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Lease Agreement

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JAZZ SEMICONDUCTOR INC

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Title: LEASE
Date: 1/21/2004

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Exhibit 10.18


HALF DOME BUILDING

LEASE

BY AND BETWEEN

CONEXANT SYSTEMS, INC.

as Landlord

and

SPECIALTYSEMI, INC.,

as Tenant

March 12, 2002


Confidential treatment has been requested for portions of this document. This copy of the document filed as an Exhibit omits the confidential information subject to the confidentiality request. Omissions are designated by the symbol [...***...]. A complete version of this document has been filed separately with the Securities and Exchange Commission.



TABLE OF CONTENTS

 

 

 

 

 

 

PAGE


 

ARTICLE 1

 

DEFINITIONS

 

1


1.1


 


Definitions


 


1


ARTICLE 2


 


LEASED PREMISES, TERM AND POSSESSION


 


5


2.1


 


Demise Of Leased Premises


 


5


2.2


 


Right To Use Common Areas


 


5


2.3


 


Lease Commencement Date And Lease Term


 


5


2.4


 


Performance Of Improvement Work; Acceptance Of Possession


 


5


2.5


 


Surrender Of Possession


 


5


 


 


(a)


 


Removal Obligations


 


5


 


 


(b)


 


Failure to Surrender in Required Condition


 


5


ARTICLE 3


 


RENT


 


6


3.1


 


Expense Rent


 


6


 


 


(a)


 


Estimates


 


6


 


 


(b)


 


Quarterly Adjustments


 


6


 


 


(c)


 


Audit of Quarterly Statement


 


6


3.2


 


Interest On Rent In Default.


 


7


3.3


 


Payment Of Rent


 


7


ARTICLE 4


 


USE OF LEASED PREMISES AND COMMON AREA


 


7


4.1


 


Permitted Use


 


7


4.2


 


General Limitations On Use


 


7


4.3


 


Noise And Emissions


 


7


4.4


 


Trash Disposal


 


8


4.5


 


Parking


 


8


4.6


 


Signs


 


8


4.7


 


Compliance With Laws And Private Restrictions


 


8


4.8


 


Compliance With Insurance Requirements


 


9


4.9


 


Landlord's Right To Enter


 


9


4.10


 


Environmental Protection


 


9


4.11


 


Rules And Regulations


 


12


4.12


 


Reservations


 


12

 

i



ARTICLE 5


 


REPAIRS, MAINTENANCE, SERVICES AND UTILITIES


 


12


5.1


 


Repair And Maintenance


 


12


5.2


 


Utilities


 


12


5.3


 


Security Measures


 


12


5.4


 


Energy And Resource Consumption


 


12


5.5


 


Limitation Of Landlord's Liability


 


12


ARTICLE 6


 


ALTERATIONS AND IMPROVEMENTS


 


13


6.1


 


By Tenant


 


13


6.2


 


Ownership Of Improvements


 


13


6.3


 


Alterations Required By Law


 


14


6.4


 


Liens


 


14


ARTICLE 7


 


ASSIGNMENT AND SUBLETTING BY TENANT


 


14


7.1


 


By Tenant


 


14


7.2


 


Merger, Reorganization, or Sale of Assets


 


14


7.3


 


Landlord's Election


 


15


7.4


 


Conditions To Landlord's Consent


 


16


7.5


 


Assignment Consideration And Excess Rentals Defined


 


16


7.6


 


Payments


 


16


7.7


 


Effect Of Landlord's Consent


 


17


ARTICLE 8


 


LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY


 


17


8.1


 


Limitation On Landlord's Liability And Release


 


17


8.2


 


Tenant's Indemnification Of Landlord


 


17


ARTICLE 9


 


INSURANCE


 


18


9.1


 


Tenant's Insurance


 


18


9.2


 


Landlord's Insurance


 


19


9.3


 


Mutual Waiver Of Subrogation


 


20


ARTICLE 10


 


DAMAGE TO LEASED PREMISES


 


20


10.1


 


Landlord's Duty To Restore


 


20


10.2


 


Insurance Proceeds


 


20


10.3


 


Landlord's Right To Terminate


 


20


10.4


 


Tenant's Right To Terminate


 


21


10.5


 


Tenant's Waiver


 


21

ii



ARTICLE 11


 


CONDEMNATION


 


21


11.1


 


Tenant's Right To Terminate


 


21


11.2


 


Landlord's Right To Terminate


 


21


11.3


 


Restoration


 


21


11.4


 


Temporary Taking


 


21


11.5


 


Division Of Condemnation Award


 


21


11.6


 


Taking Defined


 


22


ARTICLE 12


 


DEFAULT AND REMEDIES


 


22


12.1


 


Events Of Tenant's Default


 


22


12.2


 


Landlord's Remedies


 


22


12.3


 


Landlord's Default And Tenant's Remedies


 


24


12.4


 


Limitation Of Tenant's Recourse


 


24


12.5


 


Tenant's Waiver


 


24


ARTICLE 13


 


GENERAL PROVISIONS


 


24


13.1


 


Taxes On Tenant's Property


 


24


13.2


 


Holding Over


 


25


13.3


 


Transfer By Landlord


 


25


13.4


 


Force Majeure


 


25


13.5


 


Notices


 


25


13.6


 


Attorneys' Fees


 


26


13.7


 


General Waivers


 


26


13.8


 


Miscellaneous


 


26


13.9


 


Quiet Enjoyment


 


27


13.10


 


Confidentiality


 


27

 

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ARTICLE 14


 


CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT


 


27


14.1


 


Corporate Authority


 


27


14.2


 


Brokerage Commissions


 


27


14.3


 


Entire Agreement


 


28


14.4


 


Landlord's Representations


 


28


14.5


 


Subordination To Mortgages and Ground Leases


 


28


14.6


 


Tenant's Attornment Upon Foreclosure


 


28


14.7


 


Mortgagee Protection


 


29


14.8


 


Estoppel Certificate


 


29


14.9


 


Memorandum of Lease


 


29


ARTICLE 15


 


OPTIONS TO EXTEND


 


29


15.1


 


Extension Options


 


29


15.2


 


Terms of Extension


 


29


ARTICLE 16


 


EXPANSION OF LEASED PREMISES


 


30

iv



LEASE

         THIS LEASE , dated March 12, 2002 for reference purposes only, is made by and between CONEXANT SYSTEMS,  INC., a Delaware corporation ("Landlord"), and SPECIALTYSEMI, INC., a Delaware corporation ("Tenant"), to be effective and binding upon the parties as of the date the last of the designated signatories to this Lease shall have executed this Lease (the "Effective Date of this Lease").

RECITALS

         A.     Landlord, Tenant and Carlyle Capital Investors, L.L.C. ("Carlyle") are parties to that certain Contribution Agreement dated February 23, 2002 (the "Contribution Agreement"), pursuant to which Landlord and Carlyle agreed to form a joint venture, which joint venture entity is the Tenant hereunder, for the operation of a semiconductor wafer fabrication facility at the Property (as defined below).

         B.     In furtherance of the joint venture and operation of the semiconductor wafer fabrication facility, Landlord agreed to lease to Tenant a portion of its facility for office use and a machine shop pursuant to the terms of this Lease.

         NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, Landlord and Tenant covenant and agree as follows:


ARTICLE 1

DEFINITIONS

         1.1    Definitions.     All references in this Lease (subject to any further clarifications contained in this Lease) to the following terms shall have the following meaning:

         (a)    The term "Additional Rent" as used herein shall include any legal fees and costs that Tenant is obligated to pay or reimburse to Landlord pursuant to Paragraph 13.6, and any other charges or reimbursements due Landlord from Tenant pursuant to the terms of this Lease (including, without limitation, base rent, if applicable).

         (b)    The term "Building" shall mean that certain building known as building 501 located on the Property, which building is shown outlined on Exhibit "A" hereto.

         (c)    The term "Comerica Prime Plus Two" shall mean the sum of that rate quoted by Comerica Bank—California, N.A. from time to time as its prime rate, plus two percent (2%).

         (d)    The term "Common Areas" shall mean all areas within the Building and the Property which are designated for the non-exclusive use of Landlord and all tenants, occupants, and/or licensees of the Property, including but not limited to outdoor eating areas, parking areas, loading and unloading areas and docks, platforms, trash areas, roadways, sidewalks, landscaping, ramps, driveways, recreation areas (including the basketball court), cafeteria, and auditorium as outlined on Exhibit "A" hereto.

         (e)    The term "Contributed Assets" shall have the meaning given to that term in the Contribution Agreement.

         (f)     The term "Damages" shall mean any loss, damage, cost injury, liability, claim, demand, settlement, judgment, award, fine, penalty, tax or expense of any nature, including without limitation, reasonable fees and disbursements of counsel.

         (g)    The term "El Capitan Lease" shall mean that certain lease between Landlord and Tenant entered into concurrently herewith covering the Lease of Building 503 and Building 505 (also known, collectively, as the "El Capitan" building) on the Property.

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         (h)    The term "Entity" shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, cooperative, foundation, society, political party, union, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

         (i)     The term "Environmental Claim" shall mean any and all administrative, regulatory or judicial proceeding, demands, claims, liens, encumbrance, notices of non-compliance or violation, investigations, consents, orders or consent agreements relating in any way to any Environmental Law or any permit, approval or license under any Environmental Law (hereinafter "Claims"), including without limitation, (a) any and all Claims by any Governmental Body for enforcement, cleanup, remediation or other actions or Damages pursuant to any Environmental Law, and (b) any and all Claims by any Person seeking Damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment.

         (j)     The term "Environmental Condition" shall mean (a) a condition relating to or arising or resulting from a failure to comply with any applicable Environmental Law or any permit, approval or license under any Environmental Law or (b) any and all conditions, including soil, surface water and groundwater contamination, resulting from the handling or use of any Hazardous Material or the disposal, release or discharge of a Hazardous Material into the environment.

         (k)    The term "Environmental Law" shall mean any Law, now or hereafter in effect and as amended, and any judicial, legislative or administrative interpretation thereof, including any judicial, legislative or administrative order relating to the environment; the effect of Hazardous Materials on the environment or human safety or health; emissions, discharges or releases of Hazardous Materials into the environment, including without limitation into ambient air, surface water, groundwater or land; or otherwise relating to the handling of Hazardous Materials or the clean-up or other remediation of Hazardous Materials.

         (l)     The term "Environmental Response Activities" shall mean any and all response actions (as that term is broadly defined under Environmental Laws), including, without limitation, the activities set forth in 42 USC Section 9601 (23), (24), and (25).

         (m)   The term "Exhibits" shall mean the Exhibits of this Lease which are described as follows:

         (i)      Exhibit "A" —Site Plan showing the Property and delineating the Building in which the Leased Premises are located.

         (ii)     Exhibit "B" —Floor Plans showing the Leased Premises within the Building.

         (iii)   Exhibit "C" —Form of Estoppel Certificate.

         (iv)    Exhibit "D" —Site Plan showing Identified Groundwater Treatment Systems.

         (n)    The term "Expense Rent" is defined in Paragraph 3.1 below.

         (o)    The term "Expenses" shall mean, collectively, the following expenses incurred by Landlord in connection with the Property and the Leased Premises:

         (i)     Insurance costs, including without limitation, the costs to Landlord to carry and maintain the policies of fire and property damage insurance for the Building and the Property and general liability and any other insurance required or permitted to be carried by Landlord pursuant to Article 9, together with any deductible amounts paid by Landlord upon the occurrence of any insured casualty or loss. In no event shall Expenses include costs for pollution liability insurance or other environmental insurance.

         (ii)    All costs and expenses paid or incurred by Landlord in providing services to Tenant as described in this Lease.

2


 

         (iii)  Actual book depreciation costs for the Building per generally accepted accounting principles given current asset lives, provided that Landlord shall not alter the accounting treatment of the Property unless reasonably approved by Tenant.

         (iv)   Other expenses incurred by Landlord not included in clauses (i) through (iii) above (and which are not excluded below) which are reasonably approved by Tenant.

Notwithstanding the foregoing, in no event shall "Expenses" include expenses actually paid by Tenant to Landlord under any other agreement or the cost of property taxes, gas or electricity for the Building or any costs of maintenance or repair of the Building or the Common Areas of the Property, unless such maintenance or repair is needed because of the overuse, negligence or willful misconduct of Tenant, its agents, invitees, employees or contractors.

         (p)    The term "Governmental Body" shall mean any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction; (b) federal, state, local, municipal or foreign government (including any agency, department, bureau, division, court, or other administrative or judicial body thereof); or (c) governmental or quasi-governmental authority of any nature.

         (q)    The term "Hazardous Materials" shall mean (a) any petroleum, waste oil, crude oil, asbestos, urea formaldehyde or polychlorinated biphenyl; (b) any waste, gas or other substance or material that is explosive or radioactive; (c) any "hazardous substance," "pollutant," "contaminant," "hazardous waste," "regulated substance," "hazardous chemical," "toxic chemical" or "toxic substance" as designated, listed or defined (whether expressly or by reference) in any statute, regulation or other Law (including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. and any other so-called "superfund" or "superlien" law, the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., and the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., and the respective regulations promulgated thereunder, or any analogous federal, state or local laws and regulations); (d) any other substance or material (regardless of physical form) or form of energy that is subject to any Law which regulates or establishes standards of conduct in connection with, or which otherwise relates to, the protection of human health, plant life, animal life, natural resources, property or the enjoyment of life or property from the presence in the environment of any solid, liquid, gas, odor, noise or form of energy; and (e) any compound, mixture, solution, product or other substance or material that contains any substance or material referred to in clause "(a)," "(b)," "(c)," or "(d)" above.

         (r)    The terms "Identified Groundwater Treatment Systems" shall mean the storage and treatment systems in existence as of the Lease Commencement Date, identified in Exhibit "D."

         (s)    [...***...]

         (t)     The term "Law" shall mean any judicial decisions and any statute, constitution, ordinance, resolution, regulation, rule, administrative order, Environmental Laws or other requirements of any municipal, county, state, federal, or other governmental agency or authority having jurisdiction over the parties to this Lease, the Leased Premises, the Building, the Common Areas or the Property, or any of them, in effect either at the Effective Date of this Lease or at any time during the Lease Term, including, without limitation, any regulation, order, or policy of any quasi-official entity or body (e.g. a board of fire examiners or a public utility or special district).

         (u)    The term "Lease Commencement Date" is defined in Paragraph 2.3 below.

         (v)    The term "Lease Expiration Date" means the date that is fifteen years after the Lease Commencement Date, unless earlier terminated in accordance with the terms of this Lease, or extended pursuant to Article 15 hereof.


Confidential treatment has been requested for portions of this document. This copy of the document filed as an Exhibit omits the confidential information subject to the confidentiality request. Omissions are designated by the symbol [...***...]. A complete version of this document has been filed separately with the Securities and Exchange Commission.

3


         (w)   The term "Leased Premises" shall mean certain interior space in the Building outlined on Exhibit "B" hereto consisting of approximately 45,000 rentable square feet.

         (x)    The term "Lender" shall mean the holder of any promissory note or other evidence of indebtedness secured by the Property or any portion thereof.

         (y)    The term "Permitted Use" shall mean general office use and a machine shop as designated on Exhibit "B".

         (z)    The term "Person" shall mean any individual, Entity or Governmental Body.

         (aa)  The term "Private Restrictions" shall mean (as they may exist from time to time) any and all covenants, conditions and restrictions, private agreements, easements, and any other recorded documents or instruments affecting the use of the Property, the Building, the Leased Premises, or the Common Areas.

         (bb)  The term "Property" shall mean that certain real property and all improvements located thereon having an address of 4311 Jamboree Road, Newport Beach, California, which real property is shown on the Site Plan attached hereto as Exhibit "A".

         (cc)  The term "Tenant's Pro Rata Share" shall mean the percentage obtained by dividing the number of rentable square feet in the Leased Premises by the number of rentable square feet in the Building, at the time of calculation. Such percentage is currently 36%. In the event that any portion of the Property is sold by Landlord, or the rentable square footage of the Leased Premises or the Building is otherwise changed, Tenant's Pro Rata Share shall be recalculated to equal the percentage described in the first sentence of this paragraph, so that the aggregate Tenant's Pro Rata Share of all tenants, occupants, and/or licensees of the Building shall equal 100%.

         (dd)  The term "Rent" shall mean, collectively, Expense Rent and all Additional Rent.


ARTICLE 2

LEASED PREMISES, TERM AND POSSESSION

         2.1    Demise Of Leased Premises.     Landlord hereby leases to Tenant and Tenant hereby leases from Landlord for Tenant's own use for the Permitted Use and not for purposes of speculating in real estate, for the Lease Term and upon the terms and subject to the conditions of this Lease, that certain interior space described in Article 1 as the Leased Premises. Tenant's lease of the Leased Premises, together with the appurtenant right to use the Common Areas as described in Paragraphs 2.2 below, shall be conditioned upon and be subject to the continuing compliance by Tenant with (i) all the terms and conditions of this Lease, (ii) all Laws and Private Restrictions governing the use or occupancy of the Leased Premises and the Property, (iii) all Laws and Private Restrictions governing the operation of pollution control systems, waste collection and treatment systems, (iv) all easements and other matters now of public record respecting the use of the Leased Premises and Property, and (v) all reasonable rules and regulations from time to time established by Landlord under Paragraph 4.11 of this Lease. Notwithstanding any provision of this Lease to the contrary, Landlord hereby reserves to itself and its designees reasonable rights of access, use and occupancy of the Building roof, provided that Landlord and its designees do not unreasonably interfere with the conduct of Tenant's business at the Leased Premises and comply with any reasonable security measure established by Tenant. Tenant shall have a nonexclusive right of access and use or occupancy of the Building roof to the extent required in order to enable Tenant to perform Tenant's maintenance and repair obligations pursuant to this Lease.

         2.2    Right To Use Common Areas.     As an appurtenant right to Tenant's right to the use the Leased Premises, Tenant shall have the right to use the Common Areas in conjunction with its use of the Leased Premises solely for the purposes for which they were designated and intended and for no other purposes whatsoever. Tenant's right to so use the Common Areas shall terminate concurrently

4


 

with any termination of this Lease. Tenant, in its use of the Common Areas, shall at all times keep the Common Areas in a safe condition free and clear of all materials, equipment, debris, trash (except within existing enclosed trash areas), inoperable vehicles, and other items which are not specifically permitted by Landlord to be stored or located thereon by Tenant. Landlord shall have no liability to Tenant, its agents, employees, contractors and invitees in connection with their use of the Common Areas (including, without limitation, the recreation facilities located within the Common Areas) and Tenant, its agents, employees, contractors and invitees assume all risk of injury in connection with their use thereof, except for liability arising from the negligence or willful misconduct of Landlord, or Landlord's agents or employees.

         2.3    Lease Commencement Date And Lease Term.     The term of this Lease shall begin, and the Lease Commencement Date shall be deemed to have occurred, on March 12, 2002 (the "Lease Commencement Date"). The term of this Lease shall in all events end on the Lease Expiration Date (as set forth in Article 1). The Lease Term shall be that period of time commencing on the Lease Commencement Date and ending on the Lease Expiration Date (the "Lease Term").

         2.4    Performance Of Improvement Work; Acceptance Of Possession.     Landlord shall deliver and Tenant shall accept possession of the Leased Premises on the Lease Commencement Date in their then "as-is" condition, with all faults and defects. Landlord shall have no obligation to improve, alter or repair the Leased Premises prior to delivery to Tenant, or thereafter, unless specifically provided for herein.

         2.5    Surrender Of Possession.     

         (a)    Removal Obligations.     Immediately prior to the expiration or sooner termination of this Lease, Tenant shall remove any and all of Tenant's owned equipment, trade fixtures, furniture, supplies, wall decorations and other personal property, and the Contributed Assets from within the Leased Premises, the Building, the Common Areas, and the Property and shall vacate and surrender the Leased Premises, the Building, the Common Areas and the Property to Landlord in a safe, broom clean condition, and in compliance with Paragraph 4.10 hereof. Tenant shall repair all damage to the Leased Premises, the exterior of the Building, the Common Areas and the Property caused by Tenant's removal of Tenant's property in accordance with this Paragraph 2.5 and compliance with Paragraph 4.10 hereof. Tenant shall patch and refinish, to Landlord's reasonable satisfaction, all penetrations made by Tenant or its employees to the floor, walls, roof or ceiling of the Leased Premises, whether such penetrations were made with Landlord's approval or not. Tenant shall repair or replace all stained or damaged ceiling tiles, wall coverings and floor coverings, to the reasonable satisfaction of Landlord. Tenant shall repair all damage caused by Tenant to the exterior surface of the Building and the paved surfaces of the Common Areas and, where necessary, replace or resurface same. Additionally, to the extent that Landlord shall have notified or is deemed to have notified Tenant in writing at the time the improvements were completed that it desired to have certain improvements made by Tenant or at the request of Tenant removed at the expiration or sooner termination of the Lease, Tenant shall, upon the expiration or sooner termination of the Lease, remove any such improvements constructed or installed by Landlord or Tenant and repair all damage caused by such removal.

         (b)    Failure to Surrender in Required Condition.     If the Leased Premises, the Building, the Common Areas and the Property are not surrendered to Landlord in the condition required by this paragraph at the expiration or sooner termination of this Lease, Landlord may, after providing notice to Tenant of Landlord's intent to do so and a period of not less than thirty (30) days has elapsed in which Tenant may comply with the provisions of this paragraph, at Tenant's expense, so remove Tenant's signs, property and/or improvements not so removed and make such repairs and replacements not so made or hire, at Tenant's expense, independent contractors to perform such work. Tenant shall be liable to Landlord for all costs incurred by Landlord in returning the Leased Premises the Building, the Common Areas and the Property, to the condition required by this

5


 

paragraph, together with interest on all costs so incurred from the date paid by Landlord at the lesser of Comerica Prime Plus Two or the then maximum rate of interest not prohibited or made usurious by Law until paid. Tenant shall pay to Landlord the amount of all costs so incurred plus such interest thereon within ten (10) business days of Landlord's billing Tenant for same. Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in surrendering the Leased Premises, including, without limitation, any claims made by any succeeding tenants, occupants, and/or licensees or any losses to Landlord with respect to lost opportunities to lease and/or license to succeeding tenants, and/or licensees.

         2.6    Change in Lease Term.     Notwithstanding anything to the contrary contained herein, in the event the El Capitan Lease is terminated pursuant to any provision thereof, this Lease shall also terminate as of the same date.


ARTICLE 3

RENT

         3.1    Expense Rent.     Commencing on the first day of the first month following the Lease Commencement Date (the "Rent Commencement Date") and continuing on the first day of each month thereafter throughout the Lease Term, to the extent not required by Landlord to be contracted for and paid directly by Tenant, Tenant shall pay to Landlord as rent an amount equal to Tenant's Pro Rata Share of all Expenses (as defined in Article 1) incurred by Landlord (the "Expense Rent"). Payment shall be made as follows:

         (a)    Estimates.     Landlord shall deliver to Tenant Landlord's reasonable estimate of the Expenses which it anticipates will be paid or incurred for the ensuing calendar or fiscal year, as Landlord may determine, and Tenant shall pay to Landlord an amount equal to the estimated amount of such Expenses for such year in equal monthly installments during such year. Landlord reserves the right to revise such estimate from time to time.

         (b)    Quarterly Adjustments.     Landlord shall furnish to Tenant within forty five (45) days following the end of each quarter during the Lease Term, a statement certified to be complete and accurate (the "Quarterly Statement") setting forth in reasonable detail (i) the amount of the Expenses paid or incurred during the just ended quarter, and (ii) the amount that Tenant has paid to Landlord for credit against such Expenses for such period. If Tenant shall have paid more than its obligation for such Expenses for the stated period, Landlord shall, at its election, either (i) credit the amount of such overpayment toward the next ensuing payment or payments of Expense Rent that would otherwise be due (provided that the Lease has not expired or otherwise terminated) or (ii) refund in cash to Tenant the amount of such overpayment. If such quarterly statement shall show that Tenant did not pay its obligation for such expenses in full, then Tenant shall pay to Landlord the amount of such underpayment within ten (10) business days from Landlord's billing of same to Tenant. The provisions of this paragraph shall survive the expiration or sooner termination of this Lease.

         (c)    Audit of Quarterly Statement.     Within thirty (30) days after Tenant's receipt of a Quarterly Statement, if Tenant disputes the amount of Tenant's obligations set forth therein, at Tenant's expense an independent certified public accountant designated by Tenant, may, after reasonable notice to Landlord and at reasonable times, inspect Landlord's records pertaining to Expenses for the subject quarter. If Tenant still disputes any matter set forth in the subject Quarterly Statement after such inspection, a certification as to the proper amount owing by Tenant with respect to Expenses for the subject quarter shall be made at Tenant's expense by an independent certified public accountant mutually acceptable to Landlord and Tenant, and such certification shall be final and conclusive (the "Final Audit"), and any necessary adjustment shall be made for the next monthly rental payment in light of the Final Audit. If the Final Audit shows

6


 

that Expenses for the particular quarter have been overstated by more than three percent (3%), then Landlord shall be responsible for the cost of the Final Audit. Both Landlord and Tenant shall have fifteen (15) days from the date the Final Audit is received by them to dispute the calculation of Expenses set forth therein. If either party disputes the calculation of Expenses reflected in the Final Audit, then Landlord and Tenant shall resolve such dispute in the manner set forth in Section 10.18 of the Contribution Agreement. Notwithstanding the foregoing, with respect to the Quarterly Statement for the last full or partial quarter occurring during the Lease Term, Tenant shall have six (6) months after Tenant's receipt of the subject Quarterly Statement to dispute such statement in accordance with the terms of this paragraph. Tenant shall pay all Rent during the pendency of any audit hereunder. The provisions of this paragraph shall survive the expiration or earlier termination of this Lease.

         3.2    Interest On Rent In Default.     If any Rent remains delinquent for a period in excess of ten (10) calendar days, then Tenant shall pay to Landlord interest on any Rent that is not so paid from said tenth day at the rate of the lesser of Comerica Prime Plus Two or the then maximum rate of interest not prohibited or made usurious by Law until paid.

         3.3    Payment Of Rent.     All Rent shall be paid in lawful money of the United States, without any abatement, reduction or offset for any reason whatsoever except as expressly set forth herein, to Landlord at such address as Landlord may designate from time to time. Failure of Landlord to notify Tenant in writing of a change of address shall waive all late charges and interest on Rent in default until such written notice is granted.


ARTICLE 4

USE OF LEASED PREMISES AND COMMON AREA

         4.1    Permitted Use.     Tenant shall be entitled to use the Leased Premises solely for the "Permitted Use" as set forth in Article 1 and for no other purpose whatsoever. Tenant shall have the non-exclusive right to use the Common Areas in conjunction with the Permitted Use of the Leased Premises solely for the purposes for which they were designed and intended and for no other purposes whatsoever.

         4.2    General Limitations On Use.     Tenant shall not do or permit anything to be done in or about the Leased Premises, the Building, the Common Areas or the Property which does or could (i) jeopardize the structural integrity of the Building or (ii) cause damage to any part of the Leased Premises, the Building, the Common Areas or the Property. Tenant shall not operate any equipment within the Leased Premises which does or could (i) injure, vibrate or shake the Leased Premises or the Building, (ii) damage, overload or impair the efficient operation of any electrical, plumbing, heating, ventilating or air conditioning systems, pollution control systems, waste collection or treatment systems within or servicing the Leased Premises or the Building, or (iii) damage or impair the efficient operation of the sprinkler system (if any) within or servicing the Leased Premises or the Building without Landlord's prior written approval. Tenant shall not install any equipment or antennas on or make any penetrations of the exterior walls or roof of the Building without Landlord's prior written approval. Tenant shall not affix any equipment to or make any penetrations or cuts in the floor, ceiling, walls or roof of the Leased Premises. Tenant shall not place any loads upon the floors, walls, ceiling or roof systems which could endanger the structural integrity of the Building or damage its floors, foundations or supporting structural components. Tenant shall not use any of the Common Areas for the storage of its materials, supplies, inventory or equipment and all such materials, supplies, inventory or equipment shall at all times be stored within the Leased Premises. Tenant shall not commit nor permit to be committed any waste in or about the Leased Premises, the Building, the Common Areas or the Property.

         4.3    Noise And Emissions.     All noise generated by Tenant in its use of the Leased Premises shall be confined or muffled so that it does not unreasonably interfere with the businesses of or

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unreasonably annoy the occupants and/or users of the Building or adjacent properties given the nature of Tenant's operation in the Leased Premises and Tenant shall operate the Leased Premises in compliance with applicable Laws. All dust, fumes, odors and other emissions generated by Tenant's use of the Leased Premises shall be sufficiently dissipated in accordance with sound environmental practice and exhausted from the Leased Premises in compliance with applicable Laws and in such a manner so as not to interfere with the businesses of or annoy the occupants and/or users of the Building or adjacent properties, or cause any damage to the Leased Premises, the Building, the Common Areas or the Property or any component part thereof or the property of adjacent property owners.

         4.4    Trash Disposal.     Tenant shall provide trash bins or other adequate garbage disposal facilities within the trash enclosure areas provided or permitted by Landlord outside the Leased Premises sufficient for the interim disposal of all of Tenant's trash, garbage and waste. All such trash, garbage and waste temporarily stored in such areas shall be stored in such a manner so that it is not visible from outside of such areas, and Tenant shall cause such trash, garbage and waste to be regularly removed from the Property. Landlord hereby represents that that the waste storage area as it exists as of the Effective Date of this Lease is sufficient for the operations existing therein as such operations have been conducted by Landlord as of the Effective Date of this Lease. Tenant shall keep the Leased Premises and the Common Areas in a clean, safe and neat condition free and clear of all of Tenant's trash, garbage, waste and/or boxes, pallets and containers containing same at all times.

         4.5    Parking.     Landlord shall provide Tenant with the right to use 150 non-exclusive parking spaces on the Property. Tenant shall not, at any time, park or permit to be parked any inoperative vehicles in the Common Areas or on any portion of the Property. Tenant agrees to assume responsibility for compliance by its employees and invitees with the parking provisions contained herein and any reasonable rules and regulations established by Landlord for parking on the Property in accordance with Paragraph 4.11 of this Lease. Landlord reserves the right to grant easements and access rights to others for use of the parking areas on the Property, provided that such grants do not materially interfere with Tenant's use of the parking areas.

         4.6    Signs.     Tenant shall have the right to install business identification signage in the interior of the Building immediately outside the Leased Premises or on the door to the Leased Premises, subject to Landlord's prior written consent (which shall not be unreasonably withheld), provided such signage shall be installed at Tenant's sole cost and expense and only in strict compliance with Landlord's approval, using a person chosen by Tenant and approved by Landlord to install same, such approval not to be unreasonably withheld, conditioned or delayed. Landlord may remove any signs (which have not been approved in writing by Landlord), advertisements, banners, placards or pictures so placed by Tenant on or within the Leased Premises, the exterior of the Building, the Common Areas or the Property and charge to Tenant the cost of such removal, together with any costs incurred by Landlord to repair any damage caused thereby, including any cost incurred to restore the surface (upon which such sign was so affixed) to its original condition. Tenant shall remove all of Tenant's signs, repair any damage caused thereby, and restore the surface upon which the sign was affixed to its original condition, all to Landlord's reasonable satisfaction, upon the termination of this Lease.

         4.7    Compliance With Laws And Private Restrictions.     Subject to Paragraph 4.10 hereof, Tenant shall abide by and shall promptly observe and comply with, at its sole cost and expense, all Laws and Private Restrictions respecting the use and occupancy of the Leased Premises, the Building, the Common Areas or the Property including, without limitation, all Laws governing the use and/or disposal of Hazardous Materials, and shall defend with competent counsel, indemnify and hold Landlord harmless from any claims, damages, liability, fines, penalties or costs resulting from Tenant's use of the Leased Premises or Tenant's failure to so abide, observe, or comply. Tenant's obligations hereunder shall survive the expiration or sooner termination of this Lease. Landlord shall require itself and other tenants of the Property to comply with all Laws and Private Restrictions, subject to the terms of this Lease. Tenant shall immediately notify Landlord and provide copies of any governmental or

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third party communications, requests or inspections received by Tenant related in any manner to a release, condition or claim regarding Hazardous Materials at the Leased Premises, Building, and/or Property. Tenant shall promptly provide Landlord with written notice of any release or imminent release of Hazardous Materials caused or permitted by Tenant at the Property or by any person at the Leased Premises as soon as Tenant becomes aware of such release or imminent release.

         4.8    Compliance With Insurance Requirements.     With respect to any insurance policies required or permitted to be carried by Landlord in accordance with the provisions of this Lease, Tenant shall not conduct any activities nor keep, store or use any item or thing within the Leased Premises, the Building, the Common Areas or the Property which (i) is prohibited under the terms of any such policies (provided such prohibitions are made known to Tenant), (ii) would result in the termination of the coverage afforded under any of such policies, (iii) would give to the insurance carrier the right to cancel any of such policies, or (iv) would cause an increase in the rates (over standard rates) charged for the coverage afforded under any of such policies (unless such increases are paid by Tenant). Tenant shall comply with all reasonable requirements of any insurance company, insurance underwriter, or Board of Fire Underwriters which are necessary to maintain, at standard rates, the insurance coverages carried by either Landlord or Tenant pursuant to this Lease. Landlord shall provide Tenant with a copy of all insurance policies related to the Leased Premises, the Building, the Common Areas and the Property and Tenant shall be deemed to have knowledge of all of the terms and conditions of such policies.

         4.9    Landlord's Right To Enter.     Landlord and its agents and third party designees retain the right to enter the Leased Premises during normal business hours but shall give Tenant reasonable notice (except in the case of emergency when no notice shall be required) for the purpose of (i) inspecting the same; (ii) showing the Leased Premises to prospective purchasers, mortgagees or tenants, occupants, and/or licensees; (iii) making necessary alterations, additions or repairs (provided that any such alterations, additions or repairs shall be coordinated in advance with Tenant), and (iv) performing any of Tenant's obligations when Tenant has failed to do so, provided that Landlord and its agents and third party designees shall abide by Tenant's reasonable security measures and provided that access by Landlord and its agents and third party designees pursuant to this Paragraph 4.9 shall not materially and unreasonably interfere with Tenant's use of the Leased Premises. Landlord retains the right to enter the Leased Premises during normal business hours (or as otherwise agreed), subject to Tenant's reasonable security measures, for purposes of supplying any maintenance or services agreed to be supplied by Landlord. Landlord and its agents retain the right to enter the Common Areas at all times for any and all purposes, including, but not limited to (i) conducting Landlord's Environmental Response Activities; (ii) inspecting the exterior of the Building and the Common Areas; (iii) posting notices of nonresponsibility (and for such purposes Tenant shall provide Landlord at least fifteen (15) days' prior written notice of any work to be performed on the Leased Premises); and (iv) supplying any services to be provided by Landlord. Any entry into the Leased Premises or the Common Areas obtained by Landlord in accordance with this paragraph shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Leased Premises, or an eviction, actual or constructive of, Tenant from the Leased Premises or any portion thereof, nor relieve Tenant of its obligations hereunder, nor constitute a breach of contract.

         4.10    Environmental Protection.     Tenant's obligations under this Paragraph 4.10 shall survive the expiration or termination of this Lease.

         (a)    Notwithstanding anything to the contrary in this Lease, Tenant shall not use Hazardous Materials at the Leased Premises other than those contained in ordinary office supplies used in compliance with all Laws or used in the machine shop located in the Leased Premises which shall be used in compliance with all Laws. If required by applicable Laws, Tenant shall prepare and deliver to Landlord a Hazardous Materials Management Plan ("HMMP") regarding Tenant's use of Hazardous Materials in the machine shop. Tenant shall not drain or discharge any Hazardous

9


Materials in the landscaped areas or across the paved areas of the Property. In no event shall Tenant cause or permit to be discharged into the plumbing or sewage system of the Building any Hazardous Materials. Tenant shall not cause or permit Hazardous Materials to be discharged into the plumbing or sewage system of the Building unless such plumbing or sewage systems are specifically identified as designed or designated to handle the respective Hazardous Material. If the presence of Hazardous Materials on the Property [...***...] caused or permitted by Tenant results in contamination or deterioration of water or soil, then Tenant shall promptly take any and all action necessary to clean up such contamination, but the foregoing shall in no event be deemed to constitute permission by Landlord to allow the presence of such Hazardous Materials. At any time prior to the expiration of the Lease Term if Tenant has a reasonable basis to suspect that there has been any release or the presence of Hazardous Materials in the ground or ground water on the Property which did not exist upon commencement of the Lease Term, or otherwise upon Landlord's written request, Tenant shall conduct appropriate tests of water, soil or any contaminated surface and to deliver to Landlord the results of such tests to demonstrate that no contamination in excess of permitted levels has occurred as a result of Tenant's use of the Leased Premises.

         (b)    Upon termination or expiration of the Lease or cessation of the conduct of Tenant's business in the Leased Premises, Tenant at its sole expense shall cause all Hazardous Materials placed in or about the Property by Tenant, its agents, contractors, or invitees, and all installations (whether interior or exterior) made by or on behalf of Tenant relating to the storage, use, treatment, disposal or transportation of Hazardous Materials to be removed from the Property and transported for use, storage or disposal in accordance and compliance with all Laws and other requirements respecting Hazardous Materials used or permitted to be used by Tenant. Tenant shall apply for and shall obtain from all appropriate regulatory authorities (including any applicable fire department, regional water quality control board or Certified Unified Program Agency or the California Department of Toxic Substances Control) all permits, approvals and clearances necessary for the closure of the Property and shall take all other actions as may be required to complete the closure of the Property except for any permits, approvals, and clearances necessary for the operation of the Identified Groundwater Treatment System currently operated by Landlord at the Property or in connection with Environmental Response Activities of Landlord [...***...]. In addition, prior to vacating the Leased Premises, Landlord may request that Tenant shall undertake and submit to Landlord, at Landlord's cost, an environmental site assessment from an environmental consulting company reasonably acceptable to Landlord which site assessment shall evidence Tenant's compliance with this Paragraph 4.10.

         (c)    At any time prior to expiration of the Lease term, subject to reasonable prior notice (not less than forty-eight (48) hours) and Tenant's reasonable security requirements and provided such activities do not unreasonably interfere with the conduct of Tenant's business at the Leased Premises, Landlord shall have the right to enter the Leased Premises in order to conduct appropriate tests of any portion of the Property (including, without limitation, the water and soil thereof) and improvements thereon to determine whether levels of any Hazardous Materials in excess of legally permissible levels have occurred as a result of Tenant's use thereof. Landlord retains at all times the right to conduct appropriate tests of any portion of the Property (including, without limitation, the water and soil thereof) and improvements thereon to determine whether levels of any Hazardous Materials in excess of legally permissible levels have occurred as a result of Tenant's use thereof. Landlord shall furnish copies of all such test results and reports to Tenant and, at Tenant's option and cost, shall permit split sampling for testing and analysis by Tenant. Such testing shall be at Tenant's expense if Landlord has a reasonable basis for suspecting and confirms the presence of Hazardous Materials in the soil or surface or ground water in, on, under, or about the Property which has been caused by or resulted from the activities of Tenant, its agents, contractors, or invitees.


Confidential treatment has been requested for portions of this document. This copy of the document filed as an Exhibit omits the confidential information subject to the confidentiality request. Omissions are designated by the symbol [...***...]. A complete version of this document has been filed separately with the Securities and Exchange Commission.

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         (d)    Landlord may voluntarily cooperate in a reasonable manner with the efforts of all Governmental Bodies regarding Hazardous Materials at the Leased Premises, provided, however, to the extent such efforts are voluntary and not mandatory, Landlord shall not cause unreasonable interference with the operation of the wafer fabrication business by Tenant in the Leased Premises. Tenant shall not be entitled to terminate this Lease (unless such cooperation materially and unreasonably interfere with Tenant's operation in the Leased Premises) or to any reduction in or abatement of rent by reason of such compliance or cooperation. Tenant agrees at all times to cooperate fully with the requirements and recommendations of Governmental Bodies regulating, or otherwise involved in, the protection of the environment.

         (e)    Landlord shall hold harmless and indemnify Tenant from and against, and shall compensate and reimburse Tenant, for any Damages that are suffered or incurred by Tenant (regardless of whether or not such Damages relate to any third-party claim) that arise from any Environmental Condition (or any Environmental Claim arising out of or relating to any Environmental Condition) which condition was in existence on, or arose, on or before the date the Leased Premises were delivered to Tenant, or that is attributable to operations or activities of Landlord at the Leased Premises on or before such date, [...***...]. Tenant shall hold harmless and indemnify Landlord from and against, and shall compensate and reimburse Landlord for, any Damages that are suffered or incurred, directly or indirectly, by Landlord (regardless of whether or not such Damages relate to any third-party claim) that arise from any Environmental Condition (or any Environmental Claim arising out of or relating to any Environmental Condition), which condition arises after the date the Leased Premises are delivered to the Tenant as a result of a release, discharge or spill of Hazardous Materials by the Tenant after the date the Leased Premises are delivered to Tenant (or any Person present at the wafer fabrication facility by invitation of Tenant), or as a result of the negligent or unlawful conduct of Tenant after the date the Leased Premises are delivered to Tenant or failure of Tenant to comply with the terms of Paragraph 4.10(b) hereof, provided that , with respect to Tenant's obligation to indemnify Landlord for Tenant's failure to comply with Paragraph 4.10(b), Tenant shall have no obligation to indemnify Landlord for any Damages resulting from the release, spill, discharge, or handling of Hazardous Materials by Landlord or any negligent or unlawful conduct of Landlord. With respect to any Environmental Claim for which Landlord seeks indemnification from Tenant pursuant to this Paragraph 4.10(e), and which is alleged to have resulted from Tenant's release, discharge or spill of any Hazardous Materials present in the soil or groundwater prior to the Lease Commencement Date, a rebuttable presumption shall exist that the Hazardous Materials involved in the Environmental Claim for which Landlord seeks indemnification were present in the soil or groundwater prior to the Lease Commencement Date. Such presumption shall be rebuttable by clear and convincing evidence.

         (f)     [...***...]

         (g)    Structural steel fireproofing material and other building materials containing asbestos were widely used in construction from the 1950's through the mid-1970's. The Building was built before 1979 and certain asbestos-containing materials ("ACM") are located in: Resilient Flooring and Mastic, Dry Wall, Joint Compound, Thermal Pipe Insulation, Putty Tape, Transite Wall Board, Cove Base Adhesive and Roof Mastic within the Building. Landlord has no special knowledge regarding handling instructions necessary to prevent or minimize release of, or exposure to, ACM, or the potential health impacts resulting from exposure to asbestos in the Site. Tenant is urged to contact the County Health Department, the State Department of Health Services, the County Department of Health Services, or the state or federal Occupational Safety and Health Administration for more information. This disclosure statement is provided to Tenant in compliance with California Health and Safety Code Section 25915 et seq. Tenant should be aware that under the requirements of Section 25915 et seq. , Tenant is also required to provide this information to Tenant's employees, sublessees, contractors and others as described in the Code.


Confidential treatment has been requested for portions of this document. This copy of the document filed as an Exhibit omits the confidential information subject to the confidentiality request. Omissions are designated by the symbol [...***...]. A complete version of this document has been filed separately with the Securities and Exchange Commission.

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         (h)    [...***...]

         4.11    Rules And Regulations.     Landlord shall have the right from time to time to establish reasonable rules and regulations and/or amendments or additions thereto respecting the use of the Leased Premises and the Common Areas for the care and orderly management of the Property. Upon delivery to Tenant of a copy of such rules and regulations or any amendments or additions thereto, Tenant shall comply with such rules and regulations. A material violation by Tenant of any of such rules and regulations shall constitute a default by Tenant under this Lease subject to Paragraph 12.1(b) hereof. If there is a conflict between the rules and regulations and any of the provisions of this Lease, the provisions of this Lease shall prevail. Landlord shall not be responsible or liable to Tenant for the violation of such rules and regulations by any other tenants, occupants, and/or licensees of the Property.

         4.12    Reservations.     Landlord reserves the right from time to time to grant, without the consent or joinder of Tenant and without cost to Tenant, such easements, rights of way and dedications that Landlord deems necessary, and to cause the recordation of parcel maps and Private Restrictions, or seek additional entitlements or modify parcel maps, so long as such Private Restrictions, easements, rights of way and dedications do not unreasonably interfere with the use of the Leased Premises by Tenant. Tenant agrees to execute any documents reasonably requested by Landlord to effectuate any such easement rights, dedications, maps or restrictions.


ARTICLE 5

REPAIRS, MAINTENANCE, SERVICES AND UTILITIES

         5.


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