FIRST AMENDMENT TO LEASE

Exhibit 10.11

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE (this " Amendment ") is dated for reference purposes only as of June 18, 2009, by and between CARR NP PROPERTIES, L.L.C., a Delaware limited liability company (" Landlord "), and SHORETEL, INC. , a Delaware corporation (" Tenant ").

RECITALS

A.        Landlord and Tenant are parties to that certain Office Lease dated as of April 20, 2007 (the " Existing Lease "), pursuant to which Landlord leases to Tenant certain premises, containing approximately 63,781 rentable square feet of space, comprising the entirety of the building located at 960 Stewart Drive, Sunnyvale, California (the " Premises "). The Existing Lease is scheduled to expire on October 31, 2009.

B.        Landlord and Tenant now desire to extend the Lease Term to expire on September 30, 2014, and make certain other amendments to the Existing Lease, all subject to, and on the basis of, the terms, covenants and conditions hereinafter set forth. The Existing Lease, as amended by this Amendment, is sometimes referred to herein as the " Lease ."

NOW, THEREFORE, in consideration of the foregoing and the agreements of Landlord and Tenant herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1.          Use of Defined Terms; Recitals; Effective Date.

1.1                  Definitions; Recitals. All capitalized terms used and not defined herein shall have the defined meanings ascribed to them in the Existing Lease. The provisions of the Recitals above are fully incorporated herein by this reference.

1.2                  Effective Date. Unless otherwise specifically provided herein, all provisions of this Amendment shall be effective as of May 1, 2009 (the " Effective Date ").

2.          Term. The Lease Term is hereby extended for a period of fifty-nine (59) months (the " Extension Term "), commencing on November 1, 2009 (the " Extension Term Commencement Date "), and expiring on September 30, 2014 (which, for all purposes under the Lease, shall hereinafter be the " Lease Expiration Date "), unless earlier terminated pursuant to the terms and conditions of the Lease.

3.          Amendments to Lease . Commencing on the Effective Date, the Existing Lease shall be amended as follows:

3.1                  Monthly Base Rent. Tenant shall pay Base Rent in accordance with the following:

The parties acknowledge that, as of the Effective Date, Tenant has a credit against Base Rent equal to Three Hundred Five Thousand Eight Hundred Nineteen and 18/100 Dollars ($305,819.18) (" Base Rent Credit "), which amount was previously paid by Tenant as Base Rent and Tenant's Share of Direct Expenses for the months of May and June 2009. Landlord shall apply the Base Rent Credit against the Base Rent payments for the months of October, November and December 2009 and January 2010, until the Base Rent Credit has been exhausted.

3.2                  Direct Expenses. During the period commencing May 1, 2009 and ending September 30, 2009, Tenant's obligation to pay Tenant's Share of Direct Expenses pursuant to Section 4.1 of the Existing Lease shall be abated. Nothing contained herein shall affect Tenant's continuing obligation to pay for all janitorial services and other utilities charges relating to the Premises pursuant to Article 6 of the Existing Lease.

3.3                  Security Deposit. As of the Effective Date, provided that Tenant is not then in default in the performance of any of its covenants under the Lease, the Security Deposit shall be reduced to Ninety-Three Thousand Three Hundred Twenty-One and 90/100 Dollars ($93,321.90). Accordingly, within thirty (30) days following the Effective Date, Landlord shall refund to Tenant an amount equal to Twenty-Four Thousand Six Hundred Seventy-Two and 95/100 Dollars ($24,672.95).

(a)                   The parties acknowledge that the reference to " Section 4.2.3(o) " in Section 4.2.3 and Section 7.1.4 of the Existing Lease was a typographical error and should have referred to Section 4.2.3(p) of the Existing Lease; and that such correction shall be effective as of the effective date of the Existing Lease.

(b)                   Notwithstanding the provisions of Section 7.1.2 or Section 7.1.4 of the Existing Lease, if any repairs or replacements are required to be performed to the Base Building Systems (as defined in Section 4.1(c) below) prior to May 1, 2010 (i.e., one (1) year following the Effective Date), then, provided that such repairs are not necessitated by the negligence or willful misconduct of Tenant or any Tenant Parties, or by Tenant's failure to provide normal service to such Base Building Systems as required by the Existing Lease (e.g., HVAC preventive maintenance contracts), then Landlord shall, at no cost to Tenant, make such repairs or replacements. Without limiting the provisions of Section 7.1.2 of the Existing Lease, after the one (1) year warranty period above, Tenant shall have the benefit of all warranties available to Landlord regarding the Building Systems for which Tenant is responsible pursuant to Section 7.1 of the Existing Lease.

(c)                   Without limiting Landlord's obligations set forth in Section 3.4(b) above or Section 4.1 below, Landlord and Tenant acknowledge that, prior to the date of this Amendment, Tenant engaged an HVAC contractor to complete an independent inspection of the existing HVAC system serving the Premises, and that such inspection established that "HVAC Unit No. 3" has a useful life of less than five (5) years. Accordingly, following the Effective Date, Landlord shall promptly make such repairs and replacements as may be necessary to keep "HVAC Unit No. 3" in good working condition and repair, and, at such time that, consistent with reasonable and prudent industry practices, replacement of such HVAC Unit is required, Landlord shall promptly replace "HVAC Unit No. 3" at no cost to Tenant.

3.5                Permitted Alterations . The parties acknowledge and agree that, following the Effective Date, Tenant intends to perform certain Alterations to the Premises, which Alterations shall be performed subject to, and in accordance with, the terms and conditions contained in Article 8 of the Existing Lease, except as follows:

(a)                   Notwithstanding the provisions of Section 8.2 of the Existing Lease, Tenant reserves the right to retain its own architectural/interior design firm and general contractor and oversee the design and construction of the Alterations. Tenant shall provide Landlord with schematic plans depicting Tenant's proposed Alterations for Landlord's approval, which approval shall not be unreasonably withheld. Tenant's Alterations may be constructed in phases, some prior to the Extension Term Commencement Date and others thereafter.

(b)                   Subject to Landlord's approval of Tenant's improvement plans, the Alterations will be completed in accordance with all Applicable Requirements by Tenant's retained interior design firm and general contractor, who shall be licensed in the State of

California. Such work may commence upon completion and execution of all documentation and receipt of all approvals and/or permits required for the construction. Landlord will not charge any fee for review, approval and oversight of Tenant’s plans and specifications in connection with such Alterations.

(c)                   Notwithstanding the provisions of Section 8.5 of the Existing Lease, upon the expiration or any early termination of the Lease, Tenant shall have no obligation to remove any of the existing improvements or the Alterations shown on the preliminary plan attached hereto as Exhibit A , except for Tenant's personal property.

(d)                   Notwithstanding the provisions of Section 24.1 of the Existing Lease or Section 4.2 below, if Tenant's Alterations give rise to governmentally-required changes to the structural portions of the Building because of the Building's non-compliance as of the Effective Date (based on the current interpretation of the Applicable Requirements by applicable governmental or quasi-governmental authorities as of the Effective Date), then such changes to the structural portions of the Building shall be Landlord's Repair Obligations pursuant to Section 7.2.1 of the Existing Lease, and Tenant shall pay Landlord the cost of such changes as an Included Capital Item. The exclusion from Operating Expenses described in Section 4.2.3(p) of the Existing Lease shall not be applicable to Landlord's changes to the Building pursuant this Section.

(a)                   Upon Tenant's written request and satisfaction of the conditions set forth in Section 3.6(b) below, Landlord will contribute to the cost of any interior office and lab improvements to the Premises, cabling and signage (collectively, " Permitted Alterations ") that Tenant hereafter performs in or to the Premises to the extent of the lesser of (i) One Million Fifty-Two Thousand Three Hundred Eighty-Six and 50/100 Dollars ($1,052,386.50) (calculated on the basis of $16.50 per rentable square foot in the Premises) or (ii) the actual cost of the Permitted Alterations (the lesser of the previously-described amounts being hereinafter referred to as the " Alterations Allowance "). The Alterations Allowance may only be applied to the payment or reimbursement of documented "hard costs" of labor and materials and "soft costs" relating to the Permitted Alterations. Tenant shall pay for all costs of Permitted Alterations in excess of the Alterations Allowance; provided, however, that, in addition to the Alterations Allowance, Landlord shall provide Tenant a "test fit" allowance not to exceed $6,378.10 towards the cost of preparing preliminary space plans and interior design plans relating to the Permitted Alterations (such amount to be reimbursed by Landlord to Tenant within thirty (30) days of reasonably detailed invoices therefor).

(b)                   Provided that this Lease is then in full force and effect, Landlord shall pay the Alterations Allowance to Tenant within thirty (30) days after satisfaction of each of the following conditions: (i) Tenant's delivery to Landlord of invoices and other reasonably satisfactory evidence of the cost of the Permitted Alterations; (ii) with respect to any portion of the Permitted Alterations requiring a building permit, Tenant's delivery to Landlord of a certificate issued by Tenant's architect certifying, for the benefit of Landlord, that such portion of the Permitted Alterations has been completed in accordance with the plans approved by Landlord (excepting only minor field changes not inconsistent with the intent of such approved plans and

any change orders approved by Landlord) and in compliance with all Applicable Requirements; (iii) Tenant's delivery to Landlord of lien releases, in statutory form, from the Tenant's contractor, major subcontractors, and any other persons and entities providing work or materials covered by such statement who have given a preliminary 20-day notice in accordance with California Civil Code Section 3097; and (iv) Tenant's delivery to Landlord of as-built plans and specifications for the Permitted Alterations, if appropriate (provided that, in all cases, Tenant shall deliver to Landlord reasonably detailed plans and specifications for its cabling).

(c)                   If Tenant fails to submit reasonably satisfactory documentation requesting disbursement of the Alterations Allowance on or before December 31, 2010, Landlord shall have no further obligation to provide the Alterations Allowance or any remaining balance thereof to Tenant, nor shall Tenant be entitled to any credit against Rent for any unused portion.

3.7                Transfer Premium . Section 14.3.1 of the Existing Lease is hereby deleted and replaced in its entirety with the following:

"If Landlord consents to a Transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined in this Section 14.3 , received by Tenant from such Transferee. " Transfer Premium " means (i)(a) in the case of an assignment, any consideration (including, without limitation, payment for leasehold improvements) paid by the assignee on account of such assignment, and (b) in the case of any other Transfer, all rent, additional rent or other consideration paid by the Transferee to the Transferor pursuant to such Transfer in excess of the base rent and additional rent payable by such Transferor during the term of the Transfer on a per rentable square foot basis, minus (ii) any brokerage commissions, reasonable attorneys' fees and tenant improvement costs or allowances paid by Transferor in connection with the Transfer (" Recoverable Expenses "). For purposes of calculating the Transfer Premium in connection with a sublease, the Recoverable Expenses shall first be deducted before payment to Landlord of Landlord's share of the Transfer Premium. Payment of the portion of the Transfer Premium due Landlord hereunder shall be made to Landlord as follows: (1) in the case of an assignment, the Transferor shall pay the portion of the Transfer Premium due to Landlord within ten (10) business days after the Transferor receives the consideration described in clause (i)(a) above; and (2) in the case of any other Transfer, after Tenant has recouped the Recoverable Expenses from the consideration described in clause (i)(b) above, then on the first day of each succeeding month during the term of the Transfer, the Transferee shall pay directly to Landlord fifty percent (50%) of the amount by which the rent, additional rent or other consideration due from the Transferee for such month exceeds the base rent and additional rent payable by the applicable Transferor for said month which is allocable to the Contemplated Transfer Space."

3.8                Recapture. Notwithstanding the provisions of Section 14.4 of the Existing Lease, Landlord shall have no right to recapture the Contemplated Transfer Space unless the Contemplated Transfer Space constitutes at least sixty percent (60%) of the Building to which

the Transfer is applicable, in which event Landlord shall exercise such right of recapture by giving written notice to Tenant within thirty (30) days after receipt of the Transfer Notice.

3.9                Holding Over. Article 16 of the Existing Lease is hereby deleted and replaced in its entirety with the following:

"If Tenant holds over after the expiration of the Lease Term or earlier termination thereof, with or without the express written consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Tenant shall pay Rent at a monthly rate equal to (a) for the first thirty (30) days of such holding over, one hundred percent (100%) of the Base Rent payable by Tenant immediately prior to such holding over (without regard to any abatements of Rent on account of casualty or otherwise), plus Tenant's Share of Operating Expenses and Tax Expenses, computed on a monthly basis for each full or partial month Tenant remains in possession; and (ii) thereafter, an amount equal to one hundred fifty percent (150%) of the Base Rent payable by Tenant immediately prior to such holding over (without regard to any abatements of Rent on account of casualty or otherwise), plus Tenant's Share of Operating Expenses and Tax Expenses, computed on a monthly basis for each full or partial month Tenant remains in possession. Such month-to-month tenancy shall be subject to every other applicable term, covenant and agreement contained herein. If Tenant holds over after any such month-to-month tenancy has been terminated, then Tenant shall be a tenant at sufferance only, for the entire Premises upon all of the terms and conditions of this Lease as might be applicable to such tenancy; provided, however, that, as liquidated damages and not as a penalty, Tenant shall pay Base Rent at a monthly rate equal to one hundred fifty percent (150%) of the Base Rent payable by Tenant immediately prior to such holding over (without regard to any abatements of Rent on account of casualty or otherwise), plus Tenant's Share of Operating Expenses and Tax Expenses, computed on a monthly basis for each full or partial month Tenant remains in possession. Nothing contained in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all Claims resulting from such failure, including, without limiting the generality of the foregoing, any Claims made by any succeeding tenant founded upon such failure to surrender and any lost profits to Landlord resulting therefrom."

3.10              Roof Rights. Section 22.2(c) of the Lease is hereby deleted and, Tenant shall have the exclusive use of the roof of the Building, except for Landlord’s rights of entry for inspection, repair, replacement or the provision of services as are set forth in the Lease.

3.11              Signage. Section 23.1 of the Existing Lease is hereby deleted and replaced in its entirety with the following:

"23.1    Signage Rights . Tenant shall not place on any portion of the Premises any sign, placard, lettering, banner, displays, graphic, decor or other advertising or communicative material which is visible from the exterior of the Building without Landlord's prior written approval; provided, however, that Tenant shall, subject to the provisions of this Section 23.1 , be entitled to the following signage rights in accordance with Landlord's signage standards in effect at the time (" Signage Standards ") and all Applicable Requirements (" Tenant's Signage Rights "): (a) Project-standard tenant identification signage on the monument sign for the Building and (b) Tenant-identification signage on the top of the Building. The material, typeface, graphic format and proportions of Tenant's signs, as well as the precise location of such signs, shall be subject to Landlord's approval, which shall not be unreasonably withheld. Tenant, at its expense, shall be responsible for obtaining all approvals for such signs and for obtaining and installing such signs. The failure of Tenant to obtain such approvals shall not release Tenant from any of its obligations under this Lease. Any approved signs shall strictly conform to all Applicable Requirements and shall be installed and removed at Tenant's expense. Tenant, at its sole expense, shall maintain such signs in good condition and repair during the Term. Prior to the expiration or earlier termination of this Lease, Tenant at its sole cost shall remove all of its exterior signage and repair any and all damage caused to the Building and/or Project (including and fading or discoloration) by such signs and/or the removal of such signs from the Building and/or Project."

Promptly after execution of this Amendment, Landlord shall submit the Project's Signage Standards for governmental approval, which, as to the top of the Building Tenant-identification signage referenced in clause (b) above (" Tenant's Building Signage "), shall be consistent with the signage shown on Exhibit B attached hereto, and Landlord shall use commercially reasonable efforts to get such Signage Standards approved. Concurrently with Landlord's submittal of the Project's Signage Standards for governmental approval, Tenant shall have the right to submit Tenant's Building Signage for governmental approval. Subject to Landlord's obtaining approval of the Signage Standards, and subject to Tenant's obtaining all required approvals for Tenant's Building Signage, (1) Tenant's Building Signage shall be in the approximate location shown on Exhibit B attached hereto, and (2) Landlord hereby approves the typeface, graphic format and proportions of the signage shown on Exhibit B . However, Tenant acknowledges that, if changes to the signage shown on Exhibit B are required to obtain governmental approval of Tenant's Building Signage or the Signage Standards, then the location of Tenant's Building Signage and/or the typeface, graphic format and proportions of such signage shall be modified accordingly; and, further, if the approved Signage Standards do not, for any reason, permit signage on the exterior of the Building, Landlord shall have no liability to Tenant, and Tenant shall not be released from any of its obligations under the Lease.

3.12              Pre-Existing Hazardous Substances. Notwithstanding the provisions of Section 24.2 of the Existing Lease, if any Remedial Work is required to be performed as a result of Hazardous Substances in, on or below the Premises as of the Effective Date, then, except to

the extent such Remedial Work is covered by Tenant's environmental indemnity contained in the last sentence of Section 24.2.1(a) of the Existing Lease or by the provisions of Section 24.2.3 of the Existing Lease, Landlord shall perform or cause to be performed such Remedial Work, at no cost to Tenant, in compliance with Applicable Requirements.

3.13              Prohibited Uses. Without limiting the provisions of Section 5.2 of the Existing Lease, no portion of the Premises shall be used for any of the following uses: any pornographic or obscene purposes, any commercial sex establishment, any pornographic, obscene, nude or semi-nude performances, modeling, materials, activities, or sexual conduct or any other use that, as of the time of the execution hereof, has or could reasonably be expected to have a material adverse effect on the Property or its use, operation or value.

(a)                   Tenant acknowledges and agrees that its possession of the Premises as of the Effective Date is a continuation of Tenant's possession of the Premises under the Existing Lease, and that, except as specifically set forth in the Lease, including, without limitation, in Section 3.4 and Section 3.5 above, this Section 4.1 and Section 4.2 below, Tenant agrees to accept the Premises as of the Effective Date in their existing condition, "as is", without any obligation of Landlord to repair, remodel, improve or alter the Premises, to perform any other construction or other work of improvement upon the Premises, or to provide Tenant with any construction or refurbishing allowance whatsoever; provided, however, that, on the Effective Date, the roof of the Building shall be in watertight condition, the Base Building Systems and the Common Areas, including walkways, parking lots and driveways and landscaping, shall be in good working condition and repair (except to the extent repairs are necessitated by the acts or omissions of Tenant or any Tenant Parties).

(b)                   If it is determined that, on the Effective Date, the roof of the Building is not in a watertight condition, or any of the Base Building Systems or Common Areas are not in good working condition and repair (for reasons other than the acts or omissions of Tenant or any Tenant Parties), then Landlord shall not be liable to Tenant for any damages, but as Tenant's sole remedy, Landlord, at no cost to Tenant, shall perform such work or take such other action as may be necessary to place the same in the required condition; provided, however, that if Tenant does not give Landlord written notice of any deficiency in the Base Building Systems within thirty (30) days following the Effective Date, correction of such deficiency shall be the obligation of Landlord or Tenant, as the case may be, pursuant to Article 7 of the Existing Lease (as the same is amended by Section 3.4 of this Amendment).

(c)                   For purposes of the Lease, the " Base Building Systems " means the base building mechanical, electrical (excluding light bulb of maintenance), plumbing and fire and life safety systems, and glazing and roll-up doors located in or on the Premises on the Effective Date that serve the Premises generally (as distinguished from the portions of such systems that may be installed or modified by Tenant, and any systems, equipment or components that serve a particular portion of the Premises or Tenant's particular use of the Premises, such as a computer server room, "clean room" or other laboratory space).

4.2                Compliance with Applicable Requirements. In addition to Landlord's obligations in Section 4.1 above, Landlord shall, at no cost to Tenant, perform all work required to cause the Premises, including the base building, and Common Areas to comply with Applicable Requirements as of the Effective Date, including current laws, rules, regulations and ordinances, and including, specifically, the ADA (as such Applicable Requirements are interpreted by applicable governmental or quasi-governmental authorities as of said date), so long as such compliance is not necessitated by reason of the installation of any of Tenant's specialized improvements or personal property (i.e., improvements or personal property that are non-standard and required because of Tenant's particular use of the Premises) to be constructed or installed in the Premises, or by Tenant's particular use of the Premises or the particular manner in which it conducts (or proposes to conduct) its business therein (collectively, " Tenant's Particular Requirements "); and, provided, however, that, (a) the foregoing shall not affect Landlord's obligations set forth in Section 3.5(d) above in the event that structural changes to the Building are required as a result of Tenant's Alterations; and (b) unless Tenant gives Landlord written notice of the non-compliance within one hundred twenty (120) days after the commencement of Tenant's Alterations pursuant to Section 3.5 above, Landlord shall have no further responsibility or liability therefor, except as otherwise expressly provided in the Lease. Nothing contained herein shall be deemed to prohibit Landlord from obtaining a variance or relying upon a grandfathered right in order to achieve compliance with Applicable Requirements hereunder. Any compliance work required to be performed resulting from Tenant's Particular Requirements shall be Tenant's sole responsibility.

5.1                Grant of Additional Extension Options; Additional Extension Terms. Landlord hereby grants to Tenant two (2) successive options to further extend the Lease Term (each, an " Extension Option " and, collectively, the " Extension Options ") for additional periods of five (5) years each (each, an " Additional Extension Term ") commencing on the first day following the Lease Expiration Date (as the same may have then been extended), on the terms and subject to the conditions set forth in this Section 5 ; provided, however, that (a) the Extension Options shall be exercised, if at all, only with respect to the entire Premises (as the same may then be expanded); (b) the second Extension Option may be exercised only if the first Extension Option has been duly exercised; and (c) if Tenant is in default beyond applicable notice and cure periods under any of the terms, covenants or conditions of the Lease either at the time Tenant exercises any Extension Option or upon the commencement of the applicable Additional Extension Term, Landlord shall have, in addition to all of Landlord's other rights and remedies provided in the Lease, the right to terminate such Extension Option and to unilaterally revoke Tenant's exercise of such Extension Option, in which event the Lease shall expire on the Lease Expiration Date, unless sooner terminated pursuant to the terms hereof, and Tenant shall have no further rights under the Lease to renew or extend the Lease Term.

5.2                Exercise. Tenant shall exercise any Extension Option, if at all, by giving Landlord unconditional, irrevocable written notice of such election not more than three hundred sixty (360) days nor less than two hundred seventy (270) days prior to the Lease Expiration Date (as the same may have then been extended), the time of such exercise being of the essence. Subject to the provisions of this Section 5 , upon the giving of such notice, the Lease and the Lease Term shall be extended without execution or delivery of any other or further documents.

5.3                Terms and Conditions. If Tenant exercises an Extension Option pursuant to Section 5.2 above, all of the terms, covenants and conditions of the Lease shall continue in full force and effect during the applicable Additional Extension Term, including provisions regarding payment of Additional Rent, which shall remain payable on the terms herein set forth, except that (a) the Base Rent during such Additional Extension Term shall be as determined in accordance with Section 5.4 below, (b) Tenant shall continue to possess and occupy the Premises (as the same may be expanded) in their existing condition, "as is", as of the commencement of such Additional Extension Term, and, except as set forth in the Lease, Landlord shall have no obligation to repair, remodel, improve or alter the Premises, to perform any other construction or other work of improvement upon the Premises, or to provide Tenant with any construction or refurbishing allowance whatsoever, and (c) Tenant shall have no further rights to extend the Lease Term after the expiration of the second Additional Extension Term.

(a)                   The Base Rent payable by Tenant for the Premises during the first Additional Extension Term shall be ninety-five percent (95%) of the " Market Rate " (as defined below) for the Premises, valued as of the commencement of such Additional Extension Term, determined in the manner hereinafter provided; and the Base Rent payable by Tenant for the Premises during the second Additional Extension Term shall be one hundred percent (100%) of the Market Rate for the Premises, valued as of the commencement of such Additional Extension Term, determined in the manner hereinafter provided. As used herein, the term " Market Rate " shall mean the annual base rent that a willing tenant would pay, and that a willing landlord would accept, at arm's length, for space comparable to the Premises at other comparable office/R&D buildings in the vicinity of the Building (" Comparable Buildings "), based upon binding lease transactions for tenants in the Comparable Buildings that, where possible, commence or are to commence within six (6) months prior to or within six (6) months after the commencement of the applicable Additional Extension Term (" Comparison Leases "). Comparison Leases shall include renewal and new non-renewal tenancies, but shall exclude subleases and leases of space subject to another tenant's expansion rights and renewals if there was a base rent floor applicable to the determination of base rent. Rental rates payable under Comparison Leases shall be adjusted to account for variations between the Lease and the Comparison Leases with respect to: (1) the length of the Additional Extension Term compared to the lease term of the Comparison Leases; (2) rental structure, including, without limitation, rental rates per rentable square foot (including type, gross or net, and if gross, adjusting for base year or expense stop), additional rental, escalation provisions, all other payments and escalations; (3) the size of the Premises compared to the size of the premises of the Comparison Leases; (4) location, floor levels and efficiencies of the floor(s) for which the determination is being made; (5) free rent, moving expenses and other cash payments, allowances or other monetary concessions affecting the rental rate; (6) the age and quality of construction of the Building (including compliance with applicable codes on the applicable floors); and (7) leasehold improvements and/or allowances, including the amounts thereof in renewal leases, and taking into account, in the case of renewal leases (including the Lease), the value of existing leasehold improvements to the renewal tenant.

(b)                   Not later than six (6) months prior to the commencement of an Additional Extension Term, provided Tenant has given valid notice of exercise of the applicable Extension Option, Landlord shall deliver to Tenant a good faith written proposal of the Market

Rate. Within twenty-one (21) days after receipt of Landlord's proposal, Tenant shall notify Landlord in writing (1) that Tenant accepts Landlord's proposal or (2) that Tenant elects to submit the determination of Market Rate to arbitration in accordance with subparagraphs (c) through (d) below. If Tenant does not give Landlord a timely notice in response to Landlord's proposal, Landlord's proposal of Market Rate shall be binding upon Tenant.

(c)                   If Tenant timely elects to submit the determination of Market Rate to arbitration, Landlord and Tenant shall first negotiate in good faith in an attempt to determine the Market Rate for the applicable Additional Extension Term. If Landlord and Tenant are able to agree within thirty (30) days following the delivery of Tenant's notice to Landlord electing arbitration (or if Tenant accepts Landlord's initial proposal), then such agreement shall constitute a determination of the Market Rate for purposes of this Section, and the parties shall immediately execute an amendment to the Lease stating the Market Rate and the Base Rent for such Additional Extension Term. If Landlord and Tenant are unable to agree on the Market Rate within such negotiating period, then within fifteen (15) days after the expiration of such negotiating period, the parties shall meet and concurrently deliver to each other their respective written estimates of the Market Rate for the Additional Extension Term, supported by the reasons therefor (respectively, " Landlord's Determination " and " Tenant's Determination "). Landlord's Determination may be more or less than its initial proposal of the Market Rate. If either party fails to deliver its Determination in a timely manner, then the Market Rate shall be the amount specified by the other party. If Tenant's Determination of the Market Rate is higher than Landlord's Determination, then the Market Rate shall be the average of the two. In every other case, the Market Rate shall be determined as follows, each party being bound to its Determination and such Determinations establishing the only two choices available to the Appraisal Panel (as hereinafter defined):

(i)              Within ten (10) days after the parties exchange Landlord's and Tenant's Determinations, the parties shall each appoint one arbitrator who shall be a licensed California real estate broker with at least ten (10) years' experience in leasing commercial office space similar to the Building in the commercial submarket that the Building is located immediately prior to his or her appointment, and be familiar with the rentals then being charged in the Comparable Buildings. The parties may appoint the real estate brokers who assisted them in making their Determinations as their respective arbitrators. Within twenty (20) days following their appointment, the two arbitrators so selected shall appoint a third, similarly-qualified arbitrator (the " Independent Arbitrator ").

(ii)             If either Landlord or Tenant fails to appoint an arbitrator, then the Market Rate for the Additional Extension Term shall be the Determination of the other party. If the two party-designated arbitrators have not selected a third arbitrator by the end of the 20-day period above, then either party, on behalf of both, may request such appointment by the local office of the American Arbitration Association (or any successor thereto), or in the absence, failure, refusal or inability of either of such entities to act, then either party may apply to the presiding judge for the County in which the Premises are located, for the appointment of such an Independent Arbitrator, and the other party shall not raise any question as to the court's full power and jurisdiction to entertain the application and make the appointment. In all events, the determination of the arbitrators shall be limited solely to the issue area of whether Landlord's or

Tenant's Determination is the closest to the actual Market Rate as determined by the arbitrators, taking into account the requirements of Section 5.4(a) above.

(iii)            Within five (5) days following notification of the identity of the third (3rd) arbitrator so appointed, Landlord and Tenant shall submit copies of Landlord's Determination and Tenant's Determination to the three arbitrators (the " Appraisal Panel "). The Appraisal Panel shall conduct a hearing, at which Landlord and Tenant may each make supplemental oral and/or written presentations, with an opportunity for rebuttal by the other party and for questioning by the members of the Appraisal Panel, if they so wish. Within a reasonable time following the hearing, the Appraisal Panel, by majority vote, shall select either Landlord's Determination or Tenant's Determination as the Base Rent for the applicable Additional Extension Term, and shall have no right to propose a middle ground or to modify either of the two proposals or the provisions of the Lease. The Appraisal Panel shall attempt to render a decision within fifteen (15) business days after appointment. In any case, the Appraisal Panel shall render a decision within forty-five (45) days after appointment. The decision of the Appraisal Panel shall be final and binding upon the parties, and may be enforced in accordance with the provisions of California law. In the event of the failure, refusal or inability of any member of the Appraisal Panel to act, a successor shall be appointed in the manner that applied to the selection of the member being replaced. Each party shall pay the fees and expenses of the arbitrator designated by such party, and one-half of the fees and expenses of the Independent Arbitrator and the expenses incident to the proceedings (excluding