LEASE

Exhibit 10.5

LEASE

between

NRFC MILPITAS HOLDINGS, LLC,

"Landlord"

and

CREDENCE SYSTEMS CORPORATION

"Tenant"

February  27 , 2007

Premises:

Credence Systems Corporate Headquarters

1355 and 1421 California Circle,

Milpitas, California

Table of Contents

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SCHEDULES

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LEASE

THIS LEASE (this " Lease ") is entered into as of this ____ day of February, 2007, by and between NRFC MILPITAS HOLDINGS, LLC , having an address c/o NorthStar Realty Finance Corp., 527 Madison Avenue, New York, New York 10022 hereinafter called " Landlord "), and CREDENCE SYSTEMS CORPORATION , a Delaware corporation having an address at 1355 and 1421 California Circle, Milpitas, California 95035 (hereinafter called " Tenant ").

W I T N E S S E T H :

WHEREAS , Landlord, as purchaser, and Tenant, as seller, are parties to that certain Sale and Purchase Agreement, dated as of January 31, 2007, with respect to the Premises (the " Sale-Leaseback Agreement "); and

WHEREAS, the Sale-Leaseback Agreement requires Landlord and Tenant to enter into this Lease on the closing date under the Sale-Leaseback Agreement.

NOW THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. DEMISE; THE PREMISES .

(a) Upon the terms and subject to the conditions hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises (as defined below). For purposes hereof, the term " Premises " means, collectively, all of Landlord’s right, title and interest in and to the following: (i) the tracts of land (the " Land ") situated in the City of Milpitas, County of Santa Clara and State of California and more particularly described in Schedule A attached hereto, (ii) all buildings and improvements (including the Equipment, as defined below) now or hereafter located on the Land (collectively the " Improvements "), and (iii) all easements, rights of way and other appurtenances in and to the Land.

(b) The Premises are demised and let hereunder subject to (a) the rights of any parties in possession thereof, (b) the existing state of the title to the Premises as of the commencement of the term of this Lease (including the matters set forth on Schedule D hereto), (c) any state of facts that an accurate survey or physical inspection of the Premises might show, (d) all Laws (as defined below), including all zoning regulations, restrictions, rules and ordinances, building restrictions and other laws and regulations now in effect or hereafter adopted by any governmental authority having jurisdiction, and (e) any physical or other defects of any nature with respect to the Land or Improvements (it being understood and agreed that the Premises are being leased to Tenant in their "as is" "where is" condition as of the commencement of the term of this Lease, without any representation or warranty whatsoever by Landlord).

(c) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, TENANT REPRESENTS, WARRANTS, ACKNOWLEDGES AND AGREES THAT (A) THE PREMISES AND EACH PART THEREOF ARE OF THE SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY TENANT, (B) TENANT HAS EXAMINED THE TITLE TO AND THE PHYSICAL CONDITION OF THE PREMISES PRIOR TO THE EXECUTION AND DELIVERY OF THIS LEASE, AND TENANT IS SATISFIED THAT THE

PREMISES AND EACH PART THEREOF AND TITLE THERETO ARE SATISFACTORY TO TENANT AND SUITABLE FOR ALL OF ITS PURPOSES, AND TENANT ACCEPTS THE SAME "AS IS" AND "WHERE IS" WITH ALL FAULTS, AND, (C) THE PREMISES ARE LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER ADOPTED AND IN THE STATE AND CONDITION OF EVERY PART THEREOF WHEN THE SAME FIRST BECAME OR BECOMES SUBJECT TO THIS LEASE, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY LANDLORD EXPRESS OR IMPLIED, AS TO THE TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, OPERATION, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT, ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE FACILITY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES OR ANY PART THEREOF. It is agreed that all risks incident to the matters discussed in the preceding sentence as between Landlord, on the one hand, and Tenant, on the other, are to be borne by Tenant. The provisions of this Section have been negotiated and the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by Landlord, express or implied, with respect to the Premises (or any part thereof) that may arise pursuant to any Law now or hereafter in effect or otherwise.

2. TERM AND RENEWAL OPTIONS .

(a) The initial term of this Lease shall commence on the date of this Lease (the " Commencement Date ") and shall end on the last day of the month in which occurs the tenth (10 ^th ) anniversary of the Commencement Date (the " Expiration Date ") or on such earlier date upon which said term may expire or be terminated pursuant to any provision of this Lease or pursuant to Law.

(b) Tenant shall have four (4) separate, successive renewal options to extend the term of this Lease for five (5) years, subject to and upon the terms and conditions set forth in this Section 2. Each of such renewal options is referred to herein as a " Renewal Option " and each of the renewal terms resulting from the exercise of a Renewal Option is referred to herein as a " Renewal Term ". Each of the Renewal Options shall be for a Renewal Term of five (5) years, and, as such, each Renewal Term shall commence on the day after the then current Expiration Date of the term of this Lease and shall expire on the fifth anniversary of such then current Expiration Date. Notwithstanding the foregoing, Tenant’s right to extend the term of this Lease for any particular Renewal Term shall be subject to the condition that, as of the date Tenant gives Landlord the Renewal Notice (as hereinafter defined) applicable to such Renewal Term and as of the first day of such Renewal Term, (i) this Lease shall be in full force and effect and shall not have theretofore expired or been terminated, (ii) no Event of Default shall exist and (iii) this Lease has not been assigned by Tenant (other than to any Permitted Transferee (as defined below)) and the originally-named Tenant ( i.e. ,Credence Systems Corporation) or a Permitted Transferee is in actual occupancy of at least 50% of the Premises. Notwithstanding the foregoing and without limiting any right that Landlord may have generally to waive any condition contained in this Lease, Landlord may, in its sole discretion, waive one or more of the aforesaid conditions (it being understood that such waiver does not waive any default by Tenant hereunder).

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(c) Each of the Renewal Options shall be exercisable (separately) by Tenant by written notice to Landlord (each, a " Renewal Notice ") given not later than the date that is twelve (12) months prior to the then current Expiration Date (TIME BEING OF THE ESSENCE). Moreover, no Renewal Notice may be given earlier than the date that is 18 months prior to the then scheduled Expiration Date (and any purported Renewal Notice given earlier than such date shall have no force or effect).

(d) If Tenant duly exercises any Renewal Option in accordance with the terms set forth above, then the term of this Lease shall thereupon be extended for the applicable Renewal Term upon all the same terms, covenants and conditions as are contained in this Lease, except that (A) for, and during, any Renewal Term the Base Rent (as defined below) payable by Tenant in respect of such Renewal Term shall be the greater of (i) ninety-five percent (95%) of the Fair Market Base Rent (as defined below) as of the first day of such Renewal Term, and (ii) ninety-five percent (95%) of the average of the Base Rent for the 36-month period immediately preceding the first day of such Renewal Term, and (B) on the first anniversary of the first day of such Renewal Term, and on each subsequent anniversary thereafter during such Renewal Term, the Base Rent payable by Tenant hereunder shall be increased so that it is equal to 102% of the amount of the Base Rent that was payable by Tenant immediately prior to such increase ( i.e. , on each such anniversary, the amount of Base Rent payable by Tenant shall be increased on a cumulative basis by 2%).

(e) As used herein, " Fair Market Base Rent " shall mean, for any Renewal Term, the annual base rent that a willing tenant would pay and a willing landlord would accept for a lease of the Premises having a 5-year term (commencing with the commencement of such Renewal Term), assuming : (i) the Premises were being demised upon the same terms and conditions as are provided for in this Lease for such Renewal Term; (ii) the tenant has a creditworthiness substantially equivalent to that of Tenant at such time; and (iii) all other relevant factors not inconsistent with the foregoing.

(f) Fair Market Base Rent shall be determined by the appraisal process as is set forth in Schedule B attached hereto and by this reference made a part hereof.

(g) References herein to the "term of this Lease" or the "term hereof" or the like shall refer to the entire term of this Lease, i.e. , the initial term of this Lease as the same may have theretofore been extended by all applicable and duly exercised Renewal Terms or abridged by any sooner termination (other than on account of an Event of Default); and references to the "then current expiration date" of the term of this Lease shall mean, at the time in question, the expiration of such initial term as the same may have theretofore been extended by all applicable and duly exercised Renewal Terms.

3. RENT .

(a) Commencing on the Commencement Date (the " Base Rent Commencement Date "), and thereafter throughout the term of this Lease, Tenant covenants to pay Landlord, without demand therefor and without any setoff, counterclaim, abatement or deduction whatsoever, a net fixed minimum annual rent (herein called the " Base Rent ") equal to the "Base Rental Rate" (as such term is defined in Schedule C attached hereto and by this reference made a part hereof) from time to time in effect during the term of this Lease.

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(b) The Base Rent shall be payable commencing on the Base Rent Commencement Date and thereafter in equal monthly installments in advance on the first day of each and every calendar month during the term of this Lease. If the Base Rent Commencement Date or the last day of the term of this Lease occurs on a day other than the first or last day, respectively, of a calendar month, then the Base Rent for the partial calendar month in which the Base Rent Commencement Date or such last day occurs shall be a prorated portion (on a per diem basis) of a full monthly installment of Base Rent.

(c) It is the purpose and intent of Landlord and Tenant that the Base Rent payable hereunder shall be absolutely net to Landlord so that this Lease shall yield, net to Landlord, the Base Rent specified herein in each year during the term of this Lease. Accordingly, and without limiting the generality of the foregoing, Tenant shall be fully responsible for (and shall timely pay) all costs, expenses and charges of every kind and nature whatsoever relating to the Premises (whether ordinary or extraordinary, foreseen or unforeseen) that may arise or become due or payable during or in respect of the term of this Lease, including all costs, expenses and charges relating to the operation, maintenance, repair, replacement, use and/or occupancy of the Premises (it being understood, however, that nothing in this sentence shall make Tenant responsible for any debt service that is payable by Landlord under any Mortgage loan). Tenant shall be responsible for all such costs, expenses and charges whether or not they are first due and payable during the term of this Lease, so long as they are attributable to a period falling within (or prior to) such term. The provisions of this Section 3(c) shall survive the expiration or sooner termination of this Lease.

(d) All sums, other than Base Rent, payable by Tenant to Landlord under this Lease are considered additional rent for all purposes of this Lease (and the Base Rent and all additional rent are collectively called " Rent "). Landlord’s delay in rendering, or failure to render, any statement required to be rendered by Landlord for any Rent for any period shall not waive Landlord’s right to render a statement or collect that Rent for that or any subsequent period. The rendering of an incorrect statement shall not waive Landlord’s right to render a corrected statement for the period covered by the incorrect statement and collect the correct amount of the Rent.

(e) Landlord may, at its option, direct Tenant, from time to time, to pay all or any portion of the Rent directly to any other Person or party upon reasonable advance written notice to Tenant from Landlord; Landlord acknowledging and agreeing that Tenant shall be entitled to rely upon such written notice without liability to Tenant to the extent Tenant makes such payments as directed.

4. LETTER OF CREDIT .

(a) To secure the full and faithful performance by Tenant of all the terms, provisions, conditions, covenants and obligations (including, without limitation, the payment of Rent) on Tenant’s part to be performed hereunder, Tenant, simultaneously with the execution of this Lease, shall deliver to Landlord an unconditional, clean, irrevocable letter of credit, payable on sight, in form attached hereto as Schedule E , in the amount of Five Million Ninety Thousand Four Hundred Dollars ($5,090,400.00), and otherwise satisfying the criteria of this Section (each letter of credit that Tenant is required to deliver pursuant to this Section 4, a " Letter of Credit ").

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(b) Each Letter of Credit shall (1) be for the benefit of Landlord, (2) be issued by a bank that is a member of the New York Clearing House Association (or that is otherwise acceptable to Landlord), (3) intentionally omitted, (4) by its express terms, be drawable upon at a bank branch in New York City, by presentation only of a sight draft, (5) provide for the automatic extension of such Letter of Credit for additional periods of one year from the initial and each future expiration date thereof (the last such extension to provide for the continuance of such Letter of Credit for at least thirty (30) days beyond the then scheduled Expiration Date), unless the bank issuing same gives Landlord written notice by certified mail, return receipt requested, of its intention not to renew such Letter of Credit not less than 45 days prior to the initial or any future expiration date of such Letter of Credit, (6) be transferable by Landlord to any transferee of Landlord’s interest in the Premises, without cost to Landlord, and (7) otherwise be reasonably acceptable in form and substance to Landlord. If Landlord shall transfer its interest in the Premises, Tenant shall, at the request of the transferor or transferee, replace or amend each Letter of Credit within ten (10) days following such request, so that the transferee is named as the beneficiary. Any transfer fee or charge imposed by the bank issuing the Letter of Credit in connection with a transfer described in the immediately preceding sentence shall be borne by Landlord at Landlord’s sole cost and expense. For each year that the Letter of Credit is outstanding, Landlord, within 30 days after demand, shall reimubrse Tenant for up to $25,000 of the aggregate annual costs incurred by Tenant to maintain the Letter of Credit (which amount shall be equitably prorated or adjusted for any partial year, to the extent that the fee imposed by the issuer of the Letter of Credit for such partial year is prorated or adjusted).

(c) If Tenant defaults in any of its monetary obligations under this Lease (including its obligation to pay Base Rent or additional rent) or if an Event of Default otherwise occurs, then Landlord may (i) draw down on any Letter of Credit and (ii) use, apply or retain the whole or any part of the proceeds of such draw for the payment of any Base Rent or additional rent or any other sum as to which Tenant is in default under this Lease or for any damages incurred by Landlord as a result of such default (including, but not limited to, any damages or deficiency accrued before or after summary proceedings or other re-entry by Landlord). Notwithstanding the foregoing, nothing in this Section 4(c) shall entitle Landlord to draw down on any Letter of Credit in excess of the aggregate amount to which Landlord is entitled under or in connection with this Lease (whether hereunder, at law or in equity). Tenant waives any right to enjoin (and agrees not to seek to enjoin) a drawing on any Letter of Credit.

(d) If (1) Landlord transfers (or intends to transfer) its right, title and interest under this Lease to a third party, the bank issuing any Letter of Credit fails to consent to the transfer of such Letter of Credit to such third party and Tenant fails to deliver to the transferee a new Letter of Credit (satisfying all of the requirements of this Section 4), and such failure continues for twenty (20) days after Tenant receives Landlord’s written notice thereof, or (2) notice is given by the bank issuing any Letter of Credit that it does not intend to renew the same and a replacement Letter of Credit (satisfying all of the criteria in this Section 4 and in the same amount as the Letter of Credit being replaced) is not delivered to Landlord within ten days after such notice is given (it being understood that this clause (2) shall not apply if, notwithstanding such non-renewal, such Letter of Credit will remain in effect until at least the date that is 30 days after the then scheduled Expiration Date), or (3) at any time any Letter of Credit is otherwise scheduled to expire in less than thirty (30) days (and a replacement thereof, satisfying all of the criteria in this Section 4, has not been delivered to Landlord at such time), then, in any such event, Landlord may (i) draw on the applicable Letter of

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Credit, (ii) hold the proceeds thereof as security for the full and faithful performance by Tenant of all of its covenants, conditions and agreements in this Lease (including the payment of Rent), and (iii) apply such proceeds in the manner described in the immediately preceding subparagraph of this Section 4. If (x) Landlord draws on a Letter of Credit pursuant to the immediately preceding sentence, and (y) Tenant, subsequent to such draw, furnishes to Landlord a Letter of Credit (satisfying all of the requirements of this Section 4) in the amount of such draw, then Landlord shall return to Tenant the proceeds of such draw (to the extent not theretofore applied, or then entitled to be applied, by Landlord).

(e) If at any time (i) Landlord uses, applies or retains the whole or any part of the proceeds of any Letter of Credit furnished to Landlord pursuant to this Section 4, or (ii) any Letter of Credit furnished to Landlord pursuant to this Section 4 expires, then, in either such event, Tenant shall immediately deposit with Landlord one or more further Letters of Credit (meeting all of the requirements of this Section 4) equal to the amount so used, applied or retained as aforesaid (and/or in the amount of the Letter of Credit that so expired, as the case may be), so that at all times during the term hereof Landlord shall have in its possession one or more Letters of Credit (meeting all of the requirements of this Section 4) that in the aggregate are equal to Five Million Ninety Thousand Four Hundred Dollars ($5,090,400.00) (and if Tenant fails to make any such deposit, then Landlord shall have the same rights and remedies against Tenant as for the nonpayment of Base Rent).

(f) If a transfer of Landlord’s interests hereunder occurs, then Landlord may transfer each Letter of Credit to the transferee, and Landlord shall thereupon be released by Tenant from all liability for the return of such Letter of Credit, provided that such transferee shall assume such obligation.

(g) Tenant shall not assign or encumber or attempt to assign or encumber any Letter of Credit (or any proceeds thereof), and Landlord shall not be bound by any such assignment, encumbrance or attempted assignment or encumbrance. Landlord may pledge and/or deposit any Letter of Credit to or with a Mortgagee or Underlying Lessor.

(h) If Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this Lease, then each unapplied Letter of Credit furnished to Landlord pursuant to the above provisions of this Section 4 (and any unapplied proceeds from the draw of any such Letter of Credit) shall be returned to Tenant within fifteen (15) days after the later to occur of (i) the Expiration Date and (ii) the delivery of possession of the entire Premises to Landlord in the condition and in accordance with the provisions of this Lease.

(i) Notwithstanding the foregoing, if:

• (1) One of the following occurs:

  (I) (A) Tenant retires the Convertible Notes (as defined below) and does not within six months thereafter issue any new debt or equity (other than the Refinance Instrument (as defined below)) that shall under any circumstance mature, be callable, or otherwise payable, with or without the happening of any event(s) (except for the failure to make a scheduled interest or principal payment thereunder or the

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• permitted exercise of conversion rights by Tenant) prior to May 15, 2010 ( i.e. , there shall be no provision therein (except for the failure to make a scheduled interest or principal payment thereunder or the permitted exercise of conversion rights by Tenant) that could result in any principal becoming due thereunder) (debt or equity meeting the foregoing test, " Complying Security "); and (B) in the event the Convertible Notes (or any portion thereof) are refinanced or replaced with new debt or equity (the documents and instruments evidencing such debt or equity, collectively, the " Refinance Instrument ") and such Refinance Instrument shall be a Complying Security; or

  (II) with respect to any then outstanding Convertible Notes, Tenant maintains on its balance sheet for two consecutive fiscal quarters a Qualifying Amount (as defined below) in an amount equal to or greater than two hundred percent (200%) of the principal amount of any and all then outstanding Convertible Notes. " Qualifying Amount " shall mean the sum of (i) cash and cash equivalents; plus (ii) short term investments; plus (iii) accounts receivable (net of a commercially reasonable allowance, consistent with Tenant’s past practice and "GAAP", for uncollectibility); minus (iv) accounts payable; minus (v) an amount equal to the principal balance of any debt or equity issued after the date hereof which is not a Complying Security; or

  (III) the occurrence of May 15, 2010; and

  (2) no Event of Default has occurred under this Lease (the satisfaction of the criteria in the immediately preceding clauses (1) through (2), an " LOC Termination Event "); and

  (3) Tenant’s Chief Financial Officer certifies to Landlord in writing that an LOC Termination Event has occurred,

then (x) Landlord shall return each Letter of Credit furnished to Landlord under this Section 4 (to the extent unapplied), and (y) Tenant shall have no further obligations under this Section 4. As used herein, the term " Convertible Notes " shall mean the Tenant’s 1.5% Subordinated Convertible Notes due May 2008.

5. UTILITIES .

Tenant shall furnish, at its own expense, all utilities of every type and nature required by it in its use of the Premises and shall pay or cause to be paid, when due, all bills for all utilities (including water, sewerage, gas, oil, steam and electricity) used on, in connection with, or chargeable against, the Premises for any period during the term of this Lease, and Tenant shall indemnify and save harmless Landlord from and against any loss, cost and/or expense in connection therewith. Tenant understands that Landlord shall have no obligation whatsoever to furnish any utilities or services to or with respect to Premises.

6. IMPOSITIONS.

(a) Tenant covenants to pay, before any fine, penalty, interest or cost may be added thereto for the nonpayment thereof, as additional rent, any and all Impositions (as

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defined below) that at any time prior to, during, or in respect of, the term of this Lease may have been or may be assessed, levied, confirmed, imposed upon or with respect to, or grow or become due or payable out of or in respect of, or become a lien on, (i) the Premises or any part thereof or any appurtenance thereto, (ii) Landlord’s reversionary interest in the Premises, (iii) any personal property located at or used in connection with the Premises, (iv) the Rent and income received by Tenant from subtenants, (v) any use, possession or occupation of, or activity conducted at, the Premises, (vi) such franchises as may be appurtenant to the use or occupation of the Premises, (vii) this Lease or the transactions contemplated hereby (including any Rent payable hereunder and/or the leasehold estate granted hereby), and/or (viii) any document to which Tenant is a party creating or transferring any right, title or interest or estate in the Premises. Nothing herein contained shall require Tenant to pay any of the following taxes (and the following shall be excluded from the definition of "Impositions" set forth in Section 6(b) below), unless such taxes are imposed or levied upon or assessed as a total or partial substitute for, or in lieu of, any other Imposition required to be paid by Tenant pursuant to this Section 6, in which event same shall be deemed Impositions and shall be paid by Tenant: (i) transfer taxes or documentary stamp taxes payable by Landlord upon the sale or disposition by it of the Premises; (ii) income taxes assessed against Landlord, or any capital levy, corporation franchise, excess profits, estate or inheritance of Landlord; or (iii) any interest and penalties for late payment of real estate taxes where Landlord is expressly responsible under this Lease for paying such real estate taxes. In addition, if at any time during the term of this Lease, the method of taxation shall be such that there shall be levied, assessed or imposed on Landlord a capital levy, gross receipts or other tax directly on the Rents received therefrom and/or a franchise tax or an assessment, levy or charge measured by or based, in whole or in part, upon such Rents, the Premises (including but not limited to the acquisition, leasing, use, or value thereof) or the present or any future Improvements on the Premises or the construction thereof and/or measured in whole or in part by Landlord’s income from the Premises, then all such taxes, assessments, levies and charges, or the part thereof so measured or based, shall be deemed to be included within the term "Impositions" for the purposes hereof, and Tenant shall pay and discharge the same as herein provided in respect of the payment of Impositions. Tenant shall furnish to Landlord, promptly after payment of any Impositions, official receipts or other satisfactory proof evidencing payment of such Imposition. Without limiting the generality of the foregoing provisions, Tenant shall be responsible for (and shall timely pay) any and all transfer taxes, documentary stamp taxes and similar taxes payable in connection with the execution of this Lease and the transactions contemplated hereby. Tenant’s obligations under this Section 6 shall survive the expiration or sooner termination of this Lease; provided , however , that Tenant shall not be responsible for any Impositions to the extent that they are in respect of a period beyond the term of this Lease (and, accordingly, upon the termination of this Lease other than on account of an Event of Default, there shall be an appropriate per-diem apportionment of any Impositions actually paid by Tenant that are in respect of a period beyond the term of this Lease).

(b) For purposes hereof, the term " Impositions " shall mean the following (whether general or special, ordinary or extraordinary, foreseen or unforeseen):

• • • (i) any and all taxes, governmental levies, fees, Rents, assessments and charges, including (A) real property taxes, (B) real property general and special assessments (including, without limitation, (1) any special assessments for or imposed by any business improvement district or by any special assessment district, or (2) any assessments for public improvements or

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• • • betterments, whether or not commenced or completed prior to the date hereof and whether or not to be completed during the term hereof), (C) ad valorem taxes, (D) personal property taxes, (E) occupancy and Rent taxes, (F) water, water meter and sewer rents, rates and charges, and (G) license and permit fees and similar charges;

      (ii) any and all charges for, under or with respect to any easement or other agreement encumbering or affecting the Premises;

      (iii) any and all utility charges; and

      (v) any and all fines, penalties and other similar charges applicable to the foregoing, together with any interest or costs with respect to the foregoing, incurred by reason of Tenant’s failure to make any payments of any of the foregoing items as herein provided.

(c) Tenant shall have the right, at its cost and expense, to seek a reduction in the valuation of the Premises as assessed for real estate tax purposes and to prosecute any action or proceeding in connection therewith, so long as Landlord is advised thereof and not adversely affected thereby. So long as no Event of Default shall have occurred and is then continuing, Tenant shall be authorized to collect any refund of any real estate taxes paid by Tenant obtained by reason thereof and to retain the same.

7. USE .

(a) Tenant shall be permitted to use the Premises only for the following and no other use or purpose: (i) general and executive offices (and uses ancillary thereto); and (ii) research and development, manufacturing and laboratory use (and uses ancillary thereto), but only to the extent that such research and development, manufacturing and laboratory use (and uses ancillary thereto) is of the same manner and scope as exists in the Premises as of the Commencement Date. In any event, Tenant’s use of the Premises shall be subject in all instances to all zoning ordinances, all other Laws and Insurance Requirements (as hereinafter defined), and such other covenants, conditions, restrictions and other encumbrances to which the Premises are or become subject.

(b) Tenant shall not use or occupy or permit the Premises to be used or occupied, nor do or permit anything to be done in or on the Premises or any part thereof, in a manner that would in any way violate any of the Laws, Insurance Requirements, or any certificate of occupancy affecting the Premises, or make void or voidable any insurance then in force with respect thereto, or that may make it impossible to obtain fire or other insurance thereon required to be furnished hereunder by Tenant, or that will cause or be likely to cause structural injury to any of the Improvements, or that will constitute a public or private nuisance or waste. Nothing contained in this Lease and no action or inaction by Landlord shall be deemed or construed to mean that Landlord has granted to Tenant (and, except as otherwise expressly provided herein, Tenant shall not have) any right, power or permission to do or permit any act or to make any agreement that may create, give rise to, or be the foundation for, any right, title, interest, lien, charge or other encumbrance upon the estate of Landlord in the Premises.

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8. COMPLIANCE WITH LAWS AND AGREEMENTS .

Tenant shall, throughout the term of this Lease, and at Tenant’s sole cost and expense, promptly comply with (i) all Laws applicable in any way to the Premises or any portion or component thereof (including any Laws that are applicable to the use, operation, repair or maintenance of the Premises or any of Tenant’s property located therein), whether or not such Laws (a) are present or future, foreseen or unforeseen, ordinary or extraordinary, or (b) shall require structural or extraordinary repairs, alterations, or additions, (ii) all Insurance Requirements, whether or not such Insurance Requirements (a) are present or future, foreseen or unforeseen, ordinary or extraordinary, or (b) shall require structural or extraordinary repairs, alterations, or additions, and (iii) any and all agreements, contracts, easements, covenants, conditions and restrictions affecting the Premises or any part thereof or the ownership, occupancy or use thereof (regardless of whether such agreements, contracts, easements and restrictions are existing on the date hereof or are hereafter created by Tenant, or are hereafter consented to or requested by Tenant), including those listed on Schedule D hereto.

9. MAINTENANCE AND REPAIR .

(a) Tenant shall promptly throughout the term of this Lease, at Tenant’s cost and expense, take good care of and maintain the Premises (and all of its component parts) in good order and repair.

(b) Tenant shall not commit or suffer to be committed any waste upon or about the Premises, and shall promptly at its cost and expense, make all necessary (in order to maintain the Premises in as good a condition as exists as of the date hereof) replacements, restorations, renewals and repairs to the Premises and all of its component parts (including the Equipment, the roof, the structural elements of the Improvements, and the parking areas), whether interior or exterior, structural or nonstructural, ordinary or extraordinary, and foreseen or unforeseen, ordinary wear and tear excepted (and subject to the provisions of Sections 13 and 14 below). Repairs, restorations, renewals and replacements shall be at least equivalent in quality to the original work or the property replaced, as the case may be. Without limiting the generality of the foregoing, if any item of Equipment shall become obsolete, non-functional, or uneconomic to repair, Tenant shall remove such item from the Premises and, promptly replace it with a comparable item in good working order (and, upon completion thereof, Tenant shall deliver any and all warranties therefor to Landlord, which warranties must be freely assignable to Landlord). Tenant shall not make any claim or demand upon or bring any action against the Landlord for any loss, cost, injury, damage or other expense caused by any failure or defect, structural or nonstructural, of the Premises or any part thereof. Tenant shall not knowingly take or permit any action that voids any warranty with respect to the Improvements or any of its component parts.

(c) Landlord shall not under any circumstances be required to build any improvements on the Premises, or to make or pay for any repairs, replacements, alterations or renewals of any nature or description to the Premises (or any portion thereof), whether interior or exterior, ordinary or extraordinary, structural or nonstructural, foreseen or unforeseen, or to make any expenditure whatsoever in connection with this Lease or to inspect or maintain the Premises in any way. Tenant hereby waives the right to make repairs, replacements, renewals or restorations at the expense of Landlord pursuant to any Laws (including the provisions of California Civil Code sections 1941 and 1942 or any successor thereto).

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10. TENANT CHANGES .

Tenant, at its sole cost and expense, shall have the right to make alterations, additions, installations and other changes to the Premises (each, a " Tenant Change "), subject , however , in all cases, to the following provisions:

(a) Tenant, without Landlord’s consent, may make Tenant Changes that are neither Material Tenant Changes (as hereinafter defined) nor Prohibited Tenant Changes (as hereinafter defined). Tenant shall give Landlord notice of any Tenant Changes made pursuant to the preceding sentence (other than Tenant Changes that are merely decorative in nature). Tenant shall not make any Tenant Change that is a Material Tenant Change without having first obtained Landlord’s prior written approval thereof. So long as Tenant complies with the provisions of this Section 10 and there shall not otherwise exist an Event of Default under this Lease, Landlord’s approval of any proposed Material Tenant Change shall not be unreasonably withheld, so long as the proposed Material Tenant Change is not a Prohibited Tenant Change. As used herein, the term " Material Tenant Change " shall mean any Tenant Change that (i) affects the exterior face of any building façade that is part of the Improvements, (ii) affects the structural elements of any Improvements, (iii) constitutes a new or additional building or structure, (iv) reduces the usable or rentable area of any Improvements, or (v) will cost, when aggregated with the cost of all other Tenant Changes that are then in progress or that will be performed substantially contemporaneously with such Tenant Change, in excess of Two Hundred Fifty Thousand Dollars and No/100 ($250,000.00).

(b) Any request by Tenant for Landlord’s approval of any Material Tenant Change pursuant to Section 10(a) above shall be accompanied by a full set of the plans and specifications therefor and a copy of the cost estimates in respect thereof.

(c) Notwithstanding anything to the contrary contained herein, in no event shall Tenant ever make any Prohibited Tenant Change. As used herein, the term " Prohibited Tenant Change " shall mean any Tenant Change that (i) decreases the size of or decreases the usable or rentable area of any of the Improvements, (ii) would (or could reasonably likely) reduce the sales or rental value of the Premises, (iii) ties-in or connects the Premises or any Improvements thereon with any real property outside the Premises, (iv) changes the primary use of any portion of the Improvements to a use other than general and executive office use, (v) would (or could reasonably likely) have an adverse effect on the structural integrity of the Improvements or could have an adverse effect on any system serving the Improvements, or (vi) is prohibited by any Law, any Mortgage or any other agreement, covenant, condition or restriction affecting the Premises.

(d) All Tenant Changes shall be performed subject to and in accordance with the following:

i. Any Material Tenant Change shall be conducted under the supervision of a California licensed architect or engineer selected by Tenant (and reasonably approved by Landlord; Landlord agreeing to respond to any request for such approval within 10 days after receiving written notice thereof) and shall be made in accordance with detailed plans and specifications therefor and cost estimates prepared by such architect or engineer.

ii. With respect to Tenant Changes for which plans and specifications are required (by the provisions of this Lease or any Laws) to be submitted to Landlord

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or any governmental authority, (i) such plans and specifications shall be fully detailed and coordinated architectural, structural and mechanical plans and specifications (and, if requested by Landlord, fully detailed and coordinated architectural, structural and mechanical working drawings), (ii) such Tenant Changes shall be performed in accordance with such plans and specifications, and (iii) Tenant, promptly after the completion of such Tenant Changes, shall deliver to Landlord "as built" drawings therefor (or, if no "as built" drawings were prepared, then a copy of the final plans and specifications for such Tenant Changes).

iii. Tenant shall pay or reimburse Landlord for all reasonable out-of-pocket costs incurred by Landlord (including the reasonable costs of any architect, engineer or other professional employed by Landlord) in connection with (i) any review of any plans and specifications setting forth such Tenant Changes, or (ii) any on-site inspections of such Tenant Changes.

iv. Tenant, at its expense, shall timely obtain (and furnish true and complete copies to Landlord of) all permits, certificates and approvals required to be obtained from any governmental authority for the commencement and prosecution of any Tenant Changes and/or the final approval thereof upon completion. A copy of all such permits, certificates and approvals required prior to the commencement of any Tenant Changes shall be delivered to Landlord prior to the commencement thereof.

v. All Material Tenant Changes shall be performed only by contractors and subcontractors that have been first approved by Landlord in writing (not to be unreasonably withheld; Landlord agreeing to respond to any request for such approval within 10 days after receiving written notice thereof).

vi. All Tenant Changes shall be performed (x) in compliance with all Laws and Insurance Requirements, and otherwise in a good and workmanlike manner (using quality materials), and (y) in such manner as not to violate any other provision of this Lease. Throughout the performance of any Tenant Changes, Tenant, at its expense, shall carry, or cause to be carried, (i) workers’ compensation insurance in statutory limits, (ii) such general liability insurance and other insurance as Landlord shall reasonably require from Tenant and/or any contractors or subcontractors performing Tenant Changes, and (iii) any other insurance pertaining to such Tenant Changes that is required to be carried by Tenant pursuant to Section 11 below.

vii. All Tenant Changes, once commenced, shall be diligently performed to completion.

viii. Tenant acknowledges that any review or approval by Landlord of any plans and specifications with respect to any Tenant Changes, and/or any on-site inspections of any Tenant Changes, and/or any supervision by Landlord of Tenant Changes, are solely for Landlord’s benefit, and without any representation or warranty whatsoever to Tenant with respect to the adequacy, correctness or efficiency of any such plans and specifications or Tenant Changes, or the compliance thereof with Laws, Insurance Requirements or the provisions of this Lease, and Landlord shall have no liability or responsibility therefor.

ix. Upon completion of any Tenant Changes, Tenant shall deliver copies of any and all warranties therefor to Landlord, which warranties must be freely assignable to Landlord. Tenant shall maintain at the Premises, and turn over and assign to Landlord upon expiration or termination of this Lease, all such warranties.

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(e) All Tenant Changes (other than those that constitute Tenant’s Property, as hereinafter defined) shall immediately upon incorporation into the Premises be and become the property of Landlord (as Improvements). Without limiting the generality of the foregoing, Tenant shall execute any document reasonably requested by Landlord ( e.g. , a bill of sale) to confirm that any Tenant Change has been so incorporated and become the property of Landlord.

(f) If Tenant proposes to perform any Tenant Change that Landlord reasonably estimates will cost in excess of $250,000, then, as a condition to granting its consent to such Tenant Change, Landlord may require that Tenant furnish to Landlord, as security for the full completion of such Tenant Change, a cash amount (the " Alterations Deposit ") equal to 125% of Landlord’s reasonable estimate of the cost of such Tenant Change, which amount (x) Landlord shall be permitted to use, apply or retain (in whole or in part) to the extent required for the payment of any sum which Landlord may expend or may be required to expend by reason of Tenant’s default, and (y) shall otherwise be retained, used, held and applied in the same manner as the security deposit provided for in Section 4 hereof. The Alterations Deposit shall be disbursed to Tenant from time to time as the Tenant Change in questions progresses, such disbursement to be in accordance with the disbursement procedures in Section 13(e) below (applied mutatis mutandis ).

(g) If Tenant desires to make any Removable Tenant Change (as defined below), then Tenant may request that Landlord advise Tenant as to whether Tenant will be obligated to remove such Removable Tenant Change (and restore the Premises to its condition prior to the making thereof) upon the expiration or sooner termination of the term of this Lease. Landlord, within 30 days after its receipt of such request, shall so advise Tenant (it being understood that Landlord shall make such election in its sole discretion). Upon the expiration or sooner termination of the term of this Lease, Tenant, at the request of Landlord, shall (i) remove any Removable Tenant Change made by Tenant or any Tenant Party after the date hereof (other than any Removable Tenant Change that Landlord previously advised Tenant in writing would not have to be so removed), (ii) restore the Premises to the condition existing prior to the making of any such Removable Tenant Change that is required to be removed pursuant to the immediately preceding clause (i), and (iii) repair (or, at Landlord’s option, reimburse Landlord for the cost to repair) any damage to the Premises that results from such removal or restoration. For purposes hereof, a " Removable Tenant Change " shall mean any Tenant Change that is not a customary office installation (such as raised floors, vaults and slab penetrations), including any Tenant Change that is made to convert any space in the Improvements from office use to any use other than office use.

(h) Landlord acknowledges that, during the term of this Lease, Diagnostics and Characterization Group of Credence Systems Corporation will relocate to the Premises and, in connection with such relocation, will occupy approximately 8,200 square feet of space in the south side of 1355 California Circle, as more particularly described on Schedule G annexed hereto. In connection with such relocation, Landlord agrees that Tenant may make the Tenant Changes necessary to accommodate such relocation (the " DCG Changes "), so long as such Tenant Changes (i) do not have an adverse effect on the structural integrity of the Improvements or on any system serving the Improvements, (ii) are made in compliance with all applicable Laws and all applicable provisions of this Lease, (iii) are limited to approximately

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8,200 square feet of space in the south side of 1355 California Circle, (iv) are reasonably anticipated to cost less than $1 million in the aggregate to perform and complete (and, prior to commencement of such Tenant Changes, Tenant furnishes to Landlord reasonable evidence of such cost), and (v) will not result in the cost of the restoration work described in the immediately following sentence exceeding $350,000 (in 2007 dollars). Upon the expiration or sooner termination of this Lease, Tenant, at its cost, shall restore (to the condition existing immediately prior to the DCG Changes) all office space converted to another use as part of the DCG Changes.

11. INSURANCE .

(a) Tenant shall, throughout the term of this Lease, at its own cost and expense, obtain and maintain in full force and effect:

• (1) property insurance against all risk of loss to the Premises customarily covered by so-called "all risk" or "special perils" form policies (including but not limited to coverage with respect to collapse, fire, lightning, vandalism, malicious mischief, water damage, mudslide, subsidence, terrorism, building collapse, windstorm, hurricane) in amounts sufficient to provide one hundred (100%) percent of the full replacement cost of the Improvements; which amounts shall be determined from time to time as requested by Landlord. The foregoing insurance shall, inter alia , (x) contain an agreed amount endorsement or a coinsurance waiver and replacement cost value endorsement without reduction for depreciation, (y) cover additional expense of demolition and increased cost of construction, including increased costs that arise from any changes in Laws regulating any Restoration Work (as defined below), and (z) have a deductible that does not exceed $50,000. If the Property Damage Insurance does not otherwise cover damage caused by the acts of terrorists (" Terrorism Insurance "), then, at Landlord’s request, Tenant shall provide such coverage under a separate policy that complies with all requirements applicable to the Property Damage Insurance and Tenant and Landlord shall each be responsible for 50% of the costs of such Terrorism Insurance policy; provided , however , that (i) Tenant shall not be required to maintain (or reimburse Landlord for) Terrorism Insurance in excess of the Terrorism Insurance that is then required to be maintained pursuant to any Mortgage, and (ii) Landlord may elect to carry such Terrorism Insurance in lieu of Tenant, in which case (subject to the immediately preceding clause (i)) Tenant shall reimburse Landlord from time to time for 50% of the cost of such Terrorism Insurance;

  (2) flood damage insurance with a limit of not less than $2,000,000 and a commercially reasonable deductible;

  (3) intentionally omitted;

  (4) business interruption insurance in an amount equal to the Base Rent for twelve (12) months if the Premises are destroyed or rendered untenantable by any cause insured against (it being understood that the existence of such insurance does not reduce Tenant’s obligation to pay Base Rent without diminution);

  (5) the following liability insurance for personal injury, bodily injury, death, accident and property damage (collectively, the " Liability Insurance "): (a)

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• commercial general liability insurance, including products completed operations and personal injury; (b) owned (if any), hired, and non-owned automobile liability insurance; (c) workers compensation insurance written with statutory limits and employer’s liability insurance in an amount not less than $5,000,000, covering all employees engaged in connection with any the Premises (employer’s liability insurance shall not contain an occupational disease exclusion), and (d) umbrella liability insurance in the amount of at least $20,000,000 (which shall sit in excess of all liability policies as described in sections (a) through (c) above). The Liability Insurance shall provide coverage of at least $25,000,000 per occurrence per location, which limit can be achieved with any combination of primary and excess/umbrella insurance. The Liability Insurance shall be written on an occurrence basis and shall include, inter alia , coverage for liability arising from premises and operations, elevators, escalators, independent contractors, contractual liability, and products and completed operations;

  (6) if a sprinkler system shall be located in the Premises, sprinkler leakage insurance in amounts reasonably satisfactory to Landlord;

  (7) comprehensive boiler and machinery insurance covering all mechanical and electrical equipment against physical damage in an amount equal to one hundred (100%) percent of the full replacement cost of the applicable Improvements;

  (8) workers compensation insurance written with statutory limits and employer’s liability insurance in an amount not less than $5,000,000, covering all employees engaged in connection with any the Premises. Employer’s liability insurance shall not contain an occupational disease exclusion;

  (9) during the performance of any Tenant Changes, Tenant shall maintain (or cause its general contractor to maintain for the benefit of Tenant, Landlord, and Mortgagee) the following insurance: (i) completed value builders risk insurance for the Premises, including all building materials thereon, covering loss or damage from fire, lightning, extended coverage periods, sprinkler, leakage, vandalism, malicious mischief and perils insured in an amount not less than the cost, as reasonably estimated by Landlord, of the construction of the Improvements or alterations thereto, and (ii) worker’s compensation insurance covering the full statutory liability as an employer of the contractor performing the work of such construction or alterations;

  (10) property insurance against all risk of loss to Tenant’s Property (as defined below) customarily covered by so-called "all risk" or "special perils" form policies (including but not limited to coverage with respect to collapse, fire, lightning, flood, vandalism, malicious mischief, water damage, mudslide, subsidence, building collapse, windstorm, hurricane) in amounts sufficient to provide one hundred (100%) percent of the full replacement cost of Tenant’s Property;

  (11) any other insurance then required to be maintained pursuant to a Mortgage, to the extent such requirement is commercially reasonable;

  (12) such other insurance with respect to the Premises and in such amounts as Landlord from time to time may reasonably request against such other insurable risks which at the time in question are commonly insured against in the case of property similar to the Premises.

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Any insurance described in this Section 11(a) (including the insurance described in Section 11(a)(1)) that constitutes property insurance with respect to the Premises or any component thereof is referred to herein as " Property Damage Insurance ".

(b) Landlord may, from time to time, require that the limits of the aforesaid insurance be increased (so long as such requirement is required pursuant to a Mortgage or is otherwise reasonable), and such increased limits are then generally maintained by prudent owners of similar properties. All such insurance described in subparagraph (a) of this Section 11 shall: (i) in the case of any Property Damage Insurance covering the Improvements, name Landlord (and/or, at Landlord’s direction, any Mortgagee or Underlying Lessor) as additional insureds and loss payees, (ii) in the case of all other insurance (except workers’ compensation insurance), name Landlord and any Mortgagee or Underlying Lessor of which Tenant has knowledge as additional insureds (as their interests may appear in the case of any property insurance), (iii) be obtained from and maintained with domestic insurer(s) authorized to do business in California and reasonably satisfactory to Landlord with: (a) a claims paying ability of not less than "AA" (or the equivalent) by S&P (or its successor) and one other nationally recognized rating agency satisfactory to Landlord or (b) "A-IX" or better financial strength rating by AM Best (or its successor) ; (iv) contain such deductibles, and be on and/or contain such terms and conditions, as shall be reasonably satisfactory to Landlord; (v) provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of Tenant, Landlord or any Landlord Party (as hereinafter defined) that might, absent such agreement, result in a forfeiture of all or part of the payment of such loss (and, in the case that a Mortgage or Underlying Lessor is the loss payee under any property insurance policy, such policy shall contain a standard noncontributory mortgagee endorsement); and (vi) otherwise comply with the provisions of this Section 11. The proceeds of any loss under any policy or policies of property insurance (including the Property Damage Insurance) shall be payable to Landlord (or to any Mortgagee or Underlying Lessor designated by Landlord therefor) as the sole "loss payee" thereunder, it being understood that the provisions of Section 13 below shall apply in respect thereof.

(c) Tenant shall furnish Landlord (and any named Mortgagee or Underlying Lessor) with duplicate original(s) or original certificate(s) together with true copy(ies) of all insurance policies described in Section 11(a) above, including renewal and replacement policy(ies), together with written evidence that the premiums therefor (the " Premiums ") have been paid.

(d) Each policy of insurance required hereunder shall be primary with respect to the Premises and shall contain an agreement by the insurer that it will not cancel or modify such policy except after thirty (30) days prior written notice to Landlord (and all named Mortgagees and Underlying Lessors) by certified mail, return receipt requested. Not less than fifteen (15) days prior to the expiration of any such insurance policy, Tenant shall deliver to Landlord (and all named Mortgagees and Underlying Lessors) a certificate evidencing the replacement or renewal thereof.

(e) Tenant shall not take out separate insurance concurrent in form or contributing in the event of loss with that required to be furnished by Tenant under this Section 11 of this Lease.

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(f) Each insurance policy required to be maintained by Tenant under this Section 11 shall include a waiver of the insurer’s right of subrogation against Landlord (and all named Mortgagees and Underlying Lessors). To the fullest extent permitted by law, Tenant hereby releases Landlord and all Landlord Parties with respect to any claim (including a claim for negligence) that it might otherwise have for loss, damage or destruction with respect to Tenant’s property (including business interruption and rental loss resulting from such loss, damage or destruction) occurring during the term of this Lease; provided , however , that the release provided for in this sentence shall apply only to the extent that Tenant is covered (or is required by this Lease to be covered) by insurance with respect to such loss, damage or destruction (with the understanding that such release shall apply to the full extent of the amount of any deductible under such insurance, unless the loss, damage or destruction was due to Landlord’s or Landlord Parties’ gross negligence or willful misconduct, in which case, Landlord shall pay for the entire deductible).

(g) Notwithstanding anything to the contrary contained herein, in the event Tenant fails to procure any insurance required under this Section 11, Landlord shall have the right, after written notice to Tenant, to procure such insurance, and all premiums paid by Landlord with respect to such insurance so procured by Landlord (together with interest at the Default Rate, as defined below, on the amount expended by Landlord in connection therewith) shall be payable by Tenant as additional rent within 30 days after demand. Tenant shall pay to Landlord, immediately upon demand all costs incurred by Landlord to obtain and maintain in effect the policies of insurance required under this Section 11 or otherwise required by Landlord under this Lease.

12. INDEMNIFICATION; NOTIFICATION .

(a) Except to the extent arising from Landlord’s or Landlord Parties’ gross negligence or willful misconduct, Tenant shall at all times indemnify Landlord and all Landlord Parties for, defend Landlord and all Landlord Parties against, and save Landlord and all Landlord Parties harmless from, any liability, loss, cost, injury, damage or other expense or risk whatsoever (including reasonable attorneys’ fees) that may be imposed upon or incurred by or asserted against Landlord and/or any of the Landlord Parties by reason of or in connection with: (i) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Premises (or adjoining sidewalks or parking areas, but only to the extent covered by the insurance Tenant is required hereunder to maintain) at any time during the term of this Lease or during the term of Credence Systems Corporation’s prior ownership of the Premises, (ii) the use, misuse, occupancy, possession or unoccupancy of the Premises by, or any other act or omission of, Tenant or any Tenant Party, (iii) the condition of the Premises or any component thereof time during or prior to the term of this Lease, (iv) the breach by Tenant of any provision of this Lease (including Section 38 below), and/or (v) any contest described in Section 21 below that is prosecuted by or on behalf of Tenant. At Landlord’s request, Tenant shall, at its cost and expense, defend against any and all such actions, claims and demands.

(b) Tenant, promptly after obtaining knowledge thereof, shall give written notice to Landlord of each accident with respect to which a claim has been made against Tenant or any of its insurers that may result in material damages or material claims for damages against Tenant or any Landlord Party. Tenant shall furnish to Landlord information about the time, place and nature of the accident, the names and addresses of the parties involved, any person injured, witnesses and owners of any property damaged or alleged to be damaged and such other information as may be known to it. Tenant shall promptly furnish to Landlord upon request copies of all correspondence, papers, notices and documents whatsoever that it receives in connection therewith.

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(c) If any claim is brought against any Person (as defined below) entitled to indemnification against such claim pursuant to the above provisions of Section 12(a) or any other provision of this Lease (each such Person, an "Indemnified Person"), then such Indemnified Person shall, at such Indemnified Person’s option, either (i) defend against such claim itself at the Tenant’s cost and expense (in which case such Indemnified Person shall control such defense but shall consult with the Tenant concerning the conduct thereof) or (ii) permit the Tenant, at the Tenant’s sole cost and expense, to defend against such claim (in which case such Indemnified Person shall cooperate with the Tenant by providing, at the expense of the Tenant, such witnesses, documents and other assistance as the Tenant may reasonably request).

(d) Tenant’s obligations under this Section 12 shall survive the expiration or sooner termination of this Lease.

13. DAMAGE OR DESTRUCTION .

(a) Tenant shall bear all risk of damage, loss and destruction of the Premises from whatever source (whether or not any insurance proceeds are payable in respect of, or are sufficient to cover, such damage, loss or destruction). If the whole or any portion of the Premises is damaged or destroyed by fire or other casualty, then Tenant shall, at its cost and expense, forthwith repair, restore, rebuild or replace the damaged or destroyed Improvements and Tenant’s Property (as defined below), and complete the same as soon as reasonably possible, to the condition they were in prior to such damage or destruction, except for such changes in design or materials as may then be required by Laws (the repair, restoration, rebuilding and/or replacement work required of Tenant under this Section 13(a) is herein collectively called the " Restoration Work "). Notwithstanding the foregoing, if (x) the Premises are damaged or destroyed by a fire or other casualty that is caused by an affirmative action of Landlord or a Landlord Party that constitutes gross negligence or willful misconduct, (y) at the time of such fire or other casualty, Tenant maintained all of the insurance Tenant was required to maintain pursuant to Section 11 above, and (z) such fire or other casualty is not covered by such insurance, then Landlord (rather than Tenant) shall pay the cost of the Restoration Work with respect to such fire or other casualty.

(b) Tenant, shall, within thirty (30) days after the occurrence of the fire or other casualty, furnish to Landlord an estimate, prepared and certified by an architect selected by Tenant and reasonably acceptable to Landlord, of the date by which such architect expects the Restoration Work to be completed. The provisions and requirements of Section 10 shall apply with respect to the Restoration Work (and the same shall constitute Tenant Changes hereunder); and without limiting the generality of the foregoing, the same shall be performed in accordance with the plans and specifications to the extent required under Section 10.

(c) Notwithstanding any Laws to the contrary, there shall be no abatement or diminution of Base Rent or additional rent or release from any of Tenant’s obligations hereunder (nor shall Tenant have any right whatsoever to terminate this Lease except as expressly set forth herein to the contrary) by reason of any such damage or destruction to the Premises, regardless of the period of time, if any, during which the Premises or any part thereof remain untenantable.

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(d) Promptly after any damage or destruction to the Premises by fire or other casualty, Tenant shall submit proof of loss statements with the insurance company(ies) under the policies of Property Damage Insurance and provide Landlord (and any named Mortgagee or Underlying Lessor) with a copy of all such submitted statements. Landlord (and any named Mortgagee or Underlying Lessor) shall have the right to participate with Tenant in the adjustment, collection and compromise of any and all claims under all policies of Property Damage Insurance and to execute and deliver on behalf of Tenant all necessary proofs of loss, receipts, vouchers and releases required by the insurers. Tenant shall not settle any claim without the prior written approval of Landlord (and any named Mortgagee or Underlying Lessor), which approval shall not be unreasonably withheld so long as no Event of Default then exists.

(e) The proceeds of the policies of Property Damage Insurance in respect of the damage or destruction in question shall be paid either to any Mortgagee or Underlying Lessor designated by Landlord for such purpose or, if no such Mortgagee or Underlying Lessor then exists, an independent escrow agent reasonably selected by Landlord (in either event, the person being paid such proceeds is herein called the " Casualty Depositary ") in trust in accordance with the following provisions of this Section 13. The term " Net Property Damage Insurance Proceeds " shall mean the proceeds of the policies of Property Damage Insurance, in respect of the damage or destruction in question, that are actually paid to Casualty Depositary, less the reasonable cost to the Casualty Depositary and/or Landlord of recovering, holding and/or paying out such proceeds pursuant to the provisions of this Section 13 (including, without limitation, reasonable attorneys’ fees, costs and disbursements and, as applicable, the reasonable costs and expenses allocable to policing the requirements of Section 13(f)(1) through (6) below, including without limitation the costs and expenses incurred in inspecting the Restoration Work and/or any plans and specifications therefor).

(f) If the estimated cost of the Restoration Work, as reasonably determined by the Casualty Depositary, shall be $250,000 or less, then the Casualty Depositary shall pay the Net Property Damage Insurance Proceeds to Tenant, and Tenant shall hold the same in trust to be applied toward the cost of the Restoration Work.

(g) If the estimated cost of the Restoration Work, as reasonably determined by the Casualty Depositary, shall exceed $250,000, then the Casualty Depositary shall hold the Net Property Damage Insurance Proceeds, and disburse the same to Tenant, as reimbursement for the costs of the Restoration Work, from time to time, as the Restoration Work progresses (but not more frequently than monthly, and with the understanding that no disbursement made prior to the final completion of the Restoration Work shall exceed 90% of the value of the Restoration Work performed from time to time), subject , however , in all events, to the following conditions:

• (1) Each request for payment shall be made on fifteen (15) days prior written notice to the Casualty Depositary and shall be accompanied by a certificate to be made by the architect or engineer supervising the Restoration Work stating (x) that the part of the Restoration Work that has been completed has been performed in compliance with the approved plans and specifications, (y) that the amount requested is justly required to reimburse Tenant for payments by Tenant to, or is justly due to, the contractor, subcontractors, materialmen, laborers, engineers, architects or other persons rendering

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• services or materials for the Restoration Work (giving a brief description of such services and materials), and that when added to all amounts previously paid out by the Casualty Depositary does not exceed the value of the Restoration Work performed to the date of such certificate, and (z) that the amount of the Net Property Damage Insurance Proceeds remaining in the hands of the Casualty Depositary will be sufficient on completion of the Restoration Work to pay for the same in full (giving in such detail, as the Casualty Depositary may reasonably require, an estimate of the cost of such completion).

  (2) Each request shall be accompanied by waivers of lien satisfactory to the Casualty Depositary covering that part of the Restoration Work for which payment or reimbursement is being requested and by a search prepared by a title company or by other evidence satisfactory to the Casualty Depositary that there has not been filed with respect to the Premises any mechanics’ or other lien or instrument for the retention of title in respect of any part of the Restoration Work which has not been discharged of record.

  (3) The request for any payment after the Restoration Work has been substantially completed shall be accompanied by a copy of any certificate or certificates required by law to permit the legal occupancy of the Premises.

  (4) If, at anytime prior to completion of the Restoration Work, the Casualty Depositary, in its reasonable judgment, shall determine that the Net Property Damage Insurance Proceeds it is holding shall be insufficient to pay for the full completion of the Restoration Work, then Tenant shall pay the amount of such deficiency to the Casualty Depositary to be held and applied pursuant to this Section 13(f) along with the Net Property Damage Insurance Proceeds.

  (5) Notwithstanding anything to the contrary contained herein, if (ii) the Casualty Depositary is a Mortgagee, and (ii) the Mortgage held by such Mortgagee imposes additional or different conditions on the release and disbursement of the Net Property Damage Insurance Proceeds, then Tenant shall also comply with such additional or different conditions (whether or not they are more or less restrictive than the foregoing conditions), except only to the extent that such additional or different conditions result in a disbursement being withheld because of a default under such Mortgage that was not the direct or indirect result of a default by Tenant under this Lease.

  (6) If, after the completion of the Restoration Work and Tenant’s full compliance with the provisions of this Section 13(f), there is any surplus of Net Property Damage Insurance Proceeds, the excess shall be paid to Tenant (so long as no Event of Default has occurred).

(h) Notwithstanding anything herein to the contrary, if an Event of Default shall be continuing during any period that the Casualty Depositary is holding any insurance proceeds hereunder, then the Casualty Depositary shall have the right, but not the obligation, to apply the whole or any part of such proceeds to the cure or remedy of such default prior to paying over, holding and/or applying the same in accordance with the following provisions of Section 13(e) and 13(f) hereof.

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(i) Tenant hereby waives any and all rights under any applicable Law to terminate this Lease, or receive a reduction or abatement of the rent payable hereunder, upon a partial or complete destruction of the Premises (including any such rights under California Civil Code Sections 1932(2) and 1933(4) or any successor thereto).

(j) Notwithstanding anything to the contrary contained herein, if (i) twenty-five pe