EX-10.7 4 ex10_8.htm

SEVENTH AMENDMENT TO LEASE AGREEMENT

        THIS SEVENTH AMENDMENT TO LEASE AGREEMENT (“this Amendment”) is entered
into as of June 5, 2003 (“Reference Date”) by and between JANE CROCKER, formerly
Jane C. Jacobs, as Trustee under the Jane C. Jacobs Trust Agreement dated
October 5, 1990 (“Crocker”) and NORMAN E. MACKAY (“MacKay”) (Crocker and MacKay
hereinafter collectively referred to as “Landlord”) and TEGAL CORPORATION, a
Delaware corporation (“Tenant”).

RECITALS

        A. Justin M. Jacobs, Jr. dba Landbank Investments (“Landbank”) and
Tenant have entered into that certain Lease Agreement dated as of August 15,
1986 (“Original Lease”) wherein Landbank leased to Tenant and Tenant leased from
Landbank the premises consisting of an approximately 120,000 square foot
building (“Building”), the parking lot and other improvements located at 2201
South McDowell Boulevard, Petaluma, Sonoma County, California (“Original
Premises”), as more specifically described in the Original Lease.

        B. The Original Lease was amended by South McDowell Investments, a
California general partnership, as successor-in interest to Landbank, (“SMI”)
and Tenant pursuant to the following documents: (i) Amendment dated as of August
31, 1987; (ii) letter agreement dated as of September 11, 1987; (iii) Amendment
dated as of December 17, 1987; (iv) letter agreement dated January 15, 1988; (v)
Amendment dated as of March 8, 1988; and (vi) Lease Amendment dated March 10,
1997 (“Sixth Amendment”). The foregoing documents are collectively referred to
as the “Amendments”. The Amendments and the Original Lease are collectively
referred to as the “Lease.”

        C. SMI has assigned its right, title and interest in the Lease to
Landlord.

        D. Landlord and Tenant wish to further amend the Lease.

AGREEMENT.

        NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Landlord and Tenant hereby agree as
follows:

        1.     Recitals. Landlord and Tenant hereby agree that the hereinabove
Recitals are true and correct.

        2.     Definitions. Unless defined otherwise in this Amendment, all
definitions used in this Amendment shall have the same meaning and definition as
given them in the Original Lease as amended by the Amendments.

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        3.     Tenant’s Share. As used in this Amendment, “Tenant’s Share” shall
mean 37.55%.

        4.     Premises. The definition of “Premises” in Section 1 of the
Original Lease shall be deleted. From and after January 1, 2003, the Premises
shall consist of approximately 45,064 square feet of space on the ground floor
of the Building and the Chiller Area, as shown on Exhibit A, which is attached
hereto and made a part hereof by this reference (“Premises”). Tenant shall
surrender to Landlord all of the Original Premises other than the Premises shown
on Exhibit A as set forth in Section 9 below. Tenant shall have the
non-exclusive right in common with the other tenants of the Building, Landlord
and any other person granted use by Landlord to use the Common Areas. The term
“Common Areas” shall mean (i) all areas and facilities outside the Premises and
within the exterior boundary line of the Project Site that are provided and
designated by Landlord for the non-exclusive use of Landlord, Tenant and other
tenants of the Building and their respective employees, guests and invitees
which are improved as parking areas, landscaped areas, driveways, roadways
and/or walkways and (ii) the lobby of the Building, common corridors, hallways,
stairwells, elevator, and restrooms not located within space leased to other
tenants. Landlord shall have the right, at any time and from time to time: (i)
to designate or improve any portion of the Project Site as Common Areas and (ii)
to make changes to the Common Areas. Any use of the Common Area shall be subject
to such rules and regulations as Landlord may from time to time or at any time
promulgate.

        5.     Term. Section 1 of the Sixth Amendment is hereby modified to
extend the end of the Term to December 31, 2009. Section 9 of the Sixth
Amendment, Option to Extend, is hereby deleted.

        6.     Basic Rent. Effective January 1, 2003 the Basic Rent shall be as
follows:

 

                 Period   Monthly
Basic Rent    Annual
Basic Rent   January 1, 2003 through December 31, 2003   $55,000.00  
$660,000.00   January 1, 2004 through December 31, 2004  $56,650.00  
$679,800.00   January 1, 2005 through December 31, 2005  $58,349.50  
$700,194.00   January 1, 2006 through December 31, 2006  $60,099.99  
$721,199.88   January 1, 2007 through December 31, 2007  $61,902.99  
$742,835.88   January 1, 2008 through December 31, 2008  $63,760.08  
$765,120.96   January 1, 2009 through December 31, 2009  $65,672.88  
$788,074.56  

        Section 2 of the Sixth Amendment is hereby deleted. There shall be no
annual CPI adjustments in the Monthly Basic Rent set forth above.

        7.     Maintenance and Repair of the Building and the Common Areas.
Tenant shall continue to maintain the Original Premises (including the entire
Building and Common Areas) in the manner described in Section 9.B. of the
Original Lease until April 1, 2003. Effective April 1, 2003, Tenant shall only
be required to maintain and

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 repair the Premises (defined in Exhibit A) and shall at all times at Tenant’s
sole cost and expense keep all portions of the Premises in good order, condition
and repair (including replacements, as and when necessary), including, without
limitation, all drop ceilings, carpets, walls, moldings, doors, door jams, door
closers, door hardware, fixtures, equipment and appurtenances thereof, floors,
partitions, all electrical, lighting and sprinkler systems, and fixtures and
equipment. Tenant shall also be responsible for the repair of any and all damage
caused to the Building or the Common Areas by any act, neglect or omission of
Tenant or its employees, agents, invitees, licensees, contractors or subtenants;
the repair of any such damage shall be made by Tenant at Tenant’s cost and
expense and in conformance with existing Building standards of quality and
materials. Commencing on April 1, 2003 Landlord shall maintain the Common Areas
and the Building other than the Premises, except for the heating, ventilation
and air conditioning system (“HVAC System”) which shall be maintained by Tenant
as set forth in Section 9 below. Landlord may at any time delegate such
maintenance, or any portion thereof, to any other third party, affiliated or
non-affiliated, upon such terms and conditions as Landlord deems compensatory,
necessary or appropriate. The manner in which the Common Areas and the Building
are maintained hereunder, and the expenditures therefor, shall be at Landlord’s
sole discretion. In the event that Tenant’s proportionate share of any
non-emergency single repair item exceeds $5,000.00, Landlord shall give Tenant
written notice of Landlord’s intent to make such repair no less than ten (10)
days in advance of such repair. Maintenance and repair of the structural
portions and foundations of the Building and the structural members of the roof
of the Building, replacement of the parking and driveway areas, replacement or
repair of the slab, foundation, concrete walls and structural fill of the
Building and repair or replacement of any material defects in the rough plumbing
shall be at Landlord’s sole cost and expense; all other maintenance and repair
(including maintenance and repair of all portions of the roof membrane and
drains of the Building other than the structural members, restriping,
resurfacing and resealing of all parking and driveway areas and painting of the
exterior of the Building) shall be included in Operating Costs and paid by
Tenant pursuant to Section 8 of this Amendment or, at Landlord’s election, paid
directly by Tenant to the extent relating to the Premises. Landlord shall have
no obligation to make any repairs or replacements hereunder until the expiration
of ten (10) days following written notice from Tenant to Landlord of the need
therefor. Tenant waives any right now or hereafter granted by law to make any
repairs under this Section 7 upon Landlord’s failure to do so hereunder or
otherwise. Landlord shall at Landlord’s cost and expense make all alterations,
additions and improvements required to comply with any and all laws, ordinances,
rules, regulations and orders applicable to the Premises except as set forth in
Section 8.E. of the Original Lease, which shall continue to be the obligation of
Tenant as set forth in Section 8.E. of the Original Lease.

        8.     Operating Costs.

        A.     Definition. “Operating Costs” shall mean the total of all costs
and expenses paid or incurred by Landlord in connection with the use, operation,
maintenance, ownership and repair of the Common Areas and the Building. Without
limiting the generality of the foregoing, Operating Costs include all costs of
and expenses

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for: (i) maintaining, resurfacing, resealing, remarking, painting or restriping
the parking areas on the Project Site; (ii) maintenance and repair of sidewalks,
curbs, paving, walkways, landscaping (including tree trimming), planting and
irrigation systems (including replacement of landscaping and plants required to
replace dead or dying plants), trash facilities, lighting, drainage and common
utility facilities, directional or other signs, markers and bumpers and driveway
areas on the Project Site; (iii) all charges, wages, salaries, benefits and
payroll burden fees of all parties (including affiliates of Landlord) providing
services for the maintenance, repair, management and/or supervision of the
Project Site, and for security personnel retained by Landlord in connection with
the operation and maintenance of the Common Areas and the Building (although
Landlord shall not be required to obtain security services); (iv) maintenance
and repair of security systems and alarms; (v) depreciation or amortization (or
in lieu thereof, rental payments) on all tools, equipment and machinery used in
the operation and maintenance of the Common Areas and the Building;
(vi) premiums for the insurance carried by Landlord pursuant to Section 13 below
and for Comprehensive General Liability Insurance or Commercial General
Liability Insurance, casualty insurance, workers compensation insurance or other
insurance for the Common Areas, the Building and for the Project Site, or any
portion thereof or interest therein; (vii) real property taxes and all personal
property taxes and assessments levied or assessed on Project Site (but only for
personal property used or contained in the Common Areas), or any portion thereof
or interest therein; (viii) cleaning, collection, storage and removal of trash,
rubbish, dirt and debris, and sweeping and cleaning the Common Areas;
(ix) servicing and maintaining and monitoring any fire sprinkler system; (x)
regular pickup of trash and garbage; (xi) a management fee for the internal
administration and overhead costs incurred in the operation and management of
the Common Areas hereunder, but only to the extent such management fee is paid
to an unaffiliated third-party and is at prevailing commercial rates for such
fees; (xii) maintenance and repair of all portions of the roof of the Building
other than structural members of the roof; (xiii) the fee for the roof and
parking lot drainage permits required by law; (xiv) cost of janitorial supplies
and services; (xv) utility costs for Common Areas including, but not limited to,
Common Area HVAC and PG&E costs; (xvi) the Oakmead Northbay Business Park
Association assessment; (xvii) costs of exterior Building painting and painting
of interior Building Common Areas except for repainting of the exterior of the
Building more than one time in any five (5) year period; and (xviii) any
alterations, additions or improvements required to be made to the Common Area in
order to comply with applicable laws, ordinances, rules, regulations and orders.

        B.     Payment by Tenant of Tenant’s Share of Operating Costs.
Commencing on April 1, 2003 and continuing thereafter throughout the Term,
Tenant shall pay to Landlord in the manner hereinafter provided, Tenant’s Share
of Operating Costs. On the first day of each month, Tenant shall pay in advance
one-twelfth (1/12th) of the amount which Landlord estimates, based upon a
detailed budget to be given to Tenant in advance, as the Tenant’s Share of
Operating Costs for the calendar Year. Within ninety (90) days after the end of
each calendar year of the Term, or as soon thereafter as practicable, Landlord
shall furnish to Tenant a statement of the actual amount of Tenant’s Share of
Operating Costs. If the amount paid by Tenant during such calendar year is less
than Tenant’s Share of Operating Costs as shown by Landlord’s

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statement, then Tenant shall pay the difference within twenty (20) days after
the date of Landlord’s statement; if the amount paid by Tenant during such
calendar year is more than Tenant’s Share of Operating Costs as shown by such
statement, then Tenant shall receive a credit on future payments of Operating
Costs hereunder for the amount of such excess. If at any time it appears to
Landlord that Operating Costs for any calendar year will exceed Landlord’s
estimate thereof, then Landlord shall have the right by written notice to Tenant
to revise the estimated monthly amount payable by Tenant hereunder and
subsequent payments of Tenant’s estimated Share of Operating Costs hereunder
shall be increased based upon such revised statement; provided, however, there
shall be no more than one revision during each calendar year, except for the
2003 calendar year, where there may be two (2) revisions. For the years in which
the Term commences and expires, Operating Costs shall be prorated based on the
number of days of the calendar year the Term is in effect. Tenant shall have the
right to audit, at Tenant’s cost and expense, not more than once each calendar
year, the books and records of Landlord and/or its representatives relating to
the Operating Costs. Such audit shall be at the offices of Landlord’s accountant
or at such other location as designated by Landlord.

        C. Capital Improvements. If any of Tenant’s obligations under Articles 7
and 8 of the Lease, as hereby amended, would require Tenant to pay all or any
portion of any charge or Common Operating Expense which could be treated as a
capital improvement under generally accepted accounting principles, then Tenant
shall pay its share of such expense, as follows:

            8.C.1. The cost of such improvement shall be amortized over the
useful life of the improvement as reasonably determined by Landlord with
interest on the unamortized balance at the then prevailing mark rate Landlord
would pay if it borrowed funds to construct such improvements from an
institutional lender, and Landlord shall inform Tenant of the monthly
amortization payment required to so amortize such costs, and shall also provide
Tenant with the information upon which such determination is made.

            8.C.2. Tenant shall pay its proportionate share (based on the
percentage of the Building leased by Tenant) of such amortization payment for
each month after such improvement is completed until the first to occur of (i)
the expiration of the Lease Term or (ii) the end of the term over which such
costs were amortized, which amount shall be due at the same time the Base
Monthly Rent is due.

        9.  HVAC. Subject to Landlord’s reducting of Tenant’s HVAC units to the
Premises, at Landlord’s sole expense, Tenant shall maintain and repair the HVAC
System serving the Premises by procuring and maintaining an all-inclusive
contract in customary form and substance (“HVAC Maintenance Contract”) with a
contractor specializing and experienced in the maintenance and repair of HVAC
equipment (“HVAC Contractor), which HVAC Contractor and maintenance schedule
shall be approved by Landlord. Tenant shall at Tenant’s cost and expense replace
the HVAC System if needed during the Term of the Lease.

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       10.     Surrender of Portions of Original Premises. Tenant shall
surrender all portions of the Original Premises which are not a part of the
Premises (“Surrender Premises”) to Landlord no later than the date which is
sixty (60) days following the date this Amendment is executed by the parties
(“Surrender Date”). The Surrender Premises shall be delivered to Landlord in
good condition and repair with all interior walls patched and cleaned so that
they appear freshly painted, all tile floors cleaned and waxed, all carpets
cleaned and shampooed, and all broken, marred, stained or nonconforming
acoustical ceiling tiles replaced and as required by the provisions of Section 7
of the Original Lease and Section 4 of the Sixth Amendment, except as otherwise
provided in this Section 9. In addition the following shall be completed by
Tenant at Tenant’s expense on or before the Surrender Date:

                A. all kitchen equipment and fixtures shall be removed from the
kitchen area of the Surrender Premises with walls, doors and ceilings patched,
floors and carpets cleaned, all damage caused by such removal repaired, a drop
ceiling installed where the cooking area hood was located and the wall in the
cafeteria between the service area and seating area removed;

                B. all specialized equipment and telecommunication connections
shall be removed from the second floor computer room area of the Surrender
Premises, the raised portion of the flooring and wiring removed (such removal of
the raised portion and wiring to be completed at a time to be designated by
Landlord) and the floor restored to existing building standards;

                C. the existing 175 gallon water heater in kitchen area shall be
enclosed with sheet rock and an access door added; and

                D. phone wires from the portion of the Original Premises
previously occupied by ACTI shall be removed (such removal to be completed at a
time designated by Landlord).

        Notwithstanding any provisions of Section 7 of the Lease and any other
provisions therein to the contrary, within thirty (30) days following the full
execution of this Amendment by the parties, Tenant shall deliver to Landlord a
completed bill of sale (“Bill of Sale”) in the form attached hereto as Exhibit B
and made a part hereof by this reference, listing on said Bill of Sale all
furniture, cubicles and equipment and all telephone systems and connections and
power connections going to work stations, offices and cubicles which Tenant will
leave in the Surrender Premises and which shall become the property of Landlord
(“Surrendered Personal Property”). Such Bill of Sale shall reflect that no
monetary consideration was paid for the sale. Tenant hereby represents and
warrants to Landlord that the Surrendered Personal Property is owned by Tenant
and will not on the date this Amendment is executed by the parties be encumbered
by any claim or lien, such as a Uniform Commercial Code Financing Statement. The
transfer of such Surrendered Personal Property to Landlord is made in partial
consideration for the execution of this Amendment and Tenant shall not be
entitled to a credit against amounts owed to Tenant by Landlord of any amount
for such transfer.

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        With respect to the Surrender Premises, once such Surrender Premises are
surrendered to Landlord in the condition required by this Section 10 and
accepted by Landlord, Tenant shall have no further obligations under Section 7
of the Original Lease and Section 4 of the Sixth Amendment. Upon the expiration
or sooner termination of this Lease, Tenant shall comply with the provisions of
Section 7 of the Original Lease and Section 4 of the Sixth Amendment with regard
to the surrender of the Premises to Landlord. Within one hundred eighty (180)
days after the date on which this Amendment is executed by the parties, Landlord
shall provide Tenant with a list of the existing improvements which Tenant will
be required to remove at the end of the term of the Lease. Landlord’s failure to
provide such list to Tenant within said one hundred eighty (180) days shall be
deemed a waiver of Landlord’s right to require Tenant to remove such
improvements at the end of the term of the Lease.

        11.  Deferred Maintenance. Tenant acknowledges and agrees that Tenant
shall remain responsible for the payment of maintenance and repairs which Tenant
was required by the terms of the Original Lease to complete on the Original
Premises prior to April 1, 2003, but which Tenant did not complete (“Deferred
Maintenance”). Tenant shall have ninety (90) days after the date on which this
Amendment is executed by the parties in which to complete the following Deferred
Maintenance items: (1) replace the five (5) metal signs at the two (2) driveway
entrances; (2) trim the trees described on the tree trimming plan, which is
attached hereto as Exhibit C and made a part hereof by this reference; (3)
repair the gate to the patio area so that the gate will close and latch; (4)
resurface and reseal the cracks in the driveways and parking areas of the
Project Site; (5) restore the wall in the main lobby where a pay telephone was
removed; and (6) complete actions as necessary to put all plumbing in all
restrooms in good condition and repair. Landlord shall complete the other
Deferred Maintenance consisting of patching the roof membrane, cleaning the roof
drains and replacing all wooden surfaces of the four exterior wooden benches and
shall submit an invoice to Tenant for the cost of same. Tenant shall within ten
(10) days of receipt of any such invoice pay to Landlord as additional rent the
amount of any such invoice.

        12. Improvements. In conjunction with the separation of the Premises
from the Original Premises Tenant shall at Tenant’s cost and expense make the
following improvements to the Building (“Building Improvements”):

                A. construct an approximately 45-foot straight wall with one
door to separate the office spaces at the second set of pillars as shown on
Exhibit D (page 1) which is attached hereto and made a part hereof by this
reference;

                B. install a doorway to allow access to the restroom hallway
from the production area in the Premises and from the office areas in the
Surrender Premises in the location shown on Exhibit D (page 1);

                C. install a doorway for emergency exit at the end of the
hallway adjacent to the reliability lab and production area in the Surrender
Premises in the location shown on Exhibit D and also install an additional wall
to the production area;

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                D. remove wall and stub above-ceiling electrical and water lines
in the chase area adjacent to the training rooms in the location shown on
Exhibit D and restore the floor; and

                E. construct a wall with three (3) or four (4) doors in the
location shown on page 2 of Exhibit D.

        All such Building Improvements shall be completed by Tenant in
conformance with current building standards and applicable building codes. The
Building Improvement described in Section 12.A. above shall be completed no
later than the date which is sixty (60) days following the date this Amendment
is executed by the parties. The Building Improvements described in Section
12.B., C. and D. shall be completed no later than the date which is sixty (60)
days following the date this Amendment is executed by the parties. The Building
Improvement described in Section 12.E. shall be completed within thirty (30)
days after Landlord requests in writing that such Building Improvement be made.
At the time of such written request, Landlord shall specify whether three or
four doors will be required. If any of the Building Improvements are not
completed by Tenant by the date required, Landlord may at its election complete
such Building Improvements. Tenant shall within ten (10) days of receipt of an
invoice from Landlord following completion of any such work, pay to Landlord as
additional rent the amount of any such invoices plus an administration fee of
ten percent (10%) of the amount thereof.

        13. Real Property Taxes. Effective April 1, 2003, Tenant shall pay only
Tenant’s Share of the Real Property Taxes. On the first day of each month,
Tenant shall pay to Landlord as additional rent one-twelfth (1/12th) of the
amount which Landlord estimates as Tenant’s Share of Real Property Taxes for the
calendar year. Landlord acknowledges that Tenant has paid the first installment
of the Real Property Taxes due for the Original Premise, which installment was
for taxes through December 31, 2002.

        14. Insurance. Upon the execution of this Amendment by the parties,
Tenant shall have no obligation to maintain and carry the insurance described in
Sections 12.D., E., and F. of the Original Lease. Tenant shall continue to keep
in force and maintain commercial general liability insurance as set forth in the
Original Lease, except that such insurance shall be limited to liability arising
out of the use, occupancy or maintenance of the Premises rather than the
Original Premises. Landlord shall, commencing on the date this Amendment is
executed by the parties, keep in force fire, extended coverage and “all risk”
insurance, and commercial general liability insurance covering the Building and
the Common Areas. Landlord shall credit Tenant for the insurance payment for the
insurance described in the first sentence of this Section 14 applicable to the
period April 1, 2003 through the date that this Amendment is executed by the
parties less Tenant’s pro-rata share of such insurance expense commencing April
1, 2003. Tenant shall, at its sole cost and expense, comply with any and all
reasonable requirements pertaining to the Premises of any insurer necessary for
the maintenance of reasonable fire and commercial general liability insurance
covering the Building and the Common Areas. Tenant shall pay, as a part of the
Operating Costs, Tenant’s Share of the cost of such insurance carried by
Landlord.

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        15. Subtenants. Tenant represents and warrants to Landlord that there
are no subleases in effect which affect the Original Premises except for (i) a
sublease dated July 23, 1991 between Tenant and Holtemann, Ord & Smith, Inc.
(“USI Sublease”), the term of which has expired and is now a month-to-month
tenancy, (ii) a sublease dated July 5, 2000 between Tenant and Teltronics Inc.
(“Teltronics Sublease), the term of which will expire on October 31, 2003, and
(iii) a sublease dated February 15, 2003 between Tenant and SpatiaLight, Inc.
(“SpatiaLight Sublease”), the term of which will expire on August 14, 2003. The
USI Sublease and the Teltronics Sublease are hereinafter sometimes collectively
referred to as the “Assigned Subleases”. Tenant shall concurrently with the
execution of this Amendment assign to Landlord in writing all of Tenant’s right,
title and interest in the Assigned Subleases with such assignment to be
effective as of January 1, 2003. A copy of the form of such assignment is
attached hereto as Exhibit E and made a part hereof by this reference. Tenant
shall pay to Landlord subject to the reconciliation described in Section 22
below, the total amount of any security deposit paid to Tenant by the subtenants
under the Assigned Subleases and all rent and other charges collected by Tenant
under the Assigned Subleases for the period from January 1, 2003 until the date
this Amendment is executed by the parties.

        16. Sublease and Assignment Consideration. If Landlord consents to any
assignment or sublease hereunder, then Tenant shall pay to Landlord, immediately
upon Tenant’s receipt thereof, seventy-five percent (75%) of any and all
“consideration” (as defined below) received by Tenant on account of such
transaction, howsoever the same may be denominated or characterized, and in the
case of a sublease to the extent that such consideration exceeds the pro rata
portion of the Basic Rent and other charges payable by Tenant hereunder
attributable to the sublet portion of the Premises, based on the leasable area
of the Premises and the leasable area of the sublet portion of the Premises
after deducting therefrom any real estate broker commission incurred by Tenant
in connection with the sublease or assignment and the cost of any improvements
made to the space to be subleased as a condition of the sublease. As used
herein, “consideration” includes any and all consideration received by Tenant on
account of such assignment or subletting, including, without limitation, money,
property, assumption of liabilities other than those arising under this Lease,
discounts, services, credits or any other item or thing of value. Irrespective
of the form of such consideration, Landlord shall be entitled to be paid in cash
in an amount equivalent to the aggregate of the cash portion of the
consideration and the value of any non-cash portion of the consideration. In the
event that any consideration is paid or given in installments, Landlord shall
receive each such installment at the time paid or given. Notwithstanding the
above to the contrary, in the event of the sublease by Tenant of “production”
space in the Premises, such event shall not entitle Landlord to receive excess
rent consideration as described hereinabove.

        17. Signs. Tenant shall within thirty (30) days of receipt of written
notice from Landlord at Tenant’s cost and expense remove the existing Tenant
sign which Tenant installed on the Building and repair any damage to the
Building resulting from such removal of said sign. Upon removal of said sign
Tenant shall have no further right to have a sign on the Building, but may
maintain at Tenant’s expense the existing monument sign located on the lawn in
the Common Areas.

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        18. Utilities. Tenant and Landlord acknowledge that the utility system
serving the Building cannot be separately metered in a cost effective manner and
therefore agree that Tenant shall continue to provide utilities for the entire
Building. Tenant shall be reimbursed directly by other tenants in the Building
for such other tenants’ share of utility costs, at the rate of $0.1746 per
square foot per month which Landlord and Tenant agree is an equitable rate as of
the Reference Date. This rate shall be subject to review upon the request of
either Landlord or Tenant in the event of a substantial change in rates charged
by any utility company furnishing utilities to the Building. The aforementioned
rate is based upon the following calculations:

Internal Electric:   $0.1575   Exterior Lighting:  $0.0038   Gas:  $0.0058  
Water:  $0.0075   Total:  $0.1746  

Landlord shall have no obligation to pay Tenant for any utility costs due from
other tenants in the Building or for utility costs due for space in the Building
which is not leased to another Tenant for periods prior to December 31, 2004,
except for Common Areas. After December 31, 2004, Landlord shall reimburse
Tenant for utility costs due for space in the Building which is not leased to
another Tenant (except for Common Areas). Landlord shall pay to Tenant the
utility costs for the Common Areas at the rate set forth above, after deducting
therefrom Tenant’s Share of utility costs for the Common Areas.

        19. Stock Options. In consideration of the execution of this Seventh
Amendment, and concurrently with the execution of this Amendment by the parties,
Tenant shall issue to Landlord a written option (“Option”) in form reasonably
acceptable to Landlord, which Option shall grant Landlord the right to purchase
300,000 shares of Tegal Common Stock at the closing market price on the date on
which this Amendment is fully executed by the parties. Such Option will be
vested immediately and must be executed within ten (10) years of issue.

        20. First Right of Refusal. Section 32 of the Original Lease is hereby
deleted.

        21. Lease Termination. Section 8 of the Sixth Amendment is hereby
deleted. Tenant shall have no right to terminate the Lease prior to the
expiration of the Term.

        22. Reconciliation. Landlord and Tenant shall cooperate and use their
best efforts to complete within sixty (60) days from the date this Amendment is
executed by the parties a reconciliation of amounts owed to Landlord by Tenant
and credits due to Tenant.

        23. Default by Tenant. Notwithstanding the provisions of Section 16 of
the Original Lease, the failure of Tenant to perform or observe any covenant or
condition to be performed by Tenant under Sections 9, 10, and 17 of this
Amendment shall constitute

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a default hereunder by Tenant upon Tenant’s failure to cure such breach within
five (5) days after written notice from Landlord of Tenant’s failure to perform.
In addition to any other right or remedy of Landlord hereunder, upon the
occurrence of a default and without waiving or releasing Tenant from any
obligation of Tenant hereunder, Landlord may (but shall not be required to) cure
such default for the account of Tenant. Landlord shall not be responsible or
liable to Tenant for any loss or damage that may be caused to Tenant’s stock or
business by reason of effecting cure hereunder. All sums paid by Landlord and
all costs and expenses incurred by Landlord in connection with such cure
(including attorneys’ fees), together with interest thereon and the maximum rate
allowed by law from the respective dates of Landlord’s incurrence of each item
of cost or expense, shall be payable by Tenant on demand.

        24. Late Charge. Section 5.C. of the Original Lease is hereby deleted
and the following is substituted as Section 5.C.:

                    “C.        Tenant hereby acknowledges that late payment by
Tenant to Landlord of Basic Rent, Additional Rent and other sums due under this
Lease will cause Landlord to incur additional costs not contemplated by this
Lease, the exact amount of which will be extremely difficult or impossible to
ascertain. Such additional costs include processing and accounting charges and
late charges which may be imposed upon Landlord by the terms of any mortgage or
deed of trust covering the Premises. Therefore, if any installment of Basic
Rent, Additional Rent or any other sum due from Tenant shall not be received by
Landlord within five (5) days after written notice from Landlord of non-receipt,
Tenant shall pay to Landlord a late charge equal to six percent (6%) of the
overdue amount. The parties hereby acknowledge, warrant and represent that such
late charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of a Default with respect to such
overdue amount or prevent Landlord from exercising any or all of the other
rights and remedies granted under this Lease. Landlord may, as a matter of
convenience, provide to Tenant from time to time billings or invoices for Rent
or other sums due under this Lease, but Tenant’s failure to receive any such
billing or invoice, or Landlord’s omission or cessation of any such billing or
invoice shall not excuse Tenant’s obligation for timely payment in accordance
with this Lease.”

        25. Conditions Precedent. Landlord’s obligations under this Amendment
are conditioned upon:

                    A.     Approval of this Amendment by Washington Mutual,
Landlord’s lender; and

                    B.     Approval by Landlord of a resolution by Tenant’s
Board of Directors approving this Amendment and authorizing the signature of
this Amendment by the Company.

        26. Effect. Except as set forth in this Amendment, the Original Lease as
amended by the Amendments shall remain in full force and effect.

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       27.  Additional Rent. For all purposes under this Lease, all sums and
other amounts payable by Tenant to Landlord or otherwise hereunder which are not
specifically denominated as “rent” shall be payable as and shall be deemed to be
additional rent. Such sums and amounts shall be payable as and when provided
under this Lease, unless no date is specified, in which case such sums shall be
payable together with each installment of Basic Rent payable hereunder.

        28. Confidentiality. Tenant agrees not to disclose any of the terms and
conditions of this Amendment to any other tenant or prospective tenant of
Landlord in the Building, nor to any real estate brokers. Landlord acknowledges
that Tenant has disclosed the terms of this Amendment to Equis Corporation, a
consultant retained by Tenant. Tenant agrees to give Equis Corporation written
notice requesting that Equis Corporation keep all such terms confidential.
Tenant acknowledges that a disclosure in violation of this Section 28 could
impair Landlord’s ability to lease space in the Building at fair market rental
values.

        29. Lease Buy-Out/Termination. Tenant may elect to terminate this Lease
(“Right to Terminate”), as amended, upon the following terms and conditions:

                A. Notice. Tenant must give Landlord prior notice in writing of
its election to so terminate no earlier than one hundred eighty (180) days
before the termination date elected by Tenant (“Termination Date”).

                B. No Default. Tenant may not exercise said Right to Terminate
the Lease and said election shall be void if Tenant is in default of a material
provision of this Lease, as amended, as of the date of the purported exercise of
this Right to Terminate or thereafter at the Termination Date.

                C. Termination Fee. If Tenant so elects to terminate this Lease,
then Tenant shall pay to Landlord on the Termination Date as consideration for
Landlord’s agreement to allow Tenant to terminate this Lease the sum of Two
Million Dollars ($2,000,000.00). Landlord agrees that such amount shall
adequately compensate Landlord for all detriment proximately caused by such
termination or which in the ordinary course of things would be likely to result
therefrom, including, without limitation, the following: (1) expenses for
altering, remodeling or otherwise improving the Premises for the purpose of
reletting, including installation of leasehold improvements; (ii) broker’s fees,
advertising costs and other expenses of reletting the premises; (iii) costs of
carrying the Premises after such early termination, such as taxes, insurance
premiums, mortgage payments, utilities, and security precautions; (iv) free
rent, moving costs and any other monetary inducement and expense, necessary to
lease the Premises; and (v) costs of alterations or improvements required to
comply with law, except for any costs of compliance, remediation or removal of
Hazardous Materials from the Premises as set forth in Section 10 of the Original
Lease. Tenant shall continue to remain responsible for the clean up and removal
of Hazardous Materials as set forth in Section 10 of the Original Lease and,
subject to this Section 10, to remove whatever Leasehold Improvements Tenant,
itself, may have installed during the Term (as extended), including the cost of
removal of those Special Operating Systems set forth on Exhibit M to the Lease.

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               D. Surrender. If Tenant so elects to terminate this Lease, then
Tenant shall surrender possession of the Premises to Landlord pursuant to the
provisions of this Lease, as amended.

                E. Release. Upon such termination in accordance with the
provisions of this Section 29, Landlord and Tenant shall fully and
unconditionally release and discharge each other from their respective
obligations arising under this Lease from and after the date of such early
termination.

        30. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

        31. Exhibits. The following Exhibits are a part of this Amendment:

                Exhibit A Premises             Exhibit B Surrendered Personal
Property             Exhibit C Tree Trimming Plan             Exhibit D Building
Improvements             Exhibit E Assignment of Subleases

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        IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment to
be effective as of January 1, 2003.

LANDLORD:

 

    Date of Execution: 6/05/03 /s/ Jane
Crocker                                                           JANE CROCKER,
as Trustee under the
Jane C. Jacobs Trust Agreement dated
October 5, 1990       Date of Execution: 6/05/03 /s/ Norman E.
MacKay                                                NORMAN E. MACKAY         
TENANT:          

TEGAL CORPORATION,
a Delaware corporation

      Date of Execution: 6/9/03 By: /s/ Michael L.
Parodi                                             
Its: President & CEO                                                        
Date of Execution: ________________
By:                                                                           
Its:________________________________    

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EXHIBIT B
SURRENDERED PERSONAL PROPERTY
BILL OF SALE

BILL OF SALE

        TEGAL CORPORATION, a Delaware corporation, for good and valuable
consideration, hereby sells, assigns, transfers and quitclaims to JANE CROCKER,
Trustee under the Jane C. Jacobs Trust Agreement dated October 5, 1990 and
NORMAN E. MACKAY all of Tegal Corporation’s right, title and interest in and to
the furniture, equipment and other personal property (the “Personal Property”
currently situated in the 74,936 square feet of space located at 2201 South
McDowell Blvd., Petaluma, California, and hereinafter described, free and clear
of all liens and encumbrances and otherwise in “AS IS” physical condition:

    A.        Office cubicles:

    B.        Office and conference chairs:

    C.        Conference tables:

    D.        Whiteboards:

    E.        Desks and tables:

    F.        Bookshelves:

    G.        Small storage racks (6 feet):

    H.        Mid-size storage racks (9 feet):

    I.        Large storage racks:

    J.        Rolling racks:

    K.        File cabinets:

    L.        Glass display cases:

    M.        Work benches:

    N.        AT&T phone system, related equipment, phones and wiring

    O.        Security system for the Building and all related equipment

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    P.        Baler (cardboard)

    Q.        Intentionally omitted

    R.        All other personal property remaining in the Premises after
____________, 2003.

        No monetary consideration was paid for this Bill of Sale. This Bill of
Sale is made in partial consideration for the execution and delivery of that
certain Seventh Amendment to Lease Agreement by and between Tegal Corporation
and Jane Crocker, Trustee under the Jane C. Jacobs Trust Agreement dated October
5, 1990 and Norman E. MacKay.

Executed this _____ day of ___________, 2003.

                                                                                    TEGAL
CORPORATION
                                                                                   
a Delaware corporation

                                                                                   
By: ________________________

                                                                                   
Title: _______________________

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EXHIBIT E

ASSIGNMENT OF SUBLEASES

        FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, as
of the Effective Date (hereinafter defined), TEGAL CORPORATION, a Delaware
corporation (“Assignor”), assigns, transfers and conveys to JANE CROCKER,
Trustee under the Jane C. Jacobs Trust Agreement dated October 5, 1990 and
NORMAN E. MACKAY (“Assignee”), all of Assignor’s right, title and interest as
Sublandlord/Sublessor under the subleases, copies of which are attached hereto
and incorporated herein by this reference (the “Subleases”). Assignor represents
and warrants to Assignee that the copies of the Subleases attached hereto are
true, current and complete copies of all such Subleases and that there are no
amendments or modifications to such Subleases except for the amendments and
modifications attached hereto. Also attached hereto is a rent roll and Assignor
represents and warrants to Assignee that (i) the attached rent roll is true,
correct and complete; (ii) none of the subtenants is in default under the
Subleases except as set forth on the attached rent roll; (iii) Assignor is not
in default of any of Assignor’s obligations under any of the Subleases; and (iv)
Assignor holds as security deposits under the Subleases only the amounts listed
on the rent roll.

        As of the Effective Date, Assignee assumes and agrees to keep, perform,
and fulfill all obligations as Sublandlord/Sublessor under the Subleases
required to be kept, performed and fulfilled by Assignor thereunder.

        Assignor agrees to indemnify, hold harmless and defend Assignee from and
against any and all liabilities, losses, costs, causes of action, claims,
damages, and expenses (including reasonable attorneys’ fees and costs) relating
to obligations of Sublandlord/Sublessor under the Subleases arising, accruing or
incurred prior to the Effective Date. The defense of Assignee as required by the
immediately preceding sentence shall be with counsel reasonably satisfactory to
Assignee.

        Assignee agrees to indemnify, hold harmless and defend Assignor from and
against any and all liabilities, losses, costs, causes of action, claims,
damages, and expenses (including reasonable attorneys’ fees and costs) relating
to obligations of Sublandlord/Sublessor under the Subleases arising, accruing or
incurred on or after the Effective Date. The defense of Assignor as required by
the immediately preceding sentence shall be with counsel reasonably satisfactory
to Assignor.

        The provisions of this Assignment of Subleases shall be binding upon and
inure to the benefit of Assignor and Assignee and their respective successors
and assigns.

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        This Assignment of Subleases may be executed in counterparts, each of
which shall be deemed to be an original, but such counterparts when taken
together shall constitute but one assignment.

        If either party institutes an action or proceeding to enforce its rights
under this Assignment of Subleases or to interpret any provision of this
Assignment of Subleases, the losing party shall pay to the prevailing party the
attorneys’ fees and costs incurred by the prevailing party in such action or
proceeding.

        IN WITNESS WHEREOF, the undersigned have executed the within instrument
to be effective as of January 1, 2003 (“Effective Date”).

  ASSIGNOR:       TEGAL CORPORATION,   a Delaware corporation     Date of
Execution: 6/9/03 By: /s/ Michael L. Parodi                        Its:
President & CEO                          _       Date of Execution:
________________ By: ________________________________  
Its: ________________________________          ASSIGNEE:       Date of
Execution: 5/29/03 By: /s/ Jane
Crocker                                                      JANE CROCKER, as
Trustee under the
Jane C. Jacobs Trust Agreement dated
October 5, 1990       Date of Execution: 5/29/03 By: /s/ Norman E.
MacKay                                         NORMAN E. MACKAY