Document:

exv10w77

 

Exhibit 10.77

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of [DATE] (the “Effective Date”) by and
between Gen-Probe Incorporated, a Delaware corporation with offices at 10210 Genetic Center Drive,
San Diego, California 92121 (“Gen-Probe”), and [NAME] (the “Executive”).

     WHEREAS, the Executive is currently employed as an officer of Gen-Probe;

     WHEREAS, prior to September 15, 2002, Gen-Probe was a wholly-owned subsidiary of Chugai
Pharmaceutical Co., Ltd.;

     WHEREAS, Chugai distributed its Gen-Probe shareholdings to its shareholders in a “spin off”
transaction on September 15, 2002; and

     WHEREAS, the Board of Directors of Gen-Probe (the “Board”), having considered the proposed
spin-off transaction and other circumstances, deems it in the best interest of Gen-Probe to offer
this Agreement to the Executive and the Executive desires to enter into this Agreement.

     ACCORDINGLY, the parties hereto agree as follows:

	1.	 	Term of Employment. This Agreement shall be immediately effective. This Agreement,
and Executive’s employment hereunder, shall be for an indefinite term. At any time during the
term of this Agreement, either party may terminate this Agreement, and Executive’s employment,
in accordance with the provision of Sections 6 and 7 of this Agreement.
	 
	2.	 	Position and Duties. The Executive shall serve as [TITLE] of Gen-Probe,
and shall have commensurate responsibilities and authority. The Board of Directors may from
time to time particularly specify the Executive’s duties and authority. The Executive shall
not engage in or perform duties for any other persons or entities that interfere with the
performance of his duties hereunder. Any outside board of director positions held by the
Executive will be subject to approval by the Board of Directors of Gen-Probe.

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	3.	 	Salary, Bonus and Benefits. 

	 	(a)	 	Salary. During the period of the Executive’s employment, Gen-Probe
shall pay him an annual base salary at the rate the Executive is being paid as of the
Effective Date. This base salary may be adjusted annually by the Board, subject to the
terms of this Agreement and consistent with the Executive’s performance and
Gen-Probe’s policy regarding adjustments in officer compensation established from time
to time by the Board.
	 
	 	(b)	 	Bonus. In addition, at the Board’s discretion, the Executive may be
awarded incentive compensation, in the form of a cash bonus for each fiscal year
during his employment, based upon performance.
	 
	 	(c)	 	Benefits. The Executive shall be entitled to participate in the
employee benefit programs (including but not limited to medical, dental, life and
disability insurance, 401K retirement plan, and vacation program), which may be
adopted and maintained by Gen-Probe. The Executive may receive such other and
additional benefits as the Board may determine from time to time in its sole
discretion.

	4.	 	Expense Reimbursement. The Executive shall be entitled to receive prompt
reimbursement for all reasonable and customary expenses incurred by him in performing services
hereunder, including all expenses of travel and living expenses while away from home on
business or at the request of, and in the service of Gen-Probe; provided, that such expenses
are incurred and accounted for in accordance with the policies and procedures established by
Gen-Probe.
	 
	5.	 	Indemnification. Gen-Probe shall indemnify the Executive to the maximum extent
permitted by law and by the by-laws of Gen-Probe if the Executive is made a party, or
threatened to be made a party, to any threatened or pending legal action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact that the
Executive is or was an officer, director or employee of Gen-Probe or any subsidiary or
affiliate thereof, in which capacity the Executive is or was serving at Gen-Probe’s request,
against reasonable expenses (including reasonable attorneys’ fees), judgments, fines and
settlement payments incurred by him in connection with such action, suit or proceeding.
	 
	6.	 	Termination. The Executive may terminate his employment hereunder at any time, with
or without Good Reason (as defined below) upon written notice to Gen-Probe. If Executive
contends that Good Reason exists for his termination, such notice shall specifically and
expressly state the grounds which he contends constitute Good Reason. Gen-Probe may terminate
the Executive’s employment hereunder at any time, subject to the terms of this Agreement, with
or without Cause (as defined below) upon written notice to the Executive. If this Agreement
is terminated, all compensation and benefits other than severance benefits

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	 	 	described in Section 7 below, to the extent applicable, shall immediately cease, except
that the Executive will be entitled, through the date of termination, to payment of his
salary and benefits under Gen-Probe benefit programs and plans in accordance with their
terms.

As used in this Agreement, “Good Reason” shall mean any of the following events that are
not consented to by the Executive: (i) a substantial and material diminution in the
Executive’s duties and responsibilities hereunder; (ii) the location of the Executive’s
assignment on behalf of Gen-Probe is moved to a location more than 30 miles from its
present location; (iii) a reduction of more than ten percent (10%) in the Executive’s base
salary or in the Executive’s benefits received from Gen-Probe; (iv) the failure of
Gen-Probe to obtain a satisfactory agreement from any other successor to Gen-Probe to
assume and agree to perform this Agreement; or (iv) a material breach by Gen-Probe of its
obligations under this Agreement after notice in writing from the Executive and a
reasonable opportunity for Gen-Probe to cure or substantially mitigate any material adverse
effect of such breach. The Executive’s consent to any event which would otherwise
constitute Good Reason shall be conclusively presumed if the Executive does not exercise
his rights to terminate this Agreement for Good Reason under this section within ninety
(90) days of notice of the event.

As used in this Agreement, “Cause” shall mean any of the following events: (i) any act of
gross or willful misconduct, fraud, misappropriation, dishonesty, embezzlement or similar
conduct on the part of Executive; (ii) the Executive’s conviction of a felony or any
crime involving moral turpitude (which conviction, due to the passage of time or otherwise,
is not subject to further appeal); (iii) the Executive’s misuse or abuse of alcohol, drugs
or controlled substances and failure to seek and comply with appropriate treatment; (iv)
willful and continued failure by the Executive to substantially perform his duties under
this Agreement (other than any failure resulting from disability or from termination by the
Executive for Good Reason) as determined by a majority of the Board after written demand
from the Board of Directors for substantial performance is delivered to the Executive, and
the Executive fails to resume substantial performance of his duties on a continuous basis
within 30 days of such notice; (vi) the death of the Executive; or (vii) the Executive
becoming disabled such that he is not able to perform his usual duties for Gen-Probe for a
period in excess of six (6) consecutive calendar months.

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	7.	 	Severance Benefits in Certain Events. If Gen-Probe terminates the Executive’s
employment for reasons other than Cause, or if the Executive terminates his employment for
Good Reason, the Executive shall be entitled to receive as liquidated damages, the following
severance benefits:

	 	(a)	 	Salary. The Executive shall continue to receive his base salary, at
the rate in effect at the time of his termination of employment, in monthly
installments commencing the first day of the first month following termination and
continuing for an aggregate period of six (6) months (the “Salary Continuation
Period”); provided, however, that if termination under this Section 7 occurs in
connection with a Change in Control, then the Executive shall receive a single lump
sum payment, payable within 10 days of termination, equal to twelve (12) months’ base
salary.
	 
	 	 	 	For purposes of this Agreement, “Change in Control” shall have the meaning set forth on
Attachment “1” to this Agreement (hereby incorporated by reference). For purposes of
this Agreement, a termination shall be “in connection with” a Change in Control if
termination occurs within the period six (6) months prior to or eighteen (18) months
after a Change in Control.
	 
	 	 	 	(b) Bonus. If termination under this Section 7 occurs in connection
with a Change in Control then the Executive shall be entitled to receive, in lieu of
the bonus provided in Section 3(b) and in addition to the salary payment described in
Section 7(a), above, an amount equal to the greater of (i) the Executive’s targeted
level bonus in the year of the termination, or (ii) the Executive’s highest
discretionary bonus in the preceding three years. The amount payable shall be paid in
the same manner as and on the same schedule as the salary compensation paid under
subsection (a) above. No bonus compensation shall be payable under this section 7
unless termination occurs in connection with a change in control.
	 
	 	 	 	(c) Health Care and Life Insurance Coverage. Continued health care coverage
under Gen-Probe’s medical plan will be provided, without charge, to the Executive and
his eligible dependents until the earlier of (i) one (1) year following the
termination date or (ii) the first date that the Executive is covered under another
employer’s health benefit program providing substantially the same or better benefit
options to the Executive without exclusion for any pre-existing medical condition.
The period of time medical coverage continues under this agreement will be counted as
coverage time under COBRA. Gen-Probe will pay the premium for continued life
insurance coverage, if any, that the Executive may have elected under Gen-Probe’s Life
Insurance and Supplemental Life Insurance plan, subject to payment by the Executive of
the portion of such premium not contributed by Gen-Probe under such plan, during the
Salary Continuation Period.

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	 	(d)	 	401(k) Plan. The Executive’s interest in any unvested contributions
made by Gen-Probe to the Executive’s 401(k) account shall vest as of the date of
termination.
	 
	 	(e)	 	Outplacement Services. Gen-Probe agrees to provide Executive with
outplacement services during the first six months of the Salary Continuation Period.
	 
	 	(f)	 	Tax Matters. All compensation described in this Section 7 will be
subject to Gen-Probe’s collection of all applicable federal, state and local income
and employment withholding taxes. If any excise tax is imposed under Section 4999 in
connection with the compensation described in this Section 7 and/or in connection with
the acceleration upon severance of any stock options granted by Gen-Probe to the
Executive, Executive shall be solely responsible for any such excise tax.
	 
	 	(g)	 	Release of Claims. Gen-Probe’s obligation to make the payments and
provide the benefits hereunder shall be conditioned upon Executive’s execution of a
release of all claims, in standard form and content. The release shall be mutual and
shall also be signed on behalf of Gen-Probe.

	8.	 	Miscellaneous. 

	 	(a)	 	Arbitration. Executive and Gen-Probe agree that any and all claims or
disputes that in any way relate to or arise out of Executive’s employment with
Gen-Probe or the termination of such employment (including but not limited to claims
under this Agreement or any other contract, tort claims, and statutory claims of
employment discrimination, retaliation or harassment) shall be resolved exclusively
through final and binding arbitration in San Diego, California. Executive and
Gen-Probe waive any rights to a jury trial in connection with such claims or disputes.
The costs of the arbitration, including the fees of the arbitrator, shall be borne
exclusively by Gen-Probe. Any such arbitration shall take place in San Diego,
California and shall be conducted by a single neutral arbitrator who shall be a
retired federal or state judge, to be appointed by Judicial Arbitration and Mediation
Services (“JAMS”) in accordance with JAMS rules. The applicable procedural rules of
JAMS shall govern the arbitration. The arbitrator’s decision shall be delivered in
writing and shall disclose the essential findings and conclusion on which the
arbitrator’s decision is based. The parties shall be permitted to conduct adequate
discovery to allow for a full and fair exploration of the issues in dispute in the
arbitration proceeding. The arbitrator may grant any relief which otherwise would have
been available to the parties in a court proceeding. The decision and award of the
arbitrator shall be final and binding, and judgment upon the arbitrator’s award may be
entered by any court of competent jurisdiction.

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	 	(b)	 	Governing Law. This Agreement shall be construed and enforced in
accordance with and be governed by the laws of the State of California.
	 
	 	(c)	 	Entire Agreement. This Agreement sets forth the entire Agreement and
understanding between the Executive and the Company on the subject matter hereof, and
supersedes any other negotiations, agreements, understandings, oral agreements,
representations and past or future practices whether written or oral. No provision of
this Agreement may be amended, supplemented, modified, cancelled, or discharged unless
such amendment, supplement, modification, cancellation or discharge is agreed to, in
writing, signed by the Executive and a duly authorized officer of the Company (other
than the Executive); and no provisions hereof may be waived, except in writing, so
signed by or on behalf of the party granting such waiver.
	 
	 	(d)	 	Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and effect.
	 
	 	(e)	 	Notices.  For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and shall
be deemed to have duly given when personally delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, addressed as
follows:

If to the Executive:

[ADDRESS]

If to Gen-Probe:

President and Chief Executive Officer

Gen-Probe Incorporated

10210 Genetic Center Drive

San Diego, California 92121

With a copy to:

General Counsel

Gen-Probe Incorporated

10210 Genetic Center Drive

San Diego, California 92121

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	 	(f)	 	Successors. Gen-Probe will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or substantially all
the business and/or assets of Gen-Probe, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that Gen-Probe would be required to perform
it if no such succession had taken place. This Agreement and all rights under the
Agreement shall be binding upon and shall inure to the benefit of and be enforceable
by the party’s personal or legal representatives, executors, administrators, heirs,
and successors.
	 
	 	(g)	 	No Right to Continued Employment. Nothing herein shall be construed
as giving the Executive any rights to continued employment with Gen-Probe, and
Gen-Probe shall continue to have the right to terminate the Executive’s employment at
any time, with or without cause, subject to the provisions of this Agreement.
	 
	 	In witness whereof, the parties have executed this Agreement.

	 	 	 	 	 	 	 	 	 
	Executive:	 	 	 	Gen-Probe Incorporated:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By
	 	 

	 	 
	[NAME]	 	 	 	Henry L. Nordhoff	 	 
	 	 	 	 	Chairman, President and Chief Executive Officer	 	 

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ATTACHMENT “1”

DEFINITION OF “CHANGE IN CONTROL”

          Change in Control. “Change in Control” shall mean a change in ownership or control of the
Company effected through any of the following transactions:

          (a) any person or related group of persons (other than the Company or a person that,
prior to such transaction, directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Company’s outstanding
securities by means of any transaction or series of transactions; or

          (b) there is a change in the composition of the Board over a period of thirty-six
(36) consecutive months (or less) such that a majority of the Board members (rounded up to
the nearest whole number) ceases, by reason of one or more proxy contests for the election
of Board members, to be comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected or nominated for
election as Board members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time such election or nomination
was approved by the Board; or

          (c) the stockholders of the Company approve a merger or consolidation of the Company
with any other corporation (or other entity), other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or another entity) more than 66-2/3% of the combined
voting power of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a
merger or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 25% of the combined voting
power of the Company’s then outstanding voting securities shall not constitute a Change in
Control; or

          (d) the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or substantially
all of the Company’s assets.

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Schedule to Exhibit 10.77

The preceding form of Employment Agreement was entered into between the Company and the following
individuals:

	 	 	 	 	 
	Name	 	Title	 	Execution Date
	Lyle J. Arnold

	 	Vice President – Research
	 	January 12, 2004
	Paul E. Gargan

	 	Vice President – Business Development
	 	November 12, 2002
	Gurney I. Lashley

	 	Vice President – Supply Chain
	 	November 12, 2002
	Peter R. Shearer

	 	Vice President – Intellectual Property
	 	November 12, 2002
	Donald D. Tartre

	 	Vice President – Finance and
Corporate Controller
	 	January 19, 2004
	Valerie M. Day

	 	Vice President – Product Development
	 	April 1, 2004

9EXHIBIT 4.5

                      RULES FOR THE ADVANTEST CORPORATION
                        INCENTIVE STOCK OPTION PLAN 2005

                                       1

                                                              DATE: July 4, 2005

                                      RULES
                                       OF
                            THE ADVANTEST CORPORATION
                        INCENTIVE STOCK OPTION PLAN 2005

1        Definitions

1.1      In these Rules:

         "Advantest Group" means the Company and its subsidiaries;

         "Broker" means Mizuho Investors Securities Co., Ltd. or such other
         broker or agent appointed from time to time by the Company to execute
         transactions in connection with the Plan;

         "Company" means Advantest Corporation;

         "Date of Grant" means July 4, 2005;

         "Directors" means the board of directors of the Company;

         "Eligible Employee" means any such director, auditor, officer or
         employee of an Employing Company as designated by the Company;

         "Employing Company" means any one of the companies listed on Attachment
         A hereto;

         "Exercise Period" means a period commencing on April 1, 2006 and
         expiring at the close of business on March 31, 2010;

         "Exercise Price" means the price to be paid by a Stock Option Holder
         for the exercise of each Stock Option;

         "Guidelines" means Incentive Stock Option Plan 2005 Guidelines for
         exercising Stock Option granted to Eligible Employees in accordance
         with these Rules;

         "Plan" means the plan known as "The Advantest Corporation Incentive
         Stock Option Plan 2005" in its present form or as from time to time
         amended in accordance with the Rules;

         "Rules" means these rules as amended from time to time;

         "Shares" means fully paid common shares of stock of the Company;

         "Stock Option" means the stock options granted by the Company in
         accordance with the resolution of the shareholders' meeting of the
         Company held on June 28, 2005 and the resolution of the board meeting
         of the Company held on June 28, 2005;

<PAGE>
                                     - 2 -

         "Stock Option Holder" means a person holding a Stock Option;

         "Stock Option Register" means a register which is prepared and
         maintained by the Company pursuant to the Japanese Commercial Code and
         which lists information including the names and addresses of Stock
         Option Holders;

         "Subscription Price" means the price of a Share to be delivered upon
         exercise of a Stock Option, subject to adjustment provided in Rule 3,
         and the initial Subscription Price is 8,600 yen;

         "Tokyo Business Day" means a business day in Tokyo, Japan on which both
         the Company and the Tokyo Stock Exchange are open for the transaction
         of business; and

         "Unit" means 100 Shares or such other amount of Shares to which a
         voting right at a shareholders' meeting is granted pursuant to the
         Japanese Commercial Code and the Articles of Incorporation of the
         Company.

1.2      Where the context permits or requires the singular includes the plural
         and the masculine includes the feminine and vice versa.

1.3      Headings shall be ignored in construing the Rules.

2        Grant of Stock Options

2.1      Grant of Stock Options

         The Company may at its absolute discretion grant to any Eligible
         Employee such number of Stock Options as determined by the Company.
         Each Eligible Employee will be informed in writing by the Company of
         such grant.

2.2      Conditions on Exercise

         2.2.1    A Stock Option may be exercised only on a Tokyo Business Day.

         2.2.2    The number of Stock Options exercised at one time shall be 10
                  or multiples of 10. If the number of Stock Options held by a
                  Stock Option Holder is not 10 or a multiple of 10 (e.g., the
                  number of Stock Options held is 27), the remaining Stock
                  Options (in this example, 7) may be exercised only when they
                  are exercised together with 10 or a multiple of 10 Stock
                  Options (in this example, he or she may exercise 17 or 27 of
                  his Stock Options). However, if the number of Stock Options
                  held by a Stock Option Holder is less than 10, the Stock
                  Option Holder may exercise his Stock Options only when he
                  exercises all of his Stock Options.

         2.2.3    Notwithstanding Rule 2.5.1, in each case of a Stock Option
                  being non-exercisable pursuant to Rule 5, such Stock Option
                  shall be deemed automatically transferred to the Company
                  without any action of the Holder of such Stock Option and
                  without any consideration.

<PAGE>
                                     - 3 -

2.3      Acceptance of Stock Option

         To be entitled to grant of Stock Options, any Eligible Employee must
         execute a written acceptance of such Stock Options in the form of
         Attachment B hereto and deliver such acceptance form to the Company by
         July 11, 2005. The acceptance form includes the explanation of the
         terms of Stock Options in compliance with the Japanese Commercial Code.
         In the event of any inconsistency between these Rules and the
         acceptance form, the provisions of these Rules shall prevail.

2.4      No Payment

         No payment to the Company or the Employing Company shall be required
         from a Stock Option Holder upon the grant or acceptance of any Stock
         Option. The grant of the Stock Option is the Company's ex gratia.

2.5      Disposal Restrictions

         2.5.1    Neither a Stock Option nor any rights or interests in respect
                  of it may be transferred, assigned, pledged or otherwise
                  disposed of by a Stock Option Holder to any other person or
                  entity. If a Stock Option Holder purports to transfer, assign,
                  pledge or dispose of any such Stock Option or rights or
                  interests, whether voluntarily or involuntarily, then the
                  Stock Option may not be exercised and will be cancelled by the
                  Company pursuant to Rule 4.2.

         2.5.2    A Stock Option Holder may not assign, delegate or otherwise
                  transfer any of its rights or obligations under these Rules.

2.6      Certificates

         No certificates will be issued for Stock Options.

2.7      Grant to Employing Company

         When the Stock Options are granted to an Employing Company, these Rules
         shall apply to that Employing Company, and "Eligible Employee" shall
         read as "Employing Company", and in the application of Rule 5, "Stock
         Option Holder" shall be read as "Eligible Employee who is granted a
         cash bonus right corresponding to the Stock Option granted to that
         Employing Company".

3        Variations In Share Capital

3.1      Adjustment of Stock Option

         3.1.1    The Exercise Price is 860,000 yen.

         3.1.2    The number of Shares to be delivered upon exercise of each
                  Stock Option is 100 Shares (i.e., 1 Unit). If any adjustment
                  is made to the Subscription Price, then the number of Shares
                  to be delivered in relation to each Stock Option shall be
                  adjusted in accordance with the following formula, with
                  fractions of a Share being rounded down:
<PAGE>
                                     - 4 -

                        Number of Shares   =     Exercise Price
                                             ---------------------
                                              Subscription Price

         3.1.3    If the Company shall make a stock split or consolidate its
                  Shares into a smaller number of shares, then the Subscription
                  Price shall be adjusted by the Directors based on the
                  following formula:

                           NSP = OSP x                    1
                                        ----------------------------------------
                                        Stock Split Ratio or Consolidation Ratio

                  where:
                  NSP = the Subscription Price after such adjustment.
                  OSP = the Subscription Price before such adjustment.

         3.1.4    If the Company shall issue any Shares (other than Shares
                  issued upon conversion or exchange of any convertible or
                  exchangeable securities issued by the Company or upon exercise
                  of any rights or warrants issued, granted or offered by the
                  Company) or dispose of Shares owned by the Company (other than
                  Shares delivered upon exercise of any rights or warrants
                  granted by the Company) and the consideration per Share
                  receivable by the Company shall be less than the current
                  market price per Share, then the Subscription Price shall be
                  adjusted by the Directors based on the following formula:

                            NSP  =  OSP x    N + v
                                          -----------
                                             N + n

                  where:
                  NSP and OSP have the meanings ascribed thereto in Rule 3.1.3.
                  N = the number of Shares outstanding immediately prior to such
                      adjustment.
                  n = the number of additional Shares being issued as aforesaid
                      or (in the case of disposal of Shares owned by the
                      Company) the number of Shares being disposed of.
                  v = the number of Shares which the aggregate consideration
                      receivable by the Company would purchase at such current
                      market price per Share.

         3.1.5    In addition to Rule 3.1.3 and 3.1.4, in any of the following
                  circumstances, the Company will adjust the Subscription Price
                  in the manner it considers appropriate in its absolute
                  discretion:

                  (i)     the Company will issue securities convertible into
                          Shares at a consideration per Share receivable by the
                          Company which is less than the current market price
                          per Share;

                  (ii)    the Company will issue warrants, or securities with
                          warrants, to subscribe for or purchase Shares at a
                          consideration per Share receivable by the Company
                          which is less than the current market price per Share;

                  (iii)   adjustment of the Subscription Price becomes necessary
                          as a result of capital reduction, merger or corporate
                          division; or

<PAGE>
                                     - 5 -

                  (iv)    in addition to the foregoing, adjustment of the
                          Subscription Price becomes necessary as a result of
                          change (or possible change) in the number of
                          outstanding Shares.

         3.1.6    Any fractional number resulting from calculations of the
                  Subscription Price shall be rounded up to the nearest one yen.

3.2      Notice

         The Company will notify Stock Option Holders of any adjustment made
         under this Rule 3.

4        Exercise and Cancellation - General Rules

4.1      Exercise

         Unless otherwise specified in these Rules, a Stock Option shall only be
         exercisable:

         4.1.1    within the Exercise Period; and

         4.1.2    subject to the conditions imposed under Rule 2.2 and Rule 5.

4.2      Cancellation

         Unless otherwise specified in these Rules, a Stock Option shall be
         cancelled with no payment by the Company when:

         4.2.1    a shareholders' meeting of the Company approves merger whereby
                  the Company will be merged into another company;

         4.2.2    a shareholders' meeting of the Company approves share exchange
                  or share transfer whereby the Company will be a wholly owned
                  subsidiary of another company; or

         4.2.3    a Stock Option becomes non-exercisable as a Stock Option
                  Holder falls within any of the categories listed in Rule 5.

5        Exercise - Conditions

5.1      Cessation of Employment

         If a Stock Option Holder becomes a person who does not hold any
         position as a director, auditor, officer, employee or any other similar
         position of the Advantest Group, then all Stock Options then owned by
         that Stock Option Holder shall become non-exercisable; provided,
         however, that if the Company deems that it is appropriate to allow him
         to exercise his Stock Options and notifies him that his Stock Options
         continue to be exercisable, he shall be allowed to exercise his Stock
         Options during the Exercise Period.

<PAGE>
                                     - 6 -

5.2      Death

         If a Stock Option Holder dies, all Stock Options held by that Stock
         Option Holder shall become non-exercisable.

5.3      Waiver

         If a Stock Option Holder waives all or part of his Stock Options by
         submitting to the Company the form specified by the Company, then all
         or such part of Stock Options granted shall become non-exercisable.

5.4      Notice by the Company

         5.4.1    If for any reason a Stock Option Holder becomes a director,
                  auditor, officer or employee of a company which is a
                  competitor with the Company and the Company notifies the Stock
                  Option Holder that his Stock Options are non-exercisable, then
                  all of his Stock Options shall become non-exercisable.

         5.4.2    If a Stock Option Holder is in breach of laws, internal rules
                  of the Company or these Rules, and the Company notifies the
                  Stock Option Holder that his Stock Options are
                  non-exercisable, then all of his Stock Options shall become
                  non-exercisable.

6        Exercise of Stock Option

6.1      Manner of Exercise

         6.1.1    To exercise a Stock Option, a Stock Option Holder must deliver
                  on a Tokyo Business Day, an exercise notice to the Company
                  (with a copy to the Employing Company), in the prescribed form
                  (Attachment C), duly completed and signed by the Stock Option
                  Holder. The Stock Option Holder may not withdraw the exercise
                  notice for any reason.

         6.1.2    A Stock Option Holder shall pay the total amount of the
                  Exercise Price relating to the number of Stock Options that he
                  exercised (the "Total Exercise Price") and the related
                  expenses and taxes (if any), by transfer to the account
                  designated by the Company. The commission for such transfer
                  shall be incurred by the Stock Option Holder. After the
                  Company confirms its receipt of the Total Exercise Price and
                  the related expenses and taxes (if any), the Shares shall be
                  delivered by crediting the number of Shares, through the Japan
                  Securities Depository Center, Inc. (the "JSDC"), to the Stock
                  Option Holder's account opened pursuant to Rule 6.6.2.

6.2      Sale of Shares

         6.2.1    A Stock Option Holder may request, through the Company, that
                  the Broker sell all the Shares resulting from his exercise of
                  Stock Options. Any such request shall be made in a notice as
                  referred to in Rule 6.1.1.

         6.2.2    After the receipt of a notice as referred to in Rule 6.2.1,
                  the Company shall procure funds to be paid as the Total
                  Exercise Price on behalf of the Stock Option Holder, and
                  deliver the resulting Shares to the Stock Option Holder

<PAGE>
                                     - 7 -

                  in the manner specified in Rule 6.1.2. The Shares shall be
                  sold without delay after the Broker confirms receipt of the
                  Shares by the Stock Option Holder. Subject to Rule 6.5, the
                  Broker shall transfer, to the Stock Option Holder's account
                  with Mizuho Bank, Ltd. ("Mizuho Bank") opened pursuant to Rule
                  6.6.3, the proceeds of the sale of the Shares less (i) the
                  commission for the sale, (ii) the related expenses and taxes
                  (if any) and (iii) the commission for such transfer, within 30
                  days of the sale. The Stock Option Holder shall transfer, to
                  the bank account designated by the Company, an amount equal to
                  (i) the Total Exercise Price plus (ii) the related expenses
                  and taxes paid or to be paid by the Company in connection with
                  the exercise of the Stock Options or the sale of the Shares.

         6.2.3    If the Company deems that the proceeds of a sale of the Shares
                  will not be enough to cover (i) the Total Exercise Price plus
                  (ii) all expenses and taxes paid or to be paid by the Broker
                  or the Company in connection with the exercise of the Stock
                  Options or the sale of the Shares, the Company may either (a)
                  sell the Shares in accordance with Rule 6.2.2 or (b) reject
                  the request of the Stock Option Holder to sell the Shares and
                  deem that he has withdrawn the exercise of his Stock Options,
                  provided that if the request to sell the Shares has been made
                  to the Broker in accordance with Rule 6.2.1, the Company may
                  so deem only when such withdrawal can be made under the rules
                  of the JSDC and the internal rules of the Broker. If the Stock
                  Options are deemed to have not been exercised, the Stock
                  Option Holder may exercise the relevant Stock Options in
                  accordance with these Rules after he receives a notice from
                  the Company to the effect that his Stock Options have been so
                  deemed. The Company shall not be liable to the Stock Option
                  Holder for any result of any decision made under this Rule
                  6.2.3.

6.3      When the number of Shares deliverable upon exercise of the Stock
         Options includes less than one Unit, the exercising Stock Option Holder
         shall be deemed to request the Company to purchase such Shares pursuant
         to the Japanese Commercial Code. The determination of whether the
         number of Shares deliverable upon exercise includes less than one Unit
         shall be made separately with respect to each exercise (regardless of
         the number of Stock Options included therein).

6.4      No Part Exercise

         A Stock Option may be exercised with respect only to each Stock Option,
         and no Stock Option may be exercised in part.

6.5      Withholding

         The Company and the Broker shall be entitled to withhold, and the Stock
         Option Holder shall be obligated to pay, the amount of any tax
         attributable to or payable by and any social security or similar
         payments attributable to or payable by the Stock Option Holder in
         connection with the exercise or receipt of his Stock Option or the sale
         of the Shares. The Company and the Broker may establish appropriate
         procedures to provide for any such payments and to ensure that the
         relevant company receives prompt advice concerning the occurrence of
         any event which may create, or effect the timing or amount of any
         obligation to pay or withhold any such taxes or which may make
         available to the relevant company any tax deduction with respect to the
         payment.

<PAGE>
                                     - 8 -

6.6      Broker

         6.6.1    The Broker will assist the Company in connection with the
                  exercise of the Stock Options and the sale of the resulting
                  Shares.

         6.6.2    Prior to the exercise of the Stock Options, a Stock Option
                  Holder shall open and maintain an account in his name with the
                  Broker for the purpose of the delivery and deposit of the
                  Shares to be delivered upon the exercise. Such account shall
                  be opened through the Company.

         6.6.3    Prior to the sale of the Shares pursuant to Rule 6.2, a Stock
                  Option Holder shall open and maintain an account in his name
                  with Mizuho Bank for the purpose of the payment of the
                  proceeds of a sale of Shares. Such account shall be opened
                  through the Company.

7        General

7.1      Notices

         Any notice or other document required to be given under or in
         connection with the Plan may be delivered to a Stock Option Holder or
         sent by post or facsimile with confirmation in writing to him at his
         address which appears on the Stock Option Register. Notices sent by
         post shall be deemed to have been given on the day following the date
         of posting. Any notice or other document required to be given to the
         Company under or in connection with the Plan may be delivered or sent
         by post or facsimile with confirmation in writing to it at its
         registered office (or such other place or places as the Company may
         from time to time determine and provide Stock Option Holders with
         notification of).

7.2      Directors' Decisions Final and Binding

         The decision of the Directors in connection with any interpretation of
         the Rules or in any dispute relating to a Stock Option or other matter
         relating to the Plan shall be final and conclusive and binding on the
         relevant parties.

7.3      Costs

         The costs of introducing and administering the Plan shall be borne by
         the Company and the Employing Companies.

7.4      Regulations

         The Company shall have power from time to time to make or vary
         regulations for the administration and operation of the Plan, provided
         that the same are not inconsistent with these Rules.

7.5      Limitation of Liability

         The rights and obligations of a Stock Option Holder under the terms and
         conditions of his office or employment shall not be affected by his
         participation in the Plan or any right he may have to participate in
         the Plan. An individual who participates in the Plan waives all and
         any rights to compensation or damages in connection with rights under
         the Plan arising from the termination of his office or employment with
         any company for any reason whatsoever relating to any Stock Option
         under the Plan as a result of such termination or from the loss or
         diminution in value of such rights or entitlements.

<PAGE>
                                     - 9 -

7.6      Personal Information

         A Stock Option Holder hereby consents and agrees that the Company and
         the Employing Companies may collect, store, process, use, transfer and
         modify his personal information regarding identity, place of employment
         and other pertinent information needed to effectuate his participation
         in the Plan with other parties within the Advantest Group, or with
         third parties to the extent necessary or helpful in the implementation
         of the Plan.

7.7      No Entitlements

         7.7.1    Nothing in the Plan, these Rules or any document related
                  thereto shall be construed as guaranteeing any Eligible
                  Employee's continued employment or engagement with any member
                  of the Advantest Group, or as giving any Eligible Employee any
                  right to continued employment or engagement with any member of
                  the Advantest Group, during any period.

         7.7.2    Awards of Stock Options are discretionary. No award of Stock
                  Options shall confer on the Stock Option Holder any right or
                  entitlement to receive another award of stock options at any
                  time in the future.

8        Amendments

         Subject to Rule 7.4, the Company may at any time modify these Rules in
         any respect. The Company may at any time amend these Rules so that the
         Company may issue new shares upon exercise of Stock Options instead of
         transferring its treasury stock.

9        Governing Law and Jurisdiction

         These Rules and all Stock Options shall be governed by and construed in
         accordance with Japanese law. Any dispute arising out of, or in
         connection with, these Rules shall be subject to the exclusive
         jurisdiction of the Tokyo District Court.

10       Local Law Appendix

         The Local Law Appendix attached hereto shall be an integral part of
         these Rules. In the event of any inconsistency between these Rules and
         the Local Law Appendix, the provisions of the Local Law Appendix shall
         prevail.

<PAGE>
                                     - 10 -

                                                                    Attachment A

Employing Company

                 Advantest America Corporation (Holding Co.)
                 Advantest America, Inc.
                 Advantest America R&D Center, Inc.

                 Advantest (Europe) GmbH

                 Advantest (Singapore) Pte. Ltd.

                 Advantest (Malaysia) Sdn. Bhd.

                 Advantest Taiwan Inc.

                 Advantest Korea Co., Ltd.

<PAGE>
                                     - 11 -

                                                                    Attachment B

Acceptance Form:  to be delivered on July 4, 2005

                                                                    Attachment C

Exercise Notice:  to be delivered separately

<PAGE>
                                     - 12 -

                               Local Law Appendix
                                   for Germany

1.       Definitions

         Definitions as set out in 1.1 of the Rules are applicable to this
         Appendix.

2.       Eligible Employees

         The Company's discretion with respect to 2.1 will be exercised in a way
         complying with German law, in particular with the labour law principle
         of equal treatment (arbeitsrechtlicher Gleichbehandlungsgrundsatz) and
         with the prohibition of discrimination (Diskriminierungsverbot).

3.       Ex-gratia benefit

         The grant of the Stock Option is an ex-gratia benefit (freiwillige
         Leistung). It is granted without any obligation and even repeated
         granting will not create a legal claim.

4.       Vesting

         The Stock Options shall vest in Eligible Employees at the time of
         exercise of such Stock Options.

5.       Deemed Exercise

         If Stock Options held by a Stock Option Holder become non-exercisable
         pursuant to Rule 5.1, those Stock Options shall be deemed to be
         exercised immediately prior to the time the respective Stock Option
         Holder becomes a person who does not hold any position as director,
         auditor, officer, employee or any other similar position of the
         Advantest Group. If the Company deems that the proceeds of the sale of
         the resulting Shares will not be enough to cover (i) the Total Exercise
         Price plus (ii) all costs, expenses and taxes referred to in Rule
         6.2.3, then the Stock Options are deemed to be waived by the Stock
         Option Holder. This clause 5 applies to Rule 5.4 mutatis mutandis.

6.       Adjustment of the Subscription Price

         The Company's discretion with respect to the Adjustment of the
         Subscription Price will be exercised taking into fair consideration the
         circumstances where such adjustment is deemed appropriate.

7.       Taxes/Withholding

         There are income tax charges on the exercise of an option at a rate of
         between 15 % and 42 % (as of 2005) depending on the taxable income of
         the Stock Option Holder to be increased by a 5.5 % "solidarity"
         surcharge on the income tax due. The tax charge is determined by the
         difference between the market value of the shares at the date the
         shares are booked out (Ausbuchung) of the account of the Company or of
         any transfer agent of the Company and the option exercise price. The
         market value is defined on the basis of the quoted prices on the
         respective stock exchange. The Employing Company is entitled to
         deducted the taxes from the gross salary of the Stock Option Holder.
         Additionally, the usual social security contributions (to the extent
         the wage base for social security contributions are not exceeded) have
         to be paid on the difference between the exercise price and the market
         value at the date the shares are booked out (Ausbuchung) of the account
         of the Company or of any transfer agent of the Company. If the regular
         salary of the Stock Option Holder is not sufficient for the Employing
         Company to deduct wage tax and pay such tax to the competent tax
         office, the Employing Company will request the Stock Option Holder to
         either pay the tax to the Employing Company enabling the Employing
         Company to withhold wage tax or pay it to the tax office directly. The
         Employing Company will inform the tax office of such request.

<PAGE>
                                     - 13 -

         If the Stock Option Holder sells the shares within 12 months of the
         acquisition (and the aggregated total short-term capital gains less
         short-term capital losses for the respective calendar year amount to
         Euro 512 or more) or owns 1 % or more of the stated capital of the
         Company (or has owned 1 % or more at any time in the last five years)
         or holds the shares as business assets, he will be subject to income
         tax (and solidarity surcharge) on one-half of the difference between
         the sales prices and the market value at the date of exercise. If the
         Stock Option Holder sells the shares more than 12 months after
         acquisition (or within 12 months of the acquisition and the aggregated
         total short-term capital gains less short-term capital losses for the
         respective calendar year amount to less than Euro 512), does not own 1
         % or more of the stated capital of the Company (and has not owned 1 %
         or more at any time in the last five years) and does not hold the
         shares as business assets, no tax is payable.

         In principle, one-half of the gross dividends received by Stock Option
         Holders will be subject to income tax at the progressive tax rate plus
         solidarity surcharge. Investment income received by the Stock Option
         Holder, including dividends and interest, after deduction of half the
         income-related expenses in economic connection with the dividends or
         the standard amount for income-related expenses of Euro 51 (Euro 102
         for married couples filing jointly), are tax-free up to the maximum
         amount of tax-free savings allowances of Euro 1,370 (or Euro 2,740 for
         married couples filing jointly).

         Please note, however, that there are ongoing discussions among the
         German Finance Ministry officials with respect to changing German
         income tax rules. Changes with effect in 2005 or later, therefore,
         cannot be excluded.

8.       Insider Dealings

         Please note that Germany has adopted the EC-Directive on Insider
         Dealings. Insiders are, among others, persons who by virtue of their
         position as members of managing or supervisory boards of the issuing
         company or its subsidiaries or by their profession or work, have
         knowledge of not publicly known facts which may influence the market
         value of the securities issued. Insiders are subject to certain
         restrictions in selling or purchasing such securities or otherwise
         making use of their insider knowledge. Anyone in breach of those
         provisions will be liable to imprisonment or fine.

<PAGE>
                                     - 14 -

9.       Directors' decisions

         The decision of the Directors in connection with any interpretation of
         the Rules or in any dispute relating to a Stock Option or other matters
         relating to the Plan shall be final and conclusive and binding on the
         relevant parties. It may only be revised by competent courts.

10.      Governing Law

         The Rules shall be governed by and construed in accordance with
         Japanese law but mandatory provisions of German law may be applied.

<PAGE>
                                     - 15 -

                               Local Law Appendix
                                    for Italy

TAXATION

Any term not defined in the present appendix shall have the same meaning as
ascribed to it under the Rules.

For the purpose of this appendix, the Stock Option Holder is assumed to be
resident in Italy for Italian tax purposes.

Grant of a Stock Option. The grant of a Stock Option itself is not subject to
tax in the hands of the Stock Option Holder, as the Rules do not provide for the
possibility to transfer it to any third parties.

Exercise of a Stock Option. If the Exercise Price is equal to, or higher than,
the fair market value (as defined below) of the Share on the date of the offer
of the Stock Option (as defined below), the difference between:

o  the fair market value of the Share on the date of exercise of the Stock
   Option, and
o  the Exercise Price paid by the Stock Option Holder

is not taxable in the hands of the Stock Option Holder as employment income.
However, such exemption does not apply if, as a consequence of the exercise of
the Stock Option, the Stock Option Holder owns more than 10% of the share
capital of the Company.

Conversely, if the Exercise Price is lower than the fair market value of the
Share at the time of the offer of the Stock Option, the above mentioned
difference is fully taxable as employment income in the hands of the Stock
Option Holder and social security contributions also are due.

Employment income is subject to tax at progressive rates roughly ranging between
23% and 45%, depending on the total taxable income of the Stock Option Holder.
Under certain circumstances, taxes due by the Stock Option Holder are to be
withheld by the Employing Company and remitted to the competent tax offices.

As to shares listed on a regulated market, the fair market value for tax
purposes is equal to the average of the stock market prices of same shares
computed with reference to the last month. The date of the offer is the day when
the corporate bodies of the Company resolve upon the main terms and conditions
of the Plan.

Sale of Shares. The sale of Shares amounting to a "non qualified shareholding"
is subject to a 12.5% substitute tax in the hands of the transferor on the
difference between the sale price and the Exercise Price.

The sale of Shares amounting to a "qualified shareholding" is subject to
personal progressive taxation in the hands of the transferor at rates roughly
ranging between 23% and 45% on an amount equal to 40% of the difference between
the sale price and the Exercise Price.

Shares are deemed to amount to a "non qualified shareholding" in case they
entitle the relevant holder to:

<PAGE>
                                     - 16 -

o    up to 2% of the voting rights at the ordinary shareholders' meeting of the
     company or to 5% of the share capital of the company, as far as shares
     listed on a regulated market, or
o    up to 20% of the voting rights at the ordinary shareholders' meeting of the
     company or to 25% of the share capital of the company, as far as shares not
     listed on a regulated market.

If the above percentages are exceeded, the shares are deemed to amount to a
"qualified shareholding".

The amount subject to substitute tax or personal progressive taxation is reduced
by any amount possibly subject to tax at the time of the exercise of the Stock
Options (see under Exercise of Stock Options, above).

Dividends. Dividends received on "non qualified shareholdings" (as defined
above) are subject to a 12.5% tax, which is either withheld by the Italian
financial intermediary - if any - entrusted with the actual payment of such
dividends, or directly paid by the recipient, as the case may be.

Dividends received on "qualified shareholdings" (as defined above) are subject
to progressive taxation in the hands of the recipient at rates roughly ranging
between 23% and 45%. In case any Italian financial intermediary is entrusted
with the actual payment of such dividends, the same intermediary shall levy an
advanced 12.5% withholding, which can be deducted against the final tax burden
to be paid by the recipient. Similarly, any tax possibly paid or withheld abroad
on the dividends received can be deducted against the final tax burden within
the limits provided for by the relevant Italian tax law.

<PAGE>
                                     - 17 -

                               Local Law Appendix
                                    for Korea

This Appendix has been prepared to provide you with a summary of information
regarding your stock options granted by the Company under the Incentive Stock
Option Plan 2005 (the "Plan") specific to Korea.

This supplement is based on the tax laws and other laws concerning stock options
in effect in Korea as of June 2005. These laws are often complex and change
frequently. As a result, the information contained in this summary may be
out-of-date at the time you exercise your option or sell shares you acquire
under the Plan.

In addition, this supplement is general in nature. It may not apply to your
particular tax or financial situation, and the Company is not in a position to
assure you of any particular tax result. Accordingly, you are advised to seek
appropriate professional advice as to how the tax or other laws in your country
apply to your specific situation.

If you are a citizen or resident of a country other than Korea, the information
contained in this supplement may not be applicable to you.

TAX INFORMATION

Grant

You will not be subject to tax when a stock option is granted to you under the
Plan.

Date of Vesting

You will not be subject to tax when your stock options vest.

Exercise

You will be subject to income tax when you exercise your stock option. You will
be taxed on the difference between the fair market value of the shares at
exercise and the option price (i.e., the spread). This difference is treated as
salary and taxed at your marginal rate. Your employer will withhold from the
spread at exercise any social insurance contributions associated with the
realized income and pay it to Korea's social insurance funds.

Sale of Shares

When you subsequently sell the shares that you acquire under the Plan, you will
be subject to capital gains tax on any gain that you realize above the fair
market value at the time the option is exercised. No securities transaction tax
will apply to either Company's sale to you or your subsequent disposition of
shares acquired pursuant to the Plan.

Dividends

If you exercise your stock option, your employer is not required to withhold or
report income tax. It is your responsibility to report this income on your
annual tax return and to pay all taxes owed.

<PAGE>
                                     - 18 -

Labor Law Acknowledgment

By accepting this stock option, you acknowledge that the Plan is discretionary
in nature and may be unilaterally suspended or terminated by the Company at any
time.

RELATED CONSENTS

Personal Information

Through accepting the invitation extended to you to receive Stock Options
offered under the Plan, you effectively consent and agree that your employer and
the Company may use personal information regarding your identity, place of
employment, and other pertinent information needed to effectuate your
participation in the Plan with other parties within the Advantest Group or third
parties to the extent necessary or helpful to implement the Plan.

Treatment and Management of Purchased Stock

Through accepting the invitation extended to you to receive Stock Options
offered under the Plan, you effectively consent and agree that upon subscribing
to Shares under the Plan, the Company is authorized to take action regarding the
stocks and proceeds derived therefrom and participate in the management of the
stocks and proceeds derived therefrom as outlined in the Rules of the Advantest
Corporation Incentive Stock Option Plan 2005, as described in Section 6.2, 6.4,
6.5, and all other Sections describing such actions and/or participation.

<PAGE>
                                     - 19 -

                               Local Law Appendix
                                  for Malaysia

INTERPRETATION

Terms which have been defined in the Rules of the Plan shall, unless otherwise
defined in this Local Law Appendix for Malaysia, have the same meaning and
interpretation ascribed to it in the Rules of the Plan.

The terms and conditions set out in this Local Law Appendix for Malaysia shall
be applicable to Eligible Employees who are residents in Malaysia and is
supplemental to the terms and conditions set out in the Rules of the Plan. In
the event of any inconsistency or conflict between (1) this Local Law Appendix
for Malaysia, (2) the Rules of the Plan and/or (3) the written acceptance for
Stock Options in the form of Attachment B of the Rules, this Local Law Appendix
for Malaysia shall prevail.

AMENDMENTS/ADDITIONS TO THE RULES

Rule 2.3 - Acceptance of Stock Option
-------------------------------------

Rule 2.3 shall be deleted in its entirety and replaced with the following new
Rule:-

"2.3     Acceptance of Stock Option
         --------------------------

         2.3.1    Eligibility under the Plan does not confer on an Eligible
                  Employee a claim or right to participate in or any rights
                  whatsoever under the Plan and an Eligible Employee does not
                  acquire or have any rights over or in connection with the
                  Stock Options or the Shares comprised herein unless a grant of
                  Stock Options has been made by the Company to the Eligible
                  Employee pursuant to Rule 2.1 and the Eligible Employee has
                  accepted the grant of Stock Options in accordance with the
                  terms of such grant and the Plan.

         2.3.2    To be entitled to grant of Stock Options, any Eligible
                  Employee must execute a written acceptance of such Stock
                  Options in the form of Attachment B hereto and deliver such
                  acceptance form to the Company by July 11, 2005 (the "Expiry
                  Date"). The acceptance form includes the explanation of the
                  terms of Stock Options in compliance with the Japanese
                  Commercial Code. In the event of any inconsistency between
                  these Rules and the acceptance form, the provisions of these
                  Rules shall prevail.

         2.3.3    If any grant of Stock Option is not accepted in the manner
                  prescribed above, such grant shall on the Expiry Date,
                  automatically lapse and be null and void and of no further
                  legal effect."

Rule 2.7 - Grant to Employing Company
-------------------------------------

Rule 2.7 shall be deleted in its entirety.

<PAGE>
                                     - 20 -

Rule 7.7 - No Entitlements
--------------------------

The following new Rule 7.7.3 shall be inserted immediately after the existing
Rule 7.7.2:-

         "7.7.3   This Plan does not form part nor shall it in any way be
                  construed as giving rise to any term of employment of any
                  Eligible Employee, whether express or implied, in respect of
                  the grant of Stock Options under the Plan."

EXCHANGE CONTROL

These exchange control regulations are based upon the ECM Notices issued by Bank
Negara Malaysia which are in effect in Malaysia as at June 2005. A person
"resident" in Malaysia is required to comply with the Malaysian exchange control
requirements, as it may be varied or revoked by Bank Negara Malaysia from time
to time. You should therefore seek the advice of your local counsel to ensure
that you are in compliance with such requirements at all times. Non-compliance
with any of the ECM Notices constitutes an offence under paragraph 7 of the
Fifth Schedule to the Exchange Control Act, 1953.

For Malaysian exchange control purposes, a "resident" means inter alia:-
(1)  a citizen of Malaysia, excluding a person who has obtained permanent
     resident status in a territory outside Malaysia and is residing outside
     Malaysia; or
(2)  a non-citizen of Malaysia who has obtained permanent resident status in
     Malaysia and is residing permanently in Malaysia.

Currency of Payment
-------------------

All payments by residents, pursuant to the exercise of the Stock Options in
accordance with Rule 6.1.2 and/or Rule 6.2.2, must be made in a foreign currency
other than the currencies of Israel, Serbia and Montenegro.

Registration Requirement
------------------------

A resident may invest any amount in foreign currency in the Shares of the
Company under the Plan. However, a Stock Option Holder who, pursuant to the
exercise of his Stock Options, is required to transfer the sum of the Total
Exercise Price (including any related expenses or taxes) to an account
designated by the Company pursuant to Rule 6.1.2 and/or Rule 6.2.2, must
register such investments with the Controller at least seven (7) days prior to
the remittance of the Total Exercise Price (including any related expenses or
taxes).

Sale of Shares
--------------

If a resident sells his Shares pursuant to Rule 6.2, such resident must obtain
the prior approval of the Controller if the Total Exercise Price exceeds the
aggregate foreign currency equivalent of RM10 million. However, where the Total
Exercise Price exceeds the equivalent of RM1 million but does not exceed the
equivalent of RM10 million, the resident is only obliged to register the credit
facility provided by the Company to the resident under Rule 6.2 with the
Controller by making an online submission of Form SSC 10B pursuant to ECM 10 of
the ECM Notices.

<PAGE>
                                     - 21 -

A resident is required to (i) repatriate all interest, dividend, profits and
proceeds from the sale of the Shares to Malaysia as soon as they are received
and (ii) sell such receipts arising therefrom for Ringgit to an authorized
dealer, or deposit the funds in a permitted foreign currency account subject to
the limits imposed by the Controller.

TAXATION

The taxation treatment for Stock Options in Malaysia as contained herein are
based upon current taxation law and practice in Malaysia as at June 2005.
However, these laws and practice may be subject to changes. Additionally, the
private circumstances of each individual employee would be different in regard
to tax rates, personal and other relief etc. Accordingly, you should seek the
advice of your local tax expert to ensure that you are in compliance with
taxation laws and the Inland Revenue Board's ("IRB's") practices in Malaysia.

Payment of Taxes in relation to Stock Option
--------------------------------------------

Under Section 13 of the Income Tax Act, 1967, as confirmed by the IRB's Public
Ruling No.4 of 2004 (issued on 9th December 2004), employment income includes
any benefits arising from the grant of a Stock Option and the employee is liable
to pay tax on such benefits (if any). The employer shall be entitled to withhold
and pay over to the IRB such taxes under the Schedular Tax Deduction Rules 1994
(as amended) as are attributable to the value of the Stock Options upon the
exercise by the employee of the Stock Options in Malaysia. The IRB's Public
Ruling No.4 of 2004 also sets out the IRB's practice and requirements in regard
to share options generally.

Calculation of Taxable Income from the Exercise of Stock Options
----------------------------------------------------------------

Taxable income from the exercise of a Stock Option is calculated as the
difference between the market value of the Stock at the time the Stock Option is
granted and the offer price of the Stock Option, being the price to be paid by
the employee. The IRB determines market value for purposes of the foregoing by
averaging the highest price with the lowest price of the Share on the stock
exchange on the date the option is granted.

<PAGE>
                                     - 22 -

                               Local Law Appendix
                          for Peoples Republic of China

The Rules of The Advantest Corporation Incentive Stock Option Plan 2005 shall be
supplemented with the following provisions to govern Stock Options granted to
Eligible Employees who are employed at an Employing Company established in the
People's Republic of China (the "PRC"):

1.       Rule 2.1 shall read in its entirety as follows:

              Grant of Stock Options

              The Company may at its absolute discretion grant to any Eligible
              Employee such number of Stock Options as determined by the
              Company. Each Eligible Employee will be informed in writing by the
              Company of such grant. Benefits granted to Eligible Employees
              under the Plan are intended to be an additional performance
              incentive for employee performance beyond normal day-to-day
              responsibilities, and thus are not part of the regular salary
              offered in exchange for services.

2.       Rule 2.4 shall read in its entirety as follows:

              No Payment

              No payment to the Company or the Employing Company shall be
              required or permitted from a Stock Option Holder upon the grant or
              acceptance of any Stock Option. The Stock Option Holder shall not
              remit any foreign currency out of the PRC in relation to the Stock
              Option to which he or she is entitled. The grant of the Stock
              Option is the Company's ex gratia benefit of employment. The Stock
              Option has no commercial value.

3.       Rule 2.5.1 shall read in its entirety as follows:

              Disposal Restrictions

              Neither a Stock Option nor any rights or interests in respect of
              it may be transferred, assigned, pledged or otherwise disposed of
              by a Stock Option Holder to any other person or entity. If a Stock
              Option Holder purports to transfer, assign, pledge, or dispose of
              any such Stock Option or rights or interests, whether voluntarily
              or involuntary, then the Stock Option may not be exercised and
              will be cancelled by the Company. The Stock Option Holder may not
              ask the Company to redeem the Stock Options for any consideration
              if he decides not to exercise the Stock Option.

4.       Rules 2.5.2 shall be deleted.

5.       Rule 6.1.2 shall be deleted.

<PAGE>
                                     - 23 -

6.       Rule 6.2.1 shall read in its entirety as follows:

              A Stock Option Holder shall request, through the Company, that the
              Broker sell all the Shares resulting from his exercise of Stock
              Options. Such request shall be made in the same notice as referred
              to in Rule 6.1.1.

7.       Rule 6.2.2 shall read in its entirety as follows:

              After the receipt of a notice as referred to in Rule 6.2.1, the
              Employing Company shall immediately file the notices referred in
              Rules 6.1.1 and 6.2.1 (and any other relevant documents required)
              with the local tax authority. After the filing, the Company shall
              procure funds to be paid the total amount of the Exercise Price
              relating to the number of Stock Options that the Stock Option
              Holder has exercised (the "Total Exercise Price") on behalf of the
              Stock Option Holder, and deliver the resulting Shares to the Stock
              Option Holder. All of the Shares shall be sold without delay after
              the Broker confirms receipt of the Shares by the Stock Option
              Holder. Subject to Rule 6.4, the Broker shall transfer, to the
              Stock Option Holder's account with Mizuho Bank, Ltd. ("Mizuho
              Bank") opened pursuant to Rule 6.6.3, the proceeds of the sale of
              the Shares less, (i) the commission for the sale, (ii) the related
              expenses and taxes (if any), and (iii) the commission for such
              transfer, within 30 days of the sale.

8.       Rule 6.2.3 should be amended to read in its entirety as follows:

              If the Company deems that the proceeds of a sale of the Shares
              will not be enough to cover (i) the Total Exercise Price plus (ii)
              all costs, expenses and taxes referred to in Rule 6.2.2, the
              Company may either (a) sell the Shares in accordance with Rule
              6.2.2 or (b) reject the request of the Stock Option Holder to sell
              the Shares and deem that he has withdrawn the exercise of his
              Stock Options, provided that if the request to sell the Shares has
              been made to the Broker in accordance with Rule 6.2.1, the Company
              may so deem only when such withdrawal can be made under the rules
              of the Japan Securities Depository Center and the internal rules
              of the Broker. If the Stock Options are deemed to have not been
              exercised, the Stock Option Holder may exercise the relevant Stock
              Options in accordance with these Rules after he receives a notice
              from the Company to the effect that his Stock Options have been so
              deemed. The Company shall not be liable to the Stock Option Holder
              for any result of any decision made under this Rule 6.2.3.

9.       A new Rule 6.5 shall read in its entirety as follows:

              Withholding

              The Company, the Employing Company, and the Broker shall be
              entitled to withhold, and the Stock Option Holder shall be
              obligated to pay, the amount of any tax attributable to or payable
              by and any social security or similar payments attributable to or
              payable by the Stock Option Holder in connection with the exercise
              or receipt of his Stock Option or the sale of the Shares. The
              Company and the Broker may establish appropriate procedures to
              provide for any such payments and to ensure that the relevant
              company receives prompt advice concerning the occurrence of any
              event which may create, or effect the timing or amount of any
              obligation to pay or withhold any such taxes or which may
              make available to the relevant company any tax deduction with
              respect to the payment.

<PAGE>
                                     - 24 -

10.      A new Rule 6.7 shall read in its entirety as follows:

              Under no circumstances shall the Stock Option Holder be required
              or permitted to provide the Exercise Price for the exercise of the
              Stock Option.

11.      A new Rule 7.8 shall read in its entirety as follows:

              At no time shall the Plan be considered an offer to purchase or
              sell securities in the PRC.

12.      A new Rule 11 shall read in its entirety as follows:

              In order to comply with any applicable requirements announced by
              an authority of the PRC government, the Company shall have the
              right to terminate the Plan or to modify the Plan to the extent
              necessary to comply with such requirements. Such termination or
              the extent of any such modification shall be at the sole
              discretion of the Company. The Company shall bear no liability to
              the Stock Option Holder in the event the Plan is terminated or
              modified in accordance with this Rule 11.

<PAGE>
                                     - 25 -

                               Local Law Appendix
                                  for Singapore

         This Appendix is only applicable to employees of Advantest's Singapore
         entity who are ordinarily tax residents in Singapore. For avoidance of
         doubt, please contact your tax advisor to determine whether you are
         ordinarily a tax resident of Singapore.

INTERPRETATION

The terms and conditions set out in this Local Law Appendix for Singapore shall
be applicable to Eligible Employees who are residents in Singapore and is
supplemental to the terms and conditions set out in the Rules of the Plan. In
the event of any inconsistency or conflict between (1) this Local Law Appendix
for Singapore, (2) the Rules of the Plan and/or (3) the written acceptance for
Stock Options in the form of Attachment B of the Plan, this Local Law Appendix
for Singapore shall prevail.

AMENDMENTS / ADDITIONS TO THE RULES

Clause 1.1 - Definitions
------------------------

The definition of "Eligible Employees" in the Rules of the Plan to be deleted in
its entirety and replaced with the following:

"Eligible Employee" means any such director, officer or employee of an Employing
Company as designated by the Company.

Clause 2.7 - Grant to Employing Company
---------------------------------------

Clause 2.7 shall be deleted in its entirety.

Clause 4.1.1 - Exercise and Cancellation - General Rules
--------------------------------------------------------

Clause 4.1.1 shall be deleted in its entirety and replaced with the following:

within the period commencing one year from the Date of Grant and expiring at
close of business on March 31, 2010.

Clause 5.1 - Cessation of Employment
------------------------------------

Clause 5.1 shall be deleted in its entirety and replaced with the following:

If a Stock Option Holder becomes a person who does not hold any position as a
director, officer, employee or any other similar position of the Advantest
Group, then all Stock Options then owned by that Stock Option Holder shall
become non-exercisable; provided, however, that if the Company deems that it is
appropriate to allow him to exercise his Stock Options and notifies him that his
Stock Options continue to be exercisable, he shall be allowed to exercise his
Stock Options during the Exercise Period.

<PAGE>
                                     - 26 -

                               Local Law Appendix
                         for Republic of China (Taiwan)

Amendments/Additions to the Rules

2.4      No Payment

         Delete "The grant of the Stock Option is the Company's ex gratia
         benefit of employment" and move this sentence to an added provision
         2.8.

2.8      Ex Gratia Benefit (New Provision)

         The grant of the Stock Option is the Company's ex gratia benefit of
         employment. Participation in this Stock Option is entirely separate
         from any pension right or entitlement a Stock Option Holder may have
         and from the terms of the employment.

7.8      Tax Liabilities

         A Stock Option Holder should consult his or her financial and/or tax
         adviser to determine the personal tax treatment upon the grant of Stock
         Options, the exercise of Stock Options and the subsequent sale of
         Shares.

Taxation

The following discussion is intended to summarize briefly certain tax
consequences associated with the grant and exercise of options under the Plan,
as well as the sale of shares obtained under the Plan. It is not intended to
serve as specific tax advice concerning your participation. This supplement
reflects that tax laws in effect as of June 9, 2005. Any changes in the tax laws
after this date may affect the taxation of your options. You should seek the
advice of your personal tax advisor for specific tax consequences associated
with your participation in the Plan.

Grant of Stock Options
----------------------
A Stock Option Holder will not be subject to Taiwan taxation at the grant of the
stock option under the Plan.

Date of Vesting
---------------
A Stock Option Holder will not be subject to Taiwan taxation on the vesting date
of the stock option under the Plan.

Exercise of Stock Options
-------------------------
A Stock Option Holder will be subject to Taiwan taxation on the exercise of the
stock option on the difference between the fair market value of the underlying
shares on the date of exercise and the exercise price under the Plan.

Avantest Taiwan Inc. will issue a non-withholding statement and report the name,
address, ID number and taxable income of the Stock Option Holder to the tax
authorities by the end of January of the following year.

<PAGE>
                                     - 27 -

Sale of the Shares
------------------

The gains realized from the sale of the shares will not be subject to Taiwan
taxation under the Plan.

<PAGE>
                                     - 28 -

                               Local Law Appendix
                                     for USA

Purpose

         This Appendix sets forth certain terms and conditions applicable to
residents of the United States who are awarded Stock Options (each, a "U.S.
Stock Option Holder") under the Plan and supplements the terms and conditions
set forth in the Rules of the Plan. IN THE EVENT OF ANY CONFLICT AMONG THE TERMS
OF THIS APPENDIX, THE RULES OR A STOCK OPTION ACCEPTANCE FORM, THE TERMS OF THIS
APPENDIX SHALL GOVERN. Capitalized terms used in this Appendix without
definition have the meaning assigned to such terms in the Rules.

Administration of Stock Options Granted to U.S. Stock Option Holders
--------------------------------------------------------------------

         The Company, or its authorized U.S. representative, shall (i)
administer the terms of this Appendix, (ii) establish from time to time such
rules and procedures as it may deem appropriate for the proper administration of
this Appendix and (iii) make such determinations under and such interpretations
of and take such steps in connection with this Appendix or the Stock Options
granted to U.S. Stock Option Holders as it may deem necessary or advisable.

Right to American Depository Shares ("ADSs")
--------------------------------------------

         The Company may arrange, in its sole discretion, for U.S. Stock Option
Holders to receive ADSs rather than Shares upon the exercise of their Stock
Options, in which case, all references to "Shares" in the Rules, this Appendix,
a Stock Option Acceptance Form or any other document related to the Plan shall
be deemed to be a reference to four (4) ADSs per Share, as the context may
require. 400 ADSs will be deemed to constitute a "Unit." ADSs will be evidenced
by American Depository Receipts of the Company, which are currently traded on
the New York Stock Exchange.

         In the event that the Company elects to issue ADSs upon the exercise of
Stock Options by U.S. Stock Option Holders, 400 ADSs will be issued upon the
exercise of each Stock Option. The number of ADSs so issued will be adjusted
accordingly when the number of Shares to be issued upon the exercise of each
Stock Option is adjusted pursuant to the Rules.

Limitation on Number of Shares or ADSs Available for Issuance
-------------------------------------------------------------

         Notwithstanding anything to the contrary in the Rules or this Appendix,
the maximum aggregate number of Shares (or ADSs) that may be issued under the
Plan as ISOs is 130,000 Shares (or 520,000 ADSs), subject to any equitable
adjustments to the number and kind of Shares or ADSs under the Rules to the
extent permitted under Section 422 of the United States Internal Revenue Code of
1986, as amended (the "Code"). To the extent permitted under Section 422 of the
Code, any Shares or ADSs subject to a Stock Option that lapses, expires or is
otherwise terminated without the issuance of such Shares or ADSs may again be
available for purposes of this limit.

<PAGE>
                                     - 29 -

ISO Qualification.
------------------

         To the extent possible, Stock Options awarded to Eligible Employees
resident in the United States are intended to qualify as incentive stock options
("ISOs") within the meaning of Section 422 of the Code. Pursuant to the
requirements of the Code, only those Stock Options awarded to Eligible Employees
who are employees of an Employing Company (and which is a "parent corporation"
or "subsidiary corporation" within the meaning of Section 424 of the Code) may
be considered ISOs. Stock Options awarded to non-employee directors of an
Employing Company shall be nonqualified stock options.

Vesting and Exercise
--------------------

         By way of clarification, if a U.S. Stock Option Holder ceases to be a
director, auditor, officer or employee of any Employing Company under
circumstances as a result of which such U.S. Stock Option Holder's Stock Options
"shall become non-exercisable" in accordance with Rule 5.1, as applicable, it is
understood that:

         (1)      If such cessation occurs prior to the start of the Exercise
                  Period (April 1, 2006), such U.S. Stock Option Holder's Stock
                  Options shall never become exercisable, but shall be cancelled
                  without any payment being made to the U.S. Stock Option Holder
                  in respect thereof; and

         (2)      If such cessation occurs on or after the start of the Exercise
                  Period, such U.S. Stock Option Holder's Stock Options shall no
                  longer be exercisable as of the date of such cessation, and
                  shall be cancelled without any payment being made to the U.S.
                  Stock Option Holder in respect thereof.

In no event will a U.S. Stock Option Holder be permitted to exercise Stock
Options either before the start of the Exercise Period or after the end of the
Exercise Period.

         Due to the prohibition on loans to directors and executive officers of
the Company set forth under Section 402 of the Sarbanes-Oxley Act of 2002, the
cashless exercise feature of the Plan, as set forth in Rule 6.2, is not
available for U.S. Stock Option Holders who are directors and executive officers
of the Company at the present time. The Company will inform those who are
subject to this prohibition if such feature does become available in the future.
Until such time, such U.S. Stock Option Holder must exercise his or her Stock
Options in the manner set forth in Rule 6.1.

ISO Conditions
--------------

         A U.S. Stock Option Holder must comply with each of the following
conditions to ensure that his or her Stock Options qualify as ISOs. Except where
otherwise noted, responsibility for complying with the following conditions will
be the responsibility of the individual U.S. Stock Option Holder:

         (1)      Employee Status. At all times during the period commencing on
                  ----------------
                  the relevant Date of Grant and ending on the date three
                  month's prior to the date of exercise, the U.S. Stock Option
                  Holder must be an employee of the Company or another member of
                  the Advantest Group (except in the case of an employee who is
                  disabled within the meaning of Section 22(e)(3) of the Code,
                  in which case such three-month period is extended to one
                  year).

<PAGE>
                                     - 30 -

         (2)      10% Shareholders. No Stock Option shall qualify as an ISO if
                  -----------------
                  the U.S. Stock Option Holder is a 10% Shareholder, unless (a)
                  the Exercise Price, as of the Date of Grant, is at least 110%
                  of the fair market value of the Shares or ADSs subject to the
                  Stock Option and (b) such Stock Option, by its terms, is not
                  exercisable after the expiration of five years from the Date
                  of Grant. A "10% Shareholder" means that, as of the relevant
                  Date of Grant, an individual owns stock possessing more than
                  10% of the total combined voting power of all classes of stock
                  of the Company or any of its subsidiaries.

         (3)      Holding Period. A Stock Option will qualify for ISO treatment
                  ---------------
                  only if the U.S. Stock Option Holder makes no disposition of
                  the Shares or ADSs acquired upon exercise of the Stock Option
                  within two years from the Date of Grant or within one year
                  from the date of exercise.

         (4)      Restrictions on Exercise.
                  -------------------------

                  (a)     The Stock Option may only be exercised by the U.S.
                          Stock Option Holder during his or her lifetime.

                  (b)     To the extent that the aggregate fair market value of
                          Shares or ADSs with respect to which Stock Options are
                          exercisable for the first time by a U.S. Stock Option
                          Holder during any calendar year exceeds $100,000, such
                          Stock Options shall not qualify for treatment as ISOs.
                          The foregoing sentence shall be applied by taking
                          Stock Options into account in the order in which they
                          were granted.

         (5)      Conditions Otherwise Satisfied by Plan. The Plan was approved
                  ---------------------------------------
                  by shareholders of the Company on July 4, 2005. No Stock
                  Option shall be granted under the Plan later than ten years
                  from the date on which the Plan was approved by the Board of
                  Directors of the Company (the "Board").

Any Stock Option granted under the Plan that fails to satisfy conditions (1)
through (5) above shall be deemed to be a nonqualified stock option. Any
ambiguities in the terms of a Stock Option granted under the Plan shall, to the
extent possible, be construed in favor of a finding that such Stock Option
qualifies as an ISO.

         The Company shall have the right, in its sole discretion, to elect to
have any rights granted to Stock Option Holders generally by operation of any
non-U.S. law, including, without limitation, any Japanese law granting
retroactive dividend rights, not apply to U.S. Stock Option Holders where such
law (i) is not required to apply to U.S. Stock Option Holders and (ii) would
jeopardize or prevent such U.S. Stock Option Holders' Stock Options from
qualifying as ISOs.

Cessation of Employment
-----------------------

         This Appendix shall not be construed to limit the period of time, if
any, following a U.S. Stock Option Holder's termination of employment during
which the U.S. Stock Option Holder may exercise his or her Stock Options
pursuant to Rule 5. Nevertheless, a U.S. Stock Option Holder who intends for his
or her Stock Options to be treated as ISOs will be required to exercise such
Stock Options upon the earlier of (i) such time specified in the applicable
provision of Rule 5 and (ii) three months following his or her termination of
employment (except in the case of an employee who is disabled within the meaning
of Section 22(e)(3) of the Code, in which case such three-month period is
extended to one year).

<PAGE>
                                     - 31 -

Not Part of Wages
-----------------

         Awards of Stock Options are not part of a U.S. Stock Option Holder's
base salary or wages and will not be taken into account in determining any other
employment-related rights the U.S. Stock Option Holder may have, such as rights
to pension or severance pay.

Securities Law Restrictions.
----------------------------

         The Company may require each U.S. Stock Option Holder purchasing or
acquiring Shares or ADSs pursuant to a Stock Option under the Plan to represent
to and agree with the Advantest Group in writing that such U.S. Stock Option
Holder is acquiring the Shares or ADSs for investment and not with a view to the
distribution thereof. All certificates for Shares or ADSs delivered under the
Plan, upon exercise of a Stock Option, shall be subject to such stock-transfer
orders and other restrictions as the Company may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any exchange upon which the Shares or ADSs are then listed, and any applicable
federal or state securities law, and the Company may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions. No Shares or ADSs shall be issued hereunder unless the Advantest
Group shall have determined that such issuance is in compliance with, or
pursuant to an exemption from, all applicable federal and state securities laws.

Bank and Broker
---------------

         Notwithstanding anything to the contrary in the Rules, including,
without limitation, Rules 1.1 or 6.6.3, or your Stock Option Acceptance Form:

         (1)      "Broker" means JPMorgan Chase Bank or such other broker or
                  --------
                  agent appointed from time to time by the Company to execute
                  transactions in connection with the Plan; and

         (2)      A U.S. Stock Option Holder shall open and maintain an account
                  in his or her name with JPMorgan Chase Bank for the purpose of
                  the payment of the proceeds of a sale of Shares or ADSs. Such
                  account shall be opened through the Company.

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