Document:

Exhibit 10.3

Verigy
Ltd.

2006 Employee Shares Purchase Plan

(As Amended, December 20, 2006)

 

TABLE OF CONTENTS

	
  

  	
   

  	
  Page

  
	
  SECTION 1. PURPOSE OF THE PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 2. ADMINISTRATION OF THE PLAN

  	
   

  	
  1

  
	
  (a) Committee
  Composition

  	
   

  	
  1

  
	
  (b) Committee
  Responsibilities

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 3. STOCK OFFERED UNDER THE PLAN

  	
   

  	
  1

  
	
  (a) Authorized
  Shares

  	
   

  	
  1

  
	
  (b)
  Anti-Dilution Adjustments

  	
   

  	
  1

  
	
  (c)
  Reorganizations

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  SECTION 4. ENROLLMENT AND PARTICIPATION

  	
   

  	
  2

  
	
  (a) Offering
  Periods

  	
   

  	
  2

  
	
  (c) Enrollment
  at IPO

  	
   

  	
  2

  
	
  (c) Enrollment
  After IPO

  	
   

  	
  2

  
	
  (d) Duration of
  Participation

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  SECTION 5. EMPLOYEE CONTRIBUTIONS

  	
   

  	
  3

  
	
  (a) Commencement
  of Payroll Deductions

  	
   

  	
  3

  
	
  (b) Amount of
  Payroll Deductions

  	
   

  	
  3

  
	
  (c) Changing
  Withholding Rate

  	
   

  	
  3

  
	
  (d)
  Discontinuing Payroll Deductions

  	
   

  	
  3

  
	
  (e) Limit on
  Number of Elections

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 6. WITHDRAWAL FROM THE PLAN

  	
   

  	
  4

  
	
  (a) Withdrawal

  	
   

  	
  4

  
	
  (b)
  Re-Enrollment After Withdrawal

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 7. CHANGE IN EMPLOYMENT STATUS

  	
   

  	
  4

  
	
  (a) Termination
  of Employment

  	
   

  	
  4

  
	
  (b) Leave of
  Absence

  	
   

  	
  4

  
	
  (c) Death

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 8. PLAN ACCOUNTS AND PURCHASE OF SHARES

  	
   

  	
  5

  
	
  (a) Plan
  Accounts

  	
   

  	
  5

  
	
  (b) Purchase
  Price

  	
   

  	
  5

  
	
  (c) Number of
  Shares Purchased

  	
   

  	
  5

  
	
  (d) Available
  Shares Insufficient

  	
   

  	
  5

  
	
  (e) Issuance of
  Stock

  	
   

  	
  5

  
	
  (f) Tax
  Withholding

  	
   

  	
  6

  
	
  (g) Unused Cash
  Balances

  	
   

  	
  6

  
	
  (h) Stockholder
  Approval

  	
   

  	
  6

  

 

 

 

	
  SECTION 9. LIMITATIONS ON STOCK OWNERSHIP

  	
   

  	
  6

  
	
  (a) Five Percent
  Limit

  	
   

  	
  6

  
	
  (b) Dollar Limit

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 10. RIGHTS NOT TRANSFERABLE

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 11. NO RIGHTS AS AN EMPLOYEE

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 12. NO RIGHTS AS A STOCKHOLDER

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 13. AMENDMENT OR DISCONTINUANCE

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 14. COMMITTEE RULES FOR NON-U.S.
  JURISDICTIONS

  	
   

  	
  8

  
	
  (a) Rules and
  Procedures

  	
   

  	
  8

  
	
  (b) Sub-Plans

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 15. COMPLIANCE with LAW.

  	
   

  	
  8

  
	
  (a) Securities
  Laws and Regulations

  	
   

  	
  8

  
	
  (b) Governmental
  Approvals

  	
   

  	
  9

  
	
  (c) Choice of
  Law

  	
   

  	
  9

  
	
   

  	
   

  	
   

  
	
  SECTION 16. DEFINITIONS

  	
   

  	
  9

  
	
  (a) Board

  	
   

  	
  9

  
	
  (b) Code

  	
   

  	
  9

  
	
  (c) Committee

  	
   

  	
  9

  
	
  (d) Company

  	
   

  	
  9

  
	
  (e) Compensation

  	
   

  	
  9

  
	
  (f) Corporate
  Reorganization

  	
   

  	
  9

  
	
  (g) Eligible
  Employee

  	
   

  	
  9

  
	
  (h) Exchange Act

  	
   

  	
  10

  
	
  (i) Fair Market
  Value

  	
   

  	
  10

  
	
  (j) IPO

  	
   

  	
  10

  
	
  (k) Offering
  Period

  	
   

  	
  10

  
	
  (l) Participant

  	
   

  	
  10

  
	
  (m)
  Participating Company

  	
   

  	
  10

  
	
  (n) Plan

  	
   

  	
  11

  
	
  (o) Plan Account

  	
   

  	
  11

  
	
  (p) Purchase
  Price

  	
   

  	
  11

  
	
  (q) Stock

  	
   

  	
  11

  
	
  (r) Subsidiary

  	
   

  	
  11

  

 

 ii

 

Verigy Ltd.

2006 Employee Shares Purchase Plan

SECTION
1.                                               PURPOSE
OF THE PLAN.

The Board adopted the Plan effective as of the date of
the IPO.  The purpose of the Plan is to
provide Eligible Employees with an opportunity to increase their proprietary
interest in the success of the Company by purchasing Shares from the Company on
favorable terms and to pay for such purchases through payroll deductions.  The Plan is intended to qualify for favorable
tax treatment under section 423 of the Code although the Company
undertakes no obligation to maintain such qualification.  In addition, this Plan document authorizes
the grant of options to Eligible Employees resident outside of the United
States of America pursuant to terms, rules, procedures or sub-plans adopted by
the Committee (or its designate) designed to achieve tax, securities law or
other Company objectives but which may not qualify under section 423 of
the Code, provided that such terms, rules, procedures or sub-plans shall apply
on a uniform basis to all Eligible Employees employed by a Participating
Company if the grants to the Eligible Employees employed by such Participating
Company are intended to qualify under section 423 of the Code.

SECTION
2.                                               ADMINISTRATION
OF THE PLAN.

(a)           Committee Composition.  The
Committee shall administer the Plan.  The
Committee shall consist exclusively of one or more directors of the Company,
who shall be appointed by the Board.

(b)           Committee Responsibilities.  The
Committee shall have the authority and discretion to interpret the Plan and
make all other policy decisions relating to the operation of the Plan.  The Committee may adopt such rules,
guidelines and forms as it deems appropriate to implement the Plan.  The Committee’s determinations under the Plan
shall be final and binding on all persons.

SECTION
3.                                               SHARES
OFFERED UNDER THE PLAN.

(a)           Authorized Shares.  The
number of Shares available for purchase under the Plan shall be 1,700,000
(subject to adjustment pursuant to Subsection (b) below).

(b)           Anti-Dilution Adjustments.  The
aggregate number of Shares offered under the Plan, the 2,500-share limitation
described in Section 8(c) and the price of shares that any Participant has
elected to purchase shall be adjusted proportionately for any increase or
decrease in the number of outstanding Shares resulting from a subdivision or
consolidation of Shares or the payment of a share dividend, any other increase
or decrease in the outstanding Shares effected without receipt or payment of
consideration by the Company, the distribution of the shares of a Subsidiary to
the Company’s stockholders, or a similar event. 
The determination

 

of the basis for, and the calculation of, any such adjustment shall be
made in the discretion of the Committee.

(c)           Reorganizations.  Any
other provision of the Plan notwithstanding, immediately prior to the effective
time of a Corporate Reorganization, the Offering Period then in progress shall
terminate and shares shall be purchased pursuant to Section 8, unless the
Plan is continued or assumed by the surviving corporation or its parent
corporation.  The Plan shall in no event
be construed to restrict in any way the Company’s right to undertake a
dissolution, liquidation, merger, consolidation or other reorganization.

SECTION
4.                                               ENROLLMENT
AND PARTICIPATION.

(a)           Offering Periods. 
While the Plan is in effect and unless otherwise determined by the
Committee, two Offering Periods shall commence in each calendar year.  The Offering Periods shall consist of the
six-month periods commencing on each June 1 and December 1, except that:

(i)            The first Offering Period under the Plan
shall commence on the date of the IPO and shall end on November 30, 2006;

(ii)           Prior to the commencement of any Offering
Period, the Committee may in its discretion alter the length of such Offering
Period, provided that an Offering Period shall in no event be longer than 27
months; and

(iii)          The Committee may determine that the first
Offering Period applicable to the Eligible Employees of a new Participating
Company shall commence on any date specified by the Committee, provided that an
Offering Period shall in no event be longer than 27 months.

(b)           Enrollment at IPO.  Each
individual who, on the day of the IPO, qualifies as an Eligible Employee shall
automatically become a Participant on such day, and shall initially be deemed
to have elected a payroll deduction rate of zero.  Each Participant who was automatically
enrolled on the day of the IPO shall confirm their enrollment and participation
level in the manner and within the time prescribed by the Company.

(c)           Enrollment After IPO.  In
the case of any individual who qualifies as an Eligible Employee on the first
day of any Offering Period other than the first Offering Period, he or she may
elect to become a Participant on such day by submitting the prescribed
enrollment form to the Company in the manner prescribed by the Company not
later than such day.  The Company may
prescribe electronic enrollment procedures.

 2
 

 

(d)           Duration of Participation.  Once
enrolled in the Plan, a Participant shall continue to participate in the Plan
until he or she:

(i)            Reaches the end of the Offering Period in
which his or her employee contributions were discontinued under
Section 5(d) or 9(b);

(ii)           Is deemed to withdraw from the Plan under
Subsection (b) above;

(iii)          Withdraws from the Plan under
Section 6(a); or

(iv)          Ceases to be an Eligible Employee.

A Participant whose
employee contributions were discontinued automatically under Section 9(b)
shall automatically resume participation at the beginning of the earliest
Offering Period ending in the next calendar year, if he or she then is an
Eligible Employee.  In all other cases, a
former Participant may again become a Participant, if he or she then is an
Eligible Employee, by following the procedure described in Subsection (c)
above.

SECTION
5.                                               EMPLOYEE
CONTRIBUTIONS.

(a)           Commencement of Payroll
Deductions.  A Participant may purchase Shares under the
Plan solely by means of payroll deductions. 
Payroll deductions shall commence as soon as reasonably practicable
after the Company has received the Participant’s enrollment instructions in the
prescribed manner.

(b)           Amount of Payroll Deductions.  An
Eligible Employee shall designate in the enrollment instructions the portion of
his or her Compensation that he or she elects to have withheld for the purchase
of Shares.  Such portion shall be a whole
percentage of the Eligible Employee’s Compensation, but not more than 10%.

(c)           Changing Withholding Rate.  If a
Participant wishes to change the rate of payroll withholding, he or she may do
so by submitting new instructions with the Company in the prescribed manner at
any time.  The new withholding rate shall
be effective as soon as reasonably practicable after the Company has received
such instructions.  The new withholding
rate shall be a whole percentage of the Eligible Employee’s Compensation, but
not less than 1% nor more than 10%.

(d)           Discontinuing Payroll
Deductions.  If a Participant wishes to discontinue
employee contributions entirely, he or she may do so by submitting new
enrollment instructions with the Company in the prescribed manner at any
time.  Payroll withholding shall cease as
soon as reasonably practicable after the Company has received such
instructions.  (In addition, employee
contributions may be discontinued automatically pursuant to
Section 9(b).)  A Participant who
has discontinued employee contributions may resume such contributions by
submitting new enrollment instructions with the Company in the prescribed
manner.  Payroll withholding shall resume
as soon as reasonably practicable after the Company has received such
instructions.

 3
 

 

(e)           Limit on Number of Elections.  No
Participant shall make more than three elections under Subsection (c) or
(d) above during any Offering Period.

SECTION
6.                                               WITHDRAWAL
FROM THE PLAN.

(a)           Withdrawal.  A
Participant may elect to withdraw from the Plan by submitting his or her
withdrawal instructions with the Company in the prescribed manner at any time
before the last day of an Offering Period. 
As soon as reasonably practicable thereafter, payroll deductions shall
cease and the entire amount credited to the Participant’s Plan Account shall be
refunded to him or her in cash, without interest.  No partial withdrawals shall be permitted.

(b)           Deemed Withdrawal.  A
Participant shall be deemed to have withdrawn from the Plan where, during an
offering period the Participant has elected to reduce his or her withholding
rate to zero (including, with respect to the first Offering Period, a
Participant who does not reset his or her withholding level to a number above
zero) and such election remains in effect at the end of an Offering
Period.  A withdrawal pursuant to this
Section 6(b) will be deemed effective with respect to the Offering Period first
succeeding the Offering Period which ended with a withholding election at the
zero level, but will not be deemed a withdrawal from the Offering Period in
which the withholding level was reduced to zero. A former Participant who is
deemed to have withdrawn from the Plan shall not be a Participant until he or
she re-enrolls in the Plan under Subsection (c) below.  Re-enrollment may be effective only at the
commencement of an Offering Period.

(c)           Re-Enrollment After
Withdrawal.  A former Participant who has withdrawn from
the Plan pursuant to Sections 6(a) or 6(b) shall not be a Participant until he
or she re-enrolls in the Plan under Section 4(c).  Re-enrollment may be effective only at the
commencement of an Offering Period.

SECTION
7.                                               CHANGE
IN EMPLOYMENT STATUS.

(a)           Termination of Employment. 
Termination of status as an Eligible Employee for any reason, including
death, shall be treated as an automatic withdrawal from the Plan under
Section 6(a).  (A transfer from one
Participating Company to another shall not be treated as a termination of
employment.)  Determination of Eligible
Employee status shall be made by the Committee in its sole discretion.

(b)           Leave of Absence.  For
purposes of the Plan, employment shall not be deemed to terminate when the
Participant goes on a military leave, a sick leave or another bona fide leave of absence, if the leave
was approved by the Company in writing. 
Employment, however, shall be deemed to terminate 90 days after the
Participant goes on a leave, unless a contract or statute guarantees his or her
right to return to work.  Employment
shall be deemed to terminate in any event when the approved leave ends, unless
the Participant immediately returns to work.

(c)           Death.  In
the event of the Participant’s death, the amount credited to his or her Plan
Account shall be paid to a beneficiary designated by him or her for this
purpose in

 4
 

 

the prescribed manner or, if none, to the Participant’s estate.  Such designation shall be valid only if it
was submitted to the Company in the prescribed manner before the Participant’s
death and is otherwise valid under applicable law.

SECTION
8.                                               PLAN
ACCOUNTS AND PURCHASE OF SHARES.

(a)           Plan Accounts.  The
Company shall maintain a Plan Account on its books in the name of each
Participant.  Whenever an amount is
deducted from a Participant’s Compensation under the Plan, such amount shall be
credited to the Participant’s Plan Account. 
Amounts credited to Plan Accounts shall not be trust funds and may be
commingled with the Company’s general assets and applied to general corporate purposes
unless otherwise determined by the Committee in order to comply with local
law.  No interest shall be credited to
Plan Accounts.

(b)           Purchase Price.  The
Purchase Price for each Share purchased at the close of an Offering Period
shall be the lower of:

(i)            85% of the Fair Market Value of one Share on
the last trading day before the commencement of such Offering Period or, in the
case of the first Offering Period under the Plan, 85% of the IPO Price; or

(ii)           85% of the Fair Market Value of one Share on
the last trading day in such Offering Period.

(c)           Number of Shares Purchased.  As
of the last day of each Offering Period, each Participant shall be deemed to
have elected to purchase the number of Shares calculated in accordance with
this Subsection (c), unless the Participant has previously elected to
withdraw from the Plan in accordance with Section 6(a).  The amount then in the Participant’s Plan
Account shall be divided by the Purchase Price, and the number of shares that
results shall be purchased from the Company with the funds in the Participant’s
Plan Account.  The foregoing
notwithstanding, no Participant shall purchase more than 2,500 Shares with
respect to any Offering Period nor more than the amounts of Shares set forth in
Sections 3(a) and 9(b).

(d)           Available Shares
Insufficient.  In the event that the aggregate number of
shares that all Participants elect to purchase during an Offering Period
exceeds the maximum number of shares remaining available for issuance under
Section 3, then the number of shares to which each Participant is entitled
shall be determined by multiplying the number of shares available for issuance
by a fraction.  The numerator of such
fraction is the number of shares that such Participant has elected to purchase,
and the denominator of such fraction is the number of shares that all
Participants have elected to purchase.

(e)           Issuance of Shares. 
Shares purchased by a Participant under the Plan shall be credited to an
account with the transfer agent in the name of the Participant as soon as
reasonably practicable after the close of the applicable Offering Period.  The Committee may provide that such shares
shall initially be held for each Participant’s benefit by a broker designated
by the Committee.

 5
 

 

(f)            Tax Withholding.  To the
extent required by applicable federal, state, local or foreign law, as
determined by the Committee, a Participant shall make arrangements satisfactory
to the Company for the satisfaction of any withholding tax obligations that
arise in connection with the Plan.  The
Company shall not be required to issue any Shares under the Plan until such
obligations are satisfied.

(g)           Unused Cash Balances.  An
amount remaining in the Participant’s Plan Account that represents the Purchase
Price for any fractional share shall be carried over in the Participant’s Plan
Account to the next Offering Period.  Any
amount remaining in the Participant’s Plan Account that represents the Purchase
Price for whole shares that could not be purchased by reason of
Subsection (c) above, Section 3 or Section 9(b) shall be
refunded to the Participant in cash, without interest.

(h)           Shareholder Approval.  Any
other provision of the Plan notwithstanding, no Shares shall be purchased under
the Plan unless and until the Company’s stockholders have approved the adoption
of, and the issuance of Shares under, the Plan.

SECTION
9.                                               LIMITATIONS
ON STOCK OWNERSHIP.

(a)           Five Percent Limit.  Any
other provision of the Plan notwithstanding, no Participant shall be granted a
right to purchase Shares under the Plan if such Participant, immediately after
his or her election to purchase such Shares, would own stock possessing more
than 5% of the total combined voting power or value of all classes of stock of
the Company or any parent or Subsidiary of the Company.  For purposes of this Subsection (a), the
following rules shall apply:

(i)            Ownership of stock shall be determined after
applying the attribution rules of section 424(d) of the Code;

(ii)           Each Participant shall be deemed to own any
stock that he or she has a right or option to purchase under this or any other
plan; and

(iii)          Each Participant shall be deemed to have the
right to purchase 2,500 Shares under this Plan with respect to each Offering
Period.

(b)           Dollar Limit.  Any
other provision of the Plan notwithstanding, no Participant shall purchase
Shares with a Fair Market Value in excess of the following limit:

(i)            In the case of Shares purchased during an
Offering Period that commenced in the current calendar year, the limit shall be
equal to (A) $25,000 minus (B) the Fair Market Value of the Shares
that the Participant previously purchased in the current calendar year (under
this Plan and all other employee stock purchase plans of the Company or any
parent or Subsidiary of the Company);

 6
 

 

(ii)           In the case of Shares purchased during an
Offering Period that commenced in the immediately preceding calendar year, the
limit shall be equal to (A) $50,000 minus (B) the Fair Market Value
of the Shares that the Participant previously purchased (under this Plan and
all other employee stock purchase plans of the Company or any parent or
Subsidiary of the Company) in the current calendar year and in the immediately
preceding calendar year; or

(iii)          In the case of Stock purchased during an
Offering Period that commenced in the second preceding calendar year, the limit
shall be equal to (A) $75,000 minus (B) the Fair Market Value of the
Stock that the Participant previously purchased (under this Plan and all other
employee stock purchase plans of the Company or any parent or Subsidiary of the
Company) in the current calendar year and in the two preceding calendar years.

For purposes of this
Subsection (b), the Fair Market Value of Shares shall be determined in
each case as of the beginning of the Offering Period in which such Shares is
purchased.  Shares purchased under stock
purchase plans not intended to qualify under section 423 of the Code shall
be disregarded.  If a Participant is precluded
by this Subsection (b) from purchasing additional Shares under the Plan,
then his or her employee contributions shall automatically be discontinued and
shall automatically resume at the beginning of the earliest Offering Period
ending in the next calendar year (if he or she then is an Eligible Employee).

SECTION
10.                                        RIGHTS
NOT TRANSFERABLE.

The rights of any Participant under the Plan, or any
Participant’s interest in any Shares or monies to which he or she may be
entitled under the Plan, shall not be transferable by voluntary or involuntary
assignment or by operation of law, or in any other manner other than by
beneficiary designation or the laws of descent and distribution.  If a Participant in any manner attempts to
transfer, assign or otherwise encumber his or her rights or interest under the
Plan, other than by beneficiary designation or the laws of descent and
distribution, then such act shall be treated as an election by the Participant
to withdraw from the Plan under Section 6(a).

SECTION
11.                                        NO
RIGHTS AS AN EMPLOYEE.

Nothing in the Plan or in any right granted under the
Plan shall confer upon the Participant any right to continue in the employ of a
Participating Company for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Participating Companies or of
the Participant, which rights are hereby expressly reserved by each, to
terminate his or her employment at any time and for any reason, with or without
cause.

 7
 

 

SECTION
12.                                        NO
RIGHTS AS A SHAREHOLDER.

A Participant shall have no rights as a stockholder
with respect to any Shares that he or she may have a right to purchase under
the Plan until such shares have been purchased on the last day of the
applicable Offering Period and issued to the Participant.

SECTION
13.                                        AMENDMENT
OR DISCONTINUANCE.

The Board shall have the right to amend, suspend or
terminate the Plan at any time and without notice.  Except as provided in Section 3, any
increase in the aggregate number of Shares that may be issued under the Plan
shall be subject to the approval of the Company’s stockholders.  In addition, any other amendment of the Plan
shall be subject to the approval of the Company’s stockholders to the extent
required by any applicable laws and regulations, and the regulations of any
stock exchange or other securities market on which the Company’s securities may
then be traded.  The Plan shall terminate
automatically 20 years after its adoption by the Board, unless (a) the
Plan is extended by the Board and (b) the extension is approved within 12
months by a vote of the stockholders of the Company.

SECTION
14.                                        COMMITTEE
RULES FOR NON-U.S. JURISDICTIONS.

(a)           Rules and Procedures.  The
Committee may adopt rules or procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of local
laws and procedures.  Without limiting
the generality of the foregoing, the Committee is specifically authorized to
adopt rules and procedures regarding handling of payroll deductions,
enrollment/withdrawal procedures, conversion of local currency, payroll tax,
withholding procedures and handling of evidence of stock ownership which vary
with local requirements.  In addition,
the Committee may adopt rules regarding the payment of interest on amounts held
in Plan Accounts, provided that such rules shall apply on a uniform basis to all
Eligible Employees employed by a Participating Company if the grants to the
Eligible Employees employed by such Participating Company are intended to
qualify under section 423 of the Code.

(b)           Sub-Plans.  The
Committee may also adopt sub-plans applicable to particular Subsidiaries, which
sub-plans may be designed to be outside the scope of Code
section 423.  The rules of such
sub-plans may take precedence over other provisions of this Plan, with the
exception of Section 3(a), but unless otherwise superseded by the terms of
such sub-plan, the provisions of this Plan shall govern the operation of such
sub-plan.

SECTION
15.                                        COMPLIANCE
WITH LAW.

(a)           Securities Laws and
Regulations.  Shares shall not be issued under the Plan
unless the issuance and delivery of such shares comply with (or are exempt
from) all applicable requirements of law, including (without limitation) the
U.S. Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, state and non-U.S. securities laws and regulations, and the
regulations of any stock exchange or other securities market on which the
Company’s securities may then be traded.

 8
 

 

(b)           Governmental Approvals.  This
Plan and the Company’s obligation to sell and deliver shares of its stock under
the Plan shall be subject to the approval of any governmental authority
required in connection with the Plan or the authorization, issuance, sale, or
delivery of stock hereunder.

(c)           Choice of Law.  This
Plan shall be governed by the laws of the Republic of Singapore, without regard
to choice of law rules.

SECTION
16.                                        DEFINITIONS.

(a)           “Board” means the Board of
Directors of the Company, as constituted from time to time.

(b)           “Code” means the U.S.
Internal Revenue Code of 1986, as amended.

(c)           “Committee” means a
committee of the Board, as described in Section 2.

(d)           “Company” means Verigy
Ltd., a Singapore corporation.

(e)           “Compensation” means
(i) the following to the extent paid in cash to a Participant by a
Participating Company:  salaries; base
wages; commissions and other sales achievement-based compensation; shift
premiums; salaries and wages paid during flexible time off, paid holidays, jury
duty, bereavement periods and other approved time off; plus (ii) any pre-tax
contributions made by the Participant under section 401(k) or 125 of the
Code.  The Committee shall determine
whether a particular item is included in Compensation.”

(f)            “Corporate
Reorganization” means:

(i)            The consummation of a merger or consolidation
of the Company with or into another entity or any other corporate
reorganization; or

(ii)           The sale, transfer or other disposition of
all or substantially all of the Company’s assets or the complete liquidation or
dissolution of the Company.

(g)           “Eligible Employee” means
any employee of a Participating Company who meets both of the following
requirements:

(i)            His or her customary employment is for more
than five months per calendar year and for more than 20 hours per week;
and

(ii)           He or she has been an employee of a
Participating Company for not less than three consecutive months, or such other
period as the Committee may determine before the beginning of the applicable
Offering Period.

 9
 

 

The foregoing notwithstanding, (A) for the first
Offering Period, the requirements of subparagraph (ii) above shall not be applicable;
(B) an individual shall be considered an Eligible Employee regardless of
whether the individual satisfies the requirements of Paragraphs (i)
and (ii) above where so provided by the law of any country that has
jurisdiction over him or her or if he or she is subject to a collective
bargaining agreement that so provides; and (C) an individual shall not be
considered an Eligible Employee if his or her participation in the Plan is
prohibited by the law of any country that has jurisdiction over him or her or
if he or she is subject to a collective bargaining agreement that does not
provide for participation in the Plan, provided that the eligibility
requirements of the Plan shall apply on a uniform basis to all employees of a
Participating Company if the grants to the Eligible Employees employed by such
Participating Company are intended to qualify under section 423 of the
Code.

(h)           “Exchange Act” means the
U.S. Securities Exchange Act of 1934, as amended.

(i)            “Fair
Market Value” means the market price of Shares, determined by the
Committee as follows:

(i)            If the Shares are traded on Nasdaq or on a
stock exchange, then the Fair Market Value shall be equal to the last sale
price of the Shares on such market or exchange as of the date in question or,
if the market or exchange was closed on the date in question, then the Fair
Market Value will be equal to the last sale price on the last trading day
immediately preceding the day in question. If the Shares are traded on more
than one market or exchange, then the Fair Market Value shall be determined by
reference to the primary market or exchange where the Shares trade.

(ii)           If the foregoing provisions are not
applicable, then the Committee shall determine the Fair Market Value in good
faith on such basis as it deems appropriate. 
Such determination shall be conclusive and binding on all persons.

(j)            “IPO”
means the effective date of the registration statement filed by the Company
with the U.S. Securities and Exchange Commission for its initial offering of
Shares to the public.

(k)           “IPO Price” means the
price at which the shares will be first offered to the public (as reflected on
the cover page of the final prospectus prepared in connection with the IPO).

(l)            “Offering
Period” means a period with respect to which the right to purchase
Shares may be granted under the Plan, as determined pursuant to
Section 4(a).

(m)          “Participant” means an
Eligible Employee who participates in the Plan, as provided in Section 4.

 10
 

 

(n)           “Participating Company”
means (i) the Company and (ii) each present or future Subsidiary
designated by the Committee as a Participating Company.

(o)           “Plan” means this Verigy
Ltd. 2006 Employee Shares Purchase Plan, as it may be amended from time to
time.

(p)           “Plan Account” means the
account established for each Participant pursuant to Section 8(a).

(q)           “Purchase Price” means the
price at which Participants may purchase Shares under the Plan, as determined
pursuant to Section 8(b).

(r)            “Shares”
means the Ordinary Shares of the Company.

(s)           “Subsidiary” means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

ADOPTION & AMENDMENT HISTORY

	
  Adopted by the Board of
  Directors:

  	
  June 7, 2006

  	
   

  
	
   

  	
   

  	
   

  
	
  Approved by the
  sole shareholder:

  	
  June 7, 2006

  	
   

  
	
   

  	
   

  	
   

  
	
  Amended by the
  Board of Directors to revise the definition of “Compensation”
  (Section 16(e)):

  	
  August 29, 2006

  	
   

  
	
   

  	
   

  	
   

  
	
  Amended by the
  Board of Directors to revise definition of “Fair Market Value”
  (Section 16(i)):

  	
  December 20, 2006

  	
   

  

 

 11Exhibit
10.8

LEASE AGREEMENT

between

PAU
MOULDS CPP-A LLC,

a
California limited liability company

as “Landlord”

and

VERIGY
US, INC.

a
Delaware corporation

as “Tenant”

 

TABLE OF CONTENTS

	
  1.

  	
   

  	
  PREMISES

  	
   

  	
  1

  
	
  2.

  	
   

  	
  TERM

  	
   

  	
  2

  
	
  3.

  	
   

  	
  RENT

  	
   

  	
  4

  
	
  4.

  	
   

  	
  SECURITY DEPOSIT

  	
   

  	
  8

  
	
  5.

  	
   

  	
  USE AND COMPLIANCE WITH LAWS

  	
   

  	
  11

  
	
  6.

  	
   

  	
  ALTERATIONS

  	
   

  	
  14

  
	
  7.

  	
   

  	
  MAINTENANCE AND REPAIRS

  	
   

  	
  17

  
	
  8.

  	
   

  	
  TENANT’S TAXES

  	
   

  	
  19

  
	
  9.

  	
   

  	
  UTILITIES AND SERVICES

  	
   

  	
  19

  
	
  10.

  	
   

  	
  EXCULPATION AND INDEMNIFICATION

  	
   

  	
  20

  
	
  11.

  	
   

  	
  INSURANCE

  	
   

  	
  21

  
	
  12.

  	
   

  	
  DAMAGE OR DESTRUCTION

  	
   

  	
  23

  
	
  13.

  	
   

  	
  CONDEMNATION

  	
   

  	
  24

  
	
  14.

  	
   

  	
  ASSIGNMENT AND SUBLETTING

  	
   

  	
  26

  
	
  15.

  	
   

  	
  DEFAULT AND REMEDIES

  	
   

  	
  29

  
	
  16.

  	
   

  	
  LATE CHARGE AND INTEREST

  	
   

  	
  32

  
	
  17.

  	
   

  	
  PARKING

  	
   

  	
  33

  
	
  18.

  	
   

  	
  ENTRY, INSPECTION AND CLOSURE

  	
   

  	
  33

  
	
  19.

  	
   

  	
  SURRENDER AND HOLDING OVER

  	
   

  	
  33

  
	
  20.

  	
   

  	
  ENCUMBRANCES

  	
   

  	
  35

  
	
  21.

  	
   

  	
  ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

  	
   

  	
  36

  
	
  22.

  	
   

  	
  NOTICES

  	
   

  	
  36

  
	
  23.

  	
   

  	
  ATTORNEYS’ FEES

  	
   

  	
  37

  
	
  24.

  	
   

  	
  QUIET POSSESSION

  	
   

  	
  37

  
	
  25.

  	
   

  	
  SECURITY MEASURES

  	
   

  	
  37

  
	
  26.

  	
   

  	
  COMMON AREAS

  	
   

  	
  37

  
	
  27.

  	
   

  	
  RULES AND REGULATIONS

  	
   

  	
  37

  
	
  28.

  	
   

  	
  LANDLORD’S LIABILITY

  	
   

  	
  37

  
	
  29.

  	
   

  	
  CONSENTS AND APPROVALS

  	
   

  	
  38

  
	
  30.

  	
   

  	
  BROKERS

  	
   

  	
  38

  
	
  31.

  	
   

  	
  WAIVER

  	
   

  	
  38

  
	
  32.

  	
   

  	
  ENTIRE AGREEMENT

  	
   

  	
  38

  

 

 i
 

 

 

	
  33.

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  39

  
	
  34.

  	
   

  	
  TIME

  	
   

  	
  40

  
	
  35.

  	
   

  	
  AUTHORITY

  	
   

  	
  40

  
	
  36.

  	
   

  	
  TITLE TO PROJECT

  	
   

  	
  40

  

 

 ii
 

 

 

INDEX OF DEFINED TERMS

	
  Additional Rent

  	
   

  	
  7

  
	
  Alterations

  	
   

  	
  15

  
	
  Award

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  Base Rent

  	
   

  	
  4

  
	
  Bonus Rent

  	
   

  	
  27

  
	
  Broker

  	
   

  	
  38

  
	
  Building

  	
   

  	
  1

  
	
  Building Systems

  	
   

  	
  12

  
	
  Business Days

  	
   

  	
  19

  
	
  Business Hours

  	
   

  	
  19

  
	
   

  	
   

  	
   

  
	
  Claims

  	
   

  	
  20

  
	
  Commencement Date

  	
   

  	
  2

  
	
  Common Areas

  	
   

  	
  1

  
	
  Condemnation

  	
   

  	
  25

  
	
  Condemnor

  	
   

  	
  25

  
	
  Controls

  	
   

  	
  19

  
	
   

  	
   

  	
   

  
	
  Date of Condemnation

  	
   

  	
  25

  
	
   

  	
   

  	
   

  
	
  Encumbrance

  	
   

  	
  35

  
	
  Environmental Losses

  	
   

  	
  13

  
	
  Environmental Requirements

  	
   

  	
  12

  
	
  Event of Default

  	
   

  	
  29

  
	
  Expiration Date

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  Handled by Tenant

  	
   

  	
  12

  
	
  Handling by Tenant

  	
   

  	
  12

  
	
  Hazardous Materials

  	
   

  	
  12

  
	
  HVAC

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  Interest Rate

  	
   

  	
  32

  
	
  Invitees

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  Landlord

  	
   

  	
  1

  
	
  Laws

  	
   

  	
  11

  
	
  Liens

  	
   

  	
  16

  
	
   

  	
   

  	
   

  
	
  Mortgagee

  	
   

  	
  35

  
	
   

  	
   

  	
   

  
	
  Operating Costs

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  Parking Facility

  	
   

  	
  1

  
	
  Permitted Hazardous Materials

  	
   

  	
  13

  
	
  Premises

  	
   

  	
  1

  
	
  Property

  	
   

  	
  1

  
	
  Proposed Transferee

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  Rental Tax

  	
   

  	
  19

  

 

 iii
 

 

 

	
  Representatives

  	
   

  	
  12

  
	
  Rules and Regulations

  	
   

  	
  37

  
	
   

  	
   

  	
   

  
	
  Service Failure

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  Taxes

  	
   

  	
  6

  
	
  Tenant

  	
   

  	
  1

  
	
  Tenant’s Share

  	
   

  	
  7

  
	
  Tenant’s Taxes

  	
   

  	
  19

  
	
  Term

  	
   

  	
  2

  
	
  Trade Fixtures

  	
   

  	
  16

  
	
  Transfer

  	
   

  	
  26

  
	
  Transfer Documents

  	
   

  	
  27

  
	
  Transferee

  	
   

  	
  27

  

 

 iv
 

 

BASIC LEASE INFORMATION

Lease Date:

For
identification purposes only, the date of this Lease is May       ,
2006

Landlord:

PAU
MOULDS CPP-A LLC, a California limited liability company

Tenant:

Verigy
US, Inc., a Delaware corporation

Project:

10100-10200
Tantau Project

Building:

10100-10200
North Tantau Avenue, Cupertino, California

Premises:

Approximately
100,491 square feet of Rentable Area located in the Building, as shown on Exhibit
A

Term:

One
Hundred Twenty (120) full calendar months (plus any partial month at the
beginning of the Term), unless extended or sooner terminated as provided
herein.

Commencement Date:

September
1, 2006 (the “Commencement Date”), subject to
the terms and conditions of Sections 2 and 33.10 below.

Expiration Date:

The
last day of the one hundred twentieth (120th) full calendar month in the Term,
subject to Section 2 hereof.

Base
Rent:

	
  Months

  	
   

  	
  Monthly Base Rent

  	
   

  
	
    1-12*

  	
   

  	
  $

  	
  130,638.30

  	
   

  
	
  13-24

  	
   

  	
  $

  	
  134,557.45

  	
   

  
	
  25-36

  	
   

  	
  $

  	
  138,594.17

  	
   

  
	
  37-48

  	
   

  	
  $

  	
  142,752.00

  	
   

  
	
  49-60

  	
   

  	
  $

  	
  147,034.56

  	
   

  
	
  61-72

  	
   

  	
  $

  	
  151,445.59

  	
   

  
	
  73-84

  	
   

  	
  $

  	
  155,988.96

  	
   

  
	
  85-96

  	
   

  	
  $

  	
  160,668.63

  	
   

  
	
  97-108

  	
   

  	
  $

  	
  165,488.69

  	
   

  
	
  109-120

  	
   

  	
  $

  	
  170,453.35

  	
   

  

 

*(plus
any partial month at the beginning of the Term, the Monthly Base Rent for which
shall be prorated as provided in Section 3.1)

 v
 

 

Tenant’s Share:

63.7%

Security Deposit:

Five
Million Dollars ($5,000,000.00), subject to Section 4.

Landlord’s Address for Payment of
Rent and Notices:

Pau Moulds CPP-A LLC

c/o Sand Hill Property Company

30 East Fourth Avenue

San Mateo, California 94401

Attn:  John Tze

Tenant’s Address for Notices:

Verigy US, Inc.

4700 Innovation Drive

Fort Collins, CO  80525

Attn:
Real Estate Manager

Business Hours:

8:00
a.m. to 6:00 p.m.

Guarantor(s):

Agilent
Technologies, Inc., subject to Section 4.

Broker(s):

Cushman
& Wakefield (Tenant); CPS (Landlord)

	
  Exhibits:

  	
   

  	
   

  
	
  Exhibit A:

  	
   

  	
  The Premises

  
	
  Exhibit B:

  	
   

  	
  Rules and Regulations

  
	
  Exhibit C:

  	
   

  	
  Work Letter

  
	
  Exhibit D:

  	
   

  	
  Determination of Fair Market Rent

  
	
  Exhibit E:

  	
   

  	
  Form of Agilent Guaranty

  
	
  Exhibit F:

  	
   

  	
  Permitted Hazardous Materials

  

 

The
Basic Lease Information set forth above is part of the Lease.  In the event of any conflict between any
provision in the Basic Lease Information and the Lease, the Lease shall
control.

 vi

 

LEASE

THIS
LEASE is made as of the Lease Date set forth in the Basic Lease Information, by
and between the Landlord identified in the Basic Lease Information (“Landlord”), and the Tenant identified in the Basic Lease
Information (“Tenant”).  Landlord and Tenant hereby agree as follows:

1.             PREMISES.

1.1           Premises.  Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, on and subject to the terms and conditions of this
Lease, the office space identified in the Basic Lease Information as the
Premises (the “Premises”), in the Building
located at the address specified in the Basic Lease Information (the “Building”).  The
approximate configuration and location of the Premises is shown on Exhibit A.  Landlord and Tenant agree that the Rentable
Area of the Premises and Tenant’s Share for all purposes under this Lease shall
be the Rentable Area and Tenant’s Share specified in the Basic Lease
Information (unless modified pursuant to the provisions of this Lease).  Tenant also shall have the right during the
Term of the Lease to the nonexclusive use of the sidewalks, parking facility
serving the Building (the “Parking Facility”),
elevators, stairs, corridors and other common areas of the Property
(collectively, the “Common Areas”),
subject to the provisions of this Lease regarding such use.  The real property on which the Building is
located and all improvements thereon (including the Building and the Common
Areas) are referred to herein, collectively, as the “Property.”  Tenant agrees and acknowledges that all
references to the “Property” and the “Project” are to that certain real
property consisting of approximately 9.4 acres and the buildings located
thereon commonly known as 10100 and 10200 North Tantau Avenue, Cupertino,
California.  As of the Commencement Date,
Landlord will also own commercial property adjacent to the Property consisting
of approximately 2.5 acres of real property and a commercial building located
thereon commonly known as 5425 Stevens Creek Boulevard, Santa Clara, California
(the “Stevens Creek Property”).  The Stevens Creek Property is not included in
the Property or the Project for the purposes of determining rent hereunder, and
Tenant agrees and acknowledges that the Stevens Creek Property may be sold by
Landlord and/or redeveloped for other uses at a later date, and Tenant waives
any and all claims arising out of any sale and/or redevelopment of the Stevens
Creek Property; provided, however, that the foregoing waiver shall not be
deemed to be a waiver of Tenant’s rights as an occupant of the Property to
appear at public meetings and otherwise file claims to oppose or support any
planned use or redevelopment of the Stevens Creek Property in the same manner
and to the same extent as other owners and occupants of real property in the
vicinity of the Stevens Creek Property.

1.2           Condition of
Premises.  Tenant acknowledges that
possession of the Premises is being delivered to Tenant concurrently with the
execution and delivery of this Lease, and except for Landlord’s obligation to
perform and pay for certain work in and to the Building as expressly provided
in Exhibit C, attached hereto, Tenant hereby accepts Premises in its “as
is” condition with “all faults”.  Except
as expressly provided in Sections 5.1, 7.2, 12 and 13 and Exhibit C, Landlord
shall have no obligation whatsoever to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof either prior to or during
the Term.  Tenant agrees and acknowledges
that, excepting any express representations and warranties in this Lease,
Landlord has not made any representations and warranties to Tenant concerning
the Premises (including its suitability for Tenant’s use) and Tenant has not
relied on any other representations and warranties by Landlord or Landlord’s
Representatives (defined below) or any other parties concerning the
Premises.  Tenant agrees and acknowledges
that, prior to the date hereof, Tenant has thoroughly examined the Premises for
the suitability of the Premises for Tenant’s use,

 1
 

 

including without limitation the construction and
installation of all work and equipment required for Tenant’s use and occupancy
of the Premises.

1.3           Right of First Offer.  From and after the Commencement Date, so long
as no Event of Default has occurred and is continuing, Tenant shall have a
right of first offer (“ROFO”) on any “ROFO
Space” (defined below) which Landlord may offer for rent to third parties
during the Term.  If at any time Landlord
executes a written proposal or letter of intent with a third party for all or a
portion of the ROFO Space (a “Proposal”),
Landlord will immediately offer the proposed space to Tenant on the same terms
as contained in the Proposal by delivering written notice of such offer to
Tenant.  Tenant shall then have ten (10)
days to respond to Landlord in writing indicating its election to lease the
entire space covered by such Proposal on the terms and conditions of such
Proposal or waive its rights to lease the ROFO Space on such terms, in which
case Tenant shall execute and deliver a lease for such space (together with any
payments and deposits required thereunder) within ten (10) days after Landlord’s
delivery of a written lease reflecting the terms and conditions of the
Proposal, with all other terms and conditions of any such lease to be the same
as the terms and conditions of this Lease; 
provided, however, that Tenant’s failure to exercise its election and/or
execute and deliver a lease (submitted by Landlord with all of the required
terms and conditions) for any ROFO space shall be deemed Tenant’s waiver of its
right to lease such ROFO Space, irrespective of whether the terms and
conditions of the lease of such ROFO space to a third party, other than the
terms reflected in the Proposal therefor, are different than the terms and
conditions of this Lease.  Tenant’s ROFO
shall be continuous throughout the Term, and if Landlord subsequently lowers
the rental rate, reduces the length of the term, or materially alters any of
the other terms of any written proposal rejected or waived by Tenant or enters
into any additional written proposal(s) for any ROFO Space, Landlord shall
re-submit the same to Tenant for acceptance or rejection.  Notwithstanding the foregoing, Landlord shall
have no obligations under this paragraph in connection with any transaction
whereby Landlord proposes to sell the Building to a third party purchaser who
will occupy space in the Building, regardless of whether such third party’s
occupancy commences before or after its acquisition of the Building.  The right of first offer provided under this
paragraph shall be personal to Tenant (and any Permitted Transferee) and
Landlord shall have no obligations under this paragraph if Tenant has assigned
this Lease or sublet more than twenty percent (20%)  of the Premises to any party other than a
Permitted Transferee.

As used herein, “ROFO Space”
means the following:  (i) for the first
three (3) years of the Term following the Commencement Date, the ROFO Space
shall consist only of the last full available floor of the two-story portion of
the Building (the “HP Premises”)
and the last full available floor of the building located on the Stevens Creek
Property (i.e., until and unless Landlord proposes to enter into a lease which
would leave less than one complete floor available in either the Stevens Creek
Property or the HP Premises, Landlord is not required to offer the ROFO to
Tenant for such space); and (ii) after the third (3rd) anniversary of the
Commencement Date, any rentable space which is available in the Project and the
Stevens Creek Property and not included within the Premises; provided, however,
that (1) no space in the Stevens Creek Property shall be included in the ROFO
Space from and after the date Landlord sells the Stevens Creek Property, and
(2) rentable space in the Project and the Stevens Creek Property which is not
part of the Premises shall not be ROFO Space if any existing tenant wishes to
extend or modify the terms and conditions of its lease with respect to its then
existing premises (as opposed to any new or additional ROFO Space not already
leased to such tenant).

2.             TERM.

2.1           Initial
Term.  The term of this Lease (the “Term”) shall commence on the Commencement Date   (“Commencement Date”)
set forth in the Basic Lease Information and, unless sooner terminated or extended
as provided herein, shall expire on the Expiration Date set forth in the

 2
 

 

Basic
Lease Information (the “Expiration Date”);
provided, however, that (i) if Landlord has not substantially completed the “Demising
Work” (as the foregoing terms are defined in Exhibit C, attached hereto)
on or before September 1, 2006, then the Commencement Date shall be extended by
one day for each day beyond September 1, 2006, that Landlord fails to
substantially complete the Demising Work; (ii) if there is any delay in the “substantial
completion” of the Demolition Work beyond the Demolition Deadline or the “Base
Building Repair Work” beyond the “Base Building Repair Work Deadline” (as the
foregoing terms are defined in Exhibit C) and such delay likewise causes
a delay to the substantial completion of the Tenant Work (as defined in Exhibit
C) or prevents Tenant from commencing its business operations in the
Premises on September 1, 2006, then the Commencement Date, and Tenant’s
obligation to pay Base Rent, Operating Expenses and Taxes from and after the
Commencement Date, shall be delayed by one (1) day for every one (1) day of
delay in the substantial completion of the Demolition Work beyond the
Demolition Deadline or the Base Building Repair Work beyond the Base Building Repair
Work Deadline, as applicable; and (iii) the Commencement Date, and Tenant’s
obligation to pay Base Rent, Operating Expenses and Taxes from and after the
Commencement Date, shall be extended by one (1) day for every one (1) day of
delay that Tenant is prevented from commencing its business operations in the
Premises on September 1, 2006, due to any “Landlord Delays” or “Force Majeure
Delays” (as the foregoing terms are defined in Exhibit C); provided,
however, that (1) in no event shall any such Force Majeure Delay extend the
Commencement Date in excess of one hundred twenty (120) calendar days, and (2)
if Tenant has been unable to commence its business operations in the Premises
prior to February 1, 2007, as a result of any Force Majeure Delay, either party
hereto may terminate this Lease by providing written notice to the other party,
in which case Landlord shall refund to Tenant all unapplied deposits delivered
by Tenant hereunder and Landlord and Tenant shall thereupon have no further
liability to the other under this Lease excepting obligations which expressly
survive the termination hereof.  In the
event of any of the foregoing delays in the Commencement Date, the Lease shall
nevertheless remain in full force and effect, Landlord shall not be liable to
Tenant for any loss, damage, cost or expense resulting from such delay (and
Tenant waives the provisions of any Laws to the contrary), nor shall this Lease
be void or voidable.  In case of any such
delay in the Commencement Date, after the Commencement Date has been
established, Landlord and Tenant, at the request of either party, shall confirm
the Commencement Date and Expiration Date in writing; provided, however, that
the failure of Landlord and Tenant to do so shall not alter the Commencement
Date or the Expiration Date.

Notwithstanding anything to the contrary in this
Section 2, if the Commencement Date has not occurred prior to December 1, 2006,
as a result of Landlord’s failure to complete any of the Landlord Work (subject
to extension as a result of any Tenant Delays or Force Majeure Delays), then
Tenant may terminate this Lease by written notice to Landlord, in which case
Landlord shall refund to Tenant all unapplied deposits delivered by Tenant
hereunder and Landlord and Tenant shall thereupon have no further liability to
the other under this Lease excepting 
obligations which expressly survive the termination hereof.

2.2           Early
Delivery.      
Subject to the terms and conditions of Exhibit C, Landlord shall deliver
occupancy of the Premises to Tenant for the purpose of commencing the
installation of the Tenant Work, (defined in Exhibit C), on the date
both parties have executed and delivered this Lease (the “Early
Occupancy Date”).  From and
after the Early Occupancy Date, Tenant shall be deemed to be in possession of
the Premises and shall be subject to all of the terms and conditions of this
Lease, save and except the obligation to pay Base Rent and Tenant’s Share of
Operating Costs and Taxes; provided, however, that Tenant shall nevertheless
pay Landlord for any and all services and utilities used by Tenant in the
Premises during the period commencing on the Early Occupancy Date and ending on
the Commencement Date, as reasonably determined by Landlord, which obligations
shall survive the

 3
 

 

termination
of this Lease.  From and after the Early
Occupancy Date, Tenant shall provide Landlord and its contractors and agents
access to the Premises for the purpose of completing the Landlord Work.

2.3           Option
to Extend.  So long as no Event of Default has occurred and
is continuing at the time it exercises the Option to Extend or on the
Expiration Date of the Term (or the first Extended Term, as the case may be),
Tenant shall have the right and option to extend this lease (“Option to Extend”) for two (2) additional option
periods of five (5) years (each an “Extended
Term”), upon the same terms and conditions herein set forth except
that the Base Rent (as defined in Section 3, below) shall be an amount equal to
ninety-seven and one-half percent (97.5%) of “Fair
Market Value” as defined in and determined in accordance with the
terms and conditions of Exhibit D,
attached hereto.  If Tenant exercises its
Option to Extend, for either Extended Term, Base Rent for the first twelve (12)
months of such Extended Term shall be amount determined in accordance with the
preceding sentence, and shall be subject to increases of three percent (3%) for
each subsequent twelve (12) month period during the Extended Term, adjusted as
of each annual anniversary of the expiration of the initial Term.  To exercise the Option to Extend, Tenant must
give Landlord notice in writing sent so as to be received at least two hundred
seventy (270) days prior to the Expiration Date.  If Tenant timely exercises an Option to
Extend, each applicable Extended Term shall be deemed included within the
definition of “Term” hereunder; provided, however, that Tenant’s failure to
properly exercise its Option to Extend for the initial Extended Term shall
render Tenant’s right to the second Extended Term null and void.  At Landlord’s election, Tenant’s exercise of
its Option to Extend shall be void if Tenant is in default under this Lease
beyond any applicable notice and cure period on the date it exercises its
Option to Extend or on the Expiration Date.

3.             RENT.

3.1           Payment
of Base Rent.  Commencing on the Commencement Date, and
continuing throughout the Term of the Lease, Tenant shall pay to Landlord the “Base Rent” set forth in the Basic Lease Information, in
advance, without prior notice or demand, on the first day of each and every
calendar month during the Term.  Monthly
Base Rent for any partial month at the beginning or end of the Term shall be
prorated based on the actual number of days in the month.  Within five (5) Business Days after the
execution and delivery of this Lease by Tenant and Landlord, Tenant shall pay
the sum of One Hundred Twenty Five Thousand and no/100 Dollars ($125,000.00) as
an advance payment of Base Rent, which amount shall be credited toward Tenant’s
Base Rent payable for the first calendar month (and any partial month)
occurring immediately after the Commencement Date.

3.2           Additional
Rent:  Operating Costs and Taxes.

(a)           Definitions.

(1)           “Operating Costs” means all costs of owning, managing,
operating, maintaining, repairing, replacing and restoring the Property,
including all costs, expenditures, fees and charges for the following:  (A) supplying, operating, managing,
maintaining, repairing, replacing and restoring utilities, services and systems
(including all Building Systems, sewers, storm drains, elevators,
telecommunications facilities and equipment, and providing the services
specified in Section 9.1), and taxes thereon; (B) maintaining, repairing,
restoring and replacing the Parking Facility (including resurfacing, repainting,
restriping and cleaning) and other Common Areas of the Property (including
landscaped areas); (C) compensation (including salaries, wages, employment
taxes, fringe benefits and other payroll expenses) for persons who perform
duties in connection with the operation, management, maintenance, repair and
improvement of the Property, such compensation to be appropriately allocated
for persons who also perform duties unrelated to the Property; (D) premiums
for property (including

 4
 

 

coverage
for earthquake and flood if carried by Landlord), liability, rental income and
other insurance relating to the Property, and expenditures for deductible
amounts paid under such insurance; (E) licenses, permits, certificates and
inspections; (F) complying with the requirements of any Laws;
(G) amortization of cost incurred for (i) capital improvements to the
Property that are intended to reduce Operating Costs, and (ii) any repair,
replacement or restoration of any components of the Building and the Property
that that under generally accepted accounting principles are properly
classified as capital expenditures (including without limitation HVAC
equipment, parking lot resurfacing, roof covering), with interest on the
unamortized balance at the rate paid by Landlord on funds borrowed to finance
such capital improvements or replacements (or, if Landlord finances such
improvements out of Landlord’s funds without borrowing, the rate that Landlord
would have paid to borrow such funds, as reasonably determined by Landlord),
over the useful life of such improvements or replacements, as reasonably
determined by Landlord; (H) property management fees or, if no managing agent
is retained for the Property, a sum in lieu thereof which is not in excess of
the prevailing rate for management services charged by professional management
companies for the operation of similar properties (but in no event shall any
such management fees exceed four percent (4%) of the gross rent);
(I) accounting, legal and other professional services incurred in connection
with the oper­ation of the Property and the calculation of Operating Costs and
Taxes; (J) supplies, materials, tools and rental equipment; and (K) any other
cost, expenditure, fee or charge, whether or not hereinbefore described which
in accordance with generally accepted property management practices would be
considered an expense of owning, managing, operating, maintaining, repairing,
replacing, restoring, and/or improving the Property.  The portion of Operating Costs that vary
based on occupancy for any calendar year during which average occupancy of the
Building is less than one hundred percent (100%) shall be calculated based upon
the amount of such Operating Costs that would have been incurred if the
Building had an average occupancy of one hundred percent (100%) during the
entire calendar year.

Notwithstanding
the foregoing or anything to the contrary contained in this Lease, Operating
Costs shall not include, and Tenant shall have no obligation to pay or
reimburse Landlord for any of the following: (i) ground rent payments; (ii)
interest and principal payments on loans or indebtedness secured by the
Property; (iii) costs of tenant or other special improvements for Tenant (to
the extent Landlord has agreed to pay for such improvements) or other tenants of
the Building; (iv) costs of services or other benefits which are not available
to Tenant but which are available to other tenants or occupants, or for which
Landlord is reimbursed by other tenants of the Building other than through
payment of tenants’ shares of Operating Costs and Taxes; (v) leasing
commissions, attorneys’ fees, advertising expenses, promotional expenses, and
other expenses incurred in connection with leasing space in the Building or
Project or enforcing such leases; (vi) depreciation, expense reserves, or
amortization, other than as permitted under clause (G) of the definition of
Operating Costs in the first paragraph of this provision; (vii) fines or
penalties incurred due to Landlord’s violation of any Law or late payments of
Operating Expenses; (viii) the cost of any repair, improvement, alteration,
addition, change, replacement, extraordinary repair, and other item related to
the Building or Project that under generally accepted accounting principles are
properly classified as capital expenditures, except as otherwise provided in
clause (G) of the definition of Operating Costs in the first paragraph of this
provision; (ix) any costs of repair, replacement or restoration work occasioned
by any casualty or condemnation, subject to Sections 12 and 13; (x) except for
management fees (subject to the 4% cap in subsection H of the preceding
paragraph), Landlord’s general overhead and any overhead or profit increment to
any subsidiary or affiliate of Landlord for services on or to the Building or Project,
to the extent that the cost of such service exceeds competitive costs for such
services rendered by persons or entities of similar skill, competence and
experience other than a subsidiary or affiliate of Landlord; (xi) except for
management fees (subject to the 4% cap in subsection H of the preceding
paragraph), any costs or expenses representing any amount paid for services and
materials to a (personal or business) related person, firm, or entity to the
extent such amount exceeds the amount that would have been paid for such
service or materials at the then existing market

 5
 

 

rates
in the absence of such relationship; (xii) compensation paid to any employee of
Landlord above the grade of Property Manager/Building Superintendent, including
officers and executives of Landlord; (xiii) costs of electrical energy or other
utility service furnished and/or metered directly to tenants of the Building or
Project other than Tenant, (xiv) insurance deductibles for Landlord’s insurance
in excess of $25,000 for any casualty; (xv) costs incurred in connection with
the presence of any Hazardous Materials (defined below), except to the extent
caused by the Handling (defined below) of the Hazardous Materials in question
by Tenant; (xvi) any costs relating to the structural components of the
Building to the extent such costs are at Landlord’s sole expense under Section
7.2 below;  (xvii) the costs of repairs
or maintenance to the extent Landlord is reimbursed for the cost thereof under
any warranties; (xviii) the costs of repairs, alterations, and general
maintenance to the extent necessitated as a result of the active negligence or
willful misconduct of Landlord or its agents, employees, or contractors (and to
the extent such costs are incurred as a result of the negligence or willful
misconduct of any parties other than Tenant or Tenant’s Representatives or
Invitees, Landlord agrees to make commercially reasonable efforts to seek
compensation from such parties); (xix) the cost of artwork and décor in the
Common Areas over and above the reasonable costs of such artwork and décor
typically installed in similar industrial/commercial buildings in the vicinity
of the Property; (xx) costs incurred in installing, operating, maintaining and
owning any specialty service or facilities not normally installed, operated or
maintained in buildings comparable to the Building; (xxi) charitable
contributions and donations; or (xxii) any costs or expenses incurred by
Landlord in connection with the Demolition Work, Demising Work or Base Building
Repair Work.

(2)           “Taxes” means all real property taxes and general, special
and district assessments and other govern­men­tal impositions, fees, levies and
charges of whatever kind, nature or origin, imposed on or by reason of the
ownership or use of the Property, including: 
governmental charges, fees or assessments for transit or traffic
mitigation (including area-wide traffic improvement assessments and
transportation system manage­ment fees), housing, police, fire or other
governmental service or purported benefits to the Property, including
assessments, taxes, fees, levies and charges imposed by governmental agencies
for such purposes as street, sidewalk, road and utility construction and
maintenance, refuse removal and for other governmental services; personal
property taxes assessed on the personal property of Landlord used in the
operation of the Property; service payments in lieu of taxes; any tax, fee or
excise on the use or occupancy of any part of the Property, or on rent for the
Property, or for space in the Property; and any other fees, taxes and
assessments of any kind or nature whatsoever levied or assessed in addition to,
in lieu of or in substi­tution for existing or additional real or personal
property taxes on the Property or the personal property described above; any
increases in the foregoing caused by changes in assessed valuation, tax rate or
other factors or circumstances; and the reasonable cost of contesting by
appropriate proceedings the amount or validity of any taxes, assessments or
charges described above; but excluding (i) income taxes measured by the net
income of Landlord and franchise, transfer, gift, sales, estate and inheritance
taxes; (ii) penalties and interest, other than those attributable to Tenant’s
failure to comply timely with its obligations pursuant to this Lease; (iii)
increases in Taxes (whether increases result from increased rate, valuation, or
both) attributable to additional improvements to the Building or Project so
long as such increases have increased Taxes by over ten percent (10%) of the
then-applicable amounts, unless such improvements are constructed for Tenant’s
primary benefit or for the common benefit of Tenant and other tenants in the
Project; and (iv) any taxes, excises, levies, fees and charges in excess of the
amount which would be payable if such expense were paid in installments over
the longest allowable term, but only to the extent Landlord shall have the
right to pay such taxes, excises, levies, fees and charges in installments as
of the Lease Date without lodging any formal appeal or commencing any
proceeding with any taxing authority to implement installment payments or make
a change to any such installment payments existing as of the Lease Date.  To the

 6
 

 

extent
paid by Tenant or other tenants as “Tenant’s Taxes” (as defined in
Section 8), “Tenant’s Taxes” shall be excluded from Taxes.

If
Tenant disputes the amount or validity of any Taxes payable by Tenant
hereunder, then upon not less than thirty (30) days prior written notice,
Tenant shall have the right to contest and defend against the same on Landlord’s
behalf, and in good faith to diligently conduct any necessary proceedings in
connection therewith; provided, however, that any such contest shall be at
Tenant’s sole expense.  Landlord may
elect to participate in any such contest by Tenant, in which case Tenant shall
reimburse Landlord’s reasonable out-of-pocket expenses (including attorneys’
fees) incurred thereby upon Landlord’s written demand.  Tenant may not postpone or defer payment of
any contested or appealed Taxes, but shall be retroactively credited with any
savings or refund of Taxes obtained by Landlord by reason of Tenant’s
appeal.  Tenant shall indemnify, defend
and hold Landlord harmless from and against any and all claims, damages,
liabilities and costs, including, without limitation, penalties, interest and
attorneys’ fees, costs and disbursements, arising from or related to any such
contest, which obligation shall survive the expiration or earlier termination
of this Lease.

(3)           “Tenant’s Share” means the Tenant’s Share as set forth in the
Basic Lease Information.  If the rentable
area of the Premises is changed by Tenant’s leasing of additional space
hereunder or for any other reason, Tenant’s Share shall be adjusted accordingly.

(b)           Additional
Rent.

(1)           Commencing
on the Commencement Date, and continuing throughout the Term of the Lease,
Tenant shall pay Landlord, as “Additional Rent,”
Tenant’s Share of the sum of Operating Costs and Taxes for each calendar year,
or portion thereof, occurring during the Term.

(2)           As
soon as reasonably practicable after the end of each calendar year, Landlord
shall notify Tenant of Landlord’s estimate of Operating Costs, Taxes and Tenant’s
Additional Rent for the following calendar year.  Commencing on the first day of January of
each calendar year and continuing on the first day of every month thereafter in
such year, Tenant shall pay to Landlord one-twelfth (1/12th) of the estimated
Additional Rent.  If Landlord thereafter
estimates that Operating Costs or Taxes for such year will vary from Landlord’s
prior estimate, Landlord may, by notice to Tenant, revise the estimate for such
year (and Additional Rent shall thereafter be payable based on the revised
estimate).

(3)           As
soon as reasonably practicable after the end of each calendar year, Landlord
shall furnish Tenant a statement with respect to such year, showing Operating
Costs, Taxes and Additional Rent for the year, and the total payments made by
Tenant with respect thereto; provided, however, that Landlord’s failure to
deliver its statement (for up to, but not in excess of, three hundred sixty
five (365) days after the end of such year) shall not waive or relinquish
Landlord’s right to reconcile Operating Costs and Taxes, collect any underpayment
by Tenant and refund any overpayment by Tenant, and prior to Tenant’s receipt
of Landlord’s reconciliation statement Tenant shall continue to pay estimated
Operating Costs and Taxes at the most recent estimated monthly amount provided
by Landlord to Tenant.  Unless Tenant
raises any objections to Landlord’s statement within one hundred eighty (180)
days after receipt of the same, such statement shall conclusively be deemed
correct and Tenant shall have no right thereafter to dispute such statement or
any item therein or the computation of Additional Rent based thereon.  If Tenant does object to such statement
within the required time period, then Landlord shall provide Tenant with
reasonable verification of the figures shown on the statement and the parties
shall negotiate in good faith to resolve any disputes.  Notwithstanding the foregoing,

 7
 

 

Tenant
shall only be permitted to engage a certified public accountant, or other third
party service provider primarily engaged in providing lease administration and
audit services, to review Landlord’s statement, and in no event shall Tenant be
entitled to engage any accountant for such review whose compensation is
measured, in whole or in part, upon any adjustments to Landlord’s statement as
a consequence of such review.  Any
objection of Tenant to Landlord’s statement and resolution of any dispute shall
not postpone the time for payment of any amounts due Tenant or Landlord based
on Landlord’s statement, nor shall any failure of Landlord to deliver Landlord’s
statement for not more than three hundred sixty five (365) days after the end
of the year in question relieve Tenant of Tenant’s obligation to pay any
amounts due Landlord based on Landlord’s statement.

(4)           If
Tenant’s Additional Rent as finally determined for any calendar year exceeds
the total payments made by Tenant on account thereof, Tenant shall pay Landlord
the deficiency within thirty (30) days of Tenant’s receipt of Landlord’s
statement.  If the total payments made by
Tenant on account thereof exceed Tenant’s Additional Rent as finally determined
for such year, Tenant’s excess payment shall be credited toward the rent next
due from Tenant under this Lease or refunded to Tenant if such determination is
at or after the expiration or earlier termination of the Lease.  For any partial calendar year at the
beginning or end of the Term, Additional Rent shall be prorated on the basis of
a 365-day year by computing Tenant’s Share of the Operating Costs and Taxes for
the entire year and then prorating such amount for the number of days during
such year included in the Term. 
Notwithstanding the termination of this Lease, Landlord shall pay to
Tenant or Tenant shall pay to Landlord, as the case may be, within thirty (30) days
after Tenant’s receipt of Landlord’s final statement for the calendar year in
which this Lease terminates, the difference between Tenant’s Additional Rent
for that year, as finally determined by Landlord, and the total amount
previously paid by Tenant on account thereof. 
Notwithstanding the foregoing or anything to the contrary contained in
this Lease, Tenant shall have no obligation to pay for any Operating Costs or
Taxes that are fairly allocable to any time period before the Commencement Date
or after the Expiration Date (or earlier termination of this Lease).

If
for any reason Taxes for any year during the Term are reduced, refunded or
otherwise changed, Tenant’s Additional Rent shall be adjusted accordingly.  If Taxes are temporarily reduced as a result
of space in the Building being leased to a tenant that is entitled to an
exemption from property taxes or other taxes, then for purposes of determining
Additional Rent for each year in which Taxes are reduced by any such exemption,
Taxes for such year shall be calculated on the basis of the amount the Taxes
for the year would have been in the absence of the exemption.  The obligations of Landlord to refund any
overpayment of Additional Rent and of Tenant to pay any Additional Rent not
previously paid shall survive the expiration or earlier termination of this
Lease.

3.3           Payment
of Rent.  All amounts payable or reimbursable by Tenant
under this Lease, including late charges and interest, shall constitute rent
and shall be payable and recoverable as rent in the manner provided in this
Lease.  Any sums payable to Landlord on
demand under the terms of this Lease shall be payable within thirty (30) days
after notice from Landlord of the amount due. 
All rent shall be paid without offset, recoupment or deduction in lawful
money of the United States of America to Landlord at Landlord’s Address for
Payment of Rent as set forth in the Basic Lease Information, or to such other
person or at such other place as Landlord may from time to time designate.

4.             SECURITY
DEPOSIT.  Within five (5) Business Days after
both parties have executed and delivered this Lease (the “Deposit
Delivery Date”), Tenant shall deposit with Landlord the amount
specified in the Basic Lease Information as the Security Deposit (the “Security Deposit”) as security for the full
and faithful performance of each and every obligation of Tenant under the
Lease.  If an Event of Default occurs
under this Lease, Landlord may, without prejudice to any other remedy Landlord
has,

 8
 

 

apply all or a part of the Security Deposit to:  (i) any Event of Default in the payment
of rent or other sum payable hereunder; (ii) any amount that Landlord may
spend in exercising Landlord’s rights under this Lease or otherwise by reason
of the Event of Default:  and/or
(iii) any expense, loss or damage that Landlord may suffer because of any
Event of Default by Tenant hereunder, including costs and reasonable attorneys’
fees incurred by Landlord to recover possession of the Premises following an
Event of Default.  In the event Landlord
so applies all or a part of the Security Deposit, Tenant shall pay to Landlord
on demand an amount sufficient to replenish the Security Deposit to the full
amount thereof, and Tenant’s failure to do so within ten (10) Business Days
after receipt of such demand from Landlord shall constitute an Event of
Default.  Within thirty (30) Business
Days after the expiration of the Term or earlier termination of this Lease and
Tenant’s surrender of possession of the Premises to Landlord, Landlord shall
return to Tenant the Security Deposit, less any portion thereof which may have
been applied by Landlord as permitted hereunder (including without limitation
Landlord’s retention of any amounts required to remedy an Event of Default
arising out of Tenant’s failure to surrender the Premises to Tenant as required
hereunder, in an amount reasonably estimated by Landlord).  If Landlord transfers its interest in the
Building, Landlord shall deliver or credit the Security Deposit to Landlord’s
successor-in-interest, and Landlord thereupon shall be relieved of further
responsibility with respect to the Security Deposit.

Tenant shall be entitled to deliver all or part of the
Security Deposit in the form of an unconditional and irrevocable letter of
credit (the “Letter of Credit Security Deposit”)
in form and issued by a national bank with an office in the San Francisco Bay
Area (i.e., wherein said letter of credit may be drawn) reasonably satisfactory
to Landlord, as security for the full and faithful performance of every
provision of this lease to be thereafter performed by Tenant (the Letter of
Credit Security Deposit, together with (1) any cash from time to time held
by Landlord as part of the security deposit following a draw on the Letter of
Credit Security Deposit or (2) any cash from time to time held by Landlord
as part of the security deposit under this Section 4, is sometimes referred to
herein as the “Security Deposit”).  If Tenant defaults with respect to any
provision of this Lease, and such default remains uncured beyond applicable
cure periods provided herein, then Landlord may, as applicable, (i) use,
apply or retain all or any part of the Security Deposit which is then held by
Landlord in the form of cash (herein, the “Cash
Security Deposit”), or (ii) draw on any Letter of Credit
Security Deposit, in whole or in part, in either case to the extent necessary
in Landlord’s reasonable judgment to cure such default (provided that Landlord
may draw upon any Letter of Credit Security Deposit in whole in the event
Tenant defaults in its obligation to timely deliver a replacement letter of
credit as required hereunder), and Landlord may use, apply or retain all or any
part of the proceeds thereof, for the payment of any rent and any other sum in
default (beyond applicable cure periods provided herein), or for the payment of
any other amount which Landlord is entitled to spend in exercising its rights
under this Lease or otherwise by reason of Tenant’s default (beyond applicable
cure periods provided herein), or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant’s Event of Default.  If any portion of the Cash Security Deposit
or proceeds from a draw on any Letter of Credit Security Deposit is so used or
applied, Tenant shall, within thirty (30) days after written demand therefor,
as applicable, cause the issuing bank to restore any Letter of Credit Security
Deposit to its original amount or deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount, and Tenant’s
failure to do so shall be a material breach of this Lease.  Landlord shall not be obligated to keep any
Cash Security Deposit or any proceeds from a draw on the Letter of Credit
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on either.

Nothing in this Section 4 shall be construed to limit
the amount of damages recoverable by Landlord or any other remedy to the amount
of the Security Deposit.

 9
 

 

Any letter of credit delivered by Tenant hereunder as the Letter of
Credit Security Deposit shall expire no earlier than twelve (12) months after
issuance and shall provide for automatic renewals of one-year periods unless
the issuer has provided Landlord written notice of non-renewal at least thirty
(30) days prior to the then expiration date, in which case Tenant shall provide
a replacement letter of credit meeting the requirements of this Section 4 no
later than fifteen (15) days prior to the expiration date of the then
outstanding and expiring letter of credit; provided, however, that any
replacement letter of credit shall not be required to have an effective date
earlier than the expiration date of the then existing letter of credit being so
replaced.  Each subsequent replacement
letter of credit shall expire no earlier than twelve (12) months from the
expiration date of the then outstanding and expiring letter of credit and shall
provide for automatic 1-year renewals as described above.  Tenant shall ensure that at all times during
the Term of this Lease and for thirty (30) days after expiration of the
Term, cash or one or more unexpired letters of credit in the aggregate amount
of the Security Deposit required hereunder shall have been delivered to
Landlord.  Failure by Tenant to deliver cash
or any replacement letter of credit as required above shall entitle Landlord to
draw under the outstanding letter(s) of credit and to retain the entire
proceeds thereof for application as the Security Deposit under this Lease.  Each letter of credit shall be for the
benefit of Landlord and its successors and assigns, shall be expressly
transferable to such successor and assigns (and Tenant shall pay all costs
associated with any such transfer), and shall entitle Landlord or its
successors or assigns to draw from time to time under the letter of credit in
portions or in whole upon presentation of (i) a sight draft, and (ii) a
statement executed by Landlord stating that Landlord is entitled to make the
subject draw pursuant to the terms of this Lease.

So long as no Event of Default has occurred and is continuing and/or no
Event of Default has occurred within the previous twelve (12) month period, on
each anniversary of the Commencement Date (or the date Tenant delivers the
Security Deposit to Landlord pursuant to the following paragraph) Tenant shall
be entitled to reduce the amount of the Security Deposit by Four Hundred Fifty
Thousand and no/100 Dollars ($450,000.00); provided, however, that in no event
shall the Security Deposit be reduced below the minimum amount of One Million
and no/100 Dollars ($1,000,000.00).  If
an Event of Default has occurred and is continuing on any date when Tenant
would be entitled to reduce the Security Deposit as provided in this paragraph
and/or an Event of Default has occurred within the previous twelve (12) month
period, then Tenant shall not be entitled to any reduction of the Security
Deposit at such time and may only resume such reductions in the Security
Deposit amount on the following anniversary of the Commencement Date, subject
to the same requirement that no Event of Default has occurred within the
previous twelve (12) month period as a condition to any subsequent reduction.

Notwithstanding anything to the contrary in this Lease, if, prior to
the Deposit Delivery Date, Tenant provides to Landlord a guaranty of this Lease
by Agilent Technologies, Inc., in the form attached hereto as Exhibit E
(the “Agilent Guaranty”), then Tenant’s
obligation to post a Security Deposit hereunder shall be suspended, subject to
the terms and conditions of this Section 4. 
If, at any time during the Term, Tenant achieves a Standard and Poor’s
rating of not less than BBB- and maintains the same for a continuous period of
one hundred eighty (180) days after Tenant’s written notice to Landlord that it
has been rated at least BBB- by Standard and Poor’s (the “Minimum
Rating”) or posts the Security Deposit, then the Agilent Guaranty
may be revoked and Tenant’s obligation to post the Security Deposit shall be
suspended for so long as Tenant continuously satisfies the Minimum Rating thereafter.  Landlord agrees and acknowledges that Tenant
is not required to provide the Agilent Guaranty as a condition to the
effectiveness of this Lease, and may instead post the Security Deposit on or
before the Deposit Delivery Date. 
Landlord further acknowledges and agrees that if Tenant provides an
Agilent Guaranty in lieu of the Security Deposit, then Tenant may at anytime
thereafter post the Security Deposit (in the form of cash or a Letter of Credit
Security Deposit) with Landlord, in which event the Agilent Guaranty shall
thereupon be deemed canceled, void and of no further force or effect, and
Landlord shall immediately

 10
 

 

return the
original executed copy of the Agilent Guaranty to Tenant.  If Tenant has posted the Security Deposit and
thereafter achieves the Minimum Rating, Landlord shall refund the Security
Deposit (including returning any original letter of credit then held by
Landlord) upon the expiration of the one hundred eighty (180) day period
required to satisfy the Minimum Rating. 
If Tenant is at any time entitled to suspension of its obligation to
deliver the Security Deposit and Tenant thereafter becomes obligated to deliver
the Security Deposit to Landlord pursuant to the terms and conditions of this
Section 4, then Tenant shall be entitled to the reductions in the amount of the
Security Deposit that Tenant would have obtained pursuant to the preceding
paragraph (and subject to the terms and conditions thereof) and shall only be
required to deliver to Landlord the amount of the Security Deposit which would
have been held by Landlord at such time if the Security Deposit had been
delivered to Landlord on the Deposit Delivery Date and periodically reduced
thereafter in accordance with the preceding paragraph.  During all periods within the Term in which
the Agilent Guaranty is not in force and Tenant has not delivered the Security
Deposit to Landlord based on its satisfaction of the Minimum Rating, (1) each
payment of rent by Tenant shall constitute a representation and warranty by
Tenant to Landlord that, to Tenant’s knowledge, Tenant maintains the Minimum
Rating at such time and that Tenant is not aware of any facts or circumstances
that would be reasonably likely to reduce Tenant’s Standard and Poor’s rating
below the Minimum Rating, and (2) Tenant shall make commercially reasonable
efforts to update Landlord on the status of its Standard and Poor’s rating, and
if during any such period Tenant receives notice that its Standard and Poor’s
rating has been reduced below BBB-, Tenant shall immediately provide written
notice thereof to Landlord and shall deliver the Security Deposit to Landlord
within ten (10) Business Days thereafter.

Tenant waives the provisions of California Civil Code
Section 1950.7, and all other provisions of law now in force or that
become in force after the date of execution of this Lease, that provide that
Landlord may claim from a security deposit only those sums reasonably necessary
to remedy Events of Default in the payment of rent, to repair damage caused by
Tenant, or to clean the Premises. 
Landlord and Tenant agree that Landlord may, in addition, claim those
sums reasonably necessary to compensate Landlord for any foreseeable or
unforeseeable loss or damage caused by an Event of Default.  Tenant may not assign or encumber the
Security Deposit, and any attempt to do so shall be void and, in all events,
not binding upon Landlord.

5.             USE
AND COMPLIANCE WITH LAWS.

5.1           Use.  The Premises shall be used and occupied only
for general business office purposes, research and development (including
semiconductor testing lab work and related storage uses) and for other legal
uses and purposes related thereto. 
Tenant, at its expense, shall comply with all present and future Laws
relating to the condition, use or occupancy of the Premises (and shall make any
repairs, alterations or improvements as required to comply with all such Laws),
and shall observe the “Rules and Regulations” (as defined in Section 27);
provided, however, that Landlord, not Tenant, shall be required to make and pay
the cost of any alterations or improvements to the Premises or Building that
are necessary to comply with any such Laws or Rules and Regulations, unless
such alterations or improvements are required as a result of the Tenant’s
particular use of the Premises (as opposed to improvements that are required to
be made by landlords of office and research and development properties
generally) or by Alterations to the Premises made and paid for by Tenant, in
which case Tenant shall be required to make and pay for such alterations or
improvements.  The term “Laws,” as used in this Lease, means all statutes,
ordinances, codes, rules, regulations, requirements, licenses, permits,
certificates, judgments, decrees, orders or directives of any federal, state,
county or local governmental or quasi-governmental authority, agency,
department, board, panel or court now in force or which may hereafter be in
force, as same may be amended.  Tenant
shall not do, bring, keep or sell anything in or about the Premises that is prohibited
by, or that will cause a cancellation of or an increase

 11
 

 

in
the existing premium for (unless Tenant agrees in writing to pay for such
increase), any insurance policy covering the Property or any part thereof.  Tenant shall not permit the Premises to be
occupied or used in any manner that will constitute waste or a nuisance, or
disturb the quiet enjoyment of or otherwise annoy other tenants in the
Building.  Without limiting the
foregoing, the Premises shall not be used for educational activities, practice
of medicine or any of the healing arts, providing social services, for any
governmental use (including embassy or consulate use), or for personnel agency,
customer service office, studios for radio, television or other media, travel
agency or reservation center operations or uses, except to the extent such uses
are merely incidental to Tenant’s primary business operations, or part of the
services provided by Tenant to its employees and customers, at the
Premises.  Tenant shall not, without the
prior consent of Landlord, (i) bring into the Building or the Premises anything
that may cause substantial noise, odor or vibration, overload the floors in the
Premises or the Building  Systems, or
jeopardize the structural integrity of the Building or any part thereof; (ii)
connect to the utility systems of the Building any apparatus, machinery or
other equipment other than equipment that would exceed the electrical or other
utility capacity of the Building; or (iii) connect to any electrical circuit in
the Premises any equipment or other load with aggregate electrical power
requirements which would be reasonably likely to overload the rated capacity of
the circuit or otherwise interfere with the regular operation of the electrical
systems serving the Building.  The term “Building Systems,” as used in this Lease, means the heating,
ventilating and air-conditioning (“HVAC”),
mechanical, elevator, plumbing and sewer, electrical, fire protection, life
safety, security and other systems in the Building and all components thereof,
but excluding any supplemental or special HVAC, mechanical, elevator, plumbing
and sewer, electrical, fire protection, life safety, security and other systems
installed by Tenant in connection with the Lab Work (as defined in Exhibit C)
constructed at Tenant cost, as supplemented by any other specific items
Landlord and Tenant agree in writing to include or exclude from the Building
Systems at or prior to the time Landlord approves Tenant’s Construction
Drawings pursuant to Exhibit C.

5.2           Hazardous
Materials.

(a)           Definitions.

(1)           “Hazardous Materials” shall mean any substance, material or
waste (A) that now or in the future is regulated or governed by, requires
investigation or remediation under, or is defined as a hazardous waste,
hazardous substance, hazardous material, pollutant or contaminant under any
Laws, including the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. § 9601 et  seq., the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et  seq., and
Sections 25117 and 25316 of the California Health and Safety Code, or
(B) that is toxic, explosive, corrosive, flammable, radioactive,
carcinogenic, dangerous or otherwise hazardous, including gasoline, diesel
fuel, petroleum hydrocarbons, polychlorinated biphenyls (PCBs), asbestos, radon
and urea formaldehyde foam insulation.

(2)           “Environmental Requirements” shall mean all present and
future Laws and other requirements of any kind applicable to Hazardous
Materials.

(3)           “Handled” and “Handling” shall
mean and refer to any installation, generation, storage, use, disposal,
discharge, release or transportation of Hazardous Materials by Tenant or
Landlord, as applicable, or their respective agents, employees, contractors,
licensees, assignees, sublessees, transferees or representatives (collectively,
“Representatives”) or their respective
invitees (collectively, “Invitees”), at
or about the Premises and/or the Property.

 12
 

 

(4)           “Environmental Losses” shall mean all costs and expenses of
any kind (including attorneys’ fees), damages, including foreseeable and
unforeseeable consequential damages, fines and penalties incurred in connection
with any violation of and/or compliance with Environmental Requirements and all
losses of any kind attributable to the diminution of value, loss of use or
adverse effects on marketability or use of any portion of the Premises or
Property.

(b)           Tenant’s
Covenants.  No Hazardous Materials shall be Handled by
Tenant at or about the Premises or Property without Landlord’s prior written
consent, which consent may be granted, denied, or conditioned upon compliance
with Landlord’s requirements, all in Landlord’s reasonable discretion.  Notwithstanding the foregoing, (i) normal
quantities and use of those products containing small amounts of Hazardous
Materials customarily used in the conduct of general office activities, such as
copier fluids and cleaning supplies, and (ii) the Hazardous Materials
designated, and limited to the quantities listed, on Exhibit F, attached
hereto (collectively, “Permitted Hazardous
Materials”), may be used and stored at the Premises without Landlord’s
prior written consent, provided that Tenant’s activities at or about the
Premises and Property and the Handling by Tenant of all such products and the
Hazardous Materials therein shall comply at all times with all Environmental
Requirements.  At the expiration or
termination of the Lease, Tenant shall promptly remove from the Premises and
Property all Hazardous Materials Handled by Tenant at the Premises or the
Property.  Tenant shall keep Landlord
fully and promptly informed of all Handling by Tenant of Hazardous Materials
other than Permitted Hazardous Materials. 
Tenant shall be responsible and liable for the compliance with all of the
provisions of this Section by all of Tenant’s Representatives and Invitees, and
all of Tenant’s obligations under this Section (including its indemnification
obligations under paragraph (e) below) shall survive the expiration or earlier
termination of this Lease.

(c)           Compliance.  Tenant shall at Tenant’s expense promptly
take all actions required by any governmental agency or entity in connection
with or as a result of the Handling by Tenant of Hazardous Materials Handled by
Tenant or its Representatives at or about the Premises or Property, including
inspection, monitoring and testing, performing all cleanup, removal and
remediation work required with respect to such Hazardous Materials, complying
with all closure requirements and post-closure monitoring, and filing all
required reports or plans.  All of the
foregoing work and all Handling by Tenant of all Hazardous Materials shall be
performed in a good, safe and workmanlike manner by consultants and contractors
qualified and licensed to undertake such work and in a manner that will not
interfere with any other tenant’s quiet enjoyment of the Property or Landlord’s
use, operation, leasing and sale of the Property.  Tenant shall deliver to Landlord prior to
delivery to any governmental agency, or promptly after receipt from any such
agency, copies of all permits, manifests, closure or remedial action plans,
notices, and all other documents or communications relating to the Handling by
Tenant of Hazardous Materials and/or compliance with Environmental Requirements
regarding same at or about the Premises or Property.  If any lien attaches to the Premises or the
Property in connection with or as a result of the Handling by Tenant of
Hazardous Materials, and Tenant does not cause the same to be released, by payment,
bonding or otherwise, within ten (10) days after Tenant’s receipt of written
notice of the attachment thereof, Landlord shall have the right but not the
obligation to cause the same to be released and any sums expended by Landlord
(plus Landlord’s administrative costs) in connection therewith shall be payable
by Tenant within thirty (30) days after its receipt of a written demand.

(d)           Landlord’s
Rights.  Landlord shall have the right, but not the
obligation, to enter the Premises at any reasonable time (upon reasonable prior
notice to Tenant and subject to Tenant’s reasonable security requirements)
(i) to confirm Tenant’s compliance with the provisions of this
Section 5.2, and (ii) to perform Tenant’s obligations under this
Section if Tenant has failed to do so after reasonable notice to Tenant.  If there is any Handing by Tenant of
Hazardous Materials at the Premises

 13
 

 

that
are not Permitted Hazardous Materials, then Landlord shall also have the right
to engage qualified Hazardous Materials consultants to inspect the Premises and
review the Handling by Tenant of Hazardous Materials, including review of all
permits, reports, plans, and other documents regarding same.  Tenant shall pay to Landlord within thirty
(30) days after Tenant’s receipt of a written demand any reasonable
out-of-pocket costs of Landlord’s consultants’ incurred by Landlord in
performing Tenant’s obligations under this Section.  Landlord shall not be responsible for any
interference caused by Landlord’s entry into the Premises; provided, however,
that Landlord shall use reasonable efforts to minimize any interference with
Tenant’s business during any such entry.

(e)           Indemnification.  Tenant agrees to indemnify, defend, protect
and hold harmless Landlord and its constituent partners or members and its or
their partners, members, directors, officers, shareholders, employees and
agents against and from all Environmental Losses and all other claims, actions,
losses, damages, liabilities, costs and expenses of every kind, including
reasonable attorneys’, experts’ and consultants’ fees and costs, incurred at
any time and arising from or in connection with the Handling by Tenant of
Hazardous Materials at or about the Property in violation of Environmental
Requirements.  Landlord agrees to
indemnify, defend, protect and hold harmless Tenant and its directors,
officers, shareholders, employees and agents against and from all Environmental
Losses and all other claims, actions, losses, damages, liabilities, costs and
expenses of every kind, including reasonable attorneys’, experts’ and consultants’
fees and costs, incurred at any time and arising from or in connection with (i)
the Handling by Landlord of Hazardous Materials at or about the Property in
violation of Environmental Requirements, and (ii) any Hazardous Materials
existing on,  under, or about the
Building or Project as of the date of this Lease.

(f)            Landlord’s
and Tenant’s Disclaimer.  To the best knowledge of Landlord, (i) no
Hazardous Materials are present in, on or under the Premises or Property or the
soil, surface water or groundwater thereof in violation of any applicable
Environmental Requirements, (ii) no underground storage tanks are present on
the Property, and (iii) no action, proceeding or claim is pending or threatened
regarding the Property concerning any Hazardous Materials pursuant to any
Environmental Requirements.  Tenant
agrees and acknowledges that, except for the express representations in the
preceding sentence, Landlord and its agents have not made any representations
or warranties concerning the environmental condition of the Project and
Premises, including without limitation the presence of any Hazardous Materials
located at or about the Premises or the Project, and Tenant agrees that it has
relied on its own investigation to determine the environmental condition of the
Premises and has elected to proceed with the Lease based on its own evaluation
of such condition as it may affect Tenant’s use and occupancy of the
Premises.  Landlord has obtained a Phase
I environmental assessment concerning the Project and Tenant acknowledges its
receipt and review of such report prior to the Lease Date.  Notwithstanding the foregoing or anything to
the contrary in this Lease, under no circumstance shall Tenant be liable for
any claims of any type or nature, directly or indirectly arising out of or in
connection with any Hazardous Materials present at any time on or about the
Premises or Project, or the violation of any Environmental Requirements, except
to the extent that any of the foregoing actually results from the Handling of
Hazardous Materials  by Tenant or its
Representatives or Invitees in violation of applicable Environmental
Requirements.

6.             ALTERATIONS.

6.1           Landlord’s
Consent.

(a)           Tenant
shall not make or permit to be made any alterations, additions, installations
or improvements within, on, to or about the Premises or any part thereof
(singularly and

 14
 

 

collectively,
“Alterations”) without the prior written
consent of Landlord in each instance. 
Notwithstanding the foregoing, Tenant may make the following Alterations
(“Minor Alterations”) without the prior written approval of Landlord:  any Alterations that do not materially affect
any of the Building Systems, the outside appearance of the Building or the
structural components of the Building, and do not exceed an aggregate cost of
$100,000 in any one instance and otherwise 
conform with the requirements stated in Section 6.1(b) clauses (i)
through (iv) below, and that nothing herein shall alter Tenant’s obligation to
remove Alterations as provided in this Lease.  Tenant shall on request of Landlord
promptly provide Landlord with all cost and other information relating to
Tenant’s compliance with the foregoing conditions.

(b)           Landlord
will not unreasonably withhold or delay its consent to any Alterations,
provided that all of the following conditions shall be satisfied:  (i) the Alterations do not affect the
outside appearance of the Building; (ii) the Alterations do not materially
adversely affect the structural integrity of the Building or any part thereof;
(iii) excepting signage approved by Landlord, the Alterations are to the
interior of the Premises and do not materially adversely affect any part of the
Building outside of the Premises; and (iv) the Alterations do not
adversely affect the proper functioning of the Building Systems or other
utilities, systems and services of the Building, or materially increase the
usage thereof by Tenant.  The final plans
and specifications for the Alterations, any subsequent changes thereto, and all
contractors and subcontractors who will perform them shall be subject to
Landlord’s approval, which approval shall not be unreasonably be withheld.  All costs and expenses incurred in connection
with the Alterations, including the construction and installation thereof, the
preparation of the plans and specifications therefor, and the attaining of all
necessary governmental approvals and permits, shall be paid by Tenant.  Upon Landlord’s written demand, Tenant shall
pay to Landlord the actual out-of-pocket costs and expenses reasonably incurred
by Landlord in having its consultants review Tenant’s plans and specifications
and inspecting the Alterations to determine whether they are being performed in
accordance with the approved plans and specifications and in compliance with
Laws, including the fees of any architect or engineer employed by Landlord for
such purpose.

(c)           Not
less than fifteen (15) days nor more than thirty (30) days prior to
commencement of any Alterations, Tenant shall notify Landlord of the work
commencement date so that Landlord may post notices of nonresponsibility about
the Premises, and to the extent applicable, Tenant shall provide copies to
Landlord of any and all permits and plans associated with any Alterations.  All Alterations must comply with all Laws,
the other terms of this Lease, and the final plans and specifications approved
by Landlord, and Tenant shall fully and promptly comply with and observe any
rules and regulations of  Landlord then
in force with respect to the making of Alterations and/or imposed by Landlord
in connection with its approval of the plans and specifications for the
Alterations (to the extent Landlord has approval rights with respect
thereto).  Landlord’s review and approval
of Tenant’s plans and specifications are solely for Landlord’s benefit, and
Landlord shall have no duty toward Tenant, nor shall Landlord be deemed to have
made any representation or warranty to Tenant, with respect to the safety,
adequacy, correctness, efficiency or compliance with Laws of the design of the
Alterations, the plans and specifications therefor, or any other matter
regarding the Alterations.  Tenant shall
be responsible for any additional alterations and improvements required by Laws
to be made to or in the Building as a result of any Alterations to the Premises
made by or for Tenant.

6.2           Ownership
and Surrender of Alterations.  If and when Landlord consents to an
Alteration, Landlord shall also notify Tenant in writing of Landlord’s election
either to: (i) allow such improvement to remain at the Premises at the
termination of this Lease; or (ii) require Tenant to remove such improvement at
the termination of this Lease.  With
respect to Minor Alterations, Tenant may request in writing that Landlord elect
either (i) or (ii) above.  Upon their
installation, all Alterations,

 15
 

 

including,
but not limited to, wall covering, paneling and built-in cabinetry, but
excluding Trade Fixtures (as hereinafter defined), shall become a part of the
realty and belong to Landlord and shall be surrendered with the Premises except
to the extent Landlord has required removal of any such Alterations under
subsection (ii) above (and has not subsequently waived such requirement), in
which case, as a condition of Tenant’s surrender of the Premises to Landlord,
Tenant shall remove from the Premises, at Tenant’s expense, upon the expiration
or earlier termination of the Lease, any such Alterations installed by Tenant,
and Tenant’s obligation hereunder shall survive the expiration or earlier
termination of the Lease. 
Notwithstanding anything to the contrary in this Lease, Landlord hereby
agrees that Tenant shall not be required to remove the “Office TI Work”, as
defined in Exhibit C.

6.3           Liens.  Tenant shall pay when due all claims for
labor, materials and services furnished by or at the request of Tenant or
Tenant’s Representatives.  Tenant shall
keep the Premises, the Building and the Property free from all liens, security
interests (with the exception of security instruments on equipment leased by
Tenant) and encumbrances (including, without limitation, all mechanic’s liens
and stop notices) created as a result of or arising in connection with any
Alterations or any other labor, services or materials provided for or at the
request of Tenant or Tenant’s Representatives, or any other act or omission of
Tenant or Tenant’s Representatives, or persons claiming through or under them
(such liens, security interests and encumbrances singularly and collectively
are herein called “Liens”).  Tenant shall not use materials in connection
with the Alterations that are subject to any Liens.  Tenant shall indemnify Landlord against, and
hold Landlord harmless from: 
(a) all Liens; (b) the removal of all Liens and any actions or
proceedings related thereto; and (c) all Claims in connection with the
foregoing.  If Tenant fails to remove any
Liens caused by Tenant within fifteen (15) days after Tenant receives notice of
the filing of any such Liens, then, in addition to any other rights and
remedies available to Landlord, Landlord may take any action necessary to discharge
such Liens, including payment to the claimant on whose behalf the Lien was
filed.  Any sums expended by Landlord
(plus Landlord’s administrative costs) in connection with any such action shall
be payable by Tenant on demand with interest thereon from the date of
expenditure by Landlord at the Interest Rate (as defined in Section 16.2).

6.4           Additional
Requirements.  Tenant shall obtain all necessary permits and
certificates for the commencement and performance of Alterations and for final
approval thereof upon completion, and shall cause the Alterations to be
performed in compliance therewith and with all applicable Laws and insurance
requirements, and in a good and workmanlike manner.  Tenant, at its expense, shall diligently
cause the cancellation or discharge of all notices of violation arising from or
otherwise connected with Alterations, or any other work, labor, services or
materials done for or supplied to Tenant or Tenant’s Representatives, or by any
person claiming through or under Tenant or Tenant’s Representatives.  Alterations shall be performed so as not to
unreasonably interfere with any other tenant in the Building, cause labor
disharmony therein, or delay or impose any additional expense on Landlord in the
maintenance, repair or operation of the Building.  Throughout the performance of the
Alterations, Tenant, at its expense, shall carry, or cause to be carried, in
addition to the insurance described in Section 11, Workers’ Compensation
insurance in statutory limits and such other insurance as Landlord may
reasonably require, with insurers reasonably satisfactory to Landlord.  Tenant shall furnish Landlord with
satisfactory evidence that such insurance is in effect at or before the
commencement of the Alterations and, upon request, at reasonable intervals
thereafter until completion of the Alterations.

6.5           Trade
Fixtures.  Subject to the provisions of Section 5, and
the foregoing provisions of this Section, Tenant may install and maintain
furnishings, trade fixtures, movable partitions, and machines and equipment (“Trade Fixtures”) in the Premises.  Tenant shall promptly repair any damage to
the Premises or the Building caused by any installation or removal of such
Trade Fixtures.

 16
 

 

6.6           Signage.  At its sole expense, Tenant shall have the right
to install its corporate name and logo on the exterior of the Building, on the
entrance doors to the Building and on the existing monument sign located on the
Property, with such signage to be proportional to signage available to or used
by other occupants of the Project based on the size of the Premises in relation
to the size of such other occupants’ premises, and subject to limitations
arising due to any preexisting signage of Hewlett Packard. Notwithstanding the
foregoing and without limiting the provisions of Exhibit B, Section 2,
such signage shall be subject to Landlord’s prior review and approval, not to
be unreasonably withheld; provided, however, that Tenant agrees it shall be
reasonable for Landlord to withhold its approval of any signage proposed by
Tenant that would, under applicable Laws, provide Tenant with disproportionate
signage and restrict or deny Landlord the ability to offer additional
proportionate Building and/or monument signage to other occupants of the
Project.  Tenant shall reimburse to
Landlord the actual costs reasonably incurred by Landlord in approving any
signage proposed by Tenant.  In any
event, all such signage installed by Tenant shall comply with applicable Laws
and shall be subject to Landlord’s right to require removal consistent with
Landlord’s right to require removal of other Alterations by Tenant.

6.7           Rooftop
Communications Equipment.  Tenant may install, at Tenant’s sole cost and
expense, but without the payment of any rent or a license or similar fee or
charge, a satellite or microwave dish or other communications, HVAC or other
equipment servicing the business conducted by Tenant from within the Premises
(all such equipment, including non-telecommunication equipment is, for the sake
of convenience, defined collectively as the “Telecommunications
Equipment”) upon the roof of the Building, for Tenant’s personal use
and not for any other commercial purpose. 
The physical appearance and the size of the Telecommunications Equipment
shall be subject to Landlord’s reasonable approval, the location of any such
installation of the Telecommunications Equipment shall be designated by Tenant
subject to Landlord’s reasonable approval and Landlord may require Tenant to
install screening around such Telecommunications Equipment, at Tenant’s sole
cost and expense, as reasonably required by Landlord.  Tenant shall maintain such Telecommunications
Equipment at Tenant’s sole cost and expense. 
In the event Tenant elects to exercise its right to install the
Telecommunication Equipment, then Tenant shall give Landlord prior notice
thereof.  Such Telecommunications
Equipment shall be installed pursuant to plans and specifications approved by
Landlord, which approval will not be unreasonably withheld, conditioned, or
delayed.  Upon Landlord’s written demand,
Tenant shall reimburse to Landlord the actual out-of pocket costs reasonably
incurred by Landlord in approving such Telecommunications Equipment.  Tenant shall remove such Telecommunications
Equipment upon the expiration or earlier termination of this Lease and shall
return the affected portion of the rooftop and the Building to the condition
the rooftop and the Building would have been in had no such Telecommunications
Equipment been installed (reasonable wear and tear excepted).  Such Telecommunications Equipment shall, in
all instances, comply with applicable Laws.

7.             MAINTENANCE
AND REPAIRS.

7.1           Tenant’s
Obligations.  During the Term, Tenant, at Tenant’s expense,
but under the direction of Landlord if Landlord so elects and subject to
Sections 5.1, 7.2, 12 and 13, shall repair and maintain the Premises, including
all specialty equipment or facilities exclusively serving the Premises (e.g.,
supplemental HVAC), the interior walls, floor coverings, ceiling (ceiling tiles
and grid), Tenant’s Alterations, fire extinguishers, outlets and fixtures
(including without limitation bulbs and ballasts), and any appliances
(including dishwashers, hot water heaters and garbage disposals) in the
Premises, in good condition, and keep the Premises in a clean, safe and orderly
condition.

7.2           Landlord’s
Obligations.  Subject to Sections 5.1, 12 and 13,
Landlord shall maintain or cause to be maintained in good order, condition and
repair the foundations, columns, footings, sub-flooring

 17
 

 

and
load-bearing and exterior walls, windows and frames, gutters, and downspouts of
the Building, the structural portions of the roof and the roof membrane, the
Building Systems, and the Common Areas of the Property (including the
sidewalks, curbs, and Parking Facility); provided, however, that nothing
contained herein shall be construed to negate or limit Tenant’s obligation to
pay Tenant’s Share of the costs incurred hereunder by Landlord (it being
understood and agreed that such costs are Operating Costs, subject to the limitations
in Section 3.2(a)(1)).  Landlord’s
maintenance and repair of the structural components of the Building
(foundation, columns, footings, floor slab, load-bearing
and exterior walls and structural portions of the roof) shall be at Landlord’s
sole expense; provided, however, that with respect to any maintenance and
repair items described in this Section 7.2 Tenant shall pay the entire cost of
repairs for any damage occasioned by Tenant’s use of the Premises or the
Property, any act or omission of Tenant or Tenant’s Representatives or Invitees
or Tenant’s Alterations, subject to Section 11.3 concerning waiver of
subrogation rights.  Landlord shall be
under no obligation to inspect the Premises. 
Tenant shall promptly report in writing to Landlord any condition known
to Tenant which Landlord is required to repair. 
As a material part of the consideration for this Lease, Tenant hereby
waives any benefits of any applicable existing or future Law, including the
provisions of California Civil Code Sections 1932(1), 1941 and 1942, that
allows a tenant to make repairs at its landlord’s expense.

Notwithstanding any of the terms and conditions
set forth in this Lease to the contrary, if Tenant provides Notice (or oral
notice in the event of an “Emergency,” as that term is defined, below) to
Landlord of an event or circumstance which requires the action of Landlord with
respect to repair and/or maintenance required to be performed by Landlord
hereunder, which event or circumstance with respect to the Building Systems or
structural portions of the Building materially adversely affects the conduct of
Tenant’s business from the Premises, and Landlord fails to commence corrective
action within a reasonable period of time, given the circumstances, after the
receipt of such Notice, but in any event not later than thirty (30) days
after receipt of such Notice, then Tenant may proceed to take the required
action upon delivery of an additional ten (10) Business Days’ Notice to
Landlord specifying that Tenant is taking such required action (provided,
however, that the initial thirty (30) day Notice and the subsequent
ten (10) day Notice shall not be required in the event of an Emergency)
and if such action was required under the terms and conditions of this Lease to
be taken by Landlord and was not commenced by Landlord within such ten
(10) Business Day period (or sooner in the case of Emergency) and
thereafter diligently pursued to completion, then Tenant shall be entitled to
prompt reimbursement by Landlord of Tenant’s reasonable costs and expenses in
taking such action.  Promptly following
completion of any work taken by Tenant pursuant to the terms and conditions of
this Section 7.2, Tenant shall deliver a detailed invoice of the work
completed, the materials used and the costs relating thereto, and within thirty
(30) days after receipt of Tenant’s invoice, Landlord shall either pay the
same or provide a written objection to the payment of such invoice, setting
forth with reasonable particularity Landlord’s reasons for its claim that such
action did not have to be taken by Landlord pursuant to the terms and
conditions of this Lease or that the charges are excessive (in which case
Landlord shall pay the amount it contends would not have been commercially
reasonable).  If Landlord fails to pay
Tenant in a timely fashion the reasonable amount owed as a result of Tenant’s
exercise of its rights under this paragraph, then Tenant may withhold such
amount from future Base Rent and Additional Rent until Tenant is reimbursed in
full for the sum plus interest at the Interest Rate.  As used herein, an “Emergency”
shall mean an event threatening immediate and material danger to people located
in the Building or immediate, material damage to the Building, Building Systems
or Alterations, or creates a realistic possibility of an immediate and material
interference with, or immediate and material interruption of a material aspect
of Tenant’s business operations.

 18
 

 

7.3           Landlord’s
Rights.  Landlord hereby reserves the right, at any
time and from time to time, upon reasonable prior notice to Tenant, without
liability to Tenant, and without constituting an eviction, constructive or
otherwise, or entitling Tenant to any abatement of rent or to terminate this
Lease or otherwise releasing Tenant from any of Tenant’s obligations under this
Lease:

(a)           To
make alterations, additions, repairs, improvements to or in or to decrease the
size of area of, all or any part of the Building, the fixtures and equipment
therein, and the Building Systems, so long as the foregoing does not materially
adversely affect the Premises or the Building Systems serving the Premises, or
Tenant’s parking for and access to the Premises;

(b)           To
change the Building’s name or street address;

(c)           To
install and maintain any and all signs on the exterior and interior of the
Building without any reduction of Tenant’s signage;

(d)           To
reduce, increase, enclose or otherwise change at any time and from time to time
the size, number, location, layout and nature of the Common Areas (including
the Parking Facility) and other tenancies and premises in the Property and to
create additional rentable areas through use or enclosure of common areas, so
long as the foregoing does not materially adversely affect Tenant’s parking for
and access to the Premises; and

(e)           If
any governmental authority promulgates or revises any Law or imposes mandatory
controls or guidelines on Landlord or the Property relating to the use or
conservation of energy or utilities or the reduction of automobile or other
emissions or reduction or management of traffic or parking on the Property
(collectively “Controls”), to comply with such
Controls, or make any alterations to the Property related thereto.

8.             TENANT’S
TAXES.  “Tenant’s
Taxes” shall mean (a) all taxes, assessments, license fees and other
governmental charges or impositions levied or assessed against or with respect
to Tenant’s personal property or Trade Fixtures in the Premises, whether any
such imposition is levied directly against Tenant or levied against Landlord or
the Property, (b) all rental, excise, sales or transaction privilege taxes
arising out of this Lease (excluding, however, state, local and federal
personal or corporate income taxes measured by the income of Landlord from all
sources) imposed by any taxing authority upon Landlord or upon Landlord’s
receipt of, or right to receive, any rent payable by Tenant pursuant to the
terms of this Lease (“Rental Tax”),
and (c) any increase in Taxes attributable to inclusion of a value placed
on Tenant’s personal property, Trade Fixtures or Alterations.  Tenant shall pay any Rental Tax to Landlord
in addition to and at the same time as Base Rent is payable under this Lease,
and shall pay all other Tenant’s Taxes before delinquency (and, at Landlord’s
request, shall furnish Landlord satisfactory evidence thereof).  If Landlord pays Tenant’s Taxes or any
portion thereof, Tenant shall reimburse Landlord within thirty (30) days after
receipt of written demand for the amount of such payment.

9.             UTILITIES
AND SERVICES.

9.1           Description
of Services.  Landlord shall furnish to the Premises:  reasonable amounts of water, gas, sewer
service, heat, ventilation and air conditioning during the Business Hours
specified in the Basic Lease Information (“Business Hours”)
on weekdays except federal and state holidays (“Business
Days”);  and reasonable
amounts of electricity; Landlord shall also provide the Common Areas and
exterior of the Building with window washing of outside faces of glass, Common
Area janitorial services five (5) days a week (except federal and state
holidays), Common Area fluorescent

 19
 

 

tube
replacement and Common Area toilet room supplies as reasonably necessary.  Landlord shall provide an exterior area for
Tenant’s trash receptacles, it being understood that Tenant shall contract for
dumpsters and trash removal at its sole expense.  Any additional utilities or services that
Landlord may agree to provide, at Tenant’s request, shall be at Tenant’s sole
expense.

9.2           Payment
for Additional Utilities and Services.

(a)           To
the extent Tenant requires the use of Building System HVAC service at times
other than Business Hours on Business Days, Landlord shall furnish such service
to Tenant and Tenant shall pay for such services at Landlord’s actual cost,
consistent with the amounts charged by Landlord for such services during
Business Hours on Business Days. 
Landlord shall make reasonable efforts to allow Tenant to control the
Building System HVAC serving the Premises.

(b)           If
the temperature otherwise maintained in any portion of the Premises by the
Building Systems HVAC is affected as a result of (i) any lights, machines or
equipment used by Tenant in the Premises, or (ii) the occupancy of the Premises
by more than one person per 150 square feet of Rentable Area, then Tenant shall
be solely responsible for installing or upgrading supplemental HVAC service in
and to the Premises at its sole expense. 
Landlord shall not be liable for any failure of the HVAC service to the
Premises so long as the Building Systems HVAC continues to perform at
substantially the same capacity as existed as of the Lease Date.

(c)           If
Tenant’s usage of any utility service which (a) cannot be separately metered
such that Tenant pays the utility provider directly for the expense thereof,
and (b) exceeds the use of such utility Landlord determines to be typical,
normal and customary for the uses in the Building permitted under Section 5.1,
Landlord may determine the amount of such excess use by any reasonable means
and charge Tenant for the cost of such excess usage.

9.3           Interruption
of Services.  In the event of an interruption in or failure
or inability to provide any services or utilities to the Premises or Building
for any reason (a “Service Failure”),
such Service Failure shall not, regardless of its duration, impose upon
Landlord any liability whatsoever, constitute an eviction of Tenant,
constructive or otherwise, entitle Tenant to an abatement of rent (except as
expressly provided in Section 15.4(b)) or to terminate this Lease or otherwise
release Tenant from any of Tenant’s obligations under this Lease, and Tenant
agrees and acknowledges that Tenant’s remedies under Section 15.4(b) shall be
its exclusive remedy for any such Service Failure.  Tenant hereby waives any benefits of any
applicable existing or future Law, including the provisions of California Civil
Code Section 1932(1), permitting the termination of this Lease due to such
interruption, failure or inability.

10.           EXCULPATION
AND INDEMNIFICATION.

10.1         Tenant’s
Indemnification of Landlord.  Tenant shall indemnify, protect, defend and
hold harmless Landlord and its constituent partners or members and its or their
partners, members, directors, officers, shareholders, employees and agents
against and from any claims, demands, actions, liabilities, damages, losses,
costs and expenses, including reasonable attorneys’ fees (collectively, “Claims”), arising out of Tenant’s use of the Premises or
resulting from any cause in or on the Premises, and from any negligence or
willful misconduct of Tenant or of any person claiming by, through or under
Tenant or any of Tenant’s Representatives or Invitees, in or on the Project, or
any breach or default under this Lease by Tenant, except to the extent any such
Claims arise out of or result from the negligence or willful misconduct of
Landlord or its agents, employees and contractors.

 20

 

10.2         Damage
to Tenant and Tenant’s Property.  Landlord shall not be liable to Tenant for
any loss, injury or other economic damage to Tenant, Tenant’s Representatives,
Tenant’s Invitees or to Tenant’s, Tenant’s Representatives’ or Invitees’
property in or about the Premises or the Property from any cause (including,
without limitation, defects in the Property or in any equipment in the
Property; fire, explosion or other casualty; bursting, rupture, leakage or
overflow of any plumbing or other pipes or lines, sprinklers, tanks, drains,
drinking fountains or washstands in, above, or about the Premises or the
Property; or acts of other tenants in the Property); and Tenant hereby waives
all claims against Landlord for any such loss, injury or damage and the cost
and expense of defending against claims relating thereto, including any such
loss, injury or damage caused by Landlord’s negligence (whether active or
passive) or willful misconduct, excluding claims for bodily injury arising out
of the negligence or willful misconduct of Landlord or its agents, employees
and contractors.  Notwithstanding any
other provision of this Lease to the contrary, in no event shall Landlord be
liable to Tenant for any punitive, indirect, special or consequential damages
or damages for loss of business by Tenant.

10.3         Survival.  The rights and obligations of the parties
under this Section 10 shall survive the expiration or earlier termination of
this Lease.

11.           INSURANCE.

11.1         Tenant’s
Insurance.

(a)           Liability
Insurance.  Tenant shall maintain in full force
throughout the Term, commercial general liability insurance providing coverage
on an occurrence form basis with limits of not less than Five Million Dollars
($5,000,000.00) each occurrence for bodily injury and property damage combined,
Five Million Dollars ($5,000,000.00) annual general aggregate, and Five Million
Dollars ($5,000,000.00) products and completed operations annual
aggregate.  Tenant may provide the part
of the foregoing coverage through commercial umbrella coverage, provided that
the foregoing requirements are met by such coverage.  Tenant’s liability insurance policy or
policies shall:  (i) include premises and
operations liability coverage, products and completed operations liability
coverage, broad form property damage coverage including completed operations,
blanket contractual liability coverage including, to the maximum extent
possible, coverage for the indemnification obligations of Tenant under this
Lease, and personal and advertising injury coverage; (ii) provide that the
insurance company has the duty to defend all insureds under the policy; (iii)
provide that defense costs are paid in addition to and do not deplete any of
the policy limits, so long as such coverage is then generally available in the
commercial insurance market and can be obtained for an amount equal to or less
than two percent (2%) of the premium which would otherwise be payable for
Tenant’s commercial general liability policy; (iv) cover liabilities arising
out of or incurred in connection with Tenant’s use or occupancy of the Premises
or the Property; and (v) extend coverage to cover liability for the actions of
Tenant’s Representatives.  Each policy of
liability insurance required by this Section shall:  (A) contain a cross liability endorsement or
separation of insureds clause; (B) provide that any waiver of subrogation
rights or release prior to a loss does not void coverage; (C) provide that it
is primary to and not contributing with, any policy of insurance carried by
Landlord covering the same loss; (D) provide that any failure to comply with
the reporting provisions shall not affect coverage provided to Landlord, its
partners, property managers and Mortgagees; and (E) name Landlord, its
constituent partners, any property manager of the Property, and such other
parties in interest as Landlord may from time to time reasonably designate to
Tenant in writing, as additional insureds. 
All endorsements effecting such additional insured status shall be at least
as broad as additional insured endorsement form number CG 20 11 01 86
promulgated by the Insurance Services Office. 
The insurance requirements set forth herein are independent of Tenant’s
indemnification and other obligations under this Lease and shall not be
construed to restrict, limit or modify such indemnification or other
obligations of Tenant under the Lease.

 21
 

 

(b)           Property
Insurance.  Tenant shall at all times maintain in effect
with respect to any Alterations and Tenant’s Trade Fixtures and other personal
property, commercial property insurance providing coverage, on an “all risk” or
“special form” basis, in an amount equal to at least 90% of the full
replacement cost of the covered property. 
Tenant may carry such insurance under a blanket policy, provided that
such policy provides coverage equivalent to a separate policy.  During the Term, the proceeds from any such
policies of insurance shall be used for the repair or replacement of the
Alterations, Trade Fixtures and personal property so insured, excepting only
such Alterations as Landlord has expressly agreed to repair or replace after
casualty or condemnation under Section 12 or 13 below.  Landlord shall be provided coverage under
such insurance to the extent of its insurable interest and, if requested by
Landlord, both Landlord and Tenant shall sign all documents reasonably
necessary or proper in connection with the settlement of any claim or loss
under such insurance.  Landlord will have
no obligation to carry insurance on any Alterations or on Tenant’s Trade
Fixtures or personal property other than those Alterations Landlord has
expressly agreed to repair or replace after casualty or condemnation under
Section 12 or 13 below.

(c)           Requirements
For All Policies.  Each policy of insurance required under this
Section 11.1 shall:  (i) be in a form,
and written by an insurer, reasonably acceptable to Landlord, (ii) be
maintained at Tenant’s sole cost and expense, and (iii) require at least thirty
(30) days’ written notice to Landlord prior to any cancellation, non-renewal or
modification of insurance coverage. 
Insurance companies issuing such policies shall have rating
classifications of “A” or better (or if they are admitted carriers, “A-” or
better) and financial size category ratings of “VII” or better according to the
latest edition of the A.M. Best Key Rating Guide.  All insurance companies issuing such policies
shall be licensed to do business in the state where the Property is
located.  Tenant shall provide to
Landlord, upon request, evidence that the insurance required to be carried by
Tenant pursuant to this Section, including any endorsement effecting the
additional insured status, is in full force and effect and that premiums
therefor have been paid.

(d)           Updating
Coverage.  Not more than twice during the Term, Tenant
shall increase the amounts of such coverages of insurance as required by
Landlord or any Mortgagee, but in no event shall such increases be in excess of
the amounts of insurance that tenants of similar projects in the market area
are then required to carry.  Any such
increases shall be effective as of the next renewal of the policy period of the
applicable Tenant’s insurance policy(ies). 
Any limits set forth in this Lease on the amount or type of coverage
required by Tenant’s insurance shall not limit the liability of Tenant under
this Lease.

(e)           Certificates
of Insurance.  Prior to occupancy of the Premises by Tenant,
and not less than thirty (30) days prior to expiration of any policy
thereafter, Tenant shall furnish to Landlord a certificate of insurance
reflecting that the insurance required by this Section is in force,
satisfactory to Landlord in substance and form. 
Such certificates shall include industry standard language
providing  that Landlord shall be given
ten (10) days notice of cancellation of any of Tenant’s insurance policies for
nonpayment and thirty (30) days prior written notice of any cancellation or
nonrenewal of any of Tenant’s insurance policies for any other reason, and
Tenant shall make its best efforts to immediately provide to Landlord a copy of
any such notice received from its insurer.

11.2         Landlord’s
Insurance.  During the Term, Landlord shall maintain in
effect insurance on the Building (including any Alterations Landlord has
expressly agreed to repair or replace after casualty or condemnation under
Section 12 or 13 below) with responsible insurers, on an “all risk” or “special
form” basis, insuring the Building in an amount equal to at least 90% of the
replacement cost thereof, excluding land, foundations, footings and underground
installations.  Landlord may, but shall
not be

 22
 

 

obligated
to, carry insurance against additional perils (such as earthquake and/or flood)
and/or in greater amounts.

11.3         Mutual
Waiver of Right of Recovery & Waiver of Subrogation.  Notwithstanding anything to the contrary
contained in this Lease, Landlord and Tenant each hereby waive any right of
recovery against each other and the partners, members, shareholders, officers,
directors and authorized representatives of each other for any loss or damage
that is covered by any policy of insurance maintained (or required by this
Lease to be maintained) by either party with respect to the Premises or the
Property or any operation therein, regardless of cause, including negligence
(whether active or passive) or willful misconduct of the party benefiting from
the waiver, to the extent of the loss or damage covered thereby.  If any such policy of insurance relating to
this Lease or to the Premises or the Property does not permit the foregoing
waiver or if the coverage under any such policy would be invalidated as a
result of such waiver, the party maintaining such policy shall obtain from the
insurer under such policy a waiver of all right of recovery by way of
subrogation against either party in connection with any claim, loss or damage
covered by such policy.

12.           DAMAGE
OR DESTRUCTION.

12.1         Landlord’s
Duty to Repair.

(a)           If
all or a substantial part of the Premises are rendered untenantable or
inaccessible by damage to all or any part of the Property from fire or other
casualty then, unless either party is entitled to and elects to terminate this
Lease pursuant to Sections 12.2 and 12.3, Landlord shall use reasonable efforts
to repair and restore the Premises and/or the Property, as the case may be, to
substantially their former condition to the extent permitted by then applicable
Laws; provided, however, in no event shall Landlord have any obligation for
repair or restoration of any of Tenant’s Personal Property, Trade Fixtures or
Alterations other than the “Office TI Work”, as defined in Exhibit C,
attached hereto, which Landlord shall restore after any fire or other casualty.

(b)           If
all or any portion of the Premises or Common Area should become unsuitable for
Tenant’s use as a consequence of fire or other casualty, then Tenant shall be
entitled to an equitable abatement of all Base Rent, Operating Costs and
Expenses payable hereunder to the extent of the interference with Tenant’s use
of the Premises occasioned thereby.  In
no event shall Landlord be liable to Tenant by reason of any injury to or
interference with Tenant’s business or property arising from fire or other
casualty or by reason of any repairs to any part of the Property necessitated
by such casualty.

12.2         Landlord’s
Right to Terminate.  Landlord may elect to terminate this Lease
following damage by fire or other casualty under the following circumstances:

(a)           If more than sixty five percent (65%) of the Premises or Property are
damaged and in Landlord’s reasonable judgment the Premises and the Property
cannot be substantially repaired and restored under applicable Laws within 270
days from the date of the casualty;

(b)           If,
based on Landlord’s reasonable estimate of the cost to repair or restore the
Premises, adequate insurance proceeds (excluding the amount of any insurance
deductibles then carried by Landlord) will not for any reason (other than
Landlord’s breach of its obligation to carry property insurance hereunder),
including a decision made by any Mortgagee (as defined in Section 20.2),
available to Landlord from Landlord’s insurance policies to cover the entire
cost of the required repairs in excess of the first One Hundred Fifty Thousand
Dollars ($150,000.00) therefor, it being agreed that Landlord and Tenant shall
split equally, on a dollar for dollar basis, the cost of such required repairs
up to One

 23
 

 

Hundred
Fifty Thousand Dollars ($150,000.00), and Tenant does not agree to fund such
excess costs over the first One Hundred Fifty Thousand Dollars ($150,000.00)
within twenty (20) days after its receipt of a written termination notice from
Landlord; or

(c)           If
the fire or other casualty damage to the Premises occurs during the last year
of the Term and the restoration of the Premises cannot be substantially
completed within ninety (90) days after the date of such damage; provided,
however, that Landlord may not terminate this Lease pursuant to this Section
12.2(c) (without limiting Landlord’s termination rights under Sections 12.2(a)
and (b)) if Tenant, at the time of such damage, has an express written option
to extend the Term and Tenant exercises such option within thirty (30) days
following the delivery to Tenant of Landlord’s written termination notice.

If
any of the circumstances described in subparagraphs (a), (b) or (c) of this
Section 12.2 occur or arise, Landlord shall give Tenant notice within sixty
(60) days after the date of the casualty, specifying whether Landlord elects to
terminate this Lease as provided above and, if not, Landlord’s estimate of the
time required to complete Landlord’s repair obligations under this Lease.  If Landlord elects to terminate this Lease,
the Lease shall terminate thirty (30) days after the date Tenant receives
notice of Landlord’s election.

12.3         Tenant’s
Right to Terminate.  If all or a substantial part of the Premises
are rendered untenantable or inaccessible by damage to all or any part of the
Property from fire or other casualty, and Landlord does not elect to terminate
as provided above, then Tenant may elect to terminate this Lease if the
reasonable estimate, by an independent general contractor engaged by Landlord,
of the time required to complete Landlord’s repair obligations under this Lease
is greater than 270 days from the date of the casualty, in which event Tenant
may elect to terminate this Lease by giving Landlord notice of such election to
terminate within fifteen (15) days after Landlord’s notice to Tenant pursuant
to Section 12.2.  If Tenant elects to
terminate this Lease, the Lease shall terminate thirty (30) days after the date
Landlord receives notice of Tenant’s election. 
Further, notwithstanding the foregoing, if Landlord elects, or is
required to repair the Premises or the Building in accordance with the terms of
this Lease and if the repairs are not completed within 270 days (regardless of
the time estimated for completion of the repairs), subject to extension for any
Force Majeure Delays (up to, but not in excess of, a total of ninety (90) days
of any such Force Majeure Delays) or other delays caused by Tenant, Tenant
shall have the right to terminate this Lease by delivering written notice
thereof to Landlord within thirty (30) days after the expiration of the 270-day
period (as the same may be extended by up to ninety (90) days of Force Majeure
Delays or delays caused by Tenant), with any such termination effective thirty
(30) days after delivery of the notice of termination.

12.4         Waiver.  Landlord and Tenant each hereby waive the
provisions of California Civil Code Sections 1932(2), 1933(4) and any other
applicable existing or future Law permitting the termination of a lease
agreement in the event of damage or destruction under any circumstances other
than as provided in Sections 12.2 and 12.3.

13.           CONDEMNATION.

13.1         Definitions.

(a)           “Award” shall mean all compensation, sums, or anything of
value awarded, paid or received on a temporary, total or partial Condemnation.

 24
 

 

(b)           “Condemnation” shall mean (i) a permanent taking (or a
temporary taking for a period extending beyond the end of the Term) pursuant to
the exercise of the power of condemnation or eminent domain by any public or
quasi-public authority, private corporation or individual having such power (“Condemnor”), whether by legal proceedings or otherwise, or
(ii) a voluntary sale or transfer by Landlord to any such authority, either
under threat of condemnation or while legal proceedings for condemnation are
pending.

(c)           “Date of Condemnation” shall mean the earlier of the date
that title to the property taken is vested in the Condemnor or the date the
Condemnor has the right to possession of the property being condemned.

13.2         Effect
on Lease.

(a)           If
the Premises are totally taken by Condemnation, this Lease shall terminate as
of the Date of Condemnation.  If a
portion but not all of the Premises is taken by Condemnation, this Lease shall
remain in effect; provided, however, that if more than fifteen percent (15%) of
the floor area of the Premises is taken and the portion of the Premises
remaining after the Condemnation will be unsuitable for Tenant’s continued use,
or more than fifteen percent (15%) of the Parking Facility is taken (and
Landlord does not provide substitute parking within a reasonable proximity of
the Premises), then upon notice to Landlord within thirty (30) days after
Landlord notifies Tenant of the Condemnation, Tenant may terminate this Lease
effective as of the Date of Condemnation.

(b)           If
twenty-five percent (25%) or more of the parcel of land on which the Building
is situated, of the Parking Facility or of the floor area in the Building is
taken by Condemnation, or if as a result of any Condemnation the Building is no
longer reasonably suitable for use as an office building, whether or not any
portion of the Premises is taken, Landlord may elect to terminate this Lease,
effective as of the Date of Condemnation, by notice to Tenant within thirty
(30) days after the Date of Condemnation.

(c)           If
all or a portion of the Premises is temporarily taken by a Condemnor for a
period not exceeding one (1) year, this Lease shall remain in full force and
effect.

13.3         Restoration.  If this Lease is not terminated as provided
in Section 13.2, Landlord shall diligently proceed to repair and restore the
Premises to substantially its former condition (to the extent permitted by then
applicable Laws) and/or repair and restore the Building to an architecturally
complete office building; provided, however, that (i) Landlord’s obligations to
so repair and restore shall be limited to the amount of any Award received by
Landlord and not required to be paid to any Mortgagee, and (ii) Tenant shall be
entitled to terminate this Lease if Landlord does not or cannot restore those
portions of the Premises for which Landlord is responsible to substantially
their prior condition.  In no event shall
Landlord have any obligation to repair or replace any of Tenant’s personal
property, Trade Fixtures, or Alterations other than the “Office TI Work”, as
defined in Exhibit C, attached hereto.

13.4         Abatement
and Reduction of Rent.  If any portion of the Premises is taken in a
Condemnation or is rendered permanently untenantable by repairs necessitated by
the Condemnation, and this Lease is not terminated, the Base Rent, Operating
Costs and Taxes payable under this Lease shall be proportionally reduced as of
the Date of Condemnation based upon the percentage of rentable square feet in
the Premises so taken or rendered permanently untenantable.  In addition, if this Lease remains in effect
following a Condemnation and Landlord proceeds to repair and restore the
Premises, or Tenant is unable to use and occupy some or all of the Premises due
to a temporary taking as described in

 25
 

 

Section
13.2(c) above, the Base Rent, Operating Costs and Taxes payable under this
Lease shall be abated with regard to any portion of the Premises that Tenant is
prevented from occupying during the period of such repair or restoration, or
such temporary taking.  In no event shall
Landlord be liable to Tenant by reason of any injury to or interference with
Tenant’s business or property arising from Condemnation or by reason of any
repairs to any part of the Property necessitated by Condemnation.

13.5         Awards.  Any Award made shall be paid to Landlord, and
Tenant hereby assigns to Landlord, and waives all interest in or claim to, any
such Award, including any claim for the value of the unexpired Term; provided,
however, that Tenant shall be entitled to receive, or to prosecute a separate
claim for, a separate Award for relocation and moving expenses, the
interruption of or damage to Tenant’s business (including without limitation
loss of goodwill) and/or compensation for Tenant’s personal property,
Alterations and Trade Fixtures.

13.6         Waiver.  Landlord and Tenant each hereby waive the
provisions of California Code of Civil Procedure Section 1265.130 and any other
applicable existing or future Law allowing either party to petition for a
termination of this Lease upon a partial taking of the Premises and/or the
Property.

14.           ASSIGNMENT
AND SUBLETTING.

14.1         Landlord’s
Consent Required.  Tenant shall not assign this Lease or any
interest therein, or sublet or license or permit the use or occupancy of the
Premises or any part thereof by or for the benefit of anyone other than Tenant,
or in any other manner transfer all or any part of Tenant’s interest under this
Lease (each and all a “Transfer”),
without the prior written consent of Landlord, which consent (subject to the
other provisions of this Section 14) shall not be unreasonably withheld.  The term Transfer, as used herein, includes
the following:  (i) the transfer,
voluntary or involuntary, either by a single transaction or in a series of
transactions, of a controlling interest in Tenant (or, if Tenant is a trust, in
the trustee of such trust), (ii) any dissolution, merger, consolidation or
other reorganization of Tenant, and (iii) the sale, by a single transaction or
series of transactions, within any one (1) year period of assets equaling or
exceeding forty percent (40%) (or, if Tenant is a trust, exceeding twenty-five
percent) of the total value of Tenant’s assets. 
As used herein, the term “controlling interest” means (a) in the case of
a partnership, limited liability company or other business entity, the
ownership of partnership interests, membership interests or other indicia of
ownership constituting more than fifty percent (50%) of the ownership interests
in Tenant (provided that in the case of a limited partnership or manager
controlled limited liability company, it also means the ownership of more than
fifty percent (50%) of the ownership interests in the general partner or
manager of Tenant), and (b) in the case of a corporation, the ownership and/or
the right to vote stock constituting more than fifty percent (50%) of the
voting stock of Tenant.  Notwithstanding
any provision in this Lease to the contrary, Tenant shall not mortgage, pledge,
hypothecate or otherwise encumber this Lease or all or any part of Tenant’s
interest under this Lease.  Further
notwithstanding the foregoing, Tenant may assign this Lease or sublet all or
any portion of the Premises, without the requirement of any consent, recapture or
termination right by Landlord and without the sharing of any Bonus Rent, to any
successor corporation to Tenant by way of merger, consolidation or other
corporate reorganization, or to any parent, subsidiary or affiliate of Tenant,
or to any party acquiring all or substantially all of Tenant’s assets or stock,
or to any party acquiring and continuing that portion of Tenant’s business
operations conducted at or from the Premises, or to any entity with whom Tenant
is undertaking or will undertake a joint venture or similar joint research and
development, marketing, distribution, sales or development project at the
Premises, so long as (1) any assignee’s net worth (derived in accordance with
generally accepted accounting principles) is equal to or greater than the
lesser of (a) Tenant’s net worth as of the effective date of such assignment;
or (b) One Hundred Million Dollars ($100,000,000.00), which amount shall be
increased by three percent (3%) on each

 26
 

 

anniversary
of the Commencement Date; (2) Tenant provides written notice to Landlord of any
such sublease or assignment not less than thirty (30) days prior to such
transaction (unless such notice is subject to contractual confidentiality
restrictions, or is restricted by the regulations or requirements of the
Securities and Exchange Commission, and in either case, such notification shall
be made promptly following the date of such assignment or sublease), and in the
case of an assignment such notice shall include evidence reasonably
satisfactory to Landlord that the assignee satisfies the foregoing “net worth”
requirement; (3) any such assignee shall assume all of the rights and
obligations of Tenant hereunder in a written instrument delivered to Landlord
immediately after the effective date thereof (except in the case of any merger,
consolidation or sale of stock where the Tenant entity survives and remains as
the Tenant hereunder, in which such written instrument shall not be required);
and (4) any such sublease or assignment shall be subject to the terms and
conditions of Section 14.9 below  
(collectively, “Permitted Transferees”, individually, “Permitted
Transferee”).

14.2         Reasonable
Consent.

(a)           Prior
to any proposed Transfer, Tenant shall submit in writing to Landlord, not less
than thirty (30) days prior to the proposed effective date of the Transfer,
(i) the name and legal composition of the proposed assignee, subtenant,
user or other transferee (each a “Proposed Transferee”);
(ii) the nature of the business proposed to be carried on in the Premises;
(iii) a current balance sheet, income statements for the last two years
and such other reasonable financial and other information concerning the
Proposed Transferee as Landlord may request; and (iv) a copy of the
proposed assignment, sublease or other agreement governing the proposed
Transfer  (“Transfer
Documents”).  Within fifteen
(15) calendar days after Landlord receives all such information it shall notify
Tenant whether it approves or disapproves such Transfer.

(b)           Tenant
acknowledges and agrees that, among other circumstances for which Landlord
could reasonably withhold consent to a proposed Transfer, it shall be
reasonable for Landlord to withhold consent where (i)  Landlord reasonably
disapproves of the Proposed Transferee’s business operating ability or history,
reputation or creditworthiness or the character of the business to be conducted
by the Proposed Transferee at the Premises, (ii) the Proposed Transferee
is a governmental agency or unit or an existing tenant in the Project (and
Landlord then has comparable space available on the comparable terms for lease
in the Project) or, for so long as Landlord or any affiliate of Landlord owns
the Stevens Creek Property, the Stevens Creek Property, (iii) the proposed
Transfer would violate any “exclusive” rights of any tenants in the Project,
(iv) Landlord or Landlord’s agent has shown space in the Building to the
Proposed Transferee or responded to any inquiries from the Proposed Transferee
or the Proposed Transferee’s agent concerning availability of space in the
Building, at any time within the preceding nine months and Landlord then has
comparable space available for lease by such tenant on comparable terms in the
Project or, for so long as Landlord or any affiliate of Landlord owns the
Stevens Creek Property, the Stevens Creek Property, or (v) at the time
Tenant requests Landlord’s consent an Event of Default has occurred and is
continuing or Tenant has committed acts or omissions which with the passage of
time or the giving of notice, or both, would constitute an a monetary or
material Event of Default under this Lease. 
Tenant shall not place any signs in or about the Premises or Building to
market the Premises for assignment or sublease without Landlord’s prior written
approval, not to be unreasonably withheld.

14.3         Excess
Consideration.  If Landlord consents to the Transfer, Tenant
shall pay to Landlord as Additional Rent, as and when received by Tenant, fifty
percent (50%) of any Bonus Rent (as hereinafter defined) payable by or on
behalf of any transferee (the “Transferee”)
for or in connection with the Transfer. 
The term “Bonus Rent,” as used herein, means
any and all rent and other

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consideration,
whether denominated rent or otherwise, payable by or on behalf of the
Transferee under the terms of the Transfer or any collateral agreement in
excess of the Monthly Base Rent and Additional Rent payable hereunder (or in
excess of the fair market value of any equipment or other goods or services
included as part of the terms of the Transfer or any collateral agreement),
less the reasonable cost of any improvements installed by the Tenant, at its
expense, in the Premises pursuant to the Transfer for the specific subtenant or
assignee (and approved by Landlord), reasonable attorneys’ fees incurred by
Tenant in effecting the Transfer, reasonable leasing commissions actually paid
by the Tenant in connection with the Transfer, moving allowances, free rent, or
any other inducements necessary to secure an assignment or sublease with the
proposed Transferee, without deduction for carrying costs due to vacancy or
otherwise.  During any period in which an
Event of Default by Tenant has occurred and is continuing, then at Landlord’s
option, upon written notice to the Transferee, Landlord may require the
Transferee to pay all or any portion of such Bonus Rent directly to Landlord;
provided, however, that Landlord’s acceptance or collection of the Bonus Rent
will not be deemed to be a consent to any Transfer or a cure of any default
under this Section 14 or any other provisions of this Lease.  In the case of a sublease, the Bonus Rent
shall be determined by comparing the rent and/or other consideration payable
under the sublease to the portion of the Monthly Base Rent and Additional Rent
allocable to the subleased portion of the Premises (and the portion of the
Monthly Base Rent and Additional Rent allocable to the subleased portion of the
Premises shall be determined by multiplying the Monthly Base Rent and
Additional Rent by a fraction, the numerator of which is the Rentable Area of
the subleased portion of the Premises and the denominator of which is the
Rentable Area of the Premises).

14.4         No
Release Of Tenant.  No Transfer shall relieve Tenant of any
obligation to be performed by Tenant under this Lease, whether accruing before
or after such Transfer.  The consent by
Landlord to any Transfer shall not relieve Tenant or any Transferee from the
obligation to obtain Landlord’s express prior written consent to any subsequent
Transfer by Tenant or any Transferee. 
The acceptance of rent by Landlord from any other person (whether or not
such person is an occupant of the Premises) shall not be deemed to be a waiver
by Landlord of any provision of this Lease or to be a consent to any Transfer.

14.5         Expenses
and Attorneys’ Fees.  Tenant shall pay to Landlord on demand all
out-of-pocket costs and expenses (including reasonable attorneys’ fees)
reasonably incurred by Landlord in connection with reviewing and responding to
any proposed Transfer (including any request for consent to, or any waiver of
Landlord’s rights in connection with, any security interest in any of Tenant’s
property at the Premises).

14.6         Effectiveness
of Transfer.  Except in the case of any Permitted Transfer,
prior to the date on which any Transfer becomes effective, Tenant shall deliver
to Landlord a counterpart of the fully executed Transfer document and Landlord’s
standard form of Consent to Assignment or Consent to Sublease (subject to such
commercially reasonable changes requested by Tenant or the Transferee) executed
by Tenant and the Transferee in which each of Tenant and the Transferee
confirms its obligations pursuant to this Lease.  Failure or refusal of a Transferee to execute
any such instrument shall not release or discharge the Transferee from any
liability.  The voluntary, involuntary or
other surrender of this Lease by Tenant, or a mutual cancellation by Landlord
and Tenant, shall not work a merger, and any such surrender or cancellation
shall, at the option of Landlord, either terminate all or any existing
subleases or operate as an assignment to Landlord of any or all of such
subleases.

14.7         Intentionally Deleted.

14.8         Assignment
of Sublease Rents.  Tenant hereby absolutely and irrevocably
assigns to Landlord any and all rights to receive rent and other consideration
from any sublease and agrees that

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Landlord,
as assignee, or a receiver for Tenant appointed on Landlord’s application may
(but shall not be obligated to) collect such rents and other consideration and
apply the same toward Tenant’s obligations to Landlord under this Lease;
provided, however, that Landlord grants to Tenant at all times prior to
occurrence of any Event of Default by Tenant a license to collect such rents
(which license shall automatically and without notice be deemed revoked and
terminated immediately upon any Event of Default).

14.9         Additional
Requirements.  Any Transfer shall be null and void unless it
complies with this Lease and: 
(i) in the case of an assignment, provides that the assignee
assumes all of Tenant’s obligations under this Lease first accruing after the
date of such assignment, and agrees to be bound by all of the terms of this
Lease; and (ii) in the case of a sublease, provides that (a) it is
subject and subordinate to this Lease, (b) if there is any conflict or
inconsistency between the sublease and this Lease, then as between Tenant and
Landlord, or Landlord and the proposed sublessee, this Lease will prevail (but
as between Tenant and any such sublessee only, the terms of the subject
sublease will prevail), (c) Landlord may enforce all the provisions of the
sublease, including the collection of rent, upon any Event of Default by
Tenant, (d) the sublease may not be modified without Landlord’s prior written
consent (which consent shall not be unreasonably withheld) and that any
modification without such consent shall be null and void, (e) if this
Lease is terminated or Landlord reenters or repossesses the Premises, Landlord
may, at its option, take over all of Tenant’s right, title and interest as
sublessor and, at Landlord’s option, the subtenant shall attorn to Landlord,
but Landlord shall not be (x) liable for any previous act or omission of
Tenant under the sublease (but Landlord shall be responsible for curing any
default by Tenant or a continuing nature [e.g., repair and maintenance
obligations]), (y) subject to any existing defense or offset against
Tenant, or (z) bound by any previous modification of the sublease made
without Landlord’s prior written consent or by any prepayment of more than one
(1) month’s rent, with the exception of any prepaid Operating Costs.

15.           DEFAULT
AND REMEDIES.

15.1         Events
of Default.  The occurrence of any of the following shall
constitute an “Event of Default” by Tenant:

(a)           Tenant
fails to make any payment of rent (including, without limitation, Base Rent and
Additional Rent) on the date such payment is due and such failure shall
continue for ten (10) days after Tenant’s receipt of a written notice of
delinquency from Landlord.

(b)           Tenant
abandons the Premises; provided however, that no abandonment shall be
considered to occur if the Premises are maintained to the extent necessary to
maintain the insurance on the Premises.

(c)           Tenant
fails timely to deliver any subordination document, estoppel certificate or
financial statement requested by Landlord within the applicable time period
specified in Sections 20 and 21 and such failure shall continue for five (5)
Business Days after a second written notice from Landlord (i.e., a notice in
addition to Landlord’s written request for such document pursuant to Section 20
or 21).

(d)           Tenant
violates the restrictions on Transfer set forth in Section 14.

(e)           Tenant
ceases doing business as a going concern; makes an assignment for the benefit
of creditors; is adjudicated an insolvent, files a petition (or files an answer
admitting the material allegations of a petition) seeking relief under any
state or federal bankruptcy or other statute, law or

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regulation
affecting creditors’ rights; all or substantially all of Tenant’s assets are
subject to judicial seizure or attachment and are not released within sixty
(60) days, or Tenant consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for Tenant or for all or any substantial part of Tenant’s
assets.

(f)            Tenant
fails, within sixty (60) days after the commencement of any proceedings against
Tenant seeking relief under any state or federal bankruptcy or other statute,
law or regulation affecting creditors’ rights, to have such proceedings
dismissed, or Tenant fails, within sixty (60) days after an appointment,
without Tenant’s consent or acquiescence, of any trustee, receiver or
liquidator for Tenant or for all or any substantial part of Tenant’s assets, to
have such appointment vacated.

(g)           Tenant
fails to perform or comply with any provision of this Lease other than those
described in (a) through (f) above, and does not fully cure such failure within
fifteen (15) days after notice to Tenant or, if such failure cannot reasonably
be cured within such fifteen (15)-day period, Tenant fails within such fifteen
(15)-day period to commence, and thereafter to diligently proceed with, all
actions necessary to cure such failure as soon as reasonably possible.

(h)           Tenant
fails to replenish the Security Deposit as required under Section 4.

15.2         Remedies.  Upon the occurrence of an Event of Default,
Landlord shall have the following remedies, which shall not be exclusive but
shall be cumulative and shall be in addition to any other remedies now or
hereafter allowed by law:

(a)           Landlord
may terminate Tenant’s right to possession of the Premises at any time by
written notice to Tenant, subject to applicable legal due process
requirements.  Tenant acknowledges that
in the absence of such written notice from Landlord, no other act of Landlord,
including reentry into the Premises, efforts to relet the Premises, reletting
of the Premises for Tenant’s account, storage of Tenant’s personal property and
Trade Fixtures, acceptance of keys to the Premises from Tenant or exercise of
any other rights and remedies under this Section, shall constitute an
acceptance of Tenant’s surrender of the Premises or constitute a termination of
this Lease or of Tenant’s right to possession of the Premises.  Upon such termination in writing of Tenant’s
right to possession of the Premises, as herein provided, this Lease shall
terminate and Landlord shall be entitled to recover damages from Tenant,
including:  (i) the worth at the
time of the award of the unpaid Base Rent and Additional Rent which had been
earned or was payable at the time of termination; (ii) the worth at the
time of the award of the amount by which the unpaid Base Rent and Additional
Rent which would have been earned or payable after termination until the time
of the award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; (iii) the worth at the time of the award of
the amount by which the unpaid Base Rent and Additional Rent which would have
been paid for the balance of the Term after the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided; and (iv) any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant’s failure to perform its obligations
under the Lease or which in the ordinary course of things would be likely to
result therefrom, including any reasonable costs or expenses incurred by
Landlord in maintaining or preserving the Premises, the Building and the rest
of the Property after such default, the cost of recovering possession of the
Premises, reasonable expenses of reletting, including necessary renovation or
alteration of the Premises, Landlord’s reasonable attorneys’ fees and costs
incurred in connection therewith, and any real estate commissions paid or
payable.  As used in subparts (i)
and (ii) above, the “worth at the time of the award” is computed by
allowing interest on unpaid amounts at the Interest Rate (as defined in Section
16.2).  As used in subpart (iii)
above, the “worth at the time of the award” is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of the award, plus one percent (1%).

 30
 

 

(b)           Landlord
shall have the remedy described in California Civil Code Section 1951.4
(Landlord may continue this Lease in effect after Tenant’s breach and
abandonment and recover rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations).

(c)           Landlord
may, but shall not be obligated to, cure the Event of Default at Tenant’s
expense.  If Landlord pays any sum or
incurs any expense in curing the Event of Default, Tenant shall reimburse
Landlord upon demand for the amount of such payment or expense with interest at
the Interest Rate from the date the sum is paid or the expense is incurred
until Landlord is reimbursed by Tenant.

(d)           Subject
to applicable legal due process requirements, Landlord may remove all Tenant’s
property from the Premises, and such property may be stored by Landlord in a
public warehouse or elsewhere at the sole cost and for the account of
Tenant.  If Landlord does not elect to
store any or all of Tenant’s property left in the Premises, Landlord may
consider such property to be abandoned by Tenant, and Landlord may thereupon
dispose of such property in any manner deemed appropriate by Landlord.  Any proceeds realized by Landlord on the
disposal of any such property shall be applied first to offset all expenses of
storage and sale, then credited against Tenant’s outstanding obligations to
Landlord under this Lease, and any balance remaining after satisfaction of all
obligations of Tenant under this Lease shall be delivered to Tenant.

(e)           Tenant
waives any and all rights of redemption granted by or under any Laws if Tenant
is evicted or dispossessed for any cause, or if Landlord obtains possession of
the Premises by reason of the violation by Tenant of any of the terms,
covenants or conditions of this Lease, or otherwise.

15.3         Notice
Requirements.  When this Lease requires service of a notice,
that notice shall replace rather than supplement any equivalent or similar
statutory notice, including any notices required by Code of Civil Procedure
Section 1161 or any similar or successor statute, subject to all statutory
notice requirements.

15.4         Landlord’s
Default and Tenant’s Remedies.

(a)           Landlord shall not be
deemed to be in default of its obligations unless Landlord fails to perform any
covenant, condition, or agreement contained in this Lease and fails to cure the
nonperformance within a reasonable time, but not later than thirty (30) days
after receiving written notice of the failure, provided, however, that if the
nature of Landlord’s failure to perform reasonably requires more than thirty
(30) days to cure, then Landlord shall not be deemed in default if Landlord
commences to cure such failure within said thirty (30) day period and
thereafter diligently and in good faith prosecutes such cure to completion.

(b)           In the event that
Tenant is prevented from using, and does not use, the Premises or any portion
thereof, as a result of (i) any failure to provide services, utilities or
ingress to and egress from the Building, Property (including the parking
areas), or Premises as a result of the negligence or willful misconduct of
Landlord or its agents, employees or contractors, or (ii) (A) any failure to
provide services, utilities or ingress to and egress from the Building,
Property (including the parking areas) not caused by the negligence or willful
misconduct of Landlord or its agents, employees or contractors and/or Tenant or
Tenant’s Representatives, or (B) the presence of any Hazardous Materials not
brought onto the Premises or otherwise Handled by Tenant or Tenant’s
Representatives or Invitees (any such circumstances to be known as an “Abatement Event”), then Tenant shall give Landlord written
notice of

 31
 

 

such Abatement Event, and
if such Abatement Event continues for three (3) consecutive Business Days after
Landlord’s receipt of any such notice (the “Eligibility
Period”), then the Base Rent and Tenant’s Share of Operating Costs
and Taxes shall
be abated or reduced, as the case may be, after expiration of the Eligibility
Period for such time that Tenant continues to be so prevented from using, and
does not use, the Premises, or a portion thereof, in the proportion that the
rentable area of the portion of the Premises that Tenant is prevented from
using, and does not use bears to the total rentable area of the Premises;
provided, however, that in the case of any Abatement Event arising under
subsection (ii) above (i.e., 
interruption of services, utilities or access for which neither party is
responsible or Hazardous Materials for which Tenant is not responsible), Tenant
shall only be entitled abatement of rent, and the Eligibility Period shall only
continue for so long as, to the extent of and during any periods for which any
rental loss insurance which may then be carried by Landlord compensates
Landlord for such abated rent, without imposing any obligation on Landlord to
carry such rental loss insurance.  Such
right to abate Base Rent and Tenant’s Share of Tenant’s Share of Operating
Costs and Taxes shall be
Tenant’s sole and exclusive remedy at law or in equity for an Abatement Event;
provided, however, that if Landlord has not cured such Abatement Event within
one hundred eighty (180) days after receipt of notice from Tenant, Tenant shall
have the right to terminate this Lease during the first five (5) Business Days
of each calendar month following the end of such 180-day period until such time
as Landlord has cured the Abatement Event, which right may be exercised by
delivery of written notice to Landlord during such five (5) Business Day
period, and shall be effective thirty (30) days after Landlord’s receipt
thereof  Notwithstanding anything
contained in this paragraph to the contrary, any termination notice provided by
Tenant hereunder shall be null and void if Landlord cures such Abatement Event
within such thirty (30) day period following receipt of such notice.  Except as expressly provided in this Section
15.4(b) or Sections 12 and 13, nothing contained in this Lease shall be
interpreted to mean that Tenant is excused from paying rent due hereunder.

16.           LATE
CHARGE AND INTEREST.

16.1         Late
Charge.  Tenant acknowledges that late payment of rent
will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain.  These costs include processing and accounting
charges, and late charges which may be imposed on Landlord by the terms of any
ground leases and/or mortgages. 
Accordingly, if any payment of rent is not received by Landlord within
five (5) days after the date when such payment is due, Tenant shall pay to
Landlord on demand as a late charge an additional amount equal to five percent (5%)
of the overdue payment.  A late charge
shall not be imposed more than once on any particular installment not paid when
due, but imposition of a late charge on any payment not made when due does not
eliminate or supersede late charges imposed on other (prior) payments not made
when due or preclude imposition of a late charge on other installments or
payments not made when due.  Tenant
agrees that the late charge imposed by this provision is a fair and reasonable
estimate of the costs Landlord will incur by reason of the late payment by
Tenant.  Notwithstanding the foregoing or
anything to the contrary contained herein, no later charge or interest shall be
due on the first and only the first late payment of rent by Tenant in any
calendar year during the Term so long as Tenant makes such payment within three
(3) days after its receipt of a written notice of delinquency from Landlord

16.2         Interest.  In addition to the late charges referred to
above, which are intended to defray Landlord’s costs resulting from late
payments, any payment from Tenant to Landlord not paid when due shall at
Landlord’s option bear interest from the date due until paid to Landlord by
Tenant at the rate of twelve percent (12%) per annum or the maximum rate that
Landlord may charge to Tenant under applicable Laws, whichever is less (the “Interest Rate”). 
Acceptance of any late charge and/or interest shall not constitute a
waiver of Tenant’s default with respect to the overdue sum or prevent Landlord
from exercising any of its other rights and remedies under this Lease.

 32
 

 

17.           PARKING.  Tenant shall have the right to use throughout
the Term (including any Extended Term), on a non-exclusive basis, at no
additional charge to Tenant, three hundred fifteen (315) non-reserved
automobile parking spaces in the Parking Facility located on the Property;
provided, however, that the number of non-reserved automobile parking spaces
provided to Tenant is based on a ratio of three and 14/100 (3.14) such parking
spaces per one thousand (1,000) square feet of Rentable Area included in the
Premises and, accordingly, the number of such spaces is subject to pro rata
adjustment on the basis of the foregoing formula if the Rentable Area included
in the Premises is adjusted.  All parking
by Tenant, Tenant’s Representatives and Tenant’s Invitees shall be in
compliance with all reasonable Rules and Regulations of Landlord regarding the
use of the Parking Facility, as such Rules and Regulations may be modified
reasonably from time to time.  In addition,
if Tenant, Tenant’s Representatives or Tenant’s Invitees violate the Rules and
Regulations, Landlord shall have the right after reasonable notice to Tenant to
remove any vehicles so violating the Rules and Regulations, at Tenant’s
expense, and Landlord shall not be liable for any damage incurred in connection
with such removal.  Landlord reserves the
right to require Tenant, Tenant’s Representatives and Tenant’s Invitees to use
stickers or any other identification system established by Landlord; provided,
however, that any such stickers or other form of identification supplied by
Landlord shall remain the property of Landlord, and shall not be
transferable.  All responsibility for
damage to vehicles or persons in or about the Parking Facility is assumed by
the owner of the vehicle and/or its driver. 
Landlord reserves the right to designate certain areas of the Parking
Facility as visitors’ parking, to be reserved for guests and/or visitors, and
neither Tenant nor Tenant’s employees shall park in such designated areas.  Landlord also reserves the right to allow
persons other than tenants of the Building and their guests and/or visitors to
use the Parking Facility, provided the foregoing does not prevent Tenant from
its use of the parking rights granted hereunder.

18.           ENTRY,
INSPECTION AND CLOSURE.  Upon reasonable
(i.e., 24 hours) oral or written notice to Tenant (and without notice in
emergencies), Landlord and its authorized representatives may enter the
Premises during Business Hours (and at any time in case of Emergency), and
subject to Tenant’s reasonable security requirements (except in the event of
Emergency), to:  (a) determine
whether the Premises are in good condition, (b) determine whether Tenant
is complying with its obligations under this Lease, (c) perform any
maintenance or repair of the Premises or the Building that Landlord has the
right or obligation to perform, (d) install or repair improvements for
other tenants where access to the Premises is required for such installation or
repair, (e) serve, post or keep posted any notices required or allowed
under the provisions of this Lease, (f) show the Premises to prospective
brokers, agents, buyers, transferees, Mortgagees or, during the last one
hundred eighty (180) days of the Term only, tenants, or (g) do any other
act or thing necessary for the safety or preservation of the Premises or the
Building.  When reasonably necessary
Landlord may temporarily close entrances, doors, corridors, elevators or other
facilities in the Building without liability to Tenant by reason of such
closure.  Landlord shall conduct its
activities under this Section in a commercially reasonable manner that will
minimize inconvenience to Tenant.  In no
event shall Tenant be entitled to an abatement of rent on account of any entry
by Landlord, and Landlord shall not be liable in any manner for any
inconvenience, loss of business or other damage to Tenant or other persons
arising out of Landlord’s entry on the Premises in accordance with this
Section.  No action by Landlord pursuant
to this paragraph shall constitute an eviction of Tenant, constructive or
otherwise, entitle Tenant to an abatement of rent or to terminate this Lease or
otherwise release Tenant from any of Tenant’s obligations under this Lease.

19.           SURRENDER
AND HOLDING OVER.

19.1         Surrender.  Upon the expiration or earlier termination of
this Lease, Tenant shall surrender the Premises and all Alterations to Landlord
broom clean and in their condition as of the

 33
 

 

Commencement
Date, except for normal wear and tear, damage from casualty or condemnation and
any changes resulting from approved Alterations that Tenant is not required to
remove; provided, however, that prior to the expiration or earlier termination
of this Lease Tenant:  (i) shall remove
all telephone and other cabling installed in the Building by Tenant, all of
Tenant’s personal property, furniture, decorations, interior or exterior signs,
and Trade Fixtures, and all Alterations that Landlord timely elects in
accordance with this Lease to require Tenant to remove; and (ii) shall repair
any damage  to the Premises, the
Building, Common Areas and perform any restoration work caused or occasioned by
Tenant’s compliance with this Section. Tenant shall patch and refinish all
penetrations made by Tenant or its agents or employees to the floor, walls, or
ceiling of the Premises necessitated by Tenant’s removal of Alterations and/or
Trade Fixtures, whether or not made or installed with Landlord’s approval.
Tenant shall repair or replace all stained or damaged ceiling tiles, wall coverings,
and floor coverings to the extent the same require repair or replacement beyond
normal wear and tear.  All repairs shall
be made to Landlord’s reasonable satisfaction. If any such removal or repair is
not completed before the expiration or earlier termination of the Term,
Landlord shall have the right (but no obligation) to cause such removal or
repair  to be performed and to repair any
damage and perform any restoration work caused or occasioned by such removal.
Tenant shall pay Landlord on demand for all costs of removal, repair and
restoration, for storage of Tenant’s property and for the rental value of the
Premises for the period from the end of the Term through the end of the time
reasonably required for such removal, repair and restoration.  Landlord shall also have the right to retain
or dispose of all or any portion of Tenant’s property if Tenant does not pay
all such costs and retrieve the property within ten (10) days after notice from
Landlord (in which event title to all such property described in Landlord’s
notice shall be transferred to and vest in Landlord).  Tenant waives all Claims against Landlord for
any damage or loss to Tenant resulting from Landlord’s removal, storage,
retention, or disposition of Tenant’s property. 
Upon expiration or earlier termination of this Lease or of Tenant’s
possession, whichever is earliest, Tenant shall surrender all keys to the
Premises or any other part of the Building and shall deliver to Landlord all
keys for or make known to Landlord the combination of locks on all safes,
cabinets and vaults that may be located in the Premises.  The term “normal wear and tear,” for purposes
of this provision, shall be construed to mean wear and tear caused to the
Premises by the natural aging process that occurs in spite of prudent
application of good standards for maintenance and repair; and it is not
intended, nor shall it be construed, to include items of neglected or deferred
maintenance which would have or should have been attended to during the Term of
the Lease if good standards had been applied to properly maintain and keep the
Premises at all times in good condition and repair.  Tenant’s obligations under this Section shall
survive the expiration or earlier termination of this Lease.

19.2         Holding
Over.  If Tenant (directly or through any Transferee
or other successor-in-interest of Tenant) remains in possession of the Premises
after the expiration or earlier termination of this Lease, Tenant’s continued
possession shall be on the basis of a tenancy at the sufferance of
Landlord.  In such event, Tenant shall
continue to comply with and perform all the terms and obligations of Tenant
under this Lease, except that the Monthly Base Rent during Tenant’s holding
over shall be one hundred fifty percent (150%) of the Monthly Base Rent payable
in the last full month prior to the expiration or termination hereof.  Acceptance by Landlord of rent after such
expiration or termination shall not constitute a renewal of this Lease; and nothing
contained in this provision shall be deemed to waive Landlord’s right of
reentry or any other right hereunder or at law. 
Tenant shall indemnify, defend and hold Landlord harmless from and
against all Claims arising or resulting directly or indirectly from Tenant’s
failure to timely surrender the Premises, including (i) any rent payable by or
any loss, cost, or damages claimed by any prospective tenant of the Premises,
and (ii) Landlord’s damages as a result of such prospective tenant rescinding
or refusing to enter into the prospective lease of the Premises or delaying the
commencement of rent payable thereunder by reason of Tenant’s failure to timely
surrender the Premises.

 34
 

 

20.           ENCUMBRANCES.

20.1         Subordination.  This Lease is expressly made subject and
subordinate to any mortgage, deed of trust, ground lease, underlying lease or
like encumbrance affecting any part of the Property or any interest of Landlord
therein which is now existing or hereafter executed or recorded (“Encumbrance”); provided, however, that such subordination
shall only be effective as to Encumbrances created by Landlord after the
Commencement Date of this Lease if the holder of the Encumbrance agrees that so
long as this Lease is in full force and effect and there exists no Event of
Default hereunder, Tenant’s right to possession of the Premises shall not be
disturbed by reason of foreclosure, exercise of the statutory power of sale, or
receipt of a deed in lieu of foreclosure in the case of any mortgage or deed of
trust that constitutes the Encumbrance or termination in the case of any ground
lease that constitutes the Encumbrance. 
Tenant shall execute and deliver to Landlord, within ten (10) days after
written request therefor by Landlord and in a commercially reasonable form requested
by Landlord, any additional documents evidencing the subordination of this
Lease with respect to any such Encumbrance, provided that, in any case where
Tenant is entitled to the above-described nondisturbance agreement, either
prior to or concurrently with the request Tenant is provided the required
nondisturbance agreement by the holder of the Encumbrance.  If the interest of Landlord in the Property
is transferred pursuant to or in lieu of proceedings for enforcement of any
Encumbrance, provided the new owner requires Tenant to do so or Tenant is party
to a nondisturbance agreement as herein described, Tenant shall attorn to the
new owner, and this Lease shall continue in full force and effect as a direct
lease between the transferee and Tenant on the terms and conditions set forth
in this Lease.  Anything in this Section
20.1 to the contrary notwithstanding, if a Mortgagee so elects in writing, this
Lease shall be deemed superior to the Encumbrance held by the Mortgagee,
regardless of the date of recordation of the Encumbrance, and Tenant will
execute an agreement confirming the Mortgagee’s election on request.

20.2         Mortgagee
Protection.  Tenant agrees to give any holder of any
Encumbrance covering any part of the Property (“Mortgagee”),
by registered mail, a copy of any notice of default served upon Landlord,
provided that prior to such notice Tenant has been notified in writing (by way
of notice of assignment of rents and leases, or otherwise) of the address of
such Mortgagee.  If Landlord shall have
failed to cure such default within thirty (30) days from the effective date of
such notice of default, then the Mortgagee shall have an additional thirty (30)
days within which to cure such default or if such default cannot be cured
within that time, then such additional time as may reasonably be necessary to
cure such default, and this Lease shall not be terminated so long as such
remedies are being diligently pursued; provided, however, that nothing
contained in this Section 20.2 shall be construed to (i) limit Tenant’s offset
or abatement rights under Sections 7.2 or 15.4(b) as against the Landlord at
the time that the act or omission resulting in such offset right (“Act”) arises; provided, however, that upon any Mortgagee
foreclosure or acceptance of a deed in lieu of foreclosure (collectively “Foreclosure”, and the Mortgagee or other party acquiring the
Premises thereby being the “Successor”),
Tenant may not offset or abate any amounts due to Tenant arising from any
pre-Foreclosure Act against any rent or other amounts due Successor after Foreclosure,
or (ii) impose any obligation on a Mortgagee to cure such default.  Landlord represents and warrants to Tenant
that, as of the Lease Date, the only Mortgage encumbering the Property is deed
of trust in favor of Wrightwood Capital Lender LLC (“Wrightwood”).  Notwithstanding the foregoing or anything to
the contrary contained here, within thirty (30) days after the Lease Date
Landlord shall obtain a nondisturbance agreement from Wrightwood in a
commercially reasonable form.  If
Landlord has not obtained such nondisturbance agreement as provided in the
preceding sentence, then Tenant may terminate this Lease by written notice to
Landlord, in which case Landlord shall refund to Tenant all funds and deposits
delivered by Tenant hereunder and Landlord and

 35
 

 

Tenant
shall thereupon have no further liability to the other under this Lease,
excepting obligations which expressly survive the termination hereof.

21.           ESTOPPEL
CERTIFICATES AND FINANCIAL STATEMENTS.

21.1         Estoppel
Certificates.  Within ten (10) days after written request
therefor, Tenant shall execute and deliver to Landlord, in a form provided by
or satisfactory to Landlord, a certificate stating that this Lease is in full
force and effect, describing any amendments or modifications hereto, acknowledging
that this Lease is subordinate or prior, as the case may be, to any Encumbrance
and stating any other information Landlord may reasonably request, including
the Term, the date on which the Term began and expires, the monthly Base Rent,
the date to which rent has been paid, the amount of any security deposit or
prepaid rent, whether either party hereto is in default under the terms of the
Lease, and whether Landlord has completed its construction obligations
hereunder (if any).  If Tenant fails
timely to execute and deliver such certificate as provided above then Tenant
shall be deemed to have confirmed the information in any such estoppel
certificate provided by Landlord and to have waived its right to contest the
accuracy of such information at any later date. 
Any person or entity purchasing, acquiring an interest in or extending
financing with respect to the Property shall be entitled to rely upon any such
certificate.  If Tenant fails to deliver
such certificate within five (5) Business Days after Landlord’s second written
request therefor, the Tenant’s failure or refusal to timely execute or deliver
such estoppel certificate shall be an Event of Default.

21.2         Financial
Statements. Within ten (10) days
after written request therefor, but not more than once a year, and only in
connection with a sale or refinancing of Landlord’s interest in the Project or
at any time Tenant is in default of its obligations hereunder, and only if
Tenant’s financial statements are not publicly available, Tenant shall deliver
to Landlord a copy of the financial statements (including at least a year end
balance sheet and a statement of profit and loss) of Tenant (and of each
guarantor, if any, of Tenant’s obligations under this Lease, but only if the
financial statements of such guarantor are not publicly available) for each of
the three most recently completed years, prepared in accordance with generally
accepted accounting principles (and, if such is Tenant’s normal practice,
audited by an independent certified public accountant), all then available
subsequent interim statements, and such other financial information as may
reasonably be requested by Landlord or required by any Mortgagee.  Landlord agrees to keep such financial
reports (to the extent the same are not publicly available) confidential,
although Landlord may disclose the contents thereof to Landlord’s professional
advisors and to potential lenders and buyers pursuant to such parties’
agreement to maintain the confidentiality of such information.

22.           NOTICES.  Any notice, demand, request, consent or
approval that either party desires or is required to give to the other party
under this Lease shall be in writing and shall be served personally, delivered
by independent messenger or overnight courier service, sent by U.S. certified
mail, return receipt requested, postage prepaid, addressed to the other party
at the party’s address set forth in the Basic Lease Information.  Notices shall be deemed to have been given
and be effective on the earlier of (i)  receipt (or refusal of delivery)
if personally delivered or sent by independent messenger service, (ii) one (1)
day after acceptance by an overnight courier service for delivery if sent by
overnight courier service, or (iii) three (3) days after mailing if sent by mail
in accordance with this Section.  If any
notice or other act that is permitted or required under this Lease shall come
due on a Saturday, Sunday or legal holiday, it shall be deemed to be due on the
next business day.  Landlord or Tenant
may change its address for notices hereunder, effective fifteen (15) days after
notice to the other party complying with this Section.  If Tenant sublets the Premises, notices from
Landlord shall be effective on the subtenant when given to Tenant pursuant to
this Section.

 36
 

 

23.           ATTORNEYS’
FEES.  In the event of any dispute
between Landlord and Tenant in any way related to this Lease, the
non-prevailing party shall pay to the prevailing party all reasonable attorneys’
fees and costs and expenses of any type incurred by the prevailing party in
connection with any action or proceeding (including any appeal and the
enforcement of any judgment or award), whether or not the dispute is litigated
or prosecuted to final judgment.  The “prevailing
party” shall be determined based upon an assessment of which party’s major
arguments or positions taken in the action or proceeding could fairly be said
to have prevailed (whether by compromise, settlement, abandonment by the other
party of its claim or defense, final decision, after any appeals, or otherwise)
over the other party’s major arguments or positions on major disputed issues.

24.           QUIET
POSSESSION.  Subject to Tenant’s full and
timely performance of all of Tenant’s obligations under this Lease and subject
to the terms of this Lease, including Section 20, Tenant shall have the quiet
possession of the Premises throughout the Term as against any persons or
entities lawfully claiming by, through or under Landlord.

25.           SECURITY
MEASURES.  Landlord may, but shall be
under no obligation to, implement security measures for the Property, such as
the registration or search of all persons entering or leaving the Building,
requiring identification for access to the Building, evacuation of the Building
for cause, suspected cause, or for drill purposes, the issuance of magnetic
pass cards or keys for Building or elevator access and other actions that
Landlord deems necessary or appropriate to prevent any threat of property loss
or damage, bodily injury or business interruption; provided, however, that such
measures shall be implemented in a way as not to inconvenience tenants of the
Building unreasonably.  Landlord shall at
all times have the right to change, alter or reduce any such security services
or measures.  Tenant shall cooperate and
comply with, and cause Tenant’s Representatives and Invitees to cooperate and
comply with, such security measures. 
Landlord, its agents and employees shall have no liability to Tenant or
its Representatives or Invitees for the implementation or exercise of, or the failure
to implement or exercise, any such security measures or for any resulting
disturbance of Tenant’s use or enjoyment of the Premises.

26.           COMMON
AREAS.  Without Landlord’s prior written
approval, Tenant will not obstruct the Common Areas, and Tenant will not use
the Common Areas for any purpose other than ingress and egress to and from the
Premises and parking in the Parking Facility as permitted under the Lease.  The Common Areas, except for the sidewalks,
are not open to the general public and Landlord reserves the right to control
and prevent access to the Common Areas by any person whose presence, in
Landlord’s opinion, would be prejudicial to the safety, reputation and
interests of the Building and its tenants.

27.           RULES
AND REGULATIONS.  Tenant shall be bound
by and shall comply with the rules and regulations attached to and made a part
of this Lease as Exhibit B, as well as any reasonable modifications
thereof and/or additions thereto hereafter adopted by Landlord for all tenants
of the Building upon notice to Tenant thereof (collectively, the “Rules and Regulations”). 
Landlord shall not be responsible to Tenant or to any other person for
any violation of, or failure to observe, the Rules and Regulations by any other
tenant or other person.  In the event of
any conflict between the rules and regulations and the other provisions of this
Lease, the other provisions of this Lease shall govern.

28.           LANDLORD’S
LIABILITY.  The term “Landlord,” as used
in this Lease, shall mean only the owner or owners of the Property at the time
in question.  In the event of any
conveyance of title to the Property, then from and after the date of such
conveyance, the transferor Landlord shall be relieved of all liability with
respect to Landlord’s obligations to be performed under this Lease first
accruing after the date of such conveyance. 
Notwithstanding any other term or provision of this Lease, the liability
of

 37
 

 

Landlord
arising out of or based upon its obligations under this Lease is limited solely
to Landlord’s interest in the Property as the same may from time to time be
encumbered (and any sales, assignment insurance or condemnation proceeds
received by Landlord), and no personal liability shall at any time be asserted
or enforceable against any other assets of Landlord or against Landlord’s
constituent partners or members or its or their respective partners,
shareholders, members, directors, officers or managers on account of any of
Landlord’s obligations or actions under or related to this Lease.

29.           CONSENTS
AND APPROVALS.  The review and/or
approval by Landlord of any item or matter to be reviewed or approved by
Landlord under the terms of this Lease or any Exhibits hereto shall not impose
upon Landlord any liability for the accuracy or sufficiency of any such item or
matter or the quality or suitability of such item for its intended use.  Any such review or approval is for the sole
purpose of protecting Landlord’s interest in the Property, and no third
parties, including Tenant or the Representatives and Invitees of Tenant or any
person or entity claiming by, through or under Tenant, shall have any rights as
a consequence thereof.  If it is
determined that Landlord failed to give its consent where it was required to do
so under this Lease, Tenant shall be entitled to injunctive relief and actual
damages resulting therefrom so long as (i) Tenant requested such consent in
writing and (ii) provided written notice to Landlord promptly after Landlord’s
refusal or failure to respond as required hereunder of Tenant’s assertion that
such consent was wrongfully withheld; provided, however that in no event shall
Tenant be entitled to terminate this Lease for Landlord’s failure to give any
consent required to be given by Landlord under this Lease.

30.           BROKERS.  Landlord shall have no obligation to pay a
fee or commission to any broker or brokers identified in the Basic Lease
Information (the “Broker”) except
in accordance with a separate written agreement with any such Broker signed by
Landlord.  Each party hereto warrants and
represents to the other party that in connection with the negotiating and
making of this Lease neither the warranting party nor anyone acting on its
behalf has dealt with any broker or finder who might be entitled to a fee or
commission for this Lease other than the Broker acting on behalf of the
warranting party identified in the Basic Lease Information.  Each party hereto shall indemnify and hold
the other party harmless from any Claims asserted by any other person or entity
for a fee, commission or other compensation based upon any dealings with or
statements made by the indemnifying party or the indemnifying party’s
Representatives.

31.           WAIVER.  No provisions of this Lease shall be deemed
waived by Landlord or Tenant unless such waiver is in a writing signed by the
waiving party.  The waiver by Landlord or
Tenant of any breach of any provision of this Lease shall not be deemed a
waiver of such provision or of any subsequent breach of the same or any other
provision of this Lease.  No delay or
omission in the exercise of any right or remedy of Landlord or Tenant upon any
default by the other party shall impair such right or remedy or be construed as
a waiver.  Landlord’s acceptance of any
payments of rent due under this Lease shall not be deemed a waiver of any
default by Tenant under this Lease (including Tenant’s recurrent failure to
timely pay rent) other than Tenant’s nonpayment of the accepted sums, and no
endorsement or statement on any check or payment or in any letter or document
accompanying any check or payment shall be deemed an accord and
satisfaction.  Landlord’s consent to or
approval of any act by Tenant requiring Landlord’s consent or approval shall
not be deemed to waive or render unnecessary Landlord’s consent to or approval
of any subsequent act by Tenant requiring Landlord’s consent or approval.

32.           ENTIRE
AGREEMENT.  This Lease, including the
Exhibits attached hereto, all of which Exhibits are incorporated into and made
a part of this Lease by this reference thereto, constitutes the entire
agreement between Landlord and Tenant with respect to the leasing of space by
Tenant in the Building, and supersedes all prior or contemporaneous agreements,
understandings, proposals and other

 38
 

 

representations
by or between Landlord and Tenant, whether written or oral, all of which are
merged herein.  Neither Landlord nor
Landlord’s agents have made any representations or warranties whatsoever with
respect to the Premises, the Building, the Property or this Lease except as
expressly set forth herein, and no rights, easements or licenses shall be
acquired by Tenant by implication or otherwise unless expressly set forth
herein. This Lease may be amended or modified only by a written instrument
signed by Landlord and Tenant.

33.           MISCELLANEOUS.

33.1         Submission
of Lease. The submission of this
Lease for examination does not constitute an option or offer to lease the
Premises or a reservation of the Premises in favor of Tenant.  This Lease shall become effective as a
binding agreement only upon execution and delivery thereof by Landlord to
Tenant.

33.2         Successors
and Assigns.  Subject to Sections 14 and 28, this Lease
shall be binding on and shall inure to the benefit of the parties and their
respective successors, assigns and legal representatives.

33.3         Severability.  The determination that any provisions hereof
may be void, invalid, illegal or unenforceable shall not impair any other
provisions hereof and all such other provisions of this Lease shall remain in
full force and effect.  The
unenforceability, invalidity or illegality of any provision of this Lease under
particular circumstances shall not render unenforceable, invalid or illegal
other provisions of this Lease, or the same provisions under other
circumstances.

33.4         Governing
Law.  This Lease shall be governed by and construed
and interpreted in accordance with the laws (excluding conflicts of laws
principles) of the State of California.

33.5         Interpretation.  The provisions of this Lease shall be
construed in accordance with the fair meaning of the language used and shall
not be strictly construed against either party, even if such party drafted the
provision in question.  When required by
the context of this Lease, the singular includes the plural and vice versa, and
the masculine, feminine and neuter genders each include the others.  Wherever the term “including” is used in this
Lease, it shall mean “including, but not limited to” the matter or matters
thereafter enumerated.  The captions
contained in this Lease are for purposes of convenience only and are not to be
used to interpret or construe this Lease. 
In any provision of this Lease relating to the conduct, acts or
omissions of Tenant, the term “Tenant” shall include Tenant’s Representatives,
and shall only include Tenant’s Invitees where expressly provided.

33.6         Joint
and Several Liability.  If more than one person or entity is
identified as Tenant hereunder, the obligations of each and all of them under
this Lease shall be joint and several.

33.7         Recordation.  Neither Landlord nor Tenant shall record this
Lease or a memorandum thereof.

33.8         Suite
Identification.  Landlord will provide, at Landlord’s expense,
Tenant’s name plate on the suite door and Tenant’s name on the directory for
the Building, both of which shall be in building standard size and design.

33.9         Counterparts.
This Lease may be executed in counterparts with the same effect as if both
parties hereto had executed the same document. 
Both counterparts shall be construed together and shall constitute a
single lease.

 39
 

 

33.10       Access
Control System:  Tenant may install, maintain, control, and
operate, an electronic proximity card-reader access control system (the “Access
Control System”) to regulate entry into the Premises and the Building;
provided, however, that Landlord shall be provided with updated copies of all
card keys in connection with such system for the purposes of Landlord’s right
of entry hereunder.

34.           TIME.  Time is of the essence for the performance of
each and every obligation to be performed by Tenant under this Lease.

35.           AUTHORITY.  If either party hereto is a corporation,
partnership, limited liability company or other form of business entity, such
party and each of the persons executing this Lease on behalf of such party
warrant and represent to the other party hereto that such party is a duly
organized and validly existing entity, that such party has full right and
authority to enter into this Lease and that the persons signing on behalf of
such party are authorized to do so and have the power to bind such party to
this Lease.  Upon request, either party
hereto shall provide the other party with evidence reasonably satisfactory to
the other party confirming the foregoing representations.

36.           TITLE
TO PROJECT.  Landlord represents and
warrants to Tenant that, as of the Lease Date, Landlord is the owner of fee
title to the Project.

 40
 

 

IN
WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of the
Lease Date.

	
  TENANT:

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
  VERIGY US, INC.,
  a Delaware corporation

  	
   

  	
  PAU MOULDS CPP-A LLC

  a California limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  	
  Peter Pau, Manager

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  

 

 41

 

EXHIBIT
A

THE
PREMISES

 1

 

EXHIBIT B

RULES AND REGULATIONS

The following Rules and Regulations are
additional provisions of the foregoing Lease. 
Capitalized terms used herein have the meanings ascribed to them in the
Lease.

1.             No
Access to Roof.  Except as expressly permitted under the
Lease, Tenant has no right of access to the roof of the Building and will not
install, repair or replace any antenna, aerial, aerial wires, fan, air
conditioner, satellite dish or other device on the roof of the Building,
without the prior written consent of Landlord. 
Any such device installed without such written consent is subject to
removal at Tenant’s expense without notice at any time.  In any event Tenant will be liable for any
damages or repairs incurred or required as a result of its installation, use,
repair, maintenance or removal of such devices on the roof and agrees to
indemnify, protect, defend and hold harmless Landlord from any Claims arising
from any activities of Tenant or of Tenant’s Representatives on the roof of the
Building.

2.             Signage.  Except as may be expressly permitted
hereunder, no sign, placard, picture, name, advertise­ment or notice visible
from the exterior of the Premises will be inscribed, painted, affixed or
otherwise displayed by Tenant on or in any part of the Premises or the Building
without the prior written consent of Landlord. 
Landlord reserves the right to adopt general guidelines relating to
signs in or on the Building.  Approved
signage, if any, will be inscribed, painted or affixed at Tenant’s expense by a
person approved by Landlord.

3.             Prohibited
Uses.  The Premises will not be used for
manufacturing, for the storage of merchandise held for sale to the general
public at the Premises, for lodging or for the sale of goods to the general
public.  The foregoing prohibitions shall
be in addition to, and not in lieu of, any other prohibitions applicable to the
use of the Premises under the Lease and/or applicable Laws.  Except for seeing-eye dogs, neither Tenant
nor its employees, agents, contractors, or invitees shall bring any animal or
pet into the Premises, the halls or corridors or any other part of the
Building, or the common areas, without the prior written consent of Landlord,
which shall not be unreasonably refused as to animals which are required on
account of an established disability.

4.             Keys
and Locks.  Landlord will furnish Tenant, free of charge,
a reasonable number of keys to each door or lock in the Premises.  Landlord may make a reasonable charge for any
replacement keys.  Tenant will not
duplicate any keys, alter any locks or install any new or additional lock or
bolt on any door of its Premises or on any other part of the Building without
the prior written consent of Landlord and, in any event, Tenant will provide
Landlord with a key for any such lock. 
On the termination of the Lease, Tenant will deliver to Landlord all
keys to any locks or doors in the Building which have been obtained by Tenant.

5.             Freight.  An elevator will be made available for Tenant’s
use for transportation of freight, subject to such scheduling as reasonably
appropriate.  Tenant shall not transport
freight in loads exceeding the weight limitations of such elevator.  Landlord reserves the right to prescribe in a
reasonable fashion the weight, size and position of all equipment, materials,
furniture or other property brought into the Building.  Landlord reserves the right to require that
heavy objects will stand on wood strips of such length and thickness as is
necessary to properly distribute the weight. 
Landlord will not be

 B-1
 

 

responsible
for loss of or damage to any such property from any cause associated with
Tenant’s use of the elevator, and Tenant will be liable for all damage or
injuries caused by moving or maintaining such property.

6.             Nuisances
and Dangerous Substances.  Tenant will not conduct itself or permit
Tenant’s Representatives or Invitees to conduct themselves, in the Premises or
anywhere on or in the Property in a manner which is offensive or unduly
annoying to any other tenant or Landlord’s property managers.  Tenant will not install or operate any
phonograph, radio receiver, musical instrument, or television or other similar
device in any part of the Common Areas and shall not operate any such device
installed in the Premises in such manner as to disturb or annoy other tenants
of the Building.  Tenant will not use or
keep in the Premises or the Property any kerosene, gasoline or other
combustible fluid or material other than limited quantities thereof reasonably
necessary for the maintenance of Tenant’s equipment.  Tenant will not use or keep any foul or
noxious gas or substance in the Premises or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors or vibrations, or interfere
in any way with other tenants or those having business therein.

7.             Building
Name and Address.  Without Landlord’s prior written consent,
Tenant will not use the name of the Building in connection with or in promoting
or advertising Tenant’s business except as Tenant’s address.

8.             Building
Directory.  A directory for the Building will be provided
for the display of the name and location of tenants.  Landlord reserves the right to approve or
disapprove placing any additional names Tenant desires to place in the
directory and, if so approved, Landlord may assess a reasonable charge for
adding such additional names.

9.             Window
Coverings.  No curtains, draperies, blinds, shutters,
shades, awnings, screens or other coverings, window ventilators, hangings,
decorations or similar equipment shall be attached to, hung or placed in, or
used in or with any window of the Building without the prior written consent of
Landlord.

10.           Floor
Coverings.  Tenant will not lay or otherwise affix
linoleum, tile, carpet or any other floor covering to the floor of the Premises
in any manner except as approved in writing by Landlord.  Tenant will be liable for the cost of repair
of any damage resulting from the violation of this rule or the removal of any
floor covering by Tenant or its contractors, employees or invitees.

11.           Wiring
and Cabling Installations.  Landlord will reasonably direct Tenant’s
electricians and other vendors as to where and how data, telephone, and
electrical wires and cables are to be installed.  No boring or cutting portions of the Building
outside the Premises for wires or cables will be allowed without the prior
written consent of Landlord unless the same is a component of any Alterations
approved by Landlord and/or is limited to the interior of the Premises and will
not affect the Building structure or any Building Systems.  The location of burglar alarms, smoke
detectors, telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the written approval of Landlord.

12.           Office
Closing Procedures.  Tenant will see that the doors of the
Premises are closed and locked and that all water faucets, water apparatus and
utilities are shut off before Tenant or its employees leave the Premises, so as
to prevent waste or damage.  Tenant will
be liable for all damage or injuries sus­tained by other tenants or occupants
of the Building or Landlord resulting from Tenant’s carelessness

 B-2
 

 

in
this regard or violation of this rule. 
Tenant will keep the doors to the Building corridors closed at all times
except for ingress and egress.

13.           Plumbing
Facilities.  The toilet rooms, toilets, uri­nals, wash
bowls and other apparatus shall not be used for any purpose other than that for
which they were constructed and no foreign substance of any kind whatsoever
shall be disposed of therein.  Tenant
will be liable for any breakage, stoppage or damage resulting from the
violation of this rule by Tenant, its employees or invitees.

14.           Use
of Hand Trucks.  Tenant will not use or permit to be used in
the Premises or in the Common Areas any hand trucks, carts or dollies except
those equipped with rubber tires and side guards or such other equipment as
Landlord may approve.

15.           Refuse.  Tenant shall store all Tenant’s trash and
garbage within the Premises or in other facilities designated by Landlord for
such purpose.  Tenant shall not place in
any trash box or receptacle any material which cannot be disposed of in the
ordinary and customary manner of removing and disposing of trash and garbage in
the city in which the Building is located without being in violation of any law
or ordinance governing such disposal. 
All trash and garbage removal shall be made in accordance with
reasonable directions issued from time to time by Landlord, only through such
Common Areas provided for such purposes and at such times as Landlord may
reasonable designate.  Tenant shall
comply with the requirements of any recycling program adopted by Landlord for
the Building.

16.           Soliciting.  Canvassing, peddling, soliciting and/or
distribution of handbills or any other written materials in the Building are
prohibited, and Tenant will cooperate to prevent the same.

17.           Parking.  Tenant will use, and cause Tenant’s
Representatives and Invitees to use, any parking spaces to which Tenant is
entitled under the Lease in a manner consistent with Landlord’s directional
signs and markings in the Parking Facility. 
Specifically, but without limitation, Tenant will not park, or permit
Tenant’s Representatives or Invitees to park, in a manner that impedes access
to and from the Building or the Parking Facility or that violates space
reservations for handicapped drivers registered as such with the California
Department of Motor Vehicles.  Landlord may
use such reasonable means as may be necessary to enforce the directional signs
and markings in the Parking Facility, including but not limited to towing
services, and Landlord will not be liable for any damage to vehicles towed as a
result of noncompliance with such parking regulations.

18.           Fire,
Security and Safety Regulations.  Tenant will comply with all reasonable or
mandatory safety, security, fire protection and evacuation measures and
procedures established by any governmental agency.

19.           Responsibility
for Theft.  Tenant assumes any and all responsibility for
protecting the Premises from theft, robbery and pilferage, which includes
keeping doors locked and other means of entry to the Premises closed.

20.           Sales
and Auctions.  Tenant will not conduct or permit to be
conducted any sale by auction in, upon or from the Premises or elsewhere in the
Property, whether said auction be voluntary, involuntary, pursuant to any
assignment for the payment of creditors or pursuant to any bankruptcy or other
insolvency proceeding.

21.           Waiver
of Rules.  Landlord may waive any one or more of these
Rules and Regulations for the benefit of any particular tenant or tenants, but
no such waiver by Landlord will be construed as a

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waiver
of such Rules and Regulations in favor of any other tenant or tenants nor prevent
Landlord from thereafter enforcing these Rules and Regulations against any or
all of the tenants of the Building.

22.           Effect
on Lease.  These Rules and Regulations are in addition
to, and shall not be construed to in any way modify or amend, in whole or in
part, the terms, covenants, agreements and conditions of the Lease.  In the event of any conflict or inconsistency
between these Rules and Regulations and the provisions of the Lease, the
provisions of the Lease shall control. 
Violation of these Rules and Regulations constitutes a failure to fully
perform the provisions of the Lease, as referred to in Section 15.1.

23.           Nondiscriminatory
Enforcement.  Subject to the provisions of the Lease (and
the provisions of other leases with respect to other tenants), Landlord shall
use reasonable efforts to enforce these Rules and Regulations in a
nondiscriminatory manner, but in no event shall Landlord have any liability for
any failure or refusal to do so (and Tenant’s sole and exclusive remedy for any
such failure or refusal shall be injunctive relief preventing Landlord from
enforcing any of the Rules and Regulations against Tenant in a manner that
discriminates against Tenant).

24.           Additional
and Amended Rules.  Landlord reserves the right to rescind or amend
these Rules and Regulations and/or to adopt any other rules and regulations as
in its reasonable judgment may from time to time be needed for the safety, care
and cleanliness of the Building and the Property and for the preservation of
good order therein and thereon.

 B-4

 

EXHIBIT C

WORK LETTER

This Work Letter shall set forth the terms and conditions relating to
the construction of tenant improvements in and to the Premises and the Building
by both Tenant and Landlord.  All
references in this Work Letter to Articles or Sections of “the Lease” shall
mean the relevant portions of the Lease Agreement to which this Work Letter is
attached as  Exhibit C and of
which this Work Letter forms a part, and all references in this Work Letter to
Sections of “this Work Letter” shall mean the relevant portion this Exhibit
C.  All capitalized terms used in
this Work Letter and not defined shall have the meaning set forth in the Lease.

SECTION 1

CONDITION OF PREMISES AND BASE BUILDING

Tenant acknowledges that Tenant has accepted the Premises, and has
agreed to Landlord’s obligations for the initial construction of Alterations in
and to the Premises, subject to the terms and conditions of Section 1.2 of the
Lease.

SECTION 2

TENANT AND LANDLORD WORK

The work to be performed pursuant to this Work Letter shall include the
following components of work in and to the Premises and the Building:

2.1           Demolition Work.  Landlord shall perform certain demolition
work in the Premises necessary to prepare the Premises for the “Office TI Work”
(defined below), consisting of the work described on Schedule 1,
attached hereto (the “Demolition Work”).  The Landlord shall engage a contractor of its
choice to perform the Demolition Work, and such work shall be completed at no
cost or expense to Tenant.  The Demolition
Work shall be substantially completed on or before the later of (i) June 30,
2006, or (ii) the date all required governmental permits and approvals
necessary to commence the Office TI Work (defined below) have been issued and
copies of the same have been provided to Landlord by Tenant (such later date
shall be the “Demolition Deadline”).  As used herein and elsewhere in this Work
Letter, the terms “substantially completed” and “substantial completion” shall
mean the date by which all of the following have occurred:  (a) the work at issue shall have been
completed in accordance with the requirements of this Work Letter, except for
punch list items that are minor in character and do not materially, adversely
interfere with Tenant’s use or enjoyment of the Premises or the commencement
and completion of the Tenant Work (as defined below); and (b) Landlord (or
Tenant, as applicable) shall have obtained any and all governmental permits and
approvals required for the completion of the work at issue.

2.2           Demising Work.  Landlord shall perform certain work to demise
the Premises from that portion of the Building designated as 10200 North Tantau
Avenue and, with respect to the Building Systems serving the Premises, shall
either (i) separate such Building Systems so that discrete components of the
Building Systems serve the Premises exclusively, or (ii) if such separation is
not reasonably practicable, provide separate metering for the Building Systems
serving the Premises (the “Demising Work”).  In addition, as part of the “Demising Work”,
the Landlord shall also engage a contractor to

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power-wash the exterior of the Building.  The Landlord shall engage one or more
contractors of its choice to perform the Demising Work, and such work shall be
completed at no cost or expense to Tenant. 
The Demising Work shall be substantially completed on or before
September 1, 2006 (the “Demising Deadline”).

2.3           Base Building Repair
Work.  Landlord shall perform certain
repair work in and to the Building and the Premises, consisting of those items
specified on Schedule 1 attached hereto (the “Base
Building Repair Work”).  The
Landlord shall engage one or more contractors of its choice to perform the
Demising Work, and such work shall be completed by licensed and qualified
contractors at no cost or expense to Tenant. 
The Base Building Repair Work shall be substantially completed on or
before the Commencement Date (the “Base Building Repair Work
Deadline”).  All Demising Work, Demolition Work, and Base
Building Repair Work shall be completed in a good and workmanlike manner, using
new materials and equipment of good quality, and in accordance with all
applicable governmental laws, rules and regulations.  Landlord and Tenant shall reasonably
cooperate with each other in coordinating the Demising Work, Demolition Work
and Base Building Repair Work (including the plans therefor) with the design
and construction of the Tenant Work (defined below).

2.4           Office TI Work.  The Tenant shall construct interior
improvements in and to the Premises which are in the nature of standard office
tenant improvement work, including without limitation construction/relocation
of interior walls, floor and wall coverings, installation/relocation of ceiling
and lighting, installation/relocation of standard office electrical, plumbing
and HVAC facilities, and installation of built-in shelving and cabinetry, all
as shown on construction plans and specifications to be approved by Landlord
(not to be unreasonably withheld) (collectively, the “Office TI
Work”).  Tenant agrees and
acknowledges that the “Office TI Work” does not include (i) the “Lab Work”
(defined below), (ii) installation of network and communications cabling and
equipment for Tenant’s operations in the Premises, and (iii) Tenant’s
furnishings, fixtures and equipment (“FF&E”).  Landlord shall pay Tenant for the cost of
specific components of the Office TI Work, as described on Schedule 1,
attached hereto (the “Landlord TI Work”)
based on the approved final costs of such work included in Tenant’s contract
with Tenant’s Contractor.  Fifty percent
(50%) of such costs shall be due and payable by Landlord to Tenant upon
completion of fifty percent (50%) of the Landlord TI Work, within fifteen (15)
days after Tenant has notified Landlord that such work is fifty percent (50%)
complete, subject to Landlord’s right to inspect and approve the same (which
approval shall not be unreasonably withheld) within such fifteen (15) day
period.  The remaining fifty percent
(50%) of the final cost of such work (and any additional costs for such work
included in any change orders for such work approved by Landlord) shall be paid
within fifteen (15) days after the substantial completion of Tenant’s
Work.  Save and except for the cost
charged by Tenant’s Contractor for the Landlord TI Work, any and all other work
and expenses necessary to construct the Office TI Work and any other Tenant
Work, including without limitation “soft costs”
thereof, such as design costs, permit fees, insurance and the cost of any
testing required by applicable governmental authorities for the Tenant Work,
shall be at no cost to Landlord.

The Office TI Work shall be performed by Tenant’s
general contractor, Scates Construction, Inc., or any other general contractor
approved in writing by Landlord, which approval shall not be unreasonably
withheld or delayed (“Tenant’s Contractor”).  Prior to commencement of the Office TI Work,
Landlord shall have approved (which approval shall not be unreasonably
withheld) Tenant’s construction contract for the Office TI Work, including
without limitation (i) the economic terms of the construction contract for the
Office TI Work (e.g., stipulated sum or guaranteed maximum price, contractor’s
overhead and profit, profit on change orders, etc.), (ii) the line item budget
for the Office TI Work, (iii) the stipulated sum or guaranteed maximum price
for the Landlord TI Work and (iv) the schedule for completion of the Office TI
Work (including milestone dates).  In
addition, prior to Tenant’s  approval of
(and the commencement of any work under) any change orders for the Office TI
Work,

 C-2
 

 

Tenant shall provide copies of such change orders to Landlord, and
Landlord shall have the right to approve (which approval shall not be
unreasonably withheld) any and all such change orders to the extent such change
orders would (A) increase the cost of the Landlord TI Work, or (B) materially
alter the scope of the Office TI Work. 
Landlord shall reimburse Tenant for the cost of the Landlord TI Work,
including any adjustments arising out of change orders approved by Landlord
(which approval shall not be unreasonably withheld) for the Landlord TI Work,
upon substantial completion of the Office TI Work.

2.5           Lab Work.  Tenant shall be permitted to construct within
the Premises a laboratory, which may include a “clean room” and shall also
include Tenant’s equipment to be used in the laboratory and all supplementary
HVAC, mechanical, electrical and plumbing equipment and facilities located in
and serving the laboratory and/or upgrades and additions to the Building
Systems existing as of the Lease Date. 
All of the foregoing work and installations, together with the interior
finishes, ceiling and lighting within the laboratory, and all “soft costs” (as
described in Paragraph 2.3 above) with respect to construction of the
laboratory, shall be referred to herein as the “Lab Work”.  Tenant shall construct and complete the Lab
Work at no expense to Landlord and shall engage a contractor for the Lab Work
who shall be subject to Landlord’s prior approval, not to be unreasonably
withheld; provided, however, that if Tenant intends to use the same contractor
to perform the Office TI Work and the Lab Work, Landlord’s approval of Tenant’s
Contractor for the Office TI Work shall constitute Landlord’s approval of such
contractor for performance of the Lab Work. 
Landlord shall have the right to review and approve Tenant’s
construction contract for the Lab Work prior to Tenant’s executing the same,
which approval shall not be unreasonably withheld.  In addition, prior to Tenant’s  approval of (and the commencement of any work
under) any change orders for the Lab Work, Tenant shall provide copies of such
change orders to Landlord, and Landlord shall have the right to reasonably
approve any and all such change orders to the extent such change orders would
materially alter the scope of the Lab Work.

2.6           Landlord Work and
Tenant Work.  As used in this Work
Letter and in the Lease, the term “Landlord
Work” means, collectively, the Demolition Work, Demising Work and
the Base Building Repair Work.  The term “Tenant Work” means, collectively, the Office TI Work
(subject to Landlord’s obligation to reimburse the cost of the Landlord TI
Work), the Lab Work and any and all other work performed by Tenant for the use
and occupancy of the Premises, including without limitation installation of
Tenant’s cabling and FF&E.  All
Landlord Work and Tenant Work shall be completed by licensed and qualified
contractors in a good and workmanlike manner, using new materials and equipment
of good quality, and in accordance with all applicable governmental laws, rules
and regulations.    Landlord shall
provide Tenant with at least ten (10) days’ prior written notice of the date
upon which, in Landlord’s judgment, substantial completion the Demolition Work,
Demising Work and Landlord’s Base Building Repair Work will occur and shall
thereafter keep Tenant informed as to any change in Landlord’s estimate of the
date which substantial completion of such work will occur.  All Tenant Work to be performed under this
Work Letter shall be considered to be “Alterations”, as the same is defined in
the Lease and subject to all of the terms and conditions of the Lease
respecting Alterations, with the exception of Section 6.1(b), which Section
shall not be applicable to the Tenant Work; provided, however, that
notwithstanding the provisions of Section 6 of the Lease, (i) the time periods
and conditions of Landlord’s consent to the Tenant Work shall be governed by
this Work Letter, (ii) the Lab Work shall not be deemed to be owned by
Landlord, and (iii) the insurance requirements applicable to the performance of
the Tenant Work shall be governed by this Work Letter.

 C-3
 

 

SECTION 3

CONSTRUCTION DRAWINGS

3.1           Construction
Drawings.  Landlord acknowledges that
Tenant has retained Chicago Design Network, as its architect/space planner in
connection with the Office TI Work and the Lab Work (collectively, the “Tenant-Designed Work”). 
Landlord also acknowledges that it has conceptually approved the
preliminary plans for the Office TI Work identified on Schedule 2
attached hereto, it being understood that such conceptual approval shall not
limit Tenant’s obligations under this Work Letter.  As soon as reasonably practicable, Tenant
shall submit its proposed construction plans for all of the Tenant-Designed
Work to Landlord for review and approval, which approval shall not be
unreasonably withheld.  All such plans
and construction drawings, including any reasonable revisions required by
Landlord and/or revisions required by applicable governmental authorities shall
be at no cost to Landlord.  The
construction plans and drawings to be prepared for the Tenant-Designed Work
shall be referred to collectively as the “Construction Drawings.”  Tenant’s Contractor shall verify, in the
field, the dimensions and conditions as shown on the relevant portions of the
existing Building plans;  Landlord shall
have no responsibility in connection therewith. 
Landlord’s review of the Construction Drawings shall be for its sole
purpose and shall not imply Landlord’s approval of the same for quality,
design, compliance with applicable Laws or other like matters.  Accordingly, Landlord shall have no liability
whatsoever in connection therewith and shall not be responsible for any omissions
or errors contained in the Construction Drawings, and without limiting the
scope thereof, Tenant’s waiver and indemnity set forth in the Lease shall
specifically apply to the Construction Drawings.

3.2           Landlord’s Approval.  If Landlord fails to approve or disapprove of
the proposed Construction Drawings (or any subsequent material changes thereto)
or any other items subject to Landlord’s approval under Sections 2.4 and 2.5
above in writing within five (5) days following delivery to Landlord of the
proposed Construction Drawings (or subsequent material changes thereto) or
Tenant’s written request for any other approval under Sections 2.4 and 2.5
above, the Construction Drawings (or subsequent material changes thereto) or
other Tenant request shall be deemed approved. 
If Landlord disapproves of the proposed Construction Drawings (or
subsequent material changes thereto) or any other Tenant request for Landlord’s
approval in any respect, Landlord shall deliver to Tenant its detailed written
response indicating the reasons for its disapproval (and for the Construction
Drawings and any material changes thereto, Landlord’s proposal for required
changes) and the parties shall negotiate in good faith to reach agreement on
any item in dispute. With respect to all disputed items, if Landlord and Tenant
fail to agree with respect to such disputed item(s) within three (3) days of
Landlord delivering its written notice of disapproval, any such continued
disapproval shall be deemed to be a Force Majeure Delay (on a day-for-day basis
until Landlord and Tenant have agreed on any disputed item subject to Landlord’s
approval).  Notwithstanding to the
contrary in this Work Letter, Tenant shall have the right to make subsequent
changes to the Landlord-approved Construction Drawings and Landlord shall not
have any right to approve such changes to the extent any such changes in the
Construction Drawings and/or the work to be performed pursuant thereto (a) is
required by the City of Cupertino or other applicable governmental body having
jurisdiction over the Tenant-Designed Work, and (1) is reasonably consistent
with the design intent of the approved Construction Drawings, and (2) Tenant
agrees to pay for any additional cost to the Landlord TI Work caused by the
proposed changes; or (b) consists of minor field changes that (1) are
reasonably consistent with the intent or required for the proper execution of
the Construction Drawings, and (2) that will not materially adversely affect
the Building Systems, any of the Landlord Work and/or the design, use, or
operation of the Premises.

3.3           Permits.  
Promptly after Landlord’s approval, Tenant shall cause the approved
Construction Drawings to be submitted to the appropriate municipal authorities
for all applicable

 C-4
 

 

building permits necessary to allow the contractors
performing such work to commence and fully complete the construction of the
Tenant-Designed Work and, in connection therewith, Tenant shall coordinate with
Landlord in order to allow Landlord, at its option, to observe all phases of
the permitting process.  Tenant shall
deliver to Landlord copies of all required permits for the construction of
Tenant Work prior to commencing such work. 
Tenant shall undertake commercially reasonable efforts to obtain the
Permits for the Tenant Work from the appropriate municipal authorities and to
deliver such Permits to Landlord as soon as reasonably practicable.  Notwithstanding anything to the contrary set
forth in this Work Letter, Tenant hereby agrees that neither Landlord nor
Landlord’s consultants shall be responsible for obtaining any building permit
for the Tenant-Designed Work or any signed-off permits for the completed
Tenant-Designed Work, and in any event Tenant shall be responsible for
obtaining a certificate of occupancy (or signed-off building permit) for the
Office TI Work and Lab Work upon completion of the Tenant Work and shall
provide the same to Landlord immediately upon receipt thereof; provided however
that Landlord shall, in any event, cooperate with Tenant in executing permit
applications and performing other acts reasonably necessary to enable Tenant to
obtain any such permit, including any work that needs to be performed in
connection with the Landlord Work to obtain such permit.  No material changes, modifications or alterations
in the approved Construction Drawings may be made without the prior written
consent of Landlord, which consent shall not be unreasonably withheld.

3.4           Landlord Oversight
of Tenant Work.  During the
performance of the Tenant Work and in addition to Landlord’s rights under
Sections 2.4 and 2.5 above with respect to change orders, Landlord shall have
the right to observe the progress of the Tenant Work, as Landlord reasonably
deems necessary or appropriate, in all aspects of the construction of the
Tenant Work (including without limitation weekly meetings and inspections of
the in-progress Tenant Work).  Landlord
shall be provided with copies of all change orders as well as all written
notices exchanged between Tenant and its contractors, architects and engineers
to the extent such notices involve any changes to the cost or schedule of the
Tenant Work and/or any disputes involving the performance of or payment for the
Tenant Work.  Tenant agrees and
acknowledges that Landlord’s exercise of its rights to participate in and
oversee the performance of the Tenant Work shall be for its sole purpose and
shall not imply Landlord’s approval of the same for quality, design, compliance
with applicable Laws or other like matters. 
Accordingly, Landlord shall have no liability whatsoever in connection therewith
and shall not be responsible for any omissions or errors in the performance of
the Tenant Work, and without limiting the scope thereof, Tenant’s waiver and
indemnity set forth in the Lease shall specifically apply to the performance of
the Tenant Work.

3.5           Coordination.  Landlord and Tenant shall require their
respective contractors performing the Landlord Work and Tenant Work, and their
respective architects and engineers to the extent the design of any Tenant Work
impacts any Landlord Work, or vice versa, to cooperate with the other party’s
contractors and, as applicable, architects and engineers, including schedule
and staging coordination to the extent necessary and appropriate.  Tenant agrees and acknowledges that, because
Tenant is responsible for providing an integrated set of Construction Drawings
for all Tenant-Designed Work and because both Landlord and Tenant shall have
approved the scope of the Tenant Work, Tenant hereby waives any and all claims
against Landlord, under this Lease or otherwise, for any delays, liabilities,
losses, costs and expenses arising out of the failure of any components of the
design of the Tenant-Designed Work to be properly and efficiently coordinated
and integrated.

SECTION 4

CONSTRUCTION OF THE TENANT WORK

4.1           Tenant’s
Contractor(s).  Tenant shall require
that Tenant’s Contractor and any other contractors performing Tenant Work
subject to a direct contract with Tenant indemnify Landlord and any

 C-5
 

 

parties designated by Landlord in writing who have an
interest in the Building (e.g., Landlord’s lender) to the same extent that
Tenant is indemnified by Tenant’s Contractor in such contract.  Tenant shall require its contractors to carry
commercial general liability insurance meeting the requirements of the Lease
with limits of liability that are not in excess of $2,000,000 or such other
insurance as is approved by Landlord, including without limitation naming
Landlord and such additional parties designated by Landlord in writing who have
an interest in the building as Additional Insureds thereunder.  Tenant shall require its project architect to
carry professional liability insurance for all professional design work
performed in connection with the preparation of the Construction Drawings.  Tenant shall also carry, or cause its
contractors to carry, “builder’s risk” insurance insuring all materials and
incomplete Tenant Work during the construction of the Tenant Work.  Evidence reasonably satisfactory to Landlord
that Tenant has complied with the foregoing requirements shall be provided to
Landlord prior to Tenant’s commencing any work in the Premises.

4.2           Substantial
Completion of Tenant Work.  Tenant
shall notify Landlord in writing upon substantial completion of the Tenant
Work, whereupon Landlord, Tenant, Tenant’s Contractor (and any other contractor’s
engaged by Tenant for such work) and the architects and engineers who prepared
the Construction Drawings for the Tenant-Designed Work shall promptly arrange
for a joint “walk-through” of the Premises to inspect such work and identify
any “punch list” items to be corrected or completed in connection
therewith.  Unless any party has objected
to any components of the Tenant-Designed Work within ten (10) days after the
walk-through, such party shall be deemed to have accepted the Tenant Work.

4.3           Notice of Completion.  Within ten (10) days after completion of
construction of the Tenant Work, Tenant shall cause a Notice of Completion to
be recorded in the office of the Recorder of the County of Santa Clara in
accordance with Section 3093 of the California Civil Code or any successor
statute and furnish a copy thereof to Landlord upon recordation, and timely
give all notices required pursuant to Section 3259.5 of the California Civil
Code or any successor statute.  In
addition, promptly after the substantial completion of all of the
Tenant-Designed Work, at its sole expense Tenant shall cause its architects and
engineers to prepare and deliver to Landlord a set of “as built” plans and
specifications (including all working drawings), consisting of two (2) hard
copies and one set of “CAD” drawings, for the completed Tenant-Designed Work.

SECTION 5

DELAYS

5.1           Tenant Delays.  Landlord’s time for completion of any
Landlord Work or for any other obligations of Landlord under this Work Letter,
and under the Lease where expressly noted therein, shall be extended one (1)
day for each day of any “Tenant Delay” as described below.  A “Tenant Delay” shall be any act or omission
by Tenant or Tenant’s Representatives which delays Landlord’s performance of
the Landlord Work, and Tenant fails to perform or cure the same within two (2)
days after Tenant’s receipt of Landlord’s written notice of any such act or
omission.  Landlord’s time for
performance of the Landlord Work affected by a Tenant Delay shall be tolled by
the number of days of delay to such work caused by any Tenant Delay, but only
to the extent the same is the proximate cause of a delay in the performance of
any of the Landlord Work.

5.2           Force Majeure.  The term “Force
Majeure Delay” shall mean any prevention, delay or stoppage due
solely to acts of God, acts of war, terrorism, civil commotions, any strikes,
labor disputes or lockouts affecting the Silicon Valley area or any particular
trade in such area, any extraordinary or unusual delay b any governmental
authority to process and issue necessary permits for the Landlord

 C-6
 

 

Work or Tenant Work, any delays identified in Section
3.2 as Force Majeure Delays, any delay caused by the discovery, investigation
or remediation of any Hazardous Materials discovered at the Building or the
Project, or fire or other casualty, but only to the extent the same is the
proximate cause of a delay in the performance of any obligation of Landlord or
Tenant hereunder.  Landlord and Tenant
shall be excused for their time of performance under this Work Letter (and to
the extent expressly provided in the Lease, under the Lease) for a period equal
to any such Force Majeure Delay; provided, however, that (i) if either party
believes such a Force Majeure Delay has occurred, such party shall waive its
right to any claim for delay based thereon unless it provides written notice to
the other party within ten (10) days after the occurrence of the conditions
giving rise to such delay, which notice shall specify the nature and anticipated
duration of such delay, and (ii) neither party to the Lease shall be excused as
a result of any Force Majeure Delays, nor shall the defined term “Force Majeure
Delays” be deemed incorporated into the Lease, unless and only to the extent
expressly set forth in the Lease.

5.3           Landlord Delays.  The term “Landlord Delay” shall mean any
delays in the Demolition Deadline, Base Building Work Deadline or Demising
Deadline which are caused by (i) Landlord’s failure to comply with its
obligation to complete the Demolition Work, Base Building Work and/or Demising
Work by the applicable deadlines, (ii) changes requested by Landlord to the
Landlord-approved Construction Drawings, to the extent the foregoing are not
the result of any Force Majeure Delay or Tenant Delay, and (iii) any disruption
to or interference with the Tenant Work caused by Landlord’s employees or
contractors that is not cured within two (2) days after Landlord’s receipt of
Tenant’s written notice of same.

SECTION 6

MISCELLANEOUS

6.1           Tenant’s
Representative.  Tenant has
designated Michael Fisher of Agilent Technologies as its sole representative
with respect to the matters set forth in this Work Letter, who, until further
notice to Landlord, shall have full authority and responsibility to act on
behalf of the Tenant as required in this Work Letter.

6.2           Landlord’s
Representative.  Landlord has designated Rochelle Cahn of Sand
Hill Property Company as its sole representative with respect to the matters
set forth in this Work Letter, who, until further notice to Tenant, shall have
full authority and responsibility to act on behalf of the Landlord as required
in this Work Letter.

6.3           Time of the Essence
in This Work Letter.  Time is of the
essence in the performance of the parties’ obligations under this Work
Letter.  Unless otherwise indicated, all
references herein to a “number of days” shall mean and refer to calendar days.

6.4           Tenant’s Lease
Default.  Notwithstanding any
provision to the contrary contained in this Lease, if an Event of Default as
described in Article 15 of the Lease has occurred at any time on or before the
Substantial Completion of any component of the Landlord Work, then (i) in
addition to all other rights and remedies granted to Landlord pursuant to the
Lease, Landlord shall have the right to suspend Landlord’s installation of such
Landlord Work  (in which case, Tenant
shall be responsible for any delay caused by such work stoppage), and (ii) all
other obligations of Landlord under the terms of this Work Letter shall be suspended
until such time as such default is cured pursuant to the terms of the Lease.

 C-7
 

 

Schedule 1 to
Exhibit C

A.                                   The
Demolition Work shall consist generally of the following:  removal of non-structural walls and
carpeting, all as specifically identified to Landlord by Tenant in a timely
manner prior to start of Demolition Work.

B.                                     The
“Base Building Repair Work” shall consist of the following items:

1.               Repair or replace
cooling tower media and mist elimination;

2.               Repair or replace
hot water heaters within Premises;

3.               Grind and epoxy
fill crack in the southeast corner of Premises concrete floor;

4.               Upgrade Premises
elevator to meet ADA compliance

5.               Install hand rails
for handicap ramps if required by the City of Cupertino;

6.               Apply asphalt
sealant and re-stripe parking areas;

7.               Repair roof and
roof components;

8.               Perform mechanical
equipment shutdown inspections and associated repair and maintenance;

9.               Repair or replace
sand filter pump system, if necessary;

10.         Perform GFI and infrared
testing and associated repair/replacement

11.         Install refrigeration
detection and exhaust system if required by the City of Cupertino; and

12.         Install
seismic shut off valve on existing gas line if required by the City of
Cupertino.

C.                                     The
“Landlord TI Work” shall consist of the following:  reconfiguration of the ceiling, lighting,
mechanical and sprinkler systems within the cross-hatched, two-story portion of
the Premises shown on Exhibit A to the Lease, which work shall be
described in a “reflected ceiling plan” to be prepared by Tenant as part of the
Construction Drawings for the Tenant-Designed Work.

 C-8
 

 

Schedule 2 to
Exhibit C

Office Plan Sheets SP-4
and SP-4 F2, dated 4/21/06 by Chicago Design Networks, as revised 4/27/06

 C-9

 

EXHIBIT
D

DETERMINATION OF
FAIR MARKET VALUE

The term “Fair Market Value”
of Base Rent for each Extended Term, as used in Section 2.3,  shall mean the average of the annual rental
rates then being charged in the market area in comparable buildings for space
of comparable size and condition to the space for which the Fair Market Value
is being determined, taking into consideration all relevant factors, including,
without limitation, such factors as credit-worthiness of the tenant, the
duration of the term, the automatic three percent (3%) annual increases stated
in Section 2.3, any rental or other concessions granted, whether a broker’s
commission or finder’s fee will be paid and responsibility for Operating
Costs.  The Fair Market Value shall be
determined as follows: Within forty five (45) days after receiving Tenant’s
notice exercising its Option to Extend, Landlord shall notify Tenant of its
determination of the Fair Market Value. 
Tenant shall have thirty (30) days from the date of such notice (the “Response Period”) to notify Landlord
whether it disagrees with such determination. 
If Tenant fails to so timely notify Landlord during the Response Period,
the Fair Market Value shall be as provided in Landlord’s notice.  If Tenant gives Landlord timely notice of its
disagreement, Landlord and Tenant shall negotiate in good faith to agree on
Fair Market Value for an additional fifteen (15) day period.  If the parties have not resolved Fair Market
Value within such time, then within fifteen (15) days thereafter each shall
specify in writing to each other the name and address of a person to act as the
appraiser or broker on its behalf and at its cost.  Each such person shall be a licensed
commercial real estate broker or MAI certified appraiser with at least five (5)
years of experience with commercial and industrial properties in Santa Clara,
Cupertino and the surrounding area.  If
either party fails to timely appoint an appraiser or broker within such fifteen
(15) day period, then the determination of the timely appointed appraiser or
broker shall be final and binding.

The two appraiser/brokers
shall have thirty (30) days from the day of their respective appointments (the “Determination Period”) to make their
respective determinations and arrange for a simultaneous exchange of such
written determinations.  If the two
appraisers’ determinations are within five percent (5%) of one another, the
average of the two determinations shall be deemed Fair Market Value; otherwise
the two appraisers shall within ten (10) days after expiration of the
Determination Period jointly appoint an impartial third appraiser with
qualifications similar to those of the first two appraisers and within thirty
(30) days after his or her appointment, the third appraiser shall independently
make a determination of Fair Market Value without reference to the previous
determinations of the parties’ respective appraisers (and such prior
determinations shall not be disclosed to the third appraiser prior to the third
appraiser’s making his or her determination of Fair Market Value).  On or prior to the expiration of such thirty
(30) day period, the third appraiser shall provide written notice of his or her
determination of Fair Market Value to the parties’ respective appraisers and to
the parties, whereupon the parties’ respective appraisers shall promptly
deliver their previous written determinations to the third appraiser.  Within ten (10) days of receipt thereof,
third appraiser shall select which of the two previous determinations more
closely approximates the third appraiser’s determination, and shall calculate
the average of his or her determination and such other determination and
provide written notice of the result to the parties’ respective appraisers and
to the parties.  Such average amount calculated
by the third appraiser shall conclusively be deemed Fair Market Value.  Each party shall pay the cost of its own
appraiser and shall share equally the cost of the third appraiser.

In the event the appraisers
have not determined Fair Market Value Base Rent as of the date the applicable
Extended Term is to begin, Tenant shall on an interim basis pay Landlord  Base Rent based upon the Base Rent payable
for the last month of the preceding Term. If the appraisers’ final
determination is less than the preceding month’s rent, Tenant shall be entitled
to a credit against the next rental payment(s) due from Tenant hereunder in the
amount of the difference.  Alternatively,
if the

 D-1
 

 

appraisers’ final determination is more than the
preceding month’s rent, Tenant shall pay such difference with the next rental
payment(s) due.

 D-2

 

EXHIBIT
E

FORM OF AGILENT GUARANTY

GUARANTY OF LEASE

IN CONSIDERATION OF and
as an inducement to the agreement by PAU MOULDS CPP-A LLC, a California limited
liability company, as Landlord, to suspend its requirement for a Security
Deposit under the terms and conditions of that certain Office Lease dated as of
                ,
2006, with VERIGY US, INC, a Delaware corporation, as Tenant, for certain
office space in the building located at 10100 North Tantau Avenue,
Cupertino, California (the “Lease”) and other
valuable consideration, the receipt of which is hereby acknowledged, the
undersigned, AGILENT TECHNOLOGIES, INC., a Delaware corporation (hereinafter
referred to as the “Guarantor”),
hereby absolutely and unconditionally guarantees to Landlord, any assignees of
Landlord’s interest under the Lease, or any parties entitled to enforce
Landlord’s right thereunder, or any subsequent owner of the premises, the
prompt and punctual payment of all rents and all other sums to be paid by
Tenant under the Lease during the term thereof and during the period of any
extension or renewal thereof; provided, however, that notwithstanding the
foregoing or anything in this Guaranty to the contrary, in no event shall
Guarantor’s liability under this Guaranty exceed an aggregate total amount of
Five Million Dollars ($5,000,000).  

Guarantor hereby agrees
that no extension of time granted to Tenant for the payment of said rents or
other sums, or for the performance of any of the obligations of Tenant or
forbearance or delay on the part of Landlord to enforce any of the provisions,
covenants, agreements, conditions and stipulations of the Lease, or waiver by
Landlord of any of said provisions, covenants, agreements, conditions and
stipulations, shall operate to release or discharge the Guarantor from its full
liability under this instrument of guaranty or prejudice the rights of Landlord
hereunder.

Guarantor hereby
expressly waives notice of acceptance of this Guaranty, notice of any default
of Tenant, notice of any other action taken or omitted to be taken by Landlord
with reference to the Lease, any and all other notices whatsoever given or
received by Landlord under said Lease, and any duty of Landlord to advise
Guarantor of any information known to Landlord regarding the financial
condition of Tenant and all other circumstances affecting Tenant’s ability to
perform its obligations to Landlord and agrees that no assignment by Tenant of
said Lease, or any other transfer of Tenant’s interest therein and no
bankruptcy, insolvency or similar proceedings shall operate to release or
discharge this Guaranty or the obligations of the Guarantor hereunder.
Guarantor further agrees that if said Lease contains provisions regarding
acceptance of the improvements by Tenant, any such acceptance by Tenant shall
be binding on the Guarantor hereunder the same as if the Guarantor had joined
in the execution of such acceptance, and it shall not be necessary for the
Guarantor to join in the execution or be notified of such acceptance.

Guarantor hereunder
further agrees that Tenant may, as determined in its sole discretion, enter
into any one or more agreements with Landlord amending the Lease, and any such
amendment shall be binding upon the Guarantor hereunder without the necessity
of the Guarantor joining in the execution of or being notified of any such
amendment.

All of Landlord’s rights
and remedies under the Lease and under this Guaranty shall be distinct,
separate and cumulative, and no such right or remedy therein or herein set
forth shall be in exclusion of or a waiver of any other rights or remedy to
which Landlord shall be entitled at law or in equity with respect to the Lease
or this Guaranty.

 

The
obligations of the Guarantor hereunder shall be independent of the obligations
of Tenant under the Lease, and Landlord may proceed to enforce this Guaranty
without first proceeding against Tenant or joining Tenant. Guarantor further
expressly agrees that, except as expressly provided herein, nothing shall
operate as a release of this Guaranty, and this Guaranty shall be a continuing
Guaranty and shall remain in full force and effect until the satisfaction of
the express conditions hereunder for the cancellation of this Guaranty.  Notwithstanding the foregoing or anything to
the contrary contained in this Guaranty, this Guaranty shall automatically be
deemed void, terminated and of no further force or effect, and Landlord shall
promptly return the original executed copy of this Guaranty to Guarantor, upon
the first to occur of (i) Landlord’s receipt of the “Security Deposit”, or (ii)
Tenant’s satisfaction of the “Minimum Rating” pursuant to (and as such terms
are defined in) Section 4 of the Lease. 
Guarantor acknowledges receipt of the Lease and agrees that it is
familiar with the terms and conditions of the Lease governing the conditions
upon which this Guaranty may be cancelled.

Guarantor hereby waives
any defense, except payment, which Guarantor might have, including specifically
but without limitation, any rights of subrogation Guarantor may have against
Tenant until the guaranteed obligations are paid in full. Guarantor consents to
any form or election of remedy pursued by the Landlord to enforce its rights
under the Lease, in whatever order it may choose, including any remedies that
may result in a relinquishment of any deficiency judgment in its favor against
Tenant and Guarantor waives any right Guarantor may have under California Civil
Code Sections 2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and 3433, or
any successor sections.

Guarantor agrees to pay
all costs and expenses including reasonable attorneys’ fees, which may be
incurred by Landlord in any effort to collect or enforce the Lease or the
obligations of Guarantor hereunder, whether or not any lawsuit is filed,
including without limitation, all costs and attorneys’ fees incurred by
Landlord in any bankruptcy proceeding and in any judicial or nonjudicial
foreclosure action.

If, prior to the
termination of this Guaranty, any amount received by Landlord from Tenant in
payment of Tenant’s obligations under the Lease is held to constitute a
preference, fraudulent conveyance or similar voidable payment under any law now
or hereinafter if effect, and Landlord is required to repay all or any part of
said amount, then, notwithstanding any revocation or termination of this
Guaranty or the termination of the Lease, Guarantor shall be and remain liable
to Landlord for the amount so repaid to the same extent as if such amount had
never originally been received by Landlord.

This Guaranty has been executed
and delivered pursuant to, and shall be interpreted in accordance with, the
laws of the State of California and shall be binding upon Guarantor and the
legal representatives of Guarantor, and shall inure to the benefit of Landlord,
its successors, transferees and assigns.

Guarantor hereby
expressly consents to the jurisdiction of any California State Court or Federal
Court sitting in Santa Clara County, California and any appellate court from
any such court in any action or proceeding arising under this Guaranty.

Guarantor hereby
represents and warrants to Landlord that the individual signing this Guaranty
on behalf of Guarantor is authorized to bind Guarantor to the terms and
conditions of this Guaranty.

	
  Dated:

  	
   

  	
  , 2006

  	
   

  	
  GUARANTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AGILENT
  TECHNOLOGIES, INC.,

  
	
   

  	
   

  	
  A Delaware
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
									

 

EXHIBIT
F

PERMITTED HAZARDOUS MATERIALS

CONTACT: HAI TO

PHONE: 553-6819

BUSINESS UNIT: ATG CALIFORNIA SEMICONDUCTOR TEST DIVISION

 

Chemical
Inventory

 

	
   

  	
   

  	
  MSDS

  	
   

  	
   

  
	
  TRADE NAME

  	
   

  	
  MANUFACTURER

  	
   

  	
  Quantity

  
	
  Flux off Rosin

  	
   

  	
  Chemtronics

  	
   

  	
  2-13.5 oz aerosol cans

  
	
  LPS dry
  lubricant

  	
   

  	
  LPS

  	
   

  	
  11 oz Aerosol can

  
	
  Derusto enamel
  paint

  	
   

  	
  Dap

  	
   

  	
  2-12 oz Aerosol cans

  
	
  TFE dry
  lubricant

  	
   

  	
  Miller-stephanson

  	
   

  	
  500ml Aerosol can

  
	
  High Vacuum
  Grease

  	
   

  	
  Dow Corning

  	
   

  	
  3-5.3 oz tubes

  
	
  340 Heat sink
  compound

  	
   

  	
  Dow Corning

  	
   

  	
  1-5oz tube

  
	
  Epoxi patch/seal
  repair resin

  	
   

  	
  DEXTER

  	
   

  	
  2.54 oz tube

  
	
  Epoxi patch/seal
  repair hardener

  	
   

  	
  DEXTER

  	
   

  	
  0.81 oz tube

  
	
  Loctite 444

  	
   

  	
  Loctite

  	
   

  	
  0.70 bottle

  
	
  Loctite 7452

  	
   

  	
  Loctite

  	
   

  	
  1.75 oz bottle

  
	
  Water soluble
  flux

  	
   

  	
  Qualitek

  	
   

  	
  2 oz bottle

  
	
  Tread anti-seize

  	
   

  	
  Weller

  	
   

  	
  0.5 oz tube

  
	
  Epoxy

  	
   

  	
  Hardman

  	
   

  	
  2-3.5 oz packages

  
	
  Acrilic top coat
  nail polish

  	
   

  	
  long nails

  	
   

  	
  0.5 oz bottle

  
	
  Duco Cement

  	
   

  	
  Duco

  	
   

  	
  1 oz tube

  
	
  CPM #9 ink

  	
   

  	
  Mercury

  	
   

  	
  2-5oz bottles

  
	
  Smoke detector
  test smoke

  	
   

  	
  Home Safeguard

  	
   

  	
  8-2.5 oz cans

  
	
  Connector
  cleaner plus

  	
   

  	
  Miller-stephanson

  	
   

  	
  504 ml aerosol can

  
	
  Staticide

  	
   

  	
  GC electronics

  	
   

  	
  16 oz bottle

  
	
  Expo dry erase
  cleaner

  	
   

  	
  Sanford

  	
   

  	
  8 oz bottle

  
	
  plate glass lens
  cleaner

  	
   

  	
  xerox

  	
   

  	
  4 oz bottle

  
	
  Paint touch up

  	
   

  	
  I/D/E/A

  	
   

  	
  2 oz bottle

  
	
  Isopropyl
  alcohol

  	
   

  	
  pure tronics

  	
   

  	
  32 oz bottle

  
	
  Super clean
  de-flux

  	
   

  	
  microcare

  	
   

  	
  12 oz aerosol can

  
	
  acetone

  	
   

  	
  Bortz

  	
   

  	
  1 gallon can

  
	
  Flux-off

  	
   

  	
  chemtronics

  	
   

  	
  2-1 gallon cans

  
	
  Foaming Rosin
  flux

  	
   

  	
  kester

  	
   

  	
  1 gallon can

  
	
  Water soluble
  flux 2331-zx

  	
   

  	
  kester

  	
   

  	
  1 gallon can

  

 

Updated 4/18/2006

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]