Document:

exv10w14

 

Exhibit 10.14

ShoreTel, Inc.

960 Stewart Drive

Sunnyvale, CA 94085

July 19, 2004

Mr. Thomas van Overbeek

			
	Re:	 	Terms of Employment Separation and Releases of Claims

Dear Tom:

     This letter confirms the agreement (this “Agreement’) between you and ShoreTel, Inc. (the
“Company” or “ShoreTel”) concerning your separation of employment with the Company.

     1. Amendment of Company Options. It is acknowledged and agreed that the Company has
previously granted you stock options under the Company’s 1997 Stock Option Plan (the “Plan”) to
purchase an aggregate of 13,596,299 shares of the Company’s common stock, which, as of the date
hereof, 6,776,938 are vested (the “Company Options”). You will continue to vest in your Company
Options pursuant to their current vesting schedule so long as you continue to serve as a member of
the Company’s Board of Directors (the “Board”). Notwithstanding anything to the contrary as may be
provided for in any written agreement between you and the Company (including, without limitation,
any option agreement, stock purchase agreement, employment offer (including that certain offer of
employment from the Company dated December 12, 2001) or employment agreement), by this Agreement,
your Company Options are hereby expressly amended to preclude forever any accelerated vesting and
exercisability (including any accelerated lapse of the Company’s repurchase right) in the event of
(i) your termination of employment without cause, (ii) your termination of employment for good
reason (e.g., a constructive termination or otherwise), (iii) a change of control of the Company,
or (iv) upon the occurrence of a corporate transaction that results in a change of control of the
Company (the “Old Acceleration Benefit”). In lieu of the Old Acceleration Benefit and effective as
of the Effective Date (as defined below): all of your unvested Company Options will fully vest and
become exercisable (or the Company’s repurchase right shall fully lapse) if, within the six (6)
month period starting on July 19, 2004 and ending on January 19, 2005, either (i) the Company
closes a change of control as defined in the Plan (a “Change of Control”), or (ii) upon the
occurrence of a corporate transaction that results in a Change of Control of the Company (the “New
Acceleration Benefit”). In the event the Company does not undergo a Change of Control or a
corporate transaction does not occur that results in a Change of Control of the Company during such
six (6) month period, the New Acceleration Benefit shall lapse and be of no force

 

 

and effect, and your Company Options (or shares exercised in connection with your Company
Options that remain subject to the Company’s repurchase right), shall continue to vest in
accordance with their current vesting schedule (without the Old Acceleration Benefit) so long as
you continue to serve on the Board.

     2. COBRA Continuation Coverage. The Company shall use commercially reasonable efforts
to continue your health care coverage as an active employee under its group health plan so long as
you continue to serve on the Board. In the even the Company is unable to continue such coverage
(for instance, due to such coverage being available only to employees of the Company), the Company
will reimburse you for your and your wife’s applicable COBRA premium (provided you timely elect
COBRA continuation coverage) until the earlier of: (i) the date you no longer serve as a member of
the Board, (ii) the date you no longer are eligible to receive continuation coverage pursuant to
COBRA, or (iii) the date you become covered under another employer’s group health plan.

     3. Repayment of Promissory Note. Pursuant to the terms of a promissory note entered
into between you and the Company dated June 20, 2002 (and as amended thereafter in March 2003) (the
“Note”) you agree to repay the outstanding principle and accrued interest pursuant to the terms of
the Note.

     4. Resignation Date; Board of Directors.

          (a) As of July 19, 2004, you will deemed to have voluntarily resigned your employment with the
Company without further action on your part (“Resignation Date”), and your employment with the
Company will end on such date.

          (b) Effective as of the Resignation Date the Company will take such corporate actions as are
necessary to create a new sixth board seat on the Company’s Board of Directors (the “At-Large
Seat”), which seat will be (i) elected by the holders of a majority of all of the Company’s
outstanding Common Stock and Preferred Stock voting together as a single class; and (ii) filled by
a nominee selected by both (A) at least 2 out of the 3 directors elected by the holders of
Preferred Stock and (B) the Company’s “CEO-director,” all under the terms of the Company’s Fourth
Amended and Restated Shareholders’ Voting Agreement, as amended. Effective as of the Resignation
Date, it is understood that you will be appointed by the Board to fill the newly created At-Large
Seat on the Board to serve until your successor may be nominated and elected.

     5. Waiver of Claims. In consideration for the Company’s payments and promises set
forth in the Agreement, you agree to release and waive any and all claims you may have against the
Company and its owners, agents, officers, shareholders, employees, directors, attorneys,
subscribers, subsidiaries, affiliates, successors and assigns (collectively “Releasees”), whether
known or not known, including, without limitation, claims under any employment laws, including, but
not limited to, claims of unlawful discharge, breach of contract, breach of the covenant of good
faith and fair dealing, fraud, violation of public policy, defamation, physical injury, emotional
distress, claims for additional compensation or benefits arising out of your employment or
separation of employment, claims under Title VII of the 1964 Civil Rights Act, as amended, the
California Fair Employment and Housing Act and any other laws and/or

2

 

regulations relating to employment or employment discrimination, including, without
limitation, claims based on age or under the Age Discrimination in Employment Act or Older Workers
Benefit Protection Act and/or claims based upon disability or under the Americans with Disabilities
Act. By signing below, you expressly waive any benefits of Section 1542 of the Civil Code of the
State of California, which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.”

     You and the Company agree that the waiver and release set forth in this section five (5) shall
be and remain in effect as to the matters released. The waiver and release do not extend to any
obligations of the Company created under this Agreement.

     6. Return of Company Property. You hereby represent and warrant to the Company that
you have returned all real or intangible property or data of the Company of any type whatsoever
that has been in his possession or control.

     7. Proprietary Information. You hereby acknowledge that you are bound by the Employee
Invention Assignment and Confidentiality Agreement dated [insert date] (the “Employee Invention
Agreement”) and that as a result of your employment with the Company you had access to the
Company’s Proprietary Information (as defined in the Employee Invention Agreement), that you will
hold all Proprietary Information in strictest confidence and that you will not make use of such
Proprietary Information on behalf of anyone. You further confirm that you have delivered to the
Company all documents and data of any nature containing or pertaining to such Proprietary
Information and that you have not taken with you any such documents or data or any reproduction
thereof.

     8. Legal and Equitable Remedies. The parties have the right to enforce this Agreement
and/or Release and any of the provisions by injunction, specific performance or other equitable
relief without prejudice to any other rights or remedies the parties may have at law or in equity
for breach of this Agreement.

     9. Attorneys’ Fees. If any action is brought to enforce the terms of this Agreement
and/or Release, the prevailing party will be entitled to recover his or its reasonable attorneys’
fees, costs and expenses from the other party, in addition to any other relief to which the
prevailing party may be entitled.

     10. No Admission of Liability. This Agreement and Release are not and shall not be
construed or contended by you to be an admission or evidence of any wrongdoing or liability on the
part of Releasees, their representatives, heirs, executors, attorneys, agents, partners, officers,
shareholders, directors, employees, subsidiaries, affiliates, divisions, successors or assigns.
This Agreement and Release shall be afforded the maximum protection allowable under California
Evidence Code Section 1152 and/or any other state or Federal provisions of similar effect.

3

 

     11. Review of Separation Agreement and Effective Date of Release. The Company hereby
advises you to consult with your own attorney concerning the terms of this Release. You understand
that you may take up to twenty-one (2l) days to consider this Release and, by signing below, affirm
that you were advised to consult with an attorney prior to signing this agreement. You also
understand you may revoke this agreement within seven (7) days of signing this document. This
Release will be effective (the Effective Date”) on the 8th day after you sign it.

     12. Entire Agreement. This Agreement constitutes the entire agreement between you and
the Company with respect to the subject matter hereof and supersedes all prior negotiations and
agreements, whether written or oral other than your Employee Invention Assignment and
Confidentiality Agreement dated  02/24/02 , the Note and documents evidencing your
Company Options (including the Plan) and shares purchased with respect to your Company Options.
You acknowledge that neither the Company nor its agents or attorneys have made any promise,
representation or warranty whatsoever, either express or implied, written or oral, which is not
contained in this Agreement for the purpose of inducing you to execute the Agreement, and you
acknowledge that you have executed this Agreement in reliance only upon such promises,
representations and warranties as are contained herein.

     13. Modification. It is expressly agreed that this Agreement may not be altered,
amended, modified, or otherwise changed in any respect except by another written agreement that
specifically refers to this Agreement, executed by authorized representatives of each of the
parties.

     14. Effective Date of Agreement. This Agreement will be effective on the Effective
Date.

     If you agree to abide by the terms outlined in this Agreement, please sign the attached copy
and return it to me.

	 	 	 	 	 
	 	Sincerely,

 	 
	 	By:  	/s/ Seth Neiman
 	 
	 	 	Seth Neiman 	 
	 	 	Board Member 	 
	 

I have read, understand and agree to the terms set forth above:

	 	 	 
	/s/ Thomas van Overbeek
 

Thomas van Overbeek

	 	Date: Aug 9, 2004 

4exv10w15

 

Exhibit 10.15

* * * * * * * * * * * * * * * * * * * *

Sublease

OAKMEAD WEST BUILDINGS PROJECT

BUILDING G

960 STEWART DRIVE

FIRST FLOOR

* * * * * * * * * * * * * * * * * * * *

Between

APPLIED MATERIALS, INC.

(Sublandlord)

and

SHORELINE TELEWORKS

(Subtenant)

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page(s)	 
	SCHEDULE	 	 	1	 
	 	 	 
	 	 	 	 
	1.	 	SUBLEASE AGREEMENT
	 	 	4	 
	 	 	 
	 	 	 	 
	2.	 	RENT
	 	 	5	 
	 	 	 
	 	 	 	 
	3.	 	CONSTRUCTION OF INTERIOR IMPROVEMENTS AND POSSESSION
	 	 	12	 
	 	 	 
	 	 	 	 
	4.	 	SERVICES AND UTILITIES
	 	 	13	 
	 	 	 
	 	 	 	 
	5.	 	ALTERATIONS
	 	 	13	 
	 	 	 
	 	 	 	 
	6.	 	USE OF PREMISES
	 	 	16	 
	 	 	 
	 	 	 	 
	7.	 	GOVERNMENTAL REQUIREMENTS AND BUILDING RULES
	 	 	17	 
	 	 	 
	 	 	 	 
	8.	 	REPAIR AND MAINTENANCE
	 	 	17	 
	 	 	 
	 	 	 	 
	9.	 	WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE
	 	 	19	 
	 	 	 
	 	 	 	 
	10.	 	FIRE AND OTHER CASUALTY
	 	 	21	 
	 	 	 
	 	 	 	 
	11.	 	EMINENT DOMAIN
	 	 	22	 
	 	 	 
	 	 	 	 
	12.	 	RIGHTS RESERVED TO LANDLORD AND SUBLANDLORD
	 	 	22	 
	 	 	 
	 	 	 	 
	13.	 	SUBTENANT’S DEFAULT
	 	 	24	 
	 	 	 
	 	 	 	 
	14.	 	SUBLANDLORD REMEDIES
	 	 	24	 
	 	 	 
	 	 	 	 
	15.	 	SURRENDER
	 	 	26	 
	 	 	 
	 	 	 	 
	16.	 	HOLDOVER
	 	 	27	 
	 	 	 
	 	 	 	 
	17.	 	SUBORDINATION TO GROUND LEASES AND MORTGAGES
	 	 	27	 
	 	 	 
	 	 	 	 
	18.	 	ASSIGNMENT AND SUBLEASE
	 	 	28	 
	 	 	 
	 	 	 	 
	19.	 	CONVEYANCE BY SUBLANDLORD OR LANDLORD
	 	 	30	 
	 	 	 
	 	 	 	 
	20.	 	ESTOPPEL CERTIFICATE
	 	 	30	 
	 	 	 
	 	 	 	 
	21.	 	FINANCIAL STATEMENTS
	 	 	31	 
	 	 	 
	 	 	 	 
	22.	 	LEASE DEPOSIT
	 	 	31	 

-i-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page(s)	 
	23.	 	FORCE MAJEURE
	 	 	32	 
	 	 	 
	 	 	 	 
	24.	 	NOTICES
	 	 	32	 
	 	 	 
	 	 	 	 
	25.	 	QUIET POSSESSION
	 	 	32	 
	 	 	 
	 	 	 	 
	26.	 	REAL ESTATE BROKERS
	 	 	33	 
	 	 	 
	 	 	 	 
	27.	 	MISCELLANEOUS
	 	 	33	 
	 	 	 
	 	 	 	 
	28.	 	UNRELATED BUSINESS INCOME
	 	 	35	 
	 	 	 
	 	 	 	 
	29.	 	HAZARDOUS SUBSTANCES
	 	 	35	 
	 	 	 
	 	 	 	 
	30.	 	EXCULPATION
	 	 	37	 
	 	 	 
	 	 	 	 
	31.	 	EXTENSION OPTION
	 	 	37	 
	 	 	 
	 	 	 	 
	32.	 	RIGHT OF FIRST OFFER
	 	 	38	 

EXHIBITS

	 	 	 
	EXHIBIT A

	 	DESCRIPTION OF PROJECT AND PREMISES/BUILDINGS
	 
	 	 
	EXHIBIT B

	 	RULES AND REGULATIONS
	 
	 	 
	EXHIBIT C

	 	WORK LETTER AGREEMENT
	 
	 	 
	EXHIBIT D

	 	MORTGAGES CURRENTLY AFFECTING THE PROJECT
	 
	 	 
	EXHIBIT E

	 	SHELL UPGRADES
	 
	 	 
	EXHIBIT F

	 	LETTER OF CREDIT
	 
	 	 
	EXHIBIT G

	 	LIST OF HAZARDOUS SUBSTANCES AND QUANTITIES
USED BY TENANT

-ii-

 

SUBLEASE

     THIS SUBLEASE (the “Sublease”) is made as of October _, 1998 (dated for reference
purposes only and referred to herein as the “Effective Date”) between Applied Materials, Inc., a
Delaware corporation (the “Sublandlord”) and Shoreline Teleworks, a California corporation
(“Subtenant”). The term “Project” means the seven (7) buildings (“Buildings”) and
other improvements commonly known as the “Oakmead West Buildings Project” located on the land (the
“Land”) in Sunnyvale, California, described on EXHIBIT A-1.

     Sublandlord is lessee of the Project pursuant to the Lease dated September 9, 1997 (“Master
Lease”) between Sublandlord as Tenant and CarrAmerica Realty Corporation as Landlord.

     The following schedule (the “Schedule”) is an integral part of this Sublease. Terms
defined in this Schedule shall have the same meaning throughout the Sublease.

SCHEDULE

	 	1.	 	Subtenant: Shoreline Teleworks.
	 
	 	2.	 	Premises: The “Premises” means and includes the portions of the first floor of
Building G (the “Building”), 960 Stewart Drive, Sunnyvale, California,
designated Area A, Area B, and Area C on EXHIBIT A-2 attached hereto, occupied
by Tenant at any time during the Term of this Sublease, together with (1) a
nonexclusive right, in common with other tenants of the Building, to use the Building
Common Areas, and (2) a nonexclusive right, in common with other tenants of the
Project, to use the Project Common Areas subject to the Master Lease.
	 
	 	3.	 	Rentable Square Footage of the Premises: 31,891 sq. ft.
	 
	 	4.	 	Subtenant’s Proportionate Share: The Percentage listed below for Landlord’s
Operating Costs and Taxes and Sublandlord’s Operating Costs allocated to the Building,
plus the Percentage listed below for Landlord’s Operating Costs and Taxes but not
allocated to specific Buildings by Landlord.

	 	 	 	 	 	 	 	 	 
	 	 	Proportionate Share	 	Proportionate Share
	 	 	for Building	 	for Project
	Area A
	 	 	34.49	%	 	 	5.16	%
	Area A + Area B
	 	 	39.20	%	 	 	5.87	%
	Area A + Area B + Area C
	 	 	50	%	 	 	7.49	%

	 

	 
	*   	This percentage (7.49%) represents the ratio of the square footage of the Premises
to the aggregate square footage of all Buildings in the Project. As the aggregate
square footage of all Buildings subject to the Master Lease declines,

1

 

	 	 	 	this percentage may be adjusted to a percentage equal to the ratio of the square
footage of the Premises to the aggregate square footage of the Buildings then
subject to the Master Lease, but the revised percentage would apply only against the
Landlord Operating Costs allocated to all Buildings then subject to the Master Lease
but not to any one Building.
	 
	 	5.	 	Lease Deposit: $42,900.00 due upon execution of this Sublease, representing
advance payment of the first month’s rent (“Advance Rent Deposit”), plus a security
deposit in the form of an irrevocable letter of credit in the amount of $300,000.00
(subject to subsequent reduction as provided in Section 22).
	 
	 	6.	 	Permitted Use: Office; storage and shipping of equipment and parts; assembly
(using parts manufactured elsewhere), repair and testing of machinery and equipment;
research, testing and demonstration laboratory; and ancillary uses permitted under
applicable laws.
	 
	 	7.	 	Subtenant’s Real Estate Broker for this Lease: Cornish & Carey Commercial Real
Estate
	 
	 	8.	 	Sublandlord’s Real Estate Broker for this Lease: Wayne Mascia Associates
	 
	 	9.	 	Tenant Improvements: To be provided by Sublandlord. See Work letter.
	 
	 	10.	 	Commencement Date: Area A             Approximately February 1, 1999

                                        Area B            Approximately February 1, 2000

                                        Area C            Approximately October 1, 2000; See Paragraph 1.A.

	 	11.	 	Term: Commencing on the Commencement Date and expiring May 31, 2004
	 
	 	12.	 	Guarantor: None
	 
	 	13.	 	Base Rent:

	 	 	 	 	 	 	 	 	 
	 	 	Monthly/	 	Monthly*
	Months	 	Square Foot	 	Base Rent
	  1-12
	 	$	1.95	 	 	$	42,900.00	 
	13-21
	 	$	2.00	 	 	$	50,000.00	*
	22-24
	 	$	2.00	 	 	$	63,782.00	*
	25-36
	 	$	2.05	 	 	$	65,376.55	 
	37-48
	 	$	2.10	 	 	$	66,971.10	 
	49-60
	 	$	2.15	 	 	$	68,565.65	 
	61-64
	 	$	2.20	 	 	$	70,160.20	 

	 

	 
	*   	Monthly Base Rent as shown assumes that the Commencement Date for Area B and for Area C is
the first day of the thirteen (13th) month and twenty-second (22) month, respectively

2

 

	 	14.	 	Master Lease:                     Lease dated September 9, 1997 between Applied Materials, Inc. as
Tenant
                                               and CarrAmerica Realty Corporation as Landlord
	 
	 	15.	 	Landlord or Master
	 
	 	 	 	Landlord:                            CarrAmerica Realty Corporation

3

 

     1.
SUBLEASE AGREEMENT. On the terms stated in this Sublease, Sublandlord leases the
Premises to Subtenant, and Subtenant leases the Premises from Sublandlord, for the Term beginning
on the Commencement Date and ending on the Termination Date unless sooner terminated pursuant to
this Sublease.

          A. Commencement Date. The Commencement Date shall be the date established pursuant to
this section, and the Sublease shall expire on the date set forth in the Schedule.

               (1) The Commencement Date for Area A shall be the earliest occurring of the following:

                    (i) The date of Substantial Completion of the Tenant Improvements, as such term is defined in
the Work Letter Agreement attached hereto as EXHIBIT C (“Work Letter Agreement”); or

                    (ii) The date Subtenant commences occupancy of Area A.

               (2) The Commencement Date for Area B shall be the first day of the
thirteenth (13th) month of the Term.

               (3) The Commencement Date for Area C shall be the first day of the
twenty-second (22nd) month of the Term.

          B. Subtenant Delays. If the Commencement Date for Area A has not occurred on or
before February 1, 1999 due to Subtenant Delays, the Commencement Date shall be the date on which
the Commencement Date would have occurred but for Subtenant Delays. Subtenant agrees that if
Sublandlord is unable to deliver possession of the Premises to Subtenant by February 1, 1999 (the
anticipated Commencement Date of the Sublease term), this Sublease shall not be void or voidable,
nor shall Sublandlord be liable to Subtenant for any loss or damage resulting therefrom, but in
such event the obligation to pay Rent shall be suspended from the anticipated Commencement Date
until the actual Commencement Date except to the extent such delay is due to Subtenant Delays.
Subtenant Delays shall include (i) those defined as Subtenant Delays in the Work Letter Agreement,
and (ii) interference with Sublandlord’s work caused by Subtenant or Subtenants employees or
contractors. If the Commencement Date has not occurred on or before April 1, 1999 (“First
Termination Date”), Subtenant may terminate this Sublease by written notice to Sublandlord on or
before April 15, 1999; provided, however, that the First Termination Date shall be extended by a
period of time equal to any delays due to the Subtenant Delays or due to causes beyond the
reasonable control of Sublandlord (“force majeure”) such as rain, flooding, fire or
other casualty, labor disputes, civil disturbance, war, war-like operations, invasions, rebellion,
hostilities, sabotage, governmental regulations or control, inability to obtain materials, services
or governmental permits despite diligent efforts to do so, or acts of God. If the Commencement Date
has not occurred by August 1, 1999 (“Final Delivery Date”), through no fault of the terminating
party, either party may terminate this Sublease by written notice to the other on or before August
15, 1999. In either event, Sublandlord shall return the Advance Rent Deposit and the Security
Deposit within ten (10) business days.

4

 

          C. Early Occupancy. During the period beginning thirty (30) days prior to the Initial
Commencement Date (the “Early Occupancy Period”), provided that Subtenant’s occupancy does
not interfere with or cause delays to Sublandlord’s construction obligations, Subtenant shall be
permitted to enter such Area for the sole purpose of installation of its equipment cabling,
telecommunications, furniture systems, and other installations necessary for the conduct of
Subtenant’s business. Notwithstanding any other provision herein to the contrary, Subtenant’s
occupancy of such Area during the Early Occupancy Period shall be subject to all of the terms,
covenants and conditions of this Sublease (including Subtenant’s obligations regarding indemnity
and insurance), provided, however, that Subtenant’s obligation to pay Rent with respect to such
Area during the Early Occupancy Period shall be waived. In any event, Subtenant shall be
responsible for any utility charges incurred by Landlord or Sublandlord in connection with
Subtenant’s use of any Area during the Early Occupancy Period.

     2. RENT.

          A. Types of Rent. Subtenant shall pay the following Rent in the form of a check (or
via wire transfer) to Sublandlord pursuant to instructions to be given by Sublandlord to Subtenant
prior to the Commencement Date.

               (1) Base Rent in monthly installments in advance, the first monthly installment due on
or prior to the first day of the second (2nd) month following the Commencement Date (the Advance
Rent Deposit shall be applied against the first month’s Base Rent), and thereafter on or before the
first day of each month of the Term in the amount set forth on the Schedule.

               (2) Operating Cost Share Rent in an amount equal to the sum of (i) Subtenant’s
Proportionate Share of the Operating Costs for the applicable fiscal year of the Sublease charged
to Sublandlord by Landlord pursuant to the Master Lease (“Landlord’s Operating Costs”), and (ii)
Sublandlord’s Operating Costs, as defined in Section 2.3, fairly allocable to the Premises and
Subtenant’s Proportionate Share of Sublandlord’s Operating Costs allocated to the Building but not
any one Premises in the Building; Operating Cost Share Rent shall be due monthly in advance in an
estimated amount, commencing with the Commencement Date, and thereafter on or before the first day
of each month of the Term. Definitions of Operating Costs and Subtenant’s Proportionate Share, and
the method for billing and payment of Operating Cost Share Rent are set forth in Sections 2B, 2C
and 2D.

               (3) Tax Share Rent in an amount equal to the Subtenant’s Proportionate Share of the
Taxes applicable to the Building for the applicable fiscal year of this Sublease, paid
semi-annually as set forth in Section 2.B(1) below. A definition of Taxes and the method for
billing and payment of Tax Share Rent are set forth in Sections 2B, 2C and 2D.

               (4) Additional Rent in the amount of all costs, expenses, liabilities, and amounts
which Subtenant is required to pay under this Sublease, excluding Base Rent, Operating Cost Share
Rent, and Tax Share Rent, but including any interest for late payment of any item of Rent.

5

 

               (5) Rent as used in this Sublease means Base Rent, Operating Cost Share Rent, Tax
Share Rent, and Additional Rent. Subtenant’s agreement to pay Rent is an independent covenant, with
no right of setoff, deduction or counterclaim of any kind.

          B. Payment of Operating Cost Share Rent and Tax Share Rent.

               (1) (a) Payment of Estimated Operating Cost Share Rent and Tax Share Rent. Pursuant
to the Master Lease, Landlord shall estimate the Landlord Operating Costs and Taxes of the Project
by April 1 of each fiscal year, or as soon as reasonably possible thereafter. Landlord may revise
these estimates whenever it obtains more accurate information, such as an increase in utility or
maintenance costs for the Project Common Areas; provided in no event shall the estimate be revised
more than once in any calendar year. Within ten (10) days after receiving the original or revised
estimate from Sublandlord, Subtenant shall pay Sublandlord one-twelfth (1/12th) of Subtenant’s
Proportionate Share of this estimate, multiplied by the number of months that have elapsed in the
applicable fiscal year to the date of such payment including the current month, minus payments
previously made by Subtenant for the months elapsed. On the first day of each month thereafter,
Subtenant shall pay Sublandlord one-twelfth (1/12th) of Subtenant’s Proportionate Share of this
estimate, until a new estimate becomes applicable. Notwithstanding the foregoing, Landlord’s
estimate excludes the portion of the Taxes payable semi-annually to the County of Santa Clara
pursuant to property tax bills for the Project (the “Property Tax Bills”). With respect to Taxes
payable in connection with Property Tax Bills, Sublandlord shall deliver copies of such bills to
Subtenant at least thirty (30) days prior to the Delinquency Date set forth therein, and Subtenant
shall pay to Sublandlord, at least fifteen (15) days prior to the Delinquency Date, Subtenant’s
Proportionate Share of the amount payable thereunder. Any interest or penalties payable by
Sublandlord as a result of Subtenant’s failure to timely pay such Taxes to Sublandlord shall be
deemed Additional Rent payable by Subtenant hereunder.

                    (b) (Payment of Estimated Sublandlord Operating Cost. Sublandlord shall estimate the
Sublandlord’s Operating Cost of the Building and the Premises prior to the Commencement Date and
thereafter by April 1 of each fiscal year, or as soon as reasonably possible thereafter.
Sublandlord may revise these estimates whenever it obtains more accurate information, such as an
increase in utility or maintenance costs for the Building Common Areas; provided that in no event
shall the estimate be revised more than once in any calendar year. Within ten (10) days after
receiving the original or revised estimate from Sublandlord, Subtenant shall pay Sublandlord
one-twelfth (1/12th) of Subtenant’s Proportionate Share of this estimate, multiplied by the number
of months that have elapsed in the applicable fiscal year to the date of such payment including the
current month, minus payments previously made by Subtenant for the months elapsed. On the first day
of each month thereafter, Subtenant shall pay Sublandlord one-twelfth (1/12th) of Subtenant’s
Proportionate Share of this estimate, until a new estimate becomes applicable. Notwithstanding the
foregoing, Sublandlord’s estimate excludes the portion of the Taxes payable semi-annually to the
County of Santa Clara pursuant to property tax bills for the Building, if the Tenant Improvements
for the Building are billed separately (the “Building Property Tax Bills”). With respect to Taxes
payable in connection with Building Property Tax Bills, Sublandlord shall deliver copies of such
bills to Subtenant at least thirty (30) days prior to the Delinquency Date set forth therein, and
Subtenant shall pay to Sublandlord, at least fifteen (15) days prior to the Delinquency Date,
Subtenant’s Proportionate

6

 

Share of the amount payable thereunder. Any interest or penalties payable by Sublandlord as a
result of Subtenant’s failure to timely pay such Taxes to Sublandlord shall be deemed Additional
Rent payable by Subtenant hereunder.

               (2) Correction of Operating Cost Share Rent. Sublandlord shall deliver to Subtenant a
report for the previous fiscal year (the “Operating Cost Report”) promptly after receipt
from Landlord of landlord’s Operating Cost Report, which pursuant to the Master Lease shall be
April 1 of each year, or as soon as reasonably possible thereafter, setting forth (a) the actual
Sublandlord Operating Costs incurred and Landlord Operating Costs charged to Sublandlord, (b) the
amount of Operating Cost Share Rent due from Subtenant, and (c) the amount of Operating Cost Share
Rent paid by Subtenant. Within thirty (30) days after such delivery, Subtenant shall pay to
Sublandlord the amount due minus the amount paid. If the amount paid exceeds the amount due,
Sublandlord shall apply the excess to Subtenant’s payments of Operating Cost Share Rent next coming
due.

          C. Definitions.

               (1) Included Operating Costs. “Landlord Operating Costs” means any expenses,
costs and disbursements of any kind other than Taxes, paid or incurred by Landlord in connection
with the management, maintenance, operation, insurance, repair and other related activities in
connection with any part of the Project and of the personal property, fixtures, machinery,
equipment, systems and apparatus used in connection therewith, including the cost of providing
those services required to be furnished by Landlord under the Master Lease and a reasonable
management fee. “Sublandlord Operating Costs” means any expenses, costs and disbursements
of any kind other than Taxes, paid or incurred by Sublandlord in connection with the management,
maintenance, operation, insurance, repair and other related activities in connection with any part
of the Building and of the personal property, fixtures, machinery, equipment, systems and apparatus
used in connection therewith, including the cost of providing those services required to be
furnished by Sublandlord under this Sublease and a reasonable management fee. “Operating Costs”
shall mean “Landlord Operating Costs” or “Sublandlord Operating Costs”, as the case may be.
Operating Costs shall also include the costs of any capital improvements which are intended to
reduce Operating Costs or improve safety, and those made to keep the Project or the Building in
compliance with governmental requirements promulgated after the Effective Date, or to replace
existing capital improvements, facilities and equipment within the Building or the Project Common
Areas, such as the resurfacing of the parking areas (collectively, “Included Capital
Items”); provided, that the costs of any Included Capital Item shall be amortized by Landlord
or Sublandlord, as the case may be, together with an amount equal to interest at ten percent (10%)
per annum, over the estimated useful life of such item and only amortized costs are included in
Operating Costs, unless the cost of the Included Capital Item is less than Ten Thousand Dollars
($10,000) in which case it shall be expensed in the year in which it was incurred.

     The term Landlord Operating Costs shall include (i) all Operating Costs fairly allocable to
the Building, including all Operating Costs paid with respect to the maintenance, repair,
replacement and use of the Building, and (ii) a proportionate share (based on the gross rentable
area of the Building as a percentage of the gross rentable area of all of the Buildings in the
Project) of all Landlord Operating Costs which relate to the Project in general and are not fairly

7

 

allocable to any one Building in the Project. The term Sublandlord Operating Costs shall
include (i) all Operating Costs fairly allocable to the Premises, including all Operating Costs
paid with respect to the maintenance, repair, replacement and use of the Premises, and (ii) a
proportionate share (based on the gross rentable area of the Premises as a percentage of the gross
rentable area of the Building) of all Sublandlord Operating Costs which relate to the Building in
general and are not fairly allocable to any one premises in the Building.

     If the Project is not fully occupied during any portion of any fiscal year, Landlord may
adjust (an “Equitable Adjustment”) Operating Costs to equal what would have been incurred
by Landlord had the Project been fully occupied. This Equitable Adjustment shall apply only to
Operating Costs which are variable and therefore increase as occupancy of the Project increases.
Landlord may incorporate the Equitable Adjustment in its estimates of Operating Costs.

     If Landlord does not furnish any particular service whose cost would have constituted a
Landlord Operating Cost to a tenant other than Subtenant who has undertaken to perform such service
itself, Landlord Operating Costs shall be increased by the amount which Landlord would have
incurred if it had furnished the service to such tenant.

          (2) Excluded Operating Costs. Operating Costs shall not include:

	 	(a)	 	costs of alterations of tenant
premises;
	 
	 	(b)	 	costs of capital improvements
other than Included Capital Items;
	 
	 	(c)	 	interest and principal payments
on mortgages or any other debt costs, or rental payments on any
ground lease of the Project;
	 
	 	(d)	 	real estate brokers’ leasing
commissions;
	 
	 	(e)	 	legal fees, space planner fees
and advertising expenses incurred with regard to leasing the
Project or Building or portions thereof;
	 
	 	(f)	 	any cost or expenditure for which
Landlord or Sublandlord may be reimbursed by others (e.g.,
insurance proceeds, warranties, or tort claims);
	 
	 	(g)	 	the cost of any service furnished
to any tenant of the Project which Landlord does not make
available to Subtenant or service to a tenant of the Building
which Sublandlord does not make available to Subtenant;
	 
	 	(h)	 	depreciation, amortization or
expense reserves (except costs of Included Capital Items as
provided in Section 2.C(1));

8

 

	 	(i)	 	franchise or income taxes imposed
upon Landlord or Sublandlord;
	 
	 	(j)	 	costs of correcting defects in
construction of the Building (as opposed to the cost of normal
repair, maintenance and replacement expected with the
construction materials and equipment installed in the Building
in light of their specifications);
	 
	 	(k)	 	legal and auditing fees which are
for the benefit of Landlord or Sublandlord such as collecting
delinquent rents, preparing tax returns and other financial
statements;
	 
	 	(l)	 	the wages of any employee for
services not related directly to the management, maintenance,
operation and repair of the Building;
	 
	 	(m)	 	fines, penalties and interest;
	 
	 	(n)	 	any property management fee
charged by Landlord in excess of one and one/tenths percent
(1.1%) of the aggregate monthly Base Rent allocated to the
Building which is then being paid by Sublandlord as Tenant under
the Master Lease or a management fee charged by Sublandlord in
excess of three percent (3%) of the Sublandlord Operating Costs
and Taxes (excluding Landlord Operating Costs and Taxes)
allocated to the Premises;
	 
	 	(o)	 	any costs incurred in connection
with the repair and maintenance of the roof membrane on all of
the Buildings in excess of $35,000 per year; provided that (i)
the $35,000 cap (“Cap”) shall be increased by four percent (4%)
each year (i.e., $35,000 in the first year, $36,400 in the
second year, $37,856 in the third year, $39,370 in the fourth
year, $40,945 in the fifth year, $42,583 in the sixth, etc.);
	 
	 	(p)	 	any costs incurred in connection
with the replacement of the roof membrane of any of the
Buildings;
	 
	 	(q)	 	any costs incurred in connection
with the Pre-existing Contamination (as defined in Section 30)
or other contamination originating from a source either not
located on the Project or which is caused by other tenants
within the Project; and
	 
	 	(r)	 	any costs incurred in connection
with the repair of the structural parts of the Buildings, which
structural parts

9

 

	 	 	 	include only the foundation and subflooring of the Buildings
and the structural condition of the roof (except as provided
in subsection (o) above), and the exterior walls of the
Buildings (but excluding the interior surfaces of exterior
walls and exterior and interior of all windows (including
repairing, resealing or replacing thereof), doors, ceiling
and plateglass all of which shall be maintained, repaired
and/or replaced by Subtenant pursuant to Section 8).

               (3) Taxes. “Taxes” means any and all taxes, assessments and charges of any
kind, general or special, ordinary or extraordinary, levied against the Project, which Landlord or
Sublandlord shall pay or become obligated to pay in connection with the ownership, leasing,
renting, management, use, occupancy, control or operation of the Project or of the personal
property, fixtures, machinery, equipment, systems and apparatus used in connection therewith. Taxes
shall include real estate taxes, personal property taxes, sewer rents, water rents, special or
general assessments, transit taxes, ad valorem taxes, and any tax levied on the rents hereunder or
the interest of Landlord or Sublandlord under this Lease (the “Rent Tax”). Taxes
shall also include all fees and other costs and expenses paid by Landlord or Sublandlord in seeking
a refund or reduction of any Taxes, whether or not the Landlord or Sublandlord is ultimately
successful; provided that the amount paid by Landlord or Sublandlord in any calendar year shall not
exceed the greater of (i) $5,000, or (ii) thirty five percent (35%) of the annual savings achieved
during that taxable year as a result of such refund or reassessment. Taxes shall also include any
assessments or fees paid to any business park owners association, or similar entity, which are
imposed against the Project pursuant to any Covenants, Conditions and Restrictions
(“CC&R’s”) recorded against the Land and any installments of principal and interest
required to pay annual debt service for any existing or future general or special assessments for
public improvements, services or benefits, and any increases resulting from reassessments imposed
in connection with any change in ownership or new construction.

     For any year, the amount to be included in Taxes (a) from taxes or assessments payable in
installments, shall be the amount of the installments (with any interest) due and payable during
such year, and (b) from all other Taxes, at Landlord’s or Sublandlord’s election, as the case may
be, shall be the amount accrued, assessed, or otherwise imposed for such year or the amount due and
payable in such year. Any refund or other adjustment to any Taxes by the taxing authority shall
apply during the year in which the adjustment is made. Taxes shall not include any net income
(except Rent Tax), capital, stock, succession, transfer, franchise, gift, estate or inheritance
tax, except to the extent that such tax shall be imposed in lieu of any portion of Taxes.

               (4) Lease Year. “Lease Year” means each consecutive twelve-month period
beginning on the Commencement Date, prorated for partial years.

               (5) Fiscal Year. “Fiscal Year” means the calendar year, except that the first
fiscal year and the last fiscal year of the Term may be a partial calendar year.

10

 

               (6) “Project Common Areas” means the areas and facilities within the Project,
exclusive of the Buildings and their interiors, provided and designated by Landlord for the general
use of the tenants of the Project, including plazas, benches, landscape areas, parking areas,
sidewalks, service areas, and trash disposal facilities, subject to the reasonable rules and
regulations promulgated from time to time by Landlord.

               (7) “Building Common Areas” means all of the Building outside each tenant’s individual
premises, provided and designated for the general use of tenants of the Building, including the
Building entrance; common lobby; elevators; bathrooms; utility and equipment rooms; fire sprinkler
alarm; reception area; plumbing, water, and sewage lines; lobby skylight; Building signage;
electrical facilities and equipment; HVAC systems; Building mechanical, life safety and automatic
sprinkler systems; and all other appliances and equipment servicing the Building (but not
individual premises).

          D. Computation of Base Rent and Rent Adjustments.

               (1) Prorations. If this Sublease begins on a day other than the first day of a month,
the Base Rent, Operating Cost Share Rent and Tax Share Rent shall be prorated for such partial
month based on the actual number of days in such month. If this Sublease begins on a day other than
the first day, or ends on a day other than the last day, of the fiscal year, Operating Cost Share
Rent and Tax Share Rent shall be prorated for the applicable fiscal year.

               (2) Default Interest. Any sum due from Subtenant to Sublandlord not paid when due
shall bear interest from the date due until paid at the lesser of eighteen percent (18%) per annum
or the maximum rate permitted by law.

               (3) Rent Adjustments. The square footage of the Building and the Premises set forth
in the Schedule is conclusively deemed to be the actual square footage thereof, without regard to
any subsequent remeasurement of the Building or the Premises. If any Operating Cost paid in one
fiscal year relates to more than one fiscal year, Landlord or Sublandlord, as the case may be, may
proportionately allocate such Operating Cost among the related fiscal years.

               (4) Books and Records. Pursuant to the Master Lease, Landlord shall maintain books
and records reflecting the Operating Costs and Taxes in accordance with sound accounting and
management practices. Sublandlord shall maintain books and records reflecting the Operating Costs
and Taxes charged to and paid by Sublandlord. Subtenant and its certified public accountant shall
have the right to inspect Sublandlord’s books and records regarding such matters at Sublandlord’s
offices in Santa Clara, California during the ninety (90) days following the delivery of the
Operating Cost Report. Sublandlord may, at its sole discretion, exercise any right Sublandlord may
have to inspect Landlord’s books and records under the Master Lease. Subtenant shall use good
faith, reasonable efforts and due diligence to keep confidential the results of any such inspection
of which Subtenant is informed. Unless Subtenant sends to Sublandlord any written exception to
either such report within thirty (30) days prior to expiration of said ninety (90) day period, such
report shall be deemed final and accepted by Subtenant. Subtenant shall pay the amount shown on
both reports in the manner prescribed in this Sublease, whether or not Subtenant takes any such
written exception, without any prejudice to such

11

 

exception. If Subtenant makes a timely exception, Sublandlord, on behalf of Subtenant, shall
exercise its right, with Landlord, to choose an independent certified public accountant or another
firm with at least five (5) years of experience in auditing the books and records of commercial
office projects to issue a final and conclusive resolution of Subtenant’s exception. Subtenant
shall pay the cost of such certification unless Landlord is required to pay such cost pursuant to
the Master Lease.

               (5) Miscellaneous. So long as Subtenant is in default of any obligation under this
Sublease, Subtenant shall not be entitled to any refund of any amount from Sublandlord. If this
Sublease is terminated for any reason prior to the annual determination of Operating Cost Share
Rent or Tax Share Rent, either party shall pay the full amount due to the other within fifteen (15)
days after Sublandlord’s notice to Subtenant of the amount when it is determined. Sublandlord may
commingle any payments made with respect to Operating Cost Share Rent or Tax Share Rent, without
payment of interest.

     3. CONSTRUCTION OF INTERIOR IMPROVEMENTS AND POSSESSION.

          A. Building Shell. As of the date hereof, Subtenant has received and approved final
drawings, plans and specifications (the “Shell Final Plans”) for the Building and the
improvements described in 3.A.(1) below (the “Shell Upgrade Plans”).

               (1) The “Building Shell” shall mean the Building structure, exterior walls, glass,
floor slab, utilities (phone, gas, electric, plumbing, fire, and water) to the Building, and roof,
and shall include the parking lot, landscaping and the base for the street monument sign. Landlord
is responsible for bringing phone, electrical, gas and plumbing service to the Building (i.e.,
stubbed but not distributed) and for installing the main fire sprinkler trunks (i.e., installed but
not distributed or “dropped”). The Building Shell does not include any elevators, stairs, HVAC,
roof screens or thermal insulation. Notwithstanding the foregoing, Landlord has installed all
elevators, and Sublandlord has installed the improvements listed on EXHIBIT E (the “Shell
Upgrades”).

               (2) Sublandlord represents that:

                    (i) The Building Shell (including the related landscaping and hard scape), elevator, and the
Shell Upgrades have been constructed in accordance the Shell Final Plans and Shell Upgrade Plans
delivered to and approved by Subtenant.

                    (ii) The Building Shell and elevator and Shell Upgrades have been designed and constructed in
accordance with applicable Building codes and laws, including the Americans With Disabilities Act
(“ADA”) as interpreted by the applicable governmental authority which issues the building permit.

                    (iii) The Building Shell and elevator and Shell Upgrades have been constructed in a good and
workmanlike manner, and of materials in accordance with specifications delivered to and approved by
Subtenant.

                    (iv) To the best of Sublandlord’s actual knowledge, the Building and its in-place operating
systems are in good working order and condition.

12

 

     Notwithstanding anything to the contrary herein, Sublandlord’s warranties herein with respect
to the Building Shell and elevator are not warranties independent from Landlord’s warranties under
the Master Lease, and Sublandlord’s sole obligation under this section, and Subtenant’s sole remedy
for breach of such warranties, shall be that Sublandlord shall diligently pursue its remedies
against Landlord for breach of its warranties under the Master Lease.

          B. Construction of Interior Improvements. Except for Sublandlord’s obligation to
install the Tenant Improvements in accordance with the Work Letter Agreement, Sublandlord is
leasing the Premises to Subtenant “as is,” without any obligation to alter, remodel, improve, or
decorate any part of the Premises or Project. Sublandlord shall cause the Tenant Improvements to be
completed in accordance with the terms, conditions and limitations set forth in the Work Letter
Agreement.

          C. Subtenant’s Possession/Condition of Premises and Project. Sublandlord shall
deliver the Premises on the Commencement Date broom-clean and free of debris or construction
materials. Subtenant’s taking possession of any portion of the Premises shall be conclusive
evidence that the Premises were in good order, repair and condition, subject only to those “punch
list items” noted in writing to Sublandlord within the thirty (30) day period immediately following
the date on which Subtenant takes possession of such portion of the Premises.

     4. SERVICES AND UTILITIES. As of the Commencement Date (and, if applicable, during
the Early Occupancy Period), Subtenant shall promptly pay, as the same become due, all charges for
water, gas, electricity, telephone, sewer service, waste pick-up and any other utilities, materials
and services furnished directly to or used by Subtenant on or about the Premises during the Term,
including without limitation, (i) meter, use and/or connection fees, hook-up fees, or standby fees
(excluding any connection fees or hook-up fees which relate to making the existing electrical, gas,
and water service available to the Premises as of the Commencement Date), and (ii) penalties for
discontinued interrupted service. If any utility service is not separately metered to the Premises,
then Subtenant shall pay Subtenant’s Proportionate Share of the cost of such utility service with
all others served by the service not separately metered. However, if Sublandlord or Landlord
reasonably determine that Subtenant is using a disproportionate amount of any utility service not
separately metered, then Landlord or Sublandlord at its election may (i) periodically charge
Subtenant, as Additional Rent, a sum equal to Landlord’s or Sublandlord’s reasonable estimate of
the cost of Subtenant’s excess use of such utility service, or (ii) install, at Subtenant’s
expense, a separate meter to measure the utility service supplied to the Premises. Any interruption
or cessation of utilities resulting from any causes, including any entry for repairs pursuant to
this Sublease, and any renovation, redecoration or rehabilitation of any area of the Project shall
not render Sublandlord or Landlord liable for damages to either person or property or for
interruption or loss to Subtenant’s business, nor be construed as an eviction of Subtenant, nor
work an abatement of any portion of Rent, nor relieve Subtenant from fulfillment of any covenant or
agreement hereof; provided, however, in the event that an interruption of the Project or Building
services causes the Premises to be untenantable for a period of at least ten (10) consecutive
business days, monthly Rent shall be abated proportionately.

13

 

     5. ALTERATIONS.

          A. Landlord’s and Sublandlord’s Consent and Conditions. Subtenant shall not make any
improvements or alterations to the Premises other than the Initial Tenant Improvements (defined in
Paragraph 5.E below) (the “Work”) without in each instance submitting plans and
specifications for the Work to Landlord and Sublandlord and obtaining Landlord’s and Sublandlord’s
prior written consent, which shall not be unreasonably withheld, unless (a) the cost thereof is
less than $50,000 per occurrence, (b) such Work does not impact the base structural components or
systems of the Building, (c) such Work will not impact any other tenant’s premises, and (d) such
Work is not visible from outside the Building. Provided that Sublandlord receives all necessary
information and plans from Subtenant, Sublandlord agrees to respond to Subtenant’s request for
Sublandlord’s prior written consent to such alterations within seven (7) business days in the case
of Work costing between $50,000 and $100,000, and within ten (10) business days for Work costing
over $100,000. For purposes of the $50,000 and $100,000 thresholds, Subtenant may exclude costs
associated with performing alterations which are solely cosmetic in nature, such as recarpeting and
repainting the Premises. However, even if Sublandlord’s or Landlord’s prior written consent is not
required, Subtenant shall provide Sublandlord and Landlord with prior written notice at least seven
(7) days in advance of commencing the Work so that Sublandlord and Landlord may post and record a
notice of nonresponsibility or other notices deemed appropriate before the commencement of such
Work. Subtenant shall pay Landlord’s and Sublandlord’s actual out-of-pocket costs incurred for
reviewing of all of the plans and all other items submitted by Subtenant. Landlord and/or
Sublandlord will be deemed to be acting reasonably in withholding its consent for any Work which
(a) impacts the base structural components or systems of the Building, and (b) impacts any other
tenant’s premises.

     Subtenant shall pay for the cost of all Work, including the cost of any and all approvals,
permits, fees and other charges which may be required as a condition of performing such Work. Upon
completion all Work shall become the property of Landlord, except for Subtenant’s trade fixtures
and for items which Landlord requires Subtenant to remove at Subtenant’s cost at the termination of
the Sublease pursuant to Section 5E.

     The following requirements shall apply to all Work:

               (1) Prior to commencement, Subtenant shall furnish to Sublandlord and Landlord building
permits, certificates of insurance satisfactory to Landlord and Sublandlord, and, at Landlord’s and
Sublandlord’s reasonable request, security for payment of all costs.

               (2) Subtenant shall perform all Work so as to maintain peace and harmony among other
contractors serving the Project and shall avoid interference with other work to be performed or
services to be rendered in the Project.

               (3) The Work shall be performed in a good and workmanlike manner, meeting the standard for
construction and quality of materials in the Building, and shall comply with all insurance
requirements and all applicable governmental laws, ordinances and regulations (“Governmental
Requirements”).

14

 

               (4) Subtenant shall perform all Work so as to minimize or prevent disruption to other tenants
of the Building or of the Project, and Subtenant shall comply with all reasonable requests of
Landlord or Sublandlord in response to complaints from other tenants.

               (5) Subtenant shall perform all Work in compliance with any “Policies, Rules and Procedures
for Construction Projects” which may be in effect at the time the Work is performed.

               (6) Subtenant shall permit Landlord and Sublandlord to observe all Work.

               (7) Upon completion, Subtenant shall furnish Landlord and Sublandlord with contractor’s
affidavits and full and final statutory waivers of liens covering all labor and materials, as-built
plans and specifications, and all other close-out documentation related to the Work, including any
other information required under any “Policies, Rules and Procedures for Construction Projects”
which may be in effect at such time.

          B. Damage to Systems. If any part of the mechanical, electrical or other systems in
the Premises (e.g., HVAC, life safety or automatic fire extinguisher/sprinkler system) shall be
damaged during the performance of the Work, Subtenant shall promptly notify Sublandlord, and
Sublandlord, or Landlord at its election, shall repair such damage at Subtenant’s expense. Landlord
and Sublandlord may also at any reasonable time make any repairs or alterations which Landlord or
Sublandlord deems necessary for the safety or protection of the Project or the Building, or which
Landlord or Sublandlord is required to make by any court or pursuant to any Governmental
Requirement. The cost of any repairs made by Landlord or Sublandlord on account of Subtenant’s
default, or on account of the mis-use or neglect by Subtenant or its invitees, contractors or
agents anywhere in the Project, shall become Additional Rent payable by Subtenant on demand.

          C. No Liens. Subtenant has no authority to cause or permit any lien or encumbrance of
any kind to affect Landlord’s or Sublandlord’s interests in the Project; any such lien or
encumbrance shall attach to Subtenant’s interest only. If any mechanic’s lien shall be filed or
claim of lien made for work or materials furnished to Subtenant, then Subtenant shall at its
expense within ten (10) days thereafter either discharge or contest the lien or claim. If Subtenant
contests the lien or claim, then Subtenant shall (i) within such ten (10) day period, provide
Landlord or Sublandlord adequate security for the lien or claim, (ii) contest the lien or claim in
good faith by appropriate proceedings that operate to stay its enforcement, and (iii) pay promptly
any final adverse judgment entered in any such proceeding. If Subtenant does not comply with these
requirements, Landlord or Sublandlord may discharge the lien or claim, and the amount paid, as well
as attorney’s fees and other expenses incurred by Landlord or Sublandlord, as the case may be,
shall become Additional Rent payable by Subtenant on demand.

     D. Ownership of Improvements. All Work as defined in this Section 5, hardware,
equipment, machinery and all other improvements and all fixtures except trade fixtures, constructed
in the Premises by
either Landlord, Sublandlord or Subtenant, (i) shall become Landlord’s property
upon installation without compensation to Subtenant, unless Landlord consents otherwise in writing,
and (ii) shall at Landlord’s and Sublandlord’s option

15

 

(which shall be stated at the time Landlord and Sublandlord consent to such Work) either (a)
be surrendered to Landlord with the Premises at the termination of the Sublease or of Subtenant’s
right to possession, or (b) be removed in accordance with Subsection 5E below (unless Landlord and
Sublandlord at the time each gives its consent to the performance of such construction expressly
waives in writing the right to require such removal). In the event that this Sublease is terminated
prior to the scheduled expiration date due to a default by Subtenant, Sublandlord shall have the
right to remove all Tenant Improvements and Work at Subtenant’s expense.

          E. Removal Upon Termination. Upon the termination of this Sublease or Subtenant’s
right of possession, Subtenant shall remove from the Premises its trade fixtures, furniture,
moveable equipment and other personal property, any improvements which Landlord or Sublandlord
elects shall be removed by Subtenant pursuant to Section 5D, and any improvements to any portion of
the Building or Project other than the Premises. If Subtenant does not timely remove such property,
then Subtenant shall be conclusively presumed to have, at Sublandlord’s election (i) conveyed such
property to Sublandlord without compensation or (ii) abandoned such property, and Sublandlord may
dispose of or store any part thereof in any manner at Subtenant’s sole cost, without waiving
Sublandlord’s right to claim from Subtenant all expenses arising out of Subtenant’s failure to
remove the property, and without liability to Subtenant or any other person. Neither Landlord nor
Sublandlord shall have any duty to be a bailee of any such personal property. If Sublandlord elects
abandonment, Subtenant shall pay to Sublandlord, upon demand, any expenses incurred for
disposition. Notwithstanding the foregoing, Subtenant shall have no obligation to remove the Tenant
Improvements to be constructed in accordance with the Work Letter (“Initial Tenant Improvements”).

     6. USE OF PREMISES.

          A. Limitation on Use. Subtenant shall use the Premises only for the Permitted Use
stated in the Schedule. Subtenant shall not allow any use of the Premises which will negatively
affect the cost of coverage of Landlord’s or Sublandlord’s insurance on the Project, unless
Subtenant pays any additional premiums as a result of such use. Subtenant shall not allow any
inflammable or explosive liquids or materials to be kept on the Premises, other than those
materials reasonably required for Subtenant’s Permitted Use under this Lease; provided that such
materials are handled in strict accordance with all applicable Governmental Requirements. Subtenant
shall not allow any use of the Premises which would cause the value or utility of any part of the
Premises to diminish or would interfere with any other tenant or with the operation of the Project
by Landlord or Sublandlord. Subtenant shall not permit any nuisance or waste upon the Premises, or
allow any offensive noise or odor in or around the Premises. At the end of each business day, or
more frequently if necessary, Subtenant shall deposit all garbage and other trash (excluding any
inflammable, explosive and/or hazardous materials) in trash bins or containers approved by
Sublandlord in locations designated by Sublandlord from time to time. If any governmental authority
shall deem the Premises to be a “place of public accommodation” under the Americans with
Disabilities Act or any other comparable law as a result of Subtenant’s peculiar use, Subtenant
shall either modify its use to cause such authority to rescind its designation or be responsible
for any alterations, structural or otherwise, required to be made to the Building under such laws.

16

 

          B. Signs. Subtenant shall not place on any portion of the Premises any sign, placard,
lettering, banner, displays or other advertising or communicative material which is visible from
the exterior of the Building without the prior written approval of Landlord and Sublandlord.
Sublandlord hereby agrees that Subtenant shall have the right to place its standard name and logo
sign on a Sublandlord or Landlord-installed Building monument in front of the Building and, subject
to Landlord’s and Sublandlord’s reasonable approval, to place its name on a Building Directory, if
any. Any approved signs shall strictly conform to all Governmental Requirements, any CC&R’s
recorded against the Project, and any sign criteria which may be established by Landlord or
Sublandlord and in effect at the time, and shall be installed (and removed upon the Termination
Date) at Subtenant’s expense. Subtenant, at its sole cost and expense, shall maintain such signs in
good condition and repair, including the repair of any damage caused to the Building and/or Project
upon the removal of such signs).

          C. Parking. Subtenant shall have the right to park in the Project’s parking
facilities subject to the Master Lease in a number not to exceed the ratio of the rentable square
footage of the Premises then subject to this Sublease to the rentable square footage of the
facilities provided to Sublandlord under the Master Lease, upon terms and conditions as may from
time to time be established by Landlord or Sublandlord. Subtenant agrees not to overburden the
parking facilities (i.e., use more than its prorata share of the unallocated parking stalls
available) and agrees to cooperate with Landlord and Sublandlord and other tenants in the Project
in the use of the parking facilities. Under the Master Lease, Landlord has reserved the right in
its discretion to determine whether the parking facilities are becoming crowded and to allocate and
assign parking spaces among Subtenant and the other tenants in the Project. Neither Landlord nor
Sublandlord shall be liable to Subtenant, nor shall this Sublease be affected, if any parking is
impaired by moratorium, initiative, referendum, law, ordinance, regulation or order passed, issued
or made by any governmental or quasi-governmental body.

          D. Prohibition Against Use of Roof and Structure of Building. Subtenant shall be
prohibited from using any all or any portion of the roof of the Building or any portion of the
structure of the Building during the Term of this Sublease for any purposes (including without
limitation for the installation, maintenance and repair of a satellite dish and/or other
telecommunications equipment), without the prior written consent of Landlord and Sublandlord, which
consent Landlord and Sublandlord may withhold in their reasonable discretion. Subtenant shall be
solely responsible for repairing any damage to the roof and or Building caused by Subtenant’s
installation, operation or removal of any equipment. Upon the termination of this Sublease for any
reason, Subtenant, at its sole cost and expense, shall remove any equipment from the Building and
repair any damage cause to the roof or Building during such removal.

     7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Subtenant shall comply with all
Governmental Requirements applying to its use of the Premises. Subtenant shall also comply with all
reasonable rules for the Project which may be established and amended from time to time by Landlord
or Sublandlord. The present rules and regulations promulgated by Landlord are contained in
EXHIBIT B. Failure by another tenant to comply with the rules or failure by Landlord or
Sublandlord to enforce them shall not relieve Subtenant of its obligation to comply with the rules
or make Landlord or Sublandlord responsible to Subtenant in any way. Sublandlord shall use
reasonable efforts to cause Landlord to apply the rules and regulations uniformly with respect to
Subtenant and tenants in the Project. In the event of

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alterations and repairs performed by Subtenant, Subtenant shall comply with the provisions of
Section 5 of this Sublease and any applicable “Policies, Rules and Regulations for Construction
Projects” which may be established by Landlord and in effect at the time.

     8. REPAIR AND MAINTENANCE.

          A. Landlord’s Obligations. Pursuant to the terms of the Master Lease, Landlord is
obligated to keep in good order, condition and repair (i) the structural parts of the Building,
which structural parts include only the foundation and subflooring of the Building and the
structural condition of the roof (including the roof membrane), and the exterior walls of the
Building (but excluding the interior surfaces of exterior walls and exterior and interior of all
windows, doors, ceiling and plateglass which shall be maintained and repaired by Subtenant), (ii)
the Building elevator, and (iii) the Project Common Areas, including all utilities and related
utility lines and pipes outside of the Building (“Landlord’s Maintenance Obligations”), and the
costs incurred by Landlord to perform the foregoing obligations with respect to the Building to the
extent they are deemed “Operating Costs” (as defined in Section 2C) shall be passed through to
Subtenant, except that any damage to any of the foregoing caused by the negligence or willful acts
or omissions of Subtenant or of Subtenant’s agents, employees or invitees, or by reason of the
failure of Subtenant to perform or comply with any terms of this Sublease, or caused by Subtenant
or Subtenant’s agents, employees or contractors during the performance of any work may be repaired
by Sublandlord, solely at Subtenant’s expense, or at Sublandlord’s election, such repairs shall be
made by Subtenant, at Subtenant’s expense, with contractors approved by Landlord and Sublandlord.
As between Sublandlord and Subtenant, Sublandlord shall be responsible for performance of
Landlord’s Maintenance Obligations if Landlord fails to do so and shall be entitled to charge
Subtenant the cost of such work on the terms and conditions of this Sublease. At Sublandlord’s
election, except in case of roof repairs, which shall be commenced within five (5) days after
notice to Sublandlord, or emergency repairs, Sublandlord may first demand in writing that Landlord
perform any work required to be done by Landlord with respect to Landlord’s Maintenance
Obligations, and use reasonable efforts to obtain Landlord performance. Subtenant agrees to
exercise reasonable efforts to give Landlord and Sublandlord prompt notification of the need for
any repairs or maintenance; provided that such notification shall not affect Landlord’s obligation
to perform periodic inspections of the Project during the Lease Term. Subtenant waives the
provisions of Sections 1941 and 1942 of the California Civil Code and any similar or successor law
regarding Subtenant’s right to make repairs and deduct the expenses of such repairs from the Rent
due under this Sublease.

          B. Sublandlord’s Obligations. Sublandlord shall keep the Building Common Area, other
than any portion maintained by Landlord in good order, condition and repair. Sublandlord shall also
be responsible for all pest control within the Building and for trash removal from the Building.
Sublandlord shall obtain HVAC systems preventive maintenance contracts with bimonthly or monthly
service in accordance with manufacturer recommendations, subject to the reasonable prior written
approval of Landlord, and which shall provide for and include replacement of filters, oiling and
lubricating of machinery, parts replacement, adjustment of drive belts, oil changes and other
preventive maintenance, including annual maintenance of duct work, interior unit drains and
caulking at sheet metal, and recaulking of jacks and vents on an annual basis. The costs incurred
by Sublandlord to perform the foregoing obligations to the extent they are deemed “Operating Costs”
(as defined in Section 2C) shall be passed through to

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Subtenant and any other tenants in the Building, except that any damage to any of the
foregoing caused by the negligence or willful acts or omissions of Subtenant or of Subtenant’s
agents, employees or invitees, or by reason of the failure of Subtenant to perform or comply with
any terms of this Sublease, or caused by Subtenant or Subtenant’s agents, employees or contractors
during the performance of any work shall be repaired by Sublandlord solely at Subtenant’s expense,
or at Sublandlord’s election, such repairs shall be made by Subtenant, at Subtenant’s expense, with
contractors approved by Sublandlord. Subtenant agrees to exercise reasonable efforts to give
Sublandlord prompt notification of the need for any repairs or maintenance; provided that such
notification shall not affect Sublandlord’s obligation to perform periodic inspections of the
Building during the Lease Term. Subtenant waives the provisions of Section 1941 and 1942 of the
California Civil Code and any similar or successor law regarding Subtenant’s right to make repairs
and deduct the expenses of such repairs from the Rent due under this Sublease.

          C. Subtenant’s Obligations. Subtenant shall at all times and at its own expense
clean, keep and maintain in good order, condition and repair every part of the Premises (including
Subtenant’s trade fixtures and personal property) which is not within Sublandlord’s Maintenance
Obligation pursuant to Section 8B. Subtenant’s repair and maintenance obligations shall include,
without limitation, all plumbing and sewage facilities within the Premises, fixtures, interior
walls and ceiling, demising walls, floors, windows (including repairing, resealing, cleaning and
replacing, as necessary), doors, entrances, showcases skylights installed by Subtenant, all
electrical facilities and equipment, including lighting fixtures, lamps, fans and any exhaust
equipment and systems, electrical motors and all other appliances and equipment of every kind and
nature located in, upon or about the Premises. Landlord or Sublandlord may also perform any
maintenance or repairs, at Subtenant’s expense, to the extent Subtenant fails to perform such
maintenance or repairs as required herein.

     9. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.

          A. Waiver of Claims. To the extent permitted by law, Subtenant waives any claims it
may have against Sublandlord or their officers, directors, employees or agents for business
interruption or damage to property sustained by Subtenant as the result of any act or omission of
Sublandlord, its agents, employees or invitees. To the extent permitted by law, Sublandlord waives
any claims it may have against Subtenant or its officers, directors, employees or agents for loss
of rents or damage to property sustained by Sublandlord as the result of any act or omission of
Subtenant, its agents, employees or invitees.

          B. Indemnification. Subtenant shall indemnify, defend and hold harmless Sublandlord
and Landlord and their officers, directors, employees and agents against any claim by any third
party for injury to any person or damage to or loss of any property occurring in the Project or
Building and arising from the use of the Premises or from any other act or omission or negligence
of Subtenant, its employees, agents or invitees, or Subtenant’s breach of its obligations under
this Sublease. Subtenant’s obligations under this section shall survive the termination of this
Sublease.

     Sublandlord shall indemnify, defend and hold harmless Subtenant and its officers, directors,
employees and agents against any claim by any third party for injury to any person or

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damage to or loss of any property occurring in the Premises caused by the negligence or
intentional misconduct of Sublandlord or any of Sublandlord’s employees or agents, or Sublandlord’s
breach of its obligations under this Sublease. Sublandlord’s obligations under this section shall
survive the termination of this Sublease.

          C. Subtenant’s Insurance. Subtenant shall maintain insurance as follows, with such
other terms, coverages and insurers, as Landlord or Sublandlord shall reasonably require from time
to time:

               (1) Commercial general liability insurance, with (a) contractual liability including the
indemnification provisions contained in this Sublease, (b) a severability of interest endorsement,
(c) limits of not less than Two Million Dollars ($2,000,000) combined single limit per occurrence
and not less than Two Million Dollars ($2,000,000) in the aggregate for bodily injury, sickness or
death, and property damage.

               (2) Property Insurance against “All Risks” of physical loss covering the replacement cost of
all improvements, fixtures and personal property. Subtenant waives all rights of subrogation, and
Subtenant’s property insurance shall include a waiver of subrogation in favor of Landlord and
Sublandlord.

               (3) Workers’ compensation or similar insurance in form and amounts required by law, and
Employer’s Liability with not less than the following limits:

	 	 	 	 	 
	Each Accident
	 	$	1,000,000	 
	Disease—Policy Limit
	 	$	1,000,000	 
	Disease—Each Employee
	 	$	1,000,000	 

     Such insurance shall contain a waiver of subrogation provision in favor of Landlord and
Sublandlord and their agents.

     Subtenant’s insurance shall be primary and not contributory to that carried by Sublandlord, or
Landlord, its agents, or mortgagee, if any. Sublandlord, Landlord, Landlord’s building manager or
agent, mortgagee and ground lessor shall be named as additional insureds as respects to insurance
required of the Subtenant in Sections 9C(1) and 9C(2) (for Tenant Improvements). The company or
companies writing any insurance which Subtenant is required to maintain under this Sublease, as
well as the form of such insurance, shall at all times be subject to Landlord’s written approval.
Such insurance companies shall have a A.M. Best rating of A VI or better.

               (4) Subtenant shall cause any general contractor of Subtenant performing Work on the Premises
to maintain insurance as follows, with such other terms, coverages and insurers, as Landlord shall
reasonably require from time to time:

                    (a) Commercial General Liability Insurance, including contractor’s liability coverage,
contractual liability coverage, completed operations coverage, broad form property damage
endorsement, and contractor’s protective liability coverage, to afford protection with limits, for
each occurrence, of not less than One Million Dollars

20

 

($1,000,000) with respect to personal injury, death or property damage. Such policy or
policies shall also cover any Work which is performed by subcontractors hired by the general
contractor.

                    (b) Workers’ compensation or similar insurance in form and amounts required by law, and
Employer’s Liability with not less than the following limits:

	 	 	 	 	 
	Each Accident
	 	$	1,000,000	 
	Disease—Policy Limit
	 	$	1,000,000	 
	Disease—Each Employee
	 	$	1,000,000	 

     Such insurance shall contain a waiver of subrogation provision in favor of Sublandlord,
Landlord and their agents.

     Subtenant’s contractor’s insurance shall be primary and not contributory to that carried by
Subtenant, Sublandlord, or Landlord, its agents or mortgagees. Subtenant, Sublandlord and Landlord,
and if any, Landlord’s building manager or agent, mortgagee or ground lessor shall be named as
additional insured on Subtenant’s contractor’s insurance policies.

          D. Insurance Certificates. Subtenant shall deliver to Landlord and Sublandlord
certificates evidencing all insurance required to be maintained by Subtenant by the earlier of (a)
Subtenant’s entry of the Building pursuant to Paragraph 1C, or (b) five (5) days prior to the
Commencement Date, and thereafter five (5) days prior to each renewal date for such policies. Each
certificate will provide for thirty (30) days prior written notice of cancellation to Landlord,
Sublandlord and Subtenant.

          E. Landlord’s Insurance. Pursuant to the Master Lease, Landlord shall maintain
“All-Risk” property insurance at full replacement cost, including loss of rents for twelve (12)
months (including taxes and insurance), on the Building, and commercial general liability insurance
policies of not less that Five Million Dollars ($5,000,000.00) covering the common areas of the
Project, each with such terms, coverages and conditions as are normally carried by reasonably
prudent owners of properties similar to the Project, including coverage for personal injury,
property damage and contractual liability endorsement. With respect to property insurance,
Sublandlord and Subtenant mutually waive all rights of subrogation, and the respective “All-Risk”
coverage property insurance policies carried by Sublandlord, Landlord and Subtenant shall contain
enforceable waiver of subrogation endorsements.

10. FIRE AND OTHER CASUALTY.

          A. Termination. If a fire or other casualty causes substantial damage to the
Building, pursuant to the terms of the Master Lease, Landlord shall engage a registered architect
to certify within one (1) month of the casualty to both Landlord and Sublandlord the amount of time
needed to restore the Building to tenantability, using standard working methods without the payment
of overtime and other premiums. Sublandlord shall deliver a copy of such notice to Subtenant upon
receipt. If the time needed exceeds twelve (12) months from the beginning of the restoration, or
two (2) months therefrom if the restoration would begin during the last twelve (12) months of the
Sublease, then either Sublandlord or Subtenant may terminate this Sublease by notice to the other
party within ten (10) days after the notifying party’s receipt of the architect’s certificate. If
sufficient insurance proceeds will not be available to Landlord to cover

21

 

the cost of any restoration to the Building or the Premises, because (i) the casualty was not
required to be insured against by the Master Lease and was not actually insured, or (ii) of
insolvency or financial condition of Landlord’s insurance carrier, Landlord may terminate the
Master Lease and this Sublease by written notice to Sublandlord. Any termination pursuant to this
Section 10A shall be effective thirty (30) days from the date of such termination notice and Rent
shall be paid by Subtenant to that date, with an abatement for any portion of the space which has
been untenantable after the casualty.

          B. Restoration. If a casualty causes damage to the Building but this Sublease is not
terminated for any reason, then subject to the rights of any mortgagees or ground lessors, pursuant
to the Master Lease, Landlord shall obtain the applicable insurance proceeds and diligently restore
the Building subject to current Governmental Requirements. Landlord’s obligation, should it elect
or be obligated to repair or rebuild, shall be limited to the Building Shell, and Subtenant shall,
at Subtenant’s expense, replace or fully repair its damaged improvements (including any Tenant
Improvements constructed within the Premises), personal property and fixtures. Rent shall be abated
on a per diem basis during the restoration for any portion of the Premises which is untenantable.
Subtenant shall not be entitled to any compensation or damages from Landlord or Sublandlord for
loss of the use of the Premises, damage to Subtenant’s personal property and trade fixtures or any
inconvenience occasioned by such damage, repair or restoration. Subtenant hereby waives the
provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil
Code, and the provisions of any similar law hereinafter enacted.

     11. EMINENT DOMAIN. If a part of the Premises is taken by eminent domain or deed in
lieu thereof which is so substantial that the Premises cannot reasonably be used by Subtenant for
the operation of its business, then either party may terminate this Sublease effective as of the
date of the taking. Rent shall abate from the date of the taking in proportion to any part of the
Premises taken. If there is a temporary taking of a part of the Premises which is so substantial
that the Premises cannot reasonably be used by Subtenant for the operation of its business, then
Rent shall abate from the date of the taking in proportion to any part of the Premises taken. The
entire award for a taking of any kind shall be paid to Landlord or Sublandlord, and Subtenant shall
have no right to share in the award, except (i) for the portion of any award based on the value of
the Tenant Improvements financed by Subtenant in excess of the Tenant Improvement Allowance;
provided, however, that nothing contained herein shall be deemed to give Landlord or Sublandlord
any interest in or require Subtenant to assign to Landlord or Sublandlord any separate award made
to Subtenant for the taking of Subtenant’s personal property and trade fixtures, or its relocation
costs, and (ii) in the event of a temporary taking in which there was no Rent abatement under this
Sublease, then Subtenant shall be entitled to any portion of the award which was intended to
compensate Sublandlord for lost rent during the period of the temporary taking. All obligations
accrued to the date of the taking shall be performed by each party.

     12. RIGHTS RESERVED TO LANDLORD AND SUBLANDLORD. Landlord and Sublandlord may
exercise at any time any of the following rights respecting the operation of the Project or the
Building without liability to Subtenant of any kind:

22

 

          A. Name. To change the name of all or any of the Buildings or the Project; provided,
however, that so long as Subtenant occupies fifty percent (50%) or more of the Building, then
Sublandlord may not change, and will not consent to a change of, the name of such Building without
Subtenant’s prior consent, which consent shall not be unreasonably withheld or delayed.

          B. Signs. To install, modify and/or maintain necessary and appropriate signs on the
exterior and in the interior of the Building or on the Project, and to approve prior to
installation, any of Subtenant’s signs in the Premises visible from the exterior of the Building.

          C. Window Treatments. To approve, at its discretion, prior to installation, any
shades, blinds, ventilators or window treatments of any kind, as well as any lighting within the
Premises that may be visible from the exterior of the Building.

          D. Keys. To retain and use passkeys to enter the Premises or any door within the
Premises in accordance with Section 12E. Subtenant shall not alter or add any lock or bolt.

          E. Access. To have access to the Premises with twenty-four hour prior notice and in
accordance with Subtenant’s reasonable security program procedures (except in the case of an
emergency in which case Landlord and Sublandlord shall have the right to immediate access) to
inspect the Premises, and to perform its obligations, or make repairs, alterations, additions or
improvements, as permitted by the Master Lease or this Sublease.

          F. Preparation for Reoccupancy. To decorate, remodel, repair, alter or otherwise
prepare the Premises for reoccupancy at any time after Subtenant abandons the Premises, without
relieving Subtenant of any obligation to pay Rent.

          G. Heavy Articles. To approve the weight, size, placement and time and manner of
movement within the Building of any safe, central filing system or other heavy article of
Subtenant’s property. Subtenant shall move its property entirely at its own risk.

          H. Show Premises. To show the Premises to prospective purchasers, lenders,
mortgagees, investors, or rating agencies at any reasonable time, or prospective tenants during the
last twelve (12) months of the Term; provided that Landlord or Sublandlord, as the case may be,
gives prior notice to Subtenant and does not materially interfere with Subtenant’s use of the
Premises.

          I. Use of Lockbox. To designate a lockbox collection agent for collections of amounts
due Sublandlord. In that case, the date of payment of Rent or other sums shall be the date of the
agent’s receipt of such payment or the date of actual collection if payment is made in the form of
a negotiable instrument thereafter dishonored upon presentment. However, Sublandlord may reject any
payment for all purposes as of the date of receipt or actual collection by mailing to Subtenant
within 21 days after such receipt or collection a check equal to the amount sent by Subtenant.

          J. Repairs and Alterations. To make repairs or alterations to the Project and in
doing so transport any required material through the Premises, to close entrances, doors,
corridors, elevator and other facilities in the Building or the Project, to open any ceiling in the

23

 

Premises, or to temporarily suspend services or use of common areas in the Building. Without
limiting the foregoing, Sublandlord shall have the right to access the Premises for the
installation and/or alteration of the conduit connections among the Buildings within the Project.
Landlord or Sublandlord, as the case may be, may perform any such repairs or alterations during
ordinary business hours, except that Subtenant may require any work in the Premises to be done
after business hours if Subtenant pays Landlord or Sublandlord, as the case may be, for overtime
and any other additional expenses incurred. Landlord may do or permit any work on any nearby
building, land, street, alley or way.

          K. Sublandlord’s Agents. If Subtenant is in default under this Sublease, possession
of Subtenant’s funds or negotiation of Subtenant’s negotiable instrument by any of Sublandlord’ s
agents shall not waive any breach by Subtenant or any remedies of Sublandlord under this Sublease.

          L. CC&R’s. Landlord may at any time promulgate and record a set of CC&R’s which will
govern the access, parking, design, signage and other rights of the tenants in the Project, so long
as such CC&R’s do not impose any new payment obligation on Subtenant (i.e., a dues requirement) or
require Subtenant to modify any of the then existing improvements.

     13. SUBTENANT’S DEFAULT. Any of the following shall constitute a default by
Subtenant:

          A. Rent Default. Subtenant fails to pay any Rent within five (5) days after notice
that such payment was not paid when due, provided that Subtenant acknowledges that such notice
shall be in lieu of and not in addition to any notice required to be given by Sublandlord to
commence an unlawful detainer action (or similar eviction proceeding) under the then applicable
law;

          B. Assignment/Sublease or Hazardous Substances Default. Subtenant defaults in its
obligations under Section 18 Assignment and Sublease or Section 29 Hazardous Substances;

          C. Other Performance Default. Subtenant fails to perform any other obligation to
Sublandlord under this Sublease or commits any act, or fails to perform any act, which commission
or failure would constitute or cause a breach of the Master Lease, and this failure continues for
thirty (30) days after written notice from Landlord or Sublandlord, except that if Subtenant begins
to cure its failure within the thirty (30) day period but cannot reasonably complete its cure
within such period, then, so long as Subtenant continues to diligently attempt to cure its failure,
the thirty (30) day period shall be extended to one hundred twenty (120) days, or such lesser
period as is reasonably necessary to complete the cure;

          D. Credit Default. One of the following credit defaults occurs:

               (1) Subtenant commences any proceeding under any law relating to bankruptcy, insolvency,
reorganization or relief of debts, or seeks appointment of a receiver, trustee, custodian or other
similar official for the Subtenant or for any substantial part of its property, or any such
proceeding is commenced against Subtenant and either remains

24

 

undismissed for a period of sixty (60) days or results in the entry of an order for relief
against Subtenant which is not fully stayed within seven (7) days after entry;

               (2) Subtenant becomes insolvent or bankrupt, does not generally pay its debts as they become
due, or admits in writing its inability to pay its debts, or makes a general assignment for the
benefit of creditors;

               (3) Any third party obtains a levy or attachment under process of law against Subtenant’s
leasehold interest; and

          E. Abandonment Default. Subtenant abandons the Premises.

     14. SUBLANDLORD REMEDIES. Upon a default, Sublandlord shall have the following
remedies, in addition to all other rights and remedies provided by law or otherwise provided in
this Sublease, to which Sublandlord may resort cumulatively or in the alternative:

          A. Sublandlord may continue this Sublease in full force and effect, and this Sublease shall
continue in full force and effect as long as Sublandlord does not terminate this Sublease, and
Sublandlord shall have the right to collect Rent when due.

          B. Sublandlord may enter the Premises or any part thereof and release them or any part thereof
to third parties for Subtenant’s account for any period, whether shorter or longer than the
remaining Term. Subtenant shall be liable immediately to Sublandlord for all costs Sublandlord
incurs in reletting the Premises or any part thereof, including, without limitation, broker’s
commissions, expenses of cleaning and redecorating the Premises required by the reletting and like
costs. Subtenant shall pay to Sublandlord the Rent and other sums due under this Sublease on the
date the Rent is due, less the rent and other sums received by Sublandlord from any releasing. No
act by Sublandlord other than giving written notice to Subtenant shall terminate this Sublease.
Acts of maintenance, efforts to relet the Premises or the appointment of a receiver on
Sublandlord’s initiative to protect Sublandlord’s interest under this Sublease shall not constitute
a termination of Subtenant’s right to possession.

          C. Sublandlord may terminate this Sublease by giving Subtenant written notice of termination,
in which event this Sublease shall terminate on the date for termination set forth in such notice.
Subtenant shall immediately vacate the Premises and deliver possession to Sublandlord, and
Sublandlord may repossess the Premises and may, at Subtenant’s sole cost, remove any of Subtenant’s
signs and any of its other property, without relinquishing its right to receive Rent or any other
right against Subtenant. On termination, Sublandlord has the right to recover from Subtenant as
damages:

               (1) The worth at the time of award of unpaid Rent and other sums due and payable which had
been earned at the time of termination; plus

               (2) The worth at the time of award of the amount by which the unpaid Rent and other sums due
and payable which after termination until the time of award exceeds the amount of such Rent loss
that Subtenant proves could have been reasonably avoided; plus

25

 

               (3) The worth at the time of award of the amount by which the unpaid Rent and other sums due
and payable for the balance of the Term after the time of award exceeds the amount of such Rent
loss that Subtenant proves could be reasonably avoided; plus

               (4) Any other amount necessary to compensate Sublandlord for all the detriment proximately
caused by Subtenant’s failure to perform Subtenant’s obligations under this Sublease, or which, in
the ordinary course of things, would be likely to result therefrom, including, without limitation,
any costs or expenses incurred by Sublandlord: (i) in retaking possession of the Premises; (ii) in
maintaining, repairing, preserving, restoring, replacing, cleaning, altering or rehabilitating the
Premises or any portion thereof, including such acts for reletting to a new tenant or tenants;
(iii) for leasing commissions; or (iv) for any other costs necessary or appropriate to relet the
Premises; plus

               (5) At Sublandlord’s election, such other amounts in addition to or in lieu of the foregoing
as may be permitted from time to time by the laws of the State of California.

     The “worth at the time of award” of the amounts referred to in Sections 14C(1) and
14C(2) is computed by allowing interest at the maximum rate permitted by law on the unpaid rent and
other sums due and payable from the termination date through the date of award. The “worth at the
time of award” of the amount referred to in Section 14C(3) is 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 (1%). Subtenant waives redemption or relief from forfeiture under California Code of Civil
Procedure Sections 1174 and 1179, or under any other present or future law, in the event Subtenant
is evicted or Landlord takes possession of the Premises by reason of any default of Subtenant
hereunder.

          D. Sublandlord’s Remedies Cumulative. All of Sublandlord’s remedies under this
Sublease shall be in addition to all other remedies Sublandlord may have at law or in equity.
Waiver by Sublandlord of any breach of any obligation by Subtenant shall be effective only if it is
in writing, and shall not be deemed a waiver of any other breach, or any subsequent breach of the
same obligation. Sublandlord’s acceptance of payment by Subtenant shall not constitute a waiver of
any breach by Subtenant, and if the acceptance occurs after Sublandlord’s notice to Subtenant, or
termination of the Sublease or of Subtenant’s right to possession, the acceptance shall not affect
such notice or termination. Acceptance of payment by Sublandlord after commencement of a legal
proceeding or final judgment shall not affect such proceeding or judgment. Sublandlord may advance
such monies and take such other actions for Subtenant’s account as reasonably may be required to
cure or mitigate any default by Subtenant. Subtenant shall immediately reimburse Sublandlord for
any such advance, and such sums shall bear interest at the default interest rate until paid.

          E. WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY JURY IN THE EVENT OF ANY LEGAL
PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS SUBLEASE. EACH PARTY SHALL BRING ANY ACTION
AGAINST THE OTHER IN CONNECTION WITH THIS SUBLEASE IN A FEDERAL OR STATE COURT LOCATED IN
CALIFORNIA, CONSENTS TO THE JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY
PROCEEDING

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TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT FORUM.

          F. Litigation Costs. If either party commences litigation to enforce or interpret any
provision of this Sublease, the prevailing party shall recover from the non-prevailing party its
reasonable attorneys’ fees and court costs.

     15. SURRENDER. Upon the expiration or earlier termination of this Sublease for any
reason, Subtenant shall surrender the Premises to Sublandlord in its condition existing as of the
Commencement Date (including Building standard Tenant Improvements even if not completed as of the
Commencement Date), normal wear and tear and damage by fire or other casualty excepted, with all
interior walls repaired and repainted if marked or damaged, all carpets shampooed and cleaned, all
broken, marred or nonconforming acoustical ceiling tiles replaced, all windows washed, the plumbing
and electrical systems and lighting in good order and repair, including replacement of any burned
out or broken light bulb or ballasts, and all floors cleaned and waxed, all to the reasonable
satisfaction of Sublandlord. Subtenant shall remove from the Premises all Subtenant’s personal
property and all of Subtenant’s alterations required to be removed pursuant to Sections 5D and 5E
(but not the Initial Tenant Improvements), and restore the Premises to its condition prior to their
installation. If Subtenant fails to remove any alterations and/or Subtenant’s personal property,
and such failure continues after the termination of this Sublease, Landlord or Sublandlord may
retain or dispose of such property and all rights of Subtenant with respect to it shall cease, or
Sublandlord may place all or any portion of such property in public storage for Subtenant’s
account. Subtenant shall be liable to Sublandlord for costs of removal of any such alterations and
Subtenant’s personal property and storage and transportation costs of same, and the cost of
repairing and restoring the Premises, together with interest at the Interest Rate from the date of
expenditure by Sublandlord. If the Premises are not so surrendered at the termination of this
Sublease, Subtenant shall indemnify Sublandlord against all loss or liability, including attorneys’
fees and costs, resulting from delay by Subtenant in so surrendering the Premises.

     16. HOLDOVER. Subtenant shall have no right to holdover possession of the Premises
after the expiration or termination of this Sublease without Sublandlord’s prior written consent
which Sublandlord may withhold in its sole and absolute discretion. If, however, Subtenant retains
possession of any part of the Premises after the Term, Subtenant shall become a month-to-month
tenant for the entire Premises upon all of the terms of this Sublease as might be applicable to
such month-to-month tenancy, except that Subtenant shall pay all of Base Rent at one hundred fifty
percent (150%) of the rate in effect immediately prior to such holdover, plus Operating Cost Share
Rent and Tax Share Rent, computed on a monthly basis for each full or partial month Subtenant
remains in possession. Subtenant shall also pay Sublandlord all of Sublandlord’s direct and
consequential damages resulting from Subtenant’s holdover. No acceptance of Rent or other payments
by Sublandlord under these holdover provisions shall operate as a waiver of Sublandlord’s right to
regain possession or any other of Landlord’s remedies.

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     17. SUBORDINATION TO GROUND LEASES AND MORTGAGES.

          A. Subordination. Landlord and Sublandlord shall have the right to cause this
Sublease to be subordinate to any future ground lease or mortgage respecting the Project, and any
amendments to such ground lease or mortgage, at the election of the ground lessor or mortgagee as
the case may be. Subtenant shall execute and deliver, within thirty (30) days after receipt of
written demand by Sublandlord or Landlord and in the form requested by Landlord or Sublandlord,
provided that such form is reasonably acceptable to Subtenant, any additional documents evidencing
the priority or subordination of this Sublease with respect to any such mortgage or deed of trust.

          B. Termination of Ground Lease or Foreclosure of Mortgage. If any ground lease is
terminated or mortgage foreclosed or deed in lieu of foreclosure given and the ground lessor,
mortgagee, or purchaser at a foreclosure sale shall thereby become the owner of the Project, the
ground lessor or mortgagee or purchaser shall be liable as Landlord only during the time such
ground lessor or mortgagee or purchaser is the owner of the Project.

          C. Security Deposit. Any ground lessor or mortgagee shall be responsible for the
return of any security deposit by Subtenant only to the extent the security deposit, if any, is
received by such ground lessor or mortgagee.

          D. Notice and Right to Cure. The Project is subject to any ground lease and mortgage
identified with name and address of ground lessor or mortgagee in EXHIBIT D to this
Sublease (as the same may be amended from time to time by written notice to Subtenant). Subtenant
agrees to send by registered or certified mail to any ground lessor or mortgagee identified either
in such Exhibit or in any later notice from Landlord to Subtenant a copy of any notice of default
sent by Subtenant to Landlord or Sublandlord. If Landlord or Sublandlord fails to cure such default
within the required time period under this Sublease, but ground lessor or mortgagee begins to cure
within ten (10) days after such period and proceeds diligently to complete such cure, then ground
lessor or mortgagee shall have such additional time as is necessary to complete such cure,
including any time necessary to obtain possession if possession is necessary to cure, and Subtenant
shall not begin to enforce its remedies so long as the cure is being diligently pursued.

          E. Definitions. As used in this Section 17, “mortgage” shall include “trust deed” and
“deed of trust”, and “mortgagee” shall include “trustee”, “beneficiary” and the
mortgagee of any ground lessee, and “ground lessor,” “mortgagee,” and “purchaser at a foreclosure
sale” shall include, in each case, all of its successors and assigns, however remote.

     18. ASSIGNMENT AND SUBLEASE.

          A. In General. Subtenant shall not, without the prior consent of Landlord and
Sublandlord in each case, (i) make or allow any assignment or transfer, by operation of law or
otherwise, of any part of Subtenant’s interest in this Sublease, (ii) grant or allow any lien or
encumbrance, by operation of law or otherwise, upon any part of Subtenant’s interest in this
Sublease, (iii) sublet any part of the Premises, or (iv) permit anyone other than Subtenant and its
employees to occupy any part of the Premises. Subtenant shall remain primarily liable for all of

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its obligations under this Sublease, notwithstanding any assignment or transfer. No consent
granted by Landlord and Sublandlord shall be deemed to be a consent to any subsequent assignment or
transfer, lien or encumbrance, sublease or occupancy. Subtenant shall pay all of Landlord’s and
Sublandlord’s attorneys’ fees and other expenses incurred in connection with any consent requested
by Subtenant or in reviewing any proposed assignment or subletting. Any assignment or transfer,
grant of lien or encumbrance, or sublease or occupancy without Landlord’s or Sublandlord’s prior
written consent shall be void. If Subtenant shall assign this Sublease to any entity other than a
“Subtenant Affiliate” (as defined in Section 18E), then Subtenant’s right to extend the Term of
this Sublease (as set forth in Section 31) shall be extinguished thereby and will not be
transferred to the assignee, all such rights being personal to the Subtenant named herein.

          B. Sublandlord’s Consent. Sublandlord will not unreasonably withhold its consent to
any proposed assignment or subletting. It shall be reasonable for Landlord or Sublandlord to
withhold its consent to any assignment or sublease if (i) Subtenant is in default under this
Sublease, (ii) the proposed assignee or sublessee is a tenant in the Project or an affiliate of
such a tenant or a party that Landlord has identified as a prospective tenant in the Project, (iii)
the financial responsibility, nature of business, and character of the proposed assignee or
subtenant are not all reasonably satisfactory to Landlord or Sublandlord, (iv) in the reasonable
judgment of Landlord or Sublandlord the purpose for which the assignee or subtenant intends to use
the Premises (or a portion thereof) is inconsistent with the character of the Project as a first
class business park or would violate the terms of this Sublease or the Master Lease, or (v) the
proposed assignee or subtenant is a government entity. The foregoing shall not exclude any other
reasonable basis for Landlord or Sublandlord to withhold its consent.

          C. Procedure. Subtenant shall notify Landlord and Sublandlord of any proposed
assignment or sub-sublease at least thirty (30) days prior to its proposed effective date. The
notice shall include the name and address of the proposed assignee or sub-subtenant, its corporate
affiliates in the case of a corporation and its partners in a case of a partnership, and sufficient
information to permit Landlord and Sublandlord to determine the financial responsibility and
character of the proposed assignee or sub-subtenant. As a condition to any effective assignment of
this Sublease, the assignee shall execute and deliver in form satisfactory to Sublandlord prior to
the effective date of the assignment, an assumption of all of the obligations of Subtenant under
this Sublease. As a condition to any effective sub-sublease, sub-subtenant shall execute and
deliver in form satisfactory to Sublandlord prior to the effective date of the sublease, an
agreement to comply with all of Subtenant’s applicable obligations under this Sublease, and at
Sublandlord’s option, an agreement (except for the economic obligations which sub-subtenant will
undertake directly to Subtenant) to attorn to Sublandlord under the terms of the sublease in the
event this Sublease terminates before the sub-sublease expires. Any proposed sublease shall be
subject to the terms and conditions of Section 19D below.

          D. Excess Payments. If Subtenant shall assign this Sublease or sub-sublet any part of
the Premises for consideration in excess of the pro-rata portion of Rent applicable to the space
subject to the assignment or sub-sublet, then Subtenant shall pay to Sublandlord as Additional Rent
fifty percent (50%) of any such excess immediately upon receipt; provided that Subtenant shall be
first entitled to recover the reasonable costs actually incurred by Subtenant in

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connection with the sub-sublet for leasing commissions, interior improvements and attorneys’
fees.

          E. Recapture Rights.

               (1) If at any time during the Term of this Sublease, Subtenant desires to sub-sublease all or
a portion of the Premises (the “Proposed Sub-Sublease Space”), Subtenant shall notify Sublandlord
of its intention (“Subtenant’s Notice”), including proposed terms and conditions for such
sub-sublease if such Subtenant’s Notice is given pursuant to Section 18.E.3 of this Sublease.

               (2) If such proposed sub-sublease is for substantially the balance of the term of this
Sublease, Sublandlord shall have seven (7) days after receipt of Subtenant’s Notice to notify
Subtenant in writing of Sublandlord’s election to terminate this Sublease with respect to the
Proposed Sub-Sublease Space. If, however, Sublandlord fails to notify Subtenant of Sublandlord’s
election to terminate this Sublease, Sublandlord shall be deemed to have waived its right to
recapture the Proposed Sub-Sublease Space at such time and Subtenant shall have the right to lease
the Proposed Sub-Sublease Space to the third party without further notice to Sublandlord. For
purposes of this provision, for “substantially the balance of the term of this Sublease” shall mean
that less than six (6) months remain of the term of the Sublease.

               (3) If the Proposed Sub-sublease Space is not subject to “recapture” under 19.E.2, Sublandlord
shall have seven (7) days after receipt of Subtenant’s Notice to notify Subtenant in writing of
Sublandlord’s election to lease the Proposed Sub-Sublease Space on the terms stated in Subtenant’s
Notice. If Sublandlord notifies Subtenant within such seven-day period of Sublandlord’s desire to
lease the Proposed Sub-Sublease Space, Subtenant and Sublandlord shall enter into a lease on the
proposed terms an conditions stated in Subtenant’s Notice. If, however, Sublandlord fails to notify
Subtenant of Sublandlord’s election to lease the Proposed Sub-Sublease Space within such seven-day
period or, if Subtenant and Sublandlord, through no fault of Subtenant, fail to execute a lease
within thirty (30) days after the date of Sublandlord’s notice to Subtenant, Sublandlord shall be
deemed to have waived its right to lease the Proposed Sub-Sublease Space at such time and Subtenant
shall have the right to lease the Proposed Sub-Sublease Space to the third party on substantially
the terms stated in Subtenant’s Notice without further notice to Sublandlord.

          F. Assignment to Affiliates. If no default on the part of Subtenant has occurred and
is continuing, Subtenant may assign this Sublease or sublet any portion of the Premises to a parent
or subsidiary of Subtenant, or to an entity into which Subtenant is merged or consolidated or to an
entity to which substantially all of tenant’s assets are transferred (collectively, “Subtenant
Affiliate”), without first obtaining Sublandlord’s written consent, if Subtenant notifies
Sublandlord at least ten (10) business days prior to the proposed transaction, providing
information satisfactory to Sublandlord in order to determine the net worth both of the successor
entity and of Subtenant immediately prior to such assignment, and showing the net worth of the
successor to be at least equal to the net worth of Subtenant.

     19. CONVEYANCE BY SUBLANDLORD OR LANDLORD. If Landlord or Sublandlord shall at any
time transfer its interest in the Project or this Sublease, Landlord or

30

 

Sublandlord, as the case may be, shall be released of any obligations occurring after such
transfer, except the obligation to return to Subtenant any security deposit not delivered to its
transferee, and Subtenant shall look solely to Landlord’s or Sublandlord’s successors, as the case
may be, for performance of such obligations. This Sublease shall not be affected by any such
transfer.

     20. ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days of receiving a
request from the other party, execute, acknowledge in recordable form, and deliver to the other
party or its designee a certificate stating, subject to a specific statement of any applicable
exceptions, that the Sublease as amended to date is in full force and effect, that the Subtenant is
paying Rent and other charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has no offsets or claims.
The certifying party may also be required to state the date of commencement of payment of Rent, the
Commencement Date, the Termination Date, the Base Rent, the current Operating Cost Share Rent and
Tax Share Rent estimates, the status of any improvements required to be completed by Sublandlord,
and the amount of any security deposit. Failure to deliver such statement within the time required
shall be conclusive evidence against the non-certifying party that this Sublease, with any
amendments identified by the requesting party, is in full force and effect, that there are no
uncured defaults by the requesting party, that not more than one month’s Rent has been paid in
advance, that the non-certifying party has not paid any security deposit, and that the
non-certifying party has no claims or offsets against the requesting party.

     21. FINANCIAL STATEMENTS. Within ten (10) days after Sublandlord’s written request
therefor, Subtenant shall deliver to Sublandlord copies of Subtenant’s most recent publicly
reported financial statements.

     22. LEASE DEPOSIT.

          A. Advance Rent Deposit. Subtenant shall deposit with Sublandlord on the date
Subtenant executes and delivers this Sublease to Sublandlord the cash sum of Forty-Two Thousand
Nine Hundred and No/100ths Dollars ($42,900.00) as the Advance Rent Deposit. The Advance Rent
Deposit shall be applied by Sublandlord against the first month’s Base Rent payable hereunder.

          B. Security Deposit. Upon execution of this Sublease, Subtenant shall provide
Sublandlord an irrevocable letter of credit, in the form of EXHIBIT F and otherwise
approved by Sublandlord in the amount of Three Hundred Thousand Dollars ($300,000.00), issued by a
bank approved by Sublandlord, and with an expiry date of no earlier than February 28, 2002 (or the
last day of the 37th month of the Term if that is later). If no monetary default by Subtenant
occurs prior to February 1, 2002, Subtenant may substitute a letter of credit, satisfying the same
conditions, in the amount of One Hundred Fifty Thousand Dollars ($150,000.00) with an expiry date
no later than the last day of the month following expiration of the Term, and upon delivery of the
Substitute Letter of Credit, the initial letter of credit shall be returned. If subtenant exercises
its option to extend the term, Subtenant shall replace the then letter of credit with a letter of
credit in the amount of Seventy Thousand One Hundred Sixty-Two and 20/100ths Dollars ($70,162.20)
plus the then monthly estimated total of Landlord Operating Costs and

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Taxes and Sublandlord Operating Costs allocated to the Premises and satisfying the same
conditions with an expiry date no earlier than the last day of the month following expiration of
the extended term. The letter of credit shall provide for partial draws and shall require only a
written statement from Sublandlord that it is being drawn upon in connection with this Sublease.
The letter of credit or any proceeds realized by draw thereon shall be security for Subtenant’s
faithful performance of Subtenant’s obligations hereunder. If Subtenant fails to pay Rent or other
charges due hereunder, or otherwise defaults with respect to any provision of this Sublease,
Sublandlord may draw upon the letter of credit, at Sublandlord’s election, in the amount of such
default, and if Subtenant fails to accept delivery of the Premises or fails to commence to pay Rent
on the Commencement Date for the Premises, Sublandlord may draw upon the letter of credit to the
full extent thereof, Sublandlord shall hold any amount realized by draw upon the letter of credit
as a security deposit (the “deposit”). Sublandlord may use, apply or retain all or any
portion of said deposit for the payment of any rent or other charge in default or for the payment
of any other sum to which Sublandlord may become obligated by reason of Subtenant’s default, or to
compensate Sublandlord for any loss or damage which Sublandlord may suffer thereby. If Sublandlord
so uses or applies all or any portion of said deposit, Subtenant shall within ten (10) days after
written demand therefor deposit cash with Sublandlord in an amount sufficient to restore said
deposit to the full amount hereinabove stated and Subtenant’s failure to do so shall be a breach of
this Sublease. Sublandlord shall not be required to keep said deposit separate from its general
accounts. If Subtenant performs all of Subtenant’s obligations hereunder, said letter of credit, or
if it has been drawn upon, such deposit or so much thereof as had not theretofore been applied by
Sublandlord, shall be returned without payment of interest for its use, to Subtenant (or, at
Sublandlord’s option, to the last assignee, if any, of Subtenant’s interest hereunder) within ten
(10) days after the expiration of the term hereof or ten (10) days after the date Subtenant has
vacated the Premises, whichever is later.

     23. FORCE MAJEURE. Neither Sublandlord or Subtenant shall be in default under this
Sublease to the extent that party is unable to perform any of its obligations on account of any
strike or labor problem, equipment, material, supplies or energy shortages (i.e., such items cannot
be obtained at normal costs within a reasonable time because of limited availability), governmental
pre-emption or prescription, national emergency, or any other cause of any kind beyond the
reasonable control of the party required to act (provided that the foregoing shall not apply to any
monetary obligation) (“Force Majeure”).

     24. NOTICES. All notices, consents, approvals and similar communications to be given
by one party to the other under this Sublease, shall be given in writing, mailed or personally
delivered as follows:

          A. Sublandlord. To Sublandlord as follows:

Applied Materials, Inc.

Global Real Estate and Facilities

3050 Bowers Avenue, M/S 2753

Santa Clara, California 95054

Attention: Real Estate Manager

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or to such other person at such other address as Sublandlord may designate by notice to Subtenant.

          B. Subtenant. To Subtenant as follows:

Shoreline Teleworks

960 Stewart Drive, 1st Floor

Sunnyvale, CA 94086

Attn:                     

or to such other person at such other address as Subtenant may designate by notice to Sublandlord.

Mailed notices shall be sent by United States certified or registered mail, or by a reputable
national overnight courier service, postage prepaid. Mailed notices shall be deemed to have been
given on the earlier of actual delivery or three (3) business days after posting in the United
States mail in the case of registered or certified mail, and one business day in the case of
overnight courier.

     25. QUIET POSSESSION. So long as Subtenant shall perform all of its obligations under
this Sublease, Subtenant shall enjoy peaceful and quiet possession of the Premises, subject to all
of the terms of this Sublease.

     26. REAL ESTATE BROKERS. Subtenant and Sublandlord each represent that it has not
dealt with any real estate broker with respect to this Sublease except for the brokers listed in
the Schedule, and no other broker is in any way entitled to any broker’s fee or other payment in
connection with this Sublease. Subtenant and Sublandlord shall each indemnify and defend the other
against any claims by any other broker or third party for any payment of any kind in connection
with this Sublease whose claim is based upon the acts or agreements of the indemnifying party.
Sublandlord shall pay the brokers identified in the Schedule a commission for this Sublease and for
any extension thereof pursuant to Section 32 pursuant to a separate agreement to be entered into
between Sublandlord and such brokers or among such brokers.

     27. MISCELLANEOUS.

          A. Successors and Assigns. Subject to the limits on Subtenant’s assignment contained
in Section 18, the provisions of this Sublease shall be binding upon and inure to the benefit of
all successors and assigns of Sublandlord and Subtenant.

          B. Date Payments Are Due. Except for payments to be made by Subtenant under this
Sublease which are due upon demand, Subtenant shall pay to Sublandlord any amount for which
Sublandlord renders a statement of account within thirty (30) days of Subtenant’s receipt of
Sublandlord’s statement.

          C. Meaning of “Sublandlord,” “Landlord”, “Re-Entry,” “including” and “Affiliate”. The
term “Sublandlord” means only the owner of the Sublandlord’s interest in this Sublease from time to
time. The term “Landlord” means only the owner of the Project and the lessor’s interest in the
Master Lease from time to time. The words “re-entry” and “re-enter” are

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not restricted to their technical legal meaning. The words “including” and similar
words shall mean “without limitation.” The word “affiliate” shall mean a person or entity
controlling, controlled by or under common control with the applicable entity. “Control” shall mean
the power directly or indirectly, by contract or otherwise, to direct the management and policies
of the applicable entity.

          D. Time of the Essence. Time is of the essence of each provision of this Sublease.

          E. No Option. This document shall not be effective for any purpose until it has been
executed and delivered by both parties.

          F. Severability. The unenforceability of any provision of this Sublease shall not
affect any other provision.

          G. Governing Law. This Sublease shall be governed in all respects by the laws of the
state in which the Project is located, without regard to the principles of conflicts of laws.

          H. No Oral Modification. No modification of this Sublease shall be effective unless
it is a written modification signed by both parties.

          I. Sublandlord’s Right to Cure. If Sublandlord breaches any of its obligations under
this Sublease, Subtenant shall notify Sublandlord in writing and shall take no action respecting
such breach so long as Sublandlord promptly begins to cure the breach and diligently pursues such
cure to its completion. Sublandlord may cure any default by Subtenant; any expenses incurred shall
become Additional Rent due from Subtenant on demand by Sublandlord.

          J. Captions. The captions used in this Sublease shall have no effect on the
construction of this Sublease.

          K. Authority. Sublandlord and Subtenant each represents to the other that it has full
power and authority to execute and perform this Sublease.

          L. Sublandlord’s Enforcement of Remedies. Sublandlord may enforce any of its remedies
under this Sublease either in its own name or through an agent.

          M. Entire Agreement. This Sublease, together with all Appendices, constitutes the
entire agreement between the parties. No representations or agreements of any kind have been made
by either party which are not contained in this Sublease.

          N. Sublandlord’s Title. Landlord’s title and Sublandlord’s interest under the Master
Lease shall always be paramount to the interest of Subtenant, and nothing in this Sublease shall
empower Subtenant to do anything which might in any way impair Landlord’s title or Sublandlord’s
interest under the Master Lease.

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          O. Light and Air Rights. Neither Landlord nor Sublandlord has granted by this
Sublease any rights to light and air in connection with Project.

          P. Singular and Plural. Wherever appropriate in this Sublease, a singular term shall
be construed to mean the plural where necessary, and a plural term the singular. For example, if at
any time two parties shall constitute Sublandlord or Subtenant, then the relevant term shall refer
to both parties together.

          Q. Exclusivity. Sublandlord does not grant to Subtenant in this Sublease any
exclusive right except the right to occupy its Premises.

          R. No Construction Against Drafting Party. The rule of construction that ambiguities
are resolved against the drafting party shall not apply to this Sublease.

          S. Survival. All obligations of Sublandlord and Subtenant under this Sublease shall
survive the termination of this Sublease.

          T. Rent Not Based on Income. No Rent or other payment in respect of the Premises
shall be based in any way upon net income or profits from the Premises. Subtenant may not enter
into or permit any sublease or license or other agreement in connection with the Premises which
provides for a rental or other payment based on net income or profit.

          U. Building Manager and Service Providers. Sublandlord may perform any of its
obligations under this Sublease through its employees or third parties hired by the Sublandlord.

          V. Late Charge and Interest on Late Payments. Without limiting the provisions of
Section 13A, if Subtenant fails to pay any installment of Rent or other charge to be paid by
Subtenant pursuant to this Sublease within five (5) business days after the same became due and
payable (collectively referred to herein as a “Late Payment”), then Subtenant shall pay a late
charge equal to the greater of five percent (5%) of the amount of such Late Payment or $250 (“Late
Charge”). In addition, interest shall be paid by Subtenant to Sublandlord on any Late Payments of
Rent from the date due until paid at the rate provided in Section 2D(2) (“Late Interest”). Such
Late Charge and Late Interest shall constitute Additional Rent due and payable by Subtenant to
Sublandlord upon the date of payment of the Late Payment. Notwithstanding the foregoing, Subtenant
shall not be liable for any Late Charge or Late Interest for the first Late Payment during any
calendar year so long as Sublandlord receives such Late Payment within five (5) days of Subtenant’s
receipt of Sublandlord’s written notice for the same. If Sublandlord does not receive Subtenant’s
Late Payment within such five (5) day period, then Subtenant shall also be liable for the Late
Charge and Late Interest as described above.

     28. UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel at any time that
any part of the payments by Subtenant to Landlord under this Sublease may be characterized as
unrelated business income under the United States Internal Revenue Code and its regulations, then
Subtenant shall enter into any amendment proposed by Landlord to avoid such income, so long as the
amendment does not require Subtenant to make more payments or accept fewer services from Landlord,
than this Sublease provides.

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     29. HAZARDOUS SUBSTANCES.

          A. Subtenant’s Environmental Indemnity. Subtenant shall not cause or permit any
Hazardous Substances to be brought upon, stored, or used in, on or under the Project other than
such quantities of Hazardous Substances as are customary and reasonably necessary for the conduct
of the Permitted Uses listed in the Schedule to this Sublease, and which are listed in the
Hazardous Materials Inventory Sheets (collectively, the “HMIS”) to be attached hereto as
EXHIBIT G after approval by Landlord and Sublandlord, unless Landlord and Sublandlord have
consented in writing to the storage or use of such Hazardous Substances, which consent shall not be
unreasonably withheld by Sublandlord. Subtenant shall also provide Landlord and Sublandlord with
copies of all documents or information provided to or documents, information or permits received
from applicable governmental agencies to the extent they relate to the use, transportation,
disposal or storage of Hazardous Substances at the Premises, including any HMIS’s, Material Safety
Data Sheets, discharge permits, Hazardous Materials Management Plans and transportation manifests.
Subtenant shall not cause or permit any Hazardous Substances to be produced, discharged or disposed
of in, on or under the Project. Any handling, transportation, storage, treatment, disposal or use
of any Hazardous Substances in or about the Project by Subtenant, its agents, employees,
contractors or invitees shall strictly comply with all applicable Governmental Requirements.
Subtenant shall indemnify, defend and hold Landlord and Sublandlord harmless from and against any
liabilities, claims, damages, penalties, fines, attorneys’ fees and court costs, remediation costs,
investigation costs and any other expenses which result from or arise out of the use, storage,
treatment, transportation, release, or disposal of any Hazardous Substances on or about the Project
by Subtenant, its agents, employees, contractors or invitees. Sublandlord shall notify Subtenant in
writing promptly upon receipt of notice of any claim to which the indemnification set forth herein
may apply. Sublandlord shall reasonably cooperate with Subtenant in the course of Subtenant’s
defense and indemnification as provided hereunder. Subtenant shall have the right to settle any
claim to which this paragraph may apply, subject to Sublandlord’s consent, which shall not be
unreasonably withheld.

          B. “Hazardous Substances” means any hazardous or toxic substances, materials or waste
which are or become regulated by any local government authority, the state in which the Project is
located or the United States government, including those substances described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601
et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.,
any other applicable federal, state or local law, and the regulations adopted under these laws.

          C. Pre-existing Contamination. Subtenant hereby acknowledges that Sublandlord has
informed Subtenant that certain chlorinated volatile organic compounds are present in the
groundwater under the Land as of the date of this Sublease (“Pre-Existing
Contamination”). Subtenant hereby covenants for the benefit of Landlord and Sublandlord
that it will not use or store any chlorinated volatile organic compounds on the Premises or within
the Project.

     Subtenant agrees and acknowledges that: (i) neither Sublandlord nor any of Sublandlord’s
representatives have made any representations or warranties about the environmental condition of
the Land or the accuracy or completeness of any environmental

36

 

reports made available to Subtenant regarding the Land; (ii) it has had ample time and access
to the Land, to review the environmental condition of the Land and to conduct any tests which
Subtenant may deem desirable in connection with this Sublease; (iii) it is sophisticated,
knowledgeable and experienced in the analysis of environmental matters and that Subtenant has
entered into this Sublease with the intention of making and relying upon its own (or its experts’)
investigation of the environmental condition of the Land; and (iv) Subtenant is not relying upon
any representations or warranties purportedly made by Sublandlord or anyone acting or claiming to
act on Landlord’s behalf concerning the Land.

          D. Sublandlord’s Environmental Indemnity. Subject to the terms, conditions and
limitations set forth below and except to the extent such contamination was caused, exacerbated, or
contributed to by Subtenant, or Subtenant’s employees, agents, contractors or invitees, Sublandlord
shall indemnify Subtenant from and against any liability, claims, damages, penalties, fines,
attorneys’ fees and costs, remediation costs, investigation costs and other expenses arising from
any use, storage, treatment, transportation, release or disposal of Hazardous Substances on or
about the Project by Sublandlord, its agents, contractors, employees or invitees. For purposes of
the preceding sentence, the term “Sublandlord’s contractors” excludes Landlord under the Master
Lease. Sublandlord’s liability under the foregoing indemnity (i) is personal to Subtenant and may
not be assigned to or relied upon by any third party without Sublandlord’s prior written consent,
which may be withheld in Sublandlord’s sole and absolute discretion, (ii) is limited to Subtenant’s
actual, out of pocket costs incurred in complying with any applicable state or federal agencies
relating to the remediation, removal, disposal or monitoring (“Compliance Order”), and to
reasonable consultants fees and costs and reasonable attorneys’ fees and costs incurred in
defending against a proposed Compliance Order, so long as Sublandlord may select the attorney to
defend Subtenant and have sole authority to make all settlement and other decisions in regard to
the proceedings, including the decision whether to challenge the Compliance Order (and any related
order or action) by appeal or court challenge, and (iii) specifically excludes any claims, costs,
damages or losses for personal injury, property damage, punitive damages, damage to business, lost
profits or consequential damages incurred by Subtenant or any third party.

     30. EXCULPATION. Landlord shall have no personal liability under this Sublease.
Sublandlord shall have no personal liability under this Sublease; its liability shall be limited to
its equity interest in the Master Lease, and shall not extend to any other property or assets of
the Sublandlord. In no event shall any officer, director, employee, agent, shareholder, partner,
member or beneficiary of Landlord or Sublandlord be personally liable for any of
Landlord’s or Sublandlord’s obligations hereunder. The foregoing limitation shall not
limit Sublandlord’s liability pursuant to the indemnity obligation under Sections 9B and 29D
(collectively the “Indemnity Obligations”).

     31. EXTENSION OPTION. Subject to Subsection B below, Subtenant may at its option
extend the Term of this Lease for one period of approximately three (3) years and four (4) months,
expiring September 30, 2007. Such period is called the “Renewal Term”. The Renewal Term
shall be upon the same terms contained in this Sublease, except that (i) Sublandlord shall have no
obligation to provide Subtenant with any Tenant Improvement Allowances in connection with the
Renewal Term, (ii) the Base Rent during the Renewal Term shall be as set forth below, and (iii) any
reference in the Sublease to the “Term” of the Sublease shall be

37

 

deemed to include any Renewal Term and apply thereto, unless it is expressly provided
otherwise. Subtenant shall have no additional extension options.

          A. The Base Rent through and including the eight (8) month of the Renewal Term (the seventy
second (72nd) month of the Term as extended) shall be Seventy Thousand One Hundred Sixteen and
20/100ths Dollars ($70,116.20) (calculated at $2.20 per square foot per month). The Base Rent
commencing with the seventy third (73rd) month shall be $2.25 per square foot per month, and shall
be increased by $0.05 per square foot per month on each anniversary of the Commencement Date during
the Renewal Term.

          B. To exercise the option, Subtenant must deliver a binding notice to Sublandlord not sooner
than eight (8) months nor later than six (6) months prior to the expiration of the initial Term of
this Sublease. If Subtenant fails to timely give its notice of exercise, Subtenant will be deemed
to have waived its option to extend.

          C. Subtenant’s option to extend this Sublease is subject to the conditions that: (i) on the
date that Subtenant delivers its binding notice exercising an option to extend, Subtenant is not in
default under this Sublease after the expiration of any applicable notice and cure periods, and
(ii) Subtenant shall not have assigned the Sublease to any party.

     32. RIGHT OF FIRST OFFER. If upon expiration or earlier termination (of the initial
term or renewal term, if extended) of any sublease for the second (2nd) floor of the Building,
Sublandlord desires to sublease any space in the second floor (the “Proposed Sublease Space”),
Sublandlord shall notify Subtenant in writing of the proposed terms and conditions for such
sub-sublease (“Sublandlord’s Notice”). Subtenant shall have seven (7) days after receipt of
Sublandlord’s Notice to notify Sublandlord in writing of Sublandlord’s election to lease the
Proposed Sublease Space on the terms stated in Sublandlord’s Notice. If Subtenant notifies
Sublandlord within such seven-day period of Subtenant’s desire to lease the Proposed Sublease
Space, Subtenant and Sublandlord shall enter into a lease on the proposed terms an conditions
stated in Sublandlord’s Notice. If, however, Subtenant fails to notify Sublandlord of Subtenant’s
election to lease the Proposed Sublease Space within such seven-day period or, if Sublandlord and
Subtenant, through no fault of Sublandlord, fail to execute a lease within thirty (30) days after
the date of Subtenant’s notice to Sublandlord, Subtenant shall be deemed to have waived its right
to lease the Proposed Sublease Space at such time and Sublandlord shall have the right to lease the
Proposed Sublease Space to any third party on substantially the terms stated in Sublandlord’s
Notice without further notice to Subtenant.

38

 

IN
WITNESS WHEREOF, the parties hereto have executed this Sublease.

SUBLANDLORD:

	 	 	 	 	 	 	 	 	 	 	 
	APPLIED MATERIALS, INC.,	 	 	 	 	 	 
	a Delaware corporation	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Thomas M. Rohrs	 	 	 	/s/ Joseph R. Brunson	 	 
	 	 	 	 	 	 	 	 	 
	Print Name: Thomas Rohrs	 	 	 	Joseph R. Brunson	 	 
	Print Title:	 	 	 	 	 	Senior Vice President, CFO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SUBTENANT:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SHORELINE TELEWORKS,	 	 	 	 	 	 
	a California corporation	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ John Fazio	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Print Name: John Fazio	 	 	 	 	 	 
	Print Title: President & CEO	 	 	 	 	 	 

39

 

FIRST AMENDMENT TO SUBLEASE

     THIS FIRST AMENDMENT TO SUBLEASE (this “Amendment”) is dated and effective as of November 6,
2003, between Applied Materials, Inc., a Delaware corporation (“Sublandlord”) and Shoreline
Communications, Inc., a California corporation (“Subtenant”).

RECITALS

     A. Sublandlord and Subtenant (then known as Shoreline Teleworks, Inc.) entered into that
certain Sublease dated October ___, 1998 (the “Sublease”) for the first floor of Building G, 960
Stewart Drive, Sunnyvale, California (the “Premises”) as described in the Sublease.

     B. Sublandlord and Subtenant desire to amend the Sublease as set forth herein.

     NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged,
Sublandlord and Subtenant agree to amend the Sublease as set forth herein.

     1. Amendment to Section 1 of the Schedule. The name of the Subtenant is Shoreline
Communications, Inc.

     2. Amendment to Section 11 of the Schedule. Section 11 of the Schedule shall be
amended to read in its entirety as follows:

	 	11.	 	Term: Commencing on the Commencement Date and expiring
September 30, 2007.

     3. Amendment to Section 13 of the Schedule. Section 13 of the Schedule is hereby
deleted and replaced with the following to read in its entirety as follows:

     Base Rent:

	 	 	 	 	 	 	 	 	 
	Months	 	Monthly/Square Foot	 	Monthly Base Rent
	2/1/1999 - 1/31/2000
	 	$	1.95	 	 	$	42,900.00	 
	2/1/2000 - 10/31/2000
	 	$	2.00	 	 	$	50,000.00	 
	11/1/2000 - 1/31/2001
	 	$	2.00	 	 	$	63,782.00	 
	2/1/2001 - 1/31/2/2002
	 	$	2.05	 	 	$	65,376.55	 
	2/1/2002 - 1/31//2003
	 	$	2.10	 	 	$	66,971.10	 
	2/1/2003 - 4/30/2003
	 	$	2.15	 	 	$	68,566.65	 
	5/1/2003 - 5/14/2003
	 	$	2.15	 	 	$	30,965.58	*
	5/15/2003 - 5/14/2004
	 	$	1.10	 	 	$	35,080.10	 
	5/15/2044 - 5/14/2005
	 	$	1.13	 	 	$	36,036.83	 
	5/15/2005 - 5/14/2006
	 	$	1.16	 	 	$	36,993.56	 
	5/15/2006 - 5/14/2007
	 	$	1.19	 	 	$	37,950.29	 
	5/15/2007 - 9/30/2007
	 	$	1.22	 	 	$	38,907.02	 

 

			
	*	 	Monthly Base Rent prorated for partial month of May 1 through May 14

1

 

Base Rent previously paid for the period May 15, 2003 through September 30, 2003 in excess of the
amounts stated above shall be credited against installments of Base Rent as they become due,
commencing with the Base Rent due October 1, 2003.

     4. Deletion of Section 31 of the Sublease. Section 31 “Extension Option” of the
Sublease is hereby deleted in its entirety.

     5. Affirmation. As amended herein, the Sublease is and remains in full force and
effect.

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

	 	 	 	 	 	 	 
	“Sublandlord”	 	“Subtenant”
	 
	 	 	 	 	 	 
	APPLIED MATERIALS,
INC., a Delaware corporation	 	SHORELINE
COMMUNICATIONS, INC., a California corporation
	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Carter Lake	 	By:  	/s/ John Finegan	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Print Name: Carter Lake	 	Print Name: John Finegan
	 
	 	 	 	 	 	 
	Its: Senior Director	 	Its: CFO
	  Global Real Estate & Facilities
	 	 	 	 
	 
	 	 	 	 	 	 
	Date: November 7, 2003	 	Date:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Print Name: 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 

2

 

FIRST AMENDMENT TO SUBLEASE CONSENT AND AGREEMENT

     This FIRST AMENDMENT TO SUBLEASE CONSENT AND AGREEMENT (“Amendment”), dated for
reference purposes only as of ___, 2003, is made by and among CARRAMERICA REALTY
CORPORATION, a Maryland corporation (“Landlord”), APPLIED MATERIALS, INC., a Delaware
corporation (“Tenant”), and SHORELINE COMMUNICATIONS, INC., a California corporation, as
successor in interest to Shoreline Teleworks, a California corporation (“Subtenant”).

RECITALS:

     A. Landlord and Tenant have heretofore entered into a Lease, dated September 9, 1997
(hereinafter the “Master Lease”) for premises (hereinafter the “Premises”) in
Buildings A through G comprising the project commonly known as the Oakmead West Buildings Project,
located in Sunnyvale, California.

     B. On or about. November 5, 1998, Tenant and Subtenant entered into a Sublease (the
“Sublease”), pursuant to which Tenant subleases portions of Building G, consisting of
approximately 31,891 square feet (the “Subleased Premises”). On or about November 5, 1998,
Landlord consented to the Sublease pursuant to a certain Sublease Consent and Agreement (the
“Original Sublease Consent”).

     C. Tenant and Subtenant desire to extend the term of the Sublease from May 31, 2004 to
September 30, 2007, and to adjust the Base Rent due under the Sublease, pursuant to the proposed
First Amendment to Sublease Agreement dates November 6, 2003 between Tenant and Subtenant
(the “First Amendment to Sublease”) a copy of which is attached hereto as Exhibit
A.

     D. Landlord is wiling to consent to the First Amendment to Sublease upon the terms and
conditions set forth below.

AGREEMENT:

     NOW, THEREFORE, in consideration of the foregoing and the covenants, promises and undertakings
set forth herein, and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

     1. Landlord’ Consent. Landlord hereby consents to the First Amendment to Sublease in
the form attached hereto as Exhibit A. The Sublease shall not be further amended or
modified without the prior written consent of Landlord. This consent is granted only upon the
terms and conditions of this Amendment, and Tenant and Subtenant hereby agree to each of such terms
and conditions. From and after the effective date of this Amendment, all references to the
“Sublease” in the Original Sublease Consent shall be deemed to refer to the Sublease, as amended by
the First Amendment to Sublease.

     2. Conditions to Landlord’s Consent. Landlord’s consent to the First Amendment to
Sublease is expressly conditioned on Tenant’s reimbursement of Landlord for all of Landlord’s
attorneys’ fees and other expenses incurred in connection with this Amendment (collectively,
“Transfer-Related Costs”). Tenant shall reimburse Landlord for the Transfer-Related Costs
incurred by Landlord within ten (10) days following Tenant’s receipt of an invoice.

     3. Representations of Tenant and Subtenant.

1

 

          3.1 Tenant and Subtenant represent and warrant to Landlord that a true copy of the First
Amendment to Sublease, and all exhibits, addendum, amendments, modifications and supplements
thereto, is attached hereto as Exhibit A.

          3.2 Tenant and Subtenant represent and warrant to Landlord that, except as set forth in the
First Amendment to Sublease, Subtenant is not paying to Tenant any rent, additional rent or other
consideration whatsoever in connection with the First Amendment to Sublease (including, but not
limited to, payments for Tenant’s assets, trade fixtures, equipment and/or other equity ownership
of Tenant.)

          3.3 Tenant and Subtenant represent and warrant that Landlord will not be liable for any
brokerage commission or finder’s fee in connection with the consummation of the First Amendment to
Sublease of this Amendment. Tenant and Subtenant, jointly and severally, shall protect, indemnify,
defend and hold Landlord harmless from and against any claims for any such commissions, fees or
costs, and for all costs, expenses and liabilities incurred in connection with such claims,
including, without limitation, attorneys’ fees and costs.

     4. Miscellaneous.

          4.1 Unless the context clearly requires otherwise, all capitalized terms used herein shall
have the defined meanings ascribed to them in the Original Sublease Consent.

          4.2 Except as modified by this Amendment. all of the terms, conditions and provisions of the
Original Sublease Consent shall remain in full force and effect and are hereby ratified and
confirmed.

          4.3 To the extent the terms of the Original Sublease Consent and this Amendment are
inconsistent, the terms of this Amendment shall control.

          4.4 The submission of this Amendment to Tenant for examination or execution does not create an
option or constitute an offer to Tenant to amend the Original Sublease Consent on the terms and
editions contained herein, and Landlord’s consent hereunder shall not be effective until Landlord
has received a copy of this Amendment, fully executed with original signatures of Tenant and
Subtenant thereon. By executing and delivering this Amendment, the person or parsons signing on
behalf of Tenant and Subtenant represent and warrant that they have the requisite authority to bind
their respective party.

          4.5 This Amendment contains the entire agreement of the parties hereto with respect to the
subject matter hereof. It is understood that there are no oral agreements between the parties
affecting the Original Sublease Consent as hereby amended, and this Amendment supersedes and
cancels any and all previous negotiations, representations, agreements and understandings, if any,
between the parties and their respective agents with respect to the subject matter thereof, and
none shall be used to interpret or construe the Original Sublease Comment as amended hereby.

[signatures on following page]

2

 

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the dates set forth
under their respective signatures below.

	 	 	 	 	 	 	 
	LANDLORD	 	TENANT
	 
	 	 	 	 	 	 
	CARRAMERICA REALTY CORPORATION, a 

Maryland corporation	 	APPLIED MATERIALS, INC.,
a Delaware corporation
	 
	 	 	 	 	 	 
	By: 

	/s/	  Christopher Peatrass	 	By:  	/s/	  Carter Lake
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name: Christopher Peatrass	 	Name: Carter Lake
	 
	 	 	 	 	 	 
	Title: Managing Director	 	Title: Senior
Director
         
Global Real Estate & Facilities
	 
	 	 	 	 	 	 
	Date: 12/6/03	 	Date:11/13/03
	 
	 	 	 	 	 	 
	SUBTENANT	 	 	 	 
	 
	 	 	 	 	 	 
	SHORELINE COMMUNICATIONS, INC.,
a California corporation	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	/s/  John Finegan	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Name:
	 	John Finegan	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:
	 	CFO	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date:
	 	11/12/03	 	 	 	 
	 

	 	 	 	 	 	 

3

 

EXHIBIT A

FIRST AMENDMENT TO SUBLEASE AGREEMENT

See Attached

 

Applied Materials Rent Reconciliation

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Rent paid	 	New rent	 	Monthly Diff	 	Cum Diff	 	 
	May-03

	 	$	68,565.65	 	 	$	35,080.10	 	 	$	16,742.78	 	 	$	16,742.78	 	 	@50%
	Jun-03

	 	$	68,565.65	 	 	$	35,080.10	 	 	$	33,485.55	 	 	$	50,228.33	 	 	 
	Jul-03

	 	$	68,565.65	 	 	$	35,080.10	 	 	$	33,485.55	 	 	$	83,713.88	 	 	 
	Aug-03

	 	$	68,565.65	 	 	$	35,080.10	 	 	$	33,485.55	 	 	$	117,199.43	 	 	 
	Sep-03

	 	$	68,565.65	 	 	$	35,080.10	 	 	$	33,485.55	 	 	$	150,684.98	 	 	 
	Oct-03

	 	$	0.00	 	 	$	35,080.10	 	 	-$	35,080.10	 	 	$	115,604.88	 	 	 
	Nov-03

	 	$	0.00	 	 	$	35,080.10	 	 	-$	35,080.10	 	 	$	80,524.78	 	 	 
	Dec-03

	 	$	0.00	 	 	$	35,080.10	 	 	-$	35,080.10	 	 	$	45,444.68	 	 	 
	Jan-04

	 	$	0.00	 	 	$	35,080.10	 	 	-$	35,080.10	 	 	$	10,364.58	 	 	 
	Feb-04

	 	$	24,715.53	 	 	$	35,080.10	 	 	-$	10,364.58	 	 	$	0.00	 	 	 
	Mar-04

	 	$	35,080.10	 	 	$	35,080.10	 	 	$	0.00	 	 	$	0.00	 	 	 

2

 

SECOND AMENDMENT TO SUBLEASE

     THIS SECOND AMENDMENT TO SUBLEASE (this “Second Amendment”) is dated and effective as of
September 12, 2005, between Applied Materials, Inc., a Delaware corporation (“Sublandlord”) and
Shortel, Inc. (formerly known as Shorline Communications, Inc.), a California corporation
(“Subtenant”).

RECITALS

     A. Sublandlord and Subtenant (then known as Shoreline Teleworks, Inc.) entered into that
certain Sublease dated October ___, 1998, as amended by the First Amendment To Sublease dated as of
November 6, 2003 (together, the “Sublease”) for the first floor of Building G, 960 Stewart Drive,
Sunnyvale, California (the “Premises”) as described in the Sublease. Capitalized terms not defined
in this Second Amendment shall have the meanings given in the Sublease.

     B. Sublandlord and Subtenant desire to amend the Sublease to add the second floor of the
Building to the Premises, on terms and conditions set forth herein.

     NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged,
Sublandlord and Subtenant agree to amend the Sublease as set forth herein.

     1. Amendment to Section 1 of the Schedule. The name of the Subtenant is Shoretel,
Inc.

     2. Amendment to Sections 2, 3, and 4 of the Schedule. Sections 2, 3 and 4 of the
Schedule shall be amended to read in its entirety as follows:

     2. Premises: The “Premises” means and includes the portions of the first floor of
Building G (the “Building”), 960 Stewart Drive, Sunnyvale, California, designated Area A,
Area B, and Area C on Exhibit A-2 attached hereto, occupied by Tenant at any time during the
Term of this Sublease, together with (1) a nonexclusive right, in common with other tenants
of the Building, to use the Building Common Areas, and (2) a nonexclusive right, in common
with other tenants of the Project, to use the Project Common Areas subject to the Master
Lease. Commencing October 1, 2005, the “Premises” means and includes the first floor and
second floor of the Building, together with a nonexclusive right, in common with other
tenants of the Project, to use the Project Common Areas subject to the Master Lease.

	 	 	 	 	 
	3.

	 	Rentable Square Footage of the Premises:
	 	31,891 sq. ft.
	 

	 	Commencing October 1, 2005
	 	63,781 sq. ft.

     4. Subtenant’s Proportionate Share: The Percentage listed below for Landlord’s
Operating Costs and Taxes and Sublandlord’s Operating Costs allocated to the Building, plus
the Percentage listed below for Landlord’s Operating Costs and Taxes but not allocated to
specific Buildings by Landlord.

1

 

	 	 	 	 	 	 	 	 	 
	 	 	Proportionate Share	 	Proportionate Share
	 	 	for Building	 	for Project*
	Area A
	 	 	34.49	%	 	 	5.16	%
	Area A + Area B
	 	 	39.20	%	 	 	5.87	%
	Area A + Area B + Area C
	 	 	50	%	 	 	7.49	%
	Second Floor
	 	 	50	%***	 	 	14.28 	%**, ***

 

			
	*	 	This percentage (7.49%) represents the ratio of the square footage of the Premises to the
aggregate square footage of all Buildings in the Project. As the aggregate square footage of
all Buildings subject to the Master Lease declines, this percentage may be adjusted to a
percentage equal to the ratio of the square footage of the Premises to the aggregate square
footage of the Buildings then subject to the Master Lease, but the revised percentage would
apply only against the Landlord Operating Costs allocated to all Buildings then subject to
the Master Lease but not to any one Building.
	 
	**	 	As of October 1, 2005, representing Proportionate Share of Buildings in the Project
remaining subject to the Master Lease. Commencing October 6, 2005, 29.40% of a reduced
square footage subject to the Master Lease.
	 
	***	 	Second Floor monthly rent is a gross rent and Sublandlord is responsible for Building
Operating Costs and Landlord’s Operating Costs and Taxes allocated to the Second Floor of
the Building. Thus, the square footage of the second floor is not included in the
Proportionate Share calculations.

     3. Amendment to Section 10 of the Schedule. Section 10 of the Schedule shall be
amended to read in its entirety as follows:

	 	 	 	 	 
	10. Commencement Date:

	 	Area A
	 	Approximately February 1, 1999
	 

	 	Area B
	 	Approximately February 1, 2000
	 

	 	Area C
	 	Approximately October 1, 2000
	 

	 	Second Floor
	 	Approximately October 1, 2005
	 

	 	See Paragraph 1.A.
	 	 

     4. Amendment to Section 13 of the Schedule. Section 13 of the Schedule is hereby
deleted and replaced with the following to read in its entirety as follows:

2

 

Base Rent:

	 	 	 	 	 	 	 
	Months	 	Monthly/Square Foot	 	Monthly Base Rent	 
	2/1/1999
– 1/31/2000
	 	$1.95	 	$	42,900.00	 
	2/1/2000
– 10/31/2000
	 	$2.00	 	$	50,000.00	 
	11/1/2000 – 1/31/2001
	 	$2.00	 	$	63,782.00	 
	2/1/2001 – 1/31/2/2002
	 	$2.05	 	$	65,376.55	 
	2/1/2002 – 1/31//2003
	 	$2.10	 	$	66,971.10	 
	2/1/2003
– 4/30/2003
	 	$2.15	 	$	68,566.65	 
	5/1/2003 – 5/14/2003
	 	$2.15	 	$	30,965.58	*
	5/15/2003 – 5/14/2004
	 	$1.10	 	$	35,080.10	 
	5/15/2004 – 5/14/2005
	 	$1.13	 	$	36,036.83	 
	5/15/2005 – 9/30/2005
	 	$1.16	 	$	36,993.56	 
	10/1/2005 – 5/14/2006
	 	$1.16 Areas A-C	 	$	36,993.56	 
	 
	 	$0.26 Second Floor	 	$	8,291.66	 
	 
	 	 	 	 	 
	 
	 	 	 	$	45,285.22	 
	5/14/2006 – 9/30/2006
	 	$1.19 Areas A-C	 	$	37,950.29	 
	 
	 	$0.26 Second Floor	 	$	8,291.66	 
	 
	 	 	 	 	 
	 
	 	 	 	$	46,241.95	 
	10/1/2006-5/14/2007
	 	$1.19 Areas A-C	 	$	37,950.29	 
	 
	 	$0.52 Second Floor	 	$	16,583.32	 
	 
	 	 	 	 	 
	 
	 	 	 	$	54,533.61	 
	5/15/2007 – 9/30/2007
	 	$1.22 Areas A-C	 	$	38,907.02	 
	 
	 	$0.52 Second Floor	 	$	16,583.32	 
	 
	 	 	 	 	 
	 
	 		 	$	55,490.34	 

Base Rent previously paid for the period May 15, 2003 through September 30, 2003 in excess of the
amounts stated above shall be credited against installments of Base Rent as they become due,
commencing with the Base Rent due October 1, 2003.

     5. Amendment to Paragraph 1.A. Paragraph 1.A of the Sublease is hereby amended to
read in its entirety as follows:

     A. Commencement Date. The Commencement Date shall be the date established pursuant to
this section and the Sublease shall expire on the date set forth in the Schedule.

               1. The Commencement Date for Area A shall be the earliest occurring of the following:

                         (i) The date of Substantial Completion of the Tenant Improvements, as such term
is defined in the Work Letter Agreement attached hereto as EXHIBIT C (“Work Letter
Agreement”) or;

                         (ii) The date Subtenant commences occupancy of Area A.

3

 

     2. The Commencement Date for Area B shall be the first day of the thirteenth (13th)
month of the Term.

     3. The Commencement Date for Area C shall be the first day of the twenty-first (21st)
month of the Term.

     4. The Commencement Date for the Second Floor shall be October 1, 2005.

     6. Amendment to Paragraph 3.B of the Sublease. Paragraph 3.B of the Sublease is
amended to read in its entirety as follows

     B. Construction of Interior Improvements. Except for Sublandlord’s obligation
to install the Tenant Improvements in the first floor in accordance with the Work Letter
Agreement, Sublandlord is leasing the Premises to Subtenant “as is,” without any obligation
to alter, remodel, improve, or decorate any part of the Premises or Project. Sublandlord
shall cause the Tenant Improvements to be completed in accordance with the terms, conditions
and limitations set forth in the Work Letter Agreement. Sublandlord shall deliver the second
floor professionally clean with all Building mechanical, electrical, plumbing, life safety,
lighting, windows and doors and roofing systems in good operating condition.

     7. Utilities. Sublandlord and Subtenant shall transfer the utilities accounts for the
Building to Subtenant’s name after execution of a consent to this Amendment by Landlord and prior
to Subtenant’s entry into to the second floor pursuant to paragraph 9 below or Subtenant’s
occupancy of the second floor.

     8. Affirmation. As amended herein, the Sublease is and remains in full force and
effect.

     9. Early Occupancy. Upon execution of this Second Amendment and consent to this
Second Amendment by Master Landlord (the “Early Occupancy Period”), provided that Subtenant’s
activities do not interfere with or cause delays to Sublandlord’s obligations, Subtenant shall be
permitted to enter the second floor for the purpose of installation of its equipment, cabling,
telecommunications, furniture systems, and other installations necessary for the conduct of
Subtenant’s business. Notwithstanding any other provision herein to the contrary, Subtenant’s
occupancy of the second floor during the Early Occupancy Period shall be subject to all of the
terms, covenants and conditions of this Sublease (including Subtenant’s obligations
regarding indemnity and insurance), provided however, that Subtenant’s obligation to pay Rent with
respect to the second floor during the Early Occupancy Period shall be waived. In any event,
Subtenant shall be responsible for any utility charges incurred by Landlord or Sublandlord in
connection with Subtenant’s use of the second floor during the Early Occupancy Period.

4

 

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

	 	 	 	 	 	 	 
	“Sublandlord”	 	“Subtenant”
	 
	 	 	 	 	 	 
	APPLIED MATERIALS, INC., a Delaware
corporation	 	SHORETEL, INC., a California corporation
	 
	 	 	 	 	 	 
	By:

	 	/S/ Jim Barnhart	 	By:	 	/s/ John Finegan
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Print Name:

	 	Jim Barnhart	 	Print Name:	 	John Finegan
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Its:

	 	Managing Director	 	Its:	 	CFO
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Date:

	 	September 26, 2005	 	Date:	 	9/13/05
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Print Name:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Its:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 

5

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