Document:

Loan and Security Agreement

 
Exhibit 10.33

 
 
LOAN AND SECURITY AGREEMENT 
 
by and between 
 
Redback Networks, Inc., as Borrower 
 
and 
 
Silicon Valley Bank, as
Lender 
 
December 27, 2002 
 

 
TABLE OF CONTENTS 
 

	 	  	 	 	 	  	 	  	 PAGE

	
	 1.
	  	 ACCOUNTING AND OTHER TERMS
	  	 1

	
	 2.
	  	 LOAN AND TERMS OF PAYMENT
	  	 1

	
	 	  	 2.1
	 	 Promise to Pay.
	  	 1

	
	 	  	 	 	 2.1.1
	  	 Revolving Advances
	  	 1

	
	 	  	 	 	 2.1.2
	  	 Foreign Exchange Sublimit
	  	 2

	
	 	  	 	 	 2.1.3
	  	 Cash Management Services Sublimit
	  	 2

	
	 	  	 2.2
	 	 Overadvances
	  	 2

	
	 	  	 2.3
	 	 Interest Rate, Payments
	  	 2

	
	 	  	 2.4
	 	 Optional Prepayment and Termination
	  	 3

	
	 	  	 2.5
	 	 Fees
	  	 3

	
	 3.
	  	 CONDITIONS OF LOANS
	  	 4

	
	 	  	 3.1
	 	 Conditions Precedent to Initial Credit Extension.
	  	 4

	
	 	  	 3.2
	 	 Conditions Precedent to all Credit Extensions
	  	 4

	
	 4.
	  	 CREATION OF SECURITY INTEREST
	  	 5

	
	 	  	 4.1
	 	 Grant of Security Interest
	  	 5

	
	 	  	 4.2
	 	 Authorization to File Financing Statements
	  	 6

	
	 	  	 4.3
	 	 Return of Pledged Collateral
	  	 6

	
	 5.
	  	 DELIVERY AND MAINTENANCE OF CASH COLLATERAL
	  	 6

	
	 	  	 5.1
	 	 Delivery of Funds by Borrower
	  	 6

	
	 	  	 5.2
	 	 Deposits Pending Purchase of Pledged CDs
	  	 6

	
	 	  	 5.3
	 	 Issuance and Redemption of Certificates of Deposit; Interest
	  	 6

	
	 	  	 5.4
	 	 Acknowledgment by Borrower that Requirements are Commercially Reasonable
	  	 7

	
	 	  	 5.5
	 	 Withdrawal of Surplus Collateral
	  	 7

	
	 6.
	  	 REPRESENTATIONS AND WARRANTIES
	  	 8

	
	 	  	 6.1
	 	 Designated Senior Debt
	  	 8

	
	 	  	 6.2
	 	 Due Organization and Authorization
	  	 8

	
	 	  	 6.3
	 	 Collateral
	  	 8

	
	 	  	 6.4
	 	 Litigation
	  	 8

	
	 	  	 6.5
	 	 No Material Adverse Change in Financial Statements
	  	 8

 

i 

TABLE OF CONTENTS 
(CONTINUED) 
 

	 	  	 	    	 	  	 	  	 PAGE

	
	 	  	 6.6
	    	 Solvency
	  	 9

	
	 	  	 6.7
	    	 Regulatory Compliance
	  	 9

	
	 	  	 6.8
	    	 Subsidiaries
	  	 9

	
	 	  	 6.9
	    	 Full Disclosure
	  	 9

	
	 7.
	  	 AFFIRMATIVE COVENANTS
	  	 10

	
	 	  	 7.1
	    	 Government Compliance
	  	 10

	
	 	  	 7.2
	    	 Financial Statements, Reports, Certificates
	  	 10

	
	 	  	 7.3
	    	 Inventory
	  	 10

	
	 	  	 7.4
	    	 Taxes
	  	 10

	
	 	  	 7.5
	    	 Insurance
	  	 11

	
	 	  	 7.6
	    	 Protection of Intellectual Property Rights
	  	 11

	
	 	  	 7.7
	    	 Further Assurances
	  	 11

	
	 8.
	  	 NEGATIVE COVENANTS
	  	 11

	
	 	  	 8.1
	    	 Dispositions
	  	 11

	
	 	  	 8.2
	    	 Changes in Control, Business
	  	 11

	
	 	  	 8.3
	    	 Mergers or Acquisitions
	  	 12

	
	 	  	 8.4
	    	 Indebtedness
	  	 12

	
	 	  	 8.5
	    	 Encumbrance
	  	 12

	
	 	  	 8.6
	    	 Investments
	  	 12

	
	 	  	 8.7
	    	 Transactions with Affiliates
	  	 12

	
	 	  	 8.8
	    	 Subordinated Debt
	  	 12

	
	 	  	 8.9
	    	 Compliance
	  	 12

	
	 9.
	  	 EVENTS OF DEFAULT
	  	 13

	
	 	  	 9.1
	    	 Payment Default
	  	 13

	
	 	  	 9.2
	    	 Covenant Default
	  	 13

	
	 	  	 9.3
	    	 Material Adverse Change
	  	 13

	
	 	  	 9.4
	    	 Attachment
	  	 13

	
	 	  	 9.5
	    	 Insolvency
	  	 14

	
	 	  	 9.6
	    	 Other Agreements
	  	 14

	
	 	  	 9.7
	    	 Judgments
	  	 14

 

ii 

TABLE OF CONTENTS 
(CONTINUED) 
 

	 	  	 	    	 	  	 	  	 PAGE

	
	 	  	 9.8
	    	 Misrepresentations
	  	 14

	
	 10.
	  	 BANK’S RIGHTS AND REMEDIES
	  	 14

	
	 	  	 10.1
	    	 Rights and Remedies
	  	 14

	
	 	  	 10.2
	    	 Power of Attorney
	  	 15

	
	 	  	 10.3
	    	 Bank Expenses
	  	 15

	
	 	  	 10.4
	    	 Remedies Cumulative
	  	 15

	
	 	  	 10.5
	    	 Demand Waiver
	  	 16

	
	 11.
	  	 NOTICES
	  	 16

	
	 12.
	  	 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
	  	 16

	
	 13.
	  	 GENERAL PROVISIONS
	  	 16

	
	 	  	 13.1
	    	 Successors and Assigns
	  	 16

	
	 	  	 13.2
	    	 Indemnification
	  	 16

	
	 	  	 13.3
	    	 Time of Essence
	  	 17

	
	 	  	 13.4
	    	 Severability of Provision
	  	 17

	
	 	  	 13.5
	    	 Amendments in Writing, Integration
	  	 17

	
	 	  	 13.6
	    	 Counterparts
	  	 17

	
	 	  	 13.7
	    	 Survival
	  	 17

	
	 	  	 13.8
	    	 Confidentiality
	  	 17

	
	 	  	 13.9
	    	 Attorneys’ Fees, Costs and Expenses
	  	 18

	
	 14.
	  	 DEFINITIONS
	  	 18

	
	 	  	 14.1
	    	 Definitions
	  	 18

 

iii 

 
THIS LOAN AND SECURITY AGREEMENT (“Agreement”) dated December 27, 2002, between SILICON
VALLEY BANK (“Bank”), whose address is 3003 Tasman Drive, Santa Clara, California 95054 and REDBACK NETWORKS, INC., a
Delaware corporation (“Borrower”), whose address is 300 Holger Way, San Jose, California 95134 provides the terms on which Bank will lend to Borrower and Borrower will repay Bank. The parties agree as follows: 
 

	1.	 	ACCOUNTING AND OTHER TERMS 

 
Capitalized terms used herein are defined in Section
14. Accounting terms not defined in this Agreement will be construed following GAAP. Calculations and determinations must be made following GAAP. The term “financial statements” includes the notes and schedules. The terms
“including” and “includes” always mean “including (or includes) without limitation,” in this or any Loan Document. 
 

	2.	 	LOAN AND TERMS OF PAYMENT 

 

	 	2.1	 	Promise to Pay. 

 
Borrower promises to pay Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the
Credit Extensions. 
 

	 	2.1.1	 	Revolving Advances. 

 
                (a) Bank will make Advances not
exceeding the Committed Revolving Line minus the sum of (i) all amounts for services utilized under the Cash Management Services Sublimit, and (ii) the FX Reserve (as defined in Section 2.1.2). Amounts borrowed under this section may
be repaid and, pursuant to the terms hereof, reborrowed during the term of this Agreement. 
 
                (b) To obtain an Advance, Borrower must notify Bank by facsimile or telephone by 12:00 p.m.
Pacific time on the Business Day the Advance is to be made. Borrower must promptly confirm the notification by delivering to Bank the Payment/Advance Form attached as Exhibit B. Bank will credit Advances to Borrower’s deposit account
maintained with the Bank in Account Number 3300324187 (which account shall be the Cash Collateral Account). Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions
if the Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by a person whom Bank reasonably believes is a Responsible Officer or designee. Borrower will indemnify Bank for any loss Bank
suffers due to such reliance. 
 
                (c) The Bank’s obligation to make Credit Extensions terminates on the Revolving Maturity Date, when all Advances are
immediately payable. 
 
                (d) Bank’s obligation to make Credit Extensions will terminate if, in Bank’s sole discretion, there has been (i) a
material adverse change in (A) Borrower’s (1) general affairs, (2) management, (3) results of operation, (4) condition (financial or otherwise) or (B) the prospect of repayment of the Obligations, or (ii) any material adverse deviation by
Borrower 

 

1. 

from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement. 
 

	 	2.1.2	 	Foreign Exchange Sublimit. 

 
                If there is availability under the
Committed Revolving Line, Borrower may enter into foreign exchange forward contracts with the Bank under which Borrower commits to purchase from or sell to Bank a set amount of foreign currency one (1) Business Day after the contract date (each, a
“FX Forward Contract”). Bank will subtract ten percent (10%) of the U.S. Dollar value of each outstanding FX Forward Contract from the foreign exchange sublimit which is a maximum of the Committed Revolving Line minus
the sum of (a) all amounts for services utilized under the Cash Management Services Sublimit, and (b) the amount of the outstanding principal balance of the Advances (the “FX Reserve”). The aggregate amount of FX Forward
Contracts at any one time may not exceed ten (10) times the amount of the FX Reserve. 
 

	 	2.1.3	 	Cash Management Services Sublimit. 

 
                Borrower may use amounts not to exceed the
Committed Revolving Line minus the sum of (a) the FX Reserve, and (b) the outstanding principal balance of the Advances for Bank’s cash management services, which may include merchant services, direct deposit of payroll, business credit
card, and check cashing services identified in various cash management services agreements related to such services (collectively, the “Cash Management Services”). The aggregate amount utilized for Cash Management Services
(the “Cash Management Services Sublimit”) will at all times reduce the amounts available to be borrowed under the Committed Revolving Line or otherwise available for FX Forward Contracts under the Committed Revolving Line to
the extent that such Cash Management Services involve the extension of credit by Bank to Borrower. Any amounts Bank pays on behalf of Borrower or any amounts that are not paid by Borrower for any Cash Management Services will be treated as Advances
under the Committed Revolving Line and will accrue interest at the rate for Advances. 
 

	 	2.2	 	Overadvances. 

 
If Borrower’s aggregated Obligations under Sections 2.1.1, 2.1.2, and 2.1.3 exceed the Committed Revolving Line,
Borrower must immediately pay Bank the excess. 
 

	 	2.3	 	Interest Rate, Payments. 

 
                (a) Interest Rate. Advances
accrue interest on the outstanding principal balance at a per annum rate equal to the Prime Rate. After an Event of Default, Obligations accrue interest at two percent (2%) above the rate effective immediately before the Event of Default. The
interest rate increases or decreases when the Prime Rate changes. Interest is computed on a 360-day year for the actual number of days elapsed. 
 
                (b) Payments. Interest due
on the Committed Revolving Line is payable monthly in arrears on the first day of each month. Interest shall also be paid on the date of any prepayment of any Advance pursuant to this Agreement for the portion of any Advance so prepaid and upon
payment (including prepayment) in full thereof. All accrued but unpaid interest on the Advances shall be due and payable on the Revolving Maturity Date. 
 

2. 

 
                (c) General Provisions. 
 
                        (i) Bank may debit any of Borrower’s deposit accounts maintained by Borrower
with Bank, including the Cash Collateral Account, for principal and interest payments owing or any other amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits Borrower’s accounts. These debits are not a set-off. Payments
received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and applicable fees or additional
interest accrue. 
 
                        (ii) If Bank shall determine that the adoption or implementation of any applicable
law, rule, regulation, or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by Bank (or its applicable lending office) with any respect or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on capital of Bank or any person or entity controlling Bank (a “Parent”) as a consequence of its obligations hereunder to a level below that which Bank (or its Parent)
could have achieved but for such adoption, change, or compliance (taking into consideration policies with respect to capital adequacy) by an amount deemed by Bank to be material, then from time to time, within fifteen (15) days after demand by Bank,
Borrower shall pay to Bank such additional amount or amounts as will compensate Bank for such reduction. A statement of Bank claiming compensation under this Section 2.3(d)(ii) and setting forth the additional amount or amounts to be paid to
it hereunder shall be conclusive absent manifest error. 
 
2.4    Optional Prepayment and Termination. Borrower may, without penalty, at any time or from time to time, upon irrevocable written notice to Bank delivered to Bank not later than 12:00 Pacific
time at least three (3) Business Days before such prepayment and termination (a “Prepayment Notice”), prepay the aggregate amount of the Credit Extensions and request termination of the Agreement. Such Prepayment Notice shall
specify the date such prepayment is to be made (which date shall be the date of termination of this Agreement). If a Prepayment Notice is given by Borrower, Borrower shall make such prepayment, and such prepayment shall be due and payable on the
date specified therein, together with accrued interest to such date. Upon Bank’s receipt of a Prepayment Notice, together with payment in full of the Obligations, this Agreement shall terminate. 
 

	 	2.5	 	Fees. 

 
Borrower will pay: 
 
                (a) Facility Fee. A fully
earned, non-refundable facility fee of $50,000 on the Closing Date. 
 
                (b) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and reasonable expenses) incurred
through and after the date of this Agreement when due. 
 

3. 

 

	3.	 	CONDITIONS OF LOANS 

 

	 	3.1	 	Conditions Precedent to Initial Credit Extension. 

 
Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that the
following have been satisfied, all in form and substance satisfactory to Bank: 
 
(a) Borrower shall have executed and delivered the Loan Documents; 
 
(b) Borrower shall have delivered the Operating Documents and a good standing certificate of Borrower from the State of Delaware
and for each jurisdiction in which Borrower is qualified to transact business except where the failure to so qualify could reasonably be expected to have a Material Adverse Change; 
 
(c) Borrower shall have delivered the Corporate Borrowing Resolutions; 
 
(d) Borrower shall have delivered evidence that the
Lien in favor of Wells Fargo Bank, N.A. has been terminated; 
 
(e) Borrower shall have paid all reasonable costs and fees, including Bank Expenses, then due; 
 
(f) Borrower shall have timely delivered an initial Payment/Advance Form; 
 
(g) Borrower shall have deposited into the Cash
Collateral Account Cash Collateral in an amount necessary such that, after giving effect to the initial Credit Extension, the Value of the Cash Collateral Account shall be equal to or greater than the Minimum Collateral Value. Borrower may request
that Bank deposit the proceeds of such initial Credit Extension into the Cash Collateral Account in partial satisfaction of this condition precedent; and 
 
(h) Borrower shall have delivered to Bank, in addition to the documents required in Section 3.2, all documents,
certificates, and other assurances that Bank or its counsel may reasonably request. 
 

	 	3.2	 	Conditions Precedent to all Credit Extensions. 

 
Bank’s obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following: 
 
(a) timely receipt of any Payment/Advance Form;

 
(b) the representations and warranties
in Section 6 must be true in all material respects on the date of the Payment/Advance Form and on the effective date of each Credit Extension (except for representations or warranties relate to an earlier date), and no Event of Default may
have occurred and be continuing or result from the Credit Extension. Each 

 

4. 

Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties of Section 6
remain true in all material respects (except for representations or warranties that relate to an earlier date); and 
 
(c) the deposit by Borrower into the Cash Collateral Account of Cash Collateral in an amount necessary such that, after giving
effect to each Credit Extension, the aggregate Value of the Pledged CDs together with the Value of the Cash Collateral Account (collectively, the “Total Collateral Value”), including the deposit by Bank of the proceeds of
such Credit Extension therein, if any, shall be equal to or greater than the Minimum Collateral Value. 
 

	4.	 	CREATION OF SECURITY INTEREST 

 

	 	4.1	 	Grant of Security Interest. 

 
(a) Borrower grants Bank a continuing security interest in all presently existing and later acquired Collateral to secure all
Obligations and performance of each of Borrower’s duties under the Loan Documents. Except for Permitted Liens, any security interest will be a first priority security interest in the Collateral. If this Agreement is terminated, Bank’s lien
and security interest in the Collateral will continue until Borrower fully satisfies its Obligations. 
 
(b) Borrower hereby assigns, pledges, hypothecates, charges, mortgages, delivers, and transfers to Bank, and hereby grants to
Bank, a continuing first priority security interest in and against all right, title and interest of the following, whether now or hereafter existing or acquired by Borrower (collectively and severally, the “Pledged
Collateral”): 
 
(i) All Cash
Collateral, the Cash Collateral Account, and any Pledged CD issued from time to time and general intangibles arising therefrom or relating thereto (however, “general intangibles” as used in this clause shall not include any Intellectual
Property of Borrower); and all documents, instruments and agreements evidencing the same; and all extensions, renewals, modifications and replacements of the foregoing; and any interest or other amounts payable in connection therewith; 
 
(ii) All proceeds of the foregoing (including
whatever is receivable or received when Pledged Collateral or proceeds is invested, sold, collected, exchanged, returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary, including rights to payment and
return premiums and insurance proceeds under insurance with respect to any Pledged Collateral, and all rights to payment with respect to any cause of action affecting or relating to the Pledged Collateral but excluding any interest paid to Borrower
pursuant to Section 5.3(c)); and 
 
(iii) All renewals, replacements and substitutions of items of Pledged Collateral. 
 
The pledge, assignment and grant of a security interest made by Borrower hereunder is for security of the Obligations only; the parties to
this Agreement do not intend that Borrower’s 

 

5. 

delivery of the Pledged Collateral to Bank as herein provided will constitute an advance payment of any Obligations or liquidated damages,
nor do the parties intend that the Pledged Collateral increase the dollar amount of the Obligations. 
 

	 	4.2	 	Authorization to File Financing Statements. 

 
Borrower authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions, as Bank deems
necessary, in order to protect or perfect Bank’s security interest in the Collateral. 
 
4.3    Return of Pledged Collateral. If any proceeds of Pledged Collateral remain after all Obligations have been paid in full, Bank shall deliver such proceeds,
including any outstanding Pledged CD, to Borrower or other Persons entitled thereto by law. 
 

	5.	 	DELIVERY AND MAINTENANCE OF CASH COLLATERAL

 
5.1    Delivery of Funds by Borrower. At least one (1) Business Day prior to a Funding Date (the “Deposit Date”), Borrower shall be obligated and hereby agrees to deliver to
Bank immediately available funds in Dollars to be held in the Cash Collateral Account until evidenced by Pledged CDs (such delivery to be referred to in this Agreement as “delivery of Pledged Collateral”) an amount, if any,
required to establish or maintain the Total Collateral Value (including after giving effect to the deposit in the Cash Collateral Account of the proceeds of an Advance made pursuant to a Payment/Advance Form) in an amount equal to the Minimum
Collateral Value after giving effect to the Advance to be made by Bank pursuant to the Payment/Advance Form delivered by Borrower. Borrower covenants to maintain the Total Collateral Value at the Minimum Collateral Value, and upon receipt of notice
from Bank that the Total Collateral Value is less than the Minimum Collateral Value, Borrower shall be, and hereby is, obligated to deliver additional Pledged Collateral in an amount required to maintain the Total Collateral Value at the Minimum
Collateral Value. Notice of each delivery of Pledged Collateral shall be provided to Bank not less than three (3) Business Days prior to the Deposit Date, and Bank shall thereafter promptly execute and deliver a certificate of deposit information
notice, in the form of Schedule B hereto. 
 
5.2    Deposits Pending Purchase of Pledged CDs. Pending purchase of any Pledged CD or other application as provided herein, all Cash Collateral received by Bank shall be credited to and held by Bank
in the Cash Collateral Account. The books and records of Bank shall reflect that such Cash Collateral Account and all Cash Collateral deposited therein are owned by Bank, subject to the terms of this Agreement. 
 

	 	5.3	 	Issuance and Redemption of Certificates of Deposit; Interest 

 
                (a)
Unless otherwise agreed to by Bank and Borrower in writing, upon the receipt of any deposit of Cash Collateral, Bank shall issue, and Borrower shall purchase, a Pledged CD in an aggregate amount equal to the Value of the Cash Collateral.
Borrower shall, at all times, maintain the Pledged CDs with Bank. Bank will hold the Pledged CD as collateral security for the Obligations. Unless otherwise agreed to by Bank and Borrower, upon Borrower depositing any additional Cash Collateral with
Bank in accordance with the terms of this Agreement, Bank will renew or cancel, at its option, an outstanding Pledged CD, and in 

 

6. 

exchange will issue, and Borrower shall purchase, a new Pledged CD, in an amount equal to the Value of the renewed or cancelled Pledged CD
plus the Value of the additional Cash Collateral deposited with Bank. Upon surrender of a Pledged CD in connection with a withdrawal of less than all of the Cash Collateral represented by such Pledged CD, Bank will deposit the Value of the
Pledged CD in the Cash Collateral Account and concurrently therewith issue, and Borrower shall purchase, a new Pledged CD in an amount equal to the aggregate Value of the Cash Collateral remaining in the Cash Collateral Account following the
withdrawal. Bank may require the surrender of the Pledged CD to be renewed or cancelled as a condition to a withdrawal from the Cash Collateral Account, including any withdrawal required or permitted by this Agreement. 
 
                (b) Each Pledged CD shall bear interest at the Pledged CD Rate. Borrower shall specify the initial Interest Period applicable to
the Pledged CDs in connection with the notice of delivery of Pledged Collateral. Thereafter, Borrower shall notify Bank not less than five (5) Business Days prior to the end of each Interest Period of the duration of the subsequent Interest Period
with respect to the Pledged CDs. 
 
                (c) Provided (i) that the aggregate Value of the Pledged CDs is greater than the Minimum Collateral Value, and (ii) no
Event of Default has occurred and is continuing, once monthly on the last Business Day of each month, Bank shall remit to Borrower the accrued interest on any Pledged CD with an Interest Period ending on such day or, at Borrower’s option, such
accrued interest may be deposited into the Cash Collateral Account as Cash Collateral and included in the Value of the Pledged CD that may be purchased on such day. 
 
5.4    Acknowledgment by Borrower that Requirements are Commercially
Reasonable. Borrower acknowledges and agrees that the requirements set forth herein concerning receipt, deposit, withdrawal, allocation, application and distribution of Cash Collateral by Bank, including the requirements and time periods set
forth in Section 5, are commercially reasonable. 
 
5.5    Withdrawal of Surplus Collateral. Borrower may not withdraw Cash Collateral, except in the event that the Value of the Pledged CDs is greater than the Minimum Collateral Value and provided
that an Event of Default is not then continuing or would not result from a release of any Pledged CD in the amount requested, then Borrower may request in writing to Bank that Bank release to Borrower Pledged Collateral in an amount (the
“Surplus Collateral”) such that after giving effect to such release, the Value of the remaining Pledged CDs held by Bank hereunder shall be equal to or greater than the Minimum Collateral Value, as certified by Bank. Upon
receipt of such notice, and subject to the terms and conditions of this Agreement, Bank shall release such Surplus Collateral to the Borrower on the next occurring last day of the next Interest Period. Notwithstanding the foregoing, Borrower may
direct that any portion of the Cash Collateral be applied to repay any Advance so long as after giving effect to such repayment the aggregate Value of the Pledged CDs shall be greater than or equal to the Minimum Collateral Value. 
 

7. 

 

	6.	 	REPRESENTATIONS AND WARRANTIES 

 
Borrower represents and warrants as follows: 
 

	 	6.1	 	Designated Senior Debt. 

 
Borrower shall designate the Loan Documents as “Designated Senior Debt” (as that term is defined in that certain Indenture from
Borrower, as issuer, to Norwest Bank Minnesota, National Association, as trustee, dated March 29, 2000, as modified by that certain First Supplemental Indenture between Borrower, as issuer, and Wells Fargo Bank Minnesota, National Association,
(formerly known as Norwest Bank Minnesota, National Association), as trustee (the “Trustee”)). The Indenture, as modified by the First Supplemental Indenture, shall hereinafter be referred to as the
“Indenture,” and the Loan Documents shall constitute Designated Senior Debt for purposes of the Indenture. 
 

	 	6.2	 	Due Organization and Authorization. 

 
Borrower and each Subsidiary disclosed in Borrower’s public filings with the Securities Exchange Commission is duly existing and in
good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do
so could not reasonably be expected to cause a Material Adverse Change. 
 
The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower’s formation documents, nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement in which the default could reasonably be expected to cause a Material Adverse Change. 
 

	 	6.3	 	Collateral. 

 
Borrower has good title to the Collateral and Pledged Collateral, free of Liens except Permitted Liens. Borrower’s Inventory, in the
aggregate, is in all material respects of good and marketable quality, free from material defects. Borrower is the sole owner of the Intellectual Property owned by it, except for non-exclusive licenses granted to its customers in the ordinary course
of business. 
 

	 	6.4	 	Litigation. 

 
Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower’s Responsible Officers,
threatened by or against Borrower or any Subsidiary in which an adverse decision could reasonably be expected to cause a Material Adverse Change. 
 

	 	6.5	 	No Material Adverse Change in Financial Statements. 

 
The consolidated financial statements for Borrower as of and for the year ended December 31, 2001, and as of
and for the nine (9) months ended September 30, 2002, fairly 

 

8. 

present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations.
There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank. 
 

	 	6.6	 	Solvency. 

 
The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities;
the Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. 
 

	 	6.7	 	Regulatory Compliance. 

 
Borrower is not an “investment company” or a company “controlled” by an “investment company” under the
Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the
Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s properties or assets
has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all (a) required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP and (b) filings required by the Securities and Exchange
Commission. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently
conducted, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 
 

	 	6.8	 	Subsidiaries. 

 
Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 
 

	 	6.9	 	Full Disclosure. 

 
No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank (taken together
with all such written certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading. Bank
recognizes that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ
from the projected and forecasted results. 
 

9. 

 

	7.	 	AFFIRMATIVE COVENANTS 

 
Borrower will do all of the following for so long as Bank has an obligation to lend or there are outstanding Obligations: 
 

	 	7.1	 	Government Compliance. 

 
Borrower will maintain its and all Subsidiaries’ legal existence and good standing in their jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to cause a material adverse effect on Borrower’s business or operations. Borrower will comply, and have each Subsidiary comply, with all laws,
ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business or operations or would reasonably be expected to cause a Material Adverse Change. 
 

	 	7.2	 	Financial Statements, Reports, Certificates. 

 
(a) Borrower will deliver to Bank: (i) within five (5) days of filing, copies of all statements, reports, and notices made
available to Borrower’s security holders or to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (ii) a prompt report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $5,000,000 or more; and (iii) regularly-prepared budgets, sales projections, operating plans or other financial information Bank reasonably requests.

 
(b) Borrower will deliver to Bank with
its Forms 10-K and 10-Q a Compliance Certificate signed by a Responsible Officer in the form of Exhibit C. 
 
(c) Borrower will allow Bank to audit Borrower’s Accounts at Borrower’s reasonable expense. Such audits will be
conducted no more often than every calendar year unless an Event of Default has occurred and is continuing. 
 

	 	7.3	 	Inventory. 

 
Borrower will keep its Inventory, in the aggregate, in good and marketable condition, free from material defects. Returns and allowances
between Borrower and its account debtors will follow Borrower’s customary practices as they exist at execution of this Agreement. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims, that involve more than
$100,000. 
 

	 	7.4	 	Taxes. 

 
Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good faith, with adequate reserves maintained in accordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to the payment. 
 

10. 

 

	 	7.5	 	Insurance. 

 
Borrower will keep its business and the Collateral insured for risks and in amounts standard for Borrower’s industry. All property
policies will have a lender’s loss payable endorsement showing Bank as an additional loss payee and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least twenty (20) days notice
before canceling its policy. At Bank’s request, Borrower will deliver evidence of insurance and evidence of all premium payments. Proceeds payable under any policy will, so long as an Event of Default has occurred and is continuing, be payable
to Bank on account of the Obligations. 
 

	 	7.6	 	Protection of Intellectual Property Rights. 

 
Borrower will, to the extent determined to be prudent by Borrower (a) protect, defend, and maintain the validity and enforceability of the
Intellectual Property owned or used by it and promptly advise Bank of any material infringements, and (b) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited, or dedicated to the public without
Bank’s consent. 
 

	 	7.7	 	Further Assurances. 

 
Borrower will execute any further instruments and take further action as Bank reasonably requests to effect the purposes of this
Agreement, including, within thirty (30) days from the date hereof, delivering evidence that the Lien in favor of the State of California Employment Development Department has been terminated. 
 

	8.	 	NEGATIVE COVENANTS 

 
Borrower will not do any of the following without Bank’s prior written consent, which will not be
unreasonably withheld, for so long as Bank has an obligation to lend or there are any outstanding Obligations: 
 

	 	8.1	 	Dispositions. 

 
Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”), or permit any of its Subsidiaries
to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in
the ordinary course of business; (c) of worn-out or obsolete Equipment; or (d) otherwise in an amount not to exceed $1,000,000 in the aggregate. 
 

	 	8.2	 	Changes in Control, Business. 

 
Permit or suffer any Change in Control or engage in any business other than the businesses currently engaged in by Borrower or reasonably
related thereto. 
 

11. 

 

	 	8.3	 	Mergers or Acquisitions. 

 
Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person except for acquisitions where the consideration paid by the Borrower is either (a) Borrower’s stock or (b) some combination of Borrower’s
stock and not more than $10,000,000 in cash, in each case, where immediately before, and after giving effect to such transaction, no Event of Default exists or would exist. A Subsidiary may merge or consolidate into another Subsidiary or into
Borrower. 
 

	 	8.4	 	Indebtedness. 

 
Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

 

	 	8.5	 	Encumbrance. 

 
Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, in each case other than Permitted Liens. 
 

	 	8.6	 	Investments. 

 
Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of
its Subsidiaries to do so. 
 

	 	8.7	 	Transactions with Affiliates. 

 
Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that
are in the ordinary course of Borrower’s business upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s-length transaction with a non-affiliated Person. 
 

	 	8.8	 	Subordinated Debt. 

 
Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt without Bank’s prior written consent. 
 

	 	8.9	 	Compliance. 

 
Become an “investment company” or a company controlled by an “investment company,” under the Investment Company Act of
1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event
or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on
Borrower’s business or operations or 

 

12. 

would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 
 

	9.	 	EVENTS OF DEFAULT 

 
Any one of the following is an Event of Default:

 

	 	9.1	 	Payment Default. 

 
If Borrower fails to pay any of the Obligations within three (3) days after their due date. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extension will be made during the cure period); 
 

	 	9.2	 	Covenant Default. 

 
If Borrower does not perform any obligation in Sections 5 or 7 (within the applicable time periods, if any, related thereto)
or violates any covenant in Section 8; or 
 
If Borrower does not perform or observe any other material term, condition or covenant in this Agreement, any Loan Documents, or in any agreement between Borrower and Bank and as to any default under a term, condition or covenant
that can be cured, has not cured the default within ten (10) days after it occurs, or if the default cannot be cured within ten (10) days or cannot be cured after Borrower’s attempts to cure such default within the ten (10) day period, and the
default may be cured within a reasonable time, then Borrower has an additional period (of not more than thirty (30) days) to attempt to cure the default. During the additional cure period, the failure to cure the default is not an Event of Default
(but no Credit Extensions will be made during any cure period); 
 

	 	9.3	 	Material Adverse Change. 

 
If there (a) occurs a material adverse change in the business, operations, or condition (financial or otherwise) of the Borrower, or (b)
is a material impairment of the prospect of repayment of any portion of the Obligations; 
 

	 	9.4	 	Attachment. 

 
If any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver and
the attachment, seizure or levy is not removed in ten (10) days, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a material portion
of Borrower’s assets, or if a notice of lien, levy, or assessment is filed against any of Borrower’s assets by any government agency and not paid within ten (10) days after Borrower receives notice. These are not Events of Default if
stayed or if a bond is posted pending contest by Borrower (but no Credit Extensions will be made while (a) the stay is in effect, or (b) Borrower contests the action, whichever is applicable); 
 

13. 

 

	 	9.5	 	Insolvency. 

 
If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within thirty (30) days (but no Credit Extensions will be made before any Insolvency Proceeding is dismissed); 
 

	 	9.6	 	Other Agreements. 

 
If there is a default in any agreement between Borrower and a third party that gives the third party the right to accelerate any
Indebtedness exceeding $5,000,000 or that could cause a Material Adverse Change; 
 

	 	9.7	 	Judgments. 

 
If a money judgment(s) (not covered by insurance) in the aggregate of at least $10,000,000 is rendered against Borrower and is unsatisfied
and unstayed for ten (10) days (but no Credit Extensions will be made before the judgment is stayed or satisfied); or 
 

	 	9.8	 	Misrepresentations. 

 
If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty
or representation in this Agreement or in any writing delivered to Bank to induce Bank to enter this Agreement or any Loan Document. 
 

	10.	 	BANK’S RIGHTS AND REMEDIES 

 

	 	10.1	 	Rights and Remedies. 

 
  When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:

 
(a) Declare all Obligations immediately
due and payable (but if an Event of Default described in Section 9.5 occurs, all Obligations are immediately due and payable without any action by Bank); 
 
(b) Stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Bank; 
 
(c) Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable; 
 
(d) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount
held by Bank owing to or for the credit or the account of Borrower; 
 
(e) Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, 

 

14. 

purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred.
Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies; 
 
(f) Terminate any FX Forward Contracts; 
 
(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank
is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, Mask Works, rights of use of any name, trade secrets, trade names, Trademarks, service marks, and advertising
matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit; 
 
(h) Dispose of the Collateral according to the Code; and 
 
(i) Exercise its rights under the Indenture, including, but not limited to, delivering a Payment Blockage Notice (as defined in
the Indenture) to the Trustee pursuant to the terms of the Indenture. 
 

	 	10.2	 	Power of Attorney. 

 
  Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to (a)
endorse Borrower’s name on any checks or other forms of payment or security, (b) sign Borrower’s name on any invoice or bill of lading for any Accounts or drafts against account debtors, and (c) settle and adjust disputes and claims about
the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable. Bank’s appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until
all Obligations have been fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates. 
 

	 	10.3	 	Bank Expenses. 

 
  If Borrower fails to pay any amount or furnish any required proof of payment to third persons, Bank may make all or part of
the payment or obtain insurance policies required in Section 7.5 and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then applicable
rate. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default. 
 

	 	10.4	 	Remedies Cumulative. 

 
  Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay is not a waiver,
election, or 

 

15. 

acquiescence. No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was
given. 
 

	 	10.5	 	Demand Waiver. 

 
  Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. 
 

	11.	 	NOTICES 

 
  All notices or demands by any party about this Agreement or any other related agreement must be in writing and be personally
delivered or sent by an overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile to the addresses set forth at the beginning of this Agreement. A party may change its notice address by giving the
other party written notice. 
 

	12.	 	CHOICE OF LAW, VENUE AND JURY TRIAL
WAIVER 

 
  California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California.

 
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 
 

	13.	 	GENERAL PROVISIONS 

 

	 	13.1	 	Successors and Assigns. 

 
  This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights under it without Bank’s prior written consent which may be granted or withheld in Bank’s discretion. Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits under this Agreement. 
 

	 	13.2	 	Indemnification. 

 
  Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from or consequential to transactions between Bank

 

16. 

and Borrower (including reasonable attorneys’ fees and expenses), except for losses caused by
Bank’s gross negligence or willful misconduct. 
 

	 	13.3	 	Time of Essence. 

 
  Time is of the essence for the performance of all obligations in this Agreement. 
 

	 	13.4	 	Severability of Provision. 

 
  Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

 

	 	13.5	 	Amendments in Writing, Integration. 

 
  All amendments to this Agreement must be in writing and signed by Borrower and Bank. This Agreement represents the entire
agreement about this subject matter, and supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents. 
 

	 	13.6	 	Counterparts. 

 
  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute one Agreement. 
 

	 	13.7	 	Survival. 

 
  All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain
outstanding. The obligations of Borrower in Section 13.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run. 
 

	 	13.8	 	Confidentiality. 

 
  In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made (a) to Bank’s subsidiaries or affiliates in connection with their business with Borrower, (b) to prospective transferees or purchasers of any interest in the loans (provided, however, Bank
shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this provision), (c) as required by law, regulation, subpoena, or other order, (d) as required in connection with Bank’s
examination or audit, and (e) as Bank considers appropriate exercising remedies under this Agreement. Confidential information does not include information that either: (x) is in the public domain or in Bank’s possession when initially
disclosed to Bank by Borrower, or becomes part of the public domain after disclosure to Bank, or (y) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. 
 

17. 

 

	 	13.9	 	Attorneys’ Fees, Costs and Expenses. 

 
  In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the prevailing party will be entitled
to recover its reasonable attorneys’ fees and other reasonable costs and expenses incurred, in addition to any other relief to which it may be entitled. 
 

	14.	 	DEFINITIONS 

 

	 	14.1	 	Definitions. 

 
  In this Agreement: 
 
“Accounts” is defined on Exhibit A hereto. 
 
“Advance” or “Advances” is a loan advance (or advances) under
the Committed Revolving Line. 
 
“Affiliate” of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members. 
 
“Bank Expenses” are all reasonable audit fees and expenses and reasonable costs and expenses (including reasonable
attorneys’ fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings). 
 
“Borrower’s Books” are all Borrower’s books and records including ledgers,
records regarding Borrower’s assets or liabilities, business operations or financial condition and all computer programs or discs or any equipment containing the information. 
 
“Business Day” is any day that is not a Saturday, Sunday or a day on which the Bank
is closed. 
 
“Cash
Collateral” shall mean (a) all cash of Borrower which Borrower has delivered to Bank for deposit pursuant to this Agreement, and (b) any additional money delivered to Bank as Pledged Collateral. 
 
“Cash Collateral Account” shall mean
the deposit account maintained or owned by Bank (Account Number 3300324187) into which Advances and Cash Collateral may be deposited at any time and held or carried from time to time. 
 
“Cash Management Services” are defined in Section 2.1.3. 
 
“Change in Control” shall have the
meaning ascribed to it in the Indenture. 
 
“Closing Date” is the date of this Agreement. 
 

18. 

 
“Code” is the Uniform Commercial Code, as applicable. 
 
“Collateral” is the property described on Exhibit A hereto. 
 
“Committed Revolving Line” is $15,000,000. 
 
“Consolidated” refers, with respect to any Person, to the consolidation of accounts
of such Person and its Subsidiaries in accordance with GAAP. 
 
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such
as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates,
currency exchange rates or commodity prices, but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement. 
 
“Copyrights” means (a) all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, any State thereof or any other country; (b) registrations, applications, recordings
and proceedings in the United States Copyright Office or in any similar office or agency of the United States, any State thereof or any other country; (c) any continuations, renewals or extensions thereof; (d) any registrations to be issued in any
pending applications, and shall include any right or interest in and to work protectable by any of the foregoing which are presently or in the future owned, created or authorized (as a work for hire for the benefit of Borrower) or acquired by
Borrower, in whole or in part; (e) prior versions of works covered by copyright and all works based upon, derived from or incorporating such works; (f) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect
to copyrights, including, without limitation, damages, claims and recoveries for past, present or future infringement; (g) rights to sue for past, present and future infringements of any copyright; and (h) any other rights corresponding to any of
the foregoing rights throughout the world. 
 
“Corporate Borrowing Resolutions” means those resolutions executed and delivered by Borrower to Bank in accordance with Section 3.1(c), substantially in the form of Exhibit D, with appropriate
insertions. 
 
“Credit
Extension” is each Advance, Exchange Contract, Cash Management Services, or any other extension of credit by Bank for Borrower’s benefit. 
 
“Deposit Accounts” is defined on Exhibit A hereto. 
 
“Disclosure Schedule” means the
Disclosure Schedule attached hereto as Schedule A. 
 

19. 

 
“Dollars”, “dollars” and “$” shall mean lawful money of the United States of America. 
 
“Equipment” is defined on Exhibit A hereto. 
 
“ERISA” is the Employment Retirement
Income Security Act of 1974, and its regulations. 
 
“FX Forward Contract” is defined in Section 2.1.2. 
 
“FX Reserve” is defined in Section 2.1.2. 
 
“GAAP” is generally accepted accounting principles. 
 
“Indebtedness” is (a) indebtedness for
borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease
obligations, (d) Contingent Obligations, and (e) synthetic lease obligations. 
 
“Insolvency Proceeding” are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for
the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. 
 
“Intellectual Property” is defined on Exhibit A hereto. 
 
“Interest Determination Date” shall
mean the date of delivery of the Pledged Collateral and the date of the commencement of each Interest Period. 
 
“Interest Period” shall mean the period commencing initially on the date of delivery of the Pledged Collateral and
thereafter on the date immediately following the end of any such initial period or subsequent period, and ending on the last Business Day of the month ending approximately 7, 30, 60, 90, 180, 270 or 360 days thereafter. 
 
“Inventory” is defined on Exhibit
A hereto. 
 
“Investment” is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person. 
 
“Lien” is a mortgage, lien, deed of
trust, charge, pledge, security interest or other encumbrance. 
 
“Loan Documents” are, collectively, this Agreement, any note, or notes or guaranties executed by Borrower relating to this Agreement, and any other present or future agreement between Borrower and/or for the
benefit of Bank in connection with this Agreement, all as amended, extended or restated. 
 
“Material Adverse Change” is defined in Section 9.3. 
 

20. 

 
“Minimum Collateral Value” shall mean, as of any date, an amount equal to 105% of the aggregate amount of the outstanding principal balance of the Advances. 
 
“Obligations” are debts, principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later, including cash management services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts,
liabilities, or obligations of Borrower assigned to Bank. 
 
“Operating Documents” shall mean the Borrower’s certificate of incorporation, as currently filed with the State of Delaware, and its bylaws in current form, each with all future modifications and
amendments thereto. 
 
“Patents” are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. 
 
“Permitted Indebtedness” is:

 
(a) Borrower’s indebtedness to
Bank under this Agreement or any other Loan Document; 
 
(b) Indebtedness existing on the Closing Date and shown on the Schedule; 
 
(c) Subordinated Debt; 
 
(d) Indebtedness to trade creditors incurred in the ordinary course of business; 
 
(e) Indebtedness secured by Permitted Liens;

 
(f) Indebtedness related to synthetic
lease obligations; and 
 
(g) Other
Indebtedness not exceeding $500,000 in the aggregate. 
 
“Permitted Investments” are: 
 
(a) Investments shown on the Schedule and existing on the Closing Date; 
 
(b) Investments in Subsidiaries so long as such investments are approved by Borrower’s Board of Directors; and 
 
(c) Investments pursuant to a written investment
policy that has been formally adopted or otherwise approved by Borrower’s Board of Directors. 
 
“Permitted Liens” are: 
 
(a) Liens existing on the Closing Date and shown on the Schedule or arising under this Agreement or other Loan Documents;

 

21. 

 
(b)
Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, if they have no priority over any of Bank’s
security interests; 
 
(c) Liens in
connection with capital leases or purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing the acquisition of the Equipment, or (ii) existing on Equipment when acquired, if the Lien is confined to
the property and improvements and the proceeds of the equipment; 
 
(d) Licenses or sublicenses granted in the ordinary course of Borrower’s business and any interest or title of a licensor or under any license or sublicense, if the licenses and sublicenses permit granting Bank a
security interest; 
 
(e) Leases or
subleases granted in the ordinary course of Borrower’s business, and easements, rights-of-way, and similar encumbrances affecting real property, including in connection with Borrower’s leased premises or leased property; 
 
(f) Carriers’, landlords’,
warehousemen’s, mechanics’, or similar liens arising in the ordinary course of business; 
 
(g) Pledges, deposits, or bonds arising in the ordinary course of business in connection with workers’ compensation,
unemployment insurance or the like or in connection with statutory obligations, surety, and appeal bonds and the like; or 
 
(h) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (g), but
any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase. 
 
“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. 
 
“Pledged CD” shall mean any and all
certificates of deposit issued to Borrower by Bank pursuant to and in accordance with Section 5. 
 
“Pledged CD Rate” shall mean, for any Interest Determination Date, Bank’s prevailing commercial rate in
effect on such day. 
 
“Prime
Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest rate, but in any event shall not be less than four and twenty-five one hundredths percent (4.25%). 
 
“Responsible Officer” is each of the
Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower. 
 
“Revolving Maturity Date” is December 26, 2003. 
 

22. 

 
“Schedule” is any attached schedule of exceptions. 
 
“Subordinated Debt” is (a) debt incurred by Borrower subordinated to Borrower’s indebtedness owed to Bank pursuant to a written subordination agreement in a manner and form
acceptable to Bank and approved by Bank in writing, and (b) Borrower’s convertible subordinated notes issued by the Borrower pursuant to the Indenture, due April 1, 2007, in the aggregate amount of $500,000,000. 
 
“Subsidiary” is for any Person, or any
other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person. 
 
“Trademark” means (a) any trademarks,
tradenames, corporate names, company names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof and any applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any State thereof or any other country (collectively, the “Marks”); (b) any reissues, extensions or renewals thereof; (c) the goodwill of the business
symbolized by or associated with the Marks; (d) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect to the Marks, including, without limitation, damages, claims and recoveries for past, present or future
infringement; and (e) rights to sue for past, present and future infringements of the Marks. 
 
“Value” shall mean with respect to any Cash Collateral Account, Pledged CD or Cash Collateral on any date, a dollar value determined as follows (without duplication):

 
(a) cash shall be valued at its face
amount on such date; 
 
(b) a Cash
Collateral Account shall be valued at the principal balance thereof on such date; and 
 
(c) a Pledged CD shall be valued at the face amount thereof. 
 
[Signature page follows.] 
 
 

23. 

 
IN WITNESS WHEREOF, the parties have duly authorized and caused this Agreement to be executed as of the date first written above. 
 

	
	 BORROWER:

	
	 REDBACK NETWORKS,
INC.

	
	 By:
	 	 /s/    JEFFREY L. WEST

	 Title:
	 	 Vice President and Treasurer

	
	 BANK:

	
	 SILICON VALLEY
BANK

	
	 By:
	 	 /s/    FREDERICK (“BUZZ”)
KREPPEL

	 Title:
	 	 Senior Vice President

 

24. 

 
EXHIBIT A 
 
“Collateral” means of all of Borrower’s right, title and interest in and to the following whether owned now or hereafter acquired or arising, and wherever located: all Accounts; all Inventory; all Equipment; all
Deposit Accounts; all General Intangibles, excluding Intellectual Property; all Investment Property; all Other Property; and any and all claims, rights and interests in any of the foregoing, and all guaranties and security for any of the foregoing,
and all substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, all of the
foregoing, and all Borrower’s Books relating to any of the foregoing. 
 
Notwithstanding the foregoing, although the Collateral shall not be deemed to include any Intellectual Property, the Collateral shall include the proceeds of all the Intellectual Property that are
accounts, (i.e. accounts receivable) of Borrower, or general intangibles consisting of rights to payment, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary
to have a security interest in such accounts and general intangibles of Borrower that are proceeds of the Intellectual Property, then the Collateral shall automatically, and effective as of the Closing Date, include the Intellectual Property to the
extent necessary to permit perfection of Bank’s security interest in such accounts and general intangibles of Borrower that are proceeds of the Intellectual Property. 
 
As used in this Agreement and in this Exhibit, the following terms have the following meanings: 
 
“Accounts” means all present and
future “accounts” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all accounts receivable and other sums owing to Borrower. 
 
“Deposit Accounts” means all
present and future “deposit accounts” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts,
checking accounts, savings accounts and certificates of deposit, whether maintained with Bank or other institutions. 
 
“Equipment” means all present and future “equipment” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing. 
 
“General Intangibles” means all
present and future “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all payment intangibles, royalties, contract rights,
goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation
presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

 

25. 

 
“Intellectual Property” means all present and future (a) copyrights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether
published or unpublished, (b) trade secret rights, including all rights to unpatented inventions and know-how, and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent
applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same; (e) trademarks, servicemarks, trade styles, and trade names, whether or not
any of the foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by any such trademarks; (f) computer software
and computer software products; (g) designs and design rights; (h) technology; (i) all claims for damages by way of past, present and future infringement of any of the rights included above; (j) all licenses or other rights to use any property or
rights of a type described above. 
 
“Inventory” means all present and future “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is out of Borrower’s custody or possession or in transit and including any returned goods and
any documents of title representing any of the above. 
 
“Investment Property” means all present and future investment property, securities, stocks, bonds, debentures, debt securities, partnership interests, limited liability company interests, options, security
entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any securities account or otherwise, wherever located, and all other securities of every kind, whether certificated or uncertificated,

 
“Other Property”
means (a) the following as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and all rights relating thereto: all present and future “commercial tort claims”, “documents”,
“instruments”, “promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm products” and “money”; and (b) all other goods and
personal property of every kind, tangible and intangible, whether or not governed by the Code. 
 
 

26. 

 
EXHIBIT B 
 
LOAN
PAYMENT/ADVANCE REQUEST FORM 
 
DEADLINE FOR SAME DAY
PROCESSING IS 12:00 P.M. P.S.T. 
 

	 Fax To:
	 	 Date: _________________

 
 ̈ Loan Payment: 
 
Redback Networks, Inc. (Borrower) 
 

	
	 From Account #
	 	 	 	 To Account #
	 	 
	 	 	
	 	 	 	

	 	 	 (Deposit Account #)
	 	 	 	 (Loan Account #)

 
 

	 Principal $
	 	 	 	 and/or Interest $
	 	 
	 	 	
	 	 	 	

 
All Borrower’s
representation and warranties in the Loan and Security Agreement are true, correct and complete in all material respects to on the date of the telephone transfer request for and advance, but those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as of that date: 
 

	 Authorized Signature:
	 	 	 	 Phone Number:
	 	 
	 	 	
	 	 	 	

 
 ̈ LOAN ADVANCE: 
 
Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.

 

	
	 From Account #
	 	 	 	 To Account #
	 	 
	 	 	
	 	 	 	

	 	 	 (Loan Account #)
	 	 	 	 (Deposit Account #)

 
 

	 Amount of Advance $
	  	 
	 	  	

 
All Borrower’s
representation and warranties in the Loan and Security Agreement are true, correct and complete in all material respects to on the date of the telephone transfer request for and advance, but those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as of that date: 
 

	 Authorized Signature:
	 	 	 	 Phone Number:
	 	 
	 	 	
	 	 	 	

 
OUTGOING WIRE REQUEST

 
Complete only if all or a portion of funds from the
loan advance above are to be wired. 
Deadline for same day processing is 12:00 pm, P.S.T. 
 

	 Beneficiary Name:
	 	 ________________________________
	    	 Amount of Wire: $
	 	 __________________________

	
	 Beneficiary Bank:
	 	 ________________________________
	    	 Account Number:
	 	 __________________________

	
	 City and State:
	 	 ________________________________
	    	 	 	 

 

	 Beneficiary Bank Transit (ABA) #:
	 	 __ __ __ __ __ __ __ __    
	    	 Beneficiary Bank Code (Swift, Sort, Chip, etc.):
	 	 _____

 

	 	 	 	    	 (For International Wire Only)

	 Intermediary Bank:
	 	 ______________________________
	    	 Transit (ABA) #:
	 	 ________________________________

	
	 For Further Credit to:
	 	 _________________________________________________________________________________________

	
	 Special Instruction:
	 	 _________________________________________________________________________________________

 

27. 

 
By signing below, I (we)
acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreement(s) covering funds transfer service(s), which agreement(s) were previously received
and executed by me (us). 
 

	
	 Authorized Signature: ________________________________
	  	 2nd Signature (If Required):____________________________

	
	 Print Name/Title: ___________________________________
	  	 Print Name/Title:____________________________________

	
	 Telephone # _______________________________________
	  	 Telephone # ________________________________________

 
 

28. 

 
EXHIBIT C 
 
COMPLIANCE CERTIFICATE 
 

	TO:	 	SILICON VALLEY BANK 

3003
Tasman Drive 
Santa Clara, CA 95054 
 

	FROM:	 	REDBACK NETWORKS, INC. 

 
The undersigned authorized officer of Sample documents (“Borrower”) certifies that under the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for the period ending _____________ with all required covenants except as noted below and (ii) all representations and warranties in
the Agreement are true and correct in all material respects on this date. Attached are the required documents supporting the certification. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance
with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. 
 
Please indicate compliance status by circling Yes/No under “Complies” column. 
 

	 Reporting Covenant

	  	 Required

	 	 Complies

	 Form 10-Q + CC
	  	 Quarterly within 5 days of filing with SEC
	 	 Yes         No

	 Form 10-K + CC
	  	 Annually within 5 days of filing with SEC
	 	 Yes         No

 
 
 

	 Comments Regarding Exceptions: See Attached.
	    	 	    	 BANK USE ONLY

	 	    	 	    	 
	 Sincerely,
	    	 	    	 
	 Redback Networks, Inc.
	    	 	    	 Received by: ___________________________________________
 AUTHORIZED SIGNER

	
	 __________________________________________________
 SIGNATURE
	    	 	    	 Date: _________________________________________________

	  
 __________________________________________________
 TITLE
	    	 	    	 Verified: ______________________________________________
 AUTHORIZED SIGNER

	  
 __________________________________________________
 DATE
	    	 	    	 Date: _________________________________________________
  

	 	    	 	    	  
 Compliance Status:
                                    Yes    
         No

 
 

29. 

 
Exhibit D

 
CORPORATE BORROWING RESOLUTIONS

 

	 Borrower:
	 	 Redback Networks, Inc.
	    	 Bank:
	  	 Silicon Valley Bank

	 	 	 300 Holger Way
	    	 	  	 3003 Tasman Drive

	 	 	 San Jose, CA 95134
	    	 	  	 Santa Clara, CA 95954

 
I, the Secretary or
Assistant Secretary of Redback Networks, Inc. (“Borrower”), Certify that Borrower is a corporation existing under the laws of the State of Delaware. 
 
I certify that at a meeting of Borrower’s Directors (or by other
authorized corporate action) duly held the following resolutions (the “Resolutions”) were adopted. 
 
It is resolved that any one of the following officers of Borrower, whose name, title and signature is below: 
 

	 NAMES
	    	 POSITIONS
	    	 ACTUAL SIGNATURES

	
	
	    	
	    	

	
	
	    	
	    	

	
	
	    	
	    	

	
	
	    	
	    	

 
may act for Borrower
and: 
 
Borrow Money. Borrow money from
Silicon Valley Bank (“Bank”). 
 
Execute Loan Documents. Execute any loan documents Bank requires. 
 
Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.

 
Foreign Exchange Contracts. Execute spot
or forward foreign exchange contracts. 
 
Grant
Security. Grant Bank a security interest in any of Borrower’s assets. 
 
Further Acts. Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrowers right to a jury
trial) they think necessary to effectuate these Resolutions. 
 
Further resolved that all acts authorized by these Resolutions and performed before they were adopted are ratified. These Resolutions remain in effect and Bank may rely on them until Bank receives written notice of their revocation.

 

30. 

 
I certify that the persons
listed above are Borrower’s officers with the titles and signatures shown following their names and that these resolutions have not been modified are currently effective. 
 
Certified To and Attested By: 
 
X ______________________________________ 
            *Secretary or Assistant Secretary 
 
X
______________________________________ 
 
 

	*	 	NOTE: In case the Secretary or other certifying officer is designated by the foregoing resolutions as one of the signing officers, this resolution should also be
signed by a second Officer or Director of Borrower. 

 

31. 

 
SCHEDULE A 
 
Disclosure Schedule 
 
The exact correct
corporate name of Borrower is (attach a copy of the formation documents, e.g., articles, partnership agreement): ____________________________________________________________________________________________________________ 
 
 
Borrower’s state of formation: ___________________________________________________________________________________ 
 
 
Borrower has operated under only the following other names (if none, so
state): ____________________________________________________________________________________________________________ 
 
 
All other addresses at which the Borrower does business are as follows
(attach additional sheets if necessary and include all warehouse addresses): ____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
 
 
Borrower has deposit accounts and/or investment accounts located only at the following institutions (include account numbers): 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
 
 
Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing: 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
 
 
Investments existing on the Closing Date and disclosed to and accepted by Bank in writing: 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
 
 
 
Subordinated Debt: 
 
Indebtedness on the Closing
Date and disclosed to and consented to by Bank in writing: 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
 
 
Borrower is not subject to litigation which would have a material adverse
effect on the Borrower’s financial condition, except the following (attach additional comments, if needed): 
____________________________________________________________________________________________________________ 
 

32. 

____________________________________________________________________________________________________________ 
____________________________________________________________________________________________________________ 
 
 
Tax ID Number:
__________________________________________________________________________ 
 
 
Organizational Number, if any: _______________________________________________________________ 
 
 

33. 

 
SCHEDULE B 
 
NOTICES OF DELIVERY OF PLEDGED COLLATERAL 
 
To: Silicon Valley Bank 
Fax:
[                ] 
Telephone:
[                    ] 
From: Redback
Networks, Inc. 
Date: ________________________ 
 
Collateral Funding Notice 
 
On ________________________, Redback Networks, Inc. (the “Company”) will deposit $___________ in the Cash Collateral Account as required per the
Loan and Security Agreement dated December ___, 2002, by and between the Company and Silicon Valley Bank. 
 
Please provide indicative rates for Negotiable Certificate of Deposits for $________________________ for terms of 7, 30, 60, 90, 180, 270 and 360 days. 
 
Signed: _____________________________ 
                    Redback Networks, Inc.

 
To: Redback Networks, Inc. 
Attn: ____________________________ 
Fax: _____________________________  
Telephone: ________________________ 
From: Silicon Valley Bank 
Date:
____________________________ 
 
CD Information
Notice 
 
Per your request dated ________________________, for
collateral deposits to be deposited on ________________________, we provide the following indicative rates: 
 
Negotiable Certificates of Deposit: 
 
Amount                 Term
                Indicative Rate                     Maturity Date

 
Signed: ____________________________ 
                    Silicon Valley Bank

 
 

34.<PAGE>
                                                                   EXHIBIT 10.26

                             OFFICE LEASE AGREEMENT

                                     BETWEEN

                 Kruse Way Office Associates Limited Partnership

                                    LANDLORD

                                       and

                                  VideoTele.com

                                     TENANT

<PAGE>

                                TABLE OF CONTENTS

1.  BASIC LEASE INFORMATION AND EXHIBITS
    (a)  Lease Date                                                            1
    (b)  Tenant                                                                1
    (c)  Address of Tenant                                                     1
    (d)  Landlord                                                              1
    (e)  Address of Landlord                                                   1
    (f)  Premises                                                              1
    (g)  Project                                                               1
    (h)  Land                                                                  1
    (i)  Lease Term                                                            1
    (j)  Right to Extend                                                       1
    (k)  Basic Rent                                                            2
    (l)  Additional Rent                                                       2
    (m)  Security Deposit                                                      2
    (n)  Rentable Square Feet in the Premises                                  2
    (o)  Rentable Square Feet in the Project                                   2
    (p)  Tenant's Percentage                                                   2
    (q)  Parking                                                               2
    (r)  Brokers                                                               3
    (s)  Construction Completion Date                                          3
    (t)  Expansion Rights                                                      3
    (u)  Exhibits                                                              3
2.  PREMISES                                                                   3
3.  COMMENCEMENT AND EXPIRATION DATES                                          3
4.  RENT                                                                       3
5.  COSTS OF OPERATIONS AND REAL ESTATE TAXES                                  3
    (a)  Definitions                                                           3
    (b)  Additional Rent for Estimated Increases in Operating Costs            4
    (c)  Determinations                                                        5
    (d)  Personal Property Taxes                                               6
    (e)  Allocation to Project                                                 6
    (f)  Submission to Reciprocal Easements, Covenants and Restrictions        6
6.  SERVICES AND UTILITIES                                                     6
    (a)  Standard Services                                                     6
    (b)  Interruption of Services                                              6
    (c)  Additional Services                                                   7
    (d)  Satellites                                                            7
7.  SECURITY DEPOSIT                                                           7
8.  USES                                                                       8
    (a)  Uses                                                                  8
    (b)  Compliance With Law                                                   8
    (c)  Compliance With Rules and Regulations                                 8
9.  IMPROVEMENTS                                                               8
10. TENANT IMPROVEMENTS; ACCEPTANCE OF PREMISES                                8
11. CARE OF PREMISES                                                           9
12. ALTERATIONS AND ADDITIONS                                                  9
13. ACCESS                                                                    10

<PAGE>

14. DAMAGE OR DESTRUCTION                                                     10
    (a)  Damage and Repair                                                    10
    (b)  Destruction During Last Year of Term                                 11
    (c)  Business Interruption                                                11
    (d)  Tenant Improvements                                                  11
15. CONDEMNATION                                                              11
    (a)  Taking                                                               11
    (b)  Awards and Damages                                                   11
16. INDEMNIFICATION                                                           12
    (a)  Indemnity                                                            12
    (b)  Exemption of Landlord From Liability                                 12
    (c)  Waiver of Subrogation                                                12
17. HAZARDOUS SUBSTANCES                                                      13
18. INSURANCE                                                                 13
    (a)  Required Policies                                                    13
    (b)  Insurance Policy Requirements                                        14
    (c)  Landlord's Insurance.                                                14
19. ASSIGNMENT AND SUBLETTING                                                 14
20. LIENS AND INSOLVENCY                                                      15
    (a)  Liens                                                                15
    (b)  Insolvency                                                           15
21. DEFAULT                                                                   16
    (a)  Default By Tenant                                                    16
    (b)  Remedies Cumulative; Injunction                                      16
    (c)  Landlord's Remedies Upon Tenant Default                              16
    (d)  Waiver of Redemption Rights                                          18
    (e)  Nonpayment of Additional Rent                                        18
    (f)  Interest                                                             18
    (g)  Default by Landlord.                                                 18
22. PRIORITY                                                                  18
    (a)  Subordination of Lease                                               18
23. ESTOPPEL CERTIFICATES                                                     19
    (a)  Delivery of Estoppel                                                 19
    (b)  Failure to Deliver Estoppel                                          19
24. SURRENDER OF POSSESSION                                                   19
25. NON-WAIVER                                                                19
26. HOLDOVER                                                                  19
27. LANDLORD'S LIABILITY                                                      20
28. TRANSFER OF LANDLORD'S INTEREST                                           20
29. RIGHT TO PERFORM                                                          20
30. GENERAL                                                                   20
    (a)  Headings                                                             20
    (b)  Heirs and Assigns                                                    20
    (c)  Authority                                                            20
    (d)  No Brokers                                                           20
    (e)  Entire Agreement                                                     21
    (f)  Severability                                                         21
    (g)  Force Majeure                                                        21
    (h)  Notices                                                              21

<PAGE>

    (i)  Costs and Attorneys Fees                                             21
    (j)  Governing Law                                                        21
    (k)  Recording                                                            21
    (l)  Waivers                                                              22
    (m)  Time of Essence                                                      22
    (n)  Merger                                                               22
    (o)  Right to Change Public Spaces                                        22
    (p)  Name                                                                 22
    (q)  Overdue Payments                                                     22
    (r)  Intentionally Omitted                                                22
    (s)  Advertising                                                          22
    (t)  Parking                                                              23
    (u)  Execution of Lease by Landlord                                       23
31. LANDLORD'S COVENANTS                                                      23
    (a)  Quiet Enjoyment.                                                     23
    (b)  Hazardous Waste or Materials                                         23
    (c)  Rentable Square Feet                                                 23

       Exhibits
       A - Legal Description of Land
       B - Space Plan of Premises
       C - Work Agreement
       D - Building Rules and Regulations

<PAGE>

                             OFFICE LEASE AGREEMENT

          THIS LEASE is made this 28th day of APRIL, 2000 between Kruse Way
Office Associates Limited Partnership, an Oregon Limited Partnership
("Landlord"), and VideoTel.com, Inc. an OREGON CORPORATION ("Tenant").

     Landlord and Tenant agree:

     1.   BASIC LEASE INFORMATION AND EXHIBITS. The following terms as used
herein shall have the meanings provided in this Section 1, unless otherwise
specifically modified by provisions of this Lease:

          (a)   Lease Date: APRIL 28, 2000

          (b)   Tenant: VideoTele.Com
                ______________________

          (c)   Address of Tenant:
                6000 S.W. Meadows Road
                Lake Oswego, Oregon 97035

          (d)   Landlord: Kruse Way Office Associates Limited Partnership

          (e)   Address of Landlord:
                1417-116th Avenue N.E.
                Suite 202
                Bellevue, WA 98004

          (f)   Premises: The space containing approximately 22,450 square feet
of rentable area as shown on Exhibit B attached hereto and situated on the 2nd
floor of the 6000 Meadows Building (the "Building") constructed by Landlord on
the Land as defined below.

          (g)   Project: The Building and all related improvements which is
situated on the Land as defined below.

          (h)   Land: The real property more particularly described on Exhibit A
attached hereto.

          (i)   Lease Term: Commencing on such date as provided in Section 3
hereof, (the "Commencement Date") and terminating on the day which is 60 months
from Rent Commencement Date (the "Termination Date"). Landlord and Tenant agree
to execute an addendum to this lease setting forth the Commencement Date and the
Termination Date. The Commencement Date shall not be any earlier than June 1,
2000.

          (j)   Right to Extend:

                (i) Provided Tenant has never been in default pursuant to the
terms of this lease and has given Landlord nine (9) months prior written notice
of its intent to exercise its rights under this Section, Tenant shall have the
right to extend the term of this Lease for one (1) additional period of five
years (the "Extended Term") on the same terms and conditions as in this Lease
except that the Basic Rent during the Extended Term shall be a sum equal to the
fair market rent ("Market Rent") of the Leased Premises at the time of the
commencement of the Extended Term as determined either by agreement between
Landlord and Tenant or by arbitration as hereinafter described.

                (ii) In the event that Tenant desires to exercise such option,
Landlord and Tenant agree to negotiate in good faith to reach agreement on the
Market Rent of the Premises

                                        1

<PAGE>

for such Extended Term. If, for any reason, the Landlord and Tenant fail to
agree to a Market Rent for the term at least thirty (30) days prior to the end
of the initial Term, then Market Rent for the term shall be determined by
arbitration pursuant to this lease and ORS 33,210 et.seq. The arbitrator shall
be a licensed MAI appraiser, whom the Parties shall select by mutual agreement.
If the Parties are unable to agree on an arbitrator, the arbitrator shall be
selected by the Clackamas County, Oregon Court. As part of the submittals to
the arbitrator, each Party to the arbitration will present a proposed Market
Rent for the term which the submitting Party deems to be fair and reasonable.
The arbitrator is directed to select within twenty-one (21) days one of the
proposed market rents submitted and has no discretion to determine any other
market rent. The arbitrator's decision shall be final, binding and
non-appealable. Notwithstanding the above, the Market Rent for the Extended Term
shall not be less than the Base Rent in effect at the expiration of the
preceding term.

          Until the arbitrator renders his award, the Tenant shall continue to
pay the same Base Rent per month of the term as it paid for the last month of
the preceding term. The Tenant shall pay any shortfall in Market Rent payments
for the term within ten (10) days after the arbitrator renders his award; and
Landlord shall credit Tenant within ten (10) days any overpayment of Base Rent
for the term against future monthly Market Rent, as determined by the
arbitration award.

          (k)   Basic Rent: From the Rent Commencement Date (as defined in
Section 4 of this Lease) Months 1 - 12: $47,706.25 per month, $572,475 per year
($25.50/RSF); from Months 13 - 36: $48,641.67 per month, $583,700 per year
($26.00/RSF); from Months 37 - 48: $50,512.50 per month, $606,150 per year
($27.00/RSF); from Months 49 - 60: $51,447.42 per month, $617,375 per year
($27.50/RSF).

          (l)   Additional Rent: The increase in Operating Costs described in
Section 5 and all other costs, other than Basic Rent, payable by Tenant to
Landlord hereunder.

          (m)   Security Deposit: Tenant, concurrently with the execution of
this Lease, has deposited Two Hundred Thousand Dollars ($200,000.00) with
Landlord (the "Security Deposit"), the receipt of which, subject to collection,
is hereby acknowledged. On October 1, 2001, and on each successive October 1
during the term of this Lease, Tenant will submit the most recent audited annual
financial statement of Tenant certifying the net worth of Tenant as of a date
not more than thirty (30) days prior to October 1 of the applicable Lease year.
At the time said statement reflects the net worth of Tenant to be at least
$13,000,000.00 excluding additional paid in capital from any source, Landlord
shall refund $150,000.00 of the Security Deposit to Tenant and shall hold the
remaining $50,000.00 as the Security Deposit for the remainder of the term.

          (n)   Rentable Square Feet in the Premises: 22,450 SF (subject to
final BOMA measurement)

          (o)   Rentable Square Feet in the Project: 110,000 SF (subject to
final BOMA measurement)

          (p)   Tenant's Percentage: 20.4% (subject to final BOMA measurement)

          (q)   Parking: Four (4) parking stalls per 1,000 usable square feet,
or 83 total spaces. Of these 83, 11 shall be reserved underground parking in the
building at a current rate of $25.00 per stall, per month (at a ratio of
one-half (1/2) stall per 1,000 usable square feet) and 11 shall be reserved
covered parking in the Building parking deck (at a current rate of $15 per stall
per month (at a ratio of one-half (1/2) stall per 1,000 usable square feet).
Tenant's parking charges for the Lease Term total $440 per month, which shall be
payable to Landlord as Additional Rent hereunder.

                                        2

<PAGE>

          (r)   Brokers: Tenant was represented in this transaction by Cushman &
Wakefield; Landlord was represented in this transaction by Norris Beggs &
Simpson, a licensed real estate broker.

          (s)   Construction Completion Date: The date of substantial completion
of Tenant Improvements as described in Exhibit C.

          (t)   Expansion Rights: Tenant will not have any specific rights to
additional space in the Project. If however, the Tenant does expand its
Premises, additional space will be at fair market value, but not less than the
rate paid on Tenant's existing leased space. The term of any such expansion
space shall be co-terminus with this Lease.

          (u)   Exhibits: The following exhibits are attached hereto and are
hereby made a part of this Lease.

                Exhibit A - Legal Description of Land
                Exhibit B - Space Plan of Premises
                Exhibit C - Work Agreement
                Exhibit D - Building Rules and Regulations

     2.   PREMISES. Landlord does hereby lease to Tenant, and Tenant does hereby
lease from Landlord, upon the terms and conditions herein set forth, the
Premises described in Section 1(f) hereof as shown on Exhibit B attached hereto
and incorporated herein, together with rights of ingress and egress over common
areas in the Building and on the Land.

     3.   COMMENCEMENT AND EXPIRATION DATES. The term of this Lease shall
commence on the earliest of the following dates (the "Commencement Date"): (a)
the Construction Completion Date as defined in Section 1(s) above; (b) the date
on which the Premises would have been substantially completed but for delay
caused by Tenant or any agent, employee or contractor of Tenant; or (c) the date
on which the Premises are actually occupied by Tenant. Upon request of Landlord,
Tenant shall enter into a memorandum stipulating the actual Commencement Date.
If for any reason other than Tenant's failure to fulfill its obligations
hereunder, Landlord is delayed in delivering possession of the Premises to
Tenant substantially complete, Landlord shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease or the
obligations of Tenant hereunder, but in such case the Commencement Date shall
not occur until possession of the Premises is delivered to Tenant substantially
complete. If Landlord is delayed in delivering possession of the Premises to
Tenant substantially complete due to the failure of Tenant to fulfill any
obligation pursuant to the terms of this Lease or any exhibit hereto, including
without limitation Tenant's failure to comply with the terms of Exhibit C, the
Commencement Date and Tenant's obligation to pay rent shall be accelerated by
the number of days of such delay. The Lease shall expire upon the Termination
Date specified in Section 1(i).

     4.   RENT. Tenant shall pay Landlord without notice the Basic Rent stated
in Section 1(k) commencing on the later of the following dates: (a) October 1,
2000; or (b) the date which is three (3) months from the Commencement Date
("Rent Commencement Date"). Tenant shall pay the Basic Rent in advance without
demand, deduction or offset, except as specified herein, on the first day of
each calendar month during the term at the address specified in section 1(e) or
such address as may be specified by Landlord. Basic Rent and Additional Rent
(together "Rent") for any partial month shall be pro-rated in proportion to the
number of days in such month.

                                        3

<PAGE>

     5.   COSTS OF OPERATIONS AND REAL ESTATE TAXES.

          (a)   Definitions. In addition to the Basic Rent provided in
Section 1(j) of this Lease, Tenant shall pay to Landlord increases under this
Section 5 as "Additional Rent", utilizing the following definitions:

                (i)   "Operating Costs" shall mean all taxes and assessments on
real and personal property; any taxes levied or assessed (or any installment
thereof due during the Lease Year) in addition to or in lieu of such real
property or personal property taxes, or any other tax (except any federal or
state net income tax or any business or occupation tax) upon leasing of the
Project or rents collected; and all other expenses paid or incurred by Landlord
for managing, maintaining, operating and repairing the Project and the personal
property used in conjunction therewith, including without limitation, the
following: (A) electricity, water, gas, sewers, refuse collection, telephone
charges not charged to individual tenants and similar utility services; (B) the
cost of maintaining, rehabilitating or replacing heating, mechanical,
ventilating, escalator and elevator systems and restriping, repairing and
repaving parking areas; (C) the cost of repairs, janitorial and cleaning
services, window washing, landscape maintenance, and other general maintenance
or cleaning; (D) the cost of fire, extended coverage, boiler, sprinkler, public
liability, property damage, rent, earthquake (if required by any lender on the
building and if such expense is included in the base year) and other insurance;
(E) wages, salaries and other labor costs, including employee benefits, of all
persons who perform duties in connection with the operation, maintenance and
repair of the Project; (F) fees, charges and other costs, including management
fees, consulting fees, legal fees and accounting fees, of all independent
contractors reasonably engaged by Landlord; (G) management fees not to exceed 4%
of gross revenues charged by Landlord; (H) the costs for the subject period
(amortized over the useful life in accordance with the Internal Revenue Code) of
any capital improvements made to the Project after the date of this Lease which
are either designed to increase the operating efficiency of the Project or are
required by applicable law; (I) cost of all licenses, permits and inspections
required by governmental bodies with jurisdiction over the Premises, Project and
Land; and (J) the amortized costs of renovating the carpet, paint and lighting
of common hallways and lobbies; (K) deductible amounts (not to exceed $25,000)
under any insurance maintained by Landlord with respect to repair or rebuilding
of the Project, and (L) any other expenses or charges whether or not hereinabove
described, which in accordance with generally accepted accounting and management
practices would be considered an expense of managing, maintaining, operating, or
repairing the Project. During periods in which the occupied rentable area of the
Building is less than 95% of the total rentable area, Operating Costs shall be
adjusted to reflect the Operating Costs which in the reasonable judgment of
Landlord normally would have been incurred had the Building been fully assessed
and 95% occupied for the entire period.

                (ii)  "Operating Costs" shall not include the following:

                      a.  Costs of any special services rendered to individual
tenants (but not all tenants in the building) for which a special charge is
made.

                      b.  Leasing commissions and other leasing expenses.

                      c.  Legal fees, accounting fees and other costs and
expenses associated with a breach or default by any tenant.

                (iii) "Lease Year" shall mean the twelve-month period commencing
January 1 and ending December 31.

                (iv)  "Actual Operating Costs" means the actual expenses paid or
incurred by Landlord for Operating Costs during any Lease Year of the term
hereof.

                                        4

<PAGE>

                (v)   "Actual Operating Costs Allocable to the Premises" means
the Tenant's share of the Actual Operating Costs determined by dividing the
Rentable Square Feet in the Premises as set forth in Section 1(m) by the
Rentable Square Feet in the Project and multiplying the resulting quotient by
the Actual Operating Costs.

                (vi)  "Estimated Operating Costs Allocable to the Premises"
means Landlord's estimate of Actual Operating Costs Allocable to the Premises
for the following Lease Year to be given by Landlord to Tenant pursuant to
Section 5(b)(i) below.

                (vii) "Base Service Year" shall mean the calendar year 2000.

          (b)   Additional Rent for Estimated Increases in Operating Costs.

                (i)   On or before the first (1st) day of March of each Lease
Year after the Base Service Year, during the term hereof, Landlord shall furnish
Tenant a written statement of the Estimated Operating Costs Allocable to the
Premises for such Lease Year, and a calculation of the Additional Rent for such
costs as follows: one-twelfth (1/12) of the amount, if any, by which such amount
exceeds the Operating Costs Allocable to the Premises for the Base Service Year
shall be Additional Rent payable each month by Tenant as provided in Section 4.
Any shortfall for elapsed portion of the Lease Year in question shall be made up
with the next monthly payment. Landlord reserves the right to adjust this
estimate from time to time.

                (ii)  Within ninety (90) days after the close of each Lease
Year, or as soon thereafter as practicable, Landlord shall deliver to Tenant a
written statement setting forth the Actual Operating Costs Allocable to the
Premises during the preceding Lease Year. If such costs for any Lease Year
exceed Estimated Operating Costs Allocable to the Premises paid by Tenant to
Landlord pursuant to subsection (b)(i) above, Tenant shall pay the amount of
such excess to Landlord as Additional Rent within fifteen (15) days after
receipt of such statement by Tenant. If such statement shows such costs to be
less than the amount paid by Tenant to Landlord pursuant to subsection (b)(i)
above, then the amount of such overpayment by Tenant shall be credited by
Landlord to the next Rent payable by Tenant. In no event shall the Rent payable
by Tenant hereunder be less than the Rent specified in Section 1(k) of this
Lease.

                (iii) If this Lease shall terminate on a day other than the last
day of a Lease Year, the amount of any adjustment between Estimated and Actual
Operating Costs Allocable to the Premises with respect to the Lease Year in
which such termination occurs shall be prorated on the basis which the number of
days from the commencement of such Lease Year to and including such termination
date bears to 365, and any amount payable by Landlord to Tenant or Tenant to
Landlord with respect to such adjustment shall be payable within fifteen (15)
days after delivery of the statement of Actual Operating Costs Allocable to the
Premises with respect to such Lease Year.

          (c)   Determinations. The determination of Actual Operating Costs and
Estimated Operating Costs Allocable to the Premises shall be made by Landlord.
Landlord or its agent shall keep records in reasonable detail showing all
expenditures made for the items enumerated above, which records shall be
available for inspection by Tenant at any reasonable time during the two year
period following receipt of the Landlord's statement referred to in Section
5(b)(ii).

                                        5

<PAGE>

          (d)   Personal Property Taxes. Tenant shall pay, prior to delinquency,
all Personal Property Taxes payable with respect to all property of Tenant
located on the Premises, the Building, or the Project including any improvements
paid for by Tenant, and promptly, upon request of Landlord, shall provide
written proof of such payment. As used herein, "Property of Tenant" shall
include all improvements which are paid for by Tenant. "Personal Property Taxes"
shall include all property taxes assessed against the property of Tenant,
whether assessed as real or personal property.

          (e)   Allocation to Project. If the Project is assessed with other
property of Landlord as part of a larger tax lot, Landlord shall allocate taxes
and assessments affecting the property covered by the tax statement to the
Project on an equitable basis, giving consideration to the assessed value of the
Building, the Land and appurtenant improvements (including, without limitation,
parking facilities). If Operating Costs are incurred with respect to the Project
and other property of Landlord (including, without limitation, Operating Costs
associated with parking facilities), Landlord shall allocate such Operating
Costs to the Project and such other property of Landlord on an equitable basis.

          (f)   Submission to Reciprocal Easements, Covenants and Restrictions.
Landlord reserves the right to subject the Project to reciprocal easements,
covenants and restrictions to which this Lease shall automatically be
subordinate. In such event, the Operating Costs for the Project shall be deemed
to include, without limitation, Landlord's share of such costs under the
reciprocal easements, covenants and restrictions.

     6.   SERVICES AND UTILITIES.

          (a)   Standard Services. Landlord shall maintain the Premises and the
public and common areas of the Building (including the roof, exterior portions
of the building, parking and landscaping) in reasonably good order and
condition, except for damage occasioned by the negligent or willful act or
omission of Tenant or its contractors, agents, invitees, licensees or employees,
the repair of which damage shall be paid by Tenant, subject to the provisions of
Section 16(c). Landlord shall furnish the Premises with electricity for normal
office use, water, elevator service and reasonable 5 day per week janitorial
services during the term of the Lease. Electricity use beyond normal office use
and any separate metering required thereby shall be paid for by Tenant. The
Basic Rent stated in Section 1(j) hereof does not include the costs of any
janitorial or other service provided or caused to be provided by Landlord to
Tenant which are in addition to the services ordinarily provided Building
tenants.

     Landlord shall furnish the Premises with heat and air conditioning during
the following hours; Monday to Friday 7:00 a.m. to 6:00 p.m., and Saturday 9:00
a.m. - 1:00 p.m. Tenant may request provision of these services for other hours
by giving Landlord at least 48 hours prior written notice and by paying all
additional costs incurred by Landlord for such services with the next due
installment of Rent at Landlord's then current overtime rate, which is currently
$30 per hour. During other than normal business hours (as designated by
Landlord), Landlord may restrict access to the Building in accordance with the
building's security system, provided that Tenant shall have at all times during
the term of this Lease (24 hours of all days) reasonable access to the Premises.

          (b)   Interruption of Services. Landlord shall not be liable for any
loss, injury or

                                        6

<PAGE>

damage to person or property caused by or resulting from any variation,
interruption, or failure of such services due to any cause beyond reasonable
control of Landlord and rent shall not abate as a result thereof. No temporary
interruption or failure of such services incident to the making of repairs,
alterations or improvements, or due to accident, strike or conditions or events
beyond Landlord's reasonable control shall be deemed an eviction of Tenant or
relieve Tenant from any of Tenant's obligations hereunder.

          (c)   Additional Services. Before installing lights and equipment in
the Premises which in the aggregate exceed normal levels of usage (including
without limitations, computer and data processing equipment), Tenant shall
obtain the written permission of Landlord. Landlord may refuse to grant such
permission unless Tenant shall agree to pay the costs of Landlord for
installation of supplementary air conditioning capacity or electrical systems as
necessitated by such equipment or lights. Notwithstanding the above, Landlord
may not refuse to grant permission for equipment which, in the aggregate, does
not require electrical power in excess of five (5) watts per rentable SF. Tenant
agrees to notify Landlord if Tenant uses more than 25% of the Premises for
non-general office use, whereupon Landlord shall have the right to re-evaluate
Tenant's power usage and adjust Tenant's payment hereunder accordingly.

          (d)   Satellites - (See Additional insert)

          In addition, Tenant shall in advance, on the first day of each month
during the Lease term, pay Landlord the reasonable amount estimated by Landlord
as the cost of furnishing electricity for the operation of such equipment or
lights and the reasonable amount estimated by Landlord as the cost of operation
and maintenance of supplementary air conditioning units necessitated by Tenant's
use of such equipment or lights. The Rent stated in Section 1(k) hereof does not
include any amount to cover the cost of furnishing electricity or such
additional air conditioning for such purposes and such costs will be paid by
Tenant as Additional Rent. Landlord shall be entitled to install and operate at
Tenant's cost a monitoring/metering system in the Premises to measure the added
demands on electrical, heating, ventilation and air conditioning systems
resulting from such equipment and lights and from Tenant's after-hours heating,
ventilation and air conditioning service requirements. Tenant shall comply with
Landlord's instructions for the use of drapes and thermostats in the Building.

     7.   SECURITY DEPOSIT. As security for the full and faithful performance
of every covenant and condition of this Lease to be performed by Tenant, Tenant
has paid to Landlord the Security Deposit as specified in Section 1(m) hereof.
If Tenant defaults in any respect under this Lease, Landlord may apply all or
any part of the Security Deposit to the payment of any sum in default or any
other sum which Landlord may be required or may in its reasonably discretion
deems necessary to spend or incur by reason of Tenant's default. In such event,
Tenant shall, within five (5) days of written demand therefor by Landlord,
deposit with Landlord the amount so applied. If Tenant shall have fully complied
with all of the covenants and conditions of this Lease, the amount of the
Security Deposit to the extent not applied by Landlord under this Section 7
shall be repaid to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) within thirty (30) days after the expiration or
sooner termination of this Lease. In the event of Tenant's default under this
Lease, Landlord's right to retain the Security Deposit shall be deemed to be in
addition to any and all other rights and remedies at law or in equity available
to Landlord. Landlord shall not be required to keep any Security Deposit
separate from its general funds and Tenant shall not be entitled to any interest
thereon, however, the Security Deposit shall be held in an interest bearing
account, and the interest earned thereon shall become part of the Security
Deposit.

                                        7

<PAGE>

     8.   USES.

          (a)   Uses. The Premises are to be used only for general office
purposes and research and development purposes ("Permitted Uses") and for no
other business or purpose without the prior written consent of Landlord, which
consent may be withheld if Landlord, in its sole discretion, determines that any
proposed use is inconsistent with or detrimental to the maintenance and
operation of the Building as a first-class office building or is inconsistent
with any restriction on use of the Premises, the Building, the Project or the
Land contained in any lease, mortgage or other agreement or instrument by which
the Landlord is bound or to which any of such property is subject. Tenant shall
not commit any act that will increase the then existing rate of insurance on the
Building or the Project and will immediately pay any such increase. Tenant shall
promptly pay upon  demand the amount of any increase in insurance rates caused
by any act or acts of Tenant. Tenant shall not commit or allow to be committed
any waste upon the Premises, or any public or private nuisance or other act
which disturbs the quiet enjoyment of any other tenant in the Building or which
is unlawful. Tenant shall not, without the written consent of Landlord, use any
apparatus, machinery or device in or about the Premises which will cause any
substantial noise, vibration or fumes. If any of Tenant's office machines or
equipment should disturb the quiet enjoyment of any other tenant in the
Building, then Tenant shall provide adequate insulation or take other action as
may be necessary to eliminate the disturbance.

          (b)   Compliance With Law. Both Landlord and Tenant shall, at their
own expense, comply promptly with all applicable statutes, ordinances, rules,
regulations, orders and requirements, including without limitation laws and
regulations prohibiting discrimination on the basis of race, gender, religion,
national origin, age or disability, in effect during the term hereof regulating
the use, occupancy or improvement of the Premises by Tenant, Landlord or
otherwise.

          (c)   Compliance With Rules and Regulations. Tenant shall observe and
comply with all reasonable rules and regulations put into effect by Landlord.
Landlord shall not be responsible to Tenant for the non-compliance with the
rules and regulations of any other tenant or occupant of the Project.

     9.   IMPROVEMENTS. Upon expiration or sooner termination of this Lease,
all improvements and additions to the Premises, except Tenant's trade fixtures,
shall be deemed the property of Landlord.

     10.  TENANT IMPROVEMENTS: ACCEPTANCE OF PREMISES. The Premises shall be
completed in accordance with the plans and specifications attached hereto as
Exhibit C. All necessary construction shall be commenced by Landlord following
Landlord's execution of this Lease and Tenant's delivery of the first month's
Basic Rent, and the Security Deposit. Within ten (10) days ("Inspection Period")
after Landlord informs Tenant of the completion of the improvements, Tenant
shall make such inspection of the Premises as Tenant deems appropriate. Except
as otherwise specified by Tenant in writing to Landlord within the Inspection
Period, Tenant shall be deemed to have accepted the Premises in their then
condition. If, as a result of such inspection, Tenant discovers minor deviations
or variations from the plans and specifications for Tenant's improvements of a
nature commonly found on a "punch list" (as the term is used in the construction
industry), Tenant shall, during the Inspection Period, notify Landlord of such
deviations. Landlord shall promptly repair all punch list items. The existence
of such punch list items shall not postpone the Commencement Date of this Lease
or the obligation of Tenant to pay Rent. Tenant acknowledges that neither
Landlord nor Landlord's agent has made any

                                        8

<PAGE>

representation or warranty as to the suitability of the Premises for the conduct
of Tenant's business, and Tenant hereby waives any rights, claims or actions
against Landlord under any express or implied warranties of suitability.

     11.  CARE OF PREMISES. Tenant shall, at Tenant's sole cost and expense,
keep the Premises and every part thereof in good condition and repair, damage
thereto from causes beyond the reasonable control of Tenant and ordinary wear
and tear and damage by fire and other casualty not intentionally caused by
Tenant excepted. Tenant shall be responsible for the cleaning of any common
areas of the Building and the Project if such cleaning is necessary due to
Tenant's use of such common areas in a manner other than the normal, reasonable
use of such areas. All damages or injury done to the Premises, Building or
Project by Tenant or by any persons who may be in or upon the Premises, Building
or Project with the express or implied consent of Tenant, including but not
limited to the cracking or breaking of any glass of windows and doors, shall be
paid for by Tenant and Tenant shall pay for all damage to the Project to the
extent caused by acts or omissions of Tenant or Tenant's officers, contractors,
agents, invitees, licensees, or employees subject to the provisions of section
16(c). If Tenant fails to perform Tenant's obligations under this Section 11,
Landlord may at Landlord's option enter upon the Premises after ten (10) days'
prior written notice to Tenant and put the affected portion of the Project in
good order, condition and repair and the cost thereof together with interest
thereon at the rate of 15% per annum from the date of completion of work by
Landlord until payment by Tenant, shall be due and payable as Additional Rent to
Landlord together with Tenant's next installment of Basic Rent. All normal
repairs shall be those reasonably determined by Landlord as necessary to
maintain the Project as a first-class office building complex.

     12.  ALTERATIONS AND ADDITIONS.

          (a)   Tenant shall not make any alterations, improvements, additions,
or utility installations in or about the Premises or make changes to locks on
doors, or add, disturb or in any way change any floor covering, wall covering,
fixtures, plumbing or wiring (collectively, "Alterations") without first
obtaining the prior written consent of Landlord which shall not be unreasonably
withheld, and, where appropriate, in accordance with plans and specifications
approved by Landlord. Any such Alterations shall not adversely affect either
the strength or exterior appearance, or the mechanical, electrical, or plumbing
services of the Building and the Project. Any alterations required to be made to
the Premises by any applicable building, health, safety, fire,
nondiscrimination, or similar law or regulation ("law"), but only to the extent
such alterations are not also required to be made generally throughout the
building, shall be made at Tenant's sole expense and shall be subject to the
prior written consent of Landlord. Tenant shall reimburse Landlord for any sums
expended for examination and approval of architectural or mechanical plans and
specifications of the Alterations. Tenant shall also pay Landlord a sum equal to
the direct costs incurred during any inspection or supervision of the
Alterations. Landlord may require a lien and completion bond for such
construction, or require the improvements(except for any cabling installed by
the Tenant) be removed at the expiration of the Term. Tenant acknowledges and
agrees that a material condition to the granting of approval of Landlord to any
alterations and/or improvements and/or repairs required under this Lease or
desired by Tenant is that the contractors who perform such work shall carry a
Comprehensive Liability Policy covering both bodily injury, in the amount of
$100,000 per person and $300,000 aggregate, and property damages, in the amount
of $300,000, at Tenant's expense. Landlord may require proof of such insurance
coverage from each contractor at the time of submission of Tenant's request for
Landlord's consent to commence work. Landlord's approval of the plans,

                                        9

<PAGE>

specifications and working drawings for Tenant's alterations shall create no
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with all laws, rules and regulations of
governmental agencies or authorities. Tenant shall indemnify and hold Landlord
harmless from any liability, claim or suit, including attorneys' fees, arising
from any injury, damage, cost or loss sustained by persons or property as a
result of any defect in design, material or workmanship.

          (b)   Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant at or for use in the Premises, which claims are or
may be secured by any mechanics' or materialmen's liens against the Premises or
any interest therein. Within ten (10) days after notice thereof, Tenant shall
remove or cause to be removed all liens filed against the Project or any portion
thereof in connection with any Alterations or other work performed by or at the
request of Tenant.

          (c)   Tenant shall not put curtains, draperies or other hangings or
signs on or beside the windows in the Premises.

          (d)   Unless Landlord requires their removal, all Alterations (other
than trade fixtures and movable equipment) which may be made on the Premises
shall become the property of Landlord and remain upon and be surrendered with
the Premises at the expiration of the term.

     13.  ACCESS. Tenant shall permit Landlord and its agents to enter the
Premises at all reasonable times for the purpose of inspecting, cleaning,
repairing, altering or improving the Premises or the Building. Nothing contained
in this Section 13 shall be deemed to impose any obligation upon Landlord not
expressly stated elsewhere in this Lease. Landlord may temporarily close any
portion of the Building or Project without liability to Tenant by reason of such
closure, and such closure shall not constitute an eviction of Tenant or release
Tenant from any Rent or other obligations hereunder, provided that the Landlord
does not preclude Tenant's access to the premises and such closure does not
materially interfere with Tenant's use and occupancy of the premises. Landlord
shall have the right to enter the Premises for the purpose of showing the
Premises to prospective purchasers or mortgagees at all reasonable times.
Landlord shall have the right to enter the Premises for the purpose of showing
the Premises to prospective tenants within the period of one hundred eighty
(180) days prior to the expiration or sooner termination of the Lease term.
Landlord shall give tenant 24 hours prior notice of any intended entry onto the
Premises, except in the event of an emergency.

     14.  DAMAGE OR DESTRUCTION.

          (a)   Damage and Repair. If the Building is damaged by fire or any
other cause to such extent that the cost of restoration, as reasonably estimated
by Landlord, will equal or exceed thirty percent (30%) of the replacement value
of the Building, or if insurance proceeds sufficient for restoration are for any
reason unavailable, then Landlord may, no later than the sixtieth day following
the damage, give Tenant a notice of Landlord's election to terminate this Lease.
In the event of such election this Lease shall be deemed to terminate on the
third day after the giving of such notice, Tenant shall surrender possession of
the Premises within a reasonable time thereafter, the Rent and Additional Rent
shall be apportioned as of the date of Tenant's surrender and any Rent paid for
any period beyond such date shall be repaid to Tenant. If the cost of
restoration as estimated by Landlord shall amount to less than thirty percent
(30%) of said replacement value of the Building and insurance proceeds
sufficient for restoration are available,

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<PAGE>

or if Landlord does not elect to terminate this lease, Landlord shall restore
the Building and the Premises (to the extent of the improvement of the Premises
originally provided by Landlord hereunder) with reasonable promptness, subject
to delays beyond Landlord's control and delays in the making of insurance
adjustments by Landlord. To the extent that the Premises are rendered
untenantable, the Rent shall proportionately abate, except in the event such
damage resulted from the willful or intentional act or omission of Tenant, in
which event Rent shall abate only to the extent Landlord receives proceeds from
any rental income insurance policy to compensate Landlord for loss of Rent
hereunder.

          (b)   Destruction During Last Year of Term. In case the Building shall
be substantially destroyed by fire or other cause at any time during the last
Lease Year of this Lease, Landlord may terminate this Lease upon written notice
to Tenant if given within sixty (60) days of the date of such destruction.

          (c)   Business Interruption. No damages, compensation or claim shall
be payable by Landlord for inconvenience, loss of business or annoyance arising
from any repair or restoration of any portion of the Premises, the Building or
the Project. Landlord shall use its best efforts to effect such repairs
promptly.

          (d)   Tenant Improvements. Landlord will not carry insurance of any
kind on any improvements paid for by Tenant as provided in Exhibit C or on
Tenant's furniture, furnishings, fixtures, equipment or appurtenances of Tenant
under this Lease and Landlord shall not be obligated to repair any damage
thereto or replace the same.

     15.  CONDEMNATION.

          (a)   Taking. If all of the Premises or such portions of the Building
or Project as may be required for the reasonable use of the Premises are taken
by eminent domain, this Lease shall automatically terminate as of the date title
vests in the condemning authority. In the event of a taking of a material part,
but less than all, of the Building or Project, where Landlord shall determine
that the remaining portions of the Building or Project cannot be economically
and effectively used by it (whether on account of physical, economic, aesthetic
or other reasons) or where Landlord determines the Building should be restored
in such a way as to materially alter the Premises, Landlord shall forward a
written notice to Tenant of such determination not more than sixty (60) days
after the date of taking. The term of this Lease shall expire upon such date as
Landlord shall specify in such notice but not earlier than sixty (60) days after
the date of such notice. In case of taking of a part of the Premises, or a
portion of the Building or Project not required for the reasonable use of the
Premises, then this Lease shall continue in full force and effect and the Rent
shall be equitably reduced based on the proportion by which the floor area of
the Premises is reduced; however, if the floor area of the premises is reduced
by more than five percent (5%), Tenant may terminate this Lease upon thirty (30)
days notice to Landlord.

          (b)   Awards and Damages. Landlord reserves all rights to damages to
the Premises for any partial, constructive, or entire taking by eminent domain,
and Tenant hereby assigns to Landlord any right Tenant may have to such damages
or award, and Tenant shall make no claim against Landlord or the condemning
authority for damages for termination of the leasehold interest or interference
with Tenant's business. Tenant shall have the right, however, to claim and
recover from the condemning authority compensation for any loss to which Tenant
may be put for Tenant's moving expenses, business interruption or taking of
Tenant's personal property

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<PAGE>

(not including Tenant's leasehold interest) provided that such damages may be
claimed only if they are awarded separately in the eminent domain proceedings
and not out of or as part of the damages recoverable by Landlord.

     16.  INDEMNIFICATION.

          (a)   Indemnity. Subject to provisions of Section 16.c, Tenant shall
indemnify, defend and hold Landlord harmless from and against all loss, cost and
expense, including attorneys fees, arising from any act, omission, or negligence
of Tenant or its officers, contractors, licensees, agents, servants, employees,
guests, invitees, or visitors in or about the Premises or Project, or arising
from any injury or damage to any person or property, occurring in or about the
Premises or Project as a result of any act, omission or negligence of Tenant, or
its officers, contractors, licensees, agents, employees, guests, or visitors or
arising from any breach or default under this Lease by Tenant. The foregoing
provisions shall not be construed to make Tenant responsible for loss, damage,
liability or expense resulting from injuries to third parties caused solely by
the gross negligence of Landlord, or its officers, contractors, licensees,
agents, employees, invitees or other tenants of the Project.

          (b)   Exemption of Landlord From Liability. As a material part of the
consideration to Landlord, Tenant hereby agrees that, notwithstanding anything
to the contrary in Section 16(a) above, Landlord shall in no event be liable for
injury to Tenant's business or assets or any loss of income therefrom or for
damage to Tenant's employees, invitees, customers, or any other person in or
about the Premises, whether such damage, loss or injury results from conditions
arising upon the Premises or upon other portions of the Project of which
Premises are a part (including, without limitation, damaged caused by the
Project or any portion thereof or a appurtenance thereto being out of repair, or
the bursting, leakage of any water, gas, sewer or steam pipe), or from other
sources or places, and regardless of whether the cause of such damage, loss or
injury or the means of repairing the same is inaccessible to Tenant. Tenant
further agrees that notwithstanding anything to the contrary in Section 16(a)
above, Landlord shall in no event be liable for any injury or damage to any
person or property of Tenant, Tenant's employees, invitees, customers, agents or
contractors caused by theft or arising from any act, omission or neglect of any
tenant or occupant of the Project or any other third person.

          (c)   Waiver of Subrogation. Each party agrees to use commercially
reasonable efforts to cause its insurance carriers to consent to a waiver of
rights of subrogation against the other party. If such waiver shall be
obtainable only at a premium over that chargeable without such a waiver, the
party seeking such policy shall notify the other and the party in whose favor
the waiver is desired shall pay the additional premium. Each party shall look
first to any insurance in its favor before making claim against the other party.
Whether the loss or damage is due to the negligence of either Landlord or
Tenant, their agents or employees, or any other cause, Landlord and Tenant do
each hereby release and relieve the other, their agents or employees, from
responsibility for, and waive their entire claim of recovery for (i) any loss or
damage to the real or personal property of either located anywhere in the
Project, including the Project itself, arising out of or incident to the
occurrence of any of the perils which are covered by their respective property
and related insurance policies, and (ii) any loss resulting from business
interruption at the Premises or loss of rental income from the Project, arising
out of or incident to the occurrence of any of the perils which may be covered
by any business interruption insurance policy or by any loss of rental income
insurance policy held by Landlord or Tenant, to the extent to which it is
covered, or is required under the provisions of this Lease to be covered by a
policy or policies containing a

                                       12

<PAGE>

waiver of subrogation or permission to release liability

     17.  HAZARDOUS SUBSTANCES. Tenant shall not dispose of or otherwise allow
the release of any hazardous waste or materials in, on or under the Premises,
the Project or any adjacent property, except for normal office products used and
disposed of in accordance with applicable laws. Tenant represents and warrants
to Landlord that Tenant's intended use of the Premises does not involve the use,
production, disposal or bringing on to the Premises or the Project of any
hazardous waste or materials, except for normal office products used and
disposed of in accordance with applicable laws. As used herein, the term
"hazardous waste or materials" means any material or substance that, as of the
date of this Agreement, is defined or classified under federal, state, or local
laws as: (a) a "hazardous substance" pursuant to section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601(4), section 311 of the Federal Water pollution Control Act, 33
U.S.C. Section 1321; (b) a "hazardous waste" pursuant to section 1004 or section
3001 of the Resource Conservation and Recovery Act, 42 U.S.C. sections 6903,
6921; (c) a toxic pollutant under section 307(a)(1) of the Federal Water
Pollution Control Act, 33 U.S.C. Section 1317 (a)(1); (d) a "hazardous air
pollutant" under section 112 of the Clean Air Act, 42 U.S.C. Section 7412; (e) a
"hazardous Material" under the Hazardous Materials Transportation Uniform Safety
Act of 1990, 49 U.S.C. App. Section 1802 (4); (f) toxic or hazardous pursuant to
regulations promulgated under the aforementioned laws; of (g) presenting a risk
to the environment under other applicable federal, state, or local laws,
ordinances, or regulations. "Hazardous Substances" specifically include, but is
not limited to, asbestos, polychlorinated biphenyls ("PCBs"), petroleum and
petroleum-based derivatives, and urea formaldehyde. Tenant shall promptly comply
with all applicable laws and with all orders, decrees or judgments of
governmental authorities or courts having jurisdiction relating to hazardous
waste or materials.

     Tenant agrees with respect to all aspects of this section 17 to
indemnify, defend and hold harmless Landlord against any and all loss, cost and
expense (including, without limitation, consultants' fees, attorneys' fees and
disbursements) which may be imposed on, incurred or paid by, or asserted against
Landlord or the Premises or the Project by reason of, or in connection with (i)
any misrepresentation, breach of warranty or other default by Tenant under this
Lease, or (ii) the acts or omissions by Tenant under this Lease, or (ii) the
acts or omissions of Tenant, or any sublessee or other person for whom Tenant
would otherwise be liable, resulting in the release of any hazardous waste or
materials.

     18.  INSURANCE.

          (a)   Required Policies. Tenant shall, throughout the term of this
Lease and any renewal hereof, at its own expense, keep and maintain in full
force and effect: (i) a policy of commercial liability insurance including a
contractual liability endorsement covering Tenant's obligations under Section 16
and 17, with a limit of not less than Two Million Dollars ($2,000,000) combined
single limit (the limits of said insurance shall not, however, limit the
liability of Tenant hereunder); and (ii) what is commonly referred to as "all
risk" coverage insurance (but excluding earthquake and flood) on Tenant's
leasehold improvements in an amount not less than the current One Hundred
Percent (100%) replacement value thereof. Such policy shall name Landlord as an
additional insured and shall contain a provision or endorsement providing that
the insurance afforded by such policy for the benefit of Landlord shall be
primary as respects any claims, losses or liabilities arising out of the use of
the Premises or the Building or the Common Areas by the Tenant or by Tenant's
operation and that any insurance carried by

                                       13

<PAGE>

Landlord shall be excess and non-contributing.

          (b)   Insurance Policy Requirements. Insurance policies required
hereunder shall be issued by companies which are authorized to do business in
Oregon and are currently rated AXII or better in "Best's Insurance Guide." No
insurance policy required under this Section 18 shall be canceled or reduced in
coverage and each insurance policy shall provide that it is not subject to
cancellation or a reduction in coverage except after thirty (30) days prior
written notice to Landlord.

     Tenant shall deliver to Landlord upon the Commencement Date and from time
to time thereafter, copies of policies of such insurance or certificates
evidencing the existence and amounts of same containing loss payable clauses
satisfactorily to Landlord and naming Landlord as Additional Insured thereunder.

          (c)   Landlord's Insurance. Landlord agrees to acquire, maintain and
pay for, during the full term of this Lease, "all risk" property damage
insurance against such risks and hazards as are customarily insured against by
others similarly situated and operating like properties, but excluding
earthquake and flood, covering the Building, including the Premises for such
amounts and upon such terms as would a prudent owner of such property similar to
and in the general area of the Building, and shall name Tenant as an additional
insured thereon. Such insurance shall be acquired from a company authorized to
do business in the State of Oregon and rated as AXII or better in "Best's
Insurance Guide." Upon request by Tenant, Landlord shall notify Tenant of the
amount and type of insurance carried by Landlord pursuant to this section.

     19.  ASSIGNMENT AND SUBLETTING.

          (a)   Tenant shall not assign, mortgage, encumber or otherwise
transfer this Lease or sublet the whole or any part of the Premises without in
each case first obtaining Landlord's prior written consent, which Landlord may
not unreasonably withhold. Without limiting the foregoing, Landlord may withhold
its consent if in Landlord's judgment occupancy by any proposed assignee,
subtenant or other transferee: (i) is not consistent with the maintenance and
operation of a first-class suburban office building due to the proposed
occupant's nature or manner of conducting business or its experience or
reputation in the community, or (ii) is likely to cause disturbance to the
normal use and occupancy of the Building or Project by other tenants, their
employees, customers, clients or other guests or visitors. Landlord may withhold
in its absolute and sole discretion, consent to any mortgage, hypothecation,
pledge or other encumbrance of any interest in this Lease by Tenant or any
subtenant, whereby this Lease or any interest therein becomes collateral for any
obligation of Tenant or any other person.

          (b)   In the event Tenant should desire to assign this Lease or sublet
the Premises or any part hereof, Tenant shall give Landlord written notice at
least forty five (45) days in advance of the date on which Tenant desires to
make such assignment or sublease, which notice shall specify, (i) the name and
business of the proposed assignee or sublessee, (ii) the amount and location of
the space affected, (iii) the proposed effective date and duration of the
subletting or assignment, and (iv) the proposed rental to be paid to Tenant by
such sublessee or assignee. Landlord shall then have a period of twenty (20)
days following receipt of such notice within which to notify Tenant in writing
that Landlord elects either (1) to terminate this Lease as to the space so
affected as of the date so specified by Tenant and reclaim that portion of the
Premises (in which event Landlord may enter into a lease with any such proposed
subtenant or assignee upon

                                       14

<PAGE>

the rent and terms agreed to by each subtenant or assignee or on such other
terms as may be agreed upon by Landlord and such subtenant or assignee) or, (2)
to permit Tenant to assign or sublet such space, in which event if the proposed
rental rate between Tenant and sublessee is greater than the rental rate of this
Lease, then such excess rental to be deemed additional rent owed by Tenant to
Landlord under this Lease, and the amount of such excess, including any
subsequent increases due to escalation or otherwise, to be paid by Tenant to
Landlord in the same manner that Tenant pays the rental hereunder and in
addition thereto, or (3) to withhold consent to Tenant's assignment or
subleasing such space and to continue this Lease in full force and effect as to
the entire Premises.

          (c)   Except as provided above, no assignment, subletting or other
transfer shall relieve Tenant of any liability under this Lease. Consent to any
such assignment, subletting or transfer shall not operate as a waiver of the
necessity for consent to any subsequent assignment, subletting or transfer. In
connection with each request for an assignment or subletting, Tenant shall pay
the reasonable cost of processing such assignment or subletting, including
attorneys fees, upon demand of Landlord. Tenant shall provide Landlord with
copies of all assignments, subleases and assumption instruments. If Tenant is a
corporation or partnership, any transfer of a controlling ownership interest in
Tenant or any transfer of this Lease by merger, consolidation or liquidation,
shall be deemed an assignment under this Section 19. Any assignee or subtenant
shall assume all of Tenant's obligations under this Lease and be jointly and
severally liable with Tenant hereunder.

     20.  LIENS AND INSOLVENCY.

          (a)   Liens. Tenant shall keep its interest in this Lease and any
Property of Tenant (other than unattached personal property) and the Premises,
and the Project free from any liens arising out of any work performed or
materials ordered or obligations incurred by or on behalf of Tenant and hereby
indemnifies and holds Landlord harmless from any liability from any such lien.
In the event any lien is filed against the Premises, the Project or any portion
thereof by any person claiming by, through or under Tenant, Tenant shall, upon
request of Landlord, at Tenant's expense, immediately either cause such lien to
be released of record or furnish to Landlord a bond in form and amount and
issued by a surety satisfactory to Landlord, indemnifying Landlord, and the
Project against all liability, costs and expenses, including attorneys fees,
which Landlord may incur as a result thereof. Provided that such bond has been
furnished to Landlord, Tenant, at its sole cost and expense and after written
notice to Landlord, may contest, by appropriate proceedings conducted in good
faith and with due diligence, any lien, encumbrance or charge against the
Premises arising from work done or materials provided to and for Tenant, if, and
only if, such proceedings suspend the collection thereof against Landlord,
Tenant and the Premises and neither the Premises, nor the Project, nor any part
thereof or interest therein is or will be in any danger of being sold, forfeited
or lost.

          (b)   Insolvency. If Tenant becomes insolvent or voluntarily or
involuntarily bankrupt, or if a receiver, assignee or other liquidating officer
is appointed for the business of tenant, Landlord at its option may terminate
this Lease and Tenant's right of possession under this Lease and in no event
shall this Lease or any rights or privileges hereunder be an asset of Tenant in
any bankruptcy, insolvency or reorganization proceeding.

                                       15

<PAGE>

     21.  DEFAULT.

          (a)   Default By Tenant. The occurrence of any one or more of the
following events shall constitute a material default and breach of this Lease by
Tenant: (i) the abandonment of the Premises by Tenant or the vacating of the
Premises for more than thirty (30) consecutive days; (ii) the failure by Tenant
to make any payment of Rent or any other payment required to be made by Tenant
hereunder, within five (5) business days of date due provided, however, if
Tenant makes any payment due hereunder after the due date, Tenant shall be in
default if, within twelve months of the overdue payment, Tenant fails to pay
Rent or any other payment due hereunder within five (5) days of the date due;
(iii) the failure by Tenant to observe or perform any of the other covenants,
conditions or provisions of the Lease, where such failure shall continue for a
period of twenty (20) days following written notice from Landlord; provided,
however, if more than twenty (20) days are reasonably required for its cure then
Tenant shall not be deemed to be in default if Tenant commences such cure within
said 20-day period and thereafter diligently prosecutes such cure to completion;
(iv) the making by Tenant of any general assignment or general arrangement for
the benefit of creditors other than in the normal course of business; (v) the
filing by or against Tenant of a petition to have Tenant adjudged bankrupt or a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
within sixty (60) days); (vi) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in the Lease, where possession is not restored to Tenant
within thirty (30) days; or (vii) the attachment, execution or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where such seizure is not discharged within
thirty (30) days. The above notice periods may, at the election of Landlord, run
concurrently with any statutorily required notice periods.

          (b)   Remedies Cumulative; Injunction. All rights and remedies of
Landlord herein enumerated shall be cumulative, and none shall exclude any other
right or remedy allowed by law or in equity. In addition to the other remedies
in this Lease provided, Landlord shall be entitled to restrain by injunction the
violation or attempted violation of any of the covenants, agreements or
conditions of this Lease.

          (c)   Landlord's Remedies Upon Tenant Default. Upon an uncured default
of this Lease by Tenant, Landlord, besides other rights or remedies it may have,
at its option, may enter the Premises or any part thereof, either with or
without process of law, and expel, remove or put out Tenant or any other persons
who may be thereon, together with all personal property found therein. No such
reentry shall be construed as an election on Landlord's part to terminate this
Lease unless a written notice of such intention is given to Tenant. Landlord may
terminate this Lease, or it may from time to time, without terminating this
Lease and as agent of Tenant, relet the Premises or any part thereof for such
term or terms (which may be for a term less than or extending beyond the term
hereof) and at such rental or rentals and upon such other terms and conditions
as Landlord in its sole discretion may deem advisable, with the right to repair,
renovate, remodel, redecorate, alter and change the Premises, Tenant remaining
liable for any deficiency computed as hereinafter set forth. In the case of any
default, re-entry and/or dispossession, by summary proceedings or otherwise, all
Rent and Additional Rent shall become due thereupon and be paid up to the time
of such re-entry or dispossession, together with such expenses as Landlord may
reasonably incur for attorneys fees, advertising expenses, brokerage fees and/or
putting the Premises in good order or preparing the same for re-rental, together
with interest thereon as provided in Section 30(q) hereof, accruing from the
date of any such expenditure by Landlord.

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<PAGE>

     At the option of Landlord, rents received by Landlord from such reletting
shall be applied first to the payment of any indebtedness from Tenant to
Landlord other than Rent and Additional Rent due hereunder; second, to the
payment of any costs and expenses of such reletting and including, but not
limited to, attorneys fees, advertising fees and brokerage fees, and to the
payment of any repairs, renovations, remodeling, redecoration, alterations, and
changes in the Premises; third, to the payment of Rent and Additional Rent due
and to become due hereunder, and if after so applying said Rents there is any
deficiency in the Rent or Additional Rent to be paid by Tenant under this Lease,
Tenant shall pay any deficiency to Landlord monthly on the dates specified
herein and any payment made or suits brought to collect the amount of the
deficiency for any month shall not prejudice in any way the right of Landlord to
collect the deficiency for any subsequent month. The failure or refusal of
Landlord to relet the Premises or any part or parts thereof shall not release or
affect Tenant's liability hereunder, nor shall Landlord be liable for failure to
relet, or in the event of reletting, for failure to collect the Rent thereof,
and in no event shall Tenant be entitled to receive any excess of net Rents
collected over sums payable by Tenant to Landlord hereunder, however, Landlord
shall have the obligation to exert reasonable efforts to mitigate damages,
provided that Landlord shall not be required to relet the Premises prior to
leasing any other space owned by the Landlord, or its affiliates, within a one
mile radius. No such re-entry or taking possession of the Premises shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention be given to Tenant. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach and default. Should Landlord at
any time terminate this Lease by reason of any default, in addition to any other
remedy it may have, it may recover from Tenant the present value, using a ten
percent (10%) discount rate, of the amount of Rent and Additional Rent reserved
in this Lease for the balance of the Term, as it may have been extended, less
the amount that Tenant proves could be collected for the remainder of the Term,
plus all court costs and attorneys fees incurred by Landlord in the collection
of the same.

     Tenant acknowledges that certain benefits or concessions provided by
Landlord are conditioned upon Tenant's timely, full and faithful performance of
each and every obligation, covenant, representation and warranty of this Lease
throughout the entire term of this Lease, even though such benefits or
concessions may be realized by Tenant over less than the entire term of this
Lease. Accordingly; notwithstanding anything to the contrary contained herein,
in the event Landlord brings an action against Tenant for default under this
Lease which results in a termination of this Lease and eviction of Tenant,
Landlord shall become immediately entitled to receive from Tenant as Additional
Rent the amount of all such benefits and concessions allocable to the balance of
the Lease term on a pro rata basis, i.e. an amount equal to the product of (x)
the sum of (a) any amounts theretofore or thereafter paid by Landlord to Tenant
or to any third party, or any amounts credited to Tenant or to any third party,
for or on account of (i) any moving, tenant improvement, decorating or other
allowance or credit granted to Tenant but only to the extent such tenant
improvements are demolished for the next occupant of the premises, (ii) any real
estate commission paid on account of this Lease, and (iii) any expenses or costs
related to assumption by Landlord of any other lease, plus (b) an amount equal
to the difference between the rent as specified in Section 4 above and rent for
any period for which this Lease provides any lesser amount including zero or
nominal rent, including for any period of early occupancy of the Premises prior
to the commencement of the term of this Lease, plus (c) the amount spent by
Landlord for any tenant improvements to the Premises but only to the extent such
tenant improvements are demolished for the next occupant of the premises;
multiplied by (y) a fraction, the numerator of which is the number of days of
the term of this Lease remaining between the date of default and the expiration
of the term of this Lease, and the denominator of which is the

                                       17

<PAGE>

total number of days of the term of this Lease. By way of example, if Tenant
receives a moving allowance of $1,000, the Lease term is 3 years (1,095 days)
and a default occurs at the end of the first year such that there were 2 years
(730 days) remaining, the Tenant shall pay as additional rent the sum of
$666.67, which is computed as follows: ($1,000 x 730)/1,095 = $666.67.

          (d)   Waiver of Redemption Rights. Tenant, for itself, and on behalf
of any and all persons claiming through or under it, including creditors of all
kinds, does hereby waive and surrender all right and privilege which they or any
of them might have under or by reason of any present or future law, to redeem
the Premises or to have a continuance of this Lease for the term hereof, as it
may have been extended, after having been dispossessed or ejected therefrom by
process of law or under the terms of this Lease or after the termination of this
Lease as herein provided.

          (e)   Nonpayment of Additional Rent. All costs and expenses which
Tenant assumes or agrees to pay to Landlord pursuant to this Lease shall be
deemed Additional Rent and, in the event of nonpayment thereof, Landlord shall
have all the rights and remedies herein provided for in case of nonpayment of
Rent.

          (f)   Interest. All past due Rent shall bear interest at the rate of
15% per annum.

          (g)   Default by Landlord. If Landlord shall fail to perform any of
its obligations when and as due under this Lease, which failure continues for a
period of more than thirty (30) days after written notice from Tenant specifying
the default (or as to any default which requires more than thirty (30) days to
remedy, if such cure is not commenced promptly and pursued diligently or
continues beyond the time reasonably necessary therefor), Tenant may at its
option, upon prior written notice, incur any expenses reasonably necessary to
perform the obligation of Landlord specified in such notice. Upon demand and
submission of proof of payment by Tenant, Landlord shall pay Tenant an amount
equal to the amount reasonably expended by Tenant to cure such default of
Landlord.

     22.  PRIORITY.

          (a)   Subordination of Lease. This Lease shall be subordinate to any
mortgage or deed of trust now existing or hereafter placed upon the Premises or
the Project or any portion thereof containing the Premises, created by or at the
instance of Landlord, and to any and all advances to be made thereunder and to
interest thereon and all modifications, renewals and replacements or extensions
thereof ("Landlord's Mortgage") provided however, that the holder of any
Landlord's Mortgage or any person or persons purchasing or otherwise acquiring
the Premises, the Project or any portion thereof containing the Premises at any
sale or other proceeding under any Landlord's Mortgage may elect to continue
this Lease in full force and effect; and in such event, Tenant shall attorn to
such person or persons. Tenant shall properly execute, acknowledge and deliver
documents which the holder of any Landlord's Mortgage may require to effectuate
the provisions of this Section 22 within five (5) days after Landlord's request.
Not withstanding the above, Landlord shall use commercially reasonable efforts
to cause any holder of Landlord's Mortgage to enter into a Nondisturbance
Agreement with Tenant which shall provide in essence that upon any foreclosure
of any mortgage or deed of trust by such holder of Landlord's Mortgage, that
such holder will not disturb Tenant's rights pursuant to this Lease, so long as
Tenant is not in default pursuant to the provisions of this Lease

                                       18

<PAGE>

     23.  ESTOPPEL CERTIFICATES.

          (a)   Delivery of Estoppel. Tenant shall, from time to time, upon
written request of Landlord, execute, acknowledge and deliver to Landlord or its
designee a written statement stating: The date this Lease was executed and the
date it expires; the date the term commenced and the date Tenant accepted the
Premises; the amount of Basic Rent and the amount of Additional Rent currently
being paid towards increases in Operating Costs, and the date to which such Rent
has been paid; and certifying: (i) whether this Lease is in full force and
effect and has not been assigned or amended in any way (or specifying the date
and terms of agreement so affecting this Lease); (ii) whether this Lease
represents the entire agreement between the parties as to this leasing; that all
obligations under this Lease to be performed by the Landlord have been satisfied
or specifying those that have not been satisfied; (iii) whether on this date
there are no existing claims, defenses or offsets which the Tenant has against
the enforcement of this Lease by the Landlord; (iv) whether no Rent has been
paid more than one month in advance; and that no security has been deposited
with Landlord (or, if so, the amount thereof); and (v) such other items as
Landlord shall reasonably request. It is intended that any such statement
delivered pursuant to this Section may be relied upon by a prospective purchaser
of Landlord's interest or holder of any mortgage upon Landlord's interest in
the Building or the Project.

          (b)   Failure to Deliver Estoppel. If Tenant shall fail to respond
within ten (10) days of receipt by Tenant of a written request by Landlord as
herein provided, Tenant shall be deemed to have given such certificate as above
provided without modification and shall be deemed to have admitted the accuracy
of any information supplied by Landlord to a prospective purchaser or mortgagee
and to have certified that this Lease is in full force and effect, that there
are no uncured defaults in Landlord's performance, that the security deposit is
as stated in the Lease, and that not more than one month's Rent has been paid in
advance.

     24.  SURRENDER OF POSSESSION. Subject to the terms of Section 14
relating to damage and destruction, upon expiration of the term of this Lease,
whether by lapse of time or otherwise, Tenant shall promptly and peacefully
surrender the Premises to Landlord "broom-clean" and in as good condition as
when received by Tenant from Landlord or as thereafter improved, damage thereto
from causes beyond the reasonable control of Tenant, ordinary wear and tear and
damage by fire or casualty not intentionally caused by Tenant excepted. Tenant
shall remove all of its personal property and trade fixtures from the Premises
and the Project at the expiration of the term and repair any damage caused by
such removal; any property not so removed shall be deemed abandoned and may be
sold or otherwise disposed of as Landlord deems advisable.

     25.  NON-WAIVER. Waiver by Landlord of any term, covenant or condition
herein contained or any breach thereof shall not be deemed to be a waiver of
such term, covenant, or condition or of any subsequent breach of the same or any
other term, covenant, or condition herein contained. The subsequent acceptance
of Rent or Additional Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term, covenant or condition of
this Lease, other than the failure of Tenant to pay the particular Rent or
Additional Rent so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such Rent or Additional Rent.

     26.  HOLDOVER. If Tenant remains in possession of the Premises or any part
thereof

                                       19

<PAGE>

after the expiration of the term of this Lease with the express written consent
of Landlord, such occupancy shall be a tenancy from month-to-month at a rental
in the amount equal to one and one-half (1-1/2) times the last monthly rental
plus all other charges payable under this Lease, and subject to all of the
terms, covenants and conditions of this Lease applicable to a month-to-month
tenancy. Tenant acknowledges and agrees that this Section 26 does not grant any
right to Tenant to holdover.

     27.  LANDLORD'S LIABILITY. Anything in this Lease to the contrary
notwithstanding, covenants, undertakings and agreements herein made on the part
of Landlord are made and intended not as personal covenants, undertakings and
agreements for the purpose of binding Landlord personally or the assets of
Landlord except Landlord's interest in the Premises and Building, but are made
and intended for the purpose of binding only the Landlord's interest in the
Premises and Building, as the same may from time to time be encumbered. No
personal liability or personal responsibility is assumed by, nor shall at any
time be asserted or enforceable against Landlord or its partners or their
respective heirs, legal representatives, successors or assigns on account of the
Lease or on account of any covenant, undertaking or agreement of Landlord in
this Lease contained.

     28.  TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer of
Landlord's interest in the Premises or in the Building, the transferor shall be
automatically relieved of any and all obligations and liabilities on the part of
Landlord accruing from and after the date of such transfer and such transferee
shall have no obligation or liability with respect to any matter occurring or
arising prior to the date of such transfer. Tenant agrees to attorn to the
transferee.

     29.  RIGHT TO PERFORM. If Tenant shall fail to pay any sum of money
required to be paid by it hereunder or shall fail to perform any other act on
its part to be performed hereunder, and such failure shall continue for ten (10)
days after notice thereof by Landlord, Landlord may, but shall not be obligated
so to do, and without waiving or releasing Tenant from any obligations of
Tenant, make such payment or perform any such other act on Tenant's part to be
made or performed as provided in this Lease. Landlord shall have (in addition to
any other right or remedy of Landlord) the same rights and remedies in the event
of the nonpayment of sums due under this Section 29 as in the case of default by
Tenant in the payment of Rent.

     30.  GENERAL.

          (a)   Headings. Titles to Sections of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.

          (b)   Heirs and Assigns. All of the covenants, agreements, terms and
conditions contained in this Lease shall inure to and be binding upon the
Landlord and Tenant and their respective heirs, executors, administrators,
successors and assigns.

          (c)   Authority. Each individual executing this Lease on behalf of
Tenant represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of Tenant, and that this Lease is binding upon
Tenant in accordance with its terms.

          (d)   No Brokers. Except as set forth in Section 1(r), Tenant
represents and warrants to Landlord that it has not engaged any broker, finder
or other person who would be

                                       20

<PAGE>

entitled to any commission or fees in respect of the negotiation, execution or
delivery of this Lease and shall indemnify and hold harmless Landlord against
any loss, cost, liability or expense incurred by Landlord as a result of any
claim asserted by any such broker, finder or other person on the basis of any
arrangements or agreements made or alleged to have been made by or on behalf of
Tenant.

          (e)   Entire Agreement. This Lease is the final and complete
expression of Landlord and Tenant relating in any manner to the leasing, use and
occupancy of the Premises, to Tenant's use of the Project or portions thereof,
and other matters set forth in this Lease. No prior agreements or understanding
pertaining to the same shall be valid or of any force or effect and the
covenants and agreements of this Lease shall not be altered, modified or added
to except in writing signed by both Landlord and Tenant.

          (f)   Severability. Any provision of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provision hereof and the remaining provisions hereof shall nevertheless
remain in full force and effect.

          (g)   Force Majeure. Except for the payment of Rent, Additional Rent
or other sums payable by Tenant to Landlord, time periods for Tenant's or
Landlord's performance under any provisions of this Lease shall be extended for
periods of time during which Tenant's or Landlord's performance is prevented due
to circumstances beyond Tenant's or Landlord's control, including without
limitation, strikes, unavailability or delay in obtaining fuel, labor or
materials, accidents, floods, defective materials, fire or other casualty,
adverse weather conditions, inability to obtain building or use and occupancy
certificates, embargoes, governmental regulations, acts of God, war or other
strife, or other causes similar or dissimilar.

          (h)   Notices. All notices under this Lease shall be in writing and
delivered in person or sent by registered or certified mail, postage prepaid, or
by a nationally recognized overnight carrier with confirmation of delivery, to
Landlord and to Tenant at the Addresses provided respectively in Section 1(e)
and 1(c) (provided that after the Commencement Date any such notice shall be
mailed or delivered by hand to Tenant at the Premises) and to the holder of any
mortgage or deed of trust at such place as such holder shall specify to Tenant
in writing; or such other addresses as may from time to time be designated by
any such party in writing. Notices mailed as aforesaid shall be deemed given on
the date of such mailing.

          (i)   Costs and Attorneys Fees. If Tenant or Landlord shall bring any
action for any relief against the other, declaratory or otherwise, arising out
of this Lease, including any suit by Landlord for the recovery of Rent,
Additional Rent or other payments hereunder or possession of the Premises each
party shall, and hereby does, to the extent permitted by law, waive trial by
jury and the losing party shall pay the prevailing party a reasonable sum for
attorneys fees in such suit, at trial and on appeal, and such attorneys fees
shall be deemed to have accrued on the commencement of such action.

          (j)   Governing Law. This Lease shall be governed by and construed in
accordance with the internal laws of the state of Oregon.

          (k)   Recording. Tenant shall not record this Lease or a memorandum
hereof without Landlord's prior written consent and such recordation shall, at
the option of Landlord,

                                       21

<PAGE>

constitute a non-curable default of Tenant hereunder.

          (l)   Waivers. No waiver by Landlord of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provision. Landlord's consent to or approval of
any act shall not be deemed to render unnecessary the obtaining of Landlord's
consent to or approval of any subsequent act by Tenant. The acceptance of rent
hereunder by Landlord shall not be a waiver of any preceding breach at the time
of acceptance of such rent.

          (m)   Time of Essence. Time is of the essence for the performance of
all of the obligations specified hereunder.

          (n)   Merger. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger and shall, at
the option of Landlord, terminate all or any existing subtenancies or may, at
the option of Landlord, operate as an assignment to Landlord of any or all of
such subtenancies.

          (o)   Right to Change Public Spaces. Landlord shall have the right at
any time, without thereby creating an actual or constructive eviction or
incurring any liability to Tenant therefor, to change the arrangement or
location of such of the following as are not contained within the Premises or
any part thereof: entrances, passageways, doors and doorways, corridors, stairs,
toilets and other like public service portions of the Building. Nevertheless, in
no event shall Landlord diminish any service, change the arrangement or location
of the elevators serving the Premises, make any change which shall diminish the
area of the Premises, or make any change which shall change the character of the
Building from that of a first-class office building. Landlord shall not allow
the tenant in the Premises directly above Tenant's Premises to install any
additional wiring, cabling or other equipment in the space above the ceiling of
the Premises. However, nothing contained herein shall prohibit Landlord, its
agents or licensees from performing or allowing the performance of maintenance
and repair work on existing wiring or other equipment or the installation by
Landlord or third parties of wires or cables or other equipment in risers,
vertical and horizontal shafts, rooftop space and raceways, provided that
Landlord shall endeavor to minimize disruption of Tenant's operations caused by
any such installation, maintenance and/or repair of such wiring, cabling and
equipment.

          (p)   Name. The Building and the Project will be known by such name as
Landlord may designate from time to time. Landlord reserves the right to name
and re-name the Building and/or the Project from time to time and to install
signs accordingly, without compensation or prior notice to Tenant.

          (q)   Overdue Payments. Any Rent, Additional Rent or other sums
payable by Tenant to Landlord under this Lease which shall not be paid when due
thereof, shall bear interest at a rate equal to fifteen percent(15%), calculated
from the original due date thereof to the date of payment. Any late payment of
Rent (i.e. Not paid within five (5) days when due) shall also be subject to a
collection fee equal to the greater of $100.00 or five percent (5%) of the
amount due.

          (r)   Intentionally Omitted.

          (s)   Advertising. Tenant shall not inscribe any inscription, or post,
place or in

                                       22

<PAGE>

any manner display any sign, notice, picture, placard or poster, or any
advertising matter whatsoever in or about the Premises or the Building or the
Project at places visible (either directly or indirectly as an outline or shadow
on a glass pane) from anywhere outside the Premises without first obtaining
Landlord's written consent thereto. Any such consent by Landlord shall be upon
the understanding and condition that Tenant will remove the same at the
expiration or sooner termination of this Lease and Tenant shall repair any
damage to the Premises, the Building or the Project caused thereby.

          (t)   Parking. Parking shall at all times be governed by reasonable
rules and regulations as set forth in Exhibit D, which shall be published from
time to time by Landlord. Parking may be on a reserved stall and/or undesignated
stall--"window sticker" basis, and may be self-service and/or attendant service,
as determined from time to time by Landlord. Tenant shall have the right to use
that number of parking stalls as set forth in Section 1(q). Tenant shall pay for
reserved parking at Landlord's scheduled rates for such parking, as they may
change from time to time.

          (u)   Execution of Lease by Landlord. The submission of this document
for examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for the Premises, and this document shall become
effective and binding only upon execution and delivery by Landlord. No act or
omission of any employee or agent of Landlord or of Landlord's broker shall
alter, change or modify any of the provisions hereof.

     31.  LANDLORD'S COVENANTS.

          (a)   Quiet Enjoyment. Tenant shall have the right to the peaceable
and quiet use and enjoyment of the Premises, subject to the provisions of this
Lease, so long as Tenant is not in default hereunder.

          (b)   Hazardous Waste or Materials. Landlord represents to Tenant that
to the best of Landlord's actual knowledge no hazardous waste or materials have
been generated, stored or disposed of by Landlord on the land or in or on the
Building, other than in compliance with applicable laws.

          (c)   Rentable Square Feet. The rentable square feet in the Building
and the Project shall be measured in accordance with the Standard Method for
Measuring Floor Area in Office Buildings published by Building Owners and
Managers Association International and approved June 7, 1996 by American
National Standards Institute, Inc. as ANSI/BOMA Z65.1-1996.

     IN WITNESS WHEREOF this Lease has been executed the day and year first
above set forth.

                          LANDLORD:

                          KRUSE WAY OFFICE ASSOCIATES LIMITED
                          PARTNERSHIP, an Oregon Limited Partnership
                          By: Langly/Kruse One, LLC, its General Partner

                                       23

<PAGE>

                          By  /s/ P. L. Sligh, Jr.
                             ----------------------------
                               P. L. Sligh, Jr. - Member

                          TENANT:

                          VIDEOTELE.COM

                          By  /s/ Douglas C. Shafer
                             ----------------------------
                          Its  President And CEO

                                       24

<PAGE>

                LANDLORD ACKNOWLEDGMENT

                STATE OF  WA     )
                            ) ss.
                COUNTY OF King   )

     I certify that I know or have satisfactory evidence that P. L. Sligh, Jr.
is the person who appeared before me, and said person acknowledged that said
person signed this instrument, on oath stated that said person was authorized to
execute the instrument and acknowledged it as a managing member of Kruse Way
Office Associates Limited Partnership, an Oregon limited partnership, to be the
free and voluntary act of such limited partnership for the uses and purposes
mentioned in the instrument.

     Dated this 28th day of April, 2000.

     [NOTARY SEAL]                          /s/ Phyllis Y. Pack
                                            ------------------------------------
                                                   Notary Public in and for the
                                            State of WA, residing
                                            at 3527 289th ave, Redmond

                                            My appointment expires 1-29-03

                TENANT CORPORATE  ACKNOWLEDGMENT

                STATE OF OREGON  )
                           )  ss.
                COUNTY OF Washington

     I certify that I know or have satisfactory evidence that is the person who
appeared before me, and said person acknowledged that he/she signed this
instrument, on oath stated that they were authorized to execute the instrument
and acknowledged it as the Pres. & CEO of VideoTele.com, a OREGON corporation,
to be the free and voluntary act of such corporation for the uses and purposes
mentioned in the instrument.

     Dated this 21st day of the April, 2000.

     [NOTARY SEAL]                          /s/ Janet M. Bell
                                            ------------------------------------
                                                   Notary Public in and for the
                                            state of OR, residing
                                            at Washington Co

                                            My appointment expires  7/11/2001

                                       25

<PAGE>

                                    EXHIBIT A

                            LEGAL DESCRIPTION OF LAND

          A portion of the real property described as follows:

          PARCEL I:
          Part of Tract 10, BONITA MEADOWS, in the County of Clackamas and State
of Oregon, described as follows:

          Beginning at a point on the North line of said Lot 10, which is North
89[ ]44' West 67 feet from the Northeast corner thereof; thence North 89DEG.44'
West, along said North line, 160 feet to the Northeast corner of that tract
described in Deed to Barbara S. Bliven, recorded September 9, 1975 as Fee No. 75
25667, Film Records; thence South 0DEG.16' West, along the Easterly line of
said Bliven Tract, 215 feet; thence South 89DEG.44' East 40 feet; thence
North easterly 248.24 feet, more or less, to the point of beginning.

          EXCEPTING THEREFROM that portion conveyed to Clackamas County by Deed
recorded May 14, 1982 as Fee No. 82 13469.

          PARCEL II:
          Part of Tract 10, BONITA MEADOWS, in the County of Clackamas and State
of Oregon, described as follows:

          Beginning at a point on the North line of said Tract 10, which is
North 89DEG.44' West 227 feet from the Northeast corner thereof; thence North
89DEG.44' West along said North line 190 feet to the Northeast corner of that
tract described in Deed to Leland F. Miller, et ux, recorded July 5, 1967 in
Book 692, page 931, Deed Records; thence Southerly, along the Easterly line of
said Miller Tract, 535 feet, more or less, to the Southeast corner thereof,
being a point on the Southerly line of said Tract 10; thence South 74DEG.13'
East, along said Southerly line, 57.2 feet to an angle corner therein; thence
North 89DEG.26' East, along said Southerly line, 135 feet, more or less, to the
Southwesterly corner of that tract described as Parcel 2 in Deed to Richard B.
Smith, et ux, recorded September 9, 1975 as Fee No. 75 25666, Film Records;
thence North 0DEG.16' East, along the Westerly line of said Smith Tract and the
Northerly extension thereof, being the Easterly line of that tract described in
Deed to Barbara S. Bliven, recorded September 9, 1976 as Fee No. 76-25667, Film
Records, 546 feet, more or less, to the point of beginning.

          EXCEPTING THEREFROM that portion thereof conveyed to Clackamas County
by Deed recorded May 14, 1982 as Fee No. 82 13470.

          PARCEL III:
          The West 150.0 feet of Tract 10, BONITA MEADOWS, in the County of
Clackamas and State of Oregon, said 150.0 feet to be cut off by a line drawn
parallel with and 150.0 feet Easterly of the West line, when measured along the
North line of said Tract 10.

          EXCEPTING THEREFROM that portion conveyed to the County of Clackamas
by Deed recorded May 14, 1982 as Fee No. 82 13471.

<PAGE>

          PARCEL IV:
          Part of Tract 11, BONITA MEADOWS, in the County of Clackamas and State
of Oregon, described as follows:

          Beginning at the intersection of the East line of said Tract 11 with
the South line of Meadows Road; thence West, along said South line, 150 feet to
a point; thence South, parallel with the East line of said Tract 11, to a point
in the South line thereof; thence East, along the South line of said Tract 11, a
distance of 150 feet to the Southeast corner thereof; thence North, along the
East line thereof, a distance of 498.13 feet to the point of beginning.

          EXCEPTING THEREFROM that portion conveyed to the County of Clackamas
by Deed recorded May 14, 1982 as Fee No. 82 13472.

          PARCEL V:
          Parcel 2, PARTITION PLAT NO. 1996-77, in the County of Clackamas and
State of Oregon.

          A tract of land situated in the Northwest one-quarter of Section 7,
Township 2 South, Range 1 East of the Willamette Meridian, Clackamas County,
Oregon, being a portion of Parcel 1 of "Partition Plat No. 1996-77", being more
particularly described as follows:

          Beginning at the southeast corner of said Parcel 1, which bears
N 74[ ]33'21" W 46.95 feet from the Initial Point of said "Partition Plat No.
1996-77"; thence N 00[ ]34'23" E along the easterly line of said Parcel 1 a
distance of 294.40 feet; thence N 89[ ]25'37" W 60.00 feet; thence S 00[ ]34'23"
W parallel with said easterly line of Parcel 1 a distance of 278.47 feet to the
southerly line of said Parcel 1; thence S 74[ ]33'21" E along said southerly
line, 62.08 feet to the Point of Beginning.

          Containing 17,186 square feet.

     Upon completion of a lot line adjustment establishing such portion of the
real property as a legal lot, Landlord and Tenant will attach a legal
description of such portion to the Lease as the description of the Land.

<PAGE>

                                   EXHIBIT 'B'

                                   SPACE PLAN

[DIAGRAM OF SPACE]

<PAGE>

                                    EXHIBIT C

                                 WORK AGREEMENT

     The undersigned, as Landlord and Tenant, respectively, are executing
simultaneously with this Work Agreement a written Lease covering premises as
described in the Lease on the second floor of the 6000 Meadows Building, Lake
Oswego, Oregon, and hereby attach this Work Agreement and Schedule 1 hereto to
such Lease as Exhibit C thereto.

     In consideration of the mutual covenants hereinafter contained, Landlord
and Tenant mutually agree as follows:

1.   Tenant's Plans and Specifications. Landlord and Tenant hereby approve the
     preliminary plan for Videotele.com prepared by Ankrom Moisan Associated
     Architects dated 4-17-2000 and identified as sheet A.1. Landlord shall
     through its architects furnish final plans (the "Final Plans") consistent
     with such preliminary plan.

2.   Work at Landlord's Cost and Expense. Landlord will furnish and install all
     of the work indicated on the Final Plans subject to the terms of Section 10
     of the Lease. Notwithstanding any provisions herein to the contrary, Tenant
     shall reimburse Landlord within thirty (30) days after billing for (and
     the tenant improvement allowance under Section 10 shall not apply to) costs
     of this Work Agreement in excess of $24.50 per useable square foot.

3.   Change Orders. Tenant may require changes to the Final Plans. All changes
     will be subject to Landlord's prior written approval. Prior to commencing
     any change, Landlord will prepare and deliver to Tenant, for Tenant's
     approval, a change order setting forth the total cost of such change with
     associated architectural, engineering, construction, contractor's costs and
     fees, completion schedule changes and the cost of Landlord's overhead. If
     Tenant fails to approve such change order within five (5) days, Tenant
     will have been deemed to have withdrawn the proposed change and Landlord
     will not proceed to perform the change. Upon Landlord's receipt of Tenant's
     approval, Landlord will proceed with the change. Tenant agrees to pay
     Landlord promptly upon being billed therefor the cost to Landlord of such
     change. Such bills may be tendered during the progress and performance of
     the work and the furnishing and installation of the materials to which such
     bills relate.

<PAGE>

4.   Completion and Commencement Date. When Landlord's architect has furnished
     Landlord with a certificate that the work to be done pursuant to paragraph
     2 and 3 above has been substantially completed and Landlord has obtained a
     temporary certificate of occupancy or other governmental authorization
     permitting lawful occupancy of the Premises, the Premises will be deemed
     completed and possession thereof delivered to Tenant for all purposes of
     the Lease, including, without limitation, Section 2, hereof. If Landlord
     shall be delayed in substantially completing such work as a result of
     Tenant change orders, Tenant's request for long lead time materials or
     Tenant's failure to fulfill any obligation pursuant to the terms of this
     Lease or any exhibit thereto, then the Commencement Date and Tenant's
     obligation to pay rent shall be accelerated by the number of days of such
     delay as set forth in paragraph 3 of the Lease.

     IN WITNESS WHEREOF, the parties have executed this Work Agreement as of the
date first above written.

                                            LANDLORD:

                                               /s/ P. L. Sligh, Jr.
                                            ------------------------------------

                                            TENANT:

                                               /s/ Douglas C. Shafer
                                            ------------------------------------

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