sublet Space
pursuant to Section 1.b above and Sublessee’s commencement of business
operations in the Sublet Space prior to January 1, 2006), Basic Rent for the
first full or fractional calendar month of the Sublease Term shall be paid by
Sublessee to Sublessor on the first day of the calendar month immediately
following the Commencement Date. By way of illustration of the foregoing, if the
Commencement Date is October 15, 2005, Basic Rent, prorated in accordance with
this Section 5.a, for the period from October 15, 2005 through October 31, 2005
would be paid by Sublessee to Sublessor on November 1, 2005, concurrent

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with Sublessee’s payment to Sublessor of Basic Rent for the month of
November 2005. All installments of Basic Rent shall be delivered to Sublessor’s
Address, or at such other place as may be designated in writing from time to
time by Sublessor, in lawful money of the United States and without deduction or
offset for any cause whatsoever.

          b. Additional Rental. Commencing on the Early Access Period
Commencement Date or the Commencement Date, whichever occurs first, Sublessee
shall be responsible for all costs and expenses of every kind and nature
relating to the Sublet Space which may be imposed, at any time, on Sublessor
pursuant to the Master Lease (except for Basic Rent, as defined in the Master
Lease) including, but not limited to, Sublessee’s Share of all Operating
Expenses (including Real Property Taxes) for the Building and the Common Areas
of the Development, Transit Assessments, and all costs and expenses relating to
Landlord’s ownership and operation of the Building and the Development, and
other additional rent (collectively, “Additional Rent”). As hereinafter used,
“Rent” shall include Basic Rent, all Additional Rent to be paid by Sublessee
pursuant to this Section 5.b, and all other amounts payable by Sublessee under
this Sublease.

          c. Utilities and Services. Commencing on the Early Access Period
Commencement Date or the Commencement Date, whichever occurs first, Sublessee
shall be responsible for any and all water, gas, heat, light, power, sewer,
electricity and other utilities or services supplied to the Sublet Space, in
addition to Sublessee’s Share of utilities for the Common Areas payable under
Section 5.b above. Sublessee shall contract directly with all utilities
providers to receive invoices directly (in Sublessee’s name) from such utilities
providers for utilities consumed in the Sublet Space. To the extent such
utilities or services are not separately metered, Sublessee shall pay the cost
attributable to the Sublet Space, as determined by Sublessor, in Sublessor’s
reasonable discretion, within thirty (30) days after Sublessor’s delivery of an
invoice therefor. In addition, commencing on the Early Access Period
Commencement Date or the Commencement Date, whichever occurs first, Sublessee,
at its sole cost and expense, shall be responsible for providing all janitorial
and trash collection services for the Sublet Space.

     6. Letter of Credit.

          a. Form of Letter of Credit. Upon execution of this Sublease, and as a
condition precedent to the effectiveness of this Sublease, Sublessee shall
deliver to Sublessor an irrevocable stand-by letter of credit in the amount of
One Hundred Forty Five Thousand Eight Hundred Fifty Two and 50/100 Dollars
($145,852.50) (the “Letter of Credit”) as credit enhancement for Sublessee’s
faithful performance of all terms, covenants and conditions of this Sublease and
not as a security deposit, as more particularly described in this Section 6. The
Letter of Credit shall be in form and substance and issued by a bank that is
reasonably satisfactory to Sublessor. Sublessor hereby confirms that Silicon
Valley Bank is acceptable as the initial issuer of the Letter of Credit. The
Letter of Credit shall: (i) name Sublessor as beneficiary, (ii) be effective
upon the Early Access Period Commencement Date or the Commencement Date,
whichever occurs first, (iii) allow Sublessor to make partial and multiple draws
thereunder up to the face amount for the purposes permitted under this
Section 6, (iv) require the issuing bank to pay to Sublessor the amount of a
draw upon receipt by such bank of a sight draft signed by Sublessor and
presented to the issuing bank, accompanied by

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Sublessor’s statement that said draw is being made in accordance with the terms
of this Section 6, and (v) provide that Sublessor can freely transfer the Letter
of Credit upon an assignment or other transfer of its interest in this Sublease
to the assignee or transferee without having to obtain the consent of Sublessee
or the issuing bank. Sublessee shall be responsible for all fees associated with
issuance of the Letter of Credit. Sublessor shall be entitled to draw upon the
Letter of Credit in accordance with this Section 6, or at any time within thirty
(30) days prior to the expiration date of the Letter of Credit unless Sublessee
shall have delivered to Sublessor a replacement Letter of Credit meeting the
requirements of this Section 6 and with an expiration date not less than twelve
(12) months after the date of delivery. The Letter of Credit (or a replacement
thereof satisfactory to Sublessor) shall remain in effect until the Expiration
Date (i.e., December 31, 2010).

          b. Draws Under Letter of Credit. Sublessor shall have the right (but
shall not be obligated to) draw under the Letter of Credit to remedy any default
by Sublessee in the performance of its obligations under this Sublease, and/or
to compensate Sublessor for any losses, costs, liabilities or damages incurred
by Sublessor as a result of Sublessee’s failure to perform its obligations under
this Sublease (collectively, “Losses”). In the event Sublessor draws under the
Letter of Credit pursuant to this subsection (b), Sublessor shall use or apply
the proceeds of such draw to remedy Sublessee’s default and to compensate
Sublessor for Losses. If, despite the intent of the Parties that the Letter of
Credit not be considered a security deposit, a court of competent jurisdiction
determines that the Letter of Credit is in fact a security deposit, then
Sublessee hereby waives to the extent inconsistent with the foregoing any
restriction on the uses to which the proceeds of a draw under the Letter of
Credit may be applied as contained in Section 1950.7(c) of the California Civil
Code and/or any successor statute, if applicable. If Sublessor uses or applies
the proceeds of a draw under the Letter of Credit pursuant to this Section 6,
Sublessee shall, within ten (10) business days after demand therefor, deposit
cash or other collateral with the issuing bank and as required by the issuing
bank in an amount sufficient to restore the Letter of Credit to the amount
thereof in effect immediately prior to such draw, and Sublessee’s failure to do
so shall, at Sublessor’s option, be a non-curable default under this Sublease.
If Sublessee has performed all of its obligations under this Sublease, the
Letter of Credit, or so much thereof as has not theretofore been applied by
Sublessor in accordance with this Section 6, shall be returned, without payment
of interest or other increment for their use, to Sublessee upon the Expiration
Date (i.e., December 31, 2010). No trust relationship is created herein between
Sublessor and Sublessee with respect to the Letter of Credit.

     7. Use. The Sublet Space is to be used for the Permitted Uses, and for no
other purpose or business without the prior written consent of Sublessor and
Landlord. In no event shall the Sublet Space be used for a purpose or use
prohibited by the Master Lease.

     8. Indemnity

          a. Sublessee Indemnity. In addition to, and without limitation of,
Sublessee’s indemnity obligations under this Sublease incorporated by reference
from the Master Lease pursuant to Section 3.a above, Sublessee agrees to
indemnify, protect, defend, with attorneys approved by Sublessor in its
reasonable discretion, and save and hold harmless Sublessor and its trustees,
directors, officers, agents and employees, harmless from and against any and all
losses, costs, liabilities, claims, damages and expenses, including, without
limitation,

10.

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reasonable attorneys’ fees and costs, and reasonable investigation costs, that
may at the time be asserted against Sublessor by (a) Landlord for failure of
Sublessee to perform any of the covenants, agreements, terms, provisions, or
conditions contained in the Master Lease that Sublessee is obligated to perform
under the provisions of this Sublease, or (b) any person or entity as a result
of Sublessee’s failure to surrender possession of the Sublet Space in accordance
with the terms of this Sublease.

          b. Sublessor Indemnity. Sublessor agrees to indemnify, defend, and
hold Sublessee and Sublessee’s officers, directors and employees harmless from
and against any investigation and remediation costs to the extent arising from
or arising out of the release, treatment, storage, use or disposal of Hazardous
Materials in the Building or the Development by Sublessor in violation of
Environmental Regulations. Sublessor’s indemnification obligations hereunder
shall extend only to actual, out-of-pocket remediation costs (including
reasonable attorneys’ fees and investigation, oversight and response costs) but
shall not include consequential damages or incidental damages such as lost
profits or any loss of rental value of the Sublet Space suffered or allegedly
suffered by Sublessee or any of Sublessee’s agents, employees, officers,
directors, trustees, contractors, subcontractors, subtenants, assignees,
licensees or invitees or anyone claiming under Sublessee.

          c. Survival. The provisions of this Section 8 will survive the
expiration or earlier termination of this Sublease.

     9. Right to Cure Sublessee’s Defaults. If Sublessee shall at any time fail
to make any payment or perform any other obligation of Sublessee under this
Sublease, then Sublessor shall have the right, but not the obligation, after the
lesser of (i) five (5) days’ notice to Sublessee, or (ii) the time within which
Landlord may act on Sublessor’s behalf under the Master Lease, or (iii) without
notice to Sublessee in the case of any emergency, and without waiving or
releasing Sublessee from any obligations of Sublessee under this Sublease, to
make such payment or perform such obligation of Sublessee in such manner and to
such extent as Sublessor shall reasonably deem necessary. In exercising any such
right, Sublessor shall have the right to pay any reasonable incidental costs and
expenses, employ attorneys and other professionals, and incur and pay reasonable
attorneys’ fees and other costs reasonably required in connection with such
failure to perform, and Sublessee shall pay to Sublessor, upon demand, all such
reasonable costs, fees and/or expenses paid or incurred by Sublessor, together
with interest thereon at the Effective Rate set forth in the Master Lease.

     10. Damage and Destruction. The following provisions shall apply with
respect to any damage or destruction of the Sublet Space:

          a. Termination of Master Lease. If the Sublet Space is damaged or
destroyed and Landlord or Sublessor exercises any option either may have to
terminate the Master Lease, this Sublease shall automatically terminate as of
the date of the termination of the Master Lease, unless Landlord and Sublessee
have theretofore entered into a recognition and attornment agreement whereby
Landlord has agreed to accept this Sublease as a direct lease between Landlord
and Sublessee. Sublessee shall have no independent right to terminate this
Sublease upon damage or destruction.

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          b. Continuation of Sublease. If the Master Lease is not terminated
following any damage or destruction as provided in Section 10.a above, this
Sublease shall remain in full force and effect.

          c. Proceeds; Rent Abatement. Despite anything contained in the Master
Lease to the contrary, as between Sublessor and Sublessee only, in the event of
damage to or Condemnation of the Sublet Space, all insurance proceeds or
Condemnation awards received by Sublessor under the Master Lease shall be deemed
to be the property of Sublessor, and Sublessor shall have no obligation to
rebuild or restore the Sublet Space. In the event of any casualty or
Condemnation affecting the Sublet Space which results in an abatement of rent
under the Master Lease, Basic Rent shall be abated under this Sublease only as
to the affected portion of the Sublet Space, and then only to the extent that
rent is abated under the Master Lease.

     11. Eminent Domain. The following provisions shall apply with respect to
any condemnation of the Sublet Space:

          a. Total Condemnation. If all of the Premises is condemned by eminent
domain, inversely condemned or sold in lieu of condemnation, for any public or a
quasi-public use or purpose (“Condemned” or “Condemnation”), this Sublease shall
terminate as of the date of title vesting in such proceeding, and Basic Rent
shall be adjusted to the date of termination.

          b. Partial Condemnation. If any portion of the Premises is Condemned,
and Sublessor exercises any option to terminate the Master Lease, this Sublease
shall automatically terminate as of the date of the termination of the Master
Lease, unless Landlord and Sublessee have theretofore entered into a recognition
and attornment agreement whereby Landlord has agreed to accept this Sublease as
a direct lease between Landlord and Sublessee. If the Master Lease is not
terminated following any such Condemnation, this Sublease shall remain in full
force and effect. Sublessee shall have no independent right to terminate this
Sublease upon any Condemnation. Sublessee hereby waives the provisions of
California Code of Civil Procedure Section 1265.130 permitting a court of law to
terminate this Sublease.

          c. Sublessee’s Award. Subject to the provisions of the Master Lease,
Sublessee shall have the right to recover from the condemning authority, but not
from Sublessor, such compensation as may be separately awarded to Sublessee in
connection with costs and removing Sublessee’s merchandise, furniture, fixtures,
leasehold improvements and equipment to a new location.

     12. Assignment and Subletting. The following provisions shall apply with
respect to any assignment and/or subletting of the Sublet Space by Sublessee:

          a. Consent Required. Sublessee shall not directly or indirectly
(including, without limitation, by merger, consolidation, reorganization,
acquisition or other transfer of any interest in Sublessee or by transfer to any
parent, subsidiary or affiliate of Sublessee), voluntarily or by operation of
law, sell, assign, encumber, mortgage, pledge or otherwise transfer or
hypothecate all or any part of its interest in or rights with respect to this

12.

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Sublease or the Sublet Space (collectively, “Assignment”), or permit all or any
portion of the Sublet Space to be occupied by anyone other than itself or sublet
all or any portion of the Sublet Space (including, without limitation, any
sublease to, or occupancy by, any parent, subsidiary or affiliate of Sublessee)
(collectively, “Sublease”), without obtaining Sublessor’s prior written consent
in each instance, which consent shall not be unreasonably withheld or delayed.
In determining whether or not to consent to a proposed Assignment or Sublease,
Sublessor may consider the following factors, among others, all of which are
deemed reasonable: (i) whether the proposed assignee or subtenant has sufficient
financial capability to perform its obligations under this Sublease;
(ii) whether the proposed use of the Sublet Space by the proposed assignee or
subtenant is consistent with the Permitted Uses set forth in the Defined Terms
section of this Sublease; and (iii) whether Landlord has consented in writing to
the proposed Assignment or Sublease (it being understood that a condition to
Sublessor’s consent to any Assignment or Sublease is Landlord’s written consent
to the same). Any Assignment or Sublease that is not in compliance with this
Section 12 shall be null and void and, at the option of Sublessor, shall
constitute a noncurable default by Sublessee under this Sublease, and Sublessor
shall be entitled to pursue any right or remedy available to Sublessor under
this Sublease or under the laws of the State of California. No Assignment or
Sublease shall release or relieve Sublessee of its obligations under this
Sublease. The acceptance of Rent by Sublessor from any other person shall not be
deemed to be a waiver by Sublessor of any provision of this Sublease or to be a
consent to any Assignment or Sublease. Consent to one (1) Assignment or Sublease
shall not be deemed to constitute consent to any subsequent attempted Assignment
or Sublease.

          b. Assignment Documentation. With respect to any Assignment, any
assignee approved by Sublessor pursuant to this Section 12 shall, from and after
the effective date of the Assignment, assume all obligations of Sublessee under
this Sublease and shall be and remain liable jointly and severally with
Sublessee for the payment of Rent, and for the performance of all of the terms,
covenants, conditions and agreements herein contained on Sublessee’s part to be
performed. No Assignment shall be binding on Sublessor unless Sublessee shall
deliver to Sublessor a counterpart of the Assignment and an instrument that
contains a covenant of assumption by such assignee satisfactory in form and
substance to Sublessor, and consistent with the requirements of this
Section 12.b. Any failure or refusal of such assignee to execute such instrument
of assumption shall constitute a default under this Sublease but shall not
release or discharge such assignee from its liability as set forth above.

          c. Transfer Consideration. If Sublessor consents to an Assignment or
Sublease, as a condition thereto which the Parties hereby agree is reasonable,
Sublessee shall pay to Sublessor fifty percent (50%) of any rent, additional
rent or other consideration payable by the assignee or subtenant in connection
with the Assignment or Sublease in excess of the Basic Rent and Additional Rent
payable by Sublessee under this Sublease on a per rentable square foot basis if
less than all of the Sublet Space is transferred, in either case without any
deduction therefrom.

          d. Recapture Right. The recapture right set forth in Section 23.4 of
the Master Lease has been incorporated by reference into this Sublease pursuant
to Section 3 above and may be exercised by Sublessor with respect to any
Assignment or Sublease (as defined in Section 12.a above) satisfying the
requirements of such Section 23.4.

13.

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     13. Insurance. All insurance policies required to be carried by Sublessee
pursuant to the Master Lease shall contain a provision whereby Sublessor and
Landlord are each named as additional insureds under such policies.

     14. Maintenance and Repair.

          a. Obligations. Sublessee shall, at its sole cost and expense,
maintain the Sublet Space in good order, condition and repair during the
Sublease Term, ordinary wear and tear excepted, including light bulbs and
equipment within the Sublet Space, fixtures, interior walls and interior
surfaces of exterior walls and Alterations made by or for the benefit of
Sublessee. All such work shall be done with contractors previously approved in
writing by Sublessor. Sublessee shall inform Sublessor in writing of any
material repair or maintenance projects prior to their commencement. Sublessor
shall maintain the plumbing systems, electrical and lighting fixtures, HVAC
systems, ceilings, windows, doors, plate glass and skylights located within the
Building in good condition and repair, ordinary wear and tear excepted, and
Sublessee’s pro rata share (as reasonably determined by Sublessor) of the costs
thereof shall be due and payable as additional rent to Sublessor within thirty
(30) days after Sublessor’s demand therefor. Notwithstanding the foregoing,
Sublessee acknowledges that Landlord has the right, pursuant to Section 12.2 of
the Master Lease, to take over the maintenance and repair of any HVAC, plumbing,
electrical or other systems or equipment within the Premises and to include the
cost of such work as Operating Expenses of the Building.

          b. Failure to Perform. If Sublessee fails to perform Sublessee’s
obligations under this Section 14, Sublessor may, in addition to any other
rights and remedies available under this Sublease, at law or in equity, enter
upon the Sublet Space after five (5) days’ notice to Sublessee (except in the
case of emergency, in which case no notice shall be required), perform such
obligations on Sublessee’s behalf and put the Sublet Space in good order,
condition and repair, and the cost thereof, together with interest thereon at
the Effective Rate, shall be due and payable as additional rent to Sublessor
upon demand by Sublessor. Sublessor’s performance of Sublessee’s obligations
under this Section 14.b shall not be deemed a waiver or cure of such default by
Sublessee.

          c. Repairs Upon Surrender. Upon the expiration or earlier termination
of the Sublease Term, Sublessee, at its sole cost and expense, shall surrender
the Sublet Space to Sublessor in the condition described in, and in accordance
with the terms of, Section 29 of the Master Lease. Any damage or deterioration
of the Sublet Space shall not be deemed ordinary wear and tear if the same could
have been prevented by reasonable maintenance practices. Sublessee shall repair
any damage to the Sublet Space occasioned by the installation or removal of
Sublessee’s Alterations, trade fixtures, furnishings and/or equipment.

     15. Payment Upon Execution. Upon execution of this Sublease, and as a
condition precedent to the effectiveness of this Sublease, Sublessee shall pay
to Sublessor cash in the amount of Three Hundred Thirty Five Thousand Four
Hundred Sixty and 75/100 Dollars ($335,460.75) (the “Payment”). The Payment
shall be non-refundable to Sublessee, except and then only to the extent as
expressly set forth in the last sentence of this Section 15 and in Section 19.c
below. Sublessor may use and commingle the Payment with other funds of
Sublessor. Provided that, as of the first day of the month of the Sublease Term
for which the applicable

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credit to Basic Rent contemplated in this sentence is to be made, this Sublease
is in full force and effect and Sublessee is not in default of any of its
obligations under this Sublease, Sublessor shall credit the Payment to Basic
Rent payable by Sublessee under this Sublease for the original Sublet Space as
follows (i) an amount equal to Twenty Four Thousand Three Hundred Eight and
75/100 Dollars ($24,308.75) shall be credited to Basic Rent for the original
Sublet Space for each of the following months: January 2006, February 2006 and
March 2006; and (ii) an amount equal to Twenty Nine Thousand One Hundred Seventy
and 50/100 Dollars ($29,170.50) shall be credited to Basic Rent for the original
Sublet Space for each of the following months: April 2010, May 2010, June 2010,
July 2010, August 2010, September 2010, October 2010, November 2010 and
December 2010. In the event of any termination of this Sublease caused solely by
the fault or default of Sublessor (including any termination of this Sublease
due to a termination of the Master Lease caused solely by the fault or default
of Sublessor), Sublessee shall be entitled to the return (without payment of any
interest thereon) of any portion of the Payment which was to have been credited
by Sublessor pursuant to this Section 15 to Basic Rent payable by Sublessee
under this Sublease for the original Sublet Space becoming due after the
effective date of such termination of this Sublease.

     16. Right of First Offer. Subject to, and in accordance with, the
provisions of this Section 16, effective as of the Commencement Date and
continuing thereafter throughout the Sublease Term, Sublessee shall have a right
of first offer (the “Right of First Offer”) to sublease any portion of the
Premises, other than the Expansion Space, which is separately addressed in
Section 17 below and shall be subleased by Sublessee, if at all, pursuant to
Section 17 below (the “First Offer Space”) when the First Offer Space becomes
“available for sublease” during the Sublease Term. Space shall not be deemed
“available for sublease” if (i) the subtenant under an expiring sublease of such
space renews or extends its sublease pursuant to a right or option in effect as
of the Commencement Date, or (ii) Landlord exercises any recapture right under
the Master Lease with respect to such space or otherwise subleases or takes such
space back from Sublessor. Upon First Offer Space becoming available for
sublease, Sublessor shall deliver to Sublessee a written notice setting forth
the terms and conditions upon which Sublessor would be willing to sublease the
First Offer Space to Sublessee (the “Notice”), which terms and conditions shall
be based on Sublessor’s reasonable determination of the fair market rental value
of the First Offer Space, whereupon Sublessee shall have ten (10) business days
in which to elect by delivery of written notice to Sublessor whether to sublease
the First Offer Space on all of the terms and conditions of the Notice. If
Sublessee does not exercise its Right of First Offer with regard to the Notice
within the ten (10) business day period, Sublessor may sublease the First Offer
Space to any party upon any terms and conditions Sublessor elects, and the Right
of First Offer shall terminate and have no further force or effect during the
Sublease Term with respect to the particular First Offer Space that was the
subject of the Notice. In other words, if Sublessee does not timely exercise its
Right of First Offer with respect to a particular First Offer Space, Sublessee
shall thereafter have no further rights under this Section 16 with respect to
that particular First Offer Space, and Sublessor shall have no obligation to
offer that particular First Offer Space to Sublessee again. If Sublessee timely
exercises its Right of First Offer with regard to the Notice, the Parties shall
promptly enter into an amendment to this Sublease confirming Sublessee’s
sublease of the First Offer Space on the terms set forth in the Notice and for a
term coterminous with the original Sublet Space (including appropriate revisions
to Basic Rent, description of the Sublet Space, Sublessee’s Share and the number
of parking spaces available to Sublessee pursuant to this Sublease), which
amendment shall be

15.

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subject to the consent of Landlord. The Right of First Offer is personal to
Sublessee and shall be inapplicable and null and void if, on the date of
exercise of the Right of First Offer or on the date immediately preceding the
date the sublease term for the First Offer Space is to commence (i) Sublessee
has assigned its interest under this Sublease, or (ii) Sublessee is not in
occupancy of the entire original Sublet Space and the entirety of any First
Offer Space and Expansion Space, as defined in Section 17 below, previously
subleased by Sublessee pursuant to this Sublease (or, if possession of any such
previously-subleased First Offer Space and/or Expansion Space has not yet been
delivered to Sublessee, Sublessee does not intend to occupy the entirety of such
space once possession is delivered, but instead intends to assign its interest
under this Sublease with respect to such space or sublease such space in whole
or in part). Additionally, the Right of First Offer shall be inapplicable and
null and void if Sublessee is in default under this Sublease on the date of
Sublessee’s exercise of the Right of First Offer or on the date immediately
preceding the date the sublease term for the First Offer Space is to commence.

     17. Option to Expand. As of the Effective Date, Sublessor subleases that
certain portion of the Premises consisting of approximately nineteen thousand
(19,000) rentable square feet located on the first floor of Buildings F and G
(the “Expansion Space”) to Mailfrontier, Inc. (“Mailfrontier”). The term of
Mailfrontier’s sublease (the “Mailfrontier Sublease”) expires on November 30,
2006, and Mailfrontier has two (2) options to extend the term of the
Mailfrontier Sublease, each for a period of one (1) year. Subject to, and in
accordance with, the provisions of this Section 17, upon the expiration of the
initial term of the Mailfrontier Sublease, provided Mailfrontier has not
exercised its option to extend the initial term of the Mailfrontier Sublease,
or, upon the expiration of the extended term of the Mailfrontier Sublease, in
the event Mailfrontier has exercised one (1) or both of its one (1)-year options
to extend the term of the Mailfrontier Sublease, Sublessee shall have the option
(the “Expansion Option”) to expand into the Expansion Space. Sublessee shall
exercise the Expansion Option by delivering a notice (the “Expansion Space
Notice”) to Sublessor within ten (10) business days after Sublessee’s receipt of
written notice from Sublessor confirming the expiration date of the term of the
Mailfrontier Sublease (based on Mailfrontier’s exercise, or failure to exercise,
its extension options under the Mailfrontier Sublease). If Sublessee does not
timely deliver the Expansion Space Notice, Sublessor may sublease the Expansion
Space to any party upon any terms and conditions Sublessor elects, and the
Expansion Option shall terminate and have no further force or effect. If
Sublessee timely delivers the Expansion Space Notice, the Expansion Space shall
be subleased by Sublessee upon the same terms and conditions applicable to the
original Sublet Space and for a term coterminous with the original Sublet Space,
except that the Basic Rent for the Expansion Space shall be equal to the
then-Prevailing Market Rent for the Expansion Space, as determined pursuant to
Exhibit D, attached hereto. Promptly after the determination of the Prevailing
Market Rent for the Expansion Space, the Parties shall enter into an amendment
to this Sublease confirming Sublessee’s sublease of the Expansion Space
(including appropriate revisions to Basic Rent, description of the Sublet Space,
Sublessee’s Share and the number of parking spaces available to Sublessee
pursuant to this Sublease), which amendment shall be subject to the consent of
Landlord. The Expansion Option is personal to Sublessee and shall be
inapplicable and null and void if, on the date of the Expansion Space Notice or
on the date immediately preceding the date the sublease term for the Expansion
Space is to commence, (i) Sublessee has assigned its interest under this
Sublease, or (ii) Sublessee is not in occupancy of the entire original Sublet
Space and the entirety of any First Offer Space, as defined in Section 16 above,
previously subleased by Sublessee pursuant to this Sublease (or, if

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possession of any such previously-subleased First Offer Space has not yet been
delivered to Sublessee, Sublessee does not intend to occupy the entirety of such
First Offer Space once possession is delivered, but instead intends to assign
its interest under this Sublease with respect to such First Offer Space or
sublease such First Offer Space in whole or in part). Additionally, the
Expansion Option shall be inapplicable and null and void if Sublessee is in
default under this Sublease on the date of the Expansion Space Notice or on the
date immediately preceding the date the sublease term for the Expansion Space is
to commence.

     18. Brokerage Commission. Sublessor shall pay a brokerage commission to the
Broker for Sublessee’s subletting of the Sublet Space as provided for in a
separate agreement between Sublessor and the Broker. Sublessee warrants for the
benefit of Sublessor that its sole contact with Sublessor or the Sublet Space in
connection with this transaction has been directly with Sublessor and the
Broker. Sublessee further warrants for the benefit of Sublessor that no other
broker or finder can properly claim a right to a commission or a finder’s fee
based upon contacts between the claimant and Sublessee with respect to the other
party or the Sublet Space. Sublessee shall indemnify, defend by counsel
acceptable to Sublessor and hold Sublessor harmless from and against any loss,
cost or expense, including, but not limited to, attorneys’ fees and court costs,
resulting from any claim for a fee or commission by any broker or finder, other
than any claims by the Broker, in connection with the Sublet Space and this
Sublease.

     19. Miscellaneous.

          a. Entire Agreement. This Sublease contains all of the covenants,
conditions and agreements between the Parties concerning the Sublet Space, and
shall supersede all prior correspondence, agreements and understandings
concerning the Sublet Space, both oral and written. No addition or modification
of any term or provision of this Sublease shall be effective unless set forth in
writing and signed by both Sublessor and Sublessee.

          b. Captions. All captions and headings in this Sublease are for the
purposes of reference and convenience and shall not limit or expand the
provisions of this Sublease.

          c. Landlord’s Consent. This Sublease is conditioned upon Landlord’s
written approval of this Sublease within thirty (30) days after the Effective
Date. If Landlord refuses to consent to this Sublease, or if the thirty (30) day
consent period expires, this Sublease shall terminate and neither Party shall
have any continuing obligation to the other with respect to the Sublet Space;
provided Sublessor shall return the Letter of Credit and the Payment (without
payment of any interest thereon), if previously delivered to Sublessor, to
Sublessee.

          d. Authority. Each person executing this Sublease on behalf of a party
hereto represents and warrants that he or she is authorized and empowered to do
so and to thereby bind the Party on whose behalf he or she is signing.

          e. Notices. All notices, demands, consents and approvals which may or
are required to be given by either Party to the other hereunder shall be in
writing and either personally delivered, sent by commercial overnight courier,
or mailed, certified or registered, postage prepaid, and addressed to the Party
to be notified at the address for such Party as

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specified in the Defined Terms section of this Sublease or to such other place
as the Party to be notified may from time to time designate by at least ten
(10) days’ notice to the notifying Party. Notices shall be deemed served upon
receipt or refusal to accept delivery. Sublessee appoints as its agent to
receive the service of all default notices and notice of commencement of
unlawful detainer proceedings the person in charge of or apparently in charge of
occupying the Sublet Space at the time, and, if there is no such person, then
such service may be made by attaching the same on the main entrance of the
Sublet Space.

          f. Parking. During the Term of this Sublease, Sublessee may use fifty
nine (59) of the parking spaces available for the Development (subject to
adjustment pursuant to the terms of Section 2.2 of the Master Lease), on an
unreserved, non-exclusive, and unassigned basis, without additional charge to
Sublessee. Sublessee shall use such parking spaces pursuant to all of the terms
and conditions of the Master Lease with respect thereto. In the event any First
Offer Space or the Expansion Space is added to this Sublease pursuant to
Section 16 or Section 17 above, respectively, Sublessee shall have the right to
use, in addition to and on the same terms and conditions of this Section 19.f
applicable to, the original fifty nine (59) parking spaces, three (3) parking
spaces available for the Development for each one thousand (1,000) rentable
square feet of the First Offer Space or Expansion Space, as applicable.

          g. Common Areas. Sublessor has the right, in its sole discretion, from
time to time, to: (i) make changes to the common areas located in the Building,
including, without limitation, changes in the location, size, shape and number
of entrances, corridors and walkways; (ii) close such common areas temporarily
for maintenance purposes so long as reasonable access to the Sublet Space
remains available; (iii) use such common areas while engaged in making
additional improvements, repairs or alterations to the Building or any portion
thereof; and (iv) do and perform any other acts or make any other changes in, to
or with respect to such common areas and other parts of the Building as
Sublessor shall deem appropriate, including but not limited to, allowing the
first floor lobby area to be used by subtenants of the Building. The exercise of
Sublessor’s rights pursuant to this subsection shall be subject to the condition
that such exercise does not materially interfere with Sublessee’s use of the
Sublet Space.

          h. Signage. Sublessor shall, at Sublessor’s sole cost and expense,
install standard lobby directory signage in the Building designating the Sublet
Space as Sublessee’s space. In addition, Sublessee, at Sublessee’s sole cost and
expense, shall have the right to install identification signage upon the entry
to the Sublet Space, provided such signage shall be installed in accordance
with, and shall otherwise subject to the terms of, the Master Lease, and shall
require the prior written consent of both Landlord and Sublessor as to the
materials and content of such sign (and as to any subsequent changes to such
sign). Sublessee, at Sublessee’s sole expense, shall: (i) maintain such sign
during the Sublease Term, and (ii) remove such sign upon the expiration or
earlier termination of this Sublease and return the area on which the sign is
located to the condition in which it existed prior to the installation of such
sign.

          i. First Amendment. Pursuant to that certain Sublease dated as of
May 6, 2004 between Sublessor, as sublandlord, and Sublessee, as subtenant, with
respect to the

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premises located at 3160 Porter Drive in Palo Alto, California, effective as of
July 1, 2004, Sublessee has agreed to perform and observe all of the
obligations, covenants, terms and conditions to be performed or observed by
Sublessor under the First Amendment arising from and after July 1, 2004, and
Sublessee hereby reaffirms its agreement to so perform and observe such
obligations, covenants, terms and conditions. The First Amendment relates to the
walkway that connects the Building to the building located at 3160 Porter Drive.

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19.

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     IN WITNESS WHEREOF, the Parties hereto have executed one (1) or more copies
of this Sublease, effective as of the Effective Date.

            “Sublessor”

INCYTE CORPORATION, a Delaware corporation
      By:   /s/ David C. Hastings               Its: EVP, CFO                
By:                 Its:        

            “Sublessee”

CONNETICS CORPORATION, a Delaware corporation
      By:   /s/ John L. Higgins               Its: CFO                 By:      
          Its:        

20.